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 Changes in Shareholders' Equity
Consolidated and Company’s Statement of Cash Flows
Notes to the Financial Statements
1
2
7
8
10
13
15
16
24
25
26
27
28
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)
Elaine Sullivan (Non-Executive Director)
Company Secretary:
Beach Secretaries Limited
Registered office:
Head office:
Queen Mary BioEnterprises
Innovation Centre
42 New Road
London, E1 2AX, UK
10-12 Alie Street
2nd Floor
London E1 8DE, 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:
Website:
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
DAC Beachcroft
25 Walbrook
London
EC4N 8AF
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
Walbrook Public Relations
4 Lombard Street
London, EC3V 9HD
www.openorphan.com
1
Open Orphan Plc
Executive Chairman’s Statement
For the year ended 31 December 2020
Dear Shareholder,
I am very happy to report to you on the progress made in 2020. Having completed the integration of both hVIVO plc with
our existing Venn Life Sciences plc and Open Orphan operations, we now have a fully integrated services business with its
main office and business based out of Whitechapel in East London, supported by our drug development consultancy arm in
Breda, in the Netherlands and in Paris in France. During this restructuring and integration process we have reduced
the footprint of offices that we had in January 2020 from eight to now four. We have worked hard to establish Open
Orphan as the world leader in the testing of vaccines and antivirals through the use of human challenge study clinical trials.
Furthermore, most importantly we are pleased to confirm that after many years of losses racked up by Venn and hVIVO
the combined business is now operationally profitable and, furthermore, as we move through 2021 is generating cash. It has
always been our opinion that such pharma services businesses should always be profitable and going into a future that
looks bright we are steadfast in our belief that this unique business will remain fast growing and profitable.
Looking forward to 2021, we are very happy with the progress and we have set ourselves demanding goals and targets for
the year and we hope to exceed them significantly on all counts. Most importantly as we progress, we increasingly target
H1 of 2021 for the Company as a whole to be operationally profitable and are trading well to meet market forecasts.
Furthermore, we have been guiding the market that our strategy to spin out non-core assets is well on the way to being
monetized and the proceeds from these returned to shareholders via distributions in species by the end of 2021. The
strategy, described in more detail below, is progressing well having successfully completed a Reduction of Capital earlier this
year.
Non-core asset monetisations
Earlier this week we announced further details of our plans for a first distribution in specie, in relation to the demerging of
certain non-core assets, which we own 100%. These assets had resided within Open Orphan and are in the process of being
spun out into Poolbeg Pharma Limited (“Poolbeg Pharma”), a company established to develop these assets. In the
coming weeks we expect Poolbeg Pharma to complete its own IPO on the AIM market of the London Stock Exchange.,
where it will become its own standalone company. For avoidance of doubt, these non-core assets do not include the 49%
stake we hold in Imutex nor the 62.62% held in Prep Biopharm, nor do they include our Disease in Motion data business.
We are very excited about the value we can return to shareholders with this first non-core asset spin out and monetisation
and, if it grows in the same trajectory as Open Orphan has in the last two years, then it will be a positive start to our non-core
monetisation strategy. Over the coming few months we would hope to further update the market on progress with the
monetisation of the second non-core asset and we will have continued progress the spin out and monetisation of all non-
core assets.
Business update
In the last 12 months we have substantially increased the number of quarantine beds that we have access to. We have
grown from the original 24 quarantine beds we have had in our Queen Mary’s BioEnterprises Centre (QMB) in Whitechapel
in East London, by adding 19 bed additional beds through the conversion of the Whitechapel Hotel into the Whitechapel
Clinic. We have also expanded our volunteer recruitment facilities by converting a former Costa Coffee shop that was on the
ground floor of our QMB facility into a state-of-the-art volunteer recruitment screening centre. On top of that, we also opened
a standalone regional volunteer recruitment screening centre in Manchester. With these new facilities we now have the ability
to screen in excess of 500 volunteers per week to facilitate our growing pipeline of human challenge studies.
Since January 2020 we have also substantially increased our number of challenge study models. Previously hVIVO would
have been very focused around one disease indication and in recent years very dependent on RSV challenge studies.
However, in the past year I am glad to report that hVIVO, which is now home to our main London offices, offers a much
broader suite of human challenge study models which can now test vaccines and antivirals for influenza, RSV, RV, COVID-19,
asthma, malaria, hRV, COPD, and a number of other diseases.
Post pandemic, there has been an explosion in the growth of the infectious disease pharmaceuticals market, which is
estimated to grow to in excess of $250bn by 2025. As major pharmaceutical companies develop a range of new infectious
disease vaccines and antivirals, many of them can be tested using a human challenge model. As such, we believe that Open
Orphan is
2
Open Orphan Plc
Executive Chairman’s Statement (Cont’d)
For the year ended 31 December 2020
very well positioned in a rapidly growing market and we can see a growing pipeline of contracts. We are actively engaging with
a large number of the top pharma companies around the world as regards testing their products
With the pharmaceutical services business (Venn & hVIVO combined) now firmly profitable and cash generative we have a
growing working capital balance on hand, which is a very favourable situation to be in after so many years of consistent losses.
As part of putting Poolbeg Pharma on a firm footing to IPO successfully, and hopefully grow substantially in the months and
years ahead, we are using some of our cash balance (c £0.2m) toward Poolbeg Pharma. Furthermore, we are investing a further
£0.2m in developing our other non-core assets as part of ensuring that they too will hopefully be monetised in due course
ahead.
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 continue to monitor its composition and skills balance.
In November 2020, I was very happy to welcome Elaine Sullivan to the Board who brings many years of experience in pharma
and life sciences to support our strategy. In return, I would also like to acknowledge the important contribution of Mark Warne
during his tenure as non-executive director and wish him well for the future.
2020 in perspective
The calendar year just gone was an important year of transition following the various merger and acquisition activities in 2019
and January 2020. The Company has focused its attention to reverse the negative combined loss position in 2019 by
strengthening business development capability and systems, restructuring underperforming businesses, eliminating
unnecessary layers of management, and integrating support functions across the Group. This work is now complete with our
focus on driving ongoing steady performance improvements in revenue, gross margins and efficient overheads.
Our work to strengthen business development is coming to fruition as we see a significantly improved track record of major
contract wins in 2020 (versus 2019). This sets the scene for strong revenue growth in 2021 and in turn strong EBITDA and
operating profit growth.
In light of the emerging COVID-19 pandemic in March 2020 the Group took the strategic decision to develop a COVID-19
challenge model. On the back of this investment, the Open Orphan group (through its hVIVO Division) was commissioned by
the UK Government to contribute to a world-first initiative led by the UK government to manufacture a COVID-19 virus, and
collaborate to design and deliver a characterization study to understand how to use this virus for vaccine and anti-viral
challenge trials. This collaboration is ongoing with significant progress achieved to enable the Group to test vaccines and
therapeutics against COVID-19 in the near future.
Financial Results
While nobody can be happy that the Group made a loss in 2020, this was expected and importantly shows significant
improvement versus the pro forma performance of the Group in 2019. In addition, the Group made an operating profit in Q4
2020 and targets continued momentum to deliver full year profitability in 2021. As mentioned above the pharmaceutical
services business (the combined business of Venn and hVIVO) is now operationally profitable and as we move into 2021 will
be cash generative.
The Group is very well capitalised and was strengthened through two placings in 2020 raising a combined total of £17.9m
(before expenses) and strong working capital management through advanced cash payments on major agreements. As at 31
December 2020 cash and cash equivalents were £19.2m. Cash as of end May was £15.1m, reflecting the expected release of
customer prepayments in H1 2021, which should build back strongly by year end as we close contracts for execution in 2022
Reported results for Open Orphan plc are summarized on page 4 and are covered by the schedules and notes from pages 28
to 63 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).
3
Open Orphan Plc
Executive Chairman’s Statement (Cont’d)
For the year ended 31 December 2020
Proforma Results for hVIVO Ltd (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), Open Orphan DAC (on a stand-alone basis) and
Open Orphan plc (on a combined basis) for the full calendar year are outlined for reference.
Open Orphan plc
Group
(Results as Reported)
hVIVO Ltd
(Proforma results on a
stand-alone basis for a
full year)
2020
£'000
2019
£'000
2020
£'000
2019
£'000
Open Orphan plc
(formerly Venn Life
Sciences Holdings plc -
Proforma results on a
stand-alone basis for a
full year)
2019
£'000
2020
£'000
Open Orphan DAC
(Proforma results on a
stand-alone basis for a
full year)
Open Orphan plc
Group
(Proforma results on a
combined basis for a
full year)
2020
£'000
2019
£'000
2020
£'000
2019
£'000
21,995
3,543
14,515
15,092
7,844
8,643
-
-
22,359
23,735
(32,437)
(10,442)
(6,265)
(8,673)
(5,130)
(3,792)
(19,369)
(4,854)
(2,925)
(20,985)
(5,893)
(3,785)
(13,448)
(5,604)
(3,313)
(15,028)
(6,385)
(4,432)
(435)
(435)
(431)
(669)
(669)
(668)
(33,252)
(10,893)
(6,669)
(36,683)
(12,948)
(8,885)
(8,317)
(4,419)
(4,377)
(4,845)
(3,957)
(5,674)
(435)
(669)
(8,769)
(11,188)
(10,791)
(5,739)
(4,927)
(6,973)
(5,776)
(6,622)
(548)
(899)
(11,251)
(14,494)
Income Statement
Revenue (Incl. other
income)
Project & Admin Costs
Operating (Loss)
EBITDA before exceptional
items
Operating (Loss) before
exceptional items
Loss for period
Balance Sheet
£'000
£'000
Non-current Assets
Current Assets
Cash
Total Asset
Total equity
Non-current Liabilities
Current Liabilities
Total Liabilities
Total Equity &
Liabilities
18,501
10,839
19,205
48,545
22,297
2,216
24,032
26,248
48,545
4,376
3,627
1,037
9,040
2,850
1,025
5,165
6,190
9,040
Strategy
Open Orphan plc is a rapidly growing specialist pharmaceutical services clinical research organisation (CRO) and world leader
in vaccine and antiviral testing using human challenge clinical trials. 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. To enable our pathway to
sustainable revenue and earnings growth, we have focussed on the following key initiatives which we are confident will bear
fruit across 2021 and into 2022.
•
•
•
Expanding our challenge business in London beyond Influenza and Respiratory Syncytial Virus (RSV) through the
development of new models in the areas of Malaria and Pneumococcus, which are already in advanced stages of validation
and are targeted to commercialize in 2022.
Strengthening our capability to deliver for clients through the opening of the Whitechapel Clinic as an extension of hVIVO`s
current QMB site. This newly renovated, state-of-the-art unit allows us to increase our study capacity substantially in the
year ahead.
Building our capability in the Netherlands to provide deep expertise in the areas of early drug development and CMC for
early-stage drug assets. In parallel, we will leverage the considerable strength of our in-house data management,
biostatistics, randomization, and medical writing teams in France to drive internal cost synergies for London sourced
challenge projects.
4
Open Orphan Plc
Executive Chairman’s Statement (Cont’d)
For the year ended 31 December 2020
•
•
•
Ongoing focus to strengthen and optimize gross margins and EBITDA margins to 15-20% of Revenue by driving improved
load balancing and capacity utilization across our quarantine units, leveraging technology to improve operational
throughput, and driving full revenue recovery for billable time across all service lines. In addition, we are renegotiating
operating leases to optimize rental costs in light of our core operational footprint and evolving post pandemic work
practices.
Taking enabling steps to accelerate the development and commercialisation of some of our non-core Development IP
Assets through the demerger of Poolbeg Pharma, the detailed timetable which was announced earlier this week and which
offers the opportunity to access financing as a separate public company listed on AIM and a separate business focussed
on the successful commercialisation of pharmaceutical products. In addition, we continue to carefully monitor the
progress of our associates (49% share in Imutex Limited, developing vaccines against influenza (FLU v) and universal
mosquito borne diseases (AGS v), 62.62% of PrEP Biopharm Limited focused on the prevention of respiratory infections).
Leveraging technology through our Disease in Motion® platform, a unique data-focused platform which includes clinical,
immunological, virological, and digital (wearable) biomarkers with multiple infectious disease applications that are
applicable to a wide variety of end users including big tech, wearables, pharma, and biotech companies. In H2 2021, we
will consider the opportunity to spin-out the Disease in Motion* platform building on our progress with Poolbeg Pharma.
Outlook
Over the last year we have been busy transforming Open Orphan into a profitable enterprise with a world leading position
testing vaccines and antivirals using human challenge studies. This work continues apace as we anticipate that the testing of
vaccines and antivirals for multiple diseases will increasingly become part of mainstream clinical research offerings given the
historic low levels of such research to address known virus risks and potential virus risks, a fact highlighted in the starkest
possible terms by the advent of the COVID-19 pandemic.
We are satisfied that, proactively, we took the lead to develop a COVID-19 challenge model in March 2020 as it was clear to us
that such research would be essential. Indeed, this investment has been vindicated by our partnership with the UK government
to characterize a COVID-19 virus in anticipation of using it to test vaccines and therapeutics in the coming years. Through this
and other collaborations, the recognition of the amazing capability in our teams is humbling, and this has contributed to
increased awareness of Open Orphan and its respective hVIVO and Venn divisions.
Our Clinical Science Teams and Laboratory Development Teams continue to address ground-breaking research projects with
major pharmaceutical players, and their exceptional expertise, combined with a problem-solving mindset, to address our
Clients’ needs means that we expect our services to be in strong demand for the year ahead.
I have always made it very clear that the clinical research services business needs to stand on its own as a sustainable and
profitable business. As that journey is now well advanced, it means that this is the right time to bifurcate this service businesses
from the pharmaceutical development assets that will prosper with a management and environment focused on the rapid
development of new therapies and the ability to be tailored to its different funding needs. Our planned demerger strategy is
progressing well having successfully completed a Reduction of Capital in our parent company Open Orphan plc. Should we
succeed to complete the demergers, this will be an excellent opportunity for shareholders in Open Orphan to maximise value
through separate shareholdings in both a profitable pharma services company as well as exciting pharma products
commercialisation companies.
In this vein, we are very excited by the opportunity to progress our Disease in Motion® platform. The platform includes data
from cutting edge wearables that are applicable to a wide variety of end users including big tech, wearables, pharma, and
biotech companies. As volunteers remain under close observation prior to viral challenge, during disease progression and
through to full recovery, data is captured across the full time-course of the infection, yielding possible insights into the body's
response to infection. As a recognised global leader in supporting the development of therapeutics and vaccines, our team of
virological, clinical, and regulatory experts are actively in discussion with potential partners to help address the next set of
challenges facing humanity. In due course, we see the potential for this new activity stream to be demerged from the core
services business to again create significant value through separate shareholdings.
5
Open Orphan Plc
Executive Chairman’s Statement (Cont’d)
For the year ended 31 December 2020
Lastly, the Group is not simply satisfied to have returned to a positive operating position at the end of 2020 and to be targeting
to deliver a full year profit in 2021, it is now focused to further enhance the quality of profits and earnings of the Group going
forward. Therefore, notwithstanding the strategic investments we are making in new challenge models and the Disease in
Motion® platform, we will relentlessly focus on cross selling our services across our broad client base, leveraging technology
to drive improved efficiencies, and stripping away unnecessary cost in our operations.
It has been a remarkable year and I am grateful to our team for their hard work and loyalty. I am also grateful to you, our
shareholders for the faith you have placed in the Group. The new financial year has started well and is already very promising,
and we look forward to creating significant value for all our stakeholders
Cathal Friel - Executive Chairman
17 June 2021
6
Open Orphan Plc
The Board
Cathal Friel, Chairman (aged 56)
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 71)
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 60)
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.
Leo Toole, Chief Financial Officer (aged 48)
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.
Elaine Sullivan, Non-Executive Director (aged 60)
Elaine is a business leader and senior scientist with international experience in the pharmaceutical industry and Biotech and is the
CEO of Curadh Pharmaceuticals. Elaine has an in-depth background and knowledge of virology having received a PhD from the
University of Edinburgh in Molecular Virology. She has been a member of the most senior R&D management teams in Lilly and
AstraZeneca. Elaine also has extensive start-up experience having been a founder of Carrick Therapeutics and helped to raise
over €100m of investor funds as CEO of Carrick in recent years. Elaine is a Non-Executive Director at IP Group plc and Active
Biotech AB and is a member of the Supervisory Board at Evotec which is listed on the Frankfurt Stock Exchange.
7
Open Orphan Plc
Strategic Report
For the year ended 31 December 2020
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 still evolving and the Group closely monitors the situation as it develops. Our primary
focus remains the safety of our employees and the Group has implemented government policies in relation to the outbreak, including
travel restrictions for staff which impacted the delivery of studies, as well as conducting business development and marketing
activities. These risks were mitigated using technology that allowed staff to work from home effectively. During course of 2020, the
pandemic did result in the delay of some client contracts. Given the evolving nature of the pandemic, financial risk mitigation plans
remain in place, including utilising government support measures in the countries as necessary. However, in light of the significant
adoption rates of vaccinations in the countries where we operate, coupled with the progressive pathway to lift localized lock downs,
we are now increasingly confident that our business will soon be operating in line with our pre-pandemic practices. We nevertheless
are engaging with our staff and clients to assess how we alter our work and travel polices to best meet the needs of all stakeholders
in a post pandemic world.
8
Open Orphan Plc
Strategic Report (Continued)
For the year ended 31 December 2020
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.
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 4). 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 breaking data service, Disease in Motion® incorporating wearable
data capture from new challenge studies, our existing Genomic Health Data platform and hVIVOs’ large database of anonymised
patient data.
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 17 June 2021 and signed on its behalf by:
Cathal Friel
Executive Chairman
9
Open Orphan Plc
Report of the Directors
For the year ended 31 December 2020
The Directors have pleasure in submitting this report together with the audited financial statements of Open Orphan Plc for the year
ended 31 December 2020.
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
Michael Ryan (Resigned 17th January 2020)
Christian Milla (Resigned 17th January 2020)
Maurice Treacy (Resigned 17th January 2020)
David Kelly (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 and resigned 31st December 2020)
Leo Toole (Appointed 27th February 2020)
Elaine Sullivan (Appointed 23rd November 2020)
Principal activities
The principal activity of the Group is that of a rapidly growing specialist CRO pharmaceutical services company which is the world
leader in the testing of vaccines and antivirals using human challenge clinical trials. The Group has a presence in the UK, Ireland,
France and Netherlands.
Specific information, including key risks and future developments, have not been included in the Directors’ Report because they
are shown in the Strategic Report and Chairman’s Statement as permitted by section 414C (11) of the Companies Act.
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.
Directors’ interests
The interests of those Directors serving at 31 December 2020 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 were as follows:
Cathal Friel*
Brendan Buckley
On 31 December 2020
Ordinary Shares of
0.1p each
45,965,011
7,845,860
On 1 January 2020
Ordinary Shares of
0.1p each
41,046,981
7,845,860
*Held via Raglan Road Capital Ltd, Horizon Medical Technologies Ltd, and/or through a family member
10
Open Orphan Plc
Report of the Directors (continued)
For the year ended 31 December 2020
Substantial shareholdings
As at 31 May 2021, 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
HARGREAVES LANSDOWN /NOMINEES/ LIMITED
DAVYCREST NOMINEES
HARGREAVES LANSDOWN /NOMINEES/ LIMITED
INTERACTIVE INVESTOR SERVICES NOMINEES LIMITED
HARGREAVES LANSDOWN /NOMINEES/ LIMITED
INTERACTIVE INVESTOR SERVICES NOMINEES LIMITED
BARCLAYS DIRECT INVESTING NOMINEES LIMITED
RAGLAN ROAD CAPITAL LIMITED
Events after the end of the reporting period
The following events have taken place since the year end:
54,657,179
48,593,571
38,593,141
27,130,173
25,705,513
24,486,101
24,332,652
21,536,124
8.15%
7.25%
5.76%
4.05%
3.83%
3.65%
3.63%
3.21%
a) Open Orphan plc (on a stand-alone basis) successfully received the appropriate Court approval on 19 May 2021 to complete a
reduction in in capital. The reduction was intended to enable a Distribution in Specie, as part of the proposed spin-out of certain
non-core Development IP Assets, but also to make other distributions to Shareholders and/or buy back its own Open Orphan
Ordinary Shares in the future if and when the Directors may consider that it is appropriate to do so.
b) For the purposes of a proposed spin-out of certain non-core Development IP Assets, a new wholly owned subsidiary, Orph
Pharma IP Company Limited ("Orph Pharma"), was registered in April 2021.
c) On 14 June 2021, the Group announced its intention to make a distribution in specie of the entire issued share capital of its
wholly-owned subsidiary Orph Pharma IP Company Limited to Poolbeg Pharma Limited ("Poolbeg"), in return for the issue of
new shares by Poolbeg ("Poolbeg Shares") to shareholders of Open Orphan on the register at close of business on 17 June 2021.
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.
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
11
Open Orphan Plc
Report of the Directors (continued)
For the year ended 31 December 2020
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 which has
been posted to you together with this Annual Report and Accounts.
Section 172 Companies Act 2006
The Directors acknowledge their duty under s.172 of the Companies Act 2006 and consider that they have, both individually and
together, acted in the way that, in good faith, would be most likely to promote the success of the Company for the benefit of its
members as a whole. In doing so, they have had regard (amongst other matters) to:
•
•
•
•
•
the likely consequences of any decision in the long term. The Group’s long-term investment strategy is shown in the
Chairman’s Report on page 2 with associated risks highlighted in the Strategic report on Page 8.
the interests of the Group’s employees. Our employees are fundamental to us achieving our long-term strategic
objectives.
the impact of the Group’s operations on the community and the environment. The Group operates honestly and
transparently. We consider the impact on the environment on our day-to-day operations and how we can minimise this.
the desirability of the Group maintaining a reputation for high standards of business conduct. Our intention is to behave
in a responsible manner, operating within the high standard of business conduct and good corporate governance, as
highlighted in the Corporate Governance Statement on page 13.
the need to act fairly as between members of the Group. Our intention is to behave responsibly towards our shareholders
and treat them fairly and equally so that they may benefit from the successful delivery of our strategic objectives.
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 17 June 2021 and signed on its behalf by.
Cathal Friel
Executive Chairman
12
Open Orphan Plc
Corporate Governance Statement
For the year ended 31 December 2020
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 Elaine Sullivan 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
26 Board and Committee meetings were held during the year. The Directors’ attendance record (in their respective roles) during 2020
is as follows:
Cathal Friel (Executive Chairman)
Prof. Brendan Buckley (Non-Executive Director)
Maurice Treacy (Executive Director Resigned 17th January 2020)
Christian Milla (Chief Operating Officer Resigned 17th January 2020)
Michael Ryan (Non-Executive Director Resigned 17th January 2020)
David Kelly (Non-Executive Director Resigned 17th January 2020)
Michael Meade (Non-Executive Director Appointed 17th January 2020)
Mark Warne (Non-Executive Director Appointed 17th January 2020 and
Resigned 31st December 2020)
Leo Toole (Chief Financial Officer Appointed 27th February 2020)
Elaine Sullivan (Non-Executive Director Appointed 23rd November 2020)
25
21
0 (of a possible 3 up to 17th January 2020)
0 (of a possible 3 up to 17th January 2020)
0 (of a possible 3 up to 17th January 2020)
0 (of a possible 3 up to 17th January 2020)
14(of a possible 23 since 17th January2020)
17 (of a possible 23 since 17th January2020)
19 (of a possible 19 since 27th February 2020))
0 (of a possible 1 since 23rd November 2020)
Audit and Risk Committee
This comprises Michael Meade as Chairman and Elaine Sullivan 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.
13
Open Orphan Plc
Corporate Governance Statement (continued)
For the year ended 31 December 2020
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 Elaine Sullivan 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 Elaine Sullivan 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.
14
Open Orphan Plc
Report of the Remuneration Committee
For the year ended 31 December 2020
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 2020 is shown below and in note 9:
2020
£’000
2019
£’000
17
2
45
57
26
3
150
178
90
163
8
7
446
596
12
10
40
-
-
-
62
99
-
-
103
75
277
339
Non-Executive Directors
Michael Ryan (Resigned 17th January 2020)
David Kelly (Resigned 17th January 2020)
Brendan Buckley
Michael Meade (Appointed 17th January 2020)
Mark Warne (Appointed 17th January and Resigned 31 December 2020)
Elaine Sullivan (Appointed 23rd November)
Executive Directors
Cathal Friel
Trevor Philips (3) (Appointed 17th January and Resigned 4th May 2020)
Leo Toole (4) (Appointed 27th February 2020)
Christian Milla (1) (Resigned 17th January 2020)
Maurice Treacy (2) (Resigned 17th January 2020)
Total fees and emoluments
(1) Includes a £1,000 employer pension contribution in 2020 (2019: £13,000)
(2) £22,000 of remuneration paid via invoice in 2019.
(3) Includes a £4,000 employer pension contribution in 2020 (2019: nil)
(4) Includes a £15,000 employer pension contribution in 2020 (2019: nil)
Directors’ share options and warrants
As at 31 December 2020 no options had been granted to directors.
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.
15
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 2020 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 2020 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.
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
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 15 reporting units, comprising the Group’s operating businesses and holding
companies.
16
Open Orphan Plc
We performed audits of the complete financial information of Open Orphan Plc, Venn Life Sciences Limited, Venn Life Sciences
(NI) Limited, Venn Life Sciences (UK) Limited, Venn Life Sciences (Ireland) Limited, hVIVO Limited, hVIVO Services Limited and
hVIVO Inc. 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 15 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.
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.
•
•
•
•
•
•
Carrying value of intangibles
Revenue recognition
Carrying value of investments in joint ventures
Carrying value of inventory
Going concern assumption
Carrying value of Investments in subsidiary undertakings and inter-company debtors (Company only risk)
These are explained in more detail below.
Key audit matter
Carrying value of intangibles
How our audit addressed the key audit matter
Our audit procedures:
All intangibles are being held at cost less impairment.
The Group had intangible assets of £6,127,000 (2019:
£2,875,000) at 31 December 2020. Of this, £5,600,000
relates to capitalised goodwill recognised on acquisitions
and £527,000 relates to capitalised trade secrets, software,
licenses and preferred right to reserve a slot.
There have been no impairments in the year.
Revenue recognition
•
•
•
•
•
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 only assessed for impairment when
indicators of impairment exist;
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; and
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:
The amount of revenue recognised by the Group was
£20,602,000 (2019: £3,372,000). The Group recognises
revenue from clinical trial services provided to customers,
incrementally as work is performed, using service
milestones noted in the contracts and percentage of
completion of contract when recognising revenue over
time.
•
•
assessed the appropriateness of the Group’s revenue
recognition accounting policies;
reviewed a sample of contracts with customers and
tested that the Group has correctly accounted for the
revenue arising from these contracts in accordance
with
reviewed
management’s judgement on the contract price and
the allocation to performance obligations;
the accounting policies and
17
Open Orphan Plc
The percentage of completion is determined using level of
work completed to date in respect of each individual
milestones assigned to the clinical services contract. The
milestones are measured using metrics assigned to the
individual contracts. These metrics determines how the
progress of each milestone can be measured. This requires
management to estimate both the allocation of revenue to
milestones in the contract at contract inception date, and
the percentage of completion of each milestone at each
reporting date.
Contract assets and liabilities have been reviewed by the
board in detail including each contract with all major
customers and revenue has been recognised in accordance
with IFRS15.
We identified a risk of inaccurate or incomplete
recognition of revenue due to the incorrect allocation of
milestones to service contracts and percentages of
completion in calculating revenue
assumptions and judgements made in estimating the
percentage of completion require a significant degree of
management judgement and are susceptible to
management override and represent a fraud risk.
and cost of sales. The
We therefore determined this to be a key audit matter.
Carrying value of investments in joint ventures
The Group holds material investment in a joint venture,
with a carrying value of £7,076,000 (2019: £Nil) as at the
year-end.
Given that the investment is in the early stage research
and development phase, there is a risk of incorrect
valuation of equity accounted balances held by one of
Open Orphan’s subsidiary’s, hVIVO Limited. The risk of
failure in elevated due to emergence of competition with
similar products, which increases the risk of inaccurate
valuation of investments.
Furthermore, should impairment indicators be identified,
there is a level of judgement exercised by management in
estimating fair value of investments in joint ventures,
which may result in inaccurate valuation of balances.
Carrying value of inventory
hVIVO Services Limited, subsidiary undertaking, produces
and purchases viruses which require special
considerations for estimation of the future value in use,
expected life of the asset and impairment in light of
evolution of virus strains around the world. As at the year
•
•
•
•
•
•
performed detailed testing on individually significant
contracts,
including substantiating a sample of
transactions with underlying documents such as
contracts, progress metrics data, internal forecasts
and project completion reports, as well as discussions
with project managers;
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 performed a walk-through of the process followed
and related controls with regard to the recognition of
revenue; and
evaluated whether revenue has been appropriately
presented and disclosed in the financial statements.
Based on the audit work performed, we are satisfied that
management have appropriately accounted for revenue in
line with their accounting
policy and in accordance with the
requirements of IFRS 15. We are also satisfied that all
necessary disclosures have been made in the consolidated
financial statements.
We have performed the following audit procedures:
•
•
•
•
•
obtained and reviewed management’s assessment of
impairment of the associate and factors;
ensured key judgements are robust by review of
events surrounding the judgement and validating the
judgements by agreeing to supporting evidence;
where indicators of impairment were identified, we
challenged management’s assessment of the any
recoverable amount from the investment in associate
and joint venture;
where no indicators of impairment were highlighted
by management, we challenged the judgements made
in management’s
identifying
contradictory signs of any potential indicators of
impairment; and
considered the appropriateness of the Group’s
disclosures in relation to any impairment in the
financial statements.
assessment by
Based on the audit work performed, we are satisfied that
management have appropriately valued investments in line
with their accounting policy and in accordance with the
requirements of IAS 27, IAS 36. We are also satisfied that
in the
all necessary disclosures have been made
consolidated financial statements.
We have performed the following audit procedures:
•
•
obtained management’s forecasts for future value in
use of the virus inventory;
assessed the reliability of forecasts by agreeing to
historical use and ensuring future contracted use;
18
Open Orphan Plc
end the carrying value of inventory is £953,000 (2019
£Nil).
Management is required to use their judgement to assess
the future value in use of strains held in inventory at the
balance sheet date and evaluate if the shelf life of the
virus inventory will be sufficient for it to be useful for
future human challenge studies. In doing so, management
review their high probability pipeline of potential
contracts and estimate the usage of virus over its useful
life.
There are inherent risks associated with the forecasted
usage which may be affected where contracted studies
are cancelled, and future studies are signed at a date later
than the shelf life of the existing inventory. There is also a
risk that the virus strains may evolve beyond the current
research and development undertaken, thus decreasing
the monetary value of the inventory held.
•
•
•
reviewed management and challenged management
on their judgements of the forecasted usage and
estimated useful life of the virus inventory;
tested the clerical accuracy of management’s forecast;
and
considered the appropriateness of the Group’s
disclosures in relation to inventory in the financial
statements.
Based on the audit work performed we are satisfied that
although there are uncertainties associated with the useful
life of the virus stock, the Group’s revenue pipeline will
utilise
reasonable
timeframe. We are also satisfied that all necessary
disclosures have been made in the consolidated financial
statements.
inventory within a
the current
Going concern assumption
Our audit procedures:
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.
•
•
•
•
•
•
•
•
•
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
including
the directors’ assessment,
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,
challenged management’s
including
revenue and
forecast
the
corroborated the assumptions over the conversion of
new contracts and the levels of costs that are forecast
correspondence with
through observation of
potential customers to assess the
likelihood of
contracts being awarded;
assessing
the
assumptions;
comparing future cashflows with historical data; and
considered the appropriateness of the Group’s
disclosures in relation to going concern in the financial
statements.
the underlying
sensitivities of
reviewing
Based on the audit work performed we are satisfied that
although there are inherent uncertainties associated with
the forecast, the Group’s revenue pipeline, contracts won
post year end and current cash position will provide
required support to the business. We are also satisfied that
all necessary disclosures have been made
in the
consolidated financial statements
Carrying value of investment in subsidiaries and carrying
value of inter-company debtors (Company only risk)
We have performed the following audit procedures:
•
reviewed management’s assessment of
operating cashflows and indicators of impairment;
future
19
Open Orphan Plc
The Company had investments of £22,334,000 (2019:
£8,195,000) at 31 December 2020 relating exclusively to
the investments in subsidiary undertakings.
We identified a risk that the investment of the parent
company (Open Orphan plc) in its subsidiaries and
amounts receivable, may be impaired.
Management’s assessment of the recoverable amount of
investments in subsidiaries requires estimation and
judgement around assumptions used, including the cash
flows to be generated from continuing operations.
Changes to assumptions could lead to material changes in
the estimated recoverable amount, impacting the value of
investment in the subsidiary and impairment charges.
•
•
•
•
•
•
•
•
including the milestones achieved
assessed the methodology used by management to
estimate the future profitability of its subsidiaries and
recoverable value of the investments, in conjunction
with any intra-group balances, to ensure that the
method used is appropriate;
assessed the reasonableness of the key assumptions
used in management’s estimates of recoverable value,
in line with the economic and industry statistics
relevant to the business;
challenged cash inflows from revenue generating
activities and the key assumptions applied in arriving
at these,
in
research programmes; the number and monetary
value of clinical studies in the foreseeable future, and
the market share of studies in key areas of disease
focus;
assessed the reasonability of cash outflows, including
contracted delivery costs, and research and capital
spend;
assessed the appropriateness and applicability of
discount rate applied to the current business
performance;
confirmed
assumptions would not materially
impairment loss;
considered the appropriateness of the Parent
Company’s disclosures in relation to any impairment
in the Company only financial statements; and
ensured that disclosures of the key judgements and
assumptions, and sensitivity of the impairment loss
recognised was appropriately disclosed.
in key
increase the
that any adverse change
Based on the audit work performed we are satisfied that
the management have accounted for the impairment loss
in accordance with accounting
appropriately and
standards, and the
is appropriately
impairment
disclosed in the Parent Company financial statements.
loss
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
£220,000
Based on 1% 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
£95,000
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 £10,000 and £145,000.
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.
20
Open Orphan Plc
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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 11, 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.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud is detailed below.
21
Open Orphan Plc
The extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, was as follows:
•
the senior statutory auditor ensured the engagement team collectively had the appropriate competence, capabilities and
skills to identify or recognise non-compliance with applicable laws and regulations.
• we identified the laws and regulations applicable to the group through discussions with directors and other management.
• we focused on specific laws and regulations which we considered may have a direct material effect on the financial
statements or the operations of the company, including taxation legislation, data protection, anti-bribery, employment,
environmental, health and safety legislation and anti-money laundering regulations.
• we assessed the extent of compliance with the laws and regulations identified above through making enquiries of
•
management and inspecting legal correspondence.
identified laws and regulations were communicated within the audit team regularly and the team remained alert to
instances of non-compliance throughout the audit; and
• we assessed the susceptibility of the group’s financial statements to material misstatement, including obtaining an
understanding of how fraud might occur, by:
o making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge
of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and
regulations.
o
To address the risk of fraud through management bias and override of controls, we:
• performed analytical procedures to identify any unusual or unexpected relationships;
•
•
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in note 4 of the
Group financial statements were indicative of potential bias;
investigated the rationale behind significant or unusual transactions; and
in response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which
included, but were not limited to:
•
•
reading the minutes of meetings of those charged with governance;
o agreeing financial statement disclosures to underlying supporting documentation;
o
o enquiring of management as to actual and potential litigation and claims; and
o
reviewing correspondence with HMRC and the group’s legal advisors.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations
are from financial transactions, the less likely it is that we would become aware of noncompliance. Auditing standards
also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the
directors and other management and the inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may
involve deliberate concealment or collusion.
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 second year we are auditing the Group, however we had been engaged for the audits of the Venn
Life Sciences Holdings PLC (the target of the reverse in the previous year) for 8 years, where our total uninterrupted period of
engagement was 8 years, covering the periods ending 31 December 2011 to 31 December 2018.
22
Open Orphan Plc
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
17 June 2021
23
Open Orphan Plc
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
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 Based Payment charge
Loss on sale/impairment of Investments
Share of loss of associate using equity method
(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
18c/d
18b
13
Year to
31 December
2020
£’000
Year to
31 December
2019
£’000
20,602
(32,437)
1,393
(10,442)
(1,883)
(169)
(2,125)
(6,265)
(374)
(240)
-
(107)
(11,163)
372
(10,791)
(10,791)
318
(10,473)
3,372
(8,673)
171
(5,130)
(296)
(331)
(711)
(3,792)
(350)
(102)
(224)
-
(5,806)
67
(5,739)
(5,739)
1,124
(4,615)
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
2020
(1.80p)
(1.80p)
2019
(3.48p)
(3.48p)
The notes on pages 28 to 63 are an integral part of these consolidated financial statements.
24
Open Orphan Plc
Consolidated and Company’s Statement of Financial Position
As at 31 December 2020
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment in associates
Investments in subsidiaries
Right of Use Asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current 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
Leasehold Provision
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
17
16
18b
18a
37
20
21
22
26
27
27
27
27/32
27
23
37
23
24
37
25
Group
2020
£’000
6,127
1,068
7,076
-
4,230
18,501
953
9,806
80
19,205
30,044
48,545
731
44,480
(6,856)
1,442
493
(17,993)
22,297
2
2,194
20
2,216
21,396
32
2,245
359
24,032
26,248
48,545
Group
Company
Company
2019
£’000
2,875
190
-
-
1,311
4,376
-
3,615
12
1,037
4,664
9,040
317
15,214
(6,856)
1,124
253
(7,202)
2,850
42
983
-
1,025
2,977
41
444
1,703
5,165
6,190
9,040
2020
£’000
-
-
-
22,334
-
22,334
-
10,960
-
8,689
19,649
41,983
731
44,480
(2,241)
2,573
493
(4,983)
41,053
-
-
-
-
885
-
-
45
930
930
41,983
2019
£’000
-
-
-
8,195
-
8,195
-
5,529
-
421
5,950
14,145
317
15,214
(2,241)
1,085
253
(3,092)
11,536
-
-
-
-
1,359
-
-
1,250
2,609
2,609
14,145
The notes on pages 28 to 63 are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board on 17 June 2021
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 €1,891k (2019 – loss of £1,629k).
Open Orphan Plc
Cathal Friel - Executive Chairman
Registered no: 07514939
25
Open Orphan Plc
Consolidated and Company’s Statement of Changes in Shareholders’ Equity
Share
capital
£’000
-
Share
premium
£’000
-
Merger
reserve
£’000
-
Share Option
reserve
£’000
-
Foreign
currency
reserve
£’000
-
Retained
earnings
£’000
(1,463)
Total
£’000
(1,463)
Group
At 1 January 2019
Changes in equity for the
Year ended 31 Dec 2019
(Loss) for the year
Currency differences
Total comprehensive (loss)
For the year
Transactions with the
owners
Transfer re Open Orphan PLC
Share Based Payment Res.
Shares issued
Total contributions by and
distributions to owners
At 31 December 2019
Changes in equity for the
Year ended 31 Dec 2020
(Loss) for the year
Currency differences
Total comprehensive (loss)
for the year
Transactions with the
owners
Share Based Payment Res.
Shares issued
Total contributions by and
distributions to owners
At 31 December 2020
Company
At 1 January 2019
Changes in equity for the year
ended 31 December 2019
Total loss for year
Share Based Payment Res.
Currency differences
Transfer re Open Orphan PLC
Shares issued
Total contributions by and
distributions to owners
At 31 December 2019
Changes in equity for the year
ended 31 December 2020
Total comprehensive loss for year
Share Based Payment Res.
Currency differences
Shares issued
Total contributions by and
distributions to owners
At 31 December 2020
-
-
-
-
-
-
-
-
-
316
-
1
317
317
15,200
-
14
15,214
15,214
(6,856)
-
-
(6,856)
(6,856)
-
-
-
-
-
-
-
414
-
29,266
-
-
-
-
-
414
731
29,266
44,480
-
(6,856)
-
-
-
151
102
-
253
253
-
-
-
240
-
240
493
Share
capital
£’000
-
Share
premium
£’000
-
Share option
reserve
£’000
-
-
-
-
316
1
317
317
-
-
-
414
414
-
-
-
15,200
14
15,214
15,214
-
-
-
29,266
29,266
-
102
-
151
-
253
253
-
240
-
-
240
-
1,124
(5,739)
-
(5,739)
1,124
1,124
(5,739)
(4,615)
-
-
-
-
-
-
-
1,124
-
(7,202)
8,811
102
15
8,928
2,850
(10,791)
-
(10,791)
318
(10,791)
(10,473)
318
318
-
-
-
-
-
1,442
-
(17,993)
Merger
reserve
£’000
-
-
-
-
(2,241)
-
(2,241)
(2,241)
-
-
-
-
-
Foreign
currency
reserve
£’000
-
-
-
1,085
-
-
1,085
1,085
-
-
1,488
-
1,488
Retained
earnings
£’000
(1,463)
(1,629)
-
-
-
-
(1,629)
(3,092)
(1,891)
-
-
-
(1,891)
240
29,680
29,920
22,297
Total
£’000
(1,463)
(1,629)
102
1,085
13,426
15
12,999
11,536
(1,891)
240
1,488
29,680
29,517
731
44,480
493
(2,241)
2,573
(4,983)
41,053
26
Open Orphan Plc
Consolidated and Company’s Statement of Cash Flows
For the year ended 31 December 2020
Notes
28
Cash Flow from operating activities
Continuing operations
Cash used in operations
Income tax (R & D) Received
Net cash used in operating activities
Cash flow from investing activities
Cash acquired with acquisition of subsidiary
Sale of Shares in Integumen PLC
Purchase of property, plant and equipment
Purchase of intangible asset
Net cash used in investing activities
Cash flow from financing activities
Proceeds from issuance of ordinary shares & options
Costs of January and May fund raising
Exceptional Costs re RTO & restructuring
Repayment of Invoice Discounting
Interest (Paid)
Loan Note Redemptions
Premium on conversion of Convertible Debentures
to shares
Net cash generated by financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
FX translation
Cash and cash equivalents at end of year
26
7
22
Group
2020
£’000
Group
2019
£’000
Company
2020
£’000
Company
2019
£’000
2,540
1,631
4,171
2,276
-
(818)
(274)
1,184
18,031
(1,335)
(2,108)
(156)
(188)
(1,205)
-
13,039
18,394
1,037
(226)
19,205
(2,763)
-
(2,763)
(6,568)
-
(6,568)
(2,754)
-
(2,754)
36
514
(23)
-
527
4,286
(603)
(689)
(21)
(113)
-
273
3,133
897
140
-
1,037
-
-
-
-
-
18,031
(1,335)
(867)
-
(152)
(1,205)
-
36
-
-
-
36
4,286
(603)
(689)
-
(268)
-
273
14,472
2,999
7,904
421
364
8,689
281
140
-
421
27
Open Orphan Plc
Notes to the Financial Statements
For the year ended 31 December 2020
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 rapidly growing specialist CRO pharmaceutical services company which is the world
leader in the testing of vaccines and antivirals using human challenge clinical trials. The Group has a presence in the UK, Ireland,
France and Netherlands.
The financial statements are presented in GBP£’000 (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 Board decided to change the presentation currency of the Group from Euro (€) to pounds Sterling (£) in
2020 given the increased weighting of our UK operations on our Financial Statements as a result of the merger between Open Orphan
plc and hVIVO plc in January 2020. See note 38 for further details.
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 2019 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 % 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.
Open Orphan Plc completed, on 17th January 2020, an acquisition of the hVIVO group. The results reported for 2020 reflect those
of Open Orphan Plc and Venn Group for the full 12-month period and for hVIVO group from 17 January 2020 to year end. The %
of the enlarged share capital represented by the consideration shares issued to hVIVO group on the acquisition takeover was 33.1%
which represented a fair value consideration of £12.96m.
The Balance Sheet reported for the period reflect those of the combined group with share capital reflecting the position of the
ultimate parent company Open Orphan Plc.
For information purposes, a pro forma statement of Comprehensive Income for the full calendar year 2020 and comparable periods
for Open Orphan Plc on a stand-alone basis is presented in the chairman’s statement to allow a normalized presentation of
Comprehensive Income for the Group during the year 2020.
The consolidated financial statements of Open Orphan Plc have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs), IFRIC interpretations and the Companies Act 2006 applicable to companies
reporting under 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.
28
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
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 2020 include:
IFRS 3
IAS 8
Business Combinations
Accounting Policies, Changes in Accounting Estimates and Errors
We consider that there has been no impact on adoption of the new standards on the Group
Summary of new accounting policies
Several other amendments and interpretations apply for the first time in 2020, 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 2020 but not effective for periods
commencing 1 January 2020 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:
Insurance Contracts2
*IFRS 17
Interest Rates1
*IFRS 9
Benchmark Reform1
*IAS39/IFRS7
*IFRS16 (Amendment) 1 Leases’ – Covid [1]19 related rent concessions
*IAS 1
Presentation of Financial Statements2
1 Effective for annual periods beginning on or after 1 January 2021
2 Effective for annual periods beginning on or after 1 January 2023
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 2020
the Group made a loss of £10.5m but had net cash inflows from operating activities of £2.6m, however the Directors consider the use
of the going concern basis to be appropriate. The Directors have prepared working capital projections which show that with cash
balances on hand at 31 December 2020, the Group & Company will have sufficient funding to be able to continue as a going concern.
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.
29
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
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. The acquisition of the hVIVO group in January 2020 was accounted for using principles of
acquisition accounting.
(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.
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.
30
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
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 presentation 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 GBP,
which is the functional and presentation currency of the main operating entities. The prior set of financial statements were
presented in EUR, being the functional and presentation currency of the group then. The comparative figures have been restated
to be comparable. See translation in note 38.
(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:
•
•
•
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.
31
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
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:
Leasehold Improvements
Plant & Machinery
Fixtures and fittings
the shorter of five years or the life of the lease
four years
three to five years
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.
(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) Intellectual property rights
Intellectual property rights relate 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.
32
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
d) Capitalised Software development, Licences and Preferential right to reserve a slot
Internally generated intangible assets – research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred. Development costs are
capitalised when the related products meet the recognition criteria of an internally generated intangible asset, the key criteria
being as follows:
technical feasibility of the completed intangible asset has been established;
it can be demonstrated that the intangible asset will generate probable future economic benefits;
adequate technical, financial and other resources are available to complete the development;
the expenditure attributable to the intangible asset can be reliably measured; and
•
•
•
•
• management has the ability and intention to use or sell the intangible asset.
Expenses for research and development include associated wages and salaries, material costs, depreciation on non
assets and directly attributable overheads. Development costs recognised as assets are amortised over their expected useful life.
current
‑
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.
33
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
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 35 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 marketplace (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,
with the exception of investments in subsidiaries and associates which are held at cost less impairment.
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
34
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
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.
35
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
Inventories
Inventories are reported at the lower of cost (purchase price and/or production cost) and net realisable value. Net realisable value
is the estimated selling price in the ordinary course of business, less estimated costs of completion and applicable variable selling
expenses.
Inventories comprise completed manufactured grade viruses, work in process in relation to the manufacture of viruses, and
laboratory and clinical consumables. The cost of virus inventory is calculated using the weighted average cost method for each
individual strain, with cost including direct materials and, where applicable, direct labour costs and an attributable portion of
production overheads that have been incurred in bringing the inventories to their present location and condition. Adjustments
are made for any inventories where net realisable value is lower than cost, or which are considered to be obsolete. Any inventories
which management considers are not usable on future commercial engagements are provided against in the statement of
comprehensive income.
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.
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.
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.
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’.
36
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
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.
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
is 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.
37
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
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.
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.
Leasehold provision
Provisions for dilapidations and onerous lease commitments are recognised when the Company has a present or constructive
obligation as a result of past events. The recognition of provision requires management to make best estimates of the
consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. There is reasonable uncertainty around the likelihood and timing of the exit of the lease
as negotiations will involve third parties. The provision is discounted for the time value of money.
Revenue recognition
(a) Revenue from Contracts in the Venn Life Sciences Group
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.
38
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
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.
(b) Revenue from contracts in the hVIVO Group
Revenue from contracts with customers is recognised at an amount that reflects the consideration to which the Company
expects to be entitled in exchange for the goods or services and is shown net of Value Added Tax.
Service revenues
The Company primarily earns revenues by undertaking client clinical services engagements. A client clinical services engagement
typically comprises a number of quarantine cohorts. Each quarantine cohort lasts two to three weeks, but the timeline of work
involved in building up to undertaking a clinical study is in the range of three to twelve months. Whether a client clinical services
engagement is for one quarantine cohort or for a number of quarantine cohorts, the overall timeline of the engagement is much
the same, apart from the additional time for the quarantine cohorts themselves and the time lags in between quarantine cohorts
(with some cohorts offset in parallel and some sequential), as much of the upfront work is the same whether for one or a number
of quarantine cohorts.
Client clinical services revenue is recognised based on a performance over time, as the performance of the clinical services
engagements do not create an asset with an alternative use to the Company and the Company has an enforceable right to payment
for the performance completed to date.
The Company measures its progress towards the satisfaction of performance obligations using output measures. Depending on
the contractual terms, revenue from contracts with customers is recognised based on the level of work completed to date in
respect of each individual performance obligation of the client clinical services contract.
Contracts generally contain provisions for renegotiation in the event of changes in the scope, nature, duration, volume of services
or conditions of the contract (contract modifications). Contract modifications are assessed based on the terms of the contract.
Contract modifications which are distinct and provided at a stand-alone selling price are accounted for as a separate contract.
Where modifications are not distinct or provided at a stand-alone selling price, the Company evaluates whether the remaining
goods or services are distinct from those already provided. If so, the modification is accounted for as a termination of the existing
contract and the creation of a new contract. If not, the transaction price and measure of progress is updated for the single
performance obligation and amounts are recognised as revenue by revision to the total contract value arising as a result. Provisions
for losses to be incurred on contracts are recognised in full in the period in which it is determined that a loss will result from the
performance of the contractual arrangement.
The difference between the amount of revenue from contracts with customers recognised and the amount invoiced on a particular
contract is included in the statement of financial position as contract liabilities. Normally amounts become billable in advance
upon the achievement of certain milestones, in accordance with pre-agreed invoicing schedules included in the contract or on
submission of appropriate detail. Any cash payments received as a result of this advance billing are not representative of revenue
earned on the contract as revenues are recognised over the period during which the specified contractual obligations are fulfilled.
Amounts included in contract liabilities are expected to be recognised within one year and are included within current liabilities.
In the event of contract termination, if the value of work performed and recognised as revenue from contracts with customers is
greater than aggregate milestone billings at the date of termination, cancellation clauses provide for the Company to be paid for
all work performed to the termination date (enforceable right to payment for services provided to date).
39
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
2. Summary of significant accounting policies (Cont’d)
Licensing revenues
Where licensing arrangements have a single contracted performance obligation to provide the right to use intellectual property
which exists at a certain point in time, such as the delivery of a licence for study data, revenue from contracts with customers is
recognised when the Company has transferred to the customer control over the intellectual property, which generally occurs at
the beginning of the period for which the customer has the right to use the intellectual property. Licence revenue for such
arrangements is therefore generally recognised at the point of delivery of the data when the performance obligation has been
satisfied. Until this point in time, any amount invoiced in respect of the arrangement is presented in the statement of financial
position as a contract liability. Costs associated with development of the study data are capitalised as a current intangible asset
from the point that it is probable future economic benefits will be generated and are transferred to cost of sales upon handover
of the deliverable.
Where licensing arrangements are determined to have contracted performance obligations to provide a right of access to the
intellectual property, revenue is recognised over time, in line with the methods applied in recognising service revenues.
(c) 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.
(d) Royalty and license income
Royalty and license income are recognised on an accruals basis in accordance with the substance of the relevant agreements.
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, restructuring and redundancy costs.
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 presentation currency is GBP£ 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.
40
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
3. Financial risk management (Cont’d)
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 GBP £ are set out in the table below.
Rate compared to Euro
GBP
US Dollar
Rate compared to GBP
Average rate
2020
Average rate
2019
Year end rate Year end rate
2019
2020
0.89
1.14
Average rate
2020
0.88
1.13
Average rate
2019
0.90
1.23
0.85
1.12
Year end rate Year end rate
2019
2020
Euro
US Dollar
As a guide to the sensitivity of the Group’s results to movements in foreign currency exchange rates, a one penny movement in the
GBP to Euro rate would impact annual earnings by approximately £3,000 due to natural hedging (2019 - £1,000).
1.11
1.26
1.18
1.32
1.14
1.28
1.12
1.28
(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.
41
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
3. Financial risk management (Cont’d)
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 2020:
Borrowings
Leased Liabilities
Trade and other payables
At 31 December 2019:
Borrowings
Leased Liabilities
Trade and other payables
(d) Capital risk management
Note
25
37
23
25
37
23
Between
Less than
one year 1 and 2 years 2 and 5 years
£’000
Between More than
5 years
£’000
£’000
£’000
359
2,245
21,396
1,703
444
2,977
-
1,510
2
-
328
40
-
684
-
-
655
2
-
-
-
-
-
-
Total
£’000
359
4,439
21,398
1,703
1,427
3,019
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 2020. 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.
42
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
4. Critical accounting estimates and judgements (Cont’d)
(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, Intellectual Property Rights,
software, licences and Preferential Right to Reserve a Slot 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. At each period end, management reviews each material individual contract to assess
whether any anticipated losses should be recognised immediately. Revenue in relation to the licensing of data is recognised when
data is delivered to the customer.
(g) Virus inventory
In valuing virus inventory, management is required to make assumptions in relation to the future commercial use, being both
external client revenue engagements, engagements with our equity investments and internal research and development
engagements, for each virus. This includes consideration of both the current business pipeline and management’s estimates of
the future virus requirements, based on its significant knowledge and experience in the field of virology.
(h) Research and development tax credit
Hvivo Services Limited’s research and development tax claim is complex and requires management to make significant
assumptions in building the methodology for the claim, interpreting research and development tax legislation to the Company’s
specific circumstances, and agreeing the basis of the Company’s tax computations with HM Revenue & Customs.
(i) Leasehold provision
Provisions for dilapidations and onerous lease commitments are recognised when the Group has a present or constructive
obligation as a result of past events. The recognition of provision requires management to make best estimates of the
consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. There is reasonable uncertainty around the likelihood and timing of the exit of the lease
as negotiations will involve third parties. The provision is discounted for the time value of money.
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 as the industry-leading clinical development services (CDS) business pioneering human disease
models based upon viral challenge. Using human challenge studies to establish early proof-of-concept, hVIVO’s clinical trial
platform can accelerate drug and vaccine development in respiratory and infectious diseases.
A second business unit 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 Venn Life Sciences Group business’ contracts
are large, multi-country contracts, pulling resources from many different locations, the CODM considers this one business unit.
A third 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 2020 is as follows:
43
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
5. Segmental reporting (Cont’d)
2020
CRO
2020
Data
Platform
2020
CDS
2020
2019
Total
Total
£’000
£’000
£’000
£’000
£’000
7,842
(3,313)
(1,648)
(4,961)
(590)
(53)
(5,604)
57
(50)
-
-
(431)
-
(431)
(4)
-
(435)
(113)
-
-
(5,597)
(548)
5,763
86
-
934
-
5,633
9,215
21,631
(3,429)
(45)
(3,474)
-
13
-
-
-
(1,169)
13
(1,143)
(119)
(314)
(433)
14,153
(2,522)
(477)
(2,999)
(1,288)
(116)
(4,403)
(318)
(190)
(107)
(5,018)
364
969
7,076
3,296
953
5,422
9,977
28,057
(22,341)
-
(22,341)
21,995
3,543
(6,266)
(2,125)
(8,391)
(1,882)
(3,781)
(711)
(4,492)
(296)
(169)
(331)
(10,442)
(374)
(5,119)
(350)
(240)
(107)
(106)
(231)
(11,163)
(5,806)
6,127
1,068
7,076
4,230
953
9,886
19,205
48,545
2,875
190
-
1,311
-
3,627
1,037
9,040
(25,889)
(4,487)
(359)
(1,703)
(26,248)
(6,190)
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
Investment in associate
ROU Assets
Inventories
Trade and other debtors
Cash
Total assets
Segment liabilities
Operating liabilities
Borrowings
Total liabilities
44
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
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)
Inventories consumed
Professional fees
IT
Premises Costs
Volunteer costs
Agency, 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
2020
£’000
15,240
368
1,684
2,125
727
1,326
1,021
1,331
961
1,691
5,963
2019
£’000
5,202
393
234
711
-
453
194
229
-
279
978
32,437
8,673
2020
£’000
2,125
2,125
2019
£’000
711
711
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:
Fees payable to Company’s auditor for the audit of the parent Company and consolidated financial
statements
Fees payable to Company’s auditor for the audit of subsidiaries and their consolidated financial
statements
Total paid to the Company Auditor
Fees payable to the auditors of subsidiaries for services:
– The audit of Company’s subsidiaries pursuant to legislation paid to other Auditors
– Other services paid to other Auditors
– Tax services paid to other Auditors
Total paid to Other Auditors
Total auditor’s remuneration
2020
£’000
2019
£’000
36
60
96
48
40
8
96
26
21
47
45
44
8
97
192
144
45
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
9. Directors’ emoluments
Aggregate emoluments (11 directors)
Social Security Costs
Contribution to defined contribution pension scheme (3 directors)
Total directors’ remuneration
See further disclosures within the Remuneration Report on page 15.
Highest paid Director
Total emoluments received
Defined contribution pension scheme
2020
£’000
576
69
20
665
2019
£’000
326
39
13
378
2020
£’000
178
-
2019
£’000
90
13
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
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
2020
£’000
12,461
1,944
835
15,240
2019
£’000
4,203
722
277
5,202
2020
No
2019
No
41
129
9
179
2020
£’000
(243)
(131)
(374)
-
-
34
100
9
143
2019
£’000
(48)
(302)
(350)
-
-
(374)
(350)
46
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
13. Income tax expense
Group
Current tax:
Current year research and development tax credit
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)
2020
£’000
(363)
-
(363)
(9)
(9)
(372)
2019
£’000
-
-
-
(67)
(67)
(67)
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
2020
£’000
2019
£’000
(11,163)
(5,806)
Tax calculated at domestic tax rates applicable to UK standard rate of tax of 19.00% (2019 – 19%)
(2,121)
(1,107)
Tax effects of:
– Expenses not deductible for tax purposes
– Current Year R & D Tax credit
–Temporary timing differences
– Losses carried forward
Income tax (credit)
421
(207)
(10)
1,545
(372)
166
-
(67)
941
(67)
There are no tax effects on the items in the statement of comprehensive income.
The subsidiary, hVIVO Services Limited, claims UK R&D tax incentives under both the SME and RDEC schemes. During 2020, a
payment of £1.50 million was received from HMRC in respect of the RDEC and SME tax claim for the year ended 31 December
2019. The research and development tax credit receivable of £1.15 million as at 31 December 2020 includes a current year SME
claim of £0.36 million and a current year RDEC claim of £0.78 million (recorded in other income).
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
Earnings per share from continuing operations
2020
£’000
(10,791)
(10,791)
2019
£’000
(5,739)
(5,739)
599,920,207
165,081,000
(1.80p)
(3.48p)
47
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
14. Loss per share (Cont’d)
(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 and warrants are given in note 32.
Potential dilutive ordinary shares:
Options
Warrants
Total
15. Dividends
2020
2019
9,516,111
12,706,964
4,185,248
13,701,359
6,744,500
19,451,464
There were no dividends paid or proposed by the Company in either year.
16. Property, plant and equipment
Group
Leasehold
Improvements
£’000
Plant &
Machinery
£’000
Fixtures &
Fittings
£’000
Total
£’000
Cost
At 1 January 2020
Transfer in from hVIVO
Additions
Disposals
Exchange differences
At 31 December 2020
Depreciation
At 1 January 2020
Transfer in from hVIVO
Charge for the year
Elimination on disposal
Exchange differences
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
-
1,535
88
(1,014)
77
686
-
1,497
33
(1,014)
74
590
96
-
-
2,520
373
-
146
3,039
-
2,455
35
-
138
2,628
411
-
715
1,190
357
(324)
107
2,045
525
1,037
131
(297)
88
1,484
715
5,245
818
(1,338)
330
5,770
525
4,989
199
(1,311)
300
4,702
561
190
1,068
190
The Company had no property, plant and equipment at 31/12/2020. (2019: nil).
48
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
17. Intangible fixed assets
Group
Cost
At 1 January 2020
Transfer in from hVIVO
Additions
Disposals
Exchange Differences
At 31 December 2020
Amortisation
At 1 January 2020
Transfer in from hVIVO
Charge for the year
Disposals
Exchange Differences
At 31 December 2020
Net book value
At 31 December 2020
At 31 December 2019
Goodwill
£’000
Trade
secrets
£’000
Intellectual
Property
Rights
£’000
Capitalised
Software
development
£’000
Pref
right to
reserve
slot
Licences
£’000
4,210
-
2,779
-
239
7,228
1,539
-
-
-
89
1,628
5,600
2,671
600
-
-
-
33
633
396
-
53
-
21
470
163
204
-
2,118
-
-
-
2,118
-
2,118
-
-
-
2,118
-
-
-
2,199
-
-
-
2,199
-
2,057
70
-
-
2,127
72
-
-
64
-
-
-
64
-
-
-
-
-
-
-
-
274
-
-
-
46
-
-
46
64
-
228
-
Total
£’000
4,810
4,381
3,053
-
272
1,935
4,175
169
-
110
6,389
6,127
2,875
274
12,516
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
CDS
Data Platform
Total
2020
£’000
2,821
2,779
-
2019
£’000
2,671
-
-
5,600
2,671
On 17th January 2020, Open Orphan Plc acquired hVIVO Plc (now renamed hVIVO Ltd) for a consideration of £12.96m. The difference
between the fair value of the assets acquired and the consideration paid gave rise to goodwill of £2.8m being created on the
acquisition.
Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2020 was assessed
at £5,600k (2019: £2,671k) 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 2020 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.
5%
15%
49
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
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
Investment in hVIVO Plc
Impairment of Investment in VLS Germany GmbH
At 31 December
2020
£’000
8,195
-
-
14,161
(22)
2019
£’000
-
2,783
5,412
-
-
22,334
8,195
Investments in Group undertakings are recorded at cost, which is the fair value of the consideration paid. Following review an
impairment provision of £22k (2019: nil) has been made to the investment in subsidiaries.
The subsidiaries of Open Orphan Plc are as follows:
Name of Company
Venn Life Sciences Limited*
Venn Life Sciences (Ireland) Limited**(2)
Venn Life Sciences B.V.**
Venn Life Sciences UK Limited**(1)
Venn Life Sciences (NI) Limited*
Venn Life Sciences (Germany) Gmbh *
Venn Life Science (France) S.A.S.*
Venn Life Sciences (EDS) B.V.*
Open Orphan DAC*
hVIVO Limited*
hVIVO Services Limited**
hVIVO INC**
Country of Registration
Ireland
Ireland
Netherlands
England & Wales
England & Wales
Germany
France
Netherlands
Ireland
England & Wales
England & Wales
USA
Nature of Business
Intermediate holding company
Group Service company
Clinical Research Organisation
Clinical Research Organisation
Clinical Research Organisation
Clinical Research Organisation
Data Management & randomisation Systems
Pre-clinical & early clinical Research Organisation
Data Platform of Rare diseases
Intermediate holding company
Clinical development services
Sales & Marketing services
*100% Direct Ordinary Shareholding; **100% Indirect Ordinary shareholding
(1) Company dissolved post year end; (2) Company in process of being dissolved post year end.
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.
18b. Investments in associates
The group, via its holding in hVIVO Limited, has investments in two associated companies as follows:
Name of Company
Imutex Ltd (1)
PrEP Biopharm Limited (2)
Country of Registration
England & Wales
England & Wales
Nature of Business
Clinical development services
Clinical development services
50
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
18b. Investments in associates (Cont’d)
(1) hVIVO Limited owns 49% of the Ordinary Shares and the investment is valued at £7,076,000 at 31 December 2020 after adjusting for share of loss in
2020 of £107,000.
(2) hVIVO Limited owns 62.62% of Ordinary Shares and in 2018 the carrying value was fully impaired so the investment has a value of Nil at 31
December 2020.
18c. Investments in Integumen Plc
Shares in undertakings
At 1 January
Transfer re Open Orphan PLC
Sales Proceeds
Loss on disposal
At 31 December
Group
2020
£’000
-
-
-
-
-
Group
Company
Company
2019
£’000
-
597
(514)
(83)
-
2020
£’000
2019
£’000
-
-
-
-
-
-
-
-
-
-
Venn Life Sciences Limited ‘s holding in Integumen PLC ordinary shares with a market value of €597k, at the date of the reverse
takeover, were sold in July 2019 for £514k (net of commission).
18d. Other impairments of investments
At 1 January
Transfer re Open Orphan PLC
Impairment
At 31 December
Group
2020
£’000
-
-
-
-
Group
Company
Company
2019
£’000
-
141
(141)
-
2020
£’000
-
-
-
-
2019
£’000
-
26
(26)
-
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 18e below), Trade debtors and Prepayments.
18e. Investment in Arcis Biotechnology
Beginning of the year
Impairment
End of the year
Group
Group
Company Company
2020
£’000
-
-
2019
£’000
26
(26)
-
2020
£’000
-
-
2019
£’000
26
(26)
-
At 2019 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.
51
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
19. Financial instruments by category
(a) Assets
Group
2020
£’000
Group
Company Company
2019
£’000
2020
£’000
2019
£’000
31 December
Assets as per balance sheet
Trade and other receivables
Cash and cash equivalents
9,462
19,205
3,290
1,037
10,847
8,689
Total
19,536
Assets in the analysis above are all categorised as ‘other financial assets at amortised cost’ for the Group and Company.
28,667
4,327
5,452
421
5,873
(b) Liabilities
31 December
Liabilities as per balance sheet
Borrowings
Lease Liabilities (Note 37)
Trade and other payables
Total
Group
2020
£’000
359
4,439
6,376
11,174
Group
Company Company
2019
£’000
2020
£’000
2019
£’000
1,702
1,426
2,229
5,357
45
-
885
930
1,250
-
1,357
2,607
Liabilities in the analysis above are all categorised as ‘other financial liabilities at amortised cost’ for the Group and Company.
(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
2020 and 31 December 2019, 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
2020
£’000
19,158
47
19,205
2019
£’000
1,032
5
1,037
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).
52
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
20. Inventories
Beginning of the year
Laboratory and clinical consumables
Virus – finished goods
End of the year
Group
Group
Company Company
2020
£’000
-
168
785
953
2019
£’000
2020
£’000
2019
£’000
-
-
-
-
-
-
-
-
-
£925,000 of stock was acquired by the group on the acquisition of the hVIVO group on 17th January 2020.
Inventories expensed in the consolidated statement of comprehensive income are shown within Direct Project and
administrative costs. All inventories are carried at the lower of cost or net realisable value in the consolidated statement of
financial position. No provision against inventories was required during 2020.
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
Group Company
Company
2020
£’000
6,143
-
6,143
2,064
-
1,599
9,806
2019
£’000
1,573
-
1,573
1,711
2020
£’000
-
-
-
112
-
10,778
331
70
3,615
10,960
2019
£’000
-
-
-
73
5,014
442
5,529
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
Group Company Company
2020
£’000
5,481
4,325
9,806
2019
£’000
76
3,539
3,615
2020
£’000
2,756
8,204
10,960
2019
£’000
391
5,138
5,529
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
2020
£’000
19,205
19,205
Group Company Company
2019
£’000
1,037
1,037
2020
£’000
8,689
8,689
2019
£’000
421
421
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.
53
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
23. Trade and other payables
Trade payables
Amounts due to subsidiary undertakings
Social security and other taxes
Other payables *
Accrued expenses and deferred income
Group
Group
Company Company
2020
£’000
4,954
-
446
301
15,697
21,398
2019
£’000
507
-
562
347
1,603
3,019
2020
£’000
2019
£’000
72
543
-
64
206
885
33
964
-
92
270
1,359
£2,000 of other payables are due after one year after year end 2020 (2019: £42,000). All other balances are due within 1 year.
24. Deferred income tax
Deferred tax balances were as follows:
Deferred tax liabilities were made up as follows:
Accelerated tax depreciation
Group
Group
Company Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
32
32
41
41
-
-
-
-
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
Group
Company Company
2020
£’000
2019
£’000
2020
£’000
2019
£’000
41
-
(9)
32
-
108
(67)
41
-
-
-
-
-
-
Group
Group
Company Company
2020
£’000
45
314
-
2019
£’000
1,250
297
156
359
1,703
2020
£’000
45
-
-
45
2019
£’000
1,250
-
-
1,250
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. The facility was repaid in full by end of June 2020 and fully closed by end of August 2020.
54
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
25. Borrowings (Cont’d)
Therefore, at 31 December 2020 a balance of nil (2019: €156k) had been drawn down from Capital Flow. Capital flow released
the registered fixed and floating charge over the trade debtors balance in Venn Life Sciences Limited on closure of the facility.
Loan Notes for £1m issued on 11 December 2018 with a two-year term and a 10% coupon rate were available for redemption in
Dec 2020. All but one loan note for £45k was redeemed by 31 Dec 2020. The final loan note was redeemed in February 2021.
Loan Notes for £250k issued on 6 April 2019 with a 13-month term and an 8% coupon rate were redeemed in full in March 2020.
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.
26. Share capital
668,052,261 (2019 – 254,572,567) Ordinary shares of £0.001
62,833,339 (2019 – 62,833,339) Deferred shares of £0.001
Total
Group
Group Company Company
2020
£’000
668
63
731
2019
£’000
254
63
317
2020
£’000
668
63
731
2019
£’000
254
63
317
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 413,479,694 shares.:
191,049,807 £0.068/share
86,885,253 £0.061/share
16,897,031 £0.001/Share
1,653,214 £0.022/Share
2,172,565 £0.02/Share
114,821,824 £0.11/Share
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 presentation currency of the group became GBP£ in 2020. Previously the presentation currency was Euro. (See note 38). This
reserve arises from the translation of the opening balance sheet balances from Euro to GBP£ and also from the translation of the
subsidiaries which are denominated in Euro into GBP£ on consolidation.
55
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
27. Other reserves (Cont’d)
The Euro denominated subsidiaries are Venn Life Sciences Limited, Venn Life Sciences (Ireland) Ltd, Venn Life Sciences Germany GmbH,
Venn Life Sciences France S.A.S, Venn Life Sciences B.V, Venn Life Sciences E.D. B.V. and Open Orphan DAC. Hence the Foreign Currency
Reserve arises.
Share Option Reserve
A share option reserve of £151,000 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 £102,000 was made after the reverse
takeover in 2019. In 2020 a provision of £240,000 was made.
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 plus the combined earnings of OO DAC and Venn Life Sciences Holdings PLC (now renamed
Open Orphan PLC) from date of reverse acquisition on 26th June 2019 to year end 2019.
For Group and Company, earnings for the current year reflect the earnings of Open Orphan Plc including Open Orphan DAC for the full
year plus the earnings of hVIVO Group from date of acquisition 17th January 2020 to year end 2020.
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 Based Payment charge (Note 32)
– R & D Credit incl. in other Income
– Share of Imutex loss (Note 18.b)
Changes in working capital
– Losses/Impairments on Investments (Note 18c/18d)
– Lease Payments (Note 37)
– Transfer re Open Orphan PLC
– (Increase)/Decrease Trade and other receivables
– (Increase)/Decrease Inventories
– (Decrease)/Increase Trade and other payables
Net cash used in operations
29. Related Party Disclosures
Group
2020
£’000
(11,163)
Group
Company
Company
2019
£’000
(5,824)
2020
£’000
2019
£’000
(1,891)
(1,629)
2,052
2,125
374
240
(778)
107
-
(1,999)
(2,800)
(28)
14,410
2,540
627
97
711
350
102
-
224
(270)
1,857
-
(637)
(2,763)
-
-
867
(651)
50
-
22
-
-
(4,491)
-
(474)
(6,568)
-
37
711
(346)
102
-
26
-
(1,655)
-
-
-
(2,754)
Directors
Directors’ emoluments are set out in the Report of the Remuneration Committee Report.
Key management compensation for the year was as follows:
56
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
29. Related Party Disclosures (Cont’d)
Aggregate emoluments
Employer contribution to pension scheme
Key management includes the Directors only.
2020
€’000
576
20
596
2019
€’000
326
13
339
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 at that time. 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. Michael Ryan resigned as a director on 17th January 2020.
Executive Group Chairman, Cathal Friel, held a share of £108,642 of the £1m loan note issued in December 2018 through his
pension vehicle. This loan note was redeemed in full in December 2020. Cathal Friel also held all of the £250,000 loan note issued in
April 2019. This loan note was redeemed in full in April 2020. Gross Loan note interest of £15,000 (2019: £25,000) was due in 2020.
All loan note interest was paid on redemption. 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 (2020 charge €108,000; 2019 charge €97,000). Balance owed by
Group to Raglan Road Capital Ltd at year end 2020 was €3,780 (2019: €324,204).
There were no other related party transactions during the year.
The Company
During the year the Company absorbed net management charges of €324,475 (2019 – £337,923) from its subsidiaries. At 31
December 2020 the Company was owed €10,234,000 (2019 – £4,420,000) by its subsidiaries.
30. Capital commitments
The Group had no capital commitments at 31 December 2020 or at 31 December 2019.
31. Discontinued Operations
A decision to close the clinical operations division across Europe was made during 2020 and Venn Life Sciences (NI) Ltd, Venn
Life Sciences B.V. and Venn Life Sciences Germany GmbH have consequently ceased to trade from 1 January 2021 onwards.
Arrangements to dissolve these companies and other dormant companies Venn Life Sciences UK Ltd and Venn Life Sciences
(Ireland) Ltd will be undertaken over the course of 2021. There were no discontinued operations during 2019.
32. Share options and warrants
The Group has share option plans under which it grants share options to certain Directors and senior management of the Group.
Some share options have vested. Some share options have been forfeited as a result of the Director or employee leaving the Group
before options vested.
57
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
32. Share options and warrants (Cont’d)
Number of outstanding share options remaining at 31 December 2020:
Date of Grant
# Options at
01/01/2020
Options Transferred
from hVIVO Ltd
# of Options
Exercised
# of Options
Forfeited
# Options at
31/12/2020
28/01/2015
14/09/2017
28/06/2019
17/01/2020
Total
1,680,000
3,310,000
7,716,964
-
12,706,964
-
-
-
3,742,147
3,742,147
-
-
-
2,172,565
2,172,565
1,400,000
3,310,000
-
50,435
4.760.435
280,000
-
7,716,964
1,519,147
9,516,111
The weighted-average exercise price of all options outstanding at year end is 5.2p and weighted-average remaining contractual life is
2.6 years.
The pricing and vesting criteria of the share options in existence at 31 December 2020 are as follows:
In relation to the Options granted in 2015:
Options in issue 31/12/2020
Exercise price (in equal thirds when price 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 31/12/2020
Exercise price
Expected volatility
Expected dividend
Contractual life
Risk free interest rate
Estimated fair value of each option
In relation to the Options granted in 2020:
Options in issue 31/12/2020
Exercise price
Expected volatility
Expected dividend
Contractual life
Risk free interest rate
Estimated fair value of each option
280,000
13p
28%
0%
2.5 years
95%
£0.00
7,716,964
5.6p
60%
0%
3.5 years
1.84%
£0.02
1,519,147
2p
72.8%
0%
2 years
0.57%
£0.04
Charge for year was €240,000 (2019 – £102,000). The shares granted in 2020 resulted from the exchanging of hVIVO Plc options for
Open Orphan plc options when the acquisition of the hVIVO group occurred in January 2020.
A share option reserve (£151,000) was created before the reverse takeover by Open Orphan DAC in 2019 in relation to the shares and
warrants granted in June 2019. A further charge was made of €102,000 to year end 2019 bringing total reserve to £253,000.
The share options granted in 2015 have no value given the vesting conditions when issued.
58
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
32. Share options and warrants (Cont’d)
The Company has used the Black Scholes model to value the options at 31 December 2020. 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.
Warrants
4,185,248 warrants existed at 31 December 2020 (2019: 6,744,500).
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.
853,709 warrants were granted on 11 December 2018 and are exercisable from the date of grant to 10 December 2023. The exercise
price is 0.1p per ordinary share under warrant. 1,557,731 warrants were granted on 11 December 2018 and are exercisable from the
date of grant to 10 December 2023. The exercise price is 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
5.6p per ordinary share under warrant.
33. Other operating income
Other operating income represents government grants received to fund Research and Development activities around the group.
Other income includes £0.8 million (2019: nil) accrued in respect of a Research and Development Expenditure Credit (“RDEC”)
claim for 2020 by the Company, hVIVO Services Limited, which classifies such RDEC claims as a government grant where
amounts receivable as compensation for expenses or losses already incurred are recognised in the statement of comprehensive
income in the period in which they become receivable.
34. Post balance sheet events
The following events have taken place since the year end:
a) Open Orphan plc (on a stand-alone basis) successfully received the appropriate Court approval on 19 May 2021 to complete a
reduction in in capital. The reduction was intended to enable a Distribution in Specie, as part of the proposed spin-out of certain
non-core Development IP Assets, but also to make other distributions to Shareholders and/or buy back its own Open Orphan
Ordinary Shares in the future if and when the Directors may consider that it is appropriate to do so.
b) For the purposes of a proposed spin-out of certain non-core Development IP Assets, a new wholly owned subsidiary, Orph
Pharma IP Company Limited ("Orph Pharma"), was registered in April 2021.
c) On 14 June 2021, the Group announced its intention to make a distribution in specie of the entire issued share capital of its
wholly-owned subsidiary Orph Pharma IP Company Limited to Poolbeg Pharma Limited ("Poolbeg"), in return for the issue of
new shares by Poolbeg ("Poolbeg Shares") to shareholders of Open Orphan on the register at close of business on 17 June 2021.
59
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
35. Revenue, Assets and Liabilities related to contracts with customers
(a) Clinical Development Services
The group carries out its activities through hVIVO Services Limited in the United Kingdom. All revenue from contracts with
customers is derived from activities undertaken in the UK.
During the period ended 31 December 2020, the Company had four customers who each generated revenue greater than 10%
of total revenue which was £13m. These customers generated 27%, 24%, 16% and 16% of revenue respectively.
£1.8 million of revenue from contracts with customers recognised during the year was included in the opening balance of
contract liabilities on acquisition of the group.
The value of contract liabilities has increased from £1.9 million on acquisition to £14.5 million at 31 December 2020. Contract
assets have increased from £0.2 million on acquisition to £0.8 million at 31 December 2020.
Net accrued income, related to contracts with customers in CDS
Net Accrued Income brought forward
Net Accrued Income acquired on acquisition of hVIVO group
Movement in the period:
-
arising from a change in the measure of progress
Net Accrued Income as at 31 December 2020
Split:
Accrued Income
Deferred Income
Net Accrued Income
2020
Total
£’000
-
(1,689)
(12,014)
(13,703)
821
(14,524)
(13,703)
The majority of the contract liabilities balance is expected to be recognised within six months, as follows:
Analysis of expected realisation of revenue within contract liabilities
Within six months
Between six months and one year
After one year
31 December
2020
£’000
14,469
55
—
14,524
Generally, contract milestones are timed so as to result in invoicing occurring in advance, prior to the satisfaction of performance
obligations. Therefore, projects that are in progress are typically in a contract liability position. Performance obligations of
contracts with customers are satisfied on the delivery of study data to the customer along with a final study report. Due to the
nature of the business there are no warranties or refunds expected or provided for. Contractual payment terms are typically 30
to 45 days from date of invoice.
The Company considers whether there are other promises in the contract that are separate performance obligations to which a
portion of the transaction price needs to be allocated. The Company’s data and intellectual property may be made available to
the client but solely to the extent that this is necessary to the satisfaction of the client contract. This is not considered a distinct
performance obligation but an obligation in conjunction with the client study. Therefore, the full transaction price is allocated to
performing the client study.
60
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
35. Revenue, Assets and Liabilities related to contracts with customers (Cont’d)
The Company is using the practical expedient not to adjust the amount of consideration for the effects of a significant financing
component due to the fact that the period between when the promised services are transferred and when the customer pays
for the service is less than twelve months. The entity does not, in the normal course of business, incur incremental costs to
obtain a contract and has therefore not recognised any assets in this regard.
(b) Clinical Research Organisation
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.
Venn Life Sciences E.D B. V, based in Breda in the Netherlands, provides Early clinical, Non-Clinical and CMC services to a wide
variety of customers and revenue in 2020 was £5m.
Venn Life Sciences France S.A.S, based in Paris, France and Venn Life Sciences Ltd, based in Ireland, provide Data management,
Bio Statistics, Medical Methodology and Randomisation services. Revenue in 2020 was £2m.
Venn Life Sciences Germany GmbH, Venn Life Sciences NI Ltd and Venn Life Sciences B.V. based in Germany, Northern Ireland
and the Netherlands respectively, provided clinical services in 2020 with combined Revenue of £0.6m but as per Note 31 a
decision to close the Clinical operations across the group was taken in H1 2020 and these companies are no longer trading in
2021.
Net accrued income, related to contracts with customers in CRO
Net Accrued Income brought forward
Net Accrued Income acquired on acquisition of Venn Life Sciences group
Movement in the period:
-
arising from a change in the measure of progress
Net Accrued Income carried forward
Split:
Accrued Income
Deferred Income
Net Accrued Income
2020
Total
£’000
601
-
(219)
382
900
(518)
382
2019
Total
£’000
-
1,571
(970)
601
1,389
(788)
601
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.
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 £861,000 for the year (year ended 31 December 2019: £278,000). Contributions totalling £25,000 were payable to the funds
at the year end and are included within trade and other payables (31 December 2019: £36,000).
61
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
37. Leases
Amounts recognised in the statement of financial position
As at 1 January 2020
Transfer from hVIVO Group
New Leases Acquired
Depreciation expense (Note 6)
Interest expense (Note 12)
Payments (Note 28)
Exchange differences
As at 31 December 2020
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
Lease liabilities
£’000
1,311
3,051
1,479
(1,684)
—
—
73
4,230
—
4,230
1,427
3,213
1,479
—
243
(1,999)
76
4,439
2,245
2,194
31 December
2020
£’000
2,245
1,510
684
4,439
Short-term Lease payments expensed in year ended 31/12/20: £25,000 (2019: £17,000).
62
Open Orphan Plc
Notes to the Financial Statements (continued)
For the year ended 31 December 2020
38. Presentation Currency change
As specified in Note 1 and 2, the Board decided to change the presentation currency of the Group from Euro (€) to pounds Sterling
(£) in 2020, given the increased weighting of the UK operations in the Financial Statements as a result of the merger between
Open Orphan plc and hVIVO plc in January 2020. As a result of this change the Company has restated the comparative period as
follows:
Group
Group
Company
Company
2019
GBP£’000
2019
EUR€’000
2019
GBP£’000
2019
EUR€’000
Assets
Non-current assets
Intangible assets
Property, plant and equipment
Investment in associates
Investments in subsidiaries
Right of Use Asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Current 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
Provisions
Total non-current liabilities
Current liabilities
Trade and other payables
Deferred taxation
Lease liabilities
Borrowings
Total current liabilities
Total liabilities
Total equity and liabilities
2,875
190
-
-
1,311
4,376
-
3,615
12
1,037
4,664
9,040
317
15,214
(6,856)
1,124
253
(7,202)
2,850
42
983
-
1,025
2,977
41
444
1,703
5,165
6,190
9,040
3,380
223
-
-
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
-
-
-
8,195
-
8,195
-
5,529
-
421
5,950
14,145
317
15,214
(2,241)
1,085
253
(3,092)
11,536
-
-
-
-
1,359
-
-
1,250
2,609
2,609
14,145
-
-
-
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
63