VSA Capital Market Movers – Frontier IP Group


VSA Morning Technology Comment, 01/10/21

Frontier IP Group (LON:FIPP)

Portfolio Company Exscientia intention to IPO in the U.S. and CamGraPhIC fund raise

Frontier IP Group (LON:FIPP) works with technology companies, typically university spinouts, to commercialise intellectual property in return for equity stakes. This week, Frontier IP issued news on two portfolio companies, Exscientia and CamGraPhIC:

Exscientia was originally a spinout from Dundee University, and has been an incredible success. Exscientia uses AI across its technology platform from target identification through drug design and patient selection to precision engineer new medicines.

The company has filed for an IPO in the U.S. and this week, Exscientia confirmed that an updated registration statement on Form F-1/A (the “Amended Registration Statement”) has been filed with the U.S. Securities and Exchange Commission. The Amended Registration Statement states that the initial public offering price per ADS is estimated to be between US$20.00 and US$22.00. Following a proposed 300:1 share split, Frontier IP would be entitled to 1,564,800 ADSs. If the IPO takes place, which is not yet a certainty, Frontier IP’s stake would be valued between GBP23.2m and GBP25.5m.

The news today from Frontier IP follows an announcement earlier this month that Exscientia was entering into a US$70 million collaboration, over a four-year period, with the Bill & Melinda Gates Foundation’s Strategic Investment Fund (SIF) to develop anti-viral therapeutics against Coronavirus and other viruses with pandemic potential. Exscientia completed a US$100 million Series C funding round and in April 2021 a US$225 million Series D funding round led by SoftBank’s Vision Fund 2i and other major investors.

CamGraPhIC has raised GBP1.6 million through an equity funding round from existing and new investors. This fundraising values University of Cambridge spinout CamGraPhIC at GBP5.6 million pre-money. The company is developing a graphene photonic chip for data conversion for high speed datacom and telecom industries. CamGraPhIC has raised GBP3.4 million. Frontier IP holds a 20.8 per cent equity stake valued at GBP1.5 million and holds GBP1.0 million of loan notes and has previously advanced GBP0.2m in loans.

Of the 19 portfolio companies that Frontier IP has stakes in, a number are at a point of acceleration in commercial development, paving the way for a step up in valuation or a potential exit.

Although Frontier IP is yet to have an exit to crystallise cash value, and the timing and value of potential exits, such as the proposed Exscientia IPO are hard to assess, given the number of companies in the Frontier IP portfolio now at inflection points, this is increasingly becoming a real possibility.

As a result, we believe the shares offer distinct valuation upside potential. Buy

#Indicates VSA house stock.

All disclosures and supporting charts can be found in the PDF version.

Phil Smith, Research Director, Technology | T: +44 (0)20 3617 5187 | E: [email protected]

VSA Capital Research | T: +44 (0)20 3005 5000 | E: [email protected]

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