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The idea of allocating shares in external entities was I think mentioned in a fireside chat last year. Like you say Dallo, Puretech have been under substantial pressure from Invesco to crystallise value. Perhaps the avenue pursued is a breakup of the company. Up until very recently Puretech were actively pushing its wholly owned portfolio, suggesting there was no longer a need for outside finance to develop those most promising programs. Now suddenly, despite the huge cash pile, we are again creating two further entities. And it’s very interesting that Puretech are now representing itself and its IPF program as just another spoke in its hub and spoke image in the presentation. Just conjecture!
Unprecedented
Now up on Puretech Website I should say.
Unprecedented
Cheers for that ...not up on Puretech website.
I note returns to shareholders to be finalised on the completion of Karuna by Bristol Meyers.
ATB
Exciting times Dallo - interesting updates to the corporate presentation https://puretechhealth.com/images/PRTCCorpPresentation.pdf
Unprecedented
Badly worded by me in last post as I meant to say the Puretech investment case rests firmly on Karuna AND the other factors which I mentioned in the following paragraphs notably Vedanta and the new Founded Entities, Seaport and Gallop and Puretech's in-house drug therapies notably LYT-100 ( which Puretech think could a blockbuster) and the Puretech cash holding of $320m.
The issue of how best to return cash to shareholders is a tricky matter and I suspect Invesco will have a say in the matter.
The share buyback option I agree can be laborious so a mix of special dividend and a share buyback may be the answer.
I am not interested in shareholders getting shares in founded companies IPOs as this is far down the road and why invest more in these derisked companies when Puretech will still have a sizeable shareholding.
Also, other than somewhat small additional investment, I don't see the logic in Puretech investing large amounts of cash in derisked founded entities such as Seaport and Gallop as the very reason for setting them up was to derisk the costly financing of the research and development of certain drugs,
free up cash resources for own in-house drug development and return cash to shareholders .
Remember Karuna was blow out winner and maybe Vedanta may be as well but the other founded businesses have underperformed badly.
So we await to see what Zohar has in mind regarding returning cash to shareholders as she was in a bit of bother with large shareholders a few months ago when the share price hit a 5 year low of 145p or so.
ATB
Dallo. Puretech wont be able to increase their daily buybacks due to the 25% daily limit so any further buybacks would have to be through a tender offer. I also disagree that the investment case is based on Karuna - yes it represents an awful lot of cash and it hugely de-risks the investment but the investment case rests on the whether that cash is being put to good use by Puretech to further the success of its external entities and the internal pipeline. One option Puretech could take is to use some of the cash to invest in the newly founded entities (instead of or as well as seeking external cash). And another means of distributing value would be to issue shares in those entities to us upon ipo. I would quite like that option - it gives us more control over our investment. Finally, I think that the forthcoming 2024 phase 2 results of LYT-100 represent the biggest catalyst. Similar to Karuna, it is a modified version of an existing drug so efficacy is very likely and the path to FDA approval should be quick and straightforward. Crucially also (in contrast to Vedanta), competing drug trials in this area have fallen by the wayside recently and any remaining would likely be complementary with LYT-100. Potential sales are in the billions per year.
Dallo:- Many thanks for the review.
TakeAim
Regarding NAVs , Puretech's investments in its small listed founded entities, Akili, Vor and Gelesis are not material in the overall analysis with a value of just $10 to $15m exclusive of potential royalties.
Gelesis who received FDA approval for Plenity ,its weight loss product has been totally wiped out by the new drugs such as Ozempic and Puretech has abandoned its interest in taking it over.
It's smaller founded entities Sonde and Entrega have potential.
However the Puretech investment case rests firmly on its c$ 1 billion potential receipts from Karuna following the Bristol Myers Squibb takeover ie $325m for its direct shareholding plus $400m from Royalty Pharma for Karuna revenues up to $2b and 2% royalties on revenues above $2b plus c$10m on FDA approval.
The newly incorporated founded entities Seaport and Gallop release major research and development funding from Puretech's cash resources and are involved in exciting new cancer and neuroscience therapies.
Vedanta is possibly the next Karuna and this year's drug trials and maybe an IPO could be transformational .
Then we have Puretech's own in-house drugs particularly LYT-100 reaching end stage trials added to Puretech's current cash pile of C$320m.
I agree a major catalyst for shareholders will be the announcement of a major special dividend and or share buybacks.
Even though Puretech is putting its current share buyback into Treasury, I would rather see this continue at a greater level rather than a dividend at this depressed share price level as it suggests Management is not able to use its surplus cash more wisely.
If Zohar is convinced of the potential of Puretech and recognises the stark underlying mispricing of the shares then what better investment can she make other than buying Puretech shares.
ATB
..... understand it for their wholly owned projects as they would have to get someone in to independently value them but for others there are details not being disclosed to the market.
Anyway, not complaining as it is allowing me to invest at a massively discounted price (in my opinion) to it's true valuation. Would be good however to at least get a bit more certainty on the Karuna deal and it's implications for PRTC on the call tomorrow or in the coming weeks.
A special divi would certainly wake the market up a bit!
Thank you. I did read those posts and they were very helpful.
My point really was Puretech must know exactly what the implied Vedanta valuation was following the latest funding round but chose not to disclose it. Similarly they don't post proper NAV updates like other companies do. I can kind of
The Vedanta $1b valuation is higher than the DealRoom.com valuation of c$550-680m in April 2023 after the financing round completed in that month.
The increase is due to major progress in Vedantas drug pipeline with 4 drugs now in late stage clinical trials ( one in Phase3 and three in Phase2 ) and the improvement in the market for Pharma investment particularly in the US...Note Bristol Myers acquisition of Karuna for $14 billion as an example.
TakeAim
Please see my posts of the 27th and 30th December for answers to your questions with a correction to the reference of Puretech's holding in Vedanta being now 41% not 47% as stated.
Also Puretech has confirmed in its December corporate update ( which you should read in detail)
that it is examining a return of surplus cash to investors by way of a special dividend and or further share buybacks.
Vedanta has raised c $400 m in financing to date from Pfizer, Bristol Myers, Gates Foundation and other large investors and has a valuation of c1billion per Wall Street analysts with an IPO muted for this year or next year.
Just to further elaborate, I am new to the company but my initial impression is the corp presentation and financial reports aren't particularly investor friendly.
For example, normally the NAV value for stakes in unlisted companies (e.g. Vedanta) would be explicit but I can't see them referenced.
Similarly the expected value from the Karuna stake appears quite vague.
From what I can derive so far:
- $292m value in shares
-$400m milestone payments from Royal Pharma deal but exact details unknown other than part of it relates to FDA approval which would seem a formality
- further potential milestone payments and 20% sublicence revenue royalties from Karuna licence. Still relevant after BMS deal?
Lots of unanswered questions but as a result of this apparent lack in transparency, potentially a ridiculously low valuation on a share which will soon have more cash than the market cap.
So what are people expecting the ultimate value from Karuna to be. There are slides in the latest corporate presentation suggesting shares worth $292m held at fair value at year end 23 plus $400m royalties (hence the c$700m total value that is referenced).
Is there anywhere we can explicitly calculate the NAV of the Vedanta stake? It looks like the last funding round was in April and Puretech's share of the company is now c.41% but I can't find anywhere which is completely transparent as to what the latest funding means in terms of implied valuation of PRTC's stake. Anybody know for sure?
I purchased just short of 20,000 on Friday AM at 199p. I've watched Puretech for a long time and thought they were hugely undervalued. The BMS purchase of Karuna was the catalyst for me. It will be approved and that is a huge windfall for Puretech. The biotech sector will come back in a big way this year and vultures will circle Puretech as a takeover target.
I don’t think you’re using the Nasdaq site. I would ignore anyway. Volume nothing like uk even when multiply by 10
Currently up over 11% across the pond.
Ignore Nasdaq as uk market leads on this one. Looked all week and pretty much endless buying even when the markets are down. mms seem happy to move up also
Bought some...intriguing company
Interesting day . puretech announces presenting very soon and that is when we should hear what they are are goign to do with all that lovely money. today buyers in afternoon took price up and met a seller , so high volume. everyone happy , so this should churn around 200p and then move on up in January . what great potential .
Markets are soft today but this sector looks like it’s coming back to life at last.
The macro outlook for Pharma companies has dramatically improved in recent months with large Acquisitions, AI related advances in accelerating research and fast tracking of drug development and the ageing of Western and Chinese populations et al.
We are now becoming aware of the stark undervaluation of Puretech's shares and this anomaly is illustrated further by Puretech's investment in Vedanta Biosciences where it has a 47% shareholding and significant royalties potential.
Vedanta is valued at c$1billion with 4 major drugs at late stage development including one in Phase 3 trial and two in Phase 2 trials.
Vedanta has built state of the art manufacturing facilities near Boston and has raised c$400m in funding from major investors such as Invesco, Bristol Myers, Pfizer, the Gates Foundation.
Analysts are suggesting a potential market valuation of c$3-5billion on successful drug trials and an IPO is being muted for 2024.
So with Puretech's investment plus royalties in Karuna valued at c$1billion plus a potential return of over $1billion in Vedanta plus say $200 m in other founded entities we are up to over $2billion.
Then add Puretech's in house drug programmes including its late stage possible blockbuster Pulmonary Fibrosis( LYT-100) drug plus cash of c$320m and you have an economic value of c$3/4billion or over £10 a share.
Dyphne Zohar say she wanted to create a $10 billion Pharma company way back in 2021 .
She better be careful she is not usurped with an aggressive takeover approach at this crazy market cap.
Happy New Year.
So will January be the start of new instistions buying or old ones selling
Finished up 17.9% at $28.18 (equiv £2.17) on NASDAQ
A nice end to the year, and hopefully we see a steady increase into 2024 and beyond. A special divi would be nice too but I'll settle for the SP reflecting true value.
Happy New Year all.
Agreed. £5-10 should easily be achievable just on the hitherto unrecognised fundamentals which are now beginning to be seen, at long last. Seen the same thing happen countless times with heavily undervalued stocks. One might even begin to suspect the down value trajectory is somehow intentionally orchestrated to facilitate a very profitable upwards rise.