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UK hospitals lose millions after AI startup valuation collapses
Two trusts saw nearly $18 million go up in smoke when Sensyne Health was delisted from AIM
Updated Two NHS hospital trusts in the UK have lost nearly £15 million ($18 million) between them due to the collapse in value of an AI startup.
Last month, The Register reported that seven NHS hospital trusts appeared to have lost millions following deals with Sensyne Health – a fledgling AI business trying to discover and develop new medicines – which saw company shares exchanged for patient data.
The company has since delisted from AIM, part of the London Stock Exchange, while some projects continue.
In recently published financial reports, Oxford University Hospitals revealed it had lost £9.2 million ($11.12 million) of the value of the shares it had received while Chelsea and Westminster Hospital NHS Foundation Trust said the value of the shares it held had fallen by £5.4 million ($6.52 million).
In 2017, Oxford University Hospitals, with the University of Oxford, was set to receive in aggregate £5 million ($6 million) worth of equity in Sensyne – then called Drayson Technologies – as part of a series-C funding round. In its 2020-2021 annual report [PDF], Oxford University Hospitals valued the equity it held at £7.3 million ($8.7 million).
But the trust's 2021-2022 annual report [PDF] shows its investments in associates and joint ventures took a £9.16 million hit as a result of the "revaluation of a shareholding in Sensyne Health PLC, due to falling share price over the year."
We've asked the hospital trust to comment.
In August 2018, Chelsea and Westminster Hospital NHS Foundation Trust said it would get a £5 million ($6 million) equity stake in Sensyne. Last month, it did not respond to The Register's questions over the current value of its holdings.
In its latest financial report [PDF], the trust said the shares had been valued at £5.77 million ($6.95 million) in March 2021.
"As at 31 March 2022, the trust recognized the shares at the AIM listed valuation," the report said, putting the figure at £387,000.
The trust has been contacted for further comment.
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Sensyne's shares were delisted from AIM in May, after the agreement of a financing deal which saw the introduction of a new management team.
Other trusts have been hit by the collapse in the company's value. In September last year, Great Ormond Street Hospital for Children said it would receive 1,428,571 shares in Sensyne Health, when the price was around 140 pence, making the holding worth around £2 million ($2.4 million).
In its financial 2021-2022 report [PDF], the Trust recognized the shares at the AIM-listed valuation.
In a statement to The Register last month, the trust said: "Since Sensyne has delisted from AIM, GOSH cannot assign a value to the shares held. Funding from Sensyne is enabling the development of the hospital's data infrastructure to achieve our ambition to advance paediatric healthcare and research outcomes."
In a statement shared with The Register, Somerset NHS Foundation Trust said that under its deal announced in 2020, a total of 1,428,571 shares were issued at a notional value 175p per share, or about £2.5 million ($3 million).
"While the Trust still holds shares in the company, these are no longer traded on the stock market and as a result there is no readily available valuation of the shares," the statement said.
However, the trust said it had not yet shared data under the agreement. Milton Keynes University Hospital and Royal Wolverhampton NHS Foundation Trust also had deals with Sensyne worth £1.3 and £1.7 million respectively when they made the agreements. They have yet to publish their financial statements.
Cambridge University Hospital had agreed to receive 4,285,714 ordinary shares in Sensyne Health for its part in the research project, announced in December 2021. In a statement to The Register, it said it had not shared data with Sensyne, and held no shares. ®
The trust only bought the shares for £5m - what difference does a rise in asset value make?
Oxford University Hospitals became a foundation trust in 2015, giving it the ability to decide how to improve services for patients and, crucially, the ability to retain any surpluses it generates to invest in new services, and borrow money to support these investments.
First of all, the Trust would have not agreed terms on sale of the data unless it thought there would be an increase in value of the asset - in fact it was counting on this.
And yes, technically the Trust bought the shares for £5m, and while the value went up, it didn't actually sell the shares before Sensyne Health was delisted.
So how did they even determine a number for the value of the asset to then be "lost?" Basically the money – the £9.2 million in value – was already accounted for at a previous spending review. "We have £9.2 million to spend because of this investment," the Trust told the spending review. What happens when it doesn't have that money anymore? The accountants have to balance the books.
This is why it was registered as what is known as a net impairment loss: meaning the total value of the trust’s assets is lower. Losing asset value means the Trust can’t borrow as much money as it might like on as favorable terms, for example. Impairments in asset value also affect Departmental Expenditure Limits – so affect plans for the money the Trust will have committed to at spending reviews. According to NHS England, 64,265 patients were waiting for non-urgent elective operations or treatment at Oxford University Hospitals NHS Foundation Trust at the end of June – up from 47,742 in June 2021.