Allied Minds is an IP commercialisation company with a concentrated investment portfolio focused on early-stage companies within life sciences and technology. Its portfolio companies are spin-outs from US federal government laboratories and universities.
Following its latest strategic review, Allied Minds has further concentrated its strategy around its three most promising investments (Federated Wireless, Spin Memory and Hawkeye 360). Each expects an important value inflection point in 2019 and anticipates further funding rounds in 2019/20. New investment for the group is on indefinite hold and HQ cash costs are being cut by a further $1.5–2.5m to ensure the group can follow its initial investments. Our estimate of FY18 NAV falls by c 33% to $277m (assuming a write-down of the healthcare assets SciFluor and Precision Biopsy pending external funding) – no major surprise given the lack of positive news on funding. The shares still trade at a 28% discount to FY18 NAV and, with clear milestones for the core assets in 2019, we are hopeful that the long downgrade cycle may now be set to reverse.
Investor sentiment towards the IPC sector in general has turned more negative with stocks typically trading at a meaningful discount to NAV. In 2019, investor frustration at a lack of material exits/value realisation across the sector are only likely to intensify leading to greater differentiation between stocks offering potential for meaningful exits in a realistic timeframe and those that do not.