Puretech cashes in

Biotech investors seem to have discovered some of their appetite for risk over the past few months – the biotech sector, generally, was one of the first to de-rate in advance of  the technology collapse. However, the market seems to be tentatively looking for value in biotechnology, the net result of which is that PureTech (PRTC) can sit out the long wait for its clinical results with a degree of confidence in its equity and funding position. The company’s sprawling drug pipeline encompasses everything from irritable bowel syndrome to oncology medicines to treat solid state tumours. Meaningful data read-outs won’t be before the end of 2023, so investors merely need to sit on their positions and wait for something to happen.

The positive is that Puretech is still attracting both equity investments into its subsidiaries, more than $113mn (£95.7mn) in the half, while post-period the company received $115mn from share sales in its Karuna subsidiary. In total, the Karuna initial investment of $18.5mn has now returned an astonishing $681mn for PureTech. In addition, another subsidiary Akili, listed on the Nasdaq and raised a further $164mn. The increase in liquidity also made it easier for management to announce a $50mn share buyback alongside these results.  

Puretech sits on plentiful cash reserves and has a clear runway to develop meaningful data next year as its internal development pipeline is now fully funded by its subsidiary businesses. With losses predicted for some time yet, a meaningful valuation is awkward, but broker Peel Hunt reckons the cash generated from its spin out companies alone covers the current share price. Buy.

Last IC View: Buy, 191p, 26 Apr 2022