Letter from Gatemore Capital Management LLP to Sensyne Health PLC

LONDON, July 19, 2021 /PRNewswire/ --

Sir Bruce Keogh, Chairman of the Board
Lord Paul Drayson, CEO
Sensyne Health PLC
Science Park
Schrödinger Building
Heatley Rd
Oxford OX4 4GE

Dear Bruce and Paul

As you are aware, Gatemore Capital Management LLP ("Gatemore" or "we") manages the Gatemore Special Opportunities Fund, which as of today, has an economic interest of approximately 5.9% in Sensyne Health plc ("Sensyne" or the "Company").

The purpose of this letter is to request that the Company take steps to achieve a secondary listing on the NASDAQ market in the US in addition to the LSE's Alternative Investment Market (AIM).  We believe this listing will unlock significant value and assist in positioning Sensyne to become a global leader in clinical AI, a field which is estimated to grow 40% per annum to $120 billion by 2028^[1] and will fundamentally change drug discovery and shape better global health outcomes.

In this letter, we will explain the rationale behind this request and detail why, in the next stage of Sensyne's growth journey, a secondary listing is the appropriate course of action to ensure an appreciation of the Company's intrinsic value in the market.

Background

We have been enthusiastic investors in Sensyne since January 2020, and have appreciated our collaborative engagement with both the Board of Directors and Management.  We have been particularly impressed with the progress you have made over the past year, including:

• amassing a database of 18.2 million total anonymised patient records, comprising 8.5 million from the NHS in the UK and, most recently, an additional 9.7 million from two US healthcare systems: St. Luke's University Health Network and the Colorado Center for Personalized Medicine;
• making an equity investment and executing an exclusive strategic collaboration with US-based Phesi and gaining access to an additional 13.5 million anonymised patient records, bringing your total accessible records to 31.7 million;
• the imminent completion and launch of the SENSIGHT database, comprising the standardisation and curation of patient records to dramatically reduce the time and labour needed to analyse data;
• partnering with top tier pharmaceutical, research, and technology companies and institutions including Bayer, Alexion, Roche, Bristol Myers Squibb, University of Oxford, Microsoft and Cognizant;
• conceptualising, creating, and monetising, in under three months, the MagnifEye AI-powered lateral flow test analysis platform;
• launching the SENSE clinical algorithm engine, using AI to help lower costs for hospitals, and improve administrative operations and clinical workflow; and
• improving dramatically the management team, board, and overall corporate governance.

With the advent of the state-of-the-art SENSIGHT platform, the Company can now offer high-volume, high-quality, easily-parsed disease-specific data to big pharma.  As we have seen, this is of significant value to drug makers who are finding increasing uses for this data, including to accelerate R&D, improve and optimise clinical trial outcomes, reduce approval times, find new drug targets and reduce trial costs. Sensyne already has such projects underway with Roche, Bayer, Bristol Myers Squibb and others.  Furthermore, we believe your strategy to monetise SENSIGHT on both a project basis and as a SaaS offering will prove successful.

Importantly, we also commend your commitment to an ethical and transparent business model and careful handling of records and believe the growing number of partnerships with NHS Trusts validates your approach which is setting the standard in the industry.  Sensyne's unique and non-replicable model serves not only as a "moat" around its business but also as a way of achieving numerous positive impacts on global health outcomes. The recently announced agreement with the UK's Department of Health & Social Care to use MagnifEye to read COVID-19 lateral flow diagnostic tests as part of the UK government's asymptomatic testing programme is further evidence of the success of your model, and the trust it has engendered in the UK's healthcare systems.

Sensyne Patient Records and Revenue Growth^[2]

[Figure 1 – Sensyne Patient Records and Revenue Growth]

Photo: https://mma.prnewswire.com/media/1576556/Figure_1.jpg

Current Valuation

However, and despite Sensyne's recent achievements, we believe that the Company remains significantly undervalued.  While Sensyne now has one of the most valuable patient datasets globally, on an enterprise value to patient record basis, the Company trades amongst the cheapest of its peers — not even considering the significant value of Sensyne's app platform and the SENSE clinical algorithm engine business line.

Enterprise Value / Patient Record^[3]

* EY³ benchmarking.

** Note: range represents Sensyne standalone or Sensyne and Phesi records.

[Figure 2 – Enterprise Value vs. Patient Record]

Photo: https://mma.prnewswire.com/media/1576557/Figure_2.jpg

The digital healthcare industry is currently drawing high levels of attention and new capital.  There have been several recent noteworthy consolidations and fund raisings relevant to Sensyne, including the $7 billion merger of Datavant and Ciox Health, intended to create a leading healthcare data ecosystem for anonymised patient-level data.  This is further validation of the tail winds behind Sensyne's industry.  We also note other early-stage healthcare AI companies (such as 23andme, Exscientia, Insilico Medicine, Komodo Health and Tempus) have each recently raised capital at valuations in the $1.5 – $8.8 billion range^[4] (representing 5x – 30x Sensyne's valuation).

Furthermore, Liberum and Peel Hunt have published a number of reports^[5] highlighting the underlying value of the business, with recent price targets of 310p and 349p, respectively, indicating 120% – 150% upside from current trading^[6].  Peel Hunt has outlined a bull case with a price target of 921p^[7] suggesting 550% upside⁶.

Unlocking Value

We believe there have been two key issues holding back Sensyne's share price.

Firstly, the "Woodford overhang" which became the "Acacia overhang".  As was widely publicised, the collapse of Woodford Investment Management (one of the largest investors in Sensyne) left other investors concerned over how that stake would be liquidated.  Those concerns were put to rest when Acacia purchased the position, however, over time the market grew increasingly concerned about their intentions as well.  The good news is that as of three weeks ago Acacia filed a TR-1 indicating they have fully divested their position.

Secondly, and most critically, has been the lack of access to the right investor base.  Although AIM may have been an appropriate launch point for the business a few years ago, the Company's ambitions have clearly outgrown the junior market today.  We believe that the most expedient path for the business to become the recognised leader in clinical AI, and a top player in digital health, is to access the deeper pools of healthcare and growth-oriented capital available on NASDAQ. 

Sensyne is a British company and due to its important relationships with NHS Trusts, it should maintain its listing in the UK.  Nonetheless, a secondary listing on NASDAQ will provide the Company and its investors multiple and immediate benefits:

• access to the largest and leading growth-focused market: NASDAQ is the leading growth stock exchange in the world and features 980 healthcare stocks (30% of the index) vs. 80 on the AIM (10% of the index) ^[8] ;
• access to deeper pools of capital and potential investors: NASDAQ is supported by deep pools of capital and a diverse range of long-term growth investors;
• higher valuation: companies listed on NASDAQ typically trade at materially higher valuation multiples (see below);
• higher liquidity: stocks listed on NASDAQ benefit from significantly higher liquidity (see below); and
• broader healthcare focused research coverage: enhanced company profile with US-based specialist healthcare analysts.

NASDAQ vs. AIM^[9]

[Figure 3 – NASDAQ vs. AIM]

Photo: https://mma.prnewswire.com/media/1576558/Figure_3.jpg

A listing on NASDAQ would be consistent with Sensyne's strong recent strategic progress and announcements in the US, in particular the collaboration arrangement with Phesi and the impressive research agreements for c.10m healthcare records with leading US healthcare providers.  We believe these announcements position Sensyne to be the global market leader with strong presence in key UK and US markets.

There are multiple paths to a dual-listing, including: (i) filing for an IPO on NASDAQ, as done by Cardiff-based RenalytixAI in their July 2020 listing and saw its stock appreciate 40% in the four days after it announced its intention to dual-list; (ii) completing a merger with a US special purpose acquisition corporation (SPAC), as done by Leeds-based 4D Pharma's merger with Longevity Acquisition Corp announced in October 2020 (with the resulting entity dual-listed on the NASDAQ and AIM); or (iii) listing American Depository Receipts on NASDAQ as done by London-based Silence Therapeutics in September 2020.  We would be happy to discuss these case studies with you in more detail.

Successful growth companies today often operate within a virtuous cycle in capital markets where a company's story attracts more interest and becomes more relevant for a wider range of investors as it reaches larger market cap thresholds — with more investor interest driving down the cost of capital and positioning the company for leadership positions.  We believe a NASDAQ listing could help Sensyne get on this path, while a lower cost of capital could offer the opportunity to accelerate the Company's growth through potential strategic acquisitions, as referenced in your late-May trading update.

Next Steps

We urge the Board of Directors of Sensyne to engage a top-tier US investment bank to advise on a potential dual-listing on NASDAQ in the US.  It is well-recognised that the US capital markets are a better venue for growth companies such as Sensyne. 

Despite all your achievements since the IPO, your stock is still trading below its IPO price.  This is the result of a valuation gap which makes it clear that the market continues to misunderstand the intrinsic value of Sensyne.  We believe that if this valuation gap persists, the Company will inevitably be the target of a bid from a strategic buyer, who could pay a significant premium to market levels but still leave long-term shareholders short changed relative to the intrinsic value of the business. 

Between the unparalleled patient data set and the nearly complete SENSIGHT platform, Sensyne today is poised to become a global leader in one of the fastest growing segments in healthcare technology.  As long-term investors, we are eager to see the Company achieve this recognition in the market, and the key is to put Sensyne in the right venue.  We have discussed this with other major shareholders and believe there will be strong support for a dual listing.

Thank you for your attention.  We look forward to continuing productive discussions and would be delighted to discuss the contents of this letter in the coming weeks, to ensure the true value of Sensyne is unlocked and recognised by the market.

Sincerely

Liad Meidar
Managing Partner
Gatemore Capital Management LLP

For media enquiries:

Greenbrook
Rob White, Teresa Berezowski
Email: gatemore@greenbrookpr.com
Tel: +44 (0) 20 7952-2000

[1] Source: Grand View Research.

[2] Source: Sensyne market filings, Capital IQ, consensus revenue per median of Liberum and Peel Hunt forecasts.

[3] Source: EY, Realising the value of health care data: a framework for the future, 2019, Gatemore analysis.  GBP converted to USD at GBP:USD 1.4 where relevant.

[4] Source: public filings, dealroom.

[5] Source: Peel Hunt: Sensyne Health, 27-May-2021.  Liberum: Sensyne Health, 2021 ahead of expectations, major inflection in 2022 on-track, 27-May-21.

[6] Based on Sensyne closing share price of 141p as at 2-Jul-21.

[7] Source: Peel Hunt: Sensyne Health, 14 January 2021.

[8] Source: Gatemore analysis, raw data from Capital IQ.

[9] Source: Gatemore analysis, raw data from Capital IQ.

[10] Note: "High growth" defined as companies with 2 year forward revenue CAGR of greater than 100% and less than 200%.

[11] Note: compared at median level of EV / forward year consensus of index constituents.

[12] Note: compared at median of constituents' average daily traded volume over the last 12 months.