TIDMPRTC
RNS Number : 7354B
PureTech Health PLC
06 April 2017
6 April 2017
PureTech Health plc
PureTech Health Announces Annual Results for Year Ended 31
December 2016
PureTech Health plc ("PureTech Health", LSE: PRTC), an advanced
clinical stage biopharmaceutical company, today announces its
annual results for the year ended 31 December 2016. The following
information represents select highlights from the full Report,
which is available on the Investor Relations section of the
PureTech Health website at
http://puretechhealth.com/investors-reports-presentations.php.
Period Highlights
Financial and Business Highlights
-- As of 31 December 2016, PureTech Health reports a
consolidated cash balance of approximately $281.5 million, with
approximately $192.1 million held at the Parent Company
-- Aggregate Value of Growth-Stage Holdings at 31 December 2016
increased to $380.1 million from $291.7 million at 31 December
2015, an increase of 30.3 percent. A majority of the Growth Stage
Holdings Value is based on transactions including third-party
investors
-- PureTech Health's Asset Value (Corporate Cash + Growth-Stage
Holdings Value) at 31 December 2016 is $572 million. This Asset
Value does not include 15 project and concept stage programmes that
are not yet formally valued by the Group
-- In 2016, the Group's programmes attracted in excess of $98
million in funding, including $29.3 million from leading strategic
and financial institutions such as Amgen Ventures, Merck Ventures
BV*, Rock Springs Capital, Seventure, JAZZ Venture Partners, and
Canepa Advanced Healthcare Fund
o Vedanta Biosciences raised $50.0 million in new equity
investments
o Akili raised $42.4 million in new equity investments
-- PureTech Health has average equity holdings of approximately
72 percent in its programmes, and effective control over all
-- PureTech Health advanced four programmes - Alivio, Commense,
Sonde, and The Sync Project - from project stage to growth stage
due to achieving a level of de-risking, securing intellectual
property, establishing management teams, developing a sustainable
business plan and engaging key scientific founders
-- PureTech Health progressed three new programmes from concept stage to project stage:
o resTORbio - A Phase 2 clinical programme developing a
treatment to address immunosenescence, an age-dependent decline in
immune function (advanced to growth stage in the post-period and
not included in the Growth-Stage Holdings Value as of 31 December
2016)
o Nybo - A preclinical programme developing monoclonal
antibodies to target immuno-suppressive cells in pancreatic cancer,
colorectal cancer, and other solid tumours
o Glyph - A preclinical programme developing novel approaches to
enhance delivery and distribution of therapeutics via the lymphatic
system
Pipeline/Clinical Highlights
PureTech Health is advancing a robust pipeline of late and
mid-stage clinical programmes and preclinical product candidates,
with several pivotal trials and human proof-of-concept studies
expected to read out over the next 12 to 18 months. PureTech Health
has made significant progress in advancing its eight clinical
programmes and seven preclinical programmes, including:
-- Akili initiated a pivotal study of Project:EVO(TM) in
paediatric attention deficit hyperactivity disorder (ADHD),
published data from two studies showing the potential benefit of
its core cognitive treatment technology in targeting cognition and
mood in individuals diagnosed with depression, and presented
positive top line data from its Alzheimer's screen digital
biomarker study in collaboration with Pfizer
-- Gelesis initiated the U.S. portion of a pivotal study of
Gelesis100 in people who are overweight or have obesity and
presented positive top line safety data and positive satiety data
from its second candidate (Gelesis200) in obesity
-- Karuna announced positive results from a tolerability
proof-of-concept clinical study of its lead programme for the
treatment of schizophrenia and Alzheimer's disease psychosis and
cognition impairment
-- Vedanta commenced GMP manufacturing of its C. difficile
candidate, VE303, to begin human clinical studies in 2017
-- Entrega's targeted delivery platform generated positive
proof-of-concept data for delivery of peptides in large animals
-- Sonde completed initial development of its scalable, vocal
biomarker technology and gathered data from 1,800 participants
Team Highlights
As PureTech Health's pipeline deepens and progresses, the Group
has attracted several industry leaders to full-time positions to
help take PureTech Health to the next level of growth and value
realisation, including:
-- Joseph Bolen, PhD, an industry leader who has advanced more
than 30 medicines into clinical development and previously served
as President and Chief Scientific Officer for Moderna Therapeutics
and Chief Scientific Officer at Millennium, as Chief Scientific
Officer of PureTech Health
-- LeRoux Jooste, who has launched and commercialised several
blockbuster neurology drugs, as Chief Commercial Officer of
Akili
-- David Pass, PharmD, who brings commercial expertise building
a billion-dollar franchise across diabetes and metabolic disorders
from his time with Boerhinger Ingelheim, as Chief Operating Officer
of Gelesis
-- Bruce L. Roberts, PhD, who brings drug discovery and
development expertise and most recently served as head of
Neuro-Immunology and Immune-Mediated Disease Research at Sanofi
Genzyme, as Chief Scientific Officer for Vedanta Biosciences
Intellectual Property
PureTech Health has also significantly expanded and strengthened
its IP portfolio across several programmes:
-- Increased total number of patents and patent applications by 79
-- Licensed key IP to strengthen coverage for its Commense,
Sonde Health, and Vedanta Biosciences programmes
-- Received grants of patents for Vedanta Biosciences (4), Gelesis (4), and Follica (2)
Post Year-end Highlights
-- PureTech Health entered a licensing and equity agreement with
Novartis to advance two clinical-stage programmes focused on
diseases related to immunosenescence, an age-related decline in
immune function, in its resTORbio operating subsidiary
-- Vedanta Biosciences entered into clinical translational
medicine collaborations with Stanford University School of Medicine
and Leiden University Medical Center
-- Bharatt Chowrira, PhD, JD, who brings a strong track record
of value realisation with several billion-dollar deals, joined
PureTech Health in March 2017 as President and Chief of Business
and Strategy
-- Atul Pande, MD, who brings deep clinical expertise and most
recently served as Senior Vice President, Head of Neuroscience, and
Senior Advisor, Pharmaceutical R&D at GlaxoSmithKline, joined
PureTech Health in February 2017 as Chief Medical Officer
Commenting on the annual results, Daphne Zohar, Co-founder and
Chief Executive Officer of PureTech Health said:
"2016 was a year of great progress at PureTech Health.
Consistent with our previously disclosed timelines, we successfully
executed several important milestones, including the initiation of
two pivotal studies (Akili and Gelesis) which we expect to read out
later this year. We also had a number of positive clinical data
readouts, including results from our Karuna tolerability
proof-of-concept study, a second Gelesis clinical programme, and
the presentation of top line data for Akili's Alzheimer's screen
digital biomarker study in collaboration with Pfizer."
"With the active engagement of our seasoned management team,
Board of industry pioneers, and extensive network of collaborators
and leading experts, we continued to strengthen and grow our robust
pipeline of novel programmes to treat serious diseases caused by
dysfunctions in the immune, gastrointestinal and nervous
systems."
"We enter 2017 with a strong balance sheet ($281.5 million in
consolidated cash) and a focus on converting some of our exciting
progress into value realisation."
PureTech Health today released its Annual Report for the year
ended 31 December 2016. In compliance with the Financial Conduct
Authority's Listing Rule 9.6.3, the following documents have today
been submitted to the National Storage Mechanism and will shortly
be available for inspection at
http://www.morningstar.co.uk/uk/NSM
-- Annual Report and Accounts for the year ended 31 December 2016; and
-- Notice of 2016 Annual General Meeting.
Printed copies of these documents together with the Form of
Proxy have been posted to shareholders. Copies are also available
electronically on the Investor Relations section of the Company's
website at
http://puretechhealth.com/investors-reports-presentations.php.
PureTech Health's 2017 Annual General Meeting will be held at
17.00 BST on Monday 8 May 2017 at the St Martins Lane Hotel, 45 St
Martin's Lane, London WC2N 4HX, United Kingdom.
PureTech Health will also hold its annual Capital Markets
Meeting in London on Tuesday 9 May 2017 from 13.00-17.00 BST. The
meeting will feature PureTech Health presenters including members
of the Company's Board of Directors, senior team, key scientific
advisors, and management from the Company's programmes. Please
confirm if you would like to attend the Capital Markets Meeting to
PureTech.Event@fticonsulting.com.
About PureTech Health
PureTech Health (PureTech Health plc, PRTC.L) is a
cross-disciplinary, advanced, clinical-stage biopharmaceutical
Company developing novel medicines that modulate the adaptive human
systems. PureTech's therapies target the dysfunctions in the
immune, nervous, and gastro-intestinal systems by addressing the
underlying pathophysiology of disease from a systems perspective
rather than through a single receptor or pathway. The Company is
advancing a rich pipeline that includes multiple human
proof-of-concept studies and pivotal or registration studies
expected to read out over the next 12-18 months. PureTech Health's
growing research and development pipeline has been developed in
collaboration with some of the world's leading scientific experts,
who along with PureTech's experienced team and a stellar Board
identify, analyse and advance very selectively the opportunities
the Company believes hold the most promise for patients. This
experienced and engaged team places PureTech Health at the
forefront of ground-breaking science and technological innovation
and leads the Company between and beyond existing disciplines. For
more information, visit www.puretechhealth.com or connect with us
on Twitter @puretechh.
# # #
For further information:
PureTech Health FTI Consulting
Allison Mead Ben Atwell, Matthew
Cole
+1 617 651 3156 +44 (0) 20 3727 1000
amead@puretechhealth.com
*Merck Ventures BV, Amsterdam, The Netherlands, a subsidiary of
Merck KGaA, Darmstadt, Germany, known as M Ventures in the United
States and Canada, is the strategic, corporate venture capital arm
of Merck KGaA, Darmstadt, Germany.
Notes
(i) Nature of announcement
The financial information set out in this Annual Results Release
does not constitute the Company's statutory accounts for 2016 or
2015. Any references to page numbers in this announcement are to
pages within the Annual Report and Accounts. Statutory accounts for
the year ended 31 December 2016 have been reported on by the
Independent Auditor and will be delivered to the Registrar when
due.
(ii) Forward looking statements
This Annual Results Release and the Annual Report and Accounts
contain statements that are or may be forward-looking statements,
including statements that relate to the Company's future prospects,
developments and strategies. The forward-looking statements are
based on current expectations and are subject to known and unknown
risks and uncertainties that could cause actual results,
performance and achievements to differ materially from current
expectations, including, but not limited to, those risks and
uncertainties described in the risk management section. 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 Annual
Results Release. Except as required by law, regulatory requirement,
the Listing Rules and the Disclosure Guidance and Transparency
Rules, neither the Company nor any other party intends to update or
revise these forward-looking statements, whether as a result of new
information, future events or otherwise.
Letter from the Chairman
I am pleased to present the PureTech Health 2016 Annual Report.
Under the excellent leadership of our CEO and co-Founder, Daphne
Zohar, and an accomplished management team, PureTech Health
achieved significant progress over the past year and continued to
execute on all of its stated goals. It is with great excitement
that we turn to 2017, on the cusp of major inflection points and
the opportunity to drive value for patients and shareholders.
There is nothing more important than one's health. We see on a
daily basis how it affects us, our friends and our families. There
is also a tremendous strain endured on a societal level due to the
costs and loss in productivity caused by the consequences and
treatment of chronic diseases. Factors, such as an ageing
population and the effects of the environment on our systems result
in complex chronic diseases, which are the most common and costly
of all health problems in the 21st century. Fresh ideas and new
approaches are needed to address these enormous needs.
PureTech Health is at the forefront of innovation. Using an
unbiased and cross-disciplinary approach, we set out to identify
and solve some of the largest health issues affecting us today.
PureTech Health is not constricted by a particular scientific bias
or technology. Our boundless innovation philosophy coupled with
strict capital discipline allow us the freedom to tackle issues in
the most promising way. The outcomes are new therapeutics and
modalities that will potentially lead to the safe and efficacious
treatment of millions of patients.
These transformative technologies are clearly demonstrated in
our programmes, including our advanced pipeline that contains
significant catalysts in 2017. Akili, our digital cognitive
treatments and assessments programme, intervenes directly on brain
function using interference processing to treat paediatric ADHD in
a safe, non-pharmacological manner.
Gelesis, focused on the treatment of obesity and diabetes,
employs a superabsorbent hydrogel to promote weight loss with
drug-like efficacy and food-like safety. Vedanta, which takes a
differentiated approach to the microbiome, utilises rationally
defined bacterial consortia that have specific biological effects
to treat a wide range of autoimmune and infectious diseases. Karuna
is poised to tackle the huge societal and patient problems
associated with psychosis in schizophrenia and Alzheimer's
disease.
These types of products and their potential impact on patients
drive PureTech's purpose and mission.
PureTech's leadership position in the hub of biopharmaceutical
development and innovation, Boston and Cambridge, MA, and the
stellar team and network of collaborators represent a unique
cross-section of some of the industry's best minds and ideas. We
have built on this regional network to expand our collaborations
across the globe with the world's leading experts.
Together, we will continue to push the boundaries of medicine
and transcend what is possible today. Thank you for your continued
support of PureTech Health as we build a unique biopharmaceutical
company. We look forward to sharing our progress with you as we
move imminently closer to providing truly novel therapeutics to
patients and creating significant value for shareholders.
Joichi Ito
Chairman
Strategic report
Letter from the Chief Executive Officer
2016 was a seminal year and a year of great progress at PureTech
Health. In 2017, we will be focused on converting some of our
exciting progress into value realisation for our shareholders.
In a rapidly transforming healthcare landscape, PureTech Health
is at the forefront of scientific advances that are changing our
fundamental understanding of and ability to intervene in major
chronic diseases, which touch every aspect of healthcare and
account for the overwhelming majority of healthcare spending. With
our capital-efficient operating model, macroscopic view of biology,
and leading team, Board and group of global collaborators, we've
built a company ideally positioned to navigate this new era of
healthcare with truly novel medicines that could make a significant
positive impact for patients and drive major value for our
shareholders.
Consistent with our previously disclosed timelines, we
successfully executed several milestones in 2016. We initiated
pivotal studies for two of our growth-stage programmes - Gelesis
(Gelesis100 for weight loss in obesity) and Akili (Project: EVO(TM)
in paediatric ADHD) - both of which we expect to read out in 2017.
We continued to develop both of these technologies in a number of
additional indications, as our ongoing mechanistic and pilot
studies yield positive new findings. In May, we announced positive
data from a first-in-human safety and tolerability study of
Gelesis200 targeting patients with type 2 diabetes and later
presented positive satiety data at a key obesity scientific
congress. In December, a joint Akili/ Pfizer study found that
Akili's screen technology was sensitive enough to detect even
subtle functional cognitive impairments in healthy subjects at risk
of developing Alzheimer's disease, and two separate academic
collaborations demonstrated the potential benefit of Akili's core
cognitive treatment technology in targeting cognition and mood in
depressed individuals.
Our mid-stage programmes progressed as well. Karuna, our
schizophrenia and Alzheimer's psychosis programme, announced a
positive tolerability proof-of-concept study with our proprietary
combination approach. This achievement paves the way for a Phase II
trial in schizophrenia to begin later this year, which aims to
build on the previous exciting human efficacy data generated at Eli
Lilly. Vedanta has also commenced its first GMP manufacturing run
of product candidate VE303, which we plan to advance into human
clinical studies in C. difficile this year. Vedanta is also
progressing very well in its partnership with Janssen, including
moving towards human clinical trials in the next six to twelve
months.
We've also expanded our IP portfolio, increasing our total
patent and patent applications by 79 in the past year. These
patents protect not only the foundational technologies for our
programmes but also provide significant exclusivity periods for our
product candidates.
As our pipeline deepens and progresses, we've made strategic
additions to our world-class team with a focus on taking PureTech
Health to the next level of growth and value realisation:
-- Bharatt Chowrira, PhD, JD, joined PureTech Health as
President and Chief of Business and Strategy. Dr. Chowrira brings
more than two decades of experience in the biopharmaceutical
industry, combining a unique blend of R&D, corporate
development, operations, financing, public offering, M&A,
legal, IP, and licensing expertise. Dr. Chowrira was most recently
the President of Synlogic, and prior to that he was Chief Operating
Officer of Auspex (sold to Teva Pharmaceuticals for $3.5 billion)
(joined in March 2017)
-- Joseph Bolen, PhD, joined PureTech Health as Chief Scientific
Officer. Dr. Bolen brings decades of industry experience, having
overseen the discovery and advancement of more than 30 drugs. He
most recently served as President and CSO of Moderna Therapeutics,
and prior to that he was CSO and President of Research and
Development at Millennium (Sold to Takeda Pharmaceuticals for $8.8
billion)
-- Atul Pande, MD, joined PureTech Health as Chief Medical
Officer. Dr. Pande has more than two decades of experience in drug
development. He is the former Senior Vice President, Head of
Neuroscience, and Senior Advisor, Pharmaceutical R&D at
GlaxoSmithKline (joined in February 2017)
-- David Pass, PharmD, joined Gelesis as Chief Operating
Officer. Dr. Pass has more than 20 years of commercial expertise
across multiple therapeutic areas with a focus on diabetes and
metabolics. He most recently served as Vice President of Marketing
for the Diabetes Franchise at Boehringer Ingelheim where he built a
billion-dollar commercial business in diabetes
-- LeRoux Jooste, joined Akili as Chief Commercial Officer. Mr.
Jooste brings a track record of launching blockbuster neurology
products and establishing commercial capabilities that deliver
strong and sustained revenue growth
-- Bruce L. Roberts, PhD, joined Vedanta Biosciences as Chief
Scientific Officer. Dr. Roberts has 30 years of experience in
biotechnology and pharmaceutical drug discovery and development. He
most recently served as head of Neuro-Immunology and
Immune-Mediated Disease Research at Sanofi Genzyme
PureTech Health continues to build on synergies and existing
expertise from our later-stage programmes, utilising core
competencies and resources to maintain both our entrepreneurial
roots and our lean operating model.
We also continue to stage-gate resource-allocation based on
discrete deliverables and key milestones, resulting in our strong
balance sheet and cash position ($281.5 million in consolidated
cash and short term investments). All funding decisions are
proposed by senior executive management, ratified by the Board, and
guided by our capital-efficient tenets. Our early-stage programmes
are de-risked and developed internally, and we will be aggressively
exploring monetisation and commercialisation opportunities as our
assets mature. We believe that this model will deliver great value
to patients and shareholders.
For several programmes - including Akili and Vedanta Biosciences
- we secured strategic, validating financing in 2016 from investors
such as Rock Springs Capital, Amgen Ventures, Merck Ventures BV,
Amsterdam, The Netherlands, a subsidiary of Merck KGaA, Darmstadt,
Germany (known as M Ventures in the United States and Canada),
Seventure, JAZZ Venture Partners, and Canepa Advanced Healthcare
Fund. As of this year, Akili has relationships with four major
biopharmaceutical companies or their investment affiliates, and
Vedanta has an ongoing collaboration with Janssen Biotech, Inc.,
which is progressing well and earned IP-related milestone payments
this year.
In 2017, we will build on this momentum and deepen our focus on
the human adaptive systems - the nervous, gastrointestinal, and
immune systems. Approaching biology from a systems level enables us
to access the underlying pathophysiology of disease at multiple
dimensions - rather than through a single receptor or pathway -
which we believe is the key to unlocking therapeutic potential.
This focus also places us at the cutting edge of a paradigm
shift in medicine. Early intervention is critical for the reduction
of healthcare costs, and our programmes such as Akili, Gelesis,
Sonde, Commense, and resTORbio are all advancing new approaches to
enable earlier intervention to address the burden of chronic
disease.
As the healthcare landscape evolves, PureTech Health is at the
forefront of that change and we believe we will be positively
impacted by the emerging trends in the sector. We think about the
world a little differently, looking around corners together with
the experts who have pioneered the current industry. We deeply
appreciate your continued support - and the contributions of our
terrific team - and we look forward to an exciting 2017.
Daphne Zohar
Chief Executive
Letter from the Chief Scientific Officer
The foundations of modern biology were framed in the latter half
of the 20th century: The advent of "molecular" biology, advances in
medicinal chemistry and automation, and the inventions of gene
cloning, monoclonal antibodies, and gene sequencing revolutionised
biomedical research and drug discovery, creating the global
biopharmaceutical industry we know today.
Over the first decade and a half of the 21st century, a
comparable revolution has begun with the convergence of a dazzling
array of novel molecular, computational, material, and mechanical
technologies that have fundamentally transformed our knowledge of
biological systems. This shift is enabling an unprecedented
understanding of complex human diseases, most notably chronic
diseases, which are the leading cause of death and disability in
the industrialised regions of the world.
Chronic diseases - such as diabetes, obesity, cancer, heart
disease, depression, arthritis, schizophrenia, and Alzheimer's
disease - represent the most common and costly of all health
problems. In contrast to previous assumptions, we now understand
that environmental exposures outweigh an individual's inherited
genetic content as the primary influence governing chronic disease
risk. This also helps to explain why the chances of acquiring one
or more chronic diseases increases with age.
Previous efforts to develop therapeutics for highly prevalent,
complex chronic diseases have been limited by a focus on individual
drug targets, many of which were identified through genome-wide
association analyses, and the inherent platform bias of the
traditional biopharmaceutical model, which restricted the kind of
cross-disciplinary discovery that can yield breakthrough
innovation. Considering recent insights documenting the dominant
role of the environment on the immune and nervous systems in the
initiation and progression of chronic diseases, new orthogonal
systems-based approaches are clearly needed to discover safe and
effective therapeutic and diagnostic solutions for this diverse
group of complex diseases.
PureTech Health is at the forefront of incorporating this
emerging disease knowledge and cutting-edge technologies into new
therapeutic and diagnostic programmes that are focused on chronic
diseases. We've strategically centred our efforts around the
biological processes associated with the nervous, gastrointestinal,
and immune systems, as these together represent the major adaptive
systems responsible for interacting with the environment and are
frequently implicated in serious chronic disease. We seek
diagnostic and treatment solutions without bias to either
therapeutic precedent or therapeutic modality, and our team is
guided by a network of the world's leading scientists.
The success of this approach is exemplified by our pipeline,
which is rich in both the diversity of interventional modalities as
well as the range of disease indications. We have established a
solid track record of recognising key advances in technology and
landmark discoveries, ranging from digital conditioning of neural
circuits to regulation of the immune system by rationally-designed
commensal bacteria. The knowledge accumulated from this exciting
array of interrelated technology programmes is informing and
enabling our ongoing earlier concept and discovery stage programmes
that represent the next waves of PureTech Health innovations.
I'm thrilled to have joined an organisation and a team that is
pioneering the next generation of healthcare advances. PureTech
Health is truly harnessing deep expertise from the past and
technology of the future to create a modern biopharmaceutical
company.
Joseph Bolen
Chief Scientific Officer
How PureTech Health aims to build value for investors
Empowered by industry pioneers
The innovation process starts with the people. PureTech Health's
seasoned management team and Board of Directors consist of
accomplished industry leaders with significant experience in
maximising shareholder value, discovering scientific breakthroughs,
and delivering products to market.
A team that includes former CEOs, CSOs and heads of research and
development from big pharma and biotech, top academic scientists,
and entrepreneurs has proven to be a key driver in the recruitment
of top talent and ideas to PureTech Health. The Company's network
of scientists, inventors, and executives, including more than 70 of
the world's foremost experts in their fields, serve as integral
partners in the identification and development of potential new
therapies.
Boundless innovation
With a blank slate, PureTech Health sets out to identify
unexpected solutions to big problems. The Company begins by
identifying a significant medical need within its core focus areas,
and then it collaborates with the world's leading experts to
deconstruct the problem and identify the most promising
solutions.
PureTech's principle of boundless innovation allows for the
freedom to tackle issues without the constraint of being bound to a
single platform or modality. The process encourages
cross-disciplinary, orthogonal thinking and the creation of
disruptive technologies.
Technological advances and cross-disciplinary research have
transformed the way medical advances are achieved in the 21st
century. PureTech Health is harnessing this new era of convergence
for the distinct purpose of developing innovative treatments with
better risk-benefit profiles for patients.
Unbiased and data-driven
The process remains unbiased at every stage. PureTech Health is
not tied to a single scientific programme and does not have an
institutional bias to continue a specific programme, but rather
senior leadership and the Board make decisions based on the data.
Assets that are advanced to the lab from the brain-storming
processes are examined through a sceptical lens and undergo
rigorous de-risking experiments.
Optimising and diversifying risk is a central theme in
PureTech's therapeutic development. An early focus on approaches
that have signals of human efficacy and strong safety aids in
alleviating some of the industry's major obstacles in advancing
novel treatments.
PureTech's diversified portfolio also mitigates the binary risk
associated with singular scientific programmes.
With a strong emphasis on pressure testing ideas early, PureTech
Health demands the validation needed to justify further investment
and the formation of a programme around the technology. The data
and market opportunity help to guide decision-making regarding
which candidates to advance.
Capital efficiency
By pressure testing ideas early and following a strict
stage-gated funding process, PureTech Health has advanced its
programmes for a fraction of the average drug development cost. The
company has built a robust pipeline of innovative programmes in a
highly capital-efficient way that have collectively generated
significant value.
With the seeds of innovation that were planted several years
ago, the first wave of those programmes have grown in a
capital-efficient manner and are now beginning to bear fruit with
two pivotal studies reading out in 2017. The second wave of
programmes is in mid-stage clinical studies and expected to readout
in 2018, and the third wave of programmes/assets are in preclinical
development, with some moving into the clinic soon. We believe this
is a compelling innovation and growth story with a steady stream of
catalysts and value inflection points over the next two years.
Value realisation
PureTech's approach is to generate meaningful clinical data and
develop its assets to considerable value inflection points.
The Company has the built-in flexibility to choose the best path
for the advancement of its assets. In some cases, PureTech Health
will pursue third-party validation of the intrinsic value of its
pipeline through strategic partnerships, licensing agreements and
external investor participation. In other cases, when the funding
required to get to the next milestone is within PureTech's budget
and scope, PureTech Health may choose to maintain essentially all
of the ownership and fund the next study internally. The PureTech
Health Board and senior executive team are deeply engaged in this
decision-making process and consider a number of elements,
including the likelihood of achieving the next milestone and the
value accretion at that stage, while weighing potential partnership
constructs and the validation they signal.
The PureTech Health structure enables full optionality to
evaluate trade sales, IPOs, and/or commercialisation partnerships
to monetise assets in a way that creates the most value for
shareholders.
A new generation of biopharmaceuticals
PureTech Health has a deep pipeline with key areas of focus. The
discovery and preclinical pipeline builds on the synergies and
existing expertise of later stage programmes.
In particular, PureTech Health looks to expand its presence in
the treatment of chronic diseases tied to the adaptive human
systems. Utilising core competencies, such as microbiome and
bio-inspired engineering, PureTech Health has developed new
programmes that could affect the lives of millions of patients.
Programmes such as Vedanta, Akili, Gelesis, Karuna, and
resTORbio are prime examples of the first-in- class innovation
being performed at PureTech Health and offer tremendous upside
potential for shareholders as they progress towards the clinic.
PureTech Health has created a unique model for drug development
that builds on the learnings from the last 40 years of the
biopharmaceutical industry. The PureTech Health team and external
collaborators are empowered to pursue scientific discoveries that
address some of the major issues burdening the healthcare system,
while the stage-gated de-risking approach ensures capital
discipline, with all decision making executed on a group level by
the PureTech Health Board and senior team to ensure that resources
are allocated to the product candidates that hold the most
promise.
The PureTech Health Board and management team are fully aligned
with shareholders. Using a capital disciplined and data-driven
approach, the Company efficiently advances its top programmes to
valuable inflection points in order to harvest the greatest
returns.
With an advanced pipeline, including two pivotal trials expected
to readout in 2017, and an exciting preclinical and discovery
pipeline, PureTech Health is positioned to deliver meaningful
rewards to patients and shareholders over the coming year.
An advanced pipeline
PureTech Health has a robust pipeline of programmes that have
made excellent progress over the course of 2016, with multiple
programmes advancing in clinical development and approaching
commercialisation. PureTech Health's most advanced programmes are
considered growth stage and are formally valued at the conclusion
of each year. These growth stage programmes are used to derive the
aggregate value of the Company's holdings in its growth stage
programmes (Growth-Stage Holdings Value). PureTech's earlier stage
programmes are considered project stage and concept stage and are
not included in the Growth-Stage Holdings value.
Growth stage programmes
Given the progress of PureTech Health's growth stage programmes,
PureTech Health's Growth-Stage Holdings Value increased by $88.4
million or 30.3 percent during 2016, from $291.7 million to $380.1
million. The increase in PureTech Health's Growth-Stage Holdings
Value, net of new investments by PureTech Health, was approximately
$46.7 million, or approximately 16.0 percent.
Clinical stage programmes
Both Akili and Gelesis are funded through the read-out of their
pivotal studies (Gelesis mid-2017; Akili second half of 2017), with
sufficient funding to also begin commercialisation planning
activities as they prepare for product launches within the next
year. Gelesis has also initiated a six-month proof-of- concept
study of Gelesis200 for glycaemic control and weight loss in
patients with prediabetes and type 2 diabetes, which is expected to
read-out mid-2018.
Beyond its pivotal study in ADHD, Akili is also advancing its
platform technology, which powers both treatment and assessment
(monitor, screen) products, in multiple clinical trials, including
pilot studies in paediatric and early adult cognitive disorders,
depression, and neurodegenerative disorders such as Alzheimer's
disease and multiple sclerosis. In December 2016, two pilot studies
exploring the technology's potential use in late life depression
(LLD) and major depressive disorder (MDD) were published in two
peer-reviewed journals. Both studies yielded promising results and
pave the way for additional randomised, controlled studies.
Karuna has made significant progress in its clinical development
throughout 2016, with a positive readout in the second half of 2016
in a tolerability proof-of-concept study. Karuna plans to initiate
a Phase II trial in the second half of 2017 to replicate existing
efficacy data in schizophrenia with improved tolerability. If
successful, this study could serve as the basis for initiating a
pivotal study.
Follica is progressing the development of its proprietary,
in-office skin disruption therapy that induces follicular
neogenesis and enhances the new follicles with an active drug
compound. Follica is initiating a pilot optimisation study
mid-year, with a pivotal trial expected to begin in the second half
of 2017.
In June 2016, Sonde executed an exclusive license with the
Massachusetts Institute of Technology (MIT) Lincoln Laboratory for
technology being used to analyse brief patient voice samples to
screen and monitor a range of mental and physical medical concerns
based on subtle changes in acoustic characteristics of the
speaker's voice. Sonde's focus areas include mental health
conditions like depression as well as a number of other mental
health, respiratory and cardiovascular conditions. As of 31
December 2016, Sonde's mobile depression and speech research corpus
had studied 1,800 participants.
The Sync Project completed its end-to-end implementation of the
Sync system, collecting ratings data on music for various
indications, and expects to roll out product offerings in different
indications or functional music areas over the coming year.
Preclinical pipeline
Vedanta Biosciences, Commense, Entrega, and Alivio have all made
significant progress towards human clinical trials in 2016.
Vedanta's VE303 has demonstrated efficacy in animal models of C.
difficile infections and is expected to begin human clinical
studies in the second half of 2017. VE202, partnered with Janssen,
is progressing positively toward human clinical studies, which are
expected to begin in the next six to twelve months. Vedanta also
has multiple candidates in additional indications including food
allergy, multidrug-resistant organisms (MDROs), graft versus host
disease (GvHD), and oncology.
Commense initiated preclinical studies to explore the role of
VMT in immune and metabolic phenotypes. Commense also initiated
manufacturing of a VMT Procedure Kit for clinical trials and data
collection, and is expected to initiate human clinical studies in
2019 for its lead product candidate.
In 2016, Alivio executed an exclusive license agreement with MIT
and Brigham and Women's Hospital for the Alivio programme
technology. Alivio has made significant advancements in preclinical
studies to date and expects to initiate human clinical studies in
2019.
As of late 2016, Entrega has generated proof-of-concept data
demonstrating successful delivery of peptides in large animals, and
it expects to continue preclinical studies to further refine this
platform.
Project stage programmes and concept stage initiatives
(not included in the Growth-Stage Holdings Value
calculation)
Unlike its growth stage programmes, the Company's project stage
programmes and concept stage initiatives are not assigned values by
PureTech Health but rather form the basis for PureTech's next
growth stage programmes. The Company's pipeline is primarily
focused on three therapeutic areas of accelerating biological
insight and substantial unmet medical need - the nervous,
gastro-intestinal, and immune systems, and - despite not being
formally valued by PureTech Health - the most advanced of these are
now clinical stage and have strong proof- of-concept and teams in
place.
For example, in March 2017, resTORbio executed a licensing and
equity agreement with Novartis to advance two clinical-stage
programmes targeting the age-related decline in immune function. A
Phase IIb study with these candidates is planned to commence in
2017. resTORbio was not included in our Growth-Stage Holdings Value
calculation as it was still a project stage programme at 31
December 2016.
Valuation of PureTech Health's growth stage programmes
The Company expects that the value of at least some of the
Company's programmes will be realised through liquidity events,
with proceeds accruing to the Group. On average, PureTech Health
owns 72 percent of all growth stage programmes as of 31 December
2016 on a diluted basis. As all growth stage programmes are fully
consolidated in PureTech Health's consolidated financial statements
prepared in accordance with IFRS, the consolidated statements of
financial position incorporated within PureTech Health's
consolidated financial statements do not include current valuations
of the growth stage programmes. As a means to more fully meet the
information needs of shareholders, the Directors have determined
that it is appropriate to voluntarily present, as supplementary
information, an ownership adjusted valuation of its growth stage
programmes in aggregate. This valuation disclosure has been
prepared on the basis of the AICPA Guidelines (see page 102). The
AICPA Guidelines do not represent, but are consistent with,
valuation principles adopted under IFRS.
At the close of each annual financial period, the Directors
estimate and formally approve the value of PureTech Health's
holdings in its growth stage programmes which is used to derive the
Growth-Stage Holdings Value. The Directors engage an external
valuation expert in assisting the Company in estimating the
Growth-Stage Holdings Value. The Growth-Stage Holdings Value was
$380.1 million as at 31 December 2016. The Growth-Stage Holdings
Value consists of PureTech Health's ownership-adjusted interests in
its ten growth stage programmes. The Growth-Stage Holdings Value
does not include PureTech's interests in its five project stage
programmes or PureTech's interests in its 10 concept stage
initiatives.
The Growth-Stage Holdings Value is an alternative performance
measure (APM) used by the Directors as a key performance indicator
(KPl) to measure the performance of the Group. An APM is a numeric
measure of the Group's financial position that is not a GAAP
measure. As the Group exercises control over all of its investments
in subsidiary undertakings, the activities of such subsidiaries are
fully consolidated in the Group accounts and the value of those
investments is not separately disclosed in the statement of
financial position.
The Company previously disclosed Growth-Stage Holdings Values
totalling $291.7 million and $222.4 million as of 31 December 2015
and 2014, respectively. This information was provided to assist
potential shareholders and other key stakeholders in gaining a
baseline understanding of the Company's business model and its
underlying portfolio of growth- stage programmes. As previously
disclosed, beginning with this filing, the Company will disclose
the total Growth-Stage Holdings Value, but not the specific value
of each growth stage programme making up the total amount, as the
Company believes that such information could affect its ability to
realise the highest possible value for these programmes in the
event of equity financings, collaborations, partnerships or other
third-party arrangements. [Note that a pie chart showing the
relative contributions of each programme to the Growth-Stage
Holdings Value can be found on page 17 of the full report,
available at
http://puretechhealth.com/investors-reports-presentations.php]. At
31 December 2016, the largest five holdings (Akili, Gelesis,
Karuna, Vedanta Biosciences, and Follica) constitute approximately
88 percent of the Growth-Stage Holdings Value. The Company's
business model relies on the ongoing discussions and negotiations
with third-party investors and partners regarding its growth stage
programmes. Disclosing the individual valuation of the Company's
ownership stake in each growth stage programme, as part of
communicating our Growth-Stage Holdings Value, provides potential
third-party partners and investors negotiating leverage. The amount
presented in the Growth-Stage Holdings Value is usually not
reflective of the highest possible value and may not be the most
favourable valuation that could ultimately be assigned by an
investor or partner. In the interests of promoting transparency,
PureTech Health provides the above notes on our approach to
valuation. There can be no guarantee that the aforementioned
Growth-Stage Holdings Value will be considered to be correct in
light of the future performance of the Company's programmes, or
that PureTech Health would be able to ultimately realise proceeds
in the amount of such valuation, or at all, in the event of a sale
or other monetisation event involving its growth stage
programmes.
Each growth stage programme has an equity incentive plan in
place which has the potential to dilute PureTech Health's
ownership. The equity incentive plans are for the benefit of
employees, directors and other advisors and service providers of
the relevant programme.
The Growth-Stage Holdings Value has increased by $88.4 million
to $380.1 million or 30.3 percent during 2016. Excluding the impact
of the amounts invested by PureTech Health of $41.7 million
(excluding the first tranche of the Akili financing round in
January 2016 of $11.5 million) subsequent to the 31 December 2015
valuation, the Growth-Stage Holdings Value increased by
approximately 16 percent.
A majority of the Growth-Stage Holding Value is supported by
third-party investments, without effect for any increase subsequent
to the third-party transaction.
Valuation methodology
Each growth stage programme is evaluated by the Company when
requesting further investment from PureTech Health based on a range
of inputs, including, amongst others, technical likelihood of
successful business performance, market and competitor
analyses.
The Growth-Stage Holdings Value represents the sum of the parts
valuation of the Group's growth stage programmes. In 2015, the sum
of the parts valuation included Akili, Vedanta, Gelesis, Follica,
Karuna, Entrega and Tal. In 2016, Tal's Low Field Magnetic
Stimulation (LFMS) technology showed a dose-dependent - yet not
statistically significant - effect in two trials evaluating its
therapeutic potential in treatment-resistant major depressive
disorder (TR-MDD). As a result of not demonstrating a statistically
significant dose- dependent effect, the Company reclassified Tal as
a project stage programme. Furthermore, Sonde, Alivio, Commense,
and The Sync Project have graduated to growth stage primarily due
to achieving some level of de-risking, successfully securing
intellectual property, establishing management teams, developing a
sustainable business plan and engaging key scientific founders. As
such, these programmes are included in the Growth-Stage Holdings
Value at 31 December 2016. In 2016, our valuation of the
Growth-Stage Holdings Value includes Akili, Vedanta, Gelesis,
Follica, Karuna, Entrega, Sonde, Alivio, Commense and The Sync
Project. [Note that a pie chart showing the relative contributions
of each programme to the Growth-Stage Holdings Value can be found
on page 17 of the full report, available at
http://puretechhealth.com/investors-reports-presentations.php]. At
31 December 2016, the largest five holdings (Akili, Gelesis,
Karuna, Vedanta Biosciences, and Follica) constitute approximately
88 percent of the Growth-Stage Holdings Value.
Subsidiary PureTech Health
Ownership
--------------------- -------------------
GROWTH STAGE
Akili 56.5 %
Gelesis 21.4 %
Vedanta Biosciences 74.9 %
Karuna 77.8 %
Follica 59.1 %
Entrega 71.4 %
Alivio 88.7 %
Commense 90.5 %
Sonde Health 95.4 %
The Sync Project 80.0 %
--------------------- -------------------
PROJECT STAGE (not included
in Growth-Stage Holdings
Value)
resTORbio* 67.4 %
Tal 53.4 %
Vor 82.1 %
Nybo 100 %
Glyph 100 %
--------------------- -------------------
CONCEPT STAGE (not included
in Growth-Stage Holdings
Value)
ProEng PureTech Health
typically owns
100% of each
concept-stage
Programme at
the time of
license agreement
Central Pathway
3DRNAi
SynDel
Ibridge
Multibiome
VITarg
Crossroads
Potens
Cenobium
*As announced on 24 March 2017, the Company progressed resTORbio
to a growth stage programme in 2017, resulting in the percentage
ownership shown above assuming the allocation of $25 million.
More than two-thirds of the increase in the Growth-Stage
Holdings Value was related to the increase in value of the 2015
portfolio of growth stage programmes, inclusive of the negative
effect of Tal being reclassified as a project stage programme.
The valuation of each growth stage programme relied on varying
methodologies. A majority of the Growth-Stage Holding Value is
supported by third-party investments, without effect for any
increase subsequent to the transaction. This includes the
third-party financings of Gelesis, Akili and Vedanta.
Further details of the methodology applied by the Directors in
determining the Growth-Stage Holdings Value is set out in the
accompanying audited financial statements.
PureTech Health's project stage programmes and concept stage
initiatives
The Directors believe that PureTech Health has adopted a
conservative approach in providing valuation disclosure in respect
of our growth stage programmes only. The Directors believe that the
project stage programmes and concept stage initiatives, established
international advisory network and theme driven business creation
process provide significant opportunities to create and realise
significant further value for PureTech Health's shareholders.
In addition to its 10 growth stage programmes, PureTech Health
has five project stage programmes which are at an earlier stage in
PureTech Health's process and will form the basis of future growth
stage programmes.
PureTech Health's existing growth stage programmes have all
emerged from PureTech Health's established model. PureTech Health's
pipeline, infrastructure and international advisory network enables
it to explore new themes on an ongoing basis. PureTech Health
currently has 10 concept stage initiatives with the potential to
become the foundation for our future programmes.
PureTech Health's employees have built up extensive knowledge in
areas that are critical to its business such as opportunity
analysis and design of key experiments, as well as filing and
licensing intellectual property. PureTech Health also relies on
leading service providers, consultants and vendors including
leading law firms with intellectual property expertise, regulatory
consultants and contract research organisations whose expertise the
Company can employ in a disciplined manner while conducting key
validating experiments. The Directors believe this combination of
established working relationships and broad expertise across the
team enables PureTech Health to manage its business with efficiency
and reduced risk and ultimately provides PureTech Health with a
reproducible model to grow its business and generate further value
for its shareholders.
Portfolio Review
Growth Stage Programmes
Akili is a clinical-stage programme building
clinically-validated cognitive treatments and assessments that are
delivered in an action video game interface. Leveraging
medical-grade science and consumer-grade software technology, Akili
seeks to produce a new type of medical product that can offer safe
and effective scalable treatment and better monitoring for patients
across a range of mental health and neurological conditions.
Akili's technologies are based on a proprietary neuroscience
technology developed to target specific neurological systems
through sensory and digital mechanics. The lead, patent-pending
technology was exclusively licensed from the lab of Dr. Adam
Gazzaley at the University of California, San Francisco (UCSF), and
has been further developed with proprietary adaptive algorithms
invented at Akili, all built into action video game interfaces. The
programme powers both assessment and treatment products, which
target the brain's interference processing system (an individual's
core ability to process multiple streams of information), a key
function underlying cognitive control. Akili's pivotal study in
ADHD is expected to read out in the second half of 2017, with
potential FDA clearance in 2018.
Gelesis is a clinical-stage programme developing oral
non-systemic therapies utilising a novel platform technology to
induce weight loss and improve glycaemic control in people who are
overweight or have obesity, including those with prediabetes and
type 2 diabetes. Gelesis100, the programme's late-stage candidate
and potential first-in-class therapeutic, is currently being
evaluated in a six-month pivotal study. Gelesis expects its pivotal
study to read-out in mid-2017, with potential FDA approval in late
2018. Gelesis is also developing Gelesis200, created from the same
proprietary technology programme as Gelesis100, as a product
optimised to induce weight loss and improve glycaemic control in
patients with type 2 diabetes. Gelesis200's six-month efficacy
proof-of-concept study is expected to read out in mid-2018.
Vedanta Biosciences is a preclinical-stage programme novel class
of therapies for immune and infectious diseases based on rationally
designed consortia of bacteria derived from the human microbiome,
with clinical trials expected to begin in 2H 2017. Vedanta
Biosciences is a leader in the microbiome field, with capabilities
to discover, develop, and manufacture drugs based on live bacterial
consortia. Leveraging its proprietary technology programme and the
expertise of its team of scientific cofounders, Vedanta Biosciences
has isolated a vast collection of human-associated bacterial
strains and characterised how the immune system recognises and
responds to these microbes. Vedanta Biosciences has harnessed these
biological insights as well as data from translational medicine
collaborations involving human interventional studies to develop a
deep pipeline of drug candidates.
Karuna is a clinical stage programme targeting muscarinic
receptors for the treatment of central nervous system (CNS)
disorders. Karuna's lead programme, KarXT, is a product candidate
consisting of xanomeline, a novel muscarinic acetylcholine receptor
agonist that has demonstrated efficacy in placebo-controlled human
trials in schizophrenia and Alzheimer's disease, and trospium
chloride, an FDA-approved and well-established muscarinic receptor
antagonist that has been shown not to enter the CNS. If successful,
KarXT could provide a new mechanism for treating schizophrenia, a
field in which treatments have relied on the same fundamental
mechanisms for the last half-century. In December 2016, Karuna had
a positive readout in its tolerability proof-of-concept study, and
it expects to initiate a Phase II trial in the second half of 2017
to replicate existing efficacy data with xanomeline in
schizophrenia with improved tolerability.
Follica is a clinical stage programme utilising its regenerative
biology platform technology to develop a novel treatment for hair
loss. Follica's technology employs a technique designed to
stimulate the growth of new follicles and hair through disruption
of the skin, followed by treatment to enhance the effect of these
new hair follicles and develop new hair. Follica has completed
three human clinical studies of patients with androgenetic alopecia
to demonstrate hair growth and new hair follicle formation. Follica
has also performed and funded preclinical work which, together with
research from the University of Pennsylvania, serves as the
foundational observations on which the technology is based. Follica
is progressing its proprietary technology and device, and is
expected to initiate a pivotal trial in the second half of
2017.
Entrega is a preclinical stage programme developing a technology
for the oral delivery of biologics, vaccines, and other drugs that
are otherwise not efficiently absorbed when taken orally. To
underpin its technology, Entrega generated proof-of-concept data
demonstrating delivery of therapeutic peptides, including insulin,
into the bloodstream of healthy rats. As of late 2016, Entrega has
also generated proof-of-concept data demonstrating successful
delivery of peptides in large animals, and it expects to continue
preclinical studies to further refine this platform. Entrega
expects to continue preclinical studies to further refine its
peptide-delivery platform.
Alivio Therapeutics is a preclinical programme that is
developing a novel technology for the targeted treatment of chronic
and acute inflammatory disorders. Alivio's proprietary hydrogel
technology is designed to entrap drugs, preferentially adhere to
inflamed tissue, then deliver medication based on the levels of
inflammation. These properties enable a pipeline of novel drug
products with improved pharmacologic and pharmacokinetic properties
while minimising exposure to healthy tissue, leading to fewer
systemic side effects. Alivio seeks to provide solutions for the
dozens of conditions where inflammation is a central part of the
underlying disease pathology, but targeted and effective treatment
options are lacking. Alivio is expected to begin human clinical
studies in 2019.
Commense is a preclinical programme developing interventions for
maternal and paediatric health based on a deep understanding of the
early life microbiome. Drawing insights from natural exposures to
beneficial microbes, Commense is developing approaches to guide the
priming, seeding, and maintaining of the microbiome in mothers,
infants and children. Working with the world's leading microbiome
scientists, physicians, and product designers, Commense is
developing a novel category of products to address critical unmet
needs in paediatric populations. Commense is expected to begin
human clinical studies in 2019.
Sonde is a clinical stage programme developing a voice-based
technology with the potential to transform the way mental and
physical health is monitored and diagnosed. Sonde is advancing its
proprietary technology - developed internally and licensed from the
Massachusetts Laboratory - which has demonstrated the potential to
effectively screen and monitor for disease using information
obtained from an individual's voice on commonly-owned devices.
Sonde's initial focus is on chronic diseases that lack low-burden
objective measures and are associated with high burdens and costs,
including conditions that affect the neurological, muscular, and
respiratory systems required for speech production. The privacy-
preserving platform is designed to generate unprecedented
persistent and passive health awareness and objective data to
enable and enhance holistic patient management.
The Sync Project is a clinical stage programme developing
musical products that seek to create music as personalised medicine
by utilising a platform that takes in physiological data from
sensors and correlates that data with musical data components such
as beat tempo, timbre, and rhythm. In the growing digital medicine
industry, The Sync Project is positioned to become a leader. The
Sync Project has built the first end-to-end version of the platform
combining both an open consumer community and focused clinical
studies. The Sync Project expects to complete an Amazon Alexa
"Skill" application to collect data on sleep, relaxation, and
anxiety in the second half of 2017. Algorithmically programmed
music and playlist recommendation pilot studies to generate data in
the area of sleep, relaxation, and stress are expected to begin in
2017.
Project Stage Programmes
resTORbio is a clinical programme developing a platform to
address immunosenescence, an age-dependent decline in immune
function. Immunosenescence is associated with a decreased ability
to fight infections, an increase in cancer incidence, and a decline
in organ function in the elderly. With a rapidly ageing population,
there is a need to address aging-related diseases. resTORbio
technology targets pathways that may revitalise immune
homeostasis.
Tal Medical is a clinical stage programme developing
non-invasive neurostimulation treatments for brain disorders. Tal's
proprietary Low Field Magnetic Stimulation (LFMS) technology uses a
unique magnetic field waveform, with a mechanism of action
different from other brain stimulation techniques. Tal aims to
redefine the clinical practice of psychiatry and neurology by
introducing safe, effective medical device treatments as standards
of care. The programme's current focus is on depression and
sleep.
Vor Biopharma is a preclinical programme focused on developing
technologies that can broaden the applicability of targeted
therapies to treat cancer. Engineered cells, such as chimeric
antigen receptor (CAR) T cells, have shown promising results in
clinical trials for treating B cell malignancies. However,
extending these results to other cancer types has proven elusive. A
key challenge is selectively targeting cancer cells without causing
toxicity to normal hematopoietic cells. Vor is taking a
fundamentally novel approach to solve this problem by developing
modified hematopoietic stem cells (HSCs) that are protected from
depletion by cancer-targeted therapies. This effect is achieved by
editing HSCs so that the antigen targeted by the therapy has been
deleted or modified. This broad platform can be used to enhance the
therapeutic window of CAR-modified cells (such as CAR T cells, CAR
NK cells, and others), antibody-drug conjugates, or conventional
antibodies. By overcoming hematopoietic toxicity of targeted
therapies, Vor believes it can enable a broad array of important
new medicines that have a differentiated profile. Vor has an
exclusive license to the technology originally developed by
Siddhartha Mukherjee, MD, DPhil of Columbia University.
Nybo Therapeutics is a preclinical, first-in-class cancer
immunotherapy programme developing monoclonal antibodies to target
immuno-suppressive cells in pancreatic cancer, colorectal cancer
and other solid tumours. By neutralising immunosuppressive cells,
Nybo aims to allow other immune cells to attack tumours. The
overall goal is to address the great unmet medical need in
malignancies with dismal prognoses that derive little benefit from
current standards of care including ones that have no approved
immunotherapy regimens. Nybo will leverage the translational and
clinical expertise of its team of scientific co-founders and
scientific advisory board members to execute its programme.
Glyph is a preclinical programme developing novel approaches to
enhance delivery and distribution of therapeutics via the lymphatic
system. The lymphatic system, often viewed as the body's disposal
system, also plays a unique role in absorbing materials from the
digestive system and distributing them throughout the body, as well
as modulating the body's immune system. Unlike materials absorbed
through the gut into the bloodstream, materials absorbed
lymphatically bypass the portal vein and enter circulation
directly, thereby avoiding first pass metabolism.
Risk Management
The execution of the Group's strategy is subject to a number of
risks and uncertainties. As a developer of advanced and early stage
technologies addressing significant unmet medical needs, the Group
inherently operates in a high-risk environment. The overall aim of
the Group's risk management effort is to achieve an effective
balancing of risk and reward, although ultimately no strategy can
provide an absolute assurance against loss.
Risks are formally identified by the Board and appropriate
processes are put in place to monitor and mitigate them. If more
than one event occurs, it is possible that the overall effect of
such events would compound the possible effect on the Group. The
principal risks that the Board has identified as the key business
risks facing the Group are set out in the table below along with
the consequences and mitigation of each risk. Any number of these
could have a material adverse effect on the Group or its financial
condition, development, results of operations, subsidiary companies
and/or future prospects.
1. The science and technology being developed or commercialised
by some of the Group's businesses may fail and/or the Group's
businesses may not be able to develop their intellectual property
into commercially viable products or technologies. There is also a
risk that certain of the businesses may fail or not succeed as
anticipated, resulting in significant decline of the Group's
value
Impact: The failure of any of the Group's businesses would
decrease the Group's value. A failure of one of the major
businesses could also impact on the perception of the Group as a
developer of high value technologies and possibly make additional
fundraising at the PureTech or subsidiary company level more
difficult.
Mitigation: Before making any decision to develop any
technology, extensive due diligence is carried out by the Group
which covers all the major business risks, including technological
feasibility, market size, strategy, adoption and intellectual
property protection. A capital efficient approach is pursued such
that some level of proof-of-concept has to be achieved before
substantial capital is committed and thereafter allocated. Capital
is tranched so as to fund programmes only to their next value
milestone. Members of the Group's Board serve on the Board of
Directors of each business so as to maintain control over each
business's strategy and to oversee proper execution thereof. The
Group uses its extensive network of advisors to ensure that each
business has appropriate domain expertise as it develops and
executes on its strategy.
2. Clinical trials and other tests to assess the commercial
viability of a product candidate are typically expensive, complex
and time-consuming, and have uncertain outcomes. Conditions in
which clinical trials are conducted differ, and results achieved in
one set of conditions could be different from the results achieved
in different conditions or with different subject populations. If
the Group's product candidates fail to achieve successful outcomes
in their respective clinical trials, the products will not receive
regulatory approval and in such event cannot be commercialised. In
addition, if the Group fails to complete or experiences delays in
completing clinical tests for any of its product candidates, it may
not be able to obtain regulatory approval or commercialise its
product candidates on a timely basis, or at all.
Impact: A critical failure of a clinical trial may result in
termination of the programme and a significant decrease in the
Group's value. Significant delays in a clinical trial to support
the appropriate regulatory approvals could significantly impact the
amount of capital required for the business to become fully
sustainable on a cash flow basis.
Mitigation: The Group has a diversified model such that any one
clinical trial outcome would not move up an inordinate percentage
of the holdings of the Company. It has dedicated internal resources
to establish and monitor each of the clinical programmes in order
to try to maximise successful outcomes. Significant scientific due
diligence and preclinical experiments are done prior to a clinical
trial to attempt to assess the odds of the success of the trial. In
the event of the outsourcing of these trials, care and attention is
given to assure the quality of the vendors used to perform the
work.
3. The pharmaceutical industry is highly regulated. Regulatory
authorities across the world enforce a range of laws and
regulations which govern the testing, approval, manufacturing,
labelling and marketing of pharmaceutical products. Stringent
standards are imposed which relate to the quality, safety and
efficacy of these products. These requirements are a major
determinant of whether it is commercially feasible to develop a
drug substance or medical device given the time, expertise, and
expense which must be invested. The Group may not obtain regulatory
approval for its products. Moreover, approval in one territory
offers no guarantee that regulatory approval will be obtained in
any other territory. Even if products are approved, subsequent
regulatory difficulties may arise, or the conditions relating to
the approval may be more onerous or restrictive than the Group
expects.
Impact: The failure of one of the Group's products to obtain any
required regulatory approval, or conditions imposed in connection
with any such approval, may result in a significant decrease in the
Group's value.
Mitigation: The Group manages its regulatory risk by employing
highly experienced clinical managers and regulatory affairs
professionals who, where appropriate, will commission advice from
external advisors and consult with the regulatory authorities on
the design of the Group's preclinical and clinical programmes.
These experts ensure that high quality protocols and other
documentation are submitted during the regulatory process, and that
well-reputed contract research organisations with global
capabilities are retained to manage the trials.
4. There is a risk of adverse reactions with all drugs and
medical devices. If any of the Group's products are found to cause
adverse reactions or unacceptable side effects, then product
development may be delayed, additional expenses may be incurred if
further studies are required, and, in extreme circumstances, it may
prove necessary to suspend or terminate development. This may occur
even after regulatory approval has been obtained, in which case
additional trials may be required, the approval may be suspended or
withdrawn or additional safety warnings may have to be included on
the label. Adverse events or unforeseen side effects may also
potentially lead to product liability claims being raised against
the Group as the developer of the products and sponsor of the
relevant clinical trials.
Impact: Adverse reactions or unacceptable side effects may
result in a smaller market for the Group's products, or even cause
the products to fail to meet regulatory requirements necessary for
sale of the product. This, as well as any claims for injury or harm
resulting from the Group's products, may result in a significant
decrease in the Group's value.
Mitigation: The Group designs its products with safety as a top
priority and conducts extensive preclinical and clinical trials
which test for and identify any adverse side effects. Insurance is
in place to cover product liability claims which may arise during
the conduct of clinical trials.
5. The Group may not be able to sell its products profitably if
reimbursement from third-party payers such as private health
insurers and government health authorities is restricted or not
available because, for example, it proves difficult to build a
sufficiently strong economic case based on the burden of illness
and population impact. Third-party payers are increasingly
attempting to curtail healthcare costs by challenging the prices
that are charged for pharmaceutical products and denying or
limiting coverage and the level of reimbursement. Moreover, even if
the products can be sold profitably, they may not be accepted by
patients and the medical community. Alternatively, the Group's
competitors - many of whom have considerably greater financial and
human resources - may develop safer or more effective products or
be able to compete more effectively in the markets targeted by the
Group. New companies may enter these markets and novel products and
technologies may become available which are more commercially
successful than those being developed by the Group.
Impact: The failure of the Group to obtain reimbursement from
third party payers, as well as competition from other products, may
significantly decrease the amount of revenue the Group may receive
from product sales. This may result in a significant decrease in
the Group's value.
Mitigation: The Group engages reimbursement experts to conduct
pricing and reimbursement studies for its products to ensure that a
viable path to reimbursement, or direct user payment, is available.
The Group also closely monitors the competitive landscape for all
of its products and adapts its business plans accordingly.
6. The Group may not be able to obtain patent protection for
some of its products or maintain the secrecy of its trade secrets
and know-how. If the Group is unsuccessful in doing so, others may
market competitive products at significantly lower prices.
Alternatively, the Group may be sued for infringement of
third-party patent rights. If these actions are successful, then
the Group would have to pay substantial damages and potentially
remove its products from the market. The Group licenses certain
intellectual property rights from third parties. If the Group fails
to comply with its obligations under these agreements, it may
enable the other party to terminate the agreement. This could
impair the Group's freedom to operate and potentially lead to third
parties preventing it from selling certain of its products.
Impact: The failure of the Group to obtain patent protection and
maintain the secrecy of key information may significantly decrease
the amount of revenue the Group may receive from product sales. Any
infringement litigation against the Group may result in the payment
of substantial damages by the Group and result in a significant
decrease in the Group's value.
Mitigation: The Group spends significant resources using top
tier advisors in the prosecution of its patent applications. Third
party patent filings are monitored to ensure the Group continues to
have freedom to operate. Confidential information (both of the
Group and belonging to third parties) is protected through use of
confidential disclosure agreements with third parties, and suitable
provisions relating to confidentiality and intellectual property
exist in the Group's employment and advisory contracts. Licenses
are monitored for compliance with their terms.
7. The Group expects to continue to incur substantial
expenditure in further research and development activities. There
is no guarantee that the Group will become profitable and, even if
it does so, it may be unable to sustain profitability.
Impact: The strategic aim of the business is to generate profits
for its shareholders through the commercialisation of technologies
through product sales, strategic partnerships and sales of
businesses. The timing and size of these potential inflows is
uncertain, and should revenues from our activities not be achieved,
or in the event that they are achieved but at values significantly
less than the amount of capital invested, then it would be
difficult to sustain the Group's business.
Mitigation: The Group retains significant cash in order to
support funding of its operating companies. The Group has close
relationships with a wide group of investors and strategic partners
to ensure it can continue to access the capital markets and
additional monetisation and funding for its businesses.
8. The Group operates in complex and specialised business
domains and requires highly qualified and experienced management to
implement its strategy successfully. The Group and many of its
businesses are located in the United States which is a highly
competitive employment market. Moreover, the rapid development
which is envisaged by the Group may place unsupportable demands on
the Group's current managers and employees, particularly if it
cannot attract sufficient new employees. There is also risk that
the Group may lose key personnel.
Impact: The failure to attract highly effective personnel or the
loss of key personnel would have an adverse impact on the ability
of the Group to continue to grow and may negatively affect the
Group's competitive advantage.
Mitigation: The Board annually seeks external expertise to
assess the competitiveness of the compensation packages of its
senior management. Senior management continually monitors and
assesses compensation levels to ensure the Group remains
competitive in the employment market. The Group maintains an
extensive recruiting network through its Board members, advisors
and scientific community involvement. The Group also employs an
executive as a full-time in-house recruiter.
This Strategic Report was approved by the Board of
Directors.
By order of the Board
Stephen Muniz
Company Secretary
Responsibility statement of the Directors in respect of the
Annual Financial Report
The responsibility statement set out below has been reproduced
from the Annual Report and Accounts and relates to that document
and not this announcement.
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and loss of the
Company and the undertakings included in the consolidation taken as
a whole; and
-- the Strategy Report and Directors' Report includes a fair
review of the development and performance of the business and the
position of the issuer and the undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties that they face.
We consider the Annual Report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
By order of the Board
Stephen Muniz
Company Secretary
Financial review
During 2016, PureTech Health continued to deploy its cash
reserves to advance its pipeline by both progressing and de-risking
its growth stage programmes, and identifying and initiating future
programmes.
The Company has progressed research and clinical activities,
including commencing new clinical trials. The increased activities
have been further supported by financings that have occurred at the
growth stage programmes in 2016. Akili, Vedanta Biosciences,
Entrega, Karuna and Follica have executed financings that generated
funding totalling $98 million, with $29.3 million provided from
outside validating financial and strategic investors in 2016. This
included 2016 financings of $42.4 million for Akili and $50 million
for Vedanta Biosciences. $25 million of the Vedanta financing was
funded in June 2016 with the remainder funded in January 2017.
The Sync Project, Sonde, Alivio and Commense have graduated to
growth stage in 2016 after reaching a requisite level of maturity
during the year, including successfully securing intellectual
property, establishing management teams and completion of
substantive business plans. In addition, all of these programmes
have engaged key scientific founders and have achieved some level
of technological de-risking during 2016. In 2016, Tal Medical's
LFMS technology showed a dose-dependent - yet not statistically
significant - effect in two trials evaluating its therapeutic
potential in TR-MDD. As a result of not demonstrating statistically
significant dose-dependent effect, we have reclassified Tal Medical
as a project stage programme. The Group continues to source and
develop new ideas, including those that formed the basis of Vor,
Glyph, resTORbio and Nybo, as well as execute on pipeline
opportunities. In addition, PureTech Health continues to evolve
shared functions to support the increased level of activities of
the growth stage and project stage programmes.
2016 2015
$ millions $ millions
------------------------------------ ----------- -----------
Growth-Stage Holdings Value
Growth-Stage Holdings Value(1) $380.1 $291.7
Annual increase in Growth-Stage
Holdings Value in Dollars(2) $88.4 $69.3
Annual increase in Growth-Stage
Holdings Value Percentage(2) 30.3% 31.2%
Cash Reserves
Consolidated Cash Reserves(3) $281.5 $313.7
PureTech Level Cash Reserves(3) $192.1 $255.5
Results of Operations
Revenue $4.4 $11.8
Operating Loss $(73.9) $(43.6)
Adjusted Operating Loss(4) $(62.2) $(31.8)
Loss for the Period(5) $(81.6) $(58.2)
Adjusted Loss for the Period(5)(6) $(60.1) $(35.3)
------------------------------------ ----------- -----------
1) As a means of promoting transparency, the Directors also
present, as supplementary information, an ownership adjusted
valuation of the growth stage programmes in aggregate. This
valuation disclosure has been prepared on the basis of the AICPA
Guidelines. The AICPA Guidelines do not represent, but are
consistent with, valuation principles adopted under IFRS. The
Growth-Stage Holdings Value is an APM used by the Directors as a
KPl to measure the performance of the Group. An APM is a numeric
measure of the Group's financial position that is not a GAAP
measure. As the Group exercises control over all of its investments
in subsidiary undertakings, their activities are fully consolidated
in the group accounts and the value of those investments is not
separately disclosed in the statement of financial position.
2) Annual Increase in Growth-Stage Holdings Value, excluding
amounts invested by the Group, was $46.7 (2015 - $46.3) or 16%
(2015 - 20.8%).
3) Cash reserves includes cash balances and short-term investments.
4) Stated before the effect of share-based payment of $10.2
million (2015 - $11.1 million), depreciation of $1.2 million (2015
- $0.5 million) and amortisation of $0.3 million (2015 - $0.3
million). These items are non-cash charges. Adjusted operating loss
is therefore considered to be more representative of the operating
performance of the Group. Non-cash items are excluded due to the
nature of the Group in that the businesses require the cash
investment in order to operate and continue with their R&D
activities and this is therefore
deemed to be an appropriate alternative performance measure.
5) Stated before the charges discussed in Note 4 above - the IAS
39 fair value accounting charge of $3.4 million (2015 - $7.5
million) and finance cost - subsidiary preferred shares of $6.4
million (2015 - $3.5 million). These items are also non-cash
charges. Adjusted loss for the period is therefore considered to be
more representative of the operating performance of the Group.
6) In 2016, both the Loss for the period and Adjusted loss for
the period were positively impacted by recognition of a $1.6
million tax benefit.
Result of Operations
Revenue
The primary reason for the decrease in revenue relates to a
$10.0 million non-refundable milestone payment Vedanta Biosciences
received in 2015 as part of its collaboration with Janssen Biotech,
Inc. to develop and commercialise VE202, a microbiome product
candidate with an initial focus on inflammatory bowel disease.
Payments such as this are not expected to be a recurring event each
period. In September and December 2016, Vedanta Biosciences
successfully achieved two additional milestones under the agreement
with Janssen Biotech, Inc., resulting in receipt of two separate $2
million payments to Vedanta Biosciences which have been recognised
as revenue in 2016 totalling $4 million. In 2017 and beyond, the
Group has opportunities to recognise meaningful revenues by
achieving milestones under this collaboration, as well as
potentially from future agreements.
The Group's operations do not yet generate consistent product
revenues. Some of the growth stage programmes have generated
revenue from collaborations with third parties, including the
revenue events described above. Future revenues from growth stage
programmes are expected to be earned under existing and new license
and collaboration agreements and may include non-refundable license
fees. Revenue from these license and collaboration agreements
during the development and approval period is typically driven by
achievement of contractual milestones, which tend to be event
driven. Therefore, significant period to period changes in revenue
are to be expected and are not necessarily indicative of the
Group's overall revenue trend.
Operating expenses
Operating expenses before the impact of the non-cash items noted
in footnote 1 of the Results of Operations Schedule above increased
53 percent on a year-over-year basis. Most of the increase in
expenses has been to support the Group's research and development
efforts. The Group carried out development activities to progress
its programmes by initiating new clinical trials and advancing
existing clinical studies, adding headcount and expanding its
footprint requiring leasing additional space, the result of which
was an increase of 126 percent in research and development expenses
over the prior year. General and administrative expenses increased
at a much more modest rate of 6 percent over the prior year. The
lower growth rate of general and administrative expenses reflects
the ability of the Group to leverage its existing infrastructure.
By centralising many of the administrative functions, the Group can
efficiently support significant growth in the research and
development related activities for all programmes.
The Directors anticipate that operating expenses, particularly
research and development-related expenses, will continue to
increase as the Group advances its pipeline. These operating
expenses will include regulatory activities, preparation for
commercial launch of later stage programmes, clinical and
preclinical studies, intellectual property registration and the
cost of acquiring, developing and manufacturing clinical study
materials. General and administrative costs, consisting primarily
of personnel-related costs, lease costs and professional fees, are
anticipated to grow as well, although at a much lower rate than
research and development expenses.
Net finance costs
Net finance costs, before consideration of the items noted in
footnote 2 of the Results of Operations Schedule above, increased
by $2.6 million from expense of $2.1 million in 2015 to income of
$0.5 million in 2016. The expense in 2015 was driven primarily by
the conversion of previously outstanding notes payable held by
external parties into equity holdings for certain growth stage
programmes during 2015.
The Group's IAS 39 fair value accounting charge relates to
derivative liabilities associated with preferred stock conversion
rights, convertible notes and warrants at the subsidiary level.
Consistent with prior periods, this charge was driven by changes in
the equity value of the underlying subsidiaries. When the Group
realises an increase in the value of the subsidiaries that are
consolidated for accounting purposes, a charge will be recognised
when there are external preferred shareholders. The decrease in the
expense of $4.1 million from the prior period was primarily a
result of a $5.0 million decrease in the previously reported amount
related to the derivative liability associated with the preferred
share conversion rights associated with Tal Medical, offset by
increases in the derivative liabilities of all other derivative
liabilities associated with the subsidiaries' preferred share
conversion rights. In addition to the IAS 39 fair value accounting
charge, the Group recognised a finance cost of $6.4 million in 2016
due to the accretion to the liquidation preference on subsidiary
preferred stock held by external parties. The balance of
subsidiary
preferred stock held by external parties increased during 2016
due to the issuances of preferred stock in the Akili and Vedanta
equity financings.
The Group, as further described in Cash Flows below, has adopted
a conservative cash management policy and invested the significant
cash reserves generated during 2015 and 2016 in U.S. Treasuries,
which has resulted in meaningful income from interest earned on
these securities.
Financial Position
2016 2015
(31 December) (31 December)
$ millions $ millions
Assets
Total non-current
assets $10.6 $8.6
Total current
assets 288.1 318.2
Total assets 298.7 326.8
Non-current
liabilities 2.3 2.2
Total current
liabilities(1) 204.1 160.5
Total liabilities $206.4 $162.7
1) Included in current liabilities are $183.1 million and $145.3
million related to non-cash liabilities related to derivatives,
warrants and preferred shares at 31 December 2016 and 2015,
respectively.
Cash and short-term investments make up a significant portion of
the Group's current assets of $288.1 million. Amounts that cannot
be immediately deployed have been used to purchase U.S. Treasuries
with short durations. The Group's cash reserves, consisting of all
cash, cash equivalents and U.S. Treasuries, were $281.5 million at
31 December 2016 (2015 - $313.7 million). Of this amount, the Group
held $192.1 million (2015 - $255.5 million) of cash reserves at the
PureTech Health level to fund all activities of the Group,
including supporting future activities of the subsidiaries,
progressing the existing growth stage programmes toward meaningful
milestone events, funding pipeline development and maintaining an
appropriate infrastructure.
Other significant items impacting the Group's financial position
include:
-- Property and equipment increased primarily due to $3.6
million in leasehold improvements and equipment related to Vedanta
Biosciences' new facilities located in Cambridge, Massachusetts
-- Prepaid expenses and other current assets increased by $2.7
million, primarily as a result of the expected tax refund related
to the carry back of Vedanta Biosciences' current year tax losses
and advance funding of clinical trials by Gelesis
-- Current liabilities increased in 2016, primarily as a result
of equity financings involving the issuance of liability classified
preferred shares by Akili and Vedanta Biosciences totalling $27.3
million to outside investors during 2016 and the increase in
liability associated with all derivatives
Cash Flows
2016 2015
$ millions $ millions
Net cash outflow from operating
activities(1) $(58.0) $(28.6)
Net cash inflow/(outflow)
from investing activities $(43.2) $(184.2)
Net cash inflow from financing
activities $29.5 $285.9
1) Janssen Biotech, Inc.'s non-refundable milestone payment is
included in operating activities for 2015.
As noted above, the Group increased spending as expected,
primarily on its research and development operations during 2016.
The Directors anticipate that the Group's funds will be sufficient
to continue to progress the existing growth stage programmes to
meaningful milestone events and pipeline development and to fund
infrastructure costs. The Group's net operating cash outflow
reflects the payment of operating expenses which, with the
exception of the non-cash charges highlighted in Footnotes 4 and 5
of the Results of Operations Schedule, are primarily cash based.
Offsetting operating cash inflows were primarily driven by interest
earned on U.S. Treasuries.
The net cash outflow from investing activities during 2016
primarily relates to investment of excess cash available in
short-term duration U.S. Treasuries, as well as $3.6 million
expended for property and equipment. The net cash inflow from
financing activities during 2016 was from $27.3 million of proceeds
from outside investors in equity financings of growth stage
programmes and $2.0 million from issuances of convertible notes. In
addition, Vedanta Biosciences received an additional $9.9 million
in equity from outside investors in January 2017.
The Group is focused on maintaining liquidity as well as capital
preservation of investments. As a result, surplus cash reserves
have been placed in highly-rated, short duration vehicles,
primarily U.S. Treasuries with maturities under one year. The Group
monitors market conditions to manage any risk to the investment
portfolio and investigates opportunities to increase the yield on
the amounts invested, while maintaining the Group's liquidity and
capital preservation objectives. At 31 December 2016, the Group had
$4.7 million of cash reserves held in Euros. These cash reserves
are used to fund the operation of Gelesis' Italian manufacturing
and research and development subsidiary. The Directors believe it
is prudent to have these cash reserves denominated in Euro to fund
operations.
Growth-Stage Holdings Value
It is the expectation of the Group's shareholders and others
that the value of at least some of our programmes will be realised
through exit events, with proceeds accruing to the Group. As all
growth stage programmes are fully consolidated in PureTech Health's
consolidated financial statements prepared in accordance with IFRS,
the consolidated statements of financial position incorporated
within PureTech Health's consolidated financial statements do not
include current valuations of the growth stage programmes. As a
means to more fully meet the information needs of shareholders, the
Directors have determined that it is appropriate to voluntarily
present, as supplementary information, an ownership adjusted
valuation of the growth stage programmes in the aggregate. This
valuation disclosure has been prepared on the basis of the AICPA
Guidelines. The AICPA Guidelines do not represent, but are
consistent with, valuation principles adopted under IFRS. The
Growth-Stage Holdings Value is an APM used by the Directors as a
KPl to measure the performance of the Group. An APM is a numeric
measure of the Group's financial position that is not a GAAP
measure. As the Group exercises control over all of its investments
in subsidiary undertakings, their activities are fully consolidated
in the group accounts and the value of those investments is not
separately disclosed in the statement of financial position.
The Growth-Stage Holdings Value has increased by $88.4 million
to $380.1 million or 30.3 percent in 2016. Excluding the impact of
the amounts invested by PureTech Health of $41.7 million (excluding
the first tranche of the Akili financing round in January 2016 of
$11.5 million) subsequent to the 31 December 2015 valuation, the
Growth-Stage Holdings Value increased by approximately 16.0
percent.
The Growth-Stage Holdings Value represents the sum of the parts
valuation of the Group's growth stage programmes. In 2015, the sum
of the parts valuation included Akili, Vedanta Biosciences,
Gelesis, Follica, Karuna, Entrega and Tal. Sonde, Alivio, Commense
and The Sync Project graduated to growth stage in 2016 primarily
due to achieving some level of de-risking, successfully securing
intellectual property, establishing management teams, developing a
sustainable business plan and engaging key scientific founders. As
such, these subsidiaries are included in the Growth-Stage Holdings
Value at 31 December 2016. In 2016, Tal Medical's LFMS technology
showed a dose-dependent - yet not statistically significant -
effect in two trials evaluating its therapeutic potential in
TR-MDD. As a result of not demonstrating statistically significant
dose-dependent effect, Tal Medical has been reclassified as a
project stage programme and, as such, it has not been included in
the Growth-Stage Holdings Value at 31 December 2016. However, the
Directors believe that Tal has value. Accordingly, in 2016, the
Growth- Stage Holdings Value includes Akili, Vedanta Biosciences,
Gelesis, Follica, Karuna, Entrega, Sonde, Alivio, Commense and The
Sync Project. At 31 December 2016, the largest five holdings
(Akili, Gelesis, Karuna, Vedanta Biosciences, and Follica)
constitute approximately 88 percent of the Growth-Stage Holdings
Value.
Consolidated Statements of Comprehensive Loss
For the years ended December 31:
2016 2015
Note $000s $000s
============================================ ============= =============== --------------
Revenue 4,431 11,828
Operating expenses:
General and administrative expenses (37,155) (36,471)
Research and development expenses (41,205) (18,999)
============================================ ============= =============== --------------
Operating loss (73,929) (43,642)
Other income 46 448
Finance costs: Finance income 1,292 262
Finance costs - subsidiary preferred
shares (6,368) (3,515)
Finance costs - contractual (801) (2,364)
Finance costs - IAS 39 fair value
accounting (3,422) (7,509)
============================================ ============= =============== --------------
Net finance costs (9,299) (13,126)
Loss before taxes (83,182) (56,320)
-------------------------------------------- ------------- --------------- --------------
Loss before taxes pre IAS 39 fair
value accounting, finance cost
- subsidiary preferred shares,
share-based payment expense, depreciation
of tangible assets and amortisation
of intangible assets (61,669) (33,461)
Finance costs - subsidiary preferred
shares (6,368) (3,515)
Finance costs - IAS 39 fair value
accounting (3,422) (7,509)
Share-based payment expense (10,153) (11,095)
Depreciation of tangible assets (1,223) (452)
Amortisation of intangible assets (347) (288)
Loss before taxes (83,182) (56,320)
-------------------------------------------- ------------- --------------- --------------
Taxation 1,574 (1,924)
============================================ ============= =============== --------------
Loss for the year (81,608) (58,244)
Other comprehensive (loss)/income:
Items that are or may be reclassified
as profit or loss
Foreign currency translation differences (91) (262)
Unrealised gain on available for
sale investments 4 24
============================================ ============= =============== --------------
Total other comprehensive loss (87) (238)
Total comprehensive loss for the
year (81,695) (58,482)
============================================ ============= =============== --------------
Loss attributable to:
Owners of the Company (48,792) (39,393)
Non-controlling interests (32,816) (18,851)
============================================ ============= =============== --------------
(81,608) (58,244)
============================================ ============= =============== --------------
Comprehensive loss attributable
to:
Owners of the Company (48,879) (39,631)
Non-controlling interests (32,816) (18,851)
============================================ ============= =============== --------------
(81,695) (58,482)
============================================ ============= =============== --------------
Loss per share
Basic (loss) per share 3 $(0.21) $(0.21)
============================================ ============= =============== --------------
Diluted (loss) per share 3 $(0.21) $(0.21)
============================================ ============= =============== --------------
Consolidated Statements of Financial Position
For the years ended 31 December:
2016 2015
Note $000s $000s
=============================== ===== ================ ===============
Assets
Non-current assets
Property and equipment, net 6,924 4,519
Available for sale investments 83 106
Intangible assets, net 3,524 3,871
Other non-current assets 65 57
=============================== ===== ================ ===============
Total non-current assets 10,596 8,553
=============================== ===== ================ ===============
Current assets
Trade and other receivables 125 706
Prepaid expenses and other
current assets 5,662 2,964
Other financial assets 897 826
Short term investments 218,510 178,955
Cash and cash equivalents 62,959 134,751
=============================== ===== ================ ===============
Total current assets 288,153 318,202
=============================== ===== ================ ===============
Total assets 298,749 326,755
=============================== ===== ================ ===============
Equity and liabilities
Equity
Share capital 4,609 4,523
Merger reserve 138,506 138,506
Share premium 181,658 181,744
Translation reserve (184) (93)
Other reserve* 13,412 7,627
Accumulated deficit (160,335) (111,420)
=============================== ===== ================ ===============
Parent equity 177,666 220,887
Non-controlling interests* (85,255) (56,834)
=============================== ===== ================ ===============
Total equity 92,411 164,053
=============================== ===== ================ ===============
Non-current liabilities
Deferred revenue 203 291
Other long term liabilities 2,055 1,887
=============================== ===== ================ ===============
Total non-current liabilities 2,258 2,178
=============================== ===== ================ ===============
Current liabilities
Deferred revenue 2,202 2,458
Trade and other payables
Subsidiary: 11,121 7,223
Notes payable 6,953 4,955
Derivative liability 71,240 65,501
Warrant liability 14,942 14,263
Preferred shares 4 96,937 65,502
Other current liabilities 685 622
=============================== ===== ================ ===============
Total current liabilities 204,080 160,524
=============================== ===== ================ ===============
Total liabilities 206,338 162,702
=============================== ===== ================ ===============
Total equity and liabilities 298,749 326,755
=============================== ===== ================ ===============
*The 2015 amounts have been reclassified. See Note 1.
Consolidated Statement of Changes in Equity
For the years ended 31 December:
Share Capital
--------------------
Total
Parent Non-controlling
Other equity interests
reserve (As (As
(As reclassified, reclassified,
reclassified, see see
Share Merger Translation see Accumulated Note Note Total
Amount premium reserve reserve Note deficit 1) 1) Equity
Shares $000s $000s $000's $000's 1) $000's $000's $000's $000's $000"
----------------- ------------ ------ -------- ------- ----------- ------------- ----------- ------------- --------------- --------
Balance 1
January 2015 118,098,967 2,362 - 86,755 169 494 (70,421) 19,359 (42,672) (23,313)
Net loss - - - - - - (39,393) (39,393) (18,851) (58,244)
Foreign currency
exchange - - - - (262) - - (262) - (262)
Unrealised
gain - - - - - 24 - 24 - 24
----------------- ------------ ------ -------- ------- ----------- ------------- ----------- ------------- --------------- --------
Total
comprehensive
loss for
the period - - - - (262) 24 (39,393) (39,631) (18,851) (58,482)
Issuance
of shares 24,006,500 480 - 51,751 - - - 52,231 - 52,231
Issuance
of IPO shares
(net of issuance
costs of
$11.8m) 67,599,621 1,352 157,923 - - - - 159,275 - 159,275
Issuance
of Overallotment
shares (net
of issuance
costs of
$772,000) 10,139,943 202 23,948 - - - - 24,150 - 24,150
New funds
into
non-controlling
interests - - - - - - - - - -
Gain/(loss)
arising from
change in
NCI - - - - - - (1,727) (1,727) 694 (1,033)
Issuance
of shares
as equity
incentives 6,328,720 127 (127) - - - - - - -
Conversion
of convertible
notes - - - - - 88 88 - 88
Subsidiary
distribution
to members - - - - - 9 33 42 - 42
Equity settled
share based
payments - - - - - 7,100 - 7,100 3,995 11,095
================= ============ ====== ======== ======= =========== ============= =========== ============= =============== ========
Balance 31
December
2015 226,173,751 4,523 181,744 138,506 (93) 7,627 (111,420) 220,887 (56,834) 164,053
Net loss - - - - - - (48,792) (48,792) (32,816) (81,608)
Foreign currency
exchange - - - - (91) - - (91) - (91)
Unrealised
gain - - - - - 4 - 4 - 4
================= ============ ====== ======== ======= =========== ============= =========== ============= =============== ========
Total
comprehensive
loss for
the period - - - - (91) 4 (48,792) (48,879) (32,816) (81,695)
Issuance
of shares
Gain/(loss)
arising from
change in
NCI - - - - - - (23) (23) 23 -
Issuance
of shares
as equity
incentives 6,538,791 86 (86) - - - - - - -
Subsidiary
dividends - - - - - - (100) (100) - (100)
Equity settled
share based
payments - - - - - 5,781 - 5,781 4,372 10,153
================= ============ ====== ======== ======= =========== ============= =========== ============= =============== ========
Balance 31
December
2016 232,712,542 4,609 181,658 138,506 (184) 13,412 (160,335) 177,666 (85,255) 92,411
================= ============ ====== ======== ======= =========== ============= =========== ============= =============== ========
Consolidated Statements of Cash Flows
For the years ended 31 December:
2016 2015
Note $000s $000s
============================================== ======= ================ ===============
Cash flows from operating activities:
Loss for the year
Adjustments to reconcile net operating
loss to net cash used in operating
activities: (81,608) (58,244)
Non cash items:
Depreciation and amortisation 1,570 740
Equity settled share based payment
expense 10,153 11,095
Subsidiary research and development
tax credit (783) (395)
Non-cash rent expense 174 248
Unrealised gain on foreign currency
transactions - 12
Finance costs
Changes in operating assets and liabilities: 10,526 13,126
Accounts receivable, net 581 1,112
Other financial assets - (354)
Prepaid expenses and other current
assets (1,994) (780)
Deferred revenues (344) (1,104)
Other long term liabilities 168 1,614
Accounts payable and accrued expenses 3,524 4,319
============================================== ======= ================ ===============
Net cash used in operating activities (58,033) (28,611)
============================================== ======= ================ ===============
Cash flows from investing activities:
Purchase of property and equipment (3,676) (3,455)
Purchases of intangible assets - (1,155)
Purchases of short term investments (312,825) (385,383)
Proceeds from maturity of short term
investments 273,270 205,752
============================================== ======= ================ ===============
Net cash provided (used in)/by investing
activities (43,231) (184,241)
============================================== ======= ================ ===============
Cash flows from financing activities:
Proceeds from issuance of convertible
notes 2,060 1,845
Proceeds from subsidiary notes payable 268 -
Repayments of long term debt - (366)
Proceeds from the issuance of shares,
net of issuance costs 4 27,260 52,231
Proceeds from initial public offering,
net of issuance costs - 159,275
Proceeds for overallotment shares - 24,150
Proceeds from issuance of share capital
and warrants in subsidiaries - 48,760
Other financing activities (100) 42
============================================== ======= ================ ===============
Net cash provided by financing activities 29,488 285,937
============================================== ======= ================ ===============
Effect of exchange rates on cash
and cash equivalents (16) (294)
Net (decrease)/increase in cash and
cash equivalents (71,792) 72,791
Cash and cash equivalents at beginning
of year 134,751 61,960
============================================== ======= ================ ===============
Cash and cash equivalents at end
of year 62,959 134,751
============================================== ======= ================ ===============
Supplemental disclosure of non-cash
investment and financing activities:
Conversion of subsidiary notes payable
and accrued interest into preferred
stock 95 5,936
(Loss) on NCI - (2,098)
Extracts from notes to the financial statements
1. Accounting policies
General Information
PureTech Health consists of PureTech Health plc (the "Parent" or
the "Company") and its subsidiaries (together, the "Group"). The
Company's ordinary shares are admitted to the premium listing
segment of the Official List of the U.K. Listing Authority and are
traded on the Main Market of the London Stock Exchange. PureTech
Health is a cross-disciplinary biopharmaceutical company creating
21st century medicines that modulate the adaptive human systems.
PureTech Health's therapies target the immune, nervous, and
gastro-intestinal systems by addressing the underlying
pathophysiology of disease from a systems perspective rather than
through a single receptor or pathway. The Company has multiple
human proof-of-concept studies and pivotal or registration studies
expected to read out in the near-term. PureTech Health's rich and
growing research and development pipeline has been developed in
collaboration with some of the world's leading scientific experts
who, along with PureTech Health's experienced team and Board,
analyse scientific discoveries to identify and advance only the
opportunities believed to hold the most promise for patients. This
team and process place PureTech Health on the cutting edge of
ground-breaking science and technological innovation and leads the
Company between and beyond existing disciplines.
The Group provides a combination of experienced management and
administrative support to its businesses in which it typically
holds a significant ownership interest. Cash contributed by the
Parent to its subsidiaries is used to fund research, development,
regulatory and commercialisation preparation activities and to
support administration and operations.
The financial information set within this document does not
constitute the company's statutory accounts for the years ended 31
December 2016 or 2015 but is derived from those accounts. Statutory
accounts for 2016 will be delivered to the registrar of companies
in due course. The auditor has reported on those accounts; their
report were (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their report and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act
2006.
Derivative and warrant policy
Equity conversion features and put options within host
instruments that meet the definition of a derivative and have
economic and risk characteristics that are not closely related to
the host are considered embedded derivatives and are bifurcated
from the host and accounted for separately. The Group has
recognised embedded derivative liabilities related to features
within convertible notes and conversion features with subsidiary
preferred shares. Derivative financial liabilities are initially
recorded at fair value and are re-measured to fair value at each
period end while such instruments are outstanding, with gains and
losses arising from changes in fair value recognised in finance
costs in the consolidated statements of comprehensive loss. The
embedded derivative liabilities are being valued using a
probability weighted expected return model or an option pricing
allocation model.
The Group derecognises the embedded derivative liability when
the host instrument is extinguished or converted or when the
feature no longer meets the definition of a derivative.
The Group has recognised common shares and preferred share
warrants on subsidiary shares issued to investors and note holders.
Warrants are recognised as derivative financial liabilities if the
underlying shares are liability classified or the terms of the
warrants are not fixed due to potential adjustments in the exercise
price and/or the number of shares issuable under the warrants.
Warrant liabilities are recorded at fair value, with gains and
losses arising from changes in fair value recognised in finance
costs in the consolidated statements of comprehensive loss at each
period end while such instruments are outstanding. The warrant
liabilities were valued using a Black-Scholes option pricing
model.
The Group has also recognised common share warrants issued to
investors which are classified in equity and initially measured at
fair value using a Black-Scholes option pricing model.
Fair value measurements
A number of the Group's accounting policies and disclosures
require the measurement of fair values, for both financial and
non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the
Group uses market observable data to the extent possible. Fair
values are categorised into different levels in a fair value
hierarchy based on the inputs used in the valuation techniques as
follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a
liability might be categorised in different levels of the fair
value hierarchy, then the fair value measurement is categorised in
its entirety in the same level of the fair value hierarchy as the
lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value
hierarchy at the end of the reporting period during which the
change has occurred.
The carrying amount of cash and cash equivalents, accounts
receivable, short term investments, restricted cash, deposits,
accounts payable, accrued expenses and other current liabilities in
the Group's consolidated statements of financial position
approximates their fair value because of the short maturities of
these instruments.
Operating segments
Operating segments are reported in a manner that is consistent
with the internal reporting provided to the chief operating
decision maker ("CODM"). The CODM reviews discrete financial
information for the operating segments in order to assess their
performance and is responsible for making decisions about resources
allocated to the segments. The CODM has been identified as the
Directors.
Reclassification
During the year management further considered certain aspects of
accounting for share options issued by subsidiary companies and
concluded that the credit in equity associated with the related
IFRS 2 charges is more appropriately allocated wholly to
non-controlling interests rather than pro-rata to parent equity and
non-controlling interests. As a result a reclassification has been
reflected at 31 December 2015 to reduce negative non-controlling
interests and reduce other reserve within parent equity by $5.2
million (31 December 2014: $2.6 million). There is no impact on
total equity at either 31 December 2015 or 31 December 2014 and no
impact on the consolidated statement of comprehensive loss for the
year ended 31 December 2015.
2. Operating Segments
Basis for segmentation
The Directors are the Group's strategic decision makers. The
Group's operating segments are reported based on the financial
information provided to the Directors at least quarterly for the
purposes of allocating resources and assessing performance. The
Directors monitor the results of two operating segments. Each
operating segment is considered a distinct unit by the Directors.
The Group's operating segments, which are also reportable segments,
are outlined below. Substantially all of the revenue and profit
generating activities of the Group are generated within the U.S.
and accordingly, no geographical disclosures are provided.
Growth stage programmes
Programmes in this segment are those whose activities focus on
actively developing products to solve major healthcare problems in
varied markets. All programmes shown below are included in one
operating segment which is also a reportable segment:
Subsidiary Principal Activities and Target Market
-------------------- ------------------------------------------------------
Akili A clinical stage programme developing
technology and products for the screening,
diagnosis and treatment of neurological
disorders such as ADHD, autism and
depression through computer software.
Gelesis A clinical stage programme developing
products that seek to induce weight
loss and potentially improve glycaemic
control through an orally administered
capsule that expands in the GI tract
as it absorbs water.
Vedanta Biosciences A preclinical stage programme developing
a microbiome immune system drug-discovery
platform and drug candidates for the
treatment of immune-mediated diseases.
Karuna A clinical stage programme developing
an innovative combination therapy for
the treatment of schizophrenia.
Follica A clinical stage programme developing
products to generate new human hair
follicles and hair.
Entrega A preclinical stage programme developing
a drug platform for the oral administration
of proteins, peptides and other difficult-to-deliver
payloads, including magnetic nanoparticles.
Alivio A preclinical stage programme developing
a proprietary drug delivery platform
for drugs that treat inflammation and
associated disorders.
Commense A preclinical stage programme developing
commensal organism-based products for
the improvement of human health in,
for example, early childhood.
Sonde Health A clinical stage programme developing
voice-based tools for the passive assessment
and tracking of patient health.
The Sync Project A clinical stage programme developing
a platform and products that seek to
explore and leverage the health potential
of music by utilising a platform that
takes in physiological data from sensors
and correlates that data with musical
data components (e.g. beat and rhythm).
-------------------- ------------------------------------------------------
Project stage programmes
Programmes in this segment are those whose activities are
focused on financing, sourcing and creating new product candidates
and newly created programmes whose technologies are in the process
of validation. This segment includes the following programmes:
Subsidiary Principal Activities and Target Market
--------------------- ----------------------------------------------------
Project stage
programmes
resTORbio A clinical programme developing a platform
to address immunosenescence, an age-dependent
decline in immune function.
Vor A preclinical programme developing
novel targeted immunotherapies for
cancer.
Nybo A preclinical programme developing
monoclonal antibodies to target immuno-suppressive
gamma delta T cells in pancreatic cancer,
colorectal cancer and other solid tumours
Glyph A preclinical programme developing
novel approaches to enhance delivery
and distribution of therapeutics.
Tal A clinical stage medical device programme
developing an innovative, noninvasive
neurostimulation treatment for psychiatric
disorders including depression and
bipolar disorder.
Other businesses
Enlight Biosciences, Developing digital health technologies.
LLC
Mandara Sciences, Improving health through food through
LLC the creation of innovative nutrition
technology companies.
Knode A technology platform being developed
to identify experts in healthcare and
other research-based disciplines based
on the content they have produced.
Appeering Identifying healthcare expert networks
and reviewing their conversations and
content on social media.
--------------------- ----------------------------------------------------
The Group expects subsidiaries within the project stage will
become growth stage programmes. Upon the transition of a project
stage programme to the growth stage, the Group plans to
retrospectively restate operating segments as if the subsidiary had
been a growth stage programme for all periods presented. During
2016, The Sync Project, Sonde, Alivio and Commense have graduated
to growth stage primarily due to successfully securing intellectual
property, establishing management teams, developing a sustainable
business plan, achieving some level of de-risking, and engaging key
scientific founders.
In 2016, Tal's Low Field Magnetic Stimulation ("LFMS")
technology showed a dose-dependent - yet not statistically
significant - effect in two trials evaluating its therapeutic
potential in treatment-resistant major depressive disorder
(TR-MDD). As a result of not demonstrating statistically
significant dose-dependent effect, we have reclassified Tal as a
project stage programme.
The Group has retrospectively restated 2015 segment amounts to
reflect the above transitions.
Information about reportable segments
The following provides detailed information of the Group's two
reportable segments and Parent activity as of and for the years
ended 31 December 2016 and 2015, respectively:
2016
----------------- ------------------------------ ---------------
Growth Project Parent
stage stage company
programmes programmes & other Consolidated
$000s $000s $000s $000s
====================================
Consolidated Statements of
Comprehensive Loss
Revenue 4,098 333 - 4,431
General and administrative
expenses (18,259) (2,134) (16,762) (37,155)
Research and development
expenses (35,190) (5,684) (331) (41,205)
==================================== ================= ============== ============== ===============
Total operating expenses (53,449) (7,818) (17,093) (78,360)(1)
==================================== ================= ============== ============== ===============
Other income 46 - - 46
Net finance costs (14,844) 4,459 1,086 (9,299)
==================================== ================= ============== ============== ===============
Loss from continuing operations (64,149) (3,026) (16,007) (83,182)
==================================== ================= ============== ============== ===============
Loss before taxes pre IAS
39 fair value accounting,
finance cost -
subsidiary preferred shares,
share-based payment expense,
depreciation
of tangible assets and amortisation
of intangible assets (44,616) (7,054) (9,999) (61,669)
Finance costs - subsidiary
preferred shares (5,816) (552) - (6,368)
Finance costs - IAS 39 fair
value accounting (8,439) 5,017 - (3,422)
Share-based payment expense (4,185) (187) (5,781) (10,153)
Depreciation of tangible
assets (768) (228) (227) (1,223)
Amortisation of intangible
assets (325) (22) - (347)
Loss before taxes (64,149) (3,026) (16,007) (83,182)
==================================== ================= ============== ============== ===============
Provision for income taxes 1,577 8 (11) 1,574
==================================== ================= ============== ============== ===============
Loss for the year (62,572) (3,018) (16,018) (81,608)
Other comprehensive income/(loss) (87) - - (87)
==================================== ================= ============== ============== ===============
Total Comprehensive Loss
for the Year (62,659) (3,018) (16,018) (81,695)
==================================== ================= ============== ============== ===============
Total comprehensive loss
attributable to:
Owners of the Company (30,429) (2,432) (16,018) (48,879)
Non-controlling interests (32,230) (586) - (32,816)
Consolidated Statements of
Financial Position
Total assets 153,691 9,289 135,769 298,749
Total liabilities (269,084) (17,244) 79,990 (206,338)
==================================== ================= ============== ============== ===============
Net (liabilities)/assets (115,393) (7,955) 215,759 92,411
==================================== ================= ============== ============== ===============
2015
Growth Project Parent
stage stage company
programmes programmes & other Consolidated
==================================
$000s $000s $000s $000s
================================== ================== =============== ================ =================
Consolidated Statements
of Comprehensive Loss
Revenue 10,189 1,639 - 11,828
General and administrative
expenses (13,733) (2,318) (20,420) (36,471)
Research and development
expenses (15,744) (2,973) (282) (18,999)
================================== ================== =============== ================ =================
Total operating expenses (29,477) (5,291) (20,702)(3) (55,470)(2)
================================== ================== =============== ================ =================
Other income 448 - - 448
Net finance costs (10,774) (2,954) 602 (13,126)
================================== ================== =============== ================ =================
Loss from continuing operations (29,614) (6,606) (20,100) (56,320)
================================== ================== =============== ================ =================
Loss before taxes pre IAS
39 fair value accounting,
finance cost - subsidiary
preferred shares, share-based
payment expense, depreciation
of tangible
assets and amortisation
of intangible assets (17,412) (3,298) (12,751) (33,461)
Finance costs - subsidiary
preferred shares (3,066) (449) - (3,515)
Finance costs - IAS 39 fair
value accounting (5,010) (2,499) - (7,509)
Share-based payment expense (3,609) (276) (7,210) (11,095)
Depreciation of tangible
assets (250) (63) (139) (452)
Amortisation of intangible
assets (267) (21) - (288)
Loss before taxes (29,614) (6,606) (20,100) (56,320)
================================== ================== =============== ================ =================
Provision for income taxes (2,158) (85) 319 (1,924)
================================== ================== =============== ================ =================
Loss for the year (31,772) (6,691) (19,781) (58,244)
Other comprehensive income/(loss) (262) - 24 (238)
================================== ================== =============== ================ =================
Total Comprehensive Loss
for the Year (32,034) (6,691) (19,757) (58,482)
---------------------------------- ------------------ --------------- ---------------- -----------------
Total comprehensive loss
attributable to:
Owners of the Company (13,180) (6,694) (19,757) (39,631)
Non-controlling interests (18,854) 3 - (18,851)
Consolidated Statements
of Financial Position
Total assets 57,937 11,922 256,896 326,755
Total liabilities (154,833) (16,360) 8,491 (162,702)
================================== ================== =============== ================ =================
Net (liabilities)/assets (96,896) (4,438) 265,387 164,053
================================== ================== =============== ================ =================
1) For 2016, operating expenses for our reportable segments,
Parent company and other and in total, stated prior to share-based
compensation, depreciation and amortisation, were $48.1 million,
$7.4 million, $11.1 million and $66.6 million for growth stage
programmes, project stage programmes, Parent company and other and
in total, respectively.
2) For 2015, operating expenses for our reportable segments,
Parent company and other and in total, stated prior to share-based
compensation, depreciation and amortisation, were $25.3 million,
$4.9 million, $13.4 million and $43.6 million for growth stage
programmes, project stage programmes, Parent company and other and
in total, respectively.
3) Parent company and other operating expenses further adjusted
for the cost of professional services totalling $5.5 million
associated with our IPO, which is non recurring in nature, was $7.9
million for 2015.
The Parent commences initiatives in themes, raises capital for
investment in new companies and existing subsidiaries, provides
other corporate shared services and support for all subsidiaries
and manages the new company creation process.
The activity between the Parent and the reporting segments has
been eliminated in consolidation. These elimination amounts are
included in the Parent and other amounts shown above.
The proportion of net assets shown above that is attributable to
non-controlling interest is disclosed in note 15. The Group's
revenue generated outside of the United States was $86,000 and
$89,000 for the years ended 31 December 2016 and 2015,
respectively.
The Group's non-current assets consist of investments, property
and equipment, intangible assets and other assets, of which $1.2
million were located in Italy as of 31 December 2016 and 2015.
Growth stage programme valuation
At the close of each annual financial period, the Directors
estimate and formally approve the value of PureTech Health's growth
stage programmes which is used to derive the Growth-Stage Holdings
Value. The Directors engage an external valuation expert in
assisting the Company in estimating the Growth-Stage Holdings
Value. The valuations disclosed in respect of the prior periods are
not retrospectively adjusted in line with changes to the operating
segments classification, therefore where programmes are promoted or
demoted between project stage and growth stage this classification
is applied prospectively in the disclosure. This is to enable
visibility of the development of the Growth-Stage Holdings Value of
programmes in terms of their progress between periods. The
Growth-Stage Holdings Value was $380.1 million as at 31 December
2016 (2015: $291.7 million). The Growth-Stage Holdings Value
consists of PureTech's ownership-adjusted interests in its 10
growth stage programmes (2015: seven). The Growth-Stage Holdings
Value does not include PureTech Health's interests in its five
project stage programmes in 2015 and 2016, in which PureTech Health
holds, on average, approximately 90 percent on a diluted basis, or
PureTech Health's interests in its 10 concept stage initiatives in
2015 and 2016, which are, in effect, wholly owned by PureTech
Health.
The methodology for the Group's growth stage programme
valuations, extracts of which are set out below, is based on the
American Institute of Certified Public Accountants' Valuation of
Privately Held Company Equity Securities Issued as Compensation
("AICPA Guidelines"). The AICPA Guidelines do not represent, but
are consistent with, valuation principles adopted under IFRS.
The Growth-Stage Holdings Value excludes cash, cash equivalents
and short term investment balances of $192.1 million and $255.5
million held at the PureTech Health level as at 31 December 2016
and 2015, respectively. In 2015 the Growth-Stage Holdings Value
includes the $11.5 million invested by PureTech Health in the first
tranche of the Akili financing round in January 2016.
The Growth-Stage Holdings Value has been calculated on the basis
of the Company's percentage ownership as at 31 December 2016 and
2015. Where Akili had raised financing from external parties
immediately subsequent to 31 December 2015, the 2015 value reflects
the percentage ownership following the financing and the valuation
implied by that external investment on a post new money basis.
The Company's percentage ownership has been calculated on a
diluted basis, including issued and outstanding shares and
outstanding warrants and options to purchase shares, but excluding
unallocated shares authorised to be issued pursuant to equity
incentive plans and any shares issuable upon conversion of
outstanding convertible promissory notes.
Valuation methodology
The Growth-Stage Holdings Value represents the sum of the parts
("SOTP") of, principally, risk adjusted net present value ("rNPV")
from discounted cash flow ("DCF") valuations (for Entrega, Karuna,
Akili, Follica, Alivio, Sonde, Commense and The Sync Project),
probability-weighted expected return method (for Gelesis) and
valuations based on recent investments at the programme level (for
Vedanta). In the absence of recent arm's length, third-party
investments at the programme level which could otherwise have
formed the basis for the valuations, DCF valuations are used for
the valuation of the Group's programmes and any anticipated royalty
streams paid directly to PureTech Health stemming from license
agreements with some of the growth stage programmes. DCF valuations
are highly sensitive to key input assumptions, including estimates
associated with discount rates and projected financial performance.
Due to the stage of development of the programmes, projections are
particularly sensitive to certain key assumptions, namely:
-- Discount rate, and in particular the varying components of
the Equity Risk Premium and probability of success;
-- The ability to predict the investment and timing of achieving
technical and commercial viability;
-- Projected revenue and operating costs in the post product
development phase of each programme; and
-- The size and share of addressable market for intellectual
property, products and services developed.
Notwithstanding the fact that the valuation methodologies
applied are based on the AICPA Guidelines and the Directors' view
that the methodologies and assumptions adopted in each valuation
are supportable, reasonable and robust, 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 and the differences could be
significant. While this uncertainty applies to all programmes
included in the Growth-Stage Holdings Value, it could have a higher
degree of impact in the case of the four programmes that graduated
from project stage to growth stage in 2016: Sonde, Alivio, Commense
and The Sync Project. The Growth-Stage Holdings Value is an
alternative performance measure ("APM") used by the Directors as a
key performance indicator ("KPI") to measure the performance of the
Group. An APM is a numeric measure of the Group's financial
position that is not a GAAP measure. As the Group exercises control
over all of its investments in subsidiary undertakings, their
activities are fully consolidated in the Group accounts and the
value of those investments is not separately disclosed in the
statement of financial position.
3. Earnings per share
The calculation of basic and diluted earnings per share has been
calculated by dividing the loss for the period attributable to
ordinary shareholders of $48.8 million (2015: $39.4 million), by
the weighted average number of ordinary shares outstanding of
229,511,866 (2015: 185,281,244) during the year ended 31 December
2016:
Loss attributable to
ordinary shareholders:
2016 2015
------------ ------------ ------------ ------------
Basic Diluted Basic Diluted
$000s $000s $000s $000s
--------------------------- ------------ ------------ ------------ ------------
Loss for the year,
attributable to the
owners of the Company (48,792) (48,792) (39,393) (39,393)
--------------------------- ------------ ------------ ------------ ------------
Loss attributable to
ordinary shareholders (48,792) (48,792) (39,393) (39,393)
--------------------------- ------------ ------------ ------------ ------------
Weighted-average number
of ordinary shares
2016 2015
------------ ------------ ------------ ------------
Basic Diluted Basic Diluted
--------------------------- ------------ ------------ ------------ ------------
Issued ordinary shares
at 1 January 226,173,751 226,173,751 118,100,407 118,100,407
--------------------------- ------------ ------------ ------------ ------------
Effect of shares issued 3,338,215 3,338,215 67,180,837 67,180,837
--------------------------- ------------ ------------ ------------ ------------
Weighted average number
of ordinary shares 229,511,866 229,511,866 185,281,244 185,281,244
Loss per share
2016 2015
------------ ------------ ------------ ------------
Basic Diluted Basic Diluted
--------------------------- ------------ ------------ ------------ ------------
Loss per share $ (0.21) $ (0.21) $ (0.21) $ (0.21)
--------------------------- ------------ ------------ ------------ ------------
The potentially dilutive securities excluded from the
computation of diluted weighted average shares outstanding as they
would be anti-dilutive was 8,860,528 and 9,441,126 as at 31
December 2016 and 2015, respectively.
4. Subsidiary preferred shares
Certain of the Group's subsidiaries have outstanding preferred
shares which have been classified as a liability in accordance with
IAS 39 as the subsidiaries have a contractual obligation to
deliver: 1) cash or other assets to the holders under certain
future events; and/or 2) a requirement to deliver an uncertain
number of common shares upon conversion. The preferred shares do
not contain mandatory dividend rights. The preferred shares are
convertible into common shares of the subsidiary at the option of
the holder and mandatorily convertible into common shares of the
subsidiary upon a subsidiary listing on a public market at a price
above those specified in the agreements or upon the vote of the
holders of a majority of the subsidiary preferred shares. Under
certain scenarios the number of common shares receivable on
conversion will change.
The conversion feature has been accounted for as a derivative
liability at fair value with the residual proceeds allocated to the
subsidiary preferred share at issuance. The preferred shares are
entitled to a vote with holders of common stock on an as converted
basis. The holders of the preferred shares are entitled to a
liquidation preference amount in the event of a liquidation or a
sale of the respective subsidiary.
The Group recognises the preferred share balance upon the
receipt of cash financing or upon the conversion of notes into
preferred shares at the amount received, or carrying balance of any
notes and derivatives converted into preferred shares. Preferred
shares are not allocated shares of the subsidiary losses.
The following summarises the subsidiary preferred share
balance:
2016 2015
As of 31 December: $000s $000s
--------------------- ------ -------------
Akili 18,465 2,625
Follica 159 94
Gelesis 56,333 52,640
Tal 10,695 10,143
Vedanta 11,285 -
--------------------- ------ -------------
Subsidiary preferred
shares 96,937 65,502
--------------------- ------ -------------
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 then 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 common shares. A merger, acquisition, sale of voting
control or other transaction of a subsidiary in which the
shareholders of the subsidiary 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.
The minimum liquidation preference that would be payable to the
subsidiary preferred holders upon a liquidation event of the
subsidiaries, is as follows:
2016 2015
As of 31 December: $000s $000s
-------------------- ------- -------------
Akili 21,972 4,613
Follica 2,020 2,020
Gelesis 60,490 60,490
Karuna 413 413
Tal 11,430 11,430
Vedanta Biosciences 15,445 -
-------------------- ------- -------------
Total 111,770 78,966
-------------------- ------- -------------
For the two-year period ending 31 December 2016, the Group
recognised the following changes in subsidiary preferred
shares:
$000s
--------------------------------- -------
Balance at 1 January 2015 11,494
Issuance of new preferred shares 56,534
Value of derivatives at issuance (6,041)
Accretion 3,515
Balance at 1 January 2016 65,502
Issuance of new preferred shares 27,655
Value of derivatives at issuance (2,588)
Accretion 6,368
--------------------------------- -------
Balance at 31 December 2016 96,937
--------------------------------- -------
2015
In March 2015, Gelesis closed an $18.0 million private equity
financing of which PureTech Health invested $3.0 million in the
financing. Also, in conjunction with this transaction, preferred
shares were issued upon conversion of $4.3 million of outstanding
convertible notes.
In March 2015, Tal closed a $14.5 million private equity
financing of which PureTech Health invested $5.0 million in the
financing. Also, in conjunction with this transaction, preferred
shares were issued upon conversion of outstanding convertible
notes.
In December 2015, Gelesis closed a $31.5 million private equity
financing of which PureTech Health invested approximately $7
million.
2016
During 2016, Akili closed a total of $42.4 million of private
equity financings of which PureTech Health invested $25.0
million.
In June 2016, Vedanta Biosciences closed a $50.0 million private
equity financing of which PureTech Health invested $30.0 million in
the financing. Of the $50.0 million, $25.0 million was funded in
2016 with $15.0 million of that amount contributed by PureTech
Health. The remaining $25.0 million was received in January 2017.
Also, in conjunction with this transaction, preferred shares were
issued upon conversion of $0.6 million of outstanding convertible
notes.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKPDKBBKBNQK
(END) Dow Jones Newswires
April 06, 2017 02:00 ET (06:00 GMT)
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