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Strong growth in portfolio value matched by share price rise for incubator Frontier IP Group

The AIM-listed intellectual property group’s investments were worth £8mln as at the end of December 2017, helped by the additions of The Vaccine Group and water pollution tester Molendotech
Intellectual property sign
Frontier IP recently increased its stake in Fieldwork Robotics to 27.5% from 21%, in return for providing extra development and engineering support

University technology incubator Frontier IP Group PLC (LON:FIPP) saw its portfolio value rise by almost 50% over its last half-year, while its share price has increased by more than that over the past six months.

The AIM-listed intellectual property group’s investments were worth £8mln as at the end of December 2017, helped by the additions of The Vaccine Group and water pollution tester Molendotech.

READ: Frontier IP Group portfolio jumps in value by 50%

Since that half-year end, Molendotech has attracted the interest of Palintest, a subsidiary of FTSE 100 company, Halma PLC (LON:HLMA), which will help bring its novel test - that is able to identify the concentration of faecal bacteria in water - to market.

Molendotech also completed a first fund-raising which saw it receive a commitment totalling £0.5mln, to be invested in three tranches, with Frontier IP to hold approximately 14% of the issued share capital following investment of the third tranche.

Frontier IP also recently increased its stake in Fieldwork Robotics to 27.5% from 21% in return for providing that portfolio company with extra development and engineering support.

Fieldwork, a spin-out company from the University of Plymouth, is developing a soft, adaptable robot arm and highly sensitive grippers able to handle delicate items.

READ: Frontier IP Group increases support for robotics development in portfolio company

Frontier’s chief executive, Neil Crabb, said: "By providing Fieldwork with additional hands-on support, we are ensuring the company can respond swiftly and nimbly to an exciting opportunity."

Aside from Fieldwork Robotics, Frontier IP last year also took a 21% stake in another spinout company from the University of Plymouth – the afore-mentioned Vaccine Group – in August last year.

In return, Frontier IP provides that business with commercialisation services, industry expertise and “strong links” to the pharmaceutical sector.

READ: Frontier IP moves into vaccines with latest addition to the investment portfolio

The Vaccine Group was set up to exploit advances in immunology, with initial work focused on platforms that prevent the spread of pathogens from animals to people.

Crabb commented at the time: “A rapid response vaccine platform will be a valuable addition to current management strategies and a critical resource when new diseases emerge."

In other moves last year, Frontier’s main investment Exscientia - an AI-based drug researcher - secured a €15mln strategic investment from Evotec, while food additive group Nandi Protein raised £1mln.

Commercial cocoon

Frontier IP’s aim is to act as the commercial cocoon around the growing amount of  intellectual property being spun out of universities.

Its portfolio includes spinouts from six of the UK’s uni’s including Cambridge, Plymouth and Dundee.

The group trades its commercial expertise for stakes in the spin outs and has a core portfolio of six firms.

In a traditional model, the intellectual property company would make a direct financial investment that gives a fairly accurate valuation of its stake in the business.

Frontier is a little different. Because it has bartered its own services for a share of the company it is included on the balance sheet at a nominal value - sometimes just tens of thousands of pounds.

Exscientia the main attraction

The uplift for Frontier IP comes when an investee company receives funding that precipitates a revaluation, so the boost to Exscientia’s funding provided an uplift.

Exscientia has collaboration deals with two of the world’s largest pharma companies for its artificial intelligence-based drug research - French giant Sanofi and FTSE 100-listed GlaxoSmithKline PLC (LON:GSK).

Payments are made through research funding, milestones covering both non-clinical and clinical and recurrent sales milestones if any of Exscientia’s product makes it to market.

If all of its ten targets produce positive results, Exscientia can receive a total of £33mln in milestone and stage payments.

Outside of the UK, Frontier IP last year inked its first deal in Portugal with Universidade NOVA de Lisboa’s Faculty of Science and Technology.

Frontier’s chief executive Neil Crabb noted that there is a similar dynamic in Portugal to the UK.

He said: “There are strong pressures on universities to diversify their income streams and to show more impact. But there is a lack of local equivalents to us to helps support them.”

Strong share price growth

Over the past six months, Frontier IP shares have risen by almost 58% to 80.5p, and over a one year view, the increase is almost 90%.

The group’s net asset value as at 31 December 2017 was 32p per share, up from 26p a year earlier, with the discount reflecting the gap between the valuation of its portfolio and the expectations of investors.

The company recently announced the appointment of former Daily Express deputy City editor Andrew Johnson to take responsibility for its communications and investor relations, so hopefully the experienced hack will be able to keep the Frontier IP story in the headlines.

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