Hello and welcome to Edison TV. Today I'm speaking to Greg Smith, chief executive officer at IP Group, a UK-based international investor in science-based businesses across clean tech, deep tech, and healthcare. Greg, many thanks for coming in again. Good to see you. And can we start by exploring our analyst has recently put out a note and he believes that IP Group offers an asymmetric risk-reward profile skewed towards the reward based on your exposure to the Metacrine of the potential income streams from Metacrine's obesity-fighting drugs. Can you discuss that?
Yeah, so I think it's probably worth just stepping back a moment to think about where this sort of came from, the origins of it. So this is IP that was developed originally amazingly in the 1980s. So a very well-known professor in the anti-obesity and diabetes space, Professor Sir Steve Bloom, who operates at Imperial College and has done for many years. He carried out some original research back in the 1980s. So going back, you know, the best part of 40-odd years. 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. IP Group got involved in the early 2010s and we helped to really sort of work alongside the scientists and the research team to build out an IP portfolio which was commercializable, that was robust, that could go into the clinic. And that all happened in the sort of the mid-2010s against a backdrop where, to be honest, you know, the obesity space didn't have the same level of engagement from investors as it does today. So, we carried on working pretty, you know, quite relatively small amounts of capital, relatively small numbers of people. And but we ended up spinning the IP into a company effectively in 2019. And that then went through a bit of development, little bit of external capital, and then eventually was acquired by US business, Metacrine, the business you referred to. And then that in turn listed in the US last year in January. And then it only survived really sort of 8 months or so, and it was you might remember it was subject to this very competitive bidding process between Novo and Pfizer.
You know, what that means now for IP Group shareholders and the economics that IP Group shareholders 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 the whole world. So, and Albert Bourla, who's the chief exec, made some very expansive comments about the potential opportunity of this compound and this sort of class of compounds at JP Morgan earlier this year. And so, you know, over the course of what is quite a long-dated IP portfolio, we have potential milestones running out into the 2030s and actually a patent portfolio which runs into the early 2040s based around milestones and effectively royalty on net sales. So, it could be very interesting subject to, of course, the usual risks around clinical development. But if things play through, then it could be worth materially more than the numbers that we have on our balance sheet. So, it's very interesting and I think does offer, exactly as your analyst has described, quite an asymmetric risk profile in hopefully the right direction.
And you talked about the value on your balance sheet. You've recently taken a decision to attribute a discounted value for that drug on your balance sheet. Can you discuss that? How is that accounted for on your NAV?
Yeah. So, again, stepping back to put it in context, you probably remember that last time we spoke and the time before that I said that our number one priority 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 £1.10. So, that was, to be honest, that was the biggest focus for us in the year was to get that momentum back in the NAV per share. Now, of course, a major component of that was the value that came about from recognizing these future licensing streams. 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 the analyst forecasts that were available at the time. So, Metacrine was well covered, Pfizer similarly well covered. And we've taken the sort of, you know, 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. If the drug is anything like as successful as Pfizer are talking about, we could be materially understating it. So, there's clearly 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, shareholder exposure point of view, the fact that we've got these very long-term license streams offers a very interesting risk reward. And some of our shareholders have also said, 'Well, you know, there are royalty farmer companies out there that would enable you to monetize this sooner. 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, that's something obviously that is, you know, another potential thing for us to consider. But overall, a great result, years and years of great British science that's been developed and hopefully now in a place that can really benefit from, you know, sort of a global engine that's going to get this to hopefully help the lives of millions of people around the world. So, you know, hopefully an all-round success.
And sort of independently of the Metacrine IP, you've recently reiterated your guidance of reaching 250 million pounds of exit in excess between 25 and 27. You recently fully exited Hinge Health. You've also realized a few of your life sciences portfolios and sold more or less and Core Weave. Can you discuss that, but also discuss how you're seeing appetite for your investments from the broader community at the moment.
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 and end of 2027. So, we made good progress against that. In 2025, we realized 68 million of cash. The major component of it actually was the transaction that you mentioned. So, we had a successful IPO into that for a while. Hinge Health listed on the New York Stock Exchange back in May. We sold down as much as we could at the point of IPO. It was reasonably restricted to 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 6-month lock came off, we realized about half of the holding during the course of 2025, so that was 18 or 19 million. And then in the first few months of 2026, we realized the balance, which again was about 7 million or so. So, 2026 is off to a good start already. You also mentioned the Core Weave acquisition of Monolith. So, Monolith was an applied AI business. And I think to your point on, you know, 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 businesses that apply AI to particular domains, particular expertise domains, and those have been quite attractive to corporate investors. So, you remember Feature Space was acquired by Visa, that was applying AI machine learning to cybersecurity, particularly payments and combating fraud. And in the case of the Monolith exit, Monolith was basically looking at ways of being able to analyze the performance of individual cells within batteries, and the application that they applied that to was electric vehicles. So, it's sort of the intersection of some quite interesting areas. We announced that acquisition back in 25, but actually only about 3 million pounds of the consideration fell in 2025, so the remaining 20 million or so will occur during 2026. So, you can see already we're making sort of quite good progress to hopefully exceed the level of realizations that we achieved in 25 in 26.
And then another indicator of interest in the portfolio, of course, is the amount of capital that the businesses raised during the year. So in 25 the portfolio as a whole raised about 900 million pounds. So that's about 20% up on last year's more like 700 million in total last year in 2024. I had two decent standout transactions. One was a healthcare life sciences business called Artios raised just over 100 million in an oversubscribed round. That was led by very well-known life science VCs RA Capital and SV Health. So good validation of that opportunity and technology. And then Oxa which is an Oxford based autonomous software company, really interesting on the cusp of hopefully some major commercial deals over the course of this year. Very pleased to see that one supported by the national wealth fund. So UK investment and backing globally leading UK science but also alongside NVentures who are NVIDIA's venture capital arm. So that's a couple of outstanding transactions.
