Numis sees potential upside at IP Group

23rd Jun 2014 10:25

Numis Securities has repeated its 'buy' recommendation and 273p target price for IP Group after the latter's portfolio company reported positive results from a clinical trial.IP Group, which develops intellectual property-based businesses, holds a 41.8% interest in Diurnal, which is a spin-out company from the University of Sheffield.Diurnal said that its Chronocort treatment met its primary endpoint after a six-month study in 16 adults with rare disease Congenital Adrenal Hyperplasia (CAH). The product provided "significant control of the disease", it said.Numis said that the recent acquisition of Fusion, which included Diurnal, is "begin[ning] to deliver"."Given IP Group's strong balance sheet and its decision to step up its efforts in pharma and biotech, we would anticipate existing Diurnal shareholders to fund the next trial (IP Group currently owns 42% of Diurnal, held at £4.8m, or 1p/share). "At launch, we estimate that Chronocort could be worth circa £130-250m (assumes royalties out to expiry of the applied patent, in 2033, plus $100m of milestones), implying risk- adjusted contribution to IP Group's net asset value of £25- 50m (5- 10p/share) today."IP Group was trading 0.6% lower at 198.7p by 10:48.BC