FUSION IP PLC

("Fusion", "the Company" or "the Group")

Interim RESULTS FOR THE Six MONTHS ENDED 31 January 2012

Fusion IP plc (AIM: FIP), the university IP commercialisation company that turns world class research into business, is pleased to announce its Interim Results for the six months ended 31 January 2012.

Highlights:

·    A £5m placing in November 2011 with new and existing investors, in which our partner IP Group raised its shareholding in the company to 26%;

·    The signing of our first significant license from the Sheffield agreement, which could be worth up to £1m pa to Fusion at peak sales, which should be achieved soon after launch in 2015/2016;

·    The successful progression of Diurnal's lead drug, Chronocort®, through its phase I(b) clinical trials;

·    The carrying value of investments remained relatively stable increasing by 4% to £17.5m (Jun 11: £16.8m). Most of the anticipated uplifts for the year now being expected in the second half;

·    Excluding intangibles the Group reported an operating loss of £765k, (Jan 11: £569k profit), however with expected second half fundings the Directors believe the company remains broadly on plan to achieve its profit target for the full year; and

·    Closing cash balances of £5.2m (Jan 11: £3.2m).

Post period end highlights:

·    Sale of Simcyp to Certara for $32m, generating a return of £4m to Fusion, a 200 fold return on our investment;

·    Completion of a £1.8m funding for Seren, which should be sufficient to see the company through to profitability;

·    Completion of a £700k funding for Asalus, to permit the company to start its human trials of its lead product;

·    Completion of a £300k funding for Diurnal for the final phase of the Chronocort Phase I trial; and

·    Post period cash balance of approximately £8m following Simcyp sale.

Commenting on these Interim Results, David Baynes, Chief Executive Officer of Fusion, said:

This has been another good half year for the Company. The key change for Fusion is that many of our early stage spinouts are gaining sufficient critical mass to demonstrate clearly the potential value of our exclusive University pipelines. We remain confident that our business - the process of creating new technology companies out of some of the country's best university derived intellectual property - is an increasingly valuable model, with great future potential for our shareholders.

For further information please contact:

A copy of this document will be available on the company's website at www.fusion.co.uk

Chairman and Chief Executive's Statement

We are pleased to announce our interim results for the six months ended 31 January 2012. This has been another encouraging period of development for Fusion, in which we raised an additional £5m for the company, progressed the development of our portfolio, increased our share price by 187% between periods and, most importantly, subsequent to the period end, secured our first major portfolio exit with a £4m cash return generating a 200 fold pay back on our original investment. We believe this demonstrates the significant potential for our portfolio and for the university pipelines that we hold exclusive rights to.

Highlights:

·    A £5m placing in November 2011 with new and existing investors, in which our partner IP Group raised its shareholding in the company to 26%;

·    The signing of our first significant license from the Sheffield agreement, which could be worth up to £1m pa to Fusion at peak sales, which should be achieved soon after launch in 2015/2016;

·    The successful progression of Diurnal's lead drug, Chronocort®, through its phase I(b) clinical trials;

·    The carrying value of investments remained relatively stable increasing by 4% to £17.5m (Jun 11: £16.8m). Most of the anticipated uplifts for the year now being expected in the second half;

·    Excluding intangibles the Group reported an operating loss of £765k, (Jan 11: £569k profit), however with expected second half fundings the Directors believe the company remains broadly on plan to achieve its profit target for the full year; and

·    Closing cash balances of £5.2m (Jan 11: £3.2m).

Post period end highlights:

·    Sale of Simcyp to Certara for $32m, generating a return of £4m to Fusion, a 200 fold return on our investment;

·    Completion of a £1.8m funding for Seren, which should be sufficient to see the company through to profitability;

·    Completion of a £700k funding for Asalus, to permit the company to start its human trials of its lead product;

·    Completion of a £300k funding for Diurnal for the final phase of the Chronocort Phase I trial; and

·    Post period cash balance of approximately £8m following Simcyp sale.

Financial Results

Excluding the amortisation of intangible assets, the Group reported an underlying loss from operating activities of £765k compared to a profit of £569k for the six months ended 31 January 2011.

However this loss relates, in the main, to timing differences in the completion of funding rounds which are often hard to predict. The Directors believe the Company remains on plan to achieve its targets for the year. Since the period end Seren, Asalus and Diurnal have completed funding rounds of £1.8m, £700k and £300k respectively.

Fund raising and exits

£5m placing

In November 2011 Fusion announced that it had successfully raised approximately £5 million through a fundraising with existing and new institutional investors. The placing provides Fusion with the funding to continue its investment in technology originating from Cardiff and Sheffield Universities and provides medium term working capital to enable the Company to continue to support its portfolio companies in subsequent financing rounds and participate in those investment opportunities which the Directors believe to be the most promising.

Exits

On 29 February Certara LP, a leading US based provider of drug discovery and development software and scientific consulting services, acquired our portfolio company, Simcyp, for $32m.

Simcyp, a leading research-based company providing a modeling and simulation platform for predicting the fate of drugs in virtual populations, now moves into the Certara portfolio to support Certara's emphasis on supporting translational science initiatives. In the financial year ended July 2011, Simcyp made £1.9m post-tax profit.

Fusion received approximately $6.4m in cash from the sale of its 20% shareholding in Simcyp, of which approximately 14% is being held in escrow for a period, as security for certain warranty and indemnity cover.

As a result of this transaction Fusion's post period cash reserves exceed £8m.

Portfolio Company and Licensing Update

We have continued to develop the value of our portfolio companies and although we anticipated a number of portfolio uplifts in the current period, the timings of these uplifts occurred after the period end and will now be shown in the full year results, rather than the interims.

Seren Photonics

In January 2012, Seren Photonics, the Sheffield based LED technology company, signed its first collaboration agreement that will enable it to bring its unique process for increasing the amount of light created at the heart of a white high brightness LED to market. 

Under the terms of the agreement, which was signed with a major, undisclosed, LED manufacturer, Seren has given exclusive rights to its technology for certain lighting applications in India. When successfully concluded, the agreement will allow the partner to take a licence for the manufacture of LED products incorporating Seren's processes.

Subsequent to the period end, Seren also announced in March 2012 that it had raised £1.8m in equity funding to enable it to accelerate the transfer of its cutting edge technology to manufacturing partners around the globe. It is hoped that this is the last funding that will be required before the company comes to profit.

Seren's revolutionary new processing technique, developed by Professor Tao Wang from the University of Sheffield, has been shown in tests to greatly increase the efficiency at which a high brightness (HB) LED converts an applied voltage into light and significantly reduces heat generation under normal running conditions. Successful demonstrations of the patent pending technology have resulted in a significant increase of the light output compared to untreated devices, which means that either much brighter LED lamps can be manufactured or that the power consumption of LED lamps can be reduced.

Seren's technology is targeted at the large and fast growing white light HB LED markets, such as back lighting for laptops and TVs, signs and displays, as well as domestic, architectural and street lighting. 

HB LEDs are set to replace incandescent lamps as governments around the world bring in legislation banning the manufacture and sale of incandescents and concerns increase about the poor light quality and environmental contamination fears from compact fluorescents.  The rate of adoption will accelerate as the brightness of HB LEDs increases and the cost of manufacture reduces.

The funding will be used to purchase key capital equipment for HB LED pilot scale development and create a specialist engineering team for the transfer of Seren's processes to its commercial manufacturing partners. 

Fusion holds a 40% undiluted shareholding in Seren, post the period end £1.8m funding round.

Magnomatics

Magnomatics, the Sheffield-based high technology company specialising in the development of novel magnetic transmissions and ultra compact/efficient motors technology, had another excellent period and now has development contracts with over 15 major global companies in key markets such as renewable energy, hybrid vehicles, rail transportation, military systems, aerospace and oil & gas.

Fusion holds an undiluted shareholding of 48% in Magnomatics.

Diurnal

Diurnal's lead product, Chronocort®, successfully completed a clinical trial in healthy volunteers during the period. The trial involved the administration in humans of different formulations of Chronocort® followed by blood measurements of hydrocortisone taken over time. As a result of the trial, the formulation giving the hydrocortisone profile most closely resembling that of the naturally occurring hormone has now been chosen to be tested in a further clinical trial to demonstrate dose response.

In March 2012, Diurnal successfully raised £0.3m for Chronocort®, to complete the final stage of its Phase I trial. The funding will also enable the company to prepare for the Phase II trials, which are due to commence during 2012, with an estimated Phase II completion date of mid-2013.

Chronocort® has already received two related Orphan Drug designations from the European Medicines Agency, which affords ten years of market exclusivity after the grant of marketing authorisation in Europe.

Fusion holds an undiluted shareholding of 43.1% in Diurnal.

Asalus Medical Instruments

During the period Asalus, the Cardiff based medical devices company, successfully completed a pre-clinical study of its lead product, Innervision, the company's revolutionary electrosurgical smoke clearance device.

Post the period end, Asalus then completed a first closing of a £0.7m funding round, to commence Innervision's 'first-in-man' clinical study (of which  regulatory approval has been received) and to begin the process of scaling up the technology, prior to its expected launch in 2013.

Innervision is one product in a range of laparoscopic surgery devices being developed by Asalus. Laparoscopic surgery is a modern surgical technique in which operations in the abdomen are performed through small incisions, as compared to the larger incisions needed in traditional surgical procedures.  There are several benefits to conducting laparoscopic surgery and, as a result, the number of procedures conducted using this technique has grown rapidly over recent years.  Over 2 million laparoscopic operations per year are now performed in the USA alone. 

Fusion holds an undiluted shareholding of 45% in Asalus Medical Instruments.

MedaPhor

MedaPhor, the Cardiff-based ultrasound simulation company, has had an excellent trading period, with encouraging UK sales of its new ScanTrainer virtual reality ultrasound training simulator platform. The system has also been successfully launched in the US, Europe and Australia. The company has generated more sales in the first 3 months of 2012 than in the whole of 2011 and appears to be entering a period of rapid growth.

The company has its next product platform in development and is looking to expand its US sales and marketing team in 2012 to capitalise on the potential demand in the world's largest medical training market.

Fusion holds an undiluted shareholding of 38% in Medaphor.

Mesuro

Mesuro, the Cardiff University spin-out which sells RF testing equipment and device measurement services to the semiconductor industry, took orders for $1.25m of new sales of its revolutionary RF equipment technology in the last quarter of 2011.

These sales, which were made to three global customers, none of which can be identified for commercial reasons, demonstrate the huge potential of Mesuro's RF technology, which enables device manufacturers to obtain the very highest performance from their designs, maximise device efficiency, reduce power consumption and decrease time to market.

Fusion holds an undiluted shareholding of 47% in Mesuro.

Licensing

In December 2011, Fusion signed a license deal with a major pharmaceutical company utilising IP out of the University of Sheffield (details withheld for commercial reasons), for the development of a known drug, in the area of certain endocrine diseases, a market worth over $500m per annum.

The agreement is royalty-based, with limited milestone payments. The drug is already being marketed for a different treatment and as such the probability of a successful launch is considered to be high although still subject to the completion of successful trials. The drug is currently at Phase II (efficacy) stage and is expected to make its first sales in 2015/16, with royalties to Fusion expected to peak at £1m per annum.

At peak sales the revenue generated from this single agreement could cover most of Fusion's net annual overheads and is a great example of the value within our pipeline agreements with Sheffield and Cardiff.

Current trading and outlook

This has been an excellent period for the Company. Our portfolio companies are performing strongly and we have proven that the Fusion model can take early stage university IP from start-up to exit.

Although a number of key funding rounds were delayed to just outside the period end, they have subsequently completed and we remain broadly on schedule for our year end targets. We expect the second half of the year to be a busy period in terms of the activities of our portfolio companies.

We are confident that our portfolio and pipeline has considerable value, both now and in the future, and we continue to look forward with considerable optimism.

Doug Liversidge CBE                                                                         David Baynes

Chairman                                                                                              Chief Executive

Financial Review

Results

Excluding the amortisation of intangible assets, the Group achieved an underlying loss from operating activities of £765k compared to a profit of £569k for the six months ended 31 January 2011.

The Group's reported loss from operating activities for the period increased to £1.7m, compared to a loss of £0.4m for the six months ended 31 January 2011.

The movement in reported losses arose from several factors as follows:

·          Decrease in revenue and portfolio returns by £1.7m, see detail below;

·          Reduction in subsidiary spin-out operating expenses by £375k as a result of the prior year deconsolidation of two subsidiaries, which are now held as investments and so no longer impact expense lines; and

·          Increase in finance income of £44k, generated by interest charged on convertible loan notes to portfolio companies.

Revenue and portfolio returns

The first half of the year shows a significant reduction in revenue and portfolio return £376k (31 January 2011: £2.1m).

The movement can be explained as follows:

·           gain on disposal of investments of £54k (31 January 2011: £1.26M), this decrease relates to the disposal of a subsidiary in the January 2011 Interim results which resulted in a gain of £1.3m;

·           net change in fair value of investments in spin-out companies of £nil (31 January 2011: £235k), the current period result reflects an uplift in fair value of £572k arising from increased valuations in four spin-out companies, mainly Simcyp at £430k, offset by unrealised losses against two investments in portfolio companies and a provision against loans to Asterion. These movements are as shown in note 2 to the interim financial statements, the prior period showed a net uplift on review of valuations; and

·           revenue and dividend income of £322k (31 January 2011: £590k), reduced in part due to a one-off licence fee of £150k in the prior period.

Investments

At 31 January 2012, the Group had investments and loans in 20 spin-out companies amounting to £17.5m (31 July 2011: £16.8m). The investments are all classified as financial assets and are held at fair value under IAS 39 "Financial Instruments: Recognition and Measurement".

During the period the Group invested £705k in follow-on funding (31 January 2011: £621k), this included equity investments of £150k in Diurnal, convertible loan investments and accrued interest to a number of portfolio companies. In addition the Group has two trading spin-out subsidiaries which are consolidated (31 January 2011: three), during the half year the Group provided early stage funding of £5k to these subsidiaries (31 January 2011: £104k).

Intangible assets

At 31 January 2012, the Group had intangible assets of £10.4m (31 July 2011: £11.4m) which represents the IP rights over the IP pipelines with Cardiff University and the University of Sheffield. The Group's view is that these assets have a finite life of ten years, being the length of the IP pipelines, and to that extent they are being amortised over their respective unexpired periods with provision made for any impairment if required.

Cash balances

Cash balances of the Group as at 31 January 2012 were £5.2m (31 July 2011: £1.96m). The Directors believe these balances are sufficient to support the current portfolio of companies, planned creation of new portfolio companies and corporate operating expenses for at least the next twelve months.

The net increase in cash and cash equivalents of £3.2m is primarily summarised as inflows from financing activities £4.8m less outflows on operating activities of £0.9m and outflows on investing activities of £0.6m.

The Group continues to have no borrowings or foreign currency deposits.

FUSION IP PLC

("Fusion" or "the Company")

 "Fusion portfolio company, Seren Photonics, raises £1.8m to accelerate commercialisation of its revolutionary LED technology"

Fusion IP plc (AIM: FIP), the university IP commercialisation company that turns world class research into business, is pleased to announce that Seren Photonics Ltd ("Seren"), its LED technology company, has raised £1.8M in equity funding to enable Seren to transfer its cutting edge technology to manufacturing partners around the globe. The first of these exploitation agreements was recently announced with an Indian manufacturer.

Seren's revolutionary new processing technique, developed by Professor Tao Wang from the University of Sheffield, has been shown in tests to greatly increase the efficiency at which a high brightness (HB) LED converts an applied voltage into light and significantly reduces heat generation under normal running conditions. Successful demonstrations of the patent pending technology have resulted in a significant increaseof the light output compared to untreated devices, which means that either much brighter LED lamps can be manufactured or that the power consumption of LED lamps can be reduced.

Seren's technology is targeted at the large and fast growing white light HB LED markets, such as back lighting for laptops and TVs, signs and displays, as well as domestic, architectural and street lighting.  Dr Godfrey Ainsworth, Seren's Chairman said, "This market is currently worth an estimated $7bn in 2011 and is set to grow to $20bn by 2014.   HB LEDs are set to replace incandescent lamps as governments around the world bring in legislation banning the manufacture and sale of incandescents and concerns increase about the poor light quality and environmental contamination fears from compact fluorescents.  The rate of adoption will accelerate as the brightness of HB LEDs increases and the cost of manufacture reduces."

Seren's funding round raised a total of £1.8M from a number of investors, including I2BF Global Ventures (£1,100,000), Fusion IP plc (£300,000) and IP Group plc (£400,000).  The funding will be used to purchase key capital equipment for HB LED pilot scale development and create a specialist engineering team for the transfer of Seren's processes to its commercial manufacturing partners. 

Post funding Fusion will have a 40.2% undiluted shareholding in Seren.

Dr Carl Griffiths, CEO of Seren Photonics Ltd said:

"We are delighted to have secured this significant investment from our existing shareholders and from I2BF.  The funds will enable us to accelerate the transfer of Seren's technology to manufacturing partners. This will start with our existing collaboration partner in India and we are already in discussion with HB LED manufacturers in China about the possibility of licensing or creating a joint venture manufacturing facility. We will continue to look for other potential partners outside of these territories."

David Waserstein, Partner and Director of Investments at I2BF said:

"We believe LEDs will play a large role in reducing energy intensity for a range of municipal and industrial users, and that Seren is well-positioned to help drive that growth due to the double impact of its technology on both brightness and reduction of heat loss. We are also pleased to be supporting a UK university spin out at this time, which has been ably supported by our co-investors Fusion IP PLC."

Peter Grant, Operations Director for Fusion IP said:

"We are very pleased to join I2BF Global Ventures and IP Group in this funding round, which will enable Seren to continue its impressive development of its LED technology. We remain confident that Seren can make a significant contribution to enabling the use of LEDs in a variety of different energy efficient applications where there is a continuous need to reduce power consumption and improve product performance.  With this funding in place we look forward to the Company securing further deals for the use of its technology internationally."

For further information please contact:

Dragon Associates for I2BF Global Ventures                                                                                       +44 (0) 207 286 3404

Toby Guise

Charlie Methven

About Fusion IP

Fusion IP plc (Fusion) was established in 2002 to commercialise university-generated intellectual property.  It has long-term exclusive agreements with two of the UK's leading research-intensive universities, the University of Sheffield and Cardiff University, giving it exclusive access to all the IP generated by their research departments. These exclusive agreements enable Fusion to identify world class IP and turn it into a commercial opportunity, either through the creation of a start-up company or a license.

Fusion currently owns shareholdings is over 20 portfolio companies, including significant shareholdings in Seren, Simcyp, Magnomatics, Phase Focus, MedaPhor, Asalus and Diurnal

Fusion has a Co-Investment Agreement with IP Group plc ("IP Group"), in which IP Group has the right to acquire for cash, 20% of Fusion's equity in any new portfolio company. As Fusion normally owns 60% of any new portfolio company at start-up, IP Group's shareholding would normally equate to a 12% stake in the new portfolio company. IP Group holds an interest in approximately 26% of Fusion.

Fusion IP also has a Memorandum of Understanding with Finance Wales, the provider of commercial funding to Wales-based SMEs, which outlines a strategy of co-investment in opportunities arising from the Cardiff Agreement.

For more information visit www.fusionip.co.uk

About I2BF Global Ventures

I2BF Global Ventures is an international clean technology asset management group headquartered in New York with a global investment mandate, focused on venture capital and public equity activities. Established in 2005, I2BF Global Ventures has over USD 160 million in assets under management across three venture capital vehicles. I2BF Global Ventures seeks out game-changing technologies, and to invest in the most innovative and competitive companies within the sector. In keeping with its worldwide focus, I2BF Global Ventures also retains a team of technology and sector experts as well as renewable energy researchers in London, Moscow, and Dubai.

For more information visit www.i2bf.com