17-Nov-2022

Syncona Limited Interim Results for the six months ended 30 September 2022

Syncona Limited

Interim Results for the six months ended 30 September 2022

Scaling for growth: building a leading European life science investor with an ambition to grow NAV to £5 billion by 2032

17 November 2022

Syncona Ltd, (“Syncona” or the “Company”), a leading healthcare company focused on creating, building and scaling a portfolio of global leaders in life science, today announces its Interim Results for the six months ended 30 September 2022.

Key highlights

·	Positive operational and clinical progress across the portfolio against a challenging macro backdrop in the six-month period
·	Successful first decade of Syncona; proven ability to build life science companies to a global standard, delivering a portfolio IRR of 26% and 15 clinical programmes progressed
·	Growth plans outlined today for the next 10 years with ambition to organically grow net assets to £5 billion
·	Announcement of key organisational changes to support growth plans:
	-	Chris Hollowood is stepping up into the role of Chief Executive Officer (CEO) of the Investment Manager, Syncona Investment Management (SIML)^[1], leading the delivery of the growth plans for the next 10 years and managing the team, alongside creating new companies and managing portfolio companies
	-	Martin Murphy will be Chair of SIML and will continue sourcing and driving the creation of new companies, alongside managing portfolio companies
	-	Number of promotions across the team to Senior and Lead Partners
·	Natural evolution of responsibilities of the senior team to deliver growth plans for the next 10 years

Financial performance

·	Net assets of £1,365.9 million (31 March 2022: £1,309.8 million); 202.9p^[2] per share (31 March 2022: 194.4p per share), a NAV total return of 4.3%^[3]
·	Life science portfolio, valued at £602.6 million (31 March 2021: £524.9 million), a 3.9% return ^[4^]
·	Performance driven by the positive impact of foreign exchange across the life science portfolio and capital pool, generating an aggregate £112.6 million uplift to NAV^[5], which more than offset the (£49.2 million) impact from the decline in share prices of our listed holdings
	-	The decline in share prices of Syncona’s listed holdings in the six-month period has primarily been driven by challenging macro conditions; both our public and privately held companies have continued to make progress against key milestones
·	Capital base of £763.3 million (31 March 2022: £784.9 million), deploying £58.6 million of capital in the six-month period

Positive progress across a maturing portfolio with three companies expected to be in the clinic in the next six-months

·	Seven clinical data read-outs from the clinical portfolio in the six months, with 12 updates expected by the end of CY2023, notably including the first update from the Autolus obe-cel pivotal study
·	Three companies expected to enter the clinic over the next six months; maturing portfolio will have seven clinical-stage companies

Identifying exciting opportunities to create world-class companies and expand the portfolio

·	£16.0 million commitment to Kesmalea Therapeutics (“Kesmalea”) as part of a £20.0 million Series A financing alongside Oxford Science Enterprises. Kesmalea is a small molecule drug discovery platform founded by Dr Harry Finch, a world class chemist and co-inventor of GSK’s Serevent^TM
·	Post period end, announcement of an all-cash tender offer for Applied Genetic Technologies Corporation (“AGTC”), a NASDAQ listed clinical-stage retinal gene therapy company with a potentially best-in-class Phase II/III AAV gene therapy programme in X-Linked Retinitis Pigmentosa (XLRP). The offer has been unanimously recommended by AGTC’s Board and values AGTC at approximately $23.5 million (£20.8 million), with the potential for up to an additional $50.0 million in contingent value rights payable on the achievement of specified milestones. If the transaction completes, AGTC will be Syncona’s third retinal gene therapy company
·	Further opportunities to create new companies in late-stage diligence, diversified across domain and therapeutic areas

Scaling the portfolio to £5 billion in net assets by 2032

·	2022 marks Syncona’s 10th anniversary - in our first decade we have proven our ability to build globally competitive businesses that can deliver for patients, society and for our shareholders
·	Our fundamental model to deliver strong shareholder returns over the next 10 years remains the same
·	We are setting out an ambition to organically grow net assets to £5 billion by 2032 reflecting the potential returns available from a maturing and expanding portfolio
·	To deliver this ambition, we are updating our 10-year rolling targets as follows:
	-	Increasing the rate of new Syncona-founded companies to three new companies per annum
	-	Delivering an expanded portfolio of 20-25 companies
	-	Aiming to deliver top quartile life science portfolio returns
·	We are also:
	-	Building an advisory function to enable us to provide further support for the building and management of our portfolio companies at a greater scale
	-	Continuing to evolve our financing approach to optimise capital allocation and improve the risk and return profile of our portfolio
·	Expanding our portfolio and optimising our financing approach will enable us to retain sole ownership of companies to proof-of-concept[6] on a selective basis – we believe this approach has the potential to enable us to access the out-sized returns available in this asset class

Evolving and leveraging the team to drive the next phase of growth

·	The Board and senior team have reviewed the Company’s organisational structure to enable the business to scale, and to better leverage the team to deliver our growth plans
·	Chris Hollowood is stepping up into the role of CEO of SIML^[7], effective 1 January 2023 and Martin Murphy will be Chair of SIML
	-	Chris will lead the day-to-day management of the business, responsible for the implementation of Syncona’s strategy, driving the 10-year growth plan, and managing the Syncona team, whilst creating and managing portfolio companies
	-	Martin will be operationally involved in the business and continue to source and drive the creation of new Syncona companies, whilst continuing to manage existing portfolio companies
	-	Martin and Chris will both be on the Investment Committee which is responsible for investments into all new and existing portfolio companies
	-	This transition will allow Syncona to continue to leverage both Martin and Chris’ significant investment experience and track records through the Company’s next stage of growth
·	In addition, Ed Hodgkin has been promoted to the role of Senior Partner, with Magdalena Jonikas and Elisa Petris being promoted to Lead Partners, helping to lead our Investment Partners and Associate Partners as they take the lead role in creating, building and scaling new companies
·	Further expansion of the team planned to support growth; will result in an increase in cost base

Martin Murphy, CEO and Chair, Syncona Investment Management Limited, said: “I am very proud this year to be celebrating 10 years since I co-founded Syncona, alongside the Wellcome Trust. At foundation, we set out to change the way life science companies were built and funded in the UK and I believe our achievements over the last decade demonstrate the success of our approach, and the expertise and commitment of our people.

Today, we are setting out our vision to scale Syncona over the next 10 years which will deliver an expanded portfolio, develop more ground-breaking medicines, organically grow our net assets to £5 billion and deliver strong returns for our shareholders. As part of these plans, I am particularly excited that Chris will be stepping up into the role of Chief Executive Officer, whilst I will be Chair of SIML. I look forward to working closely alongside him to deliver on our purpose and vision for all our stakeholders. We are investing in and building our platform for growth at an exciting time for our industry.”

Chris Hollowood, CIO of Syncona Investment Management Limited, said: “Over the six-month period, whilst our listed holdings have continued primarily to be impacted by market conditions, this has been outweighed by the positive impact of foreign exchange movements across our diversified portfolio and capital pool, with net assets increasing by 4.3%. Syncona was set up with an evergreen balance sheet to ensure we could navigate the market cycle and the strength of our model has been demonstrated in the six months, enabling us to continue to identify exciting opportunities that become available in these challenging market conditions.

Looking ahead, the UK’s scientific research base continues to be right at the forefront of global innovation and our team continue to see significant opportunity to create more companies based on the hugely promising technology being developed to treat patients in real need. To realise the potential of our strategy and model, we have looked at how we can leverage our successes and apply the lessons we have learnt over the last 10 years to further grow the business. I am delighted to be stepping up into the role of CEO and alongside Martin and the senior team, leading Syncona through its next phase of growth as we build more global leaders in life science, develop life changing medicines and deliver strong returns for shareholders. The future is exciting.”

Melanie Gee, Chair of Syncona Limited, said: “We have outlined today our enhanced strategy to deliver growth for our shareholders over the next 10 years. We are excited by the opportunity ahead of us and look forward to continuing to leverage Martin and Chris’ leadership and expertise as they drive our maturing business through its next stage of growth. What Syncona has achieved over the last 10 years since Martin co-founded the business with the Wellcome Trust, has been truly remarkable. Under his leadership the business has grown from a start-up to a FTSE 250 listed business that has already made a significant social contribution. Looking ahead, we believe that the changes outlined today have the potential to increase the impact Syncona’s portfolio companies have on patients in areas of high unmet medical need.”

Outlook

Capital deployment in FY2022/3

Syncona continues to expect to deploy £150-250 million of capital in FY2022/3 as we support our existing portfolio and identify new opportunities. We have a number of opportunities to create new companies in late-stage diligence and expect at least one new company to be announced by the end of FY2022/3, alongside further investment in our portfolio. Our strategic balance sheet enables us to continue to invest and be opportunistic in identifying exciting opportunities that become available in these challenging market conditions.

Key upcoming milestones

Positive data generated from our clinical pipeline will be a key driver of value and, while not without risk, we have a number of portfolio companies approaching key clinical milestones.

·	Autolus expects to:
	-	Progress its FELIX pivotal study of obe-cel in r/r adult ALL and provide initial results in Q4 CY2022; data expected H1 CY2023. Longer-term follow-up data from the ALLCAR19 Phase I trial of obe-cel in r/r adult ALL is also expected in Q4 CY2022
	-	Announce additional patients and longer-term follow-up of obe-cel in B-NHL, longer-term follow-up data from AUTO1/22 in paediatric ALL and AUTO4 in peripheral T cell lymphoma in Q4 CY2022
·	Achilles will provide an interim update from its ongoing Phase I/IIa trials of its cNeT therapy in non-small cell lung cancer (NSCLC) and melanoma at the ESMO Immuno-Oncology Annual Congress in December 2022
·	Freeline expects to:
	-	Announce initial safety and efficacy data from the second cohort in the Phase I/II dose-finding trial in Fabry disease in H1 CY2023
	-	Begin dosing in the Phase I/II dose-finding trial in Gaucher disease in Q4 CY2022, with initial safety and efficacy data to be reported in H1 CY2023
·	Anaveon expects to publish further data from its Phase I/II trial for its selective IL-2 agonist, ANV419, in Q3 CY2023, following its recent data release
·	Quell expects to dose the first patient in its lead programme, QEL-001, in H1 CY2023
·	SwanBio expects to enter the clinic with its lead SBT101 programme in adrenomyeloneuropathy (AMN) in Q4 CY2022
·	Neogene expects to enter the clinic with its NT-125 TCR therapy in advanced solid tumours in H1 CY2023

Enquiries

Syncona Ltd

Annabel Clark / Fergus Witt

Tel: +44 (0) 20 3981 7940

FTI Consulting

Ben Atwell / Natalie Garland-Collins / Julia Bradshaw / Tim Stamper

Tel: +44 (0) 20 3727 1000

About Syncona

Syncona's purpose is to invest to extend and enhance human life. We do this by creating and building companies to deliver transformational treatments to patients in areas of high unmet need.

Our strategy is to create, build and scale companies around exceptional science to create a diversified portfolio of 20-25 globally leading healthcare businesses, across development stage and therapeutic areas, for the benefit of all our stakeholders. We focus on developing treatments for patients by working in close partnership with world-class academic founders and management teams. Our balance sheet underpins our strategy enabling us to take a long-term view as we look to improve the lives of patients with no or poor treatment options, build sustainable life science companies and deliver strong risk-adjusted returns to shareholders.

This announcement includes information that is or may be inside information. The person responsible for arranging for the release of this announcement on behalf of Syncona Ltd is Andrew Cossar, General Counsel, SIML.

Copies of this press release and other corporate information can be found on the company website at: www.synconaltd.com

[1] Subject to regulatory approval from the FCA

[2] Fully diluted, please refer to note 9 in the financial statements. Alternative performance measure, please refer to glossary

[3] Alternative performance measure, please refer to glossary

^[4] See footnote 3

[5] 36% of the capital pool is now held in foreign denominated currencies

[6] Syncona view: company has generated a maturing clinical data set that validates its investment thesis

[7] See footnote 1

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Last Updated: 17-Nov-2022