5 Oct 2012 07:00
5 October 2012
Imperial Innovations Group plc
Leading portfolio companies developing strongly as investment momentum across Group maintained
Imperial Innovations Group plc (AIM: IVO, "Innovations", "the Group"), a leading technology commercialisation and investment group, has published its results for the year ended 31 July 2012.
Business highlights
·; £37.9 million (2011: £35.1 million) invested in 29 companies (2011: 23 companies)
·; Portfolio companies raised a total of £147 million in cash and investment commitments (2011: £129 million)
·; 11 new investments in companies associated with, or based on, research from the UK's four leading Universities
·; Leading investments Circassia and Nexeon continue to make strong progress and made key management appointments
o Nexeon, a battery materials company, has demonstrated cells that meet commercial consumer application targets and has recently been named in the 2012 Global Cleantech 100 (by Cleantech Group)
o Circassia, a developer of allergy treatments, has achieved positive results in phase II ragweed trials and has just initiated pivotal large-scale phase III clinical study of its ToleroMune® cat allergy treatment
·; Significant investments in next tier portfolio companies PsiOxus, Cell Medica, PolyTherics, Veryan and Plaxica
·; 377 inventions appraised (2011: 351) and 51 new Imperial College patent filings (2011: 52)
·; Over 200 opportunities assessed across Cambridge, Oxford and University College London
Financial highlights
·; Pre-tax profit of £5.1 million (2011: £0.6 million) up by £4.5 million on prior year
·; Cash and short term liquidity investments at 31 July 2012: £43.9 million (2011: £48.8 million), which in addition to the undiscounted deferred £37 million receivable from the January 2011 fundraising, totals £80.9 million
·; Net assets £228.2 million at 31 July 2012 (2011: £224.1 million)
·; Total revenues at £4.3 million (2011: £4.5 million)
·; Portfolio value increased to £155.6 million (2011: £104.5 million)
·; Fair value gains of £21.6 million offset by impairments of £6.9 million and £2.3 million impairment of Thiakis contingent consideration resulting in a £14.7 million (2011: £3.3 million) net increase in the fair value of investments and a £3.5 million revised carrying value of the Thiakis contingent consideration
Martin Knight, Chairman of Imperial Innovations, said
"This past financial year has been one of good progress. We are proving that our business model is sound; that our pipeline of opportunities from the UK's leading research intensive universities is full of promise; and that our portfolio of investee companies, particularly our larger holdings, has developed well, in line with our expectations.
"We have invested more capital in the last year than in any other financial year: £37.9 million, in 29 companies. This is consistent with our view that early stage technology companies need to be funded properly to attract strong management and build businesses of scale and significance. It is worth noting that some £94.2 million has been invested by us in our top 15 investee companies. Some of these are significant businesses in their own right, far removed from the "spin-out" tag.
"We are committed to building substantial businesses based on intellectual property emanating from the UK's leading research intensive universities. We are not investors distracted from this goal by one eye permanently on the door marked 'exit'.
"We remain confident that our progress will be maintained, with continuing value being built in our portfolio of companies."
A complete copy of the Annual Report and Accounts for the year ended 31 July 2012 can be found at http://www.imperialinnovations.co.uk/annualreport2012.pdf
Enquiries:
Imperial Innovations (www.imperialinnovations.co.uk) | 020 7594 6589 |
Susan Searle, Chief Executive Officer | |
Julian Smith, Chief Financial and Operations Officer | |
Diana Crisp, PR Manager | |
College Hill | 020 7457 2020 |
Adrian Duffield/Mel Toyne-Sewell/Rozi Morris | |
J.P. Morgan Cazenove | 020 7588 2828 |
Michael Wentworth Stanley/Paul Park |
Overview
Imperial Innovations builds and invests in technology and healthcare companies. The Group's goal is to bring valuable ideas to market either by building businesses or licensing to industry.
The Group had another solid year and successfully advanced its lead assets, Nexeon and Circassia, as well as further scaling the next three, Veryan Medical, Cell Medica and PsiOxus Therapeutics, adding further experience to the boards and management teams, raising funds and securing quality investment syndicates behind these businesses.
The Group's portfolio comprises companies linked to each of its four university collaborators: Cambridge, Oxford, University College London and Imperial College London. The Group has offices in London and Cambridge and holdings in 82 companies located in the Cambridge-Oxford-London triangle. The UK's top four research universities are located within this triangle, as are some of the most exciting, fast-growing UK companies founded on world-class science and addressing global markets. In life sciences, engineering and technology, this cluster compares favourably to Silicon Valley, and its leading companies are gaining international recognition. The Group is playing a key role in the cluster, backing exciting technologies, bringing in and developing quality management teams, and leading investment rounds supported by quality syndicates.
During the year, the Group invested a total of £37.9 million (2011: £35.1 million) and the Group's portfolio of companies raised £147 million in cash and investment commitments. These investments are in line with the Group's strategy of investing more capital to progress companies, ensuring they have strong boards and management teams and are well capitalised.
A key priority for the Group this year has been ensuring that its leading assets continue to perform and that there are strong companies following behind them, generating significant value. The Group's two leading assets, Circassia and Nexeon, are fast developing towards commercialisation. Circassia, an allergy vaccine developer, is moving towards phase III trials for its lead product, while Nexeon, a battery materials company, is refining its unique silicon anode battery material for consumer electronic and electric vehicle applications in collaboration with leading industry partners.
Six other assets are demonstrating great potential to deliver value. Cell Medica, PsiOxus Therapeutics, Veryan Medical, Plaxica, PolyTherics and Cortexica are progressing well, and the first five among them received significant funding during the year. Of the £37.9 million invested this year, £11.9 million went into these leading assets, which raised over £50 million between them, underlining the Group's ability to deploy significant capital to ensure its most promising holdings can meet their potential. However, a number of the Group's companies have made slower progress than expected and/or have failed.
In addition to providing substantial support for its lead investments, the Group has also focused this year on developing and expanding its deal flow. During the year, 11 companies received their first investment from the group, in addition to three further recently formed companies. Of these investments, nine were seed rounds, four were Series A rounds and one was a later stage investment, demonstrating the Group's ability to back a company at any stage of its development.
The Group has continued to strengthen its collaborative relationships with the three other universities, and now has a healthy and growing portfolio of companies arising in addition to Imperial College London. During the year, four investments were made in Cambridge University associated companies, two in Oxford University associated companies, and two in University College London associated companies. Imperial College London continues to provide a healthy range of opportunities, and four investments were made in new Imperial-associated companies during the year.
The Group has had a solid year, with the valuation of portfolio companies increasing to £155.6 million (2011: £104.5m). Portfolio uplifts from fair value gains were £21.6 million offset by impairments of £6.9 million where seven portfolio companies have seen slower progress or have failed. Taking into account investments during the year of £37.9 million and disposals of £1.8 million, the Group's portfolio value increased by £51.1 million.
Outlook
The Group is delivering on its broader strategy, focusing on investment opportunities arising from, or associated with, four universities and making investments across the London-Cambridge-Oxford triangle. In the coming year its key priorities are:
·; To continue to build value in its top ten investments;
·; To continue to evolve and enhance the commercialisation and venture support it offers to Imperial College London; and
·; To deepen further its collaborations, develop its networks and raise its profile across all four universities.
The Group's approach is to match high quality science with experienced management and appropriate intelligent capital for its stage of development. Once the right team is in place, and the technology and the business proposition de-risked, the Group will select a small number of companies that it will encourage to grow into much larger businesses, backing them for the longer-term. We look forward to next year as the quality of our investee companies and technologies are further recognised.
Operational report
Realisations
As expected, the Group made no substantial realisations during the year. Midaz Lasers, a producer of high performance lasers, was sold to Coherent, realising a return of £0.96 million from an investment of £0.64 million. Realisations totalled £1.8 million (2011: £2.4 million).
Licensing
During the year, 25 intellectual property agreements were concluded across the therapeutics, medical technology and technology and engineering sectors. Highlights of these deals include:
·; A commercial agreement with Ashland Inc., the owner of the Valvoline™ brand and a recognised leader in the field of lubricants and automotive chemicals, regarding a group of novel lubrication technologies developed at Imperial College London by Professor Andrew Oliver
·; License of a cell line to Novartis Pharma AG to assist them in their internal research activity in the field of gastrointestinal disease
·; License of a novel microscopy design to a major optics manufacturer. The design improves image clarity by reducing the background fluorescence and can be added to existing devices as well as being a standalone device.
The Imperial College London licensing activity has been focused on three portfolio areas: therapeutics, medical technology and engineering/technology. These portfolio areas are being advanced through translational grants of more than £33 million.
In the automotive technology field, the Group is making technical and commercial progress with its portfolio of 20 technologies. During the year, an evaluation agreement was signed with Lotus Engineering for a novel aluminium forming process and an evaluation agreement was signed with Alerion Energie Rinnovabili S.r.l. for a technology for the improvement of wind power generation efficiency. An evaluation agreement was also signed with FPT Industrial for research and development on new technologies for improved performance and efficiency.
Investments
For the year ended 31 July 2012, the Group made 29 investments (2011: 23) totalling £37.9 million, an increase of £2.8 million over the previous year. Since the year end, the Group has made 3 investments worth a total of £3.3 million.
Investment in established portfolio companies
The Group invested a total of £28.5 million in established portfolio companies. Of this total, the Group invested £23.15 million in Cell Medica, Circassia, Plaxica, PolyTherics, PsiOxus Therapeutics and Veryan Medical, all companies that are among its 10 leading assets.
These companies raised a total of £92 million during the year, representing a significant proportion of the total raised by the portfolio. This level of investment activity is consistent with the Group's strategy of accelerating its own investment in, and facilitating larger funding rounds for, selected advanced portfolio company opportunities.
PolyTherics
In September 2011, the Group invested a further £1.2 million in PolyTherics as part of a £2.2 million round alongside The Capital Fund and ProVen Health VCT plc. PolyTherics is focused on enabling the production of better pharmaceuticals through its range of site-specific conjugation technologies and novel polymers. The Group holds a 32.2% stake in the business.
Plaxica
In September 2011, the Group invested a further £2.2 million in Plaxica as part of a £5 million Series B round alongside Invesco Perpetual and NESTA Investments. Plaxica is developing next generation biopolymers based on renewable resources. The Group holds a 43% stake in the business.
Veryan Medical
In October 2011, the Group invested a further £2.75 million in Veryan Medical as part of a £5 million funding round alongside Seroba Kernel Life Sciences in addition to Veryan's Chairman, Dr Geoffrey Vernon. Veryan is developing technology to improve the performance of vascular stents, and has recently completed recruitment for a clinical trial of its first product, the BioMimics 3D stent. The Group holds a 46.8% stake in the business.
Circassia
In April 2012, the Group completed an investment of £11.75 million in Circassia, as part of a drawdown of the increased second tranche of funding of £47 million. Circassia is developing therapeutics for the world's most common allergies and has raised a total of £105 million funding to date. The Group holds a 20.3% stake in the business.
PsiOxus Therapeutics
In July 2012, the Group invested £3.5 million as part of a £22 million funding round for PsiOxus Therapeutics alongside Invesco Perpetual and new investors, SR One and Lundbeckfond Ventures. PsiOxus is developing ColoAd1, an oncolytic virus capable of destroying tumour cells with high selectivity at small concentrations; the funding will enable phase I and II trials for treatment of colorectal cancer to be initiated. The Group holds a 30.6% stake in the business.
Cell Medica
In July 2012, the Group invested £1.75 million as part of a £17 million funding round for Cell Medica, alongside Invesco Perpetual and The Cancer Prevention and Research Institute of Texas. Cell Medica is developing a range of products known as Cytovir™ to treat severely immunosuppressed patients following bone marrow transplants, and Cytorex™ products to treat cancers associated with the oncogenic Epstein Barr virus. The Group holds a 28.0% stake in the business.
Portfolio operational update in top 10 companies
Circassia
Circassia, a biopharmaceuticals company developing a range of novel allergy treatments, is the Group's leading asset and during the year successfully achieved key milestones necessary to trigger the second tranche of its April 2011 fundraising and also raised a further £12 million from its investors. The company continues to make strong scientific progress and has reported positive results from a series of clinical trials.
In September 2011, it announced that its ToleroMune® hay fever treatment substantially improved patients' allergy symptoms compared with those on placebo. Following these results, the company has commenced its final phase II study of the treatment. In January 2012, Circassia's patent portfolio was extended with grants of patents covering key peptides for its grass and ragweed allergy treatments. In March 2012, the company presented the results of its ragweed allergy therapy phase II trial at the Annual Meeting of the American Academy of Allergy, Asthma and Immunology. The trial achieved positive results, demonstrating that patients with more severe symptoms achieved a significantly greater improvement following ToleroMune treatment than those on placebo.
Post year-end, in October 2012, Circassia announced it would begin a large-scale, multi-centre phase III clinical trial for its cat allergy vaccine.
In addition to technical developments, Circassia has strengthened its team through a number of appointments. Brett Haumann, former VP, Medicines Development Leader at GSK, has been appointed as Chief Medical Officer, and Stewart Sharpe, who brings 25 years' commercial and marketing experience from a number of companies including Novartis and Glaxo Wellcome, joined as VP Commercial Operations. Circassia's net carrying value increased by £16.2 million to reflect an investment of £11.8 million and a fair value gain of £4.4 million.
Nexeon
Nexeon, a battery materials and licensing company developing unique silicon anode technology for next generation lithium-ion batteries, continued to progress the capabilities of its silicon anode material by creating test cells with increasing capacities and cycle life. During the year, the company demonstrated 400 cycles of cells at 900mAh/g and 300 cycles of cells at 1,500 mAh/g. This compares very favourably with commercial carbon anode cells, whose theoretical maximum capacity is 372 mAh/g and meets commercial targets for consumer applications by achieving 300 cycles. As well as capacity benefits, Nexeon's materials can also offer a reduction in battery size. For example, a commercially available carbon-anode 2.6 Ah '18650' Li-ion cell uses around 10g of carbon anode material; this can be replaced with 3g of Nexeon's silicon material.
In December 2011, the company signed a collaboration deal with a major global automotive OEM, with the aim of developing its materials for use in electric vehicles which has made good technical progress. Nexeon is also in discussions on a further collaboration deal with a consumer electronics company, to evaluate and develop its materials for consumer applications, and with a major chemical company to accelerate material production scale-up.
Nexeon has made a number of appointments to its technical and management team during the year. David Bent, formerly Global Capital Engineering Regional Manager for Europe and Asia at Dow Corning, joined as Production Director. Dr Mary McKiernan, formerly Research Director at Cambridge Display Technology, joined as R&D Director. Michael Black, formerly CFO at AlertMe and Cambridge Display Technology, joined as Chief Financial Officer. Nexeon's net carrying value remained unchanged at the period end at £34.1 million, reflecting the previous funding round in 2011.
Veryan Medical
Veryan, a medical devices company developing robust vascular stents that induce swirling, natural blood flow, completed enrolment for its MIMICs study, a multicentre clinical evaluation of the safety and performance of its lead product, the BioMimics™ 3D stent. The trial was administered to patients with peripheral artery disease undergoing interventions in major leg arteries. Veryan's net carrying value increased by £8.2 million to reflect an investment of £2.8 million and a fair value gain of £5.4 million.
Veryan also made strong appointments to its management team and board, recruiting Nick Yeo, formerly of Light Sciences, where he held a number of senior management roles, as Chief Operating Officer. Two highly experienced veterans of the cardiovascular devices industry were appointed to the company's board: Todd Pope, formerly Worldwide President of Cordis and currently CEO of TransEnterix, joined as Non-Executive Director, as did Jeffrey Jump, President of Biosensors, a company specialising in interventional cardiology.
PsiOxus Therapeutics
PsiOxus, an Oxford based biotechnology company developing novel treatments for cancer, closed a £22 million funding round in July 2012. This funding will be used to advance the development of its oncolytic vaccine, ColoAd1, through to completion of phase I and II clinical trials for the treatment of metastatic cancers. ColoAd1 selectively targets cancer cells and replicates in them until cell death occurs; this process produces thousands of copies of the virus, which then seek out other similar cancer cells. The company's MT-102 product, a therapeutic for the treatment of cachexia and sarcopenia, is in a phase II clinical study in cancer cachexia patients. Results for this trial are expected in late 2013. PsiOxus's net carrying value increased by £3.5 million to reflect an investment of £3.5 million.
In addition to significantly strengthening the management team, PsiOxus made two key appointments during the year. Dr Paolo Paoletti, President of Global Oncology at GlaxoSmithKline, joined the board as a Non-Executive Director, and Dr Terry Hermiston, Vice President of Biologics Research at Bayer Healthcare, and the inventor of the ColoAd1 virus, became a member of the Scientific Advisory Board.
Cell Medica
Cell Medica, a biotechnology company developing cellular immunotherapy treatments for infectious diseases and cancer, raised £17 million during the year. The new funding will enable it to advance the development of its Cytovir™ product platform for the treatment of infectious diseases in severely immunosuppressed patients who have undergone bone marrow transplant. Cell Medica has also established an office in Texas where it will develop its Cytorex™ EBV product which targets cancers associated with the oncogenic Epstein Barr virus. In addition, the company is in the process of establishing a European manufacturing and distribution base in Berlin to enable supply of its Cytovir products throughout the continent.
In January 2012, the company received grant funding from the UK Technology Strategy Board for its phase I/II ASPIRE trial run in collaboration with the UCL Institute of Child Health.
The ASPIRE study is designed to establish the safety and efficacy of Cell Medica's Cytovir ADV product for the treatment of adenovirus infections in paediatric patients who have undergone bone marrow transplant. Cell Medica's net carrying value increased by £4.9 million to reflect an investment of £1.8 million and a fair value gain of £3.1 million.
PolyTherics
PolyTherics, a biotechnology company enabling better pharmaceuticals through the application of its site-specific conjugation technologies and novel polymers, made substantial progress in business development. Throughout the year, the company announced collaborations and licence deals with a number of biotechnology and pharmaceuticals groups, including Nuron Biotech, Spirogen and Pro Bono Bio.
In January 2012, PolyTherics acquired Warwick Effect Polymers, a spin-out from the University of Warwick, expanding PolyTherics' technology offering through the addition of proprietary polymers for the creation of longer-acting drugs and novel drug-targeting technology. In May 2012, Dr Anker Lundemose, co-founder of Symphogen, Santaris and Prosidion, was appointed as a non-executive director. Polytherics's net carrying value increased by £3.5 million to reflect an investment of £1.2 million and a fair value gain of £2.3 million.
Cortexica
Cortexica continued to make commercial progress following the launch, in September 2011, of its VisualSearch™ API to mobile app developers. A major international e-tailer is using Cortexica's image recognition platform for one of their vertical applications. This app was released for the iPhone in January 2012 in the US and June 2012 in the UK and Germany, and is performing at market-leading above 90% first time recognition rates. Cortexica has signed further deals to develop similar products for different market verticals. Cortexica's net carrying value increased by £4.3 million to reflect an investment of £0.5 million and a fair value gain of £3.8 million.
Oxford Immunotec
Oxford Immunotec, a medical diagnostics company developing novel tests for a range of diseases, completed a $28 million fundraising to expand sales and marketing efforts for its lead product, the T‑Spot® .TB test, for diagnosis of latent TB infection. In February, the company announced the opening of its new service laboratory in Memphis, Tennessee, to provide capacity to rapidly process its immunology samples. Oxford Immunotec's net carrying value is £4.6 million, reflecting an investment of £3.7 million and a fair value gain of £0.9 million.
Plaxica
Plaxica, a technology company developing next generation biopolymers based on renewable resources completed a £5 million fundraising earlier in the year and announced in September 2012 the commissioning of its pilot plant, based at Wilton International on Teesside. This is an important step which will validate the company's technology, as well as allowing it to provide samples to customers.
In September 2011, Phil Goodier was appointed Chief Executive Officer. Phil was previously Group Managing Director of Hexadex, has held senior positions with chemicals and polymers companies including ICI, Arch Chemicals and DuPont, and has over 20 years' executive leadership experience. Also during the year, Steve Donegan, formerly Technology and Engineering Manager at the Centre for Process Innovation, joined as Head of Engineering, and Martin Riediker, formerly CTO and Chief Innovation Officer of CIBA, joined as Chairman. Plaxica's net carrying value increased by £2.2 million to reflect an investment of £2.2 million.
Stanmore Implants
Stanmore is continuing to develop its sales and marketing activity around its leading business units, and launched its Savile Row Precision Orthopaedics unit during the year. The Savile Row technique uses technology acquired from former Group portfolio company, Acrobot, to enable the design of personalised knee implants that are optimally matched to patients. Stanmore's net carrying value is £4.3 million, reflecting a £4 million investment at the last funding round in July 2011 and a fair value gain of £0.3 million.
Movements in value for other portfolio companies
At the time of the interim results, the Group wrote-off its valuation for Novacem, a company developing a green cement product, having invested a total of £1.4 million. Though Novacem's technology demonstrated great promise, the technology development programme proved to be extremely challenging and a decision was taken to withdraw further funding.
In April 2012, Pfizer gave notice that it was 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 impaired the contingent consideration receivable. The Group remains confident that an acquirer can be found and that Thiakis' technology can be progressed to market.
The value held for EVO Electric, a company developing advanced electric machines, has also undergone a partial impairment following a valuation review earlier in the year as progress has been slower than expected.
The investments in OSspray and RepRegen were both written off as it was not possible to progress these opportunities commercially.
In contrast, a number of the Group's advanced accelerated portfolio companies have progressed well, meeting commercial and scientific milestones throughout the year. This is reflected in the uplift in the reported carrying values.
Investment in new opportunities
Imperial College London
The Group's involvement with Imperial College London is well established and more developed than with its other collaborators. The Group has a formal pipeline agreement with Imperial College, which is not the case with its other university partners. As well as providing investment funding, the Group also operates a technology transfer office which is dedicated to the protection and commercialisation of intellectual property developed at Imperial College.
Imperial College London Technology Transfer Office
A number of new initiatives were undertaken during the year to further develop the relationship between the Group and Imperial College London, which is managed by the Group's dedicated Technology Transfer Office (TTO).
·; A partnership board was formed with Imperial College London to promote communication channels and to ensure that a high level of service is delivered to Imperial College by the Group.
·; The Imperial Digital Enterprise Accelerator was founded and launched. Ten student teams and their start-up ideas were selected for a programme of mentorship and advice.
The TTO also provides substantial support to Imperial College in securing funding for the long-term pipeline of intellectual property that is a source of future commercialisation.
IP Transactions
For the year ended 31 July 2012, the Group's TTO reviewed a total of 377 invention disclosures (2011: 351), an increase of 26 on the previous year. New patent filings remained steady at 51 (2011: 52). During the year, 25 IP transactions were completed (2011: 25).
During the year, five companies associated with Imperial College London received seed or Series A investment from the Group.
TopiVert
In December 2011, the Group invested £1.9 million and committed £4 million to TopiVert alongside SV Life Sciences, as part of an £8 million round. TopiVert is developing topical medicines for the treatment of inflammatory diseases of the eye and gut, such as inflammatory bowel disease and uveitis based on NSKI technology licensed from RespiVert, a former Group holding. The Group holds a 22.7% stake in the business. Topivert is based in the Imperial Incubator.
Get Fractal
In January 2012, the Group invested £50,000, through a convertible loan, in Get Fractal, a new company developing a web-based application to standardise email marketing campaigns across email clients.
Econic Technologies
In February 2012, the Group invested £0.5 million in Econic Technologies as part of a £1.1 million seed round alongside Norner Verdandi, part of Norner AS. Econic is developing catalysts that enable polycarbonate polyols and polymers, and subsequently polyurethanes and polycarbonates, to be produced using CO2 as one of the feedstocks, offering significant savings to manufacturers. The Group holds a 44.4% stake in the business.
Abingdon Health
In March 2012, the Group invested £2 million and led a £3 million funding round for Abingdon Health alongside other private investors. Abingdon Health is led by Dr Chris Hand, former founder and CEO of Cozart (sold for £65 million in 2007). Abingdon is focused on commercialising a portfolio of novel clinical diagnostics technologies. Abingdon subsequently acquired a controlling stake in the Group's complementary portfolio company, Molecular Vision. The Group holds a 31.8% stake in the business.
Kesios Therapeutics
In July 2012, the Group invested £0.2 million as part of a seed round in Kesios Therapeutics, a new company building on the work of Professor Guido Franzoso, Chair in Inflammation and Signal Transduction in the Department of Medicine at Imperial College London. Kesios will develop small molecule drug candidates that exploit a novel target for haematological malignancies, such as multiple myeloma and related indications. The Group holds a 52.7% stake in the business.
In addition to the investments listed above, Group portfolio company Hexxcell, which is developing technologies related to increasing efficiency in oil and gas refineries, received £0.4 million in funding from the Skolkovo Foundation that was provided as part of a £9.3 million award from the Foundation to Imperial College London in February 2012. The Group holds a 36.6% stake in the business.
Investments in Cambridge
The Group's collaboration with Cambridge Enterprise is working well. Four investments were made in companies based on research developed at, or associated with, Cambridge University during the year, with one post-year end. The Group has now established an office in Cambridge at the Babraham Research Campus, to facilitate engagement with the academic, investment and business communities based in the area.
In total, the Group evaluated over 100 Cambridge technology and healthcare projects or companies, and extensive due diligence was undertaken on 20. This resulted in four investments in Cambridge-based opportunities, and one investment post year-end.
MISSION Therapeutics
In August 2011, the Group invested £1.2 million in MISSION Therapeutics as part of a £6 million Series A round alongside Sofinnova Partners, SR One and Roche Venture Fund. MISSION is a drug discovery and development company based on the pioneering work of Professor Steve Jackson, a leading expert on DNA damage response and the Head of Cancer Research UK Laboratories at the Gurdon Institute, Cambridge and the Frederick James Quick Professor of Biology at Cambridge University. The Group holds an 18.1% stake in the business.
Cambridge Communication Systems
In January 2012, the Group invested £0.3 million in Cambridge Communication Systems (CCS) as part of a £1 million seed round alongside Cambridge Angels. CCS is developing a cost-effective backhaul solution for mobile infrastructure. The company is led by John Porter and Steve Greaves, both experienced communications entrepreneurs, and the founding Chair is Robert Sansom, a senior member of the Cambridge Angels group. The Group holds a 6.4% stake in the business.
Featurespace
In June 2012, the Group led a £1.5 million funding round for Cambridge-based software company, Featurespace. The Group invested £0.8 million in the round, alongside NESTA, Cambridge Angels, Cambridge Capital Group and Mike Lynch, founder and ex-CEO of Autonomy. Featurespace's technology builds predictive analytics models to identify and influence change in consumer behaviour and has been applied to fraud detection and consumer marketing applications. The Group holds a 14.7% stake in the business.
Epsilon-3 Bio
In July 2012, the Group completed a £0.3 million investment as part of a £1.25 million round into new Cambridge company, Epsilon-3 Bio, alongside Novo Ventures and Index Ventures. Epsilon-3 Bio is based on the research of Dr David Grainger, formerly of the Department of Medicine at Cambridge University and co-founder of Cambridge-based Funxional Therapeutics. The company is developing new technology to prevent ageing and degeneration by modulating cell debris clearance; potential applications include therapeutics for Alzheimer's Disease, Lupus, Crohn's Disease and rheumatoid arthritis. The Group holds a 14.5% stake in the business.
Following the year end, the Group made one further investment in a Cambridge company:
Acunu
In August 2012, the Group invested £1.25 million as part of a £2.65 million funding round into Acunu, a data storage specialist based on technology developed at Cambridge University. Acunu's technology enables its customers to create large, quickly accessible databases using low-cost hardware, thus opening up the potential of Big Data to a much wider customer base than at present. The Group holds a 11% stake in the business.
The Group has part-funded two pre-company proof of concept projects in Cambridge alongside Cambridge Enterprise: Cambridge Nano Particles, also supported by Hermann Hauser; and Cambridge Microfiltration, supported by the Group and Cambridge Enterprise.
Investments in Oxford
The Group's visibility in the Oxford cluster continues to grow, with five of its top 15 investments located in the Oxford region: Circassia, Nexeon, Abingdon Health, PsiOxus Therapeutics and Oxford Immunotec. PsiOxus' R&D is led by Professor Len Seymour and Dr Kerry Fisher from the Department of Clinical Pharmacology at Oxford University who jointly invented the technology at Birmingham University.
The Group's involvement with businesses based on research developed at, or associated with, the University of Oxford is based on its collaboration with Oxford Spin-out Equity Management (OSEM). This collaboration is progressing well, and resulted in a significant investment during the year, with the Group leading a $28 million funding round for Oxford Immunotec, an opportunity introduced through OSEM.
Though this relationship is directed at later stage opportunities due to the nature of OSEM's involvement with companies originating from Oxford University, the Group made one early stage investment this year in Nascient.
The Group evaluated over 50 Oxford healthcare and technology opportunities during the year, and made two investments, both in healthcare companies.
Oxford Immunotec
In June 2012, the Group committed $9.5m, invested £3.7 million and led a $28 million funding round for Oxford Immunotec, alongside Invesco Perpetual and existing investors. Oxford Immunotec is a well-established international business developing, marketing and distributing novel diagnostic tests for immunological diseases. Oxford Immunotec has now raised $110 million from its investors. The Group holds a 5.4% stake in the business.
Nascient
In June 2012, the Group invested £0.6 million in Nascient, a new company based on the work of Dr Kim Midwood of the Kennedy Institute of Rheumatology at Oxford University. The Kennedy Institute was formerly at Imperial College London. Nascient is developing a novel antibody treatment for rheumatoid arthritis. The Group holds a 52.3% stake in the business.
University College London
During the year, the Group made investments in two businesses associated with University College London. In addition, the Group worked alongside UCL Business (UCLB) to secure £1 million funding from the Carbon Trust to support the development of a novel polymer fuel cell technology that incorporates intellectual property developed at Imperial College London and University College London.
In total, the Group evaluated 39 healthcare and technology opportunities from University College London and made two investments.
Autifony
In August 2011, the Group invested £1.5 million and committed £5 million to Autifony, a biotechnology company based on GSK R&D, as part of a £10 million Series A round alongside SV Life Sciences. UCLB is also an investor in Autifony, which is working in collaboration with Professor David McAlpine at the UCL Ear Institute to develop novel pharmaceuticals for the treatment of hearing loss, tinnitus and disorders of the central nervous system. The Group holds a 25.9% stake in the business.
ASIO
In December 2011, the Group made a small seed investment of £0.1 million in ASIO, with funding matched by UCLB. The company recently launched its first iPhone application, Chirp, which enables users to encode and send data as sound from any device with a speaker to an iPhone. Post year-end, in September 2012, the Group made a further investment through a convertible loan alongside UCLB totalling £0.1 million.
Recruitment and appointments
The Group strengthened its investment team through the appointment of Nigel Pitchford as Managing Director of Healthcare Ventures. He joined in January 2012. Nigel has 14 years' venture capital experience, 12 as a Partner at 3i Cambridge and two at DFJ Esprit following their acquisition of the 3i portfolio. He has a strong track record including Domantis, sold to GSK for $423 million and Apatech, sold to Baxter for $330 million.
Substantial progress has been made in recruiting Venture Partners and Entrepreneurs in Residence. Simon Cartmell, an experienced healthcare executive, and formerly CEO of Apatech, joined as a Venture Partner focusing on the non-therapeutics area. Alain Falys, an experienced technology executive and entrepreneur, with previous roles including Senior Vice President of Visa International EU, and Co-founder, Chairman and CEO of OB10 Ltd, the world's largest electronic invoicing platform, joined as a venture partner in the technology area.
Post year-end, the Group further strengthened its healthcare ventures team through the appointment of Rob Woodman. Rob spent the past five years as a Principal at Sofinnova Partners and was formerly a Business Manager at Cancer Research Technology. David McGibney joined this team as an advisor on Clinical Affairs. Having left Pfizer as SVP and Head of European R&D in 2001, David has subsequently been widely involved with a number of biotech companies and venture funds in a clinical advisory capacity.
Financial report
Summary
The Group ended the period with net assets at £228.2 million (2011: £224.1 million) up by £4.1 million from 31 July 2011.
Cash and short term liquidity investments remained healthy at £43.9 million (2011: £48.8 million) having benefitted from the receipt of the £37 million first instalment of committed deferred receipts from the January 2011 equity raise. Including the remaining future committed deferred receipt from the equity raise of £37 million (due in January 2013) the total available for investment and operations would be £80.9 million.
The Group's pre-tax profit rose to £5.1 million in the year to 31 July 2012 (2011: £0.6 million) reflecting progress in the Group's portfolio of companies.
The Group achieved total gross realisations of £1.8 million (2011: £2.4 million). Net cash collected from realisations, including receipt of amounts outstanding at the start of the year, was £1.6 million (2011: £3.1 million).
The Group's rate of investment in its portfolio companies rose to £37.9 million across 82 portfolio companies (2011: £35.1 million). This takes the total invested since the IPO in July 2006 to £120.9 million and the total raised by the Group's portfolio companies to over £408 million.
Cash and short-term liquidity investments
The Group ended the financial year with total cash and short-term liquidity investments of £43.9 million (2011: £48.8 million), comprising £11.9 million of cash and £32 million of short-term liquidity investments.
Including the future committed deferred receipts from the equity raise of £37 million, the total available for investment would be £80.9 million (2011: £122.8 million).
The decrease in the cash and short term liquidity investments balance of £4.9 million from the opening balance of £48.8 million can be analysed as follows.
2012 £m | 2011 £m | |
Net cash used in operating activities | (5.6) | (4.4) |
Purchase of trade investments | (37.9) | (35.0) |
Net proceeds from sale of trade investments | 1.6 | 3.1 |
Net cash from other investing activities | 1.0 | 0.3 |
Financing activities 1 | 36.0 | 61.1 |
Movement in net cash reserves | (4.9) | 25.1 |
1 Excludes the tranche 2 deferred proceeds on the equity raise of £37 million due in January 2013.
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 slightly to £4.3 million (2011: £4.5 million) reflecting the continuing difficult economic environment. Licence and royalty revenue from initial licence payments and intellectual property licences was £1.6 million (2011: £1.9 million).
Revenue from services (which includes intellectual property management consultancy fees) rose to £1.4 million (2011: £1.2 million). Corporate finance fees were £1.2 million (2011: £1.3 million), and were primarily generated by the Group-led funding rounds. Additionally, dividends received were £44,000 (2011: £0.2 million).
Cost of sales, which mainly arises from the revenue-sharing arrangement with Imperial College London, rose slightly to £1.2 million (2011: £1.1 million).
As expected, other administrative costs increased from £7.8 million to £9.2 million primarily reflecting the scaling-up of the business post the December 2010 equity raise.
Administrative expenses also include costs of £0.9 million (2011: £0.9 million) incurred filing patents and protecting the as yet unexploited intellectual property emanating from Imperial College London.
The Group's carried interest plan, which is a long-term employee incentive scheme, generated an accounting charge of £3.4 million (2011: £nil). This reflects the healthy progress in the portfolio of companies. 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. This year, for the first time, this target has been 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 85:15 thereafter. 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 in the Annual Report.
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 impaired this contingent consideration by £2.2 million, resulting in a fall in the carrying value to £3.5 million.
Interest income was £2.2 million (2011: £1.7 million), and includes £1.3 million (2011: £1.0 million) finance income on the unwinding of the deferred equity raise proceeds which is described more fully in note 7.
The Group reported a pre-tax profit of £5.1 million (2011: profit £0.6 million).
Basic earnings per share was 8.1p (2011: 0.93p). The Board is not recommending the payment of a dividend (2011: £nil).
Investment portfolio performance
During the year, the Group's investment portfolio grew from £104.5 million spread across 78 companies, to £155.6 million across 82 companies. Portfolio companies raised more than £109 million in cash (2011: £92 million) from all sources of investment during the year, and secured total cash and investment commitments of over £147 million in total (2011: over £129 million).
The fair value of the Group's holdings increased by £14.9 million (2011: £4.4 million), before taking into account associated revenue sharing obligations, and by £14.7 million (2011: £3.3 million) after these obligations.
Portfolio movements excluding cash invested | 2012 £m | 2011 £m |
Gains on the revaluation of investments | 22.2 | 11.3 |
Losses on the revaluation of investments | (7.3) | (6.9) |
Fair value gains | 14.9 | 4.4 |
Movement in associated revenue sharing obligations and other movements | (0.2) | (1.1) |
Net fair value gain | 14.7 | 3.3 |
(Based on International Private Equity and Venture Capital Valuation Guidelines (IPEVCVG).)
Investment and divestment activity
The Group made £37.9 million of investments to fund 29 technology companies in its portfolio (2011: £35.1 million to fund 23 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 £14.3 million (2011: £9.9 million). Additionally, some investments are made as convertible loans and at the year-end there was a total of £15.9 million (2011: £6.3 million) which is included in fixed-asset investments.
The Group realised gross £1.8 million (2011: £2.4 million) from the realisation of four investment assets. Taken together with the receipt of consideration deferred from prior year's asset sales this brings the total proceeds arising from the sale of assets to £2.2 million (2011: £3.3 million) and £1.6 million (2011: £3.1 million) after accounting for associated revenue sharing obligations.
Analysis of sale of investment |
Gross £m | Revenue share 1 £m | Net £m |
Proceeds of sale arising | 1.8 | (0.4) | 1.4 |
Revenue share outstanding | - | 0.2 | 0.2 |
Cash received in the year | 1.8 | (0.2) | 1.6 |
Cash received from prior year's deferred sale proceeds | 0.4 | (0.4) | - |
Total cash received arising from the sale of investments | 2.2 | (0.6) | 1.6 |
As at the year end, the Group was holding a total of £3.5 million (2011: £6.1 million) as discounted deferred proceeds on sales of investment assets. These amounts are held within other receivables. The total unadjusted potential proceeds are £13.1 million (2011: £13.5 million). This relates to the Thiakis receivable. During the period the receivable was impaired by £2.3 million as described below.
Analysis of Deferred Sale Proceeds |
Gross £m | Revenue share 1 £m | Net £m |
Sale proceeds deferred at the start of the year | 18.6 | (5.1) | 13.5 |
Prior deferral received in year | (0.4) | - | (0.4) |
Sale proceeds deferred at the end of the year | 18.2 | (5.1) | 13.1 |
Risk adjusted deferred proceeds at start of the year | 8.4 | (2.3) | 6.1 |
Risk adjusted deferred proceeds at end of the year | 5.0 | (1.5) | 3.5 |
Net cash flows from investments in trade investments in the year was £36.3 million (2011: £31.9 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).
Portfolio company creation
At 31 July 2012, the Group held equity stakes in 82 companies (2011: 78 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 £125.6 million in 74 companies which have been active since the IPO in July 2006. This includes investment of £4.6 million in 25 of these companies which were formed prior to the IPO. Since the IPO, £121 million has been invested in 67 companies. This investment is focused towards the later stage companies as we de-risk the investment hypothesis. Of the £125.6 million invested, 91% has been focused on 25 companies where we have invested over £1.0 million with the remaining £11.4 million invested in 49 smaller companies.
The Group has a total of £104.4 million invested capital at work in the portfolio of currently active technology companies, £94.3 million invested in the top 15 companies, and £10.1 million in the remaining 27 smaller companies.
The table below sets out the top 15 technology companies in the portfolio by value, including contingent deferred consideration (Thiakis and Respivert), 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.
Table of the net fair value of the top 15 investee companies
Name of company | Net investment carrying value | Cash invested / (Divested)
| Fair value movement | Net investment carrying value | Cumulative cash invested 1 | % Issued share capital held |
as at 31 July 2011 | year to 31 July 2012 | year to 31 July 2012 | as at 31 July 2012 | as at 31 July 2012 | as at 31 July 2012 | |
£'000 | £'000 | £'000 | £'000 | £'000 | % | |
Circassia Holdings | 20,491 | 11,750 | 4,416 | 36,657 | 25,500 | 20.3 |
Nexeon | 34,086 | - | ‑ | 34,086 | 22,373 | 38.9 |
Veryan Medical | 8,065 | 2,750 | 5,452 | 16,267 | 9,126 | 46.8 |
PsiOxus Therapeutics | 4,393 | 3,499 | - | 7,892 | 7,476 | 30.6 |
Cell Medica | 1,581 | 1,750 | 3,148 | 6,479 | 3,310 | 28.0 |
PolyTherics | 2,953 | 1,200 | 2,259 | 6,412 | 3,975 | 32.2 |
Cortexica | 2,053 | 500 | 3,803 | 6,356 | 2,553 | 30.6 |
Oxford Immunotec | - | 3,710 | 929 | 4,639 | 3,710 | 5.4 |
Plaxica | 2,332 | 2,239 | - | 4,571 | 4,122 | 43.0 |
Stanmore Implants Worldwide | 4,000 | - | 331 | 4,331 | 4,000 | 15.5 |
EVO Electric | 3,831 | 120 | (905) | 3,046 | 2,604 | 33.7 |
TopiVert | 125 | 1,875 | 100 | 2,100 | 2,000 | 22.7 |
Abingdon Health | - | 1,999 | - | 1,999 | 1,999 | 31.8 |
Process Systems Enterprise | 1,280 | - | 537 | 1,817 | - | 23.4 |
Autifony | - | 1,500 | 50 | 1,550 | 1,500 | 25.9 |
Other companies | 13,638 | 4,995 | (5,431) | 13,202 | 10,105 | n/a |
Total | 98,828 | 37,887 | 14,689 | 151,404 | 104,353 | |
Net Disposals | - | (1,405) | - | (1,405) | - | |
Net Total | 98,828 | 36,482 | 14,689 | 149,999 | 104,353 | |
Respivert A | 422 | (422) | - | - | - | - |
Thiakis B | 5,746 | - | (2,254) | 3,492 | - | - |
1. Currently active companies
A | In May 2010, the Group sold its stake in Respivert for £9.5 million representing a 4.7 times return on its investment of £2.0 million. The £0.4 million deferred proceeds outstanding at the end of last year was paid in the period and there was a small gain on currency conversion.
|
B | 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 is 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 is 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 R&D of products relating to, Thiakis. The Group has considered the impact of this on the probability of milestone receipts and has impaired this contingent consideration by £2.3 million resulting in a net carrying value of £3.5 million.
|
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.
Non-current liabilities (including those due under the TPA) increased from £5.7 million to £9.1 million at the end of 2012, primarily reflecting the introduction of the carried interest plan liability.
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 UCSF 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.
Consolidated statement of comprehensive income
For the year ended 31 July 2012
Note | 2012 £000 | 2011 £000 | |
Revenue | 2 | 4,255 | 4,520 |
Cost of sales | (1,225) | (1,072) | |
Gross profit | 3,030 | 3,448 | |
Change in fair value of investments | 3 | 14,691 | 3,262 |
Administrative expenses: | |||
Impairment of contingent proceeds | 4 | (2,254) | - |
Carried interest plan liability | 4 | (3,401) | - |
Other administrative expenses | 4 | (9,217) | (7,809) |
Operating profit / (loss) | 2,849 | (1,099) | |
Finance income | 2,227 | 1,672 | |
Profit before taxation | 5,076 | 573 | |
Taxation | - | - | |
Profit and total comprehensive income for the financial year | 5,076 | 573 | |
Basic earnings per Ordinary Share (pence) | 5 | 8.1 | 0.93 |
Diluted earnings per Ordinary share (pence) | 5 | 5.1 | 0.71 |
Consolidated balance sheet
As at 31 July 2012
Company registered number: 05796766
Note | 2012 £000 | 2011 £000 | |
Assets | |||
Non-current assets | |||
Property, plant and equipment | 64 | 98 | |
Investments | 3 | 155,135 | 104,103 |
University Challenge Seed Fund (UCSF): | |||
- Investments | 512 | 419 | |
- Loans | - | 10 | |
Financial asset - partly paid share capital | 7 | - | 35,705 |
Total non-current assets | 155,711 | 140,335 | |
Current assets | |||
Trade and other receivables | 5,434 | 8,372 | |
Financial asset - partly paid share capital | 7 | 36,583 | 36,572 |
Short term liquidity investments | 6 | 32,000 | 25,000 |
Cash and cash equivalents | 6 | 11,883 | 23,848 |
Total current assets | 85,900 | 93,792 | |
Total assets | 241,611 | 234,127 | |
Equity and liabilities | |||
Equity attributable to equity holders | |||
Issued share capital | 7 | 130,957 | 129,661 |
Share premium | 61,381 | 61,381 | |
Retained earnings | 9,626 | 6,822 | |
Share-based payments reserve | 8,150 | 8,138 | |
Other reserves | 18,096 | 18,096 | |
Total equity | 228,210 | 224,098 | |
Liabilities | |||
Non-current liabilities | |||
University Challenge Seed Fund (UCSF) | 542 | 457 | |
Provisions for liabilities and charges | 3 | 5,136 | 5,275 |
Carried interest plan liability | 3,401 | - | |
Total non-current liabilities | 9,079 | 5,732 | |
Current liabilities | |||
Trade and other payables | 4,322 | 4,297 | |
Total liabilities | 13,401 | 10,029 | |
Total equity and liabilities | 241,611 | 234,127 |
Consolidated cash flow statement
For the year ended 31 July 2012
Note | 2012 £000 | 2011 £000 | |
Cash flows from operating activities: | |||
Operating profit / (loss) | 2,849 | (1,099) | |
Adjustments to reconcile operating profit / (loss) to net cash flows used in operating activities: | |||
Depreciation of property, plant and equipment | 34 | 34 | |
Fair value movement in investments | (14,691) | (3,262) | |
Share based payments charge | 12 | 68 | |
Carried interest plan liability | 3,401 | - | |
Working capital adjustments: | |||
Decrease / (Increase) in trade and other receivables | 2,492 | (640) | |
Increase in trade and other payables | 293 | 472 | |
Net cash used in operating activities | (5,610) | (4,427) | |
Cash flows from investing activities: | |||
Purchase of trade investments | 6 | (37,899) | (34,993) |
Proceeds from sale of trade investments | 6 | 2,173 | 3,374 |
Revenue share paid on realisations of trade investments | 6 | (600) | (246) |
Net cash flows used in investments in trade investments | (36,326) | (31,865) | |
Purchase of property, plant and equipment | - | (55) | |
Interest received | 954 | 348 | |
Movement in short term liquidity investments | (7,000) | (12,487) | |
Net cash flows used in other investing activities | (6,046) | (12,194) | |
Net cash used in investing activities | (42,372) | (44,059) | |
Cash flows from financing activities: | |||
Proceeds from share issues | 36,990 | 65,531 | |
Expenses of share issues | - | (4,529) | |
Movement in cash held by EBT | 1 | 85 | |
Purchase of shares by the EBT | (976) | - | |
UCSF cash | 2 | 28 | |
Net cash generated from financing activities | 36,017 | 61,115 | |
Net (decrease) / increase in cash and cash equivalents | (11,965) | 12,629 | |
Cash and cash equivalents at beginning of the year | 23,848 | 11,219 | |
Cash and cash equivalents at end of the year | 6 | 11,883 | 23,848 |
Consolidated statement of changes in equity attributable to equity holders of the Group
Issued Share Capital | Share Premium | Retained Earnings | Share-based Payments Reserve | Other Reserves |
Total | |
£000 | £000 | £000 | £000 | £000 | £000 | |
At 1 August 2010 | 1,812 | 51,748 | 11,399 | 8,070 | 18,096 | 91,125 |
Comprehensive income | ||||||
Profit for the year | - | - | 573 | - | - | 573 |
Total comprehensive income | - | - | 573 | - | - | 573 |
Transactions with Owners | ||||||
Value of employee services | - | - | - | 68 | - | 68 |
Share capital issued | 126,817 | 9,959 | - | - | - | 136,776 |
Costs of equity raise | - | (326) | (4,203) | - | - | (4,529) |
Unwinding of discount on partly paid shares | 1,032 | - | (1,032) | - | - | - |
EBT reserve movement | - | - | 85 | - | - | 85 |
Transactions with owners | 127,849 | 9,633 | (5,150) | 68 | - | 132,400 |
At 31 July 2011 | 129,661 | 61,381 | 6,822 | 8,138 | 18,096 | 224,098 |
Comprehensive income | ||||||
Profit for the year | - | - | 5,076 | - | - | 5,076 |
Total comprehensive income | - | - | 5,076 | - | - | 5,076 |
Transactions with owners | ||||||
Value of employee services | - | - | - | 12 | - | 12 |
Unwinding of discount on partly paid shares | 1,296 | - | (1,296) | - | - | - |
EBT reserve movement | - | - | (976) | - | - | (976) |
Transactions with owners | 1,296 | - | (2,272) | 12 | - | (964) |
At 31 July 2012 | 130,957 | 61,381 | 9,626 | 8,150 | 18,096 | 228,210 |
Treasury shares with a cost of £976,000 (2011: £6,000) 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 2012 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union as at 31 July 2012. 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 2012, which have been approved by the Board of Directors and on which the auditors have reported without qualification. 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 2011, 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 2012 can be found at http://www.imperialinnovations.co.uk/annualreport2012.pdf
2. Segmental reporting
For the year ended 31 July 2012 and the year ended 31 July 2011, 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 1.5 million (35%) of the Group's revenue (2011: £1.2 million (26%) relating to two customers, £0.6 million each).
Breakdown of the revenue from all sources is as follows:
Analysis of revenue by category: | 2012 | 2011 |
£'000 | £'000 | |
Licence and royalty revenue | 1,623 | 1,875 |
Revenue from services | 1,418 | 1,168 |
Corporate finance fees | 1,170 | 1,286 |
Dividends received | 44 | 191 |
Total revenue | 4,255 | 4,520 |
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 less the revenue share charge on these fair value movements. Net change in fair value of investments of £14,691,000 (2011: £3,262,000), as set out on the face of the Consolidated Statement of Comprehensive Income, represents the change in net fair value of £14,689,000 plus £2,000 (2011: £3,249,000 plus £13,000) to reflect final adjustments on realisations before revenue share with third parties as summarised below:
2012 | 2011 | |
£'000 | £'000 | |
Net fair value gain on portfolio | 14,689 | 3,249 |
Changes in fair value realised during the period | 2 | 13 |
Net fair value movement recognised in the Consolidated Statement of Comprehensive Income | 14,691 | 3,262 |
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.
For the year ended 31 July 2012
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.
Gross investments - designated at fair value through profit or loss | |||
For the year ended 31 July 2012 | Quoted 1 Companies | Unquoted Companies | Total |
£'000 | £'000 | £'000 | |
At 1 August 2011 | 1,058 | 103,045 | 104,103 |
Gains on the revaluation of investments | 3 | 22,213 | 22,216 |
Losses on the revaluation of investments | (515) | (6,806) | (7,321) |
Fair value (losses) / gains | (512) | 15,407 | 14,895 |
Investments during the year | - | 37,887 | 37,887 |
Realisations from the sale of investments | (546) | (1,204) | (1,750) |
Net investment | (546) | 36,683 | 36,137 |
At 31 July 2012 | - | 155,135 | 155,135 |
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.
Provisions for liabilities and charges 2 | |||
For the year ended 31 July 2012 | Quoted 1 Companies | Unquoted Companies | Total |
£'000 | £'000 | £'000 | |
At 1 August 2011 | 160 | 5,115 | 5,275 |
Increase in liability arising from changes in fair value of investments | 1 | 651 | 652 |
Decrease in liability arising from changes in fair value of investments | (4) | (442) | (446) |
Net change in fair value of liability during the year | (3) | 209 | 206 |
Realisations during the year | (157) | (188) | (345) |
At 31 July 2012 | - | 5,136 | 5,136 |
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.
Investments - designated at fair value through profit or loss (net of revenue share) | |||
For the year ended 31 July 2012
| Quoted 1 Companies | Unquoted Companies | Total |
£'000 | £'000 | £'000 | |
At 1 August 2011 | 898 | 97,930 | 98,828 |
Gains on the revaluation of investments | 2 | 21,562 | 21,564 |
Losses on the revaluation of investments | (511) | (6,364) | (6,875) |
Fair value (losses) / gains | (509) | 15,198 | 14,689 |
Investments during the period | - | 37,887 | 37,887 |
Realisations from the sale on investments | (389) | (1,016) | (1,405) |
Net investments | (389) | 36,871 | 36,482 |
At 31 July 2012 | - | 149,999 | 149,999 |
1 All quoted companies are listed on AIM.
2 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:
Revenue SharingImperial College London £000 | Revenue SharingOther £000 | DeferredConsideration £000 | Total £000 | |
At 1 August 2011 | 4,994 | 242 | 39 | 5,275 |
Settlements and provisions utilised | (343) | (2) | - | (345) |
Changes in fair value attributable to revenue share | 149 | 85 | (28) | 206 |
At 31 July 2012 | 4,800 | 325 | 11 | 5,136 |
4(a). Impairment of contingent proceeds
2012 £000 | 2011 £000 | |
2,254 | - |
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 impaired this contingent consideration by £2.3 million, resulting in a fall in the carrying value to £3.5 million.
4(b). Carried interest plan liability
2012 £000 | 2011 £000 | |
3,401 | - |
The Group's carried interest plan generated an accounting charge of £3.4 million (2011: Nil). This reflects the healthy progress in the portfolio of companies. 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. This year, for the first time, this target has been 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 85%:15% 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.
4(c). Other administrative expenses
2012 £000 | 2011 £000 | |
Staff related | 5,441 | 4,428 |
Share-based payments | 12 | 68 |
Patent costs | 929 | 882 |
Other | 2,835 | 2,431 |
9,217 | 7,809 |
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. The partly paid New Convertible B shares are not included in the calculation of basic earnings per share as these shares are not entitled to dividends. However, as described in note 7 below, they have been included in share capital as the future tranches are contractually obliged to be paid by the shareholders. 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:
2012
| 2011
| |
Earnings per Ordinary Share | ||
Profit for the financial year (£000) | 5,076 | 573 |
Weighted average number of Ordinary Shares (basic) (thousands) | 62,661 | 61,496 |
Effect of dilutive potential Ordinary Shares | 37,032 | 19,297 |
Weighted average number of Ordinary Shares for the purposes of diluted earnings per share (thousands) | 99,693 | 80,793 |
Earnings per Ordinary Share basic (pence) | 8.1 | 0.93 |
Earnings per Ordinary Share diluted (pence) | 5.1 | 0.71 |
6. Short term liquidity investments and cash and cash equivalents
2012 £000 | 2011 £000 | |
Cash at bank and in hand | 11,883 | 23,848 |
Total cash and cash equivalents | 11,883 | 23,848 |
Total short term liquidity investments (3 to 12 months) | 32,000 | 25,000 |
Reconciliation of amounts invested to Trade Investments:
2012 £000 | 2011 £000 | |
Investments in period | 37,887 | 35,064 |
Amounts payable / (due) at the year end | 12 | (12) |
Current year debt to equity conversions | - | (59) |
Net cash invested in trade investments in the year | 37,899 | 34,993 |
Reconciliation of cash flows arising from sale of Trade Investments:
2012 £000 | 2011 £000 | |
Disposals of trade investments | 1,750 | 2,419 |
Deferred revenue on prior years' disposal of trade investments | 423 | 955 |
Cash flow arising on the proceeds from sale of investment in trade investments | 2,173 | 3,374 |
Reconciliation of cash flows arising on revenue share paid on asset realisations of trade investments:
2012 £000 | 2011 £000 | |
Movement in revenue sharing liability arising from disposal of trade investments | 801 | 701 |
Revenue share outstanding | (201) | (455) |
Cash flow arising on the settlement of revenue sharing liabilities on sale of trade investments | 600 | 246 |
7. Issued share capital
Ordinary shares | 2012 £000 | 2011 £000 |
Allotted and fully paid: | ||
Balance at beginning of year (62,660,949 Ordinary Shares of £0.0303 each) (2011: 59,790,621 Ordinary Shares of £0.0303 each) | 1,899 | 1,812 |
Issue of share capital during the year1 | - | 87 |
Balance as at end of year (62,660,949 Ordinary shares of £0.0303 each) (2011: 62,660,949 Ordinary shares of £0.0303 each) | 1,899 | 1,899 |
Convertible B shares | 2012 £000 | 2011 £000 |
Allotted and part paid: | ||
Balance at beginning of year (36,990,086 Convertible B shares) (2011: Nil) | 127,762 | - |
Issue of share capital during the year2 | - | 126,730 |
Unwinding of discount on partly paid shares | 1,296 | 1,032 |
Balance as at end of year (36,990,086 Convertible B shares) | 129,058 | 127,762 |
Total balance as at end of year (99,651,035 Ordinary shares and partly paid Convertible B shares) | 130,957 | 129,661 |
1 Issue of 2,870,328 New Ordinary Shares of £0.0303 each pursuant to the 2 for 3 Rights Issue during year ended 31 July 2011.
2 Issue of 36,990,086 New Convertible B Shares of £3.50 each (partly paid and discounted (see below)) during year ended 31 July 2011.
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 have not been admitted to trading on AIM. The issue price for the New Convertible B shares is 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 due on 21 January 2013. The unpaid element of the New Convertible B shares has been included in share capital (and financial assets - see below) as the holders are liable to pay the outstanding instalments.
The New Convertible B Shares represent a separate class of shares but, save as expressly provided for in the Group's Articles of Association (adopted on 6 January 2011), rank pari passu in all respects, including voting, with the Existing Ordinary Shares. The New Convertible B shares have a nominal value of 350 pence but, until the entire Issue Price has been paid, are non-transferable. The New Convertible B shares carry no right to dividends or other distributions declared, made or paid during the period of their issue. Once the Company has received all payments in respect of the Issue Price of all New Convertible B shares held by a holder, all New Convertible B Shares held by that holder will be converted into fully paid Ordinary Shares.
On conversion of the New Convertible B shares, a holder shall be entitled to one Ordinary Share for each New Convertible B share held and the Ordinary Shares resulting from the conversion will in all respects rank as one uniform class with the issued and fully paid Ordinary Shares then in issue.
The total issued voting share capital as at 31 July 2012 was 99,651,035 voting shares (31 July 2011: 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 due on 21 January 2013.
Therefore, of the total net proceeds of £135 million, £61 million cash was received in the prior period, 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 million was received on 20 January 2012 and £37 million is due on 21 January 2013. The outstanding receivable is included in the balance sheet as a financial asset within current assets.
The financial asset has been measured at its fair value, applying an appropriate discount rate, with an amount of £36,583,000 included in current assets. The discount rate reflects 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 is being unwound through the Statement of Comprehensive Income with a subsequent reserve transfer to issued share capital.
During the year ended 31 July 2012 the Group issued no shares.
Employee Benefit Trust
As at 31 July 2012, the Employee Benefit Trust held 471,080 of the Group's Ordinary Shares, which have a cost of £983,002 (2011: 198,416 Ordinary Shares at a cost of £6,013). As set out in the Directors' remuneration report in the Annual Report, 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
Directors | ||||
M. Knight | (Chairman) | |||
S. Searle | (Chief Executive Officer) | |||
R. Cummings | (Chief Investment Officer) | |||
J. Smith | (Chief Financial and Operations Officer) | |||
D. Allen | (Senior Non-Executive Director) | |||
P. Atherton | (Non-Executive Director) | |||
D. Begg | (Non-Executive Director) | |||
S. Richardson | (Non-Executive Director) | |||
M. Rowan | (Non-Executive Director) | |||
Company Secretary | Company Registration Number | |||
J. Bowen | 05796766 | |||
Registered Office | Solicitors | |||
52 Princes Gate | Mayer Brown International LLP | |||
Exhibition Road | 201 Bishopsgate | |||
London SW7 2PG | London EC2M 3AF | |||
Independent auditors | Financial Advisors and Nomad | |||
PricewaterhouseCoopers LLP | J.P. Morgan Cazenove | |||
Chartered Accountants and Statutory Auditors | 25 Bank Street, | |||
Abacus House | Canary Wharf, | |||
Castle Park | London E14 5JP | |||
Cambridge CB3 0AN | ||||
Principal Bankers | Share Registrars | |||
National Westminster Bank plc | Equiniti Limited | |||
P O Box No 592 | Aspect House | |||
18 Cromwell Place | Spencer Road | |||
London SW7 2LB | Lancing | |||
West Sussex BN99 6DA | ||||