First published in Cleantech magazine, November 2008. Copyright Cleantech Investor 2008.

IP commercialisation company for Sheffield and Cardiff Universities will increasingly focus on cleantech space

 Fusion IP is a university IP (intellectual property) commercialisation company with a strong track record in the medical life sciences sector. The company, which has exclusive agreements with the Universities of Sheffield and Cardiff, recently changed its name from Biofusion plc to Fusion IP plc – to reflect the growing diversity in terms of sector of its portfolio companies – and the expansion of its agreement with the University of Sheffield. (Originally an arrangement for the commercialisation of medical life sciences IP, this agreement was expanded in July this year to include the commercialisation of all non-life science research generated IP.) In conjunction with the name change, Fusion IP shares were reclassified for purposes of the London Stock Exchange to the ‘General Financial’ sector.

The Universities of Sheffield and Cardiff respectively rank sixth and seventh in the UK for research. Each plans to fund research to the tune of £1 billion over the lifetime of the agreements with Fusion IP. Chris Redhead, analyst at Nomura Code Securities, values the combined research spend of Sheffield and Cardiff at £167 million per annum. Fusion IP retains a closer relationship with the universities than some other incubators in that the universities jointly own 55% of the companies, ensuring that their interests are closely aligned.

To date, Fusion has made two significant investments in the clean technology sector: Magnomatics and Biohydrogen.

Magnomatics, a Sheffield University spinout, is developing magnetic gear and electrical machine technology for renewable energy, hybrid vehicle and other markets. Magnomatics is currently working on the design of light, energy efficient motors and generators. Volvo Powertrain is a key partner for Magnomatics, which completed a £565,000 funding round in September (Fusion IP invested £210,000 with the remainder coming from White Rose Seedcorn Technology Fund). Fusion IP’s stake in Magnomatics, after the recent fundraising, is 48%. Chris Redhead estimates that the value of Fusion IP’s stake in Magnomatics is around £2.4 million, based on the fundraising valuation.

Fusion IP owns 60% of Biohydrogen, which was also a spin-out from Sheffield, and has committed to invest a further £175,000. Biohydrogen is developing novel methods of producing industrial hydrogen in commercial quantities from waste sugars, using genetically modified e-coli.

Fusion IP raised £2.115 million through the issue of 2.3 million shares in July at 90p per share. The company’s share price has subsequently drifted down in line with the fall in stock markets generally. Redhead, who considers that the value of Fusion IP’s assets is already equivalent to the bulk of the market capitalisation, is optimistic for Fusion IP’s prospects. He believes the next twelve months will bring “…tangible evidence of valuation creation…” driven by “….third party funding rounds/strategic deals involving Fusion IP’s most advanced companies” – amongst which he includes Magnomatics. Redhead points out that, “… at the current market capitalisation investors not only have £167 million in attributable university R&D spend, but also any upside from the portfolio, for essentially nothing.”