PureTech Health PLC (LON: PRTC) – Expects full commercial rollout of two therapeutics during 2021.

PureTech Health PLC is an FTSE 250 index listed Company, which develops and commercialise medicines related to gastrointestinal diseases, intractable cancers, central nervous system disorders, lymphatic and immunological diseases. The pipeline consists of 26 product candidates, while two products have already received approval from US FDA (Food and Drug Administration) and European marketing authorities. The Group has a proven track record of clinical success, boundless innovation and producing valuable therapeutic products. The Company has several founded entities such as Gelesis, Karuna, Follica, Vedanta, Sonde, in which it has a controlling stake. The Company also got listed on NASDAQ at the start of 2021.

 

(Source: Company presentation)

Growth Prospects and Risk Assessment

PRTC has an impressive pipeline of 26 therapeutic candidates through the wholly-owned pipeline and the founded entities. Moreover, two therapeutic candidates, Gelesis' Plenity® and Akili's EndeavorRx^TM, have already received approval from FDA clearance and European marketing authorization. The Company is seeking a broader US launch for these two medicines during 2021. The Company had accelerated the progress of its wholly-owned pipeline during 2020 as it had initiated four clinical trials and completed one clinical trial. Moreover, it had expanded the wholly owned-pipeline with the nomination of a new therapeutic candidate, LYT-300 (oral allopregnanolone). The clinical trial for the same would be initiated by the end of 2021.

(Source: Company presentation)

Furthermore, the wholly-owned pipeline consists of LYT-100, LYT-200, LYT-210 and LYT-300. Moreover, it also consists of three discovery platforms, including Glyph™ and Orasome™.

PRTC is undergoing several clinical trials, and the critical failure of any clinical trial might result in termination of the program. Moreover, the failure to obtain any required regulatory approval might cause a significant reduction of value. The risk related to science & technology failure could require additional fundraising, and it might increase the cost. Moreover, there is a commercialisation risk pertinent to the affordability and pricing of drugs due to competitive pressure.

After understanding growth prospects and risk assessments, we will analyse some key fundamental and shareholders statistics of PureTech Health PLC.

Recent Developments

On 12 April 2021, PRTC had shown promising preclinical results for its LYT-210 antibody at the 2021 American Association for Cancer Research (AACR) Annual Virtual Meeting.

On 18 March 2021, PRTC announced that Stephen Muniz, Esq. would retire as Chief Operating Officer and Corporate Secretary effective 17 May 2021.

Financial and Operational Highlights for the twelve months ended 31 December 2020 (as of 15 April 2021)

(Source: Company result)

• The Company had not generated any revenue from product sales during FY20. Moreover, it derived the revenue in the form of Contract Revenue and Grant Revenue.
• PRTC had shown growth in revenue from USD 9.81 million during FY19 to USD 11.77 million for FY20.
• The R&D expense had witnessed a slight reduction from USD 85.85 million during FY19 to USD 81.86 million for FY20.
• The net income, including non-controlling interest, remained USD 4.60 million for FY20.
• The Company had cash & cash equivalents of USD 486.5 million as of 31 March 2021 and USD 403.9 million as of 31 December 2020.

Share Price Performance Analysis

(Source: Refinitiv, Thomson Reuters)

On 22 April 2021, at 10:08 AM GMT, PRTC shares were trading at GBX 397.50, down by 1.00% against the previous day closing price. Stock 52-week High and Low were GBX 447.66 and GBX 210.75, respectively.

PRTC's prices are in a consolidation phase and trading around the lifetime high for the past 4 months. Prices are forming a symmetrical triangle pattern on the weekly chart and a breakout of the same by the upside may change the trend of stock from sideways to upward. 100-day SMA (GBX 385.32) supports the upside potential.

On the lower side, GBX 359.00 acting as a major support level and a breakout of the same might generate selling in the stock. Therefore, if the prices reach below the aforementioned level, exit decisions should be made depending on an investors’ risk appetite.

In the last two years, PRTC’s stock price has delivered a positive return of ~112.93%; and it has outperformed the FTSE All-Share Pharmaceuticals & Biotechnology index with a return of around 10.86% and the FTSE 250 index with a return of about 11.43%.

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Business Outlook Scenario

PRTC has substantial cash resources to fund the pipeline of founded entities. The founded entities have made significant progress regarding the 22 therapeutic candidates, of which two are cleared by regulatory authorities, and 13 are in the clinical trials stage. However, the Company indicated that it would not earn any revenue from the product sales in the near future. Nonetheless, PRTC is well-positioned to initiate at least ten expected clinical trial and nine expected readouts during FY21. Moreover, the Company had generated USD 350.6 million during 2020 and USD 118 million during February 2021 from the monetization of partial stakes in the founded entities.

Also, the Company would be expecting the result of the Phase 2 trial of LYT-100 in adults with Long COVID respiratory complications and related sequelae by the second half of 2021. LYT-100 is currently getting evaluated in a Phase 2 trial in Long COVID and a Phase 2a trial in lymphedema. The top-line results of the Phase 1 clinical trial to evaluate LYT-200 as a potential treatment for metastatic solid tumors would be expected by Q4 FY21. Overall, the Company would continue to seek opportunities through strategic partnerships and royalty holdings in the founded entities.

(Source: Company presentation)

Considering the clinical and financial momentum across the Founded Entities and Wholly Owned Pipeline, robust cash generation, accelerated operational progress, two US launches in 2021, good liquidity profile, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on PureTech Health at the current price of GBX 397.50 (as on 22 April 2021 at 10:08 AM GMT), with lower-double digit upside potential based on 134.21x EV/NTM Sales (approx.) on FY21E sales (approx.).

 

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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