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Puretech makes investment gains as it mulls second listing

Gains from deconsolidating affiliate companies pushed the group into a pre-tax profit
August 27, 2019

Puretech Health (PRTC) develops treatments through both its internal pipeline and a broad portfolio of affiliate companies. Both strands made good progress in the first half of 2019. The parent company’s collaboration agreement with Boehringer Ingelheim makes it eligible for up to $26m (£21m) in upfront payments and more than $200m in milestone payments, while affiliate company Follica announced positive interim data for its male hairloss treatment and expects to initiate a “pivotal” study of a potential androgenic alopecia treatment later this year.

IC TIP: Buy at 280p

New licence agreements in the internal pipeline led contract revenues to more than double in the first half of the year, reaching close to $4m. However, this was accompanied by a sharp drop in grant revenues, leading overall sales to come in below the same period last year. Profits aren't a given in early-stage pharmaceutical companies such as Puretech, but the group made considerable gains by deconsolidating two of its affiliated companies – Alzheimer's and schizophrenia drug developer Karuna, and cell therapy company Vor – alongside some of its other investments, pushing it to an $11m pre-tax profit.

A number of Puretech’s portfolio companies, including resTORbio and Karuna, have listed on the Nasdaq stock exchange, and last month management announced it was exploring a potential listing itself, which would see new common shares issued onto the US-based exchange in addition to its existing listing on the UK market.

Broker Peel Hunt is forecasting adjusted pre-tax losses of $136m for the 2019 full year, making a loss per share of 21.6¢. This is down from a loss of $75.5m and EPS of 15.9¢ in 2018.

PURETECH HEALTH (PRTC)  
ORD PRICE:280pMARKET VALUE:£791m
TOUCH:277-280p12-MONTH HIGH:307pLOW: 148p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:124¢NET CASH:$202m
Half-year to 30 JunTurnover ($m)Pre-tax profit ($m)Earnings per share (¢)Dividend per share (p)
2018*4.98-16.1-3.0nil
20194.3911.110.0nil
% change-12---
Ex-div:na   
Payment:na   
£1=$1.23, *Restated