The recent market downturn has severely impacted biotechnology stocks, which are already considered high-risk investments. Among those affected is PureTech Health, a London-listed biotech company, whose share price has plummeted nearly 20 percent in just five days, reaching new lows amid ongoing acquisition interest.

The stock market’s decline and President Trump’s temporary pause on tariffs have provided investors with a chance to reevaluate potential investment opportunities.

Founded in Seaport, Boston, Massachusetts, PureTech Health began trading on the London Stock Exchange in 2015 at an initial price of 160p per share, raising £108 million and achieving a market valuation of approximately £363.3 million. The company joined a growing group of firms aiming to mitigate the risks of biotech investments through a diverse portfolio of innovative science and technology enterprises.

In 2020, PureTech expanded its presence by dual-listing on the Nasdaq in New York. The company has since developed a pipeline of 29 therapies and drug candidates, boasting a clinical trial success rate exceeding 80 percent. Notably, three of its products have received marketing approval in the U.S., the largest healthcare market globally.

One of PureTech’s standout achievements is its involvement with Karuna Therapeutics, a company it founded and which went public on Nasdaq in 2019. Karuna successfully adapted a drug originally for Alzheimer’s treatment to create a medication for schizophrenia. In March of the previous year, Bristol Myers Squibb acquired Karuna for $14 billion, and the FDA approved its drug, KarXT (Cobenfy), in September.

This acquisition resulted in PureTech receiving $293 million from its shareholdings and left it eligible for up to $400 million in follow-up milestone and royalty payments. Additionally, PureTech has returned $100 million to its shareholders through a tender offer, reflecting about 14 percent of its market capitalization, increasing total shareholder returns to $150 million, which includes a $50 million share buyback.

Another promising venture from PureTech recently founded is Seaport Therapeutics, now led by Daphne Zohar, the previous CEO and co-founder of PureTech. This company, in which PureTech holds a 36.7 percent stake, secured $100 million in Series A financing last April, focusing on developing neuropsychiatric therapies. Seaport’s early investors include Arch Venture Partners, Sofinnova Investments, and Third Rock Ventures, who also initially invested in Karuna.

In December, an internal drug developed by PureTech, deupirfenidone, showed positive results in a phase 2 trial for patients suffering from idiopathic pulmonary fibrosis, a disease characterized by lung scarring and difficult breathing.

Despite these advancements in therapy development and commercialization, PureTech’s shares have fallen 75 percent from their peak of over 425p in March 2021, and the company was removed from the FTSE 250 mid-cap index last December, closing at 103p on Thursday—a decline of 9 percent.

Miles Dixon, an analyst at Peel Hunt, highlighted that few companies display a valuation gap as pronounced as PureTech’s. The company’s market capitalization is estimated at around £247 million, compared to approximately £282 million in cash at the end of 2024.

This “valuation disconnect” became apparent on Monday, during the broader market decline triggered by tariff discussions, when PureTech announced it was in discussions with Nordic Capital, a U.S.-based private equity firm, regarding a potential cash offer. This information was prompted by a report from the deals website Betaville, leading to a brief 7 percent increase in PureTech’s share price before Nordic Capital indicated that its “private proposal” had been rejected by the board.

Nordic has since pulled out and is unlikely to reengage, with the uncertainty surrounding Trump’s tariff negotiations creating a cautious atmosphere in the mergers and acquisitions market.

This is the second instance of public takeover interest in PureTech, with a non-binding proposal from Nektar Therapeutics, an American firm, failing to advance three years ago.

Currently, the board of PureTech, led by CEO Bharatt Chowrira, must persuade cautious investors of the potential within its portfolio, starting with its annual results report due this month.

Recommendation: Buy

Reason: A diversified portfolio that is currently trading below cash value.