Syncona Limited (SYNC) Earnings Call Transcript & Summary

Good day, ladies and gentlemen, and welcome to Syncona Full Year Results 2025-2026. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to Chris Hollowood, Chief Executive Officer, to start the presentation.

Welcome to Syncona's Full year 2026 results. I'm joined by my colleagues, Roel and Kate, we'll walk you through the portfolio and financial results. But first, I'd like to focus on the highlights and the market backdrop. NAV per share was roughly flat for the year. The Life Science portfolio was marginally positive, driven by strong performance in Beacon offset by partial write-downs of Kesmalea and our legacy Investor Cancer Pioneer Fund. We remain well capitalized with GBP 198 million available to drive the late-stage portfolio to full value and liquidity. That portfolio has never been more mature with 86% at clinical or commercial stage, and it continues to perform well hitting operational clinical milestones as well as attracting third-party capital and strategic interest. Coming financial year is an exciting one, bringing 5 key value inflection points. Much of the year has been focused on our strategic process. We were very pleased to receive 90% shareholder support for our proposals and now have a clear mandate and great capacity to deliver value. Initially, we're focused on driving the portfolio to value and duration of a minimum of GBP 250 million of realizations that can be returned to shareholders. The value generation from these realizations will be a very important driver of addressing the discount to NAV. The SIML team is resolutely focused on its delivery and is pleased to have an incentive scheme that aligns with it. Once this is completed, we're excited about the future of our industry and the further returns we can generate for shareholders by developing high-impact medicines through building and investing in category-leading biotechs. One of the fundamentals of the Syncona model is that pharmaceutical companies rely on external innovation to provide late-stage high-impact medicines to fill their pipelines. This has never been true. Large pharmaceutical companies will lose $350 billion of revenue by 2030. This can only be replenished with a large reliance on M&A. And this is exactly what we're seeing in 2026 on track to be the greatest of year for M&A below $15 billion per M&A, the zone of our model. To pick 1 out, turns a small molecule for blood cancer, not in Phase III, but the best-in-class profile that was bought by Merck for $6 billion, an interesting competitor to iOnctura and Mosaic in our portfolio. And also the chair of [indiscernible] the Chair of Beacon to provide some color, the quality of board leadership we have in our late-stage portfolio. What is more than a new players executing M&A, the biosetcompanies of yesterday are now represent substantial companies in their own ride, increasing the overall number of counterparties and increasing the number of deals getting done significantly and not just the aggregate value. Absolutely in line with our model, this M&A remains focused on the late stage, recognition by pharma that they are not the best place for innovation the only late-stage deals will have real impact on late-stage deals become accretive for them in the near term. And this sits in tandem with the public markets where M&A feels investor appetite. Biotech public markets are up over 70% in the last 12 months, IPOs are back and the generalists are participating in. As public markets get fully priced, investors go searching for better value, which built its pricing to the private markets. This always happens with a lag, but we're starting to see investment pick up in the private markets, albeit focused on those later-stage assets still. Licensing activity also remains active with large cap biopharma continuing to secure differentiated assets and a still selective venture environment, providing another route to yield value in the portfolio. To all roads, M&A, licensing and capital markets align with a significant portfolio rebalancing we've executed over the last 3 years. And here to walk you through the details of that portfolio is Roel.

Thank you, Chris. We are excited about the strong progress across the portfolio. Over the past 2 years, we've pushed the portfolio towards late-stage assets. We focus on financing our companies to data with significant leverage from external capital. And we've acted across the portfolio to build exceptional leadership, teams that are able to execute on our ambitions. Over 80% of the portfolio is now in the clinic and on the market. And with a large proportion of our late-stage clinical companies tracking to delivering data that will confirm the clinical and commercial relevance of our most advanced programs in the next 2 years. As Chris explained earlier, that is the design where pharma is actively engaged in the market to acquire companies and products to fill its significant revenue gap. We made significant progress across the portfolio. To give you a couple of highlights. Beacon raised an oversubscribed $75 million Series C that finances the company through to registration. This high-profile financing further raise awareness of Beacon amongst investors and strategics. Since we let iOnctura $85 million Series B financing, the SIML team has worked closely with the company to identify broad applications for its lead asset, roginolisib, with the the initiation and execution of clinical trials across a number of solid and hematological cancers in the last year. We initiated 10 new clinical trials across the portfolio, including a pivotal trial for SPUR's lead program for the treatment of Gaucher disease. Other trials include studies by Purespring in IgA nephropathy and iOnctura in myelofibrosis. In addition, we delivered 3 significant milestones in research, licensing and collaboration, including strong progress in Quell -- Quell's collaboration with Mosaic. Mosaic deals to in-license 2 clinical stage assets. And all Mosaic's collaboration with Genentech. Finally, we delivered 9 capital access milestones, including 6-month data from Beacon Phase II DAWN trial, the initiation of Spur's pivotal study and the initiation of Resolution's Phase I/II study in end-stage liver disease. We are really excited about the prospects of the portfolio, and we believe it's well positioned to deliver value. With the work we've done in the last several years, we laid the foundation to now maximize the value of this portfolio for our shareholders as well as return to GBP 250 million bonds we committed to those shareholders that want to see short-term liquidity. A mature and diverse portfolio can deliver value through third-party financings, IPOs, M&A, which is not primary, but not exclusive source of liquidity, milestones and royalties. We have consistently pursued an investment thesis that is guided by the observation that realizations in our sector are a, driven by data and b, best pursued by companies that have optionality. And that's why you will see us continue to build and scale our businesses, while we engage with potential acquirers. Our key value inflection points or KVIPs, track material derisking events for our portfolio of companies. In practice, that means an important milestone that substantially changes the risk and as a consequence, the value outlook of an investment. We set these milestones to drive the similar organization and our portfolio company leadership to focus relentlessly on the delivery of critical milestones towards value creation and potential liquidity for our shareholders. For this presentation, I will focus on highlighting some of the near-term KVIPs. We are reporting 8 KVIPs across portfolio, with 5 expected this year, including Beacon's Phase III data in XLRP, if positive, will underpin the BLA filing in the U.S. And I am sure as Phase II data in uveal melanoma if positive will underpin a Phase III registration trial. We also expect Resolution and Quell data in calendar year 2026. Resolutions data, if positive, will build on data from academic match trials demonstrate proof-of-concept for its lead program in end-stage liver disease. And the Quell data, if positive, will validate the therapeutic potential of engineered T-reg cell therapy in refractory rheumatoid arteritis. None of these companies will exist if it wasn't for the collaboration with the Syncona team. All of these companies are category leaders and develop unique new drugs that will have a profound impact for patients if approved. And as you can see from the gray boxes in these slides, we own a substantial share in each of them. So that success also means that there will be substantial returns for shareholders. With that, I will hand over to Kate.

Thanks, Roel. Good morning, everyone. Over the next 2 slides, I will talk through how we have managed and we'll continue to manage our capital allocation under our new investment policy and our new capital allocation policy with a clear focus on shareholder outcomes. Under these policies, deployment is focused on clinical and late-stage assets and companies with key value inflection points. In practice, this means investing to advance our companies to late stage and clinical stage maximizing value and returns while building and scaling them to compete globally. This focused allocation is intended to move our companies towards exit. This provides the liquidity required to return a minimum of GBP 250 million to shareholders. It is also really important that we protect the value of our portfolio companies in third-party financings, supporting NAV growth and driving future upside. But alongside this, we will also continue to make selective small investments in new companies to build the foundation to drive growth once the GBP 250 million has been returned. So what have we done in the year? So of the GBP 81 million that has been deployed during the year, 84% of that went into late stage in clinical assets, concentrating capital on maximizing value and moving us closer towards returning a minimum of GBP 250 million. We have also continued to take a prudent approach to investing in new investments with GBP 8.1 million deployed into 2 early-stage opportunities, we aim and all tech with the latter being deployed through our accelerator company, Slingshot. And since the year-end, we have deployed a further GBP 25 million and that has been into late-stage clinical assets being Spur and Resolution. I'll now hand over to Chris to complete the presentation.

Just as we completed rebalancing of the portfolio, we've built a better balanced team, have a greater set of investment leaders to drive our increasing late-stage portfolio and augment them with a set of executive partners that can add value across the full spectrum of drug development. We're delighted to welcome Sam this year, previously CEO of NICE, who brings great leadership skill alongside the domain knowledge of therapeutic value and access. We're also delighted to announce today that Paul Sekhri has joined us to bring us extensive business development M&A skills to bear across the portfolio, providing greater access to strategic deals in M&A. And to give you a flavor capability, who was recently chaired long board, which he sold for over $2.5 billion. Beyond the delivery of the late-stage portfolio, we see an exciting future that the U.K. is at the center of. Advancements in gene editing, genomics and AI allow us to conduct research in ways unimaginable even 5 years ago. These tools are best applied in an environment of high innovation and embedded clinical data sets and translational capability. The U.K. is a uniqueness alignment of this and Syncona's unique in its ability to access and build companies from it. And we intend to prosecute it with a capital structure that optimizes returns for our shareholders. Our pursuit of a private fund allows us to access different pools of capital and provide leverage to longer duration aspects of our model improving the cadence of returns in Syncona, improving capital access for the portfolio and reducing financing risk of that portfolio as well. So first and foremost, we're driving to that GBP 250 million return, first, by delivering our 8 stated key value inflection points more generally driving the portfolio to late stage and all through our tailored hands-on approach and partner with our companies that is road tested in delivering a significant value through M&A. Shareholders should feel confident in delivery of value to them. The fundamental sector remains strong, underpinned by a robust M&A backdrop. Our portfolio is increasing in late stage and increasingly in the strike zone of M&A. We are fully funded to deliver our KVIPs, the most likely levers to drive that M&A. Our team has never been more experienced and has now added skill sets aligned with late-stage profile of our portfolio, driving value of strategic interest, is that underpins future net progression and the delivery of GBP 250 million. We thank our shareholders, the strong endorsement of our strategy that now provides a period of focused execution. We're now very happy to take questions.

[Operator Instructions] Our first question comes from Simon Baker from Rothschild & Co. Our next question comes from Miles Dixon from Peel Hunt.

Good morning. Hopefully, you can hear me?

Yes, we can, Myles.

If I could start with the valuations, please. I mean as impressive as the 86% of the life science portfolio being in kind of later stage clinical or commercial. I previously estimated that 90%, 95% of the value in your portfolio consists of investments held at cash or mark-to-market or tested third-party valuation rounds, particularly in arguably the worst bear market for biopharma that we've seen in a generation. Is that something that you still recognize that 90% to 95%? And given that very conservative valuation what stands out to me is quite a small change in the net valuation on the group, accepting Beacon aside on that Series C. But is it fair to suggest then that the NAV doesn't really reflect the changing sentiment towards biopharma?

So at a headline, yes, I don't haven't done the calculation you've done to say that it's 90% to 95%. But I think about 18 months ago, we did put out a slide that showed that our NAV was heavily underpinned by third-party pricing or mark-to-market in the bear market and it's only improved on that basis since then. And XBI, as you know, is the index we like to track for how the biotech market is doing has only gone up since. So those NAV marks at historical marks and don't reflect the clinical progress made within the portfolio until those companies either get to M&A or get to a future financing round. So yes, I think there is a lot of latent value in the portfolio. I think the portfolio is significantly undervalued at this level of discount. And I think it represents a great opportunity.

Great stuff. Can I just follow up on Slingshot as well, please. Can you update us on what opportunities in there? Kate, I thought, I heard you mention Rio and Artex. And does the cap that you've placed on yourself for the -- I believe it was 8 sorry, 2 sets of GBP 15 million. So does that limit the funding that can go down that what I think is a very important strategic asset in the U.K. for developing spin-outs?

Thanks, Miles. So we've obviously started Slingshot a couple of years ago now. We see it as a key strategic capability for Syncona and a big part of our future. In the ever-changing environment in U.K. biotech is a key enabler and a key differentiator relative to how the people start companies. The GBP 15 million cap we have per year is a sensibly tailored amount that allows us to maintain that capacity at Slingshot and make sure we're not impairing a key strategic asset whilst being prudent through this time where we're aiming to return the GBP 250 million. So I think it's a measured amount.

Got it. And the companies that are in or underneath the Slingshot portfolio at the moment. Can you give us a flavor for how many and what they might be?

So we got 3 at the minute, 2 are in the autoimmune inflammatory space. That's a company called [indiscernible] and then the more recent company [indiscernible] that we've announced and then Altex is in oncology. And these are companies that again come out of the ecosystems or directly from the top universities in this country. So very much on thesis for Syncona.

Great. And just 1 more, if I may, before I get back in the queue. I mean, I know that we've all talked at length about the progress of margin house and pension capital. Is there any progress, whether it be public or private the public or private fund obviously SIML team Syncona, that people are seeing that as a mature portfolio in a way for the deploy capital behind venture?

No, I am encouraged by the margin house activity. I think the wheels are turning slowly, but I do think they're turning. With respect to us, there's 2 opportunities to get exposure to Syncona. One is directly through the listed vehicle. And I think that represents a great opportunity for those people -- and also we've now got the private fund initiative, which we really launched in earnest in April. And that private fund that we can raise capital into it, I think, really increases the balance sheet efficiency and lowers the financing risk of the portfolio for Syncona Limited. So it sits synergistically to drive returns. So our shareholders should be pleased whether money comes in directly into Syncona itself or into that private fund, because I think all those roads still lead to our share price.

Our next question is from Simon Baker from Rothschild & Co.

And apologies for the slight IT issue earlier. Two if I may, please. Firstly, on Quell. You've -- beyond the rheumatoid arthritis indication, you've also talked about shotguns and vasculitis. I was just wondering about the amenability of that approach to SLE and multiple sclerosis, which is where we've seen a lot of activity in this space. And related to that, there's a question of scalability of autologous cell therapy. Is this really in order to achieve the big time? Is this really a case of waiting for the allogeneic program. Or do you see a large volume opportunity with Quell 05? And then secondly, a more general question. Given the weakness in the biotech market, which does appear to be improving at the moment, I just wanted to get your sense of your relative preference now for exit via M&A or IPO in the current climate and how you see that going forward so much?

Okay. Simon. So let's start with Quell. So Quell, as obviously bought its pipeline program for RA for very rapidly actually really impressive execution by the company. And there's really good credit data out there that suggests this has a high chance of working. There's a California chemical [ Sonoma ] that published data in that particular disease setting hard-to-treat that showed some level of efficacy, but the technical floor and how they did it means they can't actually take that program forward, whereas Quell can. So it validates but opens the market up for Quell. And also Quell in liver transplant patient has shown that it sells traffic where you want them to traffic and are still residing in the liver over a year later. So it shows the technical performance of our platform. The overall market opportunity for that program will be limited by the manufacturing capacity, because those markets are so big. So if it works, it will be as much as you can make you can sell. But that's not a problem. If you look at our Selex, which was recently bought over in the U.S., I think it was $8 billion, thinking off the top of my head, that just shows that although that's an autologous product, you can get to very, very sizable markets and very, very high value. And Quell is addressing markets bigger than our seeing. So we're not concerned by that as a route. In terms of your specific other indications, I think SLE, if I know my biology is probably tractable. And so probably on the less MS, I need to have a look at. But this program works by -- sorry, for those that aren't technical on the call, but you get these tertiary lymph nodes that build up in the inflammatory tissue, and that's the anchor point for Quell cells. The traffic into there and are effective directed to where the inflammation is, whether that's the case in MS biology, I need to check. And then on the M&A, IPO front, let's -- so we've never taken an IPO as an exit per se. It's a financing event that allows you to build a very big biotech. I think where the markets are right now, both in 2 aspects, 1 in terms of where the public markets are assigning value but also the depth of capital available in private markets for late-stage assets. means that whilst we still will use IPOs, our businesses will be much more mature before they are listed. -- and that gives you confidence in the risk profile given the greater derisking it's been done, but also in the execution of the public markets because management teams would have had the air cover the private markets to execute for a longer period and be much more attuned to that. So you'll still see IPO as part of the strategy, but you'll see it at a later stage. And because it's at a later stage and much closer to the M&A one. And if you can finance into that M&A loan in a private market, that is a more capital-efficient way to do it and will drive a greater return for us. So those 2 play sort of interchangeably with themselves. But the overall health of the financing market, you're right to know, has improved certainly at the late stage, and we hope that will filter down to those early-stage companies over the course of this year.

Thank you. There are no further raised hands. I will now hand over to the Syncona IR team to read out questions submitted via the Spark live webcasting page.

So we had one question here, which is pleased with your outline if there is any difference in the XLRP Phase III VISTA trial design. This is a trial design that Beacon has in its Phase III versus that of the J&J product, which didn't meet its primary endpoint. So recall, we have 1 competitor in this space. So the J&J product, the Phase III prime endpoint was amazed test. And so this effectively records the speed at which a patient can travel through a maze, the number of mistakes they make, the number of times they bump into things at bearing light levels. And our view had always been that is an inappropriate endpoint for this disease. So these patients are severely impaired in their site. But until the very late stage of the disease, they have a pinprick essential vision. And so they can navigate through a maze quite well. And we didn't think that amaze test would be able to discern between the treatment effect of the therapy and whether you've been treated or not. So we always had that view -- and we always knew that a much better endpoint was what's known as low lumen visual acuity. So the way I have to think about that, everybody has been to the opticians and they've all read an eye chart, it's like reading an eye chart and low light. And that does work in these patients because the first thing they lose is their night vision. So that low light condition really does impair that site further, and you get very high discernment now on the eye chart. And we knew that from other data sets that are out there, and we also knew, although FDA, the U.S. regulator had not accepted it as an endpoint for any prior therapy it was on record saying it would, if someone wanted to put it forward. So that was our key insight to set the Beacon study up using that endpoint where we knew we'd get a much higher result. And we also knew that the maze test was a flawed test for this disease. It's interesting to note that the endpoint J&J now all talk about and now [indiscernible] come back to Mirror post the readout is low limits visual acuity because guests which endpoint their product responded best on low-level acuity. What I'd also note is there are many reasons to believe that our product is a superior product. So not only do we have the correct primary we'll have a much higher response against that primary as well. So we feel very confident in the position of Beacon. So there's no more questions online, and we don't have any more over the e-mail. So I think that is then and thank you, everybody.

Thank you for joining today's call. You may now disconnect.