UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 20-F
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 20172023
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report.................report ___________
Commission file number 000‑49843000-49843
ALTERITY THERAPEUTICS LIMITED
(Exact name of Registrant as specified in its charter
Australia
(Jurisdiction of incorporation or organization)
Level 2, 369 Royal Parade, Parkville, Victoria 3052,14, 350 Collins Street, Melbourne, VIC 3000, Australia
(Address of principal executive offices)
David Stamler, Chief Executive Officer
Level 2, 369 Royal Parade, Parkville, Victoria 3052,14, 350 Collins Street, Melbourne, VIC 3000, Australia
+61 3 9349 4906 (phone) ; +61 3 9348 0377 (fax)
(Name, telephone, e-mail and/or facsimile number and address of company contact person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
American Depositary Shares, each representing | ATHE | NASDAQ Capital Market |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Ordinary Shares, as of June 30, 2017 ……………533,891,4702023 2,439,897,618
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yes ☐ No ☒
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☐☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Emerging growth company ☐ | Non-accelerated filer ☒ |
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ | Other ☐ |
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
This Annual Report on Form 20-F is incorporated by reference into our Registration StatementStatements on Form S-8 (File No. 333-153669)Nos. 333-228671, 333-248980 and 333-251073) and our Registration StatementStatements on Form F-3 (File No. 333-199783)Nos. 333-249311, 333-250076 and 333-251647).
INTRODUCTION
Alterity Therapeutics Limited (formerly Prana Biotechnology LimitedLimited) was incorporated under the laws of the Commonwealth of Australia on November 11, 1997. Our mission is to develop therapeutic drugs designed to treat the underlying causes of degeneration of the brain as the aging process progresses,neurogenerative diseases, currently focusing on Alzheimer’s disease, Huntington disease, Parkinson’s diseaseParkinsonian and other movement disorders. Other potential applications for our therapies include certain cancers, age-related macular degeneration, Motor Neuron disease, Creutzfeldt-Jakob disease (the human variant of Mad Cow disease) and a variety of orphan neurodegenerative disorders.
The principal listing of our ordinary shares and listed options to purchase our ordinary shares is on the Australian Securities Exchange, or ASX. Since September 5, 2002, our American Depository Shares, or ADSs, have traded on the NASDAQ Capital Market under the symbol “PRAN.” On April 8, 2019, we changed our name to Alterity Therapeutics Limited and our ADSs have traded under the symbol “ATHE” since that date. The Bank of New York, acting as depositary, issues American Depository Receipts, or ADRs, each of which evidences an ADS, which in turn represents sixty600 of our ordinary shares. As used in this annual report, the terms “we,” “us,” “our”, “the Company”, “the Group” and “Prana”“Alterity” mean Prana BiotechnologyAlterity Therapeutics Limited and its subsidiaries, unless otherwise indicated.
Our consolidated financial statements appearing in this annual report are prepared in Australian dollars and in accordance with the International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or IASB. IASB and Australian equivalents to International Financial Reporting Standards as issued by the Australian Accounting Standards Board.
Australian Disclosure Requirements
Our consolidated financial statements appearingordinary shares are primarily quoted on the Australian Securities Exchange (“ASX”) in this annual reportaddition to our listing of our ADSs on the Nasdaq Capital Market. As part of our ASX listing, we are required to comply with bothvarious disclosure requirements as set out under the IFRS Australian Corporations Act 2001 and Australian Accounting Standards.the ASX Listing Rules. Information furnished under the sub-heading “Australian Disclosure Requirements” is intended to comply with the ASX Listing Rules and Corporations Act 2001 disclosure requirements and is not intended to fulfill information required by this Annual Report on Form 20-F.
In this annual report, all references to “U.S. dollars” or “U.S.$” are to the currency of the United States, and all references to “Australian dollars” or “A$” are to the currency of Australia.
Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this annual report or to any registration statement or annual report that we previously filed, you may read the document itself for a complete description of its terms.
Forward-Looking Statements
Except for the historical information contained in this annual report, the statements contained in this annual report are “forward‑looking“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, as amended, with respect to our business, financial condition and results of operations. Such forward-looking statements reflect our current view with respect to future events and financial results. We urge you to consider that statements which use the terms “anticipate,” “believe,” “do not believe,” “expect,” “plan,” “intend,” “estimate,” and similar expressions are intended to identify forward‑lookingforward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release any update or revision to any forward‑lookingforward-looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof. We have attempted to identify significant uncertainties and other factors affecting forward-looking statements in the Risk Factors section that appears in Item 3.D. “Key Information-Risk Factors.”
TABLE OF CONTENTS
i
| ITEM 11. |
| 71 | ||
| ITEM 13. | ||
| 74 | ||
| ITEM 17. | FINANCIAL STATEMENTS | 74 |
| ITEM 18. | FINANCIAL STATEMENTS | 74 |
| ITEM 19. | EXHIBITS | 76 |
| SIGNATURES | 77 |
ii
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
| A. |
Statement of Comprehensive Income: | ||||||||||||||||||||
| Year Ended June 30, | ||||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
| (in A$, except loss per share and number of shares) | ||||||||||||||||||||
| Revenue from continuing operations | 132,396 | 142,657 | 176,842 | 363,775 | 150,867 | |||||||||||||||
| Other income | 3,022,673 | 4,753,697 | 6,317,438 | 7,845,396 | 4,488,526 | |||||||||||||||
| Research and development expenses | (5,700,339 | ) | (9,585,371 | ) | (12,298,167 | ) | (14,908,098 | ) | (8,203,822 | ) | ||||||||||
| General and administration expenses | (3,968,630 | ) | (3,610,551 | ) | (4,506,122 | ) | (4,925,411 | ) | (3,793,235 | ) | ||||||||||
| Intellectual property expenses | (241,892 | ) | (241,954 | ) | (257,299 | ) | (477,079 | ) | (294,894 | ) | ||||||||||
| Other operating expenses | (126,071 | ) | (45,276 | ) | (39,210 | ) | (451,251 | ) | (257,769 | ) | ||||||||||
| Finance expense – ADDF | - | - | - | (29,978 | ) | (17,676 | ) | |||||||||||||
| Other gains and losses | (660,213 | ) | 857,247 | 4,721,449 | (746,593 | ) | 140,761 | |||||||||||||
| Net loss | (7,542,076 | ) | (7,729,551 | ) | (5,885,069 | ) | (13,329,239 | ) | (7,787,242 | ) | ||||||||||
| Loss per share in cents – basic and diluted | (1.41 | ) | (1.45 | ) | (1.17 | ) | (3.11 | ) | (2.30 | ) | ||||||||||
| Weighted average number of ordinary shares outstanding - basic and diluted | 533,891,470 | 533,891,470 | 502,714,982 | 428,047,123 | 338,700,006 | |||||||||||||||
Balance Sheet Data | ||||||||||||||||||||
| As at June 30, | ||||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
| (in A$) | ||||||||||||||||||||
| Cash and cash equivalents | 21,884,957 | 28,593,538 | 34,909,574 | 34,167,018 | 13,346,760 | |||||||||||||||
| Working capital | 23,659,659 | 31,299,470 | 39,025,487 | 37,597,770 | 13,883,965 | |||||||||||||||
| Total assets | 25,280,946 | 33,725,020 | 41,834,382 | 41,640,855 | 17,073,821 | |||||||||||||||
| Net assets | 23,690,034 | 31,367,213 | 39,113,264 | 37,686,287 | 13,974,713 | |||||||||||||||
| Issued capital | 144,018,006 | 146,879,214 | 146,895,714 | 140,009,415 | 101,379,111 | |||||||||||||||
| Share based payment reserves | 2,320,480 | 9,363,181 | 9,363,181 | 8,937,434 | 10,526,925 | |||||||||||||||
| Accumulated deficit during development stage | (122,648,452 | ) | (124,875,182 | ) | (117,145,631 | ) | (111,260,562 | ) | (97,931,323 | ) | ||||||||||
| Total equity | 23,690,034 | 31,367,213 | 39,113,264 | 37,686,287 | 13,974,713 | |||||||||||||||
Year Ended June 30, | At Period End | Average Rate | High | Low | ||||
| 2013 | 0.9146 | 1.0273 | 1.0624 | 0.9112 | ||||
| 2014 | 0.9439 | 0.9183 | 0.9757 | 0.8659 | ||||
| 2015 | 0.7655 | 0.8369 | 0.9457 | 0.7580 | ||||
| 2016 | 0.7432 | 0.7289 | 0.7817 | 0.6855 | ||||
| 2017 | 0.7676 | 0.7544 | 0.7733 | 0.7174 |
| Month | High | Low |
| April 2017 | 0.7604 | 0.7604 |
| May 2017 | 0.7534 | 0.7352 |
| June 2017 | 0.7680 | 0.7387 |
| July 2017 | 0.7991 | 0.7584 |
| August 2017 | 0.7983 | 0.7872 |
| B. | Capitalization and Indebtedness |
Not applicable.
| C. | Reasons for the Offer and Use of Proceeds |
Not applicable.
| D. | Risk Factors |
Investing in our American Depositary Sharessecurities involves a high degree of risk and uncertainty. You should carefully consider the risks and uncertainties described below before investing in our American Depositary Shares.securities. Additional risks and uncertainties not presently known to us or that we believe to be immaterial may also adversely affect our business. If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be harmed. In that case, the daily price of our depositary sharessecurities could decline, and you could lose all or part of your investment. These risk factors include:
Risks Related to Our Financial Condition
○ | We have a history of operating losses and our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to our ability to continue as a going concern in its audit report for the fiscal year ended June 30, 2023. |
| ○ | We will need additional funding to complete our clinical trials and to operate our business; such funding may not be available or, if it is available, such financing is likely to substantially dilute our existing shareholders. |
Risks Related to Our Business
| ○ | We are a development stage company engaged in the development of pharmaceutical products and our success in uncertain. | |
| ○ | We rely on research institutions to conduct our clinical trials and we may not be able to secure and maintain research institutions to conduct our future trials. The institutions that we work with have their own limits and procedures that will influence or limit our ability to conduct research and development and the conduct of clinical trials. |
| ○ | We are faced with uncertainties related to our research. |
| ○ | Clinical trials as they relate to our business are expensive and time consuming and their outcome is uncertain. |
| ○ | We may experience delays in our clinical trials that could adversely affect our business and operations. |
| ○ | We may not be able to complete the development of our products candidates or develop other pharmaceutical products. |
| ○ | We may need to prioritise the development of our most promising candidates at the expense of the development of other products. |
| ○ | Our research and development efforts will be seriously jeopardised if we are unable to retain key personnel and cultivate key academic and scientific collaborations. |
| ○ | If we are unable to successfully keep pace with technological change or with the advances of our competitors, our technology and products may become obsolete or non-competitive. |
| ○ | Acceptance of our products in the marketplace is uncertain and failure to achieve market acceptance will negatively impact our business and operations. |
| ○ | We have limited large scale manufacturing experience with our product candidates. Delays in manufacturing sufficient quantities of such materials to the required standards for pre-clinical and clinical trials may negatively impact our business and operations. |
| ○ | The failure to establish sales, marketing and distribution capability would materially impair our ability to successfully market and sell our pharmaceutical products. |
| ○ | If healthcare insurers and other organisations do not pay for our products, or impose limits on reimbursement, our future business may suffer. |
| ○ | We may be exposed to product liability claims, which could harm our business. |
| ○ | Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business. |
Risks Related to Government Regulation
| ○ | If we do not obtain the necessary governmental approvals, we will be unable to develop or commercialise our pharmaceutical products. |
| ○ | We will not be able to commercialise any current or future product candidates if we fail to adequately demonstrate their safety and efficacy. |
| ○ | Positive results in previous clinical trials of product candidates may not be replicated in future clinical trials, which could result in development delays or a failure to obtain marketing approval. |
| ○ | Even if approved, any product candidates that we or our subsidiaries may develop and market may be later withdrawn from the market or subject to promotional limitations. |
| ○ | Healthcare reform measures and other statutory or regulatory changes could adversely affect our business. |
| ○ | We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act. |
Risks Related to Intellectual Property
| ○ | Our success depends upon our ability to protect our intellectual property and our proprietary technology, to operate without infringing the proprietary rights of third parties and to obtain marketing exclusivity for our products and technologies. |
| ○ | We may face difficulties in certain jurisdictions in protecting our intellectual property rights, which may diminish the value of our intellectual property rights in those jurisdictions. |
| ○ | Intellectual property rights do not address all potential threats to our competitive advantage. |
| ○ | Changes in patent laws or patent jurisprudence could diminish the value of our patents, thereby impairing our ability to protect our products or product candidates. |
| ○ | Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and protect our other proprietary information. |
Risks Related to Our Compliance with the Sarbanes-Oxley Act of 2002
| ○ | We may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which could adversely affect our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares and ADSs. |
| ○ | Material weaknesses in our disclosure controls and procedures could negatively affect shareholder and customer confidence. |
Risks Related to Ownership of Our Securities
| ○ | Our stock price may be volatile and the trading markets for our securities is limited. |
| ○ | Ownership interest in our company may be further diluted as a result of additional financings. |
| ○ | There is a substantial risk that we are a passive foreign investment company, or PFIC, to some U.S. investors which will subject those investors to adverse tax rules |
| ○ | We do not anticipate paying dividends on our ordinary shares. |
| ○ | Currency fluctuations may adversely affect the price of our securities. |
| ○ | If we fail to maintain compliance with NASDAQ’s continued listing requirements, our shares may be delisted from the NASDAQ Capital Market. |
Risks Related to Our Location in Australia
| ○ | It may be difficult to enforce a judgment in the United States against us and our officers and directors or to assert U.S. securities laws claims in Australia or serve process on our officers and directors. |
| ○ | As a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we may follow certain home country corporate governance practices instead of certain NASDAQ requirements. |
| ○ | We currently do not have a majority of independent directors serving on our Board of Directors, which may afford less protection to our shareholders than if our Board of Directors had a majority of independent directors. |
| ○ | Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares. |
| ○ | Our Constitution and other Australian laws and regulations applicable to us may adversely affect our ability to take actions that could be beneficial to our shareholders. |
Risks Related to Our Financial Condition
We have a history of significant operating losses since we began operations, we expectand our management has concluded that factors raise substantial doubt about our ability to continue as a going concern and our auditor has included an explanatory paragraph relating to incur operating lossesour ability to continue as a going concern in its audit report for the foreseeable future and may never achieve or maintain profitability.fiscal year ended June 30, 2023.
We have not sufficiently advanced the development of any of our product candidates to market or generate revenues from their commercial application. Weapplication and have incurred losses in every period since we began operations in 1997 and reported net losses of A$7,542,076,13,806,515, A$7,729,55112,847,061 and A$5,885,06915,309,353 during the fiscal years ended June 30, 2017, 20162023, 2022 and 2015,2021 respectively. As of June 30, 2017,2023, our accumulated deficit was A$122,648,452.195,163,404. We expect to continue incurring losses into the foreseeable future and will need to incurraise additional operating losses over at leastcapital to continue the next several years as we expanddevelopment of our planned research and development programs, and pre-clinical activitiesas a result, this creates a material uncertainty that casts significant doubt (or raises substantial doubt as contemplated by Public Company Accounting Oversight Board (“PCAOB”) standards) on our ability to continue as a going concern and, commence clinical trialstherefore, that we may be unable to realize our assets and discharge our liabilities in the normal course of our product candidates that includes PBT434 for Parkinson movement disorders, prospectively PBT2 for Huntington disease or alternative indications and the development of other compounds.
| the continued progress of our research and development programs; |
| the timing, scope, results and costs of |
| the cost, timing and outcome of regulatory submissions and approvals; |
| determinations as to the commercial potential of our product candidates; |
| our ability to successfully expand our contract manufacturing services; |
| our ability to establish and maintain collaborative arrangements; and |
| the status and timing of competitive developments. |
If we fail to generate revenue and eventually become and remain profitable, or if we are unable to fund our continuing losses, our shareholders could lose all or part of their investments.
We will need substantial additional funding to complete our clinical trials and to operate our business; such funding may not be available or, if it is available, such financing is likely to substantially dilute our existing shareholders.
During the year ended June 30, 2023 we raised any fundsA$316,675 from the sale of our ordinary shares pursuant to our at-the-market offering‘At-the-market” (ATM) facility in the years ended June 30, 2017 and 2016. We will need to secure additional financing in order to continue to meet our longer termlonger-term business objectives, including advancement of our research and development programs and we may also require additional funds to pursue regulatory clearances, defend our intellectual property rights, establish commercial scale manufacturing facilities, develop marketing and sales capabilities and fund operating expenses. We intend to seek such additional funding through public or private financings and/or through licensing of our assets or strategic alliances or other arrangements with corporate partners. The global economic climate could adversely impact our ability to obtain such funding, license our assets or enter into alliances or other arrangements with corporate partners.
Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never achieve, we expect to finance our cash needs primarily through public or private equity offerings, debt financings or through strategic alliances.
Risks Related to Our Business
We are a development stage company engaged in the development of pharmaceutical products and our success is uncertain.
We are a development stage company whose pharmaceutical products are designed to treat the underlying causes of degeneration of the brain.neurodegenerative diseases. We have not sufficiently advanced the development of any of our candidate products to market or generatenor generated revenues from their commercial application. Our current or any future product candidates, if successfully developed, may not generate sufficient or sustainable revenues to enable us to be profitable.
We rely on research institutions to conduct our clinical trials and we may not be able to secure and maintain research institutions to conduct our future trials. The institutions that we work with have their own limits and procedures that may influence or limit our ability to conduct research and development and the conduct of clinical trials.
Our Businessreliance upon research institutions, including public and private hospitals and clinics, provides us with less control over the timing and cost of clinical trials, clinical study management personnel and the ability to recruit subjects. If we are unable to reach agreements with suitable research institutions on acceptable terms, or if any resulting agreement is terminated, we may be unable to secure, maintain or quickly replace the research institution with another qualified institution on acceptable terms.
In addition to the government mandates for controlling the many different health and economic effects of the COVID-19 virus and pandemic, individual institutions with which we work, such as hospitals, laboratories and educational institutions have taken actions that have disrupted the progress of our business plans and the operations of our business. Many educational institutions and laboratories curtailed or limited access to their facilities since the pandemic began and; we expect that going forward there will continue to be strict limitations on access to these institutions and facilities for our researchers and research partners. Overall, changes in the way our development activities can be conducted will result in delays in our conducting research activities, carrying out clinical trials and making regulatory submissions. As a consequence, we anticipate our costs will increase. In many respects, there is great uncertainty in the general effects resulting from the governmental and private response to the pandemic, and only the passage of time will reveal its full effects.
We are faced with uncertainties related to our research.
Our research programs are based on scientific hypotheses and experimental approaches that may not lead to desired results. In addition, the timeframe for obtaining proof of principle and other results may be considerably longer than originally anticipated, or may not be possible given time, resource, financial, strategic and collaborator scientific constraints. Success in one stage of testing is not necessarily an indication that thea particular program will succeed in later stages of testing and development. It is not possible to predict whether any of the candidate products designed for these programs will prove to be safe, effective, and suitable for human use. Each candidate product will require additional research and development, scale-up, formulation and extensive clinical testing in humans. Unsatisfactory results obtained from a particular studyany of these activities relating to a program may cause us to abandon our commitment to that program or product candidate being tested. The discovery of toxicities, lack of sufficient efficacy, unacceptable pharmacology, inability to increase scale of manufacture, market attractiveness, regulatory hurdles, competition, as well as other factors, may make our targets, lead therapies or product candidates unattractive for further development or unsuitable for human use, and we may abandon our commitment to that program, target, or product candidate.
Clinical trials as they relate to our business are expensive and time consuming and their outcome is uncertain.
In order to obtain approvals to market a new drug product, we or our potential partners must demonstrate proof of safety and efficacy in humans. To meet these requirements, we or our potential partners will have to conduct extensive preclinicalnon-clinical testing and “adequate and well-controlled” clinical trials. Conducting clinical trials is a lengthy, time-consuming and expensive process. The length of time may vary substantially according to the type, complexity, novelty and intended use of the product candidate, and often can be several years or more per trial. Even if we obtain positive results from preclinicalsuch non-clinical or initial clinical trials, we may not achieve the same success in future trials. Clinical trials may not demonstrate statisticallyadequate safety or sufficient safety and effectiveness to obtain the requisite regulatory approvals for product candidates employing our technology. The failure of clinical trials to demonstrate safety and efficacy for a particular desired indication could harm development of that product candidate for other indications as well as other product candidates.
We expect to commence new clinical trials from time to time as our product development work continues. Any change in, or termination of, our clinical trials could materially harm our business, financial condition and results of operations.
We may experience delays in our clinical trials that could adversely affect our business and operations.
We do not know whether planned clinical trials will begin on time or whether we will complete any of our clinical trials on schedule or at all. Our ability to commence and complete clinical trials may be delayed by many factors, including:
| government or regulatory delays, including delays in obtaining approvals from applicable hospital ethics committees and internal review boards; |
| slower than expected patient enrollment; |
| our inability to manufacture sufficient quantities of our new proprietary compound or our other product candidates or matching controls; |
| unforeseen safety issues; or |
| lack of efficacy or unacceptable toxicity during the clinical trials or non-clinical studies. |
Patient enrollment is a function of, among other things, the nature of the clinical trial protocol, the existence of competing protocols, the size and longevity of the target patient population, and the availability of patients who comply with the eligibility criteria for the clinical trial. Delays in planned patient enrollment may result in increased costs, delays or termination of the clinical trials. Moreover, we rely on third parties such as clinical research organizationsorganisations to assist us in clinical trial management functions including; clinical trial database management, statistical analyses, site management and monitoring. Any failure by these third parties to perform under their agreements with us may cause the trials to be delayed or result in a failure to complete the trials.
If we experience delays in testing or approvals or if we need to perform more, larger or more complex clinical trials than planned, our product development costs maywill likely increase. Significant delays could adversely affect the commercial prospects of our product candidates and our business, financial condition and results of operations.
We may not be able to complete the development of our products candidates or develop other pharmaceutical products.
We may not be able to progress with the development of our current or any future pharmaceutical product candidates to a stage that will attract a suitable collaborative partner for the development of any current or future pharmaceutical product candidates. The projects initially specified in connection with any such collaboration and any associated funding may change or be discontinued as a result of changing interests of either the collaborator or us, and any such change may change the budget for the projects under the collaboration. Additionally, our research may not lead to the discovery of additional product candidates, and any of our current and future product candidates may not be successfully developed, prove to be safe and efficacious in clinical trials, meet applicable regulatory standards and receive regulatory approval, be capable of being produced in commercial quantities at reasonable costs, or be successfully or profitably marketed, either by us or a collaborative partner. The products we develop may not be able to penetrate the potential market for a particular therapy or indication or gain market acceptance among health care providers, patients and third-party payers. We cannot predict if or when the development of our current product candidates or any future product candidates will be completed or commercialized,commercialised, whether funded by us, as part of a collaboration or through a grant.
We may need to prioritizeprioritise the development of our most promising candidates at the expense of the development of other products.
We may need to prioritizeprioritise the allocation of development resources and/or funds towards what we believe to be our most promising candidate product or products. The nature of the drug development process is such that there is a constant availability of new information and data which could positively or adversely affect a product in development. We cannot predict how such new information and data may impact in the future the prioritizationprioritisation of the development of our current or future product candidates or that any of our products, regardless of its development stage or the investment of time and funds in its development, will continue to be funded or developed.
Our research and development efforts will be seriously jeopardizedjeopardised if we are unable to retain key personnel and cultivate key academic and scientific collaborations.
Our future success depends to a large extent on the continued services of our senior management and key scientific personnel. We have entered into employment or consultancy agreements with these individuals. The loss of their services could negatively affect our business. Competition among biotechnology and pharmaceutical companies for qualified employees is intense, including competition from larger companies with greater resources, and we may not be able to continue to attract and retain qualified management, technical and scientific personnel critical to our success. Our success is highly dependent on our ability to develop and maintain important relationships with leading academic institutions and scientists who conduct research at our request or assist us in formulating our research and development strategies. These academic and scientific collaborators are not our employees and may have commitments to, or consulting or advisory contracts with, other entities that may limit their availability to us. In addition, these collaborators may have arrangements with other companies to assist such companies in developing technologies that may prove competitive to ours.
If we are unable to successfully keep pace with technological change or with the advances of our competitors, our technology and products may become obsolete or non-competitive.
The biotechnology and pharmaceutical industries are subject to rapid and significant technological change. Our competitors are numerous and include major pharmaceutical companies, biotechnology firms, universities and other research institutions. These competitors may develop technologies and products that are more effective than any that we are developing, or which would render our technology and products obsolete or non-competitive. Many of these competitors have greater financial and technical resources and manufacturing and marketing capabilities than we do. In addition, many of our competitors have much more experience than we do in pre-clinical testing and human clinical trials of new or improved drugs, as well as in obtaining regulatory approvals.
We know that competitors are developing or manufacturing various technologies or products for the treatment of diseases that we have targeted for product development. Some of these competitive products use therapeutic approaches that compete directly with our product candidates. Our ability to further develop our products may be adversely affected if any of our competitors were to succeed in obtaining regulatory approval for their competitive products sooner than us.
Acceptance of our products in the marketplace is uncertain, and failure to achieve market acceptance will negatively impact our business and operations.
Our current or future candidate products may not achieve market acceptance even if they are approved by regulatory authorities. The degree of market acceptance of such products will depend on a number of factors, including:
| the receipt and timing of regulatory approvals for the uses that we are studying; |
| the establishment and demonstration to the medical community of the safety, clinical efficacy or cost-effectiveness of our product candidates and their potential advantages over existing therapeutics and technologies; and |
| the pricing and reimbursement policies of governments and third-party payors. |
Physicians, patients, payors or the medical community in general may be unwilling to accept, use or recommend any of our products.
We have limited large scale manufacturing experience withlack the resources to manufacture any of our product candidates.candidates and rely on collaborators and third party contractors. Delays in manufacturing sufficient quantities of such materials to the required standards for pre-clinical and clinical trials may negatively impact our business and operations.
We lack the resources to manufacture any of our product candidates on a clinical or commercial scale and do not currently have, nor do we plan to acquire the infrastructure or capability internally to manufacture our clinical drug supplies for use in the conduct of our clinical trials. We rely on collaborators and/or third parties for development, scale-up, formulation, optimisation, management of clinical trial and commercial scale manufacturing and commercialisation. There are no assurances we can scale-up, formulate or manufacture any product candidate in sufficient quantities with acceptable specifications for the conduct of our clinical trials or for the regulatory agencies to grant approval of such product candidate. We have not yet commercialized any products and have no commercial manufacturing experience. To be successful, our products must be properly formulated, scalable, stable and safely manufactured in clinical trial and commercial quantities in compliance with good manufacturing practices (“GMP”) and other regulatory requirements and at acceptable costs. Should any of our suppliers or our collaborators be unable to supply or be delayed in supplying us with sufficient supplies due to the COVID-19 pandemic or other causes, no assurance can be given that we will be able to find alternative means of supply in a short period of time. Should such parties’ operations suffer a material adverse event, the manufacturing of our products would also be adversely affected. Furthermore, key raw materials could become scarce or unavailable. We may not be able to manufacture sufficient quantities of ourmeet specifications previously established for product candidates in a cost-effective or timely manner. Manufacturing includes the production, formulationduring scale-up and stability testing of an active pharmaceutical ingredient and its formulation into pharmaceutical products, such as capsules or tablets. Any delays in production would delay our pre-clinical and human clinical trials, which could adversely affect our business, financial condition and operations.manufacturing.
There may be required to enter into contracting arrangements witha limited number of third parties who can manufacture our products. Our reliance on third parties to manufacture our product candidates for large-scale, pre-clinical and/will expose us and our partners to risks including the following, any of which could delay or clinical trials. We may not be able to makeprevent the transition from laboratory-scale to development-scale or from development-scale to commercial production. We may need to develop additional manufacturing resources, enter into collaborative arrangements with other parties who have established manufacturing capabilities, or have third parties manufacturecommercialisation of our products, on a contract basis. We may not have access on acceptable terms to the necessary and substantial financing that would be required to scale-up production and develop effective commercial manufacturing processes and technologies. We may not be able to enter into collaborativeresult in higher costs, or contracting arrangements on acceptable terms with parties that will meet our requirements for quality, quantity and timeliness.deprive us of potential product revenue:
| ● | Contract manufacturers can encounter difficulties in achieving the scale-up, optimisation, formulation, or volume production of a compound as well as maintaining quality control with appropriate quality assurance. They may also experience shortages of qualified personnel. Contract manufacturers are required to undergo a satisfactory GMP inspection prior to regulatory approval and are obliged to operate in accordance with the U.S. Food & Drug Administration (“FDA”), International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use (“ICH”), European and other nationally mandated GMP regulations and/or guidelines governing manufacturing processes, stability testing, record keeping and quality standards. A failure of these contract manufacturers to follow GMP and to document their adherence to such practices or failure of an inspection by a regulatory agency may lead to significant delays in the availability of our product candidate materials for clinical study, leading to delays in our trials. |
| ● | For each of our current product candidates we will initially rely on a limited number of contract manufacturers. Changing these or identifying future manufacturers may be difficult. Changing manufacturers requires re-validation of the manufacturing processes and procedures in accordance with FDA, ICH, European and other mandated GMP regulations and/or guidelines. Such re-validation may be costly and time-consuming. It may be difficult or impossible for us to quickly find replacement manufacturers on acceptable terms, if at all. |
| ● | Our contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to produce, store and distribute our products successfully. |
The failure to establish sales, marketing and distribution capability would materially impair our ability to successfully market and sell our pharmaceutical products.
We currently have no experience in marketing, sales or distribution of pharmaceutical products. If we develop any commercially marketable pharmaceutical products and decide to perform our own sales and marketing activities, we will require additional management, will need to hire sales and marketing personnel and will require additional capital. Qualified personnel may not be available in adequate numbers or at a reasonable cost. Further, our sales staff may not achieve success in their marketing efforts. Alternatively, we may be required to enter into marketing arrangements with other parties who have established appropriate marketing, sales and distribution capabilities. We may not be able to enter into marketing arrangements with any marketing partner, or if such arrangements are established, our marketing partners may not be able to commercializecommercialise our products successfully. Other companies offering similar or substitute products may have well-established and well-funded marketing and sales operations in place that will allow them to market their products more successfully. Failure to establish sufficient marketing capabilities would materially impair our ability to successfully market and sell our pharmaceutical products.
If healthcare insurers and other organizationsorganisations do not pay for ourthe products we hope to develop, or impose limits on reimbursement, our future business may suffer.
The drugs we hope to develop may be rejected by the marketplace due to many factors, including cost. The continuing efforts of governments, insurance companies, health maintenance organizationsorganisations and other payors of healthcare costs to contain or reduce healthcare costs may affect our future revenues and profitability and those of our potential customers, suppliers and collaborative partners, as well as the availability of capital. In Australia and certain foreign markets, the pricing or profitability of prescription pharmaceuticals is already subject to government control. We expect initiatives for similar government control at both the state and federal level to continue in the United States and elsewhere. The adoption of any such legislative or regulatory proposals could adversely affect our business and prospects.
Our ability to commercially exploit our products successfully will depend in part on the extent to which reimbursement for the cost of our products and related treatment will be available from government health administration authorities, private health coverage insurers and other organizations.organisations. Third-party payors, such as government and private health insurers, are increasingly challenging the price of medical products and services. Uncertainty exists as to the reimbursement status of newly approved health care products and in foreign markets, including the United States. If third-party coverage is not available to patients for any of the products we develop, alone or with collaborators, the market acceptance of these products may be reduced, which may adversely affect our future revenues and profitability. In addition, cost containment legislation and reductions in government insurance programs may result in lower prices for our products and could materially adversely affect our ability to operate profitably.
We may be exposed to product liability claims, which could harm our business.
The testing, marketing and sale of human health care products also entails an inherent risk of product liability. We may incur substantial liabilities or be required to limit development or commercializationcommercialisation of our candidate products if we cannot successfully defend ourselves against product liability claims. We have historically obtained no fault compensation insurance for our clinical trials and intend to obtain similar coverage for future clinical trials. Such coverage may not be available in the future on acceptable terms, or at all. This may result in our inability to pursue further clinical trials or to obtain adequate protection in the event of a successful claim. We may not be able to obtain product liability insurance in the event of the commercializationcommercialisation of a candidate product or such insurance may not be available on commercially reasonable terms. Even if we have adequate insurance coverage, product liability claims or recalls could result in negative publicity or force us to devote significant time, attention and financial resources to those matters.
Breaches of network or information technology security, natural disasters or terrorist attacks could have an adverse effect on our business.
Cyber-attacks or other breaches of network or information technology (IT) security, natural disasters, terrorist acts or acts of war may cause equipment failures or disrupt our research and development operations. In particular, both unsuccessful and successful cyber-attacks on companies have increased in frequency, scope and potential harm in recent years. Such an event may result in our inability, or the inability of our partners, to operate the research and development facilities, which even if the event is for a limited period of time, may result in significant expenses and/or significant damage to our experiments and trials. We have been subject, and will likely continue to be subject, to attempts to breach the security of our networks and IT infrastructure through cyber-attack, malware, computer viruses and other means of unauthorised access. However, to date, we have not been subject to cyber-attacks or other cyber incidents which, individually or in the aggregate, resulted in a material impact to our operations or financial condition. While we maintain insurance coverage for some of these events, the potential liabilities associated with these events could exceed the insurance coverage we maintain. In addition, a failure to protect employee confidential data against breaches of network or IT security could result in damage to our reputation. Any of these occurrences could adversely affect our results of operations and financial condition.
Risks Related to Government Regulation
If we do not obtain the necessary governmental approvals, we will be unable to commercializedevelop or commercialise our pharmaceutical products.
Our ongoing research and development activities are, and the production and marketing of our pharmaceutical product candidates derived from such activities will be, subject to regulation by numerous international regulatory authorities. Prior to marketing, any therapeutic product developed must undergo rigorous pre-clinical testing and clinical trials and, to the extent that any of our pharmaceutical products under development are marketed abroad, by the relevant international regulatory authorities. For example, in Australia, principally the Therapeutics Goods Administration, or TGA; the Food and Drug Administration, or FDA, in the United States; the Medicines and Healthcare products Regulatory Agency, or MHRA, in the United Kingdom; the Medical Products Agency, or MPA, in Sweden; and the European Medicines Agency, or EMA. These processes can take many years and require the expenditure of substantial resources. Governmental authorities may not grant regulatory approval due to matters arising from pre-clinical animal toxicology, safety pharmacology, drug formulation and purity, insufficient efficacy, clinical side effects or patient risk profiles, or medical contraindications.
Failure or delay in obtaining regulatory approvals would adversely affect the development and commercializationcommercialisation of our pharmaceutical product candidates. We may not be able to obtain the clearances and approvals necessary for clinical testing or for manufacturing and marketing our pharmaceutical product candidates.
Even if regulatory authorities approve any of our product candidates, the manufacture, labeling, storage, recordkeeping, reporting, distribution, advertising, promotion, marketing, sale, import and export of these drugs will be subject to strict and ongoing regulation. If we, our partners, our product candidates or the manufacturing facilities for our product candidates fail to comply with applicable regulatory requirements, a regulatory agency may suspend any ongoing clinical trials; issue warning letters or untitled letters; suspend or withdraw regulatory approval; refuse to approve pending applications or supplements to applications; suspend or impose restrictions on operations; seize or detain products, prohibit the export or import of products, or require us to initiate a product recall; seek other monetary or injunctive remedies; or impose civil or criminal penalties.
We will not be able to commercializecommercialise any current or future product candidates if we fail to adequately demonstrate their safety efficacy and superiority over existing therapies.efficacy.
Before obtaining regulatory approvals for the commercial sale of any of our pharmaceutical products, we must demonstrate through pre-clinical testing and clinical studies that our product candidates are safe and effective for use in humans for each target indication. Results from early clinical trials may not be predictive of results obtained in large-scale, later-stage clinical testing. Even though a candidate drug product shows promising results in clinical trials, regulatory authorities may not grant the necessary approvals without sufficient safety and efficacy data.
We may not be able to undertake further clinical trials of our current and future product candidates as therapies for Alzheimer’s disease, Huntington disease, Parkinsonian movement disorders or other indications or to demonstrate the safety and efficacy or superiority of any of these product candidates over existing therapies or other therapies under development, or enter into any collaborative arrangement to commercializecommercialise our current or future product candidates on terms acceptable to us, or at all. Clinical trial results that show insufficient safety and efficacy could adversely affect our business, financial condition and results of operations.
Positive results in previousa clinical trialstrial of a product candidatescandidate may not be replicated in future clinical trials, which could result in development delays or a failure to obtain marketing approval.
Positive results in previousa clinical trialstrial of a product candidate may not be predictive of similar results in future clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in late-stage clinical trials even after achieving promising results in early-stage development. Accordingly, the results from the completed pre-clinical studies and clinical trials for PBT2our product candidates may not be predictive of the results we may obtain in later stage trials. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily in pre-clinical studies and clinical trials have nonetheless failed to obtain FDA or EMA approval for their products.
Even if approved, any product candidates that we or our subsidiaries may develop and market may be later withdrawn from the market or subject to promotional limitations.
We may not be able to obtain the labeling claims necessary or desirable for the promotion of our product candidates if approved. We may also be required to undertake post-marketing clinical trials. If the results of such post-marketing studies are not satisfactory or if adverse events or other safety issues arise after approval, the FDA or a comparable regulatory agency in another country may withdraw marketing authorizationauthorisation or may condition continued marketing on commitments from us or our subsidiaries that may be expensive or time consuming to complete. In addition, if we or others identify adverse side effects after any of our products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation of our or our subsidiaries’ products, additional clinical trials, changes in labeling of our or our subsidiaries’ products and additional marketing applications may be required. Any reformulation or labeling changes may limit the marketability of such products if approved.
Healthcare reform measures and other statutory or regulatory changes could adversely affect our business.
In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory proposals to change the healthcare system in ways that could impact our business. For example, the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act of 2010 (collectively, the “ACA”), enacted in March 2010, substantially changedchanges the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry. With regard to pharmaceutical products, among other things, the ACA is expected to expand and increase industry rebates for drugs covered under Medicaid programs and make changes to the coverage requirements under the Medicare D program. Legislative and regulatory proposals impacting upon the healthcare system are submitted regularly and the existing framework in force in various jurisdictions may not apply in the short to long term.
We still cannot fully predict the impact of the ACA on our company as many of the ACA reforms require the promulgation of detailed regulations implementing the statutory provisions which has not yet been completed.
Since its enactment, there have been judicial, executive and Congressional challenges to certain aspects of the ACA. On June 17, 2021, the U.S. Supreme Court dismissed the most recent judicial challenge to the ACA without specifically ruling on the constitutionality of the ACA. Prior to the Supreme Court’s decision, President Biden issued an executive order to initiate a special enrollment period from February 15, 2021 through August 15, 2021 for purposes of obtaining health insurance coverage through the ACA marketplace. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.
In addition, other legislative changes have been proposed and adopted since the Affordable Care Act was enacted. For example, the Budget Control Act of 2011, among other things, included reductions to Medicare payments to providers, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect into 2032, with the exception of a temporary suspension from May 1, 2020 through March 31, 2022, unless additional Congressional action is taken. Additionally, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. In addition, the Medicare Access and CHIP Reauthorization Act of 2015 enacted on April 16, 2015, repealed the formula by which Medicare made annual payment adjustments to physicians and replaced the former formula with fixed annual updates and a new system of incentive payments began in 2019 that are based on various performance measures and physicians’ participation in alternative payment models such as accountable care organizations.
We expect additional state, federal, and foreign healthcare reform measures to be adopted in the future, any of which could limit the amounts that federal, state, and foreign governments will pay for healthcare products and services, which could result in reduced demand for our future products or additional pricing pressure.
If we fail to comply with our reporting and payment obligations under the Medicaid program or other governmental pricing programs, we could be subject to additional reimbursement requirements, penalties, sanctions and fines which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Pricing and rebate calculations vary among products and programs. The calculations are complex and will often be subject to interpretation by us, governmental or regulatory agencies and the courts. If we become aware that our reporting of pricing data for a prior quarter was incorrect, we will be obligated to resubmit the corrected data. For the Medicaid drug rebate program, corrected data must be submitted for a period not to exceed twelve quarters from the quarter in which the data originally were due. Such restatements and recalculations increase our costs for complying with the laws and regulations governing the Medicaid drug rebate program and other governmental pricing programs.
We may be liable for errors associated with our submission of pricing data. If we are found to have knowingly submitted false pricing data to the Medicaid program, we may be liable for civil monetary penalties in the amount of up to U.S.$100,000 per item of false information. Our failure to submit pricing data to the Medicaid program on a timely basis could result in a civil monetary penalty of U.S.$10,000 per day for each day the information is late. Such failure also could be grounds to terminate our Medicaid drug rebate agreement, which is the agreement under which we might participate in the Medicaid drug rebate program. In the event that our rebate agreement is terminated, federal payments may not be available under Medicaid for our covered outpatient drugs. We cannot assure you that our submissions will not be found to be incomplete or incorrect.
If we obtain FDA approval for any of our product candidates and begin commercializing those products in the United States, our operations may be directly or indirectly through our customers, subject to various federal and state fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute, the federal False Claims Act, and physician sunshine laws and regulations.
The Biden administration also introduced various measures in 2021 focusing on healthcare and drug pricing, in particular. For example, on January 28, 2021, President Biden issued an executive order that initiated a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021, and remained open through August 15, 2021. The executive order also instructed certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA. On the legislative front, the American Rescue Plan Act of 2021 was signed into law on March 11, 2021, which, in relevant part, eliminates the statutory Medicaid drug rebate cap, currently set at 100% of a drug’s average manufacturer price, for single source drugs and innovator multiple source drugs, beginning January 1, 2024. And, in July 2021, the Biden administration released an executive order entitled, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response, on September 9, 2021, HHS released a “Comprehensive Plan for Addressing High Drug Prices” that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. And, in November 2021, President Biden announced the “Prescription Drug Pricing Plan” as part of the Build Back Better Act (H.R. 5376) passed by the House of Representatives on November 19, 2021, which aims to lower prescription drug pricing by, among other things, allowing Medicare to negotiate prices for certain high-cost prescription drugs covered under Medicare Part D and Part B after the drugs have been on the market for a certain number of years and imposing tax penalties on drug manufacturers that refuse to negotiate pricing with Medicare or increase drug prices “faster than inflation.” If enacted, this bill could have a substantial impact on our business. In the coming years, additional legislative and regulatory changes could be made to governmental health programs that could significantly impact pharmaceutical companies and the success of our product candidates. At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. There is uncertainty as to what healthcare programs and regulations may be implemented or changed at the federal and/or state level in the United States or the effect of any future legislation or regulation. Furthermore, we cannot predict what actions the Biden administration will implement in connection with the Health Reform Law. However, it is possible that such initiatives could have an adverse effect on our ability to obtain approval and/or successfully commercialize products in the United States in the future. For example, any changes that reduce, or impede the ability to obtain, reimbursement for our product candidates approved for commercialization in the United States, if any, or any other drug products we may commercialize in the future or that reduce medical procedure volumes could adversely affect our operations and/or future business plans.
The pharmaceutical and biotechnology industries are subject to extensive regulation, and from time to time legislative bodies and governmental agencies consider changes to such regulations that could have significant impact on industry participants. For example, in light of certain highly-publicizedhighly-publicised safety issues regarding certain drugs that had received marketing approval, the U.S. Congress has considered various proposals regarding drug safety, including some which would require additional safety studies and monitoring and could make drug development more costly. Additional legislation or regulation, if any, relating to safetyThe implementation of cost containment measures or other aspects of drug developmenthealthcare system reforms may be enacted in the future, whichprevent us from being able to generate revenue, attain profitability, or commercialise our products. Such reforms could have an adverse effect on anticipated revenues from product candidates that impact we may successfully develop and for which we may obtain regulatory approval and may affect our business.overall financial condition and ability to develop product candidates. In addition, it is possible that there will be further legislation or regulation that could harm our business, financial condition and several results of operations.
We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act.
Our business operations may be subject to anti-corruption laws and regulations, including restrictions imposed by the U.S. Foreign Corrupt Practices Act or the FCPA.(the “FCPA”). The FCPA and similar anti-corruption laws in other jurisdictions such as the U.K. Bribery Act generally prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. We cannot provide assurance that our internal controls and procedures will always protect us from criminal acts committed by our employees or third parties with whom we work. If we are found to be liable for violations of the FCPA or similar anti-corruption laws in international jurisdictions, either due to our own acts or out of inadvertence, or due to the acts or inadvertence of others, we could suffer from criminal or civil penalties which could have a material and adverse effect on our results of operations, financial condition and cash flows.
Risks Related to Intellectual Property
Our success depends upon our ability to protect our intellectual property and our proprietary technology, to operate without infringing the proprietary rights of third parties and to obtain marketing exclusivity for our products and technologies.
Any future success will depend in large part on whether we can:
| obtain and maintain patents to protect our own product candidates and technologies; |
| obtain licenses to the patented technologies of third parties; |
| operate without infringing on the proprietary rights of third parties; and |
| protect our trade secrets, know-how and other confidential information. |
Patent matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the availability and breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. Any of the pending or future patent applications filed by us or on our behalf may not be approved, we may not develop additional proprietary products or processes that are patentable, or we may not be able to license any other patentable products or processes.
Our products may be eligible for orphan designation for particular therapeutic indications that are of relatively low prevalence and for which there is no effective treatment. Orphan drug designation affords market exclusivity post marketing authorizationauthorisation for a product for a specified therapeutic utility. The period of orphan protection is dependent on jurisdiction, for example, seven years in the United States and ten years in Europe. The opportunity to gain orphan drug designation depends on a variety of requirements specific to each marketing jurisdiction and can include; a showing of improved benefit relative to marketed products, that the mechanism of action of the product would provide plausible benefit and the nature of the unmet medical need within a therapeutic indication. It is uncertain if our products will be able to obtain orphan drug designation for the appropriate indications and in the jurisdictions sought.
There is a risk that the U.S. Congress, for example, could amend laws to significantly shorten the exclusivity period. Once any regulatory period of exclusivity expires, depending on the status of our patent coverage and the nature of the product, we may not be able to prevent others from marketing products that are biosimilarsimilar to or interchangeable with our products, which would materially adversely affect us.
Our commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a court determines that we were infringing any third partythird-party patents, we could be required to pay damages, alter our products or processes, obtain licenses or cease certain activities. Licenses required under patents held by third parties may not be made available on terms acceptable to us or at all. To the extent that we are unable to obtain such licenses, we could be foreclosed from the development, export, manufacture or commercializationcommercialisation of the product requiring such license or encounter delays in product introductions while we attempt to design around such patents, and any of these circumstances could adversely affect our business, financial condition and results of operations.
We may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity of third partythird-party proprietary rights. We may have to defend the validity of our patents in order to protect or enforce our rights against a third party. Third parties may in the future assert against us infringement claims or claims that we have infringed a patent, copyright, trademark or other proprietary right belonging to them. Any infringement claim, even if not meritorious, could result in the expenditure of significant financial and managerial resources and could negatively affect our profitability. While defending our patents, the scope of the claim may be reduced in breadth and inventorship of the claimed subject matter, and proprietary interests in the claimed subject matter may be altered or reduced. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Any such litigation, regardless of outcome, could be expensive and time consuming, and adverse determinations in any such proceedings could prevent us from developing, manufacturing or commercializingcommercialising our products and could adversely affect our business, financial condition and results of operations.
The patents for our product candidates have varying expiration dates and, if these patents expire, we may be subject to increased competition and we may not be able to recover our development costs or market any of our approved products profitably. In some of the larger potential market territories, such as the United States and Europe, patent term extension or restoration may be available to compensate for time taken during aspects of the product’s development and regulatory review or by procedural delays before the relevant patent office. However, such an extension may not be granted, or if granted, the applicable time period or the scope of patent protection afforded during any extension period may not be sufficient. In addition, even though some regulatory authorities may provide some other exclusivity for a product under their own laws and regulations, we may not be able to qualify the product or obtain the exclusive time period. If we are unable to obtain patent term extension/restoration or some other exclusivity, we could be subject to increased competition and our opportunity to establish or maintain product revenue could be substantially reduced or eliminated. Furthermore, we may not have sufficient time to recover our development costs prior to the expiration of our U.S. and non-U.S. patents.
We may face difficulties in certain jurisdictions in protecting our intellectual property rights, which may diminish the value of our intellectual property rights in those jurisdictions.
The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States and the European Union, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our collaboration partners encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired and our business, financial condition and results of operations may be adversely affected.
Intellectual property rights do not address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:
| Others may be able to make products that are similar to ours but that are not covered by the claims of the patents that we own. |
| Others may independently develop similar or alternative technologies or otherwise circumvent any of our technologies without infringing our intellectual property rights. |
| We or any of our collaboration partners might not have been the first to conceive and reduce to practice the inventions covered by the patents or patent applications that we own, license or will own or license. |
| We or any of our collaboration partners might not have been the first to file patent applications covering certain of the patents or patent applications that we or they own or have obtained a license, or will own or will have obtained a license. |
| It is possible that our pending patent applications will not |
| Issued patents that we own may not provide us with any competitive advantage, or may be held invalid or unenforceable, as a result of legal challenges by our competitors. |
| ● | Our competitors might conduct research and development activities in countries where we do not have patent rights, or in countries where research and development safe harbor laws exist, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets. |
| The patents of third parties or pending or future applications of third parties, if issued, may have an adverse effect on our business. |
| Compulsory licensing provisions of certain governments to patented technologies that are deemed necessary for the government to access. |
Changes in patent laws or patent jurisprudence could diminish the value of our patents, in general, thereby impairing our ability to protect our products or product candidates.
As is the case with other biotechnology and pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involves both technological and legal complexity. Therefore, obtaining and enforcing pharmaceutical patentscomplexity, it is costly, time-consuming and inherently uncertain. In addition, the America Invents Act was recently enacted in the United States, resulting in significant changes to the U.S. patent system. The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S. Patent and Trademark Office, or USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Similarly, the complexity and uncertainty of European patent laws has also increased in recent years. In addition, the European patent system is relatively stringent with regard to the type of amendments that are allowed during prosecution. These changes could limit our ability to obtain new patents in the future that may be important for our business.
Confidentiality agreements with employees and others may not adequately prevent disclosure of our trade secrets and protect our other proprietary information.
We consider proprietary trade secrets and/or confidential know-how and unpatented know-how to be important to our business. We may rely on trade secrets and/or confidential know-how to protect our technology, especially where patent protection is believed by us to be of limited value. However, trade secrets and/or confidential know-how can be difficult to maintain as confidential.
To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractors and advisors to enter into confidentiality agreements with us. However, current or former employees, consultants, contractors and advisers may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a claim that a third-party obtained illegally and is using trade secrets and/or confidential know-how is expensive, time consuming and unpredictable. The enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction.
Failure to obtain or maintain trade secrets and/or confidential know-how trade protection could adversely affect our competitive position. Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection in respect of the same. If successful in obtaining such patent protection, our competitors could limit our use of our trade secrets and/or confidential know-how.
Risks Related to Our Compliance with the Sarbanes-Oxley Act of 2002
We may fail to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, which could adversely affect our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares and ADSs.
The Sarbanes-Oxley Act of 2002 imposes certain duties on us and our executives and directors. To comply with this statute, we are required to document and test our internal control over financial reporting. Our efforts to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, governing internal control and procedures for financial reporting, have resulted in increased general and administrative expenses and a diversion of management time and attention, and we expect these efforts to require the continued commitment of significant resources. We may identify material weaknesses or significant deficiencies in our assessments of our internal control over financial reporting. Failure to maintain effective internal control over financial reporting could result in investigations or sanctions by regulatory authorities and could adversely affect our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares and ADSs.
Material weaknesses in our disclosure controls and procedures could negatively affect shareholder and customer confidence.
Under Sarbanes-Oxley, we are required to assess the effectiveness of our disclosure controls and procedures (as defined in Sarbanes-Oxley) on an annual basis. If we were to conclude that our disclosure controls and procedures were ineffective, shareholder and customer confidence could be negatively affected, which could have a material adverse impact on the market price of
ourRisks Related to Ownership of Our Securities
Our stock price may be volatile and the U.S. trading market for our American Depository Shares (ADSs)securities is limited.
The market price for our securities, like that of the securities of other pharmaceutical and biotechnology companies, has fluctuated substantially and may continue to be highly volatile in the future.On March 4, 2016, our Board of Directors resolved to change the ratio of our Ordinary Shares to ADSs from one (1) ADS representing 10 Ordinary Shares to 1 ADS representing 60 Ordinary Shares, which was effective March 24, 2016. During the last two fiscal years ended June 30, 2017 and subsequently until August 31, 2017, the market price for our ordinary shares on the ASX has, after giving effect to the implementation of the reverse ratio, ranged from as low as A$0.04 to a high of A$0.15 and the market price of our ADSs on the NASDAQ Capital Market has ranged from as low as U.S.$1.52 to a high of U.S.$6.69. The market price for our securities has been affected by both broad market developments and announcements relating to actual or potential developments concerning products under development. We believe that the following factors, in addition to other risk factors described above and elsewhere in this annual report, will continue to significantly affect the market price of our ordinary shares:
| the results of pre-clinical testing and clinical trials by us and our competitors; |
| developments concerning research and development, manufacturing, and marketing alliances or collaborations by us and our competitors; |
| announcements of technological innovations or new commercial products by us and our competitors; |
| determinations regarding our patent applications, patents and those of others; |
| publicity regarding actual or potential results relating to medicinal products under development by us and our competitors; |
| proposed governmental regulations and developments in Australia, the |
| litigation; |
| economic and other external factors; and |
| period-to-period fluctuations in our operating results. |
In addition, stock markets have experienced extreme price and volume fluctuations. These fluctuations have especially affected the stock market price of many high technology and healthcare related companies, including pharmaceutical and biotechnology companies, and, in many cases, are unrelated to the operating performance of the particular companies. Market fluctuations, as well as general political and economic conditions, such as a recession, interest rate or currency rate fluctuations, could adversely affect the market price of our securities.
Ownership interest in our company may be further diluted as a result of additional financings.
We maywill likely seek to raise funds from time to time in public or private issuances of equity, and such financings may take place in the near future or over the longer term. In May 2011, we registered U.S.$50,000,000 of securities for public sale pursuant to our registration statement on Form F-3. In July 2011, we issued a prospectus under such registration statement providing for the sale of up to 50 million ordinary shares represented by 5 million ADSs pursuant to an “At-The-Market” facility. In August 2013 we issued a prospectus providing for the sale of up to U.S.$47,184,000 of our ordinary shares under an amended “At-The-Market” facility. On November 26, 2014,October 13, 2016, we entered into Amendment No. 2 to our At-The-Marketan At-Market Issuance Sales Agreement, to continue the at-the-market equityfor an at-market offering program under which we may from time to time sell up to an additionalaggregate of U.S.$44,460,787 of our ordinary shares represented by ADSs. On November 8, 2017 we entered into Amendment No. 1 to our At-Market Issuance Sales Agreement to continue the at-market offering program which we may from time to time sell up to an aggregate of $50,000,000 of our ordinary shares represented by ADSs. From November 26, 2014July 1, 2018 until June 30, 2015July 1, 2020, we sold A$7.1 millionU.S.$5,124,764 of additional ordinary shares under this program. We made no salesOn December 16, 2020 we entered into Amendment No. 2 to our At-Market Issuance Sales Agreement to continue the at-market offering program which we may from time to time sell up to an aggregate of $50,000,000 of our ordinary shares represented by ADSs. From February 10, 2021 to date, we sold U.S.$15,156,894 of additional ordinary shares under this facility during the during the two fiscal years year ended June 30, 2017 and to date have made no sales in fiscal 2018.program. Since the inception of our At-The-Market” facility in 2011 and through June 30, 2017to date we sold an aggregate of 167,113,270833,836,990 ordinary shares under this facility and raised a total of A$46.574.2 million (U.S.$42.562.8 million) in gross proceeds.
Without shareholder approval, we may not issue more than 25% of our outstanding ordinary shares in any twelve month period other than by a pro rata rights offering or a share purchase plan offer (of shares with a value at the issue price of up to A$15,00030,000 per shareholder to a maximum of 30% of our outstanding shares) in each case to the then existing shareholders in accordance with the listing rules of the ASX. Sales of our ADSs offered through our “At-The-Market” facility and future equity offerings may result in substantial dilution to the interests of our current shareholders. The sale of a substantial number of securities to investors, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
There is a substantial risk that we are a passive foreign investment company, or PFIC, to some U.S. investors which will subject our U.S.those investors to adverse tax rules.rules
Holders of our ADSs who are U.S. residents face income tax risks. There is a substantial risk that we are a passive foreign investment company, commonly referred to as a PFIC.PFIC to some U.S. investors, and a controlled foreign corporation, or CFC to other U.S. investors. Our treatment as a PFIC could result in a reduction in the after-tax return to the holders of our ADSs and would likely cause a reduction in the value of such ADSs. For U.S. federal income tax purposes, we will be classified as a PFIC for any taxable year in which either (i) 75% or more of our gross income is passive income, or (ii) at least 50% of the average value of all of our assets for the taxable year produce or are held for the production of passive income. For this purpose, cash is considered to be an asset that produces passive income. As a result of our substantial cash position and the decline in the value of our stock, we believe that we became a PFIC during the taxable year ended June 30, 2005, and once again qualifiedwere classified as a PFIC during each of the following fiscal years. We believe that we once again will be classified as a PFIC for the taxable year ended June 30, 2017.2023 for some U.S. investors. Highly complex rules will apply to U.S. holders owning ADSs. Accordingly, you are urged to consult your tax advisors regarding the application of such rules. U.S. residents should carefully read “Item 10.E. Additional Information - Taxation, United States Federal Income Tax Consequences” for a more complete discussion of the U.S. federal income tax risks related to owning and disposing of our ADSs.
We do not anticipate paying dividends on our ordinary shares.
We have never declared or paid cash dividends on our ordinary shares and do not expect to do so in the foreseeable future. The declaration of dividends is subject to the discretion of our Board of Directors and will depend on various factors, including our operating results, financial condition, future prospects and any other factors deemed relevant by our board of directors. You should not rely on an investment in our company if you require dividend income from your investment in our company. The success of your investment will likely depend entirely upon any future appreciation of the market price of our ordinary shares, which is uncertain and unpredictable. There is no guarantee that our ordinary shares will appreciate in value or even maintain the price at which you purchased your ordinary shares.
Currency fluctuations may adversely affect the price of our ordinary shares.securities.
Our ordinary shares are quoted in Australian dollars on the ASX and our ADSs trade on the NASDAQ Capital Market in U.S. dollars. Movements in the Australian dollar/U.S. dollar exchange rate may adversely affect the U.S. dollar price of our ordinary shares. In the past year the Australian dollar has generally depreciatedstrengthened against the U.S. dollar. Any continuation ofIf the Australian dollar weakens against the U.S. dollar, this trend may negatively affect the U.S. dollar price of our ordinary shares, even if the price of our ordinary shares in Australian dollars decreases or remains unchanged. However, this trend may not continue and may be reversed. If the Australian dollar further strengthens against the U.S. dollar, the U.S. dollar price of the ordinary shares could increase, even if the price of our ordinary shares in Australian dollars decreases or remains unchanged.
If we fail to maintain compliance with NASDAQ’s continued listing requirements, our shares may be delisted from the NASDAQ Capital Market.
Our ordinary shares are quoted on the ASX and our ADSs trade on the NASDAQ Capital Market. To continue to be listed on the NASDAQ Capital Market, we need to satisfy a number of conditions, including a minimum closing bid price per ADS of $1.00 for 30 consecutive business days and shareholders’ equity of at least $2.5 million.
On February 23, 2022 we received notification from the Listing Qualifications Department of NASDAQ advising the company that it was non-compliant with NASDAQ’s requirements that listed securities maintain a minimum bid price of $US1.00 per share on NASDAQ as outlined in the NASDAQ Listing Rules.
On January 24, 2023, we received formal notification from The Nasdaq Stock Market LLC confirming that we regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2), the “Minimum Bid Price Rule”.
We could in the future fail to meet this or other NASDAQ continued listing requirements and fail to cure such noncompliance, resulting in the delisting of our ADSs from NASDAQ. If we are delisted from NASDAQ, trading in our ordinary shares could be conducted on a U.S. market where an investor would likely find it significantly more difficult to dispose of, or to obtain accurate quotations as to the value of, our ordinary shares (such delisting should not affect the trading over the ASX).
Risks Related to Our Location in Australia
It may be difficult to enforce a judgment in the United States against us and our officers and directors or to assert U.S. securities laws claims in Australia or serve process on our officers and directors.
We are incorporated in Australia. MostMore than half of our executive officers and directors are non-residents of the United States. Therefore, it may be difficult for an investor, or any other person or entity, to enforce a U.S. court judgment based upon the civil liability provisions of the U.S. federal securities laws in an Australian court against us or any of those persons or to effect service of process upon these persons in the United States. Additionally, it may be difficult for an investor, or any other person or entity, to enforce civil liabilities under U.S. federal securities laws in original actions instituted in Australia.
As a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we may follow certain home country corporate governance practices instead of certain NASDAQ requirements.
As a foreign private issuer whose shares are listed on Thethe NASDAQ Capital Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules,Rules. Among other things, as a foreign private issuer we may follow home country practice with regard to among other things, the composition of the board of directors, and its committees, director nomination process, compensation of officersprocedure, and quorum at shareholders’ meetings. In addition, we may choose to follow Australianour home country law, instead of Thethe NASDAQ Stock Market Rules, thatwhich require that we obtain shareholder approval for certain dilutive events such as for the establishment or amendment of certain equity based compensation plans, an issuance that will result in a change of control of the company, certain transactions other than a public offering involving issuances of a 20% or more interest in the company, and certain acquisitions of the stock or assets of another company. A foreign private issuer that elects to follow a home country practice instead of NASDAQ requirements must submit to NASDAQ in advance a written statement from an independent counsel in such issuer’s home country certifying that the issuer’s practices are not prohibited by the home country’s laws. In addition, a foreign private issuer must disclose in its annual reports filed with the SEC each such requirement that it does not follow and describe the home country practice followed by the issuer instead of any such requirement. Accordingly, our shareholders may not be afforded the same protection as provided under NASDAQ’s corporate governance rules. rules
We currently do not have a majority of independent directors serving on our Board of Directors, which may afford less protection to our shareholders than if our Board of Directors had a majority of independent directors.
As of the date of this annual report, a majority of our directors did not satisfy the standards for independence as specified by the SEC and the listing standards of The Nasdaq Stock Market pursuant to which we evaluate director independence. If our Board of Directors is not made up of a majority of independent directors, there may be a lower level of oversight on executive management, and our Board of Directors may be influenced by the concerns, issues or objectives of management, including compensation and governance issues, to a greater extent than would occur with a majority of independent directors. As a result, the composition of our Board of Directors may afford less protection to our shareholders than if our Board of Directors were composed of a majority of independent directors.
A lack of independent directors may also make it difficult to create board committees meeting the requirements of our board committee charters and the NASDAQ Rules pursuant to which we evaluate director independence. Historically, we have not electedstrived to follow any home country practice insteadhave an audit committee comprised of at least three independent directors and other board committees comprised solely of independent directors. Currently, our audit committee has only two members, both of who are independent under the NASDAQ Rules and applicable SEC requirements. Due to the lack of independent directors, it may be difficult to establish effective operating board committees comprised of independent members to oversee committee functions. This structure gives our executive officers additional control over certain corporate governance issues, including compensation matters and audit issues for internal control and reporting purposes, with more limited oversight of our executive officers’ decisions and activities.
Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares.
We are incorporated in Australia and are subject to the takeoverstakeover’s laws of Australia. Among other things, we are subject to the Australian Corporations Act 2001, or the Corporations Act. Subject to a range of exceptions, the Corporations Act prohibits the acquisition of a direct or indirect interest in our issued voting shares if the acquisition of that interest will lead to a person’s voting power in us increasing from 20% or below to more than 20%, or increasing from a starting point that is above 20% and below 90%. Australian takeovers laws may discourage takeover offers being made for us or may discourage the acquisition of large numbers of our ordinary shares. This may have the ancillary effect of entrenching our board of directors and may deprive or limit our shareholders’ strategic opportunities to sell their ordinary shares and may restrict the ability of our shareholders to obtain a premium from such transactions.
Our Constitution and other Australian laws and regulations applicable to us may adversely affect our ability to take actions that could be beneficial to our shareholders.
As an Australian company we are subject to different corporate requirements than a corporation organized under the laws of the United States. Our Constitution, as well as the Corporations Act, set forth various rights and obligations that are unique to us as an Australian company. These requirements operate differently than from many U.S. companies and may limit or otherwise adversely affect our ability to take actions that could be beneficial to our shareholders. For more information, you should carefully review the summary of these matters set forth under the section entitled, “Item 10.B —- Additional Information —- Memorandum and Articles of Association” as well as our Constitution.
ITEM 4.Information on the Company
| A. | History and Development of the Company |
Our legal and commercial name is Alterity Therapeutics Limited (formerly Prana Biotechnology Limited.Limited). We were incorporated under the laws of the Commonwealth of Australia on November 11, 1997 and began limited operations shortly thereafter. On April 8, 2019, we changed our name to Alterity Therapeutics Limited. Our registered office is located at Level 3, 62 Lygon Street, Carlton, Victoria, 3053, Australia and our telephone number is 011-61-3-9824-5254.+-61-3-9824-5254. Our principal executive office is located at Level 2, 369 Royal Parade, Parkville, Victoria 3052,14, 350 Collins Street, Melbourne, VIC 3000, Australia and our telephone number is 011-61-3-9349-4906.+-61-3-9349-4906. Our website address is www.pranabio.com.www.alteritytherapeutics.com. The information in our website is not incorporated by reference into this annual report.
Alterity’s mission from inception was to treat neurodegenerative diseases and its mission has remained focused on this class of diseases.
Alterity is developing first-in-class therapies to treat neurodegenerative diseases. Our missionlead drug candidate, ATH434, is to develop therapeutic drugs designed to block the accumulation and aggregation of α-synuclein, a protein implicated in neurodegeneration. ATH434 has been shown preclinically to reduce α-synuclein pathology, preserve nerve cells, and improve motor function by restoring normal iron balance in the brain. In this way, it has potential to treat Parkinson’s disease as well as Multiple System Atrophy (MSA), a rare Parkinsonian disorder. The company has been granted Orphan drug designation for ATH434 for the underlying causestreatment of degenerationMSA by both the US FDA and European Commission. The exclusivity conferred by the Orphan drug designation is expected to persist beyond the term of the brain aspatents comprising the aging process progresses, currently focusing on Alzheimer’s disease, Huntington diseaseATH434 global patent portfolio.
Phase 1 enabling studies have been completed and Parkinsonian movement disorders. Other potential applications for our therapies include neurodegenerative disorders, certain cancers, age-related macular degeneration, Motor Neuron disease, Creutzfeldt-Jakob disease (the human variantwe have commenced a randomized, double-blind, placebo-controlled Phase 2 clinical trial with recruitment of Mad Cow disease)patients underway. The global trial has received regulatory authorization to proceed in New Zealand, Italy, and a variety of orphan neurodegenerative disorders. the UK, with additional regulatory approvals expected to be established in this financial year.
Our technology is the outcome of many years of intense research from some of the leading scientists in neurodegenerative disorders and other diseases. Beginning with the worlddiscovery and patenting of our initial clinical drug candidate, PBT2, the company continued to apply its expertise to inventing and patenting novel molecules with potential to treat neurodegenerative diseases which resulted in ATH434 (see above).
In 2019 and 2020, the Company invented next generation iron chaperones, a technology capable of redistributing excess iron in the area of age-related degenerative diseases. In August 2009, a key patent protecting our clinical drug asset PBT2 was granted by the European Patent Office, or the EPO. The patent entitled ‘8-Hydroxyquinoline derivatives’ covers the composition of matter of selected families of 8-Hydroxyquinoline compounds,central nervous system including PBT2, and the uses of such compounds for the treatment of neurological diseases, including Alzheimer’s disease and Huntington disease. The European patent has a 20-year term expiring on July 16, 2023, with a possible extension of the term of up to five additional years under supplementary protection provisions. In November 2009, our key patent protecting our clinical drug asset PBT2 was granted in the United States. The U.S. patent, which is also entitled ‘8-Hydroxyquinoline derivatives,’ covers the composition of matter of selected families of 8-Hydroxyquinoline compounds, including PBT2, and will expire on December 21, 2025. It is possible that the patent may be further extended in the future under the pharmaceutical extension of term provisions that apply in the United States. In March 2015, claims to the use of PBT2 in the treatment of Alzheimer’s disease were granted and Parkinson’s disease. These compounds are the subject of composition of matter claims in October 2015, claimspatent families which either are filed in countries and regions that represent the commercially significant economies or are earmarked to be filed in those countries.
In 2021, the useCompany invented next generation zinc ionophores, a technology capable of PBT2modulating zinc for the treatment of Huntington disease were granted. In April 2011,various diseases such as cancer, neurological diseases and infectious diseases. These compounds are the Japanese Patent Office granted the same patent, also entitled ‘8-Hydroxyquinoline derivatives’, with the claimed subject matter encompassing compounds and pharmaceutical compositions containing PBT2 and the use of the compounds for the treatment of Alzheimer’s disease. The Japanese patent will expire on July 2023 and may be eligible for pharmaceutical extension of patent term for up to a further five years. In December 2011, claims for our key patent protecting our product candidate for Parkinson’s disease, PBT434 was granted in the United States. The patent is entitled ‘Neurologically Active Compounds’ and covers the composition of matter claims in a patent family which is earmarked for filing in countries and pharmaceutical compositions of selected families of 8-hydroxyquinazolinone compounds, including PBT434. In March and April 2013, we also received a Notice of Grant fromregions that represent the Canadian Patent Office and European Patent Office, respectively, for our key patent protecting PBT434. The patents, which are entitled, ‘Neurologically Active Derivatives’ cover the composition of matter of selected quinazolinone compounds, including PBT434. These two cases also included additional granted claims to the use of the compounds for the treatment of neurodegenerative diseases.commercially significant economies.
Our technology has progressed to yieldcreate a diversified library of chemical compounds whichand we continue to strengthen our intellectual property portfolio with new patents generated by our discovery and research efforts. This may yield future product candidates across various neurodegenerative and other indications. A comprehensive data package for PBT434, our lead compound for prospective development in Parkinsonian movement disorders, has been prepared to support first-in-man studies. Prospective clinical studies with PBT2 will depend on the either lifting the Partial Clinical Hold (PCH) which currently restricts drug exposure levels and/or the possible development of PBT2 into new therapeutic indications. See “Item 4.B. – Information on the Company – Business Overview – Clinical Trials for Our Product Candidates”).
Since inception, we have not been required to invest material amounts for capital expenditures since our development efforts have taken place at research facilities operated by institutions with which we have relationships. In the three fiscal years ended June 30, 2017,2023, our capital expenditures have totaledtotalled A$47,364.106,930.
| B. | Business Overview |
Alterity’s Background
Our intellectual propertytechnology has been developed over an extended period and continues to develop through the collaborative efforts of highly regarded scientists, andcompany employees as well as representatives of research institutions in this field. The intellectual property owned by our company has been developed by our employees and through a team of scientists engaged by our company at several internationally recognized institutional research facilities, listed below.
Since completing our initial public offering and listing process of our ordinary shares on the ASX on March 28, 2000, we havehistorically concentrated our resources toward the pursuit of ourneurological diseases with an initial focus in Alzheimer’s disease, targets and creation of a chemical library of proprietary molecules. Currently, our research and clinical development efforts are primarily focused on Parkinson’s disease and related disorders where we are identifying and developing novel compounds that address the underlying pathology of these disorders by binding and redistributing excess iron, reducing alpha-synuclein (or α -synuclein) aggregation, and rescuing neurons in the brain.
Our research effortsclinical development program is led toby two Phase 2 clinical trials in Multiple System Atrophy, or MSA, a very rare parkinsonian disorder with no approved treatments that address the developmentunderlying pathology of the disease. We are also conducting a novel compound, PBT2,Natural History Study in MSA and have a low molecular weight chemical entity that demonstratespreclinical program in Parkinson’s disease.
We also have a significant pre-clinical improvementrobust discovery platform with over PBT1, and currently a library of over 2,000 other molecules1000 validated compounds from different chemical scaffolds.scaffolds in our chemical library.
Since 2009, our chemistry program is undertaken within laboratories leased from The University of Melbourne’s Bio21 Molecular Science and Biotechnology Institute, which is a multidisciplinary research center that specializes in medical, agricultural and environmental biotechnology. Accommodating more than 500 research scientists, students and industry participants, the Bio21 Institute is one of the largest biotechnology research centers in Australia.
Candidate product discovery and Translational Researchtranslational Biology Programs
Alterity’s intellectual property as ais considered “platform technology” since we believebased on our approach that it addresses the causes of a broad spectrum of neurodegenerative and age-related diseases based oncan be addressed by targeting the interrelationship of metals and proteins. Historically, the majority of our research efforts have been directed at research into potential therapeutics for the treatment of Alzheimer’s disease, Huntington disease and Parkinsonian movement disorders. disorders. Published data together with our initial findings have provided strong indications that the pathology for other certain age-related and degenerative disorders may also be based on the inter-relationshipinteraction between certain metals and proteins, and we believe that the platform technology may also be applicable for certain cancers, age-related macular degeneration Motor Neuron disease, Creutzfeldt-Jakob disease and other neurodegenerative diseases.
To date, we have performed in vivo modeling for evaluations of our product candidates in a range of mouse animal models of disease including models ofparkinsonian disorders, Alzheimer’s disease, Huntington disease, Parkinsonian movement disorders, brain cancer and traumatic brain injury.
Product candidates are selected from our chemical library on the basis of rational drug design. Product candidates are designed to fulfillfulfil very specific criteria such as oral bioavailability and ability to cross the blood-brain barrier, and demonstrate significant effectiveness in both pre-clinical nonclinical in vitro and in vivo testing.
To increase the depth and breadth of our pipeline into new neurodegenerative indications, we have continued to develop our ‘two tier’ Translational Research program structure during 2016 and 2017.structure. The first tier encompasses core new chemical entity design, synthesis and characterization, the ‘discovery phase’ of the new entities as potential novel agents of interest based on their mechanism of action profile. Our discovery research has established Structure Activity Relationships (“SAR”) within chemical moieties that guide our chemists towards the design of novel therapeutics. The discovery phase also includes preliminary bioavailability and pharmacokineticmetabolic characterization. The second tier comprises ‘translational’ animal modeling programs to test and validate new candidates as potential development product candidates. To date, our
Our chemical library comprisescurrently includes more than 2,0001000 novel compounds. Using SAR that has been developed over years of testing and validation by PranaAlterity scientists, new compounds are being generated that retain functionality across diverse and novel chemical scaffolds. Over the last year, new
New compounds from fourteenvarious scaffolds were synthesized with four scaffolds undergoing mechanistic profiling. Theare synthesised and mechanistically profiled. These compounds are initially screened for differential activities including:(i)activity in biological systems relevant to the candidate diseases of interest. New screens are investigated and assessed for their ability to inhibit metal mediatedintercede in the steps thought to underly the pathogenesis of target diseases. Such steps include pathologic protein aggregation and downstream activities such as oxidative stress and nitrosative stress; (ii) metal ionophore capability; (iii) the prevention of glutamate induced excitotoxicity, (iv) anti-oligomer aggregation; (v) the ability to inhibit the activity of the signaling protein glycogen synthase kinase 3β by inducing its phosphorylation; and (vi) inhibit aggregation of protein tau species. New screens are being investigated that will assess the ability of a compound to prevent alpha-synuclein aggregation and consequential oxidative stress and toxicity compounds of interestcell death. Promising candidates arising from the Translational Research program may be progressed as back up compounds in Alzheimer’sParkinson’s disease and Huntington disease, Parkinsonian movement disorders and/or new indications in neurodegeneration,neurodegeneration.
We continue to strengthen our intellectual property portfolio with three new patents that will be instrumental in particular, orphan indications.supporting Alterity’s drug development portfolio. In January 2022, Alterity was granted a US patent covering more than 80 novel compounds related to the methods of treating neurodegenerative diseases, including Parkinson’s and Alzheimer’s diseases.
In March 2023, we announced the granting of a new Composition of Matter patent covering more than 100 novel compounds with an acyl hydrazone (AH) structure. The acyl hydrazone patent is based on a new scaffold that is distinct from those specified in recent patents granted to Alterity and includes more than 100 novel small molecules, at least one of which has demonstrated efficacy in an animal model of dementia. In conjunction with this patent, Alterity announced a licensing agreement for the new patent to Professor Colin Masters, M.D., A.O., to advance these compounds for the treatment of Alzheimer’s and related diseases.
Our Target Neurodegenerative Diseases
Multiple System Atrophy
We believe that drug candidates in our library may affect the aggregation of the proteins implicated in the pathology of neurodegenerative diseases including Parkinson’s disease and related movement disorders such as Multiple System Atrophy, or MSA.
We are focusing on the treatment of parkinsonian disorders, a group of neurodegenerative disorders which have parkinsonism as a feature. Parkinsonism is a general term for slowed movement, stiffness and tremor, and occurs in idiopathic Parkinson’s disease and less common parkinsonian disorders such as MSA, Progressive Supranuclear Palsy (PSP), among others. MSA and PSP have a limited response to available drugs for treating symptoms of Parkinson’s disease and prominent non-motor symptoms.
MSA is a rare, neurodegenerative disease characterized by failure of the autonomic nervous system and impaired movement. The symptoms reflect the progressive loss of function and death of different types of nerve cells in the brain and spinal cord. It is a rapidly progressive disease and causes profound disability. It is sporadic (not inherited) and typically presents in individuals around 50 or 60 years old. The parkinsonian disorder, MSA is a also characterized by a variable combination of slowed movement and/or rigidity, autonomic instability that affects involuntary functions such as blood pressure maintenance and bladder control, and impaired balance and/or coordination that predisposes to falls. A pathological hallmark of MSA is the accumulation of the protein α-synuclein within glia, the support cells of the central nervous system, and neuron loss in multiple brain regions. According to the U.S. National Institutes of Health, MSA affects up to 50,000 individuals in the U.S., thus it is considered an Orphan Disease. While some of the symptoms of MSA can be treated with medications, currently there are no drugs that are able to slow disease progression and there is no cure.
Because early MSA is not well characterized, Alterity is currently conducting a natural history study called “Biomarkers of progression in Multiple System Atrophy (bioMUSE)” to track the progression of patients with MSA. The study is being conducted in collaboration with Vanderbilt University Medical Center in the U.S. under the direction of Daniel Claassen, MD, Professor of Neurology and Principal Investigator. Natural history studies are important for characterizing disease progression in selected patient populations. The study is ongoing and continues to provide vital information on early stage MSA patients, helps select biomarkers suitable to evaluate target engagement and preliminary efficacy of drug candidates, and provides clinical data to characterize disease progression in patients that mirror those enrolling in Alterity’s ATH434-201 Phase 2 clinical trial. To date, the study has provided rich data for optimizing the design of Alterity’s clinical program. (see below)
Alterity’s lead candidate, ATH434, is a small molecule designed to inhibit the aggregation of pathological proteins implicated in Parkinsonianneurodegeneration. ATH434 has been shown preclinically to reduce α-synuclein pathology and preserve nerve cells by restoring normal iron balance in the brain. In this way, it has excellent potential to treat Parkinson’s disease as well as parkinsonian disorders such as MSA.
A comprehensive nonclinical program to evaluate ATH434’s profile to support clinical development is ongoing. ATH434 has also been profiled in mouse models of parkinsonian disorders, including MSA. In one animal model , ATH434 prevents α-synuclein aggregation and preserves neurons in the substantia nigra and decreased the number of glial cell inclusions in the brains of treated animals. Glial cell inclusions are the pathological hallmark of MSA and contain abundant aggregated α-synuclein that is associated with neurodegeneration. The pathologic benefits were associated with improved motor function in treated animals.
In the nonclinical studies, ATH434 had no relevant off-target binding activity in a broad panel of protein interactions. ATH434 did not have significant inhibitory activity of the hERG channel relevant to expected human plasma concentrations in a Good Laboratory Practices (GLP) study. ATH434 is brain penetrant and is subject to diverse metabolic pathways.
ATH434 has successfully completed Phase 1 clinical studies demonstrating the agent is well tolerated, orally bioavailable, and achieved brain levels comparable to efficacious levels in animal models of MSA. ATH434 is currently in two Phase 2 clinical trials (see below). ATH434 has been granted Orphan designation for the treatment of MSA by the U.S. Food and Drug Administration, or FDA, and the European Commission.
Parkinson’s Disease
Parkinson’s disease, another neurodegenerative disease of the aging population, causes a progressive slowing of movement, disorders, PBT434, has progressed through extensive modellingtremors and the loss of fine motor control due to the death of substantia nigra cells in the brain. These cells produce the neurotransmitter dopamine in the brain, which is required for normal motor control. Existing therapies, such as dopaminergic agents, may provide symptomatic relief, but do not address the underlying cause of the disease.
In 2005, we entered into a contractual arrangement with the Integrative Neuroscience Facility based at the Florey Institute of Neuroscience and Mental Health in Melbourne, (“Florey Institute”), to assist in the efficacy evaluation of novel compounds in models relevant to Parkinson’s disease, specifically the 6-hydroxydopamine mouse model and the MPTP (1-methyl-4-phenyl-1,2,3,6-tetrahydropyridine) mouse model. The toxins used in these two mouse models mimic the disease by causing impairment of the cells of the substantia nigra, the area of the brain primarily affected in Parkinson’s disease, and hassubsequent loss of motor function.
During 2009 and 2010, our lead Parkinson’s disease treatment candidate emerged, ATH434, (formerly known as PBT434) based on significant improvement in motor function and coordination in both models. Importantly, ATH434 demonstrated improved relevant indices when administered after toxins had destroyed significant amounts of substantia nigra nerve cells, indicating that the compound can restore and maintain normal neuronal function. Mechanistic work during this period demonstrated that ATH434 reduced the aggregation of toxic α-synuclein species as well as markers of oxidative stress.
Since 2011, we have continually progressed our understanding of the mechanism of action of ATH434 to reduce α-synuclein accumulation and its potential to treat other movement disorders characterized by the over expression α-synuclein. Our non-clinical research and development activities were supported by a USD $206,000 grant from the New York-based Michael J. Fox Foundation entitled, ‘ATH434, a Novel Neuroprotective Drug For Parkinson’s Disease; Completion of Pre-Clinical Studies to Enable Human Clinical Trials.’
In 2017, Doctors Finkelstein, Cherny and colleagues published data indicating that ATH434 prevented cell death in the substantia nigra in a dose-dependent manner. The data also demonstrated efficacythe therapeutic potential of ATH434 to slow neurodegeneration with results in severalmultiple Parkinson’s disease models, including a transgenic model of Parkinson’s disease (A53T) in which mice over-expressed the α-synuclein protein. In A53T mice, animals treated with ATH434 exhibited significantly increased numbers of s. nigra neurons and a significant reduction in insoluble α-synuclein and incidence of clasping behavior. Encouragingly, these results showed that ATH434 lowered α-synuclein, preserved neurons and simultaneously improved motor performance. The paper was entitled, “The novel compound ATH434 prevents iron mediated neurodegeneration and α -synuclein toxicity in multiple models of ‘Atypical Parkinsonian disorders, including Multiple System Atrophy, Corticobasal DegenerationParkinson’s disease” and Progressive Supranuclear Palsy.was published in Acta Neuropathol Comm.
In February 2021, the Michael J. Fox Foundation awarded Alterity a second grant, entitled “Pharmacologic Evaluation of ATH434 in a Hemiparkinsonian Nonhuman Primate Model for Dose Optimization in PD Clinical Trials” in the discoveryamount of USD $495,000. The goal of the study is to evaluate the pharmacologic profile of ATH434 for determining the optimal doses of ATH434 for future Parkinson’s disease clinical trials. The treatment phase of the research program during 2016study has been completed and planningdata analysis is underway to advance the most promising candidates into the Translational Research program later in calendar years 2017 and 2018.underway.
Alzheimer’s disease
PBT2 was our product candidate for Alzheimer’s disease,disease. The drug candidate is the result of rational drug design and was built “from the ground up” to fulfill very specific criteria. It was designed so that it will be orally bioavailable and has shown to cross the blood-brain barrier and to have an improved safety and efficacy profile compared to the prototype MPAC, PBT1. Phase I trials for PBT2 were completed by February 2006 in healthy young and aged volunteers and demonstrated that the drug was well tolerated and suitable for Phase II clinical development.barrier.
Pre-clinical research findings for PBT2 werehave been published in high impact scientific journals. In 2008 we reported in the journal Neuron. The paper by Prana scientist, Associate Professor Paul Adlard was entitled, “Rapid restoration of cognition in Alzheimer’s transgenic mice with 8-hydroxyquinoline analogs is associated with decreased interstitial Aβ”. The key findings included the demonstration Neuron that PBT2 could rapidly improve cognition in transgenic mice, prevent the formation of toxic soluble Abeta oligomers, lower the Abeta levelslevels in the brain of transgenic mice and protect neurons from the toxic effect of Abeta at the synapses between neurons enabling improved neurotransmission.neurons. In March 2009, we published further data on the impact of PBT2 on synapses in transgenic animal models. The findings demonstrated that PBT2 could prevent the loss of synapses in these Alzheimer’s disease animal models, indicating that PBT2 has a potent neuroprotective effect on neurons, consistent with the observation that PBT2 can improve cognitive performance in impaired transgenic animals.
A 2013 Dr. Paul Adlard, presented a paper entitled, “Metal Chaperones are novel therapeutic agents for tauopathy.” The findings presented exemplified that the ability of PBT2 to intercede in aberrant metal and target protein interactions and to correct abnormal metal distribution in the brain resulted in PBT2 being able to prevent the formation of ‘tangle like’ inclusions in neurons in a mouse model. Tau tangles are known to cause neuronal death. This work builds upon the knowledge that PBT2 can prevent the metal mediated toxic gain of function of target proteins such as Abeta and tau to form harmful aggregates in the brain. The data was generated in transgenic mouse model of tauopathy and demonstrated a significant decrease in tau tangle formation, a significant increase in cortical and hippocampal neurons and significant increase in cognitive performance as measured by the Y-maze.
It is required, however it appearsbelieved that the zinc ionophore property of PBT2 works to increase intracellular zinc in the post synaptic terminal, triggering the release of calcium which in turn, leads to neuroprotective pathways being activated inside the neuron that prevent excitotoxicity. Over recent years, the ability of
PBT2 to reduce the phosphorylation of the microtubule-associated protein ‘tau” has been demonstrated in new in vitro screening assays and modelled in transgenic mice. Phosphorylated tau is deposited in cells as fibrillar aggregates in numerous neurodegenerative diseases, notably Alzheimer's disease and also Huntington disease and other neurodegenerative disorders. The functions of tau are regulated by site-specific phosphorylation events, which are dysregulated in the disease state, resulting in tau dysfunction and mislocalization. This can lead to aggregation, neuronal dysfunction and death. Unpublished data show that PBT2 can reduce tau phosphorylation and improve cognitive function in a transgenic tau mouse model.
In February 2008,March 2014, we reportedannounced the top line results of our three month double-blind, placebo-controlled safety and tolerabilitythe 12-month Phase IIa study2 Imaging trial in Alzheimer’s Disease (“IMAGINE” Trial). PBT2 did not meet its primary endpoint of PBT2 in 80 elderly male and female patients with mild forms of Alzheimer’s disease. We announced that the trial primary endpoints of safety and tolerability were met and we also announced that with respect to the secondary endpoints, namely biomarker, cognition and behavioral changes, severala statistically significant and promising changes were observed. Specifically, thatreduction in the cerebrospinal fluid (CSF), PBT2 treatment at a 250mg dose resulted in a significant decreaselevels of beta-amyloid plaques in the target Abeta 42 protein. In addition, atbrains of prodromal/mild Alzheimer’s disease patients, as measured using PiB-PET Standardized Uptake Value Ratio (SUVR). Whilst there was a reduction in the 250mg dose, while no significant effect was observed with the ADAS-cog, twooverall levels of the five NTB tests for improvementPiB PET signal in executive function were significantly improved. In July 2008, the results of the Phase IIa trial were published in The Lancet Neurology journal.
Participants were provided the option to continue treatment on PBT2 for a further 52 weeks in an open label study, the ‘IMAGINE Extension study’ and thirty three33 participants elected to do so with twenty-seven27 participants completing the IMAGINE Extension study. The independent Data Safety Monitoring Board did not identify any safety concerns related to PBT2 over the combined two yeartwo-year period of the IMAGINE and IMAGINE Extension studies. Unpublished analysis of the IMAGINE Extension data does not distinguish between 12 and 24 months of exposure to PBT2 on any of the measured trial outcomes. However, exploratory post-hoc information from the Extension phase suggest that for the cohort of 27 trial participants that completed all 24 months (11 of the 15 participants that started IMAGINE on placebo together with 16 of the 25 participants that remained on PBT2 for 24 months), the amyloid levels decreased in this cohort compared to an historical control group from the Australian Imaging Biomarker and Lifestyle (AIBL) study.
In March 2023, we announced a sub-licensing agreement for PBT2 to Professor Colin Masters, M.D., A.O., to advance compounds for the treatment of Alzheimer’s and related diseases. Under the license agreement, Alterity grants the entire rights to the acyl hydrazone patent mentioned above, as well as an exclusive worldwide license to develop and commercialize both acyl hydrazone and PBT2 in Alzheimer’s disease. In exchange, Alterity is entitled to future royalties of net sales from the assets.
Huntington disease
Huntington disease is a progressive, autosomal dominant neurodegenerative disorder of the central nervous system caused by a mutation in a gene which encodes the huntingtin protein. The disease results in deterioration of physical, cognitive and emotional abilities that lead to severe incapacitation and eventually death, generally 15-25 years after the onset of the disease. Huntington disease primarily affects adults, usually between the ages of 30 and 50.
US-based researchers presented the effects of clioquinol in an animal model of Huntington disease, showing evidence of improved behavior, motor skills and inhibition of the abnormal form of the Huntingtin protein. Based on these findings, we have tested several proprietary compounds in collaboration with researchers based at the Veterans Affairs Medical Center and the Department of Neurology, University of California, San Francisco, under a collaborative research agreement. PBT2 has demonstrated efficacy in the R6/2 mouse model of Huntington disease.
In July 2008, we received the findings from a report commissioned by us from US-based clinical researchers on the suitability of PBT2 for Huntington disease. The report recommended that we proceed to clinical trials in Huntington disease research participants.
In late 2012 we finalized the enrolment to a Phase II2 trial to test PBT2 in patients with Huntington disease over six months. The trial, known as "Reach2HD"“Reach2HD”, was undertaken under an open IND application through the FDA and was conducted in clinical sites across the United States and Australia. The Phase IIa trial design entailed a double blind placebo controlled study of 109 patients with early to mid-stage Huntington disease. The primary objective for the trial was safety and tolerability of PBT2 in this Huntington disease patient population. Secondary endpoints included the effect of PBT2 on cognition, behaviour, functional capacity, motor effects. In addition, a small (n=6) exploratory arm of the study, was undertaken under the guidance of the co-Principal Investigator of the study, Professor Diana Rosas, using MRI brain imaging to undertake iron mapping and volumetric assessment in a patient’s brain. Professor Rosas has published that iron and other metals change in concentration and distribution in the brain with increasing severity of the condition. This study was the first clinical trial with PBT2 in this patient population and the results were reported in February 2014. The primary objective of the study was achieved with PBT2 being demonstrated as safe and well tolerated in this first study of PBT2 in Huntington disease.
In the early stage Huntington disease patients, there was a significant improvement in the Executive Function composite (p=0.038). Of particular note, the Trail Making Test Part B of itself was significantly improved at 12 weeks (p=0.001) and at 26 weeks (p=0.042).
During 2015 and 2016, three new PBT2 Phase 1 trials were successfully completed. The data from these trials have provided further safety, pharmacokinetic and pharmacodynamic information on PBT2 and will assist in the design of Phase 3 protocols for PBT2. These Phase 1 studies comprised:
Non-neurodegenerative applications
Antibiotic Resistance
In December 2020, Alterity acquired an exclusive world-wide license from UniQuest, the commercialisation company of The company is considering its optionsUniversity of Queensland (UQ), for the development and commercialization of novel zinc ionophore technology to continue developmentcombat antimicrobial resistance in Huntington diseasesuperbugs. Under the license, Alterity has the rights to develop and Alzheimer disease which may include conducting further dog studies, investigatingcommercialise therapies that re-sensitize bacteria to antibiotics. The licensed technology combines Alterity’s PBT2 and other zinc ionophores with commonly used antibiotics to treat infections caused by multidrug resistant bacteria. A published article in the utilityhigh-impact journal Science Translational Medicine, showed that PBT2 could reverse antibiotic resistance to critical superbugs and demonstrate efficacy in an animal model of lower doses of PBT2 and/or prospective development of PBT2 in alternative therapeutic indicationssepsis.
Clinical Trials for Our Product Candidates
Our Current Pipeline
ATH434
In July 2019 we are preparing to initiateannounced the completion of a clinical trial evaluating the safety and pharmacokinetics of ATH434 in healthy volunteers. The Phase I first in human Single Ascending Dose/Multiple Ascending Dose1 study, conducted in Australia, recruited 80 adult volunteers which included ten elderly people (over 65 years) with PBT434. The program will entailthe key goals of assessing the safety, tolerability and pharmacokinetic analyses in healthy volunteers administereddrug disposition within the body (pharmacokinetics) of ATH434 after single and multiple dosesoral dose administration.
The volunteers in the single ascending dose phase of PBT434. It is anticipatedthe study, made up of four individual dose levels in ascending order, received a single oral dose of ATH434 and a blood sampling over the next 72 hours. In the multiple ascending dose phase of the study, volunteers received eight days dosing with ATH434, administered as three successively higher dose levels, with intensive blood sampling for pharmacokinetics on days 1 and 8. At the two highest multiple dose levels, cerebrospinal fluid was collected at steady state to determine drug penetration to the site of action in the brain. The older adults (≥65 years) received the highest dose level for 8 days as well.
The study was successfully completed with systemic exposure to the drug comparable between adult and older adult volunteers. ATH434 was found to be safe and well tolerated. Adverse event rates were found to be comparable with placebo and no subject experienced a serious adverse event or an adverse event that led to discontinuation of the study drug.
The clinical data were presented at the American Academy of Neurology Annual Meeting in May 2019. The presentation was based on an abstract entitled A phase 1 Study of ATH434, a Novel Small Molecule Inhibitor of α-synuclein Aggregation, in Adult and Older Adult Volunteers published in the journal Neurology. In September 2019, the Company presented a poster titled: A First in Human Study of ATH434, a Novel Small Molecule Inhibitor of α-Synuclein Aggregation at the 2019 International Congress of Parkinson’s Disease and Movement Disorders (MDS Congress) in Nice, France. The poster presented findings from the completed Phase 1 trial based on an abstract published in the journal Movement Disorders.
Alterity applied to the FDA for Orphan Drug designation for the proposed use of ATH434 for the treatment of MSA, and the designation was granted in January 2019. Orphan designation entitles Alterity to seven years of market exclusivity for the use of ATH434 in the treatment of MSA and qualifies the sponsor of the drug for various development incentives of the Orphan Drug Act, including tax credits for qualified clinical testing.
In January 2020 it was announced that the Single Ascending DoseEuropean Commission, or EC, granted Orphan Drug designation to ATH434, which entitles Alterity to ten years of market exclusivity in the European Union, or EU, for the use of ATH434 in the treatment of MSA and other benefits including assistance in developing clinical protocols, reduced fees and access to EU-funded research grants.
ATH-434-201 Phase 2 Clinical Trial
In July 2022, Alterity commenced its first Phase 2 clinical trial of ATH434 in patients with early-stage MSA. The trial, known as ATH434-201, is a randomized, double-blind, placebo-controlled investigation that is exploring the effect of ATH434 treatment on imaging and protein biomarkers including excess iron and aggregating α-synuclein, respectively, which are important contributors to MSA pathology. Clinical endpoints and activity data from wearable sensors will permit comprehensive assessment of ATH434 efficacy along with characterization of safety and pharmacokinetics. The study is expected to enroll approximately 60 adult patients with early-stage MSA to receive one of two dose levels of ATH434 or placebo. Patients will receive treatment for 12 months which will provide an opportunity to detect changes in efficacy endpoints to optimize design of a definitive Phase 3 study.
The global clinical trial is currently enrolling participants at over 20 sites in three regions – Australia/New Zealand, the United States, and Europe.
ATH-434-202 Phase 2 Clinical Trial
In May 2023, we initiated a second Phase 2 clinical trial entitled, “A Biomarker Study of ATH434 in Participants with MSA.” The Biomarker trial is a single arm open label study that will enroll up to 15 individuals with advanced MSA. ATH434-202 study participants will receive treatment with ATH434 for 12-months. The study will initiateassess the effect of ATH434 treatment on neuroimaging and protein biomarkers to evaluate target engagement, in addition to clinical measures, safety, and pharmacokinetics. The selected biomarkers, including brain iron and aggregating α-synuclein, are important contributors to MSA pathology and are appropriate targets to demonstrate drug activity. The primary objective of this study is to evaluate the impact of 12 months treatment with ATH434 on brain iron by MRI (QSM/R2*) in a more advanced patient population than is being studied in Alterity’s randomized Phase 2 trial.
bioMUSE natural history study for individuals with MSA
Biomarkers of progression in Multiple system atrophy (bioMUSE) is a natural history study tracking the endprogression of individuals with early MSA. The study is being conducted in collaboration with Vanderbilt University Medical Center in the US under the direction of Daniel Claassen, MD, Associate Professor of Neurology and Principal Investigator. Natural history studies are important for characterizing disease progression in target patient populations.
BioMUSE is recruiting 20 participants and continues to provide longitudinal biomarker and clinical data to characterize disease progression in a population that mirrors those to be enrolled in the Phase 2 study. The data generated thus far have been invaluable in informing and reducing risk in the Phase 2 trial design.
Key data from bioMUSE have been presented at major medical and scientific meetings listed below. The study continues to generate important scientific data validating our cutting-edge approach to characterizing biomarkers necessary for the accurate diagnosis of MSA. Data findings have included several key components. Advanced MRI methods employed in the study, referred to as quantitative susceptibility mapping (QSM), demonstrated pathological iron accumulation in multiple areas of the 2017 fiscal yearbrain in patients with early MSA.
The study investigators concluded that advanced MRI methods for measuring iron may improve patient selection in clinical trials of disease modifying therapy and have potential to serve as a biomarker for assessing treatment induced changes. Analysis also demonstrated that wearable sensors can quantify motor impairment in individuals with MSA that is not captured by neurological examination. This means that wearable sensors can be used to assess disease progression in clinical trials.
| ● | April 2023 - American Neurological Association, Title: “Wearable Sensors for Quantitative Motor Assessments in MSA” |
| ● | November 2022 - American Autonomic Society, Title: “Urinary symptom profile in early Multiple System Atrophy” |
| ● | October 2022 - American Neurological Association, Title: “Deep Learning Segmentation Improves Precision of Volume Assessment of Subcortical Structures in early MSA” |
| ● | April 2022 - American Academy of Neurology, Title: “Iron Accumulation Correlates with Disease Severity in Patients with Multiple System Atrophy” |
| ● | September 2021 - The International Parkinson and Movement Disorder Society Congress, Title: “Non-invasive imaging markers of iron accumulation in Multiple System Atrophy” |
ATH434 Scientific Peer Validation
Scientific interest and validation in ATH434 continue to grow with data from the Multiple Ascending Doseclinical trials and natural history study commencingpresented at global scientific and clinical conferences.
In November 2021, a poster was presented at the American Autonomic Society 32nd Annual International Symposium. The poster, entitled “Cardiovascular safety and pharmacokinetics of ATH434, a novel small molecule inhibitor of α-synuclein aggregation, in calendar year 2018.adults and older adults, described results from the Company’s Phase 1 clinical trial conducted in healthy volunteers. In this trial, ATH434 was well tolerated in adult and ≥ 65-year-old volunteers and demonstrated no cardiac adverse event signal and no clinically significant changes in blood pressure or heart rate at any dose. ATH434 also demonstrated dose dependent pharmacokinetics (PK) after single and multiple oral doses and a half-life that supports twice-daily dosing.
In addition, multiple preclinical studies demonstrating the potential of ATH434 to treat parkinsonian disorders have been published.
In September 2022, the peer-reviewed journal, Neurotherapeutics, published data that demonstrated ATH434 was neuroprotective in a genetic model of Parkinson’s disease (PD). The publication, entitled “ATH434 Rescues Pre-motor Hyposmia in a Mouse Model of Parkinsonism” assessed the impact of ATH434 on motor and non-motor deficits in mice with genetically induced PD. Hyposmia, defined as reduced sensitivity to odor, is an early and common non-motor symptom of PD that precedes the typical motor symptoms by several years, occurring in approximately 90% of early-stage cases of PD. The study found that ATH434 prevented a loss of smell in the younger mice and rescued it in older mice. More importantly, the authors also demonstrated that ATH434 prevented the development of motor impairment in older animals, which was associated with a reduction in iron levels and preservation of neurons in the substantia nigra, the brain region affected in Parkinson’s. These data support other studies indicating that ATH434 has a beneficial effect on the motor and non-motor symptoms in animal models of PD.
In January 2022, data in an animal model of MSA was published in the Journal of Parkinson’s Disease. The publication, entitled, “The Compound ATH434 Prevents Alpha-Synuclein Toxicity in a Murine Model of Multiple System Atrophy” described a study evaluating the efficacy of ATH434 in genetically altered mice that develop manifestations of MSA. The investigation demonstrated that in the studied brain region, ATH434 treatment reduced both the toxic oligomeric and aggregated forms of α-synuclein, a central nervous system protein important for normal function of nerve cells. ATH434 treatment also reduced the cardinal pathology of MSA (glial cell inclusions), reduced brain iron, preserved neurons, and improved motor performance. The results independently confirmed the previous findings from a study published in Movement Disorders in 2021. The 2022 publication concluded that ATH434 is a promising small molecule drug candidate that has potential for treating MSA. The study was led by David I. Finkelstein, Ph.D., Head of Parkinson’s Disease Laboratory at the Florey Institute of Neuroscience and Mental Health and the University of Melbourne.
In June 2021, Movement Disorders, published results from a study demonstrating that ATH434 reduces α-synuclein related neurodegeneration in a widely accepted murine model of MSA. The study was performed at the Laboratory for Translational Neurodegeneration Research, Department of Neurology, Medical University of Innsbruck in Austria, a leading laboratory of animal research in MSA, under the direction of Professor Nadia Stefanova. The pre-clinical study showed that treatment with ATH434 was neuroprotective and improved motor function.
In October 2021, The Journal of Parkinson’s Disease published the results from a preclinical study investigating the effect of ATH434 on gastrointestinal complications titled “ATH434 Reverses Colorectal Dysfunction in the A53T Mouse Model of Parkinson’s Disease”. Non-motor symptoms are common in patients with Parkinsonian disorders, such as Parkinson’s disease and MSA. Parkinson’s disease patients experience gastrointestinal complications, cognitive deficits, autonomic dysfunction, and mood disturbance and these non-motor manifestations are an important source of morbidity and reduced quality of life.
In July 2021, Plos ONE published an in vitro study concluding that the novel mechanism of action of ATH434 provides a compelling case for its continued development as a therapeutic agent in neurodegenerative diseases associated with iron accumulation.
Patents and Licenses
Patent Matters
Patent matters in biotechnology are highly uncertain and involve complex legal and factual questions. Accordingly, the availability and breadth of claims allowed in biotechnology and pharmaceutical patents cannot be predicted. Statutory differences in patentable subject matter may limit the protection we can obtain on some or all of our inventions outside Australia or prevent us from obtaining patent protection outside Australia, either of which could adversely affect our business, financial condition and results of operations. For example, methods of treating humans are not patentable in many countries outside Australia and the United States. Moreover, since patent applications are not published until at least 18 months from their first filing date and the publication of discoveries in the scientific literature often lags behind actual discoveries, we cannot be certain that we or any of our licensors were the first creator of inventions covered by pending patent applications or that we or our licensors were the first to file patent applications for such inventions. Additionally, the grant and enforceability of a patent is dependent on a number of factors that may vary between jurisdictions. These factors may include the novelty of the invention, the requirement that the invention not be obvious in the light of prior art (including prior use or publication of the invention), the utility of the invention, and the extent to which the patent clearly describes the best method of working the invention.
While we intend to seek patent protection for our therapeutic candidate products and technologies, we cannot be certain that any of the pending or future patent applications filed by us or on our behalf will be approved, or that we will develop additional proprietary products or processes that are patentable or that we will be able to license any other patentable products or processes. We also cannot be certain that others will not independently develop similar products or processes, duplicate any of the products or processes developed or being developed by us or licensed to us, or design around the patents owned or licensed by us, or that any patents owned or licensed by us will provide us with competitive advantages. Furthermore, we cannot be certain that patents held by third parties will not prevent the commercializationcommercialisation of products incorporating the technology developed by us or licensed to us, or that third parties will not challenge or seek to narrow, invalidate or circumvent any of the issued, pending or future patents owned or licensed by us.
Our commercial success will also depend, in part, on our ability to avoid infringement of patents issued to others. If a court of competent jurisdiction determines that we were infringing any third party patents, we could be required to pay damages, alter our products or processes, obtain licenses or cease certain activities. We cannot be certain that the licenses required under patents held by third parties would be made available on terms acceptable to us or at all. To the extent that we are unable to obtain such licenses, we could be foreclosed from the development, export, manufacture or commercializationcommercialisation of the product requiring such license or encounter delays in product introductions while we attempt to design around such patents, and any of these circumstances could adversely affect our business, financial condition and results of operations.
We may have to resort to litigation to enforce any patents issued or licensed to us or to determine the scope and validity of third partythird-party proprietary rights. Such litigation could result in substantial costs and diversion of effort by us. We may have to participate in opposition proceedings before the Australian Patent and Trademark Office or another foreign patent office, or in interference proceedings declared by the U.S. Patent and Trademark Office, to determine the priority of invention for patent applications filed by competitors. Any such litigation, interference or opposition proceeding, regardless of outcome, could be expensive and time consuming, and adverse determinations in any such proceedings could prevent us from developing, manufacturing or commercializing our products and could adversely affect our business, financial condition and results of operations.
In addition to patent protection, we rely on unpatented trade secrets, know-how and other confidential information as well as proprietary technological innovation and expertise. Although we have taken steps to protect our trade secrets and unpatented know-how, including entering into confidentiality agreements with third parties, and confidential information and inventions agreements with employees, consultants and advisers, third parties may still obtain this information or come upon this same or similar information independently.
Patent Portfolio
Since June 30, 2022, we have filed new patents in international jurisdictions. These patentscontinued to advance our patent portfolio that aligns with our development programs.
We previously reported the filing of a patent family claiming over 150 imidazo[l,5-a]pyridine compounds that modulate biological iron and are principally directed to new chemical compositionpotentially useful for the treatment of matter claims. With the majority of patents covering our product candidates - PBT2, PBT434 and PBT519 now being Granted, we haves aggressively pursued new intellectual property, particularly in the United States.
We also previously reported that on June 18, 2020, we filed a provisional application to register a patent that claims an additional 80 novel compounds, also that modulate biological iron and also titled “Compounds for and Methods of Treating Diseases”. This application matured to a PCT application No. PCT/AU2021/050633 on June 18, 2021. Similar to the first mentioned patent application, contemporaneously with filing the PCT application on April 23, 2021, we also filed United States complete, application No. 17/239,375, under Track One. We announced allowance of the United States application on August 4, 2021, and in securing the allowance, no prior art was cited against the application. On October 26, 2021, the application was granted as US patent no. 11155547. The application is currently under examination in Europe.
On August 27, 2021, we filed a PCT application No. PCT/AU2021/050,986 to register a patent that claims an additional 150 novel compounds, all of which modulate biological Zinc for the potential treatment of cancer, neurological diseases and infectious diseases, and is titled “Compounds for and Methods of Treating Diseases”. On the same date we also filed a United States complete application, application No. 17/459854, under United States track 1 expedited review procedure. The patent was granted in the last 12 months, a case has transitioned from a Provisional application to new PCTUS on February 23, 2023, patent application, directed to a new use for PBT2 that is not a neurodegenerative disease.number 11603364.
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Filed: July 16, 2003 | Patents in Europe, the | The invention is directed to chemical scaffolds of the 8-Hydroxyquinoline compounds class and their utility in the treatment of neurological conditions. | ||
8-hydroxy and 8-mercaptoquinazolines Filed October 3, 2003 | Invention is directed |
“Neurologically- Active Compounds” Filed: April 1, 2005 | Patents have been Granted in Singapore, Japan, Mexico, Russia, Australia, the | The invention is directed to ‘F4’ quinazolinone chemical structures and their utility in the treatment of neurological conditions and includes Parkinson’s Disease lead compounds. It covers the ATH434 composition of matter. | ||
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Filed: December | ||||
| Patents have been Granted in Japan, Australia, Europe and the | This invention is directed to | ||||
“Compounds for Methods of Treating Diseases” Filed: March 13, 2020 | A | This invention is directed to | |||
“Compounds for Methods of Treating Diseases” Filed: June 18, 2021 | A | This invention is also directed to 80 novel compounds and for the treatment of neurodegenerative diseases. | |||
“Compounds for Methods of Treating Diseases” Filed: August 27, 2021 | A US Patent has been granted and national phase has been entered in Europe, China, Japan and Australia. | This invention is directed | |||
diseases. |
Competition
The pharmaceutical industry is extremely competitive. We believe that we will face competition in differing levels of intensity in all of the areas in which we are conducting research. ATH434, if approved for the treatment of MSA, may compete in a highly competitive market. Our competitors, which are located worldwide, are numerous and include, among others, major pharmaceutical companies, biotechnology firms, universities and other research institutions. These competitors may develop technologies and products that are more effective than any that we are developing, or which would render our technology and products obsolete or non-competitive. Many of these competitors have greater financial, research and screening capabilities, technical resources and manufacturing and marketing capabilities than we do. In addition, many of our competitors may have more experience than we do in non-clinical and human clinical trials of new or improved drugs, as well as in obtaining FDA, EMA, TGA and other regulatory approvals.
There are currently no approved drugs for the trials in Alzheimer’s patients and Huntington patients. In addition, in 2014, Dr. Reddy’s manufactured PBT434 drug substance to service the prospective Phase 1 program for PBT434, our lead compound in Parkinsonian movement disorders. We have investigated other manufacturers as ‘back-up’ and alternative supplierstreatment of drug substances to facilitate manufacture of pre-registration GMP compounds and investigate the possibility of manufacturing process improvements. In 2016, we commenced technology transfer of the synthetic process for PBT2 drug substance to Orgapharm S.A.S. based in Pithiviers, France to facilitate potential process improvements and to establish a second GMP manufacturer of PBT2 drug substance.
| ● | Lu AF82422: This product is being developed by H. Lundbeck A/S. It is administered by injection and is thought to act by interfering with the extracellular spread of the α-synuclein protein. A Phase 2 study is ongoing. |
| ● | TAK-341/MEDI341: This product is being developed by Takeda in partnership with AstraZeneca. It is administered by injection and is thought to act by interfering with the extracellular spread of the α-synuclein protein. A Phase 2 study is being planned. |
| ● | Ono-2808: Ono Pharmaceuticals is developing this S1P5 receptor agonist. It is an oral gent thought to act by promoting myelin synthesis. A Phase 2 clinical trial is ongoing. |
| ● | AAV-GDNF: AskBio is developing this gene therapy. It is administered in spinal fluid and is thought to reduce abnormal protein accumulation. A Phase 1 safety study is ongoing. |
| ● | TEV-56286/Anle138b: This product is being developed by Teva Pharmaceuticals in collaboration with MODAG. It is an oral agent and is thought to act as a non-specific inhibitor of protein aggregation. The drug is in Phase 1. TEV-56287 may be developed for MSA or Parkinson’s disease. |
| C. | Organizational Structure |
We have two wholly-owned subsidiaries, Prana BiotechnologyAlterity Therapeutics Inc. and Prana BiotechnologyAlterity Therapeutics UK Limited, incorporated in the United States and the United Kingdom, respectively.
| D. | Property, |
Our executive offices are located at 369 Royal Parade, Parkville, Victoria 3052,Level 14, 350 Collins Street, Melbourne, VIC 3000, Australia, where we occupy approximately 3,800105 square meters. The lease for the facility, which expires on 31 May 2026 has an annual rent of A$53,133. Our United States office is located at Suite 360, 39899 Balentine Drive, Newark, California 94560, United States of America, where we occupy approximately 911 square feet. The lease for the facility, which expires on September 30, 2017,May 31, 2024, has an annual rent of U.S.$28,900. We also utilize a facility at 30 Flemington Rd, Parkville, VIC 3010, Australia, where we occupy approximately 44 square meters. The lease for the facility which expires on July 31, 2024 has an annual rent of A$123,368.17,647.
ITEM 4A. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5.Operating and FINANCIAL review and Prospects
The following discussion and analysis includes certain forward-looking statements with respect to the business, financial condition and results of operations of our company. The words "estimate," "project,“estimate,” “project,” “intend," "expect"” “expect” and similar expressions are intended to identify forward-looking statements within the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated by such forward-looking statements, including those risk factors contained in Item 3.D. of this annual report. You should read the following discussion and analysis in conjunction with our consolidated financial statements and the notes thereto included in this annual report.
| A. | Operating Results |
Background
We were incorporated under the laws of the Commonwealth of Australia on November 11, 1997. The principal listing of our ordinary shares and listed options to purchase our ordinary shares is on the ASX. SinceFrom September 5, 2002 until April 8, 2019, our ADSs have traded on the NASDAQ Capital Market under the symbol “PRAN.” On April 8, 2019 we changed our name to Alterity Therapeutics Limited and our ADSs have traded under the symbol “ATHE” and our ordinary shares have traded under the symbol “ATH” since that date.
Our consolidated financial statements appearing in this annual report comply with both IFRS as issued by IASB and A-IFRS.IASB. In this annual report, all references to “U.S. dollars” or “U.S.$” are to the currency of the United States, and all references to “Australian dollars” or “A$” are to the currency of Australia. All of our revenues are generated in Australian dollars, except for interest earned on foreign currency bank accounts, and the majority of our expenses are incurred in Australian dollars.
Overview
We are a development stage enterprise at an early to mid-stage in the development of our pharmaceutical products that are designed to treat the underlying causes of neurodegeneration of the brain. We have incurred net losses since inception and expect to incur substantial and increasing losses for the next several years as we expand our research and development activities and move our product candidates into later stages of development. All of our product candidates are in discovery phase or early and mid-stage of development and we face the risks of failure inherent in developing drugs based on new technologies. The process of carrying out the development of our products to later stages of development may require significant additional research and development expenditures, including non-clinicalnonclinical testing and clinical trials, as well as for obtaining regulatory approval. To date, we have funded our operations primarily through the sale of equity securities, proceeds from the exercise of options, government grants, licensing and research collaborations and interest income.
Since completing our initial public offering and listing process on the ASX on March 28, 2000, we have concentrated our resources toward the pursuit of our disease targets. We have completed four Phase I1 studies of PBT2 and a Phase IIa2a clinical trial for PBT2 in patients with Alzheimer’s disease. We have completed the “IMAGINE” Phase II2 biomarker imaging trial in Alzheimer’s disease and a fifty twofifty-two week open label IMAGINE Extension study and the “Reach2HD” Phase IIa2a trial in Huntington disease. In 2019, we completed a Phase I clinical trial of ATH434 in healthy volunteers and in 2022 we commenced a Phase 2 clinical trial of ATH434 in Multiple System Atrophy (MSA), a rare and highly debilitating Parkinsonian disorder. For details regarding clinical trials for our lead compound PBT2,compounds, see Item 4.B. “Information on the Company - Business Overview - Clinical Trials for Our Lead Compound.Product Candidates.”
Going Concern Basis
The Group is a development stage medical biotechnology company and as such expects to be utilizing sources of cash funding until its research activities have become marketable. The Group has incurred recurring losses since inception including an operating loss of $13,806,515 in the year ended 30 June 2023 (2022: $12,847,061) and an operating cash outflow of $20,035,837 in the year ended 30 June 2023 (2022: $12,337,274). The Group expects to continue incurring losses into the foreseeable future and will need to raise additional capital to continue the development of its planned research and development programs. The continuing viability of the Group is subject to its ability to raise additional capital to finance the continuation of its planned research and development programs, maintaining implemented cost containment and deferment strategies, and successfully commercializing its initiatives. The Group intends to raise new equity funding within six months of the financial year end to enable progression of its planned research and development programs, however there is uncertainty associated with its ability to successfully raise such funds in the time and amounts needed to meet its requirements.
The inability to obtain funding, as and when needed, would have a negative impact on the Group’s financial condition and ability to pursue its business strategies. If the Group is unable to obtain the required funding to operate and to develop and commercialize its product candidates, it could be forced to delay, reduce or eliminate some or all of its research and development programs, which would adversely affect its business prospects.
As a result, there is a material uncertainty that may cast significant doubt (or raises substantial doubt as contemplated by Public Company Accounting Policies
Significant Costs and Expenses
Research and development expenses
. Our research and development expenses consist primarily of expenses for contracted research and development activities conducted by third parties on our behalf. Research and development expenses also include costs associated with the acquisition, development of patents and salaries and fees paid to employees and consultants involved in research and development activities.General and administration expenses.
Our general and administration expenses consist of (i) personnel expenses such as directors’ fees, salaries and benefits paid to employees and officers and equity-based payments awarded to directors, officers and employees; (ii) auditor and accounting expenses which are fees paid to our auditors for services related to annual reports and interim reports filed or submitted in Australia and the United States and fees paid to other accounting firms in respect of tax and other accounting advice; (iii) public relations and marketing expenses which are fees paid to outside consultants for services related to ASX andIntellectual property expenses
. Our intellectual property expenses consist of fees paid to our outside counsel for legal fees associated with patent applications and for theOther gains and losses
. Other gains and losses consist of foreign exchange gain (loss) which are the net unrealized gain or loss on cash balances and trade and other payables held in foreign currencies (primarily U.S. dollars, British Pounds and Euros) as well as net realized gains and losses on foreign currency transactions.Results of Operations
Year ended June 30, 20172023 compared to year ended June 201630, 2022
Interest income
Interest income only) decreasedincreased to A$132,39616,436 for the year ended June 30, 20172023 from A$142,6572,504 for the year ended June 30, 2016, a decrease2022, an increase of A$10,261,13,932, or 7.19 %.556.4%. The decreaseincrease in revenue from continuing operations in the 2017 fiscal yearinterest income is primarily attributable to lowerhigher Australian dollar cash and cash equivalents held in A$balances with higher interest bearing accounts throughoutrates during the year and lower prevailing interest rates.current fiscal year.
Other Income
We hadhave recognised a receivable and other income of A$3,022,6733,914,230 for the R&D Tax Incentive refundable cash offset in relation to eligible expenditure for the year ended June 30, 2017, relating to eligible research and development activities,2023, on which we are entitled to a 43.5% refundable tax offset under an Australian GovernmentR&D tax incentive scheme that was introduced on July 1, 2011. We had other income of A$4,753,697 for2019.
For the year ended June 30, 2016 relating2022, we recognised a receivable and other income of A$4,669,405 for the R&D Tax Incentive refundable cash offset in relation to eligible research and development activities, on which we were entitled pursuant toexpenditure for the aforementioned Australian Government tax incentive. The decrease in the research and development tax incentive is attributable to reduced eligible expenditure incurred in the 2017 fiscal year as described below.year.
Research and development expenses
Our research and development expenses decreased to A$5,700,33913,198,583 for the year ended June 30, 20172023 from A$9,585,37114,745,776 for the year ended June 30, 2016,2022, a decrease of A$3,885,032,1,547,193, or 40.53%10.5%. The decrease inis attributable to the completion of certain research and development expenses instudies during the year ended June 30, 2017 is primarily attributable to the U.S. Food and Drug Administration’s placement of PBT2 on Partial Clinical Hold resulting in significantly reduced PBT2 clinical development and manufacturing related expenses.current year.
General and administrative expenses
General and administrative expenses increaseddecreased to A$3,968,6305,056,571 for the year ended June 30, 20172023 from A$3,610,5515,513,915 for the year ended June 30, 2016, an increase2022, a decrease of A$358,079,457,345 or 9.92%8.3%. The increase in generaldecrease is mainly attributable to a reduced share-based payment expense relating to the issue of options to key management personnel and administrative expensesemployees in the fiscal year ended June 30, 2017 is attributable to increased costs of insurance, compliance and business development activities.prior period.
Intellectual property expenses
Intellectual property expenses, which include patent portfolio costs and intellectual property related legal costs, decreased slightly to A$241,892285,067 for the year ended June 30, 20172023 from A$241,954364,665 for the year ended June 30, 2016, a2022, an decrease of A$62,79,598 or 0.03%21.8%. This decrease is due to the out-licensing and lapse of certain patents during the current year.
Foreign exchange gain (loss)
We recorded a foreign exchange lossgain of A$660,213917,650 for the year ended June 30, 20172023 compared to a foreign exchange gain of A$857,2472,722,430 for the year ended June 30, 2016.2022. Foreign exchange gain (loss) reflects the impact of changes in foreign currency exchange rates on cash that we hold in U.S. dollars, British Pounds and Euros. In the 20172023 and 20162022 fiscal years,year, the Australian dollar depreciated against the U.S. dollar, which had a favorable impact on the Australian dollar value of our cash held in U.S. dollars. In the 2017 and 2016 fiscal years, the Australian dollar depreciated against the British Pound and Euro, which had a favourable impact on the Australian dollar value of our cash held in British Pounds and Euros. In the 20172023 fiscal year, we incurred a foreign exchange gain of A$656,019914,942 attributable to the cash balances that we held in U.S. dollars, and a foreign exchange gain of A$2,708 attributable to foreign currency transactions. In the 2022 fiscal year, we incurred a foreign exchange gain of A$2,813,146 attributable to the cash balances that we held in U.S. dollars, and a foreign exchange loss of A$4,19490,716 attributable to foreign currency transactions. In the 2016 fiscal year, we incurred
For a foreign exchange gaincomparison of A$951,219 attributable to the cash balances that we held in U.S. dollars, a foreign exchange lossour results of A$93,972 attributable to the trade payables balances that we held in U.S. dollars, British Pounds and Euros and a foreign exchange loss of A$231,803 attributable to foreign currency transactions.
Inflation and Seasonality
Management believes inflation has not had a material impact on our company’s operations or financial condition and that our operations are not currently subject to seasonal influences.
Conditions in Australia
We are incorporated under the laws of, and our principal offices and research and development facilities are located in, the Commonwealth of Australia. Therefore, we are directly affected by political and economic conditions in Australia. See Item 3.D. “Key Information – Risk Factors – Risks Relating to Our Location in Australia” for a description of factors that could materially affect our operations.
Recently Issued International Accounting Standards and Pronouncements
New and amended Accounting Standards and Interpretations Issuedissued and Effectiveeffective
We have adopted all of the new or IFRIC interpretationsamended Accounting Standards and Interpretations issued by the International Accounting Standards Board ‘IASB’ that are effectivemandatory for the first time forcurrent reporting period.
The adoption of these standards has not had any impact on the disclosures or amounts reported in these financial statements.
Australian Disclosure Requirements
Dividends
No dividends have been paid during the financial year beginning on(2023: nil). The Directors do not recommend the payment of a dividend in respect of the current financial year (2022: nil).
Significant changes in the state of affairs
There have been no significant changes in the state of affairs of the Group during the year.
Events since the end of the financial year
No other matters or aftercircumstances have arisen since June 30, 20172023 that wouldhave significantly affected the Group’s operations, results or state of affairs, or may do so in future years.
Likely developments and expected results of operations
The likely developments in our operations, to the extent that such matters can be expectedcommented upon, are covered in Item 5A of this report.
Environmental regulation
We are involved in scientific research and development, and the activities do not create any significant environmental impact to have aany material impact on us.extent. Our scientific research activities are in full compliance with all prescribed environmental regulations.
| Liquidity and Capital Resources |
We are a development stage company, and have had no sales income to date and as of June 30, 2017,2023, our accumulated deficit totaled A$122,648,452.195,130,889. We had A$21,884,95715,773,783 of cash and cash equivalents atas of June 30, 2017,2023, compared to A$28,593,538 at34,806,799 as of June 30, 2016. 2022.
From inception until our initial public offering in March 2000 we financed our operations primarily through borrowings from two of our then directors, which were repaid from the proceeds of such offering. Since our initial public offering, we have financed our operations primarily through sales of equity securities, proceeds from the exercise of options, government grants, licensing and research collaborations and interest earned on investments. During the period from 2001 to 2006, we were awarded government grants in the aggregate amount of A$3.3 million.
On February 21, 2011, the ADDF awarded us a grant of U.S.$700,000, to be provided in two equal instalments over two years. The purpose of the grant was to support a Phase II imaging trial with PBT2 to investigate the effect of PBT2 on the deposition of beta-amyloid in the brains of patients with mild Alzheimer’s disease The ADDF is based in New York and functions on a venture philanthropy model. We issued a convertible promissory note to the ADDF in the principal amount of the grant and a five-year warrant to purchase 612,397 ordinary shares of our company at a price per share of A$0.17 (equivalent to U.S.$0.169), being the closing pricing of our ordinary shares on the ASX on the date of our agreement with ADDF. We also agreed to issue an additional five-year warrant to purchase U.S.$105,000 of our ordinary shares at a price per share equal to the closing price of our ordinary shares on the ASX on the date the second instalment of U.S.$350,000 was paid. The note was due and payable on February 25, 2014. As at June 30, 2014 both instalments totalling U.S.$700,000 were repaid in full.
In October 2020, we received commitments for a capital raising of A$35 million by means of a two tranche placement to Australian and international institutions and other unrelated sophisticated, professional or MLV, under which we may sell ADSs, each representing sixty ordinary shares, from time to time through MLV, as our agent for the offerexempt investors. The placement was fully subscribed and salewas conducted at A$0.037 per share. For every share allocated in tranche two of the ADSs. placement, one option was issued. The option has an exercise price of A$0.07 per share and an expiry date of three years post allotment. The first tranche was completed on October 23, 2020 with A$10 million received. The second tranche was completed on November 4, 2020 following approval by shareholders at the Annual General Meeting held on November 18, 2020. We received the remaining A$25 million at the same time. A total of 945,945,946 shares and 674,694,939 free-attaching options were issued across both tranches.
As of June 30, 2017, we issued a total amount of 2,785,221 million ADSs on a post reverse ratio basis under the At-The-Market Issuance Sales Agreement for gross proceeds of A$39.4 million (U.S.$37.0 million).
From inception to June 30, 2017,2023, our capital expenditures have totaled A$970,298,844,007, consisting of computer equipment, furniture and fixtures, fit-out costs and laboratory equipment that is being used in connection with our research facility at theThe University of Melbourne. Capital expenditures for equipment are depreciated on a straight-line basis over the estimated useful lives of three3 to 20 years, with a net balance atas of June 30, 20172023 of A$30,815.61,776. We currently do not have significant capital spending requirements, but we expect to continue to engage in capital spending consistent with anticipated growth in our operations and personnel.
We believe that our cash and cash equivalents on hand at June 30, 2017 of A$21,884,957 is sufficient to meet our forecast cash outflows for, at least 12 months from the date of this report.
| Core activities, which are experimental activities whose outcome cannot be known or determined in advance, but can only be determined by applying a systematic progression of work; |
| Core activities conducted for the purpose of generating new knowledge (including new knowledge in the form of new or improved processes and materials); or |
| Supporting activities that are directly related and designed to support the |
Under the research and development tax incentive scheme, entities with an aggregated turnover for the income year of less than A$20 million will be entitled to a 43.5% refundable tax incentive. In the year ended June 30, 2017,2023, we recorded A$3.03.9 million in other income with respect to funds we will receive in relation to the 20172023 financial year under the 2011 research and development tax incentive scheme.
We have incurred recurring losses since inception, including operating losses of $13.8 million and $12.8 million for the event that weyears ended June 30, 2023 and 2022, respectively, and an operating cash outflow of $20 million and $12.3 million, respectively. We expect to continue incurring losses into the foreseeable future and will not be ableneed to raise additional capital to continue the required funding fordevelopment of our planned expenditure, we have the ability to further reduce expenses around our current commitments. We retain the ability to curtail other planned, but not committed expenditure, in order to ensure we continue to have adequate funds to pay all liabilities as and when they fall due.
Cash Flows
The following table summarizes our cash flows for the periods presented:
| Year ended June 30, | Year ended June 30, | |||||||||||||||||||||||
| 2017 | 2016 | 2015 | 2023 | 2022 | 2021 | |||||||||||||||||||
| (A$) | (A$) | |||||||||||||||||||||||
| Net cash (used) in operating activities | (5,865,080 | ) | (7,418,526 | ) | (10,871,074 | ) | (20,035,837 | ) | (12,337,274 | ) | (17,330,069 | ) | ||||||||||||
| Net cash used in investing activities | (27,918 | ) | (833 | ) | (182,834 | ) | (36,461 | ) | (89,147 | ) | (10,472 | ) | ||||||||||||
| Net cash (used) provided by financing activities | (159,564 | ) | - | 6,843,211 | ||||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | (6,052,562 | ) | (7,419,359 | ) | (4,210,697 | ) | ||||||||||||||||||
| Net cash generated from financing activities | 124,340 | 16,304,558 | 36,685,947 | |||||||||||||||||||||
| Net increase(decrease) in cash and cash equivalents | (19,947,958 | ) | 3,878,137 | 19,345,406 | ||||||||||||||||||||
| Cash and cash equivalents at beginning of period | 28,593,538 | 34,909,574 | 34,167,018 | 34,806,799 | 28,115,516 | 9,196,892 | ||||||||||||||||||
| Redemption of security deposit | - | 152,603 | - | |||||||||||||||||||||
| Exchange rate adjustments on cash held in foreign currencies | (656,019 | ) | 950,720 | 4,953,253 | 914,942 | 2,813,146 | (426,782 | ) | ||||||||||||||||
| Cash and cash equivalents at end of period | 21,884,957 | 28,593,538 | 34,909,574 | 15,773,783 | 34,806,799 | 28,115,516 | ||||||||||||||||||
Net cash used in operating activities was A$5,865,080,20,035,837, A$7,418,5212,337,274 and A$10,871,07417,330,069 during the years ended June 30, 2017, 20162023, 2022 and 2015,2021, respectively. Our payments to suppliers and employees during the years ended June 30, 2017, 20162023, 2022 and 20152021 were A$10,766,301,19,943,617, A$14,055,87916,875,144 and A$18,124,102,17,720,622, respectively. Our operating activity receipts for the years ended June 30, 2017, 20162023, 2022 and 20152021 of Nil, A$4,901,221 A$6,637,3534,126,364 and A$7,253,029Nil consisted of R&D tax incentive refunds, interestrefunds. The A$3,068,473 increase in payments to suppliers and grants.employees for the year ended June 30, 2023 when compared to the year ended June 30, 2022 reflects the increase in activity during the year due to conduct of the Phase 2 study of ATH434. The A$3,289,578845,478 decrease in payments to suppliers and employees for the year ended June 30, 20172022 when compared to the year ended June 30, 20162021 reflects the U.S. Food and Drug Administration’s placementpayment of PBT2employee entitlements on Partial Clinical Hold. The A$4,068,224 decreasetermination in payments to suppliers and employees for the year ended June 30, 2016 when compared to the year ended June 30, 2015 reflects the U.S. Food and Drug Administration’s placement of PBT2 on Partial Clinical Hold.prior period. During the years ended June 30, 2017, 20162023, 2022 and 2015,2021, our payments to suppliers and employees was offset in part by interest received of A$147,575,15,798, A$120,3922,755 and A$216,317,20,491, respectively.
Net cash used in investing activities was A$27,918,36,461, A$83389,147 and A$182,83410,472 during the years ended June 30, 2017, 20162023, 2022 and 2015,2021, respectively. Cash flows used for investing activities was primarily attributable to payments for rental security deposits and payments for the purchase of a property and equipment for the years ended June 30, 20172023, 2022 and 2015 and the purchase a payroll account term deposit for the year ended June 30, 2016.2021.
Net cash provided/(used) bygenerated from financing activities was A$(159,564),124,340, A$nil16,304,558 and A$6,843,21136,685,947 for the years ended June 30, 2017, 20162023, 2022 and 2015.2021. Cash used bygenerated from financing activities in the year ended June 30, 2017 relates2023, 2022 and 2021 related to costsproceeds from the issuance of raising capital under or At-The-Market facility. There were no funds raised under our At-The-Market facility during the year ended June 30, 2016. Cash flows provided by financing activities during the year ended June 30, 2015 is primarily attributableshares amounting to funds raised under our At-The-Market facility of A$7.11 million (U.S.$5.54 million).316,675, A$17,176,040 and A$39,236,886 respectively.
An unrealized foreign exchange lossgain of A$656,019914,942 was incurred for the year ended June 30, 2017 compared to a2023 an unrealized foreign exchange gain of A$950,7202,813,146 was incurred for the year ended June 30, 20162022 and aan unrealized foreign exchange gainloss of A$4,953,253426,782 was incurred for the year ended June 30, 2015.2021. In 2017,2023, the Australian dollar depreciated against the U.S. dollar by 4.12%3.60%. In 2016,2022, the Australian dollar depreciated against the U.S. dollar by 3%, while in 2015,8.19%. In 2021, the Australian dollar depreciatedappreciated against the U.S. dollar by 18%9.16%.
| c. | Research and Development, Patents and Licenses |
In recent years, we have continued our practice of building valuable research collaborations with institutes based in Australia, the United States the United Kingdom and other countries to enable us to investigate a variety of therapeutic indications including Alzheimer’s disease, Huntington disease, Parkinsonian movement disorders and selected cancers. These collaborative arrangements ensure that we work with well-respected laboratories with specific expertise in screening and animal modelling of relevance to the particular indication, without incurring ongoing administrative and personnel costs. We maintain in-house patent counsel and research and development project expertise to coordinate these research collaborations.
Our research and development expenses consist primarily of expenses for contracted research and development activities conducted by third parties on our behalf, including personnel, testing facilities and other payments in accordance with our research and clinical agreements. Research and development expenses also include costs associated with the acquisition and development of patents. Due to the numerous variables and the uncertain nature of the development of a clinical compound, including obtaining regulatory approvals, we are not able to reasonably estimate the nature, timing and costs of the future expenditures necessary to complete our research and development projects, the anticipated completion dates of each project and when material net cash flows from our research and development programs will commence.
When a product candidate is identified as suitable for clinical development, we establish a project team to coordinate all non-clinical and clinical development and manufacturing activities. Typically, we engage a clinical research organization to manage patient enrollment, data management, clinical site coordination and statistical analysis, as is the case with the development of our lead compound ATH434 through Phase 1 and 2 development. We manage our manufacturing campaigns through clinical manufacturing organisations for quality assurance and GMP compliance. All clinical, non-clinical, clinical development and manufacturing of our compounds is performed in compliance with the appropriate governing authorities, regulators and standards (for example, the International Conference on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Human Use).
Our technology does not currently require the licensing of enabling technology licenses or freedom to operate licenses. Our product candidates are designed and synthesizedsynthesised by our employees and the intellectual property of such product candidates is owned by us.
| D. | Trend Information |
We are a development stage company and while we believe that our technology will offer novel therapeutic strategies into an expanding market, we cannot predict with any degree of accuracy the outcome of our research or commercializationcommercialisation efforts.
We have not commercializedcommercialised any products to date. Accordingly, any trends within the markets in which we operate are expected to have more direct impact on our business in the event that we are successful in commercializingcommercialising our product candidates, including PBT2, PBT434ATH434 and new candidate products.
We will need substantial additional funding in order to complete the development, testing and commercializationcommercialisation of our product candidates. The commitment to these projects will require additional external funding, at least until we are able to generate sufficient cash flow from sale of one or more of our products to support our continued operations. If adequate funding is not available, we may be required to delay, scale back or eliminate certain aspects of our operations or attempt to obtain funds through unfavorable arrangements with partners or others that may force us to relinquish rights to certain of our technologies, products or potential markets or that could impose onerous financial or other terms. Management is continuing its efforts to obtain additional funds so that we can meet our obligations and sustain operations. See Note 1 (Going Concern Basis) of our accompanying financial statements.
| E. | Critical Accounting Estimates |
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.
We make 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 a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Share-based Payments
The value attributed to share options and remuneration shares issued is an estimate calculated using an appropriate mathematical formula based on an option pricing model. The choice of models and the resultant option value require assumptions to be made in relation to the likelihood and timing of the conversion of the options to shares and the value and volatility of the price of the underlying shares.
| Contractual Obligations | Payments due by period | |||||||||||||||||||
| Total | less than 1 year | 1-3 years | 3-5 Years | more than 5 years | ||||||||||||||||
| Operating lease obligations | 48,330 | 44,521 | 3,809 | - | - | |||||||||||||||
| Total | 48,330 | 44,521 | 3,809 | - | - | |||||||||||||||
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
(Start of the Remuneration Report for Australian Disclosure Requirements)
| A. | Directors and Senior Management |
Our directors and executive officers are as follows:
| Name | Age | Position | ||
| Geoffrey P. Kempler | Chairman of the Board of Directors | |||
| David A. Stamler | 62 | Chief Executive Officer | ||
| Kathryn J.E. Andrews | Chief Financial Officer | |||
| Director | ||||
| Peter A. Marks(1) (2) | 67 | Director | ||
| Brian D. | 69 | Director | ||
| Phillip Hains | 63 | |||
| (1) | Member of the Audit Committee |
| (2) | Member of the Remuneration Committee and Share Plan Committee |
Mr. Geoffrey Paul Kempler
Mr. Kempler is a qualified psychologist. Mr. Kempler, who haspsychologist with extensive experience in investment and business development and has been responsible for the implementation of our strategic plan and the commercializationcommercialisation of our technology. Mr. Kempler was appointed Chairman of Ausbiotech, Australia’s biotechnology organization, on 8 November 2021 and also sits on the Monash Institute of Cognitive and Clinical Neurosciences (MICCN) Industry Advisory Board at the Turner Institute of Brain and Mental Health at Monash University, where he is also an Adjunct Senior Lecturer.
Mr. Kempler holds a B.Sc degree in science from Monash University, and a Grad. Dip. App. Soc. Psych. degree from Swinburne University. Mr. Kempler
Dr. David Stamler, M.D. was appointed as a Non-Executive Chairman of Opthea Limited, an ASX listed drug development company developing innovative, biologics-based therapies for the treatment of eye disease, on November 30, 2015.
Ms. Kathryn Andrews is a highly experienced biotechnology CFO. She was appointed CFO in November 2014. Between 2012 and 2014, Ms. Andrews held a senior role with The CFO Solution, a firm focused on providing an outsourced CFO team including company secretarial to listed public companies, mainly in the biotechnology sector. Between 2002 and 2006 Ms. Andrews was the CFO and Company Secretary of Antisense Therapeutics Limited. Ms. Andrews has also provided contract accounting, governance and consulting services to various mining and resources, technology and government organisations from 2007 to 2012 and 1999 to 2002. Between 1989 and 1998 Ms. Andrews was employed by Rio Tinto Limited in a variety of accounting, internal audit and financial management roles. Between 1985 and 1989 Ms. Andrews was employed by BP Australia Limited in accounting roles. Ms. Andrews is a Certified Practicing Accountant and holds a Bachelor of Commerce from the University of Melbourne.
Mr. Peter MarksLawrence Gozlan has served as a director of our Group since August 2011. Mr. Gozlan, a leading biotechnology investor and advisor, is the Chief Investment Officer and Founder of Scientia Capital, a specialised global investment fund focused exclusively in life sciences. Scientia Capital was founded to provide high level expertise and to manage investments for high net worth individuals, family offices and institutional investors wanting exposure to the biotechnology industry. Prior to this, Mr. Gozlan was responsible for the largest biotechnology investment portfolio in Australia as the institutional biotechnology analyst at QIC (“the Queensland Investment Corporation”), an investment fund with over A$60 billion under management. He previously worked as the senior biotechnology analyst in the equities team at Foster Stockbroking Pty Ltd and gained senior corporate finance experience advising life sciences companies at Deloitte. Mr. Gozlan is currently a Director of Opthea Limited, an ASX and NASDAQ listed drug development company, and a number of private biotechnology companies in the USA. He holds a Bachelor of Science with Honors in microbiology and immunology from the University of Melbourne.
Mr. Peter Marks has served as a director of our Group since July 2005. For the period November 21, 2006 to October 20, 2011, Mr. Marks has also served as Executive Chairman of iSonea Ltd, formallyformerly KarmelSonix Ltd, a medical devices company listed on the ASX that ishas, over several years, focused on developing and commercializing a range of devices in the respiratory and medicine space. For over 13 years until the end of August 2014, Mr. Marks was a Director of Peregrine Corporate Ltd, an Australian basedAustralian-based investment bank.banking and corporate advisory firm. Mr. Marks is currentlywas until late 2016, a Director of Armadale Capital Plc (formerly Watermark Global Plc), an AIM listed investment company, focused on natural resources projects based principally in Africa with its current major investments being a gold exploration company in DRC and a coal briquetting operation in South Africa. Mr. Marks is currently Chairman of Newburyport Partners, a principal of Henslow Pty Ltd (formerly Halcyon Corporate Pty Ltd), aboutique corporate and capital markets advisory firm specializing in advising and raising capital for a range of small to mid-cap companies. Mr. Marks iswas, until March 31, 2020, a non-executive Director of Fluence Corporation Ltd. (formerly Emefcy Group Limited (formerlyand prior to that Savcor Group Limited), an ASX listed municipal & industrial waste water technology business. FromMr. Marks is also a non- executive director of Electriq~Global Ltd, an unlisted public company developing a novel and safe hydrogen fuel storage and transportation system. He also currently serves as Director of ASX listed biotech company, Noxopharm Ltd. which is progressing a clinical program in using chemical sensitisers to enhance the effectiveness of existing chemotherapy drugs and radiation therapies as well as a non-executive director (until August 2022) of Nyrada Inc, which is developing several pre-clinical non-oncology projects focusing on the cardiovascular and TBI space, and which was listed on ASX in January 2020. Mr Marks is also a director of listed resources company Iris Metals Ltd. which listed on ASX in September 2021. He has also served as a non- executive director of ASX listed company, Elsight Ltd from January 2020 until end September 2021.From September 1998 until March 2001, Mr. Marks was employed by KPMG Corporate Finance Ltd (Australia), where he rose to the position of Director and was responsible for heading up the equity capital markets group in Melbourne. From January 1992 until July 1994, Mr. Marks served as Head of the Melbourne Companies Department at the ASX and was founding Director of Momentum Funds Management Pty Ltd, an Australian venture capital firm. From December 1990 until December 1991, Mr. Marks served as Director of Corporate Finance at Burdett Buckeridge & Young Ltd in their Melbourne offices, from August 1988 until November 1990, he held senior corporate finance position at Barings Securities Ltd, and from July 1985 until July 1988, he served as an Associate Director of McIntosh Securities, now Merrill Lynch Australia. In his roles with these various financial institutions, Mr. Marks was responsible for advising a substantial number of listed and unlisted companies on issues ranging from corporate and company structure, to valuation,valuations, business strategies, acquisitions and international opportunities. Mr. Marks holds a Bachelor of Economics degree, a Bachelor of LawLaws degree and Graduate Diploma in Commercial Law from Monash University in Melbourne, Australia, and an MBA degree from theThe Scottish School of Business at the University of Edinburgh. Mr. Marks currently serves as a director on ASX and Nasdaq listed companies, Noxopharm Ltd from March 2016, Nyrada Inc from March 2018 until August 2022, Iris Metals Ltd from December 2020, and ASX listed, Evergreen Lithium, since March 2022. Mr. Marks served as director of Elsight Ltd and Nyrada Inc. in the last 3 years.
Mr. Brian Derek Meltzer
Mr. Meltzer is Chairman of our Audit Committee and Remuneration Committee. Mr. Meltzer holds a Bachelor of Commerce degree from the University of Auckland and a Master of Economics degree from Monash University.
There are no family relationships among our directors and senior executives.
Directors’ Interests
The following table sets forth all compensation we paid forrelevant interest of each director, as defined by section 608 of the Corporations Act, in the share capital of the Group, as notified by the directors to the ASX in accordance with section 205G(1) of the Corporations Act, at the date of this report is as follows:
| Director | Number of ordinary shares | Number of options over ordinary shares | ||||||
| Geoffrey Kempler | 18,011,000 | 14,000,000 | ||||||
| Lawrence Gozlan | — | 7,000,000 | ||||||
| Peter Marks | 43,111 | 7,000,000 | ||||||
| Brian Meltzer | 326,666 | 7,000,000 | ||||||
Meeting of Directors
The number of meetings our board of directors (including committee meetings of directors) held during the year ended June 30, 20172023 and the number of meetings attended by each director were:
| Board Meetings | Audit Committee Meetings | Remuneration Committee Meetings | ||||||||||||||||||||||
| Director | A | B | A | B | A | B | ||||||||||||||||||
| Geoffrey Kempler | 6 | 6 | — | — | — | — | ||||||||||||||||||
| Lawrence Gozlan | 6 | 6 | — | — | — | — | ||||||||||||||||||
| Peter Marks | 6 | 6 | 6 | 6 | 1 | 1 | ||||||||||||||||||
| Brian Meltzer | 6 | 6 | 6 | 6 | 1 | 1 | ||||||||||||||||||
| A | = | Number of meetings held during the time the director held office or was a member of the committee. |
| B | = | Number of meetings attended |
| — | = | Not a member of the relevant committee |
Board Diversity
The Group considers diversity broadly and believes the diversity of board of directors in is in line with respect to eachAustralian corporate practice. The table below provides certain information regarding the diversity of our executive officers andboard of directors duringas of the 2017 fiscal year.date of this annual report.
Salaries, fees, commissions, bonuses and other | Pension, retirement and other similar benefits | |||||||
Geoffrey P. Kempler (1) | A$ | 419,313 | A$ | 26,411 | ||||
| Dianne M. Angus | A$ | 328,799 | A$ | 19,616 | ||||
Kathryn Andrews (1) | A$ | 131,826 | A$ | 19,616 | ||||
David A. Stamler (3) | A$ | 58,290 | -- | |||||
| Peter A. Marks | A$ | 60,000 | -- | |||||
| Brian D. Meltzer | A$ | 55,833 | A$ | 29,167 | ||||
| George W. Mihaly | A$ | 75,000 | -- | |||||
Lawrence B. Gozlan (2) | A$ | 140,000 | -- | |||||
Ira Shoulson (2) | A$ | 268,137 | -- | |||||
| All executive officers and directors as a group (9 persons) | A$ | 1,537,198 | A$ | 87,465 | ||||
| Board Diversity Matrix | |
| Country of Principal Executive Offices: | Australia |
| Foreign Private Issuer | Yes |
| Disclosure Prohibited under Home Country Law | No |
| Total Number of Directors | 4 |
| Female | Male | Non- Binary | Did Not Disclose Gender | |||||||||||||
| Part I: Gender Identity | ||||||||||||||||
| Directors | 0 | 4 | ||||||||||||||
| Part II: Demographic Background | ||||||||||||||||
| Underrepresented Individual in Home Country Jurisdiction | ||||||||||||||||
| LGBTQ+ | ||||||||||||||||
| Did Not Disclose Demographic Background | 4 | |||||||||||||||
The remuneration report is set out under the following main headings:
| c) | Share-based compensation |
| d) | Key management personnel disclosure |
| e) | Employment contracts of Directors and other key management personnel |
| a) | Principles used to determine the nature and amount of remuneration |
Remuneration policy
Remuneration of all Executive and Non-Executive Directors, Officers and Employees of our Group is determined by the Board following recommendation by the Remuneration Committee.
We are committed to remunerating Senior Executives and Executive Directors in a manner that is market- competitive and consistent with “Best Practice” including the interests of Shareholders. Remuneration packages are based on fixed and variable components, determined by the Executives’ position, experience and performance, and may be satisfied via cash or equity.
In accordance with the approval of our shareholders at our 2004 annual general meeting of shareholders, the aggregate amount available per annum for the remuneration of our non-executive directors for their services (payable in cash, ordinary shares or options) is A$1,250,000.
| 2023 | 2022 | |||||||
| A$ | A$ | |||||||
| Base fees | ||||||||
| Board - member | 70,000 | 70,000 | ||||||
| Board Chairman (exclusive of Superannuation) | 100,000 | 100,000 | ||||||
Remuneration policy versus financial performance
The Group’s remuneration policy is not entirely based on our performance, but rather on industry practice.
The Group’s primary focus is research activities with a long-term objective of developing and commercializing our research and development results.
The tables below set out summary information about our earnings and movement in shareholder wealth for the five years to June 30, 2017,2023:
| 2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||
| A$ | A$ | A$ | A$ | A$ | ||||||||||||||||
| Interest income | 16,436 | 2,504 | 20,676 | 17,117 | 108,538 | |||||||||||||||
| Total comprehensive loss for the year | (13,806,515 | ) | (12,847,061 | ) | (15,309,353 | ) | (13,456,800 | ) | (12,337,830 | ) | ||||||||||
No dividends have been paid for the five years to June 30, 2023.
| 2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||
| A$ | A$ | A$ | A$ | A$ | ||||||||||||||||
| ASX share price at start of the year | 0.01 | 0.03 | 0.03 | 0.03 | 0.04 | |||||||||||||||
| ASX share price at end of the year | 0.01 | 0.01 | 0.03 | 0.02 | 0.03 | |||||||||||||||
| Basic and diluted loss per share (cents) | (0.57 | ) | (0.53 | ) | (0.90 | ) | (1.50 | ) | (2.00 | ) | ||||||||||
We believe that our performance in terms of earnings will remain negative while we continue in the research and/or trial phase. Shareholder wealth reflects this speculative and volatile market sector. This pattern is indicative of our performance over the past 5 years.
Performance based remuneration
The purpose of a performance bonus is to reward individual performance in line with our Group’s objectives. Consequently, performance-based remuneration is paid to an individual where the individual’s performance clearly contributes to a successful outcome for our Group. This is regularly measured in respect of performance against key performance indicators (“KPI’s”).
We use a variety of KPI’s to determine achievement, depending on the role of the Executive being assessed.
For details of remuneration refer to Employment Contracts of Directors and Key Management Personnel below.
| b) | Details of remuneration |
The following table sets forth all compensation we paid for the year ended June 30, 2023 with respect to each of our directors and executive officers during the 2023 fiscal year.
| Short Term Benefits | Post- Employment Superannuation | Long Term Benefits Long- service | Termination | Equity | ||||||||||||||||||||||||
| Base Fee | Bonus | Contribution | Leave | Benefit | Options | Total | ||||||||||||||||||||||
| 2023 | A$ | A$ | A$ | A$ | A$ | A$ | A$ | |||||||||||||||||||||
| Directors’ remuneration | ||||||||||||||||||||||||||||
| Mr. Geoffrey Kempler (2) | 302,800 | - | 10,500 | - | - | - | 313,300 | |||||||||||||||||||||
| Mr. Brian Meltzer | 63,348 | - | 6,652 | - | - | - | 70,000 | |||||||||||||||||||||
| Mr. Peter Marks | 70,000 | - | - | - | - | - | 70,000 | |||||||||||||||||||||
| Mr. Lawrence Gozlan | 70,000 | - | - | - | - | - | 70,000 | |||||||||||||||||||||
| 506,148 | - | 17,152 | - | - | - | 523,300 | ||||||||||||||||||||||
| Other key management personnel | ||||||||||||||||||||||||||||
| Dr. David Stamler (1)(3) | 731,381 | 194,570 | - | - | - | 724,047 | 1,649,998 | |||||||||||||||||||||
| Ms. Kathryn Andrews (1) | 294,921 | - | 25,292 | 7,215 | - | 40,128 | 367,556 | |||||||||||||||||||||
| 1,026,302 | 194,570 | 25,292 | 7,215 | - | 764,175 | 2,017,554 | ||||||||||||||||||||||
| Total | 1,532,450 | 194,570 | 42,444 | 7,215 | - | 764,175 | 2,540,854 | |||||||||||||||||||||
| (1) | Base Fee includes movements in the annual leave provision for Ms. Kathryn Andrews and Dr. David Stamler in accordance with their employment contracts. |
| (2) | Includes A$202,800 in corporate advisory fees paid to an associated entity of Mr. Geoffrey Kempler for business advisory services including investor relations, marketing and business development. |
| (3) | Includes A$194,570 performance bonus, in accordance with his employment contract based on the achievement of individual and corporate goals covering clinical, research and finance for the 2021 calendar year. |
The following table sets forth all compensation we paid for the year ended June 30, 2022 with respect to each of our directors and executive officers during the 2022 fiscal year.
| Short Term Benefits | Post- Employment Superannuation | Long Term Benefits Long- service | Termination | Equity | ||||||||||||||||||||||||
| Base Fee | Bonus | Contribution | Leave | Benefit | Options | Total | ||||||||||||||||||||||
| 2022 | A$ | A$ | A$ | A$ | A$ | A$ | A$ | |||||||||||||||||||||
| Directors’ remuneration | ||||||||||||||||||||||||||||
| Mr. Geoffrey Kempler (2) | 377,800 | - | 10,000 | - | - | - | 387,800 | |||||||||||||||||||||
| Mr. Brian Meltzer | 63,636 | - | 6,359 | - | - | - | 69,995 | |||||||||||||||||||||
| Mr. Peter Marks | 70,000 | - | - | - | - | - | 70,000 | |||||||||||||||||||||
| Mr. Lawrence Gozlan (3) | 107,500 | - | - | - | - | - | 107,500 | |||||||||||||||||||||
| Dr. David Sinclair (4) | 34,888 | 34,888 | ||||||||||||||||||||||||||
| Mr. Tristan Edwards (4) | 31,819 | 4,194 | 36,013 | |||||||||||||||||||||||||
| 685,643 | - | 20,553 | - | - | - | 706,196 | ||||||||||||||||||||||
| Other key management personnel | ||||||||||||||||||||||||||||
| Dr. David Stamler (1) | 658,393 | - | - | - | - | 965,633 | 1,624,026 | |||||||||||||||||||||
| Ms. Kathryn Andrews (1) | 296,979 | - | 23,568 | 6,711 | - | 32,531 | 359,789 | |||||||||||||||||||||
| 955,372 | - | 23,568 | 6,711 | - | 998,164 | 1,983,815 | ||||||||||||||||||||||
| Total | 1,641,015 | - | 44,121 | 6,711 | - | 998,164 | 2,690,011 | |||||||||||||||||||||
| (1) | Base Fee includes movements in the annual leave provision for Ms. Kathryn Andrews and Dr. David Stamler in accordance with their employment contracts. |
| (2) | Includes A$277,800 in corporate advisory fees paid to an associated entity of Mr. Geoffrey Kempler for business advisory services including investor relations, marketing and business development. |
| (3) | Includes A$37,500 in corporate advisory fees paid to an associated entity of Mr. Lawrence Gozlan for corporate advisory services including seeking and advancing opportunities to expand the Group’s product pipeline and other sources of funding to commence and continue the Group’s clinical trials. |
| (4) | David Sinclair and Tristan Edwards resigned on January 4, 2022. |
Performance income as a group, then consistingproportion of nine persons, heldtotal remuneration
All executives are eligible to receive incentives as determined by the Board from time to time. Their performance payments are based on a set monetary value, set number of shares or options to purchase 14,860,000or as a portion of our ordinary shares. Of such options, (ii) options to purchase 8,000,000 ordinary sharesbase salary. Therefore, there is no fixed proportion between incentive and non-incentive remuneration.
Non-Executive Directors are exercisable for A$0.33 consideration on or before December 13, 2017; (iii) options to purchase 160,000 ordinary shares are exercisable for A$0.73 consideration on or before November 3, 2018; and (iv) options to purchase 1,000,000 ordinary shares exercisable for A$0.34 consideration on or before October 2, 2018; (v) options to purchase 8,550,000 ordinary shares exercisable for A$0.07 consideration on or before June 6, 2022. All such options were granted under our 2004 Employees’, Directors’ and Consultants’ Share and Option Plan. See Item 6.E. “Directors, Senior Management and Employees - Share Ownership – Stock Option Plans.”
| Fixed remuneration | STI | LTI | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||
| % | % | % | % | % | % | |||||||||||||||||||
| Directors | ||||||||||||||||||||||||
| Mr. Geoffrey Kempler | 100 | 100 | - | - | - | - | ||||||||||||||||||
| Mr. Brian Meltzer | 100 | 100 | - | - | - | - | ||||||||||||||||||
| Mr. Peter Marks | 100 | 100 | - | - | - | - | ||||||||||||||||||
| Mr. Lawrence Gozlan | 100 | 100 | - | - | - | - | ||||||||||||||||||
| Other key management personnel | - | - | ||||||||||||||||||||||
| Dr. David Stamler | 44 | 41 | 12 | - | 44 | 59 | ||||||||||||||||||
| Ms. Kathryn Andrews | 89 | 91 | - | - | 11 | 9 | ||||||||||||||||||
Long-term incentive (“LTI”) related to up to 20 days’ vacation a year (vacation days that are not used in any calendar year will be carried over for useremuneration were provided in the following yearform of share-based payments.
Short-term incentives (“STI”) related to a maximum carry-over of two years) and reimbursement of reasonable business expenses incurredremuneration were provided in the performanceform of his duties. Mr. Kempler iscash bonus.
| c) | Share-based compensation |
We have an Employee and Consultant Plan designed to reward Executives, Employees and/or Consultants for their contributions. Due to our United States presence, a United States plan, and an Australian plan were also entitleddeveloped. At June 30, 2023, equity had been issued to participate in the employee benefits established by our company, as applicable to executives, including, without limitation, a Section 401(k) retirement plan, health, dental, life insurancefour (4) Directors, two (2) Key Management Personnel, nine (9) employees and short and long term disability plans. The agreement contains customary confidentiality provisions.
The term and conditions of each grant of options to purchase 160,000 ordinary shares, whichaffecting Directors and Key Management Personnel remuneration in this reporting period are exercisable for A$0.73 on or before November 3, 2018, as remuneration for her services. The options werefollows:
| Grant date | Date vested and exercisable | Expiry date | Exercise price | Vested | Value per option at grant date | |||||||||||
| September 18, 2020 | September 18, 2020 | September 17, 2025 | $ | 0.09 | Yes | $ | 0.03 | |||||||||
| January 7, 2021 | January 6, 2023 onwards | January 6, 2026 | $ | 0.03 | Partially | $ | 0.03 | |||||||||
| July 31, 2021 | July 31, 2021 | July 31, 2024 | $ | 0.07 | Yes | $ | 0.03 | |||||||||
| November 29, 2021 | November 29, 2022 onwards | November 29, 2026 | $ | 0.02 | Partially | $ | 0.02 | |||||||||
| November 29, 2021 | November 29, 2022 onwards | November 29, 2026 | $ | 0.04 | Partially | $ | 0.02 | |||||||||
Options granted under the 2004 ASX Plan. Duringplan carry no dividend or voting rights.
When exercisable, each option is convertible into one ordinary share as soon as practical after the 2015 fiscal year, Ms. Angus also receivedreceipt by us of the completed exercise form and full payment of such exercise price.
The exercise price of options will be equal to purchase 1,000,000or less than the weighted average price at which our shares are traded on the Australian Securities Exchange during the 5 days up to and including the grant date or such other exercise price that the Remuneration Committee determines to be appropriate under the circumstances.
The plan rules contain a restriction on removing the ‘at risk’ aspect of the instruments granted to executives. Plan participants may not enter any transaction designed to remove the ‘at risk’ aspect of an instrument before it vests.
As of June 30, 2023, there were no options over ordinary shares whichissued as remuneration to any key management personnel of our Group during the current financial year (2022: 5,000,000).
No ordinary shares were issued as a result of exercise of remuneration options by Directors and Key Management Personnel of Alterity Therapeutics Limited during the current or previous financial year.
| d) | Key management personnel disclosure |
Options and right holdings
The number of options over ordinary shares of our Group held during the financial year by each Director of Alterity Therapeutics Limited and other Key Management Personnel of our Group, including their personally related parties, are set out below:
| Share Options of the Group | Balance July 1, 2022 No. | Granted as Remuneration No. | Options Expired No. | Other movements (1) | Balance June 30, 2023 No. | Total Vested and Exercisable June 30, 2023 No. | Total Unvested June 30, 2023 No. | |||||||||||||||||||||
| Mr. Geoffrey Kempler | 19,000,000 | - | - | (5,000,000 | ) | 14,000,000 | 14,000,000 | - | ||||||||||||||||||||
| Mr. Lawrence Gozlan | 8,250,000 | - | - | (1,250,000 | ) | 7,000,000 | 7,000,000 | - | ||||||||||||||||||||
| Mr. Brian Meltzer | 8,250,000 | - | - | (1,250,000 | ) | 7,000,000 | 7,000,000 | - | ||||||||||||||||||||
| Mr. Peter Marks | 8,250,000 | - | - | (1,250,000 | ) | 7,000,000 | 7,000,000 | - | ||||||||||||||||||||
| Ms. Kathryn Andrews | 5,000,000 | - | - | - | 5,000,000 | 1,250,000 | 3,750,000 | |||||||||||||||||||||
| Dr. David Stamler | 91,392,720 | - | - | - | 91,392,720 | 32,368,255 | 59,024,465 | |||||||||||||||||||||
| 140,142,720 | - | - | (8,750,000 | ) | 131,392,720 | 68,618,255 | 62,774,465 | |||||||||||||||||||||
All vested options are exercisable for A$0.34 per shareat the end of the year and there were 62,774,465 options unvested as of June 30, 2023.
| (1) | Other movements represents expired options. |
| Share Options of the Group | Balance July 1, 2021 No. | Granted as Remuneration No. | Options Exercised No. | Other movements | Balance June 30, 2022 No. | Total Vested and Exercisable June 30, 2022 No. | Total Unvested June 30, 2022 No. | |||||||||||||||||||||
| Mr. Geoffrey Kempler | 19,000,000 | - | - | - | 19,000,000 | 19,000,000 | - | |||||||||||||||||||||
| Mr. Lawrence Gozlan | 8,250,000 | - | - | - | 8,250,000 | 8,250,000 | - | |||||||||||||||||||||
| Mr. Brian Meltzer | 8,250,000 | - | - | - | 8,250,000 | 8,250,000 | - | |||||||||||||||||||||
| Mr. Peter Marks | 8,250,000 | - | - | - | 8,250,000 | 8,250,000 | - | |||||||||||||||||||||
| Dr. David Sinclair (1) | 7,000,000 | - | - | (7,000,000 | ) | - | - | - | ||||||||||||||||||||
| Mr. Tristan Edwards (1) | 7,000,000 | - | - | (7,000,000 | ) | - | - | - | ||||||||||||||||||||
| Ms. Kathryn Andrews | 500,000 | 5,000,000 | - | (500,000 | ) | 5,000,000 | - | 5,000,000 | ||||||||||||||||||||
| Dr. David Stamler | 95,392,720 | - | - | (4,000,000 | ) | 91,392,720 | - | 91,392,720 | ||||||||||||||||||||
| 153,642,720 | 5,000,000 | - | (18,500,000 | ) | 140,142,720 | 43,750,000 | 96,392,720 | |||||||||||||||||||||
| (1) | Options held by David Sinclair and Tristan Edwards were forfeited upon resignation on January 4, 2022. |
Shares provided on or before October 2, 2018, asexercise of remuneration for her services. The options were granted under the 2004 ASX Plan. During the 2017 fiscal year, Ms Angus received options to purchase 1,000,000
No ordinary shares which are exercisable for $0.07 on or before 6 June 2022. These options are subjectwere issued to an initial 12 month vesting period. If we terminatekey management personnel as a result of the employment agreement without cause or if Ms. Angus terminates the employment agreement with good reason (as such terms are defined in the agreement) (i) we will pay to Ms. Angus, within 90 daysexercise of such termination, the sums she would have been entitled to receive had she continued to provide services for three months following the termination date; and (ii) any unvested options shall be accelerated and will become fully vested and she will be entitled to exercise herremuneration options during the remainderfinancial year ended June 30, 2023 and June 30, 2022.
Shareholdings
The number of our ordinary shares held during the financial year by each Director of our Group and other Key Management Personnel other than for remuneration, including their term.personally related parties, are set out below:
| Fully Paid Ordinary Shares of the Group | Balance July 1, 2022 No. | Received as Remuneration No. | Received on Exercise of Options No. | Net Change Other No. | Balance June 30, 2023 No. | |||||||||||||||
| Mr. Geoffrey Kempler | 18,011,000 | - | - | - | 18,011,000 | |||||||||||||||
| Mr. Lawrence Gozlan | - | - | - | - | - | |||||||||||||||
| Mr. Brian Meltzer | 326,666 | - | - | - | 326,666 | |||||||||||||||
| Mr. Peter Marks | 43,111 | - | - | - | 43,111 | |||||||||||||||
| Ms. Kathryn Andrews | - | - | - | - | - | |||||||||||||||
| Dr. David Stamler (1) | - | - | - | 3,555,000 | 3,555,000 | |||||||||||||||
| 18,380,777 | - | - | 3,555,000 | 21,935,777 | ||||||||||||||||
| On-market-purchase. |
| Fully Paid Ordinary Shares of the Group | Balance July 1, 2021 No. | Received as Remuneration No. | Received on Exercise of Options No. | Net Change Other No. | Balance June 30, 2022 No. | |||||||||||||||
| Mr. Geoffrey Kempler | 18,011,000 | - | - | - | 18,011,000 | |||||||||||||||
| Mr. Lawrence Gozlan | - | - | - | - | - | |||||||||||||||
| Mr. Brian Meltzer | 326,666 | - | - | - | 326,666 | |||||||||||||||
| Mr. Peter Marks | 43,111 | - | - | - | 43,111 | |||||||||||||||
| Dr. David Sinclair (1) | - | - | - | - | - | |||||||||||||||
| Mr. Tristan Edwards (1) | - | - | - | - | - | |||||||||||||||
| Ms. Kathryn Andrews | - | - | - | - | - | |||||||||||||||
| Dr. David Stamler | - | - | - | - | - | |||||||||||||||
| 18,380,777 | - | - | - | 18,380,777 | ||||||||||||||||
| (1) | David Sinclair and Tristan Edwards resigned on January 4, 2022. |
Loans to key management personnel
There were no loans made to the Directors or other Key Management Personnel, including their personally related parties.
Other transactions with key management personnel
There were no further transactions with Key Management Personnel not disclosed above.
| e) | Employment contracts of Directors and other key management personnel |
The following Directors and Key Management Personnel were under contract at June 30, 2023:
| Key management personnel | Duration | Notice Requirements | Termination | |||
| Kathryn Andrews | Until termination by either party. Signed 11 November 2014 | Ms. Andrews may terminate with 30 days’ notice, or | Accrued entitlements including all unreimbursed business expenses. | |||
| Without Cause the Group may terminate with 30 days’ notice, or | Permitted to keep and/or exercise options that have vested at the time of termination | |||||
| With Cause the Group may terminate without notice | ||||||
| David Stamler | Until termination by either party. Signed 6 January 2021. | Each party will be required to provide 6 months’ notice of termination unless otherwise agreed to in writing. | Accrued entitlements including all unreimbursed business expenses | |||
Vested but unexercised options shall be exercisable within 30 days after the date of termination Unvested options will terminate automatically without further notice | ||||||
| For Good Reason, Dr. Stamler may terminate at any time upon written notice | Payment of accrued salary, accrued but unused vacation pay and approved but unreimbursed expenses that are owed to date of termination Payment equivalent to 100% of current annualized salary | |||||
Vested but unexercised options shall be exercisable within 30 days after the date of termination Unvested options will terminate automatically without further notice | ||||||
| With Cause, the Group may terminate at any time upon written notice | Payment limited to accrued salary, accrued but unused vacation pay and approved but unreimbursed expenses that are owed to date of termination. | |||||
All options shall be canceled upon date of termination |
(End of Remuneration Report)
| C. | Board Practices |
Introduction
Our Board of Directors is elected by and accountable to our shareholders. Our Board of Directors’ responsibilities are divided into operating activities, financial and capital markets activities and scientific activities. The Chairman of our Board of Directors, currently Mr. Geoffrey Kempler, is responsible for the management of the Board of Directors and its functions.
Election of Directors
Directors are elected at our annual general meeting of shareholders. Under our Constitution, the term of office of our directors are staggered, such that at every annual general meeting of shareholders one-third, rounded down to the nearest whole number, of the directors, except a Managing Director, must retire from office and may offer himself/herself for re-election. No director, except a Managing Director, shall retain office for a period in excess of three years without submitting for re-election. Our Board of Directors has the power to appoint any person to be a director, either to fill a vacancy or as an additional director (provided that the total number of directors does not exceed the maximum allowed by law), and any director so appointed may hold office only until the next annual general meeting when he or she shall be eligible for election. Mr. Kempler is our Managing Director. Mr. Peter Marks, Mr. Lawrence Gozlan and Prof. Ira Shoulson must retire and may stand for re-election at our 2017 annual general meeting of shareholders. Dr. Mihaly must retire and may stand for re-election at our 2018 annual general meeting of shareholders.
Non-Executive and Independent Directors
Australian law does not require a company to appoint a certain number of independent directors to its board of directors or audit committee. However, under the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations 3rd Edition (“ASX Recommendations”), the ASX recommends, but does not require, that an ASX-listed company have a majority of independent directors on its board of directors and that the audit committee be comprised of independent directors, within the meaning of the rules of the ASX. Our Board of Directors currently has six directors, of which five are non-executive directors within the meaning of the ASX Recommendations, and our audit committee consists of such three non-executive directors. Accordingly, we currently comply with the foregoing recommendations of the ASX Recommendations.
Under the rules of the NASDAQ Stock Market, a majority of our Board of Directors must qualify as independent directors within the meaning of the rules of the NASDAQ Stock Market, each of whom satisfies the respective “independence” requirements of the NASDAQ Stock Market Rules and the Securities and Exchange Commission. Our Board of Directors has determined that each of Messrs. Lawrence Gozlan, Peter Marks and Brian Meltzer and Dr. George Mihaly qualifies as an independent director under the requirements of the ASX, the NASDAQ Stock Market and the Securities and Exchange Commission. As a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules. This includes NASDAQ rule 5605(b)(1) requiring a majority of independent directors.
Committees of the Board of Directors
Our Board of Directors has established the following committees:
Audit Committee
. The NASDAQ Stock Market rules require us to establish an audit committee comprised of at least three members, each of whom is financially literate and satisfies the respective “independence” requirements of the Securities and Exchange Commission and NASDAQ and one of whom has accounting or related financial management expertise at senior levels within a company. As a foreign private issuer whose shares are listed on The NASDAQ Capital Market, we are permitted to follow certain home country corporate governance practices instead of certain requirements of The NASDAQ Stock Market Rules. This includes the Rule related to Audit Committee Composition rule 5605(c)(2)(A)): we may have an audit committee composed of two members instead of “at least three members”.Our Audit Committee assists our Board of Directors in overseeing the accounting and financial reporting processes of our company and audits of our financial statements, including the integrity of our financial statements, compliance with legal and regulatory requirements, our independent public accountants’ qualifications and independence, the performance of our internal audit function and independent public accountants, and such other duties as may be directed by our Board of Directors. The Audit Committee is also required to assess risk management. The audit committee meets at least four times per year.
Our Audit Committee currently consists of threetwo board members, each of whom satisfies the “independence” requirements of the Securities and Exchange Commission and the NASDAQ Stock Market Rules and ASX Rules. Our Audit Committee is currently composed of Messrs. Marks and Meltzer. Our Board of Directors has determined that Mr. Meltzer meets the definition of an audit committee financial expert, as defined by rules of the Securities and Dr. Mihaly.Exchange Commission.
Remuneration Committee
. Our Board of Directors has established a Remuneration Committee, which is comprised solely of independent directors, within the meaning of the NASDAQ Stock Market Rules. The Remuneration Committee is responsible for reviewing the salary, incentives and other benefits of our executive officers and to make recommendations on such matters for approval by our Board of Directors. The Remuneration Committee is also responsible for overseeing and advising our Board of Directors with regard to the adoption of policies that govern our compensation programs, including share and ADS option and employee benefit plans. Additionally, the Remuneration Committee administers our share and ADS option plans and any other employee benefit plans through a sub-committee that it established for this purpose (see Share Plan Committee below).Share Plan Committee
. Our Remuneration Committee has established a sub-committee, the Share Plan Committee, which administers our share and ADS option plans.Directors’ Service Contracts
There are no arrangements or understandings between us and any of our subsidiaries, on the one hand, and any of our directors, on the other hand, providing for benefits upon termination of their employment or service as directors of our company or any of our subsidiaries.
Indemnification of Directors and Officers
Our Constitution provides that, subject to the Australian Corporations Act, every director, secretary, manager or officer of our company or any person employed by our company as auditor shall be indemnified out of our funds against all liability incurred by such person as a director or officer in defending proceedings, whether civil or criminal, in which judgment is given in the persons favor or in which the person is acquitted in connection with any application under the Australian Corporations Act in which relief is granted to the person by a Court.