IP Group — Novo Holdings invests in Oxford Nanopore

IP Group (LSE: IPO)

Last close As at 13/11/2024

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−1.35 (−2.95%)

Market capitalisation

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Research: TMT

IP Group — Novo Holdings invests in Oxford Nanopore

IP Group’s largest life sciences holding at end-2023, Oxford Nanopore (ONT), which developed a new generation of nanopore-based sensing technology, announced earlier today that it has successfully completed an issue of 66.7m ordinary shares (c 7.6% of its issued capital), raising £80m of gross proceeds (upsized from the initial £75m as the issue was multiple times oversubscribed). This includes a £50m strategic investment by Novo Holdings (the controlling shareholder of Novo Nordisk and Novozymes), with the remaining proceeds coming from institutional investors. As per the announcement, Novo Holdings currently intends (subject to availability and price, among others) to purchase another £10m worth of ONT shares over time in the market.

Milosz Papst

Written by

Milosz Papst

Head of Content, Investment Trusts

TMT

IP Group

Novo Holdings invests in Oxford Nanopore

Company update

Investment companies/TMT

Listed venture capital

1 August 2024

Price

41.70p

Market cap

£423m

Net cash (£m) at end 2023

91.7

Shares in issue

1.01bn

Code

IPO

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

Business description

IP Group helps to create, build and support IP-based companies internationally. The group focuses on companies that meaningfully contribute to regenerative (Kiko), healthier (life sciences) and tech-enriched (deeptech) futures. The group is mostly active in the UK, with an additional international footprint through investment platforms in Australia, New Zealand and the United States.

Analysts

Milosz Papst

+44 (0)20 3077 5700

Dan Ridsdale

+44 (0)20 3077 5700

IP Group is a research client of Edison Investment Research Limited

IP Group’s largest life sciences holding at end-2023, Oxford Nanopore (ONT), which developed a new generation of nanopore-based sensing technology, announced earlier today that it has successfully completed an issue of 66.7m ordinary shares (c 7.6% of its issued capital), raising £80m of gross proceeds (upsized from the initial £75m as the issue was multiple times oversubscribed). This includes a £50m strategic investment by Novo Holdings (the controlling shareholder of Novo Nordisk and Novozymes), with the remaining proceeds coming from institutional investors. As per the announcement, Novo Holdings currently intends (subject to availability and price, among others) to purchase another £10m worth of ONT shares over time in the market.

Period end

Net cash*
(£m)

Portfolio fair value** (£m)

NAV
(£m)

NAV/share
(p)

Price/NAV
(%)***

06/22

191.6

1,266

1,414

136.7

(49)

12/22

160.1

1,259

1,376

132.9

(58)

06/23

111.7

1,276

1,314

126.7

(55)

12/23

91.7

1,165

1,190

114.8

(49)

Note: *Includes restricted cash but not funds held on behalf of Enterprise Investment Scheme/venture capital trust investors. **Portfolio fair value includes US platform and other LP interests. ***Based on share price at respective period ends.

ONT’s CEO highlighted that the strategic investment from Novo Holdings reflects ONT’s ambition in the biopharmaceutical sector, while Dr Daniel Mahony (senior partner, growth investments at Novo Holdings) said that it illustrates Novo Holdings’ confidence in ONT’s long-term value proposition based on a comprehensive due diligence within the biopharma community and an analysis of ONT’s intellectual property portfolio. The net proceeds from the issue will be used for general corporate purposes.

ONT reiterated its guidance for 2024 and the medium term, and it continues to target an adjusted EBITDA break-even in 2027 and cash flow break-even in 2028. The company expects 20–30% underlying life sciences research tools (LSRT) revenue growth in FY24 on a constant currency basis at a gross margin of c 57% (vs 53.3% in FY23 and 56.3% in FY22). It also aims for a medium-term (ie FY27) growth rate of more than 30% per year on a constant currency basis, and an LSRT gross margin of more than 62% by FY27.

IP Group was ONT’s founding shareholder in 2005. ONT successfully completed its IPO in September 2021, allowing IP Group to realise £84.1m in cash on its investment by selling around one-fifth of its stake. Together with a minor partial realisation in 2020, this brought IP Group’s total partial realisation from ONT to £106m, already more than its total investment of £77m. IP Group held a c 9.54% stake in ONT before the share issue (based on Bloomberg data). At a price of 120p it would be valued at c £100m (or c 9% of IP Group’s total portfolio fair value at end-December 2023) and together with the above-mentioned partial realisation would translate into a multiple on invested capital of c 2.7x (of which 1.4x is realised). IP Group disclosed that, following the admission of ONT’s new shares, it will have an undiluted beneficial holding of 8.9% in ONT (and manages an additional 1.3% through its managed funds).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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United Kingdom

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by IP Group and prepared and issued by Edison, in consideration of a fee payable by IP Group. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2024 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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