Frontier IP (FIPP:58p), a company that provides a range of commercialisation services to university spin-outs in return for ‘free equity’ stakes, has produced eye-catching first half results. The fair value of its investment portfolio increased by 25 per cent to £17.1m, buoyed by £3m of unrealised investment gains, to deliver a two-thirds rise in pre-tax profits to £2.1m, lift EPS by almost half to 4.66p. Net asset value of £23.6m (46.6p per share) was up 20 per cent on the same six-month period of 2018.
The Vaccine Group (TVG), a spin-out from University of Plymouth, is a good example of how Frontier IP focuses on validating technology and, through early industry engagement, understanding how it can be scaled up. Backed by £9m of grant funding from the Chinese, UK and US governments, TVG is developing novel vaccines based on benign forms of herpesviruses that are found in all animals, including humans. They are created by inserting a non-infectious region of DNA from the pathogen being targeted into the herpesvirus. The vaccine then stimulates an immune response against the disease when delivered into the animal. Targeted diseases fall into two broad areas: zoonotic diseases, such as Ebola, bird flus and SARs, that jump from animals to animals, including humans; and diseases, such as African swine fever and bovine tuberculosis, which impact economically important livestock.
TVG is working in partnership with Shanghai Veterinary Research Institute and Kansas State University on coronavirus vaccines for use in animals to prevent COVID-19 re-emerging from animals to infect humans again. It could be a game changer. TVG raised £680,000 post period end to value Frontier IP’s 17 per cent stake at £1.6m.
There has been noteworthy news flow from several other portfolio companies, too. Amprologix is developing new classes of antibiotics to help tackle another global threat to human health, antimicrobial resistance. Molendotech, a developer of a rapid assay to screen water for faecal contamination and other harmful bacteria, is having its technology commercialised by Palintest, a subsidiary of FTSE 100 group Halma (HLMA). The global lockdowns impacting the ability of seasonal migrant workers to travel is clearly good news for Fieldwork Robotics, a developer of robotic technology to harvest soft fruit and vegetables, and Exscentia, a leading artificial intelligence-driven drug discovery company, has entered into a €240m (£214m) collaboration agreement with Bayer AG.
On a price-to-book value of 1.25 times, I maintain my 100p target price (‘Aim traded shares that hit the target’, 17 February 2020), having first advised buying at 56p (Alpha Research: ‘A differentiated IP play’, 15 November 2019). Buy.
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Simon Thompson was named 2019 Small Cap Journalist of the year at the 2019 Small Cap Awards.
