Annual Report 2015
Highlights
Chairman’s Letter
CEO’s Report
Corporate and Social Responsibility
Directors Report
Operating & Financial Review
Remuneration Report
Auditor’s Independence Declaration
Corporate Governance Statement
Annual Financial Report
Independent Audit Report to the Members
Shareholder Information
Intellectual Property Report
Corporate Directory
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VivaGel® Portfolio
Drug Delivery Portfolio
Agrochemicals and Crop Protection
Dendrimer-enhanced agrochemicals
continue to demonstrate strong results
Further field studies show Starpharma’s
dendrimer-enhanced glyphosate is more
effective on hard-to-control weeds than
glyphosate alone and have demonstrated
evidence of faster onset of action and
better overall effectiveness. Additional
agrochemical actives are also undergoing
field testing across Starpharma’s
partnered and internal programs.
Priostar® glyphosate patent
granted in China
In November, the State Intellectual Property
Office of China granted a formulation patent
for Priostar® dendrimers with agrochemicals,
including with glyphosate. This patent further
supports the commercial exploitation of
Starpharma’s dendrimer technology in
agrochemicals both in China and worldwide,
due to China being the largest glyphosate
producer in the world, with production
capacity exceeding 600,000 tonnes in a
global market exceeding US$5 billion.
Phase 3 clinical trials for prevention of
recurrent bacterial vaginosis (BV)
The phase 3 clinical trials of VivaGel® to
prevent recurrent BV commenced following
the granting of a Special Protocol Assess-
ment (SPA) from the US FDA, with the
design also agreed with European
regulators. Both these achievements
reduce the regulatory risk for the product.
Approximately 1,200 women are being
recruited across the two trials being
conducted in North America, Europe and Asia.
DEP™ docetaxel trial dose exceeds
most commonly administered
Taxotere® dose
The DEP™ docetaxel dose level in the
phase 1 trial now exceeds the most
commonly used dose for Taxotere® of
75mg/m2, with no reports of neutropenia
or hair loss. Approximately two thirds of
the anticipated patients have now been
recruited into the study and a number of
patients have exhibited potential signs
of anticancer activity.
AstraZeneca to develop oncology
drug using DEP™ platform
The collaboration agreement with
AstraZeneca was extended to conduct
scale-up of a dendrimer-enhanced DEP™
oncology molecule for further development
by AstraZeneca. This development follows
a successful program of pre-clinical studies
evaluating Starpharma’s DEP™ platform to
improve a development candidate from
AstraZeneca’s cancer pipeline.
Drug delivery pipeline
More broadly, significant progress has been
made in both internal and partnered drug
delivery programs. Pre-clinical studies are
underway for multiple candidates, building
on earlier encouraging results. Substantial
progress has also been made in the
application of the DEP™ platform for
targeted therapies.
Launch of VivaGel® condom in Australia
In late 2014, the VivaGel® condom was
launched in Australia by Starpharma’s
marketing partner, Ansell, under its
LifeStyles® Dual Protect™ brand. The
VivaGel® condom has now been rolled
out nationally into pharmacies, including
Chemist Warehouse, after the initial
product launch in Woolworths.
Additional VivaGel® condom
regulatory approvals
Marketing clearance for the VivaGel®
condom in New Zealand was achieved,
the first of the wider geographic regulatory
approvals anticipated. The VivaGel® condom
is also currently under regulatory review in
other markets.
Regulatory submissions in review for
VivaGel® BV symptomatic relief product
Excellent progress on the regulatory
submissions for marketing approval of
VivaGel® for symptomatic relief of BV
has been made in a number of countries.
Commercial discussions with parties
regarding marketing rights for the
VivaGel® symptomatic relief product in
various regions are also progressing well.
Corporate
Receipt of $4.2m R&D tax incentive payment
Starpharma received a total of $4.2 million
under the R&D Tax Incentive Program,
relating to eligible Australian and overseas
R&D activities from the 2013/14
financial year.
Strong institutional demand in
Starpharma’s $21.5m capital raising
In September, Starpharma raised $18
million through a share placement to
institutional and sophisticated investors that
was significantly oversubscribed. There was
also strong demand for the share purchase
plan offered to existing eligible shareholders
which raised an additional $3.5 million. The
company attracted six new domestic and
seven new international funds to its register
as a result of the placement and also had
strong participation from existing shareholders.
New premises
In December, Starpharma relocated its
facilities to an established laboratory
and office space in Abbotsford, which
was previously occupied by Carlton &
United Breweries.
Starpharma Holdings Limited Annual Report 2015
01
Highlights
Chairman’s Letter
Dear Shareholders,
On behalf of the Board and Management of Starpharma I’m pleased
to present the annual report for the 2015 financial year.
2015 has been a most productive year for the company. We have
enjoyed real progress in so many areas and your Board is confident
of exciting times ahead.
Starpharma remains one of Australia’s most innovative biotechnology
companies with a platform technology supporting three unique areas
of focus: VivaGel®, drug delivery and agrochemicals. Across these key
areas, there are multiple product opportunities in varying phases of
development, ranging from pre-clinical, clinical, regulatory
submissions through to products on market. Starpharma also has
strong and successful partnerships accelerating product development
opportunities whilst maximising invested capital.
One of the most exciting areas of advancement this year has been
the progress of the company’s drug delivery platform and the DEP™
docetaxel phase 1 clinical study being conducted in Australia. The
DEP™ docetaxel dose level now exceeds the most commonly used
dose of Taxotere®, whilst exhibiting a complete lack of neutropenia
and hair loss. In comparison, neutropenia occurs in 75% of patients
at lower doses of Taxotere®, the currently marketed docetaxel
formulation. Potential efficacy signals have been seen in several
patients treated with DEP™ docetaxel and preparations are underway
for a subsequent phase 2 study.
It is also very pleasing that with the support of the Federal
Government’s R&D tax incentive scheme, Australians with cancer
are the first to be treated with this potentially beneficial therapy.
In the second half of the financial year, AstraZeneca and Starpharma
signed an extension to the existing drug delivery collaboration
agreement to develop a novel oncology drug using Starpharma’s
DEP™ technology. This extension followed the achievement of
promising pre-clinical results as part of a highly successful
collaboration. We have enjoyed an excellent relationship with
AstraZeneca and look forward to further collaboration.
In the VivaGel® portfolio, since the granting of a special protocol
assessment by the US FDA in July of last year, two phase 3 clinical
trials for VivaGel® to prevent the recurrence of bacterial vaginosis
have commenced across the US, Europe and Asia and are
progressing well. In addition, excellent progress on regulatory
submissions for VivaGel® for symptomatic relief of bacterial vaginosis
has been made in the year and commercial discussions are underway
for this product’s distribution. Bacterial vaginosis is a condition that
affects up to a third of the US adult female population.
The regulatory approval and market launch of the VivaGel® condom
in Australia shows the ability of the Starpharma team to successfully
innovate and commercialise products.
The VivaGel® condom marketed in Australia under Ansell’s LifeStyles®
Dual Protect™ brand is being rolled out to wider retail channels. In
parallel, substantial regulatory progress has been made in additional
geographies.
Starpharma’s business strategy of advancing lead products internally
and in parallel with an active partnering program allows the company
to commercialise multiple products concurrently and has resulted in
Starpharma owning a deep and robust portfolio of products.
Starpharma’s wider partnering program includes a number of leading
global brands and deals with major international pharmaceutical and
agrochemical companies.
This strategy has also allowed Starpharma to progress the portfolio
more broadly while maintaining a strong cash position of $30.8 million
at 30 June.
I would like to thank my fellow Board members for their wise counsel
and support. Dr Peter Jenkins retires from the Board following the
annual general meeting in November after many years of service.
We are very indebted to Peter for his guidance over much of the
life of our company.
I would also like to thank Chief Executive Officer Dr Jackie Fairley,
her executive management team and all Starpharma employees
for their continued dedication and professionalism. We achieve an
extraordinary amount with a team of only 35 employees and the
results are a testament to their hard work. The potential for this
company having a positive impact on major health issues is truly
significant as the advantages of our dendrimer products VivaGel®
and DEP™ docetaxel demonstrate.
Finally I would like to thank you, our shareholders. We greatly
appreciate your ongoing support in an industry where product
innovation has the potential to address major medical needs but
timelines for success are sometimes measured in years due to
regulatory and development timelines. We certainly do not take
your support for granted and the focus of Jackie, her team and
your Board is driven by the desire to produce significant
commercial returns from our platform of opportunities.
Yours sincerely,
Rob Thomas AM
Starpharma Chairman
!
02
Starpharma Holdings Limited Annual Report 2015
Mr Rob Thomas AM, Chairman
CEO’s Report
I am pleased to report on Starpharma’s activities during the 2015
financial year and our future plans. Significant progress has been
made across our three key areas of focus – VivaGel®, drug
delivery and agrochemicals, with significant achievements in
all three portfolios.
VivaGel® Portfolio
During the year, a number of major regulatory, development
and commercial milestones were achieved across the VivaGel®
portfolio, both for the stand-alone gel product for bacterial vaginosis
(BV) and for the VivaGel® condom.
VivaGel® for prevention of recurrent BV
The granting in July 2014, by the US FDA of an SPA designation for
the clinical trials of VivaGel® for prevention of recurrent BV was an
important achievement. An SPA is a binding agreement received
from the FDA that stipulates that Starpharma’s phase 3 clinical
study design, endpoints, statistical analyses and other aspects of
the planned studies are acceptable to support a regulatory application
for approval of the product. An SPA reduces regulatory uncertainty
and is relatively unusual and difficult to achieve, with only a handful
of companies in Australia achieving this binding agreement. In addition
to the SPA for the US, the European authorities also agreed on the
design of the phase 3 VivaGel® studies.
Following the receipt of the SPA, Starpharma commenced the two
pivotal phase 3 clinical trials of VivaGel® for the prevention of
recurrent BV. The two double-blind, randomised, placebo-controlled
trials will enrol approximately 600 women each, at sites across North
America, Europe and Asia. The objective of the trials is to confirm the
efficacy of VivaGel® in reducing recurrent BV in women. The primary
endpoint of each trial is the recurrence of BV during the VivaGel®
treatment period.
BV is the most common vaginal infection worldwide, affecting an
estimated 30% of the adult female population in the US and more
than 50% in some US populations. The global market for treatment
and prevention of recurrence of BV is estimated to be in excess of
US$1 billion per annum. Recurrent BV is particularly troublesome
and affects 50–60% of BV sufferers, with no approved therapeutic
option currently available to prevent the condition.
VivaGel® for BV –
The Product Proposition
• A non-antibiotic therapy
• Rapid relief from symptoms
• Excellent user acceptability
• A local effect and is not
systemically absorbed
• Large market opportunities
Starpharma Holdings Limited Annual Report 2015
03
Dr Jackie Fairley, Chief Executive Officer “BV has a significant social
impact on patients, and
women are very concerned
about their odour and often
have a low quality of life.”
Dr Carter, a Board Certified OBGYN with a
large BV practice in Memphis, Tennessee,
and an investigator in the VivaGel® trials.
Significant
Market
Opportunity
>US$1B
>US$750M
Drivers of Value
Competitive
Advantages
Development and
Commercial Progress
• No products
approved
• Designed for long
term use
• Not absorbed
• Not absorbed
• Tolerability
benefits
• Non antibiotic
• Phase 3 trials underway
• Late stage license
• Partner engagement underway
• Phase 3 data: Efficacy at 5-7 days
and excellent symptomatic relief
• Submissions in 2015
• Partner engagement underway
Starpharma Holdings Limited Annual Report 2015
Prevention of
BV Recurrence
(Chronic Use)
Symptomatic
Relief of BV
(Acute use)
s
n
o
i
t
a
c
d
n
i
I
V
B
®
l
e
G
a
v
V
i
04
CEO’s ReportVivaGel® for the symptomatic relief of BVDespite BV being the most common vaginal infection worldwide, consumer and key opinion leader feedback indicates there is still significant unmet medical need in terms of options for the treatment of BV symptoms.Phase 2 and 3 clinical trials conducted by Starpharma demonstrated statistically significant clinical cure and symptomatic relief in women with BV at the end of treatment. In these trials, VivaGel® was shown to result in a marked reduction of BV-related pathogens and a rapid and sustained relief from symptoms such as odour and discharge associated with BV. In addition, VivaGel® had an excellent safety profile with patient acceptability and feedback on the product being very positive.Starpharma has already made regulatory submissions for marketing of VivaGel® for treatment, including symptomatic relief of BV, in a number of countries. Commercial discussions for marketing rights to this product are also progressing well. The excellent symptomatic relief profile shown for VivaGel® in clinical trials and positive consumer feedback on the product provides an opportunity for VivaGel® to play an important role and provide a non-antibiotic option for the management of BV.
“I would buy this product
right now if I could…”
“I like the idea of a condom
doing more for us than just
being a barrier…seems
more reassuring to know
it’s doing extra”
“I would definitely buy this
product without a shadow
of a doubt…”
VivaGel® condom consumer research
CEO’s Report
The VivaGel® condom
The VivaGel® condom was launched in Australia in October by
Starpharma’s marketing partner, Ansell, under its LifeStyles® brand
as the Dual Protect™ condom. The VivaGel® condom was initially
available nationally at Woolworths’ stores and subsequently rolled
out into pharmacies, including Chemist Warehouse, and a number
of online outlets.
The VivaGel® Dual Protect™ condom is a world-first product based
on innovative Australian technology. It is the world’s first antiviral
condom and the only condom of its type, providing primary barrier
protection and incorporating a proprietary antiviral compound,
VivaGel®, in the lubricant. VivaGel® has been shown in laboratory
studies to inactivate up to 99.9% of HIV, HPV and HSV-2, which
are viruses that cause STIs.
The Australian launch of the VivaGel® condom marks a major
milestone for Starpharma and it is very pleasing that two Australian
companies are developing and commercialising an Australian
innovation. Under the license agreement, Ansell manufactures,
markets, distributes and sells the VivaGel® condom, with
Starpharma receiving a royalty based on sales of the product.
In addition to the first market launch in Australia, Starpharma and
its partners have far-reaching plans for the product and, with further
regulatory approvals, the VivaGel® condom will be expanded into
more geographies over the coming year. Marketing clearance has
been achieved in New Zealand, with other regulatory submissions
under review for other countries.
As well as a licence agreement with Ansell, Starpharma has licensed
the VivaGel® condom in Japan to Okamoto Industries, the market
leader for condoms sold in Japan. Okamoto and Starpharma continue
to work closely with the Japanese regulatory authorities to facilitate
launch as soon as possible.
The VivaGel® condom – extensive consumer research confirms
strong interest and purchase intent.
Formal research conducted in 1,800 condom users across USA,
Europe, Asia and South America, demonstrates strong consumer
interest across genders, ages and relationship status.
* Percentages as shown are scores from respondents that said they were “very
interested” or “interested” in the condom
Starpharma Holdings Limited Annual Report 2015
05
06
Starpharma Holdings Limited Annual Report 2015
Drug Delivery PortfolioStarpharma achieved significant milestones in the DEP™ drug delivery portfolio during the financial year, with encouraging initial clinical data from the phase 1 trial of DEP™ docetaxel and the expansion of the relationship with AstraZeneca to develop one of its oncology candidates using DEP™ technology. The year also saw important progress in both the broader internal and partnered drug delivery programs.DEP™ docetaxel programThe phase 1 clinical trial of DEP™ docetaxel is progressing well with the current dose level now in excess of the most commonly used dose for Taxotere® of 75mg/m2. The primary objective of the study is to establish the maximum tolerated dose and dose-limiting toxicities of DEP™ docetaxel, which is a new formulation of the widely marketed chemotherapeutic, Taxotere®. In its existing formulation, Taxotere® is known to cause a number of side effects in some patients such as anaphylaxis, neutropenia and hair loss. There continue to be no reports of neutropenia or hair loss in the DEP™ docetaxel study and patients have tolerated the product well. This is remarkable given the fact that at similar doses, more than 75% of Taxotere®–treated patients would be expected to exhibit significant neutropenia. In addition, DEP™ docetaxel patients in the phase 1 trial do not require pre-medication with steroids to prevent allergic (anaphylactic) reactions, which can be experienced with marketed forms of docetaxel used today.Approximately two thirds of the anticipated patients have now been recruited into the study and some have received up to six cycles of treatment. Although not a primary outcome of the current study, a number of patients have exhibited signs of potential anticancer activity.Preliminary analyses of the pharmacokinetics of DEP™ docetaxel in patients dosed to date confirm a number of beneficial product features that were seen in earlier preclinical studies, including an extended duration of effect, increased total exposure to drug and reduced peak levels of drug. These pharmacokinetic characteristics could apply to and provide advantages for a range of other drugs that are cleared from the body too rapidly, and/or have toxicities associated with very high peak drug levels.CEO’s ReportThe DEP™ docetaxel trial is being conducted through the Nucleus Network at Melbourne’s AMREP/Alfred Hospital facility and Austin Health/Olivia Newton-John Cancer & Wellness Centre in Victoria, the Royal Brisbane & Women’s Hospital in Queensland and Liverpool Hospital in New South Wales. Australian patients are the first in the world to have access to Starpharma’s enhanced version of docetaxel.AstraZeneca drug delivery collaborationIn May, Starpharma signed an extension to its existing collaboration agreement with AstraZeneca to conduct scale up of a DEP™ enhanced AstraZeneca oncology molecule for further development. This follows the two companies conducting a series of studies in which Starpharma’s DEP™ drug delivery platform was used to enhance the development candidate from AstraZeneca’s cancer pipeline. This program has been successful, with key enhancements of the AstraZeneca molecule utilising the DEP™ platform being observed through evaluation by AstraZeneca in various animal and in-vitro models. Based on the results of these studies, AstraZeneca is now conducting further pre-clinical studies with a view to subsequent commencement of clinical trials.Other DEP™ programsAn attractive aspect of Starpharma’s DEP™ technology is that it is a versatile platform with many potential applications to multiple products. In addition to Starpharma’s DEP™ docetaxel and the AstraZeneca program, Starpharma continues to conduct a range of additional programs, both internally and with world-leading pharmaceutical partners. For internal programs, Starpharma is working to select additional DEP™ conjugates to add to its development pipeline with a view to advancing assets for medium-to-late stage licensing. Substantial progress has recently been made in the targeted DEP™ technology, which combines unique targeting capabilities with cytotoxic drugs. The targeted DEP™ platform offers substantial additional benefits in a range of disease areas, including cancer and inflammatory diseases.Starpharma has conducted new projects within its partnered programs, which are often undisclosed. Similar to the AstraZeneca collaboration, these undisclosed partnerships seek to improve specific molecules from a partner’s existing portfolio or development pipeline using Starpharma’s DEP™ technology. Why is preventing
neutropenia so important?
Neutropenia is a major dose limiting
toxicity of many cancer drugs
including docetaxel.
Neutropenia is an abnormally low
count of neutrophils, a type of white
blood cell that helps fight off
infections, particularly those caused
by bacteria and fungi. The lower
a neutrophil count, the more
vulnerable a person is to
infectious diseases.
Starpharma Holdings Limited Annual Report 2015
07
CEO’s ReportDr Sammi Tsegay, Research Scientist CEO’s Report
Agrochemicals and Crop Protection
In Starpharma’s agrochemicals program, both internal and partnered
programs continue to progress well. An important milestone was
reached during the financial year with Starpharma’s Priostar®
glyphosate patent granted in China, further strengthening and
expanding the company’s patent portfolio for the use of its proprietary
dendrimers in agrochemical products.
China is the largest glyphosate producer in the world and this patent
supports the commercialisation of Starpharma’s dendrimer technology
in China and worldwide. Glyphosate is an off-patent product currently
sold under a number of brands, including Roundup®, and has global
sales of approximately US$5 billion annually in a US$44 billion
agrochemical market. Glyphosate production capacity in China
exceeded 600,000 tonnes in 2012.
Starpharma conducted and completed further field trials
demonstrating the effectiveness of the company’s dendrimer
technology when applied to glyphosate for the treatment of hard-to-
control weeds. Results from these trials show that Starpharma’s
dendrimer-enhanced glyphosate formulations are more effective on a
number of hard-to-control weed species than marketed glyphosate
alone. Certain hard-to-kill weeds showed a greater than 40 per cent
survival rate following treatment with commercial glyphosate alone,
but averaged less than 10 per cent survival after exposure to the
dendrimer-enhanced formulation.
Starpharma is also partnering with a number of global crop protection
companies to advance its portfolio, including Adama, the world’s
largest generic player, and a number of other top 10 global
agrochemical companies.
Priostar® dendrimers provide a
number of benefits to agrochemical
companies and end-user growers.
These benefits include:
•
•
Improved product efficacy;
More concentrated formulations
to reduce supply chain costs and
for greater ease of handling;
Reduction in solvent loading; and
Improved bioavailability through
increased adhesion, to reduce
losses due to rain run-off, and
the need for multiple
applications.
•
•
08
Starpharma Holdings Limited Annual Report 2015
Glyphosate is an
off-patent product currently sold
under a number of brands,
including Roundup® and has
global sales of approximately
US$5 billion annually, in a US$44
billion agrochemical market.
Glyphosate production capacity
in China exceeded 600,000
tonnes in 2012.
Starpharma Holdings Limited Annual Report 2015
09
CEO’s Report
CEO’s Report
Corporate
There was strong demand for Starpharma’s institutional share
placement and share purchase plan which raised a combined total
of $21.5 million. The placement to sophisticated and institutional
investors was significantly oversubscribed and Starpharma gained
more than ten new domestic and international funds to its register as
a result of the raising. The placement was also very well supported by
existing institutions. Starpharma continues to have a very strong and
diversified shareholder register with solid support from well-known
and respected institutions across Australia, Europe, Asia and the US.
Starpharma received the total anticipated $4.2 million of research
and development (R&D) tax incentive relating to FY14 Australian
and certain overseas R&D expenditure. The R&D tax incentive allows
Starpharma to confidently advance development of its proprietary
products. For instance, the incentive supports the conduct of the
DEP™ docetaxel clinical trial in Australia with the additional benefit
that Australian patients are the first in the world to have access
to Starpharma’s improved version of docetaxel.
In December, Starpharma relocated its facilities to an established
laboratory and office space in Abbotsford, which was previously
occupied by Carlton & United Breweries.
10
Starpharma Holdings Limited Annual Report 2015
Dr Brian Kelly, Research Manager Overview of Financial Results
Future Outlook
Starpharma reported a net loss after tax of $18.95 million, an increase
of $4.3 million over the prior year loss of $14.6 million. The variance
is primarily a result of current year clinical programs in progress for
VivaGel® and DEP™ docetaxel. The R&D tax incentive for the 2015
year of $3.5 million is down on the previous year’s $4.2 million due
to lower R&D expenditure on eligible activities under the Australian
Government’s R&D tax incentive program.
Total revenue and other income for the year was $1.7 million, an
increase from the previous year due to higher royalty, customer
and licence revenue from commercial partners.
The net operating and investing cash outflows for the year were
$14.3 million. Net cash inflows from financing activities of $20.5 million
reflected net proceeds from the equity raise. Starpharma ended the
financial year to 30 June 2015 with cash reserves of $30.8 million.
2015 has been a most productive year for Starpharma with several
of our products reaching important milestones and our commercial
relationships expanding. The continuing maturation of our key
programs – VivaGel®, drug delivery and agrochemicals – create an
exciting future outlook for the company.
As one of Australia’s most innovative biotechnology companies,
Starpharma’s unique platform technology is delivering important
products in areas of unmet need, such as cancer and BV. We have
multiple product opportunities at advanced stages of development,
regulatory review and on market and we continue to build strong
and successful partnerships accelerating product development
opportunities whilst maximising invested capital. In the coming year,
I expect both strong expansion of our VivaGel® portfolio into new
markets, further approvals, launches and commercial deals in all
three areas of our business.
Jackie Fairley
Chief Executive Officer
Starpharma Holdings Limited Annual Report 2015
11
CEO’s Report3 Year Financial Summary2015 $M2014 $M2013 $MRevenue and grant income0.80.30.8Interest revenue0.91.01.6Total revenue and income1.7 1.32.4Expenditure(20.7) (15.9)(7.6)Net loss after tax(19.0) (14.6)(5.2)Net operating and investing cash outflows(14.3)(10.1)(10.0)Net proceeds from issue of equity20.50.20.9Cash and cash equivalents at the end of year30.8 24.033.8
Corporate and Social Responsibility
Pauline Stanislawski Senior, Research Chemist
12
Starpharma Holdings Limited Annual Report 2015
Starpharma is a world leader in the development of dendrimer products for pharmaceutical, life science and other applications, and aims to create value through the commercialisation of its proprietary products. In pursuing this objective, Starpharma acknowledges its role within society and believes its success will deliver long term positive benefits to all stakeholders. Starpharma’s corporate governance principles and code of conduct set the framework for how the company, management and employees are expected to conduct themselves: always ethically and responsibly. Our PeopleThe employees of Starpharma are critical for achieving business success. To ensure Starpharma remains a safe, healthy, and attractive workplace for our employees, Starpharma has established workplace policies and practices. Policies assist to ensure employees have engaging and satisfying roles and receive periodic assessments and feedback on performance. Policies provide for ongoing training and career development, and are intended to ensure a balanced work and home life. Starpharma’s code of conduct reflects the core values of the company and sets out standards of behaviour in matters including equal employment opportunity and best practice in recruitment. Starpharma also has a health and wellbeing policy to support employees in maintaining or adopting healthy lifestyles, recognising that employee physical and mental health has a positive impact on the individuals and culture of the organisation.Employees are rewarded for their performance, dedication, and contribution to the results of Starpharma. Employees are recruited into and retained in positions based on merit. A balance of skills, expertise and opinion, as well as diversity are viewed as important cultural elements within the collegiate team environment. The Board has adopted a diversity policy to provide a framework for Starpharma to achieve a number of diversity objectives, with an initial focus on gender. Employee equity participation schemes are used to provide the opportunity for all staff to share in the business success of the company and to align the objectives of employees with those of shareholders.Occupational health and safety is considered every employee’s responsibility, and a safe working culture is promoted and encouraged. There is an active committee structure to eliminate, reduce or mitigate risks associated with Starpharma’s activities. Occupational Health & Safety Committee members represent all sections of the workplace including management and employees.Our PartnersStarpharma has established important business and scientific partnerships with leading global companies, international medical research organisations and key governmental and non-governmental departments and institutions. These relationships offer critical analysis of research concepts from world experts in their field and provide the pathway for products to enter the market and change daily lives.The CommunityThe very nature of Starpharma’s products affords the opportunity of changing lives for the better. Through innovative research and development, Starpharma is creating products for needs which are currently unmet, within the public health, pharmaceutical and medical markets. All of Starpharma’s pharmaceutical and medical products and clinical research activities comply with strict regulatory and ethical approval processes. These include the FDA in the United States, TGA in Australia and other regulatory bodies as applicable.The EnvironmentThe broad application of Starpharma’s dendrimer research extends into projects that may assist the environment. Research in the field of agrochemicals may improve existing products and reduce the negative impact of current practices on the environment. More effective chemical formulations for agrochemicals could reduce the frequency or level of application and potentially improve the environmental profile of such products. In conducting its research and operations, Starpharma has documented procedures and processes in place to ensure that all waste products (albeit relatively minor in volume) are disposed of strictly in accordance with relevant environment regulations. Directors’ Report
Your directors have pleasure in presenting this report on the consolidated entity (referred to hereafter as the group or the company) consisting
of Starpharma Holdings Limited and the entities it controlled at the end of, or during, the year ended 30 June 2015.
Directors
The following persons were directors of Starpharma Holdings Limited (“the company”) at the date of this report:
R B Thomas (Chairman)
R A Hazleton
P J Jenkins
Z Peach
J K Fairley (Chief Executive Officer)
P R Turvey
All were directors during the whole of the financial year.
Information on Directors
Rob B Thomas AM, BEc, MSAA, SF Fin
Independent non-executive director (appointed 4 December 2013)
Chairman (from 13 June 2014)
Member of Remuneration & Nomination Committee
Member of Audit & Risk Committee
Mr Thomas has a strong background in financial services and is a
non-executive director of a number of listed Healthcare companies
in Australia and the United States. He has more than 35 years’
experience in the securities industry with Potter Partners (now
UBS), County Natwest and Citigroup. He is currently Chairman of
Gragher Capital Securities and AusBio Ltd. He is the immediate
past non-executive Chairman of TAL Limited (formerly Tower
Australia Limited), the NSW State Library and of Heartware
International Inc, and remains a non-executive director of
Heartware International Inc. Rob is also a director of ASX listed
REVA Medical Inc., Virgin Australia Limited and Biotron Limited.
Rob holds a Bachelor of Economics from Monash University and is
a fellow of the Securities Institute of Australia. He is also a Master
Stockbroker and is a Fellow of the Australian Institute of Company
Directors.
Other current directorships of listed entities:
Virgin Australia Limited, REVA Medical Inc., Biotron Limited,
Heartware International Inc. (NASDAQ listed, de-listed from ASX
on 17 Sep 2013)
Former directorships of listed entities in last 3 years: None
400,000 ordinary shares in Starpharma Holdings Limited
Peter J Jenkins MB BS (Melb), FRACP
Independent Non-executive director (appointed 13 May 1997)
Deputy Chairman
Member of Remuneration & Nomination Committee (since 18
December 2014), and immediate past Chairman of Remuneration
& Nomination Committee until 18 December 2014
Consultant physician and gastroenterologist. Holds and/or has
held, 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: None
Former directorships of listed entities in last 3 years: None
1,571,311 ordinary shares in Starpharma Holdings Limited
Jacinth (Jackie) K Fairley BSc, BVSc (Hons), MBA
Executive director (appointed 1 July 2006)
Chief Executive Officer
Dr Jackie Fairley has more than 25 years of operational
experience in the pharmaceutical and biotechnology industries
working in business development and senior management roles
with companies including CSL and Faulding (now Hospira). She
was appointed Chief Executive Officer of the group in July 2006.
Jackie holds first class honours degrees in Science (pharmacology
and pathology) and Veterinary Science from Melbourne University
and was a practicing veterinary surgeon prior to joining CSL in
1989. Whilst at CSL she obtained an MBA from the Melbourne
Business School where, as Dux of her final year, she was the
recipient of the prestigious Clemenger Medal and a number of
other academic prizes. Jackie is also a Graduate of the Australian
Institute of Company Directors. Jackie currently sits on the board
of the Melbourne Business School and is a member of the
Government’s Commonwealth Science Council, and is a past
member of the Federal Government’s Pharmaceutical Industry
Working Group and the Federal Ministerial Biotechnology Advisory
Council. She is also an advisor to the Carnegie Innovation Fund.
Other current directorships of listed entities: None
Former directorships of listed entities in last 3 years: None
2,302,274 ordinary shares in Starpharma Holdings Limited
2,310,000 employee performance rights
Richard A Hazleton BSChE, MSChE, HonDrEng, HonDrCommSc
Independent Non-executive director (appointed 1 December 2006)
Member of Audit & Risk Committee
Mr Hazleton is a former chairman and CEO 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 that company in October 2006. Mr
Hazleton 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
183,466 ordinary shares in Starpharma Holdings Limited
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
13
13
Directors’ Report Operating & Financial Review
Information on Directors (continued)
Principal activities
Zita Peach BSc, GAICD, FAMI
Independent Non-executive director (appointed 1 October 2011)
Chair of the Remuneration & Nomination Committee (since 18
December 2014)
Member of Remuneration & Nomination Committee (until 18
December 2014)
Ms Peach has more than 20 years of commercial experience in the
pharmaceutical industry, particularly in marketing, commercialising
products and technologies and business development in local and
international markets, working for major industry players such as
CSL Limited and Merck Sharp & Dohme, the Australian subsidiary
of Merck Inc. Ms Peach’s most recent executive position was as
the Managing Director for Australia and New Zealand and
Executive Vice President, South Asia Pacific for Fresenius Kabi, a
leading provider of pharmaceutical products and medical devices
to hospitals. Previously, Ms Peach was Vice President, Business
Development R&D for CSL, a position she held for ten years. Ms
Peach is a Non-Executive Director of the ASX-listed Vision Eye
Institute Limited. Ms Peach is a graduate member of the Australian
Institute of Company Directors.
Other current directorships of listed entities: Vision Eye Institute
Limited
Former directorships of listed entities in last 3 years: None
14,539 ordinary shares in Starpharma Holdings Limited
Peter R Turvey BA/LLB, MAICD
Independent Non-executive director (appointed 19 March 2012)
Chairman of Audit & Risk Committee
Mr Turvey has had more than 30 years of experience in the
biotech/pharmaceutical industry having been former Executive
Vice President Licensing, Group General Counsel and Company
Secretary of global biopharmaceutical company CSL Limited,
retiring in 2011. Mr. Turvey is currently a principal of Foursight
Associates Pty Ltd, a non-executive director of ASX-listed
Admedus Limited and Viralytics Limited, and a director of Victorian
Government owned entity Agriculture Victoria Services Pty Ltd. Mr.
Turvey played a key role in the transformation of CSL from a
government owned enterprise, through ASX listing in 1994, to a
global plasma and biopharmaceutical company. He also had
responsibility for the protection and licensing of CSL's intellectual
property and for risk management within CSL, which included
management of the internal audit function, reporting to the Audit &
Risk Management Committee of the Board as well as being the
Chairman of the Corporate Risk Management Committee.
Other current directorships of listed entities: Admedus Limited,
Viralytics Limited
Former directorships of listed entities in last 3 years: None
70,077 ordinary shares in Starpharma Holdings Limited
Company Secretary
The Company Secretary is Mr Nigel Baade, holding the position
since 13 December 2013. Mr Baade also holds the position of
Chief Financial Officer, which he has held from January 2009. Mr
Baade is a CPA qualified accountant with extensive experience in
the pharmaceutical and biotechnology industries. 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.
The principal activities of the group consist of research,
development and commercialisation of dendrimer products for
pharmaceutical, life-science and other applications. Activities
within the group are directed towards the development of precisely
defined nano-scale materials, with a particular focus on the
development of VivaGel® for the management and prevention of
bacterial vaginosis, and as a condom coating for prevention of
sexual transmitted infections. Starpharma is also applying its
proprietary dendrimers to drug delivery, and in agrochemicals.
Result
The financial report for the financial year ended 30 June 2015, and
the results herein, have been prepared in accordance with
Australian Accounting Standards.
The consolidated loss after income tax attributable to ordinary
shareholders for the financial year ended 30 June 2015 was
$18,950,000 (2014: $14,635,000). The net operating and investing
cash outflows for the year were $14,268,000 (2014: $10,064,000),
with a cash balance at 30 June 2015 of $30,848,000 (June 2014:
$24,028,000). Net financing cash inflows for the year of
$20,471,000 included net proceeds of $20,503,000 from a share
placement and share purchase plan.
Dividends and distributions
No dividends were paid or declared during the period and no
dividends are recommended in respect to the financial year ended
30 June 2015 (2014: Nil).
Review of operations
Key highlights until the date of this report include:
⋅ VivaGel® condom launched in Australia by Ansell under their
Lifestyles® Dual ProtectTM brand;
⋅ Marketing clearance achieved for VivaGel® condom in New
Zealand;
⋅ Commencement of the phase 3 clinical trials of VivaGel® for the
prevention of recurrent bacterial vaginosis, following the US FDA
granting a Special Protocol Assessment agreement on the
design and planned analyses of the studies;
⋅ Regulatory submissions underway for the VivaGel® for
symptomatic relief of bacterial vaginosis product;
⋅ Dosage levels in the phase 1 DEPTM docetaxel trial exceed the
most commonly administered dose of 75mg/m2, with no
neutropenia having been observed to date;
⋅ The signing of an extension to the collaboration agreement with
AstraZeneca, for further development of a dendrimer enhanced
oncology molecule using DEPTM technology;
⋅ Further field studies show dendrimer-enhanced glyphosate is
more effective on hard to control weeds than glyphosate alone;
⋅ Successful capital raising of $21.5 million via an oversubscribed
institutional placement and share purchase plan; and
⋅ Receipt of a $4.2M R&D tax incentive refund.
VivaGel® Program
Starpharma’s two double-blinded, placebo controlled phase 3 trials
are progressing well, with the vast majority of the 100 sites now
recruiting. These trials are being conducted across the US,
Canada, Mexico, Europe and Asia, with each trial planned to enrol
around 600 women. The study was granted a Special Protocol
Assessment (SPA) by the US FDA in July 2014 which reduces
Starpharma’s regulatory risk through a binding trial design. In
addition, there has been agreement on the trial design granted by
the European regulatory authority.
Bacterial Vaginosis (BV) is a highly prevalent disease with no
approved therapeutic option currently available for recurrent BV
which affects 50-60% of BV sufferers.
14
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
14
Directors’ Report Operating & Financial Review
Matters subsequent to the end of the financial year
No other matters or circumstances have arisen since 30 June
2015 that have significantly affected, or may significantly affect:
(a) the consolidated entity’s operations in future financial years, or
(b) the results of those operations in future financial years, or
(c) the consolidated entity’s state of affairs in future financial years.
Strategy, future developments and prospects
There is no change to Starpharma’s strategy from the previous
year. The company aims to create value for shareholders through
the commercial exploitation of proprietary products based on its
dendrimer technology in pharmaceutical, life science and other
applications. The company’s key focus is to advance and broaden
its product development pipeline for VivaGel®, drug delivery and
agrochemicals. It is intended to achieve this by continuing to utilise
a combination of internally funded and partnered projects across
the portfolio. The company commercialises its development
pipeline with corporate partners via licensing agreements at
various stages in a product’s development lifecycle; depending on
the product, a partner’s relative strength of product and market
expertise, comparison of current and future potential returns, and
the risks involved in advancing the product to the next value
inflection point or milestone.
Starpharma remains well positioned to capture value from its
technology in the short to medium term. Starpharma has deep
expertise, strong intellectual property portfolio, deep product
portfolio, a culture and ability to innovate and apply its technology
platform to commercial opportunities, proven risk management
practices, and a solid cash position. The company will continue
using its cash resources to invest in selected research and
development activities to achieve its objectives.
Legal
At the date of the Directors’ Report there are no significant
legal issues.
Regulatory submissions for VivaGel® for the symptomatic relief
indication are underway relating to a number of countries. These
submissions are based on the efficacy and demonstrated excellent
symptomatic relief shown in earlier VivaGel® phase 3 clinical trials
and are progressing well. This indication is for the short term use
of VivaGel® once a day for 7 days. The company is in discussions
with potential commercial partners for distribution rights for this
application of VivaGel®.
The VivaGel® condom has received conformity certification and
regulatory certification from regulatory agencies in Australia and
New Zealand, with the condom launched in Australia during the
year under Ansell’s Lifestyles® Dual ProtectTM brand. The VivaGel®
condom is licenced to Okamoto in Japan. Okamoto and
Starpharma continue to work closely with the Japanese Regulatory
Authorities to confirm the classification of the VivaGel® condom in
Japan.
Drug Delivery Program
The phase 1 human clinical trial of a dendrimer enhanced version
of docetaxel (DEPTM docetaxel) is progressing well and continues
to show very encouraging clinical data. The DEPTM docetaxel dose
level now exceeds the most commonly used dose for Taxotere® of
75mg/m2, with no neutropenia or hair loss observed or reported to
date. The trial is approximately two thirds recruited across four
Australian sites. The primary objective of the trial is to establish the
maximum tolerated dose (MTD) and dose limiting toxicities of
DEPTM docetaxel. DEPTM docetaxel is an enhanced version of the
anti-cancer drug docetaxel (Taxotere®), which had reported annual
sales of US$3.1 billion in 2010.
Preliminary pharmacokinetic (PK) findings using trial data confirm
in humans a number of beneficial product features that were also
seen in earlier pre-clinical studies. These beneficial features of
DEP™ docetaxel, when compared with the reference drug,
Taxotere®, include a substantially extended duration of exposure,
greatly increased extent of total exposure to drug, and reduced
peak levels of drug. Earlier pre-clinical studies of DEPTM docetaxel
demonstrated superior anti-cancer effectiveness compared to
docetaxel across a range of important cancer types including
breast, prostate, lung and ovarian cancer.
Progress was also made in the company’s confidential partnered
drug delivery programs, with the signing of an extension to the
collaboration agreement with AstraZeneca to scale up a dendrimer
enhanced oncology molecule for further development using DEPTM
technology.
Important progress has also been achieved in both the broader
internal and partnered drug delivery programs. Pre-clinical studies
are underway for multiple candidates, building on the earlier
encouraging results. Substantial progress has also been made in
the targeted DEPTM technology, which combines unique targeting
capabilities with cytotoxic drugs.
Agrochemical Program
Starpharma’s Priostar® dendrimers are being developed and
assessed in crop protection formulations under multiple programs
with global industry leading partners. Partners are using Priostar®
dendrimers seeking to enhance the performance of their
formulations, either by making them more efficacious when used
with crops, or by improving the stability or concentration of the
formulation.
In addition to arrangements with industry partners, Starpharma is
developing a small number of its own formulations based on
generic actives. By improving the characteristics of formulations of
these actives, Starpharma is developing value-added formulations
for licensing to third-parties. Important patents relating to Priostar®
have been granted in Europe and China, protecting valuable
intellectual property in these large markets. Starpharma’s
formulation development programs in glyphosate (RoundUp®) and
a number of other leading actives are being tested in field trials.
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
15
15
Directors’ Report Operating & Financial Review
Review of Financials
Material Business Risks
Income statement
30 June
2015
$’000
30 June
2014
$’000
Revenue from continuing operations
1,693
1,246
Other income
4
7
Research and development expenses
(16,250)
(10,991)
Administration expenses
(4,392)
(4,890)
Finance costs
(5)
(7)
Loss attributable to members
(18,950)
(14,635)
Income statement
The reported net loss after tax of $18,950,000 (2014: $14,635,000)
is after fully expensing all research and development expenditure
and patenting costs in the current year. A contra research and
development expense of $3,478,000 (2014: $4,222,000) has been
recorded for research and development activities eligible under the
Australian Government’s R&D tax incentive program. The variance
in the net loss compared to prior year is primarily a result of current
year clinical programs in progress.
Research and development expenses include the costs of the
VivaGel® and DEPTM docetaxel clinical programs, regulatory
requirements for the VivaGel® symptomatic relief of bacterial
vaginosis and VivaGel® condom programs, and progress of other
internal drug delivery and agrochemical programs. Administration
expenses include the amortisation of intangible assets, and the
share-based payments expense relating to employee equity plans.
Total revenue and other income for the year was $1,697,000
(2014: $1,253,000), an increase from the previous year due to
higher royalty, customer and licence revenue from commercial
partners.
Balance sheet
At 30 June 2015 the group’s cash position was $30,848,000 (June
2014: $24,028,000). Trade and other receivables of $4,232,000
(June 2014: $4,570,000) includes $3,426,000 receivable from the
Australian Government under the R&D tax incentive program.
Statement of cash flows
The net operating and investing cash outflows for the year were
$14,268,000 (2014: $10,064,000). During the financial year
$4,206,000 (2014: $4,701,000) was received from R&D tax
incentives associated with eligible expenditure and activities from
the prior financial year.
Net cash inflows from financing activities of $20,471,000 (2014:
$203,000) included $20,503,000 net proceeds from an equity
raise.
Earnings per share
Basic loss per share
($0.06)
($0.05)
Diluted loss per share
($0.06)
($0.05)
2015
2014
The group operates in the biotechnology and pharmaceutical
sectors and is in the development phase. Any investment in these
sectors is considered high-risk. The group is subject to normal
business risks, including but not limited to interest rate
movements, labour conditions, government policies, securities
market conditions, exchange rate fluctuations and a range of other
factors which are outside the control of the Board and
management. More specific material risks of the sector and the
group include, but are not limited to:
⋅ Scientific, technical & clinical – product development requires a
high level of scientific rigour, the outcomes of which cannot be
known beforehand. Activities are experimental in nature so the
risk of failure or delay is material. Key development activities,
including clinical trials and product manufacture, are undertaken
by specialist contract organisations; and there are risks in
managing the quality and timelines of these activities.
⋅ Regulatory – products and their testing may not be approved by,
or may be delayed, by regulatory bodies (eg. US Food and Drug
Administration) whose approvals are necessary before products
can be sold in market.
⋅ Financial - the group currently, and since inception, does not
receive sufficient income to cover operating expenses. Although
current cash reserves are sound, there is no certainty that
additional capital funding may not be required in the future, and
no assurance can be given that such funding will be available, if
required.
⋅ Intellectual property (IP) – commercial success requires the
ability to develop, obtain and maintain commercially valuable
patents, trade secrets and confidential information. Gaining and
maintaining the IP across multiple countries; and preventing the
infringement of the group’s exclusive rights involves
management of complex legal, scientific and factual issues. The
company must also operate without infringing upon the IP of
others.
⋅ Commercialisation – the company relies, and intends to rely,
upon corporate partners to market, and in some cases finalise
development and registration of its products, on its behalf. There
are risks in establishing and maintaining these relationships, and
with the manner in which partners execute on these collaborative
agreements.
⋅ Product acceptance & competiveness – a developed product
may not be considered by key opinion leaders (eg. doctors),
reimbursement authorities (eg. PBS-listing) or the end customer
to be an effective alternative to products already on market, or
other products may be preferred.
⋅ Product liability – a claim or product recall would significantly
impact the company. Insurance, at an acceptable cost, may not
be available or be adequate to cover liability claims if a marketed
product is found to be unsafe.
⋅ Key personnel – the company’s success and achievements
against timelines depend on key members of its highly qualified,
specialised and experienced management and scientific teams.
The ability to retain and attract such personnel is important.
⋅ Grant and R&D incentives – the company may undertake R&D
activities under competitive grants and be part-funded by other
incentive programs (eg. R&D tax credits). There is no certainty
that grants or incentive programs will continue to be available to
the company, and changes in government policy may reduce
their applicability.
In accordance with good business practice in the pharmaceutical
industry the company’s management actively and routinely
employs a variety of risk management strategies. These are
broadly described in the Corporate Governance Statement
(section 7.2 Risk assessment and management).
16
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
16
Directors’ Report Operating & Financial Review
Health and Safety
Meetings of Directors
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 connections to the company’s business
operations. Employees are encouraged to actively participate in
the management of environmental and occupational health and
safety (OH&S) issues. The company has adopted an OH&S Policy
and has an established OH&S committee structure as part of its
overall approach to workplace safety. The OH&S Committee
provides a forum for management and employees to consult on
health and safety matters. The primary role of the committee 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. The committee includes representatives of
management, and employees from 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 Committee meets on a regular basis over the year.
Updates on OH&S matters are provided at board meetings.
Environment and Regulation
The group is subject to environmental regulations and other
licences in respect of its research and development facilities.
There are adequate systems in place to ensure compliance with
relevant Federal, State and Local environmental regulations and
the Board is not aware of any breach of applicable environmental
regulations by the group. There were no significant changes in
laws or regulations during the 2015 financial year or since the end
of the year affecting the business activities of the group, and the
Board is not aware of any such changes in the near future.
The number of meetings of the company’s board of directors and
of each committee held during the year ended 30 June 2015, and
the numbers of meetings attended by each director were:
Directors
Board
J K Fairley
8 of 8
R A Hazleton
P J Jenkins
Z Peach
R B Thomas
P R Turvey
8 of 8
8 of 8
6 of 8
8 of 8
8 of 8
Audit & Risk
Committee
Remuneration
& Nomination
Committee
N/A
2 of 2
N/A
N/A
2 of 2
2 of 2
N/A
N/A
5 of 5
5 of 5
5 of 5
N/A
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.
Starpharma Holdings Limited Annual Report 2015
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17
17
Directors’ Report Remuneration Report
The remuneration report for the year ended 30 June 2015 sets out remuneration information for non-executive directors, executive directors and
other key management personnel of the group.
The remuneration report is presented under the following sections:
Introduction
1.
2. Remuneration governance
3. Non-executive director remuneration policy
4. Executive remuneration policy
Impact of FY15 changes on FY16 and beyond
a) Remuneration principles and strategy
b) Approach to setting and reviewing remuneration
c) Adjustments to the remuneration in FY15
d)
e) Details of executive equity incentive plans
5. Executive remuneration outcomes, including link to performance
6. Details of remuneration
7. Executive employment agreements
8. Additional disclosures relating to employee equity schemes
Introduction
1.
Remuneration strategy
Starpharma aims to ensure that its remuneration strategy successfully aligns the interests of its executives and employees with those of its
shareholders. In framing its remuneration strategy, the Board is conscious that Starpharma has only a small number of employees (~35) so
endeavours to keep its remuneration relatively straightforward. Its staff are generally required to have a specialist knowledge and develop
products over the medium to long term. The fact that Starpharma operates in a global business environment also influences its remuneration
strategy.
Starpharma continues to implement its corporate strategy to commercialise products from its dendrimer platform, with the company having
either met or nearing important regulatory and commercial milestones. There have been transitional adjustments to remuneration practices in
FY15 with further adjustments in FY16 which are outlined in this report. The objective is to achieve a simplified remuneration strategy to better
reflect a KPI driven, transparent and straightforward structure aligned with the interests of shareholders and continuing to reward performance
across multi-year timeframes related to product development.
The consequences of these adjustments to the remuneration strategy and practice in the reported remuneration for FY15 are:
•
•
•
•
•
Alignment of performance and salary review periods with the just completed financial year;
Extension of vesting periods for equity awards to increase proportion of long term incentives;
All equity awards are subject to KPIs or TSR hurdles;
Adjustments to the use of holding locks and deferral periods; and
Number of performance rights awarded adjusted to compensate for lengthening of performance periods.
Further details are outlined in section 4(c) of the remuneration report.
Recent changes to Australian tax legislation regarding employee equity schemes are being considered and may also result in further changes in
the structure of Starpharma’s equity incentive plans in the future.
The remuneration report details the remuneration arrangements for key management personnel (“KMP”) who are defined as those persons
having authority and responsibility for planning, directing and controlling the major activities of the group, directly or indirectly including any
director (whether executive or otherwise) of the parent.
The table below outlines the KMP of the group during the financial year ended 30 June 2015. Unless otherwise indicated, the individuals were
KMP for the entire financial year. For the purposes of this report, the term “KMP executives” includes the executive director and other KMP
executives of the group. “Other KMP executives” refers to KMP executives excluding the CEO.
(i) Non-executive directors
R B Thomas
Non-executive Chairman
P J Jenkins
Non-executive Director
R A Hazleton
Non-executive Director
Z Peach
Non-executive Director
P R Turvey
Non-executive Director
(iii) Other KMP executives
N J Baade
C P Barrett
A Eglezos
D J Owen
J R Paull
Chief Financial Officer & Company Secretary
VP, Business Development
VP, Business Development
VP, Research
VP, Development & Regulatory Affairs
(ii) Executive director
J K Fairley
Chief Executive Officer & Managing Director
(CEO)
There were no changes to the KMP after the reporting date to the date of this report.
Starpharma Holdings Limited Annual Report 2015
18
18
Starpharma Holdings Limited Annual Report 2015
Directors’ Report Remuneration Report
2. Remuneration governance
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 non-
executive directors, KMP executives and other senior executives. Where required, external remuneration advice may be sought by the
Remuneration and Nomination Committee or the Board.
Specifically, the Board approves the remuneration arrangements of the CEO including awards made under the short term incentive (STI) and
long term incentive (LTI) plans, following recommendations from the Remuneration and Nomination Committee. The Board approves, having
regard to recommendations made by the CEO to the Remuneration and Nomination Committee, the level of the remuneration, including STI and
LTI awards, for executives. The Board also sets the aggregate fee pool for non-executive directors (which are subject to shareholder approval)
and non-executive director fee levels.
The company’s remuneration structure aims to:
•
•
Attract and retain exceptional people to lead and manage the group and to support internal development of executive talent within the
company, recognising that Starpharma is operating in a global industry environment;
Drive sustainable growth and returns to shareholders, as executives are set both short-term and long-term performance targets linked
to the core activities necessary to build competitive advantages and shareholder value; and.
• Motivate and reward superior performance by the executive team whilst aligning the interests of shareholders.
An extensive review of remuneration practices was undertaken by the Remuneration and Nomination Committee during FY15. Details of these
adjustments and their impact can be found in section 4(c) of the remuneration report.
Benchmarking
Extensive salary and remuneration benchmarking is undertaken by Starpharma each year. Starpharma benchmarks fixed and total
remuneration against employment positions of comparable specialisation and responsibility within the industry. Fixed remuneration is
supplemented by providing incentives (variable remuneration) to enable top performers to achieve further remuneration based on company
performance, business unit performance and demonstrated individual superior performance.
All staff participate in a formal performance review and development process consisting of an objective planning and development session at
the commencement of the annual cycle and a performance and salary review at the end of the cycle. The objective of the salary review is to
ensure that all employees are appropriately remunerated, that remuneration is competitive within the relevant industry sector, and that increases
in employees’ skills and responsibilities are recognised. During the year a performance review of all staff took place in accordance with this
process to assess each employee’s performance against their pre-agreed KPIs to determine if a bonus is payable, and if so, at what level.
Use of remuneration consultants
If remuneration consultants are to be engaged to provide remuneration recommendations as defined in section 9B of the Corporations Act 2001,
they are to be engaged by, and report directly to, the Remuneration and Nomination Committee. No remuneration consultants have been
engaged to provide such remuneration services during the financial year.
Voting at the company’s 2014 Annual General Meeting (AGM)
Of the votes cast on the company’s remuneration report for the 2014 financial year, 83% were in favour of the resolution. As part of the
company’s commitment to continuous improvement, the Remuneration and Nomination Committee and the Board consider comments made by
shareholders and proxy advisers in respect of remuneration related issues.
Starpharma Holdings Limited Annual Report 2015
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2. Remuneration governance (continued)
Starpharma remuneration process summary
BOARD
Has overall responsibility for oversight of Starpharma’s remuneration policy and its principles and processes, and ensures
appropriate benchmarking and the company’s ability to pay are considered in remuneration related decision making.
Following recommendations from the Remuneration and Nomination Committee, the Board considers and approves:
•
•
•
•
Starpharma’s executive remuneration policy;
The remuneration packages of the CEO and other senior executives;
The ‘at-risk’ components of executive remuneration packages, including the structure and operation of equity based
plans; and
The remuneration of non-executive directors.
Oversee
&
Approve
Inform &
Recom-
mend
REMUNERATION
CONSULTANTS & OTHER
EXTERNAL ADVISORS
Where required, support the
Remuneration and
Nomination Committee by
providing independent
advice on matters including:
•
•
Benchmarking data;
Legal and regulatory
advice on
remuneration related
issues for directors
and executives; and
Advice on incentive
plans.
REMUNERATION & NOMINATION COMMITTEE
Reviews and recommends the following to the Board:
Support & Advise
•
•
•
•
Starpharma’s executive remuneration policies;
Specific remuneration recommendations for
the CEO and other senior executives;
Design of all incentive plans; and
Remuneration for non-executive directors.
Engage & Oversee
•
Oversee
&
Approve
Inform &
Recom-
mend
CEO
Reviews and recommends remuneration arrangements
and outcomes of performance assessments to the
Remuneration and Nomination Committee for senior
executives.
Further information on the Remuneration and Nomination Committee’s role, responsibilities and membership is outlined in the committee’s
charter available at http://www.starpharma.com/corporate_governance.
Trading in company securities
The trading of shares issued to participants under any of the company’s employee equity plans is governed by the company’s securities dealing
policy. All employees and directors are prohibited from entering into any hedging arrangements over unvested securities and from margin
lending on Starpharma securities. Further information regarding the company’s dealing in securities policy is set out in the Corporate
Governance Statement and the policy is available at http://www.starpharma.com/corporate_governance.
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3. Non-executive director remuneration policy
Determination of fees and the maximum aggregate fee pool
The Board seeks to set non-executive directors’ fees at a level which provides the group with the ability to attract and retain non-executive
directors of the highest calibre with relevant professional expertise and reflect the demands which are made on, and the responsibilities of, the
non-executive directors, whilst incurring a cost which is acceptable to shareholders.
Non-executive directors’ fees and the aggregate fee pool is reviewed annually by the Remuneration and Nomination Committee against fees
paid to non-executive directors in comparable companies within the biotechnology sector and relevant companies in the broader ASX-listed
market. The Chairman’s fees are determined by the Remuneration and Nomination Committee independently of the fees of non-executive
directors based on the same role in comparable companies within the biotechnology sector and relevant companies in the broader ASX-listed
market. The Chairman does not participate in the review of his own fees.
The company’s constitution and the ASX listing rules specify that the non-executive directors’ maximum aggregate fee pool shall be determined
from time to time by a general meeting of shareholders. The latest determination was at the 2014 AGM held on 20 November 2014 when
shareholders approved an aggregate fee pool of $550,000.
The Board will not seek any increase in the non-executive directors’ maximum fee pool at the 2015 AGM.
Fee policy
Non-executive directors’ fees consist of base fees and committee fees. The payment of committee fees recognises the additional time and
responsibility commitment required by non-executive directors who serve on board committees. The Chairman of the Board is a member of all
committees but does not receive any additional committee fees in additional to his base fee.
The base fee and committee fee structure came into effect from 1 April 2014, with the previous structure being a flat base fee for non-executive
directors.
Non-executive directors did not receive bonuses or forms of equity securities, or any performance-related remuneration during the financial
year. Statutory superannuation contributions are required under the Australian superannuation guarantee legislation to be paid on any fees paid
to Australian directors. There are no retirement allowances paid to non-executive directors. The below non-executive directors’ fees include any
statutory superannuation contributions.
Annual Non-Executive Directors’ Fees
Board fees
Chair (no additional fees for serving on Board committees)
Base fee for other non-executive directors
Committee fees
Audit & Risk Committee
Remuneration and Nomination Committee
Chair
Member
Chair
Member
$
125,000
62,500
7,500
3,000
5,000
2,500
There were 5 non-executive directors for FY15. The aggregate amount paid to non-executive directors for the year ended 30 June 2015 was
$393,000 (2014: $401,555). The details of remuneration for each non-executive director for the years ended 30 June 2015 and 30 June 2014
are outlined in the tables in section 6.
Non-executive directors’ fees were last increased with effect from 1 April 2014, coinciding with the implementation of the base fee and
committee fee structure. The previous increase in annual non-executive directors’ fees occurred effective from 1 January 2010.
As noted in the Notice of Meeting for the 2014 AGM, no increase in non-executive director fees has been made since that time. The Board will
not increase the annual non-executive directors’ fees for the period 1 April 2015 to 1 April 2016.
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4. Executive remuneration policy
a) Remuneration principles and strategy
The group’s executive remuneration strategy is designed to attract, motivate and retain high performing individuals and align the interests of
executives with shareholders, recognising it is operating in the international marketplace, and is summarised below.
Remuneration strategy linkages to group objectives
Align the interests of executives with shareholders
Attract, motivate and retain high performing individuals
•
•
The remuneration framework incorporates “at risk”
components, which are determined by performance, through
STI and LTI
Performance is assessed against a suite of measures
relevant to the success of the group and generating growth
and returns for shareholders
•
•
The remuneration offering is competitive for companies of similar
size and complexity within the industry through benchmarking
The mix of short and longer-term remuneration encourages
retention and performance across multiple years as appropriate
for the lifecycle of the group
Component
Fixed remuneration
Vehicle
Purpose
Link to Performance
Base salary, superannuation
contributions and other
benefits (breakdown of fixed
remuneration is at the
executive’s discretion)
To provide competitive fixed
remuneration set with reference
to the role, market and
experience
Group and individual performance
are considered during the annual
remuneration review
Short Term Incentives (STI)
Cash and equity
(Performance period of less
than 3 years)
the equity instrument is
currently performance rights
Rewards executives for their
contribution to achievement of
business outcomes, acts as a
retention tool and aligns with
interests of shareholders
Allocation of cash bonuses and
vesting of equity linked to internal
non-financial KPIs, both business
unit and corporate, over the medium
term which are typical within the
biotechnology industry. For example,
achievement of specified
development, clinical, regulatory and
commercial milestones
Long Term Incentives (LTI)
Equity
(Performance period of 3
years or more)
the equity instrument is
currently performance rights
Rewards executives for their
contribution to the creation of
shareholder value over the
longer term, acts as a retention
tool and aligns with interests of
shareholders
Vesting of grants are dependent on
internal measures, both business
unit and corporate over the longer
term; and total shareholder return
(TSR) relative to the ASX300 Index
b) Approach to setting and reviewing remuneration
The group aims to reward executives with a level and mix of remuneration appropriate to their position, experience and responsibilities, while
being market competitive.
The group’s policy aim is to position fixed remuneration broadly in line with the median of the relevant comparator group of companies for each
role. The Remuneration and Nomination Committee, with the Board actively reviews the group’s remuneration structure and benchmarks the
proportion of fixed remuneration, short term incentives and long term incentives against relevant comparators to ensure the policy objectives are
met and are in-line with good corporate practice for Starpharma’s size, industry and stage of development. Remuneration levels are considered
annually through the remuneration review, which considers industry benchmarks and the performance of the group and individual. Other factors
taken into account in determining remuneration include a demonstrated record of performance, internal relativities, and the group’s ability to pay.
In the case of executives, the CEO provides recommendations to the committee.
As in prior years, remuneration benchmarking was undertaken with reference to industry peers, together with, where appropriate, other
benchmarking reports which apply to specific positions. There are no guaranteed base pay increases in any executive contracts.
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The CEO has a cash bonus entitlement as a component of STI. The maximum available for FY15 was $210,000, which represents 44% of total
fixed remuneration. Other executives do not have a pre-specified maximum cash bonus entitlement; however bonuses are awarded from a
maximum shared pool for executives which equates to 20% of total fixed remuneration, subject to cash availability. The Remuneration and
Nomination Committee considers that this approach provides flexibility in rewarding superior executive performance and is appropriate for the
size of the company at this time enabling it to manage its cash reserves as required. The Remuneration and Nomination Committee, having
discussions with the CEO, annually reviews the appropriateness of this approach.
c) Adjustments to remuneration structure in FY15
This year, the Remuneration and Nomination Committee and the Board have made a number of adjustments to remuneration practices based
on best practice and the evolution of the company’s remuneration practices.
The adjustments included:
•
•
•
•
•
•
•
Aligning the performance and salary review periods for all executives to the financial year period;
Changing the performance assessment timing so that they are reported in the relevant financial year period;
Extending the vesting period on performance rights for executives beyond the previous 2 year performance period to 3 years with the
subsequent reduction in the usage of holding locks on vested performance rights. This delineates the proportion of performance rights
that are considered LTIs. (Note: FY15 is a transitional year, with the grant of performance rights to executives (other than the CEO)
during the year including performance periods of 2, 3 and 4 years. This is to ensure executives remain motivated and are retained
during the impacted performance periods, which is consistent with the objective of the overall remuneration strategy);
The discontinuation of equity incentives with continued employment as the sole performance condition for equity awards;
Clearly classifying and reporting equity allocations with less than 3 year performance periods as STI, and those with 3 year
performance periods or more as LTI;
For executives (other than the CEO), a proportion of equity STI awards are now dependent upon the achievement of Corporate KPIs,
with the balance dependent on their Business Unit KPIs; and
A proportion of equity LTI awards for executives (other than the CEO), are now dependent upon the achievement of Corporate KPIs
and TSR, with the balance dependent on their Business Unit KPIs.
The consequences of making these adjustments in the reported remuneration for FY15 are:
•
•
•
•
Extension of performance periods for equity awards;
There were two performance assessments in FY15 for executives (other than the CEO) due to alignment of the performance review
period to the financial year. The performance period for executives (other than the CEO) were previously aligned to a calendar year.
This is a one-off occurrence for the transition. The cash bonuses awarded across the 18 month performance period are disclosed in
section 6 of the remuneration report;
Number of performance rights awarded adjusted to compensate for lengthening of performance periods; and
The greater proportion of equity awards and their duration impacts the accounting of the awards in this and future financial years.
Recent changes to Australian tax legislation regarding employee equity schemes may also result in further changes to the equity incentive plans
in the future.
d) Impact of FY15 changes on FY16 and beyond
Following the FY15 adjustments, the FY16 remuneration structure will be and allow a simplified, more transparent and KPI driven structure that
continues to link remuneration to performance and shareholder value.
The target remuneration mix is outlined in the table below. The transition to achieve the desired target mix is expected to take multiple years, as
an increasing percentage of remuneration is directed to LTIs. The Remuneration and Nomination Committee and the Board are conscious of the
impact in motivating and retaining executives by adopting the target remuneration mix, hence the transition will be conducted over a number of
years in a thoughtful and deliberate manner. The STI percentage includes both short term cash bonus and short term equity awards (<3 year
performance period).
Target Remuneration Mix
CEO
Fixed Remuneration
~30% - 40%
STI – Cash Bonus &
Equity
~25% - 30%
LTI – Equity
~35% - 40%
Other KMP executives
Fixed Remuneration
~55% - 65%
STI – Cash Bonus &
Equity
~15% - 20%
LTI – Equity
~20% - 25%
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4. Executive remuneration policy (continued)
To achieve the target remuneration mix a simplified performance pay structure will be adopted. The timeline and structure of the proposed
performance related pay to be granted in FY16 to executives is illustrated below:
1 Jul 2015
30 Jun 2016
30 Jun 2017
30 Jun 2018
STI - Cash
*
*
†
†
STI - Equity
LTI - Equity
‡
‡
^
‡
^
Sep 2015
Sep 2016
Sep 2017
Sep 2018
Performance Period
Vesting/Deferral Period
STI - Cash
STI - Equity
STI - Equity
LTI - Equity
LTI - Equity
*
†
^
‡
Grant Date of Equity (subject to shareholder approval)
Shareholder Approval at AGM
Vesting Date
Review of performance for determining percentage achieved
e) Details of executive equity incentive plans
Starpharma Short Term Incentive (STI) – includes cash bonus and short-term equity
The group operates an annual STI program available to executives and awards cash and equity incentives subject to the attainment of clearly
defined KPIs.
Who participates?
Executives
How are STIs delivered?
What is the STI opportunity?
What are the STI performance
conditions for FY15?
Cash bonus and performance rights with a performance period of less than 3 years. By providing
some rights that vest in the short term, it allows the company to preserve cash by offering equity as
a short-term incentive in addition to smaller cash bonuses. This is common practice for companies in
the development phase of their life cycle.
During FY15 the CEO was awarded STI equity with 1 and 2 year performance periods. A further 1
year holding lock will apply to any STI equity which vests from those granted. In respect of
executives other than the CEO, STI equity awarded in FY15 has a 2 year performance period with
no holding lock.
The CEO has a target STI opportunity of 46% of total remuneration for FY15, with the cash
component of 16%, and equity component of 30% of total remuneration. The cash component
equates to 44% of total fixed remuneration. For executives other than the CEO, bonuses are
awarded from a maximum shared pool for executives which equates to 20% of total fixed
remuneration, subject to cash availability.
As outlined on page 23, the STI opportunity will be progressively adjusted in future years towards a
target of ~25-30% and ~15%-20% of total remuneration for the CEO and other KMP executives,
respectively.
Actual STI payments awarded to each executive depend on the extent to which they meet specific
key performance indicators (KPIs) set at the beginning of the period. The KPIs are typical of a
biotechnology company at Starpharma’s stage of development, and may include Corporate KPIs
and Business Unit KPIs relating to strategic and operational objectives. Details of the corporate KPIs
for performance, which was assessed during FY15, are explained in section 5 of the remuneration
report. Given the company’s stage of development, financial metrics (such as earnings per share)
are not entirely relevant in linking pay to performance.
The performance measures applicable in determining STIs awards for the CEO and other
executives are noted in the table below:
Corporate KPIs
Business Units KPIs
STI Cash Bonus
CEO 100%
STI Performance Rights
CEO 100%
Other executives 30%
Other executives 100%
Other executives 70%
Details regarding LTI performance conditions are contained in the next table.
How is performance assessed?
On an annual basis, after consideration of performance against KPIs, the Remuneration and
Nomination Committee recommends the amount of STI to be paid from the maximum entitlement to
the CEO for approval by the Board.
For executives other than the CEO, the Remuneration and Nomination Committee seeks
recommendations from the CEO, and then make recommendations to the Board.
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Is performance against KPIs
disclosed?
Whilst the company’s policy is not to disclose commercially sensitive information, consistent with
best practice disclosure obligations, it will retrospectively disclose achievement of corporate KPIs
to the extent commercially practicable.
Contractual entitlement?
Only the CEO has a pre-determined STI cash bonus entitlement. There is no pre-determined STI
equity entitlement. No other executive service agreements contain any contractual entitlement to
STI cash or equity.
What happens if an executive
leaves?
If an employee ceases employment, all unvested rights lapse except for certain
circumstances relating to “good leaver” provisions. The “good leaver” provisions allows the
Board to determine the accelerated vesting of the rights if the employee ceases employment
due to death, illness, permanent disability, redundancy or any other circumstance approved
by the Board after considering the portion of the performance period that has elapsed and the
extent to which performance conditions have been met.
What happens on a change of
control?
Board discretion, after considering the portion of the performance period that has elapsed and the
extent to which performance conditions have been met.
What happens in the case of
fraud/dishonesty?
If, in the opinion of the Board, an employee has acted fraudulently or dishonestly, the Board may
determine that any unvested right granted to that employee would lapse.
Re-testing
There is no re-testing of KPIs in subsequent years if performance conditions are not met.
How is the conversion of
performance rights undertaken?
As the company is in a development phase and not operating cash flow positive, the vesting of
equity incentives is currently satisfied by the issue of new shares, rather than a purchase of shares
on market, to conserve the company’s cash reserves. This is reviewed periodically and purchases
of shares on market may be undertaken in the future if appropriate.
Starpharma Long Term Incentive (LTI) – Equity
Participation in these plans is at the Board’s discretion. For key appointments, an initial allocation of long-term equity incentives may be offered
as a component of the initial employment agreement.
Who participates?
Executives
How are LTIs delivered?
Performance rights with a performance/vesting period of 3 years or more. The LTI performance
rights awarded during FY15 have 3 year (for executives) and 4 year (for executives other than the
CEO) performance periods. A portion of the CEO’s LTI performance rights granted in FY15 will also
be subject to a holding lock following vesting.
What is the LTI opportunity?
The CEO has a target LTI opportunity of 18% of total remuneration for FY15. For other KMP
executives, the target LTI opportunity for FY15 was 3% of total remuneration. As outlined in section
5 of the remuneration report, the LTI opportunity will be progressively increased in future years
towards a target of ~35-40% and ~20%-25% of total remuneration for the CEO and other KMP
executives, respectively.
What are the LTI performance
conditions for rights granted in
FY15?
Corporate KPIs reflect long term (3 year) strategic, operational and financial management
objectives. These corporate KPIs fall into the following categories, linked to Starpharma’s key
business areas:
VivaGel®
Drug Delivery
VivaGel® Phase 3 trials for Prevention of Recurrence of Bacterial
Vaginosis (BV);
Commercialisation of VivaGel® for symptomatic relief of BV;
VivaGel® coated condom;
Phase 1 DEPTM docetaxel trial;
Advance further DEPTM candidate;
Commercial arrangements in drug delivery;
Agrochemical
Commercial arrangements in agrochemicals; and
Financial
Maintaining the link between executive remuneration outcomes and the returns to shareholders,
Total Shareholder Return (TSR) is also a relevant performance condition in respect of LTI. TSR
reflects Starpharma’s TSR compared to the S&P/ASX300 Accumulation Index (Index), and includes
share price growth, and any dividends and capital returns.
The table below sets out the percentage of performance rights that will vest depending on the
company’s TSR compared to the Index over the relevant period.
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Directors’ Report Remuneration Report
4. Executive remuneration policy (continued)
Annualised Starpharma TSR compared
with the Index
Percentage of rights subject to the TSR
performance condition which vest
Below Index
Equal to Index
0%
50%
Between Index and Index + 9.99%
Pro rata basis from 51% to 99%
At least 10% above Index
100%
For example, if the TSR of the Index is 10% per annum, then Starpharma would need to achieve a
TSR of 20% per annum or more for all of the TSR related performance rights to vest.
The performance measures applicable in determining LTIs awards for the CEO and other
executives are noted in the table below:
Corporate KPIs
CEO
Other executives
70%
15%
TSR
30%
15%
Business Unit KPIs
N/A
70%
How is performance assessed?
On an annual basis, after consideration of performance against KPIs, the Remuneration and
Nomination Committee recommends the amount of LTI to vest to the CEO for approval by the
Board.
For executives other than the CEO, the Remuneration and Nomination Committee seeks
recommendations from the CEO, and then make recommendations to the Board.
TSR is calculated independently by a professional services firm.
Is performance against KPIs
disclosed?
Whilst the company’s policy is not to disclose commercially sensitive information, consistent with
best practice disclosure obligations, it will retrospectively disclose achievement of corporate KPIs to
the extent commercially practicable.
Contractual entitlement?
There are no pre-determined LTI equity entitlements.
What happens if an executive
leaves?
Same as for STI.
What happens on a change of
control?
Board discretion, after considering the portion of the performance period that has elapsed and the
extent to which performance conditions have been met.
What happens in the case of
fraud/dishonesty?
If, in the opinion of the Board, an employee has acted fraudulently or dishonestly, the Board may
determine that any unvested Right granted to that employee would lapse.
Re-testing
There is no re-testing of KPIs in subsequent years if performance conditions are not met.
How is the conversion of
performance rights undertaken?
Same as for STI.
Starpharma Employee Share Plan ($1,000 Plan)
Shares may be granted under the $1,000 Plan for no consideration and are escrowed for 3 years while participants are employed by the
company.
Details of shares issued under the $1,000 Plan during FY15 are included on page 69 of the annual report.
Starpharma Employee Share Option Plan
Equity awards until 2009 were made under the Starpharma Employee Share Option Plan. Following changes to the tax treatment of options, this
plan has not been utilised since 2009, however given recent legislative changes, it may be reinstated in the future.
No options were issued or vested under the Plan during FY15. The last options were exercised or lapsed in FY14.
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5. Executive remuneration outcomes, including link to performance
Given the company’s stage of development, financial metrics (such as profitability) are not necessarily an appropriate measure of executive
performance. The company’s remuneration policy aligns executive reward with the interests of shareholders. The primary focus is on growth in
shareholder value through achievement of development, regulatory and commercial milestones, and therefore performance goals are not
necessarily linked to typical financial performance measures utilised by companies operating in other market segments. However, the Board
recognises that share price performance is clearly relevant to the extent that it reflects shareholder returns, and as such Starpharma TSR
against the S&P/ASX300 Index is used as a relevant metric for portions of executive equity awards. The impact of share price performance on
the vesting of certain performance rights is detailed in the table below.
FY15
$0.73
$0.99
$0.41
FY14
$0.58
$1.11
$0.54
FY13
$0.82
$1.75
$0.77
150,000
200,000
250,000
21%
50%
67%
Closing price 30 June
Share price high
Share price low
Number of performance rights
forfeited by CEO during FY
based on share price
performance
% of performance rights
forfeited by CEO during FY
based on share price
performance (as percentage of
total performance rights)
FY11
$1.50
$1.67
$0.48
262,500
35%
FY12
$1.37
$1.88
$0.92
None scheduled
to vest during
FY12 therefore
not applicable
None scheduled
to vest during
FY12 therefore
not applicable
Fixed remuneration:
The average increase in KMP executive fixed remuneration for FY15 was 3.65% (between 2.45% and 4.35%). There were no increases above
5% in total fixed remuneration packages for KMP executives in the year.
Short term incentives (STI):
CEO:
Summary of FY15 related performance for the CEO
STI awards (cash and equity) for the CEO in FY15 were based on the scorecard measures and weightings as disclosed below. These targets
were set by the Remuneration and Nomination Committee and the Board at the beginning of the financial year and align to the company’s
strategic, operational and financial objectives. The KPIs are reviewed annually and updated. The Remuneration and Nomination Committee
and the Board are responsible for assessing performance against KPIs and determining the STI to be paid.
Performance category
Metric
Weighting
Satisfied
VivaGel® Phase 3 trials for Prevention of
Recurrence of Bacterial Vaginosis (BV)
Commercialisation of VivaGel® for
symptomatic relief of BV
VivaGel® coated condom
Phase 1 DEPTM docetaxel trial
Advance further DEPTM candidate
Commercial arrangements in
agrochemicals and drug delivery
Financial
Progress of Phase 3 trials
Filing regulatory submissions in selected
territories
Launch of product in selected markets
Progress of Phase 1 trial
Completion of pre-clinical studies on
another DEPTM candidate
New contract
Manage company’s capital in a prudent
manner
20%
15%
20%
20%
10%
5%
10%
Met
Met
Partially Met
Met
Partially Met
Partially Met
Met
Based on the achievements of the company during FY15, the Remuneration and Nomination Committee and the Board determined that the
CEO had achieved 93% of her target opportunity. This equates to a $194,775 cash bonus which will be paid on or around 30 September
2015, and will also result in the vesting of 278,250 performance rights on 30 September 2015. In making this assessment, the Remuneration
and Nomination Committee and the Board considered the following factors (other commercially sensitive matters were also taken into
account):
• Enrolment in the VivaGel® Phase 3 trials on target, with regulatory de-risking associated with the granting of a US FDA special
protocol assessment;
Launch of the VivaGel® condom in Australia, with additional market and regulatory clearances achieved and in review;
• Key regulatory filings for VivaGel® for symptomatic relief submitted, in review and progressing well;
•
• DEPTM docetaxel phase 1 clinical study progressing well with most commonly used Taxotere® dosage exceeded;
• Expanded agreement with AstraZeneca for enhanced oncology drug; and
• Completion of a $21.5 million share placement and share purchase plan.
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5. Executive remuneration outcomes, including link to performance (continued)
Summary of FY14 related performance for the CEO
Due to the timing of prior performance reviews, the short term bonus disclosed in previous annual
performance (i.e. FY13 performance reported in the FY14 annual report). The timing of the performance review has now been brought forward
to ensure that the performance reported in the annual report reflects the relevant financial year. Following an assessment by the Remuneration
and Nomination Committee for the FY14 performance period, 93% of the short term cash award was granted to the CEO based on the partial or
full satisfaction of pre-determined KPIs.
reports reflected the prior financial year’s
In respect of the CEO’s short term performance rights, 465,000 short term performance rights vested on 30 September 2014 based on
satisfaction of pre-determined KPIs for FY14, with 35,000 performance rights forfeited as a result of certain performance conditions not being
met.
On 30 November 2014, 50,000 or 25% of the total tranche of 200,000 performance rights vested on the satisfaction of the vesting conditions,
with the 75% balance being forfeited. The 150,000 performance rights were forfeited due to the TSR performance conditions not being met. The
50,000 performance rights vested on satisfying the continued employment condition.
A total of 74% of performance rights vested during FY15 on the achievement of the performance conditions, relating to performance from FY14
and other conditions, notably TSR, to the end of November 2014.
Other KMP executives:
For STI cash awards for other KMP executives, the CEO assesses the other KMP executives’ performance against pre-determined KPIs
relevant to their business unit. These business unit KPIs relate directly to the corporate KPIs. The achievement of corporate KPIs in FY15 is
disclosed above, with these achievements requiring significant input and superior performance from the executive team. The CEO makes
recommendations to the Remuneration and Nomination Committee and the Board in respect of the STI performance and amounts to be paid.
Subject to satisfactory performance, 100% of performance rights will vest for other KMP executives. Further details of the impact of the re-
alignment of performance reviews and their subsequent reporting for other KMP executives for cash bonuses is disclosed in the tables in
section 6 of the remuneration report.
Based on performance, the Remuneration and Nomination Committee and the Board determined that other KMP executives had achieved
between 59% and 91% of their KPIs for determining cash bonus payments.
Long term incentives (LTI):
There were no long term performance rights for KMP executives which were due to vest in FY15. As a result of the transition towards longer
vesting periods for performance rights, rights that have been granted and are classified as LTIs will be available for vesting in future years.
Details of equity awarded in previous years which have lapsed or vested during FY15 are included in section 8 of the remuneration report.
All employees except directors were granted shares under the $1,000 Plan during FY15. Details are included on page 69 of the annual report.
6. Details of remuneration
The following tables show details of the remuneration received by the directors and the key management personnel of the group for the current
and previous financial year. As required by the Accounting Standards, the value of performance rights included in the remuneration tables
relates to the fair value of the performance rights (which may include performance rights granted in prior years), rather than their face value.
Due to the re-alignment of performance reviews and their subsequent reporting for other KMP executives for this financial year, cash bonuses
noted in the table below reflect these transition arrangements. Further details are outlined below the table.
2015
Name
Short-term benefits
Post-
employment
Cash salary &
fees†
$
Cash bonus#
$
Non-monetary
benefits
$
Superannuation
$
Long-term
benefits
Long service
leave
$
Share-based payments
Shares#
$
Performance
Rights#
$
Non-executive directors
R B Thomas
P J Jenkins
R A Hazleton
Z Peach
P R Turvey
Executive director
114,155
60,502
65,500
60,502
63,927
–
–
–
–
–
–
–
–
–
–
10,845
5,748
–
5,748
6,073
–
–
–
–
–
J K Fairley
418,820
194,775*
33,687
31,500
11,674
192,873
N J Baade
C P Barrett
Other Key Management Personnel (group)
38,500^
28,000^
36,000^
38,500^
45,000^
A Eglezos
D J Owen
J R Paull
215,184
176,547
217,059
208,360
Totals
1,793,429
380,775
19,013
372
6,831
1,504
39,814
101,221
30,000
18,784
18,784
18,784
30,000
8,753
7,911
420
8,293
2,445
176,266
39,496
–
–
–
–
–
–
1,000
1,000
1,000
1,000
1,000
5,000
Total
$
125,000
66,250
65,500
66,250
70,000
–
–
–
–
–
628,813
1,319,269
71,564
71,564
63,922
71,564
75,449
361,703
344,690
335,317
354,829
370,255
982,876
3,479,063
Starpharma Holdings Limited Annual Report 2015
28
28
Starpharma Holdings Limited Annual Report 2015
Directors’ Report Remuneration Report
† There were no increases above 5% in overall total fixed remuneration packages for KMP executives in the year. Executives may elect to salary
sacrifice part of their total fixed remuneration package. Cash salary & fees represents gross salary earned less any salary sacrifice amounts.
The three forms of salary sacrifice in the year were sacrificing into superannuation, leasing a motor vehicle under a novation arrangement, and
the use of a car park. These amounts are reported in the superannuation and non-monetary benefits respectively, with the impact that the
reported numbers and the amount for cash salary & fees next may vary from one year to the next, depending on these elections.
# All performance related remuneration, including cash bonuses, shares, and performance rights granted are determined to be an ‘at risk’
component of total remuneration.
* The CEO cash bonus accrued for the performance period 1 July 2014 to 30 June 2015 is $194,775. In previous years, the cash bonus
reported was the actual cash bonus paid in the year, with the assessment occurring after the release of the annual report. As outlined in section
4 of the remuneration report, the Board in FY2015 has aligned the performance assessment with each financial year. The cash bonus actually
paid in FY2015 for the performance period 1 July 2013 to 30 June 2014 was $186,000.
^ As outlined in section 2 of the remuneration report, the Board in FY2015 has aligned the performance assessment for other KMP executives
with each financial year. Previously other KMP executive performance assessments, remuneration review and cash bonus determinations were
conducted on a calendar year basis. The cash bonus reported is for the 12 months from 1 July 2014 to 30 June 2015. The cash bonuses
awarded to other KMP executives for the period 1 January 2014 to 30 June 2014 are outlined in the table below.
Cash Bonus related to Other KMP executives for period
1 January 2014 to 30 June 2014
Name
N J Baade
C P Barrett
A Eglezos
D J Owen
J R Paull
2014
Name
$
17,500
10,000
15,000
17,500
22,500
Short-term benefits
Post-
employment
Cash salary &
fees
$
Cash bonus#
$
Non-monetary
benefits
$
Superannuation
$
Long-term
benefits
Long service
leave
$
Share-based payments
Shares#
$
Performance
Rights#
$
Non-executive directors
R B Thomas1
P T Bartels2
P J Jenkins
105,581
56,636
35,888
R A Hazleton
Z Peach
P R Turvey
Executive director
61,375
56,064
57,208
–
–
–
–
–
–
–
–
–
–
–
–
3,320
9,766
5,239
–
5,186
5,292
–
–
–
–
–
–
J K Fairley
403,648
200,000
39,932
20,775
14,612
Other Key Management Personnel (group)
N J Baade
C P Barrett
A Eglezos3
D J Owen
J R Paull
B P Rogers4
192,564
212,096
170,090
206,817
197,211
48,918
30,000
25,000
8,000
30,000
40,000
–
15,347
401
17,754
363
13,213
2,737
1,804,096
Totals
1 Appointed 4 December 2013. Appointed Chairman 13 June 2014.
2 Retired 13 June 2014.
3 Appointed 12 August 2013.
4 Retired 13 December 2013.
333,000
89,747
25,000
17,775
16,061
17,775
25,000
34,900
186,089
23,811
24,036
334
27,954
(8,809)
(42,477)
39,461
Total
$
39,208
115,347
61,875
61,375
61,250
62,500
–
–
–
–
–
–
624,576
1,303,543
82,823
82,823
35,353
82,823
82,823
(17,910)
370,544
363,130
248,591
366,731
350,437
26,168
–
–
–
–
–
–
–
999
999
999
999
999
–
4,995
973,311
3,430,699
# All performance related remuneration, including cash bonuses, shares, and performance rights granted are determined to be an ‘at risk’
component of total remuneration.
There were no retirement benefits paid in the current or prior year.
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
29
29
Directors’ Report Remuneration Report
6. Details of remuneration (continued)
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
J K Fairley
N J Baade
C P Barrett
A Eglezos
D J Owen
J R Paull
Fixed
remuneration
At risk - STI
cash
At risk - STI
equity
At risk - LTI
equity
37%
69%
71%
69%
69%
67%
15%
11%
8%
11%
11%
12%
30%
17%
18%
17%
17%
18%
18%
3%
3%
3%
3%
3%
Due to the changes highlighted in section 4(c) of the remuneration report, the performance periods for the LTI equity grants have been
increased to 3 years, and in some cases 4 years.
With adjustments implemented in FY15 and the years ahead as described in section 4(c) of the remuneration report, the at risk LTI equity
percentage will increase in future years towards the targets of ~35%-40% for the CEO and ~20%-25% for Other Executives. The proportion of at
risk STI equity will subsequently decrease.
Details of remuneration: cash bonuses, shares, performance rights and options
For each cash bonus and grant of equity included in the tables on pages 28 to 33, 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
objectives is set out below. Performance rights vest over the specified periods provided vesting criteria are met. No rights will vest if the
conditions are not satisfied, hence the minimum value of the rights yet to vest is nil. The maximum value of the rights yet to vest has been
determined as the amount of the grant date fair value of the rights that is yet to be expensed. The CEO was paid 93% of her maximum cash
bonus entitlement of $210,000 in FY15, with the balance of 7% forfeited. The bonuses for executives other than the CEO are paid are at the
absolute discretion of the Board based on an individual’s performance within the year, hence there is no component forfeited to report.
Shares
Grant date
value of shares
granted during
20151
$
Grant date
value of rights
granted during
20151,2
$
-
730,038
Year
granted
Vested
Forfeited
%
%
Name
J K Fairley
Performance rights
Financial
years in which
rights may
vest
Maximum
value yet to
vest
N J Baade
1,000
109,962
C P Barrett
1,000
109,962
A Eglezos
1,000
109,962
D J Owen
1,000
109,962
J R Paull
1,000
131,955
2015
2015
2015
2014
2014
2014
2013
2013
2015
2015
2015
2014
2013
2015
2015
2015
2014
2013
2015
2015
2015
2014
2015
2015
2015
2014
2013
2015
2015
2015
2014
2013
-
-
-
-
-
93%
-
25%
-
-
-
-
100%
-
-
-
-
100%
-
-
-
-
-
-
-
-
100%
-
-
-
-
100%
-
-
-
-
-
7%
-
75%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
30/06/18
30/06/17
30/06/16
30/06/17
30/06/16
30/06/15
30/06/16
30/06/15
30/06/19
30/06/18
30/06/17
30/06/16
30/06/15
30/06/19
30/06/18
30/06/17
30/06/16
30/06/15
30/06/19
30/06/18
30/06/17
30/06/16
30/06/19
30/06/18
30/06/17
30/06/16
30/06/15
30/06/19
30/06/18
30/06/17
30/06/16
30/06/15
$
285,297
149,130
43,624
77,911
23,934
-
45,189
-
28,657
31,619
30,264
9,147
-
28,657
31,619
30,264
9,147
-
28,657
31,619
30,264
9,147
28,657
31,619
30,264
9,147
-
34,389
37,943
36,316
9,147
-
Starpharma Holdings Limited Annual Report 2015
30
Starpharma Holdings Limited Annual Report 2015
30
Directors’ Report Remuneration Report
1 The value at grant date calculated in accordance with AASB 2 Share-based Payments of shares and performance rights granted during the
year as part of remuneration.
2 The maximum value of performance rights is determined at grant date and is amortised over the applicable vesting period. The amount which
will be included in a given key management personnel’s remuneration for a given year is consistent with this amortised amount. No
performance rights will vest if the conditions are not satisfied, hence the minimum value yet to vest is nil.
7. Executive employment agreements
Remuneration and other terms of employment for executives are formalised in employment agreements which set out duties, rights and
responsibilities, and entitlements on termination. All executives also have a formal position description for their role.
Major provisions of the agreements relating to remuneration are set out below for those KMP executives who are employed at the date of this
report.
Managing Director and Chief Executive Officer (J K Fairley)
•
•
•
•
•
No fixed term of agreement.
Base salary, inclusive of superannuation, per annum as at 30 June 2015 of $480,000, to be reviewed annually by the Remuneration
and Nomination Committee.
A cash bonus up to $210,000 for the year to 30 June 2015 allocated proportionately on the achievement of predetermined KPIs.
The CEO is entitled to participate in an equity STI and LTI plan, subject to receiving any required or appropriate shareholder approval.
Fringe benefits consist of on-site car parking.
The CEO’s termination provisions are as follows:
Notice Period
Payment in
lieu of notice
Treatment of equity STI
Treatment of LTI
Resignation
12 months
Termination for cause
None
Termination without
cause, including
redundancy
12 months
N/A
None
6 months
payment in
lieu of notice
with 6 month
notice period
Termination in cases
of death, disablement
or other cause
approved by the Board
N/A
N/A
Unvested awards forfeited
Unvested awards forfeited
Unvested awards forfeited
Unvested awards forfeited
Unvested awards lapse unless the
Board determines otherwise after
considering the portion of the
performance period that has elapsed
and the extent to which performance
conditions have been met. Vesting
of the rights may be accelerated in
this case.
Unvested awards lapse unless the
Board determines otherwise after
considering the portion of the
performance period that has elapsed
and the extent to which performance
conditions have been met. Vesting
of the rights may be accelerated in
this case.
Unvested awards lapse, unless the
Board determines otherwise after
considering the portion of the
performance period that has elapsed
and the extent to which performance
conditions have been met. Vesting
of the rights may be accelerated in
this case.
Unvested awards lapse, unless the
Board determines otherwise after
considering the portion of the
performance period that has elapsed
and the extent to which performance
conditions have been met. Vesting
of the rights may be accelerated in
this case.
Other KMP executives
Standard executive termination provisions are as follows:
Notice Period
Payment in
lieu of notice
Treatment of equity STI
Treatment of LTI
Resignation
Typically 3
months
(range 2-3
months)
N/A
Same as for CEO
Same as for CEO
Termination for cause
None
None
Same as for CEO
Termination without
cause, including
redundancy
Typically 3
months (range
3-6 months)
3 months (3-6
months)
Same as for CEO
Same as for CEO
Same as for CEO
Termination in cases
of death, disablement,
or other cause
approved by the Board
N/A
N/A
Same as for CEO
Same as for CEO
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
31
31
Directors’ Report Remuneration Report
8. Additional disclosures relating to employee equity schemes
Ordinary shares
The number of ordinary shares in the company provided as remuneration during the financial year to any of the directors or the key
management personnel of the group, including their close family members and entities related to them, are set out below.
Key management personnel of the group, excluding directors, were eligible to participate in the Employee Share Plan ($1,000 Plan). Shares to
the value of $1,000 were granted to Australian-based permanent employees under the plan during the current and prior year.
2015
Name
Balance at the
start of the year
Granted during
the year as
compensation
On vesting of
performance rights
during the year
Other changes
during the year
Balance at the
end of the year
Directors of Starpharma Holdings Limited
R B Thomas
J K Fairley
P J Jenkins
R A Hazleton
Z Peach
P R Turvey
270,000
1,664,197
1,537,462
157,616
3,000
47,000
Other key management personnel of the group
N J Baade
C P Barrett
A Eglezos
D J Owen
J R Paull
368,598
325,472
1,204
277,120
262,035
–
–
–
–
–
–
1,818
1,818
1,818
1,818
1,818
–
515,000
–
–
–
–
50,000
50,000
–
50,000
50,000
130,000
123,077
33,849
25,850
11,539
23,077
–
–
3,847
–
(160,000)
400,000
2,302,274
1,571,311
183,466
14,539
70,077
420,416
377,290
6,869
328,938
153,853
Performance rights
The number of rights over ordinary shares in the company provided as remuneration during the financial year to any of the executive directors
and the key management personnel of the group, including their close family members and entities related to them, are set out below. No non-
executive director held performance rights in the current or prior year.
2015
Name
Balance at the
start of the year
Granted during
the year as
compensation
Vested 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
Directors of Starpharma Holdings Limited
J K Fairley1
1,510,000
1,500,000
(515,000)
(185,000)
2,310,000
–
2,310,000
Other key management personnel of the group
N J Baade
C P Barrett
A Eglezos
D J Owen
150,000
150,000
100,000
150,000
250,000
250,000
250,000
250,000
(50,000)
(50,000)
–
(50,000)
J R Paull
1 The value of rights that were forfeited during the year was $98,550.
# Other changes during the year relate to the forfeiture of rights.
150,000
300,000
(50,000)
–
–
–
–
–
350,000
350,000
350,000
350,000
400,000
–
–
–
–
–
350,000
350,000
350,000
350,000
400,000
The value at vesting date of performance rights that vested during 2015 was $460,450 (2014: $370,960).
No other shares were issued on the vesting of performance rights in the current year provided as remuneration to any of the directors or the key
management personnel of the group.
Starpharma Holdings Limited Annual Report 2015
32
Starpharma Holdings Limited Annual Report 2015
32
Directors’ Report Remuneration Report
The terms and conditions of the grant of performance rights to the directors or the key management personnel of the group in the current year or
which impact future years are as follows:
Grant date
Vesting Date
Holding Lock
Expiry date
Number
of Rights
Performance
Measure
Value per right
at grant date
16 September 2013
16 September 2015
16 September 2016
500,000
Achievement of KPIs
22 November 2013
30 September 2014
30 September 2015
500,000
Achievement of KPIs
22 November 2013
22 November 2015
22 November 2016
50,000
Continued Employment
22 November 2013
22 November 2015
22 November 2016
50,000
Index TSR
22 November 2013
22 November 2015
22 November 2016
100,000
Index TSR +10%
22 November 2013
22 November 2016
22 November 2017
100,000
Continued Employment
22 November 2013
22 November 2016
22 November 2017
50,000
Index TSR
22 November 2013
22 November 2016
22 November 2017
100,000
Index TSR +10%
20 November 2014
30 September 2015
30 September 2016
300,000
Achievement of KPIs
20 November 2014
30 September 2016
30 September 2017
450,000
Achievement of KPIs
20 November 2014
30 September 2017
30 September 2018
210,000
Achievement of KPIs
20 November 2014
30 September 2017
30 September 2018
90,000
TSR
20 November 2014
30 September 2017
20 November 2014
30 September 2017
30 January 2015
30 September 2016
30 January 2015
30 September 2017
30 January 2015
30 September 2017
30 January 2015
30 September 2018
30 January 2015
30 September 2018
Information of the performance measures:
–
–
-
-
-
-
-
315,000
Achievement of KPIs
135,000
TSR
455,000
Achievement of KPIs
386,750
Achievement of KPIs
68,250
TSR
331,500
Achievement of KPIs
58,500
TSR
$0.89
$0.85
$0.85
$0.55
$0.54
$0.85
$0.58
$0.55
$0.52
$0.52
$0.52
$0.44
$0.52
$0.44
$0.46
$0.46
$0.25
$0.46
$0.27
% vested
Nil
93
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Achievement of KPIs:
The achievement of certain key business performance indicators linked to matters which the Board believes are
key drivers of shareholder value.
Continued Employment: Employee remains employed by the company until the vesting date.
Index TSR:
If the company achieves a total shareholder return (TSR), relative to the S&P/ASX 300 Accumulation Index (Index)
for the vesting period, which is equal to or greater than the Index.
Index TSR + 10%:
If the company achieves a total shareholder return (TSR), relative to the S&P/ASX 300 Accumulation Index (Index)
for the vesting period, which is which is 10% or more greater than the Index.
TSR:
Annualised Starpharma TSR compared with the
S&P/ASX300 Index
Percentage of Rights subject to the TSR performance
condition which vest
Below Index
Equal to Index
0%
50%
Between Index and Index + 9.99%
Pro rata basis from 51% to 99%
At least 10% above Index
100%
- end of remuneration report -
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
33
33
Directors’ Report
Shares under rights
Insurance of officers
Unissued ordinary shares of Starpharma Holdings Limited under
the Employee Performance Rights Plan at the date of this report
are as follows:
Grant
date Vesting date
Holding lock
cessation
date
Number of
rights
granted
Balance
of rights
at date of
report
30 Nov 2012 30 Nov 2015 30 Nov 2016
360,000 360,000
During the financial year, Starpharma Holdings Limited paid a
premium to insure the directors and executive officers of the
company and related bodies corporate, against certain liabilities
and expenses.
In accordance with normal commercial practice, the disclosure of
the amount of premium payable, and the nature of the liabilities
and expenses covered by the policy, is prohibited by a
confidentiality clause in the contract
16 Sep 2013 16 Sep 2015 16 Sep 2016 1,261,600 1,061,600
.
Audit & non audit services
22 Nov 2013 22 Nov 2015 22 Nov 2016
200,000 200,000
22 Nov 2013 22 Nov 2016 22 Nov 2017
250,000 250,000
20 Nov 2014 30 Sep 2015 30 Sep 2016
300,000 300,000
20 Nov 2014 30 Sep 2016 30 Sep 2017
450,000 450,000
20 Nov 2014 30 Sep 2017 30 Sep 2018
300,000 300,000
20 Nov 2014 30 Sep 2017
N/A
450,000 450,000
30 Jan 2015 30 Sep 2016
N/A 1,084,125 1,084,125
30 Jan 2015 30 Sep 2017
N/A 1,084,125 1,084,125
30 Jan 2015 30 Sep 2018
N/A
929,250 929,250
Performance rights and the resultant shares are granted for no
consideration.
Shares issued on the vesting of rights
The following ordinary shares of Starpharma Holdings Limited
were issued during the year to the date of this report on the vesting
of performance rights granted under the Employee Performance
Rights Plan. The shares are issued for nil consideration.
Date rights granted
Issue price of shares
(Exercise price of
right)
Number of shares
issued
13 Sep 2012
30 Nov 2012
16 Sep 2013
22 Nov 2013
$ -
$ -
$ -
$ -
481,400
50,000
22,000
465,000
The company may decide to employ the auditor on assignments
additional to their statutory audit duties where the auditor’s
expertise and experience with the company and/or the group are
important. Details of the amounts paid or payable to the auditor
(PricewaterhouseCoopers) for audit services provided during the
year is set out below. There were no non-audit services provided
by the auditor during the financial year.
During the year the following fees were paid or payable for
services provided by the auditor (PricewaterhouseCoopers) of the
company, its related practices and non-related audit firms.
Assurance Services
Audit or review of financial reports of the
entity or any entity in the group under the
Corporations Act 2001
2015
$
2014
$
94,860
92,106
No other assurance services, taxation or advisory services have
been provided by the auditor in either the current or prior year.
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act 2001 is set out on
page 35.
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 directors’ report. Amounts in
the directors’ report have been rounded off in accordance with that
Class Order to the nearest thousand dollars, or in certain cases,
the nearest dollar.
Auditor
PricewaterhouseCoopers continues in office in accordance with
section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the
Directors.
Rob Thomas AM
Chairman
Melbourne, 21 August 2015
34
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
34
Auditor’s Independence Declaration
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Starpharma Holdings Limited for the year ended 30 June 2015, I
declare that to the best of my knowledge and belief, there have been:
As lead auditor for the audit of Starpharma Holdings Limited for the year ended 30 June 2015, I
declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
b) no contraventions of any applicable code of professional conduct in relation to the audit.
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Starpharma Holdings Limited and the entities it controlled during the
period.
This declaration is in respect of Starpharma Holdings Limited and the entities it controlled during the
period.
Jon Roberts
Partner
Jon Roberts
PricewaterhouseCoopers
Partner
PricewaterhouseCoopers
Melbourne
21 August 2015
Melbourne
21 August 2015
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
PricewaterhouseCoopers, ABN 52 780 433 757
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
Liability limited by a scheme approved under Professional Standards Legislation.
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Starpharma Holdings Limited Annual Report 2015
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35
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 (3rd Edition) (“the 3rd Edition 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 3rd Edition CGC
Recommendations. All of these practices, unless otherwise stated,
were in place for the entire financial year 2015. 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.
Principle 1: Lay solid foundations for management and oversight
Relationship between the Board and management
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.
1.1 Responsibilities of the Board
The responsibilities of the Board include oversight, accountability
and approval in relation to certain:
-
-
-
-
-
-
Strategic issues
Shareholding items
Financial items
Expenditure items
Audit related items
Board and senior management oversight and delegation
Other Board responsibilities include:
-
-
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; and
reporting to shareholders.
-
Further details regarding the responsibilities of the Board are
detailed in the board charter. The Board’s conduct is governed by
the company’s constitution. Both documents are available at
www.starpharma.com/corporate_governance
1.2 Director appointment and election
Before appointing a director or putting forward a candidate to
shareholders for election, the Remuneration and Nomination
Committee will undertake appropriate background checks. The
Remuneration and Nomination Committee will also provide all
material information which is relevant to whether or not a person
should be elected or re-elected as a director to the Board for
provision to shareholders (including in relation to independence
and a recommendation regarding support or otherwise to the
candidate’s appointment or election).
The commitments of non-executive directors are considered by the
Remuneration and Nomination Committee prior to their
appointment to the Board and are reviewed regularly. 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.
initiative and on an exceptional basis, may exercise discretion to
extend this maximum term where it considers that such an
extension would benefit the company.
In 2014, the Board exercised its discretion to extend the maximum
term in the case of Dr Peter Jenkins given the change of Chairman
which took place and Dr Jenkins’ detailed knowledge of the
company. Dr Peter Jenkins will retire as a director of the company
at the close of the 2015 AGM and will not stand for re-election.
No new directors were appointed to the Board during FY15.
1.3 Written agreements with Directors and Senior Executives
New directors receive a letter of appointment, which outlines the
company’s expectations of the director in relation to their
participation, time commitments and compliance with policies and
regulatory requirements.
Senior executives and all employees are required to sign
employment agreements which set out the key terms of their
employment. All roles have formal position descriptions.
1.4 Responsibilities of the Company Secretary
The Company Secretary supports the effective functioning of the
Board and its committees. The Company Secretary is accountable
directly to the Board, through the Chair, on all matters related to
the proper functioning of the Board. The specific responsibilities of
the Company Secretary are detailed in the board charter, which is
available at www.starpharma.com/corporate_governance
1.5 Diversity objectives and achievement
The company is committed to workplace diversity, and the Board
values the level of diversity already present within the organisation,
believing that continuing to promote diversity is in the best
interests of the company, its employees and its shareholders.
In March 2015, the Board revised its Diversity Policy, which
operates alongside the Code of Conduct and Anti-Discrimination,
Bullying and Harassment policies, providing a framework for
Starpharma to achieve a number of diversity objectives. The
Diversity Policy is available at
www.starpharma.com/corporate_governance
Independent of external corporate governance initiatives, the
company has embraced a culture of inclusion and equal
opportunity across diversity areas recognised as potentially
impacting upon equality in the workplace, with a focus on gender
but without limiting other aspects of diversity.
The company recognises the corporate benefits of diversity of its
workforce and the Board, and realises the importance of being
able to attract, retain and motivate employees from the widest
possible pool of available talent.
The company’s constitution specifies that all non-executive
directors must retire from office no later than three years or the
third annual general meeting (AGM) following their last election
(whichever is longer), and that an election of directors must take
place each year. Any director, excluding the Managing Director
(CEO) who has been appointed during the year must stand for
election at the next AGM.
In accordance with the Diversity Policy, the Board has established
measurable objectives for achieving gender diversity and has
conducted an assessment of the objectives and progress in
achieving them.
Objectives set by the Board for the 2015 financial year, and
progress against these objectives is set out below:
It is anticipated that non-executive directors would generally hold
office for up to ten years, and shall serve a maximum of fifteen
years from date of first election by shareholders. The Board, on its
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36
Corporate Governance Statement
Objective
Measurement
FY15 Performance
Female
participation/talent
pipeline
Achieve greater than 40% female participation
for direct reports to the CEO or senior
executives (CEO minus 2).
Actively support and encourage training,
networking and development opportunities for
high potential employees.
45% of CEO minus 2 positions are held by females.
Professional development opportunities and options that are
aligned with the company’s needs and the individual’s role
are considered for all employees as part of the company’s
annual performance review process. Investments in
formal/external development programs are made where
possible and appropriate and in FY15, 24 different
professional development programs were attended by
female employees across all levels of the organisation. The
company also supported participation of all female staff in a
biotech industry networking initiative, which included
presentations by industry role models.
Equal opportunity
employer
Inclusion of female candidates in recruitment
process for each role with female applicants,
including for Board appointments.
100% of recruitment processes considered female
candidates. Of the positions advertised externally in FY15,
half were filled with female candidates.
Pay parity
Consistent and merit-based selection criteria
and recruitment processes used when
choosing successful candidates in all cases.
Ensure no significant pay difference for
individuals in similar roles, based on gender.
Flexible working
arrangements
Employees working under flexible working
arrangements (including part time).
Granting a majority of requests for flexible
work arrangements for family responsibilities.
100% of successful candidates were selected on merit-
based criteria after being put through a selection process.
Analysis was completed of pre- and post-remuneration
review “remuneration differentials to benchmarks” by gender,
and confirmed there were no significant gender differences
in remuneration relative to role benchmarks.
17% of employees work under flexible working
arrangements. Specifically, 33% of our female employees
work under flexible working arrangements (including part
time).
100% of requests for flexible work arrangements were
granted.
Support a return to work
after parental leave
Target a return to work following primary care
parental leave of 75%.
There were no employees who were due to return from
primary care parental leave during FY15.
Approximately half of Starpharma’s employees are female,
maintaining a similar gender representation to that of previous
years. The table below sets out the proportion of female
employees in the whole organisation, in leadership/management
roles, in senior executive positions and on the Board at July 2015.
Whole
organisation
(staff and
Board)
39
19
49%
Total
Female
% female
Leadership/
management
roles
Senior
executive
Board
19
8
42%
8
3
38%
6
2
33%
It is noted that Starpharma currently has a high level of both
gender and general diversity, however given the relatively small
number of total employees, a change of one or few employees
may have a significant impact on the company’s performance in
respect of the measurable diversity objectives.
Principle 2: Structure the Board to add value
2.1 Board committees
The Board has established two 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.
The committees established by the Board are:
-
-
Remuneration and Nomination Committee; and
Audit and Risk Committee.
Starpharma is also proud of the ethnic diversity of our employee
population, with 38% of all employees born outside Australia in 9
different countries.
1.6 Board, committee and director performance
The performance of the Board and its committees are reviewed
each year by the Chairman based on the completion of a formal
feedback questionnaire by each director. The summarised results
are then reported back to the Board. This performance evaluation
took place in FY15.
1.7 CEO and senior executive performance
Performance assessments for senior executives took place during
the year. Performance review timing of executives is now aligned
and will take place around July each year in respect of the prior
financial year. The process for these assessments is described in
the remuneration report under the heading “Remuneration
governance” on page 19 of this report.
Each committee’s charter sets out its role, responsibilities,
composition and structure. The committee charters are reviewed
annually and are available at
www.starpharma.com/corporate_governance
Both committees report regularly to the Board and minutes of
committee meetings are provided to the Board.
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Corporate Governance Statement
2.1.1 Remuneration and Nomination Committee
The Remuneration and Nomination Committee is composed of
three independent non-executive directors. At the date of this
report the committee consisted of the following:
Ms Z Peach (Chairman)
Dr P J Jenkins
Mr R Thomas
Details of these directors’ qualifications and attendance at
committee meetings are set out in the directors’ report on pages
13 to 17.
independence and knowledge necessary to discharge its
responsibilities.
The Board considers that the following specific skills and
experience are critical to the success of the company:
-
-
-
-
-
-
-
-
Leadership in a relevant industry;
Pharmaceutical/product development experience;
Commercialisation of innovation experience;
Governance;
Strategy and risk management;
Financial acumen;
Health, safety & environment; and
Remuneration.
The charter of the Remuneration and Nomination Committee deals
with items, to the extent delegated by the Board, related to
reviewing and making recommendations to the Board in respect of
the following:
The Remuneration and Nomination Committee and the Board
have assessed the capabilities of the directors against the skills
and experience noted above, and considers that collectively the
Board has appropriate experience in each area.
-
-
-
-
-
-
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Board and director candidate identification,
appointments, elections, composition, independence,
tenure and succession;
Remuneration and incentive policies and practices
generally;
Remuneration packages and other terms of employment
for executive directors, other senior executives and non-
executive directors;
Diversity related items;
Board skills matrix;
Background checks for director candidates; and
Provision and oversight of induction and training and
development opportunities for directors.
The Remuneration and Nomination Committee charter is available
at www.starpharma.com/corporate_governance
2.1.2 Audit and Risk Committee
The company has established an Audit and Risk Committee
comprising three independent non-executive directors. At the date
of this report the committee consisted of the following:
Mr P R Turvey (Chairman)
Mr R B Thomas
Mr R A Hazleton
Details of these directors’ qualifications and attendance at
committee meetings are set out in the directors’ report on pages
13 to 17.
The members of the Audit and Risk Committee between them
have the financial, accounting and risk management
related/technical expertise, as well as a sufficient understanding of
the biotechnology industry to be able to discharge the committee’s
mandate effectively. The committee meets at least twice a year,
and has direct access to the company’s auditors.
The charter of the Audit and Risk Committee deals with items, to
the extent delegated by the Board, related to reviewing and
making recommendations to the Board in respect of the following:
-
-
-
-
-
Annual report, half-year financial report and financial
forecasts or guidance given to the market;
Systems of risk management and internal controls;
All aspects related to the external auditor;
Related party transactions; and
Insurance.
The Audit and Risk Committee charter is available at
www.starpharma.com/corporate_governance
2.2 Board skills
The Board considers that a diversity of skills, backgrounds,
knowledge, experience and gender is preferable in order to
effectively govern the business. The Board and the Remuneration
and Nomination Committee work to ensure that the Board
continues to have the right balance of skills, experience,
2.3 Board members
Details of the members of the Board, their experience,
qualifications, term of office and independence status are set out in
the directors’ report under the heading “Information on Directors”.
There are five non-executive directors, all 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 appropriate for the company and
conducive to effective discussion and efficient decision-making.
2.4 Directors’ independence
The board charter contains guidelines for assessing the materiality
of directors’ relationships that may affect their independence.
These guidelines were updated during the year based on changes
to the 3rd Edition CGC Recommendations. The board charter is
available at www.starpharma.com/corporate_governance
Under these guidelines the Board has determined that all non-
executive directors were independent at the date of this report.
The CEO is not considered independent as she holds an executive
role.
2.5 Chairman and Chief Executive Officer (CEO)
The current Chairman, Mr Rob Thomas, is an independent non-
executive director appointed in 2013 and Chairman in June 2014.
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 by the Board from time to time.
In accordance with current practice, the Board’s policy is for the
roles of Chairman and CEO to be undertaken by separate people.
2.6 Director induction and professional development
The Remuneration and Nomination Committee oversees, reviews
and make recommendations to the Board in relation to the
induction, training and development of non-executive directors, to
ensure they have access to appropriate learning and development
opportunities to develop and maintain the skills and knowledge
required to effectively perform in their role as a director.
The Board receives regular updates at board meetings and board
workshops which assist directors in keeping up to date with
relevant market and industry developments.
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Corporate Governance Statement
Principle 3: Act ethically and responsibly
3.1 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 suppliers, and with the
company. The code of conduct is reviewed periodically and was
Principle 4: Safeguard integrity in financial reporting
4.1 Audit and Risk Committee
The company has established an Audit and Risk Committee
consisting of three independent non-executive directors. Details
regarding composition, meetings and charter are set out in section
2.1 and 2.1.2 of this Corporate Governance Statement.
4.2 CEO and CFO Declarations for financial statements
Before the Audit and Risk Committee recommends, and the Board
approves, the company’s financial statements for the half year or
full year, the CEO and CFO are required to provide a declaration
that, in their opinion, the financial records of the entity have been
properly maintained and that the financial statements comply with
the appropriate accounting standards and give a true and fair view
of the financial position and performance of the entity and that the
opinion has been formed on the basis of a sound system of risk
management and internal control which is operating effectively.
These declarations have been provided by the CEO and CFO to
the Audit and Risk Committee and the Board in respect of the
Principle 5: Make timely and balanced disclosures
5.1. Continuous disclosure
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.
The Board has appointed the Company Secretary as the person
responsible for disclosure of information to the ASX. The CEO and
Company Secretary are responsible for ensuring that all
announcements made by Starpharma to the ASX are factual, do
not omit material information, and are expressed in a clear and
objective manner.
The policy also sets out the requirements for ensuring compliance
with the continuous disclosure requirements of the ASX Listing
Rules and overseeing and co-ordinating information disclosure to
Principle 6: Respect the rights of shareholders
6.1 Information on website
The company provides ready access to its shareholders and
members of the public to information about the company and its
governance on its website at www.starpharma.com
6.2 Communication with investors
The company recognises that shareholders may not be aware of
all company developments at all times, notwithstanding the release
of information to the ASX in accordance with the company’s
continuous disclosure policy and the law. In addition to ensuring
that all ASX announcements and company reports are available on
the company’s website as soon as possible following confirmation
by the ASX of receipt of the announcement, the company will send
to each shareholder who has so requested, either by post or email
to their nominated address, annual reports and company
newsletters.
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). The company’s website also has an option for
shareholders to register their email address for direct email
last updated during the year in consideration of the changes to the
3rd Edition CGC Recommendations. The code of conduct covers
employment practices, equal opportunity, harassment and bullying,
conflicts of interest, use of company assets, disclosure of
confidential information and whistleblowing. The code of conduct is
available at www.starpharma.com/corporate_governance
2015 half year financial statements and the 2015 full year financial
statements which are included in this annual report.
4.3 External auditors
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,
PricewaterhouseCoopers, 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 this financial year. An analysis of fees paid to
the external auditors is provided in note 18 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 attends each AGM and is
available to answer questions shareholders may have in relation to
the conduct of the audit and the preparation and conduct of the
Auditor’s Report.
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.
Except in exceptional circumstances, all ASX announcements
(other than standard compliance announcements or newsletters
with no new material information) require the approval of the
Chairman, or another non-executive director in his absence.
A copy of the policy is available on the company’s website at
www.starpharma.com/corporate_governance
updates which the company may send for material company
matters which have previously been released to ASX and OTCQX.
6.3 Participation at Annual General Meetings
The Annual General Meeting (AGM) is generally held in November
each year. The Notice of Meeting and related Explanatory Notes
are distributed to shareholders in accordance with the
requirements of the Corporations Act.
The AGM provides an opportunity for the Board to communicate
with shareholders through the Chairman’s address and the CEO’s
presentation.
Shareholders are given the opportunity, through the Chairman, to
ask general questions of the Board. Shareholders who are unable
to attend the meeting in person may submit written questions
together with their proxy form, to be put to the meeting by the
Chairman. The external auditor attends each AGM and is available
to answer questions shareholders may have in relation to the
conduct of the audit and the preparation and conduct of the
Auditor’s Report.
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39
Corporate Governance Statement
6.4 Electronic communication with the company and its share
registry
Shareholders and other interested parties are able to subscribe to
Starpharma news via the company’s website or to certain
information via the company’s share registry. Significant ASX
announcements and financial reports are emailed to subscribers
promptly following confirmation by the ASX of receipt of the
relevant report or announcement.
Principle 7: Recognise and manage risk
Shareholders are also able to contact the company or submit
questions or comments to the company’s investor relations email
address, and where appropriate, a response will be provided. No
price sensitive information will be provided unless previously
released to the ASX.
7.1. Audit and Risk Committee
The company has established an Audit and Risk Committee
consisting of three independent non-executive directors. Details
regarding composition, meetings and charter are set out in section
2.1 and 2.1.2 of this Corporate Governance Statement.
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. A
summary of the policy is available on the company’s website at
www.starpharma.com/corporate_governance
7.2 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’s
culture and in the way activities are carried out at all levels of 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 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 product liability, business continuity and
disaster recovery, reputation, intellectual property, product
development and clinical trials. Adherence to the code of conduct
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, sets out policies for the oversight of material
Principle 8: Remunerate fairly and responsible
8.1 Remuneration and Nomination Committee
The company has established a Remuneration and Nomination
Committee consisting of three independent non-executive
directors. Details regarding composition, meetings and charter are
set out in sections 2.1 and 2.1.1 of this Corporate Governance
Statement.
8.2 Non-executive and executive remuneration
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 role has a position description which is reviewed by the CEO
(or the committee in the case of the CEO) and relevant executive.
Further information on directors’ and executives’ remuneration,
including principles used to determine remuneration, is set out in
the remuneration report on pages 18 to 33.
The CEO and CFO & Company Secretary are responsible to the
Board through the Audit and Risk Committee 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.
7.3 Internal audit function
Given the size of the company, there is no internal audit function.
As detailed in section 7.2, detailed risk assessments are carried
out in respect of a wide range of items, and where appropriate and
possible, risk mitigation strategies are implemented to minimise
the chance of the risks occurring, and to minimise any impact
where a risk eventuates.
7.4 Sustainability risks and management
The company’s key economic, environmental and social
sustainability risks are outlined on page 16 of the directors’ report
under the heading ‘Material Business Risks’.
In addition to the risk assessment and management strategies
outlined in section 7.2 and set out in the Corporate & Social
Responsibility Report on page 12 of the annual report, the
company utilises a number of risk mitigation strategies including
employing qualified staff and consultants, external advisors,
maintaining a portfolio/pipeline of products and applications, and
holding insurance in a number of areas.
Executive directors and senior management receive a mix of fixed
and variable pay, comprising both cash and equity incentives.
Non-executive directors receive fees only and do not receive
bonus payments or equity incentives. Non-executive directors do
not receive termination/retirement benefits, whereas executive
directors and senior management are entitled to termination
payments in accordance with the terms of their contracts (detailed
on page 31).
8.3 Prohibition on hedging of unvested/restricted entitlements
Employees are prohibited from entering into transactions in
products which limit the economic risk of any equity granted under
an employee incentive scheme which are unvested or subject to a
disposal restriction. Details in relation to this policy are contained
in the securities dealing policy which is available at
www.starpharma.com/corporate_governance
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40
Annual Financial Report for the year ended 30 June 2015
Contents
•
•
•
•
•
•
•
•
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Directors’ Declaration
Independent Audit Report to the Members
42
43
44
45
46
47
72
73
These financial statements are the consolidated financial statements for the consolidated entity consisting of Starpharma Holdings Limited and
its subsidiaries. The financial statements are presented in 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
4-6 Southampton Crescent
Abbotsford, Victoria, 3067
Australia
A description of the nature of the group’s operations and its principal activities is included in the CEO’s Report on pages 3 to 11 and in the
operating and financial review in the directors’ report on pages 14 to 17, which are not part of this financial report.
The financial statements were authorised for issue by the directors on 21 August 2015. The directors have the power to amend and reissue the
financial report.
Through the use of the internet, Starpharma ensures that corporate reporting is timely and complete. All recent press releases, financial reports
and other information are available on its website: www.starpharma.com
Starpharma Holdings Limited Annual Report 2015
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41
41
Consolidated Income Statement for the year ended 30 June 2015
Revenue from continuing operations
Other income
Administration expense
Research and development expense
Finance costs
Loss before income tax
Income tax expense
Loss from continuing operations attributable to members of
Starpharma Holdings Limited
Loss per share for loss from continuing operations attributable to
the ordinary equity holders of the company
Basic loss per share
Diluted loss per share
Notes
5
5
6
6
7
24
24
30 June 2015
30 June 2014
$'000
1,693
4
(4,392)
(16,250)
(5)
(18,950)
-
$'000
1,246
7
(4,890)
(10,991)
(7)
(14,635)
-
(18,950)
(14,635)
$
($0.06)
($0.06)
$
($0.05)
($0.05)
The above consolidated income statement should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2015
42
Starpharma Holdings Limited Annual Report 2015
42
Consolidated Statement of Comprehensive Income for the year ended 30 June 2015
Loss for the year
Other comprehensive income (loss)
Items that may be reclassified to profit or loss
Notes
30 June 2015
30 June 2014
$'000
(18,950)
$'000
(14,635)
Foreign exchange differences on translation of foreign operations
15
Other comprehensive income (loss)
Total comprehensive income (loss) for the year attributable to
members of Starpharma Holdings Limited
1,626
1,626
(110)
(110)
(17,324)
(14,745)
The above statement of consolidated comprehensive income should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
43
43
Consolidated Balance Sheet as at 30 June 2015
30 June 2015
30 June 2014
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Property, plant and equipment
Intangible assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Provisions (employee entitlements)
Deferred income
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions (employee entitlements)
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
Notes
8
9
10
11
12
13
13
14
15
16
$'000
30,848
4,232
35,080
910
8,393
9,303
44,383
5,933
30
732
74
6,769
18
38
56
6,825
37,558
$'000
24,028
4,570
28,598
509
7,755
8,264
36,862
3,114
27
659
44
3,844
48
19
67
3,911
32,951
160,884
7,874
(131,200)
37,558
140,349
4,852
(112,250)
32,951
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2015
44
Starpharma Holdings Limited Annual Report 2015
44
Consolidated Statement of Changes in Equity for the year ended 30 June 2015
Contributed
capital
Reserves
Accumulated
losses
Notes
$'000
140,081
$'000
3,502
Balance at 1 July 2013
Loss for the year
Other comprehensive income
Foreign exchange differences on translation of
foreign operations
Total comprehensive income (loss) for the year
Transactions with owners, recorded directly in equity
Contributions of equity, net of transaction costs
Employee share plans
Employee performance rights plan
Total transactions with owners
Balance at 30 June 2014
Loss for the year
Other comprehensive income
Foreign exchange differences on translation of
foreign operations
Total comprehensive income (loss) for the year
Transactions with owners, recorded directly in equity
Contributions of equity, net of transaction costs
Employee share plans
Employee performance rights plan
Total transactions with owners
Balance at 30 June 2015
15
14
14
15
15
14
14
15
Total
equity
$'000
45,968
(14,635)
$'000
(97,615)
(14,635)
-
-
-
235
33
-
268
-
-
-
20,503
32
-
20,535
(110)
(110)
-
-
1,460
1,460
-
(110)
(14,635)
(14,745)
-
-
-
-
235
33
1,460
1,728
140,349
4,852
(112,250)
32,951
-
(18,950)
(18,950)
1,626
1,626
-
-
1,396
1,396
-
1,626
(18,950)
(17,324)
-
-
-
-
20,503
32
1,396
21,931
37,558
160,884
7,874
(131,200)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
45
45
Consolidated Statement of Cash Flows for the year ended 30 June 2015
Notes
$'000
$'000
30 June 2015
30 June 2014
Cash Flows from Operating Activities
Receipts from trade and other debtors (inclusive of GST)
Grant income and R&D tax incentives (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Net cash outflows from operating activities
23
Cash Flow from Investing Activities
Payments for property, plant and equipment
Net cash outflows from investing activities
Cash Flow from Financing Activities
Proceeds from issue of shares
Share issue transaction costs
Lease repayments
Net cash inflows from financing activities
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
487
4,215
(19,282)
970
(5)
(13,615)
(653)
(653)
21,419
(916)
(32)
20,471
6,203
24,028
617
30,848
387
4,707
(16,108)
1,208
(7)
(9,813)
(251)
(251)
235
-
(32)
203
(9,861)
33,840
49
24,028
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2015
46
Starpharma Holdings Limited Annual Report 2015
46
Notes to the Consolidated Financial Statements 30 June 2015
Contents
1.
2.
3.
4.
5.
6.
7.
8.
9.
Significant Accounting Policies
Financial Risk Management
Critical Accounting Estimates and Judgements
Segment Information
Revenue and Other Income
Expenses
Income Tax Expense
Current Assets – Cash and Cash Equivalents
Current Assets – Trade and Other Receivables
10.
Non-Current Assets – Property, Plant and Equipment
11.
Non-Current Assets – Intangible Assets
12.
Current Liabilities – Trade and Other Payables
13.
Current and Non-Current Liabilities – Borrowings
14.
Contributed Equity
15.
Reserves
16.
Accumulated Losses
17.
Related Party Transactions
18.
Remuneration of Auditors
19.
Events Occurring After the Balance Sheet Date
20.
Commitments
21.
Subsidiaries
22.
Contingencies
23.
Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities
24.
Earnings Per Share
25.
Share-Based Payments
26.
Parent Entity Financial Information
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
48
52
54
55
55
55
55
57
58
59
60
61
61
62
63
63
64
64
64
65
66
66
66
66
67
71
47
47
Notes to the Consolidated Financial Statements 30 June 2015
(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 2015 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 entities (including structured entities) over
which the group has control. The group controls an entity when the
group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those
returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the group. They are deconsolidated from the date
that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the group.
(c) Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Chief Executive Officer.
(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 profit or loss.
Foreign exchange gains and losses that relate to borrowings are
presented in the income statement, within finance costs. All other
foreign exchange gains and losses are presented in the income
statement on a net basis within other income or other expenses.
1. Significant Accounting Policies
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all the years presented,
unless otherwise stated. The financial statements are for the
consolidated entity consisting of Starpharma Holdings Limited and
its subsidiaries (the group).
(a) Basis of preparation
These general purpose financial statements have been prepared
in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards
Board and the Corporations Act 2001. Starpharma Holdings
Limited is a for-profit entity for the purpose of preparing the
financial statements.
(i) Compliance with IFRS
The consolidated financial statements of the group also comply
with International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB).
(ii) New and amended standards adopted by the group
The group has applied the following standards and amendments
for first time for the annual reporting period commencing 1 July
2014:
•
AASB 2013-3 Amendments to AASB 136 – Recoverable
Amount Disclosures for Non-Financial Assets
AASB 2013-4 Amendments to Australian Accounting
Standards – Novation of Derivatives and Continuation of
Hedge Accounting
Interpretation 21 Accounting for Levies
AASB 2014-1 Amendments to Australian Accounting
Standards
•
•
•
None of the new and amended standards that are mandatory for
the first time for the financial year beginning 1 July 2014 affected
any of the amounts recognised in the current period or any prior
period and are not likely to affect future periods.
(iii) Early adoption of standards
The group has not elected to apply any pronouncements before
their operative date in the annual reporting period beginning 1 July
2014.
(iv) 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.
(v) Critical accounting estimates
The preparation of financial statements 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.
(vi) Going Concern
For the year ended 30 June 2015, the consolidated entity has
incurred losses of $18,950,000 (2014: $14,635,000) and
experienced net cash outflows of $13,615,000 from operations
(2014: $9,813,000), as disclosed in the balance sheet and
statement of cash flows, respectively. The company is in the
development phase, and given the entity’s strategic plans, the
directors are satisfied regarding the availability of working capital
for the period up to at least August 2016. 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.
48
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
48
Notes to the Consolidated Financial Statements 30 June 2015
(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 and
statement of comprehensive income 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 in other
comprehensive income.
•
•
On consolidation, exchange differences arising from the translation
of any net investment in foreign entities, and of borrowings and
other financial instruments designated as hedges of such
investments, are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are treated as assets and liabilities of the foreign
operation 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
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 profit or loss over the period necessary to match them with the
costs that they are intended to compensate.
(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 other comprehensive income or equity are
also recognised directly in other comprehensive income or equity,
respectively. Starpharma Holdings Limited and its wholly-owned
Australian controlled entities are not consolidated for tax purposes.
(i) Investment allowances and similar tax incentives
Companies within the group may be entitled to claim special tax
deductions for investments in qualifying assets or in relation to
qualifying expenditure (eg. investment allowances). The group
accounts for such allowances as tax credits, which means that the
allowance reduces income tax payable and current tax expense. A
deferred tax asset is recognised for unclaimed tax credits that are
carried forward as deferred tax assets.
(h) Leases
Leases of property, plant and equipment where the group has
substantially all the risks and rewards of ownership are classified
as finance leases (note 20). 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 short-term and long term payables. Each lease
payment is allocated between the liability and finance cost. The
finance cost is charged to profit or loss 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 property, plant and
equipment acquired under finance leases is depreciated over the
asset’s useful life or over the shorter of the asset’s useful life and
the lease term if there is no reasonable certainty that the group will
obtain ownership at the end of the lease term. Leases in which a
significant portion of the risks and rewards of ownership are not
transferred to the group as lessee are classified as operating
leases (note 20). Payments made under operating leases (net of
any incentives received from the lessor) are charged to profit or
loss on a straight-line basis over the period of the lease. Lease
income from operating leases where the group is a lessor is
recognised in income on a straight-line basis over the lease term.
(i) Impairment of assets
Goodwill and intangible assets that have an indefinite life are not
subject to amortisation. They are tested annually for impairment or
more frequently if events or changes in circumstances indicate that
they might be impaired. Other assets are tested 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 which are largely independent of the cash inflows from
other assets or groups of assets (cash generating units).
(j) Cash and cash equivalents
For the purpose of presentation in the statement of cash flows,
cash and cash equivalents include cash on hand, deposits held
with financial institutions, and other short-term, highly liquid
investments 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.
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
49
49
Notes to the Consolidated Financial Statements 30 June 2015
1. Significant Accounting Policies (continued)
(k) Trade Receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method, less provision for impairment. Trade receivables
are generally due for settlement within 30 to 60 days. They are
presented as current assets unless collection is not expected for
more than 12 months after reporting date. 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 90 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
profit or loss within administration expenses. When a trade
receivable for which an impairment allowance had been
recognised becomes uncollectable 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 profit or loss.
(l) Investments and other financial assets
(i) 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 period.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those with
maturities greater than 12 months after the reporting date which
are classified as non-current assets. Loans and receivables are
included in trade and other receivables (note 9) in the balance
sheet.
(m) 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. The carrying
amount of any component accounted for as a separate asset is
derecognised when replaced. All other repairs and maintenance
are charged to profit or loss 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 20 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. Gains
and losses on disposals are determined by comparing proceeds
with the carrying amount. These are included in profit or loss.
(n) Leasehold improvements
The cost of improvements to or on leasehold properties is
amortised over the unexpired period of the lease (being 3 years) or
the estimated useful life of the improvement to the group,
whichever is shorter.
(o) 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 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. The allocation is made
to those cash-generating units or groups of cash-generating units
that are expected to benefit from the business combination in
which goodwill arose.
(ii) Patents and licences
Costs associated with patents are charged to profit or loss 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 is up to 20
years.
(iii) Research and development
Research expenditure is recognised as an expense as incurred.
Costs incurred on development projects (relating to the application
of research findings or other knowledge to a plan or design for the
production of new or substantially improved products or services)
are recognised as intangible assets when it is probable that the
project will, after considering its commercial and technical
feasibility and adequate resources are available to complete
development, generate future economic benefits and its costs can
be measured reliably. The expenditure capitalised comprises all
directly attributable costs, including costs of materials, services,
direct labour and an appropriate proportion of overheads. Other
development expenditures that do not meet these criteria are
recognised as an expense as incurred. Development costs
previously recognised as an expense are not recognised as an
asset in a subsequent period. Capitalised development costs are
recorded as intangible assets and amortised from the point at
which the asset is ready for use on a straight-line basis over its
useful life. To date no development costs have been capitalised.
(p) Trade and other payables
These amounts represent liabilities for goods and services
provided to the group prior to the end of the financial year which
are unpaid. The amounts are unsecured and are usually paid
within 30 to 45 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due within 12
months from the reporting date.
(q) 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
profit or loss 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 reporting period.
50
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Starpharma Holdings Limited Annual Report 2015
50
Notes to the Consolidated Financial Statements 30 June 2015
(r) Provisions
Provisions for legal claims, service claims and make good
obligations are recognised when the group has a present legal or
constructive obligation as a result of past events, and 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 of 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.
(s) Employee benefits
(i) Short-term obligations
Liabilities for wages and salaries, including non-monetary benefits,
and annual leave expected to be settled within 12 months after the
end of the period in which the employees render the related
service are recognised in respect of employees’ services up to the
period and are measured at the amounts expected to be paid
when the liabilities are settled. The liability for annual leave and
accumulating personal leave is recognised in the provision for
employee benefits. All other short-term employee benefit
obligations are presented as payables.
(ii) Other long-term employee benefit obligations
The liability for long service leave and annual leave which is not
expected to be settled within 12 months after the end of the period
in which the employees render the related services 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 end of the reporting
period using the projected unit credit method. Consideration is
given to expected future wage and salary levels, experience of
employee departures and periods of service. Expected future
payments are discounted using market yields at the end of the
reporting period on government bonds with terms to maturity and
currency that match, as closely as possible, the estimated future
cash outflows. The obligations are presented as current liabilities
in the balance sheet if the entity does not have an unconditional
right to defer settlements for at least twelve months after the
reporting date, regardless of when the actual settlements are
expected to occur.
(iii) Superannuation and Pension Benefits
Group companies make the statutory superannuation guarantee
contribution in respect of each employee to their nominated
complying superannuation or pension fund. In certain
circumstances pursuant to an employee’s employment contract the
group companies may also be required to make additional
superannuation or pension contributions and/or agree to make
salary sacrifice superannuation or pension 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 or pension plans
are recognised as an expense as they become payable. Prepaid
contributions are recognised as an asset to the extent that a cash
refund or reduction in future payments is available.
(iv) Share-based payments
Share-based compensation benefits are offered to the directors
and employees via an Employee Performance Rights Plan, an
Employee Share Plan ($1,000 Plan), and previously via the
Starpharma Holdings Limited Employee Share Option Plan
(“SPLAM”). Information relating to these plans is set out in note 25
and in the remuneration report under the directors’ report.
The fair value of options and performance rights granted 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
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
unconditionally entitled to the options or rights. The fair value at
grant date is determined using a Black-Scholes or
binomial/trinomial model (or variant of, as appropriate) that takes
into account any exercise price, the term, the vesting and
performance criteria, the impact of dilution, the non-tradeable
nature of the option or share right, 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. The fair
value 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 or share rights that are expected to become exercisable.
At each balance sheet date, the entity revises its estimate of the
number of options or share rights 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.
Under the Employee Share Plan ($1,000 Plan) shares are issued
to employees for no cash consideration and vest immediately on
grant. On this date, the market value of the shares issued is
recognised as an employee benefits expense with a corresponding
increase in equity.
(v) 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.
(vi) 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 the end of the reporting period are discounted to
present value.
(t) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares, performance rights 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, performance rights or options, for the acquisition of a
business, are not included in the cost of the acquisition as part of
the purchase consideration.
(u) 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 reporting period but not
distributed at the end of the reporting period.
(v) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to owners 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 and excluding treasury shares.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the weighted
average number of additional ordinary shares that would have
been outstanding assuming the conversion of all dilutive potential
ordinary shares.
51
51
Notes to the Consolidated Financial Statements 30 June 2015
1. Significant Accounting Policies (continued)
(w) 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 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 flows.
(x) 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 statements.
Amounts in the financial statements have been rounded off in
accordance with that Class Order to the nearest thousand dollars,
or in certain cases, the nearest dollar.
(y) New accounting standards and interpretations
Certain new accounting standards and interpretations have been
published that are not mandatory for the 30 June 2015 reporting
period. The group’s assessment of the impact of these new
standards and interpretations is set out below.
(i) AASB 9 Financial Instruments addresses the classification,
measurement and derecognition of financial assets and financial
liabilities. The standard is not applicable until 1 January 2018 but is
available for early adoption.
There will be no impact on the group’s accounting for financial
liabilities, as the new requirements only affect the accounting for
financial liabilities that are designated at fair value through profit or
loss and the group does not have any such liabilities. The
derecognition rules have been transferred from AASB 139
Financial Instruments: Recognition and Measurement and have
not been changed. The group has not yet decided when to adopt
AASB 9.
2. Financial Risk Management
The group’s activities expose it to a variety of financial risks;
including market risk, credit risk and liquidity risk. The group’s
overall risk management program focuses on the unpredictability
of financial markets and seeks to minimise potential adverse
effects on the financial performance of the group. The Chief
Executive Officer, and Chief Financial Officer & Company
Secretary, under the guidance of the Audit and Risk Committee
and 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
Cash and cash equivalents
Trade and other receivables
Trade and other payables
(ii) AASB 15 Revenue from Contracts with Customers will replace
AASB 118 which covers contracts for goods and services and
AASB 111 which covers construction contracts. The new standard
is based on the principal that revenue is recognised when control
of a good or service transfers to a customer – so the notion of
control replaces the existing notion of risks and rewards. The
standard is not applicable until 1 January 2018 but is available for
early adoption.
Management is currently assessing the impact of AASB 15 on the
measurement and recognition of revenue from existing and future
contractual arrangements. The group has not yet decided when to
adopt AASB 15.
There are no other standards that are not yet effective and that are
expected to have a material impact on the entity in the current or
future reporting periods and on foreseeable future transactions.
(z) Parent entity financial information
The financial information for the parent entity, Starpharma
Holdings Limited, disclosed in note 26 has been prepared on the
same basis as the consolidated financial statements, except as set
out below.
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries, associates and joint venture entities
are accounted for at cost in the financial statements of Starpharma
Holdings Limited. Dividends received from associates are
recognised in the parent entity’s profit or loss when its right to
receive the dividend is established.
(ii) Share-based payments
The grant by the company of options and rights over its equity
instruments to the employees of subsidiary undertakings in the
group is treated as a capital contribution to that subsidiary
undertaking. The fair value of employee services received,
measured by reference to the grant date fair value, is recognised
over the vesting period as an increase to investment in subsidiary
undertakings, with a corresponding credit to equity.
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 using
the closing US exchange rate as at 30 June 2015 of $0.7680 was
as follows:
30 June 2015
US
30 June 2014
US
$’000
$’000
10,999
6
1
2,963
13
3
52
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
52
Notes to the Consolidated Financial Statements 30 June 2015
Group 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 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%
(1,303)
1,592
(285)
348
30 June 2015
$’000
30 June 2014
$’000
(ii) Cash Flow Interest Rate Risk
The group holds interest bearing assets and therefore the income and operating cash flows are exposed to market interest rates.
At the end of the reporting period, the group had the following term and at call deposits. Refer to note 8 for additional information.
Term Deposits and deposits at call
Group Sensitivity
30 June 2015
$’000
28,053
30 June 2014
$’000
22,559
At 30 June 2015, 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 $146,000 higher or lower (2014 - change of 50 bps: $113,000 higher/lower) due to either
higher or lower interest income from cash or cash equivalents.
(b) Credit risk
Credit risk is managed on a group basis. Credit risk arises from
cash and cash equivalents with banks and financial institutions, as
well as credit exposures from royalty and licensing agreements.
Credit risk for cash and deposits with banks and financial
institutions is managed by maximising deposits held under major
Australian and US banks. Other than government tax incentives,
third party receivables largely consist of research fees, royalty and
licensing receivables from leading, 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 group, 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 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.
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
53
53
Notes to the Consolidated Financial Statements 30 June 2015
3. Critical Accounting Estimates and Judgements
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that may have a financial impact on
the entity and that are believed to be reasonable under the
circumstances.
(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 is up to 20 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 their
previously estimated lives. The carrying value of intangible assets
at 30 June 2015 is $8,393,000 (2014: $7,755,000).
ii) Impairment of Goodwill
The group tests annually whether goodwill has suffered any
impairment in accordance with the accounting policy stated in
notes 1(i) and 1(o). 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 11 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 not recognised deferred tax assets or
liabilities, including from carried forward losses, due to the
realisation of such benefits being uncertain. The utilisation of tax
losses also depends on the ability of the entity to satisfy certain
tests at the time the losses are recouped.
iv) R&D Tax Incentives
The group’s research and development activities are eligible under
an Australian Government tax incentive for eligible expenditure
from 1 July 2011. Management has assessed these activities and
expenditure to determine which are likely to be eligible under the
incentive scheme. For the period to 30 June 2015 the group has
recorded a contra research and development expense of
$3,478,000 (2014: $4,222,000).
Late in the reporting period, ‘Tax and Superannuation Laws
Amendment (2015 Measures No. 3) Bill 2015’ was introduced into
Australian federal parliament to reduce by 1.5% the R&D Tax
Offset rate, effective from 1 July 2014. The Bill has progressed
through the Lower House and is currently awaiting debate in the
Senate. A similar rate reduction was earlier rejected by the Senate
in March 2015.
In accordance with AASB 112, tax assets should be measured at
the amount expected to be recovered from the taxation authorities,
using the tax rates (and tax laws) that have been enacted or
substantially enacted by the end of the reporting period.
Substantive enactment occurs when any future steps in the
enactment process will not change the outcome.
Management does not consider the R&D Tax Offset rate reduction
to be substantially enacted at the end of the reporting period due
the continued legislative debate in the parliament. The group has
therefore calculated the R&D tax incentive by applying the
currently legislated R&D Tax Offset rate of 45% to eligible
expenditure.
(b) Critical accounting judgements in applying accounting
policies
i) 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 judgement. In making these
judgements, 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.
54
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
54
Notes to the Consolidated Financial Statements 30 June 2015
4. Segment Information
The group has determined that on the basis of internal reporting and monitoring to the Chief Executive Officer, who is the chief operating
decision maker, the group operates in one business segment, being the discovery, development and commercialisation of dendrimers for
pharmaceutical, life science and other applications.
5. Revenue and Other Income
Revenue and other income
Royalty, customer & licence revenue
Interest revenue
Total revenue
Government grants
Total other income
Total revenue and other income
30 June 2015
$’000
30 June 2014
$’000
804
889
1,693
4
4
1,697
273
973
1,246
7
7
1,253
Total revenue and other income for the year was $1,697,000, an increase of $444,000 from the previous year, mainly due to higher revenue
from commercial partners of $531,000, offset by lower interest revenue earned on cash deposits of $84,000.
6. Expenses
Loss from continuing operations before income tax expense
includes the following items:
30 June 2015
$’000
30 June 2014
$’000
R&D tax incentive (contra expense)1
(3,478)
(4,222)
Depreciation
Amortisation
Rental expense on operating leases
Defined contribution superannuation expense
1 Refer to Note 3 a) iv) for further information.
7. Income Tax Expense
(a) Income tax expense/(credit)
Current Tax
Deferred Tax
Total income tax expense
Income tax expense is attributable to:
Profit from continuing operations
Profit from discontinued operations
Aggregate income tax credit
Deferred income tax credit (revenue) / expense included in income
tax credit comprises:
(Decrease) in deferred tax liabilities
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
250
971
564
466
153
943
434
437
30 June 2015
$’000
30 June 2014
$’000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
55
55
Notes to the Consolidated Financial Statements 30 June 2015
7. Income Tax Expense (continued)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax
Tax at the Australian tax rate of 30% (2015: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating
taxable income:
Eligible expenses claimed under R&D tax incentive
Amortisation of intangibles
Share-based payments
Unearned income
Sundry items
Difference in overseas tax rates
Previously unrecognised tax losses now recouped to reduce current
tax expense
Future income tax benefits not brought to account
Income tax expense
(c) Tax losses
Unused tax losses for which no deferred tax asset has been
recognised (as recovery is currently not probable)
Potential tax benefit
(d) 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
(e) Deferred tax liabilities
Deferred tax liabilities comprises temporary differences attributable to:
Intangibles
Sundry items
Total deferred tax liabilities
Set-off of deferred tax liabilities pursuant to set-off provisions
Net deferred tax liabilities
Deferred tax liabilities expected to be settled within 12 months
Deferred tax liabilities expected to be settled after 12 months
30 June 2015
$’000
30 June 2014
$’000
(18,950)
(5,685)
(14,635)
(4,390)
1,275
172
428
33
112
(132)
(77)
3,874
–
87,440
26,364
9,599
2,662
1,575
420
1,995
(1,995)
–
420
1,575
1,995
1,503
174
448
50
24
29
(5)
2,167
–
72,641
21,874
26,265
7,819
1,458
464
1,922
(1,922)
–
464
1,458
1,922
Deferred tax assets and deferred tax liabilities have been set off as
there is a legally recognised right to set off current tax assets and
liabilities, and the deferred tax assets and liabilities relate to
income taxes levied by the same taxation authority. Deferred tax
assets mainly comprises of temporary differences attributable to
tax losses.
Potential future income tax benefits attributable to tax losses
carried forward have not been brought to account at 30 June 2015
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 is making an assessment as to the
satisfaction of deductibility conditions at 30 June 2015 which it
believes will be satisfied.
56
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
56
Notes to the Consolidated Financial Statements 30 June 2015
8. Current Assets – Cash and Cash Equivalents
Cash at bank and on hand
Term Deposits and deposits at call
Cash at bank and on hand
The cash is bearing floating interest rates based on current
bank rates.
Term deposits and deposits at call
The term deposits have maturities of 3 months or less. Funds in
deposits at call allow the group to withdraw funds on demand.
30 June 2015
$’000
30 June 2014
$’000
2,795
28,053
30,848
1,469
22,559
24,028
Cash not available
There is $743,000 (2014: $415,023) of cash not available for use
due to restrictions associated with a bank guarantee on the
premises lease, other restrictions for finance lease and credit card
facilities; all of which are guaranteed by term deposits.
Interest rate risk
With the exception of loans to controlled entities, current
receivables are non-interest bearing.
30 June 2015
Floating
Interest
rate
Notes
$’000
Financial Assets
Fixed interest maturing
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
Contractual
Total
$’000
cash
flows
Cash & deposits
Receivables
8
9
16,225
12,943
–
–
16,225
12,943
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,680
30,848
N/A
4,232
4,232
4,232
5,912
35,080
4,232
Weighted average
interest rate
Financial Liabilities
Payables
Borrowings
12
13
Weighted average
interest rate
0.4%
2.9%
–%
–%
–%
–%
–%
–%
–
–
–
–
30
30
–
18
18
–
–
–
–
–
–
–
–
–
–
–
–
5,933
5,933
5,933
–
48
48
5,933
5,981
5,981
–%
8.2%
8.2%
–%
–%
–%
–%
–%
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
57
57
Notes to the Consolidated Financial Statements 30 June 2015
8. Current Assets – Cash and Cash Equivalents (continued)
30 June 2014
Floating
Interest
rate
Notes
$’000
Financial Assets
Fixed interest maturing
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
Contractual
Total
$’000
cash
flows
Cash & deposits
Receivables
8
9
2,034
20,621
–
–
2,034
20,621
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,373
24,028
N/A
4,570
4,570
4,570
5,943
28,598
4,570
Weighted average
interest rate
Financial Liabilities
Payables
Borrowings
12
13
Weighted average
interest rate
2.7%
3.3%
–%
–%
–%
–%
–%
–%
–
–
–
–
27
27
–
30
30
–
18
18
–
–
–
–
–
–
–
–
–
3,114
3,114
3,114
–
75
75
3,114
3,189
3,189
–%
8.2%
8.2%
8.2%
–%
–%
–%
–%
9. Current Assets – Trade and Other Receivables
Trade and grant receivables
Interest receivables
Prepayments
Other receivables
Trade and grant receivables
Trade and grant receivables primarily comprise of $3,426,000
(2014: $4,154,000) of expenditure reimbursable under the
Australian Government’s R&D tax incentive scheme. Other trade
receivables largely consist of research fees, royalty and licensing
receivables and are subject to normal terms of settlement within 30
to 60 days.
Credit risk
The group considers that there is no significant concentration of
credit risk with respect to current receivables. Grant receivables
are with government bodies and trade receivables are from large,
well respected companies. Loans to controlled entities are
assessed for recoverability and provisions are applied as
considered appropriate.
30 June 2015
$’000
30 June 2014
$’000
3,866
39
221
106
4,232
4,211
120
154
85
4,570
Impaired receivables
As at 30 June 2015, there were no material trade and grant
receivables that were past due (2014: nil). No receivables are
considered impaired at 30 June 2015 (2014: 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 to 60 days.
58
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
58
Notes to the Consolidated Financial Statements 30 June 2015
10. Non-Current Assets – Property, Plant and Equipment
Plant and Equipment
$’000
Leasehold
improvements
$’000
Plant and Equipment
under finance lease
$’000
Total Plant and
Equipment
$’000
At 30 June 2013
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2014
Opening net book amount
Additions
Disposals
Depreciation and amortisation
Closing net book amount
At 30 June 2014
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Disposals
Depreciation and amortisation
Closing net book amount
At 30 June 2015
Cost
Accumulated depreciation and amortisation
Net book amount
2,116
(1,818)
298
298
244
–
(115)
427
2,203
(1,776)
427
427
281
(6)
(146)
556
2,376
(1,820)
556
1,193
(1,188)
5
5
7
–
(8)
4
1,199
(1,195)
4
4
379
(3)
(75)
305
379
(74)
305
419
(311)
108
108
–
–
(30)
78
419
(341)
78
78
–
–
(29)
49
419
(370)
49
3,728
(3,317)
411
411
251
–
(153)
509
3,821
(3,312)
509
509
660
(9)
(250)
910
3,174
(2,264)
910
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
59
59
Notes to the Consolidated Financial Statements 30 June 2015
11. Non-Current Assets – Intangible Assets
Patents & Licences
$’000
Goodwill
$’000
Total Intangibles
$’000
At 30 June 2013
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2014
Opening net book amount
Exchange differences
Depreciation and amortisation
Closing net book amount
At 30 June 2014
Cost
Accumulated depreciation and amortisation
Net book amount
Year ended 30 June 2015
Opening net book amount
Exchange differences
Depreciation and amortisation
Closing net book amount
At 30 June 2015
Cost
Accumulated depreciation and amortisation
Net book amount
16,507
(9,306)
7,201
7,201
(84)
(943)
6,174
16,321
(10,147)
6,174
6,174
1,251
(971)
6,454
19,028
(12,574)
6,454
1,606
–
1,606
1,606
(25)
–
1,581
1,581
–
1,581
1,581
358
–
1,939
1,939
–
1,939
18,113
(9,306)
8,807
8,807
(109)
(943)
7,755
17,902
(10,147)
7,755
7,755
1,609
(971)
8,393
20,967
(12,574)
8,393
(a) Impairment tests for goodwill
Goodwill is tested annually for impairment, and an impairment loss
is recognised for the amount by which the carrying amount
exceeds the recoverable amount. The recoverable amount is the
higher of fair value less costs to sell and value in use.
The group has companies in both Australia and the United States
– these are also determined to be the Cash Generating Units
(CGUs) of the group. The directors have determined that the
goodwill (which arose on the acquisition of the remaining share of
the US business and intellectual property) should be allocated
across these CGUs as the business combination gives rise to
synergies within the group’s Australian and United States
companies and their intellectual property.
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 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 2015, goodwill
is not considered to be impaired at the end of the reporting period.
(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 2015 and determined that
there is no indication that the asset is impaired.
(d) Remaining useful life
The patents being amortised have a remaining useful life of up to
11 years as at 30 June 2015.
60
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60
Notes to the Consolidated Financial Statements 30 June 2015
12. Current Liabilities – Trade and Other Payables
Trade payables and accruals
Other payables
30 June 2015
$’000
30 June 2014
$’000
5,481
452
5,933
2,586
528
3,114
Trade payables and accruals
The majority of trade payables are related to expenditure associated with the group’s research and development programs.
13. Current and Non-Current Liabilities – Borrowings
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.
2015
Floating
Interest rate
Lease Liabilities
Weighted average interest rate
2014
Lease Liabilities
Notes
20
Notes
20
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
Total
$’000
–
30
18
–%
8.2%
8.2%
–
–%
–
–%
–
–
48
–%
–%
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
Total
$’000
Weighted average interest rate
–%
8.2%
8.2%
8.2%
–
27
30
18
–
–%
–
–
75
–%
–%
Starpharma Holdings Limited Annual Report 2015
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61
61
Notes to the Consolidated Financial Statements 30 June 2015
14. Contributed Equity
(a) Share capital
Share Capital
2015
Shares
2014
Shares
2015
$’000
2014
$’000
Ordinary shares – fully paid
319,138,501
285,109,680
160,884
140,349
(b) Movements in ordinary share capital
Date
Details
1 Jul 2013
12 Jul 2013
Proceeds on exercise of employee options
2 Sep 2013
Proceeds on exercise of employee options
2 Oct 2013
Employee performance rights plan share issue
29 Nov 2013 Employee performance rights plan share issue
6 Dec 2013
Proceeds on exercise of employee options
19 Feb 2014 Employee performance rights plan share issue
22 May 2014 Proceeds on exercise of employee options
18 Jun 2014
Proceeds on exercise of employee options
1 Jul 2013
Proceeds on exercise of employee options
Number of shares
Issue Price
283,814,948
$’000
140,081
50,000
100,000
200,000
410,000
40,000
39,732
10,000
250,000
195,000
$0.37
$0.37
$ –
$ –
$0.37
$0.83
$ –
$0.37
$0.37
Balance at 30 June 2014
285,109,680
Date
Details
1 Jul 2014
25 Sep 2014 Employee performance rights plan share issue
29 Sep 2014 Share Placement
less transaction costs
14 Oct 2014
Employee performance rights plan share issue
5 Nov 2014
Share Purchase Plan
less transaction costs
3 Dec 2014
Employee performance rights plan share issue
23 Dec 2014 Employee performance rights plan share issue
22 Jan 2015
Employee share plan ($1,000) issue
Number of shares
Issue Price
285,109,680
481,400
27,692,308
465,000
5,259,937
50,000
22,000
58,176
$ –
$0.65
$ –
$0.65
$ –
$ –
$0.55
Balance at 30 June 2015
319,138,501
18
37
–
–
15
33
–
93
72
140,349
$’000
140,349
–
18,000
(842)
–
3,419
(74)
–
–
32
160,884
(c) Ordinary shares
As at 30 June 2015 there were 319,138,501 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. Ordinary shares have no
par value and the company does not have a limited amount of
authorised capital. There is no current on-market share buy-back.
(d) Employee Share Plan ($1,000 Plan)
Information relating to the Employee Share Plan, including details
of shares issued under the plan, is set out in note 25.
(e) Employee Performance Rights Plan
Information relating to the Employee Performance Rights Plan,
including details of rights issued under the plan, is set out in note
25.
(f) Options
Information relating to the Starpharma Holdings Limited Employee
Share Option Plan, 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 25.
(g) 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. In order to
maintain or adjust the capital structure, the group may adjust the
amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets.
62
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62
Notes to the Consolidated Financial Statements 30 June 2015
15. Reserves
(a) Reserves
Share-based payments reserve
Foreign currency translation reserve
Asset revaluation reserve
(b) Movement in reserves
Share-based payments reserve
Balance at 1 July
Performance right 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
The share-based payments reserve is used to recognise the fair
value of options and performance rights granted.
(ii) Foreign currency translation reserve
Exchange differences arising on translation of the foreign
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.
16. Accumulated Losses
Accumulated losses balance at 1 July
Net loss for the year
Accumulated losses balance at 30 June
30 June 2015
$’000
30 June 2014
$’000
7,044
(1,385)
2,215
7,874
5,648
(3,011)
2,215
4,852
30 June 2015
$’000
30 June 2014
$’000
5,648
1,396
7,044
(3,011)
1,626
(1,385)
4,188
1,460
5,648
(2,901)
(110)
(3,011)
(iii) Asset revaluation reserve
The uplift in fair value of the identifiable net assets of Dendritic
Nanotechnologies Inc. on the company’s acquisition of the
remaining share in October 2006 was recognised in reserves.
30 June 2015
$’000
(112,250)
(18,950)
(131,200)
30 June 2014
$’000
(97,615)
(14,635)
(112,250)
Starpharma Holdings Limited Annual Report 2015
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63
63
Notes to the Consolidated Financial Statements 30 June 2015
17. 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 21.
(c) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other long term benefits
Share-based payments
(b) Transactions with related parties
There are related party transactions within the group between the
parent and subsidiaries. Transactions include funds advanced
to/from entities and the associated interest charge; and
management and services fees. All transactions were made on an
arm’s length basis.
30 June 2015
$
30 June 2014
$
2,275,425
176,266
39,496
987,876
3,479,063
2,226,843
186,089
39,461
978,306
3,430,699
Detailed remuneration disclosures are provided in the remuneration report on pages 18 to 33.
18. Remuneration of Auditors
The company may decide to employ the auditor on assignments
additional to their statutory audit duties where the auditors
expertise and experience with the company and/or the
consolidated group are important. Details of the amounts paid or
payable to the auditor (PricewaterhouseCoopers) for audit and
Statutory audit services
Audit or review of financial reports of the entity or any entity in the
consolidated entity
PricewaterhouseCoopers
Total remuneration for statutory audit services
No other audit services were performed in the current or prior year.
19. Events Occurring After the Balance Sheet Date
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:
30 June 2015
$
30 June 2014
$
94,860
94,860
92,106
92,106
There are no other matters or circumstances have arisen since 30 June 2015 that have significantly affected, or may significantly affect:
(a) the consolidated entity’s operations in future financial years, or
(b) the results of those operations in future financial years, or
(c) the consolidated entity’s state of affairs in future financial years.
64
Starpharma Holdings Limited Annual Report 2015
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64
Notes to the Consolidated Financial Statements 30 June 2015
20. Commitments
(a) Capital Commitments
There is no capital expenditure contracted for, not recognised as liabilities at the reporting date (2014: nil).
(b) Lease Commitments
Operating leases
The group leases laboratory and offices under a lease until 31 December 2017. Under a new premises lease agreement, rental commitments
are inclusive of outgoings. The group also leases office equipment generally over a four year term.
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
30 June 2015
$’000
30 June 2014
$’000
579
881
–
1,460
380
70
–
450
Finance Leases
The group leases plant and equipment under a finance leases expiring within two (2014: three) years.
Commitments in relation to finance leases are payable as follows:
Notes
30 June 2015
$’000
30 June 2014
$’000
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
13
13
The weighted average interest rate implicit in the lease is 8.2% (2014: 8.2%).
32
19
–
51
(3)
48
30
18
48
32
51
–
83
(8)
75
27
48
75
(c) Expenditure Commitments
The group has entered into various agreements for research, development and clinical services. These agreements have typical termination
provisions to limit the commitment to the time and materials expended at termination, the orderly close out of activities or up to an approved
work order amount.
(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
the remuneration report for details of these commitments.
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
65
65
Notes to the Consolidated Financial Statements 30 June 2015
21. 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).
Name of entity
Starpharma Pty Limited
Dendritic Nanotechnologies Inc.
Country of
Incorporation
Class of Shares
Australia
USA
Ordinary
Ordinary
2015
%
100.00%
100.00%
Equity Holding
2014
%
100.00%
100.00%
22. Contingencies
The company has no contingent assets or liabilities at 30 June 2015 (2014: nil).
23. Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities
Operating loss after tax
Depreciation and amortisation
Foreign exchange (gains) / losses
Non-cash employee benefits: share-based payments
Gain (loss) on sale of property, plant and equipment
Change in operating assets and liabilities,
net of effects of acquisitions and disposals of entities:
Decrease (increase) in receivables and other assets
Increase (decrease) increase in trade creditors
Increase in employee provisions
Increase (decrease) in deferred income
Net cash outflows from operating activities
24. 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)
30 June 2015
$’000
(18,950)
30 June 2014
$’000
(14,635)
1,221
(617)
1,428
(8)
370
2,819
92
30
(13,615)
1,096
(49)
1,493
–
928
1,418
3
(67)
(9,813)
30 June 2015
30 June 2014
(0.06)
(0.06)
(0.05)
(0.05)
(18,950)
(14,635)
Weighted average number of ordinary shares outstanding during the year used as
the denominator in calculating diluted and basic earnings per share
310,143,800
284,414,837
As at 30 June 2015 the company had on issue 6,469,100 (30 June 2014: 3,161,000) performance rights that are not considered dilutive.
The rights have not been included in the determination of basic earnings per share. The rights granted are considered to be potential ordinary
shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive.
Given the entity is currently loss making, the potential shares are anti-dilutive and have therefore not been included in the diluted earnings per
share calculation
66
Starpharma Holdings Limited Annual Report 2015
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66
Notes to the Consolidated Financial Statements 30 June 2015
25. Share-Based Payments
Performance Rights
(a) Employee Performance Rights Plan
In 2010 the Board approved the introduction of the Employee Performance Rights Plan, which was subsequently approved by shareholders at
the 2011 and 2014 annual general meetings. All executives and staff, including the CEO, are eligible to participate in the Plan. The Plan allows
for the issue of performance rights (being rights to receive fully paid ordinary shares subject to continued employment with the company and the
satisfaction of certain performance hurdles over a specified period). A further holding lock period may also be applied to restrict disposal after
the vesting date. Performance rights are granted under the Plan for no consideration. The objective of the Plan is to assist in the recruitment,
reward, retention and motivation of employees of the company.
(b) Fair value of performance rights granted
The weighted average assessed fair value at grant date of performance rights granted during the year ended 30 June 2015 was $0.46 per right
(2014: $0.83). There were 4,597,500 performance rights granted in the current year (2014: 2,211,600). The estimated fair value at grant date is
determined using either an option pricing or a binomial/trinomial model that takes into account the exercise price, the performance measure, the
term of the right, 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, adjusted for any
expected changes to future volatility due to publicly available information.
Set out below are summaries of performance rights:
2015
Grant Date
Vesting
Date
Holding
Lock
Date
Balance
at start of
the year
Granted
during
the year
Converted
during
the year
Forfeited
during
the year
13 Sep 2012
19 Sep 2014
19 Sep 2015
30 Nov 2012
30 Nov 2014
30 Nov 2015
30 Nov 2012
30 Nov 2015
30 Nov 2016
Number
499,400
200,000
360,000
16 Sep 2013
16 Sep 2015
16 Sep 2016
1,151,600
22 Nov 2013
30 Sep 2014
30 Sep 2015
22 Nov 2013
22 Nov 2015
22 Nov 2016
22 Nov 2013
22 Nov 2016
22 Nov 2017
500,000
200,000
250,000
20 Nov 2014
30 Sep 2015
30 Sep 2016
20 Nov 2014
30 Sep 2016
30 Sep 2017
20 Nov 2014
30 Sep 2017
30 Sep 2018
20 Nov 2014
30 Sep 2017
30 Jan 2015
30 Sep 2016
30 Jan 2015
30 Sep 2017
30 Jan 2015
30 Sep 2018
–
–
–
–
–
–
–
–
–
–
–
Number
–
–
–
–
–
–
–
300,000
450,000
300,000
450,000
1,084,125
1,084,125
929,250
Number
481,400
50,000
–
22,000
465,000
–
–
–
–
–
–
–
Balance
at end of
the year
Number
–
–
Number
18,000
150,000
–
360,000
68,000
35,000
–
–
–
–
–
–
–
1,061,600
–
200,000
250,000
300,000
450,000
300,000
450,000
1,084,125
1,084,125
929,250
Total
2014
Grant Date
3,161,000
4,597,500
1,018,400
271,000
6,469,100
Vesting
Date
Holding
Lock
Date
Balance
at start of
the year
Granted
during
the year
Converted
during
the year
Forfeited
during
the year
Balance
at end of
the year
25 Nov 2011
25 Nov 2013
25 Nov 2014
13 Sep 2012
19 Sep 2014
19 Sep 2015
30 Nov 2012
30 Sep 2013
30 Sep 2014
30 Nov 2012
30 Nov 2014
30 Nov 2015
30 Nov 2012
30 Nov 2015
30 Nov 2016
16 Sep 2013
16 Sep 2015
16 Sep 2016
22 Nov 2013
30 Sep 2014
30 Sep 2015
22 Nov 2013
22 Nov 2015
22 Nov 2016
22 Nov 2013
22 Nov 2016
22 Nov 2017
Number
410,000
600,900
400,000
200,000
360,000
–
–
–
–
Number
–
–
–
–
–
1,261,600
500,000
200,000
250,000
Number
410,000
10,000
200,000
–
–
–
–
–
–
Number
Number
–
91,500
200,000
–
–
–
499,400
–
200,000
360,000
110,000
1,151,600
–
–
–
500,000
200,000
250,000
Total
1,970,900
2,211,600
620,000
401,500
3,161,000
Starpharma Holdings Limited Annual Report 2015
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67
67
Notes to the Consolidated Financial Statements 30 June 2015
Information used in assessing the fair value of performance rights granted during the year ended 30 June 2015 is as follows:
Right grant date
20 November 2014
20 November 2014
20 November 2014
20 November 2014
Number of rights granted
300,000
450,000
210,000
90,000
Vesting date
30 September 2015
30 September 2016
30 September 2017
30 September 2017
Disposal Restriction until
30 September 2016
30 September 2017
30 September 2018
30 September 2018
Performance Measure
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
KPIs
50%
2.5%
–
$0.52
$0.49
KPIs
50%
2.4%
–
$0.52
$0.49
KPIs
50%
2.6%
–
$0.52
$0.49
TSR
50%
2.6%
–
$0.52
$0.41
Right grant date
20 November 2014
20 November 2014
30 January 2015
30 January 2015
Number of rights granted
315,000
135,000
560,000
476,000
Vesting date
30 September 2017
30 September 2017
30 September 2016
30 September 2017
Performance Measure
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
KPIs
50%
2.6%
–
$0.52
$0.52
TSR
50%
2.6%
–
$0.52
$0.44
KPIs
50%
1.7%
–
$0.46
$0.46
KPIs
50%
1.6%
–
$0.46
$0.46
Right grant date
30 January 2015
30 January 2015
30 January 2015
30 January 2015
Number of rights granted
84,000
408,000
72,000
524,125
Vesting date
30 September 2017
30 September 2018
30 September 2018
30 September 2016
Performance Measure
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
Right grant date
Number of rights granted
Vesting date
Performance Measure
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
TSR
50%
1.6%
–
$0.46
$0.25
KPIs
50%
2.0%
–
$0.46
$0.46
TSR
50%
2.0%
–
$0.46
$0.27
KPIs
50%
1.7%
–
$0.46
$0.46
30 January 2015
30 January 2015
524,125
449,250
30 September 2017
30 September 2018
KPIs
50%
1.6%
–
$0.46
$0.46
KPIs
50%
2.0%
–
$0.46
$0.46
68
Starpharma Holdings Limited Annual Report 2015
68
Starpharma Holdings Limited Annual Report 2015
Notes to the Consolidated Financial Statements 30 June 2015
Information used in assessing the fair value of performance rights granted during the year ended 30 June 2014 is as follows:
Right grant date
16 September 2013
22 November 2013
22 November 2013
22 November 2013
Number of rights granted
1,261,600
500,000
50,000
50,000
Vesting date
16 September 2015
30 September 2014
22 November 2015
22 November 2015
Disposal Restriction until
16 September 2016
30 September 2015
22 November 2016
22 November 2016
Performance Measure
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
KPIs
50%
2.7%
-
$0.89
$0.89
KPIs Continued Employment
Index TSR
50%
2.5%
-
$0.89
$0.85
50%
2.7%
-
$0.89
$0.85
50%
2.7%
-
$0.89
$0.55
Right grant date
22 November 2013
22 November 2013
22 November 2013
22 November 2013
Number of rights granted
100,000
100,000
50,000
100,000
Vesting date
22 November 2015
22 November 2016
22 November 2016
22 November 2016
Disposal Restriction until
22 November 2016
22 November 2017
22 November 2017
22 November 2017
Performance Measure
Index TSR+10% Continued Employment
Index TSR
Index TSR+10%
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
50%
2.7%
-
$0.89
$0.54
50%
3.0%
-
$0.89
$0.85
50%
3.0%
-
$0.89
$0.58
50%
3.0%
-
$0.89
$0.55
Share price volatility and the risk-free interest rate are obtained through an independent valuation.
Shares
(a) Employee Share Plan ($1,000 Plan)
All executives and staff, excluding directors, are eligible to participate in the Starpharma Employee Share Plan ($1,000 Plan). The objective of
the $1,000 Plan is to assist in the reward, retention and motivation of employees of the group. An annual allocation of up to $1,000 of shares
may be granted and taxed on a concessional basis. Shares are granted under the $1,000 Plan for no consideration and are escrowed for 3
years while participants are employed by the group.
(b) Fair value of shares granted
The weighted average assessed fair value at grant date of employee shares granted during the year ended 30 June 2015 was $0.55 (2014:
$0.83 per share). The fair value at grant date is determined by the share price on the date of grant. Employee shares were granted for no
consideration.
Information used in assessing the fair value of shares granted during the year ended 30 June 2015 is as follows:
Share grant date
Number of shares granted
Share price at grant date
Assessed fair value
Information used in assessing the fair value of shares granted during the year ended 30 June 2014 is as follows:
Share grant date
Number of shares granted
Share price at grant date
Assessed fair value
Starpharma Holdings Limited Annual Report 2015
Starpharma Holdings Limited Annual Report 2015
22 January 2015
58,176
$0.55
$0.55
30 January 2014
39,732
$0.83
$0.83
69
69
Notes to the Consolidated Financial Statements 30 June 2015
25. Share-Based Payments (continued)
Options
(a) Employee Option Plan
There were no options granted, exercised, forfeited or expired in the year ended to 30 June 2015. The options exercised in 2014 were granted
under the Starpharma Holdings Limited Employee Share Option Plan (ASX code SPLAM).
Where options are issued to employees of subsidiaries within the group, the subsidiaries compensate Starpharma Holdings Limited for the
amount recognised as an expense in relation to these options.
2014
Grant Date
Expiry Date
Consolidated and parent entity
Exercise
Price
Balance
at start of
the year
Exercised
during
the year
Forfeited
during
the year
Expired
during
the year
Balance
at end of
the year
Exercisable
at end of
the year
$
Number
Number
Number
Number
Number
Number
29 Jun 2009
28 Jun 2014
$0.37
635,000
635,000
Total
635,000
635,000
–
–
Weighted average exercise price
$0.37
$0.37
$ –
–
–
$ –
–
–
–
–
$ –
$ –
The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2014 was $0.72.
(b) Fair value of options granted
There were no options granted in the current or prior year. The fair value at grant date of options granted in earlier years were 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.
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period were as follows:
Employee shares issued
Employee performance rights issued
30 June 2015
$’000
30 June 2014
$’000
32
1,396
1,428
33
1,460
1,493
70
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70
Notes to the Consolidated Financial Statements 30 June 2015
26. Parent Entity Financial Information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Contributed equity
Reserves
Accumulated losses
Loss for the year
Total comprehensive income
(b) Contingencies of the parent entity
The parent entity has no contingent assets or liabilities at 30 June 2015 (2014: nil).
30 June 2015
30 June 2014
Parent
$'000
27,869
47,115
753
753
160,884
6,535
(121,057)
(14,111)
(14,111)
$'000
22,657
39,342
800
800
140,349
5,139
(106,946)
(12,283)
(12,283)
Starpharma Holdings Limited Annual Report 2015
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71
71
Directors’ Declaration for the year ended 30 June 2015
In the directors’ opinion:
(a) the financial statements and notes set out on pages 41 to 71 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 consolidated entity’s financial position as at 30 June 2015 and of its 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.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the
Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Rob Thomas AM
Chairman
Melbourne, 21 August 2015
72
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72
Independent Audit Report to the Members of Starpharma Holdings Limited
Auditor’s Independence Declaration
Independent auditor’s report to the members of Starpharma
As lead auditor for the audit of Starpharma Holdings Limited for the year ended 30 June 2015, I
Holdings Limited
declare that to the best of my knowledge and belief, there have been:
relation to the audit; and
Report on the financial report
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
We have audited the accompanying financial report of Starpharma Holdings Limited (the company),
which comprises the consolidated balance sheet as at 30 June 2015, the consolidated income
b) no contraventions of any applicable code of professional conduct in relation to the audit.
statement and consolidated statement of comprehensive income, consolidated statement of changes in
equity and consolidated statement of cash flows for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors’ declaration for Starpharma
Holdings Limited (the consolidated entity). The consolidated entity comprises the company and the
entities it controlled at year’s end or from time to time during the financial year.
This declaration is in respect of Starpharma Holdings Limited and the entities it controlled during the
period.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the
Melbourne
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
21 August 2015
Statements, that the financial statements comply with International Financial Reporting Standards.
Jon Roberts
Partner
PricewaterhouseCoopers
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the consolidated
entity’s preparation and fair presentation of the financial report in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations
Act 2001.
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
Liability limited by a scheme approved under Professional Standards Legislation.
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Starpharma Holdings Limited Annual Report 2015
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73
73
Independent Audit Report to the Members of Starpharma Holdings Limited
Auditor’s opinion
In our opinion:
(a)
the financial report of Starpharma Holdings Limited is in accordance with the Corporations Act
2001, including:
(i)
(ii)
giving a true and fair view of the consolidated entity's financial position as at 30 June
2015 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards (including the Australian Accounting
Interpretations) and the Corporations Regulations 2001.
(b)
the financial report and notes also comply with International Financial Reporting Standards as
disclosed in Note 1.
Report on the Remuneration Report
We have audited the remuneration report included in pages 18 to 33 of the directors’ report for the
year ended 30 June 2015. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Starpharma Holdings Limited for the year ended 30 June
2015 complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Jon Roberts
Partner
Melbourne
21 August 2015
74
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74
Shareholder Information
The shareholder information set out below was applicable as at 31 July 2015.
Supplementary information as required by ASX listing requirements.
A. Distribution of Equity Shareholders
Analysis of numbers of equity security holders by size of holding
1 –1,000
1,001–5,000
5,001–10,000
10,001–100,000
100,000 and over
Total
There were 452 holders of less than a marketable parcel of ordinary shares.
B. Equity Security Holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
1.
2.
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
3.
National Nominees Limited
4.
Citicorp Nominees Pty Limited
5.
T & N Argyrides Investments P/L
6.
UBS Nominees Pty Ltd
7.
BNP Paribas Noms Pty Ltd
8.
UBS Wealth Management Australia Nominees Pty Ltd
9
Sunshine Group Investments Pty Ltd
10. Mr Peter Malcolm Colman
11. Kenneth Nominees Pty Ltd
12. Mr Kingsley Bryan Bartholomew
13. Dollar Coin Investments
14. Applecross Secretarial Services Pty Ltd
15. Applecross Secretarial Services Pty Ltd
16. JPS Distribution Pty Ltd
17. Commonwealth Scientific And Industrial Research Organisation
18. HSBC Custody Nominees (Australia) Limited - A/C 2
19. Mr Nicholas Wheeler
20. Citicorp Nominees Pty Limited
Class of equity security
Shares
Performance rights
694
1,506
880
1,525
230
4,835
–
–
–
20
13
33
Number held
88,860,483
26,856,613
24,249,812
11,979,804
5,410,449
5,391,262
4,931,225
4,249,094
4,136,977
3,805,968
3,422,053
2,442,072
1,922,664
1,757,000
1,604,550
1,588,291
1,448,798
1,445,942
1,400,000
1,367,621
Ordinary shares
Percentage
of issued shares
27.84
8.42
7.60
3.75
1.70
1.69
1.55
1.33
1.30
1.19
1.07
0.77
0.60
0.55
0.50
0.50
0.45
0.45
0.44
0.43
198,270,678
62.13
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Shareholder Information
Name
Employee Performance Rights
C. Substantial Holders
Unquoted equity securities over ordinary shares
Number on issue
6,469,100
Number of holders
33
Substantial shareholders with a shareholding greater than 5% as shown in substantial shareholder notices received by the company as at 31
July 2015:
Name
Allan Gray Australia Pty Ltd
M&G Investment Funds
FIL Limited
D. Voting Rights
Number held
47,381,272
37,069,789
19,654,406
Ordinary shares
Percentage of
issue shares
14.85
13.06
6.16
The voting rights attached to each class of equity securities are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and on a poll
each share shall have one vote.
(b) Performance Rights
No voting rights.
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76
Intellectual Property Report
The Starpharma patent portfolio currently has around 25 active patent families with over 80 granted patents and more than 60 patent
applications pending.
Key patents within the Starpharma portfolio as at 31 July 2015:
Title
Priority Date &
Publication Number
Patents Granted
Applications Pending
VivaGel® Patent Portfolio
Anionic Or Cationic Dendrimer
Antimicrobial Or Antiparasitic
Compositions
14 September 1998
WO00/15240
Agents For The Prevention &
Treatment Of Sexually Transmitted
Diseases-I
30 March 2001
WO02/079299
Microbicidal Dendrimer
Composition Delivery System
(Condom related)
18 October 2005
WO2007/045009
Contraceptive Composition
22 March 2006
WO2007/106944
Method Of Treatment Or
Prophylaxis Of Bacterial Vaginosis
16 May 2011
WO2012/000891
Australia, Canada, Europe,
Japan, Mexico, New Zealand,
Singapore, South Korea, USA
Australia, Canada, China,
Europe, Hong Kong, Japan,
Mexico, New Zealand,
Singapore, South Korea, USA
Australia, India, Japan, Mexico,
New Zealand, Russian
Federation, South Korea,
Taiwan, USA
Brazil
Argentina, Canada, Europe, Hong
Kong, Malaysia
Australia, China, Japan, USA
Canada, Europe
Australia, Brazil, Canada, China,
Europe, Hong Kong, India, Israel,
Japan, South Korea, Mexico, Russia,
USA
Canada, China, Europe, India,
Japan, USA
Method of Treatment or Prophylaxis
of Infection of the Eye
13 September 2012
WO2014/043576
Drug Delivery Patent Portfolio (includes DEP® Patents)
Disulfide-containing dendritic
polymers
30 September 1996
US6020457
USA
Macromolecules Compounds
Having Controlled Stoichiometry
Modified Macromolecules
Targeted Polylysine Dendrimer
Therapeutic Agent
Macromolecules (Drug linkers)
25 October 2005
WO2007/048190
20 January 2006
WO2007/082331
11 August 2006
WO2008/017125
6 June 2011
WO2012/167309
Macromolecules and their Use
(Platinates)
10 September 2013
WO2015/035446
Priostar® Patent Portfolio
Dendritic Polymers With Enhanced
Amplification And Interior
Functionality
20 April 2005
WO2006/065266
Dendritic Polymers With Enhanced
Amplification And Interior
Functionality
21 December 2005
WO2006/115547
Australia, Canada, USA
Europe
Australia, Canada, USA
China, Europe, India, Japan
China, USA
Europe, India
Australia, Brazil, Canada, China,
Europe, Hong Kong, India, Japan,
South Korea, USA
International
Brazil, Hong Kong
Brazil, Europe, Hong Kong, Japan
Argentina, Canada, China,
Europe, India, Israel, Japan,
Mexico, New Zealand,
Singapore, South Korea,
Taiwan, USA
Argentina, Australia, Canada,
China, India, Israel, Mexico, New
Zealand, Singapore, South
Korea, Taiwan, USA
PEHAM Dendrimers for use in
Agriculture
26 October 2009
WO2011/053605
China
Australia, Brazil, Europe, India,
Japan, USA
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Solicitors
Norton Rose Fulbright
RACV Tower, 485 Bourke Street
Melbourne VIC 3000 Australia
Stock exchange listing
ASX Limited
Level 4, North Tower, Rialto, 525 Collins Street,
Melbourne VIC 3000 Australia
ASX Code: SPL
Starpharma’s American Depositary Receipts (ADRs) trade under
the code SPHRY (CUSIP number 855563102). Each Starpharma
ADR is equivalent to ten ordinary shares of Starpharma as traded
on the ASX. The Bank of New York Mellon is the depositary bank.
Starpharma’s ADRs are listed on OTCQX International
(www.otcmarkets.com), a premium market tier in the U.S. for
international exchange-listed companies, operated by OTC
Markets Group.
Website address
www.starpharma.com
Corporate Directory
Company name
Starpharma Holdings Limited
ABN 20 078 532 180
Directors
R B Thomas AM – Chairman
J K Fairley – Chief Executive Officer
P J Jenkins – Deputy Chairman
R A Hazleton
Z Peach
P R Turvey
Company Secretary
Nigel Baade
Registered office
4-6 Southampton Crescent
Abbotsford, Victoria 3067 Australia
Telephone +61 3 8532 2700
Fax +61 3 9510 5955
Postal address
PO Box 2022
Preston VIC 3072 Australia
Share register
Computershare Investor Services Pty Limited
452 Johnston Street, Abbotsford VIC 3067
GPO Box 2975
Melbourne, VIC 3001
1300 850 505 (within Australia)
+613 9415 4000 (outside Australia)
www.computershare.com
Auditor
PricewaterhouseCoopers
Freshwater Place
Southbank VIC 3006 Australia
78
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