FPO See COVER fi le
Opening the therapeutic window for doctors and patients.
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-defined paths to regulatory approval
and sales. The Company intends to directly commercialise its products in the US and
seek strategic partnerships for worldwide markets. QRxPharma’s lead compound,
MoxDuo™IR (Q8003IR), is in Phase 3 clinical development and has successfully
completed multiple comparative studies evaluating its effi cacy and safety against
equianalgesic doses of morphine, oxycodone and Percocet® for the treatment of acute
pain. Study results consistently demonstrate MoxDuo™IR’s greater overall tolerability,
achieving better pain relief with substantially fewer incidences of moderate to severe side
effects. The Company’s preclinical and clinical pipeline includes other technologies in
the fields 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 in Sydney on 16 November 2009
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 Barker
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
Key Achievements
Letter from the Chairman
CEO Review
What key opinion leaders are saying
Directors’ report
Auditor’s independence declaration
Corporate governance statement
Income statements
2
3
5
7
8
24
25
31
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
32
33
34
35
68
69
71
www.qrxpharma.com 1
KEY ACHIEVEMENTS
MAY 2007
IPO: Initial Public offering completed raising A$50 million
NOVEMBER 2007
MoxDuoTM IR: Phase 3 trials initiated with Dose Range Study
MAY 2008
JULY 2008
MoxDuoTM IR: Dose Range study completed: Establishes Preferred
Dose for Optimal Effi cacy and Tolerability; Study Goals and Secondary
Endpoints Met (256 patients)
MoxDuoTM IR: FDA accepts streamlined Phase 3 development
programme: No Long Term Safety Data Required; Only Two Additional
Phase 3 Studies for New Drug Application Submission
DEC 2008
MoxDuoTM IR: Initiation of ”Combination Rule” Pilot Study
FEB 2009
MoxDuoTM IR: Initiation of Comparative Pilot Study in Pain after Total Knee
Replacement
APRIL 2009
MoxDuoTM IR: ”Combination Rule” Pilot Study demonstrates that
MoxDuoTM IR provides greater tolerability / fewer side effects than
Morphine or Oxycodone alone (197 patients)
JUNE 2009
MoxDuoTM IV: First patient dosed in Phase 2 Investigator study
AUGUST 2009
MoxDuoTM IR: Comparative Pilot Study in Pain after Total Knee
Replacement demonstrates that MoxDuoTM IR provides greater
tolerability / fewer side effects than Percocet® (44 patients)
OCTOBER 2009
MoxDuoTM IR: FDA fi nal review of MoxDuoTM IR Phase 3 Combination
Rule study Special Protocol Assessment
Anticipated timing of announcement
DECEMBER 2009
MoxDuoTM IV: Complete dosing of patients in MoxDuo™ IV Phase 2
Investigator study
MoxDuoTM CR: Commence MoxDuo™ CR Phase 1 study
MoxDuoTM IR: Initiate remaining MoxDuo™ IR Pivotal Phase 3 study
programme
Anticipated timing of announcement
2 QRxPharma Annual Report 2009
LETTER FROM THE CHAIRMAN
Dear Shareholder,
On behalf of the Board and management of QRxPharma, I am pleased to present our
2009 annual report.
The past 12 months will be remembered as a year of change. A year in which the global economic crisis
brought an end to the belief of uninterrupted growth. A year in which companies – once icons of industries
– are now fi ghting for their very survival. A year in which fi nancial uncertainty threatened the engine of
innovation upon which wealth creation and our prosperity depend.
Against such a backdrop it is with some humility but also, pride and satisfaction – that I can report that
the past year has been very positive for QRxPharma, demonstrating the results of our focused business
approach. It’s been a year of measured achievement with both good scientifi c progress and prudent
resource management. This discipline and commitment to build shareholder value even in these uncertain
times, has placed the Company on an upward trajectory when many companies are failing to achieve their stated goals.
Our primary objective remains the commercialisation of MoxDuo™IR (formerly Q8003IR), the Company’s lead product candidate for the
treatment of acute pain. In the past 12 months, we’ve made encouraging progress towards this goal. With the successful completion of
multiple comparative pilot studies, we’ve advanced our Phase 3 program for MoxDuo™IR and demonstrated the clinical benefi t, as well as
the commercial value of our patented Dual-Opioid™ platform.
To date, more than 400 patients, experiencing different forms of post-surgical pain (bunionectomy and total knee replacement), have
received MoxDuo™IR. Study results consistently demonstrate MoxDuo™IR’s greater overall tolerability with substantially fewer
incidences of moderate to severe side effects than observed with morphine, oxycodone and Percocet®.
Data collected from these trials has provided additional guidance for optimizing the design and implementation of two pending pivotal
Phase 3 studies required for fi ling a New Drug Application (NDA) with the US Food and Drug Administration (FDA). QRxPharma remains on
track to launch the world’s fi rst dual-opioid™ product, MoxDuo™IR, in 2011.
The Company also advanced clinical development of its complementary dual-opioid™ products, with the initiation of a Phase 2
comparative proof-of-concept study, evaluating the effi cacy and safety of MoxDuo™IV (intravenous morphine and oxycodone) against
IV morphine for the treatment of moderate to severe post-operative pain. MoxDuo™CR, a continuous release formulation designed to
provide 12 hours of pain relief in patients with moderate to severe pain, is on schedule to initiate Phase 1 studies by the end of the 2009
calendar year. These formulations incorporate both tamper resistant and abuse deterrent technologies.
www.qrxpharma.com 3
LETTER FROM THE CHAIRMAN (CONTINUED)
Additionally, QRxPharma continues to advance the development of its Torsin program under collaborative research agreement with the
University of Alabama (Caldwell Labs). These small molecules target dystonia, Parkinson’s disease, Alzheimer’s disease as well as similar
neurologic disorders. Preclinical trials, supported in part by the Michael J. Fox Foundation, are presently underway to evaluate the
Company’s lead drug candidates in Parkinson’s disease.
QRxPharma has continued to make signifi cant progress over the past year, having achieved our projected clinical development goals for
MoxDuo™IR, whilst maintaining development momentum of other drug candidates. And we have done this while being suitably fi scally
conservative.
I would like to take this opportunity to thank my fellow Board members, CEO Dr John Holaday, the management team, and all staff in
Australia and the US for their dedication and determination throughout the year. We also appreciate your continued support and look
forward to communicating with you over the coming year as events unfold.
Peter C Farrell, PhD, ScD, AM
Chairman
4 QRxPharma Annual Report 2009
CEO REVIEW
Advances in science usually occur when convention is creatively challenged with solid data. Over twenty years
ago, the World Health Organization stated: “never administer two powerful opioids at the same time”. Our
founding scientist, Prof. Maree Smith at the University of Queensland, asked: “why not”. Her discovery, that
the combination of two powerful opioids, morphine and oxycodone, demonstrated synergy on pain relief with
fewer side effects, is the basis of our remarkable clinical fi ndings. The Company’s lead product candidate,
MoxDuo™IR, an immediate-release oral capsule, the fi rst patented analgesic product in the world that consists
of two opioids (a fi xed ratio of morphine and oxycodone), has shown her vision to be true. We now have
demonstrated in Phase 2 and 3 clinical trials that this combination therapy provides pain relief while signifi cantly
limiting the debilitating side effects that prevent the use of opioids for treating moderate to severe pain.
While many analgesic combination drugs exist – such as Percocet®, which contains an opioid (oxycodone)
combined with a classic mild pain reliever like acetaminophen (Tylenol®), such products are typically used for controlling mild to moderate pain.
MoxDuo™IR, however, is intended for the treatment of moderate to severe acute pain – a $2.5 billion segment of the $8 billion spent annually
on prescription opioids in the United States.
In clinical trials conducted to date, our data indicate that QRxPharma’s patented combination of morphine plus oxycodone works synergistically
to increase analgesia while signifi cantly decreasing the frequency and severity of opioid-related side effects.
Expanding on these promising clinical fi ndings with our immediate-release formulation, our Dual-Opioid™ product portfolio includes two
complementary products: MoxDuo™CR, a controlled-release oral capsule (with abuse deterrent and tamper resistant technologies) for chronic
pain and MoxDuo™IV, an intravenous formulation for treating moderate to severe hospital-based pain.
In the past 12 months, the Company signifi cantly advanced its MoxDuo™IR Phase 3 clinical program, completing two critical comparative
pilot studies. The fi rst study compared the effi cacy and safety profi le of MoxDuo™IR to corresponding doses of oxycodone and morphine in
patients experiencing moderate to severe pain in the fi rst 24 hours following a scheduled surgical procedure (bunionectomy).
When postoperative pain reached a measure of at least “4” on the Numerical Pain Rating Scale (10 being the most severe), patients either
received MoxDuo™IR, morphine or oxycodone every 6 hours for 48 hours. The study’s primary clinical endpoint was changes in the pain
intensity scores from baseline for MoxDuo versus component doses of morphine and oxycodone alone. Secondary endpoints included: (1)
effi cacy relating to the time to onset of analgesia and global assessment of effect; and (2) safety as measured by the incidence and intensity of
opioid-related adverse events. The study enrolled 197 patients at 6 US clinical research sites.
Signifi cantly, the frequency of moderate to severe adverse events (including nausea, vomiting, constipation, dizziness, etc.) was 50% to 75%
lower among patients on MoxDuo™IR compared to those receiving equi-analgesic doses of morphine or oxycodone alone. Furthermore,
patients receiving morphine or oxycodone were two to four times more likely to prematurely discontinue dosing (due to side effects) than those
on MoxDuo™IR.
These results were incorporated into an updated version of the Company’s “combination rule” pivotal Phase 3 study protocol for MoxDuo™IR
submitted in June 2009 to the US Food and Drug Administration (FDA) for Special Protocol Assessment (SPA) approval. This process enables
companies to achieve advanced agreement with the FDA regarding study design acceptability and proposed statistical analysis plans prior to
implementation of the pivotal Phase 3 clinical trial.
QRxPharma’s second pilot study compared the effi cacy and safety profi le of MoxDuo™IR capsules to equi-analgesic doses of Percocet® in
patients experiencing moderate to severe pain following total knee replacement surgery. Patients were treated every four to six hours over a
48-hour period. The study enrolled a total of 44 patients at fi ve US clinical research sites.
As with morphine and oxycodone, when compared to equi-analgesic doses of Percocet®, MoxDuo™IR demonstrated greater overall
tolerability – enabling doctors and patients to achieve better pain relief while signifi cantly decrease the frequency and severity of side effects.
www.qrxpharma.com 5
CEO REVIEW (CONTINUED)
All primary study objectives were met comparing: (1) analgesic effi cacy and safety; and (2) a fl exible dosing regimen of MoxDuo™IR against
a fi xed low dose (3/2 mg). Patients receiving the fl exible dosing regimen of MoxDuo™IR achieved signifi cantly greater pain relief than those
receiving the low dose formulation (p<0.05).
Data collected from both pilot studies will provide additional guidance for optimizing the design and implementation of the two pending pivotal
Phase 3 trials required for fi ling a New Drug Application (NDA) with the US Food and Drug Administration (FDA).
Based on the Company’s July 2008 FDA meeting, fi nal Phase 3 studies for MoxDuo™IR will include a “combination rule” trial in patients
experiencing post-surgery (bunionectomy) pain that compares MoxDuo™IR against morphine alone and oxycodone alone, and a low dose
MoxDuo™IR controlled study of the effectiveness of a fl exible dose regimen of MoxDuo™IR in patients following total knee replacement. No
additional pharmacology, toxicology or long-term clinical safety studies will be required for regulatory submission and market approval.
QRxPharma plans to launch MoxDuo™IR in the US marketplace in 2011.
The Company is also excited to report the entry of a second MoxDuo™ product into the clinic with the initiation of a Phase 2 comparative
proof-of-concept study evaluating the effi cacy and safety of MoxDuo™IV (an intravenous morphine plus oxycodone formulation) against IV
morphine for the treatment of moderate to severe post-operative pain. The study involves 40 patients recovering from hip replacement surgery
and is being conducted at the Cologne-Merheim Medical Center, a part of Witten/ Herdecke University, and Cologne University Hospital, both
in Cologne, Germany.
Data from this study will serve as a signifi cant predictor of MoxDuo™IV clinical benefi ts and provide guidance for the design of further clinical
trials leading to an Investigational New Drug (IND) submission to the FDA in 2010.
In addition, QRxPharma is on track to initiate its fi rst Phase 1 study of MoxDuo™CR, a continuous release Dual-Opioid™, by the end of
calendar year 2009. MoxDuo™CR is designed to provide 12 hours of pain relief in patients with moderate to severe pain. This proprietary
formulation encompasses not only sustained delivery technology, but also technologies to deter abuse and tampering.
Our small molecule development program for neurological disorders continues to move forward with the University of Alabama (Caldwell Labs)
under a collaborative research agreement. Preclinical trials, supported in part by the Michael J. Fox Foundation - are presently underway to
evaluate QRxPharma’s lead drug candidates for Parkinson’s disease.
Business development efforts also continue to proceed with QRxPharma’s Venomics platform to secure strategic relationships for the clinical
and commercial development of these venom-derived coagulants and anti-coagulants.
The foundation of our success is people and patents. Our progress over this year would not have been possible without the exceptional efforts
of our management team and staff. I am very grateful for their important contributions. We are executing well on all three cornerstones of our
business, including clinical, fi nancial and business development, while remaining conservative with resources. Further, our patent portfolio is
enriched this year with several key submissions that expand our opportunities with our Dual-Opioid™ platform to extend exclusivity beyond
2029, as well as other key patent applications surrounding the growing value of our neurodegenerative disease opportunities.
QRxPharma has had a very successful year. We’ve completed planned trials ahead of schedule, exceeded expectations in terms of study
results, and clearly demonstrated the value of our Dual-Opioid™ platform. We believe the MoxDuo™ product portfolio, including immediate
release, controlled release and intravenous formulations, will offer a broader selection of analgesic options to pain specialists and signifi cantly
improve patient care - providing equal or better analgesia with fewer and/or less intense side effects than current standards of care.
I look forward to an exciting year ahead.
John W Holaday, PhD
Managing Director and Chief Executive Offi cer
6 QRxPharma Annual Report 2009
WHAT KEY OPINION LEADERS ARE SAYING:
ON CURRENT PAIN THERAPIES...
“Pain is poorly controlled.” Pain Specialist - Atlanta
“ We need a better tolerated product.
Less side effects.” Orthopedic Surgeon - Los Angeles
“ Side effects. Constipation. The patient is spaced
out, drowsy, itching. Most are not happy or
comfortable.” Pain Specialist - Los Angeles
ON MOXDUOTM...
“ Fascinating. I’ve never seen a combination of two
narcotics. I’ve seen it combined with anti-infl ammatories.
This is great. Requires a smaller amount and it’s
symbiotic.” Orthopedic Surgeon - Atlanta
“ It has real advantages. The same pain
relief but less side effects. Increases
safety of the patient.” Pain Specialist - Atlanta
“ I like it. A reduction in all the side effects [we
mentioned]. Low potential for sedation. Absolutely
key for the elderly. No increase in side effects if you
increase the dose. It’s better.” Podiatrist - Los Angeles
Disclaimer: This KOL research was conducted after results of the 021 study. Product profi le presented the 50% - 75%
reductions in AEs seen in the 021 study.
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 2009.
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 (2008: $nil).
REVIEW OF OPERATIONS
The Group has made a loss from ordinary activities after income tax for the year of $13.5 million (2008: loss of $36.6 million). The loss was
in line with the expectations of the Board of Directors and resulted from fulfi lling research and development activities in the progression of
the Company’s clinical pipeline candidates and preclinical stage drugs. The results were favourably impacted by foreign exchange gains of
$5.3 million (2008: $2.6 million loss) arising from holding cash reserves primarily in US dollars. In addition, the prior year loss included an
impairment charge relating to the Torsin IP of $14.6 million. (2009: $nil)
The Company continues to closely monitor its cash position as it progresses the MoxDuoTM Phase 3 development programme, and retains
$17.8 million in cash reserves at 30 June 2009.
Further information on the operations and fi nancial position of the Group and its business strategies and prospects is set out on pages 5 to
6 of this annual report.
8 QRxPharma Annual Report 2009
LOSS PER SHARE
(a) Basic loss per share
Loss from continuing operations attributable to the ordinary
equity holders of the company
(b) Diluted loss per share
Loss from continuing operations attributable to the ordinary
equity holders of the company
2009
Cents
2008
Cents
(18.0)
(48.8)
(18.0)
(48.8)
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.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
No matter or circumstance has arisen since 30 June 2009 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
1,380,540 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.
10 QRxPharma Annual Report 2009
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 60 patents. He served as
Chairman of the Maryland BioAlliance, was a Judge for the Ernst and Young Entrepreneur of the Year Award (2003 to
2008) 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 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).
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
8,297,307 ordinary shares (including ordinary shares held by Innovation Capital Limited, Innovation Capital LLC 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 2009
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.
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 2009, 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
4
4
4
4
4
B
4
4
4
4
4
A
4
4
4
4
B
4
4
4
4
A
**
**
6
**
6
B
6
6
A
1
**
1
**
1
B
1
1
1
A
4
4
**
**
4
B
4
4
4
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.
www.qrxpharma.com 13
DIRECTORS’ REPORT (CONTINUED)
The information provided in the remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001.
A Principles used to determine the nature and amount of remuneration
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.
14 QRxPharma Annual Report 2009
The combination of these comprises the executive’s total remuneration.
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 where requested 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
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) Joseph J Berry – Vice President Operations
(cid:129) Philip J Magistro – Vice President Commercial Operations
(cid:129) Patricia T Richards, MD – Chief Medical Offi cer
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
Non-
monetary
Super-
Retirement
service
Long-
term
Share-
based
benefi ts
payments
Long
2009
Name
Non executive directors
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
Cash
salary and
fees
$
Cash
bonus
$
60,000
40,000
40,000
40,000
-
-
-
-
-
Sub-total non-executive
directors
180,000
Executive directors
John W Holaday
404,733
132,511
Other key management personnel (Group)
Warren C Stern ^
Chris J Campbell ^
Joseph J Berry ^
Philip J Magistro ^
311,677
121,674
204,644
307,257
311,677
57,881
91,255
91,255
Patricia T Richards ^
343,355
101,395
Total key management
personnel compensation
(Group)
2,063,343 595,971
benefi ts
Other
annuation
benefi ts
leave
Options
$
$
$
$
$
$
Total
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,600
-
-
3,600
-
-
23,626
-
-
-
-
27,226
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
141,155
56,462
94,104
125,088
201,155
100,062
134,104
165,088
416,809
600,409
250,176
787,420
252,287
104,416
30,794
40,495
107,178
685,638
390,567
429,306
443,427
551,928
-
1,202,155 3,888,695
^ denotes one of the highest paid executives of the company, as required to be disclosed under the Corporations Act 2001.
Gary Pace was paid $131,532 for consulting services provided to the Company during the year.
16 QRxPharma Annual Report 2009
Key management personnel and other executives of QRxPharma Limited and the Group were the same in 2008
Short-term employee benefi ts
Non-
Post-employment
benefi ts
Long-
term
Share-
based
benefi ts
payments
Long
Cash salary
Cash
monetary
Super-
Retirement
service
and fees
bonus
benefi ts
Other
annuation
benefi ts
leave
Options
$
$
$
$
$
$
$
$
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
208,788
56,744
(resigned 7 March 2008)
Warren C Stern ^
Chris J Campbell ^
Joseph J Berry ^
(appointed 12 November 2007)
227,665
197,248
150,550
90,879
75,000
70,458
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 Group, 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.
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
2009
2008
2009
2008
2009
2008
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
83%
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
Philip J Magistro
Patricia T Richards
-
82%
85%
79%
79%
82%
C Service agreements
86%
100%
100%
100%
100%
79%
90%
86%
72%
72%
84%
17%
-
-
-
-
-
18%
15%
21%
21%
18%
14%
-
-
-
-
21%
10%
14%
28%
28%
16%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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 – 3 years (with annual extension) renegotiated from 20 February 2009.
(cid:129) Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2009 of US$300,000, 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$130,000.
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 2009 of US$262,500 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.
18 QRxPharma Annual Report 2009
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 2009 of US$236,250, to be reviewed
annually by the remuneration committee.
Philip J Magistro, Vice President Commercial Operations
(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 2009 of US$236,250, to be reviewed
annually by the remuneration committee.
Patricia T Richards, Chief Medical Offi cer
(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 2009 of US$262,500, 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 2009 of $225,750, 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, renegotiated from 25 May 2009.
(cid:129) Base consulting fee for the contract year ending 25 May 2009 of US$100,000 (pro rata).
(cid:129) No termination benefi t payable on early termination by the Company.
D Share-based compensation
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.
Options issued up to 31 December 2008 were generally granted for no consideration and generally vest annually over 3 years in equal
proportions with the initial vesting on the fi rst anniversary of the date of grant. Options issued from 1 January 2009 generally vest over 3
years with the initial vesting on the fi rst anniversary of the date of the grant and subsequent vestings in 8 equal tranches on the fi rst day
of each calendar quarter over the following 2 years. 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.
www.qrxpharma.com 19
DIRECTORS’ REPORT (CONTINUED)
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
1 October 2008
4 November 2008
1 January 2009
1 January 2009
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
Over 3 years
Over 6 months
Over 6 months
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 October 2015
4 November 2015
1 January 2016
1 January 2016
$1.42
$1.00
$1.00
$2.00
$1.70
$1.45
$1.34
$1.11
$1.05
$1.04
$0.60
$0.37
$0.20
$0.20
$1.31
$1.46
$1.46
$1.15
$0.98
$0.83
$0.77
$0.64
$0.60
$0.60
$0.24
$0.07
$0.10
$0.10
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 26 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
Other key management personnel
Warren C Stern
Chris J Campbell
Joseph J Berry
Philip J Magistro
Patricia T Richards
Number of options granted
during the year
Number of options vested
during the year
2009
2008
2009
2008
-
-
-
-
-
75,000
75,000
60,000
60,000
60,000
-
-
-
-
-
-
-
150,000
200,000
500,000
201,363
80,545
134,242
134,242
268,484
268,484
134,242
50,000
66,667
166,667
201,363
80,545
134,242
134,242
268,484
268,484
134,242
-
-
-
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
binomial 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 2009
The model inputs for options granted during the year ended 30 June 2009 included:
(a) Options are granted for no consideration and generally vest over 3 years (see page 19)
(b) Exercise price: $0.20 to $0.60 (2008: $1.05 to $1.11)
(c) Grant date: 1 October 2008 to 1 January 2009 (2008: 1 January 2008 to 1 April 2008)
(d) Expiry date: 4 May 2009 to 1 January 2016 (2008: 1 January 2015 to 1 April 2015)
(e) Expected price volatility of the company’s shares: 60% to 80% (2008: 60%)
(f) Expected dividend yield: nil% (2008: nil%)
(g) Risk free interest rate: 5.18% (2008: 6.25%).
Shares provided on exercise of remuneration options
No ordinary shares in the company have been provided as a result of the exercise of remuneration options to any director of QRxPharma
Limited or other key management personnel of the Group for the fi nancial year ended 30 June 2009 or 30 June 2008.
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
$
Total of
columns B-D
$
70.2%
58.5%
70.2%
31.8%
75.8%
36.8%
26.7%
7.2%
9.1%
19.4%
-
-
-
-
-
7,443
7,443
5,954
5,954
5,954
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,443
7,443
5,954
5,954
5,954
Name
Peter C Farrell
R Peter Campbell
Michael A Quinn
John W Holaday
Gary W Pace
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.
www.qrxpharma.com 21
DIRECTORS’ REPORT (CONTINUED)
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
1 October 2008
4 November 2008
1 January 2009
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 October 2015
4 November 2015
1 January 2016
$1.42
$1.00
$1.00
$2.00
$2.20
$1.70
$1.45
$1.34
$1.11
$1.05
$1.04
$0.60
$0.37
$0.20
402,726
2,013,630
552,726
1,448,450
322,181
50,000
75,000
50,000
350,000
600,000
75,000
50,000
100,000
710,000
6,799,713
Shares issued on the exercise of options
No ordinary shares have been issued during the year ended 30 June 2009 on the exercise of options granted under the QRxPharma
Limited Employee Option Plan
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.
22 QRxPharma Annual Report 2009
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:
Taxation services
Related practices of PricewaterhouseCoopers Australian fi rm
Total remuneration for non-audit services
AUDITOR’S INDEPENDENCE DECLARATION
Consolidated
2009
2008
129,250
129,250
88,885
66,218
155,103
86,000
86,000
99,270
11,554
110,824
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 24.
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
21 August 2009
www.qrxpharma.com 23
AUDITORS’ INDEPENDENCE DECLARATION
24 QRxPharma Annual Report 2009
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. The
Company and its controlled entities together are referred to as the
Group in this statement.
A description of the Group’s main corporate governance practices
is set out below. All these practices, unless otherwise stated, were
in place for the entire year. They comply with the August 2007
ASX Principles of Good Corporate Governance and Best Practice
Recommendations.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR
MANAGEMENT AND OVERSIGHT
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 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
Day to day management of the Group’s affairs and the
implementation of the corporate strategy and policy initiatives are
formally delegated by the board to the Chief Executive Offi cer and
senior executives as set out in the Group’s delegations policy.
These delegations are reviewed on an annual basis.
A performance assessment for senior executives last took
place in July 2009 during the remuneration committee’s
annual assessment of performance bonuses. To help make
this assessment, the committee receives detailed reports on
performance from management.
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD
VALUE
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
the board to maximise performance and ensure appropriate
levels of shareholder return
(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) 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
(cid:129) approving and monitoring annual budgets and strategic plans
The board seeks to ensure that:
(cid:129) approving and monitoring fi nancial and other reporting made to
shareholders and the ASX under the continuous disclosure
regime.
(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.
www.qrxpharma.com 25
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Directors’ independence
Non executive directors
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 board should consider
whether the director:
(cid:129) is a substantial shareholder of the Company or an offi cer of, or
otherwise associated directly with, a substantial shareholder of
the Company
(cid:129) is or has been employed in an executive capacity by the
Company or any other Group member, within three years before
commencing to serve on the board
(cid:129) within the last three years has 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) is 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) has a material contractual relationship with the company or a
controlled entity other than as a director of the Group
(cid:129) is free from 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.
The board assesses independence each year. To enable this
process, the directors must provide all information that may be
relevant to the assessment.
Board members
Details of the members of the board, their experience, expertise,
qualifi cations, term of offi ce, relationships affecting their
independence and their independent status are set out in the
directors’ report under the heading “Information on directors”. At
the date of signing the directors’ report, there is one executive
director and four non-executive directors.
The four non executive directors met four 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.
Term of offi ce
The Company’s Constitution specifi es that all directors excluding
the chief executive offi cer must retire from offi ce no later than the
third annual general meeting (AGM) following their last election.
Chair
The Chair 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. In
accepting the position, the Chair has acknowledged that it will
require a signifi cant time commitment and has confi rmed that other
positions iwll not hinder his effective performance in the role of the
Chair.
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
2009, 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
26 QRxPharma Annual Report 2009
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.
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 nominations committee operates in accordance with
its charter which is available on the Company website. The
nominations 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 assess the performance of directors. Further, advise
the board on appointment and evaluation of the Managing Director
and to develop succession plans for the board, Managing Director
and senior management.
The main responsibilities of the committee include:
(cid:129) reviewing management succession planning for the Company
in general but specifi cally in regards to the CEO and other senior
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
the appointment of non executive directors, including:
(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.
PRINCIPLE 3: PROMOTE ETHICAL AND
RESPONSIBLE DECISION MAKING
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.
The Company is developing a Code of Conduct to guide the
board, individual directors and senior management as to the
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.
www.qrxpharma.com 27
CORPORATE GOVERNANCE STATEMENT (CONTINUED)
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.
PRINCIPLE 4: SAFEGUARD INTEGRITY IN
FINANCIAL REPORTING
In fulfi lling its responsibilities, the audit committee:
(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.
Audit and risk committee
External auditors
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 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 19 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.
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 external auditor will attend the annual general meeting and be
available to answer shareholder questions about the conduct of
the audit and the preparation and content of the annual report.
PRINCIPLES 5 AND 6: MAKE TIMELY AND
BALANCED DISCLOSURES AND RESPECT THE
RIGHTS OF SHAREHOLDERS
The main responsibilities of the committee include:
Continuous disclosure and shareholder communication
(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) overseeing the adequacy of the control processes in place in
relation to the preparation of fi nancial statements and reports
(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.
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.
28 QRxPharma Annual Report 2009
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) making recommendations to the board for reviewing and
approving the remuneration of executive directors
(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’’.
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.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
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.
The CEO and CFO have made the following certifi cations to the
board:
(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
(cid:129) That the above statement is founded on a sound system of
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 in relation to fi nancial reporting risks.
PRINCIPLE 8: REMUNERATE FAIRLY AND
RESPONSIBLY
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
www.qrxpharma.com 29
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
5 to 6 and in the directors’ report on pages 8 to 23, 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 2009. 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
31
32
33
34
35
68
69
71
30 QRxPharma Annual Report 2009
QRxPHARMA LIMITED ABN 16 102 254 151
INCOME STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009
Revenue from continuing operations
Other income
Research and development
Employee benefi ts expense
Depreciation and amortisation
Business Development
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
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Notes
5
6
7
7
7
7
12
14
8
719
2,009
710
2,009
5,474
(11,937)
(6,191)
(29)
(212)
(1,319)
-
-
-
(13,495)
-
(13,495 )
(13,495 )
-
(12,708)
(5,298)
(822)
(241)
(2,421)
(2,618)
-
(14,628)
(36,727)
125
(36,602)
(36,602)
6,193
(14,480)
(2,422)
(13)
(206)
(1,908)
-
(749)
-
(12,875)
-
(12,875)
(12,875)
515
(13,970)
(2,838)
(16)
(241)
(2,807)
(2,648)
(17,117)
-
(37,113)
125
(36,988)
(36,988)
Earnings per share for loss attributable
to the ordinary equity holders of the
company:
Cents
Cents
Basic loss per share
Diluted loss per share
25
25
(18.0)
(18.0)
(48.8)
(48.8)
The above income statements should be read in conjunction with the accompanying notes.
www.qrxpharma.com 31
QRxPHARMA LIMITED ABN 16 102 254 151
BALANCE SHEETS
AS AT 30 JUNE 2009
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Non-current assets
Other fi nancial assets
Property, plant and equipment
Intangible assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total equity
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Notes
9
10
11
12
13
14
15
17,773
66
566
29,672
158
458
17,552
94
220
29,583
135
119
18,405
30,288
17,866
29,837
-
274
-
274
18,679
1,684
1,684
1,684
-
73
-
73
30,361
2,024
2,024
2,024
2,341
24
-
2,605
37
-
2,365
20,231
2,642
32,479
3,263
3,263
3,263
4,169
4,169
4,169
16,995
28,337
16,968
28,310
16
17(a)
17(b)
79,694
5,737
(68,436)
16,995
79,694
3,584
(54,941)
28,337
79,694
5,432
(68,158)
16,968
79,694
3,899
(55,283)
28,310
The above balance sheets should be read in conjunction with the accompanying notes.
32 QRxPharma Annual Report 2009
QRxPHARMA LIMITED ABN 16 102 254 151
STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2009
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Notes
Total equity / (defi ciency in capital) at the
beginning of the fi nancial year
28,337
61,980
28,310
62,024
Loss for the year
(13,495)
(36,602)
(12,875)
(36,988)
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
Total equity at the end of the fi nancial year
16
17
17
-
1,533
620
2,153
16,995
(238)
3,512
(315)
2,959
-
1,533
-
1,533
(238)
3,512
-
3,274
28,337
16,968
28,310
The above statements of changes in equity should be read in conjunction with the accompanying notes.
www.qrxpharma.com 33
QRxPHARMA LIMITED ABN 16 102 254 151
CASH FLOW STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009
Cash fl ows from operating activities
Payments to suppliers and employees (inclusive of goods
and services tax)
Interest received
Income tax R&D receipt
Grant received
Net cash outfl ow from operating activities
Cash fl ows from investing activities
Payments for property, plant and equipment
Payments for shares issued in subsidiary
Proceeds (payments) for held-to-maturity investments
Net cash infl ow / (outfl ow) from investing activities
Cash fl ows from fi nancing activities
Payments made in relation to IPO
Net cash infl ow / (outfl ow) from fi nancing activities
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Notes
8
6
24
12
(17,956)
(15,822)
(18,103)
813
-
150
1,550
125
-
616
-
150
(12,669)
1,550
125
-
(16,993)
(14,147)
(17,337)
(10,994)
(230)
-
-
(230)
-
-
(68)
-
10,846
10,778
(31)
(31)
-
(2)
-
(2)
-
-
(28)
(3,252)
10,846
7,566
(31)
(31)
Net (decrease) / increase in cash and cash equivalents
(17,223)
(3,400)
(17,339)
(3,459)
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
29,672
35,690
29,583
35,690
5,324
17,773
(2,618)
29,672
5,308
(2,648)
17,552
29,583
The above cash fl ow statements should be read in conjunction with the accompanying notes.
34 QRxPharma Annual Report 2009
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 Current assets – Other current assets
12 Non-current assets – Other fi nancial assets
36
43
47
48
48
48
49
50
51
51
52
52
13 Non-current assets – Property, plant and equipment 53
14 Non-current assets – Intangible assets
15 Current liabilities – Trade and other payables
16 Contributed equity
17 Reserves and accumulated losses
18 Key management personnel disclosures
19 Remuneration of auditors
20 Contingencies
21 Commitments
22 Related party transactions
23 Subsidiaries
24 Reconciliation of profi t after income tax
to net cash infl ow from operating activities
25 Loss per share
26 Share-based payments
27 Events occurring after the balance sheet date
54
55
56
57
58
61
61
62
62
63
63
64
65
67
www.qrxpharma.com 35
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2009
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. At 30 June 2009, the Group holds cash and cash
equivalents of $17.8 million. (2008 : $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 2009 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.
36 QRxPharma Annual Report 2009
(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
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.
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.
www.qrxpharma.com 37
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
(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)).
38 QRxPharma Annual Report 2009
(N) INTANGIBLE ASSETS
(i) Intellectual property
(Q) EMPLOYEE BENEFITS
(i) Wages and salaries and annual leave
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) LEASES
Leases in which a signifi cant portion of the risks and rewards of
ownership are not transferred to the Group as lessee are classifi ed
as operating leases (note 21). Payments made under operating
leases (net of any incentive received from the lessor) are charged
to the income statement on a straight-line basis over the period of
the lease.
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 26.
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.
The fair value at grant date is independently determined using a
binomial 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.
www.qrxpharma.com 39
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
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
(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.
(T) 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.
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
(U) 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.
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.
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.
(R) 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.
(S) EARNINGS PER SHARE
(i) Basic earnings per share
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.
(V) 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.
(W) 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 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.
40 QRxPharma Annual Report 2009
(X) NEW ACCOUNTING STANDARDS AND
INTERPRETATIONS
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2009 reporting
periods. The Group’s assessment of the impact of these new
standards and interpretations is set out below.
(i) AASB 8 Operating Segments and AASB 2007-
3 Amendments to Australian Accounting Standards
arising from AASB 8 (effective from 1 January 2009)
AASB 8 requires the 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 from 1 July 2009 and it is not expected to have a
signifi cant impact on disclosure.
(ii) Revised AASB 123 Borrowing Costs and AASB
2007-6 Amendments to Australian Accounting
Standards arising from AASB 123 (effective from
1 January 2009)
The revised AASB 123 has removed the option to expense all
borrowing costs and, when adopted, will require the capitalisation
of all borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset. There will be no
impact on the fi nancial report of the Group, as the Group does not
have any borrowings.
(iii) Revised AASB 101 Presentation of Financial
Statements and AASB 2007-8 Amendments to
Australian Accounting Standards arising from
AASB 101 (effective from 1 January 2009)
The September 2007 revised AASB 101 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. If an entity has
made a prior period adjustment or has reclassifi ed items in the
fi nancial statements, it will need to disclose a third balance sheet
(statement of fi nancial position), this one being as at the beginning
of the comparative period. The Group will apply the revised
standard from 1 July 2009.
(iv) AASB 2008-1 Amendments to Australian
Accounting Standard – Share-based Payments:
Vesting Conditions and Cancellations (effective
from 1 January 2009)
AASB 2008-1 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.
(v) 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 (effective 1 July 2009)
The revised AASB 3 continues to apply the acquisition method to
business combinations, but with some signifi cant changes. For
example, all payments to purchase a business are to be recorded
at fair value at the acquisition date, with contingent payments
classifi ed as debt subsequently remeasured through the income
statement. There is a choice on an acquisition-by-acquisition basis
to measure the non-controlling interest in the acquiree either at
fair value or at the non-controlling interest’s proportionate share
of the acquiree’s net assets. All acquisition related costs must be
expensed.
The revised AASB 127 requires the effects of all transactions
with non-controlling interests to be recorded in equity if there is
no change in control and these transactions will no longer result
in goodwill or gains and losses. The standard also specifi es the
accounting when the control is lost. Any remaining interest in the
entity is remeasured to fair value, and a gain or loss is recognised in
profi t or loss. This is consistent with the Group’s current accounting
policy if signifi cant infl uence is not retained.
The Group will apply the revised standards prospectively to all
business combinations and transactions with non controlling
interests from 1 July 2009.
www.qrxpharma.com 41
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
(ix) AASB Interpretation 17 Distribution of Non-cash
Assets to Owners and AASB 2008-13 Amendments
to Australian Accounting Standards arising from
AASB Interpretation 17
AASB-I 17 applies to situations where an entity pays dividends by
distributing non-cash assets to its shareholders. These distributions
will need to be measured at fair value and the entity will need to
recognise the difference between the fair value and the carrying
amount of the distributed assets in the income statement on
distribution. The interpretation further clarifi es when a liability for
the dividend must be recognised and that it is also measured at
fair value. The Group will apply the interpretation prospectively from
1 July 2009. It is not expected to have a material impact on the
Group’s fi nancial statements.
(vi) AASB 2008-6 Further Amendments to Australian
Accounting Standards arising from the Annual
improvement project (effective 1 July 2009)
The amendments to AASB 5 Discontinued operations and AASB
1 First-time Adoption of Australian-Equivalents to international
fi nancial Reporting Standards are part of the IASB’s annual
improvements project published in May 2008. They clarify that all
of a subsidiary’s assets and liabilities are classifi ed as held for sale
if a partial disposal sale plan results in loss of control. Relevant
disclosures should be made for this subsidiary if the defi nition
of a discontinued operation is met. The Group will apply the
amendments prospectively to all partial disposals of subsidiaries
from 1 July 2009.
(vii) AASB 2008-7 Amendments to Australian
Accounting Standards – Cost of an Investment
in a Subsidiary, Jointly Controlled Entity or
Associate (effective 1 July 2009)
In July 2008, the AASB approved amendments to AASB 1 First
Time adoption of International Financial Reporting Standards
and AASB 127 Consolidated and Separate Financial Statements.
The Group will apply the revised rules prospectively from 1 July
2009. After that date, all dividends received from investments
in subsidiaries, jointly controlled entities or associates will be
recognised as revenue, even if they are paid out of pre-acquisition
profi ts, but the investments may need to be tested for impairment
as a result of the dividend payment. Under the entities current
policy, these dividends are deducted from the cost of the
investments. Furthermore, when a new intermediate parent entity
is created in internal reorganisations it will measure its investments
in subsidiaries at the carrying amounts of the net assets of the
subsidiary rather than the subsidiary’s fair value. It is not expected
to have a material impact on the Group’s fi nancial statements.
(viii) AASB 2008-8 Amendment to IAS 39 Financial
instruments: Recognition and Measurement
(effective 1 July 2009)
AASB 2008-8 amends AASB 139 Financial instruments:
Recognition and Measurement and must be applied
retrospectively in accordance with AASB 108 Accounting Policies,
Changes in Accounting Estimates and Errors. The amendment
makes two signifi cant changes. It prohibits designating infl ation
as a hedgeable component of a fi xed rate debt. It also prohibits
including time value in the one sided hedged risk when
designating options as hedges. The Group will apply the amended
standard from 1 July 2009. It is not expected to have a material
impact on the Group’s fi nancial statements.
42 QRxPharma Annual Report 2009
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
2009
$’000
2008
$’000
2009
$’000
2008
$’000
17,773
66
566
18,405
1,684
1,684
29,672
158
458
30,288
2,024
2,024
17,552
94
220
17,866
29,583
135
119
29,837
3,263
3,263
4,169
4,169
Financial assets
Cash and cash equivalents
Trade and other receivables
Other fi nancial assets
Financial liabilities
Trade and other payables
(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.
During the year the Group converted AUD$3 million (2008: $20 million) to USD taking advantage of the terms on the remaining option
contracts which had been entered into during the fi nancial year ended 30 June 2007. During that year, 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.
These put options contracts covered 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
2009
$’000
2008
$’000
2009
2008
-
15,300
-
0.8180
Amounts disclosed above represent currency sold measured at the contracted rate.
www.qrxpharma.com 43
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
The Group’s exposure to foreign currency risk at the reporting date was as follows:
Cash at bank
Term deposits
Trade payables
30 June 2009
30 June 2008
USD
$’000
EUR
$’000
USD
$’000
EUR
$’000
158
13,009
829
-
68
-
333
21,022
116
-
-
-
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 2009
30 June 2008
USD
$’000
EUR
$’000
USD
$’000
EUR
$’000
158
13,009
3,098
-
68
-
333
21,022
3,891
-
-
-
Cash at bank
Term deposits
Trade payables
Group sensitivity
Based on the fi nancial instruments held at 30 June 2009, 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 $1.8 million lower / $1.5 million
higher (2008 – $2.5 million lower / $2.0 million higher), mainly as a result of foreign exchange gains/losses on translation of US dollar
denominated fi nancial instruments as detailed in the above table. 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 $1.8 million lower / $1.5 million higher (2008 - $2.5 million lower / $2.0
million higher) had the Australian dollar weakened/strengthened by 10% against the US dollar. Profi t is more sensitive to movements in
the Australian Dollar / US Dollar exchange rates in 2008 than in 2009 because of the foreign exchange gains/losses on the translation of
US dollar denominated derivatives held for trading during the year ended 30 June 2008.
(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 2009 was $nil (2008 - $nil), thus limiting the Group’s exposure to any cash fl ow risk in relation to
liabilities.
44 QRxPharma Annual Report 2009
Group sensitivity
As at 30 June 2009, if interest rates had changed by -/+ 40 basis points from the year-end rates with all other variables held constant, the
post-tax loss for the year would have been $16,100 higher / lower (2008 – change of 125 bps: $70,100 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 2009, if interest rates had changed
by -/+ 40 basis points from the year-end rates with all other variables held constant, the post-tax loss would have been $70,100 higher /
lower (2008 – change of 125 bps: $70,100 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
2009, 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 2009. Due to negative
cash fl ow position the Group has not committed to any credit facilities rather relied upon equity fi nancing through private and public
equity investors.
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 2009, 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 2009 for the Group was $824,000 (2008: $1.6 million) which is payable within 1 month
of the year end and at 30 June 2009, the entity carried cash and cash equivalents of $17.8 million (2008: $29.7 million).
The value of trade creditors at 30 June 2009 for the parent was $241,200 (2008: $158,000) which is payable within 1 month of the year
end and at 30 June 2009, the parent entity carried cash and cash equivalents of $17.6 million (2008: $29.6 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.
(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.
www.qrxpharma.com 45
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
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%
-40bps
+40bps
Profi t
$’000
Equity
$’000
Profi t
$’000
Equity
$’000
Profi t
$’000
Equity
$’000
Profi t
$’000
Equity
$’000
30 June 2009
Financial assets
Cash and cash equivalents
17,773
1,803
Financial liabilities
Trade payables
824
(114)
Total increase/decrease
1,689
-
-
-
(1,475)
93
(1,382)
-
-
-
(16)
-
(16)
-
-
-
16
-
16
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)
-
-
-
(70)
-
(70)
-
-
-
70
-
70
-
-
-
-
-
-
46 QRxPharma Annual Report 2009
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.
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. 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 20.
Applying Accounting Standard AASB 136 “Impairment of Assets” at 30 June 2008 resulted in the Company fully impairing the carrying
value of the asset at 30 June 2008, being $14.6 million.
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.
Binomial option pricing model
During the year, the Group booked $1.5 million of share based payments as determined through the application of the binomial option
pricing model. The binomial model is dependent on a number of variables and estimates fully described in note 26.
www.qrxpharma.com 47
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
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.
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
719
2,009
710
2,009
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
-
5,324
150
5,474
-
-
-
-
735
5,308
150
6,193
515
-
-
515
5 REVENUE
From continuing operations
Interest
6 OTHER INCOME
Management fees
Foreign exchange gain
Export Market Development Grant
48 QRxPharma Annual Report 2009
7 EXPENSES
Loss before income tax includes the following specifi c expenses:
Depreciation and Amortisation
Plant and equipment
Amortisation of intangible assets
Net foreign exchange loss
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
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
29
-
29
-
4,616
42
1,533
6,191
20
802
822
2,618
2,907
38
2,353
5,298
13
-
13
-
1,330
42
1,050
2,422
16
-
16
2,648
1,136
38
1,664
2,838
11,937
-
12,708
14,628
14,480
-
13,970
-
11,937
27,336
14,480
13,970
-
136
-
73
749
17,117
25
27
www.qrxpharma.com 49
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
8 INCOME TAX BENEFIT
(A) INCOME TAX BENEFIT
Current tax
Deferred tax expense
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
-
-
-
-
(125)
(125)
-
-
-
2008
$’000
-
(125)
(125)
The deferred tax asset relates to a Research and Development tax rebate payment received during the fi nancial year ended 30 June
2008 under Section 73B 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% (2008 – 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
Share-based payments
Previously unrecognised losses recouped
Adjustment of current tax for prior periods
Benefi t of tax losses not recognised
Income tax expense
(C) TAX LOSSES
Unused tax losses for which no deferred tax asset has been
recognised
Potential tax benefi t @ 30%
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
(13,495)
(4,048)
(36,727)
(11,018)
(12,875)
(3,862)
(37,113)
(11,134)
-
-
-
461
241
4,388
-
779
-
-
225
315
-
-
5,135
779
(3,587)
(5,610)
(3,322)
(5,220)
-
701
2,886
-
(125)
-
5,610
(125)
-
759
2,563
-
(125)
-
5,220
(125)
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
37,131
11,139
27,513
8,254
34,758
10,427
26,213
7,864
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.
50 QRxPharma Annual Report 2009
(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
2009
$’000
2008
$’000
2009
$’000
2008
$’000
527
16,153
1,093
17,773
654
21,839
7,179
29,672
306
16,153
1,093
17,552
565
21,839
7,179
29,583
These bear an interest rate of 2.9% (2008: 7.3%) for the AUD accounts and 0.25% (2008:1%) on balances over USD 50,000 for the USD
accounts.
(B) TERM DEPOSITS
These are USD deposits and bear an average fi xed interest rate of 0.4% (2008: 2.3%). These deposits have a maturity of less than 3
months.
(C) COMMERCIAL BILLS
These commercial bills are in Australian dollars and bear an average interest rate of 2.9% (2008: 7.4%). They have a maturity of less than
3 months.
10 CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Interest receivable
Other receivables
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
11
55
66
105
53
11
83
105
30
158
94
135
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 and at 30 June 2009
no receivables were impaired or past due (30 June 2008: nil).
www.qrxpharma.com 51
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
11 CURRENT ASSETS – OTHER CURRENT ASSETS
Prepayments
566
458
220
119
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
12 NON-CURRENT ASSETS – OTHER FINANCIAL ASSETS
Investment in subsidiaries (note 23)
Less provision for write down to recoverable amount
These fi nancial assets are carried at cost.
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
-
-
-
-
-
-
20,708
(18,367)
20,223
(17,618)
2,341
2,605
A provision for write down to a recoverable amount of $0.75 million (2008: 17.1 million) was recognised in the parent entity to write down
the value of the investment in a subsidiary to its net asset value. In the prior year, 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 was
recognised. Refer to note 3.
During the fi nancial year two new wholly owned subsidiaries, Venomics Pty Ltd and Venomics Hong Kong Limited were incorporated.
52 QRxPharma Annual Report 2009
13 NON–CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Consolidated
Plant & Equipment
$’000
Parent
Plant & Equipment
$’000
At 1 July 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
Year ended 30 June 2009
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2009
Cost
Accumulated depreciation
Net book amount
127
(102)
25
25
68
(20)
73
195
(122)
73
73
230
(29)
274
425
(151)
274
127
(102)
25
25
28
(16)
37
155
(118)
37
37
-
(13)
24
155
(131)
24
www.qrxpharma.com 53
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
14 NON–CURRENT ASSETS – INTANGIBLE ASSETS
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
15,430
(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.
Consolidated
Year ended 30 June 2009
Opening net book amount
Impairment of intellectual property
Amortisation charge
Closing net book amount
At 30 June 2009
Cost
Accumulated amortisation and impairment
Net book amount
Patents,
trademarks and other
rights
$’000
Other intangible assets
$’000
Total
$’000
-
-
-
-
-
-
-
-
-
-
-
-
15,502
(15,502)
-
889
(889)
-
16,391
(16,391)
-
54 QRxPharma Annual Report 2009
14 NON–CURRENT ASSETS – INTANGIBLE ASSETS
Parent
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
Year ended 30 June 2009
Opening net book amount
Closing net book amount
At 30 June 2009
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)
-
15 CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Amounts due to subsidiaries
Accrued employee benefi ts
Other payables
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
824
-
768
92
1,684
1,611
-
92
321
2,024
241
2,797
105
120
3,263
158
3,802
32
177
4,169
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 55
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
16 CONTRIBUTED EQUITY
(A) SHARE CAPITAL
Ordinary shares – fully paid
Parent
Parent
2009
Shares
2008
Shares
2009
$’000
2008
$’000
75,000,000
75,000,000
79,694
79,694
(B) MOVEMENTS IN ORDINARY SHARE CAPITAL:
Date
Details
Notes
1 July 2007 Balance
Less: Transaction costs arising on share issues
30 June 2008 Balance
30 June 2009 Balance
Number of
shares
75,000,000
75,000,000
75,000,000
Issue price
$’000
79,932
(238)
79,694
79,694
Transaction costs arising on share issues incurred during the year ended 30 June 2008 represent the share based payments charge for
options issued to JPMorgan at the time of the Initial Public Offering (IPO). Refer note 26(b).
(C) ORDINARY SHARES
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 26.
(E) VOLUNTARY ESCROWS
Certain directors, consultants and pre IPO investors had voluntarily escrowed their shareholdings in the Company. At 25 May 2009, the
remaining 34,229,407 voluntary escrows on ordinary shares expired.
(F) 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.
56 QRxPharma Annual Report 2009
17 RESERVES AND ACCUMULATED LOSSES
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
(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
Balance 30 June
5,432
305
5,737
3,899
1,533
-
5,432
Foreign currency translation reserve
Balance 1 July
Currency translation differences arising during the year
Balance 30 June
(315)
620
305
3,899
(315)
3,584
387
3,512
-
3,899
-
(315)
(315)
5,432
-
5,432
3,899
1,050
483
5,432
-
-
-
3,899
-
3,899
387
2,691
821
3,899
-
-
-
(54,941)
(13,495)
(68,436)
(18,339)
(36,602)
(54,941)
(55,283)
(12,875)
(18,295)
(36,988)
(68,158)
(55,283)
(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.
www.qrxpharma.com 57
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
18 KEY MANAGEMENT PERSONNEL DISCLOSURES
(A) DIRECTORS
The following persons were directors of QRxPharma Limited during the fi nancial year:
(i) Chairman – non executive
Dr Peter C Farrell
(ii) Executive director
Dr John W Holaday, Managing Director and Chief Executive Offi cer
(iii) Non executive directors
Michael A Quinn
R Peter Campbell
Dr 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
Warren C Stern
Executive Vice President, Drug Development
Chris J Campbell
Chief Financial Offi cer and Company Secretary
Joseph J Berry
Vice President Operations
Philip J Magistro
Vice President, Commercial Operations
Patricia T Richards
Chief Medical Offi cer
All of the above persons were also key management persons during the year ended 30 June 2008.
(C) KEY MANAGEMENT PERSONNEL COMPENSATION
Short term employee benefi ts
Post employment benefi ts
Share-based payments
Consolidated
Parent
2009
$
2008
$
2009
$
2008
$
2,659,314
2,123,952
979,769
968,263
27,226
28,102
27,226
28,102
1,202,155
2,361,213
771,401
1,674,644
3,888,695
4,513,267
1,778,396
2,671,009
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.
58 QRxPharma Annual Report 2009
(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 to 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.
2009
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
Chris J Campbell
Patricia T Richards
Philip J Magistro
Joseph J Berry
805,452
402,726
500,000
200,000
150,000
75,000
75,000
60,000
60,000
60,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
604,089
805,452
402,726
402,726
241,635
880,452
477,726
560,000
260,000
210,000
402,726
536,968
268,484
268,484
161,090
536,968
268,484
166,667
66,667
50,000
201,363
268,484
134,242
134,242
80,545
343,484
209,242
393,333
193,333
160,000
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
402,726
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
www.qrxpharma.com 59
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
18 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.
2009
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
Chris J Campbell
Patricia T Richards
Philip J Magistro
Joseph J Berry
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
1,280,540
7,543,000
3,230,083
9,471,749
85,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,000
-
-
(1,174,442)
-
1,380,540
7,543,000
3,230,083
8,297,307
85,000
-
-
-
-
-
-
-
-
-
-
^ The Director is also a Director of Innovation Capital Associates Pty Limited, who acted as the trustee of the Innovation Capital QRx I & II
Trusts. A net 1,174,442 shares were distributed to benefi ciaries of the Innovation Capital QRx I & II Trusts other than the Director, after the
expiration of voluntary escrows on 25 May 2009. The Director has no continuing relevant interest in these shares.
2008
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)
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
Philip J Magistro
Joseph J Berry
60 QRxPharma Annual Report 2009
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
-
-
-
-
-
-
-
-
-
-
-
-
* The Director is also a Director of Innovation Capital Associates Pty Limited, who acts as the trustee of the Innovation Capital QRx I & II
Trusts. The movement for the year includes a net distribution of 1,174,441 shares to benefi ciaries of the Innovation Capital QRx I & II Trusts
other than the Director, after the expiration of voluntary escrows on 25 May 2008. The Director has no continuing relevant interest in these
shares.
(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 $131,532 (2008: $239,443).
19 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
Taxation services
Related practices of PricewaterhouseCoopers Australian fi rm
Total remuneration for audit related services
Consolidated
Parent
2009
$
2008
$
2009
$
2008
$
129,250
129,250
86,000
86,000
129,250
129,250
86,000
86,000
88,885
66,218
155,103
284,353
99,270
11,554
110,824
196,824
88,885
-
88,885
99,270
-
99,270
218,135
185,270
20 CONTINGENCIES
As detailed in note 3 the Group acquired on 26 April 2007 a 100% interest in CNS Co, Inc. and 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.
www.qrxpharma.com 61
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
21 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 6 months prior written notice to the University of Alabama.
(B) UNIVERSITY OF QUEENSLAND
On 10 January 2008, the Group 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 Group is contracted to pay a total of $106,000 to the University over the ensuing year.
(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
22 RELATED PARTY TRANSACTIONS
(A) SUBSIDIARIES
Interests in subsidiaries are set out in note 23.
(B) KEY MANAGEMENT PERSONNEL
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
128
57
185
100
171
271
29
2
31
19
21
40
Disclosures relating to key management personnel are set out in note 18.
(C) OUTSTANDING BALANCES
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Consolidated
Parent
2009
$
2008
$
2009
$
2008
$
-
-
2,796,779
3,802,332
Current payables
Subsidiaries
62 QRxPharma Annual Report 2009
(D) TRANSACTIONS WITH RELATED PARTIES
The following transactions occurred with related parties:
Consolidated
Parent
2009
$
2008
$
2009
$
2008
$
Other income
Management services to subsidiary
Expenses
Research and development service fees and costs from subsidiary
-
-
-
-
735,255
515,205
12,472,673
13,107,627
23 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.
Venomics Pty Limited*
Venomics Hong Kong Limited*
Australia
Australia
USA
Australia
Hong Kong
Ordinary
Ordinary /Preference
Ordinary
Ordinary
Ordinary
*Entities incorporated during the 2009 fi nancial year
Equity holding
2009
%
100
100
100
100
100
2008
%
100
100
100
-
-
24 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
2009
$’000
(13,495)
29
-
-
1,533
(4,704)
-
(16)
(340)
-
2008
$’000
(36,602)
822
14,628
-
3,257
2,353
(355)
511
1,239
-
2009
$’000
2008
$’000
(12,875)
13
-
749
1,050
(5,308)
-
(36,988)
16
-
16,267
3,305
2,648
(355)
(58)
(908)
-
804
3,309
-
Net cash outfl ow from operating activities
(16,993)
(14,147)
(17,337)
(10,994)
www.qrxpharma.com 63
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
25 LOSS PER SHARE
Consolidated
2009
Cents
2008
Cents
(A) BASIC LOSS PER SHARE
Loss from continuing operations attributable to the ordinary equity holders of the company
(18.0)
(48.8)
(B) DILUTED LOSS PER SHARE
Loss from continuing operations attributable to the ordinary equity holders of the company
(18.0)
(48.8)
(C) RECONCILIATIONS OF EARNINGS USED IN CALCULATING
EARNINGS PER SHARE
Basic loss per share
Consolidated
2009
$’000
2008
$’000
Loss attributable to the ordinary equity holders of the company used in calculating basic
earnings per share
(13,495)
(36,602)
Diluted loss per share
Loss attributable to the ordinary equity holders of the company used in calculating diluted
earnings per share
(13,495)
(36,602)
(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
2009
Number
2008
Number
75,000,000
75,000,000
75,000,000
75,000,000
(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 26.
64 QRxPharma Annual Report 2009
26 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 issued up to 31 December 2008 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. Options issued from 1 January 2009 generally vest over 3 years with the initial vesting on the fi rst anniversary
of the date of the grant and subsequent vestings in 8 equal tranches on the fi rst day of each calendar quarter over the following 2 years.
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 16. 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 16(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 65
QRxPHARMA LIMITED ABN 16 102 254 151
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
26 SHARE-BASED PAYMENTS (CONTINUED)
(C) SET OUT BELOW ARE SUMMARIES OF OPTIONS GRANTED UNDER THE PLANS:
Grant Date
Expiry date
Consolidated and parent 2009
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
1 October 2008
4 November 2008
1 January 2009
Total
31 March 2007
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 October 2015
4 November 2015
1 January 2016
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Forfeited
during the
year
Balance at
end of the
year
Vested and
exercisable
at end of
the year
Number
Number
Number
Number
Number
Number
$1.42
$1.00
$2.00
$1.00
$2.20
$1.70
$1.45
$1.34
$1.11
$1.05
$1.04
$0.60
$0.37
$0.20
402,726
2,013,630
1,448,450
552,726
322,181
50,000
75,000
50,000
350,000
600,000
75,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
100,000
710,000
5,939,713
860,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
402,726
2,013,630
1,448,450
552,726
322,181
50,000
75,000
50,000
350,000
600,000
75,000
50,000
100,000
710,000
268,484
1,342,420
965,633
368,484
214,787
16,667
25,000
16,667
116,667
200,000
25,000
-
-
10,000
6,799,713
3,569,809
$1.22
$1.39
Weighted average exercise price
$1.36
$0.24
Grant Date
Expiry date
Exercise
price
Balance at
start of the
year
Granted
during the
year
Exercised
during the
year
Forfeited
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 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
66 QRxPharma Annual Report 2009
Fair value of options granted
The assessed fair value at grant date of options granted during the year ended 30 June 2009 was $0.10 per option (2008: $0.69). The
fair value at grant date is independently determined using a binomial 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 2009 included:
(a) exercise price: $0.20 to $0.60 (2008 $1.04 to $1.70)
(b) grant date: 1 October 2008, 4 November 2008, 1 January 2009 (2008 – 1 September 2007, 1 October 2007, 9 October 2007,
1 January 2008 and 1 April 2008)
(c) expiry date: 1 October 2015, 4 November 2015, 1 January 2016 (2008 -1 September 2014, 1 October 2014, 9 October 2014,
1 January 2015 and 1 April 2015)
(d) share price at grant date: $0.20 to $0.60 (2008 - $1.04 to $1.70)
(e) expected price volatility of the company’s shares: 60% (2008 - 60%)
(f) expected dividend yield: nil% (2008 - nil%)
(g) risk free interest rate: 5.18% (2008 - 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:
Consolidated
Parent
2009
$’000
2008
$’000
2009
$’000
2008
$’000
Options issued under employee option plan
1,533
3,327
1,050
2.506
27 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.
www.qrxpharma.com 67
QRxPHARMA LIMITED ABN 16 102 254 151
DIRECTORS’ DECLARATION
FOR THE YEAR ENDED 30 JUNE 2009
In the directors’ opinion:
(a)
the fi nancial statements and notes set out on pages 30 to 67 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 2009 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 22 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
21 August 2009
68 QRxPharma Annual Report 2009
www.qrxpharma.com 69
70 QRxPharma Annual Report 2009
QRxPHARMA LIMITED ABN 16 102 254 151
SHAREHOLDER INFORMATION
FOR THE YEAR ENDED 30 JUNE 2009
The shareholder information set out below was applicable as at 2 September 2009.
A. DISTRIBUTION OF EQUITY SECURITIES
Analysis of numbers of equity security holders by size of holding:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Shares
Options
46
227
179
250
55
757
-
-
-
12
17
29
There are 19 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
Dr John Holaday and Holaday Foundation
Neweconomy Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
Four Hats Financial Services Limited
Innovation Capital Limited
National Nominees Limited
Spring Ridge Ventures I, LP
Uniquest Pty Limited
Dr Gary Pace
Innovation Capital LLC
UIIT Pty Limited
Dr Peter Farrell
Bacchus Global Assets LLC
Citicorp Nominees Pty Limited
Lynx No1 Pty Limited
ITR Investments
Mr David Stack
Joseph and Janine Meadows
Gowing Bros Ltd
Mr. Ross Richard Eddison
Ordinary shares
Number held
Percentage of issued
shares
7,543,000
6,408,730
6,078,314
5,925,586
5,269,090
4,516,002
4,228,673
4,004,499
3,230,083
2,713,685
2,175,338
1,380,540
1,380,366
1,061,822
680,336
572,308
475,895
444,706
400,000
327,632
58,816,605
10.06%
8.54%
8.10%
7.90%
7.03%
6.02%
5.64%
5.34%
4.31%
3.62%
2.90%
1.84%
1.84%
1.42%
0.91%
0.76%
0.63%
0.59%
0.53%
0.44%
78.42%
www.qrxpharma.com 71
QRxPHARMA LIMITED ABN 16 102 254 151
SHAREHOLDER INFORMATION (CONTINUED)
FOR THE YEAR ENDED 30 JUNE 2009
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
7,337,213*
29**
Number on issue
Number of holders
* Number of unissued ordinary shares under the options.
** No person holds 20% or more of these securities.
C. SUBSTANTIAL HOLDERS
Substantial holders in the company are set out below:
Ordinary shares
Innovation Capital Limited, Innovation Capital LLC, Kaylara Pty Ltd
Dr John W Holaday and Holaday Foundation
JPMorgan Securities Australia
Four Hats Financial Services Limited
Spring Ridge Ventures I, LP
Westpac Banking Corporation
Uniquest Pty Limited
Number held
Percentage
8,297,307
7,543,000
6,600,000
5,925,586
4,228,673
4,156,978
4,004,499
11.06%
10.06%
8.80%
7.90%
5.64%
6.57%
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.
72 QRxPharma Annual Report 2009
NOTES:
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