2 0 1 7 A N N U A L R E P O R T
Company Profile
Patrys is a therapeutic antibody development company with operations in Australia and the United States of
America.
Patrys’ expertise and assets target antibody therapeutics in the field of oncology with both IgM antibodies and
IgG antibody fragments under development.
Patrys has successfully out-licensed a clinical candidate, PAT-SC1, for the Chinese oncology market and has
conducted two clinical trials with another lead candidate from its IgM platform, PAT-SM6. Patrys has in-licensed
from Yale University a suite of novel, nucleus-penetrating antibodies (Deoxymabs 3E10 and 5C6) and Deoxymab
3E10 conjugated to nanoparticles which it will progress through development. Patrys will continue to advance
lead candidates from both its technology platforms towards the market.
Patrys Limited is an ASX listed company (ASX:PAB), with corporate headquarters in Melbourne, Australia.
For further information on Patrys, visit www.patrys.com
Operations
n
n
Corporate headquarters in Melbourne, Australia
Preclinical work conducted in multiple Australian and overseas sites, including Yale University,
United States of America
n
Patrys Limited trades on the Australian Securities Exchange (ASX:PAB)
Milestones
2H 2016
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Humanisation and optimisation of Deoxymab 3E10
n Non-dilutive supplier recoveries received
n
Appointment of Scientific Advisory Board
1H 2017
n
n
n
Deoxymab 3E10 lead candidate, PAT-DX1 confirmed
Further non-dilutive supplier recoveries received
Acquisition of additional novel nucleus-penetrating antibody assets developed at Yale University
(Deoxymab 3E10 conjugated to nanoparticles; PAT-DX1-NP)
n
Initiation of preclinical animal studies of PAT-DX1
1
Assets
• PAT-SC1 is an immunoglobulin M (IgM) type antibody which targets an isoform of the membrane-
bound CD55 (DAF-B). This isoform has been shown to be significantly over-expressed on the
membrane of gastric cancer tissues (74%), while no expression was detected on healthy cells and
tissues. In September 2015, Patrys signed an exclusive development and commercialisation license
agreement for all oncology indications in China for PAT-SC1 with the Chinese company Hefei Co-
source Biomedical Co.
• PAT-SM6 is a fully human monoclonal antibody (mAb) of the IgM type which targets a variant of
human GRP78 and human apolipoprotein B100 (apoB100) found in low-density lipoprotein (LDL) and
very low-density lipoprotein (VLDL). It has been successfully utilised in both melanoma and multiple
myeloma clinical trials. Further clinical trials for this product candidate have been deferred due to
manufacturing issues.
• PAT-LM1 is a fully human IgM mAb that targets a variant of the human NONO protein (also named
nmt55 and p54nrb), which is described to be a multi-functional nuclear protein. PAT-LM1 has shown
promise in a range of preclinical cancer models.
• Deoxymab 3E10 is a lupus autoantibody that penetrates live cell nuclei by binding to DNA or its
precursors outside of cells and then following it into cell nuclei through a nucleoside transporter. Once
in the nucleus, Deoxymab 3E10 interferes with DNA repair processes. To prepare Deoxymab 3E10 for
clinical development Patrys has humanised and optimised the antibody. The lead candidate, to be
known as PAT-DX1, was selected from a large number of humanised 3E10 variants that Patrys designed
to optimise for efficacy, manufacturability and novelty. The selection of PAT-DX1 was based on its
performance in a suite of in vitro assays where it surpassed other variants in its ability to penetrate into
cells’ nuclei, and also subsequently kill cancers cells; PAT-DX1 significantly outperformed native forms
of the 3E10 antibody in the screening assays. It is currently in preclinical development. Patrys recently
acquired the rights to technology conjugating nanoparticles to Deoxymab 3E10. The Company will
further develop PAT-DX1 to nanoparticles, designated PAT-DX1-NP.
• Deoxymab 5C6 is another lupus autoantibody that penetrates live cell nuclei. Similar to
Deoxymab 3E10, 5C6 is highly toxic to cancer cells with DNA repair deficiencies and has similar
potential to be used in cancer therapy. Deoxymab 5C6 is currently in preclinical development.
2
Discovery
Preclinical
Phase I
Phase 2a
Pipeline
Product
(Target)
PAT-SC1
(CD55)
PAT-SM6
(GRP78)
PAT-LM1
(NONO)
PAT-DX1
(DNA)
PAT-DX1-
NP
(DNA)
Deoxymab
5C6
(DNA)
Chinese rights
out-licensed
M. Myeloma
Trial Deferred
Licensing
candidate
Licensed from
Yale University
Licensed from
Yale University
Licensed from
Yale University
3
Letter from Chairman and CEO
Dear Shareholders,
Welcome to Patrys’ 2017 Annual Report.
Patrys has had a successful year progressing development and consolidating a number of alliances to lay
the groundwork for the eventual commercialisation of both of its novel antibody technologies. The Board
and Management team are excited by the opportunities in the cancer space, and Patrys’ potential to play a
significant role. While advances have been made in the sector, there is still a need for treatments that improve
quality of life and reduce overall healthcare costs.
During this phase of development, there may be long periods between announcements which is reflective of
the nature of the work being undertaken. The Board appreciates your patience throughout these times as we
focus on consolidating Patrys’ programs and clinical outlook.
With the continued deferment of the planned phase 1b/2a combination clinical trial of PAT-SM6 in patients
with relapsed and refractory multiple myeloma due to previously described manufacturing issues, the
Company is now focusing its efforts on the licensed novel nucleus-penetrating antibody technology platform
(“Deoxymab”) from Yale University, until non-dilutive capital can be sourced to progress the PAT-SM6 program.
Deoxymab
Deoxymab 3E10 is the name assigned by Patrys to 3E10, a lupus derived autoantibody. Unlike normal
antibodies that the body produces to bind to foreign cells (eg. pathogens) or aberrant cells (eg cancer cells)
and trigger an immune response, autoantibodies bind to normal cells. While most antibodies bind to markers
on the surface of cells, Deoxymab 3E10 penetrates cells’ nuclei and binds directly to DNA. Having bound to
the DNA, Deoxymab 3E10 inhibits DNA repair and damages DNA. Normal cells repair DNA damage utilising
intact DNA repair processes, however, Deoxymab 3E10 can kill cells that have mutations or deficiencies in DNA
repair mechanisms as found in various cancer cells. As well as showing single agent therapeutic potential,
Deoxymab 3E10 has been shown to significantly enhance the efficacy of both chemo and radiotherapies.
Since acquiring the rights to develop and commercialise Deoxymab 3E10, Patrys has completed detailed in
silico biology to optimise Deoxymab 3E10 and selected a lead candidate PAT-DX1, a di-scFv antibody. This
is a major milestone for the Company and allows Patrys to move forward with pre-clinical animal models in
the coming year. The Company looks forward to receiving data from these animal studies that will guide the
development strategy on this asset; the data is expected to be available in H2 2017.
PAT-DX1 has potential as a therapy for cancers that remain difficult to treat including endometrial, ovarian,
pancreatic, colon and some breast cancers.
PAT-DX1 is a very exciting development stage asset with a number of patents filed around the technology to
create a barrier to entry for competitors. In addition, there is the possibility to pair this technology with other
existing treatments and create combination therapies, enhancing the attractiveness of this asset to potential
partners. With this in mind, during the financial year, Patrys also acquired further intellectual property from
Yale University - the worldwide rights to develop and commercialise technology pertaining to the linking
of Deoxymab 3E10 to nanoparticles. The nanoparticles can be loaded with standard chemotherapeutic (or
other) drugs and have been demonstrated to significantly increase the efficacy of the drug therapy in pre-
clinical models. This acquisition expands the Deoxymab platform and Deoxymab 3E10-nanoparticles (newly
designated PATDX1-NP) can be developed concurrently with the PAT-DX1 program.
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IgM assets
During the past year the Company completed an investigation into the fundamental issues that arose with
the manufacturing of PAT-SM6 antibody, and has identified a path forward to enable the manufacturing and
development of PAT-SM6 and its other IgM assets. Given the significant cost and time involved with these
programs, Patrys will only consider reactivation on a partnered, risk sharing basis or if non-dilutive funds can be
accessed. Discussions with a number of potential partners are ongoing.
The Company is also committed to pursuing a number of insurance claims related to the failed manufacturing of
PAT-SM6. Given the magnitude, number and complexity of the claims, this has been a protracted process and
Patrys continue to progress the claims with its insurers.
The IgM patent portfolio has reached maturity and the majority of patents have now been granted. A research
collaboration with Macquarie University is ongoing, and will be extended into 2018.
Patrys has been pleased to report in the period on progress of its asset PAT-SC1, which was licensed in 2015 to
Hefei Co-source Biomedical, an integrated Chinese drug development company. Our Chinese partners have been
working diligently to progress the development of PAT-SC1, and the first Joint Development Committee meeting
was held in China in October 2016. This license deal covers the exclusive development and commercialisation rights
for all oncology indications in China for PAT-SC1. Patrys received an up-front licensing fee, and may, pending the
achievement of prescribed milestones, receive multiple milestone payments and royalties on eventual product sales.
Looking ahead
The Patrys team is focused on progressing its Deoxymab platform, and lead candidate PAT-DX1, in parallel with the
newly licensed Deoxymab 3E10 nanoparticle technology in a cost-effective manner. We are also focused on finding a
suitable path forward for our existing IgM assets. With prudent financial controls in place and guidance from our newly
established Scientific Advisory Board, the Company believes it’s in an excellent position to build value from its existing
base of capital and assets and looks forward to sharing this journey with its shareholders over the coming year.
John Read
Chairman
Dr James Campbell
Managing Director and CEO
5
The Board of Directors
John Read, BSc (Hons), MBA, FAICD
Chairman
Mr. Read is an experienced Chairman and Director in public, private and government organisations. Through his
extensive career in venture capital, private equity and commercialisation he has gained a depth of experience in the
formation and growth of emerging companies with an emphasis on commercial entities that provide broad societal
benefits. He is currently the Chairman of CVC Limited (ASX: CVC) and previously Chairman of Eildon Capital Limited
(ASX:EDC) from 2013 to 2016, Pro-Pac Packaging Limited (ASX:PPG) from 2005 to 2010, The Environmental Group
Limited (ASX:EGL) from 2001 to 2012 and The Central Coast Water Corporation from 2011 to 2014.
James Campbell, BSc (Hons), PhD, MBA, GAICD
Managing Director & Chief Executive Officer
Dr. Campbell has more than 20 years of international biotechnology research, management and leadership
experience and has been involved in the creation and/or transformation of multiple successful Australian and
international biotechnology companies. Dr. Campbell was previously the CFO and COO of ChemGenex
Pharmaceuticals Limited (ASX:CXS), where, as a member of the executive team he helped transform a research-
based company with a market capitalization of $10M to a company with completed clinical trials and regulatory
dossiers submitted to the FDA and EMA. In 2011 ChemGenex was sold to Cephalon for $230M.
Dr. Campbell was a foundation executive of Evolve Biosystems, and has assisted private biotechnology companies
in Australia, New Zealand and the USA with successful capital raising and partnering negotiations.
Dr. Campbell sits on the IP and Commercialisation Advisory Committee of the CRC for Mental Health, and sits
on the Advisory Board of Deakin University’s Centre for Innovation in Mental and Physical Health and Clinical
Treatment (IMPACT). Dr. Campbell is a Non-Executive Director of both Invion Limited (ASX:IVX) and Prescient
Therapeutics Limited (ASX:PTX).
Michael Stork, BBA
Non-Executive Director
Mr. Stork is the Managing Director of Stork Holdings Ltd, an Investment Holding company active in the Canadian
technology startup sector.
Mr. Stork was until early this year active on the Board of Governors of the University of Waterloo and is the
Chairman of the Waterloo Accelerator Centre, a technology company incubator affiliated with the University.
He is currently the Chairman of Spartan Biosciences Inc., an Ottawa based DNA analytics company, the Chairman
of Dejero Labs Inc., a Waterloo based broadcast technology company, and active on the Boards of a number of
other leading Canadian technology startup companies.
Suzy Jones
Non-Executive Director
Ms. Jones is Founder and Managing Partner of DNA Ink LLC, a life sciences advisory firm in San Francisco. Prior
to starting her own firm, Ms. Jones spent 20 years at Genentech where she served in many roles in business
development, product development and immunology research. She also managed several product teams during
this time including the Rituxan team, the first monoclonal antibody launched to treat cancer. Ms. Jones has
extensive networks within the pharmaceutical industry and the VC community in North America. Ms. Jones is also
a Non-Executive Director of Calithera Biosciences, Inc. (Nasdaq:CALA), a clinical-stage biotech company focused
on discovering and developing novel small molecule drugs directed against tumour metabolism and tumour
immunology targets for the treatment of cancer.
6
Management
Melanie Leydin, BBus (Acc Corp Law)
Company Secretary
Melanie Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of the
Institute of Chartered Accountants and is a Registered Company Auditor. She graduated from Swinburne University
in 1997, became a Chartered Accountant in 1999 and since February 2000 has been the principal of chartered
accounting firm, Leydin Freyer. The practice provides outsourced company secretarial and accounting services
to public and private companies specialising in the resources, technology, bioscience and biotechnology sector.
Melanie has over 25 years’ experience in the accounting profession and has extensive experience in relation to public
company responsibilities, including ASX and ASIC compliance, control and implementation of corporate governance,
statutory financial reporting, reorganisation of companies and shareholder relations.
Deanne Greenwood, BSc (Hons), PhD, MBA, GAICD
Vice President, Business Development & Intellectual Property
Dr. Greenwood joined Patrys in 2008 and has held various roles during that time. Dr. Greenwood’s efforts are focused
on commercialisation of the IgM and Deoxymab assets and management of the extensive intellectual property
portfolio. Dr. Greenwood has extensive experience related to the drug development, relationship management,
contracts and grants. Dr. Greenwood led the negotiations with Hefei Co-source Biomedical Co. LTD, a Chinese
based company which has taken an exclusive license to PAT-SC1. Prior to joining Patrys, Dr. Greenwood spent
10-years in academia conducting immunology research in the areas of vaccine development and autoimmunity, with
the last four years at the Centre for Animal Biotechnology, The University of Melbourne. Dr. Greenwood has a PhD
degree in Immunology from the Monash University, Masters of Business Administration (Technology) from La Trobe
University and is a graduate of the Australian Institute of Company Directors. Dr. Greenwood is a co-author on 11
publications on immunological related topics.
Valentina Dubljevic, BSc, MBB, GAICD
Vice President, Scientific & Clinical Development
Ms. Dubljevic joined Patrys in June 2012 and is responsible for the pre-clinical and clinical development of Patrys’
products. Ms. Dubljevic brings more than 20 years of scientific and commercial experience in the areas of anti- cancer
therapies, vaccine development, and diagnostics. Prior to joining Patrys, she worked at the Monash University
conducting research on malaria vaccine development; at Cytopia Limited developing small molecule anti-cancer drugs
and at Monash Institute of Medical Research (MIMR) developing antibody therapies for cancer. She has extensive
experience related to the drug development, management of pre-clinical studies, manufacturing, regulatory and
clinical operations, contracts and project management and has co-authored multiple scientific papers and grants. Ms.
Dubljevic holds a Bachelor of Biomedical Science degree from Griffith University, Brisbane, a Masters in Biotechnology
and Business degree from RMIT and is a graduate of the Australian Institute of Company Directors (GAICD).
Scientific Advisory Board
Pamela M. Klein, BSc, MD
Dr. Pamela M. Klein completed her medical training at Loyola University in Chicago before working at the U.S. National
Cancer Institute. Dr. Klein then moved to Genentech where, as Vice President, Development she led the development
of a large portfolio of drugs including all the HER (Herceptin, Tarceva, Perjeta), Apoptosis (antibodies and small
molecules) and Hematology compounds. After Genentech Dr. Klein was appointed to the position of Chief Medical
Officer of Intellikine where she built the clinical development capability and brought multiple early compounds from
laboratory to clinic prior to Intellikine being acquired by Milleinium/Takeda. Dr. Klein currently serves as an advisor to a
range of different biotech and investment companies, with roles on Scientific Advisory Boards and Corporate Boards as
well as broader advisory roles.
Allen Ebens, BSc, PhD
Dr. Allen Ebens completed a PhD at UCLA and completed a Post-Doc at UCSF before joining Exelixis as a scientist in
the Discovery Biology group. After more than 5 years with Exelixis Dr. Ebens moved to Genentech where over 11 years
in the Research Oncology group he worked from concept to clinic across multiple therapeutic platforms including
antibodies, small molecule drugs, antibody-drug conjugates, and cell-based therapies. Dr. Ebens was recruited from
Genentech to establish the oncology research lab at Juno Therapeutics, and he is currently the Senior Director, Immune
Oncology at NGM Biopharmaceuticals in South San Francisco. Over a significant career Dr. Ebens’ contributions
include advancement of five discovery projects to clinical development and leadership of T cell recruiting bi-specific
antibody teams to proof of concept for multiple targets including one clinical candidate.
7
About Anti-DNA Autoantibodies
The study of the generation of autoantibodies has helped shape our understanding of the basic mechanisms
of immune regulation. Normally, the immune system is able to recognise and ignore the body’s own
healthy proteins, cells, and tissues, and to not overreact to non-threatening substances in the environment.
On occasion, the immune system ceases to recognise one or more of the body’s normal constituents as
“self”, leading to the production of pathological autoantibodies, and emergence of autoimmune diseases.
Quantitative changes in particular autoantibody profiles can be indictors of disease status. Many autoimmune
diseases (notably systemic lupus erythematosus; SLE) are distinguished by the production of autoantibodies that
specifically bind to DNA (known as anti-DNA autoantibodies). The development of anti-DNA autoantibodies has
not been fully elucidated.
It was originally thought that because the vast majority of DNA is housed within the nucleus, an area where
antibodies were considered unable to gain access, production of anti-DNA autoantibodies was unlikely to occur.
It was believed that these anti-DNA autoantibodies could only bind to the small amounts of free DNA present
outside of cells (so-called extracellular DNA, or xDNA). However, in recent years, a large body of evidence has
accumulated demonstrating that a select group of lupus anti-DNA autoantibodies can traverse into the nucleus
of living cells where they can bind to their target DNA.
This finding raised the possibility that such autoantibodies could be used in molecular therapy techniques, in
particular for the treatment of cancer. Among the many antibodies that have been considered, two stand out as
having great potential for use against cancer, Deoxymabs 3E10 and 5C6.
About Deoxymab 3E10
Deoxymab 3E10 is a lupus autoantibody that penetrates live cell nuclei by binding to DNA or its precursors
outside of cells and then following it into cell nuclei through a nucleoside transporter. Once in the nucleus,
Deoxymab 3E10 interferes with DNA repair processes, but with modest inhibition and not enough to kill normal
cells that have the ability to repair DNA damage. Alternatively, cancer cells, that are exquisitely sensitive to DNA
damage because their DNA repair machinery is already impaired, accumulate more DNA damage than they can
tolerate when they encounter Deoxymab 3E10, and ultimately die.
Deoxymab 3E10 is therefore selectively toxic to cancer cells that have deficiencies in DNA repair, including a
wide range of malignancies such as gliomas, melanomas, prostate, breast and ovarian cancers. When combined
with DNA-damaging agents such as chemotherapy or radiation, Deoxymab 3E10 has an even greater effect on
these cancer cells.
Deoxymab 3E10 is particularly well suited for use in cancer therapy because it preferentially localises to tumours,
and not normal tissues. As tumours grow and go through cycles of proliferation they are constantly releasing
xDNA, and this results in the accumulation of a “swarm” of xDNA in the tumour vicinity. Deoxymab 3E10 is
specifically attracted to DNA, and is dependent on the presence of xDNA in order to penetrate cell nuclei.
Therefore, the swarm of xDNA in the tumour vicinity not only attracts Deoxymab 3E10 to the tumour, but also
facilitates nuclear penetration by Deoxymab 3E10 into the tumour cell nuclei where it then inhibits DNA repair,
sensitises them to DNA-damaging agents and kills the tumour cells.
8
Next Generation Deoxymab 3E10 Lead Candidate, PAT-DX1
Since acquiring the rights to develop and commercialise Deoxymab 3E10, Patrys has completed detailed in silico
analysis in order to prepare Deoxymab 3E10 for clinical development. The Deoxymab 3E10 parental murine
sequence has been humanised and de-immunised to remove any components that might cause lupus-like side
effects and de-risked for manufacturing. In addition, the new Deoxymab 3E10 variants generated were optimised
to enhance their binding to DNA and increase their effect on DNA repair-deficient cancer cells. Sixteen different
sequence variants of di-scFv Deoxymab 3E10 fragments were synthesised, cloned, expressed and tested in
functional assays. The rationale behind creating di-scFv antibody format is to allow more than one binding site to
DNA (ie. di-scFv has two binding sites).
Patrys has selected lead candidate PAT-DX1, a di-scFv from the collection of 3E10 variants based on its
physicochemical attributes and ability to penetrate nuclei and selectively cause DNA damage and cell death in
cancer cells with DNA repair defects.
The selection of PAT-DX1 allows Patrys to move forward with production of the autoantibody to be used in range
of animal models of cancer over the coming months. The data from these will be announced in H2 2017.
Patrys has established a research collaboration with Yale University, and has been utilising the expertise from
Dr. James Hansen’s laboratory to progress PAT-DX1 through pre-clinical development.
Further Intellectual Property Licensed from Yale University -
Deoxymab 3E10 Nanoparticles
In June 2017, Patrys announced that it had licensed from Yale University the worldwide rights to develop and
commercialise technology pertaining to the linking Deoxymab 3E10 to nanoparticles. The nanoparticles can be
loaded with standard chemotherapeutic (or other) drugs and have been demonstrated to significantly increase
the efficacy of drug therapy in pre-clinical models.
The new technology builds on one of the central attributes of Deoxymab 3E10, the fact that it is attracted to
9
the extracellular DNA (xDNA) that is associated with dying cancer cells. Using this targeting mechanism,
the 3E10-nanoparticle conjugate is preferentially attracted to tumour tissues, and delivers its payload (the
chemotherapy) to where it is most needed. This drives a progressive cycle as increased cancer cell death
attracts even more of the conjugated 3E10-nanoparticle to the tumour, and significantly enhances treatment
efficacy in animal models.
The 3E10-nanoparticle conjugation intellectual property is the subject of a patent application filed by Yale
University, which, if granted, will extend patent protection to 2036.
The synergistic nature of the PAT-DX1 and nanoparticle programs allows both to be developed concurrently,
allowing the leverage of development cost savings. The new Deoxymab 3E10 nanoparticle product has been
designated PAT-DX1-NP.
About Deoxymab 5C6
Deoxymab 5C6 is another lupus autoantibody that penetrates live cell nuclei. Similar to Deoxymab 3E10,
5C6 is highly toxic to cancer cells with DNA repair deficiencies and has similar potential to be used in cancer
therapy. Yale University has also found that 5C6 has a toxic effect on BRCA2-deficient cells in colon cancer.
IgM Assets
Patrys’ IgM natural human antibody assets have shown anti-tumour activity in mice and in humans, and
have shown a very good safety profile and signals of clinical efficacy. These antibodies can theoretically be
combined with existing chemotherapeutic treatments potentially without any cumulative toxicology effects.
Patrys is one of only a few companies worldwide with expertise in development of the IgM class of antibody.
We continue with business development efforts for all IgM assets in our portfolio.
• PAT-SC1 License Update:
In 2015, the Chinese rights for PAT-SC1 were licensed
to Hefei Co-source Biomedical Co. LTD, which is
progressing well with its development plans. The
Joint Development Committee met in October 2016,
and Patrys’ CEO Dr. James Campbell was pleased
to be hosted by our partner at its site in China. The
PAT-SC1 program is progressing well, and a further
Joint Development Meeting is planned to be held in
October 2017. This alliance provides possible future
milestone payments and royalties. Patrys has retained
the right to develop and commercialise PAT-SC1
outside of China.
• PAT-SM6 update
Patrys in conjunction with its partners completed
a review focussed on the fundamental issues that
arose with manufacturing of PAT-SM6 antibody. The
proposed clinical trial of PAT-SM6 in multiple myeloma
will remain on hold until non-dilutive capital can be
sourced.
Hefei Co-source Bio-medical Co. Ltd building
Shushan District, Hefei, Anhui, P.R China.
10
From left to right: Dr Shu Gao, Founder and CEO of Hefei
Co-source, Dr. James Campbell, Patrys CEO, Dr. Shanchun Zhang,
CEO of Hefei Bio-Medicine prepare for a meeting of the Joint
Development Committee
• Intellectual Property
Patrys’ patent portfolio undergoes a constant process of expansion and consolidation.
The five patents underlying Deoxymab, PAT-DX1, Deoxymab Nanoparticles and 5C6 and licensed from Yale
University include:
n Cell-penetrating anti-DNA antibodies and uses thereof to inhibit DNA repair
n Multivalent fragments of antibody 3E10 and methods of use thereof
n Cell penetrating nucleolytic antibody based cancer therapy
n Antibody mediated autocatalytic, targeted delivery of nanocarriers to tumours
n Binding proteins
The first patent in the Deoxymab family “Cell-penetrating anti-DNA antibodies and uses thereof to inhibit DNA
repair“ for cancer treatment has recently been granted in the U.S., with pending applications in China, Europe
and Japan. The predicted expiry date for the first filed patent is April 2031.
The six patents that encompass the current IgM portfolio covering products PAT-SM6 and PAT-LM1 include:
n Adenocarcinoma specific antibody SAM-6, and uses thereof
n Human monoclonal antibody having fat-reducing effect
n Novel glycosylated peptide target in neoplastic cells
n Neoplasm specific antibodies and, uses thereof
n LM-antibodies, functional fragments, LM-1 target antigen, and methods for making and using same
n PAT-LM1 epitopes and methods for using same
There are 24 granted applications in these families combined, and only 2 applications still under examination.
The first of these patents will expire in 2024. Patrys is seeking to partner the IgM assets in its portfolio.
11
Recent Publications
Deoxymab 3E10
Chen Z, Patel JM, Noble PW, Garcia C, Hong Z, Hansen JE and Zhou J. A lupus anti-DNA autoantibody
mediates autocatalytic, targeted delivery of nanoparticles to tumours. Oncotarget, 2016, 7(37): 59965-
59975.
Noble PW, Bernatsky S, Clarke AE, Isenberg DA, Ramsey-Goldman R and Hansen JE. DNA-damaging
autoantibodies and cancer: the lupus butterfly theory. Nat Rev Rheumatol., 2016, 12(7): 429-34.
Weisbart RH, Chan G, Jordaan G, Noble PW, Liu Y, Glazer PM, Nishimura RN and Hansen JE. DNA-
dependent targeting of cell nuclei by a lupus autoantibody. Sci Rep., 2015, 5: 12022.
Noble PW, Chan G, Young MR, Weisbart RH and Hansen JE. Optimizing a lupus autoantibody for
targeted cancer therapy. Cancer Res., 2015, 75(11): 2285-91.
Hansen JE, Chan G, Liu Y, Hegan DC, Dalal S, Dray E, Kwon Y, Xu Y, Xu X, Peterson-Roth E, Geiger E, Liu Y,
Gera J, Sweasy JB, Sung P, Rockwell S, Nishimura RN, Weisbart RH and Glazer PM. Targeting cancer with
a lupus autoantibody. Sci Transl Med., 2012, 4(157): 157ra142.
Deoxymab 5C6
Noble PW, Young MR, Weisbart RH and Hansen JE. A nucleolytic lupus autoantibody is toxic to BRCA2-
deficient cancer cells. Sci Rep., 2014, 4: 5958.
PAT-SC1
Hensel F, Timmermann W, von Rahden B, Brändlein S, Rosenwald A, Illert B. Ten year follow up of a
prospective trial for the ta`rgeted therapy of gastric cancer with the human monoclonal antibody PAT-SC1,
Oncol Rep., 2014, 31(3): 1059-66.
PAT-SM6
Rasche L, Menoret E, Dubljevic V, Menu E, Vanderkerken K, Lapa C, Steinbrunn T, Chatterjee M, Knop
S, Düll J, Greenwood DL, Hensel F, Rosenwald A, Einsele H, Brändlein S. A GRP78-directed monoclonal
antibody recaptures response in refractory multiple myeloma with extramedullary involvement, Clin.
Cancer Res., 2016, 22: 4341–4349.
Rasche L, Duell L, Castro I, Dubljevic V, Chatterjee M, Knop S, Hensel F, Rosenwald A, Einsele H, Topp
M and Brändlein S. GRP78-directed immunotherapy in relapsed or refractory multiple myeloma – results
from a Phase I trial with monoclonal antibody PAT-SM6, Haematologica, 2015, 100(3): 377-84.
Loos A, Gruber C, Altmann F, Mehofer U, Hensel F, Grandits M, Oostenbrink C, Stadlmayr G, Furtmuller
PG and Steinkellner H, Expression and glycoengineering of functionally active heteromultimeric IgM in
plants, PNAS, 2014, 111(17): 6263-8.
Hensel F, Eckstein M, Rosenwald A and Brändlein S. Early development of PAT-SM6 for the treatment of
melanoma, Melanoma Res., 2013, 23(4): 264-75.
Rosenes Z, Mok Y-F, Yang S, Griffin MD, Mulhern TD, Hatters DM, Hensel F and Howlett GJ. Simultaneous
binding of the anti-cancer IgM monoclonal antibody PAT-SM6 to low density lipoproteins and GRP78,
PLoS One, 2013, 8(4): e61239.
Rasche L, Düll J, Morgner C, Chatterjee M, Hensel F, Rosenwald A, Einsele H, Topp MS and Brändlein S.
The natural human IgM antibody PAT-SM6 induces apoptosis in primary human multiple myeloma cells by
targeting heat shock protein GRP78, PLoS One, 2013, 8(5): e63414.
Rosenes Z, Mulhern TD, Hatters DM, Ilag LL, Power BE, Hosking CH, Hensel F, Howlett GJ and Mok
Y-F. The anti-cancer IgM monoclonal antibody PAT-SM6 binds with high avidity to the unfolded protein
response regulator GRP78, PLoS One, 2012, 7(9): e44927.
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Table of Contents
Review of operations
Directors’ report
Auditor’s independence declaration
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report to the members of Patrys Limited
Shareholder information
14
16
27
28
29
30
31
32
57
58
61
13
Patrys Limited
Review of operations
30 June 2017
Overview
Patrys is a biopharmaceutical Company devoted to the development and commercialisation of novel antibody technologies
to improve the clinical outcomes for cancer patients.
The Company has two technology platforms; the Deoxymab nuclear-penetrating antibodies which were in-licensed from
Yale University in March of 2016 and an IgM platform that has yielded assets that showed safety and signals of efficacy in
both melanoma and multiple myeloma patients.
Deoxymabs
Patrys has licensed the exclusive global rights to two nuclear-penetrating antibodies (3E10 and 5C6) for cancer therapy
from Yale University. Deoxymab 3E10 is the more advanced of these assets, and the Company has a fully-costed
development plan to progress this asset towards the clinic within the next two years.
Deoxymab 3E10 has the capacity to penetrate cancer cell nuclei, inhibit DNA repair and kill DNA repair-deficient cancer
cells with the BRCA2 and/or PTEN mutations. The antibody has the ability to sensitise cancer cells to radiation and
chemotherapy and interfere with their ability to sustain themselves through DNA repair. These characteristics of Deoxymab
3E10 open up new avenues for researching treatment of BRCA2 and PTEN-related cancers including breast, brain gliomas,
astrocytomas, head and neck carcinoma are examples.
Under Patrys’ guidance over the past 15 months Deoxymab 3E10 has been re-formatted as a di-single chain fragment
(scFv) that is likely to reduce the risk of non-specific activation and associated side effects. A potent engineered form of
Deoxymab 3E10, PAT-DX1 has been selected for testing in a range of pre-clinical cell and animal models, with data to be
announced in coming months.
Patrys convened its inaugural Scientific Advisory Board (SAB) in late 2016 and the SAB members, Dr. Pamela M. Klein and
Dr. Allen Ebens, were involved in a review of the Deoxymab program in February and the selection of PAT-DX1 as the lead
candidate for pre-clinical animal studies.
Finally, Patrys has licensed global rights to 3E10 linked to nanoparticles from Yale University. The nanoparticles can be
loaded with standard chemotherapeutic (or other) drugs and have been demonstrated to significantly increase the efficacy of
the drug therapy in pre-clinical models.
IgM assets
The Company has completed an investigation into the fundamental issues that arose with the manufacturing of PAT-SM6
antibody, and has identified a path forward to restart the development of PAT-SM6 and its other IgM assets. Given the
significant cost and time involved with these programs Patrys will only consider reactivation on a partnered, risk sharing
basis or if non-dilutive funds can be accessed.
In 2015 Patrys out-licensed the Chinese development and commercialization rights for its asset PAT-SC1 to Hefei Co-
source Biomedical, an integrated Chinese drug development Company. Patrys received an up-front licensing fee, and may,
pending the achievement of prescribed milestones, receive multiple milestone payments and royalties on eventual product
sales. Patrys retains the right to develop and commercialize PAT-SC1 outside of China.
Through a Joint Development Committee and personal relationships Patrys maintains a close alliance with Hefei Co-source
Biomedical, and is very pleased with the progress being made.
Looking ahead
The small and dedicated Patrys team remains focused on progressing its Deoxymab assets, particularly PAT-DX1 and cost-
effectively developing its IgM assets.
The Company is also committed to pursuing a number of insurance claims related to the failed manufacturing run of PAT-
SM6 in 2014/15. Given the magnitude, number and complexity of the claims this has been a protracted process, and the
Patrys management team continues to progress Patrys’ claims with its insurers.
With strong governance, tight financial control and a clear path forward Management and the Board believe that the
Company is well positioned to build value from its existing base of capital and assets and looks forward to sharing this
journey with its shareholders over the coming year.
Strategic focus
The Company completed a cost and risk review of its programs in the previous financial year, and is guided by this analysis
14
Patrys Limited
Review of operations
30 June 2017
and updates thereof. The objective of the Company’s activities are to cost-effectively build shareholder value, and to
minimise the need for dilutive capital until the value of the existing assets has been recognised.
The current strategy is to build value into the Deoxymab program through pre-clinical activities, and to seek to partner or
fund through non-dilutive sources the costly clinical development programs for the Company’s IgM assets.
Business development
Patrys has an active alliance for the development of PAT-SC1 for the Chinese cancer market with the integrated Chinese
drug development Company, Hefei Co-source Biomedical. This partnership delivers annual fees with potential milestone
payments, revenue sharing and royalties. The Company has ongoing efforts to establish additional partnerships for its IgM
assets.
Operating Results
The loss for the Group after providing for income tax amounted to $1,057,876 (30 June 2016: $1,080,784).
The Group held cash and term deposits of $1,910,952 (2016: $3,215,039) at reporting date. The Group's policy is to hold its
cash and cash equivalent deposits in 'A' rated or better deposits.
The Group's strategy is to outsource product development expenses, including manufacturing, regulatory and clinical trial
expenses, to specialist, best of breed partner organisations. As a consequence, the Group has not incurred any major
capital expenditure for the period and does not intend to incur substantial commitments for capital expenditure in the
immediate future.
Consolidated revenue during the period was $531,729 (2016: $867,653). This revenue includes interest of $44,512 (2016:
$76,869), R&D tax incentive income of $410,163 (2016: $502,485), licencing income of $52,708 (2016: $274,970) and
Government grants of $23,791 (2016: $Nil).
Other income for the period consisted of supplier refunds of $846,579 (2016: $Nil) offset by realised foreign exchange
movement during the period of ($22,968) (2016: $48,572).
Total consolidated operating expenses for the period were $2,413,216 (2016: $1,997,009).
Research and development costs of $1,265,377 (2016: $1,042,256) have been expensed in the year they were incurred.
The increase in R&D costs in 2017 is due to increased activity on the Deoxymab project with commencement of pre-clinical
and manufacturing works in the financial year.
Administration and management costs contributed a further $1,147,839 (2016: $954,753) to expenses from continuing
operations. The increase during the financial year relates to an increase in corporate costs for insurance, assistance with
the R&D tax incentive application offset by a decrease in employee costs relating to R&D in 2017.
15
Patrys Limited
Directors' report
30 June 2017
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter
as the 'Group') consisting of Patrys Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it
controlled at the end of, or during, the year ended 30 June 2017.
Directors
The following persons were Directors of Patrys Limited during the whole of the financial year and up to the date of this
report, unless otherwise stated:
Mr. John Read (Non-Executive Chairman)
Mr. James Campbell (Managing Director & CEO)
Ms. Suzy Jones (Non-Executive Director)
Mr. Michael Stork (Non-Executive Director and Deputy Chairman)
Principal activities
During the financial year the principal continuing activities of the Group consisted of:
●
Commercialisation of the Group's proprietary technologies to develop natural human antibody-based therapeutic
products for the treatment of cancer; and
Pursuit of non-dilutive funding sources.
●
Dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
Significant changes in the state of affairs
During the financial year, the Company issued 27,000,000 unlisted options exercisable at $0.0078 (0.78 cents) per option.
There were no other significant changes in the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
On 12 July 2017, the Group achieved the second milestone of the Nucleus agreement and was granted the first US Patent
protecting the use of Deoxymab 3E10, securing development and commercialization rights. In accordance with the
contract, the second tranche of 34,789,333 fully paid ordinary shares were issued at a deemed issue price of $0.005174
($0.5174 cents) per share on 17 July 2017.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect
the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
The Group will continue to pursue its objective of developing antibodies as therapies for a range of different cancers.
Patrys has a pipeline of anti-cancer antibodies for both internal development and as partnering opportunities.
The Group’s focus for the coming period will be on advancing its PAT-DX1 cell-penetrating antibody development program,
and on sourcing non-dilutive capital to restart the clinical development of the natural human IgM antibody PAT-SM6 which
has been shown to have anti-cancer properties in clinical studies.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
16
Patrys Limited
Directors' report
30 June 2017
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
John Read
Non-Executive Chairman
BSc (Hons), MBA, FAICD
Mr. Read is an experienced Chairman and Director in public, private and government
organisations. Through his extensive career in venture capital, private equity and
commercialization he has gained a depth of experience in the formation and growth of
emerging companies with an emphasis on commercial entities that provide broad
societal benefits. He is currently the Chairman of CVC Limited (ASX: CVC) and
previously Chairman of Eildon Capital Limited (ASX:EDC) from 2013 to 2016, Pro-
Pac Packaging Limited (ASX:PPG) from 2005 to 2010, The Environmental Group
Limited (ASX:EGL) from 2001 to 2012 and The Central Coast Water Corporation from
2011 to 2014.
CVC Ltd (since 1989).
Other current directorships:
Former directorships (last 3 years): Eildon Capital Limited (ASX: EDC)
Interests in shares:
6,560,855 ordinary shares
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
James Campbell
Managing Director and Chief Executive Officer
Ph.D, MBA
Dr. Campbell has more than 20 years of international biotechnology research,
management and leadership experience and has been involved in the creation and/or
transformation of multiple successful Australian and international biotechnology
companies. Dr. Campbell was previously the CFO and COO of ChemGenex
Pharmaceuticals Limited (ASX:CXS), where, as a member of the Executive team he
helped transform a research-based Company with a market capitalization of $10M to
a Company with completed clinical trials and regulatory dossiers submitted to the
FDA and EMA. In 2011 ChemGenex was sold to Cephalon for $230M. Dr. Campbell
was a foundation Executive of Evolve Biosystems, and has assisted private
biotechnology companies in Australia, New Zealand and the USA with successful
capital raising and partnering negotiations. Dr. Campbell sits on the IP and
Commercialization Advisory Committee of the CRC for Mental Health, and sits on the
Advisory Board of Deakin University’s Centre for Innovation in Mental and Physical
Health and Clinical Treatment (IMPACT). Dr. Campbell is a Non-Executive Director
of both Invion Limited (ASX:IVX) and Prescient Therapeutics Limited (ASX:PTX).
Non-Executive Director of Invion Limited (ASX:IVX) and Prescient Therapeutics
Limited (ASX:PTX).
Former directorships (last 3 years): Non-Executive Director of Medibio Limited (ASX:MEB) (resigned 30/9/2016)
Interests in shares:
Interests in options:
25,000 fully paid ordinary shares
15,000,000 unlisted options exercisable at $0.0078 per option, expiring 24/11/2021
Name:
Title:
Qualifications:
Experience and expertise:
Michael Stork
Non-Executive Director and Deputy Chairman
BBA
Mr. Stork is the Managing Director of Stork Holdings Ltd, an Investment Holding
Company active in the Canadian technology startup sector. Mr. Stork was until early
this year active on the Board of Governors of the University of Waterloo and is the
Chairman of the Waterloo Accelerator Centre, a technology Company incubator
affiliated with the University. He is currently the Chairman of Spartan Biosciences
Inc., an Ottawa based DNA analytics Company, the Chairman of Dejero Labs Inc., a
Waterloo based broadcast technology Company, and active on the Boards of a
number of other leading Canadian technology startup companies.
Other current directorships:
None.
Former directorships (last 3 years): None.
Interests in shares:
95,731,764 fully paid ordinary shares (These shares are held by Stork Holdings 2010
Ltd. The shares are held by a related trust which Michael Stork in his own right does
not control).
17
Patrys Limited
Directors' report
30 June 2017
Name:
Title:
Experience and expertise:
Suzy Jones
Non-Executive Director
Ms. Jones is Founder and Managing Partner of DNA Ink LLC, a life sciences advisory
and business development firm with clients in the United States, Germany, Israel and
France. DNA Ink provides corporate strategic guidance to its clients leading to
transactions that support corporate growth including licensing, M&A and fundraising
transactions. Prior to starting her own firm, Ms. Jones spent 20 years at Genentech
where she served in many roles including Interim Head of Partnering, Head of
Business Development, Senior Project Manager and Research Associate. She
managed several products during this time including Rituxan, the first monoclonal
antibody launched to treat cancer. Ms. Jones has very extensive networks within the
pharmaceutical and biotech companies and VC community in North America. Ms.
Jones is a Non-Executive Director of Calithera Biosciences, Inc. (Nasdaq:CALA), a
clinical-stage pharmaceutical Company focused on discovering and developing novel
small molecule drugs directed against tumor metabolism and tumor immunology
targets for the treatment of cancer.
Nil.
Other current directorships:
Former directorships (last 3 years): None.
Interests in shares:
3,000,000 fully paid ordinary shares.
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Melanie Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of the Institute
of Chartered Accountants and is a Registered Company Auditor. She graduated from Swinburne University in 1997,
became a Chartered Accountant in 1999 and since February 2000 has been the principal of chartered accounting firm,
Leydin Freyer. The practice provides outsourced Company secretarial and accounting services to public and private
companies specialising in the resources, technology, bioscience and biotechnology sector. Melanie has over 25 years’
experience in the accounting profession and has extensive experience in relation to public Company responsibilities,
including ASX and ASIC compliance, control and implementation of corporate governance, statutory financial reporting,
reorganisation of Companies and shareholder relations.
Meetings of Directors
The number of meetings of the Company's Board of Directors ('the Board') held during the year ended 30 June 2017, and
the number of meetings attended by each Director were:
Full Board
Nomination and
Remuneration Committee
Audit and Risk Committee
Attended
Held
Attended
Held
Attended
Held
John Read
James Campbell*
Suzy Jones
Michael Stork
8
8
7
8
8
8
8
8
-
-
-
-
-
-
-
-
2
-
2
2
2
2
2
2
Held: represents the number of meetings held during the time the Director held office.
*
James Campbell was not a member of the Nomination & Remuneration Committee or the Audit & Risk Committee but
was invited to attend these meetings.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the consolidated entity, in
accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
18
Patrys Limited
Directors' report
30 June 2017
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
The objective of the consolidated entity's Executive reward framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns Executive reward with the achievement of strategic
objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the
delivery of reward. The Board of Directors ('the Board') ensures that Executive reward satisfies the following key criteria for
good reward governance practices:
●
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of Executive compensation
transparency
capital management
The Board is responsible for determining and reviewing compensation arrangements for the Directors themselves, the
Non-Executive Chairman and the Senior Management team. The Board has established a Nomination & Remuneration
Committee, comprising of three Directors, the majority of which are Non-Executive Directors. This Committee is primarily
responsible for making recommendations to the board on:
- The over-arching Executive remuneration framework
- The operation of the incentive plans, including key performance indicators and performance hurdles
- Remuneration levels of Executive directors and other key management personnel; and
- Non-Executive Director fees
The objective of the Committee is to ensure that remuneration policies and structures are fair and competitive and aligned
with the long term interests of the Company. The Corporate Governance Statement provides further information on the role
of this committee.
The Company has structured an Executive remuneration framework that is market competitive and complimentary to the
reward strategy of the organisation.
The Company’s remuneration framework seeks alignment with shareholders’ interests and is in particular aligned to the
rapid commercialisation of the Company’s intellectual property and in achieving its milestones in a highly ethical and
professional manner.
The Executive remuneration framework provides a mix of fixed and variable pay and performance incentive rewards.
Presently, the Company’s policy in relation to performance incentive rewards is to issue only equity (and not cash bonuses)
to executives. The Company does not have a policy or practice of cancelling or clawing-back performance-based
remuneration of its executives other than in accordance with the relevant plan rules.
In accordance with best practice corporate governance, the structure of Non-Executive Director and Executive Director
remuneration is separate.
Non-Executive directors remuneration
Directors’ fees are determined by reference to industry standards and were last reviewed effective 1 September 2012.
Components of the remuneration package include a cash element together with medium term equity instruments.
Directors’ fees are currently set at $95,000 for the Chairman and $60,000 per Non-Executive Director (note Ms. Jones
receives US$60,000) and reflect the demands which are made on and the responsibilities of the Directors. However, one
Non-Executive Director, Mr. Michael Stork, does not receive monetary Director fees and received no remuneration of any
kind during the year.
19
Patrys Limited
Directors' report
30 June 2017
ASX listing rules require the aggregate Non-Executive directors' remuneration be determined periodically by a general
meeting. The most recent determination was at the Annual General Meeting held on 27 November 2009, where the
shareholders approved a maximum annual aggregate remuneration of $250,000.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which
has both fixed and variable components.
The Executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the Executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, is reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of
the Group and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the Group and provides additional value to the Executive.
Incentives are payable to executives based upon the attainment of agreed corporate and individual milestones and are
reviewed and approved by the Board of Directors. The Board of Directors have determined that given the current economic
climate, no cash incentives will be paid for the year ended 30 June 2017 (2016: Nil).
Executives and Directors are issued with equity instruments as LTIs (long term incentives) in a manner that aligns this
element of remuneration with the creation of shareholder wealth. LTI grants are made to executives and Directors who are
able to influence the generation of shareholder wealth and thus have a direct impact on the creation of shareholder wealth.
The Board of Directors issued 15,000,000 unlisted options to James Campbell during the period in accordance with an
approval from members at the Annual General Meeting held on 24 November 2016.
Consolidated entity performance and link to remuneration
Equity instruments may be issued to new employees, and upon performance review based on performance of the
individual and the Company both in absolute terms and relative to competitors in the biotechnology sector. Equity
instruments that are issued for performance are subject to performance targets set and approved by the Nomination and
Remuneration Committee.
The Company’s remuneration policy seeks to reward staff members for their contribution to achieving significant
operational, strategic, partnering, preclinical, clinical and regulatory milestones. These milestones build sustainable and
long term shareholder value.
The Nomination and Remuneration Committee is of the opinion that the continued improved results can be attributed in
part to the adoption of performance based compensation and is satisfied that this improvement will continue to increase
shareholder wealth if maintained over the coming years.
Voting and comments made at the Company's 24 November 2016 Annual General Meeting ('AGM')
At the 24 November 2016 AGM, 99.47% of the votes received supported the adoption of the remuneration report for the
year ended 2016. The Company did not receive any specific feedback at the AGM regarding its remuneration practices.
20
Patrys Limited
Directors' report
30 June 2017
Details of remuneration
Amounts of remuneration
2017
Non-Executive Directors:
Suzy Jones*
John Read
Executive Directors:
James Campbell
Other Key Management
Personnel:
Melanie Leydin
Short-term
Short-term
benefits
Cash salary
and fees
$
benefits
Annual
Leave
$
Post-
employment
benefits
Super-
annuation
$
Long-term
benefits
Long
service
leave
$
Share-
based
payments
Equity-
settled
options
$
Termination
Payments
Cash
and fees
$
79,310
95,000
280,389
96,000
550,699
-
-
-
-
-
-
-
19,616
-
19,616
-
-
-
-
-
-
-
37,513
-
37,513
-
-
-
-
-
Total
$
79,310
95,000
337,518
96,000
607,828
*
1. Ms Jones was paid $60,000 USD at an average exchange rate of $0.7565 USD to 1 AUD.
Short-term
Short-term
benefits
Cash salary
and fees
$
benefits
Annual
Leave
$
Post-
employment
benefits
Super-
annuation
$
Long-term
benefits
Long
service
leave
$
Share-
based
payments
Equity-
settled
options
$
Termination
Payments
Cash and
fees
$
Total
$
81,484
95,000
217,761
-
-
-
-
-
2,240
-
-
-
60,000
66,539
520,784
-
33,061
33,061
-
4,054
6,294
-
32,693
32,693
-
-
-
-
-
-
-
-
-
81,484
95,000
220,001
-
70,593
70,593
60,000
206,940
663,425
2016
Non-Executive Directors:
Suzy Jones*
John Read
Executive Directors:
James Campbell**
Other Key Management
Personnel:
Melanie Leydin***
Roger McPherson***
1. Ms Jones was paid $60,000 USD at an average exchange rate of $0.7363 USD to 1 AUD.
2. Dr Campbell's hours increased to full time as of 1 March 2016.
*
**
*** 3. Roger McPherson resigned, and Melanie Leydin was appointed on 1 October 2015.
21
Patrys Limited
Directors' report
30 June 2017
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
John Read
Suzy Jones
Executive Directors:
James Campbell
Other Key Management
Personnel:
Roger McPherson
Melanie Leydin
Fixed remuneration
2016
2017
At risk - STI
At risk - LTI
2017
2016
2017
2016
100%
100%
100%
100%
89%
100%
-
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
11%
-
-
-
-
-
-
-
Service agreements
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
James Campbell
Managing Director and Chief Executive Officer
12 November 2014 as Non-Executive Director and 13 April 2015 as Managing
Director
No fixed term for an ongoing term subject to termination by the Company with 6
months' notice and termination by the employee with 6 months' notice of the
employee to the Company.
Dr Campbell will be entitled to an annual salary (inclusive of superannuation) of
$300,000. The Remuneration Package is inclusive of any fringe benefits tax for
which the Company is liable in respect of the employee’s total remuneration and any
superannuation contributions. The employee's performance will be reviewed annually
or more frequently if required.
John Read
Non-Executive Chairman
29 May 2007. A new agreement became effective 1 December 2009
No fixed term.
$95,000 per annum to be reviewed independently and annually by the Board of
Directors.
Suzy Jones
Non-Executive Director
15 December 2011
No fixed term.
$US60,000 per annum to be reviewed independently and annually by the Board of
Directors.
Melanie Leydin
Company Secretary
1 October 2015
No fixed term, with 1 months' notice.
$8,000 per month for Company secretarial and accounting services
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to Directors and other key management personnel as part of compensation during the year
ended 30 June 2017.
22
Patrys Limited
Directors' report
30 June 2017
Options
Details of options over ordinary shares granted, vested and lapsed for Directors and other key management personnel as
part of compensation during the year ended 30 June 2017 are set out below:
Name
Grant date
Vesting date
Number of Value of
options
granted
options
granted
$
Value of
options
vested
$
Number of Value of
options
lapsed
$
options
lapsed
James Campbell
James Campbell
James Campbell
24/11/2016
24/11/2016
24/11/2016
24/11/2016
24/11/2017
24/11/2018
5,000,000
5,000,000
5,000,000
20,370
17,995
15,440
5,000,000
-
-
-
-
-
-
-
-
Additional information
The earnings of the Group for the five years to 30 June 2017 are summarised below:
2017
$
2016
$
2015
$
2014
$
2013
$
Revenue and other income
Net profit/(loss) before tax
Net profit/(loss) after tax
531,729
(1,057,876)
(1,057,876)
867,653
(1,080,784)
(1,080,784)
2,224,481
(8,463,492)
(8,470,382)
759,683
(7,280,929)
(7,289,090)
1,175,624
(3,522,634)
(3,529,095)
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
2017
2016
2015
2014
2013
Share price at financial year start ($)
Share price at financial year end ($)
Basic earnings per share (cents per share)
0.01
0.01
(0.14)
0.01
0.01
(0.15)
0.03
0.01
(1.22)
0.02
0.03
(1.21)
0.02
0.02
(0.72)
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each Director and other members of key
management personnel of the Group, including their related parties, is set out below:
Balance at Received
as part of
the start of
the year
remuneration Additions
Ordinary shares
John Read*
Michael Stork
James Campbell
Suzy Jones
6,660,890
95,731,764
25,000
3,000,000
105,417,654
-
-
-
-
-
Balance at
the end of
the year
Disposals
-
-
-
-
-
(100,035)
-
-
-
(100,035)
6,560,855
95,731,764
25,000
3,000,000
105,317,619
*
The disposals during the 2017 financial year relate to expired shares as part of the loan share plan.
Option holding
The number of options over ordinary shares in the Company held during the financial year by each Director and other
members of key management personnel of the Group, including their personally related parties, is set out below:
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
15,000,000
15,000,000
-
-
-
-
15,000,000
15,000,000
Options over ordinary shares
James Campbell
23
Patrys Limited
Directors' report
30 June 2017
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of Patrys Limited under option at the date of this report are as follows:
Grant date
2 December 2009
1 July 2010
8 December 2011
8 December 2011
8 December 2011
21 August 2012
21 August 2012
21 August 2012
20 May 2014
20 May 2014
20 May 2014
24 November 2016
19 April 2017
19 April 2017
Expiry date
27 November 2017
1 July 2018
8 December 2017
8 December 2018
8 December 2019
21 August 2018
21 August 2019
21 August 2010
20 May 2020
20 May 2021
20 May 2022
24 November 2021
19 April 2022
1 July 2021
Exercise
price
Number
under option
$0.14000
$0.10000
$0.03000
$0.03000
$0.03000
$0.02000
$0.02000
$0.02000
$0.05000
$0.05000
$0.05000
$0.00780
$0.00780
$0.00780
5,952
3,600
7,334
7,333
7,333
10,000
10,000
10,000
25,000
25,000
25,000
24,000,000
1,750,000
1,250,000
27,136,552
No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of
the Company or of any other body corporate.
Shares issued on the exercise of options
There were no ordinary shares of Patrys Limited issued on the exercise of options during the year ended 30 June 2017
and up to the date of this report.
Share based compensation to Directors and key management personnel
General overview
The Company issues equity to Directors, Patrys employees and key consultants under either the Loan Share Plan (LSP) or
the Executive Share Option Plan (ESOP). Under the plans, participants are issued with equity to foster an ownership
culture within the Group to motivate Directors, employees and consultants to achieve performance targets of the Company
and the Group. Participation in the plans is at the Board’s discretion and no individual has a contractual right to participate
in the plan or to receive any guaranteed benefits.
The Company introduced the LSP in December 2009 following approval of the plan at the 2009 Annual General Meeting.
Only Australian residents are eligible to participate in the plan. The plan allows non-recourse, interest free loans to be
provided to eligible participants to acquire shares under the plan. If and when an issue is made it is treated as an in-
substance grant of options and expensed over the vesting period because of the limited recourse nature of the loans.
Generally shares issued under the plan will vest over a three year period. The shares are acquired in the name of the
participant and each participant authorises and appoints the Company Secretary to act on their behalf. Any dividends paid
on the shares are used to repay the loan. In all other respects the shares issued under the LSP carry the same rights as
other ordinary shares on issue. If the participant leaves the Company, any shares that have not vested will be brought back
by the Company and cancelled along with the loan. In respect of shares that have vested the loan balance must generally
be paid in full within six months of termination or the shares will be sold and the proceeds applied to settle the loan
balance. The issue price of the shares in the Company held under LSP is not included in equity until the loan has been
repaid.
24
Patrys Limited
Directors' report
30 June 2017
Options are granted under the ESOP. Under the ESOP each option granted converts into one ordinary share of Patrys
Limited. Options are granted under the plan for no consideration and carry no dividend or voting rights. Options may be
exercised at any time from the date of vesting to the date of their expiry.
If a participant ceases to be appointed as a Director or employed by any member of the group (other than due to his/her
death) then options that have vested at the date of cessation will generally lapse if not exercised within six months of the
cessation date (unless an extension is granted by the Board). In the case of death of the participant then the exercise
period is generally extended to twelve months. All unvested options will generally lapse on cessation.
In accordance with the rules of both the LSP and ESOP the Board has the ability to vary the terms in respect of issues in
circumstances it considers appropriate. The valuations of shares issued under the LSP and options issued under the
ESOP are determined by using an industry standard option pricing model taking into account the terms and conditions
upon which the instruments were issued.
Participants in equity based plans are not permitted to enter into transactions which limit the economic risk of participating
in the plan save in relation to the LSP. As noted above the LSP allows participants access to a limited recourse loan to
fund the acquisition of any shares issued under the LSP.
Equity issued to Directors and key management personnel
Details of equity issued in the Company provided as remuneration to each Director of Patrys Limited and each of the key
management personnel of the Company are set in the Remuneration Report. When vested, prior to the Director or key
management personnel being able to deal with each share, the loan advanced to acquire the share under the LSP must be
repaid. In the case of the options, the exercise price must be paid prior to each being converted into one ordinary share of
Patrys Limited. Details are also provided for the number of equity instruments that have vested during the 2017 financial
year.
The assessed fair value at the date of issue of the equity instruments is allocated over the period from issue date to vesting
date, and this amount is included in the remuneration tables above. Fair values at issue date are determined using the
Binomial or the Black-Scholes option pricing model that takes into account the exercise price (or amount of loan), the term
of the option (or loan), the share price at issue date and expected price volatility of the Patrys shares, the expected
dividend yield and the risk-free interest rate for the term of the option (or loan).
Further information on the shares and options issued under the LSP and ESOP, including factors and assumptions used in
determining fair value is set out in Note 27 to the financial statements.
Following the implementation of the LSP, some Australian residents choose to participate in the LSP and not the ESOP.
Details of shares and options that have been issued and vested in this or the previous year are outlined in the table below.
The tables only include transactions whilst a member of the key management personnel.
There are no performance criteria that need to be met in relation to the shares issued above. Participants need to be
appointed as a Director or employed by a Group Company at the vesting date. Unvested shares are brought back by the
Company at the cessation of appointment or employment at the issue price.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a
Director or Executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of
the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits
disclosure of the nature of the liability and the amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
25
Patrys Limited
Directors' report
30 June 2017
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the
auditor’s expertise and experience with the Company and/or the Group are important.
Details of the amount paid or payable to the auditor (BDO East Coast Partnership) for audit and non-audit services
provided during the year are set out in Note 19.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit & Risk
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence
for auditors imposed by the Corporations Act 2001 for the following reasons:
●
All non-audit services have been reviewed by the Audit & Risk Committee to ensure they do not impact the impartiality
and objectivity of the auditor.
None of the services undermine the general principles relating to auditor independence as set out in Professional
Statement APES 110, including reviewing or auditing the auditor’s own work, acting in a management or a decision-
making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.
●
Officers of the Company who are former partners of BDO East Coast Partnership
There are no officers of the Company who are former partners of BDO East Coast Partnership.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this Directors' report.
Auditor
BDO East Coast Partnership continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the Directors
___________________________
Mr. John Read
Chairman
28 August 2017
26
Patrys Limited
Auditor's independence declaration
27
Patrys Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2017
Revenue
Other income
Expenses
Research & development expenses
Administration & management expenses
Loss before income tax expense
Income tax expense
Loss after income tax expense for the year attributable to the Owners of
Patrys Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the Owners of Patrys
Limited
Note
Consolidated
2017
$
2016
$
5
6
8
531,729
867,653
823,611
48,572
(1,265,377)
(1,147,839)
(1,042,256)
(954,753)
(1,057,876)
(1,080,784)
-
-
(1,057,876)
(1,080,784)
4,797
25,408
4,797
25,408
(1,053,079)
(1,055,376)
Cents
Cents
Basic earnings per share
Diluted earnings per share
26
26
(0.14)
(0.14)
(0.15)
(0.15)
28
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
Patrys Limited
Statement of financial position
As at 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Employee benefits
Total current liabilities
Non-current liabilities
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
Note
Consolidated
2017
$
2016
$
9
10
11
1,910,952
500,728
78,860
2,490,540
3,215,039
259,307
69,762
3,544,108
4,341
663,750
668,091
5,870
708,750
714,620
3,158,631
4,258,728
12
415,120
64,874
479,994
543,708
51,338
595,046
15,540
15,540
25,213
25,213
495,534
620,259
2,663,097
3,638,469
13
14
60,035,971
518,155
(57,891,029)
60,035,971
505,645
(56,903,147)
2,663,097
3,638,469
29
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
Patrys Limited
Statement of changes in equity
For the year ended 30 June 2017
Consolidated
Foreign
currency
translation
reserve
$
Share option
reserve
$
Share loan
plan
reserve
$
Issued
capital
$
Other
reserve
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2015
59,675,971
(43,931)
167,008
274,047
- (56,102,755)
3,970,340
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Reallocation of value of
expired and cancelled equity
Transactions with owners in
their capacity as owners:
Share-based payments (note
27)
Issue of shares in
consideration for Nucleus
-
-
-
-
-
360,000
-
25,408
25,408
-
-
-
-
-
-
-
-
(1,080,784)
(1,080,784)
-
25,408
-
(1,080,784)
(1,055,376)
-
(159,573)
(120,819)
-
280,392
-
-
-
1,923
1,582
-
-
-
360,000
-
-
3,505
720,000
Balance at 30 June 2016
60,035,971
(18,523)
9,358
154,810
360,000 (56,903,147)
3,638,469
Consolidated
Foreign
currency
translation
reserve
$
Share option
reserves
$
Share loan
plan
reserve
$
Issued
capital
$
Other
reserve
$
Accumulated
losses
$
Total equity
$
Balance at 1 July 2016
60,035,971
(18,523)
9,358
154,810
360,000 (56,903,147)
3,638,469
Loss after income tax expense
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income
for the year
Reallocation of value of
expired and cancelled equity
Vested & lapsed options
Share based payments (note
27)
-
-
-
-
-
-
-
4,797
4,797
-
-
-
-
-
-
-
-
(1,057,876)
(1,057,876)
-
4,797
-
(1,057,876)
(1,053,079)
-
-
-
-
(5,416)
(64,578)
-
76,968
739
-
-
-
64,578
5,416
-
-
-
77,707
Balance at 30 June 2017
60,035,971
(13,726)
80,910
90,971
360,000 (57,891,029)
2,663,097
30
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
Patrys Limited
Statement of cash flows
For the year ended 30 June 2017
Cash flows from operating activities
Payments to suppliers and employees
Interest and other income
R&D tax incentive
Government grants
Supplier refunds
Licensing income
Note
Consolidated
2017
$
2016
$
(2,312,898)
60,120
203,668
15,340
729,289
27,500
(2,134,947)
67,741
260,879
-
-
274,970
Net cash used in operating activities
25
(1,276,981)
(1,531,357)
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Net cash from/(used in) investing activities
Cash flows from financing activities
Net cash from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
(2,771)
-
(4,900)
68,973
(2,771)
64,073
-
-
(1,279,752)
3,215,039
(24,335)
(1,467,284)
4,646,527
35,796
Cash and cash equivalents at the end of the financial year
9
1,910,952
3,215,039
31
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
Patrys Limited
Notes to the financial statements
30 June 2017
Note 1. General information
The financial statements cover Patrys Limited as a Group consisting of Patrys Limited and the entities it controlled at the
end of, or during, the year. The financial statements are presented in Australian dollars, which is Patrys Limited's functional
and presentation currency.
Patrys Limited is a listed public Company limited by shares, incorporated and domiciled in Australia.
A description of the nature of the Group's operations and its principal activities are included in the Directors' report, whi ch is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 28 August 2017. The
Directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective
notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Going concern
It is noted that for 2017 financial year, the Group incurred a loss from continuing operations after income tax of $1,057,876
(2016: $1,080,784) and had consolidated net cash outflows of $1,276,981. At present, the Group does not have a
confirmed source of income sufficient to meeting operating costs, and as at the date of the financial report, the Group
anticipates this trend will continue. These conditions indicate a material uncertainty that may cast significant doubt about
the Group’s ability to continue as a going concern.
Should the Group not be able to continue as a going concern, it may be required to realise its assets and extinguish its
liabilities other than in the ordinary course of business, and at amounts that differ from those stated in the financial
statements. The financial report does not include any adjustments relating to the recoverability and classification of
recorded asset amounts or liabilities that might be necessary should the Group not continue as a going concern.
The financial statements have been prepared on the basis that the Group is a going concern, which contemplates normal
business activity, realisation of assets and the settlement of liabilities in the normal course of business for the following
reasons:
●
●
●
●
●
●
At 30 June 2017, the Group had net current assets of $2,010,546 (30 June 2016: $2,949,062);
The Board of Directors has the ability to downscale its operations and discontinue programs should the need arise,
whilst meeting minimum expenditure commitments;
Directors have a number of external funding alternatives available such as out-licensing arrangements or raising
additional equity funds;
At 30 June 2017, the Group recognised a receivable of $431,005 from the R&D tax incentive, which is expected to be
received in the first half of the 2018 financial year;
Cash flow forecasts prepared by management demonstrate that with modest additional funding the Group has
sufficient funds to meet commitments over the next twelve months; and
The Company has a history of successfully undertaking capital raisings during the last 10 years and will raise
additional funds as required.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
32
Patrys Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
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 property, 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 Group'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 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 22.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Patrys Limited ('Company'
or 'parent entity') as at 30 June 2017 and the results of all subsidiaries for the year then ended. Patrys Limited and its
subsidiaries together are referred to in these financial statements as the 'Group'.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Patrys 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.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
33
Patrys Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 mont hs
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 Group'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.
Deferred tax assets and liabilities are always classified as non-current.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. 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.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have
been transferred and the Group has transferred substantially all the risks and rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an
active market. They are carried at amortised cost using the effective interest rate method. Gains and losses are recognised
in profit or loss when the asset is derecognised or impaired.
Impairment of financial assets
The Group assesses at the end of each reporting period whether there is any objective evidence that a financial asset or
group of financial assets is impaired. Objective evidence includes significant financial difficulty of the issuer or obligor; a
breach of contract such as default or delinquency in payments; the lender granting to a borrower concessions due to
economic or legal reasons that the lender would not otherwise do; it becomes probable that the borrower will enter
bankruptcy or other financial reorganisation; the disappearance of an active market for the financial asset; or observable
data indicating that there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for loans and receivables carried at amortised cost is the difference between the
asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest
rate. If there is a reversal of impairment, the reversal cannot exceed the amortised cost that would have been recognised
had the impairment not been made and is reversed to profit or loss.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
34
Patrys Limited
Notes to the financial statements
30 June 2017
Note 2. Significant accounting policies (continued)
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory 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 Group for the annual reporting period ended 30 June 2017. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all
previous versions of AASB 9 and completes the project to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and measurement models for financial assets. A financial asset shall
be measured at amortised cost, if it is held within a business model whose objective is to hold assets in order to collect
contractual cash flows, which arise on specified dates and solely principal and interest. All other financial instrument assets
are to be classified and measured at fair value through profit or loss unless the entity makes an irrevocable election on
initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other comprehensive
income ('OCI'). For financial liabilities, the standard requires the portion of the change in fair value that relates to the
entity's own credit risk to be presented in OCI (unless it would create an accounting mismatch). New simpler hedge
accounting requirements are intended to more closely align the accounting treatment with the risk management activities of
the entity. New impairment requirements will use an 'expected credit loss' ('ECL') model to recognise an allowance.
Impairment will be measured under a 12-month ECL method unless the credit risk on a financial instrument has increased
significantly since initial recognition in which case the lifetime ECL method is adopted. The standard introduces additional
new disclosures. The Group will adopt this standard from 1 January 2018 and it is not expected to materially impact the
Company's performance.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a
single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict
the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The standard will require: contracts (either written, verbal or
implied) to be identified, together with the separate performance obligations within the contract; determine the transaction
price, adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate
performance obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation
approach if no distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied.
Credit risk will be presented separately as an expense rather than adjusted to revenue. For goods, the performance
obligation would be satisfied when the customer obtains control of the goods. For services, the performance obligation is
satisfied when the service has been provided, typically for promises to transfer services to customers. For performance
obligations satisfied over time, an entity would select an appropriate measure of progress to determine how much revenue
should be recognised as the performance obligation is satisfied. Contracts with customers will be presented in an entity's
statement of financial position as a contract liability, a contract asset, or a receivable, depending on the relationship
between the entity's performance and the customer's payment. Sufficient quantitative and qualitative disclosure is required
to enable users to understand the contracts with customers; the significant judgements made in applying the guidance to
those contracts; and any assets recognised from the costs to obtain or fulfil a contract with a customer. The Group will
adopt this standard from 1 January 2018 and it is not expected to materially impact the Company's performance.
Note 3. Critical accounting judgements, estimates and assumptions
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, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management 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.
35
Patrys Limited
Notes to the financial statements
30 June 2017
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity
instruments at the date at which they are granted. 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.
Fair value measurement hierarchy
The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on
the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted)
in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level
3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair
value and therefore which category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable
inputs.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical
innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less
than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be
written off or written down.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group 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 Group 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.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is
different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in
which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
Employee benefits provision
As discussed in note 2, 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 taken into account.
36
Patrys Limited
Notes to the financial statements
30 June 2017
Note 4. Operating segments
Identification of reportable operating segments
A segment is a component of the consolidated entity that engages in business activities to provide products or services
within a particular economic environment. The consolidated entity operates in one business segment, being the conduct of
research and development activities in the biopharmaceutical sector. The Board of Directors assess the operating
performance of the group based on management reports that are prepared on this basis. The group has established
activities in more than one geographical area, however these activities support the research and development conducted
by the consolidated entity and are considered immaterial for the purposes of segment reporting. The group invests excess
funds in short term deposits but this is not regarded as being a separate segment.
Accounting policy for operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Note 5. Revenue
Licensing income
R&D tax incentive income
Interest income
Other income
Realised foreign currency gain
Government grants
Revenue
Consolidated
2017
$
2016
$
52,708
410,163
44,512
555
-
23,791
274,970
502,485
76,869
10,485
2,844
-
531,729
867,653
Accounting policy for revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the goods, the
risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed as revenue are
net of sales returns and trade discounts.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Note 6. Other income
Foreign exchange gain/(loss)
Supplier refunds
Other income
37
Consolidated
2017
$
2016
$
(22,968)
846,579
48,572
-
823,611
48,572
Patrys Limited
Notes to the financial statements
30 June 2017
Note 7. Expenses
Loss before income tax includes the following specific expenses:
Depreciation
Plant and equipment
Amortisation/Impairment
License and registered patents
Total depreciation and amortisation
Operating expenses
Research and development expenses
Operating lease expenses
Bad debts
Bad debt
Employee salary and benefit expense
Defined contribution superannuation expense
Salary and employee benefit expenses
Total employment expenses
Share Based Payments Expense
Share Based Payments Expense
Note 8. Income tax expense
Numerical reconciliation of income tax expense and tax at the statutory rate
Loss before income tax expense
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Effect of revenue that is not assessable in determining taxable loss
Effect of expenses that are not deductible in determining taxable loss
Deferred tax assets not brought to account
Income tax expense
38
Consolidated
2017
$
2016
$
2,545
8,891
45,000
11,250
47,545
20,141
1,265,377
16,194
1,042,256
46,292
1,281,571
1,088,548
-
8,238
43,933
710,676
68,800
895,156
754,609
963,956
77,707
3,474
Consolidated
2017
$
2016
$
(1,057,876)
(1,080,784)
(317,363)
(324,235)
(131,713)
342,840
106,236
(150,745)
155,690
319,290
-
-
Patrys Limited
Notes to the financial statements
30 June 2017
Note 8. Income tax expense (continued)
Deferred tax assets not recognised
Deferred tax assets not recognised comprises temporary differences attributable to:
Tax losses - revenue
Deductible temporary differences
Total deferred tax assets not recognised
These deferred tax assets (not recognised) will only be obtained if:
Consolidated
2017
$
2016
$
15,076,259
332,991
14,854,005
202,726
15,409,250
15,056,731
(i) the entities derive future assessable income of a nature and of an amount sufficient to enable the benefits from the
deduction for losses to be realised;
(ii) the entities continue to comply with the conditions for deductibility imposed by the law; and no changes in tax legislation
adversely affect the entities in realising the relevant benefits from deduction for the losses; and
(iii) no changes in tax legislation adversely affect the entities in realising the relevant benefits from deduction for the losses.
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.
39
Patrys Limited
Notes to the financial statements
30 June 2017
Note 9. Current assets - cash and cash equivalents
Cash at bank
Cash on deposit
Consolidated
2017
$
2016
$
1,260,952
650,000
1,215,039
2,000,000
1,910,952
3,215,039
The Group's exposure to interest rate and foreign currency risk is discussed in Note 16.
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Note 10. Current assets - trade and other receivables
Accrued revenue
Research & development incentive receivable
Other receivables
Consolidated
2017
$
2016
$
25,208
431,005
44,515
-
241,606
17,701
500,728
259,307
During the period, the Group recognised an accrual for the research and development tax incentive receivable. Under this
regime, as Patrys has an aggregated annual turnover of under $20 million, it is entitled to a refundable R&D credit of
43.5% (2016: 45%) on the eligible R&D expenditure incurred on eligible R&D activities.
The 43.5% (2016: 45%) refundable R&D tax offset is accounted for under AASB 120 Accounting for Government Grants
and Disclosure of Government Assistance and is recorded as income in the Statement of profit or loss & other
comprehensive income.
At reporting date, the Group is currently awaiting approval from AusIndustry for an overseas finding for work completed
outside of Australia on the Nucleus Therapeutics project.
Accounting policy for 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 provision for impairment. Trade receivables are generally due for settlement within 30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is
objective evidence that the Group will not be able to collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation and default or delinquency in payments (more than 60 days overdue) are considered indicators that the
trade receivable may be impaired. The amount of the impairment allowance is the difference between the asset's carrying
amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows
relating to short-term receivables are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
40
Patrys Limited
Notes to the financial statements
30 June 2017
Note 11. Non-current assets - intangibles
Intellectual property - at cost
Less: Accumulated amortisation
Consolidated
2017
$
2016
$
720,000
(56,250)
720,000
(11,250)
663,750
708,750
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2015
Additions - Acquisition of Nucleus Intellectual Property
Amortisation expense
Balance at 30 June 2016
Amortisation expense
Balance at 30 June 2017
Intellectual
property
$
Total
$
-
720,000
(11,250)
708,750
(45,000)
-
720,000
(11,250)
708,750
(45,000)
663,750
663,750
Amortisation and impairment expense is included in the line item ‘research and development’ in the Statement of profit or
loss and other comprehensive income.
Intangible assets comprise licences, intellectual property, trademarks and registered patents and have a finite useful life.
Amortisation has been historically calculated using straight line method over the estimated useful life, which ranges from 5
to 20 years. The Group amortises the Nucleus intellectual property based on an estimated useful life of 16 years.
Intellectual property which includes platform technology and product related intellectual property is reviewed on a regular
basis and where a decision has been made not to pursue a product, the remaining value recorded as an asset is impaired.
At balance date, the directors also review the intellectual property portfolio to determine whether there are any indicators of
impairment related to intellectual property.
During the previous financial year the Group acquired Nucleus intellectual property. The acquisition provides Patrys with
licence rights to a portfolio of novel anti-DNA antibodies that penetrate cell nuclei. This novel pre-clinical oncology asset
and platform has multiple potential applications to treat a range of cancers.
Accounting policy for 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.
Intellectual property
Significant costs associated with intellectual property are deferred and amortised on a straight-line basis over the period of
their expected benefit, being their finite life of 5-20 years.
41
Patrys Limited
Notes to the financial statements
30 June 2017
Note 12. Current liabilities - trade and other payables
Trade payables
Other creditors and accruals
Consolidated
2017
$
2016
$
65,276
349,844
35,489
508,219
415,120
543,708
Refer to note 16 for further information on financial instruments.
Accounting policy for trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Note 13. Equity - issued capital
Consolidated
2017
Shares
2016
Shares
2017
$
2016
$
Ordinary shares - fully paid
744,432,206
745,253,370
60,035,971
60,035,971
Movements in ordinary share capital
Details
Date
Shares
Issue price
$
Balance
Tranche 1 consideration shares issued to
shareholders of Nucleus Therapeutics Pty Ltd
Expiration of shares from share loan plan
1 July 2015
696,585,986
59,675,971
30 March 2016
30 June 2016
50,033,425
(1,366,041)
$0.00700
$0.00000
360,000
-
Balance
Expiration of shares from share loan plan
Expiration of shares from share loan plan
30 June 2016
19 December 2016
30 June 2017
745,253,370
(537,804)
(283,360)
$0.00000
$0.00000
Balance
30 June 2017
744,432,206
60,035,971
-
-
60,035,971
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
Capital risk management
The Group'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 consolidated 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 Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
42
Patrys Limited
Notes to the financial statements
30 June 2017
Note 13. Equity - issued capital (continued)
The Group would look to raise capital when an opportunity to invest in a business or Company was seen as value adding
relative to the current Company's share price at the time of the investment. The Group 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 capital risk management policy remains unchanged from the 30 June 2016 Annual Report.
Accounting policy for issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Note 14. Equity - reserves
Foreign currency reserve
Share options reserve
Share loan plan reserve
Other reserves
Consolidated
2017
$
2016
$
(13,726)
80,910
90,971
360,000
(18,523)
9,358
154,810
360,000
518,155
505,645
Foreign currency reserve
Exchange differences relating to translation from functional currencies of the Group’s foreign controlled entities into
Australian Dollars are bought to account by entries made directly to the foreign currency translation reserve.
Share loan plan reserve
The equity settled employee benefits reserves arise on issue of equity under the Loan Share Plan or the Executive Share
Option Plan to executives and senior employees. Amounts are transferred out of the reserves and into issued capital when
the loans are repaid or the options are exercised. Amounts are transferred to accumulated losses when the shares or
options are cancelled. Further information about share based payments to Directors and key management personnel is
made at Note 27 of the financial statements.
Share based payment reserve
The equity settled share based payment reserves arise on issue of options under the Employee Share Based Payment
plan to executives and senior employees. Amounts are transferred out of the reserves and into issued capital when the
options are converted to shares. Amounts are transferred to accumulated losses when the shares or options are
cancelled. Further information about share based payments to Directors and key management personnel is made at Note
27 of the financial statements.
Other reserves
The other reserve is made up of Tranche 2 and Tranche 3 shares for the acquisition of Nucleus Intellectual Property.
When the Group meets the relevant milestone and the shares are issued, the amount is transferred out of the reserve and
into issued capital.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out in the Statement of changes
in equity
Note 15. Equity - dividends
There were no dividends paid, recommended or declared during the current or previous financial year.
43
Patrys Limited
Notes to the financial statements
30 June 2017
Note 16. Financial instruments
Financial risk management objectives
The Group’s treasury function monitors and manages the financial risks relating to the operations of the Group through
internal risk reports which analyse exposures by degree and magnitude of risks. These risks include market risk (including
currency risk, fair value interest rate risk and price risk), credit risk and liquidity risk. There have been no changes to these
risks since the previous financial year.
The Board of Directors ensures that the Group maintains a competent management structure capable of defining,
analysing, measuring and reporting on the effective control of risk inherent in the Group’s underlying financial activities and
the instruments used to manage risk. Key financial risks including interest rate risk and foreign currency risk are reviewed
by management on a regular basis and are communicated to the Board so that it can evaluate and impose its oversight
responsibility. The Group does not enter into or trade financial instruments, including derivative financial instruments, for
speculative purposes. The Company and the Group have a policy regarding foreign exchange risk management. This and
other financial risks are managed prudently by the Board and the Audit & Risk Committee.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while
maximising and optimisation of the return to stakeholders through the optimisation of the debt and equity balance.
The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 13, and 14, respectively. The
Group operates globally, primarily through subsidiary companies established in the markets in which the Group trades.
None of the Group’s entities are subject to externally imposed capital requirements.
Operating cash flows are used to maintain and expand the Group’s assets.
Market risk
Foreign currency risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency rates. The Group’s exposure
to foreign currency is predominately in US dollars, Pound Sterling and Euros. The Group has maintained cash in US
dollars, Pound Sterling and Euros to cover a portion of its anticipated US dollar and Euro expenditures.
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange rate
fluctuation arise. Exchange rate exposures are managed within approved policy parameters. The Group manages the
currency risk by monitoring the trend of the US dollar, Pound Sterling and Euro. The Group maintains US dollar, Pound
Sterling and Euro bank accounts to cover a portion of its anticipated expenditures in the respective foreign currencies.
The carrying amount of the Group's foreign currency denominated financial assets and financial liabilities at the reporting
date were as follows:
Assets
Liabilities
2017
$
2016
$
2017
$
2016
$
373,621
499
52
842,460
97,746
90,543
160,899
107,350
5,594
255,949
74,638
90,106
374,172
1,030,749
273,843
420,693
Consolidated
US dollars
Euros
Pound Sterling
44
Patrys Limited
Notes to the financial statements
30 June 2017
Note 16. Financial instruments (continued)
Consolidated - 2017
% change
AUD strengthened
Effect on profit
before tax
Effect on
equity
AUD weakened
Effect on profit
before tax
Effect on
equity
% change
Euros
US Dollars
Pound Sterling
10%
10%
10%
(45)
(33,966)
(5)
(45)
(33,966)
(5)
(10%)
(10%)
(10%)
55
41,513
6
55
41,513
6
(34,016)
(34,016)
41,574
41,574
Consolidated - 2016
% change
AUD strengthened
Effect on profit
before tax
Effect on
equity
AUD weakened
Effect on profit
before tax
Effect on
equity
% change
Euros
US Dollars
Pound Sterling
10%
10%
10%
(8,886)
(76,587)
(8,231)
(8,886)
(76,587)
(8,231)
(10%)
(10%)
(10%)
10,861
93,607
10,606
10,861
93,607
10,606
(93,704)
(93,704)
115,074
115,074
Price risk
Price risk is the risk that future cashflows derived from financial instruments will be changed as a result of a market price
movement, other than foreign currency rates and interest rates. The Group is not exposed to any material commodity price
risks.
Interest rate risk
The Group's exposure to market interest rates relates primarily to the Group's short term deposits held and deposits at call.
The variance in market interest rates on interest income is not material.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral
where appropriate as a means of mitigating the risk of financial loss from defaults.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts
is not significant. There are no significant concentrations of credit risk within the Group and financial instruments are
spread amongst a number of financial institutions to minimise the risk of default of counterparties.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to pay its debts as and when they fall due. The Group has no
borrowings at reporting date and the Directors ensure that the cash on hand is sufficient to meet the commitments of the
Group at all times during the research and development phase.
The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate cash and where necessary
unutilized borrowing facilities are maintained.
45
Patrys Limited
Notes to the financial statements
30 June 2017
Note 16. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the Statement of financial position.
Consolidated - 2017
Non-derivatives
Non-interest bearing
Trade payables
Total non-derivatives
Consolidated - 2016
Non-derivatives
Non-interest bearing
Trade payables
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
$
-
415,120
415,120
-
-
-
-
-
-
415,120
415,120
Weighted
average
interest rate
%
1 year or less
$
Between 1
and 2 years
$
Between 2
and 5 years
$
Over 5 years
$
Remaining
contractual
maturities
$
-
543,708
543,708
-
-
-
-
-
-
543,708
543,708
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 17. Fair value measurement
Accounting policy for 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.
Note 18. Key management personnel disclosures
Directors
The following persons were Directors of Patrys Limited during the financial year:
Mr. John Read
Mr Michael Stork
Dr. James Campbell
Ms. Suzy Jones
46
Patrys Limited
Notes to the financial statements
30 June 2017
Note 18. Key management personnel disclosures (continued)
Other key management personnel
The following person also had the authority and responsibility for planning, directing and controlling the major activities of
the Group, directly or indirectly, during the financial year:
Ms. Melanie Leydin
Compensation
The aggregate compensation made to Directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Note 19. Remuneration of auditors
Consolidated
2017
$
2016
$
550,699
19,616
37,513
-
553,845
6,294
32,693
70,593
607,828
663,425
During the financial year the following fees were paid or payable for services provided by , the auditor of the Company, and
its network firms:
Audit services -
Audit or review of the financial statements
Other services -
Advice on taxation and other matters and review and lodgement of corporate tax returns
Consolidated
2017
$
2016
$
59,729
54,465
10,250
5,500
69,979
59,965
Other services - network firms
Advice on taxation and other matters and review and lodgement of corporate tax returns
-
953
Note 20. Commitments
Patrys has entered into several agreements whereby Patrys is obliged to make royalty payments on future sales and make
future cash milestone payments if certain events occur. These agreements include:
- Vollmers Acquisition Agreement: milestone payments and royalty payments;
- OncoMab Acquisition Agreement: royalty payments;
- Wü rzburg Cooperation Agreements: royalty payments; and
- Confirmation Assignment Agreement: Patrys, University of Wü rzburg and Acceptys, Inc.: royalty payments.
47
Patrys Limited
Notes to the financial statements
30 June 2017
Note 20. Commitments (continued)
Vollmers Acquisition Agreement
Patrys is committed to making certain milestone payments if certain hurdles are achieved as follows:
- Milestone payments for products derived from the Vollmers Hybridomas and Residual Hybridomas, payable only once for
each product, in the amount of $250,000 upon attaining the first Phase II clinical trials and a payment upon attaining
regulatory approval in any of the following markets: US, Japan, UK, France, Germany, Italy or Spain;
- Milestone payments for products derived from the PAT-SM6 LDL Rights in the amount of $250,000 upon attaining Phase
2 clinical trials, $400,000 for attaining Phase 3 clinical trials and a payment for regulatory approval in a major market; and
- Certain later stage milestone payments (at regulatory approval) and royalties on sales of products derived from the
assigned assets are also payable in amounts and at rates that are typical in the industry for transactions of this nature and
for such products.
OncoMab Acquisition Agreement
Patrys must pay to OncoMab certain royalties on sales of products derived from the assigned assets in amounts and at
rates that are typical in the industry for transactions of this nature and for such products.
University of Wurzberg Cooperation Agreement
The University of Wü rzburg assigned to Patrys all of its rights, title and interest in a library of hybridomas in consideration
for payment of a lump sum of US$75,000 and royalties payable on the sale of products that derive from the New IPR.
These payments and royalty rates are typical in the industry for transactions of such nature.
Confirmation Assignment Agreement
The University of Würzburg assigned to Patrys all of its rights, title and interest in a library of hybridomas in considerati on
for payment of a lump sum of US$75,000 and royalties payable on the sale of products that derive from the New IPR.
These payments and royalty rates are typical in the industry for transactions of such nature.
Capital expenditure commitments
There was no capital expenditure contracted for at reporting date but not provided for in the accounts.
Operating and finance lease commitments
There are no operating or finance lease commitments in place at 30 June 2017.
Licence agreement
Patrys has entered into a number of licence agreements in respect of technologies and assets as outlined below:
Patrys - Crucell 2009 Research Licence Agreement
In July of 2009, Patrys entered into a research licence agreement with Crucell Holland B.V., covering the use of Crucell’s
PER.C6® human antibody production technologies for potential use for 5 Patrys’ products, including PAT-SM6 and PAT-
LM1. Patrys is committed to make an annual license fee of €50,000. If Patrys wishes to commercialise any of the products
developed under the research licence agreement it has the right to enter into a commercial license with Crucell which
would incur annual payments and royalties payable on the sale of products that derive from the licensed PER.C6® cell line.
These payments and royalty rates are typical in the industry for transactions of such nature.
Patrys - Debiovision - Option License and Assignment Agreement
In August of 2009, Patrys acquired the rights to product SC-1 (renamed PAT-SC1) from Debiovision Inc. Once developed,
Patrys royalties will be payable to Debiovision on the sale of products that derive from PAT-SC1. These royalty rates are
typical in the industry for transactions of this nature.
Nucleus Therapeutics – Yale University – License, Commercialization and Development Agreement
In March of 2016, Patrys acquired the private Company Nucleus Therapeutics Pty Ltd, in order to obtain the global license
for the development as anti-cancer agents the antibodies 3E10 and 5C6 from Yale University. Once developed, certain
milestone payments and royalties will be payable to Yale University regarding products that derive from 3E10 and/or 5C6.
These milestones and royalties are typical in the industry for transactions of this nature.
48
Patrys Limited
Notes to the financial statements
30 June 2017
Note 20. Commitments (continued)
Payload Therapeutics – Yale University – License, Commercialization and Development Agreement
In June of 2017, Payload Therapeutics (a wholly-owned subsidiary of Patrys) obtained the global license for the
development as anti-cancer agents the antibodies 3E10 nanoparticles from Yale University. Once developed, certain
milestone payments and royalties will be payable to Yale University regarding products that derive from 3E10
nanoparticles. These milestones and royalties are typical in the industry for transactions of this nature.
Note 21. Related party transactions
Parent entity
Patrys Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 23.
Key management personnel
Disclosures relating to key management personnel are set out in note 18 and the remuneration report included in the
Directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Consolidated
2017
$
2016
$
Current payables:
Trade payables to Director related entity of Mr. John Read for directors' fees for his services*
23,750
23,750
*
The fees outstanding for 2017 were paid to Mr. Read on 10 July 2017.
Loans to/from related parties
Transactions with controlled entities
The parent entity has signed a Services Agreement with Patrys GmbH (a wholly owned subsidiary) to reimburse the
subsidiary its expenses plus 5%. The amount expensed for the period to 30 June 2017 was $318 (2016: $166,574). At 30
June 2017 there was an inter-Company loan balance owed to Patrys GmbH of ($442,339) (2016: ($442,020)). This loan is
non-interest bearing and unsecured.
The parent entity also has intercompany loans with Nucleus Therapeutics and Payload Therapeutics (both wholly owned
subsidiaries). At 30 June 2017, the parent entity has receivables of $1,056,015 and $8,560 for each subsidiary
respectively. The loans are non-interest bearing and unsecured.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
49
Patrys Limited
Notes to the financial statements
30 June 2017
Note 22. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Foreign currency reserve
Share options reserve
Share loan plan reserve
Accumulated losses
Total equity
Parent
2017
$
2016
$
70,468
(1,329,048)
70,468
(1,329,048)
Parent
2017
$
2016
$
3,106,708
3,099,450
3,774,798
3,814,069
411,830
594,703
427,370
619,916
60,035,971
5,090
440,910
90,972
(57,225,515)
60,035,971
-
369,358
154,810
(57,365,986)
3,347,428
3,194,153
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2017.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2017.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
50
Patrys Limited
Notes to the financial statements
30 June 2017
Note 23. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Name
Principal place of business /
Country of incorporation
Patrys Limited
Patrys GmbH
Nucleus Therapeutics Pty Ltd
Payload Therapeutics Pty Ltd (incorporated on 27 May
2017)
Australia
Germany
Australia
Australia
Note 24. Events after the reporting period
Ownership interest
2016
%
2017
%
-
100
100
100
-
100
100
-
On 12 July 2017, the Group achieved the second milestone of the Nucleus agreement and was granted the first US Patent
protecting the use of Deoxymab 3E10, securing development and commercialization rights. In accordance with the
contract, the second tranche of 34,789,333 fully paid ordinary shares were issued at a deemed issue price of $0.005174
($0.5174 cents) per share on 17 July 2017.
No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect
the Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Note 25. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax expense for the year
(1,057,876)
(1,080,784)
Consolidated
2017
$
2016
$
Adjustments for:
Depreciation and amortisation
Net loss/(gain) on disposal of non-current assets
Unrealised foreign exchange losses/(gains)
Share based payments
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in prepayments
Increase in deposits
Decrease in trade and other payables
Increase/(decrease) in other provisions
47,545
1,747
29,140
77,707
(241,421)
(18,226)
9,128
(128,588)
3,863
20,141
(10,486)
-
3,474
(245,982)
(35,825)
-
(125,068)
(56,827)
Net cash used in operating activities
(1,276,981)
(1,531,357)
Note 26. Earnings per share
Loss after income tax attributable to the Owners of Patrys Limited
(1,057,876)
(1,080,784)
Consolidated
2017
$
2016
$
51
Patrys Limited
Notes to the financial statements
30 June 2017
Note 26. Earnings per share (continued)
Weighted average number of ordinary shares used in calculating basic earnings per share
744,890,370
709,672,151
Weighted average number of ordinary shares used in calculating diluted earnings per share
744,890,370
709,672,151
Number
Number
Basic earnings per share
Diluted earnings per share
Accounting policy for earnings per share
Cents
Cents
(0.14)
(0.14)
(0.15)
(0.15)
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the Owners of Patrys Limited, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Note 27. Share based payments
Employee equity
The Company issues equity to Patrys (including subsidiaries Patrys GmbH, Nucleus Therapeutics and Payload
Therapeutics) directors, employees and key consultants under either the Loan Share Plan (LSP) or the Executive Share
Option Plan (ESOP). Under the plans, participants are issued with equity to foster an ownership culture within the
Company to motivate them to achieve performance targets of the Group. Participation in the plans is at the Board’s
discretion and no individual has a contractual right to participate in the plans or to receive any guaranteed benefits.
The Company introduced the LSP in December 2009, following approval of the plan at the 2009 Annual General Meeting.
Only Australian residents are eligible to participate in the plan. The plan allows non-recourse, interest free loans to be
provided to eligible participants to acquire shares under the plan. When an issue is made it is treated as an in -substance
grant of options and expensed over the vesting period because of the limited recourse nature of the loans. Generally
shares issued under the plan vest over a three year period. The shares are acquired in the name of the participant and
each participant authorises and appoints the Company Secretary to act on their behalf. Any dividends paid on the shares
are used to repay the loan. If the participant leaves the Company, any shares that have not vested are bought back by the
Company and cancelled along with the loan. In respect of shares that have vested, generally, the loan balance must be
paid in full within six months of termination of appointment or the shares are sold and the proceeds applied to settle the
loan balance. The issue price of the shares in the Company held under the LSP is not included in equity until the loan has
been repaid.
Options are granted under the ESOP. Under the ESOP each option granted converts into one ordinary share of Patrys
Limited. Options are granted under the plan for no consideration and carry no dividend or voting rights. Options may be
exercised at any time from the date of vesting to the date of their expiry. The options are typically issued in two or three
equal tranches which vest over a three year period, each tranche having an expiry date of five years after vesting date. The
exercise period in relation to an option, means the period in which the option may be exercised, and is specified by the
Board. If a participant ceases to be appointed as a Director or employed by any member of the group (other than due to
his/her death) then, generally, options that have vested at the date of cessation of appointment/employment will lapse if not
exercised within six months of the cessation date unless an extension is granted by the Board. In the case of death of the
participant then the exercise period is extended to twelve months. All unvested options will generally lapse on cessation.
The valuations of shares issued under the LSP and options issued under the ESOP are determined by using an industry
standard option pricing model taking into account the terms and conditions upon which the instruments were issued.
52
Patrys Limited
Notes to the financial statements
30 June 2017
Note 27. Share based payments (continued)
The Board aims to ensure that the aggregate number of shares or options which may be issued pursuant to the LSP and
ESOP shall not at any time exceed 5% of the total number of issued shares of the Company. All issues of shares or
options under the plans are subject to approval by the Nomination & Remuneration Committee. In accordance with the
rules of both the LSP and ESOP the Board has the ability to vary the terms in respect of issues in circumstances it
considers appropriate.
The following share-based payment arrangements were in existence during the current and/or prior reporting period:
Set out below are summaries of options granted under the plan:
2017
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
01/07/2008
02/12/2009
02/12/2009
01/07/2010
01/07/2010
01/07/2010
08/12/2011
08/12/2011
08/12/2011
21/08/2012
21/08/2012
21/08/2012
20/05/2014
20/05/2014
20/05/2014
24/11/2016
24/11/2016
24/11/2016
19/04/2017
19/04/2017
01/07/2016
27/11/2016
27/11/2017
01/07/2016
01/07/2017
01/07/2018
08/12/2017
08/12/2018
08/12/2019
21/08/2018
21/08/2019
21/08/2020
20/05/2020
20/05/2021
20/05/2022
24/11/2021
24/11/2021
24/11/2021
19/04/2022
01/07/2021
$0.33000
$0.14000
$0.14000
$0.10000
$0.10000
$0.10000
$0.03000
$0.03000
$0.03000
$0.02000
$0.02000
$0.02000
$0.05000
$0.05000
$0.05000
$0.00780
$0.00780
$0.00780
$0.00780
$0.00780
22,500
5,952
5,952
3,600
3,600
3,600
7,334
7,333
7,333
10,000
10,000
10,000
25,000
25,000
25,000
-
-
-
-
-
172,204
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,999,999
8,000,000
8,000,001
1,750,000
1,250,000
27,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(22,500)
(5,952)
-
(3,600)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(32,052)
-
-
5,952
-
3,600
3,600
7,334
7,333
7,333
10,000
10,000
10,000
25,000
25,000
25,000
7,999,999
8,000,000
8,000,001
1,750,000
1,250,000
27,140,152
The weighted average remaining contractual life of options outstanding at the end of the financial year was 4.3678 years
(2016: 2.4172 years).
53
Patrys Limited
Notes to the financial statements
30 June 2017
Note 27. Share based payments (continued)
2016
Grant date
Expiry date
price
Exercise
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
01/07/2008
01/07/2008
28/11/2008
02/12/2009
02/12/2009
02/12/2009
01/07/2010
01/07/2010
01/07/2010
08/12/2011
08/12/2011
08/12/2011
21/08/2012
21/08/2012
21/08/2012
20/05/2014
20/05/2014
20/05/2014
01/07/2015
01/07/2016
25/05/2016
27/11/2015
27/11/2016
27/11/2017
01/07/2016
01/07/2017
01/07/2018
08/12/2017
08/12/2018
08/12/2019
21/08/2018
21/08/2019
21/08/2020
20/05/2020
20/05/2021
20/05/2022
$0.33000
$0.33000
$0.26000
$0.14000
$0.14000
$0.14000
$0.10000
$0.10000
$0.10000
$0.03000
$0.03000
$0.03000
$0.02000
$0.02000
$0.02000
$0.05000
$0.05000
$0.05000
162,500
162,499
240,000
165,584
165,585
165,585
100,601
100,602
100,602
90,668
90,666
90,666
76,667
76,667
76,666
125,000
125,000
125,000
2,240,558
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(162,500)
(139,999)
(240,000)
(165,584)
(159,633)
(159,633)
(97,001)
(97,002)
(97,002)
(83,334)
(83,333)
(83,333)
(66,667)
(66,667)
(66,666)
(100,000)
(100,000)
(100,000)
(2,068,354)
-
22,500
-
-
5,952
5,952
3,600
3,600
3,600
7,334
7,333
7,333
10,000
10,000
10,000
25,000
25,000
25,000
172,204
For the options granted during the current financial year, the valuation model inputs used to determine the fair value at the
grant date, are as follows:
Grant date
Expiry date
24/11/2016
24/11/2016
24/11/2016
19/04/2017
19/04/2017
19/04/2017
19/04/2017
24/11/2021
24/11/2021
24/11/2021
19/04/2022
19/04/2022
01/07/2021
01/07/2021
Share price Exercise
at grant date
price
Expected
volatility
Dividend
Risk-free
Fair value
yield
interest rate at grant date
$0.00600
$0.00600
$0.00600
$0.00700
$0.00700
$0.00700
$0.00700
$0.00780
$0.00780
$0.00780
$0.00780
$0.00780
$0.00780
$0.00780
118.48%
118.48%
118.48%
121.94%
121.94%
123.72%
123.72%
-
-
-
-
-
-
-
2.37%
2.37%
2.37%
2.04%
2.04%
1.99%
1.99%
$0.00407
$0.00359
$0.00308
$0.00578
$0.00578
$0.00554
$0.00554
54
Patrys Limited
Notes to the financial statements
30 June 2017
Note 27. Share based payments (continued)
Set out below are the summaries of shares issued under the Share Loan Plan:
2017:
Loan Share Plan - Series
Issue
price $
Balance at
start of year
Issued during
The year
during the year
Loans cancelled
during the year
Balance at end
of year
Loans repaid
Director LSP Tranche 2
Director LSP Tranche 3
Employee LSP Tranche 2
Employee LSP Tranche 3
Employee LSP Tranche 4
Employee LSP Tranche 5
Employee LSP Tranche 6
Employee LSP Tranche 9
Employee LSP Tranche 10
Employee LSP Tranche 11
Employee LSP Tranche 12
Employee LSP Tranche 13
Employee LSP Tranche 14
Employee LSP Tranche 15
Employee LSP Tranche 16
Employee LSP Tranche 17
Employee LSP Tranche 18
Employee LSP Tranche 19
0.144
0.144
0.144
0.144
0.106
0.106
0.106
0.039
0.039
0.039
0.022
0.022
0.022
0.038
0.038
0.05
0.05
0.05
184,641
184,641
172,727
172,727
180,436
180,436
180,436
255,002
254,999
254,999
255,000
255,000
255,000
37,500
37,500
100,000
100,000
100,000
3,161,044
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2016:
Loan Share Plan - Series
Issue
price $
Balance at
start of year
Loans repaid
during the
Issued during
The year
Director LSP Tranche 1
Director LSP Tranche 2
Director LSP Tranche 3
Employee LSP Tranche 1
Employee LSP Tranche 2
Employee LSP Tranche 3
Employee LSP Tranche 4
Employee LSP Tranche 5
Employee LSP Tranche 6
Director LSP Tranche 4
Director LSP Tranche 5
Director LSP Tranche 6
Employee LSP Tranche 9
Employee LSP Tranche 10
Employee LSP Tranche 11
Employee LSP Tranche 12
Employee LSP Tranche 13
Employee LSP Tranche 14
Employee LSP Tranche 15
Employee LSP Tranche 16
Employee LSP Tranche 17
Employee LSP Tranche 18
Employee LSP Tranche 19
0.144
0.144
0.144
0.144
0.144
0.144
0.106
0.106
0.106
0.083
0.083
0.083
0.039
0.039
0.039
0.022
0.022
0.022
0.038
0.038
0.05
0.05
0.05
209,651
209,650
209,650
307,351
307,351
307,351
180,436
180,436
180,436
176,591
176,591
176,591
255,002
254,999
254,999
255,000
255,000
255,000
37,500
37,500
100,000
100,000
100,000
4,527,085
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(184,641)
(172,727)
(66,690)
(130,188)
(83,583)
(33,335)
-
-
-
(50,000)
(50,000)
(50,000)
-
-
-
-
-
(821,164)
-
184,641
-
106,037
50,248
96,853
147,101
255,002
254,999
254,999
205,000
205,000
205,000
37,500
37,500
100,000
100,000
100,000
2,339,880
Loans cancelled
during the year
Balance at end
of year
(209,651)
(25,009)
(25,009)
(307,351)
(134,624)
(134,624)
-
-
-
(176,591)
(176,591)
(176,591)
-
-
-
-
-
-
-
-
-
-
-
(1,366,041)
-
184,641
184,641
-
172,727
172,727
180,436
180,436
180,436
-
-
-
255,002
254,999
254,999
255,000
255,000
255,000
37,500
37,500
100,000
100,000
100,000
3,161,044
Accounting policy for share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
55
Patrys Limited
Notes to the financial statements
30 June 2017
Note 27. Share based payments (continued)
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of
cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, 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 option, together with non-vesting conditions that do
not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken
of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
●
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
●
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
56
Patrys Limited
Directors' declaration
30 June 2017
In the Directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June
2017 and of its performance for the financial year ended on that date; and
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.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
___________________________
Mr. John Read
Chairman
28 August 2017
57
Patrys Limited
Independent auditor's report to the members of Patrys Limited
58
Patrys Limited
Independent auditor's report to the members of Patrys Limited
59
Patrys Limited
Independent auditor's report to the members of Patrys Limited
60
Patrys Limited
Shareholder information
30 June 2017
The shareholder information set out below was applicable as at 24 August 2017.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
STORK HOLDINGS 2010 LTD
DR DAX MARCUS CALDER
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MR MLADEN MARUSIC
ONCOMAB GMBH
MR ANDREW JOHN FLECK
YALE UNIVERSITY
LGL TRUSTEES LIMITED
MR XIAOKE XIE
KILINWATA INVESTMENTS PTY LTD
MARGINATA PTY LTD
TOWNS CORPORATION PTY LTD
MR STEVEN JAMES STREICHER
J P MORGAN NOMINEES AUSTRALIA LIMITED
MR PAUL ANTHONY HENRY
PENZ INVESTMENT INC
MR ROBBERT PIERRE VAN KAMPEN
EDSTOP PTY LIMITED
STAFFWEAR PTY LTD
ESTELLEANNE PTY LTD
VALUI PTY LTD
Unquoted equity securities
Options over ordinary shares issued
61
Number
of holders
of ordinary
shares
Number
of units
61
69
109
635
589
5,234
263,789
887,421
28,345,299
750,003,156
1,463
779,504,899
804
22,501,743
Ordinary shares
% of total
Number held
shares
issued
95,731,764
70,521,428
24,253,091
20,314,889
20,250,000
18,000,000
16,116,324
13,999,999
12,999,999
10,789,397
10,000,000
10,000,000
8,000,000
7,404,787
7,000,000
6,500,000
6,500,000
6,288,566
6,026,226
6,000,000
6,000,000
12.28
9.05
3.11
2.61
2.60
2.31
2.07
1.80
1.67
1.38
1.28
1.28
1.03
0.95
0.90
0.83
0.83
0.81
0.77
0.77
0.77
382,696,470
49.09
Number
on issue
Number
of holders
27,136,552
7
Patrys Limited
Shareholder information
30 June 2017
Substantial holders
Substantial holders in the Company are set out below:
STORK HOLDINGS 2010 LTD
DR DAX MARCUS CALDER
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
% of total
Number held
shares
issued
95,731,764
70,521,428
12.86
9.47
Ordinary shares
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.
There are no other classes of equity securities.
62
Corporate Directory
Directors
Mr John Read, Chairman
Dr James Campbell, Managing Director & CEO
Mr Michael Stork, Non-Executive Director
Ms Suzy Jones, Non-Executive Director
Company Secretary
Ms Melanie Leydin
Registered Office
Level 4, 100 Albert Road,
South Melbourne, VIC 3204
P: 03 9670 3273
E: info@patrys.com
W: www.patrys.com
Australian Business Number
97 123 055 363
Securities Exchange Listing
Australian Securities Exchange
ASX Code: PAB
Auditors
BDO
Melbourne
Australia
Lawyers
Arnold Bloch Liebler
Melbourne
Australia
Share Registry
Computershare
Yarra Falls, 452 Johnston Street, Abbotsford, VIC 3067
Ph: 03 9414 5000
F: 03 9473 2500
W: www.computershare.com