##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-K
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 000-53410
 Peplin, Inc.
 (Exact Name of Registrant as Specified in Its Charter)
 Delaware
    
    26-0641830(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (IRS Employer Identification No.)6475 Christie AvenueEmeryville, California
    
    94608(Address of Principal Executive Offices)
    
    (Zip Code)
 (510) 653-9700
(Registrants Telephone Number, Including Area Code)
   Common Stock, par value $0.001 per share
  ̈ þ
  ̈ þ
 þ  ̈
  ̈  ̈
  ̈
  Large accelerated filer oAccelerated filer o
Non-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o  ̈ þ
 th
  DOCUMENTS INCORPORATED BY REFERENCE




---



##### 



PEPLIN, INC.
 FORM 10-K FOR THE YEAR ENDED JUNE 30, 2009
 TABLE OF CONTENTS
 PART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    20Item 2 Properties
    
    
    40Item 3. Legal Proceedings
    
    
    40Item 4. Submission of Matters to a Vote of Security Holders
    
    
    40PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    41Item 6. Selected Financial Data
    
    
    42Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    44Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    53Item 8. Financial Statements and Supplementary Data
    
    
    53Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    95Item 9A(T). Controls and Procedures
    
    
    95Item 9B. Other Information
    
    
    95PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    96Item 11. Executive Compensation
    
    
    96Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    96Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    96Item 14. Principal Accounting Fees and Services
    
    
    96PART IVItem 15. Exhibits
    
    
    97Signatures
    
    
    98EX-10.32EX-21.1EX-31.1EX-31.2EX-32.1
  2




---



##### Table of Contents



Forward Looking Statements
  
    
    completing the merger of a wholly owned subsidiary of LEO Pharma A/S (LEO) with
and into Peplin, with Peplin surviving the merger as a wholly owned subsidiary of LEO;
    
    our business and scientific strategies;
    
    the progress of our product development programs, including our clinical trials;
    
    our expectations with respect to regulatory submissions and approvals;
    
    our expectations with respect to corporate collaborations;
    
    our estimates regarding our research and development expenses;
    
    the protection of our intellectual property;
    
    our estimates regarding our capital requirements, the sufficiency of our cash
resources and our need for additional financing;
    
    general economic and business conditions, both nationally and in our markets;
    
    our ability to manage our growth and development;
    
    our ability to attract and retain key management and scientific personnel; and
    
    existing and future regulations that affect our business.
   
 PART I
 
 Item 1. Business
 Overview
 Euphorbia peplus E. peplus E. peplus
 3




---



##### Table of Contents



Euphorbiaceae
   4




---



##### Table of Contents



Pre-Cancerous Skin Lesions and Skin Cancer
     Existing Treatments and their Limitations
  Surgery.
 Cryotherapy.
 5




---



##### Table of Contents



Photodynamic therapy, or PDT.
 Topical agents.
 
    
    Topical imiquimod:Topical imiquimod, sold as Aldara, is indicated for the treatment of AK
lesions on the face or scalp, smaller superficial BCC tumors and external genital and perianal
warts. Topical imiquimod activates the bodys immune system, causing the migration of white
blood cells to the treated area to attack and kill the damaged skin cells. According to the
products package insert, in the treatment of AK, topical imiquimod is applied by the patient
twice per week for 16 weeks and demonstrated a complete clearance rate at eight weeks post
treatment, or 24 weeks after commencing treatment, in 45% of patients. In addition, topical
imiquimod can reveal and clear AK lesions in the skin that have not yet become clinically
apparent, resulting in a further long-term benefit. During the treatment period, and for a
period of time after, common side effects include erythema, or redness, dryness, scaling and
crusting. Due to the intensity of these side effects, some patients are advised to take a rest
period of several days during treatment. Following the treatment, an additional one to two
weeks of healing is generally required. In superficial BCC applications, topical imiquimod is
applied by the patient five times per week for six weeks. Topical imiquimod may be used alone
to treat superficial BCC, or it may be used to de-bulk tumors prior to surgery or to treat
margins after surgery.
 
    
    Topical 5-FU:Topical 5-fluorouracil, or topical 5-FU, is a topical formulation of an
off-patent chemotherapeutic agent. It is sold, in differing concentrations, as Efudex, Carac
Fluoroplex and others, and is used primarily to treat AK lesions. Topical 5-FU acts by
inhibiting the altered skin cells from making and repairing DNA, which prevents the AK cells
from growing and multiplying and ultimately results in cell death. Topical 5-FU is typically
applied twice-a-day by the patient for approximately two to four weeks. According to the May
2006 issue of The Journal of Family Practice, topical 5-FU
 6




---



##### Table of Contents



demonstrated a complete clearance rate of approximately 50%. Like topical imiquimod, topical
5-FU can also treat skin lesions that have not yet become clinically apparent. While effective,
the common side effects include burning, redness, pain, erosion and dryness of the skin which
may continue for a period of time after therapy. The pain and unsightliness of these temporary
side effects can be severe enough to affect patient tolerability and may cause the patient to
prematurely terminate treatment. To reduce inflammation, a topical corticosteroid is sometimes
applied. Following the treatment, an additional one to two months of healing is generally
required. Topical 5-FU is not commonly used in the treatment of BCC, although it is approved
for this indication.
 
    
    Topical diclofenac:Diclofenac is a non-steroidal anti-inflammatory drug that
has been shown to clear AK lesions. Topical diclofenac gel is currently indicated only for the
treatment of AK and is marketed under the trade name Solaraze. The drug is prescribed for
patient application twice-a-day for 30 to 90 days, although complete healing of AK lesions may
not be evident for up to 30 days following therapy. According to the products package insert,
topical diclofenac has produced complete clearance of treated AK lesions in 18% to 47% of
patients, based on the location of the lesion at 30 days post-treatment, or 60 to 120 days
after initial treatment. During the extended applications of the topical agent, there may be a
rash, scaling or dryness of the skin. Contact sensitization has been observed and patients are
typically advised to avoid sun exposure during treatment.
  
    
    growth in the incidence of AK due to the aging of the population;
    
    better awareness of AK, sun damage and skin cancer, including the recognition of the
benefits of early intervention and prevention of progression to skin cancer;
    
    a developing understanding among clinicians that topical agents for the treatment of AK may
treat both clinically obvious lesions and other lesions that may not yet be visible; and
    
    general patient preference for less invasive and more cosmetically acceptable treatment
alternatives.
  Our Solution  PEP005
 Euphorbia peplus E. peplus
  7




---



##### Table of Contents



PEP005 Gel for AK
 Non-head (trunk and extremities)
     Head (face and scalp)
   
    
    a short two-to-three day treatment regimen;
 8




---



##### Table of Contents




    
    localized, transient and well-tolerated side effects;
 
    
    a mode of action distinct from other AK treatment modalities;
    
    a convenient, patient-applied, take-home prescription medication; and
    
    the ability to treat visible lesions and the surrounding sun damaged skin where
lesions may develop in the future.
 PEP005 Gel for BCC
   Clinical Development Program
 PEP005 Gel for AK
  Clinical Overview.
  9




---



##### Table of Contents



Evaluation Metrics.
  
    
    Partial AK lesion clearance rate.This rate is defined as the proportion of
patients in the trial who, on the 57th day post-treatment, manifested 75% or
greater reduction in the number of AK lesions identified at baseline in the treatment area.
    
    Complete AK lesion clearance rate.This rate is defined as the proportion of
patients in the trial who, on the 57th day post-treatment visit, manifested no clinically
visible AK lesions in the treatment area whether they existed at the baseline measurement or
manifested during the trial period.
    
    Median percent reduction in lesion court.This rate is defined as
the median percent reduction in the number of lesions identified in
the treatment are at the 57th day post-treatment, compared to the
number of lesions identified of baseline.
  REGION-I
(PEP005-014) Clinical Trial.
 Safety and Tolerability
 Efficacy
 Overall
    
    Chest
    
    Arm
    
    Back of HandEfficacy measure
    
    Vehicle
    
    %
    
    p-value
    
    %
    
    p-value
    
    %
    
    p-value
    
    %
    
    p-valueComplete AK lesion
clearance rate
    
    
    5
    %
    
    
    27
    %
    
    
    <0.0001
    
    
    
    89
    %
    
    
    0.0034
    
    
    
    25
    %
    
    
    0.0002
    
    
    
    16
    %
    
    
    0.0400Partial clearance rate
    
    
    
    
    
    
    44
    %
    
    
    
    
    
    
    89
    %
    
    
    
    
    
    
    48
    %
    
    
    
    
    
    
    24
    %Median % reduction
    
    
    
    
    
    
    67
    %
    
    
    
    
    
    
    100
    %
    
    
    
    
    
    
    73
    %
    
    
    
    
    
    
    50
    %
 10




---



##### Table of Contents



Moving Forward
 PEP005-015
Clinical Trial
 Safety and Tolerability.
 Efficacy
 OverallEfficacy Measure
    
    Vehicle
    
    %
    
    p-valueComplete AK lesion clearance rate
    
    
    9.1
    %
    
    
    50.0
    %
    
    
    <0.001Partial clearance rate
    
    
    
    
    
    
    71.9
    %
    
    
    <0.001Median % reduction
    
    
    
    
    
    
    84.5
    %
 Moving Forward
 AK Clinical Development Plan.
  REGION-IIa and REGION-IIb (Phase 3, head).
 11




---



##### Table of Contents



REGION-Ib (Phase 3, non-head).
 PEP005 Gel for BCC
  Clinical Overview.
   PEP005-003 Clinical Trial.
    12




---



##### Table of Contents



PEP005-009 Clinical Trial.
 BCC Clinical Development Plan.
 Third-Party Independent Contract Research Organizations
  Intellectual Property
 Euphorbiaceae
 E. peplus
 13




---



##### Table of Contents



E. peplus
  
    
    the use of PEP005 and related compounds in the treatment of cancer, skin cancer,
pre-cancerous lesions, AK and a number of other dermatologic, oncologic and other diseases;
    
    formulations that stabilize and optimize the delivery of PEP005 and related
compounds; and
    
    immune stimulating properties, wound healing, combinations with other anti-cancer
agents and biomarkers of sensitivity.
  Manufacturing
 E. peplus E. peplus E. peplus E.
peplus
 E. peplus
 14




---



##### Table of Contents



Sales and Marketing
  Competition
    Third-Party Reimbursement
   15




---



##### Table of Contents



Government Regulation
 United States
  NDA.
 
    
    completion of preclinical laboratory and animal testing in compliance with the
FDAs good laboratory practice, or GLP, regulations;
    
    submission to the FDA of an Investigational New Drug, or IND, application for
human clinical testing which must become effective before human clinical trials may begin;
    
    performance of adequate and well-controlled human clinical trials to establish the
safety and efficacy of the proposed drug product for each intended use;
    
    satisfactory completion of an FDA pre-approval inspection of the facility or
facilities at which the product is produced to assess compliance with the FDAs current cGMP regulations; and
    
    submission to and approval by the FDA of an NDA.
  16




---



##### Table of Contents




    
    Phase 1:Studies are initially conducted in a limited population to test the
product candidate for safety, dose tolerance, absorption, metabolism, distribution and
excretion in healthy humans or, on occasion, in patients, such as cancer patients.
    
    Phase 2:Studies are generally conducted in a limited patient population to
identify possible adverse effects and safety risks, to determine the preliminary efficacy of
the product for specific targeted indications and to determine dose tolerance and optimal
dosage. Multiple Phase 2 clinical trials may be conducted by the sponsor to obtain information
prior to beginning larger and more expensive Phase 3 clinical trials. In some cases, a sponsor
may decide to run what is referred to as a Phase 2b evaluation, which is a second,
confirmatory Phase 2 trial that could, if positive and accepted by the FDA, serve as a pivotal
trial in the approval of a product candidate.
    
    Phase 3:These are commonly referred to as pivotal studies. When Phase 2
evaluations demonstrate that a dose range of the product is effective and has an acceptable
safety profile, Phase 3 trials are undertaken in large patient populations to further evaluate
dosage, to provide substantial evidence of clinical efficacy and to further test for safety in
an expanded and diverse patient population at multiple, geographically-dispersed clinical
trial sites.
    17




---



##### Table of Contents



Special Protocol Assessment.
 Manufacturing cGMP Requirements.
  Other Regulatory Requirements.
   18




---



##### Table of Contents



Australia
  
    
    completion of preclinical laboratory and animal testing;
    
    submission to the Therapeutic Goods Administration, or TGA, of a clinical trial
notification, or CTN, or a clinical trial exemption, or CTX, application for human trials;
    
    in the case of a CTN, submission of an investigators brochure, clinical
protocols, related patient information and supporting documentation to the Human Research
Ethics Committee, or HREC, of each institution at which the trial is to be conducted;
    
    in the case of a CTX, information relating to the overseas status of the medicine,
proposed usage guidelines, a pharmaceutical data sheet and a summary of preclinical and
clinical data to the HREC of each institution at which the trial is to be conducted;
    
    adequate and well-controlled clinical trials to demonstrate the safety and
efficacy of the product;
    
    compilation of evidence which demonstrates that the manufacture of the product
complies with the principles of cGMP;
    
    and submission of the manufacturing and clinical data to, and approval by, the
Drug Safety and Evaluation Branch of the TGA.
   19




---



##### Table of Contents




    
    Phase 1:clinical trials that involve the initial introduction of the drug into
human subjects and the exploration of its safety (adverse effects), dosage tolerance,
absorption, metabolism, distribution, excretion and pharmacodynamics.
    
    Phase 2: clinical trials that evaluate the efficacy of the drug for specific,
targeted indications, determine dosage tolerance and optimal dosage, and identify possible
adverse effects and safety risks. Phase 2 trials usually involve studies in a limited patient
population.
    
    Phase 3: clinical trials that generally further evaluate clinical efficacy and
further test for safety within an expanded patient population sufficient to provide
statistically significant data.
   Employees
  
 Item 1A. Risk Factors
 Risks Related to Our Business and Industry
 We have incurred net losses since inception and anticipate that we will continue to incur losses
for the foreseeable future.
  20




---



##### Table of Contents



We are dependent on the success of our lead product candidate PEP005 Gel for AK, which is in
development, and we cannot give any assurance that it will be successfully commercialized.
   If we are not able to successfully complete a Phase 3 clinical trial program, we will not be
able to commercialize PEP005 Gel for AK. Furthermore, even if we complete these clinical trials,
the FDA may require us to perform further studies before we can commercialize PEP005 Gel for AK.
  Our PEP005 product candidate for the treatment of superficial BCC is at a much earlier stage than
our AK treatment, and we cannot assure you that this product candidate will advance to Phase 3
clinical trials in a timely manner, if ever.
   21




---



##### Table of Contents



Our clinical trials may fail to demonstrate acceptable levels of safety and efficacy of our product
candidates, which could prevent or significantly delay their regulatory approval.
    
    
    we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign
regulatory authorities that a product candidate is safe
and effective for any indication;
    
    the results of clinical trials may not meet the
level of statistical significance required by the FDA
or comparable foreign regulatory authorities for
approval;
    
    the FDA or comparable foreign regulatory
authorities may disagree with the design or
implementation of our clinical trials;
    
    we may be unable to demonstrate that a product
candidates clinical and other benefits outweigh its
safety risks;
    
    we may be unable to demonstrate that a product
candidate presents an advantage over existing
therapies, or over its vehicle in any indications for
which the FDA requires the results of a product to be
measured against its vehicle, which is the portion of
the product that does not have an active pharmaceutical
ingredient;
    
    the FDA or comparable foreign regulatory
authorities may disagree with our interpretation of
data from preclinical studies or clinical trials;
    
    the data collected from clinical trials of our
product candidates may not be sufficient to support the
submission of an NDA or other submission or to obtain
regulatory approval in the United States or elsewhere;
    
    the FDA or comparable foreign regulatory
authorities may fail to approve the manufacturing
processes or facilities of third-party manufacturers
with which we or our collaborators contract for
clinical and commercial supplies; and
    
    the approval policies or regulations of the FDA or
comparable foreign regulatory authorities may
significantly change in a manner rendering our clinical
data insufficient for approval.
  22




---



##### Table of Contents



We may not be successful in obtaining Australian and other foreign country regulatory approvals for
PEP005 Gel for AK.
  
    
    completion of preclinical laboratory and animal testing;
    
    submission to the TGA of a clinical trial
notification, or a clinical trial exemption application
for human trials;
    
    in the case of a clinical trial notification,
submission of an investigators brochure, clinical
protocols, related patient information and supporting
documentation to the HREC of each institution at which the trial is to
be conducted;
    
    in the case of a clinical trial exemption,
information relating to the overseas status of the
medicine, proposed usage guidelines, a pharmaceutical
data sheet and a summary of preclinical and clinical
data to the HREC of each institution at which the trial
is to be conducted;
    
    adequate and well-controlled clinical trials to demonstrate the safety and efficacy of the product;
    
    compilation of evidence which demonstrates that
the manufacture of the product complies with the
principles of cGMP; and
    
    submission of the manufacturing and clinical data
to, and approval by, the Drug Safety and Evaluation
Branch of the TGA.
  Delays in the commencement or completion of clinical trials are common and could result in
increased costs to us and delay or limit our ability to generate revenue.
  
    
    obtaining regulatory approval to commence a clinical trial;
    
    reaching agreement on acceptable terms with
prospective CROs and trial sites, the terms of which can be subject to
extensive negotiation and may vary significantly among
different CROs and trial sites;
    
    manufacturing sufficient quantities of a product candidate for use in clinical trials;
    
    obtaining IRB approval to conduct a clinical trial at a prospective
site;
    
    recruiting and enrolling patients to participate
in clinical trials for a variety of reasons, including
 23




---



##### Table of Contents



competition from other clinical trial programs for the
treatment of skin cancer or similar indications; and
 
    
    retaining patients who have initiated a clinical
trial but may be prone to withdraw due to side effects
from the therapy, lack of efficacy or personal issues,
or who are lost to further follow-up.
  
    
    failure to conduct the clinical trial in
accordance with regulatory requirements or our clinical
protocols;
    
    inspection of the clinical trial operations or
trial sites by the FDA or other regulatory authorities
resulting in the imposition of a clinical hold;
    
    unforeseen safety issues; and
    
    a lack of adequate funding to continue the clinical trial.
  We depend on clinical investigators and clinical sites to manage our clinical trials and perform
related data collection and analysis, which exposes us to potential costs and delays outside our
control.
  Our product candidates may cause undesirable side effects or have other properties that could delay
or prevent their regulatory approval or limit the commercial attractiveness of any approved
product.
 24




---



##### Table of Contents




    
    regulatory authorities may withdraw their approval of the product;
    
    regulatory authorities may require the addition of
labeling statements, such as a black box warning or a
contraindication;
    
    we may be required to create a medication guide
outlining the risks of such side effects for
distribution to patients;
    
    we may be required to change the way the product
is administered, conduct additional clinical trials or
change the labeling of the product;
    
    we could be sued and held liable for harm caused to patients; and
    
    our reputation may suffer.
   Even if our products receive regulatory approval, we will be subject to ongoing regulatory
obligations and restrictions, which may result in significant expense and limit our ability to
commercialize our products.
  
    
    issue warning letters;
    
    impose civil or criminal penalties;
    
    suspend our regulatory approval;
    
    suspend any of our ongoing clinical trials;
    
    refuse to approve pending applications or supplements to approved applications filed by us;
 25




---



##### Table of Contents




    
    impose restrictions on our operations, including
costly new manufacturing requirements, closing our
contract manufacturers facilities or terminating
licenses to manufacture cGMP grade material;
    
    impose import or export bans; or
    
    seize or detain products or require us to initiate a product recall.
   We may need significant amounts of additional financing, which may not be available to us on
favorable terms, or at all, which raises substantial doubts about our ability to continue as a
going concern. If the Merger Agreement is terminated and we fail to obtain additional financing, we
may be unable to fund our operations and commercialize our product candidates and may never achieve
profitability.
     
    
    whether the merger is completed;
    
    the scope, results, rate of progress, timing and costs
of preclinical studies and clinical trials and other
development activities;
 26




---



##### Table of Contents




    
    the costs and timing of seeking and obtaining regulatory approvals;
    
    the costs of filing, prosecuting, defending and
enforcing any patent claims and other intellectual
property rights;
    
    the costs of developing our sales and marketing
capabilities and establishing distribution
capabilities;
    
    the costs of securing coverage, payment and
reimbursement of our product candidates, if any of our
product candidates receive regulatory approval;
    
    the effects of competing clinical, technological and market developments; and
    
    the terms, timing and cash requirements of any
future acquisitions, collaborative arrangements,
licensing of product candidates or investing in
businesses, product candidates and technologies.
  
    
    public or private equity offerings;
    
    debt financing;
    
    collaborations with pharmaceutical companies; and
    
    license agreements.
  Raising additional funds by issuing securities, debt financings or through licensing arrangements
may cause our stockholders to experience significant dilution in their ownership interest, restrict
our operations or require us to relinquish proprietary rights.
    Even if our product candidates obtain regulatory approval, they may not be accepted in the
marketplace by physicians, patients and the medical community.
 27




---



##### Table of Contents




    
    timing of marketing introduction and number and clinical profile of competitive products;
    
    our ability to provide acceptable evidence of
safety and efficacy and our ability to secure the
support of key clinicians and physicians for our
products;
    
    relative convenience and ease of administration;
    
    cost effectiveness and pricing compared to existing and new treatments;
    
    availability of coverage reimbursement and
adequate payment from health maintenance organizations
and other third-party payers;
    
    personal preferences for more entrenched therapeutic alternatives;
    
    the commercial design of our products, including
our ability to tailor our products to the specific
needs of physicians and patients;
    
    prevalence and severity of adverse side effects; and
    
    other advantages over other treatment methods.
 If we are unable to obtain adequate coverage or reimbursement from third-party payers for PEP005
Gel for AK or PEP005 Gel for BCC, or any other product candidates that we may seek to
commercialize, our revenues and prospects for profitability will suffer.
    28




---



##### Table of Contents



We do not expect to advance the application of PEP005 for other indications in the foreseeable
future.
  If we are unable to establish sales, marketing and distribution capabilities or enter into and
maintain arrangements with third parties to sell, market and distribute our product candidates, our
business may be harmed.
  Our success depends in part on our ability to protect our intellectual property. If we are not
able to protect our intellectual property, trade secrets and know-how, our competitors may use it
to develop competing products.
  29




---



##### Table of Contents




    
    the pending patent applications we have filed or
to which we have exclusive rights may not result in
issued patents or may take longer than we expect to
result in issued patents;
    
    the claims of any patent that are issued may not
provide meaningful protection or may subsequently be
held to be invalid or unenforceable;
    
    the process by which we make PEP005, which we hold as a trade
secret, may become publicly known;
    
    we may not be able to develop additional proprietary technologies that are patentable;
    
    other companies may be able to develop
alternative, economically feasible, sources of PEP005,
which may be a source of competition for us;
    
    other companies may challenge patents licensed or issued to us or our industry partners;
    
    other companies may design around technologies we have licensed or developed; and
    
    we have limited patent protection outside the
United States, which may make it easier for third
parties to compete in foreign jurisdictions. Our basic
use patents and applications have counterparts in only
nine foreign countries and under the European Patent
Convention.
   We can provide no assurance that third parties will not claim that we have infringed their
proprietary rights or that our products or methods will not infringe upon the patents of third
parties.
  30




---



##### Table of Contents



Our intellectual property rights may not provide meaningful commercial protection for our products,
which could enable third parties to use our technology or methods, or very similar technology or
methods, and could reduce our ability to compete.
   Our manufacturing operations are, in part, dependent on a single source supplier and the loss of
this supplier could harm our business.
  
    
    increased component costs if DPT raises its prices;
    
    we are not a major customer of DPT, and DPT may
therefore give other customers needs higher priority
than ours;
    
    we may not be able to obtain adequate supply of
PEP005 Gel for AK in a timely manner or on commercially
reasonable terms, or at all;
    
    if our supply relationship should be terminated,
we may have difficulty locating and qualifying an
alternative supplier, which we expect could take a year
or longer; and
    
    DPT may encounter financial hardships, which could
inhibit its ability to fulfill our orders and meet our
requirements.
  31




---



##### Table of Contents



PEP005 is naturally sourced. We may not be able to ensure quantity and quality of supply.
   We have limited manufacturing capabilities and manufacturing personnel, and if our manufacturing
capabilities are insufficient to produce an adequate supply of products, our growth could be
limited and our business could be harmed.
   If we or our current or future third-party manufacturers fail to comply with FDA, state, local or
foreign regulatory requirements, we may be unable to produce our products and our business could
suffer.
 32




---



##### Table of Contents



We operate in a highly competitive industry. Organizations which compete with us may be better
resourced and more competitive.
    
    
    significantly greater name recognition;
    
    established relations with healthcare professionals, customers and third-party payers;
    
    greater experience in conducting research and
development, manufacturing, clinical trials, obtaining
regulatory approval for products and marketing approved
products; and
    
    greater financial and human resources for product
development, sales and marketing and patent litigation.
  33




---



##### Table of Contents



If we fail to comply with healthcare regulations, we could face substantial penalties and our
business, operations and financial condition could be adversely affected.
  
    
    the federal anti-kickback law,
which prohibits, among other things, persons from
soliciting, receiving or providing remuneration,
directly or indirectly, to induce either the referral
of an individual, for an item or service or the
purchasing or ordering of a good or service, for which
payment may be made under federal healthcare programs
such as the Medicare and Medicaid programs;
    
    federal false claims laws which prohibit, among
other things, individuals or entities from knowingly
presenting, or causing to be presented, claims for
payment from Medicare, Medicaid, or other third-party
payers that are false or fraudulent, and which may
apply to entities like us which may provide coding and
billing advice to customers;
    
    the federal Health Insurance Portability and
Accountability Act of 1996, or HIPAA, which prohibits
executing a scheme to defraud any healthcare benefit
program or making false statements relating to
healthcare matters and which also imposes certain
requirements relating to the privacy, security and
transmission of individually identifiable health
information;
    
    the Federal Food, Drug, and Cosmetic Act, which
among other things, strictly regulates drug product
marketing, prohibits manufacturers from marketing drug
products for off-label use and regulates the
distribution of drug samples; and
    
    state law equivalents of each of the above U.S.
federal laws, such as anti-kickback and false claims
laws which may apply to items or services reimbursed by
any third-party payer, including commercial insurers,
and state laws governing the privacy and security of
health information in certain circumstances, many of
which differ from each other in significant ways and in
some cases are not preempted by HIPAA, thus
complicating compliance efforts.
  Changes in foreign currency exchange rates could result in fluctuations in our reported financial
results.
  34




---



##### Table of Contents



We will need to increase the size of our operations, and we may experience difficulties in
managing our growth.
  
    
    manage our clinical trials effectively, including
our ongoing Phase 3 clinical trial for PEP005 Gel for
AK and our ongoing Phase 2 clinical trials for PEP005
Gel for BCC, which are being conducted at numerous
clinical trial sites;
    
    manage our internal development efforts
effectively while carrying out our contractual
obligations to licensors, contractors, collaborators
and other third parties;
    
    continue to improve our operational, financial and
management controls, reporting systems and procedures;
and
    
    attract and retain sufficient numbers of talented employees.
  Recent proposed legislation may permit re-importation of drugs from foreign countries into the
United States, including foreign countries where the drugs are sold at lower prices than in the
United States, which could materially adversely affect our operating results and our overall
financial condition.
   Current healthcare laws and regulations and future legislative or regulatory reforms to the
healthcare system may affect our ability to sell our product candidates profitably.
 35




---



##### Table of Contents



We may enter into collaborative relationships and conflicts may arise between us and our
collaborators that could delay or prevent the development or commercialization of our product
candidates.
   A loss of key executives or failure to attract qualified personnel could limit our growth and
adversely effect our business.
  We use hazardous materials, and any claims relating to improper handling, storage or disposal of
these materials could be time consuming or costly.
 36




---



##### Table of Contents



We face costs associated with importing our products into markets outside of Australia and our
business may become subject to economic, political, regulatory and other risks associated with
international operations.
   
    
    difficulties in compliance with non-U.S. laws and regulations;
    
    changes in non-U.S. regulations and customs;
    
    changes in non-U.S. currency exchange rates and currency controls;
    
    changes in a specific countrys or regions political or economic environment;
    
    trade protection measures, import or export
licensing requirements or other restrictive actions by
U.S. or non U.S. governments; and
    
    negative consequences from changes in tax laws.
 If product liability lawsuits are successfully brought against us, we will incur substantial
liabilities and damage to our reputation.
   
    
    decreased demand for our products;
    
    injury to our reputation;
    
    suspension of our clinical trials;
    
    withdrawal of clinical trial participants;
 37




---



##### Table of Contents




    
    costs of related litigation;
    
    substantial monetary awards to patients and others;
    
    loss of revenues; and
    
    the inability to commercialize our products.
  Our compliance efforts may not be sufficient to meet the rules of the Securities Exchange Act of
1934, as amended, or the Australian Securities Exchange, subjecting us to liability, fines and
lawsuits.
  If we fail to maintain effective internal control over financial reporting in the future, the
accuracy and timing of our financial reporting may be adversely affected.
     38




---



##### Table of Contents



Risks Related To Our Common Stock
 Our holding company structure makes us dependent on our subsidiaries for our cash flow and
subordinates the rights of our stockholders to the rights of creditors of our subsidiaries in the
event of an insolvency or liquidation of any of our subsidiaries.
  We will incur significant increased costs as a result of having to comply with the Exchange Act and
the Sarbanes-Oxley Act and maintaining listing on the ASX, and as a result of the
increasing complexity of our business as we grow and execute our strategies.
   39




---



##### Table of Contents



We have never paid a dividend and we do not intend to pay dividends in the foreseeable future which
means that stockholders may not receive any return on their investment from dividends.
  Resale of our common stock may be difficult because there is not an active trading market for
our shares in the United States, and it is possible that no market in the United States will
develop. This may reduce or limit the potential value of our shares.
  Item 1B.
    
    Unresolved Staff Comments
  
 Item 2.
    
    Properties
   
 Item 3.
    
    Legal proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders
  40




---



##### Table of Contents



PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
  Denominated in Australian
    
    Denominated inDollars
    
    United States Dollars (1)High
    
    Low
    
    High
    
    LowYear Ended June 30, 2009Qtr 1: 09/30/2008
    
    $
    9.78
    
    
    $
    5.51
    
    
    $
    8.54
    
    
    $
    4.81Qtr 2: 12/31/2008
    
    $
    6.32
    
    
    $
    3.76
    
    
    $
    5.52
    
    
    $
    3.28Qtr 3: 03/31/2009
    
    $
    8.90
    
    
    $
    4.65
    
    
    $
    7.77
    
    
    $
    4.06Qtr 4: 06/30/2009
    
    $
    11.40
    
    
    $
    7.90
    
    
    $
    9.95
    
    
    $
    6.90Year Ended June 30, 2008Qtr 1: 09/30/2007
    
    $
    16.95
    
    
    $
    12.71
    
    
    $
    14.80
    
    
    $
    11.09Qtr 2: 12/31/2007
    
    $
    16.92
    
    
    $
    12.65
    
    
    $
    14.77
    
    
    $
    11.04Qtr 3: 03/31/2008
    
    $
    15.59
    
    
    $
    9.06
    
    
    $
    13.61
    
    
    $
    7.91Qtr 4: 06/30/2008
    
    $
    10.19
    
    
    $
    6.98
    
    
    $
    8.89
    
    
    $
    6.09
 
 (1)
    
    The prices of our common stock, denominated in United States dollars, is
calculated by using the exchange rate as of the close of business on September 21, 2009 of A$1.00
to US$0.8729.  Dividends
   Unregistered Sales of Equity Securities and Use of Proceeds
   41




---



##### Table of Contents



Issuer Purchases of Equity Securities
  
 Item 6.
    
    Selected Financial Data
  42




---



##### Table of Contents



Period frominceptionYears ended June 30,
    
    
    to June2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    30, 2009(Amounts in thousands, except for per share amounts)Consolidated Statements of Operations Data:Revenues
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    5,610
    
    
    $
    5,771Cost of operationsResearch and
development
    
    
    27,197
    
    
    
    19,579
    
    
    
    18,238
    
    
    
    9,265
    
    
    
    7,163
    
    
    
    93,054Sales, general and
administrative
    
    
    16,093
    
    
    
    8,089
    
    
    
    4,112
    
    
    
    2,070
    
    
    
    1,657
    
    
    
    35,953Loss from operations
    
    
    (43,290
    )
    
    
    (27,668
    )
    
    
    (22,350
    )
    
    
    (11,335
    )
    
    
    (3,210
    )
    
    
    (123,236
    )Other income (expenses)
    
    
    (576
    )
    
    
    1,733
    
    
    
    1,787
    
    
    
    995
    
    
    
    472
    
    
    
    7,328Net loss before income tax expense
    
    
    (43,866
    )
    
    
    (25,935
    )
    
    
    (20,563
    )
    
    
    (10,340
    )
    
    
    (2,738
    )
    
    
    (115,908
    )Income tax expense
    
    
    (2
    )
    
    
    (21
    )
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (23
    )Net loss
    
    $
    (43,868
    )
    
    $
    (25,956
    )
    
    $
    (20,563
    )
    
    $
    (10,340
    )
    
    $
    (2,738
    )
    
    $
    (115,931
    )Net loss per share(1)Basic and diluted
    
    $
    (3.22
    )
    
    $
    (2.57
    )
    
    $
    (2.31
    )
    
    $
    (1.74
    )
    
    $
    (0.62
    )Shares used to compute net loss
per shareBasic and diluted
    
    
    13,645
    
    
    
    10,097
    
    
    
    8,902
    
    
    
    5,946
    
    
    
    4,388
 
 (1)
    
    Please see Note 1 to our consolidated financial statements for an explanation of the
method used to calculate basic and diluted net loss per share of common stock. Years ended June 30,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Amounts in thousands, except for per share amounts)Balance sheet data:Cash and cash equivalents
    
    $
    17,751
    
    
    $
    25,231
    
    
    $
    20,246
    
    
    $
    16,840
    
    
    $
    6,244Working capital
    
    
    2,478
    
    
    
    21,530
    
    
    
    17,211
    
    
    
    14,781
    
    
    
    5,102Total assets
    
    
    23,364
    
    
    
    35,969
    
    
    
    24,088
    
    
    
    25,314
    
    
    
    7,777Non-current liabilities
    
    
    4,048
    
    
    
    9,336
    
    
    
    102
    
    
    
    62
    
    
    
    0Stockholders equity
    
    
    1,858
    
    
    
    16,215
    
    
    
    19,737
    
    
    
    16,385
    
    
    
    6,506
 43




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   
    
    our inability to complete our ongoing and planned clinical trials in a timely
manner;
    
    the results of our clinical trials may not effectively demonstrate the safety and
efficacy of our product candidates;
    
    the data from our clinical trials may not support an NDA;
    
    the FDA may disagree with the results of our clinical trials; or
    
    the FDA may change its approval policies and procedures.
   44




---



##### Table of Contents



Fiscal Year
  Critical Accounting Estimates and Judgments
   Revenue Recognition
 Revenue Recognition Revenue Arrangements with Multiple Deliverables
  Government Grant Income
   45




---



##### Table of Contents



Stock-Based Compensation
 Accounting for Stock
Based Compensation (revised 2004)
  Accounting for Equity Instruments that are issued to Other than Employees
for Acquiring, or in Connection with Selling Goods or Services
 Income Tax
 Accounting for
Income Taxes
 46




---



##### Table of Contents



Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109
 Financial Overview
 Revenue
  Research and Development Expenses
  Sales, General and Administrative
  Other Income (Expense)
   47




---



##### Table of Contents



Income Taxes
   Results of Operations
 Comparison of Years Ended June 30, 2009 and 2008
 Revenue.
 Research and Development Expenses.
  Sales, General and Administrative Expenses.
 Other Income (Expense).
 48




---



##### Table of Contents



Comparison of Years Ended June 30, 2008 and 2007
 Revenue.
 Research and Development Expenses.
  General and Administrative Expenses.
  Other Income (Expense).
 Liquidity and Capital Resources
    49




---



##### Table of Contents



50




---



##### Table of Contents




    
    whether the merger with LEO is completed;
    
    the scope, results, rate of progress, timing and costs of preclinical studies and
clinical trials and other development activities;
    
    the costs and timing of seeking and obtaining regulatory approvals;
    
    the costs of filing, prosecuting, defending and enforcing any patent claims and
other intellectual property rights;
    
    the costs of developing our sales and marketing capabilities and establishing
distribution capabilities;
    
    the costs of securing coverage, payment and reimbursement of our product
candidates, if any of our product candidates receive regulatory approval;
    
    the effects of competing clinical, technological and market developments; and
    
    the terms, timing and cash requirements of any future acquisitions, collaborative
arrangements, licensing of product candidates or investing in businesses, product
candidates and technologies.
  Contractual Obligations and Commitments
  Payments Due By PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanContractual Obligations
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 Years(in thousands)Long-term debt
obligations
(1)
    
    $
    8,627,554
    
    
    $
    5,629,087
    
    
    $
    2,998,467
    
    
    $
    
    
    
    $
    Research and development
expenditure
(2)
    
    
    9,125,312
    
    
    
    9,078,403
    
    
    
    46,909
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    3,843,464
    
    
    
    668,483
    
    
    
    1,526,888
    
    
    
    843,122
    
    
    
    804,971Interest obligations on
long-term debt
    
    
    1,268,089
    
    
    
    862,400
    
    
    
    405,689
    
    
    
    
    
    
    
    Sales, general and
administration
    
    
    129,223
    
    
    
    81,155
    
    
    
    48,068
    
    
    
    
    
    
    
    Total
    
    $
    22,993,642
    
    
    $
    16,319,528
    
    
    $
    5,026,021
    
    
    $
    843,122
    
    
    $
    804,971
 51




---



##### Table of Contents



(1)
    
    Represents the GE Loan Agreement.(2)
    
    Represents commitments under clinical trial agreements, preclinical
research studies and development obligations.  Off Balance Sheet Arrangements
  Related Party Transactions
  Recently Issued Accounting Standards
 Fair Value Measurements Effective Date of FASB Statement no. 157,
 Subsequent Events
 52




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    Foreign Currency Translation
 
 Item 8. Financial Statements and Supplementary Data
  53




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Report of Independent Registered Public Accountant
       
 54




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED BALANCE SHEETS
 June 30,2009
    
    
    2008Assets:Current assets:Cash and cash equivalents
    
    $
    17,751,089
    
    
    $
    25,230,533Grant income receivable
    
    
    179,300
    
    
    
    169,776Interest receivable
    
    
    45,692
    
    
    
    131,443Prepaid expenses
    
    
    764,484
    
    
    
    778,923Deferred costs
    
    
    
    
    
    
    4,655,836Lease deposits
    
    
    332,157
    
    
    
    Other current assets
    
    
    863,099
    
    
    
    982,400Total current assets
    
    
    19,935,821
    
    
    
    31,948,911Non-current assets:Restricted cash
    
    
    352,891
    
    
    
    390,698Lease deposits
    
    
    328,646
    
    
    
    176,170Plant and equipment  net
    
    
    2,683,077
    
    
    
    2,824,111Other non-current assets
    
    
    63,072
    
    
    
    629,206Total non-current assets
    
    
    3,427,686
    
    
    
    4,020,185Total assets
    
    $
    23,363,507
    
    
    $
    35,969,096Liabilities and stockholders equity:Current liabilities:Trade accounts payable
    
    $
    3,405,613
    
    
    $
    1,282,542Accrued research and development
    
    
    6,394,929
    
    
    
    2,024,704Accrued employee benefits and payroll taxes
    
    
    1,025,952
    
    
    
    779,621Notes payable
    
    
    5,629,087
    
    
    
    5,163,171Deferred lease incentive
    
    
    46,387
    
    
    
    Other accrued expenses
    
    
    955,993
    
    
    
    1,168,397Total current liabilities
    
    
    17,457,961
    
    
    
    10,418,435Non-current liabilities:Accrued employee benefits and payroll taxes
    
    
    75,478
    
    
    
    48,491Asset retirement obligation
    
    
    102,946
    
    
    
    74,504Notes payable
    
    
    2,998,467
    
    
    
    8,612,934Deferred lease incentive
    
    
    270,822
    
    
    
    Debt completion fee payable
    
    
    600,000
    
    
    
    600,000Total liabilities
    
    
    21,505,674
    
    
    
    19,754,364Commitment and contingencies (Note 9)Stockholders equity:Preferred stock, $0.001 par value: 10,000,000
shares authorized, no shares issued and
outstanding at June 30, 2009 and 2008,
respectively
    
    
    
    
    
    
    Common stock, $0.001 par value: 100,000,000
shares authorized; 15,371,121 and 10,341,484
issued and outstanding at June 30, 2009 and
2008, respectively
    
    
    108,159,574
    
    
    
    80,744,288Class B Common stock, $0.001 par value: 1 share
authorized, no shares issued and outstanding at
June 30, 2009 and 2008, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    2,812,200
    
    
    
    Deficit accumulated during development stage
    
    
    (115,930,501
    )
    
    
    (72,062,843
    )Accumulated other comprehensive income
    
    
    6,816,560
    
    
    
    7,533,287Total stockholders equity
    
    
    1,857,833
    
    
    
    16,214,732Total liabilities and stockholders equity
    
    $
    23,363,507
    
    
    $
    35,969,096
  55




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENTS OF OPERATIONS
 For the periodfrom inception(December 7,Years Ended June 30,
    
    
    1999) to June2009
    
    
    2008
    
    
    2007
    
    
    30, 2009License fee revenues
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    5,770,510Cost of operations:Research and development
    
    
    27,196,902
    
    
    
    19,578,667
    
    
    
    18,237,691
    
    
    
    93,053,421Sales, general and administrative
    
    
    16,092,777
    
    
    
    8,088,970
    
    
    
    4,112,192
    
    
    
    35,953,183Total cost of operations
    
    
    43,289,679
    
    
    
    27,667,637
    
    
    
    22,349,883
    
    
    
    129,006,604Loss from operations
    
    
    (43,289,679
    )
    
    
    (27,667,637
    )
    
    
    (22,349,883
    )
    
    
    (123,236,094
    )Other income (expenses):Interest income
    
    
    583,909
    
    
    
    1,540,748
    
    
    
    1,537,676
    
    
    
    5,168,939Interest expense
    
    
    (1,762,606
    )
    
    
    (1,219,221
    )
    
    
    
    
    
    
    (3,001,961
    )Grant income
    
    
    586,660
    
    
    
    1,369,013
    
    
    
    238,404
    
    
    
    4,905,795Other income
    
    
    15,792
    
    
    
    41,435
    
    
    
    10,446
    
    
    
    255,140Total other income (expenses)
    
    
    (576,245
    )
    
    
    1,731,975
    
    
    
    1,786,526
    
    
    
    7,327,913Net loss before income tax expense
    
    
    (43,865,924
    )
    
    
    (25,935,662
    )
    
    
    (20,563,357
    )
    
    
    (115,908,181
    )Income tax expense
    
    
    (1,734
    )
    
    
    (20,586
    )
    
    
    
    
    
    
    (22,320
    )Net loss
    
    $
    (43,867,658
    )
    
    $
    (25,956,248
    )
    
    $
    (20,563,357
    )
    
    $
    (115,930,501
    )Net loss per share  basic and
diluted
    
    $
    (3.22
    )
    
    $
    (2.57
    )
    
    $
    (2.31
    )Weighted average common stock
outstanding used in calculation
of net loss per share  basic
and diluted
    
    
    13,644,826
    
    
    
    10,096,957
    
    
    
    8,902,396
  56




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Totalshares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    other
    
    
    stockholderscommon
    
    
    
    
    
    
    paid-in
    
    
    Accumulated
    
    
    comprehensive
    
    
    equitystock
    
    
    Amount
    
    
    capital
    
    
    Deficit
    
    
    income (loss)
    
    
    (deficit)Balance at inception (December 7, 1999)Issuance of common stock in exchange for
the net assets of the Peplin Unit Trust on
December 10, 1999
    
    
    117,672
    
    
    $
    314,644
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    314,644Issuance of common stock at $27.60 per
share on December 10, 1999, net of share
issue costs
    
    
    39,329
    
    
    
    1,085,233
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,085,233Buy-back and cancellation of common stock
at $22.60 per share on December 10, 1999
    
    
    (53,000
    )
    
    
    (1,199,484
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,199,484
    )Issuance of common stock at $23.40 per
share on January 15, 2000, net of share
issue costs
    
    
    10,414
    
    
    
    232,355
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    232,355Share split (1 for 15.732 shares) on June
30, 2000
    
    
    1,685,586
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Fair value of stock options issued to
directors & employees during 2000
(post-split date)
    
    
    
    
    
    
    57,504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57,504Issuance of common stock at $4.40 per share
on September 18, 2000, net of share issue
costs
    
    
    875,000
    
    
    
    3,455,591
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,455,591Fair value of stock options issued to
directors and employees during 2001 and the
expense related to options issued in prior
years
    
    
    
    
    
    
    36,220
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,220Fair value of stock options issued to
non-employees during 2001
    
    
    
    
    
    
    120,552
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,552Issuance of common stock for services
rendered at $9.20 per share on November 5,
2001, net of share issue costs
    
    
    7,500
    
    
    
    69,059
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69,059Share options exercised on October 17, 2001
    
    
    1,500
    
    
    
    6,167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,167Share options exercised on November 14, 2001
    
    
    7,500
    
    
    
    31,116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,116
 57




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Totalshares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    other
    
    
    stockholderscommon
    
    
    
    
    
    
    paid-in
    
    
    Accumulated
    
    
    comprehensive
    
    
    equitystock
    
    
    Amount
    
    
    capital
    
    
    Deficit
    
    
    income (loss)
    
    
    (deficit)Share options exercised on March 18, 2002
    
    
    500
    
    
    
    2,098
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,098Fair value of stock options issued to
directors & employees during 2002 and the
expense related to options issued in prior
years
    
    
    
    
    
    
    100,887
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,887Fair value adjustment of stock options issued
to non-employees in 2001
    
    
    
    
    
    
    (25,729
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,729
    )Fair value of stock options issued for
services rendered during 2002
    
    
    
    
    
    
    6,204
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,204Issuance of common stock at $6.80 per share
on September 4, 2002, net of share issue
costs
    
    
    336,500
    
    
    
    2,264,071
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,264,071Issuance of common stock at $9.40 per share
on June 10, 2003, net of share issue costs
    
    
    250,000
    
    
    
    2,178,856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,178,856Share options exercised on August 7, 2002
    
    
    1,250
    
    
    
    5,363
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,363Share options exercised on August 12, 2002
    
    
    500
    
    
    
    2,157
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,157Fair value of stock options issued to
directors & employees during 2003 and the
expense related to options issued in prior
years
    
    
    
    
    
    
    74,606
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    74,606Fair value of stock options issued for
services rendered during 2003
    
    
    
    
    
    
    99,135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,135Issuance of common stock at $12.40 per share
on October 9, 2003, net of share issue costs
    
    
    50,000
    
    
    
    605,440
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    605,440Issuance of common stock at $12.40 per share
on October 24, 2003, net of share issue costs
    
    
    275,000
    
    
    
    3,189,935
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,189,935Issuance of common stock and options in
exchange for patents and intellectual
property at $14.60 per share on November 20,
2003
    
    
    10,000
    
    
    
    146,010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,010
 58




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Totalshares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    other
    
    
    stockholderscommon
    
    
    
    
    
    
    paid-in
    
    
    Accumulated
    
    
    comprehensive
    
    
    equitystock
    
    
    Amount
    
    
    capital
    
    
    Deficit
    
    
    income (loss)
    
    
    (deficit)Issuance of common stock at $12.40
per share on November 21, 2003, net of
share issue costs
    
    
    13,152
    
    
    
    167,305
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167,305Share options exercised on October 14,
2003
    
    
    7,500
    
    
    
    41,334
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,334Share options exercised on May 20, 2004
    
    
    5,000
    
    
    
    27,720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,720Share options exercised on June 25, 2004
    
    
    375
    
    
    
    2,097
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,097Fair value of stock options issued to
directors & employees during 2004 and
the expense related to options issued
in prior years
    
    
    
    
    
    
    418,442
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    418,442Fair value of stock options issued in
exchange for patents and intellectual
property during 2004
    
    
    
    
    
    
    31,287
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,287Share options exercised on September
16, 2004
    
    
    2,875
    
    
    
    16,072
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,072Issuance of common stock at $6.40 per
share on December 14, 2004, net of
share issue costs
    
    
    1,214,719
    
    
    
    7,192,954
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,192,954Issuance of common stock for services
rendered at $6.80 per share on April
15, 2005
    
    
    4,340
    
    
    
    29,242
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29,242Fair value of stock options issued to
directors & employees and the expense
related to options issued in prior
years
    
    
    
    
    
    
    240,928
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240,928Issuance of common stock at $5.40 per
share on August 4, 2005, net of share
issue costs
    
    
    571,429
    
    
    
    2,931,871
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,931,871Issuance of common stock for services
rendered at $5.00 per share on August
4, 2005
    
    
    10,787
    
    
    
    53,780
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,780Issuance of common stock at $5.40 per
share on September 5, 2005, net of
share issue costs
    
    
    206,777
    
    
    
    1,087,496
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,087,496
 59




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Totalshares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    other
    
    
    stockholderscommon
    
    
    
    
    
    
    paid-in
    
    
    Accumulated
    
    
    comprehensive
    
    
    equitystock
    
    
    Amount
    
    
    capital
    
    
    Deficit
    
    
    income (loss)
    
    
    (deficit)Issuance of common stock at $10.20 per
share on December 20, 2005, net of share
issue costs
    
    
    715,000
    
    
    
    6,886,824
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,886,824Issuance of common stock and warrants at
$10.40 per share on June 26, 2006, net of
share issue costs
    
    
    932,875
    
    
    
    8,795,320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,795,320Issuance of common stock at $10.60 per
share on June 30, 2006, net of share issue
costs
    
    
    9,250
    
    
    
    97,501
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97,501Share options exercised on April 11, 2006
    
    
    4,117
    
    
    
    32,343
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,343Fair value of stock options issued to
directors & employees and the expense
related to options issue in prior years
    
    
    
    
    
    
    351,186
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    351,186Cumulative translation adjustment (from
inception to date)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    666,408
    
    
    
    666,408Cumulative net loss (from inception to date)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,543,238
    )
    
    
    
    
    
    
    (25,543,238
    )Balance  June 30, 2006
    
    
    7,313,447
    
    
    $
    41,261,692
    
    
    $
    
    
    
    $
    (25,543,238
    )
    
    $
    666,408
    
    
    $
    16,384,862Other comprehensive loss:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,658,187
    
    
    
    3,658,187Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,563,357
    )
    
    
    
    
    
    
    (20,563,357
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,905,170
    )Issuance of common stock and warrants at
$10.40 per share on July 3, 2006, net of
share issue costs
    
    
    980,515
    
    
    
    9,676,197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,676,197Issuance of common stock and warrants at
$10.40 per share on November 1, 2006, net
of share issue costs
    
    
    933,171
    
    
    
    9,212,511
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,212,511Issuance of common stock for services
rendered at $11.60 per share on May 23,
2007
    
    
    2,500
    
    
    
    35,046
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    35,046Share options exercised on May 28, 2007
    
    
    43
    
    
    
    603
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    603
 60




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Totalshares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    other
    
    
    stockholderscommon
    
    
    
    
    
    
    paid-in
    
    
    Accumulated
    
    
    comprehensive
    
    
    equitystock
    
    
    Amount
    
    
    capital
    
    
    Deficit
    
    
    income (loss)
    
    
    (deficit)Fair value of stock options issued
for services rendered during 2007
    
    
    
    
    
    
    18,567
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,567Fair value of stock options issued to
directors & employees and the expense
related to options issued in prior years
    
    
    
    
    
    
    1,314,513
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,314,513Balance  June 30, 2007
    
    
    9,229,676
    
    
    $
    61,519,129
    
    
    $
    
    
    
    $
    (46,106,595
    )
    
    $
    4,324,595
    
    
    $
    19,737,129Other comprehensive loss:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,208,692
    
    
    
    3,208,692Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (25,956,248
    )
    
    
    
    
    
    
    (25,956,248
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,747,556
    )Share options exercised on July 25, 2007
    
    
    515
    
    
    
    7,633
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,633Share options exercised on August 8, 2007
    
    
    15
    
    
    
    217
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    217Share options exercised on September 9,
2007
    
    
    167
    
    
    
    1,896
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,896Issuance of common stock at $15.00 per
share on September 11, 2007, net of
share issue costs
    
    
    762,722
    
    
    
    11,082,931
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,082,931Issuance of common stock at $16.20 per
share on October 5, 2007, net of share
issue costs
    
    
    348,389
    
    
    
    5,475,757
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,475,757Fair value of stock options issued on
completion of loan facility
    
    
    
    
    
    
    452,986
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    452,986Fair value of stock options issued for
services rendered during 2008
    
    
    
    
    
    
    6,727
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,727Fair value of stock options issued to
directors & employees and the expense
related to options issued in prior years
    
    
    
    
    
    
    2,197,012
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,197,012Balance  June 30, 2008
    
    
    10,341,484
    
    
    $
    80,744,288
    
    
    
    
    
    
    $
    (72,062,843
    )
    
    $
    7,533,287
    
    
    $
    16,214,732
 61




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 Number of
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Totalshares of
    
    
    
    
    
    
    Additional
    
    
    
    
    
    
    other
    
    
    stockholderscommon
    
    
    
    
    
    
    paid-in
    
    
    Accumulated
    
    
    comprehensive
    
    
    equitystock
    
    
    Amount
    
    
    capital
    
    
    Deficit
    
    
    income (loss)
    
    
    (deficit)Other comprehensive loss:Translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (716,727
    )
    
    
    (716,727
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,867,658
    )
    
    
    
    
    
    
    (43,867,658
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (44,584,385
    )Issuance of non-vested shares on
October 6, 2008
    
    
    225,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock on acquisition
of Neosil, Inc. on October 16, 2008
    
    
    819,378
    
    
    
    3,831,985
    
    
    
    2,812,200
    
    
    
    
    
    
    
    
    
    
    
    6,644,185Issuance of common stock and warrants
at $6.05 per share on October 23, 2008,
net of share issue costs
    
    
    3,980,259
    
    
    
    20,948,574
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,948,574Share options exercised on June 15, 2009
    
    
    5,000
    
    
    
    32,869
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,869Fair value of stock options issued for
services rendered during 2009
    
    
    
    
    
    
    105,661
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,661Fair value of stock options and
restricted common stock issued to
directors & employees and the expense
related to options issued in prior
years
    
    
    
    
    
    
    2,496,197
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,496,197Balance  June 30, 2009
    
    
    15,371,121
    
    
    $
    108,159,574
    
    
    $
    2,812,200
    
    
    $
    (115,930,501
    )
    
    $
    6,816,560
    
    
    $
    1,857,833
  62




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the periodfrom inception(December 7,Years Ended June 30,
    
    
    1999) to June2009
    
    
    2008
    
    
    2007
    
    
    30, 2009Operating activities:Net loss
    
    $
    (43,867,658
    )
    
    $
    (25,956,248
    )
    
    $
    (20,563,357
    )
    
    $
    (115,930,501
    )Non-cash items:Depreciation, amortization and
accretion
    
    
    607,697
    
    
    
    525,274
    
    
    
    304,385
    
    
    
    1,752,551Amortization of borrowing costs
    
    
    776,197
    
    
    
    579,745
    
    
    
    
    
    
    
    1,355,941Loss on sale of plant and equipment
    
    
    87,605
    
    
    
    160
    
    
    
    83,574
    
    
    
    176,458Stock-based compensation
    
    
    2,601,858
    
    
    
    2,203,739
    
    
    
    1,333,080
    
    
    
    7,650,138Net
unrealized (gain) loss on foreign exchange
    
    
    3,909,382
    
    
    
    (462,579
    )
    
    
    750,595
    
    
    
    3,698,724Neosil acquisition costs
    
    
    468,527
    
    
    
    
    
    
    
    
    
    
    
    468,527Impairment of patents
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    354,589Interest paid reclassified as
financing cash flow
    
    
    975,075
    
    
    
    611,091
    
    
    
    
    
    
    
    1,586,166Changes in operating assets and
liabilities:Receivables and other assets
    
    
    1,252
    
    
    
    (4,086,121
    )
    
    
    521,228
    
    
    
    (4,035,769
    )Prepaid expenses
    
    
    14,439
    
    
    
    (34,398
    )
    
    
    (960,752
    )
    
    
    (1,019,233
    )Lease deposits
    
    
    (457,316
    )
    
    
    (17,821
    )
    
    
    (162,193
    )
    
    
    (638,357
    )Payables and other accruals
    
    
    6,254,534
    
    
    
    182,289
    
    
    
    1,058,882
    
    
    
    9,830,896Accrued employee benefits
    
    
    272,363
    
    
    
    188,289
    
    
    
    105,463
    
    
    
    624,220Deferred license fee income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (467,185
    )Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    115,950Net cash used in operating activities
    
    
    (28,356,045
    )
    
    
    (26,266,580
    )
    
    
    (17,529,095
    )
    
    
    (94,476,885
    )Investing activities:Proceeds from sale of plant and
equipment
    
    
    889
    
    
    
    8,543
    
    
    
    144
    
    
    
    41,328Purchase of plant and equipment
    
    
    (898,132
    )
    
    
    (845,742
    )
    
    
    (685,930
    )
    
    
    (4,154,373
    )Cash received on acquisition of Neosil
    
    
    4,389,740
    
    
    
    
    
    
    
    
    
    
    
    4,389,740Payments for short term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,988,967
    )Proceeds from short term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,988,967Proceeds on maturity of
available-for-sale securities
    
    
    2,220,989
    
    
    
    
    
    
    
    
    
    
    
    2,220,989Payments for intangible assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (205,321
    )Net cash provided by/(used in)
investing activities
    
    
    5,713,486
    
    
    
    (837,199
    )
    
    
    (685,786
    )
    
    
    2,292,363
 63




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For theperiod frominception(December7, 1999) toYears Ended June 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2007
    
    
    2009Financing activities:Proceeds from share issues
    
    
    24,067,380
    
    
    
    17,051,445
    
    
    
    20,344,088
    
    
    
    104,458,294Proceeds from exercise of options
    
    
    32,869
    
    
    
    9,746
    
    
    
    603
    
    
    
    209,685Share issue costs
    
    
    
    
    
    
    (547,764
    )
    
    
    (1,402,396
    )
    
    
    (4,774,188
    )Restricted cash
    
    
    
    
    
    
    (34,376
    )
    
    
    (173,825
    )
    
    
    (318,462
    )Payments for shares repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,199,484
    )Proceeds from cancellation of
shares due to reorganization
    
    
    
    
    
    
    77,895
    
    
    
    
    
    
    
    77,895Payment for cancellation of
shares due to reorganization
    
    
    (20,362
    )
    
    
    (57,533
    )
    
    
    
    
    
    
    (77,895
    )Proceeds from borrowings
    
    
    
    
    
    
    15,000,000
    
    
    
    
    
    
    
    15,193,968Borrowing costs paid
    
    
    (999,273
    )
    
    
    (1,575,734
    )
    
    
    
    
    
    
    (2,575,006
    )Repayment on borrowings
    
    
    (5,148,551
    )
    
    
    (1,164,632
    )
    
    
    
    
    
    
    (6,582,401
    )Net cash provided by financing
activities
    
    
    17,932,063
    
    
    
    28,759,047
    
    
    
    18,768,470
    
    
    
    104,412,406Effect of exchange rate on cash
and cash equivalents
    
    
    (2,768,948
    )
    
    
    3,329,305
    
    
    
    2,852,377
    
    
    
    5,523,202Net increase (decrease) in cash
and cash equivalents
    
    
    (7,479,444
    )
    
    
    4,984,573
    
    
    
    3,405,966
    
    
    
    17,751,089Cash and cash equivalents at
beginning of year
    
    
    25,230,533
    
    
    
    20,245,960
    
    
    
    16,839,994
    
    
    
    Cash and cash equivalents at end
of year
    
    $
    17,751,089
    
    
    $
    25,230,533
    
    
    $
    20,245,960
    
    
    $
    17,751,089Supplemental non-cash activities:Issue of shares in exchange
for the net assets of the
Peplin Unit Trust
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    314,644Issuance of shares in
exchange for the assets of
Neosil, Inc.
    
    
    6,644,185
    
    
    
    
    
    
    
    
    
    
    
    6,644,185Acquisition of plant and
equipment by means of
capital leases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,964Issuance of options on
completion of loan facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    452,986Issuances of common stock
and options for services
    
    
    105,661
    
    
    
    6,727
    
    
    
    54,234Acquisition of patents and
intellectual property by way
of issuance of common stock
and options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,010Supplemental cash activities:Income tax paid
    
    
    1,734
    
    
    
    20,586
    
    
    
    
    
    
    
    22,320
  64




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Note 1: Summary of significant accounting policies
 Organization and nature of operations
    Basis of presentation
 Accounting and Reporting by Development Stage Enterprises
 Liquidity and capital resources
 Subsequent Events
  65




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
  Translation of foreign currencies
 Foreign Currency Translation,
 Principles of consolidation
  Cash and cash equivalents
  Restricted cash
  Deferred costs
  Plant and equipment
   Estimateduseful lifeAsset
    
    (Years)Plant and equipment
    
    
    2-10Leasehold improvements
    
    
    5-10Office equipment
    
    
    2-10Computer software
    
    
    2-3
 66




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Impairment of long lived assets
 Accounting for the Impairment or Disposal of
Long-Lived Assets,
 Revenue recognition  license fees
 Revenue Recognition Revenue Arrangements with Multiple Deliverables
  Government grant income
    67




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Interest income
  Research and development expenditure
  Patents
  Stock-based compensation
 Accounting for Stock
Based Compensation (revised 2004) Amending and Replacing a Portion of the Staffs Views About Valuing
Share-based Payments to Continue Acceptance, Under Certain Circumstances, of the Simplified Method
  Accounting for Equity Instruments that are issued to Other than Employees
for Acquiring, or in Connection with Selling Goods or Services
 Net loss per share
  68




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
  Foreign currency transactions
  Use of estimates
  Financial instruments
  Accruals for employee entitlements
  Asset retirement obligations
 Accounting for Asset Retirement Obligations
 Notes payable
  69




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Income taxes
 Accounting for
Income Taxes
 Accounting for Uncertainty
in Income Taxes, an interpretation of FASB Statement No. 109
 Leased assets
  Recent accounting policies
 Fair Value Measurements Effective Date of FASB Statement no. 157,
 Subsequent Events
 Note 2: Concentrations of credit risk, other risks and uncertainties
  70




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
    Note 3: Other assets
 June 30,2009
    
    
    2008Current assetsBorrowing
costs (refer to Note 8)
    
    $
    436,423
    
    
    $
    938,535Lease incentive receivable
    
    
    324,835
    
    
    
    Other
    
    
    101,841
    
    
    
    43,865$
    863,099
    
    
    $
    982,400Non-current assetsBorrowing
costs (refer to  Note 8)
    
    $
    63,072
    
    
    $
    629,206
 Note 4: Plant and equipment
 June 30,2009
    
    
    2008Plant and equipment
    
    $
    1,722,456
    
    
    $
    1,743,658Leasehold improvements
    
    
    1,559,064
    
    
    
    1,350,672Office equipment (including computer software)
    
    
    954,851
    
    
    
    894,721Plant and equipment, at cost
    
    
    4,236,371
    
    
    
    3,989,051Accumulated depreciation
    
    
    (1,553,294
    )
    
    
    (1,164,940
    )Plant and equipment, net
    
    $
    2,683,077
    
    
    $
    2,824,111
  Note 5: Income taxes
  71




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Years ended June 30,2009
    
    
    2008
    
    
    2007CurrentUS FederalUS State
    
    $
    1,734
    
    
    $
    20,586
    
    
    $
    Foreign
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    1,734
    
    
    
    20,586
    
    
    
    DeferredUS FederalUS State
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    Provision for taxes
    
    $
    1,734
    
    
    $
    20,586
    
    
    $
    
  Deferred income tax
 June 30,2009
    
    
    2008Deferred tax liabilitiesForeign currency balances
    
    $
    
    
    
    $
    (181,452
    )Depreciation
    
    
    (107,427
    )
    
    
    (194,334
    )Deferred transaction costs
    
    
    
    
    
    
    (290,740
    )Accrued income
    
    
    (66,717
    )
    
    
    (90,366
    )Gross deferred tax liabilities
    
    
    (174,144
    )
    
    
    (756,892
    )Deferred tax assetsBorrowing costs
    
    
    179,379
    
    
    $
    77,723Reorganization costs
    
    
    184,679
    
    
    
    292,124Sundry creditors and accruals
    
    
    5,011
    
    
    
    74,617Employee benefits
    
    
    361,414
    
    
    
    268,830Patent costs
    
    
    561,053
    
    
    
    596,594Tax effect of intercompany transaction
    
    
    11,562,450
    
    
    
    13,717,050Doubtful debts
    
    
    4,561
    
    
    
    5,411Asset retirement obligation
    
    
    7,537
    
    
    
    4,306Stock options
    
    
    539,331
    
    
    
    6,728Foreign currency balances
    
    
    187,422
    
    
    
    Share issue transaction costs
    
    
    367,995
    
    
    
    736,091Losses available for offset against future taxable income
    
    
    6,901,680
    
    
    
    8,249,798Deferred R&D costs
    
    
    3,942,331
    
    
    
    2,123,022Gross deferred tax assets
    
    
    26,745,810
    
    
    
    26,152,294Valuation allowance
    
    
    24,630,699
    
    
    
    (25,395,402
    )Deferred tax assets
    
    
    174,144
    
    
    
    756,892Net deferred tax assets
    
    $
    
    
    
    $
    The valuation allowance consists of:US
    
    $
    2,049,484
    
    
    $
    2,510,377Foreign
    
    
    22,581,215
    
    
    
    22,885,025$
    24,630,699
    
    
    $
    25,395,402
 72




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
      73




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
   Years ended June 30,2009
    
    
    2008
    
    
    2007Tax at the applicable rates (1)
    
    $
    (14,915,004
    )
    
    $
    (8,825,124
    )
    
    $
    (6,169,007
    )State income taxes, net of U.S. federal
tax benefit
    
    
    (843,110
    )
    
    
    (415,153
    )
    
    
    Jurisdiction tax rate adjustment
    
    
    1,197,009
    
    
    
    375,579
    
    
    
    Prior year true up:R&D concession
    
    
    240,816
    
    
    
    558,624
    
    
    
    (213,697
    )Other
    
    
    27,271
    
    
    
    147,094
    
    
    
    Permanent differences:Non-deductible items
    
    
    943,890
    
    
    
    831,666
    
    
    
    405,321Tax effect of eliminated intercompany
transactions
    
    
    6,740,329
    
    
    
    3,307,196
    
    
    
    10,380,995Provision for uncertainty of
realization of tax assets
    
    
    
    
    
    
    
    
    
    
    (11,293,481
    )Derecognition of uncertain tax losses
    
    
    3,872,763
    
    
    
    1,395,466
    
    
    
    Derecognition of Patents not relating
to know-how
    
    
    
    
    
    
    277,739
    
    
    
    R&D concessions
    
    
    
    
    
    
    (256,871
    )
    
    
    (443,200
    )Other deductible amounts
    
    
    (4,886
    )
    
    
    
    
    
    
    Non-assessable items
    
    
    
    
    
    
    (483,306
    )
    
    
    Net taxable loss
    
    
    (2,740,922
    )
    
    
    (3,087,090
    )
    
    
    (7,333,069
    )Valuation allowance
    
    
    2,742,656
    
    
    
    3,107,676
    
    
    
    7,333,069Tax expense
    
    $
    1,734
    
    
    $
    20,586
    
    
    $
    
 
 (1)
    
    Prior to June 30, 2008 the statutory tax rate was based on the Australian rate
of 30%. As of October 16, 2007 the Company became a US domestic company, therefore the June 30,
2008 and June 30, 2009 rate is the US federal rate of 34%.   AdditionsChargedBalance at
    
    
    Charged to
    
    
    to Other
    
    
    Balance atBeginning
    
    
    Costs and
    
    
    Accounts
    
    
    End ofDescription
    
    of Period
    
    
    Expenses
    
    
    (1)
    
    
    PeriodYear ended June 30, 2007Deferred income
tax valuation
allowance
    
    $
    9,497,202
    
    
    
    7,333,069
    
    
    
    2,400,300
    
    
    $
    19,230,571Year ended June 30, 2008Deferred income
tax valuation
allowance
    
    $
    19,230,571
    
    
    
    3,107,676
    
    
    
    3,057,155
    
    
    $
    25,395,402Year ended June 30, 2009Deferred income
tax valuation
allowance
    
    $
    25,395,402
    
    
    
    2,742,656
    
    
    
    (3,507,359
    )
    
    $
    24,630,699
 74




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 
 (1)
    
    Recognized through the balance sheet/(equity) as a result of share issue
costs, net of foreign exchange. Includes currency translation adjustment recognized as a component
of other comprehensive income.       Balance at July 1, 2007
    
    $
    1,395,466Increase in balance due to current year tax positions
    
    
    Balance at June 30, 2008
    
    $
    3,872,763Increase in balance due to current year tax positions
    
    
    1,931,796Increase in balance on acquisition of Neosil
    
    
    11,938,748Balance at June 30, 2009
    
    $
    17,206,977
  Note 6: Related party disclosures
  75




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
         Note 7: Asset retirement obligation
  76




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
   June 30,2009
    
    
    2008Asset retirement obligationsBalance at July 1
    
    $
    74,504
    
    
    $
    59,963Liabilities incurred during the period
    
    
    30,128
    
    
    
    Accretion expense
    
    
    6,117
    
    
    
    6,080Effect of foreign exchange translation
    
    
    (7,803
    )
    
    
    8,461Balance at June 30
    
    $
    102,946
    
    
    $
    74,504
 Note 8: Notes payable
 June 30,2009
    
    
    2008Current portion
    
    $
    5,629,087
    
    
    $
    5,163,171Non-current portion
    
    $
    2,998,467
    
    
    $
    8,612,934
    77




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
    Within one year
    
    $
    5,629,087More than one year but less than two years
    
    
    2,998,467Total
    
    $
    8,627,554
 Note 9: Commitments and contingencies
 (a) Research and development expenditure
  2010
    
    $
    9,078,4022011
    
    $
    46,909Total
    
    $
    9,125,312
  (b) Sales, general and administrative expenditure
  (c) Lease expenditure commitments
     78




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
    Years ended June 30,2009
    
    
    2008
    
    
    2007Rent expense
    
    $
    567,069
    
    
    $
    533,301
    
    
    $
    170,581
  2010
    
    $
    668,4832011
    
    $
    753,2542012
    
    $
    773,6342013
    
    $
    427,1942014
    
    $
    415,928Thereafter
    
    $
    804,971Total
    
    $
    3,843,464
 (d) Government research grants
  
    
    The Company fails to use its best endeavors to commercialize the relevant grant
project within a reasonable time of completion of the project; or
    
    Upon termination of a grant due to breach of agreement or insolvency.
  (e) Other
  79




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
    Note 10: Acquisition of Neosil
   Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a
Business
  At October16, 2008(in thousands)Cash
    
    $
    4,389Available-for-sale securities
    
    
    2,243Other receivables
    
    
    112Assumed liabilities
    
    
    (100
    )Total fair value of assets acquired, net of liabilities assumed
    
    $
    6,644
 80




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
   Note 11: Stockholders equity
 Issues of common stock
       Common stock
  81




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
   Preferred stock
  Note 12: Share-based payments
 Corporate reorganization
    Peplin, Inc. Incentive Award Plan
   
    
    At June 30, 2009 the aggregate number of shares of common stock that may be made
available for issuance under the plan is 2,500,000. This amount increased by 1,000,000
from 1,500,000 on October 6, 2008, when shareholders approved the increase at the Annual
General Meeting;
    
    The maximum number of shares of common stock with respect to one or more awards that
may be granted to any one employee, consultant or non-employee director during any
fiscal year shall not exceed the award limit of 500,000, as approved by the board of
directors on October 5, 2008;
    
    Awards that may be issued include options, restricted stock awards, restricted stock
unit awards, performance awards, dividend equivalents awards, deferred stock awards,
stock payment awards or stock appreciation rights;
 82




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 
    
    Optionholders shall not be, nor have any of the rights, dividends or other privileges
of, stockholders of the Company in respect of any shares purchasable upon the exercise
of any part of an option unless and until such shares have been issued by the Company to
such holders;
    
    Options are only exercisable or distributable while the holder is an employee,
consultant or non-employee director, as applicable;
    
    Options issued under the Incentive Plan will immediately lapse if an eligible
employee is lawfully terminated or resigns, and may be affected by the death, disability
or redundancy of an eligible employee;
    
    The terms of the option shall not be more than ten years from the date the option is
granted, and the exercise price is the closing share price as of the date of grant of
the options;
    
    The grant date represents the date where all terms are approved by the board of
directors;
    
    The measurement date represents the earlier of the date at which the commitment for
performance to earn the equity instruments was reached or the date at which the
counterpartys performance is complete;
    
    Options are issued under the Incentive Plan for no cash consideration, each
convertible into one share of common stock; and
    
    Upon exercise of options, shares of common stock will be issued out of authorized
common stock.
  No. options
    
    
    Fair valueOctober 31, 2007
    
    
    793,073
    
    
    $
    5,606,222November 23, 2007
    
    
    21,000
    
    
    
    161,341December 3, 2007
    
    
    166,590
    
    
    
    1,329,271January 16, 2008
    
    
    56,119
    
    
    
    433,578June 12, 2008
    
    
    13,000
    
    
    
    47,734October 6, 2008
    
    
    385,000
    
    
    
    1,378,381November 8, 2008
    
    
    219,000
    
    
    
    532,016December 24, 2008
    
    
    199,276
    
    
    
    595,251February 9, 2009
    
    
    30,000
    
    
    
    160,554June 5, 2009
    
    
    5,000
    
    
    
    36,1911,888,058
    
    
    $
    10,280,539
  WeightedNumber of
    
    
    average
    
    
    Weightedptions
    
    
    exercise
    
    
    average fairoutstanding
    
    
    price
    
    
    valueTotal options at June 30, 2007
    
    
    
    
    
    
    
    
    
    
    - granted
    
    
    1,049,782
    
    
    $
    14.46- forfeited
    
    
    (105,245
    )
    
    $
    14.05- expired
    
    
    
    
    
    
    - exercised
    
    
    
    
    
    
    Total options at June 30, 2008
    
    
    944,537
    
    
    $
    14.51
    
    
    $
    7.33- granted
    
    
    838,276
    
    
    $
    5.37- forfeited
    
    
    (148,518
    )
    
    $
    13.60- expired
    
    
    (245,757
    )
    
    $
    13.62- exercised
    
    
    (5,000
    )
    
    $
    6.57Total options at June 30, 2009
    
    
    1,383,538
    
    
    $
    8.94
    
    
    $
    4.70Options exercisable at June
30, 2009
    
    
    616,284
    
    
    $
    11.08
    
    
    $
    5.23Options exercisable at June
30, 2008
    
    
    482,906
    
    
    $
    14.81
    
    
    $
    6.59
 83




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
  Exercise
    
    Total cashExercise date
    
    No. options
    
    price
    
    receivedJune 15, 2009
    
    
    5,000
    
    
    $
    6.57
    
    
    $
    32,8695,000
  2007
    
    $
    02008
    
    $
    7.222009
    
    $
    3.22
  2007
    
    $
    02008
    
    $
    02009
    
    $
    16,948
  Options outstanding
    
    
    Options exercisableWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageRemaining
    
    
    
    
    
    
    RemainingWeighted Average
    
    
    
    
    
    Contractual
    
    
    
    
    
    
    ContractualExercise Price $
    
    Number
    
    
    Term
    
    
    Number
    
    
    Term18.54
    
    
    10,000
    
    
    
    0.24
    
    
    
    10,000
    
    
    
    0.248.16
    
    
    10,967
    
    
    
    0.50
    
    
    
    10,967
    
    
    
    0.5012.79
    
    
    9,300
    
    
    
    1.50
    
    
    
    9,300
    
    
    
    1.5015.58
    
    
    67,500
    
    
    
    1.98
    
    
    
    67,500
    
    
    
    1.9812.79
    
    
    25,000
    
    
    
    2.50
    
    
    
    25,000
    
    
    
    2.5012.98
    
    
    42,500
    
    
    
    2.11
    
    
    
    42,500
    
    
    
    2.1112.98
    
    
    13,000
    
    
    
    2.50
    
    
    
    13,000
    
    
    
    2.5015.95
    
    
    36,000
    
    
    
    2.50
    
    
    
    36,000
    
    
    
    2.5014.09
    
    
    11,500
    
    
    
    2.78
    
    
    
    7,667
    
    
    
    2.7812.98
    
    
    2,500
    
    
    
    2.90
    
    
    
    2,500
    
    
    
    2.9015.95
    
    
    500
    
    
    
    2.95
    
    
    
    334
    
    
    
    2.9515.95
    
    
    97,000
    
    
    
    2.95
    
    
    
    68,000
    
    
    
    2.9516.32
    
    
    17,000
    
    
    
    3.08
    
    
    
    5,668
    
    
    
    3.0816.13
    
    
    12,000
    
    
    
    3.25
    
    
    
    4,000
    
    
    
    3.2514.46
    
    
    15,000
    
    
    
    3.12
    
    
    
    5,000
    
    
    
    3.1213.10
    
    
    6,000
    
    
    
    8.40
    
    
    
    2,382
    
    
    
    8.4013.81
    
    
    137,215
    
    
    
    8.43
    
    
    
    51,764
    
    
    
    8.4313.27
    
    
    25,000
    
    
    
    8.55
    
    
    
    8,855
    
    
    
    8.557.37
    
    
    10,000
    
    
    
    8.95
    
    
    
    10,000
    
    
    
    8.956.24
    
    
    385,000
    
    
    
    9.27
    
    
    
    172,500
    
    
    
    9.273.86
    
    
    219,000
    
    
    
    9.39
    
    
    
    31,941
    
    
    
    9.394.81
    
    
    196,556
    
    
    
    9.49
    
    
    
    24,734
    
    
    
    9.498.03
    
    
    30,000
    
    
    
    9.62
    
    
    
    6,672
    
    
    
    9.6210.77
    
    
    5,000
    
    
    
    9.93
    
    
    
    0
    
    
    
    9.931,383,538
    
    
    
    
    
    
    
    616,284Aggregate Intrinsic
value
    
    $
    2,588,350
    
    
    
    
    
    
    $
    631,712
 84




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
  WeightedWeighted
    
    
    averageaverage
    
    
    remaininggrant date
    
    
    contractualNon-vested Options
    
    Number
    
    
    fair value
    
    
    periodNon-vested options at June 30,
2007
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    1,049,782
    
    
    $
    7.22Vested
    
    
    (521,481
    )
    
    $
    6.61Forfeited
    
    
    (66,670
    )
    
    $
    7.00Non-vested options at June 30,
2008
    
    
    461,631
    
    
    $
    7.74
    
    
    6.42 yearsGranted
    
    
    838,276Vested
    
    
    (408,126
    )Forfeited
    
    
    (124,527
    )Non-vested options at June 30,
2009
    
    
    767,254
    
    
    $
    4.14
    
    
    8.74 yearsWeighted average grant date
fair value of options vested:2009
    
    $
    4.512008
    
    $
    6.61Total unrecognized cost of
non-vested shares2009
    
    $
    1,526,3522008
    
    $
    1,884,262
  2008
    
    $
    1,536,3052009
    
    $
    1,841,143
 85




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Other share-based payment awards under the Incentive Plan
 Non-vested
shares
    Non-employee share-based payments
   Accounting for Equity
Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling
Goods or Services
  
    
    15,000 unvested options issued under the original employment agreement were forfeited
on resignation with $79,854 of previously recognized compensation expense reversed on
that date;
    
    33,334 vested options issued under the Incentive Plan were cancelled on resignation;
    
    16,666 unvested options issued under the Incentive Plan were forfeited on resignation
with $83,457 of previously recognized compensation expense reversed on that date;
    
    85,000 vested options issued under the original employment agreement were exercisable
for a period of 270 days from the resignation, being May 12, 2009, and expired on that
date;
    
    39,950 vested options issued under the Incentive Plan were exercisable through the
consulting period, with 5,000 being exercised and the remaining 34,950 options expiring
at the completion of the consulting period;
    
    39,725 options issued under the Incentive Plan continued to vest in accordance with
the original option term. 18,341 vested during the consulting period with $12,514 of
compensation expense being recognized in the statement of operations. The remaining
21,384 options that were
unvested at the completion of the consulting period resulted in $31,488 of previously
recognized compensation expense being reversed out of the statement of operations on that
date.
 86




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
     Peplin Limited Employee Share Option Plan
    No. options
    
    
    Fair valueDecember 12, 2006
    
    
    86,000
    
    
    $
    493,575June 12, 2007
    
    
    500
    
    
    
    3,11386,500
    
    
    $
    496,688
  Exercise
    
    ExerciseExercise date
    
    No. options
    
    price (AUD)
    
    price (USD)September 4, 2007
    
    
    167
    
    
    $
    13.80
    
    
    $
    11.35167
 87




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
  Number of
    
    Weighted
    
    Weightedoptions
    
    average
    
    averageoutstanding
    
    exercise price
    
    fair valueTotal options at June 30, 2006
    
    
    73,323
    
    
    $
    11.40
    
    
    $
    4.60- granted
    
    
    86,500
    
    
    $
    13.60- forfeited
    
    
    (1,750
    )
    
    $
    12.80- expired
    
    
    (27,500
    
    
    $
    14.80- exercised
    
    
    
    
    
    
    Total options at June 30, 2007
    
    
    130,573
    
    
    $
    13.60
    
    
    $
    5.60- granted
    
    
    - forfeited
    
    
    (333
    )
    
    $
    12.08- expired
    
    
    - exercised
    
    
    (167
    )
    
    $
    12.08- cancelled
    
    
    (130,073
    )
    
    $
    14.75
    
    
    $
    6.14Total options at June 30, 2008
    
    
    
    
    
    $
    
    
    
    $
    Options exercisable at June
30, 2008
    
    
    
    
    
    $
    
    
    
    $
    Options exercisable at June
30, 2007
    
    
    67,121
    
    
    $
    12.80
    
    
    $
    5.00
     Options outstanding
    
    
    Options exercisableWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageWeighted Average
    
    
    
    
    
    Remaining
    
    
    
    
    
    
    RemainingExercise Price $
    
    Number
    
    
    Contractual Term
    
    
    Number
    
    
    Contractual Term12.60
    
    
    3,000
    
    
    
    2.00
    
    
    
    2,500
    
    
    
    2.0017.00
    
    
    10,000
    
    
    
    2.24
    
    
    
    10,000
    
    
    
    2.247.40
    
    
    15,968
    
    
    
    2.50
    
    
    
    15,800
    
    
    
    2.5011.80
    
    
    15,855
    
    
    
    3.50
    
    
    
    10,404
    
    
    
    3.5011.80
    
    
    500
    
    
    
    4.50
    
    
    
    167
    
    
    
    4.5014.60
    
    
    84,750
    
    
    
    4.50
    
    
    
    28,250
    
    
    
    4.5014.60
    
    
    500
    
    
    
    4.97
    
    
    
    
    
    
    
    4.97130,573
    
    
    
    3.91
    
    
    
    67,121
    
    
    
    3.44Aggregate Intrinsic
value
    
    $
    26,259
    
    
    
    
    
    
    $
    25,836
 88




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
  Weighted averagegrant dateNon-vested Options
    
    Number
    
    fair valueNon-vested options at June
30, 2006
    
    
    17,803
    
    
    $
    4.40Granted
    
    
    86,500
    
    
    $
    5.80Vested
    
    
    (39,852
    )
    
    $
    5.00Forfeited
    
    
    (1,000
    )
    
    $
    9.60Non-vested options at June
30, 2007
    
    
    63,451
    
    
    $
    6.40Granted
    
    
    
    
    
    $
    Vested
    
    
    (500
    )
    
    $
    7.20Forfeited
    
    
    (333
    )
    
    $
    5.32Cancelled
    
    
    (62,618
    )
    
    $
    6.91Non-vested options at June
30, 2008
    
    
    
    
    
    $
    
 Other share-based payment options to employees and contractors
    No. options
    
    Fair valueOctober 12, 2006
    
    
    60,000
    
    
    
    267,211October 14, 2006
    
    
    135,500
    
    
    
    665,540February 13, 2007
    
    
    17,500
    
    
    
    107,958April 11, 2007
    
    
    101,500
    
    
    
    537,091May 23, 2007
    
    
    2,500
    
    
    
    15,566June 11, 2007
    
    
    97,000
    
    
    
    605,563July 31, 2007
    
    
    17,000
    
    
    
    116,552August 14, 2007
    
    
    30,000
    
    
    
    215,149September 30, 2007
    
    
    12,000
    
    
    
    79,842565,500
    
    
    $
    2,994,450
   89




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Number of
    
    Weighted
    
    Weightedoptions
    
    average
    
    averageoutstanding
    
    exercise price
    
    fair valueTotal options at June 30, 2006
    
    
    234,415
    
    
    $
    13.00
    
    
    $
    5.80- granted
    
    
    414,000
    
    
    $
    12.00- forfeited
    
    
    
    
    
    $
    - expired
    
    
    (26,915
    )
    
    $
    14.78- exercised
    
    
    
    
    
    $
    Total options at June 30, 2007
    
    
    621,500
    
    
    $
    13.60
    
    
    $
    6.00- granted
    
    
    59,000
    
    
    $
    14.47- forfeited
    
    
    (17,500
    )
    
    $
    14.53- expired
    
    
    
    
    
    $
    - exercised
    
    
    
    
    
    $
    - cancelled
    
    
    (663,000
    )
    
    $
    14.85
    
    
    $
    6.60Total options at June 30, 2008
    
    
    
    
    
    $
    
    
    
    $
    Options exercisable at June
30, 2008
    
    
    
    
    
    $
    
    
    
    $
    Options exercisable at June
30, 2007
    
    
    245,833
    
    
    $
    14.00
    
    
    $
    5.80
     Options outstanding
    
    
    Options exercisableWeighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageWeighted Average
    
    
    
    
    
    Remaining
    
    
    
    
    
    
    RemainingExercise Price $
    
    Number
    
    
    Contractual Term
    
    
    Number
    
    
    Contractual Term14.40
    
    
    15,000
    
    
    
    3.28
    
    
    
    15,000
    
    
    
    3.2817.00
    
    
    85,000
    
    
    
    3.28
    
    
    
    55,000
    
    
    
    3.2813.00
    
    
    15,000
    
    
    
    1.49
    
    
    
    15,000
    
    
    
    1.4914.20
    
    
    67,500
    
    
    
    3.98
    
    
    
    67,500
    
    
    
    3.9811.80
    
    
    25,000
    
    
    
    4.50
    
    
    
    8,333
    
    
    
    4.5011.80
    
    
    195,500
    
    
    
    4.31
    
    
    
    72,500
    
    
    
    4.3114.00
    
    
    17,500
    
    
    
    4.62
    
    
    
    
    
    
    
    13.00
    
    
    101,500
    
    
    
    4.76
    
    
    
    10,000
    
    
    
    4.7611.80
    
    
    2,500
    
    
    
    4.89
    
    
    
    2,500
    
    
    
    4.8914.60
    
    
    97,000
    
    
    
    4.97
    
    
    
    
    
    
    
    621,500
    
    
    
    4.24
    
    
    
    245,833
    
    
    
    3.78Aggregate Intrinsic
value
    
    $
    71,327
    
    
    
    
    
    
    $
    49,189
 90




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
  Weighted averagegrant dateNon-vested Options
    
    Number
    
    fair valueNon-vested options at June
30, 2006
    
    
    87,500
    
    
    $
    6.00Granted
    
    
    414,000
    
    
    $
    5.40Vested
    
    
    (125,833
    )
    
    $
    4.80Forfeited
    
    
    
    
    
    $
    Non-vested options at June
30, 2007
    
    
    375,667
    
    
    $
    6.20Granted
    
    
    59,000
    
    
    $
    7.15Vested
    
    
    (15,000
    )
    
    $
    9.46Forfeited
    
    
    (17,500
    )
    
    $
    6.39Cancelled
    
    
    (402,167
    )
    
    $
    6.66Non-vested options at June
30, 2008
    
    
    
    
    
    $
    
 Other information
   Years ended June 30,2009
    
    2008
    
    2007Risk free interest rate
    
    
    3.18
    %
    
    
    4.11
    %
    
    
    5.97
    %Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected term
    
    6.02 years
    
    3.34 years
    
    2.62 yearsExpected volatility
    
    
    65
    %
    
    
    61
    %
    
    
    52
    %Expected forfeiture
    
    
    11.78
    %
    
    
    2.67
    %
    
    
    1.17
    %
  91




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
   Years ended June 30,2009
    
    
    2008
    
    
    2007Research and development
    
    $
    971,858
    
    
    $
    1,447,729
    
    
    $
    553,078Sales, general and administration
    
    
    1,630,000
    
    
    
    756,010
    
    
    
    780,002Total
    
    $
    2,601,858
    
    
    $
    2,203,739
    
    
    $
    1,333,080
 Note 13: Segment disclosures
  June 30,2009
    
    
    2008Australia
    
    $
    15,118,698
    
    
    $
    33,852,068United States
    
    
    8,244,809
    
    
    
    2,117,028$
    23,363,507
    
    
    $
    35,969,096
 Note 14: Fair value of financial instruments
   
    
    Level 1  Quoted prices in active markets for identical assets or liabilities.
    
    Level 2  Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be corroborated
by observable market date for substantially the full term of the assets or liabilities.
    
    Level 3  Unobservable inputs that are supported by little or no market activity and
that are significant to the fair value of the assets or liabilities.
  92




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
 Fair Value Measurements at Reporting Date UsingQuoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Assets
    
    
    Observable Inputs
    
    
    Unobservable InputsDescription
    
    June 30, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Cash and cash equivalentsCash
    
    $
    11,022,577
    
    
    $
    11,022,577
    
    
    $
    
    
    
    $
    Money market
funds
    
    
    6,728,512
    
    
    $
    
    
    
    $
    6,728,512
    
    
    $
    Total
    
    $
    17,751,089
    
    
    $
    11,022,577
    
    
    $
    6,728,512
    
    
    $
    
 Note 15: Employee benefit plan
  Note 16: Quarterly Financial Information (unaudited)
  Year ended June 30, 2009First
    
    
    Second
    
    
    Third
    
    
    FourthNet loss
    
    $
    (10,202,927
    )
    
    $
    (12,645,885
    )
    
    $
    (7,202,370
    )
    
    $
    (13,816,476
    )Net loss
attributable to
common
stockholders
    
    $
    (10,202,927
    )
    
    $
    (12,645,885
    )
    
    $
    (7,202,370
    )
    
    $
    (13,816,476
    )Net loss per
share  basic
and diluted
    
    $
    (0.99
    )
    
    $
    (0.90
    )
    
    $
    (0.48
    )
    
    $
    (0.91
    )
 Year ended June 30, 2008First
    
    
    Second
    
    
    Third
    
    
    FourthNet loss
    
    $
    (4,563,041
    )
    
    $
    (7,548,238
    )
    
    $
    (6,114,959
    )
    
    $
    (7,730,010
    )Net loss
attributable to
common
stockholders
    
    $
    (4,563,041
    )
    
    $
    (7,548,238
    )
    
    $
    (6,114,959
    )
    
    $
    (7,730,010
    )Net loss per
share  basic
and diluted
    
    $
    (0.49
    )
    
    $
    (0.73
    )
    
    $
    (0.59
    )
    
    $
    (0.75
    )
 Note 17: Subsequent events
 Agreement and Plan of Merger
  93




---



##### Table of Contents



PEPLIN, INC.
(A Development Stage Company)
   Voting Agreements
  Loan Agreement
    94




---



##### Table of Contents



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A(T). Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Internal Control over Financial Reporting
  
 Item 9B. Other Information
  95




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  www.peplin.com
 
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  96




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 Financial Statements:
  Exhibits.
 97




---



##### Table of Contents



SIGNATURES
  Peplin, Inc.Dated: September 28, 2009
    By:
    /s/ Thomas WiggansThomas WiggansChief Executive Officer
(Principal Executive Officer)Dated: September 28, 2009
    By:
    /s/ David J. B. SmithDavid J. B. SmithChief Financial Officer and Secretary
(Principal Financial Officer) POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ Thomas Wiggans
    
    Chief Executive Officer and Chairman of Board
    
    September 28, 2009Thomas Wiggans
    
    (Principal Executive Officer)/s/ David J.B. Smith
    
    Chief Financial Officer and Secretary
    
    September 28, 2009David J.B. Smith
    
    (Principal Financial Officer)/s/ Eugene Bauer
    
    President, Chief Medical Officer and Director
    
    September 28, 2009Eugene Bauer/s/ Joshua Funder
    
    Director
    
    September 28, 2009Joshua Funder/s/ Cherrell Hirst
    
    Director
    
    September 28, 2009Cherrell Hirst/s/ Gary Pace
    
    Director
    
    September 28, 2009Gary Pace/s/ James Scopa
    
    Director
    
    September 28, 2009James Scopa/s/ Michael Spooner
    
    Director
    
    September 28, 2009Michael Spooner
 98




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description of Exhibit2.1
    
    Agreement and Plan of
Merger, dated as of
September 2, 2009, by and
among Peplin, Inc., LEO
Pharma A/S and Plant
Acquisition Sub, Inc.
(incorporated by reference
to Exhibit 2.1 to Peplins
current report on Form 8-K
filed on September 2, 2009)3.1
    
    Certificate of
Incorporation of Peplin,
Inc. (incorporated by
reference to Exhibit 3.1 to
Registration Statement No.
000-53410 on Form 10 filed
on September 12, 2008)3.2
    
    Bylaws of Peplin, Inc.
(incorporated by reference
to Exhibit 3.2 to
Registration Statement No.
000-53410 on Form 10 filed
on September 12, 2008)4.1
    
    Form of Common Stock
certificate (incorporated
by reference to Exhibit 4.1
to Registration Statement
No. 000-53410 on Form 10
filed on September 12,
2008)4.2
    
    Form of Class B Common
Stock Certificate
(incorporated by reference
to Exhibit 4.2 to
Registration Statement No.
000-53410 on Form 10 filed
on September 12, 2008)4.3
    
    Form of Warrant Agreement,
dated December 28, 2007
(incorporated by reference
to Exhibit 4.3 to
Registration Statement No.
000-53410 on Form 10 filed
on September 12, 2008)4.4
    
    Registration Rights
Agreement, dated October
23, 2008 (incorporated by
reference to Exhibit 4.4 to
Registration Statement No.
000-53410 on Form 10/A
filed on October 27, 2008)4.5
    
    Form of Warrant Agreement
for Non-U.S. Persons, dated
October 23, 2008
(incorporated by reference
to Exhibit 4.5 to
Registration Statement No.
000-53410 on Form 10/A
filed on October 27, 2008)4.6
    
    Form of Warrant Agreement
for U.S. Persons, dated
October 23, 2008
(incorporated by reference
to Exhibit 4.6 to
Registration Statement No.
000-53410 on Form 10/A
filed on October 27, 2008)10.1
    
    Implementation Agreement
between Peplin Limited and
Peplin, Inc., dated August
8, 2007 (incorporated by
reference to Exhibit 10.1
to Registration Statement
No. 000-53410 on Form 10
filed on September 12,
2008)10.2
    
    2007 Incentive Award Plan
(incorporated by reference
to Exhibit 10.2 to
Registration Statement No.
000-53410 on Form 10 filed
on September 12, 2008)10.3
    
    Amendment to the 2007
Incentive Award Plan
(incorporated by reference
to Exhibit 10.1 to the
Companys 10-Q dated
December 1, 2008)10.4
    
    Amendment No. 2 to the 2007
Incentive Award Plan
(incorporated by reference
to Exhibit 10.2 to the
Companys 10-Q dated
December 1, 2008)10.5
    
    Form of Stock Option
Agreement (incorporated by
reference to Exhibit 10.3
to Registration Statement
No. 000-53410 on Form 10
filed on September 12,
2008)10.6
    
    Form of Indemnity Agreement
for Directors and Officers
(incorporated by reference
to Exhibit 10.4 to
Registration Statement No.
000-53410 on Form 10 filed
on September 12, 2008)10.7
    
    Purchase Agreement between Dr. Gary Pace and Peplin Limited,
dated June 23, 2006 (incorporated by reference to Exhibit
10.5 to Registration Statement No. 000-53410 on Form 10 filed
on September 12, 2008)10.8
    
    Separation Agreement between Peplin, Inc. and Michael
Aldridge, dated August 15, 2008 (incorporated by reference to
Exhibit 10.6 to Registration Statement No. 000-53410 on Form
10 filed on September 12, 2008)
 99




---



##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.9
    
    Employment Agreement between Peplin Limited, Peplin
Operations USA, Inc. and Philip Moody, dated September 8,
2006 (incorporated by reference to Exhibit 10.7 to
Registration Statement No. 000-53410 on Form 10 filed on
September 12, 2008)10.10
    
    Employment Agreement between Peplin Operations USA, Inc. and
Cheri Jones, dated June 14, 2006 (incorporated by reference
to Exhibit 10.01 to Registration Statement No. 000-53410 on
Form 10 filed on September 12, 2008)10.11
    
    Employment Offer Letter between Peplin, Inc. and David J.B.
Smith, dated March 25, 2009 (incorporated by reference to
Exhibit 10.01 to Peplins current report on Form 8-K filed on
March 30, 2009)10.12
    
    Employment Agreement between Peplin Limited and Peter
Welburn, dated May 10, 2004 (incorporated by reference to
Exhibit 10.12 to Registration Statement No. 000-53410 on Form
10 filed on September 12, 2008)10.13
    
    Letter, dated December 15, 2006, from Peplin Limited to Peter
Welburn regarding role change and salary adjustment
(incorporated by reference to Exhibit 10.13 to Registration
Statement No. 000-53410 on Form 10 filed on September 12,
2008)10.14
    
    Employment Agreement between Peplin Operations USA, Inc. and
George Mahaffey, dated May 22, 2007 (incorporated by
reference to Exhibit 10.14 to Registration Statement No.
000-53410 on Form 10 filed on September 12, 2008)10.15
    
    Employment Agreement between Peplin, Inc. and Eugene Bauer,
MD, dated August 18, 2008 (incorporated by reference to
Exhibit 10.15 to Registration Statement No. 000-53410 on Form
10 filed on September 12, 2008)10.16
    
    Employment Agreement between Peplin, Inc. and Thomas Wiggans,
dated August 15, 2008 (incorporated by reference to Exhibit
10.16 to Registration Statement No. 000-53410 on Form 10
filed on September 12, 2008)10.17
    
    Lease between Peplin Biotech Ltd. and Pine Waters Pty Ltd.,
dated June 10, 2004 (incorporated by reference to Exhibit
10.17 to Registration Statement No. 000-53410 on Form 10
filed on September 12, 2008)10.18
    
    Lease between Peplin Operations USA Inc. and Bay Centre
Office LLC, dated December 22, 2006 (incorporated by
reference to Exhibit 10.18 to Registration Statement No.
000-53410 on Form 10 filed on September 12, 2008)10.19
    
    Lease between Peplin Operations Pty Ltd. and Garrels
Investments Pty Ltd., dated May 28, 2007 (incorporated by
reference to Exhibit 10.19 to Registration Statement No.
000-53410 on Form 10 filed on September 12, 2008)10.20
    
    R&D Start Program Grant Agreement between Commonwealth of
Australia acting through the Industry Research and
Development Board and Peplin Operations Pty Ltd., dated
September 19, 2003 (incorporated by reference to Exhibit
10.21 to Registration Statement No. 000-53410 on Form 10
filed on September 12, 2008)10.21
    
    Termination and Settlement Agreement between Allergan Sales
LLC and Peplin Ltd., dated October 7, 2004 (incorporated by
reference to Exhibit 10.22 to Current Report No. 000-53410 on
Form 10 filed on September 12, 2008)10.22
    
    Form of Subscription Agreement dated, August 8, 2007
(incorporated by reference to Exhibit 10.23 to Current Report
No. 000-53410 on Form 10 filed on September 12, 2008)10.23
    
    Loan Agreement among Peplin Limited, the guarantors party
thereto, General Electric Capital Corporation as agent for
the lenders party thereto, General Electric Capital
Corporation as security trustee and General Electric Capital
Corporation and Oxford Finance Corporation as lenders, dated
December 28, 2007 (incorporated by reference to Exhibit 10.24
to Current Report No. 000-53410 on Form 10 filed on September
12, 2008)
 100




---



##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.24
    
    Guaranty, Pledge and Security Agreement among Peplin, Inc.,
Peplin Operations USA, Inc. and General Electric Capital
Corporation as agent for the lenders, dated December 28,
2007. (incorporated by reference to Exhibit 10.25 to Current
Report No. 000-53410 on Form 10 filed on September 12, 2008)10.25
    
    Clinical Services Master Agreement between Peplin Operations
Pty Ltd and Omnicare CR, Inc., dated June 1, 2005
(incorporated by reference to Exhibit 10.26 to Current Report
No. 000-53410 on Form 10 filed on September 12, 2008)10.26
    
    Development and clinical supply agreement between Peplin,
Inc. and DPT Laboratories, Ltd., dated October 23, 2007
(incorporated by reference to Exhibit 10.27 to Current Report
No. 000-53410 on Form 10 filed on September 12, 2008)10.27
    
    Plan of Merger and Reorganization between Peplin, Inc., West
Acquisitions Corp. and Neosil, Inc., dated June 9, 2008
(incorporated by reference to Exhibit 10.28 to Current Report
No. 000-53410 on Form 10 filed on September 12, 2008)10.28
    
    Stock Subscription and Registration Rights Agreement, dated
August 18, 2008, by and among Peplin, Inc. and the investors
named therein (incorporated by reference to Exhibit 10.29 to
Current Report No. 000-53410 on Form 10 filed on September
12, 2008)10.29
    
    Master Clinical Services Agreement between Peplin Operations
Pty Ltd and TKL Research, Inc., dated April 7, 2008
(incorporated by reference to Exhibit 10.30 to Current Report
No. 000-53410 on Form 10 filed on September 12, 2008)10.30
    
    Restricted Stock Award Agreement, dated November 6, 2008
(incorporated by reference to Exhibit 10.1 to the Companys
Form 8-K dated November 6, 2008)10.31
    
    Loan Agreement between Peplin, Inc. and LEO Pharma A/S, dated
as of September 2, 2009 (incorporated by reference to Exhibit
10.1 to Peplins current report on Form 8-K filed on
September 2, 2009)10.32
    
    Lease Agreement between Peplin, Inc. and The Public Trustee
of Queensland as Custodian for Opus Capital Growth Fund No.
1, dated June 3, 200921.1
    
    Subsidiaries of Peplin, Inc.24.1
    
    Power of Attorney (included in signature pages)31.1
    
    Certification of the Chief Executive Officer, as required pursuant to Section 302
of the Sarbanes-Oxley Act of 200231.2
    
    Certification of the Chief Financial Officer, as required pursuant to Section 302
of the Sarbanes-Oxley Act of 200232.1
    
    Certifications of the Chief Executive Officer and the Chief Financial Officer, as
required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and furnished
herewith pursuant to SEC Release No. 33-823899.1
    
    Form of Voting Agreement by and between LEO Pharma A/S and each of the members of
the Board of Directors and executive officers of Peplin, Inc. and affiliated
stockholders (incorporated by reference to Exhibit 99.1 to Peplins current
report on Form 8-K filed on September 2, 2009)
 
 
    
    Management contract or compensatory plan or arrangement
    
    Confidential treatment was requested and received for certain confidential portions of this exhibit
pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. In accordance with Rule 24b-2,
these confidential portions were omitted from this exhibit and filed separately with the Securities
and Exchange Commission. 101




---



##### Table of Contents




    
    This certification is not deemed filed for purposes of Section 18 of the Securities Exchange Act,
or otherwise subject to the liability of that section. Such certification will not be deemed to be
incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange
Act of 1934, except to the extent that Peplin, Inc. specifically incorporates it by reference. 102