Biotech star makes spectacular debut

Our equities writer has the details around Oxford Nanopore’s very strong start as a publicly listed business.

The spectacular £5 billion stock market debut of Oxford Nanopore Technologies (LSE:ONT) brought some cheer to former Woodford investors today, although for the rest of the retail investing public there's likely to be more frustration at being locked out of another explosive IPO.

Oxford Nanopore shares popped as much as 46% higher from their starting price of 425p as institutions began their dealings ahead of the start of unconditional trading on Tuesday morning, when ordinary investors can get involved for the first time.

Immediate exposure for retail investors comes through FTSE 250-listed IP Group (LSE:IPO), which provided original seed funding to the gene sequencing company in 2005 and has backed numerous follow-on funding rounds, resulting in a stake of 14.5%.

It generated £84 million of proceeds from selling shares and has retained a 10% holding worth £348.8 million at the start of trading, although this figure was closer to £510 million at the peak of today's strong session. IP's shares were 3% higher at 140.6p.

For the former Neil Woodford entity now called Schroder UK Public Private Trust (LSE:SUPP), the biotech accounted for almost a quarter of its net asset value at the end of June. It has sold 10% of its shareholding in IPO, with the £11 million proceeds and the £99.2 million value of its remaining stake at the start of trading representing an 21% uplift on June's fair value estimate.

Portfolio managers Tim Creed and Roger Doig said they continued to have faith in Oxford Nanopore's ability to generate further value for the trust over the mid and long-term.

The prospect of Oxford Nanopore's IPO helped Schroder UK Public Private Trust's shares to spike at almost 39p in early April, compared with 25p in December. They are back at 35p having risen 0.2p today.

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Other flagship investments in the trust, which replaced Woodford Patient Capital Trust in December 2019, include the advanced cancer treatment firm Rutherford Health and drug discovery business Benevolent AI.

As well as the support from Neil Woodford and IP Group, more recent backers for Oxford Nanopore have included M&G Investments and Singapore's Temasek after they got involved in a recent fundraising that valued the business at £2.5 billion.

The former University of Oxford spin-off was valued at £3.4 billion in today's IPO but this quickly became £5 billion after the explosive start to what is one of London's biggest flotations of the year. It is raising proceeds of £350 million through the issue of new shares.

The biotech's products enable the real-time analysis of DNA and RNA in laboratories as well as  remotely. It sequenced the genetic code of Covid-19 to help track the emergence of variants around the world while its technology is used in others areas including cancer research, food safety and crop science.

Chief executive Gordon Sanghera said today that his company is “only in the foothills of a long and exciting journey”.

“I believe that our unique technology will open up many new possibilities for positive impact, both through enabling new discoveries in scientific research, and through more accessible, faster, richer biological insights in health, agriculture, food and understanding environments.”

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The company is one of two “unicorn” companies with a valuation in excess of US$1 billion to emerge from IP's portfolio. The other is Ceres Power, which recently generated an exit multiple seven times the cash that IP invested over eight years as a shareholder.

IP listed on AIM in October 2003 and moved to London's main market in June 2006. It works in partnership with university start-ups to support and commercialise their intellectual property.

Other quoted investments in its portfolio include Tissue Regenix from the University of Leeds, Sheffield's Diurnal Group and DeepMatter Group from the University of Glasgow. Other listed stocks are Abingdon Health and Applied Graphene Materials.

Chief executive Alan Aubrey said: “Since IP Group helped found Oxford Nanopore in 2005, the company has gone from strength to strength.

“It is a great example of how IP Group has helped nurture a world-leading company based on scientific research and we're immensely proud of the team's achievements."