UPDATE: The headline has been changed to make it clear that neither Sygnia nor any other investors funding the development of the vaccine will profit from it during the pandemic. The return on investment will only come in future years – IF the vaccine works. We sincerely apologise for the previous headline creating the wrong impression. – EditorÂ
Sygnia founder and CEO Magda Wierzycka, is among a handful of SA business leaders who truly sees the world as her oyster. Well known for her forward thinking, she in 2015 bought shares in OSI, a company that transforms patents from Oxford University into viable businesses for 25% ownership. Within the OSI stable is Vaccitech, a company that has been developing a vaccine for MERS virus and has put them ahead of the Covid-19 vaccine race. In this interview with Biznews editor-in-chief Alec Hogg, Wierzycka explains how her company became the biggest individual shareholder in Oxford University’s Covid-19 vaccine. – Vanessa Marks
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Magda Wierzycka is the founder and chief executive of Sygnia. I’ve got to tell you before we bring Magda into the conversation, Magnus Heystek emailed me something which blew my mind a little bit. He said that Magda’s company Sygnia is the biggest single shareholder of the Oxford Scientific Innovation Fund. Biznews had an interview with Professor Adrian Hill who said we are going to get a vaccine for Covid-19. On Friday, AstraZeneca said they’re going to start making this vaccine that Oxford University is producing. Sygnia’s the biggest single shareholder of the company that owns all of the life long rights for all patents and inventions from Oxford University. Magda, that kind of blew me away. First of all, how did you find out about the investment opportunity and secondly where’s the flaw in my argument?
Well there isn’t. But let me take you through the layers of it. Oxford University, in 2015, struck a deal with a selection of top brand name asset managers in the UK, but it includes the likes of Goldman Sachs and Sequoias and they established a company called Oxford Sciences Innovation which owns the right to commercialise all the IP which comes out of Oxford University and it’s an in-perpetuity deal, and an exclusive one at that.
So basically the way it works is if you have an academic team, they come up with some innovation, they register a patent. Oxford University owns 50% of the rights to the patent and the academic staff owns 50%. OSI looks at the patent, if the patent is deemed worthy of commercialisation, it then sets up a company and right at inception before any money is actually transferred from OSI site that company. OSI owns 25% of the shares in that company. Oxford University 25% and the academic staff retains a 50% stake. OSI then seed that company with capital so that it can hire a management team and start working on developing a product or service. And of course at that stage the only people injecting capital is OSI.
When OSI started in 2015, it had GBP600 million on its balance sheet. OSI deploys capital into that spin out company, it effectively owns the percentage ownership of that spin out changes because Oxford University doesn’t typically put in any more capital and obviously neither does academic stuff. By the time these companies are sufficiently sizeable, OSI tends to own about 50% of each one of these spin outs. As they grow other investors come along as those companies raise capital. Since 2015, Oxford and OSI have spun out 80 companies. They spin out around 10 companies a year. One of those companies is Vaccitech which is the company working on the Covid-19 vaccine.
They have been working on the MERS vaccine, they have a head start on everybody else. So ownership of OSI shares was a bit of a closed club in the sense that the shares never traded. Last year, in the UK there were few asset managers who were under stress because of outflows, and I heard you earlier talking about passives, so some of it had to do with movement of money away from active asset management to passive management and they became fast sellers of the OSI shares or at least any shares that they had.
I have been aware of OSI since 2015. One of my non-executive directors Andre Crawford-Brunt was one of the founding shareholders in OSI, but knowing about it and owning the shares are two different things. So when I became aware of the distressed asset managers, we approached them proactively and negotiated it through different transactions and acquired the stakes in OSI, which means that on behalf of clients we know own 16% of OSI which makes us the largest shareholder. We have a board seat as well.
That’s an extraordinary story. Andre Crawford-Brunt was a shareholder and he’s well known in South Africa for his times at Deutsche. And of course he’s been very successful in the UK as well and the big shareholders of yours. So he spotted Oxford Scientific Innovation or OSI as you call it. He made an investment, obviously spoke to you about it and then the asset managers who, was it through Covid-19, became distressed, put their shares on the market and you bought them?
Alec, one of them was Neil Woodford, so a little bit of a John Biccard of the UK, a very famous asset manager who accumulated a lot of publicity and a lot of assets on the way up, and on the way down. He was a big shareholder in OSI, so he was my first target. When he faced large outflows and I knew that he had a pocket of these shares. we approached Woodford and bought his stake in OSI, and then there were a couple of others.
David I can see you just itching to ask Magda a question.
I would like to know if this is in her Fourth Industrial Revolution Fund or is it held in some of the ETFs or is just a private holding that they have?
So it’s held in a couple of appropriate unit trusts such as the Fourth Industrial Revolution unit trusts, but we also have an exclusive product called Sygnia OSI Fund. Obviously the access to these shares is quite scarce and so we’ve got a lot more commitments to the fund than we have shares available at the moment. But we are hopeful we can negotiate a couple of more deals. So it is a shareholding in some of our products, obviously the appropriate products, as well as being a stand alone product where we offer investors access directly to OSI shares.
So if a private investor wants to invest they then can apply through Sygnia OSI to become an investor in your OSI fund?
That’s correct, and although it’s an unlisted investment, what we’ve done for retail investors in particular is that Sygnia underwrites the liquidity so you can invest in the fund. But if you want to withdraw we will purchase the shares and give you your money back at the prevailing market value.
What about this Professor Adrian Hill’s vaccine and AstraZeneca’s announcement on Friday that they’re going to start producing it. Presumably this will flow through to OSI at some point?
At some point. So Oxford University as opposed to many of American companies is very adamant that they will never benefit financially as an institution from a global pandemic or a global disaster. So in terms of the deal… Vaccitech is the spin out in which OSI has a 45% stake, is developing the vaccine. But what they’ve done is they’ve set up a separate company underneath Vaccitech which is also part-owned by Oxford University directly so that the IP is protected.
The idea is that they will develop the vaccine. They have already moved to human trials. I think six thousand people an hour in human trials. According Vaccitech founders 80% probability of having a successful vaccine by September, according to Sir John Bell, the leading dean of medicine at Oxford, he puts the odds at 50/50 which is higher than any other vaccine in development. So what will happen is that vaccine will be manufactured and sold at cost until a year after World Health Organisation has declared the Covid-19 no longer to be a pandemic at which stage it will become a profit endeavour. So in the meantime it will be done at cost. Obviously if it is successful what it’s just one of the of 80 different companies that OSI owns stakes in.
Magnus tells tells us that you know Roelof Botha, another famous South African, well from the Sequoia Fund.
Yes, he was my best friend at university. He heads up Sequoia Holdings in the US.
Did he encourage you to invest in this fund?
As you know he left South Africa and became part of Paypal. Then he joined Sequoia Capital and now heads Sequoia Capital in the US. Sequoia holding is interesting because they hold the shares of OSI not in the funds, which they run on behalf of the client, but they hold it in the fund their partners fund of Sequoia. not dissimilar to Willis Towers Watson globally. They also have a stake in OSI which they hold in the partners fund rather than in the clients portfolios. Part of the reason is such scarcity of those shares. You know it’s been so difficult to get access to those shares that when you do get a pocket of shares, probably selfishly, you hang on to them.
Wow what an amazing story Magda. Dave, do you have a last question for Magda before we let you go?
What other areas are you looking at? Especially your private funds?
I’m looking at all the big drivers of impact investing. So if I think of the world going forward, I think that active asset management will have a really tough time, it is having a tough time overseas – money is moving to passive, investors are looking for cheap ways of accessing the market. It will all be about low cost access to market returns. On the other side of the spectrum you have alternative investments and there I think the big focus of most investors is impact investing. So it’s anything to do with climate change, healthcare provision, affordable education and affordable housing and technology is the big enabler of being able to deliver that in an affordable accessible manner to the masses which previously was not not possible.
I am hugely excited about OSI and within our side, the convergence of healthcare and technology. You know that a lot of really exciting companies in that portfolio. I know the Covid-19 vaccine is the top everyone’s mind. But there are some amazing innovations within OSI portfolio. So to me healthcare will become a focus for investors, for government and what’s important about government focus is that government focus comes with grant funding. So for instance Vaccitech doesn’t need to raise money from external investors. It has received GBP29 million from UK government with support from all. If they need it. So all of a sudden you’ve got kind of you know if you’re an investor you have access to non dilutive sources of funding in that sphere. So climate change, healthcare, technology. Those are my kind of areas of focus and the business we setting up for Sygnia offshore is an alternative investments business with that at its core.
Magda, the founder and chief executive of Sygnia. Thanks for joining us today and for giving us your your insights into an incredible investment opportunity.
