SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Building a platform
for long-term growth
and impact
Syncona Limited
Annual Report and Accounts 2024
STRATEGIC REPORT
02
At a glance
04
Chair’s statement
06
Business review
10
Our NAV Growth Framework in action
18
Market review
22
Our purpose and strategy
24
Our investment process
26
Our value creation model
28
Key performance indicators
30
Our ESG approach
32
Purpose-led stakeholder engagement
40
Our people and culture
44
Portfolio review
54
Financial review
56
SECR disclosure
58
TCFD report
62
Risk management
66
Principal risks and uncertainties
73
Viability statement
GOVERNANCE
74
Corporate governance report
78
Board of Directors
80
Report of the Nomination
and Governance Committee
84
Report of the Audit Committee
89
Report of the Remuneration Committee
95
Directors’ report
98
Statement of Directors’ responsibilities
FINANCIAL STATEMENTS
99
Independent Auditor’s report
105
Unaudited Group portfolio statement
106
Consolidated statement
of comprehensive income
107
Consolidated statement
of financial position
108
Consolidated statement of changes
in net assets attributable to holders
of Ordinary Shares
109
Consolidated statement
of cash flows
110
Notes to the consolidated
financial statements
SHAREHOLDER INFORMATION
132
AIFMD Disclosures (unaudited)
133
Report of the Depositary
to the shareholders
134
Company summary and
e-communications for shareholders
135
Glossary
137
Alternative performance measures
138
Advisers
Our purpose is to invest
to extend and enhance
human life
1. Alternative performance measure, please refer to page 137.
2.
Fully diluted, please refer to note 14 in the financial statements on page 121.
3.
Please see glossary on page 135 for definition.
We do this by creating, building and scaling companies to
deliver transformational treatments to patients in areas of
high unmet need. We aim to build and maintain a diversified
portfolio of 20-25 globally leading life science businesses,
across development stage, modality and therapeutic area,
for the benefit of all our stakeholders.
Business review p.06
2024 HIGHLIGHTS
synconaltd.com
Syncona Limited
£1.24bn
Net Asset Value (NAV) (188.7p per share
1,2
)
(2023: £1.25bn; 186.5p per share)
£786.1m
Life science portfolio valuation
1
(2023: £604.6m)
£452.8m
Capital pool
1,3
(2023: £650.1m)
1.2%
NAV per share return
1
(2023: (4.1)%)
2.2%
Life science portfolio return
1
(2023: (14.3)%)
£172.2m
Capital deployment
1
(2023: £177.2m)
Syncona is a leading life science investor with a strong
balance sheet and clear strategy for growth and patient
impact. The core premise of our investment strategy is that
significant risk-adjusted returns in life science come when
novel technology is developed to a late-stage clinical
product. We apply a differentiated investment model and
take a long-term approach to build world-class companies
which can reach this point.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
01
STRATEGIC REPORT
BUILD
sustainable
businesses by
taking a hands-
on partnership
approach
SCALE
our companies
over the long term,
leveraging our
capital pool and
relationships
with strategic
co-investors and
industry partners
CREATE
or add globally
leading
companies
based on
exceptional
science
AT A GLANCE
Creating and investing in life science
pioneers to deliver growth and
transform lives
BUILDING A PORTFOLIO
OF GLOBAL LEADERS
Our strategy is to create, build and scale companies around
exceptional science to build a portfolio of 20-25 globally leading
life science businesses, across development stage, modality
and therapeutic area for the benefit of all our stakeholders.
A MULTI-DISCIPLINARY TEAM
WITH A STRONG TRACK RECORD
Our team is at the heart of Syncona’s strategy. They leverage
their expertise to find and build future global leaders in life
science, whilst providing the operational, clinical and regulatory
expertise necessary to support our portfolio companies through
the development cycle. We have significant experience in
managing risk and reward in a specialised asset class. To date
our four exits have generated proceeds of £948 million, an
aggregate 4.3x multiple of cost.
OUR CAPITAL POOL
We have a balance sheet structure which underpins our
strategy and provides us with the flexibility to fund our
companies from foundation to late-stage clinical development.
Whilst we will bring in co-investors alongside us to diversify
financial risk, our ability to fund over the long term helps
to attract the best academics, founders, executives and
financing syndicate partners. It also helps to provide a
strong negotiating position for financing rounds or M&A.
A DIFFERENTIATED VALUE CREATION MODEL
We believe that significant value in our asset class
can be accessed by delivering companies to late-stage
clinical development.
Our purpose and strategy p.22
Financial review p.54
BY CREATING OR ADDING
3 new companies a year
based on exceptional science
WE WILL ACHIEVE OUR PORTFOLIO TARGET SIZE OF
20-25 companies
targeting top quartile returns
AND DELIVER
3-5 companies
to late-stage development where we have
significant ownership positions
If we do this, we will have driven strong risk-adjusted returns for
investors and delivered transformational impact for patients
OUR AMBITION IS TO GROW OUR NAV TO
£5bn
BY 2032
£452.8m
In the capital pool
150+
Years of life science and investing
experience in the investment team
02
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
IMPACT ON
PATIENT QUALITY
OF LIFE
MATURITY
ADDRESSABLE
PATIENT
NUMBERS
(PREVALENCE
1
)
CATEGORY
LEADING
PLATFORM
AVAILABILITY
OF EXISTING
TREATMENTS
LIFE
THREATENING
PROXIMITY TO
REGULATORY
FILING
CURATIVE
POTENTIAL
Patient
impact
factors
OUR STRATEGIC PORTFOLIO
Our strategic portfolio is made up of 13 leading life science companies, all built with product-focused strategies in emerging
categories of novel science where we believe there is an opportunity to make a difference to the lives of patients.
MAKING A POSITIVE IMPACT
Delivering a positive impact is fundamental to what we do at
Syncona and we are motivated every day by our purpose of
investing to extend and enhance human life. During the year
we developed our first patient impact framework, which
illustrates how we embed patient impact factors within our
investment model.
Our ESG approach p.30
Our NAV Growth Framework in action p.10
BEST IDEAS
PRE-CLINICAL
CLINICAL
LATE-STAGE CLINICAL
BLA
1
Autolus Therapeutics
Beacon Therapeutics
iOnctura
Spur Therapeutics
Resolution Therapeutics
Quell Therapeutics
Anaveon
Purespring Therapeutics
Forcefield Therapeutics
OMass Therapeutics
Mosaic Therapeutics
Kesmalea Therapeutics
Yellowstone Biosciences
Syncona investment point. 1. Biologics License Application.
MOVING TO
MARKET
MOVING TO
DEFINITIVE
DATA
MOVING TO
EMERGING
EFFICACY DATA
MOVING TO
OPERATIONAL
BUILD
Portfolio review p.44
1. The number of existing cases of a disease.
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
03
NAV GROWTH FRAMEWORK
CHAIR’S STATEMENT
Resilient performance
against challenging
backdrop
Global market conditions have
continued to be impacted by significant
macroeconomic and geopolitical
uncertainties, which have weighed on
sentiment more broadly. It has been one
of the worst bear markets for biotech
on record, with the S&P Biotech Index
(XBI) ending Syncona’s financial year
45.7% lower than its peak in February
2021. Over the same period Syncona’s
life science return is (13.5)% and NAV
per share return is (6.1)%
1
. In particular,
the funding environment for pre-clinical
and early-stage clinical biotech
companies has been difficult.
Against this backdrop, the Syncona team
2
has proactively managed the portfolio to
protect value and has taken a rigorous
approach to capital allocation, focused
on clinical assets and assets approaching
clinical entry, to enable the delivery of the
key value inflection points outlined at our
FY2023/4 Interim Results.
FINANCIAL PERFORMANCE
During FY2023/4, Syncona has delivered a
resilient performance, ending the year with
net assets of £1,238.9 million or 188.7p per
share, a 1.2% NAV per share return in the
year (31 March 2023: net assets of £1,254.7
million, NAV per share of 186.5p, (4.1)%
NAV per share return). The life science
portfolio delivered a 2.2% return, with the
increase in the value of Autolus Therapeutics
(Autolus), offset by the partial write-downs
at Anaveon and Clade Therapeutics (Clade)
and the write-off of Gyroscope Therapeutics
(Gyroscope) milestone payments.
Performance was further enhanced by
accretive share buybacks and positive
returns from our capital pool assets.
FOCUSED AND RIGOROUS
CAPITAL ALLOCATION
The challenging market backdrop and
broader sentiment has impacted Syncona’s
share price, which declined by 17.0% in the
year, with the discount to NAV widening
from 20.5% to 34.8%. The Board believes
that the share price undervalues the portfolio
and its potential and represents a compelling
investment opportunity. In September 2023,
the Board took the decision to allocate
up to £40.0 million to a share buyback
programme and post-period end a further
£20.0 million has been allocated
3
to the
programme. The Board believes this strikes
the right balance between continuing to
focus capital allocation on Syncona’s
maturing portfolio and a share buyback
given the material discount to NAV at which
the shares are currently trading. The capital
allocated to the buyback does not impact
planned investment into clinical-stage
assets in the next 24 months.
In the last year, the Syncona team’s
operational progress and proactive
management of the portfolio has
provided a platform for future growth.”
MELANIE GEE
CHAIR, SYNCONA LIMITED
1. 31 December 2020 used as starting valuation for life science and NAV per share returns.
2. Use of “Syncona team” refers to the Syncona Investment Management Limited (SIML) team.
3.
The further £20.0 million allocated to the share buyback programme will be on the same terms as announced on
29 September 2023, save that the programme has been extended beyond the Company’s 2024 Annual General
Meeting, subject to the grant of a new buyback authority to the Company by the shareholders at that meeting.
Any share purchases under the share buyback programme will be made pursuant to the authority to repurchase
shares granted to the Company at its Annual General Meeting held on 1 August 2023, or any new authority
granted to the Company at its 2024 Annual General Meeting.
4. As at 19 June 2024.
5. Please refer to glossary on page 135.
04
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
In the period, £20.2 million of shares have
been repurchased at an average discount
of 35.1% to NAV per share, resulting in an
accretion of 1.61p to NAV per share in the
year. The share buyback is ongoing, with
a further £10.0 million of shares bought
back since the period end
4
.
Over the course of the year, the Syncona
team has evolved the Company’s approach
to capital allocation, moving from focusing
on having up to three years of financing
available to ensuring Syncona is positioned
to sustainably deliver capital access
milestones, and is funded to deliver key
value inflection points, which have the
potential to deliver significant NAV growth.
As our portfolio companies continue to
mature there is increased potential to access
third party capital and liquidity, allowing
for a more dynamic approach to capital
allocation. The Board believes the evolution
in our approach retains the strategic balance
sheet that underpins the delivery of
Syncona’s long-term strategy, whilst also
allowing the Company to optimise returns
for shareholders. This Capital Allocation
Policy is covered more fully in the business
review and included in full on page 8.
EMBEDDING A NEW OPERATING MODEL
During the year, the Syncona team has
expanded its senior team and embedded
a new operating model to enable the more
efficient management of people, capital
and the Syncona portfolio. As part of this
process, in April 2023 Roel Bulthuis joined as
Managing Partner and Head of Investments,
bringing over 20 years of global life science
venture capital, business development and
investment banking experience. In May
2023, John Tsai (previously CMO at Novartis)
joined as Executive Partner, with significant
clinical, pharmaceutical and leadership
experience. Effective 1 April 2024, Rolf
Soderstrom former CFO of SIML moved to
the role of Executive Partner, where he now
supports the Leadership and Investment
Teams whilst remaining on the SIML Board
and as Chair of the Valuation Committee.
Kate Butler, former Group Finance Director
of SIML and an experienced financial leader
from a career across biotech, took up the
role of CFO of SIML. Our Executive Partner
group
5
has also expanded during the year
and is well placed to support execution
at the portfolio companies as they scale.
This is an important function for the
business and supports our proactive
portfolio management approach.
Martin Murphy stepped down as Chair
of SIML after 11 years of playing an
instrumental role in building Syncona into the
business it is today. Martin’s impact on both
the Company’s trajectory and the wider
ecosystem has been remarkable, and we
are indebted to him for his dedication and
the platform he helped us to establish. The
Board is pleased with the strategic progress
Syncona has made and with how the senior
team, now led by Chris, as CEO and Interim
Chair of SIML, is operating. A recruitment
process to appoint a new permanent Chair
of SIML is ongoing. The evolution of the team
and the model are critical to the delivery
of Syncona’s ambitious plans to achieve
£5 billion of NAV by 2032.
BUILDING A SUSTAINABLE
LIFE SCIENCE ECOSYSTEM
Since 2012, Syncona has been a key part
of changing the landscape for ambitious life
science company creation in the UK. As a
direct consequence of Syncona’s actions,
many potential therapies have been taken
from academic research into the clinic on an
industrial and scalable footing. The Board and
Syncona team are passionate about shaping
a life science ecosystem that is sustainable
and provides a platform for further success.
We contribute to this in a range of ways,
including by building companies in the UK,
funding them at scale and focusing them
on product development. The Board and
Syncona team also continuously engage
with a range of stakeholders, including
Government, industry participants, life
science property developers, charities and
regulators, to enable the scaling of a dynamic
biotech cluster in which Syncona and the
companies we build can thrive.
The Board is increasingly encouraged by the
growing cross-party public policy support
for science and innovation, and increased
investment in high-growth sectors. A key
challenge in translating science from an
academic setting and developing it into
a commercial reality is accessing the
appropriate level of capital to enable a
company to scale. We are therefore highly
supportive of the ambition behind the
Mansion House reforms. The Board and
Syncona team are committed to working
alongside the signatory pension providers and
other relevant parties as these commitments
move towards tangible proposals to
provide the scale-up capital that will take
the UK’s biotech sector to the next level.
Syncona’s positive role within the
ecosystem is also aligned with our
commitment to sustainability, which is
embedded into Syncona’s investment,
portfolio management, and business
processes. I am pleased with our continued
progress in this regard, which includes SIML
becoming a signatory of the Net Zero Asset
Managers (NZAM) initiative and completing
its first UN Principles for Responsible
Investment (PRI) submission. A full overview
of our progress in and commitment to
sustainability and responsible investment
can be found in the Sustainability Report.
OUTLOOK
Macroeconomic and geopolitical
uncertainties have created a challenging
backdrop for Syncona and our portfolio.
These conditions have impacted both the
cost of capital and financing environment
in our sector. As we move into FY2024/5,
despite the ongoing macro uncertainties,
we are cautiously optimistic given the
gradual decline in inflation and potential for
interest rate cuts. We believe improvements
in the macroeconomic environment will
create more favourable conditions for
our companies to operate in.
In the last year, the Syncona team’s
operational progress and proactive
management of the portfolio has provided
a platform for future growth. A newly
embedded operating model, expanded
team, and evolved Capital Allocation Policy
underpinning our disciplined approach
to managing our balance sheet, mean
Syncona is well positioned to take advantage
of market conditions as they improve.
With three companies added to the
portfolio during the year, including one at
clinical stage, we are on track to deliver
on our 10-year targets which were set out
in November 2022:
–
Three new companies created or added
to the portfolio per year
–
This target has been updated to reflect
that we will both create companies from
highly innovative science and invest
in existing companies at clinical stage
–
Delivering three to five companies to
late-stage development where we are
significant shareholders
–
Building a portfolio of 20-25 life science
companies
The Board remains focused on overseeing
and supporting the Syncona team with
delivery of our long-term strategy to
create, build and scale a portfolio of
20-25 leading life science companies and
organically grow net assets to £5 billion by
2032. Together, the Board and Syncona
team remain committed to these targets
and to delivering medium and long-term
growth for our shareholders.
Melanie Gee
Chair
Syncona Limited
19 June 2024
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
05
BUSINESS REVIEW
Resolute focus on proactively
managing our portfolio
The Syncona team has made significant
progress in the year, proactively managing
the portfolio against a challenging market
backdrop, embedding a new operating
model to enable scale and adding new
companies to the portfolio to deliver on
its 10-year targets.
LIFE SCIENCE PORTFOLIO
PERFORMANCE
The performance of the life science
portfolio has been driven by a £122.4
million valuation gain from Autolus, which
was largely offset by partial write-downs
of Anaveon and Clade and the write-off
of Gyroscope milestone payments.
The share price appreciation at Autolus
was driven by continued strong progress
in the development of its obe-cel therapy.
The company has submitted the key
regulatory filing for approval of the drug,
its Biologics License Application (BLA),
with the US Food and Drug Administration
(FDA) and expects to receive feedback
regarding potential approval in November
2024. Autolus also completed a strategic
collaboration with BioNTech worth $250
million in upfront proceeds and a public
offering of $350 million.
Elsewhere, the partial write-down
of Syncona’s holding in Anaveon to
£35.7 million
1
(£42.8 million decline in value)
reflected the company’s decision to focus
on its next generation, pre-clinical ANV600
programme and the post-period end sale
of Clade to Century saw a £14.4 million
write-down to £9.4 million. These actions,
whilst disappointing from a value
perspective, were aligned with our rigorous
approach to capital allocation and proactive
management of the portfolio. In addition,
Novartis’ decision during the year to
discontinue the development of GT005,
which it had been responsible for
progressing since acquiring Gyroscope
in February 2022, resulted in a write-off
of the £56.4 million risk-adjusted
valuation of the milestone payments
2
.
The financial year has started with
positive momentum and we remain
focused on driving NAV growth
for shareholders whilst delivering
transformational impact for patients.”
CHRIS HOLLOWOOD
CEO, SYNCONA INVESTMENT
MANAGEMENT LIMITED
1.
Includes additional £12.6 million invested following the write
down as part of the final tranche of the Series B financing.
2.
Increase from £54.5 million as at June 2023 due to the
impact of foreign exchange during the period.
06
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
Late-stage clinical
8%
Clinical stage
23%
Pre-clinical
69%
Late-stage clinical
36%
Clinical stage
35%
Pre-clinical
29%
Cell therapy
6
Gene therapy
3
Small molecules
2
Biologics
1
Cell therapy
3
Gene therapy
3
Small molecules
4
Biologics
3
Moving towards definitive data
8%
Moving towards emerging efficacy data
91%
Moving towards operational build
1%
Moving towards the market
36%
Moving towards definitive data
30%
Moving towards emerging efficacy data
31%
Moving towards operational build
3%
A MATURING, PROACTIVELY
MANAGED PORTFOLIO
In November 2022, we set out 10-year
targets to organically grow net assets
to £5 billion. Since then, the Syncona
team has worked hard to rebalance the
portfolio whilst prioritising capital towards
the most promising companies and
assets to provide a platform for future
growth. We now have 13 core life science
companies in our strategic portfolio that
we aim to build to a portfolio of 20-25
companies by 2032. This portfolio is
diversified across therapeutic area and
modality and weighted towards clinical
and late-stage clinical companies.
Over the year, our strategic portfolio has
continued to mature with 71.1% of its
value now in clinical-stage companies.
More broadly, we are pleased with the
clinical, operational and financial delivery
our companies have achieved, generating
15 clinical data readouts, initiating five
new clinical trials, and securing nine
financings and strategic transactions.
The Syncona team has proactively
managed the portfolio to ensure that our
companies have a path forward to reach
late-stage clinical development, where we
believe significant value can be accessed.
We set out a clear approach at our annual
results last year to navigate our portfolio
companies through challenging market
conditions and have delivered well against
this. We have worked alongside our
portfolio companies to widen financing
syndicates, execute strategic transactions,
focus capital on their most promising
assets, streamline budgets and consolidate
with other companies to drive combined
strength. Notably, the market conditions
impacting the biotech sector presented a
differentiated opportunity to take Freeline
Therapeutics (Freeline) private. Following
this transaction, post-period end we
announced that Freeline had acquired
SwanBio Therapeutics (SwanBio), creating
Spur Therapeutics (Spur).
In our FY2023/4 Interim Results, we set
out a NAV Growth Framework to provide
shareholders with more clarity on the
milestones and stages of the development
cycle where we anticipate our companies
will be able to access capital and drive
significant NAV growth in the current
market environment. In the second half,
the portfolio has delivered six capital
access milestones, including the initiation
of new clinical trials, publishing new
clinical data and the filing of Autolus’ BLA
submission to the US FDA. Since the
period end, the portfolio has delivered
a further four capital access milestones,
including encouraging clinical data
updates. This includes Spur, which
published data at the American Society
of Gene & Cell Therapy (ASGCT) Annual
Meeting, underlining the strong potential
of the company’s FLT201 therapy in
Gaucher disease. The NAV Growth
Framework is covered in further detail in
the life science portfolio review section.
CAPITAL ALLOCATION FOCUSED ON
CLINICAL-STAGE ASSETS OR ASSETS
APPROACHING CLINICAL ENTRY
Syncona has been able to leverage its
balance sheet throughout a period where
cost of capital and access to capital have
been challenging, deploying £172.2 million
in the year, in line with capital deployment
guidance. We have taken a rigorous
approach to capital allocation, with 86.1%
of capital deployed into clinical-stage assets
and assets approaching the clinic, whilst
funding our companies through to their next
key value inflection points. In doing so we
have closely monitored potential liquidity and
NAV progression alongside capital needs,
whilst considering external factors such as
the macro and financing environment.
REBALANCED PORTFOLIO
Weighted towards later-stage companies with increased diversification
CLINICAL PROFILE (BY VALUE)
DIVERSIFICATION (BY NUMBER)
SEPTEMBER 2022: PORTFOLIO OF 12 COMPANIES
MARCH 2024: PORTFOLIO OF 13 COMPANIES
NAV GROWTH FRAMEWORK (BY VALUE)
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
07
BUSINESS REVIEW
CONTINUED
Syncona is committed to driving and maximising returns for
shareholders over the long term as we seek to deliver on our
10-year targets as set out in November 2022. We strive to
deliver growth through capital appreciation and offer investors
the opportunity to access the expertise of Syncona’s specialist
team and the growth potential of a proprietary investment
portfolio in a high risk and high reward sector.
FOCUS ON DRIVING SIGNIFICANT VALUE THROUGH INVESTING IN LIFE SCIENCE
The core premise of our investment strategy
is that significant risk-adjusted returns in life
science come when novel technology is
developed to a late-stage clinical product.
We generate opportunities to do this by
creating companies from exceptional
science, then building and scaling them over
the long term to reach late-stage clinical
development, alongside third-party investors.
We also seek to make new investments in
clinical-stage opportunities, both public and
private, where we can similarly advance
them to late-stage clinical development
and generate strong risk-adjusted returns.
PORTFOLIO MANAGEMENT AND OUR NAV GROWTH FRAMEWORK
Many of our investments are both capital
intensive and illiquid. We aim to manage our
portfolio as a whole to ensure we have the
capital required to deliver our investment
strategy, either in cash or from liquid assets
in our life science portfolio. We leverage our
balance sheet by accessing external sources
of capital to support the funding of our
portfolio companies. We take a rigorous
approach to capital allocation, prioritising
capital towards clinical opportunities and
assets which are approaching clinical
entry, while continuing to create companies
based on exceptional science.
In our FY2023/4 Interim Results, we set out a
NAV Growth Framework to give shareholders
more clarity on which milestones and at what
stage of the development cycle we anticipate
our companies will be able to access capital
and drive significant NAV growth. Emerging
clinical data typically has the potential to drive
access to capital either through company
financings or, for companies that are publicly
listed, it can drive returns by share price
appreciation. Definitive clinical data has the
potential to provide significant NAV growth
and has the potential to provide access to
capital through sales of portfolio companies,
or significantly increased market liquidity
in listed shares.
If our investment strategy is successful, we
anticipate that we will generate significant
cash proceeds from exits or other liquidity
events and that over time this will be the
principal source of capital to fund our strategy.
A SUSTAINABLE MODEL AND A STRATEGIC APPROACH TO CAPITAL EFFICIENCY
Primarily, we will look to re-invest cash
proceeds across our portfolio and into
new opportunities, where we believe we
can drive significant returns by continuing
to fund companies through to clinical
and late-stage development.
Where we do not see investment
opportunities that allow us to efficiently
deploy capital across our portfolio, we
will seek to return capital to shareholders.
We will consider all forms of distribution
mechanisms for capital returns at the time.
This includes buying back our own shares,
in particular if market conditions create
dislocations between the share price
of Syncona and its stated NAV.
We will continue to ensure that we are
positioned to sustainably deliver milestones
that have the potential to enable capital
access and are funded to deliver key value
inflection points which have the potential
to deliver significant NAV growth.
Our approach to capital allocation is dynamic
and continues to evolve as the business
scales and matures, increasing the potential
to access third party capital, liquidity and
optimise returns for our shareholders.
Despite the challenging market conditions
for biotech companies, from the £704.5
million raised by our portfolio, Syncona
committed £118.2 million, with our
companies attracting £586.3 million from
external investors and pharma partners.
This demonstrates the attractiveness of
our portfolio and our ability to leverage
the Syncona balance sheet to access
significant further capital.
ADDING HIGHLY INNOVATIVE NEW
COMPANIES TO THE PORTFOLIO TO
UNDERPIN LONG-TERM GROWTH
During the year, we have delivered on
our target of adding three new companies
to the strategic portfolio. We have been
able to selectively increase our exposure
to clinical assets beyond the natural
maturation of the portfolio, by investing
€30 million (£25.7 million) as part of a
Series B financing of iOnctura. This is
a clinical-stage company developing
innovative therapies for neglected and
hard-to-treat cancers. Its lead candidate,
roginolisib, has demonstrated long-term
safety and emerging efficacy data in a
Phase Ib clinical trial for uveal melanoma,
a rare cancer of the eye where patients
have very limited treatment options.
Syncona is working with the company to
explore the breadth of roginolisib’s potential
utility and we are excited to add iOnctura
and this promising asset to our portfolio.
We are also pleased to announce the
creation of a new company, Yellowstone
Biosciences (Yellowstone), with a £16.5
million Series A financing. Yellowstone is
an oncology company pioneering soluble
bispecific T-cell receptor (TCR)-based
therapies to unlock a new class of
cancer therapeutics.
We have also committed to a Series A
financing of a company we previously
seed financed in 2021, Forcefield
Therapeutics (Forcefield), a best-in-class
therapeutics company aiming to
revolutionise the treatment of heart
attacks. Alongside Syncona’s £20.0
million commitment to Forcefield’s Series
A, post-period end Roche Venture Fund
committed a further £10.0 million to
the financing, valuing Syncona’s holding
in Forcefield at £8.9 million, a 38%
uplift to the 31 March 2024 valuation.
CAPITAL ALLOCATION POLICY
08
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
ONGOING FOCUS ON OPTIMISING
SHAREHOLDER RETURNS
During the year, the Syncona team in
partnership with the Board conducted
an ongoing review of the Company’s
approach to capital allocation. As part of
this, the Board launched a share buyback
of up to £40.0 million in September 2023
and post-period end, a further £20.0
million has been allocated to the share
buyback programme. Syncona has set out
its Capital Allocation Policy to summarise
our evolved approach to the way we
manage capital to drive and maximise
returns for shareholders. The core premise
of our investment strategy is that significant
risk-adjusted returns in life science come
when novel technology is developed to
a late-stage clinical product. As a result,
many of our investments are both capital
intensive and illiquid. We aim to manage
our portfolio as a whole to ensure we
have the capital required to deliver our
investment strategy, either in cash or from
liquid assets in our life science portfolio.
We leverage our balance sheet by
accessing external sources of capital
to support the funding of our portfolio
companies. We anticipate that we will
generate significant cash proceeds from
exits or other liquidity events and that
over time this will be the principal source
of capital to fund our strategy.
Primarily, we will look to re-invest cash
proceeds across our portfolio and into
new opportunities, where we believe
we can drive significant returns by
funding companies through to clinical
and late-stage development.
Where we do not see investment
opportunities that allow us to efficiently
deploy capital across our portfolio, we
will seek to return capital to shareholders.
We will consider all forms of distribution
mechanisms for capital returns at the time.
This includes buying back our own shares,
in particular if market conditions create
dislocations between the share price
of Syncona and its stated NAV. We will
continue to ensure that we are positioned
to sustainably deliver capital access
milestones and are funded to deliver key
value inflection points which have the
potential to deliver significant NAV growth.
Our approach to capital allocation is dynamic
and continues to evolve as the business
scales and matures, increasing the potential
to access third party capital, liquidity and
optimise returns for our shareholders.
OUTLOOK
Market conditions have been challenging.
However, value is returning to late-stage
clinical assets and financing conditions
are beginning to improve in the private
markets. We continue to proactively
manage our maturing portfolio to drive
our companies to late-stage clinical
development and are resolutely focused
on delivering the 11 capital access
milestones and eight key value inflection
points that are mapped against our NAV
Growth Framework. We have a strong
pipeline of new investment opportunities
based on highly innovative science,
across therapeutic area, modality and
stage of development, from company
creation to clinical stage.
Syncona is well positioned with a well-
funded portfolio, strong balance sheet,
newly embedded operating model,
experienced team and clear strategy to
take advantage of market conditions as
they improve. We have rebalanced the
portfolio, prioritising capital towards the
most promising companies and assets,
and have preserved value in a challenging
market. We are excited about the
opportunity ahead to achieve our 2032
targets. The financial year has started
with positive momentum and we remain
focused on driving NAV growth for
shareholders whilst delivering
transformational impact for patients.
Chris Hollowood
Chief Executive Officer
Syncona Investment Management Limited
19 June 2024
Our NAV Growth Framework in action p.10
POTENTIAL TO ENABLE CAPITAL ACCESS
POTENTIAL TO DRIVE SIGNIFICANT NAV GROWTH
OUR NAV GROWTH FRAMEWORK
As we build and scale our companies, in the current market environment there are opportunities to deliver milestones
that drive capital access and key value inflection points that have the potential to drive significant NAV growth.
MOVING TO
OPERATIONAL BUILD
MOVING TO EMERGING
EFFICACY DATA
MOVING
TO MARKET
MOVING TO
DEFINITIVE DATA
OPERATIONAL BUILD
−
Clearly defined strategy
and business plan
−
Leading management
team established
DEFINITIVE DATA
−
Significant clinical data shows
path to marketed product
−
Moving to pivotal trial and
building out commercial
infrastructure
EMERGING EFFICACY DATA
−
Clinical strategy defined
−
Initial efficacy data from
Phase I/II in patients
ON THE MARKET
−
Commercialising product
−
Revenue streams
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
09
OUR NAV GROWTH FRAMEWORK IN ACTION
Completed operational build
£20.0m
Series A commitment
2024 PORTFOLIO HIGHLIGHT
Further commitment to a Series A financing
During the year Syncona committed to a
Series A financing of Forcefield, following an
initial seed investment in 2021. This funding
will support Forcefield as it works towards the
initiation of its Phase I/II trial. Post-period end
Forcefield attracted a further £10.0 million
Series A commitment from Roche Venture
Fund, with Syncona’s total commitment
to the Series A being £20.0 million.
CREATING AND BUILDING
COMPANIES FROM LEADING SCIENCE
Forcefield has developed a strategy
focused on harnessing the potential
of its first-in-class cardioprotective
proteins to retain heart function
following heart attacks, an area devoid
of any significant advancements in
the past two decades. Forcefield was
founded by Syncona and Professor
Mauro Giacca, a leading authority in
cardiovascular disease, who is the
Head of the School of Cardiovascular
and Metabolic Medicine & Sciences
at King’s College London.
PLANNING A PATH TO THE CLINIC
The company has plans for
its progression towards clinical
development as it works towards the
initiation of its planned Phase I/II trial.
There is a significant commercial
opportunity within the field, with heart
attacks being the number one global
cause of death. Syncona has worked
closely with the Forcefield team on its
financing and clinical strategy as it
seeks to bring its therapies to patients
in an area of high unmet need.
ESTABLISHING A LEADING
MANAGEMENT TEAM
In line with Syncona’s approach of
establishing world-class management
teams at our portfolio companies, in
September 2023 Syncona Executive
Partner John Tsai, MD was appointed
as Chief Executive Officer of Forcefield.
He was previously President, Global
Drug Development and Chief Medical
Officer at Novartis AG and has over
20 years of experience in bringing
innovative therapies to market across
geographies and therapeutic areas.
John’s proven track record in leading
transformational organisational growth
and strategy, along with expertise
in regulatory approval, commercial
launches, medical affairs, and great
leadership skills make him ideally
placed to lead Forcefield in progressing
its cardioprotective protein technology
towards clinical development.
An ambition to
transform the
lives of millions
10
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Forcefield has achieved
a number of important
milestones this year,
including launching a
Series A financing and
completing the build out
of its team. I am excited
to lead this company
on the next stage of
its journey as it works
towards the initiation of
its Phase I/II clinical trial.”
FORCEFIELD CEO AND
SIML EXECUTIVE PARTNER
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
11
STRATEGIC REPORT
OUR NAV GROWTH FRAMEWORK IN ACTION
CONTINUED
Developing
therapies to
deliver patient
impact
Moving to emerging efficacy data
12
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
2024 PORTFOLIO HIGHLIGHT
Defining a clinical strategy
During the year Anaveon took the strategic
decision to focus on its next generation
compound, ANV600, a targeted therapeutic
which has the potential to extend the
benefits of IL-2 therapies to a range of
cancers. This programme builds on the
company’s ANV419 programme, with
the potential for greater potency alongside
a strong safety profile.
HARNESSING THE POTENTIAL
OF IL-2 THERAPIES
Anaveon is developing a selective IL-2
receptor agonist, a protein that could
therapeutically enhance a patient’s
immune system to respond to
tumours. In humans, IL-2 causes an
immune cell, called a T-cell, to multiply
and become activated. Under certain
situations, T-cells can be activated to
attack tumours and, as a result, IL-2
is an already approved therapy for the
treatment of metastatic melanoma
and renal cancer.
Anaveon’s next generation
compound, ANV600, is designed
to overcome known challenges
with IL-2 therapies. These include
severe, dose-limiting side effects
and a short half-life that requires
frequent infusions. ANV600 could
potentially have a wide therapeutic
use in oncology, including in
combination with cell therapies,
vaccines, checkpoint inhibitors
and radiotherapy.
PRE-CLINICAL DATA SUPPORTS
THERAPEUTIC POTENTIAL OF
ANV600
Whilst PD-1 checkpoint inhibitors
have been established as the
standard of care for many cancer
indications, they still often result in
refractory cancers (cancers that do
not respond to medical treatment).
During the year Anaveon presented
positive pre-clinical data from
ANV600, a targeted version of its
first generation product ANV419,
which showed encouraging efficacy
signals in refractory cancer models
as well as synergistic efficacy with
checkpoint inhibitors. This data
supports ANV600’s potential as
a new therapeutic in mono- and
combination therapies for cancer.
INITIAL EFFICACY DATA A POTENTIAL
KEY VALUE INFLECTION POINT
Anaveon is expecting to initiate its
Phase I/II trial of ANV600 in H2
CY2024, with the delivery of clinical
data from ANV600 in CY2026, a key
value inflection point for the company.
Following strategic actions taken
during the year the company is now
funded to this data readout which
will allow it to focus on its clinical and
operational execution as it approaches
the clinical entry of ANV600.
Anaveon’s next generation asset
has strong potential to build upon
the clinical safety and efficacy
that had been observed with its
first generation compound.”
ANAVEON BOARD MEMBER AND SIML INVESTMENT PARTNER
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
13
Moving to definitive data
COMBINING TWO LEADING
GENE THERAPY COMPANIES
During the year, Syncona was able to
take advantage of market conditions
impacting the biotech sector and wholly
acquire Freeline, an adeno-associated
virus (AAV) gene therapy company
previously listed on NASDAQ.
Post-period end, Freeline completed
the acquisition of Syncona portfolio
company SwanBio, creating a new
Syncona portfolio company Spur.
This creates a consolidated AAV gene
therapy pipeline, with the company
focused on driving forward its two
potentially first-in-class gene therapy
assets in Gaucher disease and
adrenomyeloneuropathy (AMN)
towards late-stage development,
supported by an increased capability
in central nervous system (CNS)
disorders, which supports its pre-clinical
Parkinson’s research programme.
CLINICAL DATA SUPPORTING
COMMERCIAL OPPORTUNITY
Spur announced positive safety,
tolerability and enzyme activity data
during the year from its Phase I/II
clinical trial of FLT201 in Gaucher
disease, a debilitating genetic
2024 PORTFOLIO HIGHLIGHT
Two strategic transactions in the year
The challenging market conditions
impacting the biotech sector presented a
differentiated opportunity to take Freeline
private. Following this transaction, Freeline
completed an acquisition of Syncona
portfolio company SwanBio to form Spur,
creating a consolidated AAV gene therapy
pipeline that includes first-in-class gene
therapies in Gaucher disease and AMN.
The transaction consolidates costs,
drives efficiencies, provides a broadened
clinical pipeline, and brings strategic
synergies including clinical capabilities
and manufacturing know-how.
Our goal is to bring life-changing
gene therapies to people with chronic
debilitating disease. We are excited
by the data we have presented in our
Gaucher programme, which we believe
has the potential to challenge the
standard of care for the disease.”
SPUR THERAPEUTICS CEO
disorder in which a deficiency of
the GCase enzyme leads to a buildup
of fatty substances in the organs,
causing symptoms including
enlarged spleen and liver, low blood
counts, bone pain and reduced lung
function. This was followed by
additional data released post-period
end, which further supported the
efficacy and safety profile of the
therapy whilst also underlining the
therapy’s potential in improving
quality of life for Gaucher patients.
DEMONSTRATING A CLEAR PATH
TO A COMMERCIAL PRODUCT
The company expects to announce
additional data from the Phase I/II
Gaucher disease programme, a key
value inflection point, in H2 CY2024,
and an initial safety readout from
the higher dose cohort of the
Phase I/II trial in AMN, a devastating
neurodegenerative disease for which
there are currently no approved
treatments, in H1 CY2025. Both
programmes represent first-in-class
opportunities to bring gene therapy
to life-long debilitating diseases.
OUR NAV GROWTH FRAMEWORK IN ACTION
CONTINUED
14
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Delivering
potentially
first-in-class
gene therapies
£135.6m
Syncona valuation
$2bn
Annual Gaucher market size
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
15
STRATEGIC REPORT
Moving to market
We are pleased with
the positive clinical data
Beacon has reported this
year and look forward to the
upcoming 24-month data
from the Phase II SKYLINE
trial, which we expect will
be a key value inflection
point for the business.”
BEACON BOARD DIRECTOR AND SIML LEAD PARTNER
OUR NAV GROWTH FRAMEWORK IN ACTION
CONTINUED
16
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Progressing
therapies through
late-stage
development
MATURING DATA SUPPORTING
POTENTIAL OF CLINICAL
PROGRAMMES
During the year Beacon published
positive 12-month data from its
Phase II SKYLINE trial of AGTC-501
in X-Linked Retinitis Pigmentosa
(XLRP), with the data demonstrating
a favourable efficacy and safety
profile with improvements in visual
function amongst treated patients.
The positive data supported further
investigation of AGTC-501 in XLRP,
with the subsequent initiation of the
Phase II DAWN trial and the post-
period announcement of the initiation
of the registrational Phase II/III VISTA
trial
1
. The company expects to
announce 24-month durability
data from the SKYLINE trial in H2
CY2024, with data readouts to
follow from DAWN and VISTA in
CY2025 and CY2026, respectively.
ALIGNING MANUFACTURING
CAPABILITIES WITH COMMERCIAL
LAUNCH STRATEGY
In April 2024, Ascend Advanced
Therapies announced the acquisition
of Beacon’s chemistry, manufacturing
and controls (CMC) team and good
manufacturing practice (GMP) facility,
whilst concurrently entering a
long-term partnership with Beacon,
to continue manufacturing its products
for clinical and commercial use. This
secured a dependable and scalable
product supply for Beacon, enabling
it to focus on the clinical development
of its gene therapy pipeline. Beacon
is now well positioned as it progresses
towards filing its Biologics License
Application (BLA) for its late-stage
clinical asset, AGTC-501, for the
treatment of XLRP.
2024 PORTFOLIO HIGHLIGHT
Initiation of registrational trial
Following the positive clinical data published
from the SKYLINE trial, Beacon has now
initiated its registrational Phase II/III VISTA
trial for AGTC-501. The clinical data from this
registrational trial will support its BLA in the
US and a marketing authorisation application
(MAA) in Europe, with the programme now
progressing through late-stage development
and towards commercialisation.
20,000+
XLRP patients in the US and Europe
1. The UK’s MHRA and the EU’s EMA have accepted the VISTA study design as being pivotal.
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
17
0
5
10
15
20
25
30
35
40
2100
2075
2050
2025
2000
1975
1950
Japan
Europe
USA
0
100
200
300
400
2020-23
2010s
2000s
1990s
1980s
1970s
1960s
1950s
FDA novel drug approvals
MARKET REVIEW
RISING DEMAND FOR MEDICINES
–
Healthcare costs are
increasing globally, with the
US expecting to increase
its spending on healthcare
to c.20% of GDP in 2031
(2022: c.17%)
1
–
This increasing spend on
healthcare is partly driven
by a growing and ageing
population, with the global
population of those who are
aged over 65 expected to
increase to over 1.6 billion
by 2050 (2022: 771 million)
2
–
Changes in lifestyle
alongside other factors
are also driving increases
in levels of disease. This
includes in oncology,
where the number of those
aged under-50 being
diagnosed with cancer
increased by nearly 80%
between 1990-2019
3
$4.5trn
Spent on healthcare by the US in 2022
4
1. cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet.
2. United Nations, Department of Economic and Social Affairs, Population Division, 2022 Revision of World Population Prospects.
3. bmjoncology.bmj.com/content/2/1/e000049.
4. cms.gov/files/document/highlights.pdf.
5. fda.gov/about-fda/histories-fda-regulated-products/summary-nda-approvals-receipts-1938-present.
6. A method of treatment. This comprises different modes of delivering therapies to patients.
Positive long-term
structural trends
PERCENTAGE OF POPULATION OVER 65 YEARS OF AGE
2
INNOVATION DRIVING GROWTH
–
The healthcare sector benefits
from ongoing innovation
rather than cyclical growth
patterns seen in other sectors
–
There has been continued
growth of new therapies
in development, underlined
by the recent increase in
the number of new drug
applications (NDAs) for
new molecular entities
to the US FDA
–
Whilst the sector is not
immune to volatile market
cycles, biotech public
markets have demonstrated
long-term outperformance
versus other indices over
the last 20 years
60%
Increase in the number of NDAs for new
molecular entities since the 2000s
5
INCREASE IN APPROVALS OF NEW MEDICINE
Syncona’s strategy aligns to a number
of trends which support our investment
process and pipeline.
18
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
TARGET
MODALITY
DISEASE
TOOLBOX OF
MODALITIES
GENE THERAPY
CELL THERAPY
ANTIBODY DRUG CONJUGATES
MODALITY
NOVEL TARGET
DISEASE
TARGETED PROTEIN DEGRADATION
MONOCLONAL ANTIBODIES
NANOBODIES
NEW
FRONTIER OF
MEDICINE
ENZYME REPLACEMENT THERAPY
New frontier
of medicine
“First Wave’’
Small molecule drugs,
dominated by large
pharmaceutical companies
1950s
“Second Wave’’
Large molecule (antibody
therapies, enzyme
replacement therapies)
1990s
“Third Wave’’
Advanced biologics and genetic
medicines such as gene therapy, cell
therapy and DNA/RNA medicines
2010s
THE NEXT FRONTIER OF SCIENCE
–
There has been a recent
paradigm shift in drug
development through a
combination of scientific
advances in genetics
and new modalities
–
Since the sequencing of the
human genome there has
been an exponential increase
in the understanding of
genetics, which has unlocked
new insights into what is
causing disease, allowing
us to better design drugs
to suit the disease context
–
A wide range of modalities
across the Second and
Third Waves provide us
with increased flexibility
in disease intervention
–
The diversity of modalities
now available brings new
levels of precision to drug
development, where the
pairing of a novel target
with the best modality
6
for
the right disease can drive
improved patient impact
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
19
MARKET REVIEW
CONTINUED
Poised for growth as sector
conditions start to improve
Roel Bulthuis, Managing
Partner and Head of
Investments, SIML shares his
perspective on the current
biotech market landscape.
GETTING BACK TO HEALTH
Biotech is a cyclical market and is certainly not
immune to macroeconomic and geopolitical
uncertainty. The last few years have been
particularly challenging for companies
as they compete for resources and race
to redefine what is possible in medicine.
The competitive environment has been
incredibly fierce and many companies have
not survived the current downturn. Those that
have survived have had to prioritise, restructure
and rationalise their portfolios to focus on
assets with the most significant and near-term
potential. Understanding the importance of
this across our portfolio, we worked closely
alongside our management teams during
this period to do exactly that, proactively
managing pipelines to ensure resilience.
It’s been tough in both the public and
private markets. However, optimism
is beginning to return to the sector,
and we believe that the opportunities in
healthcare remain fundamentally strong.
The structural need for new medicines
and our ever-increasing ability to address
diseases by pushing scientific boundaries
underpin biotech’s enduring potential for
growth. We continue to believe that great
science, backed by ambitious capital and
matched with the right team and strategy,
has the best chance of translating to clinically
and commercially relevant products.
While market conditions remain challenging,
we look ahead with cautious optimism given
gradual improvements in the macroeconomic
headwinds. Improvements that could
create more favourable conditions for
our companies to operate in.
GREEN SHOOTS IN PUBLIC MARKETS
Despite ongoing uncertainty, public market
conditions broadly are looking more positive,
but biotech specifically is experiencing slower
growth than some other sectors. This is
demonstrated by NASDAQ’s biotech index,
which was marginally down from January-
March 2024, versus NASDAQ’s sector-
agnostic index, which was up around
10% in the same period.
One of the positive trends we have been
seeing, however, is a recovery in public market
valuations for biotech companies at late-stage
development. 2023 saw an encouraging
increase in the average enterprise value of
later-stage, meaningfully de-risked assets
(see figure 1). Although we have seen a
stabilisation in this more recently, it has partly
been driven by a number of significant Phase
III acquisitions
1
.Our experience continues
to suggest that you can most reliably realise
value at the late-stage end of the market.
Creating and building companies that are
in control of their own destiny to realise
true commercial potential has always been
at the core of Syncona’s strategy and
current trends demonstrate how important
this is. Our view is that companies with
the stand-alone capability to develop,
register and commercialise products are
better positioned to negotiate strategic
deals and access the financing markets.
This dynamic is being reflected in IPOs,
where we are seeing an increase in the
proportion of later-stage assets entering the
public markets (see figure 2). This correction
follows the overhyped IPO markets of
2020 to 2022, where pre-clinical or Phase I
companies were the most active, often being
taken to market too early or at unsustainably
high valuations. With this observed
stabilisation, more companies are waiting
until they have a strong body of clinical data
before coming to the public markets.
We believe that this is a positive sign of
things to come but, for the time being,
overall IPO activity continues to be
restrained, after we saw an initial pick
up of activity in the first quarter of 2024.
There is still a long way to go but we
continue to believe that late-stage assets
will provide the main source of realisable
returns for the time being.
SIGNS OF RECOVERY
IN PRIVATE MARKETS
The signs of recovery seen in the private
markets are not dissimilar to what we
have seen in the public markets, with an
initial bounce back in private financings
also focused on late-stage companies.
Investors are holding portfolio companies
private for longer and looking to take them
to a later stage, which is capital intensive
and means they are more selective in
allocating funds. With competition for
private funding therefore intensified,
biotech companies are increasingly
having to meet development milestones
to access funding.
Optimism is beginning
to return to the sector,
and we believe that
the opportunities in
healthcare remain
fundamentally strong.”
20
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
0
50
100
150
200
Phase III
Phase II
Phase I
Pre-clinical
Discovery
2019
2020
2021
2022
2023
2024
2023
2022
2021
2020
2019
Pre-clinical
Phase I
Phase II
Phase III
Commercial
3.8%
10.0%
15.0%
11.0%
5.6%
22.2%
10.0%
10.0%
16.7%
11.1%
20.0%
20.0%
16.7%
22.2%
37.0%
15.0%
25.0%
27.8%
33.3%
37.0%
45.0%
30.0%
27.8%
27.8%
27
20
20
18
18
Average (Phase III + Commercial): 58%
74%
$0
$300
$600
$900
$1200
$1500
Phase III
Phase II
Phase I
Pre-clinical
Dec 21
Jun 22
Jan 23
Jun 23
Jan 24
Mar 24
2023
2022
2021
2020
2019
2018
Pre-clinical/Phase I
Phase II
Phase III/Regulatory
Marketed
38%
28%
25%
9%
41%
59%
51%
58%
17%
17%
8%
10%
35%
20%
35%
26%
29%
10%
29%
4%
2%
6%
13%
30%
This preference for funding later-stage
assets was particularly evident in the first
two months of 2024, where we saw the
average round size for Phase III assets
recover substantially (see figure 3).
This trend is yet to be replicated at earlier
stages and, furthermore, the total number
and value of private financings have been
consistent between 2023 and 2024.
The recovery in valuations across private
rounds has also continued to be slow,
with down and flat rounds still a feature of
financings across biotech. Although we are
encouraged by what we are seeing, this
underlines that private markets have some
way to go on their road to recovery.
PHARMA CONTINUES TO
OUTSOURCE INNOVATION
The focus on late-stage assets is also being
reflected within the M&A landscape. Faced
with the reality of an upcoming patent cliff,
which sees over $200 billion of revenue at
risk of patent expiry over the next six years
2
,
pharma companies remain focused on
restocking their pipelines with later-stage
assets. This was seen in biopharma deal
making in 2023, which had a clear focus
on assets at Phase III stage or later, as
buyers sought assets that could reach
commercialisation on a shorter time horizon.
With pharma having the cash balances
to deploy meaningfully into exciting
late-stage assets, there is a clear path
for biotechs to continue as the innovation
engine within the sector.
POISED FOR GROWTH
So, what does this all mean for Syncona? The
trends we are seeing align to our investment
strategy of creating, building and scaling
companies with a laser focus on commercially
relevant assets. They also align with our thesis
that there is significant value to be unlocked
at the later stage of clinical development. Our
unwavering belief in this has even allowed us
to take advantage of market conditions, taking
two clinical-stage companies private, which
will further support our growth as the
environment improves.
Having said that, we know there is a lot of
work yet to be done. The financing market
for biopharma remains difficult, competition
for resource is fierce, and the road to
recovery will take some time yet.
We’ve been working hard to support our
portfolio companies as they navigate these
market conditions, taking decisive action where
necessary to protect and enhance shareholder
value. This action and our rigorous approach
to capital allocation mean that, much like the
market, we are emerging from a challenging
period, with a portfolio where we have built
a platform to deliver long-term growth.
1.
Stifel. Note that the recent sales of CymaBay Therapeutics, ImmunoGen, Ambrx, Karuna Therapeutics
and Mirati Therapeutics have reduced the average value of Phase III companies in 2024.
2. Perspectives on Biopharma, Lazard.
3. Goldman Sachs.
4. Endpoints, data to March 2024.
5. IQVIA Pharma Deals, Mergemarket, IQVIA leadership analysis.
FIGURE 3: AVERAGE ROUND SIZE ($ MILLIONS)
4
FIGURE 4: BIOPHARMA M&A DEALS INCREASINGLY FOCUS ON DE-RISK TARGETS
5
Biopharma deal volume by pipeline stage at time of M&A announcement
(deal volume in numbers, share in %)
FIGURE 2: IPO MIX
3
FIGURE 1: AVERAGE ENTERPRISE VALUE OF A BIOTECH LISTED ON US EXCHANGES
BY STAGE OF DEVELOPMENT ($ MILLIONS)
1
$30+
bn
Taken out the index
through acquisitions
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
21
2
1
OUR PURPOSE AND STRATEGY
CREATE
BUILD
Our purpose is to invest to
extend and enhance human life.
We have a
multi-disciplinary
team, with the skill
set, track record
and capital pool
that enables us to:
Key performance indicators p.28
Create or add globally leading
companies based on exceptional
science to deliver transformational
treatments for patients in areas
of high unmet need
HOW WE PERFORMED IN 2024
–
Three companies added to the
strategic portfolio
–
Two pre-clinical companies added,
Yellowstone and Forcefield
–
One clinical-stage company
added, iOnctura
PRIMARY KPI
Building the portfolio to 20-25 companies
2024 FOCUS AREAS
–
Proactively source world-class
science; bringing commercial vision
–
Focus on dramatic impact for patients
–
Select products a life science company
can credibly take to approval
–
Focus on adding a new clinical-stage
opportunity to the portfolio to drive
near-term growth
3
Companies added to the portfolio
Build sustainable businesses
that can take products through
the development cycle with
the potential to reach approval
HOW WE PERFORMED IN 2024
–
Maturing portfolio with five clinical-stage
companies, including two late-stage
clinical companies; 15 clinical data
readouts in the year
–
Proactive management of the portfolio
to streamline clinical and pre-clinical
pipelines and budgets
–
Freeline taken private and subsequently
acquired SwanBio, creating a leading
AAV gene therapy company, Spur
PRIMARY KPI
Clinical progress across the portfolio
2024 FOCUS AREAS
–
Attract and retain the best global talent
–
Work closely with companies on an
operational basis to set strategy to
drive value and extend cash runways
–
Take long-term decisions to enable
successful product development
–
Proactive management and focus on
strong execution across the portfolio
–
Ensure companies are well financed
to achieve their vision
5
Clinical trials commenced in the year
Building a portfolio of leading
life science companies
22
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
3
SCALE
We do this by creating, building and scaling companies to
turn exceptional science into transformational treatments
for patients in areas of high unmet need. We aim to build
a portfolio of 20-25 globally leading life science businesses,
across development stage, modality and therapeutic area,
for the benefit of all our stakeholders.
Scale companies ambitiously,
leveraging our balance sheet,
expertise and track record
HOW WE PERFORMED IN 2024
–
Autolus filed its BLA with the FDA for obe-cel and
agreed a strategic collaboration and equity investment
from BioNTech, alongside a public fundraising
–
Quell entered into a cell therapy collaboration with
AstraZeneca focused on autoimmune diseases,
in a deal potentially worth over $2.0 billion
–
86.1% of capital deployment into assets at clinical
stage or approaching clinical entry
–
Embedded new operating model to support delivery
of long-term targets
PRIMARY KPI
Access to capital
2024 FOCUS AREAS
–
Capital structure provides the flexibility to fund
companies to maximise their ambitions
–
Work alongside portfolio company management
teams applying the Syncona team’s multi-disciplinary
experience and knowledge to drive value
–
Work alongside aligned co-investors to provide
broader financial scale and expertise
–
Focus on allocating capital towards clinical
opportunities and assets that are approaching
clinical entry
£704.5m
Raised across the portfolio in the year of
which Syncona committed £118.2 million
BY CREATING OR ADDING
3 new companies a year
based on exceptional science
WE WILL ACHIEVE OUR PORTFOLIO
TARGET SIZE OF
20-25 companies
targeting top quartile returns
OUR AMBITION IS TO
GROW OUR NAV TO
£5bn
BY 2032
AND DELIVER
3-5 companies
to late-stage development where we
have significant ownership positions
If we do this, we will have driven strong risk-
adjusted returns for investors and delivered
transformational impact for patients
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
23
OUR INVESTMENT PROCESS
A rigorous and
disciplined process
HANDS ON
Once an opportunity
has been identified
and invested in...
BEFORE INVESTING INTO COMPANIES, WE ASK
OURSELVES THE FOLLOWING KEY QUESTIONS:
Q
Is the company solving a problem where
there is a high unmet need for patients?
Patient impact is central to our
investment process. The team carefully
evaluates opportunities across a range
of criteria with a central focus on how
the science being developed can deliver
a transformational impact for patients.
You can read more about our patient
impact framework on pages 11-13 of
our Sustainability Report.
Q
Are the science and academic
founders globally leading?
To find the best scientific ideas,
Syncona leverages our network
in the UK and overseas. We work
alongside our founders to understand
their science, sharing a passion for
commercialising their technology.
Q
Can a biotechnology company credibly
take the product to market?
We seek to build companies that can
deliver products to market. This is
aligned with our thesis that significant
value in life sciences investment can
be accessed at late-stage development.
We are focused on disease areas where
there is the potential for accelerated
development and where regulatory
pathways enable a faster route to market.
Q
Can the science be translated into
a commercial lead programme that
will meet return targets and is there
potential to be a category leader?
The investment team seeks opportunities
with a defined lead programme which
has the potential to deliver strong risk-
adjusted returns for shareholders. Detailed
analysis is carried out to understand the
commercial potential of a programme,
applying a range of filters to understand
how it might drive long-term value, as
well as how it might support building a
platform that allows the company to lead
a new category and build a pipeline.
Company
creation
We start by talking
to leading academics
developing highly
innovative science
and IP
Input on the deal
provided by the
Leadership Team
and Executive
Partner group
LEADERSHIP TEAM AND EXECUTIVE PARTNER GROUP
Supports the investment team in their review process
Provide insight and experience through the identification
and review process, ensuring only the best opportunities
are progressed.
INVESTMENT TEAM
Reviews the selected opportunity
Through ongoing evaluation of emerging data
and analysis of the competitive landscape.
1
BEST-IN-CLASS
OPPORTUNITY
IDENTIFIED
A highly
disciplined
team supports
the investment
model
24
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
We take a proactive approach to sourcing science with a focus on
how it could translate to products that can deliver transformational
efficacy for patients in areas of high unmet need. We then apply
our rigorous due diligence process.
The company has delivered
against its key milestones
Any investment of further capital
meets our returns criteria
Management team and
company build out are
progressing well and are
aligned with our processes
Investments are in-line
with our rigorous approach
to capital allocation
FUTURE INVESTMENTS ARE MADE ONLY IF KEY
MILESTONES AND METRICS HAVE BEEN ACHIEVED:
A LONG-TERM APPROACH TO FUNDING WITH MULTIPLE INFLECTION POINTS
Ensuring our companies have the flexibility to fund to market, we are constantly assessing opportunities
throughout their journey, with milestones that can drive capital access and key value inflection points
that have the potential to drive significant NAV growth, maximising value along the way.
MULTIPLE MILESTONES
AND KEY VALUE
INFLECTION POINTS
Supporting the company through
capital access milestones and
key value inflection points.
ONGOING SUPPORT FOR
FINANCING STRATEGY
Working with the company to
build and execute a financing
strategy alongside aligned
co-investors.
EXECUTION
Working alongside
the company to
ensure it executes on
its agreed strategy.
PRODUCT
LAUNCH
COMPANY
INCEPTION
Hands-on
development via
our launch team
LAUNCH TEAM
Efficient set-up of new portfolio companies
Enables quick and effective operationalisation of a new company,
accelerating early development in line with the Syncona model.
COMPANY
SUCCESSFULLY
LAUNCHED
BUILD OUT
...we are active partners,
working together to scale
companies for success
2
APPROVAL
AND CAPITAL
ALLOCATION
Underpinned by proactive involvement and support from the
Syncona investment team and Executive Partner group.
3
BUILD OUT NEW
COMPANY IN
ADVANCE OF
LAUNCH
INVESTMENT COMMITTEE
Final decision on allocation of capital
Assessment against Syncona’s
rigorous approach to capital allocation.
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
25
MOVING TO
OPERATIONAL BUILD
MOVING TO EMERGING
EFFICACY DATA
MOVING
TO MARKET
MOVING TO
DEFINITIVE DATA
OUR VALUE CREATION MODEL
A differentiated approach
We are focused on maximising value at all points of the investment cycle to deliver
transformational treatments to patients, capture superior risk-adjusted returns for
shareholders and build long-term value for all our stakeholders.
A multi-disciplinary
team with a strong
track record
Our capital pool,
which underpins
our strategy
Proactive portfolio
management
A long-term and
disciplined approach
to capital allocation
A commitment to making
a positive impact and
responsible investing
KEY ENABLERS OF VALUE
A DIFFERENTIATED PLATFORM INVESTING IN A GLOBALLY SIGNIFICANT SCIENTIFIC RESEARCH BASE
POTENTIAL TO ENABLE CAPITAL ACCESS
POTENTIAL TO DRIVE SIGNIFICANT NAV GROWTH
OUR NAV GROWTH FRAMEWORK
As we build and scale our companies, in the current market environment there are opportunities to deliver milestones
that drive capital access and key value inflection points that have the potential to drive significant NAV growth.
OPERATIONAL BUILD
−
Clearly defined strategy
and business plan
−
Leading management
team established
DEFINITIVE DATA
−
Significant clinical data shows
path to marketed product
−
Moving to pivotal trial and
building out commercial
infrastructure
EMERGING EFFICACY DATA
−
Clinical strategy defined
−
Initial efficacy data from
Phase I/II in patients
ON THE MARKET
−
Commercialising product
−
Revenue streams
Our investment process p.24
IDENTIFY OPPORTUNITIES BASED
ON EXCEPTIONAL SCIENCE...
...WHICH HAVE THE POTENTIAL TO HAVE A
TRANSFORMATIONAL IMPACT FOR PATIENTS
CREATE
BUILD
SCALE
Read more about our patient
impact framework on pages 11
to 13 of our Sustainability Report
synconaltd.com/sustainability
26
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
The core premise of our investment strategy is that significant risk-adjusted returns come
when highly innovative technology is developed into a late-stage clinical product. Our model
is to identify exceptional science and create or add companies which have the potential to
develop products to late-stage development, where significant value can be accessed.
THE WIDER VALUE WE CREATE
As our companies progress there are various
pathways for delivering returns and liquidity
whilst protecting value.
OUR PEOPLE
PATIENTS
THE LIFE SCIENCES ECOSYSTEM
Purpose-led stakeholder engagement p.32
Capital Allocation Policy p.08
Hold to late-stage development
Deliver 3-5 companies to late-stage development,
where we have significant ownership positions;
at this point Syncona’s thesis is significant value
can be accessed, whilst often providing liquidity
opportunities.
Exits
As our companies mature, there is the potential
for liquidity through M&A and realisations of
listed shares. In all cases we are driven by the
balance of risk and reward, and we sell companies
to crystallise significant risk-adjusted returns.
If our investment strategy is successful, we
anticipate that we will generate significant cash
proceeds from exits or other liquidity events.
Protecting value
Life science development is inherently risky and
some companies won’t succeed. When issues
arise in our portfolio we take quick and decisive
action to recover as much value as possible,
reallocating capital and resource.
OUR SHAREHOLDERS
OUR PORTFOLIO COMPANIES
THE SCIENTIFIC RESEARCH
COMMUNITY
OUR CO-INVESTORS
INVESTING TOGETHER
EXTENDING AND ENHANCING TOGETHER
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
27
Capital pool
37%
Life science
portfolio
63%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
3%
1 year
3 years
5 years
Life science return
NAV per share return
0
1
2
3
4
FY24
FY23
FY22
Late clinical
31.8%
Clinical
31.3%
Pre-clinical
25.6%
Investments
9.2%
Milestones
and deferred
consideration
2.1%
KEY PERFORMANCE INDICATORS
We measure our performance against
a number of financial and non-financial
key performance indicators (KPIs) that
are aligned to our strategic priorities.
We updated our KPIs during the year
to reflect the business evolution and
strategy, including our 10-year growth
targets that we announced in FY2022/3.
NAV PROGRESSION
TO £5BN BY 2032
RATIONALE
We seek to deliver strong risk-adjusted
returns to shareholders over the long term,
with an ambition to organically grow net
assets to £5 billion by 2032.
HOW WE MEASURE PROGRESS
−
NAV per share return: on a one, three
and five-year basis
−
Life science portfolio return: on a one,
three and five-year basis
−
Capital pool as % of overall NAV
2024 HIGHLIGHTS
−
Net assets of £1.2 billion
−
1.2% NAV per share return
−
2.2% return from the life science portfolio,
with uplifts from Autolus offset by partial
write-downs of Anaveon and Clade and the
write-off of Gyroscope milestone payments
−
£452.8 million capital pool, 36.5% of NAV
NAV PER SHARE/PORTFOLIO RETURN
1
2
3
A
B
C
D
Measuring our performance
CAPITAL POOL AS A % OF NAV
BUILDING THE PORTFOLIO
TO 20-25 COMPANIES
RATIONALE
By creating or adding three new companies per
annum we aim to expand the portfolio to 20-25
companies, diversified across clinical stage and
therapeutic area.
HOW WE MEASURE PROGRESS
−
Number of companies in the portfolio
−
New companies added to the portfolio
(over one, three and five years)
−
Capital deployed in the year
2024 HIGHLIGHTS
−
Strategic portfolio of 13 companies
−
Three new companies added to the portfolio
in the year
−
£172.2 million deployed into the life
science portfolio in the year
NUMBER OF NEW PORTFOLIO COMPANIES
1
2
3
A
B
C
D
CLINICAL PROGRESS
ACROSS THE PORTFOLIO
RATIONALE
A measurement of progress of our portfolio
companies through the clinical pathway and
the growing maturity of the portfolio.
HOW WE MEASURE PROGRESS
−
Number of clinical-stage companies
−
Number of late-stage clinical companies
−
Number of pivotal studies
−
Number of clinical trials commenced
in the year
−
% of portfolio at different clinical stage
and value
2024 HIGHLIGHTS
−
Five clinical companies including two
late-stage clinical, representing 71.1%
of the strategic portfolio by value
−
15 clinical data readouts across
trials during the year
−
One clinical stage company added
to the portfolio during the year
−
Two pivotal studies across the portfolio
−
Five new clinical trials commenced
in FY2023/4
PORTFOLIO BY CLINICAL STAGE
1
2
3
A
B
C
D
13
Companies in strategic portfolio
5
Clinical trials commenced in the year
1. As a percentage of life sciences NAV.
28
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
0
200
400
600
800
FY24
FY23
FY22
Female
4
Male
7
1
CREATE
2
BUILD
3
SCALE
OUR STRATEGIC DRIVERS
A
Portfolio companies
−
Scientific theses fail
−
Clinical development doesn’t deliver a commercially viable product
−
Portfolio concentration risk to platform technology
−
Concentration risk and binary outcomes
B
Access to capital
−
Not having capital to invest
−
Private/public markets don’t value or fund our companies when
we wish to access them
−
Capital pool losses or illiquidity
OUR RISKS
CAPITAL RAISED BY THE PORTFOLIO
ACCESS TO CAPITAL
RATIONALE
A deep pool of capital underpins our strategy,
enabling us to take a long-term view and
support our portfolio companies as they scale.
HOW WE MEASURE PROGRESS
−
Available capital to deliver key value
inflection points
−
Aggregate capital raised across
Syncona and its portfolio companies
2024 HIGHLIGHTS
−
Syncona is funded to deliver on upcoming
key value inflection points across its portfolio
−
Nine portfolio company financings and
strategic transactions, with disciplined
capital allocation across the portfolio
to prioritise capital access
1
2
3
A
B
C
D
£704.5m
Of capital raised across the portfolio
SUSTAINABILITY AND THE SYNCONA TEAM
RATIONALE
A measurement of our strong commitment
to sustainability and the Syncona team.
HOW WE MEASURE PROGRESS
−
Performance against the four pillars
of our Sustainability Policy
2024 HIGHLIGHTS
Responsible investor and partner
−
Submitted first UN PRI questionnaire
2
−
Successful integration of sustainability
into launch team processes
−
Increase in carbon emissions data
gathered across the strategic portfolio
−
Rolled out increased monitoring for
sustainability within the capital pool
Social impact
−
Autolus BLA filing for its lead obe-cel therapy
as it approaches planned commercialisation
−
0.35% donation to The Syncona Foundation
−
Launch of patient impact framework
−
Increased engagement with life sciences ecosystem
Inspiring and empowering our people
−
Focus on supporting female leadership, including
launch of our Level 20 sponsorship
−
Launch of new Syncona Fellowship programme
−
Introduction of new team operating model,
underpinning the delivery of Syncona’s 10-year targets
Responsible and ethical business
−
Submitted first interim net zero target, under
the NZAM initiative
2
2. Syncona has signed up to the NZAM and PRI initiatives through the Company’s investment manager, SIML.
1
2
3
A
C
LEADERSHIP AND SENIOR INVESTMENT TEAM
£4.4m
Donated to The Syncona Foundation
C
People
−
Reliance on small Syncona team
−
Systems and controls failures
−
Unable to build high-quality team/team culture
−
Unable to execute business plans
D
Macroeconomic environment
−
Macroeconomic environment has a negative
impact on sentiment for portfolio companies
and Syncona business model
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
29
OUR ESG APPROACH
A strong commitment to sustainability.
We are committed to managing our business in a
sustainable way, investing responsibly and supporting
our portfolio companies in making positive contributions
to society by developing treatments that will make
a difference to the lives of patients and their families.
Our Sustainability Policy outlines our goals and
commitment to being a sustainable and responsible
business. We are focused on the sustainability issues
which are material to our business and stakeholders
and our Policy is built around four core pillars:
RESPONSIBLE AND ETHICAL BUSINESS
We are committed to a strong governance framework
which helps to support our business operations and
mitigate risk. Sustainability is integrated into the work
of committees of the Board as well as within the work
of the different functions within the Syncona team.
We understand the important role of reporting against
globally recognised reporting frameworks to underline
our commitment to sustainability. We also recognise
the importance of reporting on our environmental
impact and are transparent in our emissions
reporting at a Company and portfolio level.
RESPONSIBLE INVESTOR AND PARTNER
Sustainability is integrated across our model
of creating, building and scaling leading life
sciences companies. We aim to help our
companies mitigate negative impacts and
enhance their positive impacts, and particularly
to set the right culture, values and processes to
help these businesses to follow a sustainable
path over the long term. We support our
portfolio companies to establish guiding
principles and policies for sustainability, and ask
them to report back to us on their progress.
INSPIRING AND EMPOWERING OUR PEOPLE
Our people are a key differentiator. They provide
the specialised expertise that underpins our
strategy and drives its implementation. Syncona
is committed to providing its people with a
working environment where they feel empowered
in their roles and supported in their career
development. We also recognise the importance
of a diverse workplace and have aligned
our people strategy with our D&I Framework.
OUR SOCIAL IMPACT
Our purpose and vision is to have a positive impact.
We invest to extend and enhance human life and
seek to unlock the potential of truly innovative
science to transform patients’ lives. We have made
a significant contribution to the UK life sciences
ecosystem since our foundation and continue
to focus on how we can continue to evolve and
improve the companies that are built here.
OUR FOUR
CORE
PILLARS
350+
Patients dosed in clinical trials by Syncona
companies since first Syncona investment
13
New policies aligned with Syncona’s
Responsible Investment Policy implemented
100%
In-scope strategic portfolio companies to set
science-based targets validated by SBTi by 2030
1
Top 10
Firm in the FTSE 250 for appointing
women to Board and leadership positions
Making a positive
impact
1. Please refer to page 34 of our Sustainability Report for more information.
30
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Standards of conduct and behaviour
Syncona has in place a robust set of policies, internal
controls and management processes covering all of
the areas for our business to operate responsibly and
ethically. Many of these primarily apply to SIML, our
subsidiary that manages Syncona and employs the
team. SIML is an investment manager regulated by
the Financial Conduct Authority, and so is also subject
to the FCA’s compliance requirements, including the
Conduct Rules that apply to employees.
Our key policies are:
−
Anti-fraud, bribery and corruption policy
−
Political and charitable contributions
−
Gifts and inducements
−
Financial crime and anti-money laundering
−
Conflicts of interest
−
Inside information
−
Sustainability
−
Health & safety
−
Modern slavery and ethical procurement
−
Data protection and information security
−
Approach to taxation
−
Whistleblowing
Training is provided to all employees each year, and
to new joiners, through a mixture of in person training
and online resources, to ensure they are familiar with
the obligations and requirements that apply to them.
Read more in our 2024 Sustainability Report
synconaltd.com/sustainability
Further detail on each of the key policies is provided
in our Sustainability Report available on our website:
synconaltd.com/sustainability
Over the last three years, we have
established a robust and impactful
approach to managing sustainability,
both at Syncona and across our
portfolio. Over the course of this
year, we have continued to make
progress against our four key
sustainability pillars.”
ANNABEL CLARK
HEAD OF CORPORATE AFFAIRS AND ESG, SIML
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
31
PURPOSE-LED STAKEHOLDER ENGAGEMENT
Investing to
extend and enhance
human life
Investing together
We collaborate with key stakeholders to support
our investment process and business model:
Our portfolio
companies
Ambitiously scaling
companies to deliver
medicines to patients
Our shareholders
Understanding
and responding
to the priorities of
our shareholders
Our co-investors
Working in collaboration
to provide financial scale
for our portfolio
The scientific
research
community
Identifying highly
innovative science that
can make a difference
Read more p.34
Our purpose is to invest to extend and
enhance human life. We do this by creating,
building and scaling companies to deliver
transformational treatments to patients
in areas of high unmet need.
In delivering against our purpose and strategy we consider
the perspectives of key stakeholder groups. The Board
and Syncona team work hard to stay connected to all
of our stakeholders, allowing us to better understand
their needs and inform day-to-day decision-making.
32
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Extending and enhancing together
We strive to have a positive social impact, helping to support
the broader ecosystem within which we operate:
Patients
Seeking to deliver
transformational impact
Our people
A multi-disciplinary team
driving long-term strategy
Read more p.36
The life sciences
ecosystem
Supporting our wider industry
and the biotech sector
Section 172 statement
In line with the Corporate Governance Code
2018, this statement covers how the Board has
considered the matters set out in section 172
of the UK Companies Act 2006.
Section 172 requires directors to have regard to
the long-term consequences of their decisions, the
interests of key company stakeholders, the impact
of the company’s activities on the community and
the environment, the desirability of maintaining a
reputation for high standards of business conduct,
and fair treatment between the members of the
company, against a backdrop of the company’s
overall strategy and business model.
As a Guernsey company, that legislation does
not directly apply to Syncona, but the Board
recognises the importance of these issues.
As described in the Corporate governance report
(pages 74 to 77), Syncona is an investment
company and has appointed its subsidiary Syncona
Investment Management Limited (SIML) as
Investment Manager, and delegated responsibility
for managing the investment portfolio to it.
Accordingly, the Board is not directly involved
in management of the investment portfolio, other
than in respect of very large decisions, but sets
strategy and oversees the activities of the Syncona
team. The Board’s consideration of the section
172 matters therefore mostly takes place in the
context of setting strategy and oversight, with
individual decisions being relatively infrequent.
LONG-TERM DECISION-MAKING
The Board is responsible for setting the
Company’s purpose, Investment Policy,
strategic objectives and risk appetite. Our
purpose is to invest to extend and enhance
human life. We do this by creating, building
and scaling companies to turn exceptional
science into transformational treatments
for patients in areas of high unmet need.
Inherent in this model is that we are making
investments where it could take 10 to 15 years to reach
product approval, and where significant investment
and risk is involved to get to that point. A long-term
outlook is therefore embedded in the Company’s
approach, and is a core part of the Board’s discussions
on strategy and its oversight of the Syncona team
and when it does make individual decisions.
OUR KEY STAKEHOLDERS
Positive relationships with our stakeholders are
important to the success of our business and in
maintaining our reputation, and the Board reviews
how it and the Syncona team engage with these
stakeholders on an ongoing basis. Our key
stakeholders include our shareholders, our people,
our portfolio companies, our patients, the scientific
research community, co-investors and the life
sciences ecosystem. How the interests of key
stakeholders are taken into account in the business
and by the Board is described in more detail on
pages 34 to 39. For further information relating
to our impact on the environment, please see
pages 56 to 57.
As an investment company, our suppliers are limited:
other than SIML, they are principally our Administrator
and Custodian, and professional service providers.
Accordingly, we have not included suppliers as a key
stakeholder on pages 34 to 35.
MAINTAINING A REPUTATION FOR HIGH
STANDARDS OF BUSINESS CONDUCT
The Board is responsible for monitoring the culture,
values and reputation of the business. During the
year the Board reviewed the steps taken by the
Syncona team to ensure that our processes and
ways of working are aligned with the Company’s
purpose and values, including receiving reports from
the employee engagement director. The Board also
monitors the implementation of our sustainability
framework, which sets out how we will act as a
responsible investor.
Corporate governance report p.74
Our ESG approach p.30
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
33
PURPOSE-LED STAKEHOLDER ENGAGEMENT
CONTINUED
Investing together
Our shareholders
57
Presentations were made
to shareholders and
potential shareholders
WHY DO WE ENGAGE?
The Board recognises the critical importance
of understanding and incorporating the
expectations of Syncona’s shareholders
as we seek to deliver our strategy and
sustainable long-term value. We strive to
ensure our shareholders have an in-depth
understanding of our operations, portfolio,
value framework and sustainability approach.
HOW DO WE ENGAGE?
–
The Board directly engages with
shareholders through the Chair,
who seeks the perspectives of key
shareholders and investor groups
each year via written correspondence
and in-person meetings.
–
Other members of the Board also
engage with shareholders on specific
key issues when relevant, including
taking into account the perspectives
of shareholders when reviewing
Syncona’s Remuneration Policy.
–
Day-to-day communication with
shareholders is led by the Syncona
team, predominantly taking place
through individual and group meetings
hosted by Investor Relations (IR) and
members of the Leadership Team,
particularly following the publication
of interim and full-year results.
–
The Board is provided with regular
updates on shareholder sentiment from
the Syncona team and advisers as
well as on delivery against Syncona’s
IR strategy by the Syncona team.
OUTCOMES AND ACTIONS DURING
THE YEAR
–
The Syncona Board took the decision
in September 2023 to launch a £40.0
million share buyback, believing that
the shares represented a compelling
investment opportunity. The perspectives
of key shareholders were taken into
account in the decision to launch the
share buyback.
–
During the year an independent adviser
conducted an investor study in order
to understand the perspectives of
shareholders across a range of key
areas. Key outputs from the study have
been agreed with the Syncona team and
incorporated into ongoing IR activities.
–
Updates on shareholder relations
activities were provided at each Board
meeting by the Syncona team and
considered as part of discussions.
The Board is committed to ensuring
there is active engagement with all of
Syncona’s key stakeholder groups.
The perspectives of the Company’s
stakeholders are a key consideration in
Board decision-making and are integrated
into discussions held at the Board as well
as within ongoing engagement with the
Syncona team.
The Board engages with stakeholders
both directly and indirectly through the
Syncona team, which is responsible
for the day-to-day management of key
stakeholder relationships.
See case study on p.38
34
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
23
Board roles across
portfolio companies
Our portfolio
companies
WHY DO WE ENGAGE?
As a company builder which takes a hands-on
approach to managing its portfolio, strong
relationships with its portfolio companies are
critical to Syncona. Engaging with companies
allows Syncona to add value by supporting
these businesses and their management teams
through the development cycle, providing
expertise across commercial, financing and
clinical strategy. This helps Syncona to
manage risk across the portfolio and allows it
to effectively support companies in addressing
and managing issues when they arise.
HOW DO WE ENGAGE?
–
The Board monitors high-level progress
across the portfolio in order to track
delivery against key milestones which
support the delivery of Syncona’s strategy.
–
The oversight conducted by the Board
includes monitoring against Syncona’s
sustainability expectations.
–
Direct engagement with portfolio
companies is managed by the Syncona
team, with team members across
functions having close relationships with
portfolio company management teams
which helps support delivery against
commercial, clinical and financing plans.
–
This support includes taking on board
roles, where Syncona investment team
members are able to provide guidance and
ensure appropriate governance is in place.
OUTCOMES AND ACTIONS
DURING THE YEAR
–
During the year the Syncona team
evolved the reporting that is provided to the
Board on portfolio company progress, with
a summary provided by the CEO of SIML
following each quarterly business review
meeting alongside key actions identified.
–
An in-depth overview of portfolio investment
strategy was provided to the Board
as part of the September Strategy Day.
£586.3m
Of external capital raised by
Syncona companies during the year
Our co-investors
WHY DO WE ENGAGE?
A strong relationship with aligned co-
investors is critical to the delivery of
Syncona’s long-term strategy. Syncona’s
financing approach has evolved to bring
aligned co-investors to new portfolio
companies at an earlier stage, to enable
broader financial scale across the portfolio,
whilst still holding three to five companies
with significant shareholdings to late-
stage development. These co-investors
play an important role in supporting our
companies through the development
cycle, providing funding and expertise in
partnership with Syncona. Relationships
with pharma teams are also a key priority
for the Syncona team given their potential
role as acquirers and collaborators of
Syncona portfolio companies.
HOW DO WE ENGAGE?
–
The Board is provided with regular
updates on the status of key relationships
with co-investors and strategic partners.
–
The Board is also regularly updated
on Syncona’s capital strategy, which
incorporates the role of co-investors
in financing strategy within the portfolio.
–
The Syncona team takes an active role in
coordinating with current and prospective
co-investors. This takes place through
direct engagement at portfolio company
Board meetings as well as in ad hoc
engagement which can be focused
on wider areas of collaboration.
OUTCOMES AND ACTIONS
DURING THE YEAR
–
Syncona’s capital strategy was presented to
the Board at the September Strategy Day.
–
Increasing engagement with co-investors
was a key priority for the Syncona team
during the year and updates were
provided to the Board on the status of key
strategic relationships and their potential
role supporting Syncona’s capital strategy.
2
Early-stage companies added to the
portfolio sourced from leading academics
The scientific
research community
WHY DO WE ENGAGE?
The strength of Syncona’s relationships
with academics, key opinion leaders
and world-renowned institutions in the
life sciences ecosystem is central to
Syncona’s model of creating companies
based on exceptional science. Syncona
is able to bring the commercial vision,
working alongside founders to turn their
scientific ideas into a commercial reality
and bring therapies towards patients.
HOW DO WE ENGAGE?
–
The Board is provided with regular updates
on Syncona’s investment pipeline, including
information on where opportunities have
been sourced from and how this helps
to support investment cases.
–
The Syncona team leverages its broad
network in order to support the delivery
of the Company’s strategy. Members of
the investment team engage regularly
with institutions and senior leaders across
the life sciences environment to source
investment opportunities as well as
promote Syncona’s role within the sector.
OUTCOMES AND ACTIONS
DURING THE YEAR
–
Updates were provided at each Board
meeting on the status of the investment
pipeline, including the three investments
which Syncona completed during
the year.
See case study on p.38
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
35
PURPOSE-LED STAKEHOLDER ENGAGEMENT
CONTINUED
Patients
WHY DO WE ENGAGE?
Delivering strong patient impact is critical to
Syncona’s strategy of building companies
that can develop transformational treatments
for patients in areas of high unmet need.
The impact a potential therapy can have on
patients is integrated into our investment
process and the ongoing management
of the portfolio.
HOW DO WE ENGAGE?
–
The Board is provided with updates relating
to individual investment opportunities,
including how these investments have the
potential to deliver a strong patient impact,
as well as key updates relating to patients
at portfolio companies such as progress
in clinical trials.
–
The Board plays an active role in engaging
with the Syncona team on sustainability
strategy, which contains a strong focus
on patients. This includes reviewing
the Responsible Investment Policy on
an annual basis, which incorporates
Syncona’s expectations for managing
medical research and safety within
clinical trials in the portfolio.
–
The Syncona team integrates patient
impact into its investment process, with
the core of Syncona’s strategy being to
create and build companies delivering
transformational treatments in areas of
high unmet need. Patient considerations
are also a key part of Syncona’s ongoing
management of its portfolio as it
supports companies in their clinical
and commercial strategies.
OUTCOMES AND ACTIONS DURING
THE YEAR
–
The Board reviewed and approved
Syncona’s sustainability strategy,
which includes an increased focus
on measuring patient impact across
the Syncona portfolio.
350+
Patients dosed in
clinical trials by Syncona
companies since 2012
Extending and
enhancing together
36
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
10
Employee town halls in the year
Our people
WHY DO WE ENGAGE?
The Syncona team is critical to the
long-term success of the Company. Given
the very specialised nature of Syncona’s
work, ensuring that the Syncona team
has the relevant broad level of expertise
is important for long-term delivery against
strategy. It is also important that the
Syncona team remains engaged through
a healthy culture that fosters a vibrant
workplace that challenges and supports
them, with this ultimately supporting the
Company’s vision and strategy.
HOW DO WE ENGAGE?
–
The Board plays a key role in overseeing
the culture at Syncona and prioritises
direct engagement with the Syncona
team. This is predominantly led by Gian
Piero Reverberi, the Board’s designated
engagement director.
–
Regular updates are provided to the
Board on people strategy. This includes
details on hiring strategy for the year
(including key senior hires), outputs
of employee surveys, and summaries
of key business process changes
which will impact the Syncona team.
–
The Remuneration Committee considers
cross-team incentivisation through the
LTIP incentive scheme.
–
The Syncona Leadership Team is
responsible for business operations
as well as implementing the culture
at Syncona. The Leadership Team
prioritises engaging with the broader
team on strategy and operational
developments. The full team is updated
on corporate news through a weekly
meeting, whilst town halls are also
used to provide more detailed updates
on key issues to the business.
OUTCOMES AND ACTIONS DURING
THE YEAR
–
Gian Piero Reverberi directly engaged with
members of the Syncona team throughout
the year through quarterly lunches.
–
Enabling a strong unified culture has been
a key priority for the Syncona Leadership
Team, with a number of changes to
business processes implemented during
the year following feedback received from
Syncona’s first Employee Engagement
Survey, which was conducted in 2022/3.
–
The Board was provided with a business
update by the CEO of SIML at every
Board meeting, which incorporated key
people news as well as any important
changes in business processes.
–
The Board worked during the year to
evolve and strengthen the Syncona team.
2
BIA committees joined during the year
The life sciences ecosystem
WHY DO WE ENGAGE?
Since its foundation Syncona has
played a key role within the life sciences
ecosystem. Our model of providing
long-term capital has played a pivotal role
in the development of the financing
environment for early-stage life sciences
companies in the UK, who are able to
positively contribute to their communities
and local economies. This is supported
by our commitment to maintaining a close
relationship with government and wider
industry, where we actively contribute
to initiatives which underpin the long-term
growth of the sector. Our positive role
within the ecosystem is also aligned with
our commitment to sustainability, which
is embedded into Syncona’s investment,
portfolio management and business
processes. The Board and Syncona team
are also active partners in working
alongside Syncona’s various not-for-profit
and charitable partners (including The
Syncona Foundation).
HOW DO WE ENGAGE?
–
Members of the Board actively engage
across the life sciences industry and
participate in a range of initiatives which
support the insights and perspectives
they share with the Syncona team.
–
The Board approves the annual donation
to The Syncona Foundation and is
provided with a detailed annual summary
of progress across its chosen charities.
–
The Syncona team provides an
update on delivery against Syncona’s
Sustainability Policy on a biannual basis.
–
The Syncona team actively engages
with a broad range of government and
industry figures. It does so through direct
engagement as well as through its role as
an active participant in industry organisations
such as the BioIndustry Association (BIA).
–
The Syncona team leads direct
engagement with Syncona’s charitable
and not-for-profit partners, such as
Level 20 and the Windsor Fellowship.
OUTCOMES AND ACTIONS DURING
THE YEAR
–
The Board took the decision during the
year to maintain the donation provided
to The Syncona Foundation at 0.35%
of NAV.
–
The Board reviewed and approved
updates to the Syncona Sustainability
Policy and ongoing sustainability
strategy in March 2024.
–
The Syncona team increased its public
affairs activities during the year to reflect
key developments in the industry,
including the UK Government’s proposed
Mansion House reforms.
–
A public affairs strategy was developed and
approved by the Board in March 2024.
See case study on p.39
See case study on p.39
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
37
PURPOSE-LED STAKEHOLDER ENGAGEMENT
CONTINUED
A strong commitment to engaging with our shareholders
Considering stakeholders
in key decisions
Supporting our portfolio through a challenging market environment
Proactive management of the portfolio to navigate companies
through the development cycle.
In what has continued to be a
challenging market environment,
particularly for early-stage and pre-clinical
companies, the Syncona team has
worked alongside portfolio companies
to widen financing syndicates,
focus capital on their highest potential
assets and streamline budgets, whilst
exploring strategic transactions.
This proactive management of the
portfolio has provided a platform for
growth as market conditions improve.
The Board has remained engaged on
progress, having been provided with an
overview of Syncona’s financing strategy
for the portfolio at the 2023 Board
Strategy Day and provided with updates
on delivery against this at Board meetings.
Our shareholders are important to Syncona and their views and perspectives
are integrated into decisions made by the Syncona team and Board.
LAUNCHING A SHARE BUYBACK
In September 2023 as part of
the Company’s review of capital allocation
across the portfolio, the Board took the
decision to launch a share buyback
programme of up to £40.0 million, with
the shares representing a compelling
investment opportunity. The perspectives
and views of shareholders were taken into
account in this decision. The Syncona
IR team was also active in gathering
feedback from investors following the
launch of the buyback, with this being
included within the regular cycle of IR
reporting at Board meetings.
INVESTOR PERCEPTION STUDY
The Board also appointed an
independent consultancy to conduct
an investor perception study during the
year. Key areas for seeking shareholder
feedback were identified alongside
the Syncona team, with discussions
held with current shareholders as well
as potential investors who had been
identified as part of the Company’s
IR programme. This allowed the
Board to gather feedback on various
areas including Syncona’s strategy,
performance, Leadership Team and
approach to sustainability. Following
completion, key outputs were presented
to the Board by the independent
consultancy which conducted the study,
with changes to ongoing IR agreed
upon with the Syncona team.
£20.2m
Deployed into the share
buyback during the year
38
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Enhancing our coordination with government and industry stakeholders.
During the year the UK Government
launched the Mansion House reforms,
which introduced a voluntary compact
which proposed that the UK’s largest
defined contribution pension providers
increase their investment allocations
towards high growth companies. The
Syncona team has spent time throughout
the year engaging across the industry
on the reforms, including with the
BIA and through joining the British
Venture Capital Association’s (BVCA)
Investment Compact, which aims to
support the delivery of the proposals.
In doing so it has been supported by the
Board, whose members have provided
their own perspectives from their
experience across the investment
company and life science sectors. With
scale-up capital identified as a cross-party
priority in the UK, engaging across
government and industry stakeholders
on this issue helps to support Syncona’s
long-term strategy whilst also enabling
Syncona to contribute its expertise and
experience to support the continued
evolution of the life science ecosystem
in the UK. We continue to engage with
the relevant parties as these commitments
move towards tangible proposals to
provide the scale-up capital that will take
the UK’s biotech sector to the next level.
Growing our senior team whilst evolving our organisational structure.
The Board has worked to evolve and
strengthen the Syncona team. During
the year senior leaders Roel Bulthuis
(Managing Partner and Head of
Investments) and John Tsai (Executive
Partner) joined Syncona, bringing
significant venture capital and clinical
expertise from across biotech and
pharma. Kate Butler also took up the role
of CFO of SIML, with Rolf Soderstrom
moving to the role of Executive Partner.
Alongside these changes the Leadership
Team has led a re-organisation of the
Syncona team, with a focus on the
efficient management of the portfolio,
capital and people, which has helped
to introduce increased clarity in roles
and responsibilities across the business.
In November 2023 Martin Murphy
stepped down from his role as Chair of
SIML. Following his stepping down from
the role of Chair, Martin remained as
Syncona’s representative on the Boards
of Autolus, Anaveon, Clade and Quell
for a varying period of time, until 30 April
2024. The Board oversaw this transition
and is pleased that the senior team,
led by Chris Hollowood, is structured
to drive strong, sustainable risk-adjusted
returns for Syncona’s shareholders
and deliver significant value for its other
key stakeholders.
Our people are key to the delivery against our strategy
Positively contributing towards the life sciences ecosystem
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
39
OUR PEOPLE AND CULTURE
Our people are vital
to our success
Our team is at the heart of Syncona’s strategy. They leverage their
expertise to find and build future global leaders in life science, whilst
providing the operational, clinical and regulatory expertise necessary
to support our portfolio companies through the development cycle.
A HIGHLY SKILLED AND
DIFFERENTIATED TEAM
Our experienced team members have
a wide range of skills which enable
our differentiated company creation
model. Our life sciences investment team
members have a deep technical and
scientific background, supplemented
by commercial experience ranging
from venture capital investment to
pharmaceutical launch. Our Executive
Partner group provides a range of
expertise across commercial, clinical and
regulatory strategy to support our portfolio
companies as they move through the
development cycle, helping to mitigate risk
and enable course correction when issues
arise. Our corporate functions provide
operating capability to support the
business, alongside our launch team
which enables the efficient set-up of
new portfolio companies.
TEAM ORGANISATION AND NEW
OPERATING MODEL ESTABLISHED
During the year the Syncona Leadership
Team led a project to re-organise the
team and establish a new operating
model. A clear focus has been on
ensuring that there is clarity around roles
and responsibilities across teams, with
the introduction of new processes which
have reduced the number of meetings,
and supported productivity alongside
the more efficient management of people,
capital and the Syncona portfolio.
37
Total headcount
The structures that have been put in place
during the year ensure that the Leadership
Team are able to drive the operational
delivery of Syncona’s strategy, whilst also
enabling the investment team to focus
on investing in the next generation of
Syncona companies. The changes made
also addressed areas of feedback that
were identified in the 2022/3 Employee
Engagement Survey, with members of
the Syncona team actively consulted
on the evolution to our operating model
throughout the year in order to ensure
buy in across the Company.
Syncona retains a strong culture and
set of values around which the team
is aligned. In light of the operational
changes that have taken place over
the last year we have initiated a project
to refresh our values and look forward
to updating our stakeholders on this
in 2024/5. This process will be led by
the new Head of People, Harriet Gower
Isaac, who joined post-period end.
More detail on how we support
our people can be found in our
Sustainability Report
synconaltd.com/sustainability
40
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Female
0
Male
2
Female
16
Male
21
Female
4
Male
3
Female
2
Male
7
Syncona organisational operating model
Senior investment team
Building for the future
Diversity
across
Syncona
Executive
Partner group
Provides expert advice
and supports operational
implementation through
taking key actions in
the portfolio
Managing Partners
–
Lead the investment team
–
Utilise own networks to bring opportunities to Syncona
–
Provide operational expertise to support deal decisions
INVESTMENT COMMITTEE
Lead Partners
–
Utilise own networks to bring opportunities to Syncona
–
Lead deal teams during investment process,
supported by the investment team
SIML BOARD
31 MARCH 2024
SIML TEAM
31 MARCH 2024
SYNCONA LIMITED BOARD
31 MARCH 2024
SIML LEADERSHIP TEAM
31 MARCH 2024
Investment team
–
Actively networks to identify investment opportunities
–
Delivers new investments as part of deal teams
Leadership Team
Incorporates
experience from
across the business
and is responsible
for the operational
delivery of Syncona’s
strategy as well
as implementing
its culture
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
41
OUR PEOPLE AND CULTURE
CONTINUED
23
Board seats at portfolio companies
4
Portfolio companies where we
currently hold operational roles
Chris has been CEO of Syncona since January
2023, having previously held the role of Chief
Investment Officer, where he was instrumental
in the foundation and development of multiple
Syncona portfolio companies, including
notable portfolio exits such as Nightstar and
Gyroscope. Previously, Chris was a partner
of Apposite Capital LLP, a venture and growth
capital healthcare investment company. Chris
holds a degree in Natural Sciences and a PhD
in Organic Chemistry, both from the University
of Cambridge.
Portfolio company affiliation
−
Spur (Chair)
−
Purespring (Chair)
−
Beacon (Chair)
−
Yellowstone (Board member)
CHRIS HOLLOWOOD
CHIEF EXECUTIVE OFFICER, SIML
Roel manages the investment team and
utilises more than 20 years of life science
venture capital, business development
and investment banking experience to help
Syncona deliver value through the investment
cycle. Roel joined Syncona from Inkef
Capital, an Amsterdam-based venture capital
firm focused on life science investments.
As Managing Partner and head of healthcare,
he led the firm’s growth into a leading
European healthcare VC platform. Before this
he served as SVP and Managing Director
of Merck Group’s M-Ventures for almost 10
years, where he played an instrumental role
in creating the business and building it into
a leading corporate venture capital fund.
Portfolio company affiliation
−
iOnctura (Board member)
ROEL BULTHUIS
MANAGING PARTNER AND
HEAD OF INVESTMENTS, SIML
Investment Committee
Driving capital allocation decisions across the portfolio.
DEVELOPING A PLATFORM FOR
THE NEXT GENERATION OF LIFE
SCIENCE INVESTORS
Syncona has launched a structured programme
that aims to introduce talented young professionals
to a career in life science venture capital. The new
Syncona Fellowship Programme aims to seek top
talent that can contribute to the investment team
during their placement and become a member of
our industry network going forward. Syncona aims
to include three Fellows a year in the programme,
underlining Syncona’s commitment to supporting
the next generation of life science investors and
executives. The first Fellow, Ellis Kelly, joined
Syncona during the year and we look forward to
welcoming further young investors to the team
through the programme in the future.
Read full Leadership Team
biographies
synconaltd.com/our-people
42
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Senior investment team
A multi-disciplinary team of industry experts.
Executive
Partner group
Our Executive Partner group provides
a range of expertise across commercial,
clinical and regulatory strategy to support our
portfolio companies as they move through the
development cycle, helping to mitigate risk and
enable course correction when issues arise.
Our Executive Partners work closely
alongside management teams across
the portfolio as well as taking on Board
and executive leadership positions.
Within the Syncona life science team, Edward
is heavily involved in the creation of new
businesses and fulfils executive roles within
those companies to make them operational.
He has previously acted as CEO of Autolus and
Resolution, and is currently the Chair of Mosaic.
Portfolio company affiliation
−
OMass (Board member)
−
Resolution (Board member)
−
Mosaic (Chair)
EDWARD HODGKIN
MANAGING PARTNER, SIML
Elisa is closely involved in supporting Syncona’s
investment process, in the creation of new
businesses and has taken on operational roles
across several Syncona portfolio companies.
She has been closely involved in the foundation
of current and former portfolio companies
including Quell, Blue Earth and Beacon, including
in their operational and strategic set-up.
Portfolio company affiliation
−
Quell (Board member)
−
Beacon (Board member)
−
Forcefield (Board member)
ELISA PETRIS
LEAD PARTNER, SIML
Magdalena is involved in sourcing and
investing in new exciting companies as well
as working closely alongside the existing
portfolio. She was closely involved in
the sourcing and strategic development
of Kesmalea, Mosaic and OMass.
Portfolio company affiliation
−
OMass (Board member)
−
Kesmalea (Board member)
−
Mosaic (Board member)
MAGDALENA JONIKAS
LEAD PARTNER, SIML
JOHN TSAI
EXECUTIVE PARTNER
Experienced clinical leader and former
CMO of Novartis.
ROLF SODERSTROM
EXECUTIVE PARTNER
Experienced biotech executive; CFO of multiple
quoted companies and former CFO of SIML.
HITESH THAKRAR
EXECUTIVE PARTNER
Former life sciences fund manager with
significant asset allocation and public
equities experience.
KENNETH GALBRAITH
EXECUTIVE PARTNER
Experienced biotech executive; Chair/CEO
of multiple quoted companies.
ANDREW COSSAR
EXECUTIVE PARTNER
Executive Partner and Head of Strategic
Transactions. Experience in strategic
transactions across biotech.
LISA BRIGHT
EXECUTIVE PARTNER
Experienced commercial leader with a focus
on launching innovative medicines.
Read full Executive Partner group biographies
synconaltd.com/our-people
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
43
BEST IDEAS
PRE-CLINICAL
Autolus Therapeutics
Beacon Therapeutics
iOnctura
Spur Therapeutics
Resolution Therapeutics
Quell Therapeutics
Anaveon
Purespring Therapeutics
Forcefield Therapeutics
OMass Therapeutics
Mosaic Therapeutics
Kesmalea Therapeutics
Yellowstone Biosciences
PORTFOLIO REVIEW
Actively
managing
our maturing
portfolio
OUR STRATEGIC PORTFOLIO
MOVING TO
MARKET
MOVING TO
DEFINITIVE
DATA
MOVING TO
EMERGING
EFFICACY
DATA
MOVING TO
OPERATIONAL
BUILD
36%
Of strategic portfolio
2
30%
Of strategic portfolio
2
31%
Of strategic portfolio
2
3%
Of strategic portfolio
2
Syncona investment point. 1. Biologics License Application. 2. By value.
44
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
CLINICAL
LATE-STAGE CLINICAL
BLA
1
Our life science portfolio was valued at £786.1 million at 31 March 2024 (31 March 2023:
£604.6 million), delivering a 2.2% return during the year. It comprises our 13 portfolio
companies, potential milestone payments or deferred consideration, and investments,
which are non-core and provide optionality to deliver returns for our shareholders.
Key value inflection point:
Commercial traction
following US launch of obe-cel, dependent on
FDA regulatory approval in
CY2025
Key value inflection points:
24-month data from its Phase II SKYLINE trial
in XLRP in
H2 CY2024
Data readout from its Phase II/III registrational VISTA trial in XLRP in
CY2026
Key value inflection point:
Data readout from its Phase I/II trial in liver transplantation in
CY2025
Key value inflection point:
Data readout from its Phase I/II trial of its next generation asset ANV600 in
CY2026
Key value inflection point:
Data readout from its Phase I/II trial in end stage liver disease in
CY2026
Our 13 portfolio companies, known as our
strategic portfolio, are the core life science
companies where Syncona has significant
shareholdings and plays an active role in the
company’s development. These companies
are diversified across modality and therapeutic
area, with five companies at the clinical stage
(with two producing definitive data) and the
remainder of the portfolio at pre-clinical stage.
OUR NAV GROWTH FRAMEWORK
We are continuing to report against the
NAV Growth Framework we established
at our FY2023/4 Interim Results, to
give shareholders more clarity on which
milestones and what stage of the
development cycle we anticipate our
companies will be able to access capital
and drive significant NAV growth in
the current market environment.
Our portfolio companies are mapped against the categories below.
Specific portfolio company capital access milestones and key value inflection points
are not without risk and their impact will be affected by various factors including the
market environment at the time of their delivery.
1
Companies where delivery against
milestones has the potential to enable
access to capital
OPERATIONAL BUILD
–
Clearly defined strategy and
business plan
–
Leading management team established
EMERGING EFFICACY DATA
–
Clinical strategy defined
–
Initial efficacy data from Phase I/II
in patients
2
Companies where delivery against
milestones have the potential
to deliver NAV uplifts
DEFINITIVE DATA
–
Significant clinical data shows path
to marketed product
–
Moving to pivotal trial and building
out commercial infrastructure
ON THE MARKET
–
Commercialising product
–
Revenue streams
Key value inflection
point:
Data readout from
its Phase II trial in uveal
melanoma in
CY2026
Key value inflection point:
Data readout from its Phase I/II trial in Gaucher disease in
H2 CY2024
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
45
PORTFOLIO REVIEW
CONTINUED
LATE-STAGE CLINICAL COMPANIES
The Syncona team believes that Autolus’ lead therapy, obe-cel
in relapsed/refractory (r/r) adult acute lymphoblastic leukaemia
(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.
This view has been reinforced post-period by
positive longer-term follow-up data presented at
The American Society of Clinical Oncology (ASCO)
Annual Meeting. Autolus is well capitalised to drive
the full launch and commercialisation of obe-cel as
well as to advance its pipeline development plans
into autoimmune diseases, which includes
publishing data in a Phase I trial of obe-cel in
systemic lupus erythematosus (SLE) in H2
CY2024. This follows a strategic collaboration and
equity investment from BioNTech for aggregate
proceeds of $250 million upfront, as well as an
offering of American Depositary Shares for $350
million, for gross proceeds of $600 million received
in the year. We are supportive of the company
as it continues to deliver against its operational
milestones as it approaches its Prescription Drug
User Fee Act (PDUFA) date in November 2024, the
target action date that the FDA has set to respond
to Autolus’ BLA filing for obe-cel.
Company focus:
Autolus is developing next
generation programmed T-cell therapies for the
treatment of cancer and autoimmunity with a clinical
pipeline targeting haematological malignancies,
solid tumours and autoimmune diseases.
Lead programme:
Autolus announced further
data from its study of obe-cel in r/r adult ALL at the
American Society of Haematology (ASH) Annual
Meeting in December 2023, demonstrating
prolonged event free survival and a favourable
safety profile across all patient cohorts. Additional
longer-term follow up data released post-period
end at ASCO further underlined the strong safety
profile of the drug, whilst demonstrating a durable
response to treatment and potential for long-term
survival outcomes. During the year Autolus filed
a BLA with the US FDA and a Marketing
Authorisation Application (MAA) with the UK’s
Medicines and Healthcare products and
Regulatory Agency (MHRA) for obe-cel, both
of which have been accepted. The FDA has set
a PDUFA target action date of 16 November 2024
for reviewing the BLA application. The company
is preparing for the commercial launch of obe-cel
in H2 CY2024, subject to regulatory approval.
Commercialisation readiness:
During the year
Autolus opened its manufacturing facility, the
Nucleus, in Stevenage, a 70,000 sq. foot advanced
manufacturing facility which will support the
commercial launch of obe-cel. 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. The Nucleus
has obtained a Manufacturer’s Importation
Authorisation (MIA) together with the
accompanying GMP certificate. This authorisation
enables Autolus to manufacture for global
commercial and clinical product supply. Autolus has
also selected Cardinal Health as its US 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 planned commercialisation
in 2024, enabling Autolus to launch the product at
a scale which serves global demand in r/r adult
ALL. Autolus’ commercial readiness has been
strengthened through its strategic collaboration with
BioNTech, where under the terms of the agreement
BioNTech will support the launch and expansion
of obe-cel and will receive a royalty on net sales.
Pipeline programmes:
Autolus expanded the
use of its lead asset, obe-cel, into autoimmune
diseases through the initiation of a Phase I trial in
SLE, with an initial data readout expected in H2
CY2024. During the year Autolus also published
further data from the ALLCAR extension study of
obe-cel in non-Hodgkin’s lymphoma (NHL) and
chronic lymphocytic leukaemia (CLL), as well
as from its study of obe-cel in primary central
nervous system lymphoma (PCNSL), further
supporting the safety profile of the therapy.
BEST IDEAS
PRE-CLINICAL
CLINICAL
LATE CLINICAL
BLA
Obe-cel – Adult ALL
Obe-cel – SLE
Obe-cel – B-NHL
Obe-cel – Paediatric B-ALL
& B-NHL
Obe-cel – PCNSL
AUTO1/22 – Paediatric ALL
AUTO4 – PTCL
AUTO6NG – Neuroblastoma
AUTO8 – Multiple myeloma
The company also continues to make progress
across its broader pipeline, releasing further data
from AUTO1/22 in paediatric ALL and AUTO4
in peripheral T-cell lymphoma, initial data from
AUTO8 in multiple myeloma, and initiating a
Phase I trial of AUTO6NG in neuroblastoma.
The data reported to date further demonstrates
the strength of Autolus’ technology and platform.
Strategic transactions:
In February 2024
Autolus announced a strategic collaboration
with BioNTech aimed at advancing both
companies’ autologous CAR-T programmes
towards commercialisation, pending regulatory
authorisations. In connection with the strategic
collaboration, the companies entered into a
license and option agreement and a securities
purchase agreement. Under the terms of the
agreement, BioNTech made a cash payment of
$50 million to Autolus, and agreed to purchase
$200 million of Autolus’ American Depositary
Shares in a private placement. BioNTech also
has the option to utilise Autolus’ manufacturing
capacity in a cost-efficient set up, has access
to Autolus’ cell programming technologies and
has co-commercialisation options for Autolus’
AUTO1/22 and AUTO6NG programmes.
People:
The company appointed Robert F. Dolski
as CFO and promoted Dr Chris Williams to Chief
Business Officer. Robert brings more than 20
years of diversified experience as a life sciences
financial executive, driving the strategy, planning,
execution and financing of private and public
biopharmaceutical companies. Chris was part
of the team that founded Autolus in 2014 and
he initially served on the company’s Board as a
Non-Executive Director. He previously worked
at University College London (UCL) Business
where he led the establishment of strategic
collaborations, licensing deals, new companies
and financing transactions across a portfolio of cell
and gene therapies in oncology and rare diseases.
Potential key value inflection point:
Commercial traction following US launch of
obe-cel in r/r adult ALL in CY2025, dependent
on FDA regulatory approval.
MOVING TO MARKET
13.7%
OF NAV
12.6%
SHAREHOLDING
Board seats
–
Date of founding
2014
Date of Syncona investment
2014
Syncona capital invested
£147.0m
Number of employees
500
Uncalled commitment
–
Total capital raised
£1,312.9m
Syncona valuation
£169.5m
Key competitors
Gilead, Novartis,
Bristol Myers Squibb,
Johnson & Johnson
46
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
The Syncona team believes that the eye is a very attractive
target for AAV gene therapy, and Beacon Therapeutics
(Beacon) represents a significant opportunity for Syncona
to apply its domain knowledge in retinal gene therapy, where
it already has prior expertise, to a late-stage clinical asset
in X-linked retinitis pigmentosa (XLRP).
BEST IDEAS
PRE-CLINICAL
CLINICAL
LATE CLINICAL
BLA
AGTC-501 – XLRP
1
The initiation of Beacon’s Phase II/III
registrational trial, coupled with its exciting
platform potential, means the company
has real opportunity to drive value for
our shareholders.
Company focus:
Beacon is an ophthalmic
AAV-based gene therapy company founded
to save and restore the vision of patients with
a range of prevalent and rare retinal diseases
that result in blindness.
Financing stage:
Raised £96.0 million
in a Series A financing in 2023.
Lead programme:
Post-period end
Beacon announced the initiation of its Phase
II/III registrational VISTA study for its lead
candidate, AGTC-501, in XLRP. Beacon plans
to use the data generated from the VISTA trial,
in combination with data from the Phase I/II
HORIZON and Phase II SKYLINE trials, to
support its regulatory strategies in the EU and
US. During the year the company also entered
the clinic with the Phase II DAWN trial, which
assesses the safety, efficacy and tolerability
in AGTC-501 amongst patients who have
already been treated once with the therapy
in their other eye. There are no approved
treatments for XLRP, and the programme
has orphan drug designations from both the
FDA and the European Commission. During
the year Beacon presented encouraging
efficacy from the SKYLINE trial at the Annual
Macula Society Meeting, demonstrated by
improvements in retinal sensitivity, the primary
endpoint for the trial, with a 63% response
rate in the higher dose cohort. AGTC-501
has also shown a favourable safety profile
through data published from the SKYLINE
and HORIZON studies.
Commercialisation update:
Post-period
end Beacon announced the sale of its
manufacturing team and facility in Alachua,
Florida to Ascend Advanced Therapies
(Ascend). The transaction includes a long-
term partnership with Ascend to continue
manufacturing its products for clinical and
commercial use, securing GMP product
supply for AGTC-501, and enabling the
company to focus on clinical development.
Pipeline programmes:
Beacon has an
exciting pre-clinical programme in dry
age-related macular degeneration (dAMD),
a leading cause of irreversible vision loss in
people over 60. Beacon’s dAMD programme
features an intravitreally (IVT) delivered novel
AAV based gene therapy. IVT delivery is
less invasive, requires less clinician training
and can be delivered in clinic rather than
via surgery, hence provides greater access
to more patients.
Potential key value inflection points:
−
24-month data from Phase II SKYLINE
trial in XLRP expected in H2 CY2024.
−
Data readout from its Phase II/III
registrational VISTA trial in XLRP
expected in CY2026.
MOVING TO MARKET
6.5%
OF NAV
65.3%
SHAREHOLDING
Board seats
2
Date of founding
2023
Date of Syncona investment
2022
Syncona capital invested
£80.2m
Number of employees
90+
Uncalled commitment
£5.2m
Total capital raised
£109.4m
Syncona valuation
£80.3m
2
Key competitors
4DMT, Janssen
(MeiraGTx), Apellis,
IvericBio (Astellas)
1.
This includes Beacon’s clinical trials: VISTA, DAWN, SKYLINE and HORIZON. Pipeline position reflects lead VISTA trial.
2.
Syncona also has the right to a mid-single digit percentage of AGTC-501 sales and licensing, which is valued on a risk-adjusted discounted basis at £14.4 million.
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
47
PORTFOLIO REVIEW
CONTINUED
Post-period end, we announced that Freeline had
completed the acquisition of Syncona portfolio
company SwanBio to form Spur, which is in line
with Syncona’s portfolio management strategy
of consolidating companies to strengthen
management teams, improve balance sheets and
access to capital, prioritise the most promising
companies and assets, leverage synergies and
drive cost savings. During the period, as a result
of the challenging market conditions impacting
the biotech sector, and our confidence in its
lead FLT201 Gaucher disease programme,
we executed on a differentiated opportunity
to take Freeline private. Syncona continues to
be encouraged by the data published from the
Gaucher disease programme, which we believe
has the potential to deliver long-term value.
Spur’s SBT101 programme for the treatment
of AMN, a devastating central nervous system
(CNS) disorder for which there are currently no
approved treatments, is currently in a Phase I/II
trial. This programme will further bolster Spur’s
growing focus on the use of gene therapy in the
CNS, supporting the development of Spur’s
pre-clinical research programme in Parkinson’s
disease. Syncona believes that Spur represents a
significant opportunity to deliver two first-in-class
gene therapies and progress a pipeline targeting
more prevalent chronic debilitating diseases.
Company focus:
Developing transformative
gene therapies for patients suffering from
chronic debilitating diseases.
Financing stage:
As part of Syncona’s
acquisition of Freeline, Syncona provided
$15 million (£11.9 million) of financing to enable
the company to meet its near-term cash
requirements to continue to advance FLT201.
Alongside Freeline’s acquisition of SwanBio to
create Spur, Syncona committed to providing
a further £40.0 million in financing to support
the development of the company’s expanded
pipeline. During the year the management
team also executed on a series of operational
and clinical actions to extend its cash runway.
Clinical update:
Post-period end the company
presented further positive data from its lead
Gaucher disease programme at ASGCT
reinforcing the safety, tolerability and efficacy
profile of FLT201, as well as its potential to
improve quality of life for patients. Importantly
the data showed levels of lyso-Gb1
1
were
substantially reduced in patients with
persistently high lyso-Gb1 levels, despite years
BEST IDEAS
PRE-CLINICAL
CLINICAL
LATE CLINICAL
BLA
FLT201 – Gaucher
SBT101 – AMN
CLINICAL COMPANIES
MOVING TO DEFINITIVE DATA
10.9%
OF NAV
99.0%
SHAREHOLDING
on prior treatment with enzyme replacement
therapy (ERT) or substrate reduction therapy
(SRT), the current standard of care for Gaucher
disease patients. Spur’s SBT101 programme
in AMN continued to make progress during
the year. Following the integration of the AMN
programme into Spur’s pipeline, the company’s
management team is reviewing the clinical
development programme for SBT101 and now
expects to release an interim safety readout
from the higher dose cohort in H1 CY2025.
Strategic transactions:
The challenging
market conditions impacting the biotech sector
presented a differentiated opportunity to take
Freeline private. Following this transaction,
Freeline completed an acquisition of Syncona
portfolio company SwanBio to form Spur,
creating a consolidated AAV gene therapy
pipeline that includes FLT201 and SBT101.
The transaction consolidates costs, drives
efficiencies, provides a broadened clinical
pipeline, and brings strategic synergies including
clinical capabilities and manufacturing know-how.
The acquisition has taken place at the portfolio
companies’ holding valuations, resulting in
a combined valuation of £135.6 million at the
year end
2
. The combined company is led by
Freeline CEO Michael Parini and will benefit
from the world-class leadership of the broader
Freeline management team who are focused
on driving forward two potentially first-in-class
gene therapy assets.
Potential key value inflection point:
Data readout from its Phase I/II trial in
Gaucher disease expected in H2 CY2024.
Board seats
2
Date of founding
2015
Date of Syncona investment
2015
Syncona capital invested
£351.8m
Number of employees
60+
Uncalled commitment
£20.0m
Total capital raised
£526.2m
Syncona valuation
£135.6m
Key competitors
Eli Lilly
1.
Established biomarker of response in Gaucher disease patients.
2.
£104.7 million valuation within the announcement of the acquisition on
17 June 2024 reflected the 31 December 2023 valuation of SwanBio
(£74.6m) and Freeline (£20.5m), pro-rata for the movement in share price
to the acquisition date and the consideration paid for the remaining shares
in Freeline (£9.6m). Further movements in the valuation primarily reflect
an additional £27.9 million invested by Syncona alongside the acquisition.
48
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
iOnctura represents an opportunity to invest
in a clinical-stage company and to take its lead
programme, roginolisib, through to late-stage
clinical development. This is in line with
Syncona’s strategy to focus capital deployment
on clinical-stage assets or assets approaching
clinical entry. The Syncona team is working
closely alongside iOnctura to review its pipeline
and explore the breadth of roginolisib’s utility.
Syncona believes roginolisib has the potential
to modulate an important biological pathway
in cancer with a side-effect profile that will
allow it to benefit many patients.
Company focus:
Developing selective cancer
therapeutics against targets that play critical
roles in multiple tumour survival pathways.
BEST IDEAS
PRE-CLINICAL
CLINICAL
LATE CLINICAL
BLA
Roginolisib – Uveal
melanoma
Roginolisib – NSCLC
and myelofibrosis
IOA-289 – Pancreatic cancer
We have seen strong validation for the
potential of Quell Therapeutics’ (Quell)
technology and platform through its
collaboration with AstraZeneca, where Quell
received $85 million upfront, predominantly
comprising a cash payment alongside an
equity investment, to develop, manufacture
and commercialise autologous T-regulatory
(Treg) cell therapies for two autoimmune
disease indications. During the period Quell
announced positive safety data from its lead
QEL-001 programme in liver transplantation.
This was confirmed through further safety data
that was published post-period end from the
initial safety cohort of three patients, which
has supported Quell’s subsequent decision
to advance QEL-001 into the efficacy cohort
of its Phase I/II trial. We continue to work
alongside the company’s management team
as the company delivers against its upcoming
operational and clinical milestones.
Company focus:
Developing engineered Treg
cell therapies to treat a range of conditions such
as solid organ transplant rejection, autoimmune
and inflammatory diseases.
BEST IDEAS
PRE-CLINICAL
CLINICAL
LATE CLINICAL
BLA
QEL-001 – Liver transplant
MOVING TO DEFINITIVE DATA
2.1%
OF NAV
23.0%
SHAREHOLDING
6.8%
OF NAV
33.7%
SHAREHOLDING
MOVING TO EMERGING EFFICACY DATA
Financing stage:
Syncona led a €80 million
(£68.4 million) Series B financing of iOnctura
in March 2024. iOnctura has been added to
the strategic portfolio in the financial year.
Lead programme:
iOnctura’s lead
programme, roginolisib, is a first-in-class
allosteric (indirect) modulator of PI3K delta
(PI3K
), which has potential application
across a variety of solid tumour and
haematological cancers. Roginolisib
demonstrated long-term safety and emerging
efficacy data in a Phase Ib trial for uveal
melanoma, a rare cancer of the eye where
patients have very limited treatment options.
Phase II trials in uveal melanoma and other
cancer indications, including non-small
cell lung cancer and primary myelofibrosis,
are expected to begin later in CY2024.
Pipeline programmes:
The company has
a number of clinical and pre-clinical pipeline
programmes in broader oncology indications.
Potential key value inflection point:
Data readout from its Phase II trial in uveal
melanoma expected in CY2026.
Board seats
2
Date of founding
2017
Date of Syncona investment
2024
Syncona capital invested
£25.7m
Number of employees
c.20
Uncalled commitment
–
Total capital raised
£68.4m
Syncona valuation
£25.6m
Key competitors
Immunocore, Ideaya
Financing stage:
Raised $156 million in a Series
B financing in November 2021.
Clinical update:
Announced initial positive
safety data from its Phase I/II trial in liver
transplantation. Post-period end Quell presented
further safety data at the American Transplant
Congress, demonstrating that QEL-001 was
safe and well tolerated by liver transplant
patients. The company has announced that it is
advancing the therapy’s development into the
efficacy cohort of the LIBERATE Phase I/II trial.
Commercial update:
Quell entered into a
collaboration, exclusive option and license
agreement with AstraZeneca to develop,
manufacture and commercialise autologous,
engineered Treg 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.
Potential key value inflection point:
Data readout from its Phase I/II trial in liver
transplantation expected in CY2025.
Board seats
1
Date of founding
2019
Date of Syncona investment
2019
Syncona capital invested
£61.4m
Number of employees
150+
Uncalled commitment
£2.8m
Total capital raised
£232.4m
Syncona valuation
£84.7m
Key competitors
Sangamo, Sonoma,
GentiBio, Abata
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
49
MOVING TO EMERGING EFFICACY DATA
MOVING TO DEFINITIVE DATA
PORTFOLIO REVIEW
CONTINUED
Company focus:
Resolution Therapeutics
(Resolution) is pioneering macrophage
cell therapy for transformative outcomes
in inflammatory organ diseases.
Financing stage:
Raised £37.9 million to date
from Syncona through its Series A financing.
Clinical update:
Resolution’s founders presented
clinical data at the American Association for the
Study of Liver Diseases (AASLD) Annual Meeting
from an academic study (MATCH II) which
provided proof-of-principle that treatment with
a macrophage cell therapy was well tolerated
in patients, and helped to dramatically reduce
liver associated complications, including death.
Further data presented post-period at the
European Association for the Study of the Liver
(EASL) Congress confirmed the excellent safety
and efficacy of the therapy at 30 months
post-treatment. Resolution is using the outputs
of this trial to prepare its lead product RTX001,
an engineered autologous macrophage cell
therapy, for a Phase I/II clinical trial, expecting
to enter the clinic in H2 CY2024.
People update:
Resolution strengthened its
leadership team in the period with several
appointments, including of Dr Amir Hefni as
CEO, who brings almost 20 years’ experience
in drug discovery and development leadership
in the biotechnology and pharmaceutical
industry and joins Resolution from Novartis
where he was the Head of Cell & Gene
Therapy. Resolution also appointed Simon
Ramsden as CFO, who brings broad
corporate and commercial finance experience
in the pharmaceutical and biotechnology
industry, and Dr Clifford A. Brass as CMO.
Clifford brings extensive clinical development
experience having spent over 25 years
working in the pharmaceutical industry, with
a strong emphasis on advanced liver disease.
Potential key value inflection point:
Data readout from its Phase I/II trial in end
stage liver disease expected in CY2026.
PRE-CLINICAL COMPANIES
Company focus:
Developing gene therapies for
the treatment of chronic renal diseases which are
currently poorly served by existing treatments.
Financing stage:
Raised £45.0 million
in a Series A financing in 2020.
Development update:
Continuing to develop
its pre-clinical pipeline and proprietary platform.
People update:
Purespring made several key
appointments including Fredrik Erlandson as
CMO, Sachin Kelkar as CFO and Peter Mulcahy
as Chief People Officer. These appointments
strengthen Purespring’s leadership team, with
Fredrik leading the clinical development of
Purespring’s current and future pipeline, Sachin
leading the company’s finance strategy and
Peter championing culture and growth.
4.0%
OF NAV
81.6%
SHAREHOLDING
3.6%
OF NAV
77.1%
SHAREHOLDING
Board seats
1
Date of founding
2020
Date of Syncona investment
2018
Syncona capital invested
£37.9m
1
Number of employees
70+
Uncalled commitment
–
Total capital raised
£37.9m
Syncona valuation
£50.0m
Key competitors
Carisma, Shoreline
1. Excludes £12.0 million convertible note.
Board seats
3 (including Chair)
Date of founding
2020
Date of Syncona investment
2020
Syncona capital invested
£45.0m
Number of employees
40+
Uncalled commitment
–
Total capital raised
£45.0m
Syncona valuation
£45.3m
Key competitors
Novartis, Calliditas,
Reata, Sanofi,
Travere, Omeros,
Alexion, Apellis
50
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
MOVING TO EMERGING EFFICACY DATA
MOVING TO EMERGING EFFICACY DATA
MOVING TO OPERATIONAL BUILD
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 an
additional £10 million investment from British
Patient Capital announced in May 2023.
Commercial update:
The company moved
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:
The company expanded
its leadership team with the appointments
of Dr Winfried Barchet as Vice President of
Immunology, who brings more than 15 years
of experience across drug discovery and
translational research, and 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.
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.
Lead programme:
During the year Anaveon
took the strategic decision to focus on
its next-generation compound, ANV600,
a targeted version of its first-generation
product ANV419. Pre-clinical data released
to date has supported the potential
of ANV600 as a monotherapy and
as a combination therapy for cancer.
Financing stage:
Reflecting the strategic
decision to focus on the ANV600 programme,
which is pre-clinical stage, Syncona and the
syndicate of investors in Anaveon adjusted
the price of the final CHF 36.2 million (£32.5
million) tranche of the 2021 Series B financing.
Clinical update:
On track to initiate a Phase
I/II clinical trial of ANV600 in H2 CY2024.
Potential key value inflection point:
Data
readout from its Phase I/II trial of ANV600
expected in CY2026.
3.5%
OF NAV
32.7%
SHAREHOLDING
2.9%
OF NAV
36.9%
SHAREHOLDING
Board seats
2
Date of founding
2016
Date of Syncona investment
2018
Syncona capital invested
£35.4m
Number of employees
60+
Uncalled commitment
£6.0m
Total capital raised
£128.5m
Syncona valuation
£43.7m
Key competitor
Crinetics
Board seats
1
Date of founding
2017
Date of Syncona investment
2019
Syncona capital invested
£52.4m
Number of employees
20+
Uncalled commitment
–
Total capital raised
£114.7m
Syncona valuation
£35.7m
Key competitors
Roche, Sanofi,
Mural Oncology,
Sotio, Medicenna
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 in 2022 alongside
Oxford Science Enterprises. An additional
£5.0 million was raised during the year with
Syncona committing £4.0 million.
Development update:
The company
progressed development of its platform
technology and discovery programmes.
The Syncona Executive Partner group
has also been working with the company
on its strategy and in identifying novel
targets for its platform.
1.0%
OF NAV
62.2%
SHAREHOLDING
Board seats
1
Date of founding
2020
Date of Syncona investment
2022
Syncona capital invested
£12.0m
Number of employees
10
Uncalled commitment
£8.0m
Total capital raised
£25.0m
Syncona valuation
£12.0m
Key competitors
Arvinas, Kymera
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
51
MOVING TO EMERGING EFFICACY DATA
MOVING TO OPERATIONAL BUILD
PORTFOLIO REVIEW
CONTINUED
Company focus:
Pioneering soluble bispecific
T-cell receptor (TCR)-based therapies to
unlock a new class of cancer therapeutics.
Financing stage:
Syncona committed £16.5
million to Yellowstone in a Series A financing
in March 2024, and invested £1.0 million into
the company during the year. Yellowstone
has been added to the strategic portfolio
in the financial year.
People update:
The company launched with
an experienced and industry-leading team.
This includes Prof. Paresh Vyas as CSO, who
is a Professor of Haematology and Deputy
Director of MRC Molecular Haematology Unit
at the University of Oxford and Oxford
University Hospitals NHS Trust, Julian Hirst
as CFO, who has over 20 years of financial
experience, and Neil Johnston as Executive
Chair, who spent 17 years at Novartis, most
recently as global Head of Business
Development and Licensing and a member of
the company’s Pharma Executive Committee.
0.1%
OF NAV
21.6%
SHAREHOLDING
MOVING TO OPERATIONAL BUILD
PRE-CLINICAL COMPANIES
CONTINUED
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 alongside
Cambridge Innovation Capital.
Platform capabilities:
Mosaic Therapeutics’
(Mosaic) technology platform uses proprietary
disease models and artificial intelligence and
machine learning to enable identification of
novel biological intervention to drive responses
in cancer. The company will then leverage these
insights to build a pipeline of programmes.
People update:
Syncona Managing Partner,
Edward Hodgkin, became Chairman of the
company during the year.
0.6%
OF NAV
52.4%
SHAREHOLDING
Board seats
3 (including Chair)
Date of founding
2020
Date of Syncona investment
2022
Syncona capital invested
£7.3m
Number of employees
25+
Uncalled commitment
£9.2m
Total capital raised
£22.5m
Syncona valuation
£7.3m
Key competitors
IDEAYA
Board seats
2
Date of founding
2024
Date of Syncona investment
2024
Syncona capital invested
£1.0m
Number of employees
–
Uncalled commitment
£15.5m
Total capital raised
£16.5m
Syncona valuation
£1m
Key competitors
Immunocore,
Crossbow Therapeutics
Company focus:
Pioneering best-in-class
therapeutics aiming to use protective
cardiomyocytes to revolutionise the treatment
of heart attacks.
Financing stage:
Syncona committed to a
Series A financing in Forcefield in March 2024
and invested £4.0 million into the company
during the year
1
. Post-period end Forcefield
attracted a further £10.0 million Series A
commitment from Roche Venture Fund, valuing
Syncona’s investment at £8.9 million, a 38%
(£2.4 million) uplift to the 31 March 2024 value;
Syncona’s total commitment in the Series A
is £20.0 million. Forcefield has been added
to the strategic portfolio in the financial year.
People update:
John Tsai MD, joined Forcefield
as Chair and CEO, bringing over 20 years’
experience in global pharmaceuticals with a
proven track record in leading transformational
organisational growth and strategy. He is
currently an Executive Partner at Syncona
and was most recently President, Global
Drug Development and CMO at Novartis.
0.5%
OF NAV
88.5%
SHAREHOLDING
Board seats
3
Date of founding
2022
Date of Syncona investment
2022
Syncona capital invested
£6.5m
Number of employees
5+
Uncalled commitment
£21.5m
Total capital raised
£28.0m
Syncona valuation
£6.5m
Broader peer group
AstraZeneca,
Faraday Pharma,
Novo Nordisk
1.
£1.0 million of investment during the year was part of the Series A commitment.
52
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Portfolio milestones delivery since introduction of NAV Growth Framework
(FY2023/4 Interim Results, November 2023)
Strategic life science
portfolio company
Milestone
Milestone type
Expected
Status
Autolus
Further long-term follow up data from its pivotal study
in obe-cel in adult r/r B-ALL
Capital access
milestones
H2 CY2023
Delivered
BLA submission for obe-cel to the FDA
H2 CY2023
Delivered
Initiate a Phase I study of obe-cel in refractory SLE,
extending the use of obe-cel into autoimmune diseases
H1 CY2024
Delivered
Achilles
1
Provide further data from its Phase I/IIa clinical trial
in NSCLC
Capital access
milestones
Q1 CY2024
Delivered in Q2 CY2024
Provide further data from its Phase I/IIa clinical trial
in melanoma
Q1 CY2024
Delivered in Q2 CY2024
Quell
Complete dosing of the safety cohort in its Phase I/II
trial in liver transplantation
Capital access
milestones
H2 CY2023
Delivered in H1 CY2024
Initial safety data in Phase I/II trial in liver transplantation
H1 CY2024
Delivered
Beacon
Publish 12-month data from its Phase II trial in XLRP
Capital access
milestones
H1 CY2024
Delivered
Initiate its Phase II/III trial in XLRP
H1 CY2024
Delivered
Freeline (now Spur)
Release of additional data from its Phase I/II trial
in Gaucher disease
Capital access
milestone
CY2024
Delivered
SwanBio (now Spur)
Initial safety readout in higher dose cohort from its
Phase I/II trial in AMN
Capital access
milestone
H1 CY2024
2
Now expected
in H1 CY2025
Anaveon
Publish initial data from its Phase I/II trial of ANV419
in metastatic melanoma
Capital access
milestone
H2 CY2024
ANV419 programme
deprioritised
1.
Achilles is now a Syncona investment and not part of the strategic portfolio.
2.
In the Q3 Update in February 2024, Syncona updated its guidance for the SBT101 programme to report that it expected its safety readout to be published in H2 CY2024.
Portfolio milestones
and deferred consideration
During the year, Novartis took the decision
to discontinue the development of GT005
(previously the lead asset at Gyroscope
Holdings Limited) in Geographic Atrophy (GA)
secondary to dry AMD, which it had been
responsible for progressing since acquiring
Gyroscope in February 2022. Syncona had been
eligible for a series of milestone payments in
the event of the successful clinical development
and commercialisation of the programme.
The decision taken by Novartis to stop
development of GT005 therefore resulted in
a write-off of the £56.4 million risk-adjusted
valuation of the milestone payments.
Syncona also currently has rights to potential
milestone payments related to the sale of
Neogene to AstraZeneca. Alongside these,
as part of Syncona’s acquisition of AGTC,
the company has the potential to benefit from
any future commercialisation of Beacon’s 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. Together, these potential milestones
and deferred consideration are valued on
a risk-adjusted discounted cash flow basis
at £16.6 million.
1.4%
OF NAV
Syncona investments
Syncona has £72.3 million of value in
its investments, which are non-core and
provide optionality to deliver returns for
our shareholders. Our assets held within
our investments are Achilles Therapeutics
(Achilles), Clade, CRT Pioneer Fund, and
Biomodal (formerly Cambridge Epigenetix).
Syncona’s 0.8% holding in Adaptimmune
was sold during the period for £1.4 million.
Achilles published further data from 18
patients post-period end, which showed
that there had been no further objective
responses since the previous data update
in December 2022, including at the higher
dose level. Syncona believes that in order
for Achilles to be competitive, it would need
to show an ability to routinely manufacture
its products at high doses and in significant
numbers whilst delivering superior efficacy
to comparable treatments. The company has
been unable to demonstrate this to date and
on this basis, Syncona has moved Achilles
from the strategic portfolio to being classified
as a Syncona investment. Syncona does not
hold a Board role at the company but as a
significant shareholder, is engaging with
the Board on a path forward.
Post-period end, an agreement was
reached for Clade to be acquired by Century
Therapeutics for up to $45.0 million (£35.9
million), with upfront consideration to Syncona
of $9.3 million (£7.4 million). Given the
impending sale of the company and with
Syncona no longer holding a Board role, Clade
has been moved from the strategic portfolio
to being classified as a Syncona investment.
5.9%
OF NAV
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
53
FINANCIAL REVIEW
Financial review
Life science portfolio valuations
Company
31 Mar
2023
(£m)
Net
investment
in the period
(£m)
Valuation
change
(£m)
FX
movement
(£m)
31 Mar
2024
(£m)
%
of Group
NAV
(%)
Valuation
basis
1,2,3
Fully
diluted
ownership
stake
(%)
Focus
area
STRATEGIC PORTFOLIO COMPANIES
Late-stage clinical
Autolus
50.0
–
122.4
(2.9)
169.5
13.7%
Quoted
12.6%
Cell therapy
Beacon
60.0
20.2
–
0.1
80.3
6.5%
PRI
65.3%
Gene therapy
Clinical
Spur
4
72.3
63.0
1.1
(0.8)
135.6
10.9%
Cost
99.0%
Gene therapy
Quell
86.7
–
–
(2.0)
84.7
6.8%
PRI
33.7%
Cell therapy
iOnctura
0.0
25.7
–
(0.1)
25.6
2.1%
Cost
23.0%
Small molecules
Pre-clinical
Resolution
23.0
26.9
5
0.1
–
50.0
4.0%
Cost
81.6%
Cell therapy
Purespring
35.1
9.9
0.3
–
45.3
3.6%
Cost
77.1%
Gene therapy
OMass
43.7
–
–
–
43.7
3.5%
PRI
32.7%
Small molecules
Anaveon
64.2
12.6
(42.8)
1.7
35.7
2.9%
PRI
36.9%
Biologics
Kesmalea
4.0
8.0
–
–
12.0
1.0%
Cost
62.2%
Small molecules
Mosaic
7.3
–
–
–
7.3
0.6%
Cost
52.4%
Small molecules
Forcefield
2.5
4.0
–
–
6.5
0.5%
Cost
88.5%
Biologics
Yellowstone
0.0
1.0
–
–
1.0
0.1%
Cost
21.6%
Biologics
PORTFOLIO MILESTONES AND DEFERRED CONSIDERATION
Beacon deferred consideration
15.9
–
(1.6)
0.1
14.4
1.2%
DCF
–
Gene therapy
Neogene milestone payment
0.0
–
2.2
–
2.2
0.2%
DCF
–
Cell therapy
Gyroscope milestone payments
6
54.5
–
(56.4)
1.9
0.0
0.0%
Written off
–
Gene therapy
SYNCONA INVESTMENTS
CRT Pioneer Fund
32.8
(1.4)
2.5
–
33.9
2.7%
Adj third-party
64.1%
Oncology
Biomodal
7
18.5
–
–
(0.5)
18.0
1.5%
PRI
5.5%
Epigenetics
Achilles
8
8.6
–
2.5
(0.1)
11.0
0.9%
Quoted
24.5%
Cell therapy
Clade
24.3
–
(14.4)
(0.5)
9.4
0.8%
Expected
proceeds
21.7%
Cell therapy
Adaptimmune
1.2
(1.4)
0.2
–
0.0
0.0%
Quoted
Cell therapy
Total life science portfolio
604.6
168.5
16.1
(3.1)
786.1
63.5%
Capital pool
650.1
(219.7)
27.1
(4.7)
452.8
36.5%
TOTAL
1,254.7
1,238.9
100%
1. Primary input to fair value.
2.
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.
3.
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.
4.
New company following Freeline’s acquisition of SwanBio.
5.
Capital invested incorporates Series A commitment in addition to a £12.0 million convertible note.
6.
Syncona’s risk-adjusted and discounted valuation of the milestone payments from the sale of Gyroscope Therapeutics.
7. Formerly CEGX.
8.
Syncona has moved Achilles from the strategic portfolio to being classified as a Syncona investment, further information can be found in the portfolio review.
We take a robust and prudent approach to
valuation and managing our balance sheet,
whilst closely managing our costs. This
ensures that we are investing to support
the delivery of our strategy, as part of our
ongoing focus on optimising medium and
long-term returns for our shareholders.
NAV PERFORMANCE
Syncona ended the year with net assets
of £1,238.9 million, or 188.7p per share,
a 1.2% NAV per share return in the year.
RIGOROUS APPROACH
TO CAPITAL ALLOCATION
As more fully covered in the business
review, we take a rigorous approach to
capital allocation and managing our balance
sheet, closely monitoring potential liquidity
and NAV progression alongside capital
needs, whilst considering external factors.
This ensures that we can sustainably deliver
milestones that have the potential to enable
capital access and are funded to deliver
key value inflection points which have the
potential to deliver significant NAV growth.
Syncona’s strategy is
supported by our capital pool,
people and new operating
model, which underpin our
ability to deliver medium
and long-term growth for
our shareholders.
54
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Within our life science portfolio, we have
continued to prioritise capital towards
clinical opportunities and assets which
are approaching clinical entry, aligning
our capital allocation to our NAV Growth
Framework. A total £172.2 million of capital
was deployed into the life science portfolio
in the 12 months. Of this, £135.8 million
was invested in companies that are moving
towards definitive data or towards being
on the market, where key value inflection
points have the potential to drive significant
NAV growth. This includes investments
in Beacon, Spur, Resolution and a new
investment iOnctura. In addition, £26.5
million was invested in companies moving
towards emerging efficacy data, to support
programmes that have the potential
to underpin capital access, including
investments in Forcefield, Anaveon and
Purespring. The remaining £9.9 million
was invested in earlier stage companies,
including the tranched milestone payment
to Kesmalea and the new investment in
Yellowstone, supporting longer-term growth.
Alongside these investments, in September
2023 the Board allocated £40.0 million to a
share buyback programme and post-period
end, a further £20.0 million has been
allocated to the programme. At 30 March
2024, £20.2 million of this had been invested
in repurchasing 16.5 million shares, at an
average discount of 35.1%, resulting in an
accretion of 1.61p to NAV per share. The
share buyback is ongoing, with a further
£10.0 million of shares repurchased since the
year end at an average discount of 38.8%
9
.
Looking forward, we have a strong
pipeline of existing and new opportunities
and expect to deploy between £150-200
million across our life science portfolio
and into new opportunities in the financial
year to 31 March 2025. We will continue
to focus our capital allocation on clinical
opportunities and assets that are
approaching clinical entry, aligning our
capital allocation to our NAV Growth
Framework as our companies scale.
PRUDENT CAPITAL POOL MANAGEMENT
TO BALANCE INFLATIONARY RISK
Within our capital pool of £452.8 million we
ensure that we allocate between 12 and
24 months of funding to cash and Treasury
Bills. Longer-term capital is allocated to
a number of low volatility, highly liquid,
multi-asset and credit funds or mandates,
managed by Kempen and M&G with
portfolio mandates to deliver a core CPI
(consumer price index) return over the
mid-term. During the year, we exited our
position in the Schroder Diversified Growth
Fund and re-deployed the capital into
short-dated treasuries. At the year end,
£262.4 million was held in cash and
Treasury Bills, with £182.5 million held in
multi-asset funds and credit funds. The
remainder of the capital pool is invested
in mature cash generative private equity
funds. To provide Syncona with a natural
hedge against short-term US dollar cash
flows, 14.6% of our capital pool is held in
US dollars and the 2.3% strengthening of
Sterling over the year resulted in a small
unrealised foreign exchange loss at the
year end. The overall return across our
capital pool during the year was 3.4%.
31 Mar 2024
(£m)
% of gross
capital pool
10
% of
Group NAV
Cash
99.0
20.9%
8.0%
Treasury
bills
163.4
34.5%
13.2%
Multi-asset
funds
70.5
14.9%
5.7%
Credit funds
112.0
23.6%
9.0%
Private
equity funds
28.8
6.1%
2.3%
We will continue to monitor the asset
allocation and foreign exchange exposure
within the capital pool based on our
capital requirements and market
conditions, with a focus on balancing
inflationary risk with a core strategy of
capital preservation and liquidity access.
VALUATION APPROACH
At the year end, our life science portfolio
comprised listed holdings (23.0%), private
companies either valued at price of recent
investment (PRI) (33.4%), or on the basis of
capital invested (calibrated cost) (36.0%).
In addition, potential milestone and
deferred consideration payments relating
to Neogene and Beacon are valued on a
risk-adjusted discounted cash flow basis
in line with our Valuation Policy and
together represent 2.1% of the portfolio
11
.
Throughout the challenging macro
environment, which has impacted valuations
for early-stage life science companies, the
Syncona team has continued to rigorously
review the robustness of our private
company valuations. These companies have
a number of key milestones ahead which will
be central to enabling future access to capital
and key valuation inflection points that have
the potential to drive significant NAV growth.
Our approach to valuation includes taking
inputs from the investment team, with a
focus on delivery against these upcoming
milestones as well as taking into account
any developments during the period which
may have impacted the investment theses
of individual companies. We have also taken
into account the input provided by Syncona’s
external valuation adviser on our seven
largest private holdings, which together
make up 68.2% of the strategic portfolio
by value. We will continue to review our
company valuations on a quarterly basis
alongside market data as conditions evolve,
with conditions in the private markets now
beginning to improve.
INVESTING IN OUR PLATFORM TO
SUPPORT GROWTH AMBITIONS
As highlighted in last year’s annual results,
we continue to invest in our platform and
team to support our growth ambitions, which
has led to an anticipated increase in our cost
base. In particular, we have made a number
of senior appointments to the investment
team and Executive Partner group, alongside
further investment across the business to
support the scaling of our model. Syncona is
a self-managed vehicle and SIML costs are
managed prudently by the Leadership Team
within an annual budget approved by the
Board. SIML management fees for FY2023/4
were £16.6 million (1.34% of NAV
12
), an
increase of £4.5 million on FY2022/3. In
addition to an increase in headcount, this
increase also reflects the influence of the
inflationary environment on salaries and
business expenses. Notwithstanding further
inflationary impacts, the SIML team does
not expect costs to materially increase in
FY2024/5, with investment in the platform
and senior team now largely complete. Total
costs of Syncona Limited during the year
increased to £26.3 million (2.12% of NAV)
compared to £22.4 million (1.79% of NAV)
in the prior year. These costs incorporate
fees paid to SIML, ongoing operating costs
of the Company, the £4.4 million charitable
donation and the costs associated with the
long-term incentive scheme.
Kate Butler
Chief Financial Officer
Syncona Investment Management Limited
19 June 2024
9. As at 19 June 2024.
10. Gross capital excludes other assets/liabilities and cash held within the Investment Manager, SIML.
11.
Additional 5.5% of value within the life science portfolio is from the CRT Pioneer Fund (4.3%) which is valued based on an adjusted third-party valuation, and anticipated proceeds
from the sale of Clade to Century (1.2%).
12. Using NAV at 31 March 2024.
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
55
SECR DISCLOSURE
Our environmental impact
This section includes our Streamlined
Energy and Carbon Reporting (SECR).
Although the Company is not subject
to the laws of England and Wales,
its reporting has been prepared in line
with the relevant English legislation as
set out below. The reporting period is
Syncona’s financial year, the 12 months
to 31 March 2024.
OUR DIRECT FOOTPRINT
Given the relatively small nature of our
operations, with one primary office location
and 37 employees, our environmental
impacts are relatively low. Our clearest direct
impact (Scope 1 and 2) comes from the
energy we use in our headquarters, where
the electricity is powered by renewable
energy
1
. Our office space also has a zero
to landfill waste policy (Scope 3).
METHODOLOGY FOR SECR
REPORTING AND PERFORMANCE
We have employed the services of a
specialist adviser, Accenture, to quantify
the greenhouse gas (GHG) emissions
associated with the Company’s emissions
for FY2023/4. Syncona’s FY2023/4 SECR
location-based footprint is equivalent to
504.9 tCO
2
e
2
, with the largest portion being
made up of emissions relating to business
travel via air at 477.9 tCO
2
e. Syncona’s
market-based footprint, which takes into
account the green energy
1
used by its
head office, amounts to 492.3 tCO
2
e. Our
emissions have increased relative to the
FY2022/3 financial year, with the increase
in business travel primarily driven by an
increase in travel to international conferences
to support Syncona’s growth strategy and
team development, the addition of new
companies to the portfolio with overseas
facilities, and new internationally-based
employees joining the Syncona team.
The methodology used to calculate the
GHG emissions is in accordance with the
requirements of the following standards:
–
World Resources Institute (WRI)
Greenhouse Gas (GHG) Protocol
(revised version)
–
Defra’s Environmental Reporting
Guidelines: Including Streamlined Energy
and Carbon Reporting requirements
(March 2019)
–
UK office emissions have been
calculated using the Defra 2022 issue
of the conversion factor repository
Following an operational control approach
to defining our organisational boundary, our
calculated GHG emissions from business
activities fall within the reporting period of
April 2023 to March 2024 and using the
reporting period of April 2022 to March
2023 for comparison. We do not classify
portfolio company emissions as being
within our organisational boundary for
the purposes of SECR reporting. Whilst
Accenture have endeavoured to obtain
accurate and complete data wherever
possible, where there have been data gaps,
they have used reasonable estimations
such as annualisation of actual data, use
of expenditure data as a proxy and typical
office consumption benchmarks where
data was not available for the preparation
of this report. The emissions reported by
Syncona are UK-based only, given that
is the Company’s primary office location.
TOTAL ENERGY USE
The total energy use for the Company
for FY2023/4 was 65,819 kWh,
compared to 68,775 kWh in FY2022/3.
INTENSITY RATIO
As well as reporting its absolute emissions,
the Company also follows the SECR
requirement of reporting its emissions
through the publishing of an intensity
metric. In doing so, it reports a metric of
tonnes of CO
2
e per full time employee.
This is the most appropriate metric given
that the majority of emissions result from
the operations of Syncona Investment
Management Limited and the day-to-day
activities of its employees. The employee
intensity metric has been calculated from
the emissions for Scope 1, 2 and 3 to
give a ratio per employee covering all
of Syncona’s activities. For FY2023/4
this amounted to 13 tonnes of CO
2
e per
employee using a market-based approach,
and 13.3 tonnes of CO
2
e per employee
using a location-based approach. This
compares to FY2022/3 figures of 5.5
tonnes of CO
2
e per employee using a
market-based approach, and 5.8 tonnes of
CO
2
e per employee using a location-based
approach. This increase in the intensity
ratio, as with our total emissions, primarily
reflects the increase in business travel
during the year.
1. Validated using Total Gas & Power’s Pure Green certification.
2. Tonnes of CO
2
equivalent.
56
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
EFFICIENCY INITIATIVES
Syncona has clear guidance for business
travel which is followed by its team in
order to ensure environmental impacts are
considered. The following principles act
as guidance for travel by team members:
–
all flight travel to be carefully considered,
encouraging employees to substitute
air travel with rail travel where possible;
–
Syncona’s business travel provider
includes associated emissions data for
each mode of transport and this should
be a consideration for the travel booker;
–
considering practical arrangements
for meetings, for example arranging
several meetings within one trip, holding
meetings by video call or meeting
at a more closely located office;
–
clarity for employees that there are
higher emissions associated with
business-class and long-haul travel; and
–
encouraging employees to use
hotels and taxi firms with lower carbon
emissions. Syncona continually monitors
adherence to its travel policy and its
alignment with its net zero aspiration.
COMMITMENT TO STRONG
ENVIRONMENTAL REPORTING
In FY2022/3, Syncona published its full
portfolio carbon footprint for the first time
and has done so again in FY2023/4.
This incorporates its enhanced Scope 3
footprint, including category 1 (purchased
goods and services) and category 15
(investments) emissions.
Syncona has also now published its first
interim net zero target as a signatory to
the Net Zero Asset Managers (NZAM)
initiative. Further detail on our interim net
zero target as well as our full portfolio
carbon footprint can be found on page 34
of our Sustainability Report, available on
our website.
GHG EMISSIONS (tCO
2
E) AND ASSOCIATED ENERGY CONSUMPTION (KWH)
FOR FY2023/4
Emissions source
Global emissions tCO
2
e
Percentage
change
2023
2024
Scope 1
Natural gas
0.74
0.93
26%
Total Scope 1
0.74
0.93
26%
Scope 2
Electricity (market-based)
–
–
0%
Electricity (location-based)
11.2
12.6
13%
Total Scope 2 (market-based)
–
–
0%
Scope 3
Electricity transmission and distribution
3.93
4.12
5%
Natural gas well-to-tank
0.13
0.15
22%
Employee cars
2.2
0
-100%
Business flights
174.4
477.9
174%
International rail
0.03
0.05
65%
Domestic rail
0.91
0.68
-24%
Public transport
1.61
2.6
62%
Employee commuting
8.50
5.78
-32%
Paper
0.06
0.00
-100%
Waste and recycling
0.06
0.06
9%
Water
0.07
0.05
-21%
Total Scope 3
191.9
491.4
156%
Total (market-based)
192.6
492.3
156%
Total (location-based)
203.8
504.9
148%
Total energy usage (kWh)
1
68,775
65,819
-4%
Normaliser
tCO
2
e per FTE (location-based)
5.8
13.3
128%
tCO
2
e per FTE (market-based)
5.5
13.0
136%
1.
Energy reporting includes kWh from Scope 1, Scope 2 and Scope 3 employee cars only (as required by the SECR regulation).
Syncona has continued its programme
of purchasing carbon credits to offset
the direct emissions resulting from the
Company’s operations. It has purchased
carbon credits for the FY2023/4
reporting year through purchasing offsets
from the Forestal el Arriero project.
This project supports carbon emissions
removal through afforestation and is
registered under Verra’s Verified Carbon
Standard (VCS) – the world’s most
widely used greenhouse gas (GHG)
crediting programme. Moving forward
we intend to continue to review best
practice in using carbon credits to
align with our net zero aspiration.
OFFSETTING OUR CARBON EMISSIONS
Read more in our 2024 Sustainability Report
synconaltd.com/sustainability
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
57
TCFD REPORT
Climate-based
reporting
We understand that climate change represents
a systemic risk to our societies and economies.
We agree with the signatories to the 2015 Paris
Agreement that our collective approach needs to
limit climate change to within a 1.5 degree Celsius
global temperature increase by the end of the
21
st
century. There is scientific consensus among
the world’s leading climate scientists that limiting
human-caused global warming requires reaching
net zero CO
2
emissions by 2050 at the latest.
We create and build companies to deliver
transformational treatments to patients in areas
of high unmet need. As such, we indirectly
bear the potential transition and physical risks
to which the portfolio companies and other
investments are exposed. In addition, we also
benefit the most from any potential opportunities
which are associated with the transition to a
low-carbon economy of which the portfolio
companies are able to take advantage.
Listing Rule 9.8.6(R)8 requires premium-listed
commercial companies to disclose in their
annual report whether they have reported
on how climate change affects their business in
a manner consistent with the recommendations
of the Task Force on Climate-related Financial
Disclosures (TCFD), and to provide an
explanation if they are unable to do so. Although
Syncona is not required to disclose information
compliant with Listing Rule 9.8.6(R)8 as per
Listing Rule 15.4.29, we are voluntarily providing
climate-related financial disclosures consistent
with the recommendations and recommended
disclosures of the TCFD, including the Additional
Guidance, to illustrate our commitment to
climate-related issues given their importance
to our stakeholders.
In 2020 Syncona undertook a comprehensive
materiality review to understand the sustainability
issues most material to the business, including
environmental impacts and disclosure (see the
materiality matrix on page 6 of the Sustainability
Report). This materiality assessment followed
guidance published by the Global Reporting
Initiative (GRI) to assess both the impact of
sustainability-related issues on Syncona and
its portfolio as well as the importance of
sustainability-related issues to the Company’s
stakeholders. Syncona has reviewed this
assessment on an annual basis since 2020,
and in 2022, the Syncona team performed a
scenario analysis to assess the climate-related
physical and transition risks that Syncona might
be exposed to and incorporated the results of
the analysis into Syncona’s sustainability issues
matrix. To this end, during FY2023/24 Syncona
carried out an internal cross-functional project to
review the matrix to ensure it remains reflective
of the issues material to Syncona and its
portfolio companies. The results of these
analyses have led us to believe that our business
and the portfolio companies in which we invest
are not materially exposed to climate change
and that neither the risks nor opportunities
(individually or collectively) materially impact
our strategy or viability, or financial results, either
in the short or longer term. To be clear, we
therefore do not expect climate-related issues
to materially impact the Company’s cash flows,
access to finance or cost of capital over the
short, medium or long term.
We are, however, committed to managing
climate-related issues where possible by
using our influence to ensure that our portfolio
companies are addressing the challenges of
climate change – we have chosen to address
the climate-related issues in our business
within our wider sustainability framework.
At the time of publication Syncona Limited
has made climate-related financial disclosures
consistent with the TCFD recommendations
and recommended disclosures in this TCFD
summary against:
−
Governance (all disclosures)
−
Strategy (disclosures (a) and (c))
−
Risk management (disclosures (a) and (c))
−
Metrics and targets
For Strategy Disclosures (a) and (c), the Company
plans to conduct a more robust scenario analysis
of its exposure to climate-related physical and
transitional risks. In addition, since the Company
does not consider climate change to be a principal
risk, we have not disclosed information for Strategy
Recommended Disclosure (b) (Describe the impact
of climate-related risks and opportunities on the
organisation’s businesses, strategy, and financial
planning) and Risk Management Recommended
Disclosure (b) (Describe the organisation’s
processes for managing climate-related risks).
Our approach to
climate-related
financial disclosures
−
Approves and oversees implementation of climate-related policies, principally
the Company’s Sustainability Policy, Responsible Investment Policy and
Climate Ambition Statement
−
Considers, monitors and oversees the Syncona team’s identification
and assessment of climate-related risks
−
Publishes Scope 1, 2, and scope 3 (including Category 1 and 15) emissions
−
Reports against the TCFD’s recommendations and recommended disclosures
SYNCONA LIMITED
−
Oversees and manages the implementation of climate-related policies and
procedures in portfolio companies
−
Assesses and manages any portfolio company climate-related issues
SYNCONA TEAM
−
Implement climate-related policies and procedures in line with Syncona guidelines,
values and expectations (as set out in its Responsible Investment Policy)
−
Report to SIML on any material climate-related issues
PORTFOLIO COMPANIES
2050
Our aspiration is to become net zero
across our full value chain by 2050
1
1.
Following NZAM’s guidance our initial focus within our portfolio will be on Scope 1 and 2 emissions and to the extent possible, material portfolio Scope 3 emissions.
As data quality and associated methodologies improve for calculating Scope 3 emissions, we may evolve our approach.
58
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
SYNCONA LIMITED BOARD
SYNCONA LIMITED
AUDIT COMMITTEE
SYNCONA TEAM
Governance
PLANS FOR FY2024/25
−
Roll-out of NZAM interim net zero target
across the Syncona portfolio.
−
In 2025 it will be three years since we first
reported against the recommendations of
TCFD. To align with best practice we therefore
intend to update our climate scenario analysis
(beyond the usual desktop review) to ensure
it remains fit for purpose.
−
Syncona understands that the UK Government
intends to integrate TCFD into International
Sustainability Standards Board (ISSB)
standards. It is our intention to review the related
guidance once this is available, and to consider
whether any consequential changes to our
sustainability approach will be required.
−
SIML is an existing signatory to the UN PRI,
which includes reporting around sustainability
issues, providing our first submission in 2023/4.
We expect our first publicly available PRI report
to be published during 2024/5. Areas for
improvement in processes have been identified
following the completion of our first reporting
cycle, with these being incorporated into
our sustainability priorities moving forward.
−
Each change that has been made to our
sustainability issues materiality matrix will be
subject to a detailed assessment to determine
whether changes should be made to our internal
processes to reflect the movement. This will
include environmental impacts and disclosure.
PROGRESS THIS YEAR
−
SIML became a signatory to the Net Zero
Asset Managers (NZAM) initiative in May 2023.
Committing to NZAM supports Syncona’s
aspiration of becoming net zero across our full
value chain by 2050
1
.
SIML’s NZAM target was
published post period end in May 2024.
−
As part of SIML responsibilities as a signatory to
the NZAM initiative, in May 2024 we published
an interim target of 100% of Syncona’s in-scope
strategic portfolio companies to set science-
based targets validated by the SBTi by 2030.
This equates to 9% of our total AUM (NAV) by
value (using NAV as at 31 March 2023), or 23%
of our current strategic portfolio by volume
(3 out of 13 companies)
1
. In determining which
portfolio companies are currently in scope, we
took into consideration the recommendations of
the SBTi’s Private Equity Sector Science-Based
Guidance for Venture Capital.
−
We have continued to review our current
portfolio’s emissions – see the emissions
reporting detailed on page 57 for FY2023/4 –
and will be working with portfolio companies
on setting emission-reduction targets aligned
with the SBTi’s guidance for small and
medium-sized enterprises, which includes
an expectation for our in-scope portfolio
companies to set near-term targets for 2030
across Scope 1 and 2 emissions, and a
commitment to reduce Scope 3 emissions.
−
In addition, we have actively engaged with new
portfolio companies on sustainability matters.
For our new strategic portfolio companies,
Yellowstone, Forcefield and iOnctura, we are
actively engaging with them on sustainability
matters, including working with them to put in
place policies in line with our expectations and
principles (further detail of which can be found
within our Responsible Investment Policy).
−
We carried out an internal, cross-functional
project to review our sustainability materiality
matrix to ensure it remains reflective of the
issues material to Syncona and its portfolio
companies. This review, which included the
consideration of existing environmental issues,
led to certain risks being repositioned on the
matrix, as well as the addition of newly identified
issues, more fully described in the Sustainability
Report. Movements on the matrix have largely
been driven by an increased impact due to
the growing maturity of the portfolio, with this
including environmental impacts and disclosure
where the Syncona team’s evaluation has been
that there has been a slight increase in risk
as more portfolio companies have moved
to a later stage and grown their operational
footprints. In spite of this we continue to be
of the view that environmental risks across
the portfolio remain low.
Our sustainability governance framework
Governance of climate-related issues is addressed within our wider framework for governance of sustainability issues. The Syncona Limited Board oversees
implementation of the Sustainability Policy, including oversight of targets set. The Board also oversees the monitoring of risks arising from sustainability
issues (including those that are climate-related) as part of the wider process of monitoring of risk management and internal controls.
−
Approves the Sustainability Policy and Responsible Investment Policy
−
Oversees implementation of the Sustainability Policy, including oversight of any targets set
−
Considers risks facing the Company from sustainability issues as part of its role in the risk management process
−
Oversees monitoring of risks arising from sustainability issues as part of wider process of monitoring of risk
management and internal controls
−
Reviews scope and effectiveness of internal
controls and risk management systems
−
Reviews and assesses risks and associated
frameworks to manage and mitigate such risks
LEADERSHIP TEAM
−
Overall responsibility for implementation
of the Sustainability Policy
−
Manages integration of Syncona approach
to sustainability across portfolio
−
The Head of Corporate Affairs is the designated
Leadership Team lead for sustainability
INVESTMENT COMMITTEE
−
Implements the Responsible Investment Policy
−
Assesses and manages sustainability risks
in the portfolio
SUSTAINABILITY COMMITTEE
−
Advises on the Sustainability Policy
−
Oversees the integration of the Sustainability
Policy into the ongoing roles and activities
of the investment team and broader business
−
Identifies areas where business can improve
its approach
The table above sets out our sustainability governance structure, which includes
climate-related issues. Given our judgement that climate-related risks do not
represent a material risk to our business, they are addressed as part of our wider
consideration of sustainability issues and not separately.
The table describes the main areas where the Board considers sustainability issues.
Syncona is an investment company and, as further described in the Corporate
governance report on pages 74 to 77, the Board is not directly involved in
management of the investment portfolio, which is delegated to the Syncona team.
Within the Syncona team, the Sustainability Committee acts as a cross-functional
group to coordinate the implementation of our sustainability policies, horizon-
scan for sustainability developments or changes in risks, and support and advise
the business on sustainability issues, including climate-related issues. In addition,
the Sustainability Committee carries out, on an annual basis, a desktop climate
scenario analysis, pursuant to which review of emerging regulation impacting
upon portfolio companies is considered.
The Terms of Reference for the Sustainability Committee provide that it must
comprise at least one member of the Leadership Team. The Terms of Reference
for the Sustainability Committee are reviewed on a regular basis to ensure they
are appropriate in the context of the business of Syncona. See our Sustainability
Report for further information on the Committee.
A key focus for the Sustainability Committee this year has been to include
additional companies in the group from which it directly gathers environmental
data, as well as carrying out extensive preparatory work in advance of SIML signing
up to NZAM. The Committee has also led a desktop review of our climate-related
risks and opportunities under a number of scenarios (see overleaf).
The Sustainability Committee is also responsible for coordinating reporting through
the Leadership Team and onwards to the Board. Regular reporting covers our
progress against the commitments in our policy and targets and KPIs, including
climate-related targets. The Board also receives reports on the results of the desktop
climate scenario analysis that was carried out and the risks to the business.
Reports to on a biannual basis
Reports to on an annual basis
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
59
TCFD REPORT
CONTINUED
Strategy
Our business is focused on a single investment strategy in a single industry
of pre-revenue generating life science investments which are predominantly
concentrated in the UK, Western Europe and the US. See pages 22 to 25
for further information on our strategy and investment process.
In FY2021/2 we undertook a climate scenario analysis with support from
Avieco (now Accenture), an external consulting firm, to consider the
potential impact that certain physical and transitional climate-related risks
and opportunities could have on our business and portfolio companies,
in a range of different climate scenarios and on a short, medium and
long-term time horizon. This work drew on support across the business
and from our portfolio companies.
This year, as part of standard process, the Sustainability Committee
conducted a desktop review of the FY2021/2 climate scenario analysis,
including a horizon-scanning exercise for any new potential risks and
opportunities, building on the work done with Accenture, as reviewed
against last year’s analysis. The Sustainability Committee reviewed the
specific climate scenarios and time horizons that were selected for
FY2021/2. It was concluded that the scenarios are still internally consistent,
logical and based on explicit assumptions and constraints that present
plausible future development paths. Indeed, no new or further risks or
opportunities were identified this year and the Sustainability Committee
concluded that the climate scenario analysis remained representative
of the risks and opportunities faced by our business.
Climate scenarios
To analyse potential impact we selected three climate scenarios from
the Network for Greening the Financial System: ‘Net Zero 2050’ (which
assumes orderly progress towards net zero in 2050 and is aligned with
the 2015 Paris Agreement scenario of 1.5 degrees Celsius), ‘Divergent
Net Zero’ (which also assumes that net zero is reached by 2050, but
with a much less orderly path to it and therefore higher transition costs)
and ‘Current Policies’ (which assumes a 3 degrees Celsius or greater
increase in global temperatures from baseline). We believe that these
scenarios reflect a core range of potential outcomes that allow us to
analyse impacts on our business.
Time horizons
For the purpose of this exercise, and acknowledging that climate-related
issues tend to manifest themselves over the medium to long term, we
have characterised our short, medium and long-term time horizons as 0-5
years, 5-15 years and 15-30 years respectively. We believe these are
reflective of the lifecycle of the portfolio companies that we invest in;
company creation and drug development can take between 10-15 years
and a granted patent for a therapy could last for around 20 years.
At this time we have not identified any specific long-term climate
related risks within our portfolio companies. We will, however, keep
the risk landscape under review as our companies mature and
develop and the regulatory landscape evolves.
DESCRIPTION OF
RISK OR OPPORTUNITY
IMPACT ON OUR BUSINESS
AND OUR RESPONSE
SCENARIO WHERE THIS
HAS HIGHEST IMPACT
TIME
HORIZON
Extreme weather events (physical)
:
climate change could disrupt
portfolio company manufacturing and other facilities, as a result of
storms, flooding etc.
Low impact given the relatively small footprint of our portfolio companies,
which are typically in clinical development. However, we can recommend
mitigation through site choice and physical mitigation steps.
Current Policies
Medium term:
5–15 years
Logistics and supply chain disruption (physical)
:
climate change
could cause chronic and acute upstream and downstream disruption
to portfolio companies using supply chains and transport links as
a result of rising sea levels, hurricanes and other weather events,
particularly as they move towards larger clinical trials and
manufacturing products.
Low impact currently though may increase in the future as companies
develop. Mitigation actions could include recommending that
climate-related risks are integrated into supply chain management
and resilience assessments.
Current Policies
Medium term:
5–15 years
Impact of not achieving net zero (transitional)
:
there could be
increased costs or negative business impacts (such as increased
stewardship from investors or voting action) associated with achieving net
zero in a short timeframe for both Syncona and its portfolio companies.
Low impact given we have set our interim net zero target, as part of SIML
signing up to the NZAM initiative, and are working towards rolling out this
net zero strategy to our in-scope portfolio companies.
Divergent Net Zero
Short term:
0–5 years
Increased cost of capital (transitional):
Syncona may face increased
costs of capital or be constrained in raising capital in the public market
if investors perceive us as high risk from a climate perspective.
Low impact due to our low emissions and our wider sustainability focus.
Mitigation could include providing further sustainability data reporting
(which is already being implemented), aligned with emerging global
standards on sustainability issues, to seek to maintain investor confidence
in our approach to these issues.
Divergent Net Zero
Medium term:
5–15 years
Opportunity to address new health issues (products and
services)
:
for example, climate change may result in an increase
in melanoma and respiratory issues.
Low impact and not a current focus for our business. We typically seek to
build stand-alone biotech companies that have the ability to take products
to market, and believe it is less likely there will be relevant opportunities
on this business model. However, we will keep this on our radar.
Current Policies
Medium term:
5–15 years
Risk evaluatio
n
Through the risk identification process, we identified four potential risks
and one potential opportunity for evaluation by the business. As an
investment business, materiality is principally driven by the impact on
the value of our portfolio companies, and our ability and the cost of
accessing capital to deliver our strategy. Given the dynamic nature of
our portfolio (see below) and the data available, our assessment was
qualitative rather than driven by specific financial thresholds.
We assessed the potential impact on our business and likelihood of
such risk or opportunity occurring for each time horizon and climate
scenario in order to determine a numerical score of potential materiality
on our business. Physical risks were assessed taking account of
physical locations of facilities and desktop analysis of supply chains
(principally of our portfolio companies), combined with publicly available
data on vulnerability of different locations/logistics routes, and the value
of our investment in each portfolio company. We also sought to consider
the likely evolution of the businesses of our companies, though that is
challenging both because our companies typically change significantly
as they proceed through clinical development, and also because our
portfolio is itself dynamic and subject to change. We assessed the
transition risks by analysing internal data and publicly available data
to look at the impact of sustainability factors on cost of capital.
We only operate in a single sector and so sectoral analysis was not
relevant to us. Geographic variations were taken into account in respect
of physical risks as described above, but given the dynamic nature of
our portfolio our overall assessment was carried out on a global basis.
Resilience of the Company’s strategy to climate change
As revealed by the review of the Company’s climate scenario analysis,
the Company has not identified a material risk or opportunity resulting
from climate change in the short to medium term. Therefore it remains
our view that neither the risks nor opportunities (individually or
collectively) materially impact our strategy or viability, or financial
results, either in the short or longer term. Accordingly, we do not
consider there should be any impact to our financial results. However,
due to the dynamic nature of climate change and its impacts, we
intend to keep the risks and opportunities under review. For that
reason, climate-related issues are not a material input in our planning,
but we take account of the identified mitigation actions where relevant.
Should climate-related risks arise, Syncona has a range of processes
in place to manage identified climate change impacts as detailed
below. The Company has committed to a net zero ambition across
its full value chain by 2050
1
and will continue to transparently report
progress moving forward on an annual basis within the Company’s
TCFD disclosures and Sustainability Report.
60
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Risk management
As described above, during the year the Sustainability Committee
carried out a desktop review of the climate scenario analysis that was
supported by Avieco in FY2021/2, including a horizon-scanning exercise
to determine whether there were any new potential risks or opportunities
that were relevant to our business. We concluded that none of these
risks (individually or collectively) materially impact our strategy or
viability, or financial results, either in the short or longer term, and
accordingly climate-related risks have not been included as a principal
risk of the business, nor are they seen to be more than a low risk on
our sustainability issues matrix relative to other sustainability issues.
Accordingly, we address risk management of climate-related risks
alongside other sustainability issues and as part of our wider risk
management process. Within the Syncona team, the Sustainability
Committee takes a lead on horizon-scanning for sustainability
developments or changes in risks, including climate-related issues.
This then acts as an input into the wider risk management process,
both within the Syncona team and at Board and Audit Committee,
as set out in the risk management section of this Annual Report on
pages 62 to 65.
As we have done this year, we expect that the Sustainability Committee
will continue to keep the scenario analysis under review, with external
support where this is helpful. We will continue to monitor climate-related
risks and should any of these become a material or principal risk,
we will embed these within our existing risk management processes.
The Investment Committee is responsible for considering sustainability
issues in Syncona investment transactions. Once an investment is
made, the investment team is responsible for encouraging the portfolio
company to meet our sustainability requirements (as set out in our
Responsible Investment Policy) and, where reasonably possible, this is
captured in the investment agreements. The investment team member
responsible for a portfolio company then provides a progress report to
the team’s quarterly review meeting where the entire investment team
carries out an in-depth review of all portfolio companies. Further
details of how we engage with our portfolio companies are set out
in the responsible investor and partner section of our Sustainability
Report, on pages 18 to 25, available on our website.
The Leadership Team is responsible for considering sustainability
issues within Syncona’s own business and operations.
Metrics and targets
As mentioned above, as we believe that climate-related risks
do not represent a material risk to our business, we have taken a
proportionate approach in our reporting. We therefore use the metrics
and targets described within this section to assess and manage risks
and opportunities that may become material to the business.
Metrics applicable to Syncona and our portfolio companies
−
Our principal metric is our carbon footprint. We have included full
carbon footprint reporting, incorporating both Syncona operations
and our portfolio on page 34 of the Sustainability Report. The
environmental pages of our Annual Report also include our full
SECR reporting, which provides details of our emissions at an
operational level.
−
The number of portfolio companies who directly provide us with
environmental data.
−
Our progress in delivering our sustainability policies, including
those relating to climate, and these form an element of annual
performance reviews for individual Syncona team members
which impacts on the discretionary bonus for the Syncona team.
We have considered other cross-industry climate-related metrics
and targets as detailed in the TCFD Additional Guidance, including
reporting on weighted average carbon intensity and carbon price.
We do not believe that such metrics and targets are appropriate or
meaningful for our business at this stage given our single investment
strategy focused on pre-revenue single industry businesses, however
we continue to keep these under review. In addition, climate-related
considerations are not considered when setting the performance
objectives for the Board’s remuneration as it is not considered
a material risk or opportunity.
Targets applicable to Syncona and our portfolio
companies and our transition plans
As stated above, it is our ambition to be net zero throughout our
full value chain (including our portfolio companies) by 2050.
The majority of our climate impact is within our investment portfolio
and, as part of SIML becoming a signatory to NZAM, we have set a
clear interim target for 2030, which states that 100% of our in-scope
portfolio companies will set science-based targets validated by the
SBTi by 2030. This equates to 9% of our total AUM (NAV) by value
(using NAV as at 31 March 2023), or 23% of our current strategic
portfolio by volume (3 out of 13 companies)
1
. We believe this approach
in building out our coverage boundary means our interim targets are
materially consistent with the 50% global reduction in CO
2
identified as
a requirement in the IPCC special report on global warming of 1.5°C.
We are now in the process of preparing a formal transition plan to be
rolled out to in-scope companies, which will support them in reducing
their carbon emissions where possible, particularly in relation to
electricity supply. Syncona’s own operations are of a relative low
intensity with a 100% renewable energy supply provided to our
office via green energy tariffs.
For our portfolio companies, while we are long-term investors, the
nature of our investments means that the period from today to either
2030 or 2050 is likely to see significant change in our investment
portfolio, as companies succeed or fail, and enter or leave the portfolio.
We continue to remain focused on developing a meaningful transition
plan that accommodates that change in a proportionate way, and we
are considering what processes are most appropriate.
Identification of climate-related risks
Assessment of climate-related risks
Management of climate-related risks
−
Detailed identification exercise
as part of climate scenario analysis
in FY2021/2.
−
Ongoing horizon scanning
of sustainability issues by
Sustainability Committee.
−
Scenario analysis by
Sustainability Committee.
−
Within the Syncona team, managed by
Investment Committee and Leadership Team as
part of wider management of sustainability issues.
−
Feeds into wider risk management process
overseen by Audit Committee and Board.
1.
Following NZAM’s guidance our initial focus within our portfolio will be on Scope 1 and 2 emissions and to the extent possible, material portfolio Scope 3 emissions.
As data quality and associated methodologies improve for calculating Scope 3 emissions, we may evolve our approach.
STRATEGIC REPORT
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ANNUAL REPORT AND ACCOUNTS 2024
61
RISK MANAGEMENT
Understanding and managing risk
is at the core of everything we do
Our governance framework for risk
Our strategy of creating, building
and scaling a portfolio of companies,
and turning exceptional science into
transformational treatments, involves
significant risk and opportunity.
We create and build leading life science
companies. We invest in many of these
companies prior to clinical proof of
concept, and build and scale them through
scientific and operational development,
clinical trials, approval and potentially
commercialisation. This involves high
execution risk given the nature of drug
discovery, requiring significant capital from
us or third-party investors. It is therefore
key to our business that our risk appetite
is clearly defined and that we have robust
processes to manage risk. The Board is
willing to accept a level of risk in managing
our business to achieve our strategic
goals, where the risk can be managed,
and offers a sufficient risk/reward balance.
Our risk management framework enables
the business to protect value, helping
us to identify opportunities and minimise
threats to the delivery of our strategic
and operational objectives.
The framework is designed to ensure that
existing or emerging risks are identified,
assessed and managed, and are reported
to relevant stakeholders in a timely
manner to inform and support decision-
making. This process has been in place
for the year under review and up to the
date of approval of the Annual Report and
Accounts. Our process aims to mitigate
the significant risks faced by Syncona in
accordance with our risk appetite. It is
recognised that no risk management
process can provide absolute assurance
against material misstatement and loss.
At the Board meeting in March 2024, the
Board completed its year-end assessment
of risks. This followed the Audit Committee’s
formal assessment of risk and internal
controls in February 2024, which was
supported by a detailed risk assessment by
the Syncona Leadership Team. The Board
believes that it has taken all reasonable steps
to satisfy itself that the risk management
process is effective and fit for purpose. No
material control weaknesses or deficiencies
were identified as part of this review.
RISK REPORT
RISK REGISTER
ACTIVE DAY-TO-DAY MANAGEMENT
−
Oversees and monitors the risk framework
−
Reviews risk register to ensure it properly
captures the principal risks identified by
the Board
−
Oversees the framework for identifying risks
(including emerging risks)
−
Reviews the ongoing operation and
effectiveness of our control environment
to manage the principal risks faced
−
Oversees the implementation of agreed
actions by the SIML team
−
Oversees the process
−
Defines risk appetite
−
Ensures a robust assessment of principal risks
−
Considers key strategic risks and potential
emerging or future risks
−
Receives quarterly risk reports
−
Approves the viability statement
−
Responsible for the day-to-day operations
of the risk management framework
−
Designs the systems
−
Reviews the risks each quarter
−
Monitors, implements and updates controls
and mitigations
−
Reviews the quarterly risk reports
INVESTMENT COMMITTEE
−
Approves investment
transactions taking account
of key risks identified
−
Assesses plans to manage
risks in the portfolio
−
Oversees capital allocation
across the portfolio
−
Oversees portfolio
diversification
VALUATION COMMITTEE
−
Approves the valuation of
the life science investments
SUSTAINABILITY COMMITTEE
−
Oversees integration of
Sustainability Policy into
ongoing roles and activities
of the investment team and
broader business
−
Horizon-scanning for changes
to sustainability risks
QUARTERLY BUSINESS
REVIEWS
−
Review progress of each
life science portfolio company
each quarter
−
Assess progress in managing
key risks to investment case
PORTFOLIO EXECUTION
MEETINGS
−
Oversee actions identified
at quarterly business reviews
and drive their execution
−
Oversee progress of life science
portfolio companies between
quarterly business reviews
−
Manage execution risks
and develop solutions
LEADERSHIP TEAM
MEETINGS
−
Responsible for execution
of strategy
−
Responsible for day-to-day
operation and oversight of
the risk framework and
implementation of any actions
−
Responsible for people matters
and recruitment within Syncona
CAPITAL AND LIQUIDITY
MEETINGS
−
Review capital position
against key measures
and requirements
−
Monitors and assess potential
capital sources and availability
−
Monitors execution of
initiatives to access or return
capital, as appropriate
LIQUIDITY MANAGEMENT
COMMITTEE
−
Approves investment of
the capital pool in line
with agreed parameters
−
Monitors macro environment
SYNCONA LIMITED BOARD
SYNCONA LIMITED AUDIT COMMITTEE
SIML BOARD SUPPORTED BY THE SYNCONA LEADERSHIP TEAM
62
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ANNUAL REPORT AND ACCOUNTS 2024
GOVERNANCE FRAMEWORK FOR RISK
Our governance framework for risk is set
out on the previous page. The Board owns
the process, ensures a robust assessment
of principal risks and defines risk appetite.
Under delegation from the Board, the Audit
Committee oversees and monitors the risk
framework, and assesses the ongoing
operation and effectiveness of our internal
control environment to manage the
principal risks we face. This review process
provides a focus to drive continuous
improvement in our risk processes.
The Syncona team is responsible for
the day-to-day operation of the risk
framework and implementation of any
actions. Different groups, including
the Investment Committee, Valuation
Committee, Liquidity Management
Committee and Sustainability Committee,
together with the investment team through
regular meetings and quarterly business
reviews, identify new risks, and input into
different risks, and these are then collated
into the risk register and reported to the
Board and Audit Committee.
PRINCIPAL RISKS
Not all the risks identified as part of
our risk management processes are
considered to be principal risks. The
principal risks reported in the following
section are those risks that the Board
believes to be the most important and
which could cause Syncona’s results to
differ materially from expected or historical
results, or to significantly impact our
strategy. Not all of these risks are within
the control of Syncona and other factors
besides those listed may affect Syncona’s
performance. As with all businesses
operating in a dynamic environment,
some risks may not yet be known whilst
other low-level risks could become
material in the future. All risks are given
a risk score based on impact if it were
to occur and likelihood of occurrence,
and this is monitored throughout the year.
In addition, each risk is assigned a risk
appetite that the Board is willing to
accept. The correlation between the
risk score and risk appetite for each risk
is also monitored throughout the year.
Emerging risks
Emerging risks are new risks which
have the potential to crystallise at some
point in the future but are unlikely to
impact the business during the next year.
The potential future impact of such risks
is often more uncertain.
They may begin to evolve rapidly or
simply not materialise. We monitor our
business activities and external and
internal environments for new, emerging
and changes to risks, ensuring that these
are managed appropriately. This process
is fully embedded within the overall risk
management framework.
Some of the emerging risks that have
been identified and are currently being
monitored are:
–
Geopolitical uncertainty
–
Potential implementation of price
controls in the US
–
Sustainability issues, including their
potential impact on syndications
–
Legal and regulatory changes,
including changes to tax rules
–
Competitive landscape, including
people and technology
–
Changes to the UK bioscience
research environment
Risk appetite
The Board is willing to accept a level of risk
in managing our business to achieve our
strategic goals, and where the risk can be
managed and offers a sufficient risk/reward
balance. As part of the risk framework, the
Board sets the risk appetite in relation to
each of the principal risks, and monitors
the actual risk against that. Where a risk
is approaching or is outside the target risk,
the Board considers the actions being
taken to manage the risk.
Our risk appetite is set out in the table
on page 65 with a brief description of
the rationale in each case.
HOW OUR RISKS HAVE EVOLVED SINCE
THE 2023 ANNUAL REPORT
We manage and monitor risks on an
ongoing basis, and robustly challenge our
assessment of the impact and likelihood
of each risk to ensure that we are applying
the appropriate amount of focus.
The heatmap and table on pages 64 and
65 show the year-on-year changes in the
risk profile of each principal risk.
We have seen an increase in the risk
profile of ‘Not having capital to invest’.
This movement is primarily driven by
the ongoing challenging macroeconomic
environment we are operating in. Whilst
the overall risk profile for ‘Concentration
risk and binary outcomes’ has not
changed, we have reduced the impact,
and increased the likelihood to reflect the
maturing portfolio. In addition, the risk
profile for ‘Private/public markets don’t
value or fund our companies when we
wish to access them’ has not changed,
however we have increased the impact,
and decreased the likelihood, of this risk.
The increased impact is driven by the
ongoing challenging macroeconomic
environment, however we are starting to
see the funding environment, especially
for later-stage assets, open up slightly
and have therefore reduced the likelihood.
We have also seen a decrease in
the risk profile of ‘Reliance on small
Syncona team’ and ‘Unable to build
high-quality team/team culture’. During
the year we have continued to build out
the investment team and the Executive
Partner group, including a number of senior
hires. There has been further recruitment
into these teams which, added to the
changes made in the previous year and the
completion of the CEO transition, provides
us with a deeper and stronger team. As the
team becomes fully embedded into the
organisation during the coming year this risk
level will reduce further. The strengthened
team also helps us attract key talent
reducing the risk profile for ‘Unable to build
high-quality team/team culture’.
Two of our risks currently have risk profiles
that sit above the risk appetite set by the
Board. These risks, ‘Not having capital to
invest’ and ‘Private/public markets don’t
value or fund our companies when we wish
to access them’ are inherently linked to the
impact the current macroeconomic situation
is having on the funding environment for
early-stage life sciences. We are actively
working to mitigate these risks but
recognise that the risk profile is currently
higher than we would like.
The following pages provide more detail
on what has happened during the year
in relation to each principal risk.
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
63
Risk movement during the year
Likelihood
Impact
1
2
3
1
2
3
A
L
H
I
J
K
H
J
G
F
F
E
E
D
D
C
B
RISK MANAGEMENT
CONTINUED
Our risk heatmap
The heatmap below shows
our assessment of the potential
likelihood and impact of each
of our identified principal risks
and how this has changed.
More detail of the changes and
what we have done to address
them is shown on pages 66 to 71.
PORTFOLIO COMPANIES
A
Scientific theses fail
B
Clinical development doesn’t deliver
a commercially viable product
C
Portfolio concentration risk to
platform technology
D
Concentration risk and binary outcomes
ACCESS TO CAPITAL
E
Not having capital to invest
F
Private/public markets don’t value
or fund our companies when we
wish to access them
G
Capital pool losses or illiquidity
PEOPLE
H
Reliance on small Syncona team
I
Systems and controls failures
J
Unable to build high-quality team/
team culture
K
Unable to execute business plans
MACROECONOMIC ENVIRONMENT
L
Macroeconomic environment has
a negative impact on sentiment for
portfolio companies and Syncona
business model
During the year the Committee carried out
a review of the Company’s principal risks,
taking account of changes to the internal
and external environment, including
economic uncertainty, inflation, the impact
of the rise in interest rates, access to
capital at portfolio company and Group
level, capital markets volatility, and the
current political situation including
conflicts in Ukraine and the Middle East.”
ROB HUTCHINSON
CHAIR OF THE AUDIT COMMITTEE
64
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Unchanged
Increased
Decreased
YEAR-ON-YEAR CHANGE
Relevant
strategic drivers
Risk profile
year-on-year
change
Appetite
Risk profile
equal or
lower than
risk appetite
Appetite rationale
PORTFOLIO COMPANIES
A
Scientific theses fail
1
2
3
Medium
These risks are core to our business model, but we
seek to de-risk them as far as possible at an early
stage when the value at risk is typically lower.
B
Clinical development doesn’t deliver
a commercially viable product
1
2
3
High
These risks are core to our business model;
while we manage these intensely, the stage
of development is typically capital-intensive
and requires significant funding.
C
Portfolio concentration risk to
platform technology
1
2
Medium
Strong domain expertise is core to our business
model. While systemic issues could potentially have
a major impact, we believe our deep understanding
significantly mitigates the risk that these arise.
D
Concentration risk and binary outcomes
1
2
3
Medium
We want to minimise this risk but recognise the
challenges of a portfolio with significant value
and risk in each investment.
ACCESS TO CAPITAL
E
Not having capital to invest
2
3
Low
We want to minimise this risk, although balance
that with the cost of holding capital to achieve this.
F
Private/public markets don’t value
or fund our companies when we
wish to access them
2
3
Medium
We are exposed to this risk when we need to bring
in third-party capital, but manage it particularly
through our wider access to capital.
G
Capital pool losses or illiquidity
1
2
3
Low
We manage the capital pool to limit the likelihood
of loss (absolute or real value).
PEOPLE
H
Reliance on small Syncona team
1
2
3
Low
We want to minimise this risk but recognise the
constraints of our small, focused team and model.
I
Systems and controls failures
1
2
3
Averse
Our aim is to eliminate the risk of control failures
as far as possible and to actively manage any
residual risks.
J
Unable to build high-quality
team/team culture
1
2
3
Low
We want to minimise this risk but recognise the
challenges of recruiting and integrating global
high-quality staff with highly specialised skills.
K
Unable to execute business plans
1
2
3
Medium
We want to minimise this risk but recognise
many external factors may impact the execution
of business plans.
MACROECONOMIC ENVIRONMENT
L
Macroeconomic environment has
a negative impact on sentiment for
portfolio companies and Syncona
business model
2
3
N/A
We have no ability to influence the
macroeconomic environment, however we
ensure we monitor and prepare appropriately
and actively manage the risks above relative
to the environment.
The table below shows the year-on-year changes in the risk profile, the risk appetite and rationale and the strategic drivers for each risk.
More detail of the changes and what we have done to address them is shown on pages 66 to 71.
1
CREATE
2
BUILD
3
SCALE
OUR STRATEGIC DRIVERS
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
65
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.
Portfolio company risks
A
Scientific theses fail
We invest in scientific ideas that we believe have the potential
to be treatments for a range of diseases, but where there may
be no or little substantial evidence of clinical effectiveness or ability
to deliver the technology in a commercially viable way. Material
capital may need to be invested to resolve these uncertainties.
Relevant strategic drivers
Year-on-year change
1
2
3
Impacts
−
Financial loss and reputational impact from failure of investment.
Key controls
−
Extensive due diligence process, resulting in identification of key
risks and clear operational plan to mitigate these.
−
Tranching of investment to minimise capital exposed until key
de-risking steps are completed (particularly fundamental biological
uncertainty). Consideration of syndicating investments.
−
Syncona team works closely with new companies to ensure focus
on key risks and high-quality operational build-out. Team members
may take operating roles where appropriate.
−
Robust oversight by Syncona team, including formal review at our
quarterly business review and ongoing monitoring through Board roles.
−
Investment process focused on differentiated science and pathway
to clinic and end market.
−
Early advisory team input brings in specialist advice from
the beginning.
What has happened in the year?
−
The investment team and the Executive Partner group have been
built out further with the addition of John Tsai, Kenneth Galbraith and
Roel Bulthuis. This group has provided specialist support and advice
throughout the year.
−
Where required, members of the Executive Partner group and the
investment team have taken on secondments at our portfolio companies
and/or taken a Board position to provide more hands-on support.
−
The support provided by Syncona’s launch team to our early-stage
companies enabled better portfolio company management and
gave Syncona increased ability to focus on the scientific theses.
−
Syncona has continued to seek to de-risk scientific theses in our
early-stage companies and to diversify its portfolio while maintaining
concentrated ownership and significant influence.
−
We have prioritised capital towards assets that can deliver clinical data in
the near term. Alongside this, Syncona has also worked with its portfolio
companies to widen financing syndicates, streamline pipelines and
budgets, and explored creative financing solutions and consolidations.
−
Our investment in a late-stage company, iOnctura, during the year has
lower risk of scientific thesis failure due to the stage of development
the company is at, however late-stage companies do potentially
require higher capital commitments.
B
Clinical development doesn’t deliver
a commercially viable product
Success for our companies depends on delivering a commercially
viable target product profile through clinical development.
This can be affected by trial data not showing required efficacy
or adverse safety events. It can also be affected by progress of
competitors, IP rights, the company’s ability to gain regulatory
approval for and credibly market the product, potential pricing
and ability to manufacture cost-effectively.
Relevant strategic drivers
Year-on-year change
1
2
3
Impacts
−
Material impact on valuation, given capital required to take products
through clinical development.
−
Material harm to one or more individuals, and potential reputational
issues for Syncona.
Key controls
−
Build products in areas with significant unmet need and that show
substantial and differentiated efficacy.
−
Focus, oversight and support from the Syncona team on recruiting
dedicated specialist clinical teams in each portfolio company.
−
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
inception of each company, rather than leaving to later stage.
−
Company business plans seek to have platform technologies
to lead to more than one product, in different indications, so that
failure in one does not damage all value of company.
−
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.
−
Business model focuses on unmet needs and differentiated outcomes.
−
Executive Partner group brings specialist insight early to process
to try and identify and de-risk potential issues.
What has happened in the year?
−
Portfolio of 13 companies with five at clinical stage, including two
late-stage clinical.
−
15 clinical data readouts in the period including positive data
published from two late-stage companies, Autolus and Beacon, and
initial data from Anaveon for its clinical stage asset (ANV419) resulting
in a pivot to a next generation pre-clinical stage asset (ANV600) as
the lead programme.
−
Autolus achieved an important strategic milestone, filing its Biologics
License Application (BLA) with the Food and Drug Administration
(FDA) for obe-cel in relapsed/refractory (r/r) adult acute
lymphoblastic leukaemia (ALL).
−
Significant Syncona team involvement in senior clinical hires at our
portfolio companies ensured the appropriate clinical development
skills were put in place.
−
Clinical and regulatory experience provided from within team
by the Executive Partner group, further strengthened this year
with the recruitment of John Tsai.
−
Syncona team members carefully monitor portfolio company
pipeline data and take prompt action when not tracking to target
product profile.
66
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
C
Portfolio concentration risk
to platform technology
The Syncona team brings strong domain experience in cell and
gene therapy, and a substantial part of the portfolio is in these
areas. Systemic issues (whether scientific, clinical, regulatory
or commercial) may emerge that affect these technologies.
Relevant strategic drivers
Year-on-year change
1
2
Impacts
−
Material impact on valuation.
−
Impact on reputation of Syncona resulting from failure of technology
we are strongly identified with.
Key controls
−
Team pays close attention to scientific, clinical, regulatory
or commercial developments in the field.
−
Where there are genuine risks, these are identified and managed
through diligence and investment process.
−
Various risks are identified and concentration is avoided where
systemic.
What has happened in the year?
−
Ongoing monitoring of developments in cell and gene therapy.
−
Syncona continues to invest across a wide range of modalities and
therefore we adopt multiple approaches alongside increasing portfolio
target sizes which reduces the potential impact of the risk.
D
Concentration risk and
binary outcomes
The Company’s investment strategy is to invest in a concentrated
portfolio of early-stage life science businesses where it is necessary
to accept very significant and often binary risks. It is expected
that some things will succeed (and potentially result in substantial
returns) but others will fail (potentially resulting in substantial
loss of value). This is likely to result in a volatile return profile.
Relevant strategic drivers
Year-on-year change
1
2
3
Impacts
−
Loss of shareholder support, potentially reducing ability to raise
new equity when required.
−
Shareholder activism, leading to strategy change that delivers
sub-optimal outcomes.
−
Reputation risk from perceived failure of business model.
Key controls
−
The Board provides strong oversight drawing on a range of relevant
experience, including life science, FTSE and investment company
expertise. The Board has clear understanding of strategy and risk.
−
Transparent communication from Syncona team to Board about
portfolio opportunities and risks including upside and downside
valuation cases.
−
Clear communication to shareholders of the opportunities and risks
of the strategy. Provide information to shareholders about portfolio
companies to assist them in understanding portfolio value and risks.
−
Building diversified portfolio with multiple companies and products
at clinical/later stages. Consideration of syndicating investments.
−
Willing to sell investments at/above fair value, prior to approval, which
the cadence of the model naturally diversifies, mitigating binary risks.
What has happened in the year?
−
This is an inherent risk due to the nature of the business model,
and there has been increased focus on the portfolio view during
the year to try to mitigate this risk where possible; as the portfolio
matures this risk decreases.
−
Our focus on allocating capital to clinical opportunities across the
portfolio and assets that are approaching clinical entry means there
are now more companies approaching key value inflection points,
which are potentially binary outcomes. By focusing our capital
deployment we aim to mitigate the downside risks and maximise
the potential to benefit from value growth.
−
There is continued focus on clinical stage opportunities to add to
our maturing portfolio and drive nearer-term growth. Two of the new
companies invested in during the year are in oncology in different
modalities; with one an early-stage opportunity and the second
a clinical stage company.
−
Autolus achieved an important strategic milestone, filing its Biologics
License Application (BLA) with the Food and Drug Administration
(FDA) for obe-cel in relapsed/refractory (r/r) adult acute lymphoblastic
leukaemia (ALL), reflected in increased value of our holding in Autolus.
−
Initial data from Anaveon for its clinical stage asset (ANV419) resulted
in a pivot to a next generation pre-clinical stage asset (ANV600) as
the lead programme; in addition Novartis decided during the year to
discontinue the development of GT005, acquired in the Gyroscope
acquisition. Each of these led to a write-down of value.
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
67
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
Access to capital
E
Not having capital to invest
Early-stage life science businesses are very capital intensive,
and delivering our strategy will require us to have access
to substantial capital.
Relevant strategic drivers
Year-on-year change
2
3
Impacts
−
Dilution of stake in portfolio companies with loss of potential upside.
−
Loss of control of portfolio companies resulting in poorer
strategic execution.
−
Inability for portfolio companies to deliver their business plans due
to financing constraints.
Key controls
−
Syncona team monitoring capital allocation on an ongoing basis with
a three-year forward outlook, with transparent reporting to the Board.
−
Seek to maintain sufficient liquidity to fund all companies with
emerging and definitive data to their next key milestone.
−
Ongoing consideration of options for managing liquidity and the various
sources available, ensuring the appropriate balance between liquidity
risk and return on life science investments.
−
Maximise potential to raise new equity through developing
institutional shareholder base.
−
Ongoing consideration of alternative or additional capital raising
structures (e.g. sidecar funds).
−
Ongoing consideration of syndication strategy at portfolio company
level, to maximise value and minimise dilution when external capital
is brought in.
−
Ongoing consideration of potential options to manage liquidity
from our life science assets, including exit opportunities.
What has happened in the year?
−
The macroeconomic environment continued to pose challenges to
syndication or raising capital for early-stage companies on the public
markets, which led us to increase the likelihood of this risk occurring.
However, we see clear signs of change, with greater differentiation
based on the stage and progress of each individual portfolio
company; we believe that as the markets improve, the risk profile
will decrease. We continued to work closely alongside our portfolio
companies as they sought to raise capital.
−
Syncona’s strong balance sheet continued to be a key mitigation
of this risk and has enabled us to support our portfolio companies,
subject to ensuring our capital deployment is focused on assets
with the highest potential.
−
During the year Autolus and Quell each entered into strategic
collaborations with BioNTech and AstraZeneca, respectively,
demonstrating the potential for creative financing solutions
to support our portfolio companies’ funding needs.
−
Syncona has sought to ensure portfolio company budgets
are streamlined and focused on delivery of key milestones.
−
Where appropriate Syncona continues to focus on widening
financing syndicates and exploring creative financing options
for portfolio companies.
−
Syncona also continues to evaluate options for alternative
or additional capital raising structures (e.g. sidecar funds).
F
Private/public markets don’t value or fund our
companies when we wish to access them
Our capital allocation strategy includes considering bringing
third-party capital into our portfolio companies, at the right stage
of development. In addition we may consider exit opportunities
either on the public markets or through private sales.
Relevant strategic drivers
Year-on-year change
2
3
Impacts
−
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.
Key controls
−
Maintain access to significant capital, to reduce risk of being forced
to syndicate/forced seller.
−
Focus, oversight and support from the Syncona team on financing
plan for each company, with support to the company to develop
its financing story at an early stage.
What has happened in the year?
−
Macroeconomic headwinds have continued to impact sentiment
in the biotech sector, with particular impact on public markets for
early-stage biotech companies.
−
Additional scenario planning and modelling has been implemented
during the year to ensure we monitor our ability to invest at a higher
than planned level into companies if necessary.
−
We have provided significant support to our companies which
are in the process of or will soon need to be raising capital.
−
Continuous internal review of the capital landscape and potential
sources of capital and the timing of capital required.
−
Due to the challenging syndication environment experienced
throughout the year, there has been increased focus on funding
structures, particularly around seed funding and tranching, to
manage financing and progression towards de-risking. In addition
Syncona has provided convertible loans to some of the portfolio
companies to support them to reach milestones which have the
potential of enabling capital access and key value inflection points
which have the potential of delivering significant NAV growth.
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SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
G
Capital pool losses or illiquidity
The capital pool is exposed to the risk of loss or illiquidity.
Relevant strategic drivers
Year-on-year change
1
2
3
Impacts
−
Loss of capital (or reduction in the value of capital due to inflation).
−
Inability to finance life science investments.
−
Reputation risk from losses in non-core area.
−
Counterparty bank or fund fails and we are unable to recover
the money held by them.
Key controls
−
Protection against risk and illiquidity are key characteristics; return
is a secondary consideration.
−
Risk parameters monitored monthly by Syncona team, with enhanced
review on a quarterly basis.
−
External adviser (Barnett Waddingham) engaged to carry out quarterly
and annual reviews of capital pool against chosen parameters.
−
Cash balances are held at multiple investment grade or equivalent
banks and limited to three months’ forward funding requirements.
−
Near-term funding is held in UK and US treasuries.
−
Longer-term funding is held across multiple fund managers with
strict investment concentration limits, daily liquidity funds, and either
investment grade or strict low volatility limits to minimise credit risk.
−
Currently higher risk due to strategy to mitigate impact of inflation.
Investments made within defined risk volatility limits. Use of external
advisers, two fund managers with differentiated strategies,
performance reviewed and monitored by the Liquidity Management
Committee and external adviser (Barnett Waddingham).
What has happened in the year?
−
Continued active management of the capital pool through the
Liquidity Management Committee, reporting on a quarterly basis
to the SIML and Syncona Limited Boards, supported by external
advisers Barnett Waddingham.
−
Risk is being managed through a tiered approach to investment,
and liquidity and return are managed within defined volatility and
concentration limits.
−
Our external advisers support us in evaluating the markets and
providers and funds are spread across multiple banks, government
bonds and two fund managers with differentiated investment strategies.
−
Consideration is also being given to the structure of the capital pool
given the ongoing, challenging macroeconomic landscape.
H
Reliance on small Syncona team
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 succeed in retaining skilled personnel or is
unable to recruit new personnel with relevant skills.
Relevant strategic drivers
Year-on-year change
1
2
3
Impacts
−
Poorer oversight of portfolio companies, risk of loss of value from
poor strategic/operational decisions.
−
Less ability to drive strategies in portfolio companies.
−
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.
Key controls
−
Market benchmarking of remuneration for employees.
−
Provision of long-term incentive scheme to incentivise and
retain employees.
−
Ongoing recruitment to strengthen team and deepen resilience.
−
Focus on investment team development to provide internal
succession from next tier of leaders, with process supported
by Leadership Team.
−
Process development within corporate functions to reduce single
point risks.
−
Building high-quality teams within portfolio companies that can
operate at a high strategic level.
−
Dynamic and simplified governance framework to support
transformational change and ongoing business requirements.
What has happened in the year?
−
Completion of the leadership transition has resulted in us decreasing
this risk during the year.
−
The investment team and the Executive Partner group have been
further strengthened with the recruitment of John Tsai, Kenneth
Galbraith and Roel Bulthuis. This has added to the skills, experience
and executional bandwidth already brought to Syncona through the
Executive Partner group and advisers.
−
The changes made in the previous year to both the investment team
and Leadership Team are now embedded in the organisation,
providing us with a stronger team, stronger processes and improved
culture. Significant emphasis on developing and coaching our next
generation investors and launching a dedicated talent programme.
People
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
69
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
I
Systems and controls failures
We rely on a series of systems and controls to ensure proper
control of assets, record-keeping and reporting, and operation
of Syncona’s business.
Relevant strategic drivers
Year-on-year change
1
2
3
Impacts
−
Risk of loss of assets.
−
Inability to properly oversee Syncona team.
−
Inaccurate reporting to shareholders.
−
Syncona and its portfolio companies may be subjected to
phishing and ransomware attacks, data leakage and hacking.
−
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.
Key controls
−
Systems and control procedures are reviewed regularly by
the Syncona team, with input from specialist external advisers
where appropriate.
−
Certain systems have been outsourced to the Administrator
who provides independent assurance of its own systems.
−
Annual review of the effectiveness of systems and controls
carried out by the Audit Committee.
−
Anti-fraud, bribery and corruption controls.
−
Anti-money laundering controls.
−
Whistleblowing arrangements.
−
IT policies and procedures.
−
Back-up and disaster recovery procedures and testing.
−
IT and cyber security monitoring and control framework,
and regular penetration tests.
What has happened in the year?
−
Ongoing compliance reviews and review of key processes performed
during the year.
−
Implementation of organisational and governance changes to
help simplify processes and decision-making, driving increased
effectiveness and efficiency, and helping to mitigate and reduce risk.
−
Continued programme of phishing and penetration testing.
J
Unable to build high-quality team/
team culture
Portfolio companies are reliant on recruiting highly specialised,
high-quality employees to deliver their strategies. This can be
challenging given a limited pool of people with the necessary
skills in the UK/Europe. In addition, these are fast-growing
companies and establishing a high-quality culture from the
outset is key.
Relevant strategic drivers
Year-on-year change
1
2
3
Impacts
−
Ultimately, failure to deliver key elements of operational plans
resulting in material loss of value.
Key controls
−
Seek to build high-quality teams in portfolio companies. This can
begin before an investment is made.
−
Ensure executive team aims to build a high-quality culture from the
outset, and monitor and support its effectiveness.
−
Build strong portfolio company boards (including representatives from
our team and experienced non-execs) to provide effective oversight
and support.
−
Support from our team, including taking operational roles where
necessary, and facilitating access to support from across the portfolio
where appropriate, or external consultant resource from our networks.
What has happened in the year?
−
Advice and guidance provided to the portfolio companies from
within Syncona by the Executive Partner group and investment team,
which were further strengthened this year with the recruitment of
John Tsai, Kenneth Galbraith and Roel Bulthuis.
−
The strengthening of the Executive Partner group and investment
team differentiates the portfolio companies and should help attract
key talent, thereby reducing the likelihood of this risk.
−
Significant Syncona team involvement in senior hires at
portfolio companies.
People
continued
70
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ANNUAL REPORT AND ACCOUNTS 2024
K
Unable to execute business plans
Portfolio company business plans may be impacted by a
number of external factors, including access to patients,
delivery by suppliers and the wider business environment
(including factors such as COVID-19).
Relevant strategic drivers
Year-on-year change
1
2
3
Impacts
−
Ultimately, failure to deliver key elements of operational plans resulting
in material loss of value.
Key controls
−
Seek to build high-quality teams in portfolio companies. This can begin
before an investment is made. Where possible these should include
resilience to deal with unexpected external factors, though companies
will also be focused on maximising value from capital invested.
−
Seek to maintain capital buffers to cope with unanticipated issues
before cash out.
−
Oversight of key external factors/relationships that are important
to delivering business plan.
−
Sharing of knowledge (where appropriate) across portfolio to support
companies in managing external factors.
−
Syncona involvement in setting strategy and early business plans.
Board representation and significant shareholding allows some
influence on management execution.
What has happened in the year?
−
Executive Partner group and investment team have been built out
further with the addition of John Tsai, Kenneth Galbraith and Roel
Bulthuis. This group has provided specialist support and advice
throughout the year. Where required, members of the Executive
Partner group and the investment team will take on secondments
at our portfolio companies and/or take a Board position to provide
more hands-on support.
−
Additional scenario planning and modelling has been implemented
during the year to ensure we monitor our ability to invest at a higher
than planned level into companies if necessary.
−
Continuous internal review of the capital landscape and potential
sources of capital and the timing of capital required. Increased focus
on strategic syndication to secure long-term access to capital.
L
Macroeconomic environment has a negative
impact on sentiment for portfolio companies
and Syncona business model
The challenging macroeconomic environment results in
investors being more risk averse, impacting their appetite
to invest in early-stage biotech companies.
Relevant strategic drivers
Year-on-year change
2
3
Impacts
−
Investors are focusing on existing portfolios rather than investing in
early-stage biotech companies, therefore Syncona may be 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.
−
For Syncona, exit opportunities may be less attractive, with impact
on availability of capital to fund portfolio companies.
−
A reduction in demand for the Company’s shares would impact
the performance of the Company’s share price.
−
Failure to deliver strategy.
−
Shareholder activism, leading to strategy change that delivers
sub-optimal outcomes.
Key controls
−
Syncona team monitoring capital allocation on an ongoing basis,
with transparent reporting to the Board.
−
Seek to maintain sufficient liquidity to fund all companies with
emerging data, or later, to their next key milestone.
−
Maximise potential to raise new equity through developing institutional
shareholder base.
−
Ongoing consideration of alternative or additional capital raising
structures (e.g. sidecar funds, use of debt).
−
Ongoing consideration of syndication strategy at portfolio company
level, to maximise value and minimise dilution when external capital
is brought in.
−
Ongoing consideration of potential options to manage liquidity from
our life science assets, including exit opportunities.
−
Seek to maintain capital buffers to cope with unanticipated issues
before cash out.
What has happened in the year?
−
We are concentrating capital allocation towards clinical opportunities
across the portfolio, maintaining a disciplined approach against
a challenging market backdrop.
−
We consider all options with regards to future financing, including exit
options. We have increased our engagement with key pharma partners.
−
Additional scenario planning and modelling has been implemented
during the year to ensure we monitor our ability to invest at a higher
than planned level into companies if necessary.
−
Continuous internal review of the capital landscape and potential
sources of capital and the timing of capital required.
−
We have continued to have increased engagement with investors
and analysts.
−
Continued active management of the capital pool. This involves managing
risk through a tiered approach to investment, and managing liquidity and
return, within defined volatility and concentration limits. External advisers
are used to evaluate the markets and providers and funds are currently
spread across multiple banks, government bonds, and two fund
managers with differentiated diversified investment strategies.
−
Macroeconomic and fund performance is reviewed regularly by the
Syncona team and the Liquidity Management Committee and reported
quarterly to the SIML and Syncona Limited Boards.
Macroeconomic environment
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
71
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
Approach to disclosing portfolio company information
MANAGING PORTFOLIO
EXECUTION THROUGH
LEVERAGING OUR EXECUTIVE
PARTNER GROUP AND ADVISERS
Syncona’s Executive Partner group and advisers provide a broad level of expertise
across business, commercial and clinical development. Working with the Syncona team
while providing oversight across the portfolio, they help to support Syncona’s long-term
strategy whilst also helping to mitigate key risks. Examples of some of the key work carried
out by the Executive Partner group and advisers during the year are highlighted below.
JOHN TSAI
Key area of expertise:
Clinical strategy development
Actions during the year:
John became CEO of Forcefield, helping
to support the company as it progresses
through its operational and pre-clinical
development. He has also taken Board
roles at Mosaic and SwanBio (now Spur)
and plays an important role across the
portfolio in providing his differentiated
insight in progressing programmes
through the clinic.
LISA BRIGHT
Key area of expertise:
Commercial strategy
Actions during the year:
Lisa is the independent Chair of Resolution as
it approaches clinical entry in its lead therapy
in end stage liver disease. Lisa provides
critical commercial input across the portfolio
and potential investments, including assessing
Autolus’ launch readiness for the company’s
lead obe-cel therapy.
GWENAELLE PEMBERTON
Key area of expertise:
Regulatory strategy
Actions during the year:
Gwenaelle has played a critical role in
advising many of our portfolio companies,
including Forcefield and Resolution as
they progressed their regulatory strategies
and delivered key filings with regulators.
Gwenaelle has also supported in due
diligence of regulatory aspects of deals.
Our model is to create companies around
world-leading science, bringing the
commercial vision and strategy, building
the team and infrastructure and providing
the funding to scale these businesses.
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.
72
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ANNUAL REPORT AND ACCOUNTS 2024
VIABILITY STATEMENT
The Directors have assessed the prospects
of the Company, considering its ability to
continue in operation and meet its liabilities
as they fall due over the period to 31 March
2027. The period selected was considered
appropriate as:
–
it covers a period over which all the
current uncalled investment commitments
are expected to be called;
–
the Directors believe this to be a
reasonable period of time for the life
science investments to make meaningful
progress on the journey towards
fulfilling their long-term potential; and
–
the Directors have a reasonable
confidence over this horizon.
The Company’s strategy is well
documented (see pages 22 and 23) and
includes longer-term targets of creating
or adding three new companies per year,
developing a portfolio of 20-25 globally
leading healthcare businesses and taking
three to five companies to late-stage
development over a rolling 10-year basis.
The Company does not generate
income on a regular basis and relies on
its capital pool or realisations to fund its
investments. The level of the capital pool
will vary over time dependent on asset
realisations, anticipated investments and
access to other forms of capital.
The Company has the ability to manage its
capital consumption by varying the number
of investments it makes, the level of capital
commitment allocated to each investment,
the level of syndication and the ability
to realise assets. The portfolio is actively
managed on this basis.
Key factors affecting the Company’s
prospects over the assessment period
are reflected in the principal risks set out on
pages 66 to 72. These include the ability to
access capital, failure of material investment
assets, people risks and the macroeconomic
environment. The table of principal risks
sets out the key controls for these risks.
These factors also apply over the longer
term identified in the strategy, although
factors such as access to capital become
more challenging to mitigate. In addition,
over the longer term, other risks may arise
such as longer-term risks around US
pharmaceutical pricing or changes to the
business environment. These potential
risks are monitored by the Directors.
THE ASSESSMENT PROCESS
AND KEY ASSUMPTIONS
The assessment is carried out by the
SIML finance team with input from the
wider business, including the CEO and
SIML Leadership Team, and is challenged
and reviewed by the Audit Committee,
and approved by the Board.
The Company’s viability testing considers
a base case and a number of stress
scenarios. The base case reflects current
and future investments assuming preferred
investment levels. The table below gives an
overview of the scenarios modelled and the
mapping to the relevant principal risks, with
the overarching risk being that the Company
has insufficient access to capital to fund the
life science companies and its own liabilities.
The reverse stress test case is highly
unlikely given the active management
of the portfolio and the various levers
available to the Company.
Our viability testing also considers the
impact of material life science investment
failures; these do not change the Company’s
access to cash and so do not directly
negatively impact the outcome of the
viability testing but could have other negative
impacts on the Company. In addition,
we assess how additional capital can be
generated should it be needed, whether
through the sale of existing investments,
receipt of milestone payments, raising
equity financing in the public markets
or other private market options.
The Company seeks to maintain sufficient
liquidity to fund companies to their next
key value inflection point. As at 31 March
2024, Syncona had a net capital pool of
£452.8 million, of which £450.8 million is
accessible within 12 months, and expects
that investment into the life science portfolio
will be £150 million-£200 million in the
coming financial year (to March 2025).
This year it was £172.2 million. Our analysis
shows that, while there may be a significant
impact on the Group’s reported performance
in the short term under the tested scenarios,
the resilience and quality of our balance
sheet is such that solvency is maintained
and our business remains viable.
VIABILITY STATEMENT
Based on the results of this analysis,
the Directors have a reasonable expectation
that the Company will be able to continue
in operation and meet its obligations as
they fall due over the three-year period
of assessment.
SCENARIO
PRINCIPAL RISK MAPPING
1. Base case: growth plan
Preferred funding pattern for existing portfolio and three
new investments per year over the next three years.
−
Not having capital to invest
−
Private/public markets don’t value
or fund our companies when we
need to access them
−
Capital pool losses or illiquidity
2. Protecting the existing portfolio and prioritising
late-stage assets
After 12 months sources of external funding for portfolio
companies with emerging and definitive clinical data are not
available so Syncona provides sufficient capital for these
companies to achieve their next clinical milestones. New
investments and company set-ups are deprioritised and/or
financings for early-stage portfolio companies are scaled
back in this scenario.
−
Not having capital to invest
−
Private/public markets don’t value
or fund our companies when we
need to access them
−
Capital pool losses or illiquidity
−
Unable to execute business plans
−
Macroeconomic environment has a
negative impact on sentiment for portfolio
companies and Syncona business model
3. Ensure a clear path to three years of operations
by maintaining an executable plan
After 12 months active management of investment choices to
ensure the capital pool extends beyond three years of cash
runway. The base case growth plan can be followed over the
medium term but portfolio management choices, realisations
and/or new sources of capital may be required towards the
end of the three-year look out period.
−
Not having capital to invest
−
Private/public markets don’t value
or fund our companies when we
need to access them
−
Capital pool losses or illiquidity
−
Unable to execute business plans
4. Reverse stress test
An assessment to determine what would be required to
deploy all of Syncona’s capital pool in 12 months indicates
that even while remaining committed to the corporate goal
of funding three new investments for FY25, all upcoming
financing rounds of portfolio companies would have to be
funded in full by only Syncona for this to happen, which is
considered highly unlikely.
−
Not having capital to invest
−
Private/public markets don’t value
or fund our companies when we
need to access them
−
Macroeconomic environment has a
negative impact on sentiment for portfolio
companies and Syncona business model
The Company’s Strategic Report
is set out on pages 1 to 73 and
was approved by the Board on
19 June 2024.
Melanie Gee
Chair
Syncona Limited
STRATEGIC REPORT
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
73
CORPORATE GOVERNANCE REPORT
An introduction from our Chair
Robust oversight
of the execution of
investment strategy.”
MELANIE GEE
CHAIR, SYNCONA LIMITED
This Corporate governance
report, together with the
reports on pages 80 to 94,
provides a summary of the
system of governance
adopted by the Company
in the year ended 31 March
2024 and how the Company
has applied the principles
and reported against
the provisions of the UK
Corporate Governance Code.
ROLE OF THE BOARD
The Company is a closed-ended investment
company. The Company has appointed its
subsidiary SIML as Investment Manager, and
delegated responsibility for managing the
investment portfolio to it. The Board seeks
to ensure the long-term sustainable success
of the Company and other Syncona Group
companies; it sets their purpose, Investment
Policy (with shareholder agreement), strategic
objectives and risk appetite and ensures
effective engagement with stakeholders,
including employees.
The Board oversees the Investment Manager
in its execution of the investment strategy,
receiving regular reporting on the performance
of the investment portfolio. Management
of the investment portfolio is delegated to
the Investment Manager (with regular Board
oversight), other than in respect of very large
decisions (meaning decisions relating to
more than 10% of the Company’s NAV)
which are taken by the Board.
The Chair is responsible for: ensuring that the
Board upholds a high standard of corporate
governance and operates effectively and
efficiently; promoting a culture of openness
and debate, facilitating constructive relations
and open contributions between Directors;
and leading the Board in exercising effective
stewardship over the Company’s activities
in the interests of shareholders and other
stakeholders, including employees.
Members of the Investment Manager’s team
provide administrative and other support to
the Board, for example in preparing Board
materials and briefings and drafting of the
Annual Report. The Board also has access to
the advice and services of an Administrator
and Company Secretary, Citco Fund Services
(Guernsey) Limited, and a Depositary, Citco
Custody (UK) Limited, to support the Board
in ensuring that Board procedures are
followed, and to assist with compliance
with applicable rules and regulations.
The page opposite gives details of our
governance structure. Further information
on the matters reserved to the Board, and
the role of the Committees, Chair and
Senior Independent Director, are available
on our website.
74
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
Read more p.80
Read more p.84
Read more p.89
NOMINATION AND
GOVERNANCE COMMITTEE
Responsibilities
−
Reviews Board composition and
oversees succession planning.
−
Recommends Board re-elections and
appointments to Board Committees.
−
Oversees succession planning for the CEO
and Chair of the Investment Manager.
−
Supports the Chair in carrying out the
Board evaluation each year.
−
Reviews compliance with the UK
Corporate Governance Code.
Members
−
Melanie Gee (Chair)
−
Virginia Holmes
−
Rob Hutchinson
−
Kemal Malik
−
Gian Piero Reverberi
Further details of the work of each of the Committees are set out in the separate reports for each of them.
As the Board is entirely made up of independent Non-Executive Directors, we have not considered it necessary to appoint a management engagement
committee. All members of the Board are considered independent and are responsible for reviewing the performance of the Investment Manager in relation
to the investment portfolio.
AUDIT COMMITTEE
Responsibilities
−
Oversees financial reporting and advises
the Board on whether the Annual Report
is fair, balanced and understandable.
−
Evaluates the appointment, effectiveness
and independence of the auditors.
−
Oversees portfolio valuation.
−
Monitors risk management and
internal controls.
Members
−
Rob Hutchinson (Chair)
−
Julie Cherrington
−
Virginia Holmes
−
Kemal Malik
−
Gian Piero Reverberi
REMUNERATION COMMITTEE
Responsibilities
−
Approves remuneration paid
to the Chair of the Board.
−
Recommends the remuneration
of the Non-Executive Directors.
−
Approves the remuneration of the
Investment Manager’s CEO and Chair.
−
Oversees the incentive scheme
that provides long-term rewards
to the Investment Manager’s team.
Members
−
Gian Piero Reverberi (Chair)
−
Christina Csimma
−
Melanie Gee
−
Virginia Holmes
−
Rob Hutchinson
−
Seeks to ensure the long-term sustainable success of the Company.
−
Sets purpose, strategy and values and seeks to ensure the culture
of the business is aligned.
−
Recommends the Investment Policy to shareholders.
−
Oversees the Investment Manager in its execution of the
investment strategy.
−
Reviews portfolio performance considering the Investment Policy
and investment strategy.
−
Manages Syncona’s investment portfolio in line with the
Investment Policy, strategy and the long-term sustainable success
of the Company.
−
Ensures the culture of the business is in accordance with the purpose,
Investment Policy, strategy and values approved by the Board.
−
Ensures appropriate resources are available to manage the investment
portfolio and support the Syncona business.
−
Reports to the Board on portfolio performance.
−
Approves transactions with significant value or involving borrowing.
−
Robustly assesses the principal risks facing the Company and
its risk appetite, and oversees the risk management process.
−
Ensures appropriate engagement with shareholders and other
stakeholders, including employees.
−
Sets the Sustainability Policy for the business and monitors
the implementation of the policy.
−
Monitors risks and reports to the Board; makes recommendations
in relation to risk appetite.
−
Proposes and implements risk and control processes and reports
on these to the Board.
−
Engages with stakeholders in line with the approach agreed
by the Board.
−
Implements the Syncona Sustainability Policy.
−
Ensures compliance with regulatory obligations of an
investment manager.
THE INVESTMENT MANAGER
THE BOARD
COMMITTEES OF THE BOARD
Our corporate governance structure
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
75
GOVERNANCE
CORPORATE GOVERNANCE REPORT
CONTINUED
COMPOSITION AND MEETINGS
All of the Board are Non-Executive Directors
and profiles of each, including length of
service, are on pages 78 and 79. During the
year there were no changes to the Board. All
Directors are considered to be independent.
The Board holds quarterly Board meetings,
along with a Strategy day each year. The
Board meetings follow an annual work plan
that seeks to ensure a strong focus on key
strategy and governance issues, alongside
oversight of the performance of the
Investment Manager in its implementation
of the strategy. The Investment Manager
works closely with the Chair, and liaises
with the Company Secretary, to ensure the
information provided to the Board meets
its requirements. All members of the Board
also have access to the advice of the
Company Secretary as they require. The
Board may also hold ad hoc meetings or
discussions between its routine quarterly
meetings, where required for the business
of the Company. The senior members
of the Investment Manager’s team attend
each Board meeting; the Board also
schedules part of each meeting to be
held without those individuals.
The Audit Committee also meets five
times each year whilst the Nomination and
Governance Committee and Remuneration
Committee typically meet three times each
year but will meet more often if they consider
it appropriate to do so to carry out their roles.
During the year all regular Board meetings
were held in-person with ad hoc Board
meetings generally held remotely.
Committee meetings were held using a
mixture of remote and in-person formats,
reflecting the most effective use of time.
STRATEGY AND RISK
At all times the Board is focused on
ensuring that governance supports robust
oversight of strategy execution by the
Investment Manager’s team, particularly
given the very significant and often binary
risks of loss within our investments
(with the potential for substantial returns).
At the Board’s Strategy day in September,
the Board re-affirmed our fundamental
model of creating companies around
world-leading science and our commercial
strategy, building the team and
infrastructure, and providing scaled funding
when the risk is appropriate. We discussed
the challenging funding environment,
particularly for pre-clinical and early biotech
companies, and the strategies used by the
Investment Manager to actively manage the
portfolio to protect its value and to prioritise
funding companies to deliver their key value
inflection points, as more fully described in
the Chair’s Statement. We also discussed
innovations within the Investment Manager’s
team both in terms of its recent expansion
and the evolution of its processes and
its new operating model and its rigorous
approach to capital allocation.
During the year, the Board discussed the
key risks to our business, both current risks
and potential risks that may arise. This feeds
into the Company’s risk register, and more
details are reported in the Principal risks
section of the Annual Report. The Board
also considers the effectiveness of the
Company’s risk management and internal
control systems, supported by the work
carried out by the Audit Committee (see
its report on pages 84 to 88). The Board
is satisfied that the Company has adequate
and effective systems in place to identify,
mitigate and manage the risks to which
it is exposed, although recognises that the
system of internal control is designed to
manage rather than to eliminate the risk
of failure to achieve these objectives.
Following the Strategy day, the Board
worked with the Investment Manager to
provide shareholders with additional KPIs to
monitor the performance of the life sciences
portfolio by including upcoming key value
inflection points in its regular reporting.
THE SYNCONA TEAM
Significant progress has been made
during the year to expand the Investment
Manager’s senior team and implement
a new operating model to support the
delivery of the strategy. In November 2023,
Martin Murphy stepped down as Chair
of the Investment Manager and Chris
Hollowood was appointed as Interim Chair,
in addition to his role as CEO, with Roel
Bulthuis replacing Martin on the Investment
Manager’s Investment Committee. These
changes were approved by the Board
after careful consideration of succession
options, working with support from
specialist recruitment and leadership
advisers. The search for a permanent
Chair of the Investment Manager is
underway and is a priority for the Board
and the Investment Manager. The Board
considers the Chair of the Investment
Manager role to be key in assisting the
Board in its effective oversight of the
performance of the Investment Manager.
On 1 April 2024, Kate Butler succeeded
Rolf Soderstrom as CFO, with Rolf
moving to the role of Executive Partner,
in line with succession plans.
The Board recognises the importance
of ensuring that the Company’s culture
(and the culture of the Investment
Manager’s team) is aligned with its purpose
and strategy. During the year the Board
monitored the activities undertaken by
the Investment Manager’s senior team
to address feedback received in response
to the most recent Employee Engagement
Survey, including the steps taken to
improve cross-function teamworking
through the enhanced QBR process
and other changes introduced by the
implementation of the new operating model.
BOARD ATTENDANCE 2023/4
The Board is satisfied that each of the Directors commits sufficient time to the affairs
of the Company to fulfil their duties and meet their responsibilities. Attendance at
the Board and Committee meetings during the year was as shown in the table below:
Board meetings
Audit
Committee
meetings
Nomination and
Governance
Committee
meetings
Remuneration
Committee
meetings
Melanie Gee (Chair)
8/8
–
3/3
3/3
Julie Cherrington
7/8
1
5/5
–
–
Cristina Csimma
8/8
–
–
3/3
Virginia Holmes
8/8
5/5
3/3
3/3
Rob Hutchinson
8/8
5/5
3/3
3/3
Kemal Malik
8/8
5/5
3/3
–
Gian Piero Reverberi
8/8
4/5
2
3/3
3/3
1.
Julie Cherrington was unable to attend an ad hoc Board meeting in September 2023, arranged at short notice,
due to a prior commitment.
2. Gian Piero Reverberi was unable to attend an Audit Committee meeting in May 2023 due to a prior commitment.
76
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
In addition, Gian Piero Reverberi, the
designated Director for engagement
with the team of the Investment Manager,
initiated a series of informal meetings
with employees to discuss the progress
of the Investment Manager in responding
to the findings of the most recent
Employee Engagement Survey and to
understand employees’ perspectives on
the changes to the team and the operating
model. The sessions were well attended
by employees with key themes from the
conversations reported to the Board at its
March meeting. Gian Piero will continue to
meet with employees during the coming
year to support the Board in its oversight.
The Board also engages with the Syncona
team in other ways, and further details are
set out on pages 32 to 39.
Alongside Board engagement with the
Investment Manager’s team, there is
a Whistleblowing Policy in place which
includes provision for any issues to be
notified (where appropriate) to the Chair
of the Audit Committee.
ENGAGEMENT WITH SHAREHOLDERS
The Board is focused on understanding
the views of shareholders so these can
be taken into account in decision-making.
The Board considers feedback and
shareholder views collated by the investor
relations team and our advisers at every
Board meeting. Through the year, the
Chair took the opportunity to meet with a
number of our key shareholders, to directly
hear their perspectives and communicate
these to the Board. Topics discussed
included market conditions for early-stage
life companies, the management transition
within the Investment Manager, and
implementation of the strategy. The
perspectives of key shareholders were also
considered when deciding to launch the
share buyback programme in September
2023. During the year, the Board also
chose to commission an investor study
to further understand shareholder
perspectives across a range of key areas
and discussed the findings at its Strategy
day. The feedback was supportive of our
long-term strategy and the Investment
Manager’s team in executing this.
More broadly, the Company organises a
comprehensive investor relations programme,
where members of the Investment Manager’s
team meet with existing and potential
investors following the publication of the
annual and interim results, and as required
during the year. As part of this programme, 57
presentations were made to shareholders and
potential shareholders by senior members
of the Investment Manager’s team during the
year. Members of the Board, particularly the
Chair, Senior Independent Director and Chair
of each of the Committees, are also available
to meet shareholders on any issues that arise.
OTHER STAKEHOLDERS
The Board also holds responsibility for
overseeing the effective engagement with
other stakeholders to ensure that their
interests are considered, and reviews this
every year. As part of its review this year
the Board noted:
–
The continued focus of the Syncona
team on co-investors who are the most
likely third-party sources of capital for
our portfolio companies; particularly as
Syncona has increased its focus on
syndicating companies at an earlier stage.
–
A change in focus from patient groups
as a key stakeholder to the patients
themselves, recognising that they are
considered in all key business activities.
–
That as Syncona has grown and matured
it has increased the breadth of its key
stakeholders in wider society to include
the other charities and initiatives that it
supports, in addition to the continued
support provided to The Syncona
Foundation, and has expanded this
key stakeholder category accordingly.
Further details around engagement
with stakeholders are set out on pages
32 to 39.
ESG
The Company has adopted a formal
Sustainability Policy and Responsible
Investment Policy, which are overseen by
the Board, with regular reports from the
Investment Manager on implementation.
During the year the Board reviewed the
policies and updated them to reflect
the ways ESG considerations will be
incorporated into later-stage investments
and to increase focus on measuring patient
impact across the Syncona portfolio.
The Board believes that the Company’s core
activities, of investing in businesses that
seek to develop treatments that will make
a difference to the lives of patients and their
families, are the most significant way in
which the Company can seek to make a
positive contribution to society. Given these
are at the centre of what the Company
does, the Board has decided to integrate
its consideration of sustainability issues
within its normal governance processes.
Further details of our approach to ESG
and environmental impact are set out
on pages 30 and 31, and pages 56 and
57, and in our separate Sustainability
Report available on our website.
TRAINING AND ADVICE
The Company provides an extensive
induction process for new Directors,
including briefings from a significant
portion of the Investment Manager’s team
and discussions with the Chair and chairs
of each of the Board’s Committees. In
addition, consideration is given to whether
any additional training would be helpful
to the Board, taking account of feedback
from Directors as part of the Board
evaluation or otherwise. During the year,
the Chair invited external speakers to
address the Board and members of the
Syncona Leadership Team on topics
including the opportunities for AI in
life science and an update on recent
developments in the biotech market.
UK CORPORATE GOVERNANCE CODE
COMPLIANCE STATEMENT
The Company has complied with the
relevant provisions of the UK Corporate
Governance Code (July 2018), which is
publicly available at frc.org.uk, except that
given the Company’s structure, and that it
has no Executive Directors and is managed
by the Investment Manager, the Board
considers that the following provisions
are not relevant to the Company:
–
The role of the Chief Executive Officer
(Provision 14): there is no Chief Executive
Officer of the Company, and responsibility
for management of the investment portfolio
is delegated to the Investment Manager.
–
Executive Directors’ remuneration
(Provisions 33 and 36 to 40): this
is not relevant as the Company has
no Executive Directors.
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
77
GOVERNANCE
BOARD OF DIRECTORS
DATE OF APPOINTMENT
1 January 2020 as Chair
(4 June 2019 as Director)
COMMITTEE MEMBERSHIP
N
R
BIOGRAPHY
Melanie Gee is Chair and originally
joined the Board as a Non-Executive
Director in June 2019. Melanie has
over 30 years of financial advisory
experience in executive positions in
investment banking, advising clients
across a broad range of sectors
and geographies. She is a Senior
Adviser at Lazard & Co Ltd, having
joined as a managing director in
2008. Before that, Melanie spent 25
years with SG Warburg & Co Ltd
and then UBS. Melanie also has
extensive non-executive experience,
with more than a decade as a
Non-Executive Director at FTSE 100
and 250 companies. Until October
2021 she was a Non-Executive
Director at abrdn plc, where she sat
on the Nomination and Governance
and Audit Committees and was
the Non-Executive Director with
responsibility for bringing the
employee voice into the boardroom.
She was also previously a
Non-Executive Director at The Weir
Group PLC and Drax Group PLC.
IMPORTANCE OF
CONTRIBUTION
Melanie brings extensive
non-executive experience in FTSE
100 and 250 companies, giving
her an in-depth understanding of
governance requirements and an
understanding of how to build and
maintain a highly effective Board as
Chair of the Board and Nomination
and Governance Committee. Her
financial advisory experience is
highly relevant to effective oversight
of the Company’s investment and
stakeholder strategies.
CURRENT POSITIONS
−
Senior Adviser, Lazard & Co Ltd
−
Chair of Grosvenor Property UK
−
Sits on advisory groups for two
private family offices
DATE OF APPOINTMENT
1 February 2022
COMMITTEE MEMBERSHIP
A
BIOGRAPHY
Dr Julie Cherrington is an
experienced life science executive
with a strong track record in bringing
drugs into the clinic and through to
commercialisation, and particular
expertise in the oncology setting.
She is also an accomplished
company builder and has previously
served as President and Chief
Executive Officer at several
biotechnology companies in the US
West Coast, Canada and Australia.
Julie holds a BS in biology and
an MS in microbiology from the
University of California, Davis. She
earned a PhD in microbiology and
immunology from the University of
Minnesota and Stanford University.
She completed a postdoctoral
fellowship at the University of
California, San Francisco. Previously,
Julie was a non-executive director
of Mirati Therapeutics.
IMPORTANCE OF
CONTRIBUTION
Julie brings extensive understanding
of the US regulatory and clinical
development environment. Her
experience of bringing drugs through
the clinic and to commercialisation in
the US will help the Syncona Board
to understand the strategic needs
of the business in North America
and beyond.
CURRENT POSITIONS
−
Non-Executive Director of
Elevation Oncology, Inc.
(NASDAQ: ELEV)
−
Chair of Actym Therapeutics
and Tolremo Therapeutics
−
Venture Partner at Brandon Capital
−
Non-Executive Director of a
number of other early-stage
private life science companies,
including Sardona Therapeutics
DATE OF APPOINTMENT
1 February 2022
COMMITTEE MEMBERSHIP
R
BIOGRAPHY
Dr Cristina Csimma has 30 years’
experience in drug development,
new company formation, value
creation and strategic guidance
across a broad range of therapeutic
areas. She also brings significant
expertise in venture capital and
the US biotech capital market
environment. Previously, Cristina
was the Executive Chair of the
Board of Directors of Forendo
Pharma and Exonics Therapeutics,
Chair of Caraway Therapeutics and
a Board Director of Aceragen Inc,
Palisade Bio, Juniper Pharma,
Vtesse and Cydan, where she was
also the founding President and
CEO. She has served as Board
Director of T1D Exchange and on
a number of National Institutes of
Health and other non-profit advisory
committees. Cristina holds a Doctor
of Pharmacy and a Bachelor
of Science from Massachusetts
College of Pharmacy, as well as
a Master of Health Professions
from Northeastern University.
IMPORTANCE OF
CONTRIBUTION
Cristina has significant experience
across a variety of biotechnology
companies throughout their
lifecycles. In particular, her expertise
covers drug development, company
building and capital raising,
particularly in the US, which is a key
market for Syncona’s portfolio.
CURRENT POSITIONS
−
Executive Chair of Sardona
Therapeutics
MELANIE GEE
Chair
JULIE CHERRINGTON
Non-Executive Director
CRISTINA CSIMMA
Non-Executive Director
BOARD GENDER DIVERSITY
BOARD ETHNIC DIVERSITY
BOARD TENURE
AS AT 31 MARCH 2024
0-2 years
0%
2-4 years
57%
4-6 years
29%
6+ years
14%
57%
Female
14%
Minority ethnic
background
43%
Male
A diverse Board taking a long-term view
78
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
DATE OF APPOINTMENT
1 January 2021
COMMITTEE MEMBERSHIP
A
N
R
BIOGRAPHY
Virginia Holmes has an extensive
knowledge of the financial services
industry, including both investment
management and banking. She was
previously Chief Executive of AXA
Investment Managers UK and held
a number of senior leadership roles
over more than a decade at Barclays
Bank Group. Virginia brings a wide
range of non-executive director
experience of UK listed companies.
She is also a current and past chair
and trustee of a number of pension
funds and a founder director of the
Investor Forum.
IMPORTANCE OF
CONTRIBUTION
Virginia’s extensive experience and
proven track record of working with
investment businesses as they look
to develop and expand are highly
relevant to the Board in defining
the Company’s strategy and
overseeing its delivery. In addition,
her extensive non-executive
experience gives her an in-depth
understanding of governance
requirements, supporting our goal
of a highly effective Board.
CURRENT POSITIONS
−
Non-Executive Director of
Intermediate Capital Group plc
(LSE: ICG)
−
Chair of Murray International
Trust plc (LSE: MYI)
−
Chair of Unilever UK
Pension Fund
DATE OF APPOINTMENT
1 November 2017
COMMITTEE MEMBERSHIP
A
N
R
BIOGRAPHY
Rob Hutchinson has over 30 years’
experience in the financial sector
as a Chartered Accountant. He
qualified in 1990 and spent 28 years
with KPMG across various roles.
Rob retired from practice in 2014
and is a Fellow of the Institute of
Chartered Accountants in England
and Wales. He served as President
of the Guernsey Society of
Chartered and Certified Accountants
between 2007 and 2009.
IMPORTANCE OF
CONTRIBUTION
Rob has many years of broad
financial experience. He spent
a number of years in roles
specialising in the audit of banking
and fund clients at KPMG and was
appointed a partner in 1999. Rob
led the audits for a number of UK
and European private equity and
venture capital houses as well
as listed funds covering a variety
of asset classes, bringing broad
experience in issues arising from
the valuation of private assets.
Rob led the firm’s fund and private
equity practices for seven years
and served as Head of Audit for
KPMG in the Channel Islands for
five years until 2013.
CURRENT POSITIONS
−
Non-Executive Director of
Ravenscroft Holdings
DATE OF APPOINTMENT
15 June 2020
COMMITTEE MEMBERSHIP
A
N
BIOGRAPHY
Kemal Malik joined the Board in
June 2020. He has 30 years of
experience in global pharmaceutical
research and development. He has
been responsible for bringing many
innovative medicines through R&D
to successful commercialisation.
From 2014 to 2019 he was
a member of the Board of
Management of Bayer AG,
responsible for innovation across
the Bayer group. He was also
responsible for Bayer LEAPS, the
organisational unit responsible for
strategic venturing in areas of
disruptive breakthrough innovation.
Prior to his appointment to the
Bayer Board he was Head of Global
Development and Chief Medical
Officer at Bayer Healthcare for
10 years and was previously a
Non-Executive Director at Acceleron
Pharma, a Boston based
biopharmaceutical company.
Kemal began his career in the
pharmaceutical industry at Bristol
Myers Squibb with responsibilities
in medical affairs, clinical
development and new product
commercialisation. Kemal qualified
in medicine at Charing Cross and
Westminster Medical School
(Imperial College) and is a Member
of the Royal College of Physicians.
IMPORTANCE OF
CONTRIBUTION
Kemal brings extensive experience
in breakthrough innovation and
commercialisation in the life
science sector, which are highly
relevant to the Board in defining
the Company’s strategy and
overseeing its delivery.
CURRENT POSITIONS
−
Scientific Adviser to Atomwise
−
Trustee of Our Future Health
DATE OF APPOINTMENT
1 April 2018
COMMITTEE MEMBERSHIP
R
A
N
BIOGRAPHY
Gian Piero Reverberi is a senior
healthcare executive at Ferring
Pharmaceuticals, a leader in the
areas of reproductive medicine
and maternal health,
gastroenterology and urology.
Prior to this Gian Piero was
Senior Vice President and Chief
Commercial Officer at Vanda
Pharmaceuticals, a specialty
pharmaceutical company focused
on novel therapies to address
high-unmet medical needs. He
also spent 10 years at Shire,
where he served as Senior Vice
President International Specialty
Pharma, with responsibility for
EMEA, Canada, Asia Pacific and
Latin America. He started his
pharmaceutical career at Eli Lilly
in the US and Italy, where he had
responsibilities including finance,
business development, sales and
business unit leadership.
IMPORTANCE OF
CONTRIBUTION
Gian Piero has over 20 years
of experience in commercialising
novel therapies spanning
commercial strategy, business
development, business unit
leadership and management,
launching specialty and orphan
drugs across international
markets. He has a degree in
Economics and Business
Administration from Sapienza
University of Rome and a Master
in Business Administration from
SDA Bocconi in Italy.
CURRENT POSITIONS
−
Senior Vice President Europe,
Canada and Latin America at
Ferring Pharmaceuticals
VIRGINIA HOLMES
Senior Independent Director
ROB HUTCHINSON
Non-Executive Director
KEMAL MALIK
Non-Executive Director
GIAN PIERO REVERBERI
Non-Executive Director
COMMITTEE MEMBERSHIP
A
Audit
N
Nomination and Governance
R
Remuneration
Chair
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
79
GOVERNANCE
REPORT OF THE NOMINATION AND GOVERNANCE COMMITTEE
Overseeing implementation
of succession plans
The Committee’s members in the year were as per the table below:
MEETINGS ATTENDED
Melanie Gee (Chair)
3/3
Virginia Holmes
3/3
Rob Hutchinson
3/3
Kemal Malik
3/3
Gian Piero Reverberi
3/3
The Committee comprises at least three members, who
are appointed by the Board. All members of the Committee
in the year were independent Directors.
The Committee meets as required, and at least twice each
year. The table above sets out the number of meetings held
during the year and the number of meetings attended by
each of the members. Other Directors who are not members
of the Committee may also be invited to the meetings. In
addition, the Committee members communicated by email
or phone to deal with ongoing matters between meetings.
The Committee will continue
to assess the evolving needs
of the Company in its Board
succession planning process.”
MELANIE GEE
CHAIR OF THE COMMITTEE
I am pleased to present the work of the
Nomination and Governance Committee
in the year ended 31 March 2024.
ROLE OF THE COMMITTEE
The Committee’s role is to:
–
review the Board’s structure, size and composition
(including the skills, knowledge, diversity and
experience) and make recommendations to the
Board accordingly;
–
identify and nominate, for the approval of the Board,
candidates to fill Board vacancies and for putting
in place succession plans for Directors;
–
have an advisory role to the Board regarding the
re-election and election of Directors at the Company’s
AGM and, where appropriate, considering any issues
relating to any Director’s continuation in office;
–
oversee succession planning for the CEO and Chair
of the Investment Manager;
–
support the Chair in carrying out the Board evaluation
each year;
–
make recommendations for the membership of
Board sub-committees and boards of subsidiaries
(other than portfolio companies); and
–
review the Company’s compliance with the UK
Corporate Governance Code.
The Committee’s Terms of Reference are reviewed annually
and were last amended in 2023. The current version is
available on the Company’s website: synconaltd.com.
80
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
SUCCESSION PLANNING
A key part of the Committee’s role is to plan
for Board succession. The Committee seeks
to do this using a number of tools. At the
core of its approach is a skills matrix which
identifies the skill sets needed on the Board
and against which each of the Directors are
asked to evaluate themselves. Our core skill
sets focus around life sciences and private
investing, overlaid with the governance and
other skills required by the board of a listed
investment company, reflecting the Board’s
feedback through the annual evaluation
process over recent years.
In addition to the skills matrix, the Committee
has also approved a Board Diversity Policy
(set out on page 83). Diversity covers a range
of aspects, including personal characteristics
such as gender or race, ways of thinking or
geographical location and experience. The
policy seeks to ensure that the Board, and
its Committees, bring a broad strategic
perspective, based on an inclusive culture
that recognises and values the advantages
of a diverse range of people.
Further considerations in Board succession
planning include identifying individuals to take
on key Board roles such as Committee chairs
and considering the arrangements if a Director
becomes unexpectedly unavailable. Finally,
the Committee considers the performance of
each Director, length of service on the Board
and their future intentions around continuing
to be a Director, and the overall mix of lengths
of service of the Board as a whole.
Taken together, these items allow the
Committee to define the desired shape
of the Board and to recruit against it.
As a wholly non-executive Board, internal
succession planning for the Board is not
relevant to the Company. Recruitment
is carried out using external search
consultants who are provided with a brief of
desired characteristics for candidates. Our
search consultants are required to include
a diverse range of candidates bringing the
desired skill sets in preparing their long list.
The Committee re-evaluates Board
succession planning annually, taking
account of any feedback from the Board
evaluation to ensure it has a clear outlook
on the actions it should take.
During the year, the Committee reviewed the
succession planning for the CEO and Chair
of the Investment Manager. As described in
the Corporate governance report, the Board
considered the change to the Chair of the
Investment Manager that took place during
the year. The Committee will oversee
the Investment Manager’s recruitment
of a long-term successor for this role.
BOARD COMPOSITION
There were no changes to Board
composition in the year, which was in line
with the Committee’s expectations at the
beginning of the year and has allowed the
Board a longer period to consolidate
relationships following a period of significant
Board change in 2022. The Committee is
satisfied that the present Board composition
continues to bring the relevant skills
needed by the Board.
In addition, we believe that the Board
brings a diverse range of characteristics
and perspectives in line with our Board
Diversity Policy. The tables on page 83
provide further details of diversity of the
Board and the leadership team of the
Investment Manager, as at 31 March
2024. The data was collected using a
self-assessment questionnaire reflecting
the categories set out in the table, which
each of the relevant individuals was
requested to complete. The Company
has met the following targets on Board
diversity as at that date:
i. At least 40% of the individuals on the
Board are women.
ii. At least one of the following senior
positions on the Board is held by a woman:
(A) the Chair or (B) the Senior Independent
Director (as the Company is an investment
company and does not have Executive
Directors, the role of Chief Executive or
Chief Financial Officer is not relevant to it).
iii. At least one individual on the Board is
from a minority ethnic background.
There are no changes to the Board since
31 March 2024 that affect these targets.
The Committee considers the
independence of the Board taking into
account factors including length of tenure,
with those Board members who have
served on the Board for more than six
years (Gian Piero Reverberi and Rob
Hutchinson) subject to a more rigorous
review. As part of its review, the Committee
considered the common directorships held
by Julie Cherrington and Cristina Csimma
as members of the board of Sardona
Therapeutics. Having reviewed the nature
of the common directorships, their other
business interests, and their character,
judgement and behaviour, the Committee
has concluded that both Directors
continue to demonstrate independence.
The Committee and the Board consider
all Directors to be independent.
The Committee formally considered the
contribution of each Board member and
whether they each devote sufficient time
to fulfil their respective duties and
responsibilities effectively. The Committee is
satisfied with the level of commitment and
contribution offered to the performance of
the Board and recommended to the Board
that each of the Board members be
recommended for re-election to the Board
at the Company’s AGM on 6 August 2024.
The Committee reviewed Board roles
including Committee memberships. This
review included considering the diversity
of each Committee. The Committee is
satisfied that each of the Audit Committee,
Remuneration Committee and Nomination
and Governance Committee has the skill
sets and diversity required to carry out
its role. The Committee also considered
arrangements in the event of a Director
becoming unexpectedly unavailable.
During the year, as part of its discussions
regarding Board composition and
succession planning, the Committee noted
that Rob Hutchinson has served on the
Board for more than six years and, in order
to facilitate an orderly succession, agreed
to begin the search for an additional Director
with accounting and valuation experience
who could, in time, potentially take on the
role of Chair of the Audit Committee when
Rob Hutchison retires from the Board. An
external search firm has been appointed to
commence the recruitment process which
the Committee hopes to complete during
the coming year.
BOARD EVALUATION
As described in the Corporate governance
report, the Board is focused on ensuring
that governance supports robust
oversight of investment strategy execution
by the Investment Manager’s team, given
the Company’s business model. Our
Board evaluation provides an opportunity
for the Board to review its effectiveness
and progress in overseeing the execution
of the investment strategy.
2023/24 Board evaluation
The 2023/24 Board evaluation process
covered the Board, the Chair and the
individual Directors. As the 2022/23
evaluation was facilitated externally
by Independent Board Evaluation, and
was a comprehensive and extensive
evaluation, the Committee supported the
Chair’s recommendation that the 2023/24
evaluation should be facilitated internally.
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
81
GOVERNANCE
REPORT OF THE NOMINATION AND GOVERNANCE COMMITTEE
CONTINUED
Process
The Chair and the Investment Manager’s
general counsel discussed and agreed
focussed questions on key areas of board
performance, development and interest.
These were distributed to the Directors
who were asked to submit their detailed
written responses. All Directors did so,
and their responses were analysed by a
governance consultant, supported by the
Investment Manager’s general counsel,
and pulled together into a themed draft
report which was discussed and agreed by
the Chair, prior to being distributed to the
Board and discussed at a Board meeting.
The process to evaluate the performance
of the Chair was led by the Senior
Independent Director.
The process to evaluate the individual
performance of the Directors was led
by the Chair.
Findings and recommendations
of the Board evaluation
Overall, the Board agreed that it continued
to perform effectively, delivered high
governance standards and operated
efficiently. No major concerns were raised
and there was agreement on the areas
where further improvements could be
made. The key recommendations arising
from the evaluation were:
–
the Board should continue to remain aware
of the relationship between the Board and
the SIML board so that while there was
clarity over the linkages between the two
boards, the distinct roles and responsibilities
of the two entities were always recognised;
–
while management information reported to
the Board had continued to improve, there
were some areas where the Board would
welcome more concise and succinct
reporting, such as investment performance
and developments in the life sciences
market place; and
–
overseeing the delivery of the investment
strategy by our Investment Manager
remained a key priority for the Board,
particularly in current times which
required some flexibility from SIML
in implementation of the strategy
The Board supported the findings of the
evaluation and actions to implement the
recommendations have been agreed and
will be taken forward by the Investment
Manager’s team under the Chair’s oversight.
Follow-up to the previous review
The 2022/23 review delivered some key
recommendations which the Chair and
the Investment Manager’s team have been
working to implement and report progress
on. In particular, the Directors have been
pleased to see the developments in
senior-level succession planning in both
SIML and Syncona and the continuing
evolution of risk metrics and operational
KPIs, as well as the ongoing initiatives to
strengthen the relationship between the
Board and the SIML Leadership Team.
Chair evaluation
The Senior Independent Director led a
meeting of the non-executive Directors
at which the Chair was not present. The
Directors were satisfied that the Chair was
providing effective leadership for the Board,
encouraging it to maintain its focus on
the key strategic issues for the business.
Director evaluation
The Chair continued her programme of 1:1s
with each Director. In these meetings, she
discussed each Director’s performance,
and recognising their individual level of skills
and experience, supported opportunities
to develop them, where appropriate, to
increase their knowledge and strengthen
their performance.
COMMITTEE EVALUATION AND
EFFECTIVENESS
During the year, the Committee completed
its annual review of effectiveness, and
concluded that it had performed its
responsibilities effectively. The Committee
also considered the findings of the internal
Board effectiveness review for 2023/24
as it related to the Committee.
While the Committee does not consider
that there are any matters within its
responsibilities on which it should consult
with shareholders, the Committee Chair
is available to respond to any questions
on matters not addressed in this report.
Melanie Gee
Chair of the Committee
19 June 2024
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SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
BOARD DIVERSITY POLICY (ADOPTED JUNE 2022 AND UPDATED JUNE 2024)
A key component of the Company’s
investment strategy is to build
successful, sustainable and globally
leading healthcare businesses. To do
this we rely on identifying high-quality
people at all levels. We believe this
can best be done with an inclusive
culture that recognises and values
the advantages of a diverse range of
people. The same applies at Board level
as much as within our management
team or our portfolio companies.
A diverse and inclusive Board helps to
ensure that the Board brings a broad
strategic perspective. We make Board
appointments on merit, with candidates
assessed against measurable, objective
criteria, but strive to maintain a Board in
which a diverse range of skills, knowledge
and experiences are combined in an
environment which values the input
of every Director.
Due regard is given to this when
identifying and selecting candidates for
Board appointments, to achieve a Board
that reflects diversity in the broadest
sense by embracing different perspectives
and dynamics, including different skills,
industry experience, background, race,
sexual orientation and gender.
The Nomination and Governance
Committee regularly reviews and assesses
Board composition on behalf of the Board
and will consider the balance of skills,
experience, independence and knowledge
of the Board. When new appointments are
being made, we instruct search agents
that a diverse range of candidates bringing
the desired skill sets must be included in
preparing their long list.
The Board intends:
–
to have at least 40% female
representation on the Board, as part
of a broadly gender balanced Board;
–
that at least one of the Chair or the
Senior Independent Director should
be female; and
–
to have at least one individual on
the Board from a minority ethnic
background (as defined in the
FCA’s Listing Rules).
DATA ON DIVERSITY OF THE BOARD AND EXECUTIVE MANAGEMENT
For reporting purposes we have treated the leadership team of the Investment Manager as executive management,
although they are not employees of the Company.
GENDER
Number of
Board members
Percentage
of the Board
Number of senior
positions on the Board
(Chair and SID)
Number in
executive
management
Percentage
of executive
management
Men
3
43%
0
7
78%
Women
4
57%
2
2
22%
Not specified/prefer not to say
–
–
–
–
–
ETHNIC BACKGROUND
Number of
Board members
Percentage
of the Board
Number of senior
positions on the Board
(Chair and SID)
Number in
executive
management
Percentage
of executive
management
White British or other White
(including minority white groups)
6
86%
2
8
89%
Mixed/multiple ethnic groups
–
–
–
–
–
Asian/Asian British
1
14%
–
–
–
Black/African/Caribbean/
Black/British
–
–
–
–
–
Other ethnic group (including Arab)
–
–
–
–
–
Not specified/prefer not to say
–
–
–
1
11%
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
83
GOVERNANCE
REPORT OF THE AUDIT COMMITTEE
Maintaining challenging
oversight of valuation and risk
The Committee’s members in the year were as per the table below:
MEETINGS ATTENDED
Rob Hutchinson (Chair)
5/5
Julie Cherrington
5/5
Virginia Holmes
5/5
Kemal Malik
5/5
Gian Piero Reverberi
1
4/5
1.
Gian Piero Reverberi was unable to attend an Audit Committee meeting
in May 2023 due to a prior commitment.
The Committee comprises at least three members, who
are appointed by the Board. All members of the Committee
in the year were independent Directors.
The members of the Committee consider that they have
the requisite skills and experience to fulfil the responsibilities
of the Committee. Further details on the experience and
qualifications of members of the Committee can be found
on pages 78 and 79. The Board is satisfied that the
Committee has recent and relevant financial experience,
and competence relevant to the Company’s portfolio.
The Committee meets formally at least quarterly. The table
above sets out the number of meetings held during the
year and the number of meetings attended by each of
the members. Other Directors who are not members
of the Committee are also invited to the meetings. The
Independent Auditor is invited to attend those meetings at
which the annual and interim reports, as well as its planning
report, are considered, as well as the meeting when the
independent valuation adviser meets with the Committee.
In addition, the Chair of the Committee meets with the
Independent Auditor outside of the formal meetings, to
be briefed on any relevant issues. Other relevant advisers,
including the independent valuation adviser, are invited
to attend meetings to present to the Committee and enable
the Committee to ask questions.
The valuation of the life science
portfolio is a critical element
in the Company’s reporting, to
which the Committee applies
significant focus.”
ROB HUTCHINSON
CHAIR OF THE COMMITTEE
I am pleased to present the Audit Committee’s
report for the past financial year, setting
out the Committee’s structure, duties and
evaluations during the year.
ROLE OF THE COMMITTEE
The role of the Committee includes:
–
reviewing the valuations of the life science portfolio
and the valuation methods for all investments;
–
monitoring the integrity of the Consolidated Financial
Statements and interim reports;
–
reviewing any significant issues and judgements
made in the preparation of the Consolidated Financial
Statements and other financial information, including
the viability statement;
–
reviewing the content of the Annual Report and
Consolidated Financial Statements and advising
the Board on whether, taken as a whole, it is fair,
balanced and understandable;
–
monitoring changes in accounting policies and practices;
–
oversight of the Company’s risk framework and
monitoring, reviewing the relevant internal control and
risk management systems including the arrangements
of the Company’s Investment Manager for oversight
of risks within the life science portfolio, and reviewing
and approving the statements to be made in the
Annual Report concerning internal controls and risk
management systems;
–
reviewing and making recommendations on the
Company’s arrangements for compliance with legal
requirements including controls for preventing and
detecting fraud and bribery; and
–
reviewing the appointment and remuneration of
the Company’s Independent Auditor, including
monitoring and reviewing the quality, effectiveness
and independence of the Independent Auditor and
the quality and effectiveness of the audit process.
84
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
The Committee’s Terms of Reference are
reviewed annually. The current version
is available on the Company’s website:
synconaltd.com.
SIGNIFICANT FINANCIAL
STATEMENT MATTERS
A. Valuation of life science portfolio
In the year, the Group continued to deploy
significant capital into its portfolio of life
science investments. In total, the Group
holds a life science portfolio with a fair
value of £752.2 million (2023: £571.8
million) through Syncona Portfolio Limited
(a wholly owned subsidiary of Syncona
Holdings Limited) and £33.9 million (2023:
£32.8 million) in respect of the CRT
Pioneer Fund through Syncona Discovery
Limited (a subsidiary of Syncona
Investments LP Incorporated).
The valuation of the life science portfolio
is a critical element in the Company’s
reporting, given the concentration of that
portfolio and the range of potential values
of these investments. The valuation of
the life science investments held through
Syncona Holdings Limited is also used
to determine the value of the payout
under the incentive scheme provided to
employees of the Investment Manager and
the Committee is aware of the potential
risk that elevated life science valuations
might inappropriately increase the payout
under the scheme. Accordingly, the
valuation of the life science portfolio is an
area that the Committee gives particular
focus to and it instructs an independent
valuation adviser to provide an
independent view on the valuation of a
selection of key investments to support the
Committee’s challenge of the Investment
Manager. In addition, the Committee
specifically requests the Independent
Auditor to focus on the valuation of the life
science portfolio as part of the audit and
its work in this area is detailed in the
Auditor’s report on pages 99 to 104.
The Group fair values its interests in
Syncona Holdings Limited and Syncona
Discovery Limited which are based on the
fair value of underlying investments and
other assets and liabilities. Life science
investments are valued at fair value
through profit and loss in accordance with
IFRS 13 Fair Value Measurement (‘IFRS
13’) and International Private Equity and
Venture Capital (IPEV) guidelines.
In accordance with the accounting policy
in note 2, unquoted investments are
generally fair valued based on (i) cost
or price of recent investment (PRI)
appropriately calibrated to take into
consideration any changes that might
have taken place since the transaction
date, including consideration of market-
related events, or (ii) through discounted
cash flow (DCF) models, or (iii) price-
earnings multiple methodology or (iv) by
using market comparators. The majority
of our unlisted life science investments are
valued using calibrated cost or PRI as the
primary valuation input. Note 2 includes
the considerations and challenges that
the Group faces when valuing its interests.
During the year, the Committee oversaw
changes made to the Valuation Policy
by the Investment Manager, reflecting
changes to IPEV guidelines that came into
effect as of 1 April 2023. The key changes
were clarifications on specific items that
should be considered when assessing
the performance of a company during
a calibration exercise; and considerations
of the impact of market dislocation.
The changes to the Valuation Policy were
reviewed by the Independent Auditor.
The critical accounting judgements and
sources of estimation uncertainty that the
Group faces when valuing its interests are
set out in note 3. Details of the life science
portfolio balance are disclosed in the
Unaudited Group Portfolio Statement on
page 105. The risk exists that the pricing
and calibration methodology applied to
the underlying investments in the life
science portfolio does not reflect an exit
price in accordance with IFRS 13 and
IPEV guidelines.
Valuations are prepared by the Investment
Manager in line with the Valuation Policy
and a key part of the Committee’s role is
to ensure that the Investment Manager’s
judgements are challenged appropriately.
As part of this, the Committee discusses
the appropriateness of the valuation
methodology chosen by the Investment
Manager in determining the fair value of
unquoted investments, and challenges
the Investment Manager on the process
and assumptions it has used and the
parameters around the calibration
exercise, especially in relation to the effect
milestones may have on the valuations.
For particular investments the Committee
instructs an independent valuation adviser
to provide their own view of the valuation to
assist with this, and has a separate meeting
with the valuation adviser to discuss and
understand those views, which in turn
support the Committee’s challenge of the
Investment Manager. In the current year,
the Committee has particularly challenged
the Investment Manager’s approach to
valuing the investment in Anaveon AG as
the company changed its investment thesis
from a clinical programme to a pre-clinical
programme. Challenge centred around the
re-pricing of the second tranche of its Series
B, including challenging the trigger for
revaluation and the relative importance of
the change in investment thesis, syndicate
dynamics and the wider macroeconomic
environment on the valuation approach
and resulting valuation. The Committee
also discussed the Investment Manager’s
approach to the valuation of Spur
Therapeutics (which is a combination
of SwanBio and Freeline). The valuation
reflects the combined carrying value of
SwanBio and Freeline immediately prior
to the transaction after taking into account
potential synergies as a result of the
consolidation of these two entities. The
Committee has also continued to challenge
whether public market valuation reductions
during the year and the challenging
macroeconomic market conditions
impacting the financing environment for
early-stage private companies should
impact the Investment Manager’s valuation
of the unquoted companies within the life
science portfolio. It has also taken input
from the independent valuation adviser on
the evolution of companies identified as
comparators to the life science portfolio and
the drivers for their share price performance,
trends in enterprise strategy and key
success factors underpinning acquisition
by mid-large pharma.
The Committee also assesses the
Independent Auditor’s work on the
valuation, in particular to understand how
the Independent Auditor challenged the
Investment Manager’s key assumptions
within the life science valuations. An
example this year relates to the valuation
of the unquoted life science investments,
where the Committee discussed with the
Independent Auditor how it had gained
comfort over the Investment Manager’s
valuation approach given the current
macroeconomic environment.
Based on its review, the Committee
considers the valuation of these investments
to be reasonable and the Committee is
satisfied that the Group has valued its
interests in accordance with the approved
Valuation Policy.
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
85
GOVERNANCE
REPORT OF THE AUDIT COMMITTEE
CONTINUED
B. Incentive scheme
Employees of the Investment Manager
may be offered the opportunity to
participate in an incentive scheme under
which Syncona Holdings Limited may
award Management Equity Shares (MES)
to them. Awards entitle participants to
share in growth of the valuation of the
life science investments held through
Syncona Holdings Limited, subject to a
hurdle rate on invested capital being met.
MES vest on a straight-line basis over four
years and participants are able to realise
25 per cent of their vested MES each year
following the publication of the Company’s
annual financial statements, partly in the
Company’s shares and partly in cash.
The Investment Manager uses
a model originally prepared by
PricewaterhouseCoopers LLP (PwC), and
certain inputs provided by them, to value
the incentive scheme in accordance with
IFRS 2 Share based Payments (IFRS 2).
The fair value of awards of MES made in
the year ended 31 March 2024 was £0.8
million (31 March 2023: £2.5 million) and
the liability related to the cash settled
element at 31 March 2024 was £4.6
million (31 March 2023: £7.3 million).
Details of the incentive scheme
are disclosed in the Report of the
Remuneration Committee and in note 2,
and the accounting policies and key
judgements related to them are disclosed
in note 2. The valuation of the incentive
scheme in accordance with IFRS 2 does
not affect its value to employees of the
Investment Manager.
The Committee reviews the valuation each
quarter and challenges the Investment
Manager on key judgements that have been
made, such as key assumptions associated
with the valuation methodology. The
Committee also assesses the Independent
Auditor’s work on the value of the incentive
scheme to confirm it is satisfied that the
Independent Auditor has properly considered
key assumptions. Based on those
discussions, the Committee considers the
accounting for the incentive scheme to be
reasonable. The accounting for the incentive
scheme is undertaken in accordance with
the accounting policies disclosed in note 2
and is regularly reviewed by the Investment
Manager and the Committee.
EFFECTIVENESS OF THE
EXTERNAL AUDIT
Deloitte LLP (Deloitte) has acted as
the Independent Auditor from the date
of the initial listing on the London Stock
Exchange and was reappointed at the
Company’s Annual General Meeting
(AGM) on 1 August 2023 for the current
financial year. Marc Cleeve is the lead
audit partner and opinion signatory.
The Committee held formal meetings with
Deloitte, and the Chair also met informally
with Deloitte, during the course of the year:
1) before the start of the annual audit to
discuss formal planning, discuss any
potential issues and to agree the scope
that would be covered; 2) after the annual
audit work was substantially concluded
to discuss any significant issues; and 3) to
consider and discuss the interim condensed
Consolidated Financial Statements.
The Committee is closely engaged with
overseeing the Independent Auditor to
ensure the effectiveness and independence
of the audit. The Committee:
–
reviewed and discussed the audit plan
presented to the Committee before the
start of the audit including any changes
that might have an impact on the
audit approach;
–
discussed key elements of audit quality
with the Independent Auditor, particularly
around behaviours and mindset, relevant
experience of the team, use of specialists
and demonstration of scepticism
and challenge;
–
reviewed and discussed the audit findings
report and challenged them on their
process and conclusions, in particular
around valuation methodologies,
valuation components and valuation
outcomes (see above for further details);
–
monitored changes to audit personnel;
–
sought feedback from the Investment
Manager on the audit process, based on
their ongoing monitoring of it, including
factors that could affect audit quality and
how any risks identified were addressed;
–
reviewed the Independent Auditor’s
reporting against certain indicative audit
quality indicators;
–
reviewed and approved the terms of
engagement during the year, including
review of the scope and related fees;
–
reviewed the non-audit services
performed and fees charged by the
Independent Auditor during the year;
–
reviewed and discussed Deloitte’s
report on its own internal procedures,
safeguarding measures and conclusion
on its independence and objectivity,
together with the results of the FRC’s
Audit Quality Inspection and Supervision
Review of Deloitte for the 2022/2023
cycle of reviews;
–
discussed if any relationships existed
between the Independent Auditor and
the Company (other than in the ordinary
course of business) that would
compromise independence; and
–
had a private session with the Independent
Auditor following the audit to discuss any
issues raised by the Independent Auditor
in respect of the Investment Manager
and/or audit quality.
The Committee carried out an evaluation
of the performance, independence and
objectivity of the Independent Auditor
taking account of all of these factors.
There were no significant adverse
findings, or any issues faced in relation
to the financial statements, from the
evaluation this year and the Committee is
satisfied that the audit process is effective
and that the Independent Auditor is
independent and objective.
The table below summarises the
remuneration paid by the Group to Deloitte
for audit and non-audit services provided:
31 March
2024
£’000
31 March
2023
£’000
Audit services
Audit services for the
Company
160.4
125.1
Audit fee for Syncona
Group companies
161.6
142.7
Non-audit services
Interim review
40.6
36.2
CASS limited assurance
report for SIML
9.0
8.0
Subscription
for accounting
research tool
1.0
1.0
The Committee considered the level of
fees payable to the Independent Auditor
bearing in mind the nature of the audit
and the quality of the services provided.
The annual audit fee payable for the
Group was £362,600 (31 March 2023:
£304,000), a 19.3 per cent increase.
The increase reflects the additional work
required to perform a robust audit,
including extended input from specialists,
a broader scope and consideration of
updated IPEV guidelines, and inflation.
86
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
In accordance with the non-audit services
policy, non-audit services must be on the
“white list” included in the policy. Further,
permitted non-audit services in excess of
£15,000 require prior approval from the
Committee before being undertaken by
the Independent Auditor.
The Committee does not consider that
the non-audit services provided are a
threat to the objectivity and independence
of the audit, taking into account that the
fees were insignificant to the Group as a
whole, representing 13.6% of the total
audit fee, and when required a separate
team was utilised. Of the fees relating to
non-audit services, 80.2% relate to audit
related services, being the performance
of the interim review.
The Committee has in place a policy on
the recruitment of any employees by the
Company or the Investment Manager that
are associated with the Independent Auditor.
Although the Company, as a Guernsey
company, is not subject to the Statutory
Audit Services Order 2014, the Committee
considers it appropriate to report in the
manner set out in the Order. The Company
has complied with the provisions of the
Order in the financial year. As described
in the Committee’s report in 2022, the
Committee carried out a competitive audit
tender process during summer 2021
for the appointment of the Independent
Auditor for the financial year ended
31 March 2023 onwards, and
recommended Deloitte’s reappointment.
The Committee remains satisfied with
Deloitte’s effectiveness and independence
and accordingly considers it in the best
interests of shareholders to complete a
competitive tender process for the audit
before the financial year ended 2033.
Accordingly, the Company has complied
with the requirements of the Order that
audit work is tendered at least every 10
years and will comply with the requirement
that the auditor is rotated at least every 20
years. Notwithstanding these plans, the
Committee will continue to consider the
tender of the audit annually depending on
the Independent Auditor’s performance
and to ensure it meets the best interests
of the shareholders.
RISK MANAGEMENT AND
INTERNAL CONTROL
The Committee is responsible for assisting
the Board in reviewing the effectiveness of
the Group’s risk management and internal
control systems. The review covers
financial, operational, compliance and
risk management matters, and aims to
ensure that suitable controls are in place
for key risks of the Company, assets of
the Company are safeguarded, proper
accounting records are maintained and
the financial information for publication
is reliable.
During the year the Committee carried out
a review of the Company’s principal risks,
taking account of changes to the internal
and external environment, including
economic uncertainty, inflation, the impact
of the rise in interest rates, access to capital
at portfolio company and Group level,
capital markets volatility, and the current
political situation including conflicts in
Ukraine and the Middle East. The
Committee noted the increased risk relating
to access to capital, reflecting the current
macroeconomic environment, noted the
decreasing risk relating to people following
the strengthening of the Investment
Manager’s team and discussed the direction
of travel for other risks.
Following the review, the Committee
confirmed it is satisfied that the principal
risks identified remain appropriate. Further
details are given on pages 66 to 72.
As part of the effectiveness review,
the Committee also reviewed the control
framework, including an assessment of any
fraud risks. The Company’s system
of internal control is designed to manage
rather than to eliminate the risk of failure to
achieve the objectives set out above, and
by its nature can only provide reasonable
and not absolute assurance against
misstatement and loss. The controls are
maintained and implemented on an
ongoing basis by the Investment Manager,
working with the Administrator. Key internal
controls include the separate role of the
Administrator in maintaining
the financial records of the Group, and the
Custodian in overseeing the investment
assets; the existence of an Investment
Committee, Valuation Committee and
Liquidity Management Committee within
the Investment Manager to approve
investment decisions and capital allocation;
and processes to determine and review
valuations of investments.
The controls review includes the risk events
and breaches that occurred in the year
and the actions taken in response to them.
Following the review, the Committee
believes that the Company has adequate
and effective systems in place to identify,
mitigate and manage the risks to which
it is exposed.
The Committee has examined the need for
an internal audit function. The Committee
considers that the systems and procedures
employed by the Investment Manager, the
Administrator and the Custodian provided
sufficient assurance that a sound system
of internal control, which safeguards the
Company’s assets, has been maintained.
An internal audit function specific to the
Company is therefore not considered
necessary at present.
During the year, the Committee monitored
developments regarding the proposals
for UK Audit and Corporate Governance
reform. Following publication of the
updated UK Corporate Governance Code
in January 2024, the Committee has
reviewed the implications of the changes
to the Code, with a particular focus on
the additional internal controls reporting
provisions coming into force in 2026.
In consideration of these proposals, in
2023, the Investment Manager undertook
a review of existing financial controls,
implementing enhancements as needed.
In addition, a detailed review of compliance
with the revised Code will be conducted in
2025 to identify and implement any further
enhancements to processes and controls.
During the year, the Committee reviewed its
previous assessment that climate-related
risks continue to not be material to the
Group and that they could accordingly be
addressed within the Group’s existing risk
management processes, and confirmed it
remained appropriate. The Committee
intends to monitor this matter each year.
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
87
GOVERNANCE
REPORT OF THE AUDIT COMMITTEE
CONTINUED
GOING CONCERN AND
VIABILITY ASSESSMENT
The Committee assesses going concern
and viability each year.
Given the Group’s capital pool of £452.8
million, of which £450.8 million are liquid
assets, the Committee does not consider
any material uncertainties arise in relation
to the Company’s ability to continue as
a going concern for the next 12 months.
The Committee also carefully reviewed
the Investment Manager’s view of the
Company’s viability for the three-year
period ending 31 March 2027, including
the rationale for assessing viability over a
three-year period. The testing of viability
involved the analysis of base case and
severe combined stress projected forward
over this three-year period by reference
to current investment assumptions.
The Committee noted that the Company
is able to actively manage its capital
consumption by varying the number of
investments it makes, the level of capital
commitment allocated to each
investment, the level of syndication and
realising assets. Following the review
the Committee recommended that the
Company make its viability statement
as set out on page 73.
COMMITTEE EVALUATION
AND EFFECTIVENESS
During the year, the Committee undertook
its annual review of effectiveness against
its Terms of Reference and concluded
that it had performed its responsibilities
effectively. As part of the review the
Committee also confirmed it was satisfied
with its compliance with the FRC’s Audit
Committees and External Audit: Minimum
standards published in May 2023 and
considered the findings of the internal
Board evaluation for 2023/4 as it related
to the Committee.
While the Committee does not consider
that there are any matters within its
responsibilities on which it should consult
with shareholders, the Committee Chair
attends each AGM and is otherwise
available to respond to any questions
on matters not addressed in this report.
CONCLUSION AND RECOMMENDATION
After discussing with the Investment
Manager and Independent Auditor and
assessing the significant financial statement
matters listed on page 85, the Committee
is satisfied that the Consolidated Financial
Statements appropriately address the
critical judgements and key estimates in
respect to the amounts reported and the
disclosures. The Committee is also satisfied
that the significant assumptions used for
determining the value of assets and liabilities
have been appropriately scrutinised,
challenged and are sufficiently robust.
The Committee further concludes, having
carefully reviewed the Annual Report, and
discussed with the Investment Manager
and Independent Auditor, that the Annual
Report, taken as a whole, is fair, balanced
and understandable and provides the
information necessary for shareholders
to assess the Group’s performance,
business model and strategy.
The Independent Auditor reported to the
Committee that no material misstatements
were found in the course of its work. The
Investment Manager and the Administrator
confirmed to the Committee that they were
not aware of any material misstatements
including matters relating to the presentation
of the Consolidated Financial Statements.
The Committee confirms that it is satisfied
that the Independent Auditor has fulfilled
its responsibilities with diligence and
has acted independently on the work
undertaken on behalf of the Group. In
considering the work that the Independent
Auditor has undertaken this year, the
Committee has recommended, and the
Board has agreed to recommend to
shareholders, that Deloitte be reappointed
as the Independent Auditor for the next
financial year. The reappointment is subject
to shareholder approval at the 2024 AGM.
Rob Hutchinson
Chair of the Committee
19 June 2024
88
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
REPORT OF THE REMUNERATION COMMITTEE
Overseeing alignment of remuneration
approach to strategy
The Committee’s members in the year were as per the table below:
MEETINGS ATTENDED
Gian Piero Reverberi (Chair)
3/3
Cristina Csimma
3/3
Melanie Gee
3/3
Virginia Holmes
3/3
Rob Hutchinson
3/3
The Committee comprises at least three members, who
are appointed by the Board. All members of the Committee
in the year were independent Directors.
The Committee meets as required and expects to meet
at least three times each year. The table above sets out the
number of meetings held during the year and the number of
meetings attended by each of the members. Other Directors
who are not members of the Committee may also be invited
to the meetings.
The incentive scheme aligns
the team of the Investment
Manager with the strategy
by ensuring a material part
of individual compensation
is directly tied to gains in the
life science portfolio.”
GIAN PIERO REVERBERI
CHAIR OF THE COMMITTEE
I am pleased to introduce the remuneration
report for the year ended 31 March 2024, which
sets out the work performed by the Committee.
ROLE OF THE COMMITTEE
The Committee’s role is to:
–
approve the remuneration paid to the Chair of the Board;
–
make recommendations to the Board on the
remuneration of the other Directors;
–
review the Investment Manager’s remuneration
approach and related workforce remuneration policies;
–
oversee the incentive scheme that provides long-term
rewards to employees of the Investment Manager; and
–
set the Remuneration Policy and remuneration of the
CEO and the Chair of the Investment Manager.
The Company has no Executive Directors and accordingly
the Committee does not have any responsibilities for
reviewing Executive Director remuneration.
The Committee’s Terms of Reference were revised
during the year to further clarify the responsibilities
of the Committee. The updated version is available
on the Company’s website: synconaltd.com.
The Committee retains PricewaterhouseCoopers LLP
(PwC) to provide independent professional advice on
remuneration issues.
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
89
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
During the year, PwC provided the Committee with an update on
the remuneration landscape for listed companies, and provided
advice to support the Committee’s work in reviewing the fees paid
to the Chair and Non-Executive Directors and the remuneration
of the CEO and Chair of the Investment Manager. The Committee
has reviewed the advice provided to it by PwC during the year
and is satisfied that it has been objective and independent. The
total fees of PwC for the advice during the year were £72,750
(excluding VAT) (2023: £93,000 (excluding VAT)). PwC also
separately advise the Company and the Investment Manager
on various matters, including the valuation, accounting treatment
and process relating to the issue of awards under the incentive
scheme, transaction due diligence and tax advice, tax
compliance, and processes and controls, but do not have any
other connection with the Company or individual Directors.
REMUNERATION POLICY FOR NON-EXECUTIVE
DIRECTORS AND DIRECTOR FEES
A Remuneration Policy for Non-Executive Directors was approved
by shareholders at the AGM on 1 August 2023. The Remuneration
Policy can be found on page 93. During the year the Committee
reviewed the Remuneration Policy and concluded it remained
appropriate for the Company. The Committee will continue to
review the Remuneration Policy annually.
As previously reported, the Committee approved changes to the
fees paid to the Chair of the Board and to Non-Executive Directors
with effect from 1 April 2022. The Committee conducted a routine
review of the fees this year to ensure they remain appropriate
to recruit high-quality directors with appropriate skills and other
attributes, and fairly remunerate them for the work performed.
Taking into account benchmarking against comparable peer groups
and recent changes to the responsibilities undertaken by the
Chair of the Remuneration Committee, including oversight of the
remuneration of the CEO and Chair of the Investment Manager,
the Committee recommended to the Board that the fee paid to
the Chair of the Remuneration Committee increase with effect
from 1 April 2024, which the Board approved.
REMUNERATION OF INVESTMENT MANAGER STAFF
The remuneration policy for, and remuneration of, the employees
of the Investment Manager is determined by the Investment
Manager, with the exception of awards under the incentive
scheme, where the Committee is involved as set out in the next
section, and the remuneration policy and remuneration of the
Investment Manager’s CEO and Chair, as described below.
The Committee reviewed and approved the remuneration and
objectives of the CEO and Chair of the Investment Manager.
PwC provided the Committee with advice and benchmarking
data to support its work.
The Committee also reviewed the Investment Manager’s approach
to remuneration during the year for its alignment with the
Company’s purpose, culture and delivery of strategy. A summary
of the Investment Manager’s approach to remuneration is set
out on page 94. The Committee is satisfied that the approach to
remuneration and the incentive scheme are appropriate to align
the team of the Investment Manager with the Company’s strategy.
The Committee considers how sustainability issues should
impact remuneration policy. As described elsewhere in this
Annual Report, the Board believes our core activities have the
potential for transformational impact on patients and so the
existing incentive structures already align the team with delivering
a positive impact on society. In addition, part of the Syncona
team’s annual objectives relate to implementation of our wider
sustainability policies and these feed into performance and
bonus assessments. The Committee continues to monitor the
appropriateness of further sustainability metrics for remuneration.
INCENTIVE SCHEME
The Committee is responsible for approving the making of
awards under the incentive scheme that provides long-term
rewards to the employees of the Investment Manager, and
in which most of the employees of the Investment Manager
participate. Further details of the scheme can be found in
the summary of the Investment Manager’s approach to
remuneration on page 94.
The Committee approves individual awards for specific senior
members of staff of the Investment Manager (the CEO and
Chair) and has delegated authority to approve individual awards
for other employees to the Investment Manager, within
designated bands. In line with its normal practice the Committee
approved awards in July 2023, making further awards to
individual employees when they became eligible to receive them.
As previously reported, the Committee carried out a review of
the terms and operation of the incentive scheme during 2022/3.
The Committee concluded that the incentive scheme remains
fit for purpose, aligning the team of the Investment Manager
with the Company’s strategy by ensuring that a material part
of individual compensation is directly tied to gains in the
Company’s life science portfolio, which is the key driver of
shareholder returns, and that the staged realisation structure
ensures that rewards are principally driven by long-term
performance rather than short-term changes in valuation.
The existing incentive scheme has been in place for almost eight
years with 2026 the final year in which awards can be made.
During the year, the Committee reviewed proposals for a new
incentive scheme and agreed a process with the Investment
Manager to take forward proposals for further review.
COMMITTEE EVALUATION AND EFFECTIVENESS
During the year, the Committee completed its annual review
of effectiveness, and concluded that it had performed its
responsibilities effectively. The Committee also considered the
findings of the internal Board effectiveness review for 2023/24
as it related to the Committee.
While the Committee does not consider that there are any
matters within its responsibilities on which it should consult with
shareholders at present, the Committee Chair is available to
respond to any questions on matters not addressed in this report.
90
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
REPORT ON IMPLEMENTATION OF THE REMUNERATION
POLICY FOR NON-EXECUTIVE DIRECTORS
Although the Company is not subject to the laws of England and
Wales, this report is prepared in accordance with Schedule 8 of
the Large and Medium-sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations 2013, except that the
Directors have chosen not to include a chart of Total Shareholder
Return, which is required by paragraph 18 of Schedule 8, as
they are voluntarily adopting the Regulations.
During the year, the Committee carried out a routine review
of the fees paid to the Chair and Non-Executive Directors and
concluded that they remain appropriate to recruit high-quality
directors with appropriate skills and other attributes, and fairly
remunerate them for the work performed, with the exception of
the fee for the Chair of the Remuneration Committee. Taking into
account benchmarking against comparable peer groups, recent
changes to the responsibilities undertaken by the Chair of the
Remuneration Committee and an associated increase in time
commitment, the Board approved an increase to the fee for
the Chair of the Remuneration Committee to £10,000 per year
with effect from 1 April 2024.
DIRECTORS’ FEES
The fees payable to the Non-Executive Directors are set out below:
Fee per annum
Chair
£125,000
Director
£50,000
Senior Independent Director
£10,000 additional fee
Chair of Audit Committee
£15,000 additional fee
Member of Audit Committee
(other than Chair)
£5,000 additional fee
Chair of Remuneration Committee
£5,000 additional fee
Increased to £10,000 with effect from 1 April 2024
Director of Guernsey
subsidiary companies
£10,500 additional fee
Travel time allowance
£2,500 additional allowance
for each meeting attended
outside the Director’s
continent of residence
The fee paid to each Director is set out in the single total figure
table on page 92.
None of the Directors has any entitlement to taxable benefits,
pensions or pension-related benefits, medical or life insurance
schemes, share options, long-term incentive plan, or
performance-related payments. No Director is entitled to any
other monetary payment or assets of the Company except
in their capacity (where applicable) as shareholders of the
Company. Accordingly, the table on page 92 does not include
columns for these items or their monetary equivalents.
Directors’ and Officers’ insurance is maintained and paid for
by the Company on behalf of the Directors.
In line with market practice, the Company has undertaken,
subject to the Companies Law and certain limitations, to
indemnify each Director out of the assets and profits of the
Company against certain charges, losses, damages, expenses
and liabilities arising out of any claims made against him or her
in connection with the performance of his or her duties as a
Director of the Company. The indemnities would also provide
financial support from the Company should the level of cover
provided by the Directors’ and Officers’ insurance maintained
by the Company be exhausted. Non-Executive Directors are
engaged under Letters of Appointment, copies of which are
available for inspection at the Company’s Registered Office.
None of the Directors has a service contract with the
Company and, accordingly, the Directors are not entitled to any
compensation in the event of termination of their appointment or
loss of office, other than the payment of any outstanding fees.
RESULTS OF THE VOTING AT THE 2023 AGM
At the 2023 AGM, shareholders approved the remuneration report that was published in the 2023 Annual Report. The results for
this vote are shown below:
Resolution
Votes for
% for
Votes
against
% against
Withheld
Discretion
%
Discretion
Approval of the Directors’ remuneration report
509,148,250
99.94%
93,843
0.02%
14,961
211,077
0.04%
An ordinary resolution for the approval of the annual remuneration report will be put to the shareholders at the Annual General
Meeting to be held on 6 August 2024.
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
91
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
SINGLE TOTAL FIGURE TABLE (AUDITED INFORMATION)
For the year to 31 March 2024, the fees for Directors were as follows:
2024
£’000
2023
£’000
Melanie Gee (Chair)
125
125
Julie Cherrington
1
65
61
Cristina Csimma
1
60
58
Virginia Holmes
65
65
Rob Hutchinson
76
76
Kemal Malik
55
55
Gian Piero Reverberi
60
60
Total
506
499
1.
Julie Cherrington and Cristina Csimma are each resident in the USA and the amounts
paid to them include payment of the travel time allowance for travel to Board meetings
in the UK.
No payments to Directors for loss of office have been made by
the Company in the year. No payments to past Directors have
been made by the Company in the year.
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table shows the proportion of the Company’s
Directors’ fees relative to returns to shareholders. This table
includes Directors only as the Company did not have any other
staff. In line with previous announcements, the Company does
not intend to declare a dividend in relation to the year ended
31 March 2024.
For the year ended
31 March 2024
£’000
For the year ended
31 March 2023
£’000
Difference
£’000
Total Directors’ pay
506
499
7
Dividends
0
0
0
Directors’ pay as a %
of distributions to
shareholders
N/A
N/A
–
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE
INTERESTS (AUDITED INFORMATION)
Neither the Company’s Articles of Association nor the Directors’
Letters of Appointment require a Director to own shares in
the Company, although the Company encourages Directors to
consider holding shares. The interests of the Directors and their
connected persons in the equity securities of the Company at
31 March 2024 are shown in the table below:
Ordinary Shares
31 March 2024
31 March 2023
Melanie Gee (Chair)
76,500
76,500
Julie Cherrington
–
–
Cristina Csimma
–
–
Virginia Holmes
38,000
38,000
Rob Hutchinson
94,827
94,827
Kemal Malik
11,475
11,475
Gian Piero Reverberi
50,000
50,000
Gian Piero Reverberi
Chair of the Committee
19 June 2024
92
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
REMUNERATION POLICY
GENERAL
The Board has the power at any time to appoint any
person to be a Director, either to fill a casual vacancy or
as an addition to the existing Directors. There is no maximum
number of Directors unless otherwise determined by the
Company by Ordinary Resolution. Any Director so appointed
holds office only until the next following Annual General
Meeting and is then eligible for re-election.
The Directors are non-executive and the aggregate fees payable
in any year are restricted to a maximum amount determined in
accordance with the Company’s Articles of Incorporation (currently
£1,000,000). The Board currently has no intention to appoint
any Executive Directors who will be paid by the Company.
NON-EXECUTIVE DIRECTORS
All Directors are appointed under the terms of Letters of
Appointment, and none has a service contract. The Company
has no employees.
This is the Remuneration Policy for the Non-Executive Directors
of the Company, as approved by shareholders at the Company’s
Annual General Meeting on 1 August 2023.
The Remuneration Policy set out below will apply until it is next
put to shareholders for approval, which will be at the Company’s
Annual General Meeting in 2026 or sooner if it is proposed to
vary the Remuneration Policy.
The Non-Executive Directors of the Company are entitled to
such rates of annual fees as the Board at its discretion shall
from time to time determine (subject to any limit set under
the Company’s Articles of Association) and reimbursement
of reasonable fees and expenses incurred by them in the
performance of their duties. Non-Executive Directors have no
entitlement to pensions or pension-related benefits, medical
or life insurance schemes, share options, long-term incentive
plans or performance-related payments. Where expenses are
recognised as a taxable benefit, a Non-Executive Director may
receive the grossed-up costs of that expense as a benefit.
The Company has no employees. Accordingly, pay and
employment conditions of employees generally were not
taken into account when setting the Remuneration Policy and
there was no consultation with employees. The Remuneration
Committee considers the approach set out in this
Remuneration Policy is consistent with the remuneration
approach taken by the Investment Manager.
Table of Directors’ remuneration components
Element
Purpose and link to strategy
Operation
Maximum
Board Chair fee
To attract and retain
a high-calibre Chair
by offering a market
competitive fee level.
The Chair is paid a single fee for all their responsibilities. The
level of the fee is reviewed periodically by the Remuneration
Committee, with reference to workload, time commitment and
fees paid in other relevant listed companies.
At the discretion of the Remuneration Committee, part or all of
the annual fee paid to the Chair may be paid in the Company’s
Ordinary Shares. There is no requirement for the Chair to retain
any such shares.
The fees paid to the
Chair are subject to
change periodically by the
Remuneration Committee
under this policy. There
is no maximum fee level.
Non-Executive
Director fees
To attract and
retain high-calibre
Non-Executive Directors
by offering a market
competitive fee level.
The Non-Executives are paid a basic fee. Additional fees may be
paid to Non-Executives carrying out further Board responsibilities
as considered appropriate from time to time, for example acting
as Senior Independent Director or Audit Committee Chair. The fee
levels are reviewed periodically by the Chair and the Remuneration
Committee, with reference to workload, time commitment
and market levels in other relevant listed companies, and a
recommendation is then made to the Board.
At the discretion of the Board, part or all of the annual fee paid
to any Non-Executive Director may be paid in the Company’s
Ordinary Shares. There is no requirement for Non-Executive
Directors to retain any such shares.
These fee levels are
subject to change
periodically under this
policy. There is no
maximum fee level.
Notes to the table of Directors’ remuneration components
No Director is entitled to receive any remuneration from the Company which is performance-related. As a result there are no performance conditions in relation to any elements
of the Directors’ remuneration in existence to set out in this Remuneration Policy.
The Company has no employees. Accordingly, there are no differences in policy on the remuneration of Directors and the remuneration of employees.
There are no provisions in Directors’ Letters of Appointment for recovery or withholding of fees or expenses. Annual fees are pro-rated where a change takes place during
a financial year.
There are no changes in the elements above relative to the previous Remuneration Policy.
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
93
GOVERNANCE
REPORT OF THE REMUNERATION COMMITTEE
CONTINUED
REMUNERATION APPROACH OF
THE INVESTMENT MANAGER
This section of the remuneration report
gives brief details of the remuneration
approach applied by the Investment
Manager for its team. This approach
applies to the entire team, although
adjustments may be made for
employees who live outside the UK to
take account of local requirements.
The policy and components of current
remuneration are set out below, and
are intended to ensure that: (i) there is
alignment with the Syncona purpose,
strategy and values, and its long-term
interests; and (ii) remuneration is
consistent with and promotes sound
and effective risk management and
does not encourage risk taking which is
inconsistent with Syncona’s risk profile.
For the senior leadership team within
the Investment Manager, remuneration
is structured to align them with
shareholders’ interests with a significant
percentage of total remuneration linked
to long-term performance through
participation in the incentive scheme.
Base salary
Base salaries are normally reviewed
annually on 1 April. When conducting
the annual salary review for all
employees, account is taken of (i) the
individual’s performance and (ii) the
external market, which may include
market data provided by the Investment
Manager’s independent advisers.
Pension
The Investment Manager makes
contributions for eligible employees
into a personal pension plan up to a
maximum of 10 per cent of base salary.
Annual bonus
A discretionary annual bonus may
be awarded. An award will take into
account two factors: the performance
of the Investment Manager against its
corporate objectives (which are in turn
linked to delivery of strategy, in line with
the Company’s purpose and values)
and the individual’s performance.
Bonus payments are not pensionable.
Other benefits
These include private medical insurance,
income protection and life cover.
Incentive scheme
The Company operates an incentive
scheme that provides long-term rewards
to the employees of the Investment
Manager. The incentive scheme was
approved by shareholders in December
2016 and is designed to reward long-term
performance and align the investment team
with shareholders. A fuller description can
be found in the circular to shareholders
dated 28 November 2016.
Under the incentive scheme, employees
of the Investment Manager are awarded
Management Equity Shares (MES) in
Syncona Holdings Limited (SHL) at no
cost. The majority of the employees of
the Investment Manager participate in
the incentive scheme.
–
MES entitle holders to share in
approximately 12.5 per cent of the growth
of the Net Asset Value of the life science
portfolio (excluding the interest in the CRT
Pioneer Fund but including the value of
prior realisations from the life science
portfolio) subject to certain adjustments.
–
The growth is measured from the Net
Asset Value at the most recent valuation
point, which will generally be the value
determined at the most recent financial
year end, or if greater the total capital
invested in the life science portfolio.
–
For a MES to have value there must have
been growth in the adjusted Net Asset
Value of the life science portfolio of at
least 15 or 30 per cent (depending on
when the MES were issued) from the
starting value.
–
A limit applies to the maximum number
of MES that can be issued at any time,
defined by reference to the total capital
invested in the life science portfolio.
–
MES vest on a straight-line basis over
a four-year period. Holders are able to
realise 25 per cent of their vested MES
annually after the publication of the
Company’s annual results.
–
On realisation 50 per cent of the after-tax
value is paid in the Company’s Ordinary
Shares (which must normally be held for
at least 12 months) and the balance is
realisable in a cash payment. In practice a
tax rate of 28 per cent is assumed to apply
to MES realisations, and so 36 per cent of
the realisation value is paid in the Company’s
Ordinary Shares and the remaining 64 per
cent of the realisation value is paid in cash.
The incentive scheme accordingly reflects
the value generated in the life science
portfolio over a number of years. Since
December 2016 (when the incentive
scheme was established), the adjusted
Net Asset Value of the life science portfolio
has increased by a total of £511.2 million,
of which £719.2 million is a realised gain.
As an alternative, since the MES awards
made in 2022 employees have been
offered the alternative of being awarded
nil cost options to acquire MES. These
have the same economic characteristics
as holding MES, but are expected to be
taxed differently for UK taxpayers.
In the 12 months to 31 March 2024
the following payments were made
as a result of realisations of MES:
–
In July 2023, a cash payment of £6.8
million was made to MES holders (total
since December 2016: £34.7 million).
–
In July 2023, 2,477,342 Ordinary
Shares were issued to MES holders
(valued at £3.8 million at the time of
issue); these shares are subject to a
12-month lock-up (total since December
2016: 9,745,103 shares valued at
£19.6 million at the time of issue).
–
At 31 March 2024, the total liability for
the cash settled element of the incentive
scheme for MES that have vested but
not yet been realised determined in
accordance with IFRS 2 was £4.6
million (see note 12). Of that amount,
a maximum of £1.8 million can be
realised at the next realisation date.
–
The total number of Ordinary Shares in
the Company that could potentially be
issued under the incentive scheme was
1,035,451 (taking account of all MES,
whether vested or not vested, and
based on the share price at 31 March
2024 of £1.23/share), equal to 0.15 per
cent of the number of Ordinary
Shares in issue at that date. Of those
shares, a maximum of 805,048
Ordinary Shares could be issued at the
next realisation date (the actual number
of shares that can be issued will
depend on the share price at the time
of realisation). The aggregate number
of new Ordinary Shares which may be
issued on the realisation of MES under
the incentive scheme in any 10-year
period may not exceed 10 per cent of
the number of Ordinary Shares in issue
from time to time.
Share interests
Members of the Investment Manager’s
team are encouraged to build up
an interest in the Company’s shares,
but are not subject to a formal
shareholding guideline.
94
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
DIRECTORS’ REPORT
The Directors present their Annual Report and audited
Consolidated Financial Statements for the year ended
31 March 2024, which have been prepared in
accordance with The Companies (Guernsey) Law, 2008.
PRINCIPAL ACTIVITY
The Company is a Guernsey authorised closed-ended
investment company listed on the Premium Segment of the
London Stock Exchange.
The Company is governed by an independent Board of Directors and
has no employees. Management of its investments is contracted to its
subsidiary Syncona Investment Management Limited, the Investment
Manager. Its company secretarial and administrative functions are
outsourced to Citco Fund Services (Guernsey) Limited, with further
support and oversight provided by the Investment Manager. Further
details on the Company’s Investment Manager are given below.
The Company’s investment objective is to achieve superior
long-term capital appreciation from its investments. A copy of
the Investment Policy can be found on page 97. This includes
a non-material amendment made by the Board of Directors on
18 June 2024 to align the Investment Policy with the Company’s
strategy of building a portfolio of life sciences companies across
development stage, modality and therapeutic area, to take effect
on publication of this Annual Report. Further details are provided
on page 97.
INVESTMENT MANAGER
The investment portfolio is managed by the Investment Manager,
which was appointed to that role on 12 December 2017. The
Investment Manager is regulated by the Financial Conduct
Authority as an Alternative Investment Fund Manager.
The Company pays the Investment Manager an annual fee equal to
expenses incurred in managing the investment portfolio. The amount
of the fee was previously limited to a maximum of 1.05 per cent
per annum of the Company’s NAV, but as previously announced
the Company and the Investment Manager agreed to remove that
limit in November 2022. In addition, the Company has in place an
incentive scheme that provides long-term rewards to employees
of the Investment Manager. Further details of the incentive scheme
are set out in the Remuneration Committee report on page 94.
The appointment of the Investment Manager is indefinite
and can be terminated by the Company on 180 days’ notice.
No compensation is payable to the Investment Manager on
termination of its appointment.
The Directors review the performance of the Investment Manager
each year and consider that the Investment Manager is performing
well. Accordingly, the Directors consider that the continuing
appointment of the Investment Manager on the terms agreed is
in the interests of the Company and its shareholders as a whole.
EXPENSES
Management fees paid to the Investment Manager in 2024 totalled
£16.6 million (2023: £12.1 million); 1.34 per cent of NAV for the
12 months (2023: 0.93 per cent of NAV). The ongoing charges ratio,
which includes the management fee, costs and movement in value
associated with the Company’s incentive scheme and costs incurred
in running the Company, was 1.93 per cent (2023: 0.88 per cent).
DIRECTORS
Biographical details of the current Directors of the Company are
shown on pages 78 and 79. Details of the Directors’ shareholdings
are included in the Directors’ remuneration report on page 92.
At each Annual General Meeting of the Company, all the
Directors at the date of the notice convening the Annual General
Meeting retire from office and each Director may offer himself
or herself for election or re-election by the shareholders. There is
no age limit on Directors.
The Directors are required to disclose all actual and potential
conflicts of interest to the Board as they arise for consideration
and approval. These are considered carefully, taking into
account the circumstances around them, and if considered
appropriate are approved. The Board may impose restrictions
or refuse to authorise such conflicts if deemed appropriate.
Directors are regularly reminded of their obligations regarding
disclosure of conflicts of interest.
During the year, the Company maintained cover for its Directors and
Officers under a Directors’ and Officers’ liability insurance policy.
SHARE CAPITAL
As at 31 March 2024, the Company had 671,806,666 nil
paid Ordinary Shares in issue. 16,471,080 shares were held in
treasury which attract no voting rights. The total number of voting
rights at 31 March 2024 was 655,335,586. The Ordinary Shares
each have standard rights as to voting, dividends and payment
on winding up and no special rights and obligations attaching to
them. There are no material restrictions on transfers of shares.
In addition, the Company has one Deferred Share in issue. This
share has the right to payment of £1 on the liquidation of the
Company, and a right to vote only if there are no other classes
of voting shares of the Company in issue, but no other rights.
As at 31 March 2024, the Company had been notified of the
following significant (5 per cent or more) direct or indirect
holdings of securities in the Company:
Shareholder
Number of
Ordinary Shares
held
% of issued
share capital
held
The Wellcome Trust
186,000,000
27.79
BlackRock, Inc
69,185,088
10.32
Schroders plc
33,488,292
5.00
Other than as disclosed above, the Company is not aware of any
person who has a significant direct or indirect holding of securities
in the Company. There are no restrictions on voting rights. The
Company is not aware of any agreements between holders of
securities that may result in restrictions on the transfer of securities
or on voting rights.
The Company has the authority, subject to various terms as set out
in its Articles and in accordance with The Companies (Guernsey)
Law, 2008, to acquire up to 14.99 per cent of the shares in
issue. The Company intends to renew this authority annually.
On 29 September 2023, the Directors utilised this authority to
commence a share buyback programme to purchase its Ordinary
Shares up to a maximum consideration of £40.0 million. As at
31 March 2024, in aggregate the Company has purchased
16,471,080 Ordinary Shares with an aggregate nominal value of
approximately £20.2 million (this represented approximately 2.5 per
cent of the Company’s issued share capital as at 31 March 2024)
for an aggregate consideration of £20.2 million excluding taxes and
expenses. All of the repurchased Ordinary Shares have been held
in treasury. Additional details are provided in the Chair’s Statement.
RESULTS AND DIVIDENDS
The results for the year are set out in the Consolidated
Statement of Comprehensive Income on page 106.
No dividend was declared in the year ending 31 March 2024
(31 March 2023: £0.00).
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
95
GOVERNANCE
DIRECTORS’ REPORT
CONTINUED
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 £1,238.9 million (31 March 2023: £1,254.7 million)
of which £435.8 million (31 March 2023: £629.4 million) are
readily realisable within three months in normal market
conditions, and liabilities including uncalled commitments to
underlying investments and funds amounting to £95.2 million
(31 March 2023: £89.2 million).
Given the Group’s capital pool of £452.8 million (31 March 2023:
£650.1 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 increasing geopolitical uncertainty and the
changing macro environment 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.
ANNUAL GENERAL MEETING
The AGM will be held at Frances House, Sir William Place,
St Peter Port, Guernsey, GY1 1GX on 6 August 2024 at 13:00.
Details of the resolutions to be proposed at the AGM, together
with explanations, appear in the Notice of Annual General
Meeting sent to shareholders separately.
The Board remains committed to allowing shareholders the
opportunity to engage with the Board, and if shareholders have
any questions for the Board in advance of the AGM, these
can be sent by email to contact@synconaltd.com. The Board
will endeavour to answer key themes of these questions on
the Company’s website as soon as practical.
CHARITABLE DONATIONS
The Company has agreed with The Syncona Foundation that
one-twelfth of 0.35 per cent of the total NAV of the Company
at each month-end during the year will be donated annually
by the Company to charity (subject to review each year), all
of which is donated to The Syncona Foundation which in turn
makes grants to selected charities. The Company expects to
make the donation calculated by reference to the year ending
31 March 2024 during July 2024.
Further details of the Company’s charitable donations are
set out in the Company’s separate Sustainability Report,
available on its website.
STAKEHOLDERS, EMISSIONS AND OTHER MATTERS
For stakeholder information, see the Purpose-led stakeholder
engagement section of the Strategic Report. For emissions
reporting, see the Strategic Report. For future developments,
see the Strategic Report and for post-balance sheet events,
see note 21 of the Consolidated Financial Statements.
For information regarding financial instruments, see note 17
of the Consolidated Financial Statements.
The Directors have considered the relevance of the risks of
climate change and transition risks in the preparation of the
Consolidated Financial Statements and confirm that the financial
impact of climate-related matters, to the extent relevant to
the Company, has been incorporated into the Consolidated
Financial Statements.
The Directors have considered the impact of events in the Middle
East, Russia and Ukraine in the preparation of the Consolidated
Financial Statements and confirm that the financial impact of
such matters, to the extent relevant to the Company, has been
incorporated into the Consolidated Financial Statements.
OTHER INFORMATION
Under Listing Rule 9.8.4CR, a listed company must include all
information required by LR 9.8.4R in a single identifiable location or
a cross-reference table indicating where that information is set out.
For the purposes of LR 9.8.4CR, the information that is required to
be disclosed by LR 9.8.4R can be found as per the below table:
Requirement
Location
Interest capitalised
−
Not applicable
Unaudited financial information
−
Not applicable
Long-term incentive schemes
−
Audit Committee
report
−
Remuneration
Committee report
Waiver of emoluments/future
emoluments by a director
−
Not applicable
Non pre-emptive issues of equity for cash
−
Not applicable
Non pre-emptive issues of equity
for cash in relation to major
subsidiary undertakings
−
Not applicable
Information for unlisted major
subsidiary undertaking
−
Not applicable
Parent undertaking details
−
Not applicable
Contract of significance
−
Not applicable
Controlling shareholder provision
of services
−
Not applicable
Dividend waiver by shareholders
−
Not applicable
Future dividend waiver by shareholders
−
Not applicable
Agreements with controlling shareholders
−
Not applicable
All the relevant information cross-referenced above is hereby
incorporated by reference into this Directors’ report.
AUDITOR
The Company is required to appoint auditors for each financial
year of the Company, to hold office until the conclusion of the
next general meeting at which accounts are presented. Our
Independent Auditor, Deloitte LLP, has indicated their willingness
to remain in office and resolutions to reappoint them for the year to
31 March 2025 and to authorise the Directors to determine their
remuneration will be proposed at the Annual General Meeting.
As far as the Directors are aware, there is no relevant audit
information of which the Auditor is unaware and they have
taken all steps they should have taken as Directors in order
to make themselves aware of any relevant audit information
and to establish that the Auditor is aware of that information.
Signed on behalf of the Board:
Melanie Gee
Chair
Syncona Limited
19 June 2024
96
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
INVESTMENT OBJECTIVE AND POLICY
1
The Company’s investment objective is to achieve superior
long-term capital appreciation from its investments. The
Company invests in life science businesses (including private
and quoted companies) and single or multi-asset projects
(‘Life Science Investments’).
The Company will target an annualised return across its
net assets of 15 per cent per annum over the long term.
The Company also holds a portion of its assets as a capital
pool (‘Capital Pool’) to ensure it has capital available to make
future Life Science Investments. There is no limit on the size
of the Capital Pool although it is intended that the Company
should invest the significant majority of its assets in Life
Science Investments.
Life Science Investments
Life Science Investments will principally be privately owned
businesses or single or multi-asset opportunities, together
with the Company’s investment in the CRT Pioneer Fund.
The Company anticipates that its Life Science Investment
businesses will primarily be headquartered in the United
Kingdom and, to a lesser extent, continental Europe, although
some may have operations elsewhere in the world and may
market and commercialise their products on a global basis.
The Company anticipates that, over time, its Life Science
Investments portfolio will consist of around 20 to 25 life
science opportunities, of which three to five are likely to
become significant core holdings. The Company will invest
further in its existing portfolio of Life Science Investments
and will seek to create further opportunities by founding
new businesses to commercialise academic science.
The Company will seek to create and invest in new or existing
Life Science Investment businesses or opportunities with
a view to long-term ownership, to support the building of
companies that are capable of taking their products to market
on an independent basis and therefore to build sustainable,
revenue-generating businesses. However, the Company may
selectively divest companies in part or in full where it is in the
Company’s interest to do so.
The Life Science Investment portfolio is subject to the following
diversification requirements, each of which is measured only
at the time of an investment and with respect to the impact
of that investment:
–
no more than 35 per cent of the Company’s gross assets
may be invested in any single Life Science Investment;
–
no more than 60 per cent of the Company’s gross assets
may be invested in the largest two Life Science Investments;
–
no more than 75 per cent of the Company’s gross assets may
be invested in the largest three Life Science Investments; and
–
no more than 15 per cent of the Company’s gross assets
may be invested in quoted companies, disregarding for these
purposes any investments which have become quoted
companies during their ownership by the Company.
Capital Pool
The objective of the Capital Pool is to provide the Company
with access to liquidity in all market conditions, with limited
annualised volatility across the Capital Pool as a whole.
In implementing this objective the Capital Pool may be held in
a combination of cash, short-term deposits, other liquid and
low volatility assets, and funds including credit, fixed income
and multi-strategy funds.
In addition, parts of the Capital Pool may be held in funds
that were invested in accordance with any prior investment
policy of the Company, until those funds are realised.
The composition of the Capital Pool will vary over time,
depending on the aggregate amount of the Company’s
gross assets that are allocated to it.
The Capital Pool is subject to the requirement, measured at
the time of investment, that no more than 20 per cent of the
Company’s gross assets may be held in any single fund or
managed account.
Investment restrictions
The Company will not make any direct investment in any tobacco
company and has agreed with (a) The Institute of Cancer
Research (the ICR) not knowingly to make any investment which
contravenes the tobacco restriction contained in the investment
policy of the ICR and (b) Cancer Research UK not knowingly to
make or continue to hold any investments in the Fund Investment
portfolio which would result in exposure to tobacco companies
exceeding 1 per cent of the aggregate value of the Capital Pool
from time to time.
The Company will not invest more than 15 per cent of its
gross assets in other closed-ended investment funds that
are listed on the FCA’s Official List.
The Group may incur indebtedness for the purpose of
financing share repurchases or redemptions, satisfying working
capital requirements or to assist in payment of the annual
charitable donation, up to a maximum of 20 per cent of the
Company’s Net Asset Value at the time of incurrence.
Any decision to incur indebtedness for the purpose of
servicing any awards under the Group’s Long-Term Incentive
Plan must be approved by the Board. Any other decision to
incur indebtedness may be taken by the Investment Manager
within such parameters as are approved by the Board from
time to time. There are no limitations on indebtedness being
incurred at the level of the Company’s underlying investments.
The Company does not propose to enter into any securities or
derivative hedging or other derivative arrangements other than
those that may from time to time be considered appropriate for
the purposes of efficient portfolio management and will not enter
into such arrangements for investment purposes, although there
are no limitations on such arrangements being entered into at
the level of the Company’s underlying investments.
1.
Effective from the date of publication of this Annual Report. The prior policy has been amended to remove the requirement that the Company commit at least 25 per cent
of the assets that it commits to Life Science Investments to oncology projects or businesses. The non-material amendment seeks to better align the policy with the
Company’s strategy of building a portfolio of 20-25 globally leading life science companies across development stage, modality and therapeutic area. Oncology remains
an important therapeutic area for the Company.
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
97
GOVERNANCE
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
In respect of the Annual Report and audited
Consolidated Financial Statements
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law
and regulations.
The Companies Law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Under the Companies Law the Directors must not approve the
accounts unless they are satisfied that they give a true and fair view
of the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these financial statements,
International Accounting Standard 1 requires that Directors:
–
properly select and apply accounting policies;
–
present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
–
provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the entity’s financial position and
financial performance; and
–
make an assessment of the Company’s ability to continue
as a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements comply with The Companies
(Guernsey) Law, 2008. They are also responsible for safeguarding
the assets of the Group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in Guernsey governing
the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT
We confirm that 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.
This responsibility statement was approved by the Board
of Directors on 19 June 2024 and is signed on its behalf by:
Melanie Gee
Rob Hutchinson
Chair
Non-Executive Director
Syncona Limited
Syncona Limited
19 June 2024
19 June 2024
98
SYNCONA LIMITED
ANNUAL REPORT AND ACCOUNTS 2024
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SYNCONA LIMITED
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
1. Opinion
In our opinion the financial statements of Syncona Limited (the
‘parent company’) and its subsidiary (together the ‘Group’):
–
give a true and fair view of the state of the Group’s affairs as
at 31 March 2024 and of its profit for the year then ended;
–
have been properly prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the
European Union;
–
have been prepared in accordance with the requirements
of the Companies (Guernsey) Law, 2008.
We have audited the financial statements which comprise:
–
the Consolidated Statement of Comprehensive Income;
–
the Consolidated Statement of Financial Position;
–
the Consolidated Statement of Changes in Net Assets
Attributable to Holders of Ordinary Shares;
–
the Consolidated Statement of Cash Flows; and
–
the related notes 1 to 21.
The financial reporting framework that has been applied in
their preparation is applicable law and IFRSs as adopted
by the European Union.
2. Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s
responsibilities for the audit of the financial statements section
of our report.
We are independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s
(the ‘FRC’s’) Ethical Standard as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. The non-audit services
provided to the Group and parent company for the year are
disclosed in note 9 to the financial statements. We confirm that
we have not provided any non-audit services prohibited by the
FRC’s Ethical Standard to the Group.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current year was:
–
Key judgements within the valuation of unquoted life science
investments.
Within this report, key audit matter is identified as follows:
Similar level of risk
Materiality
The materiality that we used in the current year was £25.0 million
which was determined on the basis of 2% of net assets attributable
to holders of ordinary shares (‘NAV’).
Scoping
The group engagement team carried out audit work on the parent
company, its subsidiary and the underlying entities in the investment
holding structure, executed at levels of materiality applicable to each
entity, which in all instances was lower than group materiality.
Significant changes in our approach
Valuation of the long-term incentive plan (“LTIP”) liability was
not identified as a key audit matter in the current year audit. Our
risk assessment continues to identify the key area of potential
manipulation of the Long-Term Incentive Plan (“LTIP”) Liability which
relates to the matters already identified for the key audit matter and
response to key judgements within the valuation of unquoted life
science investments. This is on the basis the settlement of the
awards and reflects the prevailing performance of these investments
and has therefore contributed to the continued reduction in value
of the LTIP Liability and minimal sensitivity to changes in inputs
other than valuation of the unquoted life science investment.
As a result, the relative audit effort required to respond to this
matter has reduced to a level whereby we don’t consider this
to be a key audit matter.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group and
parent company’s ability to continue to adopt the going concern
basis of accounting included:
–
evaluating Management’s going concern paper, identifying the
assumptions applied in the going concern assessment and
testing the mechanical accuracy of the underlying forecasts;
–
performing a retrospective review of previous assumptions
and estimates to assess the accuracy of Management’s
historical forecasts;
–
performing sensitivity analysis on the key assumptions applied
to understand those that could potentially give rise to a material
uncertainty in respect of the use of the going concern basis;
–
checking consistency of the forecast assumptions applied in
the going concern assessment with other forecasts, including
investment funding and valuation assumptions;
–
assessing the liquidity position of the Group and the underlying
entities in the investment holding structure by evaluating the
impact of near term requests for capital from the portfolio of life
science investments. This included scenarios where cash outflows
are over and above commitments and anticipated deployment
of funds into life science investments amounting to £150 million –
£200 million, as well as forecast annual expenditure for the Group
and entities in the investment holding structure;
–
considering the mitigating actions identified by Management
as available responses to liquidity risks, principally the ability to
realise assets held within the capital pool (Syncona Investments
LP Incorporated), including treasury bills with an aggregate value
as at 31 March 2024 of £163 million. An additional £59.7 million
is also held in money market funds managed externally which
could be accessed if required; and
–
evaluating the disclosures made in relation to going concern
within note 2.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
99
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SYNCONA LIMITED
CONTINUED
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
Group’s ability to continue as a going concern for a period
of at least twelve months from when the financial statements
are authorised for issue.
In relation to the reporting on how the Group has applied the UK
Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the Directors’ statement in the
financial statements about whether the Directors considered
it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with
respect to going concern are described in the relevant sections
of this report.
5.1. Key judgements within the valuation of unquoted life science investments
Key audit matter description
The Group holds unquoted life science investments with a fair value of £571.8 million (2023: £498.0 million) through Syncona Portfolio Limited, a direct
subsidiary of Syncona Holdings Limited, and £33.9 million (2023: £32.7 million) through Syncona Discovery Limited, a direct subsidiary of Syncona
Investments LP Incorporated (“life science investments”). The unquoted life science investments constitute 48.9% (2023: 36.7%) of the Group net asset
value (NAV). The life science investments includes “milestone payments” and “deferred consideration” related to cash flow entitlements due to Syncona
Portfolio Limited from disposals and restructuring deals, with a reported fair value of £16.6 million (2023: £70.4 million) (1.3% of the Group NAV (2023: 5.6%)).
The Group records its interests in Syncona Holdings Limited and Syncona Investments LP Incorporated at fair value. The amounts are based on the
fair value of underlying unquoted life science investments and other assets and liabilities, and these are recorded in accordance with IFRS 9 Financial
Instruments (“IFRS 9”). The underlying unquoted life science investments are recorded at fair value through profit and loss in accordance with IFRS
13 Fair Value Measurement (“IFRS 13”) and International Private Equity and Venture Capital Valuation (“IPEV”) guidelines.
The risk exists that the pricing methodology applied to the underlying life science investments does not reflect a theoretical exit price in accordance
with IFRS 13 and IPEV guidelines.
The portfolio is valued at fair value either at a calibration of cost, price of recent investment (“PRI”), or through other valuation techniques:
–
Calibrated Cost/PRI are used for investments recently made, or recent transactions with third parties where available. Judgement exists as
to whether there is an evidence of change in fair value, based on more recent financial, technical and other data.
–
The CRT Pioneer Fund LP valuation (held through Syncona Discovery Limited) is based on the valuation provided by Sixth Element Capital LLP,
the underlying Investment Manager using a Discounted Cash Flow (“DCF”) for the underlying investments. These valuations are adjusted by
the Investment Manager to apply the policies, discount rates and/or probability of success rates that are consistent with the rest of the Group.
–
A DCF is prepared for milestone payments and deferred consideration using the contractual and estimated cash flows, adjusted for probability of
success rates and discounted to present value.
The valuation of the investments was prepared by the Investment Manager, Syncona Investment Management Limited (“SIML”), and the Board
also commissioned an independent advisor to provide an alternative valuation for certain investments to use as a reference point for assessing
the SIML valuation. We assess individual investments within the portfolio and our response reflects the key judgements identified, being those
associated with directly held investments through Syncona Portfolio Limited.
In addition to the judgement inherent in the valuation of these investments, SIML and the Board may seek to manipulate the valuation of the life
science investments and milestone payments to influence key performance indicators. As such there is an incentive to misstate investment valuation
and we identified this as a potential area for fraud.
Details of the life science investments balance and milestone payments are disclosed in notes 7, 17, 18 and 19 and the accounting policies relating
to them are disclosed in note 2. Critical accounting judgements and key sources of estimation uncertainty are described in note 3 and in the Audit
Committee report on page 84.
5. Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts
of the engagement team.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
100
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
How the scope of our audit responded to the key audit matter
In order to test the key judgements in the valuation of the underlying unquoted life science investments we performed the following procedures:
–
obtained an understanding of relevant controls relating to the valuation process of the unquoted life science investments applied by SIML, and the
monitoring and review by the Board;
–
evaluated the Directors’ methodologies, against the requirements of IFRS 13 and IPEV guidelines;
–
evaluated Management’s assessment of the impact of the current economic headwinds on the underlying life science investments and subsequently
the impact on the valuation of the investments;
–
assessed the market volatility in determining whether there has been a change in fair value of the underlying life science investments as a result;
–
evaluated the competence, capability and objectivity of the Group’s independent advisor; and
–
analysed the valuations performed by the independent advisor, and assessed the Investment Manager’s and Directors’ rationale for adopting a valuation
approach different to that used by the independent advisor.
For investments where the calibration of cost or PRI are determined to be the best method to determine fair value in accordance with IFRS 13
we performed the following procedures:
–
obtained supporting documentation for amounts invested, to assess whether the cost recorded is accurate and to understand whether the use
of calibrated cost/PRI is a reasonable valuation basis;
–
inspected the latest financial information, board meeting minutes, investor reports, and other external information sources to assess whether there
has been any indication of a change in fair value since the latest funding round on an investment by investment basis;
–
searched for contradictory evidence in reports and information obtained from the portfolio companies (including information arising after the reporting
period) to assess progress against technical milestones anticipated by the investment thesis in the last funding round;
–
compared exit prices for any disposals with the last determined fair values and inspected post year end transactions/funding rounds to test for
conditions that would suggest that the year-end fair value was materially misstated;
–
challenged Management’s assumptions over the appropriateness of the valuation methodologies used, and whether other valuation methods may
have been more appropriate, including comparison to independent valuations performed by Management’s expert, benchmarking of M&A activity
for early-stage life science companies and through wider consultation with our life sciences and healthcare team;
–
completed market-based analysis in the context of share indices and price movements on the life science / biotech market to challenge Management’s
assertion that calibration of cost or PRI remains an appropriate basis without adjustment for certain investments;
–
reviewed publicly available information for any other contradictory evidence; and;
–
assessed whether the disclosures made were in accordance with IFRS 13.
In respect of the milestone payments and deferred consideration, we performed the following additional procedures:
–
reviewed the accounting papers prepared by the Group in consideration of relevant guidance to assess the appropriateness of the recognition
and measurement policy adopted for the milestone payments and deferred consideration;
–
challenged management on the valuation methodologies used in light of our understanding of general practice in the sector and also challenged
the appropriateness of the valuation methodologies with the assistance of our valuation specialist; and
–
challenged the assumptions adopted within the DCF model to estimate the fair value, considering the probabilities of success and discount rate
estimates, with reference to published benchmarks and independently determined ranges.
Key observations
Based on the work performed, we concluded that the key judgements within the valuation of unquoted life science investments were reasonable,
and that the resulting valuations are appropriately stated.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
101
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SYNCONA LIMITED
CONTINUED
6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the
financial statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be
changed or influenced. We use materiality both in planning the
scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality
for the financial statements as a whole as follows:
Group materiality
£25.0 million (2023: £25.1 million).
Basis for determining
materiality
2% (2023: 2%) of net asset value.
Rationale for the
benchmark applied
The Group’s investment objective is to achieve
superior long-term capital appreciation from its
investments. We therefore evaluated the Group’s
NAV as the most appropriate benchmark as it is
one of the principal considerations for members
of the Group in assessing financial performance
and represents total shareholders’ interests.
NAV
NAV
Group materiality
£1,239m
Group materiality
£25.0m
Audit Committee
reporting threshold
£1.25m
6.2. Performance materiality
We set performance materiality at a level lower than materiality
to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial
statements as a whole. Performance materiality was set at 70%
of materiality for the 2024 audit (2023: 70%). In determining
performance materiality, we considered the following factors:
–
our risk assessment, including our assessment of the Group’s
overall control environment, including that of the administrator
and whether we were able to rely on controls; and
–
our past experience of the audit, which has indicated a
low number of corrected and uncorrected misstatements
identified in prior periods.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to
the Committee all audit differences in excess of £1.25m (2023:
£1.25m), as well as differences below that threshold that, in our
view, warranted reporting on qualitative grounds. We also report to
the Audit Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
7. An overview of the scope of our audit
7.1. Scoping
Our Group audit was scoped by obtaining an understanding of
the Group and its environment, including group-wide controls,
and assessing the risks of material misstatement at the Group
and component level.
The group audit engagement team carried out audit work directly
on the parent company and its consolidated subsidiary Syncona
GP Limited executed at levels of materiality applicable to each
entity (Syncona GP Limited materiality was set at £0.2 million
(2023: £0.2 million)).
7.2. Our consideration of the control environment
The Board of Directors delegates management functions to Syncona
Investment Management Limited as investment manager. Details
of Syncona’s review of its risk management framework and internal
controls are described in the report of the Audit Committee on page 87.
As part of our risk assessment, we assessed the control
environment in place at the investment manager, and obtained an
understanding of the relevant controls, such as those in relation to
our key audit matters and the financial reporting cycle. A third-party
administrator maintains the books and records of the Group. As
part of our audit procedures, we also obtained an understanding
of relevant controls in operation at the service provider of the
investment manager that are relevant to the business processes of
the Group and parent company, including general IT controls. This
involved reviewing the assurance report on controls and obtaining a
bridging letter to cover the entire year ended detailing that there have
not been any material changes to the internal control environment.
We have decided not to rely on controls as the Group does not
perform significant automated processing of large volumes of data
and the control environment is predominantly manual in nature.
7.3. Our consideration of climate-related risks
As part of our risk assessment, we have considered the potential
impact of climate change on the Group’s business and its financial
statements. We have obtained an understanding of the process
for identifying climate-related risks, the processes and controls
in place, as well as the determination of any mitigating actions.
The Group continues to assess the potential impact of environmental,
social and governance (“ESG”) related risks, including climate
change, as outlined on page 77 and within the Task Force for Climate
Related Disclosures (“TCFD”) report on pages 58 to 61. The Directors
have assessed that the Group, and the portfolio companies in which
they invest, are not materially exposed to climate change and that
neither the risks nor opportunities (individually or collectively) materially
impact their strategy or viability, or financial results, including the
valuation of the unquoted life science investments. We have also
evaluated the appropriateness of disclosures included in the financial
statements in note 3.
We performed our own risk assessment of the potential impact
of climate change on the Group’s account balances and classed
of transactions and did not identify any additional risk of material
misstatement. We read the strategic report to consider whether
the climate related disclosures are materially consistent with the
financial statements and our knowledge obtained in the audit.
The Directors have voluntarily adopted TCFD and therefore
102
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
we engaged with our ESG assurance specialists to assist with
assessing disclosures in the TCFD Report to consider whether
they are materially consistent with the guidelines.
8. Other information
The other information comprises the information included in the
annual report other than the financial statements and our auditor’s
report thereon. The Directors are responsible for the other information
contained within the annual report.
Our opinion on the financial statements does not cover the
other information and we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement,
the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible
for assessing the Group’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors
either intend to liquidate the Group or to cease operations, or
have no realistic alternative but to do so.
10. Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms
part of our auditor’s report.
11. Extent to which the audit was considered capable
of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud
is detailed below.
11.1. Identifying and assessing potential risks related
to irregularities
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance
with laws and regulations, we considered the following:
–
the nature of the industry and sector, control environment
and business performance including the design of the Group’s
remuneration policies, key drivers for the investment manager
and directors’ remuneration, bonus levels and performance
targets and incentive scheme;
–
the Group’s own assessment of the risks that irregularities
may occur either as a result of fraud or error that was approved
by the Board on 18 June 2024;
–
results of our enquiries of Management, the Directors and the
Audit Committee about their own identification and assessment
of the risks of irregularities, including those that are specific to
the Group’s sector;
–
any matters we identified having obtained and reviewed the
Group’s documentation of their policies and procedures relating to:
–
identifying, evaluating and complying with laws and
regulations and whether they were aware of any instances
of non-compliance;
–
detecting and responding to the risks of fraud and whether
they have knowledge of any actual, suspected or alleged fraud;
–
the internal controls established to mitigate risks of fraud or
non-compliance with laws and regulations; and
–
the matters discussed among the audit engagement team and
relevant internal specialists, including tax, valuations, modelling,
life sciences and healthcare team, and ESG specialists regarding
how and where fraud might occur in the financial statements and
any potential indicators of fraud.
As a result of these procedures, we considered the opportunities
and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following area: key
judgements in the valuation of unquoted life science investments.
In common with all audits under ISAs (UK), we are also required
to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory
frameworks that the Group operates in, focusing on provisions
of those laws and regulations that had a direct effect on the
determination of material amounts and disclosures in the financial
statements. The key laws and regulations we considered in this
context included the Companies (Guernsey) Law, 2008, the
Listing Rules and relevant tax legislation.
In addition, we considered provisions of other laws and regulations
that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to
operate or to avoid a material penalty. These included the Group’s
regulatory licences under The Protection of Investors (Bailiwick of
Guernsey) Law, 2020.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
103
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SYNCONA LIMITED
CONTINUED
11.2. Audit response to risks identified
As a result of performing the above, we identified key judgements
within the valuation of unquoted life science investments as a key
audit matter related to the potential risk of fraud. The key audit
matters section of our report explains the matter in more detail and
also describes the specific procedures we performed in response
to that key audit matter.
In addition to the above, our procedures to respond to risks
identified included the following:
–
reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with provisions
of relevant laws and regulations described as having a direct
effect on the financial statements;
–
enquiring of Management, the Audit Committee and in-house
legal counsel of the investment manager concerning actual
and potential litigation and claims;
–
performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
–
reading minutes of meetings of those charged with governance
and reviewing correspondence with the Guernsey Financial
Services Commission; and
–
in addressing the risk of fraud through management override of
controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members including
internal specialists and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
12. Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement
in relation to going concern, longer-term viability and that part
of the Corporate Governance Statement relating to the Group’s
compliance with the provisions of the UK Corporate Governance
Code specified for our review.
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial
statements and our knowledge obtained during the audit:
–
the Directors’ statement with regards to the appropriateness
of adopting the going concern basis of accounting and
any material uncertainties identified set out on page 96;
–
the Directors’ explanation as to its assessment of the
Group’s prospects, the period this assessment covers
and why the period is appropriate set out on page 73;
–
the Directors’ statement on fair, balanced and
understandable set out on page 98;
–
the Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out
on page 63;
–
the section of the annual report that describes the review
of effectiveness of risk management and internal control
systems set out on page 87; and
–
the section describing the work of the Audit Committee
set out on page 84.
13. Matters on which we are required to report by exception
13.1. Adequacy of explanations received and accounting records
Under the Companies (Guernsey) Law, 2008 we are required
to report to you if, in our opinion:
–
we have not received all the information and explanations
we require for our audit; or
–
proper accounting records have not been kept by the parent
company; or
–
the financial statements are not in agreement with the
accounting records.
We have nothing to report in respect of these matters.
14. Other matters which we are required to address
14.1. Auditor tenure
Following the recommendation of the Audit Committee, we were
appointed by the Board of Directors on 22 September 2012 to
audit the financial statements for the period from 14 August 2012
(date of incorporation) to 25 October 2012 and subsequent
financial periods/years. The period of total uninterrupted
engagement including previous renewals and reappointments of
the firm is thirteen years, covering the years ending 25 October
2012 to 31 March 2024.
14.2. Consistency of the audit report with the additional report
to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit
Committee we are required to provide in accordance with ISAs (UK).
15. Use of our report
This report is made solely to the parent company’s members,
as a body, in accordance with Section 262 of the Companies
(Guernsey) Law, 2008. Our audit work has been undertaken so that
we might state to the parent company’s members those matters
we are required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the parent
company and the parent company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure
Guidance and Transparency Rule (DTR) 4.1.15R – DTR 4.1.18R,
these financial statements will form part of the Electronic Format
Annual Financial Report filed on the National Storage Mechanism
of the FCA in accordance with DTR 4.1.15R – DTR 4.1.18R. This
auditor’s report provides no assurance over whether the Electronic
Format Annual Financial Report has been prepared in compliance
with DTR 4.1.15R – DTR 4.1.18R.
Marc Cleeve, FCA
For and on behalf of Deloitte LLP
Recognised Auditor
St Peter Port, Guernsey
19 June 2024
104
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
UNAUDITED GROUP PORTFOLIO STATEMENT
AS AT 31 MARCH 2024
2024
2023
Fair value
£’000
% of
Group NAV
£’000
Fair value
£’000
% of
Group NAV
£’000
Life science portfolio
Life science companies
Autolus Therapeutics plc
169,469
13.7
50,004
4.0
Spur Therapeutics Limited
1
135,627
10.9
72,303
5.7
Quell Therapeutics Limited
84,745
6.8
86,703
6.9
Beacon Therapeutics Holdings Limited
80,257
6.5
60,000
4.8
Resolution Therapeutics Limited
49,974
4.0
23,027
1.8
Purespring Therapeutics Limited
45,257
3.7
35,100
2.8
OMass Therapeutics Limited
43,712
3.5
43,712
3.5
Anaveon AG
35,713
2.9
64,203
5.1
iOnctura B.V.
25,646
2.1
–
–
Biomodal Limited
18,055
1.5
18,472
1.5
Companies of less than 1% of the NAV
47,167
3.8
47,972
3.8
Total life science companies
735,622
59.4
501,496
39.9
CRT Pioneer Fund
33,874
2.7
32,727
2.6
Deferred consideration
14,362
1.2
15,882
1.3
Milestone payments
2,248
0.2
54,516
4.3
Total life science portfolio
2
786,106
63.5
604,621
48.1
Capital pool investments
UK and US treasury bills
163,373
13.2
284,960
22.7
Credit investment funds
112,015
9.0
101,566
8.1
Multi asset funds
70,500
5.7
160,036
12.8
Legacy funds
28,778
2.3
33,001
2.7
Total capital pool investments
3
374,666
30.2
579,563
46.3
Other net assets
Cash and cash equivalents
4
104,819
8.5
82,818
6.6
Charitable donations
(4,353)
(0.4)
(4,634)
(0.4)
Other assets and liabilities
(22,360)
(1.8)
(7,713)
(0.6)
Total other net assets
78,106
6.3
70,471
5.6
Total capital pool
452,772
36.5
650,034
51.9
Total NAV of the Group
1,238,878
100.0
1,254,655
100.0
1.
Spur Therapeutics Limited (previously Bidco 1354 Limited), a new entity in the year which acquired Freeline Therapeutics Plc and SwanBio Therapeutics Limited. The valuation
of Spur Therapeutics Limited reflects the combined valuation of these companies.
2.
The life science portfolio of £786,106,202 (31 March 2023: £604,619,696) consists of life science investments totalling £735,622,223 (31 March 2023: £501,495,018), deferred
consideration of £14,361,660 (31 March 2023: £15,882,241) and milestone payments of £2,248,059 (31 March 2023: £54,515,861) held by Syncona Holdings Limited and CRT
Pioneer Fund of £33,874,260 (31 March 2023: £32,726,576) held by Syncona Investments LP Incorporated
3.
The capital pool investments of £374,665,784 (31 March 2023: £579,563,640) are held by Syncona Investments LP Incorporated.
4.
Cash amounting to £260,826 (31 March 2023: £11,402) is held by Syncona Limited. The remaining £104,558,141 (31 March 2023: £82,806,203) 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.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
105
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2024
Notes
2024
2023
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Investment income
Other income
6
Total investment income
Net losses on financial assets at fair value
through profit or loss
7
(18,389 )
(18,389 )
(67,286 )
(67,286 )
Total losses
(18,389 )
(18,389 )
(67,286 )
(67,286 )
Expenses
Charitable donations
8
General expenses
9
Total expenses
Profit/(loss) for the year
(18,389 )
(67,286 )
(56,018 )
Profit/(loss) after tax
(18,389 )
(67,286 )
(56,018 )
Earnings/(loss) per Ordinary Share
14
(2.76 )p
(10.07 )p
(8.38 )p
Earnings/(loss) per Diluted Share
14
(2.76 )p
(10.07 )p
(8.38 )p
The total columns of this statement represent the Group’s Consolidated Statement of Comprehensive Income, prepared in accordance
with IFRS Accounting Standards adopted by the European Union (“IFRS”).
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.
106
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
Notes
2024
£’000
2023
£’000
Assets
Non-current assets
Financial assets at fair value through profit or loss
10
Current assets
Cash and cash equivalents
Trade and other receivables
11
Total assets
Liabilities and equity
Non-current liabilities
Share based payments provision
12
Current liabilities
Share based payments provision
12
Accrued expense and payables
13
Total liabilities
Equity
Share capital
14
Capital reserves
14
Revenue reserves
Treasury shares
14
(20,223 )
Total equity
Total liabilities and equity
Total net assets attributable to holders of Ordinary Shares
Number of Ordinary Shares in issue
14
Net assets attributable to holders of Ordinary Shares (per share)
14
£1.89
£1.87
Diluted NAV (per share)
14
£1.89
£1.86
Melanie Gee
Rob Hutchinson
Chair
Non-Executive Director
Syncona Limited
The accompanying notes are an integral part of the financial statements.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
107
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF ORDINARY SHARES
FOR THE YEAR ENDED 31 MARCH 2024
Share
capital
£’000
Capital
reserves
£’000
Revenue
reserves
£’000
Treasury
shares
£’000
Total
£’000
As at 31 March 2022
Total comprehensive loss for the year
(67,286 )
(56,018 )
Transactions with shareholders:
Share based payments
As at 31 March 2023
Total comprehensive income for the year
(18,389 )
Acquisition of treasury shares
(20,223 )
(20,223 )
Transactions with shareholders:
Share based payments
As at 31 March 2024
(20,223 )
The accompanying notes are an integral part of the financial statements.
108
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2024
Notes
2024
£’000
2023
£’000
Cash flows from operating activities
Profit/(loss) for the year
(56,018 )
Adjusted for:
Losses on financial assets at fair value through profit or loss
7
Non-cash movement in share based payment provision
(3,846 )
(12,031 )
Operating cash flows before movements in working capital
(763 )
Decrease/(increase) in trade and other receivables
(265 )
Increase in accrued expense and payables
Net cash generated from/(used in) operating activities
(265 )
Cash flows from financing activities
Acquisition of treasury shares
14
(20,223 )
Net cash used in financing activities
(20,223 )
Net increase/(decrease) in cash and cash equivalents
(265 )
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
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.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
109
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
110
Shares were listed on the premium segment of the London Stock Exchange on 26 October 2012 when it commenced its business.
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-
Syncona Investment Management Limited (“SIML”), a subsidiary, was appointed as the Company’s Alternative Investment Fund
Manager (“Investment Manager”).
The Group’s investments in life science companies, other investments within the life science portfolio and capital pool investments
are held, respectively, 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”.
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
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
The Consolidated Financial Statements have been prepared under the historical cost basis, except for investments and share based
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 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 £1,238.9 million (31 March 2023: £1,254.7 million) of
which £435.8 million (31 March 2023: £629.4 million) are readily realisable within three months in normal market conditions, and liabilities
including uncalled commitments to underlying investments and funds amounting to £95.2 million (31 March 2023: £89.2 million).
Given the Group’s capital pool of £452.8 million (31 March 2023: £650.1 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 ever changing
macro environment on the Group. Hence, the Directors believe that it is appropriate to continue to adopt the going concern basis in
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 are 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 2024 and 31 March 2023, no such adjustments have been made. All
intra-group transactions, balances and expenses are eliminated on consolidation.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
111
FINANCIAL STATEMENTS
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
There are no standards, amendments to standards or interpretations that are effective for the annual period ending on 31 March 2024
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 interpretations that are not yet effective and are not relevant to the Group
as listed below. These are not expected to have a material impact on the Group’s Consolidated Financial Statements.
–
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; and
–
Financial assets 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 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.
This category includes all financial liabilities, other than those measured at fair value through profit or loss. The Group includes in this
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 direct 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
2. ACCOUNTING POLICIES
CONTINUED
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 is
undertaken at each valuation point and considers changes in the key company indicators, changes to the external environment,
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 in 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 life science
investments were valued on a DCF basis as at 31 March 2024 and 31 March 2023.
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
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
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
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.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
112
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
113
FINANCIAL STATEMENTS
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
Through its investment in the Holding Company and the Partnership, the Group has outstanding commitments to investments that
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 13% to 28% (31 March 2023: 12% to 27%); and probabilities of success that result in
an average cumulative probability of success across the life science portfolio of 18% (31 March 2023: 26%). 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
Treasury shares are Ordinary Shares of the Company held by the Company and presented as a reduction of equity, at the consideration
All income is accounted for in accordance with IFRS 15 “Revenue from Contracts with Customers” and is recognised in the
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
114
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
Cash comprises cash at bank. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts
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
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 and reserves between items of a revenue and capital nature has been presented alongside the Consolidated
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, or technical or commercial performance.
Where considered appropriate, once substantial clinical data has been generated the Group will use input from independent valuation
advisers 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.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
115
FINANCIAL STATEMENTS
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:
–
Resolution Therapeutics Limited
–
Anaveon AG
–
Freeline Therapeutics Plc (now Spur Therapeutics Limited)
–
SwanBio Therapeutics Limited (now Spur Therapeutics Limited)
–
Beacon Therapeutics Holdings Limited
–
Quell Therapeutics Limited
–
OMass Therapeutics Limited
–
Purespring Therapeutics Limited
–
CRT Pioneer Fund
As with any review of investments these can only be considered in the context of the limited procedures and agreed scope defining such
review and are subject to assumptions which may be forward looking in nature and subjective judgements. Upon completion of such
limited agreed procedures, L.E.K. estimated an independent range of fair values of those investments subjected to the limited procedures.
In making its determination of fair value Syncona considered the review as one of multiple inputs. The limited procedures were undertaken
within the agreed scope and limited by the information reviewed which did not involve an audit, review, compilation or any other form
of verification, examination or attestation under generally accepted auditing standards and was based on the review of multiple defined
sources. SIML is responsible for determining the fair value of the investments, and the agreed limited procedures in the review performed
to assist Syncona in its determination are only one element of, and are supplementary to, the inquiries and procedures that SIML is
required to undertake to determine the fair value of the said investments for which Management is ultimately responsible.
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, 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 progress towards
and achievement of core milestones as well as underlying company indicators 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 +/- 12% (2023: +/- 10%) 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.
As at the year end, none (31 March 2023: 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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
116
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
Principal place | 2024 | 2023 | ||
Subsidiary | of business | Principal activity | % 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
Principal place | 2024 | |||
Indirect subsidiaries | of business | Immediate parent | Principal activity | % 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 IP Holdco (3) 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% |
Bidco 1354 Limited 2 | UK | Syncona Portfolio Limited | Gene therapy | 99% |
Forcefield Therapeutics Limited | UK | Syncona Portfolio Limited | Biologics | 94% |
Resolution Therapeutics Limited | UK | Syncona Portfolio Limited | Cell therapy | 83% |
Purespring Therapeutics Limited | UK | Syncona Portfolio Limited | Gene therapy | 81% |
Beacon Therapeutics Holdings Limited | UK | Syncona Portfolio Limited | Gene therapy | 77% |
Kesmalea Therapeutics Limited | UK | Syncona Portfolio Limited | Small molecules | 59% |
Mosaic Therapeutics Limited | UK | Syncona Portfolio Limited | Small molecules | 51% |
Principal place | 2024 | |||
Indirect associates | of business | Immediate parent | Principal activity | % interest 1 |
Quell Therapeutics Limited | UK | Syncona Portfolio Limited | Cell therapy | 38% |
Anaveon AG | Switzerland | Syncona Portfolio Limited | Biologics | 37% |
OMass Therapeutics Limited | UK | Syncona Portfolio Limited | Small molecules | 37% |
Azeria Therapeutics Limited | UK | Syncona Portfolio Limited | In voluntary liquidation | 34% |
Achilles Therapeutics plc | UK | Syncona Portfolio Limited | Cell therapy | 27% |
Clade Therapeutics Inc | United States | Syncona Portfolio Limited | Cell therapy | 22% |
iOnctura B.V. | Netherlands | Syncona Portfolio Limited | Small molecules | 20% |
1. Based on undiluted issued share capital and excluding the MES issued by Syncona Holdings Limited (see note 12).
2. Has subsequently been renamed Spur Therapeutics Limited.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
117
FINANCIAL STATEMENTS
Principal place | 2023 | |||
Indirect subsidiaries | of business | Immediate parent | Principal activity | % 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 | Biologics | 76% |
Beacon Therapeutics Holdings 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 molecules | 51% |
2023 | ||||
Indirect associates | Principal place of business | Immediate parent | Principal activity | % 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 molecules | 41% |
OMass Therapeutics Limited | UK | Syncona Portfolio Limited | Small molecules | 35% |
Azeria Therapeutics Limited | UK | Syncona Portfolio Limited | In voluntary liquidation | 34% |
Achilles Therapeutics plc | UK | Syncona Portfolio Limited | Cell therapy | 27% |
Clade Therapeutics Inc | United States | Syncona Portfolio Limited | Cell therapy | 17% |
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 £1,600 (31 March 2023: £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,
The Group’s income relates to distributions from the Partnership which are used for paying costs and dividends of the Group.
During the year, distribution income from the Partnership amounted to £49,137,740 (31 March 2023: £27,494,517) of which
£4,353,307 (31 March 2023: £4,633,973) remained receivable as at 31 March 2024. The receivable reflects the charitable donations
The net gains/(losses) on financial assets at fair value through profit or loss arise from the Group’s holdings in the Holding Company
and Partnership.
2024 | 2023 | ||
Note | £’000 | £’000 | |
Net gains/(losses) from: | |||
The Holding Company | 7.a | 893 | (62,636) |
The Partnership | 7.b | (19,282) | (4,650) |
Total | (18,389) | (67,286) |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
118
7.A MOVEMENTS IN THE HOLDING COMPANY:
2024 | 2023 | |
£’000 | £’000 | |
Expenses | (98) | (97) |
Movement in unrealised gains/(losses) on life science investments at fair value through profit or loss | 991 | (62,539) |
Net gains/(losses) on financial assets at fair value through profit or loss | 893 | (62,636) |
7.B MOVEMENTS IN THE PARTNERSHIP:
2024 | 2023 | |
£’000 | £’000 | |
Investment income | 771 | 106 |
Rebates and donations | (164) | 81 |
Other income | 41 | – |
Expenses | (406) | (342) |
Realised gains on financial assets at fair value through profit or loss | 8,775 | 13,933 |
Movement in unrealised gains on financial assets at fair value through profit or loss | 16,876 | 6,049 |
Gains on foreign currency | 3,962 | 3,018 |
Gains on financial assets at fair value through profit or loss | 29,855 | 22,845 |
Distributions | (49,137) | (27,495) |
Net losses on financial assets at fair value through profit or loss | (19,282) | (4,650) |
For the year ended 31 March 2024, the Group has agreed to make a charitable donation to The Syncona Foundation of 0.35%
of the total NAV of the Group calculated on a monthly basis (31 March 2023: 0.35%). The donation is made by the General Partner.
During the year, charitable donations expense amounted to £4,353,307 (31 March 2023: £4,633,973) of which £4,353,307
2024 | 2023 | ||
Notes | £’000 | £’000 | |
Share based payments provision | 12 | 2,972 | (2,968) |
Investment management fees | 16 | 16,645 | 12,121 |
Directors’ remuneration | 16 | 506 | 499 |
Auditor’s remuneration | 290 | 183 | |
Other expenses | 2,195 | 1,758 | |
Total | 22,608 | 11,593 |
Auditor’s remuneration includes audit fees in relation to the Group of £168,650 (31 March 2023: £132,900). Total audit fees paid by
the Group and the Syncona Group Companies for the year ended 31 March 2024 totalled £322,000 (31 March 2023: £134,900).
Additional fees paid to the auditor were £50,620 (31 March 2023: £44,200) which relates to work performed at the interim review
of £40,600 (31 March 2023: £36,200) and other non-audit fees of £10,020 (31 March 2023: £8,000) which relates to regulatory
2024 | 2023 | ||
Notes | £’000 | £’000 | |
The Holding Company | 10.a | 922,680 | 919,958 |
The Partnership | 10.b | 319,018 | 338,300 |
Total | 1,241,698 | 1,258,258 |
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.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
119
FINANCIAL STATEMENTS
10.A THE NET ASSETS OF THE HOLDING COMPANY
2024 | 2023 | |
£’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 | 432,577 | 429,757 |
Fair value of the Holding Company’s investments at the end of the year | 927,387 | 924,567 |
Other net current liabilities | (4,707) | (4,609) |
Financial assets at fair value through profit or loss at the end of the year | 922,680 | 919,958 |
10.B THE NET ASSETS OF THE PARTNERSHIP
2024 | 2023 | |
£’000 | £’000 | |
Cost of the Partnership’s investments at the start of the year | 597,753 | 334,834 |
Purchases during the year | 542,413 | 1,848,806 |
Sales during the year | (755,229) | (1,575,336) |
Return of capital | (6,290) | (10,551) |
Cost of the Partnership’s investments at the end of the year | 378,647 | 597,753 |
Net unrealised gains on investments at the end of the year | 39,072 | 22,196 |
Fair value of the Partnership’s investments at the end of the year | 417,719 | 619,949 |
Cash and cash equivalents | 89,576 | 67,190 |
Other net current liabilities | (188,277) | (348,839) |
Financial assets at fair value through profit or loss at the end of the year | 319,018 | 338,300 |
2024 | 2023 | ||
Notes | £’000 | £’000 | |
Due from related parties | 16 | 4,720 | 5,457 |
Charitable donation receivable | 16 | 4,353 | 4,618 |
Prepayments | 65 | 68 | |
Total | 9,138 | 10,143 |
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:
2024 | 2023 | |
£’000 | £’000 | |
Charge/(credit) related to revaluation of the liability for cash settled share awards | 2,972 | (2,968) |
Total | 2,972 | (2,968) |
Other movements in the provision relating to realisations and granting of awards totalled £5,647,140 (31 March 2023: £7,583,660).
Amounts recognised in the Consolidated Statement of Financial Position, representing the carrying amount of liabilities arising from
share based payments transactions, are shown below:
2024 | 2023 | |
£’000 | £’000 | |
Share based payments provision – current | 1,760 | 7,296 |
Share based payments provision – non-current | 2,861 | – |
Total | 4,621 | 7,296 |
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
120
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 2024 was £757,576 (31 March 2023: £2,529,130). This represents 6,859,411 new MES issued (31 March
2023: 9,367,155). Awards were made on 13 July 2023 and 18 December 2023 at 11p and 14p per MES respectively.
The number of MES outstanding are shown below:
2024 | 2023 | |
Outstanding at the start of the year | 43,871,228 | 42,282,122 |
Issued | 6,859,411 | 9,367,155 |
Realised | (6,700,688) | (7,762,846) |
Lapsed | (3,835,892) | (15,203) |
Outstanding at the end of the year | 40,194,059 | 43,871,228 |
Weighted average remaining contractual life of outstanding MES, years | 1.15 | 1.29 |
Vested MES as at the year end | 30,085,530 | 29,523,421 |
Realisable MES as at the year end | 8,997,656 | 12,010,048 |
2024 | 2023 | ||
Notes | £’000 | £’000 | |
Charitable donations payable | 16 | 4,353 | 4,634 |
Management fees accrued | 2,222 | 1,374 | |
Other payables | 1,023 | 453 | |
Total | 7,598 | 6,461 |
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.
2024 | 2023 | |
£’000 | £’000 | |
Authorised Share Capital | ||
Balance at the start of the year | 767,999 | 767,999 |
Balance at the end of the year | 767,999 | 767,999 |
2024 | 2023 | |
Shares | Shares | |
Outstanding Ordinary Share Capital | ||
Balance at the start of the year | 669,329,324 | 666,733,588 |
Share based payment shares issued during the year | 2,477,342 | 2,595,736 |
Treasury shares purchased by the Company | (16,471,080) | – |
Balance at the end of the year | 655,335,586 | 669,329,324 |
At 31 March 2024, 280,000 Ordinary Shares had no voting rights attached and were entered into treasury by the close of 3 April 2024.
Resulting in the total Ordinary Shares available for trade on an open market being 655,335,586.
The Company has issued one Deferred Share to The Syncona Foundation for £1.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
121
FINANCIAL STATEMENTS
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
The calculations for the (loss)/earnings per share attributable to the Ordinary Shares of the Company excluding Ordinary Shares
purchased by the Company and held as treasury shares are based on the following data:
2024 | 2023 | |
Earnings/(loss) for the purposes of earnings per share | £3,788,000 | £(56,018,000) |
Basic weighted average number of shares | 656,371,037 | 668,575,494 |
Basic revenue earnings per share | 3.33p | 1.69p |
Basic capital loss per share | (2.76)p | (10.07)p |
Basic earnings/(loss) per share | 0.57p | (8.38)p |
Diluted weighted average number of shares | 666,854,451 | 668,575,494 |
Diluted revenue earnings per shares | 3.33p | 1.69p |
Diluted capital loss per share | (2.76)p | (10.07)p |
Diluted earnings/(loss) per share | 0.57p | (8.38)p |
2024 | 2023 | |
Issued share capital at the start of the year | 669,329,324 | 666,733,588 |
Weighted effect of share issues and purchases | ||
Share based payments | 1,732,786 | 1,841,906 |
Potential share based payment share issues | 1,035,451 | 3,487,581 |
Treasury shares | (4,207,658) | – |
Diluted weighted average number of shares | 667,889,903 | 672,063,075 |
2024 | 2023 | |
Net assets for the purposes of NAV per share | £1,238,878,132 | £1,254,654,716 |
Ordinary Shares available to trade | 655,335,586 | 669,329,324 |
NAV per share | 189.04p | 187.40p |
Diluted number of shares | 656,371,037 | 672,816,905 |
Diluted NAV per share | 188.74p | 186.50p |
As at 31 March 2024, if all MES were realised, the number of shares issued in the Company as a result would increase by 1,035,451
(31 March 2023: 3,487,581). The undiluted per share value of net assets attributable to holders of Ordinary Shares would move from
The Company may pay a dividend at the discretion of the Directors.
During the year ended 31 March 2024, the Company did not declare or pay a dividend (31 March 2023: £Nil was paid in relation
to the year ended 31 March 2022). The Directors believe that it is not appropriate for the Company to pay a dividend.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
122
The Group has various related parties: life science 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 £131,996,869 (31 March 2023:
£127,143,441).
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 £38,276,591
(31 March 2023: £25,404,894).
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 £268,012 in relation to Directors’ fees (31 March 2023: £215,094).
INVESTMENT MANAGER
SIML, an indirectly held subsidiary of the Company, is the Investment Manager of the Group.
For the year ended 31 March 2024, SIML was entitled to receive reimbursement of reasonably incurred expenses relating
to its investment management activities.
2024 | 2023 | |
£’000 | £’000 | |
Amounts paid to SIML | 16,645 | 12,121 |
Amounts owed to SIML in respect of management fees totalled £2,222,128 as at 31 March 2024 (31 March 2023: £1,374,098).
During the year, SIML received fees from the Group’s portfolio companies of £1,290,464 (31 March 2023: £864,632).
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 2024 and 31 March 2023, excluding expenses incurred, and outstanding
Directors’ remuneration as at the end of the year, are set out below:
2024 | 2023 | |
£’000 | £’000 | |
Directors’ remuneration for the year | 506 | 499 |
Payable at the 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 2023: 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 2024 was £4,621,843
(31 March 2023: £2,428,478).
OTHER RELATED PARTIES
As at 31 March 2024, the Company has a receivable from the Partnership, Holding Company and Syncona Portfolio Limited amounting
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
123
FINANCIAL STATEMENTS
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.
2024 | 2023 | |
£’000 | £’000 | |
Financial assets at fair value through profit or loss | ||
The Holding Company | 922,680 | 919,958 |
The Partnership | 319,018 | 338,300 |
Total financial assets at fair value through profit or loss | 1,241,698 | 1,258,258 |
Financial assets measured at amortised cost | ||
Cash and cash equivalents | 261 | 11 |
Other financial assets | 9,138 | 10,143 |
Total financial assets measured at amortised cost | 9,399 | 10,154 |
Financial liabilities at fair value through profit or loss | ||
Provision for share based payments | (4,621) | (7,296) |
Total financial liabilities at fair value through profit or loss | (4,621) | (7,296) |
Financial liabilities measured at amortised cost | ||
Other financial liabilities | (7,598) | (6,461) |
Total financial liabilities measured at amortised cost | (7,598) | (6,461) |
Net financial assets | 1,238,878 | 1,254,655 |
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 and US 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).
2024 | 2023 | |
£’000 | £’000 | |
Financial assets at fair value through profit or loss | ||
Investment in subsidiaries | 927,387 | 924,567 |
Total financial assets at fair value through profit or loss | 927,387 | 924,567 |
Financial assets measured at amortised cost 1 | ||
Current assets | 39 | 847 |
Financial liabilities measured at amortised cost 1 | ||
Current liabilities | (4,746) | (5,456) |
Net financial assets of the Holding Company | 922,680 | 919,958 |
1. Has a fair value which does not materially differ to amortised cost.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
124
The table below analyses the carrying amounts of the financial assets and liabilities held by the Partnership by category as defined in IFRS 9.
2024 | 2023 | |
£’000 | £’000 | |
Financial assets at fair value through profit or loss | ||
Listed investments | 275,388 | 445,141 |
Unlisted investments | 99,278 | 134,422 |
Investment in subsidiaries | 43,053 | 40,386 |
Total financial assets at fair value through profit or loss | 417,719 | 619,949 |
Financial assets measured at amortised cost 1 | ||
Current assets | 92,053 | 67,973 |
Financial liabilities measured at amortised cost 1 | ||
Current liabilities | (190,754) | (349,622) |
Net financial assets of the Partnership | 319,018 | 338,300 |
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
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
The Holding Company invests in early-stage life science companies that typically have limited products in development, and 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
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), Swiss Francs (CHF) and Euro (EUR) by the Holding Company’s
underlying investments.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
125
FINANCIAL STATEMENTS
The following tables present the Holding Company’s assets and liabilities in their respective currencies, converted into the Group’s
functional currency.
2024 | |||||
CHF | EUR | USD | GBP | Total | |
£’000 | £’000 | £’000 | £’000 | £’000 | |
Financial assets at fair value through profit or loss | 35,713 | 25,646 | 323,624 | 542,404 | 927,387 |
Cash and cash equivalents | – | – | – | 39 | 39 |
Accrued expense and payables 1 | – | – | – | (4,746) | (4,746) |
Total | 35,713 | 25,646 | 323,624 | 537,697 | 922,680 |
2023 | |||||
CHF | EUR | USD | GBP | Total | |
£’000 | £’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 |
Accrued expense and payables 1 | – | – | – | (5,456) | (5,456) |
Total | 64,203 | – | 310,625 | 545,130 | 919,958 |
1. In which 99.49% (31 March 2023: 99.44%) is payable within the Group.
The following table details the sensitivity of the Holding Company’s NAV to a 10% change in the USD, CHF and EUR exchange rate
against the GBP currency 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.
2024 | 2024 | 2024 | 2023 | 2023 | 2023 | |
CHF | EUR | USD | CHF | EUR | USD | |
£’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
10% increase | 3,572 | 2,565 | 32,362 | 7,134 | – | 41,490 |
10% decrease | (3,572) | (2,565) | (32,362) | (5,837) | – | (33,946) |
Interest rate risk
Interest rate risk is negligible in the Holding Company as minimal cash and no debt are held.
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.
2024 | |||
<12 months | >12 months | Total | |
£’000 | £’000 | £’000 | |
Financial assets at fair value through profit or loss | – | 927,387 | 927,387 |
Cash and cash equivalents | 39 | – | 39 |
Accrued expense and payables | (4,746) | – | (4,746) |
Total | (4,707) | 927,387 | 922,680 |
Percentage | (0.5)% | 100.5% | 100.00% |
2023 | |||
<12 months | >12 months | Total | |
£’000 | £’000 | £’000 | |
Financial assets at fair value through profit or loss | – | 924,567 | 924,567 |
Cash and cash equivalents | 847 | – | 847 |
Accrued expense and payables | (35) | (5,421) | (5,456) |
Total | 812 | 919,146 | 919,958 |
Percentage | 0.1% | 99.9% | 100.00% |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
126
THE PARTNERSHIP
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 2024
and 31 March 2023 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
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, 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.
2024 | ||||
USD | EUR | GBP | Total | |
£’000 | £’000 | £’000 | £’000 | |
Financial assets at fair value through profit or loss | 61,407 | 12,130 | 344,182 | 417,719 |
Cash and cash equivalents | 23,522 | 15 | 66,039 | 89,576 |
Trade and other receivables | 614 | 1,861 | 2 | 2,477 |
Accrued expense and payables 1 | (170,696) | – | (15,705) | (186,401) |
Distributions payable | – | – | (4,353) | (4,353) |
Total | (85,153) | 14,006 | 390,165 | 319,018 |
1. In which 91.58% (31 March 2023: 99.97%) is payable within the Group.
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 |
Accrued expense and payables 1 | (249,160) | – | (95,825) | (344,985) |
Distributions payable | – | – | (4,637) | (4,637) |
Total | (85,329) | 18,592 | 405,037 | 338,300 |
1. In which 91.58% (31 March 2023: 99.97%) is payable within the Group.
The following table details the sensitivity of the Partnership’s NAV to a 10% (31 March 2023: 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.
2024 | 2024 | 2023 | 2023 | |
USD | EUR | USD | EUR | |
£’000 | £’000 | £’000 | £’000 | |
10% increase | (8,515) | (1,401) | (8,534) | 1,592 |
10% decrease | 8,515 | 1,401 | 8,534 | (1,592) |
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
127
FINANCIAL STATEMENTS
INTEREST RATE RISK
Interest receivable on bank deposits or payable on bank overdrafts is 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 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 Partnership’s investments.
The Partnership invests in short-term UK and US treasury bills and considers the associated credit risk to be negligible. The Partnership’s
financial assets are 34.9% (31 March 2023: 46.5%) 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 trade and other receivables.
The Group’s cash and cash equivalents are held with major financial institutions; the two largest ones hold 67% and 32% respectively
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 2024, no (31 March 2023: Nil) suspension from redemptions
existed in any of the Partnership’s underlying investments.
The Partnership invests in short-term UK and US treasury bills, daily traded money market funds and daily traded credit funds and considers
the associated liquidity risk to be negligible. The Partnership’s financial assets are 34.3% (31 March 2023: 46.5%) short-term UK and US
treasury bills, 23.6% (31 March 2023: 16.6%) daily traded credit funds and 12.6% (31 March 2023: Nil) daily traded Money Market Funds.
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.
2024 1 | |||||
Within 1 month | >1 to 3 months | >3 to 12 months | >12 months | Total | |
£’000 | £’000 | £’000 | £’000 | £’000 | |
Financial assets at fair value through profit or loss | 232,186 | 113,702 | 2,368 | 69,463 | 417,719 |
Cash and cash equivalents | 89,576 | – | – | – | 89,576 |
Trade and other receivables | 2,477 | – | – | – | 2,477 |
Accrued expense and payables | (186,401) | – | – | – | (186,401) |
Distributions payable | – | (4,353) | – | – | (4,353) |
Total | 137,838 | 109,349 | 2,368 | 69,463 | 319,018 |
Percentage | 43.2% | 34.3% | 0.7% | 21.8% | 100.0% |
1.
The liquidity tables within this note reflect the anticipated cash flows assuming notice was given to all underlying investments as at 31 March 2024 and 31 March 2023 and that all
UK and US 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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
128
2023 1 | |||||
Within 1 month | >1 to 3 months | >3 to 12 months | >12 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 |
Accrued expense and 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% |
1.
The liquidity tables within this note reflect the anticipated cash flows assuming notice was given to all underlying investments as at 31 March 2024 and 31 March 2023 and that all
UK and US 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
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 2024 and 31 March 2023:
2024 | ||||
Level 1 | Level 2 | Level 3 | Total | |
Assets | £’000 | £’000 | £’000 | £’000 |
Financial assets at fair value through profit or loss: | ||||
The Holding Company | – | – | 922,680 | 922,680 |
The Partnership | – | – | 319,018 | 319,018 |
Total assets | – | – | 1,241,698 | 1,241,698 |
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 |
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 Holding Company and the Partnership are shown on the next page.
The following table presents the Holding Company’s financial assets and liabilities by level within the valuation hierarchy as at 31 March 2024
and 31 March 2023:
Impact on | ||||||
31 March 2024 | 31 March 2023 | valuation | ||||
Asset type | Level | £’000 | £’000 | Valuation technique | Significant unobservable inputs | £’000 |
Listed investment | 1 | 180,448 | 73,943 | Publicly available share | N/A | N/A |
bid price as at | ||||||
statement of financial | ||||||
position date | ||||||
SIML | 3 | 5,831 | 6,108 | Net assets of SIML | Carrying value of assets and liabilities | +/- 292 |
determined in accordance with | ||||||
generally accepted accounting | ||||||
principles, without adjustment. | ||||||
A sensitivity of 5% (31 March 2023: 5%) | ||||||
of the NAV of SIML is applied. | ||||||
Milestone payments | 3 | 2,248 | 54,516 | Discounted cash flow | The main unobservable inputs consist | PoS: |
of the assigned probability of milestone | +/- 413 | |||||
success and the discount rate used. | Discount rate: | |||||
A sensitivity of 5ppts (31 March 2023: | +/- 100 | |||||
5ppts) of the respective inputs is applied. | ||||||
Deferred | 3 | 14,362 | 15,882 | Discounted cash flow | The main unobservable inputs consist | PoS: |
consideration | of the assigned probability of milestone | +/- 898 | ||||
success and the discount rate used. | Discount rate: | |||||
A sensitivity of 5ppts (31 March 2023: | +/- 5,312 | |||||
5ppts) of the respective inputs is applied. | ||||||
Calibrated price of | 3 | 555,174 | 427,552 | Calibrated PRI | The main unobservable input is | +/- 66,621 |
recent investment | the quantification of the progress | |||||
(PRI) 1 | investments make against internal | |||||
financing and/or corporate milestones | ||||||
where appropriate. A reasonable shift | ||||||
in the fair value of the investment would | ||||||
be +/-12% (31 March 2023: +/-10%). | ||||||
Cash 2 | N/A | 41 | 294 | Amortised cost 4 | N/A | N/A |
(31 March 2023: | ||||||
Transaction price) | ||||||
Other net assets 3 | N/A | 169,283 | 346,272 | Amortised cost 4 | N/A | N/A |
(31 March 2023: | ||||||
Transaction price) | ||||||
Total financial | 927,387 | 924,567 | ||||
assets held at fair | ||||||
value through profit | ||||||
or loss |
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 £170,700,000 (31 March 2023: £344,900,000).
4.
Amortised cost is considered equivalent to fair value.
The following table presents the movements in Level 3 investments of the Holding Company for the year ended 31 March 2024 and
31 March 2023:
Milestone | |||||
payments and | |||||
Life science | deferred | 2024 | 2023 | ||
investments | consideration | SIML | Total | Total | |
£’000 | £’000 | £’000 | £’000 | £’000 | |
Opening balance | 427,552 | 70,398 | 6,108 | 504,058 | 381,286 |
Purchases during the year | 171,256 | – | – | 171,256 | 156,363 |
Sales during the year | (1,030) | – | – | (1,030) | (15,311) |
Movement from Level 1 to Level 3 | 12,934 | – | – | 12,934 | – |
Unrealised losses on financial assets at fair value through profit or loss | (55,538) | (53,788) | (277) | (109,603) | (18,280) |
Closing balance | 555,174 | 16,610 | 5,831 | 577,615 | 504,058 |
The net unrealised 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 £109,603,000 (31 March 2023: £18,280,000 (net unrealised loss)).
During the year, there were no movements from Level 3 to Level 1 (31 March 2023: £Nil). There was one movement from Level 1
to Level 3 (31 March 2023: Nil) relating to the delisting of Freeline Therapeutics Holdings plc from an active market.
FINANCIAL STATEMENTS
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
129
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
CONTINUED
FOR THE YEAR ENDED 31 MARCH 2024
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
130
The following table presents the Partnership’s financial assets and liabilities by level within the valuation hierarchy as at 31 March 2024
and 31 March 2023:
31 March | 31 March | Impact on | ||||
2024 | 2023 | valuation | ||||
Asset type | Level | £’000 | £’000 | Valuation technique | Significant unobservable inputs | £’000 |
UK and US | 1 | 163,373 | 284,960 | Publicly available price as | N/A | N/A |
treasury bills | at statement of financial | |||||
position date | ||||||
Capital pool | 2 | 112,015 | 101,566 | Valuation produced by fund | N/A | N/A |
investment fund | administrator. Inputs into | |||||
– Credit funds | fund components are from | |||||
observable inputs | ||||||
Capital pool | 2 | – | 58,615 | Valuation produced by fund | N/A | N/A |
investment fund | administrator. Inputs into | |||||
– Multi asset funds | fund components are from | |||||
observable inputs | ||||||
Capital pool | 3 | 70,500 | 101,421 | Valuation produced | The main unobservable input include | +/- 3,525 |
investment fund | by fund administrator | the assessment of the performance | ||||
– Multi asset funds | of the underlying assets by the fund | |||||
administrator. A fair reasonable shift in | ||||||
the fair value of the instruments would | ||||||
be +/-5% (31 March 2023: +/-5%) | ||||||
Legacy funds – | 3 | 28,778 | 33,001 | Valuation produced | The main unobservable input include | +/- 2,878 |
Long-term unlisted | by fund administrator | the assessment of the performance | ||||
investments | of the underlying fund by the fund | |||||
administrator. A reasonable possible | ||||||
shift in the fair value of the | ||||||
instruments would be +/-10% | ||||||
(31 March 2023: +/-13%). | ||||||
CRT Pioneer Fund | 3 | 33,874 | 32,727 | Valuation produced by fund | Unobservable inputs include the | +/- 10,840 |
administrator and adjusted | fund manager’s assessment of | |||||
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 +/-32% | ||||||
(31 March 2023: +/-36%). | ||||||
Cash 1 | N/A | 38,957 | 74,863 | Amortised cost 4 (31 March | N/A | N/A |
2023: Transaction price) | ||||||
Cash equivalents | N/A | 59,706 | – | Amortised cost equivalent | N/A | N/A |
– money market | to publicly available price | |||||
funds 2 | as at statement of financial | |||||
position date | ||||||
Other net liabilities 3 | N/A | (188,184) | (348,853) | Amortised cost 4 (31 March | N/A | N/A |
2023: Transaction price) | ||||||
Total financial assets | 319,018 | 338,300 | ||||
held at fair value | ||||||
through profit or loss |
1.
Cash and other net liabilities held within the Partnership are primarily measured at amortised cost which is equivalent to their fair value.
2.
Money Market Funds are deemed as cash equivalents and valued at amortised cost, being equivalent to their fair value.
3.
Other net liabilities primarily consists of a payable due to Syncona Portfolio Limited totalling £170,700,000 (31 March 2023: £344,900,000).
4.
Amortised cost is considered equivalent to fair value.
During the year ended 31 March 2024, there were no movements from Level 1 to Level 2 (31 March 2023: £Nil).
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
131
FINANCIAL STATEMENTS
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 2024:
Investment in | Capital pool | 2024 | 2023 | |
subsidiary | investment | Total | Total | |
£’000 | £’000 | £’000 | £’000 | |
Opening balance | 40,386 | 134,422 | 174,808 | 71,508 |
Purchases | – | 729 | 729 | 100,352 |
Sales during the year | – | (37,000) | (37,000) | – |
Return of capital | – | (6,290) | (6,290) | (10,551) |
Unrealised gains on financial assets at fair value | 2,668 | 7,416 | 10,084 | 13,499 |
Closing balance | 43,054 | 99,277 | 142,331 | 174,808 |
The net unrealised gain for the year included in the Statement of Comprehensive Income in respect of Level 3 investments of the
2024 Uncalled | 2023 Uncalled | |
commitment | commitment | |
£’000 | £’000 | |
Life science portfolio | ||
Milestone payments to life science companies 1 | 92,585 | 85,143 |
CRT Pioneer Fund | 1,561 | 2,499 |
Capital pool investments | 1,018 | 1,585 |
Total | 95,164 | 89,227 |
1.
Milestone payments to life science companies consist of financial commitments undertaken before or at the reporting date, that are contingent upon the achievement of the agreed
investment milestones. When the agreed investment milestones are not achieved, the decision to make partial or full payments remains at the discretion of the Group.
As of 31 March 2024, 280,000 shares were in the process of being purchased by the Company and therefore not available for trade.
These shares were withdrawn and held as treasury shares by the close of 3 April 2024 once the transactions settled.
As of 19 June 2024, a further 8,655,000 shares have been purchased through the share buyback programme.
Post period end a further £20.0m has been allocated to the share buyback programme.
Post period end Forcefield Therapeutics Limited syndicated their Series A financing resulting in a valuation uplift of £2.4 million.
The accounts have not been updated to reflect this.
Post period end the valuation of the quoted life science investments decreased by £69.8 million.
These Consolidated Financial Statements were approved for issuance by the Directors on 19 June 2024. Subsequent events have
AIFMD DISCLOSURES (UNAUDITED)
REPORT ON REMUNERATION AND QUANTITATIVE
REMUNERATION DISCLOSURE
Under the Alternative Investment Fund Managers Directive (AIFMD),
we are required to make disclosures relating to remuneration of staff
working for the Investment Manager for the year to 31 March 2024.
AMOUNT OF REMUNERATION PAID
The Investment Manager paid the following remuneration to staff
in respect of the financial year ending on 31 March 2024 in relation
to work on the Company:
£m
Total staff
Fixed remuneration
7.2
Variable remuneration
13.8
1
21.0
Of which senior management and risk takers
11.4
Number of beneficiaries
45
1. Including historical payments from the Syncona LTIP scheme.
LEVERAGE
The Group may employ leverage and borrow cash, up to a
maximum of 20 per cent of the NAV at the time of incurrence,
in accordance with its stated Investment Policy. The use of
borrowings and leverage has attendant risks and can, in certain
circumstances, substantially increase the adverse impact to
which the Group’s investment portfolio may be subject. For the
purposes of this disclosure, leverage is any method by which the
Group’s exposure is increased, whether through borrowing of
cash or securities, or leverage embedded in foreign exchange
forward contracts or by any other means. The AIFMD requires
that each leverage ratio be expressed as the ratio between a
Group’s exposure and its Net Asset Value, and prescribes two
required methodologies, the gross methodology and the
commitment methodology (as set out in AIFMD Level 2
Implementation Guidance), for calculating such exposure.
Using the methodologies prescribed under the AIFMD,
the leverage of the Group is detailed in the table below:
Commitment
leverage as at
31 March 2024
Gross
leverage as at
31 March 2024
Leverage ratio
0%
0%
OTHER RISK DISCLOSURES
The risk disclosures relating to risk framework and risk profile
of the Group are set out in note 18 to the Consolidated Financial
Statements on pages 124 to 128 and the Principal risks and
uncertainties on pages 66 to 72.
PRE-INVESTMENT DISCLOSURES
The AIFMD requires certain information to be made available to
investors in an Alternative Investment Fund (AIF) before they invest
and requires that material changes to this information be disclosed
in the Annual Report of the AIF. A notice giving AIFMD Article 23
Disclosures, setting out information on the Group’s investment
strategy and policies, leverage, risk, liquidity, administration,
management, fees, conflicts of interest and other shareholder
information, is available on the Group’s website at synconaltd.com
(in the Regulatory Publications section within Investors).
The notice predominantly gives information by reference to the
AIF’s most recent Annual Report and accordingly will be updated
to refer to this document following its publication.
132
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
REPORT OF THE DEPOSITARY TO THE SHAREHOLDERS
DEPOSITARY REPORT
Report of the Depositary to the shareholders
We, Citco Custody (UK) Limited, are the appointed Depositary to
Syncona Limited (the ‘AIF’) in accordance with the requirements of
Article 36 and Articles 21(7), (8) and (9) of the Directive 2011/61/EU
of the European Parliament and of the Council of 8 June 2011
on Alternative Investment Fund Managers (the ‘AIFM Directive’).
We have enquired into the conduct of Syncona Investment
Management Limited (the ‘AIFM’) and the AIF for the year
ended 31 March 2024, in our capacity as Depositary to the AIF.
This report, including the opinion, has been prepared for and
solely for the shareholders in the AIF, in accordance with the
stated Depositary requirements in the FCA Investment Fund
Sourcebook. We do not, in giving our opinion, accept or assume
responsibility for any other purposes or to any other person
to whom this report is shown.
Responsibilities of the Depositary
Our duties and responsibilities are outlined in the FCA Investment
Fund Sourcebook. One of those duties is to enquire into the
conduct of the AIFM and the AIF in each annual accounting period
and report thereon to the shareholders. Our report shall state
whether, in our opinion, the AIF has been managed in that period
in accordance with the provisions of the AIF’s Memorandum and
Articles of Association and the FCA Investment Fund Sourcebook.
It is the overall responsibility of the AIFM and the AIF to comply with
these provisions. If either the AIFM or the AIF has not so complied,
we as Depositary must state why this is the case and outline the
steps which we have taken to rectify the situation.
Basis of Depositary opinion
The Depositary conducts such reviews as it, in its reasonable opinion,
considers necessary in order to comply with its duties as outlined in
the FCA Investment Fund Sourcebook and to ensure that, in all
material respects, the AIF has been managed (i) in accordance with
the limitations imposed on its investment and borrowing powers by
the provisions of its constitutional documentation and the appropriate
regulations and (ii) otherwise in accordance with the AIF’s
constitutional documentation and the appropriate regulations.
Opinion
In our opinion, the AIF has been managed during the year, in all
material respects:
i. in accordance with the limitations imposed on the investment
and borrowing powers of the AIF by the constitutional document;
and by the AIFMD legislation as prescribed in the FCA Investment
Fund Sourcebook; and
ii. otherwise in accordance with the provisions of the
constitutional document and the AIFMD legislation.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
133
SHAREHOLDER INFORMATION
COMPANY SUMMARY AND E-COMMUNICATIONS FOR SHAREHOLDERS
THE COMPANY
Syncona is a leading life science investor focused on creating,
building and scaling a portfolio of global leaders in life science.
The Company is a Guernsey authorised closed-ended
investment company listed on the Premium Segment of the
London Stock Exchange.
INFORMATION FOR SHAREHOLDERS
The Stock Exchange code for the shares is SYNC.
The Company publishes updates with a full investment portfolio
review as at 30 September and 31 March each year. The Company
also publishes an interim management statement as at 30 June
and 31 December each year.
REGISTRAR SERVICES AND E-COMMUNICATIONS
FOR SHAREHOLDERS
In line with a large number of other listed companies, the Company
uses its website as its default method of publication of shareholder
communications. When shareholder communications are placed on
the website, shareholders are notified either by email (where they
have previously agreed to receive communications by such means)
or otherwise by post. Postal communications with shareholders are
mailed to the address held on the share register.
To receive shareholder notifications electronically in future, shareholders
should register their details free on: www.signalshares.com, using
the “shareholder reference” printed on correspondence from the
registrar and the shareholder’s registered address.
Any notifications and enquiries relating to registered share holdings,
including a change of address or other amendment, should be
directed to Link Group.
By phone
UK: 0371 664 0300
From overseas: +44 371 664 0300
Calls are charged at the standard geographic rate and will vary
by provider. Calls outside the United Kingdom will be charged at
the applicable international rate. Lines are open between 09:00
– 17:30, Monday to Friday excluding public holidays in England
and Wales.
By email
To: shareholderenquiries@linkgroup.co.uk
By post
To: Link Group, Central Square, 29 Wellington Street, Leeds LS1 4DL
Should you require further information, please visit:
synconaltd.com.
Email: contact@synconaltd.com
134
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
GLOSSARY
AAV
Adeno-associated virus – a non-enveloped virus that can be
engineered to deliver DNA to target cells.
ALL
Acute lymphoblastic leukaemia – a cancer of the bone marrow
and blood in which the body makes abnormal white blood cells.
AMN
Adrenomyeloneuropathy – a progressive and debilitating
neurodegenerative disease caused by mutations in the ABCD1
gene that disrupt the function of spinal cord cells and other tissues.
BLA
Biologics License Application.
B-NHL
B cell non-Hodgkin’s lymphoma.
CAPITAL ACCESS MILESTONE
Milestones which have the potential to enable capital access.
CAPITAL DEPLOYED/DEPLOYMENT
Follow-on investment in our portfolio companies and investment
in new companies during the year. See alternative performance
measures on page 137.
CAPITAL POOL
Capital pool investments plus cash less other net liabilities.
CAPITAL POOL INVESTMENTS
The underlying investments consist of cash and cash equivalents,
including short-term (1 and 3 month) UK treasury bills, listed fund
investments and legacy fixed term funds.
CAPITAL POOL INVESTMENTS RETURN
See alternative performance measures on page 137.
CAR T
Chimeric antigen receptor T-cell therapy – a type of immunotherapy
which reprogrammes a patient’s own immune cells to fight cancer.
CELL THERAPY
A therapy which introduces new, healthy cells into a patient’s body,
to replace those which are diseased or missing.
CLINICAL STAGE
Screened and enrolled first patient into a clinical trial.
CLL
Chronic lymphocytic leukaemia.
CNS
Central nervous system – a part of the body’s nervous system
comprised of the brain and spinal cord.
COMPANIES LAW
Companies (Guernsey) Law, 2008.
COMPANY
Syncona Limited.
CRT PIONEER FUND
The Cancer Research Technologies Pioneer Fund LP. The CRT
Pioneer Fund is managed by Sixth Element Capital and invests
in oncology focused assets.
D&I
Diversity and inclusion.
DEFINITIVE DATA
A category within our NAV Growth Framework. Companies
in this category have significant clinical data showing a path
to marketed product or are moving to pivotal trial and building
out commercial infrastructure.
EMERGING EFFICACY DATA
A category within our NAV Growth Framework. Companies in this
category have a clinical strategy defined or have initial efficacy data
from Phase I/II in patients.
ERT
Enzyme replacement therapy – the standard of care for
Gaucher disease.
EXECUTIVE PARTNER GROUP
Our Executive Partner group provides a range of expertise across
commercial, clinical and regulatory strategy to support our portfolio
companies as they move through the development cycle. Our
Executive Partners work closely alongside management teams
across the portfolio as well as taking on Board and executive
leadership positions.
GAUCHER DISEASE
A genetic disorder in which a fatty substance called glucosylceramide
accumulates in macrophages in certain organs due to the lack of
functional GCase enzyme.
GENERAL PARTNER
Syncona GP Limited.
GENE THERAPY
A therapy which seeks to modify or manipulate the expression
of a gene in order to treat or cure disease.
GROUP
Syncona Limited and Syncona GP Limited are collectively referred
to as the “Group”.
IMMUNOTHERAPY
A type of therapy that uses substances to stimulate or suppress
the immune system to help the body fight cancer, infection, and
other diseases.
INVESTMENT MANAGER
Syncona Investment Management Limited.
IRR
Internal Rate of Return.
KEY VALUE INFLECTION POINT
Milestones which have the potential to deliver significant NAV growth.
LATE CLINICAL/LATE-STAGE CLINICAL
Has advanced past Phase II clinical trials.
LEUKAEMIA
Broad term for cancers of the blood cells.
LIFE SCIENCE INVESTMENTS
Non-core assets which provide optionality to deliver returns
for our shareholders.
LIFE SCIENCE PORTFOLIO
This incorporates the Company’s portfolio companies, potential
milestone payments or deferred consideration, and investments.
LIFE SCIENCE PORTFOLIO RETURN
See alternative performance measures on page 137.
LYMPHOCYTES
Specialised white blood cells that help to fight infection.
LYMPHOMA
A type of cancer that affects lymphocytes and lymphocyte
producing cells in the body.
MACROPHAGES
A form of white blood cell and the principal phagocytic
(cell engulfing) components of the immune system.
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
135
SHAREHOLDER INFORMATION
MANAGEMENT
The management team of Syncona Investment Management Limited.
MELANOMA
A serious form of skin cancer that begins in cells known
as melanocytes.
MES
Management Equity Shares.
MODALITY
A method of treatment. This comprises different modes
of delivering therapies to patients.
MYELOMA
A type of bone marrow cancer.
NAV PER SHARE
See alternative performance measures on page 137.
NAV PER SHARE RETURN
See alternative performance measures on page 137.
NDA
New drug application, the vehicle through which drug sponsors
formally propose that the US FDA approve a new pharmaceutical
for sale and marketing in the US.
NET ASSET VALUE, NET ASSETS OR NAV
Net Asset Value (“NAV”) is a measure of the value of the Company,
being its assets – principally investments made in other companies
and cash and cash equivalents held – minus any liabilities.
NET ZERO ASPIRATION
Following NZAM’s guidance, our initial focus within our portfolio will
be on Scope 1 and 2 emissions and to the extent possible, material
portfolio Scope 3 emissions. As data quality and associated
methodologies improve for calculating Scope 3 emissions, we may
evolve our approach.
NEW MOLECULAR ENTITY
Structurally unique active ingredients that have never before
been marketed.
NSCLC
Non-small cell lung cancer – the most common form of lung cancer.
NZAM
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 gas emissions by 2050 or sooner.
ON THE MARKET
A category within our NAV Growth Framework. Companies in this
category are commercialising products or have revenue streams.
ONGOING CHARGES RATIO
See alternative performance measures on page 137.
OPERATIONAL BUILD
A category within our NAV Growth Framework. Companies
in this category have a clearly defined strategy and business
plan or a leading management team established.
PARTNERSHIP
Syncona Investments LP Incorporated.
PCNSL
Primary central nervous system lymphoma.
PDUFA
Prescription Drug User Fee Act – the date the FDA is expected
to respond by.
RETURN
A Simple Rate of Return is the method used for return calculations.
SBTI
Science Based Target initiative.
SIML
Syncona Investment Management Limited.
SLE
Systemic lupus erythematosus – a long-term autoimmune condition
that causes joint pain, skin rashes and tiredness.
STRATEGIC PORTFOLIO
Portfolio of core life science companies where Syncona has
significant shareholdings.
SYNCONA GROUP COMPANIES
The Company and its subsidiaries other than those companies
within the life science portfolio.
SYNCONA HOLDINGS LIMITED
Holding Company.
SYNCONA LEADERSHIP TEAM
Leadership team of SIML.
SYNCONA TEAM
The team of SIML, the Company’s Investment Manager.
T-CELL
A type of lymphocyte white blood cell, which forms part of the
immune system and develops from stem cells in the bone marrow.
TCFD
The Task Force on Climate-related Financial Disclosures (TCFD). First
published in 2017, the TCFD recommendations act as a framework
for assessing the physical and transition risks companies are exposed
to from climate change and the transition to a green economy.
TCR
T-cell receptor.
THE SYNCONA FOUNDATION
The Foundation distributes funds to a range of charities, principally
those involved in the areas of life science and healthcare.
UN PRI
The United Nations (UN) Principles for Responsible Investment (PRI)
is a network of investors, who commit to working to promote
sustainable investment.
VALUATION POLICY
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 (Price of Recent Investment or PRI),
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.
XLRP
X-linked retinitis pigmentosa – a severe, aggressive, inherited
retinal disease.
GLOSSARY
CONTINUED
136
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
ALTERNATIVE PERFORMANCE MEASURES
CAPITAL DEPLOYED
With reference to the life science portfolio valuation table on page 54.
Small difference in calculation may be due to rounding of inputs.
This is calculated as follows:
2024
2023
A. Net investment in the period
£168.5m
£154.7m
B. Proceeds from sales
£1.4m
£17.4m
C. CRT Pioneer Fund distributions
£2.4m
£5.1m
Total capital deployed (A+B+C)
£172.2m
£177.2m
CAPITAL POOL
With reference to the life science portfolio valuation table
on page 54. This is calculated as follows:
2024
2023
A. Cash
£104.8m
£82.8m
B. Other assets and liabilities
£(26.7)m
£(12.3)m
C. Net cash (A+B)
£78.1m
£70.5m
D. UK and US treasury bills
£163.4m
£285.0m
E. Credit investment funds
£112.0m
£101.6m
F. Multi-asset funds
£70.5m
£160.0m
G. Legacy funds
£28.8m
£33.0m
Total Capital Pool (C+D+E+F+G)
£452.8m
£650.1m
CAPITAL POOL RETURN
Gross Capital Pool return for 2024 is 3.4 per cent (2023: 5.5 per cent).
This is calculated by dividing the valuation movement of the gross
capital pool investments (B) by the gross capital pool at the
beginning of the period (A). Any small differences in calculation
may be due to rounding of inputs. This is calculated as follows:
2024
2023
Opening Capital Pool
£650.1m
£784.9m
Add back net liabilities not included in
Gross Capital Pool
£12.3m
£19.6m
Less SIML cash
£(7.3)m
£(8.2)m
A. Opening Gross Capital Pool
£655.1m
£796.3m
Life science net investments
and ongoing costs
£(203.8)m
£(185.5)m
B. Valuation movement
£22.4m
£44.3m
Closing Gross Capital Pool
£473.7m
£655.1m
Capital Pool return (B/A)
3.4%
5.5%
2024
2023
Closing Gross Capital Pool
£473.7m
£655.1m
Add back SIML cash
£5.8m
£7.3m
Less net liabilities not included in Gross
Capital Pool
£(26.7)m
£(12.3)m
Total Capital Pool
£452.8m
£650.1m
LIFE SCIENCE PORTFOLIO RETURN
Gross life science portfolio return for 2024 is 2.2 per cent
(2023: (14.3) per cent). This is calculated as follows:
2024
2023
A. Opening life science portfolio
£604.6m
£524.9m
Net investment in the period
£168.5m
£154.7m
B. Valuation movement
£13.0m
£(75.0)m
Closing life science portfolio
£786.1m
£604.6m
Life science portfolio return (B/A)
2.2%
(14.3)%
NAV PER SHARE
NAV takes account of dividends payable on the ex-dividend date.
This is calculated as follows:
2024
2023
A. NAV for the purposes
of NAV per share
£1,238,878,132
£1,254,654,716
B. Ordinary Shares available to
trade (note 14)
655,335,586
669,329,324
C. Dilutive shares
1,035,451
3,487,581
D. Fully diluted number of shares (B+C)
656,371,037
672,816,905
NAV per share (A/D)
188.7p
186.5p
NAV PER SHARE RETURN
NAV per share 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 per share 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:
2024
2023
A. Opening NAV per fully diluted share
(note 14)
186.5p
194.4p
B. Closing NAV per fully diluted share
(note 14)
188.7p
186.5p
C. Movement (B-A)
2.2p
(7.9)p
D. Dividend paid in the year (note 15)
0.0p
0.0p
E. Total movement (B+C-A)
2.2p
(7.9)p
NAV per share return (E/A)
1.2%
(4.06)%
ONGOING CHARGES RATIO
The ongoing charges ratio for 2024 is 1.93 per cent
(2023: 0.88 per cent). Any small differences in calculation may
be due to rounding of inputs. This is calculated as follows:
2024
2023
Management fee
£16.6m
£12.1m
Directors’ remuneration
£0.5m
£0.5m
Auditor’s remuneration
£0.3m
£0.3m
Other ongoing expenses
£3.6m
£1.8m
Share based payment expense
£3.0m
£(3.0m)
A. Total ongoing expenses
£24.0m
£11.7m
B. Average NAV
£1,244.4m
£1,320.5m
Ongoing charges ratio (A/B)
1.93%
0.88%
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
137
SHAREHOLDER INFORMATION
ADVISERS
SECRETARY, ADMINISTRATOR AND REGISTERED OFFICE
Citco Fund Services (Guernsey) Limited
Frances House, PO Box 273, Sir William Place, St Peter Port,
Guernsey GY1 3RD
INVESTMENT MANAGER
Syncona Investment Management Limited
2
nd
floor, 8 Bloomsbury Street, London WC1B 3SR,
United Kingdom
DEPOSITARY AND CUSTODIAN
Citco Custody (UK) Limited
7 Albemarle Street, London W1S 4HQ, United Kingdom
AUDITOR
Deloitte LLP
PO Box 137, Regency Court, Glategny Esplanade, St Peter Port,
Guernsey GY1 3HW
BROKERS
Goldman Sachs
Plumtree Court, 25 Shoe Lane, London EC4A 4AU, United Kingdom
Deutsche Numis
45 Gresham Street, London EC2V 7BF, United Kingdom
138
SYNCONA LIMITED ANNUAL REPORT AND ACCOUNTS 2024
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SYNCONA LIMITED
PO Box 273
Sir William Place
St Peter Port
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