Shares in Syncona (SYNC) got a much-needed boost in the half year to 30 September as stake building by activist Saba and progress by the fund’s life sciences companies raised hopes that a £250m return of capital can be achieved.
Interim results showed the share price leaped 39.9% to 123.8p at the end of September, well ahead of the 3% rise in the portfolio and sharply narrowing the discount to net asset value per share of 175.7p from 48% to 29.5%, Since then the shares have slipped back to 127p but are up 33% this year, though still down 36% over five years.
While US activist hedge fund Saba’s ratcheting up its position in Syncona to 16.4% in September may have been the main factor in the rally, the half-year report demonstrated the shares may have been bolstered by the company’s refreshed management team‘s focus on delivering on a commitment to return £250m to shareholders in around the next two years.
Shareholders approved a new investment policy in March. It commits Syncona to return a minimum of £250m to shareholders “in a timely manner” as it realises value from its mature portfolio. Shareholders will be consulted on the company’s future once £250m has been returned, or in February 2028 if that comes first.
No capital was returned in the half-year period and its cash pool fell from £198.3m to £148.2m as Syncona invested £43.4m into its mostly unlisted, fledgling companies, with 85.3% of the money going into later-stage and clinical businesses.
The portfolio now has two companies in late-stage clinical trials, Beacon Therapeutics and Spur Therapeutics. A further seven are at earlier clinical stages, and US-listed Autolus is already selling an approved product.
Syncona highlighted three value “inflection” points where companies achieved key targets that could make them attractive to potential bidders.
In September, Beacon’s VISTA Phase II/III pivotal trial of laru-zova in X-linked retinitis pigmentosa, an inherited cause of blindness, met its primary endpoint. Beacon plans to use the data to apply for US approval.
This month Resolution Therapeutics reported encouraging interim phase I/II data in a trial of a treatment for liver disease.
Meanwhile, Autolus increased third-quarter product revenue by 95% to $41.2m and expected least $150m for the full year.
The modest NAV gain was driven mainly by Beacon. The deferred consideration Syncona is due from the company was revalued up by £48.5m after the trial results. Autolus added £12.2m as its share price rose, and OMass added £4.6m after a $310m Series C financing. These gains were partly offset by a £24.5m write-down of Anaveon after a strategic review and a £3.3m loss from the weaker US dollar.
Chris Hollowood, chief executive of Syncona Investment Management, who added the role of chief investment officer to his responsibilities in September, said: “This financial year has started with positive performance and strong momentum across the portfolio and sector.” He added: “We believe there is a compelling opportunity ahead for significant value creation.”
Our view
Richard Williams, senior analyst at QuotedData, said: ! While SYNC’s NAV growth was relatively modest, its share price surged by almost 40%, benefiting from a broader resurgence in healthcare and biotechnology stocks that has helped narrow the trust’s discount substantially. Progress across its maturing life sciences portfolio, most notably positive pivotal trial data from Beacon Therapeutics’ gene therapy targeting inherited blindness, which represents an important step towards regulatory approval, were encouraging. With 91.7% of the portfolio now in clinical-stage or commercial businesses, SYNC is approaching a period in which successful clinical outcomes could translate into significant realisations. This is much-needed as its capital pool has fallen below £150m, with around 86% already committed or earmarked to support key milestones, leaving limited flexibility for additional investments. Delivering on its commitment to return at least £250m to shareholders will therefore depend on successful portfolio realisations. The discount has narrowed substantially to around 29.5%, but there is scope for it to narrow further as the value of the portfolio is crystallised through disposals.”
