Tern Plc Commits £117,195 to Talking Medicines Convertible Loan Notes and Boosts Shareholder Distribution to 70%

Tern Plc Enhances Investment in Talking Medicines via Convertible Loan Notes

Tern Plc has announced a substantial new investment in Talking Medicines Limited through the acquisition of unsecured convertible loan notes totaling £117,195. This transaction results in an uplifted principal value of approximately £234,389, nearly double the invested cash amount, reflecting favourable conversion terms for Tern. The capital injection was funded from proceeds of Tern’s recent fundraising round announced on 15 July 2026, underscoring the company’s ongoing commitment to backing its portfolio firms amid prevailing economic conditions.

The convertible loan notes carry a 10% per annum interest rate and convert either upon an exit event or when Talking Medicines completes a fundraising round of at least £2 million. Conversion occurs at a 20% discount to the applicable pricing, providing downside protection alongside upside potential. If neither event transpires, the notes mature on 21 November 2029, aligning with Tern’s existing convertible loan note holdings in the company. Post-investment, Tern’s total convertible loan note exposure to Talking Medicines will reach approximately £1.02 million, with its equity stake remaining stable at about 23.8%.

Talking Medicines’ Position in Healthcare AI and Data Science

Talking Medicines Limited operates at the intersection of artificial intelligence, data science, and healthcare marketing. The company leverages advanced AI and data science technologies to empower healthcare advertising agencies to secure and retain pharmaceutical clients while enhancing operational efficiency and accelerating project delivery. Its business model focuses on extracting strategic intelligence from conversational data, enabling clients to gain competitive advantages in analysis, measurement, and brand equity within the healthcare sector.

The addressable market for Talking Medicines is significant and expanding. According to Research and Markets' Healthcare Advertising Market Report 2025, the global healthcare advertising market is valued at around $23 billion, presenting a substantial opportunity for technology solutions that improve efficiency and effectiveness. Talking Medicines aims to revolutionize this market by structuring and analyzing conversational data to deliver strategic insights that are difficult to obtain manually. This focus addresses a critical need for healthcare advertising agencies operating in a data-driven environment where rapid and accurate insights are essential for competitive advantage.

Book Valuation of Tern’s Holding in Talking Medicines as of 31 December 2025

As of 31 December 2025, the date of Tern’s latest published book valuation, the combined equity and convertible loan note holding in Talking Medicines had an audited book value of approximately £1.7 million. This valuation reflects Tern’s assessment at that time and serves as a benchmark for monitoring the investment’s progress. The company disclosed this figure to provide shareholders transparency on its exposure to Talking Medicines within the broader portfolio.

Tern’s equity stake remains unchanged following the new convertible loan note issuance, maintaining shareholder exposure to equity appreciation. However, the convertible loan note position has increased from about £0.79 million to £1.02 million, representing a material rise in economic exposure. This enhanced position offers debt-like returns via the 10% interest accrual combined with conversion optionality that could yield further upside if the business achieves significant growth or triggers exit events.

Shareholder Distribution Commitment Raised to 70%

Tern’s board has significantly strengthened its commitment to returning capital to shareholders from qualifying portfolio exits. Initially, on 9 October 2025, the company committed to distributing at least 50% of net proceeds from individual investment exits exceeding £1 million. Following further review, this threshold has been increased to a minimum of 70%, marking a substantial enhancement of the distribution policy and reflecting confidence in the portfolio’s maturity and near-term prospects.

The board’s decision to increase the distribution commitment reflects an assessment that several portfolio companies are progressing toward potential transactions. Jane McCracken, Interim Non-Executive Chair, stated that the board believes portfolio companies “continue to make progress towards potential transaction opportunities,” while acknowledging that “there can be no certainty regarding the timing, terms and outcome of any potential transaction.” An illustrative example provided clarifies that on gross proceeds of £5 million from a qualifying exit, after deducting estimated professional and disposition costs of £350,000, the net proceeds would be £4.65 million, of which at least £2.555 million (70% of the £3.65 million above the £1 million threshold) would be distributed to shareholders. This transparency aids investor understanding of capital return mechanics.

Board’s Rationale for Enhanced Distribution and Portfolio Confidence

The increase from 50% to 70% in distribution commitment represents a meaningful policy shift, indicating the board’s positive view of portfolio maturity. Jane McCracken emphasized that this enhancement “reflects the Board’s confidence in the maturity of the Tern portfolio and our continued focus on delivering value for shareholders through realisations while retaining sufficient flexibility to support the Company in the longer term.” This suggests multiple portfolio companies are approaching liquidity events within a reasonable timeframe, justifying a more assertive capital return approach.

The enhanced distribution commitment includes prudent caveats: distributions are contingent on the company having “sufficient distributable reserves and no legal or regulatory impediment” to such actions. This reflects the board’s cautious capital management approach, ensuring financial flexibility and regulatory compliance while prioritizing shareholder returns.

Talking Medicines’ Financial Status and Recent Performance

Talking Medicines’ statutory accounts for the year ended 31 December 2024 show unaudited net liabilities of approximately £1.4 million and an unaudited loss of about £0.51 million. These figures typify early-stage technology companies prioritizing growth over short-term profitability. Many AI and data science firms exhibit similar financial profiles during development.

Tern notes that “given the historic nature of these figures, Tern does not consider this to be representative of the current business, trading performance and prospects of Talking Medicines,” implying material progress since 2024’s end. No updated financial data was disclosed in this announcement.

Tern Plc’s Investment Strategy Focused on IoT Technology Ventures

Tern Plc specialises in investing in high-growth, early-stage disruptive Internet of Things technology companies. This focused strategy enables sector-specific expertise and deep market knowledge. Its portfolio targets businesses leveraging IoT technologies to create transformative market solutions.

While Talking Medicines is not a traditional IoT company, it aligns with Tern’s broader technology investment mandate through its use of AI and data science to analyze conversational data in healthcare advertising. Tern’s continued investment via attractive convertible loan note terms demonstrates confidence in the business model and management team. Funding this investment from proceeds of the 15 July 2026 placing reflects disciplined capital allocation prioritizing portfolio development.

Recent Capital Raise and Funding Deployment

Tern’s investment in Talking Medicines convertible loan notes was financed from proceeds of a placing announced on 15 July 2026. Although the placing’s total size was not disclosed, the timing indicates recent successful capital market access. This capital enables support for existing portfolio companies and new investments aligned with Tern’s IoT focus.

Deploying placing proceeds directly into portfolio companies rather than retaining cash demonstrates active capital management. The £117,195 investment yielding £234,389 principal value reflects compelling terms and immediate upside, appealing to shareholders seeking value-accretive deployment.

Convertible Loan Note Conversion Terms and Investor Safeguards

The convertible loan notes provide Tern multiple value extraction routes. They accrue 10% annual interest and convert upon an exit event or a fundraising round of at least £2 million, at a 20% discount to applicable pricing. This discount ensures favourable conversion terms compared to other investors.

For example, if Talking Medicines completes a £2 million fundraising at a £10 million post-money valuation, Tern converts at an effective £8 million valuation. If neither exit nor qualifying fundraising occurs by 21 November 2029, notes mature at principal plus accrued interest, offering downside protection and aligning maturity with existing convertible loan notes.

Risks and Considerations for Investors

Investors should consider key risks related to Tern’s Talking Medicines exposure. The company’s early-stage status, net liabilities, and losses highlight developmental risks. Competition from established healthcare advertising agencies and larger tech vendors may impact market position and exit valuation. Success depends on execution, client relationships, and technological differentiation.

The £1.02 million convertible loan note holding is a significant capital allocation; any impairment affects Tern’s net asset value. The enhanced 70% shareholder distribution commitment depends on successful exits generating net proceeds above £1 million. Underperformance or lower exit valuations could reduce actual distributions. The board retains discretion subject to reserves and regulatory considerations.