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218. Bull, Bear & Beyond – IP Group: executive interview
13 Plays9 days ago
In this interview, IP Group CEO Greg Smith and Edison’s Dan Ridsdale discuss Edison’s view that the group offers a compelling asymmetric return profile through its exposure to potential future income streams from Pfizer’s anti-obesity products. Smith explains how IP Group has recognised a discounted value for these future licensing streams in NAV, reflecting clinical risk and contributing to a 13% increase in NAV per share to £1.10. He also covers progress towards the group’s target of £250m of cash realisations between 2025 and 2027, supported by exits including Hinge Health, Monolith and CoreWeave-related proceeds. Smith points to continued momentum in third-party capital through new mandates with abrdn and Australia’s CEFC, and he outlines IP Group’s AI exposure across enabling infrastructure, quantum, optical computing and healthcare applications, supported by a strong balance sheet and active capital returns.
The company has recently announced the appointment of Michael Queen, formerly CEO of 3i Group, as non-executive director and chair designate.
IP Group helps to create, build and support IP-based companies internationally. It focuses on companies that meaningfully contribute to regenerative (renewable), healthier (life sciences) and tech-enriched (deep tech) futures.
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About ‘Bull, Bear & Beyond’
Bull, Bear & Beyond': features candid conversations with senior executives and from our own team of experts from across industries, exploring strategy, innovation, and the opportunities shaping their markets and 60-second pieces are a compressed summary of content designed to convey our message in a single, easily shareable hit.
About Edison:
Edison is a content-led IR business. We believe quality investment content should inform all investors, not just brokers. Our mission: engage and build bigger, better-informed investor audiences for our clients.
Edison covers 50+ investment trusts, read about them here: https://www.edisongroup.com/equities/investment-companies/
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Transcript
Introduction to Greg Smith & IP Group
00:00:07
Speaker
Hello and welcome to Edison TV. Today I'm speaking to Greg Smith, Chief Executive Officer at IP Group, the UK-based international investor in science-based businesses across cleantech, deep tech and healthcare.
00:00:22
Speaker
Greg, many thanks for coming in again.
IP Group's Risk-Reward Profile in Obesity Drug Investments
00:00:25
Speaker
Good see And can we start by um exploring, our analyst has has recently put out a note and he believes that um IP group offers an asymmetric risk reward profile, skewed towards a reward, based on your exposure to the MetSera, the potential into income streams from MetSera's obesity fighting drugs.
00:00:48
Speaker
Can you discuss discuss that?
Origins of IP in Obesity Drugs
00:00:51
Speaker
Yeah, so I think it's probably worth just stepping back a ah moment to think about where this sort of came from, the origins of it. So this is um IP that was developed originally, amazingly, in the 1980s. So um a very well-known professor in the anti-obesity and and um diabetes space, Professor Sir Steve Blum, who operates at the Imperial College and has done for many years. He carried out some original research back in the nineteen eighty s so going back, you know, the best part of 40 odd years. um And that's not atypical for the journey that some of the science that we end up commercializing goes on. Now, of course, we weren't involved for 40 years.
Development and Acquisition of MetSera
00:01:31
Speaker
IP Group got involved in the early twenty ten s um And we helped to really sort of work alongside the the scientists and the research team to build out an IP portfolio which was commercializable, that was robust, that that could go into the clinic.
00:01:48
Speaker
And that all happened in the sort of the mid-2010s against a backdrop where, to be honest, the obesity space didn't have the same level of engagement from investors as it does today. So we carried on working pretty, quite bit relatively small amounts of capital, relatively small numbers of people, and but we ended up spinning the IP into a company um effectively in 2019. And that then went through um a bit of development, a little bit of external capital, and eventually was acquired by US s business MetSera, the business you referred to. And then that in turn um listed in in the US last year in January,
00:02:25
Speaker
And then it only survived really sort of eight months
Post-Acquisition Financial Implications for Shareholders
00:02:28
Speaker
or so. And it was, you you might remember, it was subject to this very um competitive bidding process between Nova and Pfizer. And so what you know what that means now for IP group shareholders and the economics that IP group shareholders um have is that we now have quite a, this point you made about asymmetry of risk. We now have effectively no development costs to bear And the programs, the compounds that are now effectively the backbone of Pfizer's entire anti-obesity program are being developed by one of the best resourced pharma companies in in the whole world. so and And Albert Baller, who's the chief exec, made some some very expansive comments about the potential opportunity of this compound and and this sort of class of compounds um at J.P. Morgan um earlier this year.
00:03:16
Speaker
And so, you know, over the course of what is quite a long dated IP portfolio, we have potential milestones running out into the twenty thirty s and actually a patent portfolio which runs into the early 2040s based around milestones um and effectively royalty on net sales. So it could be um very interesting, um subject to, of course, the usual...
Valuation and Asset Management Strategies
00:03:39
Speaker
risks around clinical development. But if if things play through, then it could be worth materially more than the numbers that we have on our balance sheet. So it's it's very interesting and I think does offer, exactly as your analyst has described, quite ah an asym asymmetric risk profile in in hopefully the right direction.
00:03:57
Speaker
And you talked about the the value on your balance sheet. You've recently taken the decision to to attribute a discounted value for that drug on on your balance sheet. Can you can you discuss that? how How is that accounted for in your NAV?
00:04:11
Speaker
Yeah. so again keep stepping back to put it in context um you probably remember the last time we spoke and the time before that i said that our number one priority and financially for this year was to get positive momentum back into the nav per share and so i'm very pleased that in the full year results we were able to report a 13 increase in the nav per share up to one pound ten um so that was that was you know that's To be honest, that that was the the biggest um focus for us in the year was to to get that momentum back in the NAV per share.
00:04:43
Speaker
Now, of course, a major component of that was and the value that came about from recognising these future licensing streams. um the The approach that we've taken is typical IP group. it's much like how we would value any of our other therapeutic exposures. And what we've done is we've taken um the analyst forecasts that were available at the time. So MetSera was well covered, Pfizer similarly well covered. And we've taken um the sort of know the the mid-range of that, we've discounted it back, and we've applied market-based discounts. So we think that represents you know a fair value for what we know today about the compounds. um If the drug is anything like as successful as Pfizer are talking about, we could be materially understating it. So there's clearly a potential upside in it. That said, if the compounds don't progress through their clinical trials, then we could be materially overstating it. But I think from a you know
Monetizing Royalty Streams and Shareholder Feedback
00:05:36
Speaker
shareholder exposure point of view, the fact that we've got these very long term license streams offers a very interesting risk reward. And of course, some of our shareholders have also said, well, you know, there are royalty pharma companies out there that would um enable you to monetize this sooner. and We're not in a particular rush to do that, but you know I've always said and our investment team would always say everything is available for sale at the right price and at the right time. So um that's something obviously that is ah you know another potential thing for us to consider. But overall, um a great result, um years and years of
00:06:11
Speaker
great British science that's been developed and hopefully now in a place that can really benefit from um ah you know sort of a global engine that's going to get this to um hopefully help the lives of of millions of people around the world. So you know hopefully an all-around success.
Exit Strategy and Cash Realization Targets
00:06:28
Speaker
And so independently of the MetSir IP, you've recently reiterated your um your your guidance of reaching £250 million pounds of exit i in excess between 25 and 27. You've recently fully exited Hinge Health. You've also... um realized a few of other of your life sciences ah portfolios and sub-modelists and um and call weave um can you discuss i guess discuss that but also discuss how you're seeing appetite for your investments from from the broader community at the moment
00:07:06
Speaker
Yeah, so we, again, this time last year, I'd set out an ambition or a target around being able to deliver 250 million of cash realizations from the portfolio between beginning of 25
Successful Exits and AI Portfolio Interest
00:07:18
Speaker
end of 2027. made good progress against that.
00:07:22
Speaker
In 2025, we realized 68 million of cash. and the The major component of it actually was the transaction that you mentioned. So we had ah a successful IPO, and so that for a while, um Hinge Health listed on the New York Stock Exchange back in May. and We sold down as much as we could at the point of IPO. It was was reasonably restricted to um a proportion of each investor's holding at the point of IPO. But good news, the shares traded up from their $32 a share price up into the 40s and 50s. When our ah six month lock came off, we realized about half of the holding um during the course of 2025. So that was 18, 19 million.
00:08:05
Speaker
And then um in the first few months of 2026, we realized the balance, which again was about sort of 17 million or so. So, 2026 is off to a good start already. um You also mentioned and the CoreWeave acquisition of Monolith. So, Monolith was ah an applied AI business. um and And I think to your point on, you know, what what are we seeing that's interesting in the portfolio, there's been a common theme in the last sort of couple of years. of and businesses that apply AI and um to particular domains, particular expertise domains, and those have been quite attractive to um corporate investors. So remember FeatureSpace was acquired by Visa, that was applying AI and machine learning to cybersecurity, particularly payments um and combating fraud.
00:08:51
Speaker
And in the case of the Monolith exit, Monolith was was basically looking at ways of being able to analyse the performance of individual cells within batteries and the application that they applied that to was electric vehicles. So again, sort of the intersection of some quite interesting areas.
00:09:07
Speaker
um We announced that acquisition and back in 25, but actually only about 3 million pounds of the consideration fell in 2025. So the remaining 20 million or so um will occur during 2026. So you can see already, we're making sort of quite good progress to to hopefully exceed the level of realizations that we achieved in 25 in 26. And then another um indicator of interest in the portfolio, of course, is the amount of capital that the businesses raise um during
Capital Raising and Healthcare Transactions
00:09:39
Speaker
the year. So in 25, the portfolio as a whole raised about 900 million pounds. So that's you ah about 20-ish percent up on last year's, more like 700 million in total last year in 2024. Two decent standout transactions. One was um a healthcare business, life sciences business called Arteos, raised i'm just over 100 million in an oversubscribed round.
00:10:03
Speaker
That was led by very well-known life science VCs, RA Capital and SV Health. So good you know validation of of that opportunity and technology. And then Oxer, which is ah an Oxford-based um ah autonomous software company, really interesting on the cusp of hopefully some some major commercial deals over the course of this year. I'm very pleased to see that one supported by the National Wealth Fund. So, you know yeah UK investment and backing, you know really sort of globally leading UK science.
00:10:33
Speaker
but also alongside Nventures, who are Nvidia's venture capital
New Collaborations and Mandates in UK & Australia
00:10:39
Speaker
arm. So a couple of outstanding and and transactions. Interesting.
00:10:44
Speaker
And um you recently announced a collaboration with Aberdeen. um Can you talk about that, but also your initiatives and your and and the traction that you're getting and attracting in terms of attracting third party capital?
00:10:58
Speaker
Yeah, so you might remember last time we spoke here, it was actually the similar weather, the sun was shining and I said at the time that I was confident that we would be able to announce another private capital mandate by the time of the full year results. um So it was personally very rewarding to be able to say that we delivered on that um during the full year results statement and um what we described, and we didn't give a huge amount of detail because it's it's a relatively young um relationship, but Aberdeen are one of the um you UK-based significant investors at scale and and some of the clients that they have are underlying workplace pension schemes. And as you probably know under the Mansion House, Compact and Accord, there has been an increasing level of interest in trying to find ways for those types of long-term investors to get access to a portfolio of companies that are in the sort of and the growth, particularly the sort of the growth stage of venture.
00:11:55
Speaker
And that's exactly what we're planning to do for Aberdeen. And hopefully that mandate will be up and investing, making its first investments this year. and Shortly after the results, we also, and and I guess this was sort of building on the back of the seven years of experience we've had managing um Host Plus's capital in Australia, we announced a mandate for and or in partnership with Australia's CEFC. You can think of the CEFC a little bit like the Australia's Green Bank. And their mandate is to try and leverage capital into um clean tech opportunities, clean energy opportunities um in Australia.
00:12:34
Speaker
And so we will be, and we've we've announced effectively the first close of that fund and and the the intention will be to raise a little bit more capital and then put that to work in Australia. So we're sort of, we've got ah a new UK mandate, which will have a more of a UK focus. We've got our Host Plus mandate, which is um international and um and including Australia.
00:12:53
Speaker
And then we' got the CEFC mandate. and And hopefully that's sort of just starting to demonstrate increasing confidence in IP group as an institutional manager of of these venture relationships. Because i think there's ah a lot more that we could do and there's a lot more capital we
Strategic Positioning in AI Developments
00:13:08
Speaker
could put to work. So it's good good progress so far.
00:13:11
Speaker
And you mentioned artificial intelligence earlier and one and your portfolio has always been characterized by its diversity and and being probably less software oriented than than than many peers. um And in particular, you know you've got companies deploying AI and in elements like healthcare and companies.
00:13:31
Speaker
sort of exposed to networking, high speed networking, that the the the investment cycle is driving demand for those products. Can you discuss a little bit more detail how you see your exposure to artificial intelligence and how that's going to impact your portfolio?
00:13:47
Speaker
Yes, it's definitely interesting. is i mean um I don't think any company at all is immune from both the opportunity and and the challenge of of this sort of incredible pace of development of AI that we've seen over the last couple of years. and um in In recent times, the there's been and commentators writing on the sort of the so-called SaaSpocalypse and the fact that you know AI is going to completely destroy all these business models. I think there's definitely nuances to that and there'll be areas where you've got a trusted long-term SaaS provider who where their clients will probably say, well, actually, we'd prefer you integrated AI into your tools rather than us have to rip that all up and come up with some new suppliers sort of thing. So I think there's there's definitely nuances to that from an IP group point of view. Generally speaking, our businesses are either enabled by or are enabling this AI transition. We have very limited exposure, I struggle to think of much at all, to um SaaS-based and pure sort of AI business platform level businesses, and we certainly don't invest in
00:14:47
Speaker
um in the in the models because they're sort of too energy and um capital intensive. you know We can't can't compete with the tens of billions that is that's been deployed there. we might do one or two things, watch the space, but you know nothing that's going to require that level of capital. So I think the the interesting point from our shareholders point of view is generally speaking, our companies are enabled by this opportunity rather than
AI Applications in Genomics
00:15:11
Speaker
threatened by that. know um the to To try and put some examples around it, you know um today is World Quantum Day. We're um April 14th. No idea why it's April the 14th, but World Quantum Day. So and that's an area that the UK has got particular expertise in. The UK government has been talking a lot about um allocating additional capital and resources. We've been an investor in future compute like Quantum for many years. got some good exposure in the portfolio.
00:15:38
Speaker
um Similarly, we've got things like optical computing, a great business called Lumai from Oxford, and which is massively lower power and consumption because you're using photons and light rather than and the electronics, which require transistor switching, which quite energy intensive. now so That's really interesting, novel and forms of memory that enable quicker transition of data between the processing bit and the memory.
00:16:01
Speaker
and So there's there's some really interesting over the next, I think, one to five years of of development of the whole core infrastructure behind AI for us to look forward to. And then, of course, we have companies that are applying AI. So you mentioned um in the healthcare care space, so let's double click a little bit into um genomics and genetic sequencing. So the UK, another brilliant strength in DNA sequencing.
00:16:27
Speaker
um Oxford Nanopore, which is one of our bigger holdings, as you know, is now a quoted company its own right. They have been using GPUs to sort out the base calling from their raw signal for many years now. And so that you know most of the um significant improvements that they've seen in throughput and analysis has been brought about by this incredible increase in compute power.
00:16:49
Speaker
But then and on ah on a different side of the coin, we have a business called Genomics. And Genomics has got ah um the the world's leading database of um sequence DNA information that allows and corporate partners, allows healthcare providers, ah allows people... um like drug discovery companies to be able to analyze different genetic data and determine whether or not particular compounds are going to be better suited to particular disease or different populations of disease with a proper genetic underpin to it And again, that's now being powered by agentic AI, which sits on top of the data layer.
Achievements and Future Outlook
00:17:25
Speaker
So there's there's lots of opportunity. So I think, um you know, looking forward overall, um
00:17:31
Speaker
we've got a lot of confidence in the business and that was partly brought about because you know we achieved sort of three key objectives this year in 2025. We increased our NAV per share. and We were able to realize 68 million from the portfolio and that enabled us to use some cash to reinvest in the portfolio. But I think also worth pointing out, we actually retired about 10% of our shares in issue during the year. We had a very aggressive buyback program given the discount in our in our NAV per share. And so that sets us up very nicely, I think, for the future. we've got some great exposure to um life sciences, to clean tech, to deep tech.
00:18:08
Speaker
And we've got a very strong balance sheet. And now that we're starting to see some meaningful traction on the private capital side, where you know we're looking forward with the real confidence. Greg, great to see so many things moving forward so positively and and all the things going on with the business. many Many thanks for joining me again today. Thanks for having me.