Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Correction
Royalty Pharma is receiving 3% of Karuna revenues up to $2billion equal to $60million per annum for approx 10 years equal to c$600m...Bristol Myers see $2billion revenues as a base level in its acquisition document and much higher in its investor commentary.
Regarding the Puretech/ Royalty Pharma deal on royalties from Karuna it should be noted that Puretech has already received $100m of the total $500m agreed and it is my clear understanding that the balance of $400m will be received on the FDA approval of KartX in September.
This approval is almost certain otherwise why would Bristol Myers have paid $14billion for Karuna.
Royalty Pharma are getting 3% of all KartX royalties up to $2billion revenues equal to $600m plus 1% on all revenues above $2 billion which could amount to a further $40m per annum for say 8/ 10 years when revenues , for example, reach $6billion thereby giving Royalty Pharma a possible total ROI of up to 100% on its investment.
So why would Puretech forfeit part of its royalties rights if it wasn't paid upfront by Royalty Pharma.
Remember Puretech retains royalties of 2% over and above Karuna revenues of $2billion or possible annual payments of c $80m on revenues of $6billion
As Archer quite rightly says in his analysis you must risk discount these numbers for obvious reasons and so it is a great deal for Royalty Pharma and I am not sure Puretech would have done if it knew the Bristol Myers takeover was going to happen.
How Bristol Myers deals with such a revenue drain from the royalties is another issue altogether...it would be wise to take out Puretech now at say £4 a share or £1 billion which would be a snipe in the context of its $14billion acquisition of Karuna and get all of the c$700 million in cash ( including Puretech's shares in Karuna) plus the whole shooting gallery of Puretech's remaining assets.
This underlines the crazy undervaluation of Puretech shares imho.
I hope I got my figures correct as I am a bit jet lagged after returning from Florida after a month on the beer and sunshine 🌞.
ATB
Malt
Thanks for that news on today's RNS update.
I did not read it as I thought it was just another share purchase notification.
Confirms capital return on completion of Karuna acquisition by Bristol Myers which is due to be finalised within the next 2/3 months.
ATB
Lesley
Archer has copied and paste some of Puretech's website comments but also appears to directly quote some of my own recent analysis ( and others here on LSE ).
I agree with many of his observations but he has omitted the company's commitment to return cash to shareholders following the completion of the Bristol Myers acquisition of Karuna which is only matter of months away which could result in a special dividend/ buyback of the order of £200m.
Also following the completion of the current buyback programme in 4/5 months the free float will be approx
50 million shares which is nothing.
An announcement of an IPO for Vedanta in the near term could also be a major catalyst for a mega rerate of Puretech shares imho.
Like others here I am dumbfounded by the current share price but this could dramatically change in the weeks ahead.
ATB
Well the Directors including Tim have already bought shares in the most recent placings at much higher prices and also they are now in a restricted closed period following the year end and maybe also because of impending newsflow ( we hope).
The two Tims also have options at 5p and 10p so plenty of incentives to get things moving.
Considering the crazy rises in some other AIM stocks recently any bit of good news here could attract the TikTok hordes particularly given the miniscule market cap and the late stage Lupuzor and CIPD trials about to commence.
Patience as always required but we need something positive soon as I am getting old!
ATB
By my back of the envelope calculations, it looks like the current $50m buyback programme is nearly 80% complete with an estimated 4 million further shares ( at a benchmark assumption of the current share price)
to be acquired.
Based on yesterday's buyback of c100,000 it will take a further 2 months or more to finally complete the full buyback and will leave total issued share capital of c265 m of which, at most ,will result in a free float of c50 m shares which is paltry for a company such as Puretech.
One positive announcement could see daily trading volumes close to the free float and then we will see serious upward price movements imho.
Patience still required.
ATB
Oldernowiser
Invesco own c24% with 8 other institutions including Lansdowne, M&G, Baillie Gifford, Hargreaves owning a further 47% or so .
Daphne Zohar owns c 4.8% with other management/Directors holding about 4% between them.
So nearly 80% held by Institutional and management investors leaving a 20% free float.
The share price is being tightly controlled imho and bears no relationship to the actual economic value of the company.
Why this is the case is totally perplexing to me .
Very strange indeed.
Puretech's Pulmonary Fibrosis drug , LYT-100 in Phase 2 trials is a potential blockbuster with only one drug currently approved in the market for this disease and the market size for PPF expected to reach $5 b by 2026.
Interestingly Bristol Myers has progressed its own PPF drug through Phase 2 and has been given advanced drug derogation by the FDA.
I see Bristol Myers having a close look at Puretech in this regard and given the royalties issue, it may prompt an approach particularly at Puretech's derisory current market cap and sizeable cash resources.
A lot to look forward to imho
Lambo
Thanks for your thoughts.
However there are still a number of possible catalysts in the short term including a Rest of the World deal on Lupuzor and some news on CIPD .
Also should Incanthera start delivering in bulk to AS Watson in the 2nd half of 2024 and generates significant revenues ( Mc Carthy intimated orders of 500,000 units in 2024 and increasing dramatically next year with other major retailers being signed up in Europe and the US), Incanthera's market cap could reach £50m thereby giving Immupharma access to over £5m should it sell its shares or part thereof.
And there is also a possibility of a bid from Alora or another Pharma given the late stage trials of Lupuzor and CIPD.
The risk reward ratio is appealing at a market cap of c £6/7 m imho.
But I would say that wouldn't I .
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???
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
I see Tim McCarthy has just been on Proactive Investor
in a euphoric triumphant interview on the miracle that is Incanthera.
Huge revenues expected this year for Incanthera and more growth to come next year as new deals with other major retailers are announced.
Sounds like a major winner and Tindall Asset Managers has increased its shareholdings to 11.7% per RNS today.
Immupharma's shareholding in Incanthera could be very valuable indeed.
Meanwhile Immupharma remains unloved and unwanted !
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!