Animal spirits seem to be back in the markets lately. More and more tech IPOs are debuting every month, charting ludicrous multiples. Random, low-float, tiny negative-EV biotechs are repurposing themselves as crypto “treasury” companies, and meme stock mania appears to be back in action. Personally, I’ve found myself more on the selling side lately, sitting on cash and patiently waiting for good opportunities to come by. Recently, however, I stumbled upon something that seems decently undervalued, the company’s called PureTech Health ($413M market-cap).

 

PureTech Health is a biotech company with a history of spinning out and monetizing assets (Karuna that was later acquired by Bristol Myers Squibb, Seaport which had a $100M oversubscribed series A and management transitions from parentCo to spinCo). The company now finds itself in special-sits territory after a flurry of management changes and increasing pressure from shareholders for value creation. I’ll try to summarize some interesting recent events in no particular chronological order:

 

• A VC company, Nordic Capital recently tried to acquire PRTC for an undisclosed amount, but management rebuffed the offer. The offer is now dead, but it put a floor under the stock and validated the SOTP value.

   

• The CEO and BoD Chair were replaced by financially-minded execs, potentially signaling a major shift in priorities to preserve some cash and maybe even shut down the money burning furnace altogether.

   

• The company is explicitly focused on maximizing shareholder value as pointed out in multiple recent press releases, with multiple capital return options being considered (special dividend, buyback, asset sale, or winddown). This is particularly unusual to see in biotech land, considering they’re not exactly known for prioritizing shareholders interests ahead of their own. For example, this is what the CEO said in 4Q2024 earnings call:

   

Despite this significant upside potential, our market valuation continues to reflect a heavy discount to intrinsic value, a disconnect we are committed to addressing in 2025. So delivering shareholder value remains our top priority for this year. So delivering shareholder value remains our top priority for this year.

 

• The major risks (mainly LYT-100 readout, cash burn) appear limited, given the diversified asset base and cash reserves.

   

 

So now the question is how much could this thing be worth? Below is my (likely wrong) attempt at the SOTP valuation:

 

 

Note that most of the assets are in cash and two private stakes (Seaport, Vedanta), plus back-end heavy royalties/milestones from Cobenfy (schizo drug, partnered with BMY).

 

In summary, I think the current price is not too steep and offers some downside protection. This along with the commitment to preserve value and potential monetization of the private assets seem interesting enough for me to dip my toes.

 

Disclosure: I own shares of PRTC