IP Group — Deep dive into the life sciences portfolio

IP Group (LSE: IPO)

Last close As at 18/05/2024

GBP0.53

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Research: TMT

IP Group — Deep dive into the life sciences portfolio

We consider IP Group a compelling healthcare play with 31% of its end-2022 portfolio invested in life sciences companies, or 47% including Oxford Nanopore Technologies (ONT). These investments provide exposure to drugs developed for a variety of indications, including different types of cancer, autoimmune diseases (eg rheumatoid arthritis), as well as respiratory and kidney diseases. Investors may benefit from the platform established by management over the past decade and nurtured over many years, with nine life sciences companies expected to deliver major data over the next 24 months or so. Exposure to IP Group’s innovative portfolio is now available at a wide discount to NAV of c 60%.

Milosz Papst

Written by

Milosz Papst

Director, Financials

TMT

IP Group

Deep dive into the life sciences portfolio

Life sciences portfolio overview

Investment companies

10 May 2023

Price

52.5p

Market cap

£543m

Net cash (£m) at end-2022

160.1

Shares in issue

1.04bn

Code

IPO

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(5.9)

(20.8)

(32.1)

Rel (local)

(6.5)

(18.8)

(36.0)

52-week high/low

88.1p

52.5p

Business description

IP Group helps to create, build and support IP-based companies internationally. The group focuses on companies that meaningfully contribute to sustainable (renewable), healthier (life sciences) and tech-enriched (deep tech) futures. The group has an international footprint, with investment platforms in Australia, New Zealand, the United States and China, as well as the UK.

Next events

IP Group flagship event

May 2023

AGM and investor update

June 2023

Analysts

Milosz Papst

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5700

IP Group is a research client of Edison Investment Research Limited

We consider IP Group a compelling healthcare play with 31% of its end-2022 portfolio invested in life sciences companies, or 47% including Oxford Nanopore Technologies (ONT). These investments provide exposure to drugs developed for a variety of indications, including different types of cancer, autoimmune diseases (eg rheumatoid arthritis), as well as respiratory and kidney diseases. Investors may benefit from the platform established by management over the past decade and nurtured over many years, with nine life sciences companies expected to deliver major data over the next 24 months or so. Exposure to IP Group’s innovative portfolio is now available at a wide discount to NAV of c 60%.

Period end

Net cash*
(£m)

Portfolio fair value** (£m)

NAV
(£m)

NAV/share
(p)

Price/NAV
(%)***

06/21

249.4

1,246

1,440

135.4

(14)

12/21

270.1

1,508

1,738

167.0

(26)

06/22

191.6

1,266

1,414

136.7

(49)

12/22

160.1

1,259

1,376

132.9

(58)

Note: *Includes restricted cash but not funds held on behalf of Enterprise Investment Scheme/Venture Capital Trust investors. **Portfolio fair value includes US platform and other LP interests. ***Based on share price at respective period end.

Long-term thematic approach to life sciences

Thematically, the life sciences team invests in understanding disease, focusing on disease cure and prevention rather than simply treating symptoms, thereby helping to create healthier, rather than just longer, lives. Companies that exemplify this approach are Istesso (reprogramming cells to treat autoimmunity), Akamis Bio (reconditioning tumours to enhance cancer immunotherapy) and Genomics (redirecting patient behaviour to mitigate the risk of, for example, cardiovascular disease), while ONT offers the technology that life science researchers can use in the identification and analysis of diseases.

Inflection points anticipated across the portfolio

IP Group’s life sciences portfolio includes 14 companies currently conducting or preparing to commence clinical trials. Management can point to nine of these companies where major data is expected over the next two years: Istesso, Crescendo Biologics, Artios Pharma, Mission Therapeutics, Microbiotica, Akamis Bio, Oxular, Pulmocide and Enterprise Therapeutics. Additionally, Genomics will be supporting the UK government’s recently announced Our Future Health project, involving five million volunteers across the UK, providing it with unique access to one of the richest patient datasets as UK healthcare starts to shift its emphasis from curing illness to early-stage detection and prevention of underlying conditions.

Valuation: Sizeable downside protection

We estimate that (after accounting for the c 5% year-to-date fall in ONT’s share price), IP Group’s market capitalisation implies a c 65% discount to its end-2022 gross private portfolio value (excluding cash and deposits). For a detailed discussion of IP Group’s portfolio valuations, see our previous update note.

Investing for impact as well as financial return

IP Group offers liquid public market exposure to impactful private technology and life sciences companies from across the English-speaking world. Its university and investment networks are international, with a deep thematic focus on building market-leading global companies, with the potential to scale above US$1bn in value. The group’s permanent balance sheet capital provides the flexibility to build companies from inception to scale that a traditional fixed fund life structure (based on a general partner/limited partners relationship) typically lacks, while allowing the group to retain influential shareholdings. IP Group has refocused its capital allocation policy to drive returns from its priority companies, with management targeting an average gross annual return of 20% over the next five years. IP Group invests thematically, seeking to invest in companies with products and services that meaningfully contribute to a sustainable, healthier and tech-enriched future.

Exhibit 1: FY22 total portfolio by segment

Exhibit 2: Breakdown of FY22 NAV

Source: IP Group, Edison Investment Research

Source: IP Group, Edison Investment Research

Exhibit 1: FY22 total portfolio by segment

Source: IP Group, Edison Investment Research

Exhibit 2: Breakdown of FY22 NAV

Source: IP Group, Edison Investment Research

Additional liquidity buffer from last year’s debt raise

IP Group’s wide discount to NAV likely reflects pressure on venture capital (VC) deal volumes and valuations from macroeconomic headwinds, but also investor anxiety over the ability of listed VC investment companies to provide continued funding to their early-stage portfolios amid muted VC exit volumes. However, we note that IP Group’s gross cash and deposits stood at £241.5m (or 19% of total portfolio value) at end-2022. This is further assisted by the £60m undrawn credit and its quoted portfolio, valued at £228.7m at end-2022. IP Group’s portfolio holdings raised a total £1.0bn in 2022 (of which 9% was from IP Group), less than the £2.4bn in 2021 but similar to 2020 and above earlier years. Therefore, IP Group’s management considers most of the portfolio as being well funded, although it did not provide detailed information on the cash runway across its portfolio, which we think could further reassure investors that IP Group’s portfolio companies have a large cash cushion. That said, management highlighted during the recent valuation deep-dive presentation that most of the top 20 holdings (across the entire portfolio, not just life sciences) that need to raise funding still have a cash runway towards the end of 2024.

Portfolio comprises both IP Group and Touchstone assets

IP Group acquired Touchstone Innovations in 2017 in a share-for-share merger and related £207m placing, valuing the acquisition at approximately £500m. The acquisition significantly broadened the life sciences portfolio, meaning that IP Group remains life sciences led. However, the acquisition took time to bed-down, with the impact continuing to be felt in FY18 and FY19, with portfolio fair value and NAV both falling in each of those years as IP Group integrated the two portfolios and wrote down the value of certain investments. However, the success of the acquisition can be gauged by the fact that, as at FY21 year-end, Touchstone investments represented 50% (by number) of the group’s top 20 investments, though notably only one of the group’s top five holdings (Featurespace).

IP Group’s approach to life sciences

IP Group’s life sciences portfolio (excluding ONT, considered a strategic holding) comprises 33 companies valued at £390.8m as at end-2022, including nine of the group’s top 20 holdings (see Exhibit 3). That said, IP Group highlighted recently that it has consolidated its life sciences portfolio into around 20 ‘core’ holdings.

Exhibit 3: IP Group’s top 20 holdings (FY22)

Company name

Significant named co-investors

Primary valuation basis

Fair value of
holding (£m)

1

Oxford Nanopore

LSE quoted

Quoted (bid price)

205.5

2

First Light Fusion

OSE, Hostplus, Tencent, Braavos

Adjusted funding*

114.5

3

Istesso

Puhua Capital

DCF*

95.6

4

Oxbotica

Fundamental Insurance Investments, BT Technology Ventures, BGF, bp venture, Ocado

Recent financing (> 12 months)

65.9

5

Featurespace

Highland Europe, Insight, Invoke, MissionOG, TTV Capital, Robert Sansom, Merian Chrysalis

Revenue multiple*

64.1

6

Hinge Health

Atomico Advisors, Bessemer, Coatue, Insight, Lead Edge, Tiger Global

Adjusted funding*

53.6

7

Ultraleap

Cornes, Dolby Ventures, Hostplus, Mayfair Equity Partners

Adjusted funding*

37.9

8

Garrison Technology

BGF, Dawn Capital, NM Capital

Future market/commercial events*

27.7

9

Ieso Digital Health

Morningside, Molten Ventures

Recent financing (> 12 months)

21.8

10

Akamis Bio

SR One, Lundbeckfonden Ventures, Invesco, Sedgwick Yard, ARCH Venture Partners, Parket Institute for Cancer Immunotherapy, Westlake Village BioPartners

Adjusted funding*

21.3

11

Bramble Energy

HydrogenOne Capital, BGF Investments, Parkwalk Advisors

Recent financing (< 12 months)

20.9

12

Oxford Science Enterprises

Blue Pool, Fosun Pharma, Invesco, Lansdowne, Redmile, Sequoia, Temasek, Tencent

Recent financing (< 12 months)

20.6

13

Crescendo Biologics

Sofinnova Capital, BioDiscovery 5, Millennium Pharmaceuticals, Quan Venture Funds

Recent financing (< 12 months)

18.7

14

Hysata

Clean Energy Finance Corporation

Recent financing (< 12 months)

18.7

15

Artios Pharma

Arix Bioscience, BioDiscovery 5, SV Life Sciences, Pfizer, Merck Ventures

Recent financing (> 12 months)

18.3

16

Mission Therapeutics

Pfizer, Roche, Sofinnova Partners, SR One

Recent financing (> 12 months)*

18.1

17

Nexeon

Invesco, Nortrust, SKC, Wacker Chemie

Recent financing (< 12 months)

16.6

18

Salt Pay

Scottish Mortgage, Tiger Global, Social Capital, Hedosophia

Adjusted funding*

16.5

19

Microbiotica

Tencent, Fleurie Invest, British Patient Capital, Cambridge Innovation Capital

Recent financing (< 12 months)

16.1

20

Oxular

Forbion, NeoMed, V-Bio Ventures

Recent financing (> 12 months)

15.9

Top 20

 

 

888.3

Source: IP Group accounts. Note: Life sciences companies are shaded. *Valuation established by third-party valuation specialists.

Life sciences: Framework for a healthier future

Thematically, IP Group’s life sciences team invests in understanding disease, focusing on disease cure and prevention rather than investing in companies that simply treat symptoms, thereby helping to create healthier, rather than just longer, lives.

The four pillars of IP Group’s approach are:

1.

A better understanding of the root drivers of disease, such as the human microbiome, with the group invested in Microbiotica, and genetics, where Oxford Nanopore Technologies provides tools for reading the genomes of both patients and pathogens.

2.

Reprogramming cells to change their behaviour from the diseased mode to healthy mode. A company that exemplifies this would be Istesso, which focuses on reprogramming cells to treat autoimmunity.

3.

Reconditioning tissues to improve response to existing therapies. IP Group has invested in Akamis Bio, which has technologies that recondition tumours to enhance cancer immunotherapy.

4.

Redirecting patient behaviour to reduce risk. Genomics redirects patient behaviour to mitigate the risk of, for example, cardiovascular disease.

Snapshot of the life sciences portfolio

Portfolio holdings that characterise IP Group’s four-pillar approach to life sciences include:

Understanding: Oxford Nanopore Technologies

IP Group was Oxford Nanopore Technologies’ founding shareholder in 2005 and held a 14.4% stake in the company in the run up to the initial public offering (IPO). ONT successfully completed its IPO in September 2021, allowing IP Group to realise £84m on its investment by selling around one-fifth of its stake. This brought IP Group’s total partial realisation from ONT to £106m, already more than its total investment of £77m. IP Group held a c 10% stake in the company, valued at £205.5m, at end-2022, which (despite the 65% share price drop in 2022 to 246.5p vs the IPO price of 425p) implies a healthy gross multiple on invested capital of c 4.0x (of which 1.4x is realised).

ONT reported on 21 March 2023 that its Life Science Research Tools (LSRT) revenue in FY22 stood at £146.8m, which is within its FY22 guidance of £145–160m issued in March 2022 (even if at the lower end of the range). This implies 30% year-on-year underlying growth (excluding the foreign exchange impact and revenues from the Emirati Genome Program and COVID-19 sequencing). IP Group’s management highlighted that most of ONT’s peers reduced their sales growth guidance for FY22 to below 10% or withdrew it altogether throughout last year. ONT also reported an LSRT gross margin of 56.3% (vs 53.8% in FY21) and an adjusted EBITDA loss of £78.6m (vs £57.7m in FY21). Its cash, cash equivalents and other liquid investments amounted to £558.0m at end-2022 compared to £618.2m at end-2021. ONT’s management now guides to LSRT revenue growth of 16–30% on a constant currency basis in FY23, or more than 30% on an underlying basis both in FY23 and in the medium term. LSRT gross margin guidance now stands at more than 60% in FY23 and more than 65% in the medium term. The company continues to target adjusted EBITDA break-even by FY26.

Exhibit 4: ONT’s LSRT revenues (£m)

Source: Oxford Nanopore Technologies

ONT remains a core, strategic holding for the group with significant potential upside as the company fulfils its growth and profitability ambitions over the coming years, as illustrated by the average current broker target price of c 354p, based on Refinitiv data, versus ONT’s current share price of c 234.8p.

Reprogramming: Istesso

IP Group has a 56.4% stake in Istesso, valued at £95.6m. IP Group first invested in Modern Biosciences (later renamed Istesso) in 2005. It is now the group’s third most valuable holding after Oxford Nanopore and First Light Fusion. Istesso is developing new treatments for autoimmune disease by reprogramming the metabolism of immune cells, with the potential to benefit patients with diverse conditions such as rheumatoid arthritis, multiple sclerosis and ulcerative colitis. At the end of August 2022, Istesso announced that it had commenced a Phase IIb trial for rheumatoid arthritis – a randomised, multi-centre, double-blind parallel group, placebo-controlled trial investigating the efficacy and safety of multiple doses of the metabolic reprogramming agent MBS2320. The study is to consist of a 12-week treatment period and will enrol subjects in multiple countries in Europe and Latin America. Istesso expects results from the study in H124. A Phase III trial would then start in 2025 provided the Phase II results are positive. Moreover, Istesso received FDA’s Fast Track and orphan drug designations for MBS2320 for the treatment of patients with idiopathic pulmonary fibrosis.

Reconditioning: Pulmocide

IP Group’s holding in Pulmocide is an example of an investment in the development of novel drugs with the potential to save lives in areas of unmet medical need: in this case, invasive respiratory infection. Pulmocide is looking to treat common acute and chronic respiratory tract infections associated with serious complications. With expertise in the identification of compounds with optimal characteristics for lung delivery, unlike currently available treatments for fungal infections in the lung, Pulmocide’s approach to drug development provides targeted delivery to the lung so that infections can be treated with minimal unwanted systemic effects.

Pulmocide raised a US$52m Series C extension round in December 2022 (bringing the total round size to US$147.5m) to advance the company’s lead asset PC945 through a global Phase III registration programme in patients with invasive pulmonary aspergillosis who have failed prior therapy. PC945 is a potent, novel triazole antifungal that has been specifically designed for use as an inhaled therapy. Phase III trials started in 2022, with registration with the FDA anticipated in 2025.

Redirecting: Genomics

Genomics is a spin-out from the University of Oxford, focused on bringing the genomics revolution to healthcare. Building on the broad experience of the founders, the company has developed a unique rapid genetic screening platform that enables a prevention-first approach to healthcare by using its risk prediction tools to ensure more people are on the right screening, diagnosis and treatment pathways.

In October 2022, Genomics announced a partnership with Our Future Health to generate polygenic risk scores (PRS) as part of the research programme’s aim to find new ways to prevent, detect and treat common diseases such as dementia, diabetes, heart disease, stroke and cancer across the UK population.

Our Future Health will be the UK’s largest ever health research programme, collecting information from millions of volunteers to create a detailed picture of the health of the UK population. By helping researchers to develop new ways to detect disease at an earlier stage and identify people who are at higher risk of disease, Our Future Health is designed to improve prevention and treatment and ultimately deliver better health outcomes. In particular, the programme aims to support the use of genomics in disease prevention and population health by enabling the development and testing of new early diagnostic technologies and preventive interventions.

The calculation of PRS is an important part of the programme as these enable personalised approaches to prevention, and to healthcare in general. PRS-powered tests and tools can identify people at elevated risk of disease and match them to the right prevention, screening or treatment pathways, with the aim of preventing disease altogether or catching it early when outcomes are better. Genomics has recently demonstrated the accuracy of its approach across 53 different common diseases and traits, with scores for these to be calculated within the programme.

Genetics is an important risk factor for many common diseases, with mutations in critical genes often associated with rare diseases. However, for many common diseases, small variations in DNA in up to millions of positions add up to affect the risk of developing a disease. These variations are insignificant on their own, but their effects can be combined and measured in a PRS to give a more accurate prediction of risk.

In this way, PRS-powered tests and tools can identify people who may be at risk of disease, many of whom are currently invisible to the NHS, and put them on the treatment pathways that will be most effective for them.

FY22 life sciences portfolio review

During 2022, the life sciences portfolio (excluding Oxford Nanopore, which fell 64% in the period) lost 10% of fair value, or £41.8m. This was led by declines in publicly listed portfolio companies, most notably Diurnal (£13.7m), Centessa (£14.8m) and Athenex (£7.2m). This reflected the sell-off in the biotechnology/life sciences sector alongside the broader stock markets (growth stocks in particular), as well as company-specific issues. The latter include reimbursement and pricing setbacks relating to Diurnal’s endocrine drug franchise (IP Group decided to sell the business during the period), as well as Centessa’s decision to discontinue development of its Phase III drug lixivaptan.

Meanwhile, Hinge Health (one of IP Group’s three unicorns and a provider of digital solutions for chronic musculoskeletal pain) continues to significantly grow revenues and expand its customer base, according to IP Group’s management. Nevertheless, IP Group marked down its investment by 27% compared to Hinge Health’s US$6bn valuation in a funding round in October 2021 (translating into a £9.9m valuation loss for IP Group). This was part of a broader valuation adjustment exercise to reflect the softening valuations of late-stage VC businesses across the market. For a discussion of further developments within the main life sciences holdings, see below.

IP Group continues to make new investments, including a £3.5m Series A financing for GripAble, an Imperial College-originated company developing digitally-enabled rehabilitation programmes and devices for people with neurological and musculoskeletal conditions, and Kynos Therapeutics, an Edinburgh University spinout developing novel drugs against kynurenine 3-monooxygenase, a pivotal enzyme in the mediation of autoimmunity and cancer. In addition, the group invested £2.4m into Abliva, a Stockholm-listed biotech company developing novel agents for the treatment of rare mitochondrial diseases. Abliva’s lead drug, KL1333, has been approved by the US FDA to enter a potentially pivotal study in primary mitochondrial disease, supported by a £16m funding round that closed in May 2022.

Unfactored potential: The nascent nine

While the stock market environment for growth stocks has been undoubtedly trickier in 2022 (and so far in 2023) than 2021, we believe that the positive fundamentals of the life sciences portfolio still hold true and that this bodes well for continued clinical performance in 2023 and 2024, meaning that we should expect continuing progress and major milestones to be achieved across the portfolio (see Exhibit 5 for an overview of IP Group’s current therapeutics portfolio).

Exhibit 5: Major holdings in IP Group’s therapeutics portfolio at end-2022

Source: IP Group

We set out below nine life sciences companies, each with major milestones that are expected to be achieved over the next two years, meaning either a valuation inflection point (ie results from a clinical trial), a potential exit to a major pharmaceutical company or, in due course, a Nasdaq IPO.

In particular, investors should note that:

Many initial investments were made over a decade ago: investors are benefiting from a significant period of nurturing, development and investment by IP Group.

Investors are benefiting from IP Group’s expertise and structured investment approach: the life sciences team comprises many doctors, PhD holders and other specialists, investing in cutting-edge science, with a long-term payback.

Companies are funded to the next inflection point: much of the heavy lifting has already been completed, with the majority of the below nine life sciences companies financed through to their next inflection point, according to IP Group’s management.

There is potential for valuations to increase considerably: although positive outcomes are far from guaranteed for any given company, the valuation often increases significantly on a positive outcome, with the potential for M&A or an IPO to follow.

It is a broad portfolio: the risk of any one company not achieving key milestones is mitigated through the benefit of a portfolio approach, with the nine companies identified (in the life sciences portfolio alone) providing the prospect of a strong portfolio performance. The aggregate carrying value of the portfolio (as at 31 December 2022, excluding ONT) was over £220m.

In for free: as our valuation analysis shows, IP Group’s share price does not capture much of the more speculative value beyond the largest assets and cash, providing a platform for potential outperformance on the upside.

The nine life sciences companies (sorted by carrying value) are:

Istesso (end-2022 carrying value: £95.6m; IP equity stake: 56.4%) – see above for details.

Akamis Bio (£21.3m; 25.0%), a clinical-stage biotechnology company developing a novel platform technology (T-Sign) for the targeted delivery of therapeutic transgenes to solid tumours. The company has appointed a new CEO, Dr Howard Davis, to establish its US presence to support preparations for late-stage clinical development, expanded partnerships and US-focused financing activities. In January 2023, it announced that it raised US$30m through a convertible bond issue, co-led by ARCH Venture Partners, the Parker Institute for Cancer Immunotherapy and Westlake Village BioPartners. Its two main Phase I trials are for NG-350A (an immune-stimulatory tumour gene therapy) and NG-641 (a stromal-targeted tumour gene therapy). In January 2023, the company provided an update on the trials, highlighting that both NG-350A and NG-641 have shown promising preliminary evidence of clinical activity across more than 200 patients with epithelial-derived solid tumours, including dose-dependent elevation of systemic immune response cytokines and dose-dependent increase in CD8+ immune cell infiltrates within the targeted solid tumour tissue.

Crescendo Biologics (£18.7m; 14.6%), which announced in January 2022 a US$750m collaboration with BioNTech, designed to combine Crescendo’s Humabody technology with BioNTech’s mRNA platform in the creation of novel therapeutic agents for the treatment of patients with cancer and other diseases. Crescendo received US$40m upfront (cash, equity and research funding), and will be eligible to receive development, regulatory and commercial milestone payments up to a total of more than US$750m, plus tiered royalties on global net sales. The initial term of the discovery collaboration is three years.

Artios Pharma (£18.3m; 7.1%), a clinical-stage biotech company pioneering the development of novel small molecule therapeutics that target the DNA damage response (DDR) process to treat patients with a broad range of cancers. In April 2021, Artios entered into a collaboration agreement with Novartis to discover and validate next-generation DDR targets to enhance Novartis’s Radioligand Therapies, leading to a US$153m Series C investment round in July 2021. In August 2022, Artios Pharma initiated a Phase II study with ART4215, a small molecule inhibitor of polymerase theta (Polθ) in combination with talazoparib, an oral poly (ADP-ribose) polymerase (PARP) inhibitor in an expansion study for the treatment of BRCA deficient breast cancer. Phase I safety and tolerability data is expected in H123. Moreover, in February 2023, it initiated a Phase II randomised trial of ART0380 in combination with gemcitabine in patients with platinum-resistant ovarian cancer.

Mission Therapeutics (£18.1m; 18.4%) – in January 2023, the company successfully completed its first Phase I clinical assessment for its lead deubiquitylating enzyme (DUB) programme, MTX652, addressing kidney disease. Mission Therapeutics is currently prioritising four lead DUB target programmes that are based on extensive research around the ~100 human DUBs and their market opportunities.

Microbiotica (£16.1m; 18.0%), which develops microbiome-based therapeutics and biomarkers. In March 2022, it announced a £50m (US$67m) Series B financing round (according to the company, the largest microbiome-related financing in Europe to date). The proceeds will be used to progress Microbiotica’s two lead oral live bacterial therapeutics, MB097 and MB310, for inflammatory bowel disease and immune-oncology to Phase Ib clinical studies. In April 2023, the company announced that it has entered into a clinical trial collaboration with Merck Sharp & Dohme (MSD, a subsidiary of Merck & Co), with Microbiotica conducting a Phase Ib clinical trial for MB097 in combination with KEYTRUDA (pembrolizumab, MSD’s anti-PD-1 therapy) in melanoma patients with primary resistance to an anti-PD-1 containing immunotherapy.

Oxular (£15.9m; 25.6%), a retinal therapeutics development company that has raised US$37m in March 2021, led by Forbion, to fund further Phase II human clinical studies of its lead asset, OXU-001, for the treatment of diabetic macular edema (DME). Proceeds from the financing have been used to accelerate development of Oxular’s early product pipeline, as well as building its team to support future clinical trials and expanded R&D activities. In January 2023, Oxular announced that the US FDA accepted its Investigational New Drug Application for OXU-001 for DME, which enables the advancement of the OXEYE Phase II trial. The company plans to progress OXU-003, a novel treatment for retinoblastoma, into Phase II human clinical studies in 2023, with Phase II clinical results for its lead asset, OXU-001, expected by the end of 2024.

Pulmocide (£14.7m; 12.2% – see above for details.

Enterprise Therapeutics (£7.8m plus deferred consideration of £12.5m; 21.9%), a biopharmaceutical company dedicated to the discovery and development of novel therapies to improve the lives of patients suffering from respiratory diseases. Enterprise has developed a pipeline of novel low molecular weight compounds, with its lead drug, ETD001, which targets the EnaC ion channel in the airway epithelium, expected to enter Phase II clinical trials in 2023.

Exhibit 6: Financial summary

Year end 31 December

£m

FY17

FY18

FY19

FY20

FY21

FY22

INCOME STATEMENT

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

Portfolio returns

97.4

(46.1)

(44.6)

228.0

495.3

(309.1)

Fee income

6.1

9.9

8.6

6.2

13.6

7.1

Revenue

 

 

103.5

(36.2)

(36.0)

234.2

508.9

(302.0)

Cost of sales

-

-

-

-

-

-

Gross Profit

103.5

(36.2)

(36.0)

234.2

508.9

(302.0)

Carried interest charge

(1.3)

1.1

1.3

(14.3)

(17.2)

(12.0)

Operating costs

(37.6)

(51.7)

(39.4)

(29.4)

(33.1)

(27.4)

Investment and acquisition costs

(9.1)

-

-

-

-

-

Normalised operating profit

 

 

55.5

(86.8)

(74.1)

190.5

458.6

(341.4)

Exceptionals

-

(203.2)

-

-

-

-

Share-based payments

(2.4)

(1.9)

(2.3)

(2.9)

(2.6)

(2.9)

Reported operating profit

53.1

(291.9)

(76.4)

187.6

456.0

(344.3)

Net Interest

0.3

(1.8)

(2.4)

(1.5)

(1.4)

0.8

Profit Before Tax (norm)

 

 

55.8

(88.6)

(76.5)

189.0

457.2

-

Profit Before Tax (reported)

 

 

53.4

(293.7)

(78.8)

186.1

454.6

(340.6)

Reported tax

-

(0.1)

(0.1)

(0.7)

(5.3)

(1.0)

Profit After Tax (norm)

55.8

(88.6)

(76.6)

188.3

451.9

(339.6)

Profit After Tax (reported)

53.4

(293.8)

(78.9)

185.4

449.3

(344.5)

Minority interests

(3.7)

0.1

3.4

-

(1.1)

-

Net income (normalised)

52.1

(88.5)

(73.2)

188.3

450.8

(339.6)

Net income (reported)

49.7

(293.7)

(75.5)

185.4

448.2

(344.5)

Basic average number of shares outstanding (m)

704

1,059

1,059

1,062

1,060

1,034

EPS - basic normalised (p)

 

 

7.4

(8.4)

(6.9)

17.7

42.5

(32.8)

EPS - diluted normalised (p)

 

 

7.4

(8.4)

(6.9)

17.6

41.9

(32.8)

EPS - basic reported (p)

 

 

7.1

(27.7)

(7.1)

17.5

42.3

(33.3)

Dividend (p)

-

-

-

-

1.48

1.22

Revenue growth (%)

(135.0)

(0.6)

(750.6)

117.3

0.0

Gross Margin (%)

100.0

100.0

100.0

100.0

100.0

100.0

Normalised Operating Margin (%)

53.6

239.8

205.8

81.3

90.1

113.0

Net overheads (operating costs less fee income)/NAV (%)

(2.1)

(3.4)

(2.7)

(1.7)

(1.1)

(1.5)

BALANCE SHEET

Fixed Assets

 

 

1,325.1

1,147.7

1,068.5

1,186.1

1,539.5

1,266.2

Intangible Assets

212.7

0.7

0.4

0.4

0.4

0.4

Tangible Assets

1.6

1.5

1.1

0.8

0.3

0.4

Investments

1,099.8

1,128.2

1,045.6

1,162.7

1,445.9

1,165.8

Investments in Associates

11.0

17.3

21.4

22.2

92.9

99.6

Current Assets

 

 

334.6

225.6

227.2

289.2

339.8

291.6

Stocks

8.3

6.6

32.3

18.9

17.9

50.1

Cash & equivalents

231.3

129.0

121.9

127.6

105.7

88.7

Deposits

95.0

90.0

73.0

142.7

216.2

152.8

Current Liabilities

 

 

(26.0)

(31.9)

(41.4)

(26.4)

(34.1)

(23.2)

Creditors

(19.7)

(16.5)

(26.0)

(11.0)

(18.7)

(16.9)

Lease liabilities

-

-

-

-

-

-

Short term borrowings

(6.3)

(15.4)

(15.4)

(15.4)

(15.4)

(6.3)

Long Term Liabilities

 

 

(125.2)

(123.2)

(112.4)

(117.0)

(107.1)

(158.5)

EIB loans

(97.7)

(82.4)

(67.1)

(51.9)

(36.4)

(75.1)

Other borrowings

(13.1)

(23.0)

(26.0)

(32.9)

(18.7)

(19.5)

Lease liabilities

-

-

-

-

-

-

Other long term liabilities

(14.4)

(17.8)

(19.3)

(32.2)

(52.0)

(63.9)

Net Assets

 

 

1,508.5

1,218.2

1,141.9

1,331.9

1,738.1

1,376.1

Minority interests

4.0

3.9

0.5

0.5

(3.1)

(5.6)

Shareholders' equity

 

 

1,504.5

1,214.3

1,141.4

1,331.4

1,735.0

1,370.5

Hard NAV per share (p)

 

 

122.5

115.0

107.8

125.3

167.0

132.9

CASH FLOW

Op Cash Flow before WC and tax

60.3

(75.7)

(72.6)

191.9

460.2

(340.8)

Revaluation of investments held at fair value through P&L

(94.0)

46.1

44.6

(228.0)

(495.4)

309.1

Working capital

10.2

7.8

14.1

(5.9)

30.0

(3.5)

Exceptional & other

1.1

(3.1)

(3.4)

14.5

15.2

9.7

Net operating cash flow

 

 

(22.4)

(24.9)

(17.3)

(27.5)

10.0

(25.5)

Capex

(1.6)

(0.6)

(0.7)

-

(0.2)

(0.3)

Acquisitions/disposals

106.4

(4.8)

(9.3)

(4.5)

(10.1)

(4.6)

Equity financing

109.8

(100.9)

(63.0)

(68.6)

(131.6)

(97.4)

Dividends

-

-

-

-

(15.0)

(12.3)

Other

9.3

29.0

83.2

106.3

124.9

121.1

Net Cash Flow

201.5

(102.2)

(7.1)

5.7

(22.0)

(19.0)

Opening net debt/(cash)

 

 

(97.4)

(222.3)

(121.2)

(112.4)

(203.0)

(270.1)

FX

0.2

(0.1)

0.0

0.0

0.1

0.0

Other non-cash movements

(76.8)

1.2

(1.7)

84.9

89.0

(91.0)

Closing net debt/(cash)

 

 

(222.3)

(121.2)

(112.4)

(203.0)

(270.1)

(160.1)

Source: IP Group accounts, Edison Investment Research

General disclaimer and copyright

This report has been commissioned by IP Group and prepared and issued by Edison, in consideration of a fee payable by IP Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by IP Group and prepared and issued by Edison, in consideration of a fee payable by IP Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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