Shares in healthcare investor Syncona (SYNC) jumped 9% to 217.5p on Wednesday, topping the FTSE 250 leaderboard, after the company announced the sale of gene therapy specialist Gyroscope Therapeutics for up to $1.5 billion to Swiss pharmaceutical giant Novartis.
The sale comprises of an upfront payment of £334 million with the potential to generate a further £255 million of proceeds depending on Gyroscope achieving certain clinical and regulatory milestones.
In addition, Syncona will participate in future commercialization of the business via royalty payments through a low single digit royalty payment on revenues.
The share price gain appears stingy in relation to the uplift in net asset value of 27p per share for the cash component and the milestone payments of up to 8p per share.
Chief investment officer of Syncona investment management Chris Hollowood commented: ‘In five and a half years, enabled by collaborations with four leading UK universities, we have taken Gyroscope from a concept to a potential treatment for geographic atrophy secondary to AMD, a leading cause of blindness with no approved therapies.
‘This transaction further demonstrates the success and pace of the Syncona model to deliver for all our stakeholders. We have a growing track record of founding and building globally competitive life science companies with product-focused strategies in areas of high unmet need.’
BIG GAINS
The company’s initial assessment of the present value of the milestone payments is estimated to be between £40 million and £55 million or between 6p and 8p per share, leading to a total realization value of between £374 million and £389 million.
Present value calculations adjust estimated cash proceeds by a discount rate to reflect the time value of money (what the cash could have earned risk free) and the uncertainty of the timing of the cash flows.
The total risk-adjusted return represents a multiple of between 3.3 and 3.4 times Syncona’s original investment of £113 million. The company founded Gyroscope in 2016 and holds an equity interest of 54%, representing 13.3% of the value of its portfolio.
Sycona had contemplated spinning-off Gyroscope through a stock market listing but postponed the decision in May 2021 due to challenging market conditions.
Analysts at Numis commented: ‘This disposal of Gyroscope represents an extremely strong outcome. The transaction results in a significant uplift to carrying value and in our view provides further evidence of the success of the Syncona business model.’
