REG - Syncona Limited - Third Quarter Update

SynconaAnnouncement

07/02/2023 07:00

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RNS Number : 0824P  Syncona Limited  07 February 2023

Syncona Limited

 

Third Quarter Update

 

 

7 February 2023

 

Syncona Ltd, a leading healthcare company focused on creating, building and
scaling global leaders in life science, today issues its quarterly update
covering the period from 01 October to 31 December 2022.

 

Financial performance

 

·  Net assets of £1,294.9 million (30 September 2022: £1,365.9 million),
192.6p per share (30 September 2022: 202.9p per share), a NAV return of (5.1)%
in the quarter and (1.0)% in the nine months to 31 December 2022

·   Life science portfolio valued at £641.1 million (30 September 2022:
£602.6 million), a return of (8.8)% in the quarter 1  and (6.2)% in the nine
months to 31 December 2022

·     Performance in the quarter impacted by the decline in value of our
quoted holdings:

o  Autolus Therapeutics (Autolus) share price declined following its $163.9
million fundraising at $2.00 in December 2022; the company's fundraising took
place following the announcement it had reached its primary endpoint in its
pivotal study

o  Achilles Therapeutics' (Achilles) share price declined following the
presentation of clinical data in its lead programmes in December 2022

o  Freeline Therapeutics' (Freeline) share price has been impacted by market
sentiment and delays across its programmes; new leadership has made progress
streamlining the company, re-prioritising its clinical programmes, and
strengthening clinical organisation to advance its Fabry disease and Gaucher
disease programmes; the company will provide updates on both programmes in
CY2023

·  Performance was also impacted by negative movements in foreign exchange,
with the US$ depreciating by 8.2% against Sterling, contributing to a £(48.5)
million negative impact on NAV.

o  Over the nine months to 31 December 2022 foreign exchange gains have
resulted in a £61.4 million positive impact to NAV

·   Capital base of £653.8 million at 31 December 2022 (30 September 2022:
£763.3 million), having invested £92.7 million in the quarter and £150.5
million in the nine months to 31 December 2022

 

Clinical updates across the portfolio during the quarter; important milestone
for Autolus with pivotal study meeting primary endpoint

 

·     Autolus reached an important milestone in its pivotal FELIX trial of
obe-cel in relapsed/refractory (r/r) adult acute lymphoblastic leukaemia (ALL)

o Data demonstrated the differentiated safety profile of the drug and its
transformative impact for patients

o  The company continues to target a filing of a Biological License
Application (BLA) with the US Food and Drug Administration (FDA) in CY2023

·    Anaveon announced further encouraging clinical data in the
dose-finding Phase I/II study of ANV419, with the company initiating Phase
I/II trials of the drug in metastatic melanoma and multiple myeloma

·   Achilles presented clinical data from its Phase I/IIa clinical trials in
advanced non-small cell lung cancer (NSCLC) and recurrent or metastatic
melanoma with 16 patients dosed across the two trials to date 2 

o  In order for Achilles to be competitive in the space it is operating, it
is critical that the company can manufacture at scale; Syncona is engaging
with the company regarding the optimisation of its manufacturing process

 

Strategic balance sheet enables Syncona to navigate challenging market
backdrop for biotech

 

·     Syncona's view is the financing environment for public and private
companies remains very challenging, with sector specialist investors
continuing to prioritise funding their existing portfolio over making new
investments, and an absence of generalist investors in the sector

·      Against this market backdrop Syncona has deployed £92.7 million
in the quarter

o  £48.1 million deployed into new companies; further £44.6 million
deployed to support our existing companies as they deliver on their
milestones, including investing $28.0 million (£23.0 million) in Autolus'
public offering in December 2022 3 

·      Syncona continues to take a disciplined approach to the
allocation of capital across the portfolio

 

Portfolio of 13 companies, following addition of AGTC to the portfolio in the
quarter; three companies added to the portfolio year to date

 

·    Completed acquisition of retinal gene therapy company Applied Genetic
Technologies Corporation (AGTC) for an initial investment of $23.3 million
(£19.5 million), demonstrating Syncona's differentiated capability to support
world-class science

o  A further £21.3 million invested in the quarter to support AGTC as it
progresses its lead Phase II AGTC-501 programme, which is targeting X-linked
retinitis pigmentosa (XLRP), a genetic eye disease which currently has no
approved treatments

·      Initial investment in a small molecule company, expected to be
launched in H1 CY2023

·      FY2022/3 capital deployment guidance remains unchanged at £150
million - £250 million

 

Syncona portfolio continues to attract interest from pharma

 

·   Completion of sale of Neogene Therapeutics (Neogene) to AstraZeneca for
up to $320.0 million (£261.2 million), including an upfront cash payment of
$200.0 million (£163.2 million) and up to $120.0 million (£98.0 million) in
cash potentially due in both contingent, milestones-based and non-contingent
consideration

·   Total potential cash proceeds to Syncona from the sale of up to £21.9
million, including £15.5 million in upfront proceeds 4 

·   The sale of Neogene is the fourth sale of a Syncona portfolio company
over the last four years, generating total potential proceeds of up to £1.2
billion, assuming full receipt of milestones from the sales of Neogene and
Gyroscope Therapeutics, an aggregate 5.6 multiple of cost

 

Chris Hollowood, CEO of Syncona Investment Management Limited said: "The
difficult financing conditions and uncertainties facing the biotech market
continue to be very challenging. Syncona's hands-on approach and strategic
balance sheet mean that we are well positioned to navigate this cycle. Our
highly experienced team is focused on supporting our companies, identifying
opportunities arising from these market conditions, such as AGTC, and creating
new companies, whilst maintaining a disciplined approach to capital allocation
across the portfolio. Together, this will drive growth and maximise long-term
value for our shareholders.

 

Our NAV return over the quarter has been disappointing, with the value of our
life science portfolio impacted by the share price declines of our listed
holdings, which continue to weigh on our performance. In particular, we
believe that the challenging market environment impacted the share price of
the recent Autolus financing and remain confident that obe-cel has the
potential to be a best-in-class treatment for patients with adult ALL.

 

Whilst we anticipate financing conditions to remain difficult in 2023, our
strategy of creating companies to develop products with dramatic efficacy has
the potential to create fundamental value and we have a number of key
milestones in the year ahead. With three new companies added to the portfolio
in the first nine months of our financial year, and an exciting investment
landscape, the team is highly motivated to deliver our strategy to scale the
business to net assets of £5 billion. We are confident in the long-term
potential of our model and remain positive about the future of our sector and
Syncona's role in shaping it."

 

Next key milestones

 

·    Autolus expects to:

o  Progress its pivotal study in obe-cel in r/r adult ALL, providing further
data in Q2 CY2023, with a BLA filing with the FDA expected in CY2023

o  Announce further data from AUTO1/22 in paediatric ALL and AUTO4 in
peripheral T cell lymphoma in CY2023

·   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 CY2023

·    Freeline has updated guidance to:

o  Announce initial safety and efficacy data from the Phase I/II dose-finding
trial in Fabry disease in H1 CY2023

o  Commence dosing in the Phase I/II dose-finding trial in Gaucher disease,
with initial safety and efficacy data expected to be reported in H1 CY2023

·  Anaveon will dose the first patient in its Phase I/II trial of ANV419 in
multiple myeloma in H1 CY2023, following on from the recent dosing of its
first patient in its separate Phase I/II trial of the therapy in advanced
melanoma

 

Other portfolio developments

·      Quell expects to dose the first patient in its lead programme,
QEL-001, in H1 CY2023

·      SwanBio now expects to dose the first patient in its lead
programme, SBT101, in H1 CY2023

 

Valuation movements in the quarter

 

 Company                       30 Sep 2022  Net investment in the quarter  Valuation  FX movement  31 Dec 2022  % of Group NAV  Valuation                    Fully diluted owner-ship stake  Focus area

                                                                           change                                               basis(( 5 ))(,( 6 )),( 7 )
                               (£m)         (£m)                           (£m)       (£m)         (£m)                                                      (%)
 Portfolio Companies
 Clinical
 Anaveon                       65.8                                                   (0.9)        64.9         5.0%            PRI                          37.9%                           Biologics
 Autolus                       37.4         23.0                           (5.3)      (2.4)        52.7         4.1%            Quoted                       17.9%                           Cell therapy
 AGTC                                       40.8                                                   40.8         3.1%            Cost                         100%                            Gene therapy
 Freeline                      23.5                                        (7.4)      (1.2)        14.9         1.1%            Quoted                       51.3%                           Gene therapy
 Achilles                      22.4                                        (13.5)     (0.6)        8.3          0.6%            Quoted                       24.5%                           Cell therapy
 Pre-Clinical
 SwanBio                       105.7        8.5                                       (8.5)        105.7        8.2%            Cost                         80.0%                           Gene therapy
 Quell                         95.8                                                   (7.3)        88.5         6.8%            PRI                          37.4%                           Cell therapy
 Purespring                    35.1                                                                35.1         2.7%            Cost                         84.0%                           Gene therapy
 Clade                         13.4         12.4                                      (0.9)        24.9         1.9%            Cost                         22.6%                           Cell therapy
 Resolution                    23.0                                                                23.0         1.8%            Cost                         81.1%                           Cell therapy

 Neogene 8                     17.1                                        2.1        (1.3)        17.9         1.4%            Sale proceeds                7.9%                            Cell therapy

 Syncona NewCo                              7.3                                                    7.3          0.6%            Cost                         52.8%                           Small molecule
 Drug discovery
 OMass                         43.7                                                                43.7         3.4%            PRI                          30.9%                           Small molecule
 Kesmalea                      4.0                                                                 4.0          0.3%            Cost                         57.5%                           Small molecule
 Life Science Investment
 Gyroscope milestone payments  58.6                                                   (4.5)        54.1         4.2%            DCF                          0.0%                            Gene therapy
 CRT Pioneer Fund              32.0         (0.6) 9                                                31.4         2.4%            Adj Third Party              64.1%                           Oncology
 CEGX                          20.4                                                   (1.5)        18.9         1.5%            PRI                          5.5%                            Epigenetics
 Forcefield                    2.5                                                                 2.5          0.2%            Cost                         82.0%                           Biologics
 Adaptimmune                   1.3                                         0.5        (0.1)        1.7          0.1%            Quoted                       0.8%                            Cell therapy
 Tier 1 Bio                    0.9                                                    (0.1)        0.8          0.1%            Cost                         4.9%                            Biologics
 Total Life Science Portfolio  602.6        91.4                           (23.6)     (29.3)       641.1        49.5%
 Capital pool                  763.3        (91.7)                         1.4        (19.2)       653.8        50.5%
 TOTAL                         1,365.9                                                             1,294.9      100%

 

 

 ENDS 

Enquiries

Syncona Ltd

 

Annabel Clark / Fergus Witt

Tel: +44 (0) 20 3981 7940

 

FTI Consulting

 

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

Tel: +44 (0) 20 3727 1000

 

 

About Syncona

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

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

 

 

 

 1  Life science portfolio return reflects net valuation movement of £(52.9)
million in the quarter excluding net capital invested of £92.7 million.

 2  As of company release
(https://ir.achillestx.com/news-releases/news-release-details/achilles-therapeutics-presents-encouraging-phase-iiia-update)
on 06/12/2022

 3  FX rate taken at 31/12/2022

 4  FX rate taken at closing on 16/01/2023

 5  Primary input to fair value

 6  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

 7  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

 8  Sale of Neogene to AstraZeneca completed in January 2023. Valuation is
based on proceeds of $19 million and a discounted valuation of the milestone
payments

 9  Net capital movement comprising of an investment of £0.7m and
distributions of (£1.3m) in the quarter

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