Nexvet Biopharma (NVET) 10-Q 2017 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-36828

Nexvet Biopharma

public limited company

(Exact name of registrant as specified in its charter)

Ireland	98-1205017
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Unit 5, Sragh Technology Park

Rahan Road, Tullamore

Co. Offaly, R35 FR98, Ireland

(Address of principal executive offices, including zip code)

+353 5793 24522

(Registrant’s telephone number, including area code)

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 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, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act of 1934.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒  (Do not check if a smaller reporting company)	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, 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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act of 1934).    Yes  ☐    No  ☒

As of April 30, 2017, the registrant had approximately 11,916,712 ordinary shares, nominal value $0.125, outstanding.

NEXVET BIOPHARMA PUBLIC LIMITED COMPANY

TABLE OF CONTENTS

		Page No.
Special Note Regarding Forward Looking Statements		2
	PART I.  FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss	4
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II. OTHER INFORMATION
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41
Signatures		42

1

SPECIAL NOTE REGARDING FORWARD LOOKING StatementS

This Quarterly Report on Form 10‑Q contains 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 (the “Exchange Act”).  Forward looking statements consist of all statements other than statements of historical fact, including statements regarding our future results of operations and financial position, potential acquisition by Zoetis, ability to access financing on acceptable terms or at all, results of any current or future pivotal study, future expenditures relating to our lead product candidates, time for completion of any of our studies or facilities upgrades, ability to develop our pipeline of product candidates, business strategy, prospective products, ability to successfully manufacture our own product candidates, ability to meet conditions for the receipt of government grants, time for regulatory submissions or ability to qualify for conditional licensure or obtain product approvals, research and development costs, timing and likelihood of success, plans and objectives of management for future operations, and future results of current and anticipated products.  These statements relate to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements.  The words “anticipate,” “assume,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “plan,” “potential,” “predict,” “project,” “position,” “seek,” “should,” “target,” “will,” “would,” or the negative of these terms or other similar expressions are intended to identify forward looking statements, although not all forward looking statements contain these identifying words.  These forward looking statements are based on current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors.

Factors that could cause actual results to differ materially from our expectations expressed in this report include those summarized under Risk Factors elsewhere in this report or included in our annual report on Form 10-K filed with the SEC on September 2, 2016.  Given these risks and uncertainties, you should not place undue reliance on these forward looking statements.  Also, forward looking statements represent management’s beliefs and assumptions only as of the date of this report.  Except as required by law, we do not intend, and undertake no obligation, to revise or update these forward looking statements or to update the reasons actual results could differ materially from those anticipated in these forward looking statements, even if new information becomes available in the future.

Unless otherwise stated or the context otherwise indicates, references to “we,” “us,” “our,” “Nexvet,” “Nexvet Biopharma plc” or the “Company” refer to Nexvet Biopharma public limited company and its consolidated subsidiaries.

2

PART 1 – FINANCIAL INFORMATION

Item 1.  Financial Statements

Condensed consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share amounts)

	March 31,			June 30,
	2017			2016
Assets
Current assets
Cash	$	14,521		$	31,481
Other income receivable		2,816			2,201
Prepaid expenses and other		1,619			1,280
Total current assets		18,956			34,962
Noncurrent assets
Other income receivable		599			251
Prepaid expenses and other		98			129
Total noncurrent assets		697			380
Property, plant and equipment, net		5,020			4,908
Intangible assets, net		72			74
Total assets	$	24,745		$	40,324
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable	$	1,088		$	1,729
Accrued expenses and other liabilities		2,409			3,295
Deferred income		58			23
Total current liabilities		3,555			5,047
Noncurrent liabilities
Accrued expenses and other liabilities		41			104
Deferred income		234			37
Total noncurrent liabilities		275			141
Total liabilities	$	3,830		$	5,188
Commitments and contingencies (Note 13)
Shareholders’ equity
Ordinary shares, $0.125 nominal value per share, 100,000,000 shares authorized as of March 31, 2017 and June 30, 2016—11,905,639 and 11,565,133 shares issued and outstanding as of March 31, 2017 and June30, 2016,  respectively	$	1,488		$	1,446
Euro deferred shares, €100 nominal value per share, 400 shares authorized as of March 31, 2017 and June 30, 2016—400 shares issued and outstanding as of March 31, 2017 and June30, 2016, respectively		13			13
Additional paid-in capital		83,795			82,030
Accumulated comprehensive loss		(4,835	)		(5,333	)
Accumulated deficit		(59,546	)		(43,020	)
Total shareholders’ equity		20,915			35,136
Total liabilities and shareholders’ equity	$	24,745		$	40,324

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

(in thousands, except share and per share amounts)

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2017			2016			2017			2016
Revenue
Other	$	—		$	—		$	—		$	—
Total revenue		—			—			—			—
Operating Expenses
Research and development		5,583			4,260			12,802			11,775
General and administrative		1,605			1,680			5,245			5,329
Total operating expenses		7,188			5,940			18,047			17,104
Loss from operations		(7,188	)		(5,940	)		(18,047	)		(17,104	)
Other Income (Expense)
Research and development income		635			418			1,605			1,441
Government grant income		429			—			785			4
Exchange gain (loss)		76			(259	)		(958	)		151
Interest income		29			36			89			112
Net loss	$	(6,019	)	$	(5,745	)	$	(16,526	)	$	(15,396	)
Net loss per share attributable to ordinary shareholders, basic and diluted	$	(0.51	)	$	(0.50	)	$	(1.41	)	$	(1.34	)
Weighted-average ordinary shares outstanding, basic and diluted		11,780,865			11,559,056			11,741,242			11,502,409
Comprehensive Loss
Net loss	$	(6,019	)	$	(5,745	)	$	(16,526	)	$	(15,396	)
Net (loss) gain in foreign currency translation adjustments		(19	)		210			498			(634	)
Total comprehensive loss	$	(6,038	)	$	(5,535	)	$	(16,028	)	$	(16,030	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

condensed Consolidated Statements of Changes in Shareholders’ EQUITY

(unaudited)

(in thousands, except share and per share amounts)

	Ordinary Shares				Euro Deferred Shares				Additional Paid-in Capital					Accumulated Comprehensive			Accumulated			Total Shareholders’
	Shares		Amount		Shares		Amount		Share Premium		Other			Income (Loss)			Deficit			Equity
Balance as of July 1, 2015		11,406,916	$	1,426		400	$	13	$	78,210	$	2,065		$	(4,481	)	$	(23,655	)	$	53,578
Issuance of ordinary shares—conversion    of share-based compensation		158,217	$	20		—	$	—	$	1,182	$	(1,182	)	$	—		$	—		$	20
Share-based compensation expense		—		—		—		—		—		1,755			—			—			1,755
Exchange difference on translation of    foreign operations		—		—		—		—		—		—			(852	)		—			(852	)
Net loss		—		—		—		—		—		—			—			(19,365	)		(19,365	)
Balance as of June 30, 2016		11,565,133	$	1,446		400	$	13	$	79,392	$	2,638		$	(5,333	)	$	(43,020	)	$	35,136
Issuance of ordinary shares—conversion    of share-based compensation		289,941	$	31		—	$	—	$	1,468	$	(1,468	)	$	—		$	—		$	31
Issuance of ordinary shares		50,565	$	11					$	175										$	186
Share-based compensation expense		—		—		—		—		—		1,590			—			—			1,590
Exchange difference on translation of    foreign operations		—		—		—		—		—		—			498			—			498
Net loss		—		—		—		—		—		—			—			(16,526	)		(16,526	)
Balance as of March 31, 2017		11,905,639	$	1,488		400	$	13	$	81,035	$	2,760		$	(4,835	)	$	(59,546	)	$	20,915

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

CONDENSED ConsolidaTed Statements of Cash Flows

(unaudited)

(in thousands, except share and per share amounts)

	Nine Months Ended March 31,
	2017			2016
Cash Flows from Operating Activities
Net loss	$	(16,526	)	$	(15,396	)
Adjustments to reconcile net loss to cash used in operating activities:
Share-based compensation expense		1,769			1,351
Depreciation and amortization expense		624			323
Changes in assets and liabilities:
Other income receivable		(963	)		1,433
Prepaid expenses and other		(308	)		(137	)
Accounts payable, accrued expenses, other liabilities and deferred income		(1,358	)		2,202
Net cash used in operating activities		(16,762	)		(10,224	)
Cash Flows from Investing Activities
Purchase of property, plant and equipment and intangible assets		(860	)		(3,954	)
Net cash used in investing activities		(860	)		(3,954	)
Cash Flows from Financing Activities
Proceeds from issuance of ordinary shares		38			19
Net cash provided by financing activities		38			19
Effect of exchange rate changes on cash		624			(712	)
Net decrease in cash		(16,960	)		(14,871	)
Total Cash at beginning of period		31,481			52,033
Total Cash at end of period	$	14,521		$	37,162

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Notes to CONDENSED Consolidated Financial Statements

(unaudited)

1. Organization and Description of Business

Nexvet Biopharma public limited company and its subsidiaries (“Nexvet” or the “Company”) is a clinical-stage biopharmaceutical company focused on transforming the field of companion animal therapeutics by developing and commercializing novel, species-specific biologics. Biologics are therapeutic proteins derived from biological sources. As a class, biologics have transformed human medicine in recent decades and represent many of the top-selling therapies on the market today, due to advantages including a long duration of action, attractive side effect profiles and injectability. The Company believes these advantages will translate into significant advantages for companion animal therapeutics. The Company’s platform technology, which it refers to as “PETization,” is an algorithmic approach that enables the rapid creation of monoclonal antibodies (“mAbs”), a type of biologic, that are designed to be recognized as “self” or “native” by an animal’s immune system, a property the Company refers to as “100% species-specificity.” PETization is designed to build upon the safety and efficacy data from clinically tested human therapies to create new therapies for companion animals, thereby reducing clinical risk and development cost.

mAbs are targeted antibodies produced by identical or clonal cells that are engineered to produce a specific mAb and they are a prominent class of therapeutic biologics in humans. Nexvet’s most advanced product candidates are mAbs that target and inhibit the function of nerve growth factor (“NGF”) for the control of pain associated with osteoarthritis in dogs and cats.  NGF is a protein that directs nerve growth and is involved in nerve signaling, including pain signals, and NGF inhibitors (“anti-NGFs”) seek to interrupt those signals to reduce pain.  The Company’s anti-NGF portfolio consists of ranevetmab (formerly “NV-01”) for dogs and frunevetmab (formerly “NV-02”) for cats, both in late-stage clinical development as monthly subcutaneous injectables.

Nexvet’s most clinically advanced product candidate is ranevetmab. The Company’s pivotal efficacy and field safety study of ranevetmab met its primary efficacy endpoint, demonstrating a statistically significant improvement over placebo in the assessed level of pain (p=0.041) as measured using changes in Client-Specific Outcome Measures (“CSOM”) score between enrollment and day 28.  This study’s design was agreed under protocol concurrence with the Center for Veterinary Medicine (“CVM”) at the United States Food and Drug Administration (“FDA”).  Ranevetmab was found to be safe and well tolerated with no significant adverse safety signals observed in the study.  Clinically meaningful magnitudes of benefit and statistically significant differences over placebo were also achieved for the majority of the secondary endpoints measured in the study, which used a monthly subcutaneous injection for three months.  Collectively, the results of this study constitute a substantial body of efficacy data that the Company has filed with the CVM and intends to use as the basis of its planned submissions for marketing authorizations in both the United States (“U.S.”) and Europe. The Company has a master collaboration, supply and distribution agreement, and a specific distribution agreement for ranevetmab, with Virbac S.A. (“Virbac).  

Nexvet’s next most advanced product candidate is frunevetmab.  Following positive proof-of-concept studies, in May 2016 the Company also obtained positive results from a pilot field safety and efficacy study, which enrolled 126 cats with naturally occurring osteoarthritis. The successful completion of these studies has informed preparations for a pivotal field efficacy and safety study and a pivotal target animal safety study, both of which commenced in the quarter ended December 2016.  The pivotal field efficacy and safety study is a placebo-controlled, randomized, double-blinded study targeting enrolment of 250 cats with osteoarthritis, and will utilize a comparison of owner-assessed responses, before and after treatment, as its primary endpoint.  As at March 31, 2017, 169 cats had been enrolled in the pivotal field efficacy and safety study.  The pivotal target animal safety study will examine the safety of frunevetmab in cats according to standard International Cooperation on Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products (VICH) guidance. The in-life phase of the pivotal target animal safety study has been completed. The Company has obtained protocol concurrence from CVM for both pivotal studies of frunevetmab.

In addition, the Company conducts drug discovery in the areas of immuno-oncology, inflammation and allergy.  In collaboration with Zenoaq, a leading animal health company based in Japan, the Company has used PETization to create fully canine mAbs that bind to the immuno-oncology target known as programmed cell death protein 1 (‘PD-1”) and have successfully completed preliminary pharmacokinetic, immunogenicity and safety studies for its anti-PD-1 program.

In September 2015, the Company secured a biopharmaceutical manufacturing facility in Tullamore, Ireland.  The facility has been reconfigured to be a dedicated veterinary biopharmaceutical facility with the capability to meet anticipated future clinical and commercial production needs for therapeutic drug substance. The facility is operated by a wholly-owned subsidiary of Nexvet, BioNua Limited (“BioNua”).

In November 2016, the Company entered a research collaboration with Genentech, involving use of the Company’s PETization platform.  The parties will conduct a proof-of-concept study, which will be funded by Genentech.

7

In February 2017, the Company entered into a license agreement with Pfizer Inc. (“Pfizer”), pursuant to which the Company received a non-exclusive license to certain patents in the Pfizer portfolio for anti-NGF antibodies.

In March 2017, the Company implemented a cost reduction program particularly focused on early stage research programs and general and administrative activities, which resulted in a reduction of 11 employees, including its Chief Scientific Officer.

In April 2017, the Company, Zoetis Inc. and Zoetis Belgium SA, a wholly-owned subsidiary of Zoetis (“Bidco”), entered into a transaction agreement (the “Transaction Agreement”) for a recommended acquisition of the Company, whereby Bidco will acquire all the issued and to be issued share capital of the Company for cash by means of a “scheme of arrangement” under Irish law (the “Acquisition”).  The Transaction Agreement provides that shareholders of the Company will be entitled to receive $6.72 in cash per ordinary share of the Company, including any shares issuable upon exercise of outstanding exercisable or convertible securities, in return for the cancellation of their shares, on the date the scheme of arrangement becomes effective.  This consideration values the entire issued and to be issued share capital of the Company at approximately $85 million.

Since the Company’s initial public offering, it has focused on clinical development of its most advanced candidates and securing infrastructure to become a vertically integrated veterinary biopharmaceutical company.  

The Company has incurred losses since its inception and had an accumulated deficit of $59.5 million and $43.0 million as of March 31, 2017, and June 30, 2016, respectively.  For the foreseeable future, the Company expects to continue to incur losses and negative cash flows.  To date, the Company has been funded primarily through sales of capital shares.  

The Company will require additional capital until it can generate revenue in excess of operating expenses. The Company has entered into the Transaction Agreement and expect to consummate the Acquisition in the second half of 2017.  However, if the Acquisition is not consummated on this timetable or at all, the Company may need to seek additional financing or significantly change the Company’s operating plan. The Company may seek funding through public or private equity or debt financing or other sources, such as corporate collaborations and licensing arrangements.  The Company may not be able to obtain financing on acceptable terms, or at all.  The sale of additional equity would result in additional dilution to the Company’s shareholders, and the terms of any financing may adversely affect the rights of these shareholders.  The incurrence of any debt financing could result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict operations.  If the Company is unable to obtain funding, it could be forced to delay, reduce or eliminate research and development programs or commercialization efforts, which could adversely affect the Company’s business prospects.

2. Summary of Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements of the Company are reported in U.S. dollars, include the operations of all its wholly‑owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).  Such operations include the Company and its subsidiaries.  All intercompany balances and transactions have been eliminated in consolidation. The Company’s fiscal year ends on June 30, and references to any fiscal year are to the Company’s year ended June 30 in that year.  

Unaudited Interim Financial Information

The accompanying interim condensed consolidated financial statements, related disclosures and other information as of March 31, 2017, and for the three and nine months ended March 31, 2017 and 2016 are unaudited and have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”).  The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2017, and the results of its operations, comprehensive loss and cash flows for the three and nine months ended March 31, 2017 and 2016.  The results for the three and nine months ended March 31, 2017 and 2016 are not necessarily indicative of results to be expected for a full year, any other interim periods or any future year or period.

These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes as of, and for the year ended June 30, 2016 included in the Company’s annual report on Form 10‑K filed with the SEC on September 2, 2016.  The condensed consolidated balance sheet data as of June 30, 2016, was derived from audited consolidated financial statements.

8

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions relating to the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the period.  Significant items subject to such estimates and assumptions include research and development income, research and development accruals, government grant income, share-based payments, valuation of ordinary share options and restricted share units and deferred income taxes.  Actual results could differ from those estimates.

Net Loss Per Share

Net loss per share applicable to ordinary shareholders is computed by dividing the net loss applicable to ordinary shareholders by the weighted-average number of ordinary shares outstanding for the reporting period.

Diluted net loss per share gives effect to all potentially dilutive securities, including shares issuable upon the exercise or conversion, as applicable, of outstanding warrants, ordinary share options and restricted share units, using the treasury shares method.  The Company has excluded the effects of all potentially dilutive shares, which include warrants to purchase ordinary shares, ordinary share options and restricted share units from the weighted-average number of ordinary shares outstanding as their inclusion in the computation for all periods would be anti-dilutive due to net losses.

Cash

As of March 31, 2017 and June 30, 2016, the Company’s unrestricted cash consisted of cash deposited in a business operating account or in short-term deposit accounts of less than 90 days’ original duration.

Concentration of Credit Risk and Other Risks and Uncertainties

The Company receives research and development income from two sources, the Australian government and the Irish government and grant income from one source, the Irish government.

The Company’s cash is deposited with several large commercial banks located in the U.S., Australia and Ireland, limiting the amount of credit exposure to any one financial institution.  The deposits with the financial institutions are federally insured or guaranteed, however, the Company’s cash balances with these financial institutions often exceed the amount insured or guaranteed.

The Company is subject to risks common to companies in the biotechnology industry.  The Company’s research and development may not be successfully completed, adequate protection for the Company’s technology may not be obtained, any products developed may not obtain necessary government regulatory approval and any approved products may not be commercially viable.  The Company operates in an environment of competition from other animal health companies, some of which have substantially more resources at their disposal.  In addition, the Company is dependent upon the services of its employees and consultants, as well as third‑party contract research organizations and manufacturers.

Fair Value Measurements

The Company records certain assets and liabilities at fair value in accordance with the provisions of ASC Topic 820, Fair Value Measurements.  As defined in the guidance, fair value, defined as an exit price, represents the amount that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants.  As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability.  As a basis for considering these assumptions, the guidance defines a three-tier value hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

• Level 1—Unadjusted quoted prices in active, accessible markets for identical assets or liabilities.

• Level 2—Other inputs that are directly or indirectly observable in the marketplace.

• Level 3—Unobservable inputs that are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company’s material financial instruments comprise cash and short-term deposits.  

9

Other Income Receivable

Other income receivable is recorded at the invoiced amount where available.

Research and Development Income

Australia

Nexvet Australia is eligible under the AusIndustry research and development incentive program to obtain a cash amount from the Australian Taxation Office (“ATO”).  The incentive is available to Nexvet Australia on the basis of specific criteria with which Nexvet Australia must comply.  Specifically, Nexvet Australia must have revenue of less than A$20 million and cannot be controlled by income tax exempt entities.

Ireland

Nexvet Ireland and BioNua are both eligible under the Research and Development Tax Credit (“R&D Tax Credit”) Guidelines of Ireland to claim a tax credit, up to 25% of eligible research and development expenditure less expenditure already covered by the Industrial Development Agency (Ireland) (“IDA”) grant assistance.  The tax credit is normally offset against corporation tax payable in Ireland.  For companies at the same stage of development as Nexvet Ireland and BioNua, there is the ability to elect to receive the tax credit as a cash payment in three equal amounts, approximately 9, 21 and 33 months after the relevant fiscal year end, subject to meeting certain qualifying criteria.  In this later situation, the relevant company will recognize the cash receivable as other income.

Government Grant Income

BioNua is eligible under an agreement with the IDA to receive cash as grant income based on a fixed percentage of eligible research and development expenditure in Ireland on a defined project, which includes the achievement of pre-agreed performance targets.  Government grants are recognized at their fair value when there is reasonable assurance that the grant will be received and it is probable that all attaching conditions will be complied with.

Property, Plant and Equipment

Property, plant and equipment are recorded at acquisition cost, net of accumulated depreciation and impairment.  Depreciation on property and equipment is calculated using the straight-line method over the estimated useful lives of the assets.  The estimated useful life of machinery and equipment is three to 10 years.  Leasehold improvements are amortized on the straight-line method over the shorter of the remaining lease term or estimated useful life of the asset.  Upon retirement or sale of an asset, its cost and related accumulated depreciation or accumulated amortization are removed from the property accounts and any gain or loss is included in the results of operations.  Maintenance and repairs are expensed as incurred.

Intangible Assets

The Company accounts for intangible assets under ASC 350, Intangibles—Goodwill and Other, which consists of internal use computer software costs. Costs which include acquiring off the shelf software and licenses that are expected to provide future period financial benefits are capitalized to computer software intangibles. No material internal or external costs are incurred in making the software ready for use.  Amortization is calculated on a straight-line basis over periods ranging from one to three years.

Impairment of Long-Lived Assets

The Company reviews its tangible and intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the asset may not be fully recoverable. Recoverability of assets is measured by a comparison of the carrying amount of an asset to the estimated undiscounted cash flows expected to be generated by the asset. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge will be recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no impairments of long-lived assets during the three and nine months ended March 31, 2017 or 2016.

Consumable Stores

Consumable stores represent items that are used in the manufacturing process of clinical or commercial batches of our product candidates.  As these items have alternative future uses in other development projects, consumables are recorded in prepaid and other assets and are subsequently expensed as consumed. Consumable stores are recorded at the lower of cost and net realizable value.

10

Foreign Currency

The Company’s functional currency is U.S. dollars, and the functional currency for most subsidiaries is their local currency.  Foreign currency transactions are translated into the functional currency using the exchange rate as of the date of the transaction.  At period end, monetary items denominated in a foreign currency are translated into the functional currency of the relevant entity using the period-end spot rate.  

In preparing the Company’s consolidated financial statements, the financial statements of the subsidiaries are translated at period‑end exchange rates as to assets and liabilities and weighted-average rates as to revenue and expenses.  The resulting translation adjustments are recognized in other comprehensive income (loss) (“OCI”).  

Income Taxes

The Company has historically filed income tax returns in the U.S., Australia and Ireland.

The Company applies ASC Topic 740, Income Taxes, which establishes financial accounting and reporting requirements for the effects of income taxes that result from the Company’s activities during the current and preceding years.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities on their respective tax bases, and operating losses and tax loss carry forwards.  Deferred tax assets and liabilities are measured using enacted statutory tax rates expected to apply to taxable income in the jurisdictions and years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

When the Company determines that it is more likely than not that some portion or all of the deferred tax assets will not be realized in the future, the deferred tax assets are reduced by a valuation allowance.  The valuation allowance is sufficient to reduce the deferred tax assets to the amount that the Company determines is more likely than not to be realized.

The income tax benefit from an uncertain tax position is only recognized if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on technical merits of the position.  The Company evaluates and adjusts these accruals based on changing facts and circumstances.  The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision.

License and Collaboration Agreement Revenue Recognition

Future revenue under a license and collaboration agreement is expected to consist of fees for services, royalties for product sales or payments when specific milestones are met and match underlying activities occurring during the term of the arrangement.

In fiscal year 2013, the Company entered into a license and collaboration agreement with a third party for the research and development of animal health products in Japan. The terms of the agreement include non-refundable signing and license fees, development milestone payments, the potential for manufacturing and supply services and royalties on any product sales derived from the collaboration. The Company analyzed this arrangement to determine whether the deliverables, which included license and performance obligations such as research and steering committee services, can be separated or whether these must be accounted for as a single unit of accounting. The Company recognizes license payments as revenue upon delivery of the license only if the license has stand-alone value and there are no undelivered performance obligations related to the license.

If the license is considered not to have stand-alone value, the arrangement would then be accounted for as a single unit of accounting and the license payments and payments for performance obligations would be recognized as revenue over the estimated period of when the performance obligations are performed. When the Company determines that an arrangement should be accounted for as a single unit of accounting, it determines the period over which the performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a proportional performance or straight-line method. The Company recognizes revenue using the proportional performance method when the level of effort required to complete its performance obligations under an arrangement can be reasonably estimated, and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-time equivalents are typically used as the measurement of performance. If the Company cannot reasonably estimate the level of effort to complete its performance obligations under an arrangement, then revenue under the arrangement would be recognized on a straight-line basis over the period the Company is expected to complete its performance obligations.

The Company’s license and collaboration agreement entitles it to additional payments upon the achievement of performance-based milestones. Milestones that involve substantial effort on the Company’s part are considered “substantive milestones.” A substantive milestone is included in the Company’s revenue model when the milestone is achieved. To date, no milestone payments have been received.

11

Royalty revenue is recognized upon the sale of the related products, provided the Company has no remaining performance obligations under the arrangement.

Research and Development Expense

Research and development costs are expensed as incurred and consist primarily of (i) payroll and related expense for all employees engaged in scientific research and development functions, including wages, related benefits and share-based compensation, (ii) fees for regulatory, professional and other consultants and (iii) development costs, including costs of drug discovery, safety, proof‑of‑concept, pilot and pivotal safety and efficacy studies, development of biological materials, patent license costs, regulatory costs and service providers.  The Company uses its employee and infrastructure resources across multiple development programs.  The Company allocates outsourced development costs by lead product candidates but does not allocate personnel or other internal costs related to development to specific early stage product candidates.  For cost-sharing arrangements for joint research and development activities with third parties, the Company recognizes cost reimbursements as an offset within research and development expense in accordance with the underlying agreements.

General and Administrative Expense

General and administrative expense consists primarily of non-research and development-related payroll and related expense for employees, consultants and directors, including wages, related benefits and share-based compensation.  General and administrative expense also includes professional and consulting fees for legal, accounting, tax services and other general business services, as well as other expenses such as travel, rent and facilities costs.

Other Income (Expense)

Research and Development Income

Australia

Nexvet Australia is eligible under the AusIndustry research and development incentive program to obtain a cash amount from the ATO.  The incentive is available to Nexvet Australia on the basis of specific criteria with which Nexvet Australia must comply.  Although the incentive is administered through the ATO, the Company has accounted for the incentive outside the scope of ASC Topic 740, Income Taxes, as an income tax benefit since Nexvet Australia meets the applicable requirements to participate in the program and the incentive is not linked to Nexvet Australia’s income tax liability and can be realized regardless of whether Nexvet Australia has generated taxable income.  Research and development income is recognized when eligible research and development activities have been undertaken and the Company has completed its assessment of whether such activities meet the relevant qualifying criteria.

Ireland

Nexvet Ireland and BioNua are both eligible under the R&D Tax Credit (“R&D Tax Credit”) Guidelines of Ireland to claim a tax credit, up to 25% of eligible research and development expenditure less expenditure already covered by the IDA grant assistance.  The tax credit is normally offset against corporation tax payable in Ireland.  For companies, such as Nexvet Ireland and BioNua, there may be the ability to elect to receive the tax credit as a cash payment in three equal amounts, approximately 9, 21 and 33 months after the relevant fiscal year end, subject to meeting certain qualifying criteria.  In this later situation, the relevant company will recognize the cash receivable as other income.

Government Grant Income

BioNua is eligible, under an agreement with the IDA, to receive cash as grant income based on a fixed percentage of eligible research and development expenditure in Ireland on a defined project, which includes the achievement of pre-agreed performance targets.  Any expenditure eligible under this agreement cannot be claimed under the R&D Tax Credit program.  The maximum grant available to the Company is €2.4 million over the life of the agreement.

The Company recognizes government grant income at fair value when there is reasonable assurance that the grant will be received and it is probable that all attaching conditions will be complied with.  When the grant relates to an asset, the fair value is included in the balance sheet as deferred grant income, which is released to income over the expected useful life in a manner consistent with the depreciation method for the relevant asset and subject to meeting other relevant conditions, and it is recorded on the balance sheet as other income receivable until cash is received.  When the grant relates to an expense item, it is recognized as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate, and it is recorded on the balance sheet as other income receivable until cash is received.  

12

Exchange Gain (Loss)

Exchange gain (loss) consists primarily of gains or losses due to foreign exchange translation, primarily reflecting changes in Australian, Irish and U.S. foreign exchange rates.  

Interest Income

The Company earns interest on the cash balances held with financial institutions and recognizes interest when earned on an accrual basis over time.

Comprehensive Loss

Comprehensive loss represents the total change in shareholders’ equity during the period other than from transactions with shareholders, which for the Company includes net change in foreign currency translation adjustments.

Share-Based Compensation

The Company’s share-based compensation plan (see Note 11) provides for the grant of ordinary share options, restricted share units and other share-based awards.  The fair value of share options is determined as of the date of grant using the binomial option-pricing model.  This method incorporates the fair value of the Company’s ordinary shares on the date of each grant and various assumptions such as the risk-free interest rate, actual volatility or expected volatility based on the historic volatility of peer companies, expected dividend yield, and expected term of the share option.  Restricted share units are valued at the fair value of the underlying ordinary shares as of the date of grant.  The Company classifies share-based compensation expense in the statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified.

The Company recognizes share-based compensation expense based on the grant date fair value of the entire award over the total period during which an employee is required to provide service in exchange for the award.   In accordance with ASC 718, the amount of compensation expense recognized at each balance date is at least equal to the grant date fair value of the vested portion of the award on that date.  Where performance conditions are attached to the awards, compensation expense is recognized in the period in which it becomes probable that the performance target will be achieved, net of estimated pre-vesting forfeitures over the requisite service period.  The probability of vesting is reassessed at each reporting period for awards with performance conditions and compensation expense is adjusted based on this probability assessment.  

Equity instruments issued to non-employees, including consultants, are accounted for in accordance with Financial Accounting Standards Board (“FASB”) guidance.  All transactions in which services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.  The measurement date of the fair value of the equity instrument issued is the earlier of the date on which the counterparty’s performance is complete or the date on which it is probable that performance will occur.

For transactions where the fair value of the equity instrument issued to non-employees is the more reliable measurement and a measurement date has not been reached, the fair value is re-measured at each balance sheet date using the binomial option-pricing model.  Compensation expense for these share-based awards is recognized over the term of the consulting agreement or until the award is approved and settled.

Segment Data

The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions.  The Company is a clinical-stage biopharmaceutical company focusing on developing therapies for companion animals.

13

Total assets, property and equipment, net and total property and equipment additions by geography, reconciled to the consolidated amounts, were as follows as of the dates indicated:

	March 31,		June 30,
	2017		2016
United States	(in thousands)
Total assets	$	14,436	$	30,809
Property and equipment, net		9		8
Total property and equipment additions		5		7
Australia
Total assets	$	3,002	$	3,404
Property and equipment, net		1,222		1,186
Total property and equipment additions		170		975
Ireland
Total assets	$	7,307	$	6,111
Property and equipment, net		3,789		3,714
Total property and equipment additions		670		3,945
Consolidated
Total assets	$	24,745	$	40,324
Property and equipment, net		5,020		4,908
Total property and equipment additions		845		4,927

Recently Issued Accounting Pronouncements

We evaluate all recently issued accounting pronouncements by the FASB and the following represent those that could or will have a potential impact on our financial statements.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606).  This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  This guidance also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about:

• Contracts with customers—including revenue and impairments recognized, disaggregation of revenue and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations).

• Significant judgments and changes in judgments—determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations.

• Certain assets—assets recognized from the costs to obtain or fulfill a contract.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing.  The guidance clarifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers that reflects the consideration and revenue to which the entity expects to be entitled in exchange for those goods, services, or performance obligations.  This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40).  This guidance defines management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures.  Under the guidance, management is required to evaluate, for each annual and interim reporting period, whether it is probable that the entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued or are available to be issued.  When management identifies substantial doubt about the entity’s ability to continue as a going concern, additional disclosures are required.  This guidance will be effective for annual reporting periods beginning after December 15, 2016.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows although it will require additional disclosure from time to time.

14

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes.  This guidance simplifies the presentation of deferred income taxes, in that it requires deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position.  This amendment applies to all entities that present a classified statement of financial position.  The current requirement that deferred tax liabilities and assets of a tax–paying component of an entity be offset and presented as a single amount is not affected by the amendments in this update.  This guidance will be effective for annual reporting periods beginning after December 15, 2016; however, early adoption is permitted for all entities as of the beginning of an interim or annual reporting period.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities.  This guidance requires equity investments to be measured at fair value with changes in fair value recognized in net income, simplifies the impairment assessment of equity investments, eliminates certain disclosure requirements, requires public companies to use the exit price notion when measuring fair value, and requires certain changes to the presentation of financial assets and financial liabilities.  This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption for public entities is allowable only for the provisions related to elimination of fair value disclosure requirements and related presentation of fair value changes resulting from instrument-specific credit risk in other comprehensive income. Early adoption is not allowed for any other provisions.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  This guidance increases transparency and comparability by recognizing the assets and liabilities arising from leases on the balance sheet and disclosing key information about leasing arrangements.  The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years for public business entity, not-for-profit and employee benefit plans and for all other entities this update is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020.  Early adoption is permitted for all entities.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing.  The guidance clarifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers that reflects the consideration and revenue to which the entity expects to be entitled in exchange for those goods or services or performance obligations satisfied.  In May 2016, the FASB issued ASU No. 2016-12 Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients. The core principal of this guidance is the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis. The statement of operations reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period. The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. This guidance will become effective for the Company for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

15

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments.  This guidance relates to eight specific cash flow issues and their appropriate disclosure and classifications.  The eight specific cash flow issues are: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle.  This guidance will become effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.  

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740) Intra-Entity Transfer of Assets Other Than Inventory.  This guidance requires that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.  This guidance aligns the recognition of income tax consequences for intra-entity transfers of assets other than inventory with International Financial Reporting Standards (IFRS).  This guidance will become effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810) Interest Held through Related Parties That Are under Common Control.  This guidance affects reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control.  This guidance changes the evaluation of whether a reporting entity is the primary beneficiary.  This guidance will become effective for the Company for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  The Company does not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash.  This guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amount generally described as restricted cash or restricted cash equivalents.  Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  This guidance will become effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  The Company does not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. This guidance assists entities with evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business.  It provides a robust framework to use in determining when a set of assets and activities constitutes a business.  This guidance will become effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  The Company does not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

3. Going Concern

The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming that we will continue as a going concern.  The Company had net losses for the period from inception through March 31, 2017 of $59.5 million as well as negative cash flow from operating activities which are expected to continue as it funds research and development and general and administrative activities.  Without raising new capital, the Company does not have sufficient cash resources to meet its requirements in the next 12 months.  These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.  Management continues to evaluate various financing alternatives.  Although the Company may not be successful in securing an acceptable alternative, management believes that it will be able to secure any necessary financing as a result of ongoing financing discussions with third party investors and existing shareholders.

On April 12, 2017, the Company, Zoetis Inc. and Bidco entered into the Transaction Agreement, whereby Bidco will acquire all of the issued and to be issued share capital of the Company for cash pursuant to the Acquisition.  The Acquisition is expected to be consummated in the second half of 2017, and if consummated, the Company would become an indirect, wholly-owned subsidiary of Zoetis Inc., the largest global animal health care company, and as a result it is expected that the Company would be able to obtain sufficient cash resources to meet its requirements in the next 12 months..

16

These consolidated financial statements do not include any adjustments which may be necessary should we be unable to continue as a going concern.  The Company’s continuation as a going concern is dependent on its ability to obtain additional financing as may be required ultimately to attain profitability.

4. Other Income Receivable

Other income receivable consisted of the following as of the dates indicated:

	March 31,		June 30,
	2017		2016
Current	(in thousands)
Research and development income	$	1,372	$	1,809
Government grant receivable		1,195		374
Other		249		18
Other income receivable	$	2,816	$	2,201
Noncurrent
Research and development income	$	599	$	251
Other income receivable	$	599	$	251

5. Prepaid Expenses and Other

Prepaid expenses and other consisted of the following as of the dates indicated:

	March 31,		June 30,
	2017		2016
Current	(in thousands)
Prepaid expenses	$	918	$	398
Consumable stores		467		484
Other		234		398
Prepaid expenses and other	$	1,619	$	1,280
Noncurrent
Prepaid expenses	$	98	$	129
Prepaid expenses and other	$	98	$	129

At March 31, 2017 and June 30, 2016, restricted cash was $0.1 million and $0.1 million, respectively, and is included in prepaid expenses.  The restricted cash balance relates to a collateral arrangement with a financial institution that requires the Company to maintain a minimum collateral balance of $50,000 in order to access credit card facilities.

6. Property, Plant and Equipment

Property, plant and equipment, consisted of the following as of the dates indicated:

	Computer Equipment			Research and Development Equipment			Office Equipment			Plant and Equipment			Leasehold Improvements			Total
	(in thousands)
Opening balance July 1, 2015	$	56		$	334		$	62		$	—		$	97		$	549
Additions	$	127		$	2,780		$	54		$	965		$	1,001		$	4,927
Disposals		—			(7	)		—			—			—			(7	)
Depreciation		(41	)		(289	)		(17	)		(77	)		(83	)		(507	)
Exchange rate adjustment		(2	)		(9	)		(1	)		(31	)		(11	)		(54	)
Closing balance June 30, 2016	$	140		$	2,809		$	98		$	857		$	1,004		$	4,908
Additions	$	39		$	631		$	3		$	11		$	161		$	845
Disposals		—			—			—			—			—			—
Depreciation		(42	)		(358	)		(17	)		(87	)		(105	)		(609	)
Exchange rate adjustment		(3	)		(51	)		(1	)		(33	)		(36	)		(124	)
Closing balance as of March 31, 2017	$	134		$	3,031		$	83		$	748		$	1,024		$	5,020

17

In September 2015, the Company acquired certain manufacturing assets in Ireland as set out below.  The Company determined that the transaction did not constitute the acquisition of a business under ASC Topic 805.

	Assets Acquired and Consideration
	(in thousands)
Assets acquired
Research and Development Equipment	$	380
Plant and Equipment		934
Leasehold Improvements		663
Total assets acquired	$	1,977
Consideration
Cash paid	$	1,977

7. Accrued Expenses and Other Liabilities

Accrued expenses and other liabilities consisted of the following as of the dates indicated:

	March 31,		June 30,
	2017		2016
Current	(in thousands)
Payroll and related expenses	$	1,380	$	1,883
Professional fees		360		297
Research and development costs		669		1,115
Accrued expenses and other liabilities	$	2,409	$	3,295
Noncurrent
Payroll and related expenses	$	28	$	97
Other		13		7
Accrued expenses and other liabilities	$	41	$	104

8. Ordinary Shares

As of March 31, 2017 and June 30, 2016, there were 11,905,639 and 11,565,133 ordinary shares outstanding, respectively.

9. Fair Value Measurement

Assets and liabilities carried at fair value on a recurring basis as of March 31, 2017 and June 30, 2016, including financial instruments, which the Company accounts for under the fair value option, are summarized in the following tables.

March 31, 2017	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
	(in thousands)
Assets
Cash	$	14,521	$	—	$	—	$	14,521
June 30, 2016	Level 1		Level 2		Level 3		Assets/ Liabilities at Fair Value
	(in thousands)
Assets
Cash	$	31,481	$	—	$	—	$	31,481

There were no transfers between the levels within the reporting periods.

18

10. Net Loss Per Share

The calculation of net loss per ordinary share, basic and diluted, for the three and nine months ended March 31, 2017 and 2016 is presented below.  

	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016
	(in thousands, except share and per share amounts)
Net loss	$	(6,019	)	$	(5,745	)	$	(16,526	)	$	(15,396	)
Weighted-average ordinary shares issued and    outstanding—basic and diluted		11,780,865			11,559,056			11,741,242			11,502,409
Net loss per ordinary share—basic and diluted	$	(0.51	)	$	(0.50	)	$	(1.41	)	$	(1.34	)

The following ordinary share equivalents were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have an anti-dilutive effect:

	Three Months Ended March 31,				Nine Months Ended March 31,
	2017		2016		2017		2016
Share-based awards		1,297,031		1,045,938		1,297,031		1,045,938
Warrants		1,766,998		1,766,998		1,766,998		1,766,998
Total		3,064,029		2,812,936		3,064,029		2,812,936

11. Share-Based Awards

As permitted by Australian law, the Company’s board of directors had historically granted share options and restricted share units with an exercise or conversion price, as applicable, of zero to recipients in Australia.  Contemporaneously with these awards and based upon information available at the time of grant, the Company’s board of directors, with the assistance of management, also determined the fair value of the shares underlying these share options for financial reporting purposes.  To determine the best estimate of the fair value of the Company’s ordinary shares at each grant date, the Company’s board of directors considered numerous factors, including contemporaneous third-party valuations, current business conditions and projections, risks inherent to the development of the Company’s research and development programs, including the status of pivotal safety and efficacy studies for its lead product candidates, the Company’s financial condition, the Company’s need for future financing to fund its research and development efforts and the commercialization of its lead product candidates, and other relevant factors.

Option Terms of Issue

The Company previously issued to its employees, consultants and directors under the Company’s Employee Share Option Plan (the “2012 Plan”) ordinary shares subject to an interest-free, limited recourse loan payable to the Company for the purchase price of the ordinary shares.  The 2012 Plan is no longer in use, and all of the limited recourse loans were either repaid in cash or satisfied by the repurchase by the Company of certain ordinary shares subject to such loan.  The Company issued to each former holder of such repurchased ordinary shares an option to purchase a number of ordinary shares equal to the number of ordinary shares repurchased with an exercise price of $6.35 per ordinary share and subject to the Option Terms of Issue.  The options expire in February 2018, consistent with the original repayment date of the loan.

19

2013 Long Term Incentive Plan

In September 2013, the Company’s board of directors approved a long-term incentive plan for its employees (including executive officers), directors and consultants pursuant to which in November 2013 the Company issued share options to purchase 215,799 ordinary shares and restricted share units to acquire 29,214 ordinary shares to employees, directors and consultants.  The underlying ordinary shares had a fair value of $5.15 per share, but the awards had an exercise or conversion price, as applicable, of zero, as permitted under Australian law. Because Irish law requires the payment to an issuer of at least the nominal value of shares in order to acquire such shares from the issuer, any options or restricted share units with a zero exercise or conversion price became exercisable or convertible, as applicable, at the nominal value per ordinary share in August 2014.  This nominal value became $0.10 per ordinary share in September 2014 and was revised to $0.125 per ordinary share in connection with the four-for-five share consolidation in November 2014.  In September 2014, the Company also issued share options to purchase 16,800 ordinary shares and restricted share units to acquire 21,240 ordinary shares to employees, directors and consultants.  The underlying ordinary shares had a fair value of $6.35 per ordinary share, but the awards had an exercise or conversion price of the nominal value of $0.10 per ordinary share, which nominal value became $0.125 per ordinary share in connection with the four-for-five share consolidation in November 2014.  Except for share options and restricted share units held by directors (which vested either beginning in September 2014 and quarterly thereafter or in November 2014), share options and restricted share units held by employees and consultants vest in three equal tranches in November 2014, November 2015 and November 2016.  The Company revised this plan in September 2014 and refers to this plan as its “2013 Plan.”

In November 2014, the Company awarded employees share options to purchase 141,792 ordinary shares and restricted share units to acquire 16,427 ordinary shares.  The underlying ordinary shares had a grant date fair value of $9.37.  The share options and restricted share units have an exercise price or conversion price, as applicable, of $0.125 per ordinary share.  The awards are subject to a specified performance condition and service period and they vest in tranches over one to three years.

The 2013 Plan was terminated in connection with the Company’s initial public offering.  The 2013 Plan will continue to govern outstanding awards granted thereunder.  Appropriate adjustments will be made in the number of authorized ordinary shares and other numerical limits in the 2013 Plan and in outstanding awards to prevent dilution or enlargement of participants’ rights in the event of a share split or other change in the Company’s capital structure.

Prior to its termination, the 2013 Plan was administered by the Company’s board of directors.  Subject to the provisions of the 2013 Plan, the board of directors determined, in its discretion, the persons to whom, and the times at which, awards were granted, as well as the size, terms and conditions of each award, under the 2013 Plan.  All awards are evidenced by a written agreement between the Company and the holder of the award.  The compensation committee has the authority to construe and interpret the terms of the 2013 Plan and awards granted under the 2013 Plan.

If the Acquisition closes, all awards outstanding under the 2013 Plan will vest.

2015 Equity Incentive Plan

In September 2014, the Company’s board of directors adopted, and in November 2014 the Company’s shareholders approved, the 2015 Equity Incentive Plan (“2015 Plan”).  The 2015 Plan was amended by the board of directors in January 2015, became effective on the date immediately prior to the date of the prospectus for initial public offering and was further amended by the compensation committee in September 2015.  The 2015 Plan is intended to provide incentives that will assist the Company to attract, retain and motivate employees, including officers, consultants and directors.  The Company may provide these incentives through the grant of share options, restricted share units, performance shares and units and other cash-based or share-based awards.

A total of 1,280,000 of the Company’s ordinary shares were initially authorized and reserved for issuance under the 2015 Plan.  This reserve has or will automatically increase on July 1 of each year through 2024 by an amount equal to the lesser of:

• Four percent of the number of the Company’s ordinary shares issued and outstanding on the immediately preceding June 30; and

• An amount determined by the Company’s board of directors.

The ordinary shares available under the 2015 Plan will not be reduced by awards settled in cash, but will be reduced by ordinary shares withheld to satisfy tax withholding obligations with respect to ordinary share options (but not other types of awards).  The gross number of ordinary shares issued upon the exercise of options exercised by means of a net exercise or by tender of previously-owned ordinary shares will be deducted from the ordinary shares available under the 2015 Plan.  Notwithstanding the foregoing, and subject to adjustment as described below, the maximum aggregate number of ordinary shares that may be subject to issuance at any given time in connection with outstanding awards under the 2015 Plan may not exceed a number equal to ten percent of the Company’s total issued and outstanding ordinary shares (calculated on a non-diluted basis).  

20

Appropriate adjustments will be made in the number of authorized ordinary shares and other numerical limits in the 2015 Plan and in outstanding awards to prevent dilution or enlargement of participants’ rights in the event of a share split or other change in the Company’s capital structure.  Ordinary shares subject to awards which expire or are cancelled or forfeited will again become available for issuance under the 2015 Plan.

If the Acquisition closes, all awards outstanding under the 2015 Plan will vest.

In May 2015, the Company awarded employees and directors share options to purchase 360,000 ordinary shares and restricted share units to acquire 20,280 ordinary shares with a grant date fair value of $5.93 and $6.99 per share, respectively.  The share options and restricted share units have an exercise price of $15.00 and a conversion price of $0.125 per ordinary share, respectively.  Except for restricted share units to acquire 2,280 ordinary shares held by directors (which vest immediately), the awards vest in tranches over one to five years.

In June 2015, the Company awarded employees bonus share awards to purchase 42,691 ordinary shares subject to the payment of $0.125 per ordinary share.  The underlying ordinary shares had a grant date fair value of $7.12 per ordinary share.

In August 2015, the Company awarded employees share options to purchase 60,000 ordinary shares and restricted share units to acquire 8,500 ordinary shares with a grant date fair value of $2.71 and $4.97 per share, respectively.  The share option and restricted share units have an exercise price of $5.10 and a conversion price of $0.125 per ordinary share, respectively.  The awards vest in tranches over one to five years.

In September 2015, the Company offered employees and directors restricted share units to acquire 298,834 ordinary shares, of which 296,059 were accepted, with grant date fair values of $4.26‑$4.27.  The restricted share units have a conversion price of $0.125 per ordinary share.  The restricted shares units granted to employees vest annually over four years commencing on July 1, 2016.  The restricted share units granted to directors vested on July 1, 2016.

In November 2015, the Company awarded a new employee restricted share units to acquire 2,000 ordinary shares with a grant date fair value of $4.76.  The restricted share units have a conversion price of $0.125 per ordinary share.  The restricted share units vested on September 21, 2016.

In September 2016, the Company awarded a director bonus share award to purchase 20,000 ordinary shares subject to the payment of $0.125 per ordinary share.  The underlying ordinary shares had a grant date fair value of $3.60 per ordinary share.

In September 2016, the Company awarded employees and directors restricted share units to acquire 547,842 ordinary shares, with a grant date fair value of $3.48.  The restricted share units have a conversion price of $0.125 per ordinary share.  The restricted share units granted to employees vest annually over four years commencing on July 1, 2017 for Australian and U.S. based employees and September 1, 2017 for Irish based employees.  The restricted share units granted to directors vest on July 1, 2017.

In March 2017, the Company awarded an employee bonus share award to purchase 30,565 ordinary shares subject to the payment of $0.125 per ordinary share.  The underlying ordinary shares had a grant date fair value of $3.605 per ordinary share.

21

12. Valuation of Share Awards

Prior to February 2015

The fair value of each share option is estimated on the date of grant using the binomial option-pricing model.  The Company was a private company until February 2015 and lacked company-specific historical and implied volatility information.  Therefore, the Company estimated its expected share volatility based on the historical volatility of its publicly traded peer companies until such time as it had adequate historical data regarding the volatility of its own traded share price.  The expected term of the Company’s share options was determined utilizing the “simplified” method as the Company had insufficient historical experience for share options overall, rendering existing historical experience irrelevant to expectations for current grants.  The risk-free interest rate was determined by reference to the appropriate reserve bank yield in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield was based on the fact that the Company had never paid cash dividends and did not expect to pay any cash dividends in the foreseeable future.  The fair value of the underlying ordinary shares was determined by the Company’s board of directors in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.  The board of directors exercised reasonable judgement and considered numerous objective and subjective factors to determine the best estimate of the fair value of our ordinary shares at each grant date, including:

• contemporaneous third-party valuations;

• current business conditions and projections;

• risks inherent to the development of our research and development programs, including the status of pivotal safety and efficacy studies for our lead product candidates;

• our financial condition, including cash on hand;

• our need for future financing to fund our research and development efforts and the commercialization of our lead product candidates;

• the composition of, and changes to, our management team and board of directors;

• the rights and preferences of our preference shares relative to our ordinary shares;

• the lack of marketability of our ordinary shares; and

• external market and economic conditions and other trends and conditions affecting the pharmaceutical, veterinary care and biotechnology industries.

Post February 2015

Since completion of the Company’s initial public offering, the fair value of the ordinary shares underlying share-based awards has been based on the price per share quoted on the NASDAQ Global Market on the date of grant.

Fair Value and Activity

The fair value of the share options awards was estimated using the following assumptions:

	Three Months Ended March 31,	Year Ended June 30,
	2017	2016
Risk free interest rate	n/a		1.7%
Expected term (in years)	n/a	1 - 4 years
Expected volatility	n/a		75%
Forfeiture rate	n/a		7.5%
Expected dividend yield	n/a	zero

22

The following table summarizes share option activity for fiscal year 2016 and the nine months ended March 31, 2017:

	Shares Issuable Under Options			Weighted- Average Exercise Price
Outstanding as of July 1, 2015		776,631		$	8.18
Granted		60,000			5.10
Exercised		(126,017	)		0.125
Expired or forfeited		—			—
Outstanding as of June30, 2016		710,614		$	9.35
Granted		—		$	—
Exercised (1)		(70,145	)		0.125
Expired or forfeited		(1,910	)		0.125
Outstanding as of March 31, 2017 (1)		638,559		$	10.39
Options vested and expected to vest, as of June30, 2016		371,812		$	10.08
Options vested and expected to vest, as of March 31, 2017		459,797		$	10.02

(1) The average intrinsic value of options exercised during the period ended, and outstanding as of March 31, 2017, were $4.08 and $0.43, respectively.

In addition to the share options described above, the Company has granted restricted share units to its directors, employees and consultants.  Restricted share units are valued at the fair value of the underlying ordinary shares as of the date of grant.  The ordinary shares subject to the restricted share units are generally issued when they vest.  The table below presents the Company’s restricted share unit activity for fiscal year 2016 and the nine months ended March 31, 2017:

Restricted Share Units

	Number of Restricted Share Units			Weighted Average Grant Date Fair Value
Outstanding as of July 1, 2015		57,672		$	7.48
Granted		306,559			4.25
Converted		(32,200	)		7.72
Forfeited		(1,482	)		—
Outstanding as of June30, 2016		330,549		$	4.50
Granted		547,842		$	3.48
Converted (1)		(219,796	)		4.37
Forfeited		(123	)		3.48
Outstanding as of March 31, 2017 (1)		658,472		$	3.74
Converted and expected to convert, as of June30, 2016		—		$	—
Converted and expected to convert, as of March 31, 2017		—		$	—

(1) The average intrinsic value of restricted share units converted during the period ended, and outstanding as of March 31, 2017, were $4.17 and $3.77,  respectively.

Share-Based Compensation

The Company recognizes share-based compensation expense for only the portion of awards that are expected to vest.  In developing a forfeiture rate estimate, the Company has considered its historical experience to estimate pre-vesting forfeitures for service-based awards.  The impact of a forfeiture rate adjustment will be recognized in full in the period of adjustment, and if the actual forfeiture rate is materially different from the Company’s estimate, the Company may be required to record adjustments to share-based compensation expense in future periods.  The weighted-average remaining contract life on all outstanding share options and restricted share units as of March 31, 2017, was 3.98 years and 2.70 years, respectively.

23

The Company recorded share-based compensation expense related to share options and restricted share units for the three and nine months ended March 31, 2017 and 2016 as follows:

	Three Months Ended March 31,				Nine Months Ended March 31,
	2017		2016		2017		2016
	(in thousands)				(in thousands)
Research and development	$	553	$	166	$	911	$	568
General and administrative		295		246		858		783
Total	$	848	$	412	$	1,769	$	1,351

The Company had an aggregate of $3.1 million and $2.9 million of unrecognized share-based compensation expense for share awards outstanding as of March 31, 2017, and June 30, 2016, respectively, which would be expected to be recognized over an estimated period of 3.92 years and 4.0 years, respectively.

13. Commitments and Contingencies

Indemnities and Guarantees

The Company has made certain indemnities and guarantees, under which it may be required to make payments to a guaranteed or indemnified party, in relation to certain transactions.  The Company indemnifies its directors and officers to the extent permitted under the Company’s Constitution and the Irish Companies Act 2014 and provides expense advancement for its directors and executive officers for certain expenses, including attorneys’ fees, judgements, fines, and settlements amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of the Company’s directors or executive officers.  The duration of these indemnities and guarantees varies and, in certain cases, is indefinite.  These indemnities and guarantees do not provide for any limitation of the maximum potential future payments the Company could be obligated to make. Historically, the Company has not been obligated to make any payments for these obligations and no liabilities have been recorded for these indemnities and guarantees in the accompanying balance sheets.

Operating Leases and Purchase Obligations

Commitments consisted of the following as of March 31, 2017:

	Total		Less than 1 Year		1-3 Years		3-5 Years		After 5 Years
March 31, 2017	(in thousands)
Operating leases	$	1,312	$	292	$	381	$	234	$	405
Purchase obligations		619		619		—		—		—
Total	$	1,931	$	911	$	381	$	234	$	405

Operating Leases

The Company entered a lease for its office in Melbourne, Australia commencing December 2013 for a period of five years.  As of March 31, 2017 and June 30, 2016 commitments totaled $0.2 million and $0.2 million, respectively.  Rent expense was $0.2 million and $0.2 million for the nine months ended March 31, 2017 and fiscal year 2016, respectively.  Included in rent expense is a build-out incentive of $17,000 and $26,000 for the nine months ended March 31, 2017 and fiscal year 2016, respectively.  A portion of the incentive paid by the landlord is to be repaid by the Company if the lease is terminated early, determined by the unexpired term of the lease over the original 60‑month lease term.

The Company entered a lease for a facility in Tullamore, Ireland commencing September 2015 for a period of 10 years, with an option to purchase the building at an arm’s length price to be determined at the time the option is exercised.  As of March 31, 2017, commitments on this lease totaled $0.9 million.  

The Company entered a lease in December 2016, for its research facilities in Australia effective January 1, 2016 for a period of three years.  As of March 31, 2017, commitments totaled $0.2 million. 

Purchase Obligations

In connection with the development of biologics, the Company had open contracts with suppliers for goods and services of $0.6 million as of March 31, 2017.

24

Other

BioNua is eligible under an agreement with the IDA to receive grant income as cash.  BioNua may not, without the prior written consent of the IDA, assign, dispose, mortgage or change any assets which have been funded by the IDA.  The IDA may revoke or reduce the grant if there is a serious breach of the agreement or if the Company enters a form of administration, transfers any intellectual property developed under the grant outside Ireland or disposes of BioNua.  The IDA may require the Company to repay grant income paid previously to the Company if the Company commits a serious breach of the agreement.  

14. Related Party Transaction

Dr. Andrew Gearing is a former director, a co-founder of the Company and a brother of David Gearing, a co-founder of the Company and its former Chief Scientific Officer.  Dr. Andrew Gearing serves on the board of directors of Biocomm Square Pty Ltd.  In August 2010 and August 2013, the Company entered into consulting agreements with Biocomm Square Pty Ltd for research and development support services.  These agreements were superseded by a new consulting agreement in December 2013, which was amended in April 2014 and in August 2015.  In addition, the Company entered into an agreement with Biocomm Square Pty Ltd in November 2011 for assistance in obtaining partnering arrangements with Japanese entities.  This agreement was amended and terminated in August 2015.  The Company recorded expenses of $23,000, $37,000, $71,000 and $106,000 for the three and nine months ended March 31, 2017 and 2016, respectively, related to these agreements.  As of March 31, 2017, and June 30, 2016, there was $8,000 and $12,000 payable to Biocomm Square Pty Ltd, respectively.

15. Subsequent Events

In April 2017, the Company, Zoetis Inc. and Bidco entered into the Transaction Agreement for a recommended acquisition of the Company, whereby shareholders of the Company will be entitled to receive $6.72 in cash per ordinary share of the Company, including any shares issuable upon exercise of outstanding exercisable or convertible securities, in return for the cancellation of their shares, on the date the scheme of arrangement becomes effective.  This consideration values the entire issued and to be issued share capital of the Company at approximately $85 million.  The Acquisition is currently expected to be completed in the second half of 2017.

Apart from the foregoing, there were no material subsequent events occurring after March 31, 2017 requiring disclosure.

25

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10‑Q.  The information contained in this discussion and analysis and set forth elsewhere in this report includes forward looking statements that involve risks and uncertainties.  As a result of many factors, including those factors set forth in the section of this report titled “Risk Factors” or included in our annual report on Form 10-K filed with the SEC on September 2, 2016, our actual results could differ materially from the results described in or implied by the forward looking statements.

Overview

We are a clinical-stage biopharmaceutical company focused on transforming the field of companion animal therapeutics by developing and commercializing novel, species-specific biologics.  Biologics are therapeutic proteins derived from biological sources.  As a class, biologics have transformed human medicine in recent decades and represent many of the top-selling therapies on the market today, due to advantages including a long duration of action, attractive side effect profiles and injectability.  We believe these advantages will translate into significant advantages for companion animal therapeutics.  Our platform technology, which we refer to as “PETization,” is an algorithmic approach that enables the rapid creation of mAbs, a type of biologic, that are designed to be recognized as “self” or “native” by an animal’s immune system, a property we refer to as “100% species-specificity.”  PETization is designed to build upon the safety and efficacy data from clinically tested human therapies to create new therapies for companion animals, thereby reducing clinical risk and development cost.

mAbs are targeted antibodies produced by identical or clonal cells that are engineered to produce a specific mAb and they are a prominent class of therapeutic biologics in humans. Our most advanced product candidates are mAbs that target and inhibit the function of nerve growth factor (“NGF”) for the control of pain associated with osteoarthritis in dogs and cats.  NGF is a protein that directs nerve growth and is involved in nerve signaling, including pain signals, and NGF inhibitors (“anti-NGFs”) seek to interrupt those signals to reduce pain.  Our anti-NGF portfolio consists of ranevetmab (formerly “NV-01”) for dogs, frunevetmab (formerly “NV-02”) for cats, both in late-stage clinical development as monthly subcutaneous injectables, as well as NV-03 for horses which has completed initial proof-of-concept studies.

Our most clinically advanced product candidate in ranevetmab.  Our pivotal efficacy and field study of ranevetmab met its primary efficacy endpoint demonstrating a statistically significant improvement over placebo in the assessed level of pain (p=0.041) as measured using changes in CSOM score between enrollment and day 28.  This study’s design was agreed under protocol concurrence with the CVM at the FDA.  Ranevetmab was found to be safe and well tolerated with no significant adverse safety signals observed in the study.  Clinically meaningful magnitudes of benefit and statistically significant differences over placebo were also achieved for the majority of the secondary endpoints measured in the study, which used a monthly subcutaneous injection for three months.  Collectively, the results of this study constitute a substantial body of efficacy data that we have filed with the CVM and intend to use as the basis of our planned submissions for marketing authorizations in both the U.S. and Europe.  We have a master collaboration, supply and distribution agreement, and a specific distribution agreement for ranevetmab, with Virbac.

Our next most advanced product candidate is frunevetmab.  Following positive proof-of-concept studies, in May 2016 we also obtained positive results from a pilot field safety and efficacy study, which enrolled 126 cats with naturally occurring osteoarthritis.  The successful completion of these studies has informed preparations for a pivotal field efficacy and safety study, a pivotal target animal safety study, both of which commenced in the quarter ended December 2016.  The pivotal field efficacy and safety study is a placebo-controlled, randomized, double-blinded study targeting enrolment of 250 cats with osteoarthritis and will utilize a comparison of owner-assessed responses, before and after treatment, as its primary endpoint.As at March 31, 2017, 169 cats had been enrolled in the pivotal field efficacy and safety study.  The pivotal target animal safety study will examine the safety of frunevetmab in cats according to standard International Cooperation of Harmonization of Technical Requirements for Registration of Veterinary Medicinal Products (VICH) guidance. The in-life phase of the pivotal target animal safety study has been completed.  We have obtained protocol concurrence from CVM for both pivotal studies of frunevetmab.  

In addition, we conduct drug discovery in the areas on immuno-oncology, inflammation and allergy.  In collaboration with Zenoaq, a leading animal health company based in Japan, we have used PETization to create fully canine mAbs that bind to the immuno-oncology target known as programmed cell death protein 1 (“PD-1”) and have successfully completed preliminary pharmacokinetic, immunogenicity and safety studies for our anti-PD-1 program.  

In September 2015, we secured a biopharmaceutical manufacturing facility in Tullamore, Ireland.  We have reconfigured it to be a dedicated veterinary biopharmaceutical facility with the capability to meet our anticipated future clinical and commercial production needs for drug substance.  The facility is operated by our wholly-owned subsidiary BioNua.

26

In November 2016, we entered a research collaboration with Genentech involving use of our PETization platform.  The parties will conduct a proof-of-concept study, which will be funded by Genentech.

In February 2017, we entered into a license agreement with Pfizer Inc. (“Pfizer”), pursuant to which we received a non-exclusive license to certain patents in the Pfizer portfolio for anti-NGF antibodies.

In March 2017, we implemented a cost reduction program particularly focused on early stage research programs and general and administrative activities, which resulted in a reduction of 11 employees, including our Chief Scientific Officer.

In April 2017, we, Zoetis Inc. and Zoetis Belgium SA, a wholly-owned subsidiary of Zoetis (“Bidco”), entered into a transaction agreement (the “Transaction Agreement”) for a recommended acquisition of us by, whereby Bidco will acquire all of our issued and to be issued share capital for cash by means of a “scheme of arrangement” under Irish law (the “Acquisition”).  The Transaction Agreement provides our shareholders will be entitled to receive $6.72 in cash per ordinary share, including any shares issuable upon exercise of outstanding exercisable or convertible securities, in return for the cancellation of their shares, on the date the scheme of arrangement becomes effective.  This consideration values our entire issued and to be issued share capital at approximately $85 million.

Since our initial public offering, we have focused on clinical development of our most advanced candidates and securing infrastructure to become a vertically integrated veterinary biopharmaceutical company.  We are building a pipeline of development candidates derived from PETization in therapeutic areas where human mAbs have had significant impact.

We have incurred losses since our inception and had an accumulated deficit of $59.5 million and $43.0 million as of March 31, 2017, and June 30, 2016, respectively.  For the foreseeable future, we expect to continue to incur losses and negative cash flows.  To date, we have been funded primarily through sales of capital shares.  

We will require additional capital until we can generate revenue in excess of operating expenses. We have entered into the Transaction Agreement and expect to consummate the Acquisition in the second half of 2017.  However, if the Acquisition is not consummated on this timetable or at all, we may need to seek additional financing or significantly change our operating plan.  We may seek funding through public or private equity or debt financing or other sources, such as corporate collaborations and licensing arrangements.  We may not be able to obtain financing on acceptable terms, or at all.  The sale of additional equity would result in additional dilution to our shareholders, and the terms of any financing may adversely affect the rights of our shareholders.  The incurrence of any debt financing could result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.  If we are unable to obtain funding, we could be forced to delay, reduce, or eliminate our research and development programs or commercialization efforts, which could adversely affect our business prospects.

Basis of Presentation

Operating Expenses

The majority of our operating expenses have been research and development activities related to our lead product candidates and general and administrative costs associated with our business.

Research and Development Expense

Research and development costs are expensed as incurred and consist primarily of (i) payroll and related expense for all employees engaged in scientific research and development functions, including wages, related benefits and share-based compensation, (ii) fees for regulatory, professional and other consultants and (iii) development costs, including costs of drug discovery, safety, proof‑of‑concept , pilot and pivotal safety and efficacy studies, development of biological materials, patent license costs and service providers.  We use our employee and infrastructure resources across multiple development programs.  We allocate outsourced development costs by lead product candidates, but we do not allocate personnel or other internal costs related to development to specific product candidates.  For cost-sharing arrangements for joint research and development activities with third parties, we recognize cost reimbursements as an offset within research and development expense in accordance with the underlying agreements.

27

We expect research and development expense to remain near current levels for the foreseeable future, although it may decrease in the near-term as we prioritize our program areas and comply with interim operating covenants under the Transaction Agreement.  We expect future research and development costs associated with ranevetmab to be approximately $3.05 million over the next three years.  This includes $0.9 million for the costs of pivotal safety studies and $2.15 million for chemistry, manufacturing and controls (“CMC”) studies, stability studies and regulatory compliance and other miscellaneous costs.  Assuming development costs similar to those anticipated for ranevetmab, we estimate research and development expense for the development of frunevetmab to be approximately $3.05 million which includes $1.65 million for the costs of pivotal safety and efficacy studies and $1.4 million for CMC studies, stability studies and regulatory compliance and other miscellaneous costs.

Drug development is inherently unpredictable and the nature, specific timing and estimated costs of the efforts that will be necessary to complete the development of our lead product candidates are subject to numerous factors.  For example, the nature, timing and amount of research and development expense incurred will depend largely upon the outcomes of current and future pivotal safety and efficacy studies for our lead product candidates as well as the related regulatory requirements, manufacturing costs and other costs associated with the development of our lead product candidates.  Factors that can influence the duration, cost and timing of our pivotal safety and efficacy studies and development of our lead product candidates include:

• the scope, rate of progress and expense of our ongoing studies, as well as any additional pivotal safety and efficacy studies and other research and development activities;

• results of future pivotal safety and efficacy studies;

• CMC studies;

• potential changes in government regulation; and

• the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a lead product candidate could mean a significant change in the costs and timing associated with the development of that product candidate.

General and Administrative Expense

General and administrative expense consists primarily of non-research and development-related payroll and related expense for employees, consultants and directors, including wages, related benefits and share-based compensation.  General and administrative expense also includes professional and consulting fees for legal, accounting, tax services and other general business services, as well other expenses such as travel, rent and facilities costs.  Although we are taking steps to streamline our operations and control expenses, we expect general and administrative expense to increase in the near-term connection with our consideration of the Acquisition and related matters, and to increase when we prepare to commercialize and market our products.

Other Income (Expense)

Research and Development Income

Australia

We are eligible under the AusIndustry research and development incentive program to obtain a cash amount from the ATO.  The incentive is available to us on the basis of specific criteria with which we must comply.  Although the incentive is administered through the ATO, we have accounted for the incentive outside the scope of Accounting Standards Codification, Topic 740, Income Taxes, as an income tax benefit since we meet the applicable requirements to participate in the program and the incentive is not linked to our income tax liability and can be realized regardless of whether we have generated taxable income.  Research and development income is recognized when eligible research and development activities have been undertaken and we have completed our assessment of whether such activities meet the relevant qualifying criteria.  

Ireland

Nexvet Ireland and BioNua are both eligible under the Research and Development Tax Credit (“R&D Tax Credit”) Guidelines of Ireland to claim a tax credit, up to 25% of eligible research and development expenditure less expenditure already covered by the IDA grant assistance.  The tax credit is normally offset against corporation tax payable in Ireland.  For companies, such as Nexvet Ireland and BioNua, there may be the ability to elect to receive the tax credit as a cash payment in three equal amounts, approximately 9, 21 and 33 months after the relevant fiscal year end, subject to meeting certain qualifying criteria.  

28

Government Grant Income

We are eligible, under an agreement with the IDA, to receive cash as grant income based on a fixed percentage of eligible research and development expenditure in Ireland on a defined project, which includes the achievement of pre-agreed performance targets.  Any expenditure eligible under this agreement cannot be claimed under the R&D Tax Credit program.  The maximum grant available to us is €2.4 million over the life of the agreement.

We recognize government grant income at fair value when there is reasonable assurance that the grant will be received and it is probable that all attaching conditions will be complied with.  When the grant relates to an asset, the fair value is included in the balance sheet as deferred grant income, which is released to income over the expected useful life in a manner consistent with the depreciation method for the relevant asset and subject to meeting other relevant conditions, and it is recorded on the balance sheet as other income receivable until cash is received.  When the grant relates to an expense item, it is recognized as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate, and it is recorded on the balance sheet as other income receivable until cash is received.  We have complied with all requirements of the agreement to date.

Exchange Gain (Loss)  

Exchange gain (loss) consists primarily of gains or losses due to foreign exchange translation, primarily reflecting changes in Australian, Irish and U.S. foreign exchange rates.   Our reporting currency is U.S. dollars, and the functional currency for most subsidiaries is their local currency.  Foreign currency transactions are translated into the functional currency using the current exchange rate as of the date of the transaction.  At period-end, monetary items denominated in a foreign currency are translated into the functional currency of the relevant entity using the period‑end spot rate.

Interest Income

We earn interest on the cash balances held with financial institutions and recognize interest when earned on an accrual basis over time.

Results of Operations

Results of operations for the three and nine months ended March 31, 2017 and 2016 were as follows:

	Three Months Ended March 31,						Nine Months Ended March 31,
	2017			2016			2017			2016
	(in thousands)
Revenue
Other	$	—		$	—		$	—		$	—
Total revenue		—			—			—			—
Operating expenses
Research and development		5,583			4,260			12,802			11,775
General and administrative		1,605			1,680			5,245			5,329
Total operating expenses		7,188			5,940			18,047			17,104
Loss from operations		(7,188	)		(5,940	)		(18,047	)		(17,104	)
Other income and expense
Research and development income		635			418			1,605			1,441
Government grant income		429			—			785			4
Exchange gain (loss)		76			(259	)		(958	)		151
Interest income		29			36			89			112
Net loss	$	(6,019	)	$	(5,745	)	$	(16,526	)	$	(15,396	)

29

Comparison of Three Months Ended March 31, 2017 to Three Months Ended March 31, 2016

Research and Development Expense

Research and development expense for the three months ended March31, 2017 and 2016 was as follows:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Payroll and related	$	2,436	$	1,364
Consulting		26		50
Development costs		3,121		2,846
Total	$	5,583	$	4,260

Research and development expense increased by $1.3 million, or 31%, from $4.3 million for the three months ended March 31, 2016 to $5.6 million for the three months ended March 31, 2017.  Payroll and related costs increased by $1.1 million as we build our research and development team at our manufacturing facility and incurred $0.7 million of net termination costs associated with our cost reduction program.  Development costs increased by $0.3 million as we progressed our pilot and pivotal safety and efficacy studies for frunevetmab during the period and includes a $1.0 million patent license cost.  

In the three months ended March 31, 2017 and 2016, outsourced development costs were $0.9 million and $0.8 million, respectively, for ranevetmab, $1.4 million and $1.0 million, respectively, for frunevetmab, and $0.8 million and $1.0 million, respectively, for general research.

In the three months ended March 31, 2017 and 2016, our manufacturing facility in Ireland incurred $1.6 million and $1.4 million, respectively, of total research and development expense.

General and Administrative Expense

General and administrative expense for the three months ended March 31, 2017 and 2016 was as follows:

	Three Months Ended March 31,
	2017		2016
	(in thousands)
Payroll and related	$	1,060	$	979
Consulting and legal fees		284		273
Other costs		261		428
Total	$	1,605	$	1,680

General and administrative expense decreased by $0.1 million, or 4%, from $1.7 million in the three months ended March 31, 2016 to $1.6 million in the three months ended March 31, 2017.  Payroll and related costs included $0.1 million of net termination costs associated with our cost reduction program.

Research and Development Income

Research and development income was $0.6 million and $0.4 million in the three months ended March 31, 2017 and 2016, respectively, based on the levels of qualifying expenditures in those periods under the relevant governmental programs.

Government Grant Income

In the three months ended March 31, 2017 and 2016, we recognized $0.4 million and $nil under the IDA grant award, respectively as the initial claim was made in the fourth quarter of our fiscal year 2016.

Exchange gain (loss)

In the three months ended March 31, 2017 and 2016, we recognized an exchange gain of $0.1 million and exchange loss $0.2 million, respectively, primarily related to the translation of U.S. dollar-denominated intercompany accounts and bank account balances of subsidiaries into local reporting currencies.

30

Comparison of Nine Months Ended March 31, 2017 to Nine Months Ended March 31, 2016

Research and Development Expense

Research and development expense for the nine months ended March31, 2017 and 2016 was as follows:

	Nine Months Ended March 31,
	2017		2016
	(in thousands)
Payroll and related	$	5,705	$	3,702
Consulting		87		147
Development costs		7,010		7,926
Total	$	12,802	$	11,775

Research and development expense increased $1.0 million, or 8%, from $11.8 million in the nine months ended March 31, 2016 to $12.8 million in the nine months ended March 31, 2017.  The increase was primarily attributable to a $2.0 million increase in payroll and related costs, partially offset by $0.9 million decrease in development costs.  Payroll and related costs increased as we built our research and development team, particularly at our manufacturing facility and incurred $0.7 million of net termination costs associated with our cost reduction program.  Development costs decreased as we had completed our pilot and pivotal safety and efficacy studies for ranevetmab in prior periods and includes a $1.0 million patent license cost.

In the nine months ended March 31, 2017 and 2016, outsourced development costs were $1.6 million and $3.0 million, respectively, for ranevetmab, $3.1 million and $2.9 million, respectively, for frunevetmab, and $2.3 million and $2.0 million, respectively, for general research.

In the nine months ended March 31, 2017 and 2016, our manufacturing facility in Ireland incurred $5.1 million and $1.9 million, respectively, of total research and development expense.

General and Administrative Expense

General and administrative expense for the nine months ended March 31, 2017 and 2016 was as follows:

	Nine Months Ended March 31,
	2017		2016
	(in thousands)
Payroll and related	$	3,050	$	2,956
Consulting and legal fees		1,212		1,013
Other costs		983		1,360
Total	$	5,245	$	5,329

General and administrative expense decreased by $0.1 million, or 1.5% from $5.3 million for the nine months ended March 31, 2016 to $5.2 million in the nine months ended March 31, 2017.  Payroll and related costs included $0.1 million of net termination cost associated with our cost reduction program. The $0.2 million increase to consulting and legal fees offset a $0.4 million reduction in other costs. The increase in consulting and legal fees reflected our consideration of strategic, business development and other opportunities, including the Acquisition.  The reduction in other costs were primarily due to reduced travel costs in 2017 and change of a contractor to a permanent role in 2016.

Research and Development Income

Research and development income was $1.6 million and $1.4 million in the nine months ended March 31, 2017 and 2016, based on higher levels of qualifying expenditures.

Government Grant Income

In the nine months ended March 31, 2017 and 2016, we recognized $0.8 million and $nil under the IDA grant award, respectively as the initial claim was made in the fourth quarter of our fiscal year 2016.

31

Exchange (loss) gain

In the nine months ended March 31, 2017 and 2016, we recognized an exchange loss of $1.0 million and an exchange gain of $0.2 million, respectively primarily related to the translation of U.S. dollar-denominated intercompany accounts and bank account balances of subsidiaries into local reporting currencies.

Liquidity and Capital Resources

We have incurred losses and negative cash flows from operations since our inception.  As of March 31, 2017, we had an accumulated deficit of $59.5 million.  Prior to becoming a public company, we raised aggregate gross proceeds of $41.4 million from the private sale of preference shares, ordinary shares, convertible notes and warrants.  In February and March 2015, we raised further aggregate gross proceeds of $41.8 million with aggregate net proceeds of $38.0 million, after deducting the underwriting discount of $2.9 million and offering expenses of $0.9 million payable by us, from the sale of ordinary shares in our initial public offering.  For the foreseeable future, we expect to continue to incur losses, as we seek regulatory approvals for our lead product candidates and begin commercialization activities in anticipation of regulatory approval.

We have entered into the Transaction Agreement and expect to consummate the Acquisition in the second half of 2017.  However, if the Acquisition is not consummated on this timetable or at all, we may need to seek additional financing or significantly change our operating plan.  Additional financing may be sought through public or private equity or debt financings or other sources, such as strategic collaborations.  Such financing may result in dilution to shareholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business.  In addition, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plan.

Our future capital requirements will depend on many factors, including:

• whether we consummate the Acquisition on the expected timetable, or at all;

• the scope, progress, results and costs of researching and developing our current or future product candidates, including conducting proof-of-concept and pilot and pivotal safety and efficacy studies;

• the timing of, and the costs involved in, obtaining regulatory approvals for any of our current or future product candidates;

• the number and characteristics of the product candidates we pursue;

• whether we acquire or license any other companies, assets, intellectual property or technologies in the future;

• the cost of commercialization activities, if any of our current or future product candidates are approved for sale, including marketing, sales and distribution costs;

• the cost associated with our manufacturing facility, including the cost of manufacturing our current and future product candidates and any approved products we successfully commercialize;

• our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

• the expenses needed to attract and retain skilled personnel;

• the costs associated with being a public company; and

• the costs involved in preparing and, filing, prosecuting, maintaining our patents, opposing patent claims of third parties and, defending and enforcing any patent claims brought against us, including litigation costs and the outcome of such litigation.

We have incurred net losses from inception to March 31, 2017 of $59.5 million as well as negative cash flow from operating activities, which we expect to continue as we fund research and development and general and administrative activities.  Without raising new capital, we do not have sufficient cash resources to meet our requirements in the next 12 months.  These factors raise substantial doubt regarding our ability to continue as a going concern.  Management continues to evaluate various financing alternatives.  Although we may not be successful in securing an acceptable alternative, management believes that it will be able to secure any necessary financing as a result of ongoing financing discussions with third party investors and existing shareholders.

In April 2017, we, Zoetis Inc. and Bidco entered into the Transaction Agreement, whereby Bidco will acquire all of our issued and to be issued share capital for cash pursuant to the Acquisition.  The Acquisition is expected to be consummated in the second half of 2017, and if consummated, we would become an indirect, wholly-owned subsidiary of Zoetis Inc., the largest global animal health care company, and as a result it is expected that we would be able to obtain sufficient cash resources to meet our requirements in the next 12 months..

32

Cash Flows

The following table shows a summary of our cash flows for the periods set forth below:

	Nine Months Ended March 31,
	2017			2016
	(in thousands)
Net cash used in operating activities	$	(16,762	)	$	(10,224	)
Net cash used in investing activities		(860	)		(3,954	)
Net cash provided by financing activities		38			19

Net Cash Used in Operating Activities

For the nine months ended March 31, 2017, net cash used in operating activities was $16.8 million.  Net cash used in operating activities was primarily attributable to our net loss of $16.5 million and by changes in our operating assets and liabilities of $2.6 million (principally comprising a decrease of $1.4 million in accounts payable, accrued expenses, other liabilities and deferred income and an increase of $1.0 million in other income receivable), offset by non-cash share-based compensation expense of $1.7 million and non-cash depreciation and amortization of $0.6 million.  A key change in operating assets and liabilities was the receipt of $1.6 million in respect of the 2016 fiscal year research and development income.

For the nine months ended March 31, 2016, net cash used in operating activities was $10.2 million.  Net cash used in operating activities was primarily attributable to our net loss of $15.4 million offset by non-cash share-based compensation expense of $1.4 million and non-cash depreciation and amortization of $0.3 million and by changes in our operating assets and liabilities of $3.5 million.  A key change in operating assets and liabilities was the receipt of $3.2 million in respect of the 2015 fiscal year research and development income.

Net Cash Used in Investing Activities

For the nine months ended March 31, 2017, net cash used in investing activities was $0.9 million, which was primarily attributable to purchases of property, plant and equipment and intangibles, including $0.5 million of equipment in our manufacturing facility.

For the nine months ended March 31, 2016, net cash used in investing activities was $4.0 million, which was attributable to purchases of property, plant and equipment and intangibles, including $2.0 million for the initial acquisition of manufacturing assets in our facility in Tullamore, Ireland.

Net Cash Provided by Financing Activities

For the nine months ended March 31, 2017, net cash provided by financing activities was $38,000, which was attributable to gross proceeds from the exercise or conversion of share awards or shares issued to employees and directors.

For the nine months ended March 31, 2016, net cash provided by financing activities was $19,000, which was attributable to gross proceeds from the exercise or conversion of share awards issued to employees and directors.

Contractual Obligations and Commitments

Our contractual obligations and commitmentswere reported in our annual report on Form 10‑K filed with the SEC on September 2, 2016.  In September 2015, we entered a 10-year lease for a manufacturing facility in Tullamore, Ireland, with an option to purchase the building.  As of March 31, 2017, commitments on this lease totaled $0.9 million.  There have been no other material changes from the contractual obligations and commitments previously disclosed in our annual report on Form 10‑K.

Off-Balance Sheet Arrangements

Since inception, we have not engaged in the use of any off-balance sheet arrangements, such as structured finance entities, special purpose entities or variable interest entities.

33

Critical Accounting Policies and Significant Judgments and Estimates

Our condensed consolidated financial statements have been prepared in accordance with U.S. GAAP.  The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue, and expenses during the reporting periods.  On an ongoing basis, we evaluate our estimates and judgments, including those described below.  We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that may not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our condensed consolidated financial statements included elsewhere in this report, we believe that the estimates and assumptions involved in the following accounting policies may have the greatest potential impact on our condensed consolidated financial statements.

Research and Development Accruals

As part of the process of preparing our condensed consolidated financial statements, we are required to estimate accrued research and development expenses.  Examples of estimated accrued expenses include fees paid to vendors and clinical sites in connection with our field safety and efficacy studies, to contract research organizations in connection with our proof‑of‑concept, pilot and pivotal safety and efficacy studies and to contract manufacturers in connection with the production of our product candidates and formulated biologics.

We review new and open contracts and communicate with applicable internal and vendor personnel to identify services that have been performed on our behalf and estimate the level of service performed and the associated costs incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost for accrued expenses.  The majority of our service providers invoice us monthly in arrears for services performed or as milestones are achieved.  We make estimates of our accrued expenses as of each balance sheet date.

We base our accrued expenses related to proof-of-concept, pilot and pivotal safety and efficacy studies on our estimates of the services received and efforts expended pursuant to contracts with vendors, our internal resources, and payments to clinical sites based on animal enrollments.  The financial terms of the vendor agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows.  Payments under some of these contracts depend on factors such as the successful enrollment of animals and the completion of development milestones.  We estimate the time period over which services will be performed and the level of effort to be expended in each period.  If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the related expense accrual accordingly on a prospective basis.  If we do not identify costs that have been incurred or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.  To date, we have not made any material adjustments to our estimates of accrued research and development expenses or the level of services performed in any reporting period presented.

Share-Based Compensation

We recognize share-based compensation expense based on the grant date fair value of the award over the period during which an employee is required to provide service in exchange for the award.  Where performance conditions are attached to the awards, compensation expense is recognized in the period in which it becomes probable that the performance target will be achieved, net of an estimate of pre-vesting forfeitures over the requisite service period.  The probability of vesting is reassessed at each reporting period for awards with performance conditions and compensation expense is adjusted based on its probability assessment.

Determining the fair value of share-based awards at the grant date requires judgment, and our estimates of the fair value of our ordinary shares prior to the completion of our initial public offering was highly complex and subjective.

We use the binomial option-pricing model to determine the fair value of share options.  This determination is affected by our estimated fair value per ordinary share as well as assumptions regarding a number of other complex and subjective variables.  These variables include the fair value of our ordinary shares, the expected term of the share option, our volatility over that expected term, expected dividend yield and risk-free interest rates.  Restricted share units are valued at the fair value of the underlying ordinary shares as of the date of grant. See Note 12 to our consolidated financial statements included elsewhere in this report for further details.

In addition to these assumptions, we estimate forfeitures based upon our historical experience.  At each period end, we review the estimated forfeiture rate and make changes as factors affecting the forfeiture rate calculations and assumptions change.

34

If any assumptions used in the binomial option-pricing model change significantly, share-based compensation for future awards may differ materially compared with the awards granted previously.  For the three and nine months ended March 31, 2017 and 2016, share-based compensation expense was $0.8 million, $0.4 million, $1.8 million and $1.4 million, respectively.  We had an aggregate of $3.1 million of unrecognized share-based compensation expense for share awards outstanding as of March 31, 2017, which we expect to recognize over an estimated period of 3.92 years.

As permitted by Australian law, the board of directors of Nexvet Australia historically granted share options and restricted share units with an exercise or conversion price of zero.  Because Irish law requires the payment to an issuer of at least the nominal value of shares in order to acquire such shares from the issuer, any options or restricted share units with a zero exercise or conversion price became exercisable or convertible, as applicable, at the nominal value per ordinary share in August 2014.  This nominal value became $0.10 per ordinary share in September 2014 and was revised to $0.125 per ordinary share in connection with the four-for-five share consolidation in November 2014. Contemporaneously with these awards and based upon information available at the time of grant, the board of directors, with the assistance of management, also determined the fair value of the shares underlying these awards for financial reporting purposes.  The intention has been that all awards granted have been ascribed a value per ordinary share for financial reporting purposes equal to the fair value per ordinary share underlying those awards on the date of grant.  Prior to our initial public offering, when there was no public trading market for our ordinary shares, and in accordance with the American Institute of Certified Public Accountants Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, our board of directors has exercised reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our ordinary shares at each grant date.  These factors included:

• contemporaneous third-party valuations;

• current business conditions and projections;

• risks inherent to the development of our research and development programs, including the status of pivotal safety and efficacy studies for our lead product candidates;

• our financial condition, including cash on hand;

• our need for future financing to fund our research and development efforts and the commercialization of our lead product candidates;

• the composition of, and changes to, our management team and board of directors;

• the rights and preferences of our preference shares relative to our ordinary shares;

• the lack of marketability of our ordinary shares; and

• external market and economic conditions and other trends and conditions affecting the pharmaceutical, veterinary care and biotechnology industries.

Jumpstart Our Business Startups Act

The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, provides that an “emerging growth company” can delay adopting new or revised accounting standards until those standards apply to private companies.  We have irrevocably elected not to avail ourselves of this delayed adoption of new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as public companies that are not emerging growth companies.

Income Taxes

We have historically filed income tax returns in Australia, the United States and Ireland.

As of March 31, 2017, we had total deferred tax assets of $8.7 million.  Our management has evaluated the factors bearing upon the ability to realize our deferred tax assets, which are comprised largely of tax loss carry forwards.  Our management concluded that a full valuation allowance was necessary to offset our net deferred tax assets due to our lack of taxable income prospects for the foreseeable future.

35

Recently Issued Accounting Pronouncements

We evaluate all recently issued accounting pronouncements by the FASB and the following represent those that could or will have a potential impact on our financial statements.

In May 2014, the FASB issued Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606).  This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  This guidance also requires an entity to disclose sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.  Qualitative and quantitative information is required about:

• Contracts with customers—including revenue and impairments recognized, disaggregation of revenue and information about contract balances and performance obligations (including the transaction price allocated to the remaining performance obligations).

• Significant judgments and changes in judgments—determining the timing of satisfaction of performance obligations (over time or at a point in time), and determining the transaction price and amounts allocated to performance obligations.

• Certain assets—assets recognized from the costs to obtain or fulfill a contract.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing.  The guidance clarifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers that reflects the consideration and revenue to which the entity expects to be entitled in exchange for those goods, services or performance obligations.  This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In August 2014, the FASB issued ASU 2014‑15, Presentation of Financial Statements—Going Concern (Subtopic 205‑40).  This guidance defines management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures.  Under the guidance, management is required to evaluate, for each annual and interim reporting period, whether it is probable that the entity will not be able to meet its obligations as they become due within one year after the date that the financial statements are issued or are available to be issued.  When management identifies substantial doubt about the entity’s ability to continue as a going concern, additional disclosures are required.  This guidance will be effective for annual reporting periods beginning after December 15, 2016.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows, although it will require additional disclosure from time to time.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes.  This guidance simplifies the presentation of deferred income taxes, in that it requires deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position.  This amendment applies to all entities that present a classified statement of financial position.  The current requirement that deferred tax liabilities and assets of a tax–paying component of an entity be offset and presented as a single amount is not affected by the amendments in this update.  This guidance will be effective for annual reporting periods beginning after December 15, 2016, however early adoption is permitted for all entities as of the beginning of an interim or annual reporting period.  We do not expect the adoption of this guidance to have a material impact on the Company’s consolidated results of operations, financial position or cash flows.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Financial Liabilities.  This guidance requires equity investments to be measured at fair value with changes in fair value recognized in net income, simplifies the impairment assessment of equity investments, eliminates certain disclosure requirements, requires public companies to use the exit price notion when measuring fair value, and requires certain changes to the presentation of financial assets and financial liabilities.  This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, and early adoption for public entities is allowable only for the provisions related to elimination of fair value disclosure requirements and related to presentation of fair value changes resulting from instrument-specific credit risk in other comprehensive income. Early adoption is not allowed for any other provisions.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

36

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  This guidance increases transparency and comparability by recognizing the assets and liabilities arising from leases on the balance sheet and disclosing key information about leasing arrangements.  The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for public business entity, not-for-profit and employee benefit plans and for all other entities this update is effective for fiscal years beginning after December 15, 2019, and interim period within fiscal years beginning after December 15, 2020.  Early adoption is permitted for all entities.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606) Identifying Performance Obligations and Licensing.  The guidance clarifies that an entity should recognize revenue to depict the transfer of promised goods or services to customers that reflects the consideration and revenue to which the entity expects to be entitled in exchange for those goods or services or performance obligations satisfied.  In addition, in May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606), Narrow-Scope Improvements and Practical Expedients. The core principal of this guidance is the recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  This guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.  Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326).  This guidance requires that financial assets measured at amortized cost be presented at the net amount expected to be collected.  The allowance for credit losses is a valuation account that is deducted from the amortized cost basis.  The statement of operations reflects the measurement of credit losses for newly recognized financial assets, as well as the expected credit losses during the period.  The measurement of expected credit losses is based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.  Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. This guidance will become effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.  Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash Payments.  This guidance relates to eight specific cash flow issues and their appropriate disclosure and classifications.  The eight specific cash flow issues are: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; distributions received from equity method investees; beneficial interests in securitization transactions and separately identifiable cash flows and application of the predominance principle.  This guidance will become effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In October 2016, the FASB issued ASU 2016-16, Income Taxes (Topic 740) Intra-Entity Transfers of Assets Other Than Inventory.  This guidance requires that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs.  This guidance aligns the recognition of income tax consequences for intra-entity transfers of assets other tan inventory with International Financial Reporting Standards (IFRS).  This guidance will become effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In October 2016, the FASB issued ASU 2016-17, Consolidation (Topic 810) Interest Held through Related Parties That Are under Common Control.  This guidance affects reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control.  This guidance changes the evaluation of whether a reporting entity is the primary beneficiary.  This guidance will become effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

37

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) Restricted Cash.  This guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amount generally described as restricted cash or restricted cash equivalents.  Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.  This guidance will become effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  Early adoption is permitted.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business. This guidance assists entities with evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business.  It provides a robust framework to use in determining when a set of assets and activities constitutes a business.  This guidance will become effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.  We do not expect the adoption of this guidance to have a material impact on our consolidated results of operations, financial position or cash flows.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Our cash as of March 31, 2017, was deposited with several large commercial banks located in the U.S., Australia and Ireland.  Our primary exposure to market risk for our cash is interest income sensitivity, which is affected by changes in the general level of U.S. and, to a lesser extent, Australian interest rates.  However, because our cash is held in bank accounts, a sudden change in the interest rates associated with our cash balances would not be expected to have a material impact on our financial condition or results of operations.

We do not have any major foreign currency or derivative financial instruments.  Cash is predominantly held in U.S. dollars.  We have operations in different economic environments that use the local currency as the functional currency.  This exposes us to currency exchange fluctuations.

Item 4.  Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (pursuant to Rule 13a-15 under the Exchange Act), as of the end of the period covered by this report. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have not been any changes in our internal control over financial reporting (as such term defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

38

PART II – OTHER INFORMATION

Item 1A.  Risk Factors

There have been no material changes from the risk factors disclosed in the “Risk Factors” section of our Form 10‑K for the year ended June 30, 2016, except as set forth below.

There is a substantial doubt about our ability to continue as a “going concern.”

We have incurred net losses from inception to March 31, 2017 of $59.5 million as well as negative cash flow from operating activities, which we expect to continue as we fund research and development and general and administrative activities.  Without raising new capital, we do not have sufficient cash resources to meet our requirements in the next 12 months.  These factors raise substantial doubt regarding our ability to continue as a going concern.  Management continues to evaluate various financing alternatives.  Although we may not be successful in securing an acceptable alternative, management believes that it will be able to secure any necessary financing as a result of ongoing financing discussions with third party investors and existing shareholders.

In April 2017, we, Zoetis Inc. and Bidco entered into the Transaction Agreement, whereby Bidco will acquire all of our issued and to be issued share capital for cash pursuant to the Acquisition.  The Acquisition is expected to be consummated in the second half of 2017, and if consummated, we would become an indirect, wholly-owned subsidiary of Zoetis Inc., the largest global animal health care company, and as a result it is expected that we would be able to obain sufficient cash resources to meet our requirements in the next 12 months.  However, the Acquisition may not close on the expected time frame or at all.

The announcement and pendency of our agreement to be acquired by Zoetis could adversely affect our business.

On April 13, 2017, we entered into a definitive agreement to be acquired by Zoetis for $6.72 per ordinary share in cash.  Uncertainty about the effects of the Acquisition on our employees, partners and other parties may adversely affect our business. Our employees may experience uncertainty about their roles or seniority following the Acquisition, and we may not be able to retain and attract employees as effectively as we have in the past.  Any loss or distraction of such employees could adversely affect our business and operations. In addition, we have diverted, and will continue to divert, significant management resources towards the completion of the Acquisition, which could adversely affect our business and operations and parties with which we do business may experience uncertainty associated with the Acquisition, including with respect to current or future business relationships with us. Uncertainty may cause licensors, collaborators or others to refrain from or delay doing business with us, which could cause our business to suffer.

The failure to complete the Acquisition with Zoetis could adversely affect our business.

Consummation of the Acquisition is subject to several conditions beyond our control that may prevent, delay, or otherwise adversely affect its completion. A description of such conditions is contained in our Current Report on Form 8-K filed with the SEC on April 18, 2017, and a list of such conditions is set forth on Appendix I to the Rule 2.5 Announcement attached as Exhibit 99.1 to such Current Report and incorporated by reference as Exhibit 99.1 to this Quarterly Report on Form 10-Q. Many of the conditions to consummation of the Acquisition, including obtaining the requisite approvals, are not within our control or the control of Zoetis and neither of us can predict when or if these conditions will be satisfied. If any of these conditions are not satisfied or waived, it is possible that the Acquisition will not be consummated in the expected time frame or that the Transaction Agreement may be terminated. It is also possible that shareholders may file lawsuits challenging the Acquisition, including actions seeking to rescind the Scheme or enjoin the consummation of the Acquisition.  

If the Acquisition is not completed, the price of our ordinary shares may drop to the extent that the current market price of our ordinary shares reflects an assumption that the Acquisition will be completed. A failed transaction may result in negative publicity and a negative impression of us in the investment community. Finally, any disruption to our business resulting from the announcement and pendency of the Acquisition and from intensifying competition from our competitors, including any adverse changes in our relationships with our employees, partners and other parties, could continue or accelerate in the event of a failed transaction. Our business, these relationships and our financial condition may be adversely affected, as compared to the condition prior to the announcement of the Acquisition, if it is not consummated.  In addition, if the Acquisition is not consummated in certain circumstances, we may be required to reimburse Zoetis for costs and expenses incurred for the purposes of, in preparation for, or in connection with the Acquisition, and our own costs, fees, expenses or charges incurred in connection with the Acquisition may be greater than expected.  This could leave us without adequate resources to continue our business.  

39

While the Acquisition with Zoetis is pending, we are subject to business uncertainties and contractual restrictions that could harm our operations and the future of our business or result in a loss of employees.

The Transaction Agreement includes restrictions on the conduct of our business prior to the completion of the Acquisition, generally requiring us to conduct our businesses in the ordinary course, consistent with past practice, and subjecting us to a variety of specified limitations absent Zoetis’s prior written consent. We may find that these and other contractual arrangements in the Transaction Agreement may delay or prevent us from or limit our ability to respond effectively to competitive pressures, industry developments and future business opportunities that may arise during such period, even if our management and Board of Directors think they may be advisable. The pendency of the Acquisition may also divert management’s attention and our resources from ongoing business and operations. Our employees and customers may have uncertainties about the effects of the Acquisition. In connection with the Acquisition, it is possible that persons with whom we have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationship with us as a result of the Acquisition. Similarly, current and prospective employees may experience uncertainty about their future roles with us during the period leading up to and following completion of the Acquisition, which may harm our ability to attract and retain key employees. If any of these effects were to occur, it could materially and adversely impact our revenues, earnings and cash flows and other business results and financial condition, as well as the market price of our ordinary shares and our perceived acquisition value, regardless of whether the Acquisition is completed. In addition, whether or not the Acquisition is completed, while it is pending we will continue to incur costs, fees, expenses and charges related to the Acquisition, which may materially and adversely affect our business results and financial condition.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Use of Proceeds from Initial Public Offering

On February 4, 2015, our registration statement on Form S‑1 (File No. 333-201309) was declared effective by the SEC for our initial public offering, pursuant to which we sold an aggregate of 4.2 million ordinary shares (including the underwriters’ partial exercise of their overallotment option) at a price to the public of $10.00 per share.  Merrill Lynch, Pierce, Fenner & Smith Incorporated, Cowen and Company, LLC, Piper Jaffray & Co. and JMP Securities LLC acted as underwriters.  Following the sale of the securities registered in the registration statement, the offering terminated.  On February 10, 2015 and March 11, 2015, we closed the sale of such shares, resulting in aggregate gross proceeds to us of $41.8 million and net proceeds to us of $38.0 million, after deducting the underwriting discount of $2.9 million and offering expenses payable by us of $0.9 million.  As of March 31, 2017, we have used $23.8 million of the proceeds from our initial public offering to fund the purchase of assets in a biologics manufacturing facility in Ireland, program development expenses and associated operating expenses.  We have not made any payments to our directors, officers or persons owning ten percent or more of our ordinary shares or to their associates, or to our affiliates other than payments in the ordinary course of business to officers for remuneration and to directors for services provided to our board of directors.  Otherwise, there has been no material change in the planned use of proceeds from our initial public offering as described in our final prospectus filed with the SEC on February 5, 2015 pursuant to Rule 424(b).

40

Item 6. Exhibits

		Incorporated by Reference			Filed/Furnished Herewith
Exhibit Number	Exhibit Description	Form	File No.	Exhibit Filing Date
10.1†	Non-Exclusive Patent License Agreement by and between Nexvet Ireland Limited and Pfizer Inc.				X
12.1	Statement Regarding Computation of Ratio of Earnings to Fixed Charges and Preference Share Dividends				X
31.1	Certification of Principal Executive Officer, pursuant to Rule 13a‑14(a)/15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
31.2	Certification of Principal Financial Officer, pursuant to Rule 13a‑14(a)/15d‑14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1*	Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
32.2*	Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X
101.INS	XBRL Instance Document.				X
101.SCH	XBRL Taxonomy Extension Schema Document.				X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.				X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.				X
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document.				X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.				X

† This exhibit (or portions thereof) has been filed separately with the Commission pursuant to an application for confidential treatment.  The confidential portions of this exhibit have been omitted and are marked by an asterisk.

* This certification is deemed not filed for purpose of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

41

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Nexvet Biopharma public limited company
Date: May 11, 2017	By:	/s/ Mark Heffernan
		Mark Heffernan, Ph.D.
		Chief Executive Officer and Director
Date: May 11, 2017	By:	/s/ Damian Lismore
		Damian Lismore
		Chief Financial Officer (Principal Financial and Accounting Officer)

42