Growing Syncona feels the heat from Nasdaq listings

Quoted stocks have increased the volatility for life sciences fund Syncona but it is undeterred as it continues to grow, founding two new companies and adding another.

The initial public offerings (IPOs) of two holdings have helped Syncona (SYNC ) grow over the last year, but an increase in the number of quoted stocks it holds has introduced more volatility into the life sciences fund.

The £1.4bn investment company, which is the largest life sciences fund in the UK, reported a net asset value (NAV) increase of 4.4% in the year to the end of March, despite the sector being hindered by delays to clinical trials as the world focused on treating and creating a vaccine for Covid-19.

Martin Murphy, chief executive of manager Syncona Investment Management, said the fund made ‘good progress’ despite the pandemic backdrop and that ‘the value of innovative new medicines has never been clearer’.

‘Encouragingly, where previously delayed, clinical trials are resuming across the portfolio and our companies are well funded, having raised £770m over the year, to deliver on significant clinical milestones,’ he said.

The life sciences portfolio remains the driver of returns, growing 11.8%. It benefited from the IPOs of Achilles Therapeutics, a biotech firm developing personalised cancer therapies, and gene therapy business Freeline on the Nasdaq.

Post-IPO, shares in Freeline suffered from stock market volatility. Murphy said despite a strong start to the year and a successful series C financing after listing, the company was ‘impacted by the Covid-19 pandemic and was not able to dose patients [in trials for treatment of metabolic disorder Fabry Disease]’.

‘Pleasingly, the company has dosed a further patient in this study post-period end and expects to dose escalate during the next financial year,’ he said.

Syncona’s largest holding, Autolus, also caused it more pain this year. The developer of blood cancer therapies dragged the fund to a rare period of underperformance last year after its shares plummeted 80% in the global sell-off and it has continued its tumultuous run on the Nasdaq, where it has been listed since 2018, over the past year.

Murphy said the fund had ‘experienced volatility’ due to Autolus. He said the company had prioritised its AUTO1 programme (a cell therapy study) which ‘is now progressing to a pivotal study’ and made cost savings.

‘The business raised $115m in January and is well positioned to deliver its AUTO1 product through its pivotal study and progress its exciting pipeline of programmes,’ he said.  

Murphy said the volatility in the public markets has affected the valuations of their holdings but that the ‘Nasdaq has played an important role in providing these companies with the capital to deliver their plans’.

Elsewhere, returns were held back by Syncona’s ‘capital base’ of £578m at the end of the period, held across cash, UK sovereign bonds and legacy funds. 

Despite the hiatus in clinical trials, the fund continued its strategy of seeding companies, founding two new companies and adding another, taking the total portfolio to 11 names.

Syncona founded Resolution, which is developing cell therapy for patients with end-stage liver disease, following a collaboration with the University of Edinburgh. It spent £26.6m setting up the business.

The fund also founded gene therapy company Purespring with a £45m commitment. The business is one of the first kidney-focused gene therapy companies and will look for treatment for chronic renal diseases that Murphy said ‘are currently poorly addressed with existing treatments’.

The manager also added Neogene Therapeutics to the portfolio, co-leading a $110m financing round with a $19m commitment alongside other investors. It is developing cell therapy for solid tumours based on a patient’s own neoantigens – a new protein that forms on cancer cells – which Syncona believes are the ‘best solid tumour cancer targets given their presence in cancer cells but absence in healthy cells’.

In the five years to 23 June, holders of Syncona shares – which are currently trading on a 19% premium to NAV according to broker Numis Securities – have enjoyed a 77% total return while the NAV has risen 68%. 

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