This Preliminary final report should be read in conjunction with the 30 June 2014 Annual Report signed on 27 August 2014 together with ASX announcements issued after this date.
Additional Appendix 4E disclosure requirements can be found in the directors’ report and the 30 June 2014 financial statements and accompanying notes.

Appendix 4E Preliminary Final Report

QRxPharma Limited
ABN 16 102 254 151

1. Reporting Period

Report for the financial year ended 30 June 2014.
Previous corresponding period is the financial year ended 30 June 2013.

 

2.  Results for announcement to the market

    $A’000
Revenue from ordinary activities (item 2.1)   Down   84%   To   670
Net loss from ordinary activities after tax attributable to members (item 2.2) Up 32% To (13,335)
Net loss for the period attributable to members (item 2.3)   Up   32%   To   (13,335)

Brief explanation of any of the figures reported above necessary to enable the figures to be understood (item 2.6)

 

Revenue

 

On 20 December 2011, the Company signed a binding Letter of Intent (LOI) with Actavis Inc. (Actavis) to commercialise immediate release Moxduo in the US. The LOI was secured by a non-refundable, non-creditable up front signing fee of $5.9 million (US$6 million). The fee revenue was recognised from the date of the signing of the LOI to the anticipated FDA approval date representing an approximation of the time relating to the submission of the filing with the FDA and associated processes. The Group had recognised $5.3 million as revenue up to 30 June 2013 and the remaining $0.6 million (2013: $3.5 million) during this financial year.

 

On 9 October 2012, the Company signed a license agreement with Paladin Labs Inc. (Paladin) to commercialise immediate release Moxduo in Canada. The license agreement was secured by a one-time, non-refundable, non-creditable upfront fee in the amount of $485,000 (US$500,000). No fee revenue was recognised (2013: $0.5 million) during this financial year.

 

Net loss from ordinary activities

 

The net loss of $13.3 million (2013: net loss $10.1 million) from ordinary activities resulted from the Group’s continuing efforts to secure approval for immediate release Moxduo®, a Dual Opioid®, for the treatment of moderate to severe acute pain. This included efforts to obtain approval from the United States Food and Drug Administration (FDA) of a New Drug Application (NDA) in the United States (US), and activities associated with the preparation of the regulatory filings in Europe, Australia and Canada.

 

The net loss includes the following key items:

 

  • Research and development expenditure of $6.0 million (2013: $8.3 million) which includes $3.7 million (2013: $4.4 million) for clinical and regulatory activities associated with the progression of the NDA for immediate release Moxduo with the FDA, including preparation for the FDA Advisory Committee together with advancing the regulatory filings in Europe, Australia and Canada; with a decrease in spend on product and manufacturing process development to $1.2 million (2013: $2.9 million).
  • Employee benefits expense of $5.4 million (2013: $4.2 million), which comprises salaries and wages expense of $3.7 million (2013: $2.8 million) and non cash share based payments expense of $1.7 million (2013: $1.4 million). The increase in salaries and wages expenses year on year includes; recognition of a provision for termination entitlements of $0.5 million for the former CEO and Managing Director, Dr John Holaday as per the conditions of his employment agreement; an adverse movement in the exchange rate between USD and AUD, as salaries and wages are predominately incurred in the US; inflationary adjustment to base salaries; $0.1 million in retention bonuses (2013: $nil million).

 

Cash Position

 

As at 30 June 2014, the Group holds cash and cash equivalents of $10.5 million (2013: $12 million). On 4 July 2014 an amount of $3.62 million covering potential employee liabilities was set aside in an escrow account. In addition, the Company had been carrying as a liability excess annual leave entitlements and in early July 2014 the Company paid down $0.43 million of this liability.

 

The Group announced on 14 August 2014 that it is halting all further development work on the Moxduo portfolio of products, its prime product pipeline. The Group has commenced implementing a reduction in its overhead structure, minimising non-essential expenditure and retaining only a small core team tasked with exploring all strategic alternatives for the Group and its assets, with a clear view to maximising residual value for its shareholders.

 
Dividends (items 2.4 – 2.5)
It is not proposed to a pay a dividend.
 

3. Statement of comprehensive income - Refer to the attached Annual financial report

4. Balance sheet - Refer to the attached Annual financial report

5. Statement of cash flows - Refer to the attached Annual financial report

6. Statement of changes in equity - Refer to the attached Annual financial report

7. Dividends – It is not proposed to pay a dividend (item 7 ).

8. Net Tangible Assets per Security (item 9)

 
   

30 June
2014

  

30 June
2013

Net tangible assets per ordinary share   $0.055   $0.068
 

9. The Group did not acquire or lose control over any entities during the period. (2013: none)

10. The Group had no associates or joint venture entities.

11. Commentary on the results (item 12 & 14)

Product Pipeline

QRxPharma has been developing proprietary Dual Opioid formulations for treating patients with moderate to severe acute or chronic pain.

This patented Dual Opioid product combines morphine and oxycodone to potentially offer physicians broader treatment options than traditional opioids, a large and growing market hindered by older therapies with debilitating side effects. Worldwide sales for all opioids are US$14 billion and growing at 6%. The Company’s Dual Opioids are first in class and at present there are no combination opioid - opioid products available commercially anywhere in the world.

The Company’s proprietary Dual Opioid portfolio includes three complementary products to address various pain management needs:

  • immediate release Moxduo, an oral capsule for the treatment of moderate to severe acute pain;
  • Moxduo CR, a controlled-release oral tablet for chronic pain; and
  • Moxduo IV, an intravenous formulation for hospital use.

As detailed in the Regulatory section below the Company announced on 14 August 2014 that it is halting all further development work on the Moxduo portfolio of products.

QRxPharma has also developed a proprietary abuse deterrence technology, referred to as Stealth BeadletsTM, which was developed for the controlled release Moxduo formulation for the treatment of chronic pain. Stealth Beadlets may be incorporated into almost any potentially abused drug (e.g. opioids, amphetamines, sedatives, etc.) that are sold in solid dosage forms (e.g. tablet, capsule, sachet); they provide significant resistance against the extraction of active ingredients if crushed, solubilized or heated. The Company has a non-exclusive Collaboration Agreement with Aesica Formulation Development Limited (Aesica) to promote QRxPharma’s Stealth Beadlets technology for inclusion in their clients; existing formulations of controlled drugs.

Regulatory

The near term commercial opportunity for the Group rested with the regulatory approval of immediate release Moxduo in the US. Having been denied in June 2012 a first cycle approval by the FDA of its NDA, the Company continued to progress towards an approval during the financial year culminating in the following key regulatory events:

  • August 2013: the FDA issued QRxPharma a second Complete Response Letter (CRL) regarding the Company’s Moxduo NDA. In June 2013 the Company found that for 17% of the 375 patients enrolled in its Study 022, the timing of the electronically collected oxygen desaturation information at one trial site, did not accurately reflect the local time zone or changes relating to daylight savings time. For these patients, this resulted in a displacement of electronic oxygen desaturation data relative to nurse-reported events by 1 or 2 hours out of the 48-hour study. This CRL allowed the Company time to complete the audit of all 30 million oxygen desaturation data points confirming data integrity, and to submit further information required for the FDA to fully consider the respiratory safety advantages of Moxduo from Study 022.
  • November 2013: resubsmission of a NDA to the FDA which included a comprehensive analysis of Study 022.
  • December 2013: the FDA accepted the refiled NDA for review and set 25 May 2014 as the Prescription Drug User Fee Act (PDUFA) date for action on the Company’s resubmitted NDA.
  • March 2014: the FDA set 22 April 2014 as the date for the FDA Anesthetic and Analgesic Drug Products Advisory Committee meeting to consider the Company’s resubmitted NDA for approvability of Moxduo in the management of acute pain.
  • April 2014: the FDA Advisory Committee voted on 22 April to recommend against approval of Moxduo. The Advisory Committee found the Company did not provide sufficient evidence to warrant approval of Moxduo at this time.
  • May 2014: the FDA issued a further CRL regarding the Moxduo NDA. The Agency endorsed the vote of the Advisory Committee and indicated clinical information demonstrating a clinically meaningful benefit over oxycodone and morphine alone, either by efficacy, or safety, in an appropriate patient population, is needed.
  • July 2014: an End of Review (EOR) meeting was held with the FDA on 9 July 2014 to discuss the feasibility and requirements for approving Moxduo. The meeting was granted by the FDA after issuance of the May CRL. In advance of the meeting, QRxPharma outlined several questions to discuss with FDA to ensure the Company receives clear direction for the Moxduo program. The questions addressed the overall approach for registration of Moxduo, potential study design and the number of clinical studies.
  • August 2014: the Company announced on 14 August 2014 that it is halting all further development work on the Moxduo portfolio of products. Following the EOR meeting with the agency the management team conducted a detailed review of the Moxduo technology with particular emphasis on the EOR meeting with the FDA and made a recommendation to the Board to halt all further development of the Moxduo IR, CR and IV programs. The Board agreed with, and accepted this recommendation.

The Company believes that the Moxduo program will require a repeat Phase 2 clinical study, followed by one or more pivotal Phase 3 clinical studies. The FDA has advised that agreement on a Special Protocol Assessment (SPA) would be unlikely for these studies and given specific issues related to the design of these clinical studies, such as a primary endpoint of 90% SpO2 and flexible dosing, both which have been strongly encouraged by FDA, the likelihood of success is now in considerable doubt. The Company estimates the time and cost for such a development program to be significant and is not commercially justified given the limited residual patent life.

Commercialisation

QRxPharma has entered into strategic agreements with Actavis Inc., Paladin Labs Inc., Aspen Group and Teva Pharmaceuticals for the commercialisation of immediate release Moxduo in the US, Canada, Australia (including New Zealand and Oceania), South Africa and Israel. With the decision to halt all further development work on the Moxduo portfolio of products, the Company is in discussion with these parties with respect to these licenses.

  • In July 2013 the Company signed a Collaboration Agreement with Aesica Formulation Development Limited (Aesica) for the world-wide promotion of the Company’s proprietary Stealth Beadlets abuse deterrent technology. Aesica supplies pharmaceutical contract development and manufacturing services globally and operates six manufacturing sites across the UK, Germany and Italy. Under the Collaboration Agreement Aesica will enter into fee-for-service contracts with such third parties for the development of the new Abuse Deterrent Formulations (ADF) of specific drugs of interest, whilst QRxPharma will negotiate license terms directly with each party.

Intellectual Property

The Company has continued to strengthen its intellectual property portfolio during the financial year. Whilst no new patents have been issued during the current financial year the Company continued to progress a number of provisional filings that form part of a portfolio of Company patents that if issued will extend the duration of protection for Moxduo in various formulations up until 2029.

12. Status of audit (items 15 to 17)

This report has been prepared in accordance with Australian Accounting Standards, Interpretations and other authoritative pronouncements issued by the Australian Accounting Standards Board and the Corporations Act 2001. QRxPharma Limited is a for-profit entity for the purpose of preparing the financial statements.

This preliminary financial report is based on financial statements and notes which have been audited and are not subject to any qualifications or disputes. The attached financial statements have been prepared on a going concern basis. This matter has been considered by the Group’s auditors Deloitte Touche Tohmatsu and the financial statements are subject to an Emphasis of Matter as noted in the Independent auditors’ report to the members of QRxPharma Limited on pages 64 to 65 of the 2014 Annual Report.

The Board currently constitutes the audit committee.

Chris J Campbell
Company Secretary
QRxPharma Limited
27 August 2014