Letter from the Chair
Dear Shareholders,
Well Positioned in Turbulent Times
The turbulence seen the past 12 months ended with CLINUVEL posting better than expected financial results, the best the Company has ever booked in its history. We are building a diversified pharmaceutical business, and the road is long and full of challenges. In April 2022, in a letter to shareholders, I discussed the deterioration in the geopolitical environment, and our perseverance to fulfil a long-term strategy. The basis of every company I have led is its financial household, ‘the till needs to be in order’ to realise ambitions, and to stay away from financiers. Since then, the operating environment has worsened with a rapid rise in inflation, and interest rates rising. Whilst monetary policies are put in place to dampen inflation, economic growth is expected to slow down, and a global recession cannot be ruled out. There have been further adverse market reactions to these developments and – despite the continued progress of our company across financial, operational, and clinical parameters – our share price has been adversely affected, along with most other companies operating in public markets. As Chairman of the Board, and a long-term investor, I empathise with shareholders as they have seen the decline in share price in FY2022. However, for those with a long-term view, the prospects for incremental value are positive based on our consistent strategy. Now, I draw the balance and see a viable business with no debt, and cash reserves sufficient to finance our multi-pronged strategy. In brief, the goal is to optimise further commercial operations and expand the pharmaceutical and non-pharmaceutical product portfolio. CLINUVEL stands out from many other biotechnology firms by its consistency and long view. As a shareholder, I take heart in the prospects of CLINUVEL. The Managing Director expands on the developments in the operating environment and how we are managing the challenges of it in his letter to shareholders (refer pages 22 to 30). I share opposite some other important issues.Shareholder Communications
As a Board, we assess also how and when the Company communicates with existing shareholders and new audiences. In recent years, CLINUVEL has purposely delivered an increase in the frequency and variety of communications to stakeholders. Of course, this has been enabled by the increase in our activities since the US Food and Drug Administration (FDA) approved the distribution of SCENESSE® in October 2019.
We regularly communicate on mandatory company news items, but in addition, issue bi-monthly news communiqués (also translated to German), scientific communiqués, Chair and MD Letters. As we have said in the past, we are not obliged to issue quarterly activity and cash flow reports, but the appreciation by shareholders drives us to continue this courtesy. Finally, we issue progress reports across the full range of the Company’s activities.
Many of the overseas shareholders comment positively on the frequency and consistency of the news published by the Company. The trend in the number of ASX announcements is shown below:
We have complemented these announcements with more webinars, webcasts, and videos and a wide range of social media posts. I have received positive feedback on the increased communication channels.
The Board and management have reflected on shareholder feedback on executive remuneration and governance and formulated a plan of action to explain the Company’s remuneration approach. We encourage broader participation for members to vote at Annual General Meetings. In addition, we also have had direct interactions with remuneration consultants, legal experts in remuneration matters and shareholders.
The challenge in reaching shareholders is to navigate through layers of custodians to be able to contact beneficial shareholders located around the world. Many custodians, however, do not allow the Company to contact their clients directly. Meetings were also held with proxy advisors, who review our remuneration policies and issue recommendations on voting for the remuneration report to shareholders. Finally, we had already enhanced the explanation of executive remuneration in the 2021 Annual Report to Shareholders.
The outcome of the Annual General Meeting of Shareholders in November 2021 was pleasing with more shareholders voting than ever before with the majority supporting the Company to pass the resolutions recommended by the Board. Over twenty million shares were voted on the Remuneration Report, compared to a range of 14.26 to 17.29 million per annum in the 2016-2020 period.
Importantly, this support enabled the Board and management to progress the Group’s strategic objectives and operations during the difficult operating environment in FY2022. Although the outcome of the voting on the remuneration report is not binding, we take the outcome as an important measure for the way forward. We appreciate all shareholders who voted and supported the Board’s approach.
We maintained this highly communicative approach to shareholders in FY2022. The return to face-to-face interactions with shareholders across the world has been announced by our CEO, Dr Wolgen. We will continue to meet with shareholders and proxy advisors to clarify our approach to growth, financial management, remuneration and ESG related matters.
In the coming months, we will communicate the Board’s rationale of the resolutions put forward to the members at the 2022 Annual General Meeting.
Expansion of the Team
The CLINUVEL team has expanded in recent years to meet the new business challenges: in FY2022 we have seen growth of 16% in our worldwide staff. Recruitment is a challenge in the competitive global market searching for specialised talent, but we have managed to attract high quality talent and enhance the Company’s positive and tenacious culture. The commitment and determination of the expanded team across the wide range of activities and geographic points of operation has underpinned the strong performance we have achieved.
Maintenance of a positive culture within the Group of Companies is not only important to retain talent, but also to allow for development, and productivity. Equality and fairness underpin our diversity and I am proud of the positive measures of diversity presented in the Spotlight on CLINUVEL’s Approach to ESG Issues which follows my letter. We recognise ESG is increasingly important in this world, not just to investors, and as responsible corporate citizens we are conscious of the various social and green measures falling within evolving ESG practices.
Board Activity and Expansion
During the year, the Board had input to, and provided guidance on, key initiatives of the expansion strategy of the Group. I am pleased with the progress achieved, but as our Managing Director has said, much more could have been achieved with the same pool of people we work with.
The growth of commercial operations supported a sixth consecutive annual profit. The operating profit before tax of A$34.3 million is excellent, while adjusting for non-cash expenses the net profit after tax (non-IFRS) is equivalent to last year’s.
We have expanded the melanocortin-based product portfolio and progressed the clinical program. During the year, we reported:
- positive results of the first study using afamelanotide in the treatment of arterial ischaemic stroke (AIS);
- the commencement of studies to assist DNA Repair of the skin (xeroderma pigmentosum [XP]); and
- meeting consensus on a new vitiligo study with the US FDA.
We continued to work towards the launch of the Company’s first non-pharmaceutical photoprotective product, and as part of our overall online strategies the initial launch of the Light Skin Science was made allowing for the first campaigns from our CLINUVEL Ambassadors. Features in this year’s Annual Report provide more detail on the progress of the clinical studies and the dermatocosmetic product range.
An important outcome during the year was to extend the employment contracts of CEO Dr Wolgen and CFO Mr Keamy to July 2025 and July 2024, respectively. Dr Wolgen has proven his worth, and the Board is pleased he finally agreed to add another three years to lead the Company through the current growth and expansion phase. We could not lightly accept a disruption of the realisation of our long-term goals, and we appreciate his continued commitment. Mr Keamy provides the ongoing surety of discipline to financial controls and management of our funds, which is the basis we operate from.
Whilst shareholders reacted positively to the extension of Dr Wolgen’s tenure, I am frequently asked what will happen beyond July 2025. The Board takes its responsibility to ensure the best possible executive talent succeeds at the helm. We have given ourselves time to identify and secure the services of a suitable executive team moving forwards. In the meantime, we will await how the Group develops the next three years under executive leadership.
To support the growth and expansion of the Group, the Board has increased from five members in 2019, to six in 2020, and to seven in April 2022 with the appointment of Sir Andrew Likierman. Sir Andrew enhances the skills and capabilities of the Board to achieve its strategic objectives.
The Board maintained its governance oversight of the Company over the past year. I can report there were no material issues that needed to be addressed on adherence to Company policies during the year. The initiative was also taken to formalise ESG issues in management’s regular reports to the Board. A link to the Company’s Corporate Governance Statement for FY2022 is provided on the previous page.
Summary and Acknowledgements
The financial and operational outcome achieved in FY2022 is very positive and the outlook, despite a challenging economic environment, is reason for optimism. Our sound foundation has become stronger over the past year, and I expect the diversification strategy to continue. Melanocortins remain our mainstay, but more initiatives may come to boiling point.
I thank all stakeholders who have supported the Company during the past year; in the current environment, your loyalty is highly appreciated. In recent meetings, including the Basel discussion in May 2022, many long-term shareholders expressed their support and, in doing so, have stated they want to see management’s focus on key objectives continue.
I thank all employees of CLINUVEL, management and the executive team. Finally, but by no means least, I wish to thank my colleagues on the Board for their counsel and collaboration on the key issues we have reviewed and decided on during the year.
I remain committed to continue to steer the Company forward through the difficult operating environment to achieve its long-term objectives.
