Will PureTech Health’s share price continue to recover post-earnings?

PureTech Health’s share price is on the up ahead of Thursday 25 August’s half-year earnings announcement, climbing 8.9% last week to 257p, following the UK-listed biotechnology company’s latest cash-in on its stake in Karuna Therapeutics, a company that received stellar results on its latest schizophrenia trial.

Co-founded by CEO Daphne Zohar in Boston, Massachusetts, PureTech Health [PRTC.L] went public on the LSE in 2015, priced at 160p per share. The shares climbed as high as 410.66p in September last year, before sinking to below the IPO level in June. Since that nadir, though, PureTech Health’s share price has staged a decent recovery.

The company still has a 3.5% stake in Karuna Therapeutics [KRTX] following the recent sale, worth around $250, while also holding specific rights to royalty payments of 3% of net sales. Karuna Therapeutics’ share price is soaring too, up a huge 101% this year.

What’s happening with PureTech Health’s share price?

PureTech Health shares have fallen 22% over the past year and 12% year-to-date, as the biotech sector feels the chill of investors paring back their appetite for risk. However, the stock has been resuscitated over the past month, rising 31.1%, boosted by last week’s impressive move higher. The shares have now leapt 76.3% above the 52-week low of 145.8p set on 17 June.

PureTech sells another chunk of Karuna Therapeutics stake

PureTech’s latest sale of its Karuna Therapeutics holding — a company it founded in 2009 — has raised $115.4m, and follows Karuna’s highly successful phase III trial of its schizophrenia drug KarXT. This takes PureTech’s total sales of Karuna equity since its 2019 IPO to around $681m. PureTech plans to use the funds to propel its “advancement and growth”.

PureTech’s royalty payments will include sales of the schizophrenia therapy for adults in the US, EU and Japan. Karuna’s CEO, Steve Paul, believes KarXT could “redefine what successful treatment looks like for the 21 million people living with schizophrenia worldwide and potentially usher in the first new class of medicine for these patients in more than 50 years”. The drug’s potential success also bodes well for PureTech Health’s stock prospects.

PureTech’s promising pipeline could help boost future growth

PureTech reported an annual loss for 2021 of $0.796 per share on 26 April, as net income fell from $5.99m to a loss of $60.56m, despite a 47.76% increase in revenue from $11.77m to $17.39m.

PureTech’s broad but early-stage pipeline of products, which range from cancer medication to long Covid treatments, means that the company’s results “tend to sprawl as widely as its broad product pipeline”, according to Investors’ Chronicle’s Julia Hofmann. As a result, she adds, “investors need to have patience” with PureTech Health shares. PureTech has a pipeline of 27 therapies and drug candidates, 13 of which are in clinical trials, with two products — Plenity and EndeavorRx — cleared for marketing in the US and Europe.

PureTech requires extensive funds as the number of candidates in clinical trials raises costs substantially until more of its products reach the partnering stage. However, it has cash expected to last through to 2025, boosted by its recent sales in Karuna. Investors and analysts will get the latest update on its “cash runway” guidance at Thursday’s H1 announcement.

With the company well funded for several years, and a decline in valuations across the sector generally, PureTech investors may be wise playing the longer game.

What are analysts forecasting for PruTech Health stock?

The three analysts offering 12-month price targets for PureTech Health have a median target of 580.78p, with a high estimate of 943.83p and a low estimate of 493.70p, according to the Financial Times. The median estimate represents a potential upside of 126 % from Friday’s 257p closing price. With three ‘buy’ ratings and a single ‘outperform’ rating, the consensus among four analysts is to buy PureTech Health shares. It may require a degree of patience among investors, but this biotech’s road to recovery could already be under way.