Because, in troubled times, science and people matter

Despite the positive secular market sector trends for the knowledge-intensive sectors on which we focus, venture investments have been hit by a combination of adverse factors. The protracted conflict in the Ukraine; rising energy prices in Europe; inflation in developed economies and resultant interest rate rises; the managed collapse of SVB, principal lender to the global venture sector, and the consequential volatility in the banking sector; and the broader context of political uncertainty both on a global geopolitical level and within our domestic UK market, have all combined to create a tough operating and funding environment for young companies.

This macroeconomic environment has caused a reduction in net asset value for the first time since CIC’s inception. In the year, equity attributable to shareholders declined by 15% to £347 million, or 114.6p per share.

The fall in the share price of Bicycle Therapeutics (NASDAQ: BCYC) resulted in a reduction in the carrying value of 48% or £28 million during the year. Although the company continues to make compelling clinical and commercial progress, its market capitalisation fell in line with its sector peers.

For the remainder of our portfolio, which is unlisted, we operate a robust quarterly fair value process and, over the course of the last year, have impaired several assets to reflect comparable market data, poor clinical data and/or near-term cash requirements. Individual company progress has partially offset downward external pressure on valuations. Most notably in the case of Riverlane, which delivered a £16 million uplift in carrying value based on its latest funding round, a considerable achievement in the current times.

Disposals have been made where we have judged it prudent to protect shareholder value. During the year, we have exited the majority of our interests in Centessa Pharmaceuticals (NASDAQ: CNTA), Audio Analytic was sold to a major US technology company in November 2022 and in February 2023, Sense Biodetection was sold to Sherlock Biosciences.

We have reserved funds for further investment into our balance sheet portfolio, which we believe will be sufficient to support our portfolio through to exit over the next few years.

Fund II, a Limited Partner fund that we manage and which closed at £225 million on 31 March 2022, completed four new investments during the year and one more in April 2023, thereby increasing total investment to £38 million across 11 companies. Taking into account further committed capital for tranched drawdowns and follow on reserves, Fund II is approximately 45% committed halfway through the investment period.

The latest acquisitions include:

Complement Therapeutics, an ophthalmology company developing novel therapeutics to address diseases related to complement dysregulation;

T-Therapeutics, a company using soluble T-cell receptors in a proprietary transgenic platform and discovery pipeline to develop novel medicines with applications in oncology, autoimmunity or infectious disease. This is the second time we have worked with the founder Professor Allan Bradley; and

• Cambridge GaN Devices, a fabless semiconductor company that is developing and commercialising energy-efficient, Gallium Nitride-based integrated circuits for power electronics.

The pipeline of new investments in both the life sciences and the deep tech sectors remains strong. We have reviewed more new deals this year than in any other and Fund II has sufficient uncommitted capital to take advantage of the right opportunities as they are presented.

We continue to make a positive contribution to the community in which we operate. We are working with the University of Cambridge and Cambridge

Enterprise, under the umbrella of Innovate Cambridge, to assemble all the key stakeholders needed to formulate, promote and deliver a shared vision for the Cambridge ecosystem over the next decade and beyond.

We have also developed an ESG toolkit to help our portfolio companies establish, monitor and report good governance and a strong commitment towards zero carbon. We are making this toolkit available to other venture capital businesses that have expressed an interest in learning from our experience.

We are passionate about science and technology and realising its commercial potential. We support the most promising entrepreneurs to achieve their vision and all of our investments have the potential to drive significant societal impact. This led to our new tagline ‘Because Science and People Matter’.

The senior team continues to take a leadership role in our sectors with positions of responsibility in the British Venture Capital Association, Bio Industry Association, Female Founders and the UK Government’s university spinout review. We continue to build the core Investment Team to support operational capabilities as well to embed deep domain expertise in specific areas where we have identified investment opportunity, through the recruitment of specialist Operating Partners, Entrepreneurs in Residence and other advisers.

Alongside our embedded relationships with the University of Cambridge, our accelerators and the many globally-renowned research institutes in the Cambridge region, this people strategy enables us to source and manage all stages of venture company growth from seed stage to full fruition in our increasingly fertile science ecosystem, whatever the weather.