ANNUAL REPORT 2018
01
02
03
12
13
15
19
41
42
48
79
84
86
87
Highlights
Chairman’s Letter
CEO’s Report
Corporate and Social Responsibility
Directors’ Report
Operating & Financial Review
Remuneration Report
Auditor’s Independence Declaration
Corporate Governance Statement
Annual Financial Report
Independent Audit Report to the Members
Shareholder Information
Intellectual Property Report
Corporate Directory
Q4
Q3
Q2
Q1
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 1
Highlights20182017 Commences DEP® cabazitaxel phase 1 / 2 trial in patients with advanced solid tumours Successful DEP® docetaxel phase 1 results in patients with advanced solid tumours AstraZeneca unveils first DEP® oncology candidate – AZD0466, dual Bcl2/xL inhibitor Successful VivaGel® BV phase 3 results for prevention of recurrent BV Commences DEP® docetaxel phase 2 trial VivaGel® BV receives Australian marketing approval from the TGA Completes New Drug Application (NDA) for VivaGel® BV Mundipharma licenses VivaGel® BV for Asia, Middle East, Africa and the majority of Latin America for an attractive revenue share, in addition to milestones of up to US$9.2M (A$12.2M) Mundipharma licenses VivaGel® BV for Europe, Russia, CIS, and the balance of countries in Latin America for an attractive revenue share, in addition to milestones of up to US$15.5M (A$20.9M)APPROVED In-house manufacture of DEP® irinotecan for phase 1/ 2 trial FDA accepts the VivaGel® BV NDA for filing, under priority Fast Track review, which provides a target review period of approximately 6 months from acceptance SUBMISSIONSUBMISSION Ultimately, such licensing deals will transform
Starpharma into a financially sustainable
company with the capacity to produce a
stable of exciting, high-value products from
its innovative dendrimer platform.
In oncology, Starpharma’s DEP® platform
optimises a drug’s therapeutic value by
targeting tumour tissue thus improving
efficacy and reducing side effects. During the
year we delivered impressive clinical data
from the platform through our phase 1 trial for
DEP® docetaxel which successfully achieved
its key objective. No patients experienced
neutropenia, a life-threatening side effect
seen in more than 90% of patients
administered Taxotere® (the original docetaxel
product). We also saw a reduction in a
number of other troublesome side effects,
such as hair loss, and encouraging efficacy
signals.
Starpharma was able to accelerate the
development of DEP® docetaxel by moving it
immediately from phase 1 into phase 2. As
one of our internally developed products, the
clinical development is self-funded and our
intention is to licence the product after proof
of concept human phase 2 data to maximise
its commercial value. Our second DEP®
product is equally exciting with significant
market potential. DEP® cabazitaxel, a
dendrimer-enhanced version of leading
cancer drug, Jevtana®, entered the clinic
during the year in a phase 1 / 2 trial for
patients with advanced solid tumours.
We plan to advance our third DEP® oncology
product, DEP® irinotecan, into the clinic
around the end of the year. Starpharma also
has several more DEP® products already
under development which are the subject of
preclinical programs. It’s a clear strategic
imperative for Starpharma to advance a
number of DEP® candidates for development
to provide a deep portfolio of DEP® products.
While there’s substantial value from
Starpharma continuing to develop its own
rich pipeline of DEP® drugs to licence,
tremendous value in the platform also lies
in its optionality for partnering. Starpharma
allows pharmaceutical partners to access its
DEP® platform under licence, to enhance their
novel or existing drugs – in a way that creates
significant commercial value for our partners
– in return for milestone payments and
royalties. The platform offers partners the
compelling prospect of a differentiated
product with improved efficacy and fewer
side effects, as well as patent advantages to
create a second generation of their existing
drugs with improvements and extended
patent life. Given that the development costs
are covered by partners, these partnered
DEP® programs provide Starpharma with
returns without the usual development and
financing outlay.
A number of partnerships for DEP® are
already in place with global pharmaceutical
companies, including multiple high-value
programs fully funded by AstraZeneca.
During the year, AstraZeneca unveiled its
first DEP® candidate – AZD0466, a highly
optimised dendrimer formulation of a novel
dual Bcl2/xL inhibitor, which has the potential
to be a best-in-class cancer drug.
AstraZeneca has been conducting its final
preclinical work, filing patents, and we’re
looking forward to their team commencing
the phase 1 trial for AZD0466.
The progress with AZD0466 is underpinned
by a strong commercial relationship with
AstraZeneca. Our work with AstraZeneca is
also providing valuable external validation of
the broad application of the DEP® platform
and its utility in making possible the
development of multiple cutting-edge cancer
medicines and creating value through new
intellectual property.
This has been an exceptional year for
Starpharma. The Board wishes to
acknowledge and sincerely thank our CEO
Dr Jackie Fairley and the whole Starpharma
team for their outstanding efforts. We
acknowledge the people involved in the
extensive licensing negotiations for VivaGel®
BV and those who contributed to and
compiled over 110,000 pages of data for the
FDA submission. Starpharma is reaping the
rewards of the decision to expand its internal
scale-up facilities and we thank all the staff
involved in both the clinical and preclinical
development and advancement of our DEP®
products. The expertise and dedication of our
people are key to our future success and we
commend their commitment to creating
innovative therapies that have the potential to
profoundly improve patient health worldwide.
I would like to thank my fellow Board
members for their contribution again
this year, and together, we thank our
shareholders for their ongoing support.
We do not take this for granted.
We look forward to another successful
and exciting year as we anticipate the
international launch of VivaGel® BV and
further important milestones for our internal
and partnered DEP® programs.
Yours Sincerely,
Rob Thomas AM
Starpharma Chairman
!
2 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Chairman’s LetterDear Shareholders,On behalf of the Board, it is a real pleasure to be able to report on the excellent performance by Starpharma this year.Starpharma’s strategy is to utilise its unique dendrimer technology to develop and commercialise superior products for patients globally. Through this strategy we’ve developed VivaGel® BV, a breakthrough Women’s Health product which is on the cusp of being launched in markets around the world, and we delivered excellent clinical results for the first oncology drug from our DEP® drug delivery platform. Within our VivaGel® portfolio, Starpharma recently signed a multi-region licence for VivaGel® BV with leading pharmaceutical company, Mundipharma, on very attractive deal terms. VivaGel® BV is now licensed in the majority of regions around the world. The licence with Mundipharma covers Europe, Russia, CIS, Asia, Middle East, Africa and Latin America and will provide Starpharma with an attractive revenue share, in addition to regulatory and commercialisation milestones of up to US$24.7 million (A$33.3 million). Our team is now working closely with Mundipharma to gain further regulatory approvals aside from the EU (already received), to support the market launch of VivaGel® BV in multiple regions as soon as practicable.In the US, our licensing discussions for VivaGel® BV have now reached an advanced stage of negotiation. This is particularly exciting given the very significant market opportunity for the product in that region. Our New Drug Application (NDA) for VivaGel® BV has already been accepted for filing by the FDA. The multi-region Mundipharma licence signed this year was an important milestone for the company, demonstrating the value of VivaGel® BV and its commercial value to third parties. It's worth remembering Starpharma is one of a handful of Australian biotech companies to have successfully taken a pharmaceutical product all the way from concept to commercialisation.
L
A
N
R
E
T
N
I
-
D
E
D
N
U
F
R
E
N
T
R
A
P
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 3
VIVAGEL® PLATFORMPRECLINICALCLINICALMARKET OPPORTUNITYVIVAGEL® BVBV Treatment and PreventionLicensed in the majority of regions around the world. BV Treatment est. market valued at US$750M p.a. and BV Prevention est. market valued at US$1B p.a.VIVAGEL® CONDOMAnti-viral condomLicensed in many regions around the world; launched in Australia and Canada.VIVAGEL® ACTIVEViral conjunctivitisGlobal viral conjunctivitis market US$700MDEP® PLATFORMPRECLINICALCLINICALMARKET OPPORTUNITYDEP® DOCETAXELOncology – various tumour typesDocetaxel (Taxotere®) peak sales ~US$3.1BDEP® CABAZITAXELOncology – various tumour typesCabazitaxel (Jevtana®) sales were ~US$400M in 2016DEP® IRINOTECANOncologyIrinotecan (Camptosar®) peak sales ~US$1.1BDEP® OTHER CANDIDATESOncology and other indicationsTargeting various cancer types and other indicationsTARGETED DEP®OncologyADC's Kadcyla® and Adcetris® had combined sales of ~US$1.66B in 2017ASTRAZENECA – AZD0466 DEP® PRODUCTOncologyFirst defined family of targets (Milestones of US$126M + royalties)ASTRAZENECA #2 DEP® CANDIDATEOncologySubsequent products (Milestones of up to US$93M+ royalties)ASTRAZENECA OTHER DEP® PROGRAMOncologyOutside multiproduct license *Undisclosed*UNDISCLOSED ADC PARTNER TARGETED DEP® CANDIDATEOncology*Undisclosed*UNDISCLOSED ADC PARTNER TARGETED DEP® CANDIDATEOncology*Undisclosed*Dr Jackie Fairley, Chief Executive OfficerCEO's ReportThis is a really exciting time for Starpharma. Commercialising VivaGel® BV means Starpharma is now set to generate recurrent revenue – enabling sustained investment in the DEP® platform to build a portfolio of high-value, life-changing drugs.I am very pleased to report Starpharma’s achievement of multiple, significant milestones over the past year. This has been a transformative period for the company – progressing from a largely development stage company to revenue generation based on a deep portfolio of both commercial and development opportunities. We advanced the commercialisation of our VivaGel® assets, executing a multi-region licence for VivaGel® BV and completing the New Drug Application for this exciting product which has been accepted for filing by the US FDA under priority review. In parallel, we accelerated development of our exciting DEP® portfolio of products. Starpharma reported positive results from its phase 1 DEP® docetaxel trial and transitioned rapidly into phase 2. The company also commenced a phase 1 / 2 trial for DEP® cabazitaxel and undertook substantial preparatory work in readiness for the upcoming phase 1 / 2 DEP® irinotecan trial. Good progress was also made with Starpharma's DEP® partnered programs. 6 in 10 have
recurrent
BV
4 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Dr Jackie Fairley, Chief Executive OfficerVIVAGEL® PORTFOLIOVIVAGEL® BV Phase 3 results: VivaGel® BV demonstrated compelling efficacy in all six primary and secondary efficacy measuresStarpharma reported positive phase 3 clinical results for its breakthrough product for bacterial vaginosis, VivaGel® BV. The VivaGel® BV trials achieved their primary objective demonstrating statistically significant superiority compared to placebo in preventing recurrent BV. They also met all five of the secondary efficacy endpoints. The majority of women who used VivaGel® BV remained BV-free not only during the 16-week treatment phase but sustained benefits for at least three months after cessation of treatment. VivaGel® BV also demonstrated excellent safety and tolerability.Regulatory progress added substantial value to VivaGel® BVDuring the year Starpharma completed and submitted its New Drug Application (NDA) for VivaGel® BV with the US FDA (FDA). In July 2018, the FDA confirmed that it had accepted the NDA for filing, with no issues identified. Confirmation by the FDA that the NDA has progressed to substantive review is a significant regulatory milestone for the company and this achievement reflects the completeness of the VivaGel® BV clinical and regulatory data package, which comprised more than 110,000 pages. Starpharma is one of very few Australian biotech companies to have successfully developed a product from concept and submitted a NDA in the US. The FDA also confirmed that the VivaGel® BV NDA will be the subject of a priority review, which has a target review period of approximately six months from acceptance. This priority review reflects VivaGel® BV having been granted Fast Track status and Qualified Infectious Disease Product (QIDP) designation by the FDA. These valuable priority designations are designed to make new therapeutics available to patients as rapidly as possible, carrying significant benefits for both regulatory approval and commercialisation of VivaGel® BV. During the year Starpharma also received Australian marketing approval from the TGA for VivaGel® BV. TGA approval is significant not only for the Australian market but also internationally, as there are many countries in Asia, the Middle East and South America where marketing approval is largely based on Starpharma’s home-country registration.Positive phase 3 results and FDA acceptance of the NDA filing has significantly built the commercial opportunity for VivaGel® BV. Commercial licences now cover most regions around the world,with the high-value US market to come.1 in 3 women in the US will get BV CEO's Report
Europe, Russia, CIS, Asia,
Middle East, Africa,
Latin America
ADVANCED
NEGOTIATIONS
United States
Australia, New Zealand
All other regions
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 5
Licensing for the USCommercial negotiations for licensing VivaGel® BV in the US region were undertaken during the year and are now at an advanced stage. Similar to the other regions licensed, Starpharma is undertaking a competitive licensing process for the US market which involves leading pharmaceutical and Women’s Health companies. Starpharma expects to announce a US deal in the near future.Preparation to launch VivaGel® BVStarpharma and its partners, Aspen and Mundipharma, have undertaken extensive preparations for the launch of VivaGel® BV in a number of regions, including in Australia, Europe, Asia and elsewhere. This includes marketing and sales planning, as well as market research by partners to support launches. Mundipharma plans to expedite product launch under the BETADINE® brand through their extensive marketing network and has commenced regulatory activities for its regions, other than the EU where the product is already approved. Significant pre-marketing activities for VivaGel® BV including packaging and supply chain development have been undertaken in conjunction with Starpharma’s contract manufacturing organisations in preparation for launches.VivaGel® BV was licensed in the majority of regions around the worldStarpharma signed a multi-region licence with Mundipharma for the sales and marketing rights to VivaGel® BV in Europe, Russia, the Commonwealth of Independent States (CIS), Asia, the Middle East, Africa and Latin America. Mundipharma is one of the largest privately-owned pharmaceutical companies in the world, employing over 8,600 people.Under the Mundipharma licence, Starpharma will receive returns via an attractive revenue share on VivaGel® BV sales, and is also eligible to receive total signing, regulatory and commercial milestones of up to US$24.7 million (A$33.3 million). These attractive terms were achieved through a competitive licensing process undertaken by Starpharma involving multiple leading pharmaceutical and Women’s Health companies. Mundipharma owns the successful international brand – BETADINE® and has a leading position in Women’s Health. Mundipharma intends to launch VivaGel® BV as soon as practicable, with first launches targeted for early 2019.VIVAGEL® BV LICENSED IN THE MAJORITY OF REGIONS AROUND THE WORLDADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS POSITIVE MARKET RESEARCH FINDINGS FOR VIVAGEL® BV –
FROM US PHYSICIANS AND PAYERS ALIKE
Top VivaGel® BV attributes to patients
6 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Source: Independent Expert US VivaGel® BV Market Research 2017 commissioned by StarpharmaVIVAGEL® CONDOMThe other product within Starpharma’s VivaGel® portfolio is the VivaGel® condom – the only anti-viral condom with lubricant incorporating Starpharma's proprietary anti-viral compound, VivaGel®.During the year, good regulatory progress was made in Japan, China, Europe and other markets. This progress supports the licences with LifeStyles® (previously Ansell), Okamoto in Japan, and Sky and Land Latex Co. in China. LifeStyles® have launched the VivaGel® condom in Australia and in Canada, under the Lifestyles® Dual Protect™ brand with further approvals anticipated.VivaGel® BV market research During the year, Starpharma conducted comprehensive independent market research for VivaGel® BV to inform marketing plans in the US and support its licensing discussions for the product. The independent expert market research involved qualitative and quantitative research involving over 100 obstetrician-gynaecologists and primary care physicians as well as payers.“I think part of the reason why we are seeing more recurrence is that there has got to be some kind of resistance being built up to the antibiotics” – US GYNAECOLOGIST“I would love to try it (VivaGel® BV) because it is not an antibiotic” – US GYNAECOLOGIST“It (VivaGel® BV) is certainly simple enough and the side effect profile is minimal” – US GYNAECOLOGIST“It seems like it (VivaGel® BV) would replace current (off label) prophylactic regimens that I recommend” – US NURSE PRACTITIONER“The biggest unmet need is to be able to prescribe a treatment that has minimal side effects, does not interfere with the patient's lifestyle and resolves symptoms quickly” – US PRIMARY CARE PHYSICIAN1. Speed of odour resolution2. Efficacy3. Speed of discharge resolution 4. Mode of action (non-antibiotic)5. Route of administration (vaginal gel) “The good news is not having an anti-biotic hanging around the environment is good. The more antibiotics you have out there, the more potential for resistance.” – US PAYER“I like the molecule (VivaGel® BV) there is nothing really that treats that recurrent patient” – US PAYERIndependent US Market research: Following VivaGel® BV launch, physicians estimate that twice as many physicians will prescribe a preventative therapy to their BV patients and 75% more patients will be prescribed a preventative therapy. CEO's Report
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 7
DEP® DRUG DELIVERY PLATFORMStarpharma uses dendrimers to deliver pharmaceutical drugs more effectively through its novel DEP® technology. When drugs are attached to dendrimers, they create a nanoparticle – a molecule that’s a much larger version of the drug itself.Using cancer drugs as an example, the nanoparticle allows much higher concentrations of the cancer drug to enter and remain in cancer tissue than drug alone, while also minimising the amount of cancer drug in normal healthy tissue that would otherwise be damaged. The nanoparticle carries the drug in an altered state reducing side effects such as bone marrow toxicity, and hair loss.Starpharma’s dendrimer DEP® versions of cancer drugs are showing improved efficacy and reduced side effects in preclinical and clinical studies. This, combined with creating new intellectual property, makes a powerful combination, both clinically for patients and commercially for Starpharma and its partners.DEP® DOCETAXELStarpharma’s most advanced DEP® product is DEP® docetaxel – an enhanced version of anti-cancer drug Taxotere® (docetaxel) – modified to reduce side effects such as neutropenia (white blood cell toxicity) and hair loss, while enhancing efficacy. Starpharma successfully completed its phase 1 DEP® docetaxel trial in 2017 and achieved the key objective of determining a Recommended Phase 2 Dose (RP2D), with no reports of protocol-defined dose limiting toxicities.No neutropenia was observed and there were no reports of a number of other common adverse events, such as anaphylaxis, anaemia, diarrhoea or fluid retention. There was also no hair loss apart from one patient who reported a mild case of alopecia. Encouraging efficacy signals were observed in around half of the phase 1 trial patients. The DEP® docetaxel phase 2 trial commenced immediately following phase 1. The phase 2 trial is an open-label, two-stage design, with the objective of establishing anti-tumour activity (efficacy) and safety of DEP® docetaxel at the RP2D in lung cancer and prostate cancer.A number of patients have already received multiple cycles of DEP® docetaxel in the phase 2 trial. Consistent with the phase 1 study, patients have not required steroid pre-treatment and have not experienced neutropenia (low white blood cell levels) or hair loss, despite these side effects being almost universal with standard docetaxel (Taxotere®), and a number of encouraging efficacy signals have been observed.The phase 2 trial is currently being conducted in major UK hospitals, including Guy’s Hospital London, University College London Hospital Cancer Clinical Trials Unit and Freeman Hospital Newcastle upon Tyne. A fourth site, in Leeds, has recently been initiated and is expected to accelerate patient recruitment.As part of the trial, Starpharma is also investigating the benefits of combining DEP® docetaxel with another anti-cancer agent, nintedanib (Vargatef®) in lung cancer. Recruitment for the first cohort of patients with lung cancer in this combination study has been completed. Based on positive feedback from oncologists involved in the study, Starpharma is now exploring the potential to expand recruitment in this combination arm of the study.DEP® CABAZITAXELDEP® cabazitaxel is Starpharma’s improved, dendrimer-enhanced version of cancer drug Jevtana® (cabazitaxel). Starpharma commenced its phase 1 / 2 clinical trial for DEP® cabazitaxel, having received regulatory and ethics approvals during the year. The trial is being conducted at multiple sites, with Guy’s Hospital London and University College London Hospital in the UK being the first sites open for recruitment. Further sites will be added and commence recruitment as phase 1 dose escalation progresses and the phase 2 part of the trial gets underway. The objectives of this trial are to evaluate the safety, tolerability and pharmacokinetics of DEP® cabazitaxel, to define a RP2D, and then to determine anti-tumour efficacy of the product in select tumour types. The adaptive phase 1 / 2 trial design for DEP® cabazitaxel will also enable Starpharma to move seamlessly from phase 1 to phase 2 and to explore efficacy as early as possible. As the trial progresses, decisions will be made as to which tumour types to focus on, to further characterise efficacy in specific tumour types.DEP® IRINOTECANStarpharma has recently advanced a DEP® version of major cancer drug, irinotecan towards the clinic (marketed by Pfizer under the brand name Camptosar®). Final preclinical work is being completed ahead of commencing the phase 1 / 2 DEP® irinotecan trial. Manufacture of DEP® irinotecan for use in the trial has already been completed at Starpharma’s scale-up facility and is currently being formulated in preparation for trial commencement. DEP® SCALE-UP FACILITESStarpharma has invested in its in-house DEP® scale-up facilities to accelerate the development of its internal and partnered products. These facilities enable the rapid manufacture of preclinical and clinical grade materials, accelerating these programs by six months or more, with faster turnaround than with third-party manufacturers and also provide greater flexibility in managing costs. 8 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
…the DEP® technology has enabled us to advance a very exciting oncology agent towards the clinic. Dr Susan Galbraith, Head of the Oncology Innovative Medicines Unit at AstraZeneca DEP® DRUG DELIVERY OPTIMISES THE THERAPEUTIC VALUE OF DRUGSSUPERIOR PRODUCT PROPOSITION product differentiation: improved efficacy and fewer side effectsPATENT PROTECTION new intellectual property: exploit latent opportunities through life-cycle management (next generation of drugs)ENHANCED THERAPEUTIC PROFILE targeted delivery, extended releaseEASIER PATIENT MANAGEMENT no need for steroid pre-treatment; fewer complications due to reduced side effects BETTER PATIENT EXPERIENCE • no hair loss* • no neutropenia (low white blood cells)• no bone marrow toxicity • no diarrhoea • no nail disorders • no cortisone pre-treatment • no anaphylaxis DoctorPharma CompanyPatientBased on clinical / preclinical studies * Only a single case of mild alopecia reported in the phase 1 DEP® docetaxel trial CEO's Report
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 9
AstraZeneca's AZD0466 is a dual Bcl2/xL inhibitor in a highly optimised DEP® formulation with the potential to be a best-in-class agent in this field. Bcl2 is an exciting and clinically validated oncology target. As a comparison – Abbvie’s Venetoclax (Venclexta), a first generation Bcl2 inhibitor (specific for Bcl2) was approved in 2016 with estimated US sales to exceed US$2B by 2021.We have looked for collaborations around the world to find partners with a similar approach who we can work with to help us bring new medicines to patients. There was evidence that when using Starpharma’s technology with anti-cancer molecules, it could actually improve both the effectiveness and the safety of those molecules and provide them with a broader application.Liz Chatwin, Country President, AstraZeneca Australia & New Zealand Source: www.evaluategroup.comPARTNERED DEP® LICENCES Starpharma also allows pharmaceutical partners to access its novel DEP® drug delivery platform under licence creating significant leverage and optionality. DEP® is used to enhance their novel or existing drugs – creating significant commercial value for the partner – in return for milestone payments and royalties to Starpharma.TYPICAL PARTNERED DEAL STRUCTURE• Starpharma provides access to the DEP® platform and manufactures (on a small scale) DEP® candidates under research collaboration• Partner selects their DEP® development candidate (novel or existing drug)• Partner funds the development of the DEP® candidate• Starpharma may scale-up DEP® products under contract• Starpharma is eligible to receive milestone payments and royalties based on development and sales achievements• Multiple partner DEP® programs can run in parallel, each having the ability to earn significant revenues for StarpharmaPARTNERED DEP®Starpharma’s partnered DEP® programs include a multiproduct DEP® licence with AstraZeneca, which currently involves the development and commercialisation of two novel oncology compounds, with the potential to add more.During the year, AstraZeneca unveiled its first DEP® candidate, AZD0466, using Starpharma’s DEP® drug delivery platform. AZD0466 is a highly optimised dendrimer formulation of a novel dual Bcl2/xL inhibitor, which has the potential to be a best-in-class cancer drug with a broad combination opportunity in solid and haematological tumours. AstraZeneca also has an additional, separate DEP® program for another product in its portfolio.Starpharma was delighted to host both Dr Pascal Soriot, Global CEO, AstraZeneca and Liz Chatwin, Country President AstraZeneca Australia and New Zealand at its head office on separate occasions throughout the year and continues to explore other potential DEP® programs with their team.In addition, Starpharma has two Targeted DEP® partnerships with world leading antibody-drug conjugate companies.Partnered DEP® programs continued to progress during the year and Starpharma has manufactured a number of partnered DEP® candidates at progressively larger scales. CEO's Report
M
2
.
1
6
M
3
.
1
5
M
0
.
6
4
M
8
.
0
3
M
0
.
4
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
10 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
3 YEAR FINANCIAL SUMMARY2018 $M2017 $M2016 $MRevenue, grant income & other income 3.9 3.0 3.9Interest revenue 1.1 0.6 0.7Total revenue and income 5.0 3.6 4.6Expenditure (15.3) (18.8) (25.9)Loss from continuing operations (10.3) (15.2) (21.3)Profit/(loss) from discontinued operation – 23.4 (1.4)Profit/(loss) for the period (10.3) 8.2 (22.7)Net operating cash inflows/(outflows)(10.2)(17.0)(17.8)Net investing cash inflows/ (outflows) (0.4) 32.7–Net financing cash inflows – – 32.6Cash and cash equivalents at end of year 51.3 61.2 46.0OVERVIEW OF FINANCIAL RESULTSStarpharma reported a net loss from continuing operations of $10.3 million, compared to $15.2 million last year. The improvement reflects lower expenditure on the clinical program for VivaGel® BV following its completion and for which Starpharma reported positive results during the year. Revenue for the year included revenue from Mundipharma on the licensing of VivaGel® BV for Europe, Russia, CIS, Asia, Middle East, Africa and Latin America.The reported consolidated loss after income tax for the financial year ended 30 June 2018 mirrors the net loss from continuing operations. Where as in 2017, the group reported a $8.2 million net profit, reflecting the discontinued operation profit of $23.4 million following the disposal of the agrochemicals business.The net operating cash outflows for the year were $10.2 million, a $6.8 million improvement on the prior year amount of $17.0 million, resulting in a strong cash balance at 30 June 2018 of $51.3 million.This year's financials are indicative of the company's development commercially and its strong financial position sets it up extremely well for the future.CASH & CASH EQUIVALENTS $M (AT 30 JUNE) CEO's Report
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 11
REVIEW AND FUTURE OUTLOOKI would like to take this opportunity to sincerely thank Starpharma’s executive team, and all our staff, for their outstanding efforts and commitment this past year. Our recent successes are the result of years of hard work and dedication from a small, but highly-skilled team and I believe that as a company we should be immensely proud of these achievements.This was an exceptionally positive year for the company with successful clinical trial results reported in both of our VivaGel® and DEP® drug delivery portfolios and a string of further achievements, including licences, NDA submission, product approval and other regulatory milestones. Licensing VivaGel® BV has set in place a revenue stream and business transformation that will enable continuous investment and growth in the DEP® platform.PRODUCTFY17FY18FUTUREVivaGel® BVPhase 3 completedPhase 3 results; reported Multiple licences; milestone revenue; FDA accepted NDA for filing: TGA approvalRevenue: milestone payments, revenue share, royaltiesDEP® docetaxelPhase 1 progressedCompleted phase1; commenced phase 2Licence after phase 2DEP® cabazitaxelFinal preclinical work Commenced phase 1 / 2Complete phase 1 / 2DEP® irinotecanExcellent preclinical resultsFinal preclinical workCommence phase 1 / 2AstraZeneca AZD0466 dual Bcl2/xL inhibitorFinal preclinical workAZD0466 revealed as dual Bcl2/xL inhibitor; final preclinical workAstraZeneca to commence phase 1PROGRESS AND OUTLOOK FOR STARPHARMA'S LEAD PRODUCTSIn the year ahead, we look forward to the market launch of VivaGel® BV in multiple regions as well as FDA approval. In parallel we are accelerating the clinical development of our three lead DEP® products and expanding our DEP® portfolio with a stable of oncology candidates for future development – we look forward to announcing further candidates in the coming year.Starpharma’s strong balance sheet and anticipated near-term revenues place the company in an excellent position for growth. It’s an exciting time as the company continues to transform from a largely development stage company to revenue generation based on a deep portfolio of both commercial and development opportunities.As we move forward, we remain committed to our purpose of creating innovative therapies which have the potential to profoundly improve patient health worldwide, and generate shareholder value.Jackie Fairley Chief Executive Officer 12 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Corporate & Social ResponsibilityStarpharma is a world leader in the development of dendrimer products for pharmaceutical 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 Starpharma to ensure employees have engaging and satisfying roles and receive periodic feedback on performance. Policies provide for ongoing training and career development. 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. Starpharma has significantly lower rates of employee turnover than the industry average. This higher rate of employee retention is indicative of its positive workplace.Starpharma prides itself on a strong culture based on accountability, performance, and ethical and respectful behaviours. Employees are rewarded for their performance, dedication, and contribution to the results of Starpharma. Employees are recruited into and retained in positions based on merit. A balance of skills, expertise and opinion, as well as diversity are viewed as important cultural elements within the collegiate team environment. The Board has adopted a diversity policy to provide a framework for Starpharma to achieve a number of diversity objectives, with an initial focus on gender.Over half of Starpharma’s employees are female, and leadership roles are held evenly by females and males in the company. Starpharma strives to put in place measures, such as flexible working arrangements, specifically to encourage participation by all.Starpharma is also proud of the ethnic diversity of its employee population, with almost half of all employees born outside Australia in 14 different countries.Employee equity participation schemes are used to provide the opportunity for all staff to share in the 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 inputs from world experts and provide a pathway for products to enter the market and change daily lives.THE COMMUNITYThe very nature of Starpharma's products affords the opportunity of changing lives for the better. Through innovative research and development, Starpharma is creating products for needs which are currently unmet within the health and medical 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 ENVIRONMENTStarpharma is committed to conducting its operations in an environmentally responsible manner.The company ensures it has appropriate systems in place to comply with relevant Federal, State and Local regulations, and has adopted documented procedures and processes to ensure all waste products are disposed of strictly in accordance with relevant environmental regulations.In conducting the company’s operations, management and employees are conscious of reducing their environmental footprint.50% of leadership roles are held by females54% of employees are female 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 2018.
Directors
The following persons were directors of Starpharma Holdings Limited (“the company”) at the date of this report and during the whole of the
financial year:
R B Thomas (Chairman)
R A Hazleton
Z Peach
P R Turvey
J K Fairley (Chief Executive Officer)
Information on Directors
Rob B Thomas AM, BEc, MSAA, SF Fin, FAICD, FRSN
Independent non-executive director (appointed 4 December 2013)
Chairman from 13 June 2014
Jacinth (Jackie) K Fairley BSc, BVSc (Hons), MBA, GAICD,
FTSE
Chief Executive Officer and Director (appointed 1 July 2006)
Experience
Mr Thomas has a strong background in financial services and
capital markets and is non-executive director of several Australian
listed companies. Formerly he was a partner of Potter Partners
(now UBS) where he was also Head of Research.
He is the former CEO of County NatWest Securities and then
became CEO and then Chairman of Citibank Corporate and
Investment Bank in Australia. Mr Thomas has also held the
position of Chairman at Australian Wealth Management Ltd
(ultimately IOOF Ltd), TAL (Australia’s largest life insurance
company) and Heartware Inc, the second largest global
manufacturer of left ventricular assist heart pumps.
For many years Mr Thomas was regarded as one of Australia’s
leading financial analysts and regularly lectured with FINSIA. He
has considerable expertise in Mergers & Acquisition and capital
markets including advising on the floats of Commonwealth Bank of
Australia and Qantas, and vast experience in Audit and Risk
Management. Mr Thomas is also approved under the NSW
prequalification scheme for Audit and Risk Committee Independent
Chairs and Members for government/public sector agencies and
has previously served as the Chairman of the Audit and Risk
Committee of Virgin Australia Limited (for 11 years), Heartware
Inc, REVA Medical Ltd and the State Library of NSW.
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.
Committee membership
Member of Remuneration & Nomination Committee
Member of Audit & Risk Committee
Other current directorships of ASX listed entities: REVA
Medical Inc. and Biotron Limited.
Directorships of other ASX listed entities within last three
years: Virgin Australia Limited
Specific skills and experience areas
In addition to Mr Thomas’ significant finance and M&A/capital
markets experience, Mr Thomas’ non-executive roles with various
ASX listed companies have deepened his skills and experience in
relation to accounting/corporate finance, audit and risk;
governance; licensing and commercialisation of innovation;
strategy and risk management; OH&S; and remuneration. He has
also had significant experience with US based companies as they
progress from research to commercialisation.
Interests in Starpharma Holdings Limited
775,000 ordinary shares
Experience
Dr Jackie Fairley has approximately 30 years of operational
experience in the pharmaceutical and biotechnology industries
working in senior management roles with companies including
CSL and Faulding (now Pfizer). In those roles she had
responsibilities which included clinical, regulatory, business
development, product development management and general
management. At Faulding she was responsible for Global Product
Development, Regulatory Affairs and Business Development for
Faulding’s Hospital Business which operated in more than 60
countries.
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 she was the recipient of the prestigious
Clemenger Medal. Jackie is also a Graduate of the Australian
Institute of Company Directors.
Jackie currently sits on the board of the Melbourne Business
School and is Chair of its Remuneration and Nomination
Committee. She is a non-executive director of listed investment
company Mirrabooka Investments Limited, a member of the
Federal 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 on the Investment Committee of the
Carnegie Innovation Fund.
Committees
Attends Board Committee meetings by invitation.
Other current directorships of ASX listed entities: Mirrabooka
Investments Limited
Directorships of other ASX listed entities within the last three
years: None
Specific skills and experience areas
Approaching 30 years’ experience in executive roles up to and
including as CEO and executive director of ASX listed and unlisted
pharmaceutical and biotechnology companies, Dr Fairley’s
experience covers all key areas described in Starpharma’s Board
skills matrix. In particular, Dr Fairley has significant leadership
skills in healthcare and scientific research; pharmaceutical
development; international experience; licensing and
commercialisation of innovation; business development; strategy
and risk management; and M&A/capital markets.
Interests in Starpharma Holdings Limited
3,875,434 ordinary shares
3,244,672 employee performance rights
Starpharma Holdings Limited Annual Report 2018
13
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 13
Directors’ Report
Richard A Hazleton BSChE, MSChE, MBA, HonDrEng,
HonDrCommSc
Independent non-executive director (appointed 1 December 2006)
– resides in the United States
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 CEO 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 after returning to the US, 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 is based in the US and brings to the table an
international lens on product development, manufacturing, science
and technology. He has significant experience in the areas of
strategy, accounting/corporate finance and audit and risk.
Zita Peach BSc, GAICD, FAMI
Independent non-executive director (appointed 1 October 2011)
Experience
Ms Peach has more than 25 years of commercial experience in the
pharmaceutical, biotechnology, medical devices and health
services industries. She worked for major industry players such as
CSL Limited and Merck Sharp & Dohme, the Australian subsidiary
of Merck Inc. Ms Peach’s most recent executive position was as
the Managing Director for Australia and New Zealand and
Executive Vice President, South Asia Pacific for Fresenius Kabi, a
leading provider of pharmaceutical products and medical devices
to hospitals. Previously, Ms Peach was Vice President, Business
Development, for CSL Limited, a position she held for ten years.
Ms Peach has substantial international and local expertise in the
areas of pharmaceutical/medical device product development,
commercialisation of products and technologies, marketing and
sales, licensing, M&A and international expansions. She has
overseen manufacturing, logistics, regulatory affairs, quality
assurance, clinical services, human resources, finance,
information technology, public policy, business development,
marketing and sales at Managing Director and CEO level.
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.
Ms Peach is a Non-Executive Director of the ASX-listed
AirXpanders, Inc., Monash IVF Group Limited, Pacific Smiles
Group Limited and Visioneering Technologies, Inc. Ms Peach is
also a member of the Hudson Institute of Medical Research Board.
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
Specific skills and experience areas
Having held various executive roles up to and including as
Chairman and CEO of Dow Corning over a 36 year period as well
as non-executive directorships, Mr Hazleton brings the following
significant skills and experience to the Board of Starpharma –
international experience; regulation/public policy, licensing and
commercialisation of innovation, science and technology;
governance; strategy and risk management; accounting/corporate
finance, audit and risk; OH&S; and remuneration. Mr Hazleton has
been assessed as an independent non-executive director
notwithstanding his 12-year tenure. The corporate memory he
provides is advantageous and such tenure is commonplace in the
pharmaceutical/biotech sector, due to the longer development
timelines involved.
Interests in Starpharma Holdings Limited
208,466 ordinary shares
Ms Peach is a Fellow of the Australian Institute of Company
Directors and a Fellow of the Australian Marketing Institute.
Committee membership
Chair of the Remuneration & Nomination Committee
Other current directorships of ASX listed entities: AirXpanders,
Inc., Monash IVF Group Limited, Visioneering Technologies, Inc.
and Pacific Smiles Group Limited.
Directorships of other ASX listed entities within the last three
years: Vision Eye Institute Limited (delisted from the ASX in
December 2015).
Specific skills and experience areas
With over 25 years’ experience in various senior executive roles
within ASX listed and international pharmaceutical and
biotechnology companies, as well as numerous non-executive
directorships in the biotechnology/pharmaceutical sector, Ms
Peach’s experience covers all key areas described in
Starpharma’s Board skills matrix. In particular, Ms Peach has
substantial expertise as a leader in healthcare and scientific
research; pharmaceutical/product development; licensing and
commercialisation of innovation; science and technology; sales,
marketing and business development; strategy and risk
management; remuneration; and M&A/capital markets.
Interests in Starpharma Holdings Limited
48,975 ordinary shares
Starpharma Holdings Limited Annual Report 2018
14
14 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Directors’ Report Operating & Financial Review
Peter R Turvey BA/LLB, MAICD
Independent non-executive director (appointed 19 March 2012)
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 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. In his
senior executive role at CSL, Mr Turvey was actively involved in
CSL’s extensive M&A and equity capital raising activities over a 15
year period, including during the time of the float of CSL as a
publicly listed company. This experience has been further
enhanced by Mr Turvey’s non-executive directorships of various
ASX listed biotechnology companies.
In addition to his expertise in corporate finance, audit and risk
management, Mr Turvey has extensive experience in
commercialisation and pharmaceutical product development.
Mr Turvey is currently a principal of Foursight Associates Pty Ltd
and a director of Victorian Government owned entity Agriculture
Victoria Services Pty Ltd.
Committee membership
Chair of Audit & Risk Committee
Other current directorships of ASX listed entities: None
Directorships of other ASX listed entities within the last three
years: Admedus Limited, Viralytics Limited
Specific skills and experience areas
With over 30 years of executive experience in the biotechnology
industry of which 20 years were at CSL, followed by non-executive
directorships at a number of ASX listed pharmaceutical and
biotechnology companies, Mr Turvey has significant leadership
skills and experience in healthcare and/or scientific research;
pharmaceutical/product development; international experience and
skills in regulation/public policy; licensing and commercialisation of
innovation; business development; governance; strategy; risk
management; audit and risk; and M&A/capital markets.
Interests in Starpharma Holdings Limited
149,821 ordinary shares
Company Secretary
The Company Secretary is Mr Nigel Baade, holding the position
since 2013. Mr Baade also holds the position of Chief Financial
Officer, which he has held since 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.
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® for the management and prevention of
bacterial vaginosis, and as a condom coating. Starpharma is also
applying its proprietary dendrimers to drug delivery to create
improved pharmaceuticals and has developed the valuable DEP®
delivery platform.
Result
The financial report for the financial year ended 30 June 2018, 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 2018 was
$10,285,000. In 2017, the group recorded a $8,200,000 profit,
reflecting a profit from discontinued operation of $23,417,000 from
the disposal of the agrochemicals business, and a loss from
continuing operations of $15,217,000.
The net operating cash outflows for the year were $10,201,000
(2017: $16,955,000). In 2017, net investing cash inflows for the
year of $32,656,000 reflected the $35 million gross proceeds from
the sale of the agrochemicals business. The cash balance at 30
June 2018 was $51,319,000 (June 2017: $61,188,000).
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 2018 (2017: Nil).
Review of operations
Key highlights until the date of this report include:
VivaGel® Portfolio
VivaGel® BV licensed to Mundipharma for Europe, Russia,
CIS, Asia, Middle East, Africa and Latin America;
Starpharma completed and submitted a New Drug Application
(NDA) for VivaGel® BV;
FDA accepted the VivaGel® BV NDA for filing, under priority
review, with no issues cited;
VivaGel® BV received Australian marketing approval from the
TGA; and
VivaGel® BV demonstrated compelling efficacy in pivotal
phase 3 trials for prevention of recurrent BV.
DEP® Drug Delivery Platform
DEP® docetaxel achieved its key objective of determining a
Recommended Phase 2 Dose (RP2D) in its phase 1 trial, with
no reports of protocol-defined dose limiting toxicities, no
neutropenia and encouraging efficacy signals observed;
DEP® docetaxel phase 2 trial commenced in patients with
lung cancer and prostate cancer;
DEP® docetaxel commenced a clinical trial in combination
with nintedanib (Vargatef®) in lung cancer;
DEP® cabazitaxel phase 1 / 2 trial commenced in patients
with advanced solid tumours;
Final preclinical work for DEP® irinotecan underway in
preparation for phase 1 / 2 trial;
AstraZeneca presents first DEP® oncology candidate
(AZD0466) as Bcl2/xL inhibitor;
Starpharma and Monash Institute of Pharmaceutical
Sciences were awarded grant funding to further advance
collaborative programs using the DEP® platform; and
Starpharma and Peter MacCallum Cancer Centre were
awarded a further grant to support innovative research within
Starpharma’s DEP® oncology program.
Starpharma Holdings Limited Annual Report 2018
15
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 15
Directors’ Report Operating & Financial Review
Review of operations (continued)
VivaGel® Portfolio
In August 2017, Starpharma reported that VivaGel® BV had
demonstrated statistically significant efficacy in reducing the rates
of recurrent BV (rBV) in its two pivotal phase 3 clinical trials. The
trials achieved their primary objective for VivaGel® BV,
demonstrating statistically significant superiority compared to
placebo in preventing rBV. They also met all five of the secondary
efficacy endpoints. In addition, the majority of women who used
VivaGel® BV remained BV-free not only during the 16-week
treatment phase but sustained benefits for at least three months
after cessation of treatment. VivaGel® BV also demonstrated
excellent safety and tolerability.
Following the release of these positive clinical trial results,
Starpharma executed a multi-region licence for VivaGel® BV with
Mundipharma, for Europe, Russia, the Commonwealth of
Independent States, Asia, the Middle East, Africa and Latin
America. Under the licence, Starpharma will receive returns via a
revenue share on VivaGel® BV sales and is eligible to receive total
signing, regulatory and commercial milestones of up to
US$24.7 million.
Starpharma also submitted a New Drug Application (NDA) to
register the product in the US. The FDA confirmed that it
completed its filing review and accepted the NDA for filing, with no
issues identified. This confirmation is a significant regulatory
milestone for Starpharma and reflects the completeness of the
VivaGel® BV clinical and regulatory data package, which
comprised of more than 110,000 pages. The NDA review is being
conducted by the FDA under priority review as VivaGel® BV has
been granted Fast Track status. Starpharma also received
Australian marketing approval from the Therapeutic Goods
Administration for VivaGel® BV.
Starpharma made good regulatory progress with its VivaGel®
condom in Japan, China, Europe and other markets. This progress
supports the licences with LifeStyles® (previously Ansell), Okamoto
in Japan, and Sky and Land Latex Co. for the Government market
in China.
DEP® Drug Delivery Platform
Starpharma uses its DEP® dendrimer technology to improve the
performance and delivery of pharmaceuticals. Starpharma is
currently developing a number of DEP® enhanced products
internally, in addition to its partnered programs through licences
and collaborations with leading global pharmaceutical companies.
Starpharma’s most advanced DEP® product is DEP® docetaxel - a
dendrimer-enhanced version of docetaxel, which is one of the
most widely used cancer drugs for treatment of a range of
common tumours including breast, prostate and lung. During the
year, the DEP® docetaxel phase 1 trial reported positive clinical
data and moved into phase 2. The phase 1 trial successfully
achieved the key objective of determining a Recommended Phase
2 Dose (RP2D). There were no protocol-defined dose limiting
toxicities reported and no patients experienced neutropenia, a life-
threatening side effect seen in more than 90% of patients who take
the original docetaxel product (e.g. Taxotere®). Additionally,
encouraging signs of anti-cancer efficacy, including stable disease,
were observed in approximately half of the DEP® docetaxel-treated
patients and in tumours not usually responsive to docetaxel.
Since commencement of the phase 2 trial a number of patients
have been enrolled into and have received DEP® docetaxel. The
phase 2 trial is currently being conducted in major UK hospitals,
including Guy’s Hospital London, University College London
Hospital (UCLH) Cancer Clinical Trials Unit and Freeman Hospital
Newcastle upon Tyne. A fourth site in Leeds has also been
initiated. The phase 2 trial is an open-label, two-stage design, with
the objective of establishing anti-tumour activity (efficacy) and
safety of DEP® docetaxel at the RP2D. Consistent with the results
of the phase 1 study, the patients have not required steroid pre-
treatment and have not experienced neutropenia following
treatment with DEP® docetaxel.
Starpharma’s other clinical stage DEP® product is DEP®
cabazitaxel, a dendrimer-enhanced version of leading cancer drug,
Jevtana®. The phase 1 / 2 clinical trial for DEP® cabazitaxel
commenced following regulatory and ethics approvals being
received. The key objectives of the phase 1 / 2 trial are to evaluate
the safety, tolerability and pharmacokinetics of DEP® cabazitaxel,
to define a RP2D, and to explore anti-tumour efficacy of the
product. The trial will be conducted at multiple sites, with Guy’s
Hospital London and UCLH in the UK being the first sites open for
recruitment.
Starpharma is also developing a number of other internal DEP®
products, such as DEP® irinotecan - a dendrimer-enhanced
version of irinotecan (Camptosar®), a major anti-cancer drug used
to treat colorectal cancer. During the year, Starpharma significantly
advanced this program towards human clinical trials, undertaking
final preclinical testing of DEP® irinotecan and clinical product
manufacture. DEP® irinotecan is due to commence a phase 1 / 2
trial in FY19 with final preparatory activities underway.
Starpharma’s scale-up facilities continue to be used for both
internal and partnered DEP® programs and continue to provide the
company with significant financial benefits and faster turnaround
compared to third party manufactured DEP® materials.
From its partnered programs, AstraZeneca unveiled its first DEP®
candidate - AZD0466, a highly optimised dendrimer formulation of
a novel dual Bcl2/xL inhibitor, which has the potential to be a best-
in-class cancer drug. AstraZeneca released preclinical data on
AZD0466 during the year, adding to the growing body of data
which continues to validate the value of Starpharma’s DEP® drug
delivery platform. Clinical trials for AZD0466 are expected to
commence in FY19 and will be funded by AstraZeneca. A patent
incorporating AZD0466 will be published in late August highlighting
the impressive efficacy data obtained with DEP® versions of
AstraZeneca’s Bcl modulators alone and in combination current
therapies. Starpharma also has an additional DEP® program with
AstraZeneca, separate to the existing multi-product DEP® licence.
The company also progressed its other partnered programs during
the year. Starpharma also has two undisclosed Targeted DEP®
partnerships with world leading antibody-drug conjugate
companies.
Matters subsequent to the end of the financial year
No matters or circumstances have arisen since 30 June 2018 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
The company aims to create value for shareholders through the
commercial exploitation of proprietary products based on its
dendrimer technology in pharmaceutical applications. The
company’s key focus is to advance and broaden its product
development pipeline, including internal and partnered DEP®
programs and commercial opportunities for VivaGel®. 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 licencing 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’s strategy remains consistent with previous years. The
sale of its agrochemicals business last year has enabled the
company to strengthen its focus on the development of its high-
value DEP® portfolio and has positioned the company well to
capture value from its technology in the short to medium term.
Starpharma has extensive 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.
Starpharma Holdings Limited Annual Report 2018
16
16 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Directors’ Report Operating & Financial Review
Legal
At the date of the Directors’ Report there are no significant legal
issues.
$3,523,000) was received from R&D tax incentives associated with
eligible expenditure and activities from the prior financial year.
Net cash inflows from investing activities in the prior year included
the net proceeds from the sale of the agrochemicals business.
Earnings Per Share
30 June 2018
$’000
30 June 2017
$’000
Basic & diluted earnings/(loss) per share
2018
2017
Review of Financials
Income statement
Continuing operations
Revenue
Other income
Research and product
development expense
Commercial and regulatory
operating expense
Corporate, administration and
finance expense
Loss from continuing
operations
Profit from discontinued
operation
4,884
73
3,643
4
(10,576)
(14,875)
(2,425)
(1,051)
(2,241)
(2,938)
(10,285)
(15,217)
-
23,417
Profit/(loss) for the period
(10,285)
8,200
Income statement
The reported loss from continuing operations was $10,285,000
(2017: $15,217,000). The reported net profit after tax for the prior
year of $8,200,000 reflected the gain on the sale of the
agrochemicals business in excess of the carrying value of the
related net assets. The loss from continuing operations reflects the
expensing of research and development expenditure for the
VivaGel® and DEP® programs.
Total revenue and other income for the year was $4,957,000
(2017: $3,647,000), comprising revenue of $3,812,000 (2017:
$2,992,000) for licensing, royalty and research revenue, interest
income of $1,072,000 (2017: $651,000) and other income of
$73,000 (2017: $4,000).
Research and product development expense includes the costs of
the VivaGel® BV and the internal DEP® drug delivery programs,
such as DEP® docetaxel, DEP® cabazitaxel, and DEP® irinotecan.
R&D expenses were lower than the prior year predominantly due
to the finalisation in the current year of the VivaGel® BV phase 3
clinical trials for the prevention of BV.
A contra research and development expense of $4,056,000 (2017:
$3,252,000) has been recorded for research and development
activities eligible under the Australian Government’s R&D tax
incentive program.
Commercial and regulatory operating expense includes the
expenditure related to the commercialisation of both VivaGel® and
DEP® portfolios, including business development, regulatory,
supply chain and quality assurance activities.
Corporate, administration and finance expense includes corporate
costs, as well as gains/losses on foreign currency held. The
decrease over the prior corresponding period reflects a favourable
foreign currency movement of $1,130,000, offset by an increase in
employment costs of $406,000, which includes a non-cash share-
based payments expense increase of $178,000.
Balance sheet
At 30 June 2018 the group’s cash position was $51,319,000 (June
2017: $61,188,000). Trade and other receivables of $6,134,000
(June 2017: $4,490,000) includes $3,847,000 receivable from the
Australian Government under the R&D tax incentive program and
$2,029,000 from Mundipharma for the VivaGel® BV European
licencing fee. Trade and other payables have reduced primarily on
lower accruals associated with the VivaGel® BV clinical program.
Statement of cash flows
The net operating cash outflows for the year were $10,201,000
(2017: $16,955,000). During the financial year $3,747,000 (2017:
From continuing operations
($0.03)
($0.04)
From discontinued operations
-
Total
($0.03)
$0.06
$0.02
Material Business Risks
The group operates in the biotechnology and pharmaceutical
sectors and is in the development and early commercialisation
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, are undertaken by specialist
contract research organisations; and there are risks in
managing the quality and timelines of these activities.
Regulatory – products and their testing may not be approved,
or may be delayed or withdrawn, 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 recurrent 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 licensing and collaborative agreements.
Product supply – the company is required to manufacture and
supply product under certain licencing agreements. The
manufacture of product is undertaken by specialist, regulatory
approved, third party contract manufacturing organisations
experienced in the sector. However, there are quality and
supply delays/failure risks associated with the supply of
product.
Product acceptance & competitiveness – 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.
Starpharma Holdings Limited Annual Report 2018
17
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 17
Directors’ Report Operating & Financial Review
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 group’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).
Health and Safety
The Board, CEO and senior management team of the group are
committed to providing and maintaining a safe and healthy working
environment for the company’s employees and anyone entering its
premises or with connections to the company’s business
operations. Employees are encouraged to actively participate in
the management of 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 2018 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.
Meetings of Directors
The number of meetings of the company’s Board of Directors and
of each committee held during the year ended 30 June 2018, and
the numbers of meetings attended by each director were:
Directors
Board
Audit & Risk
Committee
Remuneration
& Nomination
Committee
J K Fairley
R A Hazleton
Z Peach
R B Thomas
P R Turvey
9 of 9
9 of 9
9 of 9
9 of 9
9 of 9
N/A
2 of 2
N/A
2 of 2
2 of 2
N/A
3 of 3
3 of 3
3 of 3
N/A
The table above illustrates the number of meetings attended
compared with the number of meetings held during the period that
the director held office or was a member of the committee. N/A
denotes that the director is not a member of the relevant
committee.
Starpharma Holdings Limited Annual Report 2018
18
18 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Directors’ Report Remuneration Report
The remuneration report for the year ended 30 June 2018 sets out remuneration information for non-executive directors, executive directors and
other key management personnel of the group (KMP defined below).
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) Actual remuneration of KMP executives
b) Approach to setting and reviewing remuneration
c) Remuneration principles and strategy
d) Details of executive equity incentive plans
e) Grant of equity incentives to KMP executives in FY18
5. Executive remuneration outcomes, including link to performance
6. Details of remuneration
7. Executive employment agreements
8. Additional disclosures relating to employee equity schemes
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
(approximately 40) so endeavours to keep its remuneration relatively straightforward. 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 group either having
met or approaching important regulatory and commercial milestones.
Starpharma’s remuneration structure is transparent and KPI driven to align with the interests of shareholders and 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 FY18 remains largely consistent with the previous period, comprising fixed remuneration, short-
term incentives in both cash and equity, and equity based long-term incentives. As communicated in previous years, the strategy and structural
improvements implemented in 2015 included an increase of the relative portion of long term remuneration for executives. Also, there has been a
gradual increasing proportion of at risk remuneration for other KMP executives over the subsequent years. The result of this strategy is the
revision of the target remuneration mix outlined on page 24.
The number of rights awarded each year, as determined by the Board, is calculated on the fair value based on the 3 month VWAP to 30 June,
reflecting the beginning of the performance period. This practice is consistent with the company’s practice since 2015, and the number of rights
granted is not adjusted for changes in share price post 30 June. With the rise in Starpharma’s share price during 2017, the quantum of
remuneration associated with performance rights was impacted due to the share price increasing between the time the Board determined the
value of rights to grant and the value ascribed on the grant date; which in the case of the CEO was the 2017 AGM date. For instance, the fair
value at grant date, being the 2017 AGM, of $1.29 represents an 80% increase over the 3 month VWAP to 30 June 2017 value of $0.71.
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 2018. 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. Profiles for each of the directors and company secretary can be found at the
beginning of the Directors’ Report.
(i) Non-executive directors
(ii) Executive director
R B Thomas
Non-executive Chairman
R A Hazleton
Non-executive Director
Z Peach
Non-executive Director
P R Turvey
Non-executive Director
J K Fairley
Chief Executive Officer & Managing Director
(CEO)
(iii) Other KMP executives
N J Baade
Chief Financial Officer & Company Secretary
A Eglezos
VP, Business Development
D J Owen
VP, Research
J R Paull
VP, Development & Regulatory Affairs
There were no changes to the KMP after the reporting date up to the date of this report.
Page 19 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 19
Directors’ Report Remuneration Report
2. Remuneration governance
The Remuneration and Nomination Committee, consisting of three independent non-executive directors, advises the Board on remuneration
policies and practices generally, and makes specific recommendations on remuneration packages and other terms of employment for
non-executive directors, KMP executives and other senior executives. Where required, external remuneration advice may be sought by the
Remuneration and Nomination Committee or the Board.
Specifically, the Board approves the remuneration arrangements of the CEO including awards made under the 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 remuneration, including STI and LTI awards, for executives. The Board also
sets the aggregate fee pool for non-executive directors (which is 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
group, 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, size and responsibility within the industry. Fixed remuneration is
supplemented by providing incentives (variable remuneration) to reward superior performance.
Performance reviews
All staff participate in a formal performance review at the commencement of the annual cycle and a performance and salary review at the end of
the cycle. The performance reviews consider behavioural and cultural aspects of performance, as well as objective planning and professional
and personal development. 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. As part of the process, each employee’s performance is assessed
against their pre-agreed individual KPIs and/or business unit performance and corporate KPIs and to determine, subject to business
considerations such as cash availability, if an incentive 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 2017 Annual General Meeting (AGM)
Of the votes cast on the company’s remuneration report for the 2017 financial year, over 98% were in favour of the resolution.
As part of the group’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. Members of the Remuneration and Nomination
Committee routinely engage with proxy advisors to discuss a range of governance and remuneration matters.
20 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 20 of 87
Directors’ Report Remuneration Report
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 group’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 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.
Page 21 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 21
Directors’ Report Remuneration Report
2. 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. The fees also 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 are reviewed annually by the Remuneration and Nomination Committee against fees
paid to non-executive directors in approximately 18 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, again using benchmarking data from comparable companies in the biotechnology sector. The
Board is ultimately responsible for approving any changes to non-executive director fees, upon consideration of recommendations put forward
by the Remuneration and Nomination Committee.
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 2018 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 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 FY18
The aggregate amount paid to non-executive directors for the year ended 30 June 2018 was $349,500 (2017: $343,000). The details of
remuneration for each non-executive director for the years ended 30 June 2018 and 30 June 2017 are outlined in the tables in section 6.
Proposed fee adjustments for FY19
Having reviewed benchmarking data for directors’ fees, the Board proposes that the amounts paid as Chairman’s fees and base fees for other
non-executive directors from 1 July 2018 remain unchanged. The amounts for both committees will increase to $10,000 and $4,500 for
committee chairs and members, respectively. The proposed fees, compared to the current FY18 levels, are outlined in the table below.
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 and Risk Committee
Remuneration and Nomination Committee
Proposed Fees
from 1 July 2018
Actual Fees to
30 June 2018
$
130,000
65,500
10,000
4,500
10,000
4,500
$
130,000
65,500
8,000
3,500
8,000
3,500
Chair
Member
Chair
Member
22 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 22 of 87
Directors’ Report Remuneration Report
3. Executive remuneration policy
a) Actual remuneration of KMP executives
The actual remuneration earned by KMP executives in FY18 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
in FY18 to KMP executives and includes the face value of equity that vested in FY18. For LTI equity, the reported value reflects the KMP
executive performance over three and/or four years, which also reflects an increase in the share price over these periods.
The table differs from the remuneration details prepared on page 34 of this report which are prepared in accordance with statutory obligations
and accounting standards, and presents the expensing of the fair value of performance rights over their vesting period, and may include the
expensing of rights that may ultimately never vest into ordinary shares.
2018
Name
J K Fairley
N J Baade
A Eglezos
D J Owen
J R Paull
Fixed
remuneration
(1)
STI cash paid in
FY18
(2)
STI equity vested in
FY18
(3)
LTI equity
vested in FY18
(3)
Total actual
remuneration
earned
Total remuneration
per Accounting
Standards
(4)
530,193
264,098
263,956
266,647
272,654
175,150
201,361
62,000
60,000
62,000
67,500
55,265
53,471
55,265
62,735
717,885
101,483
101,483
101,483
121,780
1,624,589
1,692,817
482,846
478,910
485,395
524,669
531,280
539,573
532,488
581,838
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 FY18 reflects the FY17 STI paid in October 2017 following the release of the
FY17 results.
3 Intrinsic value of equity rights that vested during the year, based on the opening price on the date of vesting. Vested rights will remain as rights
in subsequent periods until exercised. The LTI equity was granted in FY15 and/or FY16.
4 In accordance with statutory obligations and accounting standards in section 6 of this report, which includes expensing of rights over their
vesting period, and rights that may ultimately never vest into ordinary shares.
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. Approximately 18 peer companies are included in the benchmarking exercise, from
within the pharma/biotechnology sector. These peer companies include Acrux, AirXpanders, Bionomics, Clinuvel, IDT Australia, Impedimed,
Mayne Pharma, Medical Developments International, Mesoblast, Nanosonics, Osprey, Pharmaxis, Phosphagenics, Prana Biotechnology, Reva
Medical, Sirtex Medical, Universal Biosensors, and Viralytics. It is anticipated that amendments to this list will occur from year to year due to
corporate activity (such as mergers and acquisitions), and the inherent volatility within the sector, and for some executive roles it may be
necessary to add or modify the composition to ensure comparable roles are benchmarked.
In reviewing the benchmarking data and determining the level of CEO pay, the Board considers the calibre of its CEO in comparison to
Starpharma’s peers, ensuring that remuneration is commensurate with talent, skills and experience. 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 FY18 was $235,000, which represented a target of 16% of
total remuneration. Other executives do not have a pre-specified maximum cash bonus entitlement; however, bonuses are awarded from a
target shared pool for executives as a percentage 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.
For FY18, the STI cash bonus pool for other KMP executives was expanded to 25% from 20% of fixed remuneration to align with the strategy to
balance the STI ‘at risk’ portions of remuneration for other KMP executives between cash and equity. For FY18, the STI cash bonus awarded
represented an average of 27% (range 26% to 28%) of fixed remuneration due to the significant outcomes as described in section 5 of this
report. The STI cash bonus awarded to other KMP executives represents an average of 13% of total remuneration in FY18.
Page 23 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 23
Directors’ Report Remuneration Report
4. Executive remuneration policy (continued)
c) 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 of
a further one year, subject to
continued employment.
Rewards executives for their
contribution to achievement of
business outcomes. Deferred
equity 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
with a 3-year performance
period.
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.
The target remuneration mix is outlined in the table below. Having implemented several structural improvements in 2015, there has been a
period of transition over multiple years as an increasing proportion of remuneration is directed to LTIs to achieve the desired target mix. The
transition over this time has been conducted in a thoughtful and deliberate manner to take into account the impact in motivating and retaining
executives. For other KMP executives, the company has gradually increased the proportion of ‘at risk’ long term incentives to an appropriate
level that ensures management will remain focused on long term outcomes.
Target Remuneration Mix
CEO
Fixed Remuneration
~35%
STI – Cash Bonus &
Equity
~25%
LTI – Equity
~40%
Other KMP executives
Fixed Remuneration
~50%
STI – Cash Bonus &
Equity
~20%
LTI – Equity
~30%
The STI and LTI components of remuneration are variable and are linked to pre-determined performance conditions, such as KPIs, that are
designed to reward executives based on the company’s performance, the performance of the relevant business unit and demonstrated
individual superior performance. The details are outlined on pages 25 to 28 of this report.
24 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 24 of 87
Directors’ Report Remuneration Report
To achieve the target remuneration mix, the below performance pay structure was adopted in FY18 and is consistent with the prior year. The
timeline and structure of the proposed performance related pay to be granted in FY19 to executives is consistent with this structure.
1 Jul 2017
30 Jun 2018
30 Jun 2019
30 Jun 2020
STI - Cash
* † STI - Equity
* † LTI - Equity
‡
‡
^
‡ ^
Sep 2017
Sep 2018
Sep 2019
Sep 2020
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
d) 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?
What are the STI performance
conditions for FY18?
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.
Providing some rights that vest in the short-term 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 FY18 the CEO and executives were awarded STI equity with a 1 year performance period
(1 July 2017 to 30 June 2018), with a deferred vesting date of 30 June 2019 dependent on continued
employment.
The STI opportunity is a target of ~25% and ~20% of total remuneration for the CEO and other KMP
executives, respectively. The STI opportunity for the CEO was within 1% of the target; and within 2%
for all other KMP executives (average 21%) for FY18.
The CEO STI opportunity for FY18 was 25% of total remuneration, comprising of a cash component
(~60%) and an equity component (~40%). The cash opportunity component was equivalent to 45% of
total fixed remuneration.
In FY18, other KMP executives had an average target STI opportunity of 21% of total remuneration,
split between cash (~60%) and equity (~40%) The cash bonuses awarded to other KMP executives in
FY18 equated to an average of 13% of total remuneration or an average of 27% (range 26%-28%) of
total fixed remuneration, based on the achievements in the year.
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 FY18, 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 on page 28.
Page 25 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 25
Directors’ Report Remuneration Report
4. Executive remuneration policy (continued)
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 for Board approval the amount of
STI to be paid from the maximum entitlement to the CEO.
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 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.
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.
Specific metrics are applied to each KPI to assist in the assessment undertaken for each
performance period. In some cases, the Board may exercise discretion to take account of events
and circumstances not envisaged.
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 allow 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 and not exercised - are not eligible to receive
dividends.
26 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 26 of 87
Directors’ Report Remuneration Report
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?
Performance rights with a performance/vesting period of 3 years or more. The LTI performance rights
awarded during FY18 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.
What is the LTI opportunity?
The CEO LTI opportunity for FY18 was 41% of total remuneration. For other KMP executives, the LTI
opportunity for FY18 was 28% to 31% of total remuneration. As outlined in section 4 of the
remuneration report, the LTI opportunity has been progressively increased since 2015 towards a target
of 40% and 30% of total remuneration for the CEO and other KMP executives, respectively.
What are the LTI performance
conditions for rights granted
in FY18?
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
business areas. For the performance period to 30 June 2018 these were:
The monetisation of the VivaGel®, Drug Delivery and Agrochemical portfolios represented by
the completion of a number of commercial deals and regulatory activity that build
shareholder value and generate income; and
The development of new product candidates for the DEP® 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 retrospectively disclose achievement of corporate KPIs to the extent commercially
practicable in the annual report.
In maintaining the link between executive remuneration outcomes and the returns to shareholders,
TSR is considered a relevant performance condition in respect of LTIs. TSR hurdle 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 Board has chosen this Index for the TSR
comparator group as it provides an external, market-based performance measure to which the
company’s performance can be compared in relative terms. The Index is considered appropriate as it
provides a comparison of shareholder returns that is relevant to investors, and reflects the aspiration
of the company.
The Board considers that the Index is a more appropriate comparator than a customised group of
peer companies due to the inherent volatility of each of these companies, typical within the
biotechnology industry. In recent years, the performance of Starpharma’s industry peers has been
particularly volatile, with a number of companies experiencing significant decreases in market
capitalisation down to under $30 million and a number have gone through some type of corporate
activity (e.g. takeovers) or are no longer ASX listed. Given that the TSR is measured over a three
year period, the Index is favoured as a more stable and appropriate comparator. Also, the published
Healthcare Index was considered as a possible comparator, however was determined to be
inappropriate given its concentrated composition including CSL Limited and other large service
oriented companies, such as private hospitals.
To achieve the full TSR performance condition, Starpharma’s TSR must reach 10% per annum (or
30% over 3 years) above the Index, which is considered a realistic but stretching target.
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% per annum above Index
(or ≥ 30% over 3 years)
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 above hurdle
recognises the return that investors expect when investing in the biotechnology sector. The Board
considers an additional return of 10% per annum (or 30% over 3 years) above the Index to be a
realistic but stretching target for all TSR rights to vest.
Page 27 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 27
Directors’ Report Remuneration Report
4. Executive remuneration policy (continued)
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%
The Board considers 30% and 15% of LTI equity as the appropriate portion for TSR for the CEO and
other executives, respectively. In determining the percentages, the Board considered input from
investors and proxy advisers to arrive at a level that is considered meaningful as a measure of
performance, and sufficient to be relevant.
The relative TSR performance measure does not allow for a portion of the award to vest at below
median performance, which is consistent with good market practice. Additionally, the Board maintains
absolute discretion in finalising remuneration outcomes for incentive-based awards to the CEO and
other executives. The Board may exercise its discretion (either up or down) to take into account the
impacts of external market conditions outside the control of management. The Board is cognisant of
ensuring fairness and that any exercise of discretion reinforces Starpharma’s strategy and
remuneration policy. Accordingly, in the event that the Index has performed particularly poorly, the
Board may exercise its discretion to prevent excessive executive awards in years of poor shareholder
returns.
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.
How is performance
assessed?
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, 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.
Is performance against KPIs
disclosed?
Same as for STI.
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?
Same as for STI.
What happens in the case of
fraud/dishonesty?
Same as for STI.
Re-testing
Same as for STI.
How is the conversion of
performance rights to shares
satisfied?
Same as for STI.
Are performance rights eligible
for dividends?
Same as for STI.
e) Grant of equity incentives to KMP executives in FY18
The Board determines the number of rights granted for STI and LTI equity each year based on the target remuneration mix as set out on page
24 as calculated on the 3 month volume weighted average price (VWAP) to 30 June (1 July is the beginning of the performance period). The 3
month VWAP is chosen specifically to reduce the impact of short-term share-price volatility on the allocation of these rights, and is not adjusted
for changes (increase or decreases) in share price post 30 June. This practice has been in place since 2015.
There was a significant rise in share price in FY18 due to several important achievements occurring during the period, including multiple clinical
trial and regulatory milestones. This resulted in a notable increase in the fair value of rights reported under AASB2, particularly for the rights
granted to the CEO. There was an 80% increase in the fair value, between the 3 month VWAP to 30 June 2017 (1 July the beginning of the
performance period) and the value at the AGM date, which is the grant date per accounting standard AASB2.
28 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 28 of 87
Directors’ Report Remuneration Report
The below tables summarise the equity incentives granted in FY18:
CEO and Managing Director (J K Fairley)
Value to grant
Deferred STI equity
$160,000
LTI equity
$546,456
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 to 30 June 2017 of $0.7139)
Fair value calculated per AASB2 based on
approval date by shareholders#
Performance Period
Deferral Period
Performance Conditions
224,121
$160,000
$288,533
895,879
$639,568
$1,131,355
1 July 2017 to 30 June 2018
1 July 2017 to 30 June 2020
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
Other KMP executives
J Paull
Value of grant
Number of Rights
Face Value of grant
(based on VWAP to 30 June 2017 of $0.7139)
Fair value per AASB2 at grant date
(Board approval date)
N J Baade
Value of grant
A Eglezos
Number of Rights
D J Owen
Face Value of grant
(based on VWAP to 30 June 2017 of $0.7139)
Fair value per AASB2 at grant date
(Board approval date)
Performance Period
Deferral Period
30 June 2019
30 September 2020
Deferred STI equity
$49,973
70,000
$49,973
$54,124
$45,690
64,000
$45,690
$49,485
LTI equity
$189,031
280,000
$199,892
$206,613
$172,828
256,000
$182,758
$188,903
1 July 2017 to 30 June 2018
1 July 2017 to 30 June 2020
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
Value of grant
Performance Conditions
Based on 3 month VWAP to 30 June 2017 of $0.7139
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 2019
30 September 2020
# The grant date to calculate the fair value of the award under AASB2 is the AGM date when shareholders approve the grant of the rights.
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 2017, which reflects the beginning of the performance period. The VWAP (before applying any
discount) for each right was $0.7139. 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.
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 is 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 to grant the number of rights. The accounting valuation has been included in the
above tables for comparison. The increase in the fair value per AASB2 reflects the increase in the share price between the Board determination
and the grant date, which in the case of the CEO is the AGM when shareholders approved the grant. Starpharma engages an independent
expert to calculate the fair value of performance rights.
Page 29 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 29
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
Number of performance rights forfeited by CEO based
on share price, with the performance period ending 30
June (or otherwise in the FY).
% of performance rights forfeited by CEO based on
share price (as a percentage of total performance
rights with the performance period ending 30 June, or
otherwise in the FY).
FY18
$1.17
$1.67
$0.71
FY17
$0.73
$0.88
$0.59
FY16
$0.645
$0.98
$0.54
FY15
$0.73
$0.99
$0.41
FY14
$0.58
$1.11
$0.54
-
244,500
430,000
150,000
200,000
0%
13%
50%
21%
50%
Fixed remuneration:
The average increase in KMP executive fixed remuneration for FY18 was 3.2% (FY17: 3.4%). There was no increase above 5% in the total
fixed remuneration package for any KMP executive in the year. The revised total fixed remuneration is consistent with similar roles in the sector
and reflects the evolution of the company and associated greater responsibility of executives.
Performance related pay:
In the assessment of STI and LTI KPIs, the Board took account of the significant achievements obtained in the performance periods and the
effort and dedication required to accomplish these milestones. These achievements include those listed on pages 32 to 33.
Short-term incentives (STI):
Summary of performance pay related to FY18 for the CEO
Maximum Available
STI Achieved
% Achieved
STI Cash
($)
$235,000
$206,800
88%
STI Equity
(# of Rights)
224,121
197,226
88%
STI awards (cash and equity) for the CEO in FY18 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 Remuneration and Nomination Committee and the Board determined that the
CEO had achieved a performance assessment of 88% of STI awards for the performance period 1 July 2017 to 30 June 2018. The KPIs are
reviewed and updated annually.
Summary of performance pay related to FY18 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 specific elements of 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 89.5% of STI awards (between 87% and 95%) for the performance period 1 July 2017 to 30 June 2018.
30 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 30 of 87
Directors’ Report Remuneration Report
Long-term incentives (LTI):
Summary of performance pay related to FY18 for the CEO
Maximum Available
LTI Achieved
KPIs for 3 years to 30 June 2018
TSR for 3 years to 30 June 2018
Total LTI Achieved
% Achieved
Performance assessment of TSR
LTI Equity
(# of Rights)
893,851
479,925
356,335
836,260
93.6%
% Achieved
89.3%
100.0%
The company’s TSR was tested against the performance of the S&P/ASX300 Index for the three-year performance period ended 30 June
2018. The company’s annualised TSR for this period was 21.4% compared to the S&P/ASX300 Index annualised TSR of 4.4%, well above the
additional 10% per annum required. As a result, 100% of the TSR component vested. The TSR calculations were performed by an
independent professional services firm.
The table below provides a summary of the achievement of annualised TSR performance:
Performance Period
Starpharma TSR
Index TSR
% of TSR awarded
3 years to
3 years to
30 June 2018
30 June 2017
21.4%
4.4%
100%
3.7%
2.0%
58%
Summary of performance pay related to FY18 for other KMP executives:
For LTI awards for other KMP executives, the CEO assesses their performance against predetermined KPIs relevant to their business unit.
These business unit KPIs relate directly to specific elements of the corporate KPIs, with 15% of LTI equity awards based on the percentage
achievement of corporate KPIs, and the remaining 15% based on TSR (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 LTI performance assessment and amounts to be awarded.
The Remuneration and Nomination Committee and the Board determined that other KMP executives had achieved a performance assessment of
between 87% and 93% (average 89%) for business unit KPIs for the performance period 1 July 2015 to 30 June 2018 for determining LTI
awards.
The 4-year LTI performance rights granted to other KMP executives in FY15, for the period from 1 July 2014 to 30 June 2018, were issued
under the previous structure whilst transitioning to the current remuneration structure. For these rights, 100% of rights will vest on 30 September
2018 based on the satisfactory performance by each executive. This is the final tranche of rights awarded to KMPs under the previous structure.
Page 31 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 31
Directors’ Report Remuneration Report
5. Executive remuneration outcomes, including link to performance (continued)
STI Performance Assessment
Performance category
Metric
Performance period
1 July 2017 to 30 June 2018
Weighting
Satisfied
Regulatory progress for VivaGel® BV
following completion of phase 3 clinical
trials
Advancement with regulatory submissions for multiple
countries
15%
Partially Met
Commercialisation of VivaGel® BV
Sign licence(s) for several territories
VivaGel® condom
Progress with regulatory and commercialisation activities
DEP® docetaxel clinical development
Progress with phase 1 trial and phase 2 commencement, in
parallel with partnering discussions
DEP® cabazitaxel clinical development
Final preclinical work and commence phase 1 trial
20%
5%
15%
10%
5%
Met
Partially Met
Partially Met
Partially Met
Met
Preclinical DEP® candidate(s)
Build DEP® pipeline
Partnered-DEP® licences
Advanced preclinical studies (e.g. commencement of
toxicology) on another DEP® candidate, in preparation for
clinical trials
Select and advance further DEP® candidate(s) for preclinical
development
5%
Partially Met
Progress with existing partnered-DEP® programs and/or
expanded field/products and/or progress with new
partnering deals
15%
Partially Met
Capital management and people
Manage company’s capital in a prudent manner and develop
personnel
10%
Met
100%
In making this STI assessment, the Remuneration and Nomination Committee and the Board considered the following factors (other
commercially sensitive matters were also taken into account):
Significant progress with VivaGel® BV regulatory activities, including:
-
-
FDA submission was completed following reporting of the positive phase 3 clinical trial results, and FDA confirmed
acceptance of the New Drug Application (NDA) for filing, with no issues cited.
TGA approval was successfully obtained.
- With its new partner, Mundipharma, Starpharma commenced activities to register VivaGel® BV in a number of countries
throughout their territory including in Asia, the Middle East and Africa.
Successfully licensed VivaGel® BV with leading pharmaceutical company Mundipharma for Europe, Russia, CIS, Asia, Middle
East, Africa and Latin America. Also good progress in US market licence negotiations.
Good regulatory progress made for the VivaGel® condom in Japan, China, Europe and other markets. This progress supports the
licences with LifeStyles® (previously Ansell), Okamoto in Japan, and Sky and Land Latex Co. in China.
Successfully completed the DEP® docetaxel phase 1 trial and commenced the phase 2 trial, in a quick and seamless transition
achieved through an adaptive trial design.
Completed final preclinical work for DEP® cabazitaxel and commenced the phase 1 / 2 trial.
Accelerated the development of DEP® irinotecan, including final preclinical toxicology, in preparation for phase 1 / 2
commencement in FY19.
Progressed with DEP® partnered programs including products under the multiproduct license with AstraZeneca (AZD0466 and
undisclosed candidates) and partnered Targeted DEP® programs.
Pursued potential other partnered-DEP® programs.
Attained a very robust financial position and maintained its stable, highly dedicated and skilled work-force.
In the assessment of STI KPIs, the Board took account of the significant achievements obtained in the performance period and the effort and
dedication required to accomplish these milestones. These achievements include the successful reporting of the two phase 3 clinical trial
results for VivaGel® BV, licensing of VivaGel® BV, submission of the NDA (110,000+ pages), and successful completion of the first DEP®
clinical trial for DEP® docetaxel.
32 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 32 of 87
Directors’ Report Remuneration Report
LTI Performance Assessment
Performance category
Metric
VivaGel® BV, Drug Delivery &
Agrochemicals
DEP® Platform
TSR
Monetisation of the VivaGel®, Drug Delivery and
Agrochemical portfolios represented by the completion of a
number of commercial deals that build shareholder value
and generate income.
Commercial deals may include licensing and/or the
outright sale of:
o VivaGel® BV;
o VivaGel® condom;
o DEP®;
o Agrochemicals; and
o Other programs.
Development of new product candidates for the DEP®
platform technology and/or the licencing of such
candidates.
Performance period
1 July 2015 to 30 June 2018
Weighting
Satisfied
40%
Met
30%
Partially Met
Starpharma’s TSR compared to the performance of the
S&P/ASX300 Index over a 3-year period
30%
Met
100%
In making this LTI assessment, the Remuneration and Nomination Committee and the Board considered the following factors (other
commercially sensitive matters were also taken into account):
VivaGel® BV, Drug Delivery & Agrochemicals:
-
-
-
-
-
-
-
-
Signed a multiproduct DEP® licence with AstraZeneca, initiated two programs under that licence and commenced a further
DEP® program separate to the licence.
Signed licensing deals for VivaGel® BV with Mundipharma, and Aspen, covering: Europe, Russia, CIS, Asia, Middle East,
Africa, Latin America, Australia and New Zealand.
Signed licensing deals for a VivaGel® condom with Sky & Land Latex Co (China) and Koushan Pharmed (Iran).
Signed licensing deals for Priostar® with Adama.
Sold the agrochemicals business to Agrium Inc for $35 million.
Successfully completed phase 3 trials for VivaGel® BV for the prevention of recurrent BV. These trials enrolled over 1,200
women across more than 100 trial sites.
Achieved key regulatory milestones for the VivaGel® portfolio which added significant commercial value: Condom approved
and launched in Canada; VivaGel® BV approved in Europe and Australia, NDA submitted and accepted for filing in the US.
Fast Track status and Qualified Infectious Disease Product designation granted by the FDA.
Installed and commissioned in-house DEP® scale-up facilities which accelerated the development of DEP® products by
providing more rapid and cost-effective manufacture of preclinical and clinical grade materials than with third-party
manufacturers.
DEP® Platform:
-
-
-
DEP® docetaxel phase 1 trial was successfully completed in FY18, with a phase 2 trial commencing immediately after, with
partnering to be pursued at the most appropriate time to maximise commercial value.
Two further DEP® drugs have been developed: DEP® cabazitaxel commenced phase 1 / 2 trial in FY18 and DEP® irinotecan
is due to commence a phase 1 / 2 trial in FY19.
Other preclinical DEP® candidates have been explored in preparation for selecting further candidates for preclinical
development.
TSR:
-
-
The company’s TSR was tested against the performance of the S&P/ASX300 Index for the three-year performance period
ended 30 June 2018. The company’s annualised TSR for this period was 21.4% compared to the S&P/ASX300 Index
annualised TSR of 4.4%, well above the additional 10% per annum required.
The TSR is calculated independently by a professional services firm and more information regarding the TSR hurdle is
provided on page 27.
Page 33 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 33
Directors’ Report Remuneration Report
6. Details of remuneration
The following tables show details of the remuneration received by the directors and the key management personnel of the group for the current
and previous financial year. As required by the Accounting Standards, the value of performance rights included in the remuneration tables
relates to the fair value of the performance rights (which may include performance rights granted in prior years), rather than their face value.
2018
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#
$
118,721
72,500
67,123
67,123
–
–
–
–
–
–
–
–
11,279
–
6,377
6,377
–
–
–
–
–
–
–
–
Total
$
130,000
72,500
73,500
73,500
Non-executive directors
R B Thomas
R A Hazleton
Z Peach
P R Turvey
Executive director
J K Fairley
475,047
206,800
35,097
20,049
13,068
942,756
1,692,817
Other Key Management Personnel (group)
N J Baade
A Eglezos
D J Owen
J R Paull
Totals
231,488
68,000
12,561
236,378
240,886
72,000
68,000
7,529
5,712
211,036
74,000
41,569
20,049
20,049
20,049
20,049
1,855
7,256
2,040
7,380
197,327
531,280
196,361
539,573
195,801
532,488
227,804
581,838
1,720,302
488,800
102,468
124,278
31,599
1,760,049
4,227,496
† Increases in overall total fixed remuneration packages for KMP executives were under 5% in the year. Executives may elect to salary sacrifice
part of their total fixed remuneration package. Cash salary & fees represents gross salary earned less any salary sacrifice amounts. The two
forms of salary sacrifice in FY18 were leasing a motor vehicle under a novation arrangement, and the use of a car park. These amounts are
reported in non-monetary benefits, and these amounts for cash salary & fees may vary from one year to the next, depending on the elections
chosen.
# 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 relates to amounts assessed to be paid for the performance period 1 July 2017 to 30 June 2018. The actual cash
payment of the bonuses will occur in the following financial year.
2017
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
116,895
R A Hazleton
Z Peach
P R Turvey
Executive director
71,000
65,753
65,753
–
–
–
–
–
–
–
–
11,105
–
6,247
6,247
–
–
–
–
–
–
–
–
Total
$
128,000
71,000
72,000
72,000
J K Fairley
446,480
175,150
35,482
30,616
11,666
587,187
1,286,581
Other Key Management Personnel (group)
N J Baade
A Eglezos
D J Owen
J R Paull
Totals
236,953
229,123
239,022
195,240
62,000
60,000
62,000
67,500
1,666,219
426,650
295
7,529
285
41,543
85,134
19,616
19,616
19,616
26,999
1,646
475
7,958
7,057
144,401
464,911
143,962
460,705
144,401
472,381
168,687
507,927
140,062
28,802
1,188,638
3,535,505
34 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 34 of 87
Directors’ Report Remuneration Report
† Increases in overall total fixed remuneration packages for KMP executives were under 5% in the year, with the exception of D J Owen, an
increase of 6.0%, reflecting the expansion of the drug delivery portfolio and consistent with extensive benchmarking of similar roles in the
industry. 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 FY17 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, and these amounts for cash salary & fees may vary from one year to the next, depending on the elections chosen.
# 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 relates to amounts assessed to be paid for the performance period 1 July 2016 to 30 June 2017. The actual cash
payment of the bonuses occurred in FY18.
The relative proportions of remuneration for 2018 that are linked to performance and those that are fixed are as follows:
CEO
J K Fairley
Other KMP Executives
N J Baade
A Eglezos
D J Owen
J R Paull
Fixed
remuneration
At risk - STI
cash
At risk - STI
Equity1
At risk - STI
Total
At risk - LTI
Equity1
Target
Actual
Target
Actual
Actual
Actual
Actual
35%
32%
50%
50%
50%
50%
48%
12%
13%
13%
13%
13%
12%
8%
8%
8%
8%
25%
24%
20%
21%
21%
21%
21%
40%
44%
30%
29%
29%
29%
31%
1 Where applicable, the expenses include negative amounts for expenses reversed during the year due to a failure to satisfy the vesting
conditions. There has been an increase in the fair value (under AASB2) of rights expensed in FY18 for share-based payments due to the
increase in share price at the date of grant (the date of shareholder approval at the AGM for the CEO’s rights) and the expensing of the value
from 1 July 2017, being the start of the performance period. The expensing from 1 July 2017 increases the reported amount in FY18, but
reduces the share-based payment expense to be allocated in future years.
As depicted in the table above, the actual remuneration mix for the CEO and other KMP executives for FY18 were within 4% of all target ranges.
Page 35 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 35
Directors’ Report Remuneration Report
6. Details of remuneration (continued)
Details of remuneration: cash bonuses, shares, and performance rights
For each cash bonus and grant of equity included in the tables on pages 34 to 39, 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 88% of her maximum cash
bonus entitlement of $235,000 in FY18, with the balance of 12% forfeited. The STI cash 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
20181,2
$
1,419,888
Name
J K Fairley
N J Baade
238,388
A Eglezos
238,388
D J Owen
238,388
J R Paull
260,737
Year
granted
Vested
Forfeited
Performance rights
Maximum
fair value yet to
vest
Financial
years in which
rights may
vest
%
-
-
-
77%
-
74%
-
-
-
86%
-
90%
-
-
-
-
83%
-
90%
-
-
-
-
86%
-
90%
-
-
-
-
90%
-
90%
-
%
-
-
-
23%
-
26%
-
-
-
14%
-
10%
-
-
-
-
17%
-
10%
-
-
-
-
14%
-
10%
-
-
-
-
10%
-
10%
-
2018
2018
2017
2017
2016
2015
2018
2018
2017
2017
2016
2015
2015
2018
2018
2017
2017
2016
2015
2015
2018
2018
2017
2017
2016
2015
2015
2018
2018
2017
2017
2016
2015
2015
30/06/2021
30/06/2019
30/06/2020
30/06/2018
30/06/2019
30/06/2018
30/06/2021
30/06/2019
30/06/2020
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2021
30/06/2019
30/06/2020
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2021
30/06/2019
30/06/2020
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2021
30/06/2019
30/06/2020
30/06/2018
30/06/2019
30/06/2018
30/06/2019
$
787,329
126,954
232,036
-
48,639
-
130,816
22,491
59,722
-
10,712
-
2,605
130,816
23,357
59,722
-
10,596
-
2,605
130,816
22,491
59,722
-
10,567
-
2,605
143,080
26,115
65,151
-
13,307
-
3,126
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 executive’s remuneration for a given year is consistent with this amortised amount. No performance rights will
vest if the conditions are not satisfied, hence the minimum value yet to vest is nil.
36 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 36 of 87
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 2018 of $527,000, to be reviewed annually by the Remuneration and
Nomination Committee.
A cash bonus up to $235,000 for the year to 30 June 2018 allocated proportionately on the achievement of predetermined KPIs.
The CEO is entitled to participate in a STI and LTI equity 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
Termination for cause
Termination without cause,
including redundancy
3 months
None
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
Page 37 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 37
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. The table may also
reflect changes to shareholdings which are unrelated to remuneration.
2018
Name
Balance at the
start of the year
Granted during
the year as
compensation
On exercise 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
R A Hazleton
Z Peach
P R Turvey
625,000
3,286,072
208,466
48,975
131,838
Other key management personnel of the group
N J Baade
A Eglezos
D J Owen
J R Paull
535,291
210,233
513,813
255,703
* Other changes relate to market transactions
–
–
–
–
–
–
–
–
–
–
556,500
–
–
–
78,669
78,669
78,669
94,403
150,000
32,862
–
–
17,983
(88,669)
(28,899)
(30,000)
(80,000)
775,000
3,875,434
208,466
48,975
149,821
525,291
260,003
562,482
270,106
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 KMP 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 FY18 or the prior year.
2018
Name
Balance at the
start of the
year
Granted during
the year as
compensation
Exercised
during the year
Other changes
during the year#
Balance at the
end of the year
Vested and
exercisable at
the end of the
year
Total Unvested
Directors of Starpharma Holdings Limited
J K Fairley1
2,924,852
1,200,000
(556,500)
(243,680)
3,244,672
353,843
2,890,829
Other key management personnel of the group
N J Baade
A Eglezos
D J Owen
679,625
679,625
681,375
320,000
320,000
320,000
(78,669)
(78,669)
(78,669)
J R Paull
1 The market value of rights that were forfeited during the year was $314,347.
# Other changes during the year relate to the forfeiture of rights.
(94,403)
350,000
787,650
(16,393)
(17,933)
(16,393)
(16,747)
904,563
903,023
906,313
89,563
88,023
91,313
1,026,500
106,500
815,000
815,000
815,000
920,000
The market value at vesting date of performance rights that vested into shares during 2018 was $1,572,212 (2017: $843,906). 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 calculated using the opening share price on the respective vesting/exercise date or forfeit date.
Dilutionary impact of performance rights on issue
As at 30 June 2018 there were 11,876,199 performance rights on issue, of which 6,985,071 were held by KMP. These rights represent 3.2%
and 1.9%, respectively, of shares on issue (based on the 370,544,775 shares at 30 June 2018).
38 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 38 of 87
Directors’ Report Remuneration Report
The terms and conditions of the grant of performance rights to the directors or the key management personnel of the group in the current year or
which impact future years are as follows:
Grant date
Vesting date
Holding lock
expiry date
Number
of rights
granted
Performance
measure Fair value per right
at grant date % vested
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 2017
30 January 2015
30 September 2017
30 January 2015
30 September 2018
30 January 2015
30 September 2018
11 November 2015
30 September 2018
11 November 2015
30 September 2018
19 November 2015
30 September 2018
19 November 2015
30 September 2018
13 October 2016
30 June 2018
13 October 2016
30 September 2019
13 October 2016
30 September 2019
29 November 2016
30 June 2018
29 November 2016
30 September 2019
29 November 2016
30 September 2019
10 August 2017
30 June 2019
10 August 2017
30 September 2020
10 August 2017
30 September 2020
29 November 2017
30 June 2019
29 November 2017
30 September 2020
29 November 2017
30 September 2020
Information of the performance measures:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
315,000
Achievement of KPIs
135,000
TSR
386,750
Achievement of KPIs
68,250
TSR
331,500
Achievement of KPIs
58,500
TSR
714,000
Achievement of KPIs
126,000
TSR
537,516
Achievement of KPIs
356,335
TSR
225,000
Achievement of KPIs
765,000
Achievement of KPIs
135,000
TSR
223,022
Achievement of KPIs
613,885
Achievement of KPIs
263,093
TSR
262,000
Achievement of KPIs
890,800
Achievement of KPIs
157,200
TSR
224,121
Achievement of KPIs
535,816
Achievement of KPIs
360,063
TSR
$0.49
$0.41
$0.52
$0.44
$0.46
$0.25
$0.46
$0.27
$0.72
$0.50
$0.76
$0.54
$0.68
$0.68
$0.43
$0.68
$0.68
$0.41
$0.77
$0.77
$0.54
$1.29
$1.29
$1.23
83
58
80
58
77
47
Nil
Nil
Nil
Nil
Nil
Nil
86
Nil
Nil
77
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.
TSR:
As set out on page 27 of the remuneration report.
- end of remuneration report -
Page 39 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 39
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
Number of
rights
granted
Balance of
rights
at date of
report
30 Jan 2015
30 Sep 2018
929,250
714,750
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.
11 Nov 2015
30 Sep 2018
2,076,800
1,785,600
Audit & non-audit services
11 Nov 2015
30 Jun 2017
519,200
319,663
19 Nov 2015
30 Sep 2018
893,851
893,851
19 Nov 2015
30 Jun 2017
219,395
181,001
13 Oct 2016
30 Jun 2018
594,450
462,284
13 Oct 2016
30 Sep 2019
2,377,800
2,022,600
29 Nov 2016
30 Jun 2018
223,022
172,842
29 Nov 2016
30 Sep 2019
876,978
876,978
10 Aug 2017
30 Jun 2019
694,120
665,320
10 Aug 2017
30 Sep 2020
2,776,480
2,661,280
29 Nov 2017
30 Jun 2019
224,121
224,121
29 Nov 2017
30 Sep 2020
895,879
895,879
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
20 Nov 2014
30 Jan 2015
11 Nov 2015
$ -
$ -
$ -
556,500
773,355
98,720
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
2018
$
2017
$
118,616
104,754
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 41.
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 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, 21 August 2018
40 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 40 of 87
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Starpharma Holdings Limited for the year ended 30 June 2018, I
declare that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Starpharma Holdings Limited and the entities it controlled during the
period.
Jon Roberts
Partner
PricewaterhouseCoopers
Melbourne
21 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, 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.
Page 41 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 41
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 2018. 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 and culture of the
group;
overseeing the operation of the group, including its systems
for control, accountability, and risk management;
-
- monitoring financial performance;
-
-
liaising 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 routinely
reviewed by the Board in addition to being 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.
42 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
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.
Starpharma’s policy on non-executive director tenure is consistent
with ASX guidance which acknowledges that shareholders are
likely to be served well by a mix of directors, including some with a
longer tenure who have accumulated experience and developed a
‘corporate memory’ over a substantial period. Starpharma is more
concerned with the average tenure of independent directors on the
Board, which is around seven years, as a meaningful metric for
evaluating Board refreshment and director succession.
Director
R B Thomas
R A Hazleton
Z Peach
P R Turvey
J K Fairley
Date first 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. Despite the length of time served on the Board, Mr
Hazleton has been assessed as ‘independent’. In determining this,
the Board took into consideration his limited contact with
Starpharma’s management team and physical location in the US,
whereby there is no suggestion that he is involved in the day to
day operations of Starpharma. Particularly for biotech companies
which have long development timelines, it can advantageous to
have directors serve for longer periods to ensure corporate
memory is retained.
No new directors were appointed to the Board during FY18.
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 March 2018, which
operates alongside the Code of Conduct (including Anti-
Discrimination, Bullying and Harassment) policy, providing a
framework for Starpharma to achieve a number of diversity
objectives. The Diversity Policy is available at
www.starpharma.com/corporate_governance
Page 42 of 87
Corporate Governance Statement
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 2018 financial year, and
progress against these objectives is set out below:
Objective
Measurement
FY18 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.
52% 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 and as needed during the year. Investments
in formal/external development programs are made
where appropriate and in FY18, 26 professional
development programs including conferences were
attended by female employees across all levels of the
organisation.
The company also continued to support 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.
Female candidates participated in every recruitment
process throughout FY18. 57% of the positions
advertised and filled externally 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 taking part in 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).
20% 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
reviewed and agreed between the requesting
employee and the company in 100% of cases during
FY18.
Support a return to work after
parental leave
Target a return to work following primary
care parental leave of 75%.
No employees were due to return from primary care
parental leave during FY18.
Just over half of Starpharma’s employees are female, maintaining
a similar gender representation to that of previous years. As
captured in Starpharma’s diversity objectives (above), the
company strives to put in place measures, such as flexible working
arrangements, specifically to encourage participation by all. The
table opposite 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 2018.
Starpharma continues to have 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 42% of all employees born outside Australia in 14
different countries.
% Female
2018
2017
Whole organisation (staff and
Board)
54% (26/48)
51% (21/41)
Leadership/management roles 50% (10/20)
50% (10/20)
Senior executive (CEO &
direct reports)
43% (3/7)
43% (3/7)
Board
40% (2/5)
40% (2/5)
Page 43 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 43
Corporate Governance Statement
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 FY18.
1.7 CEO and senior executive performance
Performance assessments for senior executives took place during
the year. Performance review timing of executives occur
throughout July/August 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. Separate succession planning discussions
are held as appropriate during the year.
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 appropriateness of 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 March 2018. 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
44 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
2.1.2 Audit and Risk Committee
The Audit and Risk Committee is comprised of three independent
non-executive directors. At the date of this report the committee
consisted of the following:
Mr P Turvey (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.
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 or have been members of other ASX-listed
company audit committees. Such positions include financial
controller, director of finance, chief accounting officer, head of risk
management and Chairman of Corporate Risk Management
Committee, and broker/analyst roles. Mr Thomas is also approved
under the NSW prequalification scheme for Audit and Risk
Committee Independent Chairs and Members for
government/public sector agencies.
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 auditor.
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.
Page 44 of 87
Corporate Governance Statement
The current composition of Starpharma’s Board includes directors
with core industry experience, as well as senior finance and risk
management experience, essential for the Audit and Risk
Committee.
A skills and experience matrix is used to review the combined
capabilities of the Board. A mix of general and specialty 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
FY18 the Board reviewed and updated the skills and experience
included in the Board skills matrix to reflect the change and
advancement of the company in its lifecycle, as well as input from
proxy advisers. Each area is closely linked to the company’s core
objectives and strategy.
The directors rated the depth of their skill and experience in each
of the following areas:
Leadership in Healthcare and/or Scientific Research;
Licensing and commercialisation of innovation;
1.
2. Pharmaceutical/Product Development;
3.
International experience;
4. Regulation/Public Policy;
5.
6. Science and Technology
7. Sales, Marketing and Business Development;
8. Governance;
9. Strategy & Risk Management;
10. Accounting/Corporate Finance;
11. Health, Safety & Environment;
12. Remuneration;
13. M&A/Capital Markets; and
14. Audit and Risk.
The results of the matrix show that there are three or more
directors with intermediate to deep skills and experience in each of
the fourteen 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.
Having regards to the current and future activities of the company,
the Board considers that collectively it has the appropriate skills
and experience in each area.
There are further disclosures in Section 2.1.2 and the directors’
biographies on pages 13 to 15 which outline the extensive
financial, accounting and risk skills and experience of the members
of the Audit and Risk Committee, which are considered
appropriate for 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
Principle 3: Act ethically and responsibly
3.1 Code of conduct
The directors are committed to the principles underpinning best
practice in corporate governance, with a commitment to the
highest standards of legislative compliance and financial and
ethical behaviour. The company has established a code of conduct
reflecting the core values of the company and setting out the
standards of ethical behaviour expected of directors, officers and
employees in all dealings and relationships including with
shareholders, contractors, customers and suppliers, and with the
company. The code of conduct is provided to new starters as part
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
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
reassessment. The Board has determined that all non-executive
directors are independent at the date of this report. Refer to
Section 1.2 on page 42 for additional information on the
independence of Mr Hazleton.
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.
of their induction and behaviour is continually monitored to ensure
compliance.
The code of conduct is reviewed periodically and was last updated
in March 2018. 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
regarding composition, meetings and charter are set out in section
2.1 and 2.1.2 of this Corporate Governance Statement.
Page 45 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 45
Corporate Governance Statement
4.2 CEO and CFO Declarations for financial statements
Before 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 Board in respect of the 2018 half year financial statements and
the 2018 full year financial statements which are included in this
annual report.
4.3 External auditors
The company’s policy is to appoint external auditor who clearly
demonstrates quality and independence. The performance of the
external auditor is reviewed annually. The current auditor,
PricewaterhouseCoopers, has been the external auditor 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 auditor 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 Auditor’s Report and the conduct of the audit.
Principle 5: Make timely and balanced disclosures
5.1. Continuous disclosure
The company has developed a continuous disclosure and
shareholder communication policy to ensure compliance with the
ASX Listing Rules and to facilitate effective communication with
shareholders.
The Board has appointed the Company Secretary as the person
responsible for disclosure of information to the ASX. The CEO and
Company Secretary are responsible for ensuring that all
announcements made by Starpharma to the ASX are factual, do
not omit material information, and are expressed in a clear and
objective manner.
Rules and overseeing and co-ordinating disclosure to the ASX,
analysts, brokers, shareholders, the media and the public.
Procedures have been established for reviewing whether there is
any price sensitive information that should be disclosed to the
market or whether any price sensitive information may have been
inadvertently disclosed.
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.
The policy also sets out the requirements for ensuring compliance
with the continuous disclosure requirements of the ASX Listing
A copy of the policy is available on the company’s website at
www.starpharma.com/corporate_governance
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 to, where they have previously been released to ASX and
OTCQX.
6.3 Participation at Annual General Meetings
The Annual General Meeting (AGM) is generally held in November
each year. The Notice of Meeting and related Explanatory Notes
are distributed to shareholders in accordance with the
requirements of the Corporations Act.
The AGM provides an opportunity for the Board to communicate
with shareholders through the Chairman’s address and the CEO’s
presentation.
Shareholders are given the opportunity, through the Chairman, to
ask general questions of the Board. Shareholders who are unable
to attend the meeting in person may submit written questions
together with their proxy form, to be put to the meeting by the
Chairman. The external auditor attends each AGM and is available
to answer questions shareholders may have in relation to the
Auditor’s Report and the conduct of the audit.
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.
46 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 46 of 87
Corporate Governance Statement
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
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
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 39.
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 pages 17 to 18 of the directors’
report under the heading ‘Material Business Risks’.
In addition to the risk assessment and management strategies
outlined in section 7.2 and set out in the Corporate & Social
Responsibility Report on page 12 of the annual report, the
company utilises a number of risk mitigation strategies including
employing qualified staff and consultants, external advisors,
maintaining a portfolio/pipeline of products and applications, and
holding insurance in a number of areas.
Executive directors and senior management receive a mix of fixed
and variable pay, comprising both cash and equity incentives.
Non-executive directors receive fees only and do not receive
bonus payments or equity incentives. Non-executive directors do
not receive termination/retirement benefits, whereas executive
directors and senior management are entitled to termination
payments in accordance with the terms of their contracts (detailed
on page 37).
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
Page 47 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 47
Annual Financial Report for the year ended 30 June 2018
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
49
50
51
52
53
54
78
79
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 21 August 2018. 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
48 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 48 of 87
Consolidated Income Statement for the year ended 30 June 2018
30 June 2018
30 June 2017*
Continuing operations
Revenue
Other income
Research and product development expense
(net of R&D tax incentive)
Commercial and regulatory operating expense
Corporate, administration and finance expense
Loss before income tax
Income tax expense
Loss from continuing operations
Profit from discontinued operation (attributable to equity holders of
the company)
Profit/(loss) for the period
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
Profit/(loss) per share for profit/(loss) attributable to the
ordinary equity holders of the company
Basic profit/(loss) per share
Diluted profit/(loss) per share
Notes
5
5
6
6
6
7
22
25
25
25
25
$'000
4,884
73
(10,576)
(2,425)
(2,241)
(10,285)
-
(10,285)
-
(10,285)
$
($0.03)
($0.03)
$
($0.03)
($0.03)
$'000
3,643
4
(14,875)
(1,051)
(2,938)
(15,217)
-
(15,217)
23,417
8,200
$
($0.04)
($0.04)
$
$0.02
$0.02
*The prior period financial results are re-presented for the additional functional expense classification “Commercial and regulatory operating
expense”.
The above consolidated income statement should be read in conjunction with the accompanying notes.
Page 49 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 49
Consolidated Statement of Comprehensive Income for the year ended 30 June 2018
Notes
Profit/(loss) for the period
Other comprehensive income
Items that may be reclassified to profit or loss
Other comprehensive income arising from discontinued operation
22
Other comprehensive income for the period
Total comprehensive income (loss) for the period
Total comprehensive income (loss) for the period attributable to
owners of Starpharma Holdings Limited arise from
Continuing operations
Discontinued operations
30 June 2018
30 June 2017
$'000
(10,285)
-
-
(10,285)
(10,285)
-
(10,285)
$'000
8,200
1,118
1,118
9,318
(15,217)
24,535
9,318
The above statement of consolidated comprehensive income should be read in conjunction with the accompanying notes.
50 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 50 of 87
Consolidated Balance Sheet as at 30 June 2018
30 June 2018
30 June 2017
Current Assets
Cash and cash equivalents
Trade and other receivables
Total Current Assets
Non-Current Assets
Property, plant and equipment
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Finance lease liabilities
Provision for employee benefits
Deferred income
Total Current Liabilities
Non-Current Liabilities
Finance lease liabilities
Provision for employee benefits
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed capital
Reserves
Accumulated losses
Total Equity
Notes
8
9
10
11
12
13
12
13
14
15
16
$'000
51,319
6,134
57,453
1,058
1,058
58,511
3,801
26
930
407
5,164
23
47
70
5,234
53,277
$'000
61,188
4,490
65,678
913
913
66,591
4,670
23
817
11
5,521
47
39
86
5,607
60,984
193,583
13,440
(153,746)
53,277
193,549
10,896
(143,461)
60,984
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Page 51 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 51
Consolidated Statement of Changes in Equity for the year ended 30 June 2018
Balance at 1 July 2016
Profit for the year
Other comprehensive income
Foreign exchange differences on translation of
discontinued operations
Asset revaluation reserve transferred to
accumulated losses on disposal of discontinued
operations
Total comprehensive income (loss) for the year
Transactions with owners, recorded directly in equity
Employee share plans
Employee performance rights plan
Total transactions with owners
Balance at 30 June 2017
Profit for the year
Other comprehensive income
Foreign exchange differences on translation of
discontinued operations
Total comprehensive income (loss) for the year
Transactions with owners, recorded directly in equity
Employee share plans
Employee performance rights plan
Total transactions with owners
Balance at 30 June 2018
14
15
14
15
Contributed
capital
Reserves
Accumulated
losses
Notes
$'000
$'000
$'000
193,512
9,787
(153,875)
-
8,200
Total
equity
$'000
49,424
8,200
-
-
-
-
37
-
37
1,118
-
1,118
(2,215)
(1,097)
-
2,206
2,206
2,215
10,415
-
-
-
-
9,318
37
2,206
2,243
193,549
10,896
(143,461)
60,984
-
-
-
34
-
34
-
-
-
-
2,544
2,544
(10,285)
(10,285)
-
-
-
-
-
-
-
34
2,544
2,578
193,583
13,440
(153,746)
53,277
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
52 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 52 of 87
Consolidated Statement of Cash Flows for the year ended 30 June 2018
30 June 2018
30 June 2017
Notes
$'000
$'000
Cash Flows from Operating Activities
Receipts from trade and other debtors (inclusive of GST)
Grant income and R&D tax incentives (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Net cash outflows from operating activities
Cash Flow from Investing Activities
Payments for property, plant and equipment
Proceeds from the sale of agrochemical business
Net cash inflows (outflows) from investing activities
Cash Flow from Financing Activities
Finance lease payments
Net cash outflows 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
24
22
2,788
3,747
(17,799)
1,067
(4)
(10,201)
(359)
-
(359)
(26)
(26)
(10,586)
61,188
717
51,319
3,309
3,523
(24,421)
635
(1)
(16,955)
(625)
33,281
32,656
(21)
(21)
15,680
45,972
(464)
61,188
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Page 53 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 53
Notes to the Consolidated Financial Statements 30 June 2018
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.
Current Liabilities – Trade and Other Payables
12.
Current and Non-Current Liabilities – Finance Lease Liabilities
13.
Current and Non-Current Liabilities – Provision for Employee Benefits
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.
Discontinued Operation
23.
Contingencies
24.
Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities
25.
Earnings Per Share
26.
Share-Based Payments
27.
Parent Entity Financial Information
55
60
61
62
62
62
62
64
65
66
67
67
67
68
69
69
69
70
70
70
71
72
73
73
73
74
77
54 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 54 of 87
Notes to the Consolidated Financial Statements 30 June 2018
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
2017:
AASB 2016-1 Amendments to Australian Accounting
Standards – Recognition of Deferred Tax Assets for
Unrealised Losses
AASB 2016-2 Amendments to Australian Accounting
Standards – Disclosure Initiative: Amendments to AASB 107,
and
AASB 2017-2 Amendments to Australian Accounting
Standards – Further Annual Improvements 2014-2016 Cycle.
None of the new and amended standards that are mandatory for
the first time for the financial year beginning 1 July 2017 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 2017.
(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 2018, the consolidated entity has
incurred losses from continuing operations of $10,285,000 (2017:
$15,217,000) and experienced net cash outflows of $10,201,000
from operations (2017: $16,955,000), as disclosed in the income
statement 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 2019. Accordingly
the directors have prepared the financial report on a going concern
basis in the belief that the consolidated entity will realise its assets
and settle its liabilities and commitments in the normal course of
business and for at least the amounts stated in the financial report.
(b) Principles of consolidation
(i) Subsidiaries
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of Starpharma Holdings Limited
(“company” or “parent entity”) as at 30 June 2018 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.
Page 55 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 55
Notes to the Consolidated Financial Statements 30 June 2018
1. Significant Accounting Policies (continued)
(i) Investment allowances and similar tax incentives
(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 entity are not consolidated for tax purposes.
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.
56 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 56 of 87
Notes to the Consolidated Financial Statements 30 June 2018
(n) Leasehold improvements
The cost of improvements to or on leasehold properties is
amortised over the remaining notice period under the premises
lease (being 4.5 years at the balance date) or the estimated useful
life of the improvement to the group, whichever is shorter.
(o) Intangible Assets
(i) 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.
(ii) 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.
(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.
Page 57 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 57
Notes to the Consolidated Financial Statements 30 June 2018
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 26 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 of employee services received, measured by
reference to the grant date fair value, is recognised over the
vesting period. Depending on the performance measure of the
58 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
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 have 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.
Page 58 of 87
Notes to the Consolidated Financial Statements 30 June 2018
(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 and are
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 2018 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 effective for annual reporting periods beginning
after 1 January 2018, and the group plans to adopt the new
standard on the required effective date.
It is expected there will not be a material 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 effective for annual reporting periods beginning
after 1 January 2018. The group plans to adopt the new standard
on the required effective date using the modified retrospective
approach.
Management has assessed the impact of AASB 15 on the
measurement and recognition of revenue from existing contractual
arrangements. Adoption of AASB 15 is not expected to have any
material impact on the group’s profit or loss, nor is there expected
to be any material adjustments to opening retained earnings as at
1 July 2018.
(iii) AASB 16 Leases will result in almost all leases being
recognised on the balance sheet, as the distinction between
operating and finance leases is removed. Under the new standard,
an asset (the right to use the leased item) and a financial liability to
pay rentals are recognised. The only exceptions are short-term
and low-value leases.
The standard is effective for annual reporting periods beginning
after 1 January 2018, and the group plans to adopt the new
standard on the required effective date.
Management is currently assessing the impact of AASB 16 on the
measurement and recognition of lease assets and liabilities.
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 27 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.
Page 59 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 59
Notes to the Consolidated Financial Statements 30 June 2018
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 and Great British pound.
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 Australian dollars, US dollars
(US$) and Great British pounds (£). 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 exchange rate as at 30 June 2018 for US$ was
$0.7391 and for £ was $0.5634 was as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
30 June 2018
US$
$’000
30 June 2017
US$
$’000
30 June 2018
£
£’000
30 June 2017
£
£’000
6,279
1,500
1,063
7,977
-
1,943
3,314
-
334
-
-
180
Group Sensitivity
The group is mainly exposed to US dollars (US$) and Great British pounds (£) on foreign currencies held, receivable and payable. 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
Australian dollar strengthens (increases) against
the foreign currency by 10%
Australian dollar weakens (decreases) against
the foreign currency by 10%
(ii) Cash Flow Interest Rate Risk
30 June 2018
$’000
30 June 2017
$’000
30 June 2018
£’000
30 June 2017
£’000
US$
(826)
1,010
US$
(713)
872
£
(481)
588
£
28
(34)
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 value of term and at call deposits. Refer to note 8 for additional information.
Term Deposits and deposits at call
Group Sensitivity
30 June 2018
$’000
47,966
30 June 2017
$’000
57,837
At 30 June 2018, 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 $241,000 higher or lower (2017 - change of 50 bps: $290,000 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. All cash and deposits are held with major
Australian banks, with the majority being held with the National
Australia Bank and Commonwealth Bank of Australia. Other than
government tax incentives, third party receivables largely consist
of research fees, royalty and licensing receivables from leading,
multinational organisations.
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient
cash and marketable securities. The directors regularly monitor the
cash position of the group, giving consideration to the level of
expenditure and future capital commitments entered into.
(d) Fair value estimation
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement for disclosure
purposes. The fair value of 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.
Page 60 of 87
60 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Notes to the Consolidated Financial Statements 30 June 2018
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) Income Taxes
The group is subject to income taxes in Australia. 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.
ii) 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 2018 the group has
recorded a contra research and development expense of
$4,056,000 (2017: $3,252,000). The total R&D Tax Incentive
receivable recorded at 30 June 2018 is $3,847,000 (2017:
$3,537,000).
Page 61 of 87
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 61
Notes to the Consolidated Financial Statements 30 June 2018
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 from continuing operations
30 June 2018
$’000
30 June 2017
$’000
Royalty, customer & license revenue
Interest revenue
Total revenue from continuing operations
Other income (including government grants)
Total revenue and other income from continuing operations
3,812
1,072
4,884
73
4,957
2,992
651
3,643
4
3,647
Total revenue and other income for the year was $4,957,000 and includes signature payments from Mundipharma under a VivaGel® BV
licensing agreement for Europe, Asia, South America, Middle East and Africa.
6. Expenses
Loss from continuing operations before income tax expense
includes the following items:
30 June 2018
$’000
30 June 2017
$’000
R&D tax incentive (contra expense)1
Employee benefits expenses (including share-based payments)
Depreciation
Rental expense on operating leases
(4,056)
9,051
311
570
(3,252)
7,780
318
553
1 Included within the research and product development expense line item in the consolidated income statement. The total R&D tax incentive for
2017 was $3,537,000 when discontinued operations are included.
7. Income Tax Expense
(a) Income tax expense/(credit)
Current Tax
Deferred Tax
Total income tax expense
Income tax attributable to continuing operations
Income tax attributable to continuing operations
30 June 2018
$’000
30 June 2017
$’000
–
–
–
–
–
–
–
–
–
–
62 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 62 of 88
Notes to the Consolidated Financial Statements 30 June 2018
30 June 2018
$’000
30 June 2017
$’000
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Profit/(loss) from discontinuing operation before income tax expense
Tax at the Australian tax rate of 30% (2017: 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
Gain on sale of subsidiaries (see note 22)
Recycling of foreign currency translation reserve on sale of
subsidiary (see note 22)
Unearned income
Sundry items
Difference in overseas tax rates
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 comprise 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
(10,285)
-
(10,285)
(3,086)
1,436
-
774
-
-
(1)
56
-
821
–
110,685
33,206
4,482
1,345
-
24
24
(24)
–
24
-
24
(15,217)
23,417
8,200
2,460
1,379
45
673
(6,082)
(335)
(5)
(15)
7
1,873
–
108,434
32,530
4,443
1,333
-
22
22
(22)
–
22
-
22
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 comprise 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 2018 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 2018 which it believes will be satisfied.
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 63
Page 63 of 88
Notes to the Consolidated Financial Statements 30 June 2018
8. Current Assets – Cash and Cash Equivalents
Cash at bank and on hand
Term Deposits and deposits at call
30 June 2018
$’000
30 June 2017
$’000
3,353
47,966
51,319
3,351
57,837
61,188
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 $806,000 (2017: $787,000) 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 2018
Floating
Interest
rate
Fixed interest maturing Non-interest
bearing
Financial Assets
Cash & deposits
Receivables
Notes
$’000
1 year or less
$’000
1 to 2 years
$’000
2 to 3 years
$’000
8
9
1,800
46,364
–
–
1,800
46,364
–
–
–
–
–
–
Weighted average interest rate
1.9%
2.4%
–%
–%
Financial Liabilities
Payables
Finance lease liabilities
11
12
–
–
–
–
26
26
–
23
23
–
–
–
$’000
3,155
6,134
9,289
–%
3,801
–
3,801
Total
$’000
Contractual
cash flows
51,319
6,134
57,453
3,801
49
3,850
N/A
6,134
6,134
3,801
49
3,850
Weighted average interest rate
–%
5.8%
5.8%
–%
–%
30 June 2017
Floating
Interest
rate
Fixed interest maturing Non-interest
bearing
Financial Assets
Cash & deposits
Receivables
Notes
$’000
1 year or less
$’000
1 to 2 years
$’000
2 to 3 years
$’000
8
9
9,143
48,862
–
–
9,143
48,862
–
–
–
–
–
–
Weighted average interest rate
1.1%
2.5%
–%
–%
Financial Liabilities
Payables
Finance lease liabilities
11
12
–
–
–
–
23
23
–
24
24
–
23
23
$’000
3,183
4,490
7,673
–%
4,670
–
4,670
Weighted average interest rate
–%
5.8%
5.8%
5.8%
–%
64 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Total
$’000
Contractual
cash flows
61,188
4,490
65,678
4,670
70
4,740
N/A
4,490
4,490
4,670
70
4,740
Page 64 of 88
Notes to the Consolidated Financial Statements 30 June 2018
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 $3,847,000
(2017: $3,537,000) of expenditure reimbursable under the
Australian Government’s R&D tax incentive scheme as well as
$2,029,000 from Mundipharma for VivaGel® BV licensing fees.
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.
30 June 2018
$’000
30 June 2017
$’000
5,911
68
37
118
6,134
3,838
64
284
304
4,490
Impaired receivables
As at 30 June 2018, there were no material trade and grant
receivables that were past due (2017: nil). No receivables are
considered impaired at 30 June 2018 (2017: nil) .
Other receivables
Other receivables comprise sundry debtors and GST claimable
and are subject to normal terms of settlement within 30 to 60 days.
Page 65 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 65
Notes to the Consolidated Financial Statements 30 June 2018
10. Non-Current Assets – Property, Plant and Equipment
Plant and Equipment
$’000
Leasehold
improvements
$’000
At 30 June 2016
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2017
Opening net book amount
Additions
Disposals
Depreciation
Closing net book amount
At 30 June 2017
Cost
Accumulated depreciation
Net book amount
Year ended 30 June 2018
Opening net book amount
Additions
Disposals
Depreciation
Closing net book amount
At 30 June 2018
Cost
Accumulated depreciation
Net book amount
2,857
(2,359)
498
498
372
(19)
(166)
685
3,099
(2,414)
685
685
468
(12)
(243)
898
3,514
(2,616)
898
397
(205)
192
192
206
–
(170)
228
602
(374)
228
228
-
-
(68)
160
602
(442)
160
Total
$’000
3,254
(2,564)
690
690
578
(19)
(336)
913
3,701
(2,788)
913
913
468
(12)
(311)
1,058
4,116
(3,058)
1,058
Plant and equipment includes the following amounts where the group is a lessee under a finance lease (refer to Note 12 for further details):
Leased equipment
Cost
Accumulated depreciation
Net book amount
66 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
30 June 2018
$’000
30 June 2017
$’000
72
(26)
46
72
(2)
70
Page 66 of 88
Notes to the Consolidated Financial Statements 30 June 2018
11. Current Liabilities – Trade and Other Payables
Trade payables and accruals
Other payables
30 June 2018
$’000
30 June 2017
$’000
3,023
778
3,801
4,034
636
4,670
Trade payables and accruals
The majority of trade payables are related to expenditure associated with the group’s research and product development programs.
12. 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.
2018
Floating
Interest
rate
Notes
20
Notes
20
Lease liabilities
Weighted average interest rate
2017
Lease liabilities
Weighted average interest rate
Fixed interest rate
1 year
or less
$’000
Over 1 to 2
years
$’000
Over 2 to 3
years
$’000
–
–%
26
23
5.8%
5.8%
–
–%
Floating
Interest
rate
Fixed interest rate
1 year
or less
$’000
Over 1 to 2
years
$’000
Over 2 to 3
years
$’000
–
–%
23
24
5.8%
5.8%
23
5.8%
Total
$’000
49
Total
$’000
70
13. Current and Non-Current Liabilities – Provision for Employee Benefits
Leave obligations
Current
Non-current
30 June 2018
$’000
30 June 2017
$’000
930
47
977
817
39
856
The leave obligations cover the group’s liability for long service leave and annual leave. The current portion of this liability includes all of the
accrued annual leave, and the unconditional entitlements to long service leave where employees have completed the required period of service.
However, based on past experience, the group does not expect all employees to take the full amount of current accrued leave or require
payment within the next 12 months. Current leave obligations expected to be settled after 12 months is $636,000 (2017: $554,000).
Refer to Note 1(s) for further information.
Page 67 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 67
Notes to the Consolidated Financial Statements 30 June 2018
14. Contributed Equity
(a) Share capital
Share Capital
2018
Shares
2017
Shares
2018
$’000
2017
$’000
Ordinary shares – fully paid
370,544,775
369,091,652
193,583
193,549
(b) Movements in ordinary share capital
Date
Details
1 Jul 2017
21 Aug 2017 Employee performance rights plan share issue
5 Oct 2017
Employee performance rights plan share issue
12 Oct 2017
Employee performance rights plan share issue
29 Jan 2018 Employee share plan ($1,000) issue
20 Mar 2018 Employee performance rights plan share issue
Number of shares
Issue Price
369,091,652
16,000
556,500
850,075
24,548
6,000
$ –
$ –
$ –
$1.38
$ –
Balance at 30 June 2018
370,544,775
Date
Details
1 Jul 2016
7 Oct 2016
Employee performance rights plan share issue
13 Oct 2016
Employee performance rights plan share issue
5 Dec 2016
Employee performance rights plan share issue
25 Jan 2017 Employee share plan ($1,000) issue
14 Jun 2017 Employee performance rights plan share issue
Number of shares
Issue Price
367,107,521
405,000
924,245
100,000
51,023
503,863
$ –
$ –
$ –
$0.73
$ –
$’000
193,549
–
–
–
34
–
193,583
$’000
193,512
–
–
–
37
–
Balance at 30 June 2017
369,091,652
193,549
(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.
(c) Ordinary shares
As at 30 June 2018 there were 370,544,775 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 26.
(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
26.
68 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 68 of 88
Notes to the Consolidated Financial Statements 30 June 2018
15. Reserves
(a) Reserves
Share-based payments reserve
(b) Movement in reserves
Share-based payments reserve
Balance at 1 July
Performance right expense
Balance at 30 June
(c) Nature and purpose of reserves
(i) Share-based payments reserve
30 June 2018
$’000
13,440
13,440
30 June 2017
$’000
10,896
10,896
30 June 2018
$’000
30 June 2017
$’000
10,896
2,544
13,440
8,690
2,206
10,896
The share-based payments reserve is used to recognise the fair value of options and performance rights granted.
16. Accumulated Losses
Accumulated losses balance at 1 July
Net profit (loss) for the year
Accumulated losses balance at 30 June
30 June 2018
$’000
(143,461)
(10,285)
(153,746)
30 June 2017
$’000
(153,875)
10,415
(143,461)
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.
(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.
(c) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
30 June 2018
$
30 June 2017
$
2,311,570
124,278
31,599
1,760,049
4,227,496
2,178,003
140,062
28,802
1,188,638
3,535,505
Detailed remuneration disclosures are provided in the remuneration report on pages 19 to 39.
Page 69 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 69
Notes to the Consolidated Financial Statements 30 June 2018
18. Remuneration of Auditors
The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and
experience with the company and/or the consolidated group are important. Details of the amounts paid or payable to the auditor
(PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out below. During the year the following fees were
paid or payable for services provided by the auditor (PricewaterhouseCoopers) of the parent entity, its related practices and non-related audit
firms:
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
30 June 2018
$
30 June 2017
$
118,616
118,616
104,754
104,754
No matters or circumstances have arisen since 30 June 2018 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.
20. Commitments
(a) Capital Commitments
There is no material capital expenditure contracted not recognised as liabilities at the reporting date (2017: nil).
(b) Lease Commitments
Operating leases
As at the reporting date the group leases laboratory and offices space under an operating lease until 19 December 2022, 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 non-cancellable operating leases
30 June 2018
$’000
30 June 2017
$’000
632
2,317
–
2,949
290
13
–
303
70 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 70 of 88
Notes to the Consolidated Financial Statements 30 June 2018
Finance Leases
The group leases plant and equipment under a finance leases expiring within two (2017: three) years.
Commitments in relation to finance leases are payable as follows:
Notes
30 June 2018
$’000
30 June 2017
$’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
12
12
28
24
–
52
(3)
49
26
23
49
26
50
–
76
(6)
70
23
47
70
The weighted average interest rate implicit in the lease is 5.8% (2017: 5.8%).
(c) 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.
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
Country of
Incorporation
Class of Shares
Equity Holding
2018
%
2017
%
Starpharma Pty Limited
Australia
Ordinary
100.00%
100.00%
Page 71 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 71
Notes to the Consolidated Financial Statements 30 June 2018
22. Discontinued Operation
(a) Description
In 2017, the group completed the sale of its Agrochemicals business on 13 June 2017, including the sale of subsidiaries Dendritic
Nanotechnologies Inc and Priostar Pty Ltd. The sale was reported in the prior year financial statements as a discontinued operation as set out
below.
For the current reporting period, there are no discontinued operations.
(b) Financial performance
Revenue
Expenses
Loss before income tax
Income tax expense
Loss after income tax of discontinued operation
Gain on sale of subsidiary after income tax
Profit/(loss) from discontinued operation
Exchange differences on translation of discontinued operation
Other comprehensive income from discontinued operation
Net cash outflow from operating activities
Net cash inflow from investing activities (2017 includes
$33,405,000 net disposal consideration less $124,000 cash
transferred on disposal of the Agrochemicals business)
Net cash flow from financing activities
Net cash inflow/(outflow) generated
(c) Details of the sale of the subsidiaries
Consideration received:
Gross
Transaction costs
Total disposal consideration
Carrying amount of net assets sold
Gain on sale before income tax and reclassification of foreign currency
translation reserve
Reclassification of foreign currency translation reserve
Income tax expense on gain
Gain on sale after income tax
72 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
13 June 2017
$’000
58
(1,306)
(1,248)
-
(1,248)
24,665
23,417
1,118
1,118
(461)
33,281
-
32,820
13 June 2017
$’000
35,000
(1,596)
33,405
(7,481)
25,924
(1,258)
-
24,665
Page 72 of 88
Notes to the Consolidated Financial Statements 30 June 2018
23. Contingencies
The company has no contingent assets or liabilities at 30 June 2018 (2017: nil).
24. Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities
Operating profit/(loss) after tax
Depreciation and amortisation
Foreign exchange (gains) / losses
Non-cash employee benefits: share-based payments
Net gain (loss) on sale of property, plant and equipment
Net (gain) loss on sale agrochemical business (Note 22)
Change in operating assets and liabilities, net of effects of acquisitions and
disposals of entities:
Decrease (increase) in receivables and other assets
Increase (decrease) increase in trade creditors
Increase in employee provisions
Increase (decrease) in deferred income
Net cash outflows from operating activities
25. Earnings Per Share
Basic earnings/(loss) per share / Diluted earnings/(loss) per share
From continuing operations attributable to the ordinary equity holders of the
company ($)
From discontinued operation ($)
Total earnings/(loss) per share attributable to the ordinary equity holders of the
company ($)
Reconciliations of earnings/(loss) used in calculating earnings per share
Profit attributable to the ordinary equity holders of the company used in
calculating basic earnings per share:
From continuing operations ($’000)
From discontinued operation ($’000)
Total ($’000)
30 June 2018
$’000
(10,285)
311
(717)
2,578
-
-
(1,757)
(847)
120
396
30 June 2017
$’000
8,200
318
464
1,996
(1)
(23,417)
(344)
(4,281)
99
11
(10,201)
(16,955)
30 June 2018
30 June 2017
(0.03)
-
(0.03)
(10,285)
-
(10,285)
(0.04)
0.06
0.02
(15,217)
23,417
8,200
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
370,136,605
368,164,540
As at 30 June 2018 the company had on issue 11,876,199 (30 June 2017: 9,419,740) performance rights. The rights are not included in the
determination of basic earnings per share. The rights are also not included in the determination of diluted earnings per share. They are not
considered dilutive as their conversion would not increase loss per share from continuing operations.
Page 73 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 73
Notes to the Consolidated Financial Statements 30 June 2018
26. 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, 2014 and 2017 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 2018 was $0.88
per right (2017: $0.65). There were 4,590,600 performance rights granted in the current year (2017: 4,072,250).
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:
2018
Grant Date
Vesting
Date
Holding
Lock
Date
20 Nov 2014
30 Sep 2017
30 Sep 2018
20 Nov 2014
30 Sep 2017
30 Jan 2015
30 Sep 2017
30 Jan 2015
30 Sep 2018
11 Nov 2015
30 Jun 20171
11 Nov 2015
30 Sep 2018
19 Nov 2015
30 Jun 20171
19 Nov 2015
30 Sep 2018
13 Oct 2016
30 Jun 20181
13 Oct 2016
30 Sep 2019
29 Nov 2016
30 Jun 20181
29 Nov 2016
30 Sep 2019
10 Aug 2017
30 Jun 2019
10 Aug 2017
30 Sep 2020
29 Nov 2017
30 Jun 2019
29 Nov 2017
30 Sep 2020
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance
at start of
the year
Number
300,000
450,000
833,875
714,750
418,413
1,849,600
181,001
893,851
535,650
2,142,600
223,022
876,978
Granted
during
the year
Number
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
694,120
2,776,480
224,121
895,879
Converted
during
the year
Forfeited
during
the year
Balance
at end of
the year
Number
226,200
330,300
773,355
–
98,720
–
–
–
–
–
–
–
–
–
–
–
Number
Number
73,800
119,700
60,520
–
–
–
–
–
714,750
319,693
64,000
1,785,600
–
–
73,366
181,001
893,851
462,284
120,000
2,022,600
50,180
–
28,800
172,842
876,978
665,320
115,200
2,661,280
–
–
224,121
895,879
Total
9,419,740
4,590,600
1,428,575
705,566
11,876,199
1 The balance of rights at end of the year have vested and remain available for employees to exercise into shares.
74 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 74 of 88
Notes to the Consolidated Financial Statements 30 June 2018
2017
Grant Date
Vesting
Date
Holding
Lock
Date
Balance
at start of
the year
22 Nov 2013
22 Nov 2016
22 Nov 2017
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
13 Oct 2016
30 Jun 2018
13 Oct 2016
30 Sep 2019
29 Nov 2016
30 Jun 2018
29 Nov 2016
30 Sep 2019
–
–
–
–
–
–
–
–
–
–
–
–
Number
250,000
450,000
300,000
450,000
944,125
944,125
809,250
513,200
2,052,800
219,395
893,851
–
–
–
–
Converted
during
the year
Number
100,000
405,000
–
–
924,245
97,1251
69,9381
42,8001
Forfeited
during
the year
Number
150,000
45,000
–
–
19,880
13,125
24,562
51,987
Balance
at end of
the year
Number
–
–
300,000
450,000
–
833,875
714,750
418,413
147,3441
55,856
1,849,600
Granted
during
the year
Number
–
–
–
–
–
–
–
–
–
–
–
–
–
38,394
–
181,001
893,851
535,650
594,450
42,8001
16,000
2,377,800
103,8561
131,344
2,142,600
223,022
876,978
–
–
–
–
223,022
876,978
Total
7,826,746
4,072,250
1,933,108
546,148
9,419,740
1Performance rights were accelerated for transferring employees on the sale of the agrochemicals business in June 2017.
Information used in assessing the fair value of performance rights granted during the year ended 30 June 2018 is as follows:
Right grant date
10 August 2017
10 August 2017
10 August 2017
29 November 2017
Number of rights granted
694,120
2,574,040
202,440
224,121
Vesting date
30 June 2019
30 September 2020
30 September 2020
30 June 2019
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%
1.84%
–
$0.77
$0.77
KPIs
50%
2.14%
–
$0.77
$0.77
TSR
50%
2.14%
–
$0.77
$0.54
KPIs
50%
1.60%
–
$1.29
$1.29
Right grant date
29 November 2017
29 November 2017
Number of rights granted
627,115
268,764
Vesting date
30 September 2020
30 September 2020
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%
1.83%
–
$1.29
$1.29
TSR
50%
1.83%
–
$1.29
$1.23
Page 75 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 75
Notes to the Consolidated Financial Statements 30 June 2018
26. Share-Based Payments (continued)
Information used in assessing the fair value of performance rights granted during the year ended 30 June 2017 is as follows:
Right grant date
13 October 2016
13 October 2016
13 October 2016
29 November 2016
Number of rights granted
594,450
2,202,810
174,990
223,022
Vesting date
30 June 2018
30 September 2019
30 September 2019
30 June 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%
1.51%
–
$0.68
$0.68
KPIs
50%
1.69%
–
$0.68
$0.68
TSR
50%
1.69%
–
$0.68
$0.43
KPIs
50%
1.57%
–
$0.68
$0.68
Right grant date
29 November 2016
29 November 2016
Number of rights granted
613,885
263,093
Vesting date
30 September 2019
30 September 2019
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%
1.85%
–
$0.68
$0.68
TSR
50%
1.85%
–
$0.68
$0.41
Share price volatility and the risk-free interest rate are obtained through an independent valuation.
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 fair value at grant date of shares granted under the Employee Share Plan during the year ended 30 June 2018
was $1.38 (2017: $0.73 per share). The fair value at grant date is determined by the share price on the date of grant. These shares
were granted for no consideration. There was no allocation of shares under the plan to key management personnel.
Information used in assessing the fair value of shares granted during the year ended 30 June 2018 is as follows:
Share grant date
Number of shares granted
Share price at grant date
Assessed fair value
Information used in assessing the fair value of shares granted during the year ended 30 June 2017 is as follows:
Share grant date
Number of shares granted
Share price at grant date
Assessed fair value
76 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
29 January 2018
24,548
$1.38
$1.38
25 January 2017
51,023
$0.73
$0.73
Page 76 of 88
Notes to the Consolidated Financial Statements 30 June 2018
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 2018
$’000
30 June 2017
$’000
34
2,544
2,578
37
2,206
2,243
27. 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 2018 (2017: nil).
30 June 2018
30 June 2017
Parent
$'000
47,506
47,506
710
710
193,583
12,898
(159,685)
(12,513)
(12,513)
$'000
57,675
57,675
910
910
193,549
10,387
(147,171)
(8,795)
(8,795)
Page 77 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 77
Directors’ Declaration for the year ended 30 June 2018
In the directors’ opinion:
(a) the financial statements and notes set out on pages 48 to 77 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 2018 and of its performance for the financial year
ended on that date; and
(b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.
Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations
Act 2001.
This declaration is made in accordance with a resolution of the directors.
Rob Thomas AM
Chairman
Melbourne, 21 August 2018
78 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 78 of 87
Independent Audit Report to the Members of Starpharma Holdings Limited
[Page 1]
Independent auditor’s report
To the members of Starpharma Holdings Limited
Independent auditor’s report
To the shareholders of Starpharma Holdings Limited
Report on the audit of the financial report
Report on the audit of the financial report
Our opinion
Our opinion
In our opinion:
In our opinion:
The accompanying financial report of Starpharma Holdings Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
The accompanying financial report of Starpharma Holdings Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
giving a true and fair view of the Group's financial position as at 30 June 2018 and of its
giving a true and fair view of the Group's financial position as at 30 June 2017 and of its financial
financial performance for the year then ended
performance for the year then ended
(a)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b)
(a)
(b)
What we have audited
The Group financial report comprises:
What we have audited
The Group financial report comprises:
the consolidated balance sheet as at 30 June 2018
the consolidated balance sheet as at 30 June 2017
the consolidated statement of comprehensive income for the year then ended
the consolidated income statement for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of cash flows for the year then ended
the consolidated statement of changes in equity for the year then ended
the consolidated income statement for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the notes to the consolidated financial statements, which include a summary of significant
the directors’ declaration.
accounting policies
Basis for opinion
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Independence
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
We are independent of the Group in accordance with the auditor independence requirements of the
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to
in accordance with the Code.
our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, 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.
Liability limited by a scheme approved under Professional Standards Legislation.
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 79
Page 79 of 87
Independent Audit Report to the Members of Starpharma Holdings Limited
[Page 2]
Our audit approach
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
An audit is designed to provide reasonable assurance about whether the financial report is free from
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
opinion on the financial report as a whole, taking into account the geographic and management
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
structure of the Group, its accounting processes and controls and the industry in which it operates.
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
The Group operates in the biotechnology industry, undertaking development of dendrimer technology
for pharmaceutical, life science and other applications. The Group owns a portfolio of proprietary
technology with applications in different stages between development and commercialisation.
The Group operates in the biotechnology industry, undertaking development of dendrimer technology
for pharmaceutical, life science and other applications. The Group owns a portfolio of proprietary
technology with applications in different stages between development and commercialisation.
Materiality
Audit scope
Key audit matters
Amongst other relevant topics, we
communicated the following key
audit matters to the Audit and Risk
Key audit matters
Committee:
Amongst other relevant
Disposal of Starpharma
Research and development tax
Agrochemicals
topics, we
communicated the
following key audit
incentive
matters to the Audit and
Risk Committee:
These are further described in the
Key audit matters section of our
License revenue
report.
recognition
Research and
development tax
incentive
These are further
described in the Key
audit matters section of
our report.
Our audit focused on where the
Group made subjective judgements;
for example, significant accounting
Audit scope
estimates involving assumptions
and inherently uncertain future
Our audit focused on
events.
where the Group made
subjective judgements;
All audit procedures are performed
for example, significant
by PwC Australia, consistent with
accounting estimates
the location of Group management
involving assumptions
and financial records.
and inherently uncertain
future events.
We tailored the scope of our audit
All audit procedures are
taking into account the accounting
performed by PwC
processes and controls, and the
Australia, consistent
with the location of
industry in which the Group
Group management and
operates.
financial records.
We tailored the scope of
our audit taking into
account the accounting
processes and controls,
and the industry in
which the Group
operates.
For the purpose of our audit we used
overall Group materiality of $0.76
million, which represents approximately
Materiality
5% of the Group’s adjusted loss before
tax.
For the purpose of our audit we used overall
Group materiality of $0.66 million, which
We applied this threshold, together with
represents approximately 5% of the Group’s
qualitative considerations, to determine
adjusted loss before tax.
the scope of our audit and the nature,
We applied this threshold, together with
timing and extent of our audit procedures
qualitative considerations, to determine the
and to evaluate the effect of
scope of our audit and the nature, timing
misstatements on the financial report as a
and extent of our audit procedures and to
whole.
evaluate the effect of misstatements on the
financial report as a whole.
We chose Group adjusted loss before tax
We chose Group adjusted loss before tax
because, in our view, it is the benchmark
because, in our view, it is the benchmark
against which the performance of the
against which the performance of the Group
Group is most commonly measured. We
is most commonly measured. We adjusted
adjusted for the impact of the gain on
for the impact of the upfront license
payments recognised as revenue during the
disposal of Starpharma Agrochemicals as
year as these items are infrequently
the financial statement line item is not
occurring and have a disproportionate
expected to reoccur and has a
impact on the earnings result.
disproportionate impact on the earnings
We utilised a 5% threshold based on our
result for the period.
professional judgement, noting it is within
the range of commonly acceptable loss
We utilised a 5% threshold based on our
related thresholds.
professional judgement, noting it is
within the range of commonly acceptable
profit related thresholds in the
biotechnology industry.
80
Page 80 of 88
80 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 80 of 87
Independent Audit Report to the Members of Starpharma Holdings Limited
[Page 3]
Key audit matters
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context.
particular audit procedure is made in that context.
Key audit matter
Key audit matter
How our audit addressed the key audit matter
How our audit addressed the key audit matter
Disposal of Starpharma Agrochemicals (Refer to
note 23)
License revenue recognition
(Refer to note 5 revenue and other income)
We have performed the following procedures to assess
the license revenue recognised for the year ended 30
June 2018:
During June 2017 the Group disposed of the Starpharma
Agrochemical business and associated net assets with
carrying value of $7.5m for a cash consideration of $35
million, as described in note 23, realising a gain of $24.7
million within the consolidated income statement.
In May 2018, the Group entered into long term license
and supply agreements to commercialise VivaGel® BV
in Asia, the Middle East, Africa and the majority of
Latin America. The agreements were amended in June
2018 to include Europe and other specific countries in
the licensed territory.
Obtained an understanding of the Group’s
We read the Starpharma Agrochemicals share sale and
purchase agreement (SPA) to obtain an understanding of
the terms of the transaction and performed the following
procedures:
obligations related to the signature payments
received and subsequent payments in accordance
with the Vivagel® BV license and supply
agreements
On disposal the accumulated foreign currency translation
reserve (FCTR) of $1.3 million related to Dendritic
Nanotechnologies Inc has been recycled to the
consolidated income statement.
The Group recognised the non-refundable amount
from the signature payments received as license
revenue. The recognition of license revenue from long
term license and supply agreements is a key audit
matter due to:
This is a key audit matter due to the fact that the
judgements required to determine
transaction is material to the financial statements.
o
o
the existence of ongoing obligations
under the agreements
the amount of consideration to be
recognised as revenue
license revenue being a significant revenue
stream of the Group
Research and development tax incentive
(Refer to note 3 critical accounting estimates)
Starpharma’s research and development (R&D)
activities are eligible for a refundable tax offset under
an Australian Government tax incentive. The Group
has assessed these activities and related expenditure to
determine their eligibility under the incentive scheme.
The R&D tax incentive receivable recorded as at 30
June 2018 was $3.85 million.
This is a key audit matter due to:
Assessed the Group’s analysis of revenue
Assessed the presentation and disclosure of the
Agrochemicals business as a discontinued
operation against the requirements of the
relevant Australian Accounting Standards.
recognition conditions applicable to the Vivagel®
BV license and supply agreements under
Australian accounting standards
Agreed the payments received to underlying
invoices and bank statements
Obtained managements calculation of the gain
Assessed the disclosures associated with license
on disposal and agreed:
revenue in the financial report
o Cash proceeds to the SPA and bank
records
o Material transaction costs incurred to
bank records
o Net assets transferred to the SPA and
their value to the Group’s financial
records
We have performed the following procedures to assess
the Group’s estimate of the R&D tax incentive
receivable as at 30 June 2018:
o FCTR to the Group’s financial records
Agreed the calculation of the results of
discontinued operations for both the current
year and prior year to the Group’s financial
records.
Compared the estimate recorded in the financial
statements as at 30 June 2017 to the amount of
cash received after lodgement of the R&D Tax
Incentive claim to assess historical accuracy of
the estimate
Assessed management’s rationale and
Compared the nature of the R&D expenditure
judgement in determining the classification of
the gain on disposal in the Group’s income tax
provision calculations.
included in the current year estimate to the prior
year estimate
the significance of the amount receivable as at 30
June 2018
the degree of judgement and interpretation of the
Assessed the nature of the expenses against the
eligibility criteria of the R&D tax incentive
programme
81
Page 81 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 81
Page 81 of 87
Independent Audit Report to the Members of Starpharma Holdings Limited
[Page 4]
Key audit matter
How our audit addressed the key audit matter
R&D tax legislation required by the Group to
assess the eligibility of the R&D expenditure
Key audit matter
under the scheme
Agreed the eligible expenditure in the estimate to
the general ledger or other underlying accounting
records
How our audit addressed the key audit matter
Research and development tax incentive (Refer
to note 3 critical accounting estimates)
Starpharma’s research and development (R&D)
activities are eligible for a refundable tax offset under an
Australian Government tax incentive. Management has
assessed these activities and expenditure to determine
their eligibility under the incentive scheme. The R&D
Tax Incentive receivable recorded for the year ended 30
June 2017 was $3.5 million.
Other information
Obtained copies of correspondence with the
company’s external tax advisor and agreed the
advice to the R&D tax incentive calculation for
the current financial year
We tested management’s estimate of the R&D Tax
Incentive receivable to assess the amount accrued as at
Assessed the classification of the amount in the
30 June 2017. As part of our procedures we:
financial statements
Compared the estimate recorded in the
financial statements as at 30 June 2016 to the
amount of cash received after lodgement of the
R&D Tax Incentive claim to assess historical
accuracy of the estimate.
The directors are responsible for the other information. The other information comprises the
information included in the annual report for the year ended 30 June 2018, including the Chairman’s
Letter, CEO’s Report, Corporate and Social Responsibility, Director’s Report, Corporate Governance
Statement, Shareholder Information, Intellectual Property Report and Corporate Directory, but does
not include the financial report and our auditor’s report thereon.
This is a key audit matter due to the fact that the
amount accrued in the financial statements is material
and there is a degree of judgement and interpretation of
the R&D tax legislation required by management to
assess the eligibility of the R&D expenditure under the
scheme.
Compared the nature of the R&D expenditure
included in the current year estimate to the
prior year estimate.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
Assessed the nature of the expenses against the
eligibility criteria of the R&D Tax Incentive
programme.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
to the general ledger.
Agreed the eligible expenditure in the estimate
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Obtained copies of correspondence with the
ATO related to the claim and agreed the
assessment to management’s estimate.
Responsibilities of the directors 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 Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
Obtained copies of correspondence with the
company’s external tax specialist and agreed
the advice to the current calculation and the
2016 lodgement.
Assessed the classification of the amount in the
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
financial statements.
82
Page 82 of 88
82 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 82 of 87
Independent Audit Report to the Members of Starpharma Holdings Limited
[Page 5]
Auditor’s responsibilities for the audit of the financial report
Other information
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
The directors are responsible for the other information. The other information comprises the
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
Chairman’s Letter to shareholders, CEO’s Report, Corporate and Social Responsibility, Director’s
audit conducted in accordance with the Australian Auditing Standards will always detect a material
Report, Operating and Financial Review, Corporate Governance Statement, Shareholder Information,
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
Intellectual Property Report and Corporate Directory included in the Group’s annual report for the year
decisions of users taken on the basis of the financial report.
ended 30 June 2017 but does not include the financial report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
Report on the remuneration report
Our opinion on the remuneration report
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
We have audited the remuneration report included in pages 19 to 39 of the directors’ report for the
year ended 30 June 2018.
Responsibilities of the directors for the financial report
Responsibilities
In our opinion, the remuneration report of Starpharma Holdings Limited for the year ended 30 June
2018 complies with section 300A of the Corporations Act 2001.
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 Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
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.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
PricewaterhouseCoopers
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
Melbourne
if, individually or in the aggregate, they could reasonably be expected to influence the economic
21 August 2018
decisions of users taken on the basis of the financial report.
Jon Roberts
Partner
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
83
Page 83 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 83
Page 83 of 87
Shareholder Information
The shareholder information set out below was applicable as at 31 July 2018.
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 391 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
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
T & N Argyrides Investments P/L
BNP Paribas Noms Pty Ltd
Applecross Secretarial Services Pty Ltd
Mr Peter Murray Jackson
HSBC Custody Nominees (Australia) Limited - A/C 2
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Mr Kingsley Bryan Bartholomew
11.
Mirrabooka Investments Limited
12.
Ms Jacinth Fairley
13.
Dollar Coin Investments
14.
Merrill Lynch (Australia) Nominees Pty Limited
15.
Commonwealth Scientific and Industrial Research Organisation
16.
Mr Mario Argyrides
17.
BNP Paribas Nominees Pty Ltd
18.
Mr Nicholas Wheeler
19.
Mr David Michael Hosey + Mrs Andrea Jane Hosey
20.
Gilridge Pty Ltd
84 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Class of equity security
Shares
Performance rights
1,293
2,075
997
1,453
271
6,089
–
–
–
14
24
38
Number held
120,044,106
38,445,033
31,485,303
10,491,864
5,250,592
4,394,597
3,361,550
3,170,000
2,820,006
2,517,072
2,500,000
2,190,886
1,996,850
1,686,935
1,448,798
1,439,900
1,416,667
1,350,000
1,213,718
1,120,267
Ordinary shares
Percentage
of issued shares
32.40
10.38
8.50
2.83
1.42
1.19
0.91
0.86
0.76
0.68
0.67
0.59
0.54
0.46
0.39
0.39
0.38
0.36
0.33
0.30
238,344,144
64.32
Page 85 of 88
Shareholder Information
Name
Employee Performance Rights
C. Substantial Holders
Unquoted equity securities over ordinary shares
Number on issue
11,865,158
Number of holders
38
Substantial shareholders with a shareholding greater than 5% as shown in substantial shareholder notices received by the company as at 31
July 2018:
Name
Allan Gray Australia Pty Ltd
M&G Investment Funds
FIL Limited
D. Voting Rights
Number held
49,041,042
37,069,789
25,549,892
Ordinary shares
Percentage of
issue shares
13.36
13.06
6.90
The voting rights attached to each class of equity securities are set out below:
(a) Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and on a poll
each share shall have one vote.
(b) Performance Rights
No voting rights.
Page 86 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 85
Intellectual Property Report
The Starpharma patent portfolio currently has around 15 active patent families with over 120 granted patents and more than 30 patent
applications pending.
Key patents within the Starpharma portfolio as at 31 July 2018:
Title
Priority Date &
Publication Number
Patents Granted
Applications Pending
VivaGel® Patent Portfolio
Anionic Or Cationic Dendrimer
Antimicrobial Or Antiparasitic
Compositions
14 September 1998
WO00/15240
Agents For The Prevention & Treatment
Of Sexually Transmitted Diseases
30 March 2001
WO02/079299
Microbicidal Dendrimer Composition
Delivery System (Condom related)
18 October 2005
WO2007/045009
Contraceptive Composition
22 March 2006
WO2007/106944
Australia, Canada, Europe,
Japan, Mexico, New Zealand,
Singapore, South Korea, USA
Australia, Brazil, Canada,
China, Europe, Hong Kong,
Japan, Mexico, New Zealand,
Singapore, South Korea, USA
Australia, Canada, Europe,
Hong Kong, India, Japan,
Malaysia, Mexico, New
Zealand, Russian Federation,
South Korea, Taiwan, USA
Australia, Canada, China,
Europe, Japan, USA
Method Of Treatment Or Prophylaxis Of
Bacterial Vaginosis
16 May 2011
WO2012/000891
Australia, China, Israel, Japan,
Russia USA
Method of Treatment or Prophylaxis of
Infection of the Eye
13 September 2012
WO2014/043576
Europe, Hong Kong,
Method of Prophylaxis of Zika Virus
Infection
15 May 2016
Drug Delivery Patent Portfolio (includes DEP® Patents)
Brazil, Canada, China,
Europe, Hong Kong, India,
South Korea, Mexico,
Canada, China, India,
Japan, USA
International
Macromolecules Compounds Having
Controlled Stoichiometry
25 October 2005
WO2007/048190
Australia, Canada, Europe,
USA
Modified Macromolecules
Targeted Polylysine Dendrimer
Therapeutic Agent
Macromolecules (Drug linkers)
20 January 2006
WO2007/082431
11 August 2006
WO2008/017125
6 June 2011
WO2012/167309
Australia, Canada, India
Japan, USA
China, Europe, Hong Kong
China, USA
Europe, India
Australia, Japan USA
Brazil, Canada, China,
Europe, Hong Kong, India,
South Korea, USA
Dendrimer Drug Conjugates
6 June 2014
WO 2015/184510
Europe, India, USA
86 STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018
Page 87 of 88
Solicitors
Norton Rose Fulbright
RACV Tower, 485 Bourke Street
Melbourne VIC 3000 Australia
Stock exchange listing
ASX Limited
Level 4, North Tower, Rialto, 525 Collins Street,
Melbourne VIC 3000 Australia
ASX Code: SPL
Starpharma’s American Depositary Receipts (ADRs) trade under
the code SPHRY (CUSIP number 855563102). Each Starpharma
ADR is equivalent to ten ordinary shares of Starpharma as traded
on the ASX. The Bank of New York Mellon is the depositary bank.
Starpharma’s ADRs are listed on OTCQX International
(www.otcmarkets.com), a premium market tier in the U.S. for
international exchange-listed companies, operated by OTC
Markets Group.
Website address
www.starpharma.com
Corporate Directory
Company name
Starpharma Holdings Limited
ABN 20 078 532 180
Directors
R B Thomas AM – Chairman
J K Fairley – Chief Executive Officer
P R Turvey
R A Hazleton
Z Peach
Company Secretary
Nigel Baade
Registered office
4-6 Southampton Crescent
Abbotsford, Victoria 3067 Australia
Telephone +61 3 8532 2700
Fax +61 3 9510 5955
Postal address
PO Box 2022
Preston VIC 3072 Australia
Share register
Computershare Investor Services Pty Limited
452 Johnston Street, Abbotsford VIC 3067
GPO Box 2975
Melbourne, VIC 3001
1300 850 505 (within Australia)
+613 9415 4000 (outside Australia)
www.computershare.com
Auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006 Australia
Page 88 of 88
STARPHARMA HOLDINGS LIMITED ANNUAL REPORT 2018 87
STARPHARMA HOLDINGS LIMITED ABN 20 078 532 1804-6 Southampton Crescent Abbotsford VIC 3067 AustraliaTelephone +61 3 8532 2700 www.starpharma.com