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 2023
Previous Corresponding Reporting
Period
01 July 2021 to 30 June 2022
1. Results for Announcement to the Market
$
Revenue from continuing activities
8,580,939
$ and %
increase/(decrease)
over previous
corresponding period
687,374 8.71%
(Loss) from continuing activities after tax attributable
to members
(51,910,013)
12,660,429 32.26%
Net (loss) for the period attributable to members
(51,910,013)
12,660,429 32.26%
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
(20.78) cents
(16.87) cents
(20.78) cents
(16.87) cents
18.00 cents
16.92 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 2023 is
attached.
6. Signed
Signed in accordance with a resolution of the Directors.
Signed ______________________________
Date: 25 August 2023
Paul Rennie
Managing Director
People.
Science.
Potential.
Annual Report 2023
Paradigm Biopharmaceuticals Ltd. is a late-stage clinical development
company. We are driven by a purpose to improve patients’ health and
quality of life by discovering, developing, and delivering pharmaceutical
therapies. Paradigm has a vision to be recognised as a global leader in the
development and commercialisation of innovative pharmaceutical therapies.
Paradigm’s values of innovation, transparency, adaptability, collaboration,
respect, and accountability comprise the central pillars of the organisation
and influence all activities and decisions.
Contents
Highlights
Chairman and Managing
Director’s Report
01
02
Consolidated Statement
of Profit or Loss and Other
Comprehensive Income
Chief Medical Officer’s Report
06
The Unmet Need in Osteoarthritis
10
Directors’ Report
Remuneration Report
Auditor’s Independence
Declaration
13
21
28
Consolidated Statement
of Financial Position
Consolidated Statement
of Cash Flows
Consolidated Statement
of Changes in Equity
29
30
31
32
Notes to the Consolidated
Financial Statements
Directors’ Declaration
Independent Audit Report
Shareholder Information
33
57
58
62
Corporate Governance Statement
64
Corporate Directory
65
ABN 94 169 346 963
Paradigm Biopharmaceuticals Limited Annual Report 2023
Highlights
900+
120
$7.4m AUD
People treated with Paradigm’s
iPPS globally since 2015
Clinical trial sites recruiting
for the phase 3 OA program
in 7 countries worldwide
R&D tax rebate
Global Clinical
Trials
OA Program
Site Locations
• Australia
• Belgium
• Canada
• Czechia
• Poland
• United Kingdom
• United States
MPS Program
Site Locations
• Australia
• Brazil
Key Highlights
from FY2023
Paradigm has continued to progress the development of PPS in the two focal clinical
programs of osteoarthritis (OA) and the ultra-rare disease mucopolysaccharidosis (MPS).
Below are several key successes from financial year 2023.
⟩ Oct 22
⟩ Dec 22, Jun 23
⟩ Jun 23
The double-blind, randomised,
placebo-controlled phase 2
PARA_OA_008 clinical trial achieved
its primary endpoint demonstrating
changes in the synovial fluid molecular
biomarkers from baseline in people
with knee OA treated with iPPS
compared to placebo.
The double-blind, randomised,
placebo-controlled phase 3
PARA_OA_002 clinical trial
underwent two successful
formal safety reviews by the data
monitoring committee (DMC) with
recommendations to proceed
without modification.
Primary and secondary endpoints
met in open-label phase 2 MPS
I clinical trial run in Adelaide,
Australia. iPPS was well tolerated
out to 73 weeks and patients
reported meaningful improvements
in pain, function, and activities of
daily living.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
01
01
Chairman and Managing Director’s Report
Paradigm continues to forge ahead and meet its
milestones on the road to registering injectable pentosan
polysulfate sodium (iPPS) as a treatment to alleviate pain
and improve joint function in both knee osteoarthritis and
the ultra-rare diseases of mucopolysaccharidosis types
I and VI. As Chair and Managing Director, I’m delighted
to share with you these clinical and operational updates
as we move towards our goal of filing a New Drug
Application (NDA) for iPPS to treat osteoarthritis.
Paul Rennie
Dear Shareholders,
I am pleased to report on the
progress made by Paradigm
Biopharmaceuticals Limited and its
controlled entities (Paradigm) during
the fiscal year 2023.
Paradigm Biopharmaceuticals is an
Australian-based, global late-stage
drug development company driven by
a purpose to improve patients’ health and
quality of life by discovering, developing,
and delivering pharmaceutical therapies.
Paradigm’s current focus is developing
pentosan polysulfate sodium (iPPS or
brand name Zilosul®) for the treatment
of diseases where inflammation plays
a major pathogenic role, indicating a
need for the anti-inflammatory and
tissue regenerative properties of iPPS.
The immediate commercial focus is
for the treatment of pain and joint
dysfunction associated with osteoarthritis
(OA) and pain and arthropathy in
patients with the rare genetic disorder
mucopolysaccharidosis types I and
VI (MPS).
OA Clinical Program
Highlights
I am pleased to report that the Company
has achieved significant progress in
the last 12 months in both OA and MPS
clinical assets. Paradigm has continued
to achieve important milestones as
we progress through the phase 3 OA
clinical program. In December 2022,
the independent data monitoring
committee (DMC) conducted the
first formal safety review for the
PARA_OA_002 phase 3 clinical trial,
with a second formal safety review
conducted in June 2023. The DMC is
responsible for assessing safety risk,
benefit, and feasibility during the conduct
of Paradigm’s PARA_OA_002 study,
as well as ensuring the validity and
scientific merit of the trial. The DMC
recommended that the clinical trial
proceed without modification.
The Paradigm team worked tirelessly
throughout the 12-month period to
achieve our goal of activating 120 clinical
trial sites to ensure rapid recruitment of
the PARA_OA_002 study. The global
phase 3 clinical trial is now operating in
seven countries following regulatory and
ethics approvals from the key regulatory
agencies in Europe, the United Kingdom
(UK), and Canada during FY2023.
Paradigm’s clinical sites screened
participants in Australia, the US and
Canada in North America, and the UK,
Belgium, Poland, and Czechia in the EU.
The significant progress and milestones
achieved in the phase 3 clinical
program during fiscal year 2023 have
culminated in the identification of all
participants needed for stage 1 of the
PARA_OA_002 clinical trial. Stage 1,
enrolling a total of 468 participants,
aims to determine the optimal dose of
iPPS compared to placebo. This dose
information will then be used to progress
through to stage 2 of PARA_OA_002
and for the subsequent confirmatory
PARA_OA_003 clinical trial.
In addition to the phase 3 OA program
focusing on the treatment indications of
pain and joint dysfunction, we continued
to explore the potential disease
modifying properties of iPPS with the
PARA_OA_008 study and in a canine
model of naturally occurring OA.
The exploratory phase 2 PARA_OA_008
study achieved two positive top-line data
readouts at Day 56 and Day 168 during
the fiscal year. The primary endpoint—
a change in one or more synovial fluid
biomarkers associated with OA disease
progression—was achieved at Day
56. Pleasingly, significant changes
from baseline in Western Ontario and
McMaster Universities Osteoarthritis
Index (WOMAC) pain, function, and
stiffness values were also observed at
Day 56 following twice-weekly iPPS
treatment compared to placebo, despite
the small patient groups. Furthermore,
this study also produced strong signals
of disease modifying potential at Day
168, showing structural improvement
as measured by continued positive
changes in synovial fluid, serum, and
urine biomarkers and positive structural
changes to the cartilage, subchondral
bone marrow lesions and osteophytes
following iPPS treatment versus placebo.
02
Paradigm Biopharmaceuticals Limited
Annual Report 2023
$66m AUD
Capital raise
Capital raise in August 2022 comprising
$45.7 million AUD institutional placement
and a fully underwritten $20.3 million AUD
entitlement offer.
7
New hires
In FY2023, Paradigm expanded the
employee base with new hires in
operational, clinical, commercial, and
administrative positions in Australia
and the US. Paradigm has balanced
gender representation including in
senior leadership positions, from the
Board to the Executive Leadership
Team to employees.
100+
Patents
As of January 2023, Paradigm owns
over 100 granted or pending patent
applications related to novel uses for PPS.
OA Preclinical Program
Highlights and OA Program
Next Steps
In conjunction with the PARA_OA_008
clinical trial, Paradigm also conducted
a study in a canine model of naturally
occurring OA to further explore the
potential disease modifying properties
of iPPS and to provide long-term
durability data at 26 weeks in dogs,
which is equivalent to a three-year period
in humans. Data reported from the
canine study at 26 weeks demonstrated
positive trends with meaningful effect
size on subjective measurements of pain,
objective functional clinical outcomes,
and objective measurements of cartilage
volume and molecular biomarkers,
following iPPS administration.
The clinical, MRI, and molecular
biomarker data produced from the
phase 2 PARA_OA_008 clinical trial
along with the data from the canine
OA model will be presented to the US
and EU regulatory authorities (FDA and
EMA). The aim is to reach agreement
on the regulatory pathway for a
DMOAD label extension, which would
add further commercial value to
Paradigm’s OA asset.
MPS Clinical Program
Highlights
The development of iPPS for MPS
(where Paradigm has achieved
designated orphan status for MPS I
and MPS VI) continues, with two major
phase 2 milestones achieved in FY23.
In April 2023, we announced that
Paradigm’s MPS VI phase 2 trial based
in Brazil had completed enrolment of
13 participants. This placebo-controlled,
double-blind, and randomised 24-week
study compares iPPS to placebo,
where the primary objective is to
evaluate the safety and tolerability of
iPPS. Secondary endpoints include
iPPS effects on pain, function, and
glycosaminoglycan (GAG) levels at 6, 12,
and 24 weeks. Recruiting 13 participants
in this ultra-rare disease is a fantastic
achievement for the Company, and we
look forward to reporting top-line data
later this calendar year.
In June 2023, the Company announced
that the phase 2 open-label, single
centre pilot study to evaluate iPPS
treatment in subjects with MPS I met
its primary and secondary endpoints.
iPPS was well tolerated out to 73 weeks
and subjects reported meaningful
improvements in pain, function, and
activities of daily living and an overall
improvement in quality of life. GAG levels
were also reduced with iPPS treatment.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
03
Chairman and Managing Director’s Report continued
I am sure most investors understand
that drug development is a complex
process, and it takes the dedication and
persistence of highly experienced staff
to bring a new drug to market. I am
pleased to advise shareholders that
there is a very professional and productive
clinical, safety, and regulatory affairs team
in place at Paradigm, and they remain
very focused on preparing the necessary
data to present to the US Food and
Drug Administration and other
regulatory agencies.
Board Initiatives
Following a vote against the Employee
Share Plan (ESP) at the 2022 Paradigm
AGM, the Board has worked diligently
and sought feedback from key
stakeholders to produce a new long-
term incentive (LTI) plan designed to
drive shareholder value and encourage
participant behaviour towards
achieving business success.
The Plan involves employees being
granted ‘Performance Rights’ each year.
Each Performance Right converts to
one ordinary share if performance-based
vesting conditions are met at the end of
a three-year vesting period.
There are three performance hurdles
which must be achieved before any
performance-based rights can vest.
(i) There must be a minimum shareholder
return as measured by the compound
annual growth rate (CAGR) of the share
price, (ii) business goals must be met,
and (iii) individual performance as
measured by key performance indicators
(KPIs) must also be met.
We look forward to presenting the
updated LTI plan to all shareholders in
the near term. An LTI plan is an important
tool for management to ensure Paradigm
can continue to attract and retain the best
talent necessary to drive the achievement
of Company milestones and increase
value for all stakeholders.
I thank Paradigm’s independent Directors for the faith and trust
they have again bestowed upon me to lead this Company as we
navigate the complexities of an extensive clinical program on
the way to registering PPS for multiple indications.
Key Operational Aspects
Much of the FY23 expenditure was
focused on clinical development for
the lead programs. Paradigm’s cash
position was bolstered by a $66 million
capital raise in August 2022. This
comprised a $45.7 million institutional
placement supported by existing
and new domestic and international
institutional investors, and a fully
underwritten 1 for 15 pro-rata non
renounceable entitlement offer of A$20.3
million at $1.30 per share.
Throughout FY23, Paradigm welcomed
seven new hires into the organisation
to grow Paradigm’s global footprint,
resulting in equal numbers of staff in
Australia and the US. Marco Polizzi
was appointed as Paradigm CEO in
July 2022, and in November 2022,
Marco’s employment with Paradigm
ceased. The terms of the separation
deed are confidential. I thank Paradigm’s
independent Directors for the faith and
trust they have again bestowed upon
me to lead this Company as we navigate
the complexities of an extensive clinical
program on the way to registering PPS
for multiple indications. Abby Macnish
Niven joined Paradigm as interim CFO
and Company Secretary, following the
departure of CFO Justin Cahill in March
2023 and after the tragic passing of
inaugural Paradigm Company Secretary
Kevin Hollingsworth. Kevin was always
a passionate contributor to Paradigm,
a great friend and colleague.
The View Ahead
In July 2022, Paradigm engaged
Plexus Ventures (USA) to assist with
our global partnering activities. Plexus
has more than 30 years’ experience in
structuring and executing transactions
and agreements among pharmaceutical
and consumer healthcare companies
worldwide. The experts from Plexus
who are working with Paradigm have
direct experience and wide networks
within the global pharmaceutical
sector. Plexus facilitates Paradigm’s
discussions with potential partners and
advises on deal strategy, timing, value
and the strategic fit and capabilities of
potential partners for Paradigm’s assets.
Throughout FY23, Paradigm together
with Plexus have attended multiple
global conferences including JP Morgan
Healthcare Conference, BIO International
and BIO-Europe, and held numerous
one-on-one meetings with potential
global and regional licensing partners
to introduce Paradigm and its late-stage
assets and pursue discussions with
interested parties.
I would like to thank our shareholders
for their continued support of Paradigm
along our journey to a New Drug
Application (NDA). We are extremely
grateful for your investment, passion
and commitment, which helps drive
us to achieve our best. I would also
like to thank the staff at Paradigm for
their dedication, contributions, and
achievements in FY23. I look forward
to reporting further significant
milestones in FY24.
On behalf of the Directors,
Paul Rennie
Chairman and Managing Director
Melbourne, Victoria
25 August 2023
04
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Paradigm Biopharmaceuticals Limited
Annual Report 2023
05
Chief Medical Officer’s Report
Donna Skerrett
Dear Shareholders,
As Paradigm’s Chief Medical Officer,
I’m pleased to report upon the
Company’s clinical and scientific
progress.
Paradigm’s goal is to develop the full
potential of underutilised molecules to
address many of the unmet medical
needs facing millions worldwide
suffering from diseases characterised
by inflammation. The Company’s current
primary focus is the clinical development
of an injectable version of the semi-
synthetic molecule pentosan polysulfate
sodium, also known as PPS or iPPS.
This molecule has been in use in oral
form to treat bladder inflammation in
humans for over 25 years.
Based on more recent scientific research,
we quickly understood that PPS had
the excellent potential to reduce pain
and improve function in diseases with
strong inflammatory components such
as osteoarthritis. This hypothesis was
reinforced with early preclinical
research results that have translated
into highly exciting clinical trial results
and real-world evidence from our
managed access programs.
Although the road to drug registration is
long and complex, we are delighted with
our continued progress in our R&D and
clinical programs, as emphasised by the
FDA Fast Track Designation granted a
little over a year ago, and our continuing
clinical milestone achievements.
This year has seen impressive advances
in the Company’s two major clinical and
scientific programs of osteoarthritis and
mucopolysaccharidosis. With these and future
upcoming milestones, Paradigm is on track
to develop iPPS into a registered product.
Navigating Drug Development
Our team of highly skilled clinical,
research, medical, regulatory, logistics,
and business experts understand that
to successfully achieve approval, all
facets of a new drug must be beyond
reproach. Most importantly, these
include clinical effect and safety, which
are key metrics used at all stages of a
drug development process.
Drug development starts with laboratory
and preclinical studies, which can then
move into early testing in small groups
of volunteers (20-80), known as phase 1
clinical trials. Phase 1 trials are focused
on safety with continued checks for side
effects (adverse events). Phase 1 studies
may also evaluate the kinetics of a drug,
i.e., understanding how much drug is
in an individual and how long the drug
stays in the circulation so a half-life can
be calculated.
Phase 2 clinical trials investigate efficacy
and continue to monitor safety in larger
studies, comparing response and
tolerance in the drug-treated group with
control subjects. When meaningful signs
of efficacy and tolerance are established
in phase 2, the program progresses to
phase 3 trials, which are powered to
demonstrate statistically significant and
clinically meaningful treatment effects
in treated compared to control subjects
and often include hundreds of patients.
Phase 3 trials compare the new
investigational drug to an existing
medication or the current standard of
care if no comparable therapy exists.
As with all studies, phase 3 continues
to monitor for any adverse effects.
In addition to the safety and efficacy
studies, further laboratory or preclinical
studies may deepen understanding of
the molecular mechanisms of action.
Furthermore, the sponsoring company
must ensure that the investigative drug
can be manufactured consistently,
and quality controlled to all necessary
specifications, which means meeting
all manufacturing, labelling, transport,
and logistical planning requirements
necessary to scale up production and
deliver consistent drug for human use.
Our team is ensuring that at every
stage, we meet and pass all regulatory
requirements on this drug development
journey, to provide a well planned and
executed registration program for
commercialising iPPS for osteoarthritis
and MPS.
Clinical Trials – the
Cornerstone of our iPPS
Development Program
As highlighted by Managing Director
Paul Rennie, the last financial year
has seen enormous progress in our
pivotal phase 3 clinical trial for knee
osteoarthritis. This global two-stage,
adaptive, double-blinded, placebo-
controlled clinical trial is active in
seven countries, with over 120 clinical
trial sites activated to date. Remotely
managing the recruitment process
for such a complex trial during the tail
end of a global pandemic has been a
massive logistical challenge, one that
the Company has met with unflagging
determination and dedication. We are
delighted to report that the PARA_
OA_002 clinical trial has now identified
all patients to be randomised for the
first stage.
06
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Multiple different initiatives contributed
to this success. The clinical team
benefited from the Company’s
partnership with NFL Alumni Health,
resulting in an invitation for our Head
of Clinical Osteoarthritis, Dr Mukesh
Ahuja, to present at a health symposium
during the NFL Draft in Kansas City.
Furthermore, Paul Rennie, Dr Ahuja
and I were invited to present to several
different NFL Alumni chapter presidents,
with a resulting positive increase in
clinical trial interest.
The Company also engaged the services
of two well-respected and effective
clinical trial recruitment enterprises,
1nHealth, and SubjectWell, which both
use targeted patient-centric technology-
enabled approaches to better identify
potential participants. In Australia, a
targeted radio ad campaign across
several states, as well as a focused
letterbox drop near clinical trial sites
were tested to increase recruitment.
Our core internal team works seamlessly
and closely with our clinical, safety, and
statistical contract research organisation
(CRO) partner vendors to manage all
aspects of patient care, monitoring,
and data management.
PARA_OA_002 stage 1 will provide
information for selection of the lowest
and best tolerated dose for proceeding
to stage 2 to complete this phase 3
study, and to initiate the confirmatory
phase 3 study. Following dose selection,
the above-noted initiatives will support
the ongoing recruitment for the
subsequent second stage of this pivotal
clinical trial, which when complete,
will have seen over 900 volunteers
randomised for the study.
Our team is ensuring that at
every stage, we meet and pass
all regulatory requirements on
this drug development journey,
to provide a well planned and
executed registration program
for commercialising iPPS for
osteoarthritis and MPS.
7
Countries
Number of countries with study
trial sites for both OA and
MPS clinical programs
468
Patients
Number of volunteers in the
first stage of the double-blind,
placebo-controlled, randomised
phase 3 PARA_OA_002 study
Paradigm Biopharmaceuticals Limited
Annual Report 2023
07
Chief Medical Officer’s Report continued
Harnessing the Potential Value
for DMOAD in OA
Right now, there are no OA treatments
available classed as DMOADs—or
disease-modifying OA drugs—for
people suffering the debilitating effects
of progressive OA. Currently available
medications and therapies can help
manage OA symptoms; however, they
are unable to address the underlying
bone dysfunction, and cannot slow,
stop or reverse the degenerative bone
disease process. Furthermore, many OA
treatments require prolonged continual
administration and are often not tolerated
for long periods of administration.
This year, we reported exciting results
from two different studies, one aimed
to examine the changes that occur
in the knee joint space (synovial fluid
or synovium) in a canine model that
treated family owned dogs with naturally
occurring osteoarthritis of the stifle
(knee equivalent) and elbow joints.
Although only exploratory (small numbers),
this study provided a glimpse into the
potential longer-term effects of iPPS
treatment. This is because the six-month
period that was investigated in the dogs
is roughly equivalent to three years of
bone deterioration in humans with OA.
Not only were clinical and functional
measures showing encouraging effects
compared to placebo, but further
explorations into changes in the knee
joint following iPPS treatment with
the assessment of biomarkers, both
molecular and structural, provided some
evidence that iPPS may slow or halt OA
disease progression.
Furthermore, an additional study
provided convincing clinical evidence of
iPPS DMOAD potential. This exploratory
double-blinded, placebo-controlled,
randomised controlled phase 2 clinical
trial investigated iPPS in 61 people with
moderate to severe knee osteoarthritis
at 56 days (two weeks after completing
the six-week treatment course) and at
168 days (six-month timepoint). A number
of trial participants will also be assessed
for pain and function at the one-year
timepoint. This PARA_OA_008 trial met
the primary endpoint of changes in one or
more synovial biomarkers at Day 56 and
durable effects on pain and function were
observed, with rescue medication use
four times higher in the placebo group
compared to one of the iPPS groups.
These results provide encouraging data
supporting DMOAD effects for iPPS.
However, as no DMOAD has ever been
successfully registered, no established
registration pathways for such drugs
exist. Given trial results and the Fast
Not only were clinical and functional measures showing
encouraging effects compared to placebo, but further explorations
into changes in the knee joint following iPPS treatment with the
assessment of biomarkers, both molecular and structural, provided
some evidence that iPPS may slow or halt OA disease progression.
08
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Track Designation, Paradigm intends
to initiate working discussions with the
FDA and EMA in order to develop and
reach agreement on a novel DMOAD
registration pathway.
Paradigm considers DMOAD labelling a
strategically valuable goal as independent
market research conducted in 2021
demonstrated that physicians would
consider Zilosul® much earlier in the
therapeutic algorithm if it had a disease
modifying indication. Subsequent analysis
of US payers found that an annual cost
of between $2,000 to $3,000 USD would
be acceptable for Zilosul® as a therapy
to reduce pain and improve function
in knee OA, whereas an additional
DMOAD label could be valued at $6,000
USD/year or higher.
A Brief MPS Update
Our MPS clinical program is a critical
pillar in the development of iPPS. Once
children born with the ultra-rare forms
of lysosomal storage disease known as
mucopolysaccharidosis or MPS have
been diagnosed, they will be reliant on
either bone marrow transplantation and/
or enzyme replacement therapy to keep
the worst of the disease effects at bay.
Despite these cutting-edge treatments,
people with MPS still experience residual
joint inflammation and pain, which can
severely impact their day-to-day lives.
The Company has progressed to phase
2 clinical trials in both MPS types I and VI.
The open-label phase 2 MPS I trial was
completed and is currently undergoing
analysis. The placebo-controlled, double-
blind, randomised phase 2 MPS VI study
completed participant enrolment and
passed several safety reviews,
enabling the inclusion of younger
subjects. As analysis continues, we
are planning further discussions with
regulators to establish regulatory
pathways for registration for iPPS for
the treatment of this rare disease.
An Exciting Stage of
Development
This year, we’ve seen our OA clinical trial
program progress in leaps and bounds
with the continued meeting of targets with
the global phase 3 trial and some highly
positive phase 2 and nonclinical study
results indicating that DMOAD may well
be within reach. Moving from clinically
relevant pain relief and improvement in
function, to potentially slowing, halting, or
even reversing degenerative osteoarthritis
will ensure that Zilosul® is at the forefront
of decision-makers’ minds when
considering reimbursement potential.
I would like to personally thank Founder
and Managing Director Paul Rennie, and
the Board for their continued support
throughout the year, as well as the entire
dedicated Paradigm team, who have
worked tirelessly to achieve excellent
results this year, I can’t wait to see what
the next few years bring.
Donna Skerrett
Chief Medical Officer
New York City, New York
Paradigm Biopharmaceuticals Limited
Annual Report 2023
09
The Unmet Need in Osteoarthritis
In combination with an ageing population, the lack of
effective treatments for osteoarthritis is a global issue.
Here, we delve into the reasons why developing a novel
non-opioid treatment that can alleviate pain and improve
mobility in osteoarthritis is so important.
Musculoskeletal disorders—including
osteoarthritis—are responsible for more
Australian health expenditure than
any other group of conditions. This is
according to the Australian Institute
of Health and Welfare (AIHW) report
on the 2019–2020 Australian Burden
of Disease Study, which included
COVID-19. Musculoskeletal disorders
cost Australians a phenomenal $14.6
billion, compared to $12.7 billion for
cardiovascular diseases or $12.1 billion
for cancer and other neoplasms1. Of the
musculoskeletal disorders, osteoarthritis
is one of the most common, affecting
one in five Australians over the age of
452, and rates only look to increase.
This need has only been strengthened
with the release of 2021 Census data,
confirming a link between ageing
and increasing rates of arthritis.
The Australian Bureau of Statistics
found that 50.4% of baby boomers—
those aged 55-74 years—reported a
Paradigm’s OA program
milestones
Feb
PARA_OA_001
First patient enrolled
(ACL study)
Jul
First SAS OA patient
Aug
PARA_OA_001
Last patient visit
(ACL study)
long-term health condition, equating
to a tenth of the Australian population.
The condition was more than twice as
likely to be arthritis compared to the
whole Australian population. Arthritis
was also the most commonly reported
long-term condition for all Australians
living in New South Wales, South
Australia, and Tasmania3.
Osteoarthritis is a chronic joint disease
most often causing pain and stiffness
in knees, hips, and hands4. In particular,
knee osteoarthritis was estimated to
affect 913,539 working-age Australians
in 2019, where the economic impact
due to lost productivity amounted to
AU$424 billion in lost GDP5.
There is a scarcity of effective treatments
for osteoarthritis, and research has
found that four of five osteoarthritis
sufferers are dissatisfied with current
treatments6. Further compounding the
issue is the absence of any registered
drugs that can prevent, stop, or slow
osteoarthritis progression7. Although
worldwide research on disease-
modifying osteoarthritis drugs—or
DMOADs—is ongoing, progress has
been slow due to the complexity of
this disorder.
In November last year, new research
presented at the Radiological Society of
North America’s annual meeting is calling
into question the efficacy of common
osteoarthritis treatments such as anti-
inflammatories and steroid injections,
and even suggesting they could
potentially worsen the underlying disease
process8,9. Although this research is not
yet published, such news is potentially
concerning to the millions of people
relying on these interventions worldwide.
Arthritis Australia—the peak non-profit
charitable organisation supporting all
types of arthritis sufferers—and the
AIHW have highlighted the paucity of
Apr
100th SAS OA patient
Aug
PARA_OA_005 100%
recruitment
Oct
Initiation of US EAP
with ex-NFL players
Dec
PARA_OA_005
Successful clinical
trial readout
Feb
EAP First patient first dose
Feb
Pre-IND meeting with US FDA
May
500th SAS OA patient
Jul
Successful EAP results
Sep
Scientific advice meeting
with EMA
Apr
PARA_OA_005
Secondary
endpoints met
Sep
IND cleared by
FDA for EAP
2016
2017
2018
2019
2020
Legend: DMC = Data Monitoring Committee; EAP = Expanded Access Program (US); EMA = European Medicines Agency;
FDA = Food and Drug Administration (US); IND = Investigational New Drug; MHRA = Medicines and Healthcare Products Regulatory Agency (UK);
NFL = National Football League; SAS = Special Access Scheme (AU); TGA = Therapeutic Goods Administration (AU).
Clinical trial
Managed access programs
Regulatory
R&D study
Program development
10
Paradigm Biopharmaceuticals Limited
Annual Report 2023
528
million
Number of people worldwide suffering
from OA in 201911.
7
81%
Number of different body zones
listed as affected by osteoarthritis
in applications for iPPS treatment
via the Australian TGA’s Special
Access Scheme.
Proportion of people suffering
from OA that are dissatisfied with
current treatments6.
research in this area of critical interest
to all Australians10. Given the lack
of effective treatments and growing
concerns around current therapies,
they are advocating loudly for the
government to provide significant
funding for arthritis research to prevent
future loss of productivity and wellbeing,
and to ensure that our health system is
not overburdened with arthritis-related
disorders, both now and into the future.
Paradigm understands this growing
global unmet need, so the team focused
its efforts on developing a safe and
effective osteoarthritis treatment to
reduce pain and improve mobility in
people with knee osteoarthritis. Our
target drug of interest is pentosan
polysulfate sodium (PPS).
PPS was discovered 60 years ago
as an anticoagulant and in 1996 was
approved as a pill by the US FDA for the
management of bladder inflammation.
However, the new formulation, known as
iPPS or Zilosul® that is being developed
for osteoarthritis, only requires a short
six-week course of subcutaneous
injections rather than daily oral use.
On the path to registration, Paradigm’s
comprehensive clinical program
continues to produce consistent clinical
results. In October of 2022, early data
from a clinical trial in 61 Australians with
moderate to severe knee osteoarthritis
demonstrated significant improvements
in pain, function, and stiffness in
those receiving a six-week treatment
course, compared to the control
group. Furthermore, certain molecular
biomarkers within the knee joint space
showed favourable differences in the
treated group, thus meeting the study’s
primary endpoint. Chief Scientific Officer
Dr Ravi Krishnan said, “These biomarker
changes are highly informative, as they
reflect the osteoarthritic disease process
and provide information about the
mechanism of action of Zilosul® in the
knee joints of osteoarthritis sufferers.”
Managing Director Mr Paul Rennie
reinforced their impact, “These results
are potentially very exciting to both
investigators and investors. If confirmed,
they provide tangible evidence that a
never-before-seen DMOAD is potentially
within reach.” Further results from this
study were analysed and released in
2023 and demonstrated further bone
and cartilage changes via MRI indicative
of a potential disease-modifying process.
To further understand the effects iPPS
has on the osteoarthritic joint and to gain
insight into their duration, the Company
completed a focused exploratory study
in a canine model of naturally occurring
osteoarthritis. Participant dogs with
elbow or stifle joint (the knee equivalent
in humans) osteoarthritis were screened
and recruited as owners brought them in
to a Werribee-based veterinary service.
Mar
IND submitted to FDA
Apr
PARA_OA_008 First patient
first dose
Nov
IND cleared by FDA
Sep
PARA_OA_002 First trial site
activated (site initiation visit)
Dec
PARA_OA_002 First patient
first dose
Jan
Naturally occurring
OA canine study
start
Feb
MHRA approval
Apr
FDA Fast Track
approval
Jun
Health Canada
approval
Jul
Partnership with
NFL Alumni Health
Aug
PARA_OA_008 Last
patient last dose
Dec
PARA_OA_002
Successful DMC
safety review
Mar
EMA approval
Mar
Scientific presentations
at OARSI international
conference
Apr
NFL Draft NFL Alumni
Health Symposium
Jun
PARA_OA_002 Successful
DMC safety review
Jun
PARA_OA_002 120th
trial site activated
(site initiation visit)
Jun
Naturally occurring OA
canine study completion
May
Jul
Launch of Hope4OA
clinical trial website
All subjects identified
stage 1 PARA_OA_002
2021
2022
2023
Paradigm Biopharmaceuticals Limited
Annual Report 2023
11
The Unmet Need in Osteoarthritis continued
Compared to placebo, iPPS-treated
dogs showed meaningful improvements
in subjective measures of pain, objective
functional clinical outcomes, and
objective measurements of cartilage
volume and molecular biomarkers.
Furthermore, positive changes were
observed out to 26 weeks, considered
to be approximately equivalent to three
years in human terms.
In parallel, Paradigm is running a global,
adaptive, two-stage, double-blinded,
randomised and placebo-controlled
clinical trial in which more than 900
participants from over 120 sites in
Australia, the US, Canada, the UK,
and Europe will be recruited to determine
the minimum effective and safe dose for
Zilosul® in knee osteoarthritis sufferers,
as well as provide further information
on the duration of effects.
Paradigm has collected consistent
data throughout its osteoarthritis
program with two phase 2 clinical trials
conducted in Australia and through
real-world evidence via the TGA Special
Access Scheme (SAS) and the FDA
Expanded Access Program (EAP). To
date, the osteoarthritis program has
achieved many significant milestones
as the Company has progressed into
a globally harmonised and FDA Fast
Tracked phase 3 clinical program for
knee osteoarthritis.
While osteoarthritis and other
musculoskeletal disorders remain a
significant burden to sufferers, these
promising results in reduction of pain,
improvement in function, improvement
in overall global impression of change,
and signals of molecular and structural
improvement provide hope that a
better osteoarthritis therapy might be
closer to a reality. The over half a billion
osteoarthritis sufferers worldwide await
further developments with interest.
What is Zilosul®?
Injectable pentosan polysulfate sodium (iPPS) —or Zilosul® for the use of treating osteoarthritis—is a semi-synthetic
heparin-like drug manufactured from the wood of European beech trees. Extracted glucuronoxylans are then
sulphated via a proprietary method to produce a negatively charged product that mimics natural glycosaminoglycans
(GAGs). GAGs are complex carbohydrates that play a regulatory role in the body through interacting with proteins
involved with inflammation.
PPS has several key features including anti-inflammatory activity and pain reduction. The mechanism of action of
PPS occurs by reducing the transcription factor NFκB. This reduction then modulates nerve growth factor (NGF)
expression, potentially reducing pain signalling12–14.
The Company’s broader focus is therefore to explore the use of PPS in the treatment of a wide spectrum of conditions
that begin with and are sustained by inflammation, such as alpha-viral induced arthralgia, heart failure, osteoarthritis
(OA), and the ultra-rare disease mucopolysaccharidosis (MPS).
Zilosul® is the registered name of injectable PPS when used for the treatment of pain and to improve function in
people with osteoarthritis.
References
1. AIHW. Disease expenditure in Australia 2019–20 (Internet).
2022 Nov (cited 2022 Dec 23). Available from: https://www.aihw.gov.
au/reports/chronic-disease/disease-expenditure-in-australia-2019-20/
contents/about.
2. AIHW. Osteoarthritis (Internet). 2022 Aug (cited 2022 Oct 11).
Available from: https://www.aihw.gov.au/reports/chronic-musculoskeletal-
conditions/osteoarthritis/contents/what-is-osteoarthritis.
3. Australian Bureau of Statistics. Long-term health conditions (Internet).
2022 (cited 2023 Jan 4). Available from: https://www.abs.gov.au/
articles/long-term-health-conditions.
4. Kolasinski SL, Neogi T, Hochberg MC, Oatis C, Guyatt G, Block J, et al.
2019 American College of Rheumatology/Arthritis Foundation Guideline
for the Management of Osteoarthritis of the Hand, Hip, and Knee.
Arthritis Rheumatol. 2020 Feb;72(2):220–33.
5. Jin X, Ackerman IN, Ademi Z. Loss of Productivity-Adjusted Life-Years
in Working-Age Australians Due to Knee Osteoarthritis: A Life-Table
Modeling Approach. Arthritis Care Res. 2022 Mar 29.
6. Matthews GI, Hunter DJ. Emerging drugs for osteoarthritis. Expert Opin
Emerg Drugs. 2011 Sep;16(3):479–91.
7. Oo WM, Yu SPC, Daniel MS, Hunter DJ. Disease-modifying drugs in
osteoarthritis: current understanding and future therapeutics. Expert Opin
Emerg Drugs. 2018 Oct 2;23(4):331–47.
8. RSNA. NSAIDs May Worsen Arthritis Inflammation (Internet).
2022 Nov (cited 2022 Dec 22). (Radiological Society of North America).
Available from: https://press.rsna.org/timssnet/media/pressreleases/14_
pr_target.cfm?id=2379.
12
Paradigm Biopharmaceuticals Limited
Annual Report 2023
9. RSNA. Steroid Injections Worsen Knee Arthritis (Internet).
2022 Nov (cited 2022 Dec 22). Available from: https://press.rsna.org/
timssnet/media/pressreleases/14_pr_target.cfm?id=2386.
10. Arthritis Australia. Impactful Arthritis Research (Internet). 2022 Sep
(cited 2022 Dec 22). Report No.: 3. Available from: https://arthritisaustralia.
com.au/programs-research/research-australia/report-3/.
11. GBD 2019 Demographics Collaborators. Global age-sex-specific
fertility, mortality, healthy life expectancy (HALE), and population
estimates in 204 countries and territories, 1950-2019: a comprehensive
demographic analysis for the Global Burden of Disease Study 2019.
The Lancet. 2020 Oct 17;396(10258):1160–203.
12. Sunaga T, Oh N, Hosoya K, Takagi S, Okumura M. Inhibitory Effects
of Pentosan Polysulfate Sodium on MAP-Kinase Pathway and NF-κB
Nuclear Translocation in Canine Chondrocytes In Vitro. J Vet Med Sci.
2012;74(6):707–11.
13. Bwalya EC, Kim S, Fang J, Suranji Wijekoon HM, Hosoya K, Okumura
M. Pentosan polysulfate inhibits IL-1β-induced iNOS, c-Jun and
HIF-1α upregulation in canine articular chondrocytes. Gualillo O,
editor. PLOS ONE. 2017 May 4;12(5):e0177144.
14. Stapledon CJM, Tsangari H, Solomon LB, Campbell DG, Hurtado P,
Krishnan R, 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. 2019 Sep 26;14(9):e0222602.
Directors’ Report
The Directors present their report together with the Financial Report of Paradigm and the entities it controlled at the end of,
or during, the year ended 30 June 2023 (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 Director and Executive Chairman (Appointed as Managing Director
and ceased as Non-Executive Chairman on 22 November 2022)
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. Paul is the founder of Paradigm
Biopharmaceuticals. Paul is also Non-Executive Chairman and Interim Chief Executive Officer of
NeuroScientific Biopharmaceuticals Ltd (ASX:NSB).
Dr Donna Skerrett, Executive Director and Chief Medical Officer (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, PA, and is currently
a member of the Board of Visitors of Lewis Katz School of Medicine at Temple University.
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). John is Chair of the Remuneration and Nomination Committee and is a
member of the Audit and Risk Management Committee.
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 served as General 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 Legal Officer of neuro-medical device company Synchron, chairman of the Board of surgeons’
education services company Vasculab, and as a legal adviser to a number of ASX listed and private life
science companies. Amos is a member of the Remuneration and Nomination Committee and a member
of the Audit and Risk Management Committee.
Helen Fisher, Non-Executive Director (Appointed on 23 February 2021)
Helen Fisher, BSc, LLB (Hons), LLM, MCom, is Chief Executive Officer and Managing Director of Bio Capital
Impact Fund (BCIF) and Non-Executive Director 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 for over ten years and led Deloitte’s life science practice in Australia for five years, having had
many years’ experience in the life sciences and healthcare sector. Helen is Chair of the Audit and Risk
Management Committee and a member of the Remuneration and Nomination Committee.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
13
Directors’ Report continued
Company Secretary
Kevin Hollingsworth, Company Secretary (Appointed on 2 May 2014 and ceased on 30 August 2022)
Kevin Hollingsworth, FCPA, FCMA, CGMA, in addition to his duties at Paradigm, served 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. Kevin Hollingsworth passed away in August 2022.
Abby Macnish Niven, Company Secretary (Appointed on 30 August 2022)
Abby Macnish Niven (BComm, Bsc, CFA, GAICD) has over 20 years’ experience in wealth management in Australia. She holds
a Bachelor of Commerce degree with a double major in Commerce and Science, is a CFA Charterholder and is a member of the
Australian Institute of Company Directors. She has also completed the Certificate in Governance Practice. Abby has also held
the role of Company Secretary and Chief Financial Officer of NeuroScientific Biopharmaceuticals Ltd (ASX:NSB) since April 2020.
Directorships in Other Listed Entities
Directorships of other listed entities held by Directors of Paradigm during the last three 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
John Gaffney
Donna Skerrett
Amos Meltzer
Helen Fisher
Board
Nomination &
Remuneration Committee
Audit &
Risk Committee
Attended
12
Held
–
Attended
–
Held
–
Attended
–
12
12
12
12
1
–
1
1
1
–
1
1
2
–
2
2
2
–
2
2
Held
12
12
12
12
12
In addition to the formal meetings identified in the table above, the committee members and the Board members each convened
on many occasions including for the purpose of, in the case of the committees, preparing recommendations to present to
the Board and, in the case of the Board, to attend to matters discussed at formal Board meetings and ensure that the Board
decisions are implemented, and action items acted upon.
Committee Membership
As at the date of the report, Paradigm had a Remuneration and Nomination Committee and an Audit and Risk Management
Committee of the Board of Directors. Members acting on the committees of the Board during the financial year were:
Remuneration & Nomination Committee
John Gaffney (Chair)
Audit & Risk Management Committee
Helen Fisher (Chair)
Amos Meltzer
Helen Fisher
John Gaffney
Amos Meltzer
14
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Principal Activities
The principal activities of Paradigm are researching and developing therapeutic products for human use.
Operating Review
Paradigm made a loss of $51,910,013 (2022: $39,249,584) for the financial year ended 30 June 2023, an increase of
$12,660,429 on the prior year. Given Paradigm is a late-stage clinical development company, it is likely that NPAT losses
can be expected in future years as the clinical development of Zilosul® continues towards marketing approval.
Revenue from continuing operations of $46,760 (2022: $79,224) decreased compared to the prior corresponding period by
$32,464. This revenue is related to the TGA approved Special Access Scheme (SAS). Under the SAS program, Zilosul® has been
made available to selected physicians to treat patients experiencing chronic arthralgia from Ross River Virus (RRV) infection,
previous SAS patients seeking re-treatment, and other subjects that do not qualify for recruitment in the PARA_OA_002 or
PARA_OA_008 clinical studies. The pay-for-use SAS program was launched late in FY21, with Paradigm supplying product to
prescribing doctors experienced with iPPS and who had the ability to provide the safety monitoring necessary for this program.
Subject monitoring is of a standard consistent with those in the PARA_OA_002 and PARA_OA_008 studies, which does add
further cost to the SAS program. Paradigm is willing to continue to provide SAS for subjects who meet strict participation
criteria, knowing that this provides a therapy option for those that have participated in SAS previously or who are ineligible
for participating in open recruiting studies. Due to the strict monitoring guidelines and reporting procedures, Paradigm has
determined that whilst the Company is conducting its global phase 3 program, it is necessary to provide access only to
prescribing doctors who have considerable experience with iPPS. Due to this we expect continued modest uptake of the
SAS program into FY24.
Other income of $8,534,179 (2022: $7,814,341) is higher than the prior corresponding period by $719,838. The main reason
for this increase is the interest received during the year was much higher than FY22 by $1,350,833 due to increased cash on
term deposits as well as the impact of higher interest rates in FY23.
Expenditure on research and development increased on the prior corresponding period by $13,667,206 to $52,679,197.
Most of the increased spend is directly related to the clinical development program for Zilosul®, a phase 3 asset in treating
pain and joint function associated with knee osteoarthritis. Paradigm reported in FY23 regulatory and ethics approvals for
the PARA_OA_002 study in Europe, Canada, and the UK, enabling site activation and patient recruitment in these countries.
During FY23, over 60 sites across the US, Australia, Canada, Europe, and the UK were activated for the PARA_OA_002 study.
Paradigm staff, in conjunction with our Clinical Research Organisation (CRO) partner, Premier, coordinated the set-up of the
now 120 activated sites, including training, system development, coordination of lab tests, and start up support as each site
commenced screening of subjects. Paradigm recently reported all subjects have been identified for stage 1 of the two-stage
adaptive PARA_OA_002 phase 2 clinical trial. In addition to the PARA_OA_002 study, expenditure increased in the PARA_
OA_008 study. This study focused on examining biomarker data on synovial fluid of the knee, whilst also collecting important
pain, function, and MRI data at various timepoints to inform the Company of the potential for Zilosul® to be developed as a
DMOAD for knee osteoarthritis. During the financial year, Paradigm reported complete enrolment of this phase 2 study as well as
top-line data from both the Day 56 time point where the primary endpoint was achieved and further significant top-line data at
Day 168 demonstrating the potential of iPPS to slow the progression of osteoarthritis.
General and administrative costs of $6,564,548 (2022: $7,934,179) were lower than the prior corresponding period by $1,369,631.
The reduced costs in FY23 are the result of our targeted cost reduction programs during FY23.
Commercial expenses of $822,695 (2022: $918,860) were lower than the prior corresponding period by $96,165. The decrease
in spend relates primarily to our cost reduction program, whilst still ensuring the delivery of targeted stakeholder engagement
and communication programs to continue raising the external global profile of Paradigm’s clinical programs.
The impairment loss during the period was Nil (2022: Nil).
Basic and diluted net loss per share increased to 20.78 cents (2022: 16.87 cents as restated) due to the greater loss attributable
to the number of shares.
On the 15th of August 2022 Paradigm announced a capital raise of approximately $66 million at $1.30 per share. The raise
comprised a $45.7 million institutional placement under Paradigm’s existing LR7.1 capacity and a 1:15 pro rata non renounceable
entitlement offer of $20.3 million. The use of funds was focused on:
• Continuation of phase 3 clinical development and new drug application (NDA) related activities for Zilosul®,
• Business development related activities
• Product development related activities (auto injector, for example)
• Working capital.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
15
Directors’ Report continued
Environmental Regulation
Paradigm’s operations are not regulated by any significant environmental law of the Commonwealth or of a state or territory
of Australia.
Risk Statement
Clinical Development
Clinical trials are inherently very risky and may prove unsuccessful or non-efficacious, impracticable or costly – which may impact
on the prospect of completion. Failure or negative or inconclusive results can occur at many stages in development and the
results of earlier clinical trials are not necessarily predictive of future results. In addition, data obtained from trials is susceptible to
varying interpretations, and regulators may not interpret the data as favourably as Paradigm, which may delay, limit or prevent
regulatory approval.
Research and Development Activities
Paradigm’s future success is dependent on the performance of Paradigm in clinical trials and whether its therapeutic product
candidate proves to be a safe and effective treatment. Paradigm’s lead product is an experimental product in clinical development
and product commercialisation resulting in potential product sales and revenues is likely to still be a few years away, and there is
no guarantee that, even when commercialised, it will be successful. It requires additional research and development, including
ongoing clinical evaluation of safety and efficacy in clinical trials and regulatory approval, prior to marketing authorisation. Drug
development is associated with a high failure rate and, until Paradigm is able to provide further clinical evidence of the ability of
Paradigm’s product to improve outcomes in patients, the future success of the product in development remains speculative.
Research and development risks include uncertainty of the outcome of results, difficulties or delays in development and generally
the uncertainty that surrounds the scientific development of pharmaceutical products.
Regulatory Approval
Paradigm operates within a highly regulated industry, relating to the manufacture, distribution and supply of pharmaceutical
products. There is no guarantee that Paradigm will obtain the required approvals, licences and registrations from all relevant
regulatory authorities in all jurisdictions in which it operates. The commencement of clinical trials may be delayed and Paradigm
may incur further costs if the Food and Drug Administration (FDA) and other regulatory agencies observe deficiencies that require
resolution or request additional studies be conducted in addition to those that are currently planned. A change in regulation may
also adversely affect Paradigm’s ability to commercialise and manufacture its treatments.
Intellectual Property Risks
Securing rights in technology and patents is an integral part of securing potential product value in the outcomes of biotechnology
research and development. Competition in retaining and sustaining protection of technology and the complex nature of technologies
can lead to patent disputes. Paradigm’s success depends, in part, on its ability to obtain patents, maintain trade secret protection
and operate without infringing the proprietary rights of third parties. Because the patent position of biotechnology companies
can be highly uncertain and frequently involves complex legal and factual questions, neither the breadth of claims allowed in
biotechnology patents nor their enforceability can be predicted. There can be no assurance that any patents which Paradigm
may own, access or control will afford Paradigm commercially significant protection of its technology or its products or have
commercial application or that access to these patents will mean that Paradigm will be free to commercialise its drug candidates.
The granting of a patent does not guarantee that the rights of others are not infringed or that competitors will not develop
technology or products to avoid Paradigm’s patented technology. Paradigm’s current patenting strategies do not cover all
countries, which may lead to generic competition arising in those markets.
Competition
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological
change, both in Australia and internationally, and there are no guarantees about Paradigm’s ability to successfully compete.
Paradigm’s products may compete with existing alternative treatments that are already available to customers. In addition, a number
of companies, both in Australia and internationally, are pursuing the development of competing products. Some of these
companies may have, or may develop, technologies superior to Paradigm’s own technology. Some competitors of Paradigm
may have substantially greater financial, technical and human resources than Paradigm does, as well as broader product offerings
and greater market and brand presence. Paradigm’s services, expertise or products may be rendered obsolete or uneconomical
or decrease in attractiveness or value by advances or entirely different approaches developed by either Paradigm or its competitors.
16
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Commercial Risk
Paradigm may, from time to time, consider acquisition, licensing, partnership or other corporate opportunities for Paradigm’s
product development programs. There can be no assurance that any such acquisition, licensing, partnership or corporate
opportunities can be concluded on terms that are, or are believed by Paradigm to be, commercially acceptable. In the case of
licensing and partnership opportunities, even if such terms are agreed there is a risk that the performance of distributors and
the delivery of contracted outcomes by collaborators will not occur due to a range of unforeseen factors relating to environment,
technology and market conditions.
Market Penetration
Where Paradigm does obtain regulatory approval, future success will also depend on Paradigm’s ability to achieve market
acceptance and attract and retain customers, which includes convincing potential consumers and partners of the efficacy of
Paradigm’s products and Paradigm’s ability to manufacture a sufficient quantity and quality of products at a satisfactory price.
Manufacturing
There is a risk that scale-up of manufacturing of pentosan polysulfate sodium (PPS) for commercial supply may present certain
difficulties. Any unforeseen difficulty relating to manufacturing or supply of commercial GMP quantities of PPS may negatively
impact Paradigm’s ability to generate profit in future.
Reliance on Key Personnel
Paradigm is reliant on key personnel employed or engaged by Paradigm. Loss of such personnel may have a material adverse
impact on the performance of Paradigm. In addition, recruiting qualified personnel is critical to Paradigm’s success. As Paradigm’s
business grows, it may require additional key financial, administrative, investor and public relations personnel as well as additional
staff for operations. While Paradigm believes that it will be successful in attracting and retaining qualified personnel, there can
be no assurance of such success. The loss of key personnel or the inability to attract suitably qualified additional personnel
could have a material adverse effect on Paradigm’s financial performance.
Insurance and Uninsured Risks
Although Paradigm maintains insurance to protect against certain risks in such amounts as it considers to be reasonable,
its insurance will not cover all the potential risks associated with its operations and insurance coverage may not continue to
be available or may not be adequate to cover any resulting liability. It is not always possible to obtain insurance against all such
risks and Paradigm may decide not to insure against certain risks because of high premiums or other reasons.
Product Safety and Efficacy
Serious or unexpected health, safety or efficacy concerns with Paradigm’s (or similar third party) products may expose Paradigm
to reputational harm or reduced market acceptance of its products, and lead to product recalls and/or product liability claims and
resulting liability, and increased regulatory reporting. There can be no guarantee that unforeseen adverse events or manufacturing
defects will not occur. Paradigm will seek to obtain adequate product liability insurance at the appropriate time in order to
minimise its liability to such claims however, there can be no assurance that adequate insurance coverage will be available
at an acceptable cost. Any health, safety or efficacy concerns are likely to lead to reduced customer demand and impact
on potential future profits of Paradigm.
Litigation
In the ordinary course of conducting its business, Paradigm is exposed to potential litigation and other proceedings, including
through claims of breach of agreements, intellectual property infringement or in relation to employees (through personal injuries,
occupational health and safety or otherwise). If such proceedings were brought against Paradigm, it would incur considerable
defence costs (even if successful), with the potential for damages and costs awards against Paradigm if it were unsuccessful,
which could have a significant negative financial effect on Paradigm’s business. Changes in laws can also heighten litigation
risk (for example, antitrust and intellectual property). Circumstances may also arise in which Paradigm, having received legal
advice, considers that it is reasonable or necessary to initiate litigation or other proceedings, including, for example, to protect
its intellectual property rights. There has been substantial litigation and other proceedings in the pharmaceutical industry,
including class actions from purchasers and end users of pharmaceutical products.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
17
Directors’ Report continued
Share Price Fluctuations
The market price of Paradigm shares will fluctuate due to various factors, many of which are non-specific to Paradigm, including
recommendations by brokers and analysts, Australian and international general economic conditions, inflation rates, interest rates,
changes in government, fiscal, monetary and regulatory policies, global geo-political events and hostilities and acts of terrorism,
and investor perceptions. Fluctuations such as these may adversely affect the market price of Paradigm shares. Neither Paradigm
nor the Directors warrant the future performance of Paradigm or any return on investment in Paradigm.
Dilution Risk
Eligible shareholders that do not take up all or part of their entitlements will be diluted by not participating to the full extent in
the Entitlement Offer and by the Institutional Placement, but will not be exposed to future increases or decreases in Paradigm’s
share price in respect of those shares which would have been issued to them had they taken up all of their entitlement.
Economic Risks
Paradigm is exposed to economic factors in the ordinary course of business. A number of economic factors/conditions,
both domestic and global, affect the performance of financial markets generally, which could affect the price at which Paradigm
Shares trade on ASX. Among other things, adverse changes in macroeconomic conditions, including movements on international
and domestic stock markets, interest rates, exchange rates, cost and availability of credit, general consumption and consumer
spending, input costs, employment rates and industrial disruptions, inflation and inflationary expectations and overall economic
conditions, economic cycles, investor sentiment, political events and levels of economic growth, both domestically and
internationally, as well as government taxation, fiscal, monetary, regulatory and other policy changes may affect the demand
for, and price of, Paradigm Shares and adversely impact Paradigm’s business, financial position and operating results. Trading
prices can be volatile and volatility can be caused by general market risks such as those that have been mentioned. Shares in
Paradigm may trade at or below the price at which they are currently trading on ASX including as a result of any of the factors
that have been mentioned, and factors such as those mentioned may also affect the income, expenses and liquidity of Paradigm.
Additionally, the stock market can experience price and volume fluctuations that may be unrelated or disproportionate to the
operating performance of Paradigm.
Dividend Guidance
No assurances can be given in relation to the payment of future dividends. Future determinations as to the payment of dividends
by Paradigm will be at the discretion of Paradigm and will depend upon the availability of profits, the operating results and
financial conditions of Paradigm, future capital requirements, covenants in relevant financing agreements, general business and
financial conditions and other factors considered relevant by Paradigm. No assurance can be given in relation to the level of tax
deferral of future dividends. Tax deferred capacity will depend upon the amount of capital allowances available and other factors.
Forward-looking Statements
There can be no guarantee that the assumptions and contingencies on which any forward-looking statements, opinions and
estimates contained in materials published by Paradigm are based will ultimately prove to be valid or accurate. The forward-looking
statements, opinions and estimates depend on various factors, including known and unknown risks, many of which are outside
the control of Paradigm. Actual performance of Paradigm may materially differ from forecast performance.
18
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Significant Changes in the State of Affairs
There have been no significant changes in the state of affairs of the entities in Paradigm during the year. Please refer to information
on the share capital raise in the Operating Review section above.
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
No matters or circumstance has arisen since 30 June 2023 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.
Likely Developments and Expected Results of Operations
Paradigm will continue to progress its clinical development program for Zilosul®, a potential blockbuster treatment for OA of
the knee. Approximately 120 sites have been activated in the US, UK, Canada, Europe and in Australia for the PARA_OA_002
study. Paradigm has identified all of the subjects required for stage 1 of the PARA_OA_002 study. Once all participants in this
stage have reached day 84, the independent data monitoring committee will review the data and recommend the optimal dose
to progress through to stage 2 of PARA_OA_002 and for the subsequent confirmatory PARA_OA_003 clinical trial. The PARA_
OA_006 extension study continues to enrol participants as they complete the PARA_OA_002 clinical trial. Top-line data from the
12-month timepoint of the PARA_OA_008 study is expected to be available in Q3 CY 2023. These milestones, along with other
important NDA activity, will progress in FY24.
Corporate Governance
The Corporate Governance Statement appears on Paradigm’s website at:
https://paradigmbiopharma.com/about-paradigm/#corporate-governance
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
20,512,805
587,555
1,094,284
–
10,204
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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
19
Directors’ Report continued
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.
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 28
of the Annual Report.
Auditor
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
20
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Remuneration Report
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.
Remuneration Report
The following were KMP of Paradigm at any time during the year and unless otherwise indicated, were KMP for the entire year:
Name
Paul Rennie
Paul Rennie
Marco Polizzi
John Gaffney
Position held
Managing & Executive Director
Non-Executive Chairman
Cheif Executive Officer
Non-Executive Director
Donna Skerrett
Executive Director
Amos Meltzer
Helen Fisher
Non-Executive Director
Non-Executive Director
Date appointed
22 November 2022
22 November 2021
1 July 2022
30 September 2014
3 July 2020
9 December 2020
23 February 2021
Date ceased
22 November 2022
20 February 2023
Remuneration and Nomination Committee
The Remuneration and Nomination Committee is comprised of three 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 and senior Company executive appointments for
the Board’s consideration, reviews the fees payable to senior Company executives and to 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.
During FY23, after appointing Mr Marco Polizzi as CEO on 1 July 2022, Mr Polizzi’s employment with Paradigm ceased
on 22 November 2022. Mr Paul Rennie, Paradigm’s founder and Non-Executive Chairman of the Board, was appointed as
Managing Director.
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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
21
Remuneration Report continued
Principles of Remuneration
The objectives of the Company’s remuneration policies are to align Directors and KMP to the Company’s and shareholders’
long-term interests and to ensure that remuneration structure is fair and competitive.
Paradigm has developed a remuneration philosophy that seeks to combine elements of Fixed Remuneration, Short-Term
Incentive (STI) and Long-Term Incentive (LTI), noting that the proposed LTI plan is pending shareholder approval, 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 achieving individual KPIs and on execution of the
Company’s strategy that will grow shareholder value; and
• LTI that is aimed at long-term retention of staff and rewards staff in a manner that is aligned with the growth in shareholder value.
During FY23, following a vote against the existing LTI plan, the Board has worked diligently and sought feedback from key
stakeholders to produce a new LTI plan designed to drive shareholder value, and encourage participant behaviours towards
achieving business success. The Plan involves employees each year being granted ‘Performance Rights’. Each Performance
Right converts to one ordinary share if performance-based vesting conditions are met at the end of a three-year vesting period.
Remuneration Framework Review
The Board adopted the Remuneration Committee’s recommendations that the process of awarding STIs needs to be based on
pre-determined KPIs that are objectively measurable and that the award of LTIs needs to be aligned with value created by the
Company for the Company’s shareholders.
The award of STIs to the KMP is reviewed by the Remuneration Committee that then provides its recommendation to the Board.
In preparing its recommendation to the Board, the Remuneration Committee considers the KMPs’ respective KPIs, and a formal
performance evaluation takes place annually, where each KMP’s actual performance is measured against that KMP’s KPIs.
STIs are measured principally based on objectively measurable KPIs and there is generally a small element of discretion that the
Remuneration Committee is required to exercise. The CEO performs the evaluations of the Company’s other senior executives.
This too occurs annually.
To ensure that the value of the LTIs is aligned with value created for the Company’s shareholders, the proposed vesting conditions
for the new LTI plan, which is subject to shareholder approval, include the Company attaining value inflection milestones. If the
vesting conditions are not met, LTIs do not vest and Company employees to whom LTIs are awarded are not able to realise any
of the potential value of the LTIs. Based on the principles that the Remuneration Committee has formulated, the Board continues
to devise remuneration policies that benchmark Paradigm’s framework with its peers and is able to effectively attract and retain
the best KMP to manage the Company and continue to create value for the Company’s shareholders.
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 of shareholders. 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 payment made for attendance at Board committee meetings or participation in other Board activities beyond the
global remuneration payable to the Directors that is described above.
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.
22
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Executive Remuneration
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 industry peers to ensure that remuneration levels and
structures remain consistent with roles of comparable skill, experience and responsibility levels.
For FY 2023, the Board resolved to apply a 60% reduction of the available STIs across the entire Company, in view of the
prevailing market conditions and the performance of the Company’s share price and the biotechnology sector generally.
As a result, in FY 2023, each Company’s employee maximum entitlement to STIs was 40% of the STIs resolved to be
available for FY 2023. With this limit applying, the Remuneration Committee recommended the awarding of STIs to employees
whose performance met or exceeded their KPIs for their respective roles and extended their efforts beyond their respective
roles’ responsibilities.
The award of an STI to Mr Paul Rennie recognises the contribution he has made to the Company’s management, business
development efforts, and fund-raising activities since being appointed Managing Director in November 2022. Based on his
performance, Mr Rennie was awarded STI in the form of a cash bonus equivalent to 7% of his fixed salary (or 40% of his eligible
STI payout). Mr Rennie is eligible under his employment agreement to a maximum of 30% of his base salary and this amount
has then been reduced by the 60% described in the previous paragraph, and also represents a pro-rata amount to align with
Mr Rennie having served as the Company’s Managing Director only for 8 months of FY 2023.
The award of an STI to Dr Donna Skerrett, Paradigm’s Chief Medical Officer, recognises the contribution Dr Skerrett made to the
Company’s research program during FY 2023. Based on her performance, Dr Skerrett was awarded STI in the form of a cash
bonus equivalent to 12% of her fixed salary (or 40% of her eligible STI payout).
Movement in Shares
The movement during the reporting period in the number of ordinary shares in Paradigm held directly, indirectly or beneficially
by each Director and KMP, 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
20,157,389
587,555
1,094,284
–
–
Purchases
355,416
Disposals
–
–
–
–
10,204
–
–
–
–
Issued
via ESP
–
–
–
–
–
Held at
year end
20,512,805
587,555
1,094,284
–
10,204
Paradigm Biopharmaceuticals Limited
Annual Report 2023
23
Remuneration Report continued
Employment Agreements
The Board has reviewed the remuneration package for the Chief Executive Officer in November 2022. 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:
Paul Rennie
Managing Director and Chief Executive Officer
Agreement commenced:
22 November 2022
Term of agreement:
Commence on the Commencement Date and will continue until terminated in accordance
with this Agreement.
Details:
Base annual package*, STI** and LTI***, subject to annual performance review, six-month termination
notice by either party, three to 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 2022/23 – $1,060,000 gross per annum inclusive of superannuation, 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 (excluding superannuation), provided KPIs agreed with the Board have been met.
For financial year 2022/23, Mr Rennie has been awarded an STI of $72,000 which is a pro-rata amount commencing from appointment as
Managing Director.
*** LTI via invitation to participate in Paradigm’s LTI plan, which is subject to shareholder approval.
The Board has reviewed the remuneration package for the Chief Medical Officer on 17 August 2022. The Remuneration
and other terms of employment for the Chief Medical Officer from 1 July 2022 to 30 June 2023 are formalised in a service
agreement. Details of this agreement are as follows:
Name:
Title:
Donna Skerrett
Chief Medical Officer
Agreement commenced:
1 September 2019
Term of agreement:
Role is ongoing
Details:
Base annual package*, STI** and LTI***, subject to annual performance review, three-month
termination notice by either party, three to 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 2023 – US$674,170 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 FY23, Dr Skerrett
has been awarded an STI of 11% of the base salary (US$80,900), which is 40% of the maximum available STI.
*** LTI via invitation to participate in Paradigm’s LTI plan, which is subject to shareholder approval.
24
Paradigm Biopharmaceuticals Limited
Annual Report 2023
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 2023 are:
Short-term
Post-
employment
Long-
term
Share-
based
payments
Directors & Key
Management
Personnel
Non-Executive
Paul Rennie
John Gaffney
Amos Meltzer
Helen Fisher
Executive
Paul Rennie1
Donna Skerrett2,3
Marco Polizzi4
Total
Salary
& fees
$
Annual
leave
$
Cash
bonus
$
Super-
annuation
and
benefits
$
Long
service
leave
$
83,333
80,000
80,000
80,000
–
–
–
–
8,750
8,400
8,400
8,400
601,791 46,349 72,000
1,001,144 45,375 120,137
662,349 34,650
-
2,588,617 126,374 192,137
16,542
92,604
297,686
440,782
–
–
–
–
-
-
-
-
Options
$
Total
$
–
–
–
–
92,083
88,400
88,400
88,400
194,513
931,195
255,596 1,514,856
-
994,685
450,109 3,798,019
Proportion
of remun-
eration
perfor-
mance
related
%
Value of
options as
proportion
of remun-
eration
%
0.0%
0.0%
0.0%
0.0%
7.73%
7.93%
0.00%
5.06%
0.00%
0.00%
0.00%
0.00%
20.89%
16.87%
0.00%
11.85%
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. Share-based payments represents valuation of shares awarded in November 2020 and January 2022 in line with the Company’s accounting policy
for accounting for share-based payments.
3. Dr Donna Skerrett is paid in USD, remuneration figures have been translated to AUD at a conversion rate of 0.6734.
4. Mr Marco Polizzi is paid in USD, remuneration figures have been translated to AUD at a conversion rate of 0.6734.
Remuneration and awards for financial year ended 30 June 2023
Board of Directors Remuneration
The Remuneration and Nomination Committee of the Board is responsible for establishing remuneration of Directors.
Non-Executive Director fees were unchanged in FY23. Non-Executive Chair fees were set at $200,000, plus superannuation.
KMP Remuneration
Following the company performance review, the Remuneration and Nominations Committee has resolved that there will be
an increase of 3–6% applied to gross salaries in FY23. Performance outcomes for KMP are as follows:
During FY23, the Company achieved many milestones, including those which are critical for the registration and commercialisation
of Zilosul®. Paradigm achieved its target of activating 120 clinical trial sites for the PARA_OA_002 phase 3 clinical trial. This was
made possible through a significant effort to ensure the phase 3 clinical protocol received feedback and approval in multiple
jurisdictions to ensure a globally harmonised clinical trial to achieve registration in these jurisdictions. The PARA_OA_002 clinical
trial has regulatory and ethics approval in seven countries including Australia, the US, the UK, Europe, and Canada. Immediately
following the close of FY23, Paradigm reported that all participants required for stage 1 of the PARA_OA_002 study had been
identified, a significant achievement for the Company. The financial year also produced strong data readouts in the PARA_
OA_008 phase 2 study, with top-line data readouts at Days 56 and 168 (~6 months) demonstrating the potential of Zilosul®
to slow the progression of osteoarthritis as witnessed through reduction of key biomarkers within the synovial fluid at both
timepoints and through MRI imaging at the Day 168 timepoint. The Company has also continued to progress the rare disease
asset of MPS with two clinical studies conducted during the year. The MPS I open-label study produced a strong top-line data
readout at Week 73, meeting the study’s primary endpoint of safety and tolerability and secondary endpoints of meaningful
improvements in pain, function, and quality of life. The randomised double-blinded phase 2 study in MPS VI completed
recruitment of 13 participants in Brazil during the period, with data available toward the end of this calendar year.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
25
Remuneration Report continued
Following review of FY23 performance against strategic objectives, the Board has decided to award STIs to Mr Paul Rennie and
Dr Donna Skerrett of 40% of their fixed salary (or 12% of their eligible STI payout). Whilst many of the Board-approved strategic
objectives were met and, in some cases, exceeded, which has created value for the organisation, this value creation has not
yet been reflected in the Company share price. Therefore, the Board resolved that the reduction in shareholder value over FY23
materialised by a softer share price has resulted in reduced STI awards relating to FY23 performance.
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 2022 are:
Short-term
Post-
employment
Long-
term
Share-
based
payments
Super-
annuation
and
benefits
$
Long
service
leave
$
Options
$
Total
$
Proportion
of remun-
eration
perfor-
mance
related
%
Value of
options as
proportion
of remun-
eration
%
11,667
8,000
8,000
8,000
–
–
–
–
–
–
–
–
128,334
88,000
88,000
88,000
0.0%
0.0%
0.0%
0.0%
0.00%
0.00%
0.00%
0.00%
Directors & Key
Management
Personnel
Non-Executive
Paul Rennie
John Gaffney
Amos Meltzer
Helen Fisher
Executive
Paul Rennie1
Donna Skerrett2,3
Total
Salary
& fees
$
Annual
leave
$
Cash
bonus
$
116,667
80,000
80,000
80,000
–
–
–
–
218,875 267,689
–
–
–
–
–
853,385 67,238
89,745
92,236
–
465,000 1,567,604
1,428,927 334,927
89,745
179,602 30,428
905,485 2,969,114
51,699 30,428
440,485 1,009,176
0.00%
5.72%
3.02%
43.65%
29.66%
30.50%
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. Share-based payments represents valuation of shares awarded in November 2020 and January 2022 in line with the Company’s accounting policy
for accounting for share-based payments.
3. Dr Donna Skerrett is paid in USD, remuneration figures have been translated to AUD at a conversion rate of 0.7258.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive
Paul Rennie
John Gaffney
Amos Meltzer
Helen Fisher
Executive
Paul Rennie
Donna Skerrett
Marco Polizzi
Fixed remuneration
At risk – STI
At risk – LTI
2023
2022
2023
2022
2023
2022
100.00%
100.00%
100.00%
100.00%
71.38%
75.20%
100.00%
100.00%
100.00%
100.00%
100.00%
56.35%
64.61%
100.00%
–
–
–
–
7.73%
7.93%
–
–
–
–
–
–
5.72%
–
–
–
–
–
–
–
–
–
20.89%
16.87%
–
43.65%
29.66%
–
26
Paradigm Biopharmaceuticals Limited
Annual Report 2023
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Non-Executive
John Gaffney
Amos Meltzer
Helen Fisher
Executive
Paul Rennie
Donna Skerrett
Marco Polizzi
STI paid/payable
STI forfeited
2023
2022
2023
2022
–
–
–
40.00%
40.00%
–
–
–
–
–
33.33%
–
–
–
–
–
–
–
60.00%
60.00%
–
100.00%
66.67%
–
Additional Information
The earnings of Paradigm for the five years to 30 June 2023 are summarised below:
Income
2023
$
8,580,939
2022
$
8,787,830
2021
$
8,941,647
2020
$
4,695,494
2019
$
3,245,628
2018
$
2,736,400
Loss after income tax
(51,910,013) (39,249,584) (34,297,184) (12,298,887) (15,627,544)
(6,190,232)
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)
2023
0.99
–
2022
0.97
–
2021
2.10
–
Basic earnings per share (cents per share)
(20.78)
(16.87)
(14.92)
2020
3.15
–
(6.12)
2019
1.40
–
(10.93)
2018
0.65
–
(5.46)
This is the end of the audited Remuneration Report.
Dated at Melbourne, Victoria this 25th day of August 2023.
Signed in accordance with a resolution of the Directors, pursuant to section 298(2)(a) of the Corporations Act 2001:
Paul Rennie
Managing Director
Paradigm Biopharmaceuticals Limited
Annual Report 2023
27
Auditor’s Independence Declaration
28
Paradigm Biopharmaceuticals Limited
Annual Report 2023
THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 21, 55 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 (0) 3 9286 8000 F +61 (0) 3 9286 8199 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Paradigm Biopharmaceuticals Limited for the year ended 30 June 2023, 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 R J MORILLO MALDONADO Partner Date: 25 August 2023 Melbourne, Victoria Consolidated Statement of Profit or Loss
and Other Comprehensive Income
for the year ended 30 June 2023
Revenue from continuing operations
Cost of sales
Other income
Other gains and losses
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 loss
Notes
2
3
Year ended
30-Jun-23
$
46,760
(18,827)
8,534,179
(389,269)
Year ended
30-Jun-22
$
79,224
(143,751)
7,814,341
894,265
(52,679,197)
(39,011,991)
(6,564,548)
(7,934,179)
(822,695)
(16,416)
(918,860)
(28,633)
(51,910,013)
(39,249,584)
–
–
(51,910,013)
(39,249,584)
Items that may be reclassified subsequently to profit or loss
Foreign currency translation
(300,402)
(186,416)
Other comprehensive loss for the year, net of tax
(300,402)
(186,416)
Total comprehensive loss attributable to members of the Consolidated Entity
(52,210,415)
(39,436,000)
Earnings per share – loss (cents)
Basic and diluted loss per share
21
(20.78) cents
(16.87) cents
The consolidated statement of profit or loss and other comprehensive income is to be read in conjunction with the
accompanying notes.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
29
Consolidated Statement of Financial Position
as at 30 June 2023
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
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 and others
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Share-based payments reserve
Currency translation reserve
Accumulated losses
Total equity
Notes
2023
$
2022
$
5
6
7
8
9
10
11
12
13
14
15
16
17
18
56,333,085
39,674,413
6,807,301
599,078
46,200
6,718,798
730,715
46,200
63,785,664
47,170,126
2,947,588
2,947,588
42,601
293,791
60,657
510,498
3,283,980
3,518,743
67,069,644
50,688,869
12,161,182
7,088,279
776,196
104,971
594,955
147,758
13,042,349
7,830,992
112,830
236,694
76,355
468,911
349,524
545,266
13,391,873
8,376,258
53,677,771
42,312,611
209,833,883
147,194,772
7,786,686
(428,784)
9,261,765
(128,382)
(163,514,014)
(114,015,544)
53,677,771
42,312,611
The consolidated statement of financial position is to be read in conjunction with the accompanying notes.
30
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Consolidated Statement of Cash Flows
for the year ended 30 June 2023
Cash flows from operating activities
Research and development and other tax incentive received
Receipts from customers
Payments to suppliers and employees (Inclusive of GST)
Interest received
Interest repayment of lease liabilities
Year ended
30-Jun-23
$
Year ended
30-Jun-22
$
Notes
7,404,899
9,525,710
23,043
81,441
(53,548,260)
(41,831,716)
950,455
(16,416)
47,932
(28,633)
Net cash outflow from operating activities
26
(45,186,279)
(32,205,266)
Cash flows from investing activities
Proceeds for financial assets held at amortised cost
Net cash inflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payment of share issue costs
Limited recourse loan repaid under ESP
Principal repayment of lease liabilities
–
–
65,987,641
(3,764,871)
416,341
(104,489)
–
–
–
–
205,288
(135,172)
Net cash inflow from financing activities
62,534,622
70,116
Net increase/(decrease) in cash and cash equivalents
17,348,343
(32,135,150)
Cash at the beginning of the financial year
Net effect of cash flows on foreign exchange
Cash at the end of the financial year
39,674,413
71,034,983
(689,671)
774,579
56,333,085
39,674,413
The consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
31
Consolidated Statement of Changes in Equity
for the year ended 30 June 2023
Balance at 30 June 2021
Loss for the period
Other comprehensive (loss)
Total comprehensive (loss) for the year
ended 30 June 2022
Transactions with owners in their capacity
as owners:
Share based payment expenses
for the year (Note 17)
ESP lapsed in the period
Transfer from share-based payments
reserve on exercise of options
Shares issued relating to repayment
of limited recourse loan for ESP
Issued
capital
$
146,989,484
Share option
reserve
$
6,453,995
Accumulated
losses
$
(75,228,227)
Currency
translation
reserve
$
58,034
Total
$
78,273,286
–
–
(39,249,584)
–
(39,249,584)
–
(186,416)
(186,416)
–
(39,249,584)
(186,416)
(39,436,000)
3,270,037
–
(335,705)
335,705
(126,562)
126,562
205,288
–
–
–
–
–
–
3,270,037
–
–
205,288
–
–
–
–
–
–
Balance at 30 June 2022
147,194,772
9,261,765 (114,015,544)
(128,382)
42,312,611
Loss for the period
Other comprehensive (loss)
Total comprehensive (loss) for the year
ended 30 June 2023
Transactions with owners in their capacity
as owners:
Shares issued
Costs in relation to shares issued
Share based payments expense
for the year (Note 17)
ESP lapsed in the period
Unlisted options lapsed in the period
Transfer from share-based payments
reserve on exercise of options
Shares issued relating to repayment
of limited recourse loan for ESP
–
–
(51,910,013)
–
(51,910,013)
(300,402)
(300,402)
(51,910,013)
(300,402)
(52,210,415)
65,987,641
(3,764,871)
–
–
–
–
–
1,447,590
–
–
(1,914,909)
1,403,783
(786,568)
786,568
–
(221,192)
221,192
416,341
–
–
–
–
–
–
–
–
–
65,987,641
(3,764,871)
1,447,590
(511,126)
–
–
416,341
Balance at 30 June 2023
209,833,883
7,786,686
(163,514,014)
(428,784)
53,677,771
The consolidated statement of changes in equity is to be read in conjunction with the accompanying notes.
32
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
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 2023
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).
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.
Rounding of Amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investment
Commission, relating to ‘rounding off’. Amounts in this report have been rounded off in accordance with that Corporations
Instrument to the nearest dollar.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
33
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
1. Summary of Significant Accounting Policies continued
Foreign Currency Translation
The Financial Statements are presented in Australian dollars, which is Paradigm Biopharmaceutical Limited’s functional
and presentation currency.
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 various other 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.
R&D Expenditure
The Company’s research and development activities are eligible under the Australian R&D Tax Incentive. The Company has
assessed these activities and expenditure to determine which are likely to be eligible under the incentive scheme. The Company
has assessed that all research and development expenditure to date does not meet the requirements for capitalisation as an
intangible asset because it is not yet probable that the expected future economic benefits that are attributable to the asset
will flow.
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 8 for further information.
34
Paradigm Biopharmaceuticals Limited
Annual Report 2023
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.
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 25.
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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
35
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
1. Summary of Significant Accounting Policies continued
(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.
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.
36
Paradigm Biopharmaceuticals Limited
Annual Report 2023
(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.
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 two to 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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
37
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
1. Summary of Significant Accounting Policies continued
(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.
(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 a non-current liability.
38
Paradigm Biopharmaceuticals Limited
Annual Report 2023
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.
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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
39
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
1. Summary of Significant Accounting Policies continued
(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 are 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.
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.
40
Paradigm Biopharmaceuticals Limited
Annual Report 2023
(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.
The Consolidated Entity does not have any assets or liabilities 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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
41
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
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 2023. The Consolidated
Entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations.
2. Other Income
R&D tax incentive
Interest received
Gain on lease modification
3. Other Gains and Losses
Realised currency gains/(losses)
Unrealised currency gains/(losses)
4. Expenses
Loss before income tax from continuing operations includes the following specific expenses:
Short-term leases
Superannuation
Share-based payment expenses
2023
$
7,042,194
1,402,577
89,408
2022
$
7,762,597
51,744
–
8,534,179
7,814,341
2023
$
(116,860)
(272,409)
(389,269)
2022
$
(81,752)
976,017
894,265
2023
$
71,421
619,700
936,462
1,627,583
2022
$
94,719
516,107
3,270,037
3,880,863
The Company has elected to show a functional view of its profit and loss. Total wages and salaries for 2023 is $9,877,486
(2022: $5,271,782), including superannuation.
42
Paradigm Biopharmaceuticals Limited
Annual Report 2023
5. Cash and Cash Equivalents
Cash at bank and in hand
6. Trade and Other Receivables
GST receivable
Interest receivable
R&D tax incentive receivable
Other receivables
7. Prepaid Expenses
Prepaid insurance
Other prepaid expenses
8. Intangible Assets
Patents
Less: Accumulated amortisation
Reconciliation
2023
$
56,333,085
56,333,085
2022
$
39,674,413
39,674,413
2023
$
43,435
456,612
6,266,304
40,950
2022
$
66,965
4,491
6,629,009
18,333
6,807,301
6,718,798
2023
$
248,362
350,717
599,078
2022
$
242,715
488,000
730,715
2023
$
9,926,366
(6,978,778)
2,947,588
2022
$
9,926,366
(6,978,778)
2,947,588
Carrying amount at the beginning of the period
2,947,588
2,947,588
Additions during the period
Disposals
Amortisation expense
Impairment loss
–
–
–
–
–
–
–
–
Balance at the end of the financial year
2,947,588
2,947,588
Paradigm Biopharmaceuticals Limited
Annual Report 2023
43
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
8. Intangible Assets continued
The Consolidated Entity performed its annual impairment test in June 2023. 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 2023 has been determined based on a value-in-use calculation
using a five-year cash flow projection approved by senior management. The after-tax discount rate applied to cash flow projections
is in the range of 25-30%. It was concluded that the risk adjusted value-in-use exceeds the carrying amount of the cash-generating
unit by $11,340,407. 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; and
• 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
with an estimated gross profit of $81m from FY2024 to FY2027. The value-in-use calculation does not include royalty from
product sales, as this is seen to be outside of the five-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 25-30% 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.
44
Paradigm Biopharmaceuticals Limited
Annual Report 2023
9. Plant and Equipment
Computer equipment
Less: Accumulated depreciation
Reconciliation
2023
$
104,522
(96,665)
7,857
2022
$
104,522
(88,489)
16,033
Carrying amount at the beginning of the period
16,033
33,994
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
–
–
(8,176)
7,857
9,419
(8,962)
457
700
–
–
(243)
457
78,038
(47,897)
30,141
–
–
(17,961)
16,033
9,419
(8,719)
700
1,077
–
–
(377)
700
78,038
(40,333)
37,705
Carrying amount at the beginning of the period
37,705
48,297
Additions during the period
Disposals
Depreciation expense
Balance at the end of the financial year
Leasehold improvements
Less: Accumulated amortisation
Reconciliation
–
–
(7,564)
30,141
20,431
(16,285)
4,146
–
–
(10,592)
37,705
20,431
(14,212)
6,219
Carrying amount at the beginning of the period
6,219
9,328
Additions during the period
Disposals
Amortisation expense
Balance at the end of the financial year
–
–
(2,073)
4,146
42,601
–
–
(3,109)
6,219
60,657
Paradigm Biopharmaceuticals Limited
Annual Report 2023
45
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
10. Right-of-use Assets
Land and buildings – right-of-use
Less: Accumulated depreciation
2023
$
813,579
(519,788)
293,791
2022
$
967,258
(456,760)
510,498
The Consolidated Entity leases land and buildings for its office under agreement of three years with option to extend (an additional
two 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 renewed the lease in August 2022. This was treated as a lease modification and $89,408 was
recognised as a gain in Other Income (Note 2).
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 have been no additions to right-of-use assets in the current financial year.
11. Trade and Other Payables
Trade and other creditors
12. Employee Benefits
Annual leave and on-costs
2023
$
12,161,182
12,161,182
2022
$
7,088,279
7,088,279
2023
$
776,196
776,196
2022
$
594,955
594,955
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.
13. Current Liabilities – Lease Liabilities
Lease liabilities
14. Non-current Liability – Employee Benefits
Long service leave provision
2023
$
104,971
104,971
2023
$
112,830
112,830
2022
$
147,758
147,758
2022
$
76,355
76,355
46
Paradigm Biopharmaceuticals Limited
Annual Report 2023
15. Non-current Liability – Lease Liabilities and Others
Lease liabilities
Make good provision
2023
$
139,776
96,918
236,694
2022
$
374,560
94,351
468,911
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
Unwinding of discount
Carrying amount at the end of the year
16. Issued Capital
Ordinary shares fully paid
Lease
make good
2023
$
Lease
make good
2022
$
94,351
2,567
96,918
91,853
2,498
94,351
2023
Number
of shares
281,756,625
2022
Number
of shares
232,680,798
2023
$
209,833,883
2022
$
147,194,772
The following movements in issued capital occurred during the year:
2023
Number
of shares
2022
Number
of shares
2023
$
2022
$
Ordinary shares
Balance as at the beginning of the period
232,680,798
229,905,798
147,194,772
146,989,484
Ordinary shares issued
Ordinary shares issue costs (net of GST)
Shares issued under ESP
ESP shares lapsed/buy-back in the period
Limited recourse loan repaid under ESP
50,759,724
–
2,000,000
(3,683,897)
–
–
65,987,641
(3,764,871)
3,075,000
(300,000)
–
–
–
–
–
–
–
–
416,341
205,288
Balance as at the end of the period
281,756,625
232,680,798
209,833,883
147,194,772
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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
47
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
16. Issued Capital continued
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 2022 Annual Report.
17. Share Based Payment Reserve
Balance as at the beginning of the period
Share based payment expenses in the period
ESP options lapsed in the period
Unlisted options lapsed in the period
Transfer from share reserve on exercise of options
2023
$
9,261,765
1,447,590
(1,914,909)
(786,568)
(221,192)
7,786,686
2022
$
6,453,995
3,270,037
(335,705)
–
(126,562)
9,261,765
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 7 July 2022, an invitation of ESP shares of 2,000,000 was approved and issued at a price of $0.96 per share to
Mr Marco Polizzi. These shares were issued on vesting conditions. Each tranche of shares were to vest in 12 months,
24 months and 36 months. However, the total number of shares were cancelled in relation to the cessation of employment.
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 $1.2746 (30 June 2022: $1.63).
Set out below are summaries of options granted under the Employee Share Plan:
ESP shares
Jul-22
Grant date
7/07/2022
Vesting condition
666,667 shares are vested on 7 July 2023, 666,667 shares are vested
on 7 July 2024 and 666,666 shares are vested on 7 July 2025
Number
2,000,000
48
Paradigm Biopharmaceuticals Limited
Annual Report 2023
30-Jun-23
Grant date
7/11/2019
10/07/2020
19/11/2020
10/09/2021
25/01/2022
7/07/2022
30-Jun-22
Expiry date
7/11/2024
10/07/2025
19/11/2025
10/09/2026
25/01/2027
7/07/2027
Grant date
7/11/2019
10/07/2020
19/11/2020
10/09/2021
25/01/2022
Expiry date
7/11/2024
10/07/2025
19/11/2025
10/09/2026
25/01/2027
Exercise
price
$2.93
$3.24
$3.05
$2.41
$1.89
$0.96
Exercise
price
$2.93
$3.24
$3.05
$2.41
$1.89
Balance at
the start of
the year
2,245,890
1,915,000
1,100,000
2,700,000
375,000
–
8,335,890
Balance at
the start of
the year
2,685,890
2,215,000
1,100,000
–
–
6,000,890
Granted
–
–
–
–
–
2,000,000
2,000,000
Exercised
(713,100)
–
–
–
–
–
(713,100)
Expired/
forfeited
(403,897)
(550,000)
–
(730,000)
–
(2,000,000)
(3,683,897)
Granted
–
–
–
2,700,000
375,000
3,075,000
Exercised
(440,000)
–
–
–
–
(440,000)
Expired/
forfeited
–
(300,000)
–
–
–
(300,000)
Balance at
the end of
the year
1,128,893
1,365,000
1,100,000
1,970,000
375,000
–
5,938,893
Balance at
the end of
the year
2,245,890
1,915,000
1,100,000
2,700,000
375,000
8,335,890
In addition, the following unlisted options were expired:
(i) 275,000 unlisted options exercisable at $1.75 each on or before 28 February 2023 in accordance with existing corporate
services mandate; and
(ii) 550,000 unlisted options exercisable at $1.75 each on or before 24 March 2023 in accordance with existing corporate
services mandate.
Unlisted Options
30-Jun-23
Grant date
24/03/2020
28/02/2020
30-Jun-22
Grant date
24/03/2020
28/02/2020
18/05/2018
16/11/2017
27/09/2017
Expiry date
24/03/2023
28/02/2023
Exercise price
$1.75
$1.75
Balance at the
start of the year
550,000
275,000
825,000
Granted
–
–
–
Exercised/
lapsed
(550,000)
(275,000)
(825,000)
Balance at the
end of the year
–
–
–
Expiry date
24/03/2023
28/02/2023
18/05/2021
15/11/2020
27/09/2020
Exercise price
$1.75
$1.75
$0.65
$0.31
$0.45
Balance at the
start of the year
550,000
275,000
861,250
35,000
1,000,000
2,721,250
Granted
–
–
–
–
–
–
Exercised
–
–
(861,250)
(35,000)
(1,000,000)
(1,896,250)
Balance at the
end of the year
550,000
275,000
–
–
–
825,000
Paradigm Biopharmaceuticals Limited
Annual Report 2023
49
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
18. Accumulated Losses
Balance as at the beginning of the period
Loss for the accounting period
ESP options lapsed in the period
Unlisted options lapsed in the period
Transfer from share reserve on exercise of options
2023
$
(114,015,544)
2022
$
(75,228,227)
(51,910,013)
(39,249,584)
1,403,783
335,705
786,568
221,192
–
126,562
(163,514,014)
(114,015,544)
19. Commitments
The Consolidated Entity had no capital commitments as at 30 June 2023 and 30 June 2022.
20. Contingencies
The Consolidated Entity had no contingent liabilities as at 30 June 2023 and 30 June 2022.
21. 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
2023
$
(51,910,013)
2022
$
(39,249,584)
Number
281,756,625
Number
232,680,798
–
825,000
Weighted average number of ordinary shares used in calculating diluted loss per share
281,756,625
233,505,798
Basic loss per share
Diluted loss per share
Cents
(0.2078)
(0.2078)
Cents
(0.1687)
(0.1687)
50
Paradigm Biopharmaceuticals Limited
Annual Report 2023
22. 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
Other receivables
Term deposits
Financial liabilities
Current
Trade and other payables at amortised cost
Lease liabilities
Non-current
Lease liabilities
2023
$
2022
$
56,333,085
39,674,413
540,997
46,200
89,789
46,200
56,920,282
39,810,402
12,161,182
104,971
12,266,153
7,088,279
147,758
7,236,037
139,776
139,776
374,560
374,560
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, and ageing analysis for credit risk.
Risk management is carried out by senior finance executives (finance team) under policies approved by the Board. These policies
include identification and analysis of the risk exposure of the Consolidated Entity and appropriate procedures, controls and
risk limits. The finance team identifies, evaluates and hedges financial risks within the Consolidated Entity’s operating units
and reports to the Board on a monthly basis.
Market Risk
Market risk is the risk that changes in market prices, such as foreign currency fluctuations, 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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
51
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
22. Financial Instruments Disclosure continued
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
Liabilities
2023
$
135,617
135,617
2022
$
343,015
343,015
2023
$
372,716
372,716
2022
$
609,350
609,350
The Consolidated Entity’s main currency exposure is the AUD:USD pair, with much of the Company’s clinical development costs
being denominated in USD. The Company reviews its currency needs and uses a combination of sourcing currency at spot or
via forward contracts to manage USD flows.
The consolidated entity had net liabilities denominated in foreign currencies of US$237K as at 30 June 2023 (2022: US$266K
net liabilities). 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
$26K lower/higher (2022: $43K lower/$35K higher). The percentage change is illustrative of 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
loss for the year ended 30 June 2023 was $389K (2022: gain of $894K).
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.
Credit risk of the Consolidated Entity is low because the majority financial instruments are cash in bank.
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 is 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 one year.
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.
52
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Consolidated – 2023
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing – fixed rate
Lease liability
Total non-derivatives
Consolidated – 2022
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
$
Remaining
contractual
maturities
$
–
–
12,161,182
–
–
–
–
–
4.70%
116,706
12,277,888
123,172
123,172
20,709
20,709
–
–
–
–
12,161,182
–
260,587
12,421,769
Weighted
average
interest rate
%
1 year
or less
$
Between
1 and 2 years
$
Between
2 and 5 years
$
Over
5 years
$
Remaining
contractual
maturities
$
–
–
7,088,279
–
–
–
–
–
4.70%
155,861
7,244,140
178,172
178,172
216,382
216,382
–
–
–
–
7,088,279
–
550,415
7,638,694
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.
23. 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
Payments for membership subscription to AusBiotech Ltd; Helen Fisher is the Chair of the
Victorian State Committee
Current payables
Trade payables – BioMeltzer
Loans to or from related parties:
Consolidated
2023
$
31,680
5,768
37,448
Consolidated
2023
$
–
–
2022
$
31,284
2,436
33,720
2022
$
3,564
3,564
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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
53
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
23. Related Parties continued
Parent Entity
The Parent Entity is Paradigm Biopharmaceuticals Limited.
Controlled Entities
Interests in controlled entities are outlined in Note 24.
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.
24. 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
2023
%
100.00%
100.00%
100.00%
100.00%
100.00%
2022
%
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 (2022: $334,061).
25. Parent Entity Disclosures
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
2023
$
2022
$
(17,296,643)
(18,902,012)
61,465,176
45,947,940
123,084,610
79,360,014
2,620,168
4,978,762
2,969,692
5,524,028
120,114,918
73,835,986
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 2023 and 30 June 2022.
Capital Commitments
The parent entity had no capital commitments as at 30 June 2023 and 30 June 2022.
Significant Accounting Policies
The accounting policies of the parent entity are consistent with those of the Consolidated Entity.
54
Paradigm Biopharmaceuticals Limited
Annual Report 2023
26. Reconciliation of Cash Flows Provided by Operating Activities
Loss for the year
Gain on lease modification
Depreciation and amortisation
Foreign exchange unrealised gains/(losses)
Share based payment expenses
Change in operating assets and liabilities
(Increase)/decrease in trade receivables
(Increase)/decrease in other receivables
Decrease in other assets
Increase in payables
Increase/(decrease) in provisions
Net cash used in operating activities
27. Non-cash Investing and Financing Activities
Shares issued/to be issued under Employee Share Plan
2023
$
(51,910,013)
2022
$
(39,249,584)
(89,408)
153,656
389,272
936,462
363,619
(452,122)
131,637
5,072,903
217,716
193,250
(858,379)
3,270,037
1,792,655
(3,812)
658,033
2,101,838
(109,302)
(45,186,279)
(32,205,266)
2023
$
1,447,590
1,447,590
2022
$
3,270,037
3,270,037
28. Events Subsequent to Reporting Date
No matters or circumstance has arisen since 30 June 2023 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.
29. 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
2023
$
2,907,128
440,782
–
450,109
3,798,019
2022
$
1,853,599
179,602
30,428
905,485
2,969,114
Paradigm Biopharmaceuticals Limited
Annual Report 2023
55
Notes to the Consolidated Financial Statements
for the year ended 30 June 2023
continued
30. 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
Audit or review of the financial statements
Other services
Preparation of the tax return and other tax matters
R&D tax incentive claim
Other services network firms
Provision of Ireland Registered Office and corporation services
2023
$
79,000
79,000
–
–
3,535
3,535
82,535
2022
$
78,000
78,000
25,520
93,012
–
118,532
196,532
In addition, RSM Ireland provided services tax and secretarial services for Paradigm. Since July 2023, services in relation to
preparing income tax returns and R&D tax incentive claims for Paradigm are no longer performed by RSM.
31. Income Tax Expenses
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 25%
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
Differences in tax rate from different jurisdictions
2023
$
2022
$
(51,910,013)
(39,249,584)
(12,977,503)
(9,812,396)
38,414
3,143
234,115
54,429
95,624
(1,384,501)
48,312
1,491
817,509
(27,326)
26,037
(825,089)
Current year tax losses not recognised
(13,936,278)
(9,771,462)
Income tax expense
Tax losses not recognised
–
–
Unrecognised deferred tax assets in relation to tax losses
29,921,538
15,985,260
56
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Directors’ Declaration
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(b) to the Financial Statements;
(c) the attached Financial Statements and notes give a true and fair view of the Consolidated Entity financial position
as at 30 June 2023 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 2023.
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
Managing Director
Dated at Melbourne, Victoria this 25th day of August 2023.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
57
Independent Audit Report
58
Paradigm Biopharmaceuticals Limited
Annual Report 2023
THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 21, 55 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 (0) 3 9286 8000 F +61 (0) 3 9286 8199 www.rsm.com.au 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 (together ‘the Consolidated entity’), which comprises the consolidated statement of financial position as at 30 June 2023, 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 2023 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. Paradigm Biopharmaceuticals Limited
Annual Report 2023
59
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. Key Audit Matter How our audit addressed this matter Research and development expenses Refer to Note 1 (d) (v) in the financial statements The Consolidated entity incurred in expenditure amounting to $52.7m in relation to Research and development expenses of ongoing projects, primarily for the phase 3 clinical trials of the osteoarthritis project. These activities are the primary business of Paradigm and deemed to be still in ‘research phase’. Accordingly, these expenses have been recognised in the profit or loss as incurred in line with AASB 138 Intangible Assets (‘AASB 138’). We considered the accounting of Research and development expenses to be a key audit matter because it is the Consolidated entity main business activity and represents its most significant expense. In addition, management is required to exercise significant judgment to determine whether a particular project is categorised to be in ‘research’ or ‘development’ phase, which then dictates the appropriate accounting treatment in the financial statements. Our audit procedures in relation to this matter included: • Holding discussions with management regarding the current status of each project to gather an understanding of management’s conclusion that the projects are still being in the ‘research phase’ as defined by AASB 138; • Gathering an understanding the entity level of controls (in particular regarding control activities relevant to procurement, payables and payments). This procedure included an evaluation of the effectiveness of the design of the controls in place; • Obtaining third party confirmation from key service providers in relation to the level of expense incurred during the year and the amount payables held at the reporting date; and • Performing substantive detail testing by agreeing a sample of expenses to supporting documentation to understand the nature of the expenditure incurred and to verify the accuracy and existence of the recorded expenses. Independent Audit Report continued
60
Paradigm Biopharmaceuticals Limited
Annual Report 2023
Key Audit Matters (continued) Key Audit Matter How our audit addressed this matter Impairment of Intangible Assets Refer to Note 8 in the financial statements As at 30 June 2023, the Consolidated entity’s Intangible asset amounted to $2,9m. This Intangible asset relates to Patent costs for ongoing respiratory projects in the development of numerous biopharmaceutical drugs. The Consolidated entity’s Intangible asset is subject to an annual impairment test. 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 2023, management has 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; • Estimating the additional funding required on the projects and the plan going forward including the use of the Patent for other purposes; • Calculating the value in use for the respiratory project using a discounted cash flow model. The model included estimated cash flows for the project for 5 years. These cash flows were then discounted to net present value using the Consolidated entity’s weighted average cost of capital (WACC); and • Comparing the determined value in use against the carrying value of the Intangible assets. Our audit procedures in relation to this matter 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; • 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 appropriateness and 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 2023; 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. Paradigm Biopharmaceuticals Limited
Annual Report 2023
61
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 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 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: https://www.auasb.gov.au/admin/file/content102/c3/ar2_2020.pdff. 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 pages 21 to 27 of the directors' report for the year ended 30 June 2023. In our opinion, the Remuneration Report of Paradigm Biopharmaceuticals Limited, for the year ended 30 June 2023, 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 R J MORILLO MALDONADO Partner Dated: 25 August 2023 Melbourne, Victoria Shareholder Information
Details of shares and options as at 14 August 2023:
Top Holders
The 20 largest holders of each class of equity security as at 14 August 2023 were:
Fully Paid Ordinary Shares
Name
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CITICORP NOMINEES PTY LIMITED
KZEE PTY LTD
MR PAUL JOHN RENNIE
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
NETWEALTH INVESTMENTS LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
WACC PTY LTD
NANCY EDITH WILSON-GHOSH
MR EVAN PHILIP CLUCAS + MS LEANNE JANE WESTON
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD
MR BRETT LANGAN
V REDFORD PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
AUSTRALIAN EXECUTOR TRUSTEES LIMITED
UBS NOMINEES PTY LTD
39KP PTY LTD
MS LENNA YU LING TYE
FLINDERS MEDICAL CENTRE FOUNDATION
Totals: Top 20 holders of ordinary fully paid shares
Total remaining holders’ balance
Total no. of shares
Distribution Schedules
A distribution of each class of equity security as at 12 August 2023:
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 and over
Rounding
Total
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Paradigm Biopharmaceuticals Limited
Annual Report 2023
Number
of shares
19,967,193
15,408,992
10,914,902
8,500,548
7,907,224
7,199,417
6,307,738
5,724,948
3,959,480
3,475,835
3,207,913
2,616,142
2,303,432
2,228,500
1,666,793
1,603,641
1,539,064
1,468,994
1,441,631
1,420,000
%
7.09%
5.47%
3.87%
3.02%
2.81%
2.56%
2.24%
2.03%
1.41%
1.23%
1.14%
0.93%
0.82%
0.79%
0.59%
0.57%
0.55%
0.52%
0.51%
0.50%
108,862,387
38.64%
172,894,238
61.36%
281,756,625
Total holders
4,641
6,737
2,401
243
23
27
0
Units
2,483,043
26,328,684
70,999,535
49,238,835
16,243,038
116,463,490
0
% of issued
capital
0.88
9.34
25.20
17.48
5.76
41.33
0.00
0.01
14,072
281,756,625
100.00
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
PAUL RENNIE AND RELATED COMPANIES
ALLIANZ SE AND RELATED ENTITIES
Unmarketable Parcels
Holdings less than a marketable parcel of ordinary shares (being 562 shares at 14 August 2023):
Holders
2,673
Voting Rights
The voting rights attaching to ordinary shares are:
Number
of shares
20,512,805
20,215,330
Units
842,453
• 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.
Paradigm Biopharmaceuticals Limited
Annual Report 2023
63
Corporate Governance Statement
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 (Fourth 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 2023 and has been approved by the Board
on 30 December 2022.
The Corporate Governance Statement is available on the Consolidated Entity’s website at:
http://www.paradigmbiopharma.com/investors/corporate-governance
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Paradigm Biopharmaceuticals Limited
Annual Report 2023
Corporate Directory
Directors
Mr Paul Rennie
Managing & Executive Director
(Appointed on 22 November 2022)
Mr Paul Rennie
Non-Executive Chairman
(Ceased on 22 November 2022)
Dr Donna Skerrett
Executive Director
Mr John Gaffney
Non-Executive Director
Mr Amos Meltzer
Non-Executive Director
Ms Helen Fisher
Non-Executive Director
Company Secretary
Mr Kevin Hollingsworth
(Ceased on 30 August 2022)
Ms Abby Macnish Niven
(Appointed on 30 August 2022)
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
https://paradigmbiopharma.com/
Paradigm Biopharmaceuticals Limited
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