Mercia Technologies continues to support portfolio company PsiOxus in £25m Series C funding round.

Mercia Technologies PLC (AIM: MERC, “Mercia”), a Midlands based leader in the funding and commercialisation of technology businesses in the UK, has taken part in a £25 million Series C funding round in portfolio company PsiOxus Therapeutics (‘PsiOxus’ or ‘the Company’), which is developing innovative oncolytic immuno-oncology treatments for cancer. Mercia has committed £0.4 million to the round alongside current investors Invesco, SROne, Lundbeckfond and Imperial Innovations. In addition, one new investor, Woodford Patient Capital Trust, has joined the syndicate.

PsiOxus has now raised in aggregate more than £55 million from investors. PsiOxus will use the new funding to conduct a Phase I clinical study.

Mercia holds c. 2% of PsiOxus following the latest funding round.

Peter Dines, Investment Director, Life Sciences at Mercia Technologies PLC, said:

“We are delighted to support this legacy portfolio business, obtained through the acquisition of Mercia Fund 2, in the company of such seasoned Life Sciences investment professionals.

“PsiOxus is the result of an effective combination of technological expertise from the University of Birmingham and Imperial College, and we are delighted to maintain our association with the Company as it moves towards the next stage of its development.”

Mercia Technologies PLC (AIM: MERC, “Mercia”), a Midlands based leader in the funding and commercialisation of technology businesses in the UK, has taken part in a £25 million Series C funding round in portfolio company PsiOxus Therapeutics (‘PsiOxus’ or ‘the Company’), which is developing innovative oncolytic immuno-oncology treatments for cancer. Mercia has committed £0.4 million to the round alongside current investors Invesco, SROne, Lundbeckfond and Imperial Innovations. In addition, one new investor, Woodford Patient Capital Trust, has joined the syndicate.

PsiOxus has now raised in aggregate more than £55 million from investors. PsiOxus will use the new funding to conduct a Phase I clinical study.

Mercia holds c. 2% of PsiOxus following this latest funding round.

Peter Dines, Investment Director, Life Sciences at Mercia Technologies PLC, said:

“We are delighted to support this legacy portfolio business, obtained through the acquisition of Mercia Fund 2, in the company of such seasoned Life Sciences investment professionals.

“PsiOxus is the result of an effective combination of technological expertise from the University of Birmingham and Imperial College, and we are delighted to maintain our association with the Company as it moves towards the next stage of its development.”

Mercia Fund Management (MFM), a leading investor in UK technology, has added a new company to their portfolio and supported an existing portfolio company with follow-on funding. Intelligent Positioning (IP), a real-time Natural Search technology developer, received a capital injection of £250,000 and CYP Design Ltd (CDL), a Life Sciences spin-out from De Montfort University, Leicester, received an additional £50,000 of investment.

MFM has built a diverse portfolio across its four key sectors: Life Sciences, Digital, Advanced Materials & Specialised Manufacturing and Software, Electronics & Hardware, and the addition of an established, profitable business in Intelligent Positioning provides our investors with enhanced portfolio breadth alongside maturity through IP’s stellar customer base within a burgeoning market.

The Intelligent Positioning offering empowers brands, corporations and marketers, from SMEs to multi-national businesses, to control and improve their Search Engine Optimisation (SEO) and online strategy including social media profile.

Their SEO and business intelligence platform, Pi Datametrics, uses a complex data process to track the top 100 URL results across different search-engines, allowing clients to monitor their ranking on a daily basis.

85% of IP’s customers have seen a 40%+ increase in traffic in their first year of working with their system. IP has already secured contracts with global brands, including BskyB, Harrods, Virgin Active and the RSPCA.

Daniel Titterton, Co-Founder and CEO of IP, said:

“Pi Datametrics has made vast progress over the last 12 months. In a very competitive space we have gone through the hard yards of proving Pi Datametrics’ worth with some of the world’s biggest and most demanding digital brands. With Mercia on board we now have the right partner to accelerate the business in value and capability, both now and in the future.”

Rob Johnson, Investment Director and Head of Software, Electronics & Hardware at MFM said:

“We are excited by the proposition created by IP and their ability to develop successful relationships with well-known brands who achieve fast, direct results from IP’s proposition.

“IP is particularly useful for multinational companies that have a large number of products and consequently have a large number of search terms ranking on Google. Without IP it is a tedious, time consuming task to monitor the relevant key search terms against their product set. Using IP makes the process simple and should deliver competitive advantage against their competitors.”

MFM has also made an EIS investment into CYP Design Ltd (CDL), following an SEIS investment in October 2013. CDL is a spin-out from De Montfort University, Leicester, which is currently developing technology to make pre-clinical drug safety tests cheaper, more efficient, and more convenient.

CDL has successfully designed a generic expression system capable of producing highly recombinant Human CYPs in baker’s yeast, resulting in a product called Sacchrosome™, a unique membrane system that brings together all the components necessary for CYP activity in a convenient and highly reproducible way. CYPs are found in the human liver and play a vital role in testing the efficacy and toxicity of drugs.

Pre-clinical trials can cost up to £100m and the pharmaceutical industry is under increasing pressure to improve the efficiency of drug discovery. An improvement of just 10% in predicting failures could save the industry around £64m in development costs per approved drug.

David Gask Executive Chairman of CDL, said:

“The funding from MFM forms part of a further £275,000 contributed by other EIS investors, allowing CDL to take the technology forward into the next growth stage.

“We are grateful to MFM for their continued support, and we look forward especially to working with Dr. Nicola Broughton, who has extensive knowledge and expertise within the Life Sciences sector.”

Dr. Nicola Broughton, Investment Director and Head of Technology Transfer at MFM, said:

“We are delighted to provide further investment to CDL. Their work looks set to revolutionise the drug testing industry by making it quicker, more effective and more convenient, and it has already received attention from potential customers within the industry.”

About Intelligent Positioning (Ton UK Ltd)
Intelligent Positioning are a big data and natural search intelligence company that helps businesses optimise their web presence by giving them detailed and actionable reports on their search ranking performance relative to their competitors. Online visibility and search are and remain critical business drivers, with natural search commanding 94% share of ‘click through’ versus paid online advertisements. To date IP has offered SEO intelligence to companies as diverse as Marks & Spencer, Virgin Active, Invesco, AXA, Disney & L’Oreal. During this time, they have built proprietary technology, and over the last 2 years, have invested free cash flow into developing a multilingual SEO platform for businesses to self serve on a subscription basis, a product known as Pi Datametrics (‘Pi’).

Intelligent Positioning’s aim with Pi is to become the market leader in natural search applications for intelligence, performance, and optimisation, providing marketing and web professionals with unrivalled decision making support. Pi is not about simply providing search visibility reports, but more importantly about providing data rich diagnostic journeys. The platform provides business clients with daily tracking of search terms relative to peers, and has enterprise grade account design for multi-tiered and segmented needs. Pi stands by the principle that for SEO, every theme and search term has a unique set of competitors. Being able to identify winners and losers across themes and categories allows the user to understand the elements in common with winning content and SEO strategies.

About CYP Design Ltd
CYP Design Ltd (CYPDESIGN™) is a spin-out from De Montfort University. The company is dedicated to supporting its customers’ drug research and development needs by offering stabilised, highly active human cytochrome P450 (CYP) enzyme products. These products are presented in unique Sacchrosomes™ and are stable at room temperature. This provides significant cost advantages as the products do not need to be shipped with dry-ice, or kept in cold storage before use, and they will provide greater convenience for customers carrying out metabolism and toxicity testing. CYP Design’s products are also being developed for use in biocatalysis and the production of drug metabolites.

Mercia Fund Management (MFM), one of the leading UK technology investors, has announced the launch of its quarterly start-up competition, The Pitch, with the chance for the winner to receive £3000. This quarter’s competition focuses on businesses within the Life Sciences sector.

Mercia is currently inviting applications from the life science sector, specifically biotechnology, medical devices and medical diagnostics. Companies applying must be no older than two years-old, and will not have received EIS or VCT funding previously.

The finalists will pitch in person to the investment team at Mercia’s Midlands-based offices in Warwickshire at 4pm on Monday 1st June.

This is the second quarterly start-up business competition to be held by Mercia this year, with the first one aimed at Electronics & Hardware. The quarterly competitions will have a rotating sector focus, based on Mercia’s four key investment areas: Life Sciences, Digital & E-commerce, Advanced Materials and Specialised Manufacturing, and Electronics & Hardware.

CEO Mark Payton said:

“We are delighted to be launching our second business plan competition, which will be focusing this quarter on start-ups in the Life Sciences sector.

“Mercia already has a wealth of expertise in this industry, particularly after the appointment of Peter Dines, founder of spinal and orthopaedic medical technology business Surgi C Group and distribution platform Newtech Ortho, this year.


“We look forward to being inspired by the pitches, and to further enhancing our links with start-ups and university spin-outs across the UK.”

To enter, please submit an executive summary or slide deck outlining your business proposition to alexh@merciafund.co.uk by 12pm on Sunday 17th May.

To read the competition poster in full, please click here.

Mercia Fund Management (MFM) is pleased to announce Razorbill Instruments, a spin-out from the University of St Andrews that specialises in nanopositioning technology, as the winner of its 2015 Q1 Business Plan Competition. The announcement further enhances Mercia’s support of technology driven growth enterprise in Scotland.

The Razorbill team, who presented their pitch to the investment team at Mercia’s Midlands-based headquarters in Warwickshire, will receive a £3000 cash prize. Razorbill aims to develop their product for launch in Spring 2016.

MFM, one of the leading technology investors in the UK, already has strong partnerships with nine UK universities based in the Midlands, which offer an enviable source of pipeline investment opportunities, as well as technological expertise. Mercia is now looking forward to strengthening its partnerships with universities and businesses across Scotland and the north of England.

Nicola Broughton, Investment Director; Head of University Technology Transfer at Mercia, said:

“We are very pleased to announce Razorbill as the winner of our Business Plan competition.

“Mercia continues to work with university spinouts in its core geographical areas of the Midlands, North and Scotland, and this is a great example of how we can provide early stage support as we seek to strengthen our relationship with key Scottish universities, which include St Andrews.”

Razorbill is developing nanopositioning technology that can deliver precise and reliable nanoscale movement, which will have a wide range of microscopy and nanofabrication applications. It was founded in 2014 by three St Andrews scientists: Alexander Ward, Jack Barraclough and Clifford Hicks. They currently have a proof-of-concept prototype, and are also continuing to develop and test their product, whilst hoping for a potential product launch in Spring 2016.

The nano-tools market is currently worth £4 billion and has uses in academic research, scanning probe microscopy, biomedical & aerospace sectors, and nanofabrication. Put simply, it allows tiny objects to be moved to form complex parts, such as computer processors. However, current technologies similar to Razorbill’s nanopositioner prototype are slow, imprecise, wear down with use, and are unreliable, particularly in low temperatures. This is even more problematic considering that key industrial processes such as circuit manufacture are shifting towards nano-manipulation.

Razorbill believes that its product will provide a solution to this problem, as it is compact, reliable, and resilient against long-term wear and extremes of temperature.

Last year Razorbill was awarded third place in the Converge Challenge 2014, a national competition aimed at encouraging innovation and entrepreneurship amongst academics.

Alexander Ward, Razorbill’s Managing Director, who recently successfully tendered a £94,000 grant from Scottish Enterprise, said:

“We are delighted to win £3000 in Mercia’s business plan competition, which will go towards capital for a pre-production prototype.

“Competition was tough, but we believe that our development of a novel technology for providing reliable, high-force, vibration free movement will prove vital for both academic research and technological development, especially in microelectronics, a cornerstone of the global economy.

“We intend to meet current market demand with a product that can deliver higher forces with better resilience to long term wear than our competitors. Our aim is to be the trusted workhouse of industrial nanomanipulation.

“However, we don’t want Razorbill to be a one-trick pony! Over the next five years, we want to grow the business and produce other high value, high tech, positioning-based products. Our hope is that, five years along the line, people will recognise Razorbill as the core developer of a family of high quality research tools.”

Ewan Chirnside, Director of the Knowledge Transfer Centre from the University of St Andrews said: “I am delighted that an excellent company prospect based on the results of fundamental research undertaken at the University of St Andrews continues to be a success”.

About Razorbill Instruments

Razorbill Instruments is a manufacturer of high quality precision instrumentation for nanopositioning. The company was founded at the end of 2014, and its core product is based on an innovative positioning technology developed at the University of St Andrews in partnership with the Max Planck Institute of Chemical Physics of Solids, Dresden. This technology is a step forward in robust and reliable nano-positioning and is a potentially game-changing nanotechnology. The company consists of a young energetic technical team bringing the cutting edge technology to customers in Physics and Biomedical Research, Microscopy, High Value Manufacturing and Nanofabrication.

razorbillinstruments.com

Mercia Fund Management (MFM), one of the leading UK technology investors, announces the launch of its quarterly start-up competition, The Pitch, with the chance for the winner to receive £3000. This quarter’s competition focuses on businesses within the Life Sciences sector.

Mercia is currently inviting applications from the life science sector, specifically biotechnology, medical devices and medical diagnostics. Companies applying must be no older than two years-old, and will not have received EIS or VCT funding previously.

The finalists will pitch in person to the investment team at Mercia’s Midlands-based offices in Warwickshire at 4pm on Monday 1st June.

This is the second quarterly start-up business competition to be held by Mercia this year, with the first one aimed at Electronics & Hardware. The quarterly competitions will have a rotating sector focus, based on Mercia’s four key investment areas: Life Sciences, Digital & E-commerce, Advanced Materials and Specialised Manufacturing, and Electronics & Hardware.

CEO Mark Payton said:

“We are delighted to be launching our second business plan competition, which will be focusing this quarter on start-ups in the Life Sciences sector.

“Mercia already has a wealth of expertise in this industry, particularly after the appointment of Peter Dines, founder of spinal and orthopaedic medical technology business Surgi C Group and distribution platform Newtech Ortho, this year.

“We look forward to being inspired by the pitches, and to further enhancing our links with start-ups and university spin-outs across the UK.”

To enter, please submit an executive summary or slide deck outlining your business proposition to alexh@merciafund.co.uk by 12pm on Sunday 17th May.

To view the competition poster, click here. http://bit.ly/1Oru8g4

PsiOxus Therapeutics Ltd. (PsiOxus), an Oxford, UKbased biotechnology company developing innovative oncolytic immuno-oncologytreatments for cancer, has expanded two of its on-going phase I studies using its anti-cancer treatment candidate, enadenotucirev (EnAd), an oncolytic Ad11/Ad3 chimeric group B adenovirus. The expanded studies, introduce a number of additional cancer types into the programme, as a result of phase I data demonstrating the successful tumour delivery of EnAd through intravenous administration. The treatment was generally well tolerated with repeated dosing. PsiOxus has already enrolled its first patients in each indication of the expanded studies.

MoA study to target non-small cell lung, bladder and kidney cancer

The initial study, a phase I mechanism of action (MoA) study of intra-tumoural and
intravenous administration of EnAd in colon cancer patients, has been expanded to
include intravenous delivery to three additional tumour types, non-small cell lung,
urothelial bladder and renal cell cancer. Initial results of the MoA study in colon
cancer found that intravenous delivery was as effective as intra-tumoural delivery.
Additionally, virus replication was reported in the tumour tissue but not the
surrounding normal cells, while CD8+ T-cells were shown to have successfully
infiltrated the tumour, which is not normally seen in most colon cancers.

EVOLVE study moves to include repeat intravenous dosing

The EVOLVE (EValuating OncoLytic Vaccine Efficacy) trial has expanded to include
repeat intravenous dosing of EnAd in metastatic urothelial bladder cancer. EVOLVE
is a first in human phase I/II study to determine the dose, safety, tolerability and
potential efficacy of EnAd when delivered intravenously to patients with epithelial
cancers. It is the first clinical study to report that live replicating oncolytic virus has
been recovered directly from the blood stream of cancer patients.

Results of this dose escalation study identified a phase II dose for single and repeat
dosing of EnAd via intravenous administration. This feature of EnAd distinguishes it
from most other oncolytic viruses, where effective delivery to tumours via
intravenous administration is not seen.

Dr Christine Wilkinson-Blanc, CMO of PsiOxus, commented: “To date, convincing
clinical success with oncolytic viruses has been associated largely with intratumoural
delivery, and little evidence existed to prove that the systemic delivery of
viruses to tumour cells by intravenous administration could be successful. The
initial results of our clinical programme suggest that EnAd can target tumour cells
following intravenous administration and then replicate. This marks a significant
breakthrough in the development and utility of oncolytic viruses in cancer.”

Progress of the EnAd program is also being driven by the company’s next generation
“Armed EnAd” anti-cancer therapeutic platform, which makes it possible to further
enhance EnAd with genetic instructions for specific anti-cancer molecules such as
therapeutic antibodies, which are then produced “in situ” in the tumours. Full
details can be found on the PsiOxus website.

About PsiOxus Therapeutics, Ltd.

PsiOxus Therapeutics is an Oxford, UK-based development stage biotechnology
company with a particular focus in immune therapeutics in oncology. PsiOxus has
developed a patented platform of tumour-targeted delivery based on its oncolytic
vaccine, enadenotucirev (EnAd). EnAd’s unique design allows it to be delivered
systemically via intravenous administration. The anti-cancer scope of EnAd can be
expanded through “arming” – a process that involves addition of new genes into
EnAd. The “Armed EnAd” platform makes possible creation of a broad range of
unique oncolytic immune therapeutics, including oncolytic vaccines that express
one or more antibodies (AbEnAd), cytokines or other immune-modulatory proteins,
or nucleotide based payloads such as RNAi. The Armed EnAd platform is in
preclinical stage, while phase I/II clinical trials of the unarmed EnAd are ongoing in
different tumor types.

PsiOxus Therapeutics Ltd. (PsiOxus), an oncolytic
immunoncology company, has announced that it will present data highlighting the
progress of its next generation “Antibody Armed EnAd” (AbEnAd) anti-cancer
therapeutic platform at the American Association for Cancer Research (AACR)
Annual Meeting 2015 in Philadelphia, PA April 19-22, 2015. AbEnAd is the antibody
armed series from the “Armed EnAd Platform” which is based upon the company’s
flagship therapeutic oncolytic virus, enadenotucirev (EnAd). EnAd was developed
using the principles of natural selection to specifically target and destroy cancer
cells, and to allow systemic intravenous delivery.

Brian Champion, Head of PsiOxus R&D, commented: “We have previously
demonstrated that EnAd can be delivered intravenously. The possibility to ‘arm’ the
EnAd particles with specific anti-cancer therapeutic agents, now enables the
production of high concentrations of immunotherapeutics, such as checkpoint
inhibitor antibodies, and other therapeutic agents selectively within the tumour
microenvironment where they are needed. The ability to use systemic
administration means that armed EnAd particles can reach and express their
therapeutic payloads in both the primary tumour as well as its metastases. The
ability to “arm” the virus with different therapeutic agents, now opens the path for
this exciting new technology to target a wide variety of cancers.”

Forcing Cancer Cells to Produce Anti-Tumour Drugs

In the AbEnAd platform, EnAd viral particles are ‘armed’ with the genetic
instructions required to produce a specific therapeutic anti-cancer antibody. Once
the AbEnAd particles infect a cancer cell, it directs the machinery of the host cell to
produce new copies of the virus as well as the specific anti-cancer antibody it is
carrying – and this antibody is then able to exert its action on surrounding cancer
cells or other local components of the tumour, such as cells of the immune system.

Because this process has an amplification effect, the AbEnAd viral particles can then
go on to infect neighbouring cells, releasing more of the anti-cancer antibody
“payload” in an expanding radius to impact surrounding tumour cells. The virus
infection also triggers the release of inflammatory mediators that serve to attract
and stimulate immune cells, such as cytotoxic T-cells that can induce tumour cell
death.. The antibody payloads encoded in the virus can thus be designed to facilitate
these anti-cancer effects.

The PsiOxus team is currently working with a class of therapeutic antibodies that
inhibit immune checkpoint pathways, which have been shown to be very effective
against a range of different cancer types in a number of previous external studies.

However, besides antibodies of different specificities in the AbEnAd series, the
“Armed EnAd Platform” can include a broad variety of agents for the “arming”, such
as inhibitory or stimulatory molecules that may be proteins/peptides or nucleotide
based such as RNAi. This allows targeting of otherwise “undrugable” pathways as
well as the use of agents that cannot feasibly be delivered systemically due to their
general side effects, e.g. immune-stimulatory molecules.

Professor Len Seymour, Professor of Gene Therapies, Department of Oncology,
University of Oxford, and member of the PsiOxus Scientific Advisory Board,
commented: ‘The “Armed EnAd Platform” development should be game-changing
for anti-cancer biologics. Not only can we target and destroy cancer cells specifically
using the EnAd virus, we now see it is possible to force the cancer cell to produce
and secrete anti-cancer biologics which can augment the local anticancer effect. This
targeted-expression approach maximises the level of the biologic at the tumour site
and simultaneously minimises unwanted systemic exposure, giving a far better
therapeutic index than could be previously achieved. What is most exciting from a
scientific standpoint, is the versatility of the “Armed EnAd Platform” in terms of the
variety of payloads that can be encoded. This platform provides a significant step
forward in the search for new ways to treat cancer, in particular for challenging
cancer subtypes that do not yield to conventional therapies.’

Learn more at AACR 2015

The most recent results from the ongoing AbEnAd research programme will be
presented as part of a poster session at the AACR meeting on Sunday 19 April 2015
from 13:00 to 17:00 (abstract number 295). For more information on AbEnAd and
the EnAd arming platform, please visit www.psioxus.com.

PsiOxus also recently announced the expansion of its first generation EnAd clinical
programme, following success with tumour-specific delivery through intravenous
administration. Full details can be found on the PsiOxus website.

About PsiOxus Therapeutics, Ltd.

PsiOxus Therapeutics is an Oxford, UK-based development stage biotechnology
company with a particular focus in immune therapeutics in oncology. PsiOxus has
developed a patented platform of tumour-targeted delivery based on its oncolytic
vaccine, enadenotucirev (EnAd). EnAd’s unique design allows it to be delivered
systemically via intravenous administration. The anti-cancer scope of EnAd can be
expanded through “arming” – a process that involves addition of new genes into
EnAd. The “Armed EnAd” platform makes possible creation of a broad range of
unique oncolytic immune therapeutics, including oncolytic vaccines that express
one or more antibodies (AbEnAd), cytokines or other immunomodulatory proteins,
or nucleotide based payloads such as RNAi. The Armed EnAd platform is in
preclinical stage, while phase I/II clinical trials are ongoing with the parent
unarmed EnAd in different tumor types.

Peter brings with him two decades’ experience of the healthcare sector, having founded and run a number of successful healthcare technology businesses.

Notable successes during his career include turning around obstetrics equipment firm Surgicraft, a company that saw sales quadruple under his leadership. It was subsequently sold to ISIS Equity Partners.

Mr Dines founded spinal and orthopaedic medical technology business Surgi C Group and distribution platform Newtech Ortho, both of which were subsequently acquired by private equity.

He holds several directorships across a range of life sciences businesses, including pharmaceuticals firm Cisiv, ultrasound service provider Diagnostic World and Spring Active, a company that delivers self-management programmes for those suffering long-term back pain.

Mark Payton, Managing Director of Mercia Fund Management, said: “Peter brings significant experience and specialist expertise to the growing team at Mercia. He is highly regarded for his track record in identifying opportunities and growing value rapidly through hands-on management in businesses in the medtech and life sciences sector.

“He joins the three other sector-specific investment directors who lead our investment activity in digital; electronics and hardware; and advanced materials, engineering and specialised manufacturing.

“His remit across the life sciences sector will focus specifically on medtech, contract services and diagnostics.”

Mr Dines said: “I am delighted to be joining Mercia at this exciting time of expansion for the company. I believe the offering of Mercia fund structures combined with expert support to assist growth is a very attractive proposition to early-stage technology companies. I am very much looking forward to using my past experience to help create new high-growth businesses in the life sciences and healthcare sector.”

The team at Mercia work closely with each portfolio company to accelerate growth.

While operating nationally, Mercia has a particular focus on the Midlands and the North, where the team believe there are opportunities that may not be identified by other technology investors.

The latest tax-efficient technology investment opportunity from Mercia Fund Management is Mercia Growth Fund 4, which opened for investment on Monday, 26th January. The closing date for investment will be on or before Thursday, 30th April, dependent on demand.

It will use the same hybrid structure as Mercia’s four previously launched tax-efficient funds, combining the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). The minimum investment is £25,000 (75% EIS and 25% SEIS). Tax advantages available through EIS and SEIS investments include initial tax relief of 30% and 50% respectively, loss relief and zero Capital Gains Tax on returns once qualifying shares have been held for at least three years.

Alongside life sciences, Mercia Growth Fund 4 will also invest in a variety of innovative businesses working in the areas of digital, advanced materials and specialised manufacturing, electronics and hardware.

Mercia Fund Management is a wholly owned subsidiary of Mercia Technologies, which listed on the Alternative Investment Market (AIM) in December raising £70m. Mercia Technologies is focused on providing later-stage direct investment to the emerging stars from the EIS and SEIS portfolio within the Mercia Growth Fund series to expand and ultimately exit these businesses.

The combination of EIS and SEIS funds under management and direct investment gives Mercia a unique model which, through follow-on funding, has the ability to back technology businesses with high growth potential anywhere from an early stage, through their growth journey and ultimately to a profitable exit.

Mercia Technologies PLC (“Mercia” or the “Company”), a Midlands based leader in the funding and commercialisation of technology businesses in the UK, has raised £70m before expenses from an institutional placing and will be admitted to AIM with a market capitalisation of £106m.

Mercia’s business is the creation, funding and development of technology businesses nationally with an emphasis in the Midlands and the North of the UK. Mercia brings technology transfer, company formation, incubation, commercialisation and investment, to technology ventures.

Mercia has a well seeded portfolio and pipeline of investments. The Company has a direct investment in 11 operating companies and access to a portfolio of 38 businesses through its third party funds, managed by its wholly owned subsidiary Mercia Fund Management (“MFM”).

Trading in Mercia’s shares is expected to start at 8.00am on Thursday 18 December 2014. (Ticker symbol MERC)

Cenkos is acting as the Company’s Nominated Adviser and Broker.

Strategy

Mercia’s strategy is to provide capital, infrastructure, accommodation and management support to accelerate the development and enhance value in selected technology businesses with a focus on:

  • UK technology sectors which offer investment prospects with high growth potential including:
    • digital
    • electronics and hardware
    • advanced materials, engineering and specialised manufacturing
    • sub sectors within life sciences.
    • investing across the UK, with an emphasis on the Midlands and the North
    • businesses with modest capital needs
      • businesses which combine technology and service provision, are rich in intellectual property, are scalable and require relatively modest capital infusion
      • flexible funding providing early stage businesses with seed and early stage follow-on capital through MFM’s third party funds and as the businesses mature at a later stage, development capital from its own resources to scale the ‘emerging stars’
      • flexible deal sourcing including (but not exclusively) from its collaborative relationships with nine UK universities which provide access to broad range of opportunities.

Reasons for Admission and use of proceeds

The placing and Admission will assist Mercia in its development by:

  • giving it access to the capital required to scale its direct investments and other emerging stars from the MFM portfolio
  • supporting regional growth, both organic and through selective complementary acquisitions
  • enhancing its scalable platform
  • enabling the recruitment of experienced commercialisation professionals including a CIO
  • expanding its number of university partners.

Mercia’s net placing proceeds of £66m are to be used:

  • 70% to 80% for investment in ‘emerging stars’, being:
    • existing direct holdings
    • other investments emerging from MFM
    • investing behind portfolio companies which can become sector consolidators
    • 20% to 30% in opportunities to scale:
      • strategic acquisitions and pipeline development
      • organic expansion.

Mark Payton, Chief Executive of Mercia Technologies PLC, said:

“We are entering the next phase of our growth as a leading national player in the development of technology businesses in the UK, by taking advantage of the significant opportunity in the Midlands and the North to scale the provision of efficient and targeted capital and support.

We provide a platform to accelerate the development of high growth technology companies in selected sectors with the goal of exiting the investments over time, generating attractive returns and realising value.

“As well as providing us with substantial funds to invest in our established portfolio of emerging stars, this listing will raise our profile and enable us to expand geographically whilst further strengthening our team to support our ambitious but realistic growth plans.”

Enquiries:

Mercia Technologies PLC (www.merciatechnologies.co.uk)

+44 (0) 330 223 1430

Mark Payton, Chief Executive Officer

Martin Glanfield, Chief Financial Officer

Cenkos Securities

+44 (0) 20 7397 8900

Ivonne Cantu / Michael Johnson

Instinctif Partners

+44 (0) 20 7457 2020

Adrian Duffield / Kay Larsen

Background

Mercia Technologies’ vision is to become a leading national player in the creation, funding, incubation and development of high-growth technology businesses with an emphasis on the Midlands and the North of the UK.

Mercia has a flexible sourcing model which provides Mercia with access to a large number of investment opportunities in its areas of focus. Mercia has collaborative relationships with nine universities (including the Universities of Birmingham and Warwick) and research centres in the UK, allowing Mercia to access their flow of spinout and early stage investment opportunities as well as a broad professional network through its management and associates.

Mercia’s model is to provide early stage businesses with capital, infrastructure and management support to accelerate their development and enhance their value. Mercia’s strategy is to: (i) provide first pathfinder/seed capital from its third party funds under management; and (ii) at a later stage, provide development capital from its own resources to scale ‘emerging stars’ with the goal of realising value for Shareholders through an exit over time.

Mercia’s third party funds under management

MFM, a regulated fund management company, manages six funds (the “MFM Funds”) with a total of circa £22m under management (“FUM”). Mercia Technologies will acquire MFM shortly before Admission pursuant to the terms of the MFM Acquisition Agreement.

The MFM Funds invest in early stage companies ranging from university spinouts to more developed businesses, not exceeding £10m in annual revenue at the date of initial investment.

Following an initial investment the MFM Funds have the ability to make follow-on investments as the businesses develop. As at 4 December 2014, the MFM Funds had invested circa £16 million and had a combined portfolio of 38 businesses across a number of sectors at varying stages of business development (the “MFM Portfolio”).

Mercia’s direct investments

Mercia provides development capital from its own resources to scale up businesses in line with its investment policy. Mercia’s strategy is to make direct investments into companies within the MFM Portfolio which the Board considers to be ‘emerging stars’ and in other opportunities arising outside of the MFM Funds.

Strategy and business model

Headquartered in the West Midlands, Mercia’s vision is to become a leading national player in the creation, funding and development of technology businesses with an emphasis on the Midlands and the North of the UK, regions which the Directors believe have been historically underserved by investment capital and incubator services providers, compared to the South of the UK.

The Directors’ belief is supported by analysis which identifies a lack of capital for businesses outside the South East and London, where there are approximately 19,000 small and medium enterprises. Between 2011 and 2013 there was an 18% increase in high growth small businesses and Mercia hopes to take advantage of this rapid expansion.

Mercia’s business model is to invest in and provide a platform to accelerate the development of early stage companies in its chosen sectors with the goal of exiting the investments over time, generating attractive returns and realising value for Shareholders.

There are numerous companies and other organisations seeking to provide technology transfer, incubator services and funding to technology spinouts including incubators, venture capital funds, technology transfer offices, angel investors and other boutique investors. These entities operate a variety of business models and cover a broad range of sectors and geographies. Mercia seeks to differentiate itself from other market participants in a numbers of ways, including:

  • Sourcing flexibility – Mercia sources technology and investment opportunities from both its university relationships and from the broad professional network of its management and associates. This gives the Group access to a broader pool of opportunities particularly in the digital sector, including the gaming, gamification, e-commerce and fintech sectors. Circa 50% of the MFM Portfolio and of the Mercia direct investments have been sourced from non-university contacts.
  • Funding flexibility – Mercia has the ability to provide capital from new venture creation through to expansion and development capital. MFM, through the MFM Funds, provides seed, early stage and development capital while Mercia from its own resources, provides capital to scale ‘emerging stars’. The Directors believe that Mercia’s flexibility in funding, sourcing and support can have a material impact on accelerating a company’s development and in capturing the inherent value in the businesses it supports for the benefit of Shareholders.
  • Sector focus – Mercia focuses on some of the highest growth sectors of the UK including: (i) digital; (ii) electronics and hardware; (iii) advanced materials, engineering and specialised manufacturing; and (iv) life sciences. In addition to their growth potential these sectors have been chosen taking into consideration the sector expertise of the investment team and their relative low capital intensity. Within these sectors, Mercia aims to invest in businesses with a technology team recognised as leaders in their field and which have an underlying scalable technology, capable of addressing multiple applications and on occasions acting as consolidators in their market.
  • Flexible support – Mercia can provide a broad range of support to its investee companies throughout their development. These include accommodation, company secretarial and accounting support, management mentoring and recruitment, business planning and development, governance and corporate finance.
  • Regional focus – Mercia intends to take advantage of the general equity gap within the UK and lack of investment in regions outside London and the South East of England. It believes that it is well placed to do so given the geographic diversity of its portfolio, with investments in the Midlands, the North, the South East and Wales and its track record in the region.
  • “Fail fast” policy – investment into the MFM Portfolio companies and the direct investments are based on performance milestones. When an investment fails to meet those milestones, support is removed and the investment is exited to protect further loss of capital. This allows Mercia to focus capital and resources on “emerging stars”.
  • Leverage of third party specialist funds – MFM’s third party specialist funds invest in seed and early stage opportunities which represent a pipeline of investment opportunities for Mercia. Mercia seeks to include pre-emption rights and permitted transfer provisions when making investments through the MFM Funds to facilitate follow-on investments and/or transfer of holdings from the MFM Funds to Mercia, as the businesses develop.

Mercia’s strategy to achieve its goal of becoming a leading player of scale in the sector includes:

  • expanding the Mercia team through the selective recruitment of experienced professionals within its sector focus
  • continuing to develop relationships with universities, accelerators and incubators
  • seeking acquisition or investment opportunities of complementary businesses
  • increasing its geographic reach, including establishing a London office which will give Mercia better access to the gaming technology hub and to co-investors
  • continuing to use its MFM third party fund platform to raise further funds to invest seed, early stage and development capital into new ventures.

Investing strategy

In respect of direct investments made by Mercia, the Directors will apply some or all of the following investing strategy to achieve the investing policy:

  • a pre-identified strong market potential and high opportunity for growth
  • the identification of likely exit opportunities, such as trade sales, flotation or partnerships
  • the technology team should be recognised as leaders in their field
  • there should typically be an underlying enabling and scalable technology, capable of addressing multiple applications
  • there should be defensible intellectual property and ideally comprehensive patent protection, with the ability to enhance this position as the investee company develops
  • the technology is typically projected to be no more than two to three years away from demonstrating incremental value to third party investors or trade buyers or being capable of generating revenue streams for the business.

As at 4 December 2014, the MFM Funds had investments in 38 companies, a number of which are considered to be ‘emerging stars’ by Mercia. Through a combination of their progress and potential, of the 38 companies in the MFM portfolio, Mercia has direct investments in 10 of them, plus a direct investment in a Leeds University spin out.

Overview of Mercia direct investments

Science Warehouse

Science Warehouse was established in 2000 as a spinout from the University of Leeds. Science Warehouse has developed a cloud-based procurement, catalogue and spend analysis platform which gives the customer control of the purchasing cycle from requisition through to payment helping to deliver cost savings and to manage spend.

Allinea Software

Located in Warwickshire, Allinea Software is a University of Warwick spinout in which Mercia Fund Management was a founding investor. Allinea is a leading vendor of tools for parallel software development and high performance computing.

nDreams

nDreams was formed in 2006 by former Eidos Creative Director, Patrick O’Luanaigh. Mercia first invested in nDreams in March 2014 through the MFM Funds. nDreams is an innovative game developer and publisher specialising in virtual worlds and virtual reality (“VR”). The first VR headset was launched by Samsung in September 2014 and includes circa 20 demonstration games, two of which are developed by nDreams with one of the games, Gunner, featured by Samsung as one of the primary demonstrators of the head set’s capabilities.

Native Antigen (“NA”)

Originally a University of Birmingham spinout, NA is an Oxford-based contract service provider specialising in the R&D and scale up manufacturing of highly pure viral and bacterial native antigens. NA’s antigens are used primarily by pharmaceutical and IVD manufacturers in vaccine research and serology where high specificity and sensitivity are vital. As well as offering antigens from a rapidly expanding portfolio, NA undertakes bespoke product development and partnering.

Ventive

Ventive was formed in 2011 and manufactures energy efficient property ventilation devices which are installed into chimney cavities. Ventive has developed a range of award winning passive heat recovery ventilation products which improve air quality without the need for an additional power source. The first products are now selling in the UK market, in both the social and private housing, new build and retrofit sectors. In addition, the product is simple to install and has no moving parts requiring minimal maintenance.

Concurrent Thinking

Located in Birmingham, Concurrent Thinking is a Data Centre Infrastructure Management solution provider founded in 2010. The software platform is designed to drive operational and management efficiencies in data centres. It monitors servers, power supplies and air conditioning systems, resulting in significantly reduced energy costs within a data centre.

Nightingale-EOS

Nightingale-EOS was founded in 2005 to develop innovative laser based technology for measuring thin film coating thickness on curved surfaces. The company’s patented n-Gauge metrology product is expected to be a major step forward for in-line metrology of thin-film coatings on small engineered parts, such as cardiac stents, orthopaedic prosthetics and contact lenses.

Warwick Audio (“WA”)

WA is a University of Warwick spinout incorporated in 2002. WA specialises in the development of flat, flexible loudspeakers which when compared to conventional speakers have a reduced cost of manufacture, are extremely lightweight, thin and use circa 10 per cent of the power.

Kwanji

Kwanji is an early stage company developing an online platform to remove the complexities, inefficiencies, manual data entry and high fees which Small and Medium Enterprises (“SMEs”) suffer when making or receiving international business payments. Kwanji aims to provide SMEs with access to the same foreign exchange (forex) rates as those enjoyed by larger businesses as well as saving them time.

Smart Antenna (“SA”)

Based in Birmingham, SA is a spinout company from the University of Birmingham established in 2013 based on conceptual antenna technology developed by the chief technology officer, Sampson Hu. MFM invested in SA in the same year. SA has designed, developed and patented a pioneering smart antenna technology which provides an efficient and low cost antenna solution to the mobile PC, tablet and portable device market. The mobile market alone comprises approximately 2 billion handsets manufactured per year.

University relationships

Mercia has collaborative relationships, on a non-exclusive basis, with the following nine universities and research centres in the UK to access their flow of spinout opportunities.

  • Aston University
  • Birmingham City University
  • The University of Birmingham
  • Coventry University
  • Keele University
  • Leicester University
  • Staffordshire University
  • University of Warwick
  • Wolverhampton University.


IMPORTANT NOTICE

This announcement has been issued by, and is the sole responsibility of, the Company. This announcement is for information only and does not constitute an offer or invitation to subscribe for or otherwise acquire or dispose of any securities or investment advice in any jurisdiction in which such an offer or solicitation is unlawful, including without limitation, the United States, Australia, Canada, South Africa or Japan.

This announcement does not constitute or form part of, and should not be construed as, an offer to sell or issue, or a solicitation of any offer to buy or subscribe for, any securities, nor should it or any part of it form the basis of, or be relied on in connection with, any contract or commitment whatsoever. Investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information in the admission document (the “Admission Document”) to be published on or around 15 December 2014 by the Company, in connection with the proposed placing and admission of the ordinary shares in the capital of the Company to trading on AIM, a market operated by London Stock Exchange plc. Copies of the Admission Document will be available following its publication during normal business hours on any day (except Saturdays, Sundays and public holidays) from the registered office of the Company.

FORWARD-LOOKING STATEMENTS

Certain statements included in this announcement may contain forward-looking information concerning the Company’s strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the sectors or markets in which the Company operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within the Company’s control or can be predicted by the Company. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. Nothing in this announcement should be construed as a profit forecast and no part of this announcement constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company, and must not be relied upon in any way in connection with any investment decision. Any forward-looking statements made herein by or on behalf of the Company speak only as of the date they are made. Except as required by the FCA, the London Stock Exchange or by applicable law or the AIM Rules for Companies, the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in the Company’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.