Ann: Notice of Annual General Meeting/Proxy Form, page-3

In accordance with their offers of employment with Neuren… on 28 May 2014 Jon Pilcher and James Shaw were granted respectively 1 million and 500,000 Loan Funded Shares at $1.84 per share and on 7 May 2015 Clive Blower was granted 1 million Loan Funded Shares at $1.64 per share. In each case, on expiry the unquoted Loan Funded Shares were out of the money and therefore were forfeited, despite having been in the money during the term. Under the plan rules, these forfeited shares are to be bought back at the amounts of the loans and cancelled. This will be done as soon as practicable following the Meeting. No cash or shares will pass from the Company to the participants…….. Consequently, each of these executives currently has no long term incentive. The Board believes that there should be such an incentive in place in order to increase the alignment of the interests of each executive and shareholders and to incentivise each executive to strive to ensure that the Company performs for the benefit of all its shareholders. Therefore Resolutions 3, 4 and 5 seek approval to issue new Loan Funded Shares, with vesting conditions that are linked to the 3 large future value drivers for the Company noted in the 2019 Annual Report.

Change of Control

In the event of a change in control of the Company, control being when a person and their associates (as defined in the New Zealand Takeovers Code) becomes the holder or controller of more than 50% of the ordinary shares of the Company, any unvested Loan Funded Shares shall vest and, if the terms of the Loan are complied with, those Loan Funded Shares can be transferred to the participant.


Let me get this straight.

Six years ago, Jon Pilcher and James Shaw were granted 1 million and 500,000 loan funded shares respectively. The stated justification was “to support the achievement of the Company’s business strategy by linking executive reward to improvements in shareholder value and providing strong alignment between the interests of executives and shareholders.”

At the time, the Phase 2 trofinetide in Rett trial was already underway, NEU was about to commence a Phase 2 trial of trofinetide in concussion and the company was said to be advancing NNZ-2591 towards an IND application.

Six years later, NEU has only just commenced a Phase 3 trial of trofinetide in Rett, the Phase 2 trial of trofinetide in concussion has been forgotten (pun intended) and the company is still advancing NNZ-2591 towards an IND application.

Sadly for Pilcher and Shaw (and Clive Blower who received his loan funded shares a year later), the loan funded shares were forfeited this year because, after six long years, they were out of the money. In other words, the share price had actually declined. Which is possibly not surprising when you reread the last paragraph.

But shareholders are now being asked to support another round of loan funded shares to the same executives for the same reason – that it will incentivize them to ensure that the Company performs for the benefit of all shareholders?

And if, at any stage, another party acquires NEU (or >50% of NEU), at whatever price, the shares automatically vest and are transferred to the executives?

I don’t support this.