The Welsh government is facing the prospect of having to write off a £10million equity investment it made in a cancer-treating healthcare group that is seeking to go into liquidation.
Rutherford Health (formerly known as Proton Partners International) said it would file an application later this week to appoint an official receiver – an insolvency service officer – as liquidator.
Its first private centre, and the first in the UK to use proton beam technology to treat cancer, opened in Newport in South Wales in 2016. Having invested over £240m , it also has cancer and diagnostic centers in Somerset, Northumberland, the Thames Valley and Liverpool.
Rutherford Group, which was looking to raise new funding to secure its long-term future, said the pandemic had dramatically reduced patient numbers. In a bid to boost patient flow, he had offered the NHS a UK-wide not-for-profit contract, in addition to existing local contracts. However, despite a good working relationship with the NHS in Wales, this has not been picked up.
A patient information process is underway and the small number of locally mandated NHS patients are being referred to their local NHS Trust to complete their treatment.
Rutherford employs about 280 people, including about 45 at its Newport center.
The Welsh Government had invested £10million – part of a £100million fundraising – in the company in 2015 in what was the largest single investment from its Welfare Investment Fund. Wales Life Sciences (WLSIF) now fully invested £50m.
Overseen by its wholly-owned investment bank, the Development Bank of Wales (then known as Finance Wales), the discretionary management of WLSIF was entrusted to fund manager Arthurian Life Sciences, chaired by the entrepreneur and investor in life sciences born in Port Talbot, Sir Chris Evans. . Management of the fund was later acquired by Arix Bioscience – with no role for Sir Chris.
Confirming that the WSLIF had invested £10 million in Rutherford, a Development Bank of Wales spokesperson said: “The Wales Life Sciences Fund is managed by Arix Capital Management – formerly Arthurian Life Sciences – via a contract discretionary fund management.
“The Development Bank of Wales is acting as a holding fund for investment in WLSIF on behalf of the Welsh Government. The performance of the individual WLSIF assets is the responsibility of Arix as fund manager. The fund will be reflected at the fair value in the accounts of the Development Bank of Wales for 2021/22 which will be published later this year, once audited.
Arix was approached for comment.
WSLIF’s stake in Rutherford is just over 5%. The development bank would not comment on how much, if any, it might recoup from its £10million investment through the liquidation process. However, the biggest shareholder, Schroder UK Public Private Trust plc, is canceling its stake valued at £22.8 million in the business due to uncertainty over returns from a liquidation.
Schroder UK Public Private Trust has taken over investments formerly held by disgraced investor Neil Woodford. While acknowledging a number of factors contributing to his business difficulties, he said Rutherford’s overambitious initial development plans were the cause of his demise.
In a statement, Schroder UK Public Private Trust’s portfolio fund managers, Tim Creed and Roger Doig, said: “The Schroders team has spent a significant amount of time working with Rutherford to improve its financial position and operational performance. , but unfortunately this sad announcement could not be avoided.
“While a number of factors contributed to Rutherford’s failure, the company’s flawed expansion strategy pursued during the initial development phase from 2015 to 2019 laid the groundwork for a need for funding. ultimately unsustainable.More than £240 million has been spent to develop four oncology therapy centres, with a significant portion of the capital expenditure going towards site requirements and the equipment needed to deliver proton beam therapy.
“While there is growing evidence that proton therapy is a better clinical option for many patients, it remains a service for which reimbursement is still very limited in the UK. The construction and operation of four centers resulted in high and unsustainable cash burn which ultimately resulted in this announcement as Rutherford was unable to attract sufficient new funds to continue operations.”
Sean Sullivan, Chief Restructuring Officer and Acting Managing Director of Rutherford, said: “Rutherford Health is committed to providing high quality care, and the past two years have proven to be an extremely challenging time for the business. .
“Covid has been particularly damaging for us as fewer patients were showing side effects during the lockdowns, and as a result cancer diagnosis was delayed and unfortunately in many cases missed. This means that fewer cancer patients come to our centres.
“On top of that, the company has grown rapidly over the past few years. It was a very expensive undertaking to set up, with over £240m of capital expenditure to build and expand cancer centers across the country, but unfortunately the number of patients has not matched that.
“We made several offers to the NHS, and although we got some contracts, they were insufficient and we were unable to secure mechanisms to speed up the process. This added to heavy financial pressures on the business and we had no choice but to put the group into liquidation. We are very proud to have been able to serve the community and cancer patients across the country. »
WSLIF has tripled its investment in Merthyr’s drug testing business, Simbec-Orion, following its private equity-funded management buyout in 2019. Although the exact amount was not disclosed , he had previously invested several million pounds in the business, before the profitable exit.