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How Imperial Innovations plans to use your £100m

How Imperial Innovations plans to use your £100m
February 8, 2016
How Imperial Innovations plans to use your £100m
IC TIP: Buy at 423p

Earlier this month, it raised a further £100m via a share placing at 425p a share, an 8 per cent premium to the prior day's closing share price. Management plans to spend the newly raised funds on investing in its existing portfolio of companies.

Chief executive Russ Cummings says investing in opportunities produced by the UCL Technology fund will also be a priority. The fund, which launched in January, will support early proof of concept, licensing projects and spinout companies across a range of the university's research areas. These include life sciences, engineering and IT. Imperial Innovations has already contributed £25m to the fund for an initial investment period of five years.

 

A brief history

Imperial Innovations started life in 1986 as the technology transfer office for Imperial College London, to exploit commercial opportunities arising from research carried out at the university. After becoming a wholly owned subsidiary of Imperial College, the group was floated on Aim in 2006.

The company has a technology pipeline agreement with Imperial College, which lasts until 2020. However, following a 2011 fundraising of £140m via a share placement, the company also invests in intellectual property developed or associated with its other three partner universities.

Historically, the group has concentrated on investments in the healthcare sector. However, management is increasingly seeking opportunities in other areas, including technology.

 

How does Imperial Innovations invest?

The group's latest fundraising follows a £150m share placing in June 2014 to fund investment in the group's unquoted portfolio. The extra funds helped Imperial double its rate of investment in quoted and unquoted companies in the financial year ending July 2015.

Around 85 per cent of the £68m it invested from the 2014 fundraising was in existing companies in the group's portfolio. Ramped up investment and gains made in its unquoted portfolio drove a £75m increase in the group's net portfolio value last year. The remainder of the money remains in cash for now.

When considering how to invest money the company raises, the company principally looks for technology that will be disruptive to a much larger market. Cancer drugs or lithium batteries are two examples. "The prize must be worth fighting for," says Mr Cummings.

 

How to value the company

Valuing companies like Imperial Innovations on the basis of the profits they generate is not the most meaningful method, since the group invests in early-stage technology. It is more helpful to look at the value of the group's investment portfolio. In 2014 Imperial gained £33.2m via the initial public offering of its largest investment, Circassia (CIR). As of July 2015, Imperial still had a 9.3 per cent stake in the allergy therapeutics company.

The value of the group's four listed investments stood at £106.8m at the end of July 2015. However, the value of Imperial's unquoted investments rose by more than a quarter in the past year to £220.4m. These investments are valued according to the fair value of Imperial's total holdings.