- It has enough cash to fund itself until Q1 2025
- Phase two results for the LYT-100 drug to be released at the end of 20212022
PureTech Health (PRTC) swung back to a loss in the first half of the year due to a decrease in investment gains in its Founded Entities businesses. This isn’t really an issue though. The group pumped more cash into R&D through the period, and fair value charges tend to wax and wane, hence the reported operating loss. The success of the company depends on its ability to fund the significant pipeline of drugs will be in the future, to say nothing of their efficacy.
Currently, it is very well capitalised. It has $439.8m in cash, which has enabled the company to maintain its guidance of the cash runway extending into Q1 2025. This is a good spot to be in, especially as clinical prospects are improving. Its pipeline is being advanced both internally and through the Founded Entities, with its lead product LYT-100 expected to deliver its top-line results for a Phase 2 trial to evaluate its effectiveness at treating adults with long Covid by the end of 2021. PureTech is also conducting a Phase 2a study of LYT-100 in patients with breast cancer-related, upper limb, secondary lymphedema. Results from this trial are expected in 2022. Due to the lack of understanding of long Covid and its prevalence in the community, Peel Hunt sees LYT-100's use treating lymphedema as a more promising avenue for the drug. “We would see any weakness in the shares in the event of a negative result for long Covid as a buying opportunity, since we see no meaningful read-through from one indication to the other,” said the broker.
The fall in interim revenue is somewhat inconsequential, as the majority of its income comes from its “founded entities” which it owns stakes in and receives royalties from. Its “other income” from these businesses was down £202m from the same period last year due to fall in the fair value of its 8.1 per cent stake in Karuna.
The combined value of PureTech’s listed and soon to be listed entities is currently worth over $560m and together with cash holding represents nearly 80 per cent of PureTech’s market cap, according to Peel Hunt. This means that even the whole pipeline of its future drugs is only contributing to around 20 per cent of the company’s valuation.
This fact alone is a compelling investment argument and the reason that Peel Hunt has a current target price of 930p. Buy.
Last IC View: Buy, 416p, 15 April 2021
| PURETECH HEALTH (PRTC) | ||||
| ORD PRICE: | 336p | MARKET VALUE: | £ 963m | |
| TOUCH: | 336-337p | 12-MONTH HIGH: | 448p | LOW: 232p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 193¢ | NET CASH: | $391m | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2020 | 6.84 | 174 | 43.0 | nil |
| 2021 | 5.84 | -94.9 | -26.0 | nil |
| % change | -15 | - | - | - |
| Ex-div: | - | |||
| Payment: | - |
