LONDON, UK: Syncona Ltd has been reached to sell its portfolio company Gyroscope Therapeutics Holdings to Novartis for up to $1.5 billion on a cash and debt free basis.
Novartis will make with an upfront payment of $800 million and up to $700 million potentially due upon the achievement of certain customary milestones related to clinical development, regulatory approvals and reimbursement.
Syncona co-founded Gyroscope Therapeutics in 2016 and has taken a long-term approach to building the business, working closely with its management team.
Today the company is a global leader in ocular gene therapies, combining discovery, research, drug development, a manufacturing platform and surgical delivery capabilities. It has nearly 200 employees and is executing on its Phase II clinical trials for the treatment of geographic atrophy (GA) secondary to age-related macular degeneration (AMD), having generated positive clinical data in its Phase I/II FOCUS trial.
On closing, the transaction is anticipated to result in cash proceeds of £334 million for Syncona’s holding in Gyroscope, representing a £180 million uplift (27p per share) to the previous valuation, a 3.0 multiple on Syncona’s original cost of £113 million and an internal rate of return (IRR) of 55%.
In addition, the sale of Gyroscope will potentially generate a further £255 million of proceeds for Syncona, through future milestone payments, which if received would take total proceeds to £589 million, a 5.2 multiple on original cost. Syncona is also positioned to benefit from any future commercialisation of Gyroscope’s lead programme via a low single digit royalty on future sales revenue.
The upfront proceeds, when received, will further strengthen Syncona’s capital pool and enhance its ability to expand its portfolio and fund its companies ambitiously as they scale, to capitalise on the opportunities available to them.
At its next valuation update, Syncona expects to value its holding in Gyroscope Therapeutics on the basis of the transaction value, including the upfront proceeds and Syncona’s risk adjusted and discounted valuation of the milestone payments.
Based on its preliminary assessment, Syncona estimates a risk adjusted and discounted valuation for its share of the milestone payments in the range of £40 million to £55 million (6p – 8p per share), leading to a total estimated value for Syncona’s holding in Gyroscope in the range of £374 million – £389 million. This would deliver an estimated IRR of 61-63%, and a multiple of 3.3 – 3.4 of original cost.
Chris Hollowood, Chief Investment Officer of Syncona Investment Management Limited, said: “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.
Gyroscope is now an international company with world-class management, positive clinical data, proprietary surgical and manufacturing platforms, and a team of nearly 200 people. The structure of the transaction will provide us with ongoing exposure to Gyroscope’s development and the potential for significant additional returns, subject to certain milestones.
We look forward to seeing Gyroscope fulfil its potential during the next phase of its growth with Novartis, who have an extensive track record in gene therapy and ophthalmology and are ideally placed to complete the journey of taking this transformational therapy to patients.
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.
On closing this will mark the third sale of a portfolio company over the last three years, generating total potential proceeds, assuming full receipt of milestones from the sale of Gyroscope, of up to £1.2 billion, an aggregate 5.8 multiple of cost. We are excited that the proceeds will further strengthen our capital base, enhance our growing portfolio companies as they scale, and fund exciting new opportunities as they emerge.”
Novartis plans to finance the transaction with cash in hand. Closing of the transaction is subject to customary closing conditions including regulatory approvals. Until closing, Novartis and Gyroscope Therapeutics will continue to operate as separate and independent companies.
