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08 Contents
Highlights 2007– 2008
About Starpharma
Chairman’s Report
Operational Report
Directors’ Report
Corporate Governance Statement
Financial Report
Shareholder Information
Intellectual Property Report
Corporate Directory
STARPHARMA HOLDINGS LIMITED
ABN 20 078 532 180
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02
04
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11
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35
78
80
81
Starpharma is a world leader in the development
of dendrimer products for pharmaceutical, life
science and other applications.
On-line Annual Report
In 2007, the Australian Government introduced legislation allowing the
option for annual reports to be provided to shareholders via the company
website. As a result more than 88% of Starpharma’s shareholders have
elected to receive this year’s annual report electronically. The change in
legislation has enabled Starpharma to undertake more environmentally
friendly and cost effective production practices with a significant
reduction in paper usage and printing costs. The Company’s website
(www.starpharma.com) is now the primary medium for report distribution.
Accordingly, shareholders may notice a change in this year’s annual
report which has been designed to ensure ease of on-line viewing whilst
at the same time maintaining the high quality of our hard-copy version as
per previous years.
We have chosen to print the annual report hard copy on 100% recycled
paper in an effort towards establishing more environmentally sustainable
corporate practices.
Highlights 2007– 2008
Commercial Development
•
Signing of Durex
® Condom Coating Full Licence Agreement
•
Collaborative research agreement with Stiefel – world’s largest
privately-owned dermatology pharmaceutical company
•
First commercial product launch of Starpharma’s DNT Priostar
® Dendrimers
VivaGel®: Clinical Development and New Indications
•
Clinical trial results: VivaGel
abstinent women when administered twice daily for 14 days
® safe and well-tolerated in sexually
•
Potential to expand VivaGel
(human papillomavirus)
® applications to prevention of HPV
Pipeline and Application Development
•
Dendrimers found to have potential application for arthritis treatments
•
Water purification technology contract with US Department of Defense
•
Funding awarded for joint project with Baker IDI Heart and Diabetes
Institute to co-develop arterial disease imaging agent
•
Dendrimer technology applications expanded to food science with
Unilever agreement
STARPHARMA HOLDINGS LIMITED Annual Report 2008
01
About Starpharma
Starpharma Holdings Limited is listed on the Australian
Securities Exchange (ASX:SPL) and its securities also trade
in the United States under the American Depository Receipts
(ADR) program on the OTCQX (OTCQX:SPHRY). It comprises
two operating subsidiaries, Starpharma Pty Ltd based in
Melbourne, Australia, and Dendritic Nanotechnologies (DNT)
Inc, based in Michigan, USA.
Dendrimers are man-made, nano-sized compounds with unique
properties that make them useful to the health and pharmaceutical
industry as both enhancements to existing products and as
entirely new products.
Starpharma aims to create value through the commercialisation
of products based on its proprietary dendrimer nanotechnology
and focuses on three key areas of exploitation, with each having
the potential for substantial revenues:
VivaGel® (SPL7013 Gel)
VivaGel®, the most advanced product in Starpharma’s
pharmaceutical pipeline, is under development both as a
condom coating and as a stand-alone vaginal microbicide to
prevent the spread of sexually transmitted infections such as
genital herpes and HIV. This is a mass-market application in
both developed and developing countries. In addition to being
developed as a stand-alone gel, VivaGel® is also under
development as a condom coating. For the commercialisation
of VivaGel® coated condoms, Starpharma has partnered with the
marketers of the world’s best-selling condom brand, Durex®.
More recently Starpharma has identified human papillomavirus
(HPV) infection as a third disease area to investigate following
encouraging pre-clinical data. Preliminary data from humans
suggest that VivaGel® may also be effective in the treatment of
bacterial vaginosis. Additionally VivaGel® has been shown to
possess potent contraceptive activity in animals.
Other Medical and Life Science Applications
Starpharma is pursuing programs in fields such as cancer,
dermatology and targeted diagnostics. Life-science applications
include laboratory transfection reagents for the introduction of
nucleic acid into cells and to increase the sensitivity and reliability
of external diagnostic tests for various human conditions.
Industrial Applications of Dendrimers
DNT is exploiting opportunities for industrial applications of
dendrimers as specialty additive chemicals in the cosmetic,
ink and coatings industries. These applications make use of
dendrimer properties such as their ability to improve adhesion
and cross-linking of polymers or fluids, and their ability to
sequester toxins and metals.
02
Starpharma’s Pipeline
Pharmaceutical and Life Science Product Pipeline
Pharma & Medical
VivaGel®
Drug Delivery
HSV-2 prevention >
HIV prevention >
Condom coating >
Cancer >
Dermatology >
ADME Engineering
Protein Drug Optimization >
Drug Optimization
Enhanced Solubilization >
in vitro Diagnostics
Stratus CS®+ (Cardiac) >
MRI imaging
Targeted Contrast Agent >
Life-sciences
Gene Transfection
Reagents
siRNA / DNA
Transfection Reagents
SuperFect® >
PrioFect® >
Early
Lead / in vivo
Clinical
Sales
*
Early
Prototype
Pre-launch
Sales
* Condom coating has the potential for an accelerated development program
+ Registered trade mark of Dade Behring Inc. (Siemens)
Partnerships
Much of Starpharma’s commercialisation strategy is based on
partnered programs, both to gain access to application or
disease-area expertise, and to capitalise on established paths
to market. Starpharma’s partners and licensees include:
•
•
•
•
•
•
•
•
SSL International plc
Stiefel Laboratories Inc.
Siemens
Qiagen
Merck KGaA
Unilever
The Baker IDI Heart and Diabetes Institute
Monash University’s Faculty of Pharmacy and
Pharmaceutical Sciences (formerly VCLP)
STARPHARMA HOLDINGS LIMITED Annual Report 2008
03
Chairman’s Report
Dear Shareholder,
On behalf of the Board and management of Starpharma, I am
pleased to present the 2007– 08 annual report for your review.
Starpharma has focused on three aspects of operations
over the last twelve months: commercialisation of Starpharma’s
technology; clinical development of VivaGel® both as a condom
coating and as a vaginal microbicide; and advancing drug delivery
applications of dendrimers through laboratory-based projects.
As well as making substantial progress in the clinical
development of the HIV and genital herpes applications of
VivaGel®, Starpharma has added human papillomavirus (HPV)
to the target list of sexually transmitted infections against which
VivaGel® will be evaluated. For the first time this year the
Company announced that it would also explore an application
of VivaGel® based on treatment, rather than prevention, namely
against bacterial vaginosis (BV).
A major theme over the year has been the advancement of the
condom coating opportunity for VivaGel® to a full licence. Initially,
this included the signing with SSL International plc of a co-
development agreement for the VivaGel® coated condom, then
regulatory and product development and most recently the
cementing of a licence agreement between the companies, the
value of which Starpharma expects to exceed A $100 million
over the life of the contract.
While Starpharma continues to work on the pharmaceutical
applications of SPL7013, the active dendrimer in VivaGel®,
we have several programs under way at DNT for industrial
applications of dendrimers.
The programs are wide-ranging, from cleaning up contaminated
ground water to improving the properties of inks and industrial
coatings.
The pharmaceutical and industrial applications of our dendrimer
technology present multiple opportunities for commercialisation.
Finally, I would like to take this opportunity to thank my fellow
Board members, CEO Jackie Fairley and her management team
and all of the company’s staff in Australia and the US for their
dedicated work throughout the year. Their collective contributions
have produced another year of substantial progress for Starpharma.
04
Peter T Bartels, AO
Chairman
Operational Report
Introduction
Starpharma’s commercial and clinical programs have advanced
during the year and important progress has been made to
broaden the applications and commercial opportunities for
VivaGel® substantially.
The demand for a product such as VivaGel® continues to build
due to the ongoing lack of success in human trials of HIV
vaccines and the absence of new technologies to counter the
spread of HIV and herpes.
Other recent developments are likely to have a favourable
impact for the commercial opportunity for VivaGel®. One such
development was the launch of vaccines against human
papillomavirus (HPV), the primary causative agent for genital
warts and cervical cancer. As a result of the promotional
activities associated with these launches, there is increased
public awareness of STIs and the fact that they can, and should,
be prevented.
Attention is also increasingly focused on other life-long viral
diseases, such as HIV and herpes simplex virus-2 (HSV-2), the
cause of genital herpes. Studies published this year showed
that the increased risk of people with genital herpes acquiring
HIV is not reduced by treatment with an antiviral agent, a finding
that highlights the pressing need for prevention of HSV-2
infection in the fight against AIDS.
Recently published statistics support the need for effective
preventive measures. For example, the incidence of STIs in
teenage girls in the US is estimated to be about 25%, and up
to 60% of new cases of HIV in women in some areas of the
world are attributable to the presence of genital herpes
(Freeman 2006).
Overview of Financial Results
The net loss for the year was A $7.5 million, compared with
A $7.2 million for the previous year. With an increased
focus on commercialisation, royalty and licensing revenue grew
in the year by 64% to A $1.4 million. Research and development
programs continue to be leveraged from various grant sources,
with other income from grants totaling A $8.2 million for the year.
Grant sources include both United States and Australian
government, with the majority from the US National Institutes
of Health (NIH).
At year end, the Company maintained cash reserves of
A $7.5 million, with operating and investing cash outflows for the
year of A $5.4 million. Financing inflows of A $3.4 million reflect
the August 2007 capital placement.
Condom Coating
In September 2008 Starpharma announced that a full licence
agreement has been signed with SSL International plc (LSE:SSL)
in relation to the VivaGel® coated condom. SSL manufactures
and sells Durex® condoms, the market-leading condom brand
worldwide. The agreement extends a co-development partnership
with SSL announced in October 2007 and undoubtedly
represents the most significant commercial milestone for the
company over the last few years.
Under the commercial terms of this agreement SSL secures
marketing rights to the VivaGel® coated condom in most of the
world, including Europe and the USA. Starpharma estimates that
its receipts under the agreement will exceed A $100m comprising
royalties on SSL sales, further milestone payments, and
development support.
Dialogue with regulatory agencies has confirmed that the
VivaGel® coated condom will be reviewed as a drug/device
combination, which will provide a potentially shorter route to
market. The regulatory landscape is also maturing with the FDA
now requiring that products containing Nonoxynol-9 (N-9) carry
warnings that they do not protect against sexually transmitted
diseases, including HIV/AIDS, and that their use is associated
with an increased risk of HIV. This clear statement by the FDA
has helped to clear up consumer confusion and misconceptions
about the value of N-9 and has accelerated the search for a safe
and effective replacement for this category. This is good news
for VivaGel®.
Jackie Fairley
Chief Executive Officer
05
Operational Report
VivaGel® safety profile strengthened
A study conducted in the US and Kenya showed that twice daily
vaginal administration of VivaGel® for 14 days was safe and
well-tolerated in sexually abstinent women, paving the way for
continued development of VivaGel® for the prevention of
infection by HIV, HSV-2 and potentially other STIs.
The results of this NIH supported trial confirmed earlier findings
that the active dendrimer of VivaGel® is not absorbed into blood
and showed that under the conditions of the study, VivaGel® had
no significant effect on vaginal microflora.
New applications for VivaGel®
Two recent developments for VivaGel® are the demonstration of
activity against HPV in vitro and generation of data indicating
potential for treatment of bacterial vaginosis (BV). In addition,
our observation that SPL7013 (the active dendrimer in VivaGel®)
inhibits an enzyme which interferes with certain treatments of
arthritis presents an attractive new commercial opportunity.
Human Papillomavirus (HPV)
HPV, the cause of genital warts, is the most common STI in the
US, with over six million new cases of infection each year. HPV is
also a factor in the development of most cases of cervical
cancer. Both Merck and GSK have vaccines against HPV
infection (registered in different parts of the world) that collectively
cover approximately 75% of HPV strains associated with cancer.
Starpharma has shown that SPL7013 inhibited clinically relevant
HPV strains tested in the laboratory. More testing is underway.
Interestingly, SPL7013 exhibited potent inhibition of HPV-45, a
strain commonly associated with cervical cancer and not
covered by either Merck or GSK vaccines.
Bacterial Vaginosis (BV)
Preliminary findings from our clinical trials also suggest that
VivaGel® tends to restore the normal composition of vaginal
bacteria in women identified as having asymptomatic BV at the
time of enrolment in the trial. This finding, along with in vitro
data, provides the basis for development of VivaGel® as a
potential treatment for the first time.
Bacterial vaginosis is caused by an imbalance in the relative
numbers of naturally occurring vaginal bacteria and disease-
causing bacteria. The condition is particularly prevalent in the
US, reportedly affecting 29% of women, and has been
implicated in pelvic inflammatory disease, increased risk of STIs,
and miscarriage. If proven effective against BV in forthcoming
trials, VivaGel® may offer several advantages over conventional
antibiotic treatments. VivaGel® is compatible with condoms and
less likely to cause drug interactions or lead to drug resistance
and is not absorbed by the body.
Hyaluronidase inhibition
Last April, Starpharma filed a patent application for a completely
new use of the active ingredient in VivaGel®, SPL7013. The
finding that SPL7013 inhibits the activity of an enzyme called
hyaluronidase has potential in the treatment or prevention of a
number of diseases. The inhibitory activity was discovered during
studies on the contraceptive activity of SPL7013, because
hyaluronidase is involved in fertilisation of an egg by a sperm.
The finding is significant because excess hyaluronidase activity
is associated with arthritis. Hyaluronidase breaks down a large
molecule called hyaluronic acid, which lubricates and cushions
joints and also assists with the retention of moisture by skin.
06
Operational Report
Multiple Commercial Applications for
Starpharma’s Dendrimers
Drug Delivery
An announcement last December heralded Starpharma’s
first collaborative research agreement in the very promising
area of drug delivery. The agreement with the world’s largest
independent pharmaceutical company specialising in
dermatology, Stiefel Laboratories Inc, relates to the application
of dendrimer technology to the improved delivery of certain
drugs used to treat dermal conditions.
Starpharma has a very active business development effort
in the drug delivery area with the potential to yield multiple
commercial arrangements, both for small molecule drugs
and protein therapeutics.
Priostar®
Dendritic Nanotechnologies Inc. (DNT) has completed several
application development projects for its Priostar® Dendritic
Additives. These are of relevance to manufacturers of cosmetics,
coatings and inks seeking to increase the performance and
marketability of their materials and products.
Priostar® Additives improve adhesion, cross-linking, and
dispersion in formulations to offer greater resistance to shearing
and UV radiation damage.
DNT’s ongoing project on water remediation with Central
Michigan University has received additional funding from the
US Department of Defense (DoD). This DoD project is directed
at the removal from groundwater of perchlorate discharged from
military installations and addresses an important issue for an
increasingly scarce resource. However, the novel dendritic
polymer system under development will be adaptable to other
commercial uses, including the selective recovery of metals
such as copper, silver and zinc, and removal from drinking
water of the contaminants such as arsenic and mercury.
In April, Starpharma signed an agreement with Unilever to
co-develop a research tool incorporating DNT’s Priostar®
dendrimer technology. Under the agreement, DNT will make its
Priostar® dendrimers available to Unilever as imaging agents for
use in analysis of the microscopic structure of foods. An
understanding of the microstructure is important in creating
appetising food and determining properties such as ‘mouth-feel’
and the controlled release of taste and smell.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
07
Operational Report
Capital investment and market performance
In February 2008, US investor Platinum-Montaur Life Sciences built
on its initial investment in Starpharma with on-market purchases
and lodged a substantial shareholder notice with the ASX.
Outlook
The Board and Management of Starpharma remain committed
to building shareholder value in the coming financial year
through focus on a number of high value initiatives.
Platinum’s increased share-holding is indicative of the growing
awareness of Starpharma in the US, where investors now hold
more than 25% of total equity. The fund manager responsible for
the Platinum position offered the following reasons behind the
decision to purchase Starpharma stock:
•
•
•
the size of the markets for Starpharma’s dendrimer technology;
the relatively low cost of determining whether the technology
works and its proven efficacy against the target in very
stringent preclinical studies; and
the high level of funding of VivaGel
National Institutes of Health.
® programs from the US
Starpharma’s involvement with the rapidly expanding
International OTCQX exchange has provided visible cross-listing
in the US while avoiding the regulatory costs associated with
listing on US exchanges. In addition, the OTCQX places
Starpharma alongside companies such as pharmaceutical
company Roche; multinational chemical manufacturer, BASF;
the world’s largest manufacturer of food and industrial
ingredients, Tate and Lyle; and the world’s largest paints and
coatings company, AkzoNobel.
Starpharma now trades between 30% and 40% of its volume
through the OTCQX and has approximately 10 market makers
actively trading the stock (code SPHRY).
The significant near term commercial opportunity of the
VivaGel® coated condom is a strong focus for Starpharma in
collaboration with our commercial partner SSL.
For VivaGel®, the company plans to complete the expanded
safety/Phase IIa trials, advance the program to conduct efficacy
trials for HIV infection and genital herpes, and initiate a Phase II
trial for the new indication of BV.
Early findings of VivaGel® activity against clinically relevant
strains of HPV will be further investigated and the development
program for VivaGel® as a contraceptive will also be progressed.
Several exciting opportunities for expanding dendrimer-based
commercial relationships and applications are approaching
deals in areas including drug delivery, life-science and industrial
applications. The company intends to advance its siRNA
delivery and drug delivery programs with the objective of
forming one or more commercial partnerships for both of them.
The finding that SPL7013 may have application in the treatment
of arthritis and dermatology through its inhibition of the enzyme
hyaluronidase also provides the potential for further commercial
arrangements.
Jackie Fairley, B.Sc, B.V.Sc. (Hons), MBA
Chief Executive Officer
08
The real life potential of VivaGel®: a case study
In 1999 Jeannie May’s life was changed forever the day she
was diagnosed with genital herpes. As with most people who
contract the virus, Jeannie struggled to come to terms with the
implications having herpes would have for her health and her
future relationships.
Jeannie’s first-hand experience living with herpes herself and
providing support to others has made her a strong advocate for
awareness and the need to break down the taboo that surrounds
genital herpes and which has prevented an open discussion of
the prevalence of this and other sexually transmitted infections.
Jeannie remembers the impact of hearing the news: “Quite
suddenly l felt like l was someone else. I now had an incurable
STI which l could potentially pass on to any future partner … my
self esteem plummeted to an undreamt of low as l struggled to
cope with the devastating diagnosis.”
When Jeannie sought out support groups and information for
people living with genital herpes, she found that although many
websites had great information, they lacked any real guidance
and support for people living with the disease – despite the
shocking reality that 1 in 8 adults in Australia carry the virus.
Jeannie was motivated to develop the ‘Living Sphere’ website
which provides factual information, peer support and guidance
for people with herpes.
Jeannie has keenly followed the development of microbicides
and their potential to significantly curb the prevalence of STIs by
preventing their transmission.
“I first heard about microbicides a few years ago … I did some
research on the internet, downloaded several helpful e-books
about them and was excited about their potential to reduce the
transmission of STIs.”
“Microbicides will empower women to take greater responsibility
for protecting themselves from STIs”, she continued.
“Some men don’t like wearing condoms so to have an alternative
which enables women to be in control of their own protection will
make a huge difference to women the world over.”
Starparhama’s VivaGel® is one of the most advanced
microbicides in development around the world. VivaGel® is
under development for the prevention of HIV, Genital Herpes
and the human papillomavirus.
09
STARPHARMA HOLDINGS LIMITED Annual Report 2008 Management
Jackie Fairley, B.Sc, B.V.Sc. (Hons), MBA
Chief Executive Officer
Dr Fairley has over 18 years’ experience
in the pharmaceutical and biotechnology
industries working in business development
and senior management roles with companies
including CSL and Faulding (now Mayne Hospira). Before
joining Starpharma in 2006, she was Chief Executive Officer of
Cerylid Biosciences. Dr Fairley also spent five years as a Vice
President for Faulding’s injectable division and more than five
years with CSL in various executive roles. She holds first class
honours degrees in Science (pharmacology/pathology) and
Veterinary Science, and has an MBA from Melbourne Business
School where she was the recipient of the Clemenger Medal.
Paul Barrett, BSc (Hons), PhD
Vice President, Business Development
More than half of Dr Barrett’s 17-year
career in the advanced technology sector
has been dedicated to product marketing and
commercialisation. Prior to joining Starpharma
from the UK in 2005 he held positions at Nortel Networks,
Smiths Industries Aerospace, Bookham Technology, and the
University of Oxford. His areas of professional experience include
nanotechnology, drug-delivery, protein science, network and
telecommunications infrastructure, optical systems
and holography.
Robert I. Berry, PhD
President of DNT
Dr Berry has been involved in the technology
and research field for 26 years and has
founded four companies and consortia to
advance the use of technology and research.
Dr. Berry most recently served as the president and CEO of the
Central Michigan University Research Corporation and as the
chief technology officer at Central Michigan University. Dr. Berry
received his doctorate from Northern Arizona University, where he
was a faculty member and was Assistant Director of Research.
Jeremy Paull, BSc (Hons), PhD
Vice President, Development and
Regulatory Affairs
Dr Paull has 8 years’ experience in drug and
device development, quality assurance, and
regulatory and clinical affairs and is currently
the Principal Investigator for Starpharma’s two NIH-funded
programs. He has been instrumental in the VivaGel® development
program and was responsible for the first clinical trials of the
product under the IND application to the US FDA. Dr Paull has a
PhD in pharmacology, and previously worked on the development
of a medical device for transdermal drug delivery.
Ben Rogers
Company Secretary and
Chief Financial Officer
Mr Rogers has extensive experience in finance
and human resources management with the
CSIRO research laboratories in Victoria, South
Australia, and Western Australia. He also operated his own
consulting business providing services to Cooperative Research
Centres and CSIRO Divisions. Mr Rogers joined Starpharma on
commencement of operations in April 1997 and was appointed
to the position of company secretary in February 1998.
Nigel Baade, BCom, CPA,
Grad Dip Arts (Development)
Financial Controller
Mr Baade is a CPA-qualified accountant
with experience in the pharmaceutical and
biotechnology industries. His previous roles
have included Finance Manager of Cerylid Biosciences and
Manager Accounting, International Business Development for
Faulding (now Mayne Hospira). Mr Baade has extensive
experience in financial control, project and cost management
of research activities, commercialisation of global business
development opportunities, private equity raising and grant
funding. Before joining Starpharma he held a commercial
planning role with Dutch multinational Hagemeyer.
David Owen, BSc (Hons), PhD
Vice President, Research
Dr Owen has extensive experience in
medicinal chemistry and biochemistry,
and in managing teams focused on
commercially directed drug discovery.
He has held several positions in the biotech industry, starting
with Mimotopes (part of Mitokor Inc.) as a senior chemist,
and has worked on projects for several major pharmaceutical
companies. He was head of chemistry at Cerylid Biosciences,
and later Glykoz, where he headed a team of chemists
working on a new class of antibacterial agents. Dr Owen has
expertise in many areas of chemistry, including the synthesis
of natural products, peptides, carbohydrates and heterocyclic
compounds, and has worked across therapeutic areas including
type 2 diabetes, antimicrobials and anticancer agents. He is
a co-author on 20 publications and 5 patents.
10
Directors’ Report
Your directors have pleasure in presenting this report on the consolidated entity (referred to hereafter as the Group)
consisting of Starpharma Holdings Limited and the entities it controlled at the end of, or during, the year ended 30 June 2008.
Directors
The following persons were directors of Starpharma Holdings Limited (“the Company”) during the whole of the financial year
and up to the date of this report:
P T Bartels (Chairman)
J K Fairley
P J Jenkins
R Dobinson
R A Hazleton
J W Raff
L Gorr was a director from the beginning of the financial year
until his resignation on 14 November 2007.
P M Colman was a director from the beginning of the financial
year until his resignation on 11 February 2008.
Principal Activities
The principal activities of the Group consist of development and
commercialisation of dendrimer products for pharmaceutical,
life-science and other applications. Activities within the
Company are directed towards the development of precisely
defined nano-scale materials, with a particular focus on the
development of its topical vaginal microbicide VivaGel® for the
prevention of genital herpes and HIV, and the application of
dendrimers to drug delivery and other life science applications.
More broadly, through partners the Company is also exploring
dendrimer opportunities in materials science with applications in
areas such as adhesives, lubricants and water remediation.
These activities are managed by the Company’s wholly owned
subsidiaries Starpharma Pty Ltd. in Melbourne, Australia and
Dendritic Nanotechnologies (“DNT”), Inc in Michigan, USA.
Products based on the Company’s dendrimer technology are on
the market in the form of diagnostic elements and laboratory
reagents.
Dividends
No dividend has been paid or declared during or since the end of the financial year.
Review of Operations
Information on the operations and financial position of the Group and its business strategies and prospects is set out in the review
of the operations and activities on pages 1 to 10 of this annual report.
Operating Loss
For the year ended 30 June 2008 the consolidated entity incurred an operating loss after income tax of $7,491,000
(June 2007: $7,245,000).
Significant changes in the state of affairs
There was an increase in contributed equity of $2,440,000
(from $76,227,000 to $78,667,000) as a result of the issue of
11,881,167 fully paid ordinary shares in a private placement to
a US-based institution and an existing Australian institutional
shareholder at a price of $0.3212 per share. Attached to the
placement were unlisted options of 7,567,119. The options have
an exercise price of $0.4346 per option with an expiry date of 21
August 2012.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
11
DIRECTORS’ REPORT
Matters subsequent to the end of the financial year
On 9 September 2008 the Company announced that a full
licence agreement has been signed with SSL International plc
(LSE:SSL) in relation to the VivaGel® coated condom. SSL
manufactures and sells Durex® condoms, the market-leading
condom brand worldwide. Under the terms of this agreement
SSL secures marketing rights to the VivaGel® coated condom in
most of the world, including Europe and the USA. In return,
Starpharma will receive further milestone payments,
development support, and royalties on net sales which
Starpharma estimates will exceed $100 million over the life of the
agreement.
No other matters or circumstances have arisen since 30 June
2008 that have significantly affected, or may significantly affect:
(a) the consolidated entity’s operations in future financial years,
or
(b) the results of the operations in future financial years, or
(c) the consolidated entity’s state of affairs in future financial
years.
Likely developments and expected results of operations
In the opinion of the directors, the consolidated entity will
continue its activities as described.
Additional comments on expected results of certain operations
of the Group are included in this annual report under the review
of operations and activities on pages 1–10.
Further information on likely developments in the operations of
the consolidated entity and the expected results of operations
have not been included in this annual financial report because
the directors believe it would be likely to result in unreasonable
prejudice to the consolidated entity.
Regulatory Environment
There were no significant changes in laws or regulations during 2007/08 or since the end of the year affecting the business activities
of the consolidated entity, and the directors are not aware of any such changes in the pipeline.
Environmental regulation
The Group is subject to environmental regulations and other
licences in respect of its laboratory facilities in Melbourne
(Victoria) and Mt Pleasant (Michigan, USA). There are adequate
systems in place to ensure compliance with relevant
Commonwealth, State and Federal environmental regulations
and the Directors are not aware of any breach of applicable
environmental regulations by the Group.
Legal
At the date of the Directors’ Report there are no significant legal issues.
Health and Safety
The Board, CEO and senior management team of the Group are
committed to providing and maintaining a safe and healthy
working environment for the Company’s employees and anyone
entering its premises or with connection to the Company’s
business operations. The Company has adopted an
Occupational Health and Safety (OH&S) Policy and has
established OH&S Committees as part of its overall approach to
workplace safety. Further details of the Company’s policy and
practices are set out in the corporate governance statement on
page 33 of this annual report.
12
DIRECTORS’ REPORT
Information on Directors
Peter T Bartels, AO, FAISM, FRS.
Chairman – Non-executive, Age 67.
Experience and expertise
Independent non-executive director and Chairman for five years.
Previously CEO and Managing Director of Coles Myer Ltd and
before that CEO and Managing Director of Fosters Brewing
Company Ltd. Has also had broad-based experience in the
pharmaceutical industry in previous roles with DHA
Pharmaceuticals and Abbott Laboratories. Chairman of the
Australian Sports Commission and the Australian Institute of
Sport. Past chairman of the Commonwealth Heads of
Government Committee for Sport and the Women’s and
Children’s Health Service.
Other current directorships of listed entities
None.
Former directorships of listed entities in last 3 years
None.
Special Responsibilities
Chairman of the Board.
Member of remuneration & nomination committee.
Member of audit & risk committee (since 19 February 2008).
Interests in shares and options at the date of the Directors’ Report
129,804 ordinary shares in Starpharma Holdings Limited
John W Raff
Dip. Ag. Sc., BSc., PhD.
Non-executive director Age 59.
Experience and expertise
Chief Executive Officer for nine years until retirement on 1 July
2006. Previously General Manager of the Biomolecular Research
Institute. Co-founder, director and major shareholder of a
technology based agricultural seed company. Chairman,
BioMelbourne Network. Also founder and investor in a number of
other start-up technology companies.
Other current directorships of listed entities
None.
Former directorships of listed entities in last 3 years
None.
Special Responsibilities
Deputy Chairman
Interests in shares and options at the date of the Directors’ Report
7,280,777 ordinary shares in Starpharma Holdings Limited
Jacinth (Jackie) K Fairley
B.Sc., B.V.Sc.(Hons), MBA
Chief Executive Officer, Age 45.
Experience and expertise
Chief Operating Officer of Starpharma from 4 July 2005 to 30
June 2006. Chief Executive Officer since 1 July 2006. Over 18
years’ experience in the pharmaceutical and biotechnology
industries working in business development and senior
management roles with companies including CSL and Faulding
(now Mayne Hospira). Former Chief Executive Officer of Cerylid
Biosciences. 5 years as a Vice President for Faulding’s
injectable division and 5 years with CSL in various executive
roles. She holds first class honours degrees in Science
(pharmacology/pathology) and Veterinary Science, and has an
MBA from the Melbourne Business School where she was the
recipient of the Clemenger Medal.
Other current directorships of listed entities
None
Former directorships of listed entities in last 3 years
None.
Special Responsibilities
Chief Executive Officer
Member of research committee (until 11 February 2008).
Interests in shares and options at the date of the Directors’ Report
53,750 ordinary shares in Starpharma Holdings Limited
1,150,000 options over ordinary shares in Starpharma Holdings
Limited
STARPHARMA HOLDINGS LIMITED Annual Report 2008
13
DIRECTORS’ REPORT
Information on Directors
Peter M Colman
BSc(Hons), PhD, FAA, FTSE.
Independent non-executive director, Age 64.
Experience and expertise
Non-executive director for ten years. Head, Structural Biology
Division, The Walter & Eliza Hall Institute of Medical Research.
Former Executive Director, Biomolecular Research Institute.
Published widely in the field of structural biology. In 1983 his
Laboratory determined the structure of the surface proteins of
influenza virus, and a major result of that work was the discovery
of Relenza. One of the founding directors of Biota Holdings
Limited. Resigned 11 February 2008.
Ross Dobinson
B. Bus (Acc)
Independent Non-executive director, Age 56.
Other current directorships of listed entities
None.
Former directorships of listed entities in last 3 years
None.
Special Responsibilities
Member of research committee (until 11 February 2008).
Interests in shares and options at the date of the Directors’ Report
5,992,286 ordinary shares in Starpharma Holdings Limited
Experience and expertise
Non-executive director for eleven years. Merchant banker with a
background in investment banking and stockbroking. Has acted
as corporate director for two leading stockbrokers, and was an
executive director of the NAB’s corporate advisory subsidiary.
Later headed the Corporate Advisory Division of Dresdner
Australia Ltd. Managing Director of TSL Group Ltd, a corporate
advisory company specialising in establishing and advising life
sciences companies. Also a director of a number of unlisted
companies.
Other current directorships of listed entities
Non-executive director of Acrux Ltd (director since 2000 and
Chairman since 31 January 2006)
Former directorships of listed entities in last 3 years
Roc Oil Company Limited (director June 1997 to 31 December
2007).
Special Responsibilities
Chairman of audit & risk committee.
Chairman of remuneration & nomination committee.
Interests in shares and options at the date of the Directors’ Report
None
Leon Gorr
B. Juris, LLB, M.Admin
Independent non-executive director, Age 64.
Experience and expertise
Non-executive director for six years. Non-executive director of
Starpharma Pty Ltd for ten years. Senior Partner, Herbert Geer.
35 years’ experience as a solicitor. Extensive experience in
providing advice on the negotiation and interpretation of
technology licensing agreements. Clients include investors in,
and advisors to the biotechnology industry. Resigned 14
November 2007.
Other current directorships of listed entities
None.
Former directorships of listed entities in last 3 years
None.
Special Responsibilities
Member of audit & risk management committee (until 14
November 2007).
Member of remuneration & nomination committee (until 14
November 2007).
Interests in shares and options at the date of the Directors’ Report
5,204,704 ordinary shares in Starpharma Holdings Limited
14
DIRECTORS’ REPORT
Richard A Hazleton
BSChE, MSChE, HonDrEngr, HonDrCommSci
Independent Non-executive director, Age 66.
Experience and expertise
Independent non-executive director since 1 December 2006.
Former chairman of US-based global corporation Dow Corning.
Joined Dow Corning in 1965 and held numerous positions in
engineering, manufacturing and finance, both in the US and
Europe, before becoming Chief Executive Officer of the
company in 1993, and Chairman of the Board of Directors and
CEO in 1994. Retired from Dow Corning in 2001. Chairman of
Dendritic Nanotechnologies Inc (DNT) from 2004 until
Starpharma’s acquisition of the company in October 2006. Has
served on the Boards of the American Chemistry Council and
the Chemical Bank and Trust Company (Midland, MI, USA) as
well as several non-profit social service agencies in Michigan
and Belgium.
Peter J Jenkins
MB, BS (Melb), FRACP
Independent Non-executive director, Age 62.
Experience and expertise
Independent non-executive director for eleven years. Consultant
physician and gastroenterologist. Holds clinical and research
positions with the Alfred Hospital and has held clinical positions
with the Baker Medical Research Centre. Former judge of the
Australian Technology Awards. Executive Director of AusBio Ltd,
an unlisted public biotechnology company.
Other current directorships of listed entities
None
Former directorships of listed entities in last 3 years
None.
Special Responsibilities
Member of remuneration & nomination committee (since 14 April
2008).
Interests in shares and options at the date of the Directors’ Report
142,616 ordinary shares in Starpharma Holdings Limited
Other current directorships of listed entities
Non-executive director of bio-pharmaceutical company Anadis
Ltd (director since 1994).
Former directorships of listed entities in last 3 years
None.
Special Responsibilities
Chairman of research committee (until 11 February 2008).
Member of audit & risk committee.
Interests in shares and options at the date of the Directors’ Report
1,416,000 ordinary shares in Starpharma Holdings Limited
STARPHARMA HOLDINGS LIMITED Annual Report 2008
15
DIRECTORS’ REPORT
Company Secretary
The Company Secretary is Mr Ben Rogers. Age 60. He has
extensive experience in finance, corporate governance and HR
management with CSIRO research laboratories in Victoria,
South Australia and Western Australia. He also operated his own
consulting business providing services to Co-operative
Research Centres and CSIRO Divisions. Mr Rogers was a
member of Starpharma’s start-up/IPO management team and
has been Company Secretary since February 1998, with
responsibilities that include the role of Chief Financial Officer.
Mr Rogers is an affiliate of Chartered Secretaries Australia.
Key
A = Number of meetings attended
B = Number of meetings held during the
time the director held office or was a
member of the committee during the
year.
* = Not a member of the relevant
committee.
Meetings of Directors
The number of meetings of the Company’s Board of directors
and of each committee held during the year ended 30 June
2008, and the numbers of meetings attended by each director
were:
Full meetings of directors
Meetings of committees
Audit & risk
Remuneration &
nomination
A
B
A
B
A
B
Research
A
B
P T Bartels
P M Colman (retired
11 February 2008)
R Dobinson
J Fairley
L Gorr (retired 14
November 2007)
R Hazleton
P J Jenkins
J W Raff
7
3
6
7
4
5
7
7
7
5
7
7
4
7
7
7
1
*
2
*
0
*
2
*
1
*
2
*
1
*
2
*
3
*
3
*
0
0
*
*
3
*
3
*
1
0
*
*
*
1
*
1
*
*
1
*
*
1
*
1
*
*
1
*
Retirement, election and continuation in office of Directors
Mr Leon Gorr retired on rotation as a director on 14 November
2007 and did not offer himself for re-election.
Prof Peter Colman retired as a director on 11 February 2008.
Mr Ross Dobinson retires by rotation as director at the annual
general meeting and, being eligible, offers himself for re-
election.
Mr Peter Bartels retires by rotation as director at the annual
general meeting and, being eligible, offers himself for re-election.
16
DIRECTORS’ REPORT – REMUNERATION REPORT
Remuneration report
The Remuneration report is set out under the following main headings:
A. Principles used to determine the nature and amount of
remuneration
B. Details of remuneration
C. Service Agreements
D. Share-based compensation
E. Additional Information
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.
A. Principles used to determine the nature and amount of remuneration
The objective of the company’s remuneration policy is to ensure
appropriate and competitive reward for the results delivered.
The framework aligns executive reward with achievement of
strategic objectives and the creation of value for shareholders.
The remuneration and nomination committee, consisting of
three independent non-executive directors, advises the Board
on remuneration policies and practices generally, and makes
specific recommendations on remuneration packages and other
terms of employment for executive directors, other senior
executives and non-executive directors.
Directors’ fees
Fees and payments to non-executive directors reflect the
demands which are made on, and the responsibilities of, the
directors. The Chairman’s fees are determined independently to
the fees of non-executive directors based on comparative roles
in the external market. The Chairman is not present at any
discussions relating to determination of his own remuneration.
Non-executive directors do not receive share options or
bonuses.
Non-executive directors’ fees are reviewed annually by the
remuneration and nomination committee, but have not been
increased since 1 January 2004. Fees and payments are
determined within an aggregate directors’ fee pool limit, which is
periodically recommended for approval by shareholders. The
aggregate amount currently stands at $450,000 which was
approved by shareholders on 15 November 2006. This amount
(or some part of it) is to be divided among the non-executive
directors as determined by the Board. The aggregate amount
currently paid to non-executive directors is $240,000 per annum.
Non-executive directors do not receive any performance-related
remuneration or retirement allowances. Superannuation
contributions required under the Australian superannuation
guarantee legislation continue to be made and are deducted
from the directors’ overall fee entitlements.
Relationship between executive reward and company
financial performance
The Company’s remuneration policy aligns executive reward
with the interests of shareholders. The primary focus remains on
the longer term objectives of developing and commercialising
products arising out of the research activities of the group, and
therefore the remuneration policy is not directly linked to financial
performance determined by losses and share price
performance. The Company has incurred losses in this financial
year and in the previous 4 financial years and has no certainty
that this will change in the near term.
Remuneration is set based on key performance indicators (KPIs)
which include (but are not limited to) successful negotiations of
commercial contracts, achieving key research and development
milestones, and ensuring the availability of adequate capital to
achieve stated objectives.
Executive pay structure
Remuneration packages are set at levels that are intended to
attract and retain executives capable of managing the Group’s
operations.
The executive pay and reward framework comprises:
– base pay and benefits,
–
–
short term performance incentives,
long term incentives through participation in the Starpharma
Employee Share Option Plan, and
superannuation.
–
Other factors taken into account in determining remuneration
packages include demonstrated record of performance, internal
relativities, data from a national biotechnology salary survey and
the Company’s ability to pay. With the exception of the CEO,
executive service agreements do not include pre-determined
bonus or option allocations, but cash incentives (bonuses) may
be awarded, or share options offered at the end of the
performance review cycle for specific contributions, or upon
achievement of a significant Company milestone at the
discretion of the Board. The amount of possible bonus payable
to each executive is determined by the remuneration and
nomination committee, taking into account factors including the
accountabilities of the role and impact on the Company. There
are no guaranteed base pay increases in any executives’
contracts.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
17
DIRECTORS’ REPORT – REMUNERATION REPORT
A. Principles used to determine the nature and amount of remuneration
Starpharma Employee Share Option Plan
All executives and staff are eligible to participate in the
Starpharma Employee Share Option Plan. The objective of the
Plan is to assist in the recruitment, reward, retention and
motivation of employees of the company.
Options are granted under the Plan for no consideration.
The exercise price of options granted under the Plan must be not
less than the market price at the time the decision is made to
invite a participant to apply for options. The exercise price is
usually calculated on the basis of 15% above market price.
Market price is calculated as the volume-weighted average price
(VWAP) of the shares in the 15 days preceding the grant of the
options.
The vesting period is usually 2 years from the date of grant, and
the exercise period usually 2 years from the end of the Vesting
Period.
Options granted under the plan carry no dividend or voting rights.
Each option is personal to the participant and is not transferable,
transmissible, assignable or chargeable, except with the written
consent of the remuneration and nomination committee.
Further information on the Starpharma Employee Share Option
Plan is set out in note 38 to the financial statements.
Performance review and development
Executives and all other staff participate in a formal two stage
performance review and development process consisting of an
objectives planning and development session at the commence -
ment of the annual cycle and a performance and salary review
towards the end of the cycle. The objective of the salary review
is to ensure that all employees are appropriately remunerated for
their contribution to the company, that remuneration is competitive
within the relevant industry sector, and that increases in
employees’ skills and responsibilities are recognized.
B. Details of remuneration
Details of the nature and amount of each element of the
remuneration of each director of Starpharma Holdings Limited
and the key management personnel (as defined in AASB 124
Related Party Disclosures) of the Company and the
consolidated entity are set out in the following tables.
The key management personnel of Starpharma Holdings
Limited includes the directors as per pages 13 to 15.
The key management personnel of Starpharma Holdings
Limited Group includes the directors as per pages 13 to 15.
above and the following executive officers, which includes the
five highest paid executives of the entity:
N J Baade
Financial Controller
C P Barrett
VP, Business Development
R I Berry
President, Dendritic Nanotechnologies, Inc
J K Fairley
CEO
D J Owen
VP, Research
J R Paull
VP, Development and Regulatory Affairs
B P Rogers
Company Secretary and CFO
Directors and Key management personnel of Starpharma Holdings Limited
Cash salary
and fees
$
Short-term benefits
Cash
Non-monetary
bonus #
benefits
$
$
Post-employment
Retirement
Super-
Benefits
annuation
$
$
Long-term
benefits
Long service
leave
$
Share-based
payment
Options #
$
Total
$
2008
Name
Non-executive directors
P T Bartels Chairman
P M Colman1
(from 1/07/2007 – 11/02/2008)
R Dobinson
L Gorr2
(from 1/07/2007 – 14/11/2007)
P J Jenkins
R A Hazleton
J W Raff Deputy Chairman
Subtotal non-executive
directors
Executive directors
J K Fairley
–
22,936
40,000
13,761
36,697
40,000
–
153,394
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000
2,064
–
1,239
3,303
–
40,000
126,606
295,869
150,000
4,458
53,040
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14
14
–
–
–
–
–
–
–
–
80,000
25,000
40,000
15,000
40,000
40,000
40,000
280,000
23,499
526,880
23,499
806,880
Totals
449,263
150,000
4,458
179,646
# All performance related remuneration, including cash bonuses and options granted are at risk.
1
2 Mr L Gorr retired as a director on 14 November 2007.
Prof P M Colman retired as a director on 11 February 2008
18
DIRECTORS’ REPORT – REMUNERATION REPORT
2007
Name
Short-term benefits
Cash
Non-monetary
bonus #
benefits
$
$
Post-employment
Retirement
Super-
Benefits
annuation
$
$
Cash salary
and fees $
Long-term
benefits
Long service
leave
$
Share-based
payment
Options#
leave
$
Total
$
80,000
40,000
40,000
40,000
40,000
23,333
263,333
–
–
–
–
–
–
–
–
200,612
Non-executive directors
P T Bartels Chairman
P M Colman
R Dobinson
L Gorr
P J Jenkins
R Hazleton 1
(from 1/12/2006–30/6/2007)
Subtotal non-executive
directors
Executive directors
J W Raff Deputy Chairman 2
(from 1/7/2006–30/6/2007)
J K Fairley 3
(from 1/7/2006–30/6/2007)
Totals
–
36,697
40,000
36,697
36,697
23,333
173,424
19,776
306,230
499,430
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000
3,303
–
3,303
3,303
–
89,909
–
–
–
–
–
–
–
664
40,172
140,000
–
–
–
–
–
–
–
–
4,041
4,705
43,769
–
173,850
140,000
964
964
124,015
479,019
124,015
942,964
# All performance related remuneration, including cash bonuses and options granted are at risk.
1 R Hazleton was appointed non-executive director on 1 December 2006.
2
J W Raff retired as CEO on 1 July 2006 and was appointed Deputy Chairman. $40,000 contributed to J W Raff’s
superannuation was his Director’s remuneration. He was paid $60,627 on retirement for accrued long service leave
entitlements.
J K Fairley was appointed CEO and Executive Director on 1 July 2006.
3
STARPHARMA HOLDINGS LIMITED Annual Report 2008
19
DIRECTORS’ REPORT – REMUNERATION REPORT
B. Details of remuneration
Directors and Key management personnel of Starpharma Holdings Limited or subsidiary companies
2008
Name
Cash salary
and fees
$
Short-term benefits
Cash
Non-monetary
bonus#
benefits
$
$
Post-employment
Retirement
Super-
Benefits
annuation
$
$
Long-term
benefits
Long service
leave
$
Share-based
payment
Options#
$
Total
$
Non-executive directors
P T Bartels Chairman
P M Colman1
(from 1/07/2007 – 11/02/2008)
R Dobinson
L Gorr2
(from 1/07/2007 – 14/11/2007)
P J Jenkins
R A Hazleton
J W Raff Deputy Chairman
Subtotal non-executive
directors
Executive directors
–
22,936
40,000
13,761
36,697
40,000
–
153,394
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000
2,064
–
1,239
3,303
–
40,000
126,606
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000
25,000
40,000
15,000
40,000
40,000
40,000
280,000
J K Fairley3
295,869
150,000
4,458
53,040 –
14
23,499
526,880
Other Key Management Personnel
B P Rogers
J R Paull
C P Barrett
N J Baade
D J Owen4
R I Berry5
74,612
148,758
151,750
132,762
137,618
195,138
–
10,000
10,000
7,000
–
–
Totals
1,289,901 177,000
11,899
11,942
1,366
327
358
13,567
43,917
80,838
22,300
26,880
18,489
12,386
6,830
347,369
–
–
–
–
–
–
–
6,576
4,044
201
123
206
–
19,122
21,544
19,531
19,122
14,276
29,959
193,047
218,588
209,728
177,823
164,844
245,494
11,164
147,053
2,016,404
# All performance related remuneration, including cash bonuses and options granted are at risk.
1 Prof P M Colman retired as a director on 11 February 2008
2 Mr L Gorr retired as a director on 14 November 2007.
3 J K Fairley was appointed CEO and Executive Director on 1 July 2006.
4 D J Owen was appointed VP, Research on 15 February 2007.
5 R I Berry is President of Dendritic Nanotechnologies Inc, which became a wholly owned subsidiary on 20 October 2006.
20
DIRECTORS’ REPORT – REMUNERATION REPORT
2007
Name
Cash salary
and fees
$
Short-term benefits
Cash
Non-monetary
bonus#
benefits
$
$
Post-employment
Retirement
Super-
Benefits
annuation
$
$
Long-term
benefits
Long service
leave
$
Share-based
payment
Options#
leave
$
Non-executive directors
P T Bartels Chairman
P M Colman
R Dobinson
L Gorr
P J Jenkins
R Hazleton1
(from 1/12/2006–30/6/2007)
Subtotal non-executive
directors
Executive directors
J W Raff Deputy Chairman2
(from 1/7/2006–30/6/2007)
J K Fairley3
(from 1/7/2006–30/6/2007)
–
36,697
40,000
36,697
36,697
23,333
173,424
19,776
306,230
Other Key Management Personnel
–
–
–
–
–
–
–
–
–
B P Rogers
J R Paull
C P Barrett
N J Baade
D J Owen4
(from 15/2/2006–30/6/2007)
R I Berry5
(from 20/10/2006–30/6/2007)
T D McCarthy
(from 1/7/2006–17/11/2006)
G Y Krippner
(from 1/7/2006–8/12/2006)
O T Grogan
(from 1/7/2006–12/1/2007)
64,159
137,210
130,818
110,005
43,091
151,797
63,216
52,176
85,964
–
–
–
10,000
–
–
–
–
–
–
–
–
–
–
–
–
80,000
3,303
–
3,303
3,303
–
89,909
–
–
–
–
–
–
–
664
40,172
140,000
–
–
–
–
–
–
–
–
Total
$
80,000
40,000
40,000
40,000
40,000
23,333
263,333
–
–
–
–
–
–
–
–
200,612
4,041
43,769
27,354
4,115
383
7,219
70,165
23,249
19,182
23,559
–
3,878
14,488
–
15,802
9,215
11,933
5,220
20,427
15,432
–
–
–
–
–
–
–
–
–
–
964
124,015
479,019
3,815
10,153
383
344
10,439
13,962
18,299
10,439
175,932
188,689
169,065
161,566
117
3,393
50,479
–
–
–
–
21,855
188,140
–
88,233
(23,930)
45,399
(25,330)
96,493
Totals
1,337,866
10,000
106,426
343,750
140,000
15,776
153,142
2,106,960
# All performance related remuneration, including cash bonuses and options granted are at risk.
1 R Hazleton was appointed non-executive director on 1 December 2006.
2 J W Raff retired as CEO on 1 July 2006 and was appointed Deputy Chairman. $40,000 contributed to J W Raff’s superannuation
was his Director’s remuneration. He was paid $60,627 on retirement for accrued long service leave entitlements.
3 J K Fairley was appointed CEO and Executive Director on 1 July 2006.
4 D J Owen was appointed VP, Research on 15 February 2007.
5 R I Berry is President of Dendritic Nanotechnologies Inc, which became a wholly owned subsidiary on 20 October 2006.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
21
DIRECTORS’ REPORT – REMUNERATION REPORT
C. Service Agreements
Remuneration and other terms of employment for the CEO and the specified executives are formalised in service agreements which
include a formal position description and set out duties, rights and responsibilities, and entitlements on termination. Each of these
agreements provides for the provision of performance-related cash bonuses, and other benefits including participation, when eligible,
in the Starpharma Holdings Employee Share Option Plan. Other major provisions of the agreements relating to remuneration are set
out below.
J K Fairley Chief Executive Officer
– No fixed term of agreement
– Base salary, inclusive of superannuation, per annum as at 30
B P Rogers Company Secretary and Chief Financial Officer
– No fixed term of agreement.
– Base salary, inclusive of superannuation, per annum as at 30
June 2008 of $350,000, to be reviewed annually by the
remuneration committee.
– A maximum cash bonus of $150,000 per year, commencing
on 1 July 2008 allocated proportionately on the achievement
of predetermined objectives.
– The Remuneration & Nomination Committee is in the process
of developing a specific long term incentive plan for Dr Fairley.
Shareholder approval for this plan will be sought once
agreement has been reached on the quantum and relevance
of performance hurdles.
– Fringe benefits – on-site car parking.
– Subject to termination at any time by:
(i)
the Executive giving to the Company twelve months’
notice in writing; or
June 2008 of $165,500, to be reviewed annually by the
remuneration committee.
– Fringe benefits – on-site car parking.
– Payment of termination benefit on termination by the
employer, other than for serious breach of obligations to the
employer, wilful neglect of duty or serious misconduct, equal
to thirteen weeks gross remuneration.
J R Paull VP – Development and Regulatory Affairs
– No fixed term of agreement.
– Base salary, inclusive of superannuation, per annum as at 30
June 2008 of $185,500, to be reviewed annually by the
remuneration committee.
– Fringe benefits – on-site car parking.
(ii) the Company giving to the Executive six months’ notice in
– Subject to termination at any time by:
writing.
If the Company gives notice in accordance with this
clause, the Executive will be entitled to a termination
payment upon the expiration of the notice period, of an
amount equal to 6 months’ total remuneration.
– The Executive’s employment may be terminated by the
Company at any time without notice if the Executive:
(i)
(ii) becomes unable to pay the Executive’s debts as they
is guilty of serious misconduct;
become due; or
(iii) is found guilty be a court of a criminal offence.
R I Berry President – Dendritic Nanotechnologies, Inc
– No fixed term of agreement.
– Minimum annual base salary, at 30 June 2008 of US$175,000.
– Subject to termination by the Company without cause by
giving the Executive 30 days notice, in which case the
Executive shall be entitled to payment of salary for six months.
– Subject to termination by the Executive giving the Company
90 days written notice.
– Subject to termination by the Company for serious breach of
obligations to the Company or conviction of a felony involving
moral turpitude, other criminal acts or illegal acts that are
injuries to the Company, in which case the Executive shall
receive salary and benefits including unused vacation
through to the effective date of such termination, and no
severance amount or termination payments or benefits of any
nature.
(i)
the Executive giving to the Company not less than three
months written notice; or
(ii) the Company giving to the Executive written notice, or
payment in lieu of that notice, which notice period shall
be six months.
– The Executive’s employment may be terminated by the
Company at any time without notice for serious breach of
obligations to the employer, wilful neglect of duty, serious
misconduct or bankruptcy.
C P Barrett VP – Business Development
– No fixed term of agreement.
– Base salary, inclusive of superannuation, per annum as at 30
June 2008 of $190,000, to be reviewed annually by the
remuneration committee.
– Subject to termination at any time by:
(i)
the Executive giving to the Company not less than two
months written notice; or
(ii) the Company giving to the Executive written notice, or
payment in lieu of that notice, which notice period shall
be four months.
– The Executive’s employment may be terminated by the
Company at any time without notice for serious breach of
obligations to the employer, wilful neglect of duty, serious
misconduct or bankruptcy.
22
DIRECTORS’ REPORT – REMUNERATION REPORT
D J Owen VP – Research
– No fixed term of agreement.
– Base salary, inclusive of superannuation, per annum as at 30
N J Baade Financial Controller
– No fixed term of agreement.
– Base salary, inclusive of superannuation, per annum as at 30
June 2008 of $150,000, to be reviewed annually by the
remuneration committee.
June 2008 of $155,000, to be reviewed annually by the
remuneration committee.
– Subject to termination at any time by:
– Subject to termination at any time by:
(i)
the Executive giving to the Company not less than three
months written notice; or
(ii) the Company giving to the Executive written notice, or
payment in lieu of that notice, which notice period shall
be three months.
(i)
the Executive giving to the Company not less than two
months written notice; or
(ii) the Company giving to the Executive written notice, or
payment in lieu of that notice, which notice period shall
be four months.
– The Executive’s employment may be terminated by the
– The Executive’s employment may be terminated by the
Company at any time without notice for serious breach of
obligations to the employer, wilful neglect of duty, serious
misconduct or bankruptcy.
Company at any time without notice for serious breach of
obligations to the employer, wilful neglect of duty, serious
misconduct or bankruptcy.
D. Share-based compensation
Options are granted under the Starpharma Holdings Limited
Employee Share Option Plan (ASX code SPLAM) (“the Plan”)
which was approved by shareholders at the 2007 annual general
meeting. All employees of the Company or associated
companies are eligible to participate in the plan. Options are
granted under the plan for no consideration and when exercised,
enable the holder to subscribe for one fully paid ordinary share
of the Company to be allotted not more than ten business days
after exercise, at the exercise price.
The vesting period is usually 2 years from the date of grant, and
the exercise period usually 2 years from the end of the Vesting
Period.
The terms and conditions of each grant of options affecting
remuneration of each director of the company and the key
management personnel of the group in this or future reporting
periods are as follows:
Grant date
Expiry date
Exercise price
Value per option at grant date
Date exercisable
8 February 2004
4 July 2005
18 July 2005
6 October 2006
17 November 2006
4 April 2007
14 November 2007
14 November 2007
8 February 2009
4 July 2010
18 July 2010
6 October 2010
30 June 2009
4 April 2011
4 April 2011
8 August 2011
$0.94
$0.94
$0.94
$0.50
$0.45
$0.50
$0.50
$0.50
$0.46
$0.15
$0.16
$0.24
$0.20
$0.14
$0.16
$0.17
9 February 2006
5 July 2007
19 July 2007
6 October 2008
1 July 2007
4 April 2009
4 April 2009
8 August 2009
Options granted under the Plan carry no dividend or voting rights.
The weighted average remaining contractual life of share options outstanding at the end of the period was 2.10 years
(2007: 2.78 years).
Fair value of options granted
The weighted average assessed fair value at grant date of
options granted to key management personnel during the year
ended 30 June 2008 was $0.18 per option (2007: $0.21 ). 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 the expected price volatility of the
underlying share, the expected dividend yield and the risk free
rate for the term of the option.
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.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
23
DIRECTORS’ REPORT – REMUNERATION REPORT
D. Share-based compensation
Options granted to each director of the company and the key management personnel of the group
during the year ended 30 June 2008 and the prior year were:
2008
Options granted on:
Number of options granted
14 November 2007 14 November 2007
200,000
150,000
6 October 2006
700,000
17 November 2006
500,000
Expiry date
Exercise price
Expected price volatility of
the company’s shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
4 April 2011
$0.50
8 August 2011
$0.50
6 October 2010
$0.50
4 April 2011
$0.45
59.8%
6.3%
–
$0.39
$0.16
59.8%
6.3%
–
$0.39
$0.17
42.5%
5.5%
–
$0.55
$0.24
44.0%
5.5%
–
$0.45
$0.20
2007
4 April 2007
550,000
4 April 2011
$0.50
38.8%
6.2
–
$0.43
$0.14
Shares issues on the exercise of options
No shares in Starpharma Holdings Limited have been issued on the exercise of options in either the current or prior year.
Share options granted to directors and key management personnel
Details of options over unissued ordinary shares of Starpharma Holdings Limited provided as remuneration to any of the directors or
the key management personnel of the Company and consolidated entity with greatest authority as part of their remuneration were as
follows:
Number of options granted during the year
Number of options vested during the year
Name
N J Baade
C P Barrett
R I Berry
J K Fairley
G Y Krippner
D J Owen
J R Paull
B P Rogers
2008
–
–
–
350,000
–
–
–
–
2007
200,000
200,000
250,000
500,000
100,000
200,000
200,000
200,000
2008
–
100,000
–
800,000
–
–
–
–
2007
–
–
–
–
–
–
–
–
The options were granted under the Starpharma Holdings Limited Employee Share Option Plan on the dates indicated. Details
of options granted to the directors and the five most highly remunerated officers of the Group can be found in section D of the
remuneration report on page 23. No options have been granted to directors or key management personnel since the end of the year.
No other directors or key management personnel hold options under the Plan.
24
E. Additional Information
Principles used to determine the nature and amount of
remuneration: relationship between remuneration and company
performance.
Policies are structured to reward performance that could
reasonably be expected to increase shareholder value, and the
performance of the Company over the current and prior year is
taken into account in determining overall levels of executive
reward. As the company is in a research and development
Further details relating to options are set out below.
DIRECTORS’ REPORT – REMUNERATION REPORT
phase and is not generating significant earnings, service
agreements for executives do not include pre-determined bonus
or share option allocations, except for the CEO. Bonuses may be
awarded or options offered for outstanding performance that
contributes to achievement of specific milestones. Further
details of the company’s remuneration policy are set out in
Section A of the Remuneration Report on page 17 to 18.
Name
N J Baade
C P Barrett
R I Berry
J K Fairley
D J Owen
J R Paull
B P Rogers
A
Remuneration consisting of options
–
–
–
10.8%
–
–
–
B
Value at grant date $
–
–
–
57,022
–
–
–
C
Value at exercise date $
–
–
–
–
–
–
–
D
Value at lapse date $
–
–
–
–
–
–
–
A = The percentage of the value of remuneration consisting of options, based on the value at grant date set out in column B.
B = The value at grant date calculated in accordance with AASB 2 Share-based payments of options granted during the year as
part of remuneration.
C = The value at exercise date of options that were granted as part of remuneration and were exercised during the year.
D = The value at lapse date of options that were granted as part of remuneration and that lapsed during the year.
Details of remunerations: cash bonuses and options
For each cash bonus and grant of options included in the tables
on pages 18 to 25, the percentage of the available bonus or
grant that was paid, or that vested, in the financial year, and the
percentage that was forfeited because the person did not meet
the service and performance criteria is set out below. No part of
the bonuses is payable in future years.
The options vest over the specified periods providing vesting
criteria are met. No options will vest if the conditions are not
satisfied, hence at 30 June 2008 the minimum value of the
options yet to vest is nil. The maximum value of the options yet to
vest has been determined assuming all conditions are met.
Cash bonus
Options
Name
N J Baade
Paid
%
100%
Forfeited
%
–
C P Barrett
100%
R I Berry
–
J K Fairley
100%
D J Owen
–
J R Paull
100%
B P Rogers
–
–
–
–
–
–
–
Year
Granted
2008
2007
2008
2007
2006
2008
2007
2008
2008
2007
2006
2008
2007
2008
2007
2004
2008
2007
2004
Vested
%
Forfeited
%
Financial years in
which options may
vest
Minimum total
value of grant
yet to vest
Maximum total
value of grant
yet to vest
–
–
100%
–
–
–
100%
100%
–
–
100%
–
100%
–
–
–
–
–
–
–
–
–
–
–
30/06/2009
30/06/2009
30/06/2008
30/06/2009
30/06/2010
30/06/2009
30/06/2008
30/06/2008
30/06/2009
30/06/2009
30/06/2006
30/06/2009
30/06/2006
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
8,630
8,630
–
8,022
21,324
12,946
–
–
10,843
7,524
–
8,630
–
STARPHARMA HOLDINGS LIMITED Annual Report 2008
25
DIRECTORS’ REPORT
Shares under option
Unissued ordinary shares of Starpharma Holdings Limited under option at the date of this report are as follows:
Date options granted
Expiry date
Issue price of shares
Number under option
6 February 2004
8 February 2004
31 December 2004
4 July 2005
18 July 2005
17 November 2006
6 October 2006
2 January 2007
2 January 2007
4 April 2007
21 August 2007
12 October 2007
12 October 2007
12 October 2007
12 October 2007
31 October 2007
14 November 2007
14 November 2007
31 December 2008
8 February 2009
31 December 2009
4 July 2010
18 July 2010
30 June 2009
6 October 2010
2 January 2009
2 January 2011
4 April 2011
21 August 2012
31 May 2009
30 June 2009
31 July 2009
31 August 2009
7 August 2011
7 August 2011
8 August 2011
$0.73
$0.94
$0.94
$0.94
$0.94
$0.45
$0.50
$0.52
$0.52
$0.50
$0.43
$0.43
$0.43
$0.43
$0.43
$0.50
$0.50
$0.50
Total:
200,000
358,000
86,000
300,000
100,000
500,000
1,038,000
45,000
20,000
590,000
7,567,119
10,000
10,000
10,000
10,000
550,000
150,000
200,000
11,744,119
No option holder has any right under the options to participate in any other issue of the company or of any other entity.
Insurance of officers
During the financial year, Starpharma Holdings Limited arranged
to insure the directors and executive officers of the Company
and related bodies corporate. The terms of the policy prohibit
disclosure of the amount of the premium paid.
The liabilities insured are legal costs that may be incurred in
defending civil or criminal proceedings that may be brought
against the officers in their capacity as officers of entities in the
Group, and any other payments arising from liabilities incurred
by the officers in connection with such proceedings. This does
not include such liabilities that arise from conduct involving a
wilful breach of duty by the officers or the improper use by the
officers of their position or of information to gain advantage for
themselves or someone else or to cause detriment to the
company. It is not possible to apportion the premium between
amounts relating to the insurance against legal costs and those
relating to other liabilities.
26
DIRECTORS’ REPORT
Audit & 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
consolidated entity are important.
Details of the amounts paid or payable to the auditor
(PricewaterhouseCoopers) for audit and non-audit services
provided during the year are set out below.
The board of directors has considered the position and, in
accordance with the advice received from the audit and risk
committee is satisfied that the provision of the non-audit services
is compatible with the general standard of independence for
auditors imposed by the Corporations Act 2001. The directors
are satisfied that the provision of non-audit services by the
auditor, as set out below, did not compromise the auditor
independence requirements of the Corporations Act 2001 for the
following reasons:
– all non-audit services have been reviewed by the audit & risk
committee to ensure they do not impact the impartiality and
objectivity of the auditor
– none of the services undermine the general principles relating
to auditor independence as set out in APES 110 Code of
Ethics for Professional Accountants.
During the year the following fees were paid or payable for services provided by the auditor (PricewaterhouseCoopers) of the parent
entity, its related practices and non-related audit firms:
Assurance Services
Audit or review of financial reports of the entity or any entity in the consolidated entity
under the Corporations Act 2001
Other assurance services:– Grant reviews & program audits
Audits performed by other auditors of controlled entities:
No taxation or advisory services have been provided in either the current or prior year.
2008
$
102,684
22,500
68,186
2007
$
107,000
57,500
74,646
Auditors’ Independence Declaration
A copy of the auditors’ independence declaration as required
under section 307C of the Corporations Act 2001 is set out on
page 28.
Auditor
PricewaterhouseCoopers continues in office in accordance with
section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the
Directors.
Peter T Bartels, AO
Director
Melbourne, 29th September 2008
STARPHARMA HOLDINGS LIMITED Annual Report 2008
27
28
Corporate Governance Statement
CORPORATE GOVERNANCE STATEMENT
Starpharma Holdings Limited (“the Company”) and the Board
are committed to achieving and demonstrating the highest
standards of corporate governance. The Board guides and
monitors the Company’s activities on behalf of the shareholders.
In developing policies and setting standards the Board
considers the Australian Securities Exchange (“ASX”) Corporate
Governance Principles and Recommendations (Second Edition
2007) (“the CGC Recommendations”).
The Corporate Governance Statement set out below describes
the Company’s current corporate governance principles and
practices which the Board considers to comply with the CGC
Recommendations, with the following exceptions:
• Composition of Board committees
• For part of the year (15 November 2007 to 14 April 2008)
following the resignation of Mr Leon Gorr the remuneration
and nomination committee consisted of two, rather than
three members. For the remainder of the year and in all
other respects the structure of the committee complied with
CGC Recommendation 2.4 (nomination committee) and 8.1
(remuneration committee).
1.The Board of Directors
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.
Day to day management of the Group’s affairs and the
implementation of the corporate strategy and policy initiatives
are delegated by the Board to the Chief Executive Officer
(“CEO”) and senior executives. These delegations are reviewed
on an annual basis.
1.1 Board charter
The Board of Starpharma Holdings Limited operates in
accordance with the charter set out below.
1.1.1 Board Composition
– The Board is to be composed of both executive and non-
executive directors with a majority of non-executive directors.
– In recognition of the importance of independent views and the
Board’s role in supervising the activities of management the
Chairman must be an independent non-executive director,
the majority of the Board must be independent of
management and all directors are required to bring
independent judgement to bear in their Board decision
making.
– The Chairman is elected by the full Board and meets regularly
with the CEO.
– The Board may decide to appoint one of the non-executive
directors as Deputy Chairman.
– The Company is to maintain a mix of directors on the Board
from different backgrounds with complementary skills and
experience.
• For part of the year (15 November 2007 to 18 February
2008) following the resignation of Mr Leon Gorr the audit
and risk committee consisted of two, rather than three
members. For the remainder of the year and in all other
respects the structure of the audit committee complied with
CGC Recommendation 4.2 (audit committee).
All other practices stated below were in place for the entire year.
This corporate governance statement is available on the
Company’s website. The company and its controlled entities
together are referred to as the Group in this statement.
– The Board is to undertake an annual Board performance
review and consider the composition, structure, and role of
the Board and individual responsibilities of directors.
– The minimum number of directors is three and the maximum
is fifteen unless the Company passes a resolution varying that
number.
– There is no requirement for a director to hold shares in the
Company.
1.1.2 Responsibilities
The responsibilities of the Board include:
– Contributing to the development of and approving the
corporate strategy;
– Reviewing and approving business plans, the annual budget
and financial 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;
– Monitoring financial performance including approval of the
annual and half-year financial reports and liaison with the
Company’s auditors;
– Appointment, performance assessment and, if necessary,
removal of the CEO;
– Ratifying the appointment and, if necessary, the removal of
senior executives;
– Ensuring there are effective management processes in place
and approving major corporate initiatives;
– Enhancing and protecting the reputation of the Group;
– Overseeing the operation of the Group, including its systems
for control, accountability, and risk management;
– Reporting to shareholders.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
29
CORPORATE GOVERNANCE STATEMENT
1.The Board of Directors
1.2 Board members
Details of the members of the Board, their experience,
qualifications, term of office and independent status are set out
in the directors’ report under the heading “Information on
Directors”. There are five non-executive directors, four of whom
are deemed independent under the principles set out below, and
one executive director at the date of signing the directors’ report.
1.4 Term of office
The Company’s Constitution specifies that all non-executive
directors must retire from office no later than the third annual
general meeting following their last election, and that one third of
non-executive directors (or if their number is not a multiple of
three then the number nearest to one third) retire at every annual
general meeting and be eligible for re-election.
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; and
– the size of the Board is conducive to effective discussion and
efficient decision-making.
1.3 Directors’ independence
The Company has adopted specific principles for assessing the
independence of directors: To be deemed independent, a
director must be a non-executive and:
– Not be a substantial shareholder of the company or an officer
of, or otherwise associated directly with, a substantial
shareholder of the company;
– within the last three years, not have been employed in an
executive capacity by the Company, or been a director after
ceasing to hold any such employment;
– within the last three years, not have been a principal of a
material professional adviser or a material consultant to the
Company, or an employee materially associated with the
service provided;
– not be a material supplier or customer of the Company, or an
officer of or otherwise associated directly or indirectly with a
material supplier or customer;
– must have no material contractual relationship with the
Company other than as a director;
– be free from any interest and any business or other
relationship which could, or could reasonably be perceived
to, materially interfere with the director’s ability to act in the
best interests of the company.
Materiality for the purposes of applying these criteria is
determined on both quantitative and qualitative bases. An
amount of 5% of the individual director’s net worth is considered
material, and in addition a transaction of any amount or a
relationship is deemed material if knowledge of it may impact
the shareholders’ understanding of the director’s performance.
A substantial shareholder for the purposes of applying these
criteria is a person with a substantial shareholding as defined in
section 9 of the Corporations Act.
The Company has also considered directors’ periods of service
on the board, particularly in the context of the long term nature of
the Company’s research, development and commercialisation
activities, and has concluded that length of service does not,
and should not reasonably be perceived to, adversely impact
upon a director’s ability to act in the best interests of the
company.
Under these criteria the Board has determined that all non-
executive directors were independent at the date of this report
with the exception of Dr J W Raff, who was an executive director
until 1 July 2006.
1.5 Chairman and Chief Executive Officer (CEO)
The current Chairman Mr Peter Bartels is an independent
non-executive director appointed in 2003. The CEO Dr Jackie
Fairley was appointed as a director and CEO on 1 July 2006. The
Chairman is responsible for leading the Board, ensuring
directors are properly briefed in all matters relevant to their role
and responsibilities, facilitating Board discussions and
managing the Board’s relationship with the Company’s senior
executives. The CEO is responsible for implementing Company
strategies and policies. The Board policy is for these separate
roles to be undertaken by separate people.
1.6 Commitment
The Board held seven meetings during the year. Meetings are
usually held at the Company’s corporate offices and laboratory
facility in the Baker Building, 75 Commercial Road, Melbourne,
Australia. The number of meeting of the Board and of each
Board committee held during the year ended 30 June 2008, and
the number of meetings attended by each director is disclosed
in the Directors’ Report. The commitments of non-executive
directors are considered by the remuneration and nomination
committee prior to their appointment to the Board and are
reviewed each year as part of the annual performance
assessment. Prior to appointment or being submitted for
re-election each non-executive director is required to specifically
acknowledge that they have and will continue to have the time
available to discharge their responsibilities to the Company.
1.7 Conflict of interests
Directors are expected to avoid any action, position or interest
that may result in a conflict with an interest of the Company. A
director who has a material personal interest in a matter that
relates to the affairs of the Company must give notice of such
interest and is precluded from participating in discussions or
decision making on such dealings.
1.8 Independent professional advice
Directors and Board committees have the right, in connection
with their duties and responsibilities, to seek independent
professional advice at the Company’s expense. Prior approval of
the Chairman is required, but this approval will not be
unreasonably withheld.
1.9 Performance assessment
The Board undertakes an annual self assessment of its
performance. Each director is asked to consider matters such as
composition, structure and role of the Board, and performance
of individual directors. The Chairman then meets individually
with each director to discuss the assessment. The CEO’s
performance is assessed taking into account attainment of
predetermined targets or goals based on various financial and
other measurable indicators related to the Company. The CEO
meets with the remuneration and nomination committee
annually to discuss attainment of key performance indicators of
both the CEO and the senior management team.
30
CORPORATE GOVERNANCE STATEMENT
2. Corporate reporting
The Company prepares audited financial statements for each
year ending 30 June, and reviewed financial statements for each
half year period ending 31 December. In accordance with ASX
Listing Requirements the annual financial statements
(preliminary final report) is lodged with the ASX by 31 August,
and half year statements are lodged with the ASX by 28 February
each year.
The CEO and the CFO have made the following certifications to
the Board:
– that the Company’s financial reports are complete and
present a true and fair view, in all material respects, of the
financial condition and operational results of the Company
and Group and are in accordance with relevant accounting
standards; and
3. 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. The committee structure and membership is
reviewed on an annual basis. Board committees are chaired by
an independent director other than the Chairman of the Board.
Minutes of committee meetings are tabled at subsequent Board
meeting, and where applicable matters determined by
committees are submitted to the full Board as recommendations
for Board decisions. Current committees of the Board are the
following:
3.1 Audit and risk committee
The audit and risk committee consists of the following
independent non-executive directors:
Mr Ross Dobinson (Chairman)
Mr Peter Bartels (from 19 February 2008)
Dr Peter Jenkins
Mr Leon Gorr was a member until his resignation as a director on
14 November 2007.
Details of these directors’ qualifications and attendance at
committee meetings are set out in the directors’ report
pages 13 to 16.
The audit and risk committee has appropriate financial expertise
and all members are financially literate and have an appropriate
understanding of the industry in which the Group operates.
The committee meets at least twice a year, and has direct
access to the Company’s auditors. The charter of this committee
is to:
– review and report to the Board on the annual report, the
half-year financial report and all other financial 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 efficiency of operations
> reliability of financial reporting
> compliance with applicable laws and regulations
– oversee the effective operation of the risk management
framework by:
> ensuring the effective implementation of the risk
management policy and program
> defining risk threshold levels for referral to the Board
– that the above statement is founded on a sound system of
risk management and internal compliance and control and
which implements the policies adopted by the Board and that
the Company’s risk management and internal compliance
and control is operating efficiently and effectively in all
material respects.
> ensuring that an effective system of internal compliance
and control is in place
> ensuring staff charged with risk management
responsibilities have appropriate authority to carry out their
functions and have appropriate access to the audit and
risk committee
> ensuring the allocation of sufficient resources for the
effective of risk
– 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 monitor related party transactions and assess
their propriety
– assist the Board in the development and monitoring of
statutory compliance and ethics programs
– provide assurance to the Board that it is receiving adequate,
up to date and reliable information
– report to the Board on matters relevant to the committee’s
role and responsibilities.
In fulfilling its responsibilities, the audit and risk committee:
– receives regular reports from management and the external
auditors;
– reviews the processes the CEO and CFO have in place to
support their certifications to the board;
– reviews any significant 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 Chairman of the
committee or the Chairman of the board.
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.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
31
CORPORATE GOVERNANCE STATEMENT
3. Board committees
3.2 Remuneration and nomination committee
The remuneration and nomination committee consists of the
following independent non-executive directors:
Mr Ross Dobinson (Chairman)
Mr Peter Bartels
Mr Richard Hazleton (from 14 April 2008)
Mr Leon Gorr was a member until his resignation as a director
on 14 November 2007.
Details of these directors’ attendance at committee meetings are
set out in the directors’ report on page 16.
The main responsibilities of the committee are to:
– conduct annual reviews of board membership having regard
to present and future needs of the Company and make
recommendations on board composition and appointments
– conduct an annual review of and conclude on the
independence of each director
Each member of the senior executive team has signed a formal
employment contract covering a range of matters including their
duties, rights, responsibilities and any entitlements on
termination. Each contract refers to a specific formal position
description which is reviewed by the committee as necessary in
consultation with the CEO and relevant executive.
The remuneration and nomination committee’s terms of
reference include responsibility for reviewing any transaction
between the organisation and the directors, or any interest
associated with the directors, to ensure the structure and the
terms of the transaction are in compliance with the Corporations
Act 2001 and are appropriately disclosed.
The Remuneration Report is set out on pages 17 to 25.
3.3 Research committee
For part of the year (1 July 2007 to 11 February 2008) the
research committee consisted of the following directors:
– propose candidates for board vacancies
– oversee board succession including the succession of the
Dr Peter Jenkins (Chairman)
Independent non-executive director
Chairman
– oversee the annual assessment of board performance
– advise the board on remuneration and incentive policies and
practices generally
– make specific recommendations on remuneration packages
and other terms of employment for executive directors, other
senior executives and non-executive directors.
When the need for a new director is identified or an existing
director is required to stand for re-election, the committee
reviews the range of skills, experience and expertise on the
board, identifies its needs and prepares a short-list of
candidates with appropriate skills and experience. Where
necessary, advice is sought from independent search
consultants.
4. External auditors
Prof Peter Colman
Independent non-executive director
Dr Jackie Fairley
Chief Executive Officer and director
Following the resignation of Prof Peter Colman the board
reviewed the need for a research committee and determined
that the future needs of the Company would be better served by
periodic scientific reviews involving non-executive directors
together with scientific advisors. Prof Colman was subsequently
appointed as a scientific adviser to the Company on a
consultancy basis.
The Company’s policy is to appoint external auditors who clearly
demonstrate quality and independence. The performance of the
external auditor is reviewed annually. The current auditors are
PricewaterhouseCoopers who have been the external auditors
of the Company since it commenced operations. It is
PricewaterhouseCoopers policy to rotate audit engagement
partners on listed companies at least every five years, and the
current audit engagement partner assumed responsibility for the
conduct of the audit in 2008.
An analysis of fees paid to the external auditors, including a
break-down of fees for non-audit services, is provided in note 29
to the financial statements. It is the policy of the external auditors
to provide an annual declaration of their independence to the
audit and risk committee.
The external auditor is requested to 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 audit report.
32
CORPORATE GOVERNANCE STATEMENT
5. Risk assessment and management
The Board, through the audit and risk committee, is responsible
for ensuring there are adequate policies in relation to risk
management, compliance and internal control systems. The
Company operates in a challenging and dynamic environment,
and risk management is viewed as integral to realising new
opportunities as well as identifying issues that may have an
adverse effect on the Company’s existing operations and its
sustainability. The Company is committed to a proactive
approach towards risk management throughout its entire
business operations. The Board aims to ensure that effective risk
management practices become embedded in the Company
culture and in the way activities are carried out at all levels in the
Company. The Board and Management recognise the
importance that risk management plays in ensuring the business
is able to fully capitalise on the opportunities available to it as
well as mitigating potential loss.
Health and Safety (see item 6) are considered to be of
paramount importance and are the focus of significant risk
management activities within the company. Other risk areas that
are addressed include business continuity and disaster
recovery, reputation, intellectual property, product development
and clinical trials.
Adherence to the Code of Conduct (see item 7) is required at all
times and the board actively promotes a culture of quality and
integrity.
The risk management policy, which is available on the Company
website, sets out the responsibilities and authorities of the
Board, the audit and risk committee, the CEO and Company
Secretary, and the senior management team. The CEO and
Company Secretary are responsible to the Board for the overall
implementation of the risk management program.
6. The environment, occupational health and safety
The Company recognises the importance of environmental
issues and is committed to the highest levels of performance.
There are adequate systems in place to ensure compliance with
environmental regulations, and employees are encouraged to
actively participate in the management of environmental and
Occupational Health and Safety (OH&S) issues. In order to
conduct activities within Australia the wholly owned subsidiary
Starpharma Pty Ltd has obtained the necessary accreditations,
laboratory certifications and licenses from the applicable
Commonwealth and State authorities. In the US the wholly
owned subsidiary DNT has obtained the necessary
accreditations, laboratory certifications and licenses as
applicable from Central Michigan University, State of Michigan
and US federal authorities. The directors are not aware of any
breach of applicable environmental regulations.
The Company has adopted an OH&S Policy and has established
OH&S committees at each of its sites as part of its overall
approach to workplace safety. These committees provide a
forum for management and employees to consult on health and
safety matters. The primary role of the committees is to
coordinate the development and implementation of OH&S
policy and procedures, to consider any work related safety
matters or incidents, and to ensure compliance with relevant
legislation and guidelines.
Each committee includes representatives of executive
management and members representing each operational area
generally in proportion to the number of people working in the
area and the perceived safety risks associated with working in
that area. The OH&S committees meet on a monthly basis.
7. Code of conduct
The directors are committed to the principles underpinning best
practice in corporate governance, with a commitment to the
highest standards of legislative compliance and financial and
ethical behaviour. The Company has adopted a code of conduct
reflecting the core values of the Company and setting out the
standards of ethical behaviour expected of directors, officers
and employees in all dealings and relationships including with
shareholders, contractors, customers and suppliers, and with
the Company. Areas covered include employment practices,
equal opportunity, harassment and bullying, conflicts of interest,
use of company assets and disclosure of confidential
information. The code of conduct is available in the Corporate
Governance section of the Company’s website.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
33
CORPORATE GOVERNANCE STATEMENT
8. Trading in Company securities
The purchase and sale of Company securities by directors,
executives and employees is only permitted (subject also to
complying with applicable laws) during the thirty day period
following the annual general meeting and the release to the
market of the half yearly and annual financial results, unless prior
approval is given to each transaction by the Chairman.
Except with the prior approval of the Chairman, no director or
executive may enter into any transaction which would have the
effect of hedging or otherwise transferring to any other person
the risk of any fluctuation in the value of:
(a) securities in the Company which are subject to a restriction
on disposal under an employee share or incentive plan; or
(b) options or performance rights (or any unvested securities in
the Company underlying them).
The Company’s share trading policy is discussed with each new
employee as part of their induction training.
9. Continuous disclosure and shareholder communication
The Board has appointed the Company Secretary as the person
responsible for disclosure of information to the ASX. This role
includes responsibility for ensuring compliance with the
continuous disclosure requirements of the ASX Listing Rules
and overseeing and co-ordinating information disclosure to the
ASX, analysts, brokers, shareholders, the media and the public.
Procedures have been established for reviewing whether there is
any price sensitive information that should be disclosed to the
market, or whether any price sensitive information may have
been inadvertently disclosed.
All ASX announcements are posted on the Company’s website
as soon as practicable after release to the ASX. Announcements
are also posted on the OTCQX website (www.otcqx.com) in
order to provide timely disclosure to US investors trading in the
Company’s Level One ADRs (OTCQX:SPHRY).
34
Annual Financial Report
FINANCIAL REPORT
Contents
Income statements
Balance sheets
Statements of changes in equity
Cash flow statements
Notes to the financial statements
Directors’ declaration
Independent audit report to the members
36
37
38
39
40
75
76
This financial report covers both the separate financial
statements of Starpharma Holdings Limited as an individual
entity and the consolidated financial statements for the
consolidated entity consisting of Starpharma Holdings Limited
and its subsidiaries. The financial report is presented in the
Australian currency.
Starpharma Holdings Limited is a company limited by shares,
incorporated and domiciled in Australia.
Its registered office and principal place of business is:
Starpharma Holdings Limited
Baker Building, 75 Commercial Road
Melbourne, Victoria, 3004, Australia
A description of the nature of the consolidated entity’s operations
and its principal activities is included in the review of operations
and activities on pages 1 to 10 and in the directors’ report on
pages 11 to 27, both of which are not part of this financial report.
The financial report was authorised for issue by the directors on
29th September 2008. The directors have the power to amend
and reissue the financial report.
Through the use of the internet, we have ensured that our
corporate reporting is timely and complete. All press releases,
financial reports and other information are available on our
website: www.starpharma.com.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
35
FINANCIAL REPORT
Income statements
For the year ended 30 June 2008
Revenue from continuing operations
Other income
Administration expense
Research and development expense
Provision for impairment of receivables
Finance costs
Impairment of financial assets
Share of results of associates accounted
for using the equity method
Loss before income tax
Income tax credit
Loss attributable to members of
Starpharma Holdings Limited
Loss per share for loss from continuing
operations attributable to ordinary
equity holders of the company
Basic loss per share
Diluted loss per share
Notes
5
5
10
33
33
7
37
Parent
2007
$’000
581
–
(1,900)
–
(4,443)
–
–
–
(5,762)
–
(5,762)
2008
$’000
414
–
(2,661)
–
(3,758)
–
(40)
–
(6,045)
–
(6,045)
Consolidated
2007
$’000
1,463
8,091
(5,325)
(11,985)
–
(33)
–
(178)
(7,967)
722
(7,245)
2008
$’000
1,709
8,212
(5,816)
(12,224)
–
(27)
(76)
–
(8,222)
731
(7,491)
($0.04)
($0.04)
($0.04)
($0.04)
The above income statements should be read in conjunction with the accompanying notes.
36
Balance Sheets
As at 30 June 2008
Current Assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Non-current assets
Receivables
Property, plant and equipment
Intangible assets
Investments accounted for using the
equity method
Deferred tax assets
Other financial assets
Total non-current assets
Total assets
Current Liabilities
Trade and other payables
Borrowings
Provisions
Deferred income
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred income
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Total equity
Notes
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
FINANCIAL REPORT
Parent
2007
$’000
5,584
1,436
7,020
–
–
3,689
–
–
16,292
19,981
27,001
1,370
–
–
–
1,370
–
–
–
–
–
2008
$’000
2,420
197
2,617
2,631
–
3,144
–
–
16,252
22,027
24,644
1,477
–
–
–
1,477
–
–
–
–
–
1,477
1,370
Consolidated
2007
$’000
10,073
1,335
11,408
–
1,111
17,786
76
43
–
19,016
30,424
1,855
69
356
980
3,260
260
57
169
954
1,440
4,700
2008
$’000
7,482
1,773
9,255
–
758
14,640
–
–
–
15,398
24,653
1,623
124
417
1,551
3,715
293
37
97
128
555
4,270
20,383
25,724
23,167
25,631
78,667
1,009
(59,293)
20,383
76,227
1,299
(51,802)
25,724
78,667
1,838
(57,338)
23,167
76,227
697
(51,293)
25,631
The above balance sheets should be read in conjunction with the accompanying notes.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
37
FINANCIAL REPORT
Statements of changes in equity
For the year ended 30 June 2008
Total equity at the beginning of the year
Exchange differences on translation
of foreign operations
Revaluation of identifiable net assets of an
associate on acquisition of remaining assets
Net income recognised directly in equity
Loss for the year
Total recognised income
and expense for the year
Transactions with equity holders in their
capacity as equity holders:
Share based payments
Fair value of options granted In private
placement
Contributions of equity, net of transaction
costs
Total equity at the end of the year
Notes
25
25
25
25
24
Consolidated
2007
$’000
21,316
(1,688)
2,215
527
(7,245)
(6,718)
275
–
10,851
25,724
2008
$’000
25,724
(1,532)
–
(1,532)
(7,491)
(9,023)
209
1,033
2,440
20,383
Parent
2007
$’000
20,267
–
–
–
(5,762)
(5,762)
275
–
10,851
25,631
2008
$’000
25,631
–
–
–
(6,045)
(6,045)
108
1,033
2,440
23,167
The above statements of changes in equity should be read in conjunction with the accompanying notes.
38
Cash flow Statements
For the year ended 30 June 2008
Notes
35
27
Cash flow from operating activities
Receipts from trade and other debtors
Grant income (inclusive of GST)
Payments to suppliers and employees
(inclusive of GST)
Interest received
Interest paid
Net cash outflows from operating activities
Cash flow from investing activities
Loans advanced to subsidiaries
Loans advanced from subsidiaries
Receipts from property, plant and equipment
Payments for property, plant and equipment
Payments for transaction costs on acquisition
of subsidiary (net of cash acquired)
Net cash outflows from investing activities
Cash flow from financing activities
Proceeds from issue of shares and options
Share issue transaction costs
Lease repayments
Net cash inflows / (outflows)
from financing activities
Net decrease in cash
and cash equivalents held
Cash and cash equivalents at the beginning
of the period
Effects of exchange rate changes on cash
and cash equivalents
Cash and cash equivalents at the end
of the period
Consolidated
2007
$’000
1,042
10,567
(15,590)
636
(35)
(3,380)
–
–
1
(182)
(91)
(272)
–
–
(127)
(127)
(3,779)
14,284
(432)
10,073
2008
$’000
1,168
8,566
(15,357)
298
(27)
(5,352)
–
–
–
(36)
–
(36)
3,817
(344)
(75)
3,398
(1,990)
10,073
(601)
7,482
The above cash flow statements should be read in conjunction with the accompanying notes.
FINANCIAL REPORT
Parent
2007
$’000
–
–
(1,463)
545
–
(918)
(5,597)
–
–
–
(232)
(5,829)
–
–
–
–
(6,747)
12,361
(30)
5,584
2008
$’000
–
–
(1,667)
235
–
(1,432)
(4,897)
–
–
–
–
(4,897)
3,817
(344)
–
3,473
(2,856)
5,584
(308)
2,420
STARPHARMA HOLDINGS LIMITED Annual Report 2008
39
FINANCIAL REPORT
Notes to the financial statements
30 June 2008
Contents
Summary of significant accounting policies
Financial Risk Management
Critical accounting estimates and judgments
Segment information
Revenue
Expenses
Income tax expense
Current assets – Cash and cash equivalents
Current assets – Trade and other receivables
1.
2.
3.
4.
5.
6.
7.
8.
9.
10. Non-current assets – Receivables
11. Non-current assets – Property, plant and equipment
12. Non-current assets – Intangible assets
13. Non-current assets – Investments accounted for using the equity method
14. Non-current assets – Deferred tax assets
15. Non-current assets – Other financial assets
16. Current liabilities – Trade and other payables
17. Current liabilities – Borrowings
18. Current liabilities – Provisions
19. Current liabilities – Deferred Income
20. Non-current liabilities – Borrowings
21. Non-current liabilities – Provisions
22. Non-current liabilities – Deferred Income
23. Non-current liabilities – Deferred tax liabilities
24. Contributed equity
25.
26.
27.
28.
29.
30. Contingencies
31. Commitments
32.
33.
34.
35.
36. Non–cash financing activities
37.
38.
39.
Reserves
Accumulated Losses
Business Combination
Key management personnel disclosures
Remuneration of auditors
Earnings per share
Share-based payments
Related party transactions
Subsidiaries
Investments in associates
Events occurring after the balance sheet date
Reconciliation of profit after income tax to net cash inflow from operating activities
Page
41
47
48
49
50
50
51
52
53
54
54
55
56
57
57
57
58
58
58
58
59
59
59
60
61
62
62
63
66
66
67
68
69
69
70
70
70
71
74
40
FINANCIAL REPORT
1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of
the financial report are set out below. These policies have been
consistently applied to all periods presented, unless otherwise
stated. The financial report includes separate financial
statements for Starpharma Holdings Limited as an individual
entity and the consolidated entity consisting of Starpharma
Holdings Limited and its subsidiaries.
Subsidiaries are all those entities (including special purpose
entities) over which the Group has power to govern the financial
and operating policies, generally accompanying a shareholding
of more than one-half of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group
controls another entity.
(a) Basis of preparation
This general purpose financial report has been prepared in
accordance with Australian equivalents to International Financial
Reporting Standards (“AIFRS”), other authoritative
pronouncements of the Australian Accounting Standards Board,
Urgent Issues Group Interpretations and the Corporations Act
2001.
Compliance with IFRS
Australian Accounting Standards include Australian equivalents
to International Financial Reporting Standards (“AIFRS”).
Compliance with AIFRS ensures that the financial report of
Starpharma Holdings Limited complies with International
Financial Reporting Standards (IFRS).
Historical cost convention
These financial statements have been prepared under the
historical cost convention, as modified by the revaluation of
available-for-sale financial assets, financial assets and liabilities
(including derivative instruments) at fair value through profit or
loss, certain classes of property, plant and equipment and
investment property.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process
of applying the Group’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements are disclosed in note 3.
For the year ended 30 June 2008, the consolidated entity has
incurred losses of $7,491,000 (2007: $7,245,000) and
experienced net cash outflows of $5,352,000 from operations
(2007: $3,380,000), as disclosed in the balance sheet and cash
flow statement, respectively. This is consistent with the
consolidated entity’s strategic plans and budget estimates, and
the directors are satisfied regarding the availability of working
capital (including ongoing royalty revenue and the remaining
balance of the contracted NIH grant funding) for the period up to
at least October 2009. Accordingly the directors have prepared
the financial report on a going concern basis in the belief that the
consolidated entity will realise its assets and settle its liabilities
and commitments in the normal course of business and for at
least the amounts stated in the financial report.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Starpharma Holdings Limited
(“company” or “parent company”) as at 30 June 2008 and the
results of all subsidiaries for the year then ended. Starpharma
Holdings Limited and its subsidiaries together are referred to in
this financial report as the Group or the consolidated entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The purchase method of accounting is used to account for the
acquisition of subsidiaries by the Group (refer to note 1(i)).
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated.
Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted by
the Group.
Minority interests in the results and equity of subsidiaries are
shown separately in the consolidated income statement and
balance sheet respectively.
Investments in subsidiaries are accounted for at cost in the
individual financial statements of Starpharma Holdings Limited.
(ii) Associates
Associates are all entities over which the Group has significant
influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for in the parent entity
financial statements using the cost method and in the
consolidated financial statements using the equity method of
accounting, after initially being recognised at cost. The Group’s
investment in associates includes goodwill (net of any
accumulated impairment loss) identified on acquisition.
The Group’s share of its associates’ post-acquisition profits or
losses is recognised in the income statement, and its share of
post-acquisition movements in reserves is recognised in
reserves. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment.
Dividends receivable from associates are recognised in the
parent entity’s income statement, while in the consolidated
financial statements they reduce the carrying amount of the
investment.
When the Group’s share of losses in an associate equals or
exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further
losses, unless it has incurred obligations or made payments on
behalf of the associate.
Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group’s interest in
the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been
changed where necessary to ensure consistency with the
policies adopted by the group.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
41
FINANCIAL REPORT
1. Summary of significant accounting policies
(c) Segment reporting
A business segment is identified for a group of assets and
operations engaged in providing products or services that are
subject to risks and returns that are different to those of other
business segments. A geographical segment is identified when
products or services are provided within a particular economic
environment subject to risks and returns that are different from
those of segments operating in other economic environments.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary
economic environment in which the entity operates (‘the
functional currency’). The consolidated financial statements are
presented in Australian dollars, which is Starpharma Holdings
Limited’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement.
(iii) Group companies
The results and financial position of all the Group entities (none
of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
– assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet
– income and expenses for each income statement are
translated at average exchange rates (unless this is not a
reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case income and
expenses are translated at the dates of the transactions), and
– all resulting exchange differences are recognised as a
separate component of equity.
Goodwill and fair value adjustments arising on the acquisition of
a foreign entity are treated as assets and liabilities of the foreign
entities and translated at the closing rate.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances and amounts collected on behalf of
third parties. Licence revenue is recognised in accordance with
the underlying agreement. Upfront payments are brought to
account as revenues unless there is a correlation to ongoing
research and both components are viewed as one agreement, in
which case the licence income is amortised over the anticipated
period of the associated research program. Unamortised
licence revenue is recognised on the balance sheet as deferred
income. Interest revenue is recognised on a time proportion
basis using the effective interest rate method.
All revenue is stated net of the amount of Goods and Services
Tax (GST).
(f) Government Grants
Government grants include contract income awarded by
government bodies for research and development projects.
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.
Government grants relating to costs are deferred and
recognised in the income statement over the period necessary
to match them with the costs that they are intended to
compensate.
Government grants relating to the purchase of property, plant
and equipment are included in non-current liabilities as deferred
income and are credited to the income statement on a straight-
line basis over the expected lives of the related assets.
(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
applicable income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable to
temporary differences and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to apply when the assets
are recovered or liabilities are settled, based on those tax rates
which are enacted or substantively enacted for each jurisdiction.
The relevant tax rates are applied to the cumulative amounts of
deductible and taxable temporary differences to measure the
deferred tax asset or liability. An exception is made for certain
temporary differences arising from the initial recognition of an
asset or a liability. No deferred tax asset or liability is recognised
in relation to these temporary differences if they arose in a
transaction, other than a business combination, that at the time
of the transaction did not affect either accounting profit or
taxable profit or loss.
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.
Current and deferred tax balances attributable to amounts
recognised directly in equity are also recognised directly in
equity.
Starpharma Holdings Limited and its wholly-owned Australian
controlled entities have not implemented the tax consolidation
legislation.
(h) Leases
Leases of plant and equipment where the Group has
substantially all the risks and rewards of ownership are classified
as finance leases (note 31). Finance leases are capitalised at the
lease’s inception at the lower of the fair value of the leased
property and the present value of the minimum lease payments.
The corresponding rental obligations, net of finance charges,
are included in other long term payables. Each lease payment is
allocated between the liability and finance cost. The finance cost
42
FINANCIAL REPORT
is charged to the income statement over the lease period so as
to produce a constant periodic rate of interest on the remaining
balance of the liability for each period. The plant and equipment
acquired under finance leases is depreciated over the shorter of
the asset’s useful life and the lease term.
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases (note 31). Payments made under operating leases (net of
any incentives received from the lessor) are charged to the
income statement on a straight-line basis over the lease term.
Lease income from operating leases is recognised in income on
a straight-line basis over the lease term.
(i) Business combinations
The purchase method of accounting is used to account for all
business combinations, including business combinations
involving entities or businesses under common control,
regardless of whether equity instruments or other assets are
acquired. Cost is measured as the fair value of the assets given,
shares issued or liabilities incurred or assumed at the date of
exchange plus costs directly attributable to the acquisition.
Where equity instruments are issued in an acquisition, the fair
value of the instruments is their published market price as at the
date of exchange unless, in rare circumstances, it can be
demonstrated that the published price at the date of exchange is
an unreliable indicator of fair value and that other evidence and
valuation methods provide a more reliable measure of fair value.
Transaction costs arising on the issue of equity instruments are
recognised directly in equity.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date, irrespective of
the extent of any minority interest. The excess of the cost of
acquisition over the fair value of the Group’s share of the
identifiable net assets acquired is recorded as goodwill (refer to
note 1(p)). If the cost of acquisition is less than the fair value of
the net assets of the subsidiary acquired, the difference is
recognised directly in the income statement, but only after a
reassessment of the identification and measurement of the net
assets acquired.
Where settlement of any part of cash consideration is deferred,
the amounts payable in the future are discounted to their present
value as at date of exchange. The discount rate used is the
entity’s incremental borrowing rate, being the rate at which a
similar borrowing could be obtained from an independent
financier under comparable terms and conditions.
(j) Impairment of assets
Goodwill and intangible assets that have an indefinite life are not
subject to amortisation and are tested annually for impairment.
Other assets are reviewed for impairment whenever events or
changes in circumstance indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the
amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an
asset’s fair value less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash
inflows (cash generating units).
(k) Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held
at call with financial institutions and other short-term, highly
liquid investments with original maturities of three months or less
that are readily convertible to known amounts of cash and which
are subject to an insignificant risk of changes in value. The
amount of significant cash and cash equivalents not available for
use is disclosed in note 8.
(l) Trade Receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment. Trade receivables
are generally due for settlement within 30 days.
Collectibility of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectible are written off
by reducing the carrying amount directly. An allowance account
(provision for impairment of trade receivables) is used when
there is objective evidence that the Group will not be able to
collect all amounts due according to the original terms of the
receivables. Significant financial difficulties of the debtor,
probability that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments (more
than 30 days overdue) are considered indicators that the trade
receivable is impaired. The amount of the impairment allowance
is the difference between the asset’s carrying amount and the
present value of estimated future cash flows, discounted at the
original effective interest rate. Cash flows relating to short-term
receivables are not discounted if the effect of discounting is
immaterial.
The amount of the impairment loss is recognised in the income
statement within other expenses. When a trade receivable for
which an impairment allowance had been recognised becomes
uncollectible in a subsequent period, it is written off against the
allowance account. Subsequent recoveries of amounts
previously written off are credited against other expenses in the
income statement. Trade receivables are recognised initially at
fair value and subsequently measured at amortised cost, less
provision for doubtful debts.
(m) Investments and other financial assets
Classification
The Group classifies its financial assets in the following
categories: financial assets at fair value through profit or loss,
loans and receivables, held-to-maturity investments and
available-for-sale financial assets. The classification depends on
the purpose for which the investments were acquired. Management
determines the classification of its investments at initial
recognition and, in the case of assets classified as held-to-
maturity, re-evaluates this designation at each reporting date.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those
with maturities greater than 12 months after the reporting date
which are classified as non-current assets. Loans and
receivables are included in trade and other receivables (note 9)
and receivables (note 10) in the balance sheet.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
43
FINANCIAL REPORT
1. Summary of significant accounting policies
(n) Property, Plant and Equipment
Property, plant and equipment is stated at historical cost less
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to the
income statement during the financial period in which they are
incurred.
Depreciation is calculated using the straight-line method to
allocate their cost or revalued amounts, net of the residual
values, over their estimated useful lives. The expected useful
lives are 2 to 10 years.
The assets’ residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount (note 1 (j)).
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount. These are included in the
income statement. When revalued assets are sold, it is Group
policy to transfer the amounts included in other reserves in
respect of those assets to retained earnings.
(o) Leasehold improvements
The cost of improvements to or on leasehold properties is
amortised over the unexpired period of the lease or the
estimated useful life of the improvement to the consolidated
entity between 5 to 6 years, whichever is shorter.
(p) Intangible Assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over
the fair value of the Group’s share of the net identifiable assets of
the acquired subsidiary/associate at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates is included in
investments in associates. Goodwill is not amortised. Instead,
goodwill is tested for impairment annually, or more frequently if
events or changes in circumstances indicate that it might be
impaired, and is carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of
impairment testing. Each of those cash-generating units
represents the Group’s investment in each company.
(ii) Patents and licences
Costs associated with patents are charged to the income
statement in the periods in which they are incurred. Licences
and acquired patents with a finite useful life are carried at cost
less accumulated amortisation and impairment losses.
Amortisation is calculated using the straight-line method to
allocate the cost of licences and patents over the period of the
expected benefit, which varies from 4 to 15 years.
(iii) Research and development
Expenditure on research activities, undertaken with the prospect
of obtaining new scientific or technical knowledge and
understanding, is recognised in the income statement as an
expense when it is incurred.
Expenditure on development activities, being the application of
research findings or other knowledge to a plan or design for the
production of new or substantially improved products or
services before the start of commercial production or use, is
capitalised if the product or service is technically and
commercially feasible and adequate resources are available to
complete development. The expenditure capitalised comprises
all directly attributable costs, including costs of materials,
services, direct labour and an appropriate proportion of
overheads. Other development expenditure is recognised in the
income statement as an expense as incurred. To date no
development costs have been capitalised.
(q) Trade and other payables
These amounts represent liabilities for goods and services
provided to the Group prior to the end of the reporting date
which are unpaid. The amounts are unsecured and are usually
paid within 30 days of recognition.
(r) Borrowings
Borrowings are initially recognised at fair value, net of
transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption amount
is recognised in the income statement over the period of the
borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the group
has an unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
(s) Provisions
Provisions for legal claims are recognised when the Group has a
present legal or constructive obligation as a result of past events
when it is more probable than not that an outflow of resources
will be required to settle the obligation; and the amount has been
reliably estimated. Provisions are not recognised for future
operating losses.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to
any one item in the same class of obligations may be small.
Provisions are measured at the present value of management’s
best estimate for the expenditure required to settle the present
obligation at the balance date. The discount rate used to
determine the present value reflects current market assessment
at the time, value of money, and the risks specific to liability. The
increase of the provision due to the passage of time is
recognised as interest expense.
(t) Employee benefits
(i) Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled within 12
months of the reporting date are recognised in 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.
44
FINANCIAL REPORT
(ii) Long service leave
The liability for long service leave is recognised in the provision
for employee benefits and measured as the present value of
expected future payments to be made in respect of services
provided by employees up to the reporting date using the
projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee
departures and periods of service. Expected future payments
are discounted using market yields at the reporting date on
national government bonds with terms to maturity and currency
that match, as closely as possible, the estimated future cash
outflows.
(iii) Superannuation
Group companies make the statutory superannuation guarantee
contribution in respect of each employee to their nominated
complying superannuation fund. In certain circumstances
pursuant to an employee’s employment contract the Group
companies may also be required to make additional
superannuation contributions and/or agree to make salary
sacrifice superannuation contributions in addition to the
statutory guarantee contribution. The Group’s legal or
constructive obligation is limited to the above contributions.
Contributions to the employees’ superannuation 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 reduction in future payments is available.
(iv) Employee benefits on-costs
Employee benefit on-costs, including payroll tax, are recognised
and included in other liabilities and costs when the employee
benefits to which they relate are recognised as liabilities.
(v) Share-based payments
Share-based compensation benefits are offered to the directors
and employees via the Starpharma Holdings Limited Employee
Share Option Plan (“SPLAM”). Information relating to these
plans is set out in note 38 and section D of the Remuneration
report under the Directors’ Report.
The fair value of options granted under SPLAM is recognised as
an employee benefit expense with a corresponding increase in
equity. The fair value is measured at grant date and recognised
over the period during which the employees become
unconditionally entitled to the options.
The fair value at grant date is determined using a Black-Scholes
option model that takes into account the exercise price, the term
of the option, the vesting and performance criteria, the impact of
dilution, the non-tradeable nature of the option, 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 excludes the impact of any
non-market vesting conditions (for example, profitability and
sales growth targets). Non-market vesting conditions are
included in assumptions about the number of options that are
expected to become exercisable. At each balance sheet date,
the entity revises its estimate of the number of options that are
expected to become exercisable. The employee benefit expense
recognised in 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.
(vi) Bonus payments
The Group recognises a liability and an expense for bonuses
based on a formula that takes into consideration performance
criteria that has been set. The group recognises a provision
where contractually obliged or where there is a past practice that
has created a constructive obligation.
(vii) Termination benefits
Termination benefits are payable when employment is
terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these
benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminating the employment
of current employees according to a detailed formal plan without
possibility of withdrawal or providing termination benefits as a
result of an offer made to encourage voluntary redundancy.
Benefits falling due more than12 months after reporting date are
discounted to present value.
(u) Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from
the proceeds. Incremental costs directly attributable to the issue
of new shares or options, for the acquisition of a business, are
not included in the cost of the acquisition as part of the purchase
consideration.
(v) Dividends
Provision is made for the amount of any dividend declared,
being appropriately authorised and no longer at the discretion of
the entity, on or before the end of the period but not distributed at
balance date.
(w) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the company, excluding any
costs of servicing equity other than ordinary shares, by the
weighted average number of ordinary shares outstanding during
the financial year, adjusted for bonus elements in ordinary
shares issued during the year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been
issued for no consideration in relation to dilutive potential
ordinary shares.
(x) 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.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
45
FINANCIAL REPORT
1. Summary of significant accounting policies
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the taxation
authority, are presented as operating cash flow.
(y) Rounding of amounts
The company is of a kind referred to in Class order 98/100,
issued by the Australian Securities and Investments
Commission, relating to the ‘’rounding off’’ of amounts in the
financial report. Amounts in the financial report have been
rounded off in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, the nearest dollar.
(z) New accounting standards and interpretations
Certain new accounting standards and interpretations have
been published that are not mandatory for 30 June 2008
reporting periods. The Group’s and the parent entity’s
assessment of the impact of these new standards and
interpretations is set out below.
(i) AASB 8 Operating Segments and AASB 2007-3 Amendments
to Australian Accounting Standards arising from AASB 8
AASB 8 and AASB 2007-3 are effective for annual reporting
periods commencing on or after 1 January 2009. AASB 8 will
result in a significant change in the approach to segment
reporting, as it requires adoption of a ‘management approach’
to reporting on financial performance. The information being
reported will be based on what the key decision makers use
internally for evaluating segment performance and deciding how
to allocate resources to operating segments. The Group has not
yet decided when to adopt AASB 8. Application of AASB 8 may
result in different segments, segment results and different types
of information being reported in the segment note of the financial
report. However, at this stage, it is not expected to affect any of
the amounts recognised in the financial statements.
(ii) Revised AASB 123 Borrowing Costs and AASB 2007-6
Amendments to Australian Accounting Standards arising from
AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116
& AASB 138 and Interpretations 1 & 12]
The revised AASB 123 is applicable to annual reporting periods
commencing on or after 1 January 2009. It has removed the
option to expense all borrowing costs and - when adopted - will
require the capitalisation of all borrowing costs directly
attributable to the acquisition, construction or production of a
qualifying asset. There will be no impact on the financial report of
the Group, as the Group already capitalises borrowing costs
relating to qualifying assets.
(iii) Revised AASB 101 Presentation of Financial Statements and
AASB 2007-8 Amendments to Australian Accounting Standards
arising from AASB 101
A revised AASB 101 was issued in September 2007 and is
applicable for annual reporting periods beginning on or after 1
January 2009. It requires the presentation of a statement of
comprehensive income and makes changes to the statement of
changes in equity, but will not affect any of the amounts
recognised in the financial statements. If an entity has made a
prior period adjustment or has reclassified items in the financial
statements, it will need to disclose a third balance sheet
(statement of financial position), this one being as at the
beginning of the comparative period. The Group intends to
apply the revised standard from 1 July 2009.
(iv) AASB 2008-1 Amendments to Australian Accounting
Standard - Share-based Payments: Vesting Conditions and
Cancellations
AASB 2008-1 was issued in February 2008 and will become
applicable for annual reporting periods beginning on or after 1
January 2009. The revised standard clarifies that vesting
conditions are service conditions and performance conditions
only and that other features of a share-based payment are not
vesting conditions. It also specifies that all cancellations,
whether by the entity or by other parties, should receive the
same accounting treatment. The Group will apply the revised
standard from 1 July 2009, but it is not expected to affect the
accounting for the Group’s share-based payments.
(v) Revised AASB 3 Business Combinations, AASB 127
Consolidated and Separate Financial Statements and AASB
2008-3 Amendments to Australian Accounting Standards arising
from AASB 3 and AASB 127
Revised accounting standards for business combinations and
consolidated financial statements were issued in March 2008
and are operative for annual reporting periods beginning on or
after 1 July 2009, but may applied earlier. The Group has not yet
decided when it will apply the revised standards. However, the
new rules generally apply only prospectively to transactions that
occur after the application date of the standard. Their impact will
therefore depend on whether the Group will enter into any
business combinations or other transactions that affect the level
of ownership held in the controlled entities in the year of initial
application. For example, under the new rules:
– all payments (including contingent consideration) to
purchase a business are to be recorded at fair value at the
acquisition date, with contingent payments subsequently
remeasured at fair value through income
– all transaction cost will be expensed
– the Group will need to decide whether to continue calculating
goodwill based only on the parent’s share of net assets or
whether to recognise goodwill also in relation to the non-
controlling (minority) interest, and
– when control is lost, any continuing ownership interest in the
entity will be remeasured to fair value and a gain or loss
recognised in profit or loss.
(vi) Amendments to IFRS 1 and IAS 27 Cost of an Investment in a
Subsidiary, Jointly Controlled Entity or Associate
In May 2008, the IASB made amendments to IFRS 1 First-time
Adoption of International Financial Reporting Standards and IAS
27 Consolidated and Separate Financial Statements. The new
rules will apply to financial reporting periods commencing on or
after 1 January 2009. Amendments to the corresponding
Australian Accounting Standards are expected to be issued
shortly. After application of these revised rules, all dividends
received from investments in subsidiaries, jointly controlled
entities or associates will be recognised as revenue, even if they
are paid out of pre-acquisition profits, but the investments may
need to be tested for impairment as a result of the dividend
payment. Furthermore, when a new intermediate parent entity is
created in internal reorganisations it will measure its investment
in subsidiaries at the carrying amounts of the net assets of the
subsidiary rather than the subsidiary’s fair value.
46
FINANCIAL REPORT
2. Financial risk management
The Group’s activities expose it to a variety of financial risks; including market risk and liquidity. The Group’s overall risk management
program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the Group. The chief executive officer and company secretary, under the guidance of the board, have responsibility
for the risk management program.
a) Market risk
(i) Foreign Exchange Risk
Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a
currency that is not the entity’s functional currency. The Group operates internationally and is exposed to foreign exchange risk
arising from currency exposures to major currencies including the US dollar. On the basis of the nature of these transactions, the
Group does not use derivative financial instruments to hedge such exposures, but maintains cash and deposits in both Australian
and US dollars. The directors are regularly monitoring the potential impact of movements in foreign exchange exposure.
The exposure to foreign currency risk at the reporting date was as follows:
Cash and cash equivalents
Trade and other receivables
Receivables - intercompany loans
Trade and other payables
Deferred Income
Consolidated
2007
US
$’000
4,309
851
–
874
711
2008
US
$’000
6,313
1,515
–
1,097
1,423
Parent
2007
US
$’000
1,209
–
1,028
24
–
2008
US
$’000
2,172
–
2,279
5
–
Group and Parent Sensitivity
The Group is mainly exposed to US dollars. The following table details the Group’s sensitivity to a 10% increase and decrease in the
Australian dollar against the US dollar. A sensitivity of 10% represents the possible change in foreign exchange rates based on
historic trends. A positive number indicates a favourable movement; that is an increase In profit or reduction in the loss.
Impact on profit / (loss) on a movement of the
US Dollar:
Australian dollar strengthens (increases)
against the US Dollar by 10%
Australian dollar weakens (decreases)
against the US Dollar by 10%
Consolidated
2007
$’000
(383)
468
2008
$’000
(501)
613
2008
$’000
11
13
Parent
2007
$’000
(17)
21
(ii) Fair Value Interest Rate Risk
The Group and Parent hold interest bearing assets and therefore the income and operating cash flows are exposed to market
interest rates.
As at the reporting date, The Group and Parent had the following at call and short term deposits of 30 days.
Deposits at call
Consolidated
2008
$’000
2,976
2007
$’000
6,054
2008
$’000
2,407
Parent
2007
$’000
5,523
STARPHARMA HOLDINGS LIMITED Annual Report 2008
47
FINANCIAL REPORT
2. Financial risk management
Group and Parent Sensitivity
At 30 June 2008, if interest rates had changed by 50 basis points either higher or lower from the year end rates with all other variables
held constant, Group profit for the year would have been $17,000 higher or lower (2007 - change of 50 bps: $32,000 higher/lower)
due to either higher or lower interest income from cash or cash equivalents. The Parent’s profit for the year would have been $12,000
higher or lower (2007 - change of 50 bps: $28,000 higher/lower).
(b) Credit risk
The Group has no significant concentrations of credit risk as it does not have significant third party receivables other than under
government funded research and development programs and royalty receivables from large, well respected companies.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities. The directors regularly monitor the
cash position of the consolidated entity, giving consideration to the level of expenditure and future capital commitments entered into.
(d) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure
purposes.
The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale
securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the
Group is the current bid price.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives and
investments in unlisted subsidiaries) is determined using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar
instruments are used for long-term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to
determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of
the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at
the reporting date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to
their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual
cash flows at the current market interest rate that is available to the Group for similar financial instruments.
3. Critical accounting estimates and judgments
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations
of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
(a) Critical accounting estimates and assumptions
The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that have a significant risk of causing material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below.
i) Amortisation of finite life intangible assets
The Group’s management determines the estimated life of the patents underlying the core technology of the business and
calculates amortisation accordingly. The estimate is based on the period of expected benefit which currently stands at 4–15 years.
This could change as a result of technical innovations or competitor actions in response to severe industry cycles. Management will
increase amortisation charges when the useful lives are less than previously estimated lives. The carrying value of intangible assets
at 30 June 2008 is $14,640,000 (2007: $17,786,000).
ii) Impairment of Goodwill
The group tests annually whether goodwill has suffered any impairment. In accordance with the accounting policy stated in notes
1(j) and 1(q). Impairment of goodwill is considered based on the fair value less cost to sell of the cash generating units over which
the goodwill is allocated. Performing the assessment of fair value less costs to sell requires the use of assumptions. Refer to note 12
for details of these assumptions.
iii) Income Taxes
The Group is subject to income taxes in Australia and the United States of America. There are transactions and calculations
undertaken during the ordinary course of business for which the ultimate tax determination may be uncertain. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and
deferred tax provisions in the period in which such determination is made.
The Group has recognised deferred tax assets relating to carried forward losses to the extent there are sufficient taxable temporary
differences (deferred tax liabilities) relating to the same taxation authority and the same subsidiary against which the unused tax
losses can be utilised. However, utilisation of the tax losses also depends on the ability of the entity to satisfy certain tests at the time
the losses are recouped.
48
FINANCIAL REPORT
(b) Critical accounting judgments in applying accounting policies
i) Fair value of intellectual property in purchase price allocation of subsidiary
The Group engaged a professional firm to undertake a valuation of the fair value of the intellectual property assets recognised on
acquisition of the remaining share of the US based associate Dendritic Nanotechnologies Inc (“DNT”). The methodology used was a
discounted cash flow analysis based on the future potential revenue derived from the intellectual property to support the fair value of
the asset acquired. To allocate the purchase price of the business combination, management attributed a value of $14.9 million
being the mid point of the experts’ valuation range.
ii) Impairment of Assets
The Group follows the guidance of AASB 136 on determining when an investment is other-than-temporarily impaired. This
determination requires significant judgment. In making these judgments, 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 financial health of the near-term business outlook for
the investee. This includes factors such as industry performance, changes in technology, operating and financing cash flow and
recent transactions involving equity instruments.
4. Segment information
Business Segment
The consolidated entity operates in one business segment, being the discovery, development and commercialisation of dendrimers
for pharmaceutical and other life science applications.
Geographic Segment
The consolidated entity operates in Australia, with the exception of Dendritic Nanotechnologies Inc. (“DNT”) which operates in the
United States of America (“USA”). The results of DNT were accounted for by the equity method up until it became a wholly owned
subsidiary of the consolidated group.
Following the 100% acquisition of DNT, it has been determined that on the basis of monitoring of the USA operations, these
operations represent a separate geographical segment. In prior periods, the results of DNT were equity accounted.
Secondary reporting format-geographical segments
2008
Revenue and other income
Expenses
Share of results of associates
Loss before income tax
Segment net assets
Secondary reporting format-geographical segments
2007
Revenue and other income
Expenses
Share of results of associates
Loss before income tax
Segment net assets
Australia
$’000
8,486
(14,261)
(5,775)
USA
$’000
1,696
(4,067)
(2,371)
Inter-segment
Eliminations
$’000
(261)
261
–
11,879
8,425
79
Australia
$’000
8,363
(13,993)
(5,630)
USA
$’000
1,246
(3,405)
(2,159)
Inter-segment
Eliminations
$’000
(55)
55
–
13,354
12,405
(35)
Total
$’000
9,921
(18,067)
(8,146)
(76)
(8,222)
20,383
Total
$’000
9,554
(17,343)
(7,789)
(178)
(7,967)
25,724
STARPHARMA HOLDINGS LIMITED Annual Report 2008
49
FINANCIAL REPORT
5. Revenue
Revenue and Other Income
Royalty, Customer & License revenue
Interest Revenue
Other Revenue
Total Revenue
Australian Government Grants
USA Government Grants
Total Other Income
Total Revenue and Other Income
Consolidated
Parent
2008
$’000
1,408
297
4
1,709
108
8,104
8,212
9,921
2007
$’000
860
599
4
1,463
276
7,815
8,091
9,554
2008
$’000
–
414
–
414
–
–
–
414
2007
$’000
–
581
–
581
–
–
–
581
With the exception of normal audit requirements, there are no unfulfilled conditions or other contingencies attached to the portions
of Government grant and contract incomes recognised above. The Group did not benefit from any other form of government
assistance.
6. Expenses
Loss from ordinary activities before income tax
expense includes the following items:
Depreciation
Amortisation
Rental expense on operating leases
Defined contribution superannuation expense
Consolidated
2007
$’000
647
1,373
441
575
2008
$’000
553
1,546
521
591
Parent
2007
$’000
–
398
–
130
2008
$’000
–
545
–
127
50
7. Income tax expense
Notes
a) Income tax expense/(credit)
Current Tax
Deferred Tax
Income tax expense is attributable to:
Profit from continuing operations
Profit from discontinued operations
Aggregate income credit
Deferred income tax credit
included in income tax expenses comprises:
(Decrease) in deferred tax liabilities
23
FINANCIAL REPORT
Consolidated
Parent Entity
2008
$’000
(731)
(731)
(731)
–
(731)
(731)
(731)
2007
$’000
–
(722)
(722)
(722)
–
(722)
(722)
(722)
2008
$’000
2007
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
b) Numerical reconciliation to income tax prima facie tax payable
Loss from continuing operations before
income tax
Tax at the Australian tax rate of 30%
Tax effect of amounts which are not deductible
(taxable) in calculating taxable income
Equity accounted loss
Write down in carrying value of investments
Gain in dilution of equity investments
Write down in carrying value of loans
Share-based payments
Difference in overseas tax rates
Future income tax benefits not brought to
account
Income tax credit
c) Amounts recognised directly in equity
(8,222)
(2,467)
(7,967)
(2,390)
(6,045)
(1,814)
(5,762)
(1,729)
–
23
–
–
61
44
1,608
(731)
81
–
(28)
–
83
87
1,445
(722)
–
–
–
1,127
30
–
657
–
Reduction of deferred tax liabilities of $267,000 (2007: $131,000) arising due to foreign exchange movements have been
recognised within the foreign currency translation reserve in equity.
d) Tax losses
Unused tax losses for which no deferred tax
asset has been recognised (as recovery is
currently not probable)
Potential tax benefit
e) Unrecognised temporary differences
Temporary differences for which no
deferred tax asset has been recognised as
recoverability is not probable
Unrecognised deferred tax relating to the
temporary differences
49,740
14,922
43,415
13,024
2,570
771
2,577
773
5,309
1,593
406
122
–
–
–
1,333
–
–
396
–
3,284
985
588
176
STARPHARMA HOLDINGS LIMITED Annual Report 2008
51
FINANCIAL REPORT
7. Income tax expense
Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 30 June 2008
because the directors do not believe that it is appropriate to regard realisation of the future income tax benefit as probable. Similarly,
future benefits attributable to net temporary differences have not been brought to account as the directors do not regard the
realisation of such benefits as probable.
Realisation of the benefit of tax losses would be subject to the Group satisfying the conditions for deductibility imposed by tax
legislation and no subsequent changes in tax legislation adversely affecting the Group. The Group made an assessment as to the
satisfaction of deductibility conditions at 30 June 2006, however no such similar assessment has been performed at 30 June 2007 or
30 June 2008.
8. Current assets – Cash and cash equivalents
Cash at bank and on hand
Deposits at call
Consolidated
Parent Entity
2008
$’000
4,506
2,976
7,482
2007
$’000
4,019
6,054
10,073
2008
$’000
13
2,407
2,420
2007
$’000
61
5,523
5,584
Cash at bank and on hand
The cash is bearing floating interest rates based on current bank rates.
Deposits at call
The deposits are bearing floating interest rates ranging from 1.25% to 7.59% (2007: 6.10% to 6.26%). These deposits are of 30 day
maturities.
Cash not available
There is $260,000 of cash not available for use due to restrictions associated with a finance lease which is guaranteed by term
deposit (2007: $329,000).
Interest rate risk
30 June 2008
Floating
Interest
rate
Fixed interest maturing
Financial Assets
Notes
1 year
or less
$’000
1 to 2
years
$’000
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
More than
5 years
$’000
Non-interest
bearing
$’000
$’000
Total
$’000
Contractual
cash flows
8
9
395
–
395
2,976
–
2,976
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,111
1,773
5,884
7,482
1,773
9,255
N/A
1,773
1,773
3.5%
2.8% 0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
16/18/21
17/20
19/22
–
–
–
–
–
124
–
124
–
133
–
133
–
160
–
160
–
–
–
–
–
–
–
–
–
–
–
–
2,076
–
1,648
3,724
2,076
417
1,648
4,141
2,076
417
1,048
4,141
0.0%
8.0% 8.0%
7.8%
0.0%
0.0%
0.0%
0.0%
Cash and
deposits
Receivables
Weighted average
interest rate
Financial
Liabilities
Payables
and provisions
Borrowings
Deferred income
Weighted average
interest rate
52
FINANCIAL REPORT
30 June 2007
Floating
Interest rate
Fixed interest maturing
Financial Assets
Cash and
deposits
Receivables
Weighted average
interest rate
Financial
Liabilities
Payables and
provisions
Borrowings
Deferred income
Weighted average
interest rate
Notes
8
9
1 year
or less
$’000
1 to 2
years
$’000
2 to 3
years
$’000
3 to 4
years
$’000
4 to 5
years
$’000
More than
5 years
$’000
Non-interest
bearing
$’000
$’000
Total
$’000
Contractual
cash flows
703
–
6,054
–
703
6,054
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,316 10,073
1,335
1,335
4,651 11,408
N/A
1,335
1,335
5.0%
5.8% 0.0%
0.0%
0.0% 0.0%
0.0%
0.0%
16/18/21
17/20
19/22
–
–
–
–
–
69
–
69
–
73
–
73
–
79
–
79
–
108
–
108
–
–
–
–
–
–
–
–
2,268
–
1,149
2,268
329
1,149
3,417
3,746
2,268
329
1,149
3,746
0.0%
7.2% 7.2%
7.2%
7.2% 0.0%
0.0%
0.0%
9. Current assets – Trade and other receivables
Trade and grant receivable
Interest receivable
Prepayments
Loans to controlled entities
Other receivables
Consolidated
Parent Entity
2008
$’000
1,311
2
370
–
90
1,773
2007
$’000
865
14
436
–
20
1,335
2008
$’000
75
–
48
–
74
197
2007
$’000
–
58
64
1,254
60
1,436
Trade and grant receivables
Trade receivables comprise of customer royalty and licence revenue and are subject to normal terms of settlement within 30 to 90
days. Grant receivables comprise expenditure reimbursable under grants from USA National Institutes of Health (“NIH”) and are
subject to normal terms of settlement within 30 to 60 days.
Impaired receivables
As at 30 June 2008 there are no receivables aged past due date (2007: nil). Accordingly, no receivables are considered impaired
at 30 June 2008 (2007: nil) other than from subsidiaries within the group.
Loans to controlled entities
At 30 June 2008, the directors reclassified the inter-company loan to DNT as a non-current receivable. The terms of the loan
agreement are that the principal and accrued interest is currently due at 30 June 2009. At 30 June 2007 the loan was classified as
a current asset.
Other receivables
Other receivables comprise sundry debtors and GST claimable and are subject to normal terms of settlement within 30 days.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
53
FINANCIAL REPORT
10. Non-current assets – Receivables
Loans to controlled entities
Impairment provision
Consolidated
Parent Entity
2008
$’000
–
–
–
2007
$’000
–
–
–
2008
$’000
37,639
(35,008)
2,631
2007
$’000
31,250
(31,250)
–
Interest rate risk
With the exception of loans to controlled entities, current and non-current receivables are non-interest bearing. Information
concerning the effective interest rate is detailed in note 8.
Credit risk
The Group considers that there is no significant concentration of credit risk with respect to current and non-current receivables.
Grant receivables are with government bodies and royalty receivables are from large, well respected companies. Loans to
controlled entities are assessed for recoverability and provisions are applied as considered appropriate.
11. Non-current assets – Property, plant and equipment
Consolidated
Plant and
Equipment
$’000
Leasehold
improvements
$’000
Plant and
Equipment under
finance lease
$’000
Total Plant and
Equipment
$’000
At 30 June 2006
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2007
Opening net book amount
Exchange differences
Acquisition of subsidiary
Additions
Disposals
Depreciation and amortisation
Closing net book amount
At 30 June 2007
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2008
Opening net book amount
Exchange differences
Additions
Disposals
Depreciation and amortisation
Closing net book amount
At 30 June 2008
Cost
Accumulated depreciation and amortisation
Net book amount
1,947
(1,346)
601
601
(7)
151
180
(2)
(303)
620
2,251
(1,631)
620
620
(9)
36
(3)
(256)
388
2,270
(1,882)
388
1,136
(753)
383
383
–
–
5
–
(193)
195
1,141
(946)
195
195
(178)
17
1,141
(1,124)
17
758
(311)
447
447
–
–
–
–
(151)
296
757
(461)
296
296
176
(119)
353
614
(261)
353
3,841
(2,410)
1,431
1,431
(7)
151
185
(2)
(647)
1,111
4,149
(3,038)
1,111
1,111
(9)
212
(3)
(553)
758
4,025
(3,267)
758
The parent entity has no plant and equipment in 2008 (2007: Nil).
54
12. Non-current assets – Intangible assets
Consolidated
Patents & Licences
$’000
Goodwill
$’000
Total Intangibles
$’000
FINANCIAL REPORT
At 30 June 2006
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2007
Opening net book amount
Acquisition of subsidiary
Exchange differences
Depreciation and amortisation
Closing net book amount
At 30 June 2007
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2008
Opening net book amount
Exchange differences
Depreciation and amortisation
Closing net book amount
At 30 June 2008
Cost
Accumulated depreciation and amortisation
Net book amount
4,374
(287)
4,087
4,087
14,900
(1,583)
(1,373)
16,031
17,634
(1,603)
16,031
16,031
(1,392)
(1,546)
13,093
16,065
(2,972)
13,093
–
–
–
–
1,972
(217)
–
1,755
1,755
–
1,755
1,755
(208)
–
1,547
1,547
–
1,547
4,374
(287)
4,087
4,087
16,872
(1,800)
(1,373)
17,786
19,389
(1,603)
17,786
17,786
(1,600)
(1,546)
14,640
17,612
(2,972)
14,640
Identifiable intangible assets with finite lives are carried at cost less accumulated amortisation and adjusted for any accumulated
impairment loss. The assets are assessed at each reporting date as to whether there is any indication that the asset is impaired.
Goodwill is tested annually for impairment based on the fair value less costs to sell of the cash generating units over which the
goodwill is allocated.
The Group operates in one business segment being the discovery, development and commercialisation of dendrimers for
pharmaceutical and other life science applications. Following the acquisition of the DNT business during 2007, the Group has
operations in both Australia and the United States – these geographical segments are also determined to be the Cash Generating
Units (CGUs) of the Starpharma Group.
The directors have determined that the goodwill arising on the acquisition of the remaining share of the DNT business should be
allocated across these CGUs as the business combination gives rise to synergies within both Starpharma’s Australian operations
and the DNT business in the United States. Allocation of the goodwill across geographical segments is considered appropriate as
the goodwill is allocated across the same business segment.
The market capitalisation of the Starpharma Group is used to determine an approximation of the fair value less costs to sell of the
two CGUs which make up the Starpharma Group. Given the excess of the market capitalisation of Starpharma Holdings Limited
over the carrying value of total assets (including goodwill) at 30 June 2008, goodwill is not considered to be impaired at year end.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
55
FINANCIAL REPORT
12. Non-current assets – Intangible assets
Parent
Patents & Licences
$’000
Goodwill
$’000
Total Intangibles
$’000
At 30 June 2006
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2007
Opening net book amount
Depreciation and amortisation
Closing net book amount
At 30 June 2007
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2008
Opening net book amount
Depreciation and amortisation
Closing net book amount
At 30 June 2008
Cost
Accumulated depreciation and amortisation
Net book amount
4,374
(287)
4,087
4,087
(398)
3,689
4,374
(685)
3,689
3,689
(545)
3,144
4,374
(1,230)
3,144
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,374
(287)
4,087
4,087
(398)
3,689
4,374
(685)
3,689
3,689
(545)
3,144
4,374
(1,230)
3,144
13. Non-current assets – Investments accounted for using the equity method
Consolidated
Parent Entity
Shares in associated entities
Notes
33
2008
$’000
–
2007
$’000
76
2008
$’000
–
2007
$’000
–
Shares in associates
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting and
carried at cost less provision for impairment by the parent entity (refer to note 33).
The carrying value of Dimerix Bioscience Pty Ltd at 30 June 2008 has been written down to Nil (2007: $76,000) with a $76,000
impairment charge to profit and loss.
56
FINANCIAL REPORT
14. Non-current assets – Deferred tax assets
Temporary differences recognised on the
acquisition of subsidiary during the year
Total deferred tax asset
Consolidated
2007
$’000
43
43
2008
$’000
–
–
Parent
2007
$’000
–
–
2008
$’000
–
–
The Group has future income tax benefits not brought to account at balance date because the directors do not believe it is
probable that the benefit of these losses will be realised in the near future. Refer to note 7 for additional detail on unused tax
losses.
15. Non-current assets – Other financial assets
Other non-traded investments
Shares in controlled entities
Provision for impairment in value
Shares in associated entities
Consolidated
Parent Entity
Notes
32
33
2008
$’000
2007
$’000
–
–
–
–
–
–
–
–
2008
$’000
33,752
(17,500)
–
16,252
2007
$’000
33,752
(17,500)
40
16,292
At 30 June 2008 and 2007, the directors undertook to assess the recoverable amount of the parent entity’s investments in its
subsidiaries. Each subsidiary has a value which is directly linked to the potential cash flows which may be derived from the
outcome of their respective research and development activities. At 30 June 2008 and 2007, the directors have assessed that
there is not sufficient certainty with respect to those potential future cash flows to warrant the deferral of research and development
expenditure (the recovery of which is not assured beyond reasonable doubt) and similarly, to support the carrying value of the
parent entity’s investments in its subsidiaries. As a result the carrying values of the parent entity’s investments in its subsidiaries,
excluding DNT, remain written down to nil as at 30 June 2008 and 2007.
16. Current liabilities – Trade and other payables
Trade creditors
Loans from controlled entities
Consolidated
Parent Entity
2008
$’000
1,623
–
1,623
2007
$’000
1,855
–
1,855
2008
$’000
823
654
1,477
2007
$’000
716
654
1,370
STARPHARMA HOLDINGS LIMITED Annual Report 2008
57
FINANCIAL REPORT
17. Current liabilities – Borrowings
Finance lease liability (secured)
Consolidated
Parent Entity
2008
$’000
124
2007
$’000
69
2008
$’000
–
2007
$’000
–
Details of the security relating to each of the secured liabilities are set out in Note 20.
18. Current liabilities – Provisions
Employee entitlements
Consolidated
Parent Entity
2008
$’000
417
2007
$’000
356
2008
$’000
–
2007
$’000
–
19. Current liabilities – Deferred income
Consolidated
Parent Entity
2008
$’000
1,551
2007
$’000
980
2008
$’000
–
2007
$’000
–
Deferred income
20. Non-current liabilities – Borrowings
Finance lease liability (secured)
Consolidated
Parent Entity
2008
$’000
293
2007
$’000
260
2008
$’000
–
2007
$’000
–
Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor
in the event of default. The carrying value of leased assets is $417,000 at 30 June 2008 (2007: $329,000).
58
FINANCIAL REPORT
20. Non-current liabilities – Borrowings
2008
Floating
Interest rate
Notes
1 year
or less
$’000
Over 1–2
years
$’000
Over 2–3
years
$’000
Over 3–4
years
$’000
Fixed interest rate
Over 5
years
$’000
Over 4–5
years
$’000
Lease Liabilities
17/20/31
Weighed average interest rate
124
8.0%
133
8.0%
160
7.8%
–
–
–
–
Total
$’000
417
2007
Floating
Interest rate
Fixed interest rate
Notes
Lease Liabilities
17/20/31
Weighed average interest rate
1 year
or less
$’000
69
7.2%
–
–
Over 1–2
years
$’000
73
Over 2–3
years
$’000
79
Over 3–4
years
$’000
108
Over 4–5
years
$’000
–
Over 5
years
$’000
–
Total
$’000
329
7.2%
7.2%
7.2%
–
–-
21. Non-current liabilities – Provisions
Employee entitlements
2008
$’000
37
2007
$’000
57
2008
$’000
–
2007
$’000
–
Consolidated
Parent Entity
22. Non-current liabilities – Deferred income
Deferred income
2008
$’000
97
2007
$’000
169
2008
$’000
–
2007
$’000
–
Consolidated
Parent Entity
23. Non-current liabilities – Deferred tax liabilities
Balance at 1 July
Recognised during the year on the acquisition of
subsidiary due to the difference in fair value of intangible
asset and its tax base
Offset of deferred tax asset arising from tax losses on
acquisition
Reduction in deferred tax liability arising from
Amortisation of intangible asset
Impacts of foreign exchange
Offset of deferred tax asset arising from post acquisition
tax losses
Net deferred tax liability
Consolidated
Parent Entity
2008
$’000
954
–
–
(241)
(95)
(490)
128
2007
$’000
–
3,178
(1,371)
(325)
(131)
(397)
954
2008
$’000
–
2007
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
STARPHARMA HOLDINGS LIMITED Annual Report 2008
59
FINANCIAL REPORT
24. Contributed equity
(a) Share Capital
Share Capital
Ordinary shares – fully paid
(b) Movements in ordinary share capital
Date
1-Jul-06
20-Oct-06
Details
Opening Balance
DNT acquisition share placement
22-Aug-07
Balance at 30 June 2007
Share Placement
less Transaction costs
Balance at 30 June 2008
Parent Entity
Parent Entity
2008
Shares
2007
Shares
2008
$’000
2007
$’000
179,715,153
167,833,986
78,667
76,227
Number of shares
147,739,245
20,094,741
167,833,986
11,881,167
179,715,153
Issue Price
$0.54
$0.321
$’000
65,376
10,851
76,227
2,784
(344)
78,667
1 Shares with unlisted options attached were issued at a price of $0.32. The fair value of the options of $1,033,000 has been taken
to reserves.
c) Ordinary shares
As at 30 June 2008 there were 179,715,153 issued ordinary shares. 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.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a
poll each share is entitled to one vote.
(d) Options
Information relating to the Starpharma Holdings Limited Employee Share Option Plan and Individual option deeds, including details
of options issued, exercised and expired during the financial year and options outstanding at the end of the financial year are set out
in Note 38.
(e) Capital risk management
The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern,
so that they can continue to provide returns for shareholders and benefits for other stakeholders.
60
25. Reserves
(a) Reserves
Share-based payments reserve
Foreign currency translation reserve
Asset revaluation reserve
(b) Movement in reserves
Share-based payments reserve
Balance at 1 July
Fair value of options
granted on share placement
Option expense
Balance at 30 June
Foreign currency translation reserve
Balance at 1 July
Currency translation differences
arising during the year
Balance at 30 June
Asset revaluation reserve
Balance at 1 July
Uplift in fair value of the identifiable net
assets of DNT on acquisition of the
remaining share in associate have been
taken to the asset revaluation reserve
Balance at 30 June
FINANCIAL REPORT
Consolidated
Parent Entity
2007
$’000
697
(1,613)
2,215
1,299
2008
$’000
1,838
–
–
1,838
2007
$’000
697
–
–
697
Consolidated
Parent Entity
2008
$’000
697
1,033
108
1,838
–
–
–
–
–
–
2007
$’000
422
–
275
697
–
–
–
–
–
–
2008
$’000
1,939
(3,145)
2,215
1,009
2008
$’000
697
1,033
209
1,939
(1,613)
(1,532)
(3,145)
2007
$’000
422
–
275
697
76
(1,689)
(1,613)
2,215
–
–
2,215
2,215
2,215
(c) Nature and purpose of reserves
(i) Share-base payments reserve
The share-based payments reserve is used to recognise the fair value of options issued but not exercised.
(ii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign associate/subsidiary are taken to the foreign currency translation reserve,
as described in Note 1(d). The reserve is recognised in income statement when the net investment is disposed of.
(iii) Asset revaluation reserve
Uplift in fair value of the identifiable net assets of DNT on acquisition of the remaining share in associate.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
61
FINANCIAL REPORT
26. Accumulated Losses
Accumulated losses balance at 1 July
Net loss for the year
Accumulated losses balance at 30 June
27. Business Combination
Consolidated
Parent Entity
2008
$’000
(51,802)
(7,491)
(59,293)
2007
$’000
(44,557)
(7,245)
(51,802)
2008
$’000
(51,293)
(6,045)
(57,338)
2007
$’000
(45,531)
(5,762)
(51,293)
(a) Summary of acquisition
On 20 October 2006, Starpharma Holdings Ltd acquired the remaining 67% of equity in Dendritic Nanotechnologies Inc. (“DNT”), an
unlisted USA Delaware corporation, located in Michigan State, USA. DNT focuses on dendrimer nanotechnology applications, within
the life-science and other sectors. Pre the acquisition, Starpharma Holdings Limited was a 33% shareholder in DNT.
(b) Purchase consideration
The total cost of the acquisition was $11,082,790 comprising the issue of ordinary shares in Starpharma Holdings Limited and the
costs directly attributable to the acquisition. The Group issued 20,094,741 shares with a fair value of $0.5400 per share, based on
the closing quoted price of Starpharma Holdings Limited shares at the date of the exchange.
(c) Assets and liabilities acquired
The fair value of the identifiable assets and liabilities of DNT as at the date of acquisition were:
100% Acquiree’s
carrying value
$’000
100% fair value
acquired
$’000
Recognised on
67% of acquisition
$’000
Assets
Cash and cash equivalents
Trade & other receivables
Other assets
Property, plant & equipment
Intangible assets
Deferred tax asset
Liabilities
Trade & other payables
Other current liabilities
Employee provisions
Deferred tax liability
Fair Value of identifiable net assets
Goodwill arising on consolidation
Cost of the combination:
Shares issued at fair value
Costs associated with the acquisition
Total cost of the acquisition
The cash outflow on the acquisition is as follows:
Net cash acquired with the subsidiary
Costs associated with the acquisition
Net cash outflow
62
141
357
53
151
5,837
–
(158)
(39)
(61)
–
6,281
141
357
53
151
14,900
1,371
(158)
(39)
(61)
(3,178)
13,537
95
240
35
101
10,023
919
(106)
(26)
(41)
(2,129)
9,111
1,972
10,851
232
11,083
141
(232)
(91)
FINANCIAL REPORT
Prior to the business combination, Starpharma Holdings Limited held a 33% investment in DNT. The identifiable net assets have
been uplifted to fair value; this has been recognised through the revaluation reserve.
The intellectual property acquired through the DNT business combination was valued at $14,900,000. The carrying value of
$9,949,000 at 30 June 2008 is adjusted for exchange rate movements and is net of amortisation charged from 20 October 2006 to
30 June 2008. Refer to Note 12 Intangible assets for additional detail on the movement and carrying value of intangible assets.
28. Key management personnel disclosures
(a) Directors
The following persons were directors of Starpharma Holdings Limited during the financial year:
Name
P T Bartels
J K Fairley
J W Raff
R Dobinson
P J Jenkins
R A Hazleton
P M Colman
L Gorr
Position
Non-executive Chairman
Chief Executive Officer and Executive Director
Non-executive Deputy Chairman
Non-executive
Non-executive
Non-executive
Non-executive (resigned 11 February 2008)
Non-executive (resigned 14 November 2007)
(b) Other key management personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group,
directly or indirectly, during the financial year:
Name
B P Rogers
J R Paull
C P Barrett
N J Baade
R I Berry
D J Owen
Position
Company Secretary and Chief Financial Officer
VP – Development and Regulatory Affairs
VP – Business Development
Financial Controller
President, DNT
VP – Research
Key management personnel during the year ended 30 June 2007 were:
Position
Name
Company Secretary and Chief Financial Officer
B P Rogers
VP – Development and Regulatory Affairs (Previously VP – Regulatory and Clinical Affairs)
J R Paull
VP – Business Development
C P Barrett
Financial Controller
N J Baade
President, DNT (from 20 October 2006)
R I Berry
VP – Research (from 15 February 2007)
D J Owen
VP – Drug Development (until 17 November 2006)
T D McCarthy
Head of Chemistry (until 8 December 2006)
G Y Krippner
VP – Commercial Development & Licensing (until 12 January 2007)
O T Grogan
STARPHARMA HOLDINGS LIMITED Annual Report 2008
63
FINANCIAL REPORT
28. Key management personnel disclosures
(c) Key management personnel compensation
Short term employee benefits
Post employment benefits
Other long term benefits
Share based payments
Consolidated
Parent Entity
2008
$’000
1,511
347
11
147
2,016
2007
$’000
1,454
484
16
153
2,107
2008
$’000
604
180
–
23
807
2007
$’000
504
314
1
124
943
(d) Equity instrument disclosures relating to key management personnel
Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions
of the options, can be found in section D of the remuneration report on pages 23 to 24.
Option holdings
The numbers of options over ordinary shares in the company held during the financial year by each director of Starpharma Holdings
Limited and other key management personnel of the Group, including their personally related parties, are set out below.
With the exception of J K Fairley, no director held options in the current or prior year.
2008
Balance at the
start of the year
Granted during
the year as
compensation
Name
Directors of Starpharma Holdings Limited
J K Fairley
800,000
350,000
Other key management personnel of the Group
B P Rogers
J R Paull
C P Barrett
N J Baade
R I Berry
D J Owen
420,000
280,000
300,000
200,000
250,000
200,000
–
–
–
–
–
–
Exercised
during the year
Other changes
during the year
Balance at the
end of the year
Vested and
exercisable at the
end of the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,150,000
800,000
420,000
280,000
300,000
200,000
250,000
200,000
220,000
80,000
100,000
–
–
–
2007
Balance at the
start of the year
Granted during
the year as
compensation
Exercised
during the year
Other changes
during the year
Balance at the
end of the year
Vested and
exercisable at the
end of the year
Name
Directors of Starpharma Holdings Limited
J K Fairley
300,000
Other key management personnel of the Group
B P Rogers
J R Paull
C P Barrett
N J Baade
R I Berry
D J Owen
T D McCarthy
G Y Krippner
O T Grogan
220,000
100,000
100,000
–
–
–
200,000
200,000
200,000
500,000
200,000
200,000
200,000
200,000
250,000
200,000
–
100,000
–
64
–
–
–
–
–
–
–
–
–
–
–
800,000
–
–
(20,000)
–
–
–
–
(200,000)
(300,000)
(200,000)
420,000
280,000
300,000
200,000
250,000
200,000
–
–
–
220,000
80,000
–
–
–
–
–
–
–
FINANCIAL REPORT
Share holdings
The numbers of ordinary shares in the company held during the financial year by each director of Starpharma Holdings Limited and
other key management personnel of the Group, including their personally related parties, are set out below. There were no shares
granted during the reporting period as compensation.
2008
Name
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
Directors of Starpharma Holdings Limited
Ordinary Shares
P T Bartels
J K Fairley
J W Raff
P M Colman1
R Dobinson
L Gorr1
P J Jenkins
R A Hazleton
109,804
30,250
5,706,689
5,992,286
2,720,976
5,204,704
1,635,608
42,616
Other key management personnel of the Group
Ordinary Shares
B P Rogers
J R Paull
C P Barrett
N J Baade
R I Berry
D J Owen
65,622
–
–
–
70,296
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,000
23,500
790,185
–
(2,720,976)
–
(219,608)
–
–
–
–
–
–
–
129,804
53,750
6,496,874
5,992,286
–
5,204,704
1,416,000
42,616
65,622
–
–
–
70,296
–
1 At 30 June 2008 these individuals were not Directors of Starpharma Holdings Limited.
2007
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
Name
Directors of Starpharma Holdings Limited
Ordinary Shares
P T Bartels
J K Fairley
J W Raff
P M Colman
R Dobinson
L Gorr
P J Jenkins
R A Hazleton
109,804
5,000
5,381,689
5,992,286
2,905,976
5,204,704
1,635,608
–
–
–
–
–
–
–
–
–
–
25,250
325,000
–
(185,000)
–
–
42,616
109,804
30,250
5,706,689
5,992,286
2,720,976
5,204,704
1,635,608
42,616
STARPHARMA HOLDINGS LIMITED Annual Report 2008
65
FINANCIAL REPORT
28. Key management personnel disclosures
Other key management personnel of the Group
Ordinary Shares
B P Rogers
J R Paull
C P Barrett
N J Baade
R I Berry
D J Owen
T D McCarthy1
G Y Krippner1
O T Grogan1
65,622
–
8,935
–
–
–
4,000
–
–
–
–
–
–
–
–
–
–
–
–
–
(8,935)
–
70,296
–
N/A
N/A
N/A
65,622
–
–
–
70,296
–
N/A
N/A
N/A
1 At 30 June 2007 these individuals were not key management personnel of the Group.
No director has entered into a material contract with the consolidated entity in either the current or previous financial year and there
were no material contracts involving directors’ interests subsisting at year end.
29. Remuneration of auditors
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 consolidated entity are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during
the year are set out below.
During the year the following fees were paid or payable for services provided by the auditor (PricewaterhouseCoopers) of the parent
entity, its related practices and non-related audit firms:
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
102,684
68,186
170,870
22,500
22,500
193,370
107,000
74,646
181,646
102,684
–
102,684
107,000
–
107,000
57,500
57,500
239,146
–
–
–
–
102,684
107,000
(a) Audit services
Audit or review of financial reports of
the entity or any entity in the consolidated entity
PricewaterhouseCoopers
Other auditors of controlled entities
Total remuneration for audit services
(b) Non-audit services
Non-audit services:
Grant reviews & program audits
PricewaterhouseCoopers
Total remuneration for non-audit services
Total remuneration of auditors
30. Contingencies
The Company has no contingent liabilities.
66
31. Commitments
(a) Capital Commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
FINANCIAL REPORT
Property, plant and equipment
Within one year
Later than one year but not later than five years
Later than five years
(b) Lease Commitments
Commitments in relation to leases
contracted for at the reporting date
but not recognised as liabilities, payable:
Not later than one year
Later than one year and not later than five years
Later than five years
Representing:
Cancellable operating leases
Non-cancellable finance lease
Future finance charges on finance leases
Consolidated
Parent Entity
2008
$’000
19
–
–
19
2007
$’000
–
–
–
–
2008
$’000
–
–
–
–
2007
$’000
–
–
–
–
Consolidated
Parent Entity
2008
$’000
2007
$’000
2008
$’000
2007
$’000
185
329
514
97
466
(49)
514
574
323
–
897
568
378
(49)
897
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Operating leases
The Group leases laboratory and offices under a lease until 31 August 2008 and leases various plant and equipment
under cancellable operating leases.
Consolidated
Parent Entity
Commitments for minimum lease payments
in relation to cancellable operating leases are
payable as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Representing cancellable operating leases
2008
$’000
2007
$’000
2008
$’000
2007
$’000
61
36
–
97
505
63
–
568
–
–
–
–
–
–
–
–
STARPHARMA HOLDINGS LIMITED Annual Report 2008
67
FINANCIAL REPORT
31. Commitments
Finance Leases
The Group leases plant and equipment with a carrying amount of $417,000 (2007: $329,000) under a finance lease expiring
within three years.
Consolidated
Parent Entity
Commitments in relation to finance
leases are payable as follows:
Not later than one year
Later than one year and not later than five years
Later than five years
Minimum lease payments
Notes
Future finance charges
Recognised as a liability
Representing finance lease liabilities:
Current
Non-Current
17
20
2008
$’000
151
315
466
(49)
417
124
293
417
2007
$’000
89
289
–
378
(49)
329
69
260
329
2008
$’000
–
–
–
–
–
–
–
–
–
2007
$’000
–
–
–
–
–
–
–
–
–
The weighted average interest rate implicit in the lease is 7.9% (2007: 7.2%).
(c) Expenditure Commitments
The Group has entered into various agreements for the research and development services. All material committed expenditure is
reimbursable under existing grant funding sources.
(d) Termination Commitments
The service contracts of key management personnel include benefits payable by the Group on termination of the employee’s
contract. Refer to section C of the remuneration report on pages 22 and 23 for details of these commitments.
32. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in note 1(b).
Equity Holding
Cost of Parent Entity’s
Holding Investment
Name of entity
Starpharma Pty Limited
Angiostar Pty Limited
Viralstar Pty Limited
Preclin Pty Limited
Dendritic Nanotechnologies Inc.
Country of
Incorporation
Australia
Australia
Australia
Australia
USA
Class of Shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
2008
%
100.00%
100.00%
100.00%
100.00%
100.00%
2007
%
100.00%
100.00%
100.00%
100.00%
100.00%
2008
$’000
9,900
3,300
4,300
–
16,252
33,752
2007
$’000
9,900
3,300
4,300
–
16,252
33,752
68
FINANCIAL REPORT
33. Investments in associates
Investments in associates are accounted for in the consolidated financial statements using the equity method of accounting and are
carried at carrying value by the parent entity. Information relating to the associates is set out below.
(a) Carrying amounts
Equity Holding
Cost of Parent Entity’s
Holding Investment
Name of entity
Country of
Incorporation
Notes
Dimerix Bioscience Pty Ltd
Australia
Class of
Shares
Ordinary
2008
%
8.50%
2007
%
8.72%
2008
$’000
–
2007
$' 000
40
(b) Movements in carrying amounts
Movements in carrying amounts
of investments in associates
Carrying amount at the beginning of the financial year
Impairment of associate
Acquisition of associate previously equity accounted
Gain on issue of equity by associate
Share of losses from ordinary activities after related income tax
Foreign currency reserve
Carrying amount at the end of the financial year
Notes
25
(c) Reserves attributable to associates
Foreign currency reserve
Balance at the beginning of the financial year
Net exchange differences on translation of results of associated entity
Balance at the end of the financial year
Consolidated
2007
$' 000
2,387
–
(2,057)
92
(270)
(76)
76
Consolidated
2007
$’000
76
(76)
–
2008
$’000
76
(76)
–
–
–
–
–
2008
$’000
–
–
–
34. Events occurring after the balance sheet date
On 9 September 2008 the Company announced that a full license agreement has been signed with SSL International plc (LSE:SSL)
in relation to the VivaGel® coated condom. SSL manufactures and sells Durex® condoms, the market-leading condom brand
worldwide. Under the terms of this agreement SSL secures marketing rights to the VivaGel® coated condom in most of the world,
including Europe and the USA. In return, Starpharma will receive further milestone payments, development support, and royalties
on net sales which Starpharma estimates will exceed $100 million over the life of the agreement.
There are no other significant events occurring since 30 June 2008 that have significantly affected or may significantly affect the
operations of the Group, the results of those operations, or the state of affairs of the Group.
STARPHARMA HOLDINGS LIMITED Annual Report 2008
69
FINANCIAL REPORT
35. Reconciliation of profit after income tax to net cash inflow from operating activities
Consolidated
Parent Entity
Operating loss after tax:
Depreciation and amortisation
Exchange rates movement
Non-cash employee benefits -share-based payments
Change in operating assets and liabilities,
net of effects of acquisitions and disposals of entities:
(Increase) decrease in receivables and other assets
(Increase) decrease in deferred tax assets
(Decrease) increase in trade creditors
Increase (decrease) in deferred tax liabilities
Increase (decrease) in employee provisions
Increase in deferred income
Share in results of associates
Gain on sale of property, plant and equipment
Impairment of financial asset
Provision for doubtful debts
2008
$’000
(7,491)
2,099
601
209
(370)
43
(232)
(826)
40
499
–
–
76
–
2007
$’000
(7,245)
2,019
502
275
1,848
(43)
(217)
(852)
(87)
246
178
(4)
–
–
2008
$’000
(6,045)
545
308
108
(253)
–
107
–
–
–
–
–
40
3,758
Net cash outflows from operating activities
(5,352)
(3,380)
(1,432)
2007
$’000
(5,762)
398
30
–
(88)
–
61
–
–
–
–
–
–
4,443
(918)
36. Non–cash financing activities
Acquisition of property, plant and equipment by means
of equipment loan
Outright acquisition of associate by means of share issue
37. Earnings per share
Consolidated
Parent Entity
2008
$’000
176
–
176
2007
$’000
–
10,851
10,851
2008
$’000
–
–
–
2007
$’000
–
10,851
10,851
Basic loss per share
Diluted loss per share
Net loss attributable to members of Starpharma Holdings Ltd used as the
numerator in calculating diluted and basic earnings per share ($’000 )
Weighted average number of ordinary shares outstanding during the year used
as the denominator in calculating diluted and basic earnings per share
2008
$
(0.04)
(0.04)
(7,491)
Consolidated
2007
$
(0.04)
(0.04)
(7,245)
177,994,656
161,667,928
70
FINANCIAL REPORT
38. Share-based payments
(a) Employee Option Plan
The establishment of the Starpharma Holdings Limited Employee Share Option Plan was approved by shareholders at the Annual
General Meeting held on 17 November 2004 and re-approved on 14 November 2007.
All full-time or part-time employees and directors of the company or associated companies are eligible to participate in the Plan.
The objective of the Plan is to assist in the recruitment, reward, retention and motivation of employees of the company.
Options are granted under the plan for no consideration.
Options are normally granted for a three or five year period and become exercisable on the second anniversary of the date of grant.
Options granted under the plan carry no dividend or voting rights.
Each option is personal to the participant and is not transferable, transmissible, assignable or chargeable, except with the written
consent of the remuneration and nomination committee.
(b) Individual Option Deeds
The company infrequently issues options to key consultants of the company. The objective of the option issues is to assist in the
reward, retention and motivation of consultants of the company.
Options are granted for no consideration, usually in lieu of some proportion of cash compensation.
Options are normally granted for a two to five year period, with various exercisable dates.
Options granted carry no dividend or voting rights.
Each option is personal to the participant and is not transferable, transmissible, assignable or chargeable, except with the written
consent of the remuneration and nomination committee.
(c) Options Attached to a Share Placement
The company issued 7,567,119 unlisted options attached to a share placement in the current year. The options have an exercise
price of $0.4346 per option with an expiry date of 21 August 2012.
Options granted carry no dividend or voting rights.
The options are not transferable, transmissible, assignable or chargeable, except with written consent.
Set out below are summaries of options granted under the schemes:
Granted
during
the year
Number
Forfeited
during
the year
Number
Expired
during
the year
Number
Balance
at end of
the year
Number
Exercisable
at end of
the year
Number
2008
Grant Date
Expiry Date
Consolidated and parent entity
6 Feb 2004a
8 Feb 2004a
31 Dec 2004a
4 Jul 2005a
18 Jul 2005a
6 Oct 2006a
17 Nov 2006a
2 Jan 2007b
4 Apr 2007a
21 Aug 2007c
12 Oct 007b
12 Oct 007b
12 Oct 007b
12 Oct 007b
31 Oct 2007a
14 Nov 2007a
14 Nov 2007a
31 Dec 2008
8 Feb 2009
31 Dec 2009
4 Jul 2010
18 Jul 2010
6 Oct 2010
30 Jun 2009
2 Jan 2009
4 Apr 2011
22 Aug 2012
31 May 2009
30 Jun 2009
31 Jul 2009
31 Aug 2009
7 Aug 2011
4 Apr 2011
8 Aug 2011
Total
Exercise
Price
$
$0.73
$0.94
$0.94
$0.94
$0.94
$0.50
$0.45
$0.52
$0.50
$0.43
$0.43
$0.43
$0.43
$0.43
$0.50
$0.50
$0.50
Balance
at start of
the year
Number
200,000
410,000
147,000
300,000
100,000
1,194,000
500,000
65,000
590,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,567,119
10,000
10,000
10,000
10,000
690,000
150,000
200,000
–
42,000
46,000
–
–
106,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200,000
368,000
101,000
300,000
100,000
1,088,000
500,000
65,000
590,000
7,567,119
10,000
10,000
10,000
10,000
690,000
150,000
200,000
200,000
368,000
101,000
–
100,000
–
500,000
45,000
–
7,567,119
10,000
10,000
10,000
10,000
–
–
–
11,959,119
8,921,119
3,506,000
8,647,119
194,000
Weighted average exercise price
$0.92
$0.44
$0.70
$ –
$0.49
$0.49
STARPHARMA HOLDINGS LIMITED Annual Report 2008
71
FINANCIAL REPORT
38. Share-based payments
2007
Grant Date
Expiry Date
Exercise
Price
$
Balance
at start of
the year
Number
Granted
during
the year
Number
Forfeited
during
the year
Number
Expired
during
the year
Number
Balance
at end of
the year
Number
Exercisable
at end of
the year
Number
Consolidated and parent entity
12 Apr 2002a
21 Jun 2002a
6 Feb 2004a
8 Feb 2004a
31 Dec 2004a
12 May 2005a
4 Jul 2005a
18 Jul 2005a
6 Oct 2006a
17 Nov 2006a
2 Jan 2007b
4 Apr 2007a
11 Apr 2007
30 Jun 2007
31 Dec 2008
8 Feb 2009
31 Dec 2009
12 May 2010
4 Jul 2010
18 Jul 2010
6 Oct 2010
30 Jun 2009
2 Jan 2009
4 Apr 2011
Total
Weighted average exercise price
$0.94
$0.94
$0.73
$0.94
$0.94
$0.94
$0.94
$0.94
$0.50
$0.45
$0.52
$0.50
220,000
200,000
200,000
720,000
167,000
100,000
300,000
100,000
–
–
–
–
–
–
–
–
–
–
–
–
1,324,000
500,000
65,000
590,000
2,007,000
2,479,000
$0.92
$0.49
200,000
–
–
310,000
20,000
100,000
–
–
130,000
–
–
–
760,000
$0.86
20,000
200,000
–
–
–
–
–
–
–
–
–
–
220,000
$0.94
–
–
200,000
410,000
147,000
–
300,000
100,000
1,194,000
500,000
65,000
590,000
3,506,000
$0.63
–
–
200,000
410,000
147,000
–
–
–
–
–
45,000
–
802,000
$0.86
a Options granted under the Employee Option Plan.
b Options granted under individual option deeds.
c Options granted under a share placement.
No options were exercised during the current or prior year.
The weighted average remaining contractual life of share options outstanding at the end of the period was 3.39 years
(2007: 2.78 years).
Fair value of options granted
The weighted average assessed fair value at grant date of options granted during the year ended 30 June 2008 was $0.14 per option
(2007: $0.21). 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 the expected price volatility
of the underlying share, the expected dividend yield and the risk free rate for the term of the option.
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.
Options are granted for no consideration, and have varying exercise and expiry dates.
Options granted during the year ended 30 June 2008 were:
Option grant date
Number of options
Exercise price
Expiry date
Expected price volatility
of the company’s shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
21 Aug 2007
12 Oct 2007
12 Oct 2007
12 Oct 2007
12 Oct 2007
7,567,119
$0.43
10,000
$0.43
10,000
$0.43
10,000
$0.43
10,000
$0.43
21 Aug 2012
31 May 2009
30 Jun 2009
31 Jul 2009
31 Aug 2009
46.9%
5.9%
0.0%
$0.34
$0.14
54.6%
6.3%
0.0%
$0.36
$0.09
54.6%
6.3%
0.0%
$0.36
$0.09
54.6%
6.3%
0.0%
$0.36
$0.09
54.6%
6.3%
0.0%
$0.36
$0.10
72
Option grant date
Number of options
Exercise price
Expiry date
Expected price volatility
of the company’s shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
FINANCIAL REPORT
31 Oct 2007
14 Nov 2007
14 Nov 2007
690,000
$0.50
150,000
$0.50
200,000
$0.50
7 Aug 2011
4 Apr 2011
8 Aug 2011
59.2%
6.3%
0.0%
$0.41
$0.18
59.8%
6.3%
0.0%
$0.39
$0.16
59.8%
6.3%
0.0%
$0.39
$0.17
Options granted during the year ended 30 June 2007 were:
Option grant date
Number of options
Exercise price
Expiry date
Expected price volatility
of the company’s shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
6 Oct 2006
17 Nov 2006
2 Jan 2007
2 Jan 2007
4 Apr 2007
1,324,000
$0.50
500,000
$0.45
45,000
$0.52
20,000
$0.52
590,000
$0.50
6 Oct 2010
30 Jun 2009
2 Jan 2009
2 Jan 2011
4 Apr 2011
42.5%
5.5%
0.0%
$0.55
$0.24
44.0%
5.5%
0.0%
$0.45
$0.20
44.1%
6.2%
0.0%
$0.47
$0.12
44.1%
6.2%
0.0%
$0.47
$0.18
38.8%
6.2%
0.0%
$0.43
$0.14
b) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
Options issued under employee option plan
Options issued under deed
Consolidated
Parent Entity
2008
$’000
203
6
209
2007
$’000
269
6
275
2008
$’000
99
9
108
2007
$’000
–
–
–
STARPHARMA HOLDINGS LIMITED Annual Report 2008
73
FINANCIAL REPORT
39. Related Party Transactions
a) Parent entity and subsidiaries
The parent entity of the Group is Starpharma Holdings Limited. Interests in subsidiaries are set out in note 32.
(b) Key management personnel
Disclosures relating to key management personnel are set out in note 28.
(c) Transactions with related parties
The following transactions occurred with related parties:
Other Transactions
Funds advanced to subsidiary
Funds advanced from subsidiary
Share-based payments
Management services from subsidiary
Management services to subsidiaries
Interest changed on loan to subsidiary
Impairment of loans to related entities
Consolidated
Parent Entity
2008
$’000
2007
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2008
$’000
4,897
–
101
(654)
78
190
(3,758)
2007
$’000
5,597
–
275
(553)
63
48
(4,443)
All transactions were made on normal commercial terms and conditions and at market rates, except that there are no fixed terms for
the repayment of outstanding balances.
(d) Outstanding balances arising from sales/purchases of goods and services
Consolidated
Parent Entity
2008
$’000
2007
$’000
–
–
–
–
–
–
–
–
2008
$’000
238
2,393
75
719
2007
$’000
48
1,254
60
539
Receivables
Interest on loan to subsidiary
Loan to subsidiary
Management services to subsidiaries
Payables
Management services from subsidiary
Outstanding balances are payable in cash.
74
Directors’ Declaration
In the directors’ opinion:
(a) the financial statements and notes set out on pages 34
to 74 are in accordance with the Corporations Act 2001,
including:
(i) complying with Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional
reporting requirements; and
(ii) giving a true and fair view of the company’s and
consolidated entity’s financial position as at 30 June 2008
and of their performance for the financial year ended on
that date; and
(b) there are reasonable grounds to believe that the company
will be able to pay its debts as and when they become due
and payable; and
(c) the remuneration disclosures set out on pages 17 to 25 of
the directors’ report comply with Accounting Standards
AASB 124 Related Party Disclosures and the Corporations
Regulations 2001.
The directors have been given the declarations by the chief
executive officer and chief financial officer required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the
directors.
Peter T Bartels, AO
Director
Melbourne, 29th September 2008
STARPHARMA HOLDINGS LIMITED Annual Report 2008
75
76
STARPHARMA HOLDINGS LIMITED Annual Report 2008
77
Shareholder information
The shareholder information set out below was applicable as at 12 September 2008
Supplementary information as required by ASX listing requirements.
A. Distribution of equity shareholders
Analysis of numbers of equity security holders by size of holding as at 12 September 2008
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,000 and over
There were 239 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:
Class of equity security
Ordinary shares
Options
–
-
1
32
12
45
Shares
148
714
425
796
164
2,247
Name
The Dow Chemical Company
Irrewarra Investments Pty Ltd
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