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VSA Capital Market Movers – Frontier IP Group plc

VSA Morning Technology Comment, 06/05/21

Frontier IP Group (LON:FIPP)

Portfolio Company The Vaccine Group (TVG ) Announces a New CEO

Frontier IP Group provides commercialisation services in return for equity in private technology companies.  The Group has today announced that portfolio company The Vaccine Group has appointed Dr Jeremy Salt as Chief Executive Officer. Frontier IP holds a 17 per cent equity stake in TVG.

TVG is a University of Plymouth spin out and its international partners have so far been awarded more than £9 million in grants from the UK, US and Chinese governments. It has also signed its first commercial deal with ECO Animal Health Group plc and The Pirbright Institute to develop vaccine candidates to combat PRRSV, one of the most economically damaging diseases to the pig industry. 

TVG develops and commercialises novel vaccine platform technology, which is being used to develop a wide range of different vaccines to combat zoonotic and economically-damaging diseases. These include vaccines to combat COVID-19, Ebola, Lassa fever, African Swine Fever, porcine respiratory and reproductive virus (PRRSV), and bovine tuberculosis.

Dr Salt, the new CEO of TVG, brings extensive experience in senior roles in animal healthcare across organisations in the commercial and not-for-profit sectors. He is joining TVG from GALVmed, a not-for-profit organisation that develops and makes available livestock vaccines, medicines and diagnostics for small-scale livestock producers, where he was Chief Scientific Officer. GALVmed is funded by the UK government’s Foreign, Commonwealth & Development Office through UKAID and the Bill & Melinda Gates Foundation.

In our view, given Dr Salt’s experience, the appointment is a major step forward for TVG and an indicator of serious intent to fully develop the company into a leader in the global vaccine market.

Of the 19 portfolio companies that Frontier IP has stakes in, a number are at a point of acceleration in commercial development, paving the way for a step up in valuation or a potential exit. TVG is one such opportunity.

Frontier IP April 2021 Trading Update – “Materially Ahead of Management Expectations”

The Group’s equity holdings are in four high growth technology clusters comprising: artificial intelligence, robotics and big and sparse data; pathogens and cell imaging; food and agritech; and engineered particles and materials. Frontier IP has a proven record in commercialising University IP to grow its own EPS and NAV by growing portfolio company valuations. That success is seeing the Group invest in its own expansion for growth.

At Interims, announced in March 2021, the Group noted it had seen progress in the second half of the Group’s financial year with further fundraising and commercialisation activity across its portfolio. On April 28th the Group announced that a SoftBank Vision Fund 2i led the Series D funding round for Exscientia had taken place. This funding round had secured $225 million from investors such as Blackrock, GT Healthcare Capital and Bristol-Myers Squibb to name a few with access a further $300 million from SoftBank at its discretion.  At the same time Frontier IP also announced a Trading Update noting, in relation to the funding round  that, “This is expected to result in an uplift in Frontier IP’s book value for its holding which will be reflected in the Group’s results to 30 June 2021.”

Frontier IP also announced that, “As a result of overall trading across the portfolio in the year to date, the Group anticipates that the outcome for the year ending 30 June 2021 will be materially ahead of management expectations with a significant contribution to the outcome being the increase in the book value of the Group’s interest in Exscientia.”

We believe that Frontier IP represents an excellent opportunity for investors to gain exposure to early-stage technology companies, based on leading edge IP, which meets the needs and demands of international markets. Although Frontier IP has yet to have an exit to crystallise cash value, and the timing and value of potential exits is hard to assess, given the number of companies in the Frontier IP portfolio now at inflection points, this is becoming a real possibility over the next twelve months. As a result, we believe the shares offer distinct valuation upside potential. Buy

 

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Phil Smith, Equity Analyst, Technology | T: +44 (0)20 3617 5187 | E: psmith@vsacapital.com

VSA Capital Research | T: +44 (0)20 3005 5000 | E: research@vsacapital.com

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