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STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 1
HIGHLIGHTSUS VivaGel® BV licenceVivaGel® BV licensed to ITF Pharma, Inc. for up to US$101M in milestones, plus royalties.VivaGel® BV first Asian region regulatory approvalsFirst Asian region regulatory approvals received for BetadineTM BV Gel.New DEP® agreement with AstraZenecaDevelopment and Option Agreement signed to progress development of a DEP® version of one of AstraZeneca’s major oncology products.Phase 1 / 2 DEP® irinotecan trialApproval received to commence phase 1 / 2 DEP® irinotecan trial (initial sites include The Christie, The Royal Marsden and Newcastle Freeman Hospital).DEP® irinotecan combinations outperform in cancer modelsDEP® irinotecan combinations outperform in both human pancreatic cancer and colon cancer models.DEP® outperforms in human pancreatic cancer modelDEP® docetaxel and DEP® cabazitaxel alone, and in combination with standard pancreatic cancer treatments, outperform in a human pancreatic cancer model.Progress with DEP® docetaxel and DEP® cabazitaxel trialsPositive interim results observed in patients treated with DEP® docetaxel and DEP® cabazitaxel in phase 1 / 2 trials; new sites opened and cohorts expanded.VivaGel® condom approved and launched in JapanOkamoto launched the VivaGel® condom in Japan under its leading ‘003’ brand.Progress with AstraZeneca DEP® program AZD0466US patent granted for DEP® Bcl2/xL inhibitor conjugates; IND filing in 2H CY2019 for AZD0466.VivaGel® BV launched in Europe & AustraliaBetadine BVTM launched in Europe by Mundipharma. Fleurstat BVgel launched in Australia by Aspen. coming year, including in Asia, where first
regulatory approvals were recently
received.
Starpharma also progressed with
regulatory submissions in other regions,
including the US. The FDA did not grant our
NDA approval on its first-round review, and
although they acknowledged the significant
unmet medical need for BV, the FDA
requested confirmatory clinical data.
Starpharma is working with the agency and
expert advisors on the optimum pathway to
approval, to bring the product to market in
the US.
Navigating complex regulatory processes
to achieve approval in international
jurisdictions is not always straight-forward
in healthcare. Our team has demonstrated
remarkable diligence and tenacity in its
dealings with regulatory bodies in a number
of regions. As an example, an additional
review of the VivaGel® condom was
completed during the year in Japan.
Starpharma worked closely with its partner
Okamoto to secure approval, and shortly
after doing so, the condom was launched
by Okamoto under their highly successful
‘003’ brand. Okamoto is Japan’s leading
marketer of condoms and receipts have
already been received for this product.
Alongside the late-stage VivaGel® portfolio,
we’ve also created a deep pipeline of
valuable DEP® products from our drug
delivery platform. Here, we’ve taken a
similar dendrimer scaffold to that used in
our proven, on-market VivaGel® products
and attached other drugs to it, such as
anti-cancer drugs. In doing so we have
been able to ameliorate some of the very
severe side-effects associated with those
drugs and improve their efficacy.
To date, Starpharma has developed three
dendrimer enhanced versions of major
anti-cancer drugs to a clinical stage, and
created a pipeline of further candidates.
Thus far, the interim results from our
current trials for DEP® docetaxel and DEP®
cabazitaxel trials have shown encouraging
signs of efficacy along with significantly
less bone marrow and other toxicities
compared with the original versions of
these drugs. Reducing life threatening
side-effects, such as neutropenia, could
be critically important for some cancer
patients, who become severely ill from
the side-effects of their treatment.
Starpharma has recently received approval
to commence a phase 1 / 2 trial for its
internal DEP® drug, DEP® irinotecan,
increasing Starpharma’s DEP® portfolio
to three clinical stage products.
Aside from the licensing opportunities these
internal products create, the immense
upside with the DEP® platform is that DEP®
can be used for many different drugs, both
novel and existing, with reproducible
benefits, both for patients and commercially.
Starpharma signed another commercial
DEP® deal during the year – to progress a
DEP® version of one of AstraZeneca’s
major oncology drugs. The Development
and Option Agreement was signed in June
and was structured in a novel and flexible
way to provide Starpharma with greater
ability to expedite the preclinical stage
work associated with this product.
We’re delighted to expand our
AstraZeneca DEP® programs, having seen
benefits in new potential drugs, but also
how DEP® can improve existing major
on-market cancer products. AstraZeneca’s
first DEP® product, AZD0466 (a Bcl2/xL
inhibitor) has already produced impressive
preclinical data and AstraZeneca expects
to commence clinical trials for AZD0466
later in the year, following allowance of
their US FDA investigational new drug
(IND) filing.
As a Board, we are proud of these recent
achievements and the value created for
our shareholders over the past few years.
We sincerely thank our CEO, Dr Jackie
Fairley, and the entire Starpharma team for
their determination and tremendous work
throughout multiple international product
launches; new commercial deals;
regulatory processes; and progress with
our multiple clinical programs.
Our team has demonstrated their ability
to deliver on key milestones all the way
from research and drug discovery, through
to clinical development, approval and
commercialisation. Such achievements are
only made possible through retaining and
building capacity in our people and
instilling a culture of innovation.
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,
particularly our long-term investors who
have stayed the course through the biotech
journey of clinical development and
commercialisation.
As we move towards the next inflection
point, we reaffirm our commitment to
creating shared value for our investors and
patients. We remain confident of the further
commercialisation of our VivaGel® products
and leveraging the DEP® platform with
further clinical development and
partnerships.
Yours Sincerely,
Rob Thomas AO
Starpharma Chairman
!
2 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
On behalf of the Board, I am delighted to report on Starpharma’s achievements this year and our strategy for future growth. Our strategy is to utilise our proprietary dendrimer technology to build a stable of high-value products and partnerships that address significant unmet patient need for the betterment of the community and our shareholders. To achieve this strategy, we will continue to pursue commercial deals to enable our unique science and innovation to become products in the hands of patients and their doctors. In the recent past, we’ve signed commercial deals with large global pharmaceutical companies – most recently with AstraZeneca, Mundipharma and ITF Pharma, Inc. Such partnerships have been central to some of our most exciting achievements this year.Starpharma has completed a series of commercial deals in which we licensed our novel BV (bacterial vaginosis) product, VivaGel® BV, in more than 160 countries. We worked closely with our commercial partners in undertaking international product launches, triggering the beginning of recurrent revenue and signalling an exciting new inflection point for the company. In June, VivaGel® BV was launched under the brand name ‘BetadineTM BV’ in Europe by Mundipharma. This followed the world-first launch of VivaGel® BV in Australia by Aspen Pharmacare under their brand ‘Fleurstat BVgel’ in April. Now, for the first time, Australian women are able to purchase a product for BV over-the-counter in pharmacies.VivaGel® BV is a novel non-antibiotic therapy for the most common vaginal condition, BV. The product is a real success story for Australian innovation – it’s exceedingly rare to have a global healthcare product developed by a small Australian company all the way from concept to commercialisation. As an Australian company, it is pleasing that Australian women were first to access this life-changing product.The European and Australian launches are just the beginning for this breakthrough product. VivaGel® BV is now licensed in most countries in the world and we are expecting further roll-out of the product throughout Europe and other regions this CHAIRMAN'S LETTER
Starpharma has licensed
VivaGel® BV in more than 160 countries
around the world
Starpharma's global partners
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 3
DR JACKIE FAIRLEY, CHIEF EXECUTIVE OFFICER"The international roll-out of VivaGel® products and the beginning of recurrent revenue this year is an important milestone for the company."I am very pleased to report on another positive year for Starpharma, in which we achieved many significant milestones across our business, including multiple international product launches, new commercial deals, and progress with our high-potential, clinical stage DEP® assets. We were delighted to launch VivaGel® BV in two regions during the year and to receive our first revenue for these on-market products. We received first Asian region approvals for VivaGel® BV, and Starpharma and its partners are currently working on regulatory activities to expedite the approval and launch of VivaGel® BV in further regions, including in the US, Asia, the Middle East and Latin America. It was also very pleasing to have the VivaGel® condom approved and rapidly launched in Japan, and to have first receipts come through for this product. In parallel with the commercial development of the VivaGel® portfolio we also expanded our relationship with AstraZeneca and signed a Development and Option Agreement for a DEP® version of one of their major marketed oncology products, and we made good progress with Starpharma's other DEP® partnered programs. We also progressed our clinical programs for DEP® docetaxel and DEP® cabazitaxel – receiving positive interim results for both trials – and recently advanced our third internal DEP® product, DEP® irinotecan, into the clinic. CEO'S REPORTADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS ADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS ADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS ADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS ADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS ADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS ADVANCED NEGOTIATIONS ADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS VivaGel® BV global launch
Further roll-out in additional European countries is expected
during CY2019 and the region represents a large commercial
opportunity, with access to more than 260 million women.
Regulatory processes are well advanced in a number of other
countries, with further regions expected to launch during the
balance of 2019 and 2020.
During the year, Starpharma signed a licence for the sales and
marketing rights for VivaGel® BV in the US to ITF Pharma, Inc.
Under the licence, Starpharma is eligible to receive up to
US$101 million in milestone payments in addition to escalating
double-digit royalties on sales. The milestones comprise
US$20 million in regulatory approval milestones for two BV
indications (treatment and prevention) and up to US$81 million in
commercial milestones. ITF Pharma, Inc. is a US-based specialty
pharmaceutical company with a focus on Women’s Health
products through its Womens Choice Pharmaceuticals Division.
The only remaining territories to be licensed for VivaGel® BV are
India, Israel and Canada – for which commercial discussions are
currently ongoing.
EUROPEAN VIVAGEL® BV PRODUCT
AUSTRALIAN VIVAGEL® BV PRODUCT
4 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
VivaGel® BV was launched in Australia and Europe, with further launches plannedStarpharma’s VivaGel® BV is a novel, breakthrough therapy for bacterial vaginosis (BV), the most common vaginal infection in the world. VivaGel® BV is now available to women over-the-counter in Europe and Australia for this troublesome and highly recurrent condition. In Australia, previously women have only been able to access antibiotic-based treatments for BV, which are available by prescription from a doctor.In Australia, the product branded as Fleurstat BVgel, was launched in April and is being marketed by Aspen Pharmacare, a leading global pharmaceutical company. Fleurstat BVgel is being sold in pharmacies around Australia, including leading chains Chemist Warehouse, Amcal, Terry White and Priceline.Since launch, market feedback and interest in the product from both healthcare professionals and consumers has been extremely positive. Aspen continues to expand its promotional activities, including a recent campaign which saw the product promoted in highly-targeted advertisements to pharmacists, healthcare practitioners and consumers in major cities around the country.VivaGel® BV is licensed in more than 160 countries and Starpharma’s partner in the majority of these countries is Mundipharma – which has a global network and a leading position in feminine care in these markets. In June, Mundipharma launched VivaGel® BV as BetadineTM BV in several countries in Europe, including Germany. This launch triggered a milestone payment of US$0.5 million (A$0.7 million) and Starpharma is eligible to earn total milestones up to US$24.7 million, plus revenue share, for this and all territories under Mundipharma’s licence. STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 5
First Asian region approvals received and further regulatory processes are underway to support the global roll-out of VivaGel® BV in other regions, including the US, Asia & the Middle EastVivaGel® BV has recently received regulatory approvals in multiple South East Asian countries, with further registration reviews at an advanced stage throughout the region. Starpharma is working closely with Mundipharma on further regulatory submissions for VivaGel® BV in other countries and regions and these activities are being undertaken as quickly as possible to ensure rapid launches. In parallel, Starpharma is also pursuing regulatory approval for VivaGel® BV in the US. During the year, Starpharma received a request from the FDA for confirmatory clinical data prior to approval. A meeting was held with the FDA, at which time several potential strategies were identified. Starpharma has been working through these options with its team of expert FDA consultants, statisticians, Key Opinion Leaders and advisors. As part of its evaluation of the options, Starpharma is seeking regulatory and legal advice on the avenues available for review of some of the conclusions reached by the FDA. Other options include generating confirmatory clinical data through an additional BV treatment trial. Should it be determined that a new clinical trial is the best strategy, Starpharma would be in a position to commence a BV treatment trial quickly. Starpharma’s focus remains to pursue the most expeditious and efficient path to approval.CEO'S REPORTVivaGel® condom launched in Japan under Okamoto’s ‘003’ brandIn June 2019, Okamoto launched the VivaGel® condom in Japan under its leading and highly successful ‘003’ brand. This is the first condom with an anti-viral coating in Japan and will carry the VivaGel® brand. The 003 refers to the thinness of the condom and is recognised as a ‘super thin’ standard of latex. Okamoto is Japan’s leading marketer of condoms with a dominant share of the Japanese condom market – and a strong record in the successful commercialisation of innovative products. Starpharma is eligible to receive royalties based on sales of the VivaGel® condom and also revenue on supply of SPL7013 active. Starpharma received first receipts from Okamoto in April. CEO'S REPORT
DEP® drug delivery
$
6 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
The benefits of patented DEP® products are
the result of the particle size and novel, highly-
controlled structure. The DEP® technology has
great potential for improving patient health while
creating significant commercial value for partners
and investors.
Starpharma’s innovative nanoparticle DEP® platform has the potential to create improved versions of anti-cancer therapies but with fewer side effects and improved effectiveness – and not just for cancer treatments but for drugs that treat a range of diseases.1 Multiple preclinical studies have established improved efficacy, survival and safety with DEP® with many different drugs; clinical trials underway.Reduced side-effects1 DEP® reduces important side effects such as bone marrow toxicity / low white blood cells (neutropenia) and alopecia (hair loss). DEP® makes drugs more water soluble and removes the need for toxic detergents in current formulations.Improved efficacy1 DEP® improves anti-cancer efficacy through better drug targeting and improved pharmacokinetics.Benefits in combination1 DEP® products are ideal candidates for combination therapy including with immuno-oncology (IO) agents and other chemotherapy. DEP® products show synergistic benefits over the original versions and given they do not require pre-treatment with cortisone, they are particularly well suited to combine with IO.Patent life In addition to the therapeutic and clinical benefits, DEP® also provides valuable commercial benefits by creating new intellectual property and extending patent life. This is of value for both new drugs but also for extending the patents for improvements to existing products. CEO'S REPORT
Starpharma's DEP® platform
remains available for many further
partnerships
Starpharma has a number of partnerships with leading
pharmaceutical companies, such as AstraZeneca. Starpharma’s
partnership with AstraZeneca includes a multiproduct DEP®
licence which currently involves the development and
commercialisation of two novel AstraZeneca oncology
compounds, with potential to add more.
AstraZeneca’s first DEP® conjugate, AZD0466 (a Bcl2/xL inhibitor),
has been described as a potentially best-in-class drug with a broad
combination opportunity in solid and haematological tumours.
During the year, the first patent for Starpharma’s DEP® dendrimers
with AstraZeneca’s Bcl2/xL inhibitors was granted in the US. The
patent provides AstraZeneca with US exclusivity until 2038, with
the potential for up to 5 years’ extension and represents an
important commercial milestone. The granted patent includes
promising data on DEP® Bcl2/xL inhibitor conjugates in various
preclinical human tumour models, both alone and in combination
with other leading current anti-cancer treatments and illustrates
the synergistic potential of DEP®. AstraZeneca expects to
commence clinical trials for AZD0466 later in the year, following
allowance of their US FDA investigational new drug (IND) filing.
In June, Starpharma signed a Development and Option
Agreement with AstraZeneca during the 2019 American Society
of Clinical Oncology (ASCO) meeting in Chicago. This new
commercial deal is for the development of a DEP® version of
one of AstraZeneca’s major marketed oncology medicines. This
agreement culminated from a successful research program under
which Starpharma identified a promising DEP® candidate with
a number of potential benefits. Following completion of agreed
preclinical studies by Starpharma, AstraZeneca has the option to
licence the DEP® oncology drug candidate for an option exercise
fee of US$5 million, plus industry standard development and
commercialisation milestones and escalating royalties on sales.
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 7
“Building on our long-standing and
successful working relationship with
Starpharma, this agreement will
enable us to further evaluate the
potential of the DEP® technology
with the aim of improving treatment
outcomes for patients.”
Starpharma’s DEP® platform enhances the commercial and therapeutic value of a wide range of drugs, making it a highly valuable partnering technologyThe value of the DEP® platform offers significant optionality, not only for Starpharma’s internal candidates but through making it available under licence to partners. DEP® has broad applicability to different types of drugs and it’s estimated that a broad range of leading drugs would be amenable to DEP® dendrimer delivery.There are multiple ways Starpharma and its partners can use the DEP® technology. One is as a lifecycle management tool to improve existing drugs to make them better to achieve continued sales and improved margins through differentiated product benefits and new intellectual property – and another is to use DEP® to enhance the features of novel drugs that may otherwise limit clinical use due to issues such as toxicity or insolubility.Through its DEP® licences, Starpharma effectively has a free carried interest in its partners’ DEP® programs and is entitled to receive significant development and commercial milestone payments and royalties. COMMENTING ON ASTRAZENECA'S DEP® DEVELOPMENT AND OPTION AGREEEMENT: DR SUSAN GALBRAITH, SENIOR VICE PRESIDENT, R&D EARLY ONCOLOGY, ASTRAZENECA DEP® docetaxel – phase 2INTERNAL PROGRAMLICENCE AFTER PROOF-OF-CONCEPT DEP® cabazitaxel – phase 1 / 2INTERNAL PROGRAMLICENCE AFTER PROOF-OF-CONCEPT Major existing oncology medicine AZD0466 MULTIPRODUCT LICENCE 2nd novel candidate MULTIPRODUCT LICENCE Antibody Drug Conjugates Licences are typically product specific and structured to allow for multiple partnered-DEP® programs to run in parallel PLATFORM DEP® DEP® irinotecan – phase 1 / 2INTERNAL PROGRAMLICENCE AFTER PROOF-OF-CONCEPT2019 DEVELOPMENT & OPTION AGREEMENT AGREEMENTS WITH UNDISCLOSED PHARMACEUTICAL PARTNERS The DEP® platform has
enabled Starpharma to build
a deep internal pipeline of high-value
oncology products
8 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
than 30 weeks and significant reductions in tumour biomarkers
such as PSA (Prostate Specific Antigen).
Efficacy signals have been observed in tumour types for which
cabazitaxel is approved (prostate) and other tumour types such
as ovarian cancer which would represent an expansion of its
current use. Responses have also been observed at doses
several fold lower than typically used for cabazitaxel (during the
dose-escalation phase). No dose-limiting or other
significant toxicities associated with DEP® cabazitaxel
have been observed including a notable lack of bone
marrow toxicity which usually occurs in >90% of
patients treated with Jevtana® (cabazitaxel).
DEP® IRINOTECAN
DEP® irinotecan is an improved version of irinotecan,
which is widely used for colon cancer. Starpharma
completed final preparations for the phase 1 / 2 trial
for DEP® irinotecan, which received regulatory and
ethics approval to commence in August.
The objectives of the trial are to evaluate the safety,
tolerability and pharmacokinetics of DEP® irinotecan –
to define a recommended phase 2 dose (RP2D), and
then to determine anti-tumour efficacy of the product
in select tumour types.
The trial will be conducted at multiple sites, with initial
sites including leading UK cancer centres The
Christie, The Royal Marsden and Newcastle Freeman
Hospital. As the trial progresses, decisions will be
made as to which tumour types to focus on and any
additional patients required. Combination therapy approaches
with DEP® irinotecan may also be investigated.
DEP® PIPELINE
The versatility of the DEP® platform means it can
be used with a wide range of therapies (e.g. small molecules,
peptides, antibodies, antibody fragments, radioisotopes).
Starpharma is developing several further DEP® candidates,
with the most attractive of these selected for advancement. This
includes a range of DEP® radiopharmaceutical candidates which
are currently being tested in a variety of preclinical models. The
company also has a number of targeted DEP® candidates in
preclinical development.
DEP® DOCETAXELDEP® docetaxel is a patented, detergent-free, enhanced version of the widely used anti-cancer drug Taxotere®, which had peak sales of US$3 billion.A phase 2 program is underway for DEP® docetaxel, currently recruiting at four sites in the UK in lung cancer and a number of other tumour types. The phase 2 program for DEP® docetaxel includes both a monotherapy arm and the use of the product in combination with Nintedanib. Both the monotherapy and Nintedanib combination arms continue to show encouraging efficacy signals, a notable lack of bone marrow toxicity (e.g. neutropenia) and other common side effects including hair-loss, anaphylaxis and oedema. Efficacy signals have been observed in tumour types typically treated with docetaxel and in tumour types not typically treated with docetaxel. Based on efficacy signals observed and investigator interest, some cohorts have been expanded and additional tumour types are being explored, including pancreatic cancer. Further potential combinations are also being explored following interest from specialist oncologists in the impressive preclinical data and DEP® docetaxel’s lack of bone marrow toxicity. In addition, given the lack of need for steroid pre-treatment, combinations with immuno-oncology agents are also under discussion.DEP® CABAZITAXELDEP® cabazitaxel is a patented, detergent-free, version of leading cancer drug Jevtana®. Two UK sites are currently recruiting patients for the escalation phase of the 1 / 2 trial. Consistent with DEP® docetaxel, early efficacy signals have been observed in the trial. The DEP® cabazitaxel phase 1 / 2 trial is underway at Guy’s Hospital London and University College London Hospital, with patient recruitment moving to the 7th dose level. The majority of patients have been dosed with multiple cycles of DEP® cabazitaxel. Encouraging efficacy signals have been observed in multiple patients including stable disease for more PHOTO: STARPHARMA'S IN-HOUSE DEP® SCALE-UP FACILITIES CEO'S REPORT
DEP® cabazitaxel, both alone and in combination with
gemcitabine, showed complete tumour regression and 100%
survival. DEP® docetaxel, alone, and in combination with
gemcitabine, significantly outperformed gemcitabine and/or
Abraxane® and showed 100% survival.
These impressive DEP® efficacy results were despite the fact
that standard pancreatic cancer treatments, gemcitabine and/or
Abraxane®, showed limited activity in this model. This exciting
data is already feeding into the clinical development programs
for DEP® docetaxel and DEP® cabazitaxel.
Similarly, a study with DEP® irinotecan showed impressive
efficacy and safety benefits of DEP® irinotecan over standard
irinotecan alone and in combination with 5-FU in a human
pancreatic cancer model. DEP® irinotecan achieved complete
tumour regression and 100% survival. These results are
particularly impressive given that the challenging model used
was virtually unresponsive to conventional irinotecan.
DEP® docetaxel & DEP® cabazitaxel
outperformed both gemcitabine & Abraxane® in
a human pancreatic cancer model1
1CAPAN-1 HUMAN PANCREATIC MODEL
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 9
DEP® drugs are ideal candidates for combination therapy Combination therapies are widely used in oncology. Combination therapies potentially reduce drug resistance, while simultaneously providing enhanced therapeutic outcomes. The synergistic combination of two drugs allows for different mechanisms to be employed yielding superior efficacy however sometimes the toxicity of combining drugs can be limiting. Therefore, because DEP® products lack typical bone marrow toxicities this can create new opportunities for their use beyond the original form of the product.During the year, Starpharma continued to add value to its DEP® portfolio through exploring DEP® products in combination with other marketed oncology agents. The company is planning to extend this into further clinical combinations in FY20 and already has additional preclinical combination studies underway.During FY19, Starpharma presented preclinical results on a series of combination studies with each of its DEP® products. For example, in November 2018, Starpharma reported that DEP® docetaxel and DEP® cabazitaxel showed significant efficacy and safety benefits over gemcitabine (Gemzar®) alone, Abraxane® (Nab-paclitaxel) alone and gemcitabine/Abraxane® combination, in a human pancreatic cancer model.Monotherapy DEP® outperforms current standard treatmentsCombination therapyLeading pancreatic cancer therapies, gemcitabine & Abraxane® both alone, and in combination, show minimal activity compared to DEP® which shows complete tumour regressionStarpharma’s DEP® drugs, alone, and in combination with gemcitabine, outperform leading pancreatic cancer therapies and show complete tumour regression 3 Year Financial Summary
10 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Overview of Financial ResultsRevenue and other income for the year was $2.7 million, which included product sales, and royalties and milestones related to the market launch of VivaGel® BV in Australia and Europe, and the VivaGel® condom in Japan.Starpharma reported a net loss of $14.3 million, compared to $10.3 million last year. The loss has increased, from the prior year due to FY18 including signature milestone payments of A$3.0 million for the licensing of VivaGel® BV for Europe, Asia, Latin America, the Middle East and Africa, combined with increased commercial and regulatory operating costs in FY19 related to the licensing and product launch of VivaGel® BV in multiple markets.The net operating cash outflows for the year were $10.3 million which is comparable to the prior year of $10.2 million. Starpharma ended the financial year with a strong cash balance of $41.3 million.Cash at 30 June 2019$41.3M2019 $M2018 $M2017 $MRevenue & other income 1.7 3.9 3.0Interest revenue1.0 1.1 0.6Total revenue and other income2.7 5.0 3.6Expenditure(17.0) (15.3) (18.8)Loss from continuing operations(14.3) (10.3) (15.2)Profit/(loss) from discontinued operation– – 23.4Profit/(loss) for the period(14.3) (10.3) 8.2Net operating cash inflows/(outflows)(10.3)(10.2)(17.0)Net investing and financing cash inflows/(outflows)(0.3) (0.4) 32.7Cash and cash equivalents at end of year41.3 51.3 61.2 CEO'S REPORT
PARTNERED LATE-
STAGE PRODUCTS
PARTNERED LATE-
STAGE PRODUCTS
INTERNAL DEP®
LICENCES
FOLLOWING PROOF-
OF-CONCEPT
PARTNERED
DEP® LICENCES
APPLICABLE TO
MULTIPLE NEW OR
EXISTING DRUGS
EXPANDING
LICENSING & CO-
DEVELOPMENT
OPPORTUNITIES
VivaGel® BV licensed in >160
countries; launched in Europe
and Australia
VivaGel® condom licensed
broadly and launched in
Japan, Australia and Canada
Multiple clinical stage DEP®
drugs in development
creating multiple licensing
opportunities; preclinical
pipeline continues to build
DEP® licences with
AstraZeneca & other leading
international pharmaceutical
companies to apply DEP®
to improve their new or
existing drugs
DEP® radiopharmaceuticals,
targeted DEP® & SPL7013
ophthalmic drops for
adenoviral conjunctivitis
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 11
Review and Future OutlookI would like to take this opportunity to sincerely thank Starpharma’s executive team, and every member of our staff and board, for their commitment this past year. We have achieved a series of significant milestones, which are a direct reflection of the expertise and dedication of our team.We are very proud of what we have achieved this year, with international launches in our VivaGel® portfolio, new commercial deals with large pharmaceutical companies and exciting progress in both our internal and partnered DEP® programs. Our committed staff take great pride in the fact that they are part of a small Australian company which has discovered and fully developed a novel, non-antibiotic therapy which will assist in the management of BV, a condition that affects around one in three women worldwide. In an era of antibiotic resistance, we are very pleased to provide women with a non-antibiotic treatment for BV and finally provide a way to manage recurrent BV.It’s been pleasing to have first revenues coming in from recent launches of VivaGel® BV in Australia and Europe and the VivaGel® condom in Japan. Whilst at an early stage, this is an important milestone for the company as we look forward to further market launches and revenue growth.In the year ahead, we anticipate further exciting progress in our clinical stage DEP® products and in some cases expanding these programs to explore combination therapies and new indications. Internally, we continue to develop new DEP® candidates and build our portfolio of high value DEP® assets. These new candidates also include expansion into the exciting area of radiotherapeutics and targeted therapies. Starpharma’s strong balance sheet and anticipated growing revenues place the company in an excellent position for growth to leverage its expertise, its human capital and intellectual property portfolio to drive success and increase shareholder value.We thank our shareholders and 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 OfficerADVANCED NEGOTIATIONS COMMERCIAL DISCUSSIONS >50%
of roles, including
leadership roles,
held by females
>50%
of roles, including
leadership roles,
held by females
NO
breaches of
Environmental
regulations
NO
breaches of
Environmental
regulations
ZERO
reportable
Worksafe
incidents
ZERO
reportable
15
Worksafe
incidents
countries
represented by a
small, diverse
group of
employees
15
countries
represented by a
small, diverse
group of
employees
>50%
of roles, including
leadership roles,
held by females
NO
breaches of
Environmental
regulations
>50%
of roles, including
leadership roles,
held by females
NO
breaches of
Environmental
regulations
ZERO
reportable
Worksafe
incidents
ZERO
15
reportable
Worksafe
countries
incidents
represented by a
small, diverse
group of
employees
15
12 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
countries
represented by a
small, diverse
group of
employees
CORPORATE AND 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 to the company achieving business success. To ensure Starpharma remains a safe, healthy, and attractive workplace for our employees, Starpharma has established workplace policies and practices. 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 well-being 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 and collegiate workplace. Policies assist Starpharma to ensure employees have engaging and satisfying roles and receive periodic feedback on performance and provide for ongoing training and career development.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.Approximately half of Starpharma’s employees are female, and more than half of the leadership roles are held by females 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 15 different countries.Employee equity 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.At Starpharma, occupational health and safety is considered every employee’s responsibility, and a safe working culture is promoted and actively encouraged. There is an active OH&S committee structure to eliminate, reduce or mitigate risks associated with Starpharma’s activities. OH&S 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 US 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.
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 2019.
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 AO, 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 a 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, a
Fellow of the Australian Institute of Company Directors and a
Fellow of the Royal Society of New South Wales.
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
825,000 ordinary shares
Experience
Dr Jackie Fairley has more than 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.
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 a non-executive director of listed investment
company Mirrabooka Investments Limited. She is a past member
of the Federal Government’s Commonwealth Science Council and
Pharmaceutical Industry Working Group and the Federal
Ministerial Biotechnology Advisory Council.
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
With more than 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
3,905,434 ordinary shares
3,835,087 employee performance rights
Starpharma Holdings Limited Annual Report 2019
13
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 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 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 13-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: Monash IVF
Group Limited, Visioneering Technologies, Inc. and Pacific Smiles
Group Limited.
Directorships of other ASX listed entities within the last three
years: AirXpanders, Inc.
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 2019
14
14 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
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: 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
179,821 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 2019, 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 2019 was
$14,254,000 (2018: $10,285,000). The net operating cash outflows
for the year were $10,344,000 (2018:$10,201,000).The cash
balance at 30 June 2019 was $41,251,000 (June 2018:
$51,319,000).
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 2019 (2018: Nil).
Review of operations
Key activities until the date of this report include:
VivaGel® Portfolio
VivaGel® BV launched in Europe by Mundipharma, under the
brand name Betadine BVTM;
VivaGel® BV launched in Australia by Aspen Pharmacare,
under the brand name Fleurstat BVgel;
VivaGel® BV was licensed to ITF Pharma, Inc for the US for
milestones of up to US$101 million in addition to escalating
royalties;
First Asian regulatory approvals received for BETADINETM BV
Gel;
VivaGel® condom launched in Japan under Okamoto’s Zero
Zero Three (‘003’) brand;
US FDA completed its review of the VivaGel® BV NDA and
advised it requires confirmatory clinical data prior to approval;
and
Positive independent market research was conducted in the
US for SPL7013 ophthalmic drops for viral conjunctivitis and
a patent was granted for the product.
DEP® Drug Delivery Platform
Starpharma signed a Development and Option Agreement
with AstraZeneca to progress the development of a DEP®
version of one of their major marketed oncology medicines;
First patent granted for Starpharma’s DEP® dendrimers with
AstraZeneca’s Bcl2/xL inhibitors, including AZD0466;
Clinical trials for DEP® docetaxel (phase 2) and DEP®
cabazitaxel (phase 1 / 2) progressed well with new sites
opened and cohorts expanded;
Approval to commence DEP® irinotecan phase 1 / 2 trial;
DEP® irinotecan, showed significant efficacy and safety
benefits over leading colorectal cancer drugs irinotecan
(Camptosar®) and cetuximab (Erbitux®), in the irinotecan-
refractory HT-29 human colon cancer model;
DEP® irinotecan showed impressive efficacy and safety
benefits over standard irinotecan in combination with 5-FU in
a human pancreatic cancer model;
Starpharma Holdings Limited Annual Report 2019
15
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 15
Directors’ Report Operating & Financial Review
Review of operations (continued)
DEP® docetaxel & DEP® cabazitaxel outperformed both
gemcitabine and Abraxane® in a human pancreatic cancer
model; and
A range of DEP® radiopharmaceutical and other DEP®
candidates are undergoing testing in a variety of models.
VivaGel® Portfolio
During the year, Starpharma’s breakthrough product for bacterial
vaginosis (BV), VivaGel® BV, was launched in multiple regions and
the VivaGel® condom was launched in Japan.
The Australian launch of VivaGel® BV in April 2019 was the first
launch globally of VivaGel® BV. Marketed as Fleurstat BVgel by
Aspen Pharmacare, it is the only BV treatment available over-the-
counter (OTC) in Australia, without the need for a prescription.
VivaGel® BV was also launched by Mundipharma under their
brand name Betadine BVTM in several countries in Europe,
including Germany, and further roll-out in additional European
countries is expected during CY2019. The launch of VivaGel® BV
in Europe triggered a milestone payment of US$0.5 million (A$0.7
million) to Starpharma. Starpharma is eligible to earn total
milestones up to US$24.7 million, plus revenue share, for all
territories under Mundipharma’s licence. In August 2019 the first
Asian regulatory approvals were received for BETADINETM BV
Gel.
In December 2018, Starpharma signed a licence with ITF Pharma,
Inc. for the sales and marketing rights to VivaGel® BV in the US.
Under the licence, Starpharma will be eligible to receive up to
US$101 million in regulatory approval and commercialisation
milestones in addition to attractive tiered royalties on sales.
In late December, Starpharma received advice from the FDA that it
will require confirmatory clinical data prior to approving VivaGel®
BV in the US. Starpharma is reviewing the potential options to
progress with the FDA and is focused on pursuing the most
expeditious and efficient path to approval. As part of its evaluation
of options, Starpharma is consulting with expert regulatory/legal
advisers on the avenues available for review of some of the
conclusions reached by FDA. Other options include generating
confirmatory data through an additional BV treatment trial.
During the year, Starpharma achieved final regulatory approval for
the VivaGel® condom in Japan. Okamoto launched the VivaGel®
condom in June 2019, under its highly successful Zero Zero Three
(003) brand. Starpharma is eligible to receive royalties based on
sales of the VivaGel® condom and also revenue on supply of
VivaGel® active. Starpharma received first receipts from Okamoto
in April. Good regulatory progress was also made in other regions
for the VivaGel® condom including for Europe and China.
DEP® Drug Delivery Platform
Starpharma uses its DEP® dendrimer technology to improve the
performance and delivery of pharmaceuticals whilst creating new
IP. 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 has three DEP® products: DEP® docetaxel, DEP®
cabazitaxel and DEP® irinotecan – in clinical trials. Recruitment
activities progressed well for DEP® docetaxel (phase 2) and DEP®
cabazitaxel (phase 1 / 2), with new sites opened to support
recruitment. Efficacy signals have been observed in a number of
patients and both products continue to exhibit a notable lack of
bone marrow toxicity and other common side effects including hair-
loss, anaphylaxis and oedema. A phase 1 / 2 clinical trial recently
commenced for DEP® irinotecan, in patients with advanced solid
tumours, including for colon and pancreatic cancer. Initial sites will
include The Christie, The Royal Marsden and Newcastle Freeman
Hospital.
Starpharma has a number of further DEP® products being
developed internally, including a range of DEP® radio-
pharmaceutical candidates which are undergoing testing in a
variety of models.
In its partnered DEP® programs - Starpharma signed a new
commercial agreement with AstraZeneca to progress the
development of a DEP® version of one of their major marketed
oncology medicines. Following completion of agreed preclinical
studies by Starpharma, AstraZeneca has the option to licence the
DEP® oncology drug candidate for an option exercise fee of
US$5 million, plus industry standard development and
commercialisation milestones and escalating royalties on sales.
This is the second commercial oncology DEP® agreement with
AstraZeneca and is separate to the existing multiproduct licence
under which AZD0466 is being developed.
AZD0466 is a DEP® Bcl2/xL inhibitor conjugate, with broad
combination potential being evaluated in both solid and
haematological tumours (blood cancers). A US FDA investigational
new drug application (IND) is planned for AZD0466 in the near
future with the product expected to enter the clinic in 2019. During
the year, the first patent for Starpharma’s DEP® dendrimers with
AstraZeneca’s Bcl2/xL inhibitors was granted in the US, providing
exclusivity until 2038, and the potential for up to five years’
extension.
The company also progressed its other partnered programs during
the year. Starpharma also has 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 2019 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 and healthcare
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.
Starpharma has extensive expertise, a 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 and VivaGel®
revenues to invest in selected research and development activities
to achieve its objectives.
Legal
At the date of the Directors’ Report there are no significant legal
issues.
Starpharma Holdings Limited Annual Report 2019
16
16 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Directors’ Report Operating & Financial Review
Review of Financials
Earnings Per Share
30 June 2019
$’000
30 June 2018
$’000
Basic & diluted earnings/(loss) per
share
2019
2018
($0.04)
($0.03)
Income statement
Revenue
Cost of goods sold
Other income
Research and product
development expense
Commercial and regulatory
operating expense
Corporate, administration and
finance expense
2,708
(251)
12
4,884
-
73
(10,454)
(10,576)
(3,774)
(2,425)
(2,495)
(2,241)
Loss for the period
(14,254)
(10,285)
Income statement
The reported loss for the period was $14,254,000 (2018:
$10,285,000) reflecting the expensing of research and
development expenditure for the VivaGel® and DEP® programs.
Total revenue and other income for the year was $2,720,000
(2018: $4,957,000), comprising revenue of $1,651,000 (2018:
$3,812,000) for licensing, royalty and research revenue, interest
income of $1,057,000 (2018: $1,072,000) and other income of
$12,000 (2018: $73,000). The current year revenue includes the
initial product supply, royalties and milestones related to the
market launch of VivaGel® BV in Australia and Europe and the
VivaGel® condom in Japan. The decrease in revenue from the prior
year is primarily due FY18 including signature milestone payments
of $2,955,000 for the licensing of VivaGel® BV for Europe, Asia,
South America, Middle East and Africa.
Research and product development expense includes the costs of
the internal DEP® drug delivery programs, and certain VivaGel® BV
related expenditure. R&D expenses were at similar levels to the
prior year with ongoing clinical expenditure on DEP® docetaxel,
and DEP® cabazitaxel, as well as initial expenditure for DEP®
irinotecan.
A contra research and development expense of $5,071,000 (2018:
$4,056,000) has been recorded for research and development
activities eligible under the Australian Government’s R&D tax
incentive program. The increase reflects the additional expenditure
on the DEP® internal programs.
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. The increase in the
year reflects internal and external costs related to commercial
licences and the launch of VivaGel® BV in multiple markets.
Corporate, administration and finance expense includes corporate
costs, as well as gains/losses on foreign currency held. The
increase over the prior corresponding period predominately
reflects a lower foreign currency gain in the year.
Balance sheet
At 30 June 2019 the group’s cash position was $41,251,000 (June
2018: $51,319,000). Trade and other receivables of $6,159,000
(June 2018: $6,134,000) includes $4,898,000 (June 2018:
$3,847,000) receivable from the Australian Government under the
R&D tax incentive program and $1,009,000 (2018: $2,065,000)
receivable from customers for product supply and milestones, such
as Mundipharma for VivaGel® BV in Europe. Trade and other
payables have increased primarily on higher accruals associated
with the three DEP® internal clinical trial programs.
Statement of cash flows
The net operating cash outflows for the year were $10,344,000
(2018: $10,201,000). During the financial year, $4,019,000 (2018:
$3,747,000) was received from R&D tax incentives associated with
eligible expenditure and activities from the prior financial year, and
the VivaGel® BV European licence milestone of US$1.5M.
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.
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.
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Directors’ Report Operating & Financial Review
Grant and R&D incentives – the company may undertake
R&D activities part-funded by incentive programs (eg. R&D
tax credits) and other under competitive grants. 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 2019 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 2019, 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.
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Directors’ Report Remuneration Report
The remuneration report for the year ended 30 June 2019 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) Approach to setting and reviewing remuneration
b) Remuneration principles and strategy
c) Details of executive equity incentive plans
d) Grant of equity incentives to KMP executives in FY19
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 45) 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 Key Performance Indicators (KPIs) 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 FY19 remains largely consistent with the previous period, comprising fixed remuneration, short-
term incentives (STI) in both cash and equity, and equity based long-term incentives (LTI). As communicated in previous years, the strategy and
structural improvements implemented in 2015 included an increase of the relative portion of LTI for executives thereby reducing the proportion
of fixed pay and short-term incentives. This was further strengthened in FY18 where the target LTI equity portions of total remuneration were
increased to arrive at the current target remuneration mix is outlined on page 24.
The number of rights awarded in the STI and LTI each year, as determined by the Board, is calculated on the face value based on the 3 month
volume weighted average price (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. Following a number of
achievements in early FY19, Starpharma’s share price increased resulting in the quantum of remuneration associated with performance rights
being 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. For instance, for the CEO the fair value at grant date, being the 2018 AGM, of $1.48 represents a 21% increase over the 3
month VWAP to 30 June 2018 face value of $1.22.
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 2019. 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
(iii) Other KMP executives
R B Thomas
Non-executive Chairman
N J Baade
Chief Financial Officer & Company Secretary
R A Hazleton
Non-executive Director
Z Peach
Non-executive Director
P R Turvey
Non-executive Director
A Eglezos
VP, Business Development
D J Owen
VP, Research
J R Paull
VP, Development & Regulatory Affairs
(ii) Executive director
J K Fairley
Chief Executive Officer & Managing
Director (CEO)
There were no changes to the KMP after the reporting date up to the date of this report.
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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 competitive 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;
Motivate and reward superior performance by the executive team whilst aligning these to the interests of shareholders; and
Create a respectful culture of performance and innovation through appropriately structured individual assessments.
Benchmarking
Extensive salary and remuneration benchmarking is undertaken by Starpharma each year for executive and non-executive positions.
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
At the beginning of a performance period all staff have KPIs set, specific to their role. At the conclusion of the performance period a
performance review against these KPIs is conducted and this feeds into the annual salary review process. 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 based on performance, 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 2018 Annual General Meeting (AGM)
Of the votes cast on the company’s remuneration report for the 2018 financial year, over 96% 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.
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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 & NOMINATION COMMITTEE
Reviews and recommends the following to the Board:
Support & Advise
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.
Engage & Oversee
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.
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.
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Directors’ Report Remuneration Report
3. Non-executive director remuneration policy
Determination of fees and the maximum aggregate fee pool
The Board seeks to set non-executive directors’ fees at a level which provides the group with the ability to attract and retain non-executive
directors of the highest calibre with relevant professional expertise. 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 a group of comparable peer 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 2019 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 FY19
The aggregate amount paid to non-executive directors for the year ended 30 June 2019 was $355,500 (2018: $349,500). The details of
remuneration for each non-executive director for the years ended 30 June 2019 and 30 June 2018 are outlined in the tables in section 6.
Proposed fee adjustments for FY20
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 2019 be increased to $134,000 and $68,000 respectively. The amounts for both committee chairs will
increase to $10,500 and the fee for committee members remains unchanged. The proposed fees, compared to the current FY19 levels
represent an overall increase of 3.5% and 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 2020
Actual Fees to
30 June 2019
$
134,000
68,000
10.500
4,500
10,500
4,500
$
130,000
65,500
10,000
4,500
10,000
4,500
Chair
Member
Chair
Member
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4. Executive remuneration policy
a) 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, whilst
being market competitive and enabling the company to retain staff whilst structuring awards which 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 for FY19 with reference to industry peers, together with, where appropriate, other
benchmarking reports which apply to specific positions. A group of peer companies were included in the benchmarking exercise for FY19, from
within the pharma/biotechnology sector. These peer companies included Acrux, AirXpanders,Bionomics, Clinuvel, IDT Australia, Impedimed,
Mayne Pharma, Medical Developments International, Mesoblast, Nanosonics, Pharmaxis, Phosphagenics, Prana Biotechnology, Reva Medical,
Sirtex Medical, Universal Biosensors and Viralytics. Several of the peer companies included for benchmarking for FY19 have been the subject
of takeover activity or are no longer operating. Starpharma reviews and develops this benchmark list of peer companies annually to add and
remove companies based on their current operations; their size; market capitalisation; and the complexity of their business. For some executive
roles it may be necessary to add or modify the composition of the peer group to ensure comparable roles are benchmarked.
In reviewing the benchmarking data and determining the level of CEO pay, the Board considers the experience and 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 FY19 was $242,500, which represented a target of 15% 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 FY19, the STI target cash bonus pool for other KMP executives was 25% 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.
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Directors’ Report Remuneration Report
4. Executive remuneration policy (continued)
b) 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 diagrams 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. This
was further strengthened in FY18 where the target LTI equity as a proportion of total remuneration was again increased to further align
executives with long term outcomes. 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 the desired level to ensure management remain focused on long term outcomes.
Target Remuneration Mix
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.
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Directors’ Report Remuneration Report
To achieve the target remuneration mix, the below performance pay structure was adopted in FY19 and is consistent with the prior year. The
timeline and structure of the proposed performance related pay to be granted in FY20 to executives is consistent with this structure.
c) Details of executive equity incentive plans
Starpharma Short-Term Incentives (STI) – includes cash bonus and short-term equity
The group operates an annual STI program available to executives and awards cash and equity incentives subject to the attainment of clearly
defined KPIs. The STI is ‘at risk’ remuneration and subject to achieving relevant KPIs.
Who participates?
Executives
How are STIs delivered?
What is the STI opportunity?
What are the STI performance
conditions for FY19?
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 at a similar stage of their life cycle.
During FY19 the CEO and executives were awarded STI equity with a 1 year performance period
(1 July 2018 to 30 June 2019), with a deferred vesting date of 30 June 2020 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 on target; and within 2% for all other
KMP executives (average 21%) for FY19.
The CEO STI opportunity for FY19 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 FY19, 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
FY19 equated to an average of 14% of total remuneration or an average of 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 FY19, 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 27.
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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?
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 common
practice for companies at a similar stage of their life cycle. 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.
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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. The LTI is ‘at-risk’ remuneration and subject to achieving the relevant KPIs.
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 FY19 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 FY19 was 41% of total remuneration. For other KMP executives, the LTI
opportunity for FY19 was ~30% of total remuneration. As outlined in section 4 of the remuneration
report, the target LTI opportunity is 40% and 30% of total remuneration for the CEO and other KMP
executives, respectively.
What are the LTI performance
conditions for rights granted
in FY19?
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 2019 these were:
The monetisation of the VivaGel® and Drug Delivery portfolios represented by the completion
of a number of commercial deals that build shareholder value and/or generate income; and
The development of new DEP® candidates and/or the licensing of DEP® 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,
relative TSR is considered a relevant performance condition in respect of LTIs. The relative 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 relative 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. Each year, the Remuneration and Nomination
Committee, and the Board, review the suitability of the Index as a comparator.
To achieve the full relative 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 relative
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 relative 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 relative TSR rights to vest.
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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 relative 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.
Relative TSR is calculated independently by a professional services firm with specialist expertise.
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.
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d) Grant of equity incentives to KMP executives in FY19
In FY19, the Board determined the number of rights granted for STI and LTI equity based on the face value of rights (see below) and the target
remuneration mix as set out on page 24.
Starpharma uses and reports face value for determining the allocation of equity as it provides transparency on the value of the allocations
compared with fair value. This practice reflects the increasingly accepted view by industry that presenting remuneration equity at face value
provides a more accurate representation of the true value of that equity and for users to understand the value of these awards.
The face value of each right is based on the VWAP of the company’s shares traded on the ASX over the 3 month period to 30 June 2018, which
reflects the beginning of the performance period. 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 relative TSR performance condition. The face value is not adjusted for changes (increase or decreases) in
share price post 30 June, which has been the practice since 2015. The face value for each right was $1.2224.
The below tables summarise the equity incentives granted in FY19:
Performance Period
Deferral Period
Deferred STI equity
LTI equity
1 July 2018 to 30 June 2019
1 July 2018 to 30 June 2021
12 months from end of
performance period
Not applicable
Vesting Date
30 June 2020
30 September 2021
Face Value per Right
Based on 3 month VWAP to 30 June 2018 of $1.2224
Method for calculating number Total value of grant at face value divided by the face value per right
of rights
J K Fairley
(CEO and Managing
Director)
Face Value of grant
Number of Rights
Fair value per AASB2#
$165,000
134,980
$199,096
$659,999
539,921
$740,696
Performance Conditions
100% Corporate KPIs
70% Corporate KPIs
30% relative TSR performance
J Paull
(Other KMP Executives)
N J Baade
A Eglezos
D J Owen
(Other KMP Executives)
Face Value of grant
Number of Rights
Fair value per AASB2†
Performance Conditions
Face Value of grant
Number of Rights
Fair value per AASB2†
$51,585
42,200
$53,231
$206,341
168,800
$202,452
70% Business Unit KPIs
30% Corporate KPIs
70% Business Unit KPIs
15% Corporate KPIs
15% relative TSR performance
$47,185
38,600
$48,690
$188,739
154,400
$185,181
Performance Conditions
Performance Conditions (% of
Face Value)
70% Business Unit KPIs
30% Corporate KPIs
70% Business Unit KPIs
15% Corporate KPIs
15% relative TSR performance
Other Vesting Conditions
Remains employed until the vesting date and has not engaged in fraud or dishonesty
# 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.
Starpharma’s accounts are required under Australian Accounting Standards to show a fair value calculation, hence its’ inclusion in the table
above.
† The grant date to calculate the fair value of the award under AASB2 is the date when the performance rights were offered. Starpharma’s
accounts are required under Australian Accounting Standards to show a fair value calculation, hence its’ inclusion in the table above.
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5. Executive remuneration outcomes, including link to performance
Given the company’s stage of development, financial metrics (such as profitability) are not necessarily an appropriate measure of executive
performance. The company’s remuneration policy aligns executive reward with the interests of shareholders. The primary focus is on growth in
shareholder value through achievement of development, regulatory and commercial milestones, and therefore performance goals are not
necessarily linked to typical financial performance measures utilised by companies operating in other market segments. However, the Board
recognises that share price performance is clearly relevant to the extent that it reflects shareholder returns, and as such Starpharma’s TSR
relative to 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).
FY19
$1.36
$1.66
$0.87
-
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
$0.41
-
244,500
430,000
150,000
0%
0%
13%
50%
21%
Fixed remuneration:
The average increase in KMP executive fixed remuneration for FY19 was 3.2% (FY18: 3.2%). There was no increase above 5% in the total
fixed remuneration package for any KMP executive in the year. The revised total fixed remuneration is consistent with similar roles in the sector
and reflects the evolution of the company and associated greater responsibility of executives.
Performance related pay:
In the assessment of STI and LTI KPIs, the Board took account of the significant achievements obtained in the performance periods and the
effort and dedication required to accomplish these milestones. These achievements include those listed on pages 32 to 33.
Short-term incentives (STI):
Summary of performance pay related to FY19 for the CEO
Maximum Available
STI Achieved
% Achieved
STI Cash
($)
$242,500
$202,488
83.5%
STI Equity
(# of Rights)
134,980
112,708
83.5%
STI awards (cash and equity) for the CEO in FY19 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 83.5% of STI awards for the performance period 1 July 2018 to 30 June 2019. The KPIs
are reviewed and updated annually.
Summary of performance pay related to FY19 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 an average performance
assessment of 88% of STI awards (between 85% and 90%) for the performance period 1 July 2018 to 30 June 2019.
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Long-term incentives (LTI):
Summary of performance pay for the CEO for the three years ended 30 June 2019
Maximum Available
LTI Achieved
KPIs for 3 years to 30 June 2019
Relative TSR for 3 years to 30 June 2019
Total LTI Achieved
% Achieved
LTI Equity
(# of Rights)
876,978
506,494
339,787
846,281
96.5%
% Achieved
94.3%
100.0%
Performance assessment of relative TSR for the three years ended 30 June 2019
The company’s TSR was tested against the performance of the S&P/ASX300 Index for the three-year performance period ended 30 June
2019. The company’s TSR over the period was 82.2% compared with an Index TSR over the period of only 26.4%. The company’s annualised
TSR for the period was 22.1% compared to the S&P/ASX300 Index annualised TSR of 8.1% well above the additional 10% per annum
required. As a result, 100% of the relative 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 annualised TSR
Index annualised TSR
Starpharma outperformance of Index (annualised over 3 years)
% of relative TSR awarded
3 years to
30 June 2019
3 years to
30 June 2018
22.1%
8.1%
14.0%
100%
21.4%
4.4%
17.0%
100%
Summary of performance pay for other KMP executives for the three years ended 30 June 2019
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 relative 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 2016 to 30 June 2019 for determining LTI
awards.
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5. Executive remuneration outcomes, including link to performance (continued)
STI Performance
Assessment
Performance category
Metric
Performance period
1 July 2018 to 30 June 2019
Weighting
Satisfied
Regulatory activities for
VivaGel® BV
Advance further VivaGel® BV registrations in multiple countries, with
priority given to major markets
15%
Partially Met
Commercialisation of
VivaGel® BV
Sign a licence for VivaGel® BV for the US; launch VivaGel® BV in at least
two regions; whilst optimising returns
26%
Met
Other VivaGel® products
Progress with regulatory and commercialisation activities (including for
other opportunities e.g. ophthalmology)
5%
Partially Met
Clinical stage internal DEP®
programs
Progress with clinical trials for DEP® docetaxel, DEP® cabazitaxel and
DEP® irinotecan, including expansion in relation to further indications and
combination therapies, in parallel with partnering discussions
20%
Partially Met
Preclinical DEP®
candidate(s)
Advanced preclinical studies on another DEP® candidate, in preparation
for clinical trials; and develop the DEP® internal pipeline with further DEP®
product candidates
10%
Met
Partnered-DEP® programs
Progress with existing partnered-DEP® programs and/or expanded
field/products and/or progress with new partnering deals
16.5%
Partially Met
Capital management,
culture and leadership
Manage company’s capital in a prudent manner to create value, increase
recurrent revenues and maintain and develop a highly results oriented
culture with exceptional leadership
7.5%
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 VivaGel® BV regulatory activities, including:
-
Starpharma obtained European approval for a second BV indication (for the prevention of recurrent BV) to enable VivaGel® BV to be
marketed more broadly in Europe.
Extensive interactions with the FDA following formal acceptance of the NDA; Support of multiple FDA clinical site inspections, as
well as an FDA inspection at Starpharma.
NDA review resulted in no nonclinical (safety) or chemistry, manufacturing, or quality control issues.
NDA not approved on first cycle review following FDA’s request for further clinical data for VivaGel® BV, a meeting was held with
the FDA, for which substantial additional data analyses were provided to the FDA.
Successful completion of other regulatory audits to support regulatory approvals/submissions in other jurisdictions.
Starpharma provided extensive support to its partners with activities to register VivaGel® BV in several regions as quickly as
practicable including in Asia, the Middle East and Africa.
-
-
-
-
-
Licensed VivaGel® BV to ITF Pharma for the US market, up to US$101M in milestones plus ascending double-digit royalties.
VivaGel® BV launched in two regions during the year – in Europe and Australia. Starpharma actively supported both partners Aspen
Pharmacare (Fleurstat BVgel) and Mundipharma (Betadine® BV) to launch products as rapidly as possible.
Extension of product and material supply arrangements to support global commercialisation.
Regulatory approval and launch of the VivaGel® condom in Japan, and made regulatory progress in China, Europe and other markets.
Positive interim results from the DEP® docetaxel phase 2 trial and DEP® cabazitaxel including encouraging efficacy signals and a
notable lack of bone marrow toxicity (e.g. neutropenia) and other common side effects including hair-loss, anaphylaxis and oedema.
Additional indications, sites and combinations advanced.
DEP® irinotecan trial: CRO appointed, sites selected, regulatory approval achieved and ethics review near final. All necessary trial
documents finalised to support trial commencement as soon as possible.
Conducted an extensive series of pre-clinical combination studies for DEP® docetaxel, DEP® cabazitaxel and DEP® irinotecan, with very
positive results – which informs trial design and partnering discussions and further builds the value of DEP®.
Developed additional DEP® products, initiated preclinical development, and commenced a DEP® radiopharmaceuticals program.
Signed a Development and Option Agreement with AstraZeneca to progress a DEP® version of one of AstraZeneca’s major existing
oncology medicines.
Progressed DEP® partnered programs including support for the preparation of an IND for AZD0466, prior to commencing clinical trials in
CY2019.
First partnered DEP® patent granted for Bcl2/xL DEP® candidates including AZD0466 in the US.
Progressed with partnered Targeted DEP® programs and pursued other partnered-DEP® programs.
Attained a very robust financial position and maintained Starpharma’s stable, highly dedicated and skilled work-force.
In the assessment of STI KPIs, the Board took account of the significant achievements obtained over the performance period and the effort and
dedication required to accomplish these milestones. These achievements include the successful launch of VivaGel® BV in Europe and
Australia and securing a further international licence, for the US, in addition to several DEP® milestones, across both the internal and external
portfolio including positive interim trial results for internal products, new candidates, a new commercial deal with AstraZeneca and granting of
valuable new DEP® patents.
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LTI Performance Assessment
Performance period
1 July 2016 to 30 June 2019
Performance category
Metric
Weighting
Satisfied
VivaGel® BV, Drug Delivery &
Agrochemicals
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.
40%
Partially Met
DEP® Platform
Relative TSR
Development of new product candidates for the DEP®
platform technology and/or the licensing of such
candidates.
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 not disclosed were also taken into account):
VivaGel® BV, Drug Delivery & Agrochemicals:
-
Signed a second commercial agreement with AstraZeneca to progress a DEP® version of one of AstraZeneca’s major existing
oncology medicines.
-
-
Achieved launch of VivaGel® BV in Australia and Europe.
Successfully licensed VivaGel® BV to ITF Pharma, Inc. for the US market for US$101M in milestones plus ascending double-digit
royalties.
-
-
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).
-
Sold the agrochemicals business to Agrium Inc for $35 million.
-
-
-
-
-
-
-
Onset of recurrent revenue from Aspen, Mundipharma and Okamoto.
Achieved TGA approval for VivaGel® BV in Australian and added a second BV indication to European approval, for the
prevention of recurrent BV.
VivaGel® condom was approved and launched in Japan and Canada.
VivaGel® BV NDA prepared, submitted, subsequently accepted for filing.
Achieved Fast Track Status and Qualified Infectious Disease Product designation granted by the FDA.
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.
Supported the IND preparation and final preclinical work completed for AZD0466 ahead of IND filing (first IND to be filed for a
DEP® product) and trial expected to start in CY2019.
-
-
-
-
-
-
-
-
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. This
facility has already provided significant savings for internal programs and revenues from manufacture of DEP® candidates for
partner programs.
DEP® Platform:
DEP® docetaxel phase 1 trial was successfully completed in FY18, with a phase 2 trial commencing immediately after.
Two further DEP® drugs have been developed: DEP® cabazitaxel commenced phase 1 / 2 trial in FY18 and DEP® irinotecan
commenced a phase 1 / 2 trial in August 2019.
Partnering discussions underway for several internal DEP® candidates with licences to be pursued at the most appropriate time to
maximise commercial value.
Other preclinical DEP® candidates have been developed and are currently preclinical development.
Development of DEP® radiopharmaceutical and targeted DEP® candidates currently undergoing preclinical testing.
Relative 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 2019. The company’s annualised TSR for this period was 22.1% compared to the S&P/ASX300 Index annualised TSR of
8.1%, well above the additional 10% per annum required.
The relative TSR is calculated independently by a professional services firm and more information regarding the relative TSR
hurdle is provided on page 27.
Starpharma Holdings Limited Annual Report 2019
33
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 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.
2019
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
R A Hazleton
Z Peach
P R Turvey
Executive director
J K Fairley
118,721
74,500
68,950
68,950
–
–
–
–
–
–
–
–
11,279
–
6,550
6,550
–
–
–
–
–
–
–
–
491,564
202,488
35,081
20,531
13,453
980,260
1,743,377
Other Key Management Personnel (group)
N J Baade
A Eglezos
D J Owen
J R Paull
Totals
214,738
76,000
36,700
244,475
80,000
7,529
232,678
70,000
22,073
218,479
80,000
42,633
20,531
20,531
20,531
20,531
2,079
2,566
2,277
7,591
201,322
551,370
204,064
559,165
203,047
550,606
230,888
600,122
1,733,055
508,488
144,016
127,034
27,966
1,819,581
4,360,140
† 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 FY19 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 2018 to 30 June 2019. The actual cash
payment of the bonuses will occur in the following financial year.
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#
$
Non-executive directors
R B Thomas
R A Hazleton
Z Peach
P R Turvey
Executive director
J K Fairley
118,721
72,500
67,123
67,123
–
–
–
–
–
–
–
–
11,279
–
6,377
6,377
–
–
–
–
–
–
–
–
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
Starpharma Holdings Limited Annual Report 2019
34
34 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Total
$
130,000
74,500
75,500
75,500
Total
$
130,000
72,500
73,500
73,500
Directors’ Report Remuneration Report
† 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.
The relative proportions of remuneration for 2019 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%
14%
14%
13%
13%
12%
7%
7%
7%
8%
25%
24%
20%
21%
21%
20%
21%
40%
44%
30%
29%
29%
30%
31%
1 Where applicable, the expenses include negative amounts for expenses reversed during the year due to a failure to satisfy the vesting
conditions.
As depicted in the table above, the actual remuneration mix for the CEO and other KMP executives for FY19 were within 4% of all target ranges.
Non-statutory Executive Remuneration
The non-statutory executive remuneration is the remuneration earned by KMP executives in FY19 and is set out below with calculations of
equity value both at the vesting date and based on the face value at the beginning of the relevant performance period. Starpharma discloses
non-statutory remuneration voluntarily because it includes the face value of equity that vested in FY19. For LTI equity, the reported value
reflects the KMP executive performance over three years, the residual four year transitional rights, and the significant impact of an increase in
the share price of 210% - 350% over the 3 to 4 year period.
The table differs from the remuneration details prepared above in this section 6 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.
2019
Name
Fixed
remuneration
(1)
STI cash
paid in FY19
(2)
STI equity
vested in
FY19 based
on face value
(3)
LTI equity
vested in
FY19 based
on face value
(3)
STI equity
vested in
FY19 based
on share
price at
vesting date
(4)
LTI equity
vested in
FY19 based
on share
price at
vesting date
(4)
Total non-
statutory
remuneration
earned based
on face value
of equity (3)
Total non-
statutory
remuneration
earned
based on
share price
at vesting
date (4)
Total
remuneration
per
Accounting
Standards
(5)
($)
($)
($)
($)
($)
($)
($)
($)
($)
J K Fairley
547,176
206,800
140,800
270,200
571,751
1,342,197
1,466,527
2,366,373
1,743,377
N J Baade
A Eglezos
D J Owen
J R Paull
271,969
272,535
275,282
281,643
68,000
72,000
68,000
74,000
39,887
41,486
39,887
46,425
76,545
79,613
76,545
89,091
170,361
407,761
550,217
824,275
551,370
170,680
408,509
556,701
832,658
559,165
171,956
411,506
555,125
831,333
550,606
211,325
505,492
613,393
950,226
600,122
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 FY19 reflects the FY18 STI paid in October 2018 following the release of the
FY18 results.
3 Value of equity rights that vested during the year, based on the face value of the performance rights based on the 3 month VWAP prior to the
start of the relevant performance period (1 July). Vested rights will remain as rights in subsequent periods until exercised. The STI equity was
granted in FY18 and the LTI equity was granted in FY15 and/or FY16.
4 Value of equity rights that vested during the year, based on the opening price on the date of vesting. Other than the 4 year rights which
automatically converted into shares following vesting, other vested rights will remain as rights in subsequent periods until exercised. The STI
equity was granted in FY18 and the LTI equity was granted in FY15 and/or FY16.
5 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.
Starpharma Holdings Limited Annual Report 2019
35
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 35
Directors’ Report Remuneration Report
6. Details of remuneration (continued)
Equity awards and share price
The total non-statutory remuneration based on the vesting date share price is higher than the total remuneration per Accounting Standards and
the non-statutory remuneration based on face value. The higher amount is primarily driven by the value attached to the equity awards that
vested in FY19. This reflects the strong share price performance over the relevant periods of up to a 2.5x fold increase in share price compared
with the face value. The LTI rights (3 and/or 4 years) are predominately driving the higher reported value at the vesting date. Likewise, if the
share price were to have significantly decreased, the value of these equity awards would have reduced accordingly. The equity award
component of each executive’s remuneration is a key instrument in the Board’s policy of aligning their remuneration with share price
performance. Furthermore, as the 2 and 3 year rights did not automatically convert to shares, and no executives exercised rights, these values
have not yet been realised despite being reported in non-statutory remuneration.
SPL.AX
1.60
1.40
1.20
1.00
0.80
0.60
0.40
Jul 14
Jul 15
Jul 16
Jul 17
Jul 18
Jul 19
Face value of equity awards granted
(based on 3 month VWAP to 30 June)
Equity awards vested (based on share price on
vesting date)
Starpharma Holdings Limited Annual Report 2019
36
36 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Directors’ Report Remuneration Report
Details of remuneration: cash bonuses, shares, and performance rights
For each cash bonus and grant of equity included in the tables on pages 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 83.5% of her maximum cash
bonus entitlement of $242,500 in FY19, with the balance of 16.5% 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
20191,2
$
939,792
Name
J K Fairley
N J Baade
233,871
A Eglezos
233,871
D J Owen
233,871
J R Paull
255,683
Year
granted
Vested
Forfeited
Performance rights
Maximum
fair value yet to
vest
Financial
years in which
rights may
vest
2019
2019
2018
2018
2017
2016
2019
2019
2018
2018
2017
2016
2015
2019
2019
2018
2018
2017
2016
2015
2019
2019
2018
2018
2017
2016
2015
2019
2019
2018
2018
2017
2016
2015
%
-
-
-
88%
-
94%
-
-
-
87%
-
90%
100%
-
-
-
91%
-
90%
100%
-
-
-
87%
-
91%
100%
-
-
-
93%
-
94%
100%
%
-
-
-
12%
-
6%
-
-
-
13%
-
10%
0%
-
-
-
9%
-
10%
0%
-
-
-
13%
-
9%
0%
-
-
-
7%
-
6%
0%
30/06/2022
30/06/2020
30/06/2021
30/06/2019
30/06/2020
30/06/2019
30/06/2022
30/06/2020
30/06/2021
30/06/2019
30/06/2020
30/06/2019
30/06/2019
30/06/2022
30/06/2020
30/06/2021
30/06/2019
30/06/2020
30/06/2019
30/06/2019
30/06/2022
30/06/2020
30/06/2021
30/06/2019
30/06/2020
30/06/2019
30/06/2019
30/06/2022
30/06/2020
30/06/2021
30/06/2019
30/06/2020
30/06/2019
30/06/2019
$
512,934
99,548
435,576
-
46,509
-
128,238
24,345
72,729
-
11,970
-
-
128,238
24,345
72,729
-
11,970
-
-
128,238
24,345
72,729
-
11,970
-
-
140,198
26,616
79,547
-
13,059
-
-
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.
Starpharma Holdings Limited Annual Report 2019
37
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 37
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 2019 of $544,000, to be reviewed annually by the Remuneration and
Nomination Committee.
A cash bonus up to $242,500 for the year to 30 June 2019 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
Starpharma Holdings Limited Annual Report 2019
38
38 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
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.
2019
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
775,000
3,875,434
208,466
48,975
149,821
Other key management personnel of the group
N J Baade
A Eglezos
D J Owen
J R Paull
525,291
260,003
562,482
270,106
* Other changes relate to market transactions
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75,000
75,000
75,000
90,000
50,000
30,000
–
–
30,000
-
(4,000)
-
(69,000)
825,000
3,905,434
208,466
48,975
179,821
600,291
331,003
637,482
291,106
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 FY19 or the prior year.
2019
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 Fairley
3,244,672
674,901
-
(84,486)
3,835,087
1,387,329
2,447,758
Other key management personnel of the group
N J Baade
A Eglezos
D J Owen
904,563
903,023
906,313
193,000
193,000
193,000
(75,000)
(75,000)
(75,000)
J R Paull
# Other changes during the year relate to the forfeiture of rights.
1,026,500
211,000
(90,000)
(29,071)
(26,365)
(26,738)
(20,022)
993,492
994,658
997,575
1,127,478
324,492
325,658
328,575
396,478
669,000
669,000
669,000
731,000
The market value at vesting date of performance rights that vested into shares during 2019 was $3,667,459 (2018: $1,572,212). No other
shares were issued on the vesting of performance rights provided as remuneration to any of the directors or the KMP of the group in the current
year.
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 2019 there were 13,183,915 performance rights on issue, of which 7,948,290 were held by KMP. These rights represent 3.5%
and 2.1%, respectively, of shares on issue (based on the 371,694,437 shares at 30 June 2019).
Starpharma Holdings Limited Annual Report 2019
39
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 39
Directors’ Report Remuneration Report
8. Additional disclosures relating to employee equity schemes (continued)
The terms and conditions of the grant of performance rights to the directors or the key management personnel of the group in the current year or
which impact future years are as follows:
Grant date
Vesting date
Performance measure
Number
of rights
granted
Fair value per right
at grant date % vested
30 January 2015
30 September 2018
331,500
Achievement of KPIs
30 January 2015
30 September 2018
58,500
TSR
11 November 2015
30 September 2018
714,000
Achievement of KPIs
11 November 2015
30 September 2018
126,000
TSR
19 November 2015
30 September 2018
537,516
Achievement of KPIs
19 November 2015
30 September 2018
356,335
TSR
13 October 2016
30 September 2019
765,000
Achievement of KPIs
13 October 2016
30 September 2019
135,000
TSR
29 November 2016
30 September 2019
613,885
Achievement of KPIs
29 November 2016
30 September 2019
263,093
TSR
10 August 2017
30 June 2019
262,000
Achievement of KPIs
10 August 2017
30 September 2020
890,800
Achievement of KPIs
10 August 2017
30 September 2020
157,200
TSR
29 November 2017
30 June 2019
224,121
Achievement of KPIs
29 November 2017
30 September 2020
535,816
Achievement of KPIs
29 November 2017
30 September 2020
360,063
TSR
16 August 2018
30 June 2020
158,000
Achievement of KPIs
16 August 2018
30 September 2021
537,200
Achievement of KPIs
16 August 2018
30 September 2021
94,800
TSR
29 November 2018
30 June 2020
134,980
Achievement of KPIs
29 November 2018
30 September 2021
377,945
Achievement of KPIs
29 November 2018
30 September 2021
161,976
TSR
$0.46
$0.27
$0.72
$0.50
$0.76
$0.54
$0.68
$0.43
$0.68
$0.41
$0.77
$0.77
$0.54
$1.29
$1.29
$1.23
$1.26
$1.26
$0.85
$1.48
$1.48
$1.13
81
81
89
100
89
100
Nil
Nil
Nil
Nil
90
Nil
Nil
88
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Nil
Information of the performance measures:
Achievement of KPIs:
The achievement of certain key business performance indicators linked to matters which the Board believes
are key drivers of shareholder value.
Relative TSR (TSR):
As set out on page 27 of the remuneration report.
- end of remuneration report -
Starpharma Holdings Limited Annual Report 2019
40
40 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
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
11 Nov 2015
30 Sep 2018
2,076,800
1,342,559
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 Jun 2017
519,200
299,325
Audit & non-audit services
19 Nov 2015
30 Sep 2018
893,851
836,260
19 Nov 2015
30 Jun 2017
219,395
181,001
13 Oct 2016
30 Jun 2018
594,450
351,084
13 Oct 2016
30 Sep 2019
2,377,800
1,971,400
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
591,750
10 Aug 2017
30 Sep 2020
2,776,480
2,523,680
29 Nov 2017
30 Jun 2019
224,121
197,226
29 Nov 2017
30 Sep 2020
895,879
895,879
16 Aug 2018
30 Jun 2020
203,500
203,500
16 Aug 2018
30 Sep 2021
814,000
814,000
2 Nov 2018
30 Jun 2020
259,147
233,227
2 Nov 2018
30 Sep 2021
1,036,587
932,907
29 Nov 2018
30 Jun 2020
134,980
134,980
29 Nov 2018
30 Sep 2021
539,921
539,921
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
2019
$
2018
$
137,537
118,616
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 42.
Performance rights and the resultant shares are granted for nil
consideration.
Rounding of amounts
Shares issued on the vesting or exercise of rights
The following ordinary shares of Starpharma Holdings Limited
were issued during the year to the date of this report on the vesting
or exercise (as applicable) of performance rights granted under the
Employee Performance Rights Plan. The shares are issued for nil
consideration.
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.
Date rights granted
Issue price of shares
(Exercise price of
right)
Auditor
Number of shares
issued
PricewaterhouseCoopers continues in office in accordance with
section 327 of the Corporations Act 2001.
30 Jan 2015
11 Nov 2015
13 Oct 2016
10 Aug 2017
$ -
$ -
$ -
$ -
706,356
332,111
98,559
4,200
This report is made in accordance with a resolution of the
Directors.
Rob Thomas AO
Chairman
Melbourne, 28 August 2019
Starpharma Holdings Limited Annual Report 2019
41
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 41
Auditor’s Independence Declaration
Auditor’s Independence Declaration
As lead auditor for the audit of Starpharma Holdings Limited for the year ended 30 June 2019, 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 entity it controlled during the
period.
Jon Roberts
Partner
PricewaterhouseCoopers
Melbourne
28 August 2019
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.
Starpharma Holdings Limited Annual Report 2019
42
42 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
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 2019. The ASX has also
published a 4th edition of the Corporate Governance Principles and
Recommendations (“4th Edition CGC Recommendations”) for
reporting on in the FY21 Annual Report. Notwithstanding this,
Starpharma already complies with a number of these 4th Edition
CGC Recommendations, as detailed below. 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.
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 eight 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 physical location in the U.S.,
whereby there is no suggestion that he is involved in the day-to-
day operations or activities of the senior management team 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 FY19.
1.3 Written agreements with Directors and Senior Executives
New directors receive a letter of appointment, which outlines the
company’s expectations of the director in relation to their
participation, time commitments and compliance with policies and
regulatory requirements.
Senior executives and all employees are required to sign
employment agreements which set out the key terms of their
employment. All roles have formal position descriptions.
1.4 Responsibilities of the Company Secretary
The Company Secretary supports the effective functioning of the
Board and its committees. The Company Secretary is accountable
directly to the Board, through the Chair, on all matters related to
the proper functioning of the Board. The specific responsibilities of
the Company Secretary are detailed in the Board charter, which is
available at www.starpharma.com/corporate_governance
1.5 Diversity objectives and achievement
The company is committed to workplace diversity, and the Board
values the level of diversity already present within the organisation,
believing that continuing to promote diversity is in the best
interests of the company, its employees and its shareholders.
The Board last revised its Diversity Policy in April 2019, 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
Starpharma Holdings Limited Annual Report 2019
43
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 43
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 2019 financial year, and
progress against these objectives is set out below:
Objective
Measurement
FY19 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.
48% 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 FY19, 50 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 FY19. 60% 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).
18% of employees work under flexible working
arrangements.
Granting a majority of requests for flexible
work arrangements for family
responsibilities.
Mutually satisfactory flexible work arrangements were
reviewed and agreed between the requesting
employee and the company in 100% of cases during
FY19.
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 FY19.
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 2019.
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 43% of all employees born outside Australia in 15
different countries.
% Female
2019
2018
Whole organisation (staff and
Board)
50% (24/48)
54% (26/48)
Leadership/management roles 60% (12/20)
50% (10/20)
Senior executive (CEO &
direct reports)
43% (3/7)
43% (3/7)
Board
40% (2/5)
40% (2/5)
Starpharma Holdings Limited Annual Report 2019
44
44 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
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 FY19.
1.7 CEO and senior executive performance
Performance assessments for senior executives take place
annually and 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 April 2019. Committee charters
are available at www.starpharma.com/corporate_governance
Both committees report regularly to the Board and minutes of
committee meetings are provided to the Board.
2.1.1 Remuneration and Nomination Committee
The Remuneration and Nomination Committee is composed of
three independent non-executive directors. At the date of this
report the committee consisted of the following:
Ms Z Peach (Chairman)
Mr R Thomas
Mr R Hazleton
Details of these directors’ qualifications and attendance at
committee meetings are set out in the directors’ report on pages
13 to 18.
The charter of the Remuneration and Nomination Committee deals
with items, to the extent delegated by the Board, related to
reviewing and making recommendations to the Board in respect of
the following:
-
-
-
-
-
-
-
-
Board and director candidate identification, appointments,
elections, composition, independence, tenure and
succession;
Remuneration and incentive policies and practices generally;
Remuneration packages and other terms of employment for
executive directors, other senior executives and non-
executive directors;
The succession of the CEO and other senior executives;
Diversity related items;
Board skills matrix;
Background checks for director candidates; and
Provision and oversight of induction and training and
development opportunities for directors.
The Remuneration and Nomination Committee charter is available
at www.starpharma.com/corporate_governance
2.1.2 Audit and Risk Committee
The 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.
Starpharma Holdings Limited Annual Report 2019
45
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 45
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
FY19 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
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
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
– 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.
Starpharma’s CEO also sits on the board of listed small-cap
investment company Mirrabooka as a non-executive director. This
external post exposes both Dr Fairley and Starpharma to insights
from institutional investors and further extends the company’s
network and provides her with a different vantage point. Dr Fairley
remains fully committed to her CEO role at Starpharma and the
Board has carefully considered the time commitment to ensure her
leadership of Starpharma is not impacted.
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 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 April 2019. 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
Starpharma Holdings Limited Annual Report 2019
46
46 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Corporate Governance Statement
Principle 4: Safeguard integrity in financial reporting
4.1 Audit and Risk Committee
The company has established an Audit and Risk Committee
consisting of three independent non-executive directors. Details
regarding composition, meetings and charter are set out in section
2.1 and 2.1.2 of this Corporate Governance Statement.
4.2 CEO and CFO Declarations for financial statements
Before the 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 2019 half year financial statements and
the 2019 full year financial statements which are included in this
annual report.
Principle 5: Make timely and balanced disclosures
5.1. Continuous disclosure
The company has developed a continuous disclosure and
shareholder communication policy to ensure compliance with the
ASX Listing Rules and to facilitate effective communication with
shareholders.
The Board has appointed the Company Secretary as the person
responsible for disclosure of information to the ASX. The CEO and
Company Secretary are responsible for ensuring that all
announcements made by Starpharma to the ASX are factual, do
not omit material information, and are expressed in a clear and
objective manner.
The policy also sets out the requirements for ensuring compliance
with the continuous disclosure requirements of the ASX Listing
Rules and overseeing and co-ordinating disclosure to the ASX,
analysts, brokers, shareholders, the media and the public.
Principle 6: Respect the rights of shareholders
6.1 Information on website
The company provides ready access to its shareholders and
members of the public to information about the company and its
governance on its website at www.starpharma.com
6.2 Communication with investors
The company recognises that shareholders may not be aware of
all company developments at all times, notwithstanding the release
of information to the ASX in accordance with the company’s
continuous disclosure policy and the law. In addition to ensuring
that all ASX announcements and company reports are available on
the company’s website as soon as possible following confirmation
by the ASX of receipt of the announcement, the company will send
to each shareholder who has so requested, either by post or email
to their nominated address, annual reports and company
newsletters.
ASX announcements are also posted on the OTCQX website
(www.otcqx.com) in order to provide timely disclosure to US
investors trading in the company’s Level One ADRs
(OTCQX:SPHRY). The company’s website also has an option for
shareholders to register their email address for direct email
updates which the company may send for material company
matters 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.
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, resulting in a new audit engagement
partner for FY20. An analysis of fees paid to the external auditors
is provided in note 19 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.
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 Board receives copies of all ASX announcements promptly
after they have been made.
A copy of the policy is available on the company’s website at
www.starpharma.com/corporate_governance
The AGM provides an opportunity for the Board to communicate
with shareholders through the Chairman’s address and the CEO’s
presentation.
Shareholders are given the opportunity, through the Chairman, to
ask general questions of the Board. Shareholders who are unable
to attend the meeting in person may submit written questions
together with their proxy form, to be put to the meeting by the
Chairman. The external auditor attends each AGM and is available
to answer questions shareholders may have in relation to the
Auditor’s Report and the conduct of the audit.
All resolutions at AGMs are voted on by poll rather than by show of
hands.
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.
Starpharma Holdings Limited Annual Report 2019
47
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 47
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 40.
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 38).
8.3 Prohibition on hedging of unvested/restricted entitlements
Employees are prohibited from entering into transactions in
products which limit the economic risk of any equity granted under
an employee incentive scheme which are unvested or subject to a
disposal restriction. Details in relation to this policy are contained
in the securities dealing policy which is available at
www.starpharma.com/corporate_governance
Starpharma Holdings Limited Annual Report 2019
48
48 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Annual Financial Report for the year ended 30 June 2019
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
50
51
52
53
54
55
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 28 August 2019. The directors have the power to amend and reissue the
financial report.
Through the use of the internet, Starpharma ensures that corporate reporting is timely and complete. All recent press releases, financial reports
and other information are available on its website: www.starpharma.com
Starpharma Holdings Limited Annual Report 2019
49
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 49
Consolidated Income Statement for the year ended 30 June 2019
30 June 2019
30 June 2018
Continuing operations
Revenue
Cost of goods sold
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 attributable to equity holders
of the company
Loss per share for loss from continuing operations attributable
to the ordinary equity holders of the company
Basic loss per share
Diluted loss per share
Notes
5
5
6
6
6
7
25
25
$'000
2,708
(251)
12
(10,454)
(3,774)
(2,495)
(14,254)
-
(14,254)
$
($0.04)
($0.04)
The above consolidated income statement should be read in conjunction with the accompanying notes.
$'000
4,884
-
73
(10,576)
(2,425)
(2,241)
(10,285)
-
(10,285)
$
($0.03)
($0.03)
Starpharma Holdings Limited Annual Report 2019
50
50 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Consolidated Statement of Comprehensive Income for the year ended 30 June 2019
Loss for the period
Other comprehensive income (loss)
Items that may be reclassified to profit or loss
Other comprehensive income (loss) for the period
Total comprehensive income (loss) for the period
Notes
30 June 2019
30 June 2018
$'000
(14,254)
$'000
(10,285)
-
-
-
-
(14,254)
(10,285)
The above statement of consolidated comprehensive income should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2019
51
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 51
Consolidated Balance Sheet as at 30 June 2019
30 June 2019
30 June 2018
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
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
14
5
13
14
15
16
17
$'000
41,251
6,159
399
47,809
1,050
1,050
48,859
4,917
26
1,056
427
6,426
-
38
38
6,464
42,395
$'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
193,621
16,775
(168,001)
42,395
193,583
13,440
(153,746)
53,277
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2019
52
52 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Consolidated Statement of Changes in Equity for the year ended 30 June 2019
Contributed
capital
Reserves
Accumulated
losses
Notes
$'000
$'000
$'000
Total
equity
$'000
Balance at 1 July 2017
Loss for the year
Other comprehensive income (loss)
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
Loss for the year
Other comprehensive income (loss)
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 2019
15
16
15
16
193,549
10,896
(143,461)
60,984
-
-
-
34
-
34
-
-
-
-
2,544
2,544
(10,285)
(10,285)
-
-
(10,285)
(10,285)
-
-
-
34
2,544
2,578
193,583
13,440
(153,746)
53,277
-
-
-
38
-
38
-
-
-
-
3,334
3,334
(14,254)
(14,254)
-
-
(14,254)
(14,254)
-
-
-
38
3,334
3,372
193,621
16,775
(168,001)
42,395
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2019
53
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 53
Consolidated Statement of Cash Flows for the year ended 30 June 2019
30 June 2019
30 June 2018
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
24
Cash Flow from Investing Activities
Payments for property, plant and equipment
Proceeds from sale of available-for-sale financial assets
Net cash outflows from investing activities
Cash Flow from Financing Activities
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
2,807
4,019
(18,244)
1,076
(2)
(10,344)
(314)
8
(306)
(26)
(26)
(10,676)
51,319
608
41,251
2,788
3,747
(17,799)
1,067
(4)
(10,201)
(359)
-
(359)
(26)
(26)
(10,586)
61,188
717
51,319
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
Starpharma Holdings Limited Annual Report 2019
54
54 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
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.
Current Assets – Inventories
11.
Non-Current Assets – Property, Plant and Equipment
12.
Current Liabilities – Trade and Other Payables
13.
Current and Non-Current Liabilities – Finance Lease Liabilities
14.
Current and Non-Current Liabilities – Provision for Employee Benefits
15.
Contributed Equity
16.
Reserves
17.
Accumulated Losses
18.
Related Party Transactions
19.
Remuneration of Auditors
20.
Events Occurring After the Balance Sheet Date
21.
Commitments
22.
Contingencies
23.
Subsidiaries
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
Starpharma Holdings Limited Annual Report 2019
56
61
62
62
62
63
63
65
66
66
67
68
68
68
69
70
70
70
71
71
71
72
72
73
73
74
77
55
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 55
Notes to the Consolidated Financial Statements 30 June 2019
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
2018:
AASB 9 Financial Instruments
AASB 15 Revenue from Contracts with Customers
AASB 2016-5 Amendments to Australian Accounting
Standards - Classification and Measurement of Share-based
Payment Transactions
AASB 2017-1 Amendments to Australian Accounting
Standards - Transfers to Investment Property, Annual
Improvements 2014-2016 Cycle and Other Amendments
Interpretation 22 Foreign Currency Transactions and
Advance Consideration.
AASB 15 Revenue from Contracts with Customers
AASB15 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
group has adopted AASB 15 effective from 1 July 2018 using the
modified retrospective approach.
Management assessed the impact of AASB 15 on the
measurement and recognition of revenue from existing contractual
arrangements. Based on the assessment, the adoption of AASB
15 has had no material impact on the group’s profit or loss, nor has
there been any adjustments to opening retained earnings as at 1
July 2018.
AASB 9 Financial Instruments
AASB 9 addresses the classification, measurement and
derecognition of financial assets and financial liabilities. The group
has adopted AASB 9 effective from 1 July 2018. There has been
no 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. AASB 9 introduces an expected credit loss model for
impairment of financial assets such as trade receivables. The
group has reviewed the requirements of the ‘expected credit loss’
model and did not identify any required provision.
The group had to change its accounting policies following the
adoption of AASB 15 but has not had to make retrospective
adjustments. Most of the other amendments listed above did not
have any impact on the amounts recognised in prior periods and
are not expected to significantly affect the current or 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 2018.
(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 2019, the consolidated entity has
incurred losses from continuing operations of $14,254,000 (2018:
$10,285,000) and experienced net cash outflows of $10,344,000
from operations (2018: $10,201,000), as disclosed in the income
statement and statement of cash flows, respectively. The company
is in the development and early commercialisation 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 2020. 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 2019 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.
Starpharma Holdings Limited Annual Report 2019
56
56 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
(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.
(e) Revenue Recognition
The accounting policies for the group’s revenue from contracts
with customers are explained in note 5.
(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.
(i) Investment allowances and similar tax incentives
Companies within the group may be entitled to claim special tax
deductions for investments in qualifying assets or in relation to
qualifying expenditure (eg. investment allowances). The group
accounts for such allowances as tax credits, which means that the
allowance reduces income tax payable and current tax expense. A
deferred tax asset is recognised for unclaimed tax credits that are
carried forward as deferred tax assets.
(h) Leases
Leases of property, plant and equipment where the group has
substantially all the risks and rewards of ownership are classified
as finance leases (note 21). 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 21). 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.
(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.
Starpharma Holdings Limited Annual Report 2019
57
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 57
Notes to the Consolidated Financial Statements 30 June 2019
1. Significant Accounting Policies (continued)
(l) Inventories
Raw materials, work in progress and finished goods are stated at
the lower of cost and net realisable value. Cost includes
expenditure incurred in acquiring the inventories and bringing them
to their existing condition and location. Costs are assigned to
individual items of inventory on the basis of weighted average
costs. Costs of purchased inventory are determined after
deducting rebates and discounts. Net realisable value is the
estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary
to make the sale.
(m) 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.
(n) Property, Plant and Equipment and Leasehold
improvements
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.
The cost of improvements to or on leasehold properties is
amortised over the remaining notice period under the premises
lease (being 3.5 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 expensed as 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. As at the reporting date no patents or licenses
are recognised as intangible assets.
(ii) Research and development
Research and development expenditure is expensed as incurred
except that costs incurred on development projects, relating to the
design and testing of new or improved products, are recognised as
intangible assets when it is probable that the project will, after
considering its commercial and technical feasibility, be completed
and generate future economic benefits and its costs can be
measured reliably. To date no research and development costs
have been recognised as intangible assets.
(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.
(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 the 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,
annual and long-service 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 and long service leave is recognised in the provision for
employee benefits. All other short-term employee benefit
obligations are presented as payables.
Starpharma Holdings Limited Annual Report 2019
58
58 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
(t) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or performance rights are
shown in equity as a deduction, net of tax, from the proceeds.
Incremental costs directly attributable to the issue of new shares or
performance rights, 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.
(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.
(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
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
performance rights that are expected to become exercisable. At
each balance sheet date, the entity revises its estimate of the
number of performance 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 at the earlier of
three years or cessation of employment. 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.
Starpharma Holdings Limited Annual Report 2019
59
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 59
Notes to the Consolidated Financial Statements 30 June 2019
(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.
1. Significant Accounting Policies (continued)
(y) New accounting standards and interpretations
Certain new accounting standards and interpretations have been
published that are not mandatory for the 30 June 2019 reporting
period. The group’s assessment of the impact of these new
standards and interpretations is set out below.
(i) 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 group has reviewed all of the group’s leasing arrangements in
light of the new lease accounting rules in AASB 16. The standard
will affect primarily the accounting for the group’s operating leases.
As at the reporting date, the group has non-cancellable operating
lease commitments of $2,315,000, see note 21. Of these
commitments, approximately $16,000 relates to low value leases
which will be recognised on a straight-line basis as an expense in
profit or loss.
For the remaining lease commitments, the group expects to
recognise right-of-use assets and lease liabilities of approximately
$2,160,000 on 1 July 2019. Overall, net assets will be
approximately the same.
The group expects that reported expenses will increase by
approximately $50,000 for the 2020 financial year, due to the
interest component calculated on the lease liability under the new
standard.
Operating cash outflows will decrease, and financing cash outflows
will increase by approximately $560,000 as repayment of the
principal portion of the lease liabilities will be classified as cash
flows from financing activities.
The group will apply the standard from its mandatory adoption
date, being the annual report period commencing 1 July 2019. The
group intends to apply the simplified transition (cumulative effect)
approach and will not restate comparative amounts for the year
prior to first adoption. All right-of-use assets will be measured at
the amount of the lease liability on adoption.
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.
Starpharma Holdings Limited Annual Report 2019
60
60 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
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 2019 for US$ of $0.7013
and for £ of $0.5535 was as follows:
Cash and cash equivalents
Trade and other receivables
Trade and other payables
30 June 2019
US$
$’000
30 June 2018
US$
$’000
30 June 2019
£
£’000
30 June 2018
£
£’000
5,405
671
542
6,279
1,500
1,063
2,438
-
1,266
3,314
-
334
Group Sensitivity
The group is mainly exposed to US dollars (US$) 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 or Great British pounds. A
positive number indicates a favourable movement; that is an increase in profit or reduction in the loss.
30 June 2019
$’000
30 June 2018
$’000
30 June 2019
£’000
30 June 2018
£’000
Impact on profit / (loss) on a movement of
Australian dollar strengthens (increases) against
the foreign currency by 10%
US$
(717)
US$
(826)
Australian dollar weakens (decreases) against
the foreign currency by 10%
877
1,010
£
(192)
235
£
(481)
588
(ii) Cash Flow Interest Rate Risk
The group holds interest bearing assets and therefore the income and operating cash flows are exposed to market interest rates.
At the end of the reporting period, the group had the following value of term and at call deposits. Refer to note 8 for additional information.
Term Deposits and deposits at call
Group Sensitivity
30 June 2019
$’000
38,306
30 June 2018
$’000
47,966
At 30 June 2019, 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 $193,000 higher or lower (2018 - change of 50 bps: $241,000 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, product supply 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 licensing, product supply and royalty 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 carrying value less impairment provision of trade
receivables and payables are assumed to approximate their fair
values due to their short-term nature. The fair value of financial
liabilities for disclosure purposes is estimated by discounting the
future contractual cash flows at the current market interest rate
that is available to the group for similar financial instruments.
Starpharma Holdings Limited Annual Report 2019
61
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 61
Notes to the Consolidated Financial Statements 30 June 2019
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.
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 2019 the group has recorded a contra research and development expense of $5,071,000 (2018: $4,056,000). The total
R&D Tax Incentive receivable recorded at 30 June 2019 is $4,898,000 (2018: $3,847,000)
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 2019
$’000
30 June 2018
$’000
Revenue from contracts with customers
Interest revenue
Total revenue from continuing operations
Other income
Total revenue and other income from continuing operations
1,651
1,057
2,708
12
2,720
3,812
1,072
4,884
73
4,957
Disaggregation of revenue from contracts with customers
Revenue from contracts with customers includes licensing revenue, royalties and products sales, and research revenue from partners.
Total revenue from contracts with customers for the year was $1,651,000 (2018: $3,812,126) and includes a $715,000 (US$500,000) milestone
payment from Mundipharma for the launch of VivaGel® BV in Europe, as well as $364,000 in prepaid minimum royalties associated with the
VivaGel® condom in Japan. The revenue in the prior year includes signature payments of $2,955,000 for the Mundipharma VivaGel® BV
licensing agreements for Europe, Asia, South America, Middle East and Africa.
Assets and liabilities related to contracts with customers
The group has recognised the following current assets and current liabilities related to contracts with customers:
Trade and other receivables (Note 9)
Contract Liabilities - deferred income
30 June 2019
$’000
30 June 2018
$’000
1,009
(427)
2,065
(407)
Trade and other receivables at year-end relate to product supply and milestones, such as the VivaGel® BV launch milestone in Europe. The
decrease from the prior year reflects the receipt of Mundipharma VivaGel® BV signature payments during the year.
Contract Liabilities (deferred income) relate to potential liabilities for product discounts, that are dependent on product registrations in certain
countries.
Starpharma Holdings Limited Annual Report 2019
62
62 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
Performance obligations
Revenue is recognised when the company satisfies a performance obligation by transferring control of the promised good or service to a
customer at an amount that reflects the consideration to which the company expects to be entitled in exchange for the goods or services.
Information about the company’s performance obligations are summarised below:
(i) Licensing revenue and royalties
Typically, a licence granted by the company provides the customer with the right to use, but not own, the company’s intellectual property as it
exists at the point in time the licence is granted. The company may receive signature payments, milestone payments for specific development
(such as clinical or regulatory) or commercial based outcomes, and/or sales-based royalties as consideration for the licence. The performance
obligation(s) for a licence are usually satisfied upon, or soon after, the granting of the licence to the partner. Signature payments are normally
fixed, where-as development and commercial milestones are variable consideration as they are dependent on the achievement of certain events
in the future. The company’s estimate of variable consideration will only be recognised to the extent it is highly probable that a significant
revenue reversal will not occur in future periods.
Royalties based on sales of product are recognised when the customer's sales of product occur. Where consideration includes guaranteed
minimum royalties, they are recognised when the licence is granted or when they are no longer subject to constraint.
Milestones payments are generally due within 30 to 60 days from timing of the milestone event. Royalties are generally due 30 to 60 days after
the end of the defined royalty reporting period.
(ii) Product sales
The performance obligation is satisfied upon delivery of the goods and payment is generally due within 30 to 60 days from delivery. Some
contracts provide customers with a right of return for product non-conformance which may give rise to variable consideration subject to
constraint.
(iii) Research revenue
The performance obligation is satisfied over-time upon completion of outlined deliverables and payment is generally due within 30 to 60 days of
achievement of each deliverable.
6. Expenses
Loss from continuing operations before income tax expense
includes the following items:
30 June 2019
$’000
30 June 2018
$’000
R&D tax incentive (contra expense)1
Employee benefits expenses (including share-based payments)
Depreciation
Rental expense on operating leases
(5,071)
10,548
298
586
(4,056)
9,051
311
570
1 Included within the research and product development expense line item in the consolidated income statement.
7. Income Tax Expense
(a) Income tax expense/(credit)
Current Tax / Deferred Tax
Total income tax expense
Income tax attributable to continuing operations
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Loss from continuing operations before income tax expense
Tax at the Australian tax rate of 30% (2018: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Eligible expenses claimed under R&D tax incentive
Share-based payments
Unearned income
Sundry items
Future income tax benefits not brought to account
Income tax expense
30 June 2019
$’000
30 June 2018
$’000
–
–
–
(14,254)
(4,276)
1,857
1,012
1
(101)
1,506
–
–
–
–
(10,285)
(3,086)
1,436
774
(1)
56
821
–
Starpharma Holdings Limited Annual Report 2019
63
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 63
Notes to the Consolidated Financial Statements 30 June 2019
7. Income Tax Expense (continued)
(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
115,313
34,594
4,133
1,240
-
3
3
(3)
–
3
-
3
110,685
33,206
4,482
1,345
-
24
24
(24)
–
24
-
24
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 2019 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 2019 which it believes will be satisfied.
Starpharma Holdings Limited Annual Report 2019
64
64 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
8. Current Assets – Cash and Cash Equivalents
Cash at bank and on hand
Term Deposits and deposits at call
30 June 2019
$’000
30 June 2018
$’000
2,945
38,306
41,251
3,353
47,966
51,319
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.
Deposits not available
There is $548,000 (2018: $806,000) of term deposits not available
for use due funds being provided as security for a bank guarantee
on the premises lease, and for a finance lease facility.
Interest rate risk
Current receivables are non-interest bearing.
30 June 2019
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
2,972
35,631
–
–
2,972
35,631
–
–
–
–
–
–
Weighted average interest rate
1.7%
2.1%
–%
–%
Financial Liabilities
Payables
Finance lease liabilities
12
13
–
–
–
–
26
26
–
–
–
–
–
–
$’000
2,648
6,159
8,807
–%
4,917
–
4,917
Total
$’000
Contractual
cash flows
41,251
6,159
47,410
4,917
26
4,943
N/A
6,159
6,159
4,917
26
4,943
Weighted average interest rate
–%
5.8%
–%
–%
–%
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
12
13
–
–
–
–
26
26
–
23
23
–
–
–
$’000
3,155
6,134
9,289
–%
3,801
–
3,801
Weighted average interest rate
–%
5.8%
5.8%
–%
–%
Starpharma Holdings Limited Annual Report 2019
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
65
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 65
Notes to the Consolidated Financial Statements 30 June 2019
9. Current Assets – Trade and Other Receivables
Trade and grant receivables
Interest receivables
Prepayments
Other receivables
30 June 2019
$’000
30 June 2018
$’000
5,857
49
79
174
6,159
5,911
68
37
118
6,134
Trade and grant receivables
Trade and grant receivables primarily comprise of $4,898,000 (2018: $3,847,000) of expenditure reimbursable under the Australian
Government’s R&D tax incentive scheme, with the balance related to customer receivables for VivaGel® licensing fees, product sales and
royalties. Customer receivables are subject to normal terms of settlement within 30 to 60 days.
Other receivables
Other receivables comprise sundry debtors and GST/VAT claimable and are subject to normal terms of settlement within 30 to 90 days.
Credit risk
The group considers that there is no significant credit risk with respect to trade and other receivables. Grant receivables are with government
bodies and trade receivables are from large, well respected companies.
Impaired receivables
As at 30 June 2019, there were no material trade and grant receivables that were past due (2018: nil). No receivables are considered impaired
at 30 June 2019 (2018: nil).
10. Inventories
Current Assets
Raw materials
Finished goods
30 June 2019
$’000
30 June 2018
$’000
248
151
399
-
-
-
Assigning costs to inventories
The costs of individual items of inventory are determined using the weighted average cost method. See Note 1(l) for the group’s other
accounting policies for inventories.
Amounts recognised in profit or loss
Inventories recognised as an expense during the year ended 30 June 2019 amounted to $251,000 (2018: Nil). These were included in cost of
goods sold.
Finished goods
Finished goods are products that are subject to a customer purchase order, have completed production, and are awaiting delivery to the
customer.
Starpharma Holdings Limited Annual Report 2019
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66 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
11. Non-Current Assets – Property, Plant and Equipment
Plant and Equipment
$’000
Leasehold
improvements
$’000
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
Year ended 30 June 2019
Opening net book amount
Additions
Disposals
Depreciation
Closing net book amount
At 30 June 2019
Cost
Accumulated depreciation
Net book amount
3,099
(2,414)
685
685
468
(12)
(243)
898
3,514
(2,616)
898
898
236
-
(255)
879
3,607
(2,728)
879
602
(374)
228
228
-
-
(68)
160
602
(442)
160
160
54
-
(43)
171
656
(485)
171
Total
$’000
3,701
(2,788)
913
913
468
(12)
(311)
1,058
4,116
(3,058)
1,058
1,058
290
-
(298)
1,050
4,263
(3,213)
1,050
Plant and equipment includes the following amounts where the group is a lessee under a finance lease (refer to Note 13 for further details):
Leased equipment
Cost
Accumulated depreciation
Net book amount
Starpharma Holdings Limited Annual Report 2019
30 June 2019
$’000
30 June 2018
$’000
72
(50)
22
72
(26)
46
67
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 67
Notes to the Consolidated Financial Statements 30 June 2019
12. Current Liabilities – Trade and Other Payables
Trade payables and accruals
Other payables
30 June 2019
$’000
30 June 2018
$’000
4,098
819
4,917
3,023
778
3,801
Trade payables and accruals
The majority of trade payables are related to expenditure associated with the group’s research and product development programs.
13. Current and Non-Current Liabilities – Finance Lease Liabilities
Lease liabilities are effectively secured, as the rights to the leased assets recognised in the financial statements revert to the lessor in the
event of default.
2019
Lease liabilities
Weighted average interest rate
2018
Lease liabilities
Weighted average interest rate
Floating
Interest rate
–
–%
Floating
Interest rate
–
–%
Notes
21
Notes
21
1 year
or less
$’000
26
5.8%
Fixed interest rate
Over 1 to 2
years
$’000
Over 2 to 3
years
$’000
–
–%
–
–%
Fixed interest rate
1 year
or less
$’000
26
5.8%
Over 1 to 2
years
$’000
23
5.8%
Over 2 to 3
years
$’000
–
–%
Total
$’000
26
Total
$’000
49
14. Current and Non-Current Liabilities – Provision for Employee Benefits
Leave obligations
Current
Non-current
30 June 2019
$’000
30 June 2018
$’000
1,056
38
1,094
930
47
977
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 $747,000 (2018: $636,000).
Refer to Note 1(s) for further information.
Starpharma Holdings Limited Annual Report 2019
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68 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
15. Contributed Equity
(a) Share capital
Share Capital
2019
Shares
2018
Shares
2019
$’000
2018
$’000
Ordinary shares – fully paid
371,694,347
370,544,775
193,621
193,583
(b) Movements in ordinary share capital
Date
Details
1 Jul 2018
5 Oct 2018
Employee performance rights plan share issue
11 Dec 2018 Employee performance rights plan share issue
8 Feb 2019
Employee share plan ($1,000) issue
19 Mar 2019 Employee performance rights plan share issue
Number of shares
Issue Price
370,544,775
706,356
369,411
34,542
39,263
$ –
$ –
$1.10
$ –
Balance at 30 June 2019
371,694,347
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
$ –
$’000
193,583
–
–
38
–
193,621
$’000
193,549
–
–
–
34
–
Balance at 30 June 2018
370,544,775
193,583
(c) Ordinary shares
As at 30 June 2019 there were 371,694,347 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.
(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.
Starpharma Holdings Limited Annual Report 2019
69
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 69
Notes to the Consolidated Financial Statements 30 June 2019
16. 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
30 June 2019
$’000
16,775
16,775
30 June 2018
$’000
13,440
13,440
30 June 2019
$’000
30 June 2018
$’000
13,440
3,334
16,775
10,896
2,544
13,440
(c) Nature and purpose of reserves
The share-based payments reserve is used to recognise the fair value of options and performance rights granted.
17. Accumulated Losses
Accumulated losses balance at 1 July
Net loss for the year
Accumulated losses balance at 30 June
30 June 2019
$’000
(153,746)
(14,254)
(168,001)
30 June 2018
$’000
(143,461)
(10,285)
(153,746)
18. 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 23.
(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 2019
$
30 June 2018
$
2,385,559
127,034
27,966
1,819,581
4,360,140
2,311,570
124,278
31,599
1,760,049
4,227,496
Detailed remuneration disclosures are provided in the remuneration report on pages 19 to 40.
Starpharma Holdings Limited Annual Report 2019
70
70 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
19. 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 non-audit services were performed in the current or prior year.
20. Events Occurring After the Balance Sheet Date
30 June 2019
$
30 June 2018
$
137,537
137,537
118,616
118,616
No matters or circumstances have arisen since 30 June 2019 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.
21. Commitments
(a) Capital Commitments
There is no material capital expenditure contracted not recognised as liabilities at the reporting date (2018: 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. 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 2019
$’000
30 June 2018
$’000
649
1,666
–
2,315
632
2,317
–
2,949
Starpharma Holdings Limited Annual Report 2019
71
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 71
Notes to the Consolidated Financial Statements 30 June 2019
21. Commitments (continued)
Finance Leases
The group leases plant and equipment under a finance leases expiring within one (2018: two) years.
Commitments in relation to finance leases are payable as follows:
Notes
30 June 2019
$’000
30 June 2018
$’000
Not later than one year
Later than one year and not later than five years
Later than five years
Minimum lease payments
Future finance charges
Recognised as a liability
Representing finance lease liabilities:
Current
Non-Current
13
13
27
–
–
27
(1)
26
26
-
26
28
24
–
52
(3)
49
26
23
49
The weighted average interest rate implicit in the lease is 5.8% (2018: 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.
22. Contingencies
Starpharma has licensed VivaGel® BV in the United States to ITF Pharma and is eligible to receive up to US$101M in regulatory approval and
commercialisation milestones, plus royalties on net sales. Upon receipt of cash proceeds under the licence, Starpharma is required to pay a
small proportion of its receipts to an investment bank which advised on the competitive licence process, up to a maximum of US$1.35M over the
life of the licence.
The company has no contingent assets at 30 June 2019 (2018: nil for contingent assets and liabilities).
23. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1(b).
Name of entity
Country of
Incorporation
Class of Shares
Equity Holding
2019
%
2018
%
Starpharma Pty Limited
Australia
Ordinary
100.00%
100.00%
Starpharma Holdings Limited Annual Report 2019
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72 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
24. Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities
Operating profit/(loss) after tax
Depreciation and amortisation
Foreign exchange (gain)/loss
Non-cash employee benefits: share-based payments
Net gain/(loss) on sale of property, plant and equipment
Net (gain)/loss on sale of available for sale financial assets
Change in operating assets and liabilities, net of effects of acquisitions and
disposals of entities:
Decrease/(increase) in receivables and other assets
(Increase)/decrease in inventories
Increase/(decrease) increase in trade creditors
Increase in employee provisions
Increase/(decrease) in deferred income
Net cash outflows from operating activities
25. Earnings Per Share
Basic earnings/(loss) per share / Diluted earnings/(loss) per share
Total earnings/(loss) per share attributable to the ordinary equity holders of the
company ($)
Reconciliations of earnings/(loss) used in calculating earnings per share
Profit/(loss) attributable to the ordinary equity holders of the company used in
calculating basic earnings/(loss) per share: ($’000)
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings/(loss) per share
30 June 2019
$’000
(14,254)
30 June 2018
$’000
(10,285)
298
(608)
3,372
-
(8)
(23)
(399)
1,140
117
21
311
(717)
2,578
-
-
(1,757)
-
(847)
120
396
(10,344)
(10,201)
30 June 2019
30 June 2018
(0.04)
(0.03)
(14,254)
(10,285)
371,293,413
370,136,605
As at 30 June 2019 the company had on issue 13,183,915 (30 June 2018: 11,876,199) 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.
Starpharma Holdings Limited Annual Report 2019
73
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 73
Notes to the Consolidated Financial Statements 30 June 2019
26. Share-Based Payments
Performance Rights
(a) Employee Performance Rights Plan
In 2010 the Board approved the introduction of the Employee Performance Rights Plan (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). 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 2019 was $1.33
per right (2018: $0.88). There were 2,988,135 performance rights granted in the current year (2018: 4,590,600).
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:
2019
Grant Date
Vesting
Date
Holding
Lock
Date
30 Jan 2015
30 Sep 2018
11 Nov 2015
30 Jun 20171
11 Nov 2015
30 Sep 20181
19 Nov 2015
30 Jun 20171
19 Nov 2015
30 Sep 20181
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
16 Aug 2018
30 Jun 2020
16 Aug 2018
30 Sep 2021
2 Nov 2018
30 Jun 2020
2 Nov 2018
30 Sep 2021
29 Nov 2018
30 Jun 2020
29 Nov 2018
30 Sep 2021
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance
at start of
the year
Number
714,750
319,693
1,785,600
181,001
893,851
462,284
2,022,600
172,842
876,978
665,320
2,661,280
224,121
895,879
Granted
during
the year
Number
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
203,500
814,000
259,147
1,036,587
134,980
539,921
Converted
during
the year
Number
706,356
20,368
Forfeited
during
the year
Balance
at end of
the year
Number
Number
8,394
–
–
299,325
289,747
131,298
1,364,555
–
–
98,559
–
–
–
–
–
–
–
–
–
–
–
–
–
–
57,591
12,641
32,000
–
–
69,370
181,001
836,260
351,084
1,990,600
172,842
876,978
595,950
115,200
2,546,080
26,895
–
–
–
197,226
895,879
203,500
814,000
22,400
236,747
89,600
946,987
–
–
134,980
539,921
Total
11,876,199
2,988,135
1,115,030
565,389
13,183,915
1 The balance of rights at end of the year have vested and remain available for employees to exercise into shares.
Starpharma Holdings Limited Annual Report 2019
74
74 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
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.
Information used in assessing the fair value of performance rights granted during the year ended 30 June 2019 is as follows:
Right grant date
16 August 2018
16 August 2018
16 August 2018
2 November 2018
Number of rights granted
203,500
691,900
122,100
259,147
Vesting date
Performance Measure
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
30 June 2020
30 September 2021
30 September 2021
30 June 2020
KPIs
50%
1.76%
–
$1.26
$1.26
KPIs
50%
2.04%
–
$1.26
$1.26
TSR
50%
2.04%
–
$1.26
$0.85
KPIs
50%
1.71%
–
$1.39
$1.39
Right grant date
2 November 2018
29 November 2018
29 November 2018
29 November 2018
Number of rights granted
1,036,587
134,980
377,945
161,976
Vesting date
30 September 2021
30 June 2020
30 September 2021
30 September 2021
Performance Measure
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
KPIs
50%
2.05%
–
$1.39
$1.39
KPIs
50%
1.68%
–
$1.48
$1.48
KPIs
50%
2.01%
–
$1.48
$1.48
Starpharma Holdings Limited Annual Report 2019
TSR
50%
2.01%
–
$1.48
$1.13
75
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 75
Notes to the Consolidated Financial Statements 30 June 2019
26. Share-Based Payments (continued)
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
Performance Measure
Expected price volatility of the
company's shares
Risk-free interest rate
Expected dividend yield
Share price at grant date
Assessed fair value
30 June 2019
30 September 2020
30 September 2020
30 June 2019
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
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 whilst
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 $1,000 Plan during the year ended 30 June 2019 was $1.10
(2018: $1.38 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 2019 is as follows:
Share grant date
Number of shares granted
Share price at grant date
Assessed fair value
8 February 2019
34,542
$1.10
$1.10
Starpharma Holdings Limited Annual Report 2019
76
76 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Notes to the Consolidated Financial Statements 30 June 2019
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
29 January 2018
24,548
$1.38
$1.38
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 2019
$’000
30 June 2018
$’000
38
3,334
3,372
34
2,544
2,578
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 2019 (2018: nil).
30 June 2019
$'000
Parent
30 June 2018
$'000
37,897
37,897
630
630
193,621
16,266
(172,619)
(12,935)
(12,935)
47,506
47,506
710
710
193,583
12,898
(159,685)
(12,513)
(12,513)
Starpharma Holdings Limited Annual Report 2019
77
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 77
Directors’ Declaration for the year ended 30 June 2019
In the directors’ opinion:
(a) the financial statements and notes set out on pages 49 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 2019 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, 28 August 2019
Starpharma Holdings Limited Annual Report 2019
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78 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
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 annual financial report
Report on the audit of the financial report
Our opinion
Our opinion
In our opinion:
In our opinion:
The accompanying annual financial report of Starpharma Holdings Limited (the Company) and its
controlled entity (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:
(a) giving a true and fair view of the Group's financial position as at 30 June 2019 and of its financial
giving a true and fair view of the Group's financial position as at 30 June 2017 and of its financial
performance for the year then ended
(a)
performance for the year then ended
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(b)
What we have audited
What we have audited
The Group financial report comprises:
The Group annual financial report comprises:
the consolidated balance sheet as at 30 June 2017
the consolidated balance sheet as at 30 June 2019
●
●
●
●
●
●
●
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 income statement for the year then ended
the consolidated statement of comprehensive income for the year then ended
the consolidated statement of changes in equity 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
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
accounting policies
the directors’ declaration.
the consolidated statement of cash flows for the year then ended
the directors’ declaration.
Basis for opinion
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 annual
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
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to
our audit of the annual financial report in Australia. We have also fulfilled our other ethical
our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in
responsibilities in accordance with the Code.
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
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
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
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 2019
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STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 79
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 annual financial report is free
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
from material misstatement. Misstatements may arise due to fraud or error. They are considered material
opinion on the financial report as a whole, taking into account the geographic and management
if 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 annual financial report.
The Group operates in the biotechnology industry, undertaking development of dendrimer technology
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
for pharmaceutical, life science and other applications. The Group owns a portfolio of proprietary
on the annual financial report as a whole, taking into account the geographic and management structure
technology with applications in different stages between development and commercialisation.
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.
Materiality
Audit scope
Key audit matters
For the purpose of our audit we used
overall Group materiality of $0.76
million, which represents approximately
5% of the Group’s adjusted loss before
tax.
Materiality
● For the purpose of our audit we
We applied this threshold, together with
qualitative considerations, to determine
the scope of our audit and the nature,
used overall Group materiality of
timing and extent of our audit procedures
$730,000, which represents
and to evaluate the effect of
approximately 5% of the Group’s
misstatements on the financial report as a
loss before tax.
whole.
● We applied this threshold,
●
together with qualitative
We chose Group adjusted loss before tax
considerations, to determine the
because, in our view, it is the benchmark
scope of our audit and the nature,
against which the performance of the
timing and extent of our audit
Group is most commonly measured. We
procedures and to evaluate the
effect of misstatements on the
adjusted for the impact of the gain on
annual financial report as a whole.
disposal of Starpharma Agrochemicals as
the financial statement line item is not
● We chose Group loss before tax
expected to reoccur and has a
because, in our view, it is the
disproportionate impact on the earnings
benchmark against which the
performance of the Group is most
result for the period.
commonly measured.
We utilised a 5% threshold based on our
● We utilised a 5% threshold based
professional judgement, noting it is
on our professional judgement,
within the range of commonly acceptable
noting it is within the range of
commonly acceptable thresholds.
profit related thresholds in the
biotechnology industry.
Our audit focused on where the
Group made subjective judgements;
for example, significant accounting
estimates involving assumptions
and inherently uncertain future
events.
Audit scope
Amongst other relevant topics, we
communicated the following key
audit matters to the Audit and Risk
Committee:
Disposal of Starpharma
Key audit matters
Agrochemicals
● Our audit focused on where the
All audit procedures are performed
by PwC Australia, consistent with
Group made subjective
the location of Group management
judgements; for example,
and financial records.
significant accounting estimates
involving assumptions and
inherently uncertain future
We tailored the scope of our audit
events.
taking into account the accounting
processes and controls, and the
All audit procedures are
industry in which the Group
performed by PwC Australia,
consistent with the location of
operates.
Group management and
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.
Research and development tax
● Amongst other relevant
incentive
topics, we communicated
These are further described in the
the following key audit
Key audit matters section of our
matters to the Audit and
report.
Risk Committee:
− Research and
development Tax
Incentive
− Revenue Recognition
under AASB 15
Revenue from
Contracts with
Customers
● These are further
described in the Key audit
matters section of our
report.
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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
our audit of the financial report for the current period. The key audit matters were addressed in the
audit of the annual 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 annual financial report as a whole, and in forming our opinion thereon, and we
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
do 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)
Research and Development Tax Incentive
(Refer to note 3 critical accounting estimates and
judgements, note 6 expenses and note 9 current
assets - trade and other receivables)
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.
The Group’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.
On disposal the accumulated foreign currency translation
reserve (FCTR) of $1.3 million related to Dendritic
Nanotechnologies Inc has been recycled to the
The R&D Tax Incentive receivable recorded as at 30
consolidated income statement.
June 2019 was $4.90 million and $5.07 million was
recognised as contra R&D expense in the income
statement for the period ended 30 June 2019.
This is a key audit matter due to the fact that the
transaction is material to the financial statements.
●
●
This is a key audit matter due to:
●
the significance of the amount receivable as at
30 June 2019; and
the degree of judgement and interpretation of
the R&D tax legislation required by the Group
to assess the eligibility of the R&D expenditure
under the scheme.
●
●
●
●
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
We have performed the following procedures to assess
procedures:
the Group’s estimate of the R&D Tax Incentive
receivable as at 30 June 2019:
●
Obtained managements calculation of the gain
Assessed the presentation and disclosure of the
Agrochemicals business as a discontinued
operation against the requirements of the
relevant Australian Accounting Standards.
compared the estimate recorded in the financial
statements as at 30 June 2018 to the amount of
cash received after lodgement of the R&D Tax
Incentive claim to assess historical accuracy of the
estimate;
compared the nature of the underlying R&D
expenditure included in the current year estimate
to the prior year estimate;
on disposal and agreed:
assessed the nature of the expenses against the
eligibility criteria of the R&D Tax Incentive
programme;
agreed the eligible expenditure in the estimate to
the general ledger or other underlying accounting
records;
obtained copies of correspondence with the
o Net assets transferred to the SPA and
company’s external tax advisor and agreed the
their value to the Group’s financial
advice to the R&D Tax Incentive calculation for the
records
current financial year; and
assessed the classification of the amount in the
financial statements.
o FCTR to the Group’s financial records
o Material transaction costs incurred to
o Cash proceeds to the SPA and bank
bank records
records
Agreed the calculation of the results of
discontinued operations for both the current
year and prior year to the Group’s financial
records.
Assessed management’s rationale and
judgement in determining the classification of
the gain on disposal in the Group’s income tax
provision calculations.
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[Page 4]
Key audit matter
How our audit addressed the key audit matter
How our audit addressed the key audit matter
Revenue recognition under AASB 15
Revenue from Contracts with Customers
(Refer to note 1 Significant Accounting Policies and
note 5 revenue and other income)
Key audit matter
How our audit addressed the key audit matter
Research and development tax incentive (Refer
The Group recognises licensing, royalty and
to note 3 critical accounting estimates)
research revenues from arrangements with
commercial partners.
We have performed the following procedures to assess
the Group’s revenue recognition as at 1 July 2018 and
for the period ended 30 June 2019:
●
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.
On 1 July 2018, the Group adopted AASB 15
Revenue from Contracts with Customers using the
modified retrospective approach. The Group has
assessed the impact of AASB 15 on the
measurement and recognition of revenue from
existing contractual arrangements. Based on the
assessment, the Group concluded there was no
material impact on the group’s profit or loss, nor
have there been any adjustments to opening
retained earnings as at 1 July 2018.
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.
The Group has recognised $1.65 million of revenue
from contracts with customers for the period ended
30 June 2019.
●
●
●
This is a key audit matter due to the nature of the
Group’s contractual arrangements and complexity
of applying the new accounting standard to those
contractual arrangements.
Other information
obtained an understanding of the Group’s
We tested management’s estimate of the R&D Tax
contractual arrangements with commercial
Incentive receivable to assess the amount accrued as at
partners, focusing on the identification of
30 June 2017. As part of our procedures we:
performance obligations, license arrangements and
the associated recognition of fixed and variable
consideration, royalty income and product sales;
evaluated the Group’s impact assessment of the
financial statements as at 30 June 2016 to the
adoption of AASB 15 and the conclusions reached
amount of cash received after lodgement of the
evaluated the appropriateness of Group’s new
R&D Tax Incentive claim to assess historical
accounting policy; and
accuracy of the estimate.
evaluated the adequacy of disclosures in the annual
financial report required under AASB 15.
Compared the estimate recorded in the
Compared the nature of the R&D expenditure
included in the current year estimate to the
prior year estimate.
Assessed the nature of the expenses against the
eligibility criteria of the R&D Tax Incentive
programme.
Agreed the eligible expenditure in the estimate
to the general ledger.
Obtained copies of correspondence with the
ATO related to the claim and agreed the
assessment to management’s estimate.
Obtained copies of correspondence with the
company’s external tax specialist and agreed
the advice to the current calculation and the
2016 lodgement.
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 2019, but does not include the annual financial
report and our auditor’s report thereon.
Our opinion on the annual financial report does not cover the other information and accordingly we do
not express any form of assurance conclusion thereon.
In connection with our audit of the annual financial report, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the
annual financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
financial statements.
Assessed the classification of the amount in the
If, based on the work we have performed on the other information that we obtained prior to the date of
this auditor’s report, 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.
82 STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019
Starpharma Holdings Limited Annual Report 2019
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Independent Audit Report to the Members of Starpharma Holdings Limited
[Page 5]
Responsibilities of the directors for the annual financial report
Other information
The directors of the Company are responsible for the preparation of the annual financial report that gives
a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
The directors are responsible for the other information. The other information comprises the
and for such internal control as the directors determine is necessary to enable the preparation of the
Chairman’s Letter to shareholders, CEO’s Report, Corporate and Social Responsibility, Director’s
annual financial report that gives a true and fair view and is free from material misstatement, whether due
Report, Operating and Financial Review, Corporate Governance Statement, Shareholder Information,
to fraud or error.
Intellectual Property Report and Corporate Directory included in the Group’s annual report for the year
ended 30 June 2017 but does not include the financial report and our auditor’s report thereon.
In preparing the annual 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
Our opinion on the financial report does not cover the other information and accordingly we do not
using the going concern basis of accounting unless the directors either intend to liquidate the Group or to
express any form of assurance conclusion thereon.
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the annual financial 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
Our objectives are to obtain reasonable assurance about whether the annual financial report as a whole is
misstated.
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
If, based on the work we have performed, we conclude that there is a material misstatement of this
audit conducted in accordance with the Australian Auditing Standards will always detect a material
other information, we are required to report that fact. We have nothing to report in this regard.
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 decisions of
users taken on the basis of the annual financial report.
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
A further description of our responsibilities for the audit of the annual financial report is located at the
true and fair view in accordance with Australian Accounting Standards and Corporations Act 2001 and
Auditing and Assurance Standards Board website at:
for such internal control as the directors determine is necessary to enable the preparation of the
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor's
financial report that gives a true and fair view and is free from material misstatement, whether due to
report.
fraud or error.
Report on the remuneration report
Our opinion on the remuneration report
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.
We have audited the remuneration report included in pages 19 to 40 of the directors’ report for the year
ended 30 June 2019.
Auditor’s responsibilities for the audit of the financial report
Responsibilities
In our opinion, the remuneration report of Starpharma Holdings Limited for the year ended 30 June 2019
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
complies with section 300A of the Corporations Act 2001.
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
The directors of the Company are responsible for the preparation and presentation of the remuneration
if, individually or in the aggregate, they could reasonably be expected to influence the economic
report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
decisions of users taken on the basis of the financial report.
opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
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.
PricewaterhouseCoopers
Jon Roberts
Partner
Melbourne
28 August 2019
Page 83 of 88
Starpharma Holdings Limited Annual Report 2019
STARPHARMA HOLDINGS LIMITED | ANNUAL REPORT 2019 83
83
Shareholder Information
The shareholder information set out below was applicable as at 20 August 2019.
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 438 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 Pty Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
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