From obesity to hair-loss... the tech firm turning concept into cure
The investment column that makes the most of your money
EVERY year governments, companies and charitable foundations spend more than $265 billion (£205 billion) studying health and disease. The US government alone spends about $30billion annually on medical research. Yet relatively few initial discoveries turn into drugs and many serious diseases remain uncured.
Pure-Tech Health was founded to try to improve the chances of success, using a different approach from almost every other player in the healthcare sector.
The US-based company floated in London in June 2015 at 160p, as it was deemed too small for US exchanges. The shares have since drifted to 142p, not helped by post-Brexit jitters. However, the shenanigans around EU membership should not affect the company and the shares could offer real longterm rewards.
Pure-Tech was founded by 47-yearold Daphne Zohar, an award-winning American businesswoman who only last month was named entrepreneur of the year by auditing and consultancy giant EY.
Zohar has assembled an extraordinary team of health and technology experts, including the former chief executive of drugs giant Sanofi and the former heads of research at rivals Merck and Pfizer, a Nobel Prize-winner in medicine and a professor and director at Massachusetts Institute of Technology, one of the world’s top universities. Not only are these people among the foremost brains in their industry, but they also come from around the world and have a global network of contacts.
The company, based in Boston, has adopted a distinctive way of looking for new treatments for diseases and medical conditions.
As a starting point, the experts think about unsolved problems in healthcare – such as obesity, diabetes, depression, schizophrenia, attention-deficit hyperactivity disorder and Alzheimer’s disease. Having identified the problems, they then go to universities and research centres around the world in search of ideas that may pro- vide solutions. Once they find interesting opportunities, they work with the scientists in question to create companies that can take these products or technologies from concepts to commercial treatments.
Since Pure-Tech was set up in 2004, they have looked at about 7,000 ideas and out of these, they have created 12 companies, with a further pipeline of projects at an earlier stage of development. Among the 12 businesses, gut-specialist Vedanta Biosciences already has a licensing agreement worth up to $339million with healthcare giant Johnson & Johnson. It is creating products to cure bowel diseases by restoring the balance of bacteria in the intestine. Clinical trials are scheduled to begin next year and the long-term outlook for this business suggests it could be worth hundreds of millions of pounds. Another Pure-Tech business is Akili, which uses video games to help people with ADHD improve the way their brains function. The idea may sound unusual, but a final study is under way now, the company is expected to receive regulatory approval late next year and a commercial launch should follow shortly afterwards.
More than six million children have been diagnosed with ADHD in the US alone and the market is worth at least $600million. Yet drugs often have unpleasant side-effects, such as insomnia, loss of appetite and manic episodes. Akili’s approach does not involve drugs and has enlisted support from UK pharmaceutical group Shire and Pfizer in the US. The technology could also be used to help those with autism and Alzheimer’s.
Gelesis is another pioneering business in Pure-Tech’s portfolio, and hopes to treat obesity with a capsule that helps people to feel fuller for longer. In late-stage trials now, the pills could revolutionise weight-loss therapies, as they are safer and less invasive than gastric bands and do not have the side-effects associated with diet pills.
The capsules could also help millions of people to avoid diabetes, one of the fastest-growing conditions in the world.
Other exciting companies include Tal, which is working on ways to treat depression faster and more safely than with traditional antidepressants, and Karuna, which is developing a treatment for schizophrenia. There is even a business, Follica, which is well on the way to creating a new hair-loss treatment.
Pure-Tech has yet to deliver revenues from any of these companies, but this is expected to change in the next couple of years. As these businesses develop, however, Pure-Tech can either keep them and continue to invest in them, go into partnership with larger drug groups or sell them completely. Different options will be chosen for each business, but the group is being closely watched by several of the largest pharmaceutical firms in the world.
Pure-Tech’s board of directors also has a collective contacts book that gives it a real advantage as products near commercialisation.
Midas verdict: Pure-Tech is valued on the stock market at £350million yet some of its individual businesses could be worth two or three times more than that. This is not a stock for short-term shareholders worried about Brexit-induced volatility. But for long-term investors, the shares, at 142p, could prove to be a real bargain.