FPO See COVER fi le
QRxPHARMA IS A CLINICAL-STAGE SPECIALTY
PHARMACEUTICAL COMPANY FOCUSED ON THE
DEVELOPMENT AND COMMERCIALISATION OF
THERAPIES FOR PAIN MANAGEMENT AND CENTRAL
NERVOUS SYSTEM (CNS) DISORDERS.
Based on a business strategy to expand the clinical utility and commercial value of
marketed and/or existing compounds, QRxPharma’s product portfolio includes both late
and early stage clinical drug candidates with well-defi ned paths to regulatory approval
and sales. The Company intends to directly commercialise its products in the US and
seek strategic partnerships as required to accelerate market penetration. QRxPharma’s
lead compound, Q8003IR, completed initial Phase 3 studies in April 2008, having met
all primary and secondary endpoints. The Company’s preclinical and clinical pipeline
includes other technologies in the fi elds of pain management, neurodegenerative
disease and venomics.
QRxPHARMA LIMITED
ABN 16 102 254 151
CORPORATE DIRECTORY
Directors
Peter C Farrell PhD, ScD, AM, Non Executive Chairman
John W Holaday PhD, Managing Director and Chief Executive Offi cer
R Peter Campbell FCA, FTIA
Gary W Pace PhD
Michael A Quinn MBA
Secretary
Chris J Campbell CA
Notice of annual general meeting
The annual general meeting of QRxPharma Limited will be held on
4 November 2008 at the Grace Hotel, 77 York Street, Sydney,
commencing at 10.00 am
Principal registered offi ce in Australia
Share register
Auditor
Solicitors
QRxPharma Limited
Level 1
194 Miller St
North Sydney NSW 2060
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
PricewaterhouseCoopers
Darling Park Tower 2
201 Sussex Street
GPO BOX 2650
Sydney NSW 1171
Dibbs Abbott Stillman
Level 8, Angel Place
123 Pitt Street
Sydney NSW 2000
Stock exchange listings
QRxPharma Limited shares are listed on the Australian Securities Exchange.
Listing Code: QRX
QRxPharma Limited American Depositary Receipts are listed on the OTCQX.
Symbol: QRXPY
Website address
www.qrxpharma.com
TABLE OF CONTENTS
Letter from the Chairman
CEO Review
Pain Management
Severe Opioid Adverse Events
Comparison of Adverse Events
Dose-Response Effi cacy
Effi cacy: Patient Global Rating
Neurodegenerative Diseases
Venomics
Directors’ report
2
Auditor’s independence declaration
4
4
4
5
5
6
7
7
8
Corporate governance statement
Income statements
Balance sheets
Statements of changes in equity
Cash fl ow statements
Notes to the fi nancial statements
Directors’ declaration
Independent auditor’s report
Shareholder information
25
26
32
33
34
35
36
73
74
77
www.qrxpharma.com 1
LETTER FROM THE CHAIRMAN
Dear Shareholders,
Over the past year, QRxPharma has made signifi cant progress, having achieved our projected
clinical development goals for Q8003IR, the Company’s lead product candidate for the acute
treatment of moderate to severe pain. Our successful completion of initial Phase 3 studies
in May 2008 was ahead of schedule, and this accomplishment not only demonstrates the
Company’s ability to deliver on its development milestones, but also represents the realisation
of signifi cant steps toward commercialising a fi rst-in-class “dual-opioid®” pain therapy.
Although opioids such as morphine have been administered to patients to relieve pain for over
two centuries, these drugs are fraught with severe side effects which often limit their clinical
use. As preclinical and clinical data demonstrate, our patented dual-opioid® technology –
a unique, fi xed-ratio morphine and oxycodone product - provides superior pain relief while
minimising side effects. Our products target both the acute and chronic pain markets (a $12
billion global market place) and include an immediate release formulation (Q8003IR), a continuous release formulation
(Q8011CR) and an intravenous formulation (Q8012IV). QRxPharma’s portfolio of dual-opioids® will provide pain physicians
with diverse doses and formulations that can be tailored to the patient’s needs for more effective pain relief, while minimising
side effects.
To translate clinical progress into greater shareholder value, we remain focused on commercialising Q8003IR. In mid-2007,
QRxPharma initiated the manufacturing of 4 capsule strengths for use in clinical trials. In November, 2007, Phase 3 studies
commenced with the primary objective of determining preferred dose parameters for pain relief in post-surgical patients
(secondary objectives included patient ratings and side effect profi les). In May 2008, we successfully completed these initial
Phase 3 studies, having achieved statistical signifi cance for all primary and secondary trial endpoints, including a dose-
related increase in pain relief, with few medically signifi cant side effects. These studies further established a 12mg/8mg
morphine and oxycodone combination of Q8003IR as the preferred dose for optimal pain relief and tolerability, with rapid
onset and a duration of action of over six hours.
A year of development activity for Q8003IR concluded with a United States Food and Drug Administration (FDA) meeting
in July 2008 where we reviewed our clinical data (including effi cacy, safety, side effects and tolerability) as well as assessed
the suffi ciency of planned clinical trials for New Drug Application (NDA) submission, the fi nal step before commercialisation.
Pending incorporation of the FDA’s recommended modifi cations, only two additional Phase 3 trials will be required for NDA
fi ling. Under this streamlined clinical development programme, no additional pharmacology, toxicology or long-term clinical
safety studies are deemed necessary for regulatory submission. The Company is however considering additional studies to
generate data that will enhance market entry.
2 QRxPharma Annual Report 2008
Acceptance of our Q8003IR proposed Phase 3 development plan by the FDA is a measure of success in terms of reduced
risk, improved resource effi ciencies and de facto endorsement of the potential value of dual-opioids®. We believe the
FDA meeting outcome serves to reinforce the soundness of our business strategy – to expand the clinical utility of existing
compounds as well as deliver new treatments for targeted indications, with well-defi ned paths to regulatory approval, and
sales to broad specialty markets.
We also continue our close association with both the University of Alabama and the University of Queensland by advancing
our preclinical pipeline in the areas of neurodegenerative disease and venomics, respectively.
Market conditions have not been favourable to our share price over the past year. Although we have maintained a stable
base of institutional and retail shareholders during this declining market, there is a clear need to broaden the Company’s
shareholder base in order to recognise the value of our growing assets. To that end, with JP Morgan, QRxPharma initiated
an American Depository Receipt programme for US listing, and then recently joined the OTCQX (QRXPY) with the help of
our Principal American Liaison, Merriman Curhan and Ford. This relationship includes informational road shows, analyst
coverage and market making, which will afford us broad access to the US market to facilitate US investment in QRxPharma.
I am proud of what we have accomplished during our fi rst year of public ownership. In the coming year, we will conserve
cash resources to ensure a strong fi nancial footing and continue our comprehensive clinical trial programme. In addition,
we plan to extend our intellectual property protection in order to enhance the market value of our product portfolio; we will
also add global shareholders as well as emphasise business development to establish appropriate strategic partnerships to
accelerate product commercialisation.
We thank you for your continued support.
Yours sincerely,
Peter C Farrell, PhD, ScD, AM
Chairman
www.qrxpharma.com 3
CEO REVIEW
Little more than a year ago, QRxPharma had only recently completed its initial public offering (IPO) and listing on the Australian Securities
Exchange (ASX), full of promise with respect to the Company’s preclinical and clinical pipeline, with emphasis on the fi eld of pain
management. We are pleased to report signifi cant progress in the Phase 3 clinical trial programme of our lead compound Q8003IR,
and the continued progression of other development projects. This has been achieved whilst still retaining $29.7 million in cash reserves
at 30 June 2008.
PRODUCT PIPELINE
PRODUCT/PROGRAM
RESEARCH
PRE-CLINICAL
PHASE I
PHASE II
PHASE III
PAIN MANAGMENT
Q8003IR
Q8012IV
Q8011CR
CNS
T9001 (DYSTONIA)
T9001 (PARKINSON’S)
VENOMICS
Q8010
Q8008
PAIN MANAGEMENT
In November 2007, we initiated Phase 3 clinical trials for Q8003IR, the Company’s lead product candidate and most advanced asset, a
patent-protected dual-opioid® immediate release formulation of morphine and oxycodone for the treatment of moderate to severe acute
pain. The goal of this double blind, placebo controlled study was to compare four different dosage regimens of Q8003IR in patients with
moderate to severe post-surgery pain (bunionectomy) and to establish the preferred dose parameters. Secondary endpoints of the study
included: (i) effi cacy relating to the time to onset of analgesia and the duration of effect and (ii) safety as measured by the incidence and
intensity of opioid-related adverse events. Completed ahead of schedule in May 2008, the study was conducted with 256 patients at six
clinical research sites across the United States of America (US).
It is rare that all primary and secondary endpoints are met in Phase 3 studies. QRxPharma achieved this milestone, thus reinforcing the
potential clinical benefi t and commercial value of its dual-opioid® product portfolio. Initial Q8003IR Phase 3 effi cacy data demonstrated
statistically signifi cant analgesic activity at all dose levels, with the 12mg/8mg (morphine-oxycodone) dose delivering the best analgesic
effect and tolerability profi le.
Although morphine and oxycodone are treatment mainstays for moderate to severe pain, side effects such as nausea, sedation,
constipation, and respiratory depression limit their use. In our initial Q8003IR Phase 3 studies, very few severe adverse effects were
observed. In particular, no respiratory depression and minimal somnolence were seen, as well as the absence of euphoria. These were
unexpected outcomes compared to what is typical with morphine or oxycodone at comparable pain relieving doses following surgery. Such
data suggests that our dual-opioids® may provide synergistic effects on pain relief with equal or better analgesia at materially lower doses
than the active opioid comparator while simultaneously reducing the incidence of side effects.
In July 2008, QRxPharma met with the US Food and Drug Administration (FDA) to review proposed Phase 3 protocol designs for the
remaining trials. Pending incorporation of the FDA’s recommended modifi cations, only two further Phase 3 trials will be required for fi ling of
a New Drug application (NDA), including a combination rule study in patients experiencing post-surgery (bunionectomy) pain and a placebo
controlled study in patients following total knee replacement.
4 QRxPharma Annual Report 2008
Q8003IR DOSE-RESPONSE EFFICACY
***
61.0
51.2
***
48.0
***
**
31.2
1
2
3
4
5
6
7
8
9
10
Q8003IR SEVERE OPIOID ADVERSE EVENTS
Dose (mg)
Phase 3 Study 007
* p<.05
** p<.01
*** p<.001
Placebo (N=60)
12/8 mg (N=50)
8
4
D
P
S
I
70
60
50
40
30
20
10
-6.8
0
0
-10
-20
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
s
t
n
e
i
t
a
P
f
o
%
14.0%
2.0%
0.0%
3.0%
2.0%2.0%
2.0%
0.0% 0.0%
2.0%
2.0%
0.0%
0.0% 0.0%
0.0% 0.0%
0.0% 0.0%
0.0% 0.0%
NAUSEA
EMESIS
DIZZINESS
HEADACHE
PRURITIS
CONSTIPATION
DRY MOUTH
SOMNOLENCE
EUPHORIA
02 DECREASE
Phase 3 Study 007
www.qrxpharma.com 5
CEO REVIEW (CONTINUED)
Q8003IR EFFICACY: PATIENT GLOBAL RATING
s
t
n
e
i
t
a
P
f
o
%
100
90
80
70
60
50
40
30
20
10
0
58.0
43.7
42.9
40.9
13.3
PLACEBO
N = 60
3/2 mg
N = 48
6/4 mg
N = 49
12/8 mg
N = 50
18/12 mg
N = 49
Phase 3 Study 007
% Good - Excellent Improvement
Under this streamlined clinical development programme, no additional animal pharmacology, toxicology or long-term clinical safety studies
will be required for regulatory submission. Whilst discussions with the FDA have streamlined the regulatory process, it has also opened
the door for the Company to reduce fi nancial risk associated with our clinical trial program, with the opportunity to approach the FDA for
a Special Protocol Assessment (SPA) which will minimise the risk of the FDA requiring further trials or requirements after presentation of
our planned trial results. During the time of the SPA negotiation, the Company may initiate some additional marketing oriented trials, not
previously planned, to strengthen both our labelling and marketing assets in preparation for NDA submission and launch as well as strategic
partnering efforts.
The global market for pain therapies is large and well defined, particularly in the regulated and closely monitored moderate to severe pain
sector. Q8011CR, a controlled-release dual-opioid® designed to provide 12 hours of pain relief in patients with moderate to severe chronic
pain, is being formulated to initiate Phase I studies.
An intravenous (IV) dual-opioid® formulation for immediate, post-surgical treatment of hospital-based pain is proposed and will commence
clinical trials in 2009. This product candidate broadens the scope of our dual-opioid® portfolio as it will be used in a peri-operative setting.
Q8012IV represents an exciting addition to the Company’s pain franchise as it is complementary to Q8003IR and Q8011CR, offering
prescribing physicians broader and better treatment options than traditional opioids.
NEURODEGENERATIVE DISEASES
QRxPharma extends its product portfolio into neurodegenerative disorders with an exclusive worldwide license from the University of
Alabama on the modulation of key proteins required for normal cellular function in the brain.The discovery relates to a molecule, “Torsin”,
that works within the cellular machinery to prevent the harmful protein missfolding that characterises neurologic disorders such as dystonia,
Parkinson’s Disease and Alzheimer’s Disese. A family of small Torsin-activating molecules have been shown in preclinical models to prevent
protein mutations and to ameliorate movement disorders by working at a causative level.
6 QRxPharma Annual Report 2008
VENOMICS
Based on collaborations with the University of Queensland and the Queensland Institute for Medical Research to identify and characterise
proteins and peptides from Australian snake venoms, QRxPharma has also developed a unique drug discovery platform for therapies in
coagulation and blood homeostasis. Venoms from some of the world’s deadliest snakes have proved a fertile area for the discovery of
novel proteins and peptides with signifi cant therapeutic potential. QRxPharma owns intellectual property assets derived from this research,
including two preclinical drug candidates in the area of haemostasis, as well as a deep pipeline of earlier stage candidates in haemostasis,
anti-coagulation and other diverse therapeutic areas.
SUMMARY
To support these developments, QRxPharma established a presence in New Jersey, US. The Company has recruited a specialised staff
of outstanding pharmaceutical industry veterans in clinical and commercial development who complement existing management. Key
appointments of Vice President, Commercialisation; Vice President, Operations; Senior Vice President, Clinical Research; and Senior
Director, Regulatory Affairs have been completed. This team has been instrumental in completing the initial Phase 3 study of Q8003IR
ahead of schedule in May 2008.
QRxPharma’s global Scientifi c Advisory Board (SAB) comprises internationally recognised leaders in the fi elds of pain therapy, central
nervous system drug discovery, pharmaceutical development, regulatory approvals and product commercialisation. Our SAB, chaired by Dr.
Solomon Snyder, was strengthened during the year with the appointments of Dr. Lester Crawford, former Commissioner of the FDA, and
Dr. Gavril Pasternak, a world authority on opioid drugs. Counsel from members of the SAB have been of great assistance to QRxPharma
particularly in dealings with the FDA, as the Company strives to bring to market a product portfolio of late and early stage clinical candidates
with abbreviated development programmes and improved patient outcomes.
QRxPharma is sharply focused on the advancement of its preclinical and clinical pipeline, emphasising product development in the fi eld
of pain management. As clinical trials progress with associated expenditures and reported losses, we will enhance the market value of
our pain portfolio. QRxPharma retains the funds necessary to meet these commitments throughout the year ahead. We have aligned the
Company’s development strategy with a concerted effort to broaden our shareholder base and establish strategic partnerships that drive
value and enable QRxPharma to address larger markets in a global environment. I am very proud of the achievements of the Company
throughout this past year and I am confi dent that the Company will continue to focus resources and efforts to achieve our goals in 2009.
Yours sincerely,
John W Holaday, PhD
Managing Director and Chief Executive Offi cer
www.qrxpharma.com 7
DIRECTORS’ REPORT
Your directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of QRxPharma Limited (referred
to hereafter as the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2008.
DIRECTORS
The following persons were directors of QRxPharma Limited during the whole of the fi nancial year and up to the date of this report:
Peter C Farrell
R Peter Campbell
Gary W Pace
Michael A Quinn
John W Holaday
PRINCIPAL ACTIVITIES
During the year the principal continuing activities of the Group consisted of the development and commercialisation of biopharmaceutical
products based on largely Australian research, targeting the US market.
DIVIDENDS - QRXPHARMA LIMITED
No dividends were paid or declared since the start of the fi nancial year (2007: $nil).
REVIEW OF OPERATIONS
The Group has made a loss from ordinary activities after income tax for the year of $36.6 million (2007: loss of $0.4 million).This result
includes non cash charges of $18.1 million relating to an impairment charge to the Torsin intellectual property (Torsin IP) of $14.6 million
and share-based payments expenses of $3.5 million. The Torsin IP is represented by an exclusive worldwide license from the University of
Alabama of certain technology relating to the treatment of central nervous system disorders and other related diseases. Excluding these
charges the loss was in line with expectations in fulfi lling research and development efforts, in the progression of the Company’s clincial
pipeline candidates and preclinical stage drugs. The Company continues to closely manage its cash position as it progresses the dual
opioid Q8003IR Phase 3 development programme, and retains $29.7 million in cash reserves at 30 June 2008.
The impairment charge of $14.6 million (2007: $nil) associated with the Torsin IP was made in accordance with Accounting Standard AASB
136 “Impairment of Assets” which requires the assessment of the Torsin IP for impairment on an annual basis. The ability of an intangible
asset such as the Torsin IP to generate suffi cient future economic benefi ts to recover its carrying amount is usually subject to greater
uncertainty before the asset is capable of generating cash fl ows. Whilst the Company has supported with limited funding the enhancement
of the Torsin IP, the decision of the Company to focus on pain assets implies the Torsin IP could not currently generate cash fl ow other than
from the out-license or sale of the asset. As no contracts have been negotiated for the out-license or sale of the Torsin IP, the Company has
fully impaired the carrying value of the asset at 30 June 2008 being $14.6 million pursuant to the requirements of AASB136.
Apart from its development activities, the Company also initiated a Level 1 American Depositary Receipt programme, listed on the
International OTCQX, and trading began on 30 June 2008 on the International PrimeQX under the ticker QRXPY.
Further information on the operations and fi nancial position of the Group and its business strategies and prospects is set out on pages 4-7
of this annual report.
8 QRxPharma Annual Report 2008
LOSS PER SHARE
(a) Basic loss per share
Loss from continuing operations attributable to the ordinary equity holders of the company
2008
Cents
2007
Cents
(48.8)
(2.8)
(b) Diluted loss per share
Loss from continuing operations attributable to the ordinary equity holders of the company
(48.8)
(2.8)
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
No signifi cant changes in the state of affairs of the Group were noted during the fi nancial year that have not otherwise been disclosed in this
report or in the fi nancial statements.
USE OF FUNDS
Expenditure for the year ended 30 June 2008 is refl ective of the Company’s successful IPO in May 2007 and the resultant initiation of its
Phase 3 clinical trial program for its lead compound, Q8003IR as well as the continued progression of earlier stage pipeline candidates, in
accordance with the Prospectus dated 27 April 2007.
During the fi nancial year ended 30 June 2007, the Group had entered into a series of foreign exchange put option contracts at an exchange
rate between Australian dollars and US dollars of AUD1.00 to USD0.8181 to protect against adverse foreign exchange movements
between AUD and USD. The option contracts were to cover anticipated expenditure of at least $29 million over 2 years to fulfi l research and
development expenditure associated with clinical trials to be conducted in the United States of America (US). The Prospectus issued by
the Company on 27 April, 2007 assumed an exchange rate between Australian dollars and US dollars of AUD1.00 to USD0.78. During the
year the Group converted AUD20 million to USD at an average rate of USD0.9027, taking advantage of the more favourable rates above the
option contracts.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
No matter or circumstance has arisen since 30 June 2008 that has signifi cantly affected, or may signifi cantly affect:
(a)
the Group’s operations in future fi nancial years, or
(b)
the results of those operations in future fi nancial years, or
(c ) the Group’s state of affairs in future fi nancial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS
Information on likely developments in the operations of the Group and the expected results of operations have not been included in this
annual report because the directors believe it would be likely to result in unreasonable prejudice to the Group.
ENVIRONMENTAL REGULATION
There are no particular and signifi cant environmental regulations under a law of the Commonwealth or of a State or Territory of Australia
affecting the Group.
www.qrxpharma.com 9
DIRECTORS’ REPORT (CONTINUED)
INFORMATION ON DIRECTORS
Peter C Farrell PhD, ScD, AM. Non Executive Chairman.
Experience and expertise
Dr Farrell has over 30 years executive and consulting experience in the medical device industry.
Dr Farrell is a Fellow of several professional bodies, including the Australian Institutes of Management and Company Directors. He is the
Vice Chair of the Executive Council of the Division of Sleep Medicine at Harvard Medical School, he serves on the Board of Trustees of
University of California, San Diego (UCSD) and is on the Health Sciences Advisory Board of the Dean of Medicine and the Advisory Board
of UCSD’s Jacobs School of Engineering. Dr Farrell is also a Visiting Professor at the University of New South Wales Graduate School for
Biomedical Engineering, of which he was founding Director in 1978.
In 1994, the Australian Institution of Engineers awarded Dr Farrell the honour of National Professional Engineer of the Year and, in 1997,
he received the David Dewhurst Award (Biomedical Engineer of the Year) from the same institution. He was also named San Diego
Entrepreneur of the Year for Health Sciences in 1998, Australian Entrepreneur of the Year for 2001, and US National Entrepreneur of the
Year for Health Sciences for 2005. Dr Farrell was admitted to membership of the Order of Australia in 2004. He holds Bachelors and
Masters degrees in chemical engineering from the University of Sydney and the Massachusetts Institute of Technology (MIT) respectively, a
PhD in bioengineering from the University of Washington in Seattle, and a ScD from the University of New South Wales for research related
to dialysis and renal medicine.
Other current directorships
Dr Farrell is the Chairman of ResMed Inc (ASX and NYSE: RMD), which he founded in 1989. He is also a Director of Pharmaxis Limited
(ASX: PXS) (director since March 2006) and Nuvasive Inc (NASDAQ: NUVA) (director since January 2005) serving on the nominations and
governance committees.
Former directorships in last 3 years
Nil.
Special responsibilities
Chairman of the Board.
Chairman of nominations committee.
Chairman of remuneration committee.
Interests in shares and options
1,280,540 ordinary shares and 604,089 options over ordinary shares.
John W Holaday PhD. Managing Director and Chief Executive Offi cer.
Experience and expertise
Dr Holaday brings four decades of experience as a scientist, founder and executive manager of biotechnology and biopharmaceutical
companies, and as a banker. Dr Holaday has extensive experience in building publicly traded specialty pharmaceutical companies. In 1992,
Dr Holaday was a co-founder of EntreMed Inc (NASDAQ: ENMD), of which he served as President, Chief Executive Officer, and Chairman of
the Board. In 1988, Dr Holaday also co-founded Medicis Pharmaceutical Corporation (NYSE: MRX), where he served as a Board Director,
as Scientific Director, and as Senior Vice President for Research and Development. Dr Holaday also founded MaxCyte Inc, a cell therapy
company, where he served as Chairman until retiring in 2003. He founded HarVest Bank of Maryland in 2004, served as Chairman until
2006 and remains on the Board. Dr Holaday was founder, Chairman and Chief Executive Offi cer of CNSCo, Inc, a private company which
was acquired by the Group on 26 April 2007.
Dr Holaday currently serves as an offi cer and Fellow in several biomedical societies, has authored and edited over 200 scientifi c articles in
journals and books, and holds over 30 patents. He served as Chairman of the Maryland BioAlliance, is a Judge for the Ernst and Young
Entrepreneur of the Year Award (2003 to present) and was named to the Ernst and Young Entrepreneur of the Year Hall of Fame in 2006. Dr.
Holaday served as a Captain, US Army, until 1972, and as managing founder of the Neuropharmacology Branch at the Walter Reed Army
Institute of Research until 1988. Dr Holaday was formerly an Associate Professor of Anaesthesiology and Critical Care Medicine and Senior
10 QRxPharma Annual Report 2008
Lecturer in Medicine at The Johns Hopkins University of Medicine and remains as Adjunct Professor of Psychiatry at the Uniformed Services
University School of Medicine, Bethesda, Maryland. Dr Holaday obtained his Doctorate in Pharmacology at the University of California, San
Francisco in 1977.
Other current directorships
Nil
Former directorships in last 3 years
Nil
Special responsibilities
Managing Director and Chief Executive Offi cer.
President of QRxPharma, Inc.
Member of remuneration committee.
Interests in shares and options
7,543,000 ordinary shares (including ordinary shares held by John Holaday and John Holaday as trustee for the John Holaday Foundation)
and 805,452 options over ordinary shares.
R Peter Campbell FCA, FTIA. Non Executive Director.
Experience and expertise
Mr Campbell is a Chartered Accountant and company Director with more than 35 years of business consulting and advisory experience,
and operates his own chartered accountancy practice based in Sydney. He is a fellow of both the Institute of Chartered Accountants in
Australia and the Taxation Institute of Australia and is a registered company auditor.
Other current directorships
Director and Chair of the audit committees of Silex Systems Limited (ASX: SLX) (director since July 1996), Sonic Healthcare Limited (ASX:
SHL) (director since January 1993), and Admerex Limited (ASX: ADL) (director since January 2007).
Former directorships in last 3 years
Non executive director of SciGen Limited (ASX: SIE) from August 1999 to February 2005.
Special responsibilities
Chairman of audit and risk committee.
Member of nominations committee.
Interests in shares and options
85,000 ordinary shares and 241,635 options over ordinary shares.
www.qrxpharma.com 11
DIRECTORS’ REPORT (CONTINUED)
Gary W Pace PhD Non-Executive Director and Consultant.
Experience and expertise
Dr Pace is a co founder of QRxPharma Limited and continues to work with the Group.
Dr Pace is a seasoned biopharmaceutical executive with over 30 years of experience in the industry. He has co founded a number of early
stage life science companies where he built products from the laboratory to commercialisation.
Dr Pace is an elected Fellow of the Australian Academy of Technological Sciences and Engineering, author and co author of over 50
research papers, reviews and patents. In 2003, Dr Pace was awarded a Centenary Medal by the Australian Government for service to
Australian society in research and development. Dr Pace holds a Bachelor of Science (Honours) from the University of New South Wales
and a PhD from Massachusetts Institute of Technology, where he was a Fulbright Scholar.
Other current directorships
Director of ResMed Inc (ASX and NYSE: RMD) (since 1995), Transition Therapeutics Inc (TSX and NASDAQ: TTH;) (since 2002), Celsion
Corp (AMX: CLN) (since 2002) and Peplin Limited (ASX: PEP) (since June 2004).
Former directorships in last 3 years
Resonance Health Limited (ASX: RHT) (April 2006 to August 2007)
Special responsibilities
Nil
Interests in shares and options
3,230,083 ordinary shares and 402,726 options over ordinary shares.
Michael A Quinn MBA. Non-Executive Director.
Experience and expertise
Mr Quinn is managing partner of Innovation Capital and has more than 30 years executive experience in technology companies in Australia,
the US and the UK. Mr Quinn holds a Bachelor of Science, a Bachelor of Economics, and an MBA from Harvard. Mr Quinn is Chairman
of the New South Wales Entrepreneurship Centre Limited, a not-for-profi t organisation that trains entrepreneurs. In 1983 he co-founded
Memtec Limited (NYSE and ASX), and has also served as Chief Executive Offi cer of an ASX listed manufacturer and distributor of health
care and scientifi c products. Mr Quinn has been a Director of several listed companies in Australia, the US and the UK and numerous
unlisted life science and other technology based companies.
Other current directorships
Director of ResMed Inc (ASX and NYSE: RMD) (director since 1992) where he chairs the audit committee and Chairman of CAP XX Limited
(AIM: CPX) (director since November 1998).
Mr Quinn is co-founder and Chairman of Innovation Capital, an Australian and US venture fund, which is a foundation shareholder of the
Company.
Former directorships in last 3 years
Nil.
Special responsibilities
Member of nominations committee.
Member of audit and risk committee.
Member of remuneration committee.
Interests in shares and options
9,471,749 ordinary shares (including ordinary shares held by Innovation Capital Limited, Innovation Capital LLC, Innovation Capital QRx
Trust, Innovation Capital QRx II Trust and Kaylara Pty Limited). 402,726 options over ordinary shares (including options held by Innovation
Capital Limited and Innovation Capital LLC).
12 QRxPharma Annual Report 2008
COMPANY SECRETARY
Chris J Campbell holds a Bachelor of Commerce and is an Associate of the Institute of Chartered Accountants in Australia. He also holds
the position of Chief Financial Offi cer of QRxPharma Limited. He has over 25 years experience with major accounting fi rms and as CFO of
publicly traded companies.
Terrence F Sayer also held the offi ce of Company Secretary from the beginning of the fi nancial year until his resignation on 6 February 2008.
MEETINGS OF DIRECTORS
The numbers of meetings of the company’s board of directors and of each board committee held during the year ended 30 June 2008, and
the numbers of meetings attended by each director were:
Full meetings of
directors
Meetings of
non-executive
directors
Meetings of committees
Audit and risk
Nominations
Remuneration
A
5
5
4
5
5
B
5
5
5
5
5
A
5
4
3
5
B
5
5
3
5
A
**
**
3
**
3
B
3
3
A
1
**
1
**
1
B
1
1
1
A
2
2
**
**
2
B
2
2
2
Peter C Farrell
John W Holaday*
R Peter Campbell
Gary W Pace
Michael A Quinn
A = Number of meetings attended
B = Number of meetings held during the time the director held offi ce or was a member of the committee during the year
* = Not a non executive director
** = Not a member of the relevant committee
REMUNERATION REPORT
The remuneration report is set out under the following main headings:
A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Share-based compensation
E Additional information.
The information provided under headings A-D includes remuneration disclosures that are required under Accounting Standard AASB 124
Related Party Disclosures. These disclosures have been transferred from the fi nancial report and have been audited. The disclosures in
Section E are additional disclosures required by the Corporations Act 2001 and the Corporations Regulations 2001 which have not been
audited.
www.qrxpharma.com 13
DIRECTORS’ REPORT (CONTINUED)
A Principles used to determine the nature and amount of remuneration (audited)
As a company building a speciality pharmaceutical business to compete internationally, QRxPharma Limited requires a board and senior
management team that have both the technical capability and relevant business experience to execute the Group’s strategy.
The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results
delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders, and
conforms with market practice for delivery of reward. The Board ensures that executive reward satisfi es the following key criteria for good
reward governance practices:
(cid:129) competitiveness and reasonableness
(cid:129) acceptability to shareholders
(cid:129)
transparency
The Group has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of
the organisation.
Alignment to shareholders’ interests:
(cid:129)
focuses on sustained growth in share price as well as focusing the executive on key non fi nancial drivers of value
(cid:129) attracts and retains high calibre executives.
Alignment to program participants’ interests:
(cid:129)
(cid:129)
rewards capability and experience
refl ects competitive reward for contribution to growth in shareholder wealth
(cid:129) provides recognition for contribution.
The framework provides a blend of fi xed pay, and short and long term incentives.
The board has established a remuneration committee which provides advice on remuneration and incentive policies and practices and
specifi c recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and
non executive directors. The Corporate Governance Statement provides further information on the role of this committee.
Non-executive directors
Fees and payments to non executive directors refl ect the demands which are made on, and the responsibilities of, the directors. The fees
were set on 27 April 2007 ahead of the Company completing its initial public offering. There is an annual base fee payable six months in
arrears, currently $60,000 for the Chairman and $40,000 for the other non executive directors (which also covers serving on a committee)
and long term incentives through participation in the QRxPharma Limited Employee Share Option Plan.
Non executive directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval
by shareholders. The maximum currently stands at $400,000 per annum and was approved by shareholders at the Annual General Meeting
on 24 April 2007.
Executive pay
The executive pay and reward framework has three components:
(cid:129) base pay and benefi ts, including superannuation
(cid:129) short term performance incentives, and
(cid:129)
long term incentives through participation in the QRxPharma Limited Employee Share Option Plan.
The combination of these comprises the executive’s total remuneration.
14 QRxPharma Annual Report 2008
Base pay
Structured as a total employment package which may be delivered as a combination of cash and prescribed non fi nancial benefi ts at the
executives’ discretion.
Executives are offered a competitive base pay that comprises the fi xed component of pay and rewards. Base pay for executives is
reviewed annually and every two years a market survey is conducted to ensure the executive’s pay is competitive with the market. An
executive’s pay is also reviewed on promotion.
There are no guaranteed base pay increases included in any executives’ contracts.
Benefi ts
Executives receive benefi ts including health insurance and tax advisory services.
Superannuation
The Group does not maintain a Group superannuation plan. The Group makes fi xed percentage contributions for Australian resident
employees to complying third party superannuation funds and for US resident employees to complying pension plans.
Short term incentives
A variable cash incentive component is payable annually dependant upon achievement of performance targets. Individual performance
targets are set by reference to components of the Group’s business plan for which the individual executive is responsible.
Long term incentives
Long term incentives are provided to certain employees through participation in the QRxPharma Limited Employee Share Option Plan.
B Details of remuneration (audited)
Amounts of remuneration
Details of the remuneration of the directors and the key management personnel (as defi ned in AASB 124 Related Party Disclosures) of
QRxPharma Limited and the Group are set out in the following tables.
The key management personnel of QRxPharma Limited and the Group includes the directors as per pages 10 to 12 and the following
executive offi cers who have authority and responsibility for planning, directing and controlling the activities of the Group, who are also the
highest paid executives of the entity:
(cid:129) Warren C Stern, PhD – Executive Vice President, Drug Development
(cid:129) Chris J Campbell – Chief Financial Offi cer and Company Secretary
(cid:129) Douglas A Saltel – Chief Operating Offi cer (resigned 7 March 2008)
(cid:129) Joseph J Berry – VP Operations (from 12 November 2007)
(cid:129) Philip J Magistro – VP Commercial Operations (from 26 November 2007)
(cid:129) Patricia T Richards, MD – Senior VP Clinical Research (from 18 February 2008)
www.qrxpharma.com 15
DIRECTORS’ REPORT (CONTINUED)
Key management personnel and other executives of QRxPharma Limited and the Group are the same
Short-term employee benefi ts
Post-employment
benefi ts
Long-term benefi ts
Cash
salary and
fees
$
Cash
bonus
$
Non-
monetary
Super-
Retirement
benefi ts
Other
annuation
benefi ts
Options
$
$
$
$
Long
$
Total
$
2008
Name
Non executive directors
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
60,000
40,000
40,000
59,765
-
-
-
-
-
Sub-total non-executive
directors
199,765
Executive directors
John W Holaday
350,000
146,250
Other key management personnel (Group)
Douglas A Saltel
(resigned 7 March 2008)
Warren C Stern ^
Chris J Campbell ^
Joseph J Berry ^
208,788
56,744
227,665
197,248
150,550
90,879
75,000
70,458
(appointed 12 November 2007)
Philip J Magistro ^
147,684
73,528
(appointed 26 November 2007)
Patricia T Richards ^
99,533
29,860
(appointed 18 February 2008)
Total key management
personnel compensation
(Group)
Other Group executives
Terrence F Sayer
(Company Secretary)
1,581,233 542,719
(resigned 6 February 2008)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,600
-
-
3,600
-
-
-
24,502
-
-
-
28,102
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
296,083
118,433
197,388
278,241
356,083
162,033
237,388
338,006
890,145
1,093,510
-
556,482
1,052,732
-
265,532
556,482
228,017
32,598
875,026
524,767
253,606
43,463
264,675
54,026
183,419
-
2,361,213
4,513,267
-
-
-
^ denotes one of the highest paid executives of the company, as required to be disclosed under the Corporations Act 2001.
Gary Pace was paid $239,443 for consulting services provided to the Company during the year, after ceasing as an employee on
30 September 2007.
Terrence F Sayer was paid $53,120 for Accounting and Offi ce Services and Company Secretarial duties provided to the Company during the year.
16 QRxPharma Annual Report 2008
Key management personnel and other executives of QRxPharma Limited and the Group were the same in 2007
Short-term employee benefi ts
Cash
Non-
Post-employment
benefi ts
Share-
based
payments
Long-
term
benefi ts
Long
salary and
Cash
monetary
Super-
Retirement
service
bonus
benefi ts
Other
annuation
benefi ts
leave
Options
$
$
$
$
$
$
$
Total
$
2007
Name
Non executive directors
Peter C Farrell
R Peter Campbell
Michael A Quinn
David Stack
(resigned 27 April 2007)
Michael S Hirshorn
(resigned 27 April 2007)
George Savage
(resigned 27 April 2007)
David A Henderson
(resigned 27 April 2007)
Sub-total non-executive
directors
Executive directors
John W Holaday
Gary W Pace
Douglas A Saltel ^
Warren C Stern ^
Felix de la Iglesia
(resigned 25 May 2007)
Chris J Campbell ^
B Nicholas Harvey ^
(resigned 1 March 2007)
Total key management
personnel compensation
(Group)
Other Group executives
Terrence F Sayer
(Company Secretary)
fees
$
10,000
6,667
6,667
-
-
-
-
23,334
79,295
97,209
72,086
51,173
-
63,651
-
-
-
-
-
-
-
-
-
-
58,977
-
-
-
-
-
386,748
58,977
-
-
Other key management personnel (Group)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,327
-
8,327
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,723
3,489
5,815
23,215
18,723
10,156
12,482
23,215
-
-
-
-
-
-
41,242
64,576
29,076
25,291
108,371
181,477
29,076
29,076
-
101,162
80,249
-
17,446
89,424
-
-
171,207
625,259
-
-
^ denotes one of the highest paid executives of the Group, as required to be disclosed under the Corporations Act 2001.
Felix de la Iglesia was paid $264,830 for consulting services provided to the Group during the year.
B Nicholas Harvey was paid $52,386 for consulting services provided to the Group during the year.
Terrence F Sayer was paid $83,373 for Accounting and Offi ce Services and Company Secretarial duties provided to the Company during the year.
David Stack was paid $4,500 for consulting services provided to the Group during the year.
www.qrxpharma.com 17
DIRECTORS’ REPORT (CONTINUED)
Key management personnel and other executives of the Group
The relative proportions of remuneration that are linked to performance and those that are fi xed are as follows:
Name
2008
2007
2008
2007
2008
2007
Fixed remuneration
At risk - STI
At risk - LTI
Directors of QRxPharma Limited
John W Holaday
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
David Stack
(resigned 27 April 2007)
86%
100%
100%
100%
100%
-
Other key management personnel of the Group
Douglas A Saltel
(resigned 7 March 2008)
Warren C Stern
Chris J Campbell
Joseph J Berry
(appointed 12 November 2007)
Philip J Magistro
(appointed 26 November 2007)
Patricia T Richards
(appointed 18 February 2008)
Felix de la Iglesia
(resigned 25 May 2007)
B Nicholas Harvey
(resigned 1 March 2007)
79%
90%
86%
72%
72%
84%
-
-
C Service agreements (audited)
100%
100%
100%
100%
62%
100%
100%
100%
100%
-
-
-
100%
100%
14%
-
-
-
-
-
21%
10%
14%
28%
28%
16%
-
-
-
-
-
-
38%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
On appointment to the board, all non executive directors enter into a service agreement with the company in the form of a letter of
appointment. The letter summarises the board policies and terms, including compensation, relevant to the offi ce of director.
Remuneration and other terms of employment for the Managing Director and Chief Executive Offi cer and the other Key Management
personnel are also formalised in service agreements. Each of these agreements provide for the provision of performance related cash
bonuses, other benefi ts including health insurance and tax advisory services, and participation, when eligible, in the QRxPharma Limited
Employee Share Option Plan. Other major provisions of the agreements relating to remuneration are set out below.
John W Holaday, Managing Director and Chief Executive Offi cer
(cid:129) Term of agreement – 2 years (with annual extension) commencing 14 April 2007.
(cid:129) Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2008 of $350,000, to be reviewed
annually by the remuneration committee.
(cid:129) Payment of a termination benefi t on early termination by the Company, other than for gross misconduct, equal to the annual
base salary and a bonus component of $150,000.
18 QRxPharma Annual Report 2008
Warren C Stern, Executive Vice President Drug Development
(cid:129) Term of agreement – 3 years (with annual extension) commencing 14 April 2007.
(cid:129) Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2008 of US$250,000 to be reviewed annually
by the remuneration committee.
(cid:129) Payment of a termination benefi t on early termination by the Company, other than for gross misconduct, equal to the annual base
salary and a bonus component of US$100,000.
Joseph J Berry, Vice President Operations
(cid:129) Term of agreement – ongoing, commencing 12 November 2007.
(cid:129) Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2008 of US$215,000 (pro rata from
commencement date), to be reviewed annually by the remuneration committee.
Philip J Magistro, Vice President Commercialisation
(cid:129) Term of agreement – ongoing commencing 26 November 2007.
(cid:129) Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2008 of US$225,000 (pro rata from
commencement date), to be reviewed annually by the remuneration committee.
Patricia T Richards, Senior Vice President Clinical Research
(cid:129) Term of agreement – ongoing, commencing 18 February 2008.
(cid:129) Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2008 of US$250,000 (pro rata from
commencement date), to be reviewed annually by the remuneration committee.
Chris J Campbell, Chief Financial Offi cer
(cid:129) Term of agreement – ongoing, commencing 1 March 2007.
(cid:129) Base salary, inclusive of superannuation, for the year ended 30 June 2008 of $215,000, to be reviewed annually by the remuneration
committee.
(cid:129) Payment of a termination benefi t on early termination without notice by the Company, other than for gross misconduct, equal to 3
months salary.
Gary W Pace, Non-Executive Director, Consultant
(cid:129) Term of agreement – 1 year, commencing 25 May 2008.
(cid:129) Base consulting fee for the year ended 30 June 2009 of US$100,000 (pro rata).
(cid:129) No termination benefi t payable on early termination by the Company.
D Share-based compensation (audited)
Options
Options over shares in QRxPharma Limited are granted under the QRxPharma Limited Employee Share Option Plan (ESOP). The ESOP
is designed to provide long term incentives for executives to deliver long term shareholder returns.
The maximum number of options available to be issued under the ESOP is 10% of diluted ordinary share capital in the Company as at the
date of issue of the relevant options. All employees and directors are eligible to participate in the ESOP, but do so at the invitation of the
Remuneration Committee. The term of option issues are determined by the Remuneration Committee.
www.qrxpharma.com 19
DIRECTORS’ REPORT (CONTINUED)
Options are generally granted for no consideration and vest annually over 3 years in equal proportions with the initial vesting on the fi rst
anniversary of the date of grant. The exercise price is set by the Remuneration Committee but being not less than the market price of
ordinary shares immediately prior to the grant date of the options.
Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share.
The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows:
Grant date
Vested and exercisable
Expiry date
Exercise price
Value per option at grant
date
31 March 2007
14 April 2007
25 May 2007
25 May 2007
1 September 2007
1 October 2007
9 October 2007
1 January 2008
1 April 2008
1 April 2008
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
31 March 2014
14 April 2014
25 May 2014
25 May 2014
1 September 2014
1 October 2014
9 October 2014
1 January 2015
1 April 2015
1 April 2015
$1.42
$1.00
$1.00
$2.00
$1.70
$1.45
$1.34
$1.11
$1.05
$1.04
$1.31
$1.46
$1.46
$1.15
$0.98
$0.83
$0.77
$0.64
$0.60
$0.60
The exercise price in respect of an option granted shall be the market price for a share prevailing at the time of grant unless the Board
decides otherwise. Options will lapse if they are not exercised before the expiration date or if the option holder leaves the employment of
the Group.
Details of options over ordinary shares in the company provided as remuneration to each director of QRxPharma Limited and each of the
key management personnel of the parent entity and the Group are set out below. When exercisable, each option is convertible into one
ordinary share of QRxPharma Limited. Further information on the options is set out in note 28 to the fi nancial statements.
Name
Directors of QRxPharma Limited
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
John W Holaday
Ronald M Cresswell (resigned 10 February 2006)
David Stack (resigned 27 April 2007)
Other key management personnel
Douglas A Saltel (resigned 7 March 2008)
Warren C Stern
Chris J Campbell
Felix de la Inglesia (resigned 25 May 2007)
Joseph J Berry (appointed 12 November 2007)
Philip J Magistro (appointed 26 November 2007)
Patricia T Richards (appointed 18 February 2008)
Number of options granted
during the year
Number of options vested
during the year
2008
2007
2008
2007
-
-
-
-
-
-
-
-
-
-
-
150,000
200,000
500,000
604,089
241,635
402,726
402,726
805,452
-
-
805,452
805.452
402,726
50,000
-
-
-
201,363
80,545
134,242
134,242
268,484
-
-
-
268,484
134,242
-
-
-
-
-
-
-
-
-
50,000
180,000
-
-
-
-
-
-
-
The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting
date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a 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.
20 QRxPharma Annual Report 2008
The model inputs for options granted during the year ended 30 June 2008 included:
(a) Options are granted for no consideration and vest over 3 years (see page 20)
(b) Exercise price: $1.05 to $1.11 (2007: $0.15 to $2.00)
(c) Grant date: 1 January 2008 to 1 April 2008 (2007: 31 March 2007 to 25 May 2007)
(d) Expiry date: 1 January 2015 and 1 April 2015 (2007: 2014)
(e) Expected price volatility of the company’s shares: 60% (2007: 60%)
(f) Expected dividend yield: nil% (2007: nil%)
(g) Risk free interest rate: 6.25% (2007: 6.25%).
Shares provided on exercise of remuneration options
Details of ordinary shares in the company provided as a result of the exercise of remuneration options to each director of QRxPharma
Limited and other key management personnel of the Group are set out below.
Name
Directors of QRxPharma Limited
Gary W Pace
Gary W Pace
David Stack (resigned 27 April 2007)
David Stack (resigned 27 April 2007)
Ronald M Cresswell (resigned 10 February 2006)
Other key management personnel of the Group
Felix de la Iglesia (resigned 25 May 2007)
B Nicholas Harvey (resigned 1 March 2007)
Date of exercise
of options
Number of ordinary shares issued on
exercise of options during the year *
2008
2007
1 March 2007
25 April 2007**
1 March 2007
25 April 2007**
25 April 2007
25 April 2007**
25 May 2007
-
-
-
-
-
-
-
207,096
71,689
447,096
154,768
42,500
88,996
131,788
* Number of ordinary shares issued prior to compression of shares.
**The options exercised above carried anti dilution provisions which resulted in an uplift of shares issued on 25 April 2007. No amount
was payable on these shares.
The amounts paid per ordinary share by each director and other key management personnel on the exercise of options at the date of
exercise were as follows:
Exercise date
Amount paid per share
18 June 2006
1 March 2007
25 May 2007
$0.15
$0.15
$0.15
No amounts are unpaid on any shares issued on the exercise of options.
www.qrxpharma.com 21
DIRECTORS’ REPORT (CONTINUED)
E Additional information unaudited
Share-based compensation: Options
A
B
C
D
E
Remuneration
consisting of
options
Value at grant date
$
Value at exercise date
$
Value at lapse date
$
61.5%
49.0%
61.5%
18.2%
58.0%
-
25.8%
14.4%
4.8%
6.2%
12.5%
541,514
216,605
361,009
1,049,039
524,520
1,049,039
1,049,039
444,784
114,293
152,390
380,976
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,049,039
-
-
-
-
-
Total of
columns B D
$
541,514
216,605
361,009
1,049,039
524,520
-
1,049,039
444,784
114,293
152,390
380,976
Name
Peter C Farrell
R Peter Campbell
Michael A Quinn
John W Holaday
Gary W Pace
Douglas A Saltel
Warren C Stern
Chris J Campbell
Joseph Berry
Philip Magistro
Patricia Richards
A = The percentage of the value of remuneration consisting of options, based on the value of options expenses during the
current year.
B = The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year
as part of remuneration.
C = The value at exercise date of options that were granted as part of remuneration and were exercised during the year,
being the intrinsic value of the options at that date.
D = The value at lapse date of options that were granted as part of remuneration and that lapsed during the year.
Shares under option
Unissued ordinary shares of QRxPharma Limited under option at the date of this report are as follows:
Date options granted
Expiry date
Issue price of shares
Number under option
31 March 2007
14 April 2007
25 May 2007
25 May 2007
25 May 2007
1 September 2007
1 October 2007
9 October 2007
1 January 2008
1 April 2008
1 April 2008
31 March 2014
14 April 2014
25 May 2014
25 May 2014
25 May 2010
1 September 2014
1 October 2014
9 October 2014
1 January 2015
1 April 2015
1 April 2015
$1.42
$1.00
$1.00
$2.00
$2.20
$1.70
$1.45
$1.34
$1.11
$1.05
$1.04
402,726
2,013,630
552,726
1,448,450
322,181
50,000
75,000
50,000
350,000
600,000
75,000
5,939,713
Shares issued on the exercise of options
No ordinary shares have been issued during the year ended 30 June 2008 on the exercise of options granted under the QRxPharma
Limited Employee Option Plan
22 QRxPharma Annual Report 2008
INDEMNIFICATION
The Company has entered into Deeds of Access, Indemnity and Insurance with each of the directors and executive offi cers of the Group
against all liabilities to another person (other then the Company or a related body corporate) that may arise from their position as directors
and executive offi cers of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good
faith. The agreement stipulates that the Company will meet the amount of any such liabilities, including costs and expenses.
INSURANCE OF OFFICERS
The directors have not included details of the nature of liabilities covered nor the amount of the premium paid in respect to Directors and
Offi cers liability insurance contracts, as such disclosure is prohibited under the terms of the contracts.
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.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the
Corporations Act 2001.
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 amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non audit services provided during the year
are set out below.
The board of directors has considered the position and, in accordance with advice received from the audit committee, is satisfi ed that the
provision of the non audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act
2001. The directors are satisfi ed that the provision of non audit services by the auditor, as set out below, did not compromise the auditor
independence requirements of the Corporations Act 2001 for the following reasons:
(cid:129) all non audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the
auditor
(cid:129) none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
1. Audit services
PricewaterhouseCoopers Australian fi rm:
Audit and review of fi nancial reports and other audit work
under the Corporations Act 2001
Total remuneration for audit services
2. Non audit services
PricewaterhouseCoopers Australian fi rm:
Audit related services
Taxation services
Total remuneration for non audit services
Consolidated
2008
2007
86,000
86,000
-
99,270
99,270
97,200
97,200
145,000
80,300
225,300
www.qrxpharma.com 23
DIRECTORS’ REPORT (CONTINUED)
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 on page 25.
ROUNDING OF AMOUNTS
The company is a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission, relating to the
“rounding off” of amounts in the fi nancial report. Amounts in the directors’ report have been rounded off in accordance with that Class
Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
AUDITOR
PricewaterhouseCoopers continues in offi ce in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
Peter C Farrell
Director
Sydney
25 August 2008
24 QRxPharma Annual Report 2008
AUDITORS’ INDEPENDENCE DECLARATION
PricewaterhouseCoopers
ABN 52 780 433 757
Darling Park Tower 2
201 Sussex Street
GPO BOX 2650
SYDNEY NSW 1171
DX 77 Sydney
Australia
www.pwc.com/au
Telephone +61 2 8266 0000
Facsimile +61 2 8266 9999
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of QRxPharma Limited for the year ended 30 June 2008 I declare that to the best of my knowledge and
belief, there have been:
(a)
(b)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of QRxPharma Limited and the entities it controlled during the period.
Manoj Santiago
Partner
PricewaterhouseCoopers
Sydney
25 August 2008
Liability limited by a scheme approved under Professional Standards Legislation
www.qrxpharma.com 25
CORPORATE GOVERNANCE STATEMENT
QRxPharma Limited (the Company) and the board are committed
to achieving and demonstrating the highest standards of corporate
governance. The board continues to review the framework and
practices to ensure they meet the interests of shareholders and
other key stakeholders in the Company. The Company and its
controlled entities together are referred to as the Group in this
statement.
The relationship between the board and senior management
is critical to the Group’s long term success. The directors are
responsible to the shareholders for the performance of the
Group in both the short and the longer term and seek to balance
sometimes competing objectives in the best interests of the Group
as a whole. Their focus is to enhance the interests of shareholders
and other key stakeholders and to ensure the Group is properly
managed.
The role of the board is to provide strategic guidance and effective
oversight of management. The directors are responsible for the
overall direction, long term objectives and strategy, performance,
compliance and policies. Day to day management of the Group’s
affairs inclusive of the implementation of the corporate objectives
and strategy and compliance and policy initiatives are delegated by
the board to the Managing Director and other senior management,
with regular consultation between the Managing Director and the
Chairman occurring on matters generally as they arise.
A description of the company’s main corporate governance
practices is set out below.
The Board of Directors
The board operates in accordance with the broad principles
set out in its charter which is available from the corporate
governance information section of the company website at www.
qrxpharma.com. The charter details the board’s composition and
responsibilities.
Board composition
The charter states:
(cid:129) the board is committed to ensuring that there will be a least
fi ve directors of whom a majority will be non executive directors.
Non executive directors bring a fresh perspective to the board’s
consideration of strategic, risk and performance matters and are
best placed to exercise independent judgement and review and
constructively challenge the performance of management
(cid:129) where possible the non executive directors be independent.
This is in recognition of the importance of independent views
and the board’s role in supervising the activities of management
and independent judgement in board decision making
(cid:129) the board is also committed to ensuring that its members have a
broad range of skills, experience and expertise. This will assist
26 QRxPharma Annual Report 2008
the board to maximise performance and ensure appropriate
levels of shareholder return
(cid:129) the board is required to undertake an annual review of its
performance and Charter to ensure that it is operating effectively
and in the best interests of the Group
Responsibilities
The board is ultimately responsible for the business and
management of the Group and specifi c responsibilities of the
board include:
(cid:129) overseeing the business and strategic direction of the Group in
order to maximise performance and generate appropriate levels
of shareholder return
(cid:129) ensuring that management establishes and follows an
appropriate system of internal controls, risk management and
legal compliance
(cid:129) reviewing the performance and implementation of
corporate strategies by senior management and ensuring
senior management have the necessary resources to do so
(cid:129) approving and supervising signifi cant capital expenditure,
capital management, acquisitions and divestments
(cid:129) appointment, performance assessment and, if necessary,
removal of the Chairman, Chief Executive Offi cer, Chief Financial
Offi cer and the Company Secretary
(cid:129) approving and monitoring annual budgets and strategic plans
(cid:129) approving and monitoring fi nancial and other reporting made
to shareholders and the ASX under the continuous disclosure
regime.
Board members
Details of the members of the board, their experience, expertise,
qualifi cations, term of offi ce and independent status are set out in
the directors’ report under the heading ‘’Information on directors’’.
There are four non executive directors, two of whom are deemed
independent under the principles set out below, and one executive
director at the date of signing the directors’ report.
The board seeks to ensure that:
(cid:129) at any point in time, its membership represents an appropriate
balance between directors with experience and knowledge of
the Group and directors with an external or fresh perspective
(cid:129) the size of the board is conducive to effective discussion and
effi cient decision making.
Directors’ independence
Term of offi ce
The board has adopted specifi c principles in relation to directors’
independence. These state that to be deemed independent, a
director must be a non executive and:
The Company’s Constitution specifi es that all directors excluding
the managing director must retire from offi ce no later than the third
annual general meeting (AGM) following their last election.
(cid:129) not be a substantial shareholder of the Company or an offi cer of,
or otherwise associated directly with, a substantial shareholder
of the Company
(cid:129) within the last three years, not have been employed in
an executive capacity by the Company or any other Group
member, or been a director after ceasing to hold any such
employment
(cid:129) within the last three years not have been a principal of a material
professional adviser or a material consultant to the Company or
any other Group member, or an employee materially associated
with the service provided
(cid:129) not be a material supplier or customer of the Company or any
other Group member, or an offi cer of or otherwise associated
directly or indirectly with a material supplier or customer
(cid:129) must have no material contractual relationship with the company
or a controlled entity other than as a director of the Group
(cid:129) not have been on the board for a period which could, or
could reasonably be perceived to, materially interfere with
the director’s ability to act in the best interests of the Group
(cid:129) be free from any interest and any business or other relationship
which could, or could reasonably be perceived to, materially
interfere with the director’s ability to act in the best interests of
the Group.
At present, materiality for these purposes is determined as a
relationship or contract where the Company or Group pays in
excess of $100,000.
Recent thinking on corporate governance has introduced the view
that a director’s independence may be perceived to be impacted
by lengthy service on the board. To avoid any potential concerns,
the board has determined that a director will not be deemed
independent if he or she has served on the board of the company
for more than ten years.
Non executive directors
The four non executive directors met fi ve times during the year,
in scheduled sessions without the presence of management, to
discuss the operation of the board and a range of other matters.
Relevant matters arising from these meetings were shared with the
full board.
Chairman
The Chairman is responsible for leading the board, ensuring
directors are properly briefed in all matters relevant to their role and
responsibilities, facilitating board discussions and managing the
board’s relationship with the Group’s senior executives.
Chief Executive Offi cer (CEO)
The CEO is responsible for implementing Group strategies and
policies.
Commitment
The number of meetings of the Company’s board of directors and
of each board committee held during the year ended 30 June 2008,
and the number of meetings attended by each director is disclosed
on page 13.
The board will meet as frequently as required but must not meet less
than four times each year.
The commitments of non executive directors are considered by the
nomination committee prior to the directors’ appointment to the
board of the Company.
Independent professional advice
Directors and board committees have the right, in connection with
their duties and responsibilities, to seek independent professional
advice. With the approval of the Chairman this advice will be at the
expense of the Company.
Avoidance of confl ict of interest
In addition to the issue of independence, the directors have a
continuing responsibility to avoid confl icts of interest (both real
and apparent) between their duty to the Company and their own
interests. Directors are required to disclose any actual or potential
confl ict of interest on appointment and are required to keep this
disclosure up to date. A director that has an actual or potential
confl ict must immediately inform the board and remove themselves
from any discussions or decision making in relation to the actual or
potential confl ict.
Performance assessment
The board undertakes an annual self assessment of its collective
performance, the performance of the Chairman and its committees.
The results and any action plans are documented together with
specifi c performance goals which are agreed for the coming year.
www.qrxpharma.com 27
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Corporate reporting
The main responsibilities of the committee include:
The Managing Director and CFO have made the following
certifi cations to the board:
(cid:129) reviewing management succession planning for the Company
in general but specifi cally in regards to the CEO and other senior
(cid:129) that the Company’s fi nancial reports are complete and present
a true and fair view, in all material respects, of the fi nancial
condition and operational results of the Company and Group
and are in accordance with relevant accounting standards
management
(cid:129) reviewing the appointments and terminations to senior executive
positions reporting to the CEO
(cid:129) reviewing and making recommendations to the board regarding
(cid:129) that the above statement is founded on a sound system of
the appointment of non executive directors, including:
risk management and internal compliance and control which
implements the policies adopted by the board and that the
Company’s risk management and internal compliance and
control is operating effi ciently and effectively in all material
respects.
Board committees
The board has established a number of committees to assist in
the execution of its duties and to allow detailed consideration
of complex issues. Current committees of the board are the
nominations, remuneration and audit and risk committees. The
nominations and audit and risk committees are comprised entirely of
non executive directors.
Each committee has its own written charter setting out its role and
responsibilities, composition, structure, membership requirements
and the manner in which the committee is to operate. All of these
charters are reviewed on an annual basis and are available on
the Company website. All matters determined by committees are
submitted to the full board as recommendations for board decisions.
Minutes of committee meetings are tabled at the subsequent
board meeting. Additional requirements for specifi c reporting by
the committees to the board are addressed in the charter of the
individual committees.
Nominations committee
The nominations committee is currently comprised of Peter C
Farrell (Chairman), Michael A Quinn, and R Peter Campbell all non
executive directors.
Details of these directors’ attendance at nomination committee
meetings are set out in the directors’ report on page 13.
The nomination committee operates in accordance with its charter
which is available on the Company website. The nomination
committee assists the board to discharge its responsibilities
with regards to overseeing the composition of the board and
competencies of directors together with developing procedures to
asses the performance of directors. Further, advise the board on
appointment and evaluation of Managing Director and to develop
succession plans for the board, Managing Director and senior
management.
28 QRxPharma Annual Report 2008
(cid:129) periodically assessing the appropriate mix of skills, experience
and expertise required on the board and assessing the extent to
required which skills are represented on the board
(cid:129) establishing processes for identifi cation of suitable candidates
for appointment to the board
(cid:129) monitoring the length of service of current board members,
considering succession planning issues and identifying the
likely order of retirement by rotation of non executive directors
(cid:129) establishing processes for the review of the performance
of individual non executive directors, the board and board
committees.
Whilst the nominations committee may recommend new director
candidates, it is the full board that is responsible for the actual
appointment of new directors and any candidate appointed
must stand for election at the next annual general meeting of the
company. The committee’s nomination of existing directors for
reappointment is also not automatic and is contingent on their past
performance, contribution to the Company and the current and
future needs of the board and Company.
Remuneration committee
The remuneration committee is currently comprised of Peter C
Farrell (Chairman), Michael A Quinn, both non executive directors
and John W Holaday, the Managing Director.
Details of these directors’ attendance at remuneration committee
meetings are set out in the directors’ report on page 13.
The remuneration committee operates in accordance with
its charter which is available on the Company website. The
remuneration committee assists the board to discharge
its responsibilities to attract and retain senior executives
and directors who will create value for shareholders. The
remuneration committee advises the board on remuneration and
incentive policies and practices generally, and makes specifi c
recommendations on remuneration packages and other terms of
employment for senior executives and directors.
The main responsibilities of the committee include:
(cid:129) assisting the board in setting the executive remuneration policy
inclusive of the operation of the Company’s employee share
option plan
(cid:129) overseeing the adequacy of the Company’s fi nancial controls
and systems
(cid:129) overseeing the process of identifi cation and management of
business, fi nancial and commercial risks.
(cid:129) making recommendations to the board for reviewing and
approving the remuneration of executive directors
In fulfi lling its responsibilities, the audit committee:
(cid:129) reviewing and approving the remuneration of senior executives
as defi ned by the board from time to time.
Each member of the senior executive team signs a formal
employment contract at the time of their appointment covering a
range of matters including their duties, rights, responsibilities and
any entitlements on termination.
Further information on directors’ and executives’ remuneration is
set out in the directors’ report under the heading ‘’Remuneration
report’’.
Audit and risk committee
The audit and risk committee is currently comprised of R Peter
Campbell (Chairman) and Michael A Quinn, both non executive
directors.
Details of these directors’ qualifi cations and attendance at audit
committee meetings are set out in the directors’ report on pages
10 - 13.
The audit committee has appropriate fi nancial expertise and
all members are fi nancially literate and have an appropriate
understanding of the industry in which the Group operates.
The audit committee operates in accordance with a charter which
is available on the company website. The audit and risk committee
assist the board to discharge its responsibilities relating to the
effectiveness of the control environment and risk management
framework in the areas of operational and balance sheet risk,
legal/regulatory compliance and fi nancial reporting, together with
the effectiveness and independence of the external audit process.
The main responsibilities of the committee include:
(cid:129) overseeing the Company’s relationship with the external
auditor (including forming a policy on the provision of non
audit services and the rotation of external audit personnel on
a regular basis) and the external audit function in general. This
includes recommending to the board the appointment, removal
and remuneration of the external auditors, and reviewing the
terms of their engagement, the scope and quality of the audit and
assess performance
(cid:129) receives regular reports from management and external auditors
(cid:129) meets with the external auditors at least twice a year, or more
frequently if necessary
(cid:129) reviews any signifi cant disagreements between the auditors and
management, irrespective of whether they have been resolved
(cid:129) provides the external auditors with a clear line of direct
communication at any time to the audit committee.
The audit committee has authority, within the scope of its
responsibilities, to seek any information it requires from any
employee or external party.
External auditors
The Company and audit committee policy is to appoint external
auditors who clearly demonstrate quality and independence.
PricewaterhouseCoopers is the incumbent external auditor. It
is PricewaterhouseCoopers policy to rotate audit engagement
partners on listed companies at least every fi ve years.
An analysis of fees paid to the external auditors, including a break
down of fees for non audit services, is provided in the directors’
report and in note 21 to the fi nancial statements. It is the policy
of the external auditors to provide an annual declaration of their
independence to the audit committee.
Risk assessment and management
The board, through the audit committee, is responsible for
ensuring there is an adequate framework in relation to risk
management, compliance and internal control systems. In
summary, the framework is designed to ensure strategic,
operational, legal, reputation and fi nancial risks are identifi ed,
assessed, effectively and effi ciently managed and monitored to
enable achievement of the Group’s business objectives.
Code of Conduct
Over the past year the board has conducted the affairs of the
Company in accordance with principles of good corporate
governance and has required that at all times all Group personnel
act with the utmost integrity, objectivity and in compliance with the
letter and the spirit of the law and Group policies.
(cid:129) overseeing the adequacy of the control processes in place in
relation to the preparation of fi nancial statements and reports
The Company is developing a Code of Conduct to guide the
board, individual directors and senior management as to the
www.qrxpharma.com 29
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
practices necessary to maintain confi dence in the Group’s integrity
with key stakeholders and the wider community together with the
responsibility and accountability of individuals for reporting and
investigating reports of unethical practices.
The Company maintains a Securities Trading Policy which is
available on the company website. All directors, offi cers and
employees are prohibited from dealing in any QRxPharma Limited
securities, except while not in possession of unpublished price
sensitive information. It is also contrary to the Company’s policy
for directors, offi cers and employees to be engaged in short
term trading of the Company’s securities. Directors, offi cers and
employees may only deal in the Company’s securities during a
specified period of 45 days after the release of the Company’s
results or after the AGM. Directors must obtain the approval of the
Chairman and employees the approval of the Company Secretary
prior to dealing in the Company’s securities outside those periods.
Continuous disclosure and shareholder communication
In fulfi lling its responsibilities on continuous disclosure of any
information concerning the Group that a reasonable person would
expect to have a material effect on the price of the company’s
securities the Company is committed to:
(cid:129) ensuring that shareholders and the fi nancial markets are
provided with timely disclosure about its activities
(cid:129) fully complying with continuous disclosure obligations contained
in applicable ASX listing rules and the Corporations Act
(cid:129) ensuring that all investors have equal and timely access to
material information concerning the Group.
The Company has detailed this commitment in a Shareholder
Communication Policy which is available on the Company website.
The Company Secretary has been nominated as the person
responsible for communications with the ASX. This role includes
responsibility for ensuring compliance with the continuous
disclosure requirements in the ASX Listing Rules and overseeing
and co ordinating information disclosure to the ASX, analysts,
brokers, shareholders, the media and the public.
The Company website provides general information and reports
on the Group, inclusive of ASX announcements, investor
presentations, and a link to ASX website which displays the share
price, share price movements and other market information.
30 QRxPharma Annual Report 2008
FINANCIAL REPORT
This fi nancial report covers both QRxPharma Limited as an
individual entity and the consolidated entity consisting of
QRxPharma Limited and its subsidiaries. The fi nancial report is
presented in the Australian currency.
QRxPharma Limited is a company limited by shares, incorporated
and domiciled in Australia. Its registered offi ce and principal place
of business is:
QRxPharma Limited
Level 1
194 Miller St
North Sydney NSW 2060.
A description of the nature of the consolidated entity’s operations
and its principal activities is included in the CEOs review on pages
4-7 and in the directors’ report on pages 8-24, both of which are
not part of this fi nancial report.
The fi nancial report was authorised for issue by the directors on
20 August 2008. The company has the power to amend and
reissue the fi nancial report.
Through the use of the internet, we have ensured that our
corporate reporting is timely, complete, and available globally at
minimum cost to the company. All press releases, fi nancial reports
and other information are available on our website:
www.qrxpharma.com
Income statements
Balance sheets
Statements of changes in equity
Cash fl ow statements
Notes to the fi nancial statements
Directors’ declaration
Independent auditor’s report to the members
Shareholder information
32
33
34
35
36
73
74
77
www.qrxpharma.com 31
QRxPHARMA LIMITED ABN 16 102 254 151
INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Revenue from continuing operations
Other income
Research and development
Employee benefi ts expense
Depreciation and amortisation
Finance costs
Other expenses
Net foreign exchange loss
Impairment of fi nancial asset
Impairment of intangible asset
Loss before income tax
Income tax benefi t
Loss from continuing operations
Loss for the year
Notes
5
6
7
7
14
16
8
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
2,009
-
(12,708)
(5,298)
(822)
-
(2,662)
(2,618)
-
(14,628)
(36,727)
125
(36,602)
(36,602)
304
4,951
(2,376)
(690)
(83)
(1,497)
(1,090)
(272)
-
(753)
348
(405)
(405)
2,009
515
(13,970)
(2,838)
(16)
-
(3,048)
(2,648)
(17,117)
-
(37,113)
125
(36,988)
(36,988)
304
4,951
(2,376)
(690)
(11)
(1,497)
(1,090)
(272)
-
-
(681)
348
(333)
(333)
Earnings per share for loss attributable
Cents
Cents
Basic loss per share
Diluted loss per share
27
27
(48.8)
(48.8)
(2.8)
(2.8)
The above income statements should be read in conjunction with the accompanying notes.
32 QRxPharma Annual Report 2008
QRxPHARMA LIMITED ABN 16 102 254 151
BALANCE SHEETS
AS AT 30 JUNE 2008
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other fi nancial assets at fair value through
profi t or loss
Held-to-maturity investments
Other current assets
Total current assets
Non-current assets
Other fi nancial assets at fair value through
profi t or loss
Other fi nancial assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Other fi nancial liabilities at fair value through
profi t or loss
Total current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Notes
9
10
11
12
13
11
14
15
16
17
11
29,672
158
-
35,690
136
374
29,583
135
-
-
458
10,491
118
-
119
30,288
46,809
29,837
35,690
136
374
10,491
-
46,691
-
548
-
548
-
73
-
-
25
15,430
73
16,003
2,605
37
-
2,642
30,361
62,812
32,479
15,620
25
-
16,193
62,884
2,024
-
678
154
2,024
2,024
832
832
4,169
-
4,169
4,169
706
154
860
860
28,337
61,980
28,310
62,024
18
19(a)
19(b)
79,694
3,584
(54,941)
28,337
79,932
387
(18,339)
61,980
79,694
3,899
(55,283)
28,310
79,932
387
(18,295)
62,024
The above balance sheets should be read in conjunction with the accompanying notes.
www.qrxpharma.com 33
QRxPHARMA LIMITED ABN 16 102 254 151
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Notes
Total equity / (defi ciency in capital) at the
beginning of the fi nancial year
61,980
(17,103)
62,024
(17,131)
Loss for the year
(36,602)
(405)
(36,988)
(333)
Transactions with equity holders in their
capacity as equity holders:
Contributions of equity, net of transaction costs
Employee shares and share options
Foreign currency translation
18
19
19
(238)
3,512
(315)
79,263
225
-
(238)
3,512
-
2,959
79,488
3,274
Total equity at the end of the fi nancial year
28,337
61,980
28,310
The above statements of changes in equity should be read in conjunction with the accompanying notes.
79,263
225
-
79,488
62,024
34 QRxPharma Annual Report 2008
QRxPHARMA LIMITED ABN 16 102 254 151
CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
Notes
Cash fl ows from operating activities
Payments to suppliers and employees (inclusive of goods
and services tax)
Interest received
Income tax R&D receipt
Payment for fi nancial instrument
Net cash outfl ow from operating activities
Cash fl ows from investing activities
Payments in relation to purchase of subsidiary
Payments for property, plant and equipment
Payments for intellectual property
Payments for shares issued in subsidiary
Proceeds (payments) for held-to-maturity investments
8
26
14
(15,822)
(2,004)
(12,669)
(1,878)
1,550
248
125
348
1,550
125
248
348
-
(1,127)
-
(1,127)
(14,147)
(2,535)
(10,994)
(2,409)
-
(68)
-
-
10,846
(220)
(18)
(274)
-
(10,491)
-
(28)
-
(3,252)
10,846
(220)
(18)
-
(400)
(10,491)
Net cash infl ow / (outfl ow) from investing activities
10,778
(11,003)
7,566
(11,129)
Cash fl ows from fi nancing activities
Proceeds from issues of shares
Payments made in relation to IPO
Proceeds from borrowings
Net cash infl ow / (outfl ow) from fi nancing activities
-
(31)
-
(31)
51,726
(3,699)
1,225
49,252
-
(31)
-
(31)
51,726
(3,699)
1,224
49,251
Net (decrease) / increase in cash and cash equivalents
(3,400)
35,713
(3,459)
35,713
Cash and cash equivalents at the beginning
of the fi nancial year
Effects of exchange rate changes on cash
and cash equivalents
Cash and cash equivalents at end of year
9
35,690
(2,618)
29,672
249
(272)
35,690
(2,648)
35,690
29,583
249
(272)
35,690
The above cash fl ow statements should be read in conjunction with the accompanying notes.
www.qrxpharma.com 35
NOTES TO THE FINANCIAL STATEMENTS
1 Summary of signifi cant accounting policies
2 Financial risk management
3 Critical accounting estimates and judgements
4 Segment information
5 Revenue
6 Other income
7 Expenses
8
Income tax benefi t
9 Current assets – Cash and cash equivalents
10 Current assets – Trade and other receivables
11 Other fi nancial assets and liabilities at
fair value through profi t or loss
12 Current assets – Held-to-maturity investments
13 Current assets – Other current assets
14 Non current assets – Other fi nancial assets
37
44
48
49
49
49
50
51
52
52
53
54
54
54
15 Non current assets – Property, plant and equipment 55
16 Non current assets – Intangible assets
17 Current liabilities – Trade and other payables
18 Contributed equity
19 Reserves and accumulated losses
20 Key management personnel disclosures
21 Remuneration of auditors
22 Contingencies
23 Commitments
24 Related party transactions
25 Subsidiaries
26 Reconciliation of profi t after income tax
to net cash infl ow from operating activities
27 Loss per share
28 Share-based payments
29 Events occurring after the balance sheet date
56
57
58
60
61
65
65
65
66
67
67
68
69
72
36 QRxPharma Annual Report 2008
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2008
1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of
the fi nancial report are set out below. These policies have been
consistently applied to all the years presented, unless otherwise
stated. The fi nancial report includes separate fi nancial statements
for QRxPharma Limited as an individual entity and the consolidated
entity consisting of QRxPharma Limited and its subsidiaries.
(A) BASIS OF PREPARATION
This general purpose fi nancial report has been prepared in
accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting
Standards Board, Urgent Issues Group Interpretations and the
Corporations Act 2001.
Compliance with IFRS
Australian Accounting Standards include Australian equivalents to
International Financial Reporting Standards (AIFRS). Compliance
with AIFRS ensures the fi nancial report of QRxPharma Limited
complies with International Financial Reporting Standards (IFRS).
Historical cost convention
These fi nancial statements have been prepared under the historical
cost convention, as modifi ed by the revaluation of fi nancial assets
and liabilities (including derivative instruments) at fair value through
profi t or loss.
Critical accounting estimates
The preparation of fi nancial statements in conformity with
AIFRS requires the use of certain critical accounting estimates.
It also requires management to exercise its judgment in the
process of applying the Group’s accounting policies. The areas
involving a higher degree of judgment or complexity, or areas
where assumptions and estimates are signifi cant to the fi nancial
statements, are disclosed in note 3.
(B) GOING CONCERN
The Group has experienced signifi cant recurring operating
losses and negative cash fl ows from operating activities since
its inception. During the year ended 30 June 2007, the Group
completed an Initial Public Offering (IPO) raising $50 million (before
transaction costs of $3.7 million) in conjunction with the admission
of the Company on the Australian Securities Exchange (ASX). At
30 June 2008, the Group holds cash and cash equivalents of
$29.7 million.
The directors have considered the signifi cance and possible
effects of these circumstances in order to determine the suitability
of adopting the going concern basis for the preparation of this
fi nancial report.
Having carefully assessed the fi nancial and operating implications
of the above matters, the directors consider that the Group will
be able to pay its debts as and when they fall due for at least 12
months following the date of these fi nancial statements and that it
is appropriate for the accounts to be prepared on a going concern
basis.
(C) PRINCIPLES OF CONSOLIDATION
The consolidated fi nancial statements incorporate the assets and
liabilities of all subsidiaries of QRxPharma Limited (‘’company’’
or ‘’parent entity’’) as at 30 June 2008 and the results of all
subsidiaries for the year then ended. QRxPharma Limited and its
subsidiaries together are referred to in this fi nancial report as the
Group or the consolidated entity.
Subsidiaries are all those entities (including special purpose entities)
over which the Group has the power to govern the fi nancial and
operating policies, generally accompanying a shareholding of
more than one half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible
are considered when assessing whether the Group controls
another 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 Group companies 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.
(D) SEGMENT REPORTING
A business segment is identifi ed for a group of assets and
operations engaged in providing products or services that are
subject to risks and returns that are different to those of other
business segments. A geographical segment is identifi ed when
products or services are provided within a particular economic
environment subject to risks and returns that are different from
those of segments operating in other economic environments.
(E) FOREIGN CURRENCY TRANSLATION
(i) Functional and presentation currency
Items included in the fi nancial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The consolidated fi nancial statements are presented in Australian
dollars, which is QRxPharma Limited’s functional and presentation
currency.
www.qrxpharma.com 37
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
national income tax rate for each jurisdiction adjusted by changes
in deferred tax assets and liabilities attributable to temporary
differences and to unused tax losses.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency 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 year
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the income statement,
except when they are deferred in equity as qualifying cash fl ow
hedges and qualifying net investment hedges or are attributable to
part of the net investment in a foreign operation.
(iii) Group companies
The results and fi nancial position of all the Group entities (none of
which has the currency of a hyperinfl ationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
(cid:129) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet
(cid:129) income and expenses for each income statement are translated
at average exchange rates (unless this is not a reasonable
approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case income and expenses are
translated at the dates of the transactions), and
(cid:129) all resulting exchange differences are recognised as a separate
component of equity.
On consolidation, exchange differences arising from the translation
of any net investment in foreign entities, and of borrowings
and other fi nancial instruments designated as hedges of such
investments, are taken to shareholders’ equity. When a foreign
operation is sold or any borrowings forming part of the net
investment are repaid, a proportionate share of such exchange
differences are recognised in the income statement as part of the
gain or loss on sale where applicable.
Goodwill and fair value adjustments arising on the acquisition of
a foreign entity are treated as assets and liabilities of the foreign
entities and translated at the closing rate.
(F) REVENUE RECOGNITION
Interest income
Interest income is recognised on a time proportion basis using the
effective interest method.
(G) INCOME TAX
The income tax expense or revenue for the period is the tax
payable on the current period’s taxable income based on the
38 QRxPharma Annual Report 2008
Deferred income tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated fi nancial
statements. However, the deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a
transaction other than a business combination that at the time of
the transaction affects neither accounting nor taxable profi t or loss.
Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantially enacted by the balance sheet
date and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
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.
Deferred tax liabilities and assets are not recognised for temporary
differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to
control the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the foreseeable
future.
Tax consolidation legislation
QRxPharma Limited and its wholly owned Australian controlled
entities have implemented the tax consolidation legislation.
The head entity, QRxPharma Limited, and the controlled entities
in the tax consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a stand alone
taxpayer in its own right.
(H) BUSINESS COMBINATIONS
The purchase method of accounting is used to account for all
business combinations, including business combinations involving
entities or businesses under common control, regardless of
whether equity instruments or other assets are acquired. Cost is
measured as the fair value of the assets given, shares issued or
liabilities incurred or assumed at the date of exchange plus costs
directly attributable to the acquisition. Where equity instruments
are issued in an acquisition, the fair value of the instruments is their
published market price as at the date of exchange unless, in rare
circumstances, it can be demonstrated that the published price
at the date of exchange is an unreliable indicator of fair value and
that other evidence and valuation methods provide a more reliable
measure of fair value. Transaction costs arising on the issue of
equity instruments are recognised directly in equity.
(I) IMPAIRMENT OF ASSETS
(ii) Loans and receivables
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. The recoverable amount is the higher of an asset’s fair
value less costs to sell and value in use. For the purposes of
assessing impairment, assets are grouped at the lowest levels
for which there are separately identifi able cash infl ows which
are largely independent of the cash infl ows from other assets or
groups of assets (cash generating units). Non fi nancial assets
other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at each reporting date.
(J) GRANT INCOME
Government grants are recognised as income over the periods
necessary to match them with the related costs which they are
intended to compensate, on a systematic basis.
(K) CASH AND CASH EQUIVALENTS
For cash fl ow statement presentation purposes, cash and cash
equivalents includes cash on hand, deposits held at call with
fi nancial 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
insignifi cant risk of changes in value, and bank overdrafts. Bank
overdrafts are shown within borrowings in current liabilities on the
balance sheet.
Loans and receivables are non derivative fi nancial assets with
fi xed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those with
maturities greater than 12 months after the balance sheet date
which are classifi ed as non current assets. Loans and receivables
are included in trade and other receivables in the balance sheet
(note 10).
(iii) Held-to-maturity investments
Held-to-maturity investments are non derivative fi nancial assets
with fi xed or determinable payments and fi xed maturities that the
Group’s management has the positive intention and ability to hold
to maturity. If the Group were to sell other than an insignifi cant
amount of held-to-maturity fi nancial assets, the whole category
would be tainted and reclassifi ed as available for sale. Held-to-
maturity fi nancial assets are included in non current assets, except
for those with maturities less than 12 months from the reporting
date, which are classifi ed as current assets.
Recognition and derecognition
Financial assets carried at fair value through profi t or loss are initially
recognised at fair value and transaction costs are expensed in the
income statement. Financial assets are derecognised when the
rights to receive cash fl ows from the fi nancial assets have expired or
have been transferred and the Group has transferred substantially
all the risks and rewards of ownership.
Subsequent measurement
(L) INVESTMENTS AND OTHER FINANCIAL
ASSETS
Loans and receivables and held-to-maturity investments are carried
at amortised cost using the effective interest method.
Classifi cation
Fair value
The Group classifi es its investments in the following categories:
fi nancial assets at fair value through profi t or loss, loans and
receivables and held-to-maturity investments. The classifi cation
depends on the purpose for which the investments were acquired.
Management determines the classifi cation of its investments at
initial recognition and, in the case of assets classifi ed as held-to-
maturity, re evaluates this designation at each reporting date.
(i) Financial assets at fair value through profi t or loss
Financial assets at fair value through profi t or loss are fi nancial
assets held for trading. A fi nancial asset is classifi ed in this
category if acquired principally for the purpose of selling in the
short term. Derivatives are classifi ed as held for trading unless
they are designated as hedges.
The fair values of option agreements are based on current market
prices.
(M) PROPERTY, PLANT AND EQUIPMENT
Depreciation on plant and equipment is calculated using the
straight line method to allocate their cost, net of their residual
values, over their estimated useful lives, as follows:
– Plant and equipment
4 years
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount (note 1(i)).
www.qrxpharma.com 39
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(N) INTANGIBLE ASSETS
(i) Intellectual property
Costs incurred in acquiring intellectual property are capitalized and
amortised on a straight line basis of the period of the expected
benefi t.
Costs include only those costs directly attributable to the
acquisition of the intellectual property.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount (note 1(i)).
(ii) Research and development
Research expenditure on internal development projects is
recognised as an expense as incurred. Costs incurred on
development projects (relating to the design and testing of new or
improved products) are recognised as intangible assets when it is
probable that the project will, after considering its commercial and
technical feasibility, be completed and generate future economic
benefi ts and its costs can be measured reliably. The expenditure
capitalised comprises all directly attributable costs, including
costs of materials, services, direct labour and an appropriate
proportion of overheads. Other development expenditures that do
not meet these criteria are recognised as an expense as incurred.
Development costs previously recognised as an expense are
not recognised as an asset in a subsequent period. Capitalised
development costs are recorded as intangible assets and
amortised from the point at which the asset is ready for use on a
straight line basis over its useful life, which varies from 3 to 5 years.
(O) TRADE AND OTHER PAYABLES
These amounts represent liabilities for goods and services
provided to the Group prior to the end of fi nancial year which are
unpaid. The amounts are unsecured and are usually paid within
30 days of recognition.
(P) BORROWINGS
Non redeemable preference shares are classifi ed as liabilities.
The accrued liabilities on preference shares are recognised in the
income statement as interest expense.
Borrowings are classifi ed as current liabilities unless the Group has
an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
(Q) BORROWING COSTS
Borrowing costs are recognised as expenses in the period in which
they are incurred. Borrowing costs include interest paid or payable
on convertible notes.
(R) EMPLOYEE BENEFITS
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non monetary benefi ts
and annual leave expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of
employees’ services up to the reporting date and are measured at
the amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
The liability for long service leave is recognised in the provision for
employee benefi ts and measured as the present value of expected
future payments to be made in respect of services provided by
employees up to the reporting date. Consideration is given to
expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on national
government bonds with terms to maturity and currency that match,
as closely as possible, the estimated future cash outfl ows.
(iii) Retirement benefi t obligations
The Group does not maintain a Group superannuation plan. The
Group makes fi xed percentage contributions for all Australian
resident employees to complying third party superannuation
funds and for US resident employees to complying pension funds.
The Group’s legal or constructive obligation is limited to these
contributions.
Contributions to complying third party superannuation funds and
pension plans are recognised as an expense as they become
payable. Prepaid contributions are recognised as an asset to the
extent that a cash refund or a reduction in the future payments is
available.
(iv) Share-based payments
Share-based compensation benefi ts are provided to employees via
the QRxPharma Limited Employee Share Option Plan. Information
relating to this scheme is set out in note 28.
The fair value of options granted under the QRxPharma Limited
Employee Share Option Plan is recognised as an employee benefi t
expense with a corresponding increase in equity. The fair value
is measured at grant date and recognised over the period during
which the employees become unconditionally entitled to the options.
Convertible notes and accrued interest are recognised as a liability.
The liability is included in borrowings until the conversion or
maturity of the notes.
The fair value at grant date is independently determined using
a Black Scholes option pricing model that takes into account
40 QRxPharma Annual Report 2008
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.
The fair value of the options granted is adjusted to refl ect
market vesting conditions, but excludes the impact of any non
market vesting conditions (for example, profi tability and sales
growth targets). Non market vesting conditions are included
in assumptions about the number of options that are expected
to become exercisable. At each balance sheet date, the entity
revises its estimate of the number of options that are expected to
become exercisable. The employee benefi t expense recognised
each period takes into account the most recent estimate. The
impact of the revision to original estimates, if any, is recognised in
the income statement with a corresponding adjustment to equity.
Upon the exercise of options, the balance of the share-based
payments reserve relating to those options is transferred to share
capital and the proceeds received, net of any directly attributable
transaction costs, are credited to share capital.
(v) Bonus plans
The Group recognises a liability and an expense for bonuses in
accordance with the terms of employment contracts. The Group
recognises a provision where contractually obliged or where there
is a past practice that has created a constructive obligation.
(vi) Employee benefi t on-costs
Employee benefi t on-costs, including payroll tax, are recognised
and included in the employee benefi t liabilities and costs when the
employee benefi ts to which they relate are recognised.
(S) CONTRIBUTED EQUITY
Ordinary shares are classifi ed 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. Incremental costs directly attributable to the issue
of new shares or options for the acquisition of a business are not
included in the cost of the acquisition as part of the purchase
consideration.
(T) EARNINGS PER SHARE
(i) Basic earnings per share
(ii) Diluted earnings per share
Diluted earnings per share adjusts the fi gures used in the
determination of basic earnings per share to take into account
the after income tax effect of interest and other fi nancing 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.
(U) DERIVATIVES
Derivatives that do not qualify for hedge accounting
Derivatives are initially recognised at fair value on the date a
derivative contract is entered into and are subsequently remeasured
to their fair value at each reporting date. Changes in the fair value of
any derivative instrument that does not qualify for hedge accounting
are recognised immediately in the income statement and are
included in other income or other expenses.
(V) FAIR VALUE ESTIMATION
The fair value of fi nancial assets and fi nancial liabilities must be
estimated for recognition and measurement or for disclosure
purposes.
The fair value of fi nancial instruments traded in active markets is
based on quoted market prices at the balance sheet date. The
quoted market price used for fi nancial assets held by the Group is
the current bid price.
(W) GOODS AND SERVICES TAX (GST)
Revenues, expenses and assets are recognised net of the amount
of associated GST, unless the GST incurred is not recoverable from
the taxation authority. In this case it is recognised as part of the
cost of 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 taxation authority is included with other
receivables or payables in the balance sheet.
Cash fl ows are presented on a gross basis. The GST components
of cash fl ows arising from investing or fi nancing activities which are
recoverable from, or payable to the taxation authority, are presented
as operating cash fl ow.
(X) ROUNDING OF AMOUNTS
Basic earnings per share is calculated by dividing the profi t
attributable to equity holders of the company, excluding any costs
of servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the fi nancial
year, adjusted for bonus elements in ordinary shares issued during
the year.
The company is a kind referred to in Class order 98/100, issued by
the Australian Securities and Investments Commission, relating to
the “rounding off” of amounts in the fi nancial report. Amounts in
the fi nancial report have been rounded off in accordance with that
Class Order to the nearest thousand dollars, or in certain cases, the
nearest dollar.
www.qrxpharma.com 41
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
(Y) NEW ACCOUNTING STANDARDS AND
INTERPRETATIONS
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2008 reporting
periods. The Group’s assessment of the impact of these new
standards and interpretations is set out below.
AASB 8 Operating Segments and AASB 2007-3
Amendments to Australian Accounting Standards
arising from AASB 8
AASB 8 and AASB 2007-3 are effective for annual reporting
periods commencing on or after 1 January 2009. AASB 8 will
result in a signifi cant change in the approach to segment reporting,
as it requires adoption of a “management approach” to reporting
on the fi nancial performance. The information being reported
will be based on what the key decision-makers use internally for
evaluating segment performance and deciding how to allocate
resources to operating segments. The Group will adopt AASB 8
for the reporting period commencing on 1 July 2009. Application
of AASB 8 may result in different segments, segment results and
different type of information being reported in the segment note of
the fi nancial report. However, it will not affect any of the amounts
recognised in the fi nancial statements.
AASB-I 13 Customer Loyalty Programmes
AASB-I 13 is applicable to annual reporting periods commencing
on or after 1 July 2008. It provides guidance on the accounting for
customer loyalty programmes and requires that the fair value of the
consideration received/receivable in respect of a sale transaction
is allocated between the award credits and the other components
of the sale. The Group does not operate any customer loyalty
programmes. AASB-I 13 will therefore have no impact on the
Group’s fi nancial statements.
Revised AASB 101 Presentation of Financial
Statements and AASB 2007-8 Amendments to
Australian Accounting Standards arising from AASB 101
The revised AASB 101 that was issued in September 2007 is
applicable for annual reporting periods beginning on or after
1 January 2009. It requires the presentation of a statement of
comprehensive income and makes changes to the statement of
changes in equity but will not affect any of the amounts recognised
in the fi nancial statements.
AASB 2008-1 Amendments to Australian Accounting
Standard – Share-based Payments: Vesting Conditions
and Cancellations
AASB 2008-1 was issued in February 2008 and will become
applicable for annual reporting periods beginning on or after
1 January 2009. The revised standard clarifi es that vesting
conditions are service conditions and performance conditions only
and that other features of a share-based payment are not vesting
conditions. It also specifi es that all cancellations, whether by the
entity or by other parties, should receive the same accounting
treatment. The Group will apply the revised standard from 1 July
2009, but it is not expected to affect the accounting for the Group’s
share-based payments.
AASB 2008-2 Amendments to Australian Accounting
Standards – Puttable Financial Instruments and
Obligations Arising on Liquidation [AASB 7, AASB 101,
AASB 132, AASB 139 and Interpretation 2]
The amendments made by AASB 2008-2 in March 2008 relate
to puttable fi nancial instruments and instruments that require the
entity to pay the holder a pro-rata share of the entity’s net assets
on liquidation. The revised standards have to be applied from 1
January 2009. Under the revised rules, the relevant instruments
will be classifi ed as equity if certain conditions are satisfi ed. As the
Group has not issued any such instruments, the amendments will
not have any effect on the Group’s or the parent entity’s fi nancial
statements.
Revised AASB 3 Business Combinations, AASB 127
Consolidated and Separate Financial Statements and
AASB 2008-3 Amendments to Australian Accounting
Standards arising from AASB 3 and AASB 127
Revised accounting standards for business combinations and
consolidated fi nancial statements were issued in March 2008 and
are operative for annual reporting periods beginning on or after
1 July 2009, but may applied earlier. The Group will apply the
revised standards for the reporting period commencing 1 July
2009. However, the new rules generally apply only prospectively to
transactions that occur after the application date of the standard.
Their impact will therefore depend on whether the Group will enter
into any business combinations or other transactions that affect the
level of ownership held in the controlled entities in the year of initial
application. For example, under the new rules:
(cid:129) all payments (including contingent consideration) to
purchase a business are to be recorded at fair value at
the acquisition date, with contingent payments subsequently
remeasured at fair value through income
(cid:129) all transaction cost will be expensed
42 QRxPharma Annual Report 2008
(cid:129) the Group will need to decide whether to continue calculating
goodwill based only on the parent’s share of net assets or
whether to recognise goodwill also in relation to the non-
controlling (minority) interest and
(cid:129) when control is lost, any continuing ownership interest in the
entity will be remeasured to fair value and a gain or loss
recognised in profi t or loss.
Amendments to IFRS 1 and IAS 27 Cost of an
Investment in a Subsidiary, Jointly Controlled Entity or
Associate
In May 2008, the IASB made amendments to IFRS 1 First-time
Adoption of International Financial Reporting Standards and IAS
27 Consolidated and Separate Financial Statements. The new
rules will apply to fi nancial reporting periods commending on
or after 1 January 2009. Amendments to the corresponding
Australian Accounting Standards are expected to be issued
shortly. The Group will apply the revised rules prospectively from
1 July 2009.
Improvements to the IFRSs
In May 2009, the IASB issued a number of improvements to
existing International Financial Reporting Standards. The
amendments will generally apply to fi nancial reporting periods
commending on or after 1 January 2009, except for some
changes to IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations regarding the sale of the controlling
interest in a subsidiary which will apply form 1 July 2009. We
expect the AASB to make the same changes to Australian
Accounting Standards shortly. The Group will apply the revised
standards from 1 July 2009. The Group does not expect that
any adjustments will be necessary as the result of applying the
revised rules.
www.qrxpharma.com 43
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
2 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk and interest rate risk), credit risk and
liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of fi nancial markets and seeks to minimise
potential adverse effects on the fi nancial performance of the Group. The Group uses derivative fi nancial instruments such as foreign
exchange contracts to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, not as trading or other
speculative instruments. Cash and cash equivalents are invested exclusively with A rated fi nancial institutions, at a minimum, with capital
preservation being the stated investment objective. Risk management is carried out under policies approved by the Board of Directors.
The Group and the parent entity hold the following fi nancial instruments:
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
29,672
158
-
-
458
35,690
136
922
10,491
118
29,583
135
-
-
119
35,690
136
922
10,491
-
30,288
47,357
29,837
47,239
2,024
-
2,024
678
154
832
4,169
-
706
154
4,169
860
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial assets at fair value through profi t or loss
Held-to-maturity investments
Other fi nancial assets
Financial liabilities
Trade and other payables
Other fi nancial liabilities
(A) MARKET RISK
(i) Foreign exchange risk
The Group is exposed to foreign exchange risk arising from currency exposure to the US dollar. Foreign exchange risk arises from future
commercial transactions and recognised assets and liabilities denominated in a currency that is not the entity’s functional currency.
Derivative fi nancial instruments of a net carrying value of $768,214 at 30 June, 2007 have been recognised at a fair value of $nil at 30
June 2008.
During the fi nancial year ended 30 June 2007, the Group had entered into a series of foreign exchange put option contracts at an
exchange rate between Australian dollars and US dollars of AUD$1.00 to US$0.8181 to protect against adverse foreign exchange
movements between AUD and USD. The option contracts were to cover anticipated expenditure of at least $29 million over 2 years to
fulfi l research and development expenditure associated with clinical trials to be conducted in the United States of America (US). The
Prospectus issued by the Company on 27 April, 2007 assumed an exchange rate between Australian dollars and US dollars of AUD$1.00
to US$0.78. During the year the Group converted AUD$20 million to USD at an average rate of US$0.9027, taking advantage of the
more favourable rates above the option contracts.
In addition, at 30 June 2007 the Group held a series of smart forward exchange contracts which had a fair value as a liability at that date
of $154,024.
44 QRxPharma Annual Report 2008
These put options contracts cover existing purchase contracts and highly probable forecasted purchases over the ensuing two fi nancial
years and mature as follows:
Buy US dollars
Sell Australian dollars
Average exchange rate
Maturity
6 – 12 months
1 - 2 years
2008
$’000
2007
$’000
2008
2007
15,300
13,200
-
15,300
0.8180
0.8180
0.8180
0.8180
15,300
28,500
Amounts disclosed above represent currency sold measured at the contracted rate.
The Group’s exposure to foreign currency risk at the reporting date was as follows:
Cash at bank
Term deposits
Trade payables
30 June 2008
30 June 2007
USD
$’000
USD
$’000
333
21,022
116
364
6,669
-
The carrying amounts of the parent entity’s fi nancial assets and liabilities are denominated in Australian dollars except as set out below:
30 June 2008
30 June 2007
USD
$’000
USD
$’000
333
21,022
3,891
364
6,669
-
Cash at bank
Term deposits
Trade payables
Group sensitivity
Based on the fi nancial instruments held at 30 June 2008, had the Australian dollar weakened / strengthened by 10% against the US
dollar with all other variables held constant, the Group’s post-tax loss for the year would have been $2.5 million lower / $2.0 million higher
(2007 – $921,000 higher / $753,000 lower), mainly as a result of foreign exchange gains/losses on translation of US dollar denominated
fi nancial instruments as detailed in the above table. Profi t is more sensitive to movements in the Australian dollar/US dollar exchange
rates in 2008 than 2007 because of the increased amount of US dollar denominated cash and cash equivalents. The Group’s exposure
to other foreign exchange movements is not material.
Parent entity sensitivity
The parent entity’s post-tax loss for the year would have been $5.7 million lower / $1.7 million higher (2007 - $798,000 lower / $653,000
higher) had the Australian dollar weakened/strengthened by 10% against the US dollar, mainly as a result of foreign exchange gains/
losses on the translation of US dollar denominated derivatives held for trading.
www.qrxpharma.com 45
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
2 FINANCIAL RISK MANAGEMENT (CONTINUED)
(ii) Price risk
The Group and the parent entity are not exposed to equity securities price risk or commodity price risk.
(iii) Cash fl ow and fair value interest rate risk
The Group’s main interest rate risk arises from the holding of cash and cash equivalents. During the year, the Group held signifi cant bank
accepted commercial bills and term deposit interest-bearing assets exposing the Group’s income and operating cash fl ows to changes
in market interest rates
The value of borrowings at 30 June 2008 was $nil (2007 - $nil), thus limiting the Group’s exposure to any cash fl ow risk in relation to
liabilities. During the fi nancial year ended 30 June 2007 prior to completion by the Company of its initial public offering, the Group
converted all outstanding convertible notes, preference shares and warrants to ordinary shares. The preference shares and convertible
notes were subject to fi xed interest rate risk of 10% per annum.
Group sensitivity
As at 30 June 2008, if interest rates had changed by -/+ 125 basis points from the year-end rates with all other variables held constant,
the post-tax loss for the year would have been $70,100 higher / lower (2007 – change of 125 bps: $22,400 higher / lower), mainly as a
result of lower/higher interest income from cash and cash equivalents.
Parent entity sensitivity
The parent entity’s main interest rate risk arises from the holding of cash equivalents. As at 30 June 2008, if interest rates had changed
by -/+ 125 basis points from the year-end rates with all other variables held constant, the post-tax loss would have been $70,100 higher /
lower (2007 – change of 125 bps: $22,400 higher / lower) as a result of lower / higher interest income from these fi nancial assets.
(B) CREDIT RISK
Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents and deposits with banks and fi nancial
institutions. For banks and fi nancial institutions, only independently rated parties with a minimum rating of ‘A’ are acceptable. At 30 June
2008, cash equivalents were held with an Aa1 and an A3 fi nancial institution, as rated by Moody’s.
(C) LIQUIDITY RISK
Prudent liquidity risk management implies maintaining suffi cient cash and marketable securities.
The Group has experienced recurring operating losses and operating cash outfl ows since inception to 30 June 2008. Due to negative
cash fl ow position the Group has not committed to any credit facilities rather relied upon equity and debt fi nancing through private and
public equity investors. On 24 May 2007 and prior to completion by the company of its initial public offering the Series A preference
shares, convertible notes and warrants have been converted to ordinary shares at a 1.85 conversion rate in accordance with the terms of
the IPO deed dated 27 April 2007.
The Group and parent entity’s exposure to liquidity risk is restricted to the value of outstanding trade creditors. Trade payables generally
have 30 day payment terms, and at 30 June 2008, the Group and parent entities had no overdue liabilities. The Group is continuously
monitoring its’ level of expenditure against the Prospectus as funds are expended in accordance with its’ drug development expenditure
program. The value of trade creditors at 30 June 2008 for the Group was $1.6 million (2007: $400,000) which is payable within 3
months of the year end and at 30 June 2008, the entity carried cash and cash equivalents of $29.7 million (2007: $37.5 million).
The value of trade creditors at 30 June 2008 for the parent was $158,000 (2007: $400,000) which is payable within 3 months of the year
end and at 30 June 2008, the parent entity carried cash and cash equivalents of $29.6 million (2007: $37.5 million).
The Group also holds a Sponsored Research Agreement with the University of Alabama. The Group is committed to paying the University
of Alabama USD 400,000 per annum, payable quarterly for fi ve years from 25 May 2007. This agreement can be terminated by the Group
at any time without cause upon 12 months prior written notice to the University of Alabama.
46 QRxPharma Annual Report 2008
(D) FAIR VALUE ESTIMATION
The fair value of fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of fi nancial instruments that are not traded in an active market is determined using valuation techniques.
The carrying value of trade payables are assumed to approximate their fair values due to their short-term nature.
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s fi nancial assets and fi nancial liabilities to interest rate risk, foreign exchange
risk and other price risk.
Carrying
amount
$’000
Foreign exchange risk
Interest rate risk
-10%
+10%
-125bps
+125bps
Profi t
$’000
Equity
$’000
Profi t
$’000
Equity
$’000
Profi t
$’000
Equity
$’000
Profi t
$’000
Equity
$’000
30 June 2008
Financial assets
Cash and cash equivalents
29,672
2,465
Financial liabilities
Trade payables
1,611
(13)
Total increase/decrease
2,452
-
-
-
(2,017)
11
(2,006)
Carrying
amount
$’000
Foreign exchange risk
-10%
+10%
Profi t
$’000
Equity
$’000
Profi t
$’000
Equity
$’000
30 June 2007
Financial assets
Cash and cash equivalents
7,033
934
Financial liabilities
Trade payables
Total increase/decrease
400
(13)
921
-
-
-
(764)
11
(753)
-
-
-
-
-
-
(70)
-
(70)
-
-
-
70
-
70
Interest rate risk
-125bps
+125bps
Profi t
$’000
Equity
$’000
Profi t
$’000
Equity
$’000
(22)
-
(22)
-
-
-
22
-
22
-
-
-
-
-
-
www.qrxpharma.com 47
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of
future events that may have a fi nancial impact on the entity and that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, seldom equal
the related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next fi nancial year are discussed below.
Research and development expenditure
The Group has expensed all internal research and development expenditure incurred during the year as the costs relate to the initial
expenditure for research and development of biopharmaceutical products and the generation of future economic benefi ts are not
considered certain. It was considered appropriate to expense the research and development costs as they did not meet the criteria to be
capitalised under AASB 138.
Fair value of fi nancial assets and liabilities
The Group has entered into a number of Australian dollar (AUD) put option agreements and smart forward exchange contracts to
purchase US dollar (USD) to manage its exposure to foreign exchange movements. The directors have assessed and measured the
derivative instruments at their fair value at year end.
Impairment of intangible assets
The Group reviews defi nite life intangibles for impairment whenever events or changes in circumstances indicate that the carrying value
may not be recoverable. The Group makes estimates and assumptions about the recoverability of intellectual property. Where the
carrying value of the intellectual property exceeds the recoverable amount, an impairment loss is recognised to record the intellectual
property at its recoverable amount.
By agreement dated 26 April 2007, between CNS Co. Inc (a company then controlled by Dr John Holaday), QRxPharma Limited,
QRxPharma Inc and Dr John Holaday, CNS Co. Inc merged with QRxPharma, Inc. Upon the merger CNS Co. Inc ceased to exist and
QRxPharma Inc became the surviving entity. Under the terms of the merger agreement QRxPharma Inc acquired 100% of the equity of
CNS Co. Inc with the purchase consideration payable to Dr John Holaday being equivalent to 10% of the post IPO ordinary capital of
QRxPharma Limited. As detailed in note 18 (h) this purchase consideration was satisfi ed through the issue of 7,500,000 ordinary shares
in QRxPharma Limited at the time of the Company’s initial public offering (“IPO”) on 25 May 2007.
Intellectual property of $15.5 million acquired through this merger relates to an exclusive worldwide license from the University of Alabama
(“UOA”) of certain technology relating to the treatment of central nervous system (CNS) disorders and other related diseases (“Torsin IP”).
The Torsin IP programme is run through the Caldwell Labs at the UOA and is directed at re engineering existing drug therapies for new
clinical applications, which include the treatment of dystonia, Parkinson’s disease and other neurological disorders which are a part of the
Central Nervous System (“CNS”) market. Under the terms of this agreement the Group will use its commercially reasonable best efforts
to bring a product or process using the Torsin IP to market through a commercially reasonable development programme to meet certain
milestones. The fi rst milestone is the fi ling of an investigational new drug application for a product within three years. The commercial
commitments are more fully described in note 22.
At 30 June 2008 this Torsin IP had a carrying value of $14.6 million. Accounting Standard AASB 136 “Impairment of Assets” requires
the assessment of the Torsin IP for impairment on an annual basis. The ability of an intangible asset such as the Torsin IP to generate
suffi cient future economic benefi ts to recover its carrying amount is usually subject to greater uncertainty before the asset is capable of
generating cash fl ows.
Whilst the Company has supported the enhancement of the Torsin IP to date, the board’s decision to focus on the Company’s pain relief
assets implies that, in its current development stage, the Torsin IP could not generate cash fl ow other than from the out-licence or sale of
the asset. As no contracts have at 30 June 2008 been negotiated for either the out-licence or sale of the Torsin IP, the Company has fully
impaired the carrying value of the asset at 30 June 2008 being $14.6 million pursuant to the requirements of AASB 136.
48 QRxPharma Annual Report 2008
It should be noted in fully impairing the carrying value of this asset at 30 June 2008 does not mean the abandonment of the programme
with the UOA as it is believed that the asset still has long term value and remains part of the Company’s preclinical and clinical pipeline of
pharmaceuticals.
Black- Scholes option pricing model
During the year, the Group booked $3.3 million of share-based payments as determined through the application of the Black- Scholes
option pricing model. The Black-Scholes model is dependent on a number of variables and estimates fully described in note 28.
4 SEGMENT INFORMATION
The Group’s operations during the year were predominantly in Australia. The Group operates in only one market segment, that of the
research and development of biopharmaceutical products for commercial sale.
5 REVENUE
From continuing operations
Interest
6 OTHER INCOME
Management fees
Gain on conversion of fi nancial instruments
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
2,009
304
2,009
304
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
-
-
-
4,951
515
-
-
4,951
-
4,951
515
4,951
On 24 May 2007 the Series B convertible notes and Series A preferred shares were converted into ordinary shares (refer note 18 (e)).
www.qrxpharma.com 49
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
7 EXPENSES
Loss before income tax includes the following specifi c expenses:
Depreciation and Amortisation
Plant and equipment
Amortisation of intangible assets
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
20
802
822
2,618
-
-
-
-
2,907
38
2,353
5,298
11
72
16
-
11
-
83
272
371
1,126
1,497
359
457
8
225
690
16
11
2,648
272
-
-
-
-
1,136
38
1,664
2,838
371
1,126
1,497
359
457
8
225
690
12,708
14,628
2,376
-
13,970
-
2,376
-
27,336
2,376
13,970
2,376
-
73
-
-
17,117
27
-
-
Net foreign exchange loss
Finance costs
Interest payable on convertible notes
Interest payable on preference shares
Fair value losses on derivative fi nancial instrument
Employee benefi t expense
Employee benefi t expense
Defi ned contribution superannuation expense
Share option expense
Research and development
Research and development expensed
Impairment of intangible asset
Impairment losses – fi nancial assets
Investment in subsidiary
Rental expenses relating to operating leases
Minimum lease payments
50 QRxPharma Annual Report 2008
8 INCOME TAX BENEFIT
(A) INCOME TAX BENEFIT
Current tax
Deferred tax expense
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
-
(125)
(125)
-
(348)
(348)
-
(125)
(125)
2007
$’000
-
(348)
(348)
The deferred tax asset relates to a Research and Development tax rebate payment received during the year under Section 73 B of the
Income Tax Assessment Act 1936.
(B) NUMERICAL RECONCILIATION OF INCOME
TAX EXPENSE TO PRIMA FACIE TAX PAYABLE
Loss from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2007 – 30%)
Tax effect of amounts which are not deductible in calculating
taxable income:
Amortisation of intangibles
Impairment of intangible asset
Impairment of fi nancial asset
Research & development expenditure
Share-based payments
Interest on preference shares
Consolidated
Parent
2008
$’000
(36,727)
(11,018)
2007
$’000
2008
$’000
2007
$’000
(753)
(226)
(37,113)
(11,134)
(681)
(205)
241
4,388
-
-
779
-
(5,610)
21
-
-
574
67
(1,103)
(667)
-
-
5,135
-
779
-
(5,220)
-
-
-
574
67
(1,103)
(667)
Previously unrecognised losses recouped
Benefi t of tax losses not recognised
Income tax expense
(125)
5,610
(125)
(348)
667
(125)
5,220
(348)
667
(348)
(125)
(348)
(C) TAX LOSSES
Unused tax losses for which no deferred tax asset has been
recognised
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
27,513
8,813
26,213
8,813
Potential tax benefi t @ 30%
8,254
2,644
7,864
2,644
No deferred tax asset has been recognised for the tax losses generated from operations in both Australia and the USA, as the benefi t for
tax losses will only be obtained if:
(i) the Group derives future assessable income of a nature and of an amount suffi cient to enable the benefi t from the deductions for the
losses to be realised, or
(ii) the Group continues to comply with the conditions for deductibility imposed by tax legislation, and
(iii) no changes in tax legislation adversely affect the Group in realising the benefi t from the deduction for the losses.
www.qrxpharma.com 51
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
8 INCOME TAX BENEFIT (CONTINUED)
(D) TAX CONSOLIDATION LEGISLATION
QRxPharma Limited and its wholly owned Australian controlled entities have implemented the tax consolidation legislation as of 7
December 2002. The accounting policy in relation to this legislation is set out in note 1(g).
9 CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash at bank
Term deposits
Commercial bills
(A) CASH AT BANK
Consolidated
Parent
2008
$’000
654
21,839
7,179
29,672
2007
$’000
2,339
6,669
26,682
35,690
2008
$’000
2007
$’000
565
21,839
7,179
29,583
2,339
6,669
26,682
35,690
These bear an interest rate of 7.3% (2007: 5.98%) for the AUD accounts and 1.0% (2007: 3%) for the USD accounts.
(B) TERM DEPOSITS
These are USD deposits and bear an average fi xed interest rate of 2.3% (2007: 5.1%). These deposits have a maturity of less than 3
months.
(C) COMMERCIAL BILLS
These commercial bills are bearing an average interest rate of 7.40% (2007: 6.30%) and have a maturity of less then 3 months.
Bank accepted commercial bills and term deposits with a maturity greater than 3 months have been classifi ed as held-to-maturity
investments (refer note 12).
10 CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Interest receivable
Other receivables
Consolidated
Parent
2008
$’000
105
53
158
2007
$’000
2008
$’000
2007
$’000
57
79
136
105
30
135
57
79
136
Information about the Group’s and the parent’s exposure to foreign currency and interest rate risk in relation to other receivables is
provided in note 2.
Due to the short term nature of these receivables, their carrying amount is assumed to approximate their fair value.
52 QRxPharma Annual Report 2008
11 OTHER FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Current assets
Derivative fi nancial instrument
Total current assets
Non-current assets
Derivative fi nancial instrument
Total non current assets
Total assets
Current liabilities
Derivative fi nancial instrument
Total liabilities
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
-
-
-
-
-
-
-
374
374
-
-
548
548
922
154
154
-
-
-
-
-
374
374
548
548
922
154
154
INSTRUMENTS USED BY THE GROUP
Derivative fi nancial instruments of a net carrying value of $768,214 at 30 June, 2007 have been fair valued to $nil at 30 June 2008.
During the fi nancial year ended 30 June 2007, the Group had entered into a series of foreign exchange put option contracts at an
exchange rate between Australian dollars and US dollars of AUD 1.00 to USD 0.8181 to protect against adverse foreign exchange
movements between AUD and USD. The options contracts were to cover anticipated expenditure of at least $29 million over 2 years
to fulfi l research and development expenditure associated with clinical trials to be conducted in the United States of America. The
Prospectus issued by the Company on 27 April, 2007 assumed an exchange rate between Australian dollars and US dollars of AUD 1.00
to USD 0.78. During the year the Group converted AUD 20 million to USD at an average rate of US$0.9027, taking advantage of the more
favourable rates above the option contracts.
In addition, at 30 June 2007 the Group held a series of smart forward exchange contracts which were fair valued as a liability at that date
at $154,024.
These put options contracts are covering existing purchase contracts and highly probable forecasted purchases over the ensuing two
fi nancial years and mature as follows:
Buy US dollars
Sell Australian dollars
Average exchange rate
Maturity
6 – 12 months
1 - 2 years
2008
$’000
2007
$’000
2008
2007
15,300
13,200
-
15,300
15,300
28,500
0.8180
0.8180
0.8180
0.8180
Amounts disclosed above represent currency sold measured at the contracted rate.
www.qrxpharma.com 53
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
12 CURRENT ASSETS – HELD-TO-MATURITY INVESTMENTS
Commercial bill
Security deposit
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
-
-
-
9,691
800
10,491
-
-
9,691
800
-
10,491
The bank accepted commercial bill of $9.7 million, bearing an interest rate of 6.47% was due to mature on 19 December 2007, but was
matured early on 14 November 2007. The proceeds were converted into US dollars and reinvested in term deposits having maturities of
less than 3 months from original investment date. The security deposit of $0.8 million bearing a fi xed interest rate of 6.2% matured on 18
May 2008. The proceeds were reinvested in commercial bills having a maturity of less than 3 months from the original investment date.
Accordingly these amounts have been reclassifi ed and disclosed as cash and cash equivalents in accordance with AASB 107 “Cash
Flow Statements”.
13 CURRENT ASSETS – OTHER CURRENT ASSETS
Prepayments
458
118
119
-
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
14 NON CURRENT ASSETS – OTHER FINANCIAL ASSETS
Investment in subsidiaries (note 25)
Less provision for write down to recoverable amount
These fi nancial assets are carried at cost.
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
-
-
-
-
-
-
20,223
(17,618)
16,121
(501)
2,605
15,620
Due to the impairment loss on the Torsin IP asset recognised in the books of the subsidiary, a provision for diminution in value against the
investment in the books of the parent entity has been recognised. Refer to note 3.
54 QRxPharma Annual Report 2008
15 NON–CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Consolidated
Plant & Equipment
$’000
Parent
Plant & Equipment
$’000
At 1 July 2006
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2007
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2007
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2008
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2008
Cost
Accumulated depreciation
Net book amount
109
(91)
18
18
18
(11)
25
127
(102)
25
25
68
(20)
73
195
(122)
73
109
(91)
18
18
18
(11)
25
127
(102)
25
25
28
(16)
37
155
(118)
37
www.qrxpharma.com 55
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
16 NON–CURRENT ASSETS – INTANGIBLE ASSETS
Consolidated
Year ended 30 June 2007
Opening net book amount
Acquisition of intellectual property
Amortisation charge
Closing net book amount
At 30 June 2007
Cost
Accumulated amortisation and impairment
Net book amount
Consolidated
Year ended 30 June 2008
Opening net book amount
Impairment of intellectual property*
Amortisation charge
Closing net book amount
At 30 June 2008
Cost
Accumulated amortisation and impairment
Net book amount
Patents,
trademarks and other
rights
$’000
Other intangible assets
$’000
Total
$’000
-
15,502
(72)
15,430
15,502
(72)
15,430
-
-
-
15,502
(72)
-
15,430
889
(889)
-
16,391
(961)
15,430
Patents,
trademarks and other
rights
$’000
Other intangible assets
$’000
Total
$’000
15,430
(14,628)
(802)
-
15,502
(15,502)
-
-
-
-
-
889
(889)
-
15,430
(14,628)
(802)
-
16,391
(16,391)
-
*The carrying amount of the Torsin IP asset has been reduced to its recoverable amount of $nil through recognition of an impairment loss
against the asset. This loss has been disclosed as a separate line item in the income statement. Refer to note 3.
56 QRxPharma Annual Report 2008
16 NON–CURRENT ASSETS – INTANGIBLE ASSETS (CONTINUED)
Parent
At 1 July 2006
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2007
Opening net book amount
Closing net book amount
At 30 June 2007
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 30 June 2008
Opening net book amount
Closing net book amount
At 30 June 2008
Cost
Accumulated amortisation and impairment
Net book amount
Patents,
trademarks and other
rights
$’000
Other intangible assets
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
414
(414)
-
-
-
414
(414)
-
-
-
414
(414)
-
414
(414)
-
-
-
414
(414)
-
-
-
414
(414)
-
17 CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Amounts due to subsidiaries
Accrued employee benefi ts
Other payables
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
1,611
-
92
321
2,024
400
-
272
6
678
158
3,802
32
177
4,169
400
28
272
6
706
Accrued employee benefi ts include accruals for annual leave. The entire obligation is presented as current, since the Group does not
have an unconditional right to defer settlement. It is expected that employees will use the full amount of accrued leave within the next 12
months.
www.qrxpharma.com 57
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
18 CONTRIBUTED EQUITY
(A) SHARE CAPITAL
Ordinary shares – fully paid
Parent
Parent
2008
Shares
2007
Shares
2008
$’000
2007
$’000
75,000,000
75,000,000
79,694
79,932
(B) MOVEMENTS IN ORDINARY SHARE CAPITAL:
Details
Notes
Number of
shares
Issue price
$’000
Date
1 July 2006
11 August 2006
12 March 2007
19 April 2007
25 April 2007
25 April 2007
25 April 2007
24 May 2007
24 May 2007
24 May 2007
24 May 2007
24 May 2007
25 May 2007
25 May 2007
25 May 2007
Opening balance
Exercise of options
Exercise of options
Exercise of options
Exercise of options
Exercise of options net
Issue of shares
Conversion of Preferred Shares Series A
Conversion of Convertible Note Series A
Conversion of Convertible Note Series B
Conversion of Convertible Note Series B Warrants
Issue of shares in settlement of IP deed
Compression of shares prior to IPO
Share issue to acquire subsidiary
Share issue from IPO
Less: Transaction costs arising on IPO
Less: Transaction costs arising on other capital raising
(d)
(d)
(d)
(d)
(d)
(d)
(e)
(e)
(e)
(e)
(f)
(g)
(h)
(i)
30 June 2007 Balance
Less: Transaction costs arising on share issues
30 June 2008 Balance
(C) ORDINARY SHARES
$0.15
$0.15
$0.15
$0.15
$0.54
$0.54
$0.27
$0.27
$1.00
$2.00
$2.00
7,588,721
9,120
60,000
654,192
80,000
653,640
509,325
18,960,911
5,674,837
5,550,000
5,550,000
1,912,500
(4,703,246)
7,500,000
25,000,000
75,000,000
75,000,000
670
1
9
98
12
-
-
9,898
3,068
1,500
1,500
1,913
-
15,000
50,000
(3,699)
(38)
79,932
(238)
79,694
Each ordinary shareholder maintains, when present in person or by proxy or by attorney at any general meeting of the company, the right
to cast one vote for each ordinary share held.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number
of and amounts paid on the shares held.
(D) OPTIONS
Information relating to the QRxPharma Limited Employee Share Option Plan, including details of options issued, exercised and lapsed
during the fi nancial year and options outstanding at the end of the fi nancial year are set out in note 28.
On 25 April 2007 cashless options were exercised resulting in the issue of 653,640 shares.
Certain options carried anti dilution provisions which resulted in an uplift of 509,325 options which were exercised at the same time.
58 QRxPharma Annual Report 2008
These shares were issued to directors and key management personnel of the Group during the year ended 30 June 2007.
(E) CONVERSION OF SERIES A PREFERENCE SHARES, CONVERTIBLE NOTES AND WARRANTS
On 24 May 2007 and prior to completion by the company of its IPO the Series A preference shares, convertible notes and warrants were
converted to ordinary shares at a 1.85 conversion rate in accordance with the terms of the IPO deed dated 27 April 2007.
(F) ISSUE OF SHARES IN SETTLEMENT OF IP DEED
On 24 May 2007 the Company issued 1,912,500 ordinary shares to Uniquest Pty Limited at $1.00 per share to compensate Uniquest Pty
Limited for early settlement of an intellectual property subscription deed.
(G) SHARE CONSOLIDATION
On 25 May 2007 and also prior to the IPO, the company completed a consolidation of ordinary shares which reduced the number of
shares on a issue by factor per share of 0.90036.
(H) SHARE ISSUE TO ACQUIRE SUBSIDIARY
The Group acquired 100% of the equity of CNS Co, Inc. on 26 April 2007 for consideration equivalent to 10% of the post IPO ordinary
capital of the Company.
(I) SHARE ISSUE FROM IPO
On 25 May 2007 the company listed on the Australian Securities Exchange (ASX) following the completion of a fully underwritten IPO with
a subscription of 25,000,000 ordinary shares at an issue price of $2.00 per share.
(J) VOLUNTARY ESCROWS
Certain directors, consultants and pre IPO investors have voluntarily escrowed their shareholdings in the Company. Collectively these
escrows extend to 34,229,407 ordinary shares through to 25 May 2009. At 25 May 2008, voluntary escrows on 10,075,929 ordinary
shares expired.
(K) CAPITAL RISK MANAGEMENT
The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so
they can continue to provide returns for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to
reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may, return capital to shareholders; issue new shares or sell assets.
www.qrxpharma.com 59
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
19 RESERVES AND ACCUMULATED LOSSES
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
3,899
(315)
387
-
3,899
-
387
-
3,584
387
3,899
387
(A) RESERVES
Share-based payments reserve
Foreign currency translation reserve
MOVEMENTS:
Share-based payments reserve
Balance 1 July
Option expense
Options issued to employees of subsidiaries
Options issued under anti dilution provisions
Balance 30 June
3,899
387
Foreign currency translation reserve
Balance 1 July
Currency translation differences arising during the year
Balance 30 June
-
(315)
(315)
-
-
-
387
3,512
-
-
162
149
-
76
387
2,691
821
-
3,899
-
-
-
162
149
-
76
387
-
-
-
(18,339)
(36,602)
(54,941)
(17,934)
(405)
(18,339)
(18,295)
(36,988)
(17,962)
(333)
(55,283)
(18,295)
(B) ACCUMULATED LOSSES
Movements in accumulated losses were as follows:
Opening accumulated losses
Loss for the year
Balance 30 June
(C) NATURE AND PURPOSE OF RESERVES
(i) Share-based payments reserve
The share-based payment reserve is used to recognise:
(cid:129) the fair value of options issued to employees but not exercised
(cid:129) the fair value of shares issued to employees
(cid:129) in the parent entity – the fair value of shares and options issued to employees of subsidiaries
(ii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entity are taken to the foreign currency translation reserve, as
described in note 1(e). The reserve is recognised in profi t and loss when the net investment is disposed.
60 QRxPharma Annual Report 2008
20 KEY MANAGEMENT PERSONNEL DISCLOSURES
(A) DIRECTORS
The following persons were directors of QRxPharma Limited during the fi nancial year:
(i) Chairman – non executive
Peter C Farrell
(ii) Executive director
John W Holaday, Managing Director and Chief Executive Offi cer
(iii) Non executive directors
Michael A Quinn
R Peter Campbell
Gary W Pace, Consultant
(B) OTHER KEY MANAGEMENT PERSONNEL
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or
indirectly, during the fi nancial year:
Name
Position
Douglas A Saltel
Chief Operating Offi cer
(resigned 7 March 2008)
Warren C Stern
Executive Vice President, Drug Development
Chris J Campbell
Chief Financial Offi cer and Company Secretary
Joseph J Berry
Vice President Operations
(appointed 12 November 2007)
Philip J Magistro
Vice President, Commercial Operations
(appointed 26 November 2007)
Patricia T Richards
Senior Vice President, Clinical Research
(appointed 18 February 2008)
All of the above persons were also key management persons during the year ended 30 June 2007, except for Patricia Richards,
Philip Magistro and Joseph Berry.
(C) KEY MANAGEMENT PERSONNEL COMPENSATION
Short term employee benefi ts
Post employment benefi ts
Long term benefi ts
Share-based payments
Consolidated
Parent
2008
$
2,123,952
28,102
-
2007
$
445,725
8,327
-
2008
$
2007
$
968,263
445,725
28,102
8,327
-
-
2,361,213
171,207
1,674,644
171,207
4,513,267
625,259
2,671,009
625,259
The company has taken advantage of the relief provided by Corporations Regulation 2M.6.04 and has transferred the detailed remuneration
disclosures to the directors’ report. The relevant information can be found in sections A-C of the remuneration report on pages 14 to 19.
www.qrxpharma.com 61
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
20 KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(D) EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL
(i) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the
options, can be found in section D of the remuneration report on pages 19 - 21.
(ii) Option holdings
The numbers of options over ordinary shares in the company held during the fi nancial year by each director of QRxPharma Limited and
other key management personnel of the Group, including their personally related parties, are set out below.
2008
Name
Balance at
start of the
year
Granted as
compensation
Exercised
Forfeited
Balance at
end of the
year
Vested and
exercisable
Unvested
Directors of QRxPharma Limited
Peter C Farrell
John W Holaday
Gary W Pace
Michael A Quinn
R Peter Campbell
604,089
805,452
402,726
402,726
241,635
Other key management personnel of the Group
Warren C Stern
Douglas A Saltel
(resigned 7 March 2008)
Chris J Campbell
Patricia T Richards
(appointed 18 February 2008)
Philip J Magistro
(appointed 26 November 2007)
Joseph J Berry
(appointed 12 November 2007)
805,452
805,452
402,726
-
-
-
-
-
-
-
-
-
-
-
500,000
200,000
150,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
604,089
805,452
402,726
402,726
241,635
201,363
268,484
134,242
134,242
80,545
402,927
536,968
268,484
268,484
161,090
-
805,452
805,452
-
268,484
-
536,968
-
-
-
-
-
402,726
500,000
200,000
150,000
134,242
-
268,484
500,000
-
-
200,000
150,000
62 QRxPharma Annual Report 2008
(ii) Option holdings (continued)
2007
Name
Balance at
start of the
year
Granted as
compensation
Exercised
Forfeited
Balance at
end of the
year
Vested and
exercisable
Unvested
Directors of QRxPharma Limited
Peter C Farrell
John W Holaday
Gary W Pace
Michael A Quinn
R Peter Campbell
David Stack
(resigned 27 April 2007)
-
-
207,096
-
-
447,096
Other key management personnel of the Group
Warren C Stern
Douglas A Saltel
Chris J Campbell
Felix de la Iglesia
(resigned 25 May 2007)
B Nicholas Harvey
(resigned 1 March 2007)
-
-
-
-
131,788
-
604,089
805,452
402,726
402,726
241,635
-
805,452
805,452
402,726
50,000
-
-
(207,096)
-
-
(447,096)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
604,089
805,452
402,726
402,726
241,635
-
805,452
805,452
402,726
50,000
(131,788)
-
-
-
-
-
-
-
-
-
-
-
-
604,089
805,452
402,726
402,726
241,635
-
805,452
805,452
402,726
50,000
-
The additional shares issued to the directors on 25 April 2007 under the anti dilution provision (note 18(d)) were:
Name
Shares issued
Directors of QRxPharma Limited
Gary W Pace
David Stack
71,689
154,768
Other key management personnel of the Group
Felix de la Iglesia
B Nicholas Harvey
88,996
45,620
www.qrxpharma.com 63
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
20 KEY MANAGEMENT PERSONNEL DISCLOSURES (CONTINUED)
(iii) Share holdings
The numbers of shares in the company held during the fi nancial year by each director of QRxPharma Limited and other key management
personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting
period as compensation.
2008
Name
Directors of QRxPharma Limited
Ordinary shares
Peter C Farrell
John W Holaday
Gary W Pace
Michael A Quinn
R Peter Campbell
Other key management personnel of the Group
Ordinary shares
Warren C Stern
Douglas A Saltel (resigned 7 March 2008)
Chris J Campbell
Patricia T Richards (appointed 18 February 2008)
Philip J Magistro (appointed 26 November 2007)
Joseph J Berry (appointed 12 November 2007)
2007
Name
Directors of QRxPharma Limited
Ordinary shares
Peter C Farrell (appointed 27 April 2007)
John W Holaday (appointed 27 April 2007)
Gary W Pace
Michael A Quinn
R Peter Campbell (appointed 27 April 2007)
David Stack (resigned 27 April 2007)
Michael S Hirshorn (resigned 27 April 2007)
George Savage (resigned 27 April 2007)
David A Henderson (resigned 27 April 2007)
Other key management personnel of the Group
Ordinary shares
Warren C Stern
Douglas A Saltel
Chris J Campbell
Felix de la Iglesia (resigned 25 May 2007)
B Nicholas Harvey (resigned 1 March 2007)
64 QRxPharma Annual Report 2008
Balance at start
of the year
Received during
the year on the
exercise of options
Other changes
during the year
Balance at the end
of the year
1,145,540
7,505,000
3,190,083
10,593,090
50,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
135,000
38,000
40,000
(1,121,341)
35,000
1,280,540
7,543,000
3,230,083
9,471,749
85,000
-
-
-
-
-
-
-
-
-
-
-
-
Balance at start
of the year
Received during
the year on the
exercise of options
Other changes
during the year
Balance at the end
of the year
-
-
1,573,511
500,000
-
-
-
-
-
-
-
-
607,096
175,000
-
-
207,096
-
-
447,096
-
-
-
-
-
-
-
131,788
1,145,540
7,505,000
1,409,476
10,093,090
50,000
94,799
-
-
-
-
-
-
773,270
(157,040)
1,145,540
7,505,000
3,190,083
10,593,090
50,000
541,895
-
-
-
-
-
-
1,380,366
149,748
(E) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
During the year, the company directly engaged and contracted the services of certain key management personnel to perform consulting
services for the Group. The total amount paid to key management personnel for contracted services rendered during the year amounted
to $239,443 (2007: $321,716). Prior to a number of consultants becoming key management personnel of the Group, they were paid
$67,800 for consulting services.
During the year ended 30 June 2007, Innovation Capital Associates Pty Limited, of which Michael Quinn is a director and shareholder,
provided administration and other services and facility support to the Company on normal commercial terms amounting to $97,930.
21 REMUNERATION OF AUDITORS
(A) AUDIT SERVICES
PricewaterhouseCoopers Australian fi rm
Audit and review of fi nancial reports and other audit work
under the Corporations Act 2001
Total remuneration for audit services
(B) NON-AUDIT SERVICES
PricewaterhouseCoopers Australian fi rm
Audit related services
Taxation services
Total remuneration for audit related services
Consolidated
Parent
2008
$
2007
$
2008
$
2007
$
86,000
86,000
97,200
97,200
86,000
86,000
97,200
97,200
-
99,270
99,270
185,270
145,000
80,300
225,300
322,500
-
99,270
99,270
185,270
145,000
80,300
225,300
322,500
22 CONTINGENCIES
As detailed in note 18(h) the Group acquired on 26 April 2007 a 100% interest in CNS Co, Inc. As also detailed in note 16 the Group
through this acquisition now holds a license agreement with University of Alabama (USA). Under the terms of this license agreement the
Group is obligated to meet certain milestone payments as advances against future royalties from the Torsin programme as follows:
(i) USD 750,000 on commencement by the Group of Phase II clinical trial for any Torsin IP product;
(ii) USD 1,500,000 on commencement by the Group of Phase III clinical trial for any Torsin IP product;
(iii) USD 2,000,000 on the date of receipt by the Group of fi rst market approval for each Torsin IP product.
The agreement may be terminated by the Group at any time on 6 months notice to the University of Alabama and upon payment of all
amounts due to University of Alabama to the effective termination date. The agreement will expire on the last expire date of the patents
licensed under the agreement.
23 COMMITMENTS
(A) UNIVERSITY OF ALABAMA.
The Group also holds a Sponsored Research Agreement with the University of Alabama. The Group is committed to paying the
University of Alabama USD 400,000 per annum, payable quarterly for fi ve years from 25 May 2007. This agreement can be
terminated by the Group at any time without cause upon 12 months prior written notice to the University of Alabama.
www.qrxpharma.com 65
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
23 COMMITMENTS (CONTINUED)
(B) UNIVERSITY OF QUEENSLAND
On 10 January 2008, the Company entered into a Collaborative Reserach Agreement with the University of Queensland for the
conduct of the Australian Research Council linkage project grant; “Pre-clinical evaluation of snake venom proteins with therapeutic
potential”. Under the terms of this grant, the Company is contracted to pay a total of $209,000 to the University over the next two
years.
(C) OPERATING LEASES
The Group leases offi ce premises in Sydney, Australia and New Jersey, USA. The leases have varying terms, escalation clauses and
renewal rights.
Commitments for minimum lease payments in
relation to non-cancellable operating leases are
payable as follows:
Within one year
Later than one year but not later than fi ve years
Later than fi ve years
24 RELATED PARTY TRANSACTIONS
(A) SUBSIDIARIES
Interests in subsidiaries are set out in note 25.
(B) KEY MANAGEMENT PERSONNEL
Consolidated
Parent
2008
$’000
2007
$’000
2008
$’000
2007
$’000
100
171
-
271
-
-
-
-
19
21
-
40
-
-
-
-
Disclosures relating to key management personnel are set out in note 20.
(C) OUTSTANDING BALANCES
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current payables
Subsidiaries
Balances in relation to related parties
Consolidated
Parent
2008
$
2007
$
2008
$
2007
$
-
-
-
45,199
3,802,332
-
27,700
45,199
66 QRxPharma Annual Report 2008
(D) TRANSACTIONS WITH RELATED PARTIES
The following transactions occurred with related parties:
Consolidated
Parent
2008
$
2007
$
2008
$
2007
$
Other income
Management services to subsidiary
Expenses
Research and development service fees and costs from subsidiary
-
-
-
-
515,205
13,107,627
-
-
25 SUBSIDIARIES
The consolidated fi nancial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1(c):
Name of entity
Country of incorporation
Class of shares
The Lynx Project Pty Limited
Haempatch Pty Limited
QRxPharma, Inc.
Australia
Australia
USA
Ordinary
Ordinary /Preference
Ordinary
Equity holding
2008
%
100
100
100
2007
%
100
100
100
26 RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH OUTFLOW
FROM OPERATING ACTIVITIES
Loss for the year
Depreciation and amortisation
Impairment of intangible asset
Impairment of fi nancial asset
Non cash employee benefi ts expense – share-based payments
Net exchange differences on cash and cash equivalents
Interest on held-to-maturity investments
Change in operating assets and liabilities
(Increase)/decrease in other receivables and prepayments
Increase/(decrease) in trade creditors and accruals
Increase/(decrease) in other operating liabilities
Consolidated
Parent
2008
$’000
(36,602)
822
14,628
-
3,257
2,353
(355)
2007
$’000
(405)
83
-
-
225
272
-
2008
$’000
(36,988)
16
-
16,267
3,305
2,648
(355)
2007
$’000
(333)
11
-
-
225
272
-
511
1,239
-
(254)
78
(2,534)
804
3,309
-
(135)
78
(2,527)
Net cash outfl ow from operating activities
(14,147)
(2,535)
(10,994)
(2,409)
www.qrxpharma.com 67
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
27 LOSS PER SHARE
Consolidated
2008
Cents
2007
Cents
(A) BASIC LOSS PER SHARE
Loss from continuing operations attributable to the ordinary equity holders of the company
(48.8)
(2.8)
(B) DILUTED LOSS PER SHARE
Loss from continuing operations attributable to the ordinary equity holders of the company
(48.8)
(2.8)
(C) RECONCILIATIONS OF EARNINGS USED IN CALCULATING
EARNINGS PER SHARE
Basic loss per share
Loss attributable to the ordinary equity holders of the company used in calculating basic
earnings per share
Diluted loss per share
Consolidated
2008
$’000
(36,602)
2007
$’000
(405)
Loss attributable to the ordinary equity holders of the company used in calculating diluted
earnings per share
(36,602)
(405)
(D) WEIGHTED AVERAGE NUMBER OF SHARES USED AS THE
DENOMINATOR
Weighted average number of ordinary shares used as the denominator in calculating basic
loss per share
Weighted average number of ordinary shares and potential ordinary shares used as the
denominator in calculating diluted loss per share
Consolidated
2008
Number
2007
Number
75,000,000
14,606,882
75,000,000
14,606,882
(E) INFORMATION CONCERNING THE CLASSIFICATION OF SECURITIES
(i) Options
Options are considered to be potential ordinary shares. The options are not included in the calculation of diluted earnings per share
because they are anti dilutive. These options could potentially dilute basic earnings per share in the future. Details relating to the options
are set out in note 28.
(ii) Cumulative redeemable preference shares
The cumulative redeemable preference shares are not ordinary shares and have not been included in the determination of basic and
diluted earnings per share. These shares are classifi ed as liabilities (refer to note 18).
68 QRxPharma Annual Report 2008
28 SHARE-BASED PAYMENTS
(A) QRXPHARMA EMPLOYEE SHARE OPTION PLAN (ESOP)
The QRxPharma Limited Employee Share Option Plan (Limited ESOP) was approved by shareholders at the extraordinary general meet-
ing of members held on 24th April 2007.
Under the Limited ESOP shares may be issued by the company to eligible employees at an exercise price as determined by the remu-
neration committee, being not less than the share price on the grant date of the options. Any person who is employed by, or is a director,
offi cer, executive or consultant of the Company or any related body corporate of the Company and whom the remuneration committee
determines is eligible to participate in the option plan are eligible to participate in the plan. Employees may elect not to participate in the
scheme.
The total number of shares that shall be reserved for issuance under the option plan shall not exceed ten percent (10%) of the Diluted Or-
dinary Share Capital in the Company as at the date of issue of the relevant options under the option plan, subject to changes in capitali-
zation as provided in clause 16.3 of the option plan. The approval of the Company’s shareholders must be obtained for any amendment
to the option plan in relation to:
(a) increasing the maximum aggregate number of shares that may be issued under the option plan;
(b) any change in the class of employees eligible to receive options under the option plan;
(c) any change in the shares reserved for issuance under the option plan; and
(d) substitution of another entity in place of the Company as the issuer of shares under the option plan.
Options will lapse if they are not exercised before the expiration date or if the option holder leaves the employment of the Group. The
Board reserves discretion to waiver the latter provisions.
Options granted under the plan carry no dividend or voting rights. The vesting period for each option is 3 years, or as varied by the Board,
one third vesting 12 months from the date of grant and the balance vesting equally each year over the remaining two year period. When
exercisable, each option is convertible into one ordinary share and entitles the holder to the same ordinary share rights as set out in note
18. Shares issued under the scheme may be sold at the expiration of any Restriction Agreement between the eligible employee and the
Company. Such restrictions may be imposed by the remuneration committee upon the grant of options under the option plan and such
restrictions will be contained in the Option Agreement between the eligible employee and the Company. In all other respects the shares
rank equally with other fully paid ordinary shares on issue (refer to note 18(c)).
(B) JP MORGAN SECURITIES AUSTRALIA LIMITED DEED
In part consideration for underwriting services in relation to the IPO, the Company granted JP Morgan Securities Australia Limited
322,181 options to purchase 322,181 ordinary shares in the Company. These options vested on 25 November 2007 and have a three year
term through to 25 May 2010, with the option exercise price being $2.20.
www.qrxpharma.com 69
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
28 SHARE-BASED PAYMENTS (CONTINUED)
(C) SET OUT BELOW ARE SUMMARIES OF OPTIONS GRANTED UNDER THE PLANS:
Grant Date
Expiry date
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Cashless
options
exercised
during the
year
Balance at
end of the
year
Vested and
exercisable
at end of
the year
Number
Number
Number
Number
Number
Number
Consolidated and parent 2008
31 March 2007
14 April 2007
25 May 2007
25 May 2007
25 May 2007
1 September 2007
1 October 2007
9 October 2007
1 January 2008
1 April 2008
1 April 2008
Total
31 March 2014
14 April 2014
25 May 2014
25 May 2014
25 May 2010
1 September 2014
1 October 2014
9 October 2014
1 January 2015
1 April 2015
1 April 2015
$1.42
$1.00
$2.00
$1.00
$2.20
$1.70
$1.45
$1.34
$1.11
$1.05
$1.04
402,726
2,819,082
1,448,450
552,726
322,181
-
-
-
-
-
-
-
-
-
-
-
50,000
75,000
50,000
350,000
600,000
75,000
5,545,165
1,200,000
Weighted average exercise price
$1.36
$1.13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(805,452)
-
-
-
-
-
-
-
-
-
402,726
2,013,630
1,448,450
552,726
322,181
50,000
75,000
50,000
350,000
600,000
75,000
134,242
671,210
482,817
184,242
322,181
-
-
-
-
-
-
(805,452)
5,939,713
1,794,692
$1.00
$1.36
$1.42
70 QRxPharma Annual Report 2008
(C) SET OUT BELOW ARE SUMMARIES OF OPTIONS GRANTED UNDER THE PLANS (CONTINUED):
Grant Date
Expiry date
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Forfeitted
during the
year
Balance at
end of the
year
Vested
and exer-
cisable at
end of the
year
Number
Number
Number
Number
Number
Number
Consolidated and parent 2007
19 December 2002
19 February 2003
1 December 2003
24 February 2004
24 February 2004
24 February 2004
25 February 2004
16 March 2004
19 May 2004
24 June 2004
13 July 2004
14 July 2004
17 August 2004
19 October 2004
19 February 2005
18 May 2005
21 September 2005
31 March 2007
14 April 2007
25 May 2007
25 May 2007
25 May 2007
Total
19 December 2012
19 February 2008
1 December 2006
24 February 2013
24 February 2014
24 February 2014
24 February 2014
16 March 2014
19 May 2014
24 June 2014
13 July 2014
14 July 2014
17 August 2014
19 October 2014
19 February 2015
18 May 2015
21 September 2015
31 March 2014
14 April 2014
25 May 2014
25 May 2014
25 May 2010
$0.30
$0.15
$0.15
$0.15
$0.30
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
$0.15
$1.42
$1.00
$2.00
$1.00
$2.20
40,000
40,000
20,000
10,000
10,000
6,875
5,000
10,000
25,000
20,000
50,000
40,000
20,000
784,248
150,000
240,000
110,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
402,726
2,819,082
1,448,450
552,726
322,181
-
(40,000)
(20,000)
(9,124)
-
-
-
(10,000)
(25,000)
-
(50,000)
-
-
(364,192)
-
(240,000)
(45,000)
-
-
-
-
-
(40,000)
-
-
(876)
(10,000)
(6,875)
(5,000)
-
-
(20,000)
-
(40,000)
(20,000)
(420,056)
(150,000)
-
(65,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
402,726
2,819,082
1,448,450
552,726
322,181
1,581,123
5,545,165
(803,316)
(777,807)
5,545,165
Weighted average exercise price
$0.15
$1.36
$0.15
$0.15
$1.36
The net shares issued upon exercising of cashless options was 653,640 (refer note 18(b)).
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$-
During the year ended 30 June 2007, 509,325 shares were also issued as certain options carried anti dilution provisions (refer to note
18(b)).
No options expired during the periods covered by the above tables.
The weighted average remaining contractual life of share options outstanding at the end of the period was 5.8 years (2007 – 7.0 years).
www.qrxpharma.com 71
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
28 SHARE-BASED PAYMENTS (CONTINUED)
Fair value of options granted
The assessed fair value at grant date of options granted during the year ended 30 June 2008 was $0.69 per option (2007: $1.46). The
fair value at grant date is independently determined using a 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.
The model inputs for options granted during the year ended 30 June 2008 included:
(a) exercise price: $1.04 to $1.70 (2007 – $1.00 to $2.20)
(b) grant date: 1 September 2007, I October 2007, 9 October 2007, 1 January 2008 and 1 April 2008 (2007 – 31 March 2007,
14 April 2007, 25 May 2007)
(c) expiry date: 1 September 2014, 1 October 2014, 9 October 2014, 1 January 2015 and 1 April 2015 (2007 – 31 March 2014,
14 April 2014, 25 May 2010, 25 May 2014)
(d) share price at grant date: $1.04 to $1.70 (2007 – $2.00)
(e) expected price volatility of the company’s shares: 60% (2007 – 60%)
(f) expected dividend yield: nil% (2007 – nil%)
(g) risk free interest rate: 6.25% (2007 – 6.25%).
The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected
changes to future volatility due to publicly available information.
(D) EXPENSES ARISING FROM SHARE-BASED PAYMENT TRANSACTIONS
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefi t expense were
as follows:
Options issued under employee option plan
Options issued under anti dilution provisions
Consolidated
Parent
2008
$’000
3,327
-
3,327
2007
$’000
149
76
225
2008
$’000
2,506
-
2,506
2007
$’000
149
76
225
29 EVENTS OCCURRING AFTER THE BALANCE SHEET DATE
No signifi cant events have occurred after the balance sheet date which would have a material impact on the fi nancial results of the Group.
72 QRxPharma Annual Report 2008
QRxPHARMA LIMITED ABN 16 102 254 151
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2008
In the directors’ opinion:
(a)
the fi nancial statements and notes set out on pages 31 to 72 are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
(ii) giving a true and fair view of the company’s and consolidated entity’s fi nancial position as at 30 June 2008 and of their
performance for the fi nancial year ended on that date; and
(b)
there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;
and
(c)
the audited remuneration disclosures set out on pages 14 to 21 of the directors’ report comply with Accounting Standards AASB
124 Related Party Disclosures and the Corporations Regulations 2001.
The directors have been given the declarations by the chief executive offi cer and chief fi nancial offi cer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Peter C Farrell
Director
Sydney
25 August 2008
www.qrxpharma.com 73
QRxPHARMA LIMITED ABN 16 102 254 151
AUDIT REPORT
FOR THE YEAR ENDED 30 JUNE 2008
PricewaterhouseCoopers
ABN 52 780 433 757
Darling Park Tower 2
201 Sussex Street
GPO BOX 2650
SYDNEY NSW 1171
DX 77 Sydney
Australia
www.pwc.com/au
Telephone +61 2 8266 0000
Facsimile +61 2 8266 9999
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF QRxPHARMA LIMITED
Report on the fi nancial report
We have audited the accompanying fi nancial report of QRxPharma Limited (the company), which
comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes
in equity and cash fl ow statement for the year ended on that date, a summary of signifi cant
accounting policies, other explanatory notes and the directors’ declaration for both QRxPharma
Limited and the QRxPharma Group (the consolidated entity). The consolidated entity comprises the
company and the entities it controlled at the year’s end or from time to time during the fi nancial
year.
Directors’ responsibility for the fi nancial report
The directors of the company are responsible for the preparation and fair presentation of the
fi nancial report in accordance with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing
and maintaining internal controls relevant to the preparation and fair presentation of the fi nancial
report that is free from material misstatement, whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances. In Note 1, the directors also state, in accordance with Accounting Standard
AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to
International Financial Reporting Standards ensures that the fi nancial report, comprising the
fi nancial statements and notes, complies with lnternational Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the fi nancial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. These Auditing Standards require that
we comply with relevant ethical requirements relating to audit engagements and plan and perform
the audit to obtain reasonable assurance whether the fi nancial report is free from material
misstatement.
Liability limited by a scheme approved under Professional Standards Legislation
74 QRxPharma Annual Report 2008
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the fi nancial report. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the fi nancial report, whether due
to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the fi nancial report in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the fi nancial report.
Our procedures include reading the other information in the Annual Report to determine whether it
contains any material inconsistencies with the fi nancial report.
For further explanation of an audit, visit our website http://www.pwc.com/au/fi nancialstatementaudit.
Our audit did not involve an analysis of the prudence of business decisions made by directors or
management.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a
basis for our audit opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
Auditor’s opinion
In our opinion:
(a)
the fi nancial report of QRxPharma Limited is in accordance with the Corporations
Act 2001, including:
(i)
(ii)
giving a true and fair view of the company’s and consolidated entity’s
fi nancial position as at 30 June 2008 and of their performance for the year
ended on that date; and
complying with Australian Accounting Standards (including the Australian
Accounting Interpretations) and the Corporations Regulations 2001; and
(b)
the fi nancial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
www.qrxpharma.com 75
QRxPHARMA LIMITED ABN 16 102 254 151
AUDIT REPORT (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2008
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 21 of the directors’ report for
the year ended 30 June 2008. The directors of the company are responsible for the preparation
and presentation of the Remuneration Report in accordance with section 300A of the Corporations
Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the Remuneration Report of QRxPharma Limited for the year ended 30 June 2008,
complies with section 300A of the Corporations Act 2001.
Matters relating to the electronic presentation of the audited fi nancial report
This auditor’s report relates to the fi nancial report and remuneration report of QRxPharma Limited
(the company) for the year ended 30 June 2008 included on QRxPharma Limited web site. The
company’s directors are responsible for the integrity of the QRxPharma Limited web site. We have
not been engaged to report on the integrity of this web site. The auditor’s report refers only to the
fi nancial report and remuneration report named above. It does not provide an opinion on any other
information which may have been hyperlinked to/from these statements or the remuneration report.
If users of this report are concerned with the inherent risks arising from electronic data
communications they are advised to refer to the hard copy of the audited fi nancial report and
remuneration report to confi rm the information included in the audited fi nancial report and
remuneration report presented on this web site.
PricewaterhouseCoopers
Manoj Santiago
Partner
76 QRxPharma Annual Report 2008
Sydney
25 August 2008
QRxPHARMA LIMITED ABN 16 102 254 151
SHAREHOLDER INFORMATION
THE SHAREHOLDER INFORMATION SET OUT BELOW WAS APPLICABLE AS AT 29 AUGUST 2008.
A. DISTRIBUTION OF EQUITY SECURITIES
Analysis of numbers of equity security holders by size of holding:
1 – 1000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Shares
Options
48
228
187
228
57
748
-
-
-
10
14
24
There are 7 holders of less than a marketable parcel of ordinary shares.
B. EQUITY SECURITY HOLDERS
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
HSBC Custody Nominees (Australia) Limited
Dr John Holaday and Holaday Foundation
Nanyang Financial Services Limited
Innovation Capital Limited
National Nominees Limited
Spring Ridge Ventures I, LP
Uniquest Pty Limited
Dr Gary Pace
Innovation Capital LLC
ANZ Nominees Limited
UIIT Pty Limited
Ecapital Nominees Pty Limited
Bacchus Global Assets LLC
Dr Peter Farrell
Citicorp Nominees Pty Limited
Innovation Capital QRX Trust
Lynx No1 Pty Limited
Mr David Stack
Gowing Brothers Limited
Irrewarra Investments Pty Ltd
Ordinary shares
Number held
Percentage of issued
shares
10,139,834
7,543,000
5,925,586
5,269,090
4,582,052
4,228,673
4,004,499
3,230,083
2,713,685
2,518,495
2,175,338
1,800,000
1,380,366
1,280,540
1,053,914
992,793
877,853
525,895
400,000
395,200
61,036,896
13.52%
10.06%
7.90%
7.03%
6.11%
5.64%
5.34%
4.31%
3.62%
3.36%
2.90%
2.40%
1.84%
1.71%
1.41%
1.32%
1.17%
0.70%
0.53%
0.53%
81.38%
www.qrxpharma.com 77
QRxPHARMA LIMITED ABN 16 102 254 151
SHAREHOLDER INFORMATION (CONTINUED)
THE SHAREHOLDER INFORMATION SET OUT BELOW WAS APPLICABLE AS AT 29 AUGUST 2008.
B. EQUITY SECURITY HOLDERS (CONTINUED)
Unquoted equity securities
Options issued under the QRxPharma Limited Employee Share Option Plan and
JP Morgan Securities Australia Limited Deed to take up ordinary shares
5,939,713*
24**
Number on issue
Number of holders
* Number of unissued ordinary shares under the options.
** No person holds 20% or more of these securities.
Escrowed ordinary shares and options
The following ordinary shares are subject to voluntary escrow:
For the period through to 25 May 2009
34,229,407***
*** 10,461,317 of these ordinary shares are also subject to ASX escrow for the same period
C. SUBSTANTIAL HOLDERS
Substantial holders in the company are set out below:
Ordinary shares
Innovation Capital Limited and Innovation Capital LLC
Dr John W Holaday and Holaday Foundation
Nanyang Financial Services Limited
Westpac Banking Corporation
Spring Ridge Ventures I, LP
Uniquest Pty Limited
Number held
Percentage
7,982,775
7,543,000
5,925,586
4,928,247
4,228,673
4,004,499
10.64%
10.06%
7.90%
6.57%
5.64%
5.34%
D. VOTING RIGHTS
The voting rights attaching to each class of equity securities are set out below:
(a) 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.
(b) Options
No voting rights.
78 QRxPharma Annual Report 2008
NOTES:
www.qrxpharma.com 79
80 QRxPharma Annual Report 2008
www.qrxpharma.com