Another update today on my favourite pharma VC play – Syncona, the old BACITs investment vehicle. In my FT column last year I suggested this was an impressive transformation worth backing. Since then the shares have more than doubled. Earlier today Syncona released an update for the quarter to 30 June 2018, reporting that the NAV was 193.1p at 30 June, up from 158.9p at 31 March, representing a total return of 23.0% during the quarter (including a 2.3p dividend). According to the Numis report on these numbers, the “key driver of returns in the quarter was the 41.8% total return from the Life Sciences Portfolio (now 62% of net assets), whilst the Funds portfolio (35% of net assets) generated a healthy 4.0% return). The most significant valuation uplift in the period was Autolus (+£172.6m) following its IPO on Nasdaq in June. In addition, Blue Earth (+£26.4m) continued to perform strongly, with unit sales of Axumin increasing by 20% from the previous quarter. The key new information in the Update is a commitment of £9.8m to a new portfolio company which uses a novel technology platform to enable drug discovery in small molecule and antibody areas”.
Numis concludes as follows:” It is positive to see continued strong progress from Blue Earth and the team continuing to make interesting new investments. We believe that Syncona is a unique vehicle with outstanding management. The transformation from a Fund of Funds investment business to a portfolio of global leading Life Science companies has progressed far more quickly than we expected, and a number of these are entering key clinical trials during 2018 giving the potential to drive the asset value further. The shares are off c.11% from their peak in early July, reflecting some profit-taking after a strong run. Although the shares are still trading at a significant premium to NAV, we believe that there is significant upside potential among the Life Science investments. Adjusting for listed portfolio movements and currency since 30 June, we estimate the current NAV is marginally higher at unchanged at 195.9p, putting the shares (248p) on a 27% premium to NAV.”
One admission though on my part. I have taken profits on Syncona. Its still an extremely overweight position in my portfolio BUT I have top sliced my holdings and sold half my stock after booking a 100% gain. I’m now very happy to sit tight on hold the rest of the shares for as long as necessary. But my own sense is that sooner or later we may get some bad news out of its portfolio – inevitable given its risk profile as a VC – at which point the shares might rerate a tad.