Although the markets rout of the past week has been indiscriminate, for biotechnology, a riskier asset class at the best of times, it has felt brutal.
The London-listed biotech companies to have been sold off have included PureTech Health, which has lost almost 20 per cent of its value over the past five days and trades at new lows, despite attracting takeover interest.
The stock market fall and President Trump’s 90-day tariffs pause have given investors an opportunity to take stock of potential bargains.
PureTech, based in Seaport, Boston, Massachusetts, listed on the London Stock Exchange in 2015 at 160p per share, when it raised £108 million and was valued at about £363.3 million. It joined a cluster of similar ventures seeking to reduce the risk of investing in biotech by creating a diversified portfolio of promising science and technology companies and assets.
The company, which went on to dual-list on New York’s Nasdaq index in 2020, has built a pipeline of 29 therapies and drug candidates and has a clinical trial success rate of more than 80 per cent. Three of its assets have received marketing clearance in America, the world’s biggest healthcare market.
Most notably, Karuna Therapeutics, a company founded by PureTech and floated on the Nasdaq exchange in 2019, successfully developed a treatment for schizophrenia by repurposing an Alzheimer’s drug. Karuna was bought for $14 billion by Bristol Myers Squibb in March last year and the drug, KarXT, or Cobenfy, as it is branded, was approved by America’s Food and Drug Administration in September.
The sale of Karuna crystallised $293 million for PureTech from its stake and remains eligible for up to another $400 million in future milestone and royalty payments. In turn, PureTech has returned $100 million to shareholders via a tender offer, which at the time represented about 14 per cent of its market capitalisation, and means it has returned a total of $150 million, including a $50 million share buyback.
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Among its more recent, promising founded entities is Seaport Therapeutics, which is led by Daphne Zohar, PureTech’s former chief executive and co-founder. Seaport, in which PureTech retains a 36.7 per cent stake, raised $100 million in a series A financing last April and is focused on the development of neuropsychiatric medicines. Seaport’s founding investors — Arch Venture Partners, Sofinnova Investments and Third Rock Ventures — initially backed Karuna.
In December, one of PureTech’s internal drug assets, deupirfenidone, had positive phase 2 trial results, showing slowed lung function decline in patients with idiopathic pulmonary fibrosis, a condition where the lungs become scarred and breathing becomes increasingly difficult.
Despite the therapeutic and commercial progress, PureTech’s shares are down 75 per cent from their high of more than 425p in March 2021 and it was demoted from the FTSE 250 mid-cap index in December. They closed at 103p on Thursday, down 9 per cent.
Miles Dixon, an analyst at Peel Hunt, the City investment bank which was appointed joint house broker this week, said: “There are not many more companies of which we can think that have a valuation disconnect as extreme as this.”
PureTech’s market capitalisation of about £247 million compares with cash of about £282 million at the end of 2024.
The “valuation disconnect” was evidenced by PureTech revealing on Monday, amid the wider tariff-triggered market rout, that it was in talks with Nordic Capital, the US private equity firm, about a possible cash offer. The disclosure was prompted by a report on the deals website Betaville. Shares in PureTech rallied 7 per cent before Nordic Capital said that it had made a “private proposal” which had been rejected by PureTech’s board.
Nordic walked away and is currently unlikely to return. The uncertainty caused by Trump’s tariffs negotiations has sent a chill through the M&A market.
The abortive interest from Nordic is the second time that PureTech is publicly known to have attracted takeover interest: a bid failed to materialise three years ago when it exchanged non-binding proposals with Nektar Therapeutics, an American company.
For now, PureTech’s board led by Bharatt Chowrira, chief executive, must convince risk-averse investors of the potential of its portfolio, starting with its full-year results this month.
Advice Buy
Why? Diversified portfolio and trades at a discount to cash
