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Strategic Report Governance Financials Company information 32 Imperial Innovations Annual Report and Accounts 2016 Portfolio update Our portfolio in detail Innovations has built particular expertise in the key sectors of Therapeutics, Medtech & Diagnostics, Engineering & Materials, and ICT & Digital. These four sectors reflect the strengths of the UK science base and the technological heritage of the four universities that we work with. We have built our capability in each sector and adapted to each one’s different dynamics. As at 31 July 2016, the Group had a portfolio of 107 companies. Of these there are 45 accelerated growth companies in which we actively invest and take a seat on the board. Collectively these 45 companies account for 98.8% of our portfolio by value. The balance is represented by 35 ‘lighter-touch’ companies, in which the Group gives support to promote organic growth and revenue generation, and some 27 low-involvement companies where the Group has a historical holding or has acquired shares through IP transactions. The accelerated growth portfolio had a total net portfolio value of £331.1 million at the end of the financial year (2015: £320.1 million). Of this 46.6% is represented by companies in the therapeutics sector and 22.7% by companies in the Engineering & Materials sector. The Group’s Medtech & Diagnostics companies represent 16.7% of the value. The ICT & Digital sector is a growing part of the Group’s portfolio companies, currently representing 14.0% of the total value, and should increase in the years ahead as the Group puts an increasing focus on this sector. The Group’s top 10 investments by net fair value represent a carrying value of £202.5 million. Therapeutics 46.6% Medtech & Diagnostics 16.7% Engineering & Materials 22.7% ICT & Digital 14.0% Therapeutics 17 Medtech & Diagnostics 7 Engineering & Materials 10 ICT & Digital 11 Imperial College 65.7% University of Cambridge 15.1% University of Oxford 11.4% UCL 1.7% Other 6.1% Portfolio analysis by net fair value Accelerated growth companies £331.1m Portfolio analysis by number Accelerated growth companies 45 Portfolio analysis by source % of total net portfolio value

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Page 1: Strategic eport - Touchstone Innovations · Strategic eport Governance Financials ... building a pipeline of new differentiated ... platform is based on the company’s oncolytic

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32 Imperial Innovations Annual Report and Accounts 2016

Portfolio update

Our portfolio in detail

Innovations has built particular expertise in the key sectors of Therapeutics, Medtech & Diagnostics, Engineering & Materials, and ICT & Digital. These four sectors reflect the strengths of the UK science base and the technological heritage of the four universities that we work with. We have built our capability in each sector and adapted to each one’s different dynamics.

As at 31 July 2016, the Group had a portfolio of 107 companies. Of these there are 45 accelerated growth companies in which we actively invest and take a seat on the board. Collectively these 45 companies account for 98.8% of our portfolio by value. The balance is represented by 35 ‘lighter-touch’ companies, in which the Group gives support to promote organic growth and revenue generation, and some 27 low-involvement companies where the Group has a historical holding or has acquired shares through IP transactions.

The accelerated growth portfolio had a total net portfolio value of £331.1 million at the end of the financial year (2015: £320.1 million). Of this 46.6% is represented by companies in the therapeutics sector and 22.7% by companies in the Engineering & Materials sector. The Group’s Medtech & Diagnostics companies represent 16.7% of the value. The ICT & Digital sector is a growing part of the Group’s portfolio companies, currently representing 14.0% of the total value, and should increase in the years ahead as the Group puts an increasing focus on this sector.

The Group’s top 10 investments by net fair value represent a carrying value of £202.5 million.

Therapeutics 46.6%

Medtech & Diagnostics 16.7%

Engineering & Materials 22.7%

ICT & Digital 14.0%

Therapeutics 17

Medtech & Diagnostics 7

Engineering & Materials 10

ICT & Digital 11

Imperial College 65.7%

University of Cambridge 15.1%

University of Oxford 11.4%

UCL 1.7%

Other 6.1%

Portfolio analysis by net fair value Accelerated growth companies £331.1m

Portfolio analysis by number Accelerated growth companies 45

Portfolio analysis by source % of total net portfolio value

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Imperial Innovations Annual Report and Accounts 2016 33

Imperial College 29%

University of Cambridge 26%

University of Oxford 12%

UCL 6%

Other 27%

Portfolio source over the last five years% of new portfolio companies

Therapeutics 29%

Medtech & Diagnostics 15%

Engineering & Materials 18%

ICT & Digital 38%

% of new portfolio companies by sector

The Group now has a quoted portfolio of four companies which as of 31 July 2016 had a net investment carrying value of £42.9 million (12.8% of total portfolio value) (2015: £106.8 million, 32.6%) and an unquoted portfolio with a net investment carrying value of £292.2 million (87.2 % of total portfolio value) (2015: £220.4 million, 67.4%) as of the same date.

In the following pages we provide an update on the major developments for all of the Group’s top 10 portfolio companies together with a selection of other portfolio companies that either had significant news flow during the year or are in some other way representative of Innovations’ interests in each sector.

Full details of the Group’s holding, net investment carrying value and cumulative cash invested in each of the top 10 investee companies can be found on page 58.

Our portfolio in detail

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34 Imperial Innovations Annual Report and Accounts 2016

Portfolio update continued

TherapeuticsInnovations continues to prove its ability to identify innovative therapeutic science early in development, build high-quality investment syndicates to provide substantial funding where necessary and develop those assets into leading businesses.

One of our key differentiators from our listed peers is the strength of our therapeutics portfolio, which is truly world-class. During the year, the Group added three new therapeutics companies to this portfolio.

By virtue of Innovations’ success, the sector’s high capital requirements, companies in this sector represent around 57% of the valuation of our top 10 portfolio companies.

£154.2mvalue of our therapeutics assets within our portfolio

£96.3mraised by therapeutics companies during the year

£27.5minvested in therapeutics companies during the year

1new company added to the Therapeutics portfolio

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Imperial Innovations Annual Report and Accounts 2016 35

Crescendo Biologics is a Cambridge-based biopharmaceutical company that is harnessing the power of its proprietary transgenic mouse platform to efficiently discover and develop Humabody® therapeutics with a focus on cancer. The underlying technology was originally developed at the Babraham Institute, Cambridge. Crescendo was formed to commercialise this research and is backed by an impressive syndicate of blue-chip investors including Innovations, Sofinnova Partners, Astellas Venture Management and EMBL Ventures.

Focus on

Crescendo Biologics

Humabodies are a novel class of small, robust and potent protein therapeutics based on fully human VH domains. VH fragments are the smallest portions of immunoglobulin that retain target specificity and potency and are the most robust antibody fragments in terms of stability, ease of engineering and manufacture.

Compared to antibodies, Humabodies offer a unique combination of potential benefits that results from their small size, cost-effective production and modular configuration. This means that they can be readily modified and customised,

for example by extending their half-life to match a relevant therapeutic treatment regime. Cresecendo is building a pipeline of new differentiated medicines, including Humabody™ Drug Conjugates (HDCs) and multi-specific immuno-oncology (IO) modulators.

On 10 October 2016, Crescendo announced a a global, strategic, multi-target collaboration and licence agreement with Takeda Pharmaceutical Company for the development of drugs for the treatment of cancer indications with high unmet need.

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36 Imperial Innovations Annual Report and Accounts 2016

Portfolio update continued

Circassia Pharmaceuticals plcCircassia is a speciality biopharmaceutical business focused on allergy and respiratory disease. The company has an established commercial infrastructure, marketed products, a pipeline of near-term therapies and a portfolio of next-generation treatments targeting multi-billion dollar market opportunities.

Circassia was established in 2006 based on a novel allergy immunotherapy platform, ToleroMune®, originally developed at Imperial College London. In February 2007, Innovations led the company’s Series A funding round, investing £2.0 million of a £6.5 million round. Subsequently Innovations led three other funding rounds, investing a total of £25.5 million in Circassia up until the company’s IPO and listing on the Main Market of the London Stock Exchange in March 2014. This IPO was followed in 2015 by a Placing which provided the finance for the Company to acquire Aerocrine and Prosonix as part of its strategy to broaden its pipeline beyond its original immunotherapy assets.

These acquisitions significantly diversified Circassia’s portfolio and Circassia is now a speciality biopharmaceutical company focused on the diagnosis, treatment and management of allergy, asthma and chronic obstructive pulmonary disease (COPD). From Aerocrine the company gained a novel, market-leading allergy management and diagnostics product NIOX® that is used by clinicians in over 40 countries to aid asthma diagnosis and management. Circassia markets these products directly in the USA and Germany and they are sold elsewhere around the world through a network of distributors.

The acquisition of Prosonix has provided Circassia with a broad pipeline of respiratory products. Circassia’s lead asthma product targets substitution of GSK’s Flixotide® pMDI, and was recently approved in the UK. Circassia expects two further filings for regulatory approval by the end of 2017, for products targeting direct substitution of Serevent® pMDI and Seretide® pMDI. The company is also developing a number of novel treatments for COPD.

On 20 June 2016, Circassia announced top-line results from its investigational cat allergy immunotherapy Phase III study. In the study, both treatment regimens and placebo greatly, and equally, reduced subjects’ combined allergy symptom and rescue medication use score from baseline. This meant that despite dramatic improvements in subjects’ allergy symptoms and rescue medication use, the very marked placebo effect meant that the treatment did not meet the study’s primary endpoint.

As a result of this news, management decided to minimise its expenditure on its allergy programme. Accordingly, Circassia stopped development activities in its grass and ragweed allergy programmes. The Phase IIb study of its house dust

mite allergy treatment will continue to completion in spring 2017. The company’s early-stage, small-scale Phase II birch allergy study also continued to completion.

On 27 September 2016, Circassia reported its interim results for the six months to 30 June 2016. The company noted substantially increased revenues from its asthma management products, strong growth in its respiratory portfolio and an expansion of its commercial footprint in order to capitalise on its broadening pipeline and early work on a number of new product opportunities.

The company also reported encouraging results from its Phase II birch allergy study but will wait for the results of its large-scale (700 patients enrolled) house dust mite field study which are due in Spring 2017, before reassessing the wider strategy for its allergy immunotherapy portfolio.

PsiOxus Therapeutics LimitedPsiOxus Therapeutics is an Oxford-based immuno-oncology company which has developed a patented platform for the systemic delivery of tumour-targeted oncolytic immune therapeutics. The company was founded in 2010 in its present form, having been created by the merger of Imperial College London spin-out Myotec Therapeutics with Oxford spin-out Hybrid BioSystems.

Founder John Beadle, a former Entrepreneur in Residence at Innovations, has been CEO from the start. The new team was further strengthened by the appointment of Paolo Paoletti as Chairman in January 2016. Dr Paoletti is CEO of another Innovations portfolio company, Kesios Therapeutics, and was previously president, GSK oncology and Vice President, clinical development at Lilly Oncology. PsiOxus has raised £45.7 million to date, with the most recent funding round being a £25.0 million Series C in May 2015.

PsiOxus’ Tumour-Specific Immuno-Gene (T-SIGn) therapy platform is based on the company’s oncolytic virus, enadenotucirev, which has unique properties that allow it to be delivered systemically via intravenous administration and to replicate only in tumour cells. The virus’s anti-cancer capability can be further enhanced through ‘arming’ – a process that involves the addition of new genes to the virus. The armed T-SIGn platform makes possible creation of a broad range of systemically delivered oncolytic immune therapeutics, including oncolytic viruses that express one or more antibodies, cytokines, immunomodulatory proteins, and nucleotide (RNA)-based payloads.

The T-SIGn platform is in pre-clinical stage, while Phase I/II clinical trials are ongoing with enadenotucirev in a variety of different tumour types and as a combination therapy alongside both checkpoint inhibitors (SPICE study with nivolumab) and conventional chemotherapeutics (OCTAVE study with paclitaxel).

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Imperial Innovations Annual Report and Accounts 2016 37

On 30 June 2016 PsiOxus announced an exclusive clinical collaboration agreement to evaluate the safety, tolerability, and preliminary efficacy of enadenotucirev in combination with Bristol-Myers Squibb’s Immuno-Oncology (I-O) agent Opdivo® (nivolumab) to treat a range of tumour types in late-stage cancer patients. Opdivo® was the first PD-1 immune checkpoint inhibitor to receive regulatory approval anywhere in the world in July 2014 and currently has regulatory approval in 51 countries including the USA, Japan and the European Union.

Given that enadenotucirev is designed to have immune stimulating effects and Opdivo® is designed to alleviate immune suppression, this new clinical collaboration will support Phase I studies to determine whether combining these two agents can significantly improve the proportion of patients achieving objective tumour responses, the extent of tumour shrinkage, and/or the durability of responses. Under the terms of this agreement, Bristol-Myers Squibb will make a one-time upfront payment of $10.0 million to PsiOxus, and the parties will share development costs.

Cell Medica LimitedCell Medica develops, manufactures and markets cellular immunotherapy products for the treatment of cancer and infections. Cell Medica employs a range of leading-edge technologies to develop immune cell products with the potential to transform the lives of cancer patients in the years ahead.

Cell Medica’s lead oncology programme is aimed at a range of cancers associated with the oncogenic Epstein Barr virus (EBV), including non-Hodgkin lymphomas, Hodgkin lymphoma and nasopharyngeal carcinoma. In addition to its oncology programs, the company is pioneering the use of adoptive T cell immunotherapy for the treatment of cytomegalovirus and adenovirus infections in patients who are profoundly immunosuppressed from allogeneic haematopoietic stem cell (bone marrow) transplantation.

The business was founded by CEO Gregg Sando, who gained an MSc Immunology at Imperial College London following a career in investment banking in London and New York. Since its initial seed funding round in 2007, Cell Medica has raised over £72.5 million of which £19.8 million has been invested by Innovations. The bulk of this funding was provided by a £50.0 million Series B funding in November 2014, which was led by Innovations alongside co-investors Invesco and Woodford Investment Management.

Cell Medica’s lead cancer immunotherapy product baltaleucel-T (CMD-003) comprises engineered T-cells targeted at malignant cells that express the oncogenic Epstein Barr virus. EBV is part of the Herpes family of viruses and was the first virus to be discovered to cause cancer.

It is now widely associated with a range of cancers. The safety and efficacy of this novel cancer immunotherapy is currently being investigated in a ground-breaking international Phase II clinical trial (CITADEL) for the treatment of advanced extra nodal natural killer T cell lymphoma (ENKTCL). The trial enrolled its first patient in early 2015 and initial data is expected towards end-2016 with completion expected in 2017.

CMD-003 was given orphan drug status by the FDA in March 2015 for the treatment of EBV+ non-Hodgkin lymphomas and in July 2016 the European Commission (EC) granted the product orphan drug designations for the treatment of ENKTCL and post-transplant lymphoproliferative disorder (PTLD).

Towards the end of 2016 the company expects to initiate label expansion studies for baltaleucel-T with the CIVIC trial. This will study baltaleucel-T in three additional indications: EBV+ Hodgkin’s lymphoma, EBV+ diffuse large B cell lymphoma and EBV+ post-transplant lympho-proliferative disease.

On 17 June 2016, Cell Medica announced an exclusive licensing agreement and a co-development partnership with the Baylor College of Medicine (‘Baylor’) to develop next-generation cellular immunotherapies incorporating chimeric antigen receptors (CARs) with genetically enhanced potency for the treatment of cancers that do not respond to conventional therapies. This new collaboration provides Cell Medica with an exclusive licence over several Baylor cell and gene technologies and an option to license new products introduced into the co-development partnership by Baylor’s leading research teams in the field of genetically engineered immune cells. As a result it is expected to generate a significant number of new products for the company’s cellular immunotherapy pipeline.

This news was followed on 12 July 2016, by the announcement of the acquisition of Delenex Therapeutics AG a privately held, clinical-stage biopharmaceutical company based in Switzerland. Delenex is focused on the development of locally and systemically applied antibody therapeutics and its proprietary PENTRA®Body technology provides a key enabling technology for Cell Medica to develop a pipeline of next-generation CAR-modified immunotherapies. Delenex’s scientific team and the company’s laboratory facilities in Switzerland will be maintained within Cell Medica’s global R&D operations which now encompass operations in the UK, USA, Germany and Switzerland.

Just after the year-end, on 24 August 2016, Cell Medica announced a research collaboration with UCL which will see the company utilise UCL’s novel T cell receptor (TCR) technology to generate leading-edge modified TCR products for the treatment of cancer. The collaboration also provides Cell Medica with an exclusive worldwide option and licence agreement for these technologies, as well as TCR gene sequences for the development and commercialisation of specific products.

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38 Imperial Innovations Annual Report and Accounts 2016

Portfolio update continued

Abzena plcAbzena provides proprietary technologies and complementary services to enable the development and manufacture of biopharmaceutical products, a growing area that requires specialist knowledge and expertise. Abzena has a global customer base which includes the majority of the top 20 biopharmaceutical companies as well as large and small biotech companies and academic groups.

During the period, Abzena completed two acquisitions in the USA which have given it a footprint on both the East and West coasts of the USA and a broader offering for its customers. In September 2015, the company acquired PacificGMP, a contract biopharmaceutical manufacturing and development company based in San Diego, USA. In December 2015, it also acquired The Chemistry Research Solution (TCRS), a contract chemistry and bioconjugation business based in Bristol, near Philadelphia. This acquisition was partly funded by a £20.0 million placing announced in the previous month.

On 25 January 2016, Abzena announced that it had entered into a licensing agreement with a large, publicly listed US biotech for the development of Antibody-Drug Conjugates (ADCs) based on Abzena’s ThioBridge™ technology. The agreement covers the development of ADCs against three undisclosed targets. Abzena will receive an initial licence and target nomination fee and has the potential to receive further licence fees and milestone payments of up to $150.0 million. The licensing agreement follows a research collaboration between the two parties, which included the evaluation of multiple ADCs for safety and efficacy in pre-clinical models.

On 13 June 2016, Abzena’s full-year results highlighted a period of strong growth. The acquisitions of TCRS and PacificGMP significantly expanded Abzena’s offering and generated a significant increase in business from US-based customers. The company also reported that several of its ‘ABZENA Inside’ programmes were making strong progress towards commercialisation with leading partners, notably GS-5745 (Gilead Sciences) in gastric cancer. Abzena entered into a further eight licensing agreements in the financial year, bringing the total to over 40. Eleven ABZENA Inside programmes are in clinical trials funded by partners.

On 14 July 2016, Abzena announced a joint venture with the Baylor Scott & White Research Institute (BSWRI) based in Texas, to create a new company, Denceptor Therapeutics Limited, which will develop immunotherapeutic products to treat cancer and autoimmune diseases using BSWRI’s dendritic cell receptor-targeting antibodies. These antibodies will be humanised using Abzena’s Composite Human Antibody™ technology to reduce unwanted drug immunogenicity.

On 25 July 2016, Abzena entered into a manufacturing agreement with Faron Pharmaceuticals Limited (AIM: FARN) that will result in Abzena manufacturing Clevegen®, a novel therapeutic antibody being developed by Faron to reduce immune suppression in cancer. Clevegen was humanised by Abzena using its Composite Human Antibody® technology and is the first product produced using this technology that will also be manufactured by Abzena following its acquisition of PacificGMP.

TopiVert Pharma LimitedTopiVert is a clinical-stage biotechnology company developing narrow spectrum kinase inhibitors (NSKIs) as novel, locally-acting medicines for the local treatment of chronic inflammatory diseases of the gastrointestinal tract and eye.

NSKIs are novel small molecules that are potent inhibitors of a range of kinases involved in the inflammatory response. They are designed to have low bioavailability, which reduces their exposure to many of the body’s healthy tissues, thereby enhancing their safety and tolerability profiles. Together, these attributes make NSKIs ideal treatment candidates for chronic inflammatory diseases where long-term therapy demands a sustained effect accompanied by excellent safety and tolerability.

The company was founded in December 2011, following an £8.0 million funding round jointly led by Innovations and SV Life Sciences. In December 2013, TopiVert raised a further £17.0 million in a funding with new investors Johnson & Johnson Development Corporation and Neomed Management, joining the syndicate alongside SV Life Sciences and the Group.

TopiVert’s most advanced drug candidate, TOP1288 for the treatment of ulcerative colitis, has successfully completed Phase I development. On 6 October 2016, the company announced that the first patients had been dosed in its Phase IIa proof-of-concept study.

TopiVert also expects to start the clinical development of TOP1630, its candidate for dry eye disease (DED), in early 2017. Current therapies for these debilitating diseases provide inadequate long-term control in a high proportion of patients and considerable unmet medical need remains.

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MISSION Therapeutics LimitedCambridge-based MISSION Therapeutics was founded in 2011 to commercialise expert research into the ubiquitin pathway for the treatment of cancers and non-malignant disease. It has built a world-leading platform for the discovery and development of first-in-class, small molecule drugs that selectively target deubiquitinating enzymes (‘DUBs’) – an emerging, and hitherto intractable drug class that is attracting significant commercial interest as the potential ‘next kinase area’.

DUBs are involved in multiple cellular processes, including DNA damage response and cell proliferation. The inhibition of these enzymes has considerable potential for the generation of novel drugs for treating cancer and other unmet medical needs, including neurodegenerative disease, muscle wasting and infectious disease. Despite significant efforts within the pharmaceutical sector, there is a lack of DUB inhibitors in clinical development.

MISSION’s leadership team has a wealth of international, commercial and scientific experience and the company has strong links with key academic and research centres including Cancer Research UK laboratories and the Gurdon Institute, University of Cambridge. Professor Steve Jackson at Cancer Research UK laboratories and the Gurdon Institute, University of Cambridge is the scientific founder of MISSION and is the Chief Scientific Officer of the company.

To date, MISSION has raised £86.0 million from investors including a £60.0 million funding round announced on 2 February 2016 which was jointly led by Innovations and new investor Woodford Patient Capital Trust plc, with follow-on investment from existing shareholders Sofinnova Partners, SR One, Roche Venture Fund and Pfizer Venture Investments. The new funding will enable MISSION to maximise the potential of its world-leading DUB platform and advance a series of first-in-class small molecule drug candidates targeting specific DUBs into early clinical development.

Precison Ocular LimitedIn February 2016 Innovations led a £15.5 million investment round in Precision Ocular Limited an Oxford-based retinal therapeutics development company focused on combining proprietary drug delivery technology and drug formulations to treat sight-threatening diseases.

Innovations committed £6.9 million to the round alongside other investors, including NeoMed and V-Bio Ventures an international venture capital firms focused on the healthcare industry; Consort Medical plc, a leading global single-source pharma services drug and delivery device company with whom Precision Ocular has a strategic development and manufacturing agreement; and Hovione Scientia Limited, a leading pharmaceutical manufacturer specialising in particle engineering and drug encapsulation, with whom Precision Ocular is developing proprietary drug products.

Precision Ocular’s delivery technology enables routine injection to deliver drugs and therapeutics to specific tissues in the back of eye, resulting in improved therapeutic benefits and safety. Precision Ocular’s drug formulations are optimised to suit the unique ocular environments where they are delivered, resulting in better pharmacokinetics (drug movement) and pharmacodynamics (therapeutic effect) as well as extended treatment durations.

Precision Ocular’s lead programme is a drug/device combination product that is prepared in a preloaded, single-use, injection instrument and is being developed to treat adults with a number of eye conditions including diabetic macular oedema (DME) and retinal vein occlusion (RVO).

Post year-end

Artios PharmaLimitedOn 21 September 2016, Innovations committed £5.1 million to the £25.0 million Series A funding round of Artios Pharma Ltd., a new Cambridge-based private biotech company, focused on the development of novel DNA Damage Response (DDR) cancer therapies.

Artios was formed with assets from Cancer Research Technology (CRT), the technology transfer unit of Cancer Research UK (CRUK). It is backed by an impressive syndicate of leading European and US life science investors including SV Life Sciences, Merck Ventures, Arix Bioscience PLC, CRT Pioneer Fund (managed by Sixth Element Capital) and AbbVie Ventures (in addition to Innovations). This syndicate reflects Artios’ international ambitions to build a pipeline of first-in-class DDR therapies identified from a network of global, independent collaborators.

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Medtech & DiagnosticsThe Medtech & Diagnostics sector includes businesses that develop medical technologies and businesses that develop diagnostic tools such as those that detect disease or can ascertain the severity of a disease.

UK universities and research institutions, especially those in the ‘Golden Triangle’, have a strong history of developing pioneering advances in these fields and we are well placed to form and fund companies around such innovation.

£56.7mvalue of our Medtech & Diagnostics assets within our portfolio

£35.5mraised by Medtech & Diagnostics companies during the year

£14.5minvested in Medtech & Diagnostics companies during the year

0new companies added to the Medtech & Diagnostics portfolio

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Cambridge-based Ieso Digital Health is transforming the accessibility, affordability and accountability of mental health treatment by delivering therapy online.

Discreet one-to-one therapy is delivered in real time using written (typed) conversation, with patients meeting an accredited therapist in a secure virtual therapy room, at a time and location that is both convenient and comfortable for them.

The use of technology and written conversation offers greater patient choice, more widespread access

Focus on

Ieso Digital Health

to effective, evidence-based therapy and a freedom to express themselves by communicating online. A written conversation also improves learning and retention compared to a spoken conversation. The therapy has been clinically validated within the NHS across a range of conditions and has been shown to be comparable or better than face to face therapy.

Innovations first invested in Ieso in 2013 by which time the company had treated a few hundred patients. The company has made huge progress since then and is now the largest provider of Cognitive Behavioural Therapy (CBT) in the UK.

During the last financial year the company had more than 5,000 patient referrals in the NHS, representing a 61% year-on-year growth compared to the same period in 2015. More than 14,000 hours of therapy were delivered in the first half of 2016 alone.

Ieso has now started treating patients in the US via a partnership with Beacon Health Options, the largest behavioural health managed care organisation in the USA and covers 45 million lives.

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Portfolio update continued

Veryan Holdings LimitedVeryan is a medical technology company that has developed and patented a three-dimensional stent, BioMimics 3D™, for use in the peripheral (leg) arteries. The shape of the BioMimics 3D™ stent improves its biomechanical performance and blood flow in the vessel, with a demonstrated benefit on clinical outcomes in peripheral arterial disease.

Existing stents indicated for placement in the leg arteries have a straight tubular design that tends to straighten any curvature present in vessels. This straightening effect may interfere with normal shortening of the femoropopliteal artery during lower limb movement, such as when the knee is bent.

However, Veryan’s BioMimics 3D™ stent technology involves adapting traditional straight stent designs to a patented three-dimensional helical shape, which more closely mimics the natural geometry of the human vascular system. When implanted, the BioMimics stent imparts natural curvature to the diseased artery, thereby promoting swirling blood flow, which improves the outcome of peripheral intervention. The unique biomimetic design of the BioMimics 3D™ stent also provides more flexibility, kink and fracture resistance than other laser-cut nitinol tube stents, making it perform particularly well over long periods of time.

In November 2012, Veryan gained CE Mark approval for its BioMimics 3D™ peripheral stent. This was followed in November 2014, with the publication of the full two-year data from the ‘Mimics’ randomised controlled study, which confirmed that Veryan’s advanced stent design provided statistically significant clinical benefits over two years when compared to straight nitinol stents.

On 14 January 2015, Innovations led an £18.0 million Series B funding round in Veryan, alongside co-investors Invesco, Seroba Kernel and Seven Mile. Innovations committed up to £8.4 million to the round. The proceeds of this fundraising were used to initiate the company’s ongoing MIMICS-2 study.

This is a prospective, single-arm, multicentre clinical study of 280 patients at more than 40 investigational sites in the USA, Germany and Japan. The study is being conducted under an FDA Investigational Device Exemption (IDE), with Japanese PMDA concurrence through the ‘Harmonization by Doing’ initiative, to provide clinical data to support parallel pre-market approval reviews in USA and Japan. On 13 June 2016, Veryan announced that the 200th patient had been recruited to the trial.

Abingdon Health Limited Abingdon Health is a UK-based medical diagnostics group focused on developing, manufacturing and commercialising point of care immunoassay tests for disorders of the immune system. Since the company’s formation in 2008 it has completed a series of selective acquisition and licensing transactions to bring together intellectual property, diagnostic platforms and manufacturing and has also created a sales and marketing structure.

Abingdon Health’s initial focus is on developing rapid tests for haematology oncology and specifically B-cell dyscrasias, which are diseases caused by disorders of plasma cells. The company is addressing unmet clinical needs in this area with the introduction of rapid and near-patient tests for diagnosis and monitoring of B-cell dyscrasias. Abingdon’s first product to market is Seralite®– FLC, the world’s first rapid diagnostic device in multiple myeloma which was launched in March 2015.

On 27 June 2016, the company announced that it has entered into a multi-year, exclusive, global distribution agreement with Sebia, the world leader in medical diagnostics by electrophoresis. The deal allows Sebia to add Abingdon Health’s Seralite®– FLC Dual Kappa and Lambda serum lateral flow immunoassay to its worldwide offering.

This announcement was quickly followed by the news that the company had secured the CE mark for Seralite®– FLC urine. This test utilises the same well characterised antibodies featured in Seralite®– FLC serum and provides accurate quantification of free light chains in urine within 10 minutes as an aid to the diagnosis and management of multiple myeloma.

Abingdon Health is also developing a multiplexed rapid diagnostics technology platform to meet the market need for simple to use, rapid, cost-effective, portable systems. The company’s rapid testing system integrates low-cost Organic Light Emitting diodes (OLEDs) and Organic Photodetectors (OPDs) with immunoassay lateral flow chemistry to allow the quantitative measurement of a range of multiplexed assay panels.

On 18 April 2016, Abingdon Health announced the signing of a collaboration agreement with Sumitomo Chemical Co Limited to develop a next-generation multiplexed point-of-care biosensor device. This agreement follows a two-year joint development agreement between Molecular Vision, a subsidiary of Abingdon Health, and Sumitomo Chemical.

On 11 July 2016, Abingdon announced the completion of a further £3.0 million investment round.

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Oxford Immunotec Global plcOxford Immunotec Global plc, headquartered near Oxford, UK is a global, high-growth diagnostics company focused on developing and commercialising proprietary tests for the management of immune-regulated conditions. The company has an extensive presence in the USA, and since November 2013 has been listed on NASDAQ. Revenues for the year ended 31 December 2015 were $62.8 million an increase of 33% on a constant currency basis compared to prior year.

Oxford Immunotec’s first product is the T-SPOT®TB test, which is used to test for tuberculosis infection. This diagnostic test has been approved for sale in over 50 countries, including the USA, where it has received pre-market approval from the Food and Drug Administration, Europe, where it has obtained a CE mark, Japan and China. The T-SPOT®TB test has advantages over current TB diagnosis methods (such as the tuberculin skin test), as it returns results more quickly and more accurately, and is suitable for use in a wider range of patients.

In addition, Oxford Immunotec has two other products, the T-SPOT.CMV test and the T-SPOT.PRT test as part of a series of products intended for the transplantation market. In addition to these three products, the company has an additional six active development programmes, each of which leverages its T cell, B cell and innate immune measuring technology.

On 23 June 2016, Oxford Immunotec announced it has entered into a definitive agreement to acquire Imugen, Inc., a Massachusetts-based clinical laboratory focused on developing and performing specialised testing for tick-borne diseases, for US$22.2 million in an all-cash transaction. This transaction is a significant step forward for Oxford Immunotec as it expands the company’s addressable market, whilst leveraging its existing commercial infrastructure to grow and diversify its revenue streams.

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Engineering & MaterialsWe take a broad approach to investing in the Engineering & Materials sector, though our focus is on enabling or platform technologies that have the potential to form the basis of very large businesses addressing significant global markets.

Many advances in the fields of engineering and materials derive from fundamental research undertaken at universities, such as those within the ‘Golden Triangle’. Our close links to these research centres give us good insight into new developments and an early chance to identify these opportunities.

£77.9mvalue of our Engineering & Materials assets within our portfolio

£49.3mraised by Engineering & Materials companies during the year

£14.6minvested in Engineering & Materials companies during the year

1new company added to the Engineering & Materials portfolio

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One of the new additions to Innovations’ accelerated growth portfolio this year was Cambridge-based Silicon Microgravity (‘SMG’) a newly-formed University of Cambridge spin-out which has developed a novel sensor technology that aims to improve the management of oil and gas reservoirs.

SMG’s robust, miniature and highly sensitive sensors, which have been developed in partnership with BP, are sent deep into boreholes to distinguish oil from water. Once the position of water is established and tracked, reservoir engineers can mitigate the potentially damaging results of water reaching a production well. SMG estimates that the technology could improve yields

on conventional reservoirs by up to 2%, representing significant increases in production and revenues. The first field trial in a production well is scheduled for 2017.

The underpinning sensor technology was developed by a team of Cambridge scientists, led by Dr Ashwin Seshia, of the University’s Department of Engineering, which has been working closely with BP to develop the sensors. SMG was set up to commercialise this research and benefited from a US$3.0 million funding led by Innovations alongside Cambridge Enterprise, the commercialisation arm of the University of Cambridge, together with grant funding from the UK government.

Focus on

Silicon Microgravity

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Nexeon Limited Nexeon is a battery materials company that is developing silicon anodes for the next generation of lithium-ion rechargeable batteries. Batteries made with silicon anodes have increased capacity, offering the potential for lighter batteries with more power and a longer lifetime between charges.

Nexeon has a broad IP portfolio relating to silicon materials and their use in lithium-ion batteries, comprising over 375 patents, of which more than 200 have been granted. In April 2014, the company completed the construction and commissioning of its new process development and manufacturing facility plant in Milton Park, Oxford, UK. The plant is capable of producing over 20 tonnes of product a year and has been built to handle a wide range of materials and reagents. In parallel, the company has toll manufacturing arrangements with a number of third-parties to augment its production capability and to react quickly to customer demands.

Nexeon is continuing to optimise its silicon materials for the blended carbon/silicon anode applications currently being demanded by the battery industry. Material development has advanced to the point that the company can now offer a product that outperforms SiOx, the only silicon-based material being used in commercial quantities today. Product sampling is underway with several potential customers in both the consumer electronics and automotive sectors. The company continues to supply low volumes of materials into niche applications such as defence where energy density is the priority.

Nexeon has designed its technology for easy adoption in existing Li-ion battery production lines. The plan is for the graphite currently used in anodes to be replaced with hybrid electrodes containing Nexeon materials which can be used in combination with conventional polymer binders and current collectors as part of the standard battery manufacturing process. In this way, Nexeon offers a drop-in capability, which gives battery manufacturers a low switching cost by virtue of the simple integration of Nexeon’s silicon anode into existing manufacturing processes.

On 4 May 2016, Nexeon completed a £30.0 million equity funding round. Innovations committed £5.0 million to the round alongside existing investor Invesco Asset Management and new investor Woodford Investment Management. Nexeon is using these funds to launch products, acquire IP and complementary technology to broaden its offering to customers, and to begin work on the design of a larger manufacturing facility. These initiatives will improve Nexeon’s ability to achieve world-leading levels of battery energy density and to satisfy the demand for superior battery performance in applications. These range from smart phones and other mobile consumer devices to electric vehicles and the large-scale static energy storage of renewable energy.

On 11 October 2016, Nexeon announced the opening of a new office and development laboratory in Yokohama, close to many of the company’s development partners and prospective customers in the electronics and automotive sectors.

Econic Technologies Limited Econic Technologies is an innovative and fast-growing chemical technology company that develops and commercialises novel catalyst technologies to build carbon dioxide (CO2)into polyurethanes and other polymers. The underlying catalyst technology was developed at Imperial College London by a team of scientists led by Professor Charlotte Williams. The current technology is covered by a number of worldwide patents and patent applications.

Econic Technologies was founded in 2011 to develop the technology further towards commercial applications. Innovations led an initial £1.1 million funding round alongside Norner Verdandi, part of Norner AS, a leading international technology consultancy and partner for polymers and materials industries. This was followed by a £1.85 million round in early 2013. In December 2013, Econic received a further £5.1 million in investments from the Group and a new investor, Jetstream Capital.

Econic’s technology is one of the few commercially viable ways to chemically utilise CO2, which although highly abundant and cheap, is very un-reactive and needs to be activated using a catalyst. Econic’s catalysts enable manufacturers to make a whole new generation of everyday plastics – for use in cars, mattresses, running shoes – that will be both profitable and ecological.

Econic partners with plastic manufacturers to help them make their products using CO2. Econic’s technology will allow replacement of up to 50% of traditional petrochemical feedstock with lower cost CO2, reducing feedstock cost by as much as 30-40%, to create added value through the chain. This means that manufacturers save money and natural resources by replacing key ingredients made from oil with a waste product they already have. At the same time, CO2 is being recycled into new plastics, instead of released back into the environment.

On 6 July 2016 Econic completed a £5.0 million funding round. Innovations has committed £2.5 million to the round alongside Jetstream Capital and new investor Woodford Investment Management. The funding will provide crucial support for the development of future catalyst generations and the expansion of Econic’s facilities, thereby accelerating the commercialisation of Econic’s catalyst technology. This latest round of investment is complemented by an EU Horizon 2020 SME award, which adds a further £2.0 million of funding over the next two years.

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Aqdot LimitedAqdot™ is a specialist chemical company which operates in the rapidly growing encapsulation market, currently valued at £4 billion. Its proprietary technologies encapsulate and protect valuable active products (cargoes) in a variety of settings and allow them to be delivered when and where the customer requires.

To date the challenge for encapsulated products has been in triggering encapsulation systems to release their cargo at the time that the customer needs them. It is this unique proprietary capability that Aqdot’s technology delivers, based on a disruptive platform originally discovered at and spun out of the University of Cambridge.

Aqdot’s technology has the potential to be game-changing in a wide range of industries, including household products such as detergents, pharmaceuticals, oil and gas, agrochemicals, cosmetics, food, paint, fragrances and personal products. By identifying unmet needs in these sectors, Aqdot is seeking to develop products that enable manufacturers to introduce novel and differentiated brands, reduce manufacturing costs and make a truly positive impact on the environment.

Innovations first invested in Aqdot in November 2013, leading a £1.0 million funding round alongside Cambridge Enterprise Limited, Parkwalk Advisors and Providence Investment Company. This was followed by a further £2.6 million funding round in December 2014 featuring the same investors. In February 2016, Innovations led a £5.0 million Series A fundraising, committing a further £3.0 million of investment to the company.

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ICT & DigitalThis sector as a whole is thriving in the UK and is supported by university talent. Our investments in this sector will often centre on entrepreneurial management teams trained and nurtured in these institutions.

In line with the strategy set out in last year’s Annual Report, the Group has increased its investment in this sector and added five new ICT & Digital companies to its accelerated growth portfolio during the year.

£46.3mvalue of our ICT & Digital assets within our portfolio

£25.3mraised by ICT & Digital companies during the year

£13.3minvested in ICT & Digital companies during the year

5new companies added to the ICT & Digital portfolio

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In October 2015 Innovations led a £1.5 million seed funding for Telectic, a London-based start-up that uses artificial intelligence (AI) to interpret the content of the World Wide Web. The company’s initial focus is on the substantial business information market, where Telectics’ AI technology can be used to provide live interpretation of the Web’s content for decision-makers, their networks and organisations, providing invaluable insights into professional networks for anyone doing research and business development.

The underlying technology has been developed over the last five years by a research team led by AI veteran Dr Jason Kingdon alongside three

other experienced AI and software entrepreneurs, Sergi Martorell, Dr Iain Mclaren and Pedro Esteban. In addition to co-founding UCL’s Intelligent Systems Lab, Jason Kingdon was the co-founder and CEO of big data AI analytics pioneer Searchspace (now part of Nice Systems) and backer of Robotic Process Automation software company Blue Prism.

Telectic thus provides a good example of Innovations’ investment in ICT & Digital companies, where it is more likely to be based around people or teams, often leveraging university research, as opposed to being created around a specific piece of IP born out of university research.

Focus on

Telectic

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Yoyo Wallet LimitedYoyo Wallet (‘Yoyo’) was founded in 2013 at Innovations by a team of highly experienced entrepreneurs from the credit card and payments industry, led by Innovations’ Venture Partner Alain Falys. The company has created an app that offers a better experience for retail customers, simplifying and speeding up in-store transactions by combining payment and loyalty in one easy scan. It also provides a marketing platform for retailers that enables digital customer engagement in-store. Retailers gain access to a set of tools that enables them to better target their customers through loyalty rewards, offers and incentives.

Crucially in a noisy mobile payments space, Yoyo offers not only mobile payments, but also adds value to consumers and retailers by integrating loyalty and engagement respectively. For example, retailers at no additional transaction cost, and with a small monthly per till fee for the EPOS software, gain a host of detailed transaction data about their customers and their purchases which current payment systems don’t provide. Yoyo’s personalised basket data thus transforms customers from anonymous purchasers to individuals with habits, tastes and motivations who can be targeted with offers and loyalty programmes.

In turn consumers gain from the fast payment transactions, get to consolidate and maximise their loyalty/deals effortlessly in one app and benefit from retail promotions specifically targeted to their interests and needs (based on their historical purchasing patterns). They also earn rewards based on usage.

These benefits provide reasons for both consumers and retailers respectively to adopt the technology and provides revenue streams (EPOS software licences per till point and share of promotional value-added sales) on top of a thin slice of transaction commissions.

Targeting two ‘closed’ groups, university campus retailers and corporate office facilities, has enabled Yoyo to achieve high transaction rates and avoid having to win over users one by one.

The ‘app’ was launched in early 2014 across 32 food and drink outlets at Imperial College London. Since then, Yoyo’s experienced management team has made strong commercial progress and as at 31 July 2016, had signed 34 universities as customers and deployed the solution at 80 head office corporate catering locations. Yoyo has also signed up a number of high-street retailers.

Featurespace Limited Featurespace is an Adaptive Behavioural Analytics company which has developed a machine learning software platform, the behaviour analytics engine (ARIC) that enables the identification of abnormal behaviour in high-volume real-time applications such as online betting and credit card transactions. The underlying technology is based on Bayesian statistics and research undertaken at the University of Cambridge by the late Professor Bill Fitzgerald and Featurespace CTO David Excell.

Featurespace’s software delivers significant economic benefits to customers, by providing a granular view of transactions which allows them to predict likely fraud and take appropriate action. For example, for a UK credit card company it reduced fraud loss by 40%, and cut the ratio of false positives to genuine rejections from 23:1 to 6:1.

Featurespace’s growing customer base includes companies such as CallCredit and KPMG in financial services, and Betfair and William Hill in gaming and lotteries. During the year the company announced a number of new customer wins including a five-year agreement with UK mobile payment innovator, Zapp Limited, to provide real-time fraud protection for its mobile payment customers, and a new project with Camelot, the UK National Lottery operator. The latter involved Featurespace’s technology being used to augment Camelot’s existing processes for identifying and protecting online players at potential risk of harmful play.

More recently, on 11 July 2016, Featurespace announced a partnership with OpenBet, the world’s leading software provider to the sports betting industry, which will result in Featurespace’s market-leading ARIC engine being implemented into OpenBet’s activity feeds, enabling OpenBet customers to have real-time access to player data.

Featurespace also made progress in the USA, announcing a number of major new customer wins with USA-based companies. The most recent of these, announced on 19 May 2016, is a new partnership with TSYS Inc, one of the world’s largest payment solutions and services companies, in which Featurespace’s adaptive behavioural analytics platform will be used to reduce fraud and false positives for TSYS’ clients.

On 31 May 2016, Featurespace completed a £6.2 million funding round. Innovations committed £2.5 million to the round alongside new co-investor TTV Capital, a leading US venture company focused on early-stage fintech companies, which contributed £2.4 million to the round. The balance was made up by existing investors, including Nesta and a number of members of the Cambridge Angels group. The new funding will enable Featurespace to expand its operations in the UK and USA and to continue to grow in financial services.

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Cortexica Vision Systems LimitedCortexica Vision Systems is the leading provider of cloud-based image recognition systems and mobile visual search technology. The company was spun-out from the Bioengineering Department of Imperial College London, originating from a research project to reverse-engineer the human visual cortex.

Cortexica provides advanced visual search and image recognition software to global retailers, brands and digital publishers that allows their customers to purchase products at the moment of inspiration by matching images to inventory. Cortexica seeks to visually empower its clients by supporting them in using its technology to drive both sales through customer engagement and to improve internal operations through simplifying existing processes.

The company’s proprietary findSimilar™ technology is used by a growing list of global retailers, including Zalando, Macy’s and Shop Direct as well as many other brands across an increasing range of verticals. findSimilar™ is an online function that displays search results of a range of products within a particular category that are visually similar in colours, shapes, details and patterns. By searching visually through the inventory, the customer has access to a greater range of product choice and inspiration without the need for inputting keywords.

On 8 July 2016, Cortexica announced the successful completion of a six-month consumer trial of its product discovery tool on the John Lewis iPad app. As a result, John Lewis has permanently added the findSimilar™ function to its Men’s and Women’s fashion product list pages.

New ICT & Digital companies In line with the plans set out in last year’s Annual Report, Innovations is continuing to develop its investment portfolio by scaling its activities in the ICT and Digital sector. Of the seven companies added to the accelerated growth portfolio during the year, five were in this sector.

• SAM Labs: a company set up two years ago by an Imperial College London Engineering graduate that is creating wireless electronics kits that allow anyone to build their own smart inventions. Innovations invested £2.0 million in a funding round which closed in January 2016.

• Garrison Technology Limited: London-based cybersecurity firm which completed a £2.0 million seed funding round in August 2015. Innovations committed £1.6 million to the round alongside existing angel investors.

• Import.io: London-based machine-learning start-up addressing the data-as-a-service (DaaS) market which completed a $13.0 million Series A funding round in January 2016, led by Innovations, with participation from Wellington Partners, Oxford Capital, Delin Capital and AME Cloud Ventures.

• Telectic Limited: London-based start-up that uses artificial intelligence (AI) to interpret the content of the internet, which completed a £1.5 million seed funding round in October 2015. Innovations committed £1.3 million to the round alongside angel investors.

• WaveOptics Limited: Oxford-based developer of Augmented Reality (AR) technology displays. Innovations led the funding round in December 2015 alongside Robert Bosch Venture Capital GmbH, Octopus Ventures, angel investors and existing investor Blippar.

Post year-end

ThisWay GlobalOn 27 September 2016, Innovations led a £1.6 million funding round in ThisWay Global Limited, a Cambridge-based technology company that is developing a software platform for the recruitment industry.

The round participants also included US-based Jetstream Ventures and Grupa Pracuj, a global recruitment technology company with a dedicated investment arm for emerging HR tech companies. ThisWay’s platform uses machine learning to streamline the recruitment process by matching high-quality candidates to the most appropriate job opportunities. The funding will allow the company to expand its offering to recruiters and pursue existing customer demand.