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Blueprint MedicinesStarpharma Holdings Limited
Baker Building
75 Commercial Road, Melbourne
VIC 3004 Australia
Telephone +61 3 8532 2700
Facsimile +61 3 9510 5955
www.starpharma.com
Starpharma Annual Report 2009
Starpharma is a world leader in the development
of dendrimer products for pharmaceutical, life science
and other applications.
CONTENTS
HigHLigHtS 2008– 2009
CHAirmAN’S report
operAtioNAL report from tHe Ceo
ABout StArpHArmA
pipeLiNe ANd pArtNerSHipS
mANAgemeNt
CorporAte ANd SoCiAL reSpoNSiBiLity
direCtorS’ report
CorporAte goverNANCe StAtemeNt
fiNANCiAL report
SHAreHoLder iNformA tioN
iNteLLeCtuAL property report
CorporAte direCtory
Starpharma Holdings Limited
ABN 20 078 532 180
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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).
Starpharma is a world leader in the development of dendrimer
nanotechnology for pharmaceutical, life-science and industrial
applications. the Company has a valuable platform technology based
on these dendrimers, which are man-made, highly defined nano-sized
compounds. the unique properties of this technology are widely
applicable both as enhancements to existing products and as entirely
new products.
the Company aims to create shareholder value through
the commercialisation of proprietary products based on
its technology.
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 2008–2009
Starpharma Holdings Limited Annual Report 2009
CommerCial Development
• Signing full licence agreement with Durex® for ViVagel® – coateD conDom
• Signing collaboratiVe reSearch, licence anD commercialiSation agreement
with eli lilly’S animal health DiViSion, elanco
• completion of a$7.1 million capital raiSing
• Dnt operationS fully integrateD anD caSh flow poSitiVe
• multiple early Stage agreementS with DeVeloperS of in Vitro DiagnoStic proDuctS executeD
1
vivaGel® Development
• DeVelopment program of ViVagel® expanDS to incluDe treatment for bacterial VaginoSiS
• ViVagel® ShowS actiVity againSt all clinically releV ant human papillomaViruS (hpV) StrainS
• clinical trial DemonStrating that ViV agel® retainS potent anD SuStaineD antiViral
actiVity againSt hiV anD genital herpeS following aDminiStration to women
• approVal of patent in Japan completeS global ip protection Strategy
pipeline anD appliCation Development
• Starpharma’S DenDrimerS Shown to reDuce toxicity anD increaSe half-life
of a wiDely uSeD cancer Drug
• effectiVe abSorption of water contaminantS by DenDrimerS DemonStrateD
Chairman’s Report
2
Dear Shareholders,
on behalf of the board and management of Starpharma i am
pleased to present the 2008 – 09 annual report for your review.
the last twelve months have been an exciting period for
Starpharma with a number of significant developments
achieved. the company is in a strong financial position
following a successful capital raising; our uS subsidiary Dnt is
now cash flow positive; the Vivagel® product portfolio continues
to produce promising clinical trial results and the company’s
technology platform has opened up opportunities for new
products and product extensions, leading to a range of potential
avenues for revenue stream.
the commercialisation of the company’s lead product Vivagel®
both as a condom coating and as a stand-alone gel remains
a focal point for Starpharma, with recent positive clinical trial
results adding to an already strong body of evidence pointing
to the potential of Vivagel®.
as well as the development of Vivagel®, Starpharma has
focused on advancing the company’s technology platform,
identifying opportunities for new applications of its dendrimer
technology to wider pharmaceutical, life-science and
industrial uses.
this diversification of the company’s pipeline has been part of
a strategy to expand on the potential for Starpharma’s
dendrimers to have a range of uses in everyday life. it has also
allowed the company to pursue partnerships with a number of
international companies to develop Starpharma’s products in
an efficient and cost effective way. this strategy will contribute
positively to increasing early revenue inflows.
in the last financial year the company has secured two
significant partnerships with leading global organisations SSl
international and eli lilly’s animal health division elanco. this
result is a testament to the successful partnering model that
management have driven aggressively over the last few years.
partnering provides Starpharma with access to international
networks and expertise, and has been an effective strategy in
accelerating the development of the company’s products.
the company has ended the 2008 – 09 financial year with a
strong full year result. the capital raising of a$7.1 million has
strengthened the cash reserves of the company and will be
integral in the commercialisation of the Vivagel® product
portfolio, and in the development of the broader product
pipeline. in addition, management of operating costs has seen
the company’s overall cash burn fall to a$2.9 million from a$6.1
million the previous year with increasing revenue and ongoing
expense management.
finally, our shareholder base was significantly strengthened
with one of australia’s leading institutional investors acorn
capital increasing its shareholding in Starpharma, and we
welcomed the entry of three new australian institutions and one
international institution. this demonstrates a growing awareness
of the short, medium and long-term potential of the company
with investors.
Starpharma’s fundamentals – prudent and experienced
management, current and near term revenue streams and
a deep product pipeline – remain extremely attractive. i thank
ceo Jackie fairley and all staff both in australia and the uS
for their dedication and commitment.
i would also like to thank our shareholders, both existing and
new for their continued support as the company continues to
mature and build its commercial momentum.
peter t Bartels, ao
chairman
Operational Report from the CEO
Starpharma Holdings Limited Annual Report 2009
3
Hpv – vivaGel® is active against all major cancer
causing strains of papillomavirus strains
in December 2008, Starpharma announced pre-clinical results
showing that Vivagel® inhibits all four strains of the human
papillomavirus targeted by the merck vaccine gardasil and the
two strains based on the gSK vaccine. in addition, the results
demonstrated activity against hpV-31, which added to previous
data showing activity against hpV-45. these two strains are
often implicated in cervical cancers but existing vaccines do not
include coverage for these virus strains.
Believed to be the only microbicide in clinical development
for genital herpes
these two new developments for Vivagel® as a stand-alone
product follow the results of a two-site expanded safety trial of
Vivagel® for prevention of genital herpes. the trial of 54 women
in the uS and Kenya found that Vivagel® was safe and well
tolerated when administered vaginally, twice daily for 14 days.
Vivagel® product range
it is forecast that the potential market size for microbicides in
the developed world alone, may be uS$1–$3.5 billion per year.
today, this opportunity remains untapped with no competitors
yet to reach the market.
the development of the Vivagel® portfolio, including the
condom coating and stand-alone vaginal microbicide product
remains a focal point for Starpharma, and last year delivered
encouraging results on a number of fronts.
vivaGel® trials produce promising results
the completion of patient testing to explore the duration of
antiviral activity following the vaginal application of Vivagel®
produced promising results in march 2009, further adding to the
already positive body of evidence regarding the safety of
Vivagel®. preliminary clinical trial results indicated that the gel
was well tolerated by the 12 healthy women who participated in
the trial. this is in addition to results from three earlier trials of
both men and women that also showed the gel to be safe and
well tolerated.
more recently in august, Starpharma announced further positive
clinical trial results showing that Vivagel® retains antiviral activity
against the human immunodeficiency virus (hiV) and herpes
simplex virus (hSV) in women for up to 24 hours after
administration. the findings indicate a sustained action of the
product with more than 90% of the initial antiviral activity retained
for hiV and hSV in more than half of the trial participants. the
results point to the potential for Vivagel® to be used other than
immediately prior to sexual intercourse and are an important
development as the company prepares to advance to late
stage clinical trials.
Operational Report from the CEO
4
vivaGel®-coated condom
the signing of a full licence agreement with SSl international for
the commercialisation of the Vivagel®-coated condom in
September 2008 was a major advancement for Starpharma, and
its achievement is seen as the company’s most significant
commercial milestone to date.
“Innovation is key to SSL’s strategy to
keep sales growing and consumers
interested”
Garry Watts, SSL International CEO
the agreement to develop and market a Vivagel®-coated
condom grants SSl international exclusive marketing rights to
the product in most of the world, including europe and the uS.
in turn Starpharma stands to gain in excess of a$100m from the
partnership through the receipt of development support,
milestone payments and royalties from sales of the product.
SSl international has secured approximately 40% of the global
branded condom market. present in more than 100 countries,
its Durex® brand is by far the world leader in condoms.
SSL International is the owner
of the world’s number one
condom brand, Durex®.
SSL International controls
approximately 40% of the
US$1.1B global market for
branded condom sales.
Drug Delivery
Starpharma’s dendrimers have also shown significant
commercial applicability in the area of drug delivery and
optimisation. the company has a growing list of pharmaceutical
companies that are actively exploring the use of Starpharma’s
proprietary dendrimers to enhance their pharmaceutical
products.
Dermatological applications
Starpharma continues its work with Steifel laboratories, the first
announced agreement under the company’s drug delivery
program with one of the world’s largest dermatology
companies. recently Steifel laboratories was acquired by
leading global pharmaceutical company gSK.
animal health: a new application of starpharma’s
dendrimers
the signing of a collaborative research, licence and
commercialisation agreement with elanco, the animal health
division of uS pharmaceutical company eli lilly. this deal
marked the entry of Starpharma into this new and growing
market sector.
the parties are collaborating to develop new animal health
products with enhanced properties using Starpharma’s
dendrimer technology. under the agreement, Starpharma will
receive revenue from research fees, and is eligible for milestone
payments and royalties on sale of any product developed.
Operational Report from the CEO
Starpharma Holdings Limited Annual Report 2009
Dendrimer reduces toxicity and increases half-life of a
widely used cancer drug
Starpharma has also made significant advances in applying its
dendrimer technology to drug delivery and drug optimisation
programs, with some particularly exciting results in cancer
drugs.
in many cases, pharmaceuticals would be improved if they
lasted longer in the body and if their side-effects were reduced.
Dendrimers can achieve this by controlling where drugs go and
how long they persist when they are introduced to the body.
a successful proof-of-concept animal study conducted by
Starpharma this year demonstrated the broad applicability of its
dendrimers to improve cancer drugs. the study found that when
doxorubicin – a widely-used cancer drug – is combined with a
Starpharma dendrimer, its plasma half-life is significantly
extended and a marked reduction in its toxicity is achieved.
Vitally, these significant improvements did not diminish the
efficacy of the treatment.
the implication of this for human treatments which may be
developed is that a larger dose of the drug could be used
without harming the patient, increasing the ability of the
treatment to kill tumours.
other agreements
there are a number of other pharmaceutical collaborations
entered into by Starpharma that remain confidential and subject
to non-disclosure terms.
life Science applications
Deepening of in vitro diagnostics pipeline
Starpharma’s dendrimer platform technology can also improve
the reliability of in vitro diagnostic (iVD) tests by correctly
orienting key detection molecules in the test kit, thus reducing
the number of incorrect diagnoses.
5
this pipeline presents another opportunity for valuable
additional revenue stream for Starpharma. the market for in vitro
diagnostics is valued at uS$17.6 billion in the uS alone and
regulatory conditions mean that new iVD products can reach the
market quickly, requiring as little as 1-2 years of development.
Starpharma has worked hard over the last 12 months to
strengthen its portfolio of related patents and further develop its
iVD business.
opportunities for laboratory reagents
in addition to these opportunities, Starpharma also receives
income from sales and royalties from laboratory reagents.
these arise as a result of our agreements with emD, Qiagen
and Sigma.
Operational Report from the CEO
6
Financial summary
royalty, customer & licence revenue
grant income
interest and other income
total revenue and income
total expenditure
income tax credit
net loss
net cash outflow before new capital (“Cash Burn”)
new share capital net proceeds
Cash at Bank
2009
$m
2.0
7.7
0.1
9.8
(14.1)
0.2
(4.1)
(2.9)
7.0
11.6
2008
$m
1.4
8.2
0.3
9.9
(18.1)
0.7
(7.5)
(6.1)
3.5
7.5
%
43%
(6%)
(67%)
(1%)
22%
45%
52%
55%
other applications
Since 2007, Dnt has been working on a uS Department of
Defense (DoD) sponsored water-remediation project in
collaboration with central michigan university. in 2008 this work
was strengthened with the commitment of a further uS$680,000
by the DoD.
in this application Starpharma’s dendrimer technology works as
a sponge soaking up toxic chemicals from groundwater. the
company is pleased to have recently reached a key milestone
in the program showing that the dendrimer-based product has a
substantially higher capacity to absorb water contaminants than
the commercial resins currently used for the purpose.
building on these findings, Starpharma continues to explore
commercial opportunities more broadly in water remediation.
overview of financial results
revenue, cash containment and increasing
cash reserves
Starpharma introduced a number of operational cost initiatives
throughout the year, and together with increasing partnering
revenues, the company recorded a significant improvement
in cash flow.
capital raising during the year has taken the company’s
cash reserves to a$11.6 million. this will support the
commercialisation of the Vivagel®-coated condom and with
grant funding will advance the development program of the
stand-alone gel, as well as support the broader product
pipeline.
the last 12 months have seen Starpharma build increasing
commercial momentum with the company’s new licensing
deals highlighting the commercial relevance of Starpharma’s
dendrimer technology platform.
Starpharma Holdings Limited Annual Report 2009
in combination with the existing revenues from the company’s
uS subsidiary Dnt, royalty, customer and licence revenue has
grown 43% in the year. existing revenues are royalty bearing
licences from Siemens healthcare Diagnostics, Qiagen and
emD merck.
grant income for the year of a$7.7 million from the united States
and australia has assisted in expanding the company’s
research programs. grants included contributions from the uS
national institutes of health grant for the Vivagel® development
program, the uS Department of Defense for its water
remediation project, and the australian pharmaceutical
partnership program (p3).
operational initiatives throughout the year were focused on
reducing the supporting activities of key research being
undertaken within the company. a significant achievement
was the full integration of Dnt’s operations, with all financial
and administrative functions now transferred to Starpharma’s
head office in melbourne, australia. as a result Dnt is now
cash flow positive.
7
outlook
over the coming year we remain focused on advancing the
development of our lead product Vivagel®, advancing other
applications of our dendrimer technology platform, and finding
new partners to increase revenue as well as strengthening and
building upon our existing international partnerships.
in the near-term, we are excited about our collaboration with
SSl international to commercialise the Vivagel®-coated
condom. the partnership will secure international coverage of
the product and Starpharma upon its launch and will no doubt
be an exciting phase for the company, offering Starpharma
access to the vast global condom market.
JaCkie Fairley
Starpharma ceo
14.3
10.1
7.5
This graph demonstrates the current
cash position of A$11.6 million at 30
June 2009 and annual Cash Burn
compared to previous years.
11.6
$AU
14
12
10
8
6
4
2
2006
2007
2008
2009
Cash Burn (Net cash outflow before new capital)
Cash Balance
About Starpharma
8
Starpharma is focused on commercialising products in three
key areas, with each having the potential for substantial
revenues:
Vivagel® and the Vivagel®–
coated condom
Vivagel® is a vaginal microbicide gel that inactivates viruses
that cause sexually transmitted infections. 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.
for the commercialisation of the Vivagel®–coated condom,
Starpharma signed a full licence agreement with SSl
international, the manufacturers and marketers of the world’s
best-selling condom brand Durex® in September 2008.
other medical and life-Science
applications
Starpharma’s platform technology enables it to create multiple
products within the company’s core human pharmaceutical
focus and beyond. this is a deliberate strategy to diversify the
application of the company’s dendrimer technology to a range
of possible uses and generate early revenues.
the recent signing of a collaborative research agreement with
eli lilly’s animal health division, elanco has resulted in the
expansion of Starpharma’s development pipeline into the new
area of animal health. in addition, Starpharma continues its
programs in a range of fields including cancer, drug delivery,
dermatology, arthritis and targeted diagnostics.
life-science applications of Starpharma’s dendrimers include
laboratory transfection reagents for the introduction of nucleic
acid into cells, and increasing the sensitivity and reliability of
diagnostic tests for various human conditions. a licence
agreement with Siemens healthcare Diagnostics already
generates royalties in this area, with further announcements
expected in the near future.
wider applications of Dendrimers
through Dnt, Starpharma’s platform technology is applicable
to industrial applications as specialty chemicals with potential
application in the cosmetic, ink, coatings and agricultural
chemicals industries.
Dendrimers are also proving to have a compelling role in
technologies aimed at ensuring the sustainability of the
environment. in partnership with the central michigan university
research corporation, Starpharma has been working with the
uS Department of Defense to apply its technology to the
removal of toxic chemicals from groundwater, with results
indicating that Starpharma’s technology absorbs contaminants
far more effectively than current methods. this could have
significant and widespread benefits on environmental damage
caused by industrial waste.
Dnt also has an agreement with unilever to use dendrimers
as a research tool for the food industry.
Pipeline and Partnerships
Starpharma Holdings Limited Annual Report 2009
partnerships
Starpharma has demonstrated a successful partnering model
with organisations that produce world-leading research and
products. partnering provides Starpharma with access to
external expertise to capture new markets quickly and effectively
whilst carefully managing expenditure. Starpharma’s
partnerships have been useful in accelerating the development
of its products, and have enabled the company to leverage the
networks and expertise of organisations at the fore of their
industry.
in the last financial year Starpharma has secured two significant
partnerships with leading global organisations.
in September 2008, Starpharma announced the signing of a full
licence agreement with SSl international (lSe: SSl), the maker
of the world’s leading condom Durex® for the commercialisation
of the Vivagel®– coated condom.
SSl international now represents approximately 40% of the
global market for branded condoms. this year, SSl international
strengthened its position in the global market with the
announcement that it had acquired majority ownership of two
market leading companies in russia and eastern europe. this
acquisition has secured SSl greater coverage in the vast
russian market for condoms and represents a significant boost
for Starpharma’s exposure to the market as well.
9
“This year we have seen
developments in all our product
categories, positioning the Company
to perform strongly in the short and
long-term.
Our partnership strategy has allowed
the Company to accelerate its
pipeline development through
multiple licencing agreements
with market-leading companies.”
Jackie Fairley, Starpharma CEO
Pipeline and Partnerships
early
leaD / in vivo
CliniCal
sales
10
pHarma & meDiCal
vivaGel®
Drug Delivery
ELANCO
hSV-2 prevention >
hiV prevention >
condom coating >
cancer >
Dermatology >
other >
aDme engineering
protein Drug optimization >
Drug optimization
enhanced Solubilization >
in vitro Diagnostics
Stratus cS® (cardiac) >
mri imaging
targeted contrast agent >
liFe – sCienCes
early
prototype
pre-launCH
sales
Gene transfection
reagents
sirna / Dna
transfection
reagents
Superfect® >
priofect® >
* Condom coating has the potential for an accelerated development program
Starpharma estimates that under the terms of the agreement
with SSl international it will receive in excess of a$100m from
milestone and royalty payments and development support over
the life of the patent. this deal represents a significant milestone
for the company and indicates the market potential of the
product with both Starpharma and SSl international working
with regulators to prepare to launch the Vivagel®-coated
condom. SSl international is an ideal partner for Starpharma
with a demonstrated commitment to growth through investment
in innovation and progressive approach to building its condom
business. furthermore, despite the downturn in the market, this
year SSl international has continued to grow with its sales of
Durex® condoms increasing by 5.5% for the year end 31
march 2009.
more recently, Starpharma signed a collaborative research,
licence and commercialisation agreement with elanco, the
animal health division of uS pharmaceutical company eli lilly to
develop new animal health products. under the agreement,
Starpharma will receive revenue from research fees, and is
eligible for milestone payments and royalties on the sale of any
product developed. elanco will exploit the resulting products
within the animal health field, which taken as a whole is reported
to be worth about uS$19 billion globally.
Starpharma Holdings Limited Annual Report 2009
COMMERCIAL pARtNERshIps
11
partner
SSl international
proDuCt
nature oF CommerCial relationsHip
Vivagel®-coated condom
licenced – pre-market entry
Siemens healthcare Diagnostics (Dade behring)
Stratus cS®: cardiac marker diagnostic licence
licenced and revenue generating
Qiagen
merck Kgaa
gene transfection
licenced and revenue generating
sirna & Dna transfection reagents
licenced and revenue generating
elanco animal health (eli lilly & company)
animal health
research collaboration, licence & commercialisation
Stiefel laboratories
Drug delivery
research collaboration
Sigma aldrich
unilever
StarburSt® commercially available via Sigma aldrich revenue generating
testing agent for food applications
r & D
other partnerships
Starpharma also has a number of research collaborations with
some of the world’s leading research institutes and universities.
the most significant is with the uS national institutes of health,
which has provided in excess of uS$30 million in grant and
other funding support for its microbicide development program
and Vivagel® specifically, a relationship that continues today.
other collaborations include the baker iDi heart and Diabetes
institute, Johns hopkins university, columbia university,
university of north carolina, university of texas medical branch
in galveston, burnet institute, melbourne Sexual health centre,
monash university and central michigan university research
corporation.
Management
12
JACkIE FAIRLEy, BsC, BVsC (hONs), MBA
Chief executive officer
Dr fairley was appointed chief executive officer of Starpharma
on 1 July 2006 after serving in the role of chief operating officer
from July 2005. as ceo and a Director of the board, Jackie’s
responsibilities include involvement in setting strategic direction,
oversight of operations and financing activities for the group.
She also plays an active role in driving key commercial
negotiations and development programs and corporate activity.
Jackie has more than 20 years’ experience in the
pharmaceutical and biotechnology industries working in
business development and senior management roles with
companies including cSl and faulding (now hospira). former
ceo of cerylid biosciences, Jackie also spent 5 years as 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.
pAuL BARREtt, B sC (hONs), phD
vice president, Business Development
Dr barrett is responsible for the commercialisation of
Starpharma’s dendrimer technology into pharmaceutical and
related fields. Since he joined Starpharma in 2005 the company
has signed a series of partnering and commercialisation
agreements including a licence with a potential value of more
than $100m with SSl international for condom coating
applications of Vivagel®, a wide ranging development and
licencing agreement with eli lilly’s animal health division
elanco, and a number of other collaborations in areas including
drug delivery and in vitro diagnostics. prior to joining Starpharma
he held positions at nortel networks, Smiths industries
aerospace, the university of oxford and bookham technology.
Dr barrett is a co-author on 13 publications in both the physical
and biological sciences.
DAVID OwEN, B sC (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.
JEREMy pAuLL, BsC (hONs), phD
vice president, Development and regulatory affairs
Dr paull heads up Starpharma’s preclinical and clinical
development programs and manages the company’s
interactions with international regulatory authorities. Jeremy also
leads Starpharma’s nih-funded programs, and is responsible
for successful collaborations with the company’s many
international research and commercial development partners.
Key priorities include the advancement of the Vivagel® stand-
alone product through late-stage development, and the
development of the coated condom product. Since joining
Starpharma in 2001, Dr paull’s efforts have been integral to the
advancement of the Vivagel® development program.
Starpharma Holdings Limited Annual Report 2009
13
JEFF LINN, B sC
Dnt vice president, Business Development
in 2009 mr linn joined Starpharma with responsibility for
commercialisation of the company’s priostar dendrimer
portfolio. Jeff has a 20 year track record of business
development, sales and marketing in the fine chemicals and
technology driven industries, and held positions in Dow
chemical, great lakes chemical company, and Vanguard
Solutions inc. he has built and managed multi-million dollar
accounts with companies which include ici, akzo, Dupont and
ciba. in addition to his commercial experience Jeff has
specialist product knowledge across a range of chemistry-
related areas, including specialty chemical additives, paints and
coatings, polymers and agricultural chemicals.
NIgEL BAADE, BCOM, CpA, gRAD DIp ARts
(DEVELOpMENt)
Chief Financial officer
mr baade is a cpa-qualified accountant with extensive
experience in the pharmaceutical and biotechnology industries.
appointed to the position on 1 January 2009, he is responsible
for the financial control and compliance of the group. mr baade
has experience in project and cost management of research
activities, commercialisation of global business development
opportunities, public and private equity raising and grant
funding compliance.
prior to joining Starpharma as financial controller in 2006, he
has held positions at hagemeyer, cerylid biosciences, faulding
(hospira) and umt (fonterra). he holds qualifications from
university of tasmania and monash university.
BEN ROgERs
Company secretary
as company Secretary mr rogers is the chief administrative
officer of the company and has the principal role of supporting
the work of the board. he has extensive experience in finance,
corporate governance and hr management with cSiro
research laboratories and co-operative research centres in
Victoria, South australia and western australia. mr rogers was a
member of Starpharma’s start-up/ipo management team and
has been company Secretary since february 1998. until 31
December 2008 his responsibilities also included the role of
chief financial officer.
Our Commitment to Corporate
and Social Responsibilty
How Starpharma meets the key criteria for many
ethical investors
• Products which address serious unmet healthcare needs –
HIV and other STIs
• Products and technologies which address issues prevalent in
developing countries
• Water management technology
• Strives for Best Practice in employee recruitment and
management
• Environmentally responsible technology and practices
14
Starpharma’s monetary value comes from the very considerable
commercial opportunities across many product application
areas including Vivagel®, and the Vivagel®-coated condom.
Some investors however, are seeking more from an investment:
a sense that their capital is being used to help humanity – to
make the world a healthier or cleaner place to live. Such
investors may find that Starpharma is an especially attractive
proposition given the remarkable opportunities for change
offered by the products it is developing.
in Vivagel®, Starpharma is pioneering a new technology
targeting the prevention of sexually transmitted infections (Stis)
such as genital herpes and hiV/aiDs. these diseases are
having devastating impacts on individuals, communities and
health systems in both developed and developing countries and
with no viable cure on the horizon have reached worldwide
epidemic status.
every day nearly one million people acquire a new Sti with
approximately 7300 new hiV infections and 5500 deaths
occurring daily. many of these are young women. these are
alarming statistics – yet little progress has been made to curb
their prevalence. Starpharma’s research has the potential to
significantly change the face of the global Sti epidemic offering
investors the opportunity to play a part in this as well.
microbicides have received widespread support from the
international research community and have a champion in uS
president barack obama who introduced the microbicide
Development act in 2007 to accelerate their development.
microbicides have been lauded as the answer to slowing the Sti
epidemic and are widely recognised as products that will
empower women to take responsibility for their own sexual
health and protect themselves against these serious diseases.
yet it is not just Starpharma’s work on Vivagel® that provides
investors a compelling case for investment based on ethical
criteria. Starpharma’s subsidiary Dendritic nanotechnologies inc
(Dnt) has been working with the uS Department of Defense
since 2007 to develop its proprietary technology to purify water.
water is a finite resource in short supply around the world,
placing water self-sufficiency high on the agenda of many
countries. accordingly water purification technologies are
increasingly becoming a priority for government’s that are
geared towards sustainability.
Starpharma is working to develop water remediation technology
using its dendrimer-based technology. this technology is
intended to act as a sponge, soaking up toxic chemicals leaving
it purer and more useable as a result. this technology has the
potential to address another important global issue and has the
potential to yield further royalty income in the future.
looking internally Starpharma’s board and management are
committed to achieving the highest standards of corporate
governance in decision-making, legislative compliance and
financial and ethical behavior. all employees are encouraged to
actively participate in the management of environmental and
work place safety issues, and the company has adopted a
code of conduct covering areas such as harassment, bullying
and equal opportunity employment practices.
Starpharma Holdings Limited Annual Report 2009
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 2009.
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)
R Dobinson
J W Raff (Deputy Chairman)
P J Jenkins
J K Fairley (Chief Executive Officer)
R A Hazleton
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, Inc (“DNT”) in Michigan, USA.
Products based on the Company’s dendrimer technology
are on the market in the form of diagnostic elements and
laboratory reagents.
15
Business Objectives
The Company aims to create value for shareholders through the commercialisation of proprietary products
based on its dendrimer nanotechnology in three key areas:
> VivaGel® (topical microbicide and condom coating)
> Other Medical and Life Science Applications
> Industrial Applications of Dendrimers
Dividends
No dividends were paid or declared during the period and no dividends are recommended in respect to the financial year
ended 30 June 2009. (2008: Nil)
Directors’ Report
Review of Operations
Achievements and significant events during the 2009 financial
year included:
December 2008 SPL7013 shows activity against all major
clinically relevant human papillomavirus (HPV) strains
July 2008 Development program for VivaGel® expanded to
SPL7013, the active ingredient VivaGel®, was shown in
include the treatment of Bacterial Vaginosis (BV)
Preliminary findings from Starpharma’s clinical trials
suggested that VivaGel® treatment may restore the normal
balance of bacteria in women who had asymptomatic BV at
the time of enrolment in the trial. This is the first application of
VivaGel® as a treatment. BV is a major cause of vaginal
infection and is particularly prevalent in the US, where it is
reported to affect 29% of women.
August 2008 VivaGel® retention of activity clinical trial
commenced
The study in 12 women was designed to determine the
timescale over which VivaGel® retains activity against HIV and
HSV-2 (genital herpes) following vaginal administration. The
objective of the trial was to give an indication of how long
before sex VivaGel® could be applied to prevent infection, as
well as providing a potential surrogate for antiviral efficacy
ahead of Phase 3 clinical studies.
16
September 2008 Signing of a Full Licence Agreement with
SSL International for the VivaGel®-coated condom
A full licence agreement was 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 the agreement
SSL has secured marketing rights to the VivaGel®-coated
condom in most of the world, including Europe and the USA.
It is estimated that receipts under the agreement comprising
royalties on SSL sales, further milestone payments, and
development support has the potential to exceed $100
million. The agreement is considered by Starpharma to be the
Company’s most important commercial milestone to date.
October 2008 Key VivaGel® Patent Approved in Japan
A key patent relating to the use of dendrimers to protect
against sexually transmitted infections was approved in
Japan, completing patent coverage for VivaGel® and the
VivaGel®-coated condom in all major markets including
Europe, the US and Japan.
pre-clinical studies to inhibit all four strains of HPV targeted by
the two marketed cervical cancer vaccines. SPL7013 has now
been shown to have in vitro activity against HPV-16 and -18,
which account for approximately 70% of cervical cancers;
and HPV-6 and -11, which together account for approximately
90% of the incidence of genital warts. In addition, SPL7013
was shown to be active against cancer-causing
HPV-31 and -45, neither of which are included in the existing
vaccines.
December 2008 Starpharma Dendrimer Reduces Toxicity of
Cancer Drug
A Starpharma dendrimer combined with a widely-used
cancer drug (doxorubicin) achieved a significant extension of
the drug’s plasma half-life and a marked reduction in drug
toxicity compared to administration of the drug alone. In this
proof-of-concept animal study the efficacy of the dendrimer-
drug construct was equivalent to that of the drug alone.
March 2009 Retention of activity study – patient testing
completed
Completion of patient testing in the retention of activity clinical
trial of VivaGel® that commenced in August 2008. Vaginal
samples were collected from each study participant up to 24
hours after five separate VivaGel® applications for in vitro
analysis of anti-HIV and anti-HSV-2 (genital herpes) activity.
Full trial results were announced subsequent to the end of this
financial year and are noted below.
April/May 2009 Equity raising of A$7.1 million by a share
placement and share purchase plan (SPP)
$5.1 million was raised from existing and new institutional and
sophisticated investors, and existing shareholders
contributed an additional $2 million through a SPP. Shares in
the placement and SPP were issued at $0.26 per share. The
placement was led by Acorn Capital, with a leading Australian
institution and a significant European fund among a number
of new institutions participating.
May 2009 Signing of a collaborative research, license and
commercialisation agreement with Elanco
Elanco is the animal health division of Eli Lilly and Company.
This agreement is an example of Starpharma’s partnering
strategy which is aimed at commercially exploiting the
dendrimer technology across a range of markets.
Directors’ Report
Starpharma Holdings Limited Annual Report 2009
Financial Summary
For the year ended 30 June 2009 the consolidated entity incurred an operating loss after income tax of $4,127,000
(June 2008: $7,491,000).
Summary of Consolidated Results
Revenue from continuing operations
Other income
Research and development expenditure
Administration expenditure
Finance costs and impairment of financial assets
Income tax credit
Loss attributable to members
2009
$’000
2,124
7,691
(9,988)
(4,128)
(28)
202
(4,127)
Year Ended 30 June
2008
$’000
1,709
8,212
(12,224)
(5,816)
(103)
731
(7,491)
Income Statement
Balance Sheet
Revenue consisted of royalty, licensing and customer revenue
from partners including Siemens Healthcare (Dade Behring),
Qiagen, EMD Biosciences and SSL International. Other income
consisted of grant income from United States and Australian
Government grants, which partly offset research and
development expenditure. The majority of US Government
grants were from the US National Institutes of Health for VivaGel®
development costs. All research and development expenditure,
including patenting costs, were fully expensed in the current and
previous corresponding period. Administration expenditure
includes the amortisation of patent intangibles.
At 30 June 2009 the Group’s cash position was $11,595,000
(2008: $7,482,000). There was an increase in contributed equity
of $6,973,000 on the completion of a private placement and
share purchase plan in April/May 2009.
17
Cash flow Statement
Net operating cash outflow for the year was $4,029,000 (2008:
$5,352,000). Favourable exchange rate movements resulted in
an overall cash burn of $2,860,000 (2008: $6,064,000) for the
year. Cash flow from financing activities included the proceeds
from the issue of shares.
Earnings per share
Basic loss per share
Diluted loss per share
2009
$0.02
$0.02
2008
$0.04
$0.04
Significant changes in the state of affairs
There was an increase in contributed equity of $6,973,000 on the completion of a private placement and share purchase plan in
April/May 2009. The fully paid ordinary shares were issued at a price of $0.26 per share.
Matters subsequent to the end of the financial year
On 3 August 2009, Starpharma announced results of the clinical
study designed to assess retention of antiviral activity following
vaginal administration of VivaGel® in women. The study showed
that cervicovaginal fluid samples (CVS) obtained immediately
after vaginal administration of VivaGel® provided effectively
complete inhibition of HIV and HSV infection in vitro. At 1 and 3
hours following administration of product, the initial high level of
inhibition of HIV and HSV was retained in all women tested.
Even at 12 and 24 hours following administration, more than
90% of the initial antiviral activity was retained for both HIV and
HSV in more than half of the women tested. This is the first
clinical study to demonstrate potent antiviral activity of any
microbicide beyond one hour after administration of the product
in humans.
These data indicate the potential for VivaGel® to be used other
than immediately prior to sexual intercourse (i.e., as a coitally-
dissociated microbicide). However, future testing in clinical
efficacy studies is required to confirm this. There were no serious
adverse events during the study, and the data indicate VivaGel®
was safe and well-tolerated in the study.
No other matters or circumstances have arisen since 30 June
2009 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.
Directors’ Report
Likely developments and expected results of operations
In the opinion of the directors, the Group will continue its activities as described.
Additional comments on expected results of operations of the Group are included in this report under the review of operations.
Further information on likely developments in the operations of the Group 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 Group.
Regulatory Environment
There were no significant changes in laws or regulations during the 2009 financial year or since the end of the year affecting
the business activities of the Group, and the directors are not aware of any such changes in the near future.
Environmental regulation
The Group is subject to environmental regulations and other licences in respect of its laboratory facilities in Melbourne
(Victoria, Australia) and Mt Pleasant (Michigan, USA). There are adequate systems in place to ensure compliance with relevant
Federal, State and Local environmental regulations and the Directors are not aware of any breach of applicable environmental
regulations by the Group.
18
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 37 of this annual report.
Information on Directors
Peter T Bartels AO, FAISM, FRS (age 68)
Independent non-executive director
Chairman
Member of remuneration & nomination committee
Member of audit & risk committee
129,804 ordinary shares in Starpharma Holdings Limited
Independent non-executive director and Chairman for six 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. Past Chairman of the Australian
Sports Commission, the Australian Institute of Sport, 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
Directors’ Report
Starpharma Holdings Limited Annual Report 2009
Information on Directors
John W Raff Dip. Ag Sc, BSc, PhD (age 60)
Non-executive director
Deputy Chairman
7,280,777 ordinary shares in Starpharma Holdings Limited
Former CEO of Starpharma, holding the position for nine years until his 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
Jacinth (Jackie) K Fairley BSc, BVSc (Hons), MBA (age 46)
Executive director
Chief Executive Officer
53,750 ordinary shares in Starpharma Holdings Limited
650,000 options over ordinary shares in Starpharma Holdings
Limited
Dr Fairley was appointed Chief Executive Officer of Starpharma on 1 July 2006 after serving in the role of Chief Operating Officer from
July 2005. As CEO and a Director of the Board, Jackie’s responsibilities include involvement in setting strategic direction, oversight
of operations and financing activities for the group. She is also plays an active role in driving key commercial negotiations and
development programs and corporate activity. Jackie has more than 20 years’ experience in the pharmaceutical and biotechnology
industries working in business development and senior management roles with companies including CSL and Faulding (now
Hospira). Former CEO of Cerylid Biosciences, Jackie also spent 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.
19
Other current directorships of listed entities: None
Former directorships of listed entities in last 3 years: None
Ross Dobinson B Bus (Acc) (age 57)
Independent Non-executive director
Chairman of audit & risk committee
Chairman of remuneration & nomination committee
Nil ordinary shares in Starpharma Holdings Limited
Non-executive director for twelve 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)
Richard A Hazleton BSChE, MSChE, HonDrEngr, HonDrCommSci (age 67)
Independent Non-executive director
Member of remuneration & nomination committee
142,616 ordinary shares in Starpharma Holdings Limited
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.
Other current directorships of listed entities: None
Former directorships of listed entities in last 3 years: None
Directors’ Report
Information on Directors
Peter J Jenkins MB, BS (Melb), FRACP (age 63)
Independent Non-executive director
Member of audit & risk committee
1,416,000 ordinary shares in Starpharma Holdings Limited
Independent non-executive director for twelve years. Consultant physician and gastroenterologist. Holds clinical and research
positions with the Alfred Hospital and has held clinical research 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: Nil
Former directorships of listed entities in last 3 years:
Non-executive director and chairman of bio-pharmaceutical
company Immuron (formerly Anadis Ltd),
resigned February 2009
Company Secretary
The Company Secretary is Mr Ben Rogers (age 61). He was a member of Starpharma’s start-up/IPO management team
and has been Company Secretary since February 1998, with responsibilities that included the role of Chief Financial Officer
until 31 December 2008. Mr Rogers has extensive experience in finance, corporate governance and HR management with
CSIRO research laboratories and Co-operative Research Centres and is an affiliate of Chartered Secretaries Australia.
20
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 2009,
and the numbers of meetings attended by each director were:
Name
P T Bartels
J W Raff
J K Fairley
R Dobinson
P J Jenkins
R Hazleton
Full meetings of directors
Meetings of committees
8 of 8
8 of 8
8 of 8
5 of 8
7 of 8
8 of 8
Audit & risk
2 of 3
N/A
N/A
3 of 3
3 of 3
N/A
Remuneration
& nomination
2 of 2
N/A
N/A
2 of 2
N/A
2 of 2
The table above illustrates the number of meetings attended compared with the number of meetings held during the period
that the director held office or was a member of the committee. N/A denotes that the director is not a member of the relevant
committee.
Retirement, election and continuation in office of Directors
Dr John Raff retires by rotation as director at the annual general meeting and, being eligible, offers himself for re-election.
Dr Peter Jenkins retires by rotation as director at the annual general meeting and, being eligible, offers himself for re-election.
Starpharma Holdings Limited Annual Report 2009
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
paid to non-executive directors for the year ended 30 June 2009
was $180,000 (2008: $280,000). 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.
21
Relationship between executive reward and company
financial performance
The Company’s remuneration policy aligns executive reward
with the interests of shareholders. The primary focus is on
sustained growth in shareholder value through achievement
of R&D and commercial milestones, and therefore the
remuneration policy is not directly linked to financial
performance determined by losses or short term 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 significant Company milestones at the discretion
of the Board. Following a performance evaluation, 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.
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 approval to grant the options. The vesting
period is 1 to 2 years from the date of grant, with the exercise
period 2 to 3 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 30 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
commencement 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
recognised. During the year an evaluation of all executives and
other staff took place in accordance with this process.
B. Details of remuneration
22
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) and the specified executives of the
Starpharma Holdings Limited and the consolidated entity are set
out in the following tables. The key management personnel of
Starpharma Holdings Limited include the directors as per pages
18 to 20. The key management personnel of the Starpharma
Holdings Limited Group include the directors as per pages 18 to
20 above and the following executive officers, which include the
five highest paid executives of the entity:
N J Baade
Chief Financial Officer
(from 1 January 2009, previously Financial
Controller until 31 December 2008)
C P Barrett
VP, Business Development
R I Berry
President, Dendritic Nanotechnologies, Inc
(until 16 December 2008)
J K Fairley
Chief Executive Officer
D J Owen
VP, Research
J R Paull
VP, Development and Regulatory Affairs
B P Rogers
Company Secretary (and Chief Financial Officer
until 31 December 2008)
Directors and Key management personnel of Starpharma Holdings Limited
2009
Name
Non-executive directors
P T Bartels Chairman
J W Raff Deputy Chairman
R Dobinson
P J Jenkins
R A Hazleton
Subtotal non-executive
directors
Executive directors
J K Fairley
Totals
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
$
–
–
30,000
–
30,000
–
60,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60,000
30,000
–
30,000
–
40,000
120,000
301,777
361,777
50,000
50,000
3,442
3,442
49,998
169,998
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60,000
30,000
30,000
30,000
30,000
40,000
180,000
412
412
32,212
437,841
32,212
617,841
# All performance related remuneration, including cash bonuses and options granted, are determined to be a ‘at risk’
component of total remuneration.
Directors’ Report – Remuneration report
Starpharma Holdings Limited Annual Report 2009
Directors and Key management personnel of Starpharma Holdings Limited
2008
Name
Non-executive directors
P T Bartels Chairman
J W Raff Deputy Chairman
R Dobinson
P J Jenkins
R A Hazleton
P M Colman1
(from 1/07/2007 – 11/02/2008)
L Gorr2
(from 1/07/2007 – 14/11/2007)
Subtotal non-executive
directors
Executive directors
J K Fairley
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
$
–
–
40,000
36,697
40,000
22,936
13,761
153,394
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000
40,000
–
3,303
–
2,064
1,239
–
126,606
295,869
150,000
4,458
53,040
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14
14
–
–
–
–
–
–
–
80,000
40,000
40,000
40,000
40,000
25,000
15,000
–
280,000
23,499
526,880
23,499
806,880
23
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
Directors’ Report – Remuneration report
B. Details of remuneration
Directors and Key management personnel of Starpharma Holdings Limited or subsidiary companies
2009
Name
Non-executive directors
P T Bartels Chairman
J W Raff Deputy Chairman
R Dobinson
P J Jenkins
R A Hazleton
Subtotal non-executive
directors
Executive directors
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
$
–
–
30,000
–
30,000
60,000
–
–
–
–
–
–
–
–
–
–
–
–
60,000
30,000
–
30,000
–
120,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60,000
30,000
30,000
30,000
30,000
180,000
J K Fairley
Other Key Management Personnel
301,777
50,000
3,442
49,998 – 412
32,212
437,841
24
B P Rogers1
J R Paull
C P Barrett
N J Baade2
D J Owen
R I Berry3
(1/07/2008 – 16/12/2008)
Totals
63,561
158,381
160,380
148,858
138,764
107,209
6,932
11,927
11,927
10,092
9,174
–
9,935
10,326
1,030
235
493
8,025
79,894
23,048
31,259
14,306
13,314
18,150
–
–
–
–
–
117,026
4,125
3,240
219
228
191
–
11,929
12,464
13,571
11,937
14,150
8,022
176,376
219,386
218,386
185,656
176,086
258,432
1,138,930
100,052
33,486
349,969
117,026
8,415
104,285
1,852,163
# All performance related remuneration, including cash bonuses and options granted are at risk.
1 B P Rogers relinquished his responsibilities as Chief Financial Officer on 31 December 2008. He remains Company Secretary.
2 N J Baade was appointed Chief Financial Officer on 1 January 2009; he previously held the position of Financial Controller.
3 R I Berry was President of Dendritic Nanotechnologies Inc, until 16 December 2008.
Directors’ Report – Remuneration report
Starpharma Holdings Limited Annual Report 2009
Directors and Key management personnel of Starpharma Holdings Limited or subsidiary companies
2008
Name
Non-executive directors
P T Bartels Chairman
J W Raff Deputy Chairman
R Dobinson
P J Jenkins
R A Hazleton
P M Colman1
(1/07/2007 – 11/02/2008)
L Gorr2
(1/07/2007 – 14/11/2007)
Subtotal non-executive
directors
Executive directors
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
$
–
–
40,000
36,697
40,000
22,936
13,761
153,394
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000
40,000
–
3,303
–
2,064
1,239
–
126,606
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000
40,000
40,000
40,000
40,000
25,000
15,000
280,000
25
J K Fairley
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 Owen
R I Berry
Totals
74,612
148,758
151,750
132,762
137,618
195,138
–
10,000
10,000
7,000
–
–
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.
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
June 2009 of $360,650, 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
after the recent changes in share and option legislation.
Shareholder approval for this plan will be sought once
agreement has been reached on the quantum and relevance
of performance hurdles.
> Fringe benefits consist of on-site car parking.
> Subject to termination at any time by:
> 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 2009 of $195,700, 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.
26
(i) the Executive giving to the Company twelve months’ notice
> The Executive’s employment may be terminated by the
in writing; or
(ii) the Company giving to the Executive six months’ notice in
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) is guilty of serious misconduct;
(ii) becomes unable to pay the Executive’s debts as they
become due; or
Company at any time without notice for serious breach of
obligations to the employer, wilful neglect of duty, serious
misconduct or bankruptcy.
N J Baade — Chief Financial Officer
(from 1 January 2009, previously Financial Controller)
> No fixed term of agreement.
> Base salary, inclusive of superannuation, per annum as at 30
June 2009 of $169,500, to be reviewed annually by the
remuneration committee.
> Subject to termination at any time by:
(iii) is found guilty by a court of a criminal offence.
(i) the Executive giving to the Company not less than two
B P Rogers — Company Secretary
(and Chief Financial Officer until 31 December 2008)
> No fixed term of agreement.
> Base salary, inclusive of superannuation, per annum as at 30
June 2009 of $131,500 part-time, to be reviewed annually by
the remuneration committee.
> Fringe benefits consist of on-site car parking.
> Payment of termination benefit on termination by the
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.
employer, other than for serious breach of obligations to the
employer, wilful neglect of duty or serious misconduct, equal
to thirteen weeks gross remuneration.
D J Owen — VP – Research
> No fixed term of agreement.
> Base salary, inclusive of superannuation, per annum as at 30
J R Paull — VP – Development and Regulatory Affairs
> No fixed term of agreement.
> Base salary, inclusive of superannuation, per annum as at 30
June 2009 of $191,200, to be reviewed annually by the
remuneration committee.
> Fringe benefits consist of on-site car parking.
> Subject to termination at any time by:
June 2009 of $157,500, 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 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 three
> The Executive’s employment may be terminated by the
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.
Company at any time without notice for serious breach of
obligations to the employer, wilful neglect of duty, serious
misconduct or bankruptcy.
Directors’ Report – Remuneration report
Starpharma Holdings Limited Annual Report 2009
R I Berry — President – Dendritic Nanotechnologies, Inc
(until 16 December 2008)
> No fixed term of agreement.
> Minimum annual base salary of US$175,000 until 16
December 2008.
> 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.
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 1 to 2
years from the date of grant, and the exercise period is 2 to 3
years from the end of the vesting period.
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:
27
Grant date
Date exercisable
Expiry date
Exercise price
Value per option at
grant date
% vested
4 July 2005
5 July 2007
4 July 2010
18 July 2005
19 July 2007
18 July 2010
6 October 2006
6 October 2008
6 October 2010
4 April 2007
14 November 2007
4 April 2009
4 April 2009
4 April 2011
4 April 2011
14 November 2007
8 August 2009
8 August 2011
1 January 2009
29 August 2009
28 August 2012
29 June 2009
29 June 2011
28 June 2014
$0.94
$0.94
$0.50
$0.50
$0.50
$0.50
$0.29
$0.37
$0.15
$0.16
$0.24
$0.14
$0.16
$0.17
$0.11
$0.23
100%
100%
100%
100%
100%
Nil
Nil
Nil
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 2.45 years (2008: 2.10 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 2009 was $0.17 per option (2008: $0.16). 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.
Information in assessing the fair value of options granted to each
director of the company and the key management personnel of
the group during the year ended 30 June 2009 and the prior year
were as follows:
Directors’ Report – Remuneration report
D. Share-based compensation
Options granted on:
Number of options granted
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
1 January 2009
600,000
28 August 2012
2009
29 June 2009
600,000
28 June 2014
14 November 2007
150,000
4 April 2011
2008
14 November 2007
200,000
8 August 2011
$0.29
88.2%
5.7%
–
$0.20
$0.11
$0.37
92.4%
5.7%
–
$0.33
$0.23
$0.50
59.8%
6.3%
–
$0.39
$0.16
$0.50
59.8%
6.3%
–
$0.39
$0.17
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:
28
Name
J K Fairley
B R Rogers
J R Paull
C P Barrett
N J Baade
D J Owen
R I Berry
Number of options granted during the year
2008
350,000
–
–
–
–
–
–
2009
–
200,000
275,000
275,000
225,000
225,000
–
Number of options vested during the year
2008
800,000
2009
150,000
200,000
200,000
200,000
200,000
200,000
250,000
100,000
–
–
–
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 pages 27 to 28. 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.
Directors’ Report – Remuneration report
Starpharma Holdings Limited Annual Report 2009
E. Additional Information
Principles used to determine the nature and amount of remuneration and the relationship between remuneration and company
performance are set out in section A of the Remuneration Report.
Details of remunerations: cash bonuses and options
For each cash bonus and grant of options included in the tables
on pages 21 to 29, 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 and in consideration in the
company’s ability to pay.
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 2009 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
J K Fairley
B P Rogers
J R Paull
C P Barrett
N J Baade
D J Owen
R I Berry
Paid
%
100%1
Forfeited
%
–1
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
Year
Granted
2009
2008
2007
2009
2007
2009
2007
2009
2007
2006
2009
2007
2009
2007
2007
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%
100%
–
100%
–
100%
100%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30/06/2009
30/06/2008
30/06/2011
30/06/2009
30/06/2011
30/06/2009
30/06/2011
30/06/2009
30/06/2008
30/06/2011
30/06/2009
30/06/2011
30/06/2009
30/06/2009
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
29
–
–
34,370
–
45,708
–
45,708
–
–
40,218
–
40,218
–
–
1
In 2009 J K Fairley offered and the Board agreed to reduce the maximum bonus payable to $50,000 in view of the Company’s
cash reserves at that time.
Share-based compensation: Options
Further details relating to options are set out below.
Name
J K Fairley
B P Rogers
J R Paull
C P Barrett
N J Baade
D J Owen
R I Berry
A
Remuneration consisting of options
7.4%
6.8%
5.7%
6.2%
6.4%
8.0%
3.1%
B
Value at grant date $
–
34,370
45,708
45,708
40,218
40,218
–
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 of options expensed during the
current year.
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,
being the intrinsic value of the options at the date.
D = The value at lapse date of options that were granted as part of remuneration and that lapsed during the year because a
vesting condition was not satisfied. The value is determined at the time of lapsing, but assuming the condition was satisfied.
Directors’ Report
E. Additional Information
Shares under option
Unissued ordinary shares of Starpharma Holdings Limited under option at the date of this report are as follows:
Grant date
Expiry date
Issue price of shares
Number under options
31 December 2004
4 July 2005
18 July 2005
6 October 2006
2 January 2007
4 April 2007
21 August 2007
12 October 2007
31 October 2007
14 November 2007
14 November 2007
1 January 2009
29 June 2009
31 December 2009
4 July 2010
18 July 2010
6 October 2010
2 January 2011
4 April 2011
31 August 2012
31 August 2009
07 August 2011
4 April 2011
8 August 2011
28 August 2012
28 June 2014
$0.94
$0.94
$0.94
$0.50
$0.52
$0.50
$0.43
$0.43
$0.50
$0.50
$0.50
$0.29
$0.37
86,000
300,000
100,000
1,038,000
20,000
590,000
7,567,119
10,000
410,000
150,000
200,000
1,458,000
1,444,000
No option holder has any right under the options to participate in any other issue of the company or of any other entity.
30
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.
Directors’ Report
Starpharma Holdings Limited Annual Report 2009
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.
2009
$
129,000
22,500
27,137
2008
$
102,684
22,500
68,186
31
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 32.
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, 24 August 2009
32
LiabilitylimitedbyaschemeapprovedunderProfessionalStandardsLegislationPricewaterhouseCoopersABN52780433757FreshwaterPlace2SouthbankBoulevardSOUTHBANKVIC3006GPOBox1331MELBOURNEVIC3001DX77Telephone61386031000Facsimile61386031999Auditor’sIndependenceDeclarationAsleadauditorfortheauditofStarpharmaHoldingsLimitedfortheyearended30June2009,Ideclarethattothebestofmyknowledgeandbelief,therehavebeen:a)nocontraventionsoftheauditorindependencerequirementsoftheCorporationsAct2001inrelationtotheaudit;andb)nocontraventionsofanyapplicablecodeofprofessionalconductinrelationtotheaudit.ThisdeclarationisinrespectofStarpharmaHoldingsLimitedandtheentitiesitcontrolledduringtheperiod.NadiaCarlinMelbournePartner24August2009PricewaterhouseCoopers Starpharma Holdings Limited Annual Report 2009
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. All
of these practices, unless otherwise stated, 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.
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”). These delegations are reviewed on
an annual basis.
1.1 Board charter
The charter of the Board of Starpharma Holdings Limited,
matters reserved for the board and matters delegated to the
CEO are 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.
> 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 Functions Reserved for the Board
The Company has established matters reserved for the board.
These are:
(a) Strategic Issues
> approving the Company's corporate strategy;
33
> overseeing and monitoring organisational performance
and the achievement of the Group’s strategic goals and
objectives;
> approving any major transaction not included in the
budget or outside the ordinary course of the business;
> determining the structure of the Company and the
definition of the business;
(b) Shareholding Items
> issuing shares or options;
> granting special rights to shares;
> determining the amount of a dividend;
(c) Financial Items
> approving the Company's credit policy;
> reviewing and approving the annual budget and financial
plans including available resources and major capital
expenditure initiatives;
> seeking credit in excess of $50,000;
> giving any guarantee or letter of credit or any security over
the Company's assets;
(d) Expenditure Items
> approval of the annual and half-year financial reports
> approving expenditure exceeding $100,000, unless
reimbursable by an external funding body in which case
the limit is $250,000;
> approving divestments of assets exceeding $50,000
(e) Audit
> Approving appointment or removal of external auditors;
> Considering any external audit reports;
(f) Board and Senior Management
> Establishing corporate governance policies;
> Appointment, performance assessment and, if necessary,
removal of the CEO
> Determining remuneration of CEO
> Ratifying the appointment and, if necessary, the removal of
senior executives;
1.1.3 Other Board Responsibilities
> Enhancing and protecting the reputation of the Group;
> Overseeing the operation of the Group, including its systems
for control, accountability, and risk management;
> Monitoring financial performance;
> Liaison with the Company’s auditors;
> Ensuring there are effective management processes in place
and approving major corporate initiatives;
> Reporting to shareholders.
1.2 Board members
Details of the members of the Board, their experience,
Corporate Governance Statement
1.The Board of Directors
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.
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;
34
> 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, and has remained a director since ceasing
employment in an executive capacity.
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.
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 Board has established the functions delegated
to the CEO. The CEO is responsible for implementing Company
strategies and policies, and for the day to day business operations
of the Group in accordance with the strategic objectives of the
Group as approved of the Board from time to time.
The Board policy is for these separate roles of Chairman and
CEO to be undertaken by separate people.
1.6 Commitment
The Board held eight 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 2009, 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.
During the year an assessment of the Board and its committees
was conducted in accordance with these procedures.
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.
Corporate Governance Statement
Starpharma Holdings Limited Annual Report 2009
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 for the year ended 30 June 2009:
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.
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 Company has established an audit and risk committee,
which consists of the following independent non-executive
directors:
Mr Ross Dobinson (Chairman)
Mr Peter Bartels
Dr Peter Jenkins
Details of these directors’ qualifications and attendance at
committee meetings are set out in the directors’ report pages
18 to 20. 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
> 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 management of risk
> 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
> that the above statement is founded on a sound system of
risk management and internal compliance and control which
implements the policies adopted by the Board and that the
Company’s risk management and internal compliance and
control is operating efficiently and effectively in all material
respects.
35
> 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.
3.2 Remuneration and nomination committee
The Company has established an remuneration and nomination
committee which consists of the following independent non-
executive directors:
Mr Ross Dobinson (Chairman)
Mr Peter Bartels
Mr Richard Hazleton
Details of these directors’ attendance at committee meetings are
set out in the directors’ report on page 20.
Corporate Governance Statement
3. Board committees
The charter of the remuneration and nomination committee is 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
> propose candidates for board vacancies
> oversee board succession including the succession of the
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. 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 21 to 30.
4. External auditors
36
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 22 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.
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 Board
has required management to design and implement a risk
management and internal control system to manage the
Group’s material business risks. The risk management policy,
which is available on the Company website, sets out policies for
the oversight of material business risks, and describes the
responsibilities and authorities of the Board, the audit and risk
committee, the CEO, CFO, Company Secretary, and the senior
management team. The CEO, CFO and Company Secretary are
responsible to the Board for the overall implementation of the
risk management program. During the financial year
management has reported to the board as to the effectiveness
of the Group’s management of its material risks.
Corporate Governance Statement
Starpharma Holdings Limited Annual Report 2009
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 established 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
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:
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 (www.starpharma.com).
37
(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 Company has developed a continuous disclosure and
shareholder communication policy to ensure compliance with
the ASX Listing Rules and to facilitate effective communication
with shareholders. A copy of this policy is available on the
Company’s website.
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).
Annual Financial Report
Contents
Income statements
Balance sheets
Statements of changes in equity
Cash flow statements
38
Notes to the financial statements
Directors’ declaration
Independent audit report to the members
39
40
41
42
43
74
75
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 in the directors’ report on pages 15 to 16, which is not
part of this financial report.
The financial report was authorised for issue by the directors on
24 August 2009. 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.
Financial Report
Starpharma Holdings Limited Annual Report 2009
Income statements
For the year ended 30 June 2009
Revenue from continuing operations
Other income
Administration expense
Research and development expense
Provision for impairment of receivables
Finance costs
Impairment of financial assets
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
7
29
Consolidated
2008
$’000
1,709
8,212
(5,816)
(12,224)
–
(27)
(76)
(8,222)
731
(7,491)
2009
$’000
2,124
7,691
(4,128)
(9,988)
–
(28)
–
(4,329)
202
(4,127)
($0.02)
($0.02)
($0.04)
($0.04)
2009
$’000
371
–
(1,237)
–
(16)
–
–
(882)
–
(882)
Parent
2008
$’000
414
–
(2,661)
–
(3,758)
–
(40)
(6,045)
–
(6,045)
39
The above income statements should be read in conjunction with the accompanying notes.
Financial Report
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
Other financial assets
Total non-current assets
Total assets
40
Current Liabilities
Trade and other payables
Borrowings
Provisions (Employee Entitlements)
Deferred income
Total current liabilities
Non-current liabilities
Borrowings
Provisions (Employee Entitlements)
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
Consolidated
2009
$’000
11,595
1,581
13,176
2008
$’000
7,482
1,773
9,255
–
447
15,224
–
15,671
–
758
14,640
–
15,398
28,847
24,653
1,764
133
316
930
3,143
160
20
25
–
205
1,623
124
417
1,551
3,715
293
37
97
128
555
3,348
4,270
Parent
2008
$’000
2,420
197
2,617
2009
$’000
8,267
289
8,556
3,389
–
2,692
16,252
22,333
30,889
2,631
–
3,144
16,252
22,027
24,644
1,566
–
–
–
1,566
–
–
–
–
–
1,566
1,477
–
–
–
1,477
–
–
–
–
–
1,477
25,499
20,383
29,323
23,167
85,640
3,279
(63,420)
25,499
78,667
1,009
(59,293)
20,383
85,640
1,903
(58,220)
29,323
78,667
1,838
(57,338)
23,167
The above balance sheets should be read in conjunction with the accompanying notes.
Financial Report
Starpharma Holdings Limited Annual Report 2009
Statements of changes in equity
For the year ended 30 June 2009
Total equity at the beginning of the year
Exchange differences on translation of
foreign operations
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:
Employee share options
Fair value of options granted in private
placement
Contributions of equity, net of transaction
costs
Total equity at the end of the year
Consolidated
Parent
Notes
19
2009
$’000
20,383
2,061
2,061
(4,127)
(2,066)
19
19
18
209
–
6,973
2008
$’000
25,724
(1,532)
(1,532)
(7,491)
(9,023)
209
1,033
2,440
2009
$’000
23,167
–
2008
$’000
25,631
–
–
(882)
–
(6,045)
(882)
(6,045)
65
–
6,973
108
1,033
2,440
41
25,499
20,383
29,323
23,167
The above statements of changes in equity should be read in conjunction with the accompanying notes.
Financial Report
Cash flow Statements
For the year ended 30 June 2009
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
Consolidated
Notes
2009
$’000
2008
$’000
2009
$’000
Parent
2008
$’000
1,745
7,074
(12,898)
1,168
8,566
(15,357)
–
–
(1,165)
–
–
(1,667)
78
(28)
298
(27)
28
–
235
–
Net cash outflows from operating activities
27
(4,029)
(5,352)
(1,137)
(1,432)
Cash flow from investing activities
Loans advanced to subsidiaries
Receipts from property, plant and equipment
Payments for property, plant and equipment
42
–
2
(49)
–
–
(36)
(462)
–
–
(4,897)
–
–
Net cash outflows from investing activities
(47)
(36)
(462)
(4,897)
Cash flow from financing activities
Proceeds from issue of shares
Share issue transaction costs
Lease repayments
7,151
(178)
(162)
3,817
(344)
(75)
Net cash inflows from financing activities
6,811
3,398
7,151
(178)
–
6,973
3,817
(344)
–
3,473
Net increase (decrease) in cash
and cash equivalents held
Cash and cash equivalents
at the beginning of the year
Effects of exchange rate changes on cash
and cash equivalents
Cash and cash equivalents at the end
of the year
2,735
(1,990)
5,374 (2,856)
7,482
10,073
2,420
5,584
1,378
(601)
473 (308)
11,595
7,482
8,267
2,420
The above cash flow statements should be read in conjunction with the accompanying notes
Financial Report
Starpharma Holdings Limited Annual Report 2009
Notes to the financial statements
30 June 2009
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 – Other financial assets
14. Current liabilities – Trade and other payables
15. Current liabilities – Borrowings
16. Non-current liabilities – Borrowings
17. Non-current liabilities – Deferred tax liabilities
18. Contributed equity
19.
20.
21.
22.
23. Contingencies
24. Commitments
25.
26.
27.
28. Non–cash financing activities
29.
30.
31.
Reserves
Accumulated losses
Key management personnel disclosures
Remuneration of auditors
Earnings per share
Share-based payments
Related party transactions
Subsidiaries
Events occurring after the balance sheet date
Reconciliation of profit after income tax to net cash inflow from operating activities
43
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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.
(a) Basis of preparation
44
This general purpose financial report has been prepared
in accordance with Australian Accounting Standards, other
authoritative pronouncements of the Australian Accounting
Standards Board, Urgent Issues Group Interpretations and
the Corporations Act 2001.
Compliance with IFRS
The financial report of Starpharma Holdings Limited
complies with International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards
Board (IASB); and the Australian equivalent of IFRS (AIFRS).
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 2009, the consolidated entity
has incurred losses of $4,127,000 (2008: $7,491,000)
and experienced net cash outflows of $4,029,000 from
operations (2008: $5,352,000), 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 September 2010.
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 entity”) as at 30
June 2009 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 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.
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.
(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.
Financial Report
Starpharma Holdings Limited Annual Report 2009
(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.
45
(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 24). 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 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 24). 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.
Financial Report
1. Summary of significant accounting policies
(i) Business combinations
(l) Trade receivables
46
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.
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.
(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
Financial Report
Starpharma Holdings Limited Annual Report 2009
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.
47
(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.
(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
Financial Report
1. Summary of significant accounting policies
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.
48
(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 30
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 than 12 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. 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.
Financial Report
Starpharma Holdings Limited Annual Report 2009
49
(v) Revised AASB 3 Business Combinations, AASB 127
Consolidated and Separate Financial Statements and
AASB 2008-3 Amendments to Australian Accounting
Standards arising from AASB 3 and AASB 127
(effective 1 July 2009)
The revised AASB 3 continues to apply the acquisition
method to business combinations, but with some
significant changes. For example, all payments to
purchase a business are to be recorded at fair value at
the acquisition date, with contingent payments classified
as debt subsequently remeasured through the income
statement. There is a choice on an acquisition-by-
acquisition basis to measure the non-controlling interest
in the acquiree either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s net
assets. All acquisition-related costs must be expensed.
This is different to the Group's current policy which is set
out in note 1(i) above. The Group will apply the revised
standards prospectively to all business combinations
and transactions.
(vi) AASB 2008-6 Further Amendments to Australian
Accounting Standards arising from the Annual
Improvements Project (effective 1 July 2009)
The amendments to AASB 5 Discontinued Operations
and AASB 1 First-Time Adoption of Australian-Equivalents
to International Financial Reporting Standards are part of
the IASB’s annual improvements project published in
May 2008. They clarify that all of a subsidiary’s assets
and liabilities are classified as held for sale if a partial
disposal sale plan results in loss of control. Relevant
disclosures should be made for this subsidiary if the
definition of a discontinued operation is met. The Group
will apply the amendments prospectively to all partial
disposals of subsidiaries from 1 July 2009.
(vii) AASB 2008-7 Amendments to Australian
Accounting Standards – Cost of an Investment in
a Subsidiary, Jointly Controlled Entity or Associate
(effective 1 July 2009)
In July 2008, the AASB approved amendments to AASB 1
First-time Adoption of International Financial Reporting
Standards and AABS 127 Consolidated and Separate
Financial Statements. The Group will apply the revised
rules prospectively from 1 July 2009. After that date, all
dividends received from investments in subsidiaries,
jointly controlled entities or associates will be recognised
as revenue, even if they are paid out of pre-acquisition
profits, but the investments may need to be tested for
impairment as a result of the dividend payment. Under
the entity’s current policy, these dividends are deducted
from the cost of the investment. 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.
(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 2009
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 (effective from 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 will
adopt AASB 8 from 1 July 2009.
(ii) Revised AASB 123 Borrowing Costs and AASB
2007-6 Amendments to Australian Accounting
Standards arising from AASB 123
(effective from 1 January 2009)
The revised AASB 123 has removed the option to
expense all borrowing costs and - when adopted – will
require the capitalisation of all borrowing costs directly
attributable to the acquisition, construction or production
of a qualifying asset. There will be no impact on the
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 (effective from 1 January 2009)
The September 2007 revised AASB 101 requires the
presentation of a statement of comprehensive income
and makes changes to the statement of changes in
equity, but will not affect any of the amounts recognised
in the 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 will apply the revised standard from 1 July 2009.
(iv) AASB 2008-1 Amendments to Australian Accounting
Standard – Share-based Payments: Vesting Conditions
and Cancellations (effective from 1 January 2009)
AASB 2008-1 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.
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, chief financial 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:
50
Cash and cash equivalents
Trade and other receivables
Receivables - intercompany loans
Trade and other payables
Deferred income
Consolidated
2008
US
$’000
6,313
1,515
–
1,097
1,423
2009
US
$’000
2,876
923
–
810
675
Parent
2008
US
$’000
2,172
–
2,279
5
–
2009
US
$’000
729
–
2,745
–
–
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
2008
$’000
(501)
613
2009
$’000
(259)
317
2009
$’000
226
(276)
(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
2009
$’000
8,856
2008
$’000
2,976
2009
$’000
8,257
Parent
2008
$’000
11
(13)
Parent
2008
$’000
2,407
Financial Report
Starpharma Holdings Limited Annual Report 2009
Group and Parent sensitivity
At 30 June 2009, 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 $46,000 higher or lower (2008 – change of 50 bps: $17,000
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 $41,000 higher or lower (2008 – change of 50 bps:
$12,000 higher/lower).
(b) Credit risk
Credit risk is managed on a group basis. Credit risk arises
from cash and cash equivalents and deposits with banks
and financial institutions, as well as credit exposures from
royalty and licensing agreements and product sales.
Credit risk for cash and deposits with banks and financial
institutions is managed by maximising deposits held
under Australian and US bank guarantees and insurance
schemes. Other than government funded research and
development programs, third party receivables consist of
royalty and licensing receivables from large, multinational
organisations.
(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.
51
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 2009 is $15,224,000 (2008:
$14,640,000).
(
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(p). 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
Financial Report
3. Critical accounting estimates and judgments
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.
(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
52
Business segment
The consolidated entity operates in one business segment, being the discovery, development and commercialisation of dendrimers
for pharmaceutical and other life science and industrial applications.
Geographic segment
The consolidated entity operates in locations from Australia and United States of America (“USA”). Dendritic Nanotechnologies Inc.
(“DNT”) operates from Michigan, USA and it has been determined that on the basis of monitoring of the USA operations, these
operations represent a separate geographical segment.
Secondary reporting format-geographical segments
2009
Revenue and other income
Expenses
Loss before income tax
Segment net assets
Secondary reporting format-geographical segments
2008
Revenue and other income
Expenses
Share of results of associate
Loss before income tax
Segment net assets
Australia
$’000
8,338
(10,905)
(2,567)
16,804
Australia
$’000
8,486
(14,261)
(5,775)
USA
$’000
1,909
(3,681)
(1,772)
8,696
USA
$’000
1,696
(4,067)
(2,371)
Inter-segment
Eliminations
$’000
(432)
442
10
(1)
Inter-segment
Eliminations
$’000
(261)
261
–
11,879
8,425
79
Total
$’000
9,815
(14,144)
(4,329)
25,499
Total
$’000
9,921
(18,067)
(8,146)
(76)
(8,222)
20,383
Financial Report
Starpharma Holdings Limited Annual Report 2009
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
2008
$’000
1,408
297
4
1,709
108
8,104
8,212
9,921
2009
$’000
2,019
105
–
2,124
379
7,312
7,691
9,815
Parent
2008
$’000
–
414
–
414
–
–
–
414
2009
$’000
–
371
–
371
–
–
–
371
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
Consolidated
Parent
53
Loss from ordinary activities before income tax
expense includes the following items:
Depreciation
Amortisation
Rental expense on operating leases
Defined contribution superannuation expense
2009
$’000
375
1,652
461
517
2008
$’000
553
1,546
521
591
2009
$’000
–
452
–
120
2008
$’000
–
545
–
127
Financial Report
7. Income tax expense
(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
Consolidated
Parent Entity
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
–
(202)
(202)
(202)
–
(202)
(128)
(128)
(4,329)
(1,299)
63
–
–
56
978
(202)
–
(731)
(731)
(731)
–
(731)
(731)
(731)
(8,223)
(2,467)
61
23
–
44
1,608
(731)
–
–
–
–
–
–
–
–
(882)
(264)
20
–
5
–
107
–
–
–
–
–
–
–
–
–
(6,045)
(1,814)
30
–
1,127
–
657
–
Deferred income tax credit
included in income tax expenses comprises:
(Decrease) in deferred tax liabilities
17
54
(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
Share-based payments
Write down in carrying value of investments
Write down in carrying value of loans
Difference in overseas tax rates
Future income tax benefits
not brought to account
Income tax credit
(c) Amounts recognised directly in equity
Reduction of deferred tax liabilities of $74,000 (2008: $267,000) 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)
51,705
49,740
3,655
5,309
Potential tax benefit
15,511
14,922
1,096
1,593
(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
899
934
270
280
467
140
406
122
Potential future income tax benefits attributable to tax losses
carried forward have not been brought to account at 30 June
2009 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 last made an assessment as to the
satisfaction of deductibility conditions at 30 June 2006, no such
similar assessment has been performed in subsequent years.
Financial Report
Starpharma Holdings Limited Annual Report 2009
8. Current assets – Cash and cash equivalents
Cash at bank and on hand
Deposits at call
Consolidated
Parent Entity
2009
$’000
2,739
8,856
11,595
2008
$’000
4,506
2,976
7,482
2009
$’000
10
8,257
8,267
2008
$’000
13
2,407
2,420
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 0.15% to 4.00% (2008: 1.25% to 7.59%). These deposits are of 30-90
day maturities.
Cash not available
There is $187,000 of cash not available for use due to restrictions associated with a finance lease which is guaranteed by term
deposit (2008: $260,000).
Interest rate risk
30 June 2009
Floating
Interest
rate
Fixed interest maturing
55
Notes
$’000
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
Total
$’000
Contractual
cash flows
Financial Assets
Cash and
deposits
Receivables
Weighted average
interest rate
8
9
7,627
1,656
–
–
7,627
1,656
–
–
–
–
–
–
–
–
–
–
–
–
2.8%
1.9%
–%
–%
–%
–%
Financial Liabilities
Payables
and provisions
Borrowings
Deferred income
14
15/16
Weighted average
interest rate
–
–
–
–
–
–
133
–
133
160
–
160
–
–
–
–
–
–
–
–
–
–
–
–
–%
8.0% 7.8%
–%
–%
–%
–%
–%
–
–
–
–%
–
–
–
–
2,312
11,595
N/A
1,581
1,581
3,893
13,176
–%
1,581
1,581
2,100
2,100
2,100
–
955
293
955
3,055
3,348
293
955
3,348
Financial Report
8. Current assets – Cash and cash equivalents
30 June 2008
Floating
Interest rate
Fixed interest maturing
Notes
$’000
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
Total
$’000
Contractual
cash flows
Financial Assets
Cash and
deposits
Receivables
Weighted average
interest rate
8
9
395
2,976
–
–
395
2,976
–
–
–
–
–
–
–
–
–
–
–
–
3.5%
2.8%
–%
–%
–%
–%
Financial Liabilities
Payables and
provisions
Borrowings
Deferred income
14
15/16
56
Weighted average
interest rate
–
–
–
–
–
–
–
124
–
124
133
–
133
160
–
160
–
–
–
–
–
–
–
–
–%
8.0% 8.0%
7.8%
–%
–%
–%
–
–
–
–%
–
–
–
–
4,111
7,482
N/A
1,773
9,255
1,773
1,773
1,773
5,884
–%
2,076
2,076
2,076
417
1,648
4,141
–
1,648
3,724
–%
417
1,048
4,141
9. Current assets – Trade and other receivables
Trade and grant receivable
Interest receivable
Prepayments
Other receivables
Consolidated
Parent Entity
2009
$’000
1,344
35
100
102
1,581
2008
$’000
1,311
2
370
90
1,773
2009
$’000
117
31
42
99
289
2008
$’000
75
–
48
74
197
Trade and grant receivables
Trade receivables primarily comprise of customer royalty and licence revenue and are subject to normal terms of settlement
within 30 to 90 days. Grant receivables comprise of expenditure reimbursable under grants from the USA government,
including the National Institutes of Health (“NIH”) and Department of Defense which are subject to normal terms of settlement
within 30 to 60 days.
Impaired receivables
As at 30 June 2009, trade and grant receivables of $234,000 (2008: nil) were past due. These relate to grant funding and
customers for whom there is no recent history of default. No receivables are considered impaired at 30 June 2009 (2008: nil) other
than from subsidiaries within the Group.
Other receivables
Other receivables comprise sundry debtors and GST claimable and are subject to normal terms of settlement within 30 days.
Financial Report
Starpharma Holdings Limited Annual Report 2009
10. Non-current assets – Receivables
Loans to controlled entities
Impairment provision
Consolidated
Parent Entity
2009
$’000
–
–
–
2008
$’000
–
–
–
2009
$’000
38,413
(35,024)
3,389
2008
$’000
37,639
(35,008)
2,631
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
57
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
Year ended 30 June 2009
Opening net book amount
Exchange differences
Additions
Disposals
Depreciation and amortisation
Closing net book amount
At 30 June 2009
Cost
Accumulated depreciation and amortisation
Net book amount
2,251
(1,631)
620
620
(9)
36
(3)
(256)
388
2,270
(1,882)
388
388
25
49
(10)
(227)
225
2,337
(2,112)
225
1,141
(946)
195
195
–
–
–
(178)
17
1,141
(1,124)
17
17
–
–
–
(9)
8
1,141
(1,133)
8
757
(461)
296
296
–
176
–
(119)
353
614
(261)
353
353
–
–
–
(139)
214
294
(80)
214
4,149
(3,038)
1,111
1,111
(9)
212
(3)
(553)
758
4,025
(3,267)
758
758
25
49
(10)
(375)
447
3,772
(3,325)
447
Financial Report
12. Non-current assets – Intangible assets
Consolidated
Patents & licences
$’000
Goodwill
$’000
Total intangibles
$’000
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
58
Year ended 30 June 2009
Opening net book amount
Exchange differences
Depreciation and amortisation
Closing net book amount
At 30 June 2009
Cost
Accumulated depreciation and amortisation
Net book amount
(a) Impairment tests for goodwill
17,634
(1,603)
16,031
16,031
(1,392)
(1,546)
13,093
16,065
(2,972)
13,093
13,093
1,948
(1,652)
13,389
18,244
(4,855)
13,389
1,755
–
1,755
1,755
(208)
–
1,547
1,547
–
1,547
1,547
288
–
1,835
1,835
–
1,835
19,389
(1,603)
17,786
17,786
(1,600)
(1,546)
14,640
17,612
(2,972)
14,640
14,640
2,236
(1,652)
15,224
20,079
(4,855)
15,224
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 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 (which arose 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.
The recoverable amounts of the Group’s CGUs have been determined based on estimation of their fair value less costs to sell.
(b) Key assumptions used for fair value less costs to sell estimation
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 Group. Given the excess of the market capitalisation of Starpharma Holdings Limited over the
carrying value of total assets (including goodwill) at 30 June 2009, goodwill is not considered to be impaired at year end.
(c) Impairment tests for finite life intangible assets
Identifiable intangible assets with finite lives are carried at cost less accumulated amortisation and adjusted for any
accumulated impairment loss. The directors have assessed these assets for indicators of impairment at 30 June 2009 and
determined that there is no indication that the asset is impaired.
Financial Report
Starpharma Holdings Limited Annual Report 2009
Parent
Patents & licences
$’000
Goodwill
$’000
Total intangibles
$’000
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
Year ended 30 June 2009
Opening net book amount
Depreciation and amortisation
Closing net book amount
At 30 June 2009
Cost
Accumulated depreciation and amortisation
Net book amount
4,374
(685)
3,689
3,689
(545)
3,144
4,374
(1,230)
3,144
3,144
(452)
2,692
4,374
(1,682)
2,692
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,374
(685)
3,689
3,689
(545)
3,144
4,374
(1,230)
3,144
3,144
(452)
2,692
4,374
(1,682)
2,692
59
13. Non-current assets – Other financial assets
Other non-traded investments
Shares in controlled entities
Provision for impairment in value
Notes
25
Consolidated
Parent Entity
2009
$’000
–
–
–
2008
$’000
–
–
–
2009
$’000
33,752
(17,500)
16,252
2008
$’000
33,752
(17,500)
16,252
(a) Impairment tests for investments in subsidiaries
The Company’s investments in subsidiaries are held at cost less accumulated impairment losses. At 30 June 2009 the
directors assessed these investments for indicators of impairment and determined that there are no indications that the
assets are further impaired.
Financial Report
14. Current liabilities – Trade and other payables
Consolidated
2008
$’000
1,623
–
1,623
2009
$’000
1,764
–
1,764
Parent
2008
$’000
823
654
1,477
2009
$’000
912
654
1,566
Trade creditors and accrued payables
Loans from controlled entities
15. Current liabilities – Borrowings
Finance lease liability (secured)
Consolidated
Parent Entity
2009
$’000
133
2008
$’000
124
2009
$’000
–
2008
$’000
–
Details of the security relating to each of the secured liabilities are set out in note 16.
60
16. Non-current liabilities – Borrowings
Finance lease liability (secured)
Consolidated
Parent Entity
2009
$’000
160
2008
$’000
293
2009
$’000
–
2008
$’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 $293,000 at 30 June 2009 (2008: $417,000).
2009
Floating
Interest
rate
Fixed interest rate
1 year
or less
$’000
Over 1–2
years
$’000
Over 2–3
years
$’000
Over 3–4
years
$’000
Over 4–5
years
$’000
Over 5
years
$’000
–
–
133
8.0%
160
7.8%
–
–
–
–
–
–
–
–
Floating
Interest
rate
Fixed interest rate
1 year
or less
$’000
Over 1–2
years
$’000
Over 2–3
years
$’000
Over 3–4
years
$’000
Over 4–5
years
$’000
Over 5
years
$’000
–
–
124
8.0%
133
8.0%
160
7.8%
–
–
–
–
–
–
Total
$’000
293
Total
$’000
417
Notes
15/16/24
Lease Liabilities
Weighed average
interest rate
2008
Notes
15/16/24
Lease Liabilities
Weighed average
interest rate
Financial Report
Starpharma Holdings Limited Annual Report 2009
17. Non-current liabilities – Deferred tax liabilities
Consolidated
Parent Entity
2009
$’000
128
(202)
74
–
–
2008
$’000
954
(241)
(95)
(490)
128
2009
$’000
–
–
–
–
–
2008
$’000
–
–
–
–
–
Balance at 1 July
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
18. Contributed equity
(a) Share Capital
Share Capital
Ordinary shares – fully paid
207,218,113
179,715,153
85,640
78,667
2009
Shares
2008
Shares
2009
$’000
2008
$’000
61
Parent Entity
Parent Entity
(b) Movements in ordinary share capital
Date
1 Jul 2007
22 Aug 2007
8 Apr 2009
22 May 2009
22 May 2009
Details
Opening Balance
Share placement
less transaction costs
Balance at 30 June 2008
Share placement (Tranche I)
Share placement (Tranche II)
Share purchase plan
less transaction costs
Balance at 30 June 2009
Number of shares
167,833,986
11,881,167
179,715,153
11,853,844
8,000,000
7,649,116
207,218,113
Issue Price
$0.321
$0.26
$0.26
$0.26
$’000
76,227
2,784
(344)
78,667
3,082
2,080
1,989
(178)
85,640
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 recognised in the share-based payments reserve.
(c) Ordinary shares
As at 30 June 2009 there were 207,218,113 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. There is no current on-market share buy-back
(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 30.
Financial Report
18. Contributed equity
(e) Share purchase plan
On 22 April 2009 the company invited eligible shareholders to subscribe for ordinary shares at an issue price of $0.26 per
share, up to a maximum of $10,000 per shareholder. A total of 7,649,116 of shares were issued on 22 May 2009 from the share
purchase plan.
(f) Capital risk management
The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going
concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders.
19. Reserves
(a) Reserves
Share-based payments reserve
Foreign currency translation reserve
Asset revaluation reserve
62
(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
(c) Nature and purpose of reserves
(i) Share-based payments reserve
Consolidated
Parent Entity
2008
$’000
1,939
(3,145)
2,215
1,009
2009
$’000
1,903
–
–
1,903
2008
$’000
1,838
–
–
1,838
Consolidated
Parent Entity
2008
$’000
697
1,033
209
1,939
(1,613)
(1,532)
(3,145)
2009
$’000
1,838
–
65
1,903
–
–
–
2008
$’000
697
1,033
108
1,838
–
–
–
2009
$’000
2,148
(1,084)
2,215
3,279
2009
$’000
1,939
–
209
2,148
(3,145)
2,061
(1,084)
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
The uplift in fair value of the identifiable net assets of DNT on the company’s acquisition of the remaining share in
October 2006 was recognised in reserves.
Financial Report
Starpharma Holdings Limited Annual Report 2009
20. Accumulated losses
Accumulated losses balance at 1 July
Net loss for the year
Accumulated losses balance at 30 June
Consolidated
Parent Entity
2009
$’000
(59,293)
(4,127)
(63,420)
2008
$’000
(51,802)
(7,491)
(59,293)
2009
$’000
(57,338)
(882)
(58,220)
2008
$’000
(51,293)
(6,045)
(57,338)
21. Key management personnel disclosures
(a) Key management personnel compensation
Short term employee benefits
Post employment benefits
Other long term benefits
Termination benefits
Share-based payments
Consolidated
Parent Entity
2009
$’000
1,273
350
8
117
104
1,852
2008
$’000
1,511
347
11
–
147
2,016
2009
$’000
416
170
–
–
32
618
63
2008
$’000
604
180
–
–
23
807
Detailed remuneration disclosures are provided in sections A-C of the remuneration report on pages 21 to 27.
(b) Equity instrument disclosures relating to key management personnel
(i) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and
conditions of the options, can be found in section D of the remuneration report on pages 27 to 28.
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.
2009
Balance at the
start of the year
Name
Directors of Starpharma Holdings Limited
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
Unvested
J K Fairley
–
Other key management personnel of the Group
1,150,000
B P Rogers
J R Paull
C P Barrett
N J Baade
D J Owen
R I Berry1
420,000
280,000
300,000
200,000
200,000
250,000
200,000
275,000
275,000
225,000
225,000
–
–
–
–
–
–
–
–
(500,000)
650,000
450,000
200,000
(220,000)
(80,000)
–
–
–
–
400,000
475,000
575,000
425,000
425,000
250,000
200,000
200,000
300,000
200,000
200,000
250,000
200,000
275,000
275,000
225,000
225,000
–
# Other Changes during the year relate to the expiry of options.
1
At 30 June 2009 R I Berry was not an executive of the Group.
Financial Report
21. Key management personnel disclosures
2008
Balance at the
start of the year
Name
Directors of Starpharma Holdings Limited
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
Unvested
350,000
J K Fairley
Other key management personnel of the Group
800,000
B P Rogers
J R Paull
C P Barrett
N J Baade
D J Owen
R I Berry
420,000
280,000
300,000
200,000
200,000
250,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,150,000
800,000
350,000
420,000
280,000
300,000
200,000
200,000
250,000
220,000
80,000
100,000
–
–
–
200,000
200,000
200,000
200,000
200,000
250,000
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
64
2009
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
R Dobinson
P J Jenkins
R A Hazleton
Other key management personnel of the Group
129,804
53,750
6,496,874
–
1,416,000
42,616
Ordinary Shares
B P Rogers
J R Paull
C P Barrett
N J Baade
D J Owen
R I Berry1
65,622
–
–
–
–
70,296
1 At 30 June 2009 R I Berry was not an executive of the Group.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
783,903
–
100,000
–
–
–
–
–
–
129,804
53,750
7,280,777
–
1,416,000
142,616
65,622
–
–
–
–
70,296
Financial Report
Starpharma Holdings Limited Annual Report 2009
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
R Dobinson
P J Jenkins
R A Hazleton
P M Colman1
L Gorr1
109,804
30,250
5,706,689
2,720,976
1,635,608
42,616
5,992,286
5,204,704
Other key management personnel of the Group
Ordinary Shares
B P Rogers
J R Paull
C P Barrett
N J Baade
D J Owen
R I Berry
65,622
–
–
–
–
70,296
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,000
23,500
790,185
(2,720,976)
(219,608)
–
–
–
–
–
–
–
–
–
129,804
53,750
6,496,874
–
1,416,000
42,616
5,992,286
5,204,704
65,622
–
–
–
–
70,296
65
1 At 30 June 2008 these individuals were not Directors of Starpharma Holdings Limited.
No director has entered into a material contract with the Group in either the current or previous financial year and there were no
material contracts involving directors’ interests subsisting at year end.
22. 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
2009
$
2008
$
2009
$
2008
$
(a) Statutory 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 statutory audit services
(b) Other audit services
Other audit services:
Grant reviews & program audits
PricewaterhouseCoopers
Total remuneration for other audit services
Total remuneration of auditors
129,000
27,137
156,137
22,500
22,500
178,637
102,684
68,186
170,870
129,000
–
129,000
102,684
–
102,684
22,500
22,500
193,370
–
–
–
–
129,000
102,684
Financial Report
23. Contingencies
The Company has no contingent assets or liabilities at 30 June 2009 (2008: nil).
24. Commitments
(a) Capital Commitments
Capital expenditure contracted for at the reporting date but not recognised as liabilities is as follows:
Property, plant and equipment
Within one year
Later than one year but not later than five years
Later than five years
(b) Lease Commitments
66
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
2009
$’000
–
–
–
–
2008
$’000
19
–
–
19
2009
$’000
–
–
–
–
2008
$’000
–
–
–
–
Consolidated
Parent Entity
2009
$’000
2008
$’000
2009
$’000
2008
$’000
402
228
–
630
337
315
(22)
630
185
329
–
514
97
466
(49)
514
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Operating leases
The Group leases laboratory and offices under a lease until 31 August 2010 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
2009
$’000
2008
$’000
2009
$’000
2008
$’000
269
68
–
337
61
36
–
97
–
–
–
–
–
–
–
–
Financial Report
Starpharma Holdings Limited Annual Report 2009
Finance leases
The Group leases plant and equipment with a carrying amount of $293,000 (2008: $417,000) under a finance lease expiring within
two years.
Consolidated
Parent Entity
Notes
2009
$’000
2008
$’000
2009
$’000
2008
$’000
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
Future finance charges
Recognised as a liability
Representing finance lease liabilities:
Current
Non-current
15
16
151
164
–
315
(22)
293
133
160
293
151
315
–
466
(49)
417
124
293
417
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
67
The weighted average interest rate implicit in the lease is 7.9% (2008: 7.9%).
(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 for details of these commitments.
25. 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 Limited1
Dendritic Nanotechnologies Inc.
Country of
Incorporation Class of Shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Australia
Australia
Australia
Australia
USA
2009
%
100.00%
100.00%
100.00%
–
100.00%
2008
%
100.00%
100.00%
100.00%
100.00%
100.00%
2009
$’000
9,900
3,300
4,300
–
16,252
33,752
2008
$’000
9,900
3,300
4,300
–
16,252
33,752
1 Preclin Pty Limited was de-registered in on 7 June 2009.
Financial Report
26. Events occurring after the balance sheet date
On 3 August 2009, Starpharma announced results of the clinical
study designed to assess retention of antiviral activity following
vaginal administration of VivaGel® in women. The study showed
that cervicovaginal fluid samples (CVS) obtained immediately
after vaginal administration of VivaGel® provided effectively
complete inhibition of HIV and HSV infection in vitro. At 1 and 3
hours following administration of product, the initial high level of
inhibition of HIV and HSV was retained in all women tested. Even
at 12 and 24 hours following administration, more than 90% of
the initial antiviral activity was retained for both HIV and HSV in
more than half of the women tested. This is the first clinical study
to demonstrate potent antiviral activity of any microbicide
beyond one hour after administration of the product in humans.
These data indicate the potential for VivaGel® to be used other
than immediately prior to sexual intercourse. However, future
testing in clinical efficacy studies is required to confirm this.
There were no serious adverse events during the study, and the
data indicate VivaGel® was safe and well-tolerated in the study.
There are no other significant events occurring since 30 June
2009 that have significantly affected or may significantly affect
the operations of the Group, the results of those operations, or
the state of the Group.
27. Reconciliation of profit after income tax to net cash inflow from operating activities
68
Operating loss after tax:
Depreciation and amortisation
Foreign exchange (gains) / losses
Non-cash employee benefits -share-based payments
Impairment of financial asset
Provision for doubtful debts
Change in operating assets and liabilities, net of effects
of acquisitions and disposals of entities:
(Increase) decrease in receivables and other assets
Decrease in deferred tax assets
Increase (decrease) increase in trade creditors
Decrease in deferred tax liabilities
Increase (decrease) in employee provisions
Increase (decrease) in deferred income
Gain on sale of property, plant and equipment
Consolidated
Parent Entity
2009
$’000
(4,127)
2,028
(1,378)
209
–
–
39
–
142
(128)
(118)
(693)
(3)
2008
$’000
(7,491)
2,099
601
209
76
–
(370)
43
(232)
(826)
40
499
–
2009
$’000
(882)
452
(473)
65
–
16
(404)
–
89
–
–
–
–
2008
$’000
(6,045)
545
308
108
40
3,758
(253)
–
107
–
–
–
–
Net cash outflows from operating activities
(4,029)
(5,352)
(1,137)
(1,432)
28. Non-cash financing activities
Acquisition of property, plant and equipment by means of
equipment loan
Consolidated
Parent Entity
2009
$’000
–
2008
$’000
176
2009
$’000
–
2008
$’000
–
–
176
–
–
Financial Report
Starpharma Holdings Limited Annual Report 2009
29. Earnings per share
Basic loss per share
Diluted loss per share
Net loss attributable to members of Starpharma Holdings Ltd used as the
numerator in calculating diluted and basic earnings per share ($’000 )
Weighted average number of ordinary shares outstanding during the year used
as the denominator in calculating diluted and basic earnings per share
2009
$
(0.02)
(0.02)
(4,127)
Consolidated
2008
$
(0.04)
(0.04)
(7,491)
184,082,782
177,994,656
30. Share-based payments
(a) Employee option plan
(b) Individual option deeds
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. The vesting period is 1 to 2
years from date of grant, with the exercise period 2 to 3
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.
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.
69
(c) Options attached to a share placement
The company issued 7,567,119 unlisted options attached
to a share placement in the prior 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.
Financial Report
30. Share-based payments
Set out below are summaries of options granted under the schemes:
2009
Expiry Date
Grant Date
Consolidated and parent entity
6 Feb 2004 a
8 Feb 2004 a
31 Dec 2004 a
4 Jul 2005 a
18 Jul 2005 a
6 Oct 2006 a
17 Nov 2006 a
2 Jan 2007 b
4 Apr 2007 a
21 Aug 2007 c
12 Oct 2007 b
12 Oct 2007 b
12 Oct 2007 b
12 Oct 2007 b
31 Oct 2007 a
14 Nov 2007 a
14 Nov 2007 a
1 Jan 2009 a
1 Jan 2009 b
29 Jun 2009 a
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
28 Aug 2012
28 Aug 2012
28 Jun 2014
70
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
$0.29
$0.29
$0.37
Balance
at start of
the year
Number
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,628,000
20,000
1,464,000
Total
Weighted average exercise price
11,959,119
3,112,000
$0.49
$0.33
a Options granted under the Employee Option Plan.
b Options granted under individual option deeds.
c Options granted under a share placement.
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
–
10,000
15,000
–
–
50,000
–
–
–
–
–
–
–
–
140,000
–
–
50,000
–
–
265,000
$0.50
200,000
358,000
–
–
–
–
500,000
45,000
–
–
10,000
10,000
–
–
–
–
–
–
–
–
–
–
86,000
300,000
100,000
1,038,000
–
20,000
590,000
7,567,119
–
–
10,000
10,000
550,000
150,000
200,000
1,578,000
20,000
1,464,000
–
–
86,000
300,000
100,000
1,038,000
–
20,000
590,000
7,567,119
–
–
10,000
10,000
290,000
150,000
–
–
–
–
1,123,000
13,683,119
10,161,119
$0.65
$0.44
$0.47
Financial Report
Starpharma Holdings Limited Annual Report 2009
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
Expiry Date
Grant Date
Consolidated and parent entity
6 Feb 2004 a
8 Feb 2004 a
31 Dec 2004 a
4 Jul 2005 a
18 Jul 2005 a
6 Oct 2006 a
17 Nov 2006 a
2 Jan 2007 b
4 Apr 2007 a
21 Aug 2007 c
12 Oct 2007 b
12 Oct 2007 b
12 Oct 2007 b
12 Oct 2007 b
31 Oct 2007 a
14 Nov 2007 a
14 Nov 2007 a
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
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
71
Total
3,506,000
8,647,119
194,000
Weighted average exercise price
$0.92
$0.44
$0.70
$ –
$0.49
$0.49
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 3.00 years (2008: 3.39 years).
Fair value of options granted
The weighted average assessed fair value at grant date of options granted during the year ended 30 June 2009 was $0.17 per option
(2008: $0.14). 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.
Information used in assessing the fair value of options granted during the year ended 30 June 2009 is as follows:
Option grant date
Number of options granted
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
1 Jan 2009
1,648,000
29 Jun 2009
1,464,000
28 Aug 2012
28 Jun 2014
$0.29
88.2%
5.7%
–
$0.20
$0.11
$0.37
92.4%
5.7%
–
$0.33
$0.23
Financial Report
Information used in assessing the fair value of options granted during the year ended 30 June 2008 is as follows:
Option grant date
Number of options granted
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
Option grant date
Number of options granted
Expiry date
72
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
21 Aug 2007
7,567,119
12 Oct 2007
10,000
12 Oct 2007
10,000
12 Oct 2007
10,000
21 Aug 2012
31 May 2009
30 Jun 2009
31 Jul 2009
$0.43
46.9%
5.9%
–
$0.34
$0.14
$0.43
54.6%
6.3%
–
$0.36
$0.09
$0.43
54.6%
6.3%
–
$0.36
$0.09
$0.43
54.6%
6.3%
–
$0.36
$0.09
12 Oct 2007
10,000
31 Oct 2007
690,000
14 Nov 2007
150,000
14 Nov 2007
200,000
31 Aug 2009
07 Aug 2011
04 Apr 2011
07 Aug 2011
$0.43
54.6%
6.3%
–
$0.36
$0.10
$0.50
59.2%
6.3%
–
$0.41
$0.18
$0.50
59.8%
6.3%
–
$0.39
$0.16
$0.50
59.8%
6.3%
–
$0.39
$0.17
(d) 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
2009
$’000
207
2
209
2008
$’000
203
6
209
2009
$’000
65
–
65
2008
$’000
99
9
108
Financial Report
Starpharma Holdings Limited Annual Report 2009
31. 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 25.
(b) Key management personnel
Disclosures relating to key management personnel are set out in note 21.
(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
2009
$’000
2008
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2009
$’000
462
–
–
(723)
121
312
(16)
2008
$’000
4,897
–
101
(654)
78
190
(3,758)
73
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
2009
$’000
2008
$’000
–
–
–
–
–
–
–
–
2009
$’000
549
2,840
117
795
2008
$’000
238
2,393
75
719
Receivables
Interest on loan to subsidiary
Loan to subsidiary
Management services to subsidiaries
Payables
Management services from subsidiary
Outstanding balances are payable in cash.
Financial Report
Directors’ Declaration
In the directors’ opinion:
(a) the financial statements and notes set out on pages 38
to 73 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 2009
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 21 to 30
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.
74
This declaration is made in accordance
with a resolution of the directors.
Peter T Bartels, AO
Director
Melbourne, 24 August 2009
75
LiabilitylimitedbyaschemeapprovedunderProfessionalStandardsLegislationPricewaterhouseCoopersABN52780433757FreshwaterPlace2SouthbankBoulevardSOUTHBANKVIC3006GPOBox1331MELBOURNEVIC3001DX77Telephone61386031000Facsimile61386031999Independentauditor’sreporttothemembersofStarpharmaHoldingsLimitedReportonthefinancialreportWehaveauditedtheaccompanyingfinancialreportofStarpharmaHoldingsLimited(thecompany),whichcomprisesthebalancesheetasat30June2009,andtheincomestatement,statementofchangesinequityandcashflowstatementfortheyearendedonthatdate,asummaryofsignificantaccountingpolicies,otherexplanatorynotesandthedirectors’declarationforbothStarpharmaHoldingsLimitedandtheStarpharmaHoldingsGroup(theconsolidatedentity).Theconsolidatedentitycomprisesthecompanyandtheentitiesitcontrolledattheyear'sendorfromtimetotimeduringthefinancialyear.Directors’responsibilityforthefinancialreportThedirectorsofthecompanyareresponsibleforthepreparationandfairpresentationofthefinancialreportinaccordancewithAustralianAccountingStandards(includingtheAustralianAccountingInterpretations)andtheCorporationsAct2001.Thisresponsibilityincludesestablishingandmaintaininginternalcontrolsrelevanttothepreparationandfairpresentationofthefinancialreportthatisfreefrommaterialmisstatement,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccountingestimatesthatarereasonableinthecircumstances.InNote1,thedirectorsalsostate,inaccordancewithAccountingStandardAASB101PresentationofFinancialStatements,thatcompliancewiththeAustralianequivalentstoInternationalFinancialReportingStandardsensuresthatthefinancialreport,comprisingthefinancialstatementsandnotes,complieswithInternationalFinancialReportingStandards.Auditor’sresponsibilityOurresponsibilityistoexpressanopiniononthefinancialreportbasedonouraudit.WeconductedourauditinaccordancewithAustralianAuditingStandards.TheseAuditingStandardsrequirethatwecomplywithrelevantethicalrequirementsrelatingtoauditengagementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialreportisfreefrommaterialmisstatement.Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialreport.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterialmisstatementofthefinancialreport,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinternalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialreportinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebythedirectors,aswellasevaluatingtheoverallpresentationofthefinancialreport.OurproceduresincludereadingtheotherinformationintheAnnualReporttodeterminewhetheritcontainsanymaterialinconsistencieswiththefinancialreport. 76
Independentauditor’sreporttothemembersofStarpharmaHoldingsLimited(continued)Ourauditdidnotinvolveananalysisoftheprudenceofbusinessdecisionsmadebydirectorsormanagement.Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinions.IndependenceInconductingouraudit,wehavecompliedwiththeindependencerequirementsoftheCorporationsAct2001.Auditor’sopinionInouropinion:(a)thefinancialreportofStarpharmaHoldingsLimitedisinaccordancewiththeCorporationsAct2001,including:(i)givingatrueandfairviewofthecompany’sandconsolidatedentity’sfinancialpositionasat30June2009andoftheirperformancefortheyearendedonthatdate;and(ii)complyingwithAustralianAccountingStandards(includingtheAustralianAccountingInterpretations)andtheCorporationsRegulations2001,and(b)thefinancialreportalsocomplieswithInternationalFinancialReportingStandardsasdisclosedinNote1.ReportontheRemunerationReportWehaveauditedtheRemunerationReportincludedinsectionsAtoEofthedirectors’reportfortheyearended30June2009.ThedirectorsofthecompanyareresponsibleforthepreparationandpresentationoftheRemunerationReportinaccordancewithsection300AoftheCorporationsAct2001.OurresponsibilityistoexpressanopinionontheRemunerationReport,basedonourauditconductedinaccordancewithAustralianAuditingStandards.Auditor’sopinionInouropinion,theRemunerationReportofStarpharmaHoldingsLimitedfortheyearended30June2009,complieswithsection300AoftheCorporationsAct2001.PricewaterhouseCoopersNadiaCarlinMelbournePartner24August2009 Starpharma Holdings Limited Annual Report 2009
Shareholder Information
The shareholder information set out below was applicable as at 8 September 2009
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 8 September 2009
1–1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,000 and over
There were 144 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
NATIONAL NOMINEES LIMITED
ANZ NOMINEES LIMITED
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