Investor Syncona blames bear market's ravaging of British biotechs for 'disappointing' returns

Life sciences investment firm Syncona has blamed a “disappointing” drop in returns on plummeting share prices for British biotechs across its portfolio in December.

The London-based company ended 2022 with net assets of £1.29 billion ($1.55 billion) compared with £1.36 billion ($1.63 billion) at the end of September, marking a 5.1% drop in net asset value (NAV) return. The firm’s website currently highlights 12 portfolio companies primarily spread across cell therapy, gene therapy and small molecules.

The valuation of its life sciences portfolio, excluding net capital invested, dropped £52.9 million ($63.4 million) in the final three months of the year. In its most recent earnings report (PDF), the company highlighted three biotechs with suffering share prices that impacted Syncona's own performance for the quarter.

Among them was fellow London-based Autolus Therapeutics, which saw its stock almost halve in value from nearly $3 to $1.85 after announcing a  $163.9 million fundraising round in December. The round was initiated only hours after Autolus revealed its CD19 CAR-T cell therapy hit the primary endpoint in a phase 2 trial in acute lymphoblastic leukemia, but the biotech’s pricing of the stock offering at $2 apiece may have dented the shares.

Achilles Therapeutics’ shares hovered around the $2 mark in October and November before sinking to below 80 cents over December, which Syncona linked to a readout of the British biotech’s lead T cell program on December 6. Achilles claimed the interim phase 1/2a data demonstrated a partial response and stable disease in heavily pre-treated patients with advanced non-small cell lung cancer, but investors were clearly unconvinced.

The final biotech that Syncona singled out is Stevenage, England-based Freeline Therapeutics, which entered November with a share price around 75 cents but ended the year at just 47 cents. Syncona said the stock had been “impacted by market sentiment and delays across its programs.”

“New leadership has made progress streamlining the company, re-prioritizing its clinical programs, and strengthening clinical organization to advance its Fabry disease and Gaucher disease programs,” the investor said. “The company will provide updates on both programs in 2023.”

“Our NAV return over the quarter has been disappointing, with the value of our life science portfolio impacted by the share price declines of our listed holdings, which continue to weigh on our performance,” Syncona CEO Chris Hollowood acknowledged in the earnings release. “In particular, we believe that the challenging market environment impacted the share price of the recent Autolus financing and remain confident that obe-cel has the potential to be a best-in-class treatment for patients with adult ALL.”

Despite a downbeat December, the company pointed to AstraZeneca’s $200 million upfront deal for T-cell receptor therapy player Neogene Therapeutics in November as evidence of the “continued attraction” of Syncona's portfolio to Big Pharma. Coming almost a year after Novartis bought Gyroscope Therapeutics for $800 million upfront, the Neogene deal marked the fourth sale of a Syncona portfolio company in four years, the firm said.

The firm anticipates “financing conditions to remain difficult in 2023” while Hollowood insisted the company “remains positive about the future of our sector.”

Syncona’s portfolio was hardly unique in struggling on the markets this winter. A report by the U.K. BioIndustry Association last week revealed that British biotech IPOs dropped to their lowest levels in a decade in 2022, with the amount the sector raised also plummeting year over year.