2010 AnnuAl RepoRt
www.qrxpharma.com
1
QRxpharma is a clinical-stage specialty
pharmaceutical company focused on the
development and commercialisation of new
treatments for pain management and central
nervous system (CnS) disorders.
Based on a development strategy which focuses on enhancing and expanding the clinical
utility of currently marketed compounds, the Company’s product portfolio includes both
late and early stage clinical drug candidates with the potential for reduced risk, abbreviated
development paths, and improved patient outcomes. The Company intends to co-promote
its products in the US and seeks strategic partnerships for worldwide markets. QRxPharma’s
lead product candidate, MoxDuo IR, is in Phase 3 clinical development and has successfully
completed multiple comparative studies evaluating its efficacy and safety against equi-
analgesic doses of morphine, oxycodone and Percocet® for the treatment of acute pain.
QRxPharma expects to complete its Phase 3 program in Q4 CY2010 and file its New Drug
Application (NDA) with the US Food and Drug Administration (FDA) for MoxDuo IR in Q1
CY2011. 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
tABle oF
ContentS
CoRpoRAte
DIReCtoRY
Corporate directory
Letter from the Chairman
CEO review
Directors’ report
Auditor’s Independence Declaration
Corporate governance statement
Financial report
Directors’ declaration
Independent auditor’s report to the members
of QRxPharma Limited
Shareholder information
1
3
5
9
25
26
32
66
67
70
diRectoRs
Peter C Farrell PhD, ScD, AM - Non-Executive Chairman
John W Holaday PhD - Managing Director and Chief Executive Officer
R Peter Campbell FCA, FTIA
Gary W Pace PhD
Michael A Quinn MBA
secRetaRy
Chris J Campbell CA
PRiNciPaL RegisteRed office iN austRaLia
QRxPharma Limited
Level 1, 194 Miller St, North Sydney NSW 2060
shaRe RegisteR
Link Market Services Limited
Level 12, 680 George Street, Sydney NSW 2000
auditoR
PricewaterhouseCoopers
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, Sydney NSW 1171
soLicitoRs
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
www.qrxpharma.com
1
KeY
AChIevementS
Sept. 2010 excellent interim analysis of second phase 3 pivotal trial for
moxduo iR
Aug. 2010 QRxPharma Receives frost & sullivan award for innovation in
Pain therapy
Aug. 2010 completed Phase 2 investigator trial for moxduo iV
JulY 2010 Positive scientific advice meetings with european regulatory
agencies on moxduo iR development and Registration
mAY 2010 successfully completed comparative Phase 1 proof of concept
study for moxduo cR
ApR. 2010 successfully completed moxduo iR combination rule Phase 3 trial
FeB. 2010
initiated second pivotal moxduo iR phase 3 study for Nda submission
FeB. 2010 formed strategic alliance for moxduo iV and license of iR in china
upComIng oBJeCtIveS:
complete second pivotal moxduo iR Phase 3 trial.
conduct moxduo iR comparator trial for labelling claims in u.s. and europe
Raise capital for trials and to prepare for iR commercialisation
submit New drug application for moxduo iR to fda
complete Phase 1 studies for moxduo cR
Negotiate global strategic partnership for moxduo products
2 QRxpharma Annual Report 2010
KeY
AChIevementS
letteR
FRom the
ChAIRmAn
Dear Shareholder,
On behalf of the Board and management of QRxPharma, I am pleased to
present our annual report for 2010.
The past twelve months represent a year of progress, scientific validation
and prudent resource management. This discipline and commitment to build
shareholder value has served our business interests well and sustained the
Company on an upward trajectory.
Our primary initial objective still remains commercialisation of MoxDuo®IR, the
Company’s lead product candidate for the treatment of acute pain. With the
successful completion of the MoxDuo IR combination rule study, the first of two
pivotal registration trials, we’ve made significant progress towards this goal.
Having satisfied this filing requirement, we turned our attention to the second
and final MoxDuo IR registration trial, a study to evaluate the effectiveness of
MoxDuo IR in patients following total knee replacement (TKR) surgery. This
trial was initiated in February 2010 and is projected to be completed towards
the end of calendar 2010.
To date, more than 600 patients experiencing pain following bunionectomy
and TKR surgery, as well as non-surgical patients with chronic pain, have
received MoxDuo IR. Study results have consistently demonstrated MoxDuo
IR’s greater overall tolerability which has allowed surgeons, pain physicians and
patients to achieve comparable or better pain relief with substantially fewer and
less severe side-effects than current standards of care.
We expect to file our first New Drug Application (NDA) with the U.S. FDA in the
first half of 2011 and launch our product in the U.S. in 2012. This represents our
most near-term value driver and symbolises a significant inflection point – our
evolution from product development to commercial realisation.
Certainly, the past year has been transformative for QRxPharma. We have
advanced clinical development of our complementary Dual-Opioid® products
with the successful completion of a Phase 2 comparative proof-of-concept
study evaluating the efficacy and safety of MoxDuo IV (intravenous morphine
and oxycodone) against IV morphine. This study was performed in Germany
and was completed on a group of patients being treated for moderate to
severe post-operative pain following hip replacement surgery. The results, once
again, demonstrated better pain control, with at least a 50% reduction of
clinically significant side effects when QRxPharma’s Dual-Opioid formulation
was used. In February 2010, we announced a strategic alliance with Chinese
drug company, Aoxing Pharmaceutical Company (NYSE AMEX: AXN), for
development of MoxDuo IV. Under the terms of the agreement, Aoxing will fund
clinical development for the Chinese market in exchange for exclusive marketing
rights in China. We retain ownership of the product and may use the clinical
work completed by Aoxing for registration purposes outside China.
www.qrxpharma.com 3
We also successfully completed a comparative proof-of-concept Phase I study with
MoxDuo CR, a continuous release formulation, designed to provide 12 hours of
pain relief in patients with moderate to severe pain. The purpose of the trial was to
determine which of the various experimental formulations provided the optimum
duration of drug levels in the blood. Based on these data, the Company remains on
track to finalise the MoxDuo CR tablet in the first half of 2011.
In addition to our pain management programs, we have also continued
development on our other pipeline programs including dystonia, Parkinson’s,
and Alzheimer’s diseases. These programs are advanced in collaboration with
our partners at the University of Alabama and the Michael J. Fox Foundation. In
addition, we secured a strategic alliance with Liaoning Nuokang Medicines Co,
the China based subsidiary of Nasdaq listed China Nuokang Biopharmaceuticals
Inc (NASDAQ: NKBP) for the development and commercialization of our venomics
assets in China.
In December 2009, we were able to bolster the Company’s cash position by closing
a capital raise of $21.6 million. We are grateful and encouraged by the ongoing
support from our shareholders along with new institutional investors who joined the
register via the placement. This offering should enable us to complete the MoxDuo
IR pivotal Phase 3 clinical trials and continue the development of the IV and CR
programs with the overall goal of providing surgeons and pain physicians the
opportunity to effectively manage patients’ pain from hospital to home.
This is an exciting time for the Company and I would like to take this opportunity to
thank my fellow Board of Director members, the management team, and the entire
QRxPharma staff, in both Australia and the U.S.
We appreciate the continued support of our shareholders and look forward to
successfully completing our planned initiatives for 2011 and then commercialising the
first of our pain formulations in early 2012.
Peter C Farrell, PhD, ScD, AM
Chairman
letteR
FRom the
ChAIRmAn
(ContInueD)
4 QRxpharma Annual Report 2010
Ceo
RevIeW
“Discovery consists of seeing what everybody has seen and thinking what nobody has
thought” according to Albert Szent-Gyorgyi, winner of the 1937 Nobel Prize for the
isolation of Vitamin C. Since the discovery of QRxPharma’s Dual-Opioids®, we’ve drawn
inspiration from his words. Prof. Maree Smith at the University of Queensland challenged
convention when she discovered that morphine and oxycodone when given together result
in better pain relief with fewer side effects. We’ve embraced this discovery and conducted
clinical trials that challenge convention and have the potential to change treatment
paradigms. Simply, our goal is to develop a better way of managing pain.
QRxPharma’s lead candidate, MoxDuo IR, an immediate-release oral capsule currently
completing pivotal Phase 3 studies, is the first patented analgesic product in the world that
consists of two opioids. In multiple comparative studies evaluating its efficacy and safety
against equianalgesic doses of morphine, oxycodone and Percocet® for the treatment of
acute pain, data demonstrate MoxDuo IR’s greater overall tolerability allowing doctors
and patients to achieve better pain relief with substantially fewer incidences of nausea,
vomiting, constipation, dizziness, hypotension and other side effects.
The Company’s Dual-Opioid portfolio also includes two complementary products:
MoxDuo CR, a 12-hour controlled-release oral tablet for chronic pain and MoxDuo IV, an
intravenous formulation for moderate to severe hospital-based pain.
Our goal is to provide physicians and patients with different formulations of dual opioids
for managing moderate to severe pain from hospital to home. With the successful
completion of pivotal trials, we are able to quantitatively demonstrate the value of this
product to partners, prescribers and patients.
moXduo iR: Nda fiLiNg WithiN Reach
The past year has been exceptionally productive and I am proud to report the Company
remains on target to file its first New Drug Application with the U.S. FDA in early 2011 for
MoxDuo IR.
In April, the Company successfully completed its first pivotal Phase 3 study for MoxDuo
IR. Required for New Drug Application (NDA) submission with the United States Food
and Drug Administration (FDA), this “combination rule” study compared the efficacy and
safety profiles of MoxDuo IR against component doses of morphine and oxycodone alone
for the management of moderate to severe post-operative pain following bunionectomy
surgery. MoxDuo IR not only demonstrated statistically superior analgesic effect compared
to component doses of morphine and oxycodone but, also, a favourable side effect profile
despite delivering twice the opioid dose of its individual components. The primary endpoint
for evaluating MoxDuo IR versus its milligram components was the sum of pain intensity
differences for each patient from baseline over the 48-hour treatment period (SPID48). The
trial enrolled 522 patients at 6 US clinical research sites.
Earlier in the year, we announced initiation of our second pivotal Phase 3 registration trial.
This study is designed to compare the effectiveness and safety of a flexible MoxDuo IR
dose regimen to a fixed low dose for managing moderate to severe pain in patients who
have undergone total knee replacement surgery. The primary endpoint for evaluating
the efficacy of flexible dose versus low dose MoxDuo IR is once again the difference
from baseline in pain intensity scores for each treatment group over the 48-hour study
period (SPID48). Secondary endpoints include: (1) efficacy relating to the time to onset
of analgesia and global assessment of effect (i.e. total pain relief) as well as amount of
supplemental analgesia used throughout the treatment period; and (2) safety as measured
by incidence and intensity of opioid-related adverse effects. The study is targeted to enroll
140 patients at 8 U.S. clinical sites, and an interim analysis revealed that with half the
patients enrolled, the study was likely to reach statistical significance without the addition
of more patients. We expect to complete patient dosing in Q4 2010 in preparation for filing
a NDA in Q1 2011.
www.qrxpharma.com 5
Ceo
RevIeW
(ContInueD)
According to the FDA, once these two pivotal studies are completed, no additional
pharmacology, toxicology or long-term clinical safety studies will be required for regulatory
submission and market approval. Meetings with the European regulatory agencies in
Germany and the United Kingdom were positive. We agreed with their recommendation
for an additional comparative study to further distinguish MoxDuo from morphine and
oxycodone that could enable labeling claims of superiority. We are on track for U.S.
commercial launch of MoxDuo IR in 2012, with European launch thereafter.
moXduo iV: deVeLoPmeNt RemaiNs oN-tRacK
The Company successfully completed a Phase 2 study for MoxDuo IV. This comparative
proof-of-concept study evaluated the efficacy and safety of intravenous morphine and
oxycodone versus IV morphine alone for the treatment of moderate to severe post-
operative pain in patients following hip replacement surgery. The Investigator Sponsored
Trial, or IST, was conducted in Germany in collaboration with QRxPharma at the Cologne-
Merhiem Medical Centre, University Hospital of the Witten/Herdecke University, and
Cologne University Hospital. The study enrolled 40 patients.
During the initial evaluation period, data indicated there was 50% better pain relief/
analgesic efficacy among patients in the Dual Opioid IV study group compared to those
receiving morphine alone. In addition, 67% of patients receiving Dual Opioid IV reported
good to excellent global improvement (i.e. experienced good to very good pain relief)
compared to 53% of those receiving morphine alone.
Across the entire 48-hour study period, SPID48 scores were higher among patients in the
Dual Opioid IV study group compared to those receiving morphine alone, and they were
able to achieve better pain relief faster and with less drug (13 IV doses per hour of Dual
Opioid vs. 17 doses per hour of morphine IV). Dual Opioid IV product dosing was also well
tolerated, with a lesser incidence of nausea and vomiting compared to morphine IV.
These results are consistent with a continually growing body of data from both
QRxPharma generated clinical trials and outside investigators demonstrating better pain
control with at least a 50% reduction of the clinically significant adverse events.
moXduo cR: successfuLLy comPLeted Phase i
The Company also advanced its controlled release formulation, or MoxDuo CR, into
the clinic. MoxDuo CR is designed to provide 12 hours of pain relief in patients suffering
from moderate to severe chronic pain including cancer, lower back, osteoarthritis and
neuropathic pain, addressing a worldwide multi-billion dollar market.
Following the granting of Investigational New Drug (IND) status by the FDA early in 2010,
we successfully completed a Phase 1 trial. The purpose of the study was to determine which
of the various experimental formulations provided the optimum duration of drug levels in
the blood for incorporation into MoxDuo CR tablets. Therefore, the study compared the
rate at which key components of the MoxDuo CR formulation were absorbed, distributed,
metabolised and eliminated by the body to the pharmacokinetic profile of Oxycontin® 20
mg (sustained release oxycodone). The results were consistent with expectations for a
twice-daily formulation and keeps QRxPharma on track to finalise the MoxDuo CR tablet
formulation in early 2011 and initiate Phase 2 trials shortly thereafter. The proprietary
formulation, manufactured with Patheon, Inc., will not only encompass sustained delivery
technology but also abuse deterrent and tamper resistant features.
coLLaBoRatioNs: BuiLdiNg VaLue thRough RisK diVeRsificatioN
In February 2010, QRxPharma and Aoxing Pharmaceutical Company (NYSE AMEX: AXN)
announced a strategic alliance to collaborate in the development of MoxDuo IV for the
China market in exchange for exclusive marketing rights in China. QRxPharma retained
ownership of MoxDuo IV and may use the development work completed by Aoxing for
product registration and commercialisation outside of China.
6 QRxpharma Annual Report 2010
6 QRxpharma Annual Report 2010
Ceo
RevIeW
(ContInueD)
Development efforts with the Company’s dystonia, Parkinson’s
Disease and Alzheimer’s Disease programme (Torsin) with a
family of small molecules continues under a collaborative research
agreement at the University of Alabama (Caldwell Labs) to
confirm the preclinical efficacy of its lead molecules. Additionally,
preclinical trials supported in part by the Michael J. Fox Foundation
are presently underway to evaluate QRxPharma’s lead drug
candidates in models of Parkinson’s disease.
During the year, we also completed a strategic alliance with
Liaoning Nuokang Medicines Co, the China based subsidiary of
Nasdaq listed China Nuokang Biopharmaceuticals Inc (NASDAQ:
NKBP), to develop and commercialise QRxPharma’s venomics
assets for the Chinese market. Data generated through the
development of these products in China will support partnering
activities in other territories, the rights of which have been retained
by Venomics Pty Limited, a subsidiary of QRxPharma Limited.
moViNg foRWaRd
I am extremely proud of the significant progress made by the
QRxPharma team over the past year with the support of our Board
of Directors and Shareholders. Our MoxDuo product portfolio
has moved forward with speed and diligence – with clinical data
collected to date clearly demonstrating the value of this paradigm
changing platform. I look forward to an exciting year ahead and
the history to be made in improving the management of pain.
John W Holaday, PhD
Managing Director and Chief Executive Officer
www.qrxpharma.com 7
www.qrxpharma.com 7
WhAt KeY
opInIon
leADeRS
ARe SAYIng:
sometimes, [Patients] don’t
like how they feel. they feel
too sleepy. there’s a lot of
constipation. and nausea.
Primary care Physician, houston
on CuRRent pAIn theRApIeS...
there’s a balance between efficacy
and side effects that’s pretty good but
not perfect. [We] can treat pain but too
often the side effects limit us. Wish we
had something with a lower potential for
unfavorable side effects.
Pain specialist, san francisco
the side effects. We are used to them but it’s a hassle. What we want is
a more potent drug that is better tolerated. fewer problems. focus on the
pain. treat quickly. Rapid onset without all the side effects. the loopiness.
the nausea.
Primary care Physician, san francisco
on moxDuo IR...
i think this is great. Very interesting concept. Very
positive efficacy and tolerability. [moxduo iR] has
®
much better gi side effects than Percocet.
Primary care Physician, houston
this is good. Really good.
it would replace
everything.
Primary care Physician, Boston
ten out of ten for me. Price
would not be an issue. [it’s]
much more important to get
pain relief without side effects.
Primary care Physician, Boston
[the] data is compelling.
there are clinically
significant differences,
not merely statistically
different. there are
substantial reductions in
side effects with equal
or greater potency.”
Pain specialist, san francisco
Disclaimer: This KOL research was conducted after results of the Combination Rule and 021 studies. Product profile presented the
50% - 75% reductions in AEs seen in the 021 trial as well as tolerability profile in Phase 3 combination rule study.
8 QRxpharma Annual Report 2010
on CuRRent pAIn theRApIeS...
DIReCtoRS’
RepoRt
on moxDuo IR...
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 2010.
diRectoRs
The following persons were directors of QRxPharma Limited during the whole of the
financial 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 and European markets.
diVideNds QRXPhaRma Limited
No dividends were paid or declared since the start of the financial year (2009: $nil).
ReVieW of oPeRatioNs
The Group has made a loss from continuing operations after income tax for the year of $27.5
million (2009: loss of $13.5 million). The loss was in line with the expectations of the board of
directors and resulted from fulfilling research and development activities in the progression of
the Company’s clinical pipeline candidates and preclinical stage drugs.
The Group continues to closely monitor its cash position as it progresses the MoxDuo®IR
Phase 3 development programme, and retains $12.8 million in cash reserves at 30 June 2010.
Further information on the operations and financial position of the Group and its
business strategies and prospects is set out on pages 5-7 of this annual report.
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
2010
Cents
2009
Cents
(30.3)
(18.0)
(30.3)
(18.0)
sigNificaNt chaNges iN the state of affaiRs
No significant changes in the state of affairs of the Group were noted during the financial
year that have not otherwise been disclosed in this report or in the financial statements.
www.qrxpharma.com 9
www.qrxpharma.com 9
DIReCtoRS’
RepoRt
(ContInueD)
10 QRxpharma Annual Report 2010
matteRs suBseQueNt to the eNd of the fiNaNciaL yeaR
No matter or circumstance has arisen since 30 June 2010 that has significantly
affected, or may significantly affect:
(a) the Group’s operations in future financial years, or
(b) the results of those operations in future financial
years, or
(c) the Group’s state of affairs in future financial 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 significant environmental regulations under a law of the
Commonwealth or of a State or Territory of Australia affecting the Group.
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 Academy of
Technological Sciences and Engineering, and the Australian Institutes of Management and
Company Directors. He is Chair of the Executive Council of the Division of Sleep Medicine
at Harvard Medical School, serves on the Boards of the Rady Management and the Jacobs
Engineering Schools of the University of California, San Diego (UCSD) and is also on
the Health Sciences Advisory Board of UCSD’s School of Medicine. Dr Farrell is a Visiting
Professor at the University of New South Wales (UNSW) and is also Chair of the UNSW
Centre for Innovation and Entrepreneurship.
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 Nuvasive Inc (NASDAQ: NUVA) (director since January
2005) serving on the nominations and governance committees.
former directorships in last 3 years
Pharmaxis Limited (ASX: PXS) from March 2006 to October 2009.
special responsibilities
Chairman of the board.
Chairman of nominations committee.
Chairman of remuneration committee.
special responsibilities
Managing Director and Chief Executive Officer.
President of QRxPharma, Inc.
Member of remuneration committee.
interests in shares and options
1,630,540 ordinary shares and 604,089 options over ordinary
shares.
interests in shares and options
7,609,635 ordinary shares (including ordinary shares held by
John Holaday and John Holaday as trustee for the John Holaday
Foundation) and 1,105,452 options over ordinary shares.
JOHn W HOLADAy PHD.
Managing Director and Chief Executive Officer.
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 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 has extensive experience in
building private and publicly traded biopharmaceutical companies.
In 1988, Dr Holaday co-founded Medicis Pharmaceutical
Corporation (NYSE: MRX), where he served as Director and as
Senior Vice President for Research and Development. In 1992, Dr
Holaday founded EntreMed Inc (NASDAQ: ENMD), where he
served as President, Chief Executive Officer, and Chairman of the
board until 2002. Dr Holaday also founded MaxCyte Inc, a cell
therapy company, where he served as Chairman until 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 Officer of CNSCo, Inc, a private
company which was acquired by QRxPharma in April 2007.
Dr Holaday serves as an officer and Fellow in several biomedical
societies, has authored and edited over 200 scientific articles
in journals and books, and holds over 60 patents. He served as
Chairman of the Maryland BioAlliance representing over 360
biotech companies. He 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 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. He has received numerous
honours and awards, including the 2008 Algernon Sydney Sullivan
award as outstanding alumnus of the University of Alabama. 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
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) and Sonic
Healthcare Limited (ASX: SHL) (director since January 1993).
former directorships in last 3 years
SciGen Limited (ASX: SIE) from August 1999 to February
2005 and Admerex Limited (ASX: ADL) from January 2007 to
October 2008.
special responsibilities
Chairman of audit committee.
Member of nominations committee.
interests in shares and options
102,000 ordinary shares and 241,635 options over ordinary
shares.
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
www.qrxpharma.com
11
DIReCtoRS’
RepoRt
(ContInueD)
12 QRxpharma Annual Report 2010
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) (director since 1995), Transition
Therapeutics Inc (TSX and NASDAQ: TTH) (director since 2002).
former directorships in last 3 years
Celsion Corp (NASDAQ: CLSN) (2002 – August 2010) and Peplin Limited (ASX: PEP)
(2004 – December 2009).
special responsibilities
Nil
interests in shares and options
3,380,083 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-profit organisation that trains entrepreneurs. In 1983 he co-founded
Memtec Limited (NYSE and ASX), and has also served as Chief Executive Officer of
an ASX listed manufacturer and distributor of health care and scientific 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 committee.
Member of remuneration committee.
interests in shares and options
8,374,371 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).
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 Officer
of QRxPharma Limited. He has over 25 years experience with major accounting firms 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
2010, and the numbers of meetings attended by each director were:
Full meetings of
directors
Meetings of
non-executive
directors
meetiNgs of committees
Audit and risk
Nominations
Remuneration
A
5
5
5
5
4
B
5
5
5
5
5
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 office 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 information provided in this remuneration report has been audited as required by section 308 (3C) of the Corporations Act 2001.
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 satisfies the following key criteria for good
reward governance practices:
• competitiveness and reasonableness
• acceptability to shareholders
• performance linkage / alignment of executive compensation
• transparency
• capital management.
The Group has structured an executive remuneration framework that is market competitive and complementary to the reward
strategy of the organisation.
Alignment to shareholders’ interests:
• focuses on sustained growth in share price as well as focusing the executive on key
non-financial drivers of value
• attracts and retains high calibre executives.
Alignment to program participants’ interests:
• rewards capability and experience
• reflects competitive reward for contribution to growth in shareholder wealth
• provides recognition for contribution.
The framework provides a blend of fixed pay, and short and long- term incentives.
www.qrxpharma.com
13
DIReCtoRS’
RepoRt
(ContInueD)
14 QRxpharma Annual Report 2010
The board has established a remuneration committee which provides advice on remuneration
and incentive policies and practices and specific 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 reflect 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:
• base pay and benefits, including superannuation
• short-term performance incentives, and
• long-term incentives through participation in the QRxPharma Limited Employee Share
Option Plan.
The combination of these comprises the executive’s total remuneration.
Base pay and benefits
Structured as a total employment package which may be delivered as a combination of
cash and prescribed non financial benefits at the executives’ discretion.
Executives are offered a competitive base pay that comprises the fixed 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.
Executives receive benefits including health insurance and tax advisory services.
superannuation
The Group does not maintain a Group superannuation plan. The Group makes fixed
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 dependent 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. Maximum available bonuses vary from 30% of base pay to a fixed amount
of USD 130,000.
Each executive has a target short-term incentive opportunity depending on the
accountabilities of the role and impact on the organisation. Each year, the remuneration
committee considers the appropriate targets and key performance indicators (KPIs) for each executive. For the year ended 30 June
2010, the KPIs were based on meeting group and individual milestone achievements.
The remuneration committee is responsible for assessing whether the KPIs are met. To help make this assessment, the committee
receives detailed reports on performance from management.
Long-term incentives
Long-term incentives are provided to certain employees through participation in the QRxPharma Limited Employee Share Option Plan.
detaiLs of RemuNeRatioN
amounts of remuneration
Details of the remuneration of the directors and the key management personnel (as defined 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 officers who have authority and responsibility for planning, directing and controlling the activities of the Group, who also
include the 5 highest paid executives of the entity:
• Warren C Stern, PhD – Executive Vice President, Drug Development
• Chris J Campbell – Chief Financial Officer and Company Secretary
• Philip J Magistro – Vice President Commercial Operations
• Patricia T Richards, MD – Chief Medical Officer
• M Janette Dixon – Vice President Global Development (appointed director of Venomics Pty Limited from 23 September 2009)
Key management personnel and other executives of QRxPharma Limited and the Group are the same
shoRt-teRm emPLoyee BeNefits
Post-
emPLoymeNt BeNefits
LoNg-
teRm BeNefits
shaRe-Based
PaymeNts
Cash salary
and fees
Cash
bonus
Non-monetary
benefits Other
Super-
annuation
Retirement
benefits
Long service
leave
Options
Total
2010
Name
Non executive directors
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
$
60,000
40,000
40,000
40,000
$
-
-
-
-
-
Sub-total non-executive directors
180,000
Executive directors
John W Holaday
Other key management personnel (Group)
340,411
144,003
Warren C Stern ^
Chris J Campbell ^
Philip J Magistro ^
Patricia T Richards ^
M. Janette Dixon ^ *
271,261
100,802
207,110
105,000
290,240
316,777
213,883
24,924
83,415
41,539
(appointed 23 September 2009)
Total key management personnel
compensation (Group)
1,819,682
499,683
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
3,600
-
-
3,600
-
-
31,385
-
-
-
34,985
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
59,589
23,835
39,726
47,095
119,589
67,435
79,726
87,095
170,245
353,845
189,868
674,282
119,435
491,498
51,143
394,638
42,325
357,489
78,069
478,261
74,455
329,877
725,540 3,079,890
^ denotes one of the 5 highest paid group executives as required to be disclosed under the Corporations Act 2001.
*M. Janette Dixon was appointed director of Venomics Pty Limited on 23 September 2009 and is considered to fall within the definition of group executive from that date. Fees and bonus
payments were made pursuant to consultancy agreements held with Biocomm Strategy Pte Ltd. In addition to the share based payments expense above, on 7 July 2009 Janette Dixon
was issued a 10% interest in Venomics Pty Limited as a reward for services rendered. Refer note 24(a) for further details.
Gary Pace was paid $97,266 for consulting services provided to the Company during the year in addition to the amount disclosed above.
Joseph Berry resigned effective 31 March 2010 and is no longer a key management person of the Group.
www.qrxpharma.com
www.qrxpharma.com
15
15
DIReCtoRS’
RepoRt
(ContInueD)
Key management personnel and other executives of QRxPharma Limited and the Group were the same in 2009
shoRt-teRm emPLoyee BeNefits
Post-
emPLoymeNt BeNefits
LoNg-
teRm BeNefits
shaRe-
Based
PaymeNts
Cash salary
and fees
Cash
bonus
Non-
monetary
benefits
Other
Super-
annuation
Retirement
benefits
Long service
leave
Options
Total
2009
Name
Non executive directors
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
Sub-total non-executive directors
Executive directors
John W Holaday
Other key management personnel (Group)
Warren C Stern ^
Chris J Campbell ^
Joseph J Berry ^
(resigned 30 March 2010)
Philip J Magistro ^
Patricia T Richards ^
$
60,000
40,000
40,000
40,000
180,000
$
-
-
-
-
-
404,733
132,511
311,677
204,644
307,257
311,677
343,355
121,674
57,881
91,255
91,255
101,395
Total key management personnel
compensation (Group)
2,063,343
595,971
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
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 5 highest paid group executives 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 ended 30 June 2009, in addition to the amount disclosed above.
Key management personnel and other executives of the Group
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Directors of QRxPharma Limited
John W Holaday
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
Other key management personnel of the Group
Warren C Stern
Chris J Campbell
Philip J Magistro
Patricia T Richards
Joseph J Berry (resigned 30 March 2010)
M. Janette Dixon (from 23 September 2009)
16 QRxpharma Annual Report 2010
fiXed RemuNeRatioN
at RisK–sti
at RisK–Lti
2010
2009
2010
2009
2010
2009
50%
50%
65%
50%
46%
55%
60%
81%
67%
-
65%
51%
30%
44%
30%
24%
45%
58%
70%
62%
72%
-
22%
-
-
-
-
21%
27%
7%
17%
-
13%
17%
-
-
-
-
18%
15%
21%
19%
21%
-
28%
50%
35%
50%
54%
24%
13%
12%
16%
-
22%
32%
70%
56%
70%
76%
37%
27%
9%
19%
7%
-
seRVice agReemeNts
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 office of director.
Remuneration and other terms of employment for the
Managing Director and Chief Executive Officer 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 benefits 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 officer
• Term of agreement–3 years (with annual extension)
renegotiated from 20 February 2009.
• Base salary, inclusive of retirement or pension contribution,
for the year ended 30 June 2010 of US$300,000, to be
reviewed annually by the remuneration committee.
• Payment of a termination benefit 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
• Term of agreement–extended from 1 July 2010 for 9 months to
31 March 2011 unless extended by mutual agreement.
• Base salary, inclusive of retirement or pension contribution, for
the year ended 30 June 2010 of US$275,000 to be reviewed
annually by the remuneration committee.
• Payment of a termination benefit 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.
chris J campbell, chief financial officer
• Term of agreement–ongoing, commencing 1 March 2007.
• Base salary, inclusive of superannuation, for the year ended
30 June 2010 of $225,750, to be reviewed annually by the
remuneration committee.
• Payment of a termination benefit on early termination without
notice by the Company, other than for gross misconduct, equal
to three months’ salary.
• Contract can be terminated by either party with three months’
notice.
Philip J magistro, Vice President commercial operations
• Term of agreement – ongoing, commencing 26 November
2007
• Base salary, inclusive of retirement or pension contribution, for
the year ended 30 June 2010 of US$275,000, to be reviewed
annually by the remuneration committee.
• Agreement can be terminated by either party with one month’s notice.
Patricia t Richards, chief medical officer
• Term of agreement - ongoing, commencing 18 February 2009
• Base salary, inclusive of retirement or pension contribution, for
the year ended 30 June 2010 of US$290,000, to be reviewed
annually by the remuneration committee.
• Agreement can be terminated by either party with one month’s
notice.
m. Janette dixon, VP global development
• Term of agreement – ongoing, commencing 17 August 2009
with QRxPharma Limited, and 1 October 2009 with Venomics
Pty Limited. Agreements are held with Janette Dixon as the
principal of BioComm Strategy Pty Ltd.
• Base consulting fee for the contract with QRxPharma Limited
for the year ended 30 June 2010 of US$50,000 per annum
(pro rata).
• Base consulting fee for the contract with Venomics Pty Limited
for the year ended 30 June 2010 of US$200,000 per annum
(pro rata).
• Each agreement can be terminated by either party with two
months’ notice.
gary W Pace, Non-executive director, consultant
• Term of agreement-1 year, renegotiated from 25 May 2010.
• Base consulting fee for the contract year ending 25 May 2010
of US$83,000 per annum (pro rata).
• Agreement can be terminated by either party with one month’s
notice.
• No termination benefit payable on early termination by the
Company.
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 first anniversary of the
date of grant. Options issued from 1 January 2009 have also been
issued for no consideration and generally vest over 3 years with the
initial vesting on the first anniversary of the date of the grant and
subsequent vestings in 8 equal tranches on the first 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
17
www.qrxpharma.com
DIReCtoRS’
RepoRt
(ContInueD)
shaRe Based comPeNsatioN (continued)
price of ordinary shares immediately prior to the grant date of the options.
Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share.
The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows:
Expiry date
Exercise price
Value per option at
grant date
% Vested
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
Vested and
exercisable
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
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 2008
Over 6 months
4 November 2015
1 January 2009
1 January 2009
31 August 2009
1 October 2009
Over 6 months
Over 3 years
Over 3 years
Over 3 years
1 January 2016
1 January 2016
31 August 2016
1 October 2016
16 November 2009
Over 3 years
16 November 2016
1 January 2010
17 February 2010
24 March 2010
Over 3 years
Over 3 years
Over 3 years
1 January 2017
17 February 2017
24 March 2014
$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
$0.65
$0.90
$1.12
$0.78
$0.84
$1.26
$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
$0.44
$0.61
$0.76
$0.53
$0.57
$0.38
100%
100%
100%
100%
67%
67%
67%
67%
67%
67%
33%
100%
100%
50%
-
-
-
-
-
-
The exercise price in respect of an option granted shall be the market price for a share prevailing at the time of grant unless the board decides
otherwise. Options will lapse if they are not exercised before the expiration date or if the option holder leaves the employment of the Group.
Details of options over ordinary shares in the company provided as remuneration to each director of QRxPharma Limited and each of the key
management personnel of the parent entity and the Group are set out below. When exercisable, each option is convertible into one ordinary
share of QRxPharma Limited. Further information on the options is set out in note 28 to the financial statements. The plan rules contain a
restriction on removing the “at risk” aspect of instruments granted to executives. Plan participants may not enter into any transaction designed
to remove the “at risk” aspect of an instrument before it vests.
18 QRxpharma Annual Report 2010
Number of options
granted during
the year
Value of options
at grant date*
$
Number of options
vested during the
year
Number of options
lapsed during the
year
Value at lapse
date**
$
-
-
-
-
-
-
-
-
201,363
80,545
134,242
134.242
300,000
227,370
268,484
137,500
150,000
130,000
130,000
73,337
56,338
70,038
70,038
350,000
166,806
305,984
171,742
96,667
196,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
Philip J Magistro
Patricia T Richards
M. Janette Dixon (from 23
September 2009)
* The value at grant date calculated in accordance with AASB 2 Share-based Payment of options granted during the year as part of remuneration.
** The value at lapse date of options that were granted as part of remuneration and that lapsed during the year because a vesting condition was not satisfied. The value is determined at
the time of lapsing, but assuming the condition was satisfied.
The assessed fair value at grant date of options granted to the individuals is allocated equally over the period from grant date to vesting
date, and the amount is included in the remuneration tables above. Fair values at grant date are independently determined using a
Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share
price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for
the term of the option.
www.qrxpharma.com
19
DIReCtoRS’
RepoRt
(ContInueD)
shaRe Based comPeNsatioN (continued)
shares provided on exercise of remuneration options
Details of ordinary shares in the company provided as a result of the exercise of remuneration options to each director of QRxPharma
Limited and other key management personnel of the Group are set out below.
date of exercise of
options
Number of ordinary shares
issued on exercise of options
during the year
Value at exercise
date*
$
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 (resigned 30 March 2010)
Philip J Magistro
Patricia T Richards
M. Janette Dixon (from 23 September 2009)
-
-
-
-
-
22 April 2010
18 March 2010
21 June 2010
-
-
2 June 2010
-
-
-
-
-
30,000
25,000
25,000
-
-
100,000
-
-
-
-
-
29,400
15,750
23,750
-
-
75,000
* The value at the exercise date of options that were granted as part of remuneration and were exercised during the year has been determined as the intrinsic value of the options at
that date.
The amounts paid per ordinary share by each director and other key management personnel on the exercise of options at the date of
exercise were as follows:
Exercise date
22 April 2010
18 March 2010
21 June 2010
2 June 2010
Amount paid per share
$0.20
$0.20
$0.20
$0.37
No amounts are unpaid on any shares issued on the exercise of options.
details of remuneration: Bonuses and share-based compensation benefits
For each cash bonus and grant of options included in the tables on pages 15, 16 and 19, the percentage of the available bonus or
grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the
service and performance criteria is set out below. No part of the bonus is payable in future years. The options vest after three years,
provided the vesting conditions are met. No options will vest if the conditions are not satisfied, hence the minimum value of the option
yet to vest is nil. The maximum value of the options yet to vest has been determined as the amount of the grant date fair value of the
options that is yet to be expensed.
20 QRxpharma Annual Report 2010
Name
Directors of QRxPharma Limited
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
-
-
-
-
-
-
-
-
-
John W Holaday
100%
Other key management personnel
Warren C Stern
95%
5%
Chris J Campbell
100%
-
Philip J Magistro
30%
70%
Patricia T Richards
89%
11%
M. Janette Dixon (from 23
September 2009)
30%
70%
BoNus
shaRe-Based comPeNsatioN BeNefits (oPtioNs)
Paid
%
Forfeited
%
Year
Granted
Vested
%
Forfeited
%
Financial years
in which options
may vest
Maximum total value
of grant yet to vest
$
2007
2007
2007
2007
2010
2007
2010
2010
2009
2007
2010
2010
2007
2010
2010
2009
2008
2010
2010
2009
2008
2010
2010
2008
100%
100%
100%
100%
-
100%
-
-
50%
100%
-
50%
100%
-
-
50%
67%
-
-
50%
67%
-
-
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2011 - 2013
-
2011 - 2013
2011 - 2013
2011 - 2012
-
2011 - 2013
2011 - 2013
-
2011 - 2013
2011 - 2013
2011 - 2013
2011
2011 - 2013
2011 - 2013
2011 - 2012
2011
2011 - 2013
2011 - 2013
-
-
-
-
-
227,370
-
56,843
16,494
3,721
-
56,838
3,721
-
56,843
13,196
2,977
29,853
56,843
13,196
2,977
70,599
56,843
109,963
-
www.qrxpharma.com 21
www.qrxpharma.com 21
DIReCtoRS’
RepoRt
(ContInueD)
Unissued ordinary shares of QRxPharma Limited under option at the date of this report are as follows:
date oPtioNs
gRaNted
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
1 January 2009
31 August 2009
1 October 2009
16 November 2009
1 January 2010
17 February 2010
24 March 2010
eXPiRy date
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
1 January 2016
31 August 2016
1 October 2016
16 November 2016
1 January 2017
17 February 2017
24 March 2014
issue PRice of
shaRes
NumBeR uNdeR
oPtioN
$1.42
$1.00
$1.00
$2.00
$1.70
$1.45
$1.34
$1.11
$1.05
$1.04
$0.60
$0.20
$0.65
$0.90
$1.12
$0.78
$0.84
$1.26
402,726
2,013,630
552,726
1,448,450
50,000
75,000
50,000
200,000
600,000
75,000
50,000
330,000
477,500
150,000
300,000
100,000
565,000
295,000
7,735,032
shares issued on the exercise of options
The following ordinary shares of QRxPharma Limited were issued during the year ended 30 June 2010 on the exercise of options
granted under the QRxPharma Limited Employee Option Plan. No further shares have been issued since that date. No amounts are
unpaid on any of the shares.
Date options granted
4 November 2008
1 January 2009
31 August 2009
Issue price of shares
$0.37
$0.20
$0.65
Number of shares issued
100,000
345,000
30,000
475,000
22 QRxpharma Annual Report 2010
iNdemNificatioN
The company has entered into Deeds of Access, Indemnity and Insurance with each of the directors and executive officers of the
Group against all liabilities to another person (other than the company or a related body corporate) that may arise from their
position as directors and executive officers 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 Officers liability insurance contracts, as such disclosure is prohibited under the terms of the contracts.
PRoceediNgs oN BehaLf of the comPaNy
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
company, or to intervene in any proceedings to which the company is a party, for the purpose of taking responsibility on behalf of the
company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the
Corporations Act 2001.
NoN-audit seRVices
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the company and/or the Group are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for 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 satisfied
that the provision of the non audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfied 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:
• all non audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
(a) PricewaterhouseCoopers Australia
Other assurance services
Accounting Advisory Services
Total remuneration for other assurance services
Taxation services
Tax compliance services
International tax consulting and tax advice
Total remuneration for taxation services
(b) Related practices of PricewaterhouseCoopers Australia
Taxation services
Tax compliance services
Total remuneration for taxation services
Total remuneration for non-audit services
2010
$
16,200
16,200
4,660
26,100
30,760
37,025
37,025
83,985
2009
$
33,250
33,250
6,280
82,605
88,885
66,218
66,218
188,353
www.qrxpharma.com 23
DIReCtoRS’
RepoRt
(ContInueD)
auditoR’s iNdePeNdeNce decLaRatioN
A copy of the auditor’s independence declaration as required under section 307C of the
Corporations Act 2001 is set out on page 25.
Rounding of amounts
The company is a kind referred to in Class order 98/100, issued by the Australian
Securities and Investments Commission, relating to the “rounding off” of amounts in the
financial or directors 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 office 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
29 September 2010
24 QRxpharma Annual Report 2010
AUDITORS’ INDEPENDENCE DECLARATION
www.qrxpharma.com 25
www.qrxpharma.com 25
CoRpoRAte
goveRnAnCe
StAtement
26 QRxpharma Annual Report 2010
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 (the Principles).
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:
• overseeing the business and strategic direction of the Group in order to maximise
performance and generate appropriate levels of shareholder return
• ensuring that management establishes and follows an appropriate system of internal
controls, risk management and legal compliance
• reviewing the performance and implementation of corporate strategies by senior
management and ensuring senior management have the necessary resources to do so
• approving and supervising significant capital expenditure, capital management,
acquisitions and divestments
• appointment, performance assessment and, if necessary, removal of the Chairman, Chief
Executive Officer, Chief Financial Officer and the Company Secretary
• approving and monitoring annual budgets and strategic plans
• approving and monitoring financial and other reporting made to shareholders and the
ASX under the continuous disclosure regime.
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 Officer 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 2010 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 together
with all other charters and policies referred to in this statement are 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:
• the board is committed to ensuring that there will be a least five 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
• 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
• 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
• 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
The board seeks to ensure that:
• 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
• the size of the board is conducive to effective discussion and
efficient decision making.
directors’ independence
The board has adopted specific 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:
• is a substantial shareholder of the Company or an officer of, or
otherwise associated directly with, a substantial shareholder of
the Company
• 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
• 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
• is a material supplier or customer of the Company or any other
Group member, or an officer of or otherwise associated directly
or indirectly with a material supplier or customer
• has a material contractual relationship with the company or a
controlled entity other than as a director of the Group
• 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.
The board regularly assesses director independence having regard
to the criteria outlined in the Principles. To enable this process, the
directors must provide all information that may be relevant to the
assessment. During the financial year ended 30 June 2010, three
non-executive directors; Peter C Farrell, R Peter Campbell and Gary
W Pace were considered to be independent.
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.
Board members
Details of the members of the board, their experience, expertise,
qualifications, term of office, 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.
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 office
The Company’s Constitution specifies that all directors excluding
the chief executive officer must retire from office no later than the
third annual general meeting (AGM) following their last election.
chair
The Chair of the board of the Company is an independent, non-
executive director.
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
significant time commitment and has confirmed that other positions
will not hinder his effective performance in the role of the Chair.
chief executive officer (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 2010,
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.
www.qrxpharma.com 27
CoRpoRAte
goveRnAnCe
StAtement
(ContInueD)
28 QRxpharma Annual Report 2010
avoidance of conflict of interest
In addition to the issue of independence, the directors have a continuing responsibility to
avoid conflicts 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 conflict
of interest on appointment and are required to keep this disclosure up to date. A director
that has an actual or potential conflict must immediately inform the board and remove
themselves from any discussions or decision making in relation to the actual or potential
conflict.
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 specific 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 committees. The nominations and audit
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 specific 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:
• reviewing management succession planning for the Company in general but specifically
in regards to the CEO and other senior management
• reviewing the appointments and terminations to senior
executive positions reporting to the CEO
• reviewing and making recommendations to the board regarding the appointment
of non executive directors, including:
• 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
• establishing processes for identification of suitable candidates for appointment to the
board
• 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
• 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 comply with the
principles. The code will guide the board, individual directors and senior
management as to the practices necessary to maintain confidence in
the Group’s integrity with key stakeholders and the wider community
together with the responsibility and accountability of individuals for
reporting and investigating reports of unethical practices.
The Company maintains a Securities Trading Policy which is
available on the company website. It is contrary to the Company’s
policy for directors, officers and employees to be engaged in short
term trading of the Company’s securities. All directors, officers
and employees are prohibited from dealing in any QRxPharma
Limited securities, except while not in possession of unpublished
price sensitive informationDirectors, officers and employees may
only then deal in the Company’s securities during a specified
period of 45 days after the release of the Company’s half-yearly or
annual results, after the AGM, or after any other announcement
under the continuous disclosure provisions of the ASX Listing
Rules. 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
audit committee
The audit committee is currently comprised of R Peter Campbell
(Chairman), an independent director, and Michael A Quinn, both
non-executive directors.
Details of these directors’ qualifications and attendance at audit
committee meetings are set out in the directors’ report on pages
10-13.
The audit committee has appropriate financial expertise and
all members are financially literate and have an appropriate
understanding of the industry in which the Group operates. The
Committee’s composition does not comply with the Principles in
that it does not include at least three members and does not have
a majority of independent directors. The board considers that the
audit committee as represented by the two non-executive directors
noted above is suitably structured and qualified to fully discharge
its responsibilities at this stage of the Company’s development.
The audit committee operates in accordance with a charter
which is available on the Company website. The audit 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 financial reporting, together with
the effectiveness and independence of the external audit process.
The main responsibilities of the committee include:
• 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
• overseeing the adequacy of the control processes in place in
relation to the preparation of financial statements and
reports
• overseeing the adequacy of the Company’s financial
controls and systems
• overseeing the process of identification and management of
business, financial and commercial risks.
In fulfilling its responsibilities, the audit committee:
• receives regular reports from management and external
auditors
• meets with the external auditors at least twice a year, or
more frequently if necessary
• reviews any significant disagreements between the auditors
and management, irrespective of whether they have been
resolved
• 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.
www.qrxpharma.com 29
CoRpoRAte
goveRnAnCe
StAtement
(ContInueD)
30 QRxpharma Annual Report 2010
external auditors
The Company and audit committee policy is to appoint external auditors who clearly
demonstrate quality and independence. PricewaterhouseCoopers is the incumbent external
auditor. It is PricewaterhouseCoopers policy to rotate audit engagement partners on listed
companies at least every five years.
An analysis of fees paid to the external auditors, including a breakdown of fees for
non-audit services, is provided in the directors’ report and in note 20 to the financial
statements. It is the policy of the external auditors to provide an annual declaration of their
independence to the audit committee.
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
continuous disclosure and shareholder communication
In fulfilling 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:
• ensuring that shareholders and the financial markets are provided with timely disclosure
about its activities
• fully complying with continuous disclosure obligations contained in applicable ASX listing
rules and the Corporations Act
• ensuring that all investors have equal and timely access to material information
concerning the Group.
The Company has detailed this commitment in its Continuous Disclosure Policy which is
available on the Company website.
The Company Secretary has been nominated as the person responsible for communications
with the ASX. This role includes responsibility for ensuring compliance with the continuous
disclosure requirements in the ASX Listing Rules and overseeing and co ordinating
information disclosure to the ASX, analysts, brokers, shareholders, the media and the
public.
The Company’s Shareholder Communication Policy is available on the Company’s website.
Under this policy, 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
financial risks are identified, assessed, effectively and efficiently managed and monitored to
enable achievement of the Group’s business objectives.
Management has provided the board with a report which attests to the effective
management of the Company’s material business risks.
The CEO and CFO have provided the following written declarations
in accordance with section 295A of the Corporations Act.
• That the company’s financial reports are complete and present
a true and fair view, in all material respects, of the financial
condition and operational results of the company and Group
and are in accordance with relevant accounting standards.
• 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 efficiently and effectively in all material
respects in relation to financial 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 specific
recommendations on remuneration packages and other terms of
employment for senior executives and directors.
The main responsibilities of the committee include:
• assisting the board in setting the executive remuneration policy
inclusive of the operation of the Company’s employee share
option plan
• making recommendations to the board for reviewing and
approving the remuneration of executive directors
• reviewing and approving the remuneration of senior executives
as defined 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’’.
www.qrxpharma.com 31
FInAnCIAl
RepoRt
These financial statements are the consolidated financial
statements of the consolidated entity consisting of
QRxPharma Limited and its subsidiaries. The financial
statements are presented in the Australian currency.
QRxPharma Limited is a company limited by shares,
incorporated and domiciled in Australia. Its registered
office and principal place of business is:
QRxPharma Limited
Level 1, 194 Miller Street
North Sydney NSW 2060.
A description of the nature of the consolidated entity's
operations and its principal activities is included in the
CEO’s review on pages 5 to 7 and in the directors' report
on pages 9 to 24, both of which are not part of these
financial statements.
The financial statements were authorised for issue by the
directors on 27 September 2010. The directors have the
power to amend and reissue the financial statements.
Through the use of the internet, we have ensured that
our corporate reporting is timely and complete. All press
releases, financial reports and other information are
available at the Investor Relations tab on our website:
www.qrxpharma.com.
Consolidated statements of comprehensive income
Consolidated balance sheets
Consolidated statements of changes in equity
Consolidated statements of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Shareholder information
33
34
35
36
37
66
67
70
32 QRxpharma Annual Report 2010
ConSolIDAteD
StAtementS
oF CompRehenSIve
InCome
For the year ended 30 June 2010.
Revenue from continuing operations
Other income
Research and development
Employee benefits expense
Depreciation and amortisation
Business development
Other expenses
Net foreign exchange (loss)
Income tax benefit
Loss from continuing operations
Loss before income tax
Loss for the year
Other comprehensive (loss)/income
Exchange differences on translation of foreign operations
Other comprehensive (loss)/income for the year, net of tax
Total comprehensive (loss) for the year
Loss for the year is attributable to:
Owners of QRxPharma Limited
Non-controlling interests
Total comprehensive (loss) is attributable to:
Owners of QRxPharma Limited
Non-controlling interests
Notes
5
6
7
7
7
7
8
2010
$’000
261
405
(18,006)
(6,081)
(65)
(1,131)
(2,383)
(474)
(27,474)
-
(27,474)
(27,474)
(172)
(172)
(27,646)
(27,348)
(126)
(27,474)
(27,520)
(126)
(27,646)
2009
$’000
719
5,474
(11,937)
(6,191)
(29)
(212)
(1,319)
-
(13,495)
-
(13,495)
(13,495)
620
620
(12,875)
(13,495)
-
(13,495)
(12,875)
-
(12,875)
Earnings per share for loss attributable to the ordinary equity holders of the company:
Basic loss per share
Diluted loss per share
26
26
Cents
(30.3)
(30.3)
Cents
(18.0)
(18.0)
The above consolidated statements of comprehensive income should be read in conjunction with the accompanying notes.
www.qrxpharma.com 33
ConSolIDAteD
BAlAnCe
SheetS
As at 30 June 2010.
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
non-current assets
Available for sale financial assets
Property, plant and equipment
Intangible assets
LIABILITIES
Current liabilities
Trade and other payables
EQuITy
Contributed equity
Reserves
Accumulated losses
Non-controlling interests
Total current assets
Total non-current assets
Total assets
Total current liabilities
Total liabilities
net assets
Notes
2010
$’000
2009
$’000
9
10
11
12
13
14
15
16
17(a)
17(b)
18
12,760
76
390
13,226
407
240
-
647
13,873
2,094
2,094
2,094
11,779
99,969
7,489
(95,784)
105
11,779
17,773
66
566
18,405
-
274
-
274
18,679
1,684
1,684
1,684
16,995
79,694
5,737
(68,436)
-
16,995
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
Total equity
34 QRxpharma Annual Report 2010
ConSolIDAteD
StAtementS oF
ChAngeS In
eQuItY
For the year ended
30 June 2010.
attRiButaBLe to the oWNeRs of
QRXPhaRma Limited
Contributed
equity
Reserves
$’000
79,694
-
$’000
3,584
620
Retained
earnings
$’000
(54,941)
(13,495)
Total
$’000
28,337
(12,875)
Non-
controlling
interests
Total equity
$’000
-
-
$’000
28,337
(12,875)
Balance at 1 July 2008
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Employee share scheme
Balance at 30 June 2009
-
79,694
1,533
5,737
-
(68,436)
1,533
16,995
-
-
1,533
16,995
Total comprehensive loss for the year
-
(172)
(27,348)
(27,520)
(126)
(27,646)
Transactions with owners in their capacity as owners:
20,275
Contributions of equity, net of
transaction costs
Employee share scheme
Transactions with non-
controlling interest reserve
-
1,461
463
-
-
-
20,275
-
20,275
1,461
463
116
115
1,577
578
-
-
Balance at 30 June 2010
20,275
99,969
1,752
7,489
(27,348)
(95,784)
(5,321)
11,674
105
105
(5,216)
11,779
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
www.qrxpharma.com 35
ConSolIDAteD
StAtementS oF
CASh FloWS
For the year ended 30 June 2010.
Cash flows from operating activities
Payments to suppliers and employees
(inclusive of goods and services tax)
Interest received
Grant received
net cash (outflow) from operating activities
Cash flows from investing activities
Proceeds from sale of shares in subsidiaries
Payments for property, plant and equipment
net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payments made in relation to capital raising
net cash inflow / (outflow) from financing activities
net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Notes
2010
$’000
2009
$’000
6
25
24
16
16
(25,635)
(17,956)
274
-
(25,361)
813
150
(16,993)
578
(31)
547
21,725
(1,450)
20,275
(4,539)
17,773
(474)
12,760
-
(230)
(230)
-
-
-
(17,223)
29,672
5,324
17,773
Cash and cash equivalents at end of year
9
The above consolidated statements of cash flows should be read in conjunction with the accompanying notes.
36 QRxpharma Annual Report 2010
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1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
Summary of significant accounting policies
Financial risk management
Critical accounting estimates and judgements
Segment information
Revenue
Other income
Expenses
Income tax benefit
Current assets – Cash and cash equivalents
Current assets – Trade and other receivables
Current assets – Other current assets
Non-current assets – Available-for sale financial assets
Non-current assets – Property, plant and equipment
Non-current assets – Intangible assets
Current liabilities – Trade and other payables
Contributed equity
Reserves and accumulated losses
Non-controlling interests
Key management personnel disclosures
Remuneration of auditors
Contingencies
Commitments
Related party transactions
Subsidiaries
Reconciliation of profit after income tax to net cash
outflow from operating activities
Loss per share
Parent entity financial information
Share based payments
Events occurring after the balance sheet date
38
47
50
51
51
51
51
51
52
52
52
53
53
53
54
54
55
56
56
59
59
59
59
60
61
61
61
62
65
www.qrxpharma.com 37
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38 QRxpharma Annual Report 2010
1 summaRy of sigNificaNt accouNtiNg PoLicies
The principal accounting policies adopted in the preparation of the financial
report are set out below. These policies have been consistently applied to all the
years presented, unless otherwise stated. The financial statements are for the
consolidated entity consisting of QRxPharma Limited and its subsidiaries.
a) Basis of preparation
This general purpose financial 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
financial report of QRxPharma Limited complies with International Financial
Reporting Standards (IFRS).
Historical cost convention
These financial statements have been prepared under the historical cost
convention, as modified by the revaluation of financial assets and liabilities
(including derivative instruments) at fair value through profit or loss.
Critical accounting estimates
The preparation of financial 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 significant to the financial statements are disclosed in note 3.
Financial statement presentation
The Group has applied the revised AASB 101 Presentation of Financial Statements
which became effective on 1 January 2009. The revised standard requires the
separate presentation of a statement of comprehensive income and a statement
of changes in equity. All non-owner changes in equity must now be presented in
the statement of comprehensive income. As a consequence, the Group had to
change the presentation of its financial statements. Comparative information has
been re-presented so that it is also in conformity with the revised standard.
b) going concern
The Group has experienced significant recurring operating losses and negative cash
flows from operating activities since its inception. During the year the company suc-
cessfully raised $20.2 million, net of transactions costs through a share placement and
rights issue and at 30 June 2010, the Group holds cash and cash equivalents of $12.8
million (2009: $17.8 million).
The ability of the Company to continue as a going concern for 12 months from the date
of this financial report is dependent upon the ompany being successful in completing
a further capital raising to provide significant funding to meet the Company’s ongoing
research and development costs and execute on the corporate strategy.
As a result of these matters, there is a significant uncertainty whether the Company will
continue as a going concern and, therefore, whether it will realize its assets and settle
its liabilities and commitments in the normal course of business and at the amounts
stated in the financial report.
Given the success of past capital raising by the Company and
management’s plan to raise further funds, the directors have
prepared the financial report on a going concern basis. The
directors remain confident about the successful outcome of
the above factors and therefore no adjustments have been
made to the financial report relating to the recoverability and
classification of the asset carrying amounts of the amounts and
classification of liabilities that might be necessary should the
Company not continue as a going concern.
c) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of QRxPharma Limited (‘’company’’ or
‘’parent entity’’) as at 30 June 2010 and the results of all subsidiaries
for the year then ended. QRxPharma Limited and its subsidiaries
together are referred to in this financial report as the Group or the
consolidated entity.
When the Group ceases to have control, joint control or
significant influence, any retained interest in the entity is
remeasured to its fair value with the change in carrying amount
recognised in profit or loss. The fair value is the initial carrying
amount for the purposes of subsequently accounting for the
retained interest as an associate, jointly controlled entity or
financial asset. In addition, any amounts previously recognised
in other comprehensive income in respect of that entity are
accounted for as if the Group had directly disposed of the
related assets and liabilities. This may mean that amounts
previously recognised in other comprehensive income are
reclassified to profit or loss.
If the ownership interest in a jointly-controlled entity or an
associate is reduced but joint control or significant influence is
retained, only a proportionate share of the amounts previously
recognised in other comprehensive income are reclassified to
profit or loss.
Subsidiaries are all those entities (including special purpose entities)
over which the Group has the power to govern the financial 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.
d) segment reporting
Operating segments are reported in a manner consistent with
the internal reporting provided to the chief operating decision
maker. The chief operating decision maker who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the executive management
team.
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.
Non-controlling interests in the results and equity of subsidiaries are
shown separately in the consolidated income statement, statement
of comprehensive income, statement of changes in equity and
balance sheet respectively. Investments in subsidiaries are accounted
for at cost in the separate financial statements of QRxPharma
Limited.
(ii) Changes in ownership interests
The Group treats transactions with non-controlling interests that do
not result in a loss of control as transactions with equity owners of
the Group. A change in ownership interest results in an adjustment
between the carrying amounts of the controlling and non-controlling
interests to reflect their relative interests in the subsidiary. Any
difference between the amount of the adjustment to non-controlling
interests and any consideration paid or received is recognised in a
separate reserve within equity attributable to owners of QRxPharma
Limited.
Change in accounting policy
The Group has adopted AASB 8 Operating Segments from 1
July 2009. AASB 8 replaces AASB 114 Segment Reporting. The
new standard requires a ‘management approach’, under which
segment information is presented on the same basis as that
used for internal reporting purposes. This has not resulted in any
change in the number of reportable segments presented.
e) foreign currency translation
(i) Functional and presentation currency
Items included in the financial 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 financial statements are
presented in Australian dollars, which is QRxPharma Limited’s
functional and presentation currency.
(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 flow hedges and qualifying net investment hedges or are
attributable to part of the net investment in a foreign operation.
www.qrxpharma.com 39
noteS to the
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40 QRxpharma Annual Report 2010
(iii) Group companies
The results and financial position of all the Group entities (none of which has the
currency of a hyperinflationary economy) that have a functional currency different
from the presentation currency are translated into the presentation currency as
follows:
• assets and liabilities for each balance sheet presented are translated at the
closing rate at the date of that balance sheet
• income and expenses for each profit and loss are translated at average ex
change rates (unless this is not a reasonable approximation of the cumu-
lative effect of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the dates of the transactions), and
• all resulting exchange differences are recognised in other comprehensive
income.
On consolidation, exchange differences arising from the translation of any net
investment in foreign entities, and of borrowings and other financial instruments
designated as hedges of such investments, are taken to other comprehensive
income. 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 profit and loss as part of the gain or loss on sale where
applicable.
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 financial 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 profit 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.
acquisition method to business combinations, there have been
some significant changes.
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 acquisition 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. The consideration transferred for the acquisition of a
subsidiary comprises the fair values of the assets transferred, the
liabilities incurred and the equity interests issued by the Group.
The consideration transferred also includes the fair value of any
contingent consideration arrangement and the fair value of any
pre-existing equity interest in the subsidiary. Acquisition-related
costs are expensed as incurred. Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business
combination are, with limited exceptions, measured initially
at their fair values at the acquisition date. On an acquisition-
by-acquisition basis, the Group recognises any non-controlling
interest in the acquiree either at fair value or at the non-
controlling interest’s proportionate share of the acquiree’s net
identifiable assets.
The excess of the consideration transferred, the amount of any
non-controlling interest in the acquire and the acquisition-date
fair value of any previous equity interest in the acquiree over
the fair value of the Group’s share of the net identifiable assets
acquired is recorded as goodwill. If those amounts are less
than the fair value of the net identifiable assets of the subsidiary
acquired and the measurement of all amounts has been reviewed,
the difference is recognised directly in profit or loss as a bargain
purchase.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used
is the entity’s incremental borrowing rate, being the rate at which
a similar borrowing could be obtained from an independent
financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability are
subsequently remeasured to fair value with changes in fair value
recognised in profit or loss.
Change in accounting policy
A revised AASB 3 Business Combinations became operative on
1 July 2009. While the revised standard continues to apply the
All purchase consideration is now recorded at fair value at
the acquisition date. Contingent payments classified as debt
are subsequently remeasured through profit or loss. Under
the Group’s previous policy, contingent payments were only
recognised when the payments were probable and could be
measured reliably and were accounted for as an adjustment to
the cost of acquisition.
Acquisition-related costs are expensed as incurred. Previously,
they were recognised as part of the cost of acquisition and
therefore included in goodwill.
Non-controlling interests in an acquiree are now recognised
either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net identifiable assets. This
decision is made on an acquisition-by-acquisition basis. Under
the previous policy, the non-controlling interest was always
recognised at its share of the acquiree’s net identifiable assets.
If the Group recognises previous acquired deferred tax assets
after the initial acquisition accounting is completed there will no
longer be any adjustment to goodwill. As a consequence, the
recognition of the deferred tax asset will increase the Group’s net
profit after tax.
i) impairment of assets
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 identifiable cash inflows which
are largely independent of the cash inflows from other assets or
groups of assets (cash generating units). Non-financial assets
other than goodwill that suffered an impairment are reviewed
for possible reversal of the impairment at each reporting date.
j) grant income
Grants from the government are recognised at their fair value
where there is a reasonable assurance that the grant will be
received and the Group will comply with all attached conditions.
k) cash and cash equivalents
For cash flow statement presentation purposes, cash and cash
equivalents includes cash on hand, deposits held at call with
financial institutions, other short term, highly liquid investments
with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to
an insignificant risk of changes in value, and bank overdrafts.
Bank overdrafts are shown within borrowings in current liabilities
on the balance sheet.
www.qrxpharma.com 41
noteS to the
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42 QRxpharma Annual Report 2010
1 summaRy of sigNificaNt accouNtiNg PoLicies (continued)
l) Non-current assets (or disposal groups) held for sale and discontin-
ued operations
Non-current assets (or disposal groups) are classified as held for sale if their
carrying amount will be recovered principally through a sale transaction rather
than through continuing use and a sale is considered highly probable. They are
measured at the lower of their carrying amount and fair value less costs to sell,
except for assets such as deferred tax assets, assets arising from employee ben-
efits, financial assets and investment property that are carried at fair value and
contractual rights under insurance contracts, which are specifically exempt from
this requirement.
An impairment loss is recognised for any initial or subsequent write-down of the
asset (or disposal group) to fair value less costs to sell. A gain is recognised for any
subsequent increases in fair value less costs to sell of an asset (or disposal group),
but not in excess of any cumulative impairment loss previously recognised. A gain
or loss not previously recognised by the date of the sale of the non-current asset (or
disposal group) is recognised at the date of derecognition.
Non-current assets (including those that are part of a disposal group) are not
depreciated or amortised while they are classified as held for sale. Interest and other
expenses attributable to the liabilities of a disposal group classified as held for sale
continue to be recognised.
Non-current assets classified as held for sale and the assets of a disposal group
classified as held for sale are presented separately from the other assets in the
balance sheet. The liabilities of a disposal group classified as held for sale are
presented separately from other liabilities in the balance sheet.
A discontinued operation is a component of the entity that has been disposed of or
is classified as held for sale and that represents a separate major line of business or
geographical area of operations, is part of a single co-ordinated plan to dispose of
such a line of business or area of operations, or is a subsidiary acquired exclusively
with a view to resale. The results of discontinued operations are presented
separately in the income statement.
m) investments and other financial assets
Classification
The Group classifies its investments in the following categories: financial assets at
fair value through profit or loss, loans and receivables, held to maturity investments
and available for sale financial assets. The classification depends on the purpose for
which the investments were acquired. Management determines the classification of
its investments at initial recognition and, in the case of assets classified as held-to-
maturity, re evaluates this designation at each reporting date.
(i) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for
trading. A financial asset is classified in this category if acquired principally for the
purpose of selling in the short term. Derivatives are classified as held for trading
unless they are designated as hedges.
(ii) Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They are included in current
assets, except for those with maturities greater than 12 months
after the balance sheet date which are classified 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 financial assets
with fixed or determinable payments and fixed 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 insignificant
amount of held to maturity financial assets, the whole category
would be tainted and reclassified as available-for-sale. Held-to-
maturity financial assets are included in non current assets, except
for those with maturities less than 12 months from the reporting
date, which are classified as current assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets, comprising principally equity
securities, are non-derivatives that are either designated in
this category or not classified in any of the other categories.
They are included in non-current assets unless the investment
matures or management intends to dispose of the investment
within 12 months of the end of the reporting period. Investments
are designated as available-for-sale if they do not have fixed
maturities and fixed or determinable payments and management
intends to hold them for the medium to long term.
Financial Assets – reclassification
The Group may choose to reclassify a non-derivative trading
financial asset out of the held-for-trading category if the financial
asset is no longer held for the purpose of selling it in the near term.
Financial assets other than loans and receivables are permitted
to be reclassified out of the held-for-trading category only in rare
circumstances arising from a single event that is unusual and
highly unlikely to recur in the near term. In addition, the Group
may choose to reclassify financial assets that would meet the
definition of loans and receivables out of the held-for-trading or
available-for-sale categories if the Group has the intention and
ability to hold these financial assets for the foreseeable future or
until maturity at the date of reclassification.
Reclassifications are made at fair value as of the reclassification
date. Fair value becomes the new cost or amortised cost as
applicable, and no reversals of air value gains or losses recorded
before reclassification date are subsequently made. Effective
interest rates for financial assets reclassified to loans and
receivables and held-to-maturity categories are determined at the
reclassification date. Further increases in estimates of cash flows
adjust effective interest rates prospectively.
Recognition and derecognition
Regular purchases and sales of financial assets are recognised on
trade-date – the date on which the Group commits to purchase
or sell the asset. Investments are initially recognised at fair value
plus transaction costs for all financial assets not carried at fair
value through the profit and loss. Financial assets carried at fair
value through profit or loss are initially recognised at fair value
and transaction costs are expensed in profit or loss. Financial
assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and
the Group has transferred substantially all the risks and rewards
of ownership. Regular purchases and sales of financial assets are
recognised on trade-date – the date on which the Group commits
to purchase or sell the asset.
Subsequent measurement
Loans and receivables and held to maturity investments are
carried at amortised cost using the effective interest method.
Available-for-sale financial assets and financial assets at fair
value through profit or loss are subsequently carried at fair
value. Gains or losses arising from changes in the fair value of
the “financial assets at fair value through profit or loss’ category
are presented in profit or loss within other income or other
expenses in the period in which they arise.
Fair value
The fair value of the available-for-sale financial assets has been
determined using valuation techniques fully described in Note 2 (d).
n) Property, plant and equipment
Property, plant and equipment are stated at historical costs less
depreciation.
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)).
0) intangible assets
(i) Intellectual property
Costs incurred in acquiring intellectual property are capitalized
and amortised on a straight line basis of the period of the
expected benefit.
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)).
www.qrxpharma.com 43
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44 QRxpharma Annual Report 2010
1 summaRy of sigNificaNt accouNtiNg PoLicies (continued)
(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 benefits
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.
p) trade and other payables
These amounts represent liabilities for goods and services provided to the Group
prior to the end of financial year which are unpaid. The amounts are unsecured
and are usually paid within 30 days of recognition.
q) Leases
Leases in which a significant portion of the risks and rewards of ownership are
not transferred to the Group as lessee are classified as operating leases (note
22). 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.
r) employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non monetary benefits 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
benefits 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 outflows.
(iii) Retirement benefit obligations
The Group does not maintain a Group superannuation plan. The Group makes
fixed percentage contributions for all Australian resident employees to complying
third party superannuation funds and for US resident employees to complying
pension funds if requested. 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 benefits are provided to employees via
the QRxPharma Limited Employee Share Option Plan. Informa-
tion relating to this scheme is set out in note 28.
The fair value of options granted under the QRxPharma Limited
Employee Share Option Plan is recognised as an employee
benefit expense with a corresponding increase in equity. The fair
value is measured at grant date and recognised over the period
during which the employees become unconditionally entitled to
the options.
The fair value at grant date is independently determined using
Black-Scholes option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the
share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free
interest rate for the term of the option.
The fair value of the options granted is adjusted to reflect
market vesting conditions, but excludes the impact of any non
market vesting conditions (for example, profitability 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 benefit 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.
(v) Bonus plans
The Group recognises a liability and an expense for bonuses
in accordance with the terms of employment contracts. The
Group recognises a provision where contractually obliged or
where there is a past practice that has created a constructive
obligation.
(vi) Employee benefit on costs
Employee benefit on-costs, including payroll tax, are recognised
and included in the employee benefit liabilities and costs when
the employee benefits to which they relate are recognised.
s) contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from
the proceeds. Incremental costs directly attributable to the issue
of new shares or options for the acquisition of a business are not
included in the cost of the acquisition as part of the purchase
consideration.
t) earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit
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 financial year, adjusted for bonus elements in ordinary
shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after income tax effect of interest and other financing
costs associated with dilutive potential ordinary shares and
the weighted average number of shares assumed to have been
issued for no consideration in relation to dilutive potential
ordinary shares.
u) derivatives
Derivatives that do not qualify for hedge accounting
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. Changes
in the fair value of any derivative instrument that does not
qualify for hedge accounting are recognised immediately in the
income statement and are included in other income or other
expenses.
v) 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 flows are presented on a gross basis. The GST components
of cash flows arising from investing or financing activities which
are recoverable from, or payable to the taxation authority, are
presented as operating cash flow.
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 financial
report. Amounts in the financial report have been rounded off
in accordance with that Class Order to the nearest thousand
dollars, or in certain cases, the nearest dollar.
x) Parent entity financial information
The financial information for the parent entity, QRxPharma
Limited, disclosed in note 27 has been prepared on the same basis
as the consolidated financial statements, except as set out below.
www.qrxpharma.com 45
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
46 QRxpharma Annual Report 2010
1 summaRy of sigNificaNt accouNtiNg PoLicies (continued)
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost in the financial statements of
QRxPharma Limited.
(ii) 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.
y) New accounting standards and interpretations
Certain new accounting standards and interpretations have been published that are
not mandatory for 30 June 2010 reporting periods. The Group’s and the parent entity’s
assessment of the impact of these new standards and interpretations is set out below.
(i) AASB 2009-8 Amendments to Australian Accounting Standards – Group
Cash-Settled Share based Payment Transactions [AASB 2] (effective from 1
January 2010)
The amendments made by the AASB to AASB 2 confirm that an entity receiving
goods or services in a Group share-based payment arrangement must recognise an
expense for those goods or services regardless of which entity in the Group settles
the transaction or whether the transaction is settled in shares or cash. They also
clarify how the Group share-based payment arrangement should be measured,
that is, whether it is measured as an equity- or a cash-settled transaction. The
Group will apply these amendments retrospectively for the financial reporting period
commencing on 1 July 2010. There will be no impact on the Group’s or the parent
entity’s financial statements.
(ii) AASB 2009-10 Amendments to Australian Accounting Standards –
Classification of Rights Issues [AASB 132] (effective from 1 February 2010)
In October 2009 the AASB issued an amendment to AASB 132 Financial
Instruments: Presentation which addresses the accounting for rights issues that are
denominated in a currency other than the functional currency of the issuer. Provided
certain conditions are met, such rights issues are now classified as equity regardless
of the currency in which the exercise price is denominated. Previously, these issues
had to be accounted for as derivative liabilities. The amendment must be applied
retrospectively in accordance with AASB 108 Accounting Policies, Changes in
Accounting Estimates and Errors. The Group will apply the amended standard from
1 July 2010. As the Group has not made any such rights issues, the amendment will
not have any effect on the Group’s or the parent entity’s financial statements.
(iii) AASB 9 Financial Instruments and AASB 2009-11 Amendments to
Australian Accounting Standards arising from AASB 9 (effective from 1
January 2013)
AASB 9 Financial Instruments addresses the classification and measurement
of financial assets and is likely to affect the Group’s accounting for its financial
assets. The standard is not applicable until 1 January 2013 but is available for early
adoption. The Group is yet to assess its full impact. However, initial indications are
that it may affect the Group’s accounting for its available-for-sale financial assets,
since AASB 9 only permits the recognition of fair value gains and losses in other
comprehensive income if they relate to equity investments that are not held for
trading. The Group has not yet decided when to adopt AASB 9.
(iv) Revised AASB 124 Related Party Disclosures and
AASB 2009-12 Amendments to Australian Accounting
Standards (effective from 1 January 2011)
In December 2009 the AASB issued a revised AASB 124 Related
Party Disclosures. It is effective for accounting periods beginning
on or after 1 January 2011 and must be applied retrospectively. The
amendment clarifies and simplifies the definition of a related party
and removes the requirement for government-related entities to
disclose details of all transactions with the government and other
government-related entities. The Group will apply the amended
standard from 1 July 2011. When the amendments are applied,
the Group will need to disclose any transactions between its
subsidiaries and its associates. However, there will be no impact on
any of the amounts recognised in the financial statements.
(v) AASB Interpretation 19 Extinguishing financial liabili-
ties with equity instruments and AASB 2009-13 Amend-
ments to Australian Accounting Standards arising from
Interpretation 19 (effective from 1 July 2010)
AASB Interpretation 19 clarifies the accounting when an entity
renegotiates the terms of its debt with the result that the liability
is extinguished by the debtor issuing its own equity instruments
to the creditor (debt for equity swap). It requires a gain or loss to
be recognised in profit or loss which is measured as the difference
between the carrying amount of the financial liability and the
fair value of the equity instruments issued. The Group will apply
the interpretation from 1 July 2010. It is not expected to have any
impact on the Group or the parent entity’s financial statements
since it is only retrospectively applied from the beginning of the
earliest period presented (1 July 2009) and the Group has not
entered into any debt for equity swaps since that date.
(vi) AASB 2010-3 Amendments to Australian Accounting
Standards arising from the Annual Improvements Project
and AASB 2010-4 Further Amendments to Australian Ac-
counting Standards arising from the Annual Improvements
Project (effective from 1 July 2010/1 January 2011)
In June 2010, the AASB made a number of amendments to
Australian Accounting Standards as a result of the IASB’s annual
improvements project. The Group will apply the amendments
from 1 July 2010. It does not expect that any adjustments will be
necessary as a result of applying the revised rules.
(vii) AASB 1053 Application of Tiers of Australian Ac-
counting Standards and AASB 2010-2 Amendments to
Australian Accounting Standards arising from Reduced
Disclosure Requirements (effective from 1 July 2013)
On 30 June 2010 the AASB officially introduced a revised
differential reporting framework in Australia. Under this
framework, a two-tier differential reporting regime applies to
all entities that prepare general purpose financial statements.
QRxPharma Limited is listed on the ASX and is not eligible to
adopt the new Australian Accounting Standards – Reduced
Disclosure Requirements. The two standards will therefore have no
impact on the financial statements of the entity.
(viii) AASB 2009-5 Further Amendments to Australian Ac-
counting Standards arising from the Annual Improvements
Project (effective for annual periods beginning on or after 1
January 2010)
In May 2009, the AASB issued a number of improvements to
existing Australian Accounting Standards. The Group will apply
the revised standards from 1 July 2010. The Group does not
expect that any adjustments will be necessary as the result of
applying the revised rules.
2 fiNaNciaL RisK maNagemeNt
The Group’s activities expose it to a variety of financial risks: market
risk (including currency risk and interest rate risk), credit risk and liquid-
ity risk. The Group’s overall risk management programme focuses on
the unpredictability of financial markets and seeks to minimise poten-
tial adverse effects on the financial performance of the Group. The
Group uses derivative financial instruments such as foreign exchange
contracts to hedge certain risk exposures. Derivatives are exclusively
used for hedging purposes, not as trading or other speculative instru-
ments. Cash and cash equivalents are invested exclusively with A rated
financial 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 holds the following financial instruments:
2010
$’000
2009
$’000
Financial assets
Cash and cash equivalents
12,760 17,773
Trade and other receivables
76
66
Available for sale financial assets
407
-
13,243 17,839
Financial liabilities
Trade and other payables
2,094 1,684
2,094 1,684
(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 ended 30 June 2010, the Group entered into a
series of Flexible Forward foreign exchange contracts to protect
against adverse foreign exchange movements between the AUD
and USD. Each contract stood alone and all had matured by 30
June 2010, although the final contract was settled following the
www.qrxpharma.com 47
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
48 QRxpharma Annual Report 2010
2 fiNaNciaL RisK maNagemeNt (continued)
year end. Each contract had a floor rate of US$0.91 and a ceiling of US$0.98.
On the maturity of each contract, if the spot rate was below the floor rate, the
Company was obligated to buy the contracted amount of US dollars from the
bank at US$0.91. If the spot rate was above the ceiling rate on contract maturity,
the Company was obligated to buy the contracted amount of US dollars from the
bank at US$0.98. If the spot rate was between US$0.91 and US$0.98, there was
no obligation by either the bank or the Company.
During the year, the Group converted A$15.7 million at an average AUD to USD
exchange rate of US$0.916. The Group converted a further A$ 2.2 million to USD
at an AUD to USD rate of US$0.91.
The Group’s exposure to foreign currency risk at the reporting date was as follows:
30 June 2010
30 June 2009
USD
$’000
353
6,708
115
EUR
$’000
-
226
-
USD
$’000
158
13,009
829
EUR
$’000
-
68
-
Cash at bank
Term deposits
Trade payables
Group sensitivity
Based on the financial instruments held at 30 June 2010, had the Australian dol-
lar weakened / strengthened by 15% (2009 - 10%) against the US dollar with all
other variables held constant, the Group’s post-tax loss for the year would have
been $1.5 million lower / $1.1 million higher (2009 – $1.9 million lower / $1.4 million
higher), mainly as a result of foreign exchange gains / losses on translation of
US dollar denominated financial instruments as detailed in the above table. The
Group’s exposure to other foreign exchange movements is not material.
(ii) Price risk
The Group and the parent entity are not exposed to equity securities price risk or
commodity price risk.
(iii) Cash flow and 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 significant bank accepted commer-
cial bills and term deposit interest-bearing assets exposing the Group’s income
and operating cash flows to changes in market interest rates.
The value of borrowings at 30 June 2010 was $nil (2009 - $nil), thus limiting the
Group’s exposure to any cash flow risk in relation to liabilities.
Group sensitivity
As at 30 June 2010, if interest rates had changed by -/+ 40 basis points (2009 -/+
40 basis points) from the year-end rates with all other variables held constant, the
post-tax loss for the year would have been $8,000 higher / $6,000 lower (2009
– $16,100 higher / lower), mainly as a result of lower / higher interest income from
cash and cash equivalents.
(b) credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial
institutions. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are acceptable. At
30 June 2010, cash equivalents were held with an Aa1 and an A3 financial institution, as rated by Moody’s.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities.
The Group has experienced recurring operating losses and operating cash outflows since inception to 30 June 2010. Due to negative
cash flow position the Group has not committed to any credit facilities and relied upon equity financing through private and public
equity investors.
The Group 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 2010, the Group had no overdue liabilities. The value of trade creditors at 30 June 2010 for
the Group was $1,313,000 (2009 - $824,000) which is payable within 1 month of year end and at 30 June 2010, the entity carried
cash and cash equivalents of $12.8 million (2009 - $17.8 million). Other payables for the Group include accruals for employee ben-
efits and other accruals to the value of $781,000 (2009 - $860,000).
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 five 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 measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
As of 1 July 2009, QRxPharma Limited has adopted the amendment to AASB 7 Financial Instruments: Disclosures which requires disclosure
of fair value measurements by level of the following fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices) (level 2), and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The following table presents the group’s assets measured and recognised at fair value at 30 June 2010. Comparative information as
not been provided as permitted by the transitional provisions of the new rules.
Assets
Available-for-sale financial assets
Equity securities
Total assets
Level 1
$’000
-
-
Level 2
$’000
-
-
Level 3
$’000
Total
$’000
407
407
407
407
The fair value of financial instruments that are not traded in an active market is determined using valuation techniques. The Group
uses a variety of methods and makes assumptions that are based on market conditions existing at the end of each reporting period.
Quoted market prices for similar instruments and recent transactions are used to estimate fair value. There has been no change in
the fair value of financial assets during the reporting period. There have been no changes to level 3 instruments for the year ended 30
June 2010.
The carrying value of trade and other payables is assumed to approximate their fair values due to their short-term nature.
www.qrxpharma.com 49
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
2 fiNaNciaL RisK maNagemeNt (continued)
Summarised sensitivity analysis
The following table summarises the sensitivity of the Group’s financial assets and financial liabilities to interest rate risk, foreign
exchange risk and other price risk.
foReigN eXchaNge RisK
iNteRest Rate RisK
-10%
30 June 2010
Carrying amount
Profit
Equity
$’000
$’000
$’000
Financial assets
Cash and cash equivalents
12,760
1,462
Financial liabilities
Trade payables
Total increase/(decrease)
1,313
24
1,486
-
-
-
Profit
$’000
(1,081)
18
(1,063)
+10%
Equity
$’000
-40bps
Equity
$’000
+40bps
Profit
Equity
$’000
$’000
Profit
$’000
-
-
-
(6)
-
(6)
-
-
-
8
-
8
-
-
-
foReigN eXchaNge RisK
iNteRest Rate RisK
-10%
30 June 2009
Carrying amount
Profit
Equity
$’000
$’000
$’000
Financial assets
Cash and cash equivalents
17,773
1,803
Financial liabilities
Trade payables
Total increase/(decrease)
824
(114)
1,689
-
-
-
Profit
$’000
(1,475)
93
(1,382)
+10%
Equity
$’000
-40bps
Equity
$’000
+40bps
Profit
Equity
$’000
$’000
Profit
$’000
-
-
-
(16)
-
(16)
-
-
-
16
-
16
-
-
-
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 financial 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 definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial 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 benefits 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 definite 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.
Black-Scholes option pricing model
During the year, the Group expensed $1.6 million of share based payments as determined through the application of the Black-Scholes
50 QRxpharma Annual Report 2010
option pricing model. The Black-Scholes model is dependent on a
number of variables and estimates fully described in note 28.
8 iNcome taX BeNefit
4 segmeNt iNfoRmatioN
Based on the internal reports that are reviewed and used by the
executive management team (the chief operating decision makers)
in assessing performance and in determining the allocation of
resources, the Group has determined that it operates within a single
operating segment The operating segment is that of the research and
development of biopharmaceutical products for commercial sale. The
Group’s operations during the year were predominantly in Australia.
5 ReVeNue
2010
$’000
2009
$’000
From continuing operations
Interest
261
719
6 otheR iNcome
Foreign exchange gain
Gain on loss of control in
Venomics Hong Kong Limited
Export market development
grant
2010
$’000
-
405
-
405
2009
$’000
5,324
-
150
5,474
7 eXPeNses
2009
$’000
Loss before income tax includes the following specific expenses:
2010
$’000
Depreciation and amortisation
Plant and equipment
net foreign exchange loss
Employee benefit expense
65
474
Employee benefit expense
4,447
Defined contribution
superannuation expense
Share option expense
58
1,576
29
-
4,616
42
1,533
Research and development
Research and development
expensed
6,081
6,191
18,006
11,937
Rental expenses relating to operating leases
Minimum lease payments
128
136
2009
$’000
(a) Numerical reconciliation of income tax expense to
prima facie tax payable
2010
$’000
(13,495)
(27,474)
Loss from continuing
operations before income tax
expense
Tax at the Australian tax rate of
30% (2009 – 30%)
Tax effect of amounts which are not deductible (taxable) in
calculating taxable income:
Share based payments
473
(8,242)
(4,048)
461
Adjustment for current tax of
prior periods
Income tax losses not
recognised
(7,769)
(3,587)
(1,080)
701
8,849
2,886
Income tax expense
-
-
(b) tax losses
Unused tax losses for which
no deferred tax asset has been
recognised
Potential tax benefit @ 30%
2010
$’000
2009
$’000
66,629
37,131
19,989
11,139
No deferred tax asset has been recognised for the tax losses
generated from operations in both Australia and the USA, as the
benefit for tax losses will only be obtained if:
(i) the Group derives future assessable income of a nature and of an
amount sufficient to enable the benefit 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 benefit from the deduction for the losses.
(c) 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).
www.qrxpharma.com 51
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
9 cuRReNt assets - cash aNd cash eQuiVaLeNts
Cash at bank
Term deposits
Commercial bills
2010
$’000
1,224
11,536
-
12,760
2009
$’000
527
16,153
1,093
17,773
(a) cash at bank
These bear an average interest rate of 4.4% (2009: 2.9%) for the AUD accounts and
0% (2009: 0.25% on balances over USD 50,000) for the USD accounts.
(b) term deposits
These are term deposits held in US dollars, Australian dollars and Euros.
The USD deposits bear an average fixed interest rate of 0.18% (2009: 0.4%). These
deposits have a maturity of less than 3 months.
The EUR deposits bear an average fixed interest rate of 0.19% (2009: n/a). These
deposits have a maturity of less than 3 months.
The AUD deposits bear an average fixed interest rate of 4.80% (2009: n/a). These
deposits have a maturity of less than 3 months.
(c) commercial bills
At 30 June 2010, the company held no commercial bills. At 30 June 2009, the
commercial bills were in Australian dollars and bore an average interest rate of 2.9%.
They had a maturity of less than 3 months.
10 cuRReNt assets - tRade aNd otheR ReceiVaBLes
Interest receivable
Other receivables
2010
$’000
11
65
76
2009
$’000
11
55
66
Information about the Group’s exposure to credit risk, 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 2010 no receivables were impaired or past
due (30 June 2009: nil).
11 cuRReNt assets - otheR cuRReNt assets
52 QRxpharma Annual Report 2010
Prepayments
2010
$’000
390
2009
$’000
566
12 NoN-cuRReNt assets – aVaiLaBLe-foR-saLe
fiNaNciaL assets
14 NoN cuRReNt assets - iNtaNgiBLe assets
unlisted securities
Equity securities
2010
$’000
2009
$’000
407
-
(a) investments in related parties
In October 2009, Liaoning Nuokang Medicines Co. Ltd., a Chinese
biopharmaceutical company based in Shenyang, China, invested
US$5 million for a controlling interest in Venomics Hong Kong
Limited a company established to develop and commercialise
the Group’s venomics assets, Textilinin and Haempatch™, for the
Chinese market. Venomics Pty Limited, which is a majority owned
subsidiary of QRxPharma Limited and holds all of the venomics
assets of the Group, maintains a minority interest in Venomics
Hong Kong Limited. Data generated through the development of
these products in China will support partnering activities in other
territories, the rights of which have been retained by Venomics Pty
Limited. The available for sale financial asset represents the Group’s
6.98% investment in Venomics Hong Kong Limited.
13 NoN-cuRReNt assets – PRoPeRty, PLaNt aNd
eQuiPmeNt
Patents,
trademarks
and other
rights
$’000
Total
Other
intangible
assets
$’000
$’000
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
-
-
-
-
-
-
-
-
-
-
15,502
889
16,391
(15,502)
(889)
(16,391)
-
-
-
At 1 July 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
year ended 30 June 2010
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2010
Cost
Accumulated depreciation
Net book amount
$’000
195
(122)
73
73
230
(29)
274
425
(151)
274
274
31
(65)
240
456
(216)
240
*The carrying amount of the Torsin IP asset was reduced to its
recoverable amount of $nil through recognition of an impairment
loss against the asset.
year ended 30 June 2010
Opening net book
amount
Impairment of
intellectual property
Amortisation charge
Closing net book
amount
At 30 June 2010
Cost
Accumulated
amortisation and
impairment
Net book amount
Patents,
trademarks
and other
rights
$’000
Total
Other
intangible
assets
$’000
$’000
-
-
-
-
-
-
-
-
-
-
15,502
889
16,391
(15,502)
(889)
(16,391)
-
-
-
www.qrxpharma.com 53
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
54 QRxpharma Annual Report 2010
15 cuRReNt LiaBiLities - tRade aNd otheR PayaBLes
Trade payables
Accrued employee benefits
Other payables
2010
$’000
1,313
468
313
2,094
2009
$’000
824
768
92
1,684
Accrued employee benefits 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.
16 coNtRiButed eQuity
2010
Shares
2009
Shares
2010
$’000
2009
$’000
(a) share capital
Ordinary shares - fully paid
102,475,000
75,000,000
99,969
79,694
(b) movements in ordinary share capital:
Date
1 July 2008
30 June 2009
Details
Opening Balance
Number of
shares
75,000,000
Balance
75,000,000
Issue price
$’000
79,694
79,694
19 November 2009
23 December 2009
Share placement
Rights issue
10,000,000
17,000,000
$0.80 8,000
13,600
$0.80
2 March 2010
18 March 2010
31 March 2010
29 April 2010
29 April 2010
2 June 2010
21 June 2010
Exercise of
employee options
Exercise of
employee options
Exercise of
employee options
Exercise of
employee options
Exercise of
employee options
Exercise of
employee options
Exercise of
employee options
92,400
$0.20
18
40,000
$0.20
92,400
$0.20
95,200
$0.20
30,000
$0.65
100,000
$0.37
25,000
$0.20
8
18
19
20
37
5
Less: Transaction costs arising on issue of shares
30 June 2010
Balance 102,475,000
(1,450)
99,969
During the 30 June 2010 year, QRxPharma Limited successfully
raised $21.6 million (before expenses) as a result of a fully
underwritten institutional placement raising $8 million and a
fully underwritten 1 for 5 renounceable rights issue raising a
further $13.6 million. The issue price under the placement and
rights Issue was $0.80 per share resulting in the issue of 27
million new ordinary shares.
(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 financial year and options outstanding at the end
of the financial year are set out in note 28.
(e) 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 benefits
for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
The Group predominantly uses equity to finance its projects. In order
to maintain or adjust the capital structure, the Group may return
capital to shareholders, issue new shares or sell assets.
During the year QRxPharma Limited undertook a private placement
and rights issue to strengthen the company’s capital. Refer 16(b)
above for further details.
17 ReseRVes aNd accumuLated Losses
(a) Reserves
Share based payments reserve
Foreign currency translation reserve
Transactions with non-controlling interest
reserve
2010 2009
$’000
$’000
6,893
133
5,432
305
463
-
7,489
5,737
Movements:
Share based payments reserve
Balance 1 July
Option expense
Non-controlling interest
Balance 30 June
Foreign currency translation reserve
Balance 1 July
Currency translation differences
arising during the year
Balance 30 June
Transactions with non-controlling interest reserve
Balance 1 July
Sale of shares in Venomics Pty Limited
Balance 30 June
2010 2009
$’000 $’000
5,432
1,576
(115)
6,893
3,899
1,533
-
5,432
305
(315)
(172)
133
-
463
463
620
305
-
-
-
(b) accumulated losses
Movements in accumulated losses were as follows:
Balance at 1 July 2009
Net loss for the year
Balance 30 June
2010
$’000
2009
$’000
(68,436)
(27,348)
(95,784)
(54,941)
(13,495)
(68,436)
(c) Nature and purpose of reserves
(i) Share-based payments reserve
The share-based payment reserve is used to recognise:
• the fair value of options issued to employees but not exercised
• the fair value of shares issued to employees
(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 will be recognised in profit and
loss when the net investment is disposed.
(iii) Transactions with non-controlling interests
This reserve is used to record amounts which may arise as a result of
transactions with non-controlling interests that do not result in a loss of
control.
www.qrxpharma.com 55
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
18 NoN-coNtRoLLiNg iNteRests
Interests in:
Share capital
Reserves
Retained earnings
2010
$’000
116
115
(126)
105
2009
$’000
-
-
-
-
Refer to note 24(a) for additional information.
19 Key maNagemeNt PeRsoNNeL discLosuRes
(a) directors
The following persons were directors of QRxPharma Limited during the financial year:
(i) Chairman - non-executive
Dr Peter C Farrell
(ii) Executive director
(iii) non-executive directors
Dr John W Holaday, Managing
Director and Chief Executive Officer
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 financial year:
Name
Warren C Stern
Chris J Campbell
Position
Executive Vice President, Drug Development
Chief Financial Officer and Company Secretary
Philip J Magistro
Patricia T Richards
M. Janette Dixon
(from 23 September 2009)
Chief Commercial Officer
Chief Medical Officer
Vice President Global Development
All of the above persons, except for M. Janette Dixon were also key management persons during the year ended 30 June 2009.
(c) Key management personnel compensation
Short term employee benefits
Post employment benefits
Share based payments
56 QRxpharma Annual Report 2010
2010
$
2009
$
2,319,365
2,659,314
34,985
27,226
725,540
1,202,155
3,079,890
3,888,695
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 the remuneration report on pages 13 to 22.
M. Janette Dixon was appointed a director of Venomics Pty Limited on 23 September 2009 and is considered to fall within the definition
of group executive from that date. Fees and bonus payments were made pursuant to consultancy agreements held with BioComm
Strategy Pte ltd. In addition to the share based payments expense above, on 7 July 2009, Janette Dixon was issued a 10% interest in
Venomics Pty Limited as a reward for services rendered. Refer note 24(a) for further details.
(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 the remuneration report on pages 17 to 20.
(ii) Option holdings
The numbers of options over ordinary shares in the company held during the financial year by each director of QRxPharma Limited
and other key management personnel of the Group, including their personally related parties, are set out below.
2010
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
-
300,000
-
-
-
-
-
-
-
-
Other key management personnel of the Group
Warren C Stern
Chris J Campbell
Patricia T Richards
Philip J Magistro
M. Janette Dixon (from 23
September 2009)
880,452
477,726
560,000
260,000
137,500
(30,000)
150,000
(25,000)
130,000
130,000
-
-
100,000
350,000 (100,000)
-
-
-
-
-
-
-
-
-
-
604,089
604,089
-
1,105,452
805,452
300,000
402,726
402,726
241,635
987,952
602,726
690,000
390,000
350,000
402,726
402,726
241,635
-
-
-
812,952
175,000
415,226
187,500
363,333
326,667
163,333
226,667
-
350,000
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 (resigned 30
March 2010)
805,452
402,726
500,000
200,000
150,000
-
-
-
-
-
75,000
60,000
60,000
60,000
60,000
604,089
805,452
402,726
402,726
241,635
880,452
477,726
560,000
260,000
402,726
201,363
536,968
268,484
268,484
268,484
161,090
134,242
134,242
80,545
536,968
343,484
268,484
209,242
166,667
393,333
66,667
193,333
210,000
50,000
160,000
-
-
-
-
-
-
-
-
www.qrxpharma.com 57
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
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
19 Key maNagemeNt PeRsoNNeL discLosuRes (continued)
(iii) Share holdings
The numbers of shares in the company held during the financial 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.
Balance at the
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
2010
1,380,540
7,543,000
3,230,083
8,297,307
85,000
-
-
-
-
-
-
-
-
-
250,000
66,635
150,000
77,064
17,000
30,000
25,000
-
-
-
-
-
-
1,630,540
7,609,635
3,380,083
8,374,371
102,000
30,000
25,000
-
-
M. Janette Dixon (from 23 September 2009)
200,000
100,000
(100,000)
200,000
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 (resigned 30 March 2010)
Balance at the
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
2009
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 acts as the trustee of the Innovation Capital QRx I & II Trusts.
The movement for the year includes a net distribution of 1,174,442 shares to beneficiaries 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.
58 QRxpharma Annual Report 2010
(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 $97,266 (2009: $131,532).
20 RemuNeRatioN of auditoRs
(iii) USD 2,000,000 on the date of receipt by the Group of first
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
expiry date of the patents licensed under the agreement.
2010
$’000
2009
$’000
(a) Pricewaterhousecoopers australia
Audit & Other assurance services
Audit and review of financial reports
and other audit work under the
Corporations Act 2001
Other assurance services
Accounting advisory services
Total remuneration for audit and
other assurance services
Taxation services
Tax compliance services
International tax consulting and advice
Total remuneration for taxation
services
Total remuneration of
PricewaterhouseCoopers Australia
110,000
96,000
16,200
33,250
126,200
129,250
4,660
26,100
6,280
82,605
30,760
88,885
156,960
218,135
(b) Related practices of Pricewaterhousecoopers
australia
Taxation services
Tax compliance services
Total remuneration of related practices
of PricewaterhouseCoopers Australia
37,025
66,218
37,025
66,218
Total auditors remuneration 193,985 284,353
21 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;
22 commitmeNts
(a) university of alabama
The Group also holds a Sponsored Research Agreement with the Uni-
versity of Alabama. The Group is committed to paying the University of
Alabama USD 400,000 per annum, payable quarterly for five 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 and upon payment of all amounts due.
(b) operating Leases
The Group leases office 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 five
years
2010 2009
$’000 $’000
63 128
13
76
57
185
23 ReLated PaRty tRaNsactioNs
(a) subsidiaries
Interests in subsidiaries are set out in note 24.
(b) Key management personnel
Disclosures relating to key management personnel are set out in
note 19.
(c) outstanding balances
There are no outstanding balances at the reporting date in
relation to transactions with related parties.
www.qrxpharma.com 59
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
24 suBsidiaRies
The consolidated financial 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
Equity holding
2010
%
2009
%
The Lynx Project Pty
Limited
Australia
Ordinary
100
100
Haempatch Pty Limited
Australia
QRxPharma, Inc.
Venomics Pty Limited
USA
Australia
Ordinary /
Preference
Ordinary
Ordinary
100
100
80
100
100
100
(a) transactions with non-controlling interests
On 7 July 2009 Janette Dixon was issued a 10% interest in Venomics Pty Limited
as a reward for services rendered. In accordance with AASB 2 Share-based
payments, this transaction was measured at fair value with reference to similar
transactions and resulted in a share based payments expense of A$578,000.
There were no transactions with non-controlling interests in 2009.
On 23 September 2009, QRxPharma Limited issued shares amounting to
a 10% interest in Venomics Pty Limited to Liaoning Nuokang Medicines Co.
Ltd, a Chinese biopharmaceutical company based in Shenyang, China for
US$500,000. The carrying amount of the non-controlling interests in Venomics
Pty Limited on the date the transaction was A$115,000. The Group recognised
a gain on the sale of a 10% interest of A$578,000 and an increase in equity
attributable to the owners of the parent of A$463,000. The effect of changes in
the ownership interest of QRxPharma Limited on the equity attributable to the
owners of QRxPharma Limited during the year is summarised as follows:
Consideration received for non-controlling interest
Carrying amount of controlling interest
Excess of consideration received recognised in the transactions
with non-controlling interest reserve within equity
2010
$’000
2009
$’000
578
(115)
463
-
-
-
60 QRxpharma Annual Report 2010
25 RecoNciLiatioN of PRofit afteR iNcome taX
to Net cash outfLoW fRom oPeRatiNg actiVities
(d) Weighted average number of shares
used as the denominator
Loss for the year
Depreciation and amortisation
Non cash employee benefits expense-share-
based payments
Net exchange differences on cash and cash
equivalents
Gain on loss of control of Venomics Hong
Kong Limited
Change in operating assets and liabilities
(Increase)/decrease in other receiv-
ables and prepayments
Increase/(decrease) in trade
creditors and accruals
Increase/(decrease) in other
operating liabilities
2010
$’000
2009
$’000
(27,474)
(13,495)
65
29
1,576
1,533
295
(4,704)
(405)
-
177
(16)
405
(340)
-
-
Net cash outflow from operating activities
(25,361)
(16,993)
26 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
2010
Cents
2009
Cents
(30.3)
(18.0)
(30.3)
(18.0)
(c) Reconciliations of earnings used in calculating
earnings per share
Basic loss per share
Loss attributable to the ordinary equity
holders of the company used in calculat-
ing basic earnings per share
Diluted loss per share
Loss attributable to the ordinary equity
holders of the company used in calculat-
ing diluted earnings per share
2010
2009
$’000
$’000
(27,348)
(13,495)
(27,348)
(13,495)
2010
Number
2009
Number
90,384,036
75,000,000
90,384,036
75,000,000
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
(e) information concerning the classification of securities
(i) Options
Options are considered to be potential ordinary shares. The
options are not included in the calculation of diluted earnings
per share because they are anti dilutive. These options could
potentially dilute basic earnings per share in the future. Details
relating to the options are set out in note 28.
27 PaReNt eNtity fiNaNciaL iNfoRmatioN
(a) summary financial information
The individual financial statements for the parent entity show
the following aggregate amounts:
2010
$’000
12,212
13,469
1,831
1,831
2009
$’000
17,866
20,231
3,263
3,263
99,969
79,694
6,430
5,432
(94,761)
11,638
(26,603)
(68,158)
16,968
(12,875)
(26,603)
(12,875)
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholder’s equity
Issued capital
Share based payment
reserve
Accumulated losses
(Loss) for the year
Total comprehensive
(loss) / income
(b) guarantees entered into by the parent entity
There are no guarantees entered into by the parent entity.
(c) contingent liabilities of the parent entity
The parent entity did not have any contingent liabilities as at 30
June 2010 or 30 June 2009.
www.qrxpharma.com 61
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
27 PaReNt eNtity fiNaNciaL iNfoRmatioN (continued)
(d) commitments of the parent entity
The parent entity leases office premises in Sydney, Australia.
2010
$’000
2009
$’000
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 five years
5
6
11
29
2
31
28 shaRe Based PaymeNts
(a) QRxPharma employee share option Plan (esoP)
The QRxPharma Limited Employee Share Option Plan (Limited ESOP) was
approved by shareholders at the extraordinary general meeting 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 remuneration 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, officer, 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 per cent (10%) of the Diluted Ordinary Share Capital
in the Company as at the date of issue of the relevant options under the option
plan, subject to changes in capitalization 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 1
January 2010 generally vest over 3 years with the initial vesting on the first
62 QRxpharma Annual Report 2010
anniversary of the date of the grant and subsequent vestings in 8 equal tranches on the first 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 at an exercise price of $2.20. These options vested on 25 No-
vember 2007 and expired on 25 May 2010.
(c) set out below are summaries of options granted under the plans:
Grant Date
Expiry date
Exercise
price
Balance at
start of the year
Granted during
the year
Exercised during
the year
Forfeited during
the year
Balance at end
of the year
2010
Vested and exercisable
at end of the year
number
number
number
number
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
2010
31 March 2007
14 April 2007
25 May 2007
25 May 2007
25 May 2007
31 March 2014
14 April 2014
$1.42
$1.00
25 May 2014
$2.00
25 May 2014
25 May 2010
$1.00
$2.20
$1.70
$1.45
$1.34
$1.11
$1.05
$1.04
1 September 2007
1 September 2014
1 October 2007
1 October 2014
9 October 2007
9 October 2014
1 January 2008
1 January 2015
1 April 2008
1 April 2008
1 April 2015
1 April 2015
1 October 2008
1 October 2015
$0.60
4 November 2008
4 November 2015
1 January 2009
1 January 2016
31 August 2009
31 August 2016
$0.37
$0.20
$0.65
1 October 2009
1 October 2016
$0.90
16 November 2009
16 November 2016
$1.12
1 January 2010
1 January 2017
$0.78
17 February 2010
17 February 2017
$0.84
24 March 2010
24 March 2014
$1.26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(100,000)
(345,000)
(30,000)
-
-
-
-
-
-
-
-
-
(322,181)
-
-
-
(150,000)
-
-
-
-
(35,000)
(30,000)
-
-
-
-
-
number
402,726
2,013,630
1,448,450
552,726
-
50,000
75,000
50,000
200,000
600,000
75,000
50,000
-
330,000
477,500
150,000
300,000
100,000
565,000
295,000
-
-
-
-
-
-
537,500
150,000
300,000
100,000
565,000
295,000
Total
6,799,713
1,947,500
(475,000)
(537,181)
7,735,032
Weighted average exercise price
$1.22
$0.90
$0.26
$1.68
$1.17
number
402,726
2,013,630
1,448,450
552,726
-
33,333
50,000
33,333
133,333
400,000
50,000
16,667
-
165,000
-
-
-
-
-
-
5,299,199
$1.30
www.qrxpharma.com 63
noteS to the
ConSolIDAteD
FInAnCIAl
StAtementS
(ContInueD)
28 shaRe Based PaymeNts (continued)
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
Number
Number
Number
Number
402,726
2,013,630
1,448,450
552,726
322,181
50,000
75,000
50,000
350,000
600,000
75,000
2009
31 March 2007
31 March 2014
14 April 2007
25 May 2007
25 May 2007
25 May 2007
14 April 2014
25 May 2014
25 May 2014
25 May 2010
1 September 2007
1 September 2014
1 October 2007
1 October 2014
9 October 2007
9 October 2014
1 January 2008
1 January 2015
1 April 2008
1 April 2008
1 April 2015
1 April 2015
1 October 2008
1 October 2015
4 November 2008
4 November 2015
1 January 2009
1 January 2016
Total
Weighted average exercise price
$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
-
-
-
50,000
100,000
710,000
5,939,713
860,000
$1.36
$0.24
-
-
-
-
-
-
-
-
-
-
-
2009
Vested and exercisable
at end of the year
Number
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
3,569,809
$1.39
Number
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
6,799,713
$1.22
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2010 was $1.09.
(2009- no options exerciseal).
The weighted average remaining contractual life of the share options outstanding at the end of the period was 4.67 years.
(2009 – 5.17 years)
Fair value of options granted
The assessed fair value at grant date of options granted during the year ended 30 June 2010 was $0.59 per option (2009 - $0.10).
The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option.
The model inputs for options granted during the year ended 30 June 2010 included:
(a) exercise price: $0.65 to $1.26 (2009 $0.20 to $0.60)
(b) grant date: 31 August 2009, 1 October 2009, 16 November 2009, 1 January 2010, 17 February 2010, 24 March 2010
(2009, 1 October 2008, 4 November 2008, 1 January 2009)
(c) expiry date: 31 August 2016, 1 October 2016, 16 November 2016, 1 January 2017, 17 February 2017, 24 March 2017 (2009-
1 October 2015, 4 November 2015, 1 January 2016)
(d) share price at grant date: $0.65 to $1.12 (2009 - $0.20 to $0.60)
(e) expected price volatility of the company’s shares: 80% (2009 - 60%)
(f) expected dividend yield: nil% (2009 - nil%)
(g) risk free interest rate: 5.3% (2009 - 5.18%).
64 QRxpharma Annual Report 2010
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 benefit expense
were as follows:
Options issued under employee option plan
2010
$’000
2009
$’000
1,576
1,533
29 eVeNts occuRRiNg afteR the BaLaNce sheet date
No significant events have occurred after the balance sheet date which would have a material impact on the financial results of the
Group.
www.qrxpharma.com 65
DIReCtoRS’
DeClARAtIon
In the directors’ opinion:
(a) the financial statements and notes set out on pages 32 to 65 are in
accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Act 2001 and other
mandatory professional reporting requirements; and
(ii) giving a true and fair view of the consolidated entity’s financial position as at
30 June 2010 and of their performance for the financial 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
Note 1 (a) confirms that the financial statements also comply with International
Financial Reporting Standards as issued by the International Accounting
Standards Board.
The directors have been given the declarations by the chief executive officer and
chief financial officer 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
29 September 2010
66 QRxpharma Annual Report 2010
www.qrxpharma.com 67
www.qrxpharma.com 67
68 QRxpharma Annual Report 2010
68 QRxpharma Annual Report 2010
www.qrxpharma.com 69
www.qrxpharma.com 69
ShAReholDeR
InFoRmAtIon
The shareholder information set out below was applicable as at 24 September 2010.
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
155
352
221
397
82
1,207
Options
-
-
-
15
16
31
There are 108 holders of less than a marketable parcel of ordinary shares.
B. eQuity secuRity hoLdeRs
Twenty largest quoted equity security holders.
The names of the twenty largest holders of quoted equity securities are listed below:
Name
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
Dr John Holaday and Holaday Foundation
Four Hats Financial Services Limited
Innovation Capital Limited
Uniquest Pty Limited
Spring Ridge Ventures I, LP
Merrill Lynch (Australia) Nominees Pty Limited
Dr Gary Pace
Citicorp Nominees Pty Limited
UBS Nominees
UIIT Pty Limited
JP Morgan Nominees Australia Limited
Jigley Holdings Pty Limited
Dr Peter Farrell
Neweconomy Nominees Pty Limited
Bacchus Global Assets LLC
ITR Investments
Mr Ross Richard Eddison
RAC & JD Brice Superannuation Pty Limited
oRdiNaRy shaRes
Percentage of issued
shares
11.15%
10.75%
7.43%
7.07%
5.14%
4.69%
4.13%
3.62%
3.30%
2.95%
2.93%
2.35%
1.91%
1.66%
1.59%
0.74%
0.72%
0.64%
0.62%
0.61%
Number held
11,427,035
11,012,020
7,609,635
7,247,372
5,269,090
4,805,399
4,228,673
3,714,588
3,380,083
3,019,821
3,005,604
2,407,306
1,958,878
1,700,000
1,630,540
760,685
742,366
658,380
638,200
626,929
75,842,604
74.01%
70 QRxpharma Annual Report 2010
ShAReholDeR
InFoRmAtIon
(ContInueD)
unquoted equity securities
Options issued under the QRxPharma Limited
Employee Share Option Plan to take up
ordinary shares
* Number of unissued ordinary shares under the options.
** No person holds 20% or more of these securities.
Number on issue Number of holders
8,010,032*
31**
c. suBstaNtiaL hoLdeRs
Substantial holders in the company are set out below:
ordinary shares
Number held
Percentage
Innovation Capital Limited, Innovation Capital LLC,
and Innovation Capital Associates Pty Limited
Dr John W Holaday and Holaday Foundation
Westpac Banking Corporation
Four Hats Financial Services Limited
Orbis Investment Management (Australia) Pty Limited
7,988,287
7.80%
7,609,635
7,584,436
7,247,372
6,019,996
7.43%
7.40%
7.07%
5.87%
d. VotiNg Rights
The voting rights attaching to each lass 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.
www.qrxpharma.com 71
noteS
72 QRxpharma Annual Report 2010
noteS
www.qrxpharma.com 73
www.qrxpharma.com