ORPH.L Regulatory News (ORPH)

24 June 2020

Open Orphan plc

("Open Orphan" or the "Group")

Full Year Results for the year ended 31 December 2019

Open Orphan plc (ORPH), a rapidly growing specialist CRO pharmaceutical services company which is the world leader in the testing of vaccines and antivirals using human challenge study models is pleased to announce its full year results for the year ended 31 December 2019.

Financial Highlights

Post Period End Highlights

· Completion of merger of Open Orphan plc and hVIVO plc in January 2020 creating a specialist pharma services group with complementary CRO services

· Continued action to reduce the cost base with annualised savings of €2.0m in hVIVO and €3.0m in Venn respectively removed since the merger in January 2020 and further annualised cost savings of €2.5m in the merged entity are expected to be implemented by 31 December 2020

· Developing the world's first challenge study model clinical trial in order to be able to test the efficacy of the large number of Covid-19 vaccines that are in development

· Developing an antibody testing service with capacity for up to 3,000 tests per day using the Quotient testing instruments which is one of the few able to offer 100% accuracy

· Expanded the Group's pipeline of opportunities and converting pipeline of contracts across the whole Group, including:

o provision of an RSV human challenge study projected to deliver £3.2m in revenue all of which is expected to be recognised in 2020 with potential for additional follow-on £7m Pivotal challenge study delivering significant further revenue

o A contract with a US Biotech company for the provision of an RSV human challenge study projected to deliver £3.5 million in revenue all of which is expected to be recognised in 2020

o Expansion of laboratory service with offerings to third party biotech companies and small cap pharma companies with new contracts already completed and this is anticipated to be an important new revenue generating stream for the Group

o Venn's traditional pharma consulting business continues to perform well and a significant contract was announced in recent weeks to obtain and support market access of newly developed vaccines into the EU and US markets for one of the top pharmaceutical companies in the world

· Increased liquidity and strong balance sheet through placings of £5.3m in January 2020 and £12.6m in May 2020 to allow the Group to complete its transition and leverage a broader service offering to an enlarged and combined customer base

Outlook

· Unprecedent growth opportunities as pharma focuses funding on Covid-19 and respiratory diseases resulting the development of a strong pipeline of opportunities, for both Covid-19 and non-Covid-19 challenge studies along with the wider CRO services offered by the Group

· Strong pipeline of work to build H2 2020 revenue, targeting operational profitability by Q3 2020

· A further €2.5m of cost to be removed from the business in H2 2020

· Right management team in place, with a clear strategy, targeting the high margin pharma services sector, to deliver significant shareholder value

· A strategic review is underway in order to seek to monetise the 49% stake in Imutex and our other non-core investments such as the 62.5% in PrEP Biopharm and our 100% stake in an immunomodulator

Cathal Friel, Executive Chairman of Open Orphan, said:

"Since the reverse takeover of Venn in June 2019 we have been building the foundations of a soon to be profitable business in Q3 and a rapidly growing CRO pharmaceutical services Group with all loses in both companies confined to the past. The merger with hVIVO, post period end, has given us a full-service business, with world class facilities, motivated colleagues and a strong pipeline of work and transforms out business into the world leader in the testing of vaccines and anti-virals through human challenge model clinical trials.

Traditionally, the testing of vaccines and antivirals had been somewhat of a Cinderella industry, however, following the advent of the Covid-19 pandemic it is clear that for the months and years ahead the development of new and novel vaccines and also the testing of such vaccines and antivirals will be one of the fastest growing areas of the pharmaceutical industry. In recent decades, governments and pharma companies around the world completely underinvested in new vaccines and the onset of Covid-19 caught them significantly off-guard and as such there is a huge capital investment program underway around the world to roll out an extensive range of Covid-19 and importantly non-Covid-19 vaccines to ensure that the world is not caught unprepared in future pandemics.

We have substantially reduced overheads and rightsized the management team including combining the CEO and other senior roles in both Venn and hVIVO. We have also brought forward some long-serving and excellent line managers and heads of departments flattening the organisation structure and giving them more autonomy and responsibility to successfully run their own areas and this is proving very effective both for the company but also most importantly for the individual managers as well. In turn, this has completely transformed the culture of the enlarged business to one of vastly more open communications, sharing of knowledge and a much faster decision-making process.

I am very excited for the year ahead and I am confident that we have created a soon to be profitable, fast-growing business which is creating value for all our stakeholders."

Conference call for sell-side analysts and investors

The Company will hold a conference call for sell-side analysts and investors at 09:30 today.

Participant dial-in numbers

A corporate presentation is available to shareholders on the Group's website at: https://www.openorphan.com/investors/reports-and-presentations/year/2020

For further information please contact

Notes to Editors - Open Orphan:

Open Orphan is a rapidly growing niche CRO pharmaceutical services group which is a world leader in the testing of vaccines and antivirals through the use of human challenge clinical trials. Conducted from Europe's only 24-bedroom quarantine clinic with onsite virology providing individually isolated rooms and connected to our specialist laboratory facility. Which offers highly specialised virology and immunology laboratory services to support pre-clinical and clinical respiratory drug, antiviral, and vaccine discovery and development. Reliable laboratory analysis underpinned by scientific expertise is essential when processing and analysing clinical samples. Robust quality processes support our team of scientists in the delivery of submission ready data.

The Group has a leading portfolio of 8 viral challenge study models which are: 2 FLU, 2 RSV, 1 HRV, 1 Asthma, 1 cough and 1 COPD viral challenge models. As announced in early March, Open Orphan is rapidly advancing a number of Coronavirus challenge study models and expects to be helping many COVID-19 vaccine development companies to test their vaccines. No other company in the world has such a portfolio, with only two competitors globally having 1 challenge study model each. In June 2020 hVIVO COVID Clear Test was launched, the most accurate antibody test available to UK employers, helping them to get their people back to work.

Open Orphan comprises of two commercial specialist CRO services businesses, hVIVO and Venn Life Sciences, and is developing an early stage orphan drug genomics data platform business. This platform captures valuable genetic data from patient populations with specific diseases with designated orphan drug status and incorporating AI tools. In June 2019, Open Orphan acquired AIM-listed Venn Life Sciences Holdings plc in a reverse take-over and in January 2020 it completed the merger with hVIVO plc. Venn, as an integrated drug development consultancy, offers CMC (chemistry, manufacturing and controls), preclinical, Phase I & II clinical trials design and execution. The merger with hVIVO created a European full pharma services group broadening the Group's customer base and with complementary specialist CRO services, widened the range of the Group's service offerings.

Dear Shareholder,

I am very happy to report to you as Executive Chairman of Open Orphan plc (formerly Venn Life Sciences Holdings plc), having completed a reverse acquisition with Open Orphan DAC in June 2019 and the acquisition of hVIVO Ltd (formerly hVIVO plc) in January 2020. I have previously served as Chief Executive Officer of the Group from May 2019 until January 2020.

While the attached Financial Statements report on the results of the Group in 2019 prior to the acquisition of hVIVO Ltd (and in particular reflecting reverse merger accounting treatment of the merger of Venn Life Sciences Holdings plc and Open Orphan DAC), this statement addresses the performance of both Open Orphan plc and hVIVO Ltd in 2019 and the outlook for the combined entity in 2020.

Governance

The Board continues to recognise the importance of the high standards of corporate governance and considers that the Group's success is enhanced by the imposition of a strong corporate governance framework. Accordingly, in recognition of the need to maintain continued best practice the Board will monitor its composition and skills balance.

I very much welcome the significant experience of Trevor Philips, Mark Warne and Michael Meade who have joined the Board as part of the recent merger and am grateful to Christian Milla, Michael Ryan, Maurice Treacy, David Kelly for their service in 2019. In addition, we have appointed Leo Toole as Chief Financial Officer and Board member.

Strategy

Our enlarged offering of early clinical development services, clinical trial delivery expertise and virology related challenge studies, with a particular focus on rare and emerging diseases, is a strong platform to deliver substantial and sustainable returns to shareholders. Our 24-bed quarantine facilities in the UK are best in class for vaccine and virus-related development and put us at the forefront of emerging virus risk management stemming from the Covid-19 pandemic event which is ongoing at the time of writing, in particular with a focus on developing the world's first Covid-19 challenge model. The Group is also focussed on expanding service revenues by actively selling laboratory services to third party pharma companies and by developing antibody testing services to accurately identify an individual's antibody status, having previously used its virology laboratory principally to service its internal clinical activities. In addition, the Group continues to develop a ground-breaking Genomic Health Data platform which can now also be populated with hVIVO's global leading collection of infectious disease progression data.

The last year has seen significant change first through the reverse merger of Open Orphan DAC and Venn Life Sciences Holdings plc (subsequently renamed Open Orphan plc) in June 2019 and secondly through the merger of Open Orphan plc and hVIVO plc in January 2020.

· The existing Open Orphan business has focused to complete and replenish some long-standing full-service clinical research projects and to build longer term relationships through multi-year contracts in our early development business. Combined with the continued deferral of certain full-service projects, this has resulted in reduced revenues in the period. Despite this, the Group has started the work to plan and implement a major restructuring of our operations to drive efficiency and competitiveness while investing in the Genomic Health Data platform.

· In 2019, hVIVO continued making great strides to transition its business from a focus on viral asset development to a focus on testing the efficacy of vaccines, antivirals and respiratory disease agents through the provision of its own proprietary inhouse developed and grown versions of disease specific viruses, known as challenge studies. It has developed and is exploiting a strong pipeline of major pharmaceutical players with a focus on vaccine and anti-viral drug development. In addition, hVIVO holds a 49% share of a Joint Venture called Imutex Limited to develop vaccines against influenza (FLU v) and universal mosquito borne diseases (AGS v).

Results

Reported results for Open Orphan plc are summarized on page 3 and are covered by the schedules and notes from pages 18 to 54 of these Financial Statements (and in particular reflect reverse merger accounting treatment under IFRS 3 and IFRS 10 of the combination of Venn Life Sciences Holdings plc and Open Orphan DAC as of 28 June 2019). Results for hVIVO plc (on a stand-alone basis) are presented for reference. In addition, pro-forma results for Open Orphan plc (formerly Venn Life Sciences Holdings plc on a stand-alone basis and excluding any impact of the 28 June 2019 combination), Open Orphan DAC (on a stand-alone basis and excluding any impact of the 28 June 2019 combination) and Open Orphan plc (on a combined basis including the impact of the June 2019 and January 2020 combinations) are outlined for reference.

Outlook

The recent merger with hVIVO reflects our goal to leverage a broader service offering to an enlarged and combined customer base, while driving restructuring and integration of core support functions into our headquarters in London. The recent placings of £5.3m (before expenses) in January 2020 and £12.6m (before expenses) in May 2020 allows us to complete this transition in the first half of 2020 and we are confident that we will see the positive impact of these changes in the second half of 2020. In addition, we will invest to develop a world-first challenge study model to address Covid-19 while expanding our laboratory service offerings to develop antibody testing services to accurately identify an individual's antibody status.

Traditionally, the testing of vaccines and antivirals had been somewhat of a Cinderella industry, however, following the advent of the Covid-19 pandemic it is clear that for the months and years ahead the development of new and novel vaccines and also the testing of such vaccines and antivirals will be one of the fastest growing areas of the pharmaceutical industry. In recent decades, governments and pharma companies around the world completely under-invested in new vaccines and the onset of Covid-19 caught them significantly off-guard and as such there is a huge capital investment program underway around the world to roll out an extensive range of Covid-19 and importantly non Covid-19 vaccines to ensure that the world is not caught unprepared in future pandemics.

We have substantially reduced overheads and right-sized the management team including combining the CEO and other senior roles in both Venn and hVIVO. We have also brought forward some long-serving and excellent line managers and heads of departments, flattening the organisation structure and giving them more autonomy and responsibility to successfully run their own areas and this is proving very effective both for the company but also most importantly for the individual managers as well. In turn, this has completely transformed the culture of the enlarged business to one of vastly more open communication, sharing of knowledge and a much faster decision-making process.

I am very excited for the year ahead and I am confident that we have created a soon to be profitable, fast-growing business which is creating value for all our stakeholders.

Cathal Friel - Executive Chairman

23 June 2020

The notes on pages 22 to 54 are an integral part of these consolidated financial statements.

The Company has elected to take the exemption under section 408 of the Companies Act 2006 not to present the parent Company income statement account.

The loss for the parent Company for the year was €1,857,289 (2018 - loss of €1,656,197).

The notes on pages 22 to 54 are an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board on 23 June 2020

Cathal Friel Open Orphan Plc

Executive Chairman Registered no: 07514939

Notes to the Financial Statements

1. General information

Open Orphan Plc is a company incorporated in England and Wales. The Company is a public limited company, limited by shares, listed on the AIM market of the London Stock Exchange. On 18 January 2016, the company also listed on the ESM market of the Irish Stock Exchange. The address of the registered office is Queen Mary Bio Enterprises, Innovation Centre, 42 New Road, London, E1 2AX, UK.

The principal activity of the Group is that of a Clinical Research Organisation providing a suite of consulting and clinical trial services to pharmaceutical, biotechnology and medical device organisations. The Group has a presence in the UK, Ireland, France, Netherlands, Germany and Singapore.

The financial statements are presented in '000 Euros (except where indicated otherwise), the currency of the primary economic environment in which the Group's trading companies operate. The Group comprises Open Orphan Plc and its subsidiary companies as set out in note 18.

The registered number of the Company is 07514939.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. The policies have been consistently applied throughout the year, unless otherwise stated.

Basis of preparation

Open Orphan Plc (formerly Venn Life Sciences Holdings Plc) completed an IPO on the London AIM Exchange and the Dublin Euronext exchange on 28 June 2019 through a reverse acquisition of Open Orphan DAC, an Irish Company, into Venn Life Sciences Holdings Plc (Venn), a UK company. Based on the accounting standards under IFRS 3 and IFRS 10, the Group has determined that the entity with control of the combined group after the combination is Open Orphan DAC. It was therefore determined that reverse acquisition accounting is to be applied for presentation of the financial statements of the Group. This means that results reported for the period reflect those of Open Orphan DAC for the full 12-month period and for Venn Life Sciences group Plc group from 01 July 2019 to year end. The Balance Sheet reported for the period and comparable periods reflect those of the combined group with share capital reflecting the position of the ultimate parent company Open Orphan Plc. Note the prior period for Open Orphan DAC was a 17-month period. The % of the enlarged share capital represented by the consideration shares issued to Open Orphan DAC on the reverse takeover was 40.1% which represented a fair value consideration of £5.7m.

For information purposes, a pro forma statement of Comprehensive Income for the period and comparable periods for Open Orphan Plc on a stand-alone basis and excluding any impact of the combination is presented in the notes to allow a normalized presentation of Comprehensive Income for the existing Group during the period. This is consistent with handling for the H1 2019 Interim results.

The consolidated financial statements of Open Orphan Plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS's), IFRIC interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. Practice is continuing to evolve on the application and interpretations of IFRS.

The consolidated financial statements have been prepared under the historical cost convention.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.

Changes in accounting policies and disclosures

The accounting policies adopted are consistent with those of the previous financial year.

The changes to new standards for the current period and effective from 1 January 2019 include:

IFRS 16 Leases

IAS 19 Employee Benefits (amendment)

The Group applies, for the first time, IFRS 16 Leases, that does not require restatement of previous financial statements. The nature and effect of this application is disclosed below.

IFRS 16 Leases

IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees - leases of 'low-value' assets (e.g. personal computers) and short-term leases (i.e. leases with a lease term of twelve months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (i.e. the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e. the right-of-use asset).

Lessees will be required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right‑of‑use asset.

IFRS 16, which is effective for annual periods beginning on or after 1 January 2019, requires lessees and lessors to make more extensive disclosures than under IAS 17.

Transition to IFRS 16

The Group adopted IFRS 16 using the simplified retrospective method of adoption with the date of initial application of 1 January 2019. The Group elected to use the transition practical expedient allowing the standard to be applied only to contracts that were previously identified as leases applying IAS 17 and IFRIC 4 at the date of initial application. The Group also elected to use the recognition exemptions for lease contracts that, at the commencement date, have a lease term of 12 months or less and do not contain a purchase option ('short-term leases'), and lease contracts for which the underlying asset is of low value ('low-value assets').

The effect of adoption of IFRS 16 is as follows:

Summary of new accounting policies

Several other amendments and interpretations apply for the first time in 2019, but do not have an impact on the Consolidated Financial Statements of the Group.

The Group has not early adopted any amendment, standard or interpretation that has been issued but is not yet effective.

Standards issued but not yet effective

There were a number of standards and interpretations which were in issue at 31 December 2019 but were not effective at 31 December 2019 and have not been adopted for these Financial Statements. The Directors have assessed the full impact of these accounting changes on the Company. To the extent that they may be applicable, the Directors have concluded that none of these pronouncements will cause material adjustments to the Group's Financial Statements. They may result in consequential changes to the accounting policies and other note disclosures. The new standards will not be early adopted by the Group and will be incorporated in the preparation of the Group Financial Statements from the effective dates noted below.

The new standards include:

IFRS 3 Business Combinations1

IFRS 17 Insurance Contracts2

IAS 1 Presentation of Financial Statements1

IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors1

1 Effective for annual periods beginning on or after 1 January 2020

2 Effective for annual periods beginning on or after 1 January 2021

There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.

Going concern

The Directors have prepared the financial statements on a going concern basis. During the financial year ended 31 December 2019 the Group made a loss of Euro €6,587k and had net cash outflows from operating activities of €3,251k, however the Directors consider the use of the going concern basis to be appropriate. The Directors have prepared working capital projections which show that, along with cash balances on hand at 31 December 2019, and additional funding of £5.3m (before expenses) in January 2020 and £12.6m (before expenses) in May 2020 as result of share placings, which were subject to shareholder approval and certain events or conditions, the Group & Company will have sufficient funding to be able to continue as a going concern.

2. Summary of significant accounting policies (Cont'd)

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings. Subsidiaries are all entities over which the Group has the power to govern their financial and operating policies generally accompanying a shareholding of more than fifty per cent of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-Company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting. Under the equity method, the investment is initially recognised at cost, and the carrying amount is increased or decreased to recognise the group's share of the profit or loss of the associate after the date of acquisition.

The group's share of post-acquisition profit or loss is recognised in the income statement.

(a) Acquisition accounting

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration agreement. Acquisition related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On an acquisition by acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.

Investments in subsidiaries are accounted for at cost less impairment. Cost is adjusted to reflect changes in consideration arising from contingent consideration amendments.

(b) Associates

Associates are all entities over which the group has significant influence but not control or joint control as defined under IAS28. This is generally the case where the group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting (see equity method below), after initially being recognised at cost less any fair value adjustment.

Equity Method:

Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the group's share of the post-acquisition profits or losses of the investee in profit or loss, and the group's share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment.

When the group's share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the group and its associates and joint ventures are eliminated to the extent of the group's interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

2. Summary of significant accounting policies (Cont'd)

Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the group. The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in page 28.

(c) Group re-organisation

The Group re-organisation of common control transaction is scoped out under IFRS 3. The results of the Group and all of its subsidiary undertakings affected by the group re-organisation are accounted using the merger accounting method. The method

of accounting for such business combination is treated to take place before the transition of IFRS. The investment is recorded at the nominal value of the shares issued, together with the fair value of any additional consideration paid.

Merged subsidiary undertakings are treated as if they had always been a member of the Group. This treatment is permitted under the exemption in IFRS 1 to not restate acquisitions before transition.

The corresponding figures for the previous period include its results for that period, the assets and liabilities at the previous balance sheet date and the shares issued by the company as consideration as if they had always been in issue. Any difference between the nominal value of the shares acquired by the Company and those issued by the company to acquire them is taken to reserves as re-organisation reserve.

(d) Reverse acquisition accounting

The acquisition of Venn Life Sciences Holdings Plc (renamed Open Orphan Plc) and its subsidiaries by Open Orphan DAC on 27 June 2019 has been accounted using the principles of reverse acquisition accounting. Although the Group financial statements have been prepared in the name of the legal parent, Open Orphan Plc, they are in substance a continuation of the consolidated financial statements of the legal subsidiary, Open Orphan DAC. The following accounting treatment has been applied in respect of the reverse accounting:

The assets and liabilities of the legal subsidiary, Open Orphan DAC, are recognised and measured in the Group financial statements at the pre-combination carrying amounts, without restatement of fair value. The retained earnings and other equity balances recognised in the Group financial statements reflect the retained earnings and other equity balances of Open Orphan DAC immediately before the business combination and the results of the period from 1 January 2019 to the date of the business combination are those of Open Orphan DAC. However, the equity structure appearing in the Group financial statements reflects the equity structure of the legal parent, Open Orphan Plc (formerly Venn Life Sciences Holdings Plc), including the equity instruments issued in order to affect the business combination.

Foreign currency translation

(a) Functional and presentational currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic

environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Euro, which is the functional and presentational currency of the main operating entities.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement within 'administrative expenses', except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges.

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentational currency as follows:

2. Summary of significant accounting policies (Cont'd)

· assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

· income and expenses for each income statement are translated at average exchange rates; and

· all resulting exchange differences are recognised in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Segmental reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Directors who make strategic decisions.

Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation and any provision for impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the asset and bringing the asset to its working condition for its intended use.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only where it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Any borrowing costs associated with qualifying property, plant and equipment are capitalised and depreciated at the rate applicable to that asset category.

Depreciation on assets is calculated using the straight-line method or reducing balances method to allocate their cost to its residual values over their estimated useful lives, as follows:

Fixtures and fittings 20% -25%

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.

2. Summary of significant accounting policies (Cont'd)

(b) Trade secrets

Trade secrets, including technical know-how, operating procedures, contact network, methods and processes, acquired in a business combination are recognised at fair value at the acquisition date. Trade secrets have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of trade secrets over their estimated useful lives of 10 years and is charged to administrative expenses in the income statement.

c) Customer relationships

Contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The contractual customer relationships have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is

calculated using the straight-line method over the expected life of the customer relationship of 5 years and is charged to administrative expenses in the income statement.

d) Workforce

Workforce acquired in a business combination are recognised at fair value at the acquisition date. The workforce has a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of 5 years and is charged to administrative expenses in the income statement.

e) Intellectual property rights

Intellectual property rights relates to patents acquired by the Group. Amortisation is calculated using the straight-line method over the expected life of 10 years and is charged to administrative expenses in the income statement.

Impairment of non-financial assets

Assets that have an indefinite life such as goodwill are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount.

The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of the money and the risks specific to the asset which the estimates of future cash flows have not been adjusted.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in the prior period. A reversal of an impairment loss is recognised in the income statement immediately. If goodwill is impaired however, no reversal of the impairment is recognised in the financial statements.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through other comprehensive income (OCI), and fair value through profit or loss.

2. Summary of significant accounting policies (Cont'd)

The classification of financial assets at initial recognition depends on the financial asset's contractual cash flow characteristics and the Group's business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15. Refer to the accounting policies in note 38 Revenue from contracts with customers.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are 'solely payments of principal and interest (SPPI)' on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.

The Group's business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in four categories:

• Financial assets at amortised cost (debt instruments)

• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)

• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

• Financial assets at fair value through profit or loss

However, only Financial assets at amortised cost are discussed as all the Group's financial assets are measured at amortised cost.

Financial assets at amortised cost (debt instruments)

This category is the most relevant to the Group. The Group measures financial assets at amortised cost if both of the following conditions are met:

· The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows, and

· The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group's financial assets at amortised cost comprise of trade and other receivables and cash and cash equivalents.

Derecognition 

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e., removed from the Group's consolidated statement of financial position) when:

· The rights to receive cash flows from the asset have expired, OR

2. Summary of significant accounting policies (Cont'd)

· The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset

When the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets

Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.

From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit).

Financial liabilities

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

The Group's financial liabilities include trade and other payables and loans and borrowings.

Subsequent measurement

Loans and borrowings

This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss. This category generally applies to interest-bearing loans and borrowings. For more information, refer to Note 25.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

2. Summary of significant accounting policies (Cont'd)

Trade and other receivables

Trade receivables are initially recognised at fair value, being the original invoice amount, and subsequently measured at amortised cost less provision for impairment. A provision for impairment is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable. Trade receivables that are less than three months past due date are not considered impaired unless there are specific financial or commercial reasons that lead management to conclude that the customer will default. Older debts are considered to be impaired unless there is sufficient evidence to the contrary that they will be settled. The amount of the provision is the difference between the asset's carrying value and the present value of the estimated future cash flows. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the income statement within administrative expenses. When a trade receivable is uncollectible it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against administrative expenses in the income statement.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of less than three months, reduced by overdrafts to the extent that there is a right of offset against other cash balances.

For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and short-term deposits as defined above net of outstanding bank overdrafts.

Share capital

Ordinary Shares and Deferred shares are classified as equity. Proceeds in excess of the nominal value of shares issued are allocated to the share premium account and are also classified as equity. Incremental costs directly attributable to the issue of new Ordinary Shares or options are deducted from the share premium account.

Merger reserve

The reserve represents a premium on the issue of the ordinary shares for the acquisition of subsidiary undertakings. The relief is only available to the issuing company securing at least a 90% equity holding in the acquired undertaking in pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided by the issue to the issuing company of equity shares in the other company.

Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings

Borrowings are recognised initially at the fair value of proceeds received, ,net of transaction costs incurred. Borrowings are subsequently carried at amortised cost. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

Borrowing costs are expensed in the consolidated Group income statement under the heading 'finance costs'. Arrangement and facility fees together with bank charges are charged to the income statement under the heading 'administrative costs'.

Current and deferred income tax

The tax expense comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income where the associated tax is also recognised in other comprehensive income.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

2. Summary of significant accounting policies (Cont'd)

Deferred tax is disclosed in accordance with IAS 12 and recognised using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised in respect of all temporary differences except where the deferred tax liability arises from the initial recognition of goodwill in business combinations.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and tax losses, to the extent that they are regarded as recoverable. They are regarded as recoverable where, on the basis of available evidence, there will be sufficient taxable profits against which the future reversal of the underlying temporary differences can be deducted.

The carrying value of the amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all, or part, of the tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been substantively enacted at the balance sheet date.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

Right of use assets

The Group recognises right of use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right of use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right of use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value (i.e., below $5,000). Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. Short-term Lease payments expensed in year ended 31/12/19: €19k (2018: Nil).

2. Summary of significant accounting policies (Cont'd)

Employee benefits

Pension obligations

Group companies operate a pension scheme with defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity with the pension cost charged to the income statement as incurred.

The Group has no further obligations once the contributions have been paid.

Share-based payment

Where equity settled share options and warrants are awarded to directors and employees, the fair value of the options and warrants at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period and the corresponding entry recorded in the share-based payment reserve. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period.

Revenue recognition

(a) Revenue from Contracts

The group provides clinical consulting services and drug development services. Revenue from providing services is recognised in the accounting period in which the services are rendered. For fixed-price contracts, revenue is recognised based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided because the customer receives and uses the benefits simultaneously. This is determined in reference to the stage of completion which is measured by labour hours incurred to the period end as a percentage of the total estimated labour hours for the contract. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.

Some contracts include multiple performance obligations in the form of various service offerings. Where the contracts include multiple performance obligations, the transaction price will be allocated to each performance obligation measured by reference to labour hours incurred to the period end as a percentage of the total estimated labour hours to achieve a particular performance obligation. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

In case of fixed-price contracts, the customer pays the fixed amount based on a payment schedule. If the services rendered by the group exceed the payment, a contract asset is recognised. If the payments exceed the services rendered, a contract liability is recognised.

Terms and Conditions tend to vary from contract to contract and in general the payment terms tend to be between 30 and 90 days in The Netherlands and between 30 and 60 days in France and Ireland.

Some contracts include references to milestone events. Where no fee is payable until a milestone is achieved, revenue is recognised up to the value of the milestone event set to occur.

The group is applying practical expedient per IFRS 15 to not disclose the aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied (or partially unsatisfied) as of the end of the reporting period as the entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity's performance completed to date and recognise revenue in the amount to which the entity has a right to invoice.

2. Summary of significant accounting policies (Cont'd)

 (b) Interest income

Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable,

which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount.

(c) Royalty and license income

Royalty and license income are recognised on an accruals basis in accordance with the substance of the relevant agreements.

Dividend distribution

Dividend distributions to the Company's shareholders are recognised as a liability in the Group's financial statements in the period in which the dividends are approved by the Company's shareholders. Interim dividends are recognised when paid.

Exceptional items

These are items of an unusual or non-recurring nature incurred by the Group and include transactional costs and one-off items relating to business combinations, such as acquisition expenses.

3. Financial risk management

Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (foreign exchange risk and cash flow interest rate risk), credit risk, liquidity risk, capital risk and fair value risk. The Group's overall risk management programme focuses on the unpredictability of the financial markets and seeks to minimise the potential adverse effects on the Group's financial performance. The Group does not use derivative financial instruments to hedge risk exposures.

Risk management is carried out by the head office finance team. It evaluates and mitigates financial risks in close co-operation with the Group's operating units. The Board provides principles for overall risk management whilst the head office finance team provides specific policy guidance for the operating units in terms of managing foreign exchange risk, credit risk and cash and liquidity management.

a) Market risk

(i) Foreign exchange - cash flow risk

The Group's presentational currency is Euro although it operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily between Euro, USD and the GBP such that the Group's cash flows are affected by fluctuations in the rate of exchange between Euro and the aforementioned foreign currencies.

Management do not use derivative financial instruments to mitigate the impact of any residual foreign currency exposure not mitigated by the natural hedge within the business model. The Group does not speculate in foreign currencies and no operating Company is permitted to take unmatched positions in any foreign currency.

(ii) Foreign exchange - Fair value risk

Translation exposures that arise on converting the results of overseas subsidiaries are not hedged. Net assets held in foreign currencies are hedged wherever practical by matching borrowings in the same currency. The principal exchange rates used by the Group in translating overseas profits and net assets into Euro are set out in the table below.

GBP 0.88 0.88 0.85 0.90

3. Financial risk management (Cont'd)

As a guide to the sensitivity of the Group's results to movements in foreign currency exchange rates, a one cent movement in the GBP to Euro rate would impact annual earnings by approximately €1,000 due to natural hedging (2018 - €500).

(iii) Cash flow and fair value interest rate risk

The Group has assets in the form of cash and cash equivalents and limited interest-bearing liabilities which relate to long-term

borrowing. Interest rates on cash and cash equivalents are currently zero whilst interest rates on borrowings have been fixed and therefore expose the Group to fair value interest rate risk. The Group does not speculate on future changes in interest rates.

Where overseas acquisitions are made, it is the Group's policy to arrange any borrowings required in local currency.

It is the Group's policy not to trade in derivative financial instruments. The Group does not use interest rate swaps.

(b) Credit risk

Credit risk is managed on a Group basis, except for credit risk relating to accounts receivable balances. Each local subsidiary and operating business unit is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. It is the Group policy to obtain deposits from customers where possible, particularly

overseas customers. In addition, the Group will seek confirmed letters of credit for the balances due. Credit risk is managed at the operating business unit level and monitored at the Group level to ensure adherence to Group policies. If there is no independent rating, local management assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored.

Credit risk also arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers.

(c) Liquidity risk

Cash flow forecasting is performed in the individual operating entities of the Group and is aggregated by Group finance. Group finance monitors cash and cash flow forecasts and it is the Group's liquidity risk management policy to maintain sufficient cash and available funding through an adequate amount of cash and cash equivalents and committed credit facilities from its bankers. Due to the dynamic nature of the underlying businesses, the head office finance team aims to maintain flexibility in funding by keeping sufficient cash and cash equivalents available to fund the requirements of the Group.

The Group's policy in relation to the finance of its overseas operations requires that sufficient liquid funds be maintained in each of its territory subsidiaries to support short and medium-term operational plans. Where necessary, short-term funding is provided by the holding Company. In the UK, the working capital bank facility and the management of liquid funds in excess of operational needs are controlled centrally. Typically, excess funds are placed as short-term deposits, to provide a balance between interest earnings and flexibility.

The table below analyses the Group's non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

At 31 December 2019:

Borrowings 25 2,002 - - - 2,002

Leased Liabilities 37 522 385 771 - 1,678

At 31 December 2018:

Borrowings 25 1,360 - - - 1,360

3. Financial risk management (Cont'd)

(d) Capital risk management

The Group's objectives when managing capital are to safeguard the ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including "current and non-current borrowings" as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is the sum of net debt plus equity.

The Group is currently largely un-geared, having net cash at 31 December 2019. It is the stated strategy of the Group to grow both organically and through acquisition with acquisitions to be funded through a mixture of debt and equity funding.

4. Critical accounting estimates and judgements

In the process of applying the Group's accounting policies, management has made accounting judgements in the determination of the carrying value of certain assets and liabilities. Due to the inherent uncertainty involved in making assumptions and estimates, actual outcomes will differ from those assumptions and estimates. The following judgements have the most significant effect on the amounts recognised in the financial statements.

(a) Business combinations

The recognition of business combinations requires the excess of the purchase price of acquisitions over the net book value of assets acquired to be allocated to the assets and liabilities of the acquired entity. The Group makes judgements and estimates in relation to the fair value allocation of the purchase price. If any unallocated portion is positive it is recognised as goodwill. However, in applying the reverse acquisition accounting method this has necessitated the Group to recognise the unallocated portion as deemed acquisition costs as required under IFRS 3 - Business Combinations. See also note 2 (d) regarding reverse acquisition accounting treatment for most recent transaction.

(b) Impairment of goodwill and cost of investments

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates as set out in note 17. In addition, the Group has also considered the impairment of the investments in the subsidiaries undertakings as set out in note 18.

(c) Impairment of receivables

Trade and other receivables are carried at the contractual amount due less any estimated provision for non-recovery. Provision is

 made based on a number of factors including the age of the receivable, previous collection experience and the financial circumstances of the counterparty.

(d) Deferred tax assets

Deferred tax assets are only recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised. See note 24.

(e) Intangible assets

The Group amortises intangible assets over their estimated useful life. The useful lives of Trade Secrets, Customer relationships, Workforce and Intellectual Property Rights have been estimated by the Group as stated in note 2. The Group tests annually whether there is any indication that Intangible assets have been impaired.

(f) Revenue recognition

Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that give rise to the revision become known by management.

5. Segmental reporting

Management has determined the Group's operating segments based on the monthly management reports presented to the Chief Operating Decision Maker ('CODM'). The CODM is the Executive Directors and the monthly management reports are used by the Group to make strategic decisions and allocate resources.

The principal activity of the Group is that of a Clinical Research Organisation (CRO) providing a suite of consulting and clinical trial services to pharmaceutical, biotechnology and medical device organisations. As the majority of the Group's contracts are large, multi-country contracts, pulling resources from many different locations, the CODM considers this one business unit.

A second business unit relates to the development of a Data platform of rare disease patients in Europe.

Currently the key operating performance measures used by the CODM are Revenue and adjusted EBITDA (before exceptional items).

The segment information provided to the Board for the reportable segments for the year ended 31 December 2019 is as follows:

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 12.

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

The total number of employees at 31 December 2019 was 132 (2018 - 5).

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 effect of losses is discussed in note 24.

14. Loss per share

(a) Basic

Basic loss per share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year.

(b) Diluted

Due to the losses in the periods the effect of the share options and warrants noted below were considered to be anti-dilutive.

Details of share options are given in note 32. Details of warrants outstanding are given in note 26.

14. Loss per share (Cont'd)

15. Dividends

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

16. Property, plant and equipment

The Company had no property, plant and equipment at 31/12/2019. (2018: €1,000 -removed on transfer to Open Orphan plc).

17. Intangible fixed assets

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.

Goodwill is tested for impairment at the balance sheet date. The recoverable amount of goodwill at 31 December 2019 was assessed at €3,140k (2018: Nil) on the basis of value in use. An impairment loss was not recognised as a result of this review.

The key assumptions in the calculation to assess value in use are the future revenues and the ability to generate future cash flows. The most recent financial results and forecast approved by management for the next two years were used followed by an extrapolation of expected cash flows at a constant growth rate for a further seven years. The projected results were discounted at a rate which is a prudent evaluation of the pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the cash-generating units.

The key assumptions used for value in use calculations in 2019 were as follows:

The impairment review is prepared on the group basis rather than a single unit basis.

17. Intangible fixed assets (Cont'd)

The Directors have made significant estimates on future revenues and EBITDA growth over the next ten years based on the Group's budgeted investment in recruiting key employees and marketing the services.

The Directors have performed a sensitivity analysis to assess the impact of downside risk of the key assumptions underpinning the projected results of the Group. The projections and associated headroom used for the group is sensitive to the EBITDA growth assumptions that have been applied.

The Company has no intangible assets.

18a. Investments in subsidiaries

Investments in Group undertakings are recorded at cost, which is the fair value of the consideration paid. Following review an impairment provision of nil (2018: nil) has been made to the investment in subsidiaries.

The subsidiaries of Open Orphan Plc are as follows:

Venn Life Sciences Limited 1 100% (direct) Ordinary Intermediate holding company

Venn Life Sciences (Ireland) Limited 1 100% (indirect) Ordinary Group Service company

Venn Life Sciences B.V. 2 100% (indirect) Ordinary Clinical Research Organisation

Notes

1. Incorporated and registered in Ireland.

2. Incorporated and registered in the Netherlands.

3. Incorporated and registered in France.

4. Incorporated and registered in England and Wales

5. Incorporated and registered in Northern Ireland

6. Incorporated and registered in Germany

7. Incorporated and registered in Singapore

All the subsidiaries are included in the consolidation. The proportions of voting shares held by the parent Company do not differ from the proportion of Ordinary Shares held.

18b. Investments - Integumen Plc

Venn Life Sciences Limited's holding in Integumen PLC ordinary shares with a market value of €702k, at the date of the reverse takeover, were sold in July 2019 for €605k (net of commission).

18c. Other impairments of investments