ORPH.L Regulatory News (ORPH)

This announcement contains inside informationfor the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK lawby 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:

Financial highlights

Outlook:

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:

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.

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

.

Consolidated and Company's Statement of Financial Position

For the year ended 31 December 2020

Consolidated and Company's Statement of Cash Flows

For the year ended 31 December 2020

Consolidated and Company's Statement of Changes in Shareholders' Equity

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:

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:

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:

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.

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.

(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:

6. Expenses - analysis by nature

7. Exceptional items

Included within Administrative expenses are exceptional items as shown below:

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:

9. Directors' emoluments

See further disclosures within the Remuneration Report on page 15.

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

11. Average number of people employed

12. Finance income and costs

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:

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.

(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.

15. Dividends

There were no dividends paid or proposed by the Company in either year.

16. Property, plant and equipment