PureTech Health PLC

PureTech Health PLC (LON: PRTC) is a FTSE 250 index listed Company, which develops and commercialise medicines related to gastrointestinal diseases, intractable cancers, central nervous system disorders, lymphatic, and immunological diseases.

On 24 August 2021, PRTC expects to publish its half-yearly results for the six months ended 30 June 2021.

Investment Rationale – SELL at GBX 330.00

• The Company failed to provide any financial guidance for FY21, while there are significant risks related to the failure of clinical trials, regulatory approval, therapeutics safety and profitability.
• The new strain of coronavirus adversely impacting the economies, and causing labor instability, and harming product development efforts.  
• From a technical standpoint, the stock is hovering below the 20-day EMA (GBX 330.60), reflecting a bearish price momentum.
• On a forward 12-month basis, EV/Sales valuation multiple is quite overvalued against the median of the Health Care sector. Moreover, the Company has shown inconsistent profitability in the past few years.

Key Risks

• Any failure or delay of pipeline and new medicines can impact the growth trajectory.
• There is a commercialization risk pertinent to the affordability and pricing of drugs due to competitive pressure.

Recent News

Funding: On 21 July 2021, Vedanta Resources (PureTech founded entity) completed US$68 million series D financing to advance its pipeline of defined bacterial consortia.

Financial Highlights (for the year ended 31 December 2020, as on 15 April 2021)

 (Source: Company Website)

• As of 31 March 2021, PureTech reported US$443.4 million in cash and cash equivalents, representing better liquidity than at the end of FY20, and a better ability to pursue its pipeline projects.
• During the year, the Company also solidified its financial position by listing of American Depository Shares on the Nasdaq Global Market.
• The Company generated no revenue from product sales; however, there was a significant increase in grant revenue.

Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative) 

Conclusion

PureTech Health has robust capital base and strong pipeline. However, the Company is surrounded by significant risks and uncertainties, such as unclear picture regarding commercial viability, failure of expensive clinical trials, delay in regulatory approvals, suspension or termination of therapeutic developments, dependence on external resources to pursue research and developments, and economic disruption due to             Covid-19 pandemic. Nevertheless, the stock has yielded substantial returns in the past year and giving an opportunity to book profit and escape short-term market uncertainties. The stock made a 52-week High and Low of GBX 447.66 and GBX 232.01, respectively.

Based on the inconsistent profitability, gloomy outlook, bearish price momentum, and unfavorable guidance, we have given a “SELL” recommendation on PureTech Health PLC at the closing price of GBX 330.00 (as on 10 August 2021). 

*All forecasted figures and Peer information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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