Syncona
Limited
Publication of
2017 Annual Report and Notice of Annual General Meeting
21 July 2017
Syncona Limited (“Syncona”), a leading healthcare company
focused on investing in and building global leaders in life
science, today announces that it has published its Annual Report
and Accounts for the year ended 31 March
2017 (“2017 Annual Report”). In addition, Syncona has
published its Notice of Annual General Meeting 2017 and a circular
relating to the 2017 Dividend.
Copies of these documents, together with the Form of Proxy for
use in connection with the 2017 Annual General Meeting, Charitable
Allocation Form and Cash Election Form, are available
electronically on the Investor Relations section of Syncona’s
website at www.synconaltd.com/investor-relations. Printed copies of
these documents are also being posted to shareholders where
requested.
Syncona’s Annual General Meeting will be held at 10:30am on 8 September
2017 at the offices of Northern Trust International Fund
Administration Services (Guernsey) Limited, Trafalgar Court, Les
Banques, St Peter Port, Guernsey GY1 3QL.
In compliance with Listing Rule 9.6.1, the following documents
have today been submitted to the National Storage Mechanism and
will shortly be available for inspection at
www.morningstar.co.uk/uk/nsm:
- 2017 Annual Report
- Notice of Annual General Meeting 2017
- Circular relating to 2017 Dividend
Disclosure & Transparency Rule (“DTR”) 6.3.5R requires the
Company to disclose to the media certain information from its 2017
Annual Report if that information is of a type that would be
required to be disseminated in a half-yearly report. The
information contained in the Appendix to this announcement,
together with the Company’s Full Year results for the year ended
March 31 2017, issued on 7:00am on 6 July 2017 (available at
https://www.synconaltd.com/results-centre), constitute the
materials required by DTR 6.3.5R to be communicated to the media in
unedited full text through a Regulatory Information Service. This
material is not a substitute for reading the full 2017 Annual
Report.
The information included in the Appendix is extracted from the
2017 Annual Report which was approved by the Board of Directors on
5 July 2017. Defined terms used in
the Appendix refer to terms as defined in the 2017 Annual Report,
unless the context otherwise requires.
[ENDS]
Enquiries
Syncona Ltd
Siobhan Weaver
Tel: +44 (0) 20 7611 2031
Copies of this press release and other corporate information
can be found on the company website at: www.synconaltd.com
Forward-looking statements – this
announcement contains certain forward-looking statements with
respect to the portfolio of investments of Syncona Ltd. These
statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that may or may not
occur in the future. There are a number of factors that could cause
actual results or developments to differ materially from those
expressed or implied by these forward-looking statements and
forecasts. Nothing in this announcement should be construed as a
profit forecast.
About Syncona:
Syncona is a leading FTSE250 healthcare company focused on
investing in and building global leaders in life science. Our
vision is to deliver transformational treatments to patients in
truly innovative areas of healthcare while generating superior
returns for shareholders. Our current investment portfolio consists
of seven high quality companies in life science and a leading range
of fund investments.
We seek to partner with the best, brightest and most ambitious
minds in science to build globally competitive businesses. We are
established leaders in gene therapy, cell therapy and advanced
diagnostics, and focus on delivering dramatic efficacy for patients
in areas of high unmet need.
Our market leading funds portfolio seeks to generate superior
returns by investing in long only and alternative investment funds.
This represents a productively deployed evergreen funding base
which enables us to take a long term approach to investing in life
sciences as we target the best new opportunities and support our
existing portfolio companies to grow and succeed.
Syncona is aligned with two of the premium charitable funders in
UK science, the Wellcome Trust, original founder of Syncona, and
Cancer Research UK, both of which are significant shareholders in
our business. We make a donation of 0.3% of Net Asset Value
to a range of charities each year.
Appendix
Responsibility statement
The Directors' responsibility statement below has been prepared
in conjunction with, and is extracted from, the 2017 Annual Report,
whereas this announcement and the announcement of the Company’s
Full Year results for the year ended March
31 2017, issued on 7:00am on 6
July 2017, contain extracts from the 2017 Annual
Report. The responsibility statement is repeated here solely
for the purpose of complying with DTR 6.3.5. These
responsibilities are for the full 2017 Annual Report and not the
extracted information presented in this announcement or
otherwise.
The Directors of the Company are:
Jeremy Tigue, Chairman
Ellen Strahlman, Non-Executive
Director
Nicholas Moss, Non-Executive
Director
Nigel Keen, Non-Executive
Director
Peter Hames, Non-Executive
Director
Tom Henderson, Non-Executive
Director
The Directors confirm to the best of our knowledge:
1. The Financial Statements have been prepared in
accordance with International Financial Reporting Standards, give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the Group as a whole; and
2. The management report in the 2017 Annual Report
including information and details in the Chairman’s Statement, the
Strategic Report, the Corporate Governance Statements, the
Directors’ Report and the notes to the Financial Statements,
provides a fair review of the Company business and a description of
the principal risks and uncertainties facing the Company.
Principal risks and uncertainties
The execution of the Company’s investment strategy is subject to
risks and uncertainties. During the year, the Company expanded its
investment policy to include investment in early-stage life science
companies. Accordingly, the principal risks and uncertainties have
been updated to reflect new risks associated with the financing of
and investment in early-stage companies.
The principal risks that the Board has identified are set out in
the table below, along with the consequences and mitigation of each
risk. Further information on risk factors is set out in note 22 to
the financial statements.
Life science portfolio
Description |
Impact |
Mitigation |
Investment risk |
|
The Company sources
life science businesses for investment. Such early-stage businesses
typically have limited products in development and, consequently,
any problems encountered in one product may have a particularly
damaging effect on the prospects of that portfolio company.
Early-stage life science businesses will spend a considerable
proportion of their resources on research and development into
unproven technology, which may be unsuccessful or may be
commercially unproductive and may require the injection of further
capital by the Company to fully exploit the results of that
research. |
The value of the
portfolio company depends on the performance of its future products
and the Company may not realise its original cost or any value from
its investment.
It may take time and significant resources for the Company to
realise its investment and the portfolio company may not be
successful or may not grow rapidly and the Company may not realise
its original cost or any value from its investment. |
The Company’s
Investment Advisor employs highly experienced personnel who have
considerable experience of building and developing early-stage life
science businesses.
Before making any investment, the Investment Advisor performs
extensive due diligence covering all the major business risks. Once
the investment is made, the Investment Advisor’s personnel work
closely with portfolio companies, taking non-executive and at times
executive roles on portfolio company boards, monitoring progress
and ensuring familiarity with issues and risks.
Within the Investment Advisor’s investment process, there is a
robust and disciplined financing and capital allocation framework,
focused on the achievement of key strategic and development
milestones ahead of any further investment. Initial investments may
involve seed funding to identify and mitigate early risks before
proceeding with more substantial investments.
The Company ensures that it has sufficient liquidity to fund its
early-stage investment programme and the Investment Manager and
Investment Advisor maintain detailed financing and capital
allocation models on an ongoing basis and forecasts are produced
for the Board that contain appropriate stress testing. |
General, commercial,
technological and clinical risks |
The Company’s life
science investments are exposed to a wide range of general,
commercial, technological and clinical risks. In particular:
· Negative results from clinical trials
· Intellectual property may fail to be granted or may be
infringed or copied
· Failure of a technology platform in an early-stage
company
· Failure to obtain regulatory approval for new products
developed
· Failure to sell products profitably or in sufficient
volumes
· Changes in pharmaceutical pricing practices
· Launch of competing products
· Reputational damage
· Targeted public campaigns
· Latent product defects resulting in claims |
All of these risks could potentially
lead to a decline in the value of a portfolio company, or in
extreme cases lead to the portfolio company failing. |
The Company’s
Investment Advisor employs highly experienced personnel who have
considerable experience of building and developing early-stage life
science businesses. The Investment Advisor’s personnel work closely
with portfolio companies, taking both executive and non-executive
roles on portfolio company boards, monitoring progress and ensuring
familiarity with issues and risks.
In addition, the Investment Advisor’s team can assist the
management teams of the portfolio companies with arranging
specialist advice, for example, communication advice to support
them dealing with issues or any likely issues. |
Dominance of portfolio
by a few larger investments and/or sector focus |
Within its life science
portfolio, the Company is seeking to build a focused portfolio of
up to 20 leading life science companies. Accordingly, a large
proportion of the overall value of the life science portfolio may,
at any time, be accounted for by one, or a few, portfolio
companies.
The Company’s life science portfolio may also be focused on a small
number of sub-sectors within the life science sector. Accordingly,
a material proportion of the overall value of the life science
investment portfolio may, at any time, be invested in a specific
sub-sector. |
If a portfolio company
experiences financial or operational difficulties, fails to achieve
anticipated results or, where relevant, suffers from poor stock
market conditions and if, as a result, its value were to be
adversely affected, this could have an adverse impact on the
overall value of the life science investment portfolio.
Similarly, if the technology or technologies utilised in a specific
sub-sector prove to be commercially unproductive or unsuccessful,
then the value of the Company’s investments in the respective
sub-sector(s) could be negatively impacted. |
The Board considers the
performance of its largest portfolio companies and the portfolio’s
concentration on specific sub-sectors on a quarterly basis.
The Company’s Investment Advisor employs highly experienced
personnel who have considerable experience of building and
developing early-stage life science businesses. The Investment
Advisor’s personnel work closely with portfolio companies, taking
non-executive and at times executive roles on portfolio companies’
boards, monitoring progress and ensuring familiarity with issues
and risks.
At 31 March 2017, the Company’s three largest investments in its
life science portfolio represented 19.4 per cent of the net asset
value of the Company. |
Market risk – realising
investment portfolio companies |
Instability in equity and debt
markets and/or the market’s appetite for investment in life science
companies could result in an inability to access capital markets or
realise value in portfolio companies through sales to financial or
strategic acquirers. |
It may take longer to realise value
from investments in portfolio companies. |
The Investment Advisor,
alongside the portfolio company management team, is focused on
ensuring that portfolio company business models appeal to both
strategic acquirers as well as public markets.
In addition, the Company seeks to ensure that it has sufficient
liquidity to fund its portfolio companies through the cycle and
should not therefore be dependent on third-party funding or
realisations from its life science portfolio to fund further
investments into a portfolio company. The Investment Manager and
Investment Advisor maintain detailed financing and capital
allocation models on an ongoing basis and forecasts are produced
for the Board that contain appropriate stress testing. To further
mitigate this risk, the Investment Advisor maintains strong
relationships with potential strategic acquirers and other leading
investors in the sector. |
Market risk – political
and economic uncertainty may negatively impact the Company’s
ability to achieve its strategic objectives |
Political and economic uncertainty,
including impacts from the EU referendum or similar scenarios,
could have several potential impacts, including changes to the
labour market available to the Investment Advisor and underlying
portfolio companies, or regulatory environment in which the Company
and its investment portfolio companies operate. |
There could be potential risks to
research funding and to attracting and retaining talent. |
The Company’s
Investment Manager and Investment Advisor monitor these
developments, with the help of professional advisers, as
appropriate, to ensure it is prepared for any potential
impacts.
The UK government recognises these challenges and we believe will
seek to address them as part of its industrial strategy. |
Funds portfolio
Description |
Impact |
Mitigation |
Investment risk |
The funds portfolio is
exposed to the risk that its portfolio fails to perform in line
with its objectives if it is inappropriately invested or markets
move adversely.
The funds portfolio has significant indirect exposure to risks
through the underlying portfolios of the investment entities. Due
to the lack of transparency in many of the underlying assets, 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 observable or predictable. These risks
will include extensive interest, foreign exchange and other market
risks which are magnified by significant gearing in many cases,
resulting in increased liquidity and return risk. |
Any underperformance of the funds
portfolio will have an impact on net asset value of the Company and
the longer-term liquidity for life science investments. |
The Company’s Investment Manager
employs highly experienced personnel who have considerable
experience in investing in capital markets. The Investment Manager
performs due diligence on potential new investments, including an
assessment of investment risk and, after the investment is made,
post investment monitoring of their performance. The Board reviews
reports from the Investment Manager at each quarterly Board
meeting, paying particular attention to the constitution of the
portfolio, the performance and volatility of underlying investments
and the liquidity forecast prepared by the Investment Manager and
Investment Advisor. |
Operational
Description |
Impact |
Mitigation |
Failure to attract or
retain key personnel |
The expertise, due
diligence, risk management skills and integrity of the staff at the
Company’s Investment Manager and Investment Advisor are key to the
success of the Company.
The industries in which the Investment Manager and Investment
Advisor operate are specialised and require highly qualified and
experienced management and personnel.
Given the relatively small size of the team, the execution of the
Company’s investment strategy is dependent on a small number of key
individuals. There is a risk that employees could be approached by
other organisations or could otherwise choose to leave the
Investment Manager or Investment Advisor. |
If the Investment Manager and/or
Investment Advisor do not succeed in retaining skilled personnel or
are unable to continue to attract all personnel necessary for the
development and operation of their business, they may not be able
to execute the Company’s investment strategy successfully. |
The Investment Advisor
carries out regular market comparisons for staff and executive
remuneration. Senior executives are shareholders in the Company and
executives of the Investment Advisor participate in the Syncona
Long Term Incentive Plan. In addition the Investment Advisor
encourages staff development and inclusion through coaching and
mentoring and carries out regular objective setting and
appraisals.
The Investment Manager’s personnel are shareholders in the Company
and they are incentivised by the BACIT UK Agreement, details of
which are on page 65. |
Financing risk |
The financial risks,
including market, credit and liquidity risk, faced by the Company,
where relevant, are set out in note 22 of the financial statements.
These risks and the controls in place to mitigate them are reviewed
at each quarterly Board meeting. |
Financing risk and the inability to
match funding to the timing of investments by the Investment
Advisor, including delayed distributions from the funds portfolio,
or holdings in the funds portfolio not being sold, or being sold
for less than expected. |
Lack of funding may
restrict the ability of a portfolio company in the Company’s life
science portfolio to fund ongoing research and development and
commercialisation programmes and the ability of the Company to
invest in new, attractive investment opportunities.
This could, in some cases, result in the Investment Advisor having
to seek funding from third-party investors, thereby diluting the
Company’s ownership of the portfolio company. In extreme cases, it
may result in the portfolio company being forced to sell off its
assets or cease its development, thereby impacting the value of
the investment. |
The Company has a strong liquidity
position and ensures that it has sufficient liquidity to fund its
early-stage investment programme. The Investment Manager and
Investment Advisor maintain detailed financing and capital
allocation models on an ongoing basis and forecasts are produced
for each Board meeting that contain appropriate stress
testing. |
Systems and
controls |
The potential loss of operation of
core systems or sensitive data leading to damage and disruption to
the Investment Manager and/or Investment Advisor or Administrator’s
business. |
Disruption of the business of the
Investment Manager and/or Investment Advisor or Administrator. |
Systems and control procedures are
developed and reviewed regularly and the Board receives reports
annually from the Investment Manager, Investment Advisor and
Administrator on their internal controls. |
Legal and regulatory
Description |
Impact |
Mitigation |
Changes in law and
regulations may adversely affect the Company |
The Company is subject
to laws and regulations of national and local governments. In
particular, the Company is subject to, and is required to comply
with, regulation of the UKLA and certain regulatory requirements
that are applicable to registered closed-ended collective
investment schemes which are domiciled in Guernsey.
In addition, changes in legislation and government policy may occur
that could adversely impact the ability of the Investment Manager
and Investment Advisor to execute the investment strategy of the
Company. Changes to tax laws may impact the Company’s returns or
the returns that shareholders may receive from the Company. |
Any material changes to laws or
regulations could adversely affect the Company, its Investment
Manager and Investment Advisor, in the ability to operate in
accordance with any such changed requirements. This could in turn
adversely affect the returns that shareholders may receive from the
Company. |
The Company, its Investment Manager
and Investment Advisor utilise professional advisers, as
appropriate, to support its monitoring of, and response to, changes
in law and regulation, including any changes in tax or other
legislation. |