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Brickell Biotech, Inc.ANNUAL REPORT 2016
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Highlights Chairman’s Letter CEO’s Report Corporate and Social Responsibility Director’s 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 Highlights
Signing of a
multiproduct
DEPTM license with
AstraZeneca and
rapid advancement of
two candidates for
development
EU marketing
approval granted
for VivaGel® BV
Phase 3 trials for
VivaGel® BV
prevention of
recurrent BV have
achieved >90%
enrolment
VivaGel® shows
potent activity
against
Zika virus
Adama signed
license for Priostar®
for novel 2,4-D
products
Targeted DEPTM
conjugate
outperforms leading
treatments in ovarian
cancer model
License signed
for VivaGel®
condom to supply
Chinese Government
market
Completion of
$34 million
capital raising
DEPTM cabazitaxel
shows complete and
sustained tumour
regression in breast
cancer model
License signed
with Aspen for
sales and
marketing of
VivaGel® BV in
Australia & NZ
Phase 1 trial for
DEPTM docetaxel
shows encouraging
anticancer activity
and no neutropenia
or hair loss
AstraZeneca
program to include a
further product from
its portfolio
Australian Olympic
Team supplied with
VivaGel® condoms
for Brazil
Starpharma Holdings Limited Annual Report 2016 1 Chairman’s Letter
Dear Shareholders,
On behalf of the Starpharma Board it is a great pleasure to present
the 2016 annual report to our investors.
Our strategy remains unchanged. The company aims to create value
for shareholders through the commercial exploitation of our dendrimer
technology in pharmaceutical, life science and other applications
utilising a combination of internally funded and partnered projects
across the portfolio.
To this end over the last 12 months Starpharma has achieved a
number of significant milestones in our three focus areas – VivaGel®,
DEP™ drug delivery and agrochemicals. Our achievements illustrate
the strength of our business strategy and the confidence our industry
partners have in our technology platform and the team at Starpharma.
FY16 was a milestone year with respect to striking important
commercial deals and achieving key regulatory goals.
Early in the financial year, Starpharma signed a multiproduct
license with AstraZeneca, for the development and commercialisation
of DEP™ drug delivery products. This is both strategically important and
a highly valuable deal. Our DEP™ program with AstraZeneca has since
expanded beyond the initial agreement with the initiation of a further
DEP™ program, highlighting the broad clinical applicability of the drug
delivery platform. Success with any of these programs will be a
powerful endorsement for the company.
Within our VivaGel® portfolio, we were granted EU approval for
VivaGel® BV for treatment and rapid relief of bacterial vaginosis (BV)
– a condition with a significant unmet medical need. This approval
marks an important milestone for Starpharma, opening up a very large
market, and has been used to expedite other approval processes for
the product in countries that recognise the EU approval, further
expanding our market reach.
Furthermore, we signed a license and supply agreement with Aspen
Pharmacare Australia for the sales and marketing of VivaGel® BV in
Australia and New Zealand, with discussions well advanced in other
territories of the world. VivaGel® BV is currently under regulatory
review in Australia – having benefited from the Australian-EU
mutual recognition agreement.
As well as continuing regulatory activities with Ansell and Okamoto for
the VivaGel® condom, an agreement was signed with Shenyang Sky
and Land Latex Co for the manufacture and sale of VivaGel® condoms
for the Chinese Government sector. This exclusive license and supply
agreement opens up a significant market segment for Starpharma
which is not captured by our current licenses.
We also licensed Starpharma's Priostar® dendrimer technology for the
development and commercialisation of an enhanced, proprietary 2,4-D
herbicide for the US market to one of the world’s leading crop protection
companies, Adama Agricultural Solutions. 2,4-D is one of the top three
herbicides sold worldwide.
The company’s phase 1 study for DEP™ docetaxel is now in advanced
stages and interim clinical data reported this year revealed that cancer
patients showed no neutropenia or alopecia, even at the highest doses.
Encouraging efficacy signals and anticancer activity in a significant
proportion of patients have also been seen. A large European site was
recently added to facilitate the completion of phase 1 and as a lead-in
to a phase 2 clinical trial.
Meanwhile, Starpharma’s VivaGel® BV pivotal phase 3 program for
the prevention of BV recurrence is now more than 90% recruited.
We continued to support growth in our pipeline of internal DEP™
candidates with exciting data generated in preclinical studies for
our Targeted DEP™ conjugates and DEP™ cabazitaxel.
Like most other Australian biotechnology companies, achieving the
right level of funding and investor mix is a critical success factor. The
combination of an oversubscribed capital raising, share purchase plan
and prudent management of cash flows, saw Starpharma end the year
with a strong cash balance of $46 million, sufficient to fund our existing
programs and secure the company’s development. We thank our
existing shareholders who participated and welcome a number of
important new funds to the register.
I would like to thank our Chief Executive Officer, Dr Jackie Fairley,
the executive management team and employees for their diligence,
dedication and passion for our business. We have a highly experienced
and focused team of professionals with the broad skill set and expertise
required to take the company forward. The dendrimer platform
technology has enormous commercial potential not just in drug delivery
but also patent life extension. We remain ambitious and confident in our
ability to realise our goals and prove up the inherent value that exists
with the company. Our DEP™ platform offers significant leverage and
optionality with tremendous potential beyond our current deals.
I also wish to thank my fellow Board members for their hard work and
expertise through the year and we express our gratitude to Dr Peter
Jenkins, who retired in November 2015, for his very significant
contribution over the years.
Finally, on behalf of the Board, we would like to thank our shareholders
for your ongoing support and for believing in Starpharma’s vision and
innovation. We do not take your support for granted. Your Board, Jackie,
and her team are driven by the desire to produce significant returns
from our technology for you, and for our society.
Yours sincerely,
Rob Thomas AM
Starpharma Chairman
!
2
Starpharma Holdings Limited Annual Report 2016
Mr Rob Thomas AM, Chairman
CEO’s Report
I am pleased to report on Starpharma’s activities during the 2016
financial year, achieving significant developments in our three
business areas – VivaGel®, drug delivery and agrochemicals.
The execution of commercial deals for VivaGel®, DEP™, and in
agrochemicals, as well as regulatory approval for VivaGel® BV in
Europe, all represent significant milestones for the company this year.
VIVAGEL® PORTFOLIO
Starpharma achieved important regulatory and development
milestones and signed two new commercial deals within the
VivaGel® portfolio this year.
VivaGel® BV treatment
A major milestone for VivaGel® BV this year was securing the
marketing approval in the European Union (EU) for the treatment
and rapid relief of symptoms of bacterial vaginosis (BV). The current
market for products in this category is estimated to be in excess of
US$750 million globally, with significant areas of unmet need for
BV sufferers.
The EU approval allows VivaGel® BV to be marketed in the European
Economic Area, which includes the 28 countries of the EU plus the
European Free Trade Association, providing access to more than 260
million women. The approval is also being used to support regulatory
and marketing approvals for VivaGel® BV in a number of other
countries that recognise the EU approval, and these activities are
now well underway.
In March 2016, Starpharma signed a license agreement with Aspen
Pharmacare Australia Pty Ltd for the sales and marketing of VivaGel®
BV in Australia and New Zealand. The company is part of Aspen
Holdings Ltd, a global pharmaceutical company listed on the South
African stock exchange. Aspen is a leading supplier of branded and
generic pharmaceutical products globally, and is in the top five OTC
(over-the-counter) pharmaceutical companies in Australia. Aspen is an
ideal partner for VivaGel® BV in Australia and New Zealand given this
background and their proven track record of successfully marketing
products in the women’s healthcare segment.
Under the license agreement, Aspen is responsible for all marketing,
promotion and distribution of the product to clinicians and pharmacies,
with a product launch targeted for later this year. Starpharma will
supply Aspen with VivaGel® BV and will receive royalties on net sales.
Extensive launch preparations and progress on the commercial
negotiations for VivaGel® BV have also occurred since approval
in Europe. Negotiations for VivaGel® BV marketing rights are well
advanced with a number of potential commercial partners. These
commercial negotiations and Term Sheets involve partners with
extensive experience in women’s health and cover a number of
territories including Europe, Asia-Pacific, Latin America, Canada
and the Middle East.
“ The European
approval of VivaGel®
BV and the multiple
deals that we have
signed this year,
including the DEP™
license with
AstraZeneca,
Targeted DEP™
programs with
industry leaders,
and the Adama
license represent
critical milestones
in the development
of Starpharma”.
Starpharma Holdings Limited Annual Report 2016
3
Dr Jackie Fairley, Chief Executive Officer
CEO’s Report
reduces Starpharma’s regulatory risk through a binding agreement on trial
design. In addition, there was agreement on the trial design by the
European regulatory authority.
The global market value for the prevention of recurrent BV is estimated
to be more than US$1 billion. An additional patent for VivaGel® BV was
granted in October 2015 by the US Patent Office, providing a seven year
extension of the patent term to 2032. The grant of this new patent is
confirmation of the innovation that VivaGel® brings to the BV field and
adds to the value of the product through extended market exclusivity.
VivaGel® BV for prevention of recurrence Starpharma is also developing the VivaGel® BV product for the prevention of recurrent BV indication. This is an area of significant unmet need with no approved therapeutic option currently available and affecting up to 50 – 60% of BV sufferers. Two double-blinded, placebo controlled phase 3 trials are being conducted across the US, Canada, Mexico, Europe and Asia with recruitment in excess of 90%. The clinical program was granted a Special Protocol Assessment (SPA) by the US FDA, which 4 Starpharma Holdings Limited Annual Report 2016 CEO’s Report
The VivaGel® condom
In July 2016, Starpharma secured a significant new commercial
opportunity for the VivaGel® condom with the signing of an exclusive
license and supply agreement with Shenyang Sky and Land Latex Co.
Ltd. (Sky and Land) for the sale of the product to the Government
segment of the Chinese condom market. Sky and Land is a diversified
Chinese company, with world-class local condom manufacturing
capabilities and a successful history of supplying condoms to the
Chinese Government. The Chinese Government provides condoms
to its citizens under a number of programs, with an annual
requirement of approximately 3 billion condoms. The Chinese
condom market is expected to grow by nearly 60% in the next five
years according to Bloomberg analysis.
Under the exclusive agreement, Starpharma will supply the VivaGel®
active for Sky and Land to manufacture VivaGel® condoms under
license. Starpharma and Sky and Land have already commenced
regulatory activities to gain approval of a VivaGel® condom in China.
The VivaGel® condom is marketed in Australia as Dual Protect™ by
Ansell and proudly travelled with our Olympic athletes to Rio in
August. The VivaGel® condom is the world’s first and only antiviral
condom. While the physical barrier of the condom provides primary
protection, the condom lubricant contains the VivaGel® active that
has been proven in laboratory studies to inactivate up to 99.9% of
HIV, HSV (genital herpes) and HPV (human papillomavirus), which
are viruses that cause sexually transmitted infections (STIs).
Together with its commercial partners Ansell and Okamoto,
Starpharma has advanced regulatory processes in a number of
important markets with approvals anticipated in coming months.
Starpharma announced in May 2016 that the VivaGel® active also
showed potent antiviral activity against the Zika virus in laboratory
studies. The near-complete antiviral protection was achieved at
concentrations significantly below that of the VivaGel® condom and
Starpharma is now investigating the potential to add Zika to the list
of viruses inactivated for the VivaGel® condoms – further improving
the value-add of the product opportunity.
VivaGel®
condom
goes
to Rio
“ The health and
wellbeing of the
Team comes first
and our association
with Starpharma
will provide extra
protection for
everyone on the
Team, and is a
common sense
approach to a very
serious problem we
are facing in Rio.”
The chief de Mission of the
2016 Australian Olympic Team,
Kitty Chiller
Starpharma Holdings Limited Annual Report 2016
5
DEP™ docetaxel clinical program
Our lead internal drug delivery program for DEP™ docetaxel is now in
the final expansion phase, with a large European site recently added
to facilitate completion of phase 1, and to facilitate rapid start-up for
phase 2. Interim results of the trial have shown encouraging efficacy
signals in a significant proportion of patients including in cancers not
typically sensitive to docetaxel. Efficacy signals have been seen in
cancers such as pancreatic, lung, prostate, gastro-oesophageal, and
brain. This activity, sometimes at quite low doses, is considered very
encouraging given the patients in the trial have often failed multiple
other cancer drugs before enrolment. Remarkably, no cases of
neutropenia or alopecia (hair loss) have been reported to date.
Neutropenia is a common dose-limiting and life-threatening side-effect
of docetaxel and many currently available chemotherapy drugs. In
addition, as a result of the DEP™ formulation being polysorbate-80
free (detergent free), patients have not required steroid pre-treatment
or experienced any hypersensitivity reactions.
Preparations for a phase 2 trial of DEP™ docetaxel are progressing
well with product manufacture, and site and CRO selection well
advanced to facilitate rapid progression from phase 1 into phase 2.
6 Starpharma Holdings Limited Annual Report 2016DEP™ DRUG DELIVERY PORTFOLIOStarpharma’s Dendrimer Enhanced Product technology, known as DEP™, can enhance the performance of pharmaceuticals to improve health outcomes for patients. Both preclinical and early clinical data have shown DEP™ versions of drugs to be enhanced in a variety of ways compared to the original or unmodified drugs. Over and above the therapeutic and clinical benefits, DEP™ also provides a valuable commercial benefit to commercial partners through significant additional patent life.Starpharma achieved important milestones for DEP™ during the year in both partnered and internal programs, with the signing of a license with AstraZeneca, and generation of exciting clinical and preclinical data for the company’s own internal candidates. CEO’s Report
AstraZeneca DEP™ license
In September 2015, Starpharma signed a multiproduct license
with AstraZeneca for use of Starpharma’s DEP™ technology, and this
has been extended to a second drug candidate being selected for
development. Under the multiproduct license agreement, Starpharma
has granted access to use DEP™ technology in the development and
commercialisation of AstraZeneca compounds against a defined
family of drug targets. AstraZeneca will fund all development and
commercialisation costs for AstraZeneca DEP™ products. The license
deal provides for potential development, launch and sales milestones
payable to Starpharma of up to US$124 million as well as royalties on
net sales for the first AstraZeneca DEP™ product. The nomination of a
second candidate illustrates the multiproduct opportunity, validates
the DEP™ technology and allows Starpharma to be eligible for
additional potential milestones of up to US$93 million, plus royalties
for this second and subsequent candidates under the agreement.
This collaboration has been extremely positive and recently
Starpharma’s partnership with AstraZeneca was further strengthened
with the initiation of a new program with AstraZeneca, which is in
addition to, and outside the scope of, the existing multiproduct
agreement.
“ We estimate that each product
successfully commercialised under
this agreement could be worth
around US$450M to Starpharma
and, depending on the range
of indications and degree of
commercial success in the market,
potentially significantly more.”
Dr Jackie Fairley
“ We already have a
long-standing and
successful working
relationship with
Starpharma. This
license agreement
will enable us to
further harness the
DEP™ technology
and evaluate its
potential across
novel molecules
within our oncology
portfolio.”
Susan Galbraith, Head of the
Oncology Innovative Medicines
Unit at AstraZeneca
CEO’s ReportStarpharma Holdings Limited Annual Report 2016 7 CEO’s Report
Additional internal DEP™ programs
In April 2016, Starpharma announced results of its most recent DEP™
candidate, DEP™ cabazitaxel, which showed complete and sustained
tumour regression in a human breast cancer model. DEP™ cabazitaxel
is Starpharma’s dendrimer-enhanced, water soluble, detergent-free
version of the cancer drug, Jevtana® (cabazitaxel). Jevtana® is a
leading oncology agent marketed for advanced prostate cancer by
Sanofi-Aventis with 2015 sales of approximately US$430 million,
growing at approximately 18% per annum.
In the study, Starpharma’s DEP™ cabazitaxel was compared to
Jevtana® in a human breast cancer preclinical model (xenograft) which
showed it significantly outperformed Jevtana® with respect to both the
level and duration of tumour regression (anticancer activity). Within
four weeks of dosing, 100% of mice treated with Starpharma’s DEP™
cabazitaxel were tumour-free and remained so for the 150-day study
duration. Mice treated with Jevtana® alone showed significant tumour
regrowth from 60 days after dosing. DEP™ cabazitaxel also
significantly outperformed Jevtana® for survival in the model
(p<0.0001).
Additional preclinical data showed that DEP™ cabazitaxel eliminated
neutropenia associated with cabazitaxel (Jevtana®). Jevtana® has
an FDA “black box” warning regarding neutropenia and severe
hypersensitivity to polysorbate-80. In contrast, Starpharma’s DEP™
cabazitaxel is water soluble and completely free of polysorbate-80.
In November 2015, Starpharma announced data showing its novel
antibody-targeted DEP™ conjugate resulted in complete tumour
regression and 100% survival in a human ovarian cancer model.
Starpharma’s antibody-targeted DEP™ conjugate (using Herceptin®
as the targeting group) significantly outperformed Roche’s Kadcyla®,
a Herceptin® antibody-drug conjugate (ADC) in the preclinical
ovarian cancer model.
Final results of the study, announced earlier this year, showed that
the HER2-targeted DEP™ conjugate resulted in complete tumour
regression at 60 days post dosing and demonstrated overall superior
anticancer effectiveness compared to Kadcyla®. These impressive
results and the benefits of DEP™ quickly led to the company signing
Targeted DEP™ partnerships with two of the leading players in the
ADC space. The market for ADCs is expected to grow to US$9 billion
by 2023.
8
Starpharma Holdings Limited Annual Report 2016
CEO’s Report
PRIOSTAR® AGROCHEMICALS
During the year, the agrochemical portfolio progressed on a number
of fronts and reached an important commercial milestone when one
of the world’s leading crop protection companies, Adama Agricultural
Solutions, licensed Priostar® for an enhanced, proprietary, 2,4-D
herbicide for the US market.
2,4-D is one of the top three herbicides sold worldwide, with 2014
global sales of approximately US$680 million. Under the license,
Starpharma will receive royalties on sales of the proprietary Adama
Priostar®-improved 2,4-D products. In addition to the US rights, the
agreement also includes a mechanism to expand the licence into
additional territories.
The improved product is expected to provide better flexibility and
weed control benefits to the grower, as well as on-target application,
and reduced environmental impact by decreasing overall exposure
to 2,4-D.
We continue to see strong international interest in Priostar®
including a collaborative program with a major Japanese company
and interest from several Chinese agrochemical entities.
Starpharma’s internal Priostar® programs including Glyphosate,
Glyphosinate Ammonium and Metolachlor have all generated valuable
new field trial data this year. As agrochemical markets become more
genericised and are saturated with equivalent products, the Priostar®
platform will allow users to create differentiated, patented formulations
securing better commercial outcomes.
“ The innovative
nature and superior
performance of
the Priostar®
formulations fit well
with our strategy to
deliver simple and
efficient solutions
to farmers to help
them grow.”
Sambi Shabtai, Head of
Innovative Development
at Adama
Starpharma Holdings Limited Annual Report 2016 9 CEO’s Report
CASH & CASH EQUIVALENTS
$M (AT 30 JUNE)
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Starpharma Holdings Limited Annual Report 2016
CORPORATEThis year Starpharma continued to receive strong support from institutional investors with its share placement and share purchase plan raising a combined total of approximately $34 million. The placement to sophisticated and institutional investors was oversubscribed and was well supported by existing holders. Our share register continues to comprise a diversified investor base, with solid support from well-known and respected institutions across Australia, Europe, Asia and the US. Starpharma’s patent position has been further strengthened during the year with a number of important patents being granted or allowed across the VivaGel®, DEP™ and Agrochemical (Priostar®) portfolios. These include allowance of key DEP™ patents in a number of jurisdictions and the granting of a US patent for VivaGel® BV. The VivaGel® BV patent term to 2032 provides an extension of seven years over the existing granted VivaGel® patents and builds on the company’s extensive patent portfolio of over 120 patents granted and more than 50 patent applications pending across VivaGel®, DEP™ drug delivery and Priostar®.Dr David Owen VP, Research OVERVIEW OF FINANCIAL RESULTS
FUTURE OUTLOOK
Total revenue and other income for the year was $4.6 million, a 173
per cent increase from the previous year mainly due to the signature
payment received from AstraZeneca under the DEP™ license.
Net loss after tax was $22.7 million, a 20 per cent increase over the
prior year loss of $19.0 million. The increase is primarily a result of the
clinical programs in progress this year for VivaGel® BV and DEP™
docetaxel. The R&D tax incentive for the 2016 financial year of $3.5
million is comparable to the previous year.
The net operating and investing cash outflows for the year were $17.8
million. Starpharma received the total anticipated $3.4 million of R&D
tax incentive relating to FY15. Net cash inflows from financing
activities of $32.6 million reflected net proceeds from the equity raise.
Starpharma ended the financial year to 30 June 2016 with cash
reserves of $46.0 million.
2016 has been a year filled with significant progress for Starpharma,
with several products achieving important commercial and regulatory
milestones. Starpharma’s key programs continue to gain interest from
global companies, and the company is well placed financially to build
on these developments.
Starpharma is proud to call itself one of Australia’s most innovative
biotechnology companies working in important areas of unmet patient
need, such as cancer and women’s health. As we continue to advance
our internal programs, we will also strengthen and expand our external
commercial relationships with global leaders to fully leverage the
immense value of our dendrimer platform. In the coming year, I expect
that all three of our business areas will gain traction in new markets,
receive further key regulatory approvals and achieve additional
commercial milestones.
Our success is the result of exceptional work by a dedicated team –
I would like to thank everyone at Starpharma for their skills and
commitment to the important work we do.
Finally, I would like to acknowledge the continued support of our
shareholders and invite you to read the full report.
Jackie Fairley
Chief Executive Officer
Starpharma Holdings Limited Annual Report 2016
11
CEO’s Report3 YEAR FINANCIAL SUMMARY2016 $M2015 $M2014 $MRevenue, grant income & other income3.90.80.3Interest revenue0.70.91.0Total revenue and income4.61.71.3Expenditure(27.3)(20.7)(15.9)Net loss after tax(22.7)(19.0)(14.6)Net operating and investing cash outflows(17.8)(14.3)(10.1)Net proceeds from issue of equity(32.6)20.50.2Cash and cash equivalents at the end of year46.030.824.0
Corporate & Social Responsibility
Corporate and Social Responsibility
12
Starpharma Holdings Limited Annual Report 2016
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 work place 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 is 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 assist in aligning 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 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, either within the public health, medical, life sciences or other markets. All of Starpharma’s pharmaceutical products and clinical research activities comply with strict regulatory and ethical approval processes. These include the FDA in the United States 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 of application and potentially improve the environmental profile of such products. Early studies in combining the company’s proprietary dendrimer technology with major agrochemicals indicate that improvements such as enhanced solubility, better adhesion to plants and modification of soil penetration properties are possible. 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 2016.
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
Z Peach
P R Turvey
J K Fairley (Chief Executive Officer)
All were directors during the whole of the financial year. Dr P J Jenkins was a director for part of the financial year, from 1 July 2015 until his
retirement following the AGM on 19 November 2015.
Information on Directors
Rob B Thomas AM, BEc, MSAA, SF Fin, FAICD
Finance and Management
Independent non-executive director (appointed 4 December 2013)
Chairman (from 13 June 2014)
Experience
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. Formerly, he was a Partner of
Potter Partners (now UBS) and also held the roles of CEO and
Head of Research. Mr Thomas is a former CEO of County
NatWest and Citibank Corporate and Investment Bank. For many
years, he was regarded as one of Australia’s leading analysts and
regularly lectured with FINSIA. Mr Thomas has chaired the Audit
and Risk Committee of Virgin Australia Limited since 2006, and is
approved under the NSW prequalification scheme for Audit and
Risk Committee Independent Chairs and Members for government
public sector agencies.
Mr Thomas is a former past Chairman of TAL Limited (formerly
Tower Australia Limited), the NSW State Library and Heartware
International Inc. Mr Thomas is currently a non-executive director
of ASX listed REVA Medical Inc., Virgin Australia Limited and
Biotron Limited.
Mr Thomas holds a Bachelor of Economics from Monash
University, a Diploma of Business (Accounting) from Swinburne
and is a fellow of FINSIA. He is also a Master Stockbroker and a
Fellow of the Australian Institute of Company Directors.
Jacinth (Jackie) K Fairley BSc, BVSc (Hons), MBA, GAICD
International Pharmaceutical Industry and Management
Chief Executive Officer and Director (appointed 1 July 2006)
Experience
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 Pfizer). 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 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.
Committees
Attends Board committee meetings by invitation.
Other current directorships of ASX listed entities
None
Committee membership
Member of Remuneration & Nomination Committee
Member of Audit & Risk Committee
Directorships of other ASX listed entities within the last three
years
None
Other current directorships of ASX listed entities
Virgin Australia Limited, REVA Medical Inc. and Biotron Limited.
Directorships of other ASX listed entities within last three
years
Heartware International Inc. (NASDAQ listed, de-listed from ASX
on September 2013)
Interests in Starpharma Holdings Limited
550,000 ordinary shares
Interests in Starpharma Holdings Limited
2,781,072 ordinary shares
2,563,246 employee performance rights
Starpharma Holdings Limited Annual Report 2016
Starpharma Holdings Limited Annual Report 2016
13
13
Directors’ Report
Information on Directors (continued)
Richard A Hazleton BSChE, MSChE, MBA, HonDrEng,
HonDrCommSc
Finance, Engineering, Science and Management
Independent non-executive director (appointed 1 December 2006)
Peter R Turvey BA/LLB, MAICD
International Pharmaceutical Industry, IP, Law, Risk &
Management
Independent non-executive director (appointed 19 March 2012)
Experience
Mr Hazleton is a former Chairman and CEO of US-based global
corporation Dow Corning. He joined Dow Corning in 1965 and held
numerous positions in engineering, manufacturing and finance,
both in the US and Europe. He was appointed as Chief Executive
Officer of the company in 1993, and Chairman of the Board of
Directors and CEO in 1994. During his career with Dow Corning,
Mr Hazleton performed the roles of European Area Vice President
and Director of Finance and later Corporate Controller and Chief
Accounting Officer. In this latter global role he was responsible for
the preparation of all public financial reports, and relationships with
financial regulatory agencies and independent auditors.
Mr Hazleton retired from Dow Corning in 2001.
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.
Committee membership
Member of Audit & Risk Committee
Member of Remuneration & Nomination Committee
Other current directorships of ASX listed entities
None
Directorships of other ASX listed entities within the last three
years
None
Interests in Starpharma Holdings Limited
208,466 ordinary shares
Zita Peach BSc, GAICD, FAMI
International Pharmaceutical Industry and Management
Independent non-executive director (appointed 1 October 2011)
Experience
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 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
AirXpanders, Inc. and Vision Eye Institute Limited (delisted in
December 2015). Ms Peach also holds board positions with 4Dx
Limited, Bionic Vision Technologies Pty Ltd, Hudson Institute of
Medical Research and Mt Buller and Mt Stirling Alpine Resort
Management Board.
Ms Peach is a graduate member of the Australian Institute of
Company Directors.
Committee membership
Chair of the Remuneration & Nomination Committee
Other current directorships of ASX listed entities
AirXpanders Inc.
Directorships of other ASX listed entities within the last three
years
Vision Eye Institute Limited (delisted from the ASX in December
2015)
Interests in Starpharma Holdings Limited
48,975 ordinary shares
14
Starpharma Holdings Limited Annual Report 2016
Experience
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, retiring in
2011. Mr. Turvey is currently a principal of Foursight Associates
Pty Ltd, a non-executive director of ASX-listed 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.
Committee membership
Chair of Audit & Risk Committee
Other current directorships of ASX listed entities
Viralytics Limited
Directorships of other ASX listed entities within the last three
years
Admedus Limited
Interests in Starpharma Holdings Limited
131,838 ordinary shares
Peter J Jenkins MB BS (Melb), FRACP
Independent non-executive director
(appointed 13 May 1997, retired 19 November 2015).
Member of Remuneration & Nomination Committee
(from 18 December 2014 until 19 November 2015) and immediate
past Chairman of Remuneration & Nomination Committee until
18 December 2014.
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 (now Pfizer) and
UMT (Fonterra). He holds qualifications from University of
Tasmania and Monash University.
Mr Baade is a director of BioMelbourne Network Inc, serving as its
Treasurer and Chairman of the Finance, Audit and Risk
Committee. Mr Baade is a member of the Australian Institute of
Company Directors.
Starpharma Holdings Limited Annual Report 2016
14
Directors’ Report
Operating & Financial Review
Principal activities
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® BV 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 2016, 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 2016 was
$22,675,000 (2015: $18,950,000). The net operating and investing
cash outflows for the year were $17,782,000 (2015: $14,268,000),
with a cash balance at 30 June 2016 of $45,972,000 (June 2015:
$30,848,000). Net financing cash inflows for the year of
$32,564,000 included net proceeds of $32,596,000 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 2016 (2015: Nil).
Review of operations
Key highlights until the date of this report include:
Commercial and regulatory
License and supply agreement signed with Shenyang Sky
and Land Latex who is a major provider of condoms to the
Chinese Government;
License and supply agreement signed with Aspen
Pharmacare Australia for VivaGel® BV in Australia and New
Zealand;
Multiproduct licensing agreement signed with AstraZeneca
utilising Starpharma’s DEP™ drug delivery platform;
An expanded drug delivery program was initiated by
AstraZeneca in addition to the existing multiproduct license;
New licensing agreement signed with Adama for the
development and commercialisation of a Priostar® enhanced,
proprietary 2,4-D herbicide for the US market; and
Marketing approval in the EU was granted for VivaGel® BV.
Phase 3 VivaGel® BV trial for prevention of recurrent BV was
more than 90% recruited; and
Early results showing encouraging efficacy signals, without
the typical side effects, in phase 1 clinical trial of DEP™
docetaxel and was more than 75% recruited.
Clinical
Preclinical
Targeted DEP™ conjugate achieves complete and sustained
tumour regression in a human ovarian cancer model;
DEP™ cabazitaxel significantly outperformed Jevtana® in a
human breast cancer model; and
VivaGel® active, astodrimer sodium (SPL7013) showed
potent activity against Zika virus in laboratory studies.
Financial
Successful capital raising of $34 million via an institutional
placement and share purchase plan; and
Receipt of a $3.4 million R&D tax incentive refund.
Europe and Asia. There is currently no approved therapeutic
option available for recurrent BV, which affects up to 50-60% of BV
sufferers.
During the period, Starpharma achieved marketing approval in the
European Union (EU) for VivaGel® BV as a stand-alone gel for the
topical treatment and rapid relief of BV including symptoms. This
approval will allow VivaGel® BV to be marketed in the European
Economic Area, which includes approximately 30 countries,
providing access to more than 260 million women. The company
continues negotiations with potential commercial European
partners for distribution rights for this VivaGel® BV product
opportunity.
In Australia, Starpharma signed a license agreement with Aspen
Pharmacare Australia Pty Ltd for the sales and marketing of
VivaGel® BV in Australia and New Zealand. Under the license
agreement, Aspen is responsible for all marketing, promotion and
local distribution of the product to clinicians and pharmacies.
Starpharma will supply Aspen with VivaGel® BV product and will
receive royalties on net sales. Launch preparations are well
advanced whilst regulatory approval is being reviewed.
Starpharma signed an exclusive license and supply agreement
with Shenyang Sky and Land Latex Co. Ltd (‘Sky and Land’) - a
major provider of condoms to the Chinese Government, in July
2016 following the MOU signed in December 2015. This
commercial deal will expand the availability of the VivaGel®
condom to a market not captured by Starpharma’s current
licenses. Sky and Land is a diversified Chinese company that
owns and operates a number of condom manufacturing plants in
China. They are a major provider of condoms to the Chinese
Government who provides condoms to its citizens under a number
of programs, with an annual requirement of an estimated 3 billion
condoms.
Having successfully tested VivaGel® active, astodrimer sodium
(SPL7013) against Zika virus in laboratory studies, Starpharma is
investigating the inclusion of Zika in the list of viruses inactivated
for the VivaGel® condom, given the outbreak of Zika virus world-
wide. The company gained wide-spread media attention upon
announcing that Starpharma and Ansell would be providing the
Australian Olympic Team with antiviral Dual Protect™ VivaGel®
condoms for the 2016 Olympic Games held in Rio de Janeiro,
Brazil.
Drug Delivery Program
Starpharma’s DEP™ technology is used to improve the
performance of pharmaceuticals. Both preclinical and early clinical
data have shown DEP™ versions of drugs to be superior in a
variety of ways to the unmodified drugs in currently marketed
formulations and others in development.
During the reporting period, Starpharma signed a licensing
agreement with global pharmaceutical company AstraZeneca. The
agreement enables the development and commercialisation by
AstraZeneca of compounds directed at a defined family of targets
using Starpharma’s DEP™ drug delivery technology. Under the
agreement Starpharma is eligible to receive milestone payments
on one or more AstraZeneca DEP™ products as they progress
through the development pipeline, and milestone and royalty
payments on any net sales of the resultant products. An upfront
signature payment of US$2 million was received during FY16.
AstraZeneca will fund all development and commercialisation
costs under the agreement, including ongoing and future
collaborative work conducted with Starpharma.
VivaGel® Program
Starpharma has progressed its two double-blinded, placebo
controlled phase 3 trials of VivaGel® BV for the prevention of
recurrent BV. More than 90% of the targeted participants have
been recruited across 100+ sites in the US, Canada, Mexico,
Starpharma Holdings Limited Annual Report 2016
Starpharma Holdings Limited Annual Report 2016
15
15
Directors’ Report Operating & Financial Review
Review of operations (continued)
Matters subsequent to the end of the financial year
No other matters or circumstances have arisen since 30 June
2016 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, patent opportunity, 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 strong 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.
Starpharma has advanced its phase 1 clinical trial of lead internal
drug delivery program DEP™ docetaxel into the final expansion
phase with a large European site recently added to facilitate
completion of phase 1 and in preparation for phase 2. The phase 1
trial has shown very encouraging efficacy signals in a significant
proportion of patients including in cancers not typically sensitive to
docetaxel. Efficacy signals have now been seen in cancers such
as pancreatic, lung, prostrate, gastro-oesophagel, and brain.
Importantly, there have been no reports of neutropenia and
alopecia. Neutropenia is a common dose-limiting and life-
threatening side-effect of currently available chemotherapy drugs.
In addition to DEP™ docetaxel, Starpharma is developing a
number of dendrimer-enhanced, or DEP™ versions of existing
drugs. The company’s most recent DEP™ candidate in the
development pipeline is DEP™ cabazitaxel - Starpharma’s
dendrimer-enhanced, water soluble, detergent free version of the
cancer drug, Jevtana® (cabazitaxel). Jevtana® is a leading
oncology agent marketed by Sanofi-Aventis.
During the year, DEP™ cabazitaxel was tested in a human breast
cancer model (xenograft) which showed it significantly
outperformed Jevtana® with respect to both the level and duration
of tumour regression (anticancer activity). Within four weeks of
dosing, 100% of mice treated with Starpharma’s DEP™
cabazitaxel were tumour-free and remained so for the 150-day
study duration. Jevtana® alone showed significant tumour regrowth
from day 60 after dosing. DEP™ cabazitaxel also significantly
outperformed Jevtana® for survival in the model (p<0.0001).
Additional preclinical data also showed that DEP™ cabazitaxel
eliminated neutropenia associated with Jevtana®.
Another drug in the development pipeline, Starpharma’s antibody-
targeted DEP™ conjugate (using Herceptin as the targeting
group), significantly outperformed both Roche’s Kadcyla® (T-DM1),
a Herceptin® antibody-drug conjugate (ADC), and the monoclonal
antibody Herceptin® (Trastuzumab) itself in a preclinical human
ovarian cancer model. Data from the study indicated that treatment
resulted in complete and sustained tumour regression and 100%
survival. Final results of the preclinical study showed complete
tumour regression at 60 days’ post dosing with the HER2-targeted
DEP™ conjugate.
Agrochemicals
Starpharma’s agrochemicals business focuses on dendrimer-
enhanced technology for crop protection products with market
potential of over US$10 billion. Starpharma’s Priostar® patented
technology has been scientifically proven to enhance the
effectiveness of crop protection products through the delivery and
formulation of agrochemical actives, providing significant value
adding potential. Core benefits include improved solubility,
increased adhesion to leaves and stems, higher weather
resistance, improved movement through soil, increased efficacy
and uptake and reduced level of hydrocarbon content.
During the year, one of the world’s leading crop protection
companies, Adama Agricultural Solutions, signed a licensing
agreement with Starpharma to commercialise an enhanced,
proprietary, 2,4-D herbicide for the US market, utilising Priostar®.
2,4-D is one of the top three herbicides sold worldwide, with 2014
global sales of approximately US$680 million. Under the license,
Starpharma will receive royalties on sales of the proprietary
Adama Priostar®-improved 2,4-D products. In addition to the US
rights, the agreement also includes an opportunity to expand the
license into additional territories.
16
Starpharma Holdings Limited Annual Report 2016
Starpharma Holdings Limited Annual Report 2016
16
Directors’ Report
Operating & Financial Review
Review of Financials
Material Business Risks
Income statement
Revenue from continuing operations
Other income
30 June
2016
$’000
30 June
2015
$’000
4,505
128
1,693
4
Research and development expenses
(22,157)
(16,250)
Administration expenses
(5,149)
(4,392)
Finance costs
(2)
(5)
Loss attributable to members
(22,675)
(18,950)
Income statement
The reported net loss after tax of $22,675,000 (2015: $18,950,000)
is after fully expensing all research and development expenditure
and patenting costs in the current year. The net loss is an increase
from the prior year with the major variance a result from the
VivaGel® BV and DEPTM docetaxel clinical programs and activities
in progress, offset by an increase in revenue.
Total revenue and other income for the year was $4,633,000
(2015: $1,697,000), comprising revenue of $3,825,000 (2015:
$804,000) for licensing, royalty and research revenue, interest
income of $680,000 (2015: $889,000) and other income of
$128,000 (2015: $4,000). The increase in revenue from the
previous year was mainly due a signature payment of $2,869,000
received from AstraZeneca under a drug delivery licensing
agreement.
Research and development expenses include the costs of the
VivaGel® BV and DEPTM docetaxel clinical programs, regulatory
requirements for the VivaGel® BV symptomatic relief of BV 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.
A contra research and development expense of $3,518,000 (2015:
$3,478,000) has been recorded for research and development
activities eligible under the Australian Government’s R&D tax
incentive program.
Balance sheet
At 30 June 2016 the group’s cash position was $45,972,000 (June
2015: $30,848,000). Trade and other receivables of $4,304,000
(June 2015: $4,232,000) includes $3,522,000 receivable from the
Australian Government under the R&D tax incentive program.
Trade and other payables of $8,839,000 (June 2015: $5,933,000)
is a result of the current clinical trial activity.
Statement of cash flows
The net operating and investing cash outflows for the year were
$17,782,000 (2015: $14,268,000). During the financial year
$3,422,000 (2015: $4,206,000) 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 $32,564,000 (2015:
$20,471,000) included $32,596,000 net proceeds from an equity
raise.
Earnings Per Share
Basic loss per share
Diluted loss per share
2016
($0.07)
($0.07)
2015
($0.06)
($0.06)
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 may significantly
impact the company. Insurance, at an acceptable cost, may
not be available or be adequate to cover liability claims or any
product recall costs (if any) if a 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).
Starpharma Holdings Limited Annual Report 2016
Starpharma Holdings Limited Annual Report 2016
17
17
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
licenses 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 2016 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 2016, and
the numbers of meetings attended by each director were:
Directors
J K Fairley
R A Hazleton
Z Peach
R B Thomas
P R Turvey
P J Jenkins1
Board
9 of 9
9 of 9
8 of 9
9 of 9
9 of 9
3 of 3
Audit & Risk
Committee
Remuneration
& Nomination
Committee
N/A
1 of 2
N/A
2 of 2
2 of 2
N/A
N/A
1 of 1
3 of 3
3 of 3
N/A
2 of 2
1 Director P J Jenkins retired as a director on 19 November 2015.
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.
18
Starpharma Holdings Limited Annual Report 2016
Starpharma Holdings Limited Annual Report 2016
18
Directors’ Report
Remuneration Report
The remuneration report for the year ended 30 June 2016 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
a) Remuneration principles and strategy
b) Approach to setting and reviewing remuneration
c) Details of executive equity incentive plans
d) Grant of equity incentives to KMP executives in FY16
5. Executive remuneration outcomes, including link to performance
6. Details of remuneration
7. Executive employment agreements
8. Additional disclosures relating to employee equity schemes
9. Actual remuneration of KMP executives
1.
Introduction
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 only has a small number of employees (35-40) 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 approaching important regulatory and commercial milestones.
New remuneration arrangements implemented in FY16
Having conducted a comprehensive review of remuneration arrangements in FY15, substantive amendments were implemented to achieve the
objective of a simplified remuneration strategy to better reflect a key performance indicator (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 value-adding milestones, such as commercial deals.
The structure and quantum of remuneration for FY16 remains largely consistent with the previous period. Key improvements resulting from the
remuneration review include that all equity awards are now subject to either KPIs or total shareholder return (TSR) hurdles, performance periods
and vesting periods are clearly delineated between short-term incentive (STI) and long-term incentive (LTI) awards based on a three year
performance period, an increase in the proportion of LTI equity awards, and all performance review periods for the grant of equity awards have
been aligned with financial years. There are transitional elements for executive remuneration reported for the FY16 year, these are necessary to
cater for the differences between the current and past remuneration arrangements.
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 2016. 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
(ii) Executive director
R B Thomas
P J Jenkins1
Non-executive Chairman
Non-executive Director
R A Hazleton
Non-executive Director
Z Peach
Non-executive Director
P R Turvey
Non-executive Director
1 P J Jenkins retired as a non-executive director on 19 November 2015
J K Fairley
Chief Executive Officer & Managing Director (CEO)
(iii) Other KMP executives
N J Baade
C P Barrett2
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
2 C P Barrett resigned as an employee on 18 September 2015
There were no changes to the KMP after the reporting date and up to the date of this report.
Starpharma Holdings Limited Annual Report 2016
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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 STI and 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.
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 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. The purpose is to
assess each employee’s performance against their pre-agreed individual KPIs and/or business unit performance and corporate KPIs to
determine, subject to business considerations such as cash availability, if an STI award 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 2015 Annual General Meeting (AGM)
Of the votes cast on the company’s remuneration report for the 2015 financial year, 99% 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. During the year, members of the Board
engaged with proxy advisors and shareholders to discuss a range of governance and remuneration matters.
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Starpharma remuneration process summary
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.
BOARD
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.
Clawback of remuneration
In the reasonable opinion of the Board, if a KMP executive has acted fraudulently or dishonestly, the Board may determine that any equity right
(including an exercisable, vested right) should lapse.
Starpharma Holdings Limited Annual Report 2016
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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 2016 AGM.
Fee policy
Non-executive directors’ fees consist of base fees and committee fees. The payment of committee fees recognises the additional time,
responsibility and 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 addition to his base fee.
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 non-executive directors’ fees reported below
include any statutory superannuation contributions.
Fees paid in FY16
The aggregate amount paid to non-executive directors for the year ended 30 June 2016 was $359,840 (2015: $393,000). The lower amount
reflects the decrease of one non-executive director from five to four for the period from November 2015. The details of remuneration for each
non-executive director for the years ended 30 June 2016 and 30 June 2015 are outlined in the tables in section 6.
Proposed fee adjustments for FY17
Having reviewed benchmarking data for directors’ fees, the Board proposes to increase base fees by 2.4% from 1 July 2016, whilst also aligning
the fee amounts for both committees at $8,000 and $3,500 for committee chairs and members, respectively. This change reflects the increasing
time and responsibility of the Remuneration and Nomination Committee in performing their duties. The proposed fees, compared to the current
FY16 levels, are outlined in the below table. Non-executive directors’ fees were last increased with effect from 1 April 2014.
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
Proposed Fees
from 1 July 2016
Actual Fees to
30 June 2016
$
128,000
64,000
8,000
3,500
8,000
3,500
$
125,000
62,500
7,500
3,000
5,000
2,500
Chair
Member
Chair
Member
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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
Vehicle
Purpose
Link to Performance
Fixed remuneration
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,
which is based on a
performance assessment, with
a one year performance period
and deferred vesting date of a
further one year, subject to
continued employment.
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
KPIs, both business unit and
corporate, over the medium term
which are important drivers of value
and 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 S&P/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 and enabling the company to structure awards that may conserve cash reserves.
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 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 or bonuses in any executive contracts.
The CEO has a maximum cash bonus entitlement as a component of STI, which for FY16 was $220,000. Other executives do not have a pre-
specified maximum cash bonus entitlement; however bonuses are awarded from a benchmarked, maximum shared pool for executives which
equates to 20% of total fixed remuneration, based on personal and business unit KPIs and 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.
The target remuneration mix is outlined in the table below. Following the implementation of the remuneration review, there is a period of
transition to achieve the desired target mix - 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.
Starpharma Holdings Limited Annual Report 2016
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4. Executive remuneration policy (continued)
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%
To achieve the target remuneration mix, the below performance pay structure was adopted in FY16. The timeline and structure of the proposed
performance related pay to be granted in FY17 to executives is consistent with this structure.
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
c) Details of executive equity incentive plans
Starpharma Short-Term Incentives (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?
Cash bonus and performance rights, both based on a one year performance period, with the
performance rights conditional upon a deferred vesting date of a further one year, subject to continued
employment.
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 FY16 the CEO and executives were awarded STI equity with a 1 year performance period
(1 July 2015 to 30 June 2016), with a deferred vesting date of 30 June 2017 dependent on continued
employment.
The STI opportunity is a target of ~25-30% and ~15%-20% of total remuneration for the CEO and
other KMP executives, respectively. Due to the transitional arrangements implemented the target will
not be achieved for FY16.
The CEO had a target STI opportunity of 34% of total remuneration for FY16, comprised of a cash
component of 16% and equity component of 18%. The cash component was equivalent to 44% of total
fixed remuneration.
In FY16, other KMP executives had an average target STI opportunity of 25% of total remuneration,
with split between cash and equity in approximately equal proportions. The cash bonuses to other
KMP executives are awarded from a maximum shared pool for executives equating to 20% of total
fixed remuneration.
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What are the STI performance
conditions for FY16?
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 FY16, 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 STI awards for the CEO and other executives
are noted in the table below:
Corporate KPIs
Business Units KPIs
STI Cash Bonus
CEO 100%
Other executives 100%
STI Performance Rights
CEO 100%
Other executives 70%
Other executives 30%
Details regarding LTI performance conditions are contained in the next table.
How is performance assessed?
At the end of each performance period (typically annually), 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 makes recommendations to the Board.
When is performance assessed
and when are awards paid or
vest?
The end of the financial year corresponds with the end of each performance period. Performance is
assessed following the end of the financial year to allow for the timely disclosure in the annual
remuneration report. This is usually within two months of the end of the financial year.
The STI cash component is paid approximately three months following the end of the financial year
and once the performance assessment review is complete.
For STI equity, a proportion of rights, based on the performance assessment, will remain available
(deferred) to vest on 30 June the following year. Any rights forfeited based on the performance
assessment will be forfeited within the first three months of the new financial year following the
performance assessment.
The vesting of deferred rights on 30 June is subject to the continued employment condition being
satisfied. Once vested, KMP executives can elect to convert vested rights into shares during
prescribed exercise windows throughout future periods. The maximum period for the exercise of
vested rights is 15 years from grant date.
STI equity awards prior to the FY16 awards vest on 30 September, for the performance period ending
30 June. The rights are automatically converted into shares within 10 business days of vesting.
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 STI cash bonus entitlement whereby the maximum amount achievable is set.
There is no predetermined 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, or any vested right, not exercised, 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 to shares
satisfied?
As the company is currently in a development phase and not operating cash flow positive, the
conversion of performance rights 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.
Are performance rights eligible
for dividends?
Performance rights - whether unvested or vested, not exercised - are not eligible to receive dividends.
Starpharma Holdings Limited Annual Report 2016
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4. Executive remuneration policy (continued)
Starpharma Long-Term Incentives (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?
What is the LTI opportunity?
Performance rights with a performance/vesting period of 3 years or more. The LTI performance
rights awarded during FY16 have 3 year performance periods for all executives. In FY15, LTIs for
other KMP executives included both 3 and 4 year performance periods as part of the transition
arrangements to the new executive remuneration structure.
The CEO has a target LTI opportunity of 28% of total remuneration for FY16. For other KMP
executives, the range of the target LTI opportunity for FY16 was 13% to 15% of total remuneration.
As outlined in section 4 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
FY16?
Corporate KPIs reflect long-term (3 year) strategic, operational and financial management
objectives. These relate to key value creating events and significant milestones that are linked to
Starpharma’s three business areas, VivaGel®, Drug Delivery and Agrochemicals, as follows:
To complete the clinical development, registration and the monetisation of the VivaGel®,
Drug Delivery and Agrochemical portfolios. With monetisation represented by the
completion of a number of commercial deals that build shareholder value and generate
income; and
The development of new product candidates for the DEPTM platform technology and/or the
licensing of such candidates.
Due to the commercially sensitive nature of the specific performance metrics within these KPIs,
Starpharma will provide further details in the annual report following the end of the performance
period.
Maintaining the link between executive remuneration outcomes and the returns to shareholders,
TSR is also a relevant performance condition in respect of LTIs. 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.
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 LTI 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?
At the end of each performance period, after consideration of performance against KPIs, the
Remuneration and Nomination Committee recommends the amount of LTIs 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.
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When is performance assessed
and when are awards paid or
vest?
The end of the financial year corresponds with the end of each performance period. Performance is
assessed following the end of the financial year to allow for the timely disclosure in the annual
remuneration report. This is usually within two months of the end of the financial year.
For LTI equity, the rights will vest on 30 September following the performance assessment. Once
vested, the KMP executives can elect to convert vested rights into shares during prescribed
exercise windows throughout future periods. The maximum period for the exercise of vested rights
is 15 years from grant date.
LTI equity awards prior to the FY16 awards vest in September when the performance period aligns
with the end of the financial year. In some cases for the CEO, rights vest in November, being the
anniversary of their grant at the company’s AGM. These rights are automatically converted into
shares within 10 business days of vesting.
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 predetermined LTI equity entitlements.
What happens if an executive
leaves?
Same as for STI.
What happens on a change of
control?
What happens in the case of
fraud/dishonesty?
Re-testing
How is the conversion of
performance rights to shares
satisfied?
Same as for STI.
Same as for STI.
Same as for STI.
Same as for STI.
Are performance rights eligible for
dividends?
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. From 1 July 2015, KMP executives are no longer invited to participate in this $1,000 Plan. Details of the shares issued under the
$1,000 Plan in the previous period are included on page 75 of the annual report.
Starpharma Employee Share Option Plan
The Starpharma Employee Share Option Plan was utilised until 2009 for equity awards, until restrictive Australian taxation legislation was
introduced for employee option plans. Subsequent amendments, effective 1 July 2015, have been made to the taxation legislation and the
Board may change the structure of Starpharma’s equity incentive plans in the future as it continually considers the optimal vehicle for awarding
LTI.
No options were issued or vested under the Starpharma Employee Share Option Plan during FY16. The last options either exercised or lapsed
in FY14.
d) Grant of equity incentives to KMP executives in FY16
The below tables summarise the equity incentives granted in FY16:
CEO and Managing Director (J K Fairley)
Value to grant
Deferred STI equity
$150,000
LTI equity
$525,000
Method for calculating number of rights
Total value of grant at fair value divided by the fair value of rights
Number of Rights
Face Value of grant
(based on VWAP of $0.6837)
Performance Period
Deferral Period
Performance Conditions
219,395
$150,000
893,851
$611,126
1 July 2015 to 30 June 2016
1 July 2015 to 30 June 2018
12 months from end of performance period
Not applicable
100% Corporate KPIs
70% of the fair value subject to
Corporate KPIs
30% of the fair value subject to
TSR performance
Other Vesting Conditions
Remains employed until the vesting date and has not engaged in fraud or dishonesty
Vesting Date
30 June 2017
30 September 2018
Starpharma Holdings Limited Annual Report 2016
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4. Executive remuneration policy (continued)
Other KMP executives
J Paull
Value of grant
N J Baade
A Eglezos
D J Owen
Number of Rights
Face Value of grant
Value of grant
Number of Rights
Face Value of grant
Performance Period
Deferral Period
Deferred STI equity
$41,022
60,000
$41,022
$34,185
50,000
$34,185
LTI equity
$155,387
240,000
$164,088
$129,489
200,000
$136,740
1 July 2015 to 30 June 2016
1 July 2015 to 30 June 2018
12 months from end of performance
period
Not applicable
Method for calculating number of rights
Total value of grant at fair value divided by the fair value of rights
Face Value of grant
Performance Conditions
Based on VWAP of $0.6837
70% Business Unit KPIs
30% Corporate KPIs
70% Business Unit KPIs
15% Corporate KPIs
15% TSR performance
Other Vesting Conditions
Remains employed until the vesting date and has not engaged in fraud or
dishonesty
Vesting Date
30 June 2017
30 September 2018
The value to grant in the above tables is the fair value based on the volume weighted average price (VWAP) of the company’s shares traded on
the ASX over the 3 month period to 30 June 2015, which reflects the beginning of the performance period. The VWAP (before applying any
discount) for each right was $0.6837. In accordance with accepted valuation standards, the VWAP is not discounted for the rights that are
subject to KPIs, and is discounted in respect of the LTI equity subject to the TSR performance condition. The undiscounted VWAP is considered
the face value for the purpose of disclosing the face value of the grant of rights.
The 3 month period has been determined to be the appropriate duration for the calculation of the VWAP as it limits any unintended
consequences of short-term volatility in the company’s share price and is consistent with the duration used in the calculation of TSR for the TSR
performance condition. Starpharma engages an independent expert to calculate the fair value of performance rights.
For accounting purposes, including for the tables in section 6, a valuation at the date of grant in accordance with AASB 2 Share-based
payments is undertaken and the fair value of these rights expensed in accordance with Accounting Standards. This may lead to a discrepancy in
the fair value amount recorded in the remuneration disclosures as required for accounting purposes and those stated in the above tables which
is the basis on which the Board made the determination.
28
Starpharma Holdings Limited Annual Report 2016
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Directors’ Report Remuneration Report
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’s 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.
Closing price 30 June
Share price high
Share price low
FY16
FY15
$0.645
$0.73
$0.98
$0.54
$0.99
$0.41
FY14
$0.58
$1.11
$0.54
FY13
FY12
$0.82
$1.37
$1.75
$0.77
$1.88
$0.92
Number of performance rights forfeited by CEO
during FY based on share price performance
% of performance rights forfeited by CEO during
FY based on share price performance (as
percentage of total performance rights)
430,000
150,000
200,000
250,000
50%
21%
50%
67%
None scheduled to vest during FY12
therefore not applicable
None scheduled to vest during FY12
therefore not applicable
Fixed remuneration:
The average increase in KMP executive fixed remuneration for FY16 was 3.7%. There was one increase above 5% in the total fixed
remuneration package for one KMP executive in the year reflecting increased responsibility.
Short-term incentives (STI):
Summary of performance pay related to FY16 for the CEO
Performance Period
1 year to 30 June 2016
2 years to 30 June 2016
Continued employment to 22 November 2015
Index TSR related to 22 November 2015
Total
Maximum Available
% Awarded
STI Cash
($)
$181,500
N/A
N/A
N/A
$181,500
$220,000
82.5%
STI Equity
(# of Rights)
% Achieved
82.5%
90.0%
100.0%
0%
181,001
405,000
50,000
–
636,001
869,395
73.2%
STI awards (cash and equity) for the CEO in FY16 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 performance period 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 awarded.
The STI equity awarded for continued employment and TSR to 22 November 2015 was granted at the AGM in November 2013. This is the final
tranche of STI equity award solely conditional on continued employment.
The company’s TSR was tested against the TSR of the S&P/ASX300 Index for the two-year performance period ended 22 November 2015, the
company’s TSR for this period was -19.8% compared to the S&P/ASX300 Index TSR of -1.8%. Given the performance conditions were not
achieved, no STI equity vested related to TSR. All ongoing equity awards for TSR will be LTI based on a three-year performance period.
Starpharma Holdings Limited Annual Report 2016
29
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Directors’ Report Remuneration Report
5. Executive remuneration outcomes, including link to performance (continued)
STI Performance Assessment of corporate KPIs
Performance category
Metric
Weighting
Satisfied
Weighting
Satisfied
Performance period
1 July 2015 to 30 June 2016
1 July 2014 to 30 June 2016
VivaGel® BV phase 3 trials for
prevention of recurrence of
Bacterial Vaginosis (BV)
Commercialisation of VivaGel®
BV for symptomatic relief of
BV
VivaGel® condom
Phase 1 DEPTM docetaxel trial
Advance further DEPTM
candidate
Progress of phase 3 trials and
commercial arrangements
Regulatory filings, approvals and
partnering deals in selected
territories
Launch activities for product in
additional selected markets
Progress with phase 1 trial and
phase 2 planning
Advanced preclinical studies on
another DEPTM candidate,
preparation for clinical trials
New partnering deals/licenses
for DEPTM candidates
Completion of new partnering deals
or expanded field/products with
existing partner
Commercial arrangements in
agrochemicals
New contracts
Capital management and
people
Manage company’s capital in a
prudent manner and develop
personnel
15%
Partially Met
20%
Partially Met
10%
Partially Met
15%
Partially Met
10%
Partially Met
15%
Met
20%
Partially Met
20%
Partially Met
10%
Met
15%
Met
Met
Met
Met
15%
10%
10%
100%
5%
Met
10%
Met
100%
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):
Multiproduct license signed with AstraZeneca for use of Starpharma’s DEP™ drug delivery platform, including two candidates;
License and supply agreement signed with Aspen Pharmacare Australia for VivaGel® BV;
Memorandum of understanding signed with Sky and Land who is a major provider of condoms to the Chinese government
(resulting in a license and supply agreement being executed subsequent to 30 June 2016);
License agreement signed with Adama for the development and commercialisation of a Priostar® enhanced, proprietary, 2,4-D
herbicide;
Marketing approval in the EU granted for VivaGel® BV;
Phase 3 VivaGel® BV trial for prevention of recurrent BV more than 90% recruited;
Phase 1 clinical trial of DEP™ docetaxel shows encouraging efficacy signals without neutropenia or alopecia and more than 75%
recruited;
HER2-targeted DEP™ conjugate achieves complete and sustained tumour regression in a human ovarian cancer model;
DEP™ cabazitaxel significantly outperformed Jevtana® in a human breast cancer model; and
Successful capital raising of $34 million via an oversubscribed institutional placement and share purchase plan.
Summary of performance pay related to FY16 for Other KMP executives
For STI awards for other KMP executives, the CEO assesses the other KMP executives’ performance against predetermined KPIs relevant
to their business unit. These business unit KPIs relate directly to the corporate KPIs, with 30% of STI equity awards based on the percentage
achievement of corporate KPIs as disclosed above. The achievement of corporate KPIs requires 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 assessment and amounts to be awarded.
The Remuneration and Nomination Committee and the Board determined that other KMP executives had achieved a median performance
assessment of 86.0% (between 84.3% and 87.8%) for the performance period 1 July 2015 to 30 June 2016 for determining STI awards. For
the performance period 1 July 2014 to 30 June 2016 all other KMP executives were assessed as achieving 97.0% of STI equity awards.
Under the STI equity grants prior to FY16, other KMP executives were to be awarded 100% upon achieving satisfactory performance. In
September 2015, the final tranche of STI equity were awarded on this basis under these terms.
30
Starpharma Holdings Limited Annual Report 2016
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Directors’ Report Remuneration Report
Long-term incentives (LTI):
Summary of performance pay related to FY16 for the CEO
Performance Period
Continued employment to 30 November 2015
Index TSR related to 30 November 2015
Index TSR +10% related to 30 November 2015
Total
Maximum Available
% Awarded
% Achieved
100%
0%
0%
LTI Equity
(# of Rights)
80,000
–
–
80,000
360,000
22%
The LTI equity awarded for continued employment and TSR to 30 November 2015 was granted at the AGM in November 2012. With changes
to remuneration outlined earlier in this report, LTI equity awards granted in FY16 are no longer granted solely based on continued employment.
The company’s Index TSR was tested against the performance of the TSR of the S&P/ASX300 Index for the three-year performance period
ended 30 November 2015, the company’s TSR for this period was -45.9% compared to the S&P/ASX300 Index TSR of 13.6%. Given the
performance condition was not achieved, no LTI equity vested related to TSR.
Summary of performance pay related to FY16 for Other KMP executives:
There were no LTI equity awards to other KMP executives relating to performance in FY16. As discussed earlier in this report, there will be LTI
equity awards for the performance period ending 30 June 2017.
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.
2016
Name
Short-term benefits
Post-
employment
Cash salary &
fees†
$
Cash bonus#*
$
Non-monetary
benefits
$
Superannuation
$
Long-term
benefits
Long service
leave
$
Share-based
payments
Performance
Rights#
$
Non-executive directors
R B Thomas
P J Jenkins
R A Hazleton
Z Peach
114,155
27,867
66,826
46,233
63,927
P R Turvey
Executive director
J K Fairley
Other Key Management Personnel (group)
N J Baade
C P Barrett1
A Eglezos
228,200
439,141
207,787
55,640
D J Owen
J R Paull
Totals
224,690
187,201
1,661,667
383,500
–
–
–
–
–
–
–
–
–
–
10,845
2,647
–
21,267
6,073
–
–
–
–
–
–
–
–
–
–
181,500
47,500
7,000
47,500
50,000
50,000
28,066
31,208
11,379
595,857
1,287,151
12,938
172
2,510
337
43,378
87,401
30,000
4,567
19,308
19,308
25,000
4,846
(7,585)
491
7,692
1,187
99,558
(10,274)
99,558
99,558
117,641
402,629
49,520
397,567
401,585
424,407
170,223
18,010
1,001,898
3,322,699
Total
$
125,000
30,514
66,826
67,500
70,000
1 C P Barrett ceased employment on 18 September 2015 and forfeited his performance rights. Any share based payment expense previously
recognised under AASB 2 in respect of the rights has been reversed.
† Increases in overall total fixed remuneration packages for KMP executives were under 5% in the year, with the exception of A Eglezos, an
increase of 6.9%, due to the increase in responsibility in the business development function following the resignation of C P Barrett during 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 and performance rights granted are determined to be an ‘at risk’ component of
total remuneration.
* The cash bonus reported are the amounts assessed to be paid for the performance period 1 July 2015 to 30 June 2016. The actual cash
payment of the bonuses will occur in the following financial year.
Starpharma Holdings Limited Annual Report 2016
31
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Directors’ Report Remuneration Report
6. Details of remuneration (continued)
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
114,155
P J Jenkins
R A Hazleton
Z Peach
P R Turvey
Executive director
J K Fairley
60,502
65,500
60,502
63,927
–
–
–
–
–
–
–
–
–
–
10,845
5,748
–
5,748
6,073
–
–
–
–
–
418,820
194,775
33,687
31,500
11,674
Other Key Management Personnel (group)
38,500
N J Baade
192,873
C P Barrett
A Eglezos
D J Owen
J R Paull
Totals
217,059
208,360
215,184
176,547
28,000
36,000
38,500
45,000
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
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
–
–
–
–
–
–
1,000
1,000
1,000
1,000
1,000
5,000
# All performance related remuneration, including cash bonuses, shares, and performance rights granted are determined to be an ‘at risk’
component of total remuneration.
The relative proportions of remuneration for 2016 that are linked to performance and those that are fixed are as follows:
Fixed
remuneration
At risk - STI
cash
At risk - STI
Equity1
CEO
J K Fairley
Other KMP Executives
N J Baade
C P Barrett
A Eglezos
D J Owen
J R Paull
Target
Actual
Target
Actual
Actual
Actual
Actual
Actual
30%-40%
40%
55%-65%
63%
88%
63%
63%
60%
14%
12%
12%
12%
12%
12%
18%
12%
**
12%
12%
13%
At risk - STI
Total
25%-30%
At risk - LTI
Equity1
35%-40%
32%
28%
15%-20%
20%-25%
24%
**
24%
24%
25%
13%
**
13%
13%
15%
1 Where applicable, the expenses include negative amounts for expenses reversed during the year due to a failure to satisfy the vesting
conditions.
** Percentage not disclosed as the total amount of STI and/or LTI remuneration expense was negative for the relevant period due to the
cessation of employment during the year.
Following the substantive changes to remuneration arrangements in FY15, there is a period of transition over multiple years, to achieve the
desired target mix, towards a higher proportion of LTI compared to STI.
32
Starpharma Holdings Limited Annual Report 2016
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Directors’ Report Remuneration Report
Details of remuneration: cash bonuses, shares, and performance rights
For each cash bonus and grant of equity included in the tables on pages 31 to 37, 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 82.5% of her maximum cash
bonus entitlement of $220,000 in FY16, with the balance of 17.5% forfeited. The bonuses for other KMP executives are paid at the absolute
discretion of the Board based on an individual’s performance within the year, hence there is no component forfeited to report.
Grant date
fair value of rights
granted during
20161,2
$
784,367
Name
J K Fairley
N J Baade
172,541
C P Barrett
-
A Eglezos
172,541
D J Owen
172,541
J R Paull
207,049
Year
granted
Vested
Forfeited
Financial
years in which
rights may
vest
Performance rights
Maximum
fair value yet to
vest
%
-
-
-
-
93%
-
25%
22%
-
-
-
-
-
100%
-
-
-
100%
-
-
-
-
-
100%
-
-
-
-
-
100%
-
-
-
-
-
100%
%
-
-
-
-
7%
-
75%
78%
-
-
-
-
-
-
100%
100%
100%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2016
2016
2015
2015
2015
2014
2014
2013
2016
2016
2015
2015
2015
2014
2015
2015
2015
2014
2016
2016
2015
2015
2015
2014
2016
2016
2015
2015
2015
2014
2016
2016
2015
2015
2015
2014
30/06/19
30/06/17
30/06/18
30/06/17
30/06/16
30/06/17
30/06/16
30/06/16
30/06/19
30/06/17
30/06/19
30/06/18
30/06/17
30/06/16
30/06/19
30/06/18
30/06/17
30/06/16
30/06/19
30/06/17
30/06/19
30/06/18
30/06/17
30/06/16
30/06/19
30/06/17
30/06/19
30/06/18
30/06/17
30/06/16
30/06/19
30/06/17
30/06/19
30/06/18
30/06/17
30/06/16
$
485,739
102,657
160,653
32,165
-
21,703
-
-
106,566
21,867
19,973
17,788
6,476
-
-
-
-
-
106,566
21,867
19,973
17,788
6,476
-
106,566
21,867
19,973
17,788
6,476
-
127,879
26,240
23,968
21,346
7,771
-
1 The value at grant date calculated in accordance with AASB 2 Share-based Payments of 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 KMP executives’ 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.
Starpharma Holdings Limited Annual Report 2016
33
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Directors’ Report Remuneration Report
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.
CEO and Managing Director (J K Fairley)
No fixed term of agreement.
Base salary, inclusive of superannuation, per annum as at 30 June 2016 of $495,000, to be reviewed annually by the Remuneration and
Nomination Committee.
A cash bonus up to $220,000 for the year to 30 June 2016 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
N/A
None
Unvested awards forfeited
Unvested awards forfeited
Unvested awards (including an
exercisable, vested right)
forfeited
Unvested awards including an
exercisable, vested right)
forfeited
Termination without cause,
including redundancy
12 months
6 months
payment in lieu
of notice with 6
month notice
period
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.
Termination in cases of death,
disablement or other cause
approved by the Board
N/A
N/A
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
3 months
Termination for cause
None
Termination without cause,
including redundancy
Typically 3
months
(range 3-6
months)
N/A
None
3 months
(3-6 months)
Same as for CEO
Same as for CEO
Same as for CEO
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
34
Starpharma Holdings Limited Annual Report 2016
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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.
2016
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
400,000
2,302,274
1,571,311
183,466
14,539
70,077
Other key management personnel of the group
N J Baade
C P Barrett#
A Eglezos
D J Owen
420,416
377,290
6,869
328,938
J R Paull
# Holding at the date the person ceased to be a KMP.
* Other changes relate to market transactions
153,853
–
–
–
–
–
–
–
–
–
–
–
408,250
–
–
–
–
100,000
100,000
100,000
100,000
100,000
150,000
70,548
–
25,000
34,436
61,761
(70,000)
–
10,489
–
(70,000)
550,000
2,781,072
1,571,311
208,466
48,975
131,838
450,416
477,290
117,358
428,938
183,853
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.
2016
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
Total Unvested
Directors of Starpharma Holdings Limited
J K Fairley1
2,310,000
1,113,246
(408,250)
(451,750)
2,563,246
–
2,563,246
Other key management personnel of the group
N J Baade
C P Barrett2
A Eglezos
D J Owen
350,000
350,000
350,000
350,000
250,000
–
250,000
250,000
(100,000)
(100,000)
(100,000)
(100,000)
–
500,000
(250,000)
–
–
–
500,000
500,000
400,000
J R Paull
1 The market value of rights that were forfeited during the year was $368,654.
2 The market value of rights that were forfeited during the year was $172,500 following resignation on 18 September 2015.
# Other changes during the year relate to the forfeiture of rights.
(100,000)
600,000
300,000
–
–
–
–
–
–
500,000
–
500,000
500,000
600,000
The market value at vesting date of performance rights that vested during 2016 was $674,246 (2015: $460,450). 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 KMP of the group.
The market value is the opening share price on the vesting or forfeit date.
Starpharma Holdings Limited Annual Report 2016
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Directors’ Report Remuneration Report
8. Additional disclosures relating to employee equity schemes (continued)
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
Fair value per right
at grant date % vested
16 September 2013
16 September 2015
16 September 2016
500,000
Achievement of KPIs
22 November 2015
22 November 2016
50,000 Continued Employment
22 November 2016
22 November 2017
100,000 Continued Employment
22 November 2013
22 November 2013
22 November 2013
22 November 2016
22 November 2017
22 November 2013
22 November 2016
22 November 2017
50,000
100,000
Index TSR
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
11 November 2015
30 June 2017
11 November 2015
30 September 2018
11 November 2015
30 September 2018
19 November 2015
30 June 2017
19 November 2015
30 September 2018
19 November 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
210,000
Achievement of KPIs
714,000
Achievement of KPIs
126,000
TSR
219,395
Achievement of KPIs
625,696
Achievement of KPIs
268,155
TSR
$0.89
$0.85
$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
$0.72
$0.72
$0.50
$0.76
$0.76
$0.54
100
100
Nil
Nil
Nil
93
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:
Index TSR + 10%:
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.
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.
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%
36
Starpharma Holdings Limited Annual Report 2016
Page 36 of 83
Directors’ Report Remuneration Report
9. Actual remuneration of KMP executives
The actual remuneration earned by KMP executives in FY16 is set out below. Starpharma discloses actual remuneration voluntarily for
increased transparency. This information is considered to be relevant as it provides shareholders with a view of the remuneration actually paid
to KMP executives for performance in FY16 and the value of equity that vested during the period. This differs from the remuneration details
prepared in accordance with statutory obligations and accounting standards on page 31 of this report, as those details include the values of
performance rights granted that are yet to vest and may never vest.
2016
Name
J K Fairley
N J Baade
C P Barrett4
A Eglezos
D J Owen
J R Paull
Fixed
remuneration
(1)
STI cash paid in
FY16
(2)
STI equity vested in
FY16
(3)
LTI equity vested in
FY16
(3)
Total remuneration
earned
498,415
250,725
115,226
250,018
244,335
255,579
194,775
21,000
25,000
21,000
21,000
22,500
251,046
72,000
72,000
72,000
72,000
72,000
63,200
1,007,436
–
–
–
–
–
343,725
212,226
343,018
337,335
350,079
1 Base salary, superannuation and non-monetary benefits such as novated motor vehicle lease, car park and communication allowances.
2 STI cash paid during the financial year. The amount disclosed for FY16 reflects the FY15 STI paid in October 2015 following the release of the
FY15 results.
3 Intrinsic value of equity rights that vested during the year, based on the opening price on the date of vesting.
4 Ceased employment on 18 September 2015, fixed remuneration includes accrued leave entitlements.
- end of remuneration report -
Starpharma Holdings Limited Annual Report 2016
37
Page 37 of 83
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
22 Nov 2013 22 Nov 2016 22 Nov 2017
250,000 250,000
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 1,084,125 944,125
30 Jan 2015
30 Sep 2017
N/A 1,084,125 944,125
30 Jan 2015
30 Sep 2018
11 Nov 2015 30 Jun 2017
N/A
N/A
929,250 809,250
519,200 513,200
11 Nov 2015 30 Sep 2018
N/A 2,076,800 2,052,800
19 Nov 2015 30 Jun 2017
19 Nov 2015 30 Sep 2018
N/A
N/A
219,395 219,395
893,851 893,851
Performance rights and the resultant shares are granted for nil
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
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
.
Audit & non-audit services
The company may decide to employ the auditor on assignments
additional to their statutory audit duties where the auditor’s
expertise and experience with the company and/or the 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
2016
$
2015
$
99,297
94,860
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 39.
Rounding of amounts
30 Nov 2012
16 Sep 2013
22 Nov 2013
20 Nov 2014
$ -
$ -
$ -
$ -
80,000
1,058,560
50,000
278,250
The company is of a kind referred to in ASIC Corporations
(Rounding Financial/Directors' Reports) Instrument 2016/191,
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 Instrument 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, 29 August 2016
38
Starpharma Holdings Limited Annual Report 2016
Page 38 of 83
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Starpharma Holdings Limited for the year ended 30 June 2016, I
declare that to the best of my knowledge and belief, there have been:
1.
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
2.
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.
Jon Roberts
Partner
PricewaterhouseCoopers
Melbourne
29 August 2016
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
Liability limited by a scheme approved under Professional Standards Legislation.
Starpharma Holdings Limited Annual Report 2016
39
Page 39 of 83
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 2016. 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; and
Board and senior management, delegation and succession.
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 at least annually. 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.
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 relation to director tenure, the Board charter provides that 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 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.
Director
Robert Thomas
Richard Hazleton
Zita Peach
Peter Turvey
Jackie Fairley
Date elected by shareholders
November 2014
November 2007*
November 2011
November 2012
N/A appointed by the Board in 2006
* Mr Hazleton was appointed in 2006 prior to being elected by
shareholders the following year. The Board has considered the
tenure of Mr Hazleton as part of its independence assessment of
all directors.
No new directors were appointed to the Board during FY16.
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.
The Board last revised its Diversity Policy in April 2016, 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. 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 2016 financial year, and
progress against these objectives is set out below:
40
Starpharma Holdings Limited Annual Report 2016
Page 40 of 83
Corporate Governance Statement
Objective
Measurement
FY16 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 appropriate and in FY16,
21 different professional development programs were
attended by female employees across all levels of the
organisation, totalling support for 28 instances of
professional development of varying durations across
the year.
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 throughout the FY15-
16 period considered female candidates. Of the
positions advertised externally in FY16, 71% 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.
100% of successful candidates were selected on
merit-based criteria after being put through
Starpharma’s 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.
Flexible working arrangements
Employees working under flexible working
arrangements (including part time).
18% of employees work under flexible working
arrangements.
Granting a majority of requests for flexible
work arrangements for family
responsibilities.
Mutually satisfactory flexible work arrangements were
agreed between the requesting employee and the
company in 100% of cases during FY16.
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 FY16.
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 as at July
2016.
Whole
organisation
(staff and
Board)
45
24
53%
Total
Female
% female
Leadership/
management
roles
Senior
executive
Board
20
9
45%
7
3
43%
5
2
40%
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.
Starpharma is also proud of the ethnic diversity of our employee
population, with 40% of all employees born outside Australia in 13
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 FY16.
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/August 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 20 of this report.
As part of the Board discussion on executive performance,
directors give consideration to succession planning to ensure
continuity and a smooth leadership transition in the event of senior
executive movements.
Starpharma Holdings Limited Annual Report 2016
41
Page 41 of 83
Corporate Governance Statement
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.
Each committee’s charter sets out its role, responsibilities,
composition and structure. The committee charters are reviewed
annually and were last reviewed in April 2016. Committee charters
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.
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)
Mr R Thomas
Mr R Hazleton
Details of these directors’ qualifications and attendance at
committee meetings are set out in the directors’ report on pages
13 to 18.
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:
-
-
-
-
-
-
-
-
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;
The succession of the CEO and other senior executives;
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 18.
Each member of the Audit and Risk Committee is financially
literate, and jointly possess a number of relevant finance
qualifications, and experience. As a collective, the members of the
Audit and Risk Committee between them have substantial
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. Members have held relevant senior positions
in finance and risk management in large, complex international
companies and are members of other ASX-listed company audit
committees. Such positions include financial controller and
broker/analyst roles.
The Board continually reviews committee membership to ensure
the appropriate qualifications, skills and experience. Given the
nature of Starpharma’s activities and its relatively straight-forward
financials, the current composition of members is considered to be
more than adequate. In future years, as the company’s operations
develop, the committee’s composition will be regularly assessed
by the Board as outlined in Section 2.2.
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
Part of the role of the Remuneration and Nomination Committee is
to assist the Board to review Board composition and succession
planning. Both the Board and the Remuneration and Nomination
Committee work to ensure that the Board continues to have the
right balance and mix of diversity (including gender), skills,
experience, background and independence necessary to
discharge its responsibilities.
A skills and experience matrix is used to review the combined
capabilities of the Board. Skills and experience areas critical to the
success of the company are selected for directors to assess
themselves against. These areas are updated as required to
reflect the company’s evolution. In FY16, the Board added Sales,
Marketing and Business Development, reflecting the growing focus
on sales and marketing following several commercial deals struck
during the period.
In FY16, directors rated the depth of their skill and experience in
each of following areas:
Leadership in a relevant industry
1.
2. Pharmaceutical/Product Development
3. Commercialisation of Innovation
4. Sales, Marketing and Business Development
5. Governance
6. Strategy and Risk Management
7. Financial, Accounting and Risk
8. Health, Safety and Environment
9. Remuneration
The results of the matrix show there are three or more directors
with intermediate to deep skills and experience in each of the nine
areas above. The breadth and depth of the desired skills and
experience represented by the directors is notable considering the
size of the Board, and no existing or projected competency gaps
have been identified. This process provides an important input to
succession planning for the Board.
Giving regard for the current and future activities of the company,
the Board considers that collectively it has the appropriate skills
and experience in each area.
42
Starpharma Holdings Limited Annual Report 2016
Page 42 of 83
Corporate Governance Statement
There are further disclosures in Section 2.1.2 and directors’
biographies on pages 13 and 14 respectively which outline the
extensive financial, accounting and risk skills and experience of
the members of the Audit and Risk Committee, which are
considered appropriate to the company’s circumstances.
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 four 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.
The Board reviews the commitments of each non-executive
director, such as other directorships, to consider each director’s
capacity to dedicate sufficient time to the company.
2.4 Directors’ independence
The board charter contains guidelines for assessing the materiality
of directors’ relationships that may affect their independence.
These guidelines are aligned with the 3rd Edition CGC
Recommendations. The board charter is available at
www.starpharma.com/corporate_governance
The Board reviews the independence of directors before they are
appointed, on an annual basis and at any other time where the
circumstances of a director change such as to require
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
reassessment. The Board has determined that all non-executive
directors were independent at the date of this report.
The CEO is not considered independent by virtue of being an
executive director and a member of management.
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.
company. The code of conduct is reviewed periodically and was
last updated in April 2016. 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
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
2016 half year financial statements and the 2016 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 in FY15. 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.
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.
Starpharma Holdings Limited Annual Report 2016
43
Page 43 of 83
Corporate Governance Statement
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
the ASX, analysts, brokers, shareholders, the media and the
public.
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
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.
Principle 7: Recognise and manage risk
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.
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
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
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.
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.
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.
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 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
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 17 of the directors’ report
under the heading ‘Material Business Risks’.
44
Starpharma Holdings Limited Annual Report 2016
Page 44 of 83
Corporate Governance Statement
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
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 19 to 37.
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 34).
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
Starpharma Holdings Limited Annual Report 2016
45
Page 45 of 83
Annual Financial Report for the year ended 30 June 2016
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
47
48
49
50
51
52
77
78
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 15 to 18, which are not part of this financial report.
The financial statements were authorised for issue by the directors on 29 August 2016. 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
46
Page 46 of 83
Starpharma Holdings Limited Annual Report 2016
Consolidated Income Statement for the year ended 30 June 2016
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 2016
30 June 2015
$'000
4,505
128
(5,149)
(22,157)
(2)
(22,675)
-
$'000
1,693
4
(4,392)
(16,250)
(5)
(18,950)
-
(22,675)
(18,950)
$
($0.07)
($0.07)
$
($0.06)
($0.06)
The above consolidated income statement should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2016
Page 47 of 83
47
Consolidated Statement of Comprehensive Income for the year ended 30 June 2016
Loss for the year
Other comprehensive income (loss)
Items that may be reclassified to profit or loss
Notes
30 June 2016
30 June 2015
$'000
(22,675)
$'000
(18,950)
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
267
267
1,626
1,626
(22,408)
(17,324)
The above statement of consolidated comprehensive income should be read in conjunction with the accompanying notes.
48
Starpharma Holdings Limited Annual Report 2016
Page 48 of 83
Consolidated Balance Sheet as at 30 June 2016
Notes
30 June 2016
$'000
30 June 2015
$'000
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
Finance lease liabilities
Provisions (employee entitlements)
Deferred income
Total Current Liabilities
Non-Current Liabilities
Finance lease liabilities
Provisions (employee entitlements)
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Accumulated losses
Total Equity
8
9
10
11
12
13
13
14
15
16
45,972
4,304
50,276
690
8,073
8,763
59,039
8,839
18
718
-
9,575
-
40
40
9,615
49,424
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
193,512
9,787
(153,875)
49,424
160,884
7,874
(131,200)
37,558
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2016
Page 49 of 83
49
Consolidated Statement of Changes in Equity for the year ended 30 June 2016
Contributed
capital
Reserves
Accumulated
losses
Notes
$'000
$'000
$'000
140,349
4,852
(112,250)
Total
equity
$'000
32,951
-
(18,950)
(18,950)
Balance at 1 July 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
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 2016
15
14
14
15
15
14
14
15
-
-
-
20,503
32
-
20,535
160,884
-
-
-
32,596
32
-
32,628
193,512
-
1,626
(18,950)
(17,324)
1,626
1,626
-
-
1,396
1,396
267
267
-
-
1,646
1,646
7,874
(131,200)
-
(22,675)
(22,675)
-
267
(22,675)
(22,408)
-
-
-
-
-
-
-
-
20,503
32
1,396
21,931
37,558
32,596
32
1,646
34,274
49,424
9,787
(153,875)
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
50
Starpharma Holdings Limited Annual Report 2016
Page 50 of 83
Consolidated Statement of Cash Flows for the year ended 30 June 2016
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
Notes
$'000
$'000
30 June 2016
30 June 2015
4,074
3,430
(25,982)
670
(3)
487
4,215
(19,282)
970
(5)
Net cash outflows from operating activities
23
(17,811)
(13,615)
Cash Flow from Investing Activities
Receipts for property, plant and equipment
Payments for property, plant and equipment
Proceeds from sale of available-for-sale financial assets
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
1
(97)
125
29
33,915
(1,319)
(32)
32,564
14,782
30,848
342
45,972
-
(653)
-
(653)
21,419
(916)
(32)
20,471
6,203
24,028
617
30,848
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2016
Page 51 of 83
51
Notes to the Consolidated Financial Statements 30 June 2016
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 – Finance Lease Liabilities
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
53
58
59
60
60
60
60
62
63
64
65
66
66
67
68
68
69
69
69
70
71
71
71
71
72
76
52
Page 52 of 83
Starpharma Holdings Limited Annual Report 2016
Notes to the Consolidated Financial Statements 30 June 2016
(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 2016 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 the first time for the annual reporting period commencing 1 July
2015:
AASB 2014-1 Amendments to Australian Accounting
Standards (including Part A: Annual Improvements 2010-
2012 and 2011-2013 Cycles and Part B: Defined Benefit
Plans: Employee Contributions – Amendments to AASB 119)
None of the new and amended standards that are mandatory for
the first time for the financial year beginning 1 July 2015 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
2015.
(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 2016, the consolidated entity has
incurred losses of $22,675,000 (2015: $18,950,000) and
experienced net cash outflows of $17,811,000 from operations
(2015: $13,615,000), 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 31 August 2017. 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.
Starpharma Holdings Limited Annual Report 2016
53
Page 53 of 83
Notes to the Consolidated Financial Statements 30 June 2016
1. Significant Accounting Policies (continued)
(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. License 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
license income is amortised over the anticipated period of the
associated research program. Unamortised license 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 of disposal 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.
54
Starpharma Holdings Limited Annual Report 2016
Page 54 of 83
Notes to the Consolidated Financial Statements 30 June 2016
(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 licenses
Costs associated with patents are charged to profit or loss in the
periods in which they are incurred. Licenses 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 licenses 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) Finance Lease Liabilities
Finance lease liabilities are initially recognised at fair value, net of
transaction costs incurred. Finance lease liabilities 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 finance lease
liability using the effective interest method. Finance lease liabilities
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.
Starpharma Holdings Limited Annual Report 2016
55
Page 55 of 83
Notes to the Consolidated Financial Statements 30 June 2016
1. Significant Accounting Policies (continued)
(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 employees via
an Employee Performance Rights Plan and an Employee Share
Plan ($1,000 Plan). Information relating to these plans is set out in
note 25 and in the remuneration report under the directors’ report.
The fair value of 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 unconditionally
entitled to the options or rights. Depending on the performance
56
measure of the right vesting, the fair value at grant date represents
either a volume weighted average price (VWAP) of shares leading
up to the grant date, or a value calculated using a hybrid Monte-
Carlo-trinomial option pricing model taking into account the
absolute TSR target, the term of the right, the share price at grant
date, the risk free rate, the expected dividend yield, expected
share price volatility, the volatility of the relevant index, and the
correlation between the share price and that index. 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.
Starpharma Holdings Limited Annual Report 2016
Page 56 of 83
Notes to the Consolidated Financial Statements 30 June 2016
(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 ASIC Corporations
(Rounding Financial/Directors' Reports) Instrument 2016/191,
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 Instrument 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 2016 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.
While the group has yet to undertake a detailed assessment, it is
expected there to be immaterial impact on the accounting for
financial instruments as the group does not have any debt
instruments classified as available-for-sale financial assets,
financial liabilities that are designated at fair value through profit or
loss or hedging instruments. A simplified approach of the expected
credit loss model will be adopted for trade receivables.
(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 principle 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.
(iii) AASB 16 Leases provides a new lessee accounting model
which requires a lessee to recognise assets and liabilities for all
leases with a term of more than 12 months, unless the underlying
asset is of low value. A lessee measures right-of-use assets
similarly to other non-financial assets and lease liabilities similarly
to other financial liabilities. Assets and liabilities arising from a
lease are initially measured on a present value basis. The
measurement includes non-cancellable lease payments (including
inflation-linked payments), and also includes payments to be made
in optional periods if the lessee is reasonably certain to exercise
an option to extend the lease, or not to exercise an option to
terminate the lease. The standard is not applicable until 1 January
2019 but is available for early adoption.
Management is currently assessing the impact of AASB 16 on the
measurement and recognition of lease assets and liabilities. The
group has not yet decided when to adopt AASB 16.
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 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.
Starpharma Holdings Limited Annual Report 2016
57
Page 57 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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
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 2016 of $0.7426 was
as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
30 June 2016
US
$’000
30 June 2015
US
$’000
12,148
3
4,565
10,999
6
2,565
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%
(1,487)
1,818
(1,303)
1,592
30 June 2016
$’000
30 June 2015
$’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 2016
$’000
44,645
30 June 2015
$’000
28,053
At 30 June 2016, 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 $226,000 higher or lower (2015 - change of 50 bps: $146,000 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 banks. More than 99% of cash and deposits is held with
major Australian banks, with the majority being held with the
National Australia Bank. 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
58
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 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 2016
Page 58 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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
that are subject to amortisation at 30 June 2016 is $6,068,000
(2015: $6,454,000).
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 of disposal of the group of cash generating
units over which the goodwill is allocated. Performing the
assessment of fair value less costs of disposal 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 2016 the group has
recorded a contra research and development expense of
$3,518,000 (2015: $3,478,000).
(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 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.
Starpharma Holdings Limited Annual Report 2016
59
Page 59 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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 & license revenue
Interest revenue
Total revenue
Total other income (including government grants)
Total revenue and other income
30 June 2016
$’000
30 June 2015
$’000
3,825
680
4,505
128
4,633
804
889
1,693
4
1,697
Total revenue and other income for the year was $4,633,000, an increase of $2,936,000 from the previous year, mainly due a non-refundable
signature payment of $2,869,000 received from AstraZeneca under a drug delivery licensing agreement, with no substantive continuing
obligation required by the company. Interest revenue on cash deposits was lower by $209,000 due to lower term deposits rates, and other
income included proceeds from the disposal of the group’s shareholding of Dimerix Limited (ASX: DXB).
6. Expenses
Loss from continuing operations before income tax expense
includes the following items:
30 June 2016
$’000
30 June 2015
$’000
R&D tax incentive (contra expense)1
Employee benefits expenses (including share-based payments)
Depreciation
Amortisation
Rental expense on operating leases
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
(3,518)
7,384
312
619
537
(3,478)
6,802
250
971
564
30 June 2016
$’000
30 June 2015
$’000
–
–
–
–
–
–
60
Starpharma Holdings Limited Annual Report 2016
Page 60 of 83
Notes to the Consolidated Financial Statements 30 June 2016
(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% (2016: 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 assets 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 2016
$’000
30 June 2015
$’000
(22,675)
(6,803)
(18,950)
(5,685)
1,290
49
503
(3)
(159)
1
(299)
5,421
–
111,370
33,793
4,109
1,207
1,574
18
1,592
(1,592)
–
18
1,574
1,592
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
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 2016
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 has made an assessment as to the
satisfaction of deductibility conditions at 30 June 2016 which it
believes will be satisfied.
Starpharma Holdings Limited Annual Report 2016
61
Page 61 of 83
Notes to the Consolidated Financial Statements 30 June 2016
8. Current Assets – Cash and Cash Equivalents
Cash at bank and on hand
Term Deposits and deposits at call
30 June 2016
$’000
30 June 2015
$’000
1,327
44,645
45,972
2,795
28,053
30,848
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.
Cash not available
There is $766,000 (2015: $743,000) of cash not available for use
due to restrictions associated with a bank guarantee on the
premises lease, and other restrictions for finance lease and credit
card facilities; all of which are guaranteed by term deposits.
Interest rate risk
Current receivables are non-interest bearing.
30 June 2016
Floating Interest
rate
Notes
$’000
Fixed interest maturing*
1 year
or less
$’000
Non-interest
bearing
$’000
Financial Assets
Cash & deposits
Receivables
Weighted average interest rate
Financial Liabilities
Payables
Finance lease liabilities
8
9
12
13
18,691
26,447
–
18,691
0.4%
–
–
–
–
26,447
2.9%
–
18
18
Weighted average interest rate
–%
8.2%
*Note there is no fixed interest maturing great than 1 year
834
4,304
5,138
–%
8,839
–
8,839
–%
Total
$’000
45,972
4,304
50,276
8,839
18
8,857
Contractual
cash
flows
N/A
4,304
4,304
8,839
18
8,857
62
Starpharma Holdings Limited Annual Report 2016
Page 62 of 83
Notes to the Consolidated Financial Statements 30 June 2016
30 June 2015
Floating
Interest
rate
Fixed interest maturing*
Notes
$’000
1 year
or less
$’000
1 to 2
years
$’000
Non-interest
bearing
$’000
Total
$’000
Contractual
cash
flows
Financial Assets
Cash & deposits
Receivables
8
9
16,225
12,943
–
–
16,225
12,943
Weighted average interest rate
0.4%
2.9%
Financial Liabilities
Payables
Finance lease liabilities
12
13
–
–
–
–
30
30
–
–
–
–%
–
18
18
1,680
4,232
5,912
–%
5,933
–
5,933
30,848
4,232
35,080
5,933
48
5,981
N/A
4,232
4,232
5,933
48
5,981
Weighted average interest rate
–%
8.2%
8.2%
–%
*Note there is no fixed interest maturing great than 2 years
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 $3,522,000
(2015: $3,426,000) of expenditure reimbursable under the
Australian Government’s R&D tax incentive scheme. Other trade
receivables largely consist of royalty and research fees and are
subject to normal terms of settlement within 30 to 60 days.
Credit risk
The group considers that there is no significant 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 2016
$’000
30 June 2015
$’000
3,938
48
178
140
4,304
3,866
39
221
106
4,232
Impaired receivables
As at 30 June 2016, there were no material trade and grant
receivables that were past due (2015: nil). No receivables are
considered impaired at 30 June 2016 (2015: nil) .
Other receivables
Other receivables comprise sundry debtors and GST claimable
and are subject to normal terms of settlement within 30 to 60 days.
Starpharma Holdings Limited Annual Report 2016
63
Page 63 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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 2014
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2015
Opening net book amount
Additions
Disposals
Depreciation
Closing net book amount
At 30 June 2015
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2016
Opening net book amount
Additions
Disposals
Depreciation
Closing net book amount
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
2,203
(1,776)
427
427
281
(6)
(146)
556
2,376
(1,820)
556
556
80
(6)
(152)
478
2,438
(1,960)
478
1,199
(1,195)
4
4
379
(3)
(75)
305
379
(74)
305
305
18
–
(131)
192
397
(205)
192
419
(341)
78
78
–
–
(29)
49
419
(370)
49
49
–
–
(29)
20
419
(399)
20
3,821
(3,312)
509
509
660
(9)
(250)
910
3,174
(2,264)
910
910
98
(6)
(312)
690
3,254
(2,564)
690
64
Starpharma Holdings Limited Annual Report 2016
Page 64 of 83
Notes to the Consolidated Financial Statements 30 June 2016
11. Non-Current Assets – Intangible Assets
Patents & Licenses
$’000
Goodwill
$’000
Total Intangibles
$’000
At 30 June 2014
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2015
Opening net book amount
Exchange differences
Amortisation
Closing net book amount
At 30 June 2015
Cost
Accumulated amortisation
Net book amount
Year ended 30 June 2016
Opening net book amount
Exchange differences
Amortisation
Closing net book amount
At 30 June 2016
Cost
Accumulated amortisation
Net book amount
16,321
(10,147)
6,174
6,174
1,251
(971)
6,454
19,028
(12,574)
6,454
6,454
233
(619)
6,068
19,529
(13,461)
6,068
1,581
–
1,581
1,581
358
–
1,939
1,939
–
1,939
1,939
66
–
2,005
2,005
–
2,005
17,902
(10,147)
7,755
7,755
1,609
(971)
8,393
20,967
(12,574)
8,393
8,393
299
(619)
8,073
21,534
(13,461)
8,073
(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 of disposal 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 to
this group of 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 of CGUs have been
determined based on estimation of their fair value less costs of
disposal.
Starpharma Holdings Limited Annual Report 2016
(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 of disposal of the group
of 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 2016, 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 2016 and determined that
there is no indication that the asset is impaired.
(d) Remaining useful life
The net book value of patents and licenses relates to the patents
in the Priostar® portfolio acquired with the purchase of Dendritic
Nanotechnologies Inc. These patents have a remaining useful life
of approximately 10 years as at 30 June 2016.
65
Page 65 of 83
Notes to the Consolidated Financial Statements 30 June 2016
12. Current Liabilities – Trade and Other Payables
Trade payables and accruals
Other payables
30 June 2016
$’000
30 June 2015
$’000
8,210
629
8,839
5,481
452
5,933
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 – Finance Lease Liabilities
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.
2016
Floating Interest
rate
Lease Liabilities
Weighted average interest rate
Notes
20
–
–%
*Note there is no lease liabilities with a term greater than 1 year.
2015
Floating Interest
rate
Lease Liabilities
Weighted average interest rate
Notes
20
–
–%
*Note there is no lease liabilities with a term greater than 2 years.
Fixed interest rate*
Over 1–2 years
$’000
–
–%
Fixed interest rate*
Over 1–2 years
$’000
18
8.2%
1 year
or less
$’000
18
8.2%
1 year
or less
$’000
30
8.2%
Total
$’000
18
Total
$’000
48
66
Starpharma Holdings Limited Annual Report 2016
Page 66 of 83
Notes to the Consolidated Financial Statements 30 June 2016
14. Contributed Equity
(a) Share capital
Share Capital
2016
Shares
2015
Shares
2016
$’000
2015
$’000
Ordinary shares – fully paid
367,107,521
319,138,501
193,512
160,884
(b) Movements in ordinary share capital
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
Date
Details
1 Jul 2015
28 Sep 2015 Employee performance rights plan share issue
9 Oct 2015
Employee performance rights plan share issue
4 Dec 2015
Employee performance rights plan share issue
16 Dec 2015 Share Placement
less transaction costs
22 Jan 2016
Share Purchase Plan
less transaction costs
25 Jan 2016
Employee share plan ($1,000) issue
Balance at 30 June 2016
Number of shares
Issue Price
319,138,501
1,058,560
278,250
130,000
43,835,617
2,623,361
43,232
367,107,521
$ –
$ –
$ –
$0.73
$0.73
$0.74
$’000
140,349
–
18,000
(842)
–
3,419
(74)
–
–
32
160,884
$’000
160,884
–
–
–
32,000
(1,303)
1,915
(16)
32
193,512
(c) Ordinary shares
As at 30 June 2016 there were 367,107,521 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.
Starpharma Holdings Limited Annual Report 2016
(f) Capital risk management
The group’s and the parent entity’s objectives when managing
capital are to safeguard their ability to continue as a going
concern, so that they can continue to provide returns for
shareholders and benefits for other stakeholders. 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.
67
Page 67 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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 2016
$’000
30 June 2015
$’000
8,690
(1,118)
2,215
9,787
7,044
(1,385)
2,215
7,874
30 June 2016
$’000
30 June 2015
$’000
7,044
1,646
8,690
(1,385)
267
(1,118)
5,648
1,396
7,044
(3,011)
1,626
(1,385)
(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 2016
$’000
(131,200)
(22,675)
(153,875)
30 June 2015
$’000
(112,250)
(18,950)
(131,200)
68
Starpharma Holdings Limited Annual Report 2016
Page 68 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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 2016
$
2,132,568
170,223
18,010
1,001,898
3,322,699
30 June 2015
$
2,275,425
176,266
39,496
987,876
3,479,063
Detailed remuneration disclosures are provided in the remuneration report on pages 19 to 37.
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 2016
$
30 June 2015
$
99,297
99,297
94,860
94,860
There are no other matters or circumstances have arisen since 30 June 2016 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.
Starpharma Holdings Limited Annual Report 2016
69
Page 69 of 83
Notes to the Consolidated Financial Statements 30 June 2016
20. Commitments
(a) Capital Commitments
There is no capital expenditure contracted for, not recognised as liabilities at the reporting date (2015: nil).
(b) Lease Commitments
Operating leases
The group leases laboratory and offices under a lease until 31 December 2017, where the rental commitment is inclusive of outgoings. The
group also leases office equipment generally over a three to five year term.
Commitments for minimum lease payments in relation 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 2016
$’000
30 June 2015
$’000
600
308
–
908
579
881
–
1,460
Finance Leases
The group leases plant and equipment under a finance leases expiring within one (2015: two) years.
Commitments in relation to finance leases are payable as follows:
Notes
30 June 2016
$’000
30 June 2015
$’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
19
–
–
19
(1)
18
18
–
18
32
19
–
51
(3)
48
30
18
48
The weighted average interest rate implicit in the lease is 8.2% (2015: 8.2%).
(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.
70
Starpharma Holdings Limited Annual Report 2016
Page 70 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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
2016
%
100.00%
100.00%
Equity Holding
2015
%
100.00%
100.00%
22. Contingencies
The company has no contingent assets or liabilities at 30 June 2016 (2015: 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
Net (gain) loss on sale of available for sale financial assets
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 2016
$’000
(22,675)
30 June 2015
$’000
(18,950)
931
(342)
1,678
(5)
(125)
(93)
2,906
(12)
(74)
1,221
(617)
1,428
(8)
–
370
2,819
92
30
(17,811)
(13,615)
30 June 2016
30 June 2015
(0.07)
(0.07)
(0.06)
(0.06)
(22,675)
(18,950)
Weighted average number of ordinary shares outstanding during the year used as
the denominator in calculating diluted and basic earnings per share
345,043,187
310,143,800
As at 30 June 2016 the company had on issue 7,826,746 (30 June 2015: 6,469,100) 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
Starpharma Holdings Limited Annual Report 2016
71
Page 71 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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 2016 was $0.74 per right
(2015: $0.46). There were 3,709,246 performance rights granted in the current year (2015: 4,597,500).
The estimated fair value at grant date of rights with a Total Shareholder Return (TSR) performance measure have been valued using a hybrid
Monte-Carlo-trinomial option pricing model taking into account the absolute TSR target, the term of the right, the share price at grant date, the
risk free rate, the expected dividend yield, expected share price volatility, the volatility of the relevant index, and the correlation between the
share price and that index. All other rights incorporate Key Performance Indicator (KPI) measures, and the fair value at grant date of these rights
represents a volume weighted average price (VWAP) of shares leading up to the grant date.
Set out below are summaries of performance rights:
2016
Grant Date
Vesting
Date
Holding
Lock
Date
30 Nov 2012
30 Nov 2015
30 Nov 2016
Balance
at start of
the year
Number
360,000
16 Sep 2013
16 Sep 2015
16 Sep 2016
1,061,600
22 Nov 2013
22 Nov 2015
22 Nov 2016
22 Nov 2013
22 Nov 2016
22 Nov 2017
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
11 Nov 2015
30 Jun 2017
11 Nov 2015
30 Sep 2018
19 Nov 2015
30 Jun 2017
19 Nov 2015
30 Sep 2018
–
–
–
–
–
–
–
–
200,000
250,000
300,000
450,000
300,000
450,000
1,084,125
1,084,125
929,250
Granted
during
the year
Number
–
–
–
–
–
–
–
–
–
–
–
Converted
during
the year
Number
80,000
1,058,560
Forfeited
during
the year
Number
280,000
3,040
50,000
150,000
Balance
at end of
the year
Number
–
–
–
–
–
250,000
278,250
21,750
–
–
–
140,000
140,000
120,000
6,000
–
450,000
300,000
450,000
944,125
944,125
809,250
513,200
24,000
2,052,800
–
–
219,395
893,851
–
–
–
–
–
–
–
–
–
–
–
–
–
–
519,200
2,076,800
219,395
893,851
Total
6,469,100
3,709,246
1,466,810
884,790
7,826,746
72
Starpharma Holdings Limited Annual Report 2016
Page 72 of 83
Notes to the Consolidated Financial Statements 30 June 2016
2015
Grant Date
Vesting
Date
Holding
Lock
Date
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
Balance
at start of
the year
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
–
–
–
–
–
–
–
–
–
–
–
Granted
during
the year
Number
–
–
–
–
–
–
–
300,000
450,000
300,000
450,000
1,084,125
1,084,125
929,250
Converted
during
the year
Number
481,400
50,000
–
22,000
465,000
–
–
–
–
–
–
–
Forfeited
during
the year
Number
18,000
150,000
Balance
at end of
the year
Number
–
–
–
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
3,161,000
4,597,500
1,018,400
271,000
6,469,100
Information used in assessing the fair value of performance rights granted during the year ended 30 June 2016 is as follows:
Right grant date
11 November 2015
11 November 2015
11 November 2015
19 November 2015
Number of rights granted
519,200
1,914,800
162,000
219,395
Earliest 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
30 June 2017
30 September 2018
30 September 2018
30 June 2017
KPIs
50%
1.97%
–
$0.74
$0.72
KPIs
50%
2.00%
–
$0.74
$0.72
TSR
50%
2.00%
–
$0.74
$0.50
KPIs
50%
1.97%
–
$0.86
$0.76
Right grant date
19 November 2015
19 November 2015
Number of rights granted
625,696
268,155
Earliest vesting date
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%
2.00%
–
$0.86
$0.76
TSR
50%
2.00%
–
$0.86
$0.54
Starpharma Holdings Limited Annual Report 2016
73
Page 73 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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
Share price volatility and the risk-free interest rate are obtained through an independent valuation.
74
Starpharma Holdings Limited Annual Report 2016
Page 74 of 83
Notes to the Consolidated Financial Statements 30 June 2016
Shares
(a) Employee Share Plan ($1,000 Plan)
All staff 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 2016 was $0.74 (2015:
$0.55 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 2016 is as follows:
Share grant date
Number of shares granted
Share price at grant date
Assessed fair value
There was no allocation of shares to key management personnel in the 25 January 2016 issue.
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
25 January 2016
43,232
$0.74
$0.74
22 January 2015
58,176
$0.55
$0.55
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 2016
$’000
30 June 2015
$’000
32
1,646
1,678
32
1,396
1,428
Starpharma Holdings Limited Annual Report 2016
75
Page 75 of 83
Notes to the Consolidated Financial Statements 30 June 2016
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 2016 (2015: nil).
30 June 2016
30 June 2015
Parent
$'000
44,486
64,138
820
820
193,512
8,181
(138,375)
(17,319)
(17,319)
$'000
27,869
47,115
753
753
160,884
6,535
(121,057)
(14,111)
(14,111)
76
Starpharma Holdings Limited Annual Report 2016
Page 76 of 83
Directors’ Declaration for the year ended 30 June 2016
In the directors’ opinion:
(a) the financial statements and notes set out on pages 46 to 76 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 2016 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, 29 August 2016
Starpharma Holdings Limited Annual Report 2016
77
Page 77 of 83
Independent Audit Report to the Members of Starpharma Holdings Limited
Independent auditor’s report to the members of Starpharma
Holdings Limited
Report on the financial report
We have audited the accompanying financial report of Starpharma Holdings Limited (the company),
which comprises the consolidated balance sheet as at 30 June 2016, the consolidated income
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.
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
directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted
our audit in accordance with Australian Auditing Standards. Those standards require that we comply
with relevant ethical requirements relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial report. The procedures selected depend on the auditor’s 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
Liability limited by a scheme approved under Professional Standards Legislation.
78
Starpharma Holdings Limited Annual Report 2016
Page 78 of 83
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
2016 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards 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 19 to 37 of the directors’ report for the
year ended 30 June 2016. 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
2016 complies with section 300A of the Corporations Act 2001.
PricewaterhouseCoopers
Jon Roberts
Partner
Melbourne
29 August 2016
Starpharma Holdings Limited Annual Report 2016
79
Page 79 of 83
Shareholder Information
The shareholder information set out below was applicable as at 31 July 2016.
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 477 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.
Citicorp Nominees Pty Limited
4.
National Nominees Limited
5.
UBS Nominees Pty Ltd
6.
BNP Paribas Noms Pty Ltd
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