IP Group to step up help for university spin-outs

UNIVERSITY spin-out developer IP Group underlined the importance of innovation to the UK economy as it made strides in growing the value of its portfolio of companies.

The group, which has stakes in Yorkshire spin-outs including Tissue Regenix, Tracsis, Getech and Avacta, said it will play a growing role in helping turn UK university research into business.

IP Group raised £55m from investors earlier this year, and plans to ramp up its investment in its portfolio of 65 technology companies, as well as developing new opportunities.

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The value of its investment portfolio hit £115.3m at the end of June, up from £101.3m at the end of 2010 and £110m a year earlier.

“Innovation has never been of such importance to the UK economy and... the group will play an increasingly important role in helping UK innovation to reach the market,” said chief executive Alan Aubrey.

Universities face a tough time as the squeeze on public spending puts pressure on research budgets. IP Group has exclusive relationships with 10 of the UK’s most research-intensive universities, including York and Leeds.

Greg Smith, recently promoted to chief financial officer, said: “We’ve got one of the most productive science bases in the world.

“It’s widely regarded by most of the UK’s political parties that technical innovation is vitally important for economic growth in the UK... and returning to the high-tech industries rather than bulge bracket manufacturing is something we are very supportive of.

“IP Group can play a role in doing that quite difficult task of taking what’s a fundamental idea that’s never been seen before and making it into a commercial business. It’s not an easy thing to do.”

The value of IP Group’s quoted companies fell to £45.5m during the first six months of 2010, from £50m six months earlier. Mr Smith said another £2m was wiped from their value during August’s financial turbulence.

“In the short-term about 40 per cent of our portfolio is AIM or Plus markets quoted companies and so we can see a bit of volatility in the share prices of these companies.

“The good thing is these quoted companies continue to make some really good commercial and technological progress.”

Two of its largest unquoted companies, Oxford Nanopore Technologies and Reyolymer, raised a combined £30.8m, helping the value of its unquoted post-seed businesses achieve a combined value of £65m. That compared with £56.3m six months earlier.

Mr Smith hailed the progress made by York-based biotech firm Tissue Regenix. The company, spun out of the University of Leeds in 2006, believes it is poised to become “a major player in regenerative medicine”. It won CE approval a year ago, allowing it to market its replacement body parts products in Europe.

Tissue Regenix’s broker Peel Hunt described the company as “one of the most exciting medical device opportunities in the UK”.

Mr Smith said the volatile market, plus its new financial firepower, means it will not float companies on the stock market prematurely.

“We are not factoring in a large number of AIM floats as a strategy,” he said. “We’re not saying we won’t take companies to market. But it’s more likely we will maintain our holdings in our private companies, or keep them private for longer.”

IP Group fell to a £4.1m pre-tax loss, deeper than the £3.8m losses seen a year earlier. But Mr Aubrey said the company is “well placed to deliver significant value for shareholders over the medium to long term”.

Shares in the company gained 3.5p to close at 46.5p, rising more than eight per cent. Analysts at house broker Numis Securities reiterated a ‘buy’ recommendation, with a 63p target price.

Partnerships paying off

IP Group floated on the Alternative Investment Market in 2003, and now has long-term partnerships with 10 of the UK’s most research-intensive universities, including Leeds and York.

It was established in 2000 and moved from AIM to the main market in 2006.

IP Group focuses on energy and renewables, medical equipment, pharmaceuticals and biotech, chemicals and materials, and IT and communications.

It also has a “strategic stake” in its smaller stock market-listed peer Fusion IP, acquired in November 2009. Sheffield-based Fusion sold a 20 per cent stake to IP Group for £3m.