Schroders Capital Global Innovation Trust plc

Q1 2024 Quarterly Net Asset Value

Schroders Capital Global Innovation Trust plc (the "Company") today announces its net asset value ("NAV") as of 31 March 2024.

Summary

·      NAV of 22.82p per share as of 31 March 2024, a decrease of 9.9% relative to the NAV per share as of 31 December 2023 (25.32p), and a decrease of 2.8% relative to the NAV per share as of 31 March 2024 (dated 28 March 2024) that was published on 2 April 2024 (23.48p).

·      In the short period between the publication of the 2023 Annual Report Accounts on 28 March 2024 and the date of this NAV announcement (31 March 2024), there is limited news to report.

·      Performance over the quarter was impacted by news, which was previously disclosed in the Company's Annual Report & Accounts for the year ended 31 December 2023, that OcuTerra's phase II diabetic retinopathy trial failed to meet its endpoints. This subsequently resulted in the position being valued to zero.  Meanwhile, shares in Oxford Nanopore fell 42% over the period, with recent results falling short of analysts' consensus estimates.

·    Excluding the above two companies, the portfolio remained broadly flat over the quarter with no single strategy segment - life sciences, venture, growth or public equities - contributing more than a total £0.4 million positive or negative contribution.

·      During the quarter, the Company made £17.9 million of realisations from equity positions. Carmot Therapeutics was exited as the company was acquired by Roche, Immunocore was fully exited and Oxford Nanopore was further reduced. Meanwhile, as previously disclosed, the Company received an additional £4.6 million distribution related to the first milestone of the Kymab sale to Sanofi.

·      The Company made a new investment of £1.3 million in life science company, Neurona Therapeutics, over the period.

·      As of 31 March 2024, the Company had £30.5 million in cash and money market (sterling liquidity) funds and £28.8 million in liquid public equity investments¹ to meet the funding requirements of the existing portfolio, execute the buyback program and target new investments in innovative venture, growth and life science businesses.

·      The Company has already begun its share repurchase programme for 2024 in order to meet its 5% commitment for the year, and as at 31 March 2024, the Company had repurchased 18,100,000 shares.  From 1 April to 21 May 2024, , the Company had repurchased an additional 6,220,000 shares, totalling 24,320,000 shares repurchased for cancellation which was 2.56% capital return during this period.

1. Excluding BenevolentAI which is fair value priced by the AIFM.

Introduction

Economic backdrop

Global stock markets registered strong gains in Q1 amid a resilient US economy and ongoing enthusiasm around artificial intelligence (AI). Expectations of interest rate cuts also boosted shares although the pace of cuts is likely to be slower than the market had hoped for at the turn of the year. Bonds saw negative returns in the quarter.

Global venture capital activity presented a mixed picture in Q1 2024. Deal volume was down for the eighth consecutive quarter (by 7% to 6,238 deals) but funding was up 11% on the quarter (to $58.4 billion), driven by several mega rounds. These mega rounds, which represent deals worth more than $100 million, increased 30% on the previous quarter, with two of the biggest deals in generative AI businesses - Anthropic and Moonshot AI. Amazon and Alibaba led these rounds, illustrating big tech's formidable interest in artificial intelligence using generative models. Meanwhile, 19 unicorns were created over the quarter. While this was down on the 23 in the prior quarter, unicorn creation has stabilised from 2022 lows. The environment for exits trended downwards. The number of M&A transactions, the predominant exit route for venture backed businesses, declined 6% quarter-on-quarter (from 2,159 in Q4 2023 to 2,022 in Q1 2024), while the number of initial public offerings ("IPOs") decreased 38% (from 107 in Q4 2023 to only 66 in Q1 2024). Overall, the current market continues to be characterised by weak exit activity counterbalanced by a favourable environment for new investments, although there are some signs for optimism.

Source for data: CB Insights Q1 2024 State of Venture Report.

Performance

The NAV as of 31 March 2024 was £191.5 million, a decrease of 11.8% compared to the NAV (£217.1 million) as of 31 December 2023. The NAV per share as of 31 March 2024 was 22.82p, a decrease of 9.9% compared with the NAV per share (25.32p) as of 31 December 2023.

The notable detractor from performance over the quarter was the portfolio's holding in OcuTerra, which was revalued at zero (from a fair value of £4.8 million as of 31 December 2023). This decision was made after the company announced that its Phase II DR:EAM clinical trial of the selective RGD integrin inhibitor, nesvategrast (OTT166) eye drops, for patients with diabetic retinopathy, did not meet its endpoints. Although the data confirmed the safety of OTT116, the experimental medication did not show a statistically significant improvement in the diabetic retinopathy severity scale (DRSS) scores compared to the placebo group.

The share price of Oxford Nanopore fell 42% contributing to a fair value loss of £17.0 million over Q1 2024. The company released a trading update in January preceding its annual results in March. The company grew LSRT revenue by 15% (from £147 million to £169 million), Underlying LSRT revenue by 39% (from £108 million to £150 million), while extending its Adjusted EBITDA losses (from £79 million to £105 million). These results fell short of analyst consensus estimates with management citing difficulties in the final quarter associated with U.S. semiconductor regulation in Asia and one-off customer delays. The company also announced changes to its commercial agreement with G42 Laboratories, a key customer delivering the Emirati Genome Programme, and reduced its medium-term growth and profitability guidance.

Excluding the above two companies, the portfolio remained broadly flat over the quarter with no single strategy segment - life sciences, venture, growth or public equities - contributing more than a total £0.4 million positive or negative contribution.

Foreign Exchange

During the quarter, the fair value of investments denominated in the Euro (EUR) and Swiss Franc (CHF) were negatively impacted by the appreciation of the British pound sterling (GBP) relative to these currencies. Meanwhile, the value of the investments denominated in US dollar (USD) were positively impacted by the appreciation of USD versus GBP.

Cash, debt, and net current assets

As of 31 March 2024, the Company held £30.4 million in cash and money market (sterling liquidity) funds.

Investment activity

Realisations

During the quarter, the Company made realisations of equity positions totalling £17.9 million. This included the sale of Carmot Therapeutics, which was acquired by Roche; the exit of the Company's position in Immunocore and a further reduction of the Oxford Nanopore holding. Meanwhile, as previously disclosed, the Company received an additional £4.6 million distribution related to the first milestone of the Kymab sale to Sanofi.

New investments

During the quarter, the Company completed a new $1.6 million (£1.3 million) investment in US-based clinical-stage cell therapy company, Neurona Therapeutics. The investment formed part of the company's series E financing round, which raised $120 million. Neurona is focused on discovering and developing allogeneic neural cell therapies to treat chronic diseases of the nervous system. The investment forms part of our portfolio sub-strategy of backing innovative life science companies at the near-clinical or clinical stage of development. This funding will aim to help advance Neurona's cell therapies to address unmet needs in chronic neurological disorders and we are encouraged by the strength of the initial clinical data.

Top 10

The Company's top 10 holdings as of 31 March 2024 compared with the respective holding as of 31 December 2023.

Outlook

Our investment team continues to focus in areas where we have the most control, including working closely with portfolio company management teams, co-investors, and other stakeholders to support business growth, managing sales of public equity holdings, and as capital availability allows, targeting new investments that align with our three strategies (venture, growth and life sciences) with the aim of building a diversified portfolio which more appropriately balances the risk of each strategy.

In the first quarter, notable progress has been made with realisations which has resulted in a healthy cash and money market funds balance (£30.5 million) to meet the funding requirements of the existing portfolio, execute the buyback program, and target new investments. The Company has sufficient capital to target several new investments during the remainder of the year.

The areas of portfolio development less directly within control including the global macroeconomy, fundraising, M&A and IPO market activity, and the valuations of loss-making listed companies continue to present headwinds. At the time of writing, the share prices of Autolus Therapeutics and Oxford Nanopore have declined ~37% and 9% respectively relative to their quarter end marks. In April, Pacific Biosciences, a close peer to Oxford Nanopore in the DNA sequencing market, cut its revenue guidance for 2024 and withdrew its longer-term guidance for 2026, citing a tougher funding environment in China and lengthening sales cycles. Oxford Nanopore, which has a predominantly consumables revenue base relative to Pacific Biosciences' capital equipment focus, should theoretically be somewhat insulated from these factors, although concerns regarding a broader DNA market slowdown are likely to persist.

Autolus Therapeutics has fallen on limited new information. The company is awaiting market approval in the US, EU, and UK for Obe-cel, a treatment for relapsed/refractory Acute Lymphocytic Leukaemia expected in Q4. Additionally, results from the Phase 1 clinical trial for Obe-cel in B-cell Non-Hodgkin Lymphoma and Chronic Lymphocytic Leukaemia are expected in Q4. Phase 1 clinical trials results are also expected in Q4 for Obe-cel in the treatment of primary CNS Lymphoma, allogenic Obe-cell for B-cell malignancies, and AUTO8 for multiple myeloma.

Elsewhere, the private equity portfolio is making good progress, particularly several of the new investments, and we look forward to providing further information in the Interim Report and Accounts.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. The securities shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.

Enquiries:

Schroder Investment Management Limited