TIDMPRTC
RNS Number : 5331J
PureTech Health PLC
24 August 2021
24 August 2021
PureTech Health plc - Half-Year Report
Strong capital base and cash runway expected into the first
quarter of 2025, with PureTech level cash and
cash equivalents of $409.7 million(1) and consolidated cash and
cash equivalents of $439.8 million(2)
as of June 30, 2021
Continued advancement of PureTech's Wholly Owned Programs, with
two Phase 2 and four Phase 1
clinical trials underway and key preclinical data published in
peer-reviewed journals for two of PureTech's
four lymphatic and inflammation platforms
Significant developments across the Founded Entities, Vor's
Nasdaq listing, Gelesis' merger agreement
with Capstar SPAC to become publicly-traded, Karuna's progress
with its Phase 3 program for KarXT in
schizophrenia and Akili's scaled U.S. commercialization of
EndeavorRx (R)
Company to host a webcast and conference call today at 9:00am
EDT / 2:00pm BST
PureTech Health plc (Nasdaq: PRTC, LSE: PRTC) ("PureTech" or the
"Company") today announces its half-yearly results for the six
months ended June 30, 2021. 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(3) , is comprised of 25
therapeutics and therapeutic candidates, including 15 that are
clinical stage and two that have received both U.S. Food and Drug
Administration (FDA) clearance and European marketing
authorization. The following information will be filed on Form 6-K
with the United States Securities and Exchange Commission and is
also available at
https://investors.puretechhealth.com/financials-filings/reports.
1. PureTech Level Cash and Cash equivalents as of June 30, 2021
represent cash and cash equivalents held at PureTech Health plc and
its wholly-owned subsidiaries only. Please refer to the Financial
Review section of this report for additional detail.
2. Consolidated Cash and cash equivalents as of June 30, 2021
represent cash and cash equivalents of $439.8 million as shown on
the Consolidated Statements of Financial Position.
3. While PureTech maintains ownership of equity interests in its
Founded Entities, the Company does not, in all cases, maintain
control over these entities (by virtue of (i) majority voting
control and (ii) the right to elect representation to the entities'
boards of directors) or direct the management and development
efforts for these entities. Consequently, not all such entities are
consolidated in the Company's financial statements. Where PureTech
maintains control, the entity is referred to as a Controlled
Founded Entity in this report and is consolidated in the financial
statements. Where PureTech does not maintain control, the entity is
referred to as a Non-Controlled Founded Entity in this report and
is not consolidated in the Company's financial statements. As of
June 30, 2021, PureTech's Controlled Founded Entities included
Follica Incorporated, Vedanta Biosciences, Inc., Sonde Health, Inc.
and Entrega, Inc., and PureTech's Non-Controlled Founded Entities
included Gelesis, Inc., Karuna Therapeutics, Inc., Akili
Interactive Labs, Inc. and Vor Biopharma Inc. Relevant ownership
interests for Founded Entities were calculated on a diluted basis
(as opposed to a voting basis) as of June 30, 2021, including
outstanding shares, options and warrants, but excluding unallocated
shares authorized to be issued pursuant to equity incentive plans.
Vedanta ownership was calculated on a diluted basis as of July 16,
2021. For each of Karuna and Vor, ownership was calculated on an
outstanding voting share basis as of June 30, 2021.
Webcast and conference call details
Members of the PureTech management team will host a conference
call at 9:00am EDT / 2:00pm BST today, August 24, 2021, 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: 499281
For those unable to listen to the call live, a replay will be
available on the PureTech website.
Commenting on PureTech's half-yearly results, Daphne Zohar,
Founder and Chief Executive Officer of PureTech, said:
"This has been another strong period for PureTech. We have made
exciting clinical progress across both our Wholly Owned Pipeline
and our Founded Entities, and substantial financial momentum leaves
us in an excellent position to continue delivering on our promise
to patients and to creating value for shareholders.
"Our Wholly Owned Programs have rapidly accelerated and grown,
with six therapeutic candidates now in development to potentially
address serious patient needs. LYT-100 is being evaluated in two
ongoing Phase 2 clinical trials in Long COVID and breast
cancer-related lymphedema, and we have also initiated three
additional Phase 1 clinical trials to further inform the
development of LYT-100 in these indications as well as in
idiopathic pulmonary fibrosis (IPF). We look forward to sharing our
potentially registration-enabling development plans in IPF in the
fourth quarter of this year following discussion with the FDA and
other regulatory bodies. Additionally, the Phase 1 portion of a
Phase 1/2 trial of LYT-200 for the potential treatment of
difficult-to-treat solid tumors is expected to read out in the
fourth quarter of this year, and - pending the results - a Phase 2
trial is planned to evaluate LYT-200 both alone and in combination
with BeiGene's tislelizumab or chemotherapy.
"Our Founded Entities have also had a productive period.
Gelesis' merger agreement with Capstar Special Purpose Acquisition
Corp., upon completion, will make it the third of PureTech's
Founded Entities to become publicly traded. Along with Vor
(Nasdaq:VOR) and Karuna (Nasdaq:KRTX), these three entities will
have a combined value of over $5.4 billion as of June 30th,
including the expected valuation of Gelesis following the
completion of its Capstar merger. In addition to our equity
holdings across all of our Founded Entities, we are also due
royalties on potential product sales from Gelesis, Karuna and
Follica. Royalties due to us from each of those programs could
potentially be worth as much as - or more than - our equity in each
program, depending on the extent of future product sales.
"Our pioneering hub and spoke model of developing new medicines
has yielded 25 therapeutics and therapeutic candidates to date with
clinical development success rates that significantly outperformed
biopharma industry averages. The common theme underlying all of
these programs has been to start with a tremendous patient need and
to identify or invent a solution based on signals of human efficacy
and clinically validated biology. In many cases, this approach has
enabled us to advance a new candidate with a significantly
de-risked profile, resulting in what we believe are differentiated
treatments for devastating diseases.
"I remain proud of and energized by the progress our team has
made this year, and I look forward to the many milestones ahead
throughout the remainder of 2021 and into 2022. "
Operational Highlights
Wholly Owned Programs(4)
PureTech's team, network and insights and expertise in the
biology of the brain, immune and gut, or BIG, systems and the
interface between those systems, referred to as the BIG Axis have
enabled the rapid advancement and growth of the Company's Wholly
Owned Programs. Focused on the lymphatic system and related
immunological and inflammatory disorders, PureTech's Wholly Owned
Pipeline currently consists of six therapeutic candidates
including:
-- LYT-100 (deupirfenidone), a clinical therapeutic candidate
that the Company is pursuing for inflammatory and fibrotic
conditions and disorders of lymphatic flow;
-- LYT-200, a clinical therapeutic candidate targeting a
foundational immunosuppressor, galectin-9, that the Company is
developing for the potential treatment of a range of cancer
indications;
-- LYT-210, a preclinical therapeutic candidate targeting
immunomodulatory gamma delta-1 T cells that the Company is
developing for a range of cancer indications;
-- LYT-300 (oral allopregnanolone), a preclinical therapeutic
candidate derived from PureTech's Glyph(TM) platform that the
Company is developing for a range of neurological and
neuropsychological conditions;
-- LYT-500, a preclinical, orally-administered therapeutic
candidate derived from PureTech's Alivio(TM) platform that the
Company is developing for inflammatory bowel disease (IBD); and
-- LYT-503/IMB-150, a preclinical therapeutic candidate derived
from PureTech's Alivio platform that is being advanced in
collaboration with Imbrium Therapeutics as a potential non-opioid
treatment for interstitial cystitis or bladder pain syndrome
(IC/BPS).
PureTech's Wholly Owned Programs also include four lymphatic and
inflammation platforms: Glyph - a synthetic lymphatic targeting
chemistry platform - and Orasome(TM) - an oral biotherapeutics
platform - both of which leverage the absorption of dietary lipids
to traffic therapeutics via the lymphatic system, Alivio - an
inflammation-targeting immunomodulation platform for the potential
treatment of a range of chronic and acute inflammatory disorders -
and a meningeal lymphatics research program to develop potential
treatments for neurodegenerative and neuroinflammatory
diseases.
Key developments and progress during the period across
PureTech's Wholly Owned Programs include:
-- In the first half of 2021, PureTech progressed two ongoing
Phase 2 clinical trials of LYT-100 including 1) a global,
randomized, double-blind, placebo-controlled Phase 2 trial to
evaluate the efficacy, safety and tolerability of LYT-100-COV in
adults with Long COVID(5) respiratory complications and related
sequelae. Topline results from this trial are expected by the end
of 2021, and 2) a Phase 2a proof-of-concept study of LYT-100-LYMPH
in patients with breast cancer-related, upper limb secondary
lymphedema. Topline results from this trial are expected in
2022.
-- PureTech has also initiated a three-month, open-label
extension of the LYT-100-COV Phase 2 trial in adults with Long
COVID respiratory complications and related sequelae who completed
the first portion of the trial. The primary endpoint of the
extension trial is to assess the longer-term safety and
tolerability of LYT-100-COV through up to 182 days of
treatment.
-- In the first half of 2021, PureTech initiated three
additional Phase 1 clinical trials of LYT-100 to explore further
the pharmacokinetic (PK), dosing and tolerability in healthy
volunteers. One of these trials is an extension of the previously
completed multiple ascending dose (MAD) study of LYT-100 and is
designed to determine the maximum tolerated dose of LYT-100 in
healthy volunteers. Results from these trials are anticipated in
the fourth quarter of 2021 and are expected to provide additional
data to inform future clinical development of LYT-100 across
multiple indications.
-- In April 2021, PureTech announced the formation of its
Clinical Advisory Board for IPF and other progressive fibrosing
interstitial lung diseases (PF-ILDs). Comprised of physicians and
researchers with deep expertise in the clinical development of
novel therapies in PF-ILDs, the Clinical Advisory Board will work
closely with PureTech as it advances LYT-100-ILD. PureTech is
planning the trial design that will potentially enable registration
of LYT-100-ILD for the treatment of IPF and potentially other
PF-ILDs. PureTech expects to provide additional guidance in the
fourth quarter of 2021, following discussion with regulatory
agencies and which may also be informed by additional ongoing Phase
1 studies of LYT-100.
-- In the August 2021 post-period, PureTech presented the
results of the Phase 1 multiple ascending dose and food effect
study of LYT-100 at the virtual European Respiratory Society
International Congress.
-- In the July 2021 post-period, PureTech announced a clinical
trial and supply agreement with an affiliate of BeiGene, Ltd. to
evaluate BeiGene's tislelizumab, an anti-PD-1 monoclonal antibody,
in combination with PureTech's LYT-200, an investigational
monoclonal antibody (mAb) targeting galectin-9, for the potential
treatment of difficult-to-treat solid tumors that are associated
with poor survival rates. Under the terms of the agreement,
PureTech will maintain control of the LYT-200 program, including
global R&D and commercial rights, and BeiGene has agreed to
supply tislelizumab for use in combination with LYT-200 for the
planned study. LYT-200 is currently being evaluated as a single
agent in the Phase 1 portion of a Phase 1/2 clinical trial. The
primary objective of the Phase 1 portion of the trial is to assess
the safety and tolerability of escalating doses of LYT-200 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 (PD) profiles of LYT-200. Results from the Phase 1
portion of the study are anticipated in the fourth quarter of 2021.
Pending these results, PureTech intends to initiate the Phase 2
expansion cohort portion of the trial, which is designed to
evaluate LYT-200 both alone and in combination with BeiGene's
tislelizumab or chemotherapy.
-- In the first half of 2021, PureTech continued to advance
LYT-300, its most advanced Glyph candidate, towards the clinic.
LYT-300 is an oral form of allopregnanolone, an IV version of which
is approved by the FDA and administered over 60 hours, and PureTech
believes LYT-300 may be applicable to a range of neurological and
neuropsychological conditions. PureTech expects to initiate a
clinical trial of LYT-300 by the end of 2021. The initial objective
of the clinical program is to characterize the safety, tolerability
and PK of orally administered LYT-300 in a Phase 1 clinical trial
in healthy volunteers. This study may also explore the impact of
LYT-300 on ß-EEG, a marker of GABA(A) target engagement. Data from
this study will be used to define a potential range of future
studies and planned indications.
-- In February 2021, a preclinical proof-of-concept study for
the 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.
-- In June 2021, PureTech announced its acquisition of the
remaining 22 percent of shares outstanding in its Founded Entity,
Alivio Therapeutics (Alivio). Alivio's therapeutic candidates, in
development for inflammatory disorders including IBD, have been
integrated into PureTech's Wholly Owned Pipeline, and the
underlying Alivio technology platform, which is designed to enable
inflammation-targeted immunomodulation for the potential treatment
of a range of chronic and acute inflammatory disorders, and related
undisclosed anti-inflammatory candidates, have been added to
PureTech's discovery programs. The lead candidate from within the
Alivio technology platform is LYT-500, which is a preclinical,
orally-administered therapeutic candidate in development for IBD.
PureTech expects preclinical proof-of-concept data for LYT-500 in
the first half of 2022.
-- In the August 2021 post-period, PureTech announced that
Imbrium exercised a license option under the companies' research
and development collaboration agreement to develop PureTech's
LYT-503/IMB-150 for the potential treatment of IC/BPS. In
connection with the option exercise, PureTech received an upfront
payment of $6.5 million and is eligible to receive up to $53
million in additional development milestone payments for this
program as well as royalties on product sales. An IND application
for LYT-503/IMB-150 is planned to be filed in early 2022.
-- In April 2021, PureTech announced the publication of
preclinical research in Nature around its meningeal lymphatics
research program, suggesting that restoring lymphatic flow in the
brain, either alone or in combination with passive immunotherapies
such as antibodies directed at amyloid beta, has the potential to
address a range of neurodegenerative diseases including Alzheimer's
and Parkinson's diseases and the associated neuroinflammation. The
work also uncovered a link between dysfunctional meningeal
lymphatics and damaging microglia activation in Alzheimer's
disease, which potentially impairs the efficacy of passive
immunotherapies such as amyloid beta-targeting antibodies. This
suggests another route by which restoring healthy drainage patterns
could improve clinical outcomes.
-- In the first half of 2021, PureTech also progressed its
Orasome technology platform, which is a novel programmable and
scalable approach for the oral administration of nucleic acids and
other biologics. Preclinical proof-of-concept data is expected in
2021.
-- In the August 2021 post-period, PureTech announced the
appointment of Julie Krop, M.D., as Chief Medical Officer. Dr. Krop
will oversee all clinical development, regulatory, CMC, and medical
affairs for the Company's advancing Wholly Owned Pipeline.
4. References in this report to "Wholly Owned Programs" refer to
the Company's six therapeutic candidates (LYT-100, LYT-200,
LYT-210, LYT-300, LYT-500 and LYT-503/IMB-150), four lymphatic and
inflammation platforms and potential future therapeutic candidates
and platforms that the Company may develop or obtain. References to
"Wholly Owned Pipeline" refer to LYT-100, LYT-200, LYT-210,
LYT-300, LYT-500 and LYT-503/IMB-150. On July 23, 2021, Imbrium
Therapeutics exercised its option to license LYT-503/IMB-150
pursuant to which it is responsible for all future development
activities and funding for LYT-503/IMB-150.
5. 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).
Founded Entities
In 2021, PureTech's Founded Entities have made significant
progress advancing 19 therapeutics and therapeutic candidates, of
which two have been cleared for marketing by the FDA and granted
marketing authorization in the European Economic Area (EEA), and 13
are clinical stage.
PureTech's Founded Entities have also made significant progress
during the period, including:
Founded Entities in which PureTech has a controlling interest or
the right to receive royalties, in order of development stage
-- Gelesis, Inc. (PureTech's ownership as of June 30, 2021 was
19.2%. PureTech's ownership will be updated following completion of
the Capstar merger announced in the July 2021 post-period. PureTech
also has a right to royalty payments as a percentage of net
sales.)
- In the July 2021 post-period, Gelesis and Capstar Special
Purpose Acquisition Corp. (NYSE: CPSR) (Capstar) a special purpose
acquisition company sponsored by affiliates of Capstar Partners,
LLC and certain private funds managed by PIMCO announced that they
have entered into a definitive business combination agreement. Upon
completion of the transaction, the combined company's securities
are expected to be traded on the New York Stock Exchange (NYSE)
under the symbol "GLS." The transaction is expected to close in the
fourth quarter of 2021, subject to the satisfaction of certain
closing conditions.
- In the first half of 2021, Gelesis made progress towards the
full U.S. commercial launch of Plenity(R)(6) in the second half of
2021. Gelesis also plans to seek FDA input on the requirements for
potentially expanding the Plenity label for treating
adolescents.
- In May 2021, Gelesis presented a scientific poster at the
American Association of Clinical Endocrinology (AACE) 2021 Annual
Virtual Meeting. The post-hoc analysis showed that treatment for
weight management with Plenity decreased a marker for liver
fibrosis (the NAFLD fibrosis score) compared to placebo.
- In April 2021, Gelesis announced the appointment of marketing
executive Jane Wildman to its Board of Directors. Ms. Wildman has
extensive experience as a board member, President and Chief
Marketing Officer across Fortune-25, mid-sized and start-up
companies, including having spent over 25 years at Procter &
Gamble.
-- Karuna Therapeutics, Inc. (PureTech ownership: 8.1%; PureTech
also has a right to royalty payments as a percentage of net
sales)
- In the August 2021 post-period, Karuna announced all Phase 3
trials in the EMERGENT clinical program evaluating KarXT
(xanomeline-trospium) for the treatment of psychosis in adults with
schizophrenia are enrolling. Karuna anticipates reporting topline
data from the Phase 3 EMERGENT-2 trial in mid-2022.
- In the August 2021 post-period, Karuna also announced it is on
track to initiate the Phase 3 ARISE trial evaluating the safety and
efficacy of KarXT compared to placebo as an adjunctive treatment in
adults with schizophrenia who have an inadequate response to their
current antipsychotic therapy in the second half of 2021.
- In June 2021, Karuna announced data from its completed Phase
1b trial evaluating the safety and tolerability of KarXT in healthy
elderly volunteers, which followed a preliminary analysis of data
from the first two cohorts in the trial announced earlier this
year. The results suggest that KarXT can be administered to elderly
volunteers at doses which achieve xanomeline blood levels similar
to those reported in the Phase 2 EMERGENT-1 trial in adults with
schizophrenia while maintaining a favorable tolerability profile.
Data from the trial also suggest that a lower dose ratio of
trospium to xanomeline, compared to the ratios used in Phase 1
trials in healthy adult volunteers and in the Phase 2 EMERGENT-1
trial evaluating KarXT in adults with schizophrenia, was better
tolerated by healthy elderly volunteers. Karuna plans to initiate a
Phase 2 trial evaluating KarXT in dementia-related psychosis in the
first half of 2022.
- In March 2021, Karuna completed a follow-on public offering of
its common stock, from which it received gross proceeds of $269.8
million, before deducting the underwriting discounts and
commissions and other estimated offering expenses.
- In February 2021, 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 (NEJM).
- In February 2021, PureTech sold one million shares of Karuna
common stock for cash consideration of approximately $118
million.
-- Follica, Incorporated (PureTech ownership: 76.0%. PureTech
also has a right to royalty payments as a percentage of net
sales)
- In January 2021, 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: 41.4%)
- In June 2021, Vedanta presented additional results from a
Phase 1 study in healthy volunteers of VE202, Vedanta's 16-strain
defined bacterial consortium candidate for IBD, at the
International Human Microbiome Consortium Congress 2021 (IHMC). The
data summarized the long-term safety and colonization dynamics of
the 16-strain version of VE202 in 31 healthy volunteers. Vedanta
plans to move this consortium forward to a Phase 2 study in
patients with mild to moderate ulcerative colitis in the second
half of 2021. The study will be partially funded with proceeds from
a $25 million investment from Pfizer, as part of the Pfizer
Breakthrough Growth Initiative, which was announced in January
2021.
- In the July 2021 post-period, Vedanta announced the closing of
a $68 million Series D financing and provided a pipeline update. As
part of the announcement, Vedanta stated it is nearing completion
of Stage 1 of an open-label Phase 1 study to evaluate the safety
and initial clinical activity of VE800 in combination with Bristol
Myers Squibb's Opdivo (R) (nivolumab) in 54 patients across select
types of advanced or metastatic cancers. To date, VE800 has
demonstrated an acceptable safety and tolerability profile, though
the observed response rates did not meet the prespecified criteria
to expand into the next stage of the study. Vedanta plans to
present the results at a future medical conference and will
continue work to identify cancer settings and patient populations
that might benefit from microbiome manipulation with its defined
bacterial consortia.
- In February 2021, Vedanta announced the appointment of Mark
Mullikin as Chief Financial Officer. Mr. Mullikin brings 25 years
of experience raising and deploying capital for life sciences
companies, and most recently held leadership roles in finance and
investor relations at publicly-traded Editas Medicine and
Novartis.
-- Sonde Health, Inc. (PureTech ownership: 44.6%)
- In the July 2021 post-period, Sonde announced that it will
collaborate with leading chipmaker Qualcomm Technologies, Inc.
(Qualcomm) to optimize use of Sonde's vocal biomarker technology on
the flagship and high-tier Qualcomm(R) Snapdragon(TM) 888 and 778G
5G Mobile Platforms to help bring native, machine learning-driven
vocal biomarker capabilities to mobile and IoT devices globally.
The optimization has the potential to unlock several native health
screening and monitoring applications on up to the hundreds of
millions of mobile devices that use these Snapdragon mobile
platforms.
-- Entrega, Inc. (PureTech ownership: 72.9%)
- 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 Eli Lilly therapeutic candidates. The
partnership has been extended into 2021.
Founded Entities in which PureTech has an equity interest, in
order of development stage:
-- Akili Interactive Labs, Inc. (PureTech ownership: 23.4%)
- In May 2021, Akili announced the closing of a $160 million
combined equity and debt financing. With the completion of the
oversubscribed Series D financing, the funding is expected to
accelerate commercialization of EndeavorRx(7) , enable expansion of
core technologies to treat acute and chronic cognitive disorders
and drive further research and development of potential new digital
therapeutics.
- In April 2021, Akili announced collaborations with Weill
Cornell Medicine, New York-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.
- In March 2021, Akili announced the publication of full data
from a multi-site open-label study (the STARS Adjunct study)
evaluating the impact of EndeavorRx (AKL-T01) on symptoms and
functional impairments in children with
attention-deficit/hyperactivity disorder (ADHD). Statistically
significant improvement was demonstrated in all predetermined
endpoints of the study, which included parent and clinician ratings
of children's ADHD symptoms and related impairments in daily life.
The results have been published in the international peer-reviewed
journal, Nature Digital Medicine.
- In the July 2021 post-period, Akili introduced new gaming
features and functionalities to its EndeavorRx treatment. Akili is
releasing these new gameplay features as it expands its go-to
market approach to bring EndeavorRx to families and healthcare
professionals at scale.
- In the August 2021 post-period, Akili and Australian digital
health company TALi(R) (ASX:TD1), completed an agreement for Akili
to license TALi's technology designed to address early childhood
attention impairments. The companies plan to work together to
execute clinical trials of the TALi technology in pediatric ADHD in
the United States and pursue FDA regulatory clearance. Under the
terms of the agreement, Akili will lead potential U.S.
commercialization and roll-out.
-- Vor Biopharma Inc. (PureTech ownership: 8.6%)
- In February 2021, 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.
- In January 2021, Vor announced that the FDA had accepted Vor's
investigational new drug application (IND) application for
VOR33.
- In June 2021, Vor announced it has entered into a multi-year
strategic collaboration and license agreement with Abound Bio to
research both single- and multi-targeted CAR-T treatments to be
used in combination with Vor's engineered HSC (eHSC) platform, with
the goal of generating novel treatment systems for patients
fighting acute myeloid leukemia (AML) and other devastating forms
of blood cancer.
- In June 2021, Vor announced the appointment of Matthew R.
Patterson as Chairman of its Board of Directors.
- In the July 2021 post-period, Vor announced the formation of a
collaboration with Janssen Biotech, Inc. (Janssen), one of the
Janssen Pharmaceutical Companies of Johnson & Johnson. The
agreement was facilitated by Johnson & Johnson Innovation.
Under the terms of the collaboration, Vor will investigate the
combination of these two technologies into a treatment solution,
pairing Vor's "invisible" eHSC transplant platform with one of
Janssen's bi-specific antibodies in development for AML. The
collaboration agreement provides that each company retains all
rights and ownership to their respective programs and
platforms.
- In the August 2021 post-period, Vor announced it expects to
enroll the first patient in a Phase 1/2a clinical trial for VOR33
in AML in the next few months. Vor remains on track to report
initial clinical data from this trial in the first half of 2022.
Additionally, Vor expects initial VCAR33 monotherapy clinical data
in 2022, depending on investigator's timing of data release. Vor
also expects to file an IND for the VOR33/VCAR33 Treatment System
in the second half of 2022.
6. 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.
7. EndeavorRx is a digital therapeutic 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(R)) 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. There were no serious adverse events; 9.3% of subjects
experienced side effects, including frustration, headache,
dizziness, emotional reaction, nausea or aggression. EndeavorRx is
only available to your patients through a prescription, and is not
intended as a stand-alone therapeutic or a substitute for your
patient's medication.
Upcoming Milestones (next 12 to 24 months)
Multiple important milestones are anticipated over the next 12
to 24 months:
-- PureTech is planning the trial design that will potentially
enable registration of LYT-100-ILD for the treatment of IPF and
potentially other PF-ILDs. PureTech expects to provide additional
guidance in the fourth quarter of 2021, following discussion with
regulatory agencies and which may also be informed by additional
ongoing Phase 1 studies of LYT-100.
-- PureTech expects topline results from the Phase 2 trial of
LYT-100-COV in adults with Long COVID respiratory complications and
related sequelae by the end of 2021.
-- PureTech expects topline results from the Phase 2a
proof-of-concept study of LYT-100-LYMPH in patients with breast
cancer-related, upper limb secondary lymphedema in 2022.
-- PureTech expects topline results from three additional
clinical trials of LYT-100 in the fourth quarter of 2021. These
additional studies are designed to explore further the PK, dosing
and tolerability in healthy volunteers. One of these trials is an
extension of the previously completed MAD study and is designed to
determine the maximum tolerated dose of LYT-100 in healthy
volunteers. Results from these trials are expected to provide
additional supportive data to support clinical development of
LYT-100 across indications.
-- PureTech expects results from the Phase 1 portion of a Phase
1/2 clinical trial of LYT-200 in metastatic solid tumors in the
fourth quarter of 2021. Pending these results, PureTech intends to
initiate the Phase 2 expansion cohort portion of the trial, which
is designed to evaluate LYT-200 both alone and in combination with
BeiGene's tislelizumab or chemotherapy for the potential treatment
of difficult-to-treat solid tumors.
-- PureTech will continue to explore additional biomarker
studies for LYT-210 in 2021. LYT-210 is a preclinical therapeutic
candidate targeting immunomodulatory gamma delta-1 T cells that is
in development to potentially treat a range of cancer
indications.
-- PureTech expects to initiate a clinical trial of LYT-300 by
the end of 2021. The initial objective of the clinical program is
to characterize the safety, tolerability and PK of orally
administered LYT-300 in a Phase 1 clinical trial in healthy
volunteers. This study may also explore the impact of LYT-300 on
ß-EEG, a marker of GABA(A) target engagement. Data from this study
will be used to define a potential range of future studies and
planned indications.
-- PureTech expects preclinical proof-of-concept data for
LYT-500 in the first half of 2022. LYT-500 contains a unique
combination of IL-22 and an anti-inflammatory drug, which is
designed to address the two key underlying causes of IBD
pathogenesis and progression, namely mucosal barrier disruption and
inflammation.
-- An IND application for LYT-503/IMB-150 is planned to be filed
in early 2022. LYT-503/IMB-150 is being advanced in collaboration
with Imbrium Therapeutics as a potential non-opioid treatment for
IC/BPS.
-- PureTech expects preclinical proof-of-concept data for its
Orasome technology platform in 2021. The proof-of-concept study is
designed to observe the presence of therapeutic serum levels of
biotherapeutics (peptides and proteins, such as antibodies)
produced by the body following the oral administration of designer
payloads. This work could lay the foundation for IND-enabling
clinical studies for one or more additional therapeutic candidates
to be included in the Company's Wholly Owned Pipeline.
-- Gelesis anticipates the full commercial U.S. launch of Plenity in the second half of 2021.
-- Gelesis expects topline results from a Phase 2 study of GS200
in weight management and glycemic control in adults with type 2
diabetes and prediabetes in 2021. Data from a pilot study of GS200
demonstrated that administration of GS200 ten minutes prior to a
meal increased fullness throughout the entire day (P=0.012).
-- Gelesis expects topline results of a pilot study of GS300 in
NASH/NAFLD in the fourth quarter of 2023.
-- Gelesis expects topline results from a pivotal study of GS500
in functional constipation in the second quarter of 2023.
-- Karuna is on track to initiate the Phase 3 ARISE trial
evaluating the safety and efficacy of KarXT compared to placebo as
an adjunctive treatment in adults with schizophrenia who have an
inadequate response to their current antipsychotic therapy in the
second half of 2021.
-- Karuna plans to initiate a Phase 2 trial evaluating KarXT in
dementia-related psychosis in the first half of 2022.
-- Karuna anticipates reporting topline data from the Phase 3 EMERGENT-2 trial in mid-2022.
-- Follica plans to initiate a Phase 3 registration program in
male androgenetic alopecia in 2022.
-- Vedanta anticipates topline results from the Phase 2 clinical
trial of VE303 in patients at high risk of recurrent Clostridioides
difficile infection (CDI) in the third quarter of 2021 and to
initiate a Phase 3 trial of VE303 in mid-2022.
-- Vedanta expects to complete the build-out of its Phase 3 and
commercial launch cGMP manufacturing facility for supply of VE303
by the end of 2021.
-- Vedanta expects to initiate a Phase 2 study of VE202 in
patients with mild to moderate ulcerative colitis in the second
half of 2021.
-- Vedanta expects topline data from the Phase 1/2 clinical
trial of VE416 for food allergy in 2022, subject to investigator
timelines.
-- In the third quarter of 2021, Sonde plans to announce the launch of Sonde Mental Fitness.
-- Sonde expects to expand outside of respiratory indications, beginning with mental fitness.
-- Sonde plans to launch key pilot programs in the employer
wellness, health system and provider space in 2022.
-- Akili expects a scaled approach to the commercial launch of
EndeavorRx in the second half of 2021.
-- Akili is exploring geographic expansion opportunities as part
of its global strategy with a near-term focus on launching the
EndeavorRx prescription treatment in the U.S. first.
-- Vor expects to enroll the first patient in a Phase 1/2a
clinical trial for VOR33 in AML in the next few months.
-- Vor remains on track to report initial clinical data from the
VOR33 Phase 1/2a clinical trial in the first half of 2022.
-- Vor expects initial VCAR33 monotherapy clinical data in 2022,
depending on investigator's timing of data release.
-- Vor expects to file an IND for the VOR33/VCAR33 Treatment System in the second half of 2022.
Financial Highlights:
-- PureTech Level Cash and Cash Equivalents as of June 30, 2021
were $409.7 million(1) (December 31, 2020: $349.4 million)
-- Consolidated Cash and Cash Equivalents as of June 30, 2021
were $439.8 million(2) (December 31, 2020: $403.9 million)
-- Founded Entities also strengthened their collective balance
sheets by attracting $636.2 million(8) as of June 30, 2021 in
equity investments and non-dilutive funding, including $634.6
million from third parties. The balance of the funding is between
PureTech and its Founded Entities. Since July 2018, Founded
Entities have raised over $1,636 million, of which $1,566 million
(96%) was from third parties.
-- Operating Loss for the period was $68.1 million (June 30, 2020: 52.8 million).
8. 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 with, Boehringer
Ingelheim, Imbrium Therapeutics L.P., Shionogi & Co Ltd, or Eli
Lilly
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 25 therapeutics and therapeutic
candidates, including two that have received both U.S. FDA
clearance and European marketing authorization. All of the
underlying programs and platforms that resulted in this pipeline of
therapeutic candidates were initially identified or discovered and
then advanced by the PureTech team through key validation points
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 and its Founded Entities' future prospects, plans,
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 upcoming milestones and timing, including with respect to
filings with regulators, 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 most recently filed Annual
Report and Accounts and Form 20-F ). 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 Nichole Sarkis
+1 617 651 3156 +44 (0) 20 3727 1000 +1 774 278 8273
amt@puretechhealth.com ben.atwell@FTIconsulting.com nichole@tenbridgecommunications.com
Interim Management Report
Introduction
PureTech's distinctive model for bringing innovative medicines
to patients has led to rapid advancement across its Wholly Owned
Pipeline and Founded Entities over the first six months of 2021.
These programs have achieved a number of clinical and business
milestones towards the Company's mission of developing
transformational medicines for millions of people who have long
struggled to find effective treatments. PureTech's productive
R&D engine has resulted in 25 therapeutics and therapeutic
candidates that are being advanced across its Wholly Owned Pipeline
and Founded Entities, including two that have been cleared for
marketing both by the U.S. FDA and granted marketing authorization
in the EEA. All of the underlying programs and platforms that
resulted in this pipeline of therapeutic candidates were initially
identified or discovered and then advanced by the PureTech team
through key validation points based on unique insights into the
biology of the BIG systems and the interface between those systems,
which is referred to as the BIG Axis.
The PureTech R&D model leverages collaboration with the
world's leading experts around specific diseases, bringing together
cross disciplinary perspectives and exploring multiple approaches
to tackling that disease. The process to identify, invent and
advance scientific breakthroughs also includes de-risking
experiments before advancing new programs. This model has enabled
PureTech to consistently gain early access to breakthrough
discoveries well before the rest of the world reads about them in
major scientific journals. PureTech's R&D focus has centered on
the biology of the Brain-Immune-Gut Axis and the crosstalk between
those systems is gaining prominence across scientific
disciplines.
PureTech's Wholly Owned Pipeline, in which PureTech retains 100
percent ownership, has rapidly advanced during the first six months
of 2021, with two Phase 2 and four Phase 1 clinical trials underway
and the trial design that will potentially enable registration of
LYT-100-ILD for the treatment of IPF and potentially other PF-ILDs
being planned. PureTech's four lymphatic and inflammation
platforms, from which three novel therapeutic candidates have
already been identified, have also continued to progress, with key
preclinical data published in two peer-reviewed journals so far in
2021.
PureTech's eight Founded Entities, which PureTech initiated and
co-invented, also achieved key milestones, including Vor's $203.4
million initial public offering in February 2021, Gelesis'
announcement that it has entered into a definitive business
combination agreement with Capstar Special Purpose Acquisition
Corp. in the July 2021 post-period, Karuna's continued progress
with its Phase 3 program for KarXT in schizophrenia and Akili's
scaled approach to the U.S. commercialization of EndeavorRx.
PureTech holds sizable equity positions across its Founded Entities
and continues to benefit from their growth, including from events
such as M&A transactions, IPOs and potential royalties from
certain product sales. For example, in the first half of 2021,
PureTech generated $118 million from the monetization of some of
its equity positions in Founded Entities.
The combination of the development of the Wholly Owned Programs,
advancement of the Founded Entities and optionality to pursue
non-dilutive partnerships and funding provides a distinctive and
multi-pronged engine to fuel potential future growth while allowing
PureTech to more fully capture the value of milestones at a
PureTech parent company level.
Notable Developments
Wholly Owned Programs
In the first half of 2021, PureTech has continued to strengthen
its Wholly Owned Programs focused on the lymphatic system and
related immunological and inflammatory disorders.
PureTech has continued to advance its clinical-stage product
candidate LYT-100 (deupirfenidone) for the potential treatment of
conditions involving inflammation and fibrosis, including lung
disease (e.g., IPF and potentially other PF-ILDs and Long COVID
respiratory complications and related sequelae), and disorders of
lymphatic flow, such as lymphedema. Two Phase 2 clinical trials of
LYT-100 progressed in the first half of 2021: 1) A global,
randomized, double-blind, placebo-controlled Phase 2 trial to
evaluate the efficacy, safety and tolerability of LYT-100-COV in
adults with Long COVID respiratory complications and related
sequelae. Topline results from this trial are expected by the end
of 2021. 2) A Phase 2a proof-of-concept study of LYT-100-LYMPH in
patients with breast cancer-related, upper limb secondary
lymphedema. Topline results from this trial are expected in 2022.
PureTech has also initiated a three-month, open-label extension of
the LYT-100-COV Phase 2 trial in adults with Long COVID respiratory
complications and related sequelae who completed the first portion
of the trial. The primary endpoint of the extension trial is to
assess the longer-term safety and tolerability of LYT-100-COV
through up to 182 days of treatment. Additionally,
PureTech also initiated three additional Phase 1 clinical trials
in 2021 to explore further the PK, dosing and tolerability of
LYT-100 in healthy volunteers. One of these trials is an extension
of the previously completed MAD study and is designed to determine
the maximum tolerated dose of LYT-100 in healthy volunteers.
Results from these trials are anticipated in the fourth quarter of
2021 and are expected to provide additional data to inform the
clinical development of LYT-100 across indications. In April 2021,
PureTech announced the formation of its Clinical Advisory Board for
IPF and other PF-ILDs. Comprised of physicians and researchers with
deep expertise in the clinical development of novel therapies in
PF-ILDs, the advisory group will work closely with PureTech as it
advances LYT-100-ILD. PureTech is planning the trial design that
will potentially enable registration of LYT-100-ILD for the
treatment of IPF and potentially other PF-ILDs. PureTech expects to
provide additional guidance in the fourth quarter of 2021,
following discussion with regulatory agencies and which may also be
informed by additional ongoing Phase 1 studies of LYT-100.
Additionally, in the August 2021 post-period, PureTech presented
the results of the Phase 1 multiple ascending dose and food effect
study of LYT-100 at the virtual European Respiratory Society
International Congress.
LYT-200 is currently being evaluated as a single agent in the
Phase 1 portion of a Phase 1/2 clinical trial. The primary
objective of the Phase 1 portion of the trial is to assess the
safety and tolerability of escalating doses of LYT-200 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 PD profiles of LYT-200.
Results from the Phase 1 portion of the study are anticipated in
the fourth quarter of 2021. Pending these results, PureTech intends
to initiate the Phase 2 expansion cohort portion of the trial,
which is designed to evaluate LYT-200 both alone and in combination
with chemotherapy or BeiGene's tislelizumab, an anti-PD-1 mAb for
which PureTech and an affiliate of BeiGene, Ltd. entered into a
clinical trial and supply agreement in the July 2021 post-period.
Under the terms of the agreement, PureTech will maintain control of
the LYT-200 program, including global R&D and commercial
rights, and BeiGene has agreed to supply tislelizumab for use in
combination with LYT-200 for the planned study. PureTech will also
continue to explore additional biomarker studies for LYT-210 in
2021.
In the first half of 2021, PureTech also progressed LYT-300, its
most advanced candidate derived from the Glyph technology platform,
towards the clinic. LYT-300 is an oral form of natural
allopregnanolone which PureTech believes may be applicable for the
potential treatment of a range of neurological and
neuropsychological conditions. PureTech expects to initiate a
clinical trial of LYT-300 by the end of 2021. The initial objective
of the clinical program is to characterize the safety, tolerability
and PK of orally administered LYT-300 in a Phase 1 clinical trial
in healthy volunteers. Data from this study will be used to define
a potential range of future studies and planned indications.
PureTech also continued to advance the underlying 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. In February 2021, a preclinical proof-of-concept
study for the Glyph technology was published in the Journal of
Controlled Release. Results demonstrated the ability of this
platform to directly target gut lymphatics with an orally dosed
small molecule immunomodulator.
In June 2021, PureTech announced the acquisition of the
remaining 22 percent of shares outstanding in its Founded Entity,
Alivio. The underlying Alivio technology platform, which is
designed to enable inflammation-targeted immunomodulation for the
potential treatment of a range of chronic and acute inflammatory
disorders, and related undisclosed anti-inflammatory candidates
have also been added to PureTech's discovery programs. Alivio's
therapeutic candidates, in development for inflammatory disorders
including IBD, have also been integrated into PureTech's Wholly
Owned Pipeline. The first of these candidates is LYT-500, an
orally-administered therapeutic candidate in development for the
treatment of IBD that contains a unique combination of IL-22 and an
anti-inflammatory drug and is designed to address the two key
underlying causes of IBD pathogenesis and progression, namely
mucosal barrier disruption and inflammation. PureTech expects
preclinical proof-of-concept data for LYT-500 in the first half of
2022. In addition, LYT-503/IMB-150 is a therapeutic candidate being
advanced in collaboration with Imbrium Therapeutics for the
potential treatment of IC/BPS, a chronic inflammatory condition of
the bladder that lacks an effective treatment option. The
LYT-503/IMB-150 therapeutic candidate is designed to selectively
treat inflamed tissues along the bladder wall, while minimizing the
potential for drug- related side effects in healthy parts of the
body. In the August 2021 post-period, PureTech announced that
Imbrium exercised a license option under the companies' research
and development collaboration agreement to develop PureTech's
LYT-503/IMB-150. In connection with the option exercise, PureTech
received an upfront payment of $6.5 million and is eligible to
receive up to $53 million in additional development milestone
payments for this program as well as royalties on product sales.
Imbrium plans to file a n IND application for LYT-503/IMB-150 in
early 2022.
PureTech also progressed its Orasome technology platform, which
utilizes a programmable and scalable approach for the oral
administration of nucleic acids and other biologics. PureTech
expects preclinical proof-of-concept data in 2021. The
proof-of-concept study is designed to observe the presence of
therapeutic serum levels of biotherapeutics (peptides and proteins,
such as antibodies) produced by the body following the oral
administration of designer payloads. This work could lay the
foundation for IND-enabling clinical studies for one or more
additional therapeutic candidates to be included in the Company's
Wholly Owned Pipeline. PureTech intends to leverage its proprietary
technology platforms, as well as its extensive network with major
pharmaceutical companies and world-leading scientists in immunology
and lymphatics, to generate additional novel therapeutic
candidates.
PureTech continued to advance its meningeal lymphatics research
program, which harnesses the meningeal lymphatics to potentially
treat a range of neurodegenerative and neuroinflammatory
conditions. In April 2021, PureTech announced the publication of
preclinical research in Nature, suggesting that restoring lymphatic
flow in the brain has the potential to address a range of
neurodegenerative diseases, such as Alzheimer's and Parkinson's
diseases, and associated neuroinflammation. The work also uncovered
a link between dysfunctional meningeal lymphatics and damaging
microglia activation in Alzheimer's disease, suggesting another
route by which restoring healthy drainage patterns could improve
clinical outcomes.
In the August 2021 post-period, PureTech announced the
appointment of Julie Krop, M.D., as Chief Medical Officer. Dr. Krop
will oversee all clinical development, regulatory, CMC and medical
affairs for the Company's advancing Wholly Owned Pipeline. Dr. Krop
joins PureTech from Freeline Therapeutics, a clinical-stage gene
therapy company, where she served as Chief Medical Officer. Prior
to this role, Dr. Krop served as Chief Medical Officer of AMAG
Pharmaceuticals (acquired by Covis group for $647 million), where
she oversaw clinical development, regulatory affairs, clinical
operations, medical affairs, program management and
pharmacovigilance. During her time at AMAG, Dr. Krop was
responsible for the oversight of three FDA approvals. Earlier in
her career, she held leadership positions at Vertex
Pharmaceuticals, Stryker Regenerative Medicine, Peptimmune,
Millennium Pharmaceuticals and Pfizer. Dr. Krop received her M.D.
from Brown University School of Medicine and completed an internal
medicine residency at Georgetown University Hospital. Additionally,
she completed fellowships in epidemiology, clinical trial design
and endocrinology as a Robert Wood Johnson Foundation Clinical
Scholar at the Johns Hopkins School of Medicine.
Commenting on her appointment, Dr. Krop said:
"I am thrilled to join the leadership team at PureTech during
such an exciting time in the Company's growth and clinical
development. PureTech's research and development model is a truly
unique approach that has fostered a broad wealth of expertise
within the Company that now powers the team's innovative
development efforts across multiple therapeutic candidates. I look
forward to helping drive PureTech's mission and advancing an
incredibly promising pipeline of investigational therapies for
patients in need."
Founded Entities
PureTech's Founded Entities have had a productive 2021 so far
with significant clinical progress and a number of strategic
financings.
Founded Entities in which PureTech has a controlling interest or
the right to receive royalties, in order of development stage
Gelesis has continued to advance its novel category of
treatments for weight management and gut related chronic diseases.
Gelesis made progress towards the full commercial U.S. launch of
Plenity in the second half of 2021 and plans to seek FDA input on
the requirements for potentially expanding the Plenity label for
treating adolescents. In the July 2021 post-period, Gelesis and
Capstar Special Purpose Acquisition Corp. (NYSE: CPSR) (Capstar)
and certain private funds managed by PIMCO announced that they have
entered into a definitive business combination agreement. Upon
completion of the transaction, the combined company's securities
are expected to be traded on the NYSE under the symbol "GLS." The
transaction is expected to close in the fourth quarter of 2021,
subject to satisfying certain closing conditions.
With input from a scientific advisory board of scientific
leaders in NASH research, Gelesis developed a research protocol for
a pilot study of GS300. Gelesis expects to enroll approximately 250
subjects in the study with topline results anticipated in the
fourth quarter of 2023. Gelesis also expects topline results from a
pivotal study of GS500, the company's therapeutic candidate
designed to treat functional constipation, in the second quarter of
2023. Additionally, Gelesis expects topline results from a Phase 2
study of GS200, Gelesis' candidate for weight management and
glycemic control in adults with type 2 diabetes and prediabetes, in
2021. Data from a pilot study of GS200 demonstrated that
administration of GS200 ten minutes prior to a meal increased
fullness throughout the entire day (P=0.012).
Additionally, in May 2021, Gelesis presented a scientific poster
at the AACE 2021 Annual Virtual Meeting. The post-hoc analysis
showed that treatment for weight management with Plenity decreased
a marker for liver fibrosis (the NAFLD fibrosis score) compared to
placebo. This retrospective analysis of Gelesis' GLOW (Gelesis Loss
of Weight) pivotal study assessed the impact of oral superabsorbent
hydrogel (OSH) treatment on liver health as measured by the NFS,
which is intended to predict the presence of significant fibrosis
using common clinical and laboratory values, including age, BMI,
diabetes status, AST/ALT ratio, platelet count and serum albumin.
The data support the rationale for conducting further trials to
evaluate OSH for the treatment of metabolic-related liver
diseases.
In April 2021, Gelesis announced the appointment of marketing
executive Jane Wildman to its Board of Directors. Ms. Wildman has
extensive experience as a board member, President and Chief
Marketing Officer across Fortune-25, mid-sized and start-up
companies, including having spent over 25 years at Procter &
Gamble.
Karuna made progress towards developing its novel therapies with
the potential to transform the lives of people with psychiatric and
neurological conditions, including schizophrenia and
dementia-related psychosis. In the August 2021 post-period, Karuna
announced that all Phase 3 trials in the EMERGENT clinical program
evaluating KarXT for the treatment of psychosis in adults with
schizophrenia are enrolling. Karuna anticipates reporting topline
data from the Phase 3 EMERGENT-2 trial in mid-2022.
Also in the August 2021 post-period, Karuna announced that it is
on track to initiate the Phase 3 ARISE trial evaluating the safety
and efficacy of KarXT compared to placebo as an adjunctive
treatment in adults with schizophrenia who have an inadequate
response to their current antipsychotic therapy in the second half
of 2021. The Phase 3, six-week, 1:1 randomized, double-blind,
placebo-controlled trial will enroll approximately 400 adults with
schizophrenia who have not achieved an adequate response to current
atypical antipsychotic treatment. Participants in this trial will
continue their currently prescribed atypical antipsychotic therapy
at the same dose or regimen schedule as prior to entry in the
study, and will receive a flexible dose of KarXT or placebo based
on tolerability and clinical response as determined by a clinician.
The primary outcome measure of the trial is change in Positive and
Negative Syndrome Scale (PANSS) total score of KarXT compared to
placebo at Week 6. Upon completion of the trial at week 6,
participants will have the opportunity to enroll in a 52-week
outpatient, open-label extension trial evaluating the long-term
safety and tolerability of KarXT when dosed with antipsychotic
treatment.
In June 2021, Karuna announced data from its completed Phase 1b
trial evaluating the safety and tolerability of KarXT in healthy
elderly volunteers, which followed a preliminary analysis of data
from the first two cohorts in the trial announced earlier this
year. The results suggest that KarXT can be administered to elderly
volunteers at doses which achieve xanomeline blood levels similar
to those reported in the Phase 2 EMERGENT-1 trial in adults with
schizophrenia while maintaining a favorable tolerability profile.
Data from the trial also suggest that a lower dose ratio of
trospium to xanomeline, compared to the ratios used in Phase 1
trials in healthy adult volunteers and in the Phase 2 EMERGENT-1
trial evaluating KarXT in adults with schizophrenia, was better
tolerated by healthy elderly volunteers. Based on results from the
Phase 1b trial in healthy elderly volunteers, Karuna plans to
initiate a Phase 2 trial evaluating KarXT in dementia-related
psychosis in the first half of 2022.
In February 2021, Karuna announced that results from the
EMERGENT-1 Phase 2 clinical trial evaluating KarXT for the
treatment of schizophrenia were published in NEJM. In March 2021,
Karuna completed a follow-on public offering of its common stock,
from which it received gross proceeds of $269.8 million, before
deducting the underwriting discounts and commissions and other
estimated offering expenses.
Also in February 2021, PureTech sold one million shares of
Karuna common stock for cash consideration of approximately $118
million. PureTech intends to use the proceeds from the transaction
to further expand and advance its clinical-stage Wholly Owned
Pipeline.
Follica continued to advance its regenerative biology platform
designed to treat androgenetic alopecia, epithelial aging and other
medical indications. In January 2021, 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. Preparations are underway for the
Phase 3 registration program in male androgenetic alopecia and
initiation is anticipated in 2022. The company also has proprietary
amplification compounds in development and ongoing discovery
efforts to expand its pipeline.
Vedanta also progressed its therapeutic candidates for
immune-mediated diseases based on a rationally-defined consortia of
human microbiome-derived bacteria. In June 2021, Vedanta presented
additional results from a Phase 1 study in healthy volunteers of
VE202, Vedanta's 16-strain defined consortium candidate for IBD, at
the 2021 IHMC. The data summarized the long-term safety and
colonization dynamics of the 16-strain version of VE202 in 31
healthy volunteers. Vedanta plans to move this consortium forward
to a Phase 2 study in patients with mild to moderate ulcerative
colitis in the second half of 2021. The study will be partially
funded with proceeds from a $25 million investment from Pfizer, as
part of the Pfizer Breakthrough Growth Initiative, which was
announced in January 2021. Additionally in the July 2021
post-period, Vedanta announced the closing of a $68 million Series
D financing and provided a pipeline update. As part of the
announcement, Vedanta stated it is nearing completion of Stage 1 of
an open-label Phase 1 study to evaluate the safety and initial
clinical activity of VE800 in combination with Bristol Myers
Squibb's Opdivo (R) (nivolumab) in 54 patients across select types
of advanced or metastatic cancers. To date, VE800 has demonstrated
an acceptable safety and tolerability profile, though the observed
response rates did not meet the prespecified criteria to expand
into the next stage of the study. Vedanta plans to present the
results at a future medical conference and will continue work to
identify cancer settings and patient populations that might benefit
from microbiome manipulation with its defined bacterial
consortia.
Vedanta is currently evaluating VE303 in a Phase 2 clinical
trial in patients at high risk of recurrent CDI. Vedanta
anticipates topline results from this Phase 2 trial in the third
quarter of 2021 and to initiate a Phase 3 trial of VE303 in
mid-2022. Additionally, Vedanta anticipates topline data from the
Phase 1/2 clinical trial of VE416, Vedanta's therapeutic candidate
for food allergy, in 2022, subject to investigator timelines.
In February 2021, Vedanta announced the appointment of Mark
Mullikin as Chief Financial Officer. Mr. Mullikin brings 25 years
of experience raising and deploying capital for life sciences
companies, and most recently held leadership roles in finance and
investor relations at publicly-traded Editas Medicine and
Novartis.
Sonde continued development of its voice-based technology
platform to measure health when a person speaks. In the July 2021
post-period, Sonde announced that it will collaborate with leading
chipmaker Qualcomm to optimize use of Sonde's vocal biomarker
technology on the flagship and high-tier Qualcomm(R) Snapdragon(TM)
888 and 778G 5G Mobile Platforms to help bring native, machine
learning-driven vocal biomarker capabilities to mobile and IoT
devices globally. The optimization has the potential to unlock
several native health screening and monitoring applications on up
to the hundreds of millions of mobile devices that use these
Snapdragon mobile platforms. Leveraging over one million voice
samples from 80,000+ individuals, Sonde's proprietary voice-based
technology platform is designed to detect changes of health
conditions - like mental fitness and respiratory disease - from
changes in voice. Using advanced audio signal processing and
machine learning, Sonde's platform senses and analyzes subtle vocal
changes due to changes in a person's physiology to provide early
health detection and monitoring.
Entrega also advanced 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
Eli Lilly therapeutic candidates. The partnership has been extended
into 2021. The company also has ongoing discovery efforts to expand
its pipeline.
Founded Entities in which PureTech has an equity interest, in
order of development stage:
Akili has made progress in advancing its digital treatments to
target cognitive dysfunction associated with conditions across
neurology and psychiatry. In March 2021, Akili announced the
publication of full data from a multi-site open-label study (the
STARS Adjunct study) evaluating the impact of EndeavorRx (AKL-T01)
on symptoms and functional impairments in children with ADHD. A
statistically significant improvement was demonstrated in all
predetermined endpoints of the study, which included parent and
clinician ratings of children's ADHD symptoms and related
impairments in daily life. The results have been published in the
international peer-reviewed journal, Nature Digital Medicine. Akili
expects a scaled approach to commercial launch of EndeavorRx in the
second half of 2021. With a near-term focus on launching the
EndeavorRx prescription treatment in the U.S. first, Akili is
exploring geographic expansion opportunities as part of its global
strategy. Additionally, in April 2021, Akili announced
collaborations with Weill Cornell Medicine, New York-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.
In May 2021, Akili announced the closing of a $160 million
combined equity and debt financing. With the completion of the
oversubscribed Series D financing, the funding is expected to
accelerate commercialization of EndeavorRx, enable expansion of
core technologies to treat acute and chronic cognitive disorders
and drive further research and development of potential new digital
therapeutics.
In the July 2021 post-period, Akili introduced new gaming
features and functionalities to its EndeavorRx treatment. Akili is
releasing these new gameplay features as it expands its go-to
market approach to bring EndeavorRx to families and healthcare
professionals at scale. In the August 2021 post-period, Akili and
Australian digital health company TALi (ASX:TD1), completed an
agreement for Akili to license TALi's technology designed to
address early childhood attention impairments. The companies plan
to work together to execute clinical trials of the TALi technology
in pediatric ADHD in the United States and pursue FDA regulatory
clearance. Under the terms of the agreement, Akili will lead
potential U.S. commercialization and roll-out.
Vor continued to engineer eHSC therapies combined with targeted
therapies for the treatment of cancer in the first half of 2021. In
February 2021, 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.
In January 2021, Vor announced that the FDA had accepted the
company's IND application for VOR33. Vor expects to enroll the
first patient in a Phase 1/2a clinical trial for VOR33 in AML in
the next few months. Vor remains on track to report initial
clinical data from this trial in the first half of 2022.
Additionally, Vor expects initial VCAR33 monotherapy clinical data
in 2022, depending on investigator's timing of data release. Vor
also expects to file an IND for the VOR33/VCAR33 Treatment System
in the second half of 2022.
Additionally, in June 2021, Vor announced it has entered into a
multi-year strategic collaboration and license agreement with
Abound Bio to research both single- and multi-targeted CAR-T
treatments to be used in combination with Vor's eHSC platform, with
the goal of generating novel treatment systems for patients
fighting AML and other devastating forms of blood cancer. Also in
June 2021, Vor announced the appointment of Matthew R. Patterson as
Chairman of its Board of Directors. Mr. Patterson, who joined Vor's
Board as a member in October 2020, brings nearly 30 years of senior
leadership experience in the research, development and
commercialization of innovative therapeutics, most recently at
Audentes Therapeutics, Inc., which he co-founded and led as the
company's Chief Executive Officer from its inception in 2012
through its acquisition by Astellas Pharma Inc. in January 2020. In
the July 2021 post-period, Vor announced the formation of a
collaboration with Janssen Biotech, Inc. (Janssen), one of the
Janssen Pharmaceutical Companies of Johnson & Johnson. The
agreement was facilitated by Johnson & Johnson Innovation.
Under the terms of the collaboration, Vor will investigate the
combination of these two technologies into a treatment solution,
pairing Vor's "invisible" eHSC transplant platform with one of
Janssen's bi-specific antibodies in development for AML. The
collaboration agreement provides that each company retains all
rights and ownership to their respective programs and
platforms.
Financial Review
Reporting Framework
You should read the following discussion and analysis together
with our Condensed Consolidated Financial Statements, including the
notes thereto, set forth elsewhere in this report. Some of the
information contained in this discussion and analysis or set forth
elsewhere in this report, including information with respect to our
plans and strategy for our business and financing our business,
includes forward-looking statements that involve risks and
uncertainties. You should read this discussion and analysis in
conjunction with the risks identified in the "Risk Factor Annex" on
pages 191 to 227 of our "Annual Report and Accounts 2020", also
included as Exhibit 15.1 to the Form 20-F for the fiscal year ended
December 31, 2020 filed with the Securities and Exchange Commission
on April 15, 2021. As a result of many factors, our actual results
could differ materially from the results described in or implied by
these forward-looking statements.
Our unaudited Condensed Consolidated Financial Statements as of
June 30, 2021 and for the six months ended June 30, 2021 have been
prepared in accordance with International Accounting Standards
("IAS") 34 Interim Financial Reporting as adopted for use in the
UK. The Condensed Consolidated Financial Statements also comply
fully with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The
annual financial statements of the Group for the year ended
December 31, 2021 will be prepared in accordance with UK-adopted
international accounting standards. This report should be read in
conjunction with the Group's 2020 Annual Reports and Accounts as of
and for the year ended December 31, 2020.
The following discussion contains references to the Condensed
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 the Company has 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 Condensed 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 as of and for
the year ended December 31, 2020 included in our "Annual Report and
Accounts 2020". For additional information regarding our operating
structure, see "-Basis of Presentation and Consolidation" below.
Fair value of
Investments held at fair value, does not take into consideration
contribution from milestones that occurred after June 30, 2021, the
value of our interests in our consolidated Founded Entities
(Vedanta, Follica, Sonde, Akili, and Entrega), our Wholly Owned
Programs, or our cash.
Business Background and Results Overview
The business background is discussed above in the Interim
Management Report, which describe in detail the business
development of our Wholly Owned Programs and Founded Entities.
PureTech Health plc 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.
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 or may not
occur. Our Founded Entities, Gelesis, Inc., or Gelesis, and Akili
Interactive Labs, Inc., or Akili which we have not controlled since
2019 and 2018, respectively, have products cleared for sale, but
our Wholly Owned Programs and our Controlled Founded Entities have
not yet generated any meaningful 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 that reduces our ownership
interest. 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 Condensed 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
Condensed Consolidated Statements of Comprehensive
Income/(Loss).
We anticipate our expenses to continue to increase
proportionally in connection with our ongoing development
activities related mostly due to the advancement into late stage
studies of the clinical programs within our Wholly Owned Programs
and Controlled Founded Entities. In addition, having completed our
U.S. listing in November 2020, we have, and will continue, 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 additional
clinical studies for LYT-100 and LYT-200, advance LYT-210, LYT-300
and LYT-500 into the clinic and continue to progress our
Glyph(TM,,) Orasome(TM) and Alivio(TM) technology platforms as well
as our meningeal lymphatics 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 for
returns with respect to each of these Founded Entities routinely
and on a case-by-case basis.
As a result, we may need substantial additional funding 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 monetization of our interests in our Founded
Entities, collaborations with third parties and also potentially
from public or private equity or debt financings or other sources.
We may be unable to raise additional funds or enter into such other
agreements or arrangements when needed on favorable terms, or at
all. If we are unable to raise capital or enter into such
agreements as, and when needed, we may have to delay, scale back or
discontinue the development and commercialization of one or more of
our wholly-owned therapeutic candidates.
Measuring Performance
The Financial Review discusses our operating and financial
performance, our cash flows and liquidity as well as our financial
position and our resources. The results for each 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 Condensed
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 Condensed 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
------------------------------------------------------------------------------
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 as noted
(PureTech LYT, PureTech LYT-100, PureTech Management,
Inc., PureTech Health LLC, PureTech Securities Corp.,
PureTech Securities II Corp., Endra Holdings, LLC,
Ensof Holdings, LLC, Appeering, Inc., Commense Inc.,
Enlight Biosciences, LLC, Ensof Biosystems, Inc., Knode
Inc., Libra Biosciences, Inc., Mandara Sciences, LLC,
Tal Medical, Inc., The Sync Project, and Alivio Therapeutics,
Inc.). During the six months ended June 30, 2021, the
Company acquired the non controlling interest in Alivio
Therapeutics, Inc. and since then Alivio Therapeutics,
Inc. is wholly owned by the Company and the related
cash and cash equivalents are included in the PureTech
Level Cash and Cash Equivalents as of June 30, 2021.
The cash and cash equivalents of Alivio Therapeutics,
Inc. were not included in the PureTech Level Cash and
Cash Equivalents as of December 31, 2020 as during
that period, the subsidiary was not wholly owned by
the Company.
==============================================================
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.
==============================================================
The Company does not present in the reported periods
Consolidated cash Reserves or PureTech Level Cash reserves as the
Company does not have short-term investments in addition to its
cash and cash equivalents in all reported periods.
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 six months
ended June 30, 2021 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 cannot predict the impact, including variations of the
virus, may have on our business, operations, and financial
condition and results.
Recent Developments (subsequent to June 30, 2021)
On July 19, 2021, Gelesis and Capstar Special Purpose
Acquisition Corp. announced that they had entered into a definitive
business combination agreement. Upon completion of the transaction,
the combined company's securities are expected to be traded on the
New York Stock Exchange. The transaction is expected to close in
the fourth quarter of 2021. As part of this transaction the shares
of Gelesis held by the Company will be exchanged for the combined
company's securities and the Company's interest is expected to
decrease from its current voting interest of 24.7 percent.
On July 21, 2021 Vedanta closed a Series D financing in which
Vedanta issued 2,387,675 Preferred D shares for consideration of
$68.0 million. From such consideration of $68.0 million, $25.0
million was received from Pfizer through conversion of its
convertible note (see Note 14.) and $5.0 million was received from
PureTech in exchange for 174,520 Preferred D shares.
On July 21, 2021 the Company granted executive management
2,052,236 performance and market based Restricted Stock Units with
a performance period that ends on December 31, 2023. The RSUs vest
based upon agreed upon market and performance conditions and as
long as the recipients are in continuous service through vesting
date. Following vesting, each recipient will be required to make a
payment of one pence per ordinary share on settlement of the RSUs.
In addition, the Company granted the directors of the Company a
total of 67,140 restricted stock units that will vest on the day
immediately preceding the Company's 2022 annual general
meeting.
On July 23, 2021 Imbrium Therapeutics exercised its option,
included in the collaboration and license agreement, to develop
LYT-503 (formerly designated as ALV-107), a non-opioid therapeutic
candidate being advanced for interstitial cystitis/bladder pain
syndrome. The Company has received a $6.5 million payment for the
option exercise and is eligible to receive additional development
milestone payments for this program as well as royalties on product
sales, if and when such milestones will be achieved and/or when
sales will be generated.
Financial Highlights
As of:
June 30, June 30,
(in thousands) 2021 2020
=================================================== ======== ==========
Consolidated Cash and cash equivalents 439,766 340,120
Less: Cash and cash equivalents held at non-wholly
owned subsidiaries (30,018) (29,437)
PureTech Level Cash and Cash Equivalents $409,748 $310,684
=================================================== ======= =======
Basis of Presentation and Consolidation
Our Condensed Consolidated Financial Information consolidates
the financial information of PureTech Health plc, as well as its
subsidiaries, and includes our interest in associates and
investments held at fair value, and is reported in 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 multiple
reportable segments: Internal, Controlled Founded Entities, and
additionally we have the portion relating to Parent Company and
Other. Substantially all of our revenue and profit generating
activities are generated within the United States and, accordingly,
no geographical disclosures are provided.
There was no change to reportable segments in 2021, except the
change in the composition of the segments with respect to Alivio,
as explained below.
During the six months ended June 30, 2021, the Company acquired
the non controlling interest in Alivio and since then Alivio is
wholly owned by the Company and is managed within the Internal
segment. The Company has revised in this interim report the prior
period segment financial information to conform to the presentation
as of and for the period ending June 30, 2021. This change in
segments reflects how the Company's Board of Directors reviews the
Group's results, allocates resources and assesses performance of
the Group at this time.
Results of Operations
The following table, which has been derived from our unaudited
financial statements for the six months ended June 30, 2021 and
2020 included herein, summarizes our results of operations for the
periods indicated, together with the changes in those items in
dollars:
Six Months Ended June
30,
=================================
Change
(2021 to
(in thousands) 2021 2020 2020)
================================================= ========= ======== ============
Contract revenue $ 2,391 $ 5,465 $ (3,074)
Grant revenue 3,445 1,379 2,066
================================================= ========= ======== ==========
Total revenue 5,836 6,844 (1,009)
================================================= ========= ======== ==========
Operating expenses:
General and administrative expenses (25,586) (21,376) (4,210)
Research and development expenses (48,330) (38,250) (10,080)
================================================= ========= ======== ==========
Operating income/(loss) (68,080) (52,782) (15,298)
================================================= ========= ======== ==========
Other income/(expense):
Gain/(loss) on investments held at fair value 74,415 276,910 (202,495)
Loss realized on sale of investment (7,500) (44,539) 37,039
Other income/(expenses) 595 482 113
Other income/(loss) 67,510 232,852 (165,342)
================================================= ========= ======== ==========
Net finance income/(costs) (16,252) 1,685 (17,936)
================================================= ========= ======== ==========
Share of net gain/(loss) of associates accounted
for using the equity method (78,108) (7,271) (70,837)
Income/(loss) before income taxes (94,931) 174,483 (269,414)
Taxation 17,378 (50,775) 68,154
================================================= ========= ======== ==========
Net income/(loss) including non-controlling
interest (77,553) 123,708 (201,260)
================================================= ========= ======== ==========
Net (loss)/income attributable to the Company $(75,395) $123,957 $(199,351)
================================================= ======== ======= =========
Comparison of the Six Months Ended June 30, 2021 and 2020
Total Revenue
Six Months Ended June
30,
(in thousands) 2021 2020 Change
============================ ========= ====== ==========
Contract Revenue:
Internal Segment $ 1,594 $5,064 $(3,470)
Controlled Founded Entities 691 401 290
Parent Company and other 105 - 105
============================ ========= ====== ========
Total Contract Revenue $ 2,391 $5,465 $(3,074)
============================ ===== ===== =======
Grant Revenue:
Internal Segment $ 853 $ 941 $ (89)
Controlled Founded Entities 2,592 438 2,154
Total Grant Revenue $ 3,445 $1,379 $ 2,066
============================ ===== ===== =======
Total Revenue $ 5,836 $6,844 $(1,009)
============================ ===== ===== =======
Our total revenue was $5.8 million for the six months ended June
30, 2021, a decrease of $1.0 million, or 14.7 percent compared to
the six months ended June 30, 2020. The decrease was primarily
attributable to a decline of $3.5 million in contract revenue in
the Internal segment, which was primarily driven by a $3.0 million
decrease in revenue recognized under IFRS 15 due to changes in
revenues associated with multiple collaborations, as well as $0.4
million decrease in contract revenue recognized by Alivio for the
six months ended June 30, 2021. The decrease was partially offset
by an increase of $2.2 million in grant revenue in the Controlled
Founded Entities segment for the six months ended June 30, 2021,
which was driven primarily by Vedanta's grant revenue earned
pursuant to its CARB-X and BARDA agreements.
Research and Development Expenses
Six Months Ended June
30,
(in thousands) 2021 2020 Change
========================================= ========= ========= =========
Research and Development Expenses:
Internal Segment $(27,246) $(19,710) $ 7,536
Controlled Founded Entities (20,953) (18,500) 2,453
Parent Company and other (130) (40) 90
========================================= ========= ========= =======
Total Research and Development Expenses: $(48,330) $(38,250) $10,080
========================================= ======== ======== ======
Our research and development expenses were $48.3 million for the
six months ended June 30, 2021, an increase of $10.1 million, or
26.4 percent compared to the six months ended June 30, 2020. The
change was primarily attributable to an increase of $7.5 million in
research and development expenses incurred by the Internal segment
due to the advancement of programs in clinical testing. We
progressed our two ongoing Phase 2 clinical trials of LYT-100
relating to a proof-of-concept study of LYT-100 in patients with
breast cancer-related, upper limb secondary lymphedema and also our
trial of LYT-100 in Long COVID respiratory complications and
related sequelae, which is also known as post-acute COVID-19
syndrome (PACS). We also initiated three additional Phase 1
clinical trials of LYT-100 to explore further its pharmacokinetic
(PK), dosing and tolerability in healthy volunteers, as well as
progressed in the development of LYT-300, our most advanced Glyph
candidate. The increase was further attributable to an increase of
$2.5 million in research and development expenses incurred by the
Controlled Founded Entities segment, primarily attributable to
Vedanta as they progressed their therapeutic candidates VE202,
VE303, VE416 and VE800 towards meaningful milestones.
General and Administrative Expenses
Six Months Ended June
30,
(in thousands) 2021 2020 Change
========================================== ========= ========= ===========
General and Administrative Expenses:
Internal Segment $ (4,335) $ (2,086) $ 2,249
Controlled Founded Entities (10,259) (5,638) 4,621
Parent Company and other (10,992) (13,652) (2,659)
========================================== ========= ========= =========
Total General and Administrative Expenses $(25,586) $(21,376) $ 4,210
========================================== ======== ======== =====
Our general and administrative expenses were $25.6 million for
the six months ended June 30, 2021, an increase of $4.2 million, or
19.7 percent compared to the six months ended June 30, 2020. The
increase was primarily attributable to an increase of $4.6 million
in the Controlled Founded Entities segment, which was primarily
driven by non-cash increases of $1.9 million in stock based
compensation expense, $1.6 million increase in payroll-related
costs due to increased personnel, an increase in professional fees
of $0.6 million, and an increase in technology-related costs of
$0.1 million. The increase was further attributable to an increase
of $2.2 million in the Internal segment, which was primarily driven
by an increase in the management fee charged by the Parent company
of $3.0 million which was partially offset by a decrease in
professional fees of $0.4 million for the six months ended June 30,
2021. The decrease in the Parent Company and other of $2.7 million
was primarily attributable to an increase in management fee charged
to other segments of $3.0 million which was partially offset by an
increase in professional fees of $0.4 million for the six months
ended June 30, 2021.
Total Other Income (Loss)
Total other income was $67.5 million for the six months ended
June 30, 2021, a decrease of $165.3 million, compared to the six
months ended June 30, 2020. The decline in other income was
primarily attributable to a decrease in gains for investments held
at fair value of $202.5 million, primarily driven by the change in
the fair value of the investment in Karuna. This decline was
partially offset by a decrease in losses realized on sale of
certain investments held at fair value, as a result of the blockage
discount included in the sale, of $37.0 million for the six months
ended June 30, 2021
Net Finance Income (Costs)
Net finance costs were $16.3 million for the six months ended
June 30, 2021, a decline of $17.9 million, compared to net finance
income of $1.7 million for the six months ended June 30, 2020. The
change was primarily attributable to a $15.5 million increased loss
in respect of the change in the fair value of our preferred shares,
warrant and convertible note liabilities held by third parties, a
$1.5 million increase in contractual costs, and a $0.9 million
decline in interest income from financial assets not at fair value
through profit or loss for the six months ended June 30, 2021.
Share of Net Gain (Loss) in Associates Accounted for Using the
Equity Method
For the six months ended June 30, 2021, the share in net loss of
associates reported under the equity method was $78.1 million as
compared to the share of net loss of $7.3 million for the six
months ended June 30, 2020. The change was primarily attributable
to an increase in Gelesis losses reported under IFRS for the six
months ended June 30, 2021 as compared to the losses reported for
the six months ended June 30, 2020, due to an increase in the fair
value of Gelesis financial instrument liabilities that are
accounted for as FVTPL.
Taxation
Income tax benefit was $17.4 million for the six months ended
June 30, 2021, as compared to income tax expense of $50.8 million
for the six months ended June 30, 2020. The change in income tax
expense was primarily attributable to the pre-tax income earned
during the six months ended June 30, 2020, as compared to the
pre-tax loss incurred during the six months ended June 30, 2021.
For information on the change in the tax rate, see Note 21 in the
Condensed consolidated financial statements.
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 ("IAS") 34 Interim Financial Reporting as
adopted for use in the UK. The Condensed Consolidated Financial
Statements also comply fully with IFRS 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.
Cash Flow and Liquidity
Our cash flows may fluctuate and are difficult to forecast and
will depend on many factors, including:
-- the expenses incurred in the development of wholly-owned and
Controlled-Founded Entity therapeutic candidates;
-- the revenue, if any, generated by wholly-owned and
Controlled-Founded Entity therapeutic candidates;
-- the revenue, if any, generated from licensing and royalty 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 June 30, 2021, we had consolidated cash and cash
equivalents of $439.8 million. As of June 30, 2021, we had PureTech
Level cash and cash equivalents of $409.7 million (for a definition
of PureTech Level cash and cash equivalent, see paragraph "Cash
flow and liquidity"in this Financial review).
Cash Flows
The following table summarizes our cash flows for each of the
periods presented:
Six Months Ended
June 30,
(in thousands) 2021 2020
========================================== ========= ===========
Net cash used in operating activities $(65,366) $(56,098)
Net cash provided by investing activities 114,964 266,052
Net cash used in financing activities (13,713) (2,194)
Net increase in cash and cash equivalents $ 35,886 $ 207,760
========================================== ======== ========
Operating Activities
Net cash used in operating activities was $65.4 million for the
six months ended June 30, 2021, as compared to $56.1 million for
the six months ended June 30, 2020. The increase in outflows is
primarily attributable to our higher operating loss and higher
income taxes paid of $3.1 million, partially offset by timing and
receipts of payments in the normal course of business.
Investing Activities
Net cash provided by investing activities was $115.0 million for
the six months ended June 30, 2021, as compared to inflows of
$266.1 million for the six months ended June 30, 2020, resulting in
a decrease of $151.1 million in net cash provided by investing
activities . The decrease in the net cash provided by investing
activities was primarily attributed to the decrease in proceeds
from the sale of investments held at fair value of $131.0 million
and the fact that for the six months ended June 30, 2020 the
Company had proceeds of $30.1 million from maturity of short term
investments while for the six months ended June 30, 2021 there were
no such cash inflows. This decrease was slightly offset by the fact
that during the six months ended June 30, 2020 we had purchases of
associate preferred shares of $10.6 million, while for the six
months ended June 30, 2021 there were no such cash outflows.
Financing Activities
Net cash used in financing activities was $13.7 million for the
six months ended June 30, 2021, as compared to $2.2 million for the
six months ended June 30, 2020, resulting in an increase of $11.5
million in the net cash used in financing activities. The increase
in the net cash used for financing activities was primarily
attributable to the decrease in proceeds from issuance of preferred
shares or convertible notes in subsidiaries of $9.8 million and to
a much lesser extent an increase of $0.8 million in the outflows
associated with settlement and vesting of share based awards.
Funding Requirements
We have incurred operating losses since inception. Based on our
current plans, we believe our existing cash and cash equivalents at
June 30, 2021 will be sufficient to fund our operations and capital
expenditure requirements 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
some additional costs as a result of operating as a U.S. public
company and anticipate to continue to incur net operating losses
for the foreseeable future as is typical for for pre-revenue
biotechnology companies. Our ability to fund our therapeutic
development and clinical operations as well as commercialization of
our wholly-owned therapeutic candidates, will depend on the amount
and timing of cash received from planned financings and potential
business development activities. Our future capital requirements
will depend on many factors, including:
-- the costs, timing and outcomes of clinical trials and
regulatory reviews associated with our wholly-owned therapeutic
candidates;
-- the costs of commercialization activities, including product
marketing, sales and distribution;
-- the costs of preparing, filing and prosecuting patent
applications and maintaining, enforcing and defending intellectual
property-related claims;
-- the emergence of competing technologies and products and other adverse marketing developments;
-- the effect on our therapeutic and product development
activities of actions taken by the 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, and we may need
additional funds to meet operational needs and capital requirements
for clinical trials and other research and development activities.
We currently have no credit facility or other committed sources of
capital. Because of the numerous risks and uncertainties associated
with the development and commercialization of our wholly-owned
therapeutic candidates, we have only a general estimate of the
amounts of increased capital outlays and operating expenditures
associated with our current and anticipated therapeutic development
programs and these may change in the future.
Condensed Consolidated Statements of Comprehensive
Income/(Loss)
For the six months ended June 30
2021 2020
Note $000s $000s
Unaudited Unaudited
=============================================== ==== ========= ===========
Contract revenue 3 2,391 5,465
Grant revenue 3 3,445 1,379
----------------------------------------------- ---- --------- ---------
Total revenue 5,836 6,844
----------------------------------------------- ---- --------- ---------
Operating expenses:
General and administrative expenses (25,586) (21,376)
Research and development expenses (48,330) (38,250)
----------------------------------------------- ---- --------- ---------
Operating income/(loss) (68,080) (52,782)
Other income/(expense):
Gain/(loss) on investments held at fair value 5 74,415 276,910
Loss realized on sale of investments 5 (7,500) (44,539)
Other income/(expense) 18 595 482
----------------------------------------------- ---- --------- ---------
Other income/(expense) 67,510 232,852
Finance income/(costs):
Finance income 7 119 1,032
Finance income/(costs) - contractual 7 (2,755) (1,213)
Finance income/(costs) - fair value accounting 7 (13,616) 1,866
----------------------------------------------- ---- --------- ---------
Net finance income/(costs) (16,252) 1,685
Share of net income/(loss) of associates
accounted for using the equity method (78,108) (7,271)
Income/(loss) before taxes (94,931) 174,483
----------------------------------------------- ---- --------- ---------
Taxation 21 17,378 (50,775)
----------------------------------------------- ---- --------- ---------
Income/(Loss) for the period (77,553) 123,708
Other comprehensive income/(loss):
Total other comprehensive income/(loss) - -
=============================================== ==== ========= =========
Total comprehensive income/(loss) for the
period (77,553) 123,708
=============================================== ==== ========= =========
Income/(loss) attributable to:
Owners of the Company (75,395) 123,957
Non-controlling interests 16 (2,158) (249)
----------------------------------------------- ---- --------- ---------
(77,553) 123,708
----------------------------------------------- ---- --------- ---------
Comprehensive income/(loss) attributable
to:
Owners of the Company (75,395) 123,957
Non-controlling interests 16 (2,158) (249)
----------------------------------------------- ---- --------- ---------
(77,553) 123,708
----------------------------------------------- ---- --------- ---------
$ $
----------------------------------------------- ---- --------- -----------
Earnings/(loss) per share:
Basic earnings/(loss) per share 8 (0.26) 0.43
Diluted earnings/(loss) per share 8 (0.26) 0.42
----------------------------------------------- ---- --------- ---------
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated Statements of Financial Position
As of
June 30, December
2021 31, 2020
Note $000s $000s
Unaudited Audited
========================================= ====== ========= ===========
Assets
Non-current assets
Property and equipment, net 9 23,327 22,777
Right of use asset, net 18 18,626 20,098
Intangible assets, net 10 898 899
Investments held at fair value 5 401,468 530,161
Investments in associates 5 - -
Lease receivable - long-term 18 1,497 1,700
Other non-current assets 11 11
----------------------------------------- ------ --------- ---------
Total non-current assets 445,826 575,645
========================================= ====== ========= =========
Current assets
Trade and other receivables 3,438 2,558
Prepaid expenses 5,331 5,405
Lease receivable - short-term 18 398 381
Other financial assets 2,124 2,124
Cash and cash equivalents 439,766 403,881
----------------------------------------- ------ --------- ---------
Total current assets 451,057 414,348
----------------------------------------- ------ --------- ---------
Total assets 896,883 989,994
----------------------------------------- ------ --------- ---------
Equity and liabilities
Equity
Share capital 5,419 5,417
Share premium 289,013 288,978
Merger reserve 138,506 138,506
Translation reserve 469 469
Other reserve (50,443) (24,050)
Retained earnings/(accumulated deficit) 185,034 260,429
----------------------------------------- ------ --------- ---------
Equity attributable to the owners of the
Company 567,997 669,748
Non-controlling interests 16 (6,625) (16,209)
----------------------------------------- ------ --------- ---------
Total equity 561,372 653,539
----------------------------------------- ------ --------- ---------
Non-current liabilities
Deferred tax liability 21 74,468 108,626
Lease liability, non-current 18 30,463 32,088
Long-term loan 15 14,974 14,818
Liability for share based awards 6 1,658 -
Total non-current liabilities 121,562 155,531
----------------------------------------- ------ --------- ---------
Current liabilities
Deferred revenue 3 560 1,472
Lease liability, current 18 3,460 3,261
Trade and other payables 17 39,850 21,826
Subsidiary:
Notes payable 13, 14 28,690 26,455
Warrant liability 13 9,233 8,206
Preferred shares 12, 13 131,511 118,972
Other current liabilities 644 732
----------------------------------------- ------ --------- ---------
Total current liabilities 213,948 180,924
----------------------------------------- ------ --------- ---------
Total liabilities 335,510 336,455
----------------------------------------- ------ --------- ---------
Total equity and liabilities 896,883 989,994
----------------------------------------- ------ --------- ---------
Please refer to the accompanying Notes to the condensed
consolidated financial information. Registered number:
09582467.
The Condensed Consolidated Financial Statements were approved by
the Board of Directors and authorized for issuance on August 23,
2021 and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
August 23, 2021
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated Statements of Changes in Equity
For the six months ended June 30
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, 2020 285,370,619 5,408 287,962 138,506 - (18,282) 254,444 668,037 (17,639) 650,398
Net income/(loss) - - - - - - 123,957 123,957 (249) 123,708
Total
comprehensive
income/(loss)
for the period - - - - - - 123,957 123,957 (249) 123,708
Exercise of
share-based
awards 141,842 3 263 - - - - 265 1 266
Revaluation of
deferred tax
assets
related to
share-based
awards - - - - - (171) - (171) - (171)
Equity settled
share-based
awards - - - - - 4,200 - 4,200 1,005 5,206
Settlement of
restricted stock
units - - - - - (12,522) - (12,522) - (12,522)
Distributions - - - - - - - - (6) (6)
================= =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
As at June 30,
2020 (unaudited) 285,512,461 5,411 288,225 138,506 - (26,776) 378,400 783,766 (16,887) 766,878
================= =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
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
================= =========== ====== ======= ======= =========== ======== ============ ======== =============== ==========
As at January
1, 2021 285,885,025 5,417 288,978 138,506 469 (24,050) 260,429 669,748 (16,209) 653,539
Net income/(loss) - - - - - - (75,395) (75,395) (2,158) (77,553)
Total
comprehensive
income/(loss)
for the period - - - - - - (75,395) (75,395) (2,158) (77,553)
Exercise of
share-based
awards 645,640 1 36 - - - - 37 6 43
Revaluation of
deferred tax
assets
related to
share-based
awards - - - - - (122) - (122) - (122)
Equity settled
share-based
awards - - - - - 3,468 - 3,468 3,075 6,544
Settlement of
restricted stock
units - - - - - (10,749) - (10,749) - (10,749)
Reclassification
of equity
settled
awards to
liability
awards - - - - - (6,773) - (6,773) - (6,773)
Vesting of
share-based
awards and net
share exercise - - - - - (2,582) - (2,582) - (2,582)
Acquisition of
subsidiary
non-controlling
interest - - - - - (9,636) - (9,636) 8,668 (968)
Distributions - - - - - - - - (6) (6)
================= =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
Balance June 30,
2021 (unaudited) 286,530,665 5,419 289,013 138,506 469 (50,443) 185,034 567,997 (6,625) 561,372
================= =========== ====== ======= ======= =========== ======== ============ ======== =============== ========
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30
2021 2020
Note $000s $000s
Unaudited Unaudited
------------------------------------------------- ----- --------- -----------
Cash flows from operating activities
Income/(loss) (77,553) 123,708
Adjustments to reconcile net operating loss
to net cash used in operating activities:
Non-cash items:
Depreciation and amortization 9, 18 3,648 3,182
Equity and liability settled share-based
payment expense 6 5,639 5,206
(Gain)/loss on investments held at fair
value 5 (74,415) (276,910)
Realized loss on sale of investments 5 7,500 44,539
Disposal of assets 9 (2) 15
Share of net (income)/loss of associates
accounted for using the equity method 5 78,108 7,271
Income taxes, net 21 (17,378) 50,775
Finance costs, net 7 16,252 (1,686)
Forgiveness of PPP Loan (68) -
Changes in operating assets and liabilities:
Accounts receivable (881) (80)
Prepaid expenses and other current assets 74 (28)
Deferred revenues 3 (912) (4,971)
Trade and other payables 17 (428) (6,991)
Other liabilities - 368
Other - (6)
Income taxes paid (3,364) (295)
Interest received 119 1,004
Interest paid (1,705) (1,200)
------------------------------------------------- ----- --------- ---------
Net cash used in operating activities (65,366) (56,098)
------------------------------------------------- ----- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment 9 (2,724) (2,054)
Proceeds from sale of property and equipment 2 -
Purchase of associate preferred shares held
at fair value 5 - (10,650)
Purchase of investments held at fair value 5 (500) (500)
Sale of investments held at fair value 5 118,000 248,970
Receipt of payment of sublease 18 186 171
Proceeds from maturity of short-term investments - 30,116
------------------------------------------------- ----- --------- ---------
Net cash provided by investing activities 114,964 266,052
------------------------------------------------- ----- --------- ---------
Cash flows from financing activities:
Receipt of PPP loan - 68
Proceeds from issuance of convertible notes
in subsidiary 14 1,415 -
Payment of lease liability 18 (1,425) (1,256)
Exercise of stock options 43 266
Settlement of RSU's (10,749) (12,522)
Vesting of restricted stock units and net
share exercise (2,582) -
Issuance of preferred shares of subsidiaries 12 - 11,250
Acquisition of a non-controlling Interest
of a subsidiary (408) -
Subsidiary dividend payments (6) -
------------------------------------------------- ----- --------- ---------
Net cash used in financing activities (13,713) (2,194)
================================================= ===== ========= =========
Effect of exchange rates on cash and cash
equivalents - -
Net increase in cash and cash equivalents 35,886 207,760
Cash and cash equivalents at beginning of
year 403,881 132,360
------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at end of period 439,766 340,120
------------------------------------------------- ----- --------- ---------
Supplemental disclosure of non-cash investment
and financing activities:
Contingent consideration in purchase of
non controlling interest 560 -
================================================= ===== ========= =========
The accompanying notes are an integral part of these financial
statements.
Notes to the Condensed Consolidated Financial Statements
1. General information
Description of Business
PureTech Health plc ("PureTech," the "Parent" or the "Company")
is a public company incorporated, domiciled and registered in the
United Kingdom ("UK"). The registered number is 09582467 and the
registered address is 8th Floor, 20 Farringdon Street, London EC4A
3AE, United Kingdom.
PureTech is a 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.
PureTech's Condensed Consolidated Financial Statements ("interim
financial statements") consolidate those of the Company and its
subsidiaries (together referred to as the "Group").
The accounting policies applied consistently to all periods
presented in these half-yearly Condensed Consolidated Financial
Statements are the same as those applied by the Group in its
Consolidated Financial Statements in its 2020 Annual Report and
Accounts.
Basis of accounting
These interim financial statements have been prepared in
accordance with International Accounting Standards (IAS) 34 Interim
Financial Reporting as adopted for use in the UK and also comply
fully with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The
annual financial statements of the Group for the year ended
December 31, 2021 will be prepared in accordance with UK-adopted
international accounting standards. The condensed consolidated
interim financial statements should be read in conjunction with the
Group's last Consolidated Financial Statements as of and for the
year ended December 31, 2020. The interim consolidated financial
statements do not include all the information required for a
complete set of IFRS financial statements. However, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual
consolidated financial information included in the annual report
and accounts as of and for the year ended December 31, 2020 which
was prepared in accordance with International Financial Reporting
Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union and in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. Certain amounts in the
Condensed Consolidated Financial Statements and accompanying notes
may not add due to rounding. All percentages have been calculated
using unrounded amounts.
These condensed consolidated half-yearly financial statements do
not comprise statutory accounts within the meaning of Section 435
of the Companies Act 2006. The comparative figures for the six
months ended June 30, 2020 are not the Group's statutory accounts
for that financial year. Those accounts were reported upon by the
Group's auditors and delivered to the registrar of companies. The
report of the auditors was unqualified, did not include a reference
to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain
statements under Section 498 (2) or (3) of the Companies Act
2006.
The unaudited interim Condensed Consolidated Financial
Statements reflect all adjustments of a normal recurring nature
that are necessary for a fair presentation of the results for the
interim periods presented. Interim results are not necessarily
indicative of results for a full year.
As of June 30, 2021 the Group had cash and cash equivalents of
$439.8 million. Considering the Group's financial position as of
June 30, 2021 and its principal risks and opportunities, a going
concern analysis has been prepared for at least the twelve-month
period from the date of signing the Condensed Consolidated
Financial Statements ("the going concern period") utilizing
realistic scenarios and applying a severe but plausible downside
scenario. Even under the downside scenario, the analysis
demonstrates the Group and the Company continue to maintain
sufficient liquidity headroom and continue to comply with all
financial obligations. Therefore, the Directors believe the Group
is adequately resourced to continue in operational existence for at
least the twelve-month period from the date of signing the
Condensed Consolidated Financial Statements, 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 Condensed
Consolidated Financial Statements.
These condensed financial statements were authorized for issue
by the Company's Board of Directors on August 23, 2021.
COVID-19 Pandemic
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 six months
ended June 30, 2021 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 our employees and other stakeholders. The
Group continues to monitor the latest developments regarding the
COVID-19 pandemic on our business, operations, and financial
condition and results.
Significant Accounting policies
There have been no significant changes in the Group's accounting
policies from those disclosed in our Consolidated Financial
Statements as of and for the year ended December 31, 2020. The
significant accounting policies we use for half-year financial
reporting are disclosed in Note 1, Accounting policies of the
accompanying notes to the Consolidated Financial Statements
included in our 2020 Annual Report.
Adoption of New Accounting Standards
There have been no recent new accounting standards that have had
an impact on the Company's Condensed Consolidated Financial
Statements.
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 Condensed Consolidated Statement of
Comprehensive Income/(Loss) consists of the following:
2021 2020
For the six months ended June 30, $000s $000s
---------------------------------- ------ --------
Contract revenue 2,391 5,465
Grant income 3,445 1,379
---------------------------------- ------ ------
Total revenue 5,836 6,844
---------------------------------- ------ ------
All amounts recorded in contract revenue were generated in the
United States.
Primarily all of the Company's contracts as of June 30, 2021 and
2020 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 input
method which the Company believes 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 lesser
extent payments are made periodically over the contract term.
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.
Timing of contract revenue recognition
2021 2020
For the six months ended June 30, $000s $000s
===================================================== ====== ========
Transferred at a point in time - Licensing Income(1) 179 -
Transferred over time(2) 2,212 5,465
===================================================== ====== ======
2,391 5,465
===================================================== ====== ======
1 2021 - Attributed to Parent Company and Other ($105 thousand)
and to Controlled Founded Entities segment ($74 thousand);
2 2021 - Attributed to Internal segment ($1,594 thousand) and
Controlled Founded Entities segment ($618 thousand); 2020 -
Attributed to Internal segment ($5,064 thousand), and Controlled
Founded Entities segment ($401 thousand).
2021 2020
Customers over 10% of revenue $000s $000s
Customer A - 1,518
Customer B 610 339
Customer C 879 2,398
Customer D 715 1,148
2,204 5,403
============================== ====== ======
4. Segment Information
The Group has identified multiple reportable segments as
presented below. There was no change to reportable segments in
2021, except the change in the composition of the segments with
respect to Alivio, as explained below. Substantially, all of the
revenue and profit generating activities of the Group are generated
within the United States and accordingly, no geographical
disclosures are provided.
During the six months ended June 30, 2021, the Company acquired
the non-controlling interest in Alivio and since then Alivio is
wholly owned by the Company and is managed within the Internal
segment. The Company has revised in these financial statements the
prior period financial information to conform to the presentation
as of and for the period ending June 30, 2021. The change in
segments reflects how the Company's Board of Directors reviews the
Group's results, allocates resources and assesses performance of
the Group at this time.
Information About Reportable Segments:
For the six months ended June 30, 2021
$000s
----------------------------------------------------------------
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
------------------------------------- --------- ----------- -------------- -------- --------------
Condensed Consolidated Statements
of Comprehensive Income/(Loss)
Contract revenue 1,594 691 - 105 2,391
Grant revenue 853 2,592 - - 3,445
------------------------------------- --------- ----------- -------------- -------- ------------
Total revenue 2,447 3,284 - 105 5,836
===================================== ========= =========== ============== ======== ============
General and administrative
expenses (4,335) (10,259) - (10,992) (25,586)
Research and development expenses (27,246) (20,953) - (130) (48,330)
===================================== ========= =========== ============== ======== ============
Operating income/(loss) (29,134) (27,929) - (11,017) (68,080)
Other income/(expense):
Gain/(loss) on investments
held at fair value - - - 74,415 74,415
Loss realized on sale of investments - - - (7,500) (7,500)
Other income/(expense) - 71 - 524 595
------------------------------------- --------- ----------- -------------- -------- ------------
Total other income/(expense) - 71 - 67,439 67,510
Net finance income/(costs) (284) (15,751) - (217) (16,252)
Share of net income/(loss)
of associates accounted for
using the equity method - - - (78,108) (78,108)
Income/(loss) before taxes (29,418) (43,609) - (21,904) (94,931)
------------------------------------- --------- ----------- -------------- -------- ------------
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 (27,376) (26,095) - (19,142) (72,613)
Finance income/(costs) - IFRS
9 fair value accounting - (13,616) - - (13,616)
Share-based payment expense (1,435) (3,079) - (1,124) (5,639)
Depreciation of tangible assets (607) (811) - (756) (2,174)
Amortization of ROU assets - (6) - (882) (888)
Amortization of intangible
assets - (1) - - (1)
Taxation - - - 17,378 17,378
------------------------------------- --------- ----------- -------------- -------- ------------
Income/(loss) for the period (29,418) (43,609) - (4,526) (77,553)
Other comprehensive income/(loss) - - - - -
------------------------------------- --------- ----------- -------------- -------- ------------
Total comprehensive income/(loss)
for the period (29,418) (43,609) - (4,526) (77,553)
------------------------------------- --------- ----------- -------------- -------- ------------
Total comprehensive income/(loss)
attributable to:
Owners of the Company (29,322) (41,534) - (4,539) (75,395)
Non-controlling interests (96) (2,075) - 13 (2,158)
------------------------------------- --------- ----------- -------------- -------- ------------
June 30, 2021 $000s
------------------------------------- ----------------------------------------------------------------
Condensed Consolidated Statement
of Financial Position:
Total assets 71,246 44,807 - 780,830 896,883
Total liabilities(1) 140,064 218,354 - (22,908) 335,510
------------------------------------- --------- ----------- -------------- -------- ------------
Net assets/(liabilities) (68,818) (173,547) - 803,738 561,372
------------------------------------- --------- ----------- -------------- -------- ------------
1 Parent Company and Other Includes eliminations of intercompany
liabilities between the Parent Company and the reportable segments
in the amount of $129.1 million.
For the six months ended June 30, 2020
$000s
----------------------------------------------------------------
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
------------------------------------- --------- ----------- -------------- -------- --------------
Condensed Consolidated Statements
of Comprehensive Income/(Loss)
Contract revenue 5,064 401 - - 5,465
Grant revenue 941 438 - - 1,379
------------------------------------- --------- ----------- -------------- -------- ------------
Total revenue 6,005 839 - - 6,844
------------------------------------- --------- ----------- -------------- -------- ------------
General and administrative
expenses (2,086) (5,638) - (13,652) (21,376)
Research and development expenses (19,710) (18,500) - (40) (38,250)
------------------------------------- --------- ----------- -------------- -------- ------------
Operating income/(loss)) (15,791) (23,299) - (13,692) (52,782)
Other income/(expense):
Gain/(loss) on investments
held at fair value - - - 276,910 276,910
Loss realized on sale of investments - - - (44,539) (44,539)
Other income/(expense) - 4 - 478 482
===================================== ========= =========== ============== ======== ============
Other income/(expense) - 4 - 232,848 232,852
Net finance income/(costs) (254) 1,417 - 522 1,685
Share of net income/(loss)
of associate accounted for
using the equity method - - - (7,271) (7,271)
Income/(loss) before taxes (16,045) (21,879) - 212,407 174,483
===================================== ========= =========== ============== ======== ============
(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 (14,226) (21,499) - 216,730 181,005
Finance income/(costs) - IFRS
9 fair value accounting - 1,866 - - 1,866
Share-based payment expense (1,423) (883) - (2,900) (5,206)
Depreciation of tangible assets (396) (777) - (782) (1,955)
Amortization of ROU assets - (586) - (641) (1,227)
Amortization of intangible
assets - - - - -
------------------------------------- --------- ----------- -------------- -------- ------------
Taxation - (1) - (50,774) (50,775)
------------------------------------- --------- ----------- -------------- -------- ------------
Income/(loss) for the period (16,045) (21,880) - 161,632 123,708
Total comprehensive income/(loss)
for the period (16,045) (21,880) - 161,632 123,708
------------------------------------- --------- ----------- -------------- -------- ------------
Total comprehensive income/(loss)
attributable to:
Owners of the Company (15,975) (21,695) - 161,627 123,957
Non-controlling interests (70) (185) - 6 (249)
------------------------------------- --------- ----------- -------------- -------- ------------
December 31, 2020 $000s
------------------------------------- ----------------------------------------------------------------
Condensed Consolidated Statement
of Financial Position:
Total assets 89,214 67,433 - 833,347 989,994
Total liabilities 130,049 200,457 - 5,949 336,455
------------------------------------- --------- ----------- -------------- -------- ------------
Net (liabilities)/assets (40,835) (133,023) - 827,397 653,539
------------------------------------- --------- ----------- -------------- -------- ------------
5. Investments
Investments held at fair value
Investments held at fair value include both unlisted and listed
securities held by PureTech. These investments, which include
interests in Akili, Vor, Karuna, Gelesis (other than the investment
in common shares which is accounted for under the equity method),
and other insignificant investments, are initially measured at fair
value and are subsequently re-measured at fair value at each
reporting date with changes in the fair value recorded to the
profit and loss statement. Interests in these investments were
accounted for as shown below:
Investments held at fair value $000's
Balance as of January 1, 2021 before allocation of share
in associate loss to long-term interest 553,167
Sale of Karuna shares (118,000)
Loss realised on sale of investments (see below) (7,500)
Cash purchase of Vor preferred shares 500
Unrealized gain/(loss) - fair value through profit and loss 74,415
------------------------------------------------------------ ---------
Balance as of June 30, 2021 before allocation of share in
associate loss to long-term interest 502,582
------------------------------------------------------------ ---------
Share of associate loss allocated to long-term interest (101,114)
------------------------------------------------------------ ---------
Balance as of June 30, 2021 after allocation of share in
associate loss to long-term interest 401,468
------------------------------------------------------------ ---------
Gelesis
2020
On April 1, 2020, PureTech participated in the second closing of
Gelesis' Series 3 Growth Preferred Share financing. For
consideration of $10.0 million, PureTech received 579,038 Series 3
Growth Preferred Shares.
During the six months ended June 30, 2021 and 2020, the Company
recognized a gain of $39.0 million and $2.4 million, respectively
related to the preferred shares and warrants that was recorded in
the line item Gain/(loss) on investments held at fair value within
the Condensed Consolidated Statement of Comprehensive
Income/(Loss). Please refer to Note 13 for information regarding
the valuation of these instruments. See below for the allocation of
share in Gelesis's losses to the investment in Gelesis preferred
shares.
Vor
2020
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
Preferred 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 B
Preferred shares.
2021
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 an additional 961,538 B Preferred
shares.
On February 9, 2021, Vor closed its initial public offering
(IPO) of 9,828,017 shares of its common stock 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. Following its IPO, the valuation of Vor common
stock is based on level 1 inputs in the fair value hierarchy. See
Note 13.
During the six months ended June 30, 2021 and 2020 the Company
recognized a gain of $26.4 million and a loss of $1.4 million,
respectively that was recorded in the line item Gain/(loss) on
investments held at fair value within the Condensed Consolidated
Statement of Comprehensive Income/(Loss). Please refer to Note 13
for information regarding the valuation of these instruments.
Karuna
2020
On January 22, 2020, PureTech sold 2,100,000 common shares of
Karuna 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. As a result of these sales,
the Company recorded a loss of $54.8 million, attributable to
blockage discount included in the sales price, to the line item
Loss Realised on Sale of Investment within the Condensed
Consolidated Statement of Comprehensive Income/ (Loss) for the six
months ended June 30, 2020. See below for gain recorded in respect
of the change in fair value of the Karuna investment.
2021
On February 9, 2021 the Group sold 1,000,000 common shares of
Karuna for $118.0 million. Following the sale the Group holds
2,406,564 common shares of Karuna representing 8.2 percent of
Karuna common stock at the time of sale. As a result of the sale,
the Company recorded a loss of $7.5 million, attributable to
blockage discount included in the sales price, to the line item
Loss Realised on Sale of Investment within the Condensed
Consolidated Statement of Comprehensive Income/ (Loss) for the six
months ended June 30, 2021. See below for gain recorded in respect
of the change in fair value of the Karuna investment.
During the six months ended June 30, 2021 and 2020 the Company
recognized a gain of $53.8 million and $261.4 million, respectively
that was recorded on the line item Gain/(loss) on investments held
at fair value within the Condensed Consolidated Statement of
Comprehensive Income/(Loss). As of June 30, 2021, PureTech
continued to hold Karuna common shares or 8.1 percent of total
outstanding Karuna common shares. Please refer to Note 13 for
information regarding the valuation of these instruments.
Akili
On May 25, 2021 Akili completed its Series D financing for gross
proceeds of $110.0 million in which Akili issued 13,053,508 Series
D preferred shares. The Group did not participate in this round of
financing and as a result, the Group's interest in Akili was
reduced from 41.9 percent to 27.5 percent.
During the six months ended June 30, 2021 and 2020, the Company
recognized a loss of $44.0 million and a gain of $14.3 million,
respectively that was recorded on the line item Gain/(loss) on
investments held at fair value within the Condensed Consolidated
Statement of Comprehensive Income/(Loss). Please refer to Note 13
for information regarding the valuation of these instruments, which
excludes any potential impact of recent sector developments.
Investment in associate
The Group's investment in Gelesis common stock was reduced to $0
in 2020 due to the equity method losses incurred against the
investment. Additional equity method losses were recognized against
the Group's investment in Gelesis preferred shares (which are
considered to be long-term interests) in fiscal year 2020 and
during the six months ended June 30, 2021 up until the investment
in Gelesis preferred shares was also reduced to $0. See above. The
equity method losses recognized during the six months ended June
30, 2021 amounted to $78.1 million. An additional $30.4 million of
equity method losses were not recognized as the net investment in
Gelesis was reduced to nil and the Group has not incurred any legal
or constructive obligations or made payments on behalf of
Gelesis.
6. Share-based Payments
Share-based payments includes stock options, restricted stock
units (RSUs) and performance-based RSUs. Share based payments are
recognized as an expense based on the grant date fair value of the
awards, except certain RSUs to executive management, see below.
Share-based Payment Expense
The Group share-based payment expense for the six months ended
June 30, 2021 and 2020, 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):
2021 2020
Six months ended June 30, $000s $000s
=========================== ====== ========
General and administrative 3,514 3,522
Research and development 2,125 1,684
=========================== ====== ======
Total 5,639 5,206
=========================== ====== ======
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan
(PSP). Under the PSP and subsequent amendments, awards of ordinary
shares may be made to the Directors, senior managers and employees
of, and other individuals providing services to the Company and its
subsidiaries up to a maximum authorized amount of 10.0 percent of
the total ordinary shares outstanding. The shares have various
vesting terms over a period of service between two and four years,
provided the recipient remains continuously engaged as a service
provider.
The share-based awards granted under the PSP expire 10 years
from the grant date. As of June 30, 2021, the Company had issued
share-based awards to purchase an aggregate of 16,588,396 shares
under this plan.
RSUs
During the six months ended June 30, 2021, the Company issued to
a consultant 75,757 RSUs subject to service conditions. During the
six months ended June 30, 2021, the Company issued no new market or
performance-based RSUs. During the six months ended June 30, 2020,
the Company issued no new service, market and performance based
RSUs under the PSP.
Each RSU entitles the holder to one ordinary share on vesting
and the RSU awards are based on a cliff vesting schedule over a
three-year requisite service period in which the Company recognizes
compensation expense for the RSUs. Following vesting, each
recipient will be required to make a payment of one pence per
ordinary share on settlement of the RSUs. Vesting of the RSUs is
subject to the satisfaction of performance and market conditions.
The grant date fair value of the market condition awards was
measured to reflect such conditions and for equity settled awards
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 RSU awards
are based on the achievement of total shareholder return ("TSR"),
with 50.0 percent of the shares under the 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 the 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 during the six months ended June
30, 2020 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 (which after deducting tax
withheld on behalf of recipients amounted to $7.2 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 in the financial statements as of and for the six
months ended June 30, 2020, whereby the full repurchase cash
settlement amount was charged to equity in Other reserves.
Similarly in 2018, 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, 2020 where all service, market and performance conditions were
met. In February 2021 the remuneration committee of PureTech's
board of directors approved the achievement of the vesting
conditions as of December 31, 2020 and on May 28, 2021 reached the
decision to cash settle RSUs to certain employees while others were
issued shares. The settlement value was determined based on the
three day average closing price of the shares. The settlement value
was $10.7 million (which after deducting tax withheld on behalf of
recipients amounted to $6.4 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 in the financial statements as of and for the six months
ended June 30, 2021.
Following the different cash settlements, the Company concluded
that although the remaining RSUs are to be settled by shares
according to their respective agreements, and any cash settlement
is at the Company's discretion, due to past practice of cash
settlement to multiple employees, some for multiple years, these
RSUs should be treated as liability awards and as such adjusted to
fair value at every reporting date with changes in fair value
recorded in earnings as stock based compensation expense.
Consequently, the Company reclassified $1.9 million from equity
to other non-current liabilities and $4.8 million from equity to
other payables equal to the fair value of the awards at the date of
reclassification. The Company treated the excess of the fair value
at the reclassification date over the grant date fair value of the
RSUs (for the portion of the vesting period that has already
elapsed) in the amount of $2.9 million as an equity transaction.
Therefore the full amount of the liability at reclassification was
recorded as a charge to equity. The changes in fair value of the
liability from reclassification date to balance sheet date will be
recorded as stock-based compensation expense in the Consolidated
Statement of Comprehensive Income (loss).
The Company incurred share-based payment expenses for
performance and market based RSUs of $0.3 million income and $2.7
million expense for the six months ended June 30, 2021 and 2020 ,
respectively. The income for the six months ended June 30, 2021
included $0.9 million income for the reduction in the liability
settled award from the date of the reclassification to the balance
sheet date due to reduction in the Company's share price. In
addition, the expense for the RSU awards prior to the
reclassification date was reduced due to the forfeiture of awards
of executives that terminated their employment.
Stock Options
During the six months ended June 30, 2021 and 2020, the Company
granted 1,912,500 and 665,392 stock option awards under the PSP,
respectively.
Stock options are treated as equity settled awards. The fair
value of the stock options awarded by the Company was estimated at
the grant date using the Black-Scholes option valuation model,
considering the terms and conditions upon which options were
granted, with the following weighted- average assumptions:
For the six months ended June 30, 2021 2020
---------------------------------- --------- ---------
Expected volatility 41.20% 39.00%
Expected terms (in years) 6.16 5.65
Risk-free interest rate 1.02% 0.75%
Expected dividend yield - -
Grant date fair value $2.04 $1.11
================================== ===== =====
As of June 30, 2021, 5,592,775 incentive options are exercisable
with a weighted-average exercise price of $1.45. Exercise prices
ranged from $0.01 to $4.58.
The Company incurred share-based payment expense for the stock
options of $2.8 million and $1.5 million for the six months ended
June 30, 2021 and 2020, respectively.
Significant Subsidiary Plans
The subsidiaries incurred $3.1 million and $1.0 million in
share-based payment expense for the six months ended June 30, 2021
and 2020, respectively.
Vedanta 2010 Stock Incentive Plan
In 2010, the Board of Directors of Vedanta approved the 2010
Stock Incentive Plan (the "Vedanta Plan"). Through subsequent
amendments, as of June 30, 2021, it allowed for the issuance of
2,297,055 share-based compensation awards through incentive share
options, nonqualified share options, and restricted shares to
employees, directors, and nonemployees providing services to
Vedanta. At June 30, 2021, 72,827 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
grant date fair value of the options is recognized as an expense
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:
For the six months ended June 30, 2021 2020
================================== ====== ======
Assumption/Input
Expected award life (in years) 7.00 6.00
Expected award price volatility 88.33% 78.24%
Risk free interest rate 1.14% 0.79%
Expected dividend yield - -
Grant date fair value $14.77 $13.13
Share price at grant date $19.43 $19.59
================================== ====== ======
Vedanta incurred share-based compensation expense of $2.6
million and $0.8 million for the six months ended June 30, 2021 and
2020, respectively.
Other Subsidiary Plans
The stock-based compensation expense under plans at other
subsidiaries of the Group not including Vedanta, was $0.4 million
and $0.2 million for the six months ended June 30, 2021 and 2020,
respectively.
7. Finance Cost, net
The following table shows the breakdown of finance income and
costs:
2021 2020
For the six months ended June 30, $000s $000s
-----------------------------------------------------
Finance income
Interest from financial assets not at fair value
through profit or loss 119 1,032
----------------------------------------------------- -------- -------
Total finance income 119 1,032
----------------------------------------------------- -------- -------
Finance costs
Contractual interest expense on notes payable (852) (13)
Interest expense on other borrowings (752) -
Interest expense on lease liability (1,106) (1,200)
Gain/(loss) on foreign currency exchange (45) -
----------------------------------------------------- -------- -------
Total finance income/(costs) - contractual (2,755) (1,213)
----------------------------------------------------- -------- -------
Gain/(loss) from change in fair value of warrant
liability (1,027) 867
Gain/(loss) from change in fair value of preferred
shares (12,539) 999
Gain/(loss) from change in fair value of convertible
debt (50) -
----------------------------------------------------- -------- -------
Total finance income/(costs) - fair value accounting (13,616) 1,866
Finance income/(costs), net (16,252) 1,685
----------------------------------------------------- -------- -------
8. Earnings/(Loss) per Share
Basic earnings/(loss) per share is computed by dividing the
income/(loss) attributable to the Company and available to ordinary
shareholders by the weighted average number of ordinary shares.
Dilutive earnings/loss per share is computed by dividing the
income/(loss) attributable to the Company and available to ordinary
shareholders by the sum of the weighted average number of ordinary
shares and the number of additional ordinary shares that would have
been outstanding if the Company's outstanding potentially dilutive
securities had been issued. During the six months ended June 30,
2021 the Company incurred a net loss and therefore all outstanding
potential securities were considered anti-dilutive. The amount of
potential securities that were excluded from the calculation
amounted to 7,418,645 shares.
The following table sets forth the computation of basic and
diluted earnings/(loss) per ordinary shares for the periods
presented (in thousands, except for shares and per share
amounts):
2021 2020
====================================================== =========== =============
Numerator:
Income/(loss) attributable to the owners of the
Company ($75,395) $123,957
====================================================== =========== ===========
Denominator:
Weighted average ordinary shares for basic earnings
per ordinary share 286,011,246 285,487,375
Effect of dilutive securities - 8,170,249
====================================================== =========== ===========
Weighted average ordinary shares for diluted earnings
per ordinary share 286,011,246 293,657,624
Basic earnings/(loss) per ordinary share ($0.26) $0.43
Diluted earnings/(loss) per ordinary share ($0.26) $0.42
====================================================== =========== ===========
9. 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, 2020 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
======================= ================== ========= ========== ============= ============ ======
Additions, net of
transfers 300 - - 183 2,241 2,724
Disposals (27) - - - - (27)
Reclassifications 2,211 - - 248 (2,459) -
Balance as of June
30, 2021 10,904 1,452 1,519 18,485 3,634 35,994
======================= ================== ========= ========== ============= ============ ======
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, 2020 (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)
======================== ================== ========= ========== ============= ============ ========
Depreciation (981) (105) (101) (987) - (2,174)
Disposals 27 - - - - 27
Balance as of June
30, 2021 (4,918) (559) (1,388) (5,802) - (12,667)
======================== ================== ========= ========== ============= ============ ========
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, 2020 4,456 998 232 13,239 3,852 22,777
======================== ================== ========= ========== ============= ============ ======
Balance as of June
30, 2021 5,985 893 131 12,684 3,634 23,327
======================== ================== ========= ========== ============= ============ ======
Depreciation of property and equipment is included in the
General and administrative expenses and Research and development
expenses line items in the Condensed Consolidated Statements of
Comprehensive Income/(Loss). The Company recorded depreciation
expense of $2.2 million and $2.0 million for the six months ended
June 30, 2021 and 2020, respectively.
10. 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, 2020 625
Additions 275
Balance as of December 31, 2020 900
================================ ========
Additions -
Balance as of June 30, 2021 900
================================ ========
Licenses
Accumulated amortization $000s
Balance as of January 1, 2020 -
Amortization (1)
Balance as of December 31, 2020 (1)
================================ ========
Amortization (1)
Balance as of June 30, 2021 (2)
================================ ========
Licenses
Intangible assets, net $000s
Balance as of December 31, 2020 899
================================ ========
Balance as of June 30, 2021 898
================================ ========
Substantially all the 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.
11. Equity
At June 30, 2021 and December 31, 2020, 286,530,665 and
285,885,025 common shares were outstanding, respectively, including
all vested common shares issued pursuant to PureTech Health LLC
Incentive Compensation arrangements as detailed in Note 6.
12. 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, as mentioned above, no
bifurcation is required.
The preferred shares are entitled to vote with holders of common
shares on an as converted basis.
The Group recognized 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 June 30, 2021 and December 31, 2020 represents
the fair value of the instruments for all subsidiary preferred
shares. The following summarizes the subsidiary preferred share
balance:
2021 2020
As of June 30, 2021 and December 31, 2020 $000s $000s
Entrega 774 1,291
Follica 13,785 12,792
Sonde 9,979 12,821
Vedanta Biosciences 106,973 92,068
------------------------------------------ ------- -------
Total subsidiary preferred share balance 131,511 118,972
------------------------------------------ ------- -------
As is customary, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of a subsidiary, the holders
of subsidiary preferred shares which are outstanding shall be
entitled to be paid out of the assets of the subsidiary available
for distribution to shareholders and before any payment shall be
made to holders of ordinary shares. A merger, acquisition, sale of
voting control or other transaction of a subsidiary in which the
shareholders of the subsidiary immediately before the transaction
do not own a majority of the outstanding shares of the surviving
company shall be deemed to be a liquidation event. Additionally, a
sale, lease, transfer or other disposition of all or substantially
all of the assets of the subsidiary shall also be deemed a
liquidation event.
As of June 30, 2021 and December 31, 2020, 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:
2021 2020
As of June 30, 2021 and December 31, 2020 $000s $000s
------------------------------------------
Entrega 2,216 2,216
Follica 6,405 6,405
Sonde 12,000 12,000
Vedanta Biosciences 86,161 86,161
------------------------------------------ ------- -------
Total minimum liquidation preference 106,782 106,782
------------------------------------------ ------- -------
For the six months ended June 30, 2021 the Group recognized the
following changes in the value of subsidiary preferred shares:
$'000s
------------------------------------------------------------- ---------
Balance as of January 1, 2021 118,972
Increase in value of preferred shares measured at fair value 12,539
Balance as of June 30, 2021 131,511
============================================================= =======
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.
2021
During the six months ended June 30, 2021, there were no
issuances of new preferred shares.
13. 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 allocable 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.
================== ==============================================================
As of June 30, 2021 and December 31, 2020, 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.
========== =================================================================
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 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 June 30, 2021, 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 June 30, 2021.
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 December 31, 2020 and January 1, 2021 118,972 25,000
Value at issuance - 1,415
Accrued interest - contractual - 770
Change in fair value 12,539 50
------------------------------------------------- ---------- ------------
Balance at June 30, 2021 131,511 27,235
------------------------------------------------- ---------- ------------
The change in fair value of preferred shares and convertible
notes are recorded in Finance income/(costs) - fair value
accounting in the Condensed Consolidated Statements of
Comprehensive Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at June 30, 2021 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 Unobservable Sensitivity to
June 30, 2021 Valuation Technique Inputs Weighted Average Decrease in Input
-------------- -------------------- -------------- ---------------- -------------------
Market - Backsolve Estimated time
106,973 & Hybrid allocation to exit 0.80 Fair value increase
-------------- -------------------- -------------------
Discount rate 30.0%
-------------- -------------------- -------------------
Volatility 95.0%
-------------- -------------------- -------------- ---------------- -------------------
Income - DCF Estimated time
14,559 & OPM allocation to exit 2.91 Fair value increase
-------------- -------------------- -------------------
Discount rate 27.0%
-------------- -------------------- -------------- ---------------- -------------------
Terminal value
growth rate (1.2)% Fair value decrease
Volatility 57.1% Fair value decrease
-------------- -------------------- -------------- ---------------- -------------------
Market - Backsolve,
Cost Approach Estimated time
9,979 & OPM allocation to exit 2.00 Fair value increase
-------------- -------------------- -------------------
Discount rate 27.2%
-------------- -------------------- -------------------
Volatility 42.5%
-------------- -------------------- -------------- ---------------- -------------------
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, except with respect to Vedanta
preferred share liabilities (Please refer to Note 12):
Subsidiary Preferred Share
Input Liability
------------------------------------------
Financial
Liability
Increase/(Decrease)
Sensitivity
As of June 30, 2021 Range $000s
---------------------------- ------------------ ----------------------
Subsidiary Enterprise Value -2% (422)
----------------------------
+2% 495
---------------------------- ------------------ --------------------
Time to Liquidity -6 Months 110
----------------------------
+6 Months (45)
---------------------------- ------------------ --------------------
Discount Rate -5% 11,909
----------------------------
+5% (5,641)
---------------------------- ------------------ --------------------
Vedanta preferred share liabilities were excluded from the
sensitivity calculation as the value of such liabilities was based
on a Market - Backsolve with a PWERM/Hybrid allocation model, and
therefore changing any individual assumption would result in an
unreasonable alternative value considering the circumstances on the
financial reporting date.
Financial Assets Held at Fair Value
Karuna and Vor Valuation
Karuna (Nasdaq: KRTX) and Vor (Nasdaq: VOR) and additional
immaterial investments are listed entities on an active exchange
and as such the fair value for the six months ended June 30, 2021
was calculated utilizing the quoted common share price. Please
refer to Note 5 for further details.
Akili and Gelesis
In accordance with IFRS 9, the Company accounts for its
preferred share investments in Akili and Gelesis as financial
assets held at fair value through the profit and loss. During the
six months ended June 30, 2021, the Company recorded its investment
in such preferred shares at fair value and recognized the change in
fair value of such investments as a net loss of $5.1 million that
was recorded to the Condensed 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, 2021 before allocation of associate
loss to long-term interest 206,892
Cash purchase of Vor preferred shares 500
Reclassification of Vor from level 3 to level 1 (33,365)
Gain/(Loss) on changes in fair value (5,793)
Balance as of June 30, 2021 before allocation of associate
loss to long-term interest 168,235
=========================================================== =========
Share of associate loss allocated to long-term interest
(please refer to Note 5) (101,114)
=========================================================== =========
Balance as of June 30, 2021 after allocation of associate
loss to long-term interest 67,120
=========================================================== =========
The change in fair value of investments held at fair value are
recorded in Gain/(loss) on investments held at fair value in the
Condensed Consolidated Statements of Comprehensive
Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at June 30, 2021 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 Valuation Sensitivity to
June 30, 2021 Technique Unobservable Inputs Weighted Average Decrease in Input
-------------- ------------------ ---------------------- ---------------- -------------------
Market Backsolve
- PWERM & Estimated time
166,456 Hybrid allocation to exit 1.53 Fair value increase
-------------- ------------------
Discount rate 24.2% Fair value increase
-------------- ------------------ -------------------
Volatility (used
in Hybrid allocation) 56.0%
-------------- ------------------ ---------------------- ---------------- -------------------
The valuation of the Group's interest in Akili excludes any
potential impact of recent sector developments.
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, except for the investment in Akili preferred
shares (Please refer to Note 5):
Investments Held at Fair
Input Value
-------------------------------------
Financial
Asset Increase/
(Decrease)
Sensitivity
As of June 30, 2021 Range $000s
-------------------------- ----------------- ------------------
Investee Enterprise Value -2% (1,932)
--------------------------
+2% 1,852
-------------------------- ----------------- ----------------
Time to Liquidity -6 Months 6,001
--------------------------
+6 Months (7,754)
-------------------------- ----------------- ----------------
Discount Rate -5% 1,532
--------------------------
5% (1,514)
-------------------------- --------- ----- ----------------
Akili investment in preferred shares was excluded from the
sensitivity calculation as the value of such investment was based
on a Market - Backsolve with a PWERM allocation model, and
therefore changing any individual assumption would result in an
unreasonable alternative value considering the circumstances on the
financial reporting date.
Warrants
Warrants issued by subsidiaries within the Group are classified
as liabilities, as they will be settled in a variable number of
preferred shares. 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 December 31, 2020 and January 1, 2021 8,206
------------------------------------------------- ----------
Change in fair value 1,027
------------------------------------------------- ----------
Balance at June 30, 2021 9,233
------------------------------------------------- ----------
The change in fair value of warrants are recorded in Finance
income/(costs) - fair value accounting in the Condensed
Consolidated Statements of Comprehensive Income/(Loss).
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.
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 change in the fair value of the subsidiary warrants was
recorded in finance costs, net in the Condensed Consolidated
Statements of Comprehensive Income/(Loss). The $9.2 million warrant
liability at June 30, 2021 was largely attributable to the
outstanding Follica preferred share warrants.
The table below sets out the weighted average of significant
unobservable inputs used at June 30, 2021 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 2.18
Expected volatility 59.4%
Risk free interest rate 0.3%
Expected dividend yield -%
Estimated fair value of the preferred share $3.65
Exercise price of the warrants $0.37
-------------------------------------------- ----------
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 June 30, 2021 Range $000s
--------------------------------------------- ------------- ----------------------
Discount Rate used in the calculation of
estimated fair value of the preferred share -5% 10,456
---------------------------------------------
+5% (4,973)
--------------------------------------------- ------------- --------------------
Convertible Notes
Vedanta issued convertible promissory notes in December 2020 and
Sonde issued convertible notes in April 2021 (collectively the
"Notes"). See Note 14 Subsidiary Notes payable for further details.
The Notes contain one or more embedded derivatives. The Company
elected to account for these Notes as FVTPL liabilities, whereby
the embedded derivatives are not bifurcated but rather the Notes
are recorded at fair value with changes in fair value recorded in
profit or loss in the Condensed Consolidated statement of
comprehensive income (loss). The aggregate fair value of the Notes
was determined to be $27.2 million at June 30, 2021. The valuations
of the Notes were each categorized as Level 3 in the fair value
hierarchy. In estimating the fair value of these Notes, a
probability-weighted methodology was utilized, whereby the Notes'
expected returns under various Note-specific liquidity scenarios
were analyzed and weighted to arrive at a probability-adjusted fair
value at June 30, 2021. The significant unobservable input used at
June 30, 2021 in the fair value measurement of Vedanta and Sonde's
convertible notes constituted the estimated time to exit, which had
a weighted-average of 0.13 years.
Fair Value Measurement and Classification
The fair value of financial instruments by category at June 30,
2021 and December 31, 2020:
2021
-----------------------------------------------------------------
Carrying Amount Fair Value
----------------------- ------------------------------------
Financial Financial
Assets Liabilities Level 1 Level 2 Level 3 Total
$000s $000s $000s $000s $000s $000s
------------------------------- --------- ------------ ------- ------- ------- ---------
Financial assets:
Money Markets(1) 412,035 - 412,035 - - 412,035
Investments held at
fair value(2) 502,582 - 334,347 - 168,235 502,582
Trade and other receivables(3) 3,438 - - 3,438 - 3,438
------------------------------- --------- ------------ ------- ------- ------- -------
Total financial assets 918,055 - 746,382 3,438 168,235 918,055
------------------------------- --------- ------------ ------- ------- ------- -------
Financial liabilities:
Subsidiary warrant
liability - 9,233 - - 9,233 9,233
Subsidiary preferred
shares - 131,511 - - 131,511 131,511
Subsidiary notes payable - 28,690 - 1,330 27,360 28,690
------------------------------- --------- ------------ ------- ------- ------- -------
Total financial liabilities - 169,434 - 1,330 168,104 169,434
------------------------------- --------- ------------ ------- ------- ------- -------
1 Issued by a diverse group of corporations, largely consisting
of financial institutions, virtually all of which are investment
grade.
2 Balance prior to share of associate loss allocated to
long-term interest (please refer to Note 5).
3 Outstanding receivables are owed primarily by corporations and
government agencies, virtually all of which are investment
grade.
2020
-----------------------------------------------------------------
Carrying Amount Fair Value
----------------------- ------------------------------------
Financial Financial
Assets Liabilities Level 1 Level 2 Level 3 Total
$000s $000s $000s $000s $000s $000s
------------------------------- --------- ------------ ------- ------- ------- ---------
Financial assets:
Money Markets(1) 394,143 - 394,143 - - 394,143
Investments held at
fair value(2) 553,167 - 346,275 - 206,892 553,167
Loans and receivables:
Trade and other receivables(3) 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 a diverse group of corporations, largely consisting
of financial institutions, virtually all of which are investment
grade.
2 Balance prior to share of associate loss allocated to
long-term interest (please refer to Note 5).
3 Outstanding receivables are owed primarily by corporations and
government agencies, virtually all of which are investment
grade.
14. Subsidiary Notes Payable
The subsidiary notes payable are comprised of loans and
convertible notes. As of June 30, 2021 and December 31, 2020, 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:
2021 2020
As of June 30, 2021 and December 31, 2020 $000s $000s
------------------------------------------
Loans 1,330 1,330
Convertible notes 27,360 25,125
------------------------------------------ ------ ------
Total subsidiary notes payable 28,690 26,455
------------------------------------------ ------ ------
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 June 30, 2021 and December 31, 2020. The accrued
interest on such loan balance is presented as Other current
liabilities and totaled approximately $0.5 million and $0.5 million
as of June 30, 2021 and December 31, 2020, respectively.
Convertible Notes
Certain of the Group's subsidiaries have issued convertible
promissory notes ("Notes") to fund their operations.
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 permitted 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 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.
On April 6, 2021 Sonde issued unsecured convertible promissory
notes of $3.0 million to its existing shareholders, of which $1.4
million were issued to third party shareholders (and $1.6 million
were issued to the Company and eliminated in consolidation). The
notes bear interest at an annual rate of 6.0 percent and mature on
the second anniversary of the issuance. The notes mandatorily
convert in a Qualified Financing, as defined in the note purchase
agreement, at a discount of 20.0 percent from the price per share
in the Qualified Financing. In addition, the notes allow for
optional conversion concurrently with the closing of a
Non-Qualified Equity Financing to the Non-Qualified Equity
Securities then issued and sold at a discount of 20.0 percent from
the price per share in the Non Qualified Equity Financing. In the
event of no conversion or repayment of the notes prior to a Change
in Control, the notes shall become immediately due and payable
prior to the closing of such Change in Control at three times the
outstanding principal plus accrued interest.
For the Vedanta and Sonde convertible notes, since these Notes
contain embedded derivatives, the Notes were assessed under IFRS 9
and the entire financial instruments were elected to be accounted
for as FVTPL.
Convertible Notes outstanding were as follows:
Vedanta Knode Appeering Sonde Total
$000s $000s $000s $000s $000s
-------------------------------- ------- ------ --------- ------ ------
As of January 1, 2021 25,000 50 75 - 25,125
-------------------------------- ------- ------ --------- ------ ------
Gross principal - - - 1,415 1,415
Accrued interest on convertible
notes 750 - - 20 770
Change in fair value - - - 50 50
================================ ======= ====== ========= ====== ======
As of June 30, 2021 25,750 50 75 1,485 27,360
================================ ======= ====== ========= ====== ======
15. 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 $15.0 million as of June 30, 2021.
The following table summarizes long-term loan activity for the
six months ended June 30, 2021:
Long-term
loan
-----------
2021
$000s
--------------------------- -----------
Balance at January 1, 2021 14,818
Accrued interest 752
Interest paid (599)
Other 3
=========================== =========
Balance at June 30, 2021 14,974
=========================== =========
The following table summarizes Vedanta's future principal
payments for the long-term loan as of June 30, 2021:
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 - - - - - (26)
========================== ==== ===== ===== ===== ===== ======
Total - 1,491 4,721 5,112 3,676 14,974
========================== ==== ===== ===== ===== ===== ======
16. Non-Controlling Interest
The following table summarizes the changes in the equity
classified non-controlling ownership interest in subsidiaries by
reportable segment:
Controlled Non-Controlled Parent
Founded Founded Company
Internal Entities Entities & Other Total
$000s $000s $000s $000s $000s
------------------------------- -------- ---------- -------------- -------- ----------
Balance at January 1, 2021
* (8,567) (8,216) - 574 (16,209)
Share of comprehensive income
(loss) (96) (2,075) - 13 (2,158)
Acquisition of a subsidiary
non controlling interest 8,668 - - - 8,668
Exercise of share-based awards - 6 - - 6
Equity settled share-based
payments (4) 3,079 - - 3,075
Other - - - (6) (6)
Balance at June 30, 2021 - (7,206) - 581 (6,625)
=============================== ======== ========== ============== ======== ========
(*) Revised to reclassify Alivio into the Internal segment to
comply with current period classification. See Note 4.
On June 11, 2021 PureTech acquired the remaining 17.1 percent of
the minority non-controlling interests of Alivio (after exercise of
all in the money stock options) increasing its ownership to 100.0
percent of Alivio. The consideration for such non controlling
interests amounted to $1.2 million, to be paid in three equal
installments, with the first installment of $0.4 million paid at
the effective date of the transaction and two additional
installments to be paid upon the occurrence of contingent events.
The Group recorded a contingent consideration liability of $0.6
million at fair value for the two additional installments,
resulting in a total acquisition cost of $1.0 million. The excess
of the consideration paid over the book value of the
non-controlling interest of approximately $9.6 million was recorded
directly as a charge to shareholders' equity. The contingent
consideration liability will be adjusted to fair value at the end
of each reporting period until settlement with changes in fair
value recorded in earnings.
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.
2021
Controlled
Founded Intra-group
Entities eliminations Total
For the period ended June 30 $000s $000s $000s
------------------------------------------ ---------- ------------- -----------
Statement of Comprehensive Loss
Total revenue 2,673 - 2,673
------------------------------------------ ---------- ------------- ---------
Income/(loss) for the year 43,759 (224) 43,536
Total comprehensive income/(loss) for the
year 43,759 (224) 43,536
------------------------------------------ ---------- ------------- ---------
Statement of Financial Position
Total assets 43,994 (17) 43,977
Total liabilities 205,969 (7,521) 198,448
========================================== ========== ============= =========
Net assets/(liabilities) (161,975) 7,504 (154,471)
========================================== ========== ============= =========
As of June 30, 2021, Controlled Founded Entities with
non-controlling interests primarily include Follica Incorporated,
Sonde Health Inc., and Vedanta Biosciences, Inc. Ownership
interests of the non-controlling interests in Follica Incorporated,
Sonde Health Inc., and Vedanta Biosciences, Inc as of June 30, 2021
are 19.9 percent, 6.2 percent and 3.3 percent, respectively. In
addition, Non-controlling interests include the amounts recorded
for subsidiary stock options, with the vast majority comprising of
Vedanta stock options.
17. Trade and Other Payables
Information regarding Trade and other payables was as
follows:
2021 2020
As of June 30, 2021 and December 31, 2020 $000s $000s
------------------------------------------ ------ --------
Trade payables 12,024 8,871
Accrued expenses 5,879 9,090
Income tax payable 14,797 1,260
Liability settled share based awards 4,211 -
Other 2,939 2,606
------------------------------------------ ------ ------
Total trade and other payables 39,850 21,826
------------------------------------------ ------ ------
18. Leases
The activity related to the Group's right of use asset and lease
liability for the six months ended June 30, 2021 is as follows:
Right of
use asset,
net
=============
2021
$000s
Balance at January 1, 20,098
Depreciation (1,472)
Balance at June 30, 18,626
====================== ===========
Total lease
liability
=============
2021
$000s
Balance at January 1, 35,348
Cash paid for rent (principal + interest) (2,532)
Interest expense 1,106
Balance at June 30, 33,923
========================================== ===========
The following details the short term and long-term portion of
the lease liability as at June 30, 2021:
Total lease
liability
=============
2021
$000s
--------------------------------------
Short-term Portion of Lease Liability 3,460
Long-term Portion of Lease Liability 30,463
-------------------------------------- -----------
Total Lease Liability 33,923
-------------------------------------- -----------
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. As of June 30, 2021 the balances
related to the sublease were as follows:
Total lease
receivable
$000s
---------------------------------------
Short-term Portion of Lease Receivable 398
Long-term Portion of Lease Receivable 1,497
--------------------------------------- -----------
Total Lease Receivable 1,895
--------------------------------------- -----------
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. Sublease income from operating
lease recognised by the Company during the six months ended June
30, 2021 was $0.5 million.
19. 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 June 30, 2021 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 June 30, 2021
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 $5.0
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
10.
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 June 30,
2021 the noncancellable commitments in respect of such contracts
amounted to approximately $5.8 million.
20. Related Parties Transactions
Related Party Subleases
During 2019, PureTech executed sublease agreements with a
related party, Gelesis. Please refer to Note 18 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 six
months ended June 30:
2021 2020
For the six months ended June 30 $000s $000s
---------------------------------
Short-term employee benefits 1,313 1,266
Share-based payments 1,896 2,222
--------------------------------- ------ ------
Total 3,209 3,488
--------------------------------- ------ ------
Short-term employee benefits include salaries, health care and
other non-cash benefits. Share-based payments are generally subject
to vesting terms over future periods.
For cash settlements of share based awards - see Note 6.
Convertible Notes Issued to Directors
Certain members of the Group have invested in convertible notes
issued by the Group's subsidiaries. As of June 30, 2021 and
December 31, 2020, the outstanding related party notes payable
totaled $92 thousand and $89 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 14.
Directors' and Senior Managers' Shareholdings and Share
Incentive Awards
The Directors and senior managers hold beneficial interests in
shares in the following businesses and sourcing companies as at
June 30, 2021:
Number
of shares Number
held as of options
of held as
Business Name (Share June 30, of June Ownership
Class) 2021 30, 2021 Interest(1)
===================== ================================== ========== =========== ==============
Directors:
Ms Daphne Zohar(2) Gelesis (Common) 59,443 1,339,114 5.10%
Dr Robert Langer Entrega (Common) - 332,500 4.24%
Dr Raju Kucherlapati Enlight (Class B Common) - 30,000 3.00%
Gelesis (Common) - 20,000 0.10%
Dr John LaMattina(3) Akili (Series A-2 Preferred) 37,372 - 0.80%
Akili (Series C Preferred) 11,755 - 0.20%
Gelesis (Common)(3) 51,070 - 0.20%
Gelesis (Common()4 3,579 83,050 0.30%
Gelesis (Series A-1 Preferred)(3) 49,523 - 0.20%
Vedanta Biosciences (Common) - 25,000 0.22%
Senior Managers:
Dr Bharatt Chowrira Karuna (Common)(4) 5,000 - 0.02%
Dr Joseph Bolen Vor (Common) - 9,191 0.04%
--------------------- ---------------------------------- ---------- ----------- -------- ---
1 Ownership interests as of June 30, 2021 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 Dr John and Ms Mary LaMattina hold 50,540 shares of common
shares and 49,523 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.
4 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 22,128,685 ordinary shares
and 7.7 percent voting rights of the Company as of June 30, 2021.
This amount excludes options to purchase 3,750,000 ordinary shares.
This amount also excludes 2,665,787 shares, which are issuable
based on the terms of performance based RSU awards granted to
certain senior managers covering the financial years 2020 and 2019.
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.
21. Taxation
Tax benefit/(expense) is recognized based on management's best
estimate of the weighted-average annual income tax rate expected
for the full financial year multiplied by the pre-tax income of the
interim reporting period.
During the six months ended June 30, 2021 and 2020, the Group
recorded a consolidated tax provision of $(17.4) million benefit
and $50.8 million expense, respectively, which represented
effective tax rates in continuing operations of 18.3 percent and
29.1 percent, respectively. The effective tax rate in the current
period is primarily driven by the Company's earnings and losses in
the U.S. federal and state jurisdiction in which it operates and is
impacted by an increase in unrecorded deferred tax assets in
respect of carry-forward losses in the Company's subsidiaries (as
it is not probable that they will be realized). The change in the
tax rate period over period results from a different increase in
the 2021 interim period as compared to the 2020 interim period in
the aforementioned unrecorded deferred tax assets.
22. Subsequent Events
The Company has evaluated subsequent events after June 30, 2021,
the date of issuance of the Condensed Consolidated Financial
Statements, and has not identified any recordable or disclosable
events not otherwise reported in these Condensed Consolidated
Financial Statements or notes thereto, except for the
following:
On July 19, 2021, Gelesis and Capstar Special Purpose
Acquisition Corp. announced that they had entered into a definitive
business combination agreement. Upon completion of the transaction,
the combined company's securities are expected to be traded on the
New York Stock Exchange. The transaction is expected to close in
the fourth quarter of 2021. As part of this transaction the Gelesis
shares held by the Company will be exchanged for the combined
company's securities and the Company's interest is expected to
decrease from its current voting interest of 24.7 percent.
On July 21, 2021 Vedanta closed a Series D financing in which
Vedanta issued 2,387,675 Preferred D shares for consideration of
$68.0 million. From such consideration of $68.0 million, $25.0
million was received from Pfizer through conversion of its
convertible note (see Note 14.) and $5.0 million was received from
PureTech in exchange for 174,520 Preferred D shares.
On July 21, 2021 the Company granted executive management
2,052,236 performance and market based Restricted Stock Units with
a performance period that ends on December 31, 2023. The RSUs vest
based upon agreed upon market and performance conditions and as
long as the recipients are in continuous service through vesting
date. Following vesting, each recipient will be required to make a
payment of one pence per ordinary share on settlement of the RSUs.
In addition, the Company granted the directors of the Company a
total of 67,140 restricted stock units that will vest on the day
immediately preceding the Company's 2022 annual general
meeting.
On July 23, 2021 Imbrium Therapeutics exercised its option,
included in the collaboration and license agreement, to develop
LYT-503 (formerly designated as ALV-107), a non-opioid therapeutic
candidate being advanced for interstitial cystitis/bladder pain
syndrome. The Company has received a $6.5 million payment for the
option exercise and is eligible to receive additional development
milestone payments for this program as well as royalties on product
sales, if and when such milestones will be achieved and/or when
sales will be generated.
Directors' responsibility statement
The Board of Directors approved this Half-yearly Financial
Report on August 23, 2021.
The Directors confirm that to the best of their knowledge the
unaudited condensed financial information has been prepared in
accordance with IAS 34 as contained in UK-adopted International
Financial Reporting Standards (IFRS) and that the interim
management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8.
Approved by the Board of Directors and signed on its behalf by
:
Daphne Zohar
Chief Executive Officer
August 23, 2021
INDEPENT REVIEW REPORT TO PURETECH HEALTH PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the condensed
consolidated statement of financial position, related condensed
consolidated statements of comprehensive income/(loss), condensed
consolidated statements of changes in equity, condensed
consolidated statements of cash flows and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the latest annual financial statements
of the group were prepared in accordance with International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union and in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and the next annual
financial statements will be prepared in accordance with UK-adopted
international accounting standards. The directors are responsible
for preparing the condensed set of financial statements included in
the half-yearly financial report in accordance with IAS 34 as
adopted for use in the UK.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Robert Seale
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
United Kingdom
August 23, 2021
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