2013 ANNUAL REPORT
QRxPharma Limited is
an Australian-based
commercial-stage specialty
pharmaceutical company
focused on the development
and commercialisation of
new pain management and
abuse prevention products.
Based on a development strategy that focuses on enhancing the clinical
utility of currently approved compounds as well as bringing new products
to market, the Company’s 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’s lead product candidate, immediate release MOXDUO®,
is presently under review at the US Food and Drug Administration.
QRxPharma entered into strategic collaborations with Actavis Inc. in
December 2011, Paladin Labs Inc. in October 2012 and Aspen Group in
September 2013 for the commercialisation of immediate release MOXDUO
in the United States, Canadian and Australian (including New Zealand and
Oceania) acute pain markets. The Company’s clinical pipeline includes an
intravenous (IV) and controlled release (CR) formulation of MOXDUO.
The Company also established a collaboration agreement with Aesica
Formulation Development Limited, for the worldwide promotion of
QRxPharma’s proprietary Stealth Beadlets® abuse deterrence technology.
For more information, visit www.qrxpharma.com.
QRxPHARMA LIMITED
ABN 16 102 254 151
TABLE OF
CONTENTS
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
2
3
4
23
24
31
70
71
73
CORPORATE
DIRECTORY
DIRECTORS
Peter C Farrell PhD, ScD, AM
Non-Executive Chairman
John W Holaday PhD
Managing Director, Chief Executive Offi cer
and Chief Scientifi c Offi cer
R Peter Campbell FCA, FTIA
Gary W Pace PhD
Michael A Quinn MBA
SECRETARY
Chris J Campbell CA
NOTICE OF ANNUAL GENERAL MEETING
The annual general meeting of QRxPharma Limited
will be held at
time
date
DibbsBarker
Level 8, Angel Place,
123 Pitt Street, Sydney
10.00am
Wednesday, 13 November 2013
PRINCIPAL REGISTERED OFFICE IN AUSTRALIA
QRxPharma Limited
Level 1, 194 Miller St, North Sydney NSW 2060
SOLICITORS
DibbsBarker
Level 8, Angel Place, 123 Pitt Street
Sydney NSW 2000
Bryan Cave LLP
1155 F Street, N.W.
Washington, D.C. 20004, U.S.A
BANKERS
Westpac Banking Corporation
Level 9 Keycorp Tower, 799 Pacifi c Highway
Chatswood NSW 2067
Silicon Valley Bank
3003 Tasman, Santa Clara, California 95054
U.S.A
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
SHARE REGISTER
Link Market Services Limited
Level 12, 680 George Street, Sydney NSW 2000
WEBSITE ADDRESS
www.qrxpharma.com
AUDITOR
Deloitte Touche Tohmatsu
Eclipse Tower
60 Station Street, Parramatta, NSW 2150
www.qrxpharma.com
www.qrxpharma.com
1
1
LETTER
FROM THE
CHAIRMAN
Dear Shareholder,
On behalf of QRxPharma’s Board and management, I am pleased to provide you with our
2013 Annual Report.
In the past year, we have focused on gaining US Food and Drug Administration (FDA)
approval for MOXDUO®, as well as working with our various strategic partners.
QRxPharma recently announced the receipt of a Complete Response Letter (CRL) in response
to our New Drug Application (NDA) for immediate release MOXDUO. In order to maintain
FDA review, the Company needs to re-fi le the NDA. We had immediately informed the FDA
after we noticed that some of the data in our originally submitted Study 022, outlining better
respiratory data on MOXDUO than either opiate given alone, were unfortunately corrupted
in our original fi ling. We have since reprocessed the data and the conclusions showing that
MOXDUO was better than either morphine or oxycodone alone were reconfi rmed. We will
resubmit the corrected data in a revised NDA in Q4 2013, following a review meeting with the
FDA to be held on 3 October 2013.
With an Advisory Committee meeting and a new Prescription Drug User Fee Act (PDUFA)
date now anticipated to occur in Q2 2014, we believe that a launch of MOXDUO into the
US acute pain market is now within reach. The FDA previously confi rmed that there were
no safety issues in any of the previously submitted studies. The data we are to resubmit also
confi rm our previous conclusions that MOXDUO has a better respiratory profi le than either of
the other opiates given by themselves.
We have continued to deliver on our commercial strategy. In the past year, we have signed
agreements with Paladin Labs Inc. and Aspen Group to commercialise immediate release
MOXDUO in the Canadian and Australian / New Zealand / Oceania, acute pain markets
respectively, and Aesica Formulation Development Limited for the worldwide promotion of
QRxPharma’s proprietary Stealth Beadlets®. Actavis, our commercialisation partner for the
US, remains supportive of our efforts. In this vein, we look forward to successfully launching
immediate release MOXDUO into the US market in the near future. Our scientifi c and clinical
teams, alongside partners like Actavis, Paladin, Aspen and Aesica, are laying the marketing
and distribution groundwork for product launches in our target markets. While there are no
guarantees of success with any FDA submission, we have complied with all FDA expectations
to the letter of the law.
I would like to take this opportunity to thank my fellow Board members, senior management,
and the entire QRxPharma staff in both Australia and the US. We also greatly appreciate
your patient and consistent support as shareholders.
Sincerely,
Peter C Farrell, PhD, ScD, AM
Chairman
2 QRxPharma Annual Report 2013
CEO
REVIEW
As mentioned in the Chairman’s Letter, QRxPharma anticipates refi ling its NDA for immediate
release MOXDUO with the FDA in Q4 2013. The FDA has previously confi rmed that the
Company’s Combination Rule Trial (Study 008) satisfi ed effi cacy requirements, and that
there were no safety issues in any of the studies submitted as part of the original NDA. In
various clinical trials, QRxPharma has demonstrated a 25% to 75% reduction in nausea,
vomiting, dizziness, headaches and sleepiness compared to equal analgesic doses of widely
prescribed acute pain opioids.
The revised NDA requires the inclusion of additional information and analysis of Study 022
data. This comparative study of MOXDUO with single equi-analgesic doses of morphine and
oxycodone indicated that MOXDUO resulted in less severe respiratory depression than either
morphine or oxycodone given separately. We have been heartened by the fact that additional
analyses conducted of the over 30 million data points for oxygen saturation obtained from the
375 patients who received either MOXDUO, morphine or oxycodone continue to support and
strengthen these earlier conclusions. We are confi dent that further analysis of Study 022, and
the entirety of our NDA data, will confi rm MOXDUO’s potential as a safe, effective alternative to
other opioid formulations.
Worldwide sales for all opioids are US$14 billion and continue to grow at 6% per annum.
QRxPharma’s proprietary Dual Opioid® technology, a fi xed 3:2 ratio of morphine and
oxycodone, are fi rst-in-class and at present there are no combination opioid - opioid products
available commercially anywhere in the world. Further, as mentioned last year, the FDA requires
all combination paracetamol (acetaminophen) / opioid acute pain products containing more
than 325 mg of paracetamol to be removed from the market by January 2014, due to concerns
over the safety of paracetamol. This accounts for over 100 million prescriptions for Vicodin alone,
the predominant acute pain opioid in the US, and creates a window of opportunity for new,
potentially safer alternatives like MOXDUO.
The Company is well positioned to take advantage of this environment and assuming approval
of the NDA for immediate release MOXDUO in Q2 2014, commercialisation lead by our US
partner, Actavis, will follow shortly thereafter.
Complementing our portfolio and commercial partnerships, the Company recently signed a
collaboration agreement with Aesica Pharmaceuticals Limited for the worldwide promotion
of QRxPharma’s proprietary Stealth Beadlets® abuse deterrent technology. This technology,
developed for the MOXDUO controlled release formulation, may be incorporated into almost any
potentially abused drug (e.g. opioids, amphetamines, sedatives, etc.) that are sold in solid dosage
forms such as tablet, sachet or capsule. The non-exclusive agreement will see Aesica promote this
technology to their clients for inclusion in their existing formulations of controlled drugs.
Further, the Company’s efforts during the year to strengthen its intellectual property portfolio
were rewarded with the issue of patent number 8,462,171 expiring in 2031, titled “Hybrid Opioid
Compounds and Compositions”. This patent covers a hybrid morphine-oxycodone molecule
where these two different opioids are chemically linked and forms part of a broad portfolio of
patents that protect MOXDUO in various formulations up until 2029.
My team and I are determined to obtain approval for MOXDUO in the coming year and we are
tremendously excited about the approaching transition into a commercial stage company. I
would like to thank you, our shareholders, for your support of QRxPharma, and I am confi dent of
a successful year ahead.
John W Holaday, PhD
Managing Director, Chief Executive Offi cer and Chief Scientifi c Offi cer
www.qrxpharma.com 3
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 2013.
DIRECTORS
The following persons were directors of QRxPharma Limited during the whole of the
fi nancial year and up to the date of this report:
Peter C Farrell
John W Holaday
R Peter Campbell
Gary W Pace
Michael A Quinn
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 global markets with the initial efforts being focused on the
US and European markets.
RESULTS
The net loss of $10.1 million (2012: net loss $16 million) from ordinary activities resulted
from the Company’s continuing efforts to secure approval for immediate release MOX-
DUO®. This included efforts to obtain approval from the United States Food and Drug
Administration (FDA) of a New Drug Application (NDA) in the United States (US), and
activities associated with the preparation of the regulatory fi lings in Canada, Europe
and Australia. Total expenditure during FY2013 decreased with the reduction in clinical
activities and the focus by the Company on the refi ling of the NDA and efforts to obtain
approval from the FDA for immediate release MOXDUO.
Revenue from continuing operations were up 112% to $4.1 million (2012: $1.9 million)
primarily through the recognition of revenue associated with the following licences:
• On 20 December 2011, the Company signed a binding Letter of Intent (LOI) with
Actavis Inc. (Actavis) to commercialise immediate release MOXDUO in the US.
The LOI was secured by a non-refundable, non-creditable up front signing fee
of $5.9 million (US$ 6 million). The fee revenue will be recognised from the date
of the signing of the LOI to the anticipated FDA approval date representing an
approximation of the time relating to the submission of the fi ling with the FDA and
associated processes. The Group has recognised $3.5 million (2012: $1.8 million)
as revenue and $592,000 (2012: $4.1 million) as deferred revenue in the year to
30 June 2013.
• On 9 October 2012, the Company signed a license agreement with Paladin Labs Inc.
(Paladin) to commercialise immediate release MOXDUO in Canada. The license
agreement was secured by a one-time, non-refundable, non-creditable upfront fee in
the amount of $485,000 (US$ 500,000). The fee has been recognised as revenue
in the year to 30 June 2013.
DIRECTORS’
REPORT
4 QRxPharma Annual Report 2013
Operating expenditures were down by 26% to $14.9 million (2012:
$20.2 million) and were inclusive of the following:
•
•
Research and development expenditure of $8.3 million
(2012: $9.2 million) which includes $3.8 million (2012: $3.1
million) for clinical and regulatory activities associated with
the progression of the NDA for immediate release MOXDUO
with the FDA, including preparation for the FDA Advisory
Committee; $0.6 million (2012: $0.4 million) for advancing
the regulatory fi lings for immediate release MOXDUO in
Canada, Europe and Australia and $2.9 million (2012: $2.9
million) for product and manufacturing process development.
The FY2012 expenditure also included clinical costs of
$1.3 million for two Phase I studies for MOXDUO CR, the
controlled release formulation, and $0.3 million for the Torsin
programme.
Employee benefi ts expense of $4.2 million (2012: $7.2 million),
which comprises salaries and wages expense of $2.8 million
(2012: $4.0 million) and non cash share based payments
expense of $1.4 million (2012: $2.2 million). These employee
benefi ts expenses were lower for FY2013 following a reduction in
employee head count after the receipt of the Complete Response
Letter (CRL) in June 2012 from the FDA. Further, $nil bonuses
were awarded during FY2013 (2012: $1.0 million).
•
Business development expenses of $0.7 million (2012: $1.3
million) associated with MOXDUO.
• Other expenses of $1.7 million (2012: $2.5 million). In FY2012
these other expenses included $0.4 million for the impairment
in the carrying value of the available-for-sale fi nancial asset,
representing the 6.98% investment in Venomics Hong Kong
Limited by Venomics Pty Limited, as well as $0.2 million for the
purchase of foreign exchange option contracts.
LOSS PER SHARE
2013
Cents
2012
Cents
(7.0)
(11.2)
(7.0)
(11.2)
(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
DIVIDENDS QRXPHARMA LIMITED
No dividends were paid or declared since the start of the fi nancial
year (2012: $nil).
REVIEW OF OPERATIONS
Product Pipeline
QRxPharma is developing proprietary Dual Opioid® formulations
for treating patients with moderate to severe acute or chronic pain.
This patented Dual Opioid product pipeline combines morphine and
oxycodone to potentially offer physicians broader treatment options
than traditional opioids, a large and growing market hindered by older
therapies with debilitating side effects. Worldwide sales for all opioids
are $14 billion and growing at 6%. The Company’s Dual Opioids are
fi rst in class and at present there are no combination opioid - opioid
products available commercially anywhere in the world.
The Company’s proprietary Dual Opioid pipeline includes three
complementary products to address various pain management needs:
•
immediate release MOXDUO, an oral capsule for the
treatment of moderate to severe acute pain;
• MOXDUO CR, a controlled-release oral tablet for chronic
pain; and
• MOXDUO IV, an intravenous formulation for hospital use.
QRxPharma has also developed a proprietary abuse deterrence
technology, referred to as Stealth Beadlets®, which was developed
for the controlled release MOXDUO formulation for the treatment
of chronic pain. Stealth Beadlets may be incorporated into almost
any potentially abused drug (e.g. opioids, amphetamines, sedatives,
etc.) that are sold in solid dosage forms (e.g. tablet, capsule, sachet);
they provide signifi cant resistance against the extraction of active
ingredients if crushed, solubilized or heated. The Company signed
a non-exclusive Collaboration Agreement with Aesica Formulation
Development Limited (Aesica) to promote QRxPharma’s Stealth
Beadlets technology for inclusion in their clients’ existing formulations
of controlled drugs.
Regulatory
The near term commercial opportunity for the Group rests with the
regulatory approval of immediate release MOXDUO in the US.
Having been denied in June 2012 a fi rst cycle approval by the FDA of its
NDA, the Company continued to progress towards an approval during
the fi nancial year culminating in the following key regulatory events:
•
February 2013: resubsmission of a NDA to the FDA which
included a comprehensive analysis of an additional study
(Study 022), which demonstrated the lower risks of respiratory
depression of immediate release MOXDUO when compared to
either of its components; morphine or oxycodone.
www.qrxpharma.com 5
DIRECTORS’
REPORT
(CONTINUED)
6 QRxPharma Annual Report 2013
REVIEW OF OPERATIONS (continued)
Regulatory (continued)
• March 2013: the FDA accepted the refi led NDA for review and set 26 August 2013
as the Prescription Drug User Fee Act (PDUFA) date for action on the Company’s
resubmitted NDA.
• March 2013: whilst the FDA confi rmed that there were no effi cacy or safety issues
in any of the studies that were part of the original NDA, it determined that the
resubmitted NDA, including new results from Study 022, would undergo review
by an FDA Advisory Committee to evaluate the approvability of MOXDUO in the
management of acute pain. The FDA subsequently set 17 July 2013 as the date for
the Advisory Committee meeting.
•
June 2013: the Advisory Committee Meeting of 17 July 2013 was delayed in order
to allow the Company and the FDA time to fully consider more results of recent
fi ndings for Study 022. During preparation for the Advisory Committee Meeting, the
Company found that for 17% of the 375 patients enrolled in Study 022, the timing
of the electronically collected oxygen desaturation information at one trial site, did
not accurately refl ect the local time zone or changes relating to daylight savings time.
For these patients, this resulted in a displacement of electronic oxygen desaturation data
relative to nurse-reported events by 1 or 2 hours out of the 48-hour study.
• August 2013: the FDA issued QRxPharma a Complete Response Letter (CRL)
regarding the Company’s MOXDUO NDA. This will allow the Company time to
complete the audit of all 30 million oxygen desaturation data points confi rming data
integrity and to submit further information required for the FDA to fully consider the
respiratory safety advantages of MOXDUO from Study 022. With the issue of the
CRL, in order to maintain FDA review, the Company is required to resubmit its NDA.
QRxPharma plans to complete its refi ling in Q4 2013, inclusive of the additional
information and analysis as requested by the FDA. QRxPharma anticipates a new
PDUFA date in Q2 2014, preceded by an Advisory Committee meeting.
•
September 2013: a review meeting has been scheduled with the FDA on 3 October
2013. The meeting was granted by the FDA after issuance of the CRL, and will
focus on outstanding issues that need to be addressed in the revised NDA and data
validation documentation.
Commercialisation
The Company has entered into strategic collaborations with Actavis Inc. (Actavis) in
December 2011, Paladin Labs Inc.(Paladin) in October 2012 and Aspen Group in September
2013 for the commercialisation of immediate release MOXDUO in the US, Canadian and
Australian / New Zealand / Oceania, acute pain markets respectively.
In July 2013 the Company signed a Collaboration Agreement with Aesica for the world-wide
promotion of the Company’s proprietary Stealth Beadlets abuse deterrent technology. Aesica
supplies pharmaceutical contract development and manufacturing services globally and
operates six manufacturing sites across the UK, Germany and Italy. Under the Collaboration
Agreement Aesica will enter into fee-for-service contracts with such third parties for the
development of the new Abuse Deterrent Formulations (ADF) of specifi c drugs of interest,
whilst QRxPharma will negotiate license terms directly with each party.
Intellectual Property
The Company continued to stengthen its intellectual property
portfolio during the year. In June 2013 the United States Patent and
Trademark Offi ce (USPTO) issued the Company US Patent No
8,461,171, expiring in 2031, titled “Hybrid Opioid Compounds and
Compositions”. While immediate release MOXDUO is a combination
of two separate opioid salts in the same capsule, this patent covers
a hybrid morphine-oxycodone molecule where these two different
opioids are chemically linked. The resulting new composition of matter
has activity that is greater than equimolar amounts of the molecules
administered separately. The patent covers the development of new
chemical entities that have the potential to provide better pain relief
and fewer side effects than their individual components. This patent
is part of a portfolio of Company patents that extend the duration of
protection for MOXDUO in various formulations until 2029.
SIGNIFICANT CHANGES IN THE STATE OF
AFFAIRS
No signifi cant changes in the state of affairs of the Group were
noted during the fi nancial year that have not otherwise been
disclosed in this report or in the fi nancial statements.
MATTERS SUBSEQUENT TO THE END OF THE
FINANCIAL YEAR
The Company announced on 28 August 2013 that the FDA
had issued a Complete Response Letter (CRL) regarding the
Company’s MOXDUO NDA for the treatment of moderate
to severe acute pain. The Company confi rmed the issuance
of the CRL was to allow time to submit and evaluate further
information required for the FDA to fully consider the respiratory
safety advantages of MOXDUO from Study 022.
With the issue of the CRL, in order to maintain FDA review, the
Company is required to resubmit its NDA. QRxPharma plans
to complete its refi ling in Q4 2013, inclusive of the additional
information and analysis as requested by the FDA. QRxPharma
anticipates a new PDUFA (Prescription Drug User Fee Act) date
in Q2 2014, preceded by an Advisory Committee meeting.
No other signifi cant events have occurred after the balance sheet
date which would have a material impact on the fi nancial results
of the Group.
The Company plans to complete this refi ling in Q4 2013 and
anticipates a new PDUFA date in Q2 2014, preceded by an
Advisory Committee meeting.
The NDA is the basis for US regulatory approval of immediate
release MOXDUO for the treatment of moderate to severe acute
pain, a $2.5 billion segment of the $8 billion spent annually on
prescription opioids in the US.
The commercial strategy of the Group involves the securing
of out-licensing deals with partners that have the regulatory
and commercial capability to take MOXDUO to market. The
out-license deals secured to date cover the US, Canadian
and Australian / New Zealand / Oceania, acute pain markets
and upon gaining marketing approval of MOXDUO in these
territories, these licenses have the potential to deliver signifi cant
revenue streams in future years.
The Group intends to complete regulatory fi lings for immediate
release MOXDUO in Europe, Canada and Australia over the
next 12 months and will continue to pursue additional out-license
deals in Europe and other geographies.
In addition to the commercialisation of MOXDUO the Company
intends to work closely with Aesica to promote QRxPharma’s
Stealth Beadlets technology.
As at 30 June 2013, the Group holds cash and cash equivalents
of $12 million (2012: $23 million). As detailed in note 1 (b) of the
Financial Report the fi nancial statements have been prepared
on the going concern basis. This matter has been considered by
the Group’s auditors Deloitte Touche Tohmatsu and the fi nancial
statements are subject to a Matter of Emphasis as noted in the
Independent auditors’ report to the members of QRxPharma
Limited on pages 71 to 72 of this Annual Report.
BUSINESS RISKS
The Group is currently loss-making being in a pre-product
sales phase with the long term fi nancial success of the Group
measured ultimately on the basis of profi table operations. Key
to becoming profi table is the successful development, approval
and commercialisation of our product portfolio.
BUSINESS STRATEGIES AND FUTURE
PROSPECTS
The Group’s strategy focuses on the development and
commercialisation of new treatments for pain management.
The following specifi c risks have the potential to affect the
Group’s achievement of its long term fi nancial success. This is not
an exhaustive list with the board and management continually
reviewing risks of the business and their potential impact.
Key to the development strategy is the approval of the immediate
release MOXDUO NDA by the FDA which remains the principal
objective of the Group for the fi nancial year ending 30 June
2014. The regulatory position was clarifi ed with the issue by the
FDA of a CRL on 26 August 2013 advising that QRxPharma is
required to resubmit its NDA for immediate release MOXDUO.
•
Regulatory risk. Products and their testing may not be
approved by, or can be delayed by regulatory bodies (e.g.
FDA) whose approvals are necessary before products can be
sold in market.
www.qrxpharma.com 7
DIRECTORS’
REPORT
(CONTINUED)
8 QRxPharma Annual Report 2013
BUSINESS RISKS (continued)
•
Partnering risk. Future product sales are dependent on managing existing commercial
relationships together with the ability to attract new partners. There are risks in
establishing and maintaining these relationships, and with the manner in which
partners execute on these collaborative agreements. The Group has ongoing
discussions with a variety of potential commercial partners and proactively seeks to
broaden strategic alliances.
•
•
Intellectual property risk. Future product sales revenues are impacted by the extent to
which there is patent protection over the products. Patent coverage risk includes the
risk that competitive products do not infringe the Group’s intellectual property and also
that our products do not infringe on other parties’ products. The Group constantly
monitors its patent portfolio and the intellectual property competitive landscape.
Funding risk. The Group currently does not earn revenues from product sales.
Accordingly, the ability of the Company to successfully bring products to market relies on
having access to continued sources of funding, including from partners and investors.
ENVIRONMENTAL REGULATION
There are no particular and signifi cant environmental regulations under a law of the
Commonwealth or of a State or Territory of Australia affecting the Group.
INFORMATION ON DIRECTORS
PETER C FARRELL PhD, ScD, AM.
Non-Executive Chairman.
Experience and expertise
Dr Farrell has over 35 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 a former Chair of the Executive
Council of the Division of Sleep Medicine at Harvard Medical School but still serves
on their Board. He also 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.
Dr Farrell has received numerous prestigious awards and was admitted to
membership of the Order of Australia in 2004. In 2012 he was admitted to the US
National Academy of Engineering. 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 UNSW for research related to dialysis and
renal medicine.
Other current directorships
Dr Farrell is the Executive 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
Nil.
Special responsibilities
Chairman of the board.
Chairman of nominations committee.
Chairman of remuneration committee.
Interests in shares and options
1,983,955 ordinary shares and 829,089 options over
ordinary shares.
JOHN W HOLADAY PhD.
Managing Director, Chief Executive Offi cer
and Chief Scientifi c Offi cer.
Experience and expertise
Dr Holaday brings four decades of experience as a scientist,
founder and executive manager of biotechnology and
biopharmaceutical companies, and as a banker. Dr Holaday
served as a Captain in the 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. Dr Holaday was
founder, Chairman and Chief Executive Offi cer of CNSCo, Inc, a
private company which was acquired by QRxPharma Limited in
April 2007.
Dr Holaday serves as an offi cer and Fellow in several biomedical
societies, has authored and edited over 200 scientifi c articles
in journals and books, and holds over 70 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. Dr Holaday serves on the Board of Math for America
DC, Carnegie Institute. 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
Director of Neuren Pharmaceuticals Limited (ASX: NEU)
(2009-August 2013).
Special responsibilities
Managing Director, Chief Executive Offi cer and Chief Scientifi c
Offi cer.
President of QRxPharma, Inc.
Member of remuneration committee.
Interests in shares and options
7,609,635 ordinary shares (including ordinary shares held by
John Holaday, John Holaday as trustee for the John Holaday
Foundation and Dorinda Holaday) and 1,905,452 options over
ordinary shares.
R PETER CAMPBELL FCA, FTIA.
Non-Executive Director.
Experience and expertise
Mr Campbell is a Chartered Accountant and company director
with more than 40 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
Chairman of Sonic Healthcare Limited (ASX: SHL) (director
since January 1993) and Director of Silex Systems Limited (ASX:
SLX) (ex-Chairman, director since July 1996).
Former directorships in last 3 years
Nil.
Special responsibilities
Chairman of audit committee.
Member of nominations committee.
Interests in shares and options
183,380 ordinary shares (including shares held by Mithena
Holdings Pty Limited) and 466,635 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
35 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.
www.qrxpharma.com 9
DIRECTORS’
REPORT
(CONTINUED)
10 QRxPharma Annual Report 2013
INFORMATION ON DIRECTORS (continued)
Dr Pace is an elected Fellow of the Australian Academy of Technological Sciences and
Engineering, author and co-author of over 50 research papers, reviews and patents.
In 2003, Dr Pace was awarded a Centenary Medal by the Australian Government for
service to Australian society in research and development. Dr Pace holds a Bachelor of
Science (Honours) from the University of New South Wales (UNSW) and a PhD from
Massachusetts Institute of Technology (MIT), 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), Pacira
Pharmaceuticals (NASDAQ: PCRX) (director since 2009).
Former directorships in last 3 years
Celsion Corp (NASDAQ: CLSN) (2002 – August 2011).
Special responsibilities
Nil
Interests in shares and options
3,615,268 ordinary shares and 627,726 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 35 years
executive experience in technology companies in Australia, the US and the UK. Mr
Quinn holds a Bachelor of Science, a Bachelor of Economics, and an MBA from
Harvard. Mr Quinn is Chairman of the New South Wales Entrepreneurship Centre
Limited, a not-for-profi t organisation that trains entrepreneurs. In 1983 he co founded
Memtec Limited (NYSE and ASX), and has also served as Chief Executive Offi cer of
an ASX listed manufacturer and distributor of health care and scientifi c products. Mr
Quinn has been a Director of several listed companies in Australia, the US and the UK
and numerous unlisted life science and other technology based companies.
Other current directorships
Director of ResMed Inc (ASX and NYSE: RMD) (director since 1992) and a member of
its audit committee.
Former directorships in last 3 years
Director of CAP-XX Limited (AIM:CPX) (ex-chairman, director from 1998 – December
2012).
Special responsibilities
Member of nominations committee.
Member of audit committee.
Member of remuneration committee.
Interests in shares and options
608,987 ordinary shares (including ordinary shares held by Innovation Capital
Associates Pty Limited, Kaylara Pty Limited and Rosemary Quinn). 627,726 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 Offi cer of QRxPharma Limited. He has over 30 years’ experience with major accounting fi rms and as the
Chief Financial Offi cer 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
2013, 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
5
B
5
5
5
5
5
A
4
4
4
4
B
4
4
4
4
A
**
**
5
**
5
B
5
5
A
1
**
1
**
1
B
1
1
1
A
4
4
**
**
4
B
4
4
4
Peter C Farrell
John W Holaday*
R Peter Campbell
Gary W Pace
Michael A Quinn
A = Number of meetings attended
B = Number of meetings held during the time the director held offi ce or was a member of the committee during the year
* = Not a non-executive director
** = Not a member of the relevant committee
REMUNERATION REPORT
The directors are pleased to present the Group’s 2013 remuneration report which sets out remuneration information for QRxPharma
Limited’s non-executive directors, executive director and other key management personnel.
DIRECTORS AND KEY MANAGEMENT PERSONNEL DISCLOSED IN THIS REPORT
NAME
POSITION
Non-executive and executive directors – see pages 8 to 10 above
Other key management personnel
Edward M Rudnic
Chris J Campbell
Chief Operating Offi cer
Chief Financial Offi cer
Richard A Paul (to 20 January 2013)
Executive Vice President Drug Development
M. Janette Dixon
Vice President Global Business Development
Changes since the end of the reporting period
There have been no changes since the end of the reporting period.
Role of the remuneration committee
The remuneration committee is a committee of the board. It is primarily responsible for making recommendations to the board on:
• remuneration levels of executive directors and other key management personnel
• the over-arching executive remuneration framework and operation of the incentive plan, and
• key performance indicators and performance hurdles for the executive team.
www.qrxpharma.com
11
DIRECTORS’
REPORT
(CONTINUED)
12 QRxPharma Annual Report 2013
REMUNERATION REPORT (continued)
Role of the remuneration committee (continued)
Their objective is to ensure that remuneration policies and structures are fair and
competitive and aligned with the long-term interests of the Company. In doing this, the
remuneration committee may seek advice from independent remuneration consultants.
No renumeration consultants were engaged during the current fi nancial year.
The Corporate Governance Statement provides further information on the role of this
committee.
Non-executive directors remuneration policy
Fees and payments to non executive directors refl ect the demands which are made on,
and the responsibilities of, the directors. The fees were set on 27 April 2007 ahead of the
Company completing its initial public offering. There is an annual base fee payable six
months in arrears, currently $60,000 for the Chairman and $40,000 for the other non-
executive directors (which also covers serving on a committee) and long term incentives
through participation in the QRxPharma Limited Employee Share Option Plan.
Non-executive directors’ fees are determined within an aggregate directors’ fee pool limit,
which is periodically recommended for approval by shareholders. The maximum currently
stands at $400,000 per annum and was approved by shareholders at the Annual General
Meeting on 24 April 2007.
Retirement allowances for non-executive directors
There are no retirement allowances for non-executive directors, in line with guidance
from the ASX Corporate Governance Council on non-executive directors’ remuneration.
Superannuation contributions required under the Australian superannuation guarantee
legislation continue to be made.
Executive remuneration policy and framework
As a Company building a speciality pharmaceutical business to compete internationally,
QRxPharma Limited requires a board and senior management team that have both the
technical capability and relevant business experience to execute the Group’s strategy.
The objective of the Group’s executive reward framework is to ensure reward for
performance is competitive and appropriate for the results delivered. The framework
aligns executive reward with achievement of strategic objectives and the creation of value
for shareholders, and conforms with market practice for delivery of reward. The board
ensures that executive reward satisfi es the following key criteria for good reward governance
practices:
• 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-fi nancial drivers of value
• attracts and retains high calibre executives.
Alignment to program participants’ interests:
• rewards capability and experience
• refl ects competitive reward for contribution to growth in
shareholder wealth
• provides recognition for contribution.
The framework provides a blend of fi xed pay, and short and long-
term incentives.
The executive pay and reward framework has three components:
• base pay and benefi ts, 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 benefi ts
Structured as a total employment package which may be delivered
as a combination of cash and prescribed non-fi nancial benefi ts at the
executives’ discretion.
Executives are offered a competitive base pay that comprises the fi xed
component of pay and rewards. Base pay for executives is reviewed
annually and every two years a market survey is conducted to ensure
the executive’s pay is competitive with the market. An executive’s pay is
also reviewed on promotion.
There are no guaranteed base pay increases included in any
executives’ contracts.
Executives receive benefi ts including health insurance.
Superannuation
The Group does not maintain a Group superannuation plan. The
Group makes fi xed percentage contributions for Australian resident
employees to complying third party superannuation funds and where
requested, for US resident employees to complying pension plans.
Short-term incentives
A variable cash incentive component is payable annually 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 a fi xed amount of $108,150 to 50% of
base pay.
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 2013, all group executives
were assessed on the achievement of a single KPI. 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, which was approved by shareholders at the extraordinary
general meeting of members held on 24 April 2007.
The QRxPharma Limited Employee Share Option Plan is
designed to provide long-term incentives for executives to deliver
long-term shareholder value and as an additional mechanism to
attract and retain high calibre executives. Participation in the plan
is at the board’s discretion and no individual has a contractual
right to participate in the plan or to receive any guaranteed
benefi ts. The vesting period for each option issued up to 31
December 2008 is 3 years, or as varied by the board, one-third
vesting 12 months from the date of grant and the balance vesting
equally each year over the remaining two year period. Options
issued from 1 January 2009 generally vest over 3 years with the
initial vesting on the fi rst anniversary of the date of the grant and
subsequent vestings in 8 equal tranches on the fi rst day of each
calendar quarter over the following 2 years. Most option grants
generally have a seven year life, after which time, if they are not
exercised, the options are forfeited. Options are granted under
the plan for no consideration.
Voting and comments made at the Company’s 2012
Annual General Meeting
QRxPharma Limited received more than 86% of “yes” votes on
its remuneration report for the 2012 fi nancial year. The Company
did not receive any specifi c feedback at the AGM or throughout
the year on its remuneration practices.
www.qrxpharma.com
13
DIRECTORS’
REPORT
(CONTINUED)
REMUNERATION REPORT (continued)
DETAILS OF REMUNERATION
Details of the remuneration of the directors and the key management personnel (as
defi ned in AASB 124 Related Party Disclosures) of QRxPharma Limited and the Group are
set out in the following tables.
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
benefi ts
Other
Super-
annuation
Retirement
benefi ts
Long
service
leave
Options
Total
$
$
$
$
$
$
$
$
20132013
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
401,205
Other key management personnel (Group)
Edward M Rudnic °
Chris J Campbell
Richard A Paul∞
(to 20 January 2013)
M. Janette Dixon *
Total key management
personnel compensation
(Group)
337,250
219,724
165,116
286,900
1,590,195
$
-
-
-
-
-
-
-
-
237,685
-
3,600
-
-
3,600
-
-
19,775
-
-
-
237,685
23,375
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30,858
26,794
26,794
30,858
90,858
70,394
66,794
70,858
115,304
298,904
223,785
624,990
386,013
139,346
(194,148)
723,263
378,845
208,653
192,610
479,510
862,910
2,714,165
** Renumeration in the form of options includes negative amounts for options forfeited during the year.
^ Gary Pace was paid $81,049 for consulting services provided to the Company during the year in addition to the amount in the above table.
° Edward M Rudnic received an additional bonus of $14,329 relating to the fi nancial year ended 30 June 2012 which has been included in the above table. He also received share
based payments to the value of $121,809 for options granted when he was engaged as a consultant in prior years, and share based payments to the value of $10,860 for options
granted while he was a member of the Scientifi c Advisory Board in prior years, which are not included in the above table.
∞ Richard A Paul received $237,685 per the conditions of his separation agreement.
* Fee payments were made to M. Janette Dixon pursuant to consultancy agreements held with BioComm Pacifi c Pte Limited.
14 QRxPharma Annual Report 2013
Key management personnel and other executives of QRxPharma Limited and the Group were the same in 2012.
SHORT-TERM EMPLOYEE BENEFITS
POST-
EMPLOYMENT BENEFITS
LONG-
TERM
BENEFITS
SHARE-
BASED
PAYMENTS
Cash
salary and
fees
Cash
bonus
Non-
monetary
benefi ts
Other
Super-
annuation
Retirement
benefi ts
Long
service
leave
Options
Total
20122012
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
$
60,000
40,000
40,000
40,000
180,000
$
-
-
-
-
-
368,170
190,054
Other key management personnel (Group)
Edward M Rudnic°
Chris J Campbell
Richard A Paul
M. Janette Dixon*
Total key management
personnel compensation
(Group)
121,895
227,057
288,057
271,511
63,605
108,150
119,311
123,251
1,456,690
604,371
$
$
$
$
$
$
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,600
-
-
3,600
-
-
30,169
-
-
33,769
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
46,416
46,416
46,416
46,416
106,416
90,016
86,416
86,416
185,664
369,264
233,609
791,833
75,997
118,183
194,350
163,231
261,497
483,559
601,718
557,993
971,034 3,065,864
^ Gary Pace was paid $81,202 for consulting services provided to the Company during the year in addition to the amount in the above table.
° Edward M Rudnic was appointed Chief Operating Offi cer on 13 February 2012. For the period from 1 July 2011 to 12 February 2012, he received consulting fees of $210,412 and
share based payments to the value of of $76,349 for options granted while he was engaged as a consultant. Additionally he received a fee of $10,161 and share based payments
to the value of $19,359 for options granted during the fi nancial year as a member of the Company’s Scientifi c Advisory Board. None of these amounts have been included in the
table above.
* Fees and bonus payments were made to M. Janette Dixon pursuant to consultancy agreements held with BioComm Pacifi c Pte Limited.
The relative proportions of remuneration that are linked to performance and those that are fi xed are as follows:
Name
Directors of QRxPharma Limited
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
John W Holaday
Other key management personnel of the Group
Edward M Rudnic
Chris J Campbell
Richard A Paul (to 20 January 2013)
M. Janette Dixon
FIXED REMUNERATION
AT RISK–STI
AT RISK–LTI
20132013
2012
20132013
2012
20132013
2012
66%
62%
60%
56%
64%
47%
63%
100%
60%
56%
48%
46%
46%
46%
47%
52%
48%
49%
-
-
-
-
-
-
-
-
-
-
-
-
-
24%
24%
24%
20%
22%
34%
38%
40%
44%
36%
53%
37%
**
40%
44%
52%
54%
54%
30%
29%
24%
32%
29%
Since the long term incentives are provided exclusively by way of options, the percentages disclosed also refl ect the value of the remuneration
consisting of options, based on the value of options expensed during the year.
** Percentage not disclosed as the total amount of LTI remuneration expense was negative for the relevant period.
www.qrxpharma.com
15
DIRECTORS’
REPORT
(CONTINUED)
REMUNERATION REPORT (continued)
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 offi ce of director.
Remuneration and other terms of employment for the Managing Director, Chief Executive Offi cer and Chief Scientifi c Offi cer and
the other key management personnel are also formalised in service agreements. Each of these agreements provides for the provision
of performance related cash bonuses, other benefi ts including health insurance and tax advisory services, and participation, when
eligible, in the QRxPharma Limited Employee Share Option Plan. Other major provisions of the agreements relating to remuneration
are set out below.
John W Holaday, Managing Director, Chief Executive Offi cer and Chief Scientifi c Offi cer
• Term of agreement – 2 years to 28 February 2014 (with annual extension) renegotiated from 28 February 2012.
• Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2013 of US$400,000, to be reviewed
annually by the remuneration committee.
• Payment of a termination benefi t on early termination by the Company, other than for gross misconduct, equal to the annual
base salary.
Edward M Rudnic, Chief Operating Offi cer
• Term of agreement – 2 years (with annual extension) from 13 February 2012.
• Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2013 of US$330,000, to be reviewed
annually by the remuneration committee.
• Payment of a termination benefi t on early termination without notice by the Company, other than for gross misconduct, equal to the
annual base salary.
Chris J Campbell, Chief Financial Offi cer
• Term of agreement – ongoing, commencing 1 March 2007.
• Base salary, inclusive of superannuation, for the year ended 30 June 2013 of $239,499, to be reviewed annually by the
remuneration committee.
• Payment of a termination benefi t 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.
Richard A Paul, Executive Vice President Drug Development (to 20 January 2013)
• Term of agreement – 2 years (with annual extension) renegotiated from 1 March 2012.
• Base salary, inclusive of retirement or pension contribution, for the year ended 30 June 2013 of US$310,000, to be reviewed annually
by the remuneration committee.
• Payment of a termination benefi t on early termination by the Company, other than for gross misconduct, equal to the annual
base salary.
M. Janette Dixon, Vice President Global Business Development
• Term of agreement – ongoing, commencing 17 August 2009 with QRxPharma Limited, and 1 October 2009 with Venomics Pty
Limited. Agreements are held with M. Janette Dixon as the principal of BioComm Pacifi c Pte Limited.
• Base consulting fee for the contract with QRxPharma Limited for the year ended 30 June 2013 of US$283,260 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 2013.
• Base consulting fee for the contract year ending 25 May 2013 of US$83,000 per annum.
• Agreement can be terminated by either party with one month’s notice.
• No termination benefi t payable on early termination by the Company.
16 QRxPharma Annual Report 2013
SHARE-BASED COMPENSATION
Options
Options over shares in QRxPharma Limited are granted under the QRxPharma Limited Employee Share Option Plan (ESOP). The
ESOP is designed to provide long term incentives for executives to deliver long term shareholder returns.
The maximum number of options available to be issued under the ESOP is 10% of diluted ordinary share capital in the Company as at
the date of issue of the relevant options. All employees and directors are eligible to participate in the ESOP, but do so at the invitation
of the remuneration committee. The term of option issues are determined by the remuneration committee.
Options issued up to 31 December 2008 were generally granted for no consideration and generally vest annually over 3 years in equal
proportions with the initial vesting on the fi rst anniversary of the date of grant. Options issued from 1 January 2009 have also been
issued for no consideration and generally vest over 3 years with the initial vesting on the fi rst anniversary of the date of the grant and
subsequent vestings in 8 equal tranches on the fi rst day of each calendar quarter over the following 2 years. The exercise price is set by the
remuneration committee but being not less than the market price of ordinary shares immediately prior to the grant date of the options.
Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible into one ordinary share.
The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows:
Grant date
31 March 2007
14 April 2007
25 May 2007
25 May 2007
1 September 2007
1 October 2007
9 October 2007
1 January 2008
1 April 2008
1 April 2008
1 October 2008
4 November 2008
1 January 2009
1 January 2009
31 August 2009
1 October 2009
16 November 2009
1 January 2010
17 February 2010
24 March 2010
1 July 2010
24 August 2010
1 October 2010
25 October 2010
8 November 2010
1 January 2011
1 January 2011
7 July 2011
28 September 2011
18 November 2011
23 January 2012
23 January 2012
1 April 2012
7 November 2012
7 November 2012
7 November 2012
7 November 2012
19 February 2013
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
Over 6 months
Over 6 months
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Over 3 years
Immediately
Over 3 years
Expiry date
Exercise price
31 March 2014
14 April 2014
25 May 2014
25 May 2014
1 September 2014
1 October 2014
9 October 2014
1 January 2015
1 April 2015
1 April 2015
1 October 2015
4 November 2015
1 January 2016
1 January 2016
31 August 2016
1 October 2016
16 November 2016
1 January 2017
17 February 2017
24 March 2014
1 July 2017
24 August 2017
1 October 2017
25 October 2014
8 November 2017
1 January 2018
1 January 2015
7 July 2018
28 September 2018
18 November 2018
23 January 2019
23 January 2016
1 April 2019
7 November 2019
7 November 2016
7 November 2019
7 November 2019
19 February 2020
$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
$1.15
$0.95
$0.93
$1.24
$1.00
$1.40
$2.00
$1.70
$1.22
$1.60
$1.50
$2.15
$1.72
$1.00
$1.03
$0.72
$0.72
$0.94
Value per option
at grant date
$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
$0.88
$0.72
$0.71
$0.48
$0.75
$1.07
$0.77
$1.30
$0.93
$1.20
$1.12
$0.80
$1.29
$0.50
$0.38
$0.53
$0.53
$0.70
% Vested
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
92%
92%
83%
83%
83%
75%
75%
58%
58%
50%
42%
42%
33%
0%
0%
0%
0%
0%
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.
www.qrxpharma.com
17
DIRECTORS’
REPORT
(CONTINUED)
REMUNERATION REPORT (continued)
SHARE BASED COMPENSATION (continued)
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 notes 21 and 30 to the fi nancial 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.
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**
$
Directors of QRxPharma Limited
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
John W Holaday
Other key management personnel
Edward M Rudnic^
Chris J Campbell
Richard Paul
(to 20 January 2013)
M. Janette Dixon
75,000
75,000
75,000
75,000
37,500
28,500
28,500
37,500
50,000
50,000
50,000
50,000
300,000
150,000
208,333
500,000
200,000
265,000
76,000
116,667
137,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
150,000
79,500
-
600,000
571,000
200,000
106,000
133,333
-
-
* The value at grant date is 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.
^
In addition to the above, 91,667 options vested during the year in relation to options Edward M Rudnic received as a consultant and 24,167 options vested during the year in
relation to options he received as a member of the Scientific Advisory Board.
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.
Shares provided on exercise of remuneration options
There were no 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 in the year to 30 June 2013.
18 QRxPharma Annual Report 2013
Details of remuneration: Bonuses and share-based compensation benefi ts
For each cash bonus and grant of options included in the tables on pages 14, 15 and 18, the percentage of the available bonus or grant
that was paid, or that vested, in the fi nancial 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 vesting period for each option issued up
to 31 December 2008 is 3 years, or as varied by the board, one third vesting 12 months from the date of grant and the balance vesting
equally each year over the remaining two year period. Options issued from 1 January 2009 generally vest over 3 years with the initial
vesting on the fi rst anniversary of the date of the grant and subsequent vesting’s in 8 equal tranches on the fi rst day of each calendar
quarter over the following 2 years. No options will vest if the conditions are not satisfi ed, 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.
Name
Directors of QRxPharma Limited
Peter C Farrell
R Peter Campbell
Michael A Quinn
Gary W Pace
John W Holaday
Other key management personnel
Chris J Campbell
Edward M Rudnic
M. Janette Dixon
Richard A Paul
BONUS
SHARE-BASED COMPENSATION BENEFITS
(OPTIONS)
Paid
%
Forfeited
%
Year Granted
Vested
%
Forfeited
%
Financial
years in which
options may
vest
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
2013
2011
2007
2013
2011
2007
2013
2011
2007
2013
2011
2007
2013
2012
2011
2010
2007
2013
2012
2011
2010
2009
2007
2013
2012
2013
2012
2011
2010
2010
2009
2013
2012
2011
0%
83%
100%
0%
83%
100%
0%
83%
100%
0%
83%
100%
0%
50%
83%
100%
100%
0%
42%
75%
100%
100%
100%
0%
33%
0%
42%
75%
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
100%
100%
2014 - 2016
2014
-
2014 - 2016
2014
-
2014 - 2016
2014
-
2014 - 2016
2014
-
2014 - 2016
2014 - 2015
2014
-
-
2014 - 2016
2014 - 2015
2014
-
-
-
2014-2016
2014-2015
2014 - 2016
2014 - 2015
2014
-
-
-
-
-
-
www.qrxpharma.com
19
DIRECTORS’
REPORT
(CONTINUED)
SHARES UNDER OPTION
Unissued ordinary shares of QRxPharma Limited under option at the date of this report are as follows:
DATE OPTIONS
GRANTED
EXPIRY DATE
ISSUE PRICE OF
SHARES
NUMBER UNDER
OPTION
31 March 2007
14 April 2007
25 May 2007
25 May 2007
1 September 2007
1 October 2007
9 October 2007
1 January 2008
1 April 2008
1 April 2008
1 January 2009
31 August 2009
16 November 2009
1 January 2010
17 February 2010
24 March 2010
1 July 2010
24 August 2010
1 October 2010
25 October 2010
8 November 2010
1 January 2011
1 January 2011
7 July 2011
28 September 2011
18 November 2011
23 January 2012
23 January 2012
1 April 2012
7 November 2012*
7 November 2012*
7 November 2012*
19 February 2013
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 January 2016
31 August 2016
16 November 2016
1 January 2017
17 February 2017
24 March 2014
1 July 2017
24 August 2017
1 October 2017
25 October 2014
8 November 2017
1 January 2018
1 January 2015
7 July 2018
28 September 2018
18 November 2018
23 January 2016
23 January 2019
1 April 2019
7 November 2019
7 November 2016
7 November 2019
19 February 2020
$1.42
$1.00
$1.00
$2.00
$1.70
$1.45
$1.34
$1.11
$1.04
$1.05
$0.20
$0.65
$1.12
$0.78
$0.84
$1.26
$1.15
$0.95
$0.93
$1.24
$1.00
$1.40
$2.00
$1.70
$1.22
$1.60
$2.15
$1.50
$1.72
$1.00
$1.03
$0.72
$0.94
402,726
2,013,630
502,726
1,398,450
50,000
75,000
50,000
200,000
75,000
600,000
60,000
299,583
300,000
100,000
404,584
276,250
225,000
50,000
150,000
25,000
850,000
832,500
290,000
150,000
15,000
250,000
300,000
870,000
350,000
450,000
430,000
1,065,000
300,000
13,410,449
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
*Included in these options were options granted to key management personnel which are disclosed on page 18.
20 QRxPharma Annual Report 2013
SHARES ISSUED ON THE EXERCISE OF OPTIONS
The following ordinary shares of QRxPharma Limited were issued during the year ended 30 June 2013 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
1 January 2009
31 August 2009
1 October 2009
Issue price of shares
$0.20
$0.65
$0.90
Number of shares issued
40,000
30,900
137,500
208,400
INDEMNIFICATION
The Company has entered into Deeds of Access, Indemnity and Insurance with each of the directors and executive offi cers of the
Group against all liabilities to another person (other than the Company or a related body corporate) that may arise from their
position as directors and executive offi cers of the Company and its controlled entities, except where the liability arises out of conduct
involving a lack of good faith. The agreement stipulates that the Company will meet the amount of any such liabilities, including costs
and expenses.
INSURANCE OF OFFICERS
The directors have not included details of the nature of liabilities covered nor the amount of the premium paid in respect to Directors
and Offi cers liability insurance contracts, as such disclosure is prohibited under the terms of the contracts.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the
Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the
Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the company with leave of the Court under section 237 of the
Corporations Act 2001.
NON-AUDIT SERVICES
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the company and/or the Group are important.
Details of the amounts paid or payable to the auditor (Deloitte Touche Tohmatsu) 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 satisfi ed
that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The directors are satisfi ed that the provision of non-audit services by the auditor, as set out below, did not
compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• 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.
www.qrxpharma.com 21
DIRECTORS’
REPORT
(CONTINUED)
NON-AUDIT SERVICES (continued)
(a) Auditor of the Group
Taxation services
Tax compliance services
PricewaterhouseCoopers Australia
Tax consulting and advice
Deloitte Touche Tohmatsu Australia
PricewaterhouseCoopers Australia
Total remuneration for taxation services
(b) Related practices of the Auditor
Taxation services
Tax compliance services
PricewaterhouseCoopers
International tax consulting and advice
PricewaterhouseCoopers
Total remuneration for taxation services
Total remuneration for non-audit services
20132013
$
2012
$
-
9,270
12,500
-
12,500
-
-
-
12,500
-
106,788
116,058
33,974
11,006
44,980
161,038
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 23.
ROUNDING OF AMOUNTS
The Company is a kind referred to in Class order 98/100, issued by the Australian
Securities and Investments Commission, relating to the “rounding off” of amounts in
the fi nancial 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
Deloitte Touche Tohmatsu continues in offi ce in accordance with section 327 of the
Corporations Act 2001.
This report is made in accordance with a resolution of directors.
Peter C Farrell
Director
Sydney
19 September 2013
22 QRxPharma Annual Report 2013
22 QRxPharma Annual Report 2013
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Eclipse Tower
Level 19
60 Station Street
Parramatta NSW 2150
PO Box 38
Parramatta NSW 2124 Australia
Tel: +61 (0) 2 9840 7000
Fax: +61 (0) 2 9840 7001
www.deloitte.com.au
The Board of Directors
QRxPharma Limited
1/194 Miller Street
North Sydney NSW 2060
19 September 2013
Dear Board Members
QRxPharma Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following
declaration of independence to the directors of QRxPharma Limited.
As lead audit partner for the audit of the financial statements of QRxPharma Limited for the year ended 30
June 2013, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit,
and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
X Delaney
Partner
Chartered Accountants
Parramatta, 19 September 2013
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
www.qrxpharma.com 23
CORPORATE
GOVERNANCE
STATEMENT
24 QRxPharma Annual Report 2013
QRxPharma Limited (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 ASX
Corporate Governance Principles and Recommendations.
PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND
OVERSIGHT
The relationship between the board and senior management is critical to the Group’s
long term success. The directors are responsible to the shareholders for the performance
of the Group in both the short and the longer term and seek to balance sometimes
competing objectives in the best interests of the Group as a whole. Their focus is to
enhance the interests of shareholders and other key stakeholders and to ensure the
Group is properly managed.
The responsibilities of the board include:
• providing strategic guidance to the Group including contributing to the development of
and approving the corporate strategy
• reviewing and approving business plans, the annual budget and fi nancial plans
including available resources and major capital expenditure initiatives
• overseeing and monitoring:
• organisational performance and the achievement of the Group’s strategic goals
and objectives
• compliance with the Company’s Code of conduct
• progress in relation to the Company’s diversity objectives and compliance with its
diversity policy
• progress of major capital expenditures and other signifi cant corporate projects
including any acquisitions or divestments
• monitoring fi nancial performance including approval of the annual and half-year
fi nancial reports and liaison with the Company’s auditors
• appointment, performance assessment and, if necessary, removal of the managing
director
• ratifying the appointment and/or removal and contributing to the performance
assessment for the members of the senior management team including the Chief
Executive Offi cer (CEO) and the Company Secretary
• ensuring there are effective management processes in place and approving major
corporate initiatives
• enhancing and protecting the reputation of the organisation
• overseeing the operation of the Group’s system for compliance and risk management
reporting to shareholders
• ensuring appropriate resources are available to senior management
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 CEO 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 May 2013 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 to be comprised of both executive and non-executive
directors with a majority of non-executive directors. Non-
executive directors bring a fresh perspective to the board’s
consideration of strategic, risk and performance matters
• in recognition of the importance of independent views
and the board’s role in supervising the activities of management,
the Chair must be an independent non-executive director,
the majority of the board must be independent of management
and all directors are required to exercise independent judgement
and review and constructively challenge the performance
of management
• the Chair is elected by the full board and is required to meet
regularly with the managing director
• the Company aims to maintain a mix of directors on the board
from different genders, age groups, ethnicity and cultural and
professional backgrounds who have complementary skills
and experience
• the board is to establish measurable board gender diversity
objectives and assess annually the objectives and progress in
achieving them
• the board is required to undertake an annual board performance
review and consider the appropriate mix of skills required by the
board to maximise its effectiveness and its contribution to 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
effi cient decision making.
Directors’ independence
The board has adopted specifi c principles in relation to directors’
independence. These state that to be deemed independent, a
director must be a non-executive and the board should consider
whether the director:
• is a substantial shareholder of the Company or an offi cer 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 offi cer 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 fi nancial year ended 30 June 2013, Peter
C Farrell, R Peter Campbell and Gary W Pace were considered
to be independent for the entire year, while Michael A Quinn is
considered to be independent from 21 November 2012.
Board members
Details of the members of the board, their experience, expertise,
qualifi cations, term of offi ce, relationships affecting their
independence and their independent status are set out in the
directors’ report under the heading “Information on directors” on
pages 8 to 10. 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 offi ce
The Company’s Constitution specifi es that all directors excluding
the CEO must retire from offi ce 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
signifi cant time commitment and has confi rmed that other positions
will not hinder his effective performance in the role of the Chair.
www.qrxpharma.com 25
CORPORATE
GOVERNANCE
STATEMENT
(CONTINUED)
PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE (continued)
Chief Executive Offi cer (CEO)
The CEO is responsible for implementing Group strategies and policies.
Commitment
The number of meetings of the Company’s board of directors and of each board
committee held during the year ended 30 June 2013, and the number of meetings
attended by each director is disclosed on page 11.
The board will meet as frequently as required but must not meet less than four times
each year.
The commitments of non-executive directors are considered by the nomination
committee prior to the directors’ appointment to the board of the Company.
Independent professional advice
Directors and board committees have the right, in connection with their duties and
responsibilities, to seek independent professional advice. With the approval of the Chairman
this advice will be at the expense of the Company.
Avoidance of confl ict of interest
In addition to the issue of independence, the directors have a continuing responsibility
to avoid confl icts of interest (both real and apparent) between their duty to the
Company and their own interests. Directors are required to disclose any actual or
potential confl ict of interest on appointment and are required to keep this disclosure up
to date. A director that has an actual or potential confl ict must immediately inform the
board and remove themselves from any discussions or decision making in relation to
the actual or potential confl ict.
Performance assessment
The board has undertaken annual self-assessments of its collective performance, the
performance of the Chairman and its committees. The results and any action plans
are documented together with specifi c performance goals which are agreed for the
coming year.
Board committees
The board has established a number of committees to assist in the execution of its duties
and to allow detailed consideration of complex issues. Current committees of the board
are the nominations, remuneration and audit and risk committees. The nominations and
audit and risk committees are comprised entirely of non-executive directors.
Each committee has its own written charter setting out its role and responsibilities,
composition, structure, membership requirements and the manner in which the committee
is to operate. All of these charters are reviewed on an annual basis and are available on the
Company website. All matters determined by committees are submitted to the full board as
recommendations for board decisions.
Minutes of committee meetings are tabled at the subsequent board meeting. Additional
requirements for specifi c reporting by the committees to the board are addressed in the
charter of the individual committees.
Nominations committee
The nominations committee is currently comprised of Peter C Farrell (Chairman), Michael A
Quinn, and R Peter Campbell, all independent, non-executive directors.
26 QRxPharma Annual Report 2013
Details of these directors’ attendance at nomination committee meetings are set out in the
directors’ report on page 11.
The main responsibilities of the committee are to:
• conduct an annual review of the membership of the board
having regard to present and future needs of the Company
and to make recommendations on board composition and
appointments
• conduct an annual review of and conclude on the independence of
each director
• propose candidates for board vacancies
• oversee the annual performance assessment program
• oversee board succession, including the succession of the Chair,
and review whether succession plans are in place to maintain
an appropriately balanced mix of skills, experience and diversity
on the board
• manage the processes in relation to meeting board diversity
objectives
• assess the effectiveness of the induction process.
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
The Company adopted a statement of values and a Code of conduct
(the Code) on 17 August 2011 which has been fully endorsed by
the board and applies to all directors and employees. The Code is
regularly reviewed and updated as necessary to ensure it refl ects the
highest standards of behaviour and professionalism and the practices
necessary to maintain confi dence in the Group’s integrity and to take
into account legal obligations and reasonable expectations of the
Company’s stakeholders.
In summary, the Code requires that at all times all Company
personnel act with the utmost integrity, objectivity and in compliance
with the letter and the spirit of the law and Company policies.
The Company maintains a Securities Trading Policy, which was
amended on 17 August 2011, and is available on the Company
website. It is contrary to the Company’s policy for directors, offi cers
and employees to be engaged in short term trading of the Company’s
securities. All directors, offi cers and employees are prohibited from
dealing in any QRxPharma Limited securities, except while not in
possession of unpublished price sensitive information. Directors,
offi cers 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 release of the
Company’s Appendix 4C quarterly report for the quarter ended 31
March, after the AGM, or during the period in which the Company
has a prospectus or other disclosure documents on issue under
which people can subscribe for securities. 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.
The directors are satisfi ed that the Group has complied with its
policies on ethical standards, including trading in securities.
Diversity Policy
The Company values diversity and recognises the benefi ts it can
bring to the organisation’s ability to achieve its goals. Accordingly the
Company adopted a diversity policy on 17 August 2011. This policy
outlines the establishment of the Company’s diversity objectives in
relation to gender, age, cultural background and ethnicity. It includes
requirements for the board to establish measurable objectives for
achieving diversity, and for the board to assess annually both the
objectives, and the Company’s progress in achieving them.
The board has considered its responsibilities in relation to
establishing measureable objectives to achieve diversity and
has decided not to create formal objectives given the size of the
Company’s workforce and its high staff retention rate. Whilst the
board has elected not to establish formal objectives for diversity, it
remains responsible for managing the diversity of the Company’s
workforce and will give due consideration to these responsibilities
in determining any future appointments.
The Group’s gender diversity statistics are as follows;
• Proportion of female employees in the Group
• Proportion of females in senior executive
positions of the Group
• Proportion of females on the Board
64%
33%
0%
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL
REPORTING
Audit and risk committee
The audit and risk committee is currently comprised of R Peter
Campbell (Chairman), and Michael A Quinn, both independent,
non-executive directors.
Details of these directors’ qualifi cations and attendance at audit
committee meetings are set out in the directors’ report on pages
9 to 11.
The audit and risk committee has appropriate fi nancial expertise
and all members are fi nancially literate and have an appropriate
understanding of the industry in which the Group operates. The
committee’s composition does not comply with the Principles
in that it does not include at least three members. The board
considers that the audit and risk committee as represented by the
two non-executive directors noted above is suitably structured and
qualifi ed to fully discharge its responsibilities at this stage of the
Company’s development.
www.qrxpharma.com 27
CORPORATE
GOVERNANCE
STATEMENT
(CONTINUED)
28 QRxPharma Annual Report 2013
PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING
(continued)
Audit and risk committee (continued)
The audit and risk committee operates in accordance with a charter which is available on
the Company website. The main responsibilities of the committee include: :
• review, assess and approve the annual full and concise reports, the half-year fi nancial report and
all other fi nancial information published by the Company or released to the market
• assist the board in reviewing the effectiveness of the organisation’s internal control environment
covering:
• effectiveness and effi ciency of operations
• reliability of fi nancial reporting
• compliance with applicable laws and regulations
• oversee the effective operation of the risk management framework
• recommend to the board the appointment, removal and remuneration of the external auditors,
and review the terms of their engagement, the scope and quality of the audit and assess
performance
• consider the independence and competence of the external auditor on an ongoing basis
• review and approve the level of non-audit services provided by the external auditors and ensure
it does not adversely impact on auditor independence
• review and monitor related party transactions and assess their propriety
• report to the board on matters relevant to the committee’s role and responsibilities.
In fulfi lling its responsibilities, the audit and risk 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 the processes the CEO and Chief Financial Offi cer (CFO) have in place to support
their certifi cates to the board
• reviews any signifi cant disagreements between the auditors and management,
irrespective of whether they have been resolved
• meets separately with the external auditors at least twice a year without the presence of
management
• provides the external auditors with a clear line of direct communication at any time to
either the Chair of the audit and risk committe or the Chair of the baord
The audit and risk committee has authority, within the scope of its responsibilities, to
seek any information it requires from any employee or external party.
External auditors
The Company and audit and risk committee policy is to appoint external auditors
who clearly demonstrate quality and independence. Deloitte Touche Tohmatsu is the
incumbent external auditor. It is Deloitte Touche Tohmatsu’s policy to rotate audit
engagement partners on listed companies at least every fi ve years.
An analysis of fees paid to the external auditors, including a breakdown of fees for
non-audit services, is provided in the directors’ report and in note 22 to the fi nancial
statements. It is the policy of the external auditors to provide an annual declaration of
their independence to the audit committee.
The 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 SHARE-
HOLDERS
Continuous disclosure and shareholder communication
The Company has written policies on information disclosure that
focus 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. These policies also
include the arrangements the Company has in place to promote
communication with shareholders and encourage effective
participation at general meetings. The Shareholder Communication
Policy and Continuous Disclosure Policy having regard to the ASX
Code of Best Practice for Reporting by Life Science Companies, are
available on the Company’s 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.
All disclosures made to the ASX, and all information provided
to analysts or the media during briefi ngs are promptly posted on
the Company’s website. Procedures have also been established
for reviewing whether any price sensitive information has
been inadvertently disclosed and, if so, this information is also
immediately released to the market.
All shareholders have the option to receive a copy of the Company’s
annual report. In addition, the Company seeks to provide
opportunities for shareholders to participate through electronic
means. All Company announcements, media briefi ngs, details of
Company meetings, press releases and fi nancial reports for the last
three years are available on the Company’s website. Where possible,
the Company arranges for advance notifi cation of signifi cant Group
briefi ngs and makes them widely accessible, including through the
use of mass communication mechanisms as may be practical.
PRINCIPLE 7: RECOGNISE AND MANAGE RISK
The board is responsible for satisfying itself annually, or more
frequently as required, that management has developed and
implemented a sound system of risk management and internal
control. Detailed work on this task is delegated to the audit and risk
committee and reviewed by the full board as detailed in the Risk
Management Policy adopted by the Company on 17 August 2011.
The audit and risk committee is responsible for ensuring there is an
adequate framework in relation to risk management, compliance
and internal control systems. In providing this oversight, the
committee:
• reviews the framework and methodology for risk identifi cation,
the degree of risk the Company is willing to accept, the
management of risk and the processes for auditing and
evaluating the Company’s risk management system
• reviews Group-wide objectives in the context of the above
mentioned categories of corporate risk
• reviews and, where necessary, approves guidelines and policies
governing the identifi cation, assessment and management of
the Company’s exposure to risk
• reviews and approves the delegations of fi nancial authorities
and addresses any need to update these authorities on an
annual basis, and
• reviews compliance with agreed policies.
The committee recommends any actions it deems appropriate to
the board for its consideration.
Management is responsible for designing, implementing and
reporting on the adequacy of the Company’s risk management
and internal control system and has to report to the audit
committee on the effectiveness of:
• the risk management and internal control system during the
year, and
• the Company’s management of its material business risks.
Corporate Reporting
In complying with recommendation 7.3, the CEO and CFO have
provided the following written declarations in accordance with
section 295A of the Corporations Act:
• that the Company’s fi nancial reports are complete and present
a true and fair view, in all material respects, of the fi nancial
condition and operational results of the Company and Group
and are in accordance with relevant accounting standards
• that the above statement is founded on a sound system of
risk management and internal compliance and control which
implements the policies adopted by the board and that the
Company’s risk management and internal compliance
and control is operating effi ciently and effectively in all material
respects in relation to fi nancial reporting risks.
PRINCIPLE 8: REMUNERATE FAIRLY AND
RESPONSIBLY
Remuneration Committee
The remuneration committee is currently comprised of Peter C
Farrell (Chairman) and Michael A Quinn, both independent,
non-executive directors, and John W Holaday, the Managing
Director, CEO and Chief Scientifi c Offi cer (CSO). Whilst Dr.
Holaday sits on the remuneration committee, he does not
participate in decisions relating to his own performance and
remuneration.
Details of these directors’ attendance at remuneration
committee meetings are set out in the directors’ report on
page 11.
www.qrxpharma.com 29
CORPORATE
GOVERNANCE
STATEMENT
(CONTINUED)
PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY (continued)
Remuneration Committee (continued)
The remuneration committee operates in accordance with its charter which is
available on the Company website. The remuneration committee assists the board to
discharge its responsibilities to attract and retain senior executives and directors who
will create value for shareholders. The remuneration committee advises the board
on remuneration and incentive policies and practices generally, and makes specifi c
recommendations on remuneration packages and other terms of employment for
senior executives and directors.
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. The standard contract refers to
a specifi c formal job description. This job description is reviewed by the remuneration
committee on an annual basis and, where necessary, is revised in consultation with the
relevant employee.
Further information on directors’ and executives’ remuneration is set out in the
Directors’ Report under the heading “Remuneration Report’’. In accordance with
Group policy, participants in equity based remuneration plans are not permitted
to enter into any transactions that would limit the economic risk of options or other
unvested entitlements. Details of this policy can be found on the Company’s website.
The committee also assumes responsibility for overseeing management succession
planning, including the implementation of appropriate executive development
programmes and ensuring adequate arrangements are in place, so that appropriate
candidates are recruited for later promotion to senior positions. This includes ensuring
due consideration is given to diversity of executives and staff below board level.
30 QRxPharma Annual Report 2013
FINANCIAL
REPORT
These fi nancial statements are the consolidated fi nancial
statements of the consolidated entity consisting of
QRxPharma Limited and its subsidiaries. The fi nancial
statements are presented in the Australian currency.
QRxPharma Limited is a company limited by shares,
incorporated and domiciled in Australia. Its registered
offi ce and principal place of business is:
QRxPharma Limited
Level 1, 194 Miller Street
North Sydney NSW 2060.
The fi nancial statements were authorised for issue by the
directors on 19 September 2013. The directors have the
power to amend and reissue the fi nancial statements.
Through the use of the internet, we have ensured that
our corporate reporting is timely and complete. All press
releases, fi nancial reports and other information are
available at the Investors tab on our website:
www.qrxpharma.com.
Consolidated statement of profi t or loss and other
comprehensive income
Consolidated statement of fi nancial position
Consolidated statement of changes in equity
Consolidated statement of cash fl ows
Notes to the consolidated fi nancial statements
Directors' declaration
Independent auditor's report to the members of
QRxPharma Limited
Shareholder information
32
33
34
35
36
70
71
73
www.qrxpharma.com 31
CONSOLIDATED
STATEMENT OF PROFIT
OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 30 June 2013
Revenue from continuing operations
Other income
Research and development expense
Employee benefi ts expense
Depreciation and amortisation
Business development expense
Other expenses
Income tax benefi t
Loss from continuing operations
Notes
5
6
7
7
7
8
Loss before income tax
Loss for the year
Other comprehensive income
Items that may be reclassifi ed subsequently to profi t or loss
Exchange differences on translation of foreign operations
Other comprehensive 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
20132013
$’000
4,066
747
(8,260)
(4,204)
(64)
(675)
(1,690)
(10,080)
-
(10,080)
(10,080)
2012
$’000
1,919
2,266
(9,162)
(7,192)
(65)
(1,343)
(2,468)
(16,045)
-
(16,045)
(16,045)
149
149
(9,931)
82
82
(15,963)
(10,075)
(5)
(10,080)
(9,926)
(5)
(9,931)
(15,949)
(96)
(16,045)
(15,867)
(96)
(15,963)
Earnings per share for loss attributable to the ordinary equity holders of the company:
Basic loss per share
Diluted loss per share
28
28
Cents
(7.0)
(7.0)
Cents
(11.2)
(11.2)
The above consolidated statement of profi t or loss and other comprehensive income should be read in conjunction with the accompanying notes.
32 QRxPharma Annual Report 2013
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
As at 30 June 2013
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Non-current assets
Plant and equipment
Available-for-sale fi nancial assets
Intangible assets
Total current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Other current liabilities
Non-Current liabilities
Provisions
EQUITY
Contributed equity
Reserves
Accumulated losses
Total current liabilities
Total non-current liabilities
Total liabilities
Net assets
Capital and reserves attributable to owners of
QRxPharma Limited
Non-controlling interests
Total equity
Notes
9
10
11
12
13
14
15
16
17
16
18
19(a)
19(b)
20
20132013
$’000
11,960
308
220
12,488
135
-
-
135
12,623
1,710
240
592
2,542
234
234
2,776
9,847
144,433
12,846
(147,381)
9,898
(51)
9,847
The above consolidated statement of fi nancial position should be read in conjunction with the accompanying notes.
2012
$’000
22,950
1,212
458
24,620
191
-
-
191
24,811
1,533
824
4,055
6,412
201
201
6,613
18,198
144,281
11,269
(137,306)
18,244
(46)
18,198
www.qrxpharma.com 33
CONSOLIDATED
STATEMENT OF
CHANGES IN
EQUITY
For the year ended 30 June 2013
ATTRIBUTABLE TO THE OWNERS OF
QRXPHARMA LIMITED
Contributed
equity
$’000
118,809
-
-
-
Reserves
Accumulated
Losses
Total
Non-
controlling
interests
Total equity
$’000
9,025
-
82
82
$’000
$’000
$’000
$’000
(121,357)
(15,949)
6,477
(15,949)
50
(96)
6,527
(16,045)
-
82
-
82
(15,949)
(15,867)
(96)
(15,963)
Balance at 1 July 2011
Loss for the year as reported in
the 2012 fi nancial statements
Other comprehensive income
Total comprehensive loss for the year
Transactions with owners in their capacity as owners:
Contributions of equity, net of
transaction costs
Employee share scheme
Balance at 30 June 2012
Loss for the year
Other comprehensive income
Total comprehensive loss for the year
25,472
-
-
25,472
-
25,472
-
25,472
144,281
-
-
-
2,162
2,244
11,269
-
149
149
-
(15,949)
(137,306)
(10,075)
-
(10,075)
2,162
11,767
18,244
(10,075)
149
(9,926)
-
(96)
(46)
(5)
-
(5)
2,162
11,671
18,198
(10,080)
149
(9,931)
Transactions with owners in their capacity as owners:
Contributions of equity, net of
transaction costs
Employee share scheme
Balance at 30 June 2013
152
-
-
152
-
152
-
152
144,433
1,428
1,577
12,846
-
(10,075)
(147,381)
1,428
(8,346)
9,898
-
(5)
(51)
1,428
(8,351)
9,847
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
34 QRxPharma Annual Report 2013
CONSOLIDATED
STATEMENT OF
CASH FLOWS
For the year ended 30 June 2013
Cash fl ows from operating activities
Receipts from licensees of cost recoveries
Payments to suppliers and employees
(inclusive of goods and services tax)
Interest received
License fee received
Grant received
Net cash (outfl ow) from operating activities
Cash fl ows from investing activities
Payments for plant and equipment
Net cash (outfl ow) from investing activities
Cash fl ows from fi nancing activities
Proceeds from issue of shares
Payments made in relation to capital raising
Net cash infl ow from fi nancing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the fi nancial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
5
5
6
27
18
6
9
20132013
$’000
1,635
(14,056)
(12,421)
60
485
150
(11,726)
(13)
(13)
152
-
152
(11,587)
22,950
597
11,960
2012
$’000
-
(17,760)
(17,760)
114
5,918
-
(11,728)
(60)
(60)
26,750
(1,278)
25,472
13,684
7,291
1,975
22,950
The above consolidated statement of cash fl ows should be read in conjunction with the accompanying notes.
www.qrxpharma.com 35
CONTENTS OF THE
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
For the year ended 30 June 2013
36 QRxPharma Annual Report 2013
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
30
31
Summary of signifi cant accounting policies
Financial risk management
Critical accounting estimates and judgements
Segment information
Revenue
Other income
Expenses
Income tax benefi t
Current assets – Cash and cash equivalents
Current assets – Trade and other receivables
Current assets – Other current assets
Non-current assets – Plant and equipment
Non-current assets – Available-for-sale fi nancial assets
Non-current assets – Intangible assets
Current liabilities – Trade and other payables
Provisions
Other current liabilities
Contributed equity
Reserves and accumulated losses
Non-controlling interests
Key management personnel disclosures
Remuneration of auditors
Contingencies
Commitments
Related party transactions
Subsidiaries
Reconciliation of loss after income tax to net cash
outfl ow from operating activities
Loss per share
Parent entity fi nancial information
Share based payments
Events occurring after the balance sheet date
37
47
49
50
50
50
51
51
52
52
53
53
53
54
55
55
55
55
57
58
58
62
63
63
63
64
64
64
65
66
69
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of
the consolidated fi nancial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated. The fi nancial statements are for the
consolidated entity consisting of QRxPharma Limited and its
subsidiaries.
a) Basis of preparation
These general purpose fi nancial statements have 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. QRxPharma Limited is a for-profi t entity
for the purpose of preparing the fi nancial statements.
(i) New and amended standards adopted by the Group
None of the new standards and amendments to standards that
are mandatory for the fi rst time for the fi nancial year beginning
1 July 2012 affected any of the amounts recognised in the current
period or any prior period and are not likely to affect future
periods.
(ii) Compliance with IFRS
The consolidated fi nancial statements of QRxPharma Limited
also comply with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards
Board (IASB).
(iii) Historical cost convention
These fi nancial statements have been prepared under the
historical cost convention, as modifi ed by the revaluation of
available-for-sale fi nancial assets and liabilities (including
derivative instruments) at fair value through profi t or loss.
(iv) Critical accounting estimates
The preparation of fi nancial statements in conformity with
Australian International Financial Reporting Standards (AIFRS)
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of
applying the Group’s accounting policies. The areas involving
a higher degree of judgment or complexity, or areas where
assumptions and estimates are signifi cant to the fi nancial
statements are disclosed in note 3.
(v) Early adoption of standards
The Group has elected not to apply any pronouncement before
their operative date in the annual reporting period beginning 1
July 2012.
and the realisation of assets and the settlement of liabilities in the
ordinary course of business.
During the year ended 30 June 2013, the Group incurred a net loss
of $10.1 million (2012: $16 million) and had net cash outfl ows from
operating activities of $11.7 million (2012: $11.7 million). As at 30 June
2013, the Group holds cash and cash equivalents of $12 million (2012:
$23 million).
The ability of the Company and the Group to continue as going
concerns for 12 months from the date of signing this fi nancial report
is dependent upon the Company being successful in completing a
further capital raising to provide the necessary funding to meet the
Company’s ongoing research and development costs and execute on
the corporate strategy.
Given the success of past capital raisings by the Company and
management’s plan to raise further funds, the directors remain
confi dent about the successful outcome of the above factors and that
it is therefore appropriate to prepare the fi nancial statements on the
going concern basis.
However, in the event that the Company is unable to complete a
further capital raising suffi cient to meet its research and development
requirements, signifi cant uncertainty would exist as to whether the
Company and the Group will continue as going concerns and,
therefore, whether they will realise their assets and settle their liabilities
and commitments in the normal course of business.
The fi nancial statements do not include any adjustments relating to
the recoverability and classifi cation of recorded asset amounts or to
the amounts and classifi cation of liabilities that might be necessary
should the Company and the Group not continue as going concerns.
c) Principles of consolidation
(i) Subsidiaries
The consolidated fi nancial statements incorporate the assets and
liabilities of all subsidiaries of QRxPharma Limited (‘’company’’ or
‘’parent entity’’) as at 30 June 2013 and the results of all subsidiaries
for the year then ended. QRxPharma Limited and its subsidiaries
together are referred to in this fi nancial report as the Group or the
consolidated entity.
Subsidiaries are all those entities (including special purpose entities)
over which the Group has the power to govern the fi nancial and
operating policies, generally accompanying a shareholding of
more than one half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or convertible are
considered when assessing whether the Group controls another entity.
b) Going concern
The fi nancial statements have been prepared on the going concern
basis, which contemplates the continuity of normal business activities
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.
www.qrxpharma.com 37
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
38 QRxPharma Annual Report 2013
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
c) Principles of consolidation (continued)
Non-controlling interests in the results and equity of subsidiaries are shown separately in the
consolidated statement of comprehensive income, statement of changes in equity and balance
sheet respectively. Investments in subsidiaries are accounted for at cost in the separate fi nancial
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 refl ect 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.
When the Group ceases to have control, joint control or signifi cant infl uence, any retained
interest in the entity is remeasured to its fair value with the change in carrying amount
recognised in profi t 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 fi nancial 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 reclassifi ed to profi t or loss.
If the ownership interest in a jointly-controlled entity or an associate is reduced but joint
control or signifi cant infl uence is retained, only a proportionate share of the amounts
previously recognised in other comprehensive income are reclassifi ed to profi t or loss.
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 identifi ed as the executive management team.
e) Foreign currency translation
(i) Functional and presentation currency
Items included in the fi nancial statements of each of the Group’s entities are measured
using the currency of the primary economic environment in which the entity operates
(‘the functional currency’). The consolidated fi nancial statements are presented
in Australian dollars, which is QRxPharma Limited’s functional and presentation
currency.
(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 statement of comprehensive income, except when they
are deferred in equity as qualifying cash fl ow hedges and qualifying net investment
hedges or are attributable to part of the net investment in a foreign operation.
Foreign exchange gains and losses are presented in the income statement on a net
basis within other income or net foreign exchange loss.
Non-monetary items that are measured at fair value in a foreign
currency are translated using the exchange rates at the date when
the fair value was determined. Translation differences on assets and
liabilities carried at fair value are reported as part of the fair value
gain or loss. For example, translation differences on non-monetary
assets and liabilities such as equities held at fair value through profi t
or loss are recognised in profi t or loss as part of the fair value gain
or loss and translation differences on non-monetary assets such
as equities classifi ed as available-for-sale fi nancial assets are
recognised in other comprehensive income.
(iii) Group companies
The results and fi nancial position of all the Group entities (none of
which has the currency of a hyperinfl ationary economy) that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• 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 profi t and loss are translated
at the exchange rate on 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 fi nancial 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 profi t
and loss as part of the gain or loss on sale where applicable.
f) Revenue recognition
Revenue is measured at the fair value of the consideration received
or receivable. Amounts disclosed as revenue are net of returns
and trade allowances. The Group recognises revenue when the
amount of revenue can be reliably measured, it is probable that
future economic benefi ts will fl ow to the entity and specifi c criteria
have been met for each of the Group’s activities as described
below. The Group bases its estimates on current available
information, taking into consideration the type of customer, the
type of transaction and the specifi cs of each arrangement.
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 receivable rate for each jurisdiction adjusted
by changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
fi nancial statements. However, the deferred income tax is not
accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable
profi t or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the
balance sheet date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax
liability is settled.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary
differences and losses.
Deferred tax liabilities and assets are not recognised for
temporary differences between the carrying amount and tax
bases of investments in controlled entities where the parent entity
is able to control the timing of the reversal of the temporary
differences and it is probable that the differences will not reverse
in the foreseeable future.
Tax consolidation legislation
QRxPharma Limited and its wholly-owned Australian controlled
entities have implemented the tax consolidation legislation.
The head entity, QRxPharma Limited, and the controlled entities
in the tax consolidated group account for their own current and
deferred tax amounts. These tax amounts are measured as if each
entity in the tax consolidated group continues to be a stand-alone
taxpayer in its own right.
h) Business combinations
The 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. Identifi able 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
identifi able assets.
www.qrxpharma.com 39
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
40 QRxPharma Annual Report 2013
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
h) Business combinations (continued)
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 identifi able assets acquired is
recorded as goodwill. If those amounts are less than the fair value of the net identifi able
assets of the subsidiary acquired and the measurement of all amounts has been
reviewed, the difference is recognised directly in profi t 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 fi nancier under comparable terms
and conditions.
Contingent consideration is classifi ed either as equity or a fi nancial liability. Amounts
classifi ed as a fi nancial liability are subsequently remeasured to fair value with changes
in fair value recognised in profi t or loss.
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 identifi able cash infl ows which are largely
independent of the cash infl ows from other assets or groups of assets (cash generating
units).
Non-fi nancial assets other than goodwill that suffered an impairment are reviewed for
possible reversal of the impairment at each reporting date.
j) Grant income
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 fl ow statement presentation purposes, cash and cash equivalents includes cash
on hand, deposits held at call with fi nancial institutions, other short term, highly liquid
investments with original maturities of three months or less that are readily convertible
to known amounts of cash and which are subject to an insignifi cant risk of changes in
value, and bank overdrafts. Bank overdrafts are shown within borrowings in current
liabilities on the balance sheet.
l) Investments and other fi nancial assets
Classifi cation
The Group classifi es its investments in the following categories: fi nancial assets at
fair value through profi t or loss, loans and receivables, held to maturity investments
and available-for-sale fi nancial assets. The classifi cation depends on the purpose for
which the investments were acquired. Management determines the classifi cation of its
investments at initial recognition and, in the case of assets classifi ed as held-to-maturity,
re-evaluates this designation at each reporting date.
(i) Financial assets at fair value through profi t or loss
Financial assets at fair value through profi t or loss are fi nancial
assets held for trading. A fi nancial asset is classifi ed in this
category if acquired principally for the purpose of selling in the
short term. Derivatives are classifi ed as held for trading unless
they are designated as hedges.
(ii) Loans and receivables
Loans and receivables are non-derivative fi nancial assets with fi xed
or determinable payments that are not quoted in an active market.
They are included in current assets, except for those with maturities
greater than 12 months after the balance sheet date which are
classifi ed as non-current assets. Loans and receivables are included in
trade and other receivables in the balance sheet (note 10).
(iii) Held-to-maturity investments
Held-to-maturity investments are non-derivative fi nancial assets
with fi xed or determinable payments and fi xed maturities that the
Group’s management has the positive intention and ability to hold to
maturity. If the Group were to sell other than an insignifi cant amount
of held-to-maturity fi nancial assets, the whole category would be
tainted and reclassifi ed as available-for-sale. Held-to-maturity
fi nancial assets are included in non-current assets, except for those
with maturities less than 12 months from the reporting date, which are
classifi ed as current assets.
(iv) Available-for-sale fi nancial assets
Available-for-sale fi nancial assets, comprising principally equity
securities, are non-derivatives that are either designated in this
category or not classifi ed 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 fi xed maturities and fi xed or
determinable payments and management intends to hold them for
the medium to long term.
Recognition and derecognition
Regular purchases and sales of fi nancial assets are recognised on
trade-date – the date on which the Group commits to purchase or
sell the asset. Financial assets are derecognised when the rights to
receive cash fl ows from the fi nancial assets have expired or have been
transferred and the Group has transferred substantially all the risks
and rewards of ownership.
When securities classifi ed as available-for-sale are sold, the
accumulated fair value adjustments recognised in other
comprehensive income are reclassifi ed to profi t or loss as gains and
losses from investment securities.
value through profi t or loss, transaction costs that are directly
attributable to the acquisition of the fi nancial asset. Transaction
costs of fi nancial assets carried at fair value through profi t or
loss are expensed in profi t or loss.
Loans and receivables and held to maturity investments are
carried at amortised cost using the effective interest method.
Available-for-sale fi nancial assets and fi nancial assets at fair
value through profi t or loss are subsequently carried at fair
value. Gains or losses arising from changes in the fair value of
the “fi nancial assets at fair value through profi t or loss’ category
are presented in profi t or loss within other income or other
expenses in the period in which they arise.
Impairment
The Group assesses at the end of each reporting period whether
there is objective evidence that a fi nancial asset or group of
fi nancial assets is impaired. A fi nancial asset or a group of
fi nancial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of
the asset (a ‘loss event’) and that loss event (or events) has an
impact on the estimated future cash fl ows of the fi nancial asset
or group of fi nancial assets that can be reliably estimated. In
the case of equity investments classifi ed as available-for-sale, a
signifi cant or prolonged decline in the fair value of the security
below its cost is considered an indicator that the assets are
impaired.
(i) Assets carried at amortised cost
For loans and receivables, the amount of the loss is measured
as the difference between the asset’s carrying amount and the
present value of estimated future cash fl ows (excluding future
credit losses that have not been incurred) discounted at the
fi nancial asset’s original effective interest rate. The carrying
amount of the asset is reduced and the amount of the loss is
recognised in the consolidated income statement. If a loan or held-
to-maturity investment has a variable interest rate, the discount
rate for measuring any impairment loss is the current effective
interest rate determined under the contract. As a practical
expedient, the Group may measure impairment on the basis of an
instrument’s fair value using an observable market price.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised (such as an
improvement in the debtor’s credit rating), the reversal of the
previously recognised impairment loss is recognised in the
consolidated income statement.
Measurement
At initial recognition, the Group measures a fi nancial asset
at its fair value plus, in the case of a fi nancial asset not at fair
(ii) Assets classifi ed as available-for-sale
If there is objective evidence of impairment for available-for-sale
fi nancial assets, the cumulative loss – measured as the difference
www.qrxpharma.com 41
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
42 QRxPharma Annual Report 2013
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
l) Investments and other fi nancial assets (continued)
between the acquisition cost and the current fair value, less any impairment loss on that
fi nancial asset previously recognised in profi t or loss – is removed from equity and recognised
in profi t or loss.
Impairment losses on equity instruments that were recognised in profi t or loss are not reversed
through profi t or loss in a subsequent period.
If the fair value of a debt instrument classifi ed as available-for-sale increases in a subsequent
period and the increase can be objectively related to an event occurring after the impairment
loss was recognised in profi t or loss, the impairment loss is reversed through profi t or loss.
m) Plant and equipment
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
4-5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each
balance sheet date.
n) Intangible assets
(i) Intellectual property
Costs incurred in acquiring intellectual property are capitalised and amortised on a
straight line basis over the period of the expected benefi t.
Costs include only those costs directly attributable to the acquisition of the intellectual
property.
An asset’s carrying amount is written down immediately to its recoverable amount if
the asset’s carrying amount is greater than its estimated recoverable amount (note
1(i)).
(ii) Research and development
Research expenditure on internal development projects is recognised as an expense as
incurred. Costs incurred on development projects (relating to the design and testing
of new or improved products) are recognised as intangible assets when it is probable
that the project will, after considering its commercial and technical feasibility, be
completed and generate future economic benefi ts and its costs can be measured
reliably. The expenditure capitalised comprises all directly attributable costs, including
costs of materials, services, direct labour and an appropriate proportion of overheads.
Other development expenditures that do not meet these criteria are recognised as
an expense as incurred. Development costs previously recognised as an expense are
not recognised as an asset in a subsequent period. Capitalised development costs are
recorded as intangible assets and amortised from the point at which the asset is ready
for use on a straight line basis over its useful life.
o) Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior
to the end of fi nancial year which are unpaid. The amounts are unsecured and are
usually paid within 30 days of recognition.
Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date.
p) Leases
Leases in which a signifi cant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classifi ed as
operating leases (note 24). 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.
q) Employee benefi ts
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non monetary benefi ts and annual leave expected to be settled within 12 months of the
reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled.
(ii) Long service leave
The liability for long service leave is recognised in the provision for employee benefi ts and measured as the present value of expected
future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using
market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the
estimated future cash outfl ows.
(iii) Retirement benefi t obligations
The Group does not maintain a Group superannuation plan. The Group makes fi xed percentage contributions for all Australian resident
employees to complying third party superannuation funds and for US resident employees to complying pension funds 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 benefi ts are provided to employees via the QRxPharma Limited Employee Share Option Plan. Information
relating to this scheme is set out in note 30.
The fair value of options granted under the QRxPharma Limited Employee Share Option Plan is recognised as an employee benefi t
expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which
the employees become unconditionally entitled to the options.
The fair value at grant date is independently determined using the 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 refl ect market vesting conditions, but excludes the impact of any non-market vesting
conditions (for example, profi tability and sales growth targets). Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number
of options that are expected to become exercisable. The employee benefi t expense recognised each period takes into account the most
recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding
adjustment to equity.
(v) Bonus plans
The Group recognises a liability and an expense for bonuses in accordance with the terms of employment contracts. The Group
recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
(vi) Employee benefi t on-costs
Employee benefi t on-costs are recognised and included in the employee benefi t liabilities and costs when the employee benefi ts to which
they relate are recognised.
www.qrxpharma.com 43
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
44 QRxPharma Annual Report 2013
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
q) Employee benefi ts (continued)
(vii) Termination benefi ts
Termination benefi ts are payable when employment is terminated before the normal
retirement date, or when an employee accepts voluntary redundancy in exchange for
these benefi ts. The Group recognises termination benefi ts when it is demonstrably
committed to either terminating the employment of current employees according to
a detailed formal plan without possibility of withdrawal or to providing termination
benefi ts as a result of an offer made to encourage voluntary redundancy. Benefi ts
falling due more than 12 months after the end of the reporting period are discounted to
present value.
r) Contributed equity
Ordinary shares are classifi ed as equity.
Incremental costs directly attributable to the issue of new shares or options are shown
in equity as a deduction, net of tax, from the proceeds.
s) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profi t attributable to equity
holders of the Company, excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares outstanding during the
fi nancial year, adjusted for bonus elements in ordinary shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the fi gures used in the determination of basic
earnings per share to take into account:
• the after income tax effect of interest and other fi nancing costs associated with
dilutive potential ordinary shares, and
• the weighted average number of additional ordinary shares that would have been
outstanding assuming the conversion of all dilutive potential ordinary shares.
t) Derivatives
Derivatives that do not qualify for hedge accounting
Derivatives are initially recognised at fair value on the date a derivative contract is
entered into and are subsequently remeasured to their fair value at each reporting date.
Changes in the fair value of any derivative instrument that does not qualify for hedge
accounting are recognised immediately in the income statement and are included in
other income or other expenses.
u) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST,
unless the GST incurred is not recoverable from the taxation authority. In this case it is
recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or
payable. The net amount of GST recoverable from, or payable to, the taxation
authority is included with other receivables or payables in the balance sheet.
Cash fl ows are presented on a gross basis. The GST components of cash fl ows arising
from investing or fi nancing activities which are recoverable from, or payable to the
taxation authority, are presented as operating cash fl ow.
v) Rounding of amounts
The company is a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission, relating to
the “rounding off” of amounts in the fi nancial report. Amounts in the fi nancial report have been rounded off in accordance with that
Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
w) Parent entity fi nancial information
The fi nancial information for the parent entity, QRxPharma Limited, disclosed in note 29 has been prepared on the same basis as the
consolidated fi nancial statements, except as set out below.
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost in the fi nancial 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.
(iii) Share based payments
The grant by the Company of options over its equity instruments to the employees of subsidiary undertakings in the Group is treated as
a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant
date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit
to equity.
x) New accounting standards and interpretations
(i) Standards and interpretations adopted during the period
The Group has adopted the amendments to Australian Accounting Standards during the current reporting period as a consequence
of AASB 2011-9 ‘Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income’. The
adoption of the amendments has not resulted in any changes to the Group’s accounting policies and has no effect on the amounts
reported for the current or prior interim periods. However, the application of AASB 2011-9 has resulted in changes to the Group’s
presentation of, or disclosure in, its fi nancial statements.
AASB 2011-9 introduces new terminology for the statement of comprehensive income and income statement. Under the
amendments to AASB 101, the statement of comprehensive income is renamed as a statement of profi t or loss and other
comprehensive income and the income statement is renamed as a statement of profi t or loss. The amendments to AASB 101 retain
the option to present profi t or loss and other comprehensive income in either a single statement or in two separate but consecutive
statements. However, the amendments to AASB 101 require items of other comprehensive income to be grouped into two categories
in the other comprehensive income section: (a) items that will not be reclassifi ed subsequently to profi t or loss and (b) items that may
be reclassifi ed subsequently to profi t or loss when specifi c conditions are met. Income tax on items of other comprehensive income
is required to be allocated on the same basis – the amendments do not change the option to present items of other comprehensive
income either before tax or net of tax. The amendments have been applied retrospectively, and hence the presentation of items of
other comprehensive income has been modifi ed to refl ect the changes. Other than the above mentioned presentation changes, the
application of the amendments to AASB 101 does not result in any impact on profi t or loss, other comprehensive income and total
comprehensive income.
(ii) Standards and interpretations in issue not yet adopted
At the date of authorisation of the fi nancial statements, a number of standards and interpretations were in issue but not yet effective.
The reported results and position of the Group will not change on adoption of these pronouncements as currently there are no
transactions that will be impacted materially by these pronouncements. Adoption will, however, result in changes to information
currently disclosed in the fi nancial statements. The Group does not intend to adopt any of these pronouncements before their
effective dates.
www.qrxpharma.com 45
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
x) New accounting standards and interpretations (continued)
Standard/Interpretation
AASB 9 Financial Instruments (December 2009), AASB
2009-11 Amendments to Australian Accounting Standards
arising from AASB 9, AASB 2012-6 ‘Amendments to
Australian Accounting Standards – Mandatory Effective Date
of AASB 9 and Transition Disclosures’
AASB 10 Consolidated Financial Statements
AASB 11 Joint Arrangements
AASB 12 Disclosure of Interests in Other Entities
AASB 127 Separate Financial Statements (2011)
Effective for annual reporting
periods beginning on or after
Expected to be initially
applied in the fi nancial year
ending
1 January 2015
30 June 2016
1 January 2013
1 January 2013
1 January 2013
1 January 2013
30 June 2014
30 June 2014
30 June 2014
30 June 2014
30 June 2014
AASB 128 Investments in Associates and Joint Ventures (2011)
1 January 2013
AASB 2011-7 Amendments to Australian Accounting
Standards arising from the Consolidation and Joint
Arrangements standards
AASB 119 Employee Benefi ts (2011), AASB 2011-10
Amendments to Australian Accounting Standards arising from
AASB 119 (2011)
1 January 2013
30 June 2014
1 January 2013
30 June 2014
AASB 13 Fair Value Measurement, AASB 2011-8 Amendments
to Australian Accounting Standards arising from AASB 13
1 January 2013
30 June 2014
AASB 2012-5 ‘Amendments to Australian Accounting
Standards arising from Annual Improvements 2009-2011
Cycle’
1 January 2013
30 June 2014
46 QRxPharma Annual Report 2013
2 FINANCIAL RISK MANAGEMENT
The Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk.
The Group’s overall risk management programme focuses on the unpredictability of fi nancial markets and seeks to minimise potential adverse
effects on the fi nancial performance of the Group. The Group uses derivative fi nancial instruments such as foreign exchange contracts to hedge
certain risk exposures. Derivatives are exclusively used for hedging purposes, not as trading or other speculative instruments. Cash and cash
equivalents are invested exclusively with ‘A’ rated fi nancial institutions, at a minimum, with capital preservation being the stated investment
objective. Risk management is carried out under policies approved by the board of directors.
The Group holds the following fi nancial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
20132013
$’000
11,960
308
2012
$’000
22,950
1,187
12,268
24,137
1,710
1,710
1,533
1,533
(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.
The Group’s exposure to foreign currency risk at the reporting date was as follows:
30 June 2013
30 June 2013
EUR
USD
GBP
30 June 2012
EUR
USD
GBP
$’000
$’000
$’000
$’000
$’000
$’000
Cash at bank
Term deposits
Trade payables
381
9,820
15
-
-
-
-
-
-
563
22,047
14
2
-
-
29
-
-
www.qrxpharma.com 47
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
48 QRxPharma Annual Report 2013
2 FINANCIAL RISK MANAGEMENT (continued)
Group sensitivity
Based on the fi nancial instruments held at 30 June 2013, had the Australian dollar
weakened / strengthened by 15% (2012: 15%) against the US dollar with all other
variables held constant, the Group’s post-tax loss for the year would have been $2.0
million lower / $1.5 million higher (2012: $4.6 million lower / $3.4 million higher),
mainly as a result of foreign exchange gains / losses on translation of US dollar
denominated fi nancial instruments as detailed in the above table. The Group’s
exposure to other foreign exchange movements is not material.
(ii) Price risk
The Group and the parent entity are not exposed to equity securities price risk or
commodity price risk.
(iii) Cash fl ow and interest rate risk
The Group’s main interest rate risk arises from the holding of cash and cash equivalents.
During the year, the Group held signifi cant interest-bearing bank term deposits exposing
the Group’s income and operating cash fl ows to changes in market interest rates.
The value of borrowings at 30 June 2013 was $nil (2012: $nil), thus limiting the Group’s
exposure to any cash fl ow risk in relation to liabilities.
Group sensitivity
As at 30 June 2013, if interest rates had changed by -17 / + 25 basis points (2012: -25 / + 40
basis points) from the year-end rates with all other variables held constant, the post-tax loss
for the year would have been $6,000 higher / $4,000 lower (2012: $21,000 higher / $13,000
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 fi nancial institutions. For banks and fi nancial institutions, only
independently rated parties with a minimum rating of ‘A’ are acceptable. At 30 June 2013, cash
equivalents were held with fi nancial institutions rated Aa2 by Moody’s.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining suffi cient cash and marketable
securities.
The Group has experienced recurring operating losses and operating cash outfl ows since
inception to 30 June 2013. Due to negative operating cash fl ow position the Group has not
committed to any credit facilities and relied upon equity fi nancing 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 2013, the
Group had no overdue liabilities. The value of trade creditors at 30 June 2013 for the Group
was $1,160,000 (2012: $757,000) which is payable within 1 month of year end and at 30 June
2013, the entity carried cash and cash equivalents of $12 million (2012: $23 million). Other
payables for the Group include accruals for employee benefi ts and other accruals to the value
of $1,024,000 (2012: $1,801,000).
The fair value of fi nancial 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. The Group has fully impaired the available-for-sale fi nancial assets to $nil at 30 June 2013
(2012: $nil).
The carrying value of trade and other payables is assumed to approximate their fair values due to their short-term nature.
Management monitors rolling forecasts of the Group’s liquidity reserve and cash and cash equivalents on the basis of expected cash fl ows. The
Group’s liquidity management policy involves projecting cash fl ows in major currencies and considering the level of liquid assets necessary to
meet these.
(d) Fair value measurements
The fair value of fi nancial assets and fi nancial liabilities must be estimated for recognition and measurement or for disclosure purposes.
AASB 7 Financial Instruments: Disclosures 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
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
(c)
The fair value of fi nancial 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.
The level 3 instrument was fully written down during the fi nancial year ended 30 June 2012.
The carrying value of trade and other payables is assumed to approximate their fair values due to their short-term nature.
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future
events that may have a fi nancial impact on the entity and that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by defi nition, seldom equal the
related actual results. The estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next fi nancial year are discussed below.
Research and development expenditure
The Group has expensed all internal research and development expenditure incurred during the year as the costs relate to the initial expenditure
for research and development of biopharmaceutical products and the generation of future economic benefi ts are not considered certain. It was
considered appropriate to expense the research and development costs as they did not meet the criteria to be capitalised under AASB 138.
Impairment of intangible assets
The Group reviews defi nite life intangibles for impairment whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. The Group makes estimates and assumptions about the recoverability of intellectual property. Where the carrying value of
the intellectual property exceeds the recoverable amount, an impairment loss is recognised to record the intellectual property at its recoverable
amount.
Black-Scholes option pricing model
During the year, the Group expensed $1.4 million of share based payments as determined through the application of the Black-Scholes option
pricing model. The Black-Scholes model is dependent on a number of variables and estimates fully described in note 30.
Impairment of available-for-sale fi nancial assets
The Group follows the guidance of AASB 139 Financial Instruments: Recognition and Measurement to determine when an available-for-
sale fi nancial asset is impaired. This determination requires signifi cant judgement. In making this judgement, the Group evaluates,
among other factors, the duration and extent to which the fair value of an investment is less than its cost and the fi nancial health of and
short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and
operational and fi nancing cash fl ows.
In the 2013 fi nancial year, the fair value of the relevant asset was assessed and determined to be $nil (2012: $nil).
www.qrxpharma.com 49
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
Revenue recognition
The Group is recognising revenue associated with the receipt in December 2011 of a non-
refundable, non-creditable up front signing fee of $5.9 million (US$6 million) from Actavis Inc.
from the date of receipt to the anticipated FDA approval date representing an approximation
of the time relating to the submission of the fi ling with the FDA and associated processes.
The Group recognised $3.5 million (2012:$1.8 million) of revenue during the year and has
deferred $592,000 (2012: $4.1 million).
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.
5 REVENUE
From continuing operations
License fee received
Interest
20132013
$’000
4,006
60
4,066
2012
$’000
1,805
114
1,919
On 20 December 2011, the Company signed a binding Letter of Intent (LOI) with Actavis Inc
to commercialise immediate release MOXDUO in the USA. The LOI was secured by a non-
refundable, non-creditable up front signing fee of $5.9 million (US$6 million). The fee revenue
will be recognised from the date of the signing of the LOI to the anticipated FDA approval
date representing an approximation of the time relating to the submission of the fi ling with the
FDA and associated processes. The Group has recognised $3.5 million (2012: $1.8 million) as
revenue and $592,000 (2012: $4.1 million) as deferred revenue in the year to 30 June 2013.
On 9 October 2012, the Company signed a license agreement with Paladin Labs Inc. to
commercialise immediate release MOXDUO in Canada. The license agreement was secured
by a one-time, non-refundable, non-creditable upfront fee in the amount of $485,000
(US$500,000). The fee has been recognised as revenue in the year to 30 June 2013.
6 OTHER INCOME
Foreign exchange gain
Export market development grant
Sale of derivative fi nancial instrument
20132013
$’000
597
150
-
747
2012
$’000
1,975
-
291
2, 266
50 QRxPharma Annual Report 2013
During the year ended 30 June 2013 there were no purchases of foreign exchange option contracts and no contracts on hand at the end of
the fi nancial year. In the previous fi nancial year ended 30 June 2012 the Group purchased a number of foreign exchange option contracts at
a cost of $152,000 to protect against adverse movements between the AU$ and US$. These option contracts were not utilised during the
period and were repurchased by the bank for $291,000 netting the Group a gain on sale of foreign currency option contracts of $139,000.
7 EXPENSES
Loss before income tax includes the following specifi c expenses:
Research and development
Research and development expense
8,260
9,162
20132013
$’000
2012
$’000
Employee benefi ts expense
Employee benefi ts expense
Defi ned contribution superannuation expense
Share-based payments
Depreciation and amortisation
Plant and equipment
Rental expenses relating to operating leases
2,731
45
1,428
4,204
64
4,965
65
2,162
7,192
65
Minimum lease payments
158
137
8 INCOME TAX BENEFIT
20132013
$’000
2012
$’000
(a) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax
expense
(10,075)
(16,045)
Tax at the Australian tax rate of 30% (2012 – 30%)
(3,023)
(4,814)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable income:
Share-based payments
Impairment of fi nancial asset
Adjustment for current tax of prior periods
Income tax losses not recognised
Income tax expense
(b) Tax losses
Unused tax losses for which no deferred tax asset
has been recognised
Potential tax benefi t @ 30%
428
-
(2,595)
(343)
2,938
-
20132013
$’000
107,304
32,191
649
122
(4,043)
1,083
2,960
-
2012
$’000
97,511
29,253
www.qrxpharma.com 51
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
8 INCOME TAX BENEFIT (continued)
No deferred tax asset has been recognised for the tax losses generated from operations in
both Australia and the USA, as the benefi t for tax losses will only be obtained if:
(i) the Group derives future assessable income of a nature and of an amount suffi cient to
enable the benefi t from the deductions for the losses to be realised, or
(ii) the Group continues to comply with the conditions for deductibility imposed by tax
legislation, and
(iii) no changes in tax legislation adversely affect the Group in realising the benefi t from the
deduction for the losses.
(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).
9 CURRENT ASSETS - CASH AND CASH EQUIVALENTS
Cash at bank
Term deposits
20132013
$’000
568
11,392
11,960
2012
$’000
796
22,154
22,950
(a) Cash at bank
These bear an average interest rate of 2.84% (2012: 4.07%) for the AUD accounts and 0%
(2012: 0%) for the USD accounts.
(b) Term deposits
These are term deposits held in US dollars and Australian dollars.
The USD deposits bear an average fi xed interest rate of 0.16% (2012: 0.21%). These
deposits have a maturity of less than 3 months.
The AUD deposits bear an average fi xed interest rate of 3.8% (2012: 5.15%). These deposits
have a maturity of less than 3 months.
10 CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Interest receivable
Other receivables
20132013
$’000
4
304
308
2012
$’000
10
1,202
1,212
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 2013 no receivables were impaired or past
due (30 June 2012: $nil).
52 QRxPharma Annual Report 2013
11 CURRENT ASSETS - OTHER CURRENT ASSETS
Prepayments
20132013
$’000
220
2012
$’000
458
12 NON-CURRENT ASSETS – PLANT AND EQUIPMENT
At 1 July 2011
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2012
Opening net book amount
Additions
Depreciation charge
Closing net book amount
At 30 June 2012
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2013
Opening net book amount
Additions
Disposals
Depreciation charge
Closing net book amount
At 30 June 2013
Cost
Accumulated depreciation
Net book amount
$’000
478
(282)
196
196
60
(65)
191
538
(347)
191
191
13
(5)
(64)
135
532
(397)
135
13 NON-CURRENT ASSETS - AVAILABLE-FOR-SALE FINANCIAL ASSETS
Unlisted Securities
Equity securities
20132013
$’000
2012
$’000
-
-
Investments in related parties
At 30 June 2012, the carrying value of the available-for-sale fi nancial asset, representing the 6.98% investment in Venomics Hong
Kong Limited by Venomics Pty Limited was assessed and determined to be $nil.
Accordingly, the investment has been fully impaired to $nil.
www.qrxpharma.com 53
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
14 NON CURRENT ASSETS - INTANGIBLE ASSETS
Patents,
trademarks
and other
rights
$’000
Other
intangible
assets
$’000
-
-
-
-
Total
$’000
-
-
-
-
-
-
-
-
15,502
889
16,391
(15,502)
(889)
(16,391)
Year ended 30 June 2012
Opening net book amount
Impairment of intellectual property
Amortisation charge
Closing net book amount
At 30 June 2012
Cost
Accumulated amortisation and
impairment
Net book amount
-
-
-
Patents,
trademarks
and other
rights
$’000
Other
intangible
assets
$’000
-
-
-
-
Total
$’000
-
-
-
-
-
-
-
-
15,502
889
16,391
(15,502)
(889)
(16,391)
-
-
-
Year ended 30 June 2013
Opening net book amount
Impairment of intellectual property
Amortisation charge
Closing net book amount
At 30 June 2013
Cost
Accumulated amortisation and
impairment
Net book amount
54 QRxPharma Annual Report 2013
15 CURRENT LIABILITIES - TRADE AND OTHER PAYABLES
Trade payables
Other payables
16 PROVISIONS
Employee Benefi ts
Current
Non-current
20132013
$’000
1,160
550
1,710
20132013
$’000
240
234
474
2012
$’000
757
776
1,533
2012
$’000
824
201
1,025
The current provision represents benefi ts that are due to be settled within 12 months after the end of the reporting period to 30 June 2013.
17 OTHER CURRENT LIABILITIES
Deferred revenue – see note 5
18 CONTRIBUTED EQUITY
(a) Share capital
Ordinary shares - fully paid
20132013
$’000
592
2012
$’000
4,055
20132013
Shares
2012
Shares
20132013
$’000
2012
$’000
144,785,606
144,577,206
144,433
144,281
www.qrxpharma.com 55
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
18 CONTRIBUTED EQUITY (continued)
(b) Movements in ordinary share capital:
Date
30 June 2011
Details
Number of shares
Issue price
Balance
125,824,127
28 July 2011
2 August 2011
2 August 2011
30 August 2011
26 September 2011
2 November 2011
2 November 2011
2 November 2011
19 December 2011
31 January 2012
31 January 2012
31 January 2012
1 February 2012
6 February 2012
6 February 2012
3 March 2012
3 March 2012
19 March 2012
22 March 2012
22 March 2012
17 April 2012
17 April 2012
18 May 2012
Less: Transaction costs arising on issue of shares
30 June 2012
Share placement
Exercise of employee options
Exercise of employee options
Rights Issue
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
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
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
17,241,379
30,000
20,000
1,046,351
20,000
8,000
5,000
50,000
33,333
7,000
3,125
8,333
25,000
50,000
60,000
3,125
8,333
16,600
25,000
15,000
20,000
20,000
37,500
Balance
144,577,206
20 December 2012
14 January 2013
8 May 2013
31 May 2013
11 June 2013
30 June 2013
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
Exercise of employee options
Balance
40,000
27,500
3,400
105,000
32,500
144,785,606
56 QRxPharma Annual Report 2013
$1.45
$0.20
$0.65
$1.45
$0.20
$0.20
$0.65
$0.84
$0.65
$0.20
$0.65
$0.84
$0.20
$0.60
$0.20
$0.65
$0.84
$0.65
$0.20
$0.65
$0.65
$0.20
$0.84
$0.20
$0.65
$0.65
$0.90
$0.90
$’000
118,809
25,000
6
13
1,517
4
2
3
42
22
1
2
7
5
30
12
2
7
11
5
10
13
4
32
(1,278)
144,281
8
18
2
95
29
144,433
(c) Ordinary shares
Each ordinary shareholder maintains, when present in person or by proxy or by attorney at any general meeting of the company, the
right to cast one vote for each ordinary share held.
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the
number of and amounts paid on the shares held.
(d) Options
Information relating to the QRxPharma Limited Employee Share Option Plan, including details of options issued, exercised and lapsed
during the fi nancial year and options outstanding at the end of the fi nancial year are set out in note 30. Ordinary shares have no par value
and the Company does not have a limited amount of authorised capital.
(e) Capital risk management
The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so they can continue to provide
returns for shareholders and benefi ts for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group predominantly uses equity to fi nance its projects. In order to maintain or adjust the capital structure, the Group may return
capital to shareholders, issue new shares or sell assets.
19 RESERVES AND ACCUMULATED LOSSES
(a) Reserves
Share-based payments reserve
Foreign currency translation reserve
Transactions with non-controlling interest reserve
Movements:
Share-based payments reserve
Balance 1 July 2012
Option expense
Balance 30 June 2013
Foreign currency translation reserve
Balance 1 July 2012
Currency translation differences arising during the year
Balance 30 June 2013
Transactions with non-controlling interest reserve
Balance 1 July 2012
Balance 30 June 2013
(b) Accumulated losses
Movements in accumulated losses were as follows:
Balance at 1 July 2012
Net loss for the year
Balance 30 June 2013
20132013
$’000
12,074
316
456
12,846
10,646
1,428
12,074
167
149
316
456
456
2012
$’000
10,646
167
456
11,269
8,484
2,162
10,646
85
82
167
456
456
20132013
$’000
(137,306)
(10,075)
(147,381)
2012
$’000
(121,357)
(15,949)
(137,306)
www.qrxpharma.com 57
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
19 RESERVES AND ACCUMULATED LOSSES (continued)
(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 profi t 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.
20 NON-CONTROLLING INTERESTS
Interests in:
Share capital
Reserves
Retained earnings
20132013
$’000
122
122
(295)
(51)
2012
$’000
122
122
(290)
(46)
21 KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Directors
The following persons were directors of QRxPharma Limited during the fi nancial year:
(i) Chairman - non-executive
Dr Peter C Farrell
(ii) Executive director
Dr John W Holaday, Managing Director, Chief Executive Offi cer and Chief
Scientifi c Offi cer
(iii) Non-executive directors
Dr Gary W Pace, Consultant
Michael A Quinn
R Peter Campbell
58 QRxPharma Annual Report 2013
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or
indirectly, during the fi nancial year:
Name
John W Holaday Managing Director, Chief Executive Offi cer and Chief Scientifi c Offi cer
Position
Edward M Rudnic Chief Operating Offi cer
Chris J Campbell Chief Financial Offi cer
Richard A Paul
Executive Vice President Drug Development (to 20 January 2013)
M. Janette Dixon
Vice President of Global Business Development
c) Key management personnel compensation
Short-term employee benefi ts
Post-employment benefi ts
Share-based payments
20132013
$
1,827,880
23,375
862,910
2,714,165
2012
$
2,061,061
33,769
971,034
3,065,864
The Company has taken advantage of the relief provided by Corporations Regulations and has transferred the detailed
remuneration disclosures to the directors’ report. The relevant information can be found in the remuneration report on pages
11 to 19.
(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 11 to 19.
(ii) Option holdings
The numbers of options over ordinary shares in the company held during the fi nancial year by each director of QRxPharma Limited
and other key management personnel of the Group, including their personally related parties, are set out on the following page.
www.qrxpharma.com 59
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
21 KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
(d) Equity instrument disclosures relating to key management personnel
(continued)
Name
Balance at start
of the year
Granted as
compensation Exercised
Forfeited Balance at end
of the year
Vested and
exercisable Unvested
20132013
Directors of QRxPharma Limited
Peter C Farrell
John W Holaday
Gary W Pace
Michael A Quinn
R Peter Campbell
754,089
1,605,452
552,726
552,726
391,635
Other key management personnel of the Group
Edward M Rudnic
Chris J Campbell
Richard A Paul
(to 20 January 2013)
M. Janette Dixon
350,000
915,226
450,000
150,000
700,000
200,000
75,000
300,000
75,000
75,000
75,000
500,000
200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
829,089
729,089
100,000
1,905,452
1,438,785
466,667
627,726
627,726
527,726
100,000
527,726
100,000
466,635
366,635
100,000
850,000
1,115,226
116,667
733,333
757,934
357,292
(600,000)
-
-
-
-
900,000
545,833
354,167
2012
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
754,089
1,355,452
552,726
552,726
391,635
-
250,000
-
-
-
Other key management personnel of the Group
Edward M Rudnic*
Chris J Campbell
Richard A Paul
M. Janette Dixon
-
350,000
765,226
250,000
500,000
200,000
(50,000)
200,000
200,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
754,089
679,089
75,000
1,605,452
1,180,452
425,000
552,726
552,726
391,635
350,000
915,226
450,000
700,000
477,726
477,726
316,635
75,000
75,000
75,000
-
350,000
596,476
318,750
125,000
325,000
379,166
320,834
* Edward M Rudnic was appointed Chief Operating Offi cer on 13 February 2012. He was previously engaged as a consultant to the company for which he received
235,000 options. Additionally he has received 70,000 options as a member of the Company’s Scientifi c Advisory Board.
60 QRxPharma Annual Report 2013
(iii) Share holdings
The numbers of shares in the company held during the fi nancial year by each director of QRxPharma Limited and other key
management personnel of the Group, including their personally related parties, are set out below. There were no shares granted
during the reporting period as compensation.
20132013
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
Edward M Rudnic
Chris J Campbell
Richard A Paul (to 20 January 2013)
M. Janette Dixon
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
1,865,367
7,609,635
3,526,827
8,505,322
183,380
-
94,780
-
70,000
-
-
-
-
-
-
-
-
-
118,588*
-
88,441*
(7,896,335)**
-
-
-
-
(70,000)
1,983,955
7,609,635
3,615,268
608,987
183,380
-
94,780
-
-
*The change represents the receipt of an in-specie distribution made by Innovation Capital Limited and Innovation Capital LLC (Innovation
Capital Fund I) to its underlying shareholders.
**The disposal represents an in-specie distribution to underlying shareholders by Innovation Capital Limited and Innovation Capital LLC
(Innovation Capital Fund I) of 7,982,775 shares and the receipt of 86,440 shares by Michael Quinn and Rosemary Quinn as part of the above
noted in-specie distribution.
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
Edward M Rudnic
Chris J Campbell
Richard A Paul
M. Janette Dixon
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
2012
1,815,540
7,609,635
3,493,833
8,480,662
174,647
-
42,647
-
240,000
-
-
-
-
-
-
50,000
-
-
49,827
-
32,994
24,660
8,733
-
2,133
-
(170,000)
1,865,367
7,609,635
3,526,827
8,505,322
183,380
-
94,780
-
70,000
www.qrxpharma.com 61
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
62 QRxPharma Annual Report 2013
21 KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
(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 $81,049 (2012: $301,775).
22 REMUNERATION OF AUDITORS
(a) Auditor of the Group
Audit & other assurance services
Deloitte Touche Tohmatsu Australia
PricewaterhouseCoopers Australia
Total remuneration for audit and other
assurance services
Taxation services
Tax compliance services
20132013
$
2012
$
90,000
-
-
111,000
90,000
111,000
PricewaterhouseCoopers Australia
-
9,270
Tax consulting and advice
Deloitte Touche Tohmatsu Australia
PricewaterhouseCoopers Australia
Total remuneration for taxation services
Total remuneration of
Deloitte Touche Tohmatsu Australia
Total remuneration of
PricewaterhouseCoopers Australia
(b) Newtwork fi rms of the auditor of the Group
Taxation services
Tax compliance services
PricewaterhouseCoopers
International tax consulting and advice
PricewaterhouseCoopers
Total remuneration of related practices
of the auditor of the Group
Total auditors remuneration
Deloitte Touche Tohmatsu Australia
PricewaterhouseCoopers
12,500
-
12,500
-
106,788
116,058
102,500
-
-
-
-
-
102,500
-
102,500
227,058
33,974
11,006
44,980
-
272,038
272,038
At the Company’s annual general meeting on 7 November 2012, shareholders approved the
appointment of Deloitte Touche Tohmatsu Australia as the new auditors of the Group.
It is the Group’s policy to employ the Group’s auditors on assignments in addition to their
statutory audit duties where their expertise and experience with the Group are important.
These assignments are principally in relation to tax advice. It is the Group’s policy to seek
competitive tenders for all major consulting projects.
23 CONTINGENCIES
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) US $750,000 on commencement by the Group of Phase II clinical trial for any Torsin IP product;
(ii) US $1,500,000 on commencement by the Group of Phase III clinical trial for any Torsin IP product;
(iii) US $2,000,000 on the date of receipt by the Group of fi rst market approval for each Torsin IP product.
The agreement may be terminated by the Group at any time on 6 months’ notice to the University of Alabama and upon payment of all
amounts due to University of Alabama to the effective termination date. The agreement will expire on the last expiry date of the patents
licensed under the agreement.
24 COMMITMENTS
Operating leases
The Group leases offi ce premises in Sydney, Australia and New Jersey, USA. The leases have varying terms, escalation clauses and
renewal rights.
Commitments for minimum lease payments in
relation to non-cancellable operating leases are
payable as follows:
Within one year
Later than one year but not later than fi ve years
20132013
$’000
139
171
310
2012
$’000
77
205
282
25 RELATED PARTY TRANSACTIONS
(a) Subsidiaries
Interests in subsidiaries are set out in note 26.
(b) Key management personnel
Disclosures relating to key management personnel are set out in note 21.
(c) Outstanding balances
There are no outstanding balances at the reporting date in relation to transactions with related parties.
www.qrxpharma.com 63
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
64 QRxPharma Annual Report 2013
26 SUBSIDIARIES
The consolidated fi nancial statements incorporate the assets, liabilities and results of
the following subsidiaries in accordance with the accounting policy described in note
1(c):
Name of entity
Country of
incorporation
Class of shares
Equity holding
20132013
%
2012
%
Australia
Ordinary
Australia
USA
Ordinary /
Preference
Ordinary
Australia
Ordinary
100
100
100
80
100
100
100
80
The Lynx Project
Pty Limited
Haempatch Pty
Limited
QRxPharma, Inc.
Venomics Pty
Limited
27 RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH
OUTFLOW FROM OPERATING ACTIVITIES
Loss for the year
Depreciation and amortisation
Non-cash employee benefi ts expense – share-based payments
Net exchange differences on cash and cash equivalents
Loss on disposal of fi xed assets
Impairment of Venomics Hong Kong Limited
Change in operating assets and liabilities
(Increase)/decrease in other receivables and prepayments
(Decrease)/increase in trade creditors and accruals
Net cash outfl ow from operating activities
28 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
20132013
$’000
2012
$’000
(10,080)
(16,045)
64
1,428
(448)
5
-
65
2,162
(1,892)
-
406
1,142
(3,837)
(11,726)
(1,315)
4,891
(11,728)
20132013
Cents
2012
Cents
(7.0)
(11.2)
(7.0)
(11.2)
(c) Reconciliations of earnings used in calculating
earnings per share
20132013
$’000
2012
$’000
29 PARENT ENTITY FINANCIAL INFORMATION
(a) Summary fi nancial information
The individual fi nancial statements for the parent entity show
the following aggregate amounts:
Basic loss per share
Loss attributable to the
ordinary equity holders of the
company used in calculating
basic earnings per share
Diluted loss per share
Loss attributable to the
ordinary equity holders of the
company used in calculating
diluted earnings per share
(10,075)
(15,949)
Balance Sheet
(10,075)
(15,949)
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
20132013
$’000
12,087
1,287
13,374
3,575
74
3,649
2012
$’000
22,817
1,496
24,313
6,079
32
6,111
(d) Weighted average number of shares used as the
denominator
20132013
Number
2012
Number
Shareholder’s equity
Issued capital
Share based payment reserve
144,433
11,612
144,281
10,183
144,622,479
142,820,519
Accumulated losses
(146,320)
(136,262)
9,725
18,202
144,622,479
142,820,519
(Loss) for the year
Total comprehensive (loss)
(10,058)
(15,503)
(10,058)
(15,503)
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 classifi cation of securities
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 30.
(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 2013 or 30 June 2012.
(d) Commitments of the parent entity
The parent entity leases offi ce premises in Sydney, Australia.
2012
$’000
Commitments for minimum lease payments in relation to non-
cancellable operating leases are payable as follows:
Within one year
20132013
$’000
15
17
www.qrxpharma.com 65
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
66 QRxPharma Annual Report 2013
29 PARENT ENTITY FINANCIAL INFORMATION (continued)
(e) Convertible Note
At 30 June 2013, QRxPharma Limited holds 50,500 (2012: 50,500) convertible
notes in Venomics Pty Limited at US$4 face value per note. These notes carry an
interest rate of 10% per annum (compounding monthly). Each note is convertible at
QRxPharma Limited’s request and it also has the ability to require redemption of some
or all of the notes under certain conditions. 5,000 notes mature on 1 December 2013
and 45,500 on 20 December 2013.
At 30 June 2013, QRxPharma Limited assessed the carrying value of the notes and
determined that these notes may not be recoverable. Accordingly, it has fully impaired
the value of these notes to $nil at 30 June 2013 (2012: $nil).
The convertible notes are carried in Venomics Pty Limited as a liability at amortised
cost and the embedded derivative at fair value.
30 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 24 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, offi cer,
executive or consultant of the Company or any related body corporate of the Company and
whom the remuneration committee determines is eligible to participate in the option plan are
eligible to participate in the plan. Employees may elect not to participate in the scheme.
The total number of shares that shall be reserved for issuance under the option plan shall not
exceed ten 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 capitalisation
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.
Options granted under the plan carry no dividend or voting rights. The vesting period for
each option issued up to 31 December 2008 is 3 years, or as varied by the board, one third
vesting 12 months from the date of grant and the balance vesting equally each year over the
remaining two year period. Options issued from 1 January 2009 generally vest over 3 years
with the initial vesting on the fi rst anniversary of the date of the grant and subsequent vestings
in 8 equal tranches on the fi rst day of each calendar quarter over the following 2 years. When
exercisable, each option is convertible into one ordinary share and entitles the holder to the
same ordinary share rights as set out in note 18. Shares issued under the scheme may be
sold at the expiration of any Restriction Agreement between the eligible employee and the
Company. Such restrictions may be imposed by the remuneration committee upon the
grant of options under the option plan and such restrictions will be contained in the Option Agreement between the eligible employee and
the Company. In all other respects the shares rank equally with other fully paid ordinary shares on issue (refer to note 18(c)).
(b) 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
20132013
Vested and
exercisable at end
of the year
Number
Number
Number
31 March 2007
31 March 2014
14 April 2007
25 May 2007
25 May 2007
$1.42
$1.00
$1.00
Number
402,726
2,013,630
502,726
14 April 2014
25 May 2014
25 May 2014
$2.00
1,398,450
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 January 2009
31 August 2009
1 October 2009
1 April 2015
1 April 2015
1 January 2016
31 August 2016
1 October 2016
16 November 2009
16 November 2016
1 January 2010
1 January 2017
17 February 2010
17 February 2017
24 March 2010
24 March 2014
1 July 2010
1 July 2017
24 August 2010
24 August 2017
1 October 2010
1 October 2017
25 October 2010
25 October 2014
8 November 2010
8 November 2017
1 January 2011
1 January 2011
7 July 2011
1 January 2018
1 January 2015
$2.00
7 July 2018
28 September 2011
28 September 2018
18 November 2011
18 November 2018
23 January 2012
23 January 2019
23 January 2012
23 January 2016
1 April 2012
1 April 2019
7 November 2012
7 November 2019
7 November 2012
7 November 2019
7 November 2012
7 November 2016
19 February 2013
19 February 2020
$1.70
$1.45
$1.34
$1.11
$1.04
$1.05
$0.20
$0.65
$0.90
$1.12
$0.78
$0.84
$1.26
$1.15
$0.95
$0.93
$1.24
$1.00
$1.40
$1.70
$1.22
$1.60
$1.50
$2.15
$1.72
$1.00
$0.72
$1.03
$0.94
50,000
75,000
50,000
200,000
75,000
600,000
100,000
334,650
150,000
300,000
100,000
460,834
295,000
225,000
50,000
150,000
25,000
850,000
1,320,000
310,000
150,000
15,000
250,000
1,400,000
300,000
350,000
-
-
-
-
-
-
-
-
-
-
-
(4,167)
(12,500)
-
-
(56,250)
(18,750)
-
-
-
-
-
(487,500)
(20,000)
-
-
-
(530,000)
-
-
-
Number
402,726
2,013,630
502,726
1,398,450
50,000
75,000
50,000
200,000
75,000
600,000
60,000
299,583
-
300,000
100,000
404,584
276,250
225,000
50,000
150,000
25,000
850,000
832,500
290,000
150,000
15,000
250,000
870,000
300,000
350,000
450,000
Number
402,726
2,013,630
502,726
1,398,450
50,000
75,000
50,000
200,000
75,000
600,000
60,000
299,583
-
300,000
100,000
404,584
276,250
206,250
45,833
125,000
20,833
708,333
688,750
222,500
87,500
8,750
125,000
362,500
125,000
116,667
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(40,000)
(30,900)
(137,500)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
450,000
1,215,000
430,000
300,000
(150,000)
1,065,000
50,000
-
-
430,000
300,000
-
-
Total
12,503,016
2,395,000
(208,400)
(1,279,167)
13,410,449
9,700,865
Weighted average exercise price
$1.31
$0.86
$0.73
$1.34
$1.24
$1.27
www.qrxpharma.com 67
NOTES TO THE
CONSOLIDATED
FINANCIAL
STATEMENTS
(CONTINUED)
30 SHARE-BASED PAYMENTS (continued)
(b) Set out below are summaries of options granted under the plans (continued)
Grant Date
Expiry date
Exercise
price
Balance at
start of the year
Granted during
the year
Exercised
during the
year
Forfeited
during the
year
Balance at
end of the
year
20122012
Vested and
exercisable at end
of the year
Number
Number
Number
25 May 2014
$2.00
1,448,450
(50,000)
1,398,450
31 March 2007
31 March 2014
$1.42
$1.00
$1.00
Number
402,726
2,013,630
502,726
14 April 2014
25 May 2014
14 April 2007
25 May 2007
25 May 2007
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 October 2008
1 January 2009
31 August 2009
1 October 2009
1 April 2015
1 April 2015
1 October 2015
1 January 2016
31 August 2016
1 October 2016
16 November 2009
16 November 2016
1 January 2010
1 January 2017
17 February 2010
17 February 2017
24 March 2010
24 March 2014
1 July 2010
1 July 2017
24 August 2010
24 August 2017
1 October 2010
1 October 2017
25 October 2010
25 October 2014
8 November 2010
8 November 2017
$1.70
$1.45
$1.34
$1.11
$1.04
$1.05
$0.60
$0.20
$0.65
$0.90
$1.12
$0.78
$0.84
$1.26
$1.15
$0.95
$0.93
$1.24
$1.00
$1.40
50,000
75,000
50,000
200,000
75,000
600,000
50,000
295,000
467,500
150,000
300,000
100,000
565,000
295,000
225,000
50,000
150,000
25,000
850,000
1,330,000
310,000
1 January 2011
1 January 2011
7 July 2011
1 January 2018
1 January 2015
$2.00
7 July 2018
28 September 2011
28 September 2018
18 November 2011
18 November 2018
23 January 2012
23 January 2019
23 January 2012
23 January 2016
1 April 2012
Total
1 April 2019
$1.70
$1.22
$1.60
$1.50
$2.15
$1.72
-
-
-
-
-
-
150,000
15,000
250,000
1,400,000
300,000
350,000
(116,183)
(16,667)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(50,000)
(195,000)
-
-
-
(104,166)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Number
402,726
2,013,630
502,726
50,000
75,000
50,000
200,000
75,000
600,000
-
100,000
334,650
150,000
300,000
100,000
460,834
295,000
225,000
50,000
150,000
25,000
850,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(10,000)
1,320,000
-
-
-
-
-
-
-
310,000
150,000
15,000
250,000
1,400,000
300,000
350,000
Number
402,726
2,013,630
502,726
1,398,450
50,000
75,000
50,000
200,000
75,000
600,000
-
100,000
306,763
137,500
250,000
83,333
345,626
221,250
131,250
29,167
75,000
12,500
425,000
660,000
155,000
-
-
-
-
-
-
10,580,032
2,465,000
(465,349)
(76,667)
12,503,016
8,299,921
Weighted average exercise price
$1.21
$1.63
$0.50
$1.63
$1.31
$1.24
The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2013 was $1.07 (2012 – $1.59)
The weighted average remaining contractual life of the share options outstanding at the end of the period was 3.13 years. (2012 – 3.88 years)
68 QRxPharma Annual Report 2013
31 EVENTS OCCURRING AFTER THE BALANCE
SHEET DATE
The Company announced on 28 August 2013 that the United
States Food and Drug Administration (FDA) had issued a
Complete Response Letter (CRL) regarding the Company’s
MOXDUO New Drug Application (NDA) for the treatment of
moderate and severe acute pain. The Company confi rmed the
issuance of the CRL was to allow time to submit and evaluate
further information required for the FDA to fully consider the
respiratory safety advantages of MOXDUO from Study 022.
With the issue of the CRL, in order to maintain FDA review, the
Company is required to resubmit its NDA. The Company plans
to complete its refi ling in Q4 2013, inclusive of the additional
information and analysis as requested by the FDA. The
Company anticipates a new PDUFA (Prescription Drug User
Fee Act) date in Q2 2014, preceded by an Advisory Committee
meeting.
No other signifi cant events have occurred after the balance sheet
date which would have a material impact on the fi nancial results
of the Group.
Fair value of options granted
The assessed fair value at grant date of options granted during
the year ended 30 June 2013 was $0.53 per option (2012 - $1.11).
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 2013 included:
(a) exercise price: $0.72 to $1.03 (2012 – $1.22 to $2.15)
(b) grant date: 7 November 2012, 19 February 2013
(2012 – 7 July 2011, 28 September 2011, 18 November 2011,
23 January 2012, 1 April 2012)
(c) expiry date: 7 November 2016, 7 November 2019,
19 February 2020 (2012 – 7 July 2018, 28 September 2018,
18 November 2018, 23 January 2019, 23 January 2016,
1 April 2019)
(d) share price at grant date: $0.72 to $0.94 (2012 – $1.22
to $1.85)
(e) expected price volatility of the Company’s shares: 80%
(2012 – 80%)
(f) expected dividend yield: nil% (2012 – nil%)
(g) risk free interest rate: 3.08% (2012 – 4.09%)
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.
(c) Expenses arising from share based payment transactions
Total expenses arising from share based payment transactions
recognised during the period as part of employee benefi t
expense were as follows:
Options issued under employee
option plan
20132013
$’000
2012
$’000
1,428
2,162
www.qrxpharma.com 69
In the directors’ opinion:
(a) the fi nancial statements and notes set out on pages 31 to 69 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 fi nancial position as at
30 June 2013 and of their performance for the fi nancial year ended on that
date; and
(b) there are reasonable grounds to believe that the company will be able to pay
its debts as and when they become due and payable; and
Note 1 (a) confi rms that the fi nancial 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 offi cer and
chief fi nancial offi cer required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Peter C Farrell
Director
Sydney
19 September 2013
DIRECTORS’
DECLARATION
70 QRxPharma Annual Report 2013
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Eclipse Tower
Level 19
60 Station Street
Parramatta NSW 2150
PO Box 38
Parramatta NSW 2124 Australia
Tel: +61 (0) 2 9840 7000
Fax: +61 (0) 2 9840 7001
www.deloitte.com.au
Independent Auditor’s Report
to the Members of QRxPharma Limited
Report on the Financial Report
We have audited the accompanying financial report of QRxPharma Limited, which comprises the
statement of financial position as at 30 June 2013, the statement of profit or loss and other
comprehensive income, the statement of cash flows and the statement of changes in equity for the year
ended on that date, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors’ declaration of the consolidated entity, comprising the
company and the entities it controlled at the year’s end or from time to time during the financial year
as set out on pages 31 to 70.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements , that the consolidated financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control, relevant to the company’s
preparation of the financial report that gives a true and fair view, in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of accounting estimates made by the directors, as
well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
www.qrxpharma.com 71
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001. We confirm that the independence declaration required by the Corporations Act 2001 ,
which has been given to the directors of QRxPharma Limited, would be in the same terms if given to
the directors as at the time of this auditor’s report.
Opinion
In our opinion, the financial report of QRxPharma Limited is in accordance with the Corporations Act
2001, including:
(a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2013 and of
its performance for the year ended on that date; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001 .
Material Uncertainty Regarding Continuation as a Going Concern
Without modifying our opinion, we draw attention to Note 1 in the financial report which indicates
that the consolidated entity incurred a net loss of $10.1 million (2012: $16 million) and had net cash
outflows from operating activities of $11.7 million (2012: $11.7 million) during the year ended 30
June 2013. These conditions, along with other matters as set forth in Note1, indicate the existence of
a material uncertainty that may cast significant doubt about the company’s and consolidated entity’s
ability to continue as going concerns and therefore, the company and the consolidated entity may be
unable to realise their assets and extinguish their liabilities in the normal course of business.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 11 to 19 of the directors’ report for the
year ended 30 June 2013. The directors of the company are responsible for the preparation and
presentation of the Remuneration Report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of QRxPharma Limited for the year ended 30 June 2013,
complies with section 300A of the Corporations Act 2001 .
DELOITTE TOUCHE TOHMATSU
X Delaney
Partner
Chartered Accountants
Parramatta, 19 September 2013
72 QRxPharma Annual Report 2013
SHAREHOLDER
INFORMATION
The shareholder information set out below was applicable as at 6 September 2013.
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
384
684
472
846
127
2,513
Options
-
-
2
15
23
40
There are 291 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
JP Morgan Nominees Australia Limited
Auckland Trust Company Limited
Citicorp Nominees Pty Limited
Dr John Holaday
National Nominees limited
Werft Pty Ltd
Uniquest Pty Limited
Dr Gary Pace
Jigley Holdings Pty Limited
UBS Nominees Pty Limited
UIIT Pty Limited
Merrill Lynch (Australia) Nominees Pty Limited
Spring Ridge Ventures I, LP
Dr Peter Farrell
Tesroff Pty Limited
Mrs Dorinda Holaday
Mr Ross Eddison
ITR Investments Pty Limited
HSF 1 Pty Limited
ORDINARY SHARES
Percentage of
issued shares
15.58%
6.51%
5.03%
4.73%
4.57%
4.44%
3.88%
3.32%
2.50%
2.49%
1.86%
1.80%
1.58%
1.47%
1.37%
1.03%
0.69%
0.54%
0.54%
0.51%
Number held
22,551,198
9,422,663
7,288,750
6,848,644
6,609,635
6,434,427
5,619,315
4,805,399
3,615,268
3,600,000
2,695,289
2,610,408
2,285,046
2,128,673
1,983,955
1,495,055
1,000,000
788,200
785,151
740,000
93,307,076
64.44%
www.qrxpharma.com 73
SHAREHOLDER
INFORMATION
(CONTINUED)
Unquoted equity securities
Number on
issue
Number of
holders
13,410,449*
40**
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.
C. SUBSTANTIAL HOLDERS
Substantial holders in the company are set out below:
Ordinary shares
Allen Gray Investment Management
Mr LA Walker, Auckland Trust Company, Tesroff
Pty Limited and Werft Pty Limited
Dr John W Holaday, Dorinda Holaday and
Holaday Foundation
Number held
18,822,019
14,403,120
Percentage
13.00%
9.95%
7,609,635
5.26%
D. VOTING RIGHTS
The voting rights attaching to each class of equity securities are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall
have one vote and upon a poll each share shall have one vote.
(b) Options
No voting rights.
74 QRxPharma Annual Report 2013
NOTES
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NOTES
76 QRxPharma Annual Report 2013
NOTES
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www.qrxpharma.com