Strong progression of PureTech’s Wholly Owned
Pipeline, with three clinical-stage therapeutic candidates being
evaluated across four clinical trials to address large patient
needs in pulmonary, oncology and CNS indications, and a growing
pipeline of four additional preclinical CNS programs
Advancements across Founded Entities, including
Karuna’s third positive registrational trial for KarXT and planned
filing for FDA approval, Akili’s commercial release of
EndeavorOTCTM for adults with ADHD, Gelesis’ application to make
Plenity® available without a prescription, additional positive
results from Vor’s Phase 1/2a leukemia trial and Vedanta’s $106.5
million financing
PureTech plans to pursue a more robust capital
return strategy enabled by cash generated via the Founded Entities
segment, while potentially advancing certain Wholly Owned Programs
through one or more new Founded Entities, asset sales and/or
partnerships
Well-capitalized with Consolidated Cash and
cash equivalents of $350.5 million1 as of June 30, 2023, and
operational runway into Q1 2026; PureTech’s Founded Entities
collectively raised over $575 million during the six months ended
June 30, 2023, and $3.8 billion since July 2018
Company to host a webcast and conference call
today at 9:00am EDT / 2:00pm BST
PureTech Health plc (Nasdaq: PRTC, LSE: PRTC) (“PureTech” or the
“Company”) today announces its half-yearly results for the six
months ended June 30, 2023. The following information will be filed
on Form 6-K with the United States Securities and Exchange
Commission (the “SEC”) and is also available at
https://investors.puretechhealth.com/financials-filings/reports.
Commenting on PureTech’s half-yearly results, Daphne Zohar,
Founder and Chief Executive Officer of PureTech, said:
“The first half of 2023 has been a strong period across both our
Founded Entities and Wholly Owned Pipeline. We have achieved
important clinical and financial milestones, while executing on our
mission of giving life to new classes of medicine to change the
lives of patients with devastating diseases. Our R&D engine has
produced 27 new therapeutics and therapeutic candidates, with two
taken from inception at PureTech to U.S. Food and Drug
Administration (FDA) and European regulatory clearances and a third
that is expected to be filed soon for FDA approval. We are proud
that our track record of clinical success is six times greater than
the industry average.2
“The maturation of our Wholly Owned Programs now gives us
several pathways to realize their value as we determine the ideal
path for each program’s advancement – this may be through internal
development, the creation of new Founded Entities, asset sales,
and/or partnering and royalty transactions – and we will be guided
by the optimal route to generate value for our shareholders. We are
proud that for nearly six years, including during a time that was
extremely challenging to the biotech sector at large, we not only
created important new medicines, but we also generated almost $800
million in cash without approaching the capital markets or diluting
our shareholders. This has allowed us to focus on what we do best:
recognize value in potential new medicines before anyone else sees
it and unlock that value through focused experiments, relentlessly
prioritizing and advancing programs with the highest probability of
success.
“Our unique model and disciplined execution have provided a safe
harbor through the stormy market challenges, and while we can
navigate in any environment, we are also very well-positioned to
benefit if the tides potentially turn in favor of the biotech
sector.
“I am tremendously proud of the achievements across our Founded
Entities and Wholly Owned Pipeline, and I am grateful to our
skilled and dedicated team who continue to shepherd this important
work forward. I look forward to another exciting period ahead and
to sharing more about our progress in the coming months.”
Webcast and conference call details
Members of the PureTech management team will host a conference
call at 9:00am EDT / 2:00pm BST today, August 29, 2023, to discuss
these results. A live webcast and presentation slides will be
available on the investors section of PureTech’s website under the
Events and Presentations tab. To join by phone, please dial:
United Kingdom (Local): +44 20 4587 0498 United
Kingdom (Toll-Free): +44 800 358 1035 USA (Local): +1
646 787 9445 USA (Toll-Free): +1 855 979 6654 Access
Code: 957610
For those unable to listen to the call live, a replay will be
available on the PureTech website.
Key Wholly Owned & Founded Entity Programs
Wholly Owned
Candidates
Ownership
Indication
LYT-100
(deupirfenidone)
100%
Conditions involving inflammation
and fibrosis, including idiopathic pulmonary fibrosis
LYT-200
(anti-galectin-9 mAb)
100%
Metastatic/locally advanced solid
tumors, including urothelial and head and neck cancers, and
hematological malignancies, such as acute myeloid leukemia
LYT-300
(oral allopregnanolone)
100%
A range of neurological and
neuropsychological conditions, including anxiety, mood disorders
and Fragile X-associated Tremor/Ataxia Syndrome
LYT-310
(oral cannabidiol)
100%
Epilepsies and other neurological
conditions
Founded Entities
Ownership3
Overview
Karuna
2.8% Equity plus milestone
payments, 20% sublicense revenue, royalties, and up to $500M from
agreement with Royalty Pharma4
Advancing transformative
medicines for people living with psychiatric and neurological
conditions
Akili
14.6% Equity
Pioneering the development of
cognitive treatments through game-changing technologies
Gelesis
22.8% Equity plus Royalties5
Advancing a novel category of
treatments for weight management and gut related chronic
diseases
Vedanta
41.0% Equity6
Pioneering a new category of oral
therapies based on defined bacterial consortia
Vor Bio
4.0% Equity
Engineering hematopoietic stem
cells to enable targeted therapies for patients with blood
cancers
Sonde
35.2% Equity
A voice-based artificial
intelligence platform to detect changes in health
Entrega
73.8% Equity
Engineering hydrogels to enable
the oral administration of peptide therapeutics (e.g., GLP-1
agonists)
Operational Highlights
Accelerated development of our Wholly Owned Programs7 driven
by significant clinical and strategic progress
- Progressed Phase 2b dose-ranging trial of LYT-100
(deupirfenidone) in patients with idiopathic pulmonary fibrosis
(IPF).
- Announced plans to advance LYT-300 (oral allopregnanolone) for
the potential treatment of anxiety and depression, and initiated a
Phase 2a proof-of-concept trial using a validated clinical model of
anxiety in healthy volunteers.
- Awarded up to $11.4 million from the U.S. Department of Defense
to advance LYT-300 for Fragile X-associated Tremor/ Ataxia Syndrome
(FXTAS).
- Initiated a Phase 1b trial of LYT-200 (anti-galectin-9 mAb) in
combination with tislelizumab in urothelial and head and neck
cancers and progressed the ongoing Phase 1b trial evaluating
LYT-200 as a single agent for the treatment of acute myeloid
leukemia (AML).
- Created and advanced multiple preclinical programs for central
nervous system (CNS) indications produced from our GlyphTM
technology platform.
Commercial and clinical momentum across Founded Entities8
demonstrates success of our R&D model
- PureTech and Royalty Pharma entered into a KarXT Royalty
Agreement for consideration of up to $500 million with $100 million
in cash up front and up to $400 million in additional payments
contingent on the achievement of certain regulatory and commercial
milestones.
- Karuna Therapeutics (Nasdaq: KRTX) (Karuna) announced that the
company remains on track to file KarXT for FDA approval in
schizophrenia in the third quarter of 2023, with a launch in the
second half of 2024, if approved.
- Akili, Inc. (Nasdaq: AKLI) (Akili) shared positive topline
results from the STARS-ADHD-Adult clinical trial evaluating the
efficacy and safety of EndeavorRx®9 in adults with
attention-deficit/hyperactivity disorder (ADHD). Akili subsequently
released EndeavorOTC,10 a video game treatment to improve attention
in adults 18 years and older with ADHD, available without a
prescription. Akili also submitted data from the
STARS-ADHD-Adolescents trial to the FDA to expand its current
EndeavorRx label to include adolescents aged 13-17.
- Gelesis Holdings, Inc. (Gelesis) has helped over 200,000 people
with their weight loss journeys and generated more than $40 million
in revenue since launch. Gelesis and PureTech have entered into an
Agreement and Plan of Merger, subject to agreed upon terms and
conditions.
- Vor Biopharma Inc. (Nasdaq: VOR) (Vor Bio) announced successful
primary engraftment of trem-cel (VOR33) in five AML patients. Vor
also announced the FDA has cleared its Investigational New Drug
application for a Phase 1/2 clinical trial of VCAR33ALLO.
- Vedanta Biosciences (Vedanta) received Fast Track designation
for VE303, its Phase 3 ready therapeutic candidate designed for the
prevention of recurrent Clostridioides difficile infection (rCDI).
Vedanta also raised $106.5 million to advance its pipeline.
Financial Highlights:
- Consolidated Cash and cash equivalents as of June 30, 2023,
were 350.5 million1 (December 31, 2022: Consolidated Cash, cash
equivalents and Short-term investments of $350.1 million1) and
PureTech Level Cash and cash equivalents as of June 30, 2023, were
$348.5 million11,12 (December 31, 2022: PureTech Level Cash, cash
equivalents and Short-term investments of $339.5 million11)
- Operating expenses for the six months ended June 30, 2023, were
$79.3 million (June 30, 2022: $108.2 million).
Key Upcoming Milestones (next 12 to 24 months)
Several significant milestones are anticipated over the next 12
to 24 months from both PureTech and our Founded Entities:
Wholly Owned Pipeline
- We expect topline results from the Phase 2b dose-ranging trial
of LYT-100 in patients with IPF in 2024. We plan to pursue a
streamlined development program for LYT-100 in IPF and are using
the same endpoints that have supported past approvals. Pending
positive clinical and regulatory feedback, we intend to advance the
program into a Phase 3 trial. We believe the results of the Phase
2b trial, together with a Phase 3 trial, could serve as the basis
for registration in the U.S. and other geographies.
- We expect results from the Phase 2a proof-of-concept trial of
LYT-300 using a validated clinical model of anxiety in healthy
volunteers by the end of 2023.
- We expect to initiate a Phase 1 trial of LYT-310 (oral
cannabidiol) in Q4 2023.
- We expect initial results from a subset of patients from the
Phase 1b trial of LYT-200 as a single agent for the treatment of
AML by the end of 2023.
- Planning is underway for a Phase 2 trial of LYT-300 in FXTAS in
collaboration with the University of California, Davis.
Founded Entities
- Karuna plans to file KarXT for FDA approval in schizophrenia in
the third quarter of 2023, with a launch in the second half of
2024, if approved. Karuna also expects to initiate its second Phase
3 trial in psychosis in Alzheimer’s disease, ADEPT-2, in the second
half of 2023.
- Akili expects to submit data to the FDA to pursue marketing
authorization for EndeavorOTC to be made available without a
prescription as a treatment for adults with ADHD in the second half
of 2023. Akili also expects data in the second half of 2023 from
Shionogi’s pivotal trial of SDT-001 in children aged 6-17 years old
with ADHD in Japan.
- Gelesis filed an initial 510(k) application with the FDA to
change the classification of Plenity13 from prescription-only to be
available without a prescription. Gelesis anticipates the FDA’s
decision on its 510(k) submission by the first quarter of 2024.
PureTech has also entered into an Agreement and Plan of Merger to
purchase all of the outstanding stock of Gelesis and take the
company private. The closing of this transaction is contingent on,
among other things, Gelesis receiving shareholder approval for the
transaction and the satisfaction of various closing
conditions.
- Vor Bio expects additional trem-cel engraftment and MylotargTM
hematologic protection data updates by year-end 2023.
- Vedanta plans to initiate a Phase 3 clinical trial of VE303 in
patients at high risk for rCDI in Q4 2023 and expects topline data
from the Phase 1/2 clinical trial of VE416, Vedanta’s therapeutic
candidate for food allergy, in 2023, subject to investigator
timelines.
About PureTech Health
PureTech is a clinical-stage biotherapeutics company dedicated
to giving life to new classes of medicine to change the lives of
patients with devastating diseases. The Company has created a broad
and deep pipeline through its experienced research and development
team and its extensive network of scientists, clinicians and
industry leaders that is being advanced both internally and through
its Founded Entities. PureTech's R&D engine has resulted in the
development of 27 therapeutics and therapeutic candidates,
including two (Plenity® and EndeavorRx®) that have received both
U.S. FDA clearance and European marketing authorization and a third
(KarXT) that is expected to be filed soon for FDA approval. A
number of these programs are being advanced by PureTech or its
Founded Entities in various indications and stages of clinical
development, including registration enabling studies. All of the
underlying programs and platforms that resulted in this pipeline of
therapeutic candidates were initially identified or discovered and
then advanced by the PureTech team through key validation
points.
For more information, visit www.puretechhealth.com or connect
with us on X (formerly Twitter) @puretechh.
Cautionary Note Regarding Forward-Looking Statements
This press release contains statements that are or may be
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements contained
in this press release that do not relate to matters of historical
fact should be considered forward-looking statements, including
without limitation those related to our and our Founded Entities’
plans, future prospects, objectives, developments, strategies and
expectations, the progress and timing of clinical trials and data
readouts, the timing of potential Investigational New Drug (IND)
and NDA submissions, the timing of regulatory approvals or
clearances from the FDA, the sufficiency of cash and cash
equivalents and expected cash runway, and the anticipated closing
of the Gelesis transaction. The forward-looking statements are
based on current expectations and are subject to known and unknown
risks, uncertainties and other important factors that could cause
actual results, performance and achievements to differ materially
from current expectations, including, but not limited to, the
following: our history of incurring significant operating losses
since our inception; our need for additional funding to achieve our
business goals, which may not be available and which may force us
to delay, limit or terminate certain of our therapeutic development
efforts; our limited information about and limited control or
influence over our Non-Controlled Founded Entities; the lengthy and
expensive process of preclinical and clinical drug development,
which has an uncertain outcome and potential for substantial
delays; potential difficulties with enrolling patients in clinical
trials, which could delay our clinical development activities; side
effects, adverse events or other safety risks which could be
associated with our therapeutic candidates and delay or halt their
clinical development; our ability to obtain regulatory approval for
and commercialize our therapeutic candidates; our ability to
realize the benefits of our collaborations, licenses and other
arrangements; our ability to maintain and protect our intellectual
property rights; our reliance on third parties, including clinical
research organizations, clinical investigators and manufacturers;
our vulnerability to natural disasters, global economic factors,
geo-political actions and unexpected events; and those risks,
uncertainties and other important factors described under the
caption “Risk Factors” in our Annual Report on Form 20-F for the
year ended December 31, 2022 filed with the SEC and in our other
regulatory filings. These forward-looking statements are based on
assumptions regarding the present and future business strategies of
the Company and the environment in which it will operate in the
future. Each forward-looking statement speaks only as at the date
of this press release. Except as required by law and regulatory
requirements, we disclaim any obligation to update or revise these
forward-looking statements, whether as a result of new information,
future events or otherwise.
Interim Management Report
Introduction
PureTech was founded with a mission to change the lives of
patients with devastating diseases. Our R&D engine has been
tremendously successful in pursuit of this goal, having generated
27 therapeutics and therapeutic candidates to date, including two
(Plenity® and EndeavorRx®) that have received U.S. Food and Drug
Administration (FDA) clearance and European Marketing Authorization
and a third, KarXT, that is expected to be filed soon for FDA
approval. We attribute our track record of productivity and
clinical success to our distinctive approach to drug development,
which is underpinned by three key pillars. First, we identify an
area with unmet patient need. We then identify therapeutic
approaches that often have validated human efficacy but have not
reached their full potential due to key limitations, such as the
route of administration or side effects. Our second pillar involves
applying our proprietary insights and technologies to overcome
these limitations, thereby unlocking a new medicine’s benefit for
patients. Our third pillar is centered on efficient de-risking,
which we achieve in two ways – by building on well-defined clinical
and regulatory paths and conducting “killer” experiments early on.
We believe in disciplined R&D, and we quickly shut down
programs that don’t reach our pre-specified thresholds for
advancement. This allows us to pivot resources towards the programs
with the greatest likelihood of advancement and has resulted in our
success rate, which is about six times higher than the industry
average.2
We are a well-capitalized organization with a unique business
model that helps fuel our Wholly Owned Programs as well as maximize
shareholder returns. Our Founded Entities, which are akin to
partnered programs, provide a significant source of non-dilutive
capital. To date, we have generated nearly $800 million from
Founded Entity equity and royalty monetization events, and we have
not had to raise funds at the PureTech level from the capital
markets in almost six years. We’re exceedingly proud of this model
and the advancements our Founded Entities have made across a range
of conditions, providing value to patients and shareholders
alike.
KarXT is an excellent example of how our Founded Entities are
able to generate value for our shareholders, and it is a hallmark
of our capital efficient approach. We allocated $18.5 million to
the program, and our return on investment has been almost 50x.14
This figure does not account for the $100 million upfront we
received in connection with our March 2023 announcement that
Royalty Pharma acquired an interest in our 3% royalty on KarXT that
provides Royalty Pharma the full amount of royalties due to us up
to $2 billion in annual net sales of KarXT. Beyond that, we are
entitled to up to $400 million in additional payments associated
with regulatory and commercial milestones. Importantly, once KarXT
achieves $2 billion in annual sales, we will retain 67% of the
royalty payments, and Royalty Pharma will continue to receive 33%.
We also continue to retain 2.8% equity ownership in Karuna as well
as milestone payments, and we are eligible to receive 20% of
sublicense income.
The same successful strategy and proven team that generated our
Founded Entities have also produced our Wholly Owned Programs. We
intend to evaluate the strong progress of our Wholly Owned Programs
and determine the ideal path for each program’s advancement – this
may be through internal development, the creation of new Founded
Entities, asset sales, and/or partnering and royalty transactions –
and we will be guided by the optimal route to generate value for
our shareholders. Having the flexibility to advance programs to an
inflection point before determining the most expedient and
cost-effective path forward is a hallmark of our model, and it
allows us to continue to nominate new candidates for advancement
without compromising ongoing development efforts.
As we realize that value and as we share program development
costs with partners, we expect to be in a position to evaluate
returning additional capital to our shareholders, beyond the
current $50 million stock buyback program. We have many options
available to us, and we are committed to maximizing shareholder
returns while we also make a difference for patients. We will be
engaging with our shareholders in the coming weeks for feedback,
and the Board will also consider factors including market
conditions and PureTech’s ongoing cash requirements as we explore
the exciting paths forward.
Notable Developments
Wholly Owned Programs
In the first half of 2023 we have continued to strengthen and
grow our Wholly Owned Programs, which are based on a strategy of
leveraging validated efficacy to rapidly advance therapeutics with
proven profiles. This approach is designed to preserve the
pharmacology of efficacious drugs while maximizing their unrealized
potential to meet significant patient needs.
Our most advanced clinical-stage therapeutic candidate,
LYT-100 (deupirfenidone), is currently in development for
idiopathic pulmonary fibrosis (IPF), which is a rare, progressive
and fatal lung disease with a median survival of 2-5 years.15
Pirfenidone is one of only two drugs approved to treat IPF, and it
has been shown to improve survival by approximately three years
compared to supportive care alone.15 However, tolerability issues
with both of the standard of care drugs result in patients
discontinuing treatment or reducing their dose. As a result, nearly
three out of every four people with IPF forego treatment with these
otherwise efficacious medicines.16 LYT-100 is a deuterated form of
pirfenidone and is designed to retain the beneficial pharmacology
and clinically-validated efficacy of pirfenidone with a highly
differentiated pharmacokinetic profile that has translated into
favorable tolerability in multiple clinical studies and has the
potential to keep patients on treatment longer to enable more
optimal disease management. LYT-100 has also demonstrated that it
can be safely dosed with a higher total drug exposure than the
currently approved dose of pirfenidone, which could translate into
improved efficacy over pirfenidone. With this profile, we believe
LYT-100 has the potential both to supplant the current standard of
care treatments and to serve a larger market of patients who are
unable to tolerate current therapies.
The first of two potentially registration-enabling studies for
LYT-100 is underway, with topline results from the Phase 2b trial
expected in 2024. This is a global trial designed to evaluate the
efficacy, tolerability, safety and dosing regimen of LYT-100
against placebo. The trial will also assess the relative efficacy
of two doses of LYT-100, one with comparable exposure to the
approved dose of pirfenidone and one with a higher level of
exposure that has the potential for improved efficacy. This is part
of a streamlined development program using the same endpoints that
have supported past approvals. Pending positive clinical and
regulatory feedback, we believe the results of the Phase 2b
clinical trial, together with a Phase 3 clinical trial, could serve
as the basis for registration in the U.S.
The unique profile of LYT-100 has the potential for therapeutic
benefit in other indications beyond IPF. We are also exploring
LYT-100 in progressive fibrosing interstitial lung diseases, a
group of lung diseases closely related to IPF, as well as other
fibrotic conditions where there is human data with pirfenidone
suggestive of clinical benefit. We are also developing LYT-100 for
medical countermeasures under the FDA Animal Rule, which allows for
the approval of drugs based on well-controlled animal models when
human efficacy studies are not feasible.17 PureTech may be eligible
to receive a priority review voucher from the FDA for a medical
countermeasure application upon approval.
We have also seen significant progress this year with our second
clinical-stage therapeutic candidate, LYT-300 (oral
allopregnanolone). LYT-300 is an oral prodrug of
allopregnanolone, developed using our GlyphTM technology platform,
which harnesses the body’s natural lipid absorption and transport
process to enable the oral administration of certain therapeutics
that otherwise cannot be administered orally. Lower levels of
allopregnanolone have been documented in patients with mood
disorders, such as depression, and there is evidence that
allopregnanolone has therapeutic potential in both anxiety and
depression.18 An intravenous formulation of allopregnanolone is
approved by the FDA as a 60-hour infusion for the treatment of
postpartum depression (PPD), though the method of administration
has significant challenges and has limited the scope of clinical
use for allopregnanolone. To overcome this, medicinal chemistry
approaches have been applied to synthesize orally bioavailable
chemical analogs of allopregnanolone. These oral analogs may have
different pharmacological effects than endogenous allopregnanolone
and therefore may not capture its full therapeutic potential,
though one of them was recently approved in PPD. We believe our
Glyph platform should enable us to retain the potency of endogenous
allopregnanolone in a more convenient oral form and potentially
enable us to unlock the therapeutic potential of allopregnanolone
across a range of neurological and neuropsychiatric conditions.
In our Phase 1 study, oral administration of LYT-300 achieved
blood levels of allopregnanolone at or above those associated with
therapeutic benefit in PPD and nine times greater than orally
administered allopregnanolone, based on third-party published
data.19 LYT-300 also demonstrated dose-dependent target engagement
with GABAA receptors, which are known to regulate mood and other
neurological conditions.
In February, we announced our plans to advance LYT-300 for the
potential treatment of anxiety disorders and depression, and in
June, we initiated a Phase 2a proof-of-concept trial in healthy
volunteers using a validated clinical model of anxiety, with
results expected by the end of 2023. These results, alongside our
Phase 1 data, will inform potential future development plans in
additional indications, and we are in the process of prioritizing
which additional indications to pursue with regard to mood
disorders. In light of the two approved PPD treatments on the
market, we believe that other depression-related indications have
greater patient needs and will therefore be higher priority for us.
Additionally, in the August 2023 post-period, we announced a grant
of up to $11.4 million from the U.S. Department of Defense to
advance LYT-300 for the treatment of Fragile X-associated Tremor/
Ataxia Syndrome (FXTAS), a devastating neurological condition. The
funds will support a Phase 2 trial of LYT-300 in collaboration with
the University of California, Davis.
Last year we announced another candidate developed from our
Glyph platform, LYT-310 (oral cannabidiol [CBD]), which is
being advanced for the potential treatment of epilepsies and other
neurological indications. A CBD-based product has already received
regulatory approval in the U.S. and Europe to treat seizures
related to certain rare conditions, but it requires a large volume
of a sesame oil-based formulation, which limits its use in broader
applications and age groups. Side effects of this approved product
can include nausea, stomach pain, sleepiness and mood changes, all
of which impact a patient’s quality of life. This presents an
opportunity for LYT-310 to expand the therapeutic application of
CBD across a much wider range of age groups and indications, most
notably given its oral dosing, streamlined manufacturing process
and potential to reduce the gastrointestinal (GI) side effects and
liver toxicity associated with the current CBD-based treatment. We
expect to initiate a Phase 1 clinical trial of LYT-310 in the
fourth quarter of 2023.
We have also generated multiple additional programs from our
Glyph platform centered around validated efficacy in central
nervous system indications. We look forward to sharing more about
those programs and the potential expansion of our pipeline in due
course.
Development of LYT-200 (anti-galectin-9 mAb) has also
progressed in the first half. LYT-200 is being developed for the
treatment of metastatic/locally advanced solid tumors, including
urothelial and head and neck cancers, as well as for the treatment
of hematological malignancies, such as acute myeloid leukemia
(AML). It is a fully human IgG4 monoclonal antibody designed to
inhibit the activity of galectin-9, an immunomodulatory molecule
expressed by tumors and immune cells and shown to suppress the
immune system from recognizing and destroying cancer cells. In the
first half of 2023, we initiated a Phase 1b clinical trial of
LYT-200 in combination with tislelizumab in urothelial and head and
neck cancers, and topline results are expected in 2024. In late
2022, we also initiated a Phase 1b clinical trial to evaluate
LYT-200 as a single agent for the treatment of AML, and we
anticipate initial results from a subset of patients by the end of
2023.
Founded Entities
Our Founded Entities have had a productive 2023 so far, with
significant commercial and clinical momentum.
Karuna made progress towards delivering transformative medicines
for people living with psychiatric and neurological conditions,
including schizophrenia and psychosis in Alzheimer’s disease. In
March 2023, Karuna announced positive topline results from the
Phase 3 EMERGENT-3 trial evaluating the efficacy, safety and
tolerability of KarXT in adults with schizophrenia. The trial met
its primary endpoint, with KarXT demonstrating a statistically
significant and clinically meaningful 8.4-point reduction in
Positive and Negative Syndrome Scale (PANSS) total score compared
to placebo (-20.6 KarXT vs. -12.2 placebo; p<0.0001) at Week 5
(Cohen’s d effect size of 0.60). Consistent with prior trials,
KarXT demonstrated an early and sustained statistically significant
reduction of symptoms from Week 2 (p<0.05) through the end of
the trial as assessed by PANSS total score. KarXT also demonstrated
reductions in positive and negative symptoms of schizophrenia as
measured by PANSS positive and PANSS negative Marder factor
subscales. KarXT was generally well tolerated, with a side effect
profile substantially consistent with previous trials of KarXT in
schizophrenia. Karuna plans to file KarXT for FDA approval in
schizophrenia in the third quarter of 2023, with a launch in the
second half of 2024, if approved. Karuna also expects to initiate
its second Phase 3 trial in psychosis in Alzheimer’s disease,
ADEPT-2, in the second half of 2023.
Akili also made significant progress in the development of their
cognitive treatments through game-changing technologies. In January
2023, Akili announced topline results from STARS-ADHD-Adolescents,
its pivotal trial of EndeavorRx (AKL-T01) in adolescents aged 13-17
years old with attention-deficit/hyperactivity disorder (ADHD). The
study showed robust improvements in attention and broader clinical
outcomes, including attention improvements that were nearly three
times as large as those seen in Akili’s pivotal trial that served
as the basis for FDA authorization of EndeavorRx for children with
ADHD aged 8-12 years old. In May 2023, Akili submitted data from
this new trial to the FDA to expand its current EndeavorRx label to
include adolescents.
Also in May 2023, Akili shared topline results of the
STARS-ADHD-Adult clinical trial evaluating the efficacy and safety
of EndeavorRx in adults with ADHD. The trial demonstrated
statistically significant improvement in attention functioning
after six weeks of treatment, achieving its predefined primary
efficacy outcome. In June, Akili announced the release of
EndeavorOTCTM without a prescription for adults 18 years and older.
Akili expects to submit its adult clinical trial data to the FDA to
pursue marketing authorization for EndeavorOTC to be made available
without a prescription as a treatment for adults with ADHD in the
second half of 2023. Akili also expects data in the second half of
2023 from Shionogi’s pivotal trial of SDT-001 in children aged 6-17
years old with ADHD in Japan.
Gelesis’ product for weight management, Plenity, has helped over
200,000 people with their weight loss journeys and generated more
than $40 million in revenue since launch. Earlier this year, the
company announced that it had filed an initial 510(k) application
with the FDA to change the classification of Plenity from
prescription-only to be available without a prescription. Gelesis
anticipates the FDA’s decision on its 510(k) submission by the
first quarter of 2024. The company has stated that it believes this
shift would double Plenity’s addressable market, should
significantly reduce the company’s customer acquisition costs, and
could open up new, broader partnership opportunities. While the
obesity treatment landscape is rapidly evolving, there still remain
major gaps for patients, providers and payers alike, including
affordability, tolerability and rebound effect, that the company
believes Plenity is well-positioned to uniquely address.
In June 2023, Gelesis presented data at the American Diabetes
Association’s annual conference showing the real-world
effectiveness of Plenity across 984 patients. Consistent with
clinical studies, responders demonstrated clinically significant
weight loss at 6 months. Also in June, PureTech and Gelesis entered
into an Agreement and Plan of Merger to purchase all of the
outstanding stock of Gelesis and take the company private. The
closing of this transaction is contingent on, among other things,
Gelesis receiving shareholder approval for the transaction and the
satisfaction of various closing conditions.
Vedanta also progressed the development of a potential new
category of oral therapies based on defined consortia of bacteria
isolated from the human microbiome and grown from pure clonal cell
banks. In April 2023, Vedanta announced a $106.5 million financing
to advance its pipeline of defined bacterial consortia therapies.
In May 2023, Vedanta announced the U.S. FDA granted Fast Track
designation to VE303 for the prevention of recurrent Clostridioides
difficile infection.
Vor has continued to progress the development of its novel
platform for engineering Hematopoietic Stem Cell (HSCs) to enable
targeted therapies post-transplant. In June 2023, Vor announced
five patients transplanted with trem-cel (VOR33) achieved primary
neutrophil engraftment and high levels of myeloid donor chimerism.
In the August 2023 post-period, Vor announced that the FDA cleared
its Investigational New Drug application for VCAR33ALLO, a T-cell
therapy derived from allogeneic healthy donors using a chimeric
antigen receptor specifically binding to CD33. Also in the August
2023 post-period, Vor announced that the company has secured a
worldwide non-exclusive license from Editas Medicine for ex-vivo
Cas9 gene-edited HSC therapies for the treatment and/or prevention
of hematological malignancies. The license provides access to key
intellectual property for the continued development and potential
commercialization of edited HSCs including trem-cel.
Sonde has continued to develop a voice-based artificial
intelligence platform that detects changes in the sound of voice
that are linked to health conditions – like depression, anxiety and
respiratory disease – to provide health tracking and
monitoring.
Entrega has continued to advance its platform for the oral
administration of biologics, vaccines and other drugs that are
otherwise not efficiently absorbed when taken orally. Entrega’s
technology platform uses a proprietary, customizable hydrogel
dosage form to control local fluid microenvironments in the GI
tract in an effort to both enhance absorption and reduce the
variability of drug exposure. Peptide therapeutics (e.g., the
emerging GLP-1 agonist class) are ideally suited to benefit from
Entrega’s approach.
1
Cash and cash equivalents (as of
June 30, 2023) or Cash, cash equivalents and Short-term investments
(as of December 31, 2022) held at PureTech Health plc and
consolidated subsidiaries. For more information, please see below
under the heading "Financial Review.”
2
Clinical success is measured as
the probability of transition success from Phase 1 to regulatory
filing. PureTech’s probability is 49%, and the industry average is
8%. The cumulative percentages are calculated by multiplying the
individual phase percentages listed in the following footnotes 3
& 4. 3 Industry average data measures the probability of
clinical trial success of therapeutics by calculating the number of
programs progressing to the next phase vs. the number progressing
and suspended (Phase 1=52%, Phase 2=29%, Phase 3=58%). BIO,
PharmaIntelligence, QLS (2021) Clinical Development Success Rates
2011 – 2020. This study did not include therapeutics regulated as
devices. 4 The aggregate percentages include all therapeutic
candidates advanced through at least Phase 1 by PureTech or its
Founded Entities from 2009 onward, using the aforementioned
calculation method based on the following individual phase
percentages, Phase 1 (n = 7/9; 78%), Phase 2 (n = 10/12; 83%),
Phase 3 (n = 3/4; 75%), last updated on June 21, 2023; Phase 2 and
Phase 3 percentages include some therapeutic candidates where Phase
1 trials were not conducted by PureTech or its Founded Entities (i)
due to the requirements of the medical device regulatory pathway or
(ii) because a prior Phase 1 trial was conducted by a third party,
which Phase 1 trials were not included in this analysis.
3
Founded Entities represent
companies founded by PureTech in which PureTech maintains ownership
of an equity interest and, in certain cases, is eligible to receive
sublicense income and royalties on product sales. Relevant
ownership interests for Vedanta, Sonde and Entrega were calculated
on a partially diluted basis (as opposed to a voting basis) as of
June 30, 2023, including outstanding shares, options and warrants,
but excluding unallocated shares authorized to be issued pursuant
to equity incentive plans. Karuna, Akili and Vor ownerships were
calculated on a beneficial ownership basis in accordance with SEC
rules as of July 31, 2023, August 3, 2023, and August 4, 2023,
respectively.
4
As of March 22, 2023, PureTech
has sold its right to receive a 3% royalty from Karuna to Royalty
Pharma on net sales up to $2 billion annually, after which
threshold PureTech will receive 67% of the royalty payments and
Royalty Pharma will receive 33%. PureTech retains its equity
ownership in Karuna. Additionally, under its license agreement with
Karuna, PureTech retains the right to receive milestone payments
upon the achievement of certain regulatory approvals and 20% of
sublicense income.
5
Gelesis ownership represents the
percentage of Gelesis’ outstanding common stock held by PureTech as
of August 11, 2023. On a beneficial ownership basis (as calculated
in accordance with SEC rules), PureTech owns 92.0% of the
outstanding securities of Gelesis as of June 12, 2023. On June 12,
2023, PureTech entered into an Agreement and Plan of Merger to
acquire all of the outstanding equity and equity-linked securities
of Gelesis and to cause Gelesis to become an indirect wholly owned
subsidiary of PureTech upon consummation of the transaction. Please
see PureTech’s Schedule 13D filings with respect to Gelesis on file
with SEC for additional information. PureTech is also eligible to
receive certain payments from Gelesis under its license agreement,
including sublicense payments and royalties on sales of certain
products, including Plenity.
6
Vedanta’s $106.5 million recent
financing round was structured as convertible debt. PureTech
ownership reflects ownership as of June 30, 2023, and does not take
into account any potential future dilution, if applicable, as a
result of conversion of that debt amount.
7
References in this report to
“Wholly Owned Programs” refer to the Company’s four therapeutic
candidates (LYT-100, LYT-200, LYT-300 and LYT-310), Glyph platform
and potential future therapeutic candidates and platforms that the
Company may develop or obtain. References to “Wholly Owned
Pipeline” refer to LYT-100, LYT-200, LYT-300 and LYT-310.
8
Our Founded Entities are
comprised of our Controlled Founded Entities and our Non-Controlled
Founded Entities, all of which are incorporated in the United
States. Where PureTech maintains control, the entity is referred to
as a Controlled Founded Entity in this report and is consolidated
in the financial statements. Where PureTech does not maintain
control, the entity is referred to as a Non-Controlled Founded
Entity in this report and is not consolidated in the financial
statements. References to our Controlled Founded Entities refer to
Entrega, Inc., for all periods prior to March 1, 2023, Vedanta
Biosciences, Inc., and for all periods prior to May 25, 2022, Sonde
Health Inc. References to our Non-Controlled Founded Entities refer
to Akili Interactive Labs, Inc., Karuna Therapeutics, Inc., Vor
Bio, Inc., Gelesis, Inc., for all periods following May 25, 2022,
Sonde Health, Inc., for all periods following March 1, 2023,
Vedanta Biosciences, Inc., and, for all periods prior to December
18, 2019, resTORbio, Inc. We formed each of our Founded Entities
and have been involved in development efforts in varying degrees.
In the case of our Controlled Founded Entity Entrega, Inc., we
continue to maintain majority voting control. With respect to our
Non-Controlled Founded Entities, we may benefit from appreciation
in our minority equity investment as a shareholder of such
companies.
9
EndeavorRx is the first-and-only
FDA-authorized treatment delivered through a video game experience.
EndeavorRx is indicated to improve attention function as measured
by computer-based testing in children ages 8 to 12 years old with
primarily inattentive or combined-type ADHD, who have a
demonstrated attention issue. Patients who engage with EndeavorRx
demonstrate improvements in a digitally assessed measure Test of
Variables of Attention (TOVA®) of sustained and selective attention
and may not display benefits in typical behavioral symptoms, such
as hyperactivity. EndeavorRx should be considered for use as part
of a therapeutic program that may include clinician-directed
therapy, medication, and/or educational programs, which further
address symptoms of the disorder. EndeavorRx is available by
prescription only. It is not intended to be used as a stand-alone
therapeutic and is not a substitution for a child’s medication. The
most common side effect observed in children in EndeavorRx’s
clinical trials was a feeling of frustration, as the game can be
quite challenging at times. No serious adverse events were
associated with its use. EndeavorRx is recommended to be used for
approximately 25 minutes a day, 5 days a week, over initially at
least 4 consecutive weeks, or as recommended by your child’s health
care provider. To learn more about EndeavorRx, please visit
EndeavorRx.com.
10
EndeavorOTC is a digital
therapeutic indicated to improve attention function, ADHD symptoms
and quality of life in adults 18 years of age and older with
primarily inattentive or combined-type ADHD. EndeavorOTC utilizes
the same proprietary technology underlying EndeavorRx, a
prescription digital therapeutic indicated to improve attention
function in children ages 8-12. EndeavorOTC is available under the
U.S. Food and Drug Administration’s current Enforcement Policy for
Digital Health Devices for Treating Psychiatric Disorders During
the Coronavirus Disease 2019 (COVID-19) Public Health Emergency.
EndeavorOTC has not been cleared or authorized by the U.S. Food and
Drug Administration for its indications. It is recommended that
patients speak to their health care provider before starting
EndeavorOTC treatment. No serious adverse events have been reported
in any of our clinical studies. To learn more, visit
EndeavorOTC.com.
11
This represents a non-IFRS number
and is comprised of Cash and cash equivalents (as of June 30, 2023)
or Cash, cash equivalents and Short-term investments (as of
December 31, 2022) held at PureTech Health plc and our following
wholly-owned owned subsidiaries: PureTech LYT, PureTech LYT-100,
Alivio Therapeutics, Inc., PureTech Management, Inc., PureTech
Health LLC, PureTech Securities Corp, PureTech Securities II. For a
reconciliation of this number to the IFRS equivalent number, please
refer to the “Financial Review” section of this report.
12
The difference between
Consolidated Cash and cash equivalents and PureTech Level Cash and
cash equivalents as of June 30, 2023, of approximately $2 million
does not include Cash and cash equivalents in all our Founded
Entities that were deconsolidated.
13
Important Safety Information
about Plenity: Patients who are pregnant or are allergic to
cellulose, citric acid, sodium stearyl fumarate, gelatin, or
titanium dioxide should not take Plenity. To avoid impact on the
absorption of medications: For all medications that should be taken
with food, take them after starting a meal. For all medications
that should be taken without food (on an empty stomach), continue
taking on an empty stomach or as recommended by your physician. The
overall incidence of side effects with Plenity was no different
than placebo. The most common side effects were diarrhea, distended
abdomen, infrequent bowel movements, and flatulence. Contact a
doctor right away if problems occur. If you have a severe allergic
reaction, severe stomach pain, or severe diarrhea, stop using
Plenity until you can speak to your doctor. Rx Only. For the safe
and proper use of Plenity or more information, talk to a healthcare
professional, read the Patient Instructions for Use, or call
1-844-PLENITY.
14
47x as of July 31, 2023
15
Fisher, M., Nathan, S. D., Hill,
C., Marshall, J., Dejonckheere, F., Thuresson, P., & Maher, T.
M. (2017). Predicting Life Expectancy for Pirfenidone in Idiopathic
Pulmonary Fibrosis. Journal of Managed Care & Specialty
Pharmacy, 23(3-b Suppl), S17–S24.
https://doi.org/10.18553/jmcp.2017.23.3-b.s17
16
Dempsey, T., Payne, S. C.,
Sangaralingham, L. R., Yao, X., Shah, N., & Limper, A. H.
(2021). Adoption of the Antifibrotic Medications Pirfenidone and
Nintedanib for Patients with Idiopathic Pulmonary Fibrosis. Annals
of the American Thoracic Society, 18(7), 1121–1128.
https://doi.org/10.1513/annalsats.202007-901oc
17
Our program in medical
countermeasures is preclinical-stage and is subject to the Animal
Rule, which allows for the approval of drugs based on validated
animal models when human efficacy studies are not feasible. The use
of the Animal Rule is intended for drugs and biological products
developed to reduce or prevent serious or life-threatening
conditions caused by exposure to lethal or permanently disabling
toxic chemical, biological, radiological or nuclear substances.
18
Schüle, C., Nothdurfter, C.,
& Rupprecht, R. (2014). The role of allopregnanolone in
depression and anxiety. Progress in Neurobiology, 113, 79–87.
https://doi.org/10.1016/j.pneurobio.2013.09.003
19
Brexanolone NDA 211371
Multi-disciplinary Review and Evaluation, FDA CDER, 2018.
Financial Review
Reporting Framework
You should read the following discussion and analysis together
with our Condensed Consolidated Financial Statements, including the
notes thereto, set forth elsewhere in this report. Some of the
information contained in this discussion and analysis or set forth
elsewhere in this report, including information with respect to our
plans and strategy for our business and financing our business,
includes forward-looking statements that involve risks and
uncertainties. You should read this discussion and analysis in
conjunction with the risks identified in the “Risk Factor Annex" on
pages 175 and 211 of our “Annual Report and Accounts 2022”, also
included as Exhibit 15.1 to the Form 20-F for the fiscal year ended
December 31, 2022 filed with the Securities and Exchange Commission
on April 27, 2023. As a result of many factors, our actual results
could differ materially from the results described in or implied by
these forward-looking statements.
Our unaudited Condensed Consolidated Financial Statements as of
June 30, 2023, and for the six months ended June 30, 2023 and 2022
have been prepared in accordance with International Accounting
Standard (“IAS”) 34 Interim Financial Reporting as adopted for use
in the UK. The Condensed Consolidated Financial Statements also
comply fully with IAS 34 as issued by the International Accounting
Standards Board (IASB). This report should be read in conjunction
with the Group’s 2022 Annual Reports and Accounts as of and for the
year ended December 31, 2022.
The following discussion contains references to the Consolidated
Financial Statements of PureTech Health plc, or the Company, and
its consolidated subsidiaries, together the Group. These financial
statements consolidate the Company’s subsidiaries and include the
Company’s interest in associates, by way of equity method, as well
as investments held at fair value. Subsidiaries are those entities
over which the Company maintains control. Associates are those
entities in which the Company does not have control for financial
accounting purposes but maintains significant influence over
financial and operating policies. Where the Company has neither
control nor significant influence for financial accounting
purposes, or when the investment in associates is not in
instruments that would be considered equity for accounting
purposes, we recognize our holdings in such entity as an investment
at fair value with changes in fair value being recorded in the
Condensed Consolidated Statements of Comprehensive Income/(Loss).
For purposes of our Consolidated Financial Statements, each of our
Founded Entities are considered to be either a “subsidiary", an
“associate” or an "investment held at fair value" depending on
whether PureTech Health plc controls or maintains significant
influence over the financial and operating policies of the
respective entity at the respective period end date, and depending
on the form of the investment. For additional information regarding
the accounting treatment of these entities, see Note 1 to our
Consolidated Financial Statements as of and for the year ended
December 31, 2022 included in our 2022 Annual Report and Accounts.
For additional information regarding our operating structure, see
“Basis of Presentation and Consolidation” below.
Business Background and Results Overview
The business background is discussed above in the Interim
Management Report, which describes the business development of our
Wholly Owned Programs and Founded Entities.
Our ability to generate product revenue sufficient to achieve
profitability will depend heavily on the successful development and
eventual commercialization of one or more of our wholly-owned or
Controlled Founded Entities’ therapeutic candidates, which may or
may not occur. Our Founded Entities, Gelesis, Inc. ("Gelesis"), and
Akili Interactive Labs, Inc. ("Akili"), which we have not
controlled since 2019 and 2018, respectively, have therapeutics
cleared for sale, but our Wholly Owned Programs have not yet
generated revenue from product sales, to date. However, we did
generate significant cash from the sale of shares of our public
Founded Entities and from the sale of an interest in Karuna future
royalties.
We deconsolidated a number of our Founded Entities, specifically
Vedanta Biosciences, Inc. ("Vedanta") in March 2023, Sonde Health
Inc. ("Sonde") in May 2022, Karuna Therapeutics, Inc. ("Karuna"),
Vor Biopharma Inc. ("Vor") and Gelesis in 2019, and Akili in
2018.
Any deconsolidation affects our financials in the following
manner:
- our ownership interest does not provide us with a controlling
financial interest;
- we no longer control the Founded Entity's assets and
liabilities and as a result we derecognize the assets, liabilities
and non-controlling interests related to the Founded Entity from
our Consolidated Statements of Financial Position;
- we record our retained investment in the Founded Entity at fair
value; and
- the resulting amount of any gain or loss is recognized in our
Consolidated Statements of Comprehensive Income/(Loss).
We anticipate our expenses to continue to increase
proportionally in connection with our ongoing development
activities related mostly to the advancement into late-stage
studies of the clinical programs within our Wholly Owned Pipeline.
We also expect that our expenses and capital requirements will
increase in the near to mid-term as we:
- continue our research and development efforts;
- seek regulatory approvals for any therapeutic candidates that
successfully complete clinical trials; and
- add clinical, scientific, operational financial and management
information systems and personnel, including personnel to support
our therapeutic development and potential future commercialization
claims.
More specifically, our internal research and development spend
will increase in the foreseeable future as we may initiate
additional clinical studies for LYT-100, LYT-200 and LYT-300, and
progress additional therapeutic candidates into the clinic, such as
LYT-310, as well as advance our technology platforms.
In addition, with respect to our Founded Entities’ programs, we
anticipate that we will continue to fund a small portion of
development costs by strategically participating in such companies’
financings when we believe participation in such financings is in
the best interests of our shareholders. The form of any such
participation may include investment in public or private
financings, collaboration, partnership arrangements, and/or
licensing arrangements, among others. Our management and strategic
decision makers consider the future funding needs of our Founded
Entities and evaluate the needs and opportunities for returns with
respect to each of these Founded Entities routinely and on a
case-by-case basis.
As a result, we may need substantial additional funding in the
future, following the period described below in the Funding
Requirement section, to support our continuing operations and
pursue our growth strategy until such time as we can generate
sufficient revenue from product sales to support our operations, if
ever. Until such time we expect to finance our operations through a
combination of monetization of our interests in our Founded
Entities, collaborations with third parties, or other sources. We
may be unable to raise additional funds or enter into such other
agreements or arrangements when needed on favorable terms, or at
all. If we are unable to raise capital or enter into such
agreements, as and when needed, we may have to delay, scale back or
discontinue the development and commercialization of one or more of
our wholly-owned therapeutic candidates.
Measuring Performance
The Financial Review discusses our operating and financial
performance, our cash flows and liquidity as well as our financial
position and our resources. The results for each period are
compared primarily with the results of the comparative period in
the prior year.
Reported Performance
Reported performance considers all factors that have affected
the results of our business, as reflected in our Consolidated
Financial Statements.
Core Performance
Core performance measures are alternative performance measures
(APM) which are adjusted and non-IFRS measures. These measures
cannot be derived directly from our Consolidated Financial
Statements. We believe that these non-IFRS performance measures,
when provided in combination with reported performance, will
provide investors, analysts and other stakeholders with helpful
complementary information to better understand our financial
performance and our financial position from period to period. The
measures are also used by management for planning and reporting
purposes. The measures are not substitutable for IFRS financial
information and should not be considered superior to financial
information presented in accordance with IFRS.
Cash flow and
liquidity
PureTech Level Cash, cash
equivalents and short-term investments
Measure type: Core
performance
Definition: Cash and cash
equivalents, and Short-term investments held at PureTech Health plc
and the following wholly-owned subsidiaries: PureTech LYT, PureTech
LYT-100, Alivio Therapeutics, Inc., PureTech Management, Inc.,
PureTech Health LLC, PureTech Securities Corp, PureTech Securities
II Corp.
Why we use it: PureTech
Level Cash, cash equivalents and short-term investments is a
measure that provides valuable additional information with respect
to cash, cash equivalents and short-term investments available to
fund the Wholly Owned Programs and make certain investments in
Founded Entities
PureTech Level Cash and Cash
Equivalents
Measure type: Core
performance
Definition: Cash and Cash
Equivalents held at PureTech Health plc and the following
wholly-owned subsidiaries: PureTech LYT, PureTech LYT-100, Alivio
Therapeutics, Inc., PureTech Management, Inc., PureTech Health LLC,
PureTech Securities Corp, PureTech Securities II Corp.
Why we use it: PureTech
Level Cash and Cash Equivalents is a measure that provides valuable
additional information with respect to cash and cash equivalents
available to fund the Wholly Owned Programs and make certain
investments in Founded Entities
Recent Developments (subsequent to June 30, 2023)
The Company has evaluated subsequent events after June 30, 2023,
up to the date of issuance, August 29, 2023, of the Condensed
Consolidated Financial Statements, and has not identified any
recordable or disclosable events not otherwise reported in these
unaudited Condensed Consolidated Financial Statements or notes
thereto.
Financial Highlights
The following is the reconciliation of the amounts appearing in
our Statement of Financial Position to the Alternative Performance
Measure described above:
(in thousands)
June 30,
2023
Consolidated Cash and Cash
Equivalents
350,515
Less: Cash and Cash Equivalents held at
non-wholly owned subsidiaries
(2,062
)
PureTech Level Cash and Cash
Equivalents
$348,453
(in thousands)
December 31,
2022
Cash and Cash Equivalents
149,866
Short-term investments
200,229
Consolidated Cash, cash equivalents and
short-term investments
350,095
Less: Cash and Cash Equivalents held at
non-wholly owned subsidiaries
(10,622
)
PureTech Level Cash, cash equivalents
and short-term investments
$339,473
Basis of Presentation and Consolidation
Our Condensed Consolidated Financial Information consolidates
the financial information of PureTech Health plc, as well as its
subsidiaries, and includes our interest in associates and
investments held at fair value, and is reported in multiple
operating segments as described below.
Basis for Segmentation
Our Directors are our strategic decision-makers. Our operating
segments are based on the financial information provided to our
Directors periodically for the purposes of allocating resources and
assessing performance. We have determined that each consolidated
Founded Entity is representative of a single operating segment as
our Directors monitor the financial results at this level. When
identifying the reportable segments, we have determined that it is
appropriate to aggregate multiple operating segments into a single
reportable segment given the high level of operational and
financial similarities across the entities. We have identified
multiple reportable segments, as presented below. Substantially all
of our revenue and profit generating activities are generated
within the United States and, accordingly, no geographical
disclosures are provided.
There was no change to reportable segments in 2023, except for
the transfer of Vedanta to the Non-Controlled Founded Entities
segment due to the deconsolidation of Vedanta on March 1, 2023.
The Non-Controlled Founded Entities segment is comprised of the
entities in respect of which PureTech Health (i) no longer holds
majority voting control as a shareholder or (ii) no longer has the
right to elect a majority of the members of the subsidiaries’ Board
of Directors. Upon deconsolidation of an entity, the segment
disclosure is restated to reflect the change on a retrospective
basis, as this constitutes a change in the composition of
reportable segments.
As of June 30, 2023, the Non-Controlled Founded Entities segment
includes Vedanta, which was deconsolidated on March 1, 2023 and for
comparative periods it includes Vedanta and Sonde which was
deconsolidated on May 25, 2022. Segment results incorporate the
operational results of Vedanta and Sonde to the dates of
deconsolidation. Following the dates of deconsolidation, the
Company accounts for its investments in Vedanta and in Sonde at the
parent level, and therefore the results associated with investment
activity following the dates of deconsolidation are included in the
Parent Company and Other section.
The Company has revised in these financial statements the prior
year financial information to conform to the presentation as of and
for the six months ended June 30, 2023 to include Vedanta in the
Non-Controlled Founded Entities segment. The change in segments
reflects how the Company’s Board of Directors reviews the Group’s
results, allocates resources and assesses performance of the Group
at this time.
Results of Operations
The following table, which has been derived from our unaudited
financial statements for the six months ended June 30, 2023 and
2022, included herein, summarizes our results of operations for the
periods indicated, together with the changes in those items in
dollars:
Six Months Ended June 30,
(in thousands)
2023
2022
Change
(2022 to 2023)
Contract revenue
$750
$1,141
$(391
)
Grant revenue
2,400
5,890
(3,490
)
Total revenue
3,150
7,030
(3,880
)
Operating expenses:
General and administrative expenses
(26,166
)
(23,644
)
(2,522
)
Research and development expenses
(53,146
)
(84,579
)
31,432
Operating income/(loss)
(76,163
)
(101,192
)
25,030
Other income/(expense):
Gain on deconsolidation of subsidiary
61,787
27,251
34,536
Gain/(loss) on investments held at fair
value
7,818
(59,019
)
66,837
Gain/(loss) on investments in notes from
associates
(6,045
)
—
(6,045
)
Other income/(expenses)
(1,134
)
7,642
(8,776
)
Other income/(loss)
62,426
(24,126
)
86,552
Net finance income/(costs)
5,316
56,320
(51,004
)
Share of net income/(loss) of associates
accounted for using the equity method
(5,324
)
(15,322
)
9,998
Gain on dilution of ownership interest in
associate
—
28,363
(28,363
)
Income/(loss) before income
taxes
(13,744
)
(55,957
)
42,213
Taxation
(11,807
)
32,485
(44,291
)
Net income/(loss) including
non-controlling interest
(25,551
)
(23,472
)
(2,079
)
Net income/(loss) for the period
attributable to the Owners of the Company
$(25,004
)
$(28,344
)
$3,340
Comparison of the Six Months Ended June 30, 2023 and 2022
Total Revenue
Six Months Ended June 30,
(in thousands)
2023
2022
Change
Contract Revenue:
Controlled Founded Entities
750
731
19
Non-Controlled Founded Entities
—
81
(81
)
Parent Company and other
—
328
(328
)
Total Contract Revenue
$750
$1,141
$(391
)
Grant Revenue:
Internal Segment
$673
$1,821
$(1,148
)
Non-Controlled Founded Entities
1,727
4,068
(2,341
)
Total Grant Revenue
$2,400
$5,890
$(3,490
)
Total Revenue
$3,150
$7,030
$(3,880
)
Our total revenue was $3.1 million for the six months ended June
30, 2023, a decrease of $3.9 million, compared to the six months
ended June 30, 2022. The decrease was primarily attributable to a
decrease in Grant Revenue, mainly due to the Non-Controlled Founded
Entities segment as a result of the partial-period reporting by
Vedanta due to their deconsolidation.
Research and Development
Expenses
Six Months Ended June 30,
(in thousands)
2023
2022
Change
Research and Development Expenses:
Internal Segment
$(46,941
)
$(62,499
)
$(15,557
)
Controlled Founded Entities
(595
)
(1,271
)
(675
)
Non-Controlled Founded Entities
(5,380
)
(20,432
)
(15,052
)
Parent Company and other
(230
)
(377
)
(147
)
Total Research and Development
Expenses:
$(53,146
)
$(84,579
)
$(31,432
)
Our research and development expenses were $53.1 million for the
six months ended June 30, 2023, a decrease of $31.4 million, or
37.2 percent compared to the six months ended June 30, 2022. The
change was primarily attributable to a decrease of $15.6 million in
research and development expenses incurred by the Internal Segment
due to prioritization of research and development projects in the
internal segment, whereby the Company elected to focus on programs
where it believes it has the highest probability of success and
reduce efforts, or cease to invest, in research and clinical stage
projects where such probability of success is lower. In addition
there was a decrease in contract manufacturing expenses in 2023 due
to the ramp up of clinical manufacturing efforts in the prior
period in 2022 prior to the start of new clinical studies. The
decrease in research and development expenses was also attributable
to a decrease of $15.1 million in the Non-Controlled Founded
Entities due to the partial period reporting by Vedanta as a result
of its deconsolidation (two months in 2023 vs. six months in the
corresponding period in 2022).
General and Administrative
Expenses
Six Months Ended June 30,
(in thousands)
2023
2022
Change
General and Administrative Expenses:
Internal Segment
$(7,405
)
$(4,156
)
$3,249
Controlled Founded Entities
(104
)
(853
)
(749
)
Non-Controlled Founded Entities
(2,942
)
(8,055
)
(5,113
)
Parent Company and other
(15,716
)
(10,580
)
5,136
Total General and Administrative
Expenses
$(26,166
)
$(23,644
)
$2,522
Our general and administrative expenses were $26.2 million for
the six months ended June 30, 2023, an increase of $2.5 million, or
10.7 percent compared to the six months ended June 30, 2022. The
change was attributable to increases of $5.1 million in Parent
Company and other and $3.2 million in the Internal Segment,
partially offset by a decrease of $5.1 million in the
Non-Controlled Founded Entities segment and a decrease of $0.7
million in the Controlled Founded Entities segment. The increase in
the Parent Company and Other was primarily driven by a $4.1 million
increase in employee compensation expense due to increase in
headcount and adjustments to compensation due to inflation,
including an increase in stock based compensation expense of $2.0
million, as well as a $3.9 million increase in consulting and
professional fees, partially offset by a $2.6 million increase in
management fees allocated to the other segments. The increase in
the Internal Segment was primarily driven by a $2.7 million
increase in management fees charged by the Parent Company. The
decrease in the Non-Controlled Founded Entities segment was
primarily attributable to the partial period reporting by Vedanta
as a result of its deconsolidation (two months in 2023 vs. six
months in the corresponding period in 2022). The decrease in the
Controlled Founded Entities segment was attributable to a $0.5
million decrease in stock based compensation expense.
Total Other Income (Loss)
Total Other Income was $62.4 million for the six months ended
June 30, 2023 compared to a loss of $24.1 million for the six
months ended June 30, 2022, reflecting a change of $86.6 million.
The increase in income was primarily attributable to a gain from
investments held at fair value of $7.8 million for the six months
ended June 30, 2023, compared to a loss of $59.0 million for the
six months ended June 30, 2022, reflecting an increase in other
income of $66.8 million. In addition, the increase in income was
also attributable to a gain from deconsolidation of Vedanta of
$61.8 million for the six months ended June 30, 2023, compared to a
gain from deconsolidation of Sonde of $27.3 million for the six
months ended June 30, 2022, reflecting an increase in other income
of $34.5 million. These increases were partially offset by a loss
from investments in notes from associates of $6.0 million for the
six months ended June 30, 2023 while there was no such loss in the
six months ended June 30, 2022 as well as a decrease in other
income of $8.8 million. The net gain from investments held at fair
value for the six months ended June 30, 2023 was primarily
attributed to our holdings in Karuna (see Note 3 in our condensed
consolidated financial statements for further details).
Finance Income (Costs)
Net finance income was $5.3 million for the six months ended
June 30, 2023, compared to net finance income of $56.3 million for
the six months ended June 30, 2022, reflecting a change of $51.0
million in Net finance Income (costs). The change was primarily
attributable to the fact that during the six months ended June 30,
2023 net change in fair value of subsidiaries' financial instrument
liabilities was an income of $2.6 million, while for the six months
ended June 30, 2022 such change was a gain of $57.7 million,
primarily related to change in fair value of Vedanta preferred
share liabilities, leading to decreased income of $55.0 million. To
a lesser extent the decrease in income was attributable to the
non-cash interest expense related to sale of future royalties of
$3.7 million for the six months ended June 30, 2023, while no such
expense existed for the six months ended June 30, 2022. This
decrease in income was partially offset by an increase in interest
income from financial assets of $7.1 million, and to a lesser
extent a decrease of $0.6 million in interest expense during the
six months ended June 30, 2023, as compared to the six months ended
June 30, 2022.
Share of Net Income/(loss) of Associates accounted for using the
equity method and Gain on Dilution of Interest in Associate
For the six months ended June 30, 2023, the share in net loss of
associates reported under the equity method was $5.3 million as
compared to the share in net loss of $15.3 million for the six
months ended June 30, 2022. The change was primarily attributable
to a decrease in Gelesis losses due to decreased activity in the
six months ended June 30, 2023, as compared to the losses reported
for the six months ended June 30, 2022. In addition, during the six
months ended June 30, 2022, PureTech recorded a gain on dilution of
its equity ownership interest in Gelesis of $28.4 million as a
result of the completion of the merger with CapStar on January 13,
2022.
Taxation
Income tax expense was an expense of $11.8 million for the six
months ended June 30, 2023, as compared to a benefit of $32.5
million for the six months ended June 30, 2022, reflecting an
increase in expense of $44.3 million. The increase in the income
tax expense was primarily attributable to the tax in respect of the
sale of future royalties to Royalty Pharma (See note 11 for further
detail) and to a lower pre-tax loss in the tax consolidated US
group.
Critical Accounting Policies and Significant Judgments and
Estimates
Our management’s discussion and analysis of our financial
condition and results of operations is based on our financial
statements, which we have prepared in accordance with UK-adopted
International Financial Reporting Standards (IFRS). The Condensed
Consolidated Financial Statements also comply fully with IAS 34 as
issued by the International Accounting Standards Board (IASB). In
the preparation of these financial statements, we are required to
make judgments, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are
based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these
estimates under different assumptions or conditions.
Our estimates and assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in
which the estimate is revised if the revision affects only that
period or in the period of the revisions and future periods if the
revision affects both current and future periods.
The accounting policies most critical to the judgments and
estimates used in the preparation of our financial statements have
not changed since our 2022 Annual Report, except for the accounting
policy for our sale of future royalties liability. For further
detail see Note 1 of the accompanying notes to the Condensed
Consolidated Financial Statements.
Cash Flow and Liquidity
Our cash flows may fluctuate and are difficult to forecast and
will depend on many factors, including:
- the expenses incurred in the development of wholly-owned and
Controlled Founded Entity therapeutic candidates;
- the revenue, if any, generated by wholly-owned and
Controlled-Founded Entity therapeutic candidates;
- the revenue, if any, generated from licensing and royalty
agreements with Founded Entities;
- the financing requirements of the Internal segment,
Controlled-Founded Entities segment and Parent segment; and
- the investing activities related to the Internal,
Controlled-Founded Entities and Parent segments, including the
monetization, through sale, of shares held in our public Founded
Entities.
As of June 30, 2023, we had consolidated cash and cash
equivalents of $350.5 million and PureTech Level cash and cash
equivalents of $348.5 million. PureTech Level cash and cash
equivalents is a non-IFRS measure (for a definition of PureTech
Level cash and cash equivalents and a reconciliation to the IFRS
number, see the section Measuring Performance earlier in this
Financial review).
Cash Flows
The following table summarizes our cash flows for each of the
periods presented:
Six Months Ended June 30,
(in thousands)
2023
2022
Change
Net cash used in operating activities
$(65,133
)
$(87,249
)
$22,115
Net cash provided by (used in) investing
activities
173,885
(6,884
)
180,770
Net cash provided by (used in) financing
activities
91,897
(5,665
)
97,562
Net increase (decrease) in cash and
cash equivalents
$200,649
$(99,798
)
$300,447
Operating Activities
Net cash used in operating activities was $65.1 million for the
six months ended June 30, 2023, as compared to $87.2 million for
the six months ended June 30, 2022, resulting in a decrease of
$22.1 million in net cash used in operating activities. The
decrease in outflows is primarily attributable to our lower
operating loss, mainly due to a decrease in research and
development activities in the Internal Segment, and to a decrease
of operating cash flows in the Non-Controlled Founded Entities
segment as a result of Vedanta's deconsolidation.
Investing Activities
Net cash provided by investing activities was $173.9 million for
the six months ended June 30, 2023, as compared to net cash used in
investing activities of $6.9 million for the six months ended June
30, 2022, resulting in an increase of $180.8 million in net cash
resulting from investing activities. The increase in the net cash
resulting from investing activities was primarily attributed to the
proceeds received from the maturity of short-term investments of
$202.5 million, partially offset by the investment in notes from
associates of $15.4 million for the six months ended June 30,
2023.
Financing Activities
Net cash provided by financing activities was $91.9 million for
the six months ended June 30, 2023, as compared to net cash used in
financing activities of $5.7 million for the six months ended June
30, 2022, resulting in an increase of $97.6 million in the net cash
resulting from financing activities. The increase in the net cash
resulting from financing activities was primarily attributable to
cash received in respect of the sale of future Karuna royalties
(see Note 11 to the Condensed Consolidated Financial Statements) in
the amount of $100.0 million, partially offset by an increase of
$3.0 million in the amount of treasury shares repurchased per the
share repurchase program during six months ended June 30, 2023 as
compared to the six months ended June 30, 2022.
Funding Requirements
We have incurred operating losses since inception. Based on our
current plans, we believe our existing financial assets at June 30,
2023 will be sufficient to fund our operations and capital
expenditure requirements into the first quarter of 2026. We expect
to incur substantial additional expenditures in the near term to
support our ongoing activities. We anticipate to continue to incur
net operating losses for the foreseeable future as is typical for
pre-revenue biotechnology companies. Our ability to fund our
therapeutic development and clinical operations as well as
commercialization of our wholly-owned therapeutic candidates, will
depend on the amount and timing of cash received from planned
financings, monetization of shares of public Founded Entities and
potential business development activities. Our future capital
requirements will depend on many factors, including:
- the costs, timing and outcomes of clinical trials and
regulatory reviews associated with our wholly-owned therapeutic
candidates;
- the costs of commercialization activities, including product
marketing, sales and distribution;
- the costs of preparing, filing and prosecuting patent
applications and maintaining, enforcing and defending intellectual
property-related claims;
- the emergence of competing technologies and products and other
adverse marketing developments;
- the effect on our therapeutic and product development
activities of actions taken by the U.S. Food and Drug
Administration (“FDA”), the European Medicines Agency (“EMA”) or
other regulatory authorities;
- our degree of success in commercializing our wholly-owned
therapeutic candidates, if and when approved; and
- the number and types of future therapeutics we develop and
commercialize.
A change in the outcome of any of these or other variables with
respect to the development of any of our wholly-owned therapeutic
candidates could significantly change the costs and timing
associated with the development of that therapeutic candidate.
Further, our operating plans may change, and we may need
additional funds to meet operational needs and capital requirements
for clinical trials and other research and development activities.
We currently have no credit facility or other committed sources of
capital beyond our existing financial assets. Because of the
numerous risks and uncertainties associated with the development
and commercialization of our wholly-owned therapeutic candidates,
we have only a general estimate of the amounts of capital outlays
and operating expenditures associated with our current and
anticipated therapeutic development programs and these may change
in the future.
Condensed Consolidated
Statements of Comprehensive Income/(Loss) (Unaudited)
For the six months ended June
30
Note
2023
$000s
2022
$000s
Contract revenue
750
1,141
Grant revenue
2,400
5,890
Total revenue
3,150
7,030
Operating expenses:
General and administrative expenses
(26,166
)
(23,644
)
Research and development expenses
(53,146
)
(84,579
)
Operating income/(loss)
(76,163
)
(101,192
)
Other income/(expense):
Gain on deconsolidation of subsidiary
3
61,787
27,251
Gain/(loss) on investments held at fair
value
3
7,818
(59,019
)
Gain/(loss) on investments in notes from
associates
5
(6,045
)
—
Other income/(expense)
(1,134
)
7,642
Other income/(expense)
62,426
(24,126
)
Finance income/(costs):
Finance income
7
7,731
630
Finance costs – contractual
7
(1,338
)
(1,961
)
Finance income/(costs) – fair value
accounting
7
2,650
57,651
Finance costs – non cash interest expense
related to sale of future royalties
11
(3,726
)
—
Net finance income/(costs)
5,316
56,320
Share of net loss of associates accounted
for using the equity method
4
(5,324
)
(15,322
)
Gain on dilution of ownership interest in
associate
—
28,363
Income/(loss) before taxes
(13,744
)
(55,957
)
Taxation
18
(11,807
)
32,485
Income/(Loss) for the period
(25,551
)
(23,472
)
Other comprehensive
income/(loss):
Items that are or may be reclassified as
profit or loss
Equity-accounted associate – share of
other comprehensive income (loss)
92
(323
)
Reclassification of foreign currency
differences on dilution of interest
—
(213
)
Total other comprehensive
income/(loss)
92
(536
)
Total comprehensive income/(loss) for
the period
(25,458
)
(24,008
)
Income/(loss) attributable to:
Owners of the Company
(25,004
)
(28,344
)
Non-controlling interests
13
(546
)
4,872
(25,551
)
(23,472
)
Comprehensive income/(loss)
attributable to:
Owners of the Company
(24,912
)
(28,880
)
Non-controlling interests
13
(546
)
4,872
(25,458
)
(24,008
)
$
$
Earnings/(loss) per share:
Basic earnings/(loss) per share
8
(0.09
)
(0.10
)
Diluted earnings/(loss) per share
8
(0.09
)
(0.10
)
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated
Statements of Financial Position (Unaudited)
As of
Note
June 30,
2023
$000s
December 31,
2022
$000s
Assets
Non-current assets
Property and equipment, net
10,790
22,957
Right of use asset, net
10,707
14,281
Intangible assets, net
931
831
Investments held at fair value
3,12
281,288
251,892
Investment in associates - equity
method
4
3,916
9,147
Investments in notes from associates
5
24,686
16,501
Lease receivable – long-term
179
835
Other non-current assets
958
10
Total non-current assets
333,453
316,454
Current assets
Trade and other receivables
2,102
11,867
Income tax receivable
18
—
10,040
Prepaid expenses
5,659
11,617
Lease receivable – short-term
199
450
Other financial assets
1,624
2,124
Short-term investments
—
200,229
Cash and cash equivalents
350,515
149,866
Total current assets
360,099
386,192
Total assets
693,552
702,647
Equity and liabilities
Equity
Share capital
5,461
5,455
Share premium
290,262
289,624
Treasury stock
(33,105
)
(26,492
)
Merger reserve
138,506
138,506
Translation reserve
182
89
Other reserve
(12,149
)
(14,478
)
Retained earnings
124,512
149,516
Equity attributable to the owners of
the Company
513,669
542,220
Non-controlling interests
13
(4,778
)
5,369
Total equity
508,891
547,589
Non-current liabilities
Sale of future royalties liability
11
103,726
—
Deferred tax liability
18
9,084
19,645
Lease liability, non-current
19,996
24,155
Long-term loan
—
10,244
Liability for share based awards
6
2,589
4,128
Total non-current liabilities
135,395
58,172
Current liabilities
Deferred revenue
—
2,185
Lease liability, current
3,221
4,972
Trade and other payables
14
31,339
54,783
Income taxes payable
12,177
57
Notes payable
12
2,359
2,345
Warrant liability
12
—
47
Preferred shares
10, 12
169
27,339
Current portion of long-term loan
—
5,156
Total current liabilities
49,265
96,885
Total liabilities
184,661
155,057
Total equity and liabilities
693,552
702,647
Please refer to the accompanying Notes to the consolidated
financial information. Registered number: 09582467.
The Condensed Consolidated Financial Statements were approved by
the Board of Directors and authorized for issuance on August 29,
2023 and signed on its behalf by:
Daphne Zohar Chief Executive Officer August 29, 2023
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated
Statements of Changes in Equity (Unaudited)
For the six months ended June
30
Share Capital
Treasury Shares
Shares
Amount
$000s
Share
premium
$000s
Shares
Amount
$000s
Merger
reserve
$000s
Translation
reserve
$000s
Other
reserve
$000s
Retained
earnings/
(accumulated
deficit)
$000s
Total
Parent
equity
$000s
Non-
controlling
interests
$000s
Total
Equity
$000s
Balance January 1, 2022
287,796,585
5,444
289,303
—
—
138,506
469
(40,077
)
199,871
593,515
(9,368
)
584,147
Net income/(loss)
—
—
—
—
—
—
—
—
(28,344
)
(28,344
)
4,872
(23,472
)
Total comprehensive income/(loss) for
the period
—
—
—
—
—
—
(536
)
—
(28,344
)
(28,880
)
4,872
(24,008
)
Deconsolidation of Subsidiary
—
—
—
—
—
—
—
—
—
—
11,904
11,904
Exercise of share-based awards
104,819
2
(2
)
—
—
—
—
—
—
—
—
—
Purchase of Treasury stock
—
—
—
(2,010,269
)
(4,267
)
—
—
—
—
(4,267
)
—
(4,267
)
Equity settled share-based awards
—
—
—
—
—
—
—
4,691
—
4,691
2,026
6,717
Partial settlement of share based
liability awards through share issuance
709,717
—
—
—
—
—
—
1,528
—
1,528
—
1,528
NCI exercise of share options in
subsidiaries
—
—
—
—
—
—
—
15,171
—
15,171
(15,164
)
7
Other
—
—
—
—
—
—
—
—
—
—
(4
)
(4
)
Balance June 30, 2022
288,611,121
5,446
289,301
(2,010,269
)
(4,267
)
138,506
(67
)
(18,688
)
171,527
581,757
(5,733
)
576,024
Share Capital
Treasury Shares
Shares
Amount
$000s
Share
premium
$000s
Shares
Amount
$000s
Merger
reserve
$000s
Translation
reserve
$000s
Other
reserve
$000s
Retained
earnings/
(accumulated
deficit)
$000s
Total
Parent
equity
$000s
Non-
controlling
interests
$000s
Total
Equity
$000s
Balance January 1, 2023
289,161,653
5,455
289,624
(10,595,347
)
(26,492
)
138,506
89
(14,478
)
149,516
542,220
5,369
547,589
Net income/(loss)
—
—
—
—
—
—
—
—
(25,004
)
(25,004
)
(546
)
(25,551
)
Other comprehensive income/(loss) for the
period
—
—
—
—
—
—
92
—
—
92
—
92
Total comprehensive income/(loss) for
the period
—
—
—
—
—
—
92
—
(25,004
)
(24,912
)
(546
)
(25,458
)
Deconsolidation of Subsidiary
—
—
—
—
—
—
—
—
—
—
(9,085
)
(9,085
)
Exercise of share-based awards
306,506
6
638
149,226
327
—
—
(10
)
—
961
—
961
Purchase of Treasury stock
—
—
—
(2,510,887
)
(7,276
)
—
—
—
—
(7,276
)
—
(7,276
)
Equity settled share-based awards
—
—
—
—
—
—
—
1,465
—
1,465
277
1,742
Partial settlement of share based
liability awards through re-issuance of treasury shares
—
—
—
161,678
337
—
—
87
—
424
—
424
Expiration of share options in
subsidiary
—
—
—
—
—
—
—
786
—
786
(786
)
—
Other
—
—
—
—
—
—
—
—
—
—
(6
)
(6
)
Balance June 30, 2023
289,468,159
5,461
290,262
(12,795,330
)
(33,105
)
138,506
182
(12,149
)
124,512
513,669
(4,778
)
508,891
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated
Statements of Cash Flows (Unaudited)
For the six months ended June
30
Note
2023
$000s
2022
$000s
Cash flows from operating activities
Income/(loss) for the period
(25,551
)
(23,472
)
Adjustments to reconcile income/(loss) for
the period to net cash used in operating activities:
Non-cash items:
Depreciation and amortization
3,061
4,294
Share-based compensation expense
6
1,256
3,552
(Gain)/loss on investment held at fair
value
3
(7,818
)
59,019
Gain on dilution of ownership interest in
associate
—
(28,363
)
Gain on deconsolidation of subsidiary
3
(61,787
)
(27,251
)
Share of net loss of associates accounted
for using the equity method
4
5,324
15,322
Loss on investments in notes from
associates
5
6,045
—
Fair value gain on other financial
instruments
—
(7,624
)
Loss on disposal of assets
522
57
Impairment of fixed assets
1,066
—
Income taxes, net
18
11,807
(32,485
)
Finance (income)/costs, net
7
(5,316
)
(56,320
)
Changes in operating assets and
liabilities:
Trade and other receivables
9,243
(1,050
)
Prepaid expenses
1,484
6,292
Deferred revenue
(283
)
(44
)
Trade and other payables
14
(9,318
)
1,707
Other
964
—
Income taxes paid
(150
)
—
Interest received
5,444
750
Interest paid
(1,127
)
(1,633
)
Net cash used in operating
activities
(65,133
)
(87,249
)
Cash flows from investing activities:
Purchase of property and equipment
(70
)
(1,647
)
Proceeds from sale of property and
equipment
590
—
Investment in convertible notes and
warrants from associates
5
(15,350
)
—
Investment in associates
—
(19,961
)
Repayment of short-term note from
associate
—
15,000
Cash derecognized upon loss of control
over subsidiary (see table below)
3
(13,784
)
(479
)
Proceeds from maturity of short-term
investments
202,500
—
Receipt of payment of sublease
—
203
Net cash provided by (used in)
investing activities
173,885
(6,884
)
Cash flows from financing activities:
Receipt of cash from sale of future
royalties
11
100,000
—
Issuance of Subsidiary Convertible
Note
—
393
Payment of lease liability
(1,764
)
(1,794
)
Exercise of stock options
961
—
NCI exercise of stock options in
subsidiary
—
7
Purchase of treasury stock
9
(7,276
)
(4,267
)
Other
(23
)
(4
)
Net cash provided by (used in)
financing activities
91,897
(5,665
)
Net increase (decrease) in cash and cash
equivalents
200,649
(99,798
)
Cash and cash equivalents at beginning of
year
149,866
465,708
Cash and cash equivalents at end of
period
350,515
365,910
Supplemental disclosure of non-cash
investment and financing activities:
Purchase of intangible assets not yet paid
in cash
200
—
Partial settlement of share based
liability award through issuance of equity
424
1,528
Assets, Liabilities and non
controlling interests in deconsolidated subsidiary
2023
$000s
2022
$000s
Trade and other receivables
(702
)
—
Prepaid assets
(3,516
)
—
Property, plant and equipment, net
(8,092
)
—
Right of use asset, net
(2,477
)
—
Trade and other Payables
15,078
1,407
Deferred revenue
1,902
—
Lease liabilities (including current
potion)
4,146
—
Long-term loan (including current
portion)
15,446
—
Subsidiary notes payable
—
3,403
Subsidiary preferred shares and
warrants
24,568
15,853
Other assets and liabilities, net
(323
)
123
Non controlling interest
9,085
(11,904
)
55,115
8,882
Investment retained in deconsolidated
subsidiary
20,456
18,848
Gain on deconsolidation
(61,787
)
(27,251
)
Cash in deconsolidated
subsidiary
13,784
479
The accompanying notes are an integral part of these financial
statements.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. General information
Description of Business
PureTech Health plc (“PureTech,” the “Parent” or the “Company”)
is a public company incorporated, domiciled and registered in the
United Kingdom (“UK”). The registered number is 09582467 and the
registered address is 8th Floor, 20 Farringdon Street, London EC4A
3AE, United Kingdom.
PureTech is a biotherapeutics company dedicated to changing the
treatment paradigm for devastating diseases.
PureTech’s Condensed Consolidated Financial Statements (“interim
financial statements”) consolidate those of the Company and its
subsidiaries (together referred to as the “Group”).
The accounting policies applied consistently to all periods
presented in these half-yearly Condensed Consolidated Financial
Statements are the same as those applied by the Group in its
Consolidated Financial Statements in its 2022 Annual Report and
Accounts.
Basis of accounting
These interim financial statements have been prepared in
accordance with International Accounting Standards (IAS) 34 Interim
Financial Reporting as adopted for use in the UK and also comply
fully with IAS 34 as issued by the International Accounting
Standards Board (IASB). The condensed consolidated interim
financial statements should be read in conjunction with the Group’s
Consolidated Financial Statements as of and for the year ended
December 31, 2022. The interim condensed consolidated financial
statements do not include all the information required for a
complete set of IFRS financial statements. However, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group’s financial position and performance since the last annual
consolidated financial information included in the Annual Report
and Accounts for the year ended December 31, 2022, which was
prepared in accordance with UK-adopted International Financial
Reporting Standards and also complied fully with International
Financial Reporting Standards as issued by the IASB. Certain
amounts in the Condensed Consolidated Financial Statements and
accompanying notes may not add due to rounding. All percentages
have been calculated using unrounded amounts.
These condensed consolidated half-yearly financial statements do
not comprise statutory accounts within the meaning of Section 435
of the Companies Act 2006. The comparative figures for the six
months ended June 30, 2022 are not the Group’s statutory accounts
for that financial year. Those accounts were reported upon by the
Group’s auditors and delivered to the registrar of companies. The
report of the auditors was unqualified, did not include a reference
to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain
statements under Section 498 (2) or (3) of the Companies Act
2006.
The unaudited interim Condensed Consolidated Financial
Statements reflect all adjustments of a normal recurring nature
that are necessary for a fair statement of the results for the
interim periods presented. Interim results are not necessarily
indicative of results for a full year.
As of June 30, 2023 the Group had cash and cash equivalents of
$350.5 million. Considering the Group’s financial position as of
June 30, 2023 and its principal risks and opportunities, a going
concern analysis has been prepared for at least the twelve-month
period from the date of signing the Condensed Consolidated
Financial Statements ("the going concern period") utilizing
realistic scenarios and applying a severe but plausible downside
scenario. Even under the downside scenario, the analysis
demonstrates the Group continues to maintain sufficient liquidity
headroom and continues to comply with all financial obligations.
Therefore, the Directors believe the Group is adequately resourced
to continue in operational existence for at least the twelve-month
period from the date of signing the Condensed Consolidated
Financial Statements. Accordingly, the Directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the Condensed Consolidated Financial Statements.
These condensed financial statements were authorized for issue
by the Company’s Board of Directors on August 29, 2023.
Significant Accounting policies
There have been no significant changes in the Group’s accounting
policies from those disclosed in our Consolidated Financial
Statements as of and for the year ended December 31, 2022, except
for the accounting policy in respect of the Sale of Future
Royalties liability detailed below. The significant accounting
policies we use for half-year financial reporting are disclosed in
Note 1, Accounting policies of the accompanying notes to the
Consolidated Financial Statements included in our 2022 Annual
Report and Accounts.
Sale of Future Royalties Liability
The Group accounts for the sale of future royalties liability as
a financial liability, as it continues to hold the rights under the
royalty bearing licensing agreement and has a contractual
obligation to deliver cash to an investor for a portion of the
royalty it receives. Interest on the sale of future royalties
liability will be recognized using the effective interest rate over
the life of the related royalty stream.
The sale of future royalties liability and the related interest
expense are based on the Group’s current estimates of future
royalties expected to be paid over the life of the arrangement.
Forecasts are updated periodically as new data is obtained. Any
increases, decreases or a shift in timing of estimated cash flows
require the Group to re-calculate the amortized cost of the sale of
future royalties liability as the present value of the estimated
future contractual cash flows that are discounted at the
liability’s original effective interest rate. The adjustment is
recognized immediately in profit or loss as income or expense.
For details on significant judgments that were applied to
determine if we have control over an investee, see Note
4.
Adoption of New Accounting Standards
There have been no recent new accounting standards that have had
an impact on the Company’s Condensed Consolidated Financial
Statements.
New Standards and Interpretations Not Yet Adopted
A number of new standards, interpretations and amendments to
existing standards are effective for annual periods commencing on
or after January 1, 2024. None of the new standards,
interpretations, and amendments are applicable to the Company’s
financial statements and therefore will not have an impact on the
Company.
2. Segment Information
The Group has identified multiple reportable segments as
presented below. There was no change to reportable segments in
2023, except for the transfer of Vedanta Biosciences, Inc.
(Vedanta) to the Non-Controlled Founded Entities segment due to the
deconsolidation of Vedanta on March 1, 2023. See Note 3 for more
detail on Vedanta's deconsolidation.
The Non-Controlled Founded Entities segment includes Vedanta,
which was deconsolidated on March 1, 2023 and for comparative
periods it includes Vedanta and Sonde Health, Inc. which was
deconsolidated on May 25, 2022. Segment results incorporate the
operational results of Vedanta and Sonde Health, Inc. to the dates
of deconsolidation. Following the dates of deconsolidation, the
Company accounts for its investments in Vedanta and in Sonde
Health, Inc. at the parent level, and therefore the results
associated with investment activity following the dates of
deconsolidation are included in the Parent Company and Other
section.
The Company has revised in these financial statements the prior
year financial information to conform to the presentation as of and
for the six months ended June 30, 2023 to include Vedanta in the
Non-Controlled Founded Entities segment. The change in segments
reflects how the Company’s Board of Directors reviews the Group’s
results, allocates resources and assesses performance of the Group
at this time.
Virtually all of the revenue and profit generating activities of
the Group are generated within the United States and accordingly,
no geographical disclosures are provided.
Information About Reportable Segments:
For the six months ended June
30, 2023
Internal
$000s
Controlled
Founded Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent Company
&
Other
$000s
Consolidated
$000s
Condensed Consolidated Statements of
Comprehensive Income/(Loss)
Contract revenue
—
750
—
—
750
Grant revenue
673
—
1,727
—
2,400
Total revenue
673
750
1,727
—
3,150
General and administrative expenses
(7,405
)
(104
)
(2,942
)
(15,716
)
(26,166
)
Research and development expenses
(46,941
)
(595
)
(5,380
)
(230
)
(53,146
)
Total operating expense
(54,346
)
(699
)
(8,322
)
(15,945
)
(79,312
)
Operating income/(loss)
(53,673
)
51
(6,595
)
(15,945
)
(76,163
)
Other income/(expense):
Gain on deconsolidation of subsidiary
—
—
—
61,787
61,787
Gain/(loss) on investment held at fair
value
—
—
—
7,818
7,818
Gain/(loss) on investment in notes from
associates
—
—
—
(6,045
)
(6,045
)
Other income/(expense)
(602
)
—
—
(532
)
(1,134
)
Total other income/(expense)
(602
)
—
—
63,028
62,426
Net finance income/(costs)
643
305
1,915
2,453
5,316
Share of net income/(loss) of associates
accounted for using the equity method
—
—
—
(5,324
)
(5,324
)
Income/(loss) before taxes
(53,633
)
357
(4,680
)
44,212
(13,744
)
Taxation
—
—
—
(11,807
)
(11,807
)
Income/(loss) for the period
(53,633
)
357
(4,680
)
32,406
(25,551
)
June 30, 2023 $000s
Condensed Consolidated Statements of
Financial Position:
Total assets
59,462
1,294
—
632,797
693,552
Total liabilities1
332,797
14,610
—
(162,746
)
184,661
Net assets/(liabilities)
(273,336
)
(13,316
)
—
795,542
508,891
1
Parent Company and Other Includes
eliminations of intercompany liabilities between the Parent Company
and the reportable segments in the amount of $365.1 million.
For the six months ended June 30,
2022
Internal
$000s
Controlled
Founded Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent Company
&
Other
$000s
Consolidated
$000s
Condensed Consolidated Statements of
Comprehensive Income/(Loss)
Contract revenue
—
731
81
328
1,141
Grant revenue
1,821
—
4,068
—
5,890
Total revenue
1,821
731
4,149
328
7,030
General and administrative expenses
(4,156
)
(853
)
(8,055
)
(10,580
)
(23,644
)
Research and development expenses
(62,499
)
(1,271
)
(20,432
)
(377
)
(84,579
)
Total Operating expenses
(66,655
)
(2,124
)
(28,487
)
(10,957
)
(108,223
)
Operating income/(loss))
(64,833
)
(1,392
)
(24,338
)
(10,628
)
(101,192
)
Other income/(expense):
Gain on deconsolidation
—
—
—
27,251
27,251
Gain/(loss) on investment held at fair
value
—
—
—
(59,019
)
(59,019
)
Gain/(loss) on disposal of assets
(57
)
—
—
—
(57
)
Other income/(expense)
—
—
—
7,699
7,699
Total other income/(expense)
(57
)
—
—
(24,069
)
(24,126
)
Net finance income/(costs)
112
6,591
50,002
(385
)
56,320
Share of net income/(loss) of associate
accounted for using the equity method
—
—
—
(15,322
)
(15,322
)
Gain on dilution of ownership interest in
associate
—
—
—
28,363
28,363
Income/(loss) before taxes
(64,779
)
5,199
25,664
(22,041
)
(55,957
)
Taxation
—
—
—
32,485
32,485
Income/(loss) for the period
(64,779
)
5,199
25,664
10,444
(23,472
)
December 31, 2022 $000s
Condensed Consolidated Statements of
Financial Position:
Total assets
51,599
976
34,365
615,707
702,647
Total liabilities1
271,186
14,093
62,542
(192,763
)
155,057
Net (liabilities)/assets
(219,587
)
(13,117
)
(28,176
)
808,470
547,589
1
Parent Company and Other Includes
eliminations of intercompany liabilities between the Parent Company
and the reportable segments in the amount of $255.5 million.
The proportion of net assets shown above that is attributable to
non-controlling interest is disclosed in Note 13.
3. Investments Held at Fair Value
Investments held at fair value include both unlisted and listed
securities held by PureTech. These investments, which include
interests in Akili, Vor, Karuna, Sonde (preferred A-2 and B
shares), Vedanta (preferred shares), Gelesis (in 2022) and other
insignificant investments, are initially measured at fair value and
are subsequently re-measured at fair value at each reporting date
with changes in the fair value recorded through profit and loss.
Activity related to such investments during the period is shown
below:
Investments held at fair value
$000's
Balance as of December 31, 2022 and
January 1, 2023
251,892
Investment in Vedanta Preferred shares –
Vedanta deconsolidation
20,456
Investment in Gelesis warrants (see also
Note 5)
1,121
Gain – change in fair value through profit
and loss
7,818
Balance as of June 30, 2023
281,288
Vedanta
On March 1, 2023 Vedanta issued convertible debt to a syndicate
of investors, that did not include PureTech. As part of the
issuance of the debt, the convertible debt holders were granted
representation on Vedanta's Board of Directors and PureTech lost
control over the Vedanta Board of Directors and the power to direct
the relevant Vedanta activities. Consequently, Vedanta was
deconsolidated on March 1, 2023 and its results of operations are
included in the condensed consolidated financial statements through
the date of deconsolidation.
Following deconsolidation, the Group still has significant
influence over Vedanta through its voting interest in Vedanta and
its remaining representation on Vedanta's Board of Directors.
However, the Group only holds convertible preferred shares in
Vedanta that do not provide their holders with access to returns
associated with a residual equity interest, and as such are
accounted for under IFRS 9, as investments held at fair value with
changes in fair value recorded in profit and loss. Under IFRS 9 the
preferred share investments are categorized as debt instruments
that are presented at fair value through profit and loss because
the amounts receivable do not represent solely payments of
principal and interest.
Upon deconsolidation, the Group derecognized its assets and
liabilities and non controlling interest in respect of Vedanta and
recorded its aforementioned investment in Vedanta at fair value.
The deconsolidation resulted in a gain of $61.8 million. As of the
date of deconsolidation, the investment in Vedanta convertible
preferred shares held at fair value amounted to $20.5 million.
During the six months June 30, 2023, the Company recognized a
loss of $2.2 million for the changes in the fair value of the
investment in Vedanta that was recorded on the line item
Gain/(loss) on investments held at fair value within the Condensed
Consolidated Statement of Comprehensive Income/(Loss). Please refer
to Note 12 for information regarding the valuation of these
instruments.
Gelesis
In February and May 2023, as part of Gelesis's issuance of
senior secured promissory notes to PureTech, Gelesis also issued to
PureTech (i) warrants to purchase 23,688,047 shares of Common Stock
of Gelesis with an exercise price of $0.2744 per share, expiring
February 2028 (ii) a warrant to purchase 192,307,692 shares of
Common Stock of Gelesis at an exercise price of $0.0182 per share
expiring on May 1, 2028 and (iii) a warrant to purchase 43,133,803
shares of Common Stock of Gelesis at an exercise price of $0.0142
per share expiring on May 1, 2028, collectively referred to as the
Warrants. For further details, see Note 5.
The Warrants were recorded at their initial fair value of $1.1
million and then subsequently re-measured to fair value through the
profit and loss statement. As of June 30, 2023, the value of the
Warrants was $0.
During the six months ended June 30, 2023 and 2022, the Company
recognized a loss of $1.1 million and $4.4 million, respectively
related to the investment in the Warrants (in 2023) and in Gelesis
preferred shares (in 2022), that was recorded in the line item
Gain/(loss) on investments held at fair value within the Condensed
Consolidated Statements of Comprehensive Income/(Loss). In
addition, the Company recognized a loss of $0.1 million and $12.7
million during the six months ended June 30, 2023 and 2022,
respectively, in respect of the Earn-out shares, for the change in
the fair value related to such investment during the period.
Sonde
On May 25, 2022, Sonde completed a Series B Preferred Share
financing, which resulted in the loss of control over Sonde and the
deconsolidation of Sonde. Therefore, the results of operations of
Sonde are included in the condensed consolidated financial
statements through the date of deconsolidation.
Following deconsolidation, the Group still had significant
influence in Sonde through its then 48.2% voting interest in Sonde
and its remaining representation on Sonde's Board of Directors. The
convertible Preferred A-2 and B shares, however, do not provide
their shareholders with access to returns associated with a
residual equity interest and as such are accounted for under IFRS
9, as investments held at fair value with changes in fair value
recorded in profit and loss. Under IFRS 9 the A-2 and B preferred
share investments are categorized as debt instruments that are
presented at fair value through profit and loss because the amounts
receivable do not represent solely payments of principal and
interest.
During the six months ended June 30, 2023 and 2022, the Company
recognized a loss of $0.2 million and $0 million, respectively in
respect of its aforementioned investment in Sonde that was recorded
in the line item Gain/(loss) on investments held at fair value
within the Condensed Consolidated Statements of Comprehensive
Income/(Loss). Please refer to Note 12 for information regarding
the valuation of these instruments.
Vor
During the six months ended June 30, 2023 and 2022, the Company
recognized a loss of $9.5 million and $21.3 million, respectively
in respect of its investment in Vor that was recorded in the line
item Gain/(loss) on investments held at fair value within the
Condensed Consolidated Statements of Comprehensive Income/(Loss).
Please refer to Note 12 for information regarding the valuation of
these instruments.
Karuna
During the six months ended June 30, 2023 and 2022 the Company
recognized a gain of $21.5 million and a loss of $7.4 million,
respectively in respect of its investment in Karuna that was
recorded on the line item Gain/(loss) on investments held at fair
value within the Condensed Consolidated Statements of Comprehensive
Income/(Loss). Please refer to Note 12 for information regarding
the valuation of these instruments.
Akili
During the six months ended June 30, 2023 and 2022, the Company
recognized a loss of $0.4 million and $12.8 million, respectively
in respect of its investment in Akili (including earn-out shares
held in Akili) that was recorded on the line item Gain/(loss) on
investments held at fair value within the Condensed Consolidated
Statement of Comprehensive Income/(Loss). Please refer to Note 12
for information regarding the valuation of these instruments.
4. Investments in Associates
Gelesis
Gelesis Holdings, Inc (“Gelesis”) is a publicly held
biotherapeutics company. The Board of Directors of Gelesis is
responsible for directing the relevant activities and making
strategic decisions for Gelesis. The Company owns 22.8% of Gelesis
common stock and accounts for its investment in Gelesis under the
equity method of accounting.
During the six-months ended June 30, 2023, the Company entered
into agreements with Gelesis to purchase senior secured convertible
promissory notes and warrants for shares of Gelesis common stock
(see Note 5). The warrants to purchase shares of Gelesis common
stock represent potential voting rights to the Company and it is
therefore necessary to consider whether they are substantive. If
these potential voting rights are substantive and the Company has
the practical ability to exercise the rights and take control of
greater than 50% of Gelesis common stock, the Company would be
required to consolidate Gelesis under the accounting standards.
In February 2023, the Company obtained warrants to purchase
23,688,047 shares of Gelesis common stock (the “February Warrants”)
at an exercise price of $0.2744 per share. The exercise of the
February Warrants was subject to the approval of the Gelesis
stockholders until May 1, 2023. On May 1, 2023, stockholder
approval is no longer required for the Company to exercise the
February Warrants. The potential voting rights associated with the
February Warrants are not substantive as the exercise price of the
February Warrants is at a significant premium to the fair value of
the Gelesis common stock.
In May 2023, the Company obtained warrants to purchase
235,441,495 shares of Gelesis common stock (the “May Warrants”).
The May Warrants are exercisable at the option of the Company and
have an exercise price of either $0.0182 or $0.0142. The May
Warrants were substantive as the Company would have benefited from
exercising such warrants since their exercise price was at the
money or at an insignificant premium over the fair value of the
Gelesis common stock. However, that benefit from exercising the May
Warrants only existed for a short period of time because in June
2023, the potential voting rights associated with the May Warrants
were impacted by the terms and conditions of the Merger Agreement
and were no longer substantive.
As of June 30, 2023, the Company has concluded that it does not
have substantive rights that give it the ability to direct the
relevant activities of, or the power to control, Gelesis.
During the six months ended June 30, 2023, and 2022 the Company
recorded $3.8 million and $14.8 million of equity method losses in
respect of Gelesis. As of June 30, 2023 the balance of the
investment in Gelesis was $1.2 million.
Merger Agreement
On June 12, 2023, PureTech Health LLC and Caviar Merger Sub LLC,
a Delaware limited liability company and a wholly owned subsidiary
of PureTech (“Merger Sub”), entered into an agreement (hereinafter
the "Merger Agreement"), pursuant to which Gelesis will merge with
and into Merger Sub, with Merger Sub continuing as the surviving
company (the “Surviving Company”, and such merger, the “Merger”).
If the Merger is completed, PureTech will acquire all issued and
outstanding shares of common stock of Gelesis (each, a “Share”) not
otherwise held by the PureTech, and Gelesis will become an indirect
wholly owned subsidiary of PureTech.
Subject to the terms and conditions of the Merger Agreement, at
the effective time of the Merger (the “Effective Time”), each Share
issued and outstanding immediately prior to the Effective Time will
be cancelled and converted into the right to receive $0.05664 per
share in cash, without interest (the “Merger Consideration”).
At the Effective Time, (i) each outstanding unexercised option
to purchase Shares, whether vested or unvested, will be cancelled
without payment of any consideration therefor, and (ii) each issued
and outstanding unvested Earn Out Share (as defined in the Merger
Agreement) will be automatically forfeited and cease to exist
immediately prior to the Closing.
At the Effective Time, (i) each outstanding warrant issued to
PureTech in the merger with Capstar on January 13, 2022 ("Gelesis
Warrant") will become a warrant exercisable for the Merger
Consideration and if a registered holder thereof properly exercises
such Gelesis Warrant within 30 days following the public disclosure
of the consummation of the Merger, the exercise price will be
reduced in accordance with the terms of the Black-Scholes pricing
adjustment set forth in the underlying warrant agreement, and (ii)
each PureTech Warrant (as defined in the Merger Agreement) will be
canceled automatically and cease to exist, and no consideration
shall be paid in exchange therefor.
Based on the terms described above, the consideration to be paid
to acquire Gelesis could be up to $5.1 million.
At the Effective Time, the Surviving Company will assume all
outstanding convertible promissory notes issued by Gelesis and the
consummation of the Merger will result in Gelesis becoming a
privately held company, and its shares will no longer be traded in
the OTC Market.
The consummation of the Merger is subject to certain closing
conditions, that if not met, provide PureTech with the right to
terminate the Merger Agreement.
Sonde
Following Sonde deconsolidation on May 25, 2022, the investment
in A-1 shares is accounted for under the equity method. During the
six months ended June 30, 2023 and 2022 the Company recorded $1.5
million and $0.6 million of equity method losses in respect of
Sonde. As of June 30, 2023, the investment in Sonde was $2.7
million.
5. Investment in Notes from Associates
Gelesis
Unsecured Promissory Note
On July 27, 2022, PureTech, as a lender, entered into an
unsecured Promissory Note ("Note") with Gelesis (GLS), as a
borrower, in the amount of $15.0 million. The Note bears an annual
interest rate of 15% per annum and accrues until the note is
repaid. The maturity date of the Note is the earlier of December
31, 2023 or five business days following the consummation of a
qualified financing by Gelesis. As of December 31, 2022, the fair
value of the Note was $16.5 million.
Based on the terms of the Note, due to the option to convert to
a variable amount of shares at the time of default, the Note is
required to be measured at fair value with changes in fair value
recorded through profit and loss. The fair value of the Note as of
June 30, 2023 was $12.1 million. During the six months ended June
30, 2023 the Group recorded a loss of $4.4 million for the change
in the fair value of the Note. The change in the fair value of the
Note was recorded in the line item Gain/(loss) on investments in
notes from associates in the Condensed Consolidated Statements of
Comprehensive Income/(Loss).
Senior secured convertible Promissory Note
On February 21, 2023, Gelesis entered into a Note and Warrant
Purchase Agreement with PureTech (the “NPA”) pursuant to which, for
a cash purchase price of $5.0 million, Gelesis issued to PureTech
(i) a short term secured convertible note in the aggregate
principal amount of $5.0 million convertible into common shares of
Gelesis at a price of $0.2744 per share (the "Initial Note") and
(ii) warrants to purchase 23,688,047 shares of Common Stock of
Gelesis (the “Warrants”) with an exercise price of $0.2744 per
share, expiring 5 years after issuance. The Notes issued under the
NPA are secured by a first-priority lien on substantially all
assets of Gelesis and the guarantors (other than the equity
interests in, and assets held by Gelesis S.r.l., a subsidiary of
Gelesis, and certain other exceptions).
The Initial Note bears interest at a rate of 12% per annum, and
were to mature on July 31, 2023. On June 28, 2023 pursuant to an
amendment to the Note agreement, the maturity date was amended to
be March 31, 2024.
On May 1, 2023, Gelesis issued to PureTech, for a cash purchase
price of $2.0 million, (i) an Additional Note in the aggregate
principal amount of $2.0 million (the “$2.0 million Additional
Note”), and (ii) a warrant to purchase 192,307,692 shares of Common
Stock of Gelesis (the “Second Closing Warrant”) at an exercise
price of $0.0182 per share expiring on May 1, 2028. The $2.0
million Additional Note is convertible into a number of shares of
Common Stock of Gelesis equal to (i) the principal amount plus
accrued and unpaid interest, divided by (ii) the initial conversion
price of $0.0182. The terms of the $2.0 million Additional Note are
generally the same as the terms of Initial Note issued on February
21, 2023, including interest rate, maturity, covenants, events of
default, and collateral.
On May 26, 2023, Gelesis issued to PureTech, for a cash purchase
price of $0.35 million, (i) an Additional Note in the aggregate
principal amount of $0.35 million (the “$0.35 million Additional
Note"), and (ii) a warrant to purchase 43,133,803 shares of Common
Stock of Gelesis (the “Third Closing Warrant”) at an exercise price
of $0.0142 per share expiring on May 1, 2028. The $0.35 million
Additional Note is convertible into a number of shares of Common
Stock of Gelesis equal to (i) the principal amount plus accrued and
unpaid interest, divided by (ii) the initial conversion price of
$0.0142. The terms of the Additional Note are generally the same as
the terms of the Initial Note issued on February 21, 2023, and the
$2.0 million Additional Note.
The initial fair value of the Initial Note, the $2.0 million
Additional Note and the $0.35 million Additional Note was $6.2
million. The fair value of such notes as of June 30, 2023 was $4.7
million. For the loss recorded in respect of these notes in the six
months ended June 30, 2023, see below.
The initial fair value of the Warrants, the Second Closing
Warrants and the Third Closing Warrant was $1.1 million and
recorded within Investments held at fair value on the Condensed
Consolidated statements of Financial Position. For the loss
recorded in respect of these warrants in the six months ended June
30, 2023, see Note 3.
On June 12, 2023, Gelesis issued an Additional Note in the
aggregate principal amount of $3.0 million (the “$3.0 million
Additional Note”) to PureTech for a cash purchase price of $3.0
million. The $3.0 million Additional Note is convertible into a
number of shares of Common Stock of Gelesis equal to (i) the
principal amount plus accrued and unpaid interest, divided by (ii)
the initial conversion price of $0.0134. The $3.0 million
Additional Note is issued on substantially the same terms (other
than conversion price and warrant coverage) as the $2.0 million
Additional Note issued on May 1, 2023 and the $0.35 million
Additional Note issued on May 26, 2023.
Due to the $3 million Additional Note being issued in
conjunction with the merger agreement to acquire Gelesis (See Note
4), the issuance of the $3 million Additional Note was not deemed
to be at arm's length and therefore the fair value of the $3
million Additional Note on transaction date was calculated using a
discounted cash flow method (See Note 12 for further details on
fair value measurements) and the $3 million Additional Note was
recorded at its initial fair value of $1.8 million. The difference
between the transaction price and the fair value of the note on the
transaction date of $1.2 million is being deferred and amortized
over the term of the Note. The balance of the deferred difference
is presented within the line item Investments in notes from
associates and its balance as of June 30, 2023 was $1.1
million.
If Gelesis enters into a binding definitive agreement with
respect to a Takeover Proposal (as defined in the Merger Agreement)
with any party other than PureTech, Gelesis shall immediately pay
to PureTech an amount equal to 200% of the aggregate principal
amount of outstanding Additional Notes (as defined in the Amended
NPA), or $10.7 million, and the Additional Notes shall be
cancelled.
As all the aforementioned notes are convertible into common
shares of Gelesis, such notes are measured at fair value with
changes in fair value recorded in the profit and loss statement.
During the six months ended June 30, 2023 the Group recorded a loss
of $1.6 million for the changes in the fair value of the senior
secured convertible promissory notes. The change in the fair value
of the notes was recorded in the line item Gain/(loss) on
investments in notes from associates in the Condensed Consolidated
Statements of Comprehensive Income/(Loss). For further information
on the fair value measurements, see Note 12.
Vedanta
On April 24, 2023, Vedanta closed the second tranche of its
convertible debt for additional proceeds of $18.0 million, of which
$5.0 million were invested by PureTech. The convertible debt
carries an interest rate of 9 percent per annum. The debt has
various conversion triggers and the conversion price is established
at the lower of 80% of the equity price of the last financing
round, or a certain pre-money valuation cap established in the
agreement. If the convertible debt is not earlier converted or
repaid, the entire outstanding amount of the convertible debt shall
be due and payable upon the earliest to occur of (a) the later of
(x) November 1, 2025 and (y) the date which is sixty (60) days
after all amounts owed under, or in connection with, the loan
Vedanta received from a certain investor have been paid in full ,
or (b) the consummation of a Deemed Liquidation Event (as defined
in the Company’s Amended and Restated Certificate of
Incorporation).
Due to the terms of the convertible debt, the investment in such
convertible debt is measured at fair value with changes in the fair
value recorded in the profit and loss statement. During the six
months ended June 30, 2023 the Group recorded a loss of $0.1
million for the changes in the fair value of the Vedanta
convertible debt. The change in the fair value of the convertible
debt was recorded in the line item Gain/(loss) on investments in
notes from associates in the Condensed Consolidated Statements of
Comprehensive Income/(Loss). For further information on the fair
value measurements, see Note 12.
Following is the activity in respect of Investments in notes
from associates during the period (all of which are measured at
fair value using unobservable level 3 inputs – See Note 12):
Investment in notes from associates
$'000s
Balance as of December 31, 2022 and
January 1, 2023
16,501
Investment In Gelesis Notes
9,229
Investment in Vedanta convertible debt
5,000
Changes in the fair value of the notes
(6,045
)
Balance as of June 30, 2023
24,686
6. Share-based Payments
Share-based payments includes stock options, restricted stock
units (RSUs) and performance-based RSUs. Share based payments are
recognized as an expense based on the grant date fair value of the
awards, except certain RSUs to executive management, see below.
Share-based Payment Expense
The Group share-based payment expense for the six months ended
June 30, 2023 and 2022, were comprised of charges related to the
PureTech Health plc incentive stock and stock option issuances and
subsidiary stock plans.
The following table provides the classification of the Group’s
consolidated share-based payment expense as reflected in the
Condensed Consolidated Statements of Comprehensive
Income/(Loss):
Six months ended June 30,
2023
$000s
2022
$000s
General and administrative
1,121
516
Research and development
135
3,037
Total
1,256
3,552
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan
(PSP). Under the PSP and subsequent amendments, awards of ordinary
shares may be made to the Directors, senior managers and employees
of, and other individuals providing services to the Company and its
subsidiaries up to a maximum authorized amount of 10.0 percent of
the total ordinary shares outstanding. The shares have various
vesting terms over a period of service between two and four years,
provided the recipient remains continuously engaged as a service
provider.
The share-based awards granted under the PSP expire 10 years
from the grant date. As of June 30, 2023, the Company had issued
share-based awards to purchase an aggregate of 25,411,791 shares
under this plan.
In June 2023 the Group adopted a new Performance Stock Plan
(PSP) that has the same terms as the 2015 PSP but allows for awards
to be made up to a maximum authorized amount of 10.0 percent of the
total ordinary shares outstanding over a 5 year period. As of June
30, 2023 no grants were made under the new plan.
RSUs
During the six months ended June 30, 2023 and 2022, the Company
granted certain executives 3,576,937 and 4,765,424 service, market,
and performance-based RSUs, respectively.
Each RSU entitles the holder to one ordinary share on vesting
and the RSU awards are based on a cliff vesting schedule over a
three-year requisite service period in which the Company recognizes
compensation expense for the RSUs. Following vesting, each
recipient will be required to make a payment of one pence per
ordinary share on settlement of the RSUs. Vesting of the RSUs is
subject to the satisfaction of performance and market
conditions.
The RSUs to executives are treated as liability awards and as
such adjusted to fair value at every reporting date until
settlement with changes in fair value recorded in earnings as stock
based compensation expense.
The performance-based awards are recognized as share-based
compensation expense over the performance period based upon the
determination of whether it is probable that the performance
targets will be achieved. The Company assesses the probability of
achieving the performance targets at each reporting period.
Cumulative adjustments, if any, are recorded to reflect subsequent
changes in the estimated outcome of performance-related conditions.
For market based awards, the fair value of such awards reflects the
probability of whether the market conditions will be met.
The fair value of the market based awards is based on the Monte
Carlo simulation analysis utilizing a Geometric Brownian Motion
process with 100,000 simulations to value those shares. The model
considers share price volatility, risk-free rate and other
covariance of comparable public companies and other market data to
predict distribution of relative share performance.
The performance and market conditions attached to the RSU awards
are based on the achievement of total shareholder return (“TSR”),
with 40.0 percent of the shares under the award vesting based on
the achievement of absolute TSR targets, 10 percent of the shares
under the award vesting based on TSR as compared to the FTSE 250
Index, 10 percent of the shares under the award vesting based on
TSR as compared to the MSCI Europe Health Care Index, and 40.0
percent of the shares under the award vesting based on the
achievement of strategic targets. The RSU award performance
criteria have changed over time as the criteria is continually
evaluated by the Group’s Remuneration Committee.
In June 2023 the Company granted its non executive directors
102,732 RSUs that will vest on the day immediately preceding the
Company's 2024 annual General Meeting. Such RSUs are treated as
equity settled RSUs and therefore the grant date fair value on such
RSUs is recognized over the vesting term.
In February 2022 the remuneration committee of PureTech's board
of directors approved the achievement of the vesting conditions as
of December 31, 2021 of the 2019 RSU grants and on May 17, 2022
reached the decision to settle the RSUs through issuance of shares
after paying all the employee withholding taxes in cash. As such,
the liability at date of settlement was settled for $1.0 million in
cash and $1.5 million in shares.
In February and May 2023 PureTech settled 276,425 vested
restricted stock units through issuance of shares, after paying the
employee withholding taxes in cash. As such, the liability at dates
of settlement was settled for $0.3 million in cash and $0.4 million
in shares.
The Company recorded $0.2 million income and $2.9 million income
for the six months ended June 30, 2023 and 2022, respectively, in
respect of all restricted stock units, of which 0.5 million income
and $3.2 million income, respectively was in respect of liability
settled share based awards. The income results from the reduction
in the value of the Company's share price, which reduces the
Company's liability settled awards.
Stock Options
During the six months ended June 30, 2023 and 2022, the Company
granted 569,125 and 8,195,500 stock option awards under the PSP,
respectively.
Stock options are treated as equity settled awards. The fair
value of the stock options awarded by the Company was estimated at
the grant date using the Black-Scholes option valuation model,
considering the terms and conditions upon which options were
granted, with the following weighted- average assumptions:
For the six months ended June 30,
2023
2022
Expected volatility
43.45
%
41.62
%
Expected terms (in years)
6.16
6.11
Risk-free interest rate
3.66
%
2.06
%
Expected dividend yield
—
—
Grant date fair value
$1.38
$1.06
As of June 30, 2023, 7,528,319 incentive options are exercisable
with a weighted-average exercise price of $2.65. Exercise prices
ranged from $1.44 to $4.54.
The Company incurred share-based payment expense for the stock
options of $1.2 million and $4.5 million for the six months ended
June 30, 2023 and 2022, respectively.
Subsidiary Plans
The subsidiaries incurred $0.3 million and $2.0 million in
share-based payment expense in respect of their share based award
plans for the six months ended June 30, 2023 and 2022,
respectively.
7. Finance Cost, net
The following table shows the breakdown of finance income and
costs:
For the six months ended June
30,
2023
$000s
2022
$000s
Finance income
Interest income from financial assets
7,731
630
Total finance income
7,731
630
Finance costs
Contractual interest expense on notes
payable
(82
)
(130
)
Interest expense on other borrowings
(363
)
(811
)
Interest expense on lease liability
(817
)
(1,021
)
Gain/(loss) on foreign currency
exchange
(76
)
1
Total finance cost –
contractual
(1,338
)
(1,961
)
Gain/(loss) from change in fair value of
warrant liability
33
3,002
Gain/(loss) from change in fair value of
preferred shares
2,617
55,152
Gain/(loss) from change in fair value of
convertible debt
—
(502
)
Total finance income/(costs) – fair
value accounting
2,650
57,651
Total Finance costs - non cash interest
expense related to sale of future royalties
(3,726
)
—
Finance income/(costs), net
5,316
56,320
8. Earnings/(Loss) per Share
Basic earnings/(loss) per share is computed by dividing the
income/(loss) attributable to the Company and available to ordinary
shareholders by the weighted average number of ordinary shares.
Dilutive earnings/loss per share is computed by dividing the
income/(loss) attributable to the Company and available to ordinary
shareholders by the sum of the weighted average number of ordinary
shares and the number of additional ordinary shares that would have
been outstanding if the Company’s outstanding potentially dilutive
securities had been issued. During the six months ended June 30,
2023 and 2022 the Company incurred a net loss and therefore all
outstanding potential securities were considered anti-dilutive. The
amount of potential securities that were excluded from the
calculation amounted to 1,878,514 and 2,992,980 shares for the six
months ended June 30, 2023 and 2022, respectively.
The following table sets forth the computation of basic and
diluted earnings/(loss) per ordinary shares for the periods
presented (in thousands, except for shares and per share
amounts):
2023
2022
Numerator:
Income/(loss) attributable to the owners
of the Company
($25,004
)
($28,344
)
Denominator:
Weighted average ordinary shares for basic
earnings per ordinary share
278,254,381
287,754,262
Effect of dilutive securities
—
—
Weighted average ordinary shares for
diluted earnings per ordinary share
278,254,381
287,754,262
Basic earnings/(loss) per ordinary
share
($0.09
)
($0.10
)
Diluted earnings/(loss) per ordinary
share
($0.09
)
($0.10
)
9. Equity
At June 30, 2023 and December 31, 2022, the Company had
276,672,829 and 278,566,306 common shares outstanding,
respectively, including all vested common shares issued pursuant to
PureTech Health LLC Incentive Compensation arrangements as detailed
in Note 6, and after deducting all shares repurchased and held by
the Company in Treasury.
On May 9, 2022, the Company announced the commencement of a
$50.0 million share repurchase program the ("Program") of its
ordinary shares of one pence each (“Ordinary Shares”). The Company
is executing the Program in two equal tranches. In respect of the
two tranches, PureTech entered into an irrevocable (see below)
non-discretionary instruction with Jefferies International Limited
(“Jefferies”) in relation to the purchase by Jefferies of Ordinary
Shares for an aggregate consideration (excluding expenses) of no
greater than $25.0 million for each tranche and the simultaneous
on-sale of such Ordinary Shares by Jefferies to PureTech, subject
to certain volume and price restrictions. Jefferies makes its
trading decisions in relation to the Ordinary Shares independently
of, and uninfluenced by, the Company. Purchases may continue during
any close period to which the Company is subject. The instruction
to Jefferies may be amended or withdrawn so long as the Company is
not in a close period or otherwise in possession of inside
information.
Any purchases of Ordinary Shares under the Program were carried
out on the London Stock Exchange and could be carried out on any
other UK recognized investment exchange which may be agreed, in
accordance with pre-set parameters and in accordance with, and
subject to limits, including those limits related to daily volume
and price, prescribed by the Company’s general authority to
repurchase Ordinary Shares granted by its shareholders at its
annual general meetings on May 27, 2021 and June 15, 2022, and
relevant Rules and Regulations. All Ordinary Shares repurchased
under the Program are held in treasury. The Company is currently
executing its second tranche.
As of June 30, 2023, the Company’s issued share capital was
289,468,159 shares, including 12,795,330 shares, which had been
repurchased under the Program and were held by the Company in
treasury.
10. Subsidiary Preferred Shares
Preferred shares issued by subsidiaries often contain redemption
and conversion features that are assessed under IFRS 9 in
conjunction with the host preferred share instrument. This balance
represents subsidiary preferred shares issued to third parties.
The subsidiary preferred shares are redeemable upon the
occurrence of a contingent event, other than full liquidation of
the Company, that is not considered to be within the control of the
Company. Therefore these subsidiary preferred shares are classified
as liabilities. These liabilities are measured at fair value
through profit and loss. The preferred shares are convertible into
ordinary shares of the subsidiaries at the option of the holder and
mandatorily convertible into ordinary shares under certain
circumstances. Under certain scenarios the number of ordinary
shares receivable on conversion will change and therefore, the
number of shares that will be issued is not fixed. As such the
conversion feature is considered to be an embedded derivative that
normally would require bifurcation. However, since the preferred
share liabilities are measured at fair value through profit and
loss, as mentioned above, no bifurcation is required.
The preferred shares are entitled to vote with holders of common
shares on an as converted basis.
The balance as of June 30, 2023 and December 31, 2022,
represents the fair value of the instruments for all subsidiary
preferred shares. The following summarizes the subsidiary preferred
share balance:
As of June 30,
2023
$000s
2022
$000s
Entrega
169
169
Follica
—
350
Vedanta Biosciences
—
26,820
Total subsidiary preferred share
balance
169
27,339
As is customary, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of a subsidiary, the holders
of subsidiary preferred shares which are outstanding shall be
entitled to be paid out of the assets of the subsidiary available
for distribution to shareholders and before any payment shall be
made to holders of ordinary shares. A merger, acquisition, sale of
voting control or other transaction of a subsidiary in which the
shareholders of the subsidiary immediately before the transaction
do not own a majority of the outstanding shares of the surviving
company shall be deemed to be a liquidation event. Additionally, a
sale, lease, transfer or other disposition of all or substantially
all of the assets of the subsidiary shall also be deemed a
liquidation event.
As of June 30, 2023 and December 31, 2022, the minimum
liquidation preference reflects the amounts that would be payable
to the subsidiary preferred holders upon a liquidation event of the
subsidiaries, which is as follows:
As of June 30,
2023
$000s
2022
$000s
Entrega
2,216
2,216
Follica
6,405
6,405
Vedanta Biosciences
—
149,568
Total minimum liquidation
preference
8,621
158,189
For the six months ended June 30, 2023 the Group recognized the
following changes in the value of subsidiary preferred shares:
$'000s
Balance as of January 1, 2023
27,339
Decrease in value of preferred shares
measured at fair value
(2,617
)
Deconsolidation of subsidiary
(24,554
)
Balance as of June 30, 2023
169
During the six months ended June 30, 2023 and 2022 there were no
issuances of new preferred shares.
11. Sale of Future Royalties Liability
On March 4, 2011, PureTech entered into a license agreement with
Karuna Therapeutics, Inc. (“Karuna”) according to which PureTech
granted Karuna a royalty bearing exclusive license to research,
develop and sell KarXT in exchange for a royalty on annual net
sales, development and regulatory milestones and a fixed portion of
sublicensing income, if any (hereinafter “License Agreement”).
On March 23, 2023 PureTech signed an agreement with Royalty
Pharma (hereinafter "Royalty agreement"), according to which
PureTech sold Royalty Pharma the right to receive royalty payments
made by Karuna in respect of net sales of KarXT, if and when
received. According to the Royalty agreement all royalty due to
PureTech under the License agreement will be paid to Royalty Pharma
up until an annual threshold of $60.0 million, while all royalties
above such annual threshold in a given year will be split 33% to
Royalty Pharma and 67% to PureTech. Under the terms of the Royalty
agreement, PureTech received a non-refundable initial payment of
$100.0 million at closing and is eligible to receive additional
payments in the aggregate of up to an additional $400.0 million
based on the achievement of certain regulatory and commercial
milestones.
PureTech continues to hold the rights under the License
Agreement and has a contractual obligation to deliver cash to
Royalty Pharma for a portion of the royalties it receives.
Therefore, PureTech will continue to account for any royalties and
regulatory milestones due to PureTech under the License Agreement
as revenue in its consolidated statements of comprehensive
income/(loss) and record the proceeds from this transaction as a
financial liability on its consolidated statements of financial
position.
In order to determine the amortized cost of the sale of future
royalties liability, PureTech is required to estimate the total
amount of future receipts and payments from/to Royalty Pharma under
the Royalty agreement over the life of the agreement. The $100.0
million liability, recorded at execution of the Royalty agreement,
will be accreted to the total of these receipts and payments as
interest expense over the life of the Royalty agreement. These
estimates contain assumptions that impact both the amortized cost
of the liability and the interest expense that will be recognized
in future periods.
Additional proceeds received from Royalty Pharma will increase
PureTech’s financial liability. As royalty payments are made to
Royalty Pharma, the balance of the liability will be effectively
repaid over the life of the Royalty agreement. The estimated timing
and amount of royalty payments and proceeds to be received from
Royalty Pharma is likely to change over the life of the Royalty
agreement. A significant increase or decrease in estimated royalty
payments, or a significant shift in timing of cash flows, will
materially impact the sale of future royalties liability, interest
expense and the time period for repayment. PureTech will
periodically assess the expected payments to, or proceeds from,
Royalty Pharma, and any such changes in amount or timing of cash
flows will require PureTech to re-calculate the amortized cost of
the sale of future royalties liability as the present value of the
estimated future cash flows from the Royalty agreement that are
discounted at the liability’s original effective interest rate The
adjustment is recognized immediately in profit or loss as income or
expense.
The following shows the activity in respect of the sale of
future royalties liability:
Sale of future royalties liability
$'000s
Balance as of January 1, 2023
—
Amounts received at closing
100,000
Non cash interest expense recognized
3,726
Balance as of June 30, 2023
103,726
12. Financial Instruments
The Group’s financial instruments consist of financial
liabilities, including preferred shares, and financial assets in
the form of notes, convertible notes and investment in shares. Many
of these financial instruments are presented at fair value with
fair value changes recorded through profit and loss.
Fair Value Process
For financial instruments measured at fair value under IFRS 9,
the change in the fair value is reflected through profit and loss.
Using the guidance in IFRS 13, the total business enterprise value
and allocable equity of each entity being valued can be determined
using a market backsolve approach through a recent arm’s length
financing round (or a future probable arm's length transaction),
market PWERM approach, discounted cash flow approach, or hybrid
approaches. The approaches, in order of strongest fair value
evidence, are detailed as follows:
Valuation Method
Description
Market – Backsolve
The market backsolve approach
benchmarks the original issue price (OIP) of the company’s latest
funding transaction as current value.
Market/Asset – PWERM
Under a PWERM, the company value
is based upon the probability-weighted present value of expected
future investment returns, considering each of the possible future
outcomes available to the enterprise. Possible future outcomes can
include IPO scenarios, potential SPAC transactions, merger and
acquisition transactions as well as other similar exit transactions
of the investee.
Income Based – DCF
The income approach is used to
estimate fair value based on the income streams, such as cash flows
or earnings, that an asset or business can be expected to
generate.
At each measurement date, the fair value of preferred share
liabilities, including embedded conversion rights that are not
bifurcated, as well as investments held at fair value (that are not
publicly traded), were determined using the following allocation
methods: option pricing model (“OPM”), Probability-Weighted
Expected Return Method ("PWERM"), or Hybrid allocation framework.
The methods are detailed as follows:
Allocation Method
Description
OPM
The OPM model treats preferred
stock as call options on the enterprise’s equity value, with
exercise prices based on the liquidation preferences of the
preferred stock.
PWERM
Under a PWERM, share value is
based upon the probability-weighted present value of expected
future investment returns, considering each of the possible future
outcomes available to the enterprise, as well as the rights of each
share class.
Hybrid
The hybrid method (“HM”) is a
combination of the PWERM and OPM. Under the hybrid method, multiple
liquidity scenarios are weighted based on the probability of the
scenarios occurrence, similar to the PWERM, while also utilizing
the OPM to estimate the allocation of value in one or more of the
scenarios.
Valuation policies and procedures are regularly monitored by the
Group. Fair value measurements, including those categorized within
Level 3, are prepared and reviewed for reasonableness and
compliance with the fair value measurements guidance under IFRS.
The Group measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements:
Fair Value
Hierarchy Level
Description
Level 1
Inputs that are quoted market
prices (unadjusted) in active markets for identical
instruments.
Level 2
Inputs other than quoted prices
included within Level 1 that are observable either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
Level 3
Inputs that are unobservable.
This category includes all instruments for which the valuation
technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instrument’s
valuation.
Whilst the Group considers the methodologies and assumptions
adopted in fair value measurements as supportable and reasonable,
because of the inherent uncertainty of valuation, those estimated
values may differ significantly from the values that would have
been used had a ready market for the investment existed.
Subsidiary Preferred Shares Liability
The following table summarizes the changes in the Group’s
subsidiary preferred shares liabilities measured at fair value,
which were categorized as Level 3 in the fair value hierarchy:
Subsidiary Preferred Shares
$000s
Balance at December 31, 2022 and January
1, 2023
27,339
Change in fair value
(2,617
)
Deconsolidation of subsidiary
(24,554
)
Balance at June 30, 2023
169
The change in fair value of preferred share liabilities are
recorded in Finance income/(costs) – fair value accounting in the
Condensed Consolidated Statements of Comprehensive
Income/(Loss).
Investments Held at Fair Value
Karuna, Vor and Akili Valuation
Karuna (Nasdaq: KRTX), Vor (Nasdaq: VOR), Akili (Nasdaq: AKLI)
and additional immaterial investments are listed entities on an
active exchange and as such the fair value as of June 30, 2023, was
calculated utilizing the quoted common share price which is
categorized as Level 1 in the fair value hierarchy. Please refer to
Note 3 for further details.
Vedanta, Sonde, Gelesis and Akili (earn-out shares)
In accordance with IFRS 9, the Company accounts for its
investment in Sonde (investment in Preferred A-2 and B shares) and
its investment in Vedanta convertible preferred shares (subsequent
to the date of deconsolidation) as investments held at fair value
through the profit and loss. In addition, the Company accounts for
its investment in Gelesis warrants and Earn-out shares and Akili
Earn-out shares (see Note 3) as investments held at fair value. All
the valuations of the aforementioned investments are categorized as
Level 3 in the fair value hierarchy due to the use of significant
unobservable inputs to value such assets. During the six months
ended June 30, 2023, the Company recorded such investments at fair
value and recognized the change in fair value of the investments as
a loss of $3.8 million that was recorded to the Condensed
Consolidated Statements of Comprehensive Income/(Loss) in the line
item Gain/(loss) on investments held at fair value.
The following table summarizes the changes in all the Group’s
investments held at fair value, which were categorized as Level 3
in the fair value hierarchy:
$'000s
Balance at January 1, 2023
12,593
Deconsolidation of Vedanta – new
investment in Vedanta preferred shares
20,456
Investment in warrants issued by
Gelesis
1,121
Loss – Change in fair value
(3,831
)
Balance as of June 30, 2023
30,339
The change in fair value of investments held at fair value are
recorded in Gain/(loss) on investments held at fair value in the
Condensed Consolidated Statements of Comprehensive
Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at June 30, 2023, in the fair value
measurement of the Group’s material investments held at fair value
categorized as Level 3 in the fair value hierarchy:
Fair Value at June 30, 2023
Valuation Technique
Unobservable Inputs
Weighted Average
Sensitivity to Decrease in
Input
11,236
Market Backsolve & OPM
Estimated Time to Exit
2.00
Fair value decrease
Volatility
60%
Fair value decrease
18,285
Market Backsolve approach that
leverages a monte carlo simulation
Estimated Time to Exit
1.73
Fair value decrease
Risk-free Discount Rate
4.87%
Fair value decrease
Volatility
105%
Fair value decrease
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value
hierarchy, used in the fair value measurement of the Group’s
investments held at fair value as of June 30, 2023, and which
impact the fair values determined at the measurement date:
As of June 30, 2023
Investment measured through
market backsolve & OPM
Input
Sensitivity Range
Investment fair value
Increase/(Decrease)
$000s
Equity value
-5%
(506
)
+5%
505
-10%
(1,012
)
+10%
1,011
As of June 30, 2023
Investments measured through
market backsolve that leverages a monte carlo simulation
Input
Sensitivity Range
Investment fair value
Increase/(Decrease)
$000s
Equity Value
-5%
(1,301
)
+5%
1,552
Time to Liquidity
-6 Months
(1,759
)
+6 Months
1,688
Volatility
-10%
(1,108
)
+10%
1,228
Investments in Notes from Associates
PureTech invested in notes from associates. See Note 5 for the
detail regarding the notes issued to the Company.
Based on the terms of the notes, the notes are required to be
measured at fair value with changes in fair value recorded through
profit and loss. The fair value of the notes as of June 30, 2023
was $24.7 million. During the six months ended June 30, 2023 the
Group recorded a $6.0 million loss for the change in the fair value
of the notes, recorded in the line item Gain/(loss) on investments
in notes from associates in the Condensed Consolidated Statements
of Comprehensive Income/(Loss). For the activity during the period
for the investments in notes from associates, that are all valued
based on level 3 inputs, see Note 5.
The notes issued by Gelesis (see detail in Note 5) were valued
using a discounted cash flow approach on the future return from the
notes, using a weighted average discount rate of 120.3%. Following
is the sensitivity of the discount rate input on the fair value of
the notes issued by Gelesis:
As of June 30, 2023
Sensitivity Range
Financial Liability
Increase/(Decrease)
$000s
Discount Rate
-5%
255
+5%
(248
)
-10%
521
+10%
(486
)
The convertible debt issued by Vedanta (see details in Note 5)
was valued using a market backsolve approach that leverages a monte
carlo simulation. Due to the proximity of the investment to June
30, 2023 the value of the Vedanta convertible notes is not
materially impacted by the unobservable inputs.
Fair Value Measurement and Classification
The fair value of financial instruments by category at June 30,
2023 and December 31, 2022:
2023
Carrying Amount
Fair Value
Financial Assets
$000s
Financial
Liabilities
$000s
Level 1
$000s
Level 2
$000s
Level 3
$000s
Total
$000s
Financial assets:
Money Markets1,2
308,046
—
308,046
—
—
308,046
Investment in notes from associates
24,686
—
—
—
24,686
24,686
Investments held at fair value
281,288
—
250,948
—
30,339
281,288
Total financial assets
614,019
—
558,994
—
55,025
614,019
Financial liabilities:
Subsidiary preferred shares
—
169
—
—
169
169
Share based liability awards
—
4,724
3,850
—
874
4,724
Total financial liabilities
—
4,893
3,850
—
1,042
4,893
1
Issued by a diverse group of
corporations, largely consisting of financial institutions,
virtually all of which are investment grade.
2
Included within Cash and cash
equivalents
The Group has a number of financial instruments that are not
measured at fair value in the statement of financial position. For
these instruments the fair values are not materially different than
their carrying amounts.
2022
Carrying Amount
Fair Value
Financial Assets
$000s
Financial
Liabilities
$000s
Level 1
$000s
Level 2
$000s
Level 3
$000s
Total
$000s
Financial assets:
Money Markets1,2
95,249
—
95,249
—
—
95,249
Short-term investments1
200,229
—
200,229
—
—
200,229
Note from associate
16,501
—
—
—
16,501
16,501
Investments held at fair value
251,892
—
239,299
—
12,593
251,892
Trade and other receivables3
11,867
—
—
11,867
—
11,867
Total financial assets
575,738
—
534,777
11,867
29,094
575,738
Financial liabilities:
Subsidiary warrant liability
—
47
—
—
47
47
Subsidiary preferred shares
—
27,339
—
—
27,339
27,339
Subsidiary notes payable
—
2,345
—
2,097
248
2,345
Share based liability awards
—
5,932
4,396
—
1,537
5,932
Total financial liabilities
—
35,664
4,396
2,097
29,171
35,664
1
Issued by a diverse group of
corporations, largely consisting of financial institutions,
virtually all of which are investment grade.
2
Included within Cash and cash
equivalents.
3
Outstanding receivables are owed
primarily by government agencies and large corporations, virtually
all of which are investment grade.
13. Non-Controlling Interest
The following table summarizes the changes in the equity
classified non-controlling ownership interest in subsidiaries by
reportable segment; On March 1, 2023, Vedanta Biosciences, Inc, Inc
was deconsolidated and therefore transferred retroactively to the
Non-Controlled Founded Entity segment. See Note 3 Investments Held
at Fair Value.
Internal
$000s
Controlled
Founded Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent Company
& Other
$000s
Total
$000s
Balance at December 31, 2022 and January
1, 2023
—
(4,266
)
9,044
592
5,369
Share of comprehensive income (loss)
—
15
(569
)
8
(546
)
Deconsolidation of subsidiaries
—
—
(9,085
)
—
(9,085
)
Equity settled share-based payments
—
(334
)
611
—
277
Expiration of share options in
subsidiary
—
(786
)
—
—
(786
)
Other
—
—
—
(6
)
(6
)
Balance at June 30, 2023
—
(5,371
)
—
594
(4,778
)
The following tables summarize the financial information related
to the Group’s subsidiaries with material non-controlling interests
during the period, aggregated for interests in similar entities,
and before and after intra group eliminations.
2023
For the period ended June 30
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
Intra-group
eliminations
$000s
Total
$000s
Statement of Comprehensive Loss
Total revenue
750
1,727
—
2,477
Income/(loss) for the period
136
(4,680
)
447
(4,098
)
Total comprehensive income/(loss) for the
period
136
(4,680
)
447
(4,098
)
Statement of Financial Position
Total assets
1,294
—
(701
)
593
Total liabilities
14,610
—
(11,930
)
2,679
Net assets/(liabilities)
(13,316
)
—
11,229
(2,087
)
As of June 30, 2023, Controlled Founded Entities with
non-controlling interests primarily include Follica Incorporated
and Entrega Inc. Ownership interests of the non-controlling
interests in Follica Incorporated and Entrega Inc. as of June 30,
2023 were 19.9 percent, and 11.7 percent respectively.
Non-controlling interests include the amounts recorded for
subsidiary stock options. During the six months ended June 30, 2023
the Group's results of operations include the results of Vedanta,
who had non controlling interests, until the date of
deconsolidation (March 1, 2023).
14. Trade and Other Payables
Information regarding Trade and other payables was as
follows:
As of June 30, 2023 and December
31, 2022
2023
$000s
2022
$000s
Trade payables
8,725
26,504
Accrued expenses
20,387
24,518
Liability settled share based awards
2,135
1,805
Other
93
1,957
Total trade and other payables
31,339
54,783
15. Sub-Leases
On January 23, 2023 PureTech executed a sublease agreement with
Allonia LLC (“Allonia”). The sublease is for approximately 11,000
rentable square feet located on the third floor of the 6 Tide
Street building, where the Company’s offices are currently located.
Allonia obtained possession of the premises on February 17, 2023
with a rent period term of two years from the Rent commencement
date, which was May 17, 2023. Allonia has the option to extend the
sublease for an additional year at the same terms. Allonia
commenced paying rent 3 months after the commencement date of the
lease. The annual lease fee is $1.1 million per year.
The sublease was determined to be an operating lease and as such
the total lease payments under the sublease agreement are
recognized over the lease term on a straight-line basis.
16. Commitments and Contingencies
The Group is party to certain licensing agreements where the
Group is licensing IP from third parties. In consideration for such
licenses the Group has made upfront payments and may be required to
make additional contingent payments based on developmental and
sales milestones and/or royalty on future sales. As of June 30,
2023, these milestone events have not yet occurred and therefore
the Group does not have a present obligation to make the related
payments in respect of the licenses. Such milestones are dependent
on events that are outside of the control of the Group and many of
these milestone events are remote of occurring. As of June 30,
2023, payments in respect of developmental milestones that are
dependent on events that are outside the control of the Group but
are reasonably possible to occur amounted to approximately $7.4
million (December 31, 2022 - $8.7 million). These milestone amounts
represent an aggregate of multiple milestone payments depending on
different milestone events in multiple agreements. The probability
that all such milestone events will occur in the aggregate is
remote. Payments made to license IP represent the acquisition cost
of intangible assets.
The Group is party to certain sponsored research arrangements as
well as arrangements with contract manufacturing and contract
research organizations, whereby the counterparty provides the
Company with research and/or manufacturing services. As of June 30,
2023, the noncancellable commitments in respect of such contracts
amounted to approximately $12.7 million (December 31, 2022 – $11.3
million).
The Company is involved from time-to-time in various legal
proceedings arising in the normal course of business. Although the
outcomes of these legal proceedings are inherently difficult to
predict, the Company does not expect the resolution of such legal
proceedings to have a material adverse effect on its financial
position or results of operations.
17. Related Parties Transactions
Related Party Subleases and royalties
During 2019, PureTech executed a sublease agreement with a
related party, Gelesis. As of June 30, 2023 and December 31, 2022,
the sublease receivable (short term and long term) amounted to $377
thousand and $1.3 million, respectively.
The Group recorded $16 thousand and $48 thousand of interest
income with respect to the sublease during the six months ended
June 30, 2023 and 2022 respectively, which is presented within
finance income in the Condensed Consolidated Statements of
Comprehensive Income/(Loss).
The Group receives royalties from Gelesis on its product sales.
The Group recorded zero and $328 thousand of royalty revenue during
the six months ended June 30, 2023 and 2022 respectively, which is
presented in Contract revenue in the Condensed Consolidated
Statements of Comprehensive Income/(Loss).
Key Management Personnel Compensation
Key management includes executive directors and members of the
executive management team of the Group (not including compensation
provided to non-executive directors). The key management personnel
compensation of the Group was as follows for the six months ended
June 30:
For the six months ended June
30
2023
$000s
2022
$000s
Short-term employee benefits
2,268
1,672
Share-based payment expense
(518
)
(2,010
)
Total
1,750
(337
)
Short-term employee benefits include salaries, health care and
other non-cash benefits. Share-based payments are generally subject
to vesting terms over future periods. For the six months ended June
30, 2023 and 2022, the Group had net income in respect of share
based compensation to executives due to the income in respect of
RSUs treated as liability share based awards because of the
decrease in the value of the RSUs.
For settlements of share based awards – see Note 6.
In addition the Company paid remuneration to non-executive
directors in the amounts of $213 thousand and $303 thousand for the
six months ended June 30, 2023 and 2022 respectively. Also, the
Company incurred $216 thousand and $145 thousand of stock based
compensation expense for such non-executive directors for the six
months ended June 30, 2023 and 2022, respectively.
During the six months ended June 30, 2023 and 2022, the Company
incurred zero, and $54 thousand, respectively of expenses paid to
related parties.
Convertible Notes Issued to Directors
Certain related parties of the Group have invested in
convertible notes issued by the Group’s subsidiaries. As of June
30, 2023 and December 31, 2022 , the outstanding related party
notes payable totaled $102 thousand and $99 thousand respectively,
including principal and interest.
The notes issued to related parties bear interest rates,
maturity dates, discounts and other contractual terms that are the
same as those issued to outside investors during the same
issuances.
Directors’ and Senior Managers’ Shareholdings and Share
Incentive Awards
The Directors and senior managers hold beneficial interests in
shares in the following businesses and sourcing companies as at
June 30, 2023:
Business Name (Share Class)
Number of shares
held as of
June 30, 2023
Number of options
held as of
June 30, 2023
Number of RSUs
held as of
June 30, 2023
Ownership
Interest1
Directors:
Ms Daphne Zohar2
Gelesis (Common)
465,121
3,303,306
1,349,697
1.37%
Dr Robert Langer
Entrega (Common)
250,000
82,500
—
4.09%
Dr Raju Kucherlapati
Enlight (Class B Common)
—
30,000
—
3.00%
Gelesis (Common)
139,625
—
50,639
0.04%
Dr John LaMattina3
Akili (Common)
56,554
—
—
0.07%
Gelesis (Common)3
395,035
37,129
—
0.12%
Vedanta Biosciences (Common)
25,000
—
—
0.15%
Senior Managers:
Dr Bharatt Chowrira
Karuna (Common)
5,000
—
—
0.01%
1
Ownership interests as of June
30, 2023 are calculated on a diluted basis, including issued and
outstanding shares, warrants and options (and written commitments
to issue options) but excluding unallocated shares authorized to be
issued pursuant to equity incentive plans and any shares issuable
upon conversion of outstanding convertible promissory notes.
2
Common shares, RSUs and options
held by Yishai Zohar, who is the husband of Ms. Zohar. Ms. Zohar
does not have any direct interest in the share capital of Gelesis.
Ms. Zohar recuses herself from any and all material decisions with
regard to Gelesis.
3
Dr John and Ms Mary LaMattina
hold 345,035 shares of common shares in Gelesis. Individually, Dr
LaMattina holds 50,000 shares of Gelesis and convertible notes
issued by Appeering in the aggregate principal amount of
$50,000.
Directors and senior managers hold 23,377,627 ordinary shares
and 11.8 percent voting rights of the Company as of June 30, 2023.
This amount excludes options to purchase 1,750,000 ordinary shares.
This amount also excludes 8,818,596 shares, which are issuable
based on the terms of performance based RSU awards granted to
certain senior managers covering the financial years 2023, 2022 and
2021, and 107,535 shares, which were issued to directors in July
2023 based on the terms of the RSU awards granted to non-executive
directors in 2022, as well as 102,732 shares issuable upon the
vesting of the restricted stock units granted to non executive
directors in June 2023. Such shares will be issued to such senior
managers and non executive directors in future periods provided
that performance and/or service conditions are met and certain of
the shares will be withheld for payment of customary withholding
taxes.
Notes from Associates
See Note 5 for details on the notes issued by Gelesis and
Vedanta to the Company.
As of June 30, 2023 the Group has a receivable from associates
in the amount of $0.8 million.
Merger Agreement with Gelesis
See Note 4 for details on the Merger Agreement with Gelesis.
18. Taxation
Tax benefit/(expense) is recognized based on management’s best
estimate of the average annual effective income tax rate which is
determined for each taxing jurisdiction and applied individually to
the interim period pre-tax income/(loss) of each jurisdiction.
Additionally, tax expense/(benefit) that relates to discrete events
and transactions is recognized in the interim period in which the
event or transactions occurs.
During the six months ended June 30, 2023 and 2022, the Group
recorded a consolidated tax provision of $11.8 million expense and
$(32.5) million benefit, respectively, which represented effective
tax rates of a negative (85.9) percent and 58.1 percent,
respectively. The tax expense in the current period is primarily
driven by the tax in respect of the sale of future royalties to
Royalty Pharma (See Note 11 for further detail) and a lower pre-tax
loss in the consolidated US group reporting for tax purposes,
partially offset by the gain on Vedanta deconsolidation which is
not taxable.
19. Subsequent Events
The Company has evaluated subsequent events after June 30, 2023,
up to the date of issuance, August 29, 2023, of the Condensed
Consolidated Financial Statements, and has not identified any
recordable or disclosable events not otherwise reported in these
unaudited Condensed Consolidated Financial Statements or notes
thereto.
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version on businesswire.com: https://www.businesswire.com/news/home/20230828020107/en/
PureTech
Public Relations publicrelations@puretechhealth.com Investor
Relations IR@puretechhealth.com
EU media
Ben Atwell, Rob Winder +44 (0) 20 3727 1000
ben.atwell@FTIconsulting.com
U.S. media
Nichole Sarkis +1 774 278 8273
nichole@tenbridgecommunications.com
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