Syncona Ltd

LSE:SYNC

Earnings Call Analysis

Syncona's Focus on Capital Allocation

Syncona, a healthcare and life sciences company, is leveraging advancements in biotechnology like gene therapies for cardio myopathies and using a combination of treatment modalities to improve patient outcomes. They have acknowledged the significance of data analytics in enhancing these treatments. While the company has navigated a transition to business plans fitting current capital costs, they emphasize a continuous update of strategies as new information becomes available. Their differentiated balance sheet allows them support companies in unique ways, but they advocate for government-supported, diverse capital access schemes for the industry. In addition, Syncona plans to deploy capital both to form companies and acquire mid to late-stage assets. They intend to fund companies through to data milestones, irrespective of market conditions, yet await potential beneficial changes in the market environment.

Syncona's Commitment to Leading-edge Science and Portfolio Management

At the heart of Syncona's mission is a dedication to be at the leading edge of scientific discovery, particularly within cell and gene therapy sectors. This strategy has evolved to concentrate resources toward these modalities, especially where they offer distinct advantages or are progressing into late-stage development. Syncona's focus on cells, where they are category leaders, is complemented by efforts to drive gene therapy where it provides unique benefits. The company is proactively managing its portfolio, extending cash runways, reviewing preclinical programs, and exploring creative financing to adapt to the high cost of capital. These measures are expected to maximize value while maintaining budget discipline across Syncona's operations.

Identifying Milestones and Inflection Points for Value Creation

Looking forward to the next three years, Syncona has identified 15 key milestones across its portfolio that are poised to impact companies' ability to access capital and drive growth. Of these, six stand out as potential value inflection points — major milestones that can drive significant net asset value (NAV). These include anticipated events such as Autolus's Biologics License Application (BLA), long-term data from Beacon on retinal gene therapy, emerging clinical outcomes from Freeline's gene therapy for Gaucher disease, and Resolution's industrialization of macrophage therapies for liver cirrhosis. Syncona remains optimistic of significant potential across its diversified portfolio despite not all projects needing to succeed to ensure overall growth.

Introducing Forcefield Therapeutics' Revolutionary Cardiac Drug

One of Syncona's exciting developments is Forcefield Therapeutics' breakthrough treatment for heart function retention. With over a decade's research leading to the discovery of two cardio-protective proteins, the company aims to transform treatment for acute myocardial infarction. The proteins, which showed a 67% decrease in infarct size in animal models, have potential for a one-time administration, potentially revolutionizing cardiac care. This is a prime example of how Syncona's strategic investments in novel therapies aim to yield substantial returns and improve patient care.

Strategic Capital Allocation and Active Portfolio Management

Syncona reported a negative return on its life science portfolio of 7% and an overall NAV return of negative 4.2%, attributed mainly to writedowns in certain assets. The company's GBP 621 million portfolio reflects active capital allocation decisions, mainly funding assets close to clinical stages as they approach value inflection points. To this end, significant investment was directed towards clinical and near-clinical stage assets, making up for over 80% of portfolio investments. Syncona also actively manages share price discounts through a share buyback program, reinforcing investor confidence in the company's valuation and future potential. They aim to maintain a three-year funding runway for the portfolio and intend to distribute excess capital should realizations significantly exceed this threshold.

Building the Future: Growth Strategy and Executive Team Expansion

Syncona's growth strategy entails increasing the number of companies created annually and elevating the portfolio to 25 companies by 2032. This strategy targets a diverse and robust portfolio capable of driving large-scale investments and generating substantial returns. Syncona’s executive team, with significant domain expertise, plays a crucial role in driving this growth while being actively involved in portfolio management. The company laid out an ambitious goal to achieve a GBP 5 billion NAV target, acknowledging the current market challenges but remaining dedicated to their strategic objectives.

Earnings Call Transcript 2024-Q2

[Christopher Hollowood, executive]

My name is Chris Hollowood, CEO of Syncona, and I welcome you to our Interim Presentation. Over the last 6 months, we've been focused on executing on strategy against the backdrop of a very challenging market. We reported a small decline in NAV principally because of the write off of the Gyroscope milestone after Novartis' decision to discontinue GT005. We talked about at the full year a rigorous capital allocation policy, which we think is essential to navigate this market. The macroeconomic environment continues to be very challenging for biotech companies both in terms of the cost of the capital, but also the access to that capital. That brings financing risk clearly, but also brings opportunity and we're looking at both. Proactive management of the portfolio is key. We are active managers so our skill set really comes to the fore.We know clinical data is value even in this market and that is where we're focused and that can be seen because 80% of the capital we've deployed in the first 6 months of this financial year has gone into clinical or near clinical companies. One of the investment opportunities that we saw was our own shares and we launched a buyback of GBP 40 million back in September this year. The balance sheet we've always talked about as being strategic and it's ever much so in this market where we can really crystallize the capital formations that allow our companies to progress when other companies are struggling, helps us to navigate the cycle and move our portfolios to key milestones. One of the things we've been very focused on over the last 6 months is the buildout of the team. We made some great hires. You're going to hear from Roel and from John later in the presentation.Against this backdrop of a strong balance sheet, a strategy that's set to deliver growth, a really experienced team that has now worked together for a considerable period; Martin has decided to step down as Chair of SIML. I'd like to personally thank Martin for all he has done to get Syncona to the point it is today. It's been a phenomenal success. We look forward to another decade of growth. I know the team would thank him as well for the experience that he's brought to them and the growth that they've seen in their careers. He will stay on a couple of Boards for us to help navigate them to key junctures so we're not losing him from that value in those portfolio companies. He leaves us with a portfolio that has 6 key inflection points over the next 12 to 36 months that we believe if positive have the potential to deliver significant NAV uplifts.I'm now going to hand over to Roel, who will walk you through the market opportunity.

[Roel Bulthuis, executive]

Thank you, Chris. Good morning, everyone. Let's see if I can handle tech. Good morning, everyone. So my name is Roel Bulthuis, Managing Partner and Head of Investments at Syncona. Joined Chris in April to help scale the business to deliver on our ambitious growth targets. I've been an investor and deal maker in the health care sector for over 20 years now and have previously built successful investment teams and portfolios at Inkef Capital and M-Ventures. And I wanted to spend a few minutes to talk you through the market context that we're operating in and how we aim to leverage our core capabilities to deliver on our strategy. I think we're all aware that we continue to operate in a very challenging market environment with significant pricing pressure and very limited access to capital.We strongly believe that the fundamental and long-term value proposition of our industry remains and that markets will come back to recognize the value of late-stage differentiated assets. We also believe that the core premise of our strategy to develop first and best-in-class molecules to late-stage clinical continues to be rewarded by pharma and investors. And while general M&A is at a low level in our sector, we do see a return to later-stage acquisitions by pharma who buy into assets that they can add to their late-stage pipeline and/or to their commercial portfolio. Pharma continues to need to replenish their portfolios with new assets and innovation continues to come from biotech. With that, valuations for later-stage assets are slowly recovering. The challenge remains, however, for earlier stage assets where there's significant pressure on valuation, very selective access to capital.And in private markets, we see that down-rounds are becoming more and more common. And so as recognition of value is shifting to later stage assets, getting access to capital and funding our companies to data is key. And that means that for us, we are very focused on leveraging and rationalizing our own capital allocation to our portfolio while we leverage external sources of funding to fund our companies to data and out of the current market environment. With data, we are convinced that there is realizable value in companies when they get close to the market as you can see and as I'll illustrate by some of the examples on the slide. As a firm, I think we have an incredible track record to fix science and translate that science to products that create value for patients and for investors.And I believe that when Syncona was founded, it really transformed the U.K. and European investor landscape with its ability to translate unique science to products and doing that with an unprecedented level of ambition that brought substantial funding, senior executive talent and discipline and focus to the sector. Today, our portfolio is maturing with a substantial focus on clinical stage assets and an organization that is increasingly experienced in managing these assets. And so while we continue to believe that our core company build strategy is fundamental to our ability to deliver differentiated products to the market, we also believe that in the current market we can leverage our balance sheet, our access to the market and our expertise to deploy capital against clinical stage assets especially during the current market environment where pressure on valuation and constrained cap tables give us a significant ability to leverage our strategy towards these deals.This is not a new activity for Syncona. As many of you know, our investment in Blue Earth Diagnostics delivered significant returns to shareholders and our more recent acquisition of AGTC was the basis for the Syncona team to build a new leading ophthalmology company called Beacon. In each of these cases, our investment and our investment thesis is based on a unique insight on the side of the Syncona team that we believe that can accelerate value creation of these companies and data. And so investing across these kind of external opportunities as well as clinical programs in our own portfolio, we can effectively prioritize capital allocation to drive to outcomes. We also continue to be focused on early stage science that we can integrate into our core company build model. And so this coupled with our focus on late stage assets means that we're building a portfolio with the potential to deliver growth on the short, medium and long term.I'll hand it back to you, Chris.

[Christopher Hollowood, executive]

Thank you, Roel. So we're launching today a new framework, by which we're going to categorize the portfolio. This is to allow our shareholders a lot greater visibility on progress within the portfolio and the milestones that really count as these companies progress to late stage clinical data. Quite often on our valuation framework, NAV uplifts don't always line up with the progress we see. And hopefully, this framework will allow investors to see the signals in the portfolio that might progress to capital access and capital access that brings NAV increases. So we see 4 distinct phases. Firstly, when we find science; we work with the scientific founders to set strategy, set the commercial opportunity, buildout the management team and we call that the operational build phase.Once that management team is in place, the Syncona team's role removes itself from the executive functions, but stays in the strategic functions; partnering with that company, helping to govern that company, intervening for course correction, helping to spot opportunities and drive growth. Between the operational build and the next phase, what you see as the company push through the preclinical stages, get into the clinic and get emerging clinical data signal. This is the first signal in patients that your biological thesis is going to translate to some clinical result. It's often with just a few patients and it's quite an exciting time because when you get that signal, you really know you're on to something. At that point, what the company needs to do is consolidate that by working out what the best dose is, getting more patient data, getting longer-term data and put together what we call a definitive data set, which is the data set that's required to go to the regulators to get permission to run a pivotal trial.Once you're at that point, you're entering the zone where we think very attractive M&A is available to the company, but you need to drive forward to create potential for that M&A to realize and so you execute on your pivotal trial, you build out your commercial infrastructure and then you get an approval and launch that product. We've seen companies in all these phases across Syncona's history and we see NAV uplift certainly at the later stages. Emerging data sets in Gyroscope and Nightstar drove acquisitions that led to hundreds of millions of pounds of NAV increase. A successful launch in Blue Earth and the acceleration of the sales in that business saw that company over several quarters increase at GBP 100 million of NAV. These are really meaningful events that are few, but you only need a few to drive growth and that is what we're focused on.So it's through that framework that we think about our portfolio. And as I said upfront, we're very focused on active management, we're very focused on capital allocation and we're very focused on getting companies that have the ability to get to the late stage where we think there's big NAV increases possible, we're going to get them there. So that is prioritizing them to derisking clinical data and then focusing on execution of the expected milestones that will drive capital access in the rest of the portfolio to allow them then to complete that step. We've had a great history in cell and gene therapy. Syncona's model is to be at the forefront of science. The forefront of science for the last decade was cell and gene therapy. We're still big believers in those modalities. Those modalities now settling down to be key modalities in this industry and we will take our portfolio that's in those spaces and really drive where the value is.We believe in cells, that is where we're category leaders and so we will drive those companies. And in gene therapy, we think there are settings where they distinctly deliver orthogonal data what any other modality can deliver and we will focus capital there to take those products into the late stage. That is the way we think we're going to deliver best risk-adjusted return. Across the rest of the portfolio, it's all about discipline. We're working with all of our companies to extend cash runways, to rationalize budgets. We're reviewing the preclinical programs to see if they still have merit in the current high cost of capital environment and we're cutting programs where possible. We're making sure companies explore creative sources of financing.We saw Quell at the year-end do a fantastic deal with AstraZeneca, significantly improve that company's cash runway that's going to let it get to really meaningful data now before it needs to fund raise again. Also widen syndicates and where possible seeking out liquidity events. And when you apply that to the portfolio, we have a very exciting 3 years coming out. We've identified 15 milestones across the portfolio that will drive those companies' ability to access the capital to develop and grow. Amongst those 15, there are 6 which we have categorized as value inflection points. These are milestones which we believe have the possibility of positive to drive significant NAV value. In Autolus, we all know that they're about to file the BLA. We think obviously there's going to be some incremental value there, but we really see the value getting driven by a successful commercial launch and we'll get the data on that in calendar year 2025.In Beacon, one of the promises of Beacon is the long-term nature of that therapy, a single injection to arrest the progression of blindness and actually in some patients actually improve their vision so quite remarkable. We'll get 24-month data in the next calendar year. That will be value to Beacon. Freeline, I'll talk about a bit in a minute, but it's got a very interesting emerging data signal. We'll see them dose more patients and we'll see those patients get to later time points that I think will read through to clinical outcomes. I think that is very meaningful in that setting. And Resolution, a company we've not talked about very much, is using macrophages to treat liver cirrhosis. They have an academic study run by the scientific founder there, which has reported data which really looks quite intriguing in terms of the outcomes for those patients.What Resolution is focused on is industrializing the format of those macrophages so it can get delivered to hundreds and thousands of patients to make it a commercial product. But that academic data derisks what they're doing and therefore raises our expectation of what that product will perform at and we'll see that in 2026. In the emerging data set, we've got Quell in there, trial for solid organ transplant and expect data over the coming 24 months. And Anaveon, their second-generation product, which is engineered to improve on the first-generation product ANV600, will give us data in 2026. We don't need all of these to work. In our past not everything has worked and we've still driven significant growth. We need some to work because when they work, they're really, really significant.So let me tell you about Freeline. It's obviously a company we founded in 2015 and has developed a therapy for Gaucher disease, which we think has the potential to be the best in class and actually first-in-class gene therapy for that disease. So Gaucher disease is one of what's known as lysosomal storage disorders. So these are disorders of the lysosome. The lysosome is a part of your cell that basically cleans up all the junk in your cell and keeps your cell healthy. There's a number of these diseases characterized by mutations to the specific proteins in the lysosome. In Gaucher's case, that's GBA. What it means for this patient is there's a buildup of toxin in cells and those cells are then consumed by the immune system and the immune system then aggregates that toxic waste and those cells traffic to the liver, they traffic to the spleen and these patients see enlarged livers, enlarged spleens, they lose lung function, they fracture easily.They actually bleed easily cause platelet counts are low. It's a horrible, horrible lifelong disease. The current therapy for it is enzyme replacement therapy so you have to go to clinic once every 2 weeks, it's every 2 weeks for your entire life, to get an infusion. So you have to take 1/2 a day or a day of work to do it for your entire life and they get infusion. That enzyme lasts in your body for about a day maximum and it does ameliorate some of the effects. What Freeline has been able to do is use its gene therapy technology to deliver a working copy of the gene to the liver to get the liver to synthesize the protein that's secreted into your blood and the blood traffics it to all the cells that are affected. We saw data from 2 patients where that key immune cell, the one that is the end of the pathology, has been normalized by this therapy, really remarkable data.We expect that to translate to real clinical outcomes as we move beyond the 6 months. The market for this is about $1.5 billion annually. It's an annual $1.5 billion market. This gene therapy has the potential to disrupt all of that. That's why we're excited and that's why active management really counts and we've decided that in this case, we want to do something other than just fund the company. We want to acquire it all so we can have our shareholders wholly exposed to the excitement of this product.So with that, I'm going to hand over to John, who's going to talk about some of the newer opportunities.

[John Tsai, executive]

Thanks, Chris. It's nice to see everyone this morning. My name is John Tsai. I'm an executive partner at Syncona. I've joined Syncona for approximately 6 months. I'm a physician by training and I've been in the pharmaceutical industry for about 25 years. Most recently I was the Chief Medical Officer and Head of Global Drug Development at Novartis who had responsibilities for 500 clinical trials and 160 projects. And based on that, I saw the great science at Syncona and was excited to join the organization and continue to see great advancement in the overall portfolio. So I'm here to talk to you about driving growth and I think we've seen some tremendous acceleration in science in a couple of different waves of innovation over the last number of years.Since the beginning of research and development and drug development, what we've seen is the first wave was small molecules and we've seen a lot of drugs come to the forefront in that first wave. Second wave was around monoclonal antibodies and where we've seen drugs like HUMIRA take a front stance. And where Syncona has really taken the leadership is in that third wave where we've seen advancements in cell and gene therapies where we've seen transformational benefits for patients and I would dare even to say cures in certain diseases where we didn't think it was possible. I think what we're seeing now is actually the fourth wave and we as a team at Syncona are taking advantage of the fourth wave and let me tell you a little bit more about the fourth wave. What we have is increasing understanding of the genetics of the individuals.We have data on proteomics, transcriptomics and what we're able to do is analyze all of that information while having the capabilities and understanding of different modalities. What we have in modalities? You've heard small molecules, large molecules, cell and gene therapies, ADCs, gene therapies, we've got even more that's available to us. And it's with that combination where we understand the biology combined with the modality and the ability to analyze all of that data that we will stay in the forefront of this fourth wave and we've started a couple of companies based on that philosophy. So a couple of the companies you can see already here is Mosaic, combination therapies for small molecules moving quickly to the marketplace in oncology. Second, you'll see Kesmalea. This is a targeted protein degradation platform looking at protein homeostasis.And 1 that's particularly of interest to my heart and you'll see why I say that in a second is Forcefield therapeutics and let me give you a little bit more background on Forcefield Therapeutics. Forcefield Therapeutics has a vision of pioneer therapeutics to retain heart function. And in fact what you've seen is there's been very little advancement in the area of pharmacologic treatment in cardiovascular disease. Cardiovascular disease is the leading cause of death around the world. Someone has a heart attack every 33 seconds and there are 3 million heart attacks every single year. And in the area of pharmacologic treatment, there's been only 2 therapeutics that have been invented over 40 years in the area for acute myocardial infarction and this is where we've taken a stance to move things forward in the area of Forcefield.Forcefield has been the work of Professor Mauro Giacca, who's been in the area for over 30 years and has been working on this project for the last 10 years. He's used an extensive array library of 1,800 secreted proteins within the mouse secretome, analyzed that data over 1,800 different proteins as I noted and found 2 that are cardio-protective. We've actually turned those 2 proteins into recombinant proteins that can be used as a onetime administration for acute myocardial infarction. We've seen tremendous benefits in mice and animal models where we've seen 67% decrease in the size of the infarct in animals and we're looking forward to moving this into clinical studies. And if I could indulge you in a little bit more science and if you could just help me here. What you see when you get to the hospital. People actually have a heart attack, they call the ambulance and you get in the hospital in the first 3 hours to the first 6 hours.What happens is you get oxidative damage where potentially 1/3 of your heart cells die. When your heart cells die, they don't come back. Over the next 72 hours what happens is you see the acute inflammation in what we call program cell death or apoptosis and at that point, up to 1/2 of your heart cells could die and they don't regenerate. And by the end of the first month is where you get fibrotic tissue overtaking the tissue. So at the 1-month mark is where you begin to see the heart failure. These are the mechanisms by which the Forcefield drugs work by increasing the ability for us what we call autophagy or improvement in cell life, decreasing apoptosis or decreasing cell death and decreasing fibrosis. I've been so excited about the science that I've decided to take over as the CEO for Forcefield. I'm looking forward to bringing this therapeutic to everyone.So with that, I'll turn it over to you, Rolf.

[Rolf Kristian Berndtson Soderstrom, executive]

Thanks, John. That's a tough act to follow. Good morning, everyone. As Chris has pointed out, access to capital is a challenge the whole sector is facing. So alongside talking about our NAV performance this morning, I'm also going to touch on capital allocation and how we manage our capital pool, which makes Syncona's balance sheet a real differentiator in these markets. So you can see from the slide during the period, we saw a return on our life science portfolio of negative 7% and an overall NAV return of negative 4.2%. Our life science portfolio is GBP 621 million reflecting an allocation of GBP 59 million into the portfolio, which was largely offset by the writedown in Gyroscope milestones following Novartis' decision to terminate the lead program. We also saw a slight uptick in listed values predominantly driven by Autolus and a small FX tailwind.Turning to capital allocation. We've always had a rigorous approach to capital allocation. But in the current market and with our portfolio maturing, we focus on ensuring capital is deployed to those assets which are approaching or in the clinical stage because this is where we see near-term value inflection points which are likely to be recognized by the market. At the same time, we need to balance this with ensuring we continue to make capital efficient investments into new and exciting areas and this is going to drive the next generation of portfolio companies, which John so nicely gave us an example of. In the period, we deployed GBP 59 million into the portfolio and, as Chris said, over 80% of that was into clinical and near clinical stage assets. Within this amount, 26% was allocated to Beacon, our late-stage retinal gene therapy company, which we expect to see progress into pivotal trials in the first half of 2024.We've also continued to invest in the early stage assets to ensure we grow new businesses to drive value over the longer term. These investments tend to be less capital intensive in the early years and we have brought in like-minded co-investors who share our vision, which brings with it capital efficiency. These investments are tranched to ensure we match capital investment to operational progress in the company. Our primary focus is to deploy capital into our portfolio companies. But as part of our capital allocation review, we do look broadly at the best investment returns available in our pipeline, but also in our own shares. During the period, we saw the discount in our share price increase to levels that materially undervalued the life science portfolio and the value potential we see in it.Consequently, the Board initiated a buyback program of up to GBP 40 million signaling their confidence in the portfolio and the compelling investment opportunity it provides. We're maintaining our guidance of GBP 150 million to GBP 200 million for the full year. The range is really dictated by the timing of new deals. And as Chris has mentioned, we've got some exciting prospects in the pipeline, which we hope to land in the second half. I would add that this guidance does not include the GBP 40 million of the share buyback program. We've discussed before, our aim is to balance capital efficiency with the confidence in our funding ability. Our aim is to keep up to 3 years of a funding runway to ensure that the portfolio of companies are funded through those key milestones that will drive NAV and capital access.To the extent we benefit from realizations that take us significantly above the 3-year funding runway, the Board would look to return excess capital to shareholders. Our capital pool policy is to maintain the value of our capital pool whilst ensuring liquidity. In these volatile economic times, we try to achieve that by holding 12 to 24 months of funding in cash and short duration treasuries alongside a selection of low volatility, highly liquid funds with an overall aim of trying to achieve a core CPI return over the whole of the capital pool over the medium term. We closed the half with GBP 581 million in our capital pool and we delivered a 1.3% return during the period.With that, I hand back to Chris. Thank you.

[Christopher Hollowood, executive]

Our model is impossible unless you have great people. We're very active managers of the portfolio. You've heard from John, we take executive roles in the portfolio to really drive them and drive that growth and we're really pleased where the team's got to. Obviously you've heard from Roel and John today who joined the team this year. That progression with the team with Ed and Lisa and Magda. And Ken and Lisa joined us as Executive Partners over a year-ago now. All of these people are CEOs in their own right that can go in, lead independent deals, can lead companies, can take on chair roles, can assist on advisory boards for particular events such as Lisa's doing in the commercial launch of Autolus. So we are set with a team now that can deliver the strategy at scale.We never have been in a position where we've got 5 independent lead investors that can effectively grow the portfolio and we've never had a position where those lead investors are augmented by experienced executive partners that can drive execution, but also bring their own domain expertise. To have the benefit of John's clinical expertise across the whole portfolio and the investment team can come to John and talk about the investment opportunities they're seeing is something we've never had the benefit of before and we're already seeing the quality of that. We remain very committed to the targets that we laid out a year-ago. It is not going to be a straight line to GBP 5 billion particularly in this market. But what we set out was a strategy where we're going to increase the number of companies that we're going to create. We created 3 last year so we already hit it.This year in this market, we're going to take greater opportunity in late-stage assets as Roel outlined. But also where we see great opportunities in our own portfolio to do interesting things that really drive risk-adjusted returns for shareholders, we'll do those as well such as what we're doing with Freeline. Those 3 new companies a year are critical to drive a bigger and broader portfolio. We're going to drive that portfolio to 25 companies. That's key because it increases that diversity across the portfolio, but also increases the optionality of where we can deploy large checks and that optionality to deploy large checks means we've got better choices and better choices lead to better returns. That diversity doesn't come from a top-down diktat.That diversity comes from Syncona exploring the frontier science. On the frontier science, there are brilliant people doing a set of diverse things. And if you follow the very, very best things and you match them with the modalities that are right in those settings for those diseases and that biology, just as John outlined, the portfolio will naturally diversify and we're already seeing that as we're moving beyond the third wave into what we think the next decade will bring in terms of modality and therapy area. When we have that portfolio, what it means is we've got a set of great choices where we want to put our GBP 100 million checks down to drive to those 3 to 5 companies that are going to be the underpinning of that GBP 5 billion target by 2032.So in summary, clearly the macroeconomic environment is difficult, but we are doing we believe all the right things to execute within it and make sure our companies are strong, hitting their milestones and will emerge from this in the right shape. We're resolutely focused on capital allocation. That is a key differentiator in this market. It is the best way to drive NAV growth when coupled to active portfolio management and you can see us doing that. We've outlined a new framework. Within that framework, we see 6 value inflection points that can really drive NAV. To reiterate, they don't all need to be positive. You just need a few to be positive and that's what will drive NAV. And the balance sheet both enables the capital formations in those companies, but also the strategic space to start the new companies especially when that part of the market is receding, we will still be there.We will still be creating the biotech leaders of the future, which means in 3 to 5 years' time, we will own the best companies that are entering the clinic at that point where the market has missed them. We are focused on delivering our targets. We believe we're making really good progress in. A lot of the platform capability has gone in this year particularly around the team. We're very pleased with where the team has got to. We are not aiming to emerge in this market in the same shape we entered it, but aiming to emerge in stronger shape with a more mature portfolio with later-stage milestones that drive greater NAV uplift and potentially liquidity events as well. Really appreciate the support of our shareholders. We look forward to speaking to you over the coming days.We're obviously very happy to take some questions now. Thank you very much.

[Unknown Analyst]

[Technical Difficulty] patient to be doing something similar to AGTC where you take it off market, package it up, resyndicate and sort of build up a stronger rare disease portfolio with that one? And then sort of finally, just generally your thoughts on Autolus. Obviously they've got a lot going on. How well financed do you think they are to undertake a strong commercial launch and then drive kind of more value for you?

[Christopher Hollowood, executive]

Rolf?

[Rolf Kristian Berndtson Soderstrom, executive]

Sure. As I said, it's just a range of things that we have. So within the existing portfolio, we have a number of things that will be coming up. I think the scope is both around partly will be driven by Freeline because I think it's not just the taking of that private, but it's also then the funding of it through its next stage. And then I think a third element of that would be we've sort of hinted at some other things that we're looking at. Within Chris' target of 3 new companies, there's a few things that we're looking at. If we land some of those in the second half, that could sort of indicate perhaps towards the top end of that valuation. The only caveat I put on that is you can never guarantee the timing of these things. But the anticipation is that we'll land some of that within the year, which would drive us towards the upper end of guidance.

[Christopher Hollowood, executive]

And then on Freeline, we think that data is very compelling. We think the public markets missed it. And some of that you could argue around the capital structure, how's our ownership position and liquidity, et cetera, et cetera? So we think it's a much better place for it to be private where that team can focus on execution. You can actually do in a more capital efficient way because you can remove the public overhead. And yes, the financing of that will be something we consider once we've taken it private. Obviously we're well capitalized ourselves. What we see as a product there that if it continues to progress as we expect could be in a pivotal trial in 2025. And that's the zone we always talk about as being an exciting zone to get our companies to.And then your wider question around kind of consolidation. I am very, very impressed by Michael Parini, who's the CEO there. I think he's a first rate CEO. And I think we are in a market where you're trying to aggregate your best people, your best assets on to similar platforms and do it in a cost efficient way. That is something we could consider. We have no plans to do it now, but it's logical in this current market. And then on Autolus, Autolus is a company we're very proud of. To go the journey from a UCL spin out all the way to a product approval is an incredibly difficult journey and that company is on the cusp of completing it so well done. Obviously there are things that happen on manufacturing that we learn such and such. But now it's at the point where I think we can really see sort of the execution.We expect the BLA filing to go as per guidance. We think they're in a good position to do the commercial rollout. I think a number of people in the room have been to visit the manufacturing facility up in Stevenage, which I think is pretty impressive. They announced their pivot out of oncology with the lead asset and I think that's an exciting breaking space that Autolus' product is well positioned for given its profile. I think the real sort of NAV uplift traction that you should expect is around the commercial launch and that's not going to be immediately obvious at the point of product approval. You're probably going to have to wait beyond that to see how those sales are tracking.

[Miles Dixon, analyst]

It's Miles Dixon from Peel Hunt. Three questions if I can. First one I think for John. You described the fourth wave. Is that really the right tool for the right job? And secondly, Chris, I think you talked about the focus on capital allocation and later-stage assets. Is that work now complete and are all your portfolio companies on board singing from the same hymn sheet or is there a bit more work to do? And then thirdly, around the autumn statement, I think probably for all of you, there's lots of discussion of what's best for U.K. Healthcare and Life Sciences. What would be on your Christmas list for the autumn statement?

[Christopher Hollowood, executive]

It's going to be a circus.

[John Tsai, executive]

Miles, I'd like to start with my Christmas list, but maybe we can go back to the very first question. The fourth wave, is it the right tools for the current job? I don't think we actually have a choice to be honest with you, Miles. Because if you think about the diseases that afflict humans, we've made so much advancement in terms of understanding the biology and truly since the genes were mapped out, now we've got more tools than ever. As I mentioned, you've got radioligand therapies, ADCs, small molecules, large molecules and it's actually a combination of those modalities that will allow you to get the best benefits. We're seeing that in oncology where we see immunotherapy combined with chemotherapy that was the start, but now we're also seeing perhaps ADCs could add to the incremental benefits that we've seen. Now they're translating that into immunology.In cardiovascular disease, we're talking about gene therapies in terms of treatment for cardio myopathies. These are patients that actually had a death sentence for 5 years and now these patients are living full lives. So how do we actually use that capability? And layering on top of that, what's really great is the data analytics capabilities. I mean we have more data than we know and you can analyze that information through digital means, laboratory results. If you could layer all of those components together, it means better outcomes for patients and we're really taking advantage of that, using the knowledge of the team and the forefront of the understanding of science at Syncona to really drive that forward. So I think to go back to where I started, I don't think we have a choice and I believe the fourth wave is already here.

[Christopher Hollowood, executive]

In terms of the portfolio, it's a significant amount of change management to go from business plans that were designed for different cost of capital to ones that better fit the current because I think we're through a lot of that work once they were 100% through and I think the majority of our companies now have plans of things that we would support and that's good. The work is never done. So you're always getting data that's course correcting your assumptions and resetting our strategies and that's right. That's the dynamic nature of what we've got and we're working very hard to ensure that those companies are properly capitalized as well because what we don't want to do is have great science impaired by not getting the right money around them. Everything in our portfolio, we like a lot. We found most of it and built it with our own bare hands. But it's not just about being a great company. It will be a survivor market for those that can access the capital.It's where our portfolio is differentiated because the balance sheet allows us to support in ways that others can't, but it can't all come from us either. Christmas lab, money. Look, we're encouraged by the government's announcements. I think what we'd like to see that we'd like to see that reduced to tangible schemes and tangible schemes that have the flexibility to help all of the players in the market. I guess firstly, the access to capital piece is great. But if it comes in one way that supports 1 section of the market, then all you've got is 1 structure capital for the market. And just as you want diversity of companies, you want diversity of capital because different capital matches different business models. I think that would really help the robustness of the offering. And I think the government is committed to it and it's a cross-party issue so labor committed to it. I think there is the kind of flip the switch and the great intent to the actual this is what's going to happen that we'd like to see. Anything else?

[Edward Thomason, analyst]

Edward Thomason from Liberum. So I had a question actually about capital allocation, but I suspect it will be probably shared across the panel. But with your balance sheet strength and particularly where you're pointing to valuations on Slide 6 are public markets and in light of your comments, Chris, at a recent conference where you talked about private markets are yet to catch up particularly in the early stage; would you look to be deploying your capital in public markets, potentially adding midstage companies on the cusp of proof of concept rather than looking at deploying it into early stage and creating companies from scratch?

[Christopher Hollowood, executive]

I think the answer is we're going to look to do both because that company formation that is the strategy for all seasons and we want to make sure that in 5 years' time, we've got that crop of companies coming through. But clearly, as Roel talked about, there's later-stage opportunities so maybe you want to take that bit.

[Roel Bulthuis, executive]

Yes. I mean there's an opportunity to help accelerate and diversify the portfolio when you look at both, right? So long term, we continue to have a strategy to do our company build. So those are companies that take time to build, they take time to mature and they take time to get to realizations. So that is something that is part of our long-term planning. I think in any market you can find, whether it's in public markets or in private markets, you can find assets that you can add to the portfolio on the condition that it fits strategy and on the condition that it's based on an investment thesis where we can contribute something that is differential and that can help us accelerate the value. And I would say that in the current market, yes, private markets still have some valuation reset to go.I think there's a couple of other things in the private market that we take into account in terms of capital access longer term. That further differentiates us from I guess what you would see as the traditional investors in private markets. But there's a lot of undervalued companies in public markets as well that have interesting assets and that could be targets for a group like ourselves. So we look at it broadly. Investment decisions I think should be driven by fundamentally I believe in the assets and our believe in our ability to translate those assets to something that we can realize and I guess we're less dependent or sensitive to transaction structures there if we can realistically make that work.

[Edward Thomason, analyst]

I just have a follow-on question, more of a crystal ball question of looking into next year of how we think it will play out? What's the real, whether it's a soft catalyst or a hard catalyst for the valuations, your NAV to start improving because the prospects and just generally the market improving, but also a more risk-on attitude towards biotech. So is there any events that you think will be a catalyst, whether they're hard or soft next year?

[Roel Bulthuis, executive]

I was going to stay away from the crystal ball. I think it's really important when you look at financing companies right now not to try to put any type of crystal ball or expectation for the markets on it. The expectation is that we need to fund our companies to data independent of what happens in a macroeconomic environment, independent of what happens to private or public markets. I think we have always conservatively financed our companies, conservatively meaning that there is a significant amount of capital that we can deploy. We are actively syndicating our companies to make sure that we leverage external capital so that we build cap tables that have quality money and allow us to finance companies to the future. It will be helpful if we see some changes in the external environment and it might accelerate our ability to get to realization. But if you look at some of the slides that we showed earlier, we don't believe that by the time that you get to data that is late clinical and that really validates that you have a product, we don't believe that you're so much subject to market sentiment and you're so much more subject to actually providing something to pharma that can contribute to a pipeline. That's where we need to get.

[Christopher Hollowood, executive]

Very good. Well, if there's no more questions, there's still tea and coffee outside and we'll be around if you want to ask us individually. Thank you very much.