
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.
Melanie Gee
Chair
Syncona Limited
CHAIR’S STATEMENT
A year of strategic evolution in
challenging market conditions
4 SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2023