2026 annual general meeting of IP Group PLC open. First of all, welcome to everyone in the room for joining us and those online. Welcome to, I'm going to say just a few words before I hand over to Greg and to Michael, and then there will be an opportunity to ask questions. For those of you who don't know me, I'm Douglas Flint, the chairman of IP Group.
I also want to extend a warm welcome to Michael Queen who's sitting two to my left, who was appointed by the chair as a non-executive director and chair designate of IP Group last month. So, also with me, Greg Smith, who's the chief executive officer, David Brennan on my right, the chief financial and operating officer, and all four of our other non-executive directors. I'll ask them to sort of raise their hands so you know who they are. Dr. Caroline Brown, there we go. M.R. Hines, and Anita Kejjel. And then to keep us all in order, Angela Leach, the company secretary, is here. She advises me that we have a quorum and therefore we can start the meeting.
As all of you will know, this is my last AGM and I retire from the company at the conclusion of this AGM. Let me say what a privilege it has been. I'll say more on that later. We went through a very rigorous succession process, for which thank you to our senior independent director, and as I had already introduced him, but we're delighted that Michael Queen has been appointed director designate and subject to being elected formally at this meeting will succeed me as chair at the conclusion of this meeting. As former chief executive of 3i, Michael has both deep knowledge of private markets, venture investment, as well as experience in the university sector, all of which will be invaluable to IP Group. In particular, he has a strong track record in scaling institutional capital platforms, which aligns very closely with the group's strategy as we continue to grow funds under management and support the portfolio through the next phases of development.
As we previously stated, given a number of directors are also approaching the 9-year maximum term, and we're dealing with this in a measured, staggered way. The board's nomination committee is actually planning for succession alongside Michael. Succession to my role was the first step as we had previously announced.
So, going back to look at last year, 2025 was a year of disciplined execution and what were, as we can all recognize, very challenging markets. But, we had a number of notable highlights which demonstrated the strength of the group's model and the opportunity. If I take three, very notable was the acquisition of Mersana by Pfizer gaining access to Mersana's weight loss drugs, and we have exposure to that through licensed intellectual property which could in the future generate significant royalty streams. We saw the IPO of Hinge Health and from which we exited in full and aggregate realized 46 million of cash proceeds, and if you go back to our early investment, that's a 53 times return. And we sold Monolith to Nasdaq-listed CorWave.
As expected in a venture portfolio which balances high risk with high opportunity, some companies progress technically but face valuation or funding pressure, while others suffered setbacks. That highlights the inherent risk in breakthrough science. The balance of success and that setback is typical of the model and underpins the long-term nature of returns. But in terms of financial performance, the group returned to profitability, largely because of the Mersana valuation, delivering a 66.9 million pound profit. Our NAV per share grew 13% to 110.4p and we closed the year with more than 200 million cash in the bank.
The board remains focused on considering actions within our control that could bring the share price into greater alignment with reported net asset value per share. And within this, consistency in our capital allocation framework, including share buybacks, together with maintaining financial resilience, have been critically important in that journey. Delivering return to shareholders, including focusing on narrowing the share price discount to NAV per share, remains a key focus. Since 2021, I'd remind you the group has delivered more than 150 million pounds of cash returns that have benefited shareholders via both dividends and more significantly through share buyback. And that's resulted in retiring 9.4% of the share capital in 2024 and 17.7% to date. During 2025, the group purchased 91.9 million shares for 45.7 million pounds.
So, over the next 2 years, as set out in the annual report, we're targeting significant cash realizations, reflecting the maturity of the portfolio. And the group remains confident that there remains significant unrecognized value within the portfolio. So, in summary, I'm going to hand over to Greg in a minute, the group's well-positioned with experienced leadership, high-quality portfolio, and as I step down at the end of this meeting, I do so confident in the group's strategy and its future direction. The focus is clear to deliver long-term returns from exceptional science. Let me hand over now to Greg for his comments. Greg.
Thank you, Douglas, and thanks to everyone in the room for coming. Thanks to everyone online for joining us. Always appreciate your time and focus to come to the IP Group AGM. Before I move on, I think it would be remiss of me not to formally thank Douglas on behalf of the whole board, the whole team at IP Group, and on behalf of our shareholders for the very considerable contribution to the group that you've made over the last 8 years. I would say your judgment, your counsel, your leadership of the board have helped guide us through a period of quite significant change while always maintaining a very clear focus on long-term value. You leave the group very well positioned, but particularly with our sincere thanks and our deep appreciation.
So, hopefully as you know, IP Group is the leading UK science and technology investor with the biggest investor in university spin-outs in the country. And in our 25th year this year, we have now formed more than 600 companies based largely around fundamental science. And our unique model, which combines the sort of deep partnerships that we have with universities and other research institutions, and access to long-term commercial and capital partners positions us very well to support breakthrough science from inception right the way through to commercial success. And as Douglas has alluded to, 2025 was a notable year for IP Group.
You'll, some of you will have dialed into the full year results and hopefully you will have remembered that the number one priority for the group this year was to return the business to NAV per share growth. And I was very pleased to say that we did exactly that. The major contributors, Douglas has also previously mentioned, but the Pfizer acquisition of Mersana which held the license to the GLP-1 program and others that now forms the backbone of their anti-obesity program was a major component. As Douglas said another significant event was the Hinge Health IPO on Nasdaq. And as you will know from the annual report we've now completely exited our position in that and made more than 50 times our cash return. So that's good.
On the subject of cash realizations, we did well on that front. We delivered strong cash realizations and as Douglas said that enabled us to retire about a tenth, about 10% of our shares in issue during the course of the year while also being able to maintain a robust liquidity position. That followed a very strong year of realizations in 2024 and that included our largest ever cash exit in the form of Featurespace to Visa and we delivered another 68 million in 2025. And as Douglas has alluded to, the board has great confidence in our ability to deliver 250 million of cash realizations over the period 2025 to 2027. We're not giving a formal update, a formal trading update at this meeting. We haven't put anything out by way of RNS, but suffice to say we are on track with our objectives for this year.
On the subject of private capital and augmenting the group's capabilities and resources on the balance sheet, we now manage or advise about half a billion pounds worth of assets. And approximately two-thirds of that is managed through our specialist EIS fund manager, Parkwalk. I think he's here in the room, which is good to see. And we are seeing, you know, sort of increasing evidence of interest in adding to that. I was very pleased in our full year results to be able to talk about a new partnership with Aberdeen. We think that this is the first DC mandate that will be directly focused at scaling science and technology businesses in the UK. So, that's very good news and good to see some progress being made around the Mansion House Accords. I also said that we were confident of delivering further mandates during the year. Hopefully within about a week of the full year results announcement, we also announced a new fund with CEFC, which is effectively the Green Bank in Australia focused on clean tech opportunities in Australia. So, we're making progress there and that is part of our sort of broader ambition to be able to drive growth in those sorts of businesses and to be able to be on their capital journey with them during their full life cycle.
Doug has mentioned this, the external funding environment has definitely remained competitive during 2025 and into 2026. There continues to be still a growing recognition of the importance of backing and investing in innovation and we continue to believe that the environment for what we do is improving and that we can continue to be well positioned in that endeavor. Quickly on the funding for the portfolio, you'll have seen hopefully in the annual report that about 80% roughly of our portfolio by value is funded into 2027 or beyond and we're definitely starting to see increased evidence of supportive funding rounds. You'll have seen in the press possibly that two quantum companies that we were the founder investors in and completed multi-hundred million pound funding rounds during the course of the last couple of weeks and that remains a very interesting area that is supportive of and driving this big transition towards AI.
So, we remain well positioned. We thank you for your shareholding, for your patience and for your support and I and the team and the new board are very motivated to deliver NAV per share growth and hopefully that will be reflected in share price growth. So, I thank you all for attending and I'll hand on to Michael.
Thank you, Sir Douglas and Greg. Subject to your approval, I take the chair with a great deal of enthusiasm and actually humility. I've been involved in the investment landscape for the last 40 years. And IP Group occupies a genuinely distinctive position investing in the kind of early stage science that's critical to this country's future. But then it turns into companies that matter. And that's in itself is a mission worth serving. But a fundamental measure of our success is shareholder value. And I want to assure you as our shareholders that shareholder value is at the forefront of my mind in everything I will do for IP Group in the future. I very much look forward to working with Greg, David and the rest of the team as well as the board. I think we've got some incredible relationships with our university partners, our portfolio companies, and hopefully, of course, our shareholders. And I really look forward to meeting as many of you as I can in the future. Thank you.
Michael, thanks very much. Before we move on to the formal part of the meeting and voting on the resolutions, I'd like to invite shareholders both in the room and online to ask any questions of the directors that they may have on any matters relevant to the business of the meeting. And if we've got any questions that have come in in advance, we'll take them too. By dealing with the questions at the outset of the meeting, hopefully we can give sufficient time to deal with all the questions that you have. For those in the room, if you can before asking your question, if you're able to give your name and state whether you're representing a shareholder, a proxy, or a corporate representative. And if it's one of the latter, a proxy corporate representative, you can identify who you're representing. For those submitting questions online, if you could indicate the same, that would be helpful. So, let me open the meeting to questions. If there are any questions, please now.
Morning, everyone. It's Julie Diaz from Railpen. We represent about 18% of the share capital here. I've got two questions, so I'll take them one by one. The first one, talks a lot about buybacks over the past couple of years. And it's been encouraging to see the company attempt that. However, it hasn't really moved the dial in terms of the discount. At the same time, the company has not really made any new investments into innovation, which presumably is its core purpose. So, could you talk us through what the long-term strategy for the company is here? For shareholders that are long-term investors and interested in investing in UK innovation, and not necessarily just interested in financial engineering.
Okay, let me deal with that a little bit on the buyback and then Greg will come back on how we're dealing with the portfolio. I mean, of course, one doesn't know the counterfactual. We believe that the buyback program was important because it shared a portion of the proceeds that we had made with shareholders through buyback. And we have a number of shareholders for whom buyback is very important, and they stress that to us. So, we don't know the counterfactual if we haven't done share buybacks, whether the share price would have reacted differently. So, that's the first point. But I think that the main point, and it's something I feel very strongly about, is that we had made realizations and we share some of that benefit with, not no one on the board, but we do share that with staff in the company. I think it's wrong to share the proceeds with staff in the company, which they have earned, without sharing some of it in some way with shareholders. So, that's philosophically part of it. And I think shareholders deserve to see some of the cash that's realized from successful investment coming back. While the company share price trades at the discount that it does, we worked out mathematically, arithmetically, it makes a great deal more sense to shareholders to buy back shares than to pay dividend. And that's what why we did it. I think one of the other frustrations, which I know we've talked about, is that the number of funds in UK PLC, as it were, directed at small cap companies, of which we are a small cap company, has got much, much less over the last couple of years. And indeed, institutions like your own have become increasingly important, and we welcome that in many ways, because you are the traditional long-term investor. And some of the small cap funds demonstrated that they weren't there for the long term, because they couldn't attract flows, because more money's going into the large scalers. So, whether buybacks have moved the dial, I think yes, you can certainly say that the discount has only narrowed very, very marginally. What it would have been if we had not done buybacks, we don't know the counterfactual. But we have continued to invest, and we have continued to put money into new ventures. But again, as we've said in the annual report and accounts, the priority in capital allocation is to support those investments that we feel most committed to, because we think that's where the most value will derive for shareholders. But at that point, giving him plenty of time to think about it, Greg.
Well, thank you. Maybe don't need too much time to think about it, because, you know, capital allocation and specifically around this balance of returning capital to shareholders, doing so in an efficient way through buybacks, but importantly investing in the business is one of the main priorities that we discuss as a board month in, month out. And I'm sure Michael will look forward to similar discussions. This is one of our main responsibilities as the board is to determine that capital allocation plan. Hopefully last year we added about 4p per share roughly as a result of the buyback at a discount, which is helpful and I think reducing the denominator and effectively concentrating shareholders into a portfolio that we feel is undervalued by the market is a positive sensible thing to do. Now, of course, on the flip side, if we continue to do that, we don't shrink our way to greatness. That isn't the ambition of the group. And so, we over the last at least 3-4 years, while the public markets haven't been so strong, have had to do a couple of things. Firstly, we have moved a lot of our early-stage sourcing deliberately into our specialist EIS fund manager, Parkwalk. There are various reasons for this, but I would say the level of investment into new opportunities very early on in the pre-seed and seed phase has remained actually pretty consistent. If you look at the league tables, there'll be a Beauhurst report coming out. There's one every year. There'll be a Beauhurst report, and you can see that we continue to be the leading investor in new pipeline. And as shareholders, the choice that we have made is to say, 'We're going to do more of that early stuff there.' And the intention is that as our capital position improves and hopefully as the share price improves, there is a ready pipeline of those opportunities slightly further along the risk journey where we have the preemption rights and the relationships to be able to invest in those companies. Traditionally, we have invested somewhere between 5 and 20% of our investment in any given year from the balance sheet into new opportunities, and we are at the lower end of that at the moment. Part of that is because obviously, we're balancing the buybacks, and part of that is because, as Douglas said, we are trying to ensure that the maturing portfolio has the capital to be able to meet its milestones and get to exits. And there's a lot of those particularly in the biotech portfolio where we're allocating capital to get them to exit rather than starting new things. One of the objectives this year, I think it's in the remuneration report somewhere in the accounts, is for the team to add new opportunities on the balance sheet. We've got a target in Parkwalk, and we've got a target in the balance sheet because I do think that landscape is shifting. I do think that the fact that we've improved our NAV per share for the first time in a few years, I do think that the pipeline of exits that we're confident in is giving us the opportunity to shift a bit more towards originating or adding new things to the balance sheet. So, I think it's a great question. It's the question that we spend a lot of time on at the board, and I think we've got an appropriate balance, and I view it as a shareholder that if we can retire some shares cheap and not constrain the business long term, then that's a good balance for all shareholders in the long term. I know there's a range of views among the shareholder base as to how we balance that, and I think that's very healthy and very natural, and the board's job of course is to try and take into account all of our shareholders and delivering value for them over the long term.
Sure, you said you had a second question.
A second question, yeah. Thank you. I wanted to get your thoughts on the third largest asset in your portfolio, which is Estessa, or the second largest if you take out Oxford Nanopore. I noticed that the value actually went up at the full year accounts. And I wanted to get yours and the board's confidence level around the valuation of that asset, and also if you could please walk us through the milestones over the next 18 months that you see coming out from that.
Oh, excuse me. Oh, yeah, you did have the microphone. Thank you. Do you want to talk about valuation?
Yeah, valuation. Happy to.
And you want to talk about milestones?
And I could also say that at the conclusion of this AGM the board meeting that's going to take place is going to get our annual presentation. So the whole team's coming in and it's going to be a very full presentation. So we take very great interest in that asset.
Yeah, no joke. Thank you. I do accept the valuation of Estessa has probably always been the most difficult asset we have to value. There's no doubt about it. It traditionally before Mersana came along, Mersana license of course, it was anyone that was really on a net present discounted value kind of calculation. And so, and the reason for that is it hasn't actually really had any third party funding for quite a long time since 2017. So we can't really rely on value of last funding round. And therefore we do have a simple metric but it's looking at size of potential market, looking at likely time we'll get to market as you know, and then applying the probability of being successful and discounting it back. In simple terms, it's just been announced actually it's doing its extension studies isn't it? So phase 2b extension study. And effectively the model has remained as it was before and the assumption remains that the phase 2b will give us enough information for it to be able to get into a position where it may be licensable and the assumption model assumes that then at some point it will be a license that applies a risk factor of that not being achieved. And then it applies probability of success of each of those trials being successful. So the common, that's just based upon you can look at stats online, it's about 63% chance I think. So about 63% chance and then it's a 65% chance if you're interested of the phase three trial being successful. And it assumes that by you'll have approval and some sort of market launch. Look at the market size, it assumes a peak sales of about $2 billion. And which we think probably not the whole market. We think it's about a 60 billion market. So, we don't think we're being overly aggressive there. It makes the assumption that I probably won't say publicly that there's an assumption about what the royalty will be because we're assuming we've licensed it. That royalty is certainly higher than royalties we've seen before because this is now being licensed in at the end of a phase two success at the beginning of phase three. Unlike Mersana, of course, which was just the original compounds being licensed out. So, obviously that'd be much lower rate number but on a much bigger market. And then we discount the whole lot. Only have to do that at 11.5%. And that's where you come back. And the reason why the value didn't change as much as reasonably it could have done after it missed the primary endpoint in that phase two trial is because actually the trial was, it was confusing to some extent because actually very good secondary endpoints. As you know, it had very good results on things like tissue and muscle repair. And only just actually, look at the beginning of the stats, missed the primary endpoint actually on the anti-inflammatory side. And so that's why it made sense. It wasn't like the end of the drug. It actually had a trace of some real promise. So, we effectively reran the calculations. And really the big change was we added about 3 and a half years. And we delayed the project by about 3 and a half years. And that's why the value came from about 127 to about
90 p. which we carry forward now. The small change, by the way, is just a statistical change on FX numbers using on the market size, which I think went up by 3 million this year. But that was no change in our belief in its value. We certainly were not putting a death knell up at the moment. And so that's why we value it as we do. I think I entirely accept it's the hardest one to really sort of be challenged from a point of view on the portfolio. And I think if at some point it ever does something around, I think at that time we'll probably get a firm feel on it. We'll find out how accurate we are or aren't. But I think to be fair all your assumptions we've made are reasonable. I'm completely comfortable with them. I'm happily open them up to interrogation. We do that with the actual model is tested by an external audit firm and then approved by our auditors. The audit partner is not sitting a million miles away from you. So you know, they do look at it very closely and we do spend a lot of time in the evaluation. So I genuinely feel very comfortable to be interrogated on it and talk about it. But I'm very happily open about you know, the what the variabilities are.
That was truly comprehensive to me. Great.
Going to say yeah, that was very comprehensive. I feel like I need to up my game on the on the patient numbers etc. That's very good Dave.
Well, I mean I would say we remain constructive and positive on Astellas, but we also remain clear-eyed as to where it is in its development. It's a company which as Dave said didn't meet its primary endpoint in the phase two, be that it did a couple of months ago or so now, that was an accident and we reflected that in the evaluation. The sort of the underlying repair biology though including the sort of the structural mechanistic signals of having a repair to your tissues continue to show consistency across all the trials that we've done and it is a well as Dave said we're having an update from the company this afternoon and it is we think it's a genuine first in class compound potentially. So it comes with all of the usual biotech caveats that it's potentially very very interesting but equally it's got to go through this process. To sort of specifically answer your question what matters now obviously the next operational steps. So hopefully in the last six weeks we've had a couple of updates from the company directly that we've put out to the market. We wrapped up two of them into one short R&S reach that we put out earlier this week. It was I promise it was just coincidental timing. I wasn't sort of telling the company we need an update before we happen to have our AGM. The two updates were one, we did some additional preclinical work within the company to look at the quality of tissue and specifically muscle tissue in aged mice. And the interesting fact about the aged mice trial was that it showed that the muscle tissue, both type one and type two tissue, improved in the group that took our compound bimagrumab, but not only improved back to where it was, amazingly improved beyond the baseline of young mice, which is quite interesting if you are getting to be a more elderly mouse like me.
So that was very interesting. And those models are obviously a preclinical, but they translate quite well into human. What we are now doing what the company's now doing and again and helpful timing, they announced the initiation of the phase two study. This is a given the company's both where we are and the novelty of the program and our cash resources, this is a targeted study, i.e. a relatively small study. It's being done in one geographic location around Newcastle. The lead PI is a complete world leader in the field. And there was a comment from one of the clinicians in Esteso's release, they see this as incredibly exciting. What we're looking for in this relatively small targeted phase two is genuine both mechanistic and tissue analysis evidence in patients who have rheumatoid arthritis that has caused sarcopenia, muscle loss and degradation, which is caused by things like RA, but also just natural aging of the body. If we can show what we saw in the phase one and the phase two A and the phase two B, then this will open up a whole range of options for the company. That trial it hasn't been publicly announced when it will read out, but we the dosing of the patients is roughly 6 months. So, you can guess it's going to be in the sort of second half of 2027 that we'll get a read out from that. There are some other things that we they are doing in the company that could be some milestones along the way, but the main human study is will read out in the second half next year. And then of course, we'll have the usual commercial conversations. So, we remain constructive, confident, but definitely clear-eyed about where that company is in its development journey.
So, you know, the responsibility for the valuation rests with the board. It's probably the most difficult asset, but the number will be wrong. It could be too little. It could be too much. It could be absolutely right.
We get a significant challenge from the chair of our audit committee in terms of the information you need to make sure that the model is robust and the assumptions are reasonable. We get challenged from the auditors including bringing their subject matter specialists to advise them when they look at the model. And we have within the board someone who works in the life sciences pharma area who asks more technical questions than the rest of us can manage. And within the investment team, we have subject matter experts who are very helpful in pointing us to where we should be thinking about where there are the upside and downside. So, I'm very confident the process is right, and it derives a number. But that number is by definition a model number. It's not something you can point to and say you know, there's an external price evidenced in the market for that asset. But we're very confident that the process we use to value it is appropriate and not aggressive.
The one in the front row, David. I don't think he's got a question.
Sorry. Thank you. Hello. Can you explain to me what's the business model of this business? And do you have any loans to pay off?
How much of that is debt?
Okay. So, so what are you doing with this Well, what are you doing with the loans to pay off? Cuz that's very easy. We have a bit of debt. It's not an enormous amount, about 120 million pounds of debt we have. It repays in three tranches. There's 40 million at the end of next year, so it's December 27. Then same amount in 28 and same amount in 29. So, that's the debt. And we have plenty of cash. We've got a well-cash positioned. I think we need to ask them how much we have about 210 million pounds cash. So, we're well resourced and we don't consider debt a problem to maintain.
