PureTech waits on results

Assessing PureTech Health (PRTC) is not a straightforward business as the company’s results tend to sprawl as widely as its broad product pipeline. In common with the rest of the biotech sector, the share price has cratered over the past 12 months as investors pared back their appetite for risk. Indeed, there was a reported rise in short selling interest prior to these results.

On the face of it, there was nothing in the results to justify further shorting the shares. PureTech’s pipeline spans a broad range of products from cancer treatments that target hard-to-treat solid state tumours, irritable bowel syndrome, long Covid sufferers and others to treat pulmonary disorders. All, in one way or another, are based on monoclonal antibody technology. Management says that currently 13 of the company’s 27 drug candidates are in clinical trials, with two products cleared for marketing by the Food and Drug Administration – Plenity and EndeavorRx.

The increase in candidates in clinical trials will have a direct impact on costs and management acknowledges that the company’s capital requirements will increase substantially as its programmes mature. However, it has a cash runway expected to last through to 2025 without any need for dilutive fundraising. It has also been selling shares in subsidiary companies. For example, it sold two tranches of shares worth $218mn (£171mn) in its Karuna subsidiary in 2021 to generate capital.

PureTech will continue to burn through cash until more of its products reach the partnering stage for larger pharma companies. At first sight, the pipeline looks very broad, but the focus on monoclonal antibodies gives it a certain specialisation. The company is well funded for several more years and the value case for the shares has been strengthened by the general fall in sector valuations. Buy.

Last IC View: Buy, 336p, 24 Aug 2021