Imperial Innovations Group Regulatory News (IVO)

16 October 2013

Imperial Innovations Group plc

Portfolio value up 21% to £188.2m - £95.2m invested over last three years

Imperial Innovations Group plc (AIM: IVO, "Innovations" or "the Group"), a leading technology commercialisation and investment group, has published its results for the year ended 31 July 2013.

Highlights

· Portfolio value up 21% to £188.2 million (2012: £155.6 million)

· £95.2 million invested over last three years

· £22.2 million (2012: £37.9 million) invested in 28 companies (2012: 29 companies)

· A number of portfolio companies being positioned for sale or IPO

· Significant progress with Circassia. Commenced phase III trials for cat allergy treatment. Positive results from phase II house dust mite allergy treatment trial and post year end from phase II grass allergy trial

· Six new companies added to the portfolio: two from Cambridge, two from Imperial College London and one each associated with UCL and Oxford

· Available cash resources of £80 million including £30 million from European Investment Bank ("EIB") at 31 July 2013

· Net assets of £230.5 million at 31 July 2013 (2012: £228.2 million)

· Pre-tax profit of £3.8 million (2012: £5.1 million)

· Net fair value gains £10.8 million (2012: £14.7 million)

· Dr Nigel Pitchford and Tony Hickson appointed directors. Nigel becomes Chief Investment Officer while Tony remains as Managing Director of Technology Transfer - see separate release

Martin Knight, Chairman of Innovations, said:

"We made good progress over the course of the last year. Our portfolio of companies has added substantial value and our investments are now valued at £188.2 million. Two of the key strengths of our business model were particularly in evidence.

"Firstly we continued to invest across the spectrum from seed investing through the early, middle and late stages of the growth of our investee companies. Our ability and willingness to fund our investee companies from the very outset right through to their maturity is a material strength and remains core to our investment case.

"Secondly, our portfolio now has demonstrable strength in depth at all of these stages, especially at the late stage. Because of this, we are confident in the prospects for future value uplifts in our portfolio.

"Our portfolio of investee companies continues to grow in stature and value. We have an admired executive team with a deep understanding of how to commercialise early stage technology, whilst our leading management teams are running the businesses established from technology created in the UK's leading research intensive universities.

"This is a potent and exciting combination which we believe will deliver good value, particularly as a number of our leading portfolio companies are approaching value creation events such as trade sale or IPO."

A complete copy of the Annual Report and Accounts for the year ended 31 July 2013 can be found at http://www.imperialinnovations.co.uk/annualreport2013.pdf 

Enquiries:

Overview

The Group has had a solid year, with the valuation of portfolio companies increasing to £188.2 million (2012: £155.6 million). Portfolio uplifts from fair value gains were £13.2 million, reflecting good progress and in particular the achievement of key milestones by Circassia. These were offset by impairments of £2.4 million. Taking into account investments during the year of £22.2 million and gross realisations of £0.4 million, the Group's portfolio value increased by £32.6 million.

The Group has taken the decision to report on the progress of its holdings by grouping them into four sectors. This reflects the increasing strengths and expertise developing within the Group.

The Group's top 30 investments represent a total carrying value of £179.2m. 46.5% is represented by companies in the therapeutics sector, including the Group's leading asset, Circassia. 25.7% are in the engineering sector, including the Group's second-largest investment in Nexeon. The Group's medtech and medical devices companies represent 20%. The information & communications technology (ICT) sector is a small and growing part, representing 7.8%.

The Innovations' business model has yet to realise its full potential in terms of overall financial performance. This is largely because, at the financial year end, all of the portfolio companies are privately held, with only modest value progression recorded in funding rounds.

The key value uplift will come at trade sale or when portfolio companies IPO. Whilst a number of investee companies will be considering strategic options including sale or flotation, the Group is not compelled to make exits at sub-optimal times in order to raise cash.

Innovations' overall financial position was further strengthened when in July 2013 it entered into agreement with the EIB for a 12 year loan of £30 million. The Group drew the first tranche of £15 million in July, which, together with existing cash, provides cash available of £65.6 million at 31 July 2013. The second £15 million can be drawn down over the next 18 months.

Outlook

Innovations is focused on delivering capital into its most promising portfolio companies and to maximise their value. Its major assets continue to make good progress as they push the boundaries of their technologies or move towards commercialisation.

Innovations' strategy is to:

· Build value in the spin-out companies through identifying and supporting management talent, industry networking and market development;

· Build the scale of the most promising investments through mergers and collaborations;

· Launch new companies where it perceives a real commercial opportunity; and

· Provide capital sufficient to allow its companies to move forward in measurable steps.

The Group is confident that the businesses it supports are strong, with experienced boards and cutting edge technologies addressing attractive, global markets. A number of the later stage investments, including Oxford Immunotec, Stanmore, PSE and Permasense, have strongly growing revenues and are expanding internationally.

Developing the right investment syndicate and selecting appropriate partners to help realise the full potential of the portfolio companies remains a core skill of the Group.

The Board is looking forward to the coming year as a number of the portfolio companies are being positioned for either a sale or listing.

Operational review

Therapeutics

The Group continues to prove its ability to identify strong therapeutic assets early in development, build high quality investment syndicates to provide substantial funding where necessary, and develop those assets into leading businesses. In addition to developments in the advanced therapeutics portfolio such as Circassia's announcement of long-term symptom reduction in its phase II house dust mite treatment trials, the Group has also made early stage investments in therapeutic assets such as Kesios Therapeutics, ensuring the pipeline for the future.

Investments

During the year, the Group invested £9.6 million in therapeutics companies including:

· An investment of £2.5 million in PolyTherics, as part of a £13.5 million share issue by the company to fund its merger with Antitope Limited to form an enlarged biopharmaceuticals group. The Group holds a 28.2% stake in the enlarged business as at July 2013 and has invested a total of £7 million. The first tranche of £11.6 million was completed in July 2013 with the balance in September 2013;

· A £3.5 million tranche of investment in Autifony;

· A £2.0 million tranche of investment in TopiVert;

· An investment of £0.9 million in Nascient; and

· A seed investment of £0.3 million in Calcico Therapeutics.

Portfolio updates

Circassia is developing treatment products for allergies to common allergens, including cat, house dust mite, ragweed and grass. Multinational, phase III trials of its ToleroMune® cat allergy treatment were started in October 2012, recruiting around 1,200 subjects across North America and Europe. In February 2013, follow-up data in a phase II trial of the cat allergy product showed that the ToleroMune® therapy maintained a significant improvement in patients' symptoms two years after the start of treatment.

In discussions with the US Federal Drug Administration at the end of phase II trials for the cat allergy product, the FDA accepted that the company's planned clinical testing would be sufficient for product registration filing, an important factor for Circassia's commercial development.

The company made several senior appointments in the year, including appointing Stewart Sharpe, formerly Head of Commercial and Business Development at OSI/Prosidion, as VP Commercial Operations and Dr Jean-Jacques Garaud, former Head of Roche Pharma Research and Early Development, as non-Executive Director. Both bring more than 25 years' experience to Circassia.

Post year-end, in September 2013, Circassia made a number of important announcements. The company announced the appointment of Chairman Dr Francesco Granata, who has over 30 years' experience of the international pharmaceutical industry, most recently as Executive Vice President at Biogen Idec with responsibility for global commercial and medical affairs operations. Circassia also appointed the CEO of Durata Therapeutics Inc, Paul R Edick, to the Board.

Circassia also announced that it has achieved successful results in a phase II clinical study of its house dust mite allergy treatment. Patients who received four doses of the treatment over 12 weeks had significantly improved allergy symptoms one year after the start of the trial compared with placebo. This met the trial's long-term primary endpoint. These results are significant because they reflect the significant long-term improvements seen by patients in Circassia's cat allergy treatment trials, which were also achieved with a short, four-dose course.

Also post year-end, Circassia announced successful results from a large phase II study of its grass allergy treatment. In the study, patients who received a short course of treatment prior to the pollen season had significantly improved symptoms at the end of the season, compared to those on placebo.

Circassia's net carrying value increased by £8.5 million to £45.1m to reflect a fair value gain based on progress in trials to the financial year end.

PsiOxus Therapeuticsis a biotechnology company focused on developing cancer-killing or oncolytic vaccines. In September 2012 it launched a phase I/II clinical trial of its ColoAd1 oncolytic vaccine. ColoAd1 is a highly potent, broad spectrum anti-cancer therapeutic capable of destroying tumour cells at minute concentrations. The Evolve study (Evaluating Oncolytic Vaccine Efficacy) has recruited and begun dosing patients to evaluate ColoAd1 for the treatment of metastatic solid tumours in 126 patients at sites across Europe. Initial results of the study are expected by the end of 2013.

During the year, PsiOxus presented data from the phase I component of the study that showed evidence of virus replication within tumour sites following intravenous delivery. In June 2013, PsiOxus began a second trial of ColoAd1 in order to compare the effectiveness of direct intra-tumoral injection with intravenous injection in patients with non-metastatic colorectal cancer. The study is designed to provide better understanding of the mechanism of action of ColoAd1.

The company received a $3.3 million contract in January 2013 from the US Defense Threat Reduction Agency for the development of agents to enhance the body's immune response to vaccines.

In March 2013, PsiOxus completed enrolment for its phase II clinical trial for MT-102, a small molecule therapeutic for the treatment of cancer cachexia, a wasting syndrome characterised by loss of muscle and fat that occurs in the majority of patients with serious illnesses such as cancer, heart failure, chronic obstructive pulmonary disease or renal failure. The randomised, double-blind, placebo controlled study will examine reversal of weight loss and improvement in functional ability and quality of life in 87 patients with Stage III or IV lung or colorectal cancer.

PolyTherics is a leading service and technology provider enabling the development of better biopharmaceuticals. In July 2013, Polytherics acquired Cambridge-based immunogenicity assessment and protein engineering company Antitope in a cash and shares transaction which closed alongside the issue of £13.5 million of new equity in Polytherics. The company now has over 80 employees based at three sites in London, Warwick and Cambridge.

During the year, Celtic Pharma Holdings exercised its option for a licence to the TheraPEG technology for the development of a long-acting form of the Factor VIII for the treatment of haemophilia A. Celtic Pharma Holdings have reported the successful outcome of preclinical trials of TheraPEG versions of the three blood clotting factors - Factor VIIA, Factor VIII and Factor IX following both intravenous and subcutaneous delivery.

PolyTherics has expanded its London operations in response to interest in its ThioBridge antibody-drug conjugate (ADC) technology and has entered into a collaboration with Biotecnol for the development of Tribody-drug conjugates. Having acquired the PolyPEG technology as part of PolyTherics acquisition of Warwick Effect Polymers Limited in January 2012, PolyTherics announced that this technology is now under evaluation by Top 5 pharmaceutical companies.

Since the end of the year, PolyTherics has strengthened its management team with the appointment of former Innovations CFO, Julian Smith, as PolyTherics' Chief Financial Officer. PolyTherics' net carrying value increased by £2.2 million to reflect a fair value gain based on progress to date and completion of the fourth licence agreement.

Cell Medicais a biotechnology company developing cellular therapeutics for infectious diseases and cancer. During the year, the company progressed with its programme of clinical trials, treating its first paediatric patient in its ASPIRE trial (for the prevention of adenovirus infection in paediatric patients following bone marrow transplant) and completing patient recruitment for its cytomegalovirus study (for the prevention of cytomegalovirus infection in patients following bone marrow transplant). The company has also made a number of senior management appointments following an expansion of its operations in the US.

Post period end, in September 2013, Cell Medica announced that it had opened a manufacturing facility in Berlin-Buch, Germany. The facility will initially focus on the manufacture of Cell Medica's Cytovir CMV product for the restoration of cytomegalovirus immunity in patients who have undergone bone marrow transplant.

Autifony is developing therapeutics to treat hearing disorders and other disorders of the central nervous system. During the year, Autifony launched a Phase I study of its lead product (AUT00063), a first-in-class Kv3 potassium channel modulator for the treatment of hearing loss and tinnitus. The 60 patient, randomised, placebo-controlled trial will be conducted in the UK and will assess the safety, tolerability and pharmacokinetics of orally administered single and multi-dose regimens of the product.

In addition to the launch of its first trial, Autifony raised further funds as an extension of its Series A funding round (announced 2011). Pfizer Ventures, the venture capital arm of Pfizer Inc., invested £5.0 million in the round, bringing the total raised by the company to £15.75 million.

Autifony also began a £2.75 million collaboration with the Universities of Manchester and Newcastle to develop a Kv3 potassium channel modulator for the treatment of schizophrenia, part-funded by a £1.9m grant from the Technology Strategy Board's Biomedical Catalyst scheme.

New therapeutics companies

Calcico Therapeutics is an early-stage drug discovery business focused on the discovery and development of novel small molecule therapeutics targeting store-operated ion channels for autoimmune and inflammatory disorders. Professor Anant Parekh, University of Oxford, is Calcico's scientific founder. The company was incorporated in 2012 with investment from Advent Venture Partners. The Group has invested an initial £0.3m.

Medtech & medical devices

Strong progress has been made by a number of the Group's holdings in this sector. Veryan has achieved a CE Mark for its lead product and is continuing its progress towards commercialisation, while Oxford Immunotec has continued to increase its revenue generation and has expanded its operations to include a number of countries worldwide.

Investments

During the year, the Group invested £4.8 million in Medtech and Medical Devices companies, including:

· £0.5 million in PsychologyOnline, a provider of clinically-proven online cognitive behavioural therapy for the treatment of depression. The investment gives the Group a 20.9% stake in the business, which has raised a total of £1.6 million since its foundation in 2010;

· A £2.3 million tranche of investment in Oxford Immunotec as part of the fundraising that was announced in 2012;

· £1.0 million in Stanmore Implants; and

· £0.7 million in Abingdon Health.

Portfolio updates

Veryan Medicalis a specialist in vascular disease and has made good progress with its BioMimics 3D™ vascular stent product, receiving CE Mark status in November 2012. The stent is designed for use in arteries in the leg, and improves blood-flow characteristics in a stented vessel by mimicking the natural helical geometry of the body's own vessels.

Clinical trials of the product with 50 patients were presented at the VIVA (Vascular InterVentional Advances) meeting in Las Vegas, US, in October 2012, showing that all treated patients remained clear of vessel damage related to the introduction of the stent, with no deaths or amputations. After 12 months, vessel damage was lower than in the control group, with no stent fracture in either group. The trial will continue to yield data for two years, supporting the process of commercialisation.

During the year, nine month data presented by Professor Peter Gaines, of the Sheffield Vascular Institute (UK), showed that 98% of patients treated with Veryan's BioMIMICS 3D Stent remained free from clinically driven target lesion revascularisation (re-occurrence of the issue which required a stent be placed) compared to 92% of patients in the control group.

Oxford Immunotecis a medical diagnostics company developing novel tests for various diseases using patented T-cell measurement technology. During the year it has made further progress in developing its market worldwide. In October 2012, regulatory approval was gained from the Japanese Ministry of Health, Labour and Welfare for the company's leading T-SPOT.TB test; this was followed by reimbursement approval in November 2012. Japan is an important market due to high levels of TB, and is now among more than 40 countries worldwide in which the T-SPOT.TB test can be sold.

Oxford Immunotec made good commercial progress during the year; in 2012, its revenues grew 67% to £13.4 million. Oxford Immunotec drew down its second tranche of funding from the Group in December 2012, taking the total investment from the Group in the company to £6.06 million; the Group holds an 8% stake in the business. During the year the Group invested £2.3 million and this resulted in a fair value uplift of £0.6 million.

Stanmore Implants, a specialist orthopaedic implants developer and manufacturer, appointed a new CEO during the year. Michael R. Mainelli succeeded Brian Steer as President and Chief Executive Officer of the company in March 2013. Michael joined the company from Active Implants Corporation, which was developing a novel meniscal implant, and has previously held roles at Stryker Spine and Stryker Japan having begun his career at General Electric Company. During the year the Group invested £1.0 million and this resulted in a fair value uplift of £0.9 million.

New Medtech companies

PsychologyOnline provides online cognitive behavioural therapy for the treatment of depression. Launched in 2010, its process has been proven in clinical trials which showed that the number of sessions required for patient recovery was substantially reduced when compared to traditional face to face therapies. PsychologyOnline has raised a total of £1.6 million from investors to date. The Group has invested £0.5 million and holds a 20.9% stake in the business.

ICT/digital/communications

The Group has a number of holdings in the field of big data analytics, the diverse nature of which demonstrate the range of possible applications of big data. For instance, Acunu uses large amounts of automatically generated data (such as is output by manufacturing plants) to create simple to use dashboard interfaces that enable users to spot problems and improve efficiency, whereas Semetric gathers vast amounts of social data from across the internet and provides this to record labels and music marketers, enabling them to assess the impact their artists are making.

Investments

During the year, the Group invested £4.6m in ICT/Digital/Communications companies, including:

· £1.0 million in Cambridge Communication Systems, the company developing a unique small-cell microwave backhaul system for mobile telecommunications. This was the Group's second investment in the company and resulted in a fair value uplift of £0.3 million;

· £1.5 million in data collection and analytics software business, Semetric. Founded by Imperial College London students, Semetric launched in 2008;

· £1.3 million in Acunu, a data analytics business, as part of a £3.6 million round. Acunu has raised a total of £6.6 million in venture finance; and

· £0.8 million in Cortexica.

Portfolio updates

Cortexica is a visual search and image recognition company developing products for retail and other applications. It provided image recognition technology for the eBay Motors app in the US, UK and Germany on both iOS and Android. New companies have continued to sign up for Cortexica's open API and progress is being made to port part of the recognition process onto the mobile device for major chip and handset manufacturers.

Cortexica is becoming known for its 'Find Similar' technology in the fashion industry, which enables users to find similar items based on an image of a piece of clothing. It was recently profiled in a major UK daily newspaper, featured on the BBC News and Australia's Channel 9 and awarded a prize at this year's 70,000 strong Mobile World Congress, where it won a prize for a session in which the audience voted for the technology which would have the biggest impact over the next decade.

Cortexica has signed its first two customers for 'Find Similar' and is currently working to secure a number of international players in the fashion industry.

New ICT companies

Acunu is a big data analytics business based on algorithms developed at Cambridge University Computer Lab. Its focus is on creating real-time solutions for operational intelligence based on rapid analysis of large amounts of data. Acunu has raised a total of £6.6 million, of which the Group has invested £1.3 million.

Semetric is a data analytics business focused on the entertainment industries. Its first product, Musicmetric, gathers and analyses huge amounts of data on audience interaction from across the internet enabling record labels and music marketers to understand the impact artists have. The Group has invested £1.5 million in the company.

YoYo is a mobile payments platform launched post year-end in August 2013. The company is developing a new smartphone application that unites customer loyalty programmes and payment, enabling simpler, more streamlined transactions that benefit both customer and retailer. The company has raised £0.8 million to date, of which the Group has invested £0.3 million.

Engineering

A number of the Group's holdings in this sector have an interest in UK manufacturing, with Nexeon and Plaxica both operating plants in the UK.

Investments

During the year, the Group invested £3.3 million in engineering companies including:

· £1 million in Econic Technologies, a developer of novel catalytic processes for the manufacture of polymers using waste carbon dioxide;

· £0.4 million in Impression Technologies, the aluminium forming technology business. Based on technology developed at Imperial College London, the company launched in late 2012;

· £1.0 million in Plaxica;

· £0.7 million in EVO Electric; and

· £0.1 million in Aqdot.

Portfolio updates

Nexeon is continuing to develop its 20 tonnes per annum pilot plant in Abingdon. This facility will provide for a scale-up from batch to continuous operation of its manufacturing processes. Though commissioning was scheduled for Autumn 2013, the company has slowed the project in order to ensure design is fully optimised. This plant will provide valuable data and know-how, reducing risk as Nexeon scales up to a commercial scale production unit. The silicon produced is to be used as the anode material in next generation rechargeable batteries.

The strategic relationship with Wacker Chemie, announced in February 2013, has been progressing well, with Nexeon benefiting from the manufacturing expertise of its German partner. Nexeon signed a second joint development agreement for its rechargeable battery technology with a global consumer electronics company.

Post year end, in August 2013, Nexeon appointed a new Chief Technology Officer, Tsuyonobu Hatazawa, from Sony, where he was responsible for the development of gel electrolytes and polymer Li-ion batteries.

Plaxica has made significant progress, having built and successfully operated its demonstration plant for Optipure® technology. Their low cost lactic acid technology has been developed to the point that they are planning the building of a second demonstration plant for the process. There is a high level of interest in the technology from potential licensees seeking lower cost lactic acid from non-food based feedstocks.

Post year end, Plaxica raised £8.0 million in a Series C round in which the Group participated alongside Invesco Perpetual and NESTA Investments. The additional funding will allow Plaxica to construct its lactic acid demonstration plant and to progress a number of important licensing and partnership discussions.

During the year, Plaxica demonstrated technical progress by producing D-Lactic Acid to specification from its demonstration plant in Wilton-on-Tees. Plaxica also appointed Paul Mulhollem to its board of directors. Paul was previously President and COO of Archer Daniels Midland Company (ADM) and has held a number of leadership positions in global agribusinesses including Cargill Inc.

New engineering companies

Impression Technologiesis a provider of specialist high-temperature metal forming technologies that enable the production of cost-effective, lightweight components. It has developed a process for forming sheet aluminium into complex, deep-drawn forms which retain excellent material properties. The Group has invested £0.4 million in the company and holds a 39% stake.

AQDOT is a spin-out company based on the cutting-edge research of the Department of Chemistry, University of Cambridge. It has developed a novel fabrication technology for smart microcapsules that possess customisable properties to suit the needs of a variety of industries. The Group has invested £0.1 million in the business.

Financial report

Summary

The Group's financial position remains healthy. Net assets at the period end of £230.5 million (2012: £228.2 million) increased by £2.3 million from 31 July 2012.

Cash and short term liquidity investments remained strong at £65.6 million (2012: £43.9 million) following receipt of the £37.0 million final instalment of committed deferred receipts from the January 2011 equity raise and following receipt in July 2013 of the first tranche of £15.0 million of a £30.0 million loan from the EIB.

The Group generated a pre-tax profit of £3.8 million in the year to 31 July 2013 (2012: £5.1 million).

Net cash collected from realisations was £0.2 million (2012: £1.6 million).

The Group's rate of investment in its portfolio companies was £22.2 million across 28 portfolio companies (2012: £37.9 million). This takes the total invested since the IPO in July 2006 to £143.1 million and the total raised by the Group's portfolio companies to over £474 million.

The Group acquired a £30 million loan facility from the EIB. The loan is composed of two equal £15 million tranches and, as noted above, in July 2013 the first tranche was drawn down. The purpose of the loan is to provide 50% of the funding for investment in biotech and therapeutics investments.

Cash and short-term liquidity investments

The Group ended the financial year with total cash and short-term liquidity investments of £65.6 million (2012: £43.9 million), comprising £58.6 million of cash and £7.0 million of short-term liquidity investments.

Including the undrawn second tranche of the EIB loan, which can be drawn down over the next 18 months, the total available for investment and working capital would be £80.6 million (2012: £80.9 million).

The increase in the cash and short term liquidity investments balance of £21.7 million from the opening balance of £43.9 million can be analysed as follows.

The Group invests cash surplus to working capital requirements in short-term deposits, classified as short term liquidity investments, across a number of banks with a focus on capital preservation rather than interest earned. The Group has no foreign currency deposits.

Revenues, cost of sales and operating costs

Total revenues fell to £3.3 million (2012: £4.3 million) reflecting lower corporate finance fees as a result of a lower rate of investment. Licence and royalty revenue was £1.4 million (2012: £1.6 million). Revenue from services was £1.6 million (2012: £1.4 million). Corporate finance fees were £0.3 million (2012: £1.2 million), and were primarily generated by the Group-led funding rounds.

Cost of sales, which mainly arises from the revenue-sharing arrangement with Imperial College London, fell to £0.8 million (2012: £1.2 million) primarily reflecting the lower licence income.

In April 2012, Pfizer gave notice that they are seeking an acquirer for, and discontinuing R&D of products relating to, Thiakis. The Group has considered the impact of this on the probability of milestone receipts and has fully written off the anticipated contingent consideration of £3.5 million.

The Group's carried interest plan, which is a long-term employee incentive scheme, generated an accounting write back of £2.4 million (2012: a charge of £3.4 million). This reflects the impact of the Thiakis write off. There is no cash payment due to the members of the scheme until the Group has made substantial future realisations. This is described more fully in the Directors' remuneration report.

As a result of an internal reorganisation other administrative expenses increased from £9.2 million to £9.5 million, mostly reflecting the associated one off reorganisation costs. Additionally, administrative expenses also include costs of £1.2 million (2012: £0.9 million) incurred on filing patents and protecting the as yet unexploited intellectual property emanating from Imperial College London. The increase reflects the desire of the Group to protect its intellectual property assets.

Finance income was £1.1 million (2012: £2.2 million) and includes £0.4 million (2012: £1.3 million) finance income on the unwinding of the deferred equity raise proceeds which is described more fully in note 8.

The Group reported a pre-tax profit of £3.8 million (2012: profit £5.1 million).

Basic earnings per share was 4.6p (2012: 8.1p). The Board is not recommending the payment of a dividend (2012: £nil).

Investment portfolio performance

During the year, the Group's investment portfolio grew from £155.6 million spread across 82 companies, to £188.2 million across 92 companies. Portfolio companies raised more than £61.4 million in cash (2012: £109 million) from all sources of investment during the year, and secured total cash and investment commitments of over £98.1 million in total (2012: over £147 million).

The fair value of the Group's holdings increased by £10.8 million after associated revenue sharing obligations.

(Based on International Private Equity and Venture Capital Valuation Guidelines (IPEVCVG).)

Investment and divestment activity

The Group made £22.2 million of investments to fund 28 technology companies in its portfolio (2012: £37.9 million to fund 29 technology companies). The early stage nature of many of the technology companies is such that investments are made on a milestone/tranche basis that matches the companies' need for cash with the achievement of agreed milestones. This provides investment security for the companies and more control over the Group's cash payments to the portfolio.

Additional investment commitments undrawn at the year-end amounted to £14.7 million (2012: £14.3 million). Additionally, some investments are made as convertible loans and at the year-end there was a total of £18.4 million (2012: £15.9 million) which is included in fixed-asset investments.

The receipt of further consideration from prior year's asset sales was £0.4 million (2012: £2.2 million).

At the start of the period, the Group was holding a total of £3.5 million as discounted deferred proceeds on the sale of the Thiakis investment asset. This amount was held within other receivables. During the period the receivable was fully written off as described below. The total corresponding risk unadjusted potential proceeds therefore fell to nil (2012: £13.1 million).

1 Revenue share represents amounts payable to Imperial College London, other third parties and the Appointee Directors' Pool on revenue and on the future realisation of investments (based on fair values).

Net cash outflow from investments in trade investments in the year was £22.0 million (2012: £36.3 million).

Portfolio company creation

At 31 July 2013, the Group held equity stakes in 92 companies (2012: 82 companies). The movement reflects disposals, formations and equity acquired less dissolutions and liquidations during the year.

Portfolio company overview

The Group has invested a total of £147.8 million in companies which have been active since the IPO in July 2006. This includes investment of £4.7 million prior to the IPO and the balance of £143.1 million has been invested since the IPO. Since the January 2011 £140 million equity raise, the weight of capital has been focused towards the later stage companies. Of the £143.1 million invested, 83% has been focused on 20 companies where we have invested over £2 million with the balance invested in smaller companies.

The Group has a total of £124.4 million invested capital at work in the portfolio of currently active technology companies, £118 million invested in the top 20 companies, and £6.4 million in the remaining 25 smaller companies.

The table below sets out the top 20 technology companies in the portfolio by value, including contingent deferred consideration, to illustrate the spread of the investments held and their relative carrying value. All of the carrying values listed below reflect the net fair value of the investment, being the gross value of the holding less the attributable revenue-sharing obligations associated with each investment. The percentage of issued share capital represents the absolute percentage of the shares held, without reflecting any revenue-sharing obligations. The percentage holdings in these companies are increasing in line with the Group's strategy to hold larger stakes in its portfolio companies.

1 Currently active companies.

2 The Group's investment in Molecular Vision is included in the Abingdon Health investment following its acquisition of 50% of the Molecular Vision equity.

3. On 18 December 2008, the Group divested its holding in Thiakis. Under the sales agreement, the Group could receive cash payments of £22.2 million (net of transaction costs). After revenue-sharing obligations of £6.1 million payable to Imperial College London and other research sponsors, the net receipt to the Group would be £16.1 million. The Group had invested a total of £1.5 million in Thiakis.

As at 31 July 2009, the first payment of £3.3 million had been received and after revenue-sharing obligations, the net receipt was £2.9 million. The estimated fair-value uplift of the remaining contingent deferred consideration, after risk adjustment using industry-standard criteria and discounting for time at 12% per annum, resulted in a fair value uplift in the 12 months ended 31 July 2009 of £6.0 million.

At each accounting reference date the fair value of the contingent deferred consideration was adjusted to reflect the probability of completion of the associated milestones and the timing of any cash receipts. As future payments are a contractual entitlement, the contingent deferred consideration was reflected in the balance sheet within trade and other receivables.

In April 2012, Pfizer gave notice that they are seeking an acquirer for, and discontinuing the Research & Development of products relating to, Thiakis. The Group considered the impact of this on the probability of milestone receipts and partially impaired this contingent consideration in the prior year. Following conclusion of discussions with Pfizer, the Group has fully written off the contingent consideration.

Deferred payment obligations

The Group has a Technology Pipeline Agreement with Imperial College London which stipulates the terms for sharing revenue generated from the commercialisation of Imperial College London intellectual property which is assigned to Imperial Innovations Limited.

Fixed-asset investments

All equity investments held by the Group are defined as financial assets under International Accounting Standard (IAS) 32 'Financial Instruments: Presentation' and are classified as financial assets held at fair value under IAS 39, 'Financial Instruments: Recognition and Measurement'. This includes all University Challenge Seed Fund equity investments.

Under IAS 39 the carrying value of all investments is measured at fair value with changes in fair value between accounting periods being charged or credited to the Consolidated Statement of Comprehensive Income.

Key performance indicators

1. The growth in the value of the portfolio of technology companies

Measured in terms of the net value and net gain / (loss) arising in the value of the portfolio using established valuation methodologies based on International Private Equity and Venture Capital Valuation Guidelines (IPEVCVG).

2. The investments made in the portfolio of technology companies

Measured in terms of total cash raised by the portfolio together with the investments made and commitments entered into.

This gives an indication of the appetite for funding within the portfolio, and demonstrates progress in the portfolio. During 2013, total investments of £22.2 million were completed by the Group (2012: £37.9 million).

Outstanding commitments due under convertible loans and milestone investments were £14.7 million (2012: £14.3 million). The companies in the portfolio raised cash in excess of £61.4 million (2012: £109 million) and total cash and commitments in excess of £98.1 million (2012: £147.2 million).

3. Potential value available from the existing portfolio

Measured by the number of accelerated and organic growth technology companies in the portfolio. Accelerated growth will be achieved through attraction of entrepreneurs, management and directors together with the investment of equity capital facilitating relationships with commercial partners.

At the end of July 2013, there were 92 technology companies in the portfolio (2012: 82) with active management of 35 accelerated growth companies, 27 organic growth companies under asset management and 30 smaller asset companies managed less actively or projects being formed.

The organic growth and smaller asset portfolios relate only to companies associated with Imperial College IP, whereas the accelerated growth portfolio comprises companies associated with all four University partners.

4. Exits achieved

Measured to give an indication of cash return to sustain future investments and because it is the ultimate indicator of the success of the business. However, the Group's strategy for its most valuable assets has evolved such that the Group selectively grows these into bigger companies to optimise value. This impacts on the timing of realisations, and also increases the size of potential future realisations.

During the year, net cash realised from disposals after accounting for revenue sharing obligations and excluding deferred consideration and retentions carried in trade and other receivables but including cash receipts from prior year debtors and deferred consideration was £0.2 million (2012: £1.6 million).

Total gross disposals were £0.4 million (2012: £1.8 million) and net realisations after accounting for the payments due under the revenue-sharing obligations to Imperial College London and others were £0.2 million (2012: £1.4 million).

5. The health and quality of the intellectual property pipeline, the flow of opportunities and the rate of commercialisation of intellectual property emanating from Imperial College

Demonstrated through the number of inventions disclosed, the patents filed and proof of concept projects undertaken at Imperial College London, and tracked through the internal Work in Progress list that captures opportunities arising from the Group's other University Partners. The Group also tracks in detail spin-out portfolios linked to each university partner. The Group's deal flow does not arise from one single source, but a varied mix including: its collaborations with Imperial College London, Cambridge Enterprise, UCL Business and Oxford Spin-out and Equity Management (OSEM); its management; its Entrepreneurs in Residence and Venture Partners; and its relationship with local investment networks.

Invention disclosures are ideas that are recorded and assessed as having commercial merit on which the technology transfer team conducts initial work.

Of the 386 invention disclosures this year (2012: 377), 306 came from Imperial College London and 80 came from external sources. The Group continues to expect the pipeline to remain "steady" at this level.

Registered intellectual property is an important component in the Group's commercial package and our patent portfolio provides the feedstock for licensing and the kernel for the creation of spin-outs emanating from Imperial College. However, models evolve allowing for the exploitation of many technologies not underpinned by patents - for example software, which is covered by copyright. During the year, the Group filed 43 new patent applications (2012: 51 patent applications).

The Group made 32 IP agreements during the year, an indicator of growth in the portfolio of licences. However, this number should be considered in the knowledge that the financial returns are likely to be skewed, with a small number of IP agreements generating the bulk of the returns. A few high value licences will therefore represent a more valuable asset than many low value ones - and at this early stage it is difficult to identify which will be successful and generate the highest returns.

6. New companies added to the Group's portfolio from all research institutions

The Group considers that the addition of new companies receiving investment to its portfolio, either through its technology transfer activities with Imperial College; investments arising from its relationships with Cambridge Enterprise, Oxford Spinout Equity Management and UCL Business; or from other technology focused research establishments to be a key indicator for the future prospects of the Group. The Group has moved away from measuring the companies funded with management teams to encompass all new companies funded in the year. This reflects the expanded relations with the other research institutions.

The Group added 11 companies (2012: 11 companies) to its portfolio during the year.

These statements were approved by the Board of Directors on the 16th of October 2013.

Consolidated statement of comprehensive income

For the year ended 31 July 2013

Consolidated balance sheet

As at 31 July 2013

Consolidated cash flow statement

For the year ended 31 July 2013

Consolidated statement of changes in equity attributable to equity holders of the Group

Treasury shares with a cost of £1,581,000 (2012: £976,000) have been netted against retained earnings representing shares held by the Employee Benefit Trust.

Notes

1. Basis of preparation

The preliminary announcement for the year ended 31 July 2013 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as at 31 July 2013. The financial information contained in this preliminary announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The financial information has been extracted from the financial statements for the year ended 31 July 2013, which have been approved by the Board of Directors. The report of the auditors on the financial statements for the year ended 31 July 2013 was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006. The financial statements will be delivered to the Registrar of Companies after the Annual General Meeting. The financial statements for the year ended 31 July 2012, upon which the auditors reported without qualification, have been delivered to the Registrar of Companies.

A complete copy of the Annual Report and Accounts for the year ended 31 July 2013 can be found at http://www.imperialinnovations.co.uk/annualreport2013.pdf

2. Segmental Reporting

For the year ended 31 July 2013 and the year ended 31 July 2012, the Group's revenue and profit was derived from its principal activity within the United Kingdom.

The Group has adopted IFRS 8, "Operating Segments". IFRS 8 defines operating segments as those activities of an entity about which separate financial information is available and which are evaluated by the Chief Operating Decision Maker to assess performance and determine the allocation of resources. The Chief Operating Decision Maker has been identified as the Board of Directors. The Directors are of the opinion that under IFRS 8 the Group has only one operating segment, being Technology Transfer, Incubation and Investment. The Board of Directors assess the performance of the operating segment using financial information which is measured and presented in a manner consistent with that in the financial statements.

The Group has 2customers that account for £1.2 million (36%) of the Group's revenue (2012: £1.5 million (35%) relating to two customers, £0.75 million each).

Breakdown of the revenue from all sources is as follows:

3. Investments

Net change in fair value of investments held at fair value through profit or loss

Net change in fair value for the year represents the change in fair value taking into account the movement in the revenue share charge on these fair value movements. Net change in fair value of investments of £10,794,000 (2012: £14,691,000), as set out on the face of the Consolidated Statement of Comprehensive Income, represents the change in net fair value of £10,781,000 plus £13,000 (2012: £14,689,000 plus £2,000) to reflect final adjustments on realisations before revenue share with third parties as summarised below:

Included within the net fair value movement recognised in the Consolidated Statement of Comprehensive Income are provisions for liabilities and charges. These are made up of the revenue sharing provision which represents a fair value estimate of monies due to Imperial College London and other third parties such as co-funders of research work and the Appointee Directors' Pool. The provision will be payable upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London's right to call for a transfer of its share of the Group's holding in investments. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy.

The following tables in this note set out how the net fair value recognised in the Consolidated Statement of Comprehensive Income for each of the periods is generated, along with the year end position with respect to the carrying value of investments.

The table below sets out the movement in the balance sheet value of the investments from the start to the end of the year, setting out the fair value gains and losses together with any investments and disposals.

The table below sets out the movement in the balance sheet value of the provision for liabilities and charges arising on revenue sharing obligations from the start to the end of the year, setting out any fair value gains and losses together with the impact arising as a result of disposals.

The table below sets out the movement in the net carrying value of investments from the start to the end of the year, setting out the fair value gains and losses together with any investments and disposals.

Net change in fair value of investments held at fair value through profit or loss - continued

1 The provision for liabilities and charges represents monies due to Imperial College London upon the eventual realisation of investments held by the Group under the revenue sharing arrangements of the Technology Pipeline Agreement (TPA) and in recognition of Imperial College London's right to call for a transfer of its share of the Group's holding in these particular investments. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy. Deferred consideration represents monies due to Imperial College London upon the eventual realisation of the Imperial Innovations LLP assets acquired from Imperial College London as part of the private share placement in 2005.

Additionally, monies are due to parties in the Appointee Directors' Pool in respect of the Imperial Innovations LLP assets acquired as part of the stepped acquisition in 2005 and to other third parties. These are included in 'Revenue Sharing Other' in the table below. The timing and amount of the realisation of the provision is dependent on the timing of the disposal of investments, which is uncertain as this is determined by the investment strategy.

The following table analyses the provision by obligation:

4a. Impairment of contingent proceeds

In April 2012, Pfizer gave notice that they were seeking an acquirer for, and discontinuing R&D of products relating to Thiakis. On 16 March 2013, Pfizer gave notice that the company is seeking to negotiate with the vendors of the products relating to Thiakis, of which the Group is a party, for the return of the assets. The Group has been negotiating with Pfizer to re-acquire these assets. The Group has considered the impact of this on the probability of milestone receipts and has written off this contingent consideration by £3.5 million (2012: £2.3 million), resulting in a fall in the carrying value, which was held in other receivables, to £nil (2012: £3.5 million).

4b. Carried interest plan (release)/charge

The Group's carried interest plan generated an accounting release of £2.4 million (2012: charge of £3.4 million). This reflects the write off of the Thiakis contingent consideration (see note 4a). Until the fair value of the portfolio of companies has exceeded the investments made by the Group plus 8% interest compounded there is no accounting liability. Last year, for the first time, this target was exceeded resulting in an accounting charge. Once future disposals are made they are distributed in the following order: repayment of monies back to the Group, repayment of an 8% hurdle back to the Group, then a catch up until an 85%:15% investor:executive ratio has been achieved and then a range of rates from 85% - 89.5% : 15% - 10.5% thereafter. Accordingly there is no cash payment due to the members of the scheme until the Group has ceased investment in the companies in the relevant portfolio and has made future realisations.

4c. Other administrative expenses

5. Earnings per share

Basic earnings per share is calculated by dividing the profit for the financial year by the weighted average number of Ordinary Shares in issue during the year. Diluted earnings per share is computed by dividing the profit for the financial period, by the weighted-average number of Ordinary Shares outstanding and, when dilutive, adjusted for the effect of all potentially dilutive shares, including share options and partly paid New Convertible B Shares on an as-if-converted basis. The potential dilutive shares are included in diluted earnings per share computations on a weighted average basis for the year. The profits and weighted average number of shares used in the calculations are set out below:

6. Short term liquidity investments and cash and cash equivalents

Reconciliation of amounts invested to trade investments:

Reconciliation of cash flows arising from sale of trade investments:

Reconciliation of cash flows arising on revenue share paid on asset realisations of trade investments:

7. Borrowings - non-current

This note provides information about the contractual terms of the Group's interest-bearing borrowings, which are measured at amortised cost.

On 1st of July 2013 the Group entered into a £30 million loan agreement with the European Investment Bank (EIB) available to draw down in two tranches of £15 million. The purpose of the loan is to provide 50% of the funding for Biotech investments. The first tranche of £15,000,000 was drawn down on 30 July 2013. Transaction costs of £186,000 incurred to obtain the loan have been netted off against the loan value. The loan is denominated in sterling.

The loan is based on a floating interest rate related to LIBOR and is repayable in 10 equal annual instalments over a twelve year period with the first payment due on 25 July 2016. There is an uncapped cash sweep of 25% of all investment realisations used to prepay the loan.

The loan contains a debt covenant requiring that the ratio of the total fair value of investments plus cash and qualifying liquidity to debt should at no time fall below 4:1. The Group closely monitors that the covenant is adhered to on an on-going basis.

The Group had no undrawn committed borrowing facilities available during the year (2012: None). There is no commitment fee on the second tranche of the EIB loan of £15 million, the drawdown of which is likely to occur within 18 months of the first tranche disbursement.

8. Issued share capital

On 24 January 2011, the Company's total issued voting share capital increased through the issue of 2,870,328 New Ordinary Shares of 3 and 1/33 pence each at 350 pence each pursuant to a 2 for 3 Rights Issue (taking the total number of Ordinary Shares admitted to trading on AIM to 62,660,949) and 36,990,086 New Convertible B Shares of 350 pence each, which had not been admitted to trading on AIM. The issue price for the New Convertible B Shares was 350 pence (the "issue price") each payable in three instalments, comprising 150 pence (paid during the period of the Rights Issue), 100 pence paid on 20 January 2012 and 100 pence paid on 21 January 2013. The unpaid element of the New Convertible B Shares had previously been included in share capital (and financial assets - see below) as the holders were liable to pay the outstanding instalments. As at the date of these financial statements the shares are fully paid up and application was therefore made for admission to trading on the London Stock Exchange's AIM market for listed securities on 22 January 2013.

The New Convertible B Shares represented a separate class of shares but, save as expressly provided for in the Group's Articles of Association (adopted on 6 January 2011), ranked pari passu in all respects, including voting, with the Existing Ordinary Shares. The New Convertible B Shares had a nominal value of 350 pence but, until the entire issue price had been paid, were non-transferable. The New Convertible B shares carried no right to dividends or other distributions declared, made or paid during the period of their

issue.

Following receipt of the final instalment, on 21 January 2013 in respect of the issue price of all New Convertible B Shares the New Convertible B Shares were converted into new fully paid Ordinary Shares of 3 and 1/33 pence each.

On conversion of the New Convertible B Shares, holders were entitled to one Ordinary Share for each New Convertible B Share held and the Ordinary Shares resulting from the conversion, in all respects, rank as one uniform class with the issued and fully paid Ordinary Shares in issue.

The aggregate nominal value of the Convertible B shares was greater than the nominal value of Ordinary Shares to which a member holding Convertible B shares was entitled on conversion. On conversion, the aggregate nominal value of Convertible B shares was subdivided into (i) Ordinary Shares of individual nominal value equal to the nominal value of each Ordinary Share in issue at the conversion date and (ii) Deferred Shares with an aggregate nominal value equal to such amount of the aggregate nominal value of the Convertible B shares which exceeded the aggregate nominal value of the Ordinary Shares.

Deferred shares are not transferable and do not entitle the holder to the payment of any dividend or otherwise participate in the profits of the Company or to receive notice of or attend or vote at any general meeting of the Company and on any reduction of capital in accordance with the Companies Act 2006 may be cancelled without payment of consideration. The Deferred Shares are not listed on any stock exchange. The Company may purchase the Deferred Shares for not more than the sum of £0.01 in aggregate for all the Deferred Shares and cancel the Deferred Shares so purchased, without any requirement to obtain the consent or sanction of the holders of the Deferred Shares.

The total issued voting share capital as at 31 July 2013 was 99,651,035 voting shares (31 July 2012: 99,651,035 voting shares).

Equity raise

The Company raised net proceeds of £135 million from the Rights Issue and issue of New Convertible B shares during the year ended 31 July 2011. This was made up of: £10 million received from the 2 for 3 Rights Issue of 2,870,328 New Ordinary Shares at 350 pence each; £129.5 million from the issue of 36,990,086 New Convertible B Shares at 350 pence each (payable in three instalments); less expenses of £4.5 million, which related primarily to investment banking, legal and regulatory filing fees, accounting, printing and public relations fees. These issue expenses were taken directly to the share premium account and retained earnings in proportion to the proceeds from the Rights Issue and issue of New Convertible B Shares respectively.

The issue price for the New Convertible B Shares is payable at 350 pence each in three instalments comprising 150 pence paid during the period of the Rights Issue, 100 pence paid on 20 January 2012 and 100 pence paid on 21 January 2013.

Therefore, of the total net proceeds of £135 million, £61 million cash was received in January 2011, comprising £10 million from the 2 for 3 Rights Issue, £55.5 million from the first instalment of the New Convertible B Shares less £4.5 million of issue expenses.

Of the remaining total proceeds of £74 million relating to the New Convertible B Shares, £37.0 million was received on 20 January 2012 and £37 million was received on 21 January 2013. The outstanding receivable due on 21 January 2013 was included in the balance sheet as a financial asset within current assets in the prior year.

The financial asset had been measured at its fair value, applying an appropriate discount rate, and included in current assets. The discount rate reflected management's best estimate of the time value of money with reference to the yield of Invesco's bonds due to be repaid in 2013.

The amount discounted has now been fully unwound through the Statement of Comprehensive Income with a subsequent reserve transfer to issued share capital.

Hedging arrangements by Employee Benefit Trust

As at 31 July 2013, the Employee Benefit Trust held 971,080 (2012: 471,080) of the Group's Ordinary Shares, which have a cost of £2,564,009 (2012: £983,002). During the year the Employee Benefit Trust increased its holding by a further 500,000 shares for a cost of £1,581,007. These represent unallocated shares which are considered to be under the de-facto control of the Group and have therefore been consolidated in the financial statements.

It is the intention of the Group to use these shares to settle the option liabilities at the point of exercise and they represent a partial hedge on the cost of the exercise. No shares have been issued from the EBT during the year.

Company Information