Clinical-stage biopharmaceutical company PureTech Health(LSE: PRTC) is in the early stages of a promising turnaround. It shares still trade 12% lower than a year ago, despite recovering lost ground in recent months, so there could be an opportunity here.
Keep it Pure
PureTech's shares are up almost 3% today after it published its half-yearly report to 30 June, which showed a combination of rising revenues but bigger losses. That's not unusual in the famously risky biopharma sector, as the group advances more than 20 late and mid-stage clinical programmes and pre-clinical products.
Today it reported significant progress across its pipeline and said it expects to pass a number of key milestones over the next 12 months. The London-listed, Boston-based firm, which has a market cap of £322m, posted a pre-tax loss of $67.2m, up 40% on last year's $44.5m loss. Most of this went on research and development, which is exactly how a company like this should be spending its money.
Revenue jumped an impressive 92% year-on-year even though its operations do not yet generate consistent product revenues, as is customary with pre-commercial biopharma companies. These revenues related primarily to passing milestones on collaborations with third parties. PureTech expects to earn future revenues from growth stage programmes under both existing and new license and collaboration agreements, which may include non-refundable license fees.
PureTech is now sitting on cash and equivalents of $247.5m, a drop of 12% on the $281.5m over the year. Chief operating officer Stephen Muniz said this leaves the group well-positioned to fund the upcoming clinical trials and ongoing pre-clinical development.
Bought the pharm
If you want a risky turnaround play, this is it. You are gambling on the company's success in generating more revenue than it spends on R&D. Its valuation and earnings per share forecasts can give you no indication either. The pipeline looks rich, with PureTech well-positioned to deliver novel medicines and drive major value for shareholders. It remains a punt, but biopharma usually is.
With a far larger market cap of £2.24bn, FTSE 250 power generation specialist Aggreko(LSE: AGK) should be easier to assess. Its share price trades a whopping 65% lower than five years ago, as it has felt the heat from the oil and gas industry downturn and Latin American slowdown.
Heat is on
Earlier this month it posted a healthy 16% rise in first-half group revenue to £792m, excluding exceptional items, but this was disappointingly flat after excluding fuel and currency fluctuations. A 10% drop in profit before tax and exceptional items to £63m was a further blow, although an 84% leap in operating cash flow to £184m partly made up for that.
Chief executive Chris Weston reckons Aggreko is making good progress in boosting its product offering and reducing its cost base, with £100m of cash savings targeted. However, the turnaround has some way to go. Earnings per share are forecast to fall 8% in 2017 for what will be the fifth successive annual drop, but there is light at the end of the tunnel with City analysts suggesting a 12% rise in 2018.
Trading at 13.9 times earnings with a PEG of -1, there is value in this stock. The current yield of 3.3% will keep you warm while you wait for Aggreko to power on again.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.