Open Orphan plc
Annual Report
for the year ended 31 December 2019
A rapidly growing specialist CRO
pharmaceutical services company which is
the world leader in the testing of vaccines and
antivirals using human challenge study models
www.openorphan.com
Group subsidiaries and associates:
Open Orphan Plc
Contents
Company Information
Executive Chairman’s Statement
The Board
Strategic Report
Report of the Directors
Corporate Governance Statement
Report of the Remuneration Committee
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income Statement
Consolidated and Company’s Statement of Financial Position
Consolidated and Company’s Statement of Cash Flows
Consolidated and Company’s Statement of Changes in Shareholders' Equity
Notes to the Financial Statements
1
2
4
5
7
10
12
13
18
19
20
21
22
Open Orphan Plc
Company Information
Directors:
Cathal Friel (Executive Chairman)
Leo Toole (Chief Financial Officer)
Prof. Brendan Buckley (Non-Executive Director)
Michael Meade (Non-Executive Director)
Mark Warne (Non-Executive Director)
Company Secretary:
Beach Secretaries Limited
Registered office:
Head office:
Queen Mary BioEnterprises
Innovation Centre
42 New Road
London, E1 2AX, UK
4th Floor
150 Minories
London EC3 N1LS, UK
Place of incorporation:
England and Wales (Company number – 07514939)
Auditors:
Nominated Advisor and Joint broker:
Joint Broker:
Euronext Growth advisor
and Joint Broker:
Solicitors to the Company:
Registrars:
Bankers:
Public relations:
Jeffreys Henry LLP
Finsgate
5 – 7 Cranwood Street
London EC1V 9EE
Arden Partners plc,
125, Old Broad Street
London, EC2N 1AR
finnCap Ltd
60, New Broad Street
London, EC2M 1JJ
Davy
Davy House
49 Dawson Street
Dublin 2
BPE Solicitors LLP
St James’ House
St James’ Square
Cheltenham GL50 3PR
SLC Registrars Limited
Elder House
St Georges Business Park
Weybridge
Surrey, KT13 OTS
Ulster Bank
Victoria Square
11 – 16 Donegall Square East
Belfast, BT1 5UB
Capital Markets Communications Ltd (Camarco)
107 Cheapside
London, EC2V 6DN
Website:
www.openorphan.com
1
Open Orphan Plc
Executive Chairman’s Statement
For the year ended 31 December 2019
Dear Shareholder,
I am very happy to report to you as Executive Chairman of Open Orphan plc (formerly Venn Life Sciences Holdings plc), having
completed a reverse acquisition with Open Orphan DAC in June 2019 and the acquisition of hVIVO Ltd (formerly hVIVO plc) in
January 2020. I have previously served as Chief Executive Officer of the Group from May 2019 until January 2020.
While the attached Financial Statements report on the results of the Group in 2019 prior to the acquisition of hVIVO Ltd (and in
particular reflecting reverse merger accounting treatment of the merger of Venn Life Sciences Holdings plc and Open Orphan
DAC), this statement addresses the performance of both Open Orphan plc and hVIVO Ltd in 2019 and the outlook for the
combined entity in 2020.
Governance
The Board continues to recognise the importance of the high standards of corporate governance and considers that the Group’s
success is enhanced by the imposition of a strong corporate governance framework. Accordingly, in recognition of the need to
maintain continued best practice the Board will monitor its composition and skills balance.
I very much welcome the significant experience of Trevor Philips, Mark Warne and Michael Meade who have joined the Board as
part of the recent merger and am grateful to Christian Milla, Michael Ryan, Maurice Treacy, David Kelly for their service in 2019.
In addition, we have appointed Leo Toole as Chief Financial Officer and Board member.
Strategy
Our enlarged offering of early clinical development services, clinical trial delivery expertise and virology related challenge
studies, with a particular focus on rare and emerging diseases, is a strong platform to deliver substantial and sustainable returns
to shareholders. Our 24-bed quarantine facilities in the UK are best in class for vaccine and virus-related development and put us
at the forefront of emerging virus risk management stemming from the Covid-19 pandemic event which is ongoing at the time of
writing, in particular with a focus on developing the world’s first Covid-19 challenge model. The Group is also focussed on
expanding service revenues by actively selling laboratory services to third party pharma companies and by developing antibody
testing services to accurately identify an individual’s antibody status, having previously used its virology laboratory principally to
service its internal clinical activities. In addition, the Group continues to develop a ground-breaking Genomic Health Data
platform which can now also be populated with hVIVO’s global leading collection of infectious disease progression data.
The last year has seen significant change first through the reverse merger of Open Orphan DAC and Venn Life Sciences Holdings
plc (subsequently renamed Open Orphan plc) in June 2019 and secondly through the merger of Open Orphan plc and hVIVO plc
in January 2020.
•
The existing Open Orphan business has focused to complete and replenish some long-standing full-service clinical research
projects and to build longer term relationships through multi-year contracts in our early development business. Combined
with the continued deferral of certain full-service projects, this has resulted in reduced revenues in the period. Despite this,
the Group has started the work to plan and implement a major restructuring of our operations to drive efficiency and
competitiveness while investing in the Genomic Health Data platform.
In 2019, hVIVO continued making great strides to transition its business from a focus on viral asset development to a focus
on testing the efficacy of vaccines, antivirals and respiratory disease agents through the provision of its own proprietary
inhouse developed and grown versions of disease specific viruses, known as challenge studies. It has developed and is
exploiting a strong pipeline of major pharmaceutical players with a focus on vaccine and anti-viral drug development. In
addition, hVIVO holds a 49% share of a Joint Venture called Imutex Limited to develop vaccines against influenza (FLU v) and
universal mosquito borne diseases (AGS v).
•
Results
Reported results for Open Orphan plc are summarized on page 3 and are covered by the schedules and notes from pages 18 to
54 of these Financial Statements (and in particular reflect reverse merger accounting treatment under IFRS 3 and IFRS 10 of the
combination of Venn Life Sciences Holdings plc and Open Orphan DAC as of 28 June 2019). Results for hVIVO plc (on a stand-
alone basis) are presented for reference. In addition, pro-forma results for Open Orphan plc (formerly Venn Life Sciences
Holdings plc on a stand-alone basis and excluding any impact of the 28 June 2019 combination), Open Orphan DAC (on a stand-
alone basis and excluding any impact of the 28 June 2019 combination) and Open Orphan plc (on a combined basis including the
impact of the June 2019 and January 2020 combinations) are outlined for reference.
2
Open Orphan Plc
Executive Chairman’s Statement
For the year ended 31 December 2019
Open Orphan plc
(As reported)
hVIVO plc
(As reported)
Revenue (incl. Other income)
Operating (Loss)
EBITDA before exceptional items
Loss for the period
Non-current assets
Current assets (excl. cash)
Cash
Total Assets
Equity attributable to owners
Non-current liabilities
Current liabilities
Total equity and liabilities
2019
€’000
4,039
(5,837)
(4,311)
(6,543)
2019
€’000
5,144
4,264
1,219
10,627
3,350
1,205
6,072
10,627
2018
€’000
-
(1,611)
(1,611)
(1,656)
2018
€’000
1
36
165
202
(1,656)
-
1,858
202
2019
£’000
15,092
(5,893)
(3,785)
(6,973)
2019
£’000
10,759
4,385
2,276
17,420
10,685
2,233
4,502
17,420
2018
£’000
13,626
(13,427)
(8,862)
(16,833)
2018
£’000
9,638
5,227
13,368
28,233
17,333
20
10,880
28,233
Open Orphan plc
(formerly Venn Life
Sciences Holdings plc -
proforma results
on a stand-alone basis
and excluding any
impact of the 28 June
2019 combination)
Open Orphan DAC
(proforma results
on a stand-alone basis
and excluding any
impact of the
28 June 2019
combination)
Open Orphan plc
(proforma results on a
combined basis and
including the impact of
the 28 June 2019 and
17 January 2020
combinations)
2019
€’000
9,854
(6,469)
(5,053)
(6,442)
2018
€’000
14,291
(2,367)
(1,432)
(4,775)
2019
€’000
-
(763)
(763)
(1,025)
2018
€’000
-
(1,611)
(1,611)
(1,656)
2019
€’000
27,061
(14,249)
(10,130)
(16,524)
2018
€’000
29,712
(19,174)
(13,072)
(25,481)
Outlook
The recent merger with hVIVO reflects our goal to leverage a broader service offering to an enlarged and combined customer
base, while driving restructuring and integration of core support functions into our headquarters in London. The recent placings
of £5.3m (before expenses) in January 2020 and £12.6m (before expenses) in May 2020 allows us to complete this transition in
the first half of 2020 and we are confident that we will see the positive impact of these changes in the second half of 2020. In
addition, we will invest to develop a world-first challenge study model to address Covid-19 while expanding our laboratory
service offerings to develop antibody testing services to accurately identify an individual’s antibody status.
Traditionally, the testing of vaccines and antivirals had been somewhat of a Cinderella industry, however, following the advent
of the Covid-19 pandemic it is clear that for the months and years ahead the development of new and novel vaccines and also
the testing of such vaccines and antivirals will be one of the fastest growing areas of the pharmaceutical industry. In recent
decades, governments and pharma companies around the world completely under-invested in new vaccines and the onset of
Covid-19 caught them significantly off-guard and as such there is a huge capital investment program underway around the world
to roll out an extensive range of Covid-19 and importantly non Covid-19 vaccines to ensure that the world is not caught
unprepared in future pandemics.
We have substantially reduced overheads and right-sized the management team including combining the CEO and other senior
roles in both Venn and hVIVO. We have also brought forward some long-serving and excellent line managers and heads of
departments, flattening the organisation structure and giving them more autonomy and responsibility to successfully run their
own areas and this is proving very effective both for the company but also most importantly for the individual managers as well.
In turn, this has completely transformed the culture of the enlarged business to one of vastly more open communication,
sharing of knowledge and a much faster decision-making process.
I am very excited for the year ahead and I am confident that we have created a soon to be profitable, fast-growing business
which is creating value for all our stakeholders.
Cathal Friel - Executive Chairman
23 June 2020
3
Open Orphan Plc
The Board
Cathal Friel, Chairman (aged 55)
Cathal Friel has 30 plus years of corporate experience and is the Managing Director and founder of Raglan Capital. Cathal was a
Cofounder and Director of Amryt Pharma plc, a leading European Orphan Drug Company listed on the London and Dublin Stock
Exchanges. He is also Director and one of the founders of Open Orphan, was previously Executive Chairman and co-founder of
Fastnet Oil & Gas plc and was one of the founding directors of Merrion Stockbrokers. Cathal has an MBA from the University of
Ulster.
Prof. Brendan Buckley, Non-Executive Director (aged 70)
Professor Brendan Buckley is a medical graduate of University College Cork and a doctoral graduate in Biochemistry of Oxford
University. Brendan has over 30 years’ experience in clinical research. He is one of the founders of Open Orphan as well as being
Adjunct Professor at University College Dublin. He was the Chief Medical Officer of ICON plc until 2017. In 2009, Brendan co-
founded Firecrest Clinical Ltd, a company which focussed on improving the performance of clinical trial sites. Brendan was a
Director of the Health Products Regulatory Authority of Ireland between 2004 and 2011. He was also a member of the EMA’s
Committee for Orphan Medicinal Products (COMP) from 2000-2003 and the EMA’s Scientific Advisory Committee on Diabetes and
Metabolism until 2011.
Michael Meade, Non-Executive Director (aged 59)
Michael Meade holds a degree in Law from Trinity College, Dublin. He qualified as a Chartered Accountant in Ireland with KMG
Reynolds McCarren prior to working with Arthur Andersen in London. He has spent the last 30 years working in investment banking
in London with respectively HSBC Investment Bank, UBS Investment Bank and Numis Securities where he spent the last thirteen
years. During his career he has specialised in advising small and mid-cap quoted companies with a particular focus on those in the
healthcare sector. His experience extends across all forms of capital raising, mergers and acquisitions, and general strategy.
Dr. Mark Warne, Non-Executive Director (aged 45)
Dr Mark Warne was appointed to the hVIVO Board as a Non-Executive Director in April 2016. Mark previously spent almost 10
years at IP Group Plc, an intellectual property commercialisation company, where he led the Healthcare team. He managed a
portfolio of £330m of net assets in 2016/2017 and represented IP Group on the boards of both listed and private companies. In
2018, concurrent with the integration of Touchstone Innovations into IP Group, Mark became a Partner in the Life Sciences
division. He joined IP Group from pre-clinical drug discovery CRO, Exelgen, where he was Managing Director. Mark spent eight
years at Exelgen (formerly Tripos Discovery Research) where he also held positions in licensing and strategic affairs, project
management and research. He has a PhD in Computational Chemistry, an MSc in Colloid Science and a BSc in Chemistry, all from
the University of Bristol. Mark is a Chartered Chemist and member of the Royal Society of Chemistry. Mark was appointed Chief
Executive Officer of DeepMatter Group plc in July 2018, having joined DeepMatter as a Non-Executive Director in September 2015
and also served as its Executive Chairman between April 2017 and July 2018. He also serves as a non-executive director on the
board of Ixico plc.
Leo Toole, Chief Financial Officer (aged 47)
Leo Toole brings over 20 years’ experience in senior finance roles in Pharmaceuticals, Medical Technology and FMCG sectors. Through
positions in multinational companies across Europe and in the venture capital space in the UK and Ireland, he has extensive experience
in building finance teams, corporate development, equity and debt financing, public markets, and mergers and acquisitions. Leo is a
Business graduate of Trinity College Dublin, Ireland and HEC Liège, Belgium. He also holds an MBA with Distinction from INSEAD in
France and Singapore.
4
Open Orphan Plc
Strategic Report
For the year ended 31 December 2019
Review of the business
A comprehensive review of the year is given in the Chairman’s Statement on page 2.
Principal risks and uncertainties
The Directors continually identify, monitor and manage the risks and uncertainties of the Group. Risk is inherent in all businesses. Set
out below are certain risk factors which could have an impact on the Group’s long-term performance and mitigating factors adopted
to alleviate these risks. This list does not purport to be an exhaustive summary of the risks affecting the Group.
Management and employees
The Group’s future success will be dependent on key employees and their on-going relationships with customers. It is believed that
the Group is of a size that the departure of no one individual represents a significant risk to the Group. The Group also encourages
customer contacts to be maintained by more than one individual. Key employees are incentivised through a mixture of sales
commission and profit related bonuses. Main Board Directors are incentivised as detailed in the Directors’ Remuneration Report.
Political risk
The Group’s strategy of establishing itself across European countries could potentially have an effect if there is any political instability
in those countries.
Regulatory risk
There can be no guarantee that any of the Group’s services will be able to obtain or maintain the necessary regulatory approvals in
any or all of the territories in respect of which applications for such approvals are made. Where regulatory approvals are obtained,
there can be no guarantee that the conditions attached to such approvals will not be considered too onerous by the Group or its
partners in order to be able to market their products effectively. The Group seeks to reduce this risk by focusing on products with low
risk profiles, by seeking advice from regulatory advisers, through consultations with regulatory approval bodies and by working with
experienced distribution partners.
Competition risk
The Group’s current and future potential competitors include, amongst others, major multinational pharmaceutical and healthcare
companies with substantially greater resources than those of the Group. There can be no assurance that competitors will not succeed
in developing systems and products that are more effective or economic than any of those developed by the Group, with its partners,
or which would render the partners’ products obsolete or otherwise non-competitive. The Group seeks to reduce this risk by ensuring
that a professional and better standard service is provided to its partners for registering their products, maintaining confidentiality
agreements and selecting leading businesses in their respective fields as partners capable of addressing significant competition,
should it arise.
Effect of foreign currency
The Group in general does not hedge the foreign currency risk arising from sales by an operation denominated in a currency other
than its functional currency. In most cases substantial deposits on such sales are received at the time of the order and the remaining
balances are, to a large extent, matched by overseas costs. In respect of the translation of foreign currency assets, where these are
significant, the Group endeavours to match the amount of foreign currency assets by funding overseas operations through financing
denominated in the local currency.
Covid-19 outbreak
Events in relation to the COVID-19 outbreak are evolving rapidly and the Group is closely monitoring the situation as it develops. Our
primary focus remains the safety of our employees and the Group has implemented government policies in relation the outbreak,
including travel restrictions for staff which potentially impacts the delivery of studies, as well as conducting business development
and marketing activities. These risks are mitigated using technology that allows staff to work from home effectively. The pandemic
could result in the cancellation or delay of client contracts. Given the rapidly evolving nature of the pandemic, financial risk mitigation
plans are in place, including utilising government support measures in the countries as necessary.
Financial risk management
The Group has instigated certain financial risk management policies and procedures which are set out in note 3 to the financial
statements.
5
Open Orphan Plc
Strategic Report (Continued)
For the year ended 31 December 2019
Future outlook
The Chairman’s Statement on page 2 gives information on the future outlook of the Group.
Key Performance Indicators (KPIs)
The key performance indicators currently used by the Group are revenue, adjusted EBITDA (before exceptional items) and cash
resources. (See page 2). The Company also uses non-financial key performance indicators such as measuring customer experience,
new business win rates and staff utilisation.
Review of strategy and business model
The Board of Directors judge the Group’s financial performance by reference to the internal budget which it establishes at the
beginning of each financial year.
As noted in the Chairman’s Statement, the enlarged offering of early clinical development services, clinical trial delivery expertise and
virology related challenge studies, with a particular focus on rare and emerging diseases, is a strong platform to deliver substantial
and sustainable returns to shareholders. Our 24-bed quarantine facilities in the UK are best in class for vaccine and virus-related
development and put us at the forefront of emerging virus risk management stemming from the Covid-19 pandemic event which is
ongoing at the time of writing. The Company is also focussed on expanding service revenues by actively selling laboratory services to
third party pharma companies having previously used its virology laboratory principally to service its internal clinical activities. In
addition, the Company continues to develop a ground-breaking Genomic Health Data platform which can avail of hVIVOs’ large
database of anonymised patient data.
The Directors carry out their activities to promote long-term success of the Group for the benefit of the Company’s shareholders,
employees, suppliers and other stakeholders. They engage with shareholders, employees, suppliers and other stakeholders to
reflect their insights and views when making decisions on strategy; delivering operational effectiveness; making plans; driving
initiatives; and committing to deliver outcomes that enhance social value. The culture and values promoted by the Directors
creates a focus across the Group on observing and maintaining the highest standards of business conduct whilst promoting the
long-term success of the Company.
Environment
The Directors consider that the nature of the Group’s activities is not inherently detrimental to the environment.
Employees
The Group places value on the involvement of its employees and they are regularly briefed on the Group’s activities. The Group
closely monitors staff attrition rates which it seeks to maintain at current low levels and aims to structure staff compensation levels
at competitive rates in order to attract and retain high calibre personnel.
Disabled employees
Applications for employment by disabled persons are always fully considered, bearing in mind the specific aptitudes of the applicant
involved. It is the policy of the Group that the training, career development and promotion of disabled persons, as far as possible, be
identical with that of other employees.
Social, community, and human rights
The Board recognises that the Group has a duty to be a good corporate citizen and to respect the laws, and where appropriate
the customs and culture of the territories in which it operates. It contributes as far as is practicable to the local communities in
which it operates and takes a responsible and positive approach to employment practices.
The Strategic Report was approved by the Board on 23 June 2020 and signed on its behalf by:
Cathal Friel
Executive Chairman
6
Open Orphan Plc
Report of the Directors
For the year ended 31 December 2019
The Directors have pleasure in submitting this report together with the audited financial statements of Open Orphan Plc for the year
ended 31 December 2019.
Directors
The Directors who held office during the year and as at the date of signing the financial statements were as follows:
Prof. Brendan Buckley
Cathal Friel
Anthony Richardson (Resigned 31st July 2019)
Michael Ryan (Resigned 17th January 2020)
Christian Milla (Resigned 17th January 2020)
Maurice Treacy (Appointed 28th June 2019 and Resigned 17th January 2020)
David Kelly (Appointed 1st August 2019 and Resigned 17th January 2020)
Trevor Philips (Appointed 17th January 2020 and resigned 4th May 2020)
Michael Meade (Appointed 17th January 2020)
Mark Warne (Appointed 17th January 2020)
Leo Toole (Appointed 27th February 2020)
Principal activities
The principal activity of the Group continued to be that of a Clinical Research Organisation (CRO) providing a suite of consulting and
clinical trial services to pharmaceutical, biotechnology and medical device organisations.
Dividends
There were no dividends paid or proposed by the Company in either year.
Going concern
The Directors have considered the applicability of the going concern basis in the preparation of these financial statements. This
included the review of internal budgets and financial results which show, taking into account reasonably probable changes in financial
performance that the Group should be able to operate within the level of its current funding arrangements. For more detail refer to
Note 2.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group therefore continues to adopt the going concern basis of preparation for
its consolidated financial statements.
Creditors’ payment policy
It is the policy of the Group to agree appropriate terms and conditions for its transactions with suppliers (ranging from standard
written terms to individual negotiated contracts) and for payment to be made in accordance with these terms provided the supplier
has complied with its obligations. The average number of day’s credit taken by the Group as at 31 December 2019 was 48 days (2018
- 81 days).
Directors’ interests
The interests of those Directors serving at 31 December 2019 and as at the date of signing of these financial statements, all of which
are beneficial, in the share capital of the Company Open Orphan plc (formerly Venn Life Sciences Holdings plc) were as follows:
Cathal Friel*
Brendan Buckley
Michael Ryan
On 31 December 2019
Ordinary Shares of
0.1p each
41,046,981
7,845,860
5,383
*Held via Raglan Road Capital Ltd, Horizon Medical Technologies Ltd and/or through a family member
On 1 January 2019
Ordinary Shares
of 0.1p each
-
-
5,383
7
Open Orphan Plc
Report of the Directors (continued)
For the year ended 31 December 2019
At 27 June 2019, prior to the reverse takeover of Venn Life Sciences Holdings PLC, Brendan Buckley held 21,090 shares in Open
Orphan DAC and Raglan Capital Limited, a company of which Cathal Friel is a director, held 57,468 shares in Open Orphan DAC.
Cathal Friel also had control over 40,000 additional shares though ownership of a family member.
Substantial shareholdings
As at 31 May 2020, the following interests of 3% or more in the issued Ordinary Share capital had been notified to the Company:
Shareholder
Number of Shares
Percentage of issued share
capital
THE BANK OF NEW YORK /NOMINEES/ LIMITED
NORTRUST NOMINEES LIMITED
HARGREAVES LANSDOWN /NOMINEES/ LIMITED
RAGLAN ROAD CAPITAL LIMITED
BARCLAYS DIRECT INVESTING NOMINEES LIMITED
HARGREAVES LANSDOWN /NOMINEES/ LIMITED
Events after the end of the reporting period
The following events have taken place since the year end:
54,195,388
38,618,608
23,911,713
21,536,124
20,210,983
18,213,947
9.13%
6.51%
4.03%
3.63%
3.41%
3.07%
(a) Completed a merger to acquire the entire issued and to be issued share capital of hVIVO plc for an aggregate consideration of
approximately GBP£13 million in equity on 17th January 2020
(b) Re-admission of the Enlarged Share Capital following the merger of Open Orphan plc and hVIVO plc to trading on AIM and
Euronext Growth on 17th January 2020
(c) Executed a placing on 31st January 2020 raising GBP £5.3 million (before expenses)
(d) Cathal Friel, CEO, became Executive Chairman; Brendan Buckley, Chairman, became Non-Executive director and Trevor
Philips, CEO of hVIVO Plc became CEO of Open Orphan Plc Group and was appointed to the board on 17th January 2020.
Christian Milla, Michael Ryan and David Kelly resigned from the board on 17th January 2020. Michael Meade and Mark Warne
were appointed to the board on the same date. Leo Toole was appointed Chief Financial Officer on 13th February and
subsequently appointed to the board on 27th February 2020.
(e) Trevor Philips resigned as a Director on 4th May 2020
(f) Executed a placing on 22 May 2020 raising GBP£12.6 million (before expenses)
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared
the Group and Parent Company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the European Union. Under Company law the Directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Company and Group
for that period. In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures
disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will
continue in business.
•
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them
to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets
of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
8
Open Orphan Plc
Report of the Directors (continued)
For the year ended 31 December 2019
The Directors are responsible for the maintenance and integrity of the Company’s website (www.openorphan.com). Legislation in the
United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ liability insurance
The Company has entered into deeds of indemnity for the benefit of each Director of the Company in respect of liabilities to which
they may become liable in their capacity as Director of the Company and of any Company in the Group. Those indemnities are
qualifying third party indemnity provisions for the purposes of Section 234 of the Companies Act 2006 and have been in force during
the whole of the financial year and up to the date of approval of the financial statements.
Auditors
Jeffreys Henry LLP have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be
proposed at the forthcoming Annual General Meeting.
Disclosure of information to the Auditors
The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant
audit information of which the group and Company’s auditors are unaware, and each Director has taken all the steps that he ought
to have taken as a Director in order to make him aware of any relevant audit information and to establish that the Company’s auditors
are aware of that information.
Annual General Meeting
The resolutions to be proposed at the forthcoming Annual General Meeting are set out in the formal notice of the meeting.
Recommendation
The Board considers that the resolutions to be proposed at the Annual General Meeting are in the best interests of the Company and
it is unanimously recommended that shareholders support these proposals as the Board intends to do in respect of their own
holdings.
The Directors’ report was approved by the Board on 23 June 2020 and signed on its behalf by.
Cathal Friel
Executive Chairman
9
Open Orphan Plc
Corporate Governance Statement
For the year ended 31 December 2019
Compliance
The Directors recognise the value of the principles of the UK Corporate Governance Code (the Code). Although, as an AIM company,
compliance with the UK Corporate Governance Code is not required, the directors acknowledge that compliance with a recognised
code is mandatory under the AIM rules. In this respect, the directors have targeted to be compliant with the Code to the greatest
extent possible, given the size and nature of the Group.
The following statement describes how the Group seeks to address the principles underlying the Code where practicable and
appropriate for a company of this size.
Board composition and responsibility
The Board currently comprises an executive Chairman, an executive Director and three non-executive Directors. The Board notes that
the Combined Code guidance recommends that at least half the Board should comprise independent non-executive Directors. The
Board has determined that Michael Meade and Mark Warne are independent in character and judgement and that there are no
relationships or circumstances which could materially affect or interfere with the exercise of their independent judgement. The Board
is satisfied with the balance between executive and non-executive Directors which allows it to exercise objectivity in decision making
and proper control of the Group’s business. The Board considers this composition is appropriate in view of the size and requirements
of the Group’s business and the need to maintain a practical balance between executives and non-executives.
All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment and are subject to
re-election at least every three years. Non-executive Directors are appointed for a specific term of office which provides for their
removal in certain circumstances, including under section 168 of the Companies Act 2006. The Board does not automatically re-
nominate non-executive Directors for election by shareholders. The terms of appointment of the non-executive Directors can be
obtained by request to the Company Secretary.
The Board’s primary objective is to focus on adding value to the assets of the Group by identifying and assessing business
opportunities and ensuring that potential risks are identified, monitored and controlled. Matters reserved for Board decisions include
strategic long-term objectives and capital structure of major transactions. The Executive Chairman is responsible for the overall
strategy of the Group and oversees its implementation through the Senior Management Team (COO, CFO, Head of HR and other
Senior Leaders), which is accountable for the operational performance of the Group.
Board meetings
18 Board meetings were held during the year. The Directors’ attendance record (in their respective roles) during 2019 is as follows:
Cathal Friel (Chief Executive Officer)
Maurice Treacy (Executive officer -Appointed 28 June 2019)
Christian Milla (Chief Operating Officer)
Michael Ryan (Non-Executive Director)
Prof. Brendan Buckley (Non-Executive Chairman)
Anthony Richardson (former CEO -resigned 31 July 2019)
David Kelly (Appointed 1 August 2019)
18
14 (of a possible 14 since appointment)
14
13
12
8 (of a possible 8 up to resignation)
7 (of a possible 10 since appointment)
Audit and Risk Committee
This comprises Michael Meade as Chairman and Mark Warne and Brendan Buckley as the other members of the committee. The
principal duties of the committee are to review the half-yearly and annual financial statements before their submission to the Board
and to consider any matters raised by the auditors. The Committee also reviews the independence and objectivity of the auditors.
The terms of reference of the Committee reflect current best practice, including authority to:
• Recommend the appointment, re-appointment and removal of the external auditors;
•
•
Ensure the objectivity and independence of the auditors including occasions when non-audit services are provided; and
Ensure appropriate ‘whistle-blowing’ arrangements are in place.
10
Open Orphan Plc
Corporate Governance Statement (continued)
For the year ended 31 December 2019
The Chairman may seek information from any employee of the Group and obtain external professional advice at the expense of the
Company if considered necessary. Due to the relatively low number of personnel employed within the Group, the nature of the
business and the current control and review systems in place, the Board has decided not to establish a separate internal audit
department.
Remuneration Committee
The Company has established a formal and transparent procedure for developing policy on executive remuneration and for fixing the
remuneration packages of individual Directors. No Director is involved in deciding his own remuneration.
This committee comprises Brendan Buckley as Chairman with Michael Meade and Mark Warne as the other members of the
committee. The committee considers the employment and performance of individual executive Directors and determine their terms
of service and remuneration. It also has authority to grant options under the Company’s Executive Share Option Scheme. The
Committee intends to meet at least twice a year.
Board appointments
The Nomination Committee comprises Michael Meade as chairman with Mark Warne as the other member of the committee. It
identifies and nominates for the approval of the Board, candidates to fill Board vacancies as and when they arise. The Nomination
Committee intends to meet at least twice a year.
Internal control
The Directors are responsible for ensuring that the Group maintains a system of internal control to provide them with reasonable
assurance regarding the reliability of financial information used within the business and for publication and that the assets are
safeguarded. There are inherent limitations in any system of internal control and accordingly even the most effective system can
provide only reasonable, but not absolute, assurance with respect to the preparation of financial reporting and the safeguarding of
assets.
The Group, in administering its business has put in place strict authorisation, approval and control levels within which senior
management operates. These controls reflect the Group’s organisational structure and business objectives. The control system
includes clear lines of accountability and covers all areas of the organisation. The Board operates procedures which include an
appropriate control environment through the definition of the above organisation structure and authority levels and the identification
of the major business risks.
Internal financial reporting
The Directors are responsible for establishing and maintaining the Group’s system of internal reporting and as such have put in place
a framework of controls to ensure that the on-going financial performance is measured in a timely and correct manner and that risks
are identified as early as is practicably possible. There is a comprehensive budgeting system and monthly management accounts are
prepared which compare actual results against both the budget and the previous year. They are reviewed and approved by the Board,
and revised forecasts are prepared on a regular basis.
Relations with shareholders
The Company reports to shareholders twice a year. The Company dispatches the notice of its Annual General Meeting, together with
a description of the items of special business, at least 21 days before the meeting. Each substantially separate issue is the subject of a
separate resolution and all shareholders have the opportunity to put questions to the Board at the Annual General Meeting. The
Chairman of the Audit and Remuneration Committees normally attend the Annual General Meeting and will answer questions which
may be relevant to their work. The Chairman advises the meeting of the details of proxy votes cast on each of the individual resolutions
after they have been voted on in the meeting.
The Chairman and the non-executive Directors intend to maintain a good and continuing understanding of the objectives and views
of the shareholders.
Corporate social responsibility
The Board recognises that it has a duty to be a good corporate citizen and is conscious that its business processes minimise harm to
the environment, contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive
approach to employment practices.
11
Open Orphan Plc
Report of the Remuneration Committee
For the year ended 31 December 2019
Statement of compliance
This report sets out the Group policy on Directors’ remuneration, including emoluments, benefits and other share-based awards
made to each Director.
Policy on Executive Directors’ remuneration
Remuneration packages are designed to motivate and retain executive Directors to ensure the continued development of the
Company and to reward them for enhancing value to shareholders. The main elements of the remuneration package for executive
Directors are basic salary or fees, performance related bonuses, benefits and share option incentives.
Directors’ remuneration
The remuneration of the Directors serving for the year ended 31 December 2019 is shown below and in note 9:
2019
€’000
2018
€’000
14
11
-
-
45
70
113
-
117
85
315
385
-
-
6
153
38
197
-
224
-
-
224
421
Non-Executive Directors
Michael Ryan
David Kelly (Appointed 1 Aug 2019)
Daniel Fitzpatrick
John Given
Brendan Buckley
Executive Directors
Cathal Friel
Dairine Dempsey
Christian Milla (1)
Maurice Treacy (2)
Total fees and emoluments
(1) Includes a €15,000 employer pension contribution
(2) €25,000 of remuneration paid via invoice.
Directors’ share options and warrants
As at 31 December 2019 the following options had been granted:
Director
Date Granted
Christian Milla
14/09/2017
Mike Ryan
14/09/2017
Maurice Treacy
28/06/2019
No. of Ordinary Shares
under option
770,000
200,000
7,716,964
The 2017 stock options vest at an exercise price of 13p in equal thirds once the share price has reached 25p, 35p and 45p for 20 consecutive days.
50% of the 2019 stock options vested at an exercise price of 5.6p on 28 June 2019 and 50% vested at an exercise price of 5.6p on 28 December 2019
subject to conditions.
In addition 657,285 warrants are legally held by Cathal Friel CMF Pension Fund. These warrants were granted on 11/12/2018 and expire on 10/12/2023
and have an exercise price of 0.1/2.2 p.
12
Open Orphan Plc
Independent auditor’s report to the members of Open Orphan Plc
Opinion
We have audited the financial statements of Open Orphan Plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2019 which comprise the consolidated statement of comprehensive income, the consolidated and company
statements of financial position, the consolidated and company statements of cash flows, the consolidated and company
statements of changes in equity and notes to the financial statements, including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31
December 2019 and of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006;
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions related to going concern
In auditing the financial statements, we have concluded that the director's use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the entity’s ability to
continue to adopt the going concern basis of accounting included a detailed review of cashflow forecasts.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the Group's ability to continue as a going concern for a period of at least
twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is
not a complete list of all risks identified by our audit.
13
Open Orphan Plc
Key audit matter
Carrying value of investments and intangibles– Group and
Company
The Group had intangible assets of €3,380,000 (2018: €Nil)
at 31 December 2019. Of this, €3,140,000 relates to
capitalised goodwill on the reverse takeover in 2019 and
€240,000 relates to capitalised trade secrets. There has
been no impairment in the period.
The Company had investments of €9,634,000 (2018: €Nil)
at 31 December 2019 relating exclusively to the
investments in subsidiary undertakings.
The directors have confirmed all intangibles, including
additions were correctly recognised, calculated and being
held at cost less impairment. No impairments have been
made in the year.
Revenue recognition
The amount of revenue recognised by the Group was
€3,844,000 (2018: €Nil). The carrying value of accrued
revenue within prepayments and accrued income was
€1,634,000 (2018: €Nil).
The directors have confirmed that all of the accrued income
has been reviewed by the board in detail including each
contract with all major customers and can confirm that all
of these balances are considered to be fully recoverable
and in accordance with IFRS15.
Going concern assumption
The Group is dependent upon its ability to generate
sufficient cash flows to meet continued operational costs
and hence continue trading. Due to the slim profit margins,
foreign exchange risk continues to be a key risk which can
affect results. The management of employee and
contractor costs is also key to profitability of the Group.
The key assumptions that impact the conclusions are the
levels of future revenue, and the ability to control the
operating costs.
There are, therefore, inherent risks that the forecasts may
overstate future revenue due to the timing of closure of future
contracts, or understate future costs, and that the Group will
not be able to operate within its cash resources and continue
to operate as a going concern
The going concern assumptions are dependent on the
future growth of the current business.
How our audit addressed the key audit matter
Our audit procedures:
- we have tested items which were not capitalised as
additions to intellectual property and checked that the
conditions for capitalisation had not been met;
-intangibles are tested for impairment annually so in line
with policy
- where an impairment test was necessary, we audited
management’s assumptions and sensitivities;
- we considered whether management had exercised any
bias in assumptions used or the outputs produced in the
forecasts prepared;
- we performed an analytical review to compare the
profitability of components and discussed the findings with
management;
- the analysis work undertaken by the directors shows that
the Group is expected to become cash generative. We have
understood and assessed the methodology used by
directors
it to be
in this analysis and determined
reasonable.
Our audit approach:
- we checked a sample of time sheets and supporting
information which were used to calculate the postings to
the revenue account;
- we reviewed the calculation of revenue to be accrued and
tested a sample of items for the hours and rates applied
from the time sheet system and agreed contract rates to
the amount posted in the nominal ledger;
- where appropriate we considered the remaining amount
of accrued revenue which still required to be invoiced
including calculations of that revenue and considered the
recoverability of a sample of balances;
- we considered the work performed concerning the
change in accounting policy due to the adoption of IFRS 15,
Revenue from Contracts with Customers, and considered
the disclosure necessary.
-review of contracts and management’s judgement on the
contract price and the allocation to performance
obligations.
Our audit procedures:
- obtained management’s forecasts and cash flow analysis,
and their going concern assessment;
- assessed the reliability of forecasts to date by agreeing
historical actuals to budgets, and challenging the current
forecasts;
- tested the clerical accuracy of management’s forecast;
- reviewed the directors’ assessment, including challenging
the liquidity position;
- agreeing the assumed cash flows to the business plan and
walking through the business planning process and testing
the central assumptions and external data;
-
forecast assumptions,
including reviewing the forecast revenue and corroborated
the assumptions over the conversion of new contracts and
the levels of costs that are forecast through observation of
correspondence with potential customers to assess the
likelihood of contracts being awarded;
- assessing the sensitivities of the underlying assumptions;
- comparing future cashflows with historical data;
- considered the appropriateness of the Company’s
disclosures in relation to going concern in the financial
statements.
challenged management’s
14
Open Orphan Plc
As detailed above, we note that there are inherent risks
over the Group’s forecasts and the potential timing of the
conversion of the Group’s contract pipeline. We further
highlight that whilst the Directors are satisfied that there
are sufficient contracts in the pipeline that we, as
auditors, note that there is an inherent uncertainty that a
sufficient amount of contract wins will materialise within
the timing expected within the Group’s cashflow
forecasts. However, we note that we have seen contract
wins materialise post year end in line with forecasts made.
We note that the Group has historically been loss making
given the level of research and development activity. The
Group has a relatively fixed cost base which means that in
order to continue to operate as a going concern it has
to win and deliver sufficient contracts to cover its cost
base and operate within the cash resources it has, which
means that the outcome of a successful pipeline of work is
key to the Group’s going concern.
Based on the audit work performed we are satisfied that
although there are inherent uncertainties associated with
the forecast, the Group’s revenue pipeline will provide
required support to the business if the contracts that are
expected to be won come through within the expected
timing. We note that post year end the group have
successfully raised additional funding of £5.3m (before
expenses) in January 2020 and £12.6m (before expenses)
in May 2020 as result of share placings, which were subject
to shareholder approval and certain events or conditions.
We are also satisfied that all necessary disclosures have
been made in the consolidated financial statements
Our application of materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Rationale for
benchmark applied
Group financial statements
€100,000
Based on 2.5% of revenue.
We believe that revenues are a
by
primary measure
the
shareholders
is
Group’s performance. This
considered a standard
industry
benchmark.
used
in assessing
Company financial statements
€39,000
Based on 5% of net loss
We believe that losses are the
primary measure used by the
shareholders
the
performance of the Company. This
is considered a standard industry
benchmark.
in assessing
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was between €5,000 and €84,000.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above €5,000 as
well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
An overview of the scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. In particular, we looked at where the directors made subjective judgments, for example in respect of significant
15
Open Orphan Plc
accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of
our audits we also addressed the risk of management override of internal controls, including evaluating whether there was
evidence of bias by the directors that represented a risk of material misstatement due to fraud.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls,
and the industry in which they operate.
The Group financial statements are a consolidation of 12 reporting units, comprising the Group’s operating businesses and holding
companies.
We performed audits of the complete financial information of Open Orphan Plc, Venn Life Sciences Limited, Venn Lie Sciences (NI)
Limited, Venn Life Sciences (UK) Limited and Venn Life Sciences (Ireland) Limited. The first three companies were individually
financially significant and accounted for 27% of the Group’s revenue. We also performed specified audit procedures over goodwill
and other intangible assets, as well as certain account balances and transaction classes that we regarded as material to the Group
at the 12 reporting units.
The Group engagement team performed all audit procedures, with the exception of the audit of Venn Life Sciences (France) SAS,
Venn Life Sciences (Germany) GmbH, Venn Life Sciences (Netherlands) B.V., Venn Life Sciences (EDS) B.V. (Netherlands) and Open
Orphan DAC. These components were audited by component auditors and we reviewed and controlled the audit work undertaken
in those components.
Other information
The other information comprises the information included in the annual report other than the financial statements and our
auditor’s report thereon. The directors are responsible for the other information contained within the annual report. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the
financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of
this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report
to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
16
Open Orphan Plc
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 8, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements. A further description of our responsibilities for the audit of the financial statements is located on the Financial
Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Other matters which we are required to address
We were appointed by the shareholders of the Company on 2 October 2019 to audit the financial statements for the period ending
31 December 2019. This is the first year we are auditing the Group, however we have been engaged for the audits of the Venn
Life Sciences Holdings PLC (the target of the reverse in the year) for 8 years, where our total uninterrupted period of engagement
is 8 years, covering the periods ending 31 December 2011 to 31 December 2018.
The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the group or the parent company and we
remain independent of the group and the parent company in conducting our audit. Further services were provided to the Group
as disclosed in Note 8 of the accounts.
Our audit opinion is consistent with the additional report to the audit committee.
Use of this report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Sudhir Rawal (Senior Statutory Auditor)
For and on behalf of
Jeffreys Henry LLP (Statutory Auditor)
Finsgate
5-7 Cranwood Street,
London EC1V 9EE
23 June 2020
17
Open Orphan Plc
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019
Continuing operations
Revenue, from contracts with customers
Direct Project and Administrative Costs
Other operating income
Operating (loss)
Depreciation
Amortisation
Exceptional items
EBITDA before exceptional items
Finance Expense
Share Options/Warrants Reserve charge
Loss on sale/impairment of Investments
(Loss) before income tax
Income tax credit
(Loss) for the year
(Loss) for the year is attributable to:
Owners of the parent
Other comprehensive income
Currency translation differences
Total comprehensive (loss) for the year
Notes
5,35
6
33
6,16,37
6,17
7
5/6
12
32
18b/18c
13
Year to
31 December
2019
€’000
18 July 2017 to
31 December
2018
€’000
3,844
(9,876)
195
(5,837)
(337)
(378)
(811)
(4,311)
(399)
(120)
(263)
(6,619)
76
(6,543)
(6,543)
(44)
(6,587)
-
(1,611)
-
(1,611)
(-)
(-)
(-)
(1,611)
(45)
-
-
(1,656)
-
(1,656)
(1,656)
-
(1,656)
Earnings per share from continuing operations
attributable to owners of the parent during the year
Basic and diluted (loss) per ordinary share
From continuing operations
For the year
All activities relate to continuing operations.
Note
14
2019
(3.96c)
(3.96c)
2018
(785.2c)
(785.2c)
The notes on pages 22 to 54 are an integral part of these consolidated financial statements.
The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company
income statement account.
The loss for the parent Company for the year was €1,857,289 (2018 – loss of €1,656,197).
18
Open Orphan Plc
Consolidated and Company’s Statement of Financial Position
As at 31 December 2019
Assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Right of Use Asset
Total non-current assets
Current assets
Trade and other receivables
Income tax recoverable
Cash and cash equivalents
Total current assets
Total assets
Equity attributable to owners
Share capital
Share premium account
Merger reserves
Foreign currency reserves
Share option reserve
Retained earnings
Total equity
Liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Total non-current liabilities
Current liabilities
Trade and other payables
Deferred taxation
Lease liabilities
Borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
16
17
18a
37
21
22
26
27
27
27
27/32
23
37
23
24
37
25
Group
2019
€’000
223
3,380
-
1,541
5,144
4,250
14
1,219
5,483
10,627
372
19,041
(8,060)
(102)
298
(8,199)
3,350
49
1,156
1,205
3,500
48
522
2,002
6,072
7,277
10,627
Group
2018
€’000
Company
2019
€’000
Company
2018
€’000
1
-
-
-
1
3
33
165
201
202
-
-
-
-
-
(1,656)
(1,656)
-
-
-
498
-
-
1,360
1,858
1,858
202
-
-
9,634
-
9,634
6,500
-
495
6,995
16,629
372
19,041
(2,635)
-
298
(3,513)
13,563
-
-
-
1,597
-
-
1,469
3,066
3,066
16,629
1
-
-
-
1
3
33
165
201
202
-
-
-
-
-
(1,656)
(1,656)
-
-
-
498
-
-
1,360
1,858
1,858
202
The notes on pages 22 to 54 are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board on 23 June 2020
Cathal Friel
Executive Chairman
Open Orphan Plc
Registered no: 07514939
19
Open Orphan Plc
Consolidated and Company’s Statement of Cash Flows
For the year ended 31 December 2019
Notes
28
Group
2019
€’000
Group
2018
€’000
Company
2019
€’000
Company
2018
€’000
(3,251)
-
(3,251)
(1,149)
-
(1,149)
(3,240)
-
(3,240)
(1,149)
-
(1,149)
Cash Flow from operating activities
Continuing operations
Cash used in operations
Income tax (paid)
Net cash used in operating activities
Cash flow from investing activities
Investment in Subsidiary
Sale of Shares in Integumen PLC
Purchase of property, plant and equipment
Interest (paid)
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issuance of ordinary shares & options
Premium on conversion of Convertible Debentures
to shares
Exceptional Costs
Repayment of Invoice Discounting
Proceeds from Issuing Convertible Debentures
Costs of June 2019 fund raising
Net cash generated by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
26
22
42
605
(27)
(133)
487
5,043
321
(811)
(25)
-
(710)
3,818
1,054
165
1,219
-
-
(1)
(45)
(46)
-
-
-
-
1,360
-
1,360
165
-
165
42
-
-
(315)
(273)
5,043
321
(811)
-
-
(710)
3,843
330
165
495
-
-
(1)
(45)
(46)
-
-
-
-
1,360
-
1,360
165
-
165
20
Open Orphan Plc
Consolidated and Company’s Statement of Changes in Shareholders’ Equity
Group
At 18 July 2017
Changes in equity for the
Period ended 31 Dec 2018
(Loss) for the period
Total comprehensive (loss)
For the period
Transactions with the
owners
Share option provision reserve
Total contributions by and
distributions to owners
At 31 December 2018
Changes in equity for the
Year ended 31 Dec 2019
(Loss) for the year
Currency translation
differences
Total comprehensive (loss)
for the year
Transactions with the
owners
Transfer Open Orphan PLC
Share option provision reserve
Shares issued
Total contributions by and
distributions to owners
At 31 December 2019
Company
Share
capital
€’000
-
Share
premium
€’000
-
Merger
Reserves
€’000
-
Share Option
reserve
€’000
-
Foreign
currency
reserve
€’000
-
Retained
Earnings
€’000
-
Total
€’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,656)
(1,656)
(1,656)
(1,656)
-
-
-
(1,656)
-
(1,656)
(6,543)
(6,543)
(58)
-
(58)
(58)
(6,543)
(6,601)
371
-
1
372
372
19,025
-
16
19,041
19,041
(8,060)
-
-
(8,060)
(8,060)
178
120
-
298
298
(44)
-
-
-
-
-
(44)
(102)
-
(8,199)
11,470
120
17
11,607
3,350
As at 18 July 2017
Changes in equity for the period
ended 31 December 2018
Total comprehensive loss for
the period
At 31 December 2018
Changes in equity for the year
ended 31 December 2019
Total comprehensive gain for
the year
Share option provision reserve
Transfer re Open Orphan PLC
Shares issued
Total contributions by and
distributions to owners
At 31 December 2019
Share
capital
€’000
-
Share
premium
€’000
-
Share
Option reserve
€’000
-
Merger
reserve
€’000
-
Retained
earnings
€’000
-
Total
€’000
-
-
-
-
-
371
1
372
372
-
-
-
-
19,025
16
19,041
19,041
-
-
-
120
178
-
298
298
-
-
-
(1,656)
(1,656)
(1,656)
(1,656)
(1,857)
(1,857)
-
(2,635)
-
(2,635)
(2,635)
-
-
-
(1,857)
(3,513)
120
16,939
17
15,219
13,563
21
Open Orphan Plc
Notes to the Financial Statements
For the year ended 31 December 2019
1. General information
Open Orphan Plc is a company incorporated in England and Wales. The Company is a public limited company, limited by shares, listed
on the AIM market of the London Stock Exchange. On 18 January 2016, the company also listed on the ESM market of the Irish Stock
Exchange. The address of the registered office is Queen Mary Bio Enterprises, Innovation Centre, 42 New Road, London, E1 2AX, UK.
The principal activity of the Group is that of a Clinical Research Organisation providing a suite of consulting and clinical trial services
to pharmaceutical, biotechnology and medical device organisations. The Group has a presence in the UK, Ireland, France,
Netherlands, Germany and Singapore.
The financial statements are presented in ‘000 Euros (except where indicated otherwise), the currency of the primary economic
environment in which the Group’s trading companies operate. The Group comprises Open Orphan Plc and its subsidiary companies
as set out in note 18.
The registered number of the Company is 07514939.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The policies
have been consistently applied throughout the year, unless otherwise stated.
Basis of preparation
Open Orphan Plc (formerly Venn Life Sciences Holdings Plc) completed an IPO on the London AIM Exchange and the Dublin Euronext
exchange on 28 June 2019 through a reverse acquisition of Open Orphan DAC, an Irish Company, into Venn Life Sciences Holdings Plc
(Venn), a UK company. Based on the accounting standards under IFRS 3 and IFRS 10, the Group has determined that the entity with
control of the combined group after the combination is Open Orphan DAC. It was therefore determined that reverse acquisition
accounting is to be applied for presentation of the financial statements of the Group. This means that results reported for the period
reflect those of Open Orphan DAC for the full 12-month period and for Venn Life Sciences group Plc group from 01 July 2019 to year
end. The Balance Sheet reported for the period and comparable periods reflect those of the combined group with share capital
reflecting the position of the ultimate parent company Open Orphan Plc. Note the prior period for Open Orphan DAC was a 17-month
period. The % of the enlarged share capital represented by the consideration shares issued to Open Orphan DAC on the reverse
takeover was 40.1% which represented a fair value consideration of £5.7m.
For information purposes, a pro forma statement of Comprehensive Income for the period and comparable periods for Open Orphan
Plc on a stand-alone basis and excluding any impact of the combination is presented in the notes to allow a normalized presentation
of Comprehensive Income for the existing Group during the period. This is consistent with handling for the H1 2019 Interim results.
The consolidated financial statements of Open Orphan Plc have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS’s), IFRIC interpretations and the Companies Act 2006 applicable to companies
reporting under IFRS. Practice is continuing to evolve on the application and interpretations of IFRS.
The consolidated financial statements have been prepared under the historical cost convention.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in note 4.
Changes in accounting policies and disclosures
The accounting policies adopted are consistent with those of the previous financial year.
The changes to new standards for the current period and effective from 1 January 2019 include:
IFRS 16
IAS 19
Leases
Employee Benefits (amendment)
The Group applies, for the first time, IFRS 16 Leases, that does not require restatement of previous financial statements. The
nature and effect of this application is disclosed below.
22
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
IFRS 16 Leases
IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a Lease,
SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS
16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to
account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The
standard includes two recognition exemptions for lessees – leases of ‘low-value’ assets (e.g. personal computers) and short-term
leases (i.e. leases with a lease term of twelve months or less). At the commencement date of a lease, a lessee will recognise a
liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during the
lease term (i.e. the right-of-use asset).
Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the
right-of-use asset.
Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease
term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The
lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use
asset.
IFRS 16, which is effective for annual periods beginning on or after 1 January 2019, requires lessees and lessors to make more
extensive disclosures than under IAS 17.
Transition to IFRS 16
The Group adopted IFRS 16 using the simplified retrospective method of adoption with the date of initial application of 1
January 2019. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts
that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to
use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and
do not contain a purchase option (‘short-term leases’), and lease contracts for which the underlying asset is of low value (‘low-
value assets’).
The effect of adoption of IFRS 16 is as follows:
Impact on the statement of financial position as at 31 December 2018 and up to date of reverse takeover:
Assets
Right of Use Assets
Liabilities
Lease Liabilities
Net impact on equity at 31 December 2018
H1 2019 Loss
Net impact on equity at 30 June 2019
At 31 Dec 2018
€’000
2,075
(2,205)
130
4
134
Impact on Consolidated Statement of Comprehensive Income for the year ended 31 December 2018:
Depreciation expense
Rent expense (included in Administration costs)
Profit from operations
Finance costs
Loss for the year ending 31 December 2018
Year ended 31 December
2018
€’000
533
(635)
(102)
110
8
23
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
Transition to IFRS 16 (Cont’d)
Impact on the statement of cash flows (increase/(decrease)) for the year ended 31 December 2018:
Net cash flows from operating activities
Net cash flows from financing activities
Summary of new accounting policies
Year ended
31 December
2018
€’000
102
(110)
Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the Consolidated
Financial Statements of the Group.
The Group has not early adopted any amendment, standard or interpretation that has been issued but is not yet effective.
Standards issued but not yet effective
There were a number of standards and interpretations which were in issue at 31 December 2019 but were not effective at 31
December 2019 and have not been adopted for these Financial Statements. The Directors have assessed the full impact of these
accounting changes on the Company. To the extent that they may be applicable, the Directors have concluded that none of these
pronouncements will cause material adjustments to the Group’s Financial Statements. They may result in consequential changes to
the accounting policies and other note disclosures. The new standards will not be early adopted by the Group and will be incorporated
in the preparation of the Group Financial Statements from the effective dates noted below.
The new standards include:
IFRS 3
IFRS 17
IAS 1
IAS 8
Business Combinations1
Insurance Contracts2
Presentation of Financial Statements1
Accounting Policies, Changes in Accounting Estimates and Errors1
1 Effective for annual periods beginning on or after 1 January 2020
2 Effective for annual periods beginning on or after 1 January 2021
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the
Group.
Going concern
The Directors have prepared the financial statements on a going concern basis. During the financial year ended 31 December 2019
the Group made a loss of Euro €6,587k and had net cash outflows from operating activities of €3,251k, however the Directors consider
the use of the going concern basis to be appropriate. The Directors have prepared working capital projections which show that, along
with cash balances on hand at 31 December 2019, and additional funding of £5.3m (before expenses) in January 2020 and £12.6m
(before expenses) in May 2020 as result of share placings, which were subject to shareholder approval and certain events or
conditions, the Group & Company will have sufficient funding to be able to continue as a going concern.
24
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings.
Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies generally
accompanying a shareholding of more than fifty per cent of the voting rights. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are
fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control
ceases.
Inter-Company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of
between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under
the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the
group’s share of the profit or loss of the associate after the date of acquisition.
The group’s share of post-acquisition profit or loss is recognised in the income statement.
(a) Acquisition accounting
The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred, and the equity interests issued by the
Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition
basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair
value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired is
recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase,
the difference is recognised directly in the income statement.
Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from
contingent consideration amendments.
(b) Associates
Associates are all entities over which the group has significant influence but not control or joint control as defined under IAS28. This
is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for
using the equity method of accounting (see equity method below), after initially being recognised at cost less any fair value
adjustment.
Equity Method:
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the group’s share of movements in other
comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint
ventures are recognised as a reduction in the carrying amount of the investment.
When the group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the other entity. Unrealised gains on transactions between the group and its associates and joint ventures are eliminated
to the extent of the group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred.
25
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies
adopted by the group. The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy
described in page 28.
(c) Group re-organisation
The Group re-organisation of common control transaction is scoped out under IFRS 3. The results of the Group and all of its
subsidiary undertakings affected by the group re-organisation are accounted using the merger accounting method. The method
of accounting for such business combination is treated to take place before the transition of IFRS. The investment is recorded at
the nominal value of the shares issued, together with the fair value of any additional consideration paid.
Merged subsidiary undertakings are treated as if they had always been a member of the Group. This treatment is permitted under
the exemption in IFRS 1 to not restate acquisitions before transition.
The corresponding figures for the previous period include its results for that period, the assets and liabilities at the previous
balance sheet date and the shares issued by the company as consideration as if they had always been in issue. Any difference
between the nominal value of the shares acquired by the Company and those issued by the company to acquire them is taken to
reserves as re-organisation reserve.
(d) Reverse acquisition accounting
The acquisition of Venn Life Sciences Holdings Plc (renamed Open Orphan Plc) and its subsidiaries by Open Orphan DAC on 27
June 2019 has been accounted using the principles of reverse acquisition accounting. Although the Group financial statements
have been prepared in the name of the legal parent, Open Orphan Plc, they are in substance a continuation of the consolidated
financial statements of the legal subsidiary, Open Orphan DAC. The following accounting treatment has been applied in respect
of the reverse accounting:
The assets and liabilities of the legal subsidiary, Open Orphan DAC, are recognised and measured in the Group financial statements
at the pre-combination carrying amounts, without restatement of fair value. The retained earnings and other equity balances
recognised in the Group financial statements reflect the retained earnings and other equity balances of Open Orphan DAC
immediately before the business combination and the results of the period from 1 January 2019 to the date of the business
combination are those of Open Orphan DAC. However, the equity structure appearing in the Group financial statements reflects
the equity structure of the legal parent, Open Orphan Plc (formerly Venn Life Sciences Holdings Plc), including the equity
instruments issued in order to affect the business combination.
Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Euro,
which is the functional and presentational currency of the main operating entities.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised
in the income statement within ‘administrative expenses’, except when deferred in other comprehensive income as qualifying cash
flow hedges and qualifying net investment hedges.
(c) Group companies
The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have
a functional currency different from the presentation currency are translated into the presentational currency as follows:
26
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
•
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates; and
all resulting exchange differences are recognised in other comprehensive income.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other
comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity
are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating
segments, has been identified as the Executive Directors who make strategic decisions.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical
cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition
for its intended use.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only where it is
probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured
reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income
statement during the financial period in which they are incurred. Any borrowing costs associated with qualifying property, plant and
equipment are capitalised and depreciated at the rate applicable to that asset category.
Depreciation on assets is calculated using the straight-line method or reducing balances method to allocate their cost to its residual
values over their estimated useful lives, as follows:
20% –25%
Fixtures and fittings
The assets’ residual values and useful economic lives are reviewed regularly, and adjusted if appropriate, at the end of each reporting
period.
An asset’s carrying value is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Gains and losses on the disposal of assets are determined by comparing the proceeds with the carrying amount and are recognised
in administration expenses in the income statement.
Intangible assets
(a) Goodwill
Goodwill represents the excess amount of the cost of an acquisition over the fair value of the Group’s share of the net identifiable
assets of the acquired underlined businesses at the date of the acquisition. Goodwill on acquisitions of businesses is included in
‘intangible assets’. In normal cases Goodwill has an indefinite useful life and is tested annually for impairment and carried at cost less
accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include
the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating
units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose,
identified according to operating segment.
27
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
(b) Trade secrets
Trade secrets, including technical know-how, operating procedures, contact network, methods and processes, acquired in a business
combination are recognised at fair value at the acquisition date. Trade secrets have a finite useful life and are carried at cost less
accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trade secrets over their
estimated useful lives of 10 years and is charged to administrative expenses in the income statement.
c) Customer relationships
Contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The
contractual customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is
calculated using the straight-line method over the expected life of the customer relationship of 5 years and is charged to
administrative expenses in the income statement.
d) Workforce
Workforce acquired in a business combination are recognised at fair value at the acquisition date. The workforce has a finite useful
life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected
life of 5 years and is charged to administrative expenses in the income statement.
e) Intellectual property rights
Intellectual property rights relates to patents acquired by the Group. Amortisation is calculated using the straight-line method over
the expected life of 10 years and is charged to administrative expenses in the income statement.
Impairment of non-financial assets
Assets that have an indefinite life such as goodwill are not subject to amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds its
recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the
time value of the money and the risks specific to the asset which the estimates of future cash flows have not been adjusted.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
flows. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the
carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset (cash-generating unit) in the prior period. A reversal of an
impairment loss is recognised in the income statement immediately. If goodwill is impaired however, no reversal of the impairment
is recognised in the financial statements.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument
of another entity.
Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through other
comprehensive income (OCI), and fair value through profit or loss.
28
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and
the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing
component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair
value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not
contain a significant financing component or for which the Group has applied the practical expedient are measured at the
transaction price determined under IFRS 15. Refer to the accounting policies in note 38 Revenue from contracts with customers.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash
flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred
to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash
flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial
assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention
in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or
sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity
instruments)
• Financial assets at fair value through profit or loss
However, only Financial assets at amortised cost are discussed as all the Group’s financial assets are measured at amortised cost.
Financial assets at amortised cost (debt instruments)
This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following
conditions are met:
•
•
The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual
cash flows, and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal
and interest on the principal amount outstanding
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to
impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost comprise of trade and other receivables and cash and cash equivalents.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily
derecognised (i.e., removed from the Group’s consolidated statement of financial position) when:
•
The rights to receive cash flows from the asset have expired, OR
29
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
•
The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received
cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a) the Group
has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained
substantially all the risks and rewards of the asset, but has transferred control of the asset
When the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it
evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained
substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the
transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The
transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has
retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original
carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Impairment of financial assets
Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS
9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising
from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported
net, such provisions are recorded in a separate provision account with the loss being recognised in the consolidated statement of
comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is
written off against the associated provision.
From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts
owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting
difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit).
Financial liabilities
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and
borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly
attributable transaction costs.
The Group’s financial liabilities include trade and other payables and loans and borrowings.
Subsequent measurement
Loans and borrowings
This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently
measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or
premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in
the statement of profit or loss. This category generally applies to interest-bearing loans and borrowings. For more information,
refer to Note 25.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing
financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability
are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the
recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.
30
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
Trade and other receivables
Trade receivables are initially recognised at fair value, being the original invoice amount, and subsequently measured at amortised
cost less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not
be able to collect all amounts due according to the original terms of the receivable. Trade receivables that are less than three months
past due date are not considered impaired unless there are specific financial or commercial reasons that lead management to
conclude that the customer will default. Older debts are considered to be impaired unless there is sufficient evidence to the contrary
that they will be settled. The amount of the provision is the difference between the asset’s carrying value and the present value of
the estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the
amount of the loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectible it
is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against
administrative expenses in the income statement.
Cash and cash equivalents
Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original
maturity of less than three months, reduced by overdrafts to the extent that there is a right of offset against other cash balances.
For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits as
defined above net of outstanding bank overdrafts.
Share capital
Ordinary Shares and Deferred shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated
to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary
Shares or options are deducted from the share premium account.
Merger reserve
The reserve represents a premium on the issue of the ordinary shares for the acquisition of subsidiary undertakings. The relief is only
available to the issuing company securing at least a 90% equity holding in the acquired undertaking in pursuance of an arrangement
providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be
provided by the issue to the issuing company of equity shares in the other company.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the
business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method.
Borrowings
Borrowings are recognised initially at the fair value of proceeds received, ,net of transaction costs incurred. Borrowings are
subsequently carried at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to
defer settlement of the liability for at least 12 months after the balance sheet date.
Borrowing costs are expensed in the consolidated Group income statement under the heading ‘finance costs’. Arrangement and
facility fees together with bank charges are charged to the income statement under the heading ‘administrative costs’.
Current and deferred income tax
The tax expense comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates
to items recognised in other comprehensive income where the associated tax is also recognised in other comprehensive income.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date
in the countries where the Company and its subsidiaries operate and generate taxable income. Management evaluates positions
taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
31
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
Deferred tax is disclosed in accordance with IAS 12 and recognised using the liability method, on all temporary differences at the
balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised in respect of all temporary differences except where the deferred tax liability arises from the
initial recognition of goodwill in business combinations.
Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and tax losses, to the
extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of available evidence, there will
be sufficient taxable profits against which the future reversal of the underlying temporary differences can be deducted.
The carrying value of the amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all, or part, of the tax asset to be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or
the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the balance sheet date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on
either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Right of use assets
The Group recognises right of use assets at the commencement date of the lease (i.e., the date the underlying asset is available
for use). Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognised, initial
direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless
the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use
assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right of use assets
are subject to impairment.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any
lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under
residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be
exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the
option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the
period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement
date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease
liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed
lease payments or a change in the assessment to purchase the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those
leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also
applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e.,
below $5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line
basis over the lease term. Short-term Lease payments expensed in year ended 31/12/19: €19k (2018: Nil).
32
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
Employee benefits
Pension obligations
Group companies operate a pension scheme with defined contribution plans. A defined contribution plan is a pension plan under
which the Group pays fixed contributions into a separate entity with the pension cost charged to the income statement as incurred.
The Group has no further obligations once the contributions have been paid.
Share-based payment
Where equity settled share options and warrants are awarded to directors and employees, the fair value of the options and warrants
at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period and the corresponding
entry recorded in the share-based payment reserve. Non-market vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest.
Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the
remaining vesting period.
Revenue recognition
(a) Revenue from Contracts
The group provides clinical consulting services and drug development services. Revenue from providing services is recognised in the
accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service
provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and
uses the benefits simultaneously. This is determined in reference to the stage of completion which is measured by labour hours
incurred to the period end as a percentage of the total estimated labour hours for the contract. Where the contract outcome cannot
be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.
Some contracts include multiple performance obligations in the form of various service offerings. Where the contracts include
multiple performance obligations, the transaction price will be allocated to each performance obligation measured by reference to
labour hours incurred to the period end as a percentage of the total estimated labour hours to achieve a particular performance
obligation. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised
that are recoverable.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or
decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the
revision become known by management.
In case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the
group exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is
recognised.
Terms and Conditions tend to vary from contract to contract and in general the payment terms tend to be between 30 and 90 days
in The Netherlands and between 30 and 60 days in France and Ireland.
Some contracts include references to milestone events. Where no fee is payable until a milestone is achieved, revenue is recognised
up to the value of the milestone event set to occur.
The group is applying practical expedient per IFRS 15 to not disclose the aggregate amount of the transaction price allocated to the
performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period as the entity has a right to
consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance
completed to date and recognise revenue in the amount to which the entity has a right to invoice.
33
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
2. Summary of significant accounting policies (Cont’d)
(b) Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,
which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s
net carrying amount.
(c) Royalty and license income
Royalty and license income are recognised on an accruals basis in accordance with the substance of the relevant agreements.
Dividend distribution
Dividend distributions to the Company’s shareholders are recognised as a liability in the Group’s financial statements in the period in
which the dividends are approved by the Company’s shareholders. Interim dividends are recognised when paid.
Exceptional items
These are items of an unusual or non-recurring nature incurred by the Group and include transactional costs and one-off items
relating to business combinations, such as acquisition expenses.
3. Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (foreign exchange risk and cash flow interest rate risk), credit
risk, liquidity risk, capital risk and fair value risk. The Group’s overall risk management programme focuses on the unpredictability of
the financial markets and seeks to minimise the potential adverse effects on the Group’s financial performance. The Group does not
use derivative financial instruments to hedge risk exposures.
Risk management is carried out by the head office finance team. It evaluates and mitigates financial risks in close co-operation with
the Group’s operating units. The Board provides principles for overall risk management whilst the head office finance team provides
specific policy guidance for the operating units in terms of managing foreign exchange risk, credit risk and cash and liquidity
management.
a) Market risk
(i) Foreign exchange – cash flow risk
The Group’s presentational currency is Euro although it operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily between Euro, USD and the GBP such that the Group’s cash flows are affected by fluctuations
in the rate of exchange between Euro and the aforementioned foreign currencies.
Management do not use derivative financial instruments to mitigate the impact of any residual foreign currency exposure not
mitigated by the natural hedge within the business model. The Group does not speculate in foreign currencies and no operating
Company is permitted to take unmatched positions in any foreign currency.
(ii) Foreign exchange – Fair value risk
Translation exposures that arise on converting the results of overseas subsidiaries are not hedged. Net assets held in foreign
currencies are hedged wherever practical by matching borrowings in the same currency. The principal exchange rates used by the
Group in translating overseas profits and net assets into Euro are set out in the table below.
Rate compared to Euro
GBP
US Dollar
Average rate
2019
Average rate
2018
Year end rate Year end rate
2018
2019
0.88
1.12
0.88
1.18
0.85
1.12
0.90
1.14
34
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
3. Financial risk management (Cont’d)
As a guide to the sensitivity of the Group’s results to movements in foreign currency exchange rates, a one cent movement in the
GBP to Euro rate would impact annual earnings by approximately €1,000 due to natural hedging (2018 - €500).
(iii) Cash flow and fair value interest rate risk
The Group has assets in the form of cash and cash equivalents and limited interest-bearing liabilities which relate to long-term
borrowing. Interest rates on cash and cash equivalents are currently zero whilst interest rates on borrowings have been fixed and
therefore expose the Group to fair value interest rate risk. The Group does not speculate on future changes in interest rates.
Where overseas acquisitions are made, it is the Group’s policy to arrange any borrowings required in local currency.
It is the Group’s policy not to trade in derivative financial instruments. The Group does not use interest rate swaps.
(b) Credit risk
Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local subsidiary and
operating business unit is responsible for managing and analysing the credit risk for each of their new clients before standard payment
and delivery terms and conditions are offered. It is the Group policy to obtain deposits from customers where possible, particularly
overseas customers. In addition, the Group will seek confirmed letters of credit for the balances due. Credit risk is managed at the
operating business unit level and monitored at the Group level to ensure adherence to Group policies. If there is no independent
rating, local management assesses the credit quality of the customer, taking into account its financial position, past experience and
other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The
utilisation of credit limits is regularly monitored.
Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial
institutions, as well as credit exposures to customers.
(c) Liquidity risk
Cash flow forecasting is performed in the individual operating entities of the Group and is aggregated by Group finance. Group finance
monitors cash and cash flow forecasts and it is the Group’s liquidity risk management policy to maintain sufficient cash and available
funding through an adequate amount of cash and cash equivalents and committed credit facilities from its bankers. Due to the
dynamic nature of the underlying businesses, the head office finance team aims to maintain flexibility in funding by keeping sufficient
cash and cash equivalents available to fund the requirements of the Group.
The Group’s policy in relation to the finance of its overseas operations requires that sufficient liquid funds be maintained in each of
its territory subsidiaries to support short and medium-term operational plans. Where necessary, short-term funding is provided by
the holding Company. In the UK, the working capital bank facility and the management of liquid funds in excess of operational needs
are controlled centrally. Typically, excess funds are placed as short-term deposits, to provide a balance between interest earnings
and flexibility.
The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows.
At 31 December 2019:
Borrowings
Leased Liabilities
Trade and other payables
At 31 December 2018:
Borrowings
Trade and other payables
Note
25
37
23
25
23
Less than
Between
one year 1 and 2 years 2 and 5 years
€’000
Between More than
5 years
€’000
€’000
€’000
2,002
522
3,500
1,360
498
-
385
47
-
-
-
771
2
-
-
-
-
-
-
-
Total
€’000
2,002
1,678
3,549
1,360
498
35
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
3. Financial risk management (Cont’d)
(d) Capital risk management
The Group’s objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is
calculated as total borrowings (including “current and non-current borrowings” as shown in the consolidated balance sheet) less cash
and cash equivalents. Total capital is the sum of net debt plus equity.
The Group is currently largely un-geared, having net cash at 31 December 2019. It is the stated strategy of the Group to grow both
organically and through acquisition with acquisitions to be funded through a mixture of debt and equity funding.
4. Critical accounting estimates and judgements
In the process of applying the Group’s accounting policies, management has made accounting judgements in the determination of
the carrying value of certain assets and liabilities. Due to the inherent uncertainty involved in making assumptions and estimates,
actual outcomes will differ from those assumptions and estimates. The following judgements have the most significant effect on the
amounts recognised in the financial statements.
(a) Business combinations
The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets
acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to
the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill. However, in applying
the reverse acquisition accounting method this has necessitated the Group to recognise the unallocated portion as deemed
acquisition costs as required under IFRS 3 – Business Combinations. See also note 2 (d) regarding reverse acquisition accounting
treatment for most recent transaction.
(b) Impairment of goodwill and cost of investments
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.
The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations
require the use of estimates as set out in note 17. In addition, the Group has also considered the impairment of the investments in
the subsidiaries undertakings as set out in note 18.
(c) Impairment of receivables
Trade and other receivables are carried at the contractual amount due less any estimated provision for non-recovery. Provision is
made based on a number of factors including the age of the receivable, previous collection experience and the financial
circumstances of the counterparty.
(d) Deferred tax assets
Deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which
deductible temporary differences can be utilised. See note 24.
(e) Intangible assets
The Group amortises intangible assets over their estimated useful life. The useful lives of Trade Secrets, Customer relationships,
Workforce and Intellectual Property Rights have been estimated by the Group as stated in note 2. The Group tests annually whether
there is any indication that Intangible assets have been impaired.
(f) Revenue recognition
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or
decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the
revision become known by management.
36
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
5. Segmental reporting
Management has determined the Group’s operating segments based on the monthly management reports presented to the Chief
Operating Decision Maker (‘CODM’). The CODM is the Executive Directors and the monthly management reports are used by the
Group to make strategic decisions and allocate resources.
The principal activity of the Group is that of a Clinical Research Organisation (CRO) providing a suite of consulting and clinical trial
services to pharmaceutical, biotechnology and medical device organisations. As the majority of the Group’s contracts are large, multi-
country contracts, pulling resources from many different locations, the CODM considers this one business unit.
A second business unit relates to the development of a Data platform of rare disease patients in Europe.
Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA (before exceptional items).
The segment information provided to the Board for the reportable segments for the year ended 31 December 2019 is as follows:
Income statement
External revenue and other income
EBITDA before exceptional items
Exceptional items
EBITDA
Depreciation
Amortisation
Operating (loss)
Net finance (costs)
Share Options Reserve charge
Loss on Financial Asset Investments
Retained (loss) before tax
Segment assets
Intangibles
PPE
ROU Assets
Trade and other debtors
Cash
Total assets
Segment liabilities
Operating liabilities
Borrowings
Total liabilities
2019
CRO
2019
Data
Platform
2019
Total
2018
Total
€’000
€’000
€’000
€’000
4,039
(3,549)
(811)
(4,360)
(336)
(378)
(5,074)
(137)
(120)
(263)
(5,594)
3,380
216
1,541
4,252
1,197
10,586
(4,877)
(1,652)
(6,529)
-
(762)
-
(762)
(1)
-
(763)
(262)
-
-
4,039
(4,311)
(811)
(5,122)
(337)
(378)
(5,837)
(399)
(120)
(263)
-
(1,611)
-
(1,611)
-
-
(1,611)
(45)
-
-
(1,025)
(6,619)
(1,656)
-
7
-
12
22
41
(398)
(350)
(748)
3,380
223
1,541
4,264
1,219
10,627
(5,275)
(2,002)
(7,277)
-
1
-
36
165
202
(498)
(1,360)
(1,858)
37
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
6. Expenses – analysis by nature
Employee benefit expense (note 10)
PPE Depreciation (note 16) and amortisation (note 17)
Depreciation related to Right of use Assets (Note 37)
Exceptional items (note 7)
Foreign exchange losses
Professional fees
Travel
Printing, postage, stationary
Subcontractors and freelancers
Other expenses
Total direct project and administrative costs
7. Exceptional items
Included within Administrative expenses are exceptional items as shown below:
Exceptional items include:
– Transaction costs relating to business combinations and acquisitions
Total exceptional items
2019
€’000
5,931
448
267
811
128
516
212
8
317
1,238
9,876
2018
€’000
438
-
-
-
-
303
135
8
-
727
1,611
2019
€’000
2018
€’000
811
811
-
-
8. Auditor remuneration
Services provided by the Company’s auditor and its associates. During the year the Group (including its overseas subsidiaries)
obtained the following services from the Company’s auditor and its associates:
2019
€’000
2018
€’000
Fees payable to Company’s auditor for the audit of the parent Company and consolidated financial
statements
Fees payable to the auditors of subsidiaries for services:
– The audit of Company’s subsidiaries pursuant to legislation paid to Company Auditor
– The audit of Company’s subsidiaries pursuant to legislation paid to other Auditors
– Other services
– Tax services
Total auditor’s remuneration
30
24
51
16
9
130
7
-
-
-
7
38
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
9. Directors’ emoluments
Aggregate emoluments
Contribution to defined contribution pension scheme
Total directors’ remuneration
See further disclosures within the Remuneration Report on page 12.
Highest paid Director
Total emoluments received
Defined contribution pension scheme
2019
€’000
370
15
385
2019
€’000
102
15
2018
€’000
376
45
421
2018
€’000
179
45
No share options were exercised in the year by highest paid director nor was there any shares awarded to that director in the year.
10. Employee benefit expense
Wages and salaries
Social security costs
Pension costs
Total employee benefit expense
11. Average number of people employed
Average number of people (including Executive Directors) employed was:
Administration
Clinical research
Sales and marketing
Total average number of people employed
The total number of employees at 31 December 2019 was 132 (2018 - 5).
12. Finance income and costs
Interest expense:
– Interest on Lease liabilities (Note 37)
– Interest on other loans
Finance costs
Finance income
– Interest income on cash and short-term deposits
Finance income
Net finance expense
2019
€’000
4,792
823
316
5,931
2018
€’000
359
29
50
438
2019
No
2018
No
34
100
9
143
2019
€’000
(55)
(344)
(399)
-
-
(399)
5
-
-
5
2018
€’000
-
(45)
(45)
-
-
(45)
39
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
13. Income tax expense
Group
Current tax:
Current tax for the year
Overprovision of prior year tax charge
Total current tax (credit)
Deferred tax (note 24):
Origination and reversal of temporary differences
Total deferred tax
Income tax (credit)
2019
€’000
2018
€’000
-
-
-
(76)
(76)
(76)
-
-
-
-
-
-
The tax on the Group’s results before tax differs from the theoretical amount that would arise using the standard tax rate applicable
to the profits of the consolidated entities as follows:
(Loss) before tax
2019
€’000
2018
€’000
(6,619)
(1,656)
Tax calculated at domestic tax rates applicable to UK standard rate of tax of 19.00% (2018 – 19%)
(1,258)
(315)
Tax effects of:
– Expenses not deductible for tax purposes
–Temporary timing differences
– Losses carried forward
Income tax (credit)
189
(76)
1,069
(76)
3
(312)
-
-
There are no tax effects on the items in the statement of comprehensive income. The effect of losses is discussed in note 24.
14. Loss per share
(a) Basic
Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number
of ordinary shares in issue during the year.
(Loss) from continuing operations
Total
Weighted average number of Ordinary Shares in issue
2019
€’000
(6,543)
(6,543)
165,081,000
2018
€’000
(1,656)
(1,656)
211,000
Earnings per share from continuing operations
(3.96c)
(785.2c)
(b) Diluted
Due to the losses in the periods the effect of the share options and warrants noted below were considered to be anti-dilutive.
Details of share options are given in note 32. Details of warrants outstanding are given in note 26.
40
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
14. Loss per share (Cont’d)
Potential dilutive ordinary shares:
Weighted Options
Weighted Warrants
Total
15. Dividends
There were no dividends paid or proposed by the Company in either year.
16. Property, plant and equipment
Group
Cost
At 1 January 2019
Transfer re Open Orphan PLC
Additions
Disposals
Exchange differences
At 31 December 2019
Depreciation
At 1 January 2019
Transfer re Open Orphan PLC
Charge for the year
Elimination on disposal
Exchange differences
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
2019
2018
9,131,123
6,651,204
15,782,327
-
-
-
Fixtures & fittings
€’000
1
812
37
(11)
-
839
-
546
77
(7)
-
616
223
1
The Company had no property, plant and equipment at 31/12/2019. (2018: €1,000 -removed on transfer to Open Orphan plc).
41
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
17. Intangible fixed assets
Group
Cost
At 1 January 2019
Transfer re Open Orphan PLC
Additions
Disposals
At 31 December 2019
Amortisation
At 1 January 2019
Transfer re Open Orphan PLC
Charge for the year
Disposals
At 31 December 2019
Net book value
At 31 December 2019
At 31 December 2018
Customer
relationships
€’000
Trade
secrets
€’000
Goodwill
€’000
Intellectual
Property
Rights
€’000
Workforce
€’000
Total
€’000
-
1,654
-
-
1,654
-
1,504
150
-
1,654
-
-
-
705
-
-
705
-
435
30
-
465
240
-
-
1,810
3,140
-
4,950
-
1,810
-
-
1,810
3,140
-
-
360
-
-
360
-
360
-
-
360
-
-
-
1,468
-
-
1,468
-
1,270
198
-
1,468
-
5,997
3,140
-
9,137
-
5,379
378
-
5,757
-
-
3,380
-
Goodwill was allocated to the Group’s cash-generating units (CGU’s) identified according to operating segment. An operating
segment-level summary of the goodwill allocation is presented below.
CRO
Data Platforms
Total
2019
€’000
3,140
-
3,140
2018
€’000
-
-
-
Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2019 was assessed
at €3,140k (2018: Nil) on the basis of value in use. An impairment loss was not recognised as a result of this review.
The key assumptions in the calculation to assess value in use are the future revenues and the ability to generate future cash flows.
The most recent financial results and forecast approved by management for the next two years were used followed by an
extrapolation of expected cash flows at a constant growth rate for a further seven years. The projected results were discounted at a
rate which is a prudent evaluation of the pre-tax rate that reflects current market assessments of the time value of money and the
risks specific to the cash-generating units.
The key assumptions used for value in use calculations in 2019 were as follows:
Longer-term growth rate (from 2022 onwards)
Discount rate
The impairment review is prepared on the group basis rather than a single unit basis.
%
2.5
15
42
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
17. Intangible fixed assets (Cont’d)
The Directors have made significant estimates on future revenues and EBITDA growth over the next ten years based on the Group’s
budgeted investment in recruiting key employees and marketing the services.
The Directors have performed a sensitivity analysis to assess the impact of downside risk of the key assumptions underpinning the
projected results of the Group. The projections and associated headroom used for the group is sensitive to the EBITDA growth
assumptions that have been applied.
The Company has no intangible assets.
18a. Investments in subsidiaries
Company
Shares in Group undertakings
At 1 January
Transfer re Open Orphan PLC
Investment in Open Orphan DAC
Disposal
At 31 December
2019
€’000
-
3,272
6,362
-
9,634
2018
€’000
-
-
-
-
Investments in Group undertakings are recorded at cost, which is the fair value of the consideration paid. Following review an
impairment provision of nil (2018: nil) has been made to the investment in subsidiaries.
The subsidiaries of Open Orphan Plc are as follows:
Name of Company
Note Proportion Held Class of Shareholding
Nature of Business
Venn Life Sciences Limited
Venn Life Sciences (Ireland) Limited
Venn Life Sciences B.V.
Venn Life Sciences UK Limited
Venn Life Sciences (NI) Limited
Venn Life Sciences (Germany) Gmbh
Venn Life Science (France) S.A.S.
Venn Life Sciences (EDS) B.V.
Kinesis Singapore Pte.
Open Orphan DAC
1
1
2
4
5
6
3
2
7
1
100% (direct)
100% (indirect)
100% (indirect)
100% (indirect)
100% (direct)
100% (direct)
100% (direct)
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100% (direct)
Ordinary
100% (indirect)
Ordinary
100% (direct)
Ordinary
Intermediate holding company
Group Service company
Clinical Research Organisation
Clinical Research Organisation
Clinical Research Organisation
Clinical Research Organisation
Data management and
randomisation systems
Pre-clinical & early clinical
Research Organisation
Pre-clinical & early clinical
Research Organisation
Orphan and Rare Drug services
Notes
1. Incorporated and registered in Ireland.
2. Incorporated and registered in the Netherlands.
3. Incorporated and registered in France.
4. Incorporated and registered in England and Wales
5. Incorporated and registered in Northern Ireland
6. Incorporated and registered in Germany
7. Incorporated and registered in Singapore
All the subsidiaries are included in the consolidation. The proportions of voting shares held by the parent Company do not differ from
the proportion of Ordinary Shares held.
43
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
18b. Investments - Integumen Plc
Shares in undertakings
At 1 January
Transfer re Open Orphan PLC
Sales Proceeds
Loss on disposal
At 31 December
Group
2019
€’000
-
702
(605)
(97)
-
Group
Company
Company
2018
€’000
2019
€’000
2018
€’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Venn Life Sciences Limited‘s holding in Integumen PLC ordinary shares with a market value of €702k, at the date of the reverse
takeover, were sold in July 2019 for €605k (net of commission).
18c. Other impairments of investments
At 1 January
Transfer re Open Orphan PLC
Impairment
At 31 December
Group
2019
€’000
-
166
(166)
-
Group
Company
Company
2018
€’000
-
-
-
-
2019
€’000
-
31
(31)
-
2018
€’000
-
-
-
-
A decision to impair in full some balances transferred from the Venn Group was made due to uncertainty over recoverability. These balances were held in
Investments (See note 20), Trade debtors and Prepayments.
19. Financial instruments by category
(a) Assets
31 December
Assets as per balance sheet
Trade and other receivables
Cash and cash equivalents
Total
(b) Liabilities
31 December
Liabilities as per balance sheet
Borrowings
Lease Liabilities (Note 37)
Trade and other payables
Total
Group
2019
€’000
3,871
1,219
5,090
Group
2019
€’000
2,002
1,678
2,622
6,302
Group
2018
€’000
Company Company
2018
2019
€’000
€’000
-
165
165
6,414
495
6,909
-
165
165
Group
2018
€’000
Company Company
2018
€’000
2019
€’000
1,360
-
498
1,858
1,469
-
1,597
3,066
1,360
-
498
1,858
Liabilities in the analysis above are all categorised as ‘other financial liabilities at amortised cost’ for the Group and Company.
44
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
(c) Credit quality of financial assets
The Group is exposed to credit risk from its operating activities (primarily for trade receivables and other receivables) and from its
financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial
instruments.
The Group’s maximum exposure to credit risk, due to the failure of counter parties to perform their obligations as at 31 December
2019 and 31 December 2018, in relation to each class of recognised financial assets, is the carrying amount of those assets as indicated
in the accompanying balance sheets.
Trade receivables
The credit quality of trade receivables that are neither past due date nor impaired have been assessed based on historical information
about the counterparty default rate. The Group does not hold any other receivable balances with customers, whose past default has
resulted in the non-recovery of the receivables balances.
Cash at bank
The credit quality of cash has been assessed by reference to external credit ratings, based on reputable credit agencies’ long-term
issuer ratings:
Rating
A – AAA
Sub-A rating
Total
2019
€’000
1,213
6
1,219
2018
€’000
-
165
165
The balance categorised as Sub-A rating is a deposit held with Allied Irish Banks p.l.c. (Guaranteed by Irish government as key
shareholder).
20. Investments
Beginning of the year
Impairment
End of the year
Group
2019
€’000
31
(31)
-
Group
2018
€’000
-
-
-
Company Company
2018
2019
€’000
31
(31)
-
€’000
-
-
-
At the year-end a provision was made against the value of the investment, which consisted of a minority shareholding in Arcis
Biotechnology Holdings Limited, a privately held company operating in the biotechnology industry.
21. Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
Prepayments and accrued income (Note 35)
Amounts owed by subsidiary undertakings
Other receivables
Group
2019
€’000
1,850
(-)
1,850
2,013
-
387
4,250
Group Company
2019
€’000
2018
€’000
Company
2018
€’000
-
(-)
-
3
-
-
3
-
(-)
-
86
5,899
515
6,500
-
(-)
-
3
-
-
3
45
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
21. Trade and other receivables (Cont’d)
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
The carrying amounts of the Group’s trade and other receivables denominated in foreign currencies were as follows:
UK Sterling
Euros
22. Cash and cash equivalents
Group
2019
€’000
89
4,161
4,250
Group Company Company
2018
2019
2018
€’000
-
3
3
€’000
460
6,040
6,500
€’000
-
3
3
Cash and cash equivalents include the following for the purposes of the statement of cash flows:
Cash at bank and on hand
Cash and cash equivalents (excluding bank overdrafts)
Group
Group Company Company
2019
€’000
1,219
1,219
2018
€’000
165
165
2019
€’000
495
495
2018
€’000
165
165
The Group’s cash and cash equivalents are held in non-interest-bearing accounts. The Directors consider that the carrying amount of
cash and cash equivalents approximates to their fair value.
23. Trade and other payables
Group
Group
Company Company
Trade payables
Amounts due to subsidiary undertakings
Social security and other taxes
Other payables *
Accrued expenses and deferred income
2019
€’000
596
-
661
408
1,884
2018
€’000
-
-
3
24
471
2019
€’000
36
1,135
-
108
318
1,597
*€49,000 of other payables are due after one year after year end 2019 (2018: Nil). All other balances are due within 1 year.
3,549
498
2018
€’000
-
-
3
24
471
498
24. Deferred income tax
Deferred tax liabilities
Deferred tax balances were as follows:
Deferred tax liabilities
Deferred tax liabilities were made up as follows:
Accelerated tax depreciation
Group
2019
€’000
Group
2018
€’000
Company Company
2018
€’000
2019
€’000
48
48
48
48
-
-
-
-
-
-
-
-
-
-
-
-
46
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
24. Deferred income tax (Cont’d)
Deferred tax assets
Deferred income tax assets are recognised to the extent that the realisation of the related tax benefit through future taxable profits
is probable. There was no deferred tax asset recognised for the Company. The gross movement on the deferred income tax account
is as follows:
At 1 January
Transfer re Open Orphan PLC
Income statement movement (note 13)
At 31 December
25. Borrowings
Current – falling due within 1 year
Loan Notes
Convertible debenture securities(“CDS”)
Invoice Discounting
Total borrowings
Group
2019
Group
2018
Company Company
2018
2019
€’000
€’000
€’000
€’000
-
126
(76)
48
-
-
-
-
-
-
-
-
-
Group
2019
Group
2018
Company Company
2018
2019
€’000
€’000
€’000
€’000
1,469
350
183
-
1,360
-
1,469
-
-
-
1,360
-
2,002
1,360
1,469
1,360
The Company and Group do not have bank borrowings. All Borrowings due within one year.
Venn Life Sciences Limited entered into an invoice discounting arrangement with Capital Flow in November 2018 to help
improve cash flow for that company. At 31 December 2019 a balance of €183k (2018: €469k pre reverse acquisition) had been
drawn down from Capital Flow and was secured against amounts receivable from trade debtors.
This liability of €183k is repayable to capital flow within 90 days, regardless of whether the customer has settled their invoices
with the company within that time. Capital flow has registered a fixed and floating charge over the trade debtors balance in
Venn Life Sciences Limited. Capital flow charged the company an arrangement fee for setting up this invoice discounting facility.
On a monthly basis Capital Flow charge the company a fixed administration fee to the company for use of the facility as well as
variable discount fees, trust account fees and disbursement fees depending on the level of use of the invoice discounting facility.
Loan Notes for £1m (€1,175k) were issued on 11 December 2018. The loan notes have a 2-year term. The loan notes have a 10%
coupon rate. Interest is payable at six monthly intervals.
Loan Notes for £250k (€294k) were issued on 6 April 2019. The loan notes have a 13-month term. The loan notes have an 8%
coupon rate. Interest is payable at six monthly intervals.
There are 2 remaining Convertible debenture securities holders and they are entitled to interest of 7% per annum on their
securities. Neither of these CDS holders chose to convert their securities into Ordinary shares in Open Orphan DAC at the time of
the reverse takeover of the Venn Group in June 2019. Consequently, these CDS holdings can be redeemed by the company at
any time from June 2020 up to March 2022. Following reverse acquisition the holders lost their right to convert.
47
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
26. Share capital
254,572,567 (2018 – 210,902) Ordinary shares of £0.001
62,833,339 (2018 – Nil) Deferred shares of £0.001
Total
Group
2019
€’000
295
77
372
Group Company Company
2018
2019
2018
€’000
€’000
€’000
-
-
-
295
77
372
-
-
-
Deferred shares have no rights to income, capital or voting and the Company has the right to acquire all such shares for an aggregate
price of £1.
During the year the Company issued 183,177,419 shares. 182,098,111 issued @ £0.056/share, 382,102 @ £0.001/share, 697,206 @
£0.022/share.
Warrants
6,744,500 warrants existed at 31 December 2019 (2018: 6,216,666).
166,666 warrants were granted on 7 June 2011 and exercisable from the date of grant to 6 June 2021. The exercise price was €0.353
(30p) per ordinary share under warrant.
1,759,752 warrants were granted on 11 December 2018 and are exercisable from the date of grant to 10 December 2023. The exercise
price is €0.001 (0.1p) per ordinary share under warrant. 3,210,940 warrants were granted on 11 December 2018 and are exercisable
from the date of grant to 10 December 2023. The exercise price is €0.026 (2.2p) per ordinary share under warrant.
1,607,142 warrants were granted on 28 June 2019 and are exercisable from the date of grant to 27 June 2024. The exercise price was
€0.066 (5.6p) per ordinary share under warrant.
27. Other reserves
Group and Company
Share Premium
Share premium is the difference between the nominal value of share capital and the actual cash received on fund-raising less
any costs associated with the fund-raising.
Merger Reserves
This includes reverse acquisition reverse which resulted from the reverse acquisition of Venn Life Sciences Holdings Plc by Open
Orphan DAC on 28 June 2019. See note 2 (d). Also includes a Group re-organisation reserve relating to previous re-organisation of
the Old Venn Group.
Foreign Currency Reserve
The two subsidiaries, Venn Life Sciences NI Ltd and Venn Life Sciences UK Ltd, are denominated in GBP (£), whilst the reporting currency
of the Group is Eur. Hence the Foreign Currency Reserve arises.
Share Option Reserve
A share option reserve of €178,000 was created in June 2019, prior to the reverse takeover of Venn Life Sciences Holdings PLC by OO
DAC, in relation to the share options and warrants issued in June 2019. A further provision of €120,000 was made after the reverse
takeover.
48
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
27. Other reserves (Cont’d)
Retained Earnings
For Group and Company, retained earnings brought forward reflect the retained earnings of OO DAC prior to the reverse takeover of
Venn Life Sciences Holdings PLC by OO DAC.
Group earnings for the current year reflect the earnings of OO DAC only up to the date of the Reverse acquisition and the combined
earnings of OO DAC and Venn Life Sciences Holdings PLC (now renamed Open Orphan PLC) from date of reverse acquisition to year
end.
For Company earnings for the current year reflect the earnings of OO DAC only up to the date of the Reverse acquisition and the
earnings of Venn Life Sciences Holdings PLC (now renamed Open Orphan PLC) – company only - from date of reverse acquisition to
year end.
28. Cash used in operations
Loss before income tax
Adjustments for:
– Depreciation and amortisation (Note 6)
– Foreign currency translation of net assets
– Exceptional Items (Note 7)
– Net finance costs/(Income) (Note 12)
– Share Option Reserve (Note 32)
Changes in working capital
– Losses/Impairments on Investments (Note 18b/18c)
– Lease Payments (Note 37)
– Transfer re Open Orphan PLC
– (Increase)/Decrease Trade and other receivables
– (Decrease)/Increase Trade and other payables
Net cash used in operations
29. Related Party Disclosures
Group
2019
€’000
(6,619)
715
(58)
811
399
120
263
(318)
2,185
(749)
(3,251)
Group
2018
€’000
(1,656)
Company
2019
Company
2018
€’000
(1,857)
€’000
(1,656)
1
-
-
45
-
-
-
(36)
497
-
-
811
(394)
120
73
-
(1,993)
-
-
1
-
-
45
-
-
-
(36)
497
(1,149)
(3,240)
(1,149)
Directors
Directors’ emoluments are set out in the Report of the Remuneration Committee Report.
Key management compensation for the year was as follows:
Aggregate emoluments
Employer contribution to pension scheme
Key management includes the Directors only.
2019
€’000
370
15
385
2018
€’000
376
45
421
49
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
29. Related Party Disclosures (Cont’d)
Group
On 10 November 2016 the group signed a contract worth €2.5m with Sedana Medical AB ("Sedana Medical").
The then CEO of Sedana Medical, Michael Ryan, was also a director of Venn Life Sciences. Accordingly, Michael Ryan was a related
party of Venn Life Sciences as defined in the AIM Rules and ESM Rules. As a result, the contract is treated as a "related party
transaction" under the AIM Rules and the ESM Rules.
The Independent Directors, at that date, being Allan Wood, Anthony Richardson, Jonathan Hartshorn, Gracielle Schutjens, Cornelius
Groen, Paul Kennedy and Mary Sheahan, who are not related parties under the AIM Rules and ESM Rules for the purpose of the
contract, having consulted with Davy, the Company's NOMAD and ESM adviser, for the purpose of the AIM Rules and ESM Rules,
considered the contract to be fair and reasonable insofar as the shareholders of the Company are concerned. Michael Ryan did not
take part in the Board's consideration of these matters.
Executive Group Chairman, Cathal Friel, holds a share of £108,642 of the £1m loan note issued in December 2018 through his
pension vehicle. Cathal Friel also holds all of the £250k loan note issued in April 2019. Loan note interest of €17k accrued in
2019.Cathal Friel is also a director of Raglan Road Capital Ltd which rents office space and provides advisory and office related
services to Open Orphan DAC (2019 charge €97k; 2018 charge €707k). Balance owed by Group to Raglan Road Capital Ltd at year
end 2019 was €324,204 (2018: €439,013). Additionally, €29,587 of wages was owed to Cathal Friel at year end 2019 (2018: Nil).
There were no other related party transactions during the year.
The Company
During the year the Company absorbed management charges of €384,010 (2018 - Nil) from its subsidiary undertakings. At 31
December 2019 the Company was owed €5,200,109 (2018 - Nil) by its subsidiaries.
30. Capital commitments
The Group had no capital commitments at 31 December 2019 or at 31 December 2018.
31. Discontinued Operations
There were no discontinued operations in 2019 or 2018.
32. Share options
The Group has share option plans under which it grants share options to certain Directors and senior management of the Group.
To date no share options have vested. Some share options have been forfeited as a result of the Director or employee leaving the
Group before options vested.
Number of outstanding share options remaining at 31 December 2019:
Date of Grant
# Options at
01/01/2019
Options Transferred
from OO PLC
# of Options
Granted
# of Options
Forfeited
# Options at
31/12/2019
28/01/2015
14/09/2017
28/06/2019
Total
-
-
-
-
1,680,000
3,560,000
3,858,482
-
-
3,858,482
250,000
1,680,000
3,310,000
7,716,964
9,098,482
3,858,482
250,000
12,706,964
50
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
32. Share options (Cont’d)
The weighted-average exercise price of all options outstanding at year end is 8.5p and weighted-average remaining contractual life is
3.2 years.
The pricing and vesting criteria of the share options in existence at 31 December 2019 are as follows:
In relation to the Options granted in 2015 and 2017:
Options in issue 31/12/2019
Exercise price (equal thirds when price hits 25p/35p/45p)
Expected volatility
Expected dividend
Contractual life
Risk free rate
Estimated fair value of each option
In relation to the Options granted in 2019:
Options in issue 31/12/2019
Exercise price (equal thirds when price hits 25p/35p/45p)
Expected volatility
Expected dividend
Contractual life
Risk free interest rate
Estimated fair value of each option
4,990,000
13p
28%
0%
3.5 years
95%
£0.00
7,716,964
5.6p
60%
0%
5 years
1.84%
£0.02
Charge for year was €120,000 (2018 – Nil). The share options granted in 2015 and 2017 have no value. A share option reserve
(€178,000) was created before the reverse takeover in relation to the shares and warrants granted in June 2019. A further charge was
made of €120,000 to year end 2019 bringing total reserve to €298,000. The Company has used the Black Scholes model to value
the options at 31 December 2019. This method simulates a range of possible future share price scenarios and calculates the
average of net present value of the option across those scenarios and which captures the effect of the market-based performance
conditions applying to such awards. The expected volatility was calculated with refence to historic share price movements.
33. Other operating income
Other operating income represents government grants received to fund Research and Development activities.
34. Post balance sheet events
The following events have taken place since the year end:
a) Completed a merger to acquire the entire issued and to be issued share capital of hVIVO plc for an aggregate consideration
of approximately GBP£13 million in equity on 17th January 2020
b) Re-admission of the Enlarged Share Capital following the merger of Open Orphan plc and hVIVO plc to trading on AIM and
Euronext Growth on 17th January 2020
c) Executed a placing on 31st January 2020 raising GBP £5.3 million (before expenses)
d) Cathal Friel, CEO, became Executive Chairman; Brendan Buckley, Chairman, became Non-Executive director and Trevor
Philips, CEO of hVIVO Plc became CEO of Open Orphan Plc Group and was appointed to the board on January 17th 2020.
Christian Milla, Michael Ryan and David Kelly resigned from the board on 17th January 2020. Michael Meade and Mark
Warne were appointed to the board on the same date. Leo Toole was appointed Chief Financial Officer on 13th February
and, subsequently appointed to the board on 27th February 2020.
e) Trevor Philips resigned as a Director on 4th May 2020
f) Executed a placing on 22 May 2020 raising GBP£12.6 million (before expenses)
51
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
35. Revenue, Assets and Liabilities related to contracts with customers
The group derives revenues from external customers from the provision of Clinical consulting services and drug development
services split into various service offerings across various geographical regions.
A. 2019 Revenue from contracts with customers by service offering:
Division
Full Service
BiosStats
RTSM (IRT)
Data Management
Med & Meth
Early Clinical
Non Clinical*
CMC*
QA
Misc.
Total
2019 Revenue € 2018 Revenue €
-
-
-
-
-
-
-
-
-
-
-
73
258
337
438
236
1,451
266
791
93
96
4,039
Net accrued income, related to contracts with customers
Net Accrued Income brought forward
Transfer re Open Orphan PLC
Movement in the period:
-
arising from a change in the measure
of progress
arising from impairment of a contract
asset
arising from a change in the time
frame for a performance obligation to
be satisfied
a change in the time frame for a right
to consideration to become
-
-
-
Net Accrued Income carried forward
Split:
Accrued Income
Deferred Income
Net Accrued Income
2018
Total
€’000
-
-
-
-
2019
Total
€’000
-
1,848
(1,141)
707
1,634
(927)
707
The costs incurred to obtain or fulfil a contract which has been recognised as contract assets have been determined with
reference to labour hours incurred to the period end as a percentage of the total estimated labour hours to complete specified
performance obligations as stipulated by the relevant contracts. Contract assets are not amortised as they are of a short- term
nature. Contract assets at year end 2019 were €7,650,000 (2018: Nil) and contract liabilities were €6,531,000 (2018: Nil).
52
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
36. Pensions
The Group operates a number of defined contribution pension schemes whose assets are held separately from those of the
Group in independently administered funds. The pension charge represents contributions payable by the Group and amounted
to €316,000 for the year (period ending 31 December 2018: €50,000). Contributions totalling €42,000 were payable to the fund
at the year end and are included within trade and other payables (31 December 2018: €23,000).
37. Leases
Amounts recognised in the statement of financial position
As at 1 January 2019
Transfer re Open Orphan plc
Depreciation expense (Note 6)
Interest expense (Note 12)
Payments (Note 28)
As at 31 December 2019
Current
Non-current
Maturity of leases
Current - Within one year
Non-Current – Between one to two years
Non-Current – Between two to five years
Right of use assets
€’000
-
1,808
(267)
—
—
1,541
Lease liabilities
€’000
-
1,941
—
55
(318)
1,678
—
1,541
522
1,156
31 December
2019
£’000
522
385
771
1,678
53
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2019
Proforma Statement of Comprehensive Income - Open Orphan Plc (on a stand-alone basis and excluding
any impact of the 28 June 2019 combination with Open Orphan DAC.)
The schedule below reflects normalized Comprehensive Income for Open Orphan Plc (formerly Venn Life Sciences Holdings Plc)
as if it were presented on a stand-alone basis and excluded any impact of the 28 June 2019 combination with Open Orphan DAC.
Moreover, the schedule does not reflect any 2019 results for hVIVO plc.
Continuing operations
Revenue
Direct Project and Administrative Costs
Other operating income
Operating (loss)
Depreciation
Amortisation
Exceptional items
EBITDA before exceptional items
Finance Expense/ income
Impairment of Financial Asset Investments
Impairment of Intangible Assets
Gain on sale of Financial Asset Investment
(Loss) before income tax
Income tax credit
(Loss) for the year from continuing operations
(Loss) for the year is attributable to:
Owners of the parent
Other comprehensive income
Currency translation differences
Total comprehensive (loss) for the year
Total comprehensive (loss) for the year is attributable to:
Owners of the parent
Total comprehensive (loss) for the year attributable to
owners of the parent arises from:
Continuing operations
2019
€’000
9,374
(16,323)
480
(6,469)
(660)
(756)
(-)
(5,053)
(305)
-
-
181
(6,593)
151
(6,442)
(6,442)
(44)
(6,486)
(6,486)
(6,486)
(6,486)
2018
€’000
13,920
(16,658)
371
(2,367)
(95)
(840)
(-)
(1,432)
10
(421)
(2,232)
-
(5,010)
235
(4,775)
(4,775)
85
(4,690)
(4,690)
(4,690)
(4,690)
54
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