Final Results to 31 December 2020
This announcement contains inside information
for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR")
OPEN ORPHAN PLC
("Open Orphan" or the "Company")
Final Results to 31 December 2020
Important year of transition following the various merger and acquisition activities in 2019 and January 2020
Open Orphan (AIM: ORPH), a rapidly growing specialist pharmaceutical services clinical research organisation (CRO) and a world leader in vaccine and antiviral testing using human challenge clinical trials, announces its audited results for the 12 months to 31 December 2020. Following the acquisition of hVIVO in January of last year, 2020 was a year of transition for the Company with management integrating both businesses and driving improvements in revenue, gross margin and efficient overheads.
This culminated in Q4 2020 proving to be an inflection point for the Company as it successfully generated both an operating profit and positive cashflow. In addition, the Company ended the year with a strong order book of contracted revenue which has been the foundation for the Company's very strong start to 2021. In the context of the rapidly evolving COVID-19 pandemic and broader growth of the global infectious disease market, this should translate into very strong growth opportunities for the Company going forward.
Operational highlights:
· Integration of hVIVO and Venn Life Sciences completed with pharmaceutical services business now profitable and poised for strong revenue and EBITDA growth in 2021; growing working capital balance on hand
· Clearly established as the world leader in the testing of vaccines and antivirals through the use of human challenge study clinical trials
· Strategy in place to maximise shareholder value via the demerger of non-core assets with first spin-out Poolbeg Pharma Ltd well under way
· In the last 12 months substantially increased the number of quarantine beds available to Open Orphan:
§ Original 24 quarantine beds in Queen Mary's BioEnterprises Centre (QMB) in Whitechapel
§ 19 bed additional beds through the conversion of the Whitechapel Hotel
· Open Orphan has the capacity to screen in >500 volunteers per week to support a growing pipeline of human challenge studies.
§ New state-of-the-art volunteer recruitment screening centre on the ground floor of QMB
§ New standalone regional volunteer recruitment screening centre in Manchester
· Strategic decision In March 2020 to develop a COVID-19 challenge model:
§ hVIVO was uniquely placed to contribute to a world-first initiative led by the UK government to work as part of the Vaccine Task Force's Human Challenge project to manufacture a COVID-19 virus, and to collaborate on the design and delivery of a characterization study to understand how to use this virus for vaccine and anti-viral challenge trials, which is ongoing.
§ Collaboration is ongoing with significant progress achieved to enable the Group to test vaccines and therapeutics against COVID-19 in the near future.
Financial highlights
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Open Orphan plc Group (Results as Reported) |
hVIVO Ltd (Proforma results on a stand-alone basis for a full year)
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Open Orphan plc (formerly Venn Life Sciences Holdings plc - Proforma results on a stand-alone basis for a full year) |
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) |
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2020 |
2019 |
2020 |
2019 |
2020 |
2019 |
2020 |
2019 |
2020 |
2019 |
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Income Statement |
£'000
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£'000
|
£'000
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£'000
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£'000
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£'000
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£'000
|
£'000
|
£'000
|
£'000
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|
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Revenue (Incl. other income) |
21,995 |
3,543 |
14,515 |
15,092 |
7,844 |
8,643 |
- |
- |
22,359 |
23,735 |
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Operating (Loss) |
(10,442) |
(5,130) |
(4,854) |
(5,893) |
(5,604) |
(6,385) |
(435) |
(669) |
(10,893) |
(12,948) |
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EBITDA before exceptional items |
(6,265) |
(3,792) |
(2,925) |
(3,785) |
(3,313) |
(4,432) |
(431) |
(668) |
(6,669) |
(8,885) |
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Loss for period |
(10,791) |
(5,739) |
(4,927) |
(6,973) |
(5,776) |
(6,622) |
(548) |
(899) |
(11,251) |
(14,494) |
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· An important year of transition to reverse the proforma losses in 2019 by strengthening business development, restructuring underperforming businesses, driving cross group synergies, eliminating unnecessary layers of management, and integrating support functions across the Group.
· Significantly improved track record of major contract wins in 2020 (versus 2019) setting the scene for strong revenue growth in 2021
· Turnaround on track evidenced by an operating profit delivered for Q4 2020 and targeting full year profitability in 2021
· Cashflow positive in Q4 2020 driven by advanced cash payments on major agreements.
· Pharmaceutical services business (the combined business of Venn and hVIVO) is operationally profitable and moving into cash generation.
· Well capitalized following two placings raising a combined total of £17.9m (before expenses)
· Cash and cash equivalents of £15.1m as at 31 May 2021
· Proforma revenues of £22.4m (2019: £23.7m), with losses reduced to £11.3m (2019: £14.5m)
· Reported revenues of £22.0m (2019: £3.5m), with a reported loss for the period of £10.8m (2019: £5.7m)
Outlook:
· Clinical Science Teams and Laboratory Development Teams continue to address ground-breaking research projects with major pharmaceutical players - strong demand for services expected.
· Planned demerger strategy is progressing well with further update provided today on Poolbeg Pharma
· Demergers offer an excellent opportunity for shareholders to maximise value through separate shareholdings in a profitable pharma services company as well as exciting pharma products commercialisation companies.
· Opportunity to progress Disease in Motion® platform.
· Targeting delivery of full year profit in 2021 - focusing on enhancing profits and earnings
Cathal Friel, Executive Chairman of Open Orphan plc commented: "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 well advanced. We are confident that the actions we are taking now to drive our core CRO business and monetise non-core assets should create significant value for all our stakeholders."
The Company's Annual Report and Accounts for the year ended 31 December 2020 will be posted to shareholders in due course together with the notice of the 2021 Annual General Meeting], and will be available on the Company's website, https://www.openorphan.com/
Analyst Briefing
An online briefing for Analysts will be hosted by Cathal Friel, Executive Chairman, and Leo Toole, Group Financial Officer, at 11.00am on Thursday 17 June 2021 to review the results and prospects. Analysts wishing to attend should contact Walbrook PR on openorphan@walbrookpr.com or on 020 7933 8780.
Investor presentation
OPEN ORPHAN PLC is pleased to announce that Cathal Friel and Leo Toole will also provide a live presentation relating to Final Results 2020 via the Investor Meet Company platform on 17th Jun 2021 at 6:00pm BST.
The presentation is open to all existing and potential shareholders.
Investors can sign up to Investor Meet Company for free and add to meet OPEN ORPHAN PLC via:
https://www.investormeetcompany.com/open-orphan-plc/register-investor
Investors who already follow OPEN ORPHAN PLC on the Investor Meet Company platform will automatically be invited.
For further information please contact:
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Open Orphan plc |
+353 (0) 1 644 0007 |
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Cathal Friel, Executive Chairman |
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Arden Partners plc (Nominated Adviser and Joint Broker) |
+44 (0) 20 7614 5900 |
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John Llewellyn-Lloyd / Richard Johnson / Oscair McGrath |
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finnCap plc (Joint Broker) |
+44 (0) 20 7220 0500 |
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Geoff Nash / James Thompson/ Richard Chambers |
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Davy (Euronext Growth Adviser and Joint Broker) |
+353 (0) 1 679 6363 |
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Anthony Farrell |
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Walbrook PR (Financial PR & IR) |
+44 (0)20 7933 8780 or openorphan@walbrookpr.com |
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Paul McManus / Louis Ashe-Jepson / Sam Allen |
+44 (0)7980 541 893 / 07747 515 393 / 07502 558 258 |
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Notes to Editors
Open Orphan plc (London and Euronext: ORPH) is a rapidly growing pharmaceutical service/contract research company that is a world leader in testing vaccines and antivirals using human challenge clinical trials. The company provides services to Big Pharma, biotech and government/public health organisations.
Open Orphan runs challenge studies in London from both its 19-bedroom Whitechapel quarantine clinic, opened in February 2021, and its 24-bedroom QMB clinic which also has a highly specialised virology and immunology laboratory on-site. Open Orphan has a leading portfolio of eight human challenge study models for conditions such as RSV, flu, asthma and COPD. In addition, Open Orphan is also developing the world's first COVID-19 human challenge study model as part of the Human Challenge Programme and has signed a reservation contract with the UK Government for the first three COVID-19 vaccine challenge studies.
Building upon its many years of challenge studies and virology research, the Company is developing an in-depth database of infectious disease progression data. Based on the Company's Disease in Motion® platform, this unique dataset includes clinical, immunological, virological and digital (wearable) biomarkers. The Disease in Motion platform has many potential applications across a wide variety of end users including big technology, wearables, pharma and biotech companies. Following COVID-19 there is now a renewed interest and investment in infectious diseases.
Open Orphan's Paris office has been providing biometry, data management and statistics to its many European pharmaceutical clients for over 20 years. For over 15 years, the Company's Netherlands office has been providing drug development consultancy and services, including CMC (chemistry, manufacturing and controls), PK and medical writing, to a broad range of European clients. Both offices are now also fully integrated with the London office and working on challenge study contracts as well as supporting third party trial contracts.
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 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).
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)
| Open Orphan plc (formerly Venn Life Sciences Holdings plc - Proforma results on a stand-alone basis for a full year) | 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 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 |
Income Statement | £'000
| £'000
| £'000
| £'000
| £'000
| £'000
| £'000
| £'000
| £'000
| £'000
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Revenue (Incl. other income) | 21,995 | 3,543 | 14,515 | 15,092 | 7,844 | 8,643 | - | - | 22,359 | 23,735 |
Project & Admin Costs | (32,437) | (8,673) | (19,369) | (20,985) | (13,448) | (15,028) | (435) | (669) | (33,252) | (36,683) |
Operating (Loss) | (10,442) | (5,130) | (4,854) | (5,893) | (5,604) | (6,385) | (435) | (669) | (10,893) | (12,948) |
EBITDA before exceptional items | (6,265) | (3,792) | (2,925) | (3,785) | (3,313) | (4,432) | (431) | (668) | (6,669) | (8,885) |
Operating (Loss) before exceptional items | (8,317) | (4,419) | (4,377) | (4,845) | (3,957) | (5,674) | (435) | (669) | (8,769) | (11,188) |
Loss for period | (10,791) | (5,739) | (4,927) | (6,973) | (5,776) | (6,622) | (548) | (899) | (11,251) | (14,494) |
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Balance Sheet | £'000 | £'000 |
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Non-current Assets | 18,501 | 4,376 |
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Current Assets | 10,839 | 3,627 |
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Cash | 19,205 | 1,037 |
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Total Asset | 48,545 | 9,040 |
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Total equity | 22,297 | 2,850 |
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Non-current Liabilities | 2,216 | 1,025 |
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Current Liabilities | 24,032 | 5,165 |
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Total Liabilities | 26,248 | 6,190 |
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Total Equity & Liabilities | 48,545 | 9,040 |
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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.
· 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.
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
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
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| Year to |
| Year to |
| Notes | 31 December |
| 31 December |
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| 2020 |
| 2019 |
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| £'000 |
| £'000 |
Continuing operations |
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Revenue, from contracts with customers | 5,35 | 20,602 |
| 3,372 |
Direct Project and Administrative Costs | 6 | (32,437) |
| (8,673) |
Other operating income | 33 | 1,393 |
| 171 |
Operating (loss) |
| (10,442) |
| (5,130) |
Depreciation | 6,16,37 | (1,883) |
| (296) |
Amortisation | 6,17 | (169) |
| (331) |
Exceptional items | 7 | (2,125) |
| (711) |
EBITDA before exceptional items | 5/6 | (6,265) |
| (3,792) |
Finance Expense | 12 | (374) |
| (350) |
Share Based Payment charge | 32 | (240) |
| (102) |
Loss on sale/impairment of Investments | 18c/d | - |
| (224) |
Share of loss of associate using equity method | 18b | (107) |
| - |
(Loss) before income tax |
| (11,163) |
| (5,806) |
Income tax credit | 13 | 372 |
| 67 |
(Loss) for the year |
| (10,791) |
| (5,739) |
(Loss) for the year is attributable to: |
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Owners of the parent |
| (10,791) |
| (5,739) |
Other comprehensive income |
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Currency translation differences |
| 318 |
| 1,124 |
Total comprehensive (loss) for the year |
| (10,473) |
| (4,615) |
Earnings per share from continuing operations attributable to owners of the parent during the year | Note | 2020 |
| 2019 | |
Basic and diluted (loss) per ordinary share |
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From continuing operations | 14 | (1.80p) |
| (3.48p) | |
For the year |
| (1.80p) |
| (3.48p) | |
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All activities relate to continuing operations. |
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Consolidated and Company's Statement of Financial Position
For the year ended 31 December 2020
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Group
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|
Company
|
|
| 2020 | 2019 | 2020 | 2019 |
| Notes | £'000 | £'000 | £'000 | £'000 |
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Intangible assets | 17 | 6,127 | 2,875 | - | - |
Property, plant and equipment | 16 | 1,068 | 190 | - | - |
Investment in associates | 18b | 7,076 | - | - | - |
Investments in subsidiaries | 18a | - | - | 22,334 | 8,195 |
Right of Use Asset | 37 | 4,230 | 1,311 | - | - |
Total non-current assets |
| 18,501 | 4,376 | 22,334 | 8,195 |
Current assets |
|
|
|
|
|
Inventories | 20 | 953 | - | - | - |
Trade and other receivables | 21 | 9,806 | 3,615 | 10,960 | 5,529 |
Current Tax recoverable |
| 80 | 12 | - | - |
Cash and cash equivalents | 22 | 19,205 | 1,037 | 8,689 | 421 |
Total current assets |
| 30,044 | 4,664 | 19,649 | 5,950 |
Total assets |
| 48,545 | 9,040 | 41,983 | 14,145 |
Equity attributable to owners |
|
|
|
|
|
Share capital | 26 | 731 | 317 | 731 | 317 |
Share premium account | 27 | 44,480 | 15,214 | 44,480 | 15,214 |
Merger reserves | 27 | (6,856) | (6,856) | (2,241) | (2,241) |
Foreign currency reserves | 27 | 1,442 | 1,124 | 2,573 | 1,085 |
Share option reserve | 27/32 | 493 | 253 | 493 | 253 |
Retained earnings | 27 | (17,993) | (7,202) | (4,983) | (3,092) |
Total equity |
| 22,297 | 2,850 | 41,053 | 11,536 |
Liabilities |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Trade and other payables | 23 | 2 | 42 | - | - |
Lease liabilities | 37 | 2,194 | 983 | - | - |
Leasehold Provision |
| 20 | - | - | - |
Total non-current liabilities |
| 2,216 | 1,025 | - | - |
Current liabilities |
|
|
|
|
|
Trade and other payables | 23 | 21,396 | 2,977 | 885 | 1,359 |
Deferred taxation | 24 | 32 | 41 | - | - |
Lease liabilities | 37 | 2,245 | 444 | - | - |
Borrowings | 25 | 359 | 1,703 | 45 | 1,250 |
Total current liabilities |
| 24,032 | 5,165 | 930 | 2,609 |
Total liabilities |
| 26,248 | 6,190 | 930 | 2,609 |
Total equity and liabilities |
| 48,545 | 9,040 | 41,983 | 14,145 |
Consolidated and Company's Statement of Cash Flows
For the year ended 31 December 2020
|
| Group | Group | Company | Company |
|
| 2020 | 2019 | 2020 | 2019 |
| Notes | £'000 | £'000 | £'000 | £'000 |
Cash Flow from operating activities |
|
|
|
|
|
Continuing operations |
|
|
|
|
|
Cash used in operations | 28 | 2,540 | (2,763) | (6,568) | (2,754) |
Income tax (R & D) Received |
| 1,631 | - | - | - |
Net cash used in operating activities |
| 4,171 | (2,763) | (6,568) | (2,754) |
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
|
Cash acquired with acquisition of subsidiary |
| 2,276 | 36 | - | 36 |
Sale of Shares in Integumen PLC |
| - | 514 | - | - |
Purchase of property, plant and equipment |
| (818) | (23) | - | - |
Purchase of intangible asset |
| (274) |
|
|
|
Net cash used in investing activities |
| 1,184 | 527 | - | 36 |
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
Proceeds from issuance of ordinary shares & options | 26 | 18,031 | 4,286 | 18,031 | 4,286 |
Costs of January and May fund raising |
| (1,335) | (603) | (1,335) | (603) |
Exceptional Costs re RTO & restructuring | 7 | (2,108) | (689) | (867) | (689) |
Repayment of Invoice Discounting |
| (156) | (21) | - | - |
Interest (Paid) |
| (188) | (113) | (152) | (268) |
Loan Note Redemptions |
| (1,205) |
| (1,205) |
|
Premium on conversion of Convertible Debentures to shares |
| - | 273 | - | 273 |
Net cash generated by financing activities |
| 13,039 | 3,133 | 14,472 | 2,999 |
|
|
|
|
|
|
Net increase in cash and cash equivalents |
| 18,394 | 897 | 7,904 | 281 |
Cash and cash equivalents at beginning of year |
| 1,037 | 140 | 421 | 140 |
FX Translation |
| (226) |
| 364 |
|
Cash and cash equivalents at end of year | 22 | 19,205 | 1,037 | 8,689 | 421 |
Consolidated and Company's Statement of Changes in Shareholders' Equity
|
|
Group |
Share capital |
Share premium |
|
Merger reserve |
Share Option reserve |
Foreign currency reserve |
|
Retained earnings |
Total |
|
|||||||||||
|
|
|
£'000 |
£'000 |
|
£'000 |
£'000 |
£'000 |
|
£'000 |
£'000 |
|
|||||||||||
|
|
At 1 January 2019 |
- |
- |
|
- |
- |
- |
|
(1,463) |
(1,463) |
|
|||||||||||
|
|
Changes in equity for the Year ended 31 Dec 2019 |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
(Loss) for the year |
- |
- |
|
- |
- |
- |
|
(5,739) |
(5,739) |
|
|||||||||||
|
|
Currency differences |
- |
- |
|
- |
- |
1,124 |
|
- |
1,124 |
|
|||||||||||
|
|
Total comprehensive (loss) For the year |
- |
- |
|
- |
- |
1,124 |
|
(5,739) |
(4,615) |
|
|||||||||||
|
|
Transactions with the owners |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
Transfer re Open Orphan PLC |
316 |
15,200 |
|
(6,856) |
151 |
- |
|
- |
8,811 |
|
|||||||||||
|
|
Share Based Payment Res. |
- |
- |
|
- |
102 |
- |
|
- |
102 |
|
|||||||||||
|
|
Shares issued |
1 |
14 |
|
- |
- |
- |
|
- |
15 |
|
|||||||||||
|
|
Total contributions by and distributions to owners |
317 |
15,214 |
|
(6,856) |
253 |
- |
|
- |
8,928 |
|
|||||||||||
|
|
At 31 December 2019 |
317 |
15,214 |
|
(6,856) |
253 |
1,124 |
|
(7,202) |
2,850 |
|
|||||||||||
|
|
Changes in equity for the Year ended 31 Dec 2020 |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
(Loss) for the year |
- |
- |
|
- |
- |
|
|
(10,791) |
(10,791) |
|
|||||||||||
|
|
Currency differences |
- |
- |
|
- |
- |
318 |
|
- |
318 |
|
|||||||||||
|
|
Total comprehensive (loss) for the year |
- |
- |
|
- |
- |
318 |
|
(10,791) |
(10,473) |
|
|||||||||||
|
|
Transactions with the owners |
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
Share Based Payment Res. |
- |
- |
|
- |
240 |
- |
|
- |
240 |
|
|||||||||||
|
|
Shares issued |
414 |
29,266 |
|
- |
- |
- |
|
- |
29,680 |
|
|||||||||||
|
|
Total contributions by and distributions to owners |
414 |
29,266 |
|
- |
240 |
- |
|
- |
29,920 |
|
|||||||||||
|
|
At 31 December 2020 |
731 |
44,480 |
|
(6,856) |
493 |
1,442 |
|
(17,993) |
22,297 |
|
|||||||||||
|
Company |
Share capital |
|
Share premium |
Share option reserve |
Merger reserve |
Foreign currency reserve |
Retained earnings |
Total |
||||||||||||||
|
|
£'000 |
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||||||
|
At 1 January 2019 |
- |
|
- |
- |
- |
- |
(1,463) |
(1,463) |
||||||||||||||
|
Changes in equity for the year ended 31 December 2019 |
|
|
|
|
|
|
|
|
||||||||||||||
|
Total loss for year |
- |
|
- |
- |
- |
- |
(1,629) |
(1,629) |
||||||||||||||
|
Share Based Payment Res. |
- |
|
- |
102 |
- |
- |
- |
102 |
||||||||||||||
|
Currency differences |
- |
|
- |
- |
- |
1,085 |
- |
1,085 |
||||||||||||||
|
Transfer re Open Orphan PLC |
316 |
|
15,200 |
151 |
(2,241) |
- |
- |
13,426 |
||||||||||||||
|
Shares issued |
1 |
|
14 |
- |
- |
- |
- |
15 |
||||||||||||||
|
Total contributions by and distributions to owners |
317 |
|
15,214 |
253 |
(2,241) |
1,085 |
(1,629) |
12,999 |
||||||||||||||
|
At 31 December 2019 |
317 |
|
15,214 |
253 |
(2,241) |
1,085 |
(3,092) |
11,536 |
||||||||||||||
|
Changes in equity for the year ended 31 December 2020 |
|
|
|
|
|
|
|
|
||||||||||||||
|
Total comprehensive loss for year |
- |
|
- |
- |
- |
- |
(1,891) |
(1,891) |
||||||||||||||
|
Share Based Payment Res. |
- |
|
- |
240 |
- |
- |
- |
240 |
||||||||||||||
|
Currency differences |
- |
|
- |
- |
- |
1,488 |
- |
1,488 |
||||||||||||||
|
Shares issued |
414 |
|
29,266 |
- |
- |
- |
- |
29,680 |
||||||||||||||
|
Total contributions by and distributions to owners |
414 |
|
29,266 |
240 |
- |
1,488 |
(1,891) |
29,517 |
||||||||||||||
|
At 31 December 2020 |
731 |
|
44,480 |
493 |
(2,241) |
2,573 |
(4,983) |
41,053 |
||||||||||||||
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.
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 |
Business Combinations |
|
IAS 8 |
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:
|
*IFRS 17 |
Insurance Contracts2 |
|
* IFRS 9 |
Interest Rates1 |
|
* IAS39/IFRS7 |
Benchmark Reform1 |
|
*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.
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.
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.
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 |
the shorter of five years or the life of the lease |
|
Plant & Machinery |
four years |
|
Fixtures and fittings |
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.
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 ‑ current assets and directly attributable overheads. Development costs recognised as assets are amortised over their expected useful life.
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.
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
· 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.
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'.
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.
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.
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).
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.
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.
|
|
Average rate 2020 |
Average rate 2019 |
Year end rate 2020 |
Year end rate 2019 |
|
Rate compared to Euro |
|
|
|
|
|
GBP |
0.89 |
0.88 |
0.90 |
0.85 |
|
US Dollar |
1.14 |
1.13 |
1.23 |
1.12 |
|
|
|
|
|
|
|
Rate compared to GBP |
Average rate 2020 |
Average rate 2019 |
Year end rate 2020 |
Year end rate 2019 |
|
Euro |
1.12 |
1.14 |
1.11 |
1.18 |
|
US Dollar |
1.28 |
1.28 |
1.26 |
1.32 |
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).
(iii) Cash flow and fair value interest rate risk
The Group has assets in the form of cash and cash equivalents and limited interest-bearing liabilities which relate to long-term
borrowing. Interest rates on cash and cash equivalents are currently zero whilst interest rates on borrowings have been fixed and therefore expose the Group to fair value interest rate risk. The Group does not speculate on future changes in interest rates.
Where overseas acquisitions are made, it is the Group's policy to arrange any borrowings required in local currency.
It is the Group's policy not to trade in derivative financial instruments. The Group does not use interest rate swaps.
(b)Credit risk
Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local subsidiary and operating business unit is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. It is the Group policy to obtain deposits from customers where possible, particularly
overseas customers. In addition, the Group will seek confirmed letters of credit for the balances due. Credit risk is managed at the operating business unit level and monitored at the Group level to ensure adherence to Group policies. If there is no independent rating, local management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.
Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers.
(c) Liquidity risk
Cash flow forecasting is performed in the individual operating entities of the Group and is aggregated by Group finance. Group finance monitors cash and cash flow forecasts and it is the Group's liquidity risk management policy to maintain sufficient cash and available funding through an adequate amount of cash and cash equivalents and committed credit facilities from its bankers. Due to the dynamic nature of the underlying businesses, the head office finance team aims to maintain flexibility in funding by keeping sufficient cash and cash equivalents available to fund the requirements of the Group.
The Group's policy in relation to the finance of its overseas operations requires that sufficient liquid funds be maintained in each of its territory subsidiaries to support short and medium-term operational plans. Where necessary, short-term funding is provided by the holding Company. In the UK, the working capital bank facility and the management of liquid funds in excess of operational needs are controlled centrally. Typically, excess funds are placed as short-term deposits, to provide a balance between interest earnings and flexibility.
The table below analyses the Group's non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
|
|
|
Less than |
Between |
Between |
More than |
Total |
|
|
|
one year |
1 and 2 years |
2 and 5 years |
5 years |
£'000 |
|
|
Note |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
At 31 December 2020: |
|
|
|
|
|
|
|
Borrowings |
25 |
359 |
- |
- |
- |
359 |
|
Leased Liabilities |
37 |
2,245 |
1,510 |
684 |
- |
4,439 |
|
Trade and other payables |
23 |
21,396 |
2 |
- |
- |
21,398 |
|
At 31 December 2019: |
|
|
|
|
|
|
|
Borrowings |
25 |
1,703 |
- |
- |
- |
1,703 |
|
Leased Liabilities |
37 |
444 |
328 |
655 |
- |
1,427 |
|
Trade and other payables |
23 |
2,977 |
40 |
2 |
- |
3,019 |
(d) Capital risk management
The Group's objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including "current and non-current borrowings" as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is the sum of net debt plus equity.
The Group is currently largely un-geared, having net cash at 31 December 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.
(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:
|
|
2020 |
2020 |
2020 |
2020 |
2019 |
|
|
CRO |
Data Platform |
CDS |
Total |
Total |
|
|
|
|
|
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Income statement |
|
|
|
|
|
|
External revenue and other income |
7,842 |
- |
14,153 |
21,995 |
3,543 |
|
EBITDA before exceptional items |
(3,313) |
(431) |
(2,522) |
(6,266) |
(3,781) |
|
Exceptional items |
(1,648) |
- |
(477) |
(2,125) |
(711) |
|
EBITDA |
(4,961) |
(431) |
(2,999) |
(8,391) |
(4,492) |
|
Depreciation |
(590) |
(4) |
(1,288) |
(1,882) |
(296) |
|
Amortisation |
(53) |
- |
(116) |
(169) |
(331) |
|
Operating (loss) |
(5,604) |
(435) |
(4,403) |
(10,442) |
(5,119) |
|
Net finance (costs) |
57 |
(113) |
(318) |
(374) |
(350) |
|
Share Options Reserve charge |
(50) |
- |
(190) |
(240) |
(106) |
|
Loss on Financial Asset Investments |
- |
- |
(107) |
(107) |
(231) |
|
Retained (loss) before tax |
(5,597) |
(548) |
(5,018) |
(11,163) |
(5,806) |
|
Segment assets |
|
|
|
|
|
|
Intangibles |
5,763 |
- |
364 |
6,127 |
2,875 |
|
PPE |
86 |
13 |
969 |
1,068 |
190 |
|
Investment in associate |
- |
- |
7,076 |
7,076 |
- |
|
ROU Assets |
934 |
- |
3,296 |
4,230 |
1,311 |
|
Inventories |
- |
- |
953 |
953 |
- |
|
Trade and other debtors |
5,633 |
(1,169) |
5,422 |
9,886 |
3,627 |
|
Cash |
9,215 |
13 |
9,977 |
19,205 |
1,037 |
|
Total assets |
21,631 |
(1,143) |
28,057 |
48,545 |
9,040 |
|
Segment liabilities |
|
|
|
|
|
|
Operating liabilities |
(3,429) |
(119) |
(22,341) |
(25,889) |
(4,487) |
|
Borrowings |
(45) |
(314) |
- |
(359) |
(1,703) |
|
Total liabilities |
(3,474) |
(433) |
(22,341) |
(26,248) |
(6,190) |
6. Expenses - analysis by nature
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Employee benefit expense (note 10) |
15,240 |
5,202 |
|
PPE Depreciation (note 16) and amortisation (note 17) |
368 |
393 |
|
Depreciation related to Right of use Assets (Note 37) |
1,684 |
234 |
|
|
|
|
|
Exceptional items (note 7) |
2,125 |
711 |
|
Inventories consumed |
727 |
- |
|
Professional fees |
1,326 |
453 |
|
IT |
1,021 |
194 |
|
Premises Costs |
1,331 |
229 |
|
Volunteer costs |
961 |
- |
|
Agency, Subcontractors and freelancers |
1,691 |
279 |
|
Other expenses |
5,963 |
978 |
|
Total direct project and administrative costs |
32,437 |
8,673 |
7. Exceptional items
Included within Administrative expenses are exceptional items as shown below:
|
|
|
2020 |
2019 |
|
|
|
£'000 |
£'000 |
|
Exceptional items include: |
|
|
|
|
- Transaction costs relating to business combinations and acquisitions |
|
2,125 |
711 |
|
Total exceptional items |
|
2,125 |
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:
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Fees payable to Company's auditor for the audit of the parent Company and consolidated financial statements |
36 |
26 |
|
Fees payable to Company's auditor for the audit of subsidiaries and their consolidated financial statements |
60 |
21 |
|
Total paid to the Company Auditor |
96 |
47 |
|
Fees payable to the auditors of subsidiaries for services: |
|
|
|
- The audit of Company's subsidiaries pursuant to legislation paid to other Auditors |
48 |
45 |
|
- Other services paid to other Auditors |
40 |
44 |
|
- Tax services paid to other Auditors |
8 |
8 |
|
Total paid to Other Auditors |
96 |
97 |
|
Total auditor's remuneration |
192 |
144 |
9. Directors' emoluments
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Aggregate emoluments (11 directors) |
576 |
326 |
|
Social Security Costs |
69 |
39 |
|
Contribution to defined contribution pension scheme (3 directors) |
20 |
13 |
|
Total directors' remuneration |
665 |
378 |
See further disclosures within the Remuneration Report on page 15.
|
|
2020 |
2019 |
|
Highest paid Director |
£'000 |
£'000 |
|
Total emoluments received |
178 |
90 |
|
Defined contribution pension scheme |
- |
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
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Wages and salaries |
12,461 |
4,203 |
|
Social security costs |
1,944 |
722 |
|
Pension costs |
835 |
277 |
|
Total employee benefit expense |
15,240 |
5,202 |
11. Average number of people employed
|
|
2020 |
2019 |
|
|
No |
No |
|
Average number of people (including Executive Directors) employed was: |
|
|
|
Administration |
41 |
34 |
|
Clinical research |
129 |
100 |
|
Sales and marketing |
9 |
9 |
|
Total average number of people employed |
179 |
143 |
12. Finance income and costs
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
Interest expense: |
|
|
|
- Interest on Lease liabilities (Note 37) |
(243) |
(48) |
|
- Interest on other loans |
(131) |
(302) |
|
Finance costs |
(374) |
(350) |
|
Finance income |
|
|
|
- Interest income on cash and short-term deposits |
- |
- |
|
Finance income |
- |
- |
|
Net finance expense |
(374) |
(350) |
|
13. Income tax expense
|
|
|
|
|
2020 |
2019 |
|
Group |
£'000 |
£'000 |
|
Current tax: |
|
|
|
Current year research and development tax credit |
(363) |
- |
|
Overprovision of prior year tax charge |
- |
- |
|
Total current tax (credit) |
(363) |
- |
|
|
|
|
|
Deferred tax (note 24): |
|
|
|
Origination and reversal of temporary differences |
(9) |
(67) |
|
Total deferred tax |
(9) |
(67) |
|
Income tax (credit) |
(372) |
(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:
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
(Loss) before tax |
(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 |
421 |
166 |
|
- Current Year R & D Tax credit |
(207) |
- |
|
-Temporary timing differences |
(10) |
(67) |
|
- Losses carried forward |
1,545 |
941 |
|
Income tax (credit) |
(372) |
(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.
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
|
|
|
|
(Loss) from continuing operations |
(10,791) |
(5,739) |
|
Total |
(10,791) |
(5,739) |
|
Weighted average number of Ordinary Shares in issue |
599,920,207 |
165,081,000 |
|
Earnings per share from continuing operations |
(1.80p) |
(3.48p) |
(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.
|
|
2020 |
2019 |
|
|
|
|
|
Potential dilutive ordinary shares: |
|
|
|
Options |
9,516,111 |
12,706,964 |
|
Warrants |
4,185,248 |
6,744,500 |
|
Total |
13,701,359 |
19,451,464 |
|
|
|
|
15. Dividends
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 |
- |
- |
715 |
715 |
|
Transfer in from hVIVO |
1,535 |
2,520 |
1,190 |
5,245 |
|
Additions |
88 |
373 |
357 |
818 |
|
Disposals |
(1,014) |
- |
(324) |
(1,338) |
|
Exchange differences |
77 |
146 |
107 |
330 |
|
At 31 December 2020 |
686 |
3,039 |
2,045 |
5,770 |
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
At 1 January 2020 |
- |
- |
525 |
525 |
|
Transfer in from hVIVO |
1,497 |
2,455 |
1,037 |
4,989 |
|
Charge for the year |
33 |
35 |
131 |
199 |
|
Elimination on disposal |
(1,014) |
- |
(297) |
(1,311) |
|
Exchange differences |
74 |
138 |
88 |
300 |
|
At 31 December 2020 |
590 |
2,628 |
1,484 |
4,702 |
|
|
|
|
|
|
|
Net book value |
|
|
|
|
|
At 31 December 2020 |
96 |
411 |
561 |
1,068 |
|
At 31 December 2019 |
- |
- |
190 |
190 |
The Company had no property, plant and equipment at 31/12/2020. (2019: nil).
17. Intangible fixed assets
|
Group
|
Goodwill £'000 |
Trade secrets £'000 |
Intellectual Property Rights £'000 |
Capitalised Software development £'000 |
Licences £'000 |
Pref right to reserve slot |
Total £'000 |
|
Cost |
|
|
|
|
|
|
|
|
At 1 January 2020 |
4,210 |
600 |
- |
- |
- |
- |
4,810 |
|
Transfer in from hVIVO |
- |
- |
2,118 |
2,199 |
64 |
- |
4,381 |
|
Additions |
2,779 |
- |
- |
- |
- |
274 |
3,053 |
|
Disposals |
- |
- |
- |
- |
- |
|
- |
|
Exchange Differences |
239 |
33 |
- |
- |
- |
- |
272 |
|
At 31 December 2020 |
7,228 |
633 |
2,118 |
2,199 |
64 |
274 |
12,516 |
|
Amortisation |
|
|
|
|
|
|
|
|
At 1 January 2020 |
1,539 |
396 |
- |
- |
- |
- |
1,935 |
|
Transfer in from hVIVO |
- |
- |
2,118 |
2,057 |
- |
- |
4,175 |
|
Charge for the year |
- |
53 |
- |
70 |
- |
46 |
169 |
|
Disposals |
- |
- |
- |
- |
- |
- |
- |
|
Exchange Differences |
89 |
21 |
- |
- |
- |
- |
110 |
|
At 31 December 2020 |
1,628 |
470 |
2,118 |
2,127 |
- |
46 |
6,389 |
|
Net book value |
|
|
|
|
|
|
|
|
At 31 December 2020 |
5,600 |
163 |
- |
72 |
64 |
228 |
6,127 |
|
At 31 December 2019 |
2,671 |
204 |
- |
- |
- |
- |
2,875 |
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.
|
|
2020 |
2019 |
|
|
£'000 |
£'000 |
|
CRO |
2,821 |
2,671 |
|
CDS |
2,779 |
- |
|
Data Platform |
- |
- |
|
Total |
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) |
|
5% |
|
Discount rate |
|
15% |
The impairment review is prepared on the group basis rather than a single unit basis.
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 |
2020 |
2019 |
|
Shares in Group undertakings |
£'000 |
£'000 |
|
At 1 January |
8,195 |
- |
|
Transfer re Open Orphan PLC |
- |
2,783 |
|
Investment in Open Orphan DAC |
- |
5,412 |
|
Investment in hVIVO Plc |
14,161 |
- |
|
Impairment of Investment in VLS Germany GmbH |
(22) |
- |
|
At 31 December |
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 |
Country of Registration |
Nature of Business |
|
Venn Life Sciences Limited* |
Ireland |
Intermediate holding company |
|
Venn Life Sciences (Ireland) Limited**(2) |
Ireland |
Group Service company |
|
Venn Life Sciences B.V.** |
Netherlands |
Clinical Research Organisation |
|
Venn Life Sciences UK Limited**(1) |
England & Wales |
Clinical Research Organisation |
|
Venn Life Sciences (NI) Limited* |
England & Wales |
Clinical Research Organisation |
|
Venn Life Sciences (Germany) Gmbh * |
Germany |
Clinical Research Organisation |
|
Venn Life Science (France) S.A.S.* |
France |
Data Management & randomisation Systems |
|
Venn Life Sciences (EDS) B.V.* |
Netherlands |
Pre-clinical & early clinical Research Organisation |
|
Open Orphan DAC* |
Ireland |
Data Platform of Rare diseases |
|
hVIVO Limited* |
England & Wales |
Intermediate holding company |
|
hVIVO Services Limited** |
England & Wales |
Clinical development services |
|
hVIVO INC** |
USA |
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 |
Country of Registration |
Nature of Business |
|
Imutex Ltd (1) |
England & Wales |
Clinical development services |
|
PrEP Biopharm Limited (2) |
England & Wales |
Clinical development services |
(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
|
|
Group |
Group |
Company |
Company |
|
Shares in undertakings |
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 January |
- |
- |
- |
- |
|
Transfer re Open Orphan PLC |
- |
597 |
- |
- |
|
Sales Proceeds |
- |
(514) |
- |
- |
|
Loss on disposal |
- |
(83) |
- |
- |
|
At 31 December |
- |
- |
- |
- |
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
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 January |
- |
- |
- |
- |
|
Transfer re Open Orphan PLC |
- |
141 |
- |
26 |
|
Impairment |
- |
(141) |
- |
(26) |
|
At 31 December |
- |
- |
- |
- |
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
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Beginning of the year |
|
26 |
|
26 |
|
Impairment |
- |
(26) |
- |
(26) |
|
End of the year |
- |
- |
- |
- |
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.
19. Financial instruments by category
(a) Assets
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
31 December |
|
|
|
|
|
Assets as per balance sheet |
|
|
|
|
|
Trade and other receivables |
9,462 |
3,290 |
10,847 |
5,452 |
|
Cash and cash equivalents |
19,205 |
1,037 |
8,689 |
421 |
|
Total |
28,667 |
4,327 |
19,536 |
5,873 |
Assets in the analysis above are all categorised as 'other financial assets at amortised cost' for the Group and Company.
(b) Liabilities
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
31 December |
|
|
|
|
|
Liabilities as per balance sheet |
|
|
|
|
|
Borrowings |
359 |
1,702 |
45 |
1,250 |
|
Lease Liabilities (Note 37) |
4,439 |
1,426 |
- |
- |
|
Trade and other payables |
6,376 |
2,229 |
885 |
1,357 |
|
Total |
11,174 |
5,357 |
930 |
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:
|
|
2020 |
2019 |
|
Rating |
£'000 |
£'000 |
|
A - AAA |
19,158 |
1,032 |
|
Sub-A rating |
47 |
5 |
|
Total |
19,205 |
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).
20. Inventories
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Beginning of the year |
- |
- |
- |
- |
|
Laboratory and clinical consumables |
168 |
- |
- |
- |
|
Virus - finished goods |
785 |
|
|
|
|
End of the year |
953 |
- |
- |
- |
£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
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade receivables |
6,143 |
1,573 |
- |
- |
|
Less: provision for impairment of trade receivables |
- |
- |
- |
- |
|
Trade receivables - net |
6,143 |
1,573 |
- |
- |
|
Prepayments and accrued income (Note 35) |
2,064 |
1,711 |
112 |
73 |
|
Amounts owed by subsidiary undertakings |
- |
- |
10,778 |
5,014 |
|
Other receivables |
1,599 |
331 |
70 |
442 |
|
|
9,806 |
3,615 |
10,960 |
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:
|
|
Group |
Group |
Company |
Company |
|
|||
|
|
2020 |
2019 |
2020 |
2019 |
|
|||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|||
|
UK Sterling |
5,481 |
76 |
2,756 |
391 |
||||
|
Euros |
4,325 |
3,539 |
8,204 |
5,138 |
|
|||
|
|
9,806 |
3,615 |
10,960 |
5,529 |
|
|||
22. Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the statement of cash flows:
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cash at bank and on hand |
19,205 |
1,037 |
8,689 |
421 |
|
Cash and cash equivalents (excluding bank overdrafts) |
19,205 |
1,037 |
8,689 |
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.
23. Trade and other payables
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Trade payables |
4,954 |
507 |
72 |
33 |
|
Amounts due to subsidiary undertakings |
- |
- |
543 |
964 |
|
Social security and other taxes |
446 |
562 |
- |
- |
|
Other payables * |
301 |
347 |
64 |
92 |
|
Accrued expenses and deferred income |
15,697 |
1,603 |
206 |
270 |
|
|
21,398 |
3,019 |
885 |
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:
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Deferred tax liabilities were made up as follows: |
|
|
|
|
|
Accelerated tax depreciation |
32 |
41 |
- |
- |
|
|
32 |
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:
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
At 1 January |
41 |
- |
- |
- |
|
Transfer re Open Orphan PLC |
- |
108 |
|
|
|
Income statement movement (note 13) |
(9) |
(67) |
- |
- |
|
At 31 December |
32 |
41 |
- |
- |
|
|
|
|
|
|
25. Borrowings
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Current - falling due within 1 year Loan Notes |
45 |
1,250 |
45 |
1,250 |
|
Convertible debenture securities("CDS") |
314 |
297 |
- |
- |
|
Invoice Discounting |
- |
156 |
- |
- |
|
Total borrowings |
359 |
1,703 |
45 |
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.
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
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
668,052,261 (2019 - 254,572,567) Ordinary shares of £0.001 |
668 |
254 |
668 |
254 |
|
62,833,339 (2019 - 62,833,339) Deferred shares of £0.001 |
63 |
63 |
63 |
63 |
|
Total |
731 |
317 |
731 |
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.
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
|
|
Group |
Group |
Company |
Company |
|
|
2020 |
2019 |
2020 |
2019 |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Loss before income tax |
(11,163) |
(5,824) |
(1,891) |
(1,629) |
|
Adjustments for: |
|
|
|
|
|
- Depreciation and amortisation (Note 6) |
2,052 |
627 |
- |
- |
|
- Foreign currency translation of net assets |
|
97 |
- |
37 |
|
- Exceptional Items (Note 7) |
2,125 |
711 |
867 |
711 |
|
- Net finance costs/(Income) (Note 12) |
374 |
350 |
(651) |
(346) |
|
- Share based payment expense (Note 32) |
240 |
102 |
50 |
102 |
|
- R & D Credit incl. in other Income |
(778) |
|
|
|
|
- Share of Imutex loss (Note 18.b) |
107 |
- |
- |
- |
|
Changes in working capital |
|
|
|
|
|
- Losses/Impairments on Investments (Note 18c/18d) |
- |
224 |
22 |
26 |
|
- Lease Payments (Note 37) |
(1,999) |
(270) |
- |
- |
|
- Transfer re Open Orphan PLC |
|
|
- |
(1,655) |
|
- (Increase)/Decrease Trade and other receivables |
(2,800) |
1,857 |
(4,491) |
- |
|
- (Increase)/Decrease Inventories |
(28) |
- |
- |
- |
|
- (Decrease)/Increase Trade and other payables |
14,410 |
(637) |
(474) |
- |
|
Net cash used in operations |
2,540 |
(2,763) |
(6,568) |
(2,754) |
29. Related Party Disclosures
Directors
Directors' emoluments are set out in the Report of the Remuneration Committee Report.
Key management compensation for the year was as follows:
|
|
2020 |
2019 |
|
|
€'000 |
€'000 |
|
Aggregate emoluments |
576 |
326 |
|
Employer contribution to pension scheme |
20 |
13 |
|
|
596 |
339 |
Key management includes the Directors only.
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.
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 |
1,680,000 |
- |
- |
1,400,000 |
280,000 |
|
14/09/2017 |
3,310,000 |
- |
- |
3,310,000 |
- |
|
28/06/2019 |
7,716,964 |
- |
- |
- |
7,716,964 |
|
17/01/2020 |
- |
3,742,147 |
2,172,565 |
50,435 |
1,519,147 |
|
Total |
12,706,964 |
3,742,147 |
2,172,565 |
4.760.435 |
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 |
|
|
280,000 |
|
|
Exercise price (in equal thirds when price 25p/35p/45p) |
|
|
13p |
|
|
Expected volatility |
|
|
28% |
|
|
Expected dividend |
|
|
0% |
|
|
Contractual life |
|
|
2.5 years |
|
|
Risk free rate |
|
|
95% |
|
|
Estimated fair value of each option |
|
|
£0.00 |
|
In relation to the Options granted in 2019:
|
Options in issue 31/12/2020 |
|
|
7,716,964 |
|
|
Exercise price |
|
|
5.6p |
|
|
Expected volatility |
|
|
60% |
|
|
Expected dividend |
|
|
0% |
|
|
Contractual life |
|
|
3.5 years |
|
|
Risk free interest rate |
|
|
1.84% |
|
|
Estimated fair value of each option |
|
|
£0.02 |
|
In relation to the Options granted in 2020:
|
Options in issue 31/12/2020 |
|
|
1,519,147 |
|
|
Exercise price |
|
|
2p |
|
|
Expected volatility |
|
|
72.8% |
|
|
Expected dividend |
|
|
0% |
|
|
Contractual life |
|
|
2 years |
|
|
Risk free interest rate |
|
|
0.57% |
|
|
Estimated fair value of each option |
|
|
£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.
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.
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
|
|
2020 |
|
|||
|
|
Total |
|
|||
|
|
£'000 |
|
|||
|
Net Accrued Income brought forward |
|
- |
|
||
|
Net Accrued Income acquired on acquisition of hVIVO group |
(1,689) |
|
|||
|
Movement in the period: - arising from a change in the measure of progress |
(12,014) |
|
|||
|
Net Accrued Income as at 31 December 2020 |
(13,703) |
|
|||
|
Split: |
|
|
|||
|
Accrued Income |
821 |
||||
|
Deferred Income |
(14,524) |
|
|||
|
Net Accrued Income |
(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
|
|
31 December |
|
|
|
2020 |
|
|
|
£'000 |
|
|
Within six months |
14,469 |
|
|
Between six months and one year |
55 |
|
|
After one year |
- |
|
|
|
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.
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
|
|
2020 |
2019 |
|
|||||||||||
|
|
Total |
Total |
|
|||||||||||
|
|
£'000 |
£'000 |
|
|||||||||||
|
Net Accrued Income brought forward |
601 |
- |
|
|||||||||||
|
Net Accrued Income acquired on acquisition of Venn Life Sciences group |
- |
1,571 |
|
|||||||||||
|
Movement in the period: - arising from a change in the measure of progress |
(219) |
(970) |
|
|||||||||||
|
Net Accrued Income carried forward |
382 |
601 |
|
|||||||||||
|
Split: |
|
|
|
|||||||||||
|
Accrued Income |
900 |
1,389 |
|
|||||||||||
|
Deferred Income |
(518) |
(788) |
|
|||||||||||
|
Net Accrued Income |
382 |
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).
37. Leases
Amounts recognised in the statement of financial position
|
|
|
Right of use assets |
Lease liabilities |
|
|||
|
|
|
£'000 |
£'000 |
|
|||
|
As at 1 January 2020 |
|
1,311 |
1,427 |
|
|||
|
Transfer from hVIVO Group |
|
3,051 |
3,213 |
|
|||
|
New Leases Acquired |
|
1,479 |
1,479 |
|
|||
|
Depreciation expense (Note 6) |
|
(1,684) |
- |
|
|||
|
Interest expense (Note 12) |
|
- |
243 |
|
|||
|
Payments (Note 28) |
|
- |
(1,999) |
|
|||
|
Exchange differences |
|
73 |
76 |
|
|||
|
As at 31 December 2020 |
|
4,230 |
4,439 |
|
|||
|
Current - |
2,245 |
|
|||||
|
Non-current 4,230 |
2,194 |
|
|||||
Maturity of leases
|
|
31 December |
|
|
|
2020 |
|
|
|
£'000 |
|
|
Current - Within one year |
2,245 |
|
|
Non-Current - Between one to two years |
1,510 |
|
|
Non-Current - Between two to five years |
684 |
|
|
|
4,439 |
|
Short-term Lease payments expensed in year ended 31/12/20: £25,000 (2019: £17,000).
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 |
2019 |
2019 |
2019 |
|
|
|
GBP£'000 |
EUR€'000 |
GBP£'000 |
EUR€'000 |
|
Assets |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
Intangible assets |
|
2,875 |
3,380 |
- |
- |
|
Property, plant and equipment |
|
190 |
223 |
- |
- |
|
Investment in associates |
|
- |
- |
- |
- |
|
Investments in subsidiaries |
|
- |
- |
8,195 |
9,634 |
|
Right of Use Asset |
|
1,311 |
1,541 |
- |
- |
|
Total non-current assets |
|
4,376 |
5,144 |
8,195 |
9,634 |
|
Current assets |
|
|
|
|
|
|
Inventories |
|
- |
- |
- |
- |
|
Trade and other receivables |
|
3,615 |
4,250 |
5,529 |
6,500 |
|
Current Tax recoverable |
|
12 |
14 |
- |
- |
|
Cash and cash equivalents |
|
1,037 |
1,219 |
421 |
495 |
|
Total current assets |
|
4,664 |
5,483 |
5,950 |
6,995 |
|
Total assets |
|
9,040 |
10,627 |
14,145 |
16,629 |
|
Equity attributable to owners |
|
|
|
|
|
|
Share capital |
|
317 |
372 |
317 |
372 |
|
Share premium account |
|
15,214 |
19,041 |
15,214 |
19,041 |
|
Merger reserves |
|
(6,856) |
(8,060) |
(2,241) |
(2,635) |
|
Foreign currency reserves |
|
1,124 |
(102) |
1,085 |
- |
|
Share option reserve |
|
253 |
298 |
253 |
298 |
|
Retained earnings |
|
(7,202) |
(8,199) |
(3,092) |
(3,513) |
|
Total equity |
|
2,850 |
3,350 |
11,536 |
13,563 |
|
Liabilities |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
Trade and other payables |
|
42 |
49 |
- |
- |
|
Lease liabilities |
|
983 |
1,156 |
- |
- |
|
Provisions |
|
- |
- |
- |
- |
|
Total non-current liabilities |
|
1,025 |
1,205 |
- |
- |
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
|
2,977 |
3,500 |
1,359 |
1,597 |
|
Deferred taxation |
|
41 |
48 |
- |
- |
|
Lease liabilities |
|
444 |
522 |
- |
- |
|
Borrowings |
|
1,703 |
2,002 |
1,250 |
1,469 |
|
Total current liabilities |
|
5,165 |
6,072 |
2,609 |
3,066 |
|
Total liabilities |
|
6,190 |
7,277 |
2,609 |
3,066 |
|
Total equity and liabilities |
|
9,040 |
10,627 |
14,145 |
16,629 |
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