Regulators in America made history just over a month ago. They approved a new drug that, for the first time, uses leukaemia patients’ own cells to fight cancer. The drug, Kymriah, comes with a hefty price tag: $475,000 (£355,000) per course.
Novartis’s innovative treatment is one of a wave of drugs promising to revolutionise medicine. Syncona, an investment firm that joined the stock market last year, has a growing presence in this sector.
A rare beast on the FTSE, it is both a fund of funds and a direct investor in promising biotech companies. Syncona joined the market when it reversed into the investment fund BACIT with backing from the Wellcome Trust, which has a 37% stake.
Syncona is run by Martin Murphy, a former Cambridge biochemist with a long history of investment, and its seven core biotech companies span the bold new wave of medicine: gene, cell and DNA therapy. They are at various stages of maturity but each has a common mission: hitting the market with a saleable product. Syncona takes hefty equity stakes, parachutes in its staff, then nurtures its investments all the way to maturity.
It has already achieved this with one of its companies, Blue Earth Diagnostics, which uses molecular imaging to pinpoint prostate cancer. Spun out of GE Healthcare, Blue Earth sells its innovation in America for almost $4,000 a time.
Another of Syncona’s companies, Autolus, is developing chimeric antigen receptor (CAR) T-cell therapy — the sort of thing that now nets Novartis $475,000 a pop. Last week, Autolus raised another $80m — with Syncona pumping in £19.2m to take its stake to 38.4%.
Syncona’s shares have rocketed since it made its market debut, and last week rose by 10% more as another of its investments, NightstaRx, achieved a blockbuster listing on Nasdaq. It develops gene therapies to treat blindness, and Syncona holds 43.4%.
The shares are up more than 40% so far this year, valuing Syncona at £1.2bn — a premium to its net asset value of about £1bn. That’s a hefty gain, but this is just the start. Syncona wants to do two deals a year, eventually building to a portfolio of about 20 investments. The fund side of the business — currently 61% of its value — provides the firepower. It can be converted into cash as and when investments require.
There will be failures along the road, but if, as Syncona hopes, it can find three to five winners in this pack, that’s a decent prospect. Buy.
