Schroders Capital Global
Innovation Trust plc
Q1 2024 Quarterly Net Asset
Value
Schroders Capital Global Innovation
Trust plc (the "Company") today announces its net asset value
("NAV") as of 31 March 2024.
Summary
· NAV of
22.82p per share as of 31 March 2024, a decrease of 9.9% relative
to the NAV per share as of 31 December 2023 (25.32p), and a
decrease of 2.8% relative to the NAV per share as of 31 March 2024
(dated 28 March 2024) that was published on 2 April 2024
(23.48p).
· In the
short period between the publication of the 2023 Annual Report
Accounts on 28 March 2024 and the date of this NAV announcement (31
March 2024), there is limited news to report.
· Performance over the quarter was impacted by news, which was
previously disclosed in the Company's Annual Report & Accounts
for the year ended 31 December 2023, that OcuTerra's phase II
diabetic retinopathy trial failed to meet its endpoints. This
subsequently resulted in the position being valued to zero.
Meanwhile, shares in Oxford Nanopore fell 42% over the period, with
recent results falling short of analysts' consensus
estimates.
· Excluding the
above two companies, the portfolio remained broadly flat over the
quarter with no single strategy segment - life sciences, venture,
growth or public equities - contributing more than a total £0.4
million positive or negative contribution.
· During
the quarter, the Company made £17.9 million of realisations from
equity positions. Carmot Therapeutics was exited as the company was
acquired by Roche, Immunocore was fully exited and Oxford Nanopore
was further reduced. Meanwhile, as previously disclosed, the
Company received an additional £4.6 million distribution related to
the first milestone of the Kymab sale to Sanofi.
· The
Company made a new investment of £1.3 million in life science
company, Neurona Therapeutics, over the period.
· As of
31 March 2024, the Company had £30.5 million in cash and money
market (sterling liquidity) funds and £28.8 million in liquid
public equity investments1 to meet the funding
requirements of the existing portfolio, execute the buyback program
and target new investments in innovative venture, growth and life
science businesses.
· The
Company has already begun its share repurchase programme for 2024
in order to meet its 5% commitment for the year, and as at 31 March
2024, the Company had repurchased 18,100,000 shares. From 1
April to 21 May 2024, , the Company had repurchased an additional
6,220,000 shares, totalling 24,320,000 shares repurchased for
cancellation which was 2.56% capital return during this
period.
1.
Excluding BenevolentAI which is fair value priced by the
AIFM.
Introduction
Economic backdrop
Global stock markets registered
strong gains in Q1 amid a resilient US economy and ongoing
enthusiasm around artificial intelligence (AI). Expectations of
interest rate cuts also boosted shares although the pace of cuts is
likely to be slower than the market had hoped for at the turn of
the year. Bonds saw negative returns in the quarter.
Global venture capital activity
presented a mixed picture in Q1 2024. Deal volume was down for the
eighth consecutive quarter (by 7% to 6,238 deals) but funding was
up 11% on the quarter (to $58.4 billion), driven by several mega
rounds. These mega rounds, which represent deals worth more than
$100 million, increased 30% on the previous quarter, with two of
the biggest deals in generative AI businesses - Anthropic and
Moonshot AI. Amazon and Alibaba led these rounds, illustrating big
tech's formidable interest in artificial intelligence using
generative models. Meanwhile, 19 unicorns were created over the
quarter. While this was down on the 23 in the prior quarter,
unicorn creation has stabilised from 2022 lows. The environment for
exits trended downwards. The number of M&A transactions, the
predominant exit route for venture backed businesses, declined 6%
quarter-on-quarter (from 2,159 in Q4 2023 to 2,022 in Q1 2024),
while the number of initial public offerings ("IPOs") decreased 38%
(from 107 in Q4 2023 to only 66 in Q1 2024). Overall, the current
market continues to be characterised by weak exit activity
counterbalanced by a favourable environment for new investments,
although there are some signs for optimism.
Source for data: CB Insights Q1 2024 State of Venture
Report.
Performance
The NAV as of 31 March 2024 was
£191.5 million, a decrease of 11.8% compared to the NAV (£217.1
million) as of 31 December 2023. The NAV per share as of 31 March
2024 was 22.82p, a decrease of 9.9% compared with the NAV per share
(25.32p) as of 31 December 2023.
Attribution analysis (£m)
|
Private
equity
|
Public
equity
|
Money market
funds
|
Cash
|
Other
|
NAV
|
Life
sciences
|
Venture
|
Growth
|
Fair value as at 31.12.23
|
31.0
|
39.3
|
73.3
|
56.8
|
9.7
|
2.9
|
4.1
|
217.1
|
+ Investments
|
2.7
|
-
|
-
|
-
|
21.0
|
(23.7)
|
-
|
-
|
- Realisations at value
|
(9.0)
|
-
|
-
|
(8.9)
|
(2.5)
|
20.4
|
-
|
-
|
+/- Fair value
gains/(losses)
|
(5.1)
|
(0.4)
|
-
|
(17.5)
|
0.4
|
-
|
-
|
(22.6)
|
- Repurchase and cancellation of the
Company's own shares
|
-
|
|
-
|
-
|
-
|
(2.5)
|
-
|
(2.5)
|
+/- Costs and other
movements
|
-
|
-
|
-
|
-
|
-
|
4.8
|
(5.3)
|
(0.5)
|
Fair value as at 31.03.24
|
19.6
|
38.9
|
73.3
|
30.5
|
28.6
|
1.9
|
(1.2)
|
191.5
|
The notable detractor from
performance over the quarter was the portfolio's holding in
OcuTerra, which was revalued at zero (from a fair value of £4.8
million as of 31 December 2023). This decision was made after the
company announced that its Phase II DR:EAM clinical trial of the
selective RGD integrin inhibitor, nesvategrast (OTT166) eye drops,
for patients with diabetic retinopathy, did not meet its endpoints.
Although the data confirmed the safety of OTT116, the experimental
medication did not show a statistically significant improvement in
the diabetic retinopathy severity scale (DRSS) scores compared to
the placebo group.
The share price of Oxford Nanopore
fell 42% contributing to a fair value loss of £17.0 million over Q1
2024. The company released a trading update in January preceding
its annual results in March. The company grew LSRT revenue by 15%
(from £147 million to £169 million), Underlying LSRT revenue by 39%
(from £108 million to £150 million), while extending its Adjusted
EBITDA losses (from £79 million to £105 million). These results
fell short of analyst consensus estimates with management citing
difficulties in the final quarter associated with U.S.
semiconductor regulation in Asia and one-off customer
delays. The company also announced changes
to its commercial agreement with G42 Laboratories, a key customer
delivering the Emirati Genome Programme, and reduced its
medium-term growth and profitability guidance.
Excluding the above two companies,
the portfolio remained broadly flat over the quarter with no single
strategy segment - life sciences, venture, growth or public
equities - contributing more than a total £0.4 million positive or
negative contribution.
Foreign Exchange
During the quarter, the fair value of
investments denominated in the Euro (EUR) and Swiss Franc (CHF)
were negatively impacted by the appreciation of the British pound
sterling (GBP) relative to these currencies. Meanwhile, the value
of the investments denominated in US dollar (USD) were positively
impacted by the appreciation of USD versus GBP.
Cash, debt, and net current assets
As of 31 March 2024, the Company
held £30.4 million in cash and money market (sterling
liquidity) funds.
Investment
activity
Realisations
During the quarter, the Company made
realisations of equity positions totalling £17.9 million. This
included the sale of Carmot Therapeutics, which was acquired by
Roche; the exit of the Company's position in Immunocore and a
further reduction of the Oxford Nanopore holding. Meanwhile, as
previously disclosed, the Company received an additional £4.6
million distribution related to the first milestone of the Kymab
sale to Sanofi.
New
investments
During the quarter, the Company
completed a new $1.6 million (£1.3 million) investment in US-based
clinical-stage cell therapy company, Neurona Therapeutics. The
investment formed part of the company's series E financing round,
which raised $120 million. Neurona is
focused on discovering and developing allogeneic neural cell
therapies to treat chronic diseases of the nervous system.
The investment forms part of our portfolio
sub-strategy of backing innovative life science companies at the
near-clinical or clinical stage of development. This funding will
aim to help advance Neurona's cell therapies to address unmet needs
in chronic neurological disorders and we are encouraged by the
strength of the initial clinical data.
Top 10
The Company's top 10 holdings as of
31 March 2024 compared with the respective holding as of 31
December 2023.
Holding
|
Strategy
|
Fair value as of 31 Dec 23
(£m)
|
% of total
equities
|
Fair value as of 31 Mar 24
(£m)
|
% of total
equities
|
Atom Bank
|
Growth
|
23.1
|
11.5
|
23.1
|
14.2
|
Oxford Nanopore
|
Public
|
41.7
|
20.8
|
20.4
|
12.6
|
Reaction Engines
|
Venture
|
10.6
|
5.3
|
10.6
|
6.5
|
HP Environmental Technologies
Fund
|
Growth
|
10.9
|
5.4
|
10.5
|
6.5
|
Ada Health
|
Growth
|
9.6
|
4.8
|
9.6
|
5.9
|
Back Market
|
Growth
|
8.8
|
4.4
|
8.7
|
5.4
|
Autolus Therapeutics
|
Public
|
8.5
|
4.2
|
8.4
|
5.2
|
Revolut
|
Growth
|
7.9
|
3.9
|
8.0
|
4.9
|
AgroStar
|
Growth
|
7.3
|
3.6
|
7.6
|
4.7
|
Nexeon
|
Venture
|
7.0
|
3.5
|
7.0
|
4.3
|
Outlook
Our investment team continues to
focus in areas where we have the most control, including working
closely with portfolio company management teams, co-investors, and
other stakeholders to support business growth, managing sales of
public equity holdings, and as capital availability allows,
targeting new investments that align with our three strategies
(venture, growth and life sciences) with the aim of building a
diversified portfolio which more appropriately balances the risk of
each strategy.
In the first quarter, notable
progress has been made with realisations which has resulted in a
healthy cash and money market funds balance (£30.5 million) to meet
the funding requirements of the existing portfolio, execute the
buyback program, and target new investments. The Company has
sufficient capital to target several new investments during the
remainder of the year.
The areas of portfolio development
less directly within control including the global macroeconomy,
fundraising, M&A and IPO market activity, and the valuations of
loss-making listed companies continue to present headwinds. At the
time of writing, the share prices of Autolus Therapeutics and
Oxford Nanopore have declined ~37% and 9% respectively relative to
their quarter end marks. In April, Pacific Biosciences, a close
peer to Oxford Nanopore in the DNA sequencing market, cut its
revenue guidance for 2024 and withdrew its longer-term guidance for
2026, citing a tougher funding environment in China and lengthening
sales cycles. Oxford Nanopore, which has a predominantly
consumables revenue base relative to Pacific Biosciences' capital
equipment focus, should theoretically be somewhat insulated from
these factors, although concerns regarding a broader DNA market
slowdown are likely to persist.
Autolus Therapeutics has fallen on
limited new information. The company is awaiting market approval in
the US, EU, and UK for Obe-cel, a treatment for relapsed/refractory
Acute Lymphocytic Leukaemia expected in Q4. Additionally, results
from the Phase 1 clinical trial for Obe-cel in B-cell Non-Hodgkin
Lymphoma and Chronic Lymphocytic Leukaemia are expected in Q4.
Phase 1 clinical trials results are also expected in Q4 for Obe-cel
in the treatment of primary CNS Lymphoma, allogenic Obe-cell for
B-cell malignancies, and AUTO8 for multiple myeloma.
Elsewhere, the private equity
portfolio is making good progress, particularly several of the new
investments, and we look forward to providing further information
in the Interim Report and Accounts.
Past performance is not a guide to future performance and may
not be repeated. The value of investments and the income from them
may go down as well as up and investors may not get back the
amounts originally invested. The securities shown above are for
illustrative purposes only and are not to be considered a
recommendation to buy or sell.
Enquiries:
Schroder Investment Management
Limited
Shilla Pindoria (Company
Secretary)
|
0207 658 6000
|
Augustine Chipungu
(Press)
|
0207 658 2106
|
John Spedding (Head of Investment
Trusts)
|
0207 658 3206
|