VSA Morning Technology Comment, 04/03/21
Frontier IP Group (LON:FIPP)
Frontier IP Group today announced that portfolio company Exscientia Limited ("Exscientia") has successfully completed its Series C funding round. Exscientia, is a clinical stage pharmatech company pioneering the use of artificial intelligence (AI) to design new drugs. Exscientia has today announced that funds managed by BlackRock joined the Company's Series C investment round. Including existing Series C investors, Novo Holdings, Evotec, Bristol Myers Squibb, and GT Healthcare Capital, the round totalled US$100 million in funding.
As a result of the financing round, Frontier IP now holds a 2.11 per cent equity stake in Exscientia. At year end June 2020, Frontier IP held 2.45 per cent of the equity of Exscientia. This new capital will be used to support Exscientia's platform development towards autonomous drug design. In addition, the company will extend its proprietary pipeline into clinical trials and expand existing capabilities in biological analytics that support target selection and portfolio development. The scale of the funding round, that Blackrock has now invested and the overall quality of the investor base reflects on progress that Exscientia is making - Exscientia was named the fastest growing private biotech or pharmaceutical company in the UK in the 2021 Alantra Pharma Fast 50.
FIPP provide commercialisation services in return for equity in private technology companies. 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’s early access to companies with leading-edge IP and the structural growth in the target clusters offers potential for strong upside.
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. 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.
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.
Frontier IP also announced today that, “Based on the Group's overall trading for the year to date and the outlook for the remainder of the financial year, the Board remains confident on the prospects for the year ended 30 June 2021.”Frontier IP expects to announce its interims results for the six months to 31 December 2020 on 24 March 2021.
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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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