REG - Syncona Limited - Final Results
15/06/2023 07:00
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RNS Number : 7685C Syncona Limited 15 June 2023
Syncona Limited
Full Year Results for the 12 months ended 31 March 2023
Strong progress delivering evolved strategy and growth targets with four new
companies added to the portfolio
Decisive and proactive action across the portfolio against a challenging
market backdrop
Small NAV decline in the year driven by decline of our listed holdings and
partial write down of SwanBio Therapeutics
15 June 2023
Syncona Ltd, (the "Company"), a leading healthcare company focused on
creating, building and scaling a portfolio of global leaders in life science,
today announces its Annual Results for the 12 months ended 31 March 2023.
Financial performance
· Net assets of £1,254.7 million (31 March 2022: £1,309.8 million); 186.5p per
share (31 March 2022: 194.4p(( 1 (#_ftn1) )) per share), a NAV return of
(4.1)%(( 2 (#_ftn2) )) (31 March 2022: 0.3%)
· £177.2 million deployed(( 3 (#_ftn3) )) into both new and existing portfolio
companies in line with disciplined approach to capital allocation(( 4
(#_ftn4) ))
· Against a challenging market backdrop, the life science portfolio is valued at
£604.6 million
(31 March 2022: £524.9 million) delivering a (14.3)% return(( 5 (#_ftn5) ))
o £28.2 million in valuation uplifts across the portfolio, including £15.9
million from deferred consideration related to Beacon Therapeutics' (Beacon)
AGTC-501 potential product in
X-Linked Retinitis Pigmentosa (XLRP)
o £26.5 million gain from positive foreign exchange movements
o Outweighed by a £77.9 million(( 6 (#_ftn6) )) decline in the valuation of
our listed life science holdings, driven by macro conditions as well as
company specific challenges and the partial write down of our holding in
SwanBio Therapeutics (SwanBio) to £58.2 million, a £51.0 million decline in
value(( 7 (#_ftn7) )), reflecting change in strategy to focus solely on its
lead programme
o Remaining private portfolio companies are making positive progress and are
funded to their next key milestones
· Capital pool(( 8 (#_ftn8) )) of £650.1 million (31 March 2022: £784.9
million)
Chris Hollowood, CEO of Syncona Investment Management, said: "Earlier this
financial year, we set out an ambitious plan to organically scale the business
to £5 billion of net assets within 10 years. At the heart of this is
improving shareholder returns. Growing the asset base will allow us to operate
our model at scale, driving balance sheet efficiency and enabling enhanced
risk-adjusted returns.
Navigating our companies through the clinical pathway to late-stage where we
believe significant value can be accessed is particularly important in the
current environment. In the short term, however, it is important that our
strategy addresses the near-term challenges from the macroeconomic environment
where there have been dramatic changes to the cost and access to capital. We
have undertaken a thorough review of the portfolio focusing our portfolio
companies' pipelines on the most promising advanced assets, widening financing
syndicates and executing on strategic transactions. We believe these steps
balance the need to focus Syncona's capital on the assets with the potential
to drive attractive risk-adjusted returns, reach late-stage development and
deliver near-term growth. We will continue to grow the portfolio through the
addition of the next wave of cutting-edge biotech companies which will drive
the forefront of the industry in the future.
Whilst we expect conditions to improve over the medium term with valuations
already improving for late-stage assets, we have taken decisive action across
the portfolio to navigate the current period, take advantage of these
conditions where possible and build a wave of new companies to drive longer
term sustainable growth. However, the action taken across the portfolio,
coupled with the challenging market environment has contributed to a reduction
in net assets, with our listed companies' share prices declining and SwanBio
being partially written down.
More broadly, however, we have seen positive progress across the portfolio
with 16 clinical data read-outs, seven financings, and a further three
post-period end, including one significant pharma investment. Syncona's
portfolio is increasingly diversified with a number of near-term value
drivers, particularly from our late clinical stage companies.
I am also pleased with the changes we have made to our organisational
structure and the corresponding expansion of the team. The proactive approach
we have taken to portfolio management combined with these improvements will
provide increased resilience in the current market conditions as well as a
platform to drive growth. We believe our focus on building companies to
late-stage development alongside our balance sheet strength will ultimately
enable us to deliver strong risk-adjusted returns for our shareholders over
the long term, driving transformational impact for patients."
Leveraging expert capital sources to fund companies to deliver key milestones
· Portfolio companies raised £394.3 million during the year with Syncona
committing £176.9 million
o £230.5 million of funding in the year raised by late-stage assets Beacon and
Autolus Therapeutics (Autolus)
· Seven financings during the year and a further three post-period end(( 9
(#_ftn9) ))
o Includes a significant pharma investment from AstraZeneca in Quell
Therapeutics (Quell)
o Portfolio companies funded to deliver next key milestones
· Neogene Therapeutics (Neogene) sold to AstraZeneca, the fourth sale of a
Syncona portfolio company, taking total potential sales proceeds generated
from the portfolio to £1.2 billion(( 10 (#_ftn10) ))
Addition of four new companies to the portfolio; acquiring a late-stage asset
and investing in early-stage science alongside strategic partners
· Acquired a late-stage asset in Applied Genetics Technologies Corporation
(AGTC) for an initial investment of $23.3 million
o As part of the transaction, Syncona is set to benefit from any future
commercialisation of the lead asset AGTC-501 via a "deferred consideration"
which provides the right to a mid-single digit percentage of future income
from sales and licensing
· Creation of retinal gene therapy, Beacon, with two pre-clinical programmes
including one in-licensed from the University of Oxford
· Combination of Beacon with AGTC in a £96.0 million Series A financing
alongside strategic partner Oxford Science Enterprises (OSE)
o Focuses capital on late-stage opportunities, leverages operating synergies and
enables combined cost savings
· Investment in Kesmalea Therapeutics (Kesmalea), a small molecule drug
discovery platform, and Mosaic Therapeutics (Mosaic), an oncology therapeutics
company, alongside strategic co-investors OSE and Cambridge Innovation Capital
(CIC), maintaining the core Syncona model whilst diversifying financial risk
Decisive and proactive action across the portfolio to navigate a challenging
market backdrop
· Post-period end, SwanBio has taken the strategic decision to focus on its lead
programme, SBT101 in adrenomyeloneuropathy (AMN)
o Syncona continues to believe in the potential impact of gene therapy to treat
patients with AMN
o The Company has provided further funding to enable the business to generate
safety data from the initial dose cohort of the SBT101 programme
o In parallel, given that the financing environment for early-stage companies
remains challenging, Syncona will be working with the company to explore all
financing and strategic options for the business
· Freeline Therapeutics (Freeline) has taken the decision to prioritise the
development of its FLT201 Gaucher programme and implemented operational
efficiencies to extend its cash runway to Q2 CY2024
Strong clinical and operational progress across the portfolio
· 16 clinical data read-outs and five clinical trials commenced including two
companies entering the clinic:
o Autolus announced that it had met its primary endpoint in its FELIX pivotal
study for its lead obe-cel therapy and is approaching the filing of a
Biologics License Application (BLA) in H2 CY2023
o Beacon's lead Phase II programme in XLRP has orphan drug designations from
both the US Food and Drug Administration (FDA) and the European Commission,
with 12-month data from the trial expected in H2 CY2023
o SwanBio dosed first patient in its lead programme SBT101 post period end
· Positive operational progress with key milestones achieved:
o Key senior hires made across the portfolio, including CEO appointments of
industry leaders at new companies Mosaic (Brian Gladsden) and Beacon (David
Fellows)
o Post-period end Autolus opened its Nucleus manufacturing facility to prepare
for the commercial launch of obe-cel
Significant progress delivering on updated targets and evolved strategy
· 10-year rolling targets updated at Interim Results, to reflect aim to build an
expanded portfolio and deliver enhanced shareholder returns:
o Create three new companies per annum, expanding the portfolio to 20-25
companies
o Deliver a 15% IRR through the cycle, targeting top quartile life science
returns
o Grow the life science portfolio to drive balance sheet efficiency to ensure
capital can be allocated to drive growth with the capital pool becoming a
smaller proportion of NAV over time
· Good progress on evolving the team and operational model to deliver scale:
o Chris Hollowood took up role of CEO of Syncona Investment Management Limited
(SIML), with Martin Murphy moving to SIML Chair, as of 1 January 2023
o Roel Bulthuis joined as Managing Partner and Head of Investments of SIML in
April 2023, bringing over 20 years of life science venture capital, business
development and investment banking experience
o Ed Hodgkin promoted to Managing Partner with Elisa Petris and Magdalena
Jonikas promoted to Lead Partner
o Established "Launch Team", to support portfolio companies operationalise and
"Executive and Advisory Group" to improve execution at portfolio companies
o John Tsai (previously Chief Medical Officer at Novartis) joined as Executive
Partner post-period end, bringing significant clinical, pharmaceutical and
leadership experience
o Ken Galbraith (previously CEO and Chair at multiple biotechs) re-joined
post-period end as Executive Partner bringing significant operational,
financing and investment experience
Improving balance sheet efficiency for shareholders with publication of
Capital Return Policy
· Syncona anticipates that shareholder returns will predominantly be driven by
long-term capital appreciation
· To support our strategy, we aim to maintain three years of financing runway to
fund our portfolio and our target of three new companies per annum
· If, in the event of realisations, the Company's capital pool increases
significantly in excess of three year forward capital deployment guidance, and
subject to an assessment of investment opportunities at the time, the Board
would look to return capital to shareholders
· We will consider all forms of distribution mechanisms for capital returns,
taking into account various factors including the market conditions at the
time
Outlook
Capital deployment and pipeline in FY2023/4
Our balance sheet enables us to continue to invest and be opportunistic in
identifying exciting opportunities, as well as support our existing portfolio
through a disciplined approach. We expect to deploy £150-200 million of
capital in FY2023/4. The UK continues to have a world class scientific
research base, and we see a significant opportunity to found new companies
across a range of modalities and therapeutic areas.
Diversified portfolio with seven clinical companies and 10 data read-outs
expected by the end of the financial year, including from two late clinical
companies
Positive data generated from our clinical pipeline will be a key driver of
value and, while not without risk, our late-stage clinical companies have the
potential to deliver significant value over the next financial year.
Late clinical companies
· Autolus expects to:
o Progress its pivotal study in obe-cel in r/r adult ALL, with further long-term
follow up data in H2 CY2023 and a BLA filing with the FDA expected in H2
CY2023
o Announce further data from obe-cel in r/r B-NHL and CLL, obe-cel in Primary
CNS, AUTO1/22 in paediatric ALL and AUTO4 in peripheral T cell lymphoma in H2
CY2023
· Beacon expects to release 12-month data from its Phase II trial in XLRP in H2
CY2023
Clinical companies
· Anaveon expects to:
O Announce further data in its Phase I/II dose finding trial of ANV419 in solid
tumours in H2 CY2023
o Publish initial data from its Phase I/II trials of ANV419 in metastatic
melanoma and multiple myeloma in CY2024
· Achilles expects to provide further data from the higher dose clinical cohorts
of the Phase I/IIa clinical trials of its cNeT therapy in NSCLC and melanoma
in Q4 CY2023
· Quell expects to dose the first patient in its lead programme, QEL-001, in H2
CY2023
· SwanBio expects to have dosed the initial cohort in its Phase I/II AMN
programme in H2 CY2023
· Freeline expects to report initial data in the Phase I/II dose-finding trial
in Gaucher disease in H2 CY2023
Enquiries
Syncona Ltd
Annabel Clark / Fergus Witt
Tel: +44 (0) 20 3981 7940
FTI Consulting
Ben Atwell / Natalie Garland-Collins / 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 life
science businesses, across development stage, modality 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 (http://www.synconaltd.com)
Forward-looking statements - this announcement contains certain
forward-looking statements with respect to the portfolio of investments of
Syncona Limited. These statements and forecasts involve risk and uncertainty
because they relate to events and depend upon circumstances that may or may
not occur in the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed or implied
by these forward-looking statements. In particular, many companies in the
Syncona Limited portfolio are conducting scientific research and clinical
trials where the outcome is inherently uncertain and there is significant risk
of negative results or adverse events arising. In addition, many companies in
the Syncona Limited portfolio have yet to commercialise a product and their
ability to do so may be affected by operational, commercial and other risks.
Life science portfolio valuations
Company Net investment in the period Valuation FX movement 31 Mar 2023 % of Group NAV Valuation Fully diluted owner-ship stake Focus area
31 Mar 2022 change basis(( 11 (#_ftn11) )),(( 12 (#_ftn12) )),(( 13 (#_ftn13) ))
(£m) (£m) (£m) (£m) (£m) (%)
Strategic portfolio companies
Late clinical
Beacon - 60.0 - - 60.0 4.8% PRI 65.3% Gene therapy
Autolus 62.0 23.0 (38.7) 3.7 50.0 4.0% Quoted Cell therapy
17.9%
Clinical
Quell 81.4 - - 5.3 86.7 6.9% PRI 36.7% Cell therapy
Anaveon 59.8 - - 4.4 64.2 5.1% PRI 38.0% Biologics
SwanBio 75.1 30.6 (51.0) 3.5 58.2 4.7% Adjusted cost 79.9% Gene therapy
Freeline 32.3 - (20.3) 2.1 14.1 1.1% Quoted 49.2% Gene therapy
Achilles 24.8 - (17.8) 1.6 8.6 0.7% Quoted 27.1% Cell therapy
Pre-clinical
OMass 34.7 9.0 - - 43.7 3.5% PRI 30.7% Small molecules
Purespring 18.5 16.6 - - 35.1 2.8% Cost 84.0% Gene therapy
Neogene 14.5 (17.4) 2.1 0.8 - - Sold - Cell therapy
Clade 11.4 12.4 - 0.5 24.3 1.9% Cost 22.4% Cell therapy
Resolution 10.4 12.6 - - 23.0 1.8% Cost 81.1% Cell therapy
Mosaic - 7.3 - - 7.3 0.6% Cost 52.4% Small molecules
Kesmalea - 4.0 - - 4.0 0.3% Cost 57.5% Small molecules
Portfolio milestones and deferred consideration
Gyroscope milestone payments(( 14 (#_ftn14) )) 49.8 - 1.4 3.3 54.5 4.3% DCF - Gene therapy
Beacon deferred consideration - - 15.9 - 15.9 1.3% DCF - Gene therapy
Syncona investments
CRT Pioneer Fund 28.2 (4.2) 8.8 - 32.8 2.6% Adj Third Party 64.1% Oncology
Biomodal(( 15 (#_ftn15) )) 17.3 - - 1.2 18.5 1.5% PRI 5.5% Epigenetics
Forcefield 2.5 - - - 2.5 0.2% Cost 93.2% Biologics
Adaptimmune 2.2 - (1.1) 0.1 1.2 0.1% Quoted 0.8% Cell therapy
Tier 1 Bio - 0.8 (0.8) - - - Written off - Biologics
Total Life Science Portfolio 524.9 154.7 (101.5) 26.5 604.6 48.2%
Capital pool 784.9 (175.2) 14.4 26.0 650.1 51.8%
TOTAL 1,309.8 (20.5) (87.1) 52.5 1,254.7 100%
Chair statement; a year of strategic evolution in challenging market
conditions
The last year has seen a series of significant economic and geopolitical
events, including the Russia and Ukraine conflict, that have led to a very
challenging global economic environment. We have seen increased inflation with
Central Banks weighing up difficult decisions on raising interest rates and
significant valuation moves across several sectors leading to increased
volatility across global markets. The widespread economic uncertainty has had
a substantial impact on the biotech space and we have seen a dramatic change
to both valuations and the cost of capital in the sector in which we operate.
We have seen the impact of this macro backdrop on our listed holdings and have
also seen challenging financing conditions across the market for early-stage
biotech companies.
It is against this backdrop that Syncona initiated a review of its strategy,
conducted by the Syncona team in partnership with the Board, announcing our
evolved approach at our Interim Results last November. We believe the changes
we are in the process of implementing will enable the Company to increase its
resilience to challenging market conditions, help our portfolio companies to
navigate their complex, high-risk development pathways successfully, grow the
portfolio to provide better diversification and thereby improve shareholder
returns over time. The team have made a good start embedding these changes and
the Board looks forward to seeing further progress in the coming financial
year.
Financial performance
Syncona ended the year with net assets of £1,254.7 million or 186.5p per
share, a (4.1)% return in the year (31 March 2022: net assets of £1,309.8
million, NAV per share of 194.4p, 0.3% return). Performance has been driven by
the continued share price declines of our listed holdings which partially
reflected the wider market backdrop for biotech companies and the write down
of our valuation of SwanBio, which outweighed the positive impact of foreign
exchange and uplifts elsewhere in the portfolio. The Syncona team have been
actively working to maximise value across our portfolio, focusing on
navigating our companies through their clinical pathway to late-stage
development, where we believe the most significant value can be accessed, and
ensuring capital discipline to enable them to deliver on their missions to get
products to patients.
Decisive action across the portfolio with continued focus on clinical assets;
maintaining disciplined capital allocation against a challenging market
backdrop
In the context of the current environment, Syncona's balance sheet is of
critical strategic importance. The Syncona Investment Committee has continued
to take a disciplined approach to capital allocation across the portfolio,
whilst ensuring that where companies are delivering on key milestones and
maintaining a clear path to take products to patients, we are able to continue
to support them. We have been focusing our capital where we believe there is a
differentiated opportunity to fund companies to milestones close to late-stage
development and where recently we have seen valuations start to recover.
The Syncona team has also been quick to respond to opportunities that have
been presented by the current market environment, and the Board has been
pleased to see that our balance sheet has enabled us to add four new companies
to the portfolio in this financial year, in line with our evolved strategy.
These included one late-stage asset (AGTC-501), which we believe has exciting
potential for both patients and shareholders over the long term.
Strategy evolution
Our strategy evolution includes a number of enhancements to our processes and,
importantly an updated set of long-term targets. We have looked closely at how
to optimise our approach to financing our companies and also at improving the
way we manage our companies through the development cycle, particularly as
they navigate the clinical pathway. Reducing the impact of our cash holding
for shareholders has been a core focus for the Board this year, and we are
pleased that the Syncona team has committed to a target of expanding the life
science portfolio by creating three new companies per year, having
historically created one to two companies on an annual basis. We believe an
expanded and diversified portfolio, where we reach a portfolio size of 20-25
companies, which sits alongside a capital pool that provides three years of
financing will help to deliver our growth ambitions whilst minimising the
impact of cash on the return shareholders experience.
As part of this work, we also recognised the impact that proceeds from
realisations may have on balance sheet efficiency and longer-term performance.
We anticipate that shareholder returns will continue to be predominantly
driven by long-term capital appreciation. However, if, in the event of
realisations, our capital pool increases significantly in excess of our three
year forward capital deployment guidance, and subject to an assessment of
investment opportunities at the time, the Board would look at returning
capital to shareholders.
Syncona team evolution
To support the expansion of the portfolio and the management of mature
portfolio companies as they scale through the clinic, the Board, in
partnership with the Syncona Leadership Team, has reviewed the Company's
organisational structure, to enable the delivery of the Company's long-term
growth targets. We have been pleased to see the expansion of the senior
investment team, alongside the implementation of the evolved operational
model. We believe these changes will support the delivery of a sustainable
portfolio, reduce volatility and improve shareholder returns.
Outlook
The Board is disappointed by Syncona's share price performance and where it is
trading relative to NAV. We continue to monitor it closely, whilst focusing on
supporting the team to drive our evolved strategy and deliver on our stated
NAV ambition. The team has made good progress on executing our evolved
strategy and our long-term targets are clear. We are looking to deliver an
expanded portfolio of 20-25 companies by 2032, and to hold three to five
companies with significant shareholdings to late-stage development to enable
our shareholders to participate in the significant value creation in our
sector.
The UK life science landscape remains exciting and provides a rich set of
opportunities. The UK Government's support for the sector is encouraging and
the team are actively engaged in discussions with them across a range of
important initiatives, most critically around how to attract more capital to
the sector. We look forward to seeing the impact of these initiatives.
As I look forward more broadly, I am confident that the evolution of both our
strategy and the Syncona team, alongside the clear action taken in the
portfolio to support companies to navigate the current market backdrop, will
help the Company deliver for all of our stakeholders over the long term.
Finally, I would like to take the opportunity to thank the Syncona team, the
portfolio company management teams and my Board colleagues for their hard work
and dedication this year.
Melanie Gee, Chair of Syncona Limited, 14 June 2023
Business review
This year Syncona has implemented a range of key strategic initiatives which
we believe will position ourselves to deliver our long-term growth ambitions.
These strategic changes at Syncona have been executed alongside decisive
actions taken to re-focus certain portfolio companies' clinical pipelines
around the highest value potential programmes. We have also sought to take
advantage of the market conditions where possible creating the next wave of
leading biotech companies.
NAV performance driven by the decline in share prices of listed companies and
the partial write-down in value of SwanBio
In terms of financial performance, we ended the year with net assets of
£1,254.7 million or 186.5p per share, a (4.1)% return in the year (31 March
2022: net assets of £1,309.8 million, NAV per share of 194.4p, NAV return of
0.3%). Performance has been driven by both declines in the value of our listed
holdings as well as the partial write-down of SwanBio, which were partially
offset by the positive impact of foreign exchange and uplifts elsewhere in the
portfolio.
We recognise that the share prices of Syncona's listed holdings have continued
to weigh on performance, and that this has been impacted by the current macro
conditions as well as specific company issues. The Syncona team has worked
closely with the management teams at these portfolio companies to ensure they
remain funded to deliver their next key milestones and are focused on
delivering value from their clinical stage programmes.
The Company has written down its holding in SwanBio to £58.2 million, a
£51.0 million decline in value during the year. We continue to believe in the
potential impact of gene therapy to treat patients with AMN. SwanBio's
management team has taken the strategic decision to restructure the pipeline
and have chosen to focus on its lead programme. As part of our valuation
process, we have recognised that the company is now driving forward one
programme, rather than a pipeline of programmes. We will work closely with the
company as it generates data from its initial dose cohort. The financing
environment has been challenging for early-stage companies and SwanBio has not
executed a third-party financing to date. We are, therefore, working on a
range of financing and strategic options for the company in parallel.
Across the rest of the private portfolio, our companies are making strong
operational and clinical progress, whilst also leveraging strategic
opportunities to bring in further financing in order to help realise their
ambitions in a challenging environment. Overall, the portfolio has diversified
and matured over the year and now includes seven clinical stage companies
where there have been 16 clinical data read-outs, whilst we have also seen
five clinical trial initiations, two companies enter the clinic and seven
financings completed.
Focusing portfolio company clinical pipeline on late-stage assets and
attracting strategic sources of funding
Navigating our companies through the clinical pathway to late-stage where we
believe significant value can be accessed is particularly important in the
current environment. Across the portfolio, we have been able to support our
companies as they execute on a number of opportunities to ensure the companies
are able to deliver on their plans prudently and are positioned to achieve key
milestones. Similar to the difficult decision we have taken at SwanBio, at
Freeline, we have worked with the management team to streamline its pipeline
of programmes, executing the sale of its manufacturing facility and focusing
on its Gaucher programme where it has a potential first mover advantage. At
Autolus, we participated in a $163.9 million financing, with the company now
funded into 2025 as it approaches the filing of a BLA with the FDA for its
lead obe-cel therapy later in 2023, a key milestone.
Despite the difficult financing environment for public and private companies,
we have seen the completion of the sale of Neogene to AstraZeneca for up to
$320.0 million (£261.2 million) 16 (#_ftn16) . The sale of Neogene is the
fourth sale of a Syncona portfolio company over the last four years,
generating total potential sale proceeds of up to £1.2 billion 17 (#_ftn17)
, with upfront proceeds alone generating a 4.3x return on capital invested.
Outside of M&A, our portfolio also continues to attract interest from both
pharma and strategic investors, underlined by the post-period end
collaboration and exclusive option and license agreement Quell has entered
into with AstraZeneca, for which it will receive $85 million up front,
predominantly in cash alongside equity, and the additional £10.0 million
commitment from British Patient Capital into OMass Therapeutics (OMass) in its
expanded Series B financing.
Balance sheet and Syncona expertise is important in navigating the current
market backdrop
£394.3 million has been committed to the portfolio during the year by Syncona
and third parties, with Syncona committing £176.9 million 18 (#_ftn18) . Our
balance sheet has been more important than ever in the current environment
enabling us to protect our positions where companies are making strong
progress and also take advantage of current market valuations to access
late-stage assets that can be operated on our model. It has always been
critical to our long-term approach but in an environment where there is a
greater scarcity of capital, we are able to support companies with products
that have huge potential for patients and continue to progress these through
the development pathway to ensure they achieve their missions. The team
continue to take a disciplined approach to capital allocation across the
portfolio, rigorously balancing the risk and reward potential of each
investment decision and ensuring investment into companies that have made the
necessary decisions to drive capital efficiency into their operations to
deliver our return targets.
Scaling the business to deliver long-term growth and value for shareholders
A key part of our strategy evolution is our plan to increase the rate of new
company creation to three per year, having previously founded one to two
companies a year. We believe this will enable increased potential for growth
from the life science portfolio, providing greater optionality to optimise
capital allocation, and helping us to build an expanded portfolio of 20-25
companies. Growing the life science portfolio whilst maintaining a runway of
three years of capital will mean that over time our capital pool becomes a
smaller proportion of overall NAV, driving balance sheet efficiency.
Overall, we are aiming to grow NAV to £5.0 billion by 2032, delivering an IRR
of 15% over the cycle, whilst aiming to deliver top quartile returns from the
life science portfolio. This target reflects the continued returns potentially
available from a maturing and expanded portfolio as our companies progress
through the development cycle.
Differentiated company creation model, balance sheet and strategic approach to
delivering value has supported portfolio expansion and diversification
We are delighted to have made a strong start to delivering on our new 10-year
rolling targets this year, adding four new companies to the portfolio
including a late-stage asset, which provides further diversification. The
breadth of our approach to company creation exemplifies our multi-disciplinary
expertise and differentiated model. The team has created an ophthalmic gene
therapy company, Beacon, based around two pre-clinical assets, one of which is
in-licensed from the University of Oxford. Beacon has now been combined with
AGTC, previously a NASDAQ listed company with a late-stage asset which was
acquired by Syncona during the year, creating a combined company with a
diverse pipeline of assets in an area where Syncona has significant expertise.
As part of the transaction, Syncona is set to benefit from any future
commercialisation of the company's lead AGTC-501 asset via a "deferred
consideration" which provides the right to a mid-single digit percentage of
future income from sales and licensing.
Incorporating royalties (or similar structures) into our investments has the
potential to offer Syncona future income streams aligned with our strategic
approach to creating value for our shareholders. We were also pleased during
the year to add two cutting edge companies in the small molecule space in
Mosaic and Kesmalea.
Evolving our team and operational model to deliver our updated long-term
growth ambitions
To continue to deliver on our 10-year rolling targets, we have evolved and
expanded our senior team. Roel Bulthuis has joined as Managing Partner and
Head of Investments, bringing over 20 years of life science venture capital,
business development and investment banking experience and Ed Hodgkin was
promoted to Managing Partner, with Elisa Petris and Magdalena Jonikas promoted
to Lead Partner. We were also pleased post-period end to welcome John Tsai and
Ken Galbraith to Syncona as Executive Partners. Both bring significant
experience in clinical and commercial roles, with John Tsai joining Syncona
from Novartis, where he was President, Global Development and CMO, and Ken
Galbraith bringing over 30 years as a senior biotech leader, including as CEO
of four companies.
We have also evolved our operational model to enable the efficiency needed to
scale and support our growth ambitions and to improve the clinical execution
of our companies as they navigate complex development pathways to bring
innovative drugs through to late-stage. We have formed a discrete Launch Team
within Syncona to support our new portfolio companies in becoming operational.
Our new Executive and Advisory Group has also been formed to provide
functional expertise, particularly through the mid- and late-stage of clinical
development, to support our portfolio companies to pre-empt potential clinical
and operational issues and course correct when challenges arise.
Valuations for late-stage assets improving, whilst life science research base
remains exciting for sourcing leading science
The financing environment for biotech companies has been acutely challenging
over the last 12 months. However, valuations are starting to recover for later
stage clinical assets, as investors focus on good science validated by
clinical data. This market dynamic validates a core principle of our strategy
to build companies that are focused on delivering products to patients and we
believe our companies are well positioned to progress to clinical stage with
our ongoing support. Alongside the improving market conditions, we are seeing
for late-stage companies, pharma companies are increasingly active in the
M&A space, and we are seeing assets with strong clinical data being
acquired at attractive multiples, another core tenet of our strategy. As our
portfolio matures, we believe it is well positioned to take advantage of these
evolving dynamics.
Moving to our pipeline of new opportunities, our core sourcing approach
remains focused on identifying exciting science generated by world-class
academics at universities both here in the UK and on a global basis. We
continue to see a rich pipeline of ground-breaking science around which to
create new companies across a range of therapeutic areas, leveraging our model
and relationships with world-class academics. Our team has a strong track
record in picking great science which has the potential to have a meaningful
impact for patients, and we are excited by the potential of our platform to
create and build more great companies based on this strong opportunity set.
Well positioned to navigate the current market conditions; portfolio
increasingly diversified with potential for near-term inflection points and
long-term growth
Our portfolio is increasingly diversified with seven clinical stage companies
including two late-stage clinical companies, Autolus and Beacon, that have key
clinical and regulatory milestones in the next 12 months and are well
positioned to deliver value. To achieve our long-term ambitions, we have
worked hard to build and invest in our platform this year to scale the
business to deliver on the significant opportunity that lies ahead.
The opportunity to build the best globally leading life science companies here
in the UK is exciting for patients and all of our stakeholders. We believe our
evolved ambition, talented team and ambitious target to grow NAV to £5.0
billion will deliver strong risk-adjusted returns for shareholders over the
long term.
Life science portfolio review
Our life science portfolio was valued at £604.6 million at 31 March 2023 (31
March 2022: £524.9 million), delivering a (14.3)% return during the year.
Our strategic portfolio 19 (#_ftn19) of 13 companies is diversified across
modality and therapeutic area, with seven companies at the clinical stage and
the remainder of the portfolio at pre-clinical stage. Alongside the potential
milestone payments or deferred consideration from potential products, the life
science portfolio also includes investments, which are non-core where we
typically do not hold Board seats or engage actively but they still provide
optionality to deliver returns for our shareholders.
Strategic portfolio
Late clinical companies - 8.8% of NAV
Beacon (4.8% of NAV, 65% shareholding)
Syncona View
Beacon represents a significant opportunity for Syncona to apply its domain
knowledge in retinal gene therapy to a late-stage clinical asset in XLRP,
where Syncona already has prior expertise from its ownership of Nightstar
Therapeutics (Nightstar), which had an asset looking to treat the disease.
Syncona has leveraged its network to establish a world class leadership team,
with decades of gene therapy and ophthalmic experience. We believe that the
platform potential of Beacon is incredibly exciting and has the potential to
drive near-term value for our shareholders.
· Syncona acquired a late-stage asset in AGTC and combined it with Beacon and
its two exciting pre-clinical programmes, including one from the University of
Oxford, creating a leading ophthalmic gene therapy company.
· Syncona has committed £75.0 million of a £96.0 million Series A financing,
with the new company becoming Syncona's third ophthalmic gene therapy company,
having previously created Nightstar and Gyroscope Therapeutics (Gyroscope) -
two of Syncona's most successful exits.
· Builds on late-stage pipeline and operations of AGTC alongside exciting
pre-clinical programmes in dry age-related macular degeneration (AMD), and an
additional programme from the University of Oxford in cone-rod dystrophy
(CRD).
· As part of the transaction, Syncona is set to benefit from any future
commercialisation of the lead asset AGTC-501 via a "deferred consideration"
which provides the right to a mid-single digit percentage of future income
from sales and licensing.
· Beacon benefitting from experienced leadership of CEO David Fellows (ex
Nightstar), CMO Dr Nadia Waheed (ex Gyroscope) and gene therapy expert Dr
Abraham Scaria as Chief Scientific Officer
Beacon is a clinical-stage company focused on the development and
commercialisation of AAV-based gene therapies for the treatment of rare and
debilitating diseases with an initial focus on inherited ophthalmic diseases.
Syncona believes that the eye is a very attractive target for AAV gene
therapy.
Lead programme: Beacon is progressing its lead candidate, AGTC-501, in XLRP
through a Phase II trial. There are no approved treatments for XLRP, and the
programme has orphan drug designations from both the FDA and the European
Commission, with 12-month data from the trial expected in H2 CY2023. AGTC-501
has a strong body of clinical evidence having demonstrated meaningful efficacy
and a good safety profile in its recent Phase I/II HORIZON trial.
Commercial: Following the acquisition of AGTC, Syncona made significant
progress during the year in re-setting focus on the company's lead AGTC-501
asset and re-defining its clinical and manufacturing plan to prepare for a
commercial roll-out. Syncona also restructured the team and company's
facilities, adding expertise in key areas across the business in order to
drive delivery against its refined clinical plan. This significant amount of
work carried out by Syncona team during the year has provided a solid platform
for Beacon as it now progresses its expanded pipeline.
Pipeline programmes: Beacon has in-licensed an exciting pre-clinical programme
from the University of Oxford, targeting CRD. Beacon's second pre-clinical
programme is in dry AMD. Professor Robert MacLaren, who was a co-founder of
Nightstar and served on the Scientific Advisory Board of Gyroscope, will act
as a Scientific Advisor to Beacon, with a focus on the CRD programme, and has
also joined the Board as a non-executive director.
People: The company is led by CEO David Fellows, who previously served as CEO
of Nightstar. Former Gyroscope executive Nadia Waheed has also joined the
company as CMO, along with Dr Abraham Scaria as CSO. Syncona's CEO Chris
Hollowood acts as Chair of the company's Board with Syncona Lead Partner Elisa
Petris also serving as a Director, with the company now able to leverage an
experienced leadership team who have a broad level of expertise across
ophthalmic diseases.
Autolus (4.0% of NAV, 18% shareholding)
Syncona view
Autolus has reported encouraging clinical data to date, underlining the
potential of its lead therapy, obe-cel, as a drug which can deliver meaningful
impact for patients with relapsed/refractory (r/r) adult acute lymphoblastic
leukaemia (ALL). The company continues to deliver against its operational
milestones as it approaches the planned filing of its BLA with the FDA later
in CY2023 and prepares for the commercial launch of obe-cel, a longstanding
goal, which is an important milestone for the business. From a valuation
perspective, Autolus' share price continues to be impacted by difficult market
conditions however we believe the company has made positive operational
progress and are supportive of the business as it progresses to its BLA
filing.
· Announced that the FELIX pivotal study of lead therapy obe-cel in r/r adult
ALL had met its primary endpoint; clinical data presented supports the
encouraging safety profile of the drug.
· Additional data announced at the American Society of Clinical Oncology (ASCO)
and the European Haematology Association (EHA) conferences post-period end,
further underlining the potential of the drug to drive meaningful impact for
patients.
· Share price continues to be impacted by challenging market environment.
· Autolus funded into CY2025 with $343.4 million at 31 March 2023 following the
recent financing, in addition to the $70 million received in non-dilutive
funds from Blackstone for the achievement of development and manufacturing
milestones.
Autolus is developing next generation programmed T cell therapies for the
treatment of cancer with a clinical pipeline targeting haematological
malignancies and solid tumours. Syncona believes that the company's lead
therapy, obe-cel in r/r adult ALL, has the potential to have a meaningful
impact for patients suffering from ALL whilst also having a very positive
safety profile in a last line setting.
Lead programme: Obe-cel reached an important milestone during the year, with
Autolus announcing in December 2022 that it had met its primary endpoint in
the pivotal FELIX trial. The data released was consistent with data already
presented in the ALLCAR19 academic study, with a 70% overall remission rate
(ORR), meeting the primary endpoint for the trial, based on a pre-planned
interim analysis of 50 patients, as verified by an independent data monitoring
committee. Additional data released post-period at the ASCO and EHA
conferences in June further underlined the strong safety profile of the drug,
with an increase in response rates. The company expects to release further
follow up data from the study at the American Society of Haematology (ASH)
meeting in late 2023. Syncona believes further data read-outs have the
potential to underline obe-cel's durability profile, which, at the latest data
point from the ALLCAR19 study, showed that 35% of adult relapsed/refractory
B-ALL patients treated with obe-cel had sustained complete remissions between
24 and 47 months without any need for additional anti-leukaemia therapy. With
data from competitor programmes showing challenges with durability and
toxicity, obe-cel has potential to be differentiated, delivering impact for
patients suffering from a devastating disease.
Scaling for commercial roll out: The company has also made significant
progress in developing its manufacturing and commercial roll out capabilities.
Post-period end, the company opened its Nucleus facility in Stevenage, a
70,000 sq. foot advanced manufacturing facility which will support the
commercial launch of obe-cel, with an initial capacity of up to 2,000 batches
per year with room to expand if needed. The Nucleus is the first of its kind
in the UK and provides a specialist manufacturing capability for the supply of
personalised cell therapy products. Autolus also announced post-period end
that it had selected Cardinal Health as its U.S. Commercial Distribution
Partner, enabling distribution capabilities required to commercialise a CAR
T-cell therapy in the US. These significant operational milestones will help
to support obe-cel's launch, enabling Autolus to launch the product at a scale
which serves global demand in r/r adult ALL.
Pipeline programmes: Autolus also continues to make progress in its broader
pipeline, releasing further data in CY2023 from its studies of AUTO1/22 in
paediatric ALL, AUTO4 in T cell lymphoma, and obe-cel in relapsed/refractory B
cell non-Hodgkin's lymphoma (B-NHL) and chronic lymphocytic leukaemia (CLL).
The data reported thus far not only continues to underline the strength of
Autolus' technology and platform, but the encouraging data from the ALLCAR
extension study of obe-cel also supports the safety profile of its lead
product candidate in additional haematological indications. Further data
read-outs are expected from all of these programmes later in CY2023.
Licensing agreements: The company has also made progress in developing its
commercial pipeline, announcing partnerships during the year allowing Bristol
Myers Squibb and Cabaletta Bio use of Autolus' proprietary RQR8 safety switch.
These agreements further underline the commercial potential of the company's
technology, with Moderna also exercising an option during the year to license
Autolus' proprietary binders against an undisclosed immune-oncology target.
People: At an executive level, the company has announced that Chief Financial
Officer (CFO) Dr Lucinda Crabtree will be leaving to join MorphoSys as CFO. A
search is underway for her replacement, and she will remain with Autolus until
Q3 CY2023 to ensure a smooth transition.
Clinical stage companies - 18.5% of NAV
Anaveon (5.1% of NAV, 38% shareholding)
Syncona view
Syncona continues to be encouraged by the progress at Anaveon. The company
continues to show strong momentum as it delivers against its milestones, with
clinical data released during the year underlining the potential of its ANV419
therapy to address issues seen elsewhere in the use of Interleukin 2 (IL-2) in
solid tumours. We believe Anaveon is well positioned to deliver on its goal of
becoming the best-in-class therapy in the IL-2 space.
· Company focus: Developing a selective IL-2 receptor agonist, a type of protein
that could enhance a patient's immune system to respond therapeutically to
cancer.
· Financing stage: Remains funded to deliver on upcoming milestones following
CHF110 Million (£90 million) Series B financing in December 2021
· Clinical update: Published encouraging data from the Phase I/II dose-finding
trial in ANV419; company has now initiated two further Phase I/II trials of
the drug in metastatic melanoma and multiple myeloma. Further data from the
Phase I/II dose-finding study in solid tumours is expected in H2 CY2023,
whilst initial data from the Phase I/II studies in melanoma and myeloma is
expected in CY2024.
· People: Dr Gary Phillips joined as Chief Business Officer (CBO), bringing 30
years of healthcare leadership across a variety of commercial roles, and Dr
Eduard Gasal joined as Chief Medical Officer (CMO), having previously held
senior clinical roles at Amgen, Novartis and Innovent Biologics.
SwanBio (4.7% of NAV, 80% shareholding)
Syncona view
Syncona continues to believe in the potential of gene therapy to impact
patients with AMN. The company has taken the decision to restructure its
pipeline to focus on its lead programme and to reflect this Syncona has
written down its holding in SwanBio to £58.2 million, a £51.0 million
decline in value during the year. Syncona invested £30.6 million during the
year in the company, including £6.5 million later in the period and a further
$12.0 million post-period end to enable the company to generate safety data
from the initial dose cohort of the SBT101 programme. In parallel, given that
the financing environment for early-staqe companies remains challenging and
SwanBio has not executed a third-party financing to date, Syncona will be
working with the company to explore all strategic and financing options.
· Company focus: Developing gene therapies to target neurological disorders;
lead SBT101 programme is targeting the treatment of AMN, a genetic
neuro-degenerative disease affecting the spine for which there are currently
no approved treatments.
· Financing stage: Additional $12.0 million of financing committed post-period
end by Syncona to support dosing of the first cohort of patients in the
company's Phase I/II clinical trial of SBT101.
· Clinical update: Post-period end the company successfully dosed its first
patient in its Phase I/II clinical trial of SBT101, an important milestone for
the business. The company expects to complete dosing the low dose cohort in H2
CY2023.
Quell (6.9% of NAV, 37% shareholding)
Syncona view
We have seen excellent validation for Quell's technology and platform through
the collaboration with AstraZeneca announced post-period end, where Quell
received $85 million upfront, comprising a cash payment predominantly and an
equity investment, to develop, manufacture and commercialise autologous
T-regulatory cell therapies for two autoimmune disease indications. This
agreement further underlines the continued interest in Syncona portfolio
companies from pharma and provides validation for the Syncona model for
building globally competitive businesses. Quell expects to dose its first
patients in its lead programme in liver transplantation in H2 CY2023. We will
continue to work alongside the company's management team as it delivers
against its upcoming operational and clinical milestones.
· Company focus: Developing engineered T-regulatory (Treg) cell therapies to
treat a range of conditions such as solid organ transplant rejection,
autoimmune and inflammatory diseases.
· Financing stage: Raised $156 million in a Series B financing in November 2021.
· Clinical update: Expects to dose its first patient in its Phase I/II lead
programme targeting liver transplant in H2 CY2023.
· Commercial update: Post-period end Quell entered into a collaboration,
exclusive option and license agreement with AstraZeneca to develop,
manufacture and commercialise autologous, engineered T-regulatory cell
therapies for two autoimmune disease indications, providing excellent
validation for Quell's technologies and capabilities. As part of the
collaboration, Quell received $85 million upfront, comprising a predominant
cash payment and an equity investment, with potential payments of over $2
billion contingent on successfully reaching development and commercial
milestones, plus tiered royalties. Following the agreement, Syncona's
ownership stake in Quell is 33.7%, whilst our valuation for the company
remains unchanged at £86.7 million.
· People update: Appointed Dr Luke Devey as CMO. Dr Devey has over 15 years of
clinical experience and brings significant translational and scientific
expertise to the Quell executive team, most recently at Janssen Immunology
where he was Vice President of Translational Science.
Freeline (1.1% of NAV, 49% shareholding)
Syncona view
Freeline's share price has been impacted by market sentiment and the
re-prioritisation of its clinical pipeline. Freeline has taken the decision to
prioritise the development of its FLT201 Gaucher programme, which Syncona
believes has the potential to deliver long-term value. The management team has
executed on a series of operational and clinical actions to extend its cash
runway. It has implemented a reduction in its workforce and sold its German
chemistry, manufacturing and controls subsidiary. With a refocused clinical
pipeline and extended cash runway, we believe the company can deliver data
from FLT201 later in the year, building on the positive pre-clinical data we
have seen to date.
· Company focus: Clinical delivery in Gaucher disease
· Financing stage: Listed on NASDAQ with cash runway to Q2 CY2024.
· Clinical update: Announced its decision to pause development of the FLT190
Fabry programme following an assessment of the company's current financial
position and strategic priorities. Based on highly encouraging pre-clinical
data, Freeline believes its FLT201 programme in Gaucher disease has the
potential to be its greatest value driver and a first- and best-in-class
therapy in its setting. The company expects to release initial data from the
FLT201 programme in H2 CY2023.
· Commercial update: Along with its decision to pause development of FLT190, the
company also announced a reduction of its workforce by nearly 30%, with these
changes extending the company's cash runway to Q2 CY2024. The company also
sold its German chemistry, manufacturing and controls (CMC) subsidiary and
related intellectual property for $25 million, subject to purchase price
adjustments.
· People update: Paul Schneider joined as CFO in May 2022 and has since also
joined the company's Board, bringing more than 20 years' experience in
leadership roles in biopharmaceutical companies. Co-founder Professor Amit
Nathwani has retired from the Board and will remain engaged with the company
as a clinical and scientific advisor.
Achilles (0.7% of NAV, 27% shareholding)
Syncona view
Syncona continues to engage with Achilles Therapeutics (Achilles) as it
progresses its lead programmes in advanced non-small cell lung cancer (NSCLC)
and recurrent or metastatic melanoma. The company is well funded with a cash
runway to mid-CY2025. Whilst we were pleased to see further data released from
its lead programmes during the period, we are looking to review the next data
updates to demonstrate that robust manufacturing can translate into clinical
efficacy for the company's products.
· Company focus: Developing precision T cell therapies targeting clonal
neoantigens to treat solid tumours.
· Financing stage: Listed on NASDAQ with cash runway to mid-CY2025.
· Clinical update: Presented data in its Phase I/IIa trials in advanced NSCLC
and recurrent or metastatic melanoma with 16 patients dosed across the two
trials to date, additional clinical and translational science data expected in
Q4 2023. Whilst Syncona was pleased to see the data underlining the safety
profile of Achilles' product and a partial durable response, it is critical
that the company can demonstrate that robust manufacturing can translate into
clinical efficacy for the company's products. Post-period end the company
announced that its new AI application had been integrated into its PELEUS™
bioinformatics platform, supporting the potential of the platform in other
modalities such as cancer vaccines.
· People update: James Taylor joined the company as CBO, bringing over 25 years
of deal making experience across pharmaceutical and biotech companies.
Pre-clinical companies - 10.9% of NAV
OMass (3.5% of NAV, 31% shareholding)
· Company focus: Developing small molecule drugs to treat rare diseases and
immunological conditions.
· Financing stage: Raised £75.5 million in a Series B financing in April 2022,
with additional £10 million investment from British Patient Capital
post-period end announced in May 2023.
· Development update: Announced a joint publication in Nature Chemistry with
co-founder Professor Dame Carol Robinson's team at Oxford University,
underlining some of the key benefits of OMass' OdyssION™ platform in
searching for new drugs against inadequately drugged and previously
intractable targets.
· Commercial update: Post-period end the company announced its move to a new
purpose-built 16,000 sq. foot mixed-use facility at the ARC Oxford campus,
helping it to prepare for its next phase of growth and enabling further
collaboration as it expands its team.
· People update: Announced the appointment of Dr Jon Roffey as Vice President,
Head of Medicinal Chemistry, who brings over 20 years of drug discovery
experience across biotech and pharmaceuticals, including taking multiple
candidate drugs into late-stage clinical development. Post-period end the
company also announced the expansion of its Leadership Team with the arrival
of Dr Winfried Barchet as Vice President of Immunology, who brings more than
15 years of experience across drug discovery and translational research,
whilst Jim Geraghty joined as Chairman of its Board of Directors, bringing
over 35 years of strategic experience including more than 25 years as a senior
executive at biotechnology companies developing and commercialising innovative
therapies.
Purespring (2.8% of NAV, 84% shareholding)
· Company focus: Purespring Therapeutics (Purespring) is developing gene
therapies for the treatment of chronic renal diseases which are currently
poorly served by existing treatments.
· Financing stage: Raised £45 million in a Series A financing in 2020.
· Development update: Continuing to develop its pre-clinical pipeline and
proprietary platform.
· People update: Purespring CEO Richard Francis became CEO of Teva
Pharmaceutical Industries in January 2023, with Chief Development Officer
(CDO) Julian Hanak moving to the role of CEO. Richard will remain actively
involved with the business as a member of the Board. Purespring also
strengthened its Leadership Team with the appointment of Dr Alice Brown as
Chief Scientific Officer (CSO), who brings more than a decade of experience
working in advanced therapies across both large pharma and early-stage
biotech.
Clade (1.9% of NAV, 22% shareholding)
· Company focus: Clade Therapeutic (Clade) is developing scalable
next-generation iPSC derived medicines.
· Financing stage: Raised $87 million in a Series A financing in August 2021.
· Development update: Continuing to develop its pre-clinical pipeline whilst
building out its manufacturing footprint under the leadership of CEO Chad
Cowan (co-founder of Sana Biotechnology and CRISPR Therapeutics) and CBO Jim
Glasheen (co-founder of Atalanta Therapeutics).
Resolution (1.8% of NAV, 81% shareholding)
· Company focus: Resolution Therapeutics (Resolution) is developing macrophage
cell therapies to treat diseases characterised by life-threatening
inflammatory organ damage.
· Financing stage: Raised a further £10.0 million from Syncona in an extension
of its £26.6 million Series A financing in April 2022.
· Commercial update: Announced research collaborations with panCELLA and CCRM,
as it looks to progress its allogeneic programme and further develop its
manufacturing capabilities.
· People update: Post-period end the company has appointed Dr Clifford A. Brass,
as CMO. Most recently Dr Brass was Vice President, Head of Clinical Sciences
for Hepatology, Gastroenterology and Transplantation in Global Drug
Development at Novartis, and has over 25 years of experience in the
pharmaceutical industry. Resolution has also strengthened its Board with the
appointment of Syncona Commercial Adviser Lisa Bright as Chair and Altavant
Sciences CEO Dr Bill Symonds as a non-executive director.
Mosaic (0.6% of NAV, 52% shareholding)
· Company focus: Oncology therapeutics company focusing on drug development
against genetically informed targets.
· Financing stage: £22.5 million Series A announced in April 2023, led by
Syncona with a £16.5 million commitment.
· People update: Company is led by CEO Brian Gladsden, a global leader in cancer
therapeutics with 25 years of experience in biopharmaceuticals, most recently
at Novartis Oncology, where he was Senior Vice President and a member of the
Worldwide Leadership Team. Syncona CEO Chris Hollowood has been appointed
Chair of the company's Board with Lead Partner Magdalena Jonikas also a
director.
Kesmalea (0.3% of NAV, 58% shareholding)
· Company focus: An opportunity to create a new generation of small molecule
oral drugs addressing diseases through modulating protein homeostasis.
· Financing stage: £20.0 million Series A financing led by Syncona with a
£16.0 million commitment.
· People update: Company is Chaired by Dr Clive Dix, CEO of C4X Discovery and
former Chair of the UK Vaccine Taskforce. Company founder Dr Harry Finch, the
co-inventor of GSK's Serevent(TM), is a Director of the company alongside
Syncona Lead Partner Magdalena Jonikas.
Portfolio milestones and deferred consideration - 5.6% of NAV
Syncona has rights to potential milestone payments related to the sale of
Gyroscope to Novartis. Alongside these, as part of Syncona's acquisition of
AGTC, the Company has the potential to benefit from any future
commercialisation of the lead asset AGTC-501 via a "deferred consideration"
which provides the right to a mid-single digit percentage of future income
from sales and licensing. These potential milestones and deferred
consideration are valued on a discounted risk adjusted basis at £70.4
million.
Syncona investments - 4.4% of NAV
Syncona has £55.0 million of value in its investments, typically where we do
not hold Board seats or manage the investment actively alongside executive
teams. Our assets held within our investments are CRT Pioneer Fund, Forcefield
Therapeutics, Biomodal (formerly Cambridge Epigenetix), and Adaptimmune. Key
updates during the period from these investments include:
· Our largest investment is CRT Pioneer Fund, which invests in early-stage drug
discovery projects with a focus on oncology. The fund was written up by £8.8
million in the year, predominantly driven by a change in valuation for its
HSF1 inhibitor asset, which has been licensed to Nuvectis and has now
initiated a Phase Ib study.
· Syncona has written off its $1 million investment in Tier 1 Bio, following a
lack of adequate progress in initial target discovery which led to the company
deciding to close down.
Next key milestones for clinical companies
Autolus - cell therapy / oncology
Obe-cel - adult ALL Further follow up data from pivotal FELIX study in obe-cel in r/r adult ALL
expected in H2 CY2023
Obe-cel - B-NHL and CLL Further data expected in CY2023
AUTO1/22 - paediatric ALL Further data expected in CY2023
AUTO4 in peripheral T cell lymphoma Further data expected in CY2023
Beacon - ophthalmic gene therapy
XLRP 12-month data from the Phase II trial in XLRP expected in H2 CY2023
Anaveon - biologics
ANV419 - multiple tumour types Further data from dose finding study expected in H2 CY2023
ANV419 - metastatic melanoma Initial data expected in CY2024
ANV419 - multiple myeloma Initial data expected in CY2024
Quell - cell therapy / autoimmune disease
QEL-001 - liver transplant Expect to dose first patient in H2 CY2023
SwanBio - gene therapy / CNS
SBT101 Expects to have dosed the initial dose cohort in its Phase I/II AMN programme
in H2 CY2023
Achilles - cell therapy / oncology
cNeT - non-small cell lung cancer Further update from ongoing Phase I/IIa trials of cNeT therapy in Q4 CY2023
cNeT - melanoma Further update from ongoing Phase I/IIa trials of cNeT therapy in Q4 CY2023
Freeline - gene therapy / systemic diseases
FLT201 - Gaucher disease Type 1 Initial data expected in H2 CY2023
Finance review
We take a robust and prudent approach to valuation, managing our balance sheet
and our costs with a continued focus on optimising returns for our
shareholders.
NAV Performance
Overall NAV performance is down in the year driven by a decline in value of
our listed holdings and the partial write-down of our holding in SwanBio which
was partially offset by positive foreign exchange movements on our US dollar
assets, both within our life science portfolio and balance sheet, alongside
uplifts from some of our smaller investments and potential deferred
considerations and future milestone payments.
Valuation approach
At the year end, our life science portfolio comprised listed holdings (12%),
private companies either valued at Price of Recent Investment (PRI) (45%), or
on the basis of capital invested (Calibrated Cost) (26%). In addition, we have
the right to potential milestone payments related to the sale of Gyroscope and
a deferred consideration for our right to a mid-single digit percentage of
future income from AGTC-501 sales and licensing. These potential income
streams are valued on a risk adjusted discounted basis in line with our
Valuation Policy and together represent 12% of the portfolio 20 (#_ftn20) .
Given the public market valuation reductions in the year and the challenging
macroeconomic market conditions impacting the financing environment for
early-stage companies, in line with our usual process we have carried out
year-end private portfolio valuations against a backdrop of heightened
valuation uncertainty. We have carried out a rigorous review of each of our
portfolio companies to ensure the robustness of the valuations, including
taking account of the input provided by our external valuation adviser on our
five largest private holdings.
Regarding SwanBio, despite inbound investor interest, the business was not
able to execute a third-party financing. The company's management team
determined it was necessary to restructure its pipeline to focus solely on
SBT101 to drive cost efficiency and allocate capital to its most promising and
most advanced asset. Whilst Syncona is continuing to work with the company on
progressing SBT101 and its future financing and strategic options, this change
to its investment thesis triggered a revisit of our valuation of the company
and subsequent write off of the value attributed to the pipeline programmes no
longer being progressed. This has been treated as an adjusting post balance
sheet event, the details of which are set out in note 21 of the financial
statements. The remainder of our private portfolio companies are funded to
deliver their key milestones.
Optimising capital efficiency
As part of a wider strategy review, we have looked at how to improve returns
for shareholders. Our aim is that returns will be predominantly driven by
long-term capital appreciation and growing the value of the life science
portfolio remains our core focus.
To support our strategy execution, we aim to maintain around three years of
financing runway. We seek to leverage our capital to deliver returns to
shareholders. During the financial year our portfolio companies brought in
£394.3 million of capital commitments of which Syncona contributed £176.9
million. Over the next 12 months, we expect to deploy between £150 million to
£200 million across our portfolio and new companies and we have already seen
further examples of high-quality external financings in the first quarter of
the current financial year.
To optimise capital efficiency, if in the future, due to cash inflows from
realisations, our capital pool increases significantly in excess of our
expected three-year capital deployment and potential investment opportunities,
the Board would look at returning capital to shareholders.
Capital pool management
Syncona's capital pool of £650.1 million is central to the delivery of our
strategy of building life science companies of scale over the long term. The
mandate for our capital is focused on liquidity and capital preservation. We
aim to keep between 12 and 24 months of funding in cash and Treasury Bills.
During the year, in response to the inflationary environment, we allocated our
longer duration capital to a number of low volatility, highly liquid, multi
asset funds or mandates, managed by Schroders, Kempen and M&G with
portfolio mandates to deliver core CPI return over the mid-term.
£m 31/03/2022 31/03/2023
NET CASH 465.5 69.7
T-Bills 180.0 285.0
Multi-manager funds 99.5 261.6
legacy Funds 39.9 33.8
784.9 650.1
We also hold 25% of our capital pool in US dollar linked funds and assets to
provide a natural hedge against expected short-term US$ cashflows. The
depreciation of Sterling against the US dollar and other foreign currencies
has resulted in a £26.0 million gain, which when combined with the returns
from our funds, resulted in an overall return within our capital pool of 5.5%
in the year. We continually monitor our capital pool based on our objectives
and market conditions.
Investing today to build for the future
Growing our team to deliver on our growth plans means a modest increase to our
cost base. Syncona is a self-managed vehicle and SIML costs are managed
prudently by the Leadership Team within an annual budget approved by the
Board. We take a disciplined approach to costs. SIML Management Fees for
FY2022/3 were £12.1 million (0.96% of NAV 21 (#_ftn21) ; an increase of
£1.4 million on FY2021/2). This increase is due to a number of factors
including the addition of senior hires to deliver a growing portfolio and
salary increases across the team to reflect the inflationary environment.
Total costs to Syncona Limited during the year, which incorporates fees paid
to SIML, ongoing operating costs of the Company, the charitable donation and
costs associated with the long-term incentive scheme, were £22.4 million
(1.8% of NAV) (FY2021/2: £24.2 million). The decrease in the year was
primarily a result of changes to the valuation of the long-term incentive
scheme. To deliver on our evolved strategy, we will be making selective
incremental investments in further expanding the team over the next one to two
years and whilst there will be associated costs with these hires, we expect
these to be appropriate for the scale of our business and aligned with our
prudent approach to managing our cost base.
Supplementary information
Our growing track record
- £1,083.1 million deployed in life science portfolio since 2012
- 22% IRR and 1.5x multiple on cost across whole portfolio(( 22 (#_ftn22) ))
Company Cost (£m) Value (£m) Multiple IRR
Existing portfolio companies
Quell £61.4 £86.7 1.4 16%
Beacon (incl. Deferred Consideration) £60.0 £75.9 1.3 150%
Anaveon £39.9 £64.2 1.6 24%
SwanBio £105.7 £58.2 0.6 (28)%
Autolus £147.0 £50.0 0.3 (28)%
OMass £35.4 £43.7 1.2 9%
Purespring £35.1 £35.1 1.0 0%
Clade £23.2 £24.3 1.0 5%
Resolution £23.0 £23.0 1.0 0%
Freeline £183.1 £14.1 0.1 (55)%
Achilles £60.7 £8.6 0.1 (42)%
Mosaic £7.3 £7.3 1.0 0%
Kesmalea £4.0 £4.0 1.0 0%
Realised companies
Gyroscope (incl. Milestone value) £113.1 £379.8 3.4 55%
Blue Earth £35.3 £351.0 9.9 83%
Nightstar £56.4 £255.7 4.5 71%
Neogene (incl. Milestone value) £14.3 £17.4 1.2 10%
Azeria £6.5 £2.1 0.3 (58)%
Investments
Unrealised investments £50.0 £54.9 1.1 2%
Realised investments £21.8 £27.1 1.2 26%
Total £1,083.1 £1,583.2 1.5 21.9%
Approach to disclosing portfolio company information
Our model is to create companies around world-leading science, bringing the
commercial vision and strategy, building the team and infrastructure and
providing scaled funding.
When we create or invest in a portfolio company, or when a portfolio company
completes an external financing or other transaction, we may announce that
transaction. Our decision on whether (and when) to announce a transaction
depends on a number of factors including the commercial preferences of the
portfolio company. We would make an announcement where we consider that a
transaction is material to our shareholders' understanding of our portfolio,
whether as a result of the amount of the commitment, any change in valuation
or otherwise.
In addition, our portfolio companies are regularly progressing clinical
trials. These trials represent both a significant opportunity and risk for
each company and may be material for Syncona.
In many cases, data from clinical trials is only available at the end of the
trial. However, a number of our portfolio companies carry out open label
trials, which are clinical studies in which both the researchers and the
patients are aware of the drug being given. In some cases, the number of
patients in a trial may be relatively small. Data is generated as each patient
is dosed with the drug in a trial and is collected over time as results of the
treatment are analysed and, in the early stages of these studies, dose-ranging
studies are completed. Because of the trial design, clinical data in open
label trials is received by our portfolio companies on a frequent basis.
Individual data points need to be treated with caution, and it is typically
only when all or substantially all of the data from a trial is available and
can be analysed that meaningful conclusions can be drawn from that data about
the prospect of success or otherwise of the trial. In particular it is highly
possible that early developments (positive or negative) in a trial can be
overtaken by later analysis with further data as the trial progresses.
We would expect to announce our assessment of the results of a trial at the
point we conclude on the data available to us that it has succeeded or failed,
unless we conclude it is not material to our shareholders' understanding of
our portfolio. We would not generally expect to announce our assessment of
interim clinical data in an ongoing trial, other than in the situation where
the portfolio company announces interim clinical trial data, in which case we
will generally issue a simultaneous announcement unless we believe the data is
not materially different from previously announced data.
In all cases we will comply with our legal obligations, under the Market Abuse
Regulation or otherwise, in determining what information to announce.
Principal risks and uncertainties
The principal risks that the Board has identified are set out in the following
pages, along with the potential impact, key controls and what we have done
during the year to manage the risks. Further information on financial risk
management is set out in note 18 to the Consolidated Financial Statements.
Description Key Controls What has happened in the year?
Portfolio company risks
Scientific theses fail · Extensive due diligence process, resulting in identification of · Continued to seek to de-risk scientific theses in our early stage
key risks and clear operational plan to mitigate these. companies.
· Tranching of investment to minimise capital exposed until key · Significant capital raised by portfolio companies to support
We invest in scientific ideas that we believe have the potential to be de-risking steps are completed (particularly fundamental biological de-risking scientific theses.
treatments for a range of diseases, but where there may be no or little uncertainty). Consideration of syndicating investments.
substantial evidence of clinical effectiveness or ability to deliver the
· The build out of the Executive and Advisory Group including
technology in a commercially viable way. Material capital may need to be · Syncona team works closely with new companies to ensure focus on experienced subject matter experts during the year enables specialist advice
invested to resolve these uncertainties. key risks and high-quality operational build-out. Team members may take which aids the identification and resolution of issues at an early stage and
operating roles where appropriate. ongoing support to assist in managing the operational challenges of drug
discovery and development.
· Robust oversight by Syncona team, including formal review at our
Impacts: quarterly business review and ongoing monitoring through Board roles.
· Financial loss and reputational impact from failure of
investment.
Clinical development doesn't deliver a commercially viable product · Build products in areas with significant unmet need and that show · 16 clinical data read-outs during the financial year with our
substantial and differentiated efficacy and therefore will potentially have most clinically advanced company, Autolus, approaching a meaningful milestone
less competition and more pricing power. as it plans to file a BLA with the US FDA in H2 CY2023.
Success for our companies depends on delivering a commercially viable target · Focus, oversight and support from the Syncona team on recruiting · The acquisition of AGTC added a clinical stage company to the
product profile through clinical development. This can be affected by trial dedicated specialist clinical teams in each portfolio company to manage trials portfolio thereby diluting this risk.
data not showing required efficacy or adverse safety events. It can also be effectively, maximise likelihood of success, and with a clear understanding of
affected by progress of competitors, IP rights, the company's ability to gain the requirements of regulators. · The build out of the Executive and Advisory Group during the year
regulatory approval for and credibly market the product, potential pricing and
brings specialist knowledge to Syncona which reduces this risk.
ability to manufacture cost-effectively. · Investment process considers strength of IP or regulatory
exclusivity protection and this is then operationalised by each company.
· Investment process considers manufacturing as a key issue from
Impacts: inception of each company, rather than leaving to later stage, and this is
then operationalised.
· Material impact on valuation, given capital required to take
products through clinical development. · Company business plans seek to have multiple products in
different indications so that failure in one does not damage all value of
· Material harm to one or more individuals, and potential company. Consideration of syndicating investments.
reputational issues for Syncona.
· At portfolio level, building a portfolio with multiple companies
at clinical/later stages, to enable us to absorb failures.
· Clinical trials policy requires reporting of significant trial
issues to Syncona team and to Board in serious cases.
Portfolio concentration risk to platform technology · Team pays close attention to scientific, clinical, regulatory or · Ongoing monitoring of developments in cell and gene therapy.
commercial developments in the field.
· In addition, we invest across a range of modalities and therefore
· Where there are genuine risks, identified and managed through we adopt multiple approaches alongside increasing portfolio target size which
The Syncona team brings strong domain experience in cell and gene therapy, and diligence and investment process. reduces the potential impact of this risk.
a substantial part of the portfolio is in these areas. Systemic issues
(whether scientific, clinical, regulatory or commercial) may emerge that
affect these technologies.
Impacts:
· Material impact on valuation.
· Impact on reputation of Syncona resulting from failure of
technology we are strongly identified with.
Concentration risk and binary outcomes · Board provides strong oversight drawing on a range of relevant · This is an inherent risk due to the nature of the business model,
experience, including life science, FTSE and investment company expertise. however as the portfolio matures, the binary and concentration risk profile
Board has clear understanding of strategy and risk. changes.
The Company's investment strategy is to invest in a concentrated portfolio of · Transparent communication from Syncona team to Board about · Scientific risk will reduce over time as the clinical development
early stage life science businesses where it is necessary to accept very portfolio opportunities and risks including upside and downside valuation pathway develops.
significant and often binary risks. It is expected that some things will cases.
succeed (and potentially result in substantial returns) but others will fail
· Financial exposure risk increases as our investment in individual
(potentially resulting in substantial loss of value). This is likely to result · Clear communication to shareholders of the opportunities and assets increases.
in a volatile return profile. risks of the strategy. Provide information to shareholders about portfolio
companies to assist them in understanding portfolio value and risks. · As we grow, concentration risk should reduce as we increase the
number of new companies we are starting and individual investment relative to
· Building diversified portfolio with multiple companies and NAV should become more diluted.
Impacts: products at clinical/later stages. Consideration of syndicating investments.
· The acquisition of AGTC during the year has diversified the risk
· Loss of shareholder support, potentially reducing ability to · Willing to sell investments at/above fair value, prior to of having primarily early-stage life science businesses.
raise new equity when required. approval, which removes binary risks.
· Reputation risk from perceived failure of business model.
Access to capital
Not having capital to invest · Syncona team monitoring capital allocation on an ongoing basis · Whilst this is not an immediate risk as we have a strong balance
with a three-year forward outlook, with transparent reporting to the Board. sheet with over three years of capital available, we are seeing the impact of
current negative market sentiment in our portfolio syndications and across the
· Seek to maintain capital pool of three years' financing broader market place.
Early-stage life science businesses are very capital intensive, and delivering requirements, although noting this risks being a significant drag on overall
our strategy will require us to have access to substantial capital. returns. · As the portfolio matures, capital requirements will increase.
However, more mature assets attract higher valuations so our ability to
· Maximise potential to raise new equity through developing realise value will increase.
institutional shareholder base.
Impacts:
· Increasing the quantum and cadence of investment will drive
· Ongoing consideration of alternative or additional capital better capital efficiency and an increasingly mature portfolio which can be
· Dilution of stake in portfolio companies with loss of potential raising structures (e.g. side funds; operating company vs investment company; realised over time.
upside. use of debt).
· For new investments, we have invested alongside strategic
· Loss of control of portfolio companies resulting in poorer · Ongoing consideration of syndication strategy at portfolio co-investors, maintaining the core Syncona model whilst diversifying financial
strategic execution. company level, to maximise value and minimise dilution when external capital risk.
is brought in. Clarity of funding options: solo hold and partner approaches.
· Inability for portfolio companies to deliver their business plans
· We have introduced a Capital Return Policy focusing on driving
due to financing constraints. · Ongoing consideration of exits. balance sheet efficiency by balancing reinvestment with capital returns.
· During the financial year our portfolio companies brought in
£394.3 million of capital commitments of which Syncona contributed £176.9
million.
Private/public markets don't value or fund our companies when we wish to · Maintain access to significant capital, to reduce risk of being · Macroeconomic headwinds have continued to impact sentiment in the
access them forced to syndicate/forced seller. biotech sector, with particular impact on public markets for early stage
biotech companies.
· Focus, oversight and support from the Syncona team on financing
plan for each company, with support to the company to develop its financing · During the year we have increased the level of scenario planning
Our capital allocation strategy includes considering bringing third-party story at an early stage. and modelling we perform to ensure we monitor our ability to invest at a
capital into our portfolio companies, at the right stage of development. In higher than planned level into our companies if necessary. We have also
addition we may consider exit opportunities either on the public markets or increased the frequency of our internal meetings to discuss the capital
through private sales. landscape, the potential sources of capital and the timing of capital
required.
· During the financial year our portfolio companies brought in
Impacts: £394.3 million of capital commitments of which Syncona contributed £176.9
million.
· Syncona is required to invest further capital, leading to greater
exposure to individual companies than desired and less ability to support
other companies.
· Inability for portfolio companies to deliver their business plans
due to financing constraints.
· Exit opportunities may be less attractive, with impact on
availability of capital.
· Reputation risk from failed transactions.
Capital pool losses or illiquidity · Protection against risk and liquidity are key characteristics; · This risk has increased primarily due to high inflation currently
return is a focus to avoid loss of real value, but a secondary consideration. being experienced alongside volatile capital markets. As a result, more active
management of the capital pool is in place.
· Risk parameters monitored monthly by Syncona team, with enhanced
The capital pool is exposed to the risk of loss or illiquidity. review on a quarterly basis. · Risk is being managed through a tiered approach to investment. We
are managing liquidity and return within defined volatility and concentration
· External adviser (Barnett Waddingham) engaged to carry out limits. External advisers are used to evaluate the markets and providers, and
quarterly and annual reviews of capital pool against chosen parameters. funds are currently spread across multiple banks, government bonds, and three
Impacts:
fund managers
· Cash balances are held at multiple investment grade or equivalent
· Loss of capital (or reduction in the value of capital due to banks and limited to three months' forward funding requirements. with differentiated diversified investment strategies.
inflation).
· Near-term funding is held in UK and US treasuries. · Macroeconomic and fund performance is reviewed regularly by the
· Inability to finance life science investments.
Liquidity Management Committee and reported quarterly to
· Longer-term funding is held across low volatility, highly liquid,
· Reputation risk from losses in non-core area. multi-asset funds or mandates. the SIML and Syncona Limited Boards.
· Counterparty bank or fund fails and we are unable to recover the
money held by them.
People
Reliance on small Syncona team · Market benchmarking of remuneration for staff. · Part of the evolved strategy is an increased focus on people and
capabilities. During the year the SIML CEO transition was announced and
· Provision of long-term incentive scheme to incentivise and retain implemented. The Investment, Launch and Executive and Advisory teams have been
staff. built out and the Corporate teams have been strengthened.
The execution of the Company's strategy is dependent on a small number of key
individuals with specialised expertise. This is at risk if the team does not · Ongoing recruitment to strengthen team and deepen resilience.
succeed in retaining skilled personnel or is unable to recruit new personnel
with relevant skills. · Focus on investment team development to provide internal
succession from next tier of leaders, with process supported by Chief Human
Resources Officer.
Impacts: · Process development within corporate functions to reduce single
point risks.
· Poorer oversight of portfolio companies, risk of loss of value
from poor strategic/operational decisions. · Building high-quality teams within portfolio companies that can
operate at a high strategic level.
· Insufficient resource to take advantage of investment
opportunities.
· Loss of licence to operate if insufficient resource or processes
mean we fail to meet stakeholder expectations.
Systems and controls failures · Systems and control procedures are reviewed regularly by Syncona · Ongoing compliance reviews and reviews of key processes performed
team, with input from specialist external advisers where appropriate. during the year to assess quality, identify efficiencies and ensure
compliance.
· Certain systems have been outsourced to the Administrator who
We rely on a series of systems and controls to ensure proper control of provides independent assurance of its own systems.
assets, record-keeping and reporting, and operation of Syncona's business.
· Annual review of the effectiveness of systems and controls
carried out by the Audit Committee.
Impacts: · Anti-fraud, bribery and corruption controls.
· Risk of loss of assets. · Anti-money laundering controls.
· Inability to properly oversee Syncona team. · Whistleblowing arrangements.
· Inaccurate reporting to shareholders.
· Syncona team unable to carry out its functions properly.
· Breach of legal or regulatory requirements.
· Reputation risk, loss of confidence from shareholders and
other stakeholders.
Unable to build high-quality team/team culture · Seek to build high-quality teams in portfolio companies. This can · The build out of the Executive and Advisory Group to include
begin before an investment is made. experienced subject matter experts during the year enables the provision of
specialist advice thereby differentiating a Syncona portfolio company.
· Ensure executive team aims to build a high-quality culture from
Portfolio companies are reliant on recruiting highly specialised, high-quality the outset, and monitor and support its effectiveness. · As we move further though the clinical pathway with our companies
staff to deliver their strategies. This can be challenging given a limited
and execute on our strategy our track record will continue to strengthen which
pool of people with the necessary skills in the UK/Europe. In addition, these · Build strong portfolio company boards (including representatives will attract high-quality people.
are fast-growing companies and establishing a high-quality culture from the from our team and experienced non-execs) to provide effective oversight and
outset is key. support.
· Support from our team, including taking operational roles where
necessary, and facilitating access to support from across the portfolio where
Impacts: appropriate, or external consultant resource from our networks.
· Ultimately, failure to deliver key elements of operational plans
resulting in material loss of value.
Unable to execute business plans · Seek to build high-quality teams in portfolio companies. This can · The build out of the Executive and Advisory Group including
begin before an investment is made. Where possible these should include experienced subject matter experts during the year enables specialist advice
resilience to deal with unexpected external factors, though companies will which aids the identification and resolution of issues at an early stage and
also be focused on maximising value from capital invested. ongoing support to assist in managing the operational challenges of drug
Portfolio company business plans may be impacted by a number of external
discovery and development.
factors, including access to patients, delivery by suppliers and the wider · Seek to maintain capital buffers to cope with unanticipated
business environment (including factors such as COVID-19). issues before cash out. · During the year we have increased the level of scenario planning
and modelling we perform to ensure we monitor our ability to invest at a
· Oversight of key external factors/relationships that are higher than planned level into our companies if necessary, enabling us to
important to delivering business plan. support our portfolio companies through execution challenges as appropriate.
Impacts:
· Sharing of knowledge (where appropriate) across portfolio to · We have also increased the frequency of our internal meetings to
· Ultimately, failure to deliver key elements of operational plans support companies in managing external factors. discuss the capital landscape, the potential sources of capital and the timing
resulting in material loss of value. of capital required.
Macroeconomic environment
Macroeconomic environment has a negative impact on sentiment for portfolio · Ongoing consideration of syndication strategy at portfolio · We have focused capital allocation on clinical opportunities
companies and Syncona business model company level alongside potential partnership and licensing agreements to across the portfolio, maintaining disciplined approach against a challenging
extend portfolio companies' cash runways, maximise value and minimise dilution market backdrop.
when external capital is brought in.
· We have continued to monitor capital requirements across the
The challenging macroeconomic environment results in investors being highly · Syncona team monitor capital allocation on an ongoing basis with entire portfolio closely, ensuring we consider all options with regards to
risk averse. a three-year forward outlook, with transparent reporting to the Board. future financing, including exit options.
· Seek to maintain capital pool of three years' financing · We have increased the level of scenario planning and modelling we
requirements, although noting this risks being a significant drag on overall perform to ensure we monitor our ability to invest at a higher than planned
Impacts: returns. level into our companies if necessary. We have also increased the frequency of
our internal meetings to discuss the capital landscape, the potential sources
· Investors are focusing on existing portfolios rather than · Regular engagement with shareholders and analysts. of capital and the timing of capital required.
investing in early stage biotech companies, therefore Syncona may be required
to invest further capital, leading to greater exposure to individual companies · Maximise potential for Syncona to raise new equity through · We have increased engagement with investors and analysts.
than desired and less ability to support other companies. developing institutional shareholder base.
· We have implemented more active management of the capital pool.
· Inability for portfolio companies to deliver their business plans · Ongoing consideration of alternative or additional capital This involves managing risk through a tiered approach to investment, and
due to financing constraints. raising structures (e.g. side funds; operating company vs investment company; managing liquidity and return, within defined volatility and concentration
use of debt). limits. External advisers are used to evaluate the markets and providers and
· For Syncona, exit opportunities may be less attractive, with
funds are currently spread across multiple banks, government bonds, and three
impact on availability of capital to fund portfolio companies. · Ongoing consideration of exits. fund managers with differentiated diversified investment strategies.
· A reduction in demand for the Company's shares would impact the · Seek to maintain capital buffers to cope with unanticipated · Macroeconomic and fund performance is reviewed regularly by the
performance of the Company's share price. issues before cash out. Syncona team, the Liquidity Management Committee and reported quarterly to the
SIML and Syncona Limited Boards.
· Failure to deliver strategy. · Maintain access to significant capital, to reduce risk of being
forced to syndicate/forced seller.
Responsibility Statement
The Directors' responsibility statement below has been prepared in conjunction
with, and is extracted from, the Company's Annual Report and Accounts for the
year ended 31 March 2023 ("2023 Annual Report"), whereas this announcement
contains extracts from the 2023 Annual Report. The responsibility statement is
repeated here solely for the purpose of complying with DTR 6.3.5. These
responsibilities are for the full 2023 Annual Report and not the extracted
information presented in this announcement or otherwise.
The Directors of the Company are:
Melanie Gee, Chair
Julie Cherrington, Non-Executive Director
Cristina Csimma, Non-Executive Director
Virginia Holmes, Non-Executive Director
Rob Hutchinson, Non-Executive Director
Kemal Malik, Non-Executive Director
Gian Piero Reverberi, Non-Executive Director
The Directors confirm to the best of our knowledge:
the financial statements, prepared in accordance with International Financial
Reporting Standards as adopted by the European Union, give a true and fair
view of the assets, liabilities, financial position and profit or loss of the
Group and the undertakings included in the consolidation taken as a whole;
the Annual Report and financial statements, taken as a whole, are fair,
balanced and understandable and provide the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy; and
the financial statements include information and details in the Chair's
statement, the Strategic Report, the Corporate Governance report, the
Directors' report and the notes to the Consolidated Financial Statements,
which provide a fair review of the information required by:
a) DTR 4.1.8 of the Disclosure and Transparency Rules, being a fair review of
the Company business and a description of the principal risks and
uncertainties facing the Company; and
b) DTR 4.1.11 of the Disclosure and Transparency Rules, being an indication of
important events that have occurred since the end of the financial year and
the likely future development of the Company.
SYNCONA LIMITED
UNAUDITED GROUP PORTFOLIO STATEMENT
As at 31 March 2023
2023 2022
Fair value % of Fair value % of
£'000 Group NAV £'000 Group NAV
£'000 £'000
Life science portfolio
Life science companies
Quell Therapeutics Limited 86,703 6.9 81,416 6.2
Anaveon AG 64,203 5.1 59,818 4.6
Beacon Therapeutics Holdings Limited((1)) 60,000 4.8 - -
SwanBio Therapeutics Limited 58,186 4.6 75,103 5.7
Autolus Therapeutics plc 50,004 4.0 61,979 4.7
Omass Therapeutics Limited 43,712 3.5 34,712 2.7
Purespring Therapeutics Limited 35,100 2.8 18,500 1.4
Resolution Therapeutics Limited 23,027 1.8 10,388 0.8
Cambridge Epigenetix Limited 18,472 1.5 17,345 1.3
Freeline Therapeutics Holdings plc 14,117 1.1 32,277 2.5
Companies of less than 1% of the NAV 47,972 3.8 55,351 4.2
Total life science companies 501,496 39.9 446,889 34.1
Milestone payments 54,516 4.3 49,802 3.8
CRT Pioneer Fund 32,727 2.6 28,183 2.2
Deferred consideration 15,882 1.3 - -
Total life science portfolio((2)) 604,621 48.1 524,874 40.1
Capital pool investments
Treasury bills 284,960 22.7 179,984 13.7
Credit investment funds 101,566 8.1 99,489 7.6
Multi asset funds 160,036 12.8 - -
Legacy funds 33,001 2.7 39,857 3.1
Total capital pool investments((3)) 579,563 46.3 319,330 24.4
Other net assets
Cash and cash equivalents((4)) 82,818 6.6 485,223 37.0
Charitable donations (4,634) (0.4) (4,250) (0.3)
Other assets and liabilities (7,713) (0.6) (15,336) (1.2)
Total other net assets 70,471 5.6 465,637 35.5
Total NAV of the Group 1,254,655 100.0 1,309,841 100.0
((1)) As at 31 March 2023 the legal name for this investment was SPL 123
Limited. The entity was renamed Beacon Therapeutics Holdings Limited on 1 June
2023.
((2)) The life science portfolio of £604,619,696 (31 March 2022:
£524,873,761) consists of life science investments totalling £517,377,259
(31 March 2022: £446,888,721), milestone payments on Gyroscope sale of
£54,515,861 (31 March 2022: £49,801,548) held by Syncona Holdings Limited
and CRT Pioneer Fund of £32,726,576 (31 March 2022: £28,183,492) held by
Syncona Investments LP Incorporated.
((3)) Capital pool investments of £579,563,640 (31 March 2022: £319,330,598)
are held by Syncona Investments LP Incorporated.
((4)) Cash amounting to £11,402 (31 March 2022: £275,902) is held by Syncona
Limited. The remaining £82,806,203 (31 March 2022: £484,947,557) is held by
its subsidiaries other than portfolio companies ("Syncona Group Companies").
Cash held by Syncona Group Companies other than Syncona GP Limited is not
shown in Syncona Limited's Consolidated Statement of Financial Position since
it is included within financial assets at fair value through profit or loss.
Assets held by the Group are held primarily through Syncona Holdings Limited
and Syncona Investments LP Incorporated. See note 1 for a description of these
entities.
The totals in the above table may differ slightly to the audited financial
statements due to rounding differences.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2023
2023 2022
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment income
Other income 6 27,495 - 27,495 25,391 - 25,391
Total investment income 27,495 - 27,495 25,391 - 25,391
Net losses on financial assets at fair value through profit or loss 7 - (67,286) (67,286) - (6,698) (6,698)
Total losses - (67,286) (67,286) - (6,698) (6,698)
Expenses
Charitable donations 8 4,634 - 4,634 4,250 - 4,250
General expenses 9 11,593 - 11,593 5,605 - 5,605
Total expenses 16,227 - 16,227 9,855 - 9,855
(Loss)/profit for the year 11,268 (67,286) (56,018) 15,536 (6,698) 8,838
(Loss)/profit after tax 11,268 (67,286) (56,018) 15,536 (6,698) 8,838
Earnings/(loss) per Ordinary Share 14 1.69p (10.07)p (8.38)p 2.34p (1.01)p 1.33p
Earnings/(loss) per Diluted Share 14 1.69p (10.07)p (8.38)p 2.31p (1.00)p 1.31p
The total columns of this statement represent the Group's Consolidated
Statement of Comprehensive Income, prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European Union.
The profit/(loss) for the year is equivalent to the "total comprehensive
income" as defined by International Accounting Standards ("IAS") 1
"Presentation of Financial Statements". There is no other comprehensive income
as defined by IFRS.
All the items in the above statement are derived from continuing operations.
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 March 2023
Notes 2023 2022
£'000 £'000
ASSETS
Non-current assets
Financial assets at fair value through profit or loss 10 1,258,258 1,323,232
Current assets
Bank and cash deposits 11 276
Trade and other receivables 11 10,143 9,878
Total assets 1,268,412 1,333,386
LIABILITIES AND EQUITY
Non-current liabilities
Share based payments 12 - 8,459
Current liabilities
Share based payments 12 7,296 9,388
Payables 13 6,461 5,698
Total liabilities 13,757 23,545
EQUITY
Share capital 14 767,999 767,999
Capital reserves 14 463,163 530,449
Revenue reserves 23,493 11,393
Total equity 1,254,655 1,309,841
Total liabilities and equity 1,268,412 1,333,386
Total net assets attributable to holders of Ordinary Shares 1,254,655 1,309,841
Number of Ordinary Shares in issue 14 669,329,324 666,733,588
Net assets attributable to holders of Ordinary Shares 14 £1.87 £1.96
(per share)
Diluted NAV (per share) 14 £1.86 £1.94
The audited Consolidated Financial Statements were approved on 14 June 2023
and signed on behalf of the Board of Directors by:
Melanie Gee
Rob
Hutchinson
Chair
Non-Executive
Director
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF
ORDINARY SHARES
For the year ended 31 March 2023
Share Capital Revenue Total
capital reserves reserves
£'000 £'000 £'000 £'000
As at 31 March 2021 767,999 537,147 (4,857) 1,300,289
Total comprehensive income for the year - (6,698) 15,536 8,838
Transactions with shareholders:
Share based payments - - 714 714
As at 31 March 2022 767,999 530,449 11,393 1,309,841
Total comprehensive income for the year - (67,286) 11,268 (56,018)
Transactions with shareholders:
Share based payments - - 832 832
As at 31 March 2023 767,999 463,163 23,493 1,254,655
The accompanying notes are an integral part of the financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2023
Notes 2023 2022
£'000 £'000
Cash flows from operating activities
(Loss)/profit for the year (56,018) 8,838
Adjusted for:
Losses on financial assets at fair value through profit or loss 7 67,286 6,698
Non-cash movement in share based provision (12,031) (15,764)
Operating cash flows before movements in working capital (763) (228)
(Increase)/decrease in other receivables (265) 568
Increase/(decrease) in other payables 763 (78)
Net cash (used in)/generated from operating activities (265) 262
Net (decrease)/increase in cash and cash equivalents (265) 262
Cash and cash equivalents at beginning of the year 276 14
Cash and cash equivalents at end of the year 11 276
Cash held by the Company and Syncona Group Companies is disclosed in the Group
Portfolio Statement.
The accompanying notes are an integral part of the financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 31 March 2023
1. GENERAL INFORMATION
Syncona Limited (the "Company") is incorporated in Guernsey as a registered
closed-ended investment company. The Company's Ordinary Shares were listed on
the premium segment of the London Stock Exchange on 26 October 2012 when it
commenced its business.
The Company makes its life science investments through Syncona Holdings
Limited (the "Holding Company"), a subsidiary of the Company. The Company
maintains its capital pool through Syncona Investments LP Incorporated (the
"Partnership"), in which the Company is the sole limited partner. The general
partner of the Partnership is Syncona GP Limited (the "General Partner"), a
wholly-owned subsidiary of the Company. Syncona Limited and Syncona GP Limited
are collectively referred to as the "Group".
Syncona Investment Management Limited ("SIML"), a subsidiary, was appointed as
the Company's Alternative Investment Fund Manager ("Investment Manager").
The investment objective and policy is set out in the Directors' Report.
2. ACCOUNTING POLICIES
The Group's investments in life science companies, other investments within
the life science portfolio and capital pool investments are held through the
Holding Company and the Partnership, which are measured at fair value through
profit or loss in accordance with the requirement of IFRS 10 "Consolidated
Financial Statements".
Statement of compliance
The Consolidated Financial Statements which give a true and fair view are
prepared in accordance with IFRS as adopted by the European Union and are in
compliance with The Companies (Guernsey) Law, 2008. The Consolidated Financial
Statements were approved by the Board and authorised for issue on 14 June
2023.
Information reported to the Board (the Chief Operating Decision Maker
("CODM")) for the purpose of allocating resources and monitoring performance
of the Group's overall strategy to found, build and fund companies in
innovative areas of healthcare, consists of financial information reported at
the Group level. The capital pool is fundamental to the delivery of the
Group's strategy and performance is reviewed by the CODM only to the extent
this enables the allocation of those resources to support the Group's
investment in life science companies. There are no reconciling items between
the results contained within this information and amounts reported in the
financial statements. IFRS requires operating segments to be identified on the
basis of the internal financial reports that are provided to the CODM, and as
such the Directors present the results of the Group as a single operating
segment.
Basis of preparation
The Consolidated Financial Statements have been prepared under the historical
cost basis, except for investments and derivatives held at fair value through
profit or loss, which have been measured at fair value.
The financial information set out in this announcement does not constitute the
Group's statutory accounts for the years ended 31 March 2023 and 31 March 2022
but is derived from those accounts. The auditors have reported on those
accounts and provided an unqualified opinion, including key audit matters
within their audit report. It did not draw attention to any matters by way of
emphasis without qualifying their report and did not contain statements under
The Companies (Guernsey) Law, 2008. A copy is available upon written request
from the Company's registered office. The auditors' reports do not necessarily
report on all of the information contained in these financial results.
Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditors' engagement they should obtain a
copy of the auditors' reports together with the accompanying financial
information from the issuer's registered office.
Functional currency
The Group's functional currency is Sterling ("£" or "GBP"). £ is the
currency in which the Group measures its performance and reports its results.
Ordinary Shares are denominated in £ and any dividends declared are paid in
£. The Directors believe that £ best represents the functional currency,
although the Group has significant exposure to other currencies as described
in note 18.
Going concern
The financial statements are prepared on a going concern basis. The net assets
held by the Group and within investment entities controlled by the Group
currently consist of securities and cash amounting to £1,254.7 million (31
March 2022: £1,309.8 million) of which £629.4 million (31 March 2022:
£764.7 million) are readily realisable within three months in normal market
conditions, and liabilities including uncalled commitments to underlying
investments and funds amounting to £89.2 million (31 March 2022: £88.5
million).
Given the Group's capital pool of £650.1 million (31 March 2022: £784.9
million) the Directors consider that the Group has adequate financial
resources to continue its operations, including existing commitments to its
investments and planned additional capital expenditure for 12 months following
the approval of the financial statements. The Directors also continue to
monitor the potential future impact of the war in Ukraine and the ever
changing macro environment, including inflationary pressures, on the Group.
Hence, the Directors believe that it is appropriate to continue to adopt the
going concern basis in preparing the Consolidated Financial Statements.
Basis of consolidation
The Group's Consolidated Financial Statements consist of the financial records
of the Company and the General Partner.
The results of the General Partner during the year are consolidated in the
Consolidated Statement of Comprehensive Income from the effective date of
incorporation and is consolidated in full. The financial statements of the
General Partner are prepared in accordance with United Kingdom ("UK")
Accounting Standards under Financial Reporting Standard 101 "Reduced
Disclosure Framework". Where necessary, adjustments are made to the financial
statements of the General Partner to bring the accounting policies used in
line with those used by the Group. During the years ended 31 March 2023 and 31
March 2022, no such adjustments have been made. All intra-group transactions,
balances and expenses are eliminated on consolidation.
Entities that meet the definition of an investment entity under IFRS 10 are
held at fair value through profit or loss in accordance with IFRS 9 "Financial
Instruments". The Company, the Partnership and the Holding Company meet the
definition of investment entities. The General Partner does not meet the
definition of an investment entity due to providing investment management
related services to the Group, and is therefore consolidated.
New standards adopted by the Group
There are no standards, amendments to standards or interpretations that are
effective for the annual period ending on 31 March 2023 that have a material
effect on the Group's Consolidated Financial Statements.
Standards, amendments and interpretations not yet effective
There are a number of other standards, amendments and interpretation that are
not yet effective and are not relevant to the Group as listed below. These are
not discussed in detail as no material impact to the Group's Consolidated
Financial Statements is expected.
- Amendments to IFRS 17, "Insurance Contracts";
- Amendments to IFRS 10 and IAS 28: Sale or contribution of assets between an
investor and its associate or joint venture;
- Amendments to IAS 1: Classification of Liabilities as Current or Non-current;
- Amendments to IAS 1: Non-current Liabilities with Covenants;
- Amendments to IAS 8: Accounting Policies, Changes in Accounting Estimates and
Errors;
- Amendments to IAS 12: Income Taxes;
- Amendments to IFRS 16: Lease Liability in a Sale and Leaseback
Financial instruments
Financial assets and derivatives are recognised in the Group's Consolidated
Statement of Financial Position when the Group becomes a party to the
contractual provisions of the instrument. On initial recognition, financial
assets are recognised at fair value less transaction costs which are
recognised in the statement of comprehensive income.
On subsequent measurement, a financial asset is classified as measured at
amortised cost, fair value through other comprehensive income, or fair value
through profit or loss.
Financial assets measured at amortised cost
Financial assets are measured at amortised cost if held within a business
model whose objective is to hold financial assets in order to collect
contractual cash flows and its contractual terms give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding. The Group includes in this category short-term
non-financing receivables including trade and other receivables.
As at 31 March 2023 and 31 March 2022, there are no financial assets measured
at fair value through other comprehensive income.
Financial liabilities measured at amortised cost
This category includes all financial liabilities, other than those measured at
fair value through profit or loss. The Group includes in this category
short-term payables.
Financial assets at fair value through profit or loss
The Group's investments in life science companies and capital pool investments
are held through the Holding Company and the Partnership, respectively, which
are measured at fair value through profit or loss in accordance with the
requirement of IFRS 10. The net asset value ("NAV") of the Holding Company and
the Partnership represent the Group's assessment of the fair value of its
directly held assets (see note 10) and have been determined on the basis of
the policies adopted for underlying investments described below.
Fair value - investments in subsidiaries
The Group classified its investments in subsidiaries as investments at fair
value through profit or loss in accordance with the requirements under IFRS
10.
Fair value - life science portfolio - life science investments
The Group's investments in life science companies are, in the case of quoted
companies, valued based on bid prices in an active market as at the reporting
date.
In the case of the Group's investments in unlisted companies, the fair value
is determined in accordance with the International Private Equity and Venture
Capital ("IPEV") valuation guidelines. These may include the use of recent
arm's length transactions, Discounted Cash Flow ("DCF") analysis and earnings
multiples as valuation techniques. Wherever possible, the Group uses valuation
techniques which make maximum use of market-based inputs.
The following considerations are used when calculating the fair value of
unlisted life science companies:
- Cost at the transaction date is the primary input when determining fair value.
Similarly, where there has been a recent investment in the unlisted company by
third parties, the Price of Recent Investment ("PRI") is the primary input
when determining fair value, although further judgement may be required to the
extent that the instrument in which the recent investment was made is
different from the instrument held by the Group.
- The length of period for which it remains appropriate to consider cost or the
PRI as the primary input when determining fair value depends on the
achievement of target milestones of the investment at the time of acquisition.
An analysis of such milestones, which can be value maintaining or value
enhancing, is undertaken at each valuation point and considers changes to the
external environment, the suitability of the milestones and the current facts
and circumstances. Where this calibration process shows there is objective
evidence that an investment has been impaired or increased in value since the
investment was made, such as observable data suggesting a change of the
financial, technical, or commercial performance of the underlying investment,
the Group carries out an enhanced assessment which may use one or more of the
alternative methodologies set out in the IPEV Valuation Guidelines.
- DCF involves estimating the fair value of an investment by calculating the
present value of expected future cash flows, based on the most recent
forecasts in respect of the underlying business. Given the significant
uncertainties involved with producing reliable cash flow forecasts for seed,
start-up and early-stage companies, the DCF methodology will more commonly be
used in the event that a life science company is in the final stages of
clinical testing prior to regulatory approval or has filed for regulatory
approval. No investments were valued on a DCF basis as at 31 March 2023 and 31
March 2022.
Fair value - life science portfolio - milestone payments
Milestone payments which form part of the total consideration resulting from a
business combination and are dependent on the meeting of future conditions are
initially recognised at fair value through profit or loss. Subsequent
measurement of milestone payments is at fair value through profit or loss.
When estimating the fair value of the milestone payments the present value of
expected future cash flows is calculated based on the known future cash flows
and an estimate of the likelihood of meeting the stated conditions using
publicly available information where possible.
Fair value - life science portfolio - deferred consideration
Financial assets resulting from an investment purchase entitling the Group to
future income that has a price which is dependent on a non-financial variable
not specific to a party in the contract ("deferred consideration") is measured
on initial recognition at fair value. Subsequent measurement of the financial
asset is at fair value through profit or loss. When estimating the fair value
of the financial asset the present value of expected future cash flows is
calculated using an income-based valuation approach and an estimate of the
likelihood of meeting the stated conditions using publicly available
information where possible.
Fair value - capital pool investments in underlying funds
The Group's capital pool investments in underlying funds are ordinarily valued
using the values (whether final or estimated) as advised to the Investment
Manager by the managers, general partners or administrators of the relevant
underlying fund. The valuation date of such investments may not always be
coterminous with the valuation dates of the Company and in such cases the
valuation of the investments as at the last valuation date is used. The NAV
reported by the administrator may be unaudited and, in some cases, the
notified asset values are based upon estimates. The Group or the Investment
Manager may depart from this policy where it is considered such valuation is
inappropriate and may, at its discretion, permit any other valuation method to
be used if it considers that such valuation method better reflects value
generally or in particular markets or market conditions and is in accordance
with good accounting practice.
Forward currency contracts
Forward foreign currency contracts are derivative contracts and as such are
recognised at fair value on the date on which they are entered into and
subsequently remeasured at their fair value. Fair value is determined by
forward rates in active currency markets. Whilst the Group currently holds no
forward currency contracts, forward currency contracts are held by the
Partnership and Syncona Portfolio Limited from time to time for hedging
purposes only.
Other financial liabilities
Other financial liabilities include all other financial liabilities other than
financial liabilities at fair value through profit or loss. The Group's other
financial liabilities include payables and share based payments. The carrying
amounts shown in the Consolidated Statement of Financial Position approximate
the fair values due to the short-term nature of these other financial
liabilities.
Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the
Consolidated Statement of Financial Position if, and only if, there is a
currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise assets and settle the
liabilities simultaneously.
Derecognition of financial instruments
A financial asset is derecognised when: (a) the rights to receive cash flows
from the financial asset have expired, (b) the Group retains the right to
receive cash flows from the financial asset, but has assumed an obligation to
pay them in full without material delay to a third party under a "pass through
arrangement"; or (c) the Group has transferred substantially all the risks and
rewards of the financial asset, or has neither transferred nor retained
substantially all the risks and rewards of the financial asset, but has
transferred control of the financial asset.
A financial liability is derecognised when the contractual obligation under
the liability is discharged, cancelled or expired.
Impairment of financial assets
IFRS 9 requires the Group to record expected credit losses ("ECLs") on all
financial assets held at amortised cost, all loans and trade receivables,
either on a 12-month or lifetime basis. The Group only holds receivables with
no financing component and which have maturities of less than 12 months at
amortised cost and therefore has applied the simplified approach to recognise
lifetime ECLs permitted by IFRS 9.
Commitments
Through its investment in the Holding Company and the Partnership, the Group
has outstanding commitments to investments that are not recognised in the
Consolidated Financial Statements. Refer to note 20 for further details.
Share based payments
Certain employees of SIML participate in equity incentive arrangements under
which they receive awards of Management Equity Shares ("MES") in the Holding
Company above a base line value set out at the date of award. The MES are not
entitled to dividends but any dividends or capital value realised by the Group
in relation to the Holding Company are taken into account in determining the
value of the MES. MES vest if an individual remains in employment for the
applicable vesting period. 25% of an individual MES become realisable each
year, they have the right to sell these realisable shares to the Company and
the Company is obligated to purchase said shares. The price is determined
using a formula stipulated in the Articles of Association ("Articles") of the
Holding Company.
The terms of the equity incentive arrangements provide that half of the
proceeds (net of expected taxes) are settled in Company shares which must be
held for at least 12 months, with the balance paid in cash. Consequently, the
arrangements are deemed to be partly an equity-settled share based payment
scheme and partly a cash-settled share based payment scheme under IFRS 2
"Share Based Payments" in the Consolidated Financial Statements of the Group.
The fair value of the MES at the time of the initial award is determined in
accordance with IFRS 2 and taking into account the particular rights attached
to the MES as described in the Articles. The fair value is measured using a
probability-weighted expected returns methodology, which is an appropriate
future-oriented approach when considering the fair value of shares that have
no intrinsic value at the time of issue. The approach replicates that of a
binomial option pricing model. The key assumptions used within the model are:
NAV progression; discount rates ranging from 12% to 27% (31 March 2022: 12% to
30%); and probabilities of success that result in an average cumulative
probability of success across the life science portfolio of 26% (31 March
2022: 32%). In this case, the expected future payout to the MES was made by
reference to the expected evolution of the Holding Company's value, including
expected dividends and other realisations which is then compared to the base
line value. This is then discounted into present value terms adopting an
appropriate discount rate. The "capital asset pricing methodology" was used
when considering an appropriate discount rate to apply to the payout expected
to accrue to the MES on realisation.
When MES are awarded, a share based payment charge is recognised in the
Consolidated Statement of Comprehensive Income of the employing company, SIML,
equal to the fair value at that date, spread over the vesting period. In its
own financial statements, the Company records a capital contribution to the
Holding Company with an amount credited to the share based payments reserve in
respect of the equity-settled proportion and to liabilities in respect of the
cash-settled proportion (see below).
When the Company issues new shares to acquire the MES, the fair value of the
MES is credited to share capital.
To the extent that the Company expects to pay cash to acquire the MES, the
fair value of the MES is recognised as a liability in the Company's
Consolidated Statement of Financial Position. The fair value is established at
each statement of financial position date and recognised in the Consolidated
Statement of Comprehensive Income throughout the vesting period, based on the
proportion vested at each Statement of Financial Position date and adjusted to
reflect subsequent movements in fair value up to the date of acquisition of
the MES by the Company.
The fair value paid to acquire MES (whether in shares in the Company or cash)
will result in an increase in the carrying value of the Holding Company by the
Company.
The movement in the share based payment provision of the Group is a non-cash
fair value movement to the reported liability, rather than a working capital
balance movement. This movement is recognised directly in the Consolidated
Statement of Comprehensive Income.
Income
All income is accounted for in accordance with IFRS 15 "Revenue from Contracts
with Customers" and is recognised in the Consolidated Statement of
Comprehensive Income when the right to receive is established. Income is
further discussed in note 6.
Expenses
Expenses are accounted for on accruals basis. Expenses incurred on the
acquisition of investments at fair value through profit or loss are presented
within the Capital column of the Consolidated Statement of Comprehensive
Income. All other expenses are presented within the Revenue column of the
Consolidated Statement of Comprehensive Income. Charitable donations are
accounted for on accruals basis and are recognised in the Consolidated
Statement of Comprehensive Income. Expenses directly attributable to the
issuance of shares are charged against capital and recognised in the
Consolidated Statement of Changes in Net Assets Attributable to Holders of
Ordinary Shares.
Cash and cash equivalents
Cash comprises of cash at bank. Cash equivalents are short-term, highly liquid
investments that are readily convertible to known amounts of cash and which
are subject to insignificant changes in value.
Translation of foreign currency
Items included in the Group's Consolidated Financial Statements are measured
in £, which is the currency of the primary economic environment where the
Group operates. The Group's assets are primarily denominated in £.
Transactions in currencies other than £ are translated at the rate of
exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the date of the Consolidated
Statement of Financial Position are retranslated into £ at the rate of
exchange ruling at that date.
Foreign exchange differences arising on retranslation are recognised in the
Consolidated Statement of Comprehensive Income. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign
currency are translated using the rate of exchange at the date of the
transaction.
Non-monetary assets and liabilities denominated in foreign currencies that are
stated at fair value are retranslated into £ at foreign exchange rates ruling
at the date the fair value was determined.
Presentation of the Consolidated Statement of Comprehensive Income
In order to better reflect the activities of an investment company,
supplementary information which analyses the Consolidated Statement of
Comprehensive Income between items of a revenue and capital nature has been
presented alongside the Consolidated Statement of Comprehensive Income.
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the Group's Consolidated Financial Statements requires
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses at the reporting date. However, uncertainties about these
assumptions and estimates, in particular relating to underlying investments of
private equity investments and the life science investments could result in
outcomes that require a material adjustment to the carrying amount of the
assets or liabilities affected in future periods.
Critical accounting judgements
In the process of applying the Group's accounting policies, the following
judgements have been made, which have the most significant effect on the
amounts recognised in the Consolidated Financial Statements:
Fair value - life science portfolio
In the case of the Group's investments in unlisted companies, the fair value
is determined in accordance with the IPEV Valuation Guidelines. These include
the use of recent arm's length transactions, DCF analysis and earnings
multiples. Wherever possible, the Group uses valuation techniques which make
maximum use of market-based inputs.
In most cases, where the Group is the sole institutional investor and/or until
such time as substantial clinical data has been generated, the primary
valuation input is Cost or PRI, subject to adequate consideration being given
to current facts and circumstances. This includes whether there is objective
evidence that suggests the investment has been impaired or increased in value
due to observable data, technical, or commercial performance.
Where considered appropriate, once substantial clinical data has been
generated the Group will use input from independent valuation advisors to
assist in the determination of fair value.
The key judgement relates to determining whether a Cost or PRI (Market) based
approach is the most appropriate for determining fair value of the Group's
investments in unlisted companies. In making this judgement, the Group
highlights that the majority of its investments are early-stage businesses,
typically with products in the discovery stage of drug development and
pre-revenue generation. As a result, it considers that the determination of
fair value should be based on what a market participant buyer would pay to
acquire or develop a substitute asset with comparable scientific or commercial
progression, adjusted for obsolescence (i.e. its current replacement cost).
This technique is applied until such time that the life science investment is
at a stage in its life cycle where cash flow forecasts are more predictable,
thus using an income-based approach provides a more reliable estimate of fair
value.
However there are also other methodologies that can be used to determine the
fair value of investments in private companies including the use of the DCF
methodology. It is possible that the use of an alternative valuation
methodology would result in a different fair value than that recorded by the
Group.
When assessing the judgement, the Group's determination of the fair values of
certain investments took into consideration multiple sources including
Management and publicly available information and publications, as well as
input from an independent review by L.E.K. Consulting LLP ("L.E.K.") in
respect of Syncona's valuation of the following investments: Anaveon AG; Omass
Therapeutics Limited; Beacon Therapeutics Holdings Limited (formally known as
SPL 123 Limited); Quell Therapeutics Limited; and SwanBio Therapeutics
Limited.
The review was limited to certain specific limited procedures which we
identified and requested L.E.K. to perform within an agreed limited scope, and
it was subject to assumptions which are forward looking in nature and
subjective judgements. Upon completion of the review within the parameters of
the agreed procedures L.E.K. estimated an independent range of fair values of
those investments. The limited procedures carried out by L.E.K. did not
involve an audit, review, compilation or any other form of verification,
examination or attestation under generally accepted auditing standards and
were based on the sources agreed in the limited scope only. Syncona Limited is
responsible for determining the fair value of the investments, and the review
performed by L.E.K. to assist Syncona is only one element of the enquiries and
procedures in the process in making a determination of the fair value of those
investments and for which the Directors of Syncona Limited is ultimately
responsible.
Contingent Consideration
During the year ended 31 March 2022, the investment in Gyroscope was sold to
an external third party for consideration comprising of upfront cash and cash
to be paid in the future subject to certain milestones being met ("milestone
payments"). Gyroscope was previously held as an investment at fair value
through profit or loss by Syncona Portfolio Limited due to Syncona Portfolio
Limited meeting the conditions of being an investment entity and holding its
subsidiaries at fair value through profit or loss.
There is currently no prescriptive accounting standard for the seller where
milestone payments which are contingent on a future event is agreed in a
contract for the disposal of a subsidiary. Guidance available within IFRS 3
"Business Combinations" to the acquiring entity was therefore applied to the
recognition and measurement of the milestone payments. IFRS 3 requires the
acquirer to recognise any milestone payments dependent on uncertain events to
be recognised as a financial liability at fair value through profit or loss in
their financial statements. In accordance with available guidance and industry
practice it was concluded that the milestone payments receivable following the
sale of a subsidiary in a business combination are required to be recognised
as a financial asset measured at fair value through profit or loss in the
financial statements of Syncona Portfolio Limited. This forms part of the fair
value of the Groups investment in the Holding Company.
Key sources of estimation uncertainty
The Group's investments consist of its investments in the Holding Company and
the Partnership, both of which are classified at fair value through profit or
loss and are valued accordingly, as disclosed in note 2.
The key sources of estimation uncertainty are the valuation of the Holding
Company's investments in privately held life science companies and milestone
payments on sale of a subsidiary, the Partnership's private equity investments
and investment in the CRT Pioneer Fund, and the valuation of the share based
payment liability.
The unquoted investments within the life science portfolio are very illiquid.
Many of the companies are early stage investments and privately owned.
Accordingly, a market value can be difficult to determine. The primary inputs
used by the Company to determine the fair value of investments in privately
held life science companies are the cost of the capital invested and PRI,
adjusted to reflect the achievement or otherwise of milestones or other
factors. The accounting policy for all investments is described in note 2 and
the fair value of all investments is described in note 19.
In determining a suitable range to sensitise the fair value of the unlisted
life science portfolio, Management note the achievement or not of value
enhancing milestones as being a key source of estimation uncertainty. Such
activities and resulting data emanating from the life science companies can be
the key trigger for fair value changes and typically involve financing events
which crystallise value at those points in time. The range of 10% (2022: 18%)
identified by Management reflects their estimate of the range of reasonably
possible valuations over the next financial year, taking into account the
position of the portfolio as a whole. Key technical milestones considered by
Management and that typically trigger value enhancement (or deterioration if
not achieved) include the generation of substantial clinical data.
The Company has assessed the current impact of the war in Ukraine on the
private life science companies and does not consider that any revaluations are
required as a result, however the final impact of the war is not yet certain
and may have effects on the portfolio companies that have not been
anticipated.
As at the year end, none (31 March 2022: none) of the Partnership's underlying
investments have imposed restrictions on redemptions. However, underlying
managers often have the right to impose such restrictions. The Directors
believe it remains appropriate to estimate their fair values based on NAV as
reported by the administrators of the relevant investments.
Where investments held by the Partnership can be subscribed to, the Directors
believe that such NAV represents fair value because subscriptions and
redemptions in the underlying investments occur at these prices at the
Consolidated Statement of Financial Position date, where permitted.
4. INVESTMENT IN SUBSIDIARIES AND ASSOCIATES
The Company meets the definition of an investment entity in accordance with
IFRS 10. Therefore, with the exception of the General Partner, the Company
does not consolidate its subsidiaries and indirect associates, but rather
recognises them as financial assets at fair value through profit or loss.
Direct interests in subsidiaries
Subsidiary Principal place Principal activity 2023 2022
of business % interest((1)) % interest((1))
Syncona GP Limited Guernsey General Partner 100% 100%
Syncona Holdings Limited Guernsey Portfolio management 100% 100%
Syncona Investments LP Incorporated Guernsey Portfolio management 100% 100%
((1)) Based on undiluted issued share capital and excluding the MES issued by
Syncona Holdings Limited (see note 12).
There are no significant restrictions on the ability of subsidiaries to
transfer funds to the Company.
Indirect interests in subsidiaries and associates
Indirect Subsidiaries Principal place Immediate parent Principal activity 2023
of business % interest((1))
Syncona Discovery Limited UK Syncona Investments LP Inc Portfolio management 100%
Syncona Portfolio Limited Guernsey Syncona Holdings Limited Portfolio management 100%
Syncona IP Holdco Limited UK Syncona Portfolio Limited Portfolio management 100%
Syncona IP Holdco (2) Limited UK Syncona Portfolio Limited Portfolio management 100%
Syncona Investment Management Limited UK Syncona Holdings Limited Portfolio management 100%
SIML Switzerland AG Switzerland SIML Portfolio management 100%
Resolution Therapeutics Limited UK Syncona Portfolio Limited Cell therapy 85%
SwanBio Therapeutics Limited United States Syncona Portfolio Limited Gene therapy 82%
Purespring Therapeutics Limited UK Syncona Portfolio Limited Gene therapy 81%
Forcefield Therapeutics Limited UK Syncona Portfolio Limited Gene therapy 76%
SPL 123 Limited UK Syncona Portfolio Limited Gene therapy 70%
Freeline Therapeutics Holdings plc UK Syncona Portfolio Limited Gene therapy 58%
Mosaic Therapeutics Limited UK Syncona Portfolio Limited Small molecule 51%
Indirect associates Principal place Immediate parent Principal activity 2023
of business % interest((1))
Anaveon AG Switzerland Syncona Portfolio Limited Biologics 46%
Quell Therapeutics Limited UK Syncona Portfolio Limited Cell therapy 44%
Kesmalea Therapeutics Limited UK Syncona Portfolio Limited Small molecule 41%
Omass Therapeutics Limited UK Syncona Portfolio Limited Small molecule 35%
Azeria Therapeutics Limited UK Syncona Portfolio Limited In voluntary liquidation 34%
Achilles Therapeutics plc UK Syncona Portfolio Limited Cell therapy 27%
Indirect Subsidiaries Principal place Immediate parent Principal activity 2022
of business % interest((1))
Syncona Discovery Limited UK Syncona Investments LP Inc Portfolio management 100%
Syncona Portfolio Limited Guernsey Syncona Holdings Limited Portfolio management 100%
Syncona IP Holdco Limited UK Syncona Portfolio Limited Portfolio management 100%
Syncona Investment Management Limited UK Syncona Holdings Limited Portfolio management 100%
SIML Switzerland AG Switzerland SIML Portfolio management 100%
SwanBio Therapeutics Limited United States Syncona Portfolio Limited Gene therapy 76%
Purespring Therapeutics Limited UK Syncona Portfolio Limited Gene therapy 76%
Forcefield Therapeutics Limited UK Syncona Portfolio Limited Gene therapy 76%
Resolution Therapeutic Limited UK Syncona Portfolio Limited Cell therapy 73%
Freeline Therapeutics Holdings plc UK Syncona Portfolio Limited Gene therapy 61%
Omass Therapeutics Limited UK Syncona Portfolio Limited Small molecule 53%
Indirect associates Principal place Immediate parent Principal activity 2022
of business % interest((1))
Quell Therapeutics Limited UK Syncona Portfolio Limited Cell therapy 44%
Anaveon AG Switzerland Syncona Portfolio Limited Biologics 41%
Azeria Therapeutics Limited UK Syncona Portfolio Limited In voluntary liquidation 34%
Achilles Therapeutics plc UK Syncona Portfolio Limited Cell therapy 27%
Autolus Therapeutics plc UK Syncona Portfolio Limited Cell therapy 21%
((1)) Based on undiluted issued share capital and excluding the MES issued by
Syncona Holdings Limited (see note 12).
5. TAXATION
The Company and the General Partner are exempt from taxation in Guernsey under
the provisions of The Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989
and have both paid an annual exemption fee of £1,200 (31 March 2022:
£1,200).
The General Partner is incorporated and a tax resident in Guernsey, its
corporate affairs being managed solely in Guernsey. Having regard to the
non-UK tax residence of the General Partner and the Company, and on the basis
that the Partnership is treated as transparent for UK and Guernsey tax
purposes and that the Partnership's business is an investment business and not
a trade, no UK tax will be payable on either the General Partner's or the
Company's shares of Partnership profit (save to the extent of any UK
withholding tax on certain types of UK income such as interest).
Some of the Group's underlying investments may be liable to tax, although the
tax impact is not expected to be material to the Group, and is included in the
fair value of the Group's investments.
6. INCOME
The Group's income relates to cash transfers from the Partnership which are
used for paying costs and dividends of the Group.
During the year, income received from the Partnership amounted to £27,494,517
(31 March 2022: £25,390,625) of which £4,633,973 (31 March 2022:
£4,249,836) remained receivable as at 31 March 2023. The receivable reflects
the charitable donations of the Group. Refer to note 8.
7. NET (LOSSES)/GAINS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The net (losses)/gains on financial assets at fair value through profit or
loss arise from the Group's holdings in the Holding Company and Partnership.
Note 2023 2022
£'000 £'000
Net (losses)/gains from:
The Holding Company 7.a (62,636) 22,019
The Partnership 7.b (4,650) (28,717)
(67,286) (6,698)
7.a Movements in the Holding Company:
2023 2022
£'000 £'000
Expenses (97) (90)
Movement in unrealised (loss)/gains on life science investments at fair value (62,539) 22,109
through profit or loss
Net (loss)/gains on financial assets at fair value through profit or loss (62,636) 22,019
7.b Movements in the Partnership:
2023 2022
£'000 £'000
Investment income 106 23
Rebates and donations 81 409
Expenses (342) (229)
Realised gains on financial assets at fair value through profit or loss 13,933 13,716
Movement in unrealised gains/(losses) on financial assets at fair value 6,049 (19,185)
through profit or loss
Gains on foreign currency 3,018 1,940
Gains/(losses) on financial assets at fair value through profit or loss 22,845 (3,326)
Distributions (27,495) (25,391)
Net losses on financial assets at fair value through profit or loss (4,650) (28,717)
8. CHARITABLE DONATIONS
For the year ending 31 March 2023, the Group has agreed to make a donation to
charity of 0.35% of the total NAV of the Group calculated on a monthly basis,
0.35% (31 March 2022: 0.2%) to be donated to The Syncona Foundation and 0% (31
March 2022: 0.15%) to The Institute of Cancer Research, and these donations
are made by the General Partner.
During the year, charitable donations expense amounted to £4,633,973 (31
March 2022: £4,249,836) of which £4,633,973 (31 March 2022: £4,249,836)
remained payable as at 31 March 2023. Refer to note 13.
9. GENERAL EXPENSES
2023 2022
£'000 £'000
Share based payments (See note 12) (2,968) (7,304)
Investment management fees (See note 16) 12,121 10,699
Directors' remuneration (See note 16) 499 419
Auditor's remuneration 183 141
Other expenses 1,758 1,650
11,593 5,605
Auditor's remuneration includes audit fees in relation to the Group of
£132,900 (31 March 2022: £105,000). Total audit fees paid by the Group and
the Syncona Group Companies for the year ended 31 March 2023 totalled
£267,800 (31 March 2022: £210,000). Additional fees paid to the auditor were
£44,200 (31 March 2022: £38,000) which relates to work performed at the
interim review of £36,200 (31 March 2022: £30,000) and other non-audit fees
of £8,000 (31 March 2022: £8,000).
Further details of the share based payments can be found in note 12.
10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Note 2023 2022
£'000 £'000
The Holding Company 10.a 919,958 980,282
The Partnership 10.b 338,300 342,950
1,258,258 1,323,232
The Holding Company and the Partnership are the only two investments held
directly by the Group and as such the reconciliation of movement in
investments has been presented separately for each below.
10.a The net assets of the Holding Company
2023 2022
£'000 £'000
Cost of the Holding Company's investment at the start of the year 494,810 494,810
Purchases during the year - -
Cost of the Holding Company's investments at the end of the year 494,810 494,810
Net unrealised gains on investments at the end of the year 429,757 489,984
Fair value of the Holding Company's investments at the end of the year 924,567 984,794
Other net current liabilities (4,609) (4,512)
Financial assets at fair value through profit or loss at the end of the year 919,958 980,282
10.b The net assets of the Partnership
2023 2022
£'000 £'000
Cost of the Partnership's investments at the start of the year 334,834 418,472
Purchases during the year 1,848,806 835,375
Sales during the year (1,589,269) (923,659)
Return of capital (10,551) (9,070)
Net realised gains on disposals during the year 13,933 13,716
Cost of the Partnership's investments at the end of the year 597,753 334,834
Net unrealised gains on investments at the end of the year 22,196 16,147
Fair value of the Partnership's investments at the end of the year 619,949 350,981
Cash and cash equivalents 67,190 475,786
Other net current liabilities (348,839) (483,817)
Financial assets at fair value through profit or loss at the end of the year 338,300 342,950
11. TRADE AND OTHER RECEIVABLES
2023 2022
£'000 £'000
Due from related parties (see note 16) 5,457 5,462
Charitable donation receivable (see note 16) 4,618 4,250
Prepayments 68 166
10,143 9,878
12. SHARE BASED PAYMENTS
Share based payments are associated with awards of MES in the Holding Company,
relevant details of which are set out in note 2.
The total cost recognised within general expenses in the Consolidated
Statement of Comprehensive Income is shown below:
2023 2022
£'000 £'000
Charge related to revaluation of the liability for cash settled share awards (2,968) (7,304)
Total (2,968) (7,304)
Other movements in the provision relating to realisations and granting of
awards totalled £7,583,660 (31 March 2022: £7,189,892). Amounts recognised
in the Consolidated Statement of Financial Position, representing the carrying
amount of liabilities arising from share based payments transactions are shown
below:
2023 2022
£'000 £'000
Share based payments - current 7,296 9,388
Share based payments - non-current - 8,459
Total 7,296 17,847
When a participant elects to realise vested MES by sale of the MES to the
Company, half of the proceeds (net of anticipated taxes) will be settled in
shares of the Company, with the balance settled in cash.
The fair value of the MES is established using an externally developed model
as set out in note 2. Vesting is subject only to the condition that employees
must remain in employment at the vesting date. Each MES is entitled to share
equally in value attributable to the Holding Company above the applicable base
line value at the date of award, provided that the applicable hurdle value of
15% or 30% growth in the value of the Holding Company above the base line
value at the date of award has been achieved.
The fair value of awards made in the year ended 31 March 2023 was £2,529,130
(31 March 2022: £2,883,500). This represents 9,367,155 new MES issued (31
March 2022: 8,238,571). An award was made on 15 July 2022 at 27p per MES.
The number of MES outstanding are shown below:
2023 2022
Outstanding at the start of the year 42,282,122 43,873,239
Issued 9,367,155 8,238,571
Realised (7,762,846) (7,253,638)
Lapsed (15,203) (2,576,050)
Outstanding at the end of the year 43,871,228 42,282,122
Weighted average remaining contractual life of outstanding MES, years 1.29 1.20
Vested MES as at the year end 29,523,421 31,293,486
Realisable MES as at the year end 12,010,048 11,478,050
13. PAYABLES
2023 2022
£'000 £'000
Charitable donations payable 4,634 4,250
Management fees payable 1,374 1,048
Other payables 453 400
6,461 5,698
14. SHARE CAPITAL
A. Authorised Share Capital
The Company is authorised to issue an unlimited number of shares, which may
have a par value or no par value. The Company is a closed-ended investment
company with an unlimited life.
As the Company's shares have no par value, the share price consists solely of
share premium and the amounts received for issued shares are recorded in share
capital in accordance with The Companies (Guernsey) Law, 2008.
2023 2022
£'000 £'000
Ordinary Share Capital
Balance at the start of the year 767,999 767,999
Balance at the end of the year 767,999 767,999
2023 2022
Shares Shares
Ordinary Share Capital
Balance at the start of the year 666,733,588 664,580,417
Share based payment shares issued during the year 2,595,736 2,153,171
Balance at the end of the year 669,329,324 666,733,588
The Company has issued one Deferred Share to The Syncona Foundation for £1.
B. Capital and Revenue Reserves
Gains and losses recorded on the realisation of investments, realised exchange
differences, unrealised gains and losses recorded on the revaluation of
investments held as at the year end and unrealised exchange differences of a
capital nature are transferred to capital reserves. Income and expenses of a
revenue nature are transferred to revenue reserves.
C. (Loss)/earnings per share
The calculations for the (loss)/earnings per share attributable to the
Ordinary Shares of the Company are based on the following data:
2023 2022
(Loss)/earnings for the purposes of earnings per share £(56,018,000) £8,838,000
Basic weighted average number of shares 668,575,494 666,108,284
Basic revenue earnings per share 1.69p 2.34p
Basic capital (loss)/earnings per share (10.07)p (1.01)p
Basic earnings per share (8.38)p 1.33p
Diluted weighted average number of shares 668,575,494 672,988,341
Diluted revenue earnings per shares 1.69p 2.3p
Diluted capital (loss)/earnings per share (10.07)p (1.00)p
Diluted earnings per share (8.38)p 1.31p
Potential ordinary shares shall be treated as dilutive when, and only when,
their conversion to ordinary shares would decrease earnings per share or
increase loss per share from continuing operations. Therefore at 31 March 2023
both basic and diluted EPS are consistent.
2023 2022
Issued share capital at the start of the year 666,733,588 664,580,417
Weighted effect of share issues
Share based payments 1,841,906 1,527,867
Potential share based payment share issues 3,487,581 6,880,057
Diluted weighted average number of shares 672,063,075 672,988,341
D. NAV per share
2023 2022
Net assets for the purposes of NAV per share £1,254,654,716 £1,309,840,518
Ordinary Shares in issue 669,329,324 666,733,588
NAV per share 187.40p 196.50p
Diluted number of shares 672,816,905 673,613,645
Diluted NAV per share 186.50p 194.40p
As at 31 March 2023, if all MES were realised, the number of shares issued in
the Company as a result would increase by 3,487,581 (31 March 2022:
6,880,057). The undiluted per share value of net assets attributable to
holders of Ordinary Shares would fall from £1.87 to £1.86 (31 March 2022:
£1.97 to £1.94) if these shares were issued.
15. DISTRIBUTION TO SHAREHOLDERS
The Company may pay a dividend at the discretion of the Directors.
During the year ended 31 March 2023, the Company did not declare or pay a
dividend (31 March 2022: £Nil was paid in relation to the year ended 31 March
2021). The Directors believe that it is not appropriate for the Company to pay
a dividend.
The Company is not declaring a 2023 dividend.
16. RELATED PARTY TRANSACTIONS
The Group has various related parties; life sciences investments held by the
Holding Company, the Investment Manager, the Company's Directors and The
Syncona Foundation.
Life science investments
The Group makes equity investments in some life science investments where it
retains control. The Group has taken advantage of the investment entity
exception as permitted by IFRS 10 and has not consolidated these investments,
but does consider them to be related parties.
During the year, the total amount invested in life science investments which
the Group controls was £127,143,441 (31 March 2022: £62,765,311).
The Group makes other equity investments where it does not have control but
may have significant influence through its ability to participate in the
financial and operating policies of these companies, therefore the Group
considers them to be related parties. These amounts are unsecured, interest
free, and repayable on demand.
During the year, the total amount invested in life science investments in
which the Group has significant influence was £25,404,894 (31 March 2022:
£46,592,768).
Commitments of milestone payments to the life science investments are
disclosed in note 20.
During the year, SIML charged the life science investments a total of
£215,094 in relation to Director's fees (31 March 2022: £222,406).
Investment Manager
SIML, an indirectly held subsidiary of the Company, is the Investment Manager
of the Group.
For the year ended 31 March 2023, SIML was entitled to receive reimbursement
of reasonably incurred expenses as it relates to its investment management
activities. In the year-ended 31 March 2022 this was capped at 1.05% per annum
of the Company's NAV. This cap was removed during the year effective from
1 April 2022.
2023 2022
£'000 £'000
Amounts paid to SIML 12,121 10,699
Amounts owed to SIML in respect of management fees totalled £1,374,098 as at
31 March 2023 (31 March 2022: £1,047,525).
During the year, SIML received fees from the Group's portfolio companies of
£864,632 (31 March 2022: £615,342).
Company Directors
As at the year end, the Company had seven Directors, all of whom served in a
non-executive capacity. Rob Hutchinson also serves as a Director of the
General Partner.
Directors' remuneration for the years ended 31 March 2023 and 31 March 2022,
excluding expenses incurred, and outstanding Directors' remuneration as at the
end of the year, are set out below.
2023 2022
£'000 £'000
Directors' remuneration for the year 499 419
Payable at end of the year - -
Shares held by the Directors can be found in the Report of the Remuneration
Committee. The directors of Syncona Limited together hold 0.04% (31 March
2022: 0.04%) of the Syncona Limited voting shares.
The Syncona Foundation
Charitable donations are made by the Company to The Syncona Foundation. The
Syncona Foundation was incorporated in England and Wales on 17 May 2012 as a
private company limited by guarantee, with exclusively charitable purposes and
holds the Deferred Share in the Company. The amount donated to The Syncona
Foundation during the year ended 31 March 2023 was £2,428,478 (31 March
2022: £2,691,553).
Other related parties
As at 31 March 2023, the Company has a receivable from the Partnership,
Holding Company and Syncona Portfolio Limited amounting to £15,438 (31 March
2022: £15,409), £5,426,437 (31 March 2022: £5,431,409) and £15,438 (31
March 2022: £15,409), respectively.
17. FINANCIAL INSTRUMENTS
In accordance with its investment objectives and policies, the Group holds
financial instruments which at any one time may comprise the following:
- securities and investments held in accordance with the investment objectives
and policies;
- cash and short-term receivables and payables arising directly from operations;
and
- derivative instruments including forward currency contracts.
The financial instruments held by the Group are comprised principally of the
investments in the Holding Company and the Partnership.
Details of the Group's significant accounting policies and methods adopted,
including the criteria for recognition, the basis of measurement and the basis
on which income and expenses are recognised, in respect of its financial
assets and liabilities are disclosed in note 2.
2023 2022
£'000 £'000
Financial assets at fair value through profit or loss
The Holding Company 919,958 980,282
The Partnership 338,300 342,950
Total financial assets at fair value through profit or loss 1,258,258 1,323,232
Financial assets measured at amortised cost
Bank and cash deposits 11 276
Other financial assets 10,143 9,878
Total financial assets measured at amortised cost 10,154 10,154
Financial liabilities at fair value through profit or loss
Provision for share based payments (7,296) (17,847)
Total financial liabilities at fair value through profit or loss (7,296) (17,847)
Financial liabilities measured at amortised cost
Other financial liabilities (6,461) (5,698)
Total financial liabilities measured at amortised cost (6,461) (5,698)
Net financial assets 1,254,655 1,309,841
The financial instruments held by the Group's underlying investments are
comprised principally of life science investments, hedge, equity, credit,
long-term alternative investment funds, short-term UK treasury bills and cash.
The table below analyses the carrying amounts of the financial assets and
liabilities held by the Holding Company by category as defined in IFRS 9 (see
note 2).
2023 2022
£'000 £'000
Financial assets at fair value through profit or loss
Investment in subsidiaries 924,567 984,794
Total financial assets at fair value through profit or loss 924,567 984,794
Financial assets measured at amortised cost((1))
Current assets 847 947
Financial liabilities measured at amortised cost((1))
Current liabilities (5,456) (5,459)
Net financial assets of the Holding Company 919,958 980,282
The table below analyses the carrying amounts of the financial assets and
liabilities held by the Partnership by category as defined in IFRS 9.
2023 2022
£'000 £'000
Financial assets at fair value through profit or loss
Listed investments 445,141 279,473
Unlisted investments 134,422 39,857
Investment in subsidiaries 40,386 31,651
Total financial assets at fair value through profit or loss 619,949 350,981
Financial assets measured at amortised cost((1))
Current assets 67,973 476,586
Financial liabilities measured at amortised cost((1))
Current liabilities (349,622) (484,617)
Net financial assets of the Partnership 338,300 342,950
((1)) Has a fair value which does not materially differ to amortised cost
Capital risk management
The Group's objectives when managing capital include the safeguarding of the
Group's ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital.
The Group does not have externally-imposed capital requirements.
The Group may incur indebtedness for the purpose of financing share
repurchases or redemptions, making investments (including as bridge finance
for investment obligations), satisfying working capital requirements or to
assist in payment of the charitable donation, up to a maximum of 20% of the
NAV at the point of obtaining debt. The Group may utilise gearing for
investment purposes if, at the time of incurrence, it considers it prudent and
desirable to do so in light of prevailing market conditions. There is no
limitation on indebtedness being incurred at the level of the underlying
investments.
18. FINANCIAL RISK MANAGEMENT AND ASSOCIATED RISKS
Financial risk management
The Group is exposed to a variety of financial risks as a result of its
activities. These risks include market risk (including market price risk,
foreign currency risk and interest rate risk), credit risk and liquidity risk.
These risks have existed throughout the year and the Group's policies for
managing them are summarised below.
The risks below do not reflect the risks of the underlying investment
portfolios of certain of the financial assets at fair value through profit or
loss. The Group has significant indirect exposure to a number of risks through
the underlying portfolios of the investment entities. There is no mechanism to
control these risks without considerably prejudicing return objectives.
Due to the lack of transparency in certain underlying assets in particular
certain of those held by the Partnership it is not possible to quantify or
hedge the impact of these risks on the portfolio as each investment entity may
have complex and changing risk dynamics that are not easily observable or
predictable. These risks will include interest, foreign exchange and other
market risks which are magnified by gearing in some, not many cases, resulting
in increased liquidity and return risk.
Syncona Limited
Syncona Limited is exposed to financial risks through its investments in the
Holding Company and the Partnership. The risks and policies for managing them
are set out in the following sections.
The Holding Company
Market price risk
The Holding Company invests in early stage life science companies that
typically have limited products in development, any problems encountered in
development may have a damaging effect on that company's business and the
value of the investment.
This is mitigated by the employment of highly experienced personnel, the
performance of extensive due diligence prior to investment and ongoing
performance monitoring.
Foreign currency risk
Foreign currency risk represents the potential losses or gains on the life
science investments future income streams and the potential losses or gains on
investments made in United States Dollars ("USD") and Swiss Francs ("CHF") by
the Holding Company's underlying investments.
The following tables present the Holding Company's assets and liabilities in
their respective currencies, converted into the Group's functional currency.
CHF USD GBP 2023
Total
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss 64,203 310,625 549,739 924,567
Cash and cash equivalents - - 847 847
Payables((1)) - - (5,456) (5,456)
Total 64,203 310,625 545,130 919,958
CHF USD GBP 2022
Total
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss 59,818 370,772 554,204 984,794
Cash and cash equivalents - - 297 297
Receivables - - 650 650
Payables((1)) - - (5,459) (5,459)
Total 59,818 370,772 549,692 980,282
((1)) In which 99.44% (31 March 2022: 99.49%) is payable within the group.
Foreign currency sensitivity analysis
The following table details the sensitivity of the Holding Company's NAV to a
10% change in the GBP exchange rate against the USD and CHF with all other
variables held constant. The sensitivity analysis percentage represents the
Investment Manager's assessment, based on the foreign exchange rate movements
over the relevant period and of a reasonably possible change in foreign
exchange rates.
2023 2023 2022 2022
USD CHF USD CHF
£'000 £'000 £'000 £'000
10% increase 41,490 7,134 35,663 6,646
10% decrease (33,946) (5,837) (29,179) (5,438)
Interest rate risk
Interest rate risk is negligible in the Holding Company as minimal cash and no
debt is held.
Liquidity risk
Liquidity risk is the risk that the financial commitments made by the Holding
Company are not able to be met as they fall due. The Holding Company holds
minimal cash and has no access to debt and instead relies on liquidity from
the Partnership. The liquidity risk associated with the Partnership is set out
in the Partnership section below.
The table below details the Holding Company's liquidity analysis for its
financial assets and liabilities.
<12 months >12 months 2023
Total
£'000 £'000 £'000
Financial assets at fair value through profit or loss - 924,567 924,567
Cash and cash equivalents 847 - 847
Receivables - - -
Payables (35) (5,421) (5,456)
Total 812 919,146 919,958
Percentage 0.1% 99.9% 100.00%
<12 months >12 months 2022
Total
£'000 £'000 £'000
Financial assets at fair value through profit or loss - 984,794 984,794
Cash and cash equivalents 297 - 297
Receivables - 650 650
Payables (37) (5,422) (5,459)
Total 260 980,022 980,282
Percentage 0.0% 100.0% 100.0%
The Partnership
Market price risk
The overall market price risk management of each of the fund holdings of the
Partnership is primarily driven by their respective investment objectives. The
Partnership's assets include investments in multi-asset funds and segregated
portfolios which are actively managed by appointed investment managers with
specific objectives to manage market risk. The Investment Manager assesses the
risk in the Partnership's fund portfolio by monitoring exposures, liquidity,
and concentrations of the underlying funds' investments, in the context of the
historic and current volatility of their asset classes, and the Investment
Manager's risk appetite. The maximum risk resulting from financial instruments
is generally determined by the fair value of underlying funds. The overall
market exposure as at 31 March 2023 and 31 March 2022 is shown in the
Consolidated Statement of Financial Position.
The financial instruments are sensitive to market price risk; any increase or
decrease in market price will have an equivalent effect on the market value of
the financial instruments.
Foreign currency risk
Foreign currency risk represents the potential losses or gains the Partnership
may suffer through holding foreign currency assets in the face of foreign
exchange movements. The Partnership's treatment of currency transactions is
set out in note 2 to the Consolidated Financial Statements under "Translation
of foreign currency" and "Forward currency contracts". Currency risk exists in
the underlying investments, the analysis of which is not feasible.
The investments of the Partnership are denominated in USD, Euro ("EUR"), and
GBP. The Partnership's functional and presentation currency is £; hence, the
Consolidated Statement of Financial Position may be significantly affected by
movements in the exchange rates between the foreign currencies previously
mentioned. The Investment Manager may manage exposure to EUR and USD movements
by using forward currency contracts to hedge exposure to investments in EUR
and USD-denominated share classes.
The following tables present the Partnership's assets and liabilities in their
respective currencies, converted into the Group's functional currency.
2023
USD EUR GBP Total
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss 123,311 18,565 478,073 619,949
Cash and cash equivalents 40,519 27 26,644 67,190
Trade and other receivables 1 - 782 783
Payables((1)) (249,160) - (95,825) (344,985)
Distributions payable - - (4,637) (4,637)
(85,329) 18,592 405,037 338,300
2022
USD EUR GBP Total
£'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss 3,899 27,418 319,664 350,981
Cash and cash equivalents 354,553 28 121,205 475,786
Trade and other receivables 2 - 798 800
Payables((1)) (334,998) - (145,369) (480,367)
Distributions payable - - (4,250) (4,250)
23,456 27,446 292,048 342,950
((1)) In which 99.97% (31 March 2022: 99.18%) is payable within the group.
Foreign currency sensitivity analysis
The following table details the sensitivity of the Partnership's NAV to a 10%
change in the GBP exchange rate against the USD and EUR with all other
variables held constant. The sensitivity analysis percentage represents the
Investment Manager's assessment, based on the foreign exchange rate movements
over the relevant period and of a reasonably possible change in foreign
exchange rates.
2023 2023 2022 2022
USD EUR USD EUR
£'000 £'000 £'000 £'000
10% increase (8,534) 1,592 2,355 2,745
10% decrease 8,534 (1,592) (2,355) (2,745)
Interest rate risk
Interest receivable on bank deposits or payable on bank overdrafts are
affected by fluctuations in interest rates, however the effect is not expected
to be material. All cash balances receive interest at variable rates. Interest
rate risk may exist in the Partnership's underlying investments, the analysis
of which is impractical due to the lack of visibility over the underlying
information required to perform this analysis within the Partnership's
investments.
Credit risk
Credit risk in relation to listed securities transactions awaiting settlement
is managed through the rules and procedures of the relevant stock exchanges.
In particular, settlements for transactions in listed securities are affected
by the credit risk of the Citco Custody (UK) Limited (the "Custodian") which
acts as the custodian of the partnership's assets, on a delivery against
payment or receipt against payment basis. Transactions in unlisted securities
are affected against binding subscription agreements. Credit risk may exist in
the Partnership's underlying fund investments, the analysis of which is
impractical due to the lack of visibility over the underlying information
required to perform this analysis within the Partnerships investments.
The Partnership invests in short-term treasury bills and considers the
associated credit risk to be negligible. The Partnership's financial assets
are 46.5% (31 March 2022: 51.8%) short-term treasury bills.
The principal credit risks for the Partnership are in relation to deposits
with banks. The securities held by the Custodian are held in trust and are
registered in the name of the Partnership. Citco is "non-rated", however, the
Investment Manager takes comfort over the credit risk of Citco as they have
proven to rank amongst the "Best in Class" and "Top rated" in the recognised
industry survey carrying a global presence and over 40 years of experience in
the provision of custodian and other services to their clients and the hedge
fund industry. The credit risk associated with debtors is limited to other
receivables.
The Group's cash and cash equivalents are held with major financial
institutions; the two largest ones hold 79% and 20% respectively (31 March
2022: 85% and 14% respectively).
Liquidity risk
The Partnership is exposed to the possibility that it may be unable to
liquidate certain of its assets as it otherwise deems advisable as the
Partnership's underlying funds or their managers may require minimum holding
periods and restrictions on redemptions. Further, there may be suspension or
delays in payment of redemption proceeds by underlying funds or holdbacks of
redemption proceeds otherwise payable to the Partnership until after the
applicable underlying fund's financial records have been audited. Therefore,
the Partnership may hold receivables that may not be received by the
Partnership for a significant period of time, may not accrue any interest and
ultimately may not be paid to the Partnership. As at 31 March 2023, no (31
March 2022: Nil) suspension from redemptions existed in any of the
Partnership's underlying investments.
The Partnership invests in short-term treasury bills and considers the
associated liquidity risk to be negligible. The Partnership's financial assets
are 46.5% (31 March 2022: 51.8%) short-term treasury bills.
The table below details the Partnership's liquidity analysis for its financial
assets and liabilities. The table has been drawn up based on the undiscounted
net cash flows on the financial assets and liabilities that settle on a net
basis and the undiscounted gross cash flows on those financial assets and
liabilities that require gross settlement.
Within 1 >1 to 3 >3 to 12 >12 months 2023((1))
month months months Total
£'000 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss 320,284 166,425 59,853 73,387 619,949
Cash and cash equivalents 67,190 - - - 67,190
Trade and other receivables 783 - - - 783
Payables (344,985) - - - (344,985)
Distributions payable - (4,637) - - (4,637)
Total 43,272 161,788 59,853 73,387 338,300
Percentage 12.8% 47.8% 17.7% 21.7% 100.0%
Within 1 >1 to 3 >3 to 12 >12 months 2022((1))
month months months Total
£'000 £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss 279,473 - - 71,508 350,981
Cash and cash equivalents 475,786 - - - 475,786
Trade and other receivables 800 - - - 800
Payables (480,367) - - - (480,367)
Distributions payable - (4,250) - - (4,250)
Total 275,692 (4,250) - 71,508 342,950
Percentage 80.3% (1.2)% 0.0% 20.9% 100.0%
((1)) The liquidity tables above reflect the anticipated cash flows assuming
notice was given to all underlying investments as at 31 March 2023 and 31
March 2022 and that all treasury bills are held to maturity. They include a
provision for "audit hold back" which most hedge funds can apply to full
redemptions and any other known restrictions the managers of the underlying
funds may have placed on redemptions. Where there is currently no firm
indication from the underlying manager on the expected timing of the receipt
of redemption proceeds, the relevant amount is included in the ">12 months"
category. The liquidity tables are therefore conservative estimates.
19. FAIR VALUE MEASUREMENT
IFRS 13 "Fair Value Measurement" requires the Group to establish a fair value
hierarchy that prioritises the inputs to valuation techniques used to measure
fair value. The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3
measurements). The three levels of the fair value hierarchy under IFRS 13 are
set as follows:
· Level 1 Quoted prices (unadjusted) in active markets for identical assets or
liabilities;
· Level 2 Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability either directly (that is, as prices) or
indirectly (that is, derived from prices) or other market corroborated inputs;
and
· Level 3 Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement. For this purpose, the
significance of an input is assessed against the fair value measurement in its
entirety. If a fair value measurement uses observable inputs that require
significant adjustment based on unobservable inputs, that measurement is a
Level 3 measurement. Assessing the significance of a particular input to the
fair value measurement requires judgement, considering factors specific to the
asset or liability.
The determination of what constitutes "observable" requires significant
judgement by the Group. The Group considers observable data to be market data
that is readily available, regularly distributed or updated, reliable and
verifiable, and provided by independent sources that are actively involved in
the relevant market.
The following table presents the Group's financial assets by level within the
valuation hierarchy as at 31 March 2023 and 31 March 2022:
2023
Level 1 Level 2 Level 3 Total
Assets £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss:
The Holding Company - - 919,958 919,958
The Partnership - - 338,300 338,300
Total assets - - 1,258,258 1,258,258
2022
Level 1 Level 2 Level 3 Total
Assets £'000 £'000 £'000 £'000
Financial assets at fair value through profit or loss:
The Holding Company - - 980,282 980,282
The Partnership - - 342,950 342,950
Total assets - - 1,323,232 1,323,232
The investments in the Holding Company and the Partnership are classified as
Level 3 investments due to the use of the adjusted NAV of the subsidiaries as
a proxy for fair value, as detailed in note 2. The subsidiaries hold some
investments valued using techniques with significant unobservable inputs as
outlined in the sections that follow.
The underlying assets of the Partnership and the Holding Company are shown
below.
The following table presents the Holding Company's financial assets and
liabilities by level within the valuation hierarchy as at 31 March 2023 and 31
March 2022:
Asset type Level 31 March 2023 31 March 2022 Valuation technique Significant unobservable inputs Impact on
£'000 £'000 valuation
£'000
Listed Investment 1 73,943 121,226 Publicly available share n/a n/a
bid price as at
statement of financial
position date
SIML 3 6,108 5,822 Net Assets of SIML Carrying value of assets and +/- £305
liabilities determined in accordance
with generally accepted accounting
principles, without adjustment. A
sensitivity of 5% (31 March 2022: 5%) of the NAV of SIML
is applied.
Milestone payments resulting from sale of subsidiary 3 54,516 49,802 Discounted Cash Flow The main unobservable inputs PoS: +/-
consist of the assigned probability of
£6,447
milestone success and the discount
Discount
rate used.
rate: £8,486
Deferred consideration 3 15,882 - Discounted Cash Flow The main unobservable inputs PoS: +/-
consist of the assigned probability of £10,963
milestone success and the discount Discount
rate used. rate: £5,343
Calibrated PRI ((1)) 3 427,552 325,662 Calibrated PRI The main unobservable input is the +/- £42,755
quantification of the progress
investments make against internal
financing and/or corporate
milestones where appropriate. A
reasonable shift in the fair value of
the investment would be +/-10% (31 March 2022: +/-18%).
Cash ((2)) n/a 294 543 Transaction price n/a n/a
Other net assets ((3)) n/a 346,272 481,739 Transaction price n/a n/a
Total financial assets held at fair value through profit or loss 924,567 984,794
((1)) Valuation made by reference to price of recent funding round unadjusted
following adequate consideration of current facts and circumstances.
((2)) Cash and other net assets held within the Holding Company are primarily
measured at amortised cost which is equivalent to their fair value.
((3)) Other net assets primarily consists of a receivable due from the
Partnership totalling £344.9 million.
The following table presents the movements in Level 3 investments of the
Holding Company for the year ended 31 March 2023 and 31 March 2022:
Life Milestone SIML 2023 2022
science payments Total Total
investments
£'000 £'000 £'000 £'000 £'000
Opening balance 325,662 49,802 5,822 381,286 303,804
Purchases during the year 154,051 - 2,312 156,363 107,817
Sales during the year (15,311) - - (15,311) (325,837)
(Losses)/gains on financial assets at fair value through profit or loss (36,850) 20,596 (2,026) (18,280) 295,502
Transfer from Level 3 - - - - -
Closing balance 427,552 70,398 6,108 504,058 381,286
The net loss for the year included in the Consolidated Statement of
Comprehensive Income in respect of Level 3 investments in the Holding Company
held as at the year end amounted to £18,280,000 (31 March 2022:
£295,502,000).
During the year, there were no movements from Level 3 to Level 1 (31 March
2022: £Nil).
The following table presents the Partnership's financial assets and
liabilities by level within the valuation hierarchy as at 31 March 2023 and 31
March 2022:
Asset type Level 31 March 2023 31 March 2022 Valuation technique Significant unobservable inputs Impact on
£'000 £'000 valuation
£'000
UK treasury bills 1 284,960 179,984 Publicly available price as at n/a n/a
statement of financial
position date
Capital pool 2 101,566 99,489 Valuation produced n/a n/a
by fund administrator.
investment fund -
Inputs into fund
components are from
Credit funds
observable inputs
Capital pool 2 58,615 - Valuation produced n/a n/a
by fund administrator.
Investment fund -
Inputs into fund
components are from
Multi asset funds
observable inputs
Capital pool 3 101,421 - Valuation produced The main unobservable input +/- £5,071
by fund administrator
Investment fund -
include the assessment of the performance of the underlying assets by the fund
administrator.
Multi asset funds
A fair reasonable shift in the
Fair Value of the instruments would be +/-5% (31 March 2022: n/a.
Legacy funds - 3 33,001 39,857 Valuation produced The main unobservable input +/- £4,290
Long-term unlisted
by fund administrator
include the assessment of the
investments
performance of the underlying
fund by the fund administrator.
A reasonable possible shift in the
fair value of the instruments
would be +/-13% (31 March 2022: +/-10%).
CRT Pioneer Fund 3 32,727 28,183 Valuation produced by Unobservable inputs include the +/- £11,782
fund administrator and
fund managers assessment of
adjusted by Management
the performance of the underlying
investments and adjustments
made to this assessment to
generate the deemed fair value.
A reasonable possible shift in
the fair value of the instruments
would be +/-36% (31 March 2022: +/-48%).
Cash ((1)) n/a 74,863 475,786 Transaction price n/a n/a
Other net liabilities ((2)) n/a (348,853) (480,349) Transaction price n/a n/a
Total financial assets held at fair value through profit or loss 338,300 342,950
((1)) Cash and other net liabilities held within the Partnership are primarily
measured at amortised cost which is equivalent to their fair value.
((2)) Other net liabilities primarily consists of a payable due to Syncona
Portfolio Limited totalling £344.9 million.
During the year ended 31 March 2023, there were no movements from Level 1 to
Level 2 (31 March 2022: £Nil).
Assets classified as Level 2 investments are primarily underlying funds
fair-valued using the latest available NAV of each fund as reported by each
fund's administrator, which are redeemable by the Group subject to necessary
notice being given. Included within the Level 2 investments above are
investments where the redemption notice period is greater than 90 days. Other
assets within the level 2 investments are daily traded credit funds priced
using the latest market price equivalent to their NAV. Such investments have
been classified as Level 2 because their value is based on observable inputs.
The Group's liquidity analysis is detailed in note 18.
Assets classified as Level 3 long-term unlisted investments are underlying
funds which are not traded or available for redemption. The fair value of
these assets is derived from quarterly statements provided by each fund's
administrator.
The following table presents the movements in Level 3 investments of the
Partnership for the year ended 31 March 2023:
Investment in Capital pool 2023 2022
Subsidiary investment Total Total
£'000 £'000 £'000 £'000
Opening balance 31,651 39,857 71,508 82,844
Purchases - 100,352 100,352 2,592
Return of capital - (10,551) (10,551) (9,070)
Gains/(losses) on financial assets at fair value 8,735 4,764 13,499 (4,858)
Closing balance 40,386 134,422 174,808 71,508
The net gains/losses for the year included in the Statement of Comprehensive
Income in respect of Level 3 investments of the Partnership held as at the
year end amounted to £13,499,000 gains (31 March 2022: £4,858,000 losses).
20. COMMITMENTS AND CONTINGENCIES
The Group had the following commitments as at 31 March 2023:
2023 2022
Uncalled Uncalled
commitment commitment
£'000 £'000
Life science portfolio
Milestone payments to life science companies 85,143 82,617
CRT Pioneer Fund 2,499 3,424
Capital pool investments 1,585 2,429
Total 89,227 88,470
There were no contingent liabilities as at 31 March 2023 (March 2022: Nil).
The commitments are expected to fall due in the next 36 months.
21. SUBSEQUENT EVENTS
These Consolidated Financial Statements were approved for issuance by the
Directors on 14 June 2023. Subsequent events have been evaluated until 14 June
2023.
Since the balance sheet date share price movements resulted in an increase in
value of the listed life science investments of £17.1 million as at 13 June
2023.
At 31 March 2023 SwanBio Therapeutics Limited ("SwanBio"), was running
fundraising processes to bring in external capital required to finance the
company as a platform-based business and to progress the lead programme into
clinical trials. Management had reasonable expectations based on investor
activity that these fundraising processes would generate the additional
external funding by early June 2023. Prior to the year-end Syncona put in
place two convertible loan notes to provide SwanBio ongoing funding to support
the entire platform through to the end of June 2023, and beyond this, support
SBT101 to complete low dose cohort whilst it continues to pursue fundraising.
At the date these financial statements are approved, the fundraising processes
continue to progress with no offers generated yet. Ongoing investor
discussions led Syncona and the SwanBio's management to believe that these
processes were unlikely to generate additional capital by end of June.
Consequently, on 14 June 2023, SwanBio decided to restructure the programme
pipeline to focus solely on its lead asset, SBT101. Management believes this
provides further evidence that external capital access was constrained at the
year-end and has assessed and accounted its impact as an adjusting post
balance sheet event. The drawdown of the second convertible loan was
conditional on this restructuring, in the absence of external fundraising, to
fund the business through to the end of its low dose cohort to generate data
and whilst it continues to look at financing and strategic options for the
business.
The restructuring of the programmes changed the investment thesis of SwanBio
from a platform-based business (with four pipeline programmes) to a single
asset business. This triggered Management to revisit the valuation of SwanBio
and write off the value attributed to the programs no longer being progressed.
SwanBio is valued using calibrated cost in line with the investment valuation
policy as described in note 2. The change in investment thesis due to the
restructuring has resulted in a reduction in the fair value of SwanBio from
£109.9m to £58.2m at the year-end. This was determined through assessing the
value of SBT101 relative to the total valuation of SwanBio as a platform
company attributed by Syncona previously at the Series B funding and applying
this percentage to the total capital invested in the company, exclusive of any
funding which was allocated specifically to SBT101. This has resulted in a
calibration adjustment of 47% of cost being applied to the valuation of
SwanBio.
SwanBio continues to make positive progress post year end. This supports the
judgement made by Management that value is maintained within the SBT101
programme.
GLOSSARY
AAV Life science portfolio return
Adeno-associated virus - a non-enveloped virus that can be engineered to
See alternative performance measures below.
deliver DNA to target cells.
Lymphocytes
ALL
Specialised white blood cells that help to fight infection.
Acute lymphoblastic leukaemia - a cancer of the bone marrow and blood in which
the body makes abnormal white blood cells. Lymphoma
A type of cancer that affects lymphocytes and lymphocyte producing cells in
BLA the body.
Biologics License Application. Macrophages
A form of white blood cell and the principal phagocytic (cell engulfing)
B-NHL components of the immune system.
B cell non-Hodgkin's lymphoma. Management
Capital deployed/deployment The management team of Syncona Investment Management Limited.
Follow-on investment in our portfolio companies and investment in new
companies during the year. See alternative performance measures below. Mass Spectrometry
A technique used by which chemical substances are identified by the sorting of
Capital pool gaseous ions in electric fields according to their mass-to-charge ratios.
Capital pool investments plus cash less other net liabilities. See alternative
performance measures below. Melanoma
A serious form of skin cancer that begins in cells known as melanocytes.
Capital pool investments
The underlying investments consist of cash and cash equivalents, including MES
short-term (1 and 3 month) UK treasury bills, listed fund investments and
Management Equity Shares.
legacy fixed term funds.
Myeloma
Capital pool investments return
A type of bone marrow cancer.
See alternative performance measures below.
Net Asset Value, Net Assets or NAV
CAR T-cell therapy
Net Asset Value ("NAV") is a measure of the value of the Company, being its
Chimeric antigen receptor T-cell therapy - a type of immunotherapy which assets - principally investments made in other companies and cash and cash
reprogrammes a patient's own immune cells to fight cancer. equivalents held - minus any liabilities.
Cell therapy NAV per share
A therapy which introduces new, healthy cells into a patient's body, to
See alternative performance measures below.
replace those which are diseased or missing.
NAV return
Clinical stage
See alternative performance measures below.
Screened and enrolled first patient into a clinical trial. NSCLC
Non-small cell lung cancer - the most common form of lung cancer.
NZAM
CLL The Net Zero Asset Managers (NZAM) initiative is an international group of
asset managers who are committed to supporting the goal of net zero greenhouse
Chronic lymphocytic leukaemia. gas emissions by 2050 or sooner.
CNS Partnership
Central nervous system - a part of the body's nervous system comprised of the Syncona Investments LP Incorporated.
brain and spinal cord.
Pre-clinical
Companies Law
Companies (Guernsey) Law 2008. Not yet entered clinical trials
Company Return
Syncona Limited.
A Simple Rate of Return is the method used for return calculations.
CRT Pioneer Fund
The Cancer Research Technologies Pioneer Fund LP. The CRT Pioneer Fund is SIML
managed by Sixth Element Capital and invests in oncology focused assets. Syncona Investment Management Limited.
D&I Strategic Portfolio
Diversity and inclusion. Portfolio of core life science companies where Syncona has significant
shareholdings.
Fabry disease
A rare genetic disease resulting from a deficiency of the enzyme Syncona Group companies
alpha-galactosidase A, leading to dysfunctional lipid metabolism and abnormal The Company and its subsidiaries other than those companies within the life
glycolipid deposits. science portfolio.
Gaucher disease Syncona team
A genetic disorder in which a fatty substance called glucosylceramide The team of SIML, the Company's Investment Manager.
accumulates in macrophages in certain organs due to the lack of functional
GCase enzyme. T cell
A type of lymphocyte white blood cell, which forms part of the immune system
General Partner and develops from stem cells in the bone marrow.
Syncona GP Limited.
TCFD
Gene therapy
The Task Force on Climate-related Financial Disclosures (TCFD). First
A therapy which seeks to modify or manipulate the expression of a gene in published in 2017, the TCFD recommendations act as a framework for assessing
order to treat or cure disease. the physical and transition risks companies are exposed to from climate change
and the transition to a green economy.
Group
Syncona Limited and Syncona GP Limited are collectively referred to as the The Syncona Foundation
"Group".
The Foundation distributes funds to a range of charities, principally those
involved in the areas of life science and healthcare.
ICR
The Institute of Cancer Research. UN PRI
The United Nations (UN) Principles for Responsible Investment (PRI) is a
Immunotherapy network of investors, who commit to working to promote sustainable investment.
A type of therapy that uses substances to stimulate or suppress the immune
system to help the body fight cancer, infection, and other diseases. Valuation Policy
Investment Manager The Group's investments in life science companies are, in the case of quoted
Syncona Investment Management Limited. companies, valued based on bid prices in an active market as at the reporting
date. In the case of the Group's investments in unlisted companies, the fair
iPSC technology value is determined in accordance with the International Private Equity and
Induced pluripotent stem cells (iPSCs) are a type of pluripotent stem cell Venture Capital ("IPEV") Valuation Guidelines. These may include the use of
which can be generated directly from mature cells (such as those of the skin recent arm's length transactions (Price of Recent Investment or PRI),
or blood). Discounted Cash Flow ("DCF") analysis and earnings multiples as valuation
techniques. Wherever possible, the Group uses valuation techniques which make
IRR maximum use of market-based inputs.
Internal Rate of Return.
Late clinical
Has advanced past Phase II clinical trials.
Leukaemia
Broad term for cancers of the blood cells.
Life science portfolio
The underlying investments in this segment are those whose activities focus on
actively developing products to deliver transformational treatments to
patients.
Alternative performance measures
Capital deployed
With reference to the life science portfolio valuation table is calculated as
follows:
2023 2022
ANet investment in the period £154.7m £(203.0)m
adjusted for:
BProceeds from sales £17.4m £325.8m
CCRT Pioneer fund distributions £5.1m £0.4m
Total Capital deployed (A+B+C) £177.2m £123.2m
Life science portfolio return
Gross life science portfolio return for 2023 (14.3) per cent; 2022 0.8 per
cent. This is calculated as follows:
2023 2022
AOpening life science portfolio £524.9m £722.1m
Net investment in the period £154.7m £(203.0)m
BValuation movement £(75.0)m £5.9m
Closing life science portfolio £604.6m £524.9m
Life science portfolio return (B/A) (14.3)% 0.80%
Capital Pool
With reference to the life science portfolio valuation table. This is
calculated as follows:
2023 2022
ACash £82.8m £485.2m
BOther assets and liabilities £(12.3)m £(19.7)m
CNet Cash (A+B) £70.5m £465.5m
DUK and US Treasury bills £285.0m £180.0m
ECredit investment funds £101.6m £99.5m
FMulti asset funds £160.0m -
GLegacy funds £33.0m £39.9m
Total Capital Pool (C+D+E+F+G) £650.1m £784.9m
Capital Pool return
Gross Capital Pool return for 2023 5.5 per cent (2022 1.6 per cent). Any small
differences in calculation may be due to rounding of inputs. This is
calculated as follows:
2023 2022
Opening Capital Pool £784.9m £578.2m
Add back net liabilities not included in Gross Capital Pool £19.6m £38.9m
Less SIML cash £(8.2)m £(7.5)m
AOpening Gross Capital Pool £796.3m £609.6m
Life science net investments and ongoing costs £(185.5)m £177.0m
BValuation movement £44.3m £9.7m
Closing Gross Capital Pool £655.1m £796.3m
Capital Pool return (B/A) 5.5% 1.6%
2023 2022
Closing Gross Capital Pool £655.1m £796.3m
Add back SIML cash £7.3m £8.2m
Less net liabilities not included in Gross Capital Pool £(12.3)m £(19.6)m
Total Capital Pool £650.1m £784.9m
NAV per share
NAV per share is calculated by dividing net assets by the number of shares in
issue adjusted for dilution by the potential share based payment share issues.
NAV takes account of dividends payable on the ex-dividend date. This is
calculated as follows:
2023 2022
ANAV for the purposes of NAV per share £1,254,654,716 £1,309,840,518
BOrdinary shares in issue (note 14) 669,329,324 666,733,588
CDilutive shares 3,487,581 6,880,057
DFully diluted number of shares (B+C) 672,816,905 673,613,645
NAV per share (p) (A/D) 186.5 194.4
Life science portfolio return
Gross life science portfolio return for 2023 (14.3) per cent; 2022 0.8 per
cent. This is calculated as follows:
2023 2022
A Opening life science portfolio £524.9m £722.1m
Net investment in the period £154.7m £(203.0)m
B Valuation movement £(75.0)m £5.9m
Closing life science portfolio £604.6m £524.9m
Life science portfolio return (B/A) (14.3)% 0.80%
Capital Pool
With reference to the life science portfolio valuation table. This is
calculated as follows:
2023 2022
A Cash £82.8m £485.2m
B Other assets and liabilities £(12.3)m £(19.7)m
C Net Cash (A+B) £70.5m £465.5m
D UK and US Treasury bills £285.0m £180.0m
E Credit investment funds £101.6m £99.5m
F Multi asset funds £160.0m -
G Legacy funds £33.0m £39.9m
Total Capital Pool (C+D+E+F+G) £650.1m £784.9m
Capital Pool return
Gross Capital Pool return for 2023 5.5 per cent (2022 1.6 per cent). Any small
differences in calculation may be due to rounding of inputs. This is
calculated as follows:
2023 2022
Opening Capital Pool £784.9m £578.2m
Add back net liabilities not included in Gross Capital Pool £19.6m £38.9m
Less SIML cash £(8.2)m £(7.5)m
A Opening Gross Capital Pool £796.3m £609.6m
Life science net investments and ongoing costs £(185.5)m £177.0m
B Valuation movement £44.3m £9.7m
Closing Gross Capital Pool £655.1m £796.3m
Capital Pool return (B/A) 5.5% 1.6%
2023 2022
Closing Gross Capital Pool £655.1m £796.3m
Add back SIML cash £7.3m £8.2m
Less net liabilities not included in Gross Capital Pool £(12.3)m £(19.6)m
Total Capital Pool £650.1m £784.9m
NAV per share
NAV per share is calculated by dividing net assets by the number of shares in
issue adjusted for dilution by the potential share based payment share issues.
NAV takes account of dividends payable on the ex-dividend date. This is
calculated as follows:
2023 2022
A NAV for the purposes of NAV per share £1,254,654,716 £1,309,840,518
B Ordinary shares in issue (note 14) 669,329,324 666,733,588
C Dilutive shares 3,487,581 6,880,057
D Fully diluted number of shares (B+C) 672,816,905 673,613,645
NAV per share (p) (A/D) 186.5 194.4
NAV return
NAV return is a measure of how the NAV per share has performed over a period,
considering both capital returns and dividends paid to shareholders. NAV
return is calculated as the increase in NAV between the beginning and end of
the period, plus any dividends paid to shareholders in the year. This is
calculated as follows:
2023 2022
AOpening NAV per fully diluted share (note 14): 194.4p 193.9p
BClosing NAV per fully diluted share (note 14): 186.5p 194.4p
CMovement (B-A) (7.9)p 0.5p
DDividend paid in the year (note 15): 0.0p 0.0p
ETotal movement (C+D) (7.9)p 0.5p
NAV return (E/A) (4.1)% 0.3%
1 (#_ftnref1) Fully diluted, please refer to note 14 in the financial
statements. Alternative performance measure, please refer to glossary
2 (#_ftnref2) Alternative performance measure, please refer to glossary
(( 3 (#_ftnref3) )) See footnote 2
(( 4 (#_ftnref4) )) Gross capital deployed figure also includes impact of
drawdowns into the CRT Pioneer Fund
(( 5 (#_ftnref5) )) See footnote 2
(( 6 (#_ftnref6) )) Excluding the impact of FX
(( 7 (#_ftnref7) )) SwanBio has been partially written down by £51.0
million; valuation also accounts for £30.6 million of capital deployed, as
well as impact of convertible loan and excludes FX
(( 8 (#_ftnref8) )) Please see glossary for definition
(( 9 (#_ftnref9) )) Post period end financings include $12.0 million
additional commitment to SwanBio, along with OMass additional investment from
BPC and Quell-AstraZeneca collaboration
(( 10 (#_ftnref10) )) Since 2012, includes potential full receipt of
milestones from sales of Gyroscope and Neogene
11 (#_ftnref11) Primary input to fair value
12 (#_ftnref12) The basis of valuation is stated to be "Cost", this means
the primary input to fair value is capital
invested (cost) which is then calibrated in accordance with our Valuation
Policy
13 (#_ftnref13) The basis of valuation is stated to be "PRI", this means the
primary input to fair value is price of recent
investment which is then calibrated in accordance with our Valuation Policy
14 (#_ftnref14) Syncona's risk-adjusted and discounted valuation of the
milestone payments from the sale of Gyroscope Therapeutics
15 (#_ftnref15) Formerly CEGX
16 (#_ftnref16) FX rate taken at date of transaction closing
17 (#_ftnref17) See footnote 10
18 (#_ftnref18) Syncona has invested £177.2 million in the year into its
portfolio and new opportunities. Uncalled commitments at 31 March 2023 were
£87.6 million
19 (#_ftnref19) See glossary
20 (#_ftnref20) Additional 5% of value within the life science portfolio is
the CRT Pioneer Fund which is valued based on an adjusted third party
valuation
21 (#_ftnref21) Using NAV at 31 March 2023
22 (#_ftnref22) Includes sales of Blue Earth, Nightstar, Gyroscope, and
Neogene closures of 14MG and Azeria. All IRR and multiple on cost figures are
calculated on a gross basis, reflects original Syncona Partners capital
invested where applicable
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