Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
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JSB
If you read the Bristol Meyers official statement on its website regarding the acquisition of Karuna you will note that the deal is not contingent on FDA approval but only on shareholders and regulatory approval of the transaction and is expected to be completed by the end of June 2024 at the latest.
FDA approval is assumed as a given .
Puretech will receive c$325m on completion of the Karuna takeover and on FDA approval of Karuna drugs will receive a milestone payment of c$10 m.
Also Royalty Pharma will then pay the balance of $400m in respect of it acquiring Royalty rights of 3% on Karuna revenues up to $2b and 1% above $2b ( Puretech will get 2% royalties above $2b).
So add $325m plus $400m plus $10m gives us $735m payments to Puretech from Karuna deal in the current year alone.
Please tell me I am missing something here!!
As I have said in my previous posts Bristol Myers will surely not allow Puretech and Royalty Pharma to skim of potentially over $1b to $2b in royalties over 15 years on the back of BM's global distribution and marketing power.
Crazy stuff and Puretech has a market cap of £530m with own cash of c$325m.
Are we missing something???
Dallo - thanks for your analysis on the situation. It’s been very helpful. The closure of the deal is dependant on FDA approval which will happen by September at the latest but I would anticipate this could be earlier. BMS plan to launch immediately in H2 of this year. The funds from the sale and the approval milestone should come at a similar time. Do you happen to know how much the approval milestone is for Puretech?
Other things to note are that BMS will want to clear up the royalties payments before finalising the sale. They won’t want to pay $14 billion for others to skim off them until 2039! Puretech’s 2% over $2 billion is extremely lucrative given that analysts have Karuna hitting $6 billion by peak sales in 2030 which would generate $80 million per annum. I’m wondering if they might buy Puretech’s 2% out in a discount lump sum? $200 million? That would be a significant discount for BMS but also provide Puretech with cash up front.
Cash by year end with just Karuna successfully closing and all milestones paid out with have Puretech at around $1 billion (£785 million) or £2.90 per share.
That’s excluding any further deals on the pipeline or IPO’s on Vedanta, Seaport etc.
I’m bullish on biotech this year and think it will see a resurgence. I’m aligned with the other contributors that Puretech is grossly undervalued and I don’t think it’s out of the question that we see the share price at £5 in 2024.
TakeAim
Fully agree with your analysis.
I sometimes think I am stupid in my view on Puretech but the price action today is bewildering and makes no sense
The presentation by Zohar yesterday was highly impressive and clearly set out the value disconnect which the market totally ignored but one suspects there may be deliberate manipulation going on with a predatory objective of offering a false premium in any possible offer ie an offer of 100% or 200% above the last share price which would still undervalue the true worth of Puretech.
I emailed the company of this danger and with Invesco holding 23% of the shares , the company is very vulnerable to a low ball bid .
Short term traders have sold out as the shareholders cash returns now await the closure of the Bristol Myers takeover of Karuna which has a minor regulatory risk.
Wall Street may determine our fate very soon and Puretech better have defenses in place to repel a bid below true value.
ATB
Well anyone would think they announced they were selling the company for £1.90 a share in the conference but I can assure people that wasn't the case.
Puretech reaffirmed that we will soon be sitting on $320m + $294m in cash = $614m in cash with both Karuna royalty agreements still in play. They will be announcing how they plan to utilise that capital as soon as the Karuna deal closes.
They discussed in length the science behind the platform they use to test and develop drugs that have already shown activity in previous trials and how they are then able to improve safety and efficacy performance.
They also spoke about the newly founded and wholly owned entities and were clearly very excited about their potential. So much so, I'm not sure Vedanta even got a mention!
Only slight criticism from me was that they didn't really discuss in any sort of detail the size of the markets they are attempting to address with the drugs they are developing which would have shed more light on the scale or the returns we could expect in the future.
However, nothing to suggest that this is anything other than the unearthed gem most on this board believe it to be.
It is clear we have a large seller in play but not phased by that as this will re-rate as and when it is ready, or alternatively get taken out by big pharma. Surely a platform that can take promising drugs that have failed on safety grounds and then improve their tolerability has to be worth a lot of money to someone. A cheeky offer of £5 a share would feel like a no brainer to me but what do I know?!
J P MORGAN CONFERENCE to be precise!
Presentation at Morgan Stanley Conference at 12pm EST or 5pm UK.
Really appreciate the insightful comments, thanks all.
Was anybody able to join the call earlier? Any highlights?
There was a £687k sell at £2.09 at 9am. Was always told to follow the price and ignore the trades :)
Yes I noticed also and thought a little strange.
Everything else points to a big move up
651k UT at 205 and other big sells came in late
The big traditional pharma companies patents are running out so they will be on the hunt for promising new pipelines. Just yesterday Harpoon received a takeover approach from Merck. There have been other recent deals like that also.
Vedanta looks like a promising candidate - if it does not do an IPO there is the possibility of a trade sale.
And Arix are both hugely undervalued and due a big rerate upwards , and should both reward the patient very well in my humble opinion.
atb to all holders here and there.
Unprecedented
I think some form of corporate action is very possible and may involve a takeover of Puretech.
For instance surely Bristol Myers having paid $14 billion for Karuna is not going to accept a situation whereby Puretech and Royalty Pharma have royalties of 3% on Karuna revenues going forward particularly as these revenues will be driven by Bristol Myers massive distribution and marketing power.
I feel something is going to pop here very soon imho.
I wish I had some more funds to add to the 100 ,000 shares I hold at present.
Greed is a terrible curse!
Or perhaps a break up to facilitate an imminent sale…
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