TIDMPRTC
RNS Number : 5151V
PureTech Health PLC
15 April 2021
15 April 2021
PureTech Health plc
PureTech Announces Annual Results for Year Ended December 31,
2020
Strong capital base and cash runway extended into the first
quarter of 2025, with PureTech level cash and cash equivalents of
$443.4 million as of March 31, 2021(1) ($349.4 million as of
December 31, 2020(2) ) and consolidated cash and cash equivalents
of $486.5 million as of March 31, 2021(3) ($403.9 million as of
December 31, 2020(4) )
Advancement of Wholly Owned Pipeline with four clinical trial
initiations and one successful readout, with three clinical trials
ongoing
Significant milestones across PureTech's Founded Entities
including one FDA Clearance for Marketing, two European Marketing
Authorizations, initiation of a Phase 3 program, $247.8 million
raised in 2020(5) and $473.2 million raised in the 2021
post-period(6)
Further validation of PureTech's model through m onetization of
partial stakes in Founded Entities that generated $ 350.6 million
in 2020 and an additional $118 million in the 2021 post-period
Listing on Nasdaq Global Market broadens access to US
investors
Company to host a webcast and conference call today at 9:00am
EDT / 2:00pm BST
PureTech Health plc (Nasdaq: PRTC, LSE: PRTC) ("PureTech" or the
"Company"), a clinical-stage biotherapeutics company dedicated to
discovering, developing and commercializing highly differentiated
medicines for devastating diseases, today announced its results for
the year ended December 31, 2020 as well as its cash balance as of
the first quarter ended March 31, 2021. The following information
represents select highlights from the full report, which will be
filed as an Exhibit to Form 20-F with the United States Securities
and Exchange Commission and is also available at
https://investors.puretechhealth.com/financials-filings/reports
.
Webcast and conference call details
Members of the PureTech Management Team will host a conference
call at 9:00am EDT / 2:00pm BST today, April 15, to discuss these
results. A live webcast and presentation slides will be available
on the investors section of PureTech's website under the Events and
Presentations tab. To join by phone, please dial:
United Kingdom : 0800 640 6441
United Kingdom (Local) : 020 3936 2999
United States : 1 855 9796 654
United States (Local) : 1 646 664 1960
All other locations : +44 20 3936 2999
Access code : 440629
For those unable to listen to the call live, a replay will be
available on the PureTech website.
Commenting on the annual results, Daphne Zohar, Founder and
Chief Executive Officer of PureTech said:
"2020 was a year like no other. For our team at PureTech, it was
defined both by transformational progress and tremendous
resilience, as we realized significant financial, clinical and
regulatory milestones while navigating the challenges of a global
pandemic. I am immensely proud of our team's dedication to our
mission: develop groundbreaking medicines for serious diseases for
which patients currently have few options.
"We now have 26 therapeutics and therapeutic candidates being
advanced through our Wholly Owned Pipeline or our Founded Entities.
This includes two therapeutics that have received FDA clearance and
European marketing authorization - Gelesis' Plenity(R) and Akili's
EndeavorRx(TM) - both of which were initially conceived of and
advanced by the PureTech team to address urgent medical needs for
patients. We expect a broader U.S. launch for both therapeutics
this year.
"We made notable progress in the advancement of our Wholly Owned
Pipeline this year, initiating four clinical trials and reporting
the successful completion of one clinical trial. We are currently
evaluating two candidates - LYT-100 and LYT-200 - across three
different indications where there is serious need. I am also
pleased to have expanded our Wholly Owned Pipeline with the
nomination of a new therapeutic candidate, LYT-300 (oral
allopregnanolone), which we expect to enter a clinical trial by the
end of 2021.
"Additionally, we continued to solidify our financial position
by generating $350.6 million in 2020 and an additional $118 million
in the February 2021 post-period via the monetization of partial
stakes in Founded Entities. We also successfully completed a
listing of American Depository Shares on the Nasdaq Global Market
in November 2020, which enables us to broaden access to an
international investor base as we maintained our premium listing on
the London Stock Exchange and our membership in the FTSE 250.
"We are well-positioned for an exciting year ahead, which we
expect will include multiple value drivers across our Wholly Owned
Programs and our Founded Entities, including at least ten expected
clinical trial initiations and nine expected readouts.
"I would like to thank our shareholders for their vision and
continued support over the last year. Above all, I would like to
thank the patients and clinicians working alongside us in our
clinical trials. We are grateful for your support, humbled by your
trust and inspired by your courage. You make possible the medical
advances of the future."
Continued advancement and growth of Wholly Owned Programs(7)
Our team, network and expertise in the BIG Axis has enabled the
rapid advancement and growth of our Wholly Owned Programs. Focused
on the lymphatic system and related immunological disorders, our
Wholly Owned Pipeline currently consists of LYT-100, a
clinical-stage therapeutic candidate we are pursuing for
inflammatory and fibrotic conditions and disorders of lymphatic
flow, LYT-200, a clinical therapeutic candidate targeting a
foundational immunosuppressive protein, galectin-9, we are
developing for the potential treatment of a range of cancer
indications, LYT-210, a preclinical therapeutic candidate targeting
immunomodulatory gamma delta-1 T cells we are developing for a
range of cancer indications and autoimmune disorders and LYT-300, a
preclinical therapeutic candidate we are developing for a range of
neurological and neuropsychological conditions. Our Wholly Owned
Programs also include three discovery platforms: Glyph(TM) - our
synthetic lymphatic targeting chemistry platform - and Orasome(TM)
- our oral biotherapeutics platform - both of which leverage
absorption of dietary lipids to traffic therapeutics via the
lymphatic system, and our meningeal lymphatics discovery research
program for treating neurodegenerative and neuroinflammatory
diseases. Key developments included the following:
Program Highlights
LYT-100
-- In November 2020, we announced the completion of a Phase 1
randomized, double-blind multiple ascending dose and food effect
study of LYT-100, which was initiated in March 2020. The study
demonstrated favorable proof-of-concept for LYT-100's tolerability
and pharmacokinetic, or PK, profile.
-- In December 2020, we announced the initiation of a global,
randomized, double-blind, placebo-controlled Phase 2 trial to
evaluate the efficacy, safety and tolerability of LYT-100 in adults
with Long COVID respiratory complications and related sequelae.
Topline results are expected in the second half of 2021.
-- In December 2020, we announced the initiation of a Phase 2a
proof-of-concept study of LYT-100 in patients with breast
cancer-related, upper limb secondary lymphedema. Topline results
are expected in the first half of 2022.
-- We are planning registration-enabling studies of LYT-100 for
the treatment of idiopathic pulmonary fibrosis, or IPF, and
potentially other progressive fibrosing interstitial lung diseases,
or PF-ILDs, and we expect to provide additional guidance later this
year.
LYT-200
-- In December 2020, we announced the initiation of our Phase 1
clinical trial to evaluate LYT-200 as a potential treatment for
metastatic solid tumors, with topline results anticipated in the
fourth quarter of 2021. The primary objective of the Phase 1
portion of the adaptive Phase 1/2 trial is to assess the safety and
tolerability of escalating doses of LYT-200 in order to identify a
dose to carry forward into the Phase 2 portion of the trial. The
Phase 1 portion will also assess the PK and pharmacodynamic, or PD,
profiles of LYT-200. Pending favorable topline results, we intend
to initiate the Phase 2 expansion cohort portion of the trial,
which is designed to evaluate LYT-200 either alone and/or in
combination with chemotherapy and anti-PD-1 therapy for the
treatment of multiple solid tumor types, including pancreatic
cancer and cholangiocarcinoma, or CCA.
-- In June 2020, we presented a scientific poster for LYT-200 at
the American Association for Cancer Research, or AACR, 2020 Virtual
Annual Meeting. New preclinical results were presented that
established galectin-9 as a novel target for cancer
immunotherapy.
LYT-300 and the Glyph (TM) Technology Platform
-- We are advancing our Glyph technology platform, which is
designed to employ the body's natural lipid absorption and
transport process to orally administer drugs via the lymphatic
system. We have successfully extended the platform to encompass
more than 20 molecules as well as a range of novel linker
chemistries that have demonstrated promising lymphatic targeting in
preclinical studies. Our most advanced Glyph candidate, LYT-300, is
an oral form of allopregnanolone, an FDA-approved drug, which is a
natural neurosteroid that we believe may be applicable to a range
of neurological conditions. We expect to initiate a clinical trial
with LYT-300 by the end of 2021.
-- In the February 2021 post-period, preclinical
proof-of-concept for our Glyph technology was published in the
Journal of Controlled Release. The results demonstrate the ability
of this platform to directly target gut lymphatics with an orally
dosed small molecule immunomodulator.
Orasome (TM) Technology Platform
-- We progressed our Orasome technology platform, which utilizes
multiple vesicle components, including those isolated from milk.
Our Orasome vesicles are being designed to transport macromolecular
medicines to selected mucosal cell types of the intestinal tract.
In 2021, we expect preclinical proof-of-concept data and anticipate
additional preclinical results from a non-human primate
proof-of-concept study. This work could lay the foundation for
investigational new drug, or IND, application enabling clinical
studies for one or more additional therapeutic candidates to be
included in our Wholly Owned Pipeline.
Corporate Highlights
-- On November 16, 2020, we commenced trading of American
Depository Shares, or ADSs, on the Nasdaq Global Market under the
ticker symbol "PRTC" (the "U.S. Listing"). In addition to the U.S.
Listing, we maintain our premium listing on the Official List of
the UK Financial Conduct Authority and trading on the main market
of the London Stock Exchange. Our ticker symbol in the UK is also
PRTC, and we are a member of the FTSE250 index.
-- In October 2020, we announced the appointment of biotech
entrepreneur Kiran Mazumdar-Shaw to our board of directors. Ms.
Shaw brings extensive experience in biotherapeutics, strategic
leadership, financial and business development and a dedication to
improving patients' lives to our board of industry leaders.
-- In the January 2021 post-period, we announced that George
Farmer, Ph.D., was appointed as Chief Financial Officer. Dr. Farmer
is responsible for all aspects of our finances, including capital
markets strategy and execution, strategic and financial planning
and financial reporting.
Financial Highlights
-- In 2020, we sold shares in our Founded Entities for cash
consideration of $350.6 million, while in the February 2021
post-period we sold an additional one million shares in Karuna
Therapeutics, Inc. for cash consideration of $118 million.
-- PureTech level cash and cash equivalents were $443.4 million
as of March 31, 2021(1) and $349.4 million as of December 31,
2020(2) . We extended our cash runway guidance by one year into the
first quarter of 2025.
-- Consolidated cash and cash equivalents, which includes cash
held at the PureTech level and at Controlled Founded Entities, were
$486.5 million as of March 31, 2021(3) and $403.9 million as of
December 31, 2020(4) .
-- PureTech's Founded Entities raised $247.8 million in 2020(5)
and an additional $473.2 million in the 2021 post-period(6) ,
almost all of which came from third parties.
Significant regulatory, clinical and financial momentum across
PureTech's Founded Entities(8)
PureTech's Founded Entities have made significant progress
advancing 22 therapeutics and therapeutic candidates, of which two
have been cleared for marketing by the U.S. Food and Drug
Administration and granted marketing authorization in the European
Economic Area and 13 are clinical stage. Key developments included
the following:
Founded Entities in which PureTech has a controlling interest or
the right to receive royalties, in order of development stage:
-- Gelesis, Inc. (PureTech ownership: 19.3%; We also have a
right to royalty payments as a percentage of net sales)
o In June 2020, Gelesis received approval to market
Plenity(R)(9) with a Conformité Européenne, or CE, Mark as a class
III medical device indicated for weight loss in overweight and
obese adults with a Body Mass Index, or BMI, of 25-40 kg/m(2) ,
when used in conjunction with diet and exercise. In addition to its
U.S. FDA clearance, Gelesis is now able to market Plenity(R)
throughout the European Economic Area and in other countries that
recognize the CE Mark. Gelesis plans to bring Plenity to the U.S.
first, where it has been available to a limited extent since the
second half of 2019 through an early experience program and since
2020 via a beta launch while the company ramps up its commercial
operations and inventory for a broader launch in the second half of
2021. In just one month of limited promotion and marketing
investment during the limited launch, Gelesis acquired more new
patients on Plenity, than any other branded prescription in the
weight loss market. Gelesis also plans to seek FDA input on the
requirements for expanding the Plenity label for treating
adolescents.
o In June 2020, Gelesis announced a partnership with China
Medical System Holdings Ltd., or CMS, for the commercialization of
Plenity in China. Through the terms of the deal, CMS provided $35
million upfront in a combination of licensing fees and equity
investment, with the potential for an additional $388 million in
future milestone payments as well as royalties.
o In the second half of 2020, Gelesis initiated a Phase 3 study
of GS500 in functional constipation.
o In November 2020, Gelesis' collaborator Alessandra Silvestri,
Ph.D., of the Laboratory of Mucosal Immunology and Microbiota at
Humanitas Research Hospital, presented a poster on the therapeutic
benefits of Gel-B (GS300) at The Liver Meeting, the American
Association for the Study of Liver Diseases, or AASLD, annual
conference. The data demonstrated that, in a preclinical model, the
proprietary therapeutic candidate reversed the damage to the
intestines induced by a high fat diet and Gelesis believes that
therapies exploiting the gut liver axis may offer a unique
treatment option for metabolic liver disorders.
o Also in November 2020, Gelesis presented three posters at
ObesityWeek 2020, the annual congress of The Obesity Society.
Presentations included new data that showed that prediabetes and
impaired beta cell function were associated with a dysfunctional
gut barrier, a potential precursor to metabolic diseases; an
additional analysis of Gelesis' pivotal GLOW study suggested
fasting plasma glucose levels and insulin resistance could be
strong predictors of weight loss with Plenity; and a new in vitro
beverage interaction study that demonstrated Plenity's hydrogel
maintained its properties in the presence of alcoholic or acidic
drinks.
o In September 2020, Gelesis delivered one oral presentation and
two poster presentations showcasing notable efficacy data for
Plenity(R) at the European and International Congress on Obesity,
or ECO-ICO 2020.
o In March 2020, Gelesis was named to Fast Company's list of the
World's Most Innovative Companies for 2020.
-- Karuna Therapeutics, Inc. (PureTech ownership: 8.2%; We also
have a right to royalty payments as a percentage of net sales)
o In June 2020, Karuna announced next steps in the EMERGENT
program, the clinical program evaluating KarXT for the treatment of
adults with schizophrenia, following the completion of a successful
End-of-Phase 2 meeting with the FDA.
o In December 2020, Karuna announced the initiation of the Phase
3 EMERGENT-2 trial, the first of two Phase 3 five-week inpatient
trials evaluating the efficacy and safety of KarXT for the
treatment of acute psychosis in adults with schizophrenia.
o In May 2020, Karuna presented data from EMERGENT-1, the Phase
2 clinical trial evaluating KarXT for the treatment of acute
psychosis in patients with schizophrenia, at the American Society
of Clinical Psychopharmacology, or ASCP, 2020 Annual Meeting. The
poster and oral presentation detailed new and previously reported
efficacy and safety data from the Phase 2 clinical trial.
o In the first quarter of the 2021 post-period, Karuna announced
the initiation of the Phase 3 EMERGENT-4 trial, a 52-week,
outpatient, open-label long-term safety and tolerability extension
trial of EMERGENT-2 and EMERGENT-3.
o In the February 2021 post-period, Karuna announced that
results from the EMERGENT-1 Phase 2 clinical trial evaluating KarXT
for the treatment of schizophrenia were published in the New
England Journal of Medicine, or NEJM.
-- Follica, Incorporated (PureTech ownership: 78.2%; We also
have a right to royalty payments as a percentage of net sales)
o In June 2020, Follica announced the completion of a successful
End-of-Phase 2 meeting with the FDA for its lead program to treat
male androgenetic alopecia, which supports the progression into
Phase 3 development. The initiation of a Phase 3 registration
program in male androgenetic alopecia is expected in 2021.
o In December 2020, Follica announced the publication of a pilot
study evaluating scalp skin disruption to promote hair growth in
female pattern hair loss, or FPHL, in International Journal of
Women's Dermatology. The pilot study, led by Maryanne M. Senna,
M.D., an Assistant Professor of Dermatology at Harvard Medical
School, demonstrated the treatment promoted hair growth over a
four-month course of treatment.
o In the January 2021 post-period, Follica announced the
appointment of two leaders in aesthetic medicine and dermatology to
its Board of Directors. Tom Wiggans, former CEO of Dermira, joined
as Executive Chairman with over 30 years of experience leading
biopharmaceutical companies from the start-up stage to global
commercialization, and Michael Davin, former CEO of Cynosure,
joined as an Independent Director with over 30 years of experience
in the medical device industry.
-- Vedanta Biosciences, Inc. (PureTech ownership: 49.5%)
o In June 2020, Vedanta announced topline Phase 1 clinical data
in healthy volunteers, which showed that VE202, Vedanta's
orally-administered live biotherapeutic product, or LBP, candidate
for inflammatory bowel disease, or IBD, was generally
well-tolerated at all doses studied and demonstrated durable and
dose-dependent colonization. The trial was conducted by Janssen
Research & Development, LLC, and a more complete study dataset
and analyses will be submitted to a peer-reviewed journal. Vedanta
expects to advance VE202 into a Phase 2 study for IBD in 2021.
Vedanta has regained full rights to the program and will owe
Janssen single-digit royalty payments on net sales of a
commercialized product.
o In the January 2021 post-period, Vedanta announced a $25
million investment from Pfizer as part of the Pfizer Breakthrough
Growth Initiative. The proceeds will fund the Phase 2 study of
VE202 in IBD. Vedanta will retain control of all its programs and
has granted Pfizer a right of first negotiation on VE202.
o In October 2020, additional data from a Phase 1 clinical study
of VE202 in healthy volunteers was presented by Janssen Research
& Development, LLC, at United European Gastroenterology, or
UEG, Week 2020. The new UEG Week data presentation focused on the
kinetics and durability of colonization from an 11-strain
consortium of VE202 under various dosing and pre-treatment
regimens.
o Vedanta has also continued to progress its three ongoing
clinical trials of VE303, VE416 and VE800. In 2021, Vedanta
anticipates topline results from a Phase 2 trial of VE303 in
high-risk Clostridioides difficile infection, or CDI and a
first-in-patient clinical trial of VE800 in combination with
Bristol- Myers Squibb's checkpoint inhibitor Opdivo(R) (nivolumab)
in patients with select types of advanced or metastatic cancer.
Topline results from a Phase 1/2 trial of VE416 for food allergy
are expected in 2022.
o In June 2020, Vedanta strengthened its balance sheet with an
additional $12 million in new equity and R&D collaboration
funds, bringing its total Series C round to $71.1 million.
o In September 2020, Vedanta announced it has been awarded
funding of $7.4 million, with the potential for up to an additional
$69.5 million, from the Biomedical Advanced Research and
Development Authority, or BARDA, to advance clinical development of
VE303 for high-risk CDI. Vedanta is the first-ever recipient of a
BARDA award in the microbiome field.
-- Sonde Health, Inc. (PureTech ownership: 44.6%)
o In July 2020, Sonde launched Sonde One for Respiratory, a new
voice-enabled health detection and monitoring app, to potentially
help employers improve employee safety, meet government mandates
and satisfy their own administrative needs as they reopen office
doors in a COVID-19 environment.
o In August 2020, Sonde acquired NeuroLex Labs, a leading
voice-enabled survey and data acquisition platform. The transaction
did not involve any financial participation from PureTech.
o In November 2020, Sonde announced the launch of a new
Developer Portal that provides organizations with access to Sonde's
advanced vocal biomarker-based health check technology. As part of
the launch, Sonde has introduced a new self-serve application
programming interface, or API, and documentation to allow
developers to quickly, easily, and autonomously integrate Sonde's
voice-enabled respiratory symptoms checker into their own iOS and
Android mobile applications.
o Sonde has collected over one million voice samples from over
80,000 subjects as a part of the ongoing validation of its
platform, and it has also initiated research and development to
expand its proprietary technology into Alzheimer's disease, or AD,
respiratory and cardiovascular disease, as well as other health and
wellness conditions, including mental health.
-- Alivio Therapeutics, Inc. (PureTech ownership: 78.0%)
o Alivio continued to advance its targeted disease
immunomodulation platform for the potential treatment of chronic
and acute inflammatory disorders. Alivio expects an IND filing for
ALV-107 for interstitial cystitis or bladder pain syndrome, or
IC/BPS, in 2021 and an IND for ALV-304 in IBD in 2023. Alivio is
also evaluating the potential application of its proprietary
platform to enable the oral administration of biologics in
additional indications.
o In October 2020, Alivio announced a $3.3 million U.S.
Department of Defense, or DoD, Technology/Therapeutic Development
Award to advance its therapeutic candidate, ALV-304, for the
treatment of IBD. The funds will support Alivio's preclinical
research and development activities to potentially enable the IND
filing.
-- Entrega, Inc. (PureTech ownership: 72.9%)
o Entrega continued to advance its platform for the oral
administration of biologics, vaccines and other drugs that are
otherwise not efficiently absorbed when taken orally. As part of
its collaboration with Eli Lilly, Entrega has continued to
investigate the application of its peptide administration
technology to certain Lilly therapeutic candidates. In 2020, the
partnership was extended into 2021.
Founded Entities in which PureTech has an equity interest, in
order of development stage:
-- Akili Interactive Labs, Inc. (PureTech ownership: 33.7%)
o In June 2020, Akili received clearance from the FDA to market
EndeavorRx(TM)(10) (AKL-T01) as a prescription treatment for
improving attention function in children with
attention-deficit/hyperactivity disorder, or ADHD. Delivered
through a captivating video game experience, EndeavorRx is
indicated to improve attention function as measured by
computer-based testing in children ages 8-12 years old with
primarily inattentive or combined-type ADHD, who have a
demonstrated attention issue. Akili plans to take a scaled approach
to the commercial launch of EndeavorRx in 2021. The FDA clearance
followed the April 2020 announcement thatEAVOR(TM) would be
available for use for a limited time by children with ADHD and
their families in response to new guidance from the FDA recognizing
the need for access to certain low-risk clinically-validated
digital health devices for psychiatric conditions, including ADHD,
during the COVID-19 pandemic.
o Also in June 2020, Akili announced that it had received
approval to market EndeavorRx in Europe. Akili received a CE Mark
certification for EndeavorRx as a prescription-only digital
therapeutic intended for the treatment of attention and inhibitory
control deficits in pediatric patients with ADHD. The CE Mark
approval enables the future marketing of EndeavorRx in European
Economic Area member countries. With a near-term focus on launching
the EndeavorRx prescription treatment in the U.S. first, Akili is
exploring expansion opportunities in Europe as part of its global
strategy.
o In the April 2021 post-period, Akili announced collaborations
with Weill Cornell Medicine, NewYork-Presbyterian Hospital and
Vanderbilt University Medical Center to evaluate Akili digital
therapeutic AKL-T01 as a treatment for patients with cognitive
dysfunction following COVID-19 (also known as "COVID brain fog").
Under each collaboration, Akili will work with research teams at
each institution to conduct two separate randomized, controlled
clinical studies evaluating AKL-T01's ability to target and improve
cognitive functioning in COVID-19 survivors who have exhibited a
deficit in cognition.
o In January 2020, Akili announced that its STARS Adjunct trial
achieved its primary endpoint evaluating the effects of EndeavorRx
in children with ADHD when used with and without stimulant
medication. The study achieved its predefined primary efficacy
outcome, demonstrating a statistically significant improvement in
the ADHD Impairment Rating Scale, or IRS, from baseline after one
month of treatment (p<0.001) in both children taking stimulant
medications and in those not taking stimulants.
o In February 2020, The Lancet Digital Health journal published
the results from Akili's STARS-ADHD pivotal trial of AKL-T01.
o In October 2020, Akili announced multiple data presentations
on EndeavorRx, including results from the STARS Adjunct trial, a
multi-site open-label study designed to evaluate the impact of
EndeavorRx on impairments in daily life in children with ADHD and
inform prescribing practices. Also presented were analyses across
four clinical trials of EndeavorRx, evaluating the impact of
treatment on children's attention function compared to normative
ranges. The data were presented for the first time at the American
Academy of Child and Adolescent Psychiatry, or AACAP, 2020 Virtual
Annual Meeting.
o In the March 2021 post-period, Nature Digital Medicine
published the full results from the STARS Adjunct trial.
-- Vor Biopharma Inc. (PureTech ownership: 8.6%)
o In the January 2021 post-period, Vor announced that the FDA
had accepted the company's IND application for VOR33. Vor plans to
enroll the first patient in a Phase 1/2a clinical trial for VOR33
in the second quarter of 2021 and expects initial human engraftment
and protection data from this trial to be reported in late 2021 or
in the first half of 2022.
o In the February 2021 post-period, Vor announced the pricing of
its initial public offering of common stock on the Nasdaq Global
Market under the symbol "VOR." The aggregate gross proceeds to Vor
from the offering were approximately $203.4 million, before
deducting the underwriting discounts and commissions and other
offering expenses payable by Vor.
o In July 2020, Vor announced a $110 million Series B financing
to advance VOR33 into clinical trials, deepen its portfolio and
accelerate the validation of additional targets for its scientific
platform.
o In November 2020, Vor announced an exclusive licensing
agreement with the National Cancer Institute, or NCI, part of the
National Institutes of Health, or NIH, for intellectual property
related to a clinical-stage anti-CD33 chimeric antigen receptor T
cell, or CAR-T, therapy candidate, VCAR33. VCAR33 is currently
being evaluated in a multi-site Phase 1/2 clinical trial in young
adults and pediatric patients with relapsed or refractory acute
myeloid leukemia, or AML, and Vor expects initial monotherapy
clinical proof-of-concept data in 2022, depending on investigator's
timing of data release.
o In January 2020, Vor held a pre-IND meeting with the FDA to
gather feedback to assemble the data package for a potential IND
filing.
PureTech Health today released its Annual Report for the year
ended December 31, 2020. 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
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
-- Annual Report and Accounts for the year ended December 31, 2020; and
-- Notice of 2021 Annual General Meeting.
Printed copies of these documents together with the Form of
Proxy will be posted to shareholders. Copies are also available
electronically on the Investor Relations section of the Company's
website at
https://investors.puretechhealth.com/financials-filings/reports
.
PureTech's 2021 Annual General Meeting (AGM) will be held on May
27, 2021 at 11:00am EDT / 4:00pm BST at PureTech's headquarters,
which is located at 6 Tide Street, Boston, Massachusetts, United
States. Please note that in light of COVID-19, it will not be
possible for the Directors to travel to the United Kingdom. The
Company has therefore decided to hold the AGM in the United States
where most of the Directors are resident.
The Company's preference had been to welcome shareholders in
person to the 2021 AGM, particularly given the constraints faced in
2020 due to the COVID-19 pandemic. However, at present, in light of
the limits on international travel and the public health guidance
issued in the UK and the US and in order to protect the wellbeing
of PureTech's people and shareholders, the Company is proposing to
hold the AGM as a closed meeting with the minimum attendance
required to form a quorum. Accordingly, shareholders will not be
permitted to attend the AGM in person but can be represented by the
Chair of the meeting acting as their proxy.
The Company continues to closely monitor the evolving situation
in respect of COVID-19 and its forthcoming AGM. The health and
welfare of the Company's shareholders, as well as its employees and
partners, is the number one priority.
The Company appreciates that a number of its shareholders are
not resident or located in the United States and asks shareholders
to participate in the AGM by submitting any questions in advance
and voting via proxy rather than attending in person. As such, any
specific questions on the business of the AGM and resolutions can
be submitted ahead of meeting by e-mail to ir@puretechhealth.com
(marked for the attention of Dr. Bharatt Chowrira).
Shareholders are encouraged to complete and return their votes
by proxy, and to do so no later than 4:00 pm (BST) on Tuesday May
25, 2021. This will appoint the chair of the meeting as proxy and
will ensure that votes will be counted even though attendance at
the meeting is restricted. Details of how to appoint a proxy are
set out in the notice of AGM.
PureTech will keep shareholders updated of any changes it may
decide to make to the current plans for the AGM. Please visit the
Company's website at www.puretechhealth.com for the most up to date
information.
About PureTech Health
PureTech is a clinical-stage biotherapeutics company dedicated
to discovering, developing and commercializing highly
differentiated medicines for devastating diseases, including
inflammatory, fibrotic and immunological conditions, intractable
cancers, lymphatic and gastrointestinal diseases and neurological
and neuropsychological disorders, among others. The Company has
created a broad and deep pipeline through the expertise of its
experienced research and development team and its extensive network
of scientists, clinicians and industry leaders. This pipeline,
which is being advanced both internally and through PureTech's
Founded Entities is comprised of 26 products and product
candidates, including two that have received FDA clearance and
European marketing authorization. All of the underlying programs
and platforms that resulted in this pipeline of product candidates
were initially identified or discovered and then advanced by the
PureTech team through key validation points based on the Company's
unique insights into the biology of the brain, immune and gut, or
BIG, systems and the interface between those systems, referred to
as the BIG Axis.
For more information, visit www.puretechhealth.com or connect
with us on Twitter @puretechh.
Cautionary Note Regarding Forward-Looking Statements
This press release contains 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, our expectations regarding the potential therapeutic benefits
of our product candidates and those of our Founded Entities, our
expectations regarding 2021 milestones and timing, including with
respect to clinical trial initiations and expected data readouts,
our ability to broaden access to an international investor base,
our cash runway and financial position as well as those risks and
uncertainties described in the risk factors included in the
regulatory filings for PureTech Health plc (including the risk
factors in our 2020 Annual Report and Accounts). These
forward-looking statements are based on assumptions regarding the
present and future business strategies of the company and the
environment in which it will operate in the future. Each
forward-looking statement speaks only as at the date of this press
release. Except as required by law and regulatory requirements,
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.
Contact:
Investors EU media U.S. media
Allison Mead Talbot Ben Atwell, Rob Winder Stephanie Simon
+1 617 651 3156 +44 (0) 20 3727 1000 +1 617 581 9333
amt@puretechhealth.com ben.atwell@FTIconsulting.com stephanie@tenbridgecommunications.com
Notes
1 Cash and cash equivalents held at PureTech Health plc and only
wholly-owned subsidiaries (please refer to Note 1 to our
consolidated financial statements for further information with
respect to our wholly-owned subsidiaries) as of March 31, 2021. The
measure includes cash outflows and inflows for the first quarter of
2021, particularly the sale of 1,000,000 common shares of Karuna
for aggregate proceeds of $118.0 million on February 9, 2021. This
represents a non-IFRS number. For a reconciliation of this number
to IFRS, please see below under the heading "Financial Review."
2 Cash and cash equivalents held at PureTech Health plc and only
wholly-owned subsidiaries (Please refer to Note 1 to our
consolidated financial statements for further information with
respect to our wholly-owned subsidiaries) as of December 31, 2020.
This represents a non-IFRS number. For a reconciliation of this
number to IFRS, please see below under the heading "Financial
Review."
3 Cash and cash equivalents held at PureTech Health plc and
consolidated subsidiaries (please refer to Note 1 to our
consolidated financial statements for further information with
respect to our consolidated subsidiaries) as of March 31, 2021. The
measure includes cash outflows and inflows for the first quarter of
2021, particularly the sale of 1,000,000 common shares of Karuna
for aggregate proceeds of $118.0 million on February 9, 2021.
4 Cash and cash equivalents held at PureTech Health plc and
consolidated subsidiaries (please refer to Note 1 to our
consolidated financial statements for further information with
respect to our consolidated subsidiaries) as of December 31,
2020.
5 Funding figure includes private equity financings, loans and
promissory notes, public offerings or grant awards. Funding figure
excludes future milestone considerations received in conjunction
with partnerships and collaborations such as those with Boehringer
Ingelheim, Imbrium Therapeutics L.P., Shionogi & Co., Ltd. or
Eli Lilly. Funding figure does not include Vor's gross proceeds of
$203.4 million from its February 2021 post-period IPO or Karuna's
gross proceeds of $269.8 million from its February 2021 post-period
follow-on offering.
6 Funding figure includes Vor's gross proceeds of $203.4 million
from its February 2021 post-period IPO and Karuna's gross proceeds
of $269.8 million from its February 2021 post-period follow-on
offering.
7 References in this report to "Wholly Owned Programs" refer to
the Company's four therapeutic candidates (LYT-100, LYT-200,
LYT-210 and LYT-300), three discovery platforms and potential
future therapeutic candidates and discovery platforms that the
Company may develop or obtain. References to "Wholly Owned
Pipeline" refer to LYT-100, LYT-200, LYT-210 and LYT-300.
8 Relevant ownership interests for Founded Entities were
calculated on a diluted basis (as opposed to a voting basis) as of
December 31, 2020, including outstanding shares, options and
warrants, but excluding unallocated shares authorized to be issued
pursuant to equity incentive plans. Karuna ownership is calculated
on an outstanding voting share basis as of March 4, 2021. Vor
ownership is calculated on an outstanding voting share basis as of
February 9, 2021.
9 Important Safety Information: Patients who are pregnant or are
allergic to cellulose, citric acid, sodium stearyl fumarate,
gelatin, or titanium dioxide should not take Plenity. To avoid
impact on the absorption of medications: For all medications that
should be taken with food, take them after starting a meal. For all
medications that should be taken without food (on an empty
stomach), continue taking on an empty stomach or as recommended by
your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were
diarrhea, distended abdomen, infrequent bowel movements, and
flatulence. Contact a doctor right away if problems occur. If you
have a severe allergic reaction, severe stomach pain, or severe
diarrhea, stop using Plenity until you can speak to your doctor. Rx
Only. For the safe and proper use of Plenity or more information,
talk to a healthcare professional, read the Patient Instructions
for Use, or call 1-844-PLENITY.
10 EndeavorRx is indicated to improve attention function as
measured by computer-based testing in children ages 8-12 years old
with primarily inattentive or combined-type ADHD, who have a
demonstrated attention issue. Patients who engage with EndeavorRx
demonstrate improvements in a digitally assessed measure Test of
Variables of Attention (TOVA) of sustained and selective attention
and may not display benefits in typical behavioral symptoms, such
as hyperactivity. EndeavorRx should be considered for use as part
of a therapeutic program that may include clinician-directed
therapy, medication, and/or educational programs, which further
address symptoms of the disorder. EndeavorRx is available by
prescription only. It is not intended to be used as a stand-alone
therapeutic and is not a substitution for a child's medication.
Letter from the Chair
2020 was a year of important milestones and significant value
creation for PureTech, capped off with a virtual team celebration
as we rang the opening bell on Nasdaq in early January of 2021.
The bell ringing ceremony highlighted both our bold vision and
our financial strength, as we entered the new year jointly listed
on the London Stock Exchange and Nasdaq, while broadening access to
an international investor base. Fueled by an exceptional team,
powerful scientific insights and highly differentiated therapeutic
candidates that have emerged from PureTech's productive business
model, we believe we are truly building the biopharmaceutical
company of the future.
When I joined the board five years ago, PureTech was a
cutting-edge R&D company advancing early-stage projects. During
my time on the board, I have seen the company grow into a proven
industry leader with an impressive track record that has yielded 26
innovative therapeutics and therapeutic candidates across our
Wholly Owned Pipeline and our Founded Entities, including 15
programs in clinical development and two that have been cleared for
marketing by the U.S. Food and Drug Administration and European
authorities. As one metric of our rapid progress, consider that we
advanced three programs from our Wholly Owned Pipeline into the
clinic in the last two months of 2020. These programs include the
global launch of one of the only clinical trials seeking to address
the long-term sequelae of COVID-19 infection, a constellation of
highly serious symptoms known as post-acute COVID-19 syndrome
(PACS) or Long COVID, a clinical study for lymphedema, a painful
and disfiguring condition that affects one million people in the
U.S., and an oncology study evaluating the clinical properties of a
novel monoclonal antibody for the potential treatment of
intractable solid tumors.
To put it simply, PureTech's story is one of innovation coupled
with rapid growth. I can't think of another company that comes
close.
Our success rests firmly on our commitment to innovation -
innovation in our pipeline, in our approach to raising and
deploying capital and in the development of our team.
The story of scientific innovation and patient focus comes
through loud and clear in the therapeutic clearances our Founded
Entities received. Consider Gelesis' Plenity(R)1 , a novel approach
to overweight and obesity: In just one month of limited promotion
and marketing investment, Gelesis acquired more new patients on
Plenity than any other branded prescription in the weight loss
market. Additionally, Akili's EndeavorRx(TM) received both FDA and
European clearance in 2020, becoming the first prescription video
game in the world. Both of these therapeutics, like those of all of
our Founded Entities, were initially conceived of and advanced by
the PureTech team, as part of our commitment to think well outside
the box in addressing pressing medical needs for patients. Both are
expecting a broader launch in the U.S. this year.
Innovation in capital deployment is the hallmark of our business
strategy. The PureTech team spends a lot of time devising and
executing what we call "killer" experiments - that is, experiments
designed to take out potential programs by revealing their flaws.
If a program survives this hurdle, we believe that it has been
substantially de-risked, and deserves the commitment of additional
resources. We are proud of our clinical track record, particularly
in the stages where industry failures are typically high as
depicted in the graphic on page 9. We have also engineered our
Founded Entities to spread risk so that our fortunes do not rise
and fall on the outcome of a single, binary readout. Our business
model is unusual in the biopharma world, and it has served us
exceptionally well.
Innovation in teamwork is the third pillar of our success. We
build a global network of top-tier scientific collaborators to help
identify promising ideas, solve knotty problems and apply
scientific insights to new realms. These collaborators have been
invaluable. But they wouldn't take us far without the experienced
team we have built to advance our R&D and clinical programs.
Our rapid response to the emerging global crisis of Long COVID is
an example of how agile and strategic our team is as we push
ourselves to deliver breakthroughs for patients.
I am honored to be Chair of the board and to work closely with
my colleagues on this remarkable board and team. I know my fellow
board members join me in that sentiment. We were delighted to
welcome two new members to the board in the past year: Kiran
Mazumdar -- Shaw, a highly successful, pioneering biotech
entrepreneur and passionate philanthropist, who joined in October
of 2020 as an independent non-executive director, and Bharatt
Chowrira, Ph.D., J.D., PureTech's President and Chief of Business
and Strategy, who has been with the Company since 2017 and was
promoted to the Board in January of 2021. Also in January, we were
pleased to welcome George Farmer, Ph.D., as our Chief Financial
Officer. Dr. Farmer's depth of experience as a biotech executive
and equity analyst will serve us well as we set our business
development strategy for the years ahead.
Additionally, in March of 2021, we announced that Stephen Muniz,
Esq., will retire from his role as Chief Operating Officer and
Corporate Secretary and will step down from the Board of Directors,
effective May 17, 2021. On behalf of the Board, I would like to
thank Steve for all of his hard work and leadership over the past
13 years.
I would also like to extend a sincere thank you to all of our
shareholders for enabling our continued growth. As always, I am
proud to be part of the PureTech team and I look forward to
continued success in 2021.
Christopher Viehbacher
Chair
April 14, 2021
1 Important Safety Information: Patients who are pregnant or are
allergic to cellulose, citric acid, sodium stearyl fumarate,
gelatin, or titanium dioxide should not take Plenity. To avoid
impact on the absorption of medications: For all medications that
should be taken with food, take them after starting a meal. For all
medications that should be taken without food (on an empty
stomach), continue taking on an empty stomach or as recommended by
your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were
diarrhea, distended abdomen, infrequent bowel movements, and
flatulence. Contact a doctor right away if problems occur. If you
have a severe allergic reaction, severe stomach pain, or severe
diarrhea, stop using Plenity until you can speak to your doctor. Rx
Only. For the safe and proper use of Plenity or more information,
talk to a healthcare professional, read the Patient Instructions
for Use, or call 1-844-PLENITY.
2 The cumulative percentages are calculated by multiplying the
individual phase percentages included in the following
footnotes.
3 The aggregate percentages include all therapeutic candidates
advanced through at least Phase 1 by PureTech or its Founded
Entities from 2009 onward, using the aforementioned calculation
method based on the following individual phase percentages, Phase 1
(n = 6/7; 86%), Phase 2 (n = 9/10; 90%), Phase 3 (n = 2/3; 67%);
Phase 2 and Phase 3 percentages include some therapeutic candidates
where Phase 1 trials were not conducted by PureTech or its Founded
Entities (i) due to the requirements of the medical device
regulatory pathway or (ii) because a prior Phase 1 trial was
conducted by a third party.
4 Industry average data measures the probability of clinical
trial success of therapeutics by calculating the number of programs
progressing to the next phase vs. the number progressing and
suspended (Phase 1=63%, Phase 2=31%, Phase 3=58%). BIO,
Biomedtracker, Amplion (2015) Clinical Development Success Rates
2006 - 2015. This study did not include therapeutics regulated as
devices.
Letter from the Chief Executive Officer
Giving life to science by rapidly advancing scientific
breakthroughs for patients.
With the COVID-19 pandemic sweeping the globe, the biopharma
industry was challenged in 2020 to elevate its thinking and to
seize big, bold ideas that could prove transformative for patients.
We've all taken pride in the industry's response to the pandemic,
and rightfully so. I'm also immensely proud of PureTech's response.
Proud, but not surprised - because thinking big has been woven into
our DNA from the beginning.
PureTech was founded to advance a singularly important mission:
Develop groundbreaking medicines for serious diseases for which
patients currently have few options, or none at all. We start with
a clear-eyed assessment of the need. We then collaborate with the
best scientific minds, identifying emerging discoveries that could
help us meet our goals of inventing entirely new solutions when the
current approaches are not sufficiently innovative. One telling
statistic: Our global network of world-class scientists probing the
Brain-Immune-Gut (BIG) Axis has published more than 25 papers
describing research breakthroughs, many in top journals such as
Cell, Nature and Science. In many cases, long before the rest of
the world read about the discoveries, we had already secured the
relevant intellectual property and ran crucial de-risking
experiments to validate their therapeutic potential.
It has become clear in recent years that the BIG Axis and the
crosstalk between those systems plays a critically important role
in regulating health and disease. We have developed preeminent
expertise in key components of the BIG Axis, including the gut
epithelial barrier, the microbiome and - importantly - the
lymphatic system, and those insights have translated into a highly
promising and rapidly advancing pipeline. Across our Wholly Owned
Pipeline and our Founded Entities, our R&D engine has delivered
26 therapeutics and therapeutic candidates, including 15
clinical-stage programs and two innovative therapeutics that are
now on the market, having received regulatory clearances by the
U.S. Food and Drug Administration (FDA) and European
regulators.
Despite the challenges of operating in a pandemic, 2020 was a
highly successful year for PureTech across the key areas of
pipeline growth, clinical execution and financing. Here is a look
at just a few of our scientific highlights from the past year:
-- We launched three trials of LYT-100 (deupirfenidone), our
lead therapeutic candidate from our Wholly Owned Pipeline and had a
successful readout from one of those trials, and the other two are
ongoing. LYT-100 is currently being evaluated in a Phase 2 trial in
Long COVID and a Phase 2a trial in lymphedema. Topline results from
these trials are anticipated in the second half of 2021 and the
first half of 2022, respectively. We are also planning
registration-enabling studies in idiopathic pulmonary fibrosis
(IPF) and potentially other progressive fibrosing interstitial lung
diseases (PF-ILDs), for which we expect to provide additional
guidance later this year. All three of these indications - Long
COVID, lymphedema and progressive fibrosing lung diseases -
represent underserved patient populations with limited or no
existing treatment options.
-- We launched the first part of a Phase 1/2 trial of our
monoclonal antibody LYT-200, which targets a foundational
immuno-suppressive protein, galectin-9, preferentially expressed in
multiple difficult-to-treat cancers. This trial in relapsed and
refractory metastatic cancer patients is designed to evaluate
safety and identify a recommended Phase 2 dose for potential
further evaluation in combination with chemotherapy and an
anti-PD-1 immunotherapy, and we also believe that there is
potential for LYT-200 to advance as a monotherapy. We anticipate
topline results from the first stage of the study in the fourth
quarter of 2021.
-- We advanced work on LYT-300, an exciting new candidate
generated from our expertise and focus in lymphatics. LYT-300 is an
oral form of the natural neurosteroid allopregnanolone. An IV
version of allopregnanolone, also known as brexanolone, is approved
by the FDA to treat postpartum depression. The FDA-approved product
is infused over 60 hours. We leveraged our Glyph(TM) technology
platform, which is designed to employ the body's natural lipid
absorption and transport process to send oral drugs into the
lymphatic system, to develop LYT-300. We believe that the oral
bioavailability demonstrated in our preclinical work creates
significant potential for LYT-300, as an oral dosing regimen may
unlock a range of neurological indications.
-- Our Founded Entity Akili received clearance from the FDA as
well as European marketing authorization for the first prescription
treatment delivered through a video game, EndeavorRx, designed for
children with attention deficit hyperactivity disorder (ADHD).
Cognitive dysfunction is a key feature of many neuropsychiatric
disorders, including ADHD, which affects approximately 6.4 million
pediatric patients in the United States. The treatment of the
cognitive dysfunction associated with these conditions is only
partially served, or not served at all, by currently available
medications or by in-person behavioral therapy.
-- Our Founded Entity Gelesis received European marketing
authorization for its lead product Plenity, an innovative treatment
for obesity that was cleared by the FDA with a label that extends
to the broadest patient population of any prescription weight
management product. Excess weight is growing rapidly in prevalence
worldwide, with approximately 70 percent of American adults
struggling with overweight and obesity. Globally there are more
than 1.9 billion adults 18 years of age or older who have
overweight and 600 million who have obesity. Current treatment
options are associated with safety concerns, lifestyle impact,
complexity of use, high cost and compliance issues that have
limited their adoption.
-- Our other Founded Entities, which we are proud to have
invented the underlying platforms and programs for, continued to
advance pioneering pipelines. Highlights include:
- Karuna (Nasdaq: KRTX) announced the initiation of its Phase 3
program evaluating KarXT for the treatment of acute psychosis in
adults with schizophrenia; there are currently no existing
medicines that sufficiently and safely treat psychosis and negative
and cognitive symptoms.
- Vedanta Biosciences is advancing four clinical-stage
therapeutic candidates based on rationally-defined consortia of
human microbiome-derived bacteria, with results from two clinical
trials expected in 2021. All of Vedanta's therapeutic candidates
are designed to address immune-mediated diseases for which existing
treatment options have undesirable side effects or are ineffective
for many patients.
- Vor Biopharma (Nasdaq: VOR) expects to enroll the first
patient in a Phase 1/2a clinical trial for VOR33 in the second
quarter of 2021 for its engineered hematopoietic stem cell therapy
for the treatment of acute myeloid leukemia (AML), while its
potential companion therapeutic, VCAR33, is currently being
evaluated in an investigator-initiated Phase 1/2 clinical trial.
Existing targeted therapies for AML frequently cause substantial
toxicities, limiting their potential, so there is a need for new
strategies.
In other words, we are making substantial, and exciting,
progress for patients. We are giving life to breakthrough
science.
On top of the scientific and clinical advances, we continued to
solidify our financial presence, as exemplified by our listing on
Nasdaq in November. We remain listed on the London Stock Exchange
and a member of the FTSE 250; this joint listing on Nasdaq expands
our access to capital in the U.S. as well as Europe. We have long
worked with scientists and physicians around the world in our drive
to bring novel therapeutics to patients, and we are proud to have
expanded our global reach to the investor community as well.
LYT-100: A case study for our R&D model
Our development program for LYT-100 is the perfect case study of
our R&D model and is emblematic of our commitment to leveraging
our extensive knowledge of the BIG Axis and lymphatic biology on
behalf of patients with serious unmet need. The LYT-100 story also
underscores our commitment - distinctive in the biotech world - to
follow the science wherever it takes us, and to move nimbly and
strategically to seize new opportunities which hold significant
potential value for patients and shareholders alike.
Our unique insights into the biology of the lymphatic system led
us to identify LYT-100 and acquire its related intellectual
property in 2019. The story of LYT-100 is illustrative of our
approach to pipeline development at PureTech. Our foundational
insights into the lymphatic biology and related immunology that
underly the BIG Axis prompted us to recognize the role of
inflammation and fibrosis in lymphedema, a major underserved
disorder of the lymphatic system. While investigating this pathway,
we were able to tap into our network of scientific and business
collaborators to identify unpublished data on the approved drug
pirfenidone. That, in turn, led us to LYT-100. Why were we so
interested? The goal in designing LYT-100, a deuterated, oral small
molecule, is to have a differentiated profile, which may overcome
some of the historic challenges associated with pirfenidone, an
approved and marketed anti-inflammatory and anti-fibrotic drug for
the treatment of IPF. Pirfenidone is effective, but it is
associated with significant tolerability issues and requires
frequent dosing. As a result, about half of patients discontinue
treatment, dose adjust or switch therapies, which leads to
suboptimal disease management. We are developing LYT-100 to offer a
differentiated safety profile compared to current standard of care
drugs, which may support improved patient compliance not only in
IPF but also a wide range of other inflammatory and fibrotic
diseases.
In keeping with our commitment to put all our programs to a
rigorous test before investing heavily in clinical development, we
launched a randomized, double-blind multiple ascending dose and
food effect study of LYT-100 in healthy subjects in 2020. We
reported the results this past fall: The study demonstrated
favorable proof-of-concept for LYT-100's tolerability and
pharmacokinetic profile and paved the way for twice-a-day dosing
without regard to meals in future studies. We believe this work
substantially de-risked the program and opened the door for
potentially rapid clinical development.
We are deeply excited about LYT-100 because we believe it has
substantial potential to treat a wide range of interstitial lung
diseases (ILDs), including IPF and other progressive fibrosing
ILDs. These are devastating and often deadly diseases that
collectively affect approximately 200,000 people in the U.S. alone.
We aim to bring patients new hope and more therapeutic options
given the devastating nature of the disease and limitations with
current standards of care.
LYT-100 also has strong potential in lymphedema, a serious
chronic condition that affects roughly one million people in the
U.S. This disease, which leads to painful and sometimes disfiguring
swelling, is particularly devastating for breast cancer patients,
who have no treatments other than compression bandages and physical
therapy. At PureTech, we maintain a laser focus on debilitating
diseases with inadequate treatment options, and this population
certainly meets that criteria. We are hopeful we can bring these
patients relief with LYT-100. Our Phase 2a proof-of-concept study
is enrolling patients with breast cancer-related, upper limb
secondary lymphedema; we expect to report topline results in the
first half of 2022.
The LYT-100 story is also a window into the way we at PureTech
can move nimbly and with great speed to address unexpected
challenges.
By late spring of 2020, as the COVID pandemic surged, we were
starting to hear deep concerns from our network of leading
pulmonologists about the long-lasting effects of the infection.
They were seeing patients who had recovered from the acute phase of
their illness and had been discharged from the hospital - yet who
continued to suffer from severe shortness of breath, deep fatigue
and muscle weakness that significantly limited their ability to
return to their daily activities. This long-lasting respiratory
dysfunction, along with other serious and persistent symptoms,
would later be designated Long COVID or PACS. The symptoms appear
to mimic respiratory complications of other viral pneumonias like
Severe Acute Respiratory Syndrome (SARS) and Middle East
Respiratory Syndrome (MERS), and up to one third of SARS and MERS
survivors had abnormal pulmonary testing and lung imaging that
persisted for years. Testimony from Long COVID-affected patients
and epidemiological studies published in The Lancet and elsewhere
confirmed the serious nature of this threat, which the World Health
Organization has called a top priority for research in 2021 and the
United States Congress has given the National Institutes of Health
over $1 billion to study.
We quickly recognized that LYT-100's anti-fibrotic and
anti-inflammatory properties had the potential to address the
debilitating sequelae of COVID infection. We knew we had an
obligation to evaluate this potential as quickly as possible, and I
am proud to say that our team moved mountains to rapidly assess the
unmet need, establish protocols and secure regulatory approvals for
a global clinical study. Within months, we had launched a
randomized, placebo-controlled Phase 2 trial of LYT-100 in Long
COVID - one of just a handful of clinical programs worldwide to
evaluate a potential therapy for this condition, which could affect
a substantial portion of the over 125 million people worldwide who
have been infected with COVID-19. We are enrolling in both the U.S.
and Europe and expect a readout in the second half of 2021.
Our innovative approach to R&D continues to shape the growth
of our Wholly Owned Pipeline. We are quite excited about our two
anti-cancer monoclonal antibodies, LYT-200 and LYT-210. And we are
also eager to initiate a clinical trial with LYT-300 later this
year. We see substantial potential for LYT-300 in a wide array of
neurological and neuropsychological conditions where patients have
been waiting for far too long for effective treatments.
Strong financing to support focused development
At the start of 2021, we celebrated PureTech's U.S. listing on
Nasdaq with a virtual bell ringing ceremony. It was a wonderful
opportunity both to mark how far we've come and to look ahead with
pride and confidence at our opportunities to build additional value
for shareholders while potentially providing enormous value for
patients. We were delighted to be joined at the bell ringing by our
new chief financial officer, George Farmer, Ph.D., an experienced
financial analyst and biotech executive who joined our management
team in January 2021.
At the PureTech level, we are well-capitalized with cash
resources into the first quarter of 2025. Our strong financial
position is the result of our unique strategy, which allows us to
derive value from the equity growth of our Founded Entities. In
2020, we generated cash proceeds of $350.6 million from the sales
of equity in our Founded Entities, and in February 2021 we
generated an additional $118 million. This approach provided us
with access to non-dilutive funding for our operations and growth
and to further expand and advance our Wholly Owned Programs, while
still maintaining significant equity ownership across our Founded
Entities.
The Founded Entities are also well-capitalized, having raised
$1.2 billion from January 2017 through the end of 2020, with an
additional $473.2 million so far in the 2021 post-period. In the
most recent financial milestone, Vor Biopharma completed a
successful Nasdaq IPO in February of 2021, raising $203.4 million
in gross proceeds before deducting the underwriting discounts and
commissions and other offering expenses.
We are well-positioned for the exciting year ahead, which we
expect to include multiple value drivers across our Wholly Owned
Programs and our Founded Entities, including at least 10 expected
clinical study initiations and nine expected readouts. In addition,
we look forward to a broader U.S. launch of Gelesis' Plenity and
Akili's EndeavorRx.
I would like to thank the entire PureTech team on their
resilience this year as we accomplished historic milestones as an
organization while navigating remote working and the emotional
strain of a global pandemic. I would also like to extend my
gratitude to our tremendous Board and R&D Committee for their
wise counsel and strategic oversight. We are fortunate to have a
dedicated team and outstanding scientific collaborators who remain
committed to developing highly differentiated medicines for
patients in dire need of better options. To our shareholders: Thank
you for your vision and continued support over the last year.
Above all, we thank the patients and clinicians working
alongside us in our clinical trials. We are grateful for your
support, humbled by your trust and inspired by your courage. You
make possible the medical advances of the future.
We look forward to another transformational year focused on
giving life to science and making a difference for patients -
together.
Daphne Zohar
Founder, Chief Executive Officer and Director
April 14, 2021
1 $200.9 million in proceeds from the January 22, 2020 sale of
2.1 million Karuna common shares, $45.0 million in proceeds from
the May 25, 2020 sale of 555.5 thousand Karuna common shares and
$3.0 million in proceeds from the April 30, 2020 sale of 2.1
million resTORbio common shares.
2 EndeavorRx is indicated to improve attention function as
measured by computer-based testing in children ages 8-12 years old
with primarily inattentive or combined-type ADHD, who have a
demonstrated attention issue. Patients who engage with EndeavorRx
demonstrate improvements in a digitally assessed measure Test of
Variables of Attention (TOVA) of sustained and selective attention
and may not display benefits in typical behavioral symptoms, such
as hyperactivity. EndeavorRx should be considered for use as part
of a therapeutic program that may include clinician-directed
therapy, medication, and/or educational programs, which further
address symptoms of the disorder. EndeavorRx is available by
prescription only. It is not intended to be used as a stand-alone
therapeutic and is not a substitution for a child's medication.
3 Long COVID is a term being used to describe the emerging and
persistent complications following the resolution of COVID-19
infection, also known as post-acute COVID-19 syndrome (PACS).
4 $101.6 million in proceeds from the August 26, 2020 sale of 1.3 million Karuna common shares.
5 Important Safety Information: Patients who are pregnant or are
allergic to cellulose, citric acid, sodium stearyl fumarate,
gelatin, or titanium dioxide should not take Plenity. To avoid
impact on the absorption of medications: For all medications that
should be taken with food, take them after starting a meal. For all
medications that should be taken without food (on an empty
stomach), continue taking on an empty stomach or as recommended by
your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were
diarrhea, distended abdomen, infrequent bowel movements, and
flatulence. Contact a doctor right away if problems occur. If you
have a severe allergic reaction, severe stomach pain, or severe
diarrhea, stop using Plenity until you can speak to your doctor. Rx
Only. For the safe and proper use of Plenity or more information,
talk to a healthcare professional, read the Patient Instructions
for Use, or call 1-844-PLENITY.
6 For more information in relation to the PureTech Level Cash
and Cash Equivalents and Consolidated Cash and Cash Equivalents
measures used in this Annual Report, please see pages 75 and 76 of
the Financial Review.
Letter from the Chief Innovation Officer and the Chief
Scientific Officer
2020 was a transformational year for PureTech's pipeline. For
the first time, two therapeutic candidates from within our Wholly
Owned Pipeline entered the clinic, and over the course of just
twelve months, we initiated a total of four clinical trials
evaluating these candidates across three different indications,
with one trial reading out successfully so far for LYT-100.
Additionally, we grew our Wholly Owned Pipeline with the nomination
of a new therapeutic candidate, LYT-300 (oral allopregnanolone)
that was born from one of our three discovery platforms and for
which we expect to initiate a clinical trial by the end of this
year. For PureTech, this progress is both characteristic of our
R&D engine that has yielded 26 therapeutics and therapeutic
candidates being advanced via our Wholly Owned Pipeline and our
Founded Entities, and it is demonstrative of our strategic shift to
retain full ownership in our innovations as we advance our Wholly
Owned Pipeline.
This momentum was not stymied by the global pandemic that
changed so much about the world in 2020. In fact, as the pandemic
threw down a gauntlet to therapeutic innovators, we were all
challenged to think boldly, move nimbly and harness minds and
resources to meet this immense public health challenge. This global
response is akin to PureTech's distinctive approach to R&D: We
start with the unmet need, identify the ideal solution, put the
brightest minds on discovery, aggressively evaluate feasibility,
and then pursue development with scientific rigor and the input of
world-leading experts.
Leveraging our leadership in understanding of the immune system,
we applied our R&D approach to identifying LYT-100, an exciting
therapeutic candidate with potential to treat several important
serious conditions of high unmet need. Based on a substantial body
of data, we are developing LYT-100 for multiple therapeutic
indications involving inflammation, fibrosis and disorders of
lymphatic flow, including progressive fibrosing interstitial lung
diseases such as idiopathic pulmonary fibrosis (IPF), lymphedema
and severe respiratory sequelae of COVID-19, which is now commonly
called "Long COVID" or post-acute COVID-19 syndrome (PACS). The
common thread? Immune dysfunction and fibrosis.
PureTech has been developing expertise in immunology for years.
We have continued to deepen our focus on the BIG Axis of the Brain,
Immune and Gut - complex and dynamic modulatory systems that enable
us to respond in healthy ways to changing circumstances but that,
when disrupted, give rise to a wide range of diseases. The BIG Axis
is tied together by the 3,500 kilometers of lymphatic vessels that
thread our bodies, studded with highly specialized nodes that
filter and train immune cells for their local tissues. That vast
lymphatic system is not just a passive vessel for fluid but a
vibrant organ with an active and important role in regulating the
immune system.
Our understanding of the importance of this system led us to
LYT-100 (deupirfenidone), a new chemical entity which retains the
pharmacology of pirfenidone - an FDA-approved treatment for IPF
that has been granted FDA Breakthrough Therapy designation in
unclassifiable interstitial lung diseases (ILDs) - but which has a
differentiated pharmacokinetic profile. We will be evaluating
whether LYT-100 can offer tolerability and efficacy with less
frequent dosing, and our goal is to mitigate some of the GI-related
tolerability issues that have historically been associated with
pirfenidone and limited its usage. LYT-100 has been observed to
reduce pro-inflammatory cytokines IL-6 and TNF- <ALPHA> in
preclinical models. Both cytokines may be involved in the
hyperinflammatory response to external assault such as virus
infection. LYT-100 is also anti-fibrotic and suppresses TGF-
<BETA> induced production of scar tissue components such as
collagen.
We are building on a comprehensive body of research evaluating
LYT-100. A foundational milestone came in the fall of 2020, when we
reported results from a Phase 1 multiple ascending dose and food
effect study. LYT-100 was well-tolerated at all pre-specified
doses, with a favorable pharmacokinetic profile. All adverse events
that were possibly or probably related to LYT-100 were mild and
transient and there were no discontinuations of subjects while
taking LYT-100. These results provided strong proof-of-concept for
the potential tolerability of LYT-100, and we moved rapidly to
initiate two Phase 2 clinical trials for LYT-100.
The first study is in Long COVID. This is one of just a handful
of clinical trials anywhere in the world to assess a potential
therapy for this serious public health threat. Our decision is
based not only on the results of the Phase 1 study, but also on a
substantial body of preclinical research. The second study is in
lymphedema, a debilitating condition that affects approximately one
million people in the U.S., and is particularly prevalent in women
recovering from breast cancer. There is currently no approved
pharmaceutical treatment for lymphedema.
Idiopathic pulmonary fibrosis (IPF) and potentially other
progressive fibrosing interstitial lung diseases (PF-ILDs)
Because of the unique properties demonstrated with LYT-100, we
are now planning registration-enabling studies of LYT-100 for IPF
and potentially other PF-ILDs, which represent a deep area of
underserved medical need and substantial commercial opportunities,
and we expect to provide additional guidance later this year. There
are approximately 200,000 people living with PF-ILDs, including
IPF, in the United States. IPF is a progressive condition
characterized by irreversible scarring of the lungs, which worsens
over time and makes it difficult to breathe. The prognosis of IPF
is poor, with the median survival after diagnosis generally
estimated at two to five years.
Current treatments for PF-ILDs, including pirfenidone (approved
for IPF only) and nintedanib, have serious limitations,
particularly GI-related tolerability issues. In fact, one large,
multinational post-marketing analysis of about 11,000 patients with
IPF found that only about 13 percent were receiving pirfenidone
during a follow-up period of approximately five years. We believe a
therapeutic compound that improves upon tolerability, dosing
frequency and the overall clinical profile of pirfenidone, while
retaining or exceeding its efficacy, would be an attractive
therapeutic option for IPF and potentially other PF-ILDs, and we
intend to communicate our clinical development plans for LYT-100
later this year.
Groundbreaking Phase 2 clinical trial for Long COVID
The COVID-19 pandemic has affected over 125 million people
around the world, and there is increasing data around the
longer-term complications of COVID-19, referred to as Long COVID or
PACS, including data regarding respiratory issues that persist
following recovery. Survivors of the virus can have lung fibrosis
that causes shortness of breath and other problems that could
potentially last for years, and a high proportion of mild, moderate
and severe COVID-19 patients (up to 53 percent in one study)
already show signs of lung fibrosis at three weeks post symptom
onset. We have now embarked on a global, randomized, double-blind,
placebo-controlled Phase 2 trial designed to evaluate the efficacy,
safety, and tolerability of LYT-100 in adults with post-acute
COVID-19 respiratory complications. The primary endpoint is a
standardized test of how far a patient can walk in six minutes.
Secondary endpoints, including pharmacokinetics, inflammatory
biomarkers, imaging and patient-reported outcomes will also be
evaluated. The study is ongoing initiated in both the United States
and Europe; results are expected in the second half of 2021.
Phase 2a study of LYT-100 in lymphedema
In 2020, we also initiated a Phase 2a trial of LYT-100 in
lymphedema to explore clinical efficacy endpoints in patients with
breast-cancer related, upper limb secondary lymphedema. Lymphedema
is a debilitating condition that affects approximately one million
people in the U.S., and it is particularly prevalent in women
recovering from breast cancer. It can lead to painful and
disfiguring swelling and recurring infections, yet there are no
approved drugs and little relief for patients other than
compression bandages, physical therapy and massage. This is
particularly unfortunate as the lymphatic damage induces a vicious
feedback loop of inflammation and fibrosis with immune infiltration
of tissues. It is a biochemical process - so while physical
treatments offer palliation, a therapeutic approach is urgently
needed.
The randomized, placebo-controlled, Phase 2a proof-of-concept
study of LYT-100 is expected to enroll up to 50 patients. The
primary endpoints will be safety and tolerability, with secondary
clinical efficacy and biomarker endpoints. Results are expected in
the first half of 2022.
Anti-cancer programs: LYT-200 targeting galectin-9 and LYT-210
targeting gamma delta-1 T cells
We have also made great strides in our anti-cancer programs,
both of which are built around fully human monoclonal antibodies
that target foundational immunosuppressive mechanisms. We see
potential for both LYT-200 and LYT-210 as single agents as well as
in combination with checkpoint inhibitors and other anti-cancer
treatments.
We were thrilled to launch a Phase 1 trial of LYT-200 in
December. The adaptive trial design will assess the safety and
tolerability of escalating doses of LYT-200. Results are expected
in the fourth quarter of 2021, and we may then proceed with a
chosen dose into Phase 2. We shared the strong preclinical data
supporting LYT-200 and its target, galectin-9, at the American
Association for Cancer Research 2020 Virtual Annual Meeting.
Galectin-9 is an immuno-suppressive protein prominently expressed
in multiple difficult-to-treat cancers, including breast cancer,
pancreatic and cholangiocarcinoma. Analysis of a vast data set
suggested that high galectin-9 levels in tumor cells and immune
cells within the tumor microenvironment (TME) are associated with
shorter time to cancer relapse as well as with an immuno-suppressed
TME phenotype in a number of solid tumors. Additionally, a recent
study published in Nature Communications identified the molecular
mechanism by which PD-1 and galectin-9 interact to shield tumors
from the immune system, demonstrating for the first time that
galectin-9 is a ligand for PD-1 and emphasizing its importance as a
promising target for immunotherapy. Data suggests galectin-9 may
also be an informative biomarker to enrich future clinical studies,
a hypothesis we are further exploring with the support of a grant
received from the Department of Defense (DOD) in the fall of
2020.
Our preclinical LYT-210 program continues to show promise and
support our development rationale that immunosuppressive gamma
delta-1 T cells correlate with more aggressive disease in a range
of tumor types. To date, both in vivo and in vitro research
demonstrates that targeting these T cells can stimulate an
anti-cancer immune response and may be synergistic with checkpoint
inhibitors.
LYT-300: Leveraging lymphatic targeting through the Glyph(TM)
platform
We further expanded our Wholly Owned Pipeline in 2020 with the
nomination of LYT-300, which will be entering the clinic this
year.
LYT-300 is an oral form of a natural neurosteroid called
allopregnanolone, an IV version of which has been approved by the
Food and Drug Administration to treat postpartum depression and is
administered over the course of 60 hours, under medical
supervision, which is a high treatment burden for any patient.
Allopregnanolone has been recognized for its therapeutic potential
in a range of neurological and neuropsychological conditions,
including epilepsy, anxiety, depression, essential tremors and
sleep disorders. Allopregnanolone belongs to a class of natural
neurosteroids whose important role in a range of neurological
conditions is well established; however, these neurosteroids are
not orally bioavailable, which has greatly limited their evaluation
as potential therapeutics. Making these natural neurosteroids, such
as allopregnanolone, orally bioavailable could potentially allow
for their development against a number of neurological
conditions.
Our approach: our Glyph technology platform, which employs the
body's natural lipid absorption and transport process to send oral
drugs into the lymphatic system and bypass first-pass metabolism by
the liver. We essentially coopt the incredible system of lymphatics
vasculature to create an option for drug distribution that bypasses
natural barriers and keeps the compound from being destroyed by the
liver. We have demonstrated mechanistic proof-of-concept of LYT-300
(oral allopregnanolone) in vivo and intend to initiate a Phase 1
clinical trial by the end of 2021.
Additional novel therapeutic platforms: Orasome(TM) and
meningeal lymphatics
Glyph is just one of our three novel therapeutic platforms, each
of which enriches our drug discovery process with highly versatile
technology. Our Orasome technology platform was inspired by the in
vivo trafficking of ubiquitous, naturally occurring vesicles, which
are often referred to as exosomes, and our platform utilizes
multiple vesicle components, including those isolated from milk. We
have engineered these vesicles to remain stable following oral
consumption and transit through the upper GI tract. We are now able
to purify these vesicles in substantial quantities and have
successfully packed a variety of different molecular entities
within them. We are exploring using these vesicles to deliver
nucleic acids such as mRNA and other expression systems that could
instruct the body to make its own proteins. These hardy vesicles
could also be leveraged as a convenient and far less costly way to
administer biological medicines in oral form. We expect preclinical
proof-of-concept and non-human primate data this year.
Finally, we are leveraging the incredible discovery of the
brain's lymphatic network - located in the meninges - to evaluate a
wide range of therapeutic possibilities. Correcting neurological
lymphatic dysfunction could provide an avenue into treating
multiple neurodegenerative and neuroinflammatory conditions that
have largely resisted drug development efforts, such as Alzheimer's
disease and Parkinson's disease. PureTech is building deep
expertise around the anatomy and physiology of this novel system to
understand its involvement in disease and ways to modulate its
function. A collection of our research insights into this
fascinating new area of medicine will be submitted to a
peer-reviewed publication in 2021.
Although this has been a hard year for all of us in many ways,
we are proud of the significant achievements of PureTech's stellar
scientific and clinical teams. The challenges of the COVID-19
pandemic have made us all even more aware of the vital importance
of our work and the urgency of patient need. Our team has
demonstrated an agility, resourcefulness and strategic mindset that
enabled us to respond nimbly to the pandemic while advancing a
rapidly growing clinical pipeline of potentially important
therapeutic candidates and a diverse and exciting research
portfolio. We congratulate our team on rallying to meet the needs
of the moment, working patiently through the heightened health
precautions we have adopted, and opening new horizons for
lymphatic-based therapeutic approaches and related immunology.
Throughout this year, we have all experienced the joy of discovery
and the satisfaction of advancing important programs to meet
profound medical needs. We are also incredibly grateful to the
patients, volunteers and caregivers participating in our clinical
studies who are making invaluable contributions to research that
could potentially improve treatment outcomes for so many.
We look forward to the discoveries and milestones to come as we
continue to accelerate the growth of PureTech's Wholly Owned
Programs.
Dr. Joseph Bolen
Chief Scientific Officer
Dr. Eric Elenko
Chief Innovation Officer
April 14, 2021
How PureTech is building value for investors
We are a clinical-stage biotherapeutics company dedicated to
discovering, developing and commercializing highly differentiated
medicines for devastating diseases, including inflammatory,
fibrotic and immunological conditions, intractable cancers,
lymphatic and gastrointestinal diseases and neurological and
neuropsychological disorders, among others.
The therapeutic candidates within our Wholly Owned Pipeline and
the therapeutics and therapeutic candidates being developed by our
Founded Entities were initiated by our experienced research and
development team and our extensive network of scientists,
clinicians and industry leaders.
We established the underlying programs and platforms that have
resulted in 26 therapeutics and therapeutic candidates that are
being advanced within our Wholly Owned Programs or by our Founded
Entities. Of these therapeutics and therapeutic candidates, 15 are
clinical-stage and two have been cleared for marketing by the FDA
and granted marketing authorization in the European Economic Area,
or EEA, and in other countries that recognize the CE Mark. Our
Non-Controlled Founded Entities are advancing 10 of these
therapeutic candidates, including two that are currently in Phase
3/Pivotal studies, as well as two FDA-cleared therapeutics. Our
Controlled Founded Entities are advancing 10 of these therapeutic
candidates, including one that is expected to enter a Phase 3 study
and three that are in Phase 2 development, and we are advancing
four of these therapeutic candidates within our Wholly Owned
Pipeline. We and our Founded Entities have relationships with
several pharmaceutical companies or their investment arms to
advance some of the programs and platforms underlying these
therapeutics and therapeutic candidates.
All of these underlying programs and platforms were initially
identified or discovered and then advanced by our team through key
validation points based on our unique insights into the biology of
the Brain, Immune and Gut, or BIG, systems and the interface
between those systems, which we refer to as the BIG Axis. The
architectural framework supporting BIG Axis cross-talk is built on
evidence highlighting the presence of 70 percent of the entire
immune cell population in the gut, approximately 500 million
neurons innervating the gastrointestinal, or GI, tract, enteric
neurons as part of the autonomic nervous system and key components
such as the gut epithelial barrier, microbiome, metabolites and
neurotransmitters that play key roles in protecting and influencing
the immune system and central nervous system, or CNS.
We are led by a proven and seasoned management team of business
leaders with significant experience in discovering and developing
important new medicines, delivering them to market and maximizing
shareholder value. Collectively, the members of our management team
have overseen research and development of therapeutics supporting
23 regulatory approvals and have served in the C-suite of companies
acquired for more than $13 billion in the aggregate.
Our team, network and expertise in the BIG Axis enable us to
identify and advance scientific discoveries at the interface of the
BIG systems. We begin by collaborating with a cross-disciplinary
group of experienced clinicians and the world's leading experts in
brain, immune and gut biology in a discovery process that breaks
down specific diseases and comprehensively identifies, reviews and
empirically tests unpublished scientific discoveries in a modality
agnostic and unbiased way. Our model, which employs (1) this
collaborative process leveraging our biological expertise in the
BIG axis and our scientific network, (2) a disciplined approach to
program advancement, and (3) a capital efficient approach to
driving clinical developments and value creation, has enabled us to
rapidly convert these findings into promising therapeutic
candidates.
Historically, we have developed these programs and therapeutic
candidates with strategic allies, including equity partners who
helped us to advance those programs via our Founded Entities. As
these programs have succeeded and our resources have grown, we have
increasingly focused on our Wholly Owned Programs. Our Wholly Owned
Programs are designed to harness key immunological, fibrotic and
lymphatic system mechanisms. They currently consist of LYT-100, a
clinical-stage therapeutic candidate we are developing for
inflammatory and fibrotic conditions and disorders of lymphatic
flow, LYT-200, a clinical therapeutic candidate targeting a
foundational immunosuppressive protein, galectin-9, which we are
developing as a potential treatment of solid tumors, LYT-210, a
preclinical therapeutic candidate targeting immunomodulatory gamma
delta-1 T cells, which we are developing for a range of cancer
indications and autoimmune disorders, and LYT-300, a preclinical
therapeutic candidate, which we intend to develop for a range of
neurological and neuropsychological conditions. Our Wholly Owned
Programs also include three discovery platforms: Glyph(TM) - our
synthetic lymphatic targeting chemistry platform - and Orasome(TM)
- our oral biotherapeutics platform - both of which leverage
absorption of dietary lipids to traffic therapeutics via the
lymphatic system, and our meningeal lymphatics discovery research
program for treating neurodegenerative and neuroinflammatory
diseases.
Components of our Value
The table to the right depicts the four components of our value:
(1) our Wholly Owned Programs, (2) Founded Entities that we have a
controlling interest in or from which we are entitled to receive
royalty payments, (3) Founded Entities where our interest is
limited to our equity ownership and (4) our available cash, cash
equivalents and short-term investments at the PureTech level.
We hold majority voting control of our Controlled Founded
Entities and continue to play a role in the development of their
therapeutic candidates through representation on their board of
directors, with respect to Follica, Vedanta, Alivio and Sonde. Our
board designees represent a majority of the members of the board of
directors of Follica, Vedanta and Alivio and a minority of the
members of the board of directors of Sonde. With respect to our
Non-Controlled Founded Entities, we do not hold majority equity
ownership and are not responsible for the development or
commercialization of their therapeutic candidates and therapeutics.
Our Non-Controlled Founded Entities have independent management
teams, and we do not control the day-to-day development of their
respective therapeutic candidates.
1. Our Wholly Owned Programs. We are focused on the advancement
of our Wholly Owned Programs and delivering value to our
shareholders by driving our Wholly Owned Programs to key clinical
and commercial milestones, while continuing cutting edge research
and development efforts to discover and advance new therapeutic
candidates. The table to the right includes a summary of our Wholly
Owned Programs and their development status.
2. Founded Entities with Controlling Interest or Right to
Receive Royalties. The table to the right summarizes, in order of
development stage, the therapeutic candidates being developed by
our Founded Entities in which we either have a controlling interest
or the right to receive royalty payments. We established the
underlying programs and platforms that have resulted in the
therapeutic candidates noted in the table and advanced them through
key validation points. Each of these therapeutic candidates targets
indications related to one or more of the BIG systems, and any
value we realize from these therapeutic candidates will be through
the potential growth and realization of equity and royalty stakes
highlighted in the table to the right.
3. Founded Entities Limited to Equity Interest. We also hold
equity ownership in our Non-Controlled Founded Entities, Akili and
Vor. The table to the right describes these entities, in order of
development stage. Our interest in the therapeutic candidates of
these entities is limited to the potential appreciation of our
equity interest in these entities.
4. Cash and Cash Equivalents. We had PureTech level cash and
cash equivalents of $443.4 million as of March 31, 2021 and $349.4
million as of December 31, 202010.
1 The FDA and corresponding regulatory authorities will
ultimately review our clinical results and determine whether our
wholly-owned therapeutic candidates are safe and effective. No
regulatory agency has made any such determination that our
wholly-owned therapeutic candidates are safe or effective for use
by the general public for any indication.
2 Long COVID is a term being used to describe the emerging and
persistent complications following the resolution of COVID-19
infection, also known as post-acute COVID-19 syndrome (PACS).
3 Relevant ownership interests for Founded Entities were
calculated on a diluted basis (as opposed to a voting basis) as of
December 31, 2020, including outstanding shares, options and
warrants, but excluding unallocated shares authorized to be issued
pursuant to equity incentive plans. Karuna ownership is calculated
on an outstanding voting share basis as of March 4, 2021. Vor
ownership is calculated on an outstanding voting share basis as of
February 9, 2021.
4 With the exception of Plenity(R) , candidates are
investigational and have not been cleared by the FDA for use in the
United States.
5 PureTech Health has a right to royalty payments as a percentage of net sales.
6 These therapeutic candidates are regulated as devices and
their development has been approximately equated to phases of
clinical development.
7 Important Safety Information: Patients who are pregnant or are
allergic to cellulose, citric acid, sodium stearyl fumarate,
gelatin, or titanium dioxide should not take Plenity. To avoid
impact on the absorption of medications: For all medications that
should be taken with food, take them after starting a meal. For all
medications that should be taken without food (on an empty
stomach), continue taking on an empty stomach or as recommended by
your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were
diarrhea, distended abdomen, infrequent bowel movements, and
flatulence. Contact a doctor right away if problems occur. If you
have a severe allergic reaction, severe stomach pain, or severe
diarrhea, stop using Plenity until you can speak to your doctor. Rx
Only. For the safe and proper use of Plenity or more information,
talk to a healthcare professional, read the Patient Instructions
for Use, or call 1-844-PLENITY.
8 Contingent on FDA review of the research plan.
9 EndeavorRx(TM) is indicated to improve attention function as
measured by computer-based testing in children ages 8-12 years old
with primarily inattentive or combined-type ADHD, who have a
demonstrated attention issue. Patients who engage with EndeavorRx
demonstrate improvements in a digitally assessed measure Test of
Variables of Attention (TOVA) of sustained and selective attention
and may not display benefits in typical behavioral symptoms, such
as hyperactivity. EndeavorRx should be considered for use as part
of a therapeutic program that may include clinician-directed
therapy, medication, and/or educational programs, which further
address symptoms of the disorder. EndeavorRx is available by
prescription only. It is not intended to be used as a stand-alone
therapeutic and is not a substitution for a child's medication.
10 For more information in relation to the PureTech Level Cash
and Cash Equivalents and Consolidated Cash and Cash Equivalents
measures used in this Annual Report, please see pages 75 and 76 of
the Financial Review.
Key Pipeline Components and Expected Milestones Through 2021
Through 2021, we anticipate many significant potential
milestones across our Wholly Owned Programs and Founded Entities,
including at least nine clinical readouts, at least 10 clinical
trial initiations and the full commercial rollout of two
therapeutics. Of these, five clinical readouts and four clinical
trial initiations are anticipated within our Wholly Owned Programs.
Additionally, we expect the continued progress of discovery and
preclinical programs, as well as the potential for additional
strategic partnerships and transactions and the growth of value
through our equity and royalty holdings in our Founded Entities.
Our Wholly Owned Programs and certain of our Founded Entities'
programs that contribute to our value are as follows:
Our Wholly Owned Programs Harnessing Immunological and Lymphatic
System Mechanisms:
LYT-100, Our Lead Clinical-Stage Therapeutic Candidate Targeting
a Range of Inflammatory, Fibrotic, Lymphatic Flow Disorders and
Other Related Indications: We are advancing our wholly-owned
therapeutic candidate LYT-100 for the potential treatment of
inflammatory and fibrotic conditions and disorders of lymphatic
flow, including lung dysfunction conditions (e.g., IPF and
potentially other PF-ILDs and Long COVID respiratory complications
and related sequelae) and lymphedema. In November 2020, we
announced the completion of a Phase 1 multiple ascending dose and
food effect study, which demonstrated favorable tolerability and PK
proof-of-concept for LYT-100. In December 2020, we announced the
initiation of a Phase 2a proof-of-concept study of LYT-100 in
patients with breast cancer-related, upper limb secondary
lymphedema, with topline results anticipated in the first half of
2022. In December 2020, we announced the initiation of a Phase 2
trial in Long COVID respiratory complications and related sequelae
in both the United States and Europe. Topline results are expected
in the second half of 2021. We are also advancing LYT-100 for the
treatment of IPF and potentially other PF-ILDs, and are planning
registration-enabling studies and expect to provide additional
guidance later this year. Furthermore, we plan to initiate
additional clinical trials of LYT-100 in 2021 to explore further
the PK, dosing and tolerability in healthy volunteers. One of these
trials is an extension of the previously completed MAD study, in
which the maximum tolerated dose was not reached. Results from
these trials are anticipated in 2021 and are expected to provide
additional supportive data to help with the clinical development of
LYT-100 across indications. We have an active IND on file with the
FDA for LYT-100.
LYT-200 and LYT-210, Two Immuno-Oncology, or IO, Therapeutic
Candidates Harnessing Key Immune Cell Trafficking and Programming
Mechanisms: The lymphatic system plays a crucial role in
programming immune cells for precise functions and trafficking them
to specific tissues. By modulating immune cell trafficking and
programming, we are developing therapeutic candidates for the
potential treatment of cancer and other immunological disorders. We
are advancing LYT-200, targeting galectin-9, for a range of cancer
indications, and LYT-210, targeting immunomodulatory gamma delta-1
T cells for a range of cancer indications and autoimmune disorders.
In December 2020, we announced the initiation of our Phase 1
clinical trial of LYT-200 for the potential treatment of metastatic
solid tumors that are difficult to treat and have poor survival
rates, with topline results anticipated in the fourth quarter of
2021. Pending favorable topline results, we intend to initiate the
Phase 2 expansion cohort portion of the trial. We are also
exploring additional biomarker studies for LYT-210 in 2021. We have
an active IND on file with the FDA for LYT-200.
LYT-300, Preclinical Therapeutic Candidate Developed Using our
Glyph Technology Platform, Targeting Neurological and
Neuropsychological Conditions: The most advanced therapeutic
candidate developed from our synthetic lymphatic-targeting
chemistry platform called Glyph is LYT-300 (oral allopregnanolone),
which is being evaluated in a preclinical setting for a range of
neurological and neuropsychological conditions. We expect to
initiate a clinical trial with LYT-300 by the end of 2021.
Our Discovery Platforms - Glyph (Lymphatic Targeting Chemistry
Platform) and Orasome (Oral Biotherapeutics Platform) - Leveraging
Absorption of Dietary Lipids to Traffic Therapeutics via the
Lymphatic System: We are harnessing the role of the lymphatic
system in the absorption of dietary lipids to orally administer and
traffic therapeutics via the lymphatic system. Our Glyph and
Orasome technology platforms are based on this key function of the
lymphatic system. In 2021, we expect preclinical proof-of-concept
data and results from an additional preclinical non-human primate
proof-of-concept study for our Orasome technology platform. We also
expect to advance additional therapeutic candidates from these
platforms internally, and to potentially continue to broaden the
platforms through strategic collaborations around non-core
applications, beyond our existing discovery collaboration with a
large pharmaceutical company.
Our Meningeal Lymphatics Discovery Research Program: The recent
discovery of meningeal lymphatics in the brain, an area once
thought to have immune privilege, has shed new light on
neurodegenerative diseases and lymphatic vessel aging. We believe
that augmenting meningeal lymphatic vasculature function may
potentially improve outcomes for a range of neurodegenerative and
neuroinflammatory conditions that are not currently effectively
treated.
Founded Entities in which PureTech has a controlling interest or
the right to receive royalties, in order of development stage:
Gelesis
Gelesis, Inc., or Gelesis, which is developing a novel category
of therapies for obesity and GI-related chronic diseases, received
clearance from the FDA in April 2019 and European marketing
authorization in June 2020 to market and sell its lead product
Plenity(R)1 (formerly known as Gelesis100) as an aid for weight
management in adults with a BMI of 25-40 kg/m(2) , when used in
conjunction with diet and exercise. Gelesis plans to bring Plenity
to the U.S. first, where it has been available to a limited extent
since the second half of 2019 through an early experience program
and since 2020 via a beta launch while the company ramps up its
commercial operations and inventory for a broader launch in the
second half of 2021. Gelesis plans to seek FDA input on the
requirements for expanding the Plenity label for treating
adolescents. Gelesis is also advancing a pipeline of therapeutic
candidates focused on treating GI disorders. Gelesis initiated a
Phase 3 study of GS500 in functional constipation in the second
half of 2020 and expects to enroll the first patient in 2021.
Additionally, Gelesis expects topline results from a Phase 2 study
of GS200 for weight management and glycemic control in adults with
type 2 diabetes or pre-diabetes in 2021 and to initiate a Phase 2
study of GS300 in non-alcoholic steatohepatitis and non-alcoholic
fatty liver disease, or NASH/NAFLD, also in 2021. We have entered
into a royalty and sublicense income agreement with Gelesis,
pursuant to which we are entitled to low single-digit royalties on
the worldwide net sales of certain commercialized therapeutics, as
well as a low teen percentage of any income Gelesis receives from
sublicensing certain of its technology. Our interest in Gelesis
also includes our equity ownership of 19.3 percent at December 31,
2020.
Karuna
Karuna Therapeutics, Inc., or Karuna, which is developing novel
therapies with the potential to transform the lives of people with
disabling and potentially fatal neuropsychiatric disorders,
including schizophrenia and dementia-related psychosis, is
developing KarXT, an investigational therapeutic candidate designed
to selectively activate muscarinic acetylcholine receptors in the
brain. KarXT is Karuna's proprietary therapeutic candidate, which
combines xanomeline, a muscarinic receptor agonist, with trospium
chloride, an FDA-approved and well established muscarinic receptor
antagonist that has been shown not to measurably cross the
blood-brain barrier, to preferentially stimulate M1/M4 muscarinic
receptors in the brain without stimulating muscarinic receptors in
peripheral tissues in order to achieve meaningful therapeutic
benefit in patients with psychotic and cognitive disorders. In
November 2019, Karuna announced topline results from EMERGENT-1,
its Phase 2 clinical trial of KarXT for the treatment of acute
psychosis in patients with schizophrenia, in which KarXT met the
trial's primary endpoint with a statistically significant
(p<0.0001) and clinically meaningful 11.6 point mean reduction
in total Positive and Negative Syndrome Scale, or PANSS, over
placebo at week five (-17.4 KarXT vs. -5.9 placebo), with similar
discontinuation rates between KarXT (20 percent) and placebo (21
percent). The study enrolled 182 schizophrenia patients with acute
psychosis, 90 of whom received KarXT. The number of
discontinuations due to treatment emergent adverse events, or AEs,
were equal in the KarXT and placebo arms (n=2 in each group). One
SAE was observed in the KarXT treatment group, in which the patient
discontinued treatment and subsequently sought hospital care for
worsening psychosis, meeting the regulatory definition of a serious
adverse event, or SAE. In June 2020, Karuna announced the next
steps in the EMERGENT program, the clinical program evaluating
KarXT for the treatment of adults with schizophrenia, following the
completion of a successful End-of-Phase 2 meeting with the FDA in
June 2020. The EMERGENT program includes the previously completed
positive Phase 2 efficacy and safety trial (EMERGENT-1), two Phase
3 trials evaluating efficacy and safety (EMERGENT-2 and
EMERGENT-3), and two Phase 3 trials evaluating the long-term safety
of KarXT (EMERGENT-4 and EMERGENT-5). The first Phase 3 trial,
EMERGENT-2, was initiated in December 2020. EMERGENT-3 and
EMERGENT-5, the remaining trials in the EMERGENT program, are on
track to initiate in the first half of 2021. In August 2020, Karuna
announced that it would not move forward to develop KarXT in pain.
Topline results from a Phase 1b trial evaluating the analgesic
effects of KarXT on experimentally induced pain in healthy
volunteers were inconclusive and did not provide sufficient
evidence of an analgesic benefit of KarXT compared to placebo.
Additionally, Karuna plans to initiate a Phase 2 trial evaluating
KarXT for the treatment of psychosis in patients with schizophrenia
who have an inadequate response to current standard of care
therapies in the second half of 2021. A multi-cohort,
placebo-controlled, inpatient Phase 1b dose-ranging trial
evaluating the safety and tolerability of KarXT in healthy elderly
volunteers is ongoing. Karuna completed the first two cohorts
in
this trial, Cohorts 1 and 2, and expects data from the final
cohort, Cohort 3, in the second quarter of 2021. We have entered
into an exclusive license agreement with Karuna pursuant to which
we are entitled to receive low single-digit royalties and up to
$10.0 million in milestone payments on worldwide net sales of any
commercialized product covered by the granted license. Our interest
in Karuna also includes our equity ownership of 8.2 percent as of
March 4, 2021.
Follica
Follica, Incorporated, or Follica, which is developing a
regenerative biology platform designed to treat androgenetic
alopecia, epithelial aging and other medical conditions, is
advancing FOL-004 for the treatment of hair loss in male
androgenetic alopecia. In December 2019, Follica announced topline
results from a safety and efficacy optimization study. Follica
announced the completion of a successful End-of-Phase 2 meeting
with the FDA in June 2020, which supports the progression into
Phase 3 development. The initiation of a Phase 3 registration
program is expected in 2021. We are party to a royalty agreement
with Follica pursuant to which we are entitled to low single-digit
royalties on worldwide net sales of certain commercialized
therapeutics and a percentage of any sublicense income for certain
of its technologies within the range of mid single-digit and mid
teen percentages. Our interest in Follica also includes our equity
ownership of 78.2 percent at December 31, 2020.
Vedanta
Vedanta Biosciences, Inc., or Vedanta, which is developing a
potential new category of therapies for immune-mediated diseases
based on a rationally-defined consortia of human microbiome-derived
bacteria, expects topline data from a Phase 2 clinical trial for
VE303 in high-risk CDI in 2021; topline data from a
first-in-patient clinical trial of VE800 in combination with
Bristol-Myers Squibb's checkpoint inhibitor Opdivo(R) (nivolumab)
in patients with selected types of advanced or metastatic cancer in
2021; and topline data from a Phase 1/2 clinical trial for VE416
for food allergy in 2022. Vedanta announced topline data from two
Phase 1 studies in healthy volunteers of VE202, a therapeutic
candidate being developed for IBD in June 2020 and expects to
advance VE202 into a Phase 2 study in IBD in 2021. Our interest in
Vedanta is limited to our equity ownership of 49.5 percent at
December 31, 2020.
Sonde
Sonde Health, Inc. or Sonde, is developing a voice-based
technology platform to measure health when a person speaks. Sonde's
proprietary technology is designed to sense and analyze subtle
changes in the voice to create a range of persistent brain, muscle
and respiratory health measurements that provide a more complete
picture of health in just seconds. Sonde has collected over one
million voice samples from over 80,000 subjects as a part of the
ongoing validation of its platform, and it has also initiated
research and development to expand its proprietary technology into
AD, respiratory and cardiovascular disease, as well as other health
and wellness conditions, including mental health. In July 2020,
Sonde launched Sonde One for Respiratory, a new voice-enabled
health detection and monitoring app, to potentially help employers
improve employee safety, meet government mandates and satisfy their
own administrative needs as they reopen office doors in a COVID-19
environment. Our interest in Sonde is limited to our equity
ownership of 44.6 percent at December 31, 2020.
Alivio
Alivio Therapeutics, Inc., or Alivio, is pioneering
inflammation-targeted disease immunomodulation, which involves
selectively restoring immune homeostasis at inflamed sites in the
body, while having minimal impact on the rest of the body's immune
system, as a novel strategy to treat a range of chronic and acute
inflammatory disorders. This long sought-after approach has the
potential to broadly enable new medicines to treat a range of
chronic and acute inflammatory disorders, including enabling the
use of drugs which were previously limited by issues of systemic
toxicity or PK. Alivio is developing therapeutic candidates that
are designed to selectively treat autoimmune disease without having
related systemic toxicities. Alivio's pipeline includes candidates
for IBD, chronic pouchitis and IC/BPS. Alivio expects an IND filing
for ALV-107 for IC/BPS in 2021 and an IND for ALV-304 for IBD in
2023. Our interest in Alivio is limited to our equity ownership of
78.0 percent at December 31, 2020.
Entrega
Entrega Inc. or Entrega, is focused on the oral administration
of biologics, vaccines and other drugs that are otherwise not
efficiently absorbed when taken orally. The vast majority of
biologic drugs, including peptides, proteins and other
macromolecules, are currently administered by injection, which can
present challenges for healthcare administration and compliance
with treatment regimes. Entrega has ongoing discovery efforts to
expand its pipeline. Our interest in Entrega is limited to our
equity ownership of 72.9 percent at December 31, 2020.
Founded Entities in which PureTech has an equity interest, in
order of development stage:
Akili
Akili Interactive Labs, Inc., or Akili, is pioneering the
development of treatments designed to have direct therapeutic
activity, delivered not through a traditional pill but via a
high-quality video game experience. Akili is developing platform
technologies designed to target a broad range of medical conditions
across neurology and psychiatry. Akili received clearance from the
FDA and European marketing authorization in June 2020 for
EndeavorRx(TM)(2) (formerly known as AKL-T01) as a prescription
treatment for children with ADHD. Delivered through a captivating
video game experience, EndeavorRx is indicated to improve attention
function as measured by computer-based testing in children ages
8-12 years old with primarily inattentive or combined-type ADHD,
who have a demonstrated attention issue. Akili plans to take a
scaled approach to the commercial launch of EndeavorRx in 2021. Our
interest in Akili is limited to our equity ownership of 33.7
percent at December 31, 2020.
Vor
Vor Biopharma, Inc. or Vor, which is a cell therapy company that
combines a novel patient engineering approach with targeted
therapies to provide a single company solution for patients
suffering from hematological malignancies, announced in the January
2021 post-period that the FDA had accepted the company's IND
application for VOR33. Vor plans to enroll the first patient in a
Phase 1/2a clinical trial for VOR33 in the second quarter of 2021
and expects initial human engraftment and protection data from this
trial to be reported in late 2021 or in the first half of 2022. In
the February 2021 post-period, Vor announced the pricing of its
initial public offering of common stock on the Nasdaq Global Market
under the symbol "VOR". The aggregate gross proceeds were
approximately $203.4 million, before deducting the underwriting
discounts and commissions and other offering expenses payable by
Vor. Our interest in Vor is limited to our equity ownership of 8.6
percent at February 9, 2021.
Our Scientific Focus: The Brain-Immune-Gut (BIG) Axis
The therapeutic candidates being advanced within our Wholly
Owned Programs and by our Founded Entities, and our work in these
areas, in close collaboration with leading academic and clinical
experts, has led us to focus on the biological interplay among
these three systems, which we refer to as the BIG Axis. The
architectural framework supporting BIG Axis cross-talk is built on
evidence highlighting the presence of 70 percent of the entire
immune cell population in the gut, approximately 500 million
neurons innervating the GI tract, enteric neurons as part of the
autonomic nervous system and key components such as the gut
epithelial barrier, microbiome, metabolites and neurotransmitters
that play key roles in protecting and influencing the immune system
and CNS.
The brain, immune system and gut lymphatic system form an
interconnected adaptive network to respond to acute and chronic
environmental change. Using the immune system to act as a bridge,
the body relies on the bidirectional relationship between the gut
and brain to maintain normal homoeostasis. Dysregulation of immune
signaling through gut inflammation, microbiome changes and a
compromised intestinal barrier all contribute to a range of
immunological, GI and neurology and neuropsychological disorders.
We have been at the forefront of research and development in the
BIG Axis, including the role of gut-immune transport,
immune-microbial signaling, gut barrier dysfunction and repair and
gut and inflammation selective targeting strategies. Across our
Wholly Owned Programs, we are pursuing strategies to directly reach
the immune system via the mesenteric lymph nodes, addressing
lymphatic flow and vessel restoration disorders and targeting
immunosuppressive and pathogenic lymphocytes.
Recent scientific advances, including the work of our network of
scientific collaborators, have uncovered the lymphatic system as
one of the most critical players in the BIG Axis. In addition to
maintaining the balance of interstitial fluid that surrounds the
body's cells, the lymphatic system plays a key role in conducting
surveillance of the immune system through an intricate network of
vessels connecting the over 300 lymph nodes, serving as a
"superhighway" for programming immune cells for specific functions
and trafficking them to specific tissues. The mesenteric lymph node
group around the intestines serves as the primary interface between
the gut and the immune system and for programming circulating
adaptive immune cells. The recent discovery of meningeal lymphatics
in the brain, an area once thought to have immune privilege, has
shed new light on neurodegenerative diseases and lymphatic vessel
aging.
Through our scientific leadership in the BIG systems and the BIG
Axis, we have created the underlying programs and therapeutic
candidates that have the potential to treat inflammatory and
immunological conditions, intractable cancers, lymphatic and GI
diseases and neurological and neuropsychological disorders, among
others.
Our Focus on the Lymphatic System
The lymphatic system is a network of tissues and organs in the
body that fulfills three essential functions: (1) maintaining the
balance of the fluid that surrounds the body's cells, or
interstitial fluid, (2) conducting surveillance of the immune
system and serving as a "superhighway" for immune cell trafficking
and (3) absorbing dietary lipids through an intricate network of
vessels in the intestinal tract.
Dysfunction of the lymphatic system is associated with numerous
disease states, and we believe that restoring lymphatic function in
various disease settings can yield meaningful patient benefit. Our
proprietary Wholly Owned Programs leverage these critical functions
of the lymphatic system to produce therapeutic candidates with the
potential to treat serious diseases:
-- Maintaining balance of fluids: We are leveraging insights
into the lymphatic system by developing clinical-stage therapeutic
candidate LYT-100 and several discovery-stage programs to address
disorders involving impaired lymphatic flow and other inflammatory
and fibrotic conditions, such as lymphedema and certain
neurological disorders.
-- Immune modulation: The lymphatic system plays a crucial role
in programming immune cells for precise functions and trafficking
them to specific tissues. By modulating immune cell trafficking and
programming, we are developing therapeutic candidates for the
treatment of cancer and immunological disorders. We are advancing
LYT-200, our therapeutic candidate targeting galectin-9 in solid
tumors and LYT-210, our therapeutic candidate targeting
immunosuppressive gamma delta-1 T cells in solid tumors and
autoimmune disorders, for a range of cancer indications and
autoimmune disorders.
-- Driving therapeutics through the lymphatics: We are
harnessing the role of the lymphatic system in the absorption of
dietary lipids to orally administer and traffic therapeutics via
the lymphatic system where immune cells are programmed. LYT-300 and
our Glyph (lymphatic targeting) and Orasome (oral biotherapeutics)
platforms are based on this key function of the lymphatic
system.
Our Model
We employ the following process to identify and develop
therapeutic candidates:
-- Step 1: A Collaborative Discovery Process Leveraging our
Biological Expertise in the BIG Axis and our Scientific Network: We
collaborate with the world's leading domain experts on a
disease-specific discovery theme through the lens of BIG Axis
biology. All of our Wholly Owned Programs target one or more of the
BIG systems and we prioritize programs that have the potential to
reduce early development risk based on preliminary signals of
activity in humans and promising tolerability profiles. We have
proven our ability to efficiently leverage our cross-disciplinary
research and discovery efforts across multiple indications and
potential therapeutic areas. Our program collaborators and
co-inventors across our Wholly Owned Programs and Founded Entities'
programs include leading academic minds; recipients of major awards
such as the Nobel Prize, the U.S. National Medal of Science, the
Charles Stark Draper Prize and the Priestley Medal; members of
prestigious institutions such as the Howard Hughes Medical
Institute, all three of the National Academies and world renowned
academic institutions such as Harvard, MIT, Yale, Columbia, Johns
Hopkins, Imperial College of London and Cornell, among others; and
former senior executives and board members at some of the world's
largest pharmaceutical companies.
-- Step 2: A Disciplined Approach to Program Advancement: We
employ a rigorous and disciplined approach to research and
development. The breadth and depth of our Wholly Owned Programs and
our Founded Entities' programs allow us to quickly pivot resources
to the more promising therapeutic opportunities, strategically
reallocate capital across programs and terminate Wholly Owned
Programs we choose not to pursue without adversely impacting the
development of other programs. We, through our internal resources
and with our extensive expert network and collaboration partners,
repeat key academic work and conduct focused experiments both
internally and externally to rapidly advance those that we believe
hold the greatest promise and deprioritize less attractive
programs. Collectively, these activities decrease the risk of any
individual program event negatively impacting our Wholly Owned
Programs and enable us to preserve capital for the programs across
our Wholly Owned Programs and Founded Entities that we believe have
the greatest opportunity for value creation in alignment with our
shareholders.
-- Step 3: A Capital Efficient Approach to Driving Clinical
Development and Value Creation: Our management team has
successfully driven these therapeutic candidates from early stage
research and development, through POC and into clinical trials and
has supported dedicated teams at our Non-Controlled Founded
Entities through pivotal trials and FDA clearance. We have financed
our development efforts through strategic collaborations,
pharmaceutical partnerships, non-dilutive funding mechanisms,
including through the sale of our Founded Entities' equity and
through grants, and public and private equity financings. We
leverage shared resources, institutional knowledge and
infrastructure between our earlier-stage Founded Entities and
development efforts within our Wholly Owned Programs to advance our
programs efficiently prior to POC. This approach has enabled the
discovery and development of 26 therapeutics and therapeutic
candidates to date, including two that have been cleared for
marketing by the FDA and granted marketing authorization in the
EEA, between our Wholly Owned Programs and our Founded Entities, in
which we retain equity ownership ranging from 8.6 percent to 78.0
percent. We had PureTech level cash and cash equivalents of $443.4
million as of March 31, 2021 and $349.4 million as of December 31,
2020(5) . From January 1, 2017 to December 31, 2020, our Founded
Entities strengthened their collective balance sheets by attracting
$1.2 billion in investments and non-dilutive funding, including
$1.1 billion from third parties. As part of our disciplined capital
management, we have been able to generate $477.8 million in
non-dilutive funding, as of February 9, 2021, through the sales of
portions of Founded Entity shares.
Our Strategy
Our goal is to identify, invent, develop and commercialize
innovative new categories of therapeutics that are derived from our
deep understanding of the BIG Axis to address significant unmet
medical needs. To achieve this goal, key components of our strategy
include:
-- Advancing Wholly Owned Programs Through Development and
Commercialization, Including Pipeline Expansion:
- Progressing LYT-100, LYT-200, LYT-210 and LYT-300 through
clinical studies: We are developing novel classes of
immunomodulatory drugs to treat serious diseases, including lung
dysfunction, immuno-oncology, lymphatic, neurological and
neuropsychological disorders.
- Harnessing our proprietary drug discovery and development
capabilities to drive pipeline maturation and expansion: We are
pioneering the development of therapeutic candidates by leveraging
our unique insights into the lymphatic system and the BIG Axis. Our
Wholly Owned Programs currently comprise four proprietary
therapeutic candidates and three innovative technology platforms.
We intend to leverage our proprietary technology platforms, as well
as our extensive network with world-leading scientists in
immunology and lymphatics and major pharmaceutical companies, to
generate and acquire additional novel therapeutic candidates. To do
so, we will rely on the track record of our team, which has been
instrumental in the generation of 26 therapeutics and therapeutic
candidates to date between our Wholly Owned Programs and our
Founded Entities, including two that have been cleared for
marketing by the FDA and granted marketing authorization in the
EEA, as well as our established internal identification and
prioritization approach. We will continue to take advantage of our
differentiated model to manage the risk of any single program and
quickly redeploy resources towards performing assets.
- Maximizing the impact of our Wholly Owned Programs by
expanding development across multiple indications: We aim to focus
our development efforts on therapeutic candidates that have the
potential to treat multiple diseases and plan to develop them in
additional indications where warranted. For example, we believe
that our therapeutic candidate LYT-100 has the potential to be
evaluated in multiple inflammatory and fibrotic indications beyond
our initial target indication of lymphedema, such as IPF and
potentially other PF-ILDs and Long COVID respiratory complications
and related sequelae. We are initially developing our other
therapeutic candidates, LYT-200 and LYT-210, for the treatment of
certain cancers, including CCA, colorectal cancer, or CRC, and
pancreatic cancers, among others, and we are evaluating LYT-210 for
the potential treatment of GI autoimmune diseases as well. Lastly,
we are evaluating LYT-300 for a range of neurological and
neuropsychological conditions.
-- Deriving Value from Equity Growth of Our Founded Entities:
Historically, we have pursued a variety of strategic options to
fund and drive the development of our Founded Entities' therapeutic
candidates, including private and public financings and multiple
partnerships and collaborations with selected partners. In the
preliminary stages of our growth, we partnered with equity
investors, pharmaceutical and biotechnology companies and
government and non-governmental organizations for certain of our
Founded Entities which are now in advanced stages and have the
potential for near-term value creation with significant upside
potential. Going forward, our Founded Entities may participate in
private and public financings, enter into partnerships and
collaborations, partner with equity investors, pharmaceutical and
biotechnology companies and government and non-governmental
organizations and generate revenues from sales of products. We hold
equity ownership in our Founded Entities and benefit from their
growth and catalysts such as M&A transactions, IPOs and
royalties from sales. We also intend to strategically monetize our
equity holdings in our Founded Entities after significant value
creation has occurred, generating non-dilutive financing. For
example, PureTech generated cash proceeds of $350.6 million in 2020
and an additional $118 million in the 2021 post-period, from the
sales of equity in our Founded Entities, which we intend to use to
fund our operations and growth and to further expand and advance
our clinical-stage Wholly Owned Pipeline, while still maintaining
significant equity ownership to derive value from future growth of
that entity. We may create additional entities opportunistically
based on future strategic imperatives.
-- Advancing Discovery Platforms by Partnering Non-Core
Applications via Non-Dilutive Funding Sources, Including
Partnerships and Grants, to Enable Retention of Value: As we
further develop our Wholly Owned Programs through key value
inflection points, we may opportunistically enter into strategic
partnerships when we believe that such partnerships could add value
to the development or potential commercialization of our
wholly-owned therapeutic candidates. We will also continue to
pursue government grant funding and discovery partnerships that
allow us to maintain most of the value of our platforms while
offsetting operational costs.
We believe this combination of development of our Wholly Owned
Programs, Founded Entity advancement and non-dilutive partnerships
and funding provides us with a unique and multi-pronged engine
fueling potential future growth.
By Order of the Board
Daphne Zohar
Founder, Chief Executive Officer and Director
April 14, 2021
1 Important Safety Information: Patients who are pregnant or are
allergic to cellulose, citric acid, sodium stearyl fumarate,
gelatin, or titanium dioxide should not take Plenity. To avoid
impact on the absorption of medications: For all medications that
should be taken with food, take them after starting a meal. For all
medications that should be taken without food (on an empty
stomach), continue taking on an empty stomach or as recommended by
your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were
diarrhea, distended abdomen, infrequent bowel movements, and
flatulence. Contact a doctor right away if problems occur. If you
have a severe allergic reaction, severe stomach pain, or severe
diarrhea, stop using Plenity until you can speak to your doctor. Rx
Only. For the safe and proper use of Plenity or more information,
talk to a healthcare professional, read the Patient Instructions
for Use, or call 1-844-PLENITY.
2 EndeavorRx(TM) is indicated to improve attention function as
measured by computer-based testing in children ages 8-12 years old
with primarily inattentive or combined-type ADHD, who have a
demonstrated attention issue. Patients who engage with EndeavorRx
demonstrate improvements in a digitally assessed measure Test of
Variables of Attention (TOVA) of sustained and selective attention
and may not display benefits in typical behavioral symptoms, such
as hyperactivity. EndeavorRx should be considered for use as part
of a therapeutic program that may include clinician-directed
therapy, medication, and/or educational programs, which further
address symptoms of the disorder. EndeavorRx is available by
prescription only. It is not intended to be used as a stand-alone
therapeutic and is not a substitution for a child's medication.
3 Relevant ownership interests for Founded Entities were
calculated on a diluted basis (as opposed to a voting basis) as of
December 31, 2020, including outstanding shares, options and
warrants, but excluding unallocated shares authorized to be issued
pursuant to equity incentive plans. Karuna ownership is calculated
on an outstanding voting share basis as of March 4, 2021. Vor
ownership is calculated on an outstanding voting share basis as of
February 9, 2021.
4 Long COVID is a term being used to describe the emerging and
persistent complications following the resolution of COVID-19
infection, also known as post-acute COVID-19 syndrome (PACS).
5 For more information in relation to the PureTech Level Cash
and Cash Equivalents and Consolidated Cash and Cash Equivalents
measures used in this Annual Report, please see pages 75 and 76 of
the Financial Review.
Risk management
The execution of the Group's strategy is subject to a number of
risks and uncertainties. As a clinical-stage biotherapeutics
company, the Group operates in an inherently 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 assurance against loss.
Risks are formally identified by the Board and appropriate
processes are put in place to monitor and mitigate them on an
ongoing basis. 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. These risks are only a high level summary of the
principal risks affecting our business; any number of these or
other risks could have a material adverse effect on the Group or
its financial condition, development, results of operations,
subsidiary companies and/or future prospects. Further information
on the risks facing the Group can be found on pages 191 to 227,
which also includes a description of circumstances under which
principal and other risks and uncertainties might arise in the
course of our business and their potential impact.
Risk Impact* Management Plans/Actions
----------------------------------- --------------------------------------- ---------------------------------------
1 Risks related to science
and technology failure The failure of any Before making any decision
The science and technology of our businesses could to develop any technology,
being developed or commercialized decrease our value. extensive due diligence
by some of our businesses A failure of one of is carried out that covers
may fail and/or our businesses the major businesses all the major business risks,
may not be able to develop could also impact the including technological
their intellectual property perception of PureTech feasibility, market size,
into commercially viable as a developer of high strategy, adoption and intellectual
therapeutics or technologies. value technologies property protection.
There is also a risk and possibly make additional A capital efficient approach
that certain of the businesses fundraising at PureTech is pursued such that some
may fail or not succeed or any Founded Entity level of proof of concept
as anticipated, resulting more difficult. has to be achieved before
in significant decline substantial capital is committed
of our value. and thereafter allocated.
Capital deployment is generally
tranched so as to fund programs
only to their next value
milestone. Members of our
Board serve on the board
of directors of several
of the business so as to
continue to guide each business's
strategy and to oversee
proper execution thereof.
We use our extensive network
of advisors to ensure that
each business has appropriate
domain expertise as it develops
and executes on its strategy
and the R&D Committee of
our Board reviews each program
at each stage of development
and advises our Board on
further actions. Additionally,
we have a diversified model
with numerous assets such
that the failure of any
one of our businesses would
not result in a failure
of all of our businesses.
----------------------------------- --------------------------------------- ---------------------------------------
2 Risks related to clinical
trial failure A critical failure We have a diversified model
Clinical trials and other of a clinical trial such that any one clinical
tests to assess the commercial may result in termination trial outcome would not
viability of a therapeutic of the program and significantly impact our
candidate are typically a significant decrease ability to operate as a
expensive, complex and in our value. Significant going concern. We have dedicated
time-consuming, and have delays in a clinical internal resources to establish
uncertain outcomes. trial to support the and monitor each of the
Conditions in which clinical appropriate regulatory clinical programs in order
trials are conducted approvals could impact to try to maximise successful
differ, and results achieved the amount of capital outcomes. We also engage
in one set of conditions required for the business outside experts to help
could be different from to become fully sustainable design clinical programs
the results achieved on a cash flow basis. to help provide valuable
in different conditions information and mitigate
or with different subject the risk of failure. Significant
populations. If our therapeutic scientific due diligence
candidates fail to achieve and preclinical experiments
successful outcomes in are done prior to a clinical
their respective clinical trial to attempt to assess
trials, the therapeutics the odds of the success
will not receive regulatory of the trial. In the event
approval and in such of the outsourcing of these
event cannot be commercialized. trials, care and attention
In addition, if we fail is given to assure the quality
to complete or experience of the vendors used to perform
delays in completing the work.
clinical tests for any
of our therapeutic candidates,
we may not be able to
obtain regulatory approval
or commercialize our
therapeutic candidates
on a timely basis, or
at all.
----------------------------------- --------------------------------------- ---------------------------------------
3 Risks related to regulatory
approval The failure of one We manage our regulatory
The pharmaceutical industry of our therapeutics risk by employing highly
is highly regulated. to obtain any required experienced clinical managers
Regulatory authorities regulatory approval, and regulatory affairs professionals
across the world enforce or conditions imposed who, where appropriate,
a range of laws and regulations in connection with will commission advice from
which govern the testing, any such approval, external advisors and consult
approval, manufacturing, may result in a significant with the regulatory authorities
labelling and marketing decrease in our value. on the design of our preclinical
of pharmaceutical therapeutics. and clinical programs. These
Stringent standards are experts ensure that high-quality
imposed which relate protocols and other documentation
to the quality, safety are submitted during the
and efficacy of these regulatory process, and
therapeutics. These requirements that well-reputed contract
are a major determinant research organizations with
of whether it is commercially global capabilities are
feasible to develop a retained to manage the trials.
drug substance or medical We also engage with experts,
device given the time, including on our R&D Committee,
expertise, and expense to help design clinical
which must be invested. trials to help provide valuable
We may not obtain regulatory information and maximize
approval for our therapeutics. the likelihood of regulatory
Moreover, approval in approval. Additionally,
one territory offers we have a diversified model
no guarantee that regulatory with numerous assets such
approval will be obtained that the failure to receive
in any other territory. regulatory approval or subsequent
Even if therapeutics regulatory difficulties
are approved, subsequent with respect to any one
regulatory difficulties therapeutic would not adversely
may arise, or the conditions impact all of our therapeutics
relating to the approval and businesses.
may be more onerous or
restrictive than we expect.
----------------------------------- --------------------------------------- ---------------------------------------
4 Risks related to therapeutic
safety Adverse reactions or We design our therapeutics
There is a risk of adverse unacceptable side effects with safety as a top priority
reactions with all drugs may result in a smaller and conduct extensive preclinical
and medical devices. market for our therapeutics, and clinical trials which
If any of our therapeutics or even cause the therapeutics test for and identify any
are found to cause adverse to fail to meet regulatory adverse side effects. Despite
reactions or unacceptable requirements necessary these steps and precautions,
side effects, then therapeutic for sale of the therapeutic. we cannot fully avoid the
development may be delayed, This, as well as any possibility of unforeseen
additional expenses may claims for injury or side effects, and to mitigate
be incurred if further harm resulting from the risk further we have
studies are required, our therapeutics, may insurance in place to cover
and, in extreme circumstances, result in a significant product liability claims
it may prove necessary decrease in our value. which may arise during the
to suspend or terminate conduct of clinical trials.
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
us as the developer of
the therapeutics and
sponsor of the relevant
clinical trials. These
risks are also applicable
to our Founded Entities
and any trials they conduct
or therapeutic candidates
they develop.
----------------------------------- --------------------------------------- ---------------------------------------
5 Risks related to therapeutic
profitability The failure to obtain We engage reimbursement
We may not be able to reimbursement from experts to conduct pricing
sell our therapeutics third party payers, and reimbursement studies
profitably if reimbursement as well as competition for our therapeutics to
from third-party payers from other therapeutics, ensure that a viable path
such as private health could significantly to reimbursement, or direct
insurers and government decrease the amount user payment, is available.
health authorities is of revenue we may receive We also closely monitor
restricted or not available from therapeutic sales the competitive landscape
because, for example, for certain therapeutics. for all of our therapeutics
it proves difficult to This may result in and adapt our business plans
build a sufficiently a significant decrease accordingly. Not all therapeutics
strong economic case in our value. that we are developing will
based on the burden of rely on reimbursement. Also,
illness and population while we cannot control
impact. outcomes, we try to design
Third-party payers are studies to generate data
increasingly attempting that will help support potential
to curtail healthcare reimbursement.
costs by challenging
the prices that are charged
for pharmaceutical therapeutics
and denying or limiting
coverage and the level
of reimbursement. Moreover,
even if the therapeutics
can be sold profitably,
they may not be accepted
by patients and the medical
community.
Alternatively, our competitors
- many of whom have considerably
greater financial and
human resources - may
develop safer or more
effective therapeutics
or be able to compete
more effectively in the
markets targeted by us.
New companies may enter
these markets and novel
therapeutics and technologies
may become available
which are more commercially
successful than those
being developed by us.
These risks are also
applicable to our Founded
Entities and could result
in a decrease in their
value.
----------------------------------- --------------------------------------- ---------------------------------------
6 Risks related to intellectual
property protection The failure to obtain We spend significant resources
We may not be able to patent protection and in the prosecution of our
obtain patent protection maintain the secrecy patent applications and
for some of our therapeutics of key information maintenance of our patents,
or maintain the secrecy may significantly decrease and we have an in-house
of its trade secrets the amount of revenue patent counsel and patent
and know-how. If we are we may receive from group to help with these
unsuccessful in doing therapeutic sales. activities. We also work
so, others may market Any infringement litigation with experienced external
competitive therapeutics against us may result attorneys and law firms
at significantly lower in the payment of substantial to help with the protection,
prices. Alternatively, damages by us and result maintenance and enforcement
we may be sued for infringement in a significant decrease of our patents. Third party
of third-party patent in our value. patent filings are monitored
rights. If these actions to ensure the Group continues
are successful, then to have freedom to operate.
we would have to pay Confidential information
substantial damages and (both our own and information
potentially remove our belonging to third parties)
therapeutics from the is protected through use
market. We license certain of confidential disclosure
intellectual property agreements with third parties,
rights from third parties. and suitable provisions
If we fail to comply relating to confidentiality
with our obligations and intellectual property
under these agreements, exist in our employment
it may enable the other and advisory contracts.
party to terminate the Licenses are monitored for
agreement. This could compliance with their terms.
impair the our freedom
to operate and potentially
lead to third parties
preventing us from selling
certain of our therapeutics.
----------------------------------- --------------------------------------- ---------------------------------------
7 Risks related to enterprise
profitability The strategic aim of We retain significant cash
We expect to continue the business is to in order to support funding
to incur substantial generate profits for of our Founded Entities
expenditure in further our shareholders through and our Wholly Owned Pipeline.
research and development the commercialization We have close relationships
activities. There is of technologies through with a wide group of investors
no guarantee that we therapeutic sales, and strategic partners to
will become operationally strategic partnerships ensure we can continue to
profitable, and, even and sales of businesses. access the capital markets
if we do so, we may be The timing and size and additional monetization
unable to sustain operational of these potential and funding for our businesses.
profitability. inflows is uncertain, Additionally, our Founded
and should revenues Entities are able to raise
from our activities money directly from third
not be achieved, or party investors and strategic
in the event that they partners.
are achieved but at
values significantly
less than the amount
of capital invested,
then it would be difficult
to sustain our business.
----------------------------------- --------------------------------------- ---------------------------------------
8 Risks related to hiring
and retaining qualified
employees The failure to attract The Board annually seeks
We operate in complex highly effective personnel external expertise to assess
and specialized business or the loss of key the competitiveness of the
domains and require highly personnel would have compensation packages of
qualified and experienced an adverse impact on its senior management. Senior
management to implement the ability of us to management continually monitors
our strategy successfully. continue to grow and and assesses compensation
We and many of our businesses may negatively affect levels to ensure we remain
are located in the United our competitive advantage. competitive in the employment
States which is a highly market. We maintain an extensive
competitive employment recruiting network through
market. our Board members, advisors
Moreover, the rapid development and scientific community
which is envisaged by involvement. We also employ
us may place unsupportable an executive as a full-time
demands on our current in-house recruiter. Additionally,
managers and employees, we are proactive in our
particularly if we cannot retention efforts and include
attract sufficient new incentive-based compensation
employees. There is also in the form of equity awards
risk that we may lose and annual bonuses, as well
key personnel. as a competitive benefits
package. We have a number
of employee engagement efforts
to strengthen our PureTech
community.
----------------------------------- --------------------------------------- ---------------------------------------
9 Risks related to business,
economic or public health
disruptions Broad-based business To date, we have seen limited
Business or economic or economic disruptions impact on our research and
disruptions or global could adversely affect development activities and
health concerns could our ongoing or planned the operation of our company
seriously harm our development research and development more generally, but we will
efforts and increase activities. For example, continuously monitor this
our costs and expenses. in December 2019 an pandemic and its impact
outbreak of a novel on our business going forward
strain of coronavirus and may see further impact
originated in Wuhan, as the situation continues
China, and has since to develop. We have been
spread to a number proactive in limiting the
of other countries, number of staff on site,
including the United requiring that all on-site
States. To date, this employees test twice a week
outbreak has already and providing personal protective
resulted in extended equipment to our staff.
shutdowns of certain
businesses around the
world. Global health
concerns, such as coronavirus,
could also result in
social, economic, and
labor instability in
the countries in which
we or the third parties
with whom we engage
operate. We cannot
presently predict the
scope and severity
of any potential business
shutdowns or disruptions,
but if we or any of
the third parties with
whom we engage, including
the suppliers, clinical
trial sites, regulators
and other third parties
with whom we conduct
business, were to experience
shutdowns or other
business disruptions,
our ability to conduct
our business in the
manner and on the timelines
presently planned could
be materially and negatively
impacted. It is also
possible that global
health concerns such
as this one could disproportionately
impact the hospitals
and clinical sites
in which we conduct
any of our current
and/or future clinical
trials, which could
have a material adverse
effect on our business
and our results of
operation and financial
impact.
----------------------------------- --------------------------------------- ---------------------------------------
* When assessing potential impact of a given risk, we looked at
the potential effects on our research and development activities,
financial health and overall business operations.
Brexit
The United Kingdom withdrew from the European Union on January
31, 2020 (Brexit) and the transition period for such withdrawal
ended on December 31, 2020. Although the Board has considered the
potential impact of Brexit as part of its risk management, given
that we principally operate in the United States and hold
substantially all assets in U.S. dollars, we do not believe there
will be any material financial effect on our business, or any
significant operational issues which could arise, as a result of
Brexit.
Responsibility statement of the Directors in respect of the
annual financial report
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 profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole; and
-- the strategic 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 our position and performance,
business model and strategy.
By Order of the Board
Daphne Zohar
Founder, Chief Executive Officer and Director
April 14, 2021
Financial Review
Reporting Framework
You should read the following discussion and analysis together
with our consolidated financial statements, including the notes
thereto, set forth elsewhere in this report. Some of the
information contained in this discussion and analysis or set forth
elsewhere in this report, including information with respect to our
plans and strategy for our business and financing our business,
includes forward-looking statements that involve risks and
uncertainties. As a result of many factors, including the risks set
forth on pages 69 to 71 and in the Additional Information section
from pages 191 to 227, our actual results could differ materially
from the results described in or implied by these forward-looking
statements.
Our audited consolidated financial statements as of December 31,
2020 and 2019 and for the years ended December 31, 2020, 2019 and
2018 have been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act
2006 and International Financial Reporting Standards (IFRSs)
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in
the EU. The Consolidated Financial Statements also comply fully
with IFRSs as issued by the International Accounting Standards
Board (IASB).
The following discussion contains references to the consolidated
financial statements of PureTech Health plc, or the Company, and
its consolidated subsidiaries, together the Group. These financial
statements consolidate the Company's subsidiaries and include the
Company's interest in associates and investments held at fair
value. Subsidiaries are those entities over which the Company
maintains control. Associates are those entities in which the
Company does not have control for financial accounting purposes but
maintains significant influence over financial and operating
policies. Where we have neither control nor significant influence
for financial accounting purposes, we recognize our holding in such
entity as an investment at fair value. For purposes of our
consolidated financial statements, each of our Founded Entities are
considered to be either a "subsidiary", an "associate" or an
"investment held at fair value" depending on whether PureTech
Health plc controls or maintains significant influence over the
financial and operating policies of the respective entity at the
respective period end date. For additional information regarding
the accounting treatment of these entities, see Note 1 to our
consolidated financial statements included in this report. For
additional information regarding our operating structure, see
"-Basis of Presentation and Consolidation" below. Fair value of
investments accounted for at fair value, does not take into
consideration contribution from milestones that occurred after
December 31, 2020, the value of our consolidated Founded Entities
(Vedanta, Follica, Sonde, Akili, Alivio, and Entrega), our Wholly
Owned Programs, or our cash.
Business Background and Results Overview
The business background is discussed from pages 1 to 59, which
describe in detail the business development of our Wholly Owned
Programs and Founded Entities.
Our ability to generate product revenue sufficient to achieve
profitability will depend heavily on the successful development and
eventual commercialization of one or more of our wholly-owned or
Founded Entities' therapeutics candidates, which may never occur.
Our Founded Entities, Gelesis, Inc., or Gelesis, and Akili
Interactive Labs, Inc., or Akili in which we lost control in 2019
and 2018, respectively, have products cleared for sale, but we and
our Controlled Founded Entities have not generated any revenue from
product sales.
We have deconsolidated a number of our Founded Entities during
the past three fiscal years including Akili, in 2018 and, Vor
Biopharma Inc., or Vor, Karuna Therapeutics, Inc., or Karuna and
Gelesis Inc., or Gelesis, during 2019. We expect this trend to
continue into the foreseeable future as our Controlled Founded
Entities raise additional funding. Any deconsolidation affects our
financials in the following manner:
-- our ownership interest does not provide us with a controlling financial interest;
-- we no longer control the Founded Entity's assets and
liabilities and as a result we derecognize the assets, liabilities
and non-controlling interests related to the Founded Entity from
our Consolidated Statements of Financial Position;
-- we record our non-controlling financial interest in the Founded Entity at fair value; and
-- the resulting amount of any gain or loss is recognized in our
Consolidated Statements of Comprehensive Income/(Loss).
We anticipate our expenses to continue to increase
proportionally in connection with our ongoing development
activities related to our preclinical and clinical programs within
our Wholly Owned Programs and Controlled Founded Entities. In
addition, having completed our U.S. listing in November 2020, we
expect to incur additional costs associated with operating as a
public company in the U.S. We also expect that our expenses and
capital requirements will increase substantially in the near to
mid-term as we:
-- continue our research and development efforts;
-- seek regulatory approvals for any therapeutic candidates that
successfully complete clinical trials;
-- add clinical, scientific, operational financial and
management information systems and personnel, including personnel
to support our therapeutic development and potential future
commercialization claims; and
-- operate as a U.S. public company.
In addition, our internal research and development spend will
increase in the foreseeable future as we may initiate clinical
studies for LYT-100, LYT-200, LYT-210 and LYT-300, and as we
continue to progress our Glyph(TM) and Orasome(TM) technology
platforms as well as our meningeal lymphatics discovery research
program.
In addition, with respect to our Founded Entities' programs, we
anticipate that we will continue to fund a small portion of
development costs by strategically participating in such companies'
financings when it is in the best interests of our shareholders.
The form of any such participation may include investment in public
or private financings, collaboration and partnership arrangements
and licensing arrangements, among others. Our management and
strategic decision makers consider the future funding needs of our
Founded Entities and evaluate the needs and opportunities with
respect to each of these Founded Entities routinely and on a
case-by-case basis.
As a result, we may need substantial additional funding to
support our continuing operations and pursue our growth strategy.
Until such time as we can generate significant revenue from product
sales, if ever, we expect to finance our operations through a
combination of public or private equity or debt financings or other
sources, which may include monetization of certain of our interests
in our Founded Entities and collaborations with third parties. We
may be unable to raise additional funds or enter into such other
agreements or arrangements when needed on favorable terms, or at
all. If we fail to raise capital or enter into such agreements as,
and when needed, we may have to significantly delay, scale back or
discontinue the development and commercialization of one or more of
our wholly-owned therapeutic candidates.
Measuring Performance
The Financial Review discusses our operating and financial
performance, our cash flows and liquidity as well as our financial
position and our resources. The results for each year are compared
primarily with the results of the preceding year.
Reported Performance
Reported performance considers all factors that have affected
the results of our business, as reflected in our consolidated
financial statements.
Core Performance
Core performance measures are alternative performance measures
(APM) which are adjusted and non-IFRS measures. These measures
cannot be derived directly from our consolidated financial
statements. We believe that these non-IFRS performance measures,
when provided in combination with reported performance, will
provide investors, analysts and other stakeholders with helpful
complementary information to better understand our financial
performance and our financial position from period to period. The
measures are also used by management for planning and reporting
purposes. The measures are not substitutable for IFRS results and
should not be considered superior to results presented in
accordance with IFRS.
Cash flow and liquidity
==============================================================================
Consolidated Measure type: Core performance
Cash Reserves
==============
Definition: Cash and cash equivalents, and Short-term
investments held at PureTech Health plc and consolidated
subsidiaries (Please refer to Note 1 to our consolidated
financial statements for further information with respect
to our consolidated subsidiaries)
==============
Why we use it: Consolidated Cash Reserves is a measure
that provides valuable additional information with
respect to cash reserves available to fund the Wholly
Owned Programs and Founded Entities
==============
PureTech Level Measure type: Core performance
Cash Reserves
==============
Definition: Cash and cash equivalents, and Short-term
investments held at PureTech Health plc and only wholly-owned
subsidiaries (Please refer to Note 1 to our consolidated
financial statements for further information with respect
to our wholly-owned subsidiaries)
==============
Why we use it: PureTech Level Cash Reserves is a measure
that provides valuable additional information with
respect to cash reserves available to fund the Wholly
Owned Programs and make certain investments in Founded
Entities
============== ==============================================================
PureTech Level Measure type: Core performance
Cash and Cash
Equivalents
Definition: Cash and cash equivalents held at PureTech
Health plc and only wholly-owned subsidiaries (Please
refer to Note 1 to our consolidated financial statements
for further information with respect to our wholly-owned
subsidiaries)
Why we use it: PureTech Level Cash and Cash Equivalents
is a measure that provides valuable additional information
with respect to cash and cash equivalents available
to fund the Wholly Owned Programs and make certain
investments in Founded Entities
==============================================================
Consolidated Measure type: Core performance
Cash Reserves
as of March
31, 2021
Definition: Cash and cash equivalents, and Short-term
investments held at PureTech Health plc and consolidated
subsidiaries as of March 31, 2021
Why we use it: The measure includes cash outflows
and inflows for the first quarter of 2021, particularly
the sale of 1,000,000 common shares of Karuna for aggregate
proceeds of $118.0 million on February 9, 2021. Further,
the measure allows for a more current representation
of the Consolidated Cash Reserves (see above in table)
as of the date of signing of our Consolidated Financial
Statements
==============================================================
PureTech Level Measure type: Core performance
Cash Reserves
as of March
31, 2021
Definition: Cash and cash equivalents, and Short-term
investments held at PureTech Health plc and only wholly-owned
subsidiaries as of March 31, 2021
Why we use it: The measure includes cash outflows
and inflows for the first quarter of 2021, particularly
the sale of 1,000,000 common shares of Karuna for aggregate
proceeds of $118.0 million on February 9, 2021. Further,
the measure allows for a more current representation
of the PureTech Level Cash Reserves (see above in table)
as of the date of signing of our Consolidated Financial
Statements
==============================================================
PureTech Level Measure type: Core performance
Cash and Cash
Equivalents
as of March
31, 2021
==============
Definition: Cash and cash equivalents held at PureTech
Health plc and only wholly-owned subsidiaries as of
March 31, 2021
==============
Why we use it: The measure includes cash outflows
and inflows for the first quarter of 2021, particularly
the sale of 1,000,000 common shares of Karuna for aggregate
proceeds of $118.0 million on February 9, 2021. Further,
the measure allows for a more current representation
of the PureTech Level Cash and Cash Equivalents (see
above in table) as of the date of signing of our Consolidated
Financial Statements
============== ==============================================================
COVID-19
In December 2019, illnesses associated with COVID-19 were
reported and the virus has since caused widespread and significant
disruption to daily life and economies across geographies. The
World Health Organization has classified the outbreak as a
pandemic. Our business, operations and financial condition and
results have not been significantly impacted during the year ended
December 31, 2020 as a result of the COVID-19 pandemic. In response
to the COVID-19 pandemic, we have taken swift action to ensure the
safety of our employees and other stakeholders. We continue to
monitor the latest developments regarding the COVID-19 pandemic on
our business, operations, and financial condition and results, and
have made certain assumptions regarding the pandemic for purposes
of our operational planning and financial projections, including
assumptions regarding the duration and severity of the pandemic and
the global macroeconomic impact of the pandemic. Despite careful
tracking and planning, however, we are unable to accurately predict
the extent of the impact of the pandemic on our business,
operations, and financial condition and results in future periods
due to the uncertainty of future developments. We are focused on
all aspects of our business and are implementing measures aimed at
mitigating issues where possible including by using digital
technology to assist operations for our R&D and enabling
functions.
Recent Developments (subsequent to December 31, 2020)
On January 8, 2021, PureTech participated in the second closing
of Vor's Series B Preferred Share financing. For consideration of
$0.5 million, PureTech received 961,538 shares.
On February 9, 2021, Vor closed its initial public offering of
9,828,017 shares at a price to the public of $18.00 per share.
Subsequent to the closing, PureTech held 3,207,200.00 shares of Vor
common stock, representing 8.6% of Vor common stock.
On February 9, 2021, PureTech Health sold 1,000,000 common
shares of Karuna for aggregate proceeds of $118.0 million.
Following the sale PureTech holds 2,406,564 shares of Karuna common
stock, representing 8.2% of Karuna common stock.
As of March 31, 2021, we had consolidated cash and cash
equivalents of $486.5 million and PureTech Level cash and cash
equivalents of $443.4 million.
Financial Highlights
As of:
=======================================
March 31, December December
(in thousands) 2021 31, 2020 31, 2019
========================================= =========== =========== =============
Cash and cash equivalents 486,469 403,881 132,360
Short-term investments - - 30,088
========================================= =========== =========== ===========
Consolidated Cash Reserves 486,469 403,881 162,448
Less: Cash and cash equivalents held at
non-wholly owned subsidiaries (43,072) (54,473) (41,840)
========================================= =========== =========== ===========
PureTech Level Cash Reserves 443,397 349,407 120,608
Less: Short-term investments - - (30,088)
========================================= =========== =========== ===========
PureTech Level Cash and Cash Equivalents $ 443,397 $ 349,407 $ 90,520
========================================= ======= ======= === ======
Basis of Presentation and Consolidation
Our consolidated financial information consolidates the
financial information of PureTech Health plc, as well as its
subsidiaries, and includes our interest in associates and
investments held at fair value, and is reported in four operating
segments as described below.
Basis for Segmentation
Our directors are our strategic decision-makers. Our operating
segments are based on the financial information provided to our
directors quarterly for the purposes of allocating resources and
assessing performance. We have determined that each Founded Entity
is representative of a single operating segment as our directors
monitor the financial results at this level. When identifying the
reportable segments we have determined that it is appropriate to
aggregate multiple operating segments into a single reportable
segment given the high level of operational and financial
similarities across the entities. We have identified four
reportable segments which are outlined below. Substantially all of
our revenue and profit generating activities are generated within
the United States and, accordingly, no geographical disclosures are
provided.
Internal
The Internal segment is advancing Wholly Owned Programs designed
to harness key immunological, fibrotic and lymphatic system
mechanisms. These novel classes of immunomodulatory drugs are
designed to treat serious diseases, including lung dysfunction,
immuno-oncology, lymphatic, neurological and neuropsychological
disorders. The Internal segment is comprised of the technologies
that are wholly owned and will be advanced through either PureTech
Health funding or non-dilutive sources of financing in the
near-term. The operational management of the Internal segment is
conducted by the PureTech Health team, which is responsible for the
strategy, business development, and research and development. As of
December 31, 2020, this segment included PureTech LYT, Inc.
(formerly Ariya Therapeutics Inc.) and PureTech LYT 100, Inc.
Controlled Founded Entities
The Controlled Founded Entities segment is comprised of our
subsidiaries that are currently consolidated operational
subsidiaries that either have, or have plans to hire, independent
management teams and have previously raised, or are currently in
the process of raising, third-party dilutive capital. These
subsidiaries have active research and development programs and
either have entered into or plan to seek a strategic partnership
with an equity or debt investment partner, who will provide
additional industry knowledge and access to networks, as well as
additional funding to continue the pursued growth of the company.
As of December 31, 2020, this segment included Alivio Therapeutics,
Inc., Entrega, Inc., Follica, Incorporated, Sonde Health, Inc. and
Vedanta Biosciences, Inc.
Non-Controlled Founded Entities
The Non-Controlled Founded Entities segment is comprised of the
entities in respect of which PureTech Health (i) no longer holds
majority voting control as a shareholder and (ii) no longer has the
right to elect a majority of the members of the entity's Board of
Directors. Upon deconsolidation of an entity the segment disclosure
is restated to reflect the change on a retrospective basis, as this
constitutes a change in the composition of its reportable segments.
The Non-Controlled Founded Entities segment included Akili
Interactive Labs, Inc. ("Akili"), Vor Biopharma, Inc. ("Vor"),
Karuna Therapeutics, Inc. ("Karuna"), and Gelesis, Inc.
("Gelesis").
The Non-Controlled Founded Entities segment incorporates the
operational results of the aforementioned entities to the date of
deconsolidation. Following the date of deconsolidation, we account
for our investment in each entity at the parent level, and
therefore the results associated with investment activity following
the date of deconsolidation is included in the Parent Company and
Other segment (the "Parent Company and Other segment").
Parent Company and Other segment
The Parent Company and Other segment includes activities that
are not directly attributable to the operating segments, such as
the activities of the Parent, corporate support functions and
certain research and development support functions that are not
directly attributable to a strategic business segment as well as
the elimination of intercompany transactions. This segment also
captures the accounting for our holdings in entities for which
control has been lost, which is inclusive of the following items:
gain on deconsolidation, gain or loss on investments held at fair
value, gain on loss of significant influence, and the share of net
loss of associates accounted for using the equity method. As of
December 31, 2020, this segment included PureTech Health plc,
PureTech Health LLC, PureTech Management, Inc., PureTech Securities
Corp., and PureTech Securities II Corp. as well as certain other
dormant, inactive and shell entities.
The table below summarizes the entities that comprised each of
our segments as of December 31, 2020:
Internal Segment
PureTech LYT 100.0%
PureTech LYT-100, Inc. 100.0%
=================================== =====
Controlled Founded Entities
Alivio Therapeutics, Inc. 91.9%
Entrega, Inc. 83.1%
Follica, Incorporated 85.4%
Sonde Health, Inc. 51.8%
Vedanta Biosciences, Inc. 59.3%
=================================== =====
Non-Controlled Founded Entities
Akili Interactive Labs, Inc. 41.9%
Gelesis, Inc. 25.1%
Karuna Therapeutics, Inc. 12.7%
Vor Biopharma Inc. 16.4%
=================================== =====
Parent Segment(1)
Puretech Health plc 100.0%
PureTech Health LLC 100.0%
PureTech Securities Corporation 100.0%
PureTech Securities II Corporation 100.0%
PureTech Management, Inc. 100.0%
=================================== =====
1 Includes dormant, inactive and shell entities that are not listed here.
Components of Our Results of Operations
Revenue
To date, we have not generated any revenue from product sales
and we do not expect to generate any revenue from product sales for
the near term future. We derive our revenue from the following:
Contract revenue.
We generate revenue primarily from licenses, services and
collaboration agreements, including amounts that are recognized
related to upfront payments, milestone payments and amounts due to
us for research and development services. In the future, revenue
may include additional milestone payments and royalties on any net
product sales under our collaborations. We expect that any revenue
we generate will fluctuate from period to period as a result of the
timing and amount of license, research and development services and
milestone and other payments.
Grant Revenue.
Grant revenue is derived from grant awards we receive from
governmental agencies and non-profit organizations for certain
qualified research and development expenses. We recognize grants
from governmental agencies as grant income in the Consolidated
Statement of Comprehensive Income/(Loss), gross of the expenditures
that were related to obtaining the grant, when there is reasonable
assurance that we will comply with the conditions within the grant
agreement and there is reasonable assurance that payments under the
grants will be received. We evaluate the conditions of each grant
as of each reporting date to ensure that we have reasonable
assurance of meeting the conditions of each grant arrangement and
it is expected that the grant payment will be received as a result
of meeting the necessary conditions.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs
incurred for our research activities, including our discovery
efforts, and the development of our wholly-owned and our Controlled
Founded Entities' therapeutic candidates, which include:
-- employee-related expenses, including salaries, related
benefits and equity-based compensation;
-- expenses incurred in connection with the preclinical and
clinical development of our wholly-owned and our Founded Entities'
therapeutic candidates, including our agreements with contract
research organizations, or CROs;
-- expenses incurred under agreements with consultants who supplement our internal capabilities;
-- the cost of lab supplies and acquiring, developing and
manufacturing preclinical study materials and clinical trial
materials;
-- costs related to compliance with regulatory requirements; and
-- facilities, depreciation and other expenses, which include
direct and allocated expenses for rent and maintenance of
facilities, insurance and other operating costs.
We expense all research costs in the periods in which they are
incurred and development costs are capitalized only if certain
criteria are met. For the periods presented, we have not
capitalized any development costs since we have not met the
necessary criteria required for capitalization. Costs for certain
development activities are recognized based on an evaluation of the
progress to completion of specific tasks using information and data
provided to us by our vendors and third-party service
providers.
Research and development activities are central to our business
model. Therapeutic candidates in later stages of clinical
development generally have higher development costs than those in
earlier stages of clinical development, primarily due to the
increased size and duration of later-stage clinical trials. We
expect that our research and development expenses will continue to
increase for the foreseeable future in connection with our planned
preclinical and clinical development activities in the near term
and in the future. The successful development of our wholly-owned
and our Founded Entities' therapeutic candidates is highly
uncertain. As such, at this time, we cannot reasonably estimate or
know the nature, timing and estimated costs of the efforts that
will be necessary to complete the remainder of the development of
these therapeutic candidates. We are also unable to predict when,
if ever, material net cash inflows will commence from our
wholly-owned or our Founded Entities' therapeutic candidates. This
is due to the numerous risks and uncertainties associated with
developing therapeutics, including the uncertainty of:
-- progressing research and development of our Wholly Owned
Pipeline, including LYT-100, LYT-200, LYT-210, LYT-300 and continue
to progress our Glyph(TM) and Orasome(TM) technology platforms as
well as our meningeal lymphatics discovery research program and
other potential therapeutic candidates within our Wholly Owned
Programs;
-- establishing an appropriate safety profile with
investigational new drug application enabling studies to advance
our preclinical programs into clinical development;
-- the success of our Founded Entities and their need for additional capital;
-- identifying new therapeutic candidates to add to our Wholly Owned Pipeline;
-- successful enrollment in, and the initiation and completion of, clinical trials;
-- the timing, receipt and terms of any marketing approvals from
applicable regulatory authorities;
-- commercializing our wholly-owned and our Founded Entities'
therapeutic candidates, if approved, whether alone or in
collaboration with others;
-- establishing commercial manufacturing capabilities or making
arrangements with third-party manufacturers;
-- addressing any competing technological and market
developments, as well as any changes in governmental
regulations;
-- negotiating favorable terms in any collaboration, licensing
or other arrangements into which we may enter and performing our
obligations under such arrangements;
-- maintaining, protecting and expanding our portfolio of
intellectual property rights, including patents, trade secrets and
know-how, as well as obtaining and maintaining regulatory
exclusivity for our wholly-owned and our Founded Entities'
therapeutic candidates;
-- continued acceptable safety profile of our therapeutics, if any, following approval; and
-- attracting, hiring and retaining qualified personnel.
A change in the outcome of any of these variables with respect
to the development of a therapeutic candidate could mean a
significant change in the costs and timing associated with the
development of that therapeutic candidate. For example, the U.S.
Food and Drug Administration, or FDA, the European Medicines
Agency, or EMA, or another comparable foreign regulatory authority
may require us to conduct clinical trials beyond those that we
anticipate will be required for the completion of clinical
development of a therapeutic candidate, or we may experience
significant trial delays due to patient enrollment or other
reasons, in which case we would be required to expend significant
additional financial resources and time on the completion of
clinical development. In addition, we may obtain unexpected results
from our clinical trials and we may elect to discontinue, delay or
modify clinical trials of some therapeutic candidates or focus on
others. Identifying potential therapeutic candidates and conducting
preclinical testing and clinical trials is a time-consuming,
expensive and uncertain process that takes years to complete, and
we may never generate the necessary data or results required to
obtain marketing approval and achieve product sales. In addition,
our wholly-owned and our Founded Entities' therapeutic candidates,
if approved, may not achieve commercial success.
General and Administrative Expenses
General and administrative expenses consist primarily of
salaries and other related costs, including stock-based
compensation, for personnel in our executive, finance, corporate
and business development and administrative functions. General and
administrative expenses also include professional fees for legal,
patent, accounting, auditing, tax and consulting services, travel
expenses and facility-related expenses, which include direct
depreciation costs and allocated expenses for rent and maintenance
of facilities and other operating costs.
We expect that our general and administrative expenses will
increase in the future as we increase our general and
administrative headcount to support our continued research and
development and potential commercialization of our portfolio of
therapeutic candidates. We also expect to incur increased expenses
associated with being a public company in the United States,
including costs of accounting, audit, information systems, legal,
regulatory and tax compliance services, director and officer
insurance costs and investor and public relations costs.
Total Other Income/(Loss)
Gain on Deconsolidation
Upon losing control of a subsidiary, the assets and liabilities
are derecognized along with any related non-controlling interest
("NCI"). Any interest retained in the former subsidiary is measured
at fair value when control is lost. Any resulting gain or loss is
recognized as profit or loss in the Consolidated Statements of
Comprehensive Income/(Loss).
Gain/(Loss) on Investments Held at Fair Value
Investments held at fair value include both unlisted and listed
securities held by us, which include investments in Akili, Gelesis,
Karuna, Vor, ResTORbio (until its sale in 2020) and certain
insignificant investments. Our ownership in Akili and Vor is in
preferred shares. Preferred shares form part of our ownership in
Gelesis and such preferred shares investment is accounted for as
Investments Held at Fair value while the investment in common stock
is accounted for under the equity method. Our ownership in Karuna
was in preferred shares until its IPO in June 2019 when such shares
were converted into common shares. When Karuna's preferred shares
converted into common shares, our equity interest in Karuna
investment was removed from Investments Held at Fair Value and
accounted for under the equity method as we still retained
significant influence in Karuna at such time. On December 2, 2019
we lost significant influence in Karuna and, beginning on that
date, we accounted for our investment in Karuna in accordance with
IFRS 9 as an Investment Held at Fair Value. We account for
investments in preferred shares of our associates in accordance
with IFRS 9 as Investments Held at Fair Value when the preferred
shares do not provide access to returns underlying ownership
interests.
Loss Realized on Investments Held at Fair Value
Loss realized on investments held at fair value relates to
realized differences in the per share disposal price of a listed
security as compared to the per share exchange quoted price at the
time of disposal. The difference is attributable to a blockage
discount, attributable to a variety of market factors, primarily
the number of shares being transacted was significantly larger than
the daily trading volume of a given security.
Gain on Loss of Significant Influence
Gain on loss of significant influence relates to the assessment
in connection with our ability to exert significant influence over
an investment in a Non-Controlled Founded Entity. As of December
31, 2020, only our investment in Gelesis meets the scope of equity
method accounting. For the years ended December 31, 2019 and
December 31, 2018, we recognized gains on loss of significant
influence in Karuna and resTORbio, respectively.
Other Income (Expense)
Other income (expense) consists primarily of gains and losses
related to the sale of an asset and certain investments as well as
sub-lease income.
Finance Costs/Income
Finance costs consist of loan interest expense and the changes
in the fair value of certain liabilities associated with financing
transactions, mainly preferred share liabilities in respect of
preferred shares issued by our non wholly owned subsidiaries to
third parties. Finance income consists of interest income on funds
invested in money market funds and U.S. treasuries.
Share of Net Gain (Loss) of Associates Accounted for Using the
Equity Method, and Impairment of Investment in Associate
Associates are accounted for using the equity method (equity
accounted investees) and are initially recognized at cost, or if
recognized upon deconsolidation they are initially recorded at fair
value at the date of deconsolidation. The consolidated financial
statements include our share of the total comprehensive income and
equity movements of equity accounted investees, from the date that
significant influence commences until the date that significant
influence ceases. When the share of losses exceeds the net
investment in the investee, including the investment in preferred
shares that are considered Long-term Interests, the carrying amount
is reduced to nil and recognition of further losses is discontinued
except to the extent that we have incurred legal or constructive
obligations or made payments on behalf of an investee.
We compare the recoverable amount of the investment to its
carrying amount on a go-forward basis and determine the need for
impairment.
Income Tax
We must make certain estimates and judgments in determining
income tax expense for financial statement purposes. The amount of
taxes currently payable or refundable is accrued, and deferred tax
assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and
their respective tax bases. Deferred tax assets are also recognized
for realizable loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using substantively enacted tax
rates in effect for the year in which those temporary differences
are expected to be recovered or settled. Net deferred tax assets
are not recorded if we do not assess their realization as probable.
The effect on deferred tax assets and liabilities of a change in
income tax rates is recognized in our financial statements in the
period that includes the substantive enactment date.
Results of Operations
The following table, which has been derived from our audited
financial statements for the years ended December 31, 2020, 2019
and 2018 included herein, summarizes our results of operations for
the periods indicated, together with the changes in those items in
dollars:
Year Ended December 31,
==============================================================
Change Change
(2019 to (2018 to
(in thousands) 2020 2019 2018 2020) 2019)
================================== =========== =========== ========= ========== =============
Contract revenue $ 8,341 $ 8,688 $ 16,371 $ (347) $ (7,683)
Grant revenue 3,427 1,119 4,377 2,308 (3,258)
================================== =========== =========== ========= ========== ===========
Total revenue 11,768 9,807 20,748 1,961 (10,941)
================================== =========== =========== ========= ========== ===========
Operating expenses:
General and administrative
expenses (49,440) (59,358) (47,365) 9,918 (11,993)
Research and development
expenses (81,859) (85,848) (77,402) 3,988 (8,445)
================================== =========== =========== ========= ========== ===========
Operating income/(loss) (119,531) (135,399) (104,019) 15,868 (31,380)
================================== =========== =========== ========= ========== ===========
Other income/(expense):
Gain/(loss) on deconsolidation - 264,409 41,730 (264,409) 222,679
Gain/(loss) on investments
held at fair value 232,674 (37,863) (34,615) 270,537 (3,248)
Loss realized on sale of
investment (54,976) - - (54,976) -
Loss on impairment of intangible
asset - - (30) - 30
Gain/(loss) on disposal of
assets (30) (82) 4,060 52 (4,142)
Gain on loss of significant
influence - 445,582 10,287 (445,582) 435,295
Other income/(expenses) 1,065 121 (278) 944 399
Other income/(loss) 178,732 672,167 21,154 (493,434) 651,013
================================== =========== =========== ========= ========== ===========
Net finance income/(costs) (6,115) (46,147) 25,917 40,032 (72,065)
================================== =========== =========== ========= ========== ===========
Share of net gain/(loss)
of associates accounted for
using the equity method (34,117) 30,791 (11,490) (64,908) 42,281
Impairment of investment
in associate - (42,938) - 42,938 (42,938)
================================== =========== =========== ========= ========== ===========
Income/(loss) before income
taxes 18,969 478,474 (68,438) (459,504) 546,911
Taxation (14,401) (112,409) (2,221) 98,008 (110,188)
================================== =========== =========== ========= ========== ===========
Net income/(loss) including
non-controlling interest 4,568 366,065 (70,659) (361,497) 436,724
================================== =========== =========== ========= ========== ===========
Net (loss)/income attributable
to the Company $ 5,985 $ 421,144 $(43,654) $(415,159) $ 464,798
================================== ======= ======= ======== ========= =======
Comparison of the Years Ended December 31, 2020 and 2019
Total Revenue
Year Ended December 31,
===============================
(in thousands) 2020 2019 Change
================================= =========== ====== ==========
Contract Revenue:
Internal Segment $ 3,560 $6,064 $(2,503)
Controlled Founded Entities 2,726 2,487 239
Non-Controlled Founded Entities - - -
Parent Company and other 2,054 137 1,917
================================= =========== ====== ========
Total Contract Revenue $ 8,341 $8,688 $ (347)
================================= ======= ===== =======
Grant Revenue:
Internal Segment $ 32 $ 15 $ 17
Controlled Founded Entities 3,395 1,104 2,291
Non-Controlled Founded Entities - - -
Parent Company and other - - -
================================= =========== ====== ========
Total Grant Revenue $ 3,427 $1,119 $ 2,308
================================= ======= ===== =======
Total Revenue $ 11,768 $9,807 $ 1,961
================================= ======= ===== =======
Our total revenue was $11.8 million for the year ended December
31, 2020, an increase of $2.0 million, or 20.0 percent compared to
the year ended December 31, 2019. The increase was primarily
attributable to an increase of $2.3 million in grant revenue in the
Controlled Founded Entities segment for the year ended December 31,
2020, which was driven primarily by Vedanta's grant revenue earned
pursuant to its CARB-X and BARDA agreements. The increase was
further attributable to an increase of $1.9 million in contract
revenue in the Parent segment for the year ended December 31, 2020,
which was primarily driven by a $2.0 million milestone payment
received from Karuna for initiation of its KarXT Phase 3 clinical
study pursuant to the Exclusive Patent License Agreement between
PureTech and Karuna. The increases were partially offset by a
decline of $2.5 million in contract revenue in the Internal
segment, which was primarily drive by the Orasome collaboration and
license agreement with Roche, which concluded during the year ended
December 31, 2020.
Research and Development Expenses
Year Ended December 31,
================================
(in thousands) 2020 2019 Change
========================================= ========= ========= ==========
Research and Development Expenses:
Internal Segment $(41,583) $(25,977) $ 15,607
Controlled Founded Entities (40,043) (42,780) (2,737)
Non-Controlled Founded Entities - (15,555) (15,555)
Parent Company and other (234) (1,536) (1,302)
========================================= ========= ========= ========
Total Research and Development Expenses: $(81,859) $(85,848) $(3,988)
========================================= ======== ======== =======
Our research and development expenses were $81.9 million for the
year ended December 31, 2020, a decline of $4.0 million, or 4.6
percent compared to the year ended December 31, 2019. The change
was attributable to a decline of $15.6 million in the
Non-Controlled Founded Entities segment owing to the
deconsolidation of Vor, Karuna and Gelesis during year ended
December 31, 2019. The decline was further attributable to declines
of $2.7 million in the Controlled Founded Entities segment and $1.3
million in the Parent segment for the year ended December 31, 2020.
The declines were partially offset by an increase of $15.6 million
in research and development expenses incurred by the Internal
segment for the year ended December 31, 2020. In 2020 we progressed
our wholly-owned therapeutic candidates to key milestones. We
completed a Phase 1 multiple ascending dose and food effect study
for LYT-100. We also initiated a Phase 2a proof-of-concept study of
LYT-100 in patients with breast cancer-related, upper limb
secondary lymphedema as well as initiated a Phase 2 trial of
LYT-100 in Long COVID respiratory complications and related
sequelae, which is also known as post-acute COVID-19 syndrome
(PACS). Finally, we initiated a Phase 1 clinical trial of LYT-200
for the potential treatment of metastatic solid tumors that are
difficult to treat and have poor survival rates.
General and Administrative Expenses
Year Ended December 31,
================================
(in thousands) 2020 2019 Change
========================================== ========= ========= ==========
General and Administrative Expenses:
Internal Segment $ (2,112) $ (2,385) $ (273)
Controlled Founded Entities (15,061) (14,436) 625
Non-Controlled Founded Entities - (10,439) (10,439)
Parent Company and other (32,267) (32,098) 168
========================================== ========= ========= ========
Total General and Administrative Expenses $(49,440) $(59,358) $(9,918)
========================================== ======== ======== =======
Our general and administrative expenses were $49.4 million for
the year ended December 31, 2020, a decrease of $9.9 million, or
16.7 percent compared to the year ended December 31, 2019. The
decrease was primarily attributable to a decline of $10.4 million
in the Non-Controlled Founded Entities segment, owing to the
deconsolidation of Vor, Karuna and Gelesis during the year ended
December 31, 2019.
Total Other Income/(Loss)
Total other income was $178.7 million for the year ended
December 31, 2020, a decrease of $493.4 million, compared to the
year ended December 31, 2019. We recognized a gain on loss of
significant influence of $445.6 million with respect to Karuna for
the year ended December 31, 2019. No loss of significant influence
of associates occurred during the year ended December 31, 2020. The
decline was further attributable to a decline of $264.4 million in
gain on deconsolidation as no deconsolidation of subsidiaries
occurred during the year ended December 31, 2020, as compared to a
gain of $264.4 million recognized for the deconsolidation of Vor,
Karuna and Gelesis during the year ended December 31, 2019. The
decline was further attributable to a loss of $55.0 million
realized on the sale of certain investments held at fair value
during year ended December 31, 2020. The declines were partially
offset by an increase of $270.5 million on gain on investments held
at fair value for the year ended December 31, 2020, which was
primarily driven by Karuna.
Net Finance Income (Costs)
Net finance costs were $6.1 million for the year ended December
31, 2020, a decline of $40.0 million, or 86.7 percent compared to
net finance costs of $46.1 million for the year ended December 31,
2019. The change was primarily attributable to a $42.1 million
decline in the change in the fair value of our preferred shares,
warrant and convertible note liabilities held by third parties for
the year ended December 31, 2020.
Share of Net Gain (Loss) in Associates Accounted for Using the
Equity Method, and Impairment of Investment in Associate
The share of net loss in associates was $34.1 million for the
year ended December 31, 2020, a decrease of $64.9 million, or 210.8
percent as compared to net gain of $30.8 million for the year ended
December 31, 2019. The change in share of net gain/(loss) in
associates was primarily attributable to the financial results of
Gelesis for the year ended December 31, 2020. Additionally, we
allocated a share of our net loss in Gelesis for the year ended
December 31, 2020, totaling $23.0 million, to our long-term
interest in Gelesis as of December 31, 2020. We recorded equity
method income of $37.1 million with respect to Gelesis, which was
partially offset by our share of net loss in Karuna of $6.3 million
for the year ended December 31, 2019. Additionally, we recorded an
impairment charge of $42.9 million for the year ended December 31,
2019, related to our investment in common shares held in Gelesis.
See Note 6 to our consolidated financial statements included
elsewhere in this annual report.
Taxation
Income tax expense was $14.4 million for the year ended December
31, 2020, a decline of $98.0 million, or 87.2 percent as compared
to the year ended December 31, 2019. The decline in income tax
expense was primarily attributable to the gains realized on the
loss of significant influence on Karuna for the year ended December
31, 2019 and the gains recognized on deconsolidation of Vor, Karuna
and Gelesis during the year ended December 31, 2019.
Comparison of the Years Ended December 31, 2019 and 2018
Total Revenue
Year Ended December 31,
===============================
(in thousands) 2019 2018 Change
================================= ========= ======= ===========
Contract Revenue:
Internal Segment $ 6,064 $ 2,110 $ 3,954
Controlled Founded Entities 2,487 14,233 (11,745)
Non-Controlled Founded Entities - - -
Parent Company and other 137 29 108
================================= ========= ======= =========
Total Contract Revenue $ 8,688 $16,371 $ (7,683)
================================= ===== ====== ========
Grant Revenue:
Internal Segment $ 15 $ 86 $ (71)
Controlled Founded Entities 1,104 4,271 (3,167)
Non-Controlled Founded Entities - 20 (20)
Parent Company and other - - -
================================= ========= ======= =========
Total Grant Revenue $ 1,119 $ 4,377 $ (3,258)
================================= ===== ====== ========
Total Revenue $ 9,807 $20,748 $(10,941)
================================= ===== ====== ========
Our total revenue was $9.8 million for the year ended December
31, 2019, a decrease of $10.9 million, or 52.7 percent compared to
the year ended December 31, 2018. The decline was attributable to
decreases of $11.7 million in contract revenue and $3.2 million in
grant revenue in the Controlled Founded Entities segment for the
year ended December 31, 2019, which was driven primarily by
Vedanta's contract revenue earned under its milestone-based JBI
collaboration agreement and grant revenue earned pursuant to its
CARB-X agreement during 2018. The decline in Controlled Founded
Entities segment's contract and grant revenues, was partially
offset by a $4.0 million increase in contract revenue in the
Internal segment, which was driven by increases in contract revenue
earned under the Orasome collaboration and license agreement with
Roche and the Lymphatic Targeting platform collaboration and
license agreement with Boehringer Ingelheim entered into in July
2019 for the year ended December 31, 2019.
Research and Development Expenses
Year Ended December 31,
==================================
(in thousands) 2019 2018 Change
========================================= ========= ========= ============
Research and Development Expenses:
Internal Segment $(25,977) $ (8,929) $ 17,047
Controlled Founded Entities (42,780) (36,930) 5,850
Non-Controlled Founded Entities (15,555) (29,851) (14,296)
Parent Company and other (1,536) (1,692) (156)
========================================= ========= ========= ==========
Total Research and Development Expenses: $(85,848) $(77,402) $ 8,446
========================================= ======== ======== ======
Our research and development expenses were $85.8 million for the
year ended December 31, 2019, an increase of $8.4 million, or 10.9
percent compared to the year ended December 31, 2018. The change
was attributable to increases of $17.0 million in the Internal
segment for the year ended December 31, 2019. In 2019, we continued
to shift our focus towards the Internal segment, investing in
research and development activities to advance a Wholly Owned
Pipeline of therapeutic candidates designed to harness key
immunological, fibrotic and lymphatic system mechanisms. During the
year ended December 31, 2019, we progressed LYT-100 towards first
patient dosing in its Phase 1 multiple ascending dose and food
effect study, which began in 2020, and prepared for the initiation
of a Phase 1 clinical study of LYT-200 in solid tumors, which also
began in 2020. Research and development expenses in the Controlled
Founded Entities segment also increased $5.9 million as Vedanta
progressed its candidates VE202, VE303, VE416 and VE800 to
meaningful milestones. The increases were partially offset by a
decline of $14.3 million in the Non-Controlled Founded Entities
segment owing to the deconsolidation of Akili during the year ended
December 31, 2018 and the deconsolidation of Vor, Karuna and
Gelesis during the year ended December 31, 2019.
General and Administrative Expenses
Year Ended December 31,
===============================
(in thousands) 2019 2018 Change
========================================== ========= ========= =========
General and Administrative Expenses:
Internal Segment $ (2,385) $ (1,498) $ 887
Controlled Founded Entities (14,436) (10,212) 4,224
Non-Controlled Founded Entities (10,439) (16,385) (5,946)
Parent Company and other (32,098) (19,270) 12,828
========================================== ========= ========= =======
Total General and Administrative Expenses $(59,358) $(47,365) $11,993
========================================== ======== ======== ======
Our general and administrative expenses were $59.4 million for
the year ended December 31, 2019, an increase of $12.0 million, or
25.3 percent compared to the year ended December 31, 2018. The
change was attributable to increases of $12.8 million in the Parent
segment for year ended December 31, 2019, which was primarily
driven by increased professional fees incurred in the exploration
of an ADR listing and increased non-cash depreciation and
amortization expenses incurred in the implementation of IFRS 16
Leases and the lease we entered into during the year ended December
31, 2019 for our new headquarters. Controlled Founded Entities
segment's general and administrative expenses also increased by
$4.2 million. The increases in the Internal and Controlled Founded
Entities segments' general and administrative were offset by the
deconsolidation of Akili during the year ended December 31, 2018
and the deconsolidation of Vor, Karuna and Gelesis during the year
ended December 31, 2019
Total Other Income/(Loss)
Total other income was $672.2 million for the year ended
December 31, 2019, an increase of $651.0 million, as compared to
the year ended December 31, 2018. The growth was attributable to an
increase of $435.3 million in gain on loss of significant influence
for the year ended December 31, 2019. For the year ended December
31, 2019 we recognized a gain on loss of significant influence of
$445.6 million with respect to Karuna, while for the year ended
December 31, 2018 we recognized a gain on loss of significant
influence of $10.3 million with respect to resTORbio. The growth
was further attributable to an increase of $222.7 million in gain
on deconsolidation as we recognized a gain of $264.4 million for
the deconsolidation of Vor, Karuna and Gelesis during the year
ended December 31, 2019, as compared to a gain of $41.7 million for
the deconsolidation of Akili during the year ended December 31,
2018. The gains were partially offset by a decline of $4.1 million
in income related to asset disposals and an increase in fair value
accounting losses of $3.2 million on certain investments held at
fair value for the year ended December 31, 2019.
Net Finance Income (Costs)
Net finance costs were $46.1 million for the year ended December
31, 2019, an increase of $72.1 million in costs, or 278.1 percent
as compared to the year ended December 31, 2018. The change was
primarily attributable to a $70.5 million decline in the change in
the fair value of our preferred shares, warrant and convertible
note liabilities held by third parties for the year ended December
31, 2019.
Share of Net Gain/(Loss) in Associates Accounted for Using the
Equity Method, and Impairment of Investment in Associate
The share of net income in associates was $30.8 million for the
year ended December 31, 2019, an increase of $42.3 million, or
368.0 percent as compared to a net loss for the year ended December
31, 2018. The change in associate income was attributable to the
deconsolidation of Karuna and Gelesis and subsequent equity method
accounting from the date of deconsolidation to December 31, 2019.
We recorded equity method income of $37.1 million with respect to
Gelesis, which was partially offset by our share of net loss in
Karuna of $6.3 million for the year ended December 31, 2019.
Additionally, we recorded an impairment charge of $42.9 million for
the year ended December 31, 2019, related to our investment in
common shares held in Gelesis. See Note 6 to our consolidated
financial statements included elsewhere in this annual report.
Taxation
Income tax expense was $112.4 million for the year ended
December 31, 2019, an increase of $110.2 million, or 4961.2 percent
as compared to the year ended December 31, 2018. The growth in
income tax expense was primarily attributable to the gains realized
on the loss of significant influence on Karuna for the year ended
December 31, 2019 and the gains recognized on deconsolidation of
Vor, Karuna and Gelesis during the year ended December 31,
2019.
Critical Accounting Policies and Significant Judgments and
Estimates
Our management's discussion and analysis of our financial
condition and results of operations is based on our financial
statements, which we have prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards
(IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU. The Consolidated Financial Statements also
comply fully with IFRSs as issued by the International Accounting
Standards Board (IASB). In the preparation of these financial
statements, we are required to make judgments, estimates and
assumptions about the carrying amounts of assets and liabilities
that are not readily apparent from other sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates under different assumptions or
conditions.
Our estimates and assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in
which the estimate is revised if the revision affects only that
period or in the period of the revisions and future periods if the
revision affects both current and future periods.
While our significant accounting policies are described in more
detail in the notes to our consolidated financial statements
appearing at the end of this report, we believe the following
accounting policies to be most critical to the judgments and
estimates used in the preparation of our financial statements. See
Note 1 to our consolidated financial statements for a further
detailed description of our significant accounting policies.
Financial instruments
We account for our financial instruments according to IFRS 9. As
such, when issuing preferred shares in our subsidiaries we
determine the classification of financial instruments in terms of
liability or equity. Such determination involves significant
judgement. These judgements include an assessment of whether the
financial instruments include any embedded derivative features,
whether they include contractual obligations upon us to deliver
cash or other financial assets or to exchange financial assets or
financial liabilities with another party at any point in the future
prior to liquidation, and whether that obligation will be settled
by exchanging a fixed amount of cash or other financial assets for
a fixed number of the Group's equity instruments.
In accordance with IFRS 9 we carry certain investments in equity
securities at fair value as well as our subsidiary preferred share,
convertible notes and warrant liabilities, all through profit and
loss (FVTPL). Valuation of the aforementioned financial instruments
(assets and liabilities) includes making significant estimates,
specifically determining the appropriate valuation methodology and
making certain estimates of the future earnings potential of the
subsidiary businesses, appropriate discount rate and earnings
multiple to be applied, marketability and other industry and
company specific risk factors.
Consolidation:
The consolidated financial statements include the financial
statements of the Company and the entities it controls. Based on
the applicable accounting rules, the Company controls an investee
when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those
returns through its power over the investee. Therefore an
assessment is required to determine whether the Company has i)
power over the investee; (ii) exposure, or rights, to variable
returns from its involvement with the investee; and (iii) the
ability to use its power over the investee to affect the amount of
the investor's returns. Judgement is required to perform such
assessment and it requires that the Company considers, among
others, activities that most significantly affect the returns of
the investee, its voting shares, representation on the board,
rights to appoint management, investee dependence on the Company
and other contributing factors.
Investment in Associates
When we do not control an investee but maintain significant
influence over the financial and operating policies of the investee
the investee is an associate. Significant influence is presumed to
exist when we hold 20 percent or more of the voting power of an
entity, unless it can be clearly demonstrated that this is not the
case. We evaluate if we maintain significant influence over
associates by assessing if we have the power to participate in the
financial and operating policy decisions of the associate.
Associates are accounted for using the equity method (equity
accounted investees) and are initially recognized at cost, or if
recognized upon deconsolidation they are initially recorded at fair
value at the date of deconsolidation. The consolidated financial
statements include our share of the total comprehensive income and
equity movements of equity accounted investees, from the date that
significant influence commences until the date that significant
influence ceases. When our share of losses exceeds the net
investment in an equity accounted investee, including preferred
share investments that are considered to be Long-Term Interests,
the carrying amount is reduced to zero and recognition of further
losses is discontinued except to the extent that we have incurred
legal or constructive obligations or made payments on behalf of an
investee. To the extent we hold interests in associates that are
not providing access to returns underlying ownership interests, the
instrument held by PureTech is accounted for in accordance with
IFRS 9.
Judgement is required in order to determine whether we have
significant influence over financial and operating policies of
investees. This judgement includes, among others, an assessment
whether we have representation on the board of directors of the
investee, whether we participate in the policy making processes of
the investee, whether there is any interchange of managerial
personnel, whether there is any essential technical information
provided to the investee and if there are any transactions between
us and the investee.
Judgement is also required to determine which instruments we
hold in the investee form part of the investment in the associate,
which is accounted for under IAS 28 and scoped out of IFRS 9, and
which instruments are separate financial instruments that fall
under the scope of IFRS 9. This judgement includes an assessment of
the characteristics of the financial instrument of the investee
held by us and whether such financial instrument provides access to
returns underlying an ownership interest.
Where the company has other investments in an equity accounted
investee that are not accounted for under IAS 28, judgement is
required in determining if such investments constitute Long-Term
Interests for the purposes of IAS 28 (please refer to Notes 5 and
6). This determination is based on the individual facts and
circumstances and characteristics of each investment, but is
driven, among other factors, by the intention and likelihood to
settle the instrument through redemption or repayment in the
foreseeable future, and whether or not the investment is likely to
be converted to common stock or other equity instruments
Income Taxes
We must make certain estimates and judgments in determining
income tax expense for financial statement purposes. The amount of
taxes currently payable or refundable is accrued, and deferred tax
assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets are also recognized
for realizable loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities for a change in tax rates is recognized in
income in the period that includes the enactment date. Net deferred
tax assets are not recorded if we do not assess their realization
as probable. Judgement is required to determine if realization of
such deferred tax assets is probable.
Share-based Payments
Share-based payments includes stock options, restricted stock
units ("RSUs") as well as service, market and performance-based RSU
awards in which the expense is recognized based on the grant date
fair value of these awards.
In accordance with IFRS 2, "Share-based Payments," the fair
value of the share option awards is estimated on the grant date
using the Black-Scholes option-valuation model which requires the
input of certain assumptions, including the expected life of the
share-based award, share price volatility, dividend yield and
interest rate. The volatility is based on our historical data for
the purposes of the Black-Scholes option-valuation model. Expected
life is based on the median expected term. Volatility is calculated
by taking the weighted-average of the historical volatilities of
our shares. We have not declared dividends and we do not plan to
pay any dividends in the future. The risk-free interest rate for
periods in the expected life of the option is based on the U.S.
Treasury constant maturities in effect at the time of the
grant.
The fair value of the market and performance-based awards is
based on the Monte Carlo simulation analysis utilizing a Geometric
Brownian Motion process with 100,000 simulations to value those
shares. The model considers share price volatility, risk-free rate
and other covariance of comparable public companies and other
market data to predict distribution of relative share
performance.
We recognize the estimated fair value of service, market and
performance-based awards as share-based compensation expense over
the vesting period based upon the determination of whether it is
probable that the performance targets will be achieved. We assess
the probability of achieving the performance targets at each
reporting period. Cumulative adjustments, if any, are recorded to
reflect subsequent changes in the estimated outcome of
performance-related conditions. For share-based payment awards with
market conditions, the grant date fair value is measured to reflect
such conditions and there is no true-up for differences between
expected and actual outcomes.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, see our
consolidated financial statements and the related notes found
elsewhere in this report.
Cash Flow and Liquidity
Our cash flows may fluctuate and are difficult to forecast and
will depend on many factors, including:
-- the expenses incurred in the development of wholly-owned and
Controlled-Founded Entity therapeutic candidates;
-- the revenue generated by wholly-owned and Controlled-Founded Entity therapeutic candidates;
-- the revenue generated from licensing and royalty agreement with Founded Entities;
-- the financing requirements of the Internal segment,
Controlled-Founded Entities segment and Parent segment; and
-- the investment activities in the Internal, Controlled-Founded
Entities, and Non-Controlled Founded Entities and Parent
segments.
As of December 31, 2020, we had consolidated cash and cash
equivalents of $403.9 million. As of December 31, 2020, we had
PureTech Level cash and cash equivalents of $349.4 million.
Cash Flows
The following table summarizes our cash flows for each of the
periods presented:
Years Ended December 31,
==================================
(in thousands) 2020 2019 2018
========================================== ========== ========= ===========
Net cash used in operating activities $(131,827) $(98,156) $(72,796)
Net cash provided by/(used in) investing
activities 364,478 63,659 (39,645)
Net cash provided by/(used in) financing
activities 38,869 49,910 156,887
Effect of exchange rates on cash and cash
equivalents - (104) (44)
Net increase in cash and cash equivalents $ 271,520 $ 15,309 $ 44,402
========================================== ========= ======== ========
Operating Activities
Net cash used in operating activities was $131.8 million for the
year ended December 31, 2020, as compared to $98.2 million for the
year ended December 31, 2019. The increase in outflows was
primarily attributable to estimated income taxes of $20.7 million
paid for our disposals of Karuna common shares during the year
ended December 31, 2020. The increase was further attributable to a
decrease of $4.5 million in payments received with respect to
contract revenue for the year ended December 31, 2020. We received
a $2.0 million milestone payment from Karuna for initiation of its
KarXT Phase 3 clinical study pursuant to the Exclusive Patent
License Agreement between PureTech and Karuna during the year ended
December 31, 2020. We received $3.5 million from Imbrium
Therapeutics LP for the execution of a Research Collaboration
Option and License Agreement and $3.0 million from Boehringer
Ingelheim for the execution of a Collaboration and License
Agreement during the year ended December 31, 2019. The increase in
outflows was further attributable to reduced interest income and
the timing of payments in the normal course of business for the
year ended December 31, 2020.
Net cash used in operating activities was $98.2 million for the
year ended December 31, 2019, as compared to $72.8 million for the
year ended December 31, 2018. The increase in outflows was
primarily due to our increased operating loss that resulted from
increased research and development activities. In 2019, our income
resulted from increased non-cash gains, that had no impact on the
cash used in operating activities.
Investing Activities
Net cash provided by investing activities was $364.5 million for
the year ended December 31, 2020, as compared to inflows of $63.7
million for the year ended December 31, 2019. The inflow was
primarily attributable to the sale of Karuna and resTORbio common
shares for aggregate proceeds of $350.6 million during the year
ended December 31, 2020. The inflow was further attributable to
cash provided by the maturity of short-term investments totaling
$30.1 million. The inflows were offset by purchases of Gelesis and
Vor preferred shares totaling $11.1 million and the purchase of
fixed assets totaling $5.2 million.
Net cash provided by investing activities was $63.7 million for
the year ended December 31, 2019, as compared to net cash used in
investing activities of $39.6 million for the year ended December
31, 2018. Cash provided by the maturity of short-term investments
of $174.0 million was offset by the purchase of short-term
investments of $69.5 million as well as the purchase of fixed
assets totaling $12.1 million and the purchase of intangible assets
totaling $0.4 million. The inflow was further offset by our
investment in Gelesis convertible promissory notes totaling $6.5
million and Gelesis Series 3 Growth preferred shares and Karuna
Series B preferred shares totaling $16.0 million. The inflow was
further offset by the derecognition of cash totaling $16.0 million
held by Vor, Karuna and Gelesis upon deconsolidation.
Financing Activities
Net cash provided by financing activities was $38.9 million for
the year ended December 31, 2020, as compared to $49.9 million for
the year ended December 31, 2019. The net inflow was primarily
attributable to the issuances by Vedanta of a $25.0 million
convertible promissory note and a long-term loan with net proceeds
of $14.7 million. The inflow was further attributable to $13.8
million received from the Vedanta Series C-2 and Sonde Series A-2
preferred share financings. The inflows were partially offset by
the $12.9 million settlement of 2017 RSU awards granted to certain
executives.
Net cash provided by financing activities was $49.9 million for
the year ended December 31, 2019, as compared to net inflows of
$156.9 million for the year ended December 31, 2018. The net inflow
was primarily attributable to aggregate proceeds of the issuance of
$51.0 million received from the Vedanta Series C and C-2, Gelesis
Series 2 Growth and Sonde Series A-2 preferred share financings.
Further inflows of $1.6 million were attributable to the proceeds
from the issuance of convertible notes by Karuna. The inflows were
partially offset by payment of our lease liability totaling $1.7
million and $1.3 million in withholding payroll tax payments
related to the vesting of 2016 RSU awards granted to certain
executives.
Funding Requirements
We have incurred operating losses since inception. Based on our
current plans, we believe our existing cash and cash equivalents at
December 31, 2020 will be sufficient to fund our operations and
capital expenditure requirements into the first quarter of 2024 and
following the sale of 1,000,000 common shares of Karuna for
aggregate proceeds of $118.0 million on February 9, 2021, we have
sufficient funding to extend operations over a four year period
into the first quarter of 2025. We expect to incur substantial
additional expenditures in the near term to support our ongoing
activities. Additionally, we expect to incur additional costs as a
result of operating as a U.S. public company. We expect to continue
to incur net losses for the foreseeable future. Our ability to fund
our therapeutic development and clinical operations as well as
commercialization of our wholly-owned therapeutic candidates, will
depend on the amount and timing of cash received from planned
financings. Our future capital requirements will depend on many
factors, including:
-- the costs, timing and outcomes of clinical trials and
regulatory reviews associated with our wholly-owned therapeutic
candidates;
-- the costs of commercialization activities, including product
marketing, sales and distribution;
-- the costs of preparing, filing and prosecuting patent
applications and maintaining, enforcing and defending intellectual
property-related claims;
-- the emergence of competing technologies and products and
other adverse marketing developments;
-- the effect on our therapeutic and product development
activities of actions taken by the FDA, EMA or other regulatory
authorities;
-- our degree of success in commercializing our wholly-owned
therapeutic candidates, if and when approved; and
-- the number and types of future therapeutics we develop and commercialize.
A change in the outcome of any of these or other variables with
respect to the development of any of our wholly-owned therapeutic
candidates could significantly change the costs and timing
associated with the development of that therapeutic candidate.
Further, our operating plans may change in the future, and we may
need additional funds to meet operational needs and capital
requirements associated with such operating plans.
Until such time, if ever, as we can generate substantial product
revenue, we expect to finance our operations through a combination
of equity financings, debt financings, collaborations with other
companies or other strategic transactions. We do not currently have
any committed external source of funds. To the extent that we raise
additional capital through the sale of equity or convertible debt
securities, your ownership interest will be diluted, and the terms
of these securities may include liquidation or other preferences
that adversely affect your rights as a common stockholder. Debt
financing and preferred equity financing, if available, may involve
agreements that include covenants limiting or restricting our
ability to take specific actions, such as incurring additional
debt, making acquisitions or capital expenditures or declaring
dividends. If we raise additional funds through collaborations,
strategic alliances or marketing, distribution or licensing
arrangements with third parties, we may have to relinquish valuable
rights to our technologies, future revenue streams, research
programs or therapeutic candidates or grant licenses on terms that
may not be favorable to us. If we are unable to raise additional
funds through equity or debt financings or other arrangements when
needed, we may be required to delay, limit, reduce or terminate our
research, therapeutic development or future commercialization
efforts or grant rights to develop and market therapeutic
candidates that we would otherwise prefer to develop and market
ourselves.
Further, our operating plans may change, and we may need
additional funds to meet operational needs and capital requirements
for clinical trials and other research and development activities.
We currently have no credit facility or committed sources of
capital. Because of the numerous risks and uncertainties associated
with the development and commercialization of our wholly-owned
therapeutic candidates, we are unable to estimate the amounts of
increased capital outlays and operating expenditures associated
with our current and anticipated therapeutic development
programs.
Financial Position
Summary Financial Position
As of December 31,
=============================
(in thousands) 2020 2019 Change
=============================== ======= ======= ===========
Investments held at fair value 530,161 714,905 (184,744)
Other non-current assets 45,484 57,428 (11,943)
Non-current assets 575,645 772,333 (196,687)
=============================== ======= ======= =========
Short-term investments - 30,088 (30,088)
Cash and cash equivalents 403,881 132,360 271,521
Other current assets 10,468 6,397 4,071
Current assets 414,348 168,845 245,504
=============================== ======= ======= =========
Total assets 989,994 941,178 48,816
=============================== ======= ======= =========
Lease Liability 32,088 34,914 (2,827)
Deferred tax liability 108,626 115,445 (6,820)
Other non-current liabilities 14,818 1,219 13,598
Non-current liabilities 155,531 151,579 3,952
=============================== ======= ======= =========
Trade and other payables 20,566 19,750 817
Notes payable 26,455 1,455 25,000
Warrant liability 8,206 7,997 209
Preferred shares 118,972 100,989 17,983
Other current liabilities 6,724 9,011 (2,287)
Total current liabilities 180,924 139,201 41,722
=============================== ======= ======= =========
Total liabilities 336,455 290,780 45,674
=============================== ======= ======= =========
Net assets 653,539 650,397 3,142
=============================== ======= ======= =========
Total equity 653,539 650,398 3,141
=============================== ======= ======= =========
Investments Held at Fair Value
Investments held at fair value decreased $184.7 million to
$530.2 million as of December 31, 2020. Investments held at fair
value consists primarily of our common share investment in Karuna
and our preferred share investments in Akili, Gelesis and Vor. See
Notes 5 and 6 to our consolidated financial statements included
elsewhere in this annual report. Fair value of investments
accounted for at fair value, does not take into consideration
contribution from milestones that occurred after December 31, 2020,
the value of our consolidated Founded Entities (Vedanta, Follica,
Sonde, Akili, Alivio, and Entrega), our Wholly Owned Programs, or
our cash.
Cash and Cash Equivalents, and Short-term Investments
Consolidated cash, cash equivalents and short-term investments
increased $241.4 million to $403.9 million as of December 31, 2020,
while we had PureTech Level cash and cash equivalents of $349.4
million. The increase reflected primarily the disposals of Karuna
common shares during the year ended December 31, 2020. On January
22, 2020, PureTech sold 2,100,000 shares of Karuna common shares
for aggregate proceeds of $200.9 million. On May 26, 2020, PureTech
sold an additional 555,500 Karuna common shares for aggregate
proceeds of $45.0 million. On August 26, 2020, PureTech sold
1,333,333 common shares of Karuna for aggregate proceeds of $101.6
million. The inflows from the disposals were primarily offset by
our operating loss of $119.5 million for the year ended December
31, 2020.
Non-Current Liabilities
Non-current liabilities increased $4.0 million to $155.5 million
as of December 31, 2020. The increase reflected the execution by
Vedanta of a $15.0 million long-term loan and security agreement
with Oxford Finance LLC which was partially offset by declines of
$2.8 million and $6.8 million in our long-term lease and deferred
tax liabilities, respectively as of December 31, 2020.
Trade and Other Payables
Trade and other payables decreased $0.8 million to $20.6 million
as of December 31, 2020. The decline reflected primarily the timing
of payments as of December 31, 2020.
Notes Payable
Notes payable increased $25.0 million to $26.5 million as of
December 31, 2020. The increase reflected the issuance by Vedanta
of a $25.0 million convertible promissory note to a third party
investor.
Preferred Shares
Preferred share liability increased $18.0 million to $119.0
million as of December 31, 2020. The increase reflected the
issuance by Sonde of Series A-2 preferred shares for aggregate
proceeds of $4.8 million and the issuance by Vedanta of Series C-2
preferred shares for aggregate proceeds of $9.0 million. The
increases also reflected Finance costs of $4.2 million owing to the
change in fair value of preferred shares during the year ended
December 31, 2020.
Quantitative and Qualitative Disclosures about Financial
Risks
Interest Rate Sensitivity
As of December 31, 2020, we had consolidated cash and cash
equivalents of $403.9 million, while we had PureTech Level cash and
cash equivalents of $349.4 million. Our exposure to interest rate
sensitivity is impacted by changes in the underlying U.K. and U.S.
bank interest rates. We have not entered into investments for
trading or speculative purposes. Due to the conservative nature of
our investment portfolio, which is predicated on capital
preservation and investments in short duration, high-quality U.S.
Treasury Bills and U.S. debt obligations and related money market
accounts we do not believe change in interest rates would have a
material effect on the fair market value of our portfolio, and
therefore we do not expect our operating results or cash flows to
be significantly affected by changes in market interest rates.
Foreign Currency Exchange Risk
We maintain our consolidated financial statements in our
functional currency, which is the U.S. dollar. Monetary assets and
liabilities denominated in currencies other than the functional
currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Non-monetary assets
and liabilities denominated in foreign currencies are translated
into the functional currency at the exchange rates prevailing at
the date of the transaction. Exchange gains or losses arising from
foreign currency transactions are included in the determination of
net income/(loss) for the respective periods. Such foreign currency
gains or losses were not material for all reported periods.
We recorded foreign currency losses in respect of foreign
operations of $0.5 million, $0.0 million and $0.2 million for the
years ended December 31, 2020, December 31, 2019, and December 31,
2018, respectively, which are included in Other comprehensive
income/(loss) in the Consolidated Statements of Comprehensive
Income/(Loss).
We do not currently engage in currency hedging activities in
order to reduce our currency exposure, but we may begin to do so in
the future. Instruments that may be used to hedge future risks
include foreign currency forward and swap contracts. These
instruments may be used to selectively manage risks, but there can
be no assurance that we will be fully protected against material
foreign currency fluctuations.
Controlled Founded Entity Investments
We maintain investments in certain Controlled Founded Entities.
Our investments in Controlled Founded Entities are eliminated as
intercompany transactions upon financial consolidation. We are
however exposed to a preferred share liability owing to the terms
of existing preferred shares and the ownership of Controlled
Founded Entities preferred shares by third parties. The liability
of preferred shares is maintained at fair value through the profit
and loss. Our strong cash position, budgeting and forecasting
processes, as well as decision making and risk mitigation framework
enable us to robustly monitor and support the business activities
of the Controlled Founded Entities to ensure no exposure to credit
losses and ultimately dissolution or liquidation. Accordingly, we
view exposure to third party preferred share liability as low.
Please refer to Note 16 to our consolidated financial statements
for further information regarding our exposure to Controlled
Founded Entity Investments.
Non-Controlled Founded Entity Investments
We maintain certain investments in Non-Controlled Founded
Entities which are deemed either as investments and accounted for
as investments held at fair value or associates and accounted for
under the equity method (please refer to Note 1 to our consolidated
financial statements). Our exposure to investments held at fair
value was $530.2 million as of December 31, 2020 and we may or may
not be able to realize the value in the future. Accordingly, we
view the risk as high. Our exposure to investments in associates in
limited to the carrying amount of the investment. We are not
exposed to further contractual obligations or contingent
liabilities beyond the value of initial investment. As of December
31, 2020, Gelesis was the only associate. The carrying amount of
the investment in Gelesis as an associate was zero. Accordingly, we
do not view this as a risk. Please refer to Notes 5, 6 and 16 to
our consolidated financial statements for further information
regarding our exposure to Non-Controlled Founded Entity
Investments.
Equity Price Risk
As of December 31, 2020, we held 3,406,564 common shares of
Karuna. The fair value of our investment in the common stock of
Karuna was $346.1 million.
The investment in Karuna is exposed to fluctuations in the
market price of these common shares. The effect of a 10.0 percent
adverse change in the market price of Karuna common shares as of
December 31, 2020 would have been a loss of approximately $34.6
million recognized as a component of Other income (expense) in our
Consolidated Statements of Comprehensive Income/(Loss).
Liquidity Risk
We do not believe we will encounter difficulty in meeting the
obligations associated with our financial liabilities that are
settled by delivering cash or another financial asset. While we
believe our cash, cash equivalents and short-term investments do
not contain excessive risk, we cannot provide absolute assurance
that in the future our investments will not be subject to adverse
changes or decline in value based on market conditions.
Credit Risk
We maintain an investment portfolio in accordance with our
investment policy. The primary objectives of our investment policy
are to preserve principal, maintain proper liquidity and to meet
operating needs. Although our investments are subject to credit
risk, our investment policy specifies credit quality standards for
our investments and limits the amount of credit exposure from any
single issue, issuer or type of investment. Also, due to the
conservative nature of our investments and relatively short
duration, interest rate risk is mitigated. We do not own derivative
financial instruments. Accordingly, we do not believe that there is
any material market risk exposure with respect to derivative or
other financial instruments.
Credit risk is also the risk of financial loss if a customer or
counterparty to a financial instrument fails to meet its
contractual obligations. We assess the credit quality of customers
on an ongoing basis, taking into account its financial position,
past experience and other factors. The credit quality of financial
assets that are neither past due nor impaired can be assessed by
reference to credit ratings (if available) or to historical
information about counterparty default rates. We are also
potentially subject to concentrations of credit risk in accounts
receivable. Concentrations of credit risk with respect to
receivables is owed to the limited number of companies comprising
our customer base. Our exposure to credit losses is low, however,
due to the credit quality of our larger collaborative partners such
as Boehringer Ingelheim and Eli Lilly.
JOBS Act Exemptions and Foreign Private Issuer Status
We qualify as an "emerging growth company" as defined in the
U.S. Jumpstart Our Business Startups Act of 2012. An emerging
growth company may take advantage of specified reduced reporting
and other requirements that are otherwise applicable generally to
public companies. This includes an exemption from the auditor
attestation requirement in the assessment of our internal control
over financial reporting pursuant to the Sarbanes-Oxley Act of
2002. We may take advantage of this exemption for up to five years
or such earlier time that we are no longer an emerging growth
company. We will cease to be an emerging growth company if we have
more than $1.07 billion in total annual gross revenue, have more
than $700.0 million in market value of our ordinary shares held by
non-affiliates or issue more than $1.0 billion of non-convertible
debt over a three-year period. We may choose to take advantage of
some but not all of these provisions that allow for reduced
reporting and other requirements.
We are considering whether we will take advantage of the
extended transition period provided under Section 7(a)(2)(B) of the
Securities Act of 1933, as amended, for complying with new or
revised accounting standards. Since IFRS makes no distinction
between public and private companies for purposes of compliance
with new or revised accounting standards, the requirements for our
compliance as a private company and as a public company are the
same.
Owing to our U.S. listing, we will report under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, as a
non-U.S. company with foreign private issuer status. Even after we
no longer qualify as an emerging growth company, as long as we
qualify as a foreign private issuer under the Exchange Act, we will
be exempt from certain provisions of the Exchange Act that are
applicable to U.S. domestic public companies, including:
-- the sections of the Exchange Act regulating the solicitation
of proxies, consents or authorizations in respect of a security
registered under the Exchange Act;
-- sections of the Exchange Act requiring insiders to file
public reports of their stock ownership and trading activities and
liability for insiders who profit from trades made in a short
period of time;
-- the rules under the Exchange Act requiring the filing with
the SEC of quarterly reports on Form 10-Q containing unaudited
financial and other specified information, or current reports on
Form 8-K, upon the occurrence of specified significant events;
and
-- Regulation FD, which regulates selective disclosures of material information by issuers.
Consolidated Statements of Comprehensive Income/(Loss)
For the years ended December 31
2020 2019 2018
Note $000s $000s $000s
----------------------------------------- ---- --------- --------- -----------
Contract revenue 3 8,341 8,688 16,371
Grant revenue 3 3,427 1,119 4,377
----------------------------------------- ---- --------- --------- ---------
Total revenue 11,768 9,807 20,748
----------------------------------------- ---- --------- --------- ---------
Operating expenses:
General and administrative expenses 7 (49,440) (59,358) (47,365)
Research and development expenses 7 (81,859) (85,848) (77,402)
----------------------------------------- ---- --------- --------- ---------
Operating income/(loss) (119,531) (135,399) (104,019)
Other income/(expense):
Gain on deconsolidation 5 - 264,409 41,730
Gain/(loss) on investments held at
fair value 5 232,674 (37,863) (34,615)
Loss realized on sale of investments 5 (54,976) - -
Loss on impairment of intangible
asset - - (30)
Gain/(loss) on disposal of assets 11 (30) (82) 4,060
Gain on loss of significant influence 6 - 445,582 10,287
Other income/(expense) 21 1,065 121 (278)
----------------------------------------- ---- --------- --------- ---------
Other income/(expense) 178,732 672,167 21,154
Finance income/(costs):
Finance income 9 1,183 4,362 3,358
Finance income/(costs) - subsidiary
preferred shares 9 - (1,458) (106)
Finance income/(costs) - contractual 9 (2,946) (2,576) 34
Finance income/(costs) - fair value
accounting 9 (4,351) (46,475) 22,631
----------------------------------------- ---- --------- --------- ---------
Net finance income/(costs) (6,115) (46,147) 25,917
Share of net income/(loss) of associates
accounted for using the equity method 6 (34,117) 30,791 (11,490)
Impairment of investment in associate 6 - (42,938) -
Income/(loss) before taxes 18,969 478,474 (68,438)
----------------------------------------- ---- --------- --------- ---------
Taxation 25 (14,401) (112,409) (2,221)
----------------------------------------- ---- --------- --------- ---------
Income/(Loss) for the year 4,568 366,065 (70,659)
Other comprehensive income/(loss):
Items that are or may be reclassified
as profit or loss
Foreign currency translation differences 469 (10) (214)
Unrealized gain/(loss) on investments
held at fair value - - (26)
----------------------------------------- ---- --------- --------- ---------
Total other comprehensive income/(loss) 469 (10) (240)
Total comprehensive income/(loss)
for the year 5,037 366,055 (70,899)
----------------------------------------- ---- --------- --------- ---------
Income/(loss) attributable to:
Owners of the Company 5,985 421,144 (43,654)
Non-controlling interests 18 (1,417) (55,079) (27,005)
----------------------------------------- ---- --------- --------- ---------
4,568 366,065 (70,659)
----------------------------------------- ---- --------- --------- ---------
Comprehensive income/(loss) attributable
to:
Owners of the Company 6,454 421,134 (43,894)
Non-controlling interests 18 (1,417) (55,079) (27,005)
----------------------------------------- ---- --------- --------- ---------
5,037 366,055 (70,899)
----------------------------------------- ---- --------- --------- ---------
$ $ $
----------------------------------------- ---- --------- --------- -----------
Earnings/(loss) per share:
Basic earnings/(loss) per share 10 0.02 1.49 (0.16)
Diluted earnings/(loss) per share 10 0.02 1.44 (0.16)
----------------------------------------- ---- --------- --------- ---------
The accompanying notes are an integral part of these financial
statements.
Consolidated Statements of Financial Position
as of December 31
2020 2019
Note $000s $000s
----------------------------------------- ------ -------- ----------
Assets
Non-current assets
Property and equipment, net 11 22,777 21,455
Right of use asset, net 21 20,098 22,383
Intangible assets, net 12 899 625
Investments held at fair value 5 530,161 714,905
Investments in associates 6 - 10,642
Lease receivable - long-term 21 1,700 2,082
Deferred tax assets - 142
Other non-current assets 11 99
----------------------------------------- ------ -------- --------
Total non-current assets 575,645 772,333
========================================= ====== ======== ========
Current assets
Trade and other receivables 2,558 1,977
Prepaid expenses 5,405 1,946
Lease receivable - short-term 21 381 350
Other financial assets 13, 22 2,124 2,124
Short-term investments 22 - 30,088
Cash and cash equivalents 22 403,881 132,360
----------------------------------------- ------ -------- --------
Total current assets 414,348 168,845
----------------------------------------- ------ -------- --------
Total assets 989,994 941,178
----------------------------------------- ------ -------- --------
Equity and liabilities
Equity
Share capital 14 5,417 5,408
Share premium 14 288,978 287,962
Merger reserve 14 138,506 138,506
Translation reserve 14 469 -
Other reserve 14 (24,050) (18,282)
Retained earnings/(accumulated deficit) 14 260,429 254,444
----------------------------------------- ------ -------- --------
Equity attributable to the owners of the
Company 14 669,748 668,038
Non-controlling interests 14, 18 (16,209) (17,640)
----------------------------------------- ------ -------- --------
Total equity 14 653,539 650,398
----------------------------------------- ------ -------- --------
Non-current liabilities
Deferred revenue 3 - 1,220
Deferred tax liability 25 108,626 115,445
Lease liability, non-current 21 32,088 34,914
Long-term loan 20 14,818 -
Total non-current liabilities 155,531 151,579
----------------------------------------- ------ -------- --------
Current liabilities
Deferred revenue 3 1,472 5,474
Lease liability, current 21 3,261 2,929
Trade and other payables 19 21,826 19,842
Subsidiary:
Notes payable 16, 17 26,455 1,455
Warrant liability 16 8,206 7,997
Preferred shares 15, 16 118,972 100,989
Other current liabilities 732 515
----------------------------------------- ------ -------- --------
Total current liabilities 180,924 139,201
----------------------------------------- ------ -------- --------
Total liabilities 336,455 290,780
----------------------------------------- ------ -------- --------
Total equity and liabilities 989,994 941,178
----------------------------------------- ------ -------- --------
Please refer to the accompanying Notes to the consolidated
financial information. Registered number: 09582467.
The consolidated financial statements were approved by the Board
of Directors and authorized for issuance on April 14, 2021 and
signed on its behalf by:
Daphne Zohar
Chief Executive Officer
April 14, 2021
The accompanying notes are an integral part of these financial
statements.
Consolidated Statements of Changes in Equity
For the years ended December 31
Share Capital
===================
Total
Retained
earnings/ Total
Share Translation Other (accumulated Parent Non-controlling
Amount premium reserve reserve deficit) equity interests Equity
Merger
reserve
Shares $000s $000s $000s $000s $000s $000s $000s $000s $000s
================ =========== ====== ======= ======= =========== ======== ============ ======== =============== ==========
Balance January
1, 2018 237,429,696 4,679 181,588 138,506 224 17,178 (124,745) 217,430 (145,586) 71,844
Net
income/(loss) - - - - - - (43,654) (43,654) (27,005) (70,659)
Foreign currency
exchange - - - - (214) - - (214) - (214)
Unrealized gain
on investments - - - - - - (26) (26) - (26)
================ =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
Total
comprehensive
income/(loss)
for
the period - - - - (214) - (43,680) (43,894) (27,005) (70,899)
Deconsolidation
of subsidiary - - - - - (4) 619 615 55,168 55,783
Issuance of
placing
shares 45,000,000 696 96,797 - - - - 97,493 - 97,493
Exercise of
share-based
awards 64,171 - - - - - 122 122 - 122
Subsidiary
dividends - - - - - - (8) (8) - (8)
Equity settled
share-based
payments - - - - - 3,749 - 3,749 8,888 12,637
================ =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
Balance December
31, 2018 282,493,867 5,375 278,385 138,506 10 20,923 (167,692) 275,507 (108,535) 166,972
Adjustment for
the initial
application
of IFRS 16 - - - - - - 999 999 - 999
================ =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
Adjusted balance
as of January
1,
2019 282,493,867 5,375 278,385 138,506 10 20,923 (166,693) 276,506 (108,535) 167,971
Net
income/(loss) - - - - - - 421,144 421,144 (55,079) 366,065
Foreign currency
exchange - - - - (10) - - (10) - (10)
Total
comprehensive
income/(loss)
for
the period - - - - (10) - 421,144 421,134 (55,079) 366,055
Deconsolidation
of subsidiary - - - - - - - - 97,178 97,178
Subsidiary note
conversion and
changes in NCI
ownership
interest - - - - - (20,631) - (20,631) 23,049 2,418
Exercise of
share-based
awards 237,090 5 499 - - - - 504 - 504
Purchase of
subsidiary's
non-controlling
interest
through
issuance of
shares 2,126,338 28 9,078 - - (33,145) - (24,039) 24,039 -
Revaluation of
deferred tax
assets
related to
share-based
awards - - - - - 3,061 - 3,061 - 3,061
Equity settled
share-based
payments - - - - - 12,785 - 12,785 1,683 14,468
Vesting of
restricted
stock units
(RSU) 513,324 - - - - (1,280) - (1,280) - (1,280)
Other - - - - - 5 (7) (2) 25 23
================ =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
As at December
31, 2019 285,370,619 5,408 287,962 138,506 - (18,282) 254,444 668,038 (17,640) 650,398
Net
income/(loss) - - - - - - 5,985 5,985 (1,417) 4,568
Foreign currency
exchange 469 469 469
================ =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
Total
comprehensive
income/(loss)
for
the period - - - - 469 - 5,985 6,454 (1,417) 5,037
Exercise of
share-based
awards 514,406 9 1,016 - - - 1,025 11 1,036
Revaluation of
deferred tax
assets
related to
share-based
awards - - - - - (684) - (684) - (684)
Equity settled
share-based
payments - - - - - 7,805 - 7,805 2,822 10,627
Settlement of
restricted
stock units - - - - - (12,888) - (12,888) - (12,888)
Other - - - - - - - - 13 13
================ =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
Balance December
31, 2020 285,885,025 5,417 288,978 138,506 469 (24,050) 260,429 669,748 (16,210) 653,539
================ =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
The accompanying notes are an integral part of these financial
statements.
Consolidated Statements of Cash Flows
For the years ended December 31
2020 2019 2018
Note $000s $000s $000s
--------------------------------------------- ---- --------- --------- -----------
Cash flows from operating activities
Income/(loss) for the year 4,568 366,065 (70,659)
Adjustments to reconcile net operating
loss to net cash used in operating
activities:
Non-cash items:
11,
Depreciation and amortization 12 6,645 6,665 2,778
Impairment of intangible assets - - 30
Impairment of investment in associate 6 - 42,938 -
Equity settled share-based payment
expense 8 10,718 14,468 12,637
(Gain)/loss on investments held at
fair value 5 (232,674) 37,863 20,307
Realized loss on sale of investments 54,976 - -
(Gain)/loss on short-term investments - - (843)
Gain on deconsolidation 5 - (264,409) (41,730)
Gain on loss of significant influence 5 - (445,582) (10,287)
Conversion of debt to equity - - 349
Disposal of assets 11 66 140 161
Share of net (income)/loss of associates
accounted for using the equity method 6 34,117 (30,791) 11,491
Income taxes, net 25 14,402 112,077 1,723
Unrealized (gain)/loss on foreign currency
transactions - - (271)
Finance costs, net 9 6,114 46,229 (8,446)
Changes in operating assets and liabilities:
Accounts receivable 22 (529) 747 467
Other financial assets 13 - (48) (1,327)
Prepaid expenses and other current
assets (3,371) (25) 774
Deferred revenues 3 (5,223) 186 4,841
Trade and other payables 19 605 11,166 5,094
Other liabilities (7) 3,002 115
Income taxes paid (20,737) - -
Interest received 1,155 3,648 -
Interest paid 21 (2,651) (2,495) -
--------------------------------------------- ---- --------- --------- ---------
Net cash used in operating activities (131,827) (98,156) (72,796)
--------------------------------------------- ---- --------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment 11 (5,170) (12,138) (4,365)
Proceeds from sale of property and
equipment - - 125
Purchases of intangible assets 12 (254) (400) (125)
Purchase of associate preferred shares
held at fair value 5, 6 (10,000) (13,670) (3,500)
Purchase of investments held at fair
value 5 (1,150) (1,556) -
Sale of investments held at fair value 5 350,586 9,294 -
Receipt of payment of sublease 21 350 191 -
Purchase of convertible note 6 - (6,480) -
Cash derecognized upon loss of control
over subsidiary - (16,036) (13,390)
Purchases of short-term investments 22 - (69,541) (166,452)
Proceeds from maturity of short-term
investments 22 30,116 173,995 148,062
--------------------------------------------- ---- --------- --------- ---------
Net cash provided by/(used in) investing
activities 364,478 63,659 (39,645)
--------------------------------------------- ---- --------- --------- ---------
Cash flows from financing activities:
Receipt of PPP loan 68 - -
Issuance of long term loan 20 14,720 - -
Proceeds from issuance of convertible
notes 17 25,000 1,606 6,147
Payment of lease liability 21 (2,908) (1,678) -
Repayment of long-term debt - (178) (185)
Distribution to Tal shareholders 27 - (112) -
Exercise of stock options 1,036 504 -
Proceeds from the issuance of shares
and subsidiary preferred shares 15 - - 152,030
Settlement of RSU's (12,888) - -
Vesting of restricted stock units - (1,280) -
Issuance of preferred shares of subsidiaries 15 13,750 51,048 -
Issuance of warrants in subsidiary 92 - -
Buyback of shares - - (35)
Distribution to shareholders on dissolution
of subsidiary - - (1,062)
Subsidiary dividend payments - - (8)
--------------------------------------------- ---- --------- --------- ---------
Net cash provided by financing activities 38,869 49,910 156,887
--------------------------------------------- ---- --------- --------- ---------
Effect of exchange rates on cash and
cash equivalents - (104) (44)
Net increase in cash and cash equivalents 271,520 15,309 44,402
Cash and cash equivalents at beginning
of year 132,360 117,051 72,649
--------------------------------------------- ---- --------- --------- ---------
Cash and cash equivalents at end of
year 403,881 132,360 117,051
--------------------------------------------- ---- --------- --------- ---------
Supplemental disclosure of non-cash
investment and financing activities:
Purchase of non controlling interest
in consideration for issuance of shares
and options - 9,106 -
Purchase of intangible asset and investment
held at fair value in consideration
for issuance of warrant liability and
assumption of other long and short-term
liabilities - 15,894 -
Leasehold improvements purchased through
lease incentives (deducted from Right
of Use Asset) - 10,680 -
Conversion of subsidiary convertible
note into preferred share liabilities - 4,894 -
Conversion of subsidiary convertible
note into subsidiary common stock (NCI) - 2,418 -
Supplemental disclosure of cash paid
for income taxes:
Cash paid for income taxes 20,737 176 92
--------------------------------------------- ---- --------- --------- ---------
The accompanying notes are an integral part of these financial
statements.
Notes to the Consolidated Financial Statements
1. Accounting policies
Description of Business
PureTech Health plc ("PureTech," the "Parent" or the "Company")
is a public company incorporated, domiciled and registered in the
United Kingdom ("UK"). The registered number is 09582467 and the
registered address is 8th Floor, 20 Farringdon Street, London EC4A
3AE, United Kingdom.
PureTech's group financial statements consolidate those of the
Company and its subsidiaries (together referred to as the "Group").
The Parent company financial statements present financial
information about the Company as a separate entity and not about
its Group.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
group financial statements.
Basis of Presentation
The consolidated financial statements of the Group are presented
as of December 31, 2020 and 2019 and for the years ended December
31, 2020, 2019 and 2018. The Group financial statements have been
approved by the Directors on April 14, 2021 and are prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards (IFRSs) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the EU. The
Consolidated Financial Statements also comply fully with IFRSs as
issued by the International Accounting Standards Board (IASB).
IFRSs as adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU differs in certain respects from IFRS as issued
by the IASB. However, the differences have no impact for the
periods presented.
For presentation of the Consolidated Statements of Comprehensive
Income/(Loss), the Company uses a classification based on the
function of expenses, rather than based on their nature, as it is
more representative of the format used for internal reporting and
management purposes and is consistent with international
practice.
Certain amounts in the Consolidated Financial Statements and
accompanying notes may not add due to rounding. All percentages
have been calculated using unrounded amounts.
Basis of Measurement
The consolidated financial statements are prepared on the
historical cost basis except that the following assets and
liabilities are stated at their fair value: investments held at
fair value and liabilities classified as fair value through the
profit or loss.
Use of Judgments and Estimates
In preparing these consolidated financial statements, management
has made judgements, estimates and assumptions that affect the
application of the Group's accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying
assumptions are reviewed on an on-going basis.
Significant estimation applied in determining the following:
-- Financial instruments valuations (Note 16): when estimating
the fair value of subsidiary convertible notes and subsidiary
preferred shares carried at fair value through profit and loss
(FVTPL) and investments held at fair value, at initial recognition
and upon subsequent measurement. This includes determining the
appropriate valuation methodology and making certain estimates of
the future earnings potential of the subsidiary businesses,
appropriate discount rate and earnings multiple to be applied,
marketability and other industry and company specific risk factors.
See Note 16 for the sensitivity analysis for key estimates used in
these valuations.
-- Valuation of share based payments (Note 8): when estimating
the fair value of share based payment on grant date. This includes
making certain estimates regarding the expected life of the
share-based award, share price volatility, risk free interest rate
as well as other covariance of comparable public companies and
other market data to predict distribution of relative share
performance.
Significant judgement is also applied in determining the
following:
-- Revenue recognition (Note 3): when determining the correct
amount of revenue to be recognized. This includes making certain
judgements when determining the appropriate accounting treatment of
key customer contract terms in accordance with the applicable
accounting standards. In particular, judgement is required to
determine the performance obligations in a contract (if promised
goods and services are distinct or not) and timing of revenue
recognition (on delivery or over a period of time).
-- Subsidiary preferred shares liability classification (Note
15): when determining the classification of financial instruments
in terms of liability or equity. These judgements include an
assessment of whether the financial instrument include any embedded
derivative features, whether they include contractual obligations
upon the Group to deliver cash or other financial assets or to
exchange financial assets or financial liabilities with another
party, and whether that obligation will be settled by the Company
exchanging a fixed amount of cash or other financial assets for a
fixed number of its own equity instruments. Further information
about these critical judgements and estimates is included below
under Financial Instruments.
-- When the power to control the subsidiaries exists (please
refer to Notes 5 and 6 and accounting policy below Subsidiaries).
This judgement includes an assessment of whether the Company has
(i) power over the investee; (ii) exposure, or rights, to variable
returns from its involvement with the investee; and (iii) the
ability to use its power over the investee to affect the amount of
the investor's returns. The Company considers among others its
voting shares, representation on the board, rights to appoint
management, investee dependence on the Company etc. If the power to
control investees exists we consolidate the financial statements of
such investee in the consolidated financial statements of the
Group. Upon issuance of new shares in a subsidiary and a resulting
change in any shareholders or governance agreements, the Group
reassesses its ability to control the investee based on the revised
board composition and revised subsidiary governance and management
structure. When such new circumstances result in the Group losing
its power to control the investee, the investee is
deconsolidated.
-- Whether the Company has significant influence over financial
and operating policies of investees in order to determine if the
Company should account for its investment as an associate based on
IAS 28 or based on IFRS 9, Financial Instruments (please refer to
Note 5). This judgement includes, among others, an assessment
whether the Company has representation on the board of directors of
the investee, whether the Company participates in the policy making
processes of the investee, whether there is any interchange of
managerial personnel, whether there is any essential technical
information provided to the investee and if there are any
transactions between the Company and the investee.
-- Upon determining that the Company does have significant
influence over the financial and operating policies of an investee,
if the Company holds more than a single instrument issued by its
equity-accounted investee, judgement is required to determine
whether the additional instrument forms part of the investment in
the associate, which is accounted for under IAS 28 and scoped out
of IFRS 9, or it is a separate financial instrument that falls in
the scope of IFRS 9 (please refer to Notes 5 and 6). This judgement
includes an assessment of the characteristics of the financial
instrument of the investee held by the Company and whether such
financial instrument provides access to returns underlying an
ownership interest.
-- Where the company has other investments in an equity
accounted investee that are not accounted for under IAS 28,
judgement is required in determining if such investments constitute
Long-Term Interests for the purposes of IAS 28 (please refer to
Notes 5 and 6). This determination is based on the individual facts
and circumstances and characteristics of each investment, but is
driven, among other factors, by the intention and likelihood to
settle the instrument through redemption or repayment in the
foreseeable future, and whether or not the investment is likely to
be converted to common stock or other equity instruments (please
also refer to accounting policy with regard to Investments in
Associates below). When considering the individual facts and
circumstances of the Group's investment in its associate's
preferred stock in the manner described above, including the
long-term nature of such investment, the ability of the Group to
convert its preferred stock investment to an investment in common
shares and the likelihood of such conversion, as well the fact that
there is no planned redemption or other settlement of the preferred
stock by the investee in the foreseeable future, we concluded that
such investment is considered a Long Term Interest.
As of December 31, 2020 the Group had cash and cash equivalents
of $403.9 million. Considering the Group's and the Company's
financial position as of December 31, 2020 and its principal risks
and opportunities, a going concern analysis has been prepared for
at least the twelve-month period from the date of signing the
Consolidated Financial Statements ("the going concern period")
utilizing realistic scenarios and applying a severe but plausible
downside scenario. Even under the downside scenario, the analysis
demonstrates the Group and the Company continue to maintain
sufficient liquidity headroom and continues to comply with all
financial obligations. On February 9, 2021, the Group sold
1,000,000 common shares of Karuna for aggregate proceeds of $118.0
million, further strengthening the liquidity headroom of the Group.
Therefore, the Directors believe the Group and the Company is
adequately resourced to continue in operational existence for at
least the twelve-month period from the date of signing the
Consolidated Financial Statements, irrespective of uncertainty
regarding the duration and severity of the COVID-19 pandemic and
the global macroeconomic impact of the pandemic. Accordingly, the
Directors considered it appropriate to adopt the going concern
basis of accounting in preparing the Consolidated Financial
Statements and the PureTech Health plc Financial Statements.
Basis of consolidation
The consolidated financial information as of December 31, 2020
and 2019 and for each of the years ended December 31, 2020, 2019
and 2018 comprises an aggregation of financial information of the
Company and the consolidated financial information of PureTech
Health LLC ("PureTech LLC"). Intra-group balances and transactions,
and any unrealized income and expenses arising from intra-group
transactions, are eliminated.
Subsidiaries
As used in these financial statements, the term subsidiaries
refers to entities that are controlled by the Group. Financial
results of subsidiaries of the Group as of December 31, 2020 are
reported within the Internal segment, Controlled Founded Entities
segment or the Parent Company and Other segment (please refer to
Note 4). Under applicable accounting rules, the Group controls an
entity when it is exposed to, or has the rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. In
assessing control, the Group takes into consideration potential
voting rights and board interest and holding. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases. Losses applicable to the non-controlling
interests in a subsidiary are allocated to the non-controlling
interests even if doing so causes the non-controlling interests to
have a deficit balance.
A list of all current and former subsidiaries organized with
respect to classification as of December 31, 2020 and the Group's
total voting percentage, based on outstanding voting common and
preferred shares as of December 31, 2020, 2019 and 2018, is
outlined below. All current subsidiaries are domiciled within the
United States and conduct business activities solely within the
United States.
Voting percentage at December 31, through
the holdings in
---------------------------------------------------------------
2020 2019 2018
-------------------- ------------------- --------------------
Subsidiary Common Preferred Common Preferred Common Preferred
------------------------------------- -------- ---------- ------- ---------- ------ ------------
Subsidiary operating companies
Alivio Therapeutics, Inc.(1,2) - 91.9 - 91.9 - 92.0
Entrega, Inc. (indirectly
held through Enlight)(1,2) - 83.1 - 83.1 - 83.1
Follica, Incorporated(1,2,5) 28.7 56.7 28.7 56.7 4.4 79.2
PureTech LYT (formerly Ariya
Therapeutics, Inc.)(8) - 100.0 - 100.0 - 100.0
PureTech LYT-100 - 100.0 - 100.0 - 100.0
PureTech Management, Inc.(3) 100.0 - 100.0 - 100.0 -
PureTech Health LLC(3) 100.0 - 100.0 - 100.0 -
Sonde Health, Inc.(1,2) - 51.8 - 64.1 - 96.4
Vedanta Biosciences, Inc.(1,2) - 59.3 - 61.8 - 74.3
Vedanta Biosciences Securities
Corp. (indirectly held through
Vedanta)(1,2) - 59.3 - 61.8 - 74.3
Deconsolidated former subsidiary
operating companies
Akili Interactive Labs, Inc.(2,7) - 41.9 - 41.9 - 41.9
Gelesis, Inc.(1,2,9) 4.9 20.2 5.7 20.2 7.3 18.4
Karuna Pharmaceuticals, Inc.(1,2,10) 12.6 - 28.4 - - 71.0
Vor Biopharma Inc.(1,2,11) - 16.4 - 47.5 - 93.2
Nontrading holding companies
Endra Holdings, LLC (held
indirectly through Enlight)(2) 86.0 - 86.0 - 86.0 -
Ensof Holdings, LLC (held
indirectly through Enlight)(2) 86.0 - 86.0 - 86.0 -
PureTech Securities Corp.(2) 100.0 - 100.0 - 100.0 -
PureTech Securities II Corp.(2) 100.0 - - - - -
Inactive subsidiaries
Appeering, Inc.(2) - 100.0 - 100.0 - 100.0
Commense Inc.(2,6) - 99.1 - 99.1 - 99.1
Enlight Biosciences, LLC(2) 86.0 - 86.0 - 86.0 -
Ensof Biosystems, Inc. (held
indirectly through Enlight)(1,2) 57.7 28.3 57.7 28.3 57.7 28.3
Knode Inc. (indirectly held
through Enlight)(2) - 86.0 - 86.0 - 86.0
Libra Biosciences, Inc.(2) - 100.0 - 100.0 - 100.0
Mandara Sciences, LLC(2) 98.3 - 98.3 - 98.3 -
Tal Medical, Inc.(1,2) - 100.0 - 100.0 - 64.5
------------------------------------- -------- ---------- ------- ---------- ------ ----------
1 The voting percentage is impacted by preferred shares that are
classified as liabilities, which results in the ownership
percentage not being the same as the ownership percentage used in
allocations to non-controlling interests disclosed in Note 18. The
allocation of losses/profits to the noncontrolling interest is
based on the holdings of subordinated stock that provide ownership
rights in the subsidiaries. The ownership of liability classified
preferred shares are quantified in Note 15.
2 Registered address is Corporation Trust Center, 1209 Orange
St., Wilmington, DE 19801, USA.
3 Registered address is 2711 Centerville Rd., Suite 400, Wilmington, DE 19808, USA.
4 The Company's interests in its subsidiaries are predominantly
in the form of preferred shares, which have a liquidation
preference over the common stock, are convertible into common stock
at the holder's discretion or upon certain liquidity events, are
entitled to one vote per share on all matters submitted to
shareholders for a vote and entitled to receive dividends when and
if declared. In the case of Enlight, Mandara and PureTech Health
LLC, the holdings are membership interests in an LLC. The holders
of common stock are entitled to one vote per share on all matters
submitted to shareholders for a vote and entitled to receive
dividends when and if declared.
5 On July 19, 2019, all of the outstanding notes, plus accrued
interest, issued by Follica to PureTech converted into 15,216,214
shares of Series A-3 Preferred Shares and 12,777,287 shares of
common share pursuant to a Series A-3 Note Conversion Agreement
between Follica and the noteholders. Please refer to Note 16.
6 Commense turned inactive during 2019.
7 On May 8, 2018, PureTech lost control of Akili, Akili was
deconsolidated from the Group's financial statements and is no
longer considered a subsidiary. This results in only the profits
and losses generated by Akili through the deconsolidation date
being included in the Group's Consolidated Statement of
Income/(Loss) and Other Comprehensive Income/(Loss). See Note 5 for
further details about the accounting for the investment in Akili
subsequent to deconsolidation.
8 On July 18, 2018, Calix Biopharma, Inc., Glyph Biosciences,
Inc., and Nybo Therapeutics, Inc. merged into Ariya Therapeutics,
Inc. Thus, the Group no longer holds an interest in Calix, Glyph
and Nybo but rather owns 100.0 percent voting interest of
Ariya.
9 As of December 31, 2018, PureTech maintained control of
Gelesis. On July 1, 2019 PureTech lost control of Gelesis and
Gelesis was deconsolidated from the Group's financial statements,
resulting in only the profits and losses generated by Gelesis
through the deconsolidation date being included in the Group's
Consolidated Statement of Income/(Loss) and Other Comprehensive
Income/(Loss). See Notes 5 and 6 for further details about the
accounting for the investments in Gelesis subsequent to
deconsolidation.
10 On March 15, 2019, PureTech lost control of Karuna, Karuna
was deconsolidated from the Group's financial statements and is no
longer considered a subsidiary. This results in only the profits
and losses generated by Karuna through the deconsolidation date
being included in the Group's Consolidated Statement of
Income/(Loss) and Other Comprehensive Income/(Loss). See Note 5 for
further details about the accounting for the investment in Karuna
subsequent to deconsolidation.
11 On February 12, 2019, PureTech lost control of Vor, Vor was
deconsolidated from the Group's financial statements and is no
longer considered a subsidiary. This results in only the profits
and losses generated by Vor through the deconsolidation date being
included in the Group's Consolidated Statement of Income/(Loss) and
Other Comprehensive Income/(Loss).See Note 5 for further details
about the accounting for the investment in Vor subsequent to
deconsolidation.
Change in subsidiary ownership and loss of control
Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as equity
transactions.
Where the Group loses control of a subsidiary, the assets and
liabilities are derecognized along with any related non-controlling
interest ("NCI"). Any interest retained in the former subsidiary is
measured at fair value when control is lost. Any resulting gain or
loss is recognized as profit or loss in the Consolidated Statements
of Comprehensive Income/(Loss).
Associates
As used in these financial statements, the term associates are
those entities in which the Group has no control but maintains
significant influence over the financial and operating policies.
Significant influence is presumed to exist when the Group holds
between 20 and 50 percent of the voting power of an entity, unless
it can be clearly demonstrated that this is not the case. The Group
evaluates if it maintains significant influence over associates by
assessing if the Group has lost the power to participate in the
financial and operating policy decisions of the associate.
Application of the equity method to associates
Associates are accounted for using the equity method (equity
accounted investees) and are initially recognized at cost, or if
recognized upon deconsolidation they are initially recorded at fair
value at the date of deconsolidation. The consolidated financial
statements include the Group's share of the total comprehensive
income and equity movements of equity accounted investees, from the
date that significant influence commences until the date that
significant influence ceases.
To the extent the Group holds interests in associates that are
not providing access to returns underlying ownership interests, the
instrument held by PureTech is accounted for in accordance with
IFRS 9 as investments held at fair value.
When the Group's share of losses exceeds its equity method
investment in the investee, losses are applied against Long-Term
Interests, which are investments accounted for under IFRS 9.
Investments are determined to be Long-Term Interests when they are
long-term in nature and in substance they form part of the Group's
net investment in that associate. This determination is impacted by
many factors, among others, whether settlement by the investee
through redemption or repayment is planned or likely in the
foreseeable future, whether the investment can be converted and/or
is likely to be converted to common stock or other equity
instrument and other factors regarding the nature of the
investment. Whilst this assessment is dependent on many specific
facts and circumstances of each investment, typically conversion
features whereby the investment is likely to convert to common
stock or other equity instruments would point to the investment
being a Long-Term Interest. Similarly, where the investment is not
planned or likely to be settled through redemption or repayment in
the foreseeable future, this would indicate that the investment is
a Long-Term Interest. When the net investment in the associate,
which includes the Group's investments in other long-term
interests, is reduced to nil, recognition of further losses is
discontinued except to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of an
investee.
The Group has also adopted the amendments to IAS 28 Investments
in Associates that addresses the dual application of IAS 28 and
IFRS 9 (see below) when equity method losses are applied against
Long-Term Interests (LTI). The amendments provide the annual
sequence in which both standards are to be applied in such a case.
The Group has applied the equity method losses to the LTIs
presented as part of Investments held at fair value subsequent to
remeasuring such investments to their fair value at balance sheet
date.
Change in Accounting Policy
As of January 1, 2019, the Group has adopted new accounting
policies for the accounting for leases. See updated accounting
policy for leases (IFRS 16) below.
Financial Instruments
Classification
The Group classifies its financial assets in the following
measurement categories:
-- Those to be measured subsequently at fair value (either
through other comprehensive income, or through profit or loss),
and
-- Those to be measured at amortized cost.
The classification depends on the Group's business model for
managing the financial assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains and losses will are
recorded in profit or loss. For investments in debt instruments,
this will depend on the business model in which the investment is
held. For investments in equity instruments that are not held for
trading, this will depend on whether the Group has made an
irrevocable election at the time of initial recognition to account
for the equity investment at FVOCI. As of balance sheet dates, none
of the Company's financial assets are accounted for as FVOCI.
Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at FVTPL,
transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets that
are carried at FVTPL are expensed.
Impairment
The Group assesses on a forward-looking basis the expected
credit losses associated with its debt instruments carried at
amortized cost. The Group had no debt instruments carried at
amortized cost as of balance sheet date. For trade receivables, the
Group applies the simplified approach permitted by IFRS 9, which
requires expected lifetime losses to be recognized from initial
recognition of the receivables.
Financial Assets
The Group's financial assets consist of cash and cash
equivalents, trade and other receivables, debt and equity
securities, other deposits and investments in associates' preferred
shares. The Group's financial assets are classified into the
following categories: investments held at fair value, trade and
other receivables, short-term investments and cash and cash
equivalents. The Group determines the classification of financial
assets at initial recognition depending on the purpose for which
the financial assets were acquired.
Investments held at fair value are investments in equity
instruments that are not held for trading. Such investments consist
of the Group's minority interest holdings where the Group has no
significant influence or preferred share investments in the Group's
associates that are not providing access to returns underlying
ownership interests. These financial assets are initially measured
at fair value and subsequently re-measured at fair value at each
reporting date. The Company elects if the gain or loss will be
recognized in Other Comprehensive Income/(Loss) or through profit
and loss on an instrument by instrument basis.The Company has
elected to record the changes in fair values for the financial
assets falling under this category through profit and loss. Please
refer to Note 5.
Short-term investments are short-term government treasury bonds
carried at fair value with changes in fair value recorded through
profit and loss in financing income.
Changes in the fair value of financial assets at FVTPL are
recognized in other income/(expense) in the Consolidated Statements
of Comprehensive Income/(Loss) as applicable.
Trade and other receivables are non-derivative financial assets
with fixed and determinable payments that are not quoted on active
markets. These financial assets are carried at the amounts expected
to be received less any expected lifetime losses. Such losses are
determined taking into account previous experience, credit rating
and economic stability of counterparty and economic conditions.
When a trade receivable is determined to be uncollectible, it is
written off against the available provision. Trade and other
receivables are included in current assets, unless maturities are
greater than 12 months after the end of the reporting period.
Financial Liabilities
The Group's financial liabilities consist of trade and other
payables, subsidiary notes payable, preferred shares, and warrant
liability. Warrant liabilities are initially recognized at fair
value. After initial recognition, these financial liabilities are
re-measured at FVTPL using an appropriate valuation technique.
Subsidiary notes payable without embedded derivatives are accounted
for at amortized cost.
The majority of the Group's subsidiaries have preferred shares
and notes payable with embedded derivatives, which are classified
as current liabilities. When the Group has preferred shares and
notes with embedded derivatives that qualify for bifurcation, the
Group has elected to account for the entire instrument as FVTPL
after determining under IFRS 9 that the instrument qualifies to be
accounted for under such FVTPL method.
The Group derecognizes a financial liability when its
contractual obligations are discharged, cancelled or expire.
Equity Instruments Issued by the Group
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions, in
accordance with IAS 32:
1. They include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavorable to the Group; and
2. Where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group's own
equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial
instrument is classified as a financial liability. Where the
instrument so classified takes the legal form of the Group's own
shares, the amounts presented in the financial information for
share capital and merger reserve account exclude amounts in
relation to those shares.
Changes in the fair value of liabilities at FVTPL are recognized
in Net finance income (costs) in the Consolidated Statements of
Comprehensive Income/(Loss) as applicable.
IFRS 15, Revenue from Contracts with Customers
The standard establishes a five-step principle-based approach
for revenue recognition and is based on the concept of recognizing
an amount that reflects the consideration for performance
obligations only when they are satisfied and the control of goods
or services is transferred.
The majority of the Group's contract revenue is generated from
licenses and services, some of which are part of collaboration
arrangements.
Management reviewed contracts where the Group received
consideration in order to determine whether or not they should be
accounted for in accordance with IFRS 15. To date, PureTech has
entered into transactions that generate revenue and meet the scope
of either IFRS 15 or IAS 20 Accounting for Government Grants.
Contract revenue is recognized at either a point-in-time or over
time, depending on the nature of the services and existence of
acceptance clauses.
The Group accounts for agreements that meet the definition of
IFRS 15 by applying the following five step model:
-- Identify the contract(s) with a customer - A contract with a
customer exists when (i) the Group enters into an enforceable
contract with a customer that defines each party's rights regarding
the goods or services to be transferred and identifies the payment
terms related to those goods or services, (ii) the contract has
commercial substance and, (iii) the Group determines that
collection of substantially all consideration for goods or services
that are transferred is probable based on the customer's intent and
ability to pay the promised consideration.
-- Identify the performance obligations in the contract -
Performance obligations promised in a contract are identified based
on the goods or services that will be transferred to the customer
that are both capable of being distinct, whereby the customer can
benefit from the good or service either on its own or together with
other resources that are readily available from third parties or
from the Group, and are distinct in the context of the contract,
whereby the transfer of the goods or services is separately
identifiable from other promises in the contract.
-- Determine the transaction price - The transaction price is
determined based on the consideration to which the Group will be
entitled in exchange for transferring goods or services to the
customer. To the extent the transaction price includes variable
consideration, the Group estimates the amount of variable
consideration that should be included in the transaction price
utilizing either the expected value method or the most likely
amount method depending on the nature of the variable
consideration. Variable consideration is included in the
transaction price if, in the Group's judgement, it is probable that
a significant future reversal of cumulative revenue under the
contract will not occur.
-- Allocate the transaction price to the performance obligations
in the contract - If the contract contains a single performance
obligation, the entire transaction price is allocated to the single
performance obligation. Contracts that contain multiple performance
obligations require an allocation of the transaction price to each
performance obligation based on a relative standalone selling price
basis.
-- Recognize revenue when (or as) the Group satisfies a
performance obligation - The Group satisfies performance
obligations either over time or at a point in time as discussed in
further detail below. Revenue is recognized at the time the related
performance obligation is satisfied by transferring a promised good
or service to a customer.
Revenue generated from services agreements (typically where
licenses and related services were combined into one performance
obligation) is determined to be recognized over time when it can be
determined that the services meet one of the following: (a) the
customer simultaneously receives and consumes the benefits provided
by the entity's performance as the entity performs; (b) the
entity's performance creates or enhances an asset that the customer
controls as the asset is created or enhanced; or (c) the entity's
performance does not create an asset with an alternative use to the
entity and the entity has an enforceable right to payment for
performance completed to date.
It was determined that the Group has contracts that meet
criteria (a), since the customer simultaneously receives and
consumes the benefits provided by the Company's performance as the
Company performs. Therefore revenue is recognized over time using
the input method based on costs incurred to date as compared to
total contract costs. The Company believes that in research and
development service type agreements using costs incurred to date
represents the most faithful depiction of the entity's performance
towards complete satisfaction of a performance obligation.
Revenue from licenses that are not part of a combined
performance obligation are recognized at a point in time due to the
licenses relating to intellectual property that has significant
stand-alone functionality and as such represent a right to use the
entity's intellectual property as it exists at the point in time at
which the license is granted.
Amounts that are receivable or have been received per
contractual terms but have not been recognized as revenue since
performance has not yet occurred or has not yet been completed are
recorded as deferred revenue. The Company classifies as non-current
deferred revenue amounts received for which performance is expected
to occur beyond one year or one operating cycle.
Grant Income
The Company recognizes grants from governmental agencies as
grant income in the Consolidated Statement of Comprehensive
Income/(Loss), gross of the expenditures that were related to
obtaining the grant, when there is reasonable assurance that the
Company will comply with the conditions within the grant agreement
and there is reasonable assurance that payments under the grants
will be received. The Company evaluates the conditions of each
grant as of each reporting date to ensure that the Company has
reasonable assurance of meeting the conditions of each grant
arrangement and it is expected that the grant payment will be
received as a result of meeting the necessary conditions.
The Company submits qualifying expenses for reimbursement after
the Company has incurred the research and development expense. The
Company records an unbilled receivable upon incurring such
expenses. In cases were grant income is received prior to the
expenses being incurred or recognized, the amounts received are
deferred until the related expense is incurred and/or recognized.
Grant income is recognized in the Consolidated Statements of
Comprehensive Income/(Loss) over the periods in which the Company
recognizes the related reimbursable expense for which the grant is
intended to compensate.
Functional and Presentation Currency
These consolidated financial statements are presented in United
States dollars ("U.S. dollars"). The functional currency of
virtually all members of the Group is the U.S. dollar. The assets
and liabilities of a previously held subsidiary were translated to
U.S. dollars at the exchange rate prevailing on the balance sheet
date and revenues and expenses were translated at the average
exchange rate for the period. Foreign exchange differences
resulting from the translation of this subsidiary were reported in
the Consolidated Statements of Comprehensive Income/(Loss) in Other
Comprehensive Income/(Loss).
Foreign Currency
Transactions in foreign currencies are translated to the
respective functional currencies of Group entities at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are retranslated to the functional currency at
the foreign exchange rate ruling at that date. Foreign exchange
differences arising on remeasurement are recognized in the
Consolidated Statement of Comprehensive Income/(Loss) except for
qualifying cash flow hedges, which are recognized directly in other
comprehensive income. The Company did not have qualifying cash flow
hedges during the reported periods. Non-monetary assets and
liabilities that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate at the date
of the transaction.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments
with original maturities of three months or less.
Share Capital
Ordinary shares are classified as equity. The Group is comprised
of share capital, share premium, merger reserve, other reserve,
translation reserve, and accumulated deficit.
Property and Equipment
Property and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of
the asset. Assets under construction represent leasehold
improvements and machinery and equipment to be used in operations
or research and development activities. When parts of an item of
property and equipment have different useful lives, they are
accounted for as separate items (major components) of property and
equipment. Depreciation is calculated using the straight-line
method over the estimated useful life of the related asset:
Laboratory and manufacturing equipment 2-8 years
Furniture and fixtures 7 years
Computer equipment and software 1-5 years
Leasehold improvements 5-10 years, or the remaining term
of the lease, if shorter
-------------------------------------- ---------------------------------
Depreciation methods, useful lives and residual values are
reviewed at each balance sheet date.
Intangible Assets
Intangible assets, which include purchased patents and licenses
with finite useful lives, are carried at historical cost less
accumulated amortization, if amortization has commenced, and
impairment losses. Intangible assets with finite lives are
amortized from the time they are available for use. Amortization is
calculated using the straight-line method to allocate the costs of
patents and licenses over their estimated useful lives.
Research and development intangible assets, which are still
under development and have accordingly not yet obtained marketing
approval, are presented as In-Process Research and Development
(IPR&D). IPR&D is not amortized since it is not yet
available for its intended use, but it is evaluated for potential
impairment on an annual basis or more frequently when facts and
circumstances warrant.
Impairment
Impairment of Non-Financial Assets
The Group reviews the carrying amounts of its property and
equipment and intangible assets at each reporting date to determine
whether there are indicators of impairment. If any such indicators
of impairment exist, then an asset's recoverable amount is
estimated. The recoverable amount is the higher of an asset's fair
value less cost of disposal and value in use.
The Company's IPR&D intangible assets are not yet available
for their intended use. As such, they are to be tested for
impairment at least annually.
An impairment loss is recognized when an asset's carrying amount
exceeds its recoverable amount. For the purposes of impairment
testing, assets are grouped at the lowest levels for which there
are largely independent cash flows. If a non- financial asset
instrument is impaired, an impairment loss is recognized in the
Consolidated Statements of Comprehensive Income/(Loss).
The Company did not record any impairment of such assets during
the reported periods.
Investments in associates are considered impaired if, and only
if, objective evidence indicates that one or more events, which
occurred after the initial recognition, have had an impact on the
future cash flows from the net investment and that impact can be
reliably estimated. If an impairment exists the Company measures an
impairment by comparing the carrying value of the net investment in
the associate to its recoverable amount and recording any excess as
an impairment loss. See Note 6 for impairment recorded in respect
of an investment in associate during the year ended December 31,
2019.
Employee Benefits
Short-Term Employee Benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and expensed as the related service is provided.
A liability is recognized for the amount expected to be paid if the
Group has a present legal or constructive obligation due to past
service provided by the employee, and the obligation can be
estimated reliably.
Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and has no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution
plans are recognized as an employee benefit expense in the periods
during which related services are rendered by employees. Prepaid
contributions are recognized as an asset to the extent that a cash
refund or a reduction in future payments is available.
Share-based Payments
Share-based payment arrangements, in which the Group receives
goods or services as consideration for its own equity instruments,
are accounted for as equity-settled share-based payment
transactions in accordance with IFRS 2, regardless of how the
equity instruments are obtained by the Group. The grant date fair
value of employee share-based payment awards is recognized as an
expense with a corresponding increase in equity over the requisite
service period related to the awards. The fair value is measured
using an option pricing model, which takes into account the terms
and conditions of the options granted. The amount recognized as an
expense is adjusted to reflect the actual number of awards for
which the related service and non-market performance conditions are
expected to be met, such that the amount ultimately recognized as
an expense is based on the number of awards that do meet the
related service and non-market performance conditions at the
vesting date. For share-based payment awards with market
conditions, the grant date fair value is measured to reflect such
conditions and there is no true-up for differences between expected
and actual outcomes.
Development Costs
Expenditures on research activities are recognized as incurred
in the Consolidated Statements of Comprehensive Income/(Loss). In
accordance with IAS 38 development costs are capitalized only if
the expenditure can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits are
probable, the Group can demonstrate its ability to use or sell the
intangible asset, the Group intends to and has sufficient resources
to complete development and to use or sell the asset, and it is
able to measure reliably the expenditure attributable to the
intangible asset during its development. The point at which
technical feasibility is determined to have been reached is when
regulatory approval has been received where applicable. Management
determines that commercial viability has been reached when a clear
market and pricing point have been identified, which may coincide
with achieving meaningful recurring sales. Otherwise, the
development expenditure is recognized as incurred in the
Consolidated Statements of Comprehensive Income/(Loss). As of
balance sheet date the Group has not capitalized any development
costs.
Provisions
A provision is recognized in the Consolidated Statements of
Financial Position when the Group has a present legal or
constructive obligation due to a past event that can be reliably
measured, and it is probable that an outflow of economic benefits
will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects risks specific to the liability.
Leases
On January 1, 2019, the Group adopted a new accounting standard
for leases. The Group leases real estate and equipment for use in
operations. These leases generally have lease terms of 1 to 10
years. The Group includes options that are reasonably certain to be
exercised as part of the determination of the lease term. The group
determines if an arrangement is a lease at inception of the
contract in accordance with guidance detailed in the new standard.
ROU assets represent the Group's right to use an underlying asset
for the lease term and lease liabilities represent our obligation
to make lease payments arising from the lease. Operating lease ROU
assets and liabilities are recognized at commencement date based on
the present value of lease payments over the lease term. As most of
our leases do not provide an implicit rate, we use the Group's
estimated incremental borrowing rate based on information available
at commencement date in determining the present value of future
payments.
The Group's operating leases are virtually all leases from real
estate.
When adopting IFRS 16 on January 1, 2019, the Group has applied
a modified retrospective approach by measuring the right-of-use
asset at an amount equal to the lease liability at the date of
transition and therefore comparative information was not restated.
Upon transition, the Group has applied the following practical
expedients:
-- excluding initial direct costs from the right-of-use assets;
-- using hindsight when assessing the lease term; and
-- not reassessing whether a contract is or contains a lease;
The Group has elected to account for lease payments as an
expense on a straight-line basis over the life of the lease
for:
-- Leases with a term of 12 months or less and containing no purchase options; and
-- Leases where the underlying asset has a value of less than $5,000.
The lease liability was initially measured at the present value
of the lease payments that were not paid at the transition date,
discounted by using the Group's incremental borrowing rate as the
rate implicit in the lease was not readily determinable.
The right-of-use asset is depreciated on a straight-line basis
and the lease liability will give rise to an interest charge.
The financial impact of adopting IFRS 16 on the Group was
primarily as follows:
January
1, 2019
$000s
-------------------- --------
Right of use asset 10,353
Lease liability 10,995
Accumulated deficit 999
-------------------- --------
Further information regarding the subleases, right of use asset
and lease liability can be found in Note 21.
Finance Income and Finance Costs
Finance income is comprised of income on funds invested in U.S.
treasuries, income on money market funds and to a much lesser
extent income on a finance lease. Financing income is recognized as
it is earned. Finance costs comprise mainly of loan and lease
liability interest expenses and the changes in the fair value of
warrant and financial liabilities carried at FVTPL.
Taxation
Tax on the profit or loss for the year comprises current and
deferred income tax. In accordance with IAS 12, tax is recognized
in the Consolidated Statements of Comprehensive Income/(Loss)
except to the extent that it relates to items recognized directly
in equity.
Current income tax is the expected tax payable or receivable on
the taxable income or loss for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustment to
tax payable in respect of previous years.
Deferred tax is recognized due to temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax assets are recognized for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Deferred taxes are recognized in Consolidated Statements of
Comprehensive Income/(Loss) except to the extent that they relate
to items recognized directly in equity or in other comprehensive
income.
Fair Value Measurements
The Group's accounting policies require that certain financial
and non-financial assets and certain financial liabilities be
measured at their fair value.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to
measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs. Fair values
are categorized 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).
The Group recognizes 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, 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
Group's Directors.
Prior period reclassification
During 2019 management identified that for the year ended
December 31, 2018, Gain/(loss) on investments held at fair value of
$14.3 million was incorrectly classified as Finance costs -
subsidiary preferred shares. As a result, in the 2019 financial
statements a prior year reclassification has been made in the
Consolidated Statement of Comprehensive Income/(Loss) for the year
ended December 31, 2018.
2. New Standards and Interpretations Not Yet Adopted
A number of new standards, interpretations, and amendments to
existing standards are effective for annual periods commencing on
or after January 1, 2021 and have not been applied in preparing the
consolidated financial information. The Company's assessment of the
impact of these new standards and interpretations is set out
below.
Effective January 1, 2023, the definition of accounting
estimates has been amended as an amendment to IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors. The
amendments clarify how companies should distinguish changes in
accounting policies from changes in accounting estimates. The
distinction is important because changes in accounting estimates
are applied prospectively only to future transactions and future
events, but changes in accounting policies are generally also
applied retrospectively to past transactions and other past events.
This amendment is not expected to have an impact on the Company's
financial statements.
Effective January 1, 2023, IAS 1 has been amended to clarify
that liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting
period. Classification is unaffected by the expectations of the
entity or events after the reporting date. The Company does not
expect this amendment will have a material impact on its financial
statements.
None of the other new standards, interpretations, and amendments
are applicable to the Company's financial statements and therefore
will not have an impact on the Company.
3. Revenue
Revenue recorded in the Consolidated Statement of Comprehensive
Income/(Loss) consists of the following:
2020 2019 2018
For the years ended December 31, $000s $000s $000s
--------------------------------- ------ ------ --------
Contract revenue 8,341 8,688 16,371
Grant income 3,427 1,119 4,377
--------------------------------- ------ ------ ------
Total revenue 11,768 9,807 20,748
--------------------------------- ------ ------ ------
All amounts recorded in contract revenue were generated in the
United States.
Primarily all of the Company's contracts as of December 31,
2020, 2019 and 2018 were determined to have a single performance
obligation which consists of a combined deliverable of license to
intellectual property and research and development services.
Therefore, for such contracts, revenue is recognized over time
based on the inputs method which is a faithful depiction of the
transfer of goods and services. Progress is measured based on costs
incurred to date as compared to total projected costs. Payments for
such contracts are primarily made up front at the inception of the
contract (or upon achieving a milestone event) and to a much lesser
extent payments are made periodically over the contract term.
During the year ended December 31, 2020, the Company received a
$2.0 million milestone payment from Karuna Therapeutics, Inc.
following initiation of its KarXT Phase 3 clinical study pursuant
to the Exclusive Patent License Agreement between PureTech and
Karuna. This milestone was recognized as revenue during the year
ended December 31, 2020
Disaggregated Revenue
The Group disaggregates contract revenue in a manner that
depicts how the nature, amount, timing, and uncertainty of revenue
and cash flows are affected by economic factors. The Group
disaggregates revenue based on contract revenue or grant revenue,
and further disaggregates contract revenue based on the transfer of
control of the underlying performance obligations.
2020 2019 2018
Timing of contract revenue recognition $000s $000s $000s
------------------------------------------- ------ ------ --------
Transferred at a point in time - Licensing
Income(1) 2,054 - 12,000
Transferred over time(2) 6,286 8,688 4,371
------------------------------------------- ------ ------ ------
8,341 8,688 16,371
------------------------------------------- ------ ------ ------
1 2020 - Attributed to Parent Company and Other; 2018 -
attributed to Controlled Founded Entities segment. See note 4,
Segment information.
2 2020 - Attributed to Internal segment ($3,560 thousand) and
Controlled founded entities segment ($2,726 thousand); 2019 -
Attributed to Internal segment ($6,064 thousand), Controlled
founded entities segment ($2,487 thousand) and Parent Company and
Other ($137 thousand); 2018 - Attributed to Internal segment
($2,110 thousand), Controlled founded entities segment ($2,233
thousand) and Parent Company and Other ($29 thousand). See Note 4,
Segment Information.
2020 2019 2018
Customers over 10% of revenue* $000s $000s $000s
---------------------------------------- ------ ------ --------
Janssen Biotech, Inc. - - 12,000
BMEB Services LLC - - 1,415
Roche Holding AG 1,518 4,973 -
Eli Lilly and Company 896 1,433 -
Boehringer Ingelheim International GMBH 2,043 1,091 -
Imbrium Therapeutics L.P. 1,736 1,013 -
Karuna Therapeutics, Inc. 2,000 - -
---------------------------------------- ------ ------ ------
8,193 8,510 13,415
---------------------------------------- ------ ------ ------
An estimation uncertainty arises due to management's application
of the inputs method in recognizing revenue overtime. In doing so,
the total cost to satisfy the performance obligation includes a
significant estimate by management in its budgets and projected
cash flows. The sensitivity of this calculation for the years ended
December 31, 2020, 2019 and 2018 is detailed below:
For the year ended December 31, 2020
-------------------------------------------------- ------- ----------
Budgeted costs to complete +10% (10)%
-------------------------------------------------- ------- ------
Revenue (535) 654
-------------------------------------------------- ------ ------
For the year ended December 31, 2019
-------------------------------------------------- ------- ----------
Budgeted costs to complete +10% (10)%
-------------------------------------------------- ------- ------
Revenue (951) 738
-------------------------------------------------- ------ ------
For the year ended December 31, 2018
-------------------------------------------------- ------- ----------
Budgeted costs to complete +10% (10)%
-------------------------------------------------- ------- ------
Revenue (265) 323
-------------------------------------------------- ------ ------
Contract Balances
Accounts receivables represent rights to consideration in
exchange for products or services that have been transferred by the
Group, when payment is unconditional and only the passage of time
is required before payment is due. Accounts receivables do not bear
interest and are recorded at the invoiced amount. Accounts
receivable are included within Trade and other receivables on the
Consolidated Statement of Financial Position.
Contract liabilities represent the Group's obligation to
transfer products or services to a customer for which consideration
has been received, or for which an amount of consideration is due
from the customer. Contract liabilities are included within
deferred revenue on the Consolidated Statement of Financial
Position.
2020 2019
Contract Balances $000s $000s
------------------------------ ------ --------
Accounts receivable 711 1,699
Deferred revenue - long term 0 1,220
Deferred revenue - short term 1,472 5,474
------------------------------ ------ ------
During the year ended December 31, 2020, $5.3 million of revenue
was recognized on deferred revenue outstanding at December 31,
2019.
Remaining performance obligations represent the transaction
price of unsatisfied or partially satisfied performance obligations
within contracts with an original expected contract term that is
greater than one year and for which fulfillment of the contract has
started as of the end of the reporting period. The aggregate amount
of transaction consideration allocated to remaining performance
obligations as of December 31, 2020 was $1.7 million. The following
table summarizes when the Group expects to recognize the remaining
performance obligations as revenue. The Group will recognize
revenue associated with these performance obligations as transfer
of control occurs:
Greater
Less than than 1
1 Year Year Total
-------------------------------------------- --------- ------- --------
Remaining Performance Obligation 1,713 - 1,713
-------------------------------------------- --------- ------- ------
4. Segment Information
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
Group has determined that each entity is representative of a single
operating segment as the Directors monitor the financial results at
this level. When identifying the reportable segments the Group has
determined that it is appropriate to aggregate multiple operating
segments into a single reportable segment given the high level of
operational and financial similarities across the entities. The
Group has identified four reportable segments which 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.
During the year ended December 31, 2019, the Company
deconsolidated three of its subsidiaries which resulted in a change
to the composition of its reportable segments. The Company has
revised in the 2019 financial statements the 2018 financial
information to conform to the presentation as of and for the period
ending December 31, 2019. The change in segments reflects how the
Company's Board of Directors reviews the Group's results, allocates
resources and assesses performance.
Internal
The Internal segment (the "Internal segment"), is advancing
Wholly Owned Programs designed to harness key immunological,
fibrotic and lymphatic system mechanisms. These novel classes of
immunomodulatory drugs are designed to treat serious diseases,
including lung dysfunction, immuno-oncology, lymphatic,
neurological and neuropsychological disorders. The Internal segment
is comprised of the technologies that are wholly owned and will be
advanced through either PureTech Health funding or non-dilutive
sources of financing in the near-term. The operational management
of the Internal segment is conducted by the PureTech Health team,
which is responsible for the strategy, business development, and
research and development. As of December 31, 2020, this segment
included PureTech LYT (formerly Ariya Therapeutics) and PureTech
LYT-100.
Controlled Founded Entities
The Controlled Founded Entity segment (the "Controlled Founded
Entity segment") is comprised of the Group's subsidiaries that are
currently consolidated operational subsidiaries that either have,
or have plans to hire, independent management teams and currently
have already raised, or are currently in the process of raising,
third-party dilutive capital. These subsidiaries have active
research and development programs and either have entered into or
plan to seek a strategic partnership with an equity or debt
investment partner, who will provide additional industry knowledge
and access to networks, as well as additional funding to continue
the pursued growth of the company. As of December 31, 2020, this
segment included Alivio Therapeutics, Inc., Entrega Inc., Follica
Incorporated, Sonde Health Inc., and Vedanta Biosciences, Inc.
Non-Controlled Founded Entities
The Non-Controlled Founded Entities segment (the "Non-Controlled
Founded Entities segment") is comprised of the entities in respect
of which PureTech Health (i) no longer holds majority voting
control as a shareholder and no longer has the right to elect a
majority of the members of the subsidiaries' Board of Directors.
Upon deconsolidation of an entity the segment disclosure is
restated to reflect the change on a retrospective basis, as this
constitutes a change in the composition of its reportable segments.
The Non-Controlled Founded Entities segment included Akili
Interactive Labs, Inc. ("Akili"), Vor Biopharma Inc. ("Vor"),
Karuna Therapeutics, Inc. ("Karuna"), and Gelesis Inc.
("Gelesis").
The Non-Controlled Founded Entities segment incorporates the
operational results of the aforementioned entities to the date of
deconsolidation. Following the date of deconsolidation, the Company
accounts for its investment in each entity at the parent level, and
therefore the results associated with investment activity following
the date of deconsolidation is included in the Parent Company and
Other segment (the "Parent Company and Other segment").
Parent Company and Other Segment
The Parent Company and Other segment includes activities that
are not directly attributable to the operating segments, such as
the activities of the Parent, corporate support functions and
certain research and development support functions that are not
directly attributable to a strategic business segment as well as
the elimination of intercompany transactions. This segment also
captures the accounting for the Company's holdings in entities for
which control has been lost, which is inclusive of the following
items: gain on deconsolidation, gain or loss on investments held at
fair value, gain on loss of significant influence, and the share of
net income/(loss) of associates accounted for using the equity
method. As of December 31, 2020, this segment included PureTech
Health plc, PureTech Health LLC, PureTech Management, Inc.,
PureTech Securities Corp. and PureTech Securities II Corp., as well
as certain other dormant, inactive and shell entities.
Information About Reportable Segments:
2020
--------------------------------------------------------------
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
------------------------------------- -------- ---------- -------------- -------- --------------
Consolidated Statements of
Comprehensive Income/(Loss)
Contract revenue 3,560 2,726 - 2,054 8,341
Grant revenue 32 3,395 - - 3,427
------------------------------------- -------- ---------- -------------- -------- ------------
Total revenue 3,592 6,121 - 2,054 11,768
===================================== ======== ========== ============== ======== ============
General and administrative
expenses (2,112) (15,061) - (32,267) (49,440)
Research and development
expenses (41,583) (40,043) - (234) (81,859)
===================================== ======== ========== ============== ======== ============
Total operating expense (43,695) (55,104) - (32,500) (131,299)
Other income/(expense):
Gain/(loss) on investments
held at fair value - - - 232,674 232,674
Loss realized on sale of
investments - - - (54,976) (54,976)
Gain/(loss) on disposal of
assets (15) (15) - - (30)
Other income/(expense) - 100 - 965 1,065
------------------------------------- -------- ---------- -------------- -------- ------------
Total other income/(expense) (15) 85 - 178,662 178,732
Net finance income/(costs) 19 (5,204) - (930) (6,115)
Share of net income/(loss)
of associates accounted for
using the equity method - - - (34,117) (34,117)
Income/(loss) before taxes (40,098) (54,102) - 113,170 18,969
------------------------------------- -------- ---------- -------------- -------- ------------
Income/(loss) before taxes
pre IFRS 9 fair value accounting,
finance costs - subsidiary
preferred shares, share-based
payment expense, depreciation
of tangible assets and amortization
of intangible assets (36,770) (44,181) - 121,644 40,694
Finance income/(costs) -
subsidiary preferred shares - - - - -
Finance income/(costs) -
IFRS 9 fair value accounting - (4,351) - - (4,351)
Share-based payment expense (2,491) (2,822) - (5,405) (10,718)
Depreciation of tangible
assets (838) (1,560) - (1,547) (3,945)
Amortization of ROU assets - (1,186) - (1,523) (2,709)
Amortization of intangible
assets - (1) - - (1)
Taxation - (1) - (14,400) (14,401)
------------------------------------- -------- ---------- -------------- -------- ------------
Income/(loss) for the year (40,098) (54,103) - 98,769 4,568
Other comprehensive income/(loss) - - - 469 469
------------------------------------- -------- ---------- -------------- -------- ------------
Total comprehensive income/(loss)
for the year (40,098) (54,103) - 99,238 5,037
------------------------------------- -------- ---------- -------------- -------- ------------
Total comprehensive income/(loss)
attributable to:
Owners of the Company (40,098) (52,701) - 99,253 6,454
Non-controlling interests - (1,402) - (15) (1,417)
------------------------------------- -------- ---------- -------------- -------- ------------
Consolidated Statements of
Financial Position:
Total assets 87,917 68,731 - 833,347 989,994
Total liabilities 117,964 212,542 - 5,949 336,455
------------------------------------- -------- ---------- -------------- -------- ------------
Net assets/(liabilities) (30,047) (143,812) - 827,397 653,539
------------------------------------- -------- ---------- -------------- -------- ------------
2019
---------------------------------------------------------------
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
------------------------------------- -------- ---------- -------------- --------- --------------
Consolidated Statements of
Comprehensive Income (Loss)
Contract revenue 6,064 2,487 - 137 8,688
Grant revenue 15 1,104 - - 1,119
------------------------------------- -------- ---------- -------------- --------- ------------
Total revenue 6,079 3,591 - 137 9,807
------------------------------------- -------- ---------- -------------- --------- ------------
General and administrative
expenses (2,385) (14,436) (10,439) (32,098) (59,358)
Research and development
expenses (25,977) (42,780) (15,555) (1,536) (85,848)
------------------------------------- -------- ---------- -------------- --------- ------------
Total operating expense (28,362) (57,216) (25,994) (33,634) (145,206)
Other income/(expense):
Gain on deconsolidation - - - 264,409 264,409
Gain/(loss) on investments
held at fair value - - - (37,863) (37,863)
Gain/(loss) on disposal of
assets 17 (39) - (60) (82)
Gain on loss of significant
influence - - - 445,582 445,582
Other income/(expense) - 166 - (45) 121
===================================== ======== ========== ============== ========= ============
Other income/(expense) 17 127 - 672,023 672,167
Net finance income/(costs) - (16,947) (30,141) 941 (46,147)
Share of net income/(loss)
of associate accounted for
using the equity method - - - 30,791 30,791
Impairment of investment
in associate - - - (42,938) (42,938)
Income/(loss) before taxes (22,266) (70,445) (56,135) 627,320 478,474
===================================== ======== ========== ============== ========= ============
(Loss)/income before taxes
pre IFRS 9 fair value accounting,
finance costs - subsidiary
preferred shares, share-based
payment expense, depreciation
of tangible assets and amortization
of intangible assets (21,889) (48,996) (21,873) 640,298 547,540
Finance income/(costs) -
subsidiary preferred shares - 107 (1,564) (1) (1,458)
Finance income/(costs) -
IFRS 9 fair value accounting - (17,294) (28,737) (444) (46,475)
Share-based payment expense (5) (1,678) (3,543) (9,242) (14,468)
Depreciation of tangible
assets (376) (1,531) (207) (1,114) (3,228)
Amortization of ROU assets - (1,060) (83) (2,177) (3,320)
Amortization of intangible
assets 4 7 (128) - (117)
Taxation - (134) (162) (112,113) (112,409)
------------------------------------- -------- ---------- -------------- --------- ------------
Income/(loss) for the year (22,266) (70,579) (56,297) 515,207 366,065
Other comprehensive income/(loss) - - (10) - (10)
------------------------------------- -------- ---------- -------------- --------- ------------
Total comprehensive income/(loss)
for the year (22,266) (70,579) (56,307) 515,207 366,055
------------------------------------- -------- ---------- -------------- --------- ------------
Total comprehensive income/(loss)
attributable to:
Owners of the Company (7,002) (54,717) (32,353) 515,207 421,133
Non-controlling interests (15,264) (15,862) (23,953) - (55,079)
------------------------------------- -------- ---------- -------------- --------- ------------
Consolidated Statements of
Financial Position:
Total assets 17,614 41,612 - 881,952 941,178
Total liabilities 12,076 132,935 - 145,768 290,779
------------------------------------- -------- ---------- -------------- --------- ------------
Net (liabilities)/assets 5,538 (91,324) - 736,184 650,399
------------------------------------- -------- ---------- -------------- --------- ------------
2018
--------------------------------------------------------------
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
------------------------------------- -------- ---------- -------------- -------- --------------
Consolidated Statements of
Comprehensive Loss
Contract revenue 2,110 14,233 - 29 16,371
Grant revenue 86 4,271 20 - 4,377
------------------------------------- -------- ---------- -------------- -------- ------------
Total revenue 2,195 18,504 20 29 20,748
------------------------------------- -------- ---------- -------------- -------- ------------
General and administrative
expenses (1,498) (10,212) (16,385) (19,270) (47,365)
Research and development
expenses (8,929) (36,930) (29,851) (1,692) (77,402)
------------------------------------- -------- ---------- -------------- -------- ------------
Total operating expense (10,427) (47,142) (46,236) (20,962) (124,768)
------------------------------------- -------- ---------- -------------- -------- ------------
Other income/(expense):
Gain on deconsolidation - - - 41,730 41,730
Gain/(loss) on investments
held at fair value - - - (34,615) (34,615)
Gain/(loss) on disposal of
assets - - - 4,054 4,054
Gain on loss of significant
influence - - - 10,287 10,287
Other income/(expense) - 104 (405) (302)
------------------------------------- -------- ---------- -------------- -------- ------------
Other income/(expense) - - 104 21,051 21,155
Net finance income/(costs) 5,341 5,945 14,631 25,918
Share of net income/(loss)
of associate accounted for
using the equity method - - - (11,490) (11,490)
------------------------------------- -------- ---------- -------------- -------- ------------
Income/(loss) before taxes (8,232) (23,297) (40,167) 3,258 (68,438)
------------------------------------- -------- ---------- -------------- -------- ------------
(Loss)/income before taxes
pre IAS 39 fair value accounting,
finance costs - subsidiary
preferred shares, share-based
payment expense, depreciation
of tangible assets and amortization
of intangible assets (8,210) (24,344) (38,761) (4,235) (75,550)
Finance income/(costs) -
subsidiary preferred shares - - - (106) (106)
Finance income/(costs) -
IAS 39 fair value accounting - 5,341 5,516 11,775 22,632
Share-based payment expense (11) (2,465) (6,262) (3,899) (12,637)
Depreciation of tangible
assets (7) (1,823) (390) (256) (2,476)
Amortization of intangible
assets (4) (6) (270) (22) (302)
Taxation - (381) (185) (1,655) (2,221)
------------------------------------- -------- ---------- -------------- -------- ------------
Income/(loss) for the year (8,454) (26,206) (41,239) 5,239 (70,659)
Other comprehensive income/(loss) - (214) - (26) (240)
------------------------------------- -------- ---------- -------------- -------- ------------
Total comprehensive income/(loss)
for the year (8,454) (26,420) (41,239) 5,213 (70,899)
------------------------------------- -------- ---------- -------------- -------- ------------
Total comprehensive income/(loss)
attributable to:
Owners of the Company (1,139) (15,710) (32,260) 5,213 (43,894)
Non-controlling interests (7,315) (10,710) (8,980) - (27,005)
------------------------------------- -------- ---------- -------------- -------- ------------
Consolidated Statements of
Financial Position:
Total assets 2,984 15,603 35,934 387,240 441,761
Total liabilities 13,366 60,992 202,161 (1,731) 274,787
===================================== ======== ========== ============== ======== ============
Net (liabilities)/assets (10,381) (45,389) (166,227) 388,970 166,973
===================================== ======== ========== ============== ======== ============
The proportion of net assets shown above that is attributable to
non-controlling interest is disclosed in Note 18.
5. Investments held at fair value
Investments held at fair value include both unlisted and listed
securities held by PureTech. These investments, which include
Akili, Vor, Karuna, Gelesis (other than the investment in common
shares - please refer to Note 6), resTORbio and other insignificant
investments, are initially measured at fair value and are
subsequently re-measured at fair value at each reporting date.
Interests in these investments were accounted for as shown
below:
Investments held at fair value $000's
Balance as of January 1, 2019 169,755
Deconsolidation of subsidiaries (Vor, Karuna and Gelesis
(Note 6)) 138,571
Reclassification of Karuna investment to investment in associate (118,006)
Gain on Karuna investment at initial public offering(1) 40,633
Cash purchase of Gelesis convertible notes (please refer
to Note 6) 6,480
Cash purchase of Gelesis preferred shares (please refer
to Note 6) 8,020
Reclassification of Karuna investment at loss of significant
influence 557,243
Sale of resTORbio shares (9,295)
Loss - fair value through profit and loss(1) (78,496)
================================================================= =========
Balance as of December 31, 2019 and January 1, 2020 714,905
Sale of Karuna shares (347,538)
Sale of resTORbio shares (3,048)
Loss realised on sale of investments (54,976)
Cash purchase of Gelesis preferred shares (please refer
to Note 6) 10,000
Cash purchase of Vor preferred shares 1,150
Gain/(loss) - fair value through profit and loss 232,674
Balance as of December 31, 2020 before allocation of share
in associate loss to long-term interest 553,167
================================================================= =========
Share of associate loss allocated to long-term interest
(please refer to Note 6) (23,006)
================================================================= =========
Balance as of December 31, 2020 after allocation of share
in associate loss to long-term interest(2) 530,161
================================================================= =========
1 The net amount of these two items is a loss of $37.9 million
which is reported on the line Gain/(loss) on investments held at
fair value in the Consolidated Statements of Comprehensive
Income/(Loss).
2 Fair value of investments accounted for at fair value, does
not take into consideration contribution from milestones that
occurred after December 31, 2020, the value of the Group's
consolidated Founded Entities (Vedanta, Follica, Sonde, Akili,
Alivio, and Entrega), the Internal segment, or cash and cash
equivalents.
Vor
Vor was founded by PureTech through an initial Series A-1
Preferred Shares financing and raised funds through issuance of
convertible notes. As of December 31, 2018, PureTech maintained
control of Vor and the subsidiary's financial results were fully
consolidated in the Group's consolidated financial statements.
On February 12, 2019, Vor completed a Series A-2 Preferred
Shares financing round with PureTech and several new third party
investors. The financing provided for the purchase of 62,819,866
shares of Vor Series A-2 Preferred Shares at the purchase price of
$0.40 per share.
As a result of the issuance of Series A-2 preferred shares to
third-party investors, PureTech's ownership percentage and
corresponding voting rights dropped from 79.5 percent to 47.5
percent, and PureTech simultaneously gave up control on Vor's Board
of Directors, both of which triggered a loss of control over the
entity. As of February 12, 2019, Vor was deconsolidated from the
Group's financial statements, resulting in only the profits and
losses generated by Vor through the deconsolidation date being
included in the Consolidated Statement of Comprehensive
Income/(Loss). While the Company no longer controlled Vor, it was
concluded that PureTech still had significant influence over Vor by
virtue of its large, albeit minority, ownership stake and its
continued representation on Vor's Board of Directors. During the
year ended December 31, 2019, the Company recognized a $6.4 million
gain on the deconsolidation of Vor, which was recorded to the Gain
on the deconsolidation of subsidiary line item in the Consolidated
Statement of Comprehensive Income/(Loss).
As PureTech did not hold common shares in Vor upon
deconsolidation and the preferred shares it holds do not have
equity-like features, the voting percentage attributable to common
shares is nil. Therefore, PureTech had no basis to account for its
investment in Vor under IAS 28. The preferred shares held by
PureTech fall under the guidance of IFRS 9 and are treated as a
financial asset held at fair value through the Consolidated
Statement of Comprehensive Income/(Loss). The fair value of the
preferred shares at deconsolidation was $12.0 million.
During the year ended December 31, 2019, the Company recognized
a gain of $0.6 million that was recorded on the line item
Gain/(loss) on investments held at fair value within the
Consolidated Statement of Comprehensive Income/(Loss). Please refer
to Note 16 for information regarding the valuation of these
instruments.
On February 12, 2020, PureTech participated in the second
closing of Vor's Series A-2 Preferred Share financing. For
consideration of $0.7 million, PureTech received 1,625,000 A-2
shares. On June 30, 2020, PureTech participated in the first
closing of Vor's Series B Preferred Share financing. For
consideration of $0.5 million, PureTech received 961,538 shares.
Upon the conclusion of such Vor financings PureTech no longer has
significant influence over Vor. During the year ended December 31,
2020 PureTech recognized a fair value gain of $19.1 million in
respect of its investment in Vor that was recorded in the line item
Gain/(loss) on investments held at fair value within the
Consolidated Statement of Comprehensive Income/(Loss). Please refer
to Note 16 for information regarding the valuation of these
instruments.
Gelesis
As of July 1, 2019, Gelesis was deconsolidated from the Group's
financial statements, resulting in only the profits and losses
generated by Gelesis through the deconsolidation date being
included in the Group's Consolidated Statement of Income/(Loss). At
the date of deconsolidation, PureTech recorded a $156.0 million
gain on the deconsolidation of Gelesis, which was recorded to the
Gain on the deconsolidation of subsidiary line item in the
Consolidated Statement of Income/(Loss). The preferred shares and
warrants held by PureTech fall under the guidance of IFRS 9 and are
treated as financial assets held at fair value, where changes to
the fair value of the preferred shares and warrant are recorded
through the Consolidated Statement of Income/(Loss). The fair value
of the preferred shares and warrants at deconsolidation was $49.2
million. Please refer to Note 6 for information regarding the
Company's investment in Gelesis as an associate.
On August 12, 2019, Gelesis issued a convertible promissory note
to the Company in the amount of $2.0 million. On October 7, 2019,
Gelesis issued an amended and restated convertible note (the
"Gelesis Note") to the Company in the principal amount of up to
$6.5 million. The Gelesis Note was payable in installments, with
$2.0 million of the note drawn down upon execution of the original
note in August 2019 and an additional $3.3 million and $1.2 million
drawn down on October 7, 2019 and November 5, 2019, respectively.
The Gelesis Note was convertible upon the occurrence of Gelesis'
next qualified equity financing, or at the demand of the Company at
any date after December 31, 2019. The Gelesis Note fell under the
guidance of IFRS 9 and was treated as a financial asset held at
fair with all movements to the value of the note recorded through
the Consolidated Statement of Income/(Loss).
On December 5, 2019, Gelesis closed its Series 3 Growth
Preferred Stock financing, at which point all outstanding principal
and interest under the Gelesis Note converted into shares of Series
3 Growth Preferred Stock. In addition to the shares issued upon
conversion of the Gelesis Note, PureTech purchased $8.0 million of
Series 3 Growth Preferred Stock in the December financing. On April
1, 2020, PureTech participated in the 2nd closing of Gelesis's
Series 3 Growth Preferred Share financing. For consideration of
$10.0 million, PureTech received 579,038 Series 3 Growth
shares.
During the years ended December 31, 2020 and 2019, the Company
recognized in respect of the investments in Gelesis held at fair
value a gain of $7.1 million and a loss of $18.7 million,
respectively, that were recorded in the line item Gain/(loss) on
investments held at fair value within the Consolidated Statements
of Comprehensive Income/(Loss). The loss recorded in 2019 was
primarily as a result of the Gelesis Series 3 Growth financing,
which was executed with terms that resulted in a decrease in fair
value across all other classes of preferred shares. Additionally,
due to the equity method based investment in Gelesis being reduced
to zero, the Company allocated a portion of its share in the net
loss in Gelesis for the year ended December 31, 2020, totaling
$23.0 million, to its preferred share investments in Gelesis, which
are considered to be long-term interests in Gelesis . Please refer
to Note 16 for information regarding the valuation of these
instruments.
Karuna
Karuna was founded by PureTech and raised funding through
Preferred Share financings as well as convertible note issuances.
As of December 31, 2018, PureTech maintained control of Karuna and
Karuna's financial statements were fully consolidated in the
Group's consolidated financial statements.
On March 15, 2019, Karuna completed the closing of a Series B
Preferred Share financing with PureTech and several new third party
investors. The financing provided for the purchase of 5,285,102
shares of Karuna Series B Preferred Shares at a purchase price of
$15.14 per share.
As a result of the issuance of the preferred shares to
third-party investors, PureTech's ownership percentage and
corresponding voting rights related to Karuna dropped from 70.9
percent to 44.3 percent, and PureTech simultaneously lost control
over Karuna's Board of Directors, both of which triggered a loss of
control over the entity. As of March 15, 2019, Karuna was
deconsolidated from the Group's financial statements, resulting in
only the profits and losses generated by Karuna through the
deconsolidation date being included in the Group's Consolidated
Statement of Comprehensive Income/(Loss). At the date of
deconsolidation, PureTech recorded a $102.0 million gain on the
deconsolidation of Karuna, which was recorded to the Gain on the
deconsolidation of subsidiary line item in the Consolidated
Statement of Comprehensive Income/(Loss). While the Company no
longer controls Karuna, it was concluded that PureTech still had
significant influence over Karuna by virtue of its large, albeit
minority, ownership stake and its continued representation on
Karuna's Board of Directors. PureTech still had the power to
participate in the financial and operating policy decisions of the
entity, although it did not control these policies. As PureTech had
significant influence over Karuna, the entity was accounted for as
an associate under IAS 28.
Upon the date of deconsolidation, PureTech held both preferred
and common shares in Karuna and a warrant issued by Karuna to
PureTech. The preferred shares and warrant held by PureTech fell
under the guidance of IFRS 9 and were treated as financial assets
held at fair value, and all movements to the value of preferred
shares held by PureTech were recorded through the Consolidated
Statement of Comprehensive Income/(Loss), in accordance with IFRS
9. The fair value of the preferred shares and warrant at
deconsolidation was $72.4 million. Subsequent to deconsolidation,
PureTech purchased an additional $5.0 million of Karuna Series B
Preferred shares.
Due to the immaterial investment in common shares and
overwhelmingly large losses by Karuna, the common share investment
accounted for under the equity method was remeasured to nil
immediately following both the deconsolidation and the exercise of
the warrant in the first half of 2019.
On June 28, 2019, Karuna priced its IPO. PureTech's ownership
percentage and corresponding voting rights related to Karuna
dropped from 44.3 percent percent to 31.6 percent; however,
PureTech retained significant influence due to its continued
presence on the board and its large, albeit minority, equity stake
in the company. Upon completion of the IPO, the Karuna preferred
shares held by PureTech converted to common shares. In light of
PureTech's common share holdings in Karuna and corresponding voting
rights, PureTech had re-established a basis to account for its
investment in Karuna under IAS 28. The preferred shares investment
held at fair value was therefore reclassified to investment in
associate upon completion of the conversion. During the year ended
December 31, 2019 and up to June 28, 2019, the Company recognized a
gain of $40.6 million that was recorded on the line item Gain on
investments held at fair value within the Consolidated Statement of
Comprehensive Income/(Loss) related to the preferred shares that
increased in value between the date of deconsolidation and the date
of Karuna's IPO.
As of December 2, 2019 it was concluded that the Company no
longer exerted significant influence over Karuna owing to the
resignation of the PureTech designee from Karuna's board of
directors, with PureTech retaining no ability to reappoint
representation. Furthermore, PureTech is not involved in any
manner, or has any influence, on the management of Karuna, or on
any of its decision making processes and has no ability to do so.
As such, PureTech lost the power to participate in the financial
and operating policy decisions of Karuna. As a result, Karuna is no
longer deemed an Associate and does not meet the scope of equity
method accounting, resulting in the investment being accounted for
as an investment held at fair value. As of December 2, 2019 the
Company's interest in Karuna was 28.4 percent. For the period of
June 28, 2019 through December 2, 2019, PureTech's investment in
Karuna was subject to equity method accounting. In accordance with
IAS 28, the Company's investment was adjusted by the share of
losses generated by Karuna (weighted average of 31.4 percent based
on common stock ownership interest), which resulted in a net loss
of associates accounted for using the equity method of $6.3 million
during the year ended December 31, 2019.
Upon PureTech's loss of significant influence, the investment in
Karuna was reclassified to an investment held at fair value. This
change led PureTech to recognize a gain on loss of significant
influence of $445.6 million that was recorded to the Consolidated
Statement of Comprehensive Income/(Loss) on the line item Gain on
loss of significant influence during the year ended December 31,
2019. The investment in Karuna after the recording of the gain on
loss of significant influence was $557.2 million, which was
reclassified from Investments in associates to Investments held at
fair value. Additionally, from December 2, 2019 PureTech recorded a
$0.7 million loss on the line item Gain/(loss) on investments held
at fair value within the Consolidated Statement of Comprehensive
Income/(Loss) for the year ended December 31, 2019.
On January 22, 2020, PureTech sold 2,100,000 shares of Karuna
common shares for aggregate proceeds of $200.9 million. On May 26,
2020, PureTech sold an additional 555,500 Karuna common shares for
aggregate proceeds of $45.0 million. On August 26, 2020, PureTech
sold 1,333,333 common shares of Karuna for aggregate proceeds of
$101.6 million. As a result of the sales, Puretech recorded a loss
of $54.8 million attributable to blockage discount included in the
sales price, to the line item Loss Realized on Sale of Investment
within the Consolidated Statement of Comprehensive Income/(Loss).
Additionally, during the year ended December 31, 2020 PureTech
recognized a fair value gain of $191.2 million in respect of its
investment in Karuna that was recorded in the line item Gain/(loss)
on investments held at fair value within the Consolidated Statement
of Comprehensive Income/(Loss). As of December 31, 2020 PureTech
held a 12.6 percent interest in Karuna. Please refer to Note 16 for
information regarding the valuation of these instruments.
Akili
On May 8, 2018, Akili completed the first closing of a Series C
Preferred Stock financing in which PureTech Health did not invest.
As a result of the issuance of the preferred shares to third-party
investors, following the first close of the Series C financing,
PureTech's ownership percentage and corresponding voting rights
related to Akili dropped from 61.8 percent to 41.9 percent,
triggering a loss of control over the entity. As of May 2018, Akili
was deconsolidated from the Group's financial statements, resulting
in only the profits and losses generated by Akili through May 2018
being included in the Group's Consolidated Statements of
Comprehensive Income/(Loss). As a result of the deconsolidation,
PureTech recognized a $41.7 million gain on the deconsolidation
during the year ended December 31, 2018, which was recorded to the
Consolidated Statement of Comprehensive Income/(Loss) on the line
item Gain on the deconsolidation of subsidiary.
As PureTech did not hold common shares in Akili upon
deconsolidation and the preferred shares it holds do not have
equity-like features, the voting percentage attributable to common
shares is nil. Therefore, PureTech had no basis to account for its
investment in Akili under IAS 28. The preferred shares held by
PureTech Health fall under the guidance of IFRS 9 and are treated
as a financial asset held at fair value and all movements to the
value of the preferred shares is recorded through the Consolidated
Statements of Comprehensive Income/(Loss), in accordance with IFRS
9.
During the years ended December 31, 2020 and 2019, the Company
recognized a gain of $14.4 million and $11.5 million, respectively,
that was recorded in the line item Gain/(loss) on investments held
at fair value within the Consolidated Statements of Comprehensive
Income/(Loss) in respect of PureTech's investment in Akili. Please
refer to Note 16 for information regarding the valuation of these
instruments.
resTORbio
On January 26, 2018, resTORbio, Inc., closed its initial public
offering. Prior to the resTORbio IPO, PureTech Health recorded a
loss of $14.3 million during the year ended December 31, 2018 to
the Consolidated Statement of Comprehensive Income/(Loss) within
Gain/(Loss) on investments held at Fair Value to adjust the fair
value related to its resTORbio Series A Preferred Share investment.
Upon completion of the public offering, the resTORbio Series A
Preferred Shares held by PureTech Health converted to common
shares. In light of PureTech's common shares holdings in resTORbio
and corresponding voting rights, the preferred shares investment
held at fair value was reclassified to investment in associate upon
the completion of the conversion.
For the period of January 1, 2018 through November 5, 2018,
PureTech's investment in resTORbio was subject to equity method
accounting. In accordance with IAS 28, PureTech's investment was
adjusted by the share of profits and losses generated by resTORbio
(34.9 percent based on common stock ownership interest) in that
period, which resulted in a net loss from associates of $11.5
million recorded to the Consolidated Statement of Comprehensive
Income/(Loss) in the line item Share of net loss of associates
during the year ended December 31, 2018.
As of November 6, 2018, it was that concluded the Company no
longer exerted significant influence over resTORbio, as PureTech
lost the power to participate in the financial and operating policy
decisions of resTORbio. As a result, resTORbio was no longer deemed
an Associate and did not meet the scope of equity method
accounting, resulting in the investment being accounted for as an
investment held at fair value. This change led PureTech to
recognize a gain on loss of significant influence of $10.3 million
that was recorded to the Consolidated Statement of Comprehensive
Income/(Loss) on the line item Gain on loss of significant
influence during the year ended December 31, 2018. Additionally,
PureTech recorded a loss of $33.0 million for the adjustment to
fair value in connection with its investment in resTORbio to the
Consolidated Statement of Comprehensive Income/(Loss) on the line
item Gain/(loss) on investments held at fair value during the year
ended December 31, 2018.
On November 15, 2019, resTORbio announced that top line data
from the Protector 1 Phase 3 study evaluating the safety and
efficacy of RTB101 in preventing clinically symptomatic respiratory
illness in adults age 65 and older, did not meet its primary
endpoint and the Company has stopped the development of RTB101 in
this indication. As a result of ceasing the development of RTB101,
resTORbio's share price witnessed a decline in price. In November
and December 2019, PureTech Health sold 7,680,700 common shares of
resTORbio for aggregate proceeds of $9.3 million. Immediately
following the sale of common shares, PureTech Health held 2,119,696
common shares, or 5.8 percent, of resTORbio. During the year ended
December 31, 2019 PureTech recorded a loss of $71.9 million for the
adjustment to fair value of its investment in resTORbio to the
Consolidated Statement of Comprehensive Income/(Loss) in the line
item Gain (loss) on investments held at fair value.
On April 30, 2020, PureTech sold its remaining 2,119,696
resTORbio common shares, for aggregate proceeds of $3.0 million. As
a result of the sale, the Company recorded a loss of $0.2 million
attributable to blockage discount included in the sales price, to
the line item Loss realized on sale of investments within the
Consolidated Statement of Comprehensive Income/ (Loss).
Additionally, during the year ended December 31, 2020, the Company
recognized a gain of $0.1 million that was recorded on the line
item Gain/(loss) on investments held at fair value within the
Consolidated Statement of Comprehensive Income/(Loss). Please refer
to Note 16 for information regarding the valuation of these
instruments.
Gain on deconsolidation
The following table summarizes the gain on deconsolidation
recognized by the Company:
2020 2019 2018
Year ended December 31, $000s $000s $000s
----------------------------------------- ------ ------- --------
Gain on deconsolidation of Akili - - 41,730
Gain on deconsolidation of Vor - 6,357 -
Gain on deconsolidation of Karuna - 102,038 -
Gain on deconsolidation of Gelesis [Note
6] - 156,014 -
----------------------------------------- ------ ------- ------
Total gain on deconsolidation - 264,409 41,730
----------------------------------------- ------ ------- ------
6. Investments in Associates
Gelesis
Gelesis was founded by PureTech and raised funding through
preferred shares financings as well as issuances of warrants and
loans. As of December 31, 2018, PureTech maintained control of
Gelesis and the subsidiary's financial results were fully
consolidated in the Group's consolidated financial statements.
On July 1, 2019, the Gelesis Board of Directors was
restructured, resulting in two of the three PureTech
representatives resigning from the Board with PureTech retaining no
ability to reappoint directors to these board seats. As a result of
this restructuring, PureTech lost control over Gelesis' Board of
Directors, which triggered a loss of control over the entity. At
the deconsolidation date, PureTech held a 25.2 percent voting
interest in Gelesis. As of July 1, 2019, Gelesis was deconsolidated
from the Group's financial statements, resulting in only the
profits and losses generated by Gelesis through the deconsolidation
date being included in the Group's Consolidated Statement of
Income/(Loss) and Other Comprehensive Income/(Loss). At the date of
deconsolidation, PureTech recorded a $156.0 million gain on the
deconsolidation of Gelesis, which was recorded to the Gain on the
deconsolidation of subsidiary line item in the Consolidated
Statement of Income/(Loss) and Other Comprehensive Income/(Loss).
While the Company no longer controls Gelesis, it was concluded that
PureTech still has significant influence over Gelesis by virtue of
its large, albeit minority, ownership stake and its continued
representation on Gelesis' Board of Directors. PureTech still has
the power to participate in the financial and operating policy
decisions of the entity, although it does not control these
policies. As PureTech has significant influence over Gelesis, the
entity is accounted for as an associate under IAS 28, starting at
the date of deconsolidation.
Upon the date of deconsolidation, PureTech held preferred shares
and common shares of Gelesis and a warrant issued by Gelesis to
PureTech. PureTech's investment in common shares of Gelesis is
subject to equity method accounting with an initial investment of
$16.4 million. In accordance with IAS 28, PureTech's investment was
adjusted by the share of profits and losses generated by Gelesis
subsequent to the date of deconsolidation. See table below for the
Group's share in the profits and losses of Gelesis for the periods
presented.
The preferred shares and warrant held by PureTech fall under the
guidance of IFRS 9 and are treated as financial assets held at fair
value, where changes to the fair value of the preferred shares and
warrant are recorded through the Consolidated Statement of
Income/(Loss) and Other Comprehensive Income/(Loss), in accordance
with IFRS 9. The fair value of the preferred shares and warrant at
deconsolidation was $49.2 million. See Note 5 for changes in the
fair value subsequent to deconsolidation date.
Impairment loss for the year ended December 31, 2019
Following the issuance of the Gelesis Series 3 Preferred Shares
at a higher valuation than the previous round with some favorable
liquidation provisions primarily to PureTech and also to the other
Series 3 preferred share investors, which resulted in adjustments
to the fair values of other preferred shares, warrant classes and
Gelesis common stock, the Company assessed the investment in common
shares held in Gelesis for impairment. Management compared the
recoverable amount of the investment to its carrying amount as of
December 31, 2019, which resulted in an impairment loss to the
Investment in Gelesis. The recoverable amount was estimated based
on the fair value of the Gelesis common shares held by PureTech,
which are considered to be within Level 3 of the fair value
hierarchy. The costs of disposal are immaterial for the calculation
of Gelesis investment's recoverable amount.
During the year ended December 31, 2019, the total fair value of
common shares was determined utilizing a hybrid valuation approach
with significant unobservable inputs within the PureTech valuation
framework (refer to Note 16). The multi-scenario hybrid valuation
approach utilized the recent transaction method within an option
pricing framework and an IPO scenario within a
probability-weighted-expected return framework to determine the
value allocation for the common share class of Gelesis. The fair
value of the common shares was determined as the calculated
business enterprise value allocated to the outstanding common
shares treated as call options within the OPM or the value of
common shares within the PWERM. The PWERM maintained a 75.0 percent
probability of occurrence while the OPM maintained a 25.0 percent
probability of occurrence. The probability weighted term to exit
was 1.57 years. The discount rate utilized was 20.0 percent while
the risk-free rate and volatility utilized were 1.62 percent and
56.0 percent, respectively.
The impairment loss amounted to $42.9 million and was recorded
to Impairment of investment in associate within the Consolidated
Statement of Comprehensive Income/(Loss) for the year ended
December 31, 2019. As of December 31, 2019 the investment in
Gelesis was $10.6 million, which is equal to the fair value of the
common shares held by PureTech.
During the year ended December 31, 2020 the Group recorded its
share in the losses of Gelesis and its investment in associates
accounted for under the equity method was reduced to zero. Since
the Group has investments in Gelesis preferred shares that are
deemed to be Long-term interests, the Company continued recognizing
its share in Gelesis losses while applying such losses to its
preferred share investment in Gelesis accounted for as an
investment held at fair value.
Karuna
For the period of June 28, 2019 through December 2, 2019,
PureTech's investment in Karuna was subject to equity method
accounting. In accordance with IAS 28, the Company's investment was
adjusted by the share of losses generated by Karuna (weighted
average of 31.4 percent based on common stock ownership interest),
which resulted in a net loss of $6.3 million during the year ended
December 31, 2019 recorded in the line item Share of net
income/(loss) of associates. Starting December 2, 2019, due to the
loss of significant influence in Karuna on such date, the Company
is accounting for the investment in Karuna as an investment held at
fair value. See Note 5 for further detail on the Group's investment
in Karuna.
resTORbio
For the period of January 1, 2018 through November 5, 2018,
PureTech's investment in resTORbio was subject to equity method
accounting. In accordance with IAS 28, PureTech's investment was
adjusted by the share of profits and losses generated by resTORbio
(34.9 percent based on common stock ownership interest) during that
period, which resulted in a net loss from associates of $11.5
million that was recorded to the Consolidated Statement of
Comprehensive Income/(Loss) in the line item Share of net
income/(loss) of associates during the year ended December 31,
2018. See Note 5 for further detail on the Group's investment in
resTORbio.
The following table summarizes the activity related to the
investment in associates balance for the years ended December 31,
2020, 2019 and 2018.
Investment in Associates $000's
As of January 1, 2018 -
Investment upon initial public offering of resTORbio 115,210
Cash investment in Associate 3,500
Share of net loss of resTORbio accounted for using the equity
method (11,490)
Gain on loss of significant influence of resTORbio 10,287
Reclassification of resTORbio investment upon loss of significant
influence (117,507)
================================================================== =========
As of December 31, 2018 and January 1, 2019 -
Reclassification of Karuna investment at initial public
offering 118,006
Investment in Gelesis upon deconsolidation 16,444
Share of net loss of Karuna accounted for using the equity
method (6,345)
Share of net profit of Gelesis accounted for using the equity
method 37,136
Impairment of investment in Gelesis (42,938)
Reclassification of investment in Karuna upon loss of significant
influence (111,661)
================================================================== =========
As of December 31, 2019 and January 1, 2020 10,642
Share of net loss in Gelesis (34,117)
Share of other comprehensive income in Gelesis 469
Share of losses recorded against long term interests 23,006
================================================================== =========
As of December 31, 2020 -
================================================================== =========
Summarized financial information
The following table summarizes the financial information of
Gelesis as included in its own financial statements, adjusted for
fair value adjustments at deconsolidation and differences in
accounting policies. The table also reconciles the summarized
financial information to the carrying amount of the Company's
interest in Gelesis. The information for the year ended December
31, 2019 includes the results of Gelesis only for the period July
1, 2019 to December 31, 2019, as Gelesis was consolidated prior to
this period.
2020 2019
As of and for the year ended December 31, $000s $000s
==========================================================
Percentage ownership interest 47.9% 49.3%
Non-current assets 372,184 369,336
Current assets 92,875 40,079
Non-current liabilities (133,743) (82,406)
Current liabilities (300,748) (216,852)
Non controlling interests and options issued to
third parties (6,577) (1,542)
========================================================== ========= =========
Net assets attributable to shareholders of Gelesis
Inc. 23,989 108,615
========================================================== ========= =========
Group's share of net assets 11,481 53,580
Goodwill 8,216 -
Impairment (42,702) (42,938)
Recorded against Long-term Interests 23,006 -
========================================================== ========= =========
Investment in associate - 10,642
========================================================== ========= =========
Revenue 21,442 -
Income/(loss) from continuing operations (100%) (71,157) 74,573
Total comprehensive income/(loss) (100%) (70,178) 74,573
========================================================== ========= =========
Group's share in income/(loss) from continuing operations (34,117) 37,136
========================================================== ========= =========
Group's share of total comprehensive income/(loss) (33,648) 37,136
========================================================== ========= =========
7. Operating Expenses
Total operating expenses were as follows:
2020 2019 2018
For the years ending December 31, $000s $000s $000s
---------------------------------- ------- ------- ---------
General and administrative 49,440 59,358 47,365
Research and development 81,859 85,848 77,402
---------------------------------- ------- ------- -------
Total operating expenses 131,299 145,206 124,767
---------------------------------- ------- ------- -------
The average number of persons employed by the Group during the
year, analyzed by category, was as follows:
For the years ending December 31, 2020 2019 2018
---------------------------------- ---- ---- ------
General and administrative 43 39 55
Research and development 95 90 90
---------------------------------- ---- ---- ----
Total 138 129 145
---------------------------------- ---- ---- ----
The aggregate payroll costs of these persons were as
follows:
2020 2019 2018
For the years ending December 31, $000s $000s $000s
----------------------------------
General and administrative 22,943 24,468 22,939
Research and development 20,674 20,682 20,109
---------------------------------- ------ ------ ------
Total 43,616 45,150 43,048
---------------------------------- ------ ------ ------
Detailed operating expenses were as follows:
2020 2019 2018
For the years ending December 31, $000s $000s $000s
------------------------------------------ -------
Salaries and wages 29,403 27,703 27,274
Healthcare benefits 1,866 1,511 1,465
Payroll taxes 1,629 1,468 1,672
Share-based payments 10,718 14,468 12,637
------------------------------------------ ------- ------- -------
Total payroll costs 43,616 45,150 43,048
------------------------------------------ ------- ------- -------
Other selling, general and administrative
expenses 26,497 34,890 24,426
Other research and development expenses 61,186 65,166 57,293
------------------------------------------ ------- ------- -------
Total other operating expenses 87,683 100,056 81,719
------------------------------------------ ------- ------- -------
Total operating expenses 131,299 145,206 124,767
------------------------------------------ ------- ------- -------
Auditors remuneration:
2020 2019 2018
For the years ending December 31, $000s $000s $000s
-------------------------------------------------- ------ ------ --------
Audit of these financial statements 1,145 870 652
Audit of the financial statements of subsidiaries 291 290 200
Audit-related assurance services 490 163 162
Non-audit related services 173 778 159
Total 2,099 2,101 1,173
================================================== ====== ====== ======
Please refer to Note 8 for further disclosures related to
share-based payments and Note 24 for management's remuneration
disclosures.
8. Share-based Payments
Share-based payments includes stock options, restricted stock
units ("RSUs") and performance-based RSUs in which the expense is
recognized based on the grant date fair value of these awards.
Share-based Payment Expense
The Group share-based payment expense for the years ended
December 31, 2020, 2019 and 2018, were comprised of charges related
to the PureTech Health plc incentive stock and stock option
issuances and subsidiary stock plans.
The following table provides the classification of the Group's
consolidated share-based payment expense as reflected in the
Consolidated Statement of Income/(Loss):
2020 2019 2018
For the years ending December 31, $000s $000s $000s
---------------------------------- ------ ------ --------
General and administrative 7,650 10,677 5,293
Research and development 3,068 3,791 7,344
---------------------------------- ------ ------ ------
Total 10,718 14,468 12,637
================================== ====== ====== ======
Ariya Stock Option Exchange
In conjunction with the acquisition of the remaining minority
interests of PureTech LYT (previously named Ariya Therapeutics,
Inc.) (Please refer to Note 18), PureTech Health exchanged
subsidiary stock options previously granted to the co-inventors and
advisors of PureTech LYT with stock options to purchase 2,147,965
of the Company's ordinary shares under the PureTech Health
Performance Share Plan. As this was an exchange of awards within
the consolidated group, whereby the Company's stock options were
replacing Ariya's stock options, the exchange is accounted for as a
modification of the original award and the incremental fair value
on the date of the replacement is amortized over the remaining
vesting period of the awards.
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan
("PSP"). Under the PSP and subsequent amendments, awards of
ordinary shares may be made to the Directors, senior managers and
employees of, and other individuals providing services to the
Company and its subsidiaries up to a maximum authorized amount of
10.0 percent of the total ordinary shares outstanding. The shares
have various vesting terms over a period of service between two and
four years, provided the recipient remains continuously engaged as
a service provider.
The share-based awards granted under the PSP are equity settled
and expire 10 years from the grant date. As of the years ended
December 31, 2020, 2019 and 2018, the Company had issued
share-based awards to purchase an aggregate of 5,835,993, 5,409,751
and 5,657,602 shares, respectively, under this plan.
RSUs
RSU activity for the years ended December 31, 2020, 2019 and
2018 is detailed as follows:
Wtd Avg
Grant Date
Number Fair Value
of Shares/Units (GBP)
================================================== ================ =============
Outstanding (Non-vested) at January 1, 2018 5,589,416 1.09
RSUs Granted in Period 2,860,778 1.54
Vested (513,324) 1.06
Forfeited (1,338,087) 1.06
================================================== ================ ===========
Outstanding (Non-vested) at December 31, 2018 and
January 1, 2019 6,598,783 1.29
RSUs Granted in Period 1,775,569 2.95
Vested (3,738,005) 1.10
Forfeited - -
================================================== ================ ===========
Outstanding (Non-vested) at December 31, 2019 and
January 1, 2020 4,636,347 2.08
RSUs Granted in Period 1,759,011 1.80
Vested (2,781,687) 1.54
Forfeited (191,089) 2.37
================================================== ================ ===========
Outstanding (Non-vested) at December 31, 2020 3,422,582 2.46
================================================== ================ ===========
Each RSU entitles the holder to one ordinary share on vesting
and the RSU awards are based on a cliff vesting schedule over a
three-year requisite service period in which the Company recognizes
compensation expense on a graded basis for the RSUs. Following
vesting, each recipient will be required to make a payment of one
pence per ordinary share on settlement of the RSUs. Vesting of the
RSUs is subject to the satisfaction of performance and market
conditions. The grant date fair value of the market condition
awards is measured to reflect such conditions and there is no
true-up for differences between expected and actual outcomes.
The Company recognizes the estimated fair value of these
performance-based awards as share-based compensation expense over
the performance period based upon its determination of whether it
is probable that the performance targets will be achieved. The
Company assesses the probability of achieving the performance
targets at each reporting period. Cumulative adjustments, if any,
are recorded to reflect subsequent changes in the estimated outcome
of performance-related conditions.
The fair value of the market and performance-based awards is
based on the Monte Carlo simulation analysis utilizing a Geometric
Brownian Motion process with 100,000 simulations to value those
shares. The model considers share price volatility, risk-free rate
and other covariance of comparable public companies and other
market data to predict distribution of relative share
performance.
The performance and market conditions attached to the 2020 RSU
awards are based on the achievement of total shareholder return
("TSR"), with 50.0 percent of the shares under award vesting based
on the achievement of absolute TSR targets, 12.5 percent of the
shares under the award vesting based on TSR as compared to the FTSE
250 Index, 12.5 percent of the shares under the award vesting based
on TSR as compared to the MSCI Europe Health Care Index, and 25.0
percent of the shares under the award vesting based on the
achievement of strategic targets. The RSU award performance
criteria have changed over time as the criteria is continually
evaluated by the Group's Remuneration Committee.
In 2017, the Company granted certain executives RSUs that vested
based on service, market and performance conditions, as described
above. The vesting of all RSUs was achieved by December 31, 2019
where all service, market and performance conditions were met. The
remuneration committee of PureTech's board of directors approved
the achievement of the vesting conditions as of December 31, 2019
and reached the decision to cash settle the 2017 RSUs. The
settlement value was determined based on the 3 day average closing
price of the shares. The settlement value was $12.5 million. The
settlement value did not exceed the fair value at settlement date
and as such the cash settlement was treated as an equity
transaction, whereby the full repurchase cash settlement amount was
charged to equity in Other reserves.
In 2018, the Company granted certain executives RSUs that vested
based on service, market and performance conditions, as described
above. The remuneration committee of PureTech's board of directors
approved the achievement of certain vesting conditions as of July
2020 and reached the decision to cash settle a portion of the 2018
RSUs to certain executives. The settlement value was determined
based on the 3 day average closing price of the shares. The
settlement value was $0.4 million. The settlement value did not
exceed the fair value at settlement date and as such the cash
settlement was treated as an equity transaction, whereby the full
repurchase cash settlement amount was charged to equity in Other
reserves.
The Company incurred share-based payment expenses for
performance and market based RSUs of $5.7 million, $2.2 million and
$2.3 million for the years ended December 31, 2020, 2019 and 2018,
respectively.
Stock Options
Stock option activity for the years ended December 31, 2020,
2019 and 2018 is detailed as follows:
Wtd Average
of Wtd Average
remaining Stock
Wtd Average contractual Price
Number Exercise term (in at Exercise
of Options Price (GBP) years) (GBP)
==================================== =========== ============ ============ ============
Outstanding at January 1, 2018 2,343,085 1.22
Granted 2,796,820 1.57
Exercised (64,171) 1.20 1.56
Forfeited - -
Options Exercisable at December 31,
2018 and January 1, 2019 1,195,929 1.26 7.92
==================================== =========== ============ ============ ============
Outstanding at at December 31, 2018
and January 1, 2019 5,075,734 1.40 8.78
==================================== =========== ============ ============ ============
Granted 3,634,183 0.84
Exercised (237,090) 1.98 2.81
Forfeited - -
Options Exercisable at December 31,
2019 and January 1, 2020 4,349,921 0.93 8.34
==================================== =========== ============ ============ ============
Outstanding at at December 31, 2019
and January 1, 2020 8,472,827 1.16 8.55
==================================== =========== ============ ============ ============
Granted 4,076,982 3.14
Exercised (514,410) 1.52 2.88
Forfeited (1,119,313) 1.88
Options Exercisable at December 31,
2020 5,447,405 0.98 7.46
==================================== =========== ============ ============ ============
Outstanding at December 31, 2020 10,916,086 1.81 8.38
==================================== =========== ============ ============ ============
The fair value of the stock options awarded by the Company was
estimated at the grant date using the Black-Scholes option
valuation model, considering the terms and conditions upon which
options were granted, with the following weighted-average
assumptions:
At December 31, 2020 2019 2018
-------------------------- --------- --------- ---------
Expected volatility 41.25% 35.68% 44.18%
Expected terms (in years) 6.11 5.81 6.08
Risk-free interest rate 0.53% 1.85% 2.79%
Expected dividend yield - - -
Grant date fair value $1.72 $2.23 $0.96
Share price at grant date $4.30 $2.57 $2.05
-------------------------- ----- ----- -----
The Company incurred share-based payment expense for the stock
options of $2.1 million, $9.2 million and $1.4 million for the
years ended December 31, 2020, 2019 and 2018, respectively. The
significant decrease for the year ended December 31, 2020, as
compared to the year ended December 31, 2019, is largely
attributable to the exchange of the Ariya awards with the Company's
stock options in the year ended December 31, 2019, which resulted
in an additional expense recorded in such year, as described
above.
For shares outstanding as of December 31, 2020, the range of
exercise prices is detailed as follow:
Wtd Average
of
Wtd remaining
Average contractual
Options Exercise term (in
Range of Exercise Prices (GBP) Outstanding Price (GBP) years)
============================== ============== ============== ============
0.01 2,122,965 - 8.76
1.00 to 2.00 4,703,639 1.47 6.99
2.00 to 3.00 1,539,482 2.51 9.45
3.00 to 4.00 2,550,000 3.51 9.97
============================== ============ ============ ============
Total 10,916,086 1.81 8.38
============================== ============ ============ ============
For shares exercisable at December 31, 2020, utilizing the
closing share price on December 31, 2020, the estimated tax
obligation associated with the share-based payments transferable to
the tax authority on the employee's behalf was $6.9 million.
PureTech LLC Incentive Stock Issuance
In May 2015 and August 2014, the directors of PureTech Health
LLC approved the issuance of shares to the management team,
directors and advisors of PureTech Health LLC, subject to vesting
restrictions. The share-based awards granted under the 2016
PureTech LLC Incentive Stock Issuance Plan are equity settled and
expire 10 years from the grant date. No additional shares will be
granted under this compensation arrangement. The fair value of the
shares awarded was estimated as of the date of grant.
The Company incurred an expense of $0.2 million in share-based
payment expense for the year ended December 31, 2018, related to
PureTech Health LLC incentive compensation. No share-based payment
expense was incurred related to PureTech Health LLC incentive
compensation for the years ended December 31, 2020, and 2019,
respectively.
As of December 31, 2020, all shares related to the pre-IPO
incentive compensation plan had fully vested.
Subsidiary Plans
Certain subsidiaries of the Group have adopted stock option
plans. A summary of stock option activity by number of shares in
these subsidiaries is presented in the following table:
Outstanding Granted Exercised Expired Forfeited Outstanding
as of January During During During During as of December
1, 2020 the Year the Year the Year the Year 31, 2020
Alivio 3,698,244 189,924 - - - 3,888,168
Entrega 972,000 - - - (10,000) 962,000
Follica 1,309,040 - - - - 1,309,040
Sonde 1,829,004 363,830 - - - 2,192,834
Vedanta 1,450,100 493,951 (813) - (201,350) 1,741,888
-------- -------------- --------- --------- --------- --------- ---------------
Outstanding Granted Exercised Expired Forfeited Outstanding
as of January During During During During as of December
1, 2019 the Year the Year the Year the Year 31, 2019
------------- -------------- --------- --------- --------- -------------- -----------------
Gelesis 3,681,732 - - (110,386) (3,571,346)(1) -
Alivio 2,393,750 1,329,494 (3,125) - (21,875) 3,698,244
PureTech LYT 2,180,000 - - - (2,180,000)(2) -
Commense 540,416 - - - (540,416) -
Entrega 914,000 58,000 - - - 972,000
Follica 1,229,452 79,588 - - - 1,309,040
Karuna 1,949,927 - - - (1,949,927)(1) -
Sonde 22,500 1,806,504 - - - 1,829,004
Vedanta 1,373,750 154,193 - - (77,843) 1,450,100
------------- -------------- --------- --------- --------- -------------- ---------------
1 These shares represent the options outstanding on the date of
deconsolidation of Karuna and Gelesis.
2 These shares represent the options outstanding on the date of
exchange to PureTech stock options.
Outstanding Granted Exercised Expired Forfeited Outstanding
as of January During During During During as of December
1, 2018 the Year the Year the Year the Year 31, 2018
----------------- -------------- --------- --------- --------- -------------- -----------------
Gelesis 2,728,232 953,500 - - - 3,681,732
Alivio 2,393,750 - - - - 2,393,750
Akili 2,385,355 - - - (2,385,355)(1) -
PureTech LYT - 2,180,000 - - - 2,180,000
Commense 418,750 121,666 - - - 540,416
Entrega 867,750 60,000 - (3,750) (10,000) 914,000
Follica 1,271,302 - - (41,850) - 1,229,452
Karuna 855,427 1,111,000 - (4,125) (12,375) 1,949,927
Knode 32,500 - - (32,500) - -
Sonde 35,000 - - (6,250) (6,250) 22,500
Tal 1,663,806 - - (30,250) (2,750) 1,630,806
The Sync Project 1,080,000 - - - (1,080,000) -
Vedanta 1,194,014 278,786 - (24,800) (74,250) 1,373,750
----------------- -------------- --------- --------- --------- -------------- ---------------
1 These shares represent the options outstanding on the date of Akili's deconsolidation.
The weighted-average exercise prices and remaining contractual
life for the options outstanding as of December 31, 2020 were as
follows:
Weighted-average
exercise Weighted-average
Number price contractual
Outstanding at December 31, 2020 of options $ life outstanding
--------------------------------- ----------- ---------------- -----------------
Alivio 3,888,168 0.21 7.65
Entrega 962,000 0.70 2.80
Follica 1,309,040 0.89 6.29
Sonde 2,192,834 0.19 8.76
Vedanta 1,741,888 7.48 6.15
--------------------------------- ----------- ---------------- -----------------
The weighted average exercise prices for the options granted for
the years ended December 31, 2020, 2019 and 2018 were as
follows:
2020 2019 2018
For the years ended December 31, $ $ $
Alivio 0.47 0.49 -
PureTech LYT - - 0.03
Commense - - 1.34
Entrega - - 1.95
Follica - 0.03 -
Karuna - - 9.42
Sonde 0.18 0.20 -
Vedanta 19.59 19.13 14.66
--------------------------------- ----- ----- -----
The weighted average exercise prices for options forfeited
during the year ended December 31, 2020 were as follows:
Weighted-average
exercise
Number price
Forfeited during the year ended December 31, 2020 of options $
Vedanta 201,350 16.03
--------------------------------------------------- ----------- ----------------
The weighted average exercise prices for options exercisable as
of December 31, 2020 were as follows:
Weighted-average Exercise Price
Number of exercise price Range
Exercisable at December 31, Options $ $
============================ ========= ================ ==============
Alivio 3,888,168 0.04 0.03-0.49
Entrega 918,164 0.64 0.03-2.36
Follica 1,273,326 0.89 0.03-1.40
Sonde 774,238 0.20 0.13-0.20
Vedanta 1,119,289 11.64 0.02-19.94
============================ ========= ================ ==============
Significant Subsidiary Plans
Vedanta 2010 Stock Incentive Plan
In 2010, the Board of Directors for Vedanta approved the 2010
Stock Incentive Plan (the "Vedanta Plan"). Through subsequent
amendments, as of December 31, 2020, it allowed for the issuance of
2,145,867 share-based compensation awards through incentive share
options, nonqualified share options, and restricted shares to
employees, directors, and nonemployees providing services to
Vedanta. At December 31, 2020, 178,929 shares remained available
for issuance under the Vedanta Plan.
The options granted under Vedanta Plan are equity settled and
expire 10 years from the grant date. Typically, the awards vest in
four years but vesting conditions can vary based on the discretion
of Vedanta's Board of Directors.
Options granted under the Vedanta Plan are exercisable at a
price per share not less than the fair market value of the
underlying ordinary shares on the date of grant. The estimated fair
value of options, including the effect of estimated forfeitures, is
recognized over the options' vesting period.
The fair value of the stock option grants has been estimated at
the date of grant using the Black-Scholes option pricing model with
the following range of assumptions:
Assumption/Input 2020 2019 2018
-------------------------------- ------------- ------------- -------------
Expected award life (in years) 6.00-10.00 5.86-6.07 6.03-6.16
Expected award price volatility 89.24%-95.46% 89.24%-95.46% 91.60%-92.56%
Risk free interest rate 0.32%-0.87% 1.73%-1.88% 2.65%-2.78%
Expected dividend yield - - -
Grant date fair value $13.09-$16.54 $14.12-$15.61 $11.21-$11.26
Share price at grant date $19.59 $18.71-$19.94 $14.66
-------------------------------- ------------- ------------- -------------
Vedanta incurred share-based compensation expense of $2.4
million, $1.7 million and $2.1 million for the years ended December
31, 2020, 2019 and 2018, respectively.
Gelesis 2016 Stock Incentive Plan
In September 2016, the Directors of Gelesis approved the 2016
Stock Incentive Plan (the "2016 Gelesis Plan") which provides for
the grant of incentive stock options, nonqualified stock options,
and restricted stock to employees, directors, and nonemployees
providing services to Gelesis. At 30 June 2019, 329,559 shares
remained available for issuance under the Gelesis Plan.
The options granted under the 2016 Gelesis Plan are equity
settled and expire 10 years from the grant date. Typically, the
awards vest in four years but vesting conditions can vary based on
the discretion of Gelesis Board of Directors.
Options granted under the 2016 Gelesis Plan are exercisable at a
price per share not less than the fair market value of the
underlying ordinary shares on the date of grant. The estimated fair
value of options, including the effect of estimated forfeitures, is
recognized over the options' vesting period.
The fair value of the stock option grants has been estimated at
the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:
Assumption/Input 2020 2019 2018
-------------------------------- ------ ------ ----------
Expected award life (in years) - 0 6.22
Expected award price volatility -% -% 64.58%
Risk free interest rate -% -% 2.79%
Expected dividend yield - - -
Grant date fair value $- $- $7.84
Share price at grant date $- $- $12.82
-------------------------------- ------
Gelesis used an average historical share price volatility based
on an analysis of reported data for a peer group of comparable
companies which were selected based upon industry similarities. As
there is not sufficient historical share exercise data to calculate
the expected term of the options, Gelesis elected to use the
"simplified" method for all options granted at the money to value
share option grants. Under this approach, the weighted average
expected life is presumed to be the average of the vesting term and
the contractual term of the option.
Gelesis incurred share-based compensation expense of $2.4
million for the six month period prior to deconsolidation ended
June 30, 2019 and $3.9 million for the year ended December 31,
2018.
Karuna Pharmaceuticals, Inc. 2009 Stock Incentive Plan
In 2009, the Board of Directors for Karuna Pharmaceuticals, Inc.
approved the 2009 Stock Incentive Plan (the "Karuna 2009 Plan"). It
allowed for the issuance of 1,000,000 share-based compensation
awards through stock options, restricted stock units and other
stock-based awards under the Karuna 2009 Plan to employees,
officers, directors, consultants and advisors of Karuna. At 15
March 2019, 106,865 shares remained available for issuance under
the Karuna 2009 Plan.
The options granted under the Karuna 2009 Plan are equity
settled and expire 10 years from the grant date. Typically, the
awards vest in four years but vesting conditions can vary based on
the discretion of Karuna's Board of Directors.
Options granted under the Karuna 2009 Plan are exercisable at a
price per share not less than the fair market value of the
underlying ordinary shares on the date of grant. The estimated fair
value of options, including the effect of estimated forfeitures, is
recognized over the options' vesting period.
The fair value of the stock option grants has been estimated at
the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:
Assumption/Input 2020 2019 2018
-------------------------------- ------ ------ ---------
Expected award life (in years) - 0 6.07
Expected award price volatility -% -% 50.28%
Risk free interest rate -% -% 1.95%
Expected dividend yield - - -
Grant date fair value $- $- $3.51
Share price at grant date $- $- $7.08
-------------------------------- -----
Karuna incurred share-based compensation expense of $1.2 million
for the period prior to deconsolidation ended March 15, 2019 and
$1.9 million for the years ended December 31, 2018.
Other Plans
The stock compensation expense under plans at other subsidiaries
of the Group not including Gelesis, Vedanta and Karuna was $0.42
million, $0.01 million and $0.8 million for the years ended
December 31, 2020, 2019 and 2018, respectively. The negative
expense incurred during the year ended December 31, 2019 was
largely attributable to Commense forfeitures.
9. Finance Cost, net
The following table shows the breakdown of finance income and
costs:
2020 2019 2018
For the year ended December 31 $000s $000s $000s
----------------------------------------------
Finance income
Interest from financial assets not at fair
value through profit or loss 1,183 4,362 3,358
---------------------------------------------- ------- -------- ------
Total finance income 1,183 4,362 3,358
---------------------------------------------- ------- -------- ------
Finance costs
Contractual interest expense on notes payable (96) (149) (388)
Interest expense on other borrowings (496) - (4)
Interest expense on lease liability (2,354) (2,495) -
Gain on forgiveness of debt - - 289
Gain/(loss) on foreign currency exchange - 68 137
---------------------------------------------- ------- -------- ------
Total finance income/(costs) - contractual (2,946) (2,576) 34
---------------------------------------------- ------- -------- ------
Gain/(loss) from change in fair value of
warrant liability (117) (11,890) 82
Gain/(loss) from change in fair value of
preferred shares and convertible notes (4,234) (34,585) 22,549
---------------------------------------------- ------- -------- ------
Total finance income/(costs) - fair value
accounting (4,351) (46,475) 22,631
Total finance income/(costs) - subsidiary
preferred shares - (1,458) (106)
---------------------------------------------- ------- -------- ------
Total finance income/(costs) (4,351) (47,933) 22,525
---------------------------------------------- ------- -------- ------
Finance income/(costs), net (6,115) (46,147) 25,917
---------------------------------------------- ------- -------- ------
10. Earnings/(Loss) per Share
The basic and diluted loss per share has been calculated by
dividing the income/(loss) for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the years ended December 31, 2020, 2019 and
2018, respectively.
Earnings/(Loss) Attributable to Owners of the Company:
2020 2019 2018
--------------- ---------------- --------------------
Basic Diluted Basic Diluted Basic Diluted
$000s $000s $000s $000s $000s $000s
--------------------------- ------ ------- ------- ------- -------- ----------
Income/(loss) for
the year, attributable
to the owners of
the Company 5,985 5,985 421,144 421,144 (43,654) (43,654)
=========================== ====== ======= ======= ======= ======== ========
Income/(loss) attributable
to ordinary shareholders 5,985 5,985 421,144 421,144 (43,654) (43,654)
=========================== ====== ======= ======= ======= ======== ========
Weighted-Average Number of Ordinary Shares:
2020 2019 2018
------------------------ ------------------------ --------------------------
Basic Diluted Basic Diluted Basic Diluted
------------------------ ----------- ----------- ----------- ----------- ----------- -------------
Issued ordinary shares
at January 1, 285,370,619 285,370,619 282,493,867 282,493,867 236,897,579 236,897,579
Effect of shares
issued 233,048 233,048 932,600 932,600 36,950,688 36,950,688
Effect of dilutive
shares (please refer
to Note 8) - 7,252,246 - 8,355,866 - -
------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Weighted average
number of ordinary
shareholders at
December
31, 285,603,667 292,855,913 283,426,467 291,782,333 273,848,267 273,848,267
------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Earnings/(Loss) per Share:
2020 2019 2018
--------------- --------------- -----------------
Basic Diluted Basic Diluted Basic Diluted
$ $ $ $ $ $
--------------------- ------ ------- ------ ------- ------ ---------
Basic and diluted
earnings/(loss) per
share 0.02 0.02 1.49 1.44 (0.16) (0.16)
--------------------- ------ ------ ------ ------ ------ ------
11. Property and Equipment
Computer
Laboratory Furniture Equipment Construction
and Manufacturing and and Leasehold in
Equipment Fixtures Software Improvements process Total
Cost $000s $000s $000s $000s $000s $000s
Balance as of January
1, 2019 7,306 488 1,431 4,924 239 14,388
Additions, net of
transfers 3,374 1,126 175 13,494 4,649 22,818
Disposals (183) (168) (9) (45) - (405)
Deconsolidation of
subsidiaries (3,076) - (137) (754) (4,190) (8,157)
Reclassifications (25) 6 48 36 (76) (11)
Exchange differences (11) - - 1 24 14
----------------------- ------------------ --------- ---------- ------------- ------------ -------
Balance as of December
31, 2019 7,385 1,452 1,508 17,656 646 28,647
----------------------- ------------------ --------- ---------- ------------- ------------ -------
Additions, net of
transfers 1,536 - 51 399 3,347 5,332
Disposals (642) - (40) - - (682)
Reclassifications 141 - - - (141) -
Balance as of December
31, 2020 8,420 1,452 1,519 18,054 3,852 33,297
======================= ================== ========= ========== ============= ============ =======
Computer
Laboratory Furniture Equipment Construction
and Manufacturing and and Leasehold in
Accumulated depreciation Equipment Fixtures Software Improvements process Total
and impairment loss $000s $000s $000s $000s $000s $000s
------------------------ ------------------ --------- ---------- ------------- ------------ ----------
Balance as of January
1, 2018 (2,360) (175) (534) (807) - (3,876)
Depreciation (1,032) (60) (296) (1,088) (2,476)
Disposals 114 2 74 20 - 210
Deconsolidation of
subsidiaries - - - - -
Reclassifications - - - - - -
Exchange differences 56 - - 21 - 77
======================== ================== ========= ========== ============= ============ ========
Balance as of January
1, 2019 (3,222) (233) (756) (1,854) - (6,065)
Depreciation (1,328) (144) (312) (1,448) - (3,232)
Disposals 102 138 5 20 - 265
Deconsolidation of
subsidiaries 1,457 - 53 319 - 1,829
Reclassifications 15 - (20) 6 - 1
Exchange differences 8 - - 2 - 10
======================== ================== ========= ========== ============= ============ ========
Balance as of December
31, 2019 (2,968) (239) (1,030) (2,955) - (7,192)
------------------------ ------------------ --------- ---------- ------------- ------------ --------
Depreciation (1,572) (215) (297) (1,860) - (3,944)
Disposals 576 - 40 - - 616
Balance as of December
31, 2020 (3,965) (454) (1,287) (4,815) - (10,520)
======================== ================== ========= ========== ============= ============ ========
Computer
Laboratory Furniture Equipment Construction
and Manufacturing and and Leasehold in
Property and Equipment, Equipment Fixtures Software Improvements process Total
net $000s $000s $000s $000s $000s $000s
Balance as of December
31, 2019 4,417 1,213 478 14,701 646 21,455
Balance as of December
31, 2020 4,456 998 232 13,239 3,852 22,777
======================== ================== ========= ========== ============= ============ ======
Depreciation of property and equipment is included in the
General and administrative expenses and Research and development
expenses line items in the Consolidated Statements of Comprehensive
Income/(Loss). The Company recorded depreciation expense of $3.9
million, $3.2 million and $2.5 million for the years ended December
31, 2020, 2019 and 2018, respectively.
12. Intangible Assets
Intangible assets consist of licenses of intellectual property
acquired by the Group through various agreements with third parties
and are recorded at the value of the consideration transferred.
Information regarding the cost and accumulated amortization of
intangible assets is as follows:
Licenses
Cost $000s
Balance as of January 1, 2019 5,067
Additions 400
Deconsolidation of subsidiary (4,842)
-------------------------------- --------
Balance as of December 31, 2019 625
Additions 275
Balance as of December 31, 2020 900
================================ ========
Licenses
Accumulated amortization $000s
Balance as of January 1, 2019 (1,987)
Amortization (117)
Deconsolidation of subsidiary 2,104
-------------------------------- --------
Balance as of December 31, 2019 -
Amortization (1)
Balance as of December 31, 2020 (1)
================================ ========
Licenses
Intangible assets, net $000s
Balance as of December 31, 2019 625
Balance as of December 31, 2020 899
================================ ========
These intangible asset licenses represent
in-process-research-and-development assets since they are still
being developed and are not ready for their intended use. As such,
these assets are not yet amortized but tested for impairment
annually. The Company tested such assets for impairment as of
balance sheet date and concluded that none were impaired. During
the year ended December 31, 2019, Vor, Karuna and Gelesis were
deconsolidated and as such $2.7 million in net assets were
derecognized.
Amortization expense was included in the Research and
development expenses line item in the accompanying Consolidated
Statements of Comprehensive Income/(Loss). Amortization expense,
recorded using the straight-line method, was approximately $0.0
million, $0.1 million and $0.3 million for the years ended December
31, 2020, 2019 and 2018, respectively.
13. Other Financial Assets
Other financial assets consist of restricted cash held, which
represents amounts that are reserved as collateral against letters
of credit with a bank that are issued for the benefit of a landlord
in lieu of a security deposit for office space leased by the Group.
Information regarding restricted cash was as follows:
2020 2019
As of December 31, $000s $000s
----------------------------- ------ --------
Restricted cash 2,124 2,124
----------------------------- ------ ------
Total other financial assets 2,124 2,124
----------------------------- ------ ------
14. Equity
Total equity for PureTech as of December 31, 2020, and 2019 was
as follows:
December December
31, 2020 31, 2019
Equity $000s $000s
-----------------------------------------------------
Share capital, GBP0.01 par value, issued and paid
285,885,025 and 285,370,619 as of December 31, 2020
and 2019, respectively 5,417 5,408
Merger Reserve 138,506 138,506
Share premium 288,978 287,962
Translation reserve 469 -
Other reserves (24,050) (18,282)
Retained earnings/(accumulated deficit) 260,429 254,444
----------------------------------------------------- --------- ---------
Equity attributable to owners of the Group 669,748 668,038
Non-controlling interests (16,209) (17,640)
----------------------------------------------------- --------- ---------
Total equity 653,539 650,398
===================================================== ========= =========
Changes in share capital and share premium relate primarily to
incentive options exercises during the period.
Shareholders are entitled to vote on all matters submitted to
shareholders for a vote. Each ordinary share is entitled to one
vote. Each ordinary share is entitled to receive dividends when and
if declared by the Company's Directors. The Company has not
declared any dividends in the past.
On June 18, 2015, the Company acquired the entire issued share
capital of PureTech LLC in return for 159,648,387 Ordinary Shares.
This was accounted for as a common control transaction at cost. It
was deemed that the share capital was issued in line with movements
in share capital as shown prior to the transaction taking place. In
addition, the merger reserve records amounts previously recorded as
share premium.
Other reserves comprise the cumulative credit to share-based
payment reserves corresponding to share-based payment expenses
recognized through Consolidated Statements of Comprehensive
Income/(Loss) as well as other additions that flow directly through
equity such as the excess or deficit from changes in ownership of
subsidiaries while control is maintained by the Group.
15. Subsidiary Preferred Shares
IFRS 9 addresses the classification, measurement, and
recognition of financial liabilities. Preferred shares issued by
subsidiaries and affiliates often contain redemption and conversion
features that are assessed under IFRS 9 in conjunction with the
host preferred share instrument. This balance represents subsidiary
preferred shares issued to third parties.
The subsidiary preferred shares are redeemable upon the
occurrence of a contingent event, other than full liquidation of
the Company, that is not considered to be within the control of the
Company. Therefore these subsidiary preferred shares are classified
as liabilities. These liabilities are measured at fair value
through profit and loss. The preferred shares are convertible into
ordinary shares of the subsidiaries at the option of the holder and
mandatorily convertible into ordinary shares upon a subsidiary
listing in a public market at a price above that specified in the
subsidiary's charter or upon the vote of the holders of subsidiary
preferred shares specified in the charter. Under certain scenarios
the number of ordinary shares receivable on conversion will change
and therefore, the number of shares that will be issued is not
fixed. As such the conversion feature is considered to be an
embedded derivative that normally would require bifurcation.
However, since the preferred share liabilities are measured at fair
value through profit and loss no bifurcation is required.
The preferred shares are entitled to vote with holders of common
shares on an as converted basis.
The Group recognizes 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.
The balance as of December 31, 2020 and 2019 represents the fair
value of the instruments for all subsidiary preferred shares. The
following summarizes the subsidiary preferred share balance:
2020 2019
As of December 31, $000s $000s
Entrega 1,291 3,222
Follica 12,792 11,663
Sonde 12,821 7,212
Vedanta Biosciences 92,068 78,892
----------------------------------------- ------- -------
Total subsidiary preferred share balance 118,972 100,989
----------------------------------------- ------- -------
As is customary, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of a subsidiary, the holders
of subsidiary preferred shares which are outstanding shall be
entitled to be paid out of the assets of the subsidiary available
for distribution to shareholders and before any payment shall be
made to holders of ordinary shares. A merger, acquisition, sale of
voting control or other transaction of a subsidiary in which the
shareholders of the subsidiary immediately before the transaction
do not own a majority of the outstanding shares of the surviving
company shall be deemed to be a liquidation event. Additionally, a
sale, lease, transfer or other disposition of all or substantially
all of the assets of the subsidiary shall also be deemed a
liquidation event.
As of December 31, 2020 and 2019, the minimum liquidation
preference reflects the amounts that would be payable to the
subsidiary preferred holders upon a liquidation event of the
subsidiaries, which is as follows:
2020 2019
As of December 31, $000s $000s
Entrega 2,216 2,216
Follica 6,405 6,405
Sonde 12,000 7,250
Vedanta Biosciences 86,161 77,161
------------------------------------- ------- ------
Total minimum liquidation preference 106,782 93,032
------------------------------------- ------- ------
For the years ended December 31, 2020 and 2019 the Group
recognized the following changes in the value of subsidiary
preferred shares:
$000s
Balance as of January 1, 2019 217,519
Adjustment to preferred shares due to adoption of IFRS 9 -
Issuance of new preferred shares 51,048
Conversion of convertible notes 4,894
Increase in value of preferred shares measured at fair value 33,636
Finance costs 1,458
Deconsolidation of subsidiary (207,346)
Other (108)
Cash Distribution (112)
------------------------------------------------------------- ---------
Balance as December 31, 2019 and January 1, 2020 100,989
------------------------------------------------------------- ---------
Issuance of new preferred shares 13,750
Increase in value of preferred shares measured at fair value 4,234
Balance as December 31, 2020 118,972
============================================================= =========
2020
In January 2020 and April 2020, Sonde Health issued and sold
shares of Series A-2 preferred shares for aggregate proceeds of
$4.8 million, of which none was contributed by PureTech.
In April 2020 and July 2020, Vedanta issued and sold shares of
Series C-2 preferred shares for aggregate proceeds of $9.0 million,
of which none was contributed by PureTech.
2019
On March 15, 2019, Karuna was deconsolidated. As of
deconsolidation, the fair value of Karuna's preferred share
liability was $31.7 million.
On April 4, 2019, Sonde Health issued and sold shares of Series
A-2 preferred shares for aggregate proceeds of $11.1 million, of
which $5.3 million was contributed by outside investors.
Approximately $5.8 million of outstanding principal and interest on
convertible promissory notes issued by Sonde to PureTech converted
into Series A-2 preferred shares in this financing in accordance
with their terms. On August 29, 2019, Sonde sold an additional
1,052,632 shares of its Series A-2 preferred shares for aggregate
proceeds of $2.0 million. It has been determined that these shares
are liability classified and contain a liability classified
embedded derivative. This embedded derivative is a conversion
feature which can result in settlement in a variable number of
shares. The instrument is not bifurcated and is measured in whole
at fair value through the profit and loss.
In April 2019, Gelesis completed further closings of its Series
2 Growth financing issuing 799,894 shares for proceeds of $10.2
million, of which $8.6 million was contributed by outside investors
and $1.7 million was contributed by PureTech.
In March and May 2019, Vedanta completed a second and third
closing of its Series C preferred shares financing for aggregate
proceeds of $18.7 million. PureTech Health did not participate in
either closing. It has been determined that these shares are
liability classified and contain a liability classified embedded
derivative. This embedded derivative is a conversion feature which
can result in settlement in a variable number of shares. The
instrument is not bifurcated and is measured in whole at fair value
through the profit and loss.
On July 1, 2019, Gelesis was deconsolidated. As of
deconsolidation, the fair value of Gelesis' preferred share
liability was $175.6 million.
On July 19, 2019, all of the outstanding notes, plus accrued
interest, issued by Follica converted into 17,639,204 shares of
Series A-3 Preferred Shares and 14,200,044 shares of common share
pursuant to a Series A-3 Note Conversion Agreement between Follica
and the noteholders. Third parties held 2,422,990 A-3 preferred
shares following the conversion. It has been determined that these
shares are liability classified and contain a liability classified
embedded derivative. This embedded derivative is a conversion
feature which can result in settlement in a variable number of
shares. The instrument is not bifurcated and is measured in whole
at fair value through the profit and loss.
In September 2019, Vedanta received $16.6 million from outside
investors through the issuance of its Series C-2 preferred shares
in two separate closings. The issuances provided for the purchase
of 711,772 Series C-2 shares at a purchase price of $23.38.
PureTech Health did not participate in either closing. It has been
determined that these shares are liability classified and contain a
liability classified embedded derivative. This embedded derivative
is a conversion feature which can result in settlement in a
variable number of shares. The instrument is not bifurcated and is
measured in whole at fair value through the profit and loss.
16. Financial Instruments
The Group's financial instruments consist of financial
liabilities, including preferred shares, convertible notes,
warrants and loans payable, as well as financial assets classified
as assets held at fair value.
Fair Value Process
For financial instruments measured at fair value under IFRS 9
the change in the fair value is reflected through profit and loss.
Using the guidance in IFRS 13, the total business enterprise value
and allocatable equity of each entity within the Group was
determined using a discounted cash flow income approach,
replacement cost/asset approach, market scenario approach, or
market backsolve approach through a recent arm's length financing
round. The approaches, in order of strongest fair value evidence,
are detailed as follows:
Valuation Method Description
================== ==============================================================
Market - Backsolve The market backsolve approach benchmarks the original
issue price (OIP) of the company's latest funding transaction
as current value.
================== ==============================================================
Market - Scenario The market scenario method is based on guideline transaction
prices and multiples of similar public and private
companies in initial public offerings and mergers and
acquisitions.
================== ==============================================================
Income Based The income approach is used to estimate fair value
- DCF based on the income streams, such as cash flows or
earnings, that an asset or business can be expected
to generate.
================== ==============================================================
Asset/Cost The asset/cost approach considers reproduction or replacement
cost as an indicator of value.
================== ==============================================================
During the years ended December 31, 2020 and 2019 at each
measurement date, the total fair value of preferred shares,
warrants and convertible note instruments, including embedded
conversion rights that are not bifurcated, was determined using the
following allocation methods: option pricing model ("OPM"),
probability-weighted expected return method ("PWERM") or Hybrid
allocation framework. The methods are detailed as follows:
Allocation
Method Description
============= =================================================================
OPM The OPM model treats preferred stock as call options
on the enterprise's equity value, with exercise prices
based on the liquidation preferences of the preferred
stock.
============= =================================================================
Current Value The enterprise value determined as of the valuation
date is allocated to different classes of security
based upon their rights and preferences.
============= =================================================================
Common Stock Every share is treated equally and the equity value
Equivalent derived is allocated assuming full conversion of preferred
shares into common stock at the applicable conversion
rate.
PWERM Under a PWERM, share value is based upon the probability-weighted
present value of expected future investment returns,
considering each of the possible future outcomes available
to the enterprise, as well as the rights of each share
class.
============= =================================================================
Hybrid The hybrid method ("HM") is a combination of the PWERM
and OPM. Under the hybrid method, multiple liquidity
scenarios are weighted based on the probability of
the scenarios occurrence, similar to the PWERM, while
also utilizing the OPM to estimate the allocation of
value in one or more of the scenarios.
============= =================================================================
Valuation policies and procedures are regularly monitored by the
Company's finance group. Fair value measurements, including those
categorized within Level 3, are prepared and reviewed on their
issuance date and then on an annual basis and any third-party
valuations are reviewed for reasonableness and compliance with the
fair value measurements guidance under IFRS. The Group measures
fair values using the following fair value hierarchy that reflects
the significance of the inputs used in making the measurements:
Fair Value
Hierarchy Level Description
================ ===========================================================
Level 1 Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments.
================ ===========================================================
Level 2 Inputs other than quoted prices included within Level
1 that are observable either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
================ ===========================================================
Level 3 Inputs that are unobservable. This category includes
all instruments for which the valuation technique includes
inputs not based on observable data and the unobservable
inputs have a significant effect on the instrument's
valuation.
================ ===========================================================
Whilst the Group considers the methodologies and assumptions
adopted in fair value measurements as supportable, 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.
COVID-19 Consideration
At December 31, 2020, the Group assessed certain key assumptions
within the valuation of its unquoted instruments and considered the
impact of the COVID-19 pandemic on all unobservable inputs (Level
3). The assumptions considered with respect to COVID-19 included
but were not limited to the following: exit scenarios and timing,
discount rates, revenue assumptions as well as volatilities. The
Group views any impact of the COVID-19 pandemic on its unquoted
instruments as immaterial as of December 31, 2020.
Subsidiary Preferred Shares Liability and Subsidiary Convertible
Notes
The following table summarizes the changes in the Group's
subsidiary preferred shares and convertible note liabilities
measured at fair value, which were categorized as Level 3 in the
fair value hierarchy:
Subsidiary Subsidiary
Preferred Convertible
Shares Notes
$000s $000s
================================================= ========== ==============
Balance at January 1, 2018 215,635 11,343
Value at issuance 54,537 5,824
Conversion 7,930 (7,581)
Deconsolidation of preferred shares (36,517) -
Change in fair value (24,066) (128)
================================================= ========== ============
Balance at December 31, 2018 and January 1, 2019 217,519 9,458
Value at issuance 51,048 1,607
Conversion to preferred 4,894 (4,894)
Conversion to common - (2,418)
Deconsolidation (207,346) (5,017)
Change in fair value 33,636 1,389
Finance Costs 1,458 -
Other (112) -
Cash distribution (108) -
------------------------------------------------- ---------- ------------
Balance at December 31, 2019 and January 1, 2020 100,989 125
------------------------------------------------- ---------- ------------
Value at issuance 13,750 25,000
Change in fair value 4,234 -
Balance at December 31, 2020 118,972 25,125
================================================= ========== ============
The change in fair value of preferred shares and convertible
notes are recorded in Finance income/(costs) - fair value
accounting in the Consolidated Statements of Comprehensive
Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at December 31, 2020 in the fair value
measurement of the Group's material subsidiary preferred shares
liabilities categorized as Level 3 in the fair value hierarchy:
Fair Value at
December 31, Valuation Unobservable Sensitivity to
2020 Technique Inputs Weighted Average Decrease in Input
============= ==================== ============== ================ ===================
Market - Backsolve Estimated time
92,068 & Hybrid allocation to exit 0.88 Fair value increase
===================
Discount rate 30.0%
===================
Volatility 95.0%
============== ================ ===================
Income - DCF Estimated time
14,083 & OPM allocation to exit 2.89 Fair value increase
===================
Discount rate 19.7%
============== ================ ===================
Terminal value
growth rate (2.8)% Fair value decrease
Volatility 56.8% Fair value increase
============== ================ ===================
Cost Approach Estimated time
12,821 & OPM allocation to exit 2.00 Fair value increase
============= ==================== ===================
Discount rate 29.4%
============= ==================== ===================
Volatility 40.0%
============= ==================== ============== ================ ===================
Subsidiary Preferred Shares Sensitivity
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value hierarchy
and used in the fair value measurement of the Group's subsidiary
preferred shares liabilities, as well as that with respect to the
enterprise value of the underlying subsidiary in general (Please
refer to Note 15):
Subsidiary Preferred Share
Input Liability
------------------------------------------
Financial
Liability
Increase/(Decrease)
Sensitivity
As of December 31, 2020 Range $000s
Subsidiary Enterprise Value -2% (2,146)
+2% 2,194
Time to Liquidity '-6 Months 5,815
'+6 Months (5,437)
================== ====================
Discount Rate -5% 12,227
============================
+5% (5,779)
============================ ================== ====================
Financial Assets Held at Fair Value
Karuna Valuation
Karuna (Nasdaq: KRTX) is a listed entity on an active exchange
and as such the fair value for the year ended December 31, 2020 was
calculated utilizing the quoted common share price. Please refer to
Note 5 for further details.
Akili, Gelesis and Vor Valuation
In accordance with IFRS 9, the Company accounts for its
preferred share investments in Akili, Gelesis and Vor as financial
assets held at fair value through the profit and loss. During the
year ended December 31, 2020, the Company recorded its investment
at fair value and recognized a gain of $41.3 million that was
recorded to the Consolidated Statements of Comprehensive
Income/(Loss) on the line item Gain/(loss) on investments held at
fair value.
The following table summarizes the changes in the Group's
investments held at fair value, which were categorized as Level 3
in the fair value hierarchy:
$'000s
--------------------------------------------------------------- -----------
Balance at January 1, 2018 1,449
Deconsolidation of Akili 70,748
Gain/(Loss) on changes in fair value 12,966
--------------------------------------------------------------- ---------
Balance at December 31, 2018 and January 1, 2019 85,163
--------------------------------------------------------------- ---------
Deconsolidation of Vor 12,028
Deconsolidation of Karuna 77,373
Deconsolidation of Gelesis 49,170
Reclass of Karuna to Associate (118,006)
Gain/(Loss) on changes in fair value 48,867
Issuance of note receivable 6,480
Conversion of note receivable (6,630)
--------------------------------------------------------------- ---------
Balance at December 31, 2019 and January 1, 2020 154,445
Cash purchase of Gelesis preferred shares (please refer
to Note 6) 10,000
Cash purchase of Vor preferred shares 1,150
Gain/(Loss) on changes in fair value 41,297
Balance as of December 31, 2020 before allocation of associate
gain/(loss) to long-term interest 206,892
=============================================================== =========
Share of associate loss allocated to long-term interest
(please refer to Note 6) (23,006)
=============================================================== =========
Balance as of December 31, 2020 after allocation of associate
gain/(loss) to long-term interest 183,886
=============================================================== =========
The change in fair value of investments held at fair value are
recorded in Gain/(loss) on investments held at fair value in the
Consolidated Statements of Comprehensive Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at December 31, 2020 in the fair value
measurement of the Group's material investments held at fair value
categorized as Level 3 in the fair value hierarchy:
Fair Value at
December 31, Valuation Unobservable Sensitivity to
2020 Technique Inputs Weighted Average Decrease in Input
------------- -------------------- ---------------------- ---------------- -------------------
Market - Scenario Estimated time
204,379 & Hybrid allocation to exit 1.73 Fair value increase
Exit valuation
multiples 2.19 Fair value decrease
---------------------- ---------------- -------------------
Discount rate 28.0% Fair value increase
===================
Discount for
lack of marketability
("DLOM") 10.0%
===================
Volatility 65.0%
---------------------- ---------------- ===================
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value hierarchy
and used in the fair value measurement of the Group's investments
held at fair value, as well as that with respect to the enterprise
value of the underlying investee in general (Please refer to Note
5):
Investments Held at Fair
Input Value
------------------------------------
Financial
Asset Increase/
(Decrease)
Sensitivity
As of December 31, 2020 Range $000s
Investee Enterprise Value -2% (3,915)
+2% 3,886
Time to Liquidity '-6 Months 22,828
==========================
'+6 Months (20,005)
========================== ---------------- ----------------
Discount Rate -5% 11,691
==========================
+5% (10,689)
========================== ---------------- ----------------
Warrants
Warrants issued by subsidiaries within the Group are classified
as liabilities, as they will be settled in a variable number of
shares and are not fixed-for-fixed. The following table summarizes
the changes in the Group's subsidiary warrant liabilities, which
were categorized as Level 3 in the fair value hierarchy:
Subsidiary
Warrant
Liability
$000s
------------------------------------------------- ------------
Balance at January 1, 2018 13,095
Change in fair value (83)
------------------------------------------------- ----------
Balance at December 31, 2018 and January 1, 2019 13,012
------------------------------------------------- ----------
Warrant Issuance 4,706
Gelesis Deconsolidation (21,611)
Change in fair value 11,890
------------------------------------------------- ----------
Balance at December 31, 2019 and January 1, 2020 7,997
------------------------------------------------- ----------
Warrant Issuance 92
Change in fair value 117
------------------------------------------------- ----------
Balance at December 31, 2020 8,206
------------------------------------------------- ----------
The change in fair value of warrants are recorded in Finance
income/(costs) - fair value accounting in the Consolidated
Statements of Comprehensive Income/(Loss).
In June 2019, Gelesis amended their existing license and patent
agreement with One S.r.l. As a result of the amendment Gelesis
issued One S.r.l. a warrant equal to 2.7 percent of as converted
shares following the next financing round. The fair value of the
warrant was $4.7 million at issuance. On July 1, 2019, Gelesis
deconsolidated and warrant liability of $21.6 million relating to
Series A-1, A-3, A-4 and One S.r.l. warrants was derecognized.
In connection with various amendments to its 2010 Loan and
Security Agreement, Follica issued Series A-1 preferred share
warrants at various dates in 2013 and 2014. Each of the warrants
has an exercise price of $0.14 and a contractual term of ten years
from the date of issuance. In 2017, in conjunction with the
issuance of convertible notes, the exercise price of the warrants
was adjusted to $0.07 per share. The change in the fair value of
the subsidiary warrants was recorded in finance costs, net in the
Consolidated Statements of Comprehensive Income/(Loss). The $8.2
million warrant liability at December 31, 2020 was largely
attributable to the outstanding Follica preferred share
warrants.
In connection with the September 2, 2020 Oxford Finance LLC loan
issuance, Vedanta also issued Oxford Finance LLC 12,886 Series C-2
preferred share warrants with an exercise price of $23.28 per
share, expiring September 2030.
The table below sets out the weighted average of significant
unobservable inputs used at December 31, 2020 with respect to
determining the fair value of the Group's warrants categorized as
Level 3 in the fair value hierarchy:
Assumption/Input Warrants
--------------------------------------------------------- ----------
Expected term 2.65
Expected volatility 54.9%
Risk free interest rate 0.1%
Expected dividend yield -%
Estimated fair value of the convertible preferred shares $3.09
Exercise price of the warrants $0.27
--------------------------------------------------------- ----------
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value hierarchy
and used in the fair value measurement of the Group's warrant
liabilities:
Input Warrant Liability
=============================
Financial
Liability
Increase/
(Decrease)
Sensitivity
As at December 31 Range $000s
Discount Rate -5% 7,279
===========================================
+5% (3,321)
=========================================== ============== ==========
Fair Value Measurement and Classification
The fair value of financial instruments by category at December
31, 2020 and 2019:
2020
--------------------------------------------------------------
Carrying Amount Fair Value
----------------------- ------------------------------------
Financial Financial
Assets Liabilities Level 1 Level 2 Level 3 Total
$000s $000s $000s $000s $000s $000s
------------------------------- --------- ------------ ------- ------- ------- ---------
Financial assets:
U.S. treasuries(1) - - - - - -
Money Markets(2) 394,143 - 394,143 - - 394,143
Investments held
at fair value(3) 553,167 - 346,275 - 206,892 553,167
Trade and other receivables(4) 2,558 - - 2,558 - 2,558
------------------------------- --------- ------------ ------- ------- ------- -------
Total financial assets 949,867 - 740,417 2,558 206,892 949,867
------------------------------- --------- ------------ ------- ------- ------- -------
Financial liabilities:
Subsidiary warrant
liability - 8,206 - - 8,206 8,206
Subsidiary preferred
shares - 118,972 - - 118,972 118,972
Subsidiary notes
payable - 26,455 - 1,330 25,125 26,455
------------------------------- --------- ------------ ------- ------- ------- -------
Total financial liabilities - 153,633 - 1,330 152,303 153,633
------------------------------- --------- ------------ ------- ------- ------- -------
1 Issued by governments and government agencies, as applicable,
all of which are investment grade.
2 Issued by a diverse group of corporations, largely consisting
of financial institutions, virtually all of which are investment
grade.
3 Balance prior to share of associate loss allocated to
long-term interest (please refer to Note 6).
4 Outstanding receivables are owed primarily by corporations and
government agencies, virtually all of which are investment
grade.
2019
--------------------------------------------------------------
Carrying Amount Fair Value
----------------------- ------------------------------------
Financial Financial
Assets Liabilities Level 1 Level 2 Level 3 Total
$000s $000s $000s $000s $000s $000s
------------------------------- --------- ------------ ------- ------- ------- ---------
Financial assets:
U.S. treasuries(1) 30,088 - 30,088 - - 30,088
Money Markets(2) 106,586 - 106,586 - - 106,586
Investments held
at fair value 714,905 - 560,460 - 154,445 714,905
Loans and receivables:
Trade and other receivables(3) 1,977 - - 1,977 - 1,977
------------------------------- --------- ------------ ------- ------- ------- -------
Total financial assets 853,556 - 697,134 1,977 154,445 853,556
------------------------------- --------- ------------ ------- ------- ------- -------
Financial liabilities:
Subsidiary warrant
liability - 7,997 - - 7,997 7,997
Subsidiary preferred
shares - 100,989 - - 100,989 100,989
Subsidiary notes
payable - 1,455 - 1,455 - 1,455
------------------------------- --------- ------------ ------- ------- ------- -------
Total financial liabilities - 110,441 - 1,455 108,986 110,441
------------------------------- --------- ------------ ------- ------- ------- -------
1 Issued by governments and government agencies, as applicable,
all of which are investment grade.
2 Issued by a diverse group of corporations, largely consisting
of financial institutions, virtually all of which are investment
grade.
3 Outstanding receivables are owed primarily by corporations and
government agencies, virtually all of which are investment
grade.
17. Subsidiary Notes Payable
The subsidiary notes payable are comprised of loans and
convertible notes. During the years ended December 31, 2020 and
2019, the financial instruments for Knode and Appeering did not
contain embedded derivatives and therefore these instruments
continue to be held at amortized cost. The notes payable consist of
the following:
2020 2019
December 31, $000s $000s
-------------------------------
Loans 1,330 1,330
Convertible notes 25,125 125
------------------------------- ------ ------
Total subsidiary notes payable 26,455 1,455
------------------------------- ------ ------
Loans
In October 2010, Follica entered into a loan and security
agreement with Lighthouse Capital Partners VI, L.P. The loan is
secured by Follica's assets, including Follica's intellectual
property and bears interest at a rate of 12.0 percent. The
outstanding loan balance totaled approximately $1.3 million and
$1.3 million as of December 31, 2020 and 2019. The accrued interest
on such loan balance is presented as Other current liabilities and
totaled approximately $0.5 million and $0.4 million as of December
31, 2020 and 2019, respectively.
Convertible Notes
Convertible Notes outstanding were as follows:
Karuna Follica Vedanta Knode Appeering Total
$000s $000s $000s $000s $000s $000s
January 1, 2019 2,838 6,495 - 50 75 9,458
Gross principal 1,607 - - - - 1,607
Change in fair value 572 817 - - - 1,389
Conversion to preferred - (4,894) - - - (4,894)
Conversion to common - (2,418) - - - (2,418)
Deconsolidation (5,017) - - - - (5,017)
December 31, 2019
and January 1, 2020 - - - 50 75 125
------------------------ ------- ------- ------- ------ --------- -------
Gross principal - - 25,000 - - 25,000
Change in fair value - - - - - -
======================== ======= ======= ======= ====== ========= =======
December 31, 2020 - - 25,000 50 75 25,125
======================== ======= ======= ======= ====== ========= =======
On March 15, 2019, Karuna was deconsolidated in conjunction with
the closing of a Series B Preferred Stock financing and the
outstanding convertible note liability of $5.0 million was
derecognized.
In May 2017 and September 2017, Follica received $0.5 million
and $0.6 million, respectively, from an existing third-party
investor through the issuance of convertible notes. The notes bore
interest at an annual rate of 10.0 percent, matured 30 days after
demand by the holder, were convertible into equity upon a
qualifying financing event, and required payment of at least five
times the outstanding principal and accrued interest upon a change
of control transaction.
On July 19, 2019, all of the outstanding notes, plus accrued
interest, issued by Follica converted into 17,639,204 shares of
Series A-3 Preferred Stock and 14,200,044 shares of common shares
pursuant to a Series A-3 Note Conversion Agreement between Follica
and the noteholders. Third parties held 2,422,990 A-3 preferred
shares and 1,981,944 common shares following the conversion. The
preferred shares are classified as financial liabilities at fair
value through the profit and loss. The common shares are accounted
for as Non-controlling interests. See Note 18 for further details
on such change in non-controlling interests.
On December 30, 2020, Vedanta issued a $25.0 million convertible
promissory note to an investor. The note bears interest at an
annual rate of 6.0 percent and matures on the first anniversary of
the note. Prepayment of the note is not allowed and there is no
conversion discount feature on the note. The note mandatorily
converts in a Qualified equity financing and a Qualified Public
Offering at the current price of the financing or offering, all as
defined in the note purchase agreement. In addition, the note
allows for optional conversion immediately prior to a Non Qualified
public offering, Non Qualified Equity financing, or a Corporate
transaction. In the case of a Non qualified financing or a
Corporate transaction the note will convert to the preferred shares
issued at the time of the last financing round at the price at such
financing round. In the event of no conversion prior to a change in
control transaction, the note is repaid at one and a half times the
outstanding principal plus accrued interest.
18. Non-Controlling Interest
During the year ended December 31, 2019, the Company
deconsolidated three of its subsidiaries which resulted in a change
to the composition of its reportable segments. The Company has
revised in the 2019 financial statements the 2018 financial
information to conform to the presentation as of and for the period
ending December 31, 2019. Please refer to Note 4 "Segment
Information" for further details regarding reportable segments.
The following table summarizes the changes in the equity
classified non-controlling ownership interest in subsidiaries by
reportable segment:
Parent
Controlled Non-Controlled Company
Founded Founded & Other Total
Internal Entities Entities
$000s $000s $000s $000s $000s
------------------------------ -------- ---------- -------------- -------- -----------
Balance at January 1, 2018 (1,484) (18,869) (125,758) 525 (145,586)
Share of comprehensive loss (7,315) (10,710) (8,980) - (27,005)
Deconsolidation of subsidiary - - 55,168 - 55,168
Equity settled share-based
payments - 2,476 6,345 67 8,888
------------------------------ -------- ---------- -------------- -------- ---------
Balance at December 31, 2018
and January 1, 2019 (8,799) (27,103) (73,225) 592 (108,535)
Share of comprehensive loss (15,264) (15,862) (23,953) - (55,079)
Deconsolidation of sub
sidiary - - 97,178 - 97,178
Subsidiary note conversion
and changes in NCI ownership
interest - 23,049 - - 23,049
Equity settled share-based
payments - 1,683 - - 1,683
Purchase of minority interest 24,039 - - - 24,039
Other 24 - - 1 25
============================== ======== ========== ============== ======== =========
Balance at December 31, 2019
and January 1, 2020 - (18,233) - 593 (17,640)
Share of comprehensive loss - (1,402) - (15) (1,417)
Equity settled share-based
payments - 2,822 - - 2,822
Other - 30 - (6) 24
------------------------------ -------- ---------- -------------- -------- ---------
Balance as of December 31,
2020 - (16,783) - 573 (16,210)
------------------------------ -------- ---------- -------------- -------- ---------
The following tables summarize the financial information related
to the Group's subsidiaries with material non-controlling
interests, aggregated for interests in similar entities, and before
and after intra group eliminations.
2020
Controlled Non-Controlled
Founded Founded
Internal Entities Entities Intra-group
For the year ended December eliminations Total
31 $000s $000s $000s $000s $000s
---------------------------------- -------- ---------- -------------- ------------- -----------
Statement of Comprehensive
Loss
---------------------------------- -------- ---------- -------------- ------------- -----------
Total revenue - 5,224 - 5,224
---------------------------------- -------- ---------- -------------- ------------- ---------
Income/(loss) for the year - (55,942) - 1,073 (54,869)
Other comprehensive income/(loss) - - - -
---------------------------------- -------- ---------- -------------- ------------- ---------
Total comprehensive income/(loss)
for the year - (55,942) - 1,073 (54,869)
---------------------------------- -------- ---------- -------------- ------------- ---------
Statement of Financial Position
Total assets - 68,346 - (7) 68,339
Total liabilities - 200,430 - (14,621) 185,809
================================== ======== ========== ============== ============= =========
Net assets/(liabilities) - (132,084) - 14,615 (117,470)
================================== ======== ========== ============== ============= =========
As of December 31, 2020, Controlled Founded Entities with
non-controlling interests primarily include Alivio Therapeutics,
Inc., Follica Incorporated, Sonde Health Inc., and Vedanta
Biosciences, Inc. Ownership interests of the non-controlling
interests in Alivio Therapeutics, Inc., Follica Incorporated, Sonde
Health Inc., and Vedanta Biosciences, Inc are 8.1 percent, 19.9
percent, 4.5 percent and 0.4 percent, respectively. In addition,
Non-controlling interests include the amounts recorded for
subsidiary stock options, with the vast majority comprising of
Vedanta stock options.
2019
Controlled Non-Controlled
Founded Founded
Internal Entities Entities
For the year ended December 31 $000s $000s $000s(1)
------------------------------------------ -------- ---------- ----------------
Statement of Comprehensive Loss
Total revenue 6,079 1,968 -
Income/(loss) for the year (24,289) (26,250) (47,905)
Other comprehensive income/(loss) - - (10)
------------------------------------------ -------- ---------- --------------
Total comprehensive income/(loss) for the
year (24,289) (26,250) (47,915)
------------------------------------------ -------- ---------- --------------
Statement of Financial Position
Total assets 17,614 5,290 -
Total liabilities 11,510 50,554 -
------------------------------------------ -------- ---------- --------------
Net Liabilities 6,104 (45,264) -
------------------------------------------ -------- ---------- --------------
1 Non-Controlled Founded Entities non-controlling interest
calculation does not include equity method accounting, fair value
method accounting or the gain on the deconsolidation of subsidiary
related to Vor, Karuna, Gelesis, resTORbio or Akili, which is
recorded within PureTech Health, LLC. Please refer to Note 5.
2018
--------------------------------------
Controlled Non-Controlled
Founded Founded
Internal Entities Entities
For the year ended December 31 $000s $000s $000s(1)
------------------------------------------ -------- ---------- ----------------
Statement of Comprehensive Loss
Total revenue 2,195 18,504 20
Income/(loss) for the year (8,454) (26,206) (41,239)
Other comprehensive income/(loss) - (214) (214)
------------------------------------------ -------- ---------- --------------
Total comprehensive income/(loss) for the
year (8,454) (26,420) (41,453)
------------------------------------------ -------- ---------- --------------
1 Non-Controlled Founded Entities non-controlling interest
calculation does not include equity method accounting, fair value
method accounting or the gain on the deconsolidation of subsidiary
related to resTORbio or Akili, which is recorded within PureTech
Health, LLC. Please refer to Note 5.
On July 19, 2019 PureTech and a third party investor converted
their convertible debt in Follica to Follica Preferred shares
(presented as liabilities) and Follica common shares. The amount of
convertible debt converted by the third party investor into Follica
common shares amounted to $2.4 million (see also Note 16). As a
result of the conversion Follica NCI share (in Follica common
stock) was reduced from 68 percent to 19.9 percent, which resulted
in a reduction in the NCI share in Follica's shareholders' deficit
of $19.9 million. The excess of the change in the book value of NCI
($19.9 million noted above) over the contribution made by NCI ($2.4
million) amounted to $17.5 million and was recorded as a loss
directly in shareholders' equity.
During 2019 a subsidiary of the Company fully funded by the
Company ceased its operations and became inactive. This resulted in
a change in the NCI share in the subsidiary deficit. As a result
the Company recorded a loss directly in equity of $3.1 million.
On October 1, 2019, PureTech acquired the remaining 10.0 percent
of minority non-controlling interests of PureTech LYT, Inc.
(previously named Ariya Therapeutics, Inc.), increasing its
ownership from 90.0 percent to 100.0 percent. In consideration for
the acquisition of minority interests, PureTech issued 2,126,338
shares of common shares. The fair value of the shares issued in
consideration for the minority non-controlling interest amounted to
$9.1 million. The carrying amount of the non-controlling interest
at the acquisition was a $24.0 million deficit and the excess of
the consideration paid over the book value of the non-controlling
interest of approximately $33.1 million was recorded directly in
shareholders' equity.
19. Trade and Other Payables
Information regarding Trade and other payables was as
follows:
2020 2019
As of December 31 $000s $000s
------------------------------- ------ --------
Trade payables 8,871 11,098
Accrued expenses 9,090 8,651
Income tax payable 1,260 93
Other 2,606 -
------------------------------- ------ ------
Total trade and other payables 21,826 19,842
------------------------------- ------ ------
20. Long-term loan
In September 2020, Vedanta entered into a $15.0 million loan and
security agreement with Oxford Finance LLC. The loan is secured by
Vedanta's assets, including equipment, inventory and intellectual
property. The loan bears a floating interest rate of 7.7 percent
plus the greater of (i) 30 day U.S. Dollar LIBOR reported in the
Wall Street Journal or (ii) 0.17 percent. The loan matures
September 2025 and requires interest only payments for the initial
24 months. The loan also carries a Final fee upon full repayment of
7.0 percent of the original principal or $1.1 million. For loan
consideration, Vedanta also issued Oxford Finance LLC 12,886 Series
C-2 preferred share warrants with an exercise price of $23.28 per
share, expiring September 2030. The outstanding loan balance
totaled approximately $14.8 million as of December 31, 2020.
The following table summarizes long-term loan obligations as at
December 31, 2020 and 2019:
Long-term loan
======================
2020 2019
$000s $000s
======================================================
Balance at January 1, - -
Net loan proceeds 14,720 -
Accrued interest 496 -
Interest paid (296) -
Reclassification of accrued interest to other current
liabilities (102) -
====================================================== ============ ======
Balance at December 31, 14,818 -
====================================================== ============ ======
The following table summarizes Vedanta's principal payments for
the long-term loan as of December 31, 2020:
Balance Type 2021 2022 2023 2024 2025 Total
========================== ==== ===== ===== ===== ===== ========
Principal - 1,491 4,721 5,112 3,676 15,000
Unamortized loan discount
and issuance costs - - - - - (182)
========================== ==== ===== ===== ===== ===== ======
Total - 1,491 4,721 5,112 3,676 14,818
========================== ==== ===== ===== ===== ===== ======
21. Leases
The activity related to the Group's right of use asset and lease
liability for the year ended December 31, 2020 and 2019 is as
follows:
Right of use asset,
net
=======================
2020 2019
$000s $000s
Balance at January 1, 22,383 10,353
Additions - 19,434
Subleases - (2,580)
Depreciation (2,699) (3,237)
Adjustments 414 -
Deconsolidated - (1,587)
------------------------ ---------- ---------
Balance at December 31, 20,098 22,383
------------------------ ---------- ---------
Total lease liability
=========================
2020 2019
$000s $000s
Balance at January 1, 37,843 10,995
Additions - 30,305
Cash paid for rent (principal + interest) (5,263) (4,173)
Interest expense 2,354 2,495
Adjustments 414 -
Deconsolidated - (1,779)
------------------------------------------ ----------- ----------
Balance at December 31, 35,348 37,843
------------------------------------------ ----------- ----------
The following details the short term and long-term portion of
the lease liability as at December 31, 2020 and 2019:
Total lease liability
=========================
2020 2019
$000s $000s
-------------------------------------- ----------- ------------
Short-term Portion of Lease Liability 3,261 2,929
Long-term Portion of Lease Liability 32,088 34,914
-------------------------------------- ----------- ----------
Total Lease Liability 35,348 37,843
-------------------------------------- ----------- ----------
The following table details the future maturities of the lease
liability, showing the undiscounted lease payments to be paid after
the reporting date:
2020
$000s
------------------------------------ --------
Less than one year 5,422
One to two years 5,609
Two to three years 6,275
Three to four years 6,489
Four to five years 5,101
More than five years 16,452
------------------------------------ ------
Total undiscounted lease maturities 45,348
------------------------------------ ------
Interest 10,000
------------------------------------ ------
Total lease liability 35,348
==================================== ======
During the year ended December 31, 2019, PureTech entered into a
lease agreement for certain premises consisting of approximately
50,858 rentable square feet of space located at 6 Tide Street. The
lease commenced on April 26, 2019 ("Commencement Date") for an
initial term consisting of ten years and three months and there is
an option to extend for two consecutive periods of five years each.
The Company assessed at lease commencement date whether it is
reasonably certain to exercise the extension options and deemed
such options not reasonably certain to be exercised. The Company
will reassess whether it is reasonably certain to exercise the
options only if there is a significant event or significant changes
in circumstances within its control.
On June 26, 2019, PureTech executed a sublease agreement with
Gelesis. The lease is for the approximately 9,446 rentable square
feet located on the sixth floor of the Company's former offices at
the 501 Boylston Street building. The sublessee obtained possession
of the premises on June 1, 2019 and the rent period term began on
June 1, 2019 and expires on August 31, 2025. The sublease was
determined to be a finance lease and the Group, therefore,
derecognized the right of use asset and recognized a lease
receivable at inception of the sublease. As of December 31, 2020
the balances related to the sublease were as follows:
Total lease
receivable
$000s
--------------------------------------- -------------
Short-term Portion of Lease Receivable 381
Long-term Portion of Lease Receivable 1,700
--------------------------------------- -----------
Total Lease Receivable 2,082
--------------------------------------- -----------
The following table details the future maturities of the lease
receivable, showing the undiscounted lease payments to be received
after the reporting date:
2020
$000s
------------------------------------ --------
Less than one year 494
One to two years 504
Two to three years 513
Three to four years 523
Four to five years 353
More than five years -
------------------------------------ ------
Total undiscounted lease receivable 2,387
------------------------------------ ------
Unearned Finance income 305
------------------------------------ ------
Net investment in the lease 2,082
------------------------------------ ------
On August 6, 2019, PureTech executed a sublease agreement with
Dewpoint Therapeutics, Inc. ("Dewpoint"). The sublease is for
approximately 11,852 rentable square feet located on the third
floor of the 6 Tide Street building, where the Company's offices
are currently located. Dewpoint obtained possession of the premises
on September 1, 2019 with a rent period term that began on
September 1, 2019 and expires on August 31, 2021. The sublease was
determined to be an operating lease.
Rental income recognized by the Company during the year ended
December 31, 2020 was $1.08 million and is included in the Other
income/(expense) line item in the Consolidated Statements of
Comprehensive Income/(Loss). The following table details the future
payments under the sublease, showing the undiscounted lease
payments to be received after the reporting date:
2020
$000s
------------------- --------
Less than one year 722
Total 722
=================== ======
Total rent expense under the Group's operating leases was
approximately $2.5 million during the year ended December 31, 2018.
Rent expense is included in the General and administrative expenses
line item in the Consolidated Statements of Comprehensive
Income/(Loss).
22. Capital and Financial Risk Management
Capital Risk Management
The Group's capital and financial risk management policy is to
maintain a strong capital base so as to support its strategic
priorities, maintain investor, creditor and market confidence as
well as sustain the future development of the business. The Group's
objectives when managing capital are to safeguard its ability to
continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. To
maintain or adjust the capital structure, the Group may issue new
shares or incur new debt. The Group has some external debt and no
material externally imposed capital requirements. The Group's share
capital is clearly set out in Note 14.
Management continuously monitors the level of capital deployed
and available for deployment in the Internal and Parent segments as
well as at Founded Entities. The Directors seek to maintain a
balance between the higher returns that might be possible with
higher levels of deployed capital and the advantages and security
afforded by a sound capital position.
The Group's Directors have overall responsibility for
establishment and oversight of the Group's capital and risk
management framework. The Group is exposed to certain risks through
its normal course of operations. The Group's main objective in
using financial instruments is to promote the development and
commercialization of intellectual property through the raising and
investing of funds for this purpose. The Group's policies in
calculating the nature, amount and timing of investments are
determined by planned future investment activity. Due to the nature
of activities and with the aim to maintain the investors' funds as
secure and protected, the Group's policy is to hold any excess
funds in highly liquid and readily available financial instruments
and maintain insignificant exposure to other financial risks.
COVID-19
In December 2019, illnesses associated with COVID-19 were
reported and the virus has since caused widespread and significant
disruption to daily life and economies across geographies. The
World Health Organization has classified the outbreak as a
pandemic. The Group's operations, financial condition and results
have not been significantly impacted during the year ended December
31, 2020 as a result of the COVID-19 pandemic. In response to the
COVID-19 pandemic, the Group has taken swift action to ensure the
safety of employees and other stakeholders. The Group continues to
monitor the latest developments regarding the COVID-19 pandemic on
business, operations, and financial condition and results, and have
made certain assumptions regarding the pandemic for purposes of the
Group's operational planning and financial projections, including
assumptions regarding the duration and severity of the pandemic and
the global macroeconomic impact of the pandemic. Despite careful
tracking and planning, however, the Group is unable to accurately
predict the extent of the impact of the pandemic on the business,
operations, and financial condition and results in future periods
due to the uncertainty of future developments. The Group is focused
on all aspects of the business and is implementing measures aimed
at mitigating issues where possible including by using digital
technology to assist operations for R&D and enabling
functions.
Credit Risk
The Group has exposure to the following risks arising from
financial instruments:
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. Financial instruments that potentially
subject the Group to concentrations of credit risk consist
principally of cash and cash equivalents, investments held at fair
value and trade and other receivables. The Group held the following
balances:
2020 2019
As of December 31 $000s $000s
----------------------------
Cash and cash equivalents 403,881 132,360
Short-term investments - 30,088
Trade and other receivables 2,558 1,977
---------------------------- ------- -------
Total 406,438 164,425
---------------------------- ------- -------
The Group invests its excess cash in U.S. Treasury Bills, U.S.
debt obligations and money market accounts, which the Group
believes are of high credit quality. Further the Group's cash, cash
equivalents and short-term investments are held at diverse,
investment-grade financial institutions.
The Group assesses the credit quality of customers on an ongoing
basis. The credit quality of financial assets that are neither past
due nor impaired is assessed by historical and recent payment
history, counterparty financial position, reference to credit
ratings (if available) or to historical information about
counterparty default rates. The Group does not have expected credit
losses owing largely to a small number of counterparties and the
high credit quality of such counterparties.
The aging of trade and other receivables that were not impaired
at December 31 is as follows:
2020 2019
As of December 31 $000s $000s
-----------------------------
Neither past due or impaired 2,558 1,977
----------------------------- ------ ------
Total 2,558 1,977
============================= ====== ======
Liquidity Risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Group actively manages its risk of a funds
shortage by closely monitoring the maturity of its financial assets
and liabilities and projected cash flows from operations, under
both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group's reputation. Due to the
nature of these financial liabilities, the funds are available on
demand to provide optimal financial flexibility.
The table below summarizes the maturity profile of the Group's
financial liabilities, including subsidiary preferred shares that
have customary liquidation preferences, as of December 31, 2020 and
2019 based on contractual undiscounted payments:
2020
---------------------------------------------------------
Three to
Carrying Within Twelve One to
Amount Three Months Months Five Years Total
As of December 31 $000s $000s $000s $000s $000s
-------- ------------- -------- ----------- ---------
Long-term loan 14,818 296 905 18,780 19,981
Subsidiary notes payable 26,455 1,455 25,000 - 26,455
Trade and other payables 21,826 21,826 - - 21,826
Warrants(2) 8,206 8,206 - - 8,206
Subsidiary preferred shares
(Note 15)(1) 118,972 118,972 - - 118,972
---------------------------- -------- ------------- -------- ----------- -------
Total 190,278 150,756 25,905 18,780 195,441
---------------------------- -------- ------------- -------- ----------- -------
2019
---------------------------- ---------------------------------------------------------
Three to
Carrying Within Twelve One to
Amount Three Months Months Five Years Total
As of December 31 $000s $000s $000s $000s $000s
---------------------------- -------- ------------- -------- ----------- ---------
Subsidiary notes payable 1,455 1,455 - - 1,455
Trade and other payables 19,842 19,842 - - 19,842
Warrants(2) 7,997 7,997 - - 7,997
Subsidiary preferred shares
(Note 15)(1) 100,989 100,989 - - 100,989
---------------------------- -------- ------------- -------- ----------- -------
Total 130,283 130,283 - - 130,283
============================ ======== ============= ======== =========== =======
1 Redeemable only upon a liquidation or Deemed liquidation
event, as defined in the applicable shareholder documents.
2 Warrants issued by subsidiaries to third parties to purchase preferred shares.
Interest Rate Sensitivity
As of December 31, 2020, the Group had cash and cash equivalents
of $403.9 million. The Group's exposure to interest rate
sensitivity is impacted by changes in the underlying U.K. and U.S.
bank interest rates. The Group has not entered into investments for
trading or speculative purposes. Due to the conservative nature of
the Group's investment portfolio, which is predicated on capital
preservation and investments in short duration, high-quality U.S.
Treasury Bills and U.S. debt obligations and related money market
accounts, a change in interest rates would not have a material
effect on the fair market value of the Group's portfolio, and
therefore the Group does not expect operating results or cash flows
to be significantly affected by changes in market interest
rates.
Controlled Founded Entity Investments
The Group maintains investments in certain Controlled Founded
Entities. The Group's investments in Controlled Founded Entities
are eliminated as intercompany transactions upon financial
consolidation. The Group is however exposed to a preferred share
liability owing to the terms of existing preferred shares and the
ownership of Controlled Founded Entities preferred shares by third
parties. As discussed in Note 15, certain of the Group's
subsidiaries have issued preferred shares that include the right to
receive a payment in the event of any voluntary or involuntary
liquidation, dissolution or winding up of a subsidiary, which shall
be paid out of the assets of the subsidiary available for
distribution to shareholders and before any payment shall be made
to holders of ordinary shares. The liability of preferred shares is
maintained at fair value through the profit and loss. The Group's
strong cash position, budgeting and forecasting processes, as well
as decision making and risk mitigation framework enable the Group
to robustly monitor and support the business activities of the
Controlled Founded Entities to ensure no exposure to credit losses
and ultimately dissolution or liquidation. Accordingly, the Group
views exposure to 3rd party preferred share liability as low.
Please refer to Notes 15 and 16 for further information regarding
the Group's exposure to Controlled Founded Entity Investments.
Non-Controlled Founded Entity Investments
The Group maintains certain investments in Non-Controlled
Founded Entities which are deemed either as investments and
accounted for as investments held at fair value or associates and
accounted for under the equity method (please refer to Note 1). The
Group's exposure to investments held at fair value is $530.2
million as of December 31, 2020 and the Group may or may not be
able to realize the value in the future. Accordingly, the Group
views the risk as high. The Group's exposure to investments in
associates is limited to the carrying amount of the investment in
an Associate. The Group is not exposed to further contractual
obligations or contingent liabilities beyond the value of initial
investment. As of December 31, 2020, Gelesis was the only
associate. The carrying amount of the investment in Gelesis as an
associate was zero. Accordingly, the Group does not view this as a
risk. Please refer to Notes 5, 6 and 16 for further information
regarding the Group's exposure to Non-Controlled Founded Entity
Investments.
Equity Price Risk
As of December 31, 2020, the Group held 3,406,564 common shares
of Karuna. The fair value of the Group's investment in the common
stock of Karuna was $346.1 million .
The investment in Karuna is exposed to fluctuations in the
market price of these common shares. The effect of a 10.0 percent
adverse change in the market price of Karuna common shares as of
December 31, 2020 would have been a loss of approximately $34.6
million recognized as a component of Other income (expense) in the
Consolidated Statements of Comprehensive Income/(Loss).
Foreign Exchange Risk
The Group maintains consolidated financial statements in the
Group's functional currency, which is the U.S. dollar. Monetary
assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at
rates of exchange prevailing at the balance sheet dates.
Non-monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rates prevailing at the date of the transaction. Exchange
gains or losses arising from foreign currency transactions are
included in the determination of net income/(loss) for the
respective periods. Such foreign currency gains or losses were not
material for all reported periods. See Note 9.
The Group recorded foreign currency losses in respect of foreign
operations of $0.5 million, $0.0 million and $0.2 million for the
periods ended December 31, 2020, December 31, 2019, and December
31, 2018, respectively, which are included within Other
comprehensive income/(loss) in the Consolidated Statements of
Comprehensive Income/(Loss).
The Group does not currently engage in currency hedging
activities since its foreign currency risk is limited, but the
Group may begin to do so in the future if and when its foreign
currency risk exposure changes. Instruments that may be used to
hedge future risks include foreign currency forward and swap
contracts. These instruments may be used to selectively manage
risks, but there can be no assurance that the Group will be fully
protected against material foreign currency fluctuations.
23. Commitments and Contingencies
The Group is party to certain licensing agreements where the
Company is licensing IP from third parties. In consideration for
such licenses the Group has made upfront payments and may be
required to make additional contingent payments based on
developmental and sales milestones and/or royalty on future sales.
As of December 31, 2020 these milestone events have not yet
occurred and therefore the Company does not have a present
obligation to make the related payments in respect of the licenses.
Many of these milestone events are remote of occurring. As of
December 31, 2020 payments in respect of developmental milestones
that are dependent on events that are outside the control of the
company but are reasonably possible to occur amounted to
approximately $5.3 million. These milestone amounts represent an
aggregate of multiple milestone payments depending on different
milestone events in multiple agreements. The probability that all
such milestone events will occur in the aggregate is remote.
Payments made to license IP represent the acquisition cost of
intangible assets. See Note 12.
The Company is party to certain sponsored research arrangements
as well as arrangements with contract manufacturing and contract
research organizations, whereby the counterparty provides the
Company with research and/or manufacturing services. As of December
31, 2020 the noncancellable commitments in respect of such
contracts amounted to approximately $5.1 million.
24. Related Parties Transactions
Related Party Subleases
During 2019, PureTech executed sublease agreements with a
related party Gelesis. Please refer to Note 21 for further details
regarding the sublease.
Key Management Personnel Compensation
Key management includes executive directors and members of the
executive management team of the Group. The key management
personnel compensation of the Group was as follows for the years
ended December 31:
2020 2019 2018
As of December 31 $000s $000s $000s
-----------------------------
Short-term employee benefits 4,833 5,543 3,998
Share-based payments 5,822 2,774 3,062
----------------------------- ------ ------ ------
Total 10,656 8,317 7,060
----------------------------- ------ ------ ------
Short-term employee benefits include salaries, health care and
other non-cash benefits. Share-based payments are generally subject
to vesting terms over future periods.
Convertible Notes Issued to Directors
Certain members of the Group have invested in convertible notes
issued by the Group's subsidiaries. As of December 31, 2020, 2019
and 2018, the outstanding related party notes payable totaled $89
thousand, $84 thousand and $79 thousand, respectively, including
principal and interest.
The notes issued to related parties bear interest rates,
maturity dates, discounts and other contractual terms that are the
same as those issued to outside investors during the same
issuances, as described in Note 17.
Directors' and Senior Managers' Shareholdings and Share
Incentive Awards
The Directors and senior managers hold beneficial interests in
shares in the following businesses and sourcing companies as at
December 31, 2020:
Number Number
of shares of options
held as held as
Business Name (Share of December of December Ownership
Class) 31, 2020 31, 2020 Interest(1)
=========================== ================================== ============ ============ ==============
Directors:
Ms. Daphne Zohar(2) Gelesis (Common) 59,443 1,339,114 5.10%
Dame Marjorie Scardino - - - -%
Kiran Mazumdar-Shaw - - - -%
Dr. Robert Langer Entrega (Common) - 332,500 4.24%
Alivio (Common) - 1,575,000 6.14%
Dr. Raju Kucherlapati Enlight (Class B Common) - 30,000 3.00%
Gelesis (Common) - 20,000 0.10%
Dr. John LaMattina(4) Akili (Series A-2 Preferred) 37,372 - 0.15%
Akili (Series C Preferred) 11,755 - 0.05%
Gelesis (Common)(4) 51,070 - 0.20%
Gelesis (Common)(5) - 83,050 0.30%
Gelesis (Series A-1 Preferred)(4) 49,253 - 0.20%
Vedanta Biosciences (Common) - 25,000 0.22%
Mr. Christopher Viehbacher - - - -%
Mr. Stephen Muniz Gelesis (Common)(5) - 20,000 0.10%
Senior Managers:
Dr. Bharatt Chowrira Karuna (Common)(5) 10,000 - 0.04%
Dr. Eric Elenko - - - -%
Dr. Joep Muijrers - - - -%
Dr. George Farmer - - - -%
Dr. Joseph Bolen Vor (Common) - 125,000 0.04%
--------------------------- ---------------------------------- ------------ ------------ -------- ---
1 Ownership interests as of December 31, 2020 are calculated on
a diluted basis, including issued and outstanding shares, warrants
and options (and written commitments to issue options) but
excluding unallocated shares authorized to be issued pursuant to
equity incentive plans and any shares issuable upon conversion of
outstanding convertible promissory notes.
2 Common shares and options held by Yishai Zohar, who is the
husband of Ms. Zohar. Ms. Zohar does not have any direct interest
in the share capital of Gelesis. Ms Zohar recuses herself from any
and all material decisions with regard to Gelesis.
3 Shares held through Dr. Bennett Shapiro and Ms. Fredericka F.
Shapiro, Joint Tenants with Right of Survivorship.
4 Dr. John and Ms. Mary LaMattina hold 50,540 shares of common
shares and 49,524 shares of Series A-1 preferred shares in Gelesis.
Individually, Dr. LaMattina holds 530 shares of Gelesis and
convertible notes issued by Appeering in the aggregate principal
amount of $50,000.
5 Options to purchase the listed shares were granted in
connection with the service on such founded entity's Board of
Directors and any value realized therefrom shall be assigned to
PureTech Health, LLC.
Directors and senior managers hold 23,245,840 ordinary shares
and 8.1 percent voting rights of the Company as of December 31,
2020. This amount excludes options to purchase 3,459,344 ordinary
shares. This amount also excludes 6,204,268 shares, which are
issuable based on the terms of performance based RSU awards granted
to certain senior managers covering the financial years 2020, 2019
and 2018. Such shares will be issued to such senior managers in
future periods provided that performance conditions are met and
certain of the shares will be withheld for payment of customary
withholding taxes.
25. Taxation
Tax on the profit or loss for the year comprises current and
deferred income tax. Tax is recognized in the Consolidated
Statements of Comprehensive Income/(Loss) except to the extent that
it relates to items recognized directly in equity.
For the years ended December 31, 2020, 2019 and 2018, the Group
filed a consolidated U.S. federal income tax return which included
all subsidiaries in which the Company owned greater than 80 percent
of the vote and value. For the years ended December 31, 2020, 2019
and 2018, the Group filed certain consolidated state income tax
returns which included all subsidiaries in which the Company owned
greater than 50 percent of the vote and value. The remaining
subsidiaries file separate U.S. tax returns.
Current income tax is the expected tax payable or receivable on
the taxable income or loss for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustment to
tax payable in respect of previous years.
Deferred tax is recognized due to temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax assets are recognized for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Deferred tax assets are reviewed at
each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Deferred taxes are recognized in Consolidated Statements of
Comprehensive Income/(Loss) except to the extent that they relate
to items recognized directly in equity or in other comprehensive
income.
Amounts recognized in Consolidated Statements of Comprehensive
Income/(Loss):
2020 2019 2018
As of December 31 $000s $000s $000s
-----------------------------
Income/(loss) for the year 4,568 366,065 (70,659)
Income tax expense/(benefit) 14,401 112,409 2,221
----------------------------- ------ ------- --------
Income/(loss) before taxes 18,969 478,474 (68,438)
============================= ====== ======= ========
Recognized income tax expense/(benefit):
2020 2019 2018
As of December 31 $000s $000s $000s
-----------------------------------------------
Federal 21,796 - 2
Foreign - - -
State - - 496
----------------------------------------------- ------- ------- ------
Total current income tax expense/(benefit) 21,796 - 498
----------------------------------------------- ------- ------- ------
Federal (7,349) 83,776 2,034
Foreign - - (311)
State (46) 28,633 -
----------------------------------------------- ------- ------- ------
Total deferred income tax expense/(benefit) (7,395) 112,409 1,723
----------------------------------------------- ------- ------- ------
Total income tax expense/(benefit), recognized 14,401 112,409 2,221
=============================================== ======= ======= ======
The tax expense was $14.4 million, $112.4 million and $2.2
million in 2020, 2019 and 2018 respectively. The decrease in tax
expense is primarily the result of the decrease in profit before
tax.
Reconciliation of Effective Tax Rate
The Group is primarily subject to taxation in the U.S. A
reconciliation of the U.S. federal statutory tax rate to the
effective tax rate is as follows:
2020 2019 2018
---------------- ---------------- -------------------
As of December 31 $000s % $000s % $000s %
---------------------------- ------- ------- -------- ------ -------- ---------
Weighted-average
statutory rate 3,984 21.00 97,183 21.00 (14,372) 21.00
Effects of state
tax rate in U.S. 1,844 9.72 22,111 4.78 (3,267) 4.77
R&D and orphan drug
tax credits (5,642) (29.74) (6,321) (1.37) (3,268) 4.78
Share-based payment
measurement 327 1.73 433 0.09 3,429 (5.01)
Mark-to-market adjustments 919 4.84 3,725 0.80 (3,745) 5.47
Transaction Costs 361 1.91 - 0.00 - 0.00
Interest Expense (2,258) (11.91) 1,030 0.22 - 0.00
Executive Compensation 827 4.36 - 0.00 - 0.00
Accretion on preferred
shares - 0.00 - 0.00 22 (0.03)
Deconsolidation adjustments - 0.00 (13,658) (2.95) 9,688 (14.16)
Mark-to-market investment
in subsidiary - 0.00 - 0.00 (55) 0.08
Income of partnerships
not subject to tax - 0.00 - 0.00 (78) 0.11
Recognition of deferred
tax assets not previously
recognized - 0.00 (6,251) (1.35) - 0.00
Current year losses
for which no deferred
tax asset is recognized 13,948 73.53 14,514 3.14 13,012 (19.01)
Other 91 0.48 (356) (0.06) 854 (1.25)
---------------------------- ------- ------- -------- ------ -------- -------
14,401 75.92 112,409 24.29 2,221 (3.25)
============================ ======= ======= ======== ====== ======== =======
The Company is also subject to taxation in the UK but to date no
taxable income has been generated in the UK. Changes in corporate
tax rates can change both the current tax expense (benefit) as well
as the deferred tax expense (benefit).
Deferred Tax Assets and Liabilities
Deferred tax assets have been recognized in the U.S.
jurisdiction in respect of the following items:
2020 2019
As of December 31 $000s $000s
-------------------------------------------------------
Operating tax losses 39,901 68,690
Capital loss carryovers - 2,292
Research credits 10,805 9,931
Share-based payments 5,429 9,711
Deferred revenue 358 1,125
Lease Liability 9,657 10,339
Other temporary differences 2,078 2,117
======================================================= ========= =========
Deferred tax assets 68,228 104,205
======================================================= ========= =========
Investment in subsidiaries (120,676) (173,069)
ROU asset (5,491) (6,115)
Fixed assets (3,588) (3,225)
Other temporary differences (27) -
======================================================= ========= =========
Deferred tax liabilities (129,782) (182,409)
======================================================= ========= =========
Deferred tax assets (liabilities), net (61,554) (78,204)
Deferred tax liabilities, net, recognized 108,626 115,445
Deferred tax assets, net, recognized - (142)
======================================================= ========= =========
Deferred tax assets (liabilities), net, not recognized 47,072 37,099
======================================================= ========= =========
We have recognized deferred tax assets related to entities in
the U.S. Federal and Massachusetts consolidated return groups due
to future reversals of existing taxable temporary differences that
will be sufficient to recover the net deferred tax assets. Our
remaining deferred tax assets have not been recognized because it
is not probable that future taxable profits will be available to
support their realizability.
There was movement in deferred tax recognized, which impacted
income tax expense by approximately $7.4 million benefit, primarily
related to changes in the value of investments. The Company sold a
portion of its stock in Karuna during 2020 and was able to
partially offset its gains by using various attributes (i.e. net
operating losses, research and development credits, etc.) resulting
in current tax expense of $21.8 million.
The Company had U.S. federal net operating losses carry forwards
("NOLs") of approximately $169.7 million, $243.0 million and $238.1
million as of December 31, 2020, 2019 and 2018, respectively, which
are available to offset future taxable income. These NOLs expire
through 2037 with the exception of $101.9 million which is not
subject to expiration. The Company had U.S. Federal research and
development tax credits of approximately $3.9 million, $7.4 million
and $6.7 million as of December 31, 2020, 2019 and 2018,
respectively, which are available to offset future taxes that
expire at various dates through 2040. The Company also had Federal
Orphan Drug credits of approximately $5.2 million and $3.7 million
as of December 31, 2020 and 2019, which are available to offset
future taxes that expire at various dates through 2040. A portion
of these Federal NOLs and credits can only be used to offset the
profits from the Company's subsidiaries who file separate Federal
tax returns. These NOLs and credits are subject to review and
possible adjustment by the Internal Revenue Service.
The Company had Massachusetts net operating losses carry
forwards ("NOLs") of approximately $67.4 million, $273.0 million
and $179.5 million for the years ended December 31, 2020, 2019 and
2018, respectively, which are available to offset future taxable
income. These NOLs expire at various dates beginning in 2030. The
Company had Massachusetts research and development tax credits of
approximately $2.1 million, $1.6 million and $1.3 million for the
years ended December 31, 2020, 2019 and 2018, respectively, which
are available to offset future taxes and expire at various dates
through 2035. These NOLs and credits are subject to review and
possible adjustment by the Massachusetts Department of Revenue.
Utilization of the NOLs and research and development credit
carryforwards may be subject to a substantial annual limitation
under Section 382 of the Internal Revenue Code of 1986 due to
ownership change limitations that have occurred previously or that
could occur in the future. These ownership changes may limit the
amount of NOL and research and development credit carryforwards
that can be utilized annually to offset future taxable income and
tax, respectively. The Company notes that a 382 analysis was
performed through December 31, 2020. The results of this analysis
concluded that certain net operating losses were subject to
limitation under Section 382 of the Internal Revenue Code. None of
the Company's tax attributes which are subject to a restrictive
Section 382 limitation have been recognized in the financial
statements.
Uncertain Tax Positions
The Company has no uncertain tax positions as of December 31,
2020. U.S. corporations are routinely subject to audit by federal
and state tax authorities in the normal course of business.
26. Sale of assets
In February 2018, The Sync Project, Inc. ("Sync") entered into
an asset purchase agreement with Bose Corporation for the sale of
certain assets and liabilities. The total aggregate purchase price
was $4.5 million, consisting of approximately $4.0 million paid at
closing and $0.5 million in cash deposited into escrow to be held
for 12 months in order to secure the indemnification obligations of
Sync after the closing date.
PureTech Health derecognized certain assets and liabilities
based on their historical costs. The excess of the consideration
transferred over the historical costs of the assets and liabilities
resulted in a gain of approximately $4.0 million, which was
recorded to the line item "Gain/(loss) on disposal of assets" on
the accompanying Consolidated Statements Comprehensive
Income/(Loss) for the year ended December 31, 2018.
Additionally, as part of the derecognition, the Company and
certain preferred shareholders received a cash distribution of
approximately $3.3 million during the year ended December 31, 2018.
During the year ended December 31, 2019, certain preferred
shareholders received further cash distributions of $0.1 million.
As of December 31, 2020, no remaining third party obligations
remained.
27. Tal Merger Agreement
During the year ended December 31, 2018, Tal Medical, Inc.
("Tal") a subsidiary of the Group entered into an option agreement
with a third party, through which the third party was given the
option to acquire substantially all of Tal's assets. The option was
contingent on the third party raising gross proceeds of $15.0
million prior to January 1, 2019 (the option expiration date). Upon
the expiration of the option all external investors, not including
PureTech, would be entitled to a distribution equal to the cash on
hand on the date of expiration, and Tal's operations would wind
down. As of December 31, 2018, the minimum gross proceeds were not
raised, resulting in the option expiring. As a result, the
preferred shares were adjusted to the cash distribution the
external investors were entitled to, which totaled $0.1 million,
resulting in gain of $11.0 million being recognized in Finance
income/(costs) - fair value accounting line of the Consolidated
Statements of Comprehensive Income/(Loss) for the year ended
December 31, 2018. In 2019 a merger was executed between PureTech
and Tal wherein PureTech became the sole shareholder of Tal
following the liquidation of all assets. In 2019, certain preferred
shareholders received distributions of $0.1 million in connection
with the merger. As of December 31, 2019 and 2020 Tal was an
inactive entity in the Group's Parent segment.
28. Subsequent Events
The Company has evaluated subsequent events after December 31,
2020, the date of issuance of the Consolidated Financial
Statements, and has not identified any recordable or disclosable
events not otherwise reported in these consolidated financial
statements or notes thereto, except for the following:
On January 8, 2021, PureTech participated in the second closing
of Vor's Series B Preferred Share financing. For consideration of
$0.5 million, PureTech received 961,538 shares.
On February 9, 2021, Vor closed its initial public offering of
9,828,017 shares at a price to the public of $18.00 per share.
Subsequent to the closing, PureTech held 3,207,200 shares of Vor
common stock, representing 8.6 percent of Vor common stock.
On February 9, 2021, PureTech Health sold 1,000,000 common
shares of Karuna for aggregate proceeds of $118.0 million.
Following the sale PureTech holds 2,406,564 shares of Karuna common
stock, representing 8.2 percent of Karuna common stock.
PureTech Health plc Statement of Financial Position
For the years ended December 31
2020 2019
Note $000s $000s
------------------------------------------- ----
Assets
Non-current assets
Investment in subsidiary 2 161,082 141,348
Intercompany long-term receivable 3 297,556 -
------------------------------------------- ---- -------- -------
Total non-current assets 458,638 141,348
------------------------------------------- ---- -------- -------
Current assets
Intercompany receivables 3 - 296,531
Total current assets - 296,531
------------------------------------------- ---- -------- -------
Total assets 458,638 437,879
------------------------------------------- ---- -------- -------
Equity and liabilities
Equity
Share capital 4 5,417 5,408
Share premium 4 288,978 287,962
Merger reserve 4 138,506 138,506
Other reserve 4 20,725 991
Accumulated deficit (Income/(loss) for the
year $(2,739)) 4 (10,621) (7,882)
=========================================== ==== ======== =======
Total equity 443,005 424,985
------------------------------------------- ---- -------- -------
Current liabilities
Trade and other payables 621 1,235
Intercompany payables 5 15,012 11,658
------------------------------------------- ---- -------- -------
Total current liabilities 15,633 12,893
------------------------------------------- ---- -------- -------
Total equity and liabilities 458,638 437,878
------------------------------------------- ---- -------- -------
Please refer to the accompanying Notes to the PureTech Health
plc financial information. Registered number: 09582467.
The PureTech Health plc financial statements were approved by
the Board of Directors and authorized for issuance on April 14,
2021 and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
April 14, 2021
The accompanying Notes are an integral part of these financial
statements.
PureTech Health plc Statements of Cash Flows
For the years ended December 31
2020 2019
$000s $000s
------------------------------------------------------ ------- ---------
Cash flows from operating activities
Net loss (2,739) (2,689)
Adjustments to reconcile net operating loss to net
cash used in operating activities:
Non-cash items:
Intercompany receivable - (539)
Intercompany payable 3,354 1,453
Accounts payable and accrued expenses (614) 1,235
------------------------------------------------------ ------- ---------
Net cash (used in) operating activities - (540)
------------------------------------------------------ ------ ------
Cash flows from investing activities:
------------------------------------------------------ ------- ---------
Net cash provided by (used in) investing activities - -
====================================================== ======= =========
Cash flows from financing activities:
Exercise of share based awards - 540
Net cash provided by (used in) financing activities - 540
------------------------------------------------------ ------- ---------
Effect of exchange rates on cash and cash equivalents - -
Net decrease in cash and cash equivalents - -
Cash and cash equivalents at beginning of year - -
------------------------------------------------------ ------- ---------
Cash and cash equivalents at end of year - -
------------------------------------------------------ ------- ---------
Supplemental disclosure of non-cash investment and
financing activities:
Increase in investment against share-based awards 19,734 -
Issuance of shares against intercompany receivable - 9,106
Exercise of share-based awards against intercompany
receivable 1,025 -
------------------------------------------------------ ------- ---------
The accompanying Notes are an integral part of these financial
statements.
PureTech Health plc Statements of Changes in Equity
For the years ended December 31
Share Merger Other Accumulated Total
Amount Premium Reserve Reserve deficit equity
Shares $000s $000s $000s $000s $000s $000s
---------------------------- ----------- ------ -------- -------- -------- ----------- ----------
Balance January 1,
2019 282,493,867 5,375 278,349 138,506 991 (5,192) 418,029
Total comprehensive
loss for the period
Issue of shares to
Ariya founders 2,126,338 28 9,078 - - - 9,106
Issuance of restricted
stock units 513,324 - - - - - -
Exercise of share-based
awards 237,090 5 535 - - - 540
Net loss - - - - - (2,689) (2,689)
---------------------------- ----------- ------ -------- -------- -------- ----------- --------
Balance December 31,
2019 285,370,619 5,408 287,962 138,506 991 (7,881) 424,986
---------------------------- ----------- ------ -------- -------- -------- ----------- --------
Total comprehensive
loss for the period
Exercise of share-based
awards 514,406 9 1,016 - - - 1,025
Equity settled share-based
payments - - - - 33,902 - 33,902
Settlement of restricted
stock units (RSU) - - - - (12,888) - (12,888)
Vesting of restricted
stock units - - - - (1,280) - (1,280)
Net loss - - - - - (2,739) (2,739)
---------------------------- ----------- ------ -------- -------- -------- ----------- --------
Balance December 31,
2020 285,885,025 5,417 288,978 138,506 20,725 (10,620) 444,285
---------------------------- ----------- ------ -------- -------- -------- ----------- --------
The accompanying Notes are an integral part of these financial
statements.
Notes to the Financial Statements
1. Accounting policies
Basis of Preparation and Measurement
The financial statements of PureTech Health plc (the "Parent")
are presented as of December 31, 2020 and 2019 and for the years
ended December 31, 2020 and 2019 and have been prepared under the
historical cost convention in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards
(IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it
applies in the EU. The financial statements of PureTech Health plc
also comply fully with IFRSs as issued by the International
Accounting Standards Board (IASB). A summary of the significant
accounting policies that have been applied consistently throughout
the year are set out below.
Functional and Presentation Currency
The functional currency of the Parent is United States ("U.S.")
Dollars and the financial statements are presented in U.S.
Dollars.
Investments
Investments are stated at historic cost less any provision for
impairment in value and are held for long-term investment purposes.
Provisions are based upon an assessment of events or changes in
circumstances that indicate that an impairment has occurred such as
the performance and/or prospects (including the financial
prospects) of the investee company being significantly below the
expectations on which the investment was based, a significant
adverse change in the markets in which the investee company
operates or a deterioration in general market conditions.
Impairment
If there is an indication that an asset might be impaired, the
Parent would perform an impairment review. An asset is impaired if
the recoverable amount, being the higher of net realizable value
and value in use, is less than its carrying amount. Value in use is
measured based on future discounted cash flows attributable to the
asset. In such cases, the carrying value of the asset is reduced to
recoverable amount with a corresponding charge recognized in the
profit and loss account.
Financial Instruments
Currently the Parent does not enter into derivative financial
instruments. Financial assets and financial liabilities are
recognized and cease to be recognized on the basis of when the
related titles pass to or from the Parent Company.
Equity Settled Share Based Payments
Share based payment awards granted in subsidiaries to employees
and consultants to be settled in Parent's equity instruments are
accounted for as equity-settled share-based payment transactions in
accordance with IFRS 2. The grant date fair value of employee
share-based payment awards granted in subsidiaries is recognized as
an increase to the investment with a corresponding increase in
equity over the requisite service period related to the awards. The
fair value is measured using an option pricing model, which takes
into account the terms and conditions of the options granted.
2. Investment in subsidiary
$000s
------------------------------------------------------------------ ---------
Balance at May 8, 2015 -
Investment in PureTech LLC as a result of the reverse acquisition 141,348
Increase due to equity settled share based payments granted
to employees and service providers in subsidiaries 19,734
------------------------------------------------------------------ -------
Balance at December 31, 2020 and 2019 161,082
------------------------------------------------------------------ -------
PureTech consists of the Parent and its subsidiaries (together,
the "Group"). Investment in subsidiary represents the Parent's
investment in PureTech LLC as a result of the reverse acquisition
of the Group's financial statements immediately prior to the
Parent's initial public offering ("IPO") on the London Stock
Exchange in June 2015. PureTech LLC operates in the U.S. as a
US-focused scientifically driven research and development company
that conceptualizes, sources, validates and commercializes
unexpected and potentially disruptive approaches to advance the
needs of human health. For a summary of the Parent's indirect
subsidiaries please refer to Note 1 of the Consolidated Financial
Statements of PureTech Health plc.
In 2020, the Parent recognized a $19.7 million increase in its
investment in its operating subsidiary PureTech LLC due to equity
settled share based payments granted to employees and service
providers in subsidiaries. $24.8 million relates to amounts which
should have been recognized at December 31, 2019. The prior year
balance sheet has not been adjusted since the directors do not
believe this item is qualitatively material to users of the
financial statements, it has no impact on distributable reserves of
the Parent and no impact on the Group consolidated financial
statements. The disclosure relating to such share based payment
awards is detailed in Note 8 of the of the accompanying
Consolidated Financial Statements.
3. Intercompany receivables
The Parent has an accounts receivable balance from its operating
subsidiary PureTech LLC of $297.6 million due to cash received from
the IPO and other share issuances.
As of December 31, 2020 the intercompany receivable balance was
classified as a long-term receivable since the Parent does not
expect to realize the receivable within the next 12 months.
4. Share capital and reserves
PureTech plc was incorporated with the Companies House under the
Companies Act 2006 as a public company on May 8, 2015.
On March 12, 2018, the Company raised approximately $100.0
million, before issuance costs and other expenses, by way of a
Placing of 45,000,000 placing shares.
On June 24, 2015, the Company authorized 227,248,008 of ordinary
share capital at one pence apiece. These ordinary shares were
admitted to the premium listing segment of the United Kingdom's
Listing Authority and traded on the Main Market of the London Stock
Exchange for listed securities. In conjunction with the
authorization of the ordinary shares, the Parent completed an IPO
on the London Stock Exchange, in which it issued 67,599,621
ordinary shares at a public offering price of 160 pence per
ordinary share, in consideration for $159.3 million, net of
issuance costs of $11.8 million.
Additionally, the IPO included an over-allotment option
equivalent to 15 percent of the total number of new ordinary
shares. The stabilization manager provided notice to exercise in
full its over-allotment option on July 2, 2015. As a result, the
Parent issued 10,139,943 ordinary shares at the offer price of 160
pence per ordinary share, which resulted in net proceeds of $24.2
million, net of issuance costs of $0.8 million.
In 2020, Other reserves increased by $19.7 million due to equity
settled share based payments granted to employees and service
providers in subsidiaries. See Note 2 above.
5. Intercompany payables
The Parent has a balance due to its operating subsidiary
PureTech LLC of $15.0 million, which is related to IPO costs and
operating expenses. These intercompany payables do not bear any
interest and are repayable upon demand.
6. Profit and loss account
As permitted by Section 408 of the Companies Act 2006, the
Parent's profit and loss account has not been included in these
financial statements. The Parent's loss for the year was $2.7
million.
7. Directors' remuneration, employee information and share-based
payments
The remuneration of the executive directors of the Parent
Company is disclosed in Note 24, Related Parties Transactions, of
the accompanying Consolidated Financial Statements. Full details
for directors' remuneration can be found in the Directors'
Remuneration Report. Full detail of the share-based payment charge
and the related disclosures can be found in Note 8, Share-based
Payments, of the accompanying Consolidated Financial
Statements.
The Parent had no employees during 2020 or 2019.
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Puretech Health (LSE:PRTC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Puretech Health (LSE:PRTC)
Historical Stock Chart
From Jul 2023 to Jul 2024
