TIDMPRTC
RNS Number : 2853J
PureTech Health PLC
26 April 2022
26 April 2022
PureTech Health plc
PureTech Announces Annual Results for Year Ended December 31,
2021
Strong capital base with PureTech level cash and cash
equivalents of $418.9 million(1) and consolidated cash and cash
equivalents of $465.7 million(2) as of December 31, 2021
Rapidly progressing pipeline of 27 therapeutics and therapeutic
candidates, across Wholly Owned and Founded Entity programs, with
11 clinical trials initiated and 6 clinical trial readouts in
2021
Founded Entities continuing to mature and generate value for
PureTech, with three now publicly traded and a fourth soon expected
to go public
Reviewing capital allocation strategy to drive additional value
to shareholders with potential returns of capital through various
mechanisms
Company to host a webcast and conference call today at 9:00am
EDT / 2:00pm BST
PureTech Health plc (Nasdaq: PRTC, LSE: PRTC) ("PureTech" or the
"Company"), a clinical-stage biotherapeutics company dedicated to
discovering, developing and commercializing highly differentiated
medicines for devastating diseases, today announced its results for
the year ended December 31, 2021 as well as its cash balance as of
the first quarter ended March 31, 2022. The following information
represents select highlights from the full UK annual report and
accounts, except as noted herein, a portion of which will be filed
as an exhibit to PureTech's Annual Report on Form 20-F for the year
ended December 31, 2021 to be filed with the United States
Securities and Exchange Commission (the "SEC") and is also
available at
https://investors.puretechhealth.com/financials-filings/reports
.
Webcast and conference call details
Members of the PureTech Management Team will host a conference
call at 9:00am EDT / 2:00pm BST today, April 26, 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: 942895
For those unable to listen to the call live, a replay will be
available on the PureTech website.
Commenting on the annual results, Daphne Zohar, Founder and
Chief Executive Officer of PureTech said:
"I'm very proud of what our team has achieved in 2021. The
collaboration and commitment to discovering and developing highly
differentiated medicines for devastating diseases where novel
treatment options are greatly needed, has resulted in another year
full of important accomplishments for PureTech.
"Across our Wholly Owned and Founded Entity programs, we now
have 27 therapeutics and therapeutic candidates advancing towards
clinical, regulatory and commercial milestones. Twenty of these sit
within our Founded Entities where we already have two products that
have been cleared for marketing by the United States Food and Drug
Administration (the "FDA") and granted marketing authorization in
the European Economic Area - Gelesis' Plenity(R)(3) and Akili's
EndeavorRx(R)(4) . Thirteen of these therapeutic candidates are
clinical stage and we look forward to multiple data readouts in the
coming year, including data from Karuna's Phase 3 EMERGENT-2 trial
expected in mid-2022 as well data from Vor Bio's Phase 1/2a
clinical trial of VOR33, which is expected in the second half of
2022.
"The other seven therapeutic candidates are being developed
within our rapidly advancing and growing Wholly Owned Pipeline,
which is curated around our focus on immunological, fibrotic and
lymphatic system disorders and builds upon pharmacology that has
been validated in humans where our key innovations enable potential
unlocking of the broad potential of these therapies. Across our
Wholly Owned Programs, we generated significant fundamental value
and achieved a number of clinical and business milestones towards
our mission of developing transformational medicines for millions
of people who have long struggled to find effective treatments. In
2021 alone, we initiated five clinical studies, with four readouts
thus far and one that is ongoing.
"Importantly, we are in the fortunate position to be growing our
business that is generating non-dilutive capital and we do not
currently have to look at public equity markets to raise capital.
As such, we have a strong financial position that will allow us to
build on the momentum of 2021 and deliver on value driving
milestones. In 2021, our consolidated business ended the year with
a capital base of $465.7 million, helped by generating non-dilutive
cash from the Founded Entities, whilst maintaining significant
equity positions, royalty streams and milestones that position us
to capture future value. Furthermore, our self-sustaining Founded
Entities are set to continue an exciting period of strategic
execution, having collectively raised an aggregate of $1.9 billion
in recent years, 94% of which came from outside parties.
"Based on the strong foundation we have built to support
PureTech's future growth, our Board and senior leadership team have
been considering various approaches to drive additional value for
our shareholders, including reviewing a capital allocation strategy
that balances investment in the continued growth of our business
with potential returns of capital to shareholders. As we evaluate
our capital allocation strategy, we intend to engage with
shareholders to understand preferences and market perspectives with
respect to certain potential near term activities related to the
implementation of this strategy.
"We look to the coming months and years with excitement and
optimism as we continue to create significant value from innovative
science and develop therapeutics that we sincerely believe have the
potential to significantly improve treatment outcomes for patients
all over the world."
Continued advancement and growth of our Wholly Owned
Programs(5)
Our team, network and insights and expertise in immunology and
therapeutic development have enabled the rapid advancement and
growth of our Wholly Owned Programs. Focused on immunological,
fibrotic and lymphatic system disorders, our Wholly Owned Pipeline
builds upon validated biologic pathways and proven pharmacology,
and currently consists of seven therapeutic candidates, including
LYT-100 (deupirfenidone), a clinical therapeutic candidate that we
are pursuing for the potential treatment of a range of conditions
involving inflammation and fibrosis and disorders of lymphatic
flow, LYT-200, a clinical immuno-oncology fully human monoclonal
antibody candidate targeting a foundational immunosuppressive
protein, galectin-9, that we are developing for the potential
treatment of difficult--to--treat solid tumors, LYT-210, a
preclinical immuno-oncology therapeutic candidate targeting
immunomodulatory gamma delta-1 T cells that we are developing for a
range of cancer indications, LYT--300 (oral allopregnanolone), a
clinical therapeutic candidate that we are developing for a range
of neurological and neuropsychological conditions, which was
generated from our Glyph(TM) lymphatic targeting platform, and
three therapeutic candidates generated from Alivio(TM), our
technology platform that enables targeting of therapeutics locally
to the sites of inflammation while minimizing systemic exposure,
for the potential treatment of a range of chronic and acute
inflammatory disorders: LYT-510 (oral immunosuppressant molecule),
in development for the potential treatment of inflammatory bowel
disease (IBD) and chronic pouchitis, LYT-500 (oral combination of
two therapeutic agents), in development for IBD, and
LYT-503/IMB-150, which is being advanced as a partnered program as
a potential non-opioid treatment for interstitial cystitis or
bladder pain syndrome (IC/BPS). In addition to these programs, we
are advancing Orasome(TM) and other Technology Platforms for the
oral administration of therapeutics. Finally, we are pursuing our
meningeal lymphatics research program to develop potential
treatments for neurodegenerative and neuroinflammatory diseases. In
addition to programs originating from these innovative platforms to
fuel our pipeline, we also continually identify external
clinical-stage programs that are highly differentiated and
complementary to the immuno--modulation focus of our Wholly Owned
Pipeline. Key developments and progress include the following:
Program Highlights
LYT-100
-- In the January 2022 post-period, we were pleased to announce
results from a randomized, double-blind crossover study in healthy
older adults demonstrating that approximately 50% fewer subjects
treated with LYT-100 experienced gastrointestinal (GI)-related
adverse events (AE) compared to subjects treated with pirfenidone
(17.4% vs. 34.0%). Based on these results, additional data
generated from our robust LYT-100 clinical program and recent
regulatory feedback, we intend to advance LYT-100 into late-stage
clinical development for the treatment of idiopathic pulmonary
fibrosis (IPF), beginning with a dose-ranging study evaluating six
months of treatment with LYT-100 with topline results expected by
the end of 2023.
-- In 2021, we progressed two 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 (6) respiratory complications and related sequelae 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 the LYT-100-COV trial are expected in the first half of 2022, and topline results from the LYT-100-LYMPH trial are expected in 2022.
-- In 2021, we 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 will measure change in distance walked on the
six-minute walk test (6MWT), with secondary endpoints to assess the
longer-term safety and tolerability of LYT-100- COV up to 182 days
of treatment.
-- In 2021, we initiated additional clinical studies to further
evaluate the pharmacokinetic (PK), dosing and tolerability of
LYT-100 in healthy volunteers and healthy older adults to inform
the clinical development of LYT-100 across multiple indications.
Results from these studies demonstrated that LYT-100 was
well-tolerated at 824mg TID dosing with low rates of GI AEs that
were comparable to placebo. These results will further inform our
dose-ranging study design in treatment-naïve IPF patients.
-- In 2021, we formed a Clinical Advisory Board for IPF and
other progressive fibrosing interstitial lung diseases (PF-ILDs).
These physicians and researchers with deep expertise in the
clinical development of novel therapies in PF-ILDs include Bill
Bradford, M.D., Ph.D., biopharma advisor with broad expertise in
drug development; Vincent Cottin, M.D., Professor of Respiratory
Medicine at Université Claude Bernard Lyon and Coordinator of the
National Coordinating Reference Center for Rare Pulmonary Diseases
at Louis Pradel Hospital, Hospices Civils de Lyon, Lyon, France;
Kevin Flaherty, M.D., Professor at the University of Michigan
specializing in IPF and other ILDs; Toby Maher, M.D., Ph.D.,
Professor of Clinical Medicine and Director of Interstitial Lung
Disease at Keck School of Medicine of the University of Southern
California; Paul Noble, M.D., Chair of the Department of Medicine
at Cedars-Sinai Medical Center and a noted researcher in lung
inflammation and fibrosis; and Marlies Wijsenbeek, M.D., Ph.D.,
pulmonary physician at the Erasmus Medical Center.
-- In August 2021, we presented the results of the Phase 1
multiple ascending dose and food effect study of LYT-100 at the
virtual European Respiratory Society (ERS) International Congress.
The results from the study were subsequently published in the
journal Clinical Pharmacology in Drug Development in November
2021.
LYT-200
-- In 2021, we progressed the first stage of an adaptive Phase
1/2 clinical trial evaluating LYT-200 (anti-galectin-9 fully human
monoclonal antibody) as a single agent for the potential treatment
of difficult-to-treat solid tumors. In November 2021, we presented
a scientific poster describing the trial at the Society for
Immunotherapy of Cancer (SITC) 36th annual meeting. Topline results
from the Phase 1 portion of the study are expected in the first
half of 2022. Pending these results, we intend to initiate the
Phase 2 expansion cohort portion of the trial, which is designed to
evaluate LYT-200 both as a single agent and/or in combination with
BeiGene's tislelizumab, an anti-PD-1 monoclonal antibody, or
chemotherapy. The Phase 2 portion of the study is currently planned
to enroll patients with a range of solid tumor types, including
pancreatic cancer and other GI solid tumors. Under the terms of the
clinical trial and supply agreement we entered into with an
affiliate of BeiGene, Ltd. in July 2021, we 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 Phase 2 study cohorts.
-- In November 2021, the FDA granted orphan drug designation to
LYT-200 for the treatment of pancreatic cancer. The FDA grants
orphan drug designation to novel drug and biologic products for the
treatment, diagnosis or prevention of conditions affecting fewer
than 200,000 persons in the U.S. Orphan drug designation qualifies
PureTech for incentives under the Orphan Drug Act, including tax
credits for some clinical trials and eligibility for seven years of
market exclusivity in the U.S. if the drug is approved, in addition
to our broad intellectual property coverage which can extend the
exclusivity into 2038.
LYT-210
-- In April 2021, we presented a scientific poster detailing
promising preclinical results for LYT-210 (anti-gamma-delta-1 fully
human monoclonal antibody) at the 2021 American Association for
Cancer Research (AACR) Annual Virtual Meeting. The research
demonstrated that LYT-210 is both highly specific and highly
potent, rapidly inducing cell death of immunomodulatory gamma
delta-1 cells, while sparing other T cells, such as cytotoxic gamma
delta T cells, that play important roles in a healthy immune
response.
LYT-300
-- In December 2021, we initiated a Phase 1 clinical study of
LYT-300 (oral allopregnanolone), the first therapeutic candidate
generated from our Glyph platform, for the potential treatment of
neurological and neuropsychological conditions. Results from the
study are expected in the second half of 2022 and will be used to
inform the design of possible future studies evaluating LYT-300 in
indications that could include depression, anxiety, sleep
disorders, fragile X tremor-associated syndrome, essential tremor
and epileptic disorders, among others.
Alivio Technology Platform
-- In June 2021, we announced the acquisition of the remaining
22% of outstanding shares in our Founded Entity, Alivio
Therapeutics ("Alivio"). Alivio's therapeutic candidates, in
development for inflammatory disorders including IBD, have been
integrated into our Wholly Owned Pipeline, and the underlying
Alivio technology platform has been added to our lymphatic and
inflammation platforms.
-- The Alivio technology platform has generated three
therapeutic candidates:
- In the 2022 post-period, we nominated a new therapeutic
candidate, LYT-510, to our pipeline. LYT-510 is an
orally-administered therapeutic candidate for the potential
treatment of IBD and chronic pouchitis, which is a rare orphan
disease . We intend to file for regulatory approval to initiate
first-in-human studies at year end 2022 and initiate a clinical
study evaluating LYT-510 as a single agent for the potential
treatment of IBD and chronic pouchitis in early 2023.
- LYT-500 is an orally administered combination of therapeutic
agents in development for IBD. We expect preclinical
proof-of-concept data for LYT-500 in the first half of 2022.
- LYT-503/IMB-150 is a non-opioid pain candidate being developed
as a partnered program for the potential treatment of IC/BPS. An
Investigational New Drug (" IND ") application is expected to be
filed for LYT-503/IMB-150 in 2022.
Glyph Technology Platform
-- In September 2021, preclinical proof-of-concept research
supporting the Glyph technology platform, which showed for the
first time that restoring normal function of the mesenteric
lymphatics may reverse insulin resistance and modify
obesity-associated metabolic disease, was published in Nature
Metabolism. Preclinical proof-of-concept work published in the
Journal of Controlled Release in February 2021 also supported the
platform's ability to directly target the lymphatic system.
Orasome and Other Technology Platforms for Oral Administration
of Therapeutics
-- In 2021, we also progressed versatile and programmable oral
biotherapeutics approaches, such as our Orasome platform, which is
a novel programmable and scalable approach for the oral
administration of nucleic acids and other biologics. We established
preclinical proof-of-concept supporting the platform's potential to
achieve therapeutic levels of proteins in circulation following the
oral administration of therapeutic protein expression systems. We
expect to generate additional preclinical data, with Orasomes and
other technologies, in 2022.
Meningeal Lymphatics Research Program
-- In April 2021, preclinical work supporting our meningeal
lymphatics research program was published in Nature. The research
suggests 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.
Corporate Highlights
-- In 2021, we continued to build our clinical development team
by bringing together seasoned experts focused on tackling diseases
with significant unmet medical needs. Julie Krop, M.D., was
appointed as Chief Medical Officer. Dr. Krop oversees all clinical
development, regulatory, CMC and medical affairs for advancing our
Wholly Owned Pipeline. Other additions to our team included Paul
Ford, M.D., Ph.D., SVP of Clinical Development who is primarily
overseeing the overall LYT-100 development program, including for
IPF.
-- In the March 2022 post-period, we appointed Sharon
Barber--Lui to our board of directors as a non--executive director
and as a member of the Audit Committee. She previously led U.S.
Oncology Portfolio Strategy, Operations and Business Analytics at
Merck & Co. Inc. Ms. Barber-Lui brings extensive experience in
finance, operations, portfolio management and commercialization to
our board of industry, business , and academic leaders.
-- In 2021, we remained deeply committed to making progress in
our Environmental, Social and Governance (ESG) program. The second
edition of our ESG report has been published as part of the annual
report and a new ESG webpage has been launched which can be
accessed at investors.puretechhealth.com .
Capital Allocation Strategy
-- Based on the strong foundation we have built to support
PureTech's future growth, our Board and senior leadership team have
been considering various approaches to drive additional value for
our shareholders, including reviewing a capital allocation strategy
that balances investment in the continued growth of our business
with potential returns of capital to shareholders. Our strategy
includes the maintenance of a minimum of three years of cash on
hand to fund the continued development and expansion of our Wholly
Owned Pipeline and strategic investment in our Founded Entities.
Our cash runway is expected into the first quarter of 2025.
-- In the future, when appropriate to do so, we will also aim to
return a portion of the proceeds we may generate from either (1)
the monetization of equity interests in our Founded Entities, (2)
the receipt of potential royalty and sublicense income, and/or (3)
other sources of proceeds such as strategic partnerships, to
shareholders through various mechanisms, including share buybacks
or special dividends.
-- We may augment this approach should opportunities arise to
use available funds for strategic growth opportunities, such as
in-licensing of therapeutic candidates or intellectual property,
asset purchases, or strategic M&A, to the extent such
opportunities are aligned with our long-term strategic vision.
-- As we evaluate our capital allocation strategy, we intend to
engage with shareholders to understand preferences and market
perspectives with respect to certain potential near-term activities
related to the implementation of this capital allocation strategy.
Any plan to return capital to shareholders will be subject to
market and industry conditions at the time, the approval of our
Board of Directors, restrictions under the law and other corporate
considerations.
Financial Highlights
-- In 2021, PureTech sold 1,750,000 shares of Karuna common
stock for cash consideration of approximately $218 million in two
separate transactions in February and November.
-- PureTech Level Cash and Cash Equivalents were $418.9 million
as of December 31, 2021(1) . We reiterated our cash runway guidance
into the first quarter of 2025.
-- Consolidated cash and cash equivalents, which includes cash
held at the PureTech level and at Controlled Founded Entities, were
$465.7 million as of December 31, 2021(2) .
-- PureTech's Founded Entities raised $731.9 million in 2021(7)
and approximately an additional $105 million in the 2022
post-period, almost all of which came from third parties.
-- PureTech Level Cash and Cash Equivalents were $377.9 million,
based on consolidated cash and cash equivalents of $413.2 million
as of March 31, 2022(8) , with spend largely attributed to the
successful progression of Wholly Owned Programs into more advanced
stages of development.
PureTech's Founded Entities matured over the year, with
significant clinical and financial momentum(9)
PureTech's Founded Entities have made significant progress
advancing 20 therapeutics and therapeutic candidates, of which two
have been cleared for marketing by the FDA and granted marketing
authorization in the European Economic Area and 13 are clinical
stage. Key developments included the following:
-- Karuna Therapeutics, Inc. (PureTech ownership as of February
15, 2022: 5.6%; We also are eligible to receive payments under our
license agreement, including sublicense payments and royalties on
net sales)
- In November 2021, Karuna announced further updates to the
EMERGENT program's four ongoing Phase 3 trials, including that
topline data from EMERGENT-2, a five-week inpatient trial
evaluating the efficacy and safety of KarXT compared to placebo in
246 adults with schizophrenia in the U.S., are expected in
mid-2022. EMERGENT-3, a five-week inpatient trial evaluating the
efficacy and safety of KarXT compared to placebo in 246 adults with
schizophrenia in the U.S. and Ukraine, is underway. EMERGENT-4, a
52-week outpatient, open-label extension trial evaluating the
long-term safety and tolerability of KarXT in 350 adults with
schizophrenia who completed EMERGENT-2 or EMERGENT-3, and
EMERGENT-5, a 52-week outpatient, open-label trial evaluating the
long-term safety and tolerability of KarXT in adults with
schizophrenia who were not enrolled in EMERGENT-2 or EMERGENT-3,
are also underway.
- In 2021, Karuna initiated the Phase 3 ARISE trial evaluating
the safety and efficacy of KarXT compared to placebo as an
adjunctive treatment in adults with schizophrenia who experience an
inadequate response to current standard of care.
- 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.
- In November 2021, Karuna announced the evaluation of KarXT for
the treatment of dementia-related psychosis (DRP) will initially
focus on psychosis in Alzheimer's disease, the most common subtype
of DRP. The initial focus on the Alzheimer's disease dementia
subtype reflects various strategic development, regulatory and
commercial considerations, and Karuna remains interested in
exploring KarXT in other dementia subtypes in future development
programs. Karuna plans to initiate a Phase 3 program in
mid-2022.
- In late 2021, Karuna initiated a Phase 1 trial of an advanced
formulation of KarXT as it continued to advance its earlier
pipeline of muscarinic receptor targeted programs and novel
formulations of KarXT. Karuna is also advancing its artificial
intelligence-based target agnostic discovery program for treating
psychiatric and neurological conditions.
- In November 2021, Karuna announced its entry into an exclusive
license agreement with Zai Lab (Shanghai) Co., Ltd. (Zai) for the
development, manufacturing and commercialization of KarXT in
Greater China, including mainland China, Hong Kong, Macau and
Taiwan. Under the terms of the agreement, Karuna received a $35.0
million upfront payment and is eligible to receive certain
development and regulatory milestone and sales milestone payments,
as well as royalties based on annual net sales of KarXT in Greater
China.
- 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 March 2021, Karuna completed a follow-on public offering of
its common stock, from which it received net proceeds of $270.0
million.
- In 2021, PureTech sold 1,750,000 shares of Karuna common stock
for cash consideration of approximately $218 million in two
separate transactions in February and November.
-- Akili Interactive Labs, Inc. (PureTech ownership as of
December 31, 2021: 22.3%)
- In the January 2022 post-period, Akili entered into a
definitive agreement to become publicly traded via a merger with
Social Capital Suvretta Holdings Corp. I ("SCS") (Nasdaq: DNAA), a
special purpose acquisition company. The transaction is expected to
close in mid-2022, after which Akili will be listed on the Nasdaq
stock market under the new ticker symbol "AKLI". The transaction
implies a post-money equity value of the combined company of up to
approximately $1 billion and is expected to deliver up to $412
million in gross cash proceeds to Akili, including the contribution
of up to $250 million of cash held in SCS's trust account and $162
million from PIPE investors at $10 per share.
- 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(R) (4) , enable
expansion of core technologies to treat acute and chronic cognitive
disorders and drive further research and development of potential
new digital therapeutics.
- In March 2021, the 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) was published in
Nature Digital Medicine. 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.
- In the February 2022 post-period, Akili announced the
publication of full data in the medical journal PLOS ONE from a
single arm, unblinded study conducted by Dr. Elysa Marco at Cortica
Healthcare and Drs. Joaquin Anguera and Courtney Gallen at the
University of California, San Francisco. The study measured
electroencephalography (EEG) data alongside behavioral and clinical
metrics of attention in children with ADHD using AKL-T01
(EndeavorRx). Data from the study show that EndeavorRx treatment
resulted in increased brain activity related to attention function,
as measured by EEG, which correlated with improvements in objective
behavioral measures of attention.
- In September 2021, Akili announced topline results of a Phase
2 study of SDT-001 (Japanese version of AKL-T01), a digital
therapeutic designed to improve measures of attention in children
diagnosed with attention-deficit/hyperactivity disorder (ADHD). The
study, conducted by Akili partner Shionogi & Co., Ltd., was
designed to evaluate the feasibility, safety and efficacy of the
digital therapeutic in children with ADHD and to inform the design
of a potential pivotal study. Results showed the treatment was
well-received by patients and demonstrated improvements in ADHD
inattention symptoms consistent with those seen across previous
studies of AKL-T01.
- In the March 2022 post-period, Akili announced it had been
named to Fast Company's prestigious list of the World's Most
Innovative Companies for 2022. This list honors businesses that are
making the biggest impacts on their industries and culture as a
whole and thriving in today's ever-changing world.
- In July 2021, Akili introduced new gaming features and
functionalities to its EndeavorRx treatment. Akili is releasing
these new gameplay features as it expands its pre-launch activities
to bring EndeavorRx to families and healthcare professionals.
- 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 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. Akili expects data from the studies in COVID
fog in the second half of 2022.
- In August 2021, 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
U.S. and pursue FDA regulatory clearance. Under the terms of the
agreement, Akili will lead potential U.S. commercialization and
roll-out.
- In the March 2022 post-period, Akili appointed Jon David as
Chief Product Officer. A 20-year veteran of the games industry, Mr.
David joins Akili to develop and execute the strategic vision of
Akili's future product pipeline after serving as Vice President and
General Manager at Glu Mobile, acquired in 2021 by Electronic Arts,
where he led the development of both new IP and hit franchises
including Covet Fashion and Diner Dash Adventures. Mr. David also
guided the success of fan-favorite franchises and the launches of
hit titles including Plants vs. Zombies 2 and Plants vs. Zombies
Garden Warfare.
-- Gelesis Holdings, Inc. (PureTech ownership as of March 31,
2022: 23.5%; We also are eligible to receive payments under our
license agreement, including sublicense payments and royalties on
net sales)
- In December 2021, Gelesis announced that Plenity (R) is now
broadly available across the U.S. to adults who meet the
prescription criteria.
- In the January 2022 post-period, Gelesis announced the
completion of its business combination with Capstar Special Purpose
Acquisition Corp. (NYSE: CPSR) ("Capstar"). Gelesis Holdings, Inc.
began trading on the New York Stock Exchange under the ticker
symbol "GLS" on January 14, 2022.
- In January 2022 post-period, Gelesis launched the "Who Said?"
marketing campaign across the U.S., which challenges many long-held
cultural and societal assumptions around weight loss. Plenity's
multichannel campaign encompasses TV, digital, social and Out of
Home (OOH) to grow awareness of Plenity's novel approach to weight
management.
- In the March 2022 post-period, Gelesis announced preliminary
results from its broad awareness media campaign, noting that within
the first three weeks, the company saw a 3-fold increase in web
traffic and 3.5-fold increase in the number of individuals seeking
a new prescription compared to previous months when supply was
limited.
- In November 2021, Gelesis' first commercial-scale
manufacturing line was completed and validated, and the company
announced that it had received a $30 million fully paid pre-order,
in addition to the $10 million pre-order received in January 2021,
for its first commercial product for weight management, Plenity,
from Ro, a leading U.S. direct-to-patient healthcare company.
- In late 2021, both primary endpoints were achieved in the
Gelesis LIGHT-UP study of GS200 in adults with overweight or
obesity who also have prediabetes or type 2 diabetes.
- In November 2021, Gelesis announced a publication in Nature's
Scientific Reports describing the genesis of the underlying
technology and engineering process for Gelesis' non-systemic
superabsorbent hydrogels. These new materials were designed to
replicate compositional and mechanical properties of raw
vegetables, and the paper describes their therapeutic approach for
weight management as well as possible future solutions for other
gut-related conditions.
- 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 the January 2022 post-period, Gelesis appointed Inogen
Co-Founder and former CFO, Ali Bauerlein, to its Board of Directors
and Audit Committee. Ms. Bauerlein brings success in scaling to
$300M+ revenue in a direct-to-consumer business model and public
company execution as Gelesis plans to scale Plenity to meet growing
consumer demand.
-- Vor Bio Inc. (PureTech ownership as of March 4, 2022:
8.6%)
- In February 2021, Vor Bio 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 Bio from the
offering were approximately $203.4 million, before deducting the
underwriting discounts and commissions and other offering expenses
payable by Vor Bio.
- In the March 2022 post-period, Vor Bio announced VCAR33 is now
made up of two programs with different cell sources. The VCAR33
programs are chimeric antigen receptor T (CAR-T) cell therapy
candidates designed to target CD33, a clinically-validated target
for AML. VCAR33 (AUTO) uses autologous cells from each patient, and
is being studied in an ongoing Phase 1/2 clinical trial sponsored
by the National Marrow Donor Program (NMDP) in young adult and
pediatric patients with relapsed/refractory AML in a
bridge-to-transplant study. VCAR33 (ALLO) uses allogeneic healthy
donor-derived cells. Vor Bio also announced it plans to collect
initial data on VOR33 from the VBP101 clinical trial and initial
clinical data from the VCAR33 (ALLO) program prior to IND
submission for the Treatment System following ongoing discussions
with the FDA and alongside improved scientific understanding of the
differences in T-cell sources.
- In September 2021, the FDA granted Fast Track designation to
VOR33, Vor Bio's lead engineered hematopoietic stem cell (eHSC)
therapeutic candidate for the treatment of acute myeloid leukemia
(AML).
- Vor Bio initiated VBP101, a Phase 1/2a clinical trial of VOR33
for AML patients who currently have limited treatment options and
expects to report VOR33's initial clinical data in the first half
of 2022.
- In November 2021, Vor Bio announced its first multi-targeted
treatment system comprising VOR33-CLL1 multiplex-edited eHSC
therapy and VCAR33-CLL1 multi-specific CAR-T therapy. Vor Bio
continues to make progress on editing multiple antigens with its
eHSC platform.
- In June 2021, Vor Bio announced the build-out of an in-house
clinical manufacturing facility in Cambridge, Massachusetts in the
same premises as Vor Bio's current headquarters, to support
flexible manufacturing for the company's eHSC and CAR-T product
candidate pipeline for patients with blood cancers. Vor Bio
anticipates that the facility will be operational in 2022.
- In July 2021, Vor Bio 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 Bio will investigate the
combination of these two technologies into a treatment solution,
pairing Vor Bio'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 June 2021, Vor Bio 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 Bio's eHSC platform, with the goal of
generating novel treatment systems for patients fighting AML and
other devastating forms of blood cancer.
- In January 2021, Vor Bio announced that the FDA had accepted
the company's IND application for VOR33. In May 2021, Vor Bio
announced that it received the Canadian clinical trial application
clearance for VOR33 from Health Canada.
- In June 2021, Vor Bio announced the appointment of Matthew R.
Patterson as Chairman of its Board of Directors. Mr. Patterson
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.
-- Vedanta Biosciences, Inc. (PureTech ownership as of December
31, 2021: 41.4%)
- In October 2021, Vedanta announced that its Phase 2 clinical
trial of VE303, an orally administered investigational live
biotherapeutic product (LBP) in development for the prevention of
recurrent C. difficile infection (CDI) in high-risk patients, met
its primary endpoint of preventing disease recurrence through Week
8. VE303 achieved a 31.7% absolute risk reduction in rate of
recurrence when compared with placebo, representing a greater than
80% reduction in the odds of a recurrence. This is believed to be
the most advanced clinical trial of an investigational drug based
on a rationally defined bacterial consortium, a microbiome-based
therapeutic approach that delivers orally administered candidates
of precisely known composition that can be manufactured with
pharmaceutical-grade consistency. Based on the Phase 2 data, the
Biomedical Advanced Research and Development Authority (BARDA)
exercised its first contract option for additional funding of $23.8
million, pursuant to its existing 2020 contract with Vedanta, to
support a planned Phase 3 clinical trial of VE303.
- In January 2021, Vedanta announced a $25 million investment
from Pfizer, as part of the Pfizer Breakthrough Growth Initiative.
Vedanta will retain control of all of its programs and has granted
Pfizer a right of first negotiation on VE202, Vedanta's 16-strain
defined bacterial consortium candidate. As part of the investment,
Michael Vincent, M.D., Ph.D., Senior Vice President and Chief
Scientific Officer, Inflammation & Immunology Research Unit at
Pfizer, joined Vedanta's Scientific Advisory Board.
- In late 2021, Vedanta also completed the build-out of its
Phase 3 and commercial launch CGMP manufacturing facility for
supply of VE303.
- 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 initiate a Phase 2 clinical trial of VE202 in mild to
moderate ulcerative colitis patients.
- In 2021, Vedanta's ongoing Phase 1/2 clinical trial of VE416
for food allergy continued to progress.
- In July 2021, Vedanta announced results from the Phase 1 study
evaluating the safety and initial clinical activity of VE800, an
immuno-oncology therapeutic candidate, in combination with Bristol
Myers Squibb's Opdivo (R) (nivolumab) in 54 patients across select
types of advanced or metastatic cancers. VE800 demonstrated an
acceptable safety and tolerability profile, though the observed
response rates did not meet the prespecified criteria to advance
into the next stage of the study. Vedanta is analyzing blood, stool
and tumor samples from patients in whom response or disease control
was observed in order to profile patient subtypes that might
benefit from microbiome manipulation. 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 July 2021, Vedanta closed a $68 million financing, which
included the $25 million investment from Pfizer as part of the
Pfizer Breakthrough Growth Initiative announced in January 2021.
Vedanta plans to use the proceeds to advance its pipeline of
defined bacterial consortia, including progressing VE303 into a
Phase 3 clinical trial in patients at high risk for recurrent CDI,
initiating a Phase 2 clinical trial of VE202 in mild to moderate
ulcerative colitis and continuing to advance programs in additional
indications.
- In February 2021, Vedanta appointed 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 companies such as Editas Medicine and Novartis.
- In October 2021, Vedanta announced the appointment of Simona
Levi, Ph.D., J.D., as Chief Legal Officer and Corporate Secretary.
Dr. Levi brings over 25 years of U.S. and international legal
experience with private and public companies across the life
sciences industry focusing on complex transactions, intellectual
property law and litigation as well as corporate governance.
-- Follica, Incorporated (PureTech ownership as of December 31,
2021: 76.0%. We also are eligible to receive payments under our
license agreement, including sublicense payments and royalties on
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 Chief Executive Officer 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 Chief Executive
Officer of Cynosure, joined as an Independent Director with over 30
years of experience in the medical device industry.
- Preparations are underway for the registration clinical
program in male androgenetic alopecia and initiation is anticipated
in 2022.
-- Sonde Health, Inc. (PureTech ownership: 44.6%)
- In October 2021, Sonde launched Sonde Mental Fitness, a
voice-enabled mental health detection and monitoring technology
that uses a brief voice sample to evaluate mental well-being. Sonde
Mental Fitness is currently available through its API platform for
integration into third-party apps. It's also available as a
standalone app for iOS and Android, mobile devices to serve as a
proof-of-concept for health systems, employers and wellness
services interested in testing out the API's capabilities.
- In the January 2022 post-period, Sonde announced the signing
of a multi-year strategic partnership with GN Group to research and
develop commercial vocal biomarkers for mild cognitive impairment.
The research will serve as the backbone for new voice-based tools
to help at-risk individuals gain timely and accurate health
insights using GN Group's device technologies and, ultimately, to
enable early detection and management of life-threatening diseases
for the millions of people living with hearing loss.
- In July 2021, Sonde announced a strategic collaboration with
leading chipmaker Qualcomm Technologies, Inc. (Qualcomm) to embed
Sonde's vocal biomarker technology into its 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 as of December 31, 2021:
74.3%)
- 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 2022.
- Entrega has also continued advancement of its ENT-100 platform
for the oral administration of biologics, vaccines and other drugs
that are otherwise not efficiently absorbed when taken orally.
PureTech Health today released its Annual Report for the year
ended December 31, 2021. In compliance with the Financial Conduct
Authority's Listing Rule 9.6.3, the following documents have today
been submitted to the National Storage Mechanism and will shortly
be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
-- Annual Report and Accounts for the year ended December 31,
2021; and
-- Notice of 2022 Annual General Meeting.
Printed copies of these documents together with the Form of
Proxy will be posted to shareholders. Copies are also available
electronically on the Investor Relations section of the Company's
website at
https://investors.puretechhealth.com/financials-filings/reports
.
PureTech's 2021 Annual General Meeting (AGM) will be held on
June 15, 2022 at 11:00am EDT / 4:00pm BST at PureTech's
headquarters, which is located at 6 Tide Street, Boston,
Massachusetts, United States. Please note that in order to protect
the health and wellbeing of our people and our shareholders we
continue to monitor developments relating to COVID-19 and, in light
of increased circulation of new variants in different regions and
potentially disruptive travel limitations, the Company has decided
to hold the AGM in the United States where most of the Directors
are resident.
While the Company's preference had been to welcome shareholders
in person to the 2022 AGM in the United Kingdom, we considered the
conditions at hand and are proposing to hold the AGM at our Boston
office in the United States. Shareholders are strongly encouraged
to submit a proxy vote in advance of the meeting and to appoint the
Chair of the meeting to act as their proxy. If a shareholder wishes
to attend the meeting person, we ask that the shareholder notify
the Company by email to ir@puretechhealth.com to assist us in
planning and implementing arrangements for this year's AGM. The
health and welfare of the Company's shareholders, as well as its
employees and partners, is the number one priority.
The Company appreciates that a number of its shareholders are
not resident or located in the United States and asks shareholders
to participate in the AGM by submitting any questions in advance
and voting via proxy rather than attending in person. As such, any
specific questions on the business of the AGM and resolutions can
be submitted ahead of meeting by e-mail to ir@puretechhealth.com
(marked for the attention of Dr. Bharatt Chowrira).
Shareholders are encouraged to complete and return their votes
by proxy, and to do so no later than 4:00 pm (BST) on June 13,
2022. This will appoint the chair of the meeting as proxy and will
ensure that votes will be counted even though attendance at the
meeting is restricted and you are unable to attend in person.
Details of how to appoint a proxy are set out in the notice of
AGM.
PureTech will keep shareholders updated of any changes it may
decide to make to the current plans for the AGM. Please visit the
Company's website at www.puretechhealth.com for the most up to date
information.
About PureTech Health
PureTech is a clinical-stage biotherapeutics company dedicated
to discovering, developing and commercializing highly
differentiated medicines for devastating diseases, including
inflammatory, fibrotic and immunological conditions, intractable
cancers, lymphatic and gastrointestinal diseases and neurological
and neuropsychological disorders, among others. The Company has
created a broad and deep pipeline through the expertise of its
experienced research and development team and its extensive network
of scientists, clinicians and industry leaders.
This pipeline, which is being advanced both internally and
through PureTech's Founded Entities, is comprised of 27
therapeutics and therapeutic candidates, including two that have
received both U.S. FDA clearance and European marketing
authorization, as of the date of PureTech's most recently filed
Annual Report and corresponding Form 6-K. 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 in immunology and drug development.
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 within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements contained
in this press release that do not relate to matters of historical
fact should be considered forward-looking statements, including
without limitation those statements that relate to expectations
regarding PureTech's future prospects, development plans and
strategies, the progress and timing of clinical trials and data
readouts, the timing of potential IND applications, the sufficiency
of cash and cash equivalents and expected cash runway, and
PureTech's potential implementation of a capital deployment
strategy and plans to return capital to shareholders.. The
forward-looking statements are based on current expectations and
are subject to known and unknown risks, uncertainties and other
important factors that could cause actual results, performance and
achievements to differ materially from current expectations,
including, but not limited to, the following: our history of
incurring significant operating losses since our inception; our
need for additional funding to achieve our business goals, which
may not be available and which may force us to delay, limit or
terminate certain of our therapeutic development efforts; our
limited information about and limited control or influence over our
Non-Controlled Founded Entities; the lengthy and expensive process
of preclinical and clinical drug development, which has an
uncertain outcome and potential for substantial delays; potential
difficulties with enrolling patients in clinical trials, which
could delay our clinical development activities; side effects,
adverse events or other safety risks which could be associated with
our therapeutic candidates and delay or halt their clinical
development; our ability to obtain regulatory approval for and
commercialize our therapeutic candidates; our ability to realize
the benefits of our collaborations, licenses and other
arrangements; our ability to maintain and protect our intellectual
property rights; our reliance on third parties, including clinical
research organizations, clinical investigators and manufacturers;
our vulnerability to natural disasters, global economic factors,
geo-political actions and unexpected events, including health
epidemics or pandemics like the COVID-19 pandemic, and conflicts
such as the Russia-Ukraine conflict; and the those important
factors described under the caption "Risk Factors" in our Annual
Report on Form 20-F for the year ended December 31, 2021 filed with
the SEC and in our other regulatory filings. These forward-looking
statements are based on assumptions regarding the present and
future business strategies of the Company and the environment in
which it will operate in the future. Each forward-looking statement
speaks only as at the date of this press release. Except as
required by law and regulatory requirements, we disclaim any
obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or
otherwise.
Contact:
PureTech
Public Relations
publicrelations@puretechhealth.com
Investor Relations
IR@puretechhealth.com
EU Media
Ben Atwell, Rob Winder
+44 (0) 20 3727 1000
ben.atwell@FTIconsulting.com
U.S. Media
Nichole Sarkis
+1 774 278 8273
nichole@tenbridgecommunications.com
Notes
1 Cash and cash equivalents held at PureTech Health plc and only
wholly-owned subsidiaries (please refer to Note 1 to our
consolidated financial statements for further information with
respect to our wholly-owned subsidiaries) as of Dec 31, 2021. This
represents a non-IFRS number. For a reconciliation of this number
to IFRS, please see below under the heading "Financial Review."
2 Cash and cash equivalents held at PureTech Health plc and
consolidated subsidiaries (please refer to Note 1 to our
consolidated financial statements for further information with
respect to our consolidated subsidiaries) as of December 31,
2021.
3 Important Safety Information about Plenity (R) : 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.
4 EndeavorRx (R) 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.
5 References in this report to "Wholly Owned Programs" refer to
the Company's seven therapeutic candidates (LYT-100, LYT-200,
LYT-210, LYT-300, LYT-510, 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-510, 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.
6 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).
7 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. Funding figure does not
include Gelesis' gross proceeds of $105.0 million from its January
2022 post-period SPAC merger.
8 Cash and cash equivalents held at PureTech Health plc and only
wholly-owned subsidiaries as of March 31, 2022. The measure
includes cash outflows and inflows for the first quarter of 2022.
This represents a non-IFRS number. For a reconciliation of this
number to IFRS, please see below under the heading "Financial
Review."
9 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'
board of directors) or direct the management and development
efforts for these entities. Consequently, not all such entities are
consolidated in the 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 financial statements. As of December 31, 2021,
Controlled Founded Entities include Follica Incorporated, Vedanta
Biosciences, Inc., Sonde Health, Inc. and Entrega, Inc., and
Non-Controlled Founded Entities include Gelesis Holdings, Inc.,
Karuna Therapeutics, Inc., Akili Interactive Labs, Inc., Vor Bio
Inc.
Letter from the Chair
The past year has been a highly dynamic one for the biotech
industry. With vaccines and therapies against COVID-19 taking
center stage in the public consciousness, investment in life
sciences companies soared and then public companies faced
headwinds. The pace of incredible innovation across a wide range of
therapeutic modalities and diseases accelerated. The fundamental
opportunity we have to bring transformative medicines to people in
need has never been larger or more achievable. Research tools grow
more powerful at an accelerating pace, and we are steadily building
the evidence base for many innovative platforms with the potential
to fill pipelines of breakthrough medicines in the years to
come.
PureTech represents the most compelling elements of the
biotherapeutics industry in a single company. We leverage
world-leading expertise in immunology and the brain, immune and
gastrointestinal systems to address serious debilitating diseases.
We prioritize harnessing validated biology to advance
differentiated therapeutic candidates with well-managed risk
profiles and robust development rationales from day one. The result
is a unique pharmaceutical pioneer with a strong track record of
innovation and clinical success, an exciting, diversified pipeline
of innovative therapeutic candidates and programs, a strong balance
sheet and a clear vision for bringing breakthrough new medicines to
the patients.
We are moving steadily towards our vision of a fully integrated
biotherapeutics company, creating value organically from
internally-driven growth while also sourcing programs that
complement our strategy and expertise to build a truly
differentiated portfolio of high-value new medicines. In my
experience, very few companies come anywhere close to PureTech's
realization of a truly innovative business and development model
that has delivered such a sustainable foundation for long-term
growth.
Across our Wholly Owned Pipeline, all our work is united by a
mission to deliver highly differentiated medicines for devastating
diseases where there are currently limited or no options available
for patients. That internal pipeline now includes seven therapeutic
candidates. We advanced three of these through the clinic in 2021,
most notably in two Phase 2 trials of LYT-100, a Phase 1/2 trial of
LYT-200 and a Phase 1 study of LYT-300.
As a highly versatile therapeutic candidate built on substantial
validated biology and clinical data, PureTech's lead therapeutic
candidate, LYT-100 (deupirfenidone), is rapidly building a
compelling expanded clinical profile to address a range of serious
fibrotic and inflammatory diseases. Study data announced in late
2021 and the early 2022 post-period have helped paint a picture of
a therapeutic with substantially enhanced tolerability relative to
pirfenidone, a drug already approved for IPF, a chronic orphan
condition that causes progressive scarring of the lungs and has a
median survival of 3-5 years.
This de-risked strategy of leveraging validated biology is
employed across several of our Wholly Owned Pipeline candidates. It
is enhanced by our novel research platform technologies, each of
which can be applied to known therapeutic entities, with clinical
validation, to generate novel candidates that not only help grow
our Wholly Owned Pipeline organically but have the potential to
change the treatment paradigm for a range of serious diseases and
generate significant value for the patients and our
shareholders.
To complement our innovative R&D engine, our Founded
Entities are also maturing well, with three of them now publicly
traded and a fourth one soon expected to go public, and they
continue to generate value for PureTech through their ongoing,
independent activity. In 2021, for example, we monetized a portion
of our equity in one of our Founded Entities, Karuna Therapeutics,
resulting in approximately $218 million being added to PureTech's
balance sheet and bringing the total to approximately $565 million
generated to date while still maintaining a significant equity
stake as one of the largest shareholders and the right to receive
royalties and sublicense revenues from the KarXT programs. Our
Founded Entities are a source of value to us through potential
M&A transactions, equity stakes, royalties and milestone
payments as they continue to deliver on their promise. Monetization
of our stakes in the Founded Entities has provided us with
important resources to advance our Wholly Owned Pipeline.
Collectively, our eight Founded Entities are now advancing 20
therapeutics and therapeutic candidates, of which two have been
cleared for marketing by the FDA and granted marketing
authorization in the European Economic Area, and 13 are clinical
stage.
The Founded Entities continued to mature over the year, with
Akili and Gelesis making major strides towards full commercial
launches for their groundbreaking products as well as entering the
public equity markets. Vor Bio also entered the clinic and
completed its initial public offering on Nasdaq.
In the January 2022 post-period, Gelesis became public, raising
capital to fuel its commercialization strategy for Plenity(R)1 as a
truly novel approach for overweight and obesity. Akili also
announced its entry into a definitive agreement to become publicly
traded via a merger with Social Capital Suvretta. The transaction
is expected to close in mid-2022, after which Akili will be listed
on the Nasdaq stock market under the new ticker symbol "AKLI".
Diversifying the ways we can create value for shareholders adds
stability to our anticipated growth trajectory and - as we have
seen - feeds value back into the core enterprise centered on the
Wholly Owned Programs. Those programs have substantial potential
opportunities in major markets, while the risk profile of the
portfolio is offset by our equity holdings, royalties and other
payments from our Founded Entities. The resulting balance of
opportunity and risk is rare in the biotherapeutics industry, and
we are justifiably proud of the model.
Overall, PureTech delivered substantial growth across the
Founded Entities and Wholly Owned Pipeline in 2021. Sustaining this
momentum over such an extensive range of projects does not happen
without a significant unified effort, and I congratulate the hard
work and dedication of the PureTech team and its broader network.
It is deeply rewarding to work with such a seasoned Board of
Directors and management team who translate the Board's guidance
into operational excellence and strong partnerships. The grounding
focus of our shared passion for helping people with devastating
diseases is palpable in our work, and I am convinced it is integral
to PureTech's culture and success.
Thank you to all of our shareholders for continuing to support
our work for patients. After another year of PureTech evolving into
an exemplar for a truly innovative pharmaceutical enterprise, I am
humbled by the opportunity to be part of the team's journey and I
look forward to continued success in 2022.
Christopher Viehbacher
Chair
April 25, 2022
1 Please see footnote 11 on page 7 for Important Safety
Information about Plenity(R).
Letter from the Chief Executive Officer
Towards our goal of building value and delivering on our mission
of bringing breakthrough medicines to patients, we continue to
deliver on the growing value from the hub-and-spoke R&D model
that PureTech pioneered for therapeutic development. For years, we
developed in-house expertise and a global network of world-class
advisors that informed the creation of our Founded Entities (the
spokes). The success of several of our Founded Entities as they
became independent and are advancing innovative new medicines
validated our R&D model and established a strong track record
which enables self-sustaining growth, as evidenced by their raising
$1.9 billion in aggregate over the last few years. In addition,
these Founded Entities are a source of capital to PureTech. To
date, we have been able to generate over $560 million in
non-dilutive cash while still maintaining strong equity positions.
We anticipate further value to us from these entities through
events such as M&A transactions or public listings with
subsequent value accretion in addition to royalty and milestone
payments from commercialized products such as KarXT or Plenity and
product candidates in development. We are also structured to
potentially receive sublicense revenues from pharma partnerships
entered into with certain Founded Entities.
As our balance sheet and track record strengthened, we decided
to maintain a group of Wholly Owned Programs to capture more of the
value from our core capabilities of identifying and inventing novel
medicines and taking them through proof-of-concept. The Wholly
Owned Programs and our core areas of expertise around brain, immune
and gastrointestinal systems, with a particular focus on
immunological disorders, are the hub of our R&D model. In
addition, we have consistently demonstrated our ability to harness
validated biology and add important innovative steps that enable
new medicines to advance. We have been building a differentiated,
integrated biopharmaceutical company that develops its own
wholly-owned therapeutics as well as benefits from the successes of
the now-independent Founded Entities. This gives PureTech a diverse
foundation for sustainable growth with a well-managed risk
profile.
PureTech's history of building on validated biology has been
woven into our strategic framework from our early days. For
example, our Founded Entity Karuna's core technology improved upon
a clinical compound by addressing tolerability issues and opening
up new possibilities in an area of major need where therapeutic
innovation has languished - schizophrenia and other serious
psychiatric and neurological conditions. This is very similar to
our approach to our Wholly Owned Program, LYT-100, in the way of
its de-risked clinical profile with a new chemical entity. LYT-100
maintains the pharmacology of pirfenidone with a differentiated PK
profile, enabling an improved tolerability profile. We were excited
when LYT-100 demonstrated a comparable total exposure to
pirfenidone based on PK modeling from prior studies, while
improving on the GI-related AEs, as announced in the January 2022
post-period.
Each of our programs is highly innovative and has the potential
to change the treatment paradigm for a number of serious diseases.
In the same vein as Karuna and LYT-100, LYT-300 from our Glyph(TM)
platform, LYT-510 and LYT-500 from our Alivio(TM) platform, and
Orasome(TM) programs are reasonably de-risked given they are based
on validated biology and pharmacology. We believe that focusing on
validated biology therefore offers us an important strategic
advantage and confidence as we invest in these programs. I am
beyond excited about the progress of our Wholly Owned Programs,
especially those that are now in human studies. Our other public
Founded Entities, Gelesis and Vor Bio, also harnessed validated
biology to create new opportunities for millions of patients as a
result of our foundational input.
We are building our Wholly Owned Pipeline based on candidates
that emerge from three potentially disruptive technology platforms
as well as from thematic sourcing of programs externally.
Our proprietary technology platforms in lymphatics and
inflammation are powerful tools for further enabling this strategy.
Across our Alivio, Glyph and Orasome and other oral delivery
technologies, we have a versatile toolkit for rapidly articulating
entirely new target product profiles based on validated biology and
pharmacology. An example is LYT-300, an oral allopregnanolone
candidate emerging from the Glyph platform. Allopregnanolone is a
natural neurosteroid that is approved to treat postpartum
depression but is generally poorly orally bioavailable and has to
be administered as a 60-hour intravenous infusion. Although
efficacious, the intravenous formulation has limited its
application. Applying our Glyph technology, we have developed an
oral form of natural allopregnanolone (LYT-300) that we are
currently evaluating in a first-in-human clinical study. Similarly,
we have several molecules with clinically validated biology and
pharmacology that we are evaluating utilizing our Glyph, Alivio and
Orasome and other oral delivery technologies to breathe new life
into these molecules with a highly differentiated profile. We plan
to advance one or more of these into clinical development under the
Wholly Owned Pipeline.
In addition to the innovation engine of our platforms, we
continually identify and seek access to external clinical-stage
programs that are highly differentiated and complementary to the
immune modulation focus of our Wholly Owned Pipeline.
Looking ahead, we believe our strategy and in-house capabilities
strongly position us to build on the value through advancing
innovative, differentiated medicines for patients.
The core of our business is advancing innovative medicines, and
we believe 2022 will deliver significant growth on that front, with
our internal pipeline expecting multiple clinical milestones, new
registration-enabling studies, new programs and deepened platform
validation.
In addition to research and development excellence, we are
executing on a broader strategy to build shareholder value. This
includes continuing to strengthen our balance sheet, implementing
steps to address the disconnect we believe exists between our
valuation and true value and supporting our Founded Entities in
their growth and creation. We have also been considering various
approaches to drive additional value for our shareholders,
including through the implementation of a capital deployment
strategy that balances investment in the continued growth of our
business with potential returns of capital to shareholders.
Portfolio review
Across the key areas of pipeline development and clinical
execution, PureTech continued to deliver. Highlights from the past
year include:
Wholly Owned Pipeline
In 2021, our team was proud to welcome Dr. Julie Krop as Chief
Medical Officer, who brings deep expertise in regulatory affairs,
CMC and clinical development (both as a leader and as a
board-certified physician) to oversee the significantly expanded
Wholly Owned Pipeline.
-- LYT-100: In the January 2022 post-period, we were excited to
share a successful readout from a Phase 1 trial enrolling a healthy
older adult population which demonstrated that 50% fewer subjects
experienced GI-related AEs compared to those treated with the
FDA-approved drug pirfenidone for IPF. We intend to advance a
late-stage clinical program in IPF that will leverage a streamlined
505(b)(2) development path, with topline results from the
dose-ranging study expected by the end of 2023. LYT-100 is a
selectively deuterated form of pirfenidone that maintains the
pharmacology of pirfenidone but has a highly differentiated PK
profile that has translated into favorable tolerability, as
demonstrated by data from multiple human clinical studies. We have
assembled a stellar clinical advisory board of advisors for IPF and
related lung disorders to help us advance LYT-100 into
registration-enabling studies, and have appointed pulmonary drug
development veteran, Paul Ford, M.D., Ph.D., as SVP of Clinical
Development to provide additional internal expertise. LYT-100 is
also being evaluated in a Phase 2 trial in Long COVID with results
expected in the first half of 2022, and a Phase 2a trial in
lymphedema with topline results expected in 2022. We are evaluating
a range of additional fibrotic conditions for LYT-100, such as
radiation induced fibrosis, myocardial fibrosis and other organ
system fibrosis.
-- LYT-200/210: LYT-200 is currently being evaluated as a single
agent in the first stage of an adaptive Phase 1/2 trial and we
expect to report topline results in the first half of 2022 from
this study. Complementing this activity, we entered into a clinical
trial and supply agreement with BeiGene to evaluate LYT-200 with
BeiGene's tislelizumab, an anti-PD-1 immune checkpoint inhibitor,
in patients with difficult-to-treat solid tumors. On the regulatory
front, the FDA granted LYT-200 orphan drug designation for
pancreatic cancer, which qualifies PureTech for incentives under
the Orphan Drug Act, including tax credits for some clinical trials
and eligibility for seven years of market exclusivity in the U.S.
if the drug is approved. We believe the targeting of a foundational
immunosuppressive protein, galectin-9, gives LYT-200 the potential
to treat a range of cancers. This year we also presented new
research at the American Association for Cancer Research (AACR)
Annual Meeting demonstrating that our other fully human monoclonal
antibody candidate for cancer, LYT-210, which is both highly
specific and highly potent, rapidly inducing cell death of
immunomodulatory gamma delta-1 T cells while sparing other T cells
that play important roles in a healthy immune response.
-- LYT-300: We initiated a first-in-human clinical trial of
LYT-300, oral allopregnanolone, to evaluate its safety,
tolerability and PK profile, as well as its impact on beta-EEG, a
marker of GABA(A) target engagement, potentially providing early
insights into its mechanism. We also presented preclinical
proof-of-concept data at the American College of
Neuropsychopharmacology (ACNP) Annual Meeting showing that systemic
exposure of natural allopregnanolone was achieved after oral
administration of LYT-300 in multiple preclinical models. Results
from the Phase 1 trial are expected in the second half of 2022 and
will be used to inform the design of possible future studies
evaluating LYT-300 in indications that could include depression,
anxiety, sleep disorders, fragile X tremor-associated syndrome,
essential tremor and epileptic disorders, among others.
-- On top of the progress of LYT-300 (developed using the Glyph
platform), preclinical proof-of-concept work was published in
Nature Metabolism and the Journal of Controlled Release supporting
the Glyph technology platform's ability to employ the body's
natural lipid absorption and transport process to send oral drugs
into the lymphatic system.
-- LYT-510: LYT-510 is an oral inflammation-targeting
formulation of tacrolimus, a potent immunosuppressant drug, in
development to treat IBD and chronic pouchitis. In multiple
preclinical IBD models, LYT-510 showed significant improvements in
several efficacy endpoints compared to untreated controls.
Furthermore, the inflammation-targeting properties were shown to
result in very low systemic blood levels compared to the current
immunosuppressant formulations, which minimizes the potential for
systemic side effects. We intend to file for regulatory approval to
initiate first-in-human studies at year end 2022 and initiate a
clinical study evaluating LYT-510 as a single agent for the
potential treatment of IBD and chronic pouchitis in early 2023.
-- LYT-500: We identified this candidate as a potential therapy
for IBD and progressed preclinical evaluation. LYT-500 uses the
Alivio platform to combine two active agents (IL-22 and an
immunosuppressant drug) into a single therapeutic candidate for IBD
that is designed to enhance the treatment of inflamed tissues while
having the potential to minimally impact the rest of the body.
Proof-of-concept data are expected in the first half of 2022. In
addition to the progress of LYT-510 and LYT-500 (developed using
the Alivio platform), we are evaluating other potential therapeutic
candidates leveraging Alivio to selectively restore immune
homeostasis at inflamed sites in the body, while minimalizing
impact on the rest of the immune system.
-- LYT-503/IMB-150: This non-opioid pain candidate being
developed as a partnered program for the potential treatment of
IC/BPS is expected to be filed for an IND application in 2022.
-- Orasome platform and other technologies for oral
administration of biologics: We have established preclinical
proof-of-concept supporting the platform's potential to achieve
therapeutic levels of proteins in circulation following oral
administration of therapeutic protein expression systems. We intend
to generate additional preclinical data in 2022 exploring the
potential of Orasomes and other technologies, for a wide array of
novel therapeutic protein-based applications.
-- Meningeal lymphatics research program: We published
preclinical research in Nature supporting the hypothesis 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.
Founded Entities
-- Karuna Therapeutics (Nasdaq: KRTX): Announced that all four
Phase 3 trials in their EMERGENT program, evaluating KarXT for the
treatment of psychosis in adults with schizophrenia, are enrolling.
They also initiated their Phase 3 ARISE trial of KarXT for the
treatment of schizophrenia in adults who experience an inadequate
response to current standard of care. Additional clinical
milestones include data from Karuna's completed Phase 1b trial of
KarXT in healthy elderly volunteers, which Karuna intends to
support a Phase 3 program evaluating KarXT for the treatment of
psychosis in Alzheimer's disease, initiating in mid-2022. Earlier
in 2021, results from the Phase 2 EMERGENT-1 trial evaluating KarXT
for the treatment of schizophrenia were published in NEJM. Finally,
Karuna announced entry into an exclusive license agreement with Zai
Lab for the development, manufacturing and commercialization of
KarXT in Greater China, including mainland China, Hong Kong, Macau
and Taiwan. Karuna received a $35.0 million upfront payment and is
eligible to receive certain development and regulatory milestone
and sales milestone payments, as well as royalties based on annual
net sales of KarXT in Greater China.
-- Akili: Delivered strong progress on multiple fronts,
including taking a step towards becoming a publicly-traded company.
In the January 2022 post-period, Akili entered into a definitive
agreement to become publicly traded via a merger with Social
Capital Suvretta Holdings Corp. I (Nasdaq: DNAA), a special purpose
acquisition company. With a fully committed PIPE of $162 million,
transaction is expected to close in mid-2022, after which Akili
will be listed on the Nasdaq stock market under the new ticker
symbol "AKLI". Akili previously completed a $160 million financing,
a new licensing agreement with Australian digital health company,
TALi(R), and the launch of new gaming features and functionalities
for its FDA and European marketing-authorized video game treatment,
EndeavorRx(R), designed for children with attention deficit
hyperactivity disorder (ADHD). Additionally, Akili initiated pilot
studies of AKL-T01 for COVID brain fog in collaboration with Weill
Cornell Medicine, New York Presbyterian Hospital and Vanderbilt
University Medical Center. Akili also published data in Nature
Digital Medicine from their STARS Adjunct study of EndeavorRx and
announced positive results from Japanese partner Shionogi's Phase 2
ADHD study of SDT-001.
-- Gelesis (NYSE: GLS): Made broad commercialization-focused
progress in the U.S. toward the launch of Plenity(R), an
FDA-cleared weight management approach, for adults meeting
prescription criteria. In the January 2022 post-period, Gelesis
debuted as a public company following a business combination with
Capstar Special Purpose Acquisition Corp., raising approximately
$105 million in gross proceeds to support Plenity's launch. Also in
the January 2022 post-period, Gelesis launched the "Who Said?"
multichannel marketing campaign across the U.S., which challenges
many long-held cultural and societal assumptions around weight
loss. Other achievements include completing and validating its
first commercial-scale manufacturing line, the successful LIGHT-UP
study of GS200 in adults who are overweight or obese who also have
prediabetes or type 2 diabetes and receipt of $40 million fully
paid pre-orders for Plenity(R) from leading U.S. direct-to-patient
healthcare company Ro. Finally, leading nutrition authority, Joy
Bauer, MS, RDN, CDN, was appointed Chief Nutrition Officer of
Plenity.
-- Vor Bio (Nasdaq: VOR): Initiated VBP101, a Phase 1/2a
clinical trial for VOR33, its eHSC therapy candidate for acute
myeloid leukemia, an indication for which FDA granted Fast Track
designation. Vor Bio also completed its initial public offering on
Nasdaq under the ticker symbol "VOR", with gross proceeds of over
$200 million. Additionally, Vor Bio entered into a collaboration
with Janssen Biotech to investigate the combination of Vor Bio's
"invisible" eHSC transplant platform with one of Janssen's
bi-specific antibodies in development for AML.
-- Vedanta Biosciences: Successfully completed its most advanced
clinical study to date, achieving its primary endpoint in a Phase 2
clinical trial of VE303 for the prevention of recurrent CDI in
high-risk patients. This triggered the exercise of a $23.8 million
option by program partner, the U.S. Biomedical Advanced Research
and Development Authority (BARDA), to support a Phase 3 clinical
trial of VE303. Vedanta also completed a $68 million financing,
including a $25 million investment from Pfizer as part of the
Pfizer Breakthrough Growth Initiative.
-- Follica: Appointed two leaders in aesthetic medicine and
dermatology to its Board of Directors. Tom Wiggans, former Chief
Executive Officer 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 Chief Executive Officer of Cynosure, joined as an
Independent Director with over 30 years of experience in the
medical device industry.
-- Sonde: Launched Sonde Mental Fitness, a voice-enabled mental
health detection and monitoring technology that uses a brief voice
journal entry to evaluate mental well-being, expanding Sonde beyond
respiratory health. This news followed Sonde's collaboration
announcement with leading chipmaker, Qualcomm Technologies, to
embed Sonde's vocal biomarker technology on the flagship and
high-tier Qualcomm(R) Snapdragon(TM) mobile platforms. This is
intended to help bring native, machine learning-driven vocal
biomarker capabilities to mobile and IoT devices globally.
-- Entrega: Entrega's platform for the oral administration of
biologics has continued development including via a partnership
with Eli Lilly regarding certain Lilly therapeutic candidates.
We are well-positioned for a new stage of PureTech's
development. In the year ahead, our anticipated catalysts continue
to grow in scope and maturity, with two commercial entities -
Gelesis and Akili - aiming to build launch momentum in addition to
a wide range of clinical readouts and clinical pipeline expansion
across the broader portfolio.
As always, I am proud of the breadth of activity and momentum
PureTech sustains across our deep pipeline & portfolio, and am
very grateful for the continued efforts, passion and counsel of our
team, our R&D Committee and broader advisory network, as well
as our Board and investors. Thank you to all. I am encouraged by
the entrepreneurial spirit that is infused in our work and the
mission that unites us in striving to bring powerful new medicines
to patients.
To the patients and physicians taking part in our clinical
trials: Thank you for your sacrifices and your trust in us as we
work towards dramatically improving treatment for the conditions
that impact your lives and the lives of many others. Advancing
medicine is a shared project and we are privileged to partner with
you in shaping its future.
Daphne Zohar
Founder, Chief Executive Officer and Director
April 25, 2022
Letter from the Chief Scientific Officer, Chief Medical Officer
and Chief Innovation and Strategy Officer
2021 was a year of growth for PureTech's internal R&D as we
significantly expanded our clinical activity across our Wholly
Owned Pipeline while also delivering substantial research advances
for our platform technologies. Our R&D strategy continues to
support our overarching corporate focus on building a
differentiated, integrated biopharmaceutical company focused on
developing new therapies for underserved and often devastating
diseases with limited or no options available for patients. Our
unique innovative research engine is designed to produce new
medicines that can be rapidly advanced into the clinic with our
experienced fully integrated clinical, regulatory and manufacturing
expertise.
Our research process begins by identifying therapeutic products
for serious diseases that have a well -- established human
efficacy, but their usage is significantly limited by challenges,
such as poor safety, tolerability, oral bioavailability or
dosing.
Second, we apply our innovative research and development
expertise and proprietary platform technologies, to these products
to generate a novel therapeutic candidate that addresses one or
more of the key underlying limitations and potentially unlock the
full therapeutic effectiveness of the therapy.
The essential ingredient in our program selection is typically
oriented around providing key benefits to the patients, such as
substantially improving the tolerability profile of existing
therapies that had previously demonstrated robust efficacy or
through targeting of existing therapies to certain cells, such as
the immune cells and sites of disease, such as inflammation, in
order to improve efficacy while reducing systemic side effects.
This strategy has helped us provide a solid foundation for
PureTech's long-term growth. In addition to the success of our
Founded Entity programs, we've also made tremendous strides with
our Wholly Owned Pipeline, which is built on three potentially
disruptive technology platforms in addition to external programs
thematically identified to align with our immune modulation focus.
We currently have seven therapeutic candidates in our Wholly Owned
Pipeline including one that is being advanced by a pharma partner.
In 2021, we advanced three clinical-stage wholly-owned therapeutic
candidates that have the potential to treat a range of indications
including serious lung conditions, solid tumors lymphatic flow
disorders and neurological indications. Additionally, we saw
continued validation of our lymphatic and inflammation-focused
technology platforms, including the advancement of a therapeutic
candidate from one of these platforms into human studies and the
achievement of preclinical proof-of-concept from another. The
highlights of our extensive progress across the portfolio are
summarized below:
Multi-pronged progress for LYT-100 across a range of
indications
LYT-100 (deupirfenidone) is our most advanced wholly-owned
therapeutic candidate. It is a selectively deuterated form of
pirfenidone, a drug that is approved for treating IPF, a serious
and progressive lung disease. Based on prior work with pirfenidone,
a substantial amount of preclinical and clinical data support
LYT-100's broader potential in inflammatory and fibrotic
conditions. These include lung disease (IPF and other respiratory
conditions), and disorders of lymphatic flow, such as lymphedema.
We are also exploring the potential evaluation of LYT-100 in
radiation induced fibrosis, myocardial fibrosis and other organ
system fibrosis. Due to LYT-100's broad potential across a range of
fibrotic and inflammatory diseases, we expect LYT-100 to have a
"pipeline within a product" opportunity which enables rapid
clinical development in multiple indications, and so our clinical
development strategy has focused on a comprehensive analysis of the
potential applicability of LYT-100 in areas of greatest unmet
medical need that map against its known validated biological
effects.
Although pirfenidone is one of the standard of care medicines
for IPF and has demonstrated efficacy against this progressive,
fatal disease, its usage has been greatly limited by the drug's
severe tolerability issues - especially with regards to GI
side-effects. Approximately half of the IPF patients that start
therapy with pirfenidone either discontinue therapy, reduce their
dose or switch to other therapies, all of which lead to suboptimal
disease management. These issues pushed our team to establish a
goal: To demonstrate a favorable tolerability profile of LYT-100
that could improve compliance and potentially lead to improved
disease outcomes.
LYT-100's deuterium modification improves the metabolic
stability of the molecule and enables its administration at a
dosage that can achieve the same level of drug exposure as
pirfenidone, but with a lower maximal drug concentration (Cmax).
High Cmax is often associated with AEs, therefore by reducing the
Cmax while maintaining the comparable exposure to pirfenidone,
LYT-100 has the potential to allow the patient to stay on the
therapy longer to potentially achieve an optimal therapeutic
outcome.
To date, our clinical studies strongly support a substantial
tolerability advantage of LYT-100 over pirfenidone. Our study
enrolling healthy older adults showed an approximate 50% reduction
in the number of healthy older adults treated with LYT-100 that
experienced GI-related AEs relative to those treated with
pirfenidone. Additionally, our multiple ascending dose study and
our healthy older adults crossover study demonstrated that LYT-100
was well-tolerated at all doses studied and that all
treatment-related AEs were mild and transient. Results of the Phase
1 multiple ascending dose and food effect study were presented at
the virtual European Respiratory Society International Congress and
published in the journal Clinical Pharmacology in Drug
Development.
We attribute this improved tolerability to LYT-100's
substantially differentiated PK properties that reduce AEs while
preserving exposure and pharmacology. These results are extremely
encouraging, and we are advancing LYT-100 into further clinical
development for IPF.
Last year, we initiated a LYT-100 Phase 2 clinical study focused
on patients who suffer from Long COVID respiratory complications.
Since then, the pandemic has affected more than 500 million people
around the world. Over 40% of hospitalized COVID-19 patients have
lasting dyspnea and up to 33% of severe COVID-19 patients develop
lung fibrosis. In the last 12 months, we've progressed the Phase 2
clinical trial of LYT-100 in patients who suffer from Long COVID
respiratory complications and related sequelae, and we anticipate
topline results in the first half of 2022.
We've also progressed LYT-100 in a Phase 2a proof-of-concept
trial in patients with breast cancer-related, upper limb, secondary
lymphedema. There are no approved treatments for lymphedema and we
believe leveraging our unique insights into the lymphatic system
and immunology can provide a role for deupirfenidone to make an
impact for patients living with severe unmet medical need with this
condition. Our preclinical work supports this hypothesis. In fact,
in those studies, LYT-100 showed greater anti-fibrotic and
anti-inflammatory activity when compared to pirfenidone. Results
from the Phase 2a study are anticipated in 2022.
Anti-cancer programs: LYT-200 targeting galectin-9 and LYT-210
targeting gamma delta-1 T cells
Our anti-cancer programs target emerging, foundational
immunosuppressive mechanisms to pursue a differentiated approach to
cancer types that currently do not have adequate effective
treatments. We see potential for PureTech as a leader against these
targets, with both our fully human monoclonal antibody candidates
having potential both as single agents and in combination with
existing therapies such as checkpoint inhibitors and
chemotherapeutics.
We are developing LYT-200 for solid tumors with currently poor
survival rates. In 2021, the FDA granted LYT-200 orphan drug
designation for the treatment of pancreatic cancer, which qualifies
PureTech for incentives under the Orphan Drug Act, including tax
credits for some clinical trials and eligibility for seven years of
market exclusivity in the U.S. if the drug is approved, in addition
to our broad intellectual property coverage which can extend the
exclusivity into 2038. The ongoing Phase 1 portion of its adaptive
Phase 1/2 study in solid tumors continues to progress, with a
maximum tolerated dose not yet reached, and is expected to read out
in the first half of 2022.
In 2021 we also began a clinical relationship with BeiGene to
evaluate LYT-200 together with tislelizumab, an anti-PD-1 immune
checkpoint inhibitor, in patients with solid tumors. LYT-200 is
being evaluated as a single agent in the first phase of the
adaptive Phase 1/2 study, which, pending the results, is then
designed to investigate LYT-200 in combination with tislelizumab.
While we believe that LYT-200 has the potential to have activity on
its own, its mechanism for targeting immunosuppression may also
lead to increased efficacy when combined with other cancer
immunotherapies, such as checkpoint inhibitors or chemotherapeutic
drugs, depending on the cancer.
For LYT-210, we presented promising preclinical data at the
eminent American Association for Cancer Research (AACR) Annual
Meeting. That research demonstrated that LYT-210 is both very
specific and exceptionally potent, rapidly inducing cell death of
immunomodulatory gamma delta-1 T cells, while sparing other T
cells, such as cytotoxic gamma delta T cells, that play important
roles in a healthy immune response. Gamma delta T cells are an
increasingly well recognized approach for tackling
difficult-to-treat cancers.
LYT-300: Harnessing lymphatic targeting through our Glyph(TM)
platform
We were thrilled to initiate first-in-human clinical studies of
LYT-300 (oral allopregnanolone) in December 2021. LYT-300 is the
first candidate from the Glyph technology platform to enter the
clinic, leveraging the platform's ability to enable direct delivery
of an oral drug to the lymphatic system.
Given the research supporting the broad potential neurological
and neuropsychological effects of allopregnanolone, LYT-300 is
being evaluated for the potential treatment of a variety of
conditions. The Phase 1 study evaluates multiple aspects of safety,
tolerability and PK, and topline results are expected in the second
half of 2022.
In early 2021, we presented preclinical proof-of-concept data
for LYT-300 at the American College of Neuropsychopharmacology
(ACNP) Annual Meeting.
As we advance LYT-300, we see its maturing data set as also
being supportive of our Glyph technology platform. The Glyph
technology enables us to generate novel prodrugs by reversibly
linking small molecule drugs to dietary fat molecules. This linkage
is designed to enable the transport of the small molecules directly
into systemic circulation via the lymphatic system following oral
administration, thereby bypassing first-pass liver metabolism.
We believe our Glyph platform could similarly enhance the
potential of natural biologically active molecules or existing
therapies that had previously demonstrated robust efficacy but
could not be administered orally, by unlocking oral administration
including natural neurosteroids or immune modulators that could
directly target the mesenteric lymph nodes. Furthermore,
preclinical proof-of-concept studies were published in the Journal
of Controlled Release and Nature Metabolism that support the Glyph
platform's ability to directly target the lymphatic system.
LYT-510, LYT-500, LYT-503/IMB-150: The integration of
Alivio(TM)
In 2021, we completed the acquisition of Alivio Therapeutics and
the integration of its targeted anti-inflammatory platform
technology and candidates into our Wholly Owned Pipeline. LYT-510,
in development for the treatment of IBD and chronic pouchitis, is
an oral inflammation-targeting formulation of tacrolimus.
Tacrolimus is a potent immunosuppressant drug approved for certain
indications, however its approval for IBD and chronic pouchitis has
been hampered by systemic toxicities, narrow therapeutic window of
activity and opportunistic infections that can arise from systemic
immunosuppression. There is clinical data demonstrating that
tacrolimus is effective in addressing IBD indications, but AEs have
held it back. We believe that LYT-510 can overcome these clinical
challenges with targeted drug delivery to the intestines, with the
potential to be the first tacrolimus treatment approved for IBD in
the U.S. We intend to file for regulatory approval to initiate
first-in-human studies at year end 2022 and initiate a clinical
study evaluating LYT-510 as a single agent for the potential
treatment of IBD and chronic pouchitis in early 2023. LYT-500, an
oral therapeutic candidate in development for the potential
treatment of mucosal barrier damage in people with IBD, includes
two orally dosed active agents (IL-22 and an immunosuppressant
drug) designed to selectively act at inflamed intestinal tissues
while reducing their impact on normal tissue. We expect preclinical
proof-of-concept data for LYT-500 in the first half of 2022. We
believe the targeted activation and oral formulation offered by
Alivio offers a path to unlocking the full therapeutic potential of
tacrolimus and other anti-inflammatory drugs in a way that matches
the chronic, variable expression of autoimmune diseases.
The Alivio integration also includes the addition of therapeutic
candidate, LYT-503/IMB-150, to our Wholly Owned Pipeline. It is
being developed as a partnered program as a potential non-opioid
treatment for interstitial cystitis or bladder pain syndrome
(IC/BPS). An IND application is expected to be filed for
LYT-503/IMB-150 in 2022.
Progressing the Orasome(TM) platform and other oral delivery
technologies, and Meningeal Lymphatics Research Program
In addition to Glyph and Alivio, we are also making strides with
the oral administration of biologics, such as the Orasome platform,
and meningeal lymphatics research program. Each of these possesses
a huge breadth of potential applications that could offer our
pipeline many developmental options as they mature.
In 2021, the Orasome platform achieved preclinical
proof-of-concept of its core concept: This technology is designed
to promote following oral administration of an expression system,
intestinal tract cells to produce virtually any type of therapeutic
protein, including monoclonal antibodies, "on command" with
transport to the circulatory system. We recently demonstrated in a
preclinical model that administration of Orasomes carrying an
expression system for a therapeutic protein, to the GI tract of a
rodent led to therapeutic protein detection in systemic
circulation.
This is a big idea - if we are successful, a patient could
swallow a pill and have the body make its own therapeutic protein.
We intend to generate additional preclinical data for Orasome and
other technologies in 2022.
For our meningeal lymphatics research program, we and our
collaborators published notable preclinical work 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 research also uncovered a link between
dysfunctional meningeal lymphatics and damaging microglia
activation in Alzheimer's disease, suggesting another route by
which restoring healthy (lymphatic) drainage could improve clinical
outcomes.
PureTech advantages: strategy, people and passion
With many teams in the industry advancing single platform
technologies, internally we are energized by the opportunity to be
advancing a portfolio of programs across multiple promising
approaches. They are built on leading research from our scientific
collaborators and provide important innovative approaches that
leverage validated biology and pharmacology to reduce technology
and development risk. This is a key part of our R&D strategy,
and we believe we realize synergies from their parallel internal
development that potentially enable new medicines to advance.
Our approach gives PureTech multiple opportunities for success
and we're proud of our track record, having now generated 27
therapeutics and therapeutic candidates, of which 16 are clinical
stage and two have gone from inception through successful FDA and
EU regulatory clearances for marketing.
To reach this point, we have collaborated with the world's
leading domain experts on disease-specific discovery themes,
particularly to leverage our expertise in immunology. All of our
Wholly Owned Programs are building upon validated biologic pathways
and proven pharmacology of known therapeutics while applying
important innovation that enable new medicines to advance. We have
proven our ability to utilize cross-disciplinary research and
discovery efforts across multiple indications and potential
therapeutic area thanks to a team of esteemed collaborators and
co-inventors.
We are very proud of our work to advance our Wholly Owned
Programs in 2021. Our focus on unmet medical needs in devastating
diseases is a clear guiding principle that we believe brings out
the best of our team and collaborators - we extend our warmest
thanks to both for their efforts and counsel. We are in a
transformative phase for PureTech and look forward to sharing our
progress with you soon.
Dr. Joseph Bolen
Chief Scientific Officer
Dr. Julie Krop
Chief Medical Officer
Dr. Eric Elenko
Chief Innovation and Strategy Officer
April 25, 2022
How PureTech is building value for investors
We are a clinical-stage biotherapeutics company dedicated to
discovering, developing and commercializing highly differentiated
medicines for devastating diseases where limited or no treatment
options currently exist for patients. We do this by building upon
underlying mechanisms from well-established science that have been
validated in clinical testing, while applying innovative insight or
technology that generates new medicines that can unleash the full
potential of the therapeutic. All the activity within our Wholly
Owned Pipeline and the foundational activities at our Founded
Entities were initiated by our experienced research and development
team and our extensive network of scientists, clinicians and
industry leaders. We are led by a proven and seasoned management
team with significant experience in discovering and developing
important new medicines, delivering them to market and maximizing
shareholder value. Collectively, the members of our management team
have overseen research and development of therapeutics supporting
26 regulatory approvals and have served in the C-suite of companies
acquired for more than $14 billion in the aggregate.
Our model leverages collaboration with the world's leading
experts in specific diseases, bringing together cross-disciplinary
perspectives on new treatment opportunities. We combine these
insights with our research and development expertise and
proprietary platform technologies to generate novel therapeutic
candidates that often are aimed at addressing key limitations with
existing treatments that have limited their broad application or
adoption. In addition to building on validated biology and clinical
pharmacology, we further de-risk programs with key experiments at
an early stage to validate the underlying value proposition. This
model has enabled our consistent early access to scientific
breakthroughs before their peer-reviewed publication and gives us
an edge in advancing innovative and substantially differentiated
treatment approaches for a range of indications including
inflammatory, fibrotic and immunological conditions, intractable
cancers, lymphatic and gastrointestinal diseases and neurological
and neuropsychological disorders, among
others.
Across the entire portfolio, we established the underlying
programs and platforms that have resulted in 27 therapeutics and
therapeutic candidates that are being advanced within our Wholly
Owned Programs or by our Founded Entities. Of these therapeutics
and therapeutic candidates, 16 are clinical-stage and two have been
cleared for marketing by the FDA and granted marketing
authorization in the European Economic Area, or EEA, and in other
countries that recognize the CE Mark. Our publicly-listed Founded
Entities, Karuna, Vor and Gelesis, are advancing seven of these
therapeutic candidates, including two that are currently in Phase
3/Pivotal studies, as well as one FDA-cleared therapeutic. Our
privately-held Founded Entities, Akili, Vedanta, Follica, Sonde and
Entrega, are advancing 13 other therapeutic candidates, including
two that are expected to enter a Phase 3 study. Finally, we are
advancing seven therapeutic candidates within our Wholly Owned
Pipeline, including one therapeutic candidate that is being as a
partnered program, with two Phase 2 and two Phase 1 clinical trials
underway. We and our Founded Entities have relationships with
several pharmaceutical companies or their investment arms to
advance some of the programs and platforms underlying these
therapeutics and therapeutic candidates.
This diverse portfolio is a natural result of the innovative
R&D model we pioneered for therapeutic development. It adds
stability to our anticipated growth trajectory and feeds value back
into the core enterprise centered on the Wholly Owned Programs. The
basis for our high growth strategy is to build a differentiated,
integrated biopharmaceutical company that develops its own
therapeutics while also benefiting from the successes of the
now-independent Founded Entities. This provides PureTech with a
strong foundation for sustainable growth with a well-managed risk
profile that helps drive new opportunities for patients as well as
shareholder value.
Components of our Value
The table to the right depicts the four components of our value:
(1) our Wholly Owned Programs, (2) Founded Entities, (3) our
available cash, cash equivalents and short-term investments at the
PureTech level and (4) our return of capital to shareholders.
We hold majority voting control of or otherwise retain
significant influence over our Controlled Founded Entities and
continue to play a role in the development of their therapeutic
candidates through representation on their boards of directors. Our
board designees represent a majority of the members of the board of
directors of Follica and Vedanta and a minority of the members of
the board of directors of Sonde and Entrega. With respect to our
Non-Controlled Founded Entities, we do not hold majority equity
ownership and are not responsible for the development or
commercialization of their therapeutic candidates and therapeutics.
Our Non-Controlled Founded Entities have independent management
teams, and we do not control the day-to-day development of their
respective therapeutic candidates.
1 Our Wholly Owned Programs. We are focused on the advancement
of our Wholly Owned Programs and delivering value to our
shareholders by driving our Wholly Owned Programs to key clinical
and commercial milestones, while continuing cutting-edge research
and development efforts to discover and advance new therapeutic
candidates. The table to the right includes a summary of our Wholly
Owned Programs and their development status.
2 Our Founded Entities(1) . The table to the right summarizes
the therapeutic candidates being developed by our Founded Entities
in order of our equity value. We established the underlying
programs and platforms that have resulted in the therapeutic
candidates noted in the table, each of which targets indications
related to one or more of the brain, immune and gastrointestinal
systems, and advanced them through key validation points. In
certain cases, our interest in the therapeutic candidates of these
entities is limited to the potential appreciation of our equity
interest in these entities. In other cases, we have an equity
interest in these entities and the right to receive royalty
payments on product sales and/or sublicense revenues. Any value we
realize from these therapeutic candidates will be through the
potential growth and realization of equity and royalty stakes,
including sublicense payments from pharma partnerships entered into
with certain Founded Entities.
3 Cash and Cash Equivalents. We had PureTech Level Cash and Cash
Equivalents of $418.9 million as of December 31, 2021(2) .
4 Our Return of Capital to Shareholders. In light of the strong
foundation we have built for PureTech's future growth, the Board
and senior leadership team are considering various approaches to
drive additional value to our shareholders. We are reviewing a
capital allocation strategy that will see us prioritize funding the
continued development and expansion of our Wholly Owned Pipeline
and strategic investment in our Founded Entities in accordance with
our strategic plan while we will also look to return certain
proceeds we may receive in the future to shareholders through
various distribution mechanisms, including share buybacks or
special dividends.
Key Pipeline Components and Expected Milestones Through 2022
Through 2022, we anticipate many significant potential
milestones across our Wholly Owned Programs and Founded Entities,
including at least 10 clinical readouts, at least five clinical
trial initiations and the full commercial rollout of two
therapeutics. Of these, five clinical readouts and one clinical
trial initiation are anticipated within our Wholly Owned Programs.
Additionally, we expect the continued progress of discovery and
preclinical programs, as well as the potential for additional
strategic partnerships and transactions and the growth of value
through our equity and royalty holdings in our Founded Entities.
Our Wholly Owned Programs and certain of our Founded Entities'
programs that contribute to our value are as follows:
Our Wholly Owned Programs Focused on Immunological, Fibrotic and
Lymphatic System Disorders:
LYT-100, Our Lead Clinical-Stage Therapeutic Candidate Targeting
a Range of Conditions Involving Inflammation and Fibrosis and
Disorders of Lymphatic Flow: We are advancing our clinical-stage
therapeutic candidate LYT-100 (deupirfenidone) for the potential
treatment of conditions involving inflammation and fibrosis,
including lung disease (IPF and Long COVID(11) respiratory
complications and related sequelae) and disorders of lymphatic
flow, such as lymphedema. We are also exploring the potential
evaluation of LYT-100 in other inflammatory and fibrotic conditions
such as radiation induced fibrosis, myocardial fibrosis and other
organ system fibrosis based on the strength of existing clinical
data around the use of pirfenidone in these indications. In the
January 2022 post-period, we announced results from a randomized,
double-blind crossover study in healthy older adults demonstrating
that approximately 50% fewer subjects treated with LYT-100
experienced GI-related AEs compared to subjects treated with
pirfenidone (17.4% vs. 34.0%). Based on these results, additional
data generated from our robust LYT-100 clinical program and recent
regulatory feedback, we intend to advance LYT-100 into late-stage
clinical development for the treatment of IPF, streamlining the
program by capitalizing on efficiencies of the 505(b)(2) regulatory
pathway. The dose-ranging study, which is anticipated to begin in
the first half of 2022, will enroll approximately 250
treatment-naïve patients to evaluate LYT-100 efficacy relative to
placebo. The trial will also compare the relative tolerability and
efficacy between LYT-100 and pirfenidone. Topline results from this
study are expected by the end of 2023. We believe the results of
this study, together with a Phase 3 study, could serve as the basis
for registration in the U.S. Additionally, two Phase 2 clinical
trials of LYT-100 progressed in 2021: 1) A Phase 2 trial of
LYT-100-COV in adults with Long COVID respiratory complications and
related sequelae. Topline results from this trial are expected in
the first half of 2022. 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. In 2021, we 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 will measure change in distance walked on the 6MWT, with
secondary endpoints to assess the longer-term safety and
tolerability of LYT-100-COV through up to 182 days of treatment. We
also initiated additional Phase 1 clinical trials in 2021 to
further evaluate the PK, dosing and tolerability of LYT-100 in
healthy volunteers and healthy older adults to inform the clinical
development of LYT-100 across multiple indications. Results from
these studies demonstrated that LYT-100 was well-tolerated at 824mg
TID dosing with low rates of GI AEs that were comparable to
placebo. These results will further inform our dose-ranging study
design in treatment-naïve IPF patients. In April 2021, we announced
the formation of a Clinical Advisory Board for IPF and other
PF-ILDs. In August 2021, we presented the results of the Phase 1
multiple ascending dose and food effect study of LYT-100 at the
virtual European Respiratory Society (ERS) International Congress.
The results from the study were subsequently published in the
journal Clinical Pharmacology in Drug Development in November
2021.
LYT-200 and LYT-210, Two Immuno-Oncology (IO) Therapeutic
Candidates Harnessing Key Immune Cell Trafficking and Programming
Mechanisms: The lymphatic system plays a crucial role in
programming immune cells for precise functions and trafficking them
to specific tissues. By modulating immune cell trafficking and
programming, we are developing therapeutic candidates for the
potential treatment of cancer and other immunological disorders. We
are advancing LYT-200, targeting a foundational immunosuppressive
protein, galectin-9, for the potential treatment of
difficult-to-treat solid tumors including pancreatic ductal
adenocarcinoma (PDAC), colorectal cancer (CRC) and
cholangiocarcinoma (CCA), and LYT-210, targeting immunomodulatory
gamma delta-1 T cells for a range of cancer indications. LYT-200 is
being evaluated as a single agent in the first stage of an adaptive
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.
Topline results from the Phase 1 portion of the study are
anticipated in the first half of 2022. Pending these results, we
intend to initiate the Phase 2 expansion cohort portion of the
trial, which is designed to evaluate LYT-200 both as a single agent
and in combination with chemotherapy or BeiGene's tislelizumab, an
anti-PD-1 mAb for which we and an affiliate of BeiGene, Ltd.
entered into a clinical trial and supply agreement in July 2021.
Under the terms of the agreement, we 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 Phase 2 study cohorts. In
November 2021, the FDA granted orphan drug designation to LYT-200
for the treatment of pancreatic cancer. The FDA grants orphan drug
designation to novel drug and biologic products for the treatment,
diagnosis or prevention of conditions affecting fewer than 200,000
persons in the U.S. Orphan Drug designation qualifies PureTech for
incentives under the Orphan Drug Act, including tax credits for
some clinical trials and eligibility for seven years of market
exclusivity in the U.S. if the drug is approved, in addition to our
broad intellectual property coverage which can extend the
exclusivity into 2038. In April 2021, we presented a scientific
poster detailing additional promising preclinical results for
LYT-210 at the 2021 American Association for Cancer Research (AACR)
Annual Virtual Meeting. The research demonstrated that LYT-210 is
both highly specific and highly potent, rapidly inducing cell death
of immunomodulatory gamma delta-1 T cells, while sparing other T
cells that play important roles in a healthy immune response. We
expect to complete additional biomarker studies for LYT-210 in
2022.
LYT-300, Preclinical Therapeutic Candidate Developed Using our
Glyph Technology Platform, Targeting Neurological and
Neuropsychological Conditions: Using our Glyph platform, which
harnesses the natural trafficking of dietary lipids via the
lymphatics, we are advancing LYT-300, an oral form of
allopregnanolone, for the potential treatment for a range of
neurological and neuropsychological conditions. Allopregnanolone is
a natural neurosteroid that is a positive allosteric modulator of
<GAMMA> -aminobutyric-acid type A (GABA (A) ) receptors,
which are known to play a key biological role in depression,
epilepsy and other neurological and neuropsychological conditions.
In December 2021, we initiated a Phase 1 clinical study of LYT-300,
which is designed to characterize the safety, tolerability and PK
of orally administered LYT-300 in healthy volunteers. Results are
expected in the second half of 2022 and will be used to inform the
design of possible future studies evaluating LYT-300 in indications
that could include depression, anxiety, sleep disorders, fragile X
tremor-associated syndrome, essential tremor and epileptic
disorders, among others. Also in December 2021, we presented
preclinical proof-of-concept data at the 60th American College of
Neuropsychopharmacology (ACNP) Annual Meeting supporting the
clinical advancement of LYT-300. The data presented at ACNP showed
that systemic exposure of natural allopregnanolone was achieved
after oral administration of LYT-300 in multiple preclinical models
of increasing complexity. In contrast, systemic levels of
allopregnanolone were not observed following oral administration of
natural unmodified allopregnanolone. These results demonstrate the
potential of the Glyph technology platform to enhance the systemic
absorption of natural bioactive molecules and other small molecules
with poor oral bioavailability. We are also advancing our Glyph
technology platform, which is designed to employ the lymphatic
system's natural lipid absorption and transport process and has led
to the nomination of a new therapeutic candidate, LYT-300, for
continued expansion of our Wholly Owned Pipeline. We have
successfully extended the platform to encompass more than 20
molecules as well as a range of novel linker chemistries that have
demonstrated promising lymphatic targeting in preclinical studies.
In 2021, preclinical proof-of-concept work was published in Nature
Metabolism and the Journal of Controlled Release supporting the
Glyph technology platform's ability to directly target the
lymphatic system.
LYT-510, LYT-500 and LYT-503/IMB-150, our Therapeutic Candidates
Developed Using our Alivio Technology Platform for Inflammatory
Disorders: In June 2021, we announced the acquisition of the
remaining 22% of shares outstanding in our Founded Entity, Alivio
Therapeutics (Alivio). The underlying Alivio technology platform,
which is designed to enable oral and locally targeted
immunomodulation for the potential treatment of a range of chronic
and acute inflammatory disorders, has been added to our lymphatic
and inflammation programs. Alivio's therapeutic candidates, in
development for inflammatory disorders including IBD, have also
been integrated into our Wholly Owned Pipeline. The first of these
candidates is LYT-510, an oral inflammation-targeting formulation
of tacrolimus, a potent immunosuppressant drug, in development to
treat IBD and chronic pouchitis. In multiple preclinical IBD
models, LYT-510 showed significant improvements in several efficacy
endpoints compared to untreated controls. Furthermore, the
inflammation-targeting properties were shown to result in very low
systemic blood levels compared to the current immunosuppressant
formulations, which minimizes the potential for systemic side
effects. We intend to file for regulatory approval to initiate
first-in-human studies at year end 2022 and initiate a clinical
study evaluating LYT-510 as a single agent for the potential
treatment of IBD and chronic pouchitis in early 2023. In addition,
LYT-500 is an orally-administered therapeutic candidate in
development for the treatment of IBD that contains a unique
combination of IL-22 and an approved potent anti-inflammatory drug
and is designed to address the key underlying causes of IBD
pathogenesis and progression, such as mucosal barrier disruption
that are currently not adequately treated by the standard of care
medicines. We expect preclinical proof-of-concept data for LYT-500
in the first half of 2022. LYT-503/IMB-150 is a therapeutic
candidate being advanced as a partnered program 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. An IND application is expected to be filed for
LYT-503/IMB-150 in 2022.
In addition to our Glyph and Alivio lymphatic and inflammation
platforms, our Wholly Owned Programs include Orasome and other oral
biotherapeutics platforms enabling the body to produce its own
therapeutic protein in the gastrointestinal tract and enter the
systemic circulation via the lymphatic system - and a meningeal
lymphatics research program to develop potential treatments for
neurodegenerative and neuroinflammatory diseases.
Orasome and Other Technology Platforms for Oral Administration
of Therapeutics: We are developing versatile and programmable oral
biotherapeutics approaches, such as our Orasome technology, to
promote following oral administration of an expression system,
intestinal tract cells, to produce virtually any type of
therapeutic protein, including monoclonal antibodies, "on command"
with transport to the circulatory system. We recently demonstrated
in a preclinical model that administration of Orasomes carrying an
expression system for a therapeutic protein to the GI tract of a
rodent led to therapeutic protein detection in systemic
circulation. In 2021, we established preclinical proof-of-concept
supporting the potential of the Orasome technology platform to
achieve production of therapeutic proteins in the gut of an animal
following simulated oral administration of expression systems and
transport of these proteins from the gut into systemic circulation.
Proof-of-concept was observed with multiple formulations which are
being further optimized to achieve a range of expression profiles
for therapeutic proteins. We expect to generate additional data in
2022, with Orasomes and other technologies, across a range of
preclinical models and therapeutic proteins. We expect to generate
data to demonstrate that oral administration of Orasomes, carrying
an expression system for a desired therapeutic protein, can achieve
therapeutic levels of the protein in multiple species of
preclinical models with achievement of safe repeat-dose
administration. Using the Orasome technology platform, it may be
possible for a patient to take an oral drug product that will
permit their own GI tract cells to make virtually any type of
protein. This
approach also has the potential to provide a more convenient and
significantly less expensive means to administer biological
medicines. This work could lay the foundation for IND-enabling
clinical studies for one or more additional therapeutic candidates
to be included in our Wholly Owned Pipeline. In addition to
Orasomes, we are also exploring the use of other approaches, such
as certain exosomes isolated from milk as well as synthetic novel
polymers and vesicles for delivering biotherapeutics.
Our Meningeal Lymphatics Research Program: We continued to
advance our meningeal lymphatics research program, which harnesses
the meningeal lymphatics to potentially treat a range of
neurodegenerative and neuroinflammatory conditions. In April 2021,
we announced the publication of preclinical research in Nature,
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, such as Alzheimer's and Parkinson's
diseases, which potentially impairs the efficacy of passive
immunotherapies such as amyloid-beta-targeting antibodies. 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.
Founded Entities
Karuna
Karuna Therapeutics, Inc., or Karuna, which is developing its
novel therapies with the potential to deliver transformative
medicines for people living with psychiatric and neurological
conditions, made progress towards developing KarXT
(xanomeline-trospium), an oral, investigational M1/M4-preferring
muscarinic acetylcholine receptor agonist in development for the
treatment of psychiatric and neurological conditions, including
schizophrenia and psychosis in Alzheimer's disease (AD). KarXT is
designed to unlock the therapeutic potential of xanomeline, which
demonstrated significant benefits in reducing symptoms of psychosis
in Phase 2 studies in schizophrenia and AD, while ameliorating side
effects seen in earlier studies. In August 2021, Karuna announced
that all four Phase 3 trials in the EMERGENT program, the clinical
program evaluating KarXT for the treatment of psychosis in adults
with schizophrenia, are enrolling. In November 2021, Karuna
announced that topline data from EMERGENT-2, a five-week inpatient
trial evaluating the efficacy and safety of KarXT compared to
placebo in 246 adults with schizophrenia in the U.S., are expected
in mid-2022. EMERGENT-3, a five-week inpatient trial evaluating the
efficacy and safety of KarXT compared to placebo in 246 adults with
schizophrenia in the U.S. and Ukraine, is underway. EMERGENT-4, a
52-week outpatient, open-label extension trial evaluating the
long-term safety and tolerability of KarXT in 350 adults with
schizophrenia who completed EMERGENT-2 or EMERGENT-3, and
EMERGENT-5, a 52-week outpatient, open-label trial evaluating the
long-term safety and tolerability of KarXT in adults with
schizophrenia who were not enrolled in EMERGENT-2 or EMERGENT-3,
are also underway. Enrollment for this trial began in the second
quarter of 2021. Karuna plans to increase the number of sites in
the U.S. and Puerto Rico, and allow for up to 600 patients in the
trial. 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 in 2021.
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 3 program evaluating KarXT for the treatment of
psychosis in AD in mid-2022, with details available in the first
half of 2022. In November 2021, Karuna announced the evaluation of
KarXT for the treatment of dementia-related psychosis (DRP) will
initially focus on psychosis in AD, the most common subtype of DRP.
The initial focus on the AD dementia subtype reflects various
strategic development, regulatory and commercial considerations,
and Karuna remains interested in exploring KarXT in other dementia
subtypes in future development programs. In November 2021, Karuna
initiated the Phase 3, six-week, 1:1 randomized, double-blind,
placebo-controlled ARISE trial evaluating KarXT for the treatment
of schizophrenia in approximately 400 adults who experience an
inadequate response to current standard of care. 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. In late 2021, Karuna initiated a Phase 1 trial of
an advanced formulation of KarXT as it continued to advance its
earlier pipeline of muscarinic receptor targeted programs and novel
formulations of KarXT. Karuna is also advancing its artificial
intelligence-based target agnostic discovery program for treating
psychiatric and neurological conditions. Karuna also continues to
advance its earlier pipeline of muscarinic receptor targeted
programs and novel formulations of KarXT, including its artificial
intelligence-based target agnostic discovery program for treating
psychiatric and neurological conditions. Additionally, in November
2021, Karuna and Zai Lab announced their entry into an exclusive
license agreement for the development, manufacturing, and
commercialization of KarXT in Greater China, including mainland
China, Hong Kong, Macau and Taiwan. Under the terms of the
agreement, Karuna received a $35.0 million upfront payment and is
eligible to receive certain development and regulatory milestone
and sales milestone payments, as well as royalties based on annual
net sales of KarXT in Greater China. Zai Lab will fund
substantially all development, regulatory and commercialization
activities in Greater China. In February 2021, Karuna announced
that results from the Phase 2 EMERGENT-1 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 net proceeds of $270.0 million. In
2021, we sold 1,750,000 shares of Karuna common stock for cash
consideration of approximately $218 million in two separate
transactions in February and November. We intend to use the
proceeds from the transaction to further expand and advance its
clinical-stage Wholly Owned Pipeline. We are eligible to receive
certain sublicense payments and royalties on sales of any
commercialized product covered by the license agreement between us
and Karuna pursuant to the terms of such license agreement. Our
interest in Karuna also includes our equity ownership of 5.6% at
February 15, 2022.
Akili
Akili Interactive Labs, Inc., or Akili, has made progress in
advancing its digital diagnostics, treatments and monitors for
cognitive impairments across disease and disorders. In the January
2022 post-period, Akili entered into a definitive agreement to
become publicly traded via a merger with Social Capital Suvretta
Holdings Corp. I (Nasdaq: DNAA), a special purpose acquisition
company. The transaction is expected to close in mid-2022, after
which Akili will be listed on the Nasdaq stock market under the new
ticker symbol "AKLI". The transaction implies a post-money equity
value of the combined company of up to approximately $1 billion and
is expected to deliver up to $412 million in gross cash proceeds to
Akili, including the contribution of up to $250 million of cash
held in SCS's trust account and $162 million from PIPE investors at
$10 per share. In May 2021, Akili closed on the $160 million
combined equity and debt financing, which is expected to accelerate
commercialization of EndeavorRx(R)12 . In March 2021, the 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) was published in
Nature Digital Medicine. In the February 2022 post-period, Akili
announced the publication of full data in the medical journal PLOS
ONE from a single arm, unblinded study conducted by Dr. Elysa Marco
at Cortica Healthcare and Drs. Joaquin Anguera and Courtney Gallen
at the University of California, San Francisco. The study measured
electroencephalography (EEG) data alongside behavioral and clinical
metrics of attention in children with ADHD using AKL-T01
(EndeavorRx). Data from the study show that EndeavorRx treatment
resulted in increased brain activity related to attention function,
as measured by EEG, which correlated with improvements in objective
behavioral measures of attention. In September 2021, Akili
announced topline results from Shionogi's Phase 2 study of SDT-001
(Japanese version of AKL-T01) that showed treatment was
well-received by patients and demonstrated improvements in
attention-deficit/hyperactivity disorder (ADHD) inattention
symptoms consistent with those seen across previous studies of
AKL-T01. In July 2021, Akili introduced new gaming features and
functionalities to its EndeavorRx treatment. Akili is releasing
these new gameplay features as it expands its pre-launch activities
to bring EndeavorRx to families and healthcare professionals. In
April 2021, Akili announced collaborations with Weill Cornell
Medicine, New
York-Presbyterian Hospital and Vanderbilt University Medical
Center to initiate pilot studies of Akili digital therapeutic
AKL-T01 as a treatment for patients with cognitive dysfunction
following COVID-19 (also known as "COVID fog"). In August 2021,
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. Our
interest in Akili is limited to our equity ownership of 22.3% at
December 31, 2021.
Gelesis
Gelesis Holdings, Inc., or Gelesis, has continued to advance its
novel category of treatments for weight management and gut related
chronic diseases. In December 2021, Gelesis announced its lead
product, Plenity(13) (formerly known as Gelesis100), is now broadly
available in the U.S. to adults who meet the prescription criteria.
In the January 2022 post-period, Gelesis announced the completion
of its business combination with Capstar Special Purpose
Acquisition Corp. (NYSE: CPSR) ("Capstar"). Gelesis Holdings, Inc.
began trading on the New York Stock Exchange under the ticker
symbol "GLS" on January 14, 2022. In the January 2022 post-period,
Gelesis launched the "Who Said?" marketing campaign across the
U.S., which challenges many long-held cultural and societal
assumptions around weight loss. Plenity's multichannel campaign
encompasses TV, digital, social and Out of Home (OOH) to grow
awareness of Plenity's novel approach to weight management. In the
March 2022 post-period, Gelesis announced preliminary results from
its broad awareness media campaign, noting that within the first
three weeks, Gelesis saw a 3-fold increase in web traffic and
3.5-fold increase in the number of individuals seeking a new
prescription compared to previous months when supply was limited.
In November 2021, Gelesis announced that it had received a $30
million fully paid pre-order, in addition to the $10 million
pre-order received in January 2021, for Plenity from Ro, a leading
U.S. direct-to-patient healthcare company. Plenity was initially
made available through a beta launch in 2020, and demand quickly
outpaced supply while Gelesis worked to construct a larger
manufacturing facility. Gelesis' first commercial-scale
manufacturing line at the facility was also completed and validated
in November 2021. In late 2021, Gelesis completed a preliminary
analysis of the LIGHT-UP study, a multicenter, randomized,
double-blind, placebo-controlled, investigational study that
enrolled 254 subjects with overweight or obesity who also have
prediabetes or type 2 diabetes, and that analysis remains underway.
The study was designed to assess the change in body weight in
adults after six months of treatment with a new oral superabsorbent
hydrogel (GS200) or placebo. The study met both of its primary
endpoints: the proportion of participants who achieved at least 5%
body weight loss (defined as "Responders") and the change in body
weight as compared to placebo after six months of therapy. The
LIGHT-UP study was conducted at 36 clinical sites in Europe and
North America with 208 subjects who completed the 6-month study. In
November 2021, Gelesis announced a publication in Nature's
Scientific Reports describing the genesis of the underlying
technology and engineering process for Gelesis' non-systemic
superabsorbent hydrogels. These new materials were designed to
replicate compositional and mechanical properties of raw
vegetables, and the paper describes their therapeutic approach for
weight management as well as possible future solutions for other
gut-related conditions. 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. We
are eligible to receive certain payments from Gelesis under our
license agreement, including sublicense payments and royalties on
any sales of Plenity. Our interest in Gelesis also includes our
equity ownership of 23.5% at March 31, 2022.
Vor
Vor Bio, Inc. or Vor, a clinical-stage cell and genome
engineering company that aims to change the standard of care for
patients with blood cancers by engineering hematopoietic stem cells
(HSC) to enable targeted therapies post-transplant, continued to
engineer eHSC therapies combined with targeted therapies for the
treatment of cancer in 2021. In February 2021, Vor Bio completed
its initial public offering of common stock on the Nasdaq Global
Market under the symbol "VOR". The aggregate gross proceeds to Vor
Bio from the offering were approximately $203.4 million, before
deducting the underwriting discounts and commissions and other
offering expenses payable by Vor Bio. In the March 2022
post-period, Vor Bio announced VCAR33 is now made up of two
programs with different cell sources. The VCAR33 programs are
chimeric antigen receptor T (CAR-T) cell therapy candidates
designed to target CD33, a clinically-validated target for AML.
VCAR33(AUTO) uses autologous cells from each patient, and is being
studied in an ongoing Phase 1/2 clinical trial sponsored by the
National Marrow Donor Program (NMDP) in young adult and pediatric
patients with relapsed/refractory AML in a bridge-to-transplant
study. Data from this study are expected in 2022. VCAR33(ALLO) uses
allogeneic healthy donor-derived cells. Vor Bio plans to submit an
IND application in the first half of 2023 to support a Phase 1/2
clinical trial of VCAR33(ALLO) for patients with
relapsed/refractory AML. Additionally, Vor Bio announced in the
March 2022 post-period its plans to collect initial data on VOR33
from the VBP101 clinical trial and initial clinical data from the
VCAR33(ALLO) program prior to IND submission for the Treatment
System following ongoing discussions with the FDA and alongside
improved scientific understanding of the differences in T-cell
sources. Vor Bio plans to share initial clinical data from the
VBP101 trial of VOR33 for patients with AML in the second half of
2022. In September 2021, the FDA granted Fast Track designation to
VOR33 for the treatment of acute myeloid leukemia (AML). Vor Bio
initiated VBP101, a Phase 1/2a clinical trial of VOR33 for AML
patients who currently have limited treatment options and expects
to report VOR33's initial clinical data in the second half of 2022.
Vor Bio also expects to submit an IND filing with the FDA for the
VOR33/VCAR33 Treatment System in the second half of 2022. In
November 2021, Vor Bio announced its first multi-targeted Treatment
System comprising VOR33-CLL1 multiplex-edited eHSC therapy and
VCAR33-CLL1 multi -- specific CAR-T therapy and it continues to
make progress on editing multiple antigens with its eHSC platform.
Vor Bio plans to share preclinical data on its VOR33-CLL1 +
VCAR33-CLL1 Treatment System approach at upcoming scientific
meetings in 2022. Vor Bio expects initial monotherapy clinical
proof-of-concept data for VCAR33 in 2022, depending on
investigator's timing of data release. In June 2021, Vor Bio
announced the build-out of an in-house clinical manufacturing
facility in Cambridge, Massachusetts in the same premises as Vor
Bio's current headquarters, to support flexible manufacturing for
the company's eHSC and CAR-T product candidate pipeline for
patients with blood cancers. Vor Bio anticipates that the facility
will be operational in 2022. In July 2021, Vor Bio formed a
collaboration with Janssen Biotech, Inc. (Janssen), one of the
Janssen Pharmaceutical Companies of Johnson & Johnson to
investigate the combination of Vor Bio's "invisible" eHSC
transplant platform with one of Janssen's bi-specific antibodies in
development for AML. In June 2021, Vor Bio 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 Bio's eHSC platform,
with the goal of generating novel treatment systems for patients
fighting AML and other devastating forms of blood cancer. Our
interest in Vor Bio is limited to our equity ownership of 8.6% at
March 4, 2022.
Vedanta
Vedanta Biosciences, Inc., or Vedanta, progressed the
development of a potential new category of oral therapies based on
defined consortia of bacteria is isolated from the human microbiome
and grown from pure clonal cell banks. In October 2021, Vedanta
announced that it achieved the primary endpoint in a Phase 2
clinical trial of VE303, an orally administered investigational
live biotherapeutic product (LBP) in development for the prevention
of recurrent C. difficile infection (CDI) in high-risk patients.
Based on the Phase 2 data, the Biomedical Advanced Research and
Development Authority (BARDA) exercised its first contract option
for additional funding of $23.8 million, pursuant to its existing
2020 contract with Vedanta, to support a planned Phase 3 clinical
trial of VE303. In July 2021, Vedanta closed a $68 million
financing, which included a $25 million investment from Pfizer as
part of the Pfizer Breakthrough Growth Initiative. Vedanta plans to
use the proceeds to advance its pipeline of defined bacterial
consortia, including progressing VE303 into a Phase 3 clinical
trial in patients at high risk for recurrent CDI, initiating a
Phase 2 clinical trial of VE202 in mild to moderate ulcerative
colitis. In late 2021, Vedanta completed the build-out of its Phase
3 and commercial launch CGMP manufacturing facility for supply of
VE303. In June 2021, Vedanta presented additional results from a
Phase 1 study in healthy volunteers of VE202 for IBD at the 2021
International Human Microbiome Consortium Congress (IHMC). In July
2021, Vedanta announced results from the Phase 1 study evaluating
the safety and initial clinical activity of VE800, an
immuno-oncology therapeutic candidate, in combination with Bristol
Myers Squibb's Opdivo(R) (nivolumab) in 54 patients across select
types of advanced or metastatic cancers. 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. Our interest in Vedanta is limited to our equity
ownership of 41.4% at December 31, 2021.
Follica
Follica, Incorporated, or Follica, continued to advance its
regenerative platform designed to treat androgenetic alopecia,
epithelial aging and other related conditions. In January 2021,
Follica announced the appointment of two leaders in aesthetic
medicine and dermatology to its Board of Directors. Follica
continued to advance its regenerative biology platform, including
preparing for a registration clinical program in male androgenetic
alopecia, which is expected to be initiated in 2022. Follica also
has proprietary amplification compounds in development and ongoing
discovery efforts to expand its pipeline. We are eligible to
receive certain payments from Follica under our license agreement,
including sublicense payments and royalties on any sales of certain
potential products by Follica. Our interest in Follica also
includes our equity ownership of 76.0% at December 31, 2021.
Sonde
Sonde Health, Inc. or Sonde, continued the development of its
proprietary voice-based technology platform designed to detect
changes of health conditions - like mental fitness and respiratory
disease - from changes in voice, leveraging over one million voice
samples from 80,000+ individuals. In October 2021, Sonde launched
Sonde Mental Fitness, a voice-enabled mental health detection and
monitoring technology that uses a brief voice sample to evaluate
mental well-being. Sonde Mental Fitness is available as an
application programming interface for health systems, employers and
wellness services. Sonde One, its health screening app, helps large
organizations to execute a daily population screening regimen that
can help reduce the spread of COVID-19, comply with government
mandates and return to work safely. In the January 2022
post-period, Sonde announced the signing of a multi-year strategic
partnership with GN Group to research and develop commercial vocal
biomarkers for mild cognitive impairment. The research will serve
as the backbone for new voice-based tools to help at-risk
individuals gain timely and accurate health insights using GN
Group's device technologies and, ultimately, to enable early
detection and management of life-threatening diseases for the
millions of people living with hearing loss. In July 2021, Sonde
announced a strategic collaboration with leading chipmaker,
Qualcomm, to embed 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.
Sonde plans to launch key pilot programs in the employer wellness,
health system and provider space in 2022. Our interest in Sonde is
limited to our equity ownership of 44.6% at December 31, 2021.
Entrega
Entrega, Inc. or Entrega, 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 2022. Entrega has also continued
advancement of its ENT-100 platform for the oral administration of
biologics, vaccines and other drugs that are otherwise not
efficiently absorbed when taken orally. Our interest in Entrega is
limited to our equity ownership of 74.3% at December 31, 2021.
Our Mission: Developing Breakthrough Medicines for Underserved
and Serious Diseases
The programs within our Wholly Owned Programs and at our Founded
Entities were initiated in close collaboration with leading
academic and clinical experts. We discover, develop and aim to
commercialize new therapies for underserved and often devastating
diseases where limited or no treatment options currently exist for
patients. We do this by building upon validated biology of known
therapeutics while applying unique innovative steps that improve
pharmacologic profiles.
Unlocking the Potential of Validated Biology
The common theme underlying all of our programs has been to
start with a tremendous patient need. In many cases, these programs
are identified based on signals of human efficacy and clinically
validated biology, which has enabled us to advance therapeutic
candidates with significantly de-risked profiles and robust
development rationales, resulting in differentiated potential
treatments for patients.
For example, the key innovation behind our Founded Entity,
Karuna, was built around two validated drugs: xanomeline, a novel
muscarinic agonist, and trospium, an approved muscarinic
antagonist. We were able to ameliorate the GI tolerability issues
of xanomeline by pairing it with a gut-restricted muscarinic
antagonist to develop a novel formulation that enabled a new
approach for the potential treatment of schizophrenia and other
serious psychiatric and neurological conditions, an area of major
unmet need. KarXT now represents a potential first-in-class and
best-in-class therapy for schizophrenia.
We have continued to harness the power of this approach to
develop new medicines by applying our innovation and technology
that can unleash the full potential of a therapeutic that was
previously held back from their full potential by key challenges,
such as poor safety, tolerability, oral bioavailability or
dosing.
LYT-100
Pirfenidone has been proven effective against fibrosis and
inflammation, but significant tolerability issues negatively affect
patient compliance and often result in suboptimal disease
management. To tackle this problem, we are developing a proprietary
clinical-stage therapeutic candidate, LYT-100 (selectively
deuterated form of pirfenidone) that maintains the pharmacology of
pirfenidone but has a highly differentiated PK profile that has
translated into favorable tolerability, as demonstrated by data
from multiple human clinical studies.
LYT-300/Glyph(TM) Technology Platform
Allopregnanolone is a natural neurosteroid with well-established
biology that has demonstrated efficacy for the treatment of
epilepsy, depression and other neurological indications. However,
it is not orally bioavailable and is commercially formulated to be
administered as a cumbersome 60-hour IV infusion. We have applied
our innovative Glyph technology to generate LYT-300, which is an
orally bioavailable prodrug of natural allopregnanolone. Our Glyph
technology platform is based on the natural process of dietary
lipid transport in the body. We use the Glyph technology to design
prodrugs of natural bioactive molecules, such as allopregnanolone,
for oral administration of drugs, that are transported via the
lymphatic system and bypass first-pass liver metabolism. LYT-300
has been shown in preclinical models to enable allopregnanolone to
be bioavailable.
LYT-510, LYT-500/Alivio(TM) Technology Platform
Our Alivio technology platform is designed to target biologics
and other drugs to sites of inflammation in a localized manner
while limiting their systemic exposure, which offers the potential
to significantly improve both the safety and efficacy profile of
the therapy. We are developing LYT-510 as an oral
inflammation-targeting formulation of tacrolimus, a potent
immunosuppressant drug, to treat IBD and chronic pouchitis.
Tacrolimus is approved for certain indications, however its
approval for IBD and chronic pouchitis has been hampered by
systemic toxicities, narrow therapeutic window of activity and
opportunistic infections that can arise from systemic
immunosuppression. There is clinical data demonstrating that
tacrolimus is effective in addressing IBD indications, but AEs have
held it back. We believe that LYT-510 can overcome these clinical
challenges with targeted drug delivery to the intestines, with the
potential to be the first tacrolimus treatment approved for IBD in
the U.S. In multiple preclinical IBD models, LYT-510 showed
significant improvements in several efficacy endpoints compared to
untreated controls. Furthermore, the inflammation-targeting
properties were shown to result in very low systemic blood levels
compared to the current immunosuppressant formulations, which
minimizes the potential for systemic side effects. LYT-500 is an
oral therapeutic candidate that we are developing for the potential
treatment of mucosal barrier damage in people with IBD. We believe
the targeted activation and oral formulation offered by Alivio
offers a path to unlocking the full therapeutic potential of
anti-inflammatory drugs in a way that matches the chronic, variable
expression of autoimmune diseases.
Orasome(TM) and other Technology Platforms for Oral
Administration of Therapeutics
Validated biology has shown that intestinal cells can be
engineered to produce clinically validated therapeutic proteins,
such as EPO, GLP-1 and mAbs. Therapeutic proteins and nucleic acid
therapeutics (e.g. mRNA) are primarily administered by injection.
Using the Orasome technology platform, it may be possible for a
patient to take an oral drug product that will permit their own
gastrointestinal tract cells to make virtually any type of
therapeutic protein. This approach also has the potential to
provide a more convenient and significantly less expensive means to
administer biological medicines. In addition to Orasomes, we are
also exploring the use of other approaches, such as certain
exosomes isolated from milk as well as synthetic novel polymers and
vesicles for delivering biotherapeutics.
Our Model
We employ the following process to identify and develop
therapeutic candidates:
-- Step 1: A Collaborative Discovery Process Leveraging
Validated Biology and our Scientific Network: We collaborate with
the world's leading domain experts on a disease-specific discovery
theme through our core areas of expertise around brain, immune and
gastrointestinal systems, with a particular focus on immunological
disorders. Our Wholly Owned Programs are built around this
expertise and we prioritize programs that have the potential to
reduce early development risk based on preliminary signals of
activity in humans and promising tolerability profiles. We have
proven our ability to efficiently leverage our cross-disciplinary
research and discovery efforts across multiple indications and
potential therapeutic areas. Our program collaborators and
co-inventors across our Wholly Owned Programs and Founded Entities'
programs include leading academic minds; recipients of major awards
such as the Nobel Prize, the U.S. National Medal of Science, the
Charles Stark Draper Prize and the Priestley Medal; members of
prestigious institutions such as the Howard Hughes Medical
Institute, all three of the National Academies and world-renowned
academic institutions such as Harvard, MIT, Yale, Columbia, Johns
Hopkins, Imperial College of London and Cornell, among others; and
former senior executives and board members at some of the world's
largest pharmaceutical companies.
-- Step 2: A Disciplined Approach to Program Advancement: We
employ a rigorous and disciplined approach to research and
development. The breadth and depth of our Wholly Owned Programs and
our Founded Entities' programs allow us to quickly pivot resources
to the more promising therapeutic opportunities, strategically
reallocate capital across programs and terminate Wholly Owned
Programs we choose not to pursue without adversely impacting the
development of other programs. Through our internal resources and
with our extensive expert network and collaboration partners, we
repeat key academic work and conduct focused experiments both
internally and externally to rapidly advance those that we believe
hold the greatest promise and deprioritize less attractive
programs. Collectively, these activities decrease the risk of any
individual program event negatively impacting our Wholly Owned
Programs and enable us to preserve capital for the programs across
our Wholly Owned Programs and Founded Entities that we believe have
the greatest opportunity for value creation in alignment with our
shareholders.
-- Step 3: A Capital Efficient Approach to Driving Clinical
Development and Value Creation: Our management team has
successfully driven these therapeutic candidates from early-stage
research and development, through POC and into clinical trials and
has supported dedicated teams at our Non-Controlled Founded
Entities through pivotal trials and FDA clearance. We have financed
our development efforts through strategic collaborations,
pharmaceutical partnerships, non-dilutive funding mechanisms,
including through the sale of our Founded Entities' equity and
through grants, and public and private equity financings. We
leverage shared resources, institutional knowledge and
infrastructure between our earlier stage Founded Entities and
development efforts within our Wholly Owned Programs to advance our
programs efficiently prior to POC. This approach has enabled the
discovery and development of 27 therapeutics and therapeutic
candidates to date, including two that have been cleared for
marketing by the FDA and granted marketing authorization in the
EEA, between our Wholly Owned Programs and our Founded Entities, in
which we retain equity ownership ranging from 5.6% to 76.0%. We had
PureTech Level Cash and Cash Equivalents of $418.9 million as of
December 31, 2021(14) . From January 1, 2017 to December 31, 2021,
our Founded Entities strengthened their collective balance sheets
by attracting $1.9 billion in investments and non-dilutive funding,
including $1.8 billion from third parties. As part of our
disciplined capital management, we have been able to generate
$578.0 million in non-dilutive funding, as of December 31, 2021,
through the sales of portions of Founded Entity shares.
Our goal is to identify, invent, develop and commercialize
innovative new categories of therapeutics that are derived from our
deep understanding of the brain, immune, and gastrointestinal
systems, with a particular focus on immunological disorders, to
address significant unmet medical needs. To achieve this goal, key
components of our strategy include:
-- Advancing Wholly Owned Programs through development and
commercialization, including pipeline expansion:
Progressing LYT-100, LYT-200, LYT-210, LYT-300, LYT-510,
LYT-500, and LYT-503/IMB-150(15) through clinical studies.
- Harnessing our proprietary drug discovery and development
capabilities to drive pipeline maturation and expansion: We are
pioneering the development of therapeutic candidates by leveraging
our unique insights into the lymphatic system and immunology and
drug development. Our Wholly Owned Programs currently comprise
seven proprietary therapeutic candidates and three innovative
technology platforms. We intend to leverage our proprietary
lymphatic and inflammation technology platforms, as well as our
extensive network with world-leading scientists in immunology and
lymphatics and major pharmaceutical companies, to generate and
acquire additional novel therapeutic candidates. To do so, we will
rely on the track record of our team, which has been instrumental
in the generation of 27 therapeutics and therapeutic candidates to
date between our Wholly Owned Programs and our Founded Entities,
including two that have been cleared for marketing by the FDA and
granted marketing authorization in the EEA, as well as our
established internal identification and prioritization approach. In
many cases, these programs are identified based on signals of human
efficacy and clinically validated biology, which has enabled us to
advance candidates with significantly de-risked profiles and robust
development rationales. We will continue to take advantage of our
differentiated model to manage the risk of any single program and
quickly redeploy resources towards performing assets.
- Maximizing the impact of our Wholly Owned Programs by
expanding development across multiple indications: We aim to focus
our development efforts on therapeutic candidates that have the
potential to treat multiple diseases and plan to develop them in
additional indications where warranted. For example, we believe
that our lead therapeutic candidate LYT-100 has the potential to
treat multiple inflammatory and fibrotic indications that affect
the lung, heart and other organ systems. We are initially
developing our other therapeutic candidates, LYT-200 and LYT-210,
for the treatment of difficult-to-treat solid tumors, which will
likely include PDAC, CRC and CCA. We are advancing LYT-300, an oral
lipid prodrug version of allopregnanolone generated from our Glyph
platform, for the potential treatment of a range of neurological
and neuropsychological conditions. Lastly, we are developing
LYT-510 for the potential treatment of IBD and chronic pouchitis,
LYT-500, an oral combination therapy, for the potential treatment
of IBD, and advancing LYT-503/IMB-150 as a partnered program for
the potential treatment of IC/BPS. Each therapeutic candidate was
generated from our Alivio technology platform.
-- Deriving value from equity growth of our Founded Entities:
Going forward, our Founded Entities may participate in private and
public financings, enter into partnerships and collaborations,
partner with equity investors, pharmaceutical and biotechnology
companies and government and non-governmental organizations and
generate revenues from sales of products. We hold equity ownership
in our Founded Entities and benefit from their growth and catalysts
such as M&A transactions, IPOs and royalties from sales. We
also intend to strategically monetize our equity holdings in our
Founded Entities over time after significant value inflection has
occurred, generating non-dilutive financing. For example, PureTech
generated cash proceeds of approximately $218 million in 2021 from
the sales of equity in our Founded Entities.
-- Advancing discovery platforms by partnering non-core
applications via non-dilutive funding sources, including
partnerships and grants, to enable retention of value: As we
further develop our Wholly Owned Programs through key value
inflection points, we may opportunistically enter into strategic
partnerships when we believe that such partnerships could add value
to the development or potential commercialization of our
wholly-owned therapeutic candidates. We will also continue to
pursue government grant funding and discovery partnerships that
allow us to maintain most of the value of our platforms while
offsetting operational costs.
We believe this combination of development of our Wholly Owned
Programs, Founded Entity advancement and non-dilutive partnerships
and funding provides us with a unique and multi-pronged engine
fueling potential future growth and a diverse portfolio of
differentiated treatment opportunities for patients.
By Order of the Board
Daphne Zohar
Founder, Chief Executive Officer and Director
April 25, 2022
1 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.
2 For more information in relation to the PureTech Level Cash
and Cash Equivalents and Consolidated Cash and Cash Equivalents
measures used in this Annual Report, please see pages 97 and 98 of
the Financial Review.
3 The FDA and corresponding regulatory authorities will
ultimately review our clinical results and determine whether our
wholly-owned therapeutic candidates are safe and effective. No
regulatory agency has made any such determination that our
wholly-owned therapeutic candidates are safe or effective for use
by the general public for any indication. 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.
4 Long COVID is a term being used to describe the emerging and
persistent complications following the resolution of COVID-19
infection, also known as post-acute COVID-19 syndrome (PACS).
5 Relevant ownership interests and references to equity
ownership for Founded Entities contained in this strategic report
(pages 2-72) were calculated on a partially diluted basis (as
opposed to a voting basis) as of December 31, 2021, including
outstanding shares, options and warrants, but excluding unallocated
shares authorized to be issued pursuant to equity incentive plans.
Vor, Karuna and Gelesis ownerships were calculated on a beneficial
ownership basis in accordance with SEC rules as of March 4, 2022
and February 15, 2022 and March 31, 2022, respectively.
6 With the exception of Plenity(R) and EndeavorRx(R), candidates
are investigational and have not been cleared by the FDA for use in
the U.S.
7 PureTech has a right to royalty payments, including sublicense
payments, as a percentage of net sales.
8 Please see footnote 10 on page 6 for EndeavorRx(R) indication
and overview.
9 These therapeutic candidates are regulated as devices and
their development has been approximately equated to phases of
clinical development.
10 Please see footnote 11 on page 7 for Important Safety
Information about Plenity(R).
11 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).
12 Please see footnote 10 on page 6 for EndeavorRx(R) indication
and overview.
13 Please see footnote 11 on page 7 for Important Safety
Information about Plenity(R).
14 For more information in relation to the PureTech Level Cash
and Cash Equivalents and Consolidated Cash and Cash Equivalents
measures used in this Annual Report, please see pages 97 and 98 of
the Financial Review.
15 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.
Risk management
The execution of the Group's strategy is subject to a number of
risks and uncertainties. As a clinical-stage biotherapeutics
company, the Group operates in an inherently high-risk environment.
The overall aim of the Group's risk management effort is to achieve
an effective balancing of risk and reward, although ultimately no
strategy can provide an assurance against loss.
Risks are formally identified by the Board and appropriate
processes are put in place to monitor and mitigate them on an
ongoing basis. If more than one event occurs, it is possible that
the overall effect of such events would compound the possible
effect on the Group. The principal risks that the Board has
identified as the key business risks facing the Group are set out
in the table below along with the consequences and mitigation of
each risk. These risks are only a high-level summary of the
principal risks affecting our business; any number of these or
other risks could have a material adverse effect on the Group or
its financial condition, development, results of operations,
subsidiary companies and/or future prospects. Further information
on the risks facing the Group can be found on pages 191 to 227,
which also includes a description of circumstances under which
principal and other risks and uncertainties might arise in the
course of our business and their potential impact.
Risk Impact* Management Plans/Actions
1 Risks related to science The failure of any Before making any decision
and technology failure of our businesses to develop any technology,
The science and technology could decrease our extensive due diligence
being developed or commercialized value. A failure of is carried out that
by some of our businesses one of the major businesses covers all the major
may fail and/or our businesses could also impact business risks, including
may not be able to develop the perception of technological feasibility,
their intellectual property PureTech as a developer market size, strategy,
into commercially viable of high value technologies adoption and intellectual
therapeutics or technologies. and possibly make property protection.
There is also a risk that additional fundraising A capital efficient
certain of the businesses at PureTech or any approach is pursued
may fail or not succeed Founded Entity more such that some level
as anticipated, resulting difficult. of proof of concept
in significant decline has to be achieved
of our value. before substantial
capital is committed
and thereafter allocated.
Capital deployment
is generally tranched
so as to fund programs
only to their next
value milestone. Members
of our Board serve
on the board of directors
of several of the businesses
so as to continue to
guide each business's
strategy and to oversee
proper execution thereof.
We use our extensive
network of advisors
to ensure that each
business has appropriate
domain expertise as
it develops and executes
on its strategy and
the R&D Committee of
our Board reviews each
program at each stage
of development and
advises our Board on
further actions. Additionally,
we have a diversified
model with numerous
assets such that the
failure of any one
of our businesses would
not result in a failure
of all of our businesses.
2 Risks related to clinical A critical failure We have a diversified
trial failure of a clinical trial model such that any
Clinical trials and other may result in termination one clinical trial
tests to assess the commercial of the program and outcome would not significantly
viability of a therapeutic a significant decrease impact our ability
candidate are typically in our value. Significant to operate as a going
expensive, complex and delays in a clinical concern. We have dedicated
time-consuming, and have trial to support the internal resources
uncertain outcomes. appropriate regulatory to establish and monitor
Conditions in which clinical approvals could impact each of the clinical
trials are conducted differ, the amount of capital programs in order to
and results achieved in required for the business try to maximise successful
one set of conditions to become fully sustainable outcomes. We also engage
could be different from on a cash flow basis. outside experts to
the results achieved in help design clinical
different conditions or programs to help provide
with different subject valuable information
populations. If our therapeutic and mitigate the risk
candidates fail to achieve of failure. Significant
successful outcomes in scientific due diligence
their respective clinical and preclinical experiments
trials, the therapeutics are done prior to a
will not receive regulatory clinical trial to attempt
approval and in such event to assess the odds
cannot be commercialized. of the success of the
In addition, if we fail trial. In the event
to complete or experience of the outsourcing
delays in completing clinical of these trials, care
tests for any of our therapeutic and attention are given
candidates, we may not to assure the quality
be able to obtain regulatory of the vendors used
approval or commercialize to perform the work.
our therapeutic candidates
on a timely basis, or
at all.
3 Risks related to regulatory The failure of one We manage our regulatory
approval of our therapeutics risk by employing highly
The pharmaceutical industry to obtain any required experienced clinical
is highly regulated. Regulatory regulatory approval, managers and regulatory
authorities across the or conditions imposed affairs professionals
world enforce a range in connection with who, where appropriate,
of laws and regulations any such approval, will commission advice
which govern the testing, may result in a significant from external advisors
approval, manufacturing, decrease in our value. and consult with the
labelling and marketing regulatory authorities
of pharmaceutical therapeutics. on the design of our
Stringent standards are preclinical and clinical
imposed which relate to programs. These experts
the quality, safety and ensure that high-quality
efficacy of these therapeutics. protocols and other
These requirements are documentation are submitted
a major determinant of during the regulatory
whether it is commercially process, and that well-reputed
feasible to develop a contract research organizations
drug substance or medical with global capabilities
device given the time, are retained to manage
expertise, and expense the trials. We also
which must be invested. engage with experts,
We may not obtain regulatory including on our R&D
approval for our therapeutics. Committee, to help
Moreover, approval in design clinical trials
one territory offers no to help provide valuable
guarantee that regulatory information and maximize
approval will be obtained the likelihood of regulatory
in any other territory. approval. Additionally,
Even if therapeutics are we have a diversified
approved, subsequent regulatory model with numerous
difficulties may arise, assets such that the
or the conditions relating failure to receive
to the approval may be regulatory approval
more onerous or restrictive or subsequent regulatory
than we expect. difficulties with respect
to any one therapeutic
would not adversely
impact all of our therapeutics
and businesses.
4 Risks related to therapeutic Adverse reactions We design our therapeutics
safety or unacceptable side with safety as a top
There is a risk of adverse effects may result priority and conduct
reactions with all drugs in a smaller market extensive preclinical
and medical devices. If for our therapeutics, and clinical trials
any of our therapeutics or even cause the which test for and
are found to cause adverse therapeutics to fail identify any adverse
reactions or unacceptable to meet regulatory side effects. Despite
side effects, then therapeutic requirements necessary these steps and precautions,
development may be delayed, for sale of the therapeutic. we cannot fully avoid
additional expenses may This, as well as any the possibility of
be incurred if further claims for injury unforeseen side effects.
studies are required, or harm resulting To mitigate the risk
and, in extreme circumstances, from our therapeutics, further we have insurance
it may prove necessary may result in a significant in place to cover product
to suspend or terminate decrease in our value. liability claims which
development. This may may arise during the
occur even after regulatory conduct of clinical
approval has been obtained, trials.
in which case additional
trials may be required,
the approval may be suspended
or withdrawn or additional
safety warnings may have
to be included on the
label. Adverse events
or unforeseen side effects
may also potentially lead
to product liability claims
being raised against us
as the developer of the
therapeutics and sponsor
of the relevant clinical
trials. These risks are
also applicable to our
Founded Entities and any
trials they conduct or
therapeutic candidates
they develop.
5 Risks related to therapeutic The failure to obtain We engage reimbursement
profitability reimbursement from experts to conduct
We may not be able to third party payers, pricing and reimbursement
sell our therapeutics as well as competition studies for our therapeutics
profitably if reimbursement from other therapeutics, to ensure that a viable
from third-party payers could significantly path to reimbursement,
such as private health decrease the amount or direct user payment,
insurers and government of revenue we may is available. We also
health authorities is receive from therapeutic closely monitor the
restricted or not available sales for certain competitive landscape
because, for example, therapeutics. This for all of our therapeutics
it proves difficult to may result in a significant and adapt our business
build a sufficiently strong decrease in our value. plans accordingly.
economic case based on Not all therapeutics
the burden of illness that we are developing
and population impact. will rely on reimbursement.
Third-party payers are Also, while we cannot
increasingly attempting control outcomes, we
to curtail healthcare try to design studies
costs by challenging the to generate data that
prices that are charged will help support potential
for pharmaceutical therapeutics reimbursement.
and denying or limiting
coverage and the level
of reimbursement. Moreover,
even if the therapeutics
can be sold profitably,
they may not be accepted
by patients and the medical
community.
Alternatively, our competitors
- many of whom have considerably
greater financial and
human resources - may
develop safer or more
effective therapeutics
or be able to compete
more effectively in the
markets targeted by us.
New companies may enter
these markets and novel
therapeutics and technologies
may become available which
are more commercially
successful than those
being developed by us.
These risks are also applicable
to our Founded Entities
and could result in a
decrease in their value.
6 Risks related to intellectual
property protection
We may not be able to The failure to obtain We spend significant
obtain patent protection patent protection resources in the prosecution
for some of our therapeutics and maintain the secrecy of our patent applications
or maintain the secrecy of key information and maintenance of
of its trade secrets and may significantly our patents, and we
know-how. If we are unsuccessful decrease the amount have an in-house patent
in doing so, others may of revenue we may counsel and patent
market competitive therapeutics receive from therapeutic group to help with
at significantly lower sales. Any infringement these activities. We
prices. Alternatively, litigation against also work with experienced
we may be sued for infringement us may result in the external attorneys
of third-party patent payment of substantial and law firms to help
rights. If these actions damages by us and with the protection,
are successful, then we result in a significant maintenance and enforcement
would have to pay substantial decrease in our value. of our patents. Third
damages and potentially party patent filings
remove our therapeutics are monitored to ensure
from the market. We license the Group continues
certain intellectual property to have freedom to
rights from third parties. operate. Confidential
If we fail to comply with information (both our
our obligations under own and information
these agreements, it may belonging to third
enable the other party parties) is protected
to terminate the agreement. through use of confidential
This could impair our disclosure agreements
freedom to operate and with third parties,
potentially lead to third and suitable provisions
parties preventing us relating to confidentiality
from selling certain of and intellectual property
our therapeutics. exist in our employment
and advisory contracts.
Licenses are monitored
for compliance with
their terms.
7 Risks related to enterprise The strategic aim We retain significant
profitability of the business is cash in order to support
We expect to continue to generate profits funding of our Founded
to incur substantial expenditure for our shareholders Entities and our Wholly
in further research and through the commercialization Owned Pipeline. We
development activities. of technologies through have close relationships
There is no guarantee therapeutic sales, with a wide group of
that we will become operationally strategic partnerships investors and strategic
profitable, and, even and sales of businesses. partners to ensure
if we do so, we may be The timing and size we can continue to
unable to sustain operational of these potential access the capital
profitability. inflows are uncertain. markets and additional
Should revenues from monetization and funding
our activities not for our businesses.
be achieved, or in Additionally, our Founded
the event that they Entities are able to
are achieved but at raise money directly
values significantly from third party investors
less than the amount and strategic partners.
of capital invested,
then it would be difficult
to sustain our business.
8 Risks related to hiring The failure to attract The Board annually
and retaining qualified highly effective personnel seeks external expertise
employees or the loss of key to assess the competitiveness
We operate in complex personnel would have of the compensation
and specialized business an adverse impact packages of its senior
domains and require highly on our ability to management. Senior
qualified and experienced continue to grow and management continually
management to implement may negatively affect monitors and assesses
our strategy successfully. our competitive advantage. compensation levels
We and many of our businesses to ensure we remain
are located in the United competitive in the
States which is a highly employment market.
competitive employment We maintain an extensive
market. recruiting network
Moreover, the rapid development through our Board members,
which is envisaged by advisors and scientific
us may place unsupportable community involvement.
demands on our current We also employ an executive
managers and employees, as a full-time in-house
particularly if we cannot recruiter. Additionally,
attract sufficient new we are proactive in
employees. There is also our retention efforts
the risk that we may lose and include incentive-based
key personnel. compensation in the
form of equity awards
and annual bonuses,
as well as a competitive
benefits package. We
have a number of employee
engagement efforts
to strengthen our PureTech
community.
9 Risks related to business, Broad-based business, To date, we have seen
economic or public health economic or geopolitical limited impact on our
disruptions disruptions could research and development
Business, economic or adversely affect our activities and the
geopolitical disruptions ongoing or planned operation of our company
or global health concerns research and development more generally, but
could seriously harm our activities. For example, we will continuously
development efforts and the COVID-19 global monitor the COVID-19
increase our costs and pandemic resulted pandemic and the invasion
expenses. in extended shutdowns of Ukraine and their
of certain businesses impact on our business
around the world. going forward. It is
More recently, the possible that we may
Russian invasion of see further impact
Ukraine has created as the situation continues
significant economic to develop. With respect
disruption as a result to the COVID-19 pandemic,
of sanctions by the we have continued to
International community be proactive in limiting
and the almost complete the number of staff
shutdown of the Ukrainian on site, requiring
economy and business, that all on-site employees
including healthcare, test twice a week and
in Ukraine. Global providing personal
health concerns, such protective equipment
as COVID-19, or geopolitical to our staff.
events, like the invasion
of Ukraine, could
also result in social,
economic, and labor
instability in the
countries in which
we or the third parties
with whom we engage
operate. We cannot
presently predict
the scope and severity
of any potential business
shutdowns or disruptions,
but if we or any of
the third parties
with whom we engage,
including the suppliers,
clinical trial sites,
regulators and other
third parties with
whom we conduct business,
were to experience
shutdowns or other
business disruptions,
our ability to conduct
our business in the
manner and on the
timelines presently
planned could be materially
and negatively impacted.
It is also possible
that global health
concerns or geopolitical
events such as these
one could disproportionately
impact the hospitals
and clinical sites
in which we conduct
any of our current
and/or future clinical
trials, which could
have a material adverse
effect on our business
and our results of
operation and financial
impact.
Brexit
The United Kingdom withdrew from the European Union on January
31, 2020 (Brexit) and the transition period for such withdrawal
ended on December 31, 2020. Although the Board has considered the
potential impact of Brexit as part of its risk management, given
that we principally operate in the United States and hold
substantially all assets in U.S. dollars, we do not believe there
have been or will be any material financial effect on our business,
or any significant operational issues which have arisen or could
arise, as a result of Brexit.
Responsibility statement of the directors in respect of the
annual financial report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the company and the undertakings included in the consolidation
taken as a whole; and
-- the strategic report includes a fair review of the
development and performance of the business and the position of the
issuer and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face.
We consider the annual report and accounts, taken as a whole, is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
By Order of the Board
Daphne Zohar
Founder, Chief Executive Officer and Director
April 25, 2022
Financial Review
Reporting Framework
You should read the following discussion and analysis together
with our Consolidated Financial Statements, including the notes
thereto, set forth elsewhere in this report. Some of the
information contained in this discussion and analysis or set forth
elsewhere in this report, including information with respect to our
plans and strategy for our business and financing our business,
includes forward-looking statements that involve risks and
uncertainties. As a result of many factors, including the risks set
forth on pages 90 to 93 and in the Additional Information section
from pages 217 to 252, our actual results could differ materially
from the results described in or implied by these forward-looking
statements.
Our audited Consolidated Financial Statements as of December 31,
2021 and 2020, and for the years ended December 31, 2021, 2020 and
2019, have been prepared in accordance with UK-adopted
International Financial Reporting Standards (IFRS). The
Consolidated Financial Statements also comply fully with IFRSs as
issued by the International Accounting Standards Board (IASB).
The following discussion contains references to the Consolidated
Financial Statements of PureTech Health plc, or the Company, and
its consolidated subsidiaries, together the Group. These financial
statements consolidate the Company's subsidiaries and include the
Company's interest in associates and investments held at fair
value. Subsidiaries are those entities over which the Company
maintains control. Associates are those entities in which the
Company does not have control for financial accounting purposes but
maintains significant influence over financial and operating
policies. Where 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 Consolidated Financial Statements, each of our Founded
Entities are considered to be either a "subsidiary", an "associate"
or an "investment held at fair value" depending on whether PureTech
Health plc controls or maintains significant influence over the
financial and operating policies of the respective entity at the
respective period end date. For additional information regarding
the accounting treatment of these entities, see Note 1 to our
Consolidated Financial Statements included in this report. For
additional information regarding our operating structure, see
"-Basis of Presentation and Consolidation" below. Fair value of
Investments held at fair value, does not take into consideration
contribution from milestones that occurred after December 31, 2021,
the value of our interests in our consolidated Founded Entities
(Vedanta, Follica, Sonde, and Entrega), our Wholly Owned Programs,
or our cash.
Business Background and Results Overview
The business background is discussed from pages 1 to 72, which
describe in detail the business development of our Wholly Owned
Programs and Founded Entities.
Our ability to generate product revenue sufficient to achieve
profitability will depend heavily on the successful development and
eventual commercialization of one or more of our wholly-owned or
Controlled Founded Entities' therapeutics candidates, which may or
may not occur. Our Founded Entities, Gelesis, Inc. ("Gelesis"), and
Akili Interactive Labs, Inc. ("Akili"), which we have not
controlled since 2019 and 2018, respectively, have 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 deconsolidated a number of our Founded Entities, specifically
Karuna Therapeutics, Inc. ("Karuna"), Vor Biopharma Inc. ("Vor"),
and 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 Consolidated Statements of Financial Position;
-- we record our non-controlling financial interest in the
Founded Entity at fair value; and
-- the resulting amount of any gain or loss is recognized in our
Consolidated Statements of Comprehensive Income/(Loss).
We anticipate our expenses to continue to increase
proportionally in connection with our ongoing development
activities related mostly due to the advancement into late-stage
studies of the clinical programs within our Wholly Owned Pipeline
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, LYT-200 and LYT-300, and advance
LYT-210, LYT-510 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 in the
future, following the assessment period described above, to support
our continuing operations and pursue our growth strategy until such
time as we can generate sufficient revenue from product sales to
support our operations, if ever. Until such time we expect to
finance our operations through a combination of monetization of our
interests in our Founded Entities, collaborations with third
parties 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 Consolidated
Financial Statements.
Core Performance
Core performance measures are alternative performance measures
(APM) which are adjusted and non-IFRS measures. These measures
cannot be derived directly from our Consolidated Financial
Statements. We believe that these non-IFRS performance measures,
when provided in combination with reported performance, will
provide investors, analysts and other stakeholders with helpful
complementary information to better understand our financial
performance and our financial position from period to period. The
measures are also used by management for planning and reporting
purposes. The measures are not substitutable for IFRS results and
should not be considered superior to results presented in
accordance with IFRS.
Cash flow and
liquidity
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,and other inactive entities
in which we have no current operations. During the
year ended December 31, 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 December 31, 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 no longer presents 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 March 2020, the World Health Organization declared the
COVID-19 outbreak a pandemic. The pandemic has since caused
widespread and significant disruption to daily life and the global
economy as governments have taken actions, including the issuance
of stay-at-home orders and social distancing guidelines, and
businesses have adjusted their activities. While our business,
operations and financial condition and results have not been
significantly impacted in 2020 or 2021, as a result of 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 as a result of variations of the virus, that
the pandemic may have on our business, operations, and financial
condition and results.
Recent Developments (subsequent to December 31, 2021)
On January 13, 2022 Gelesis completed its business combination
with Capstar Special Purpose Acquisition Corp ("Capstar"). As part
of the business combination all shares held in Gelesis, common and
preferred, were exchanged for common shares of the merged entity.
In addition, PureTech invested $15.0 million in the class A common
shares of Capstar as part of the PIPE transaction that took place
immediately prior to the closing of the business combination and an
additional approximately $5.0 million, as part of the Backstop
agreement signed with Capstar on December 30, 2021. Pursuant to the
business combination, Gelesis became a wholly-owned subsidiary of
Capstar and Capstar changed its name to Gelesis Holdings, Inc.,
which began trading on the New York Stock Exchange under the ticker
symbol "GLS" on January 14, 2022. Following the closing of the
business combination, PureTech holds 16,727,582 shares of Gelesis
Holdings Inc. common stock, which is equal to approximately 23.2%
of Gelesis Holdings Inc's outstanding common shares.
On January 26, 2022 Akili Interactive and Social Capital
Suvretta Holdings Corp a special purpose acquisition company
announced 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 Nasdaq Stock
Market under the ticker symbol "AKLI". The transaction is expected
to close in mid-2022. As part of this transaction the Akili
Interactive shares held by the Company will be exchanged for the
combined company's securities and the Company's interest in the
combined public entity is expected to decrease from its current
voting interest in Akili of 26.4%.
Financial Highlights
Following is the reconciliation of the amounts appearing in our
Statement of Financial Position to the Alternative Performance
Measure described above:
As of:
March 31, December December
(in thousands) 2022* 31, 2021 31, 2020
Consolidated Cash and cash equivalents 413,217 465,708 403,881
Less: Cash and cash equivalents held at
non-wholly owned subsidiaries (35,303) (46,856) (54,473)
PureTech Level Cash and Cash Equivalents $377,914 $418,851 $349,407
* Information as of March 31, 2022 is not included in PureTech
Health plc's Annual Report and Accounts 2021 and is included here
for quantitative reconciliation purposes
Basis of Presentation and Consolidation
Our Consolidated Financial Information consolidates the
financial information of PureTech Health plc, as well as its
subsidiaries, and includes our interest in associates and
investments held at fair value, and is reported in four operating
segments as described below.
Basis for Segmentation
Our Directors are our strategic decision-makers. Our operating
segments are based on the financial information provided to our
Directors periodically 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 which are outlined below. Substantially all of
our revenue and profit generating activities are generated within
the United States and, accordingly, no geographical disclosures are
provided.
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 year ended December 31, 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 report the prior period
segment financial information to conform to the presentation as of
and for the period ending December 31, 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.
Following is the description of our reportable segments:
Internal
The Internal segment is advancing Wholly Owned Programs, which
is focused on immunological, fibrotic and lymphatic system
disorders and builds upon validated biologic pathways and proven
pharmacology. The Internal segment is comprised of the technologies
that are wholly owned and will be advanced through either PureTech
Health funding or non-dilutive sources of financing in the
near-term. The operational management of the Internal segment is
conducted by the PureTech Health team, which is responsible for the
strategy, business development, and research and development. As of
December 31, 2021, this segment included PureTech LYT, Inc.
(formerly Ariya Therapeutics Inc.), PureTech LYT-100, Inc and
Alivio Therapeutics, Inc.
Controlled Founded Entities
The Controlled Founded Entities segment is comprised of our
subsidiaries that are currently consolidated operational
subsidiaries that either have, or have plans to hire, independent
management teams and have previously raised, or are currently in
the process of raising, third-party dilutive capital. These
subsidiaries have active research and development programs and
either have entered into or plan to seek a strategic partnership
with an equity or debt investment partner, who will provide
additional industry knowledge and access to networks, as well as
additional funding to continue the pursued growth of the company.
As of December 31, 2021, this segment included Entrega, Inc.,
Follica, Incorporated, Sonde Health, Inc. and Vedanta Biosciences,
Inc.
Non-Controlled Founded Entities
The Non-Controlled Founded Entities segment is comprised of the
entities in respect of which PureTech Health (i) no longer holds
majority voting control as a shareholder and (ii) no longer has the
right to elect a majority of the members of the entity's Board of
Directors. Upon deconsolidation of an entity the segment disclosure
is restated to reflect the change on a retrospective basis, as this
constitutes a change in the composition of its reportable segments.
The Non-Controlled Founded Entities segment included Akili
Interactive Labs, Inc. ("Akili"), Vor Biopharma, Inc. ("Vor"),
Karuna Therapeutics, Inc. ("Karuna"), and Gelesis, Inc.
("Gelesis").
The Non-Controlled Founded Entities segment incorporates the
operational results of the aforementioned entities to the date of
deconsolidation. Following the date of deconsolidation, we account
for our investment in each entity at the parent level, and
therefore the results associated with investment activity following
the date of deconsolidation is included in the Parent Company and
Other segment (the "Parent Company and Other segment").
Parent Company and Other
Parent Company and Other includes activities that are not
directly attributable to the operating segments, such as the
activities of the Parent, corporate support functions and certain
research and development support functions that are not directly
attributable to a strategic business segment as well as the
elimination of intercompany transactions. Parent Company and Other
also captures the accounting for our holdings in entities for which
control has been lost, which is inclusive of the following items:
gain on deconsolidation, gain or loss on investments held at fair
value, gain on loss of significant influence, and the share of net
loss of associates accounted for using the equity method. As of
December 31, 2021, this segment included PureTech Health plc,
PureTech Health LLC, PureTech Management, Inc., PureTech Securities
Corp., and PureTech Securities II Corp. as well as certain other
dormant, inactive and shell entities.
The table below summarizes the entities that comprised each of
our segments as of December 31, 2021:
Internal Segment
PureTech LYT 100.0%
PureTech LYT-100, Inc. 100.0%
Alivio Therapeutics, Inc. 100.0%
Controlled Founded Entities
Entrega, Inc. 77.3 %
Follica, Incorporated 85.4 %
Sonde Health, Inc. 51.8 %
Vedanta Biosciences, Inc. 48.6 %
Non-Controlled Founded Entities
Akili Interactive Labs, Inc. 26.7 %
Gelesis, Inc. 24.5 %
Karuna Therapeutics, Inc. 5.6%
Vor Biopharma Inc. 8.6%
Parent Segment(1)
Puretech Health plc 100.0%
PureTech Health LLC 100.0%
PureTech Securities Corporation 100.0%
PureTech Securities II Corporation 100.0%
PureTech Management, Inc. 100.0%
1 Includes dormant, inactive and shell entities that are not listed here.
Components of Our Results of Operations
Revenue
To date, we have not generated any meaningful revenue from
product sales and we do not expect to generate any meaningful
revenue from product sales for the near term future. We derive our
revenue from the following:
Contract revenue
We generate revenue primarily from licenses, services and
collaboration agreements, including amounts that are recognized
related to upfront payments, milestone payments, royalties and
amounts due to us for research and development services. In the
future, revenue may include additional milestone payments and
royalties on any net product sales under our collaborations. We
expect that any revenue we generate will fluctuate from period to
period as a result of the timing and amount of license, research
and development services and milestone and other payments.
Grant Revenue
Grant revenue is derived from grant awards we receive from
governmental agencies and non-profit organizations for certain
qualified research and development expenses. We recognize grants
from governmental agencies as grant income in the Consolidated
Statement of Comprehensive Income/(Loss), gross of the expenditures
that were related to obtaining the grant, when there is reasonable
assurance that we will comply with the conditions within the grant
agreement and there is reasonable assurance that payments under the
grants will be received. We evaluate the conditions of each grant
as of each reporting date to ensure that we have reasonable
assurance of meeting the conditions of each grant arrangement and
it is expected that the grant payment will be received as a result
of meeting the necessary conditions.
For proceeds from sale of our investments held at fair value,
please see our Consolidated Cash flow Statements, Net cash provided
by investing activities.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs
incurred for our research activities, including our discovery
efforts, and the development of our wholly-owned and our Controlled
Founded Entities' therapeutic candidates, which include:
-- employee-related expenses, including salaries, related
benefits and equity-based compensation;
-- expenses incurred in connection with the preclinical and
clinical development of our wholly-owned and our Founded Entities'
therapeutic candidates, including our agreements with contract
research organizations, or CROs;
-- expenses incurred under agreements with consultants who
supplement our internal capabilities;
-- the cost of lab supplies and acquiring, developing and
manufacturing preclinical study materials and clinical trial
materials;
-- costs related to compliance with regulatory requirements;
and
-- facilities, depreciation and other expenses, which include
direct and allocated expenses for rent and maintenance of
facilities, insurance and other operating costs.
We expense all research costs in the periods in which they are
incurred and development costs are capitalized only if certain
criteria are met. For the periods presented, we have not
capitalized any development costs since we have not met the
necessary criteria required for capitalization. Costs for certain
development activities are recognized based on an evaluation of the
progress to completion of specific tasks using information and data
provided to us by our vendors and third-party service
providers.
Research and development activities are central to our business
model. Therapeutic candidates in later stages of clinical
development generally have higher development costs than those in
earlier stages of clinical development, primarily due to the
increased size and duration of later-stage clinical trials. We
expect that our research and development expenses will continue to
increase for the foreseeable future in connection with our planned
preclinical and clinical development activities in the near term
and in the future. The successful development of our wholly-owned
and our Founded Entities' therapeutic candidates is highly
uncertain. As such, at this time, we cannot reasonably estimate or
know the nature, timing and estimated costs of the efforts that
will be necessary to complete the remainder of the development of
these therapeutic candidates. We are also unable to predict when,
if ever, material net cash inflows will commence from our
wholly-owned or our Founded Entities' therapeutic candidates. This
is due to the numerous risks and uncertainties associated with
developing therapeutics, including the uncertainty of:
-- progressing research and development of our Wholly Owned
Pipeline, including LYT-100, LYT-200, LYT-210, LYT-300, LYT-510,
LYT-500 and continue to progress our Glyph(TM) , Orasome(TM) and
Alivio(TM) technology platforms as well as our meningeal lymphatics
research program and other potential therapeutic candidates based
on previous human efficacy and clinically validated biology within
our Wholly Owned Programs;
-- establishing an appropriate safety profile with
investigational new drug application enabling studies to advance
our preclinical programs into clinical development;
-- the success of our Founded Entities and their need for
additional capital;
-- identifying new therapeutic candidates to add to our Wholly
Owned Pipeline;
-- successful enrollment in, and the initiation and completion
of, clinical trials;
-- the timing, receipt and terms of any marketing approvals from
applicable regulatory authorities;
-- commercializing our wholly-owned and our Founded Entities'
therapeutic candidates, if approved, whether alone or in
collaboration with others;
-- establishing commercial manufacturing capabilities or making
arrangements with third-party manufacturers;
-- addressing any competing technological and market
developments, as well as any changes in governmental
regulations;
-- negotiating favorable terms in any collaboration, licensing
or other arrangements into which we may enter and performing our
obligations under such arrangements;
-- maintaining, protecting and expanding our portfolio of
intellectual property rights, including patents, trade secrets and
know-how, as well as obtaining and maintaining regulatory
exclusivity for our wholly-owned and our Founded Entities'
therapeutic candidates;
-- continued acceptable safety profile of our therapeutics, if
any, following approval; and
-- attracting, hiring and retaining qualified personnel.
A change in the outcome of any of these variables with respect
to the development of a therapeutic candidate could mean a
significant change in the costs and timing associated with the
development of that therapeutic candidate. For example, the FDA,
the EMA, or another comparable foreign regulatory authority may
require us to conduct clinical trials beyond those that we
anticipate will be required for the completion of clinical
development of a therapeutic candidate, or we may experience
significant trial delays due to patient enrollment or other
reasons, in which case we would be required to expend significant
additional financial resources and time on the completion of
clinical development. In addition, we may obtain unexpected results
from our clinical trials and we may elect to discontinue, delay or
modify clinical trials of some therapeutic candidates or focus on
others. Identifying potential therapeutic candidates and conducting
preclinical testing and clinical trials is a time-consuming,
expensive and uncertain process that takes years to complete, and
we may never generate the necessary data or results required to
obtain marketing approval and achieve product sales. In addition,
our wholly-owned and our Founded Entities' therapeutic candidates,
if approved, may not achieve commercial success.
General and Administrative Expenses
General and administrative expenses consist primarily of
salaries and other related costs, including stock-based
compensation, for personnel in our executive, finance, corporate
and business development and administrative functions. General and
administrative expenses also include professional fees for legal,
patent, accounting, auditing, tax and consulting services, travel
expenses and facility-related expenses, which include direct
depreciation costs and allocated expenses for rent and maintenance
of facilities and other operating costs.
We expect that our general and administrative expenses will
increase in the future as we increase our general and
administrative headcount to support our continued research and
development and potential commercialization of our portfolio of
therapeutic candidates. We also expect to incur increased expenses
associated with being a public company in the United States,
including costs of accounting, audit, information systems, legal,
regulatory and tax compliance services, director and officer
insurance costs and investor and public relations costs.
Total Other Income/(Loss)
Gain on Deconsolidation
Upon losing control of a subsidiary, the assets and liabilities
are derecognized along with any related non-controlling interest
("NCI"). Any interest retained in the former subsidiary is measured
at fair value when control is lost. Any resulting gain or loss is
recognized as profit or loss in the Consolidated Statements of
Comprehensive Income/(Loss).
Gain/(Loss) on Investments Held at Fair Value
Investments held at fair value include both unlisted and listed
securities held by us, which include investments in Akili, Gelesis,
Karuna, Vor and certain insignificant investments. Our ownership in
Akili is in preferred shares. Our ownership in Vor was in preferred
shares until February 2021 at which time the preferred shares were
converted into common shares as part of Vor Initial Public
Offering. Preferred shares form part of our ownership in Gelesis
and such preferred shares investment is accounted for as
Investments Held at Fair value while the investment in common stock
is accounted for under the equity method. When the investment in
common stock is reduced to zero by equity method losses, subsequent
equity method losses are applied to the preferred share investment,
which is considered to be a Long-term Interest. Our ownership in
Karuna was in preferred shares until its IPO in June 2019 when such
shares were converted into common shares. When Karuna's preferred
shares converted into common shares, our equity interest in Karuna
investment was removed from Investments Held at Fair Value and
accounted for under the equity method as we still retained
significant influence in Karuna at such time. On December 2, 2019
we lost significant influence in Karuna and, beginning on that
date, we accounted for our investment in Karuna in accordance with
IFRS 9 as an Investment Held at Fair Value. We account for
investments in preferred shares of our associates in accordance
with IFRS 9 as Investments Held at Fair Value when the preferred
shares do not provide access to returns underlying ownership
interests.
Loss Realized on Investments Held at Fair Value
Loss realized on investments held at fair value relates to
realized differences in the per share disposal price of a listed
security as compared to the per share exchange quoted price at the
time of disposal. The difference is attributable to a block sale
discount, attributable to a variety of market factors, primarily
the number of shares being transacted was significantly larger than
the daily trading volume of a given security.
Gain on Loss of Significant Influence
Gain on loss of significant influence relates to the assessment
related to the loss of our ability to exert significant influence
over an investment in a Non-Controlled Founded Entity that is
accounted for under the equity method. For the year ended December
31, 2019, we recognized gain on loss of significant influence in
Karuna.
Other Income (Expense)
Other income (expense) consists primarily of gains and losses
related to the sale of an asset and certain investments as well as
sub-lease income.
Finance Costs/Income
Finance costs consist of loan interest expense and the changes
in the fair value of certain liabilities associated with financing
transactions, mainly preferred share liabilities in respect of
preferred shares issued by our non wholly owned subsidiaries to
third parties. Finance income consists of interest income on funds
invested in money market funds and U.S. treasuries.
Share of Net Gain (Loss) of Associates Accounted for Using the
Equity Method, and Impairment of Investment in Associate
Associates are accounted for using the equity method (equity
accounted investees) and are initially recognized at cost, or if
recognized upon deconsolidation they are initially recorded at fair
value at the date of deconsolidation. The consolidated financial
statements include our share of the total comprehensive income and
equity movements of equity accounted investees, from the date that
significant influence commences until the date that significant
influence ceases. When the share of losses exceeds the net
investment in the investee, including the investment in preferred
shares that are considered Long-term Interests, the carrying amount
is reduced to nil and recognition of further losses is discontinued
except to the extent that we have incurred legal or constructive
obligations or made payments on behalf of an investee.
We compare the recoverable amount of the investment to its
carrying amount on a go-forward basis and determine the need for
impairment. We recorded an impairment in the common stock
investment in Gelesis in the year ended December 31, 2019.
Income Tax
We must make certain estimates and judgments in determining
income tax expense for financial statement purposes. The amount of
taxes currently payable or refundable is accrued, and deferred tax
assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial
statement carrying amount of existing assets and liabilities and
their respective tax bases. Deferred tax assets are also recognized
for realizable loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using substantively enacted tax
rates in effect for the year in which those temporary differences
are expected to be recovered or settled. Net deferred tax assets
are not recorded if we do not assess their realization as probable.
The effect on deferred tax assets and liabilities of a change in
income tax rates is recognized in our financial statements in the
period that includes the substantive enactment date.
Results of Operations
The following table, which has been derived from our audited
financial statements for the years ended December 31, 2021, 2020
and 2019, included herein, summarizes our results of operations for
the periods indicated, together with the changes in those items in
dollars:
Year Ended December 31,
Change Change
(2020 (2019
(in thousands) 2021 2020 2019 to 2021) to 2020)
Contract revenue $ 9,979 $ 8,341 $ 8,688 $ 1,638 $ (347)
Grant revenue 7,409 3,427 1,119 3,982 2,308
Total revenue 17,388 11,768 9,807 5,621 1,961
Operating
expenses:
General and
administrative
expenses (57,199) (49,440) (59,358) (7,760) 9,918
Research and
development
expenses (110,471) (81,859) (85,848) (28,612) 3,988
Operating
income/(loss) (150,282) (119,531) (135,399) (30,751) 15,868
Other
income/(expense):
Gain/(loss) on
deconsolidation - - 264,409 - (264,409)
Gain/(loss) on
investments
held at fair
value 179,316 232,674 (37,863) (53,358) 270,537
Loss realized on
sale of
investment (20,925) (54,976) - 34,051 (54,976)
Gain/(loss) on
disposal of
assets - - - - -
Gain on loss of
significant
influence - - 445,582 - (445,582)
Other
income/(expenses) 1,592 1,035 39 557 996
Other
income/(loss) 159,983 178,732 672,167 (18,749) (493,434)
Net finance
income/(costs) 5,050 (6,115) (46,147) 11,164 40,032
Share of net
gain/(loss)
of associates
accounted for
using the equity
method (73,703) (34,117) 30,791 (39,587) (64,908)
Impairment of
investment
in associate - - (42,938) - 42,938
Income/(loss)
before income
taxes (58,953) 18,969 478,474 (77,922) (459,504)
Taxation (3,756) (14,401) (112,409) 10,645 98,008
Net income/(loss)
including
non-controlling
interest (62,709) 4,568 366,065 (67,277) (361,497)
Net (loss)/income
attributable
to the Company $ (60,558) $ 5,985 $ 421,144 $ (66,543) $ (415,159)
Comparison of the Years Ended December 31, 2021 and 2020
Total Revenue
Year Ended December 31,
(in thousands) 2021 2020 Change
Contract Revenue:
Internal Segment $ 8,129 $ 5,297 $ 2,833
Controlled Founded
Entities 1,615 990 625
Non-Controlled Founded
Entities - - -
Parent Company and other 235 2,054 (1,819)
Total Contract Revenue $ 9,979 $ 8,341 $ 1,638
Grant Revenue:
Internal Segment $ 1,253 $ 1,563 $ (310)
Controlled Founded
Entities 6,156 1,864 4,292
Non-Controlled Founded
Entities - - -
Parent Company and other - - -
Total Grant Revenue $ 7,409 $ 3,427 $ 3,982
Total Revenue $ 17,388 $ 11,768 $ 5,621
Our total revenue was $17.4 million for the year ended December
31, 2021, an increase of $5.6 million, or 47.8 percent compared to
the year ended December 31, 2020. The increase was primarily
attributable to an increase of $2.8 million in contract revenue in
the Internal segment, which was primarily driven by a $6.5 million
increase in revenue due to payment from Imbrium Therapeutics, Inc.
following the exercise of the option to acquire an exclusive
license for the Initial Product Candidate. The increase was
partially offset by a decrease in contract revenue of $3.7 million
recognized under IFRS 15 due to the completion of development
activities related to revenues associated with multiple
collaborations in the year ended December 31, 2021. The increase
was also driven by an increase of $4.3 million in grant revenue in
the Controlled Founded Entities segment for the year ended December
31, 2021, which was driven primarily by Vedanta's grant revenue
earned pursuant to its CARB-X and BARDA agreements. The
aforementioned increases were partially offset by the a
non-recurrent milestone payment of $2.0 million received from
Karuna (and included in Parent Company and Other) in the year ended
December 31, 2020.
Research and Development Expenses
Year Ended December 31,
(in thousands) 2021 2020 Change
Research and Development
Expenses:
Internal Segment $ (65,444) $ (45,346) $ 20,098
Controlled Founded
Entities (43,783) (36,279) 7,504
Non-Controlled Founded
Entities - - -
Parent Company and other (1,244) (234) 1,010
Total Research and
Development Expenses: $ (110,471) $ (81,859) $ 28,612
Our research and development expenses were $110.5 million for
the year ended December 31, 2021, an increase of $28.6 million, or
35.0 percent compared to the year ended December 31, 2020. The
change was primarily attributable to an increase of $20.1 million
in research and development expenses incurred by the Internal
segment due to the advancement of programs in clinical testing.
This was primarily driven by an increase in clinical trial and
clinical research organization expenditures of $14.0 million, an
increase in research and development related consulting and
professional fees of $2.5 million and an increase in research and
development related salaries and stock compensation of $2.6
million. We progressed our ongoing clinical trials of LYT-100 and
LYT- 200 in multiple indications and initiated clinical trials with
respect to LYT 300, as well as advanced pre-clinical studies and
research related to multiple candidates and research platforms. The
increase was further attributable to an increase of $7.5 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
Year Ended December 31,
(in thousands) 2021 2020 Change
General and
Administrative Expenses:
Internal Segment $ (8,673) $ (3,482) $ 5,191
Controlled Founded
Entities (20,729) (13,691) 7,038
Non-Controlled Founded
Entities - - -
Parent Company and other (27,797) (32,267) (4,470)
Total General and
Administrative Expenses $ (57,199) $ (49,440) $ 7,760
Our general and administrative expenses were $57.2 million for
the year ended December 31, 2021, an increase of $7.8 million, or
15.7 percent compared to the year ended December 31, 2020. The
increase was primarily attributable to an increase of $7.0 million
in the Controlled Founded Entities segment, which was primarily
driven by non-cash increases of $2.9 million in stock based
compensation expense, $1.4 million increase in payroll-related
costs due to increased personnel, an increase in professional fees
of $1.1 million, and an increase in legal fees of $0.9 million. The
increase was further attributable to an increase of $5.2 million in
the Internal segment, which was primarily driven by an increase in
the management fee charged by the Parent company of $6.2 million
which was partially offset by a decrease in depreciation expense of
$0.5 million for the year ended December 31, 2021. The decrease in
the Parent Company and other of $4.5 million was primarily
attributable to the allocation of management fee charged to other
segments of $7.0 million which was partially offset by an increase
in professional and recruiting fees of $0.9 million and an increase
in business insurance of $1.7 million for the year ended December
31, 2021.
Total Other Income (Loss)
Total other income was $160.0 million for the year ended
December 31, 2021, a decrease of $18.7 million, compared to the
year ended December 31, 2020. The decline in other income was
primarily attributable to a decrease in gains from investments held
at fair value of $53.4 million, primarily driven by the change in
the fair value of the investment in Karuna. These gains from
investments held at fair value were partially offset by losses
realized on sale of certain investments held at fair value, as a
result of the block sale discount included in the sale. The losses
realized on sale of certain investments held at fair value for the
year ended December 31, 2021 decreased $34.1 million compared to
the year ended December 31, 2020.
Net Finance Income (Costs)
Net finance Income was $5.0 million for the year ended December
31, 2021, a change of $11.2 million, compared to net finance cost
of $6.1 million for the year ended December 31, 2020. The change
was primarily attributable to a $14.0 million change leading to
increased income in respect of the change in the fair value of our
preferred shares, warrant and convertible note liabilities held by
third parties, partially offset by a $1.8 million increase in
contractual finance costs, mainly in our controlled founded entity,
Vedanta, and a $1.0 million decline in interest income from
financial assets for the year ended December 31, 2021.
Share of Net Gain (Loss) in Associates Accounted for Using the
Equity Method
For the year ended December 31, 2021, the share in net loss of
associates reported under the equity method was $73.7 million as
compared to the share of net loss of $34.1 million for the year
ended December 31, 2020. The change was primarily attributable to
an increase in Gelesis losses reported under IFRS for the year
ended December 31, 2021 as compared to the losses reported for the
year ended December 31, 2020, due to an increase in the fair value
of Gelesis financial instrument liabilities that are accounted for
at Fair Value Through Profit and Loss (FVTPL).
Taxation
Income tax expense was $3.8 million for the year ended December
31, 2021, as compared to income tax expense of $14.4 million for
the year ended December 31, 2020. The decrease in income tax
expense was primarily attributable to the decrease in profit before
tax in entities in the U.S. Federal and Massachusetts consolidated
return groups of the Company. For information on the change in the
tax rate, see Note 25 in the consolidated financial statements.
Comparison of the Years Ended December 31, 2020 and 2019
Total Revenue
Year Ended December 31,
(in thousands) 2020 2019 Change
Contract Revenue:
Internal Segment $ 5,297 $ 7,077 $ (1,780)
Controlled Founded
Entities 990 1,474 (484)
Non-Controlled Founded
Entities - - -
Parent Company and other 2,054 137 1,917
Total Contract Revenue $ 8,341 $ 8,688 $ (347)
Grant Revenue:
Internal Segment $ 1,563 $ 928 $ 635
Controlled Founded
Entities 1,864 191 1,673
Non-Controlled Founded
Entities - - -
Parent Company and other - - -
Total Grant Revenue $ 3,427 $ 1,119 $ 2,308
Total Revenue $ 11,768 $ 9,807 $ 1,961
Our total revenue was $11.8 million for the year ended December
31, 2020, an increase of $2.0 million, or 20.0 percent compared to
the year ended December 31, 2019. The increase was primarily
attributable to an increase of $2.3 million in grant revenue in the
Controlled Founded Entities segment for the year ended December 31,
2020, which was driven primarily by Vedanta's grant revenue earned
pursuant to its CARB-X and BARDA agreements. The increase was
further attributable to an increase of $1.9 million in contract
revenue in the Parent segment for the year ended December 31, 2020,
which was primarily driven by a $2.0 million milestone payment
received from Karuna for initiation of its KarXT Phase 3 clinical
study pursuant to the Exclusive Patent License Agreement between
PureTech and Karuna. The increases were partially offset by a
decline of $1.8 million in contract revenue in the Internal
segment, which was primarily drive by the Orasome collaboration and
license agreement with Roche, which concluded during the year ended
December 31, 2020.
Research and Development Expenses
Year Ended December 31,
(in thousands) 2020 2019 Change
Research and Development
Expenses:
Internal Segment $ (45,346) $ (28,874) $ 16,472
Controlled Founded Entities (36,279) (39,883) (3,603)
Non-Controlled Founded Entities - (15,555) (15,555)
Parent Company and other (234) (1,536) (1,302)
Total Research and Development
Expenses: $ (81,859) $ (85,848) $ (3,988)
Our research and development expenses were $81.9 million$81.9
million for the year ended December 31, 2020, a decline of $4.0
million, or 4.6 percent compared to the year ended December 31,
2019. The change was attributable to a decline of $15.6 million in
the Non-Controlled Founded Entities segment owing to the
deconsolidation of Vor, Karuna and Gelesis during year ended
December 31, 2019. The decline was further attributable to declines
of $3.6 million in the Controlled Founded Entities segment and $1.3
million in the Parent segment for the year ended December 31, 2020.
The declines were partially offset by an increase of $16.5 million
in research and development expenses incurred by the Internal
segment for the year ended December 31, 2020. In 2020 we progressed
our wholly-owned therapeutic candidates to key milestones. We
completed a Phase 1 multiple ascending dose and food effect study
for LYT-100. We also initiated a Phase 2a proof-of-concept study of
LYT-100 in patients with breast cancer-related, upper limb
secondary lymphedema as well as initiated a Phase 2 trial of
LYT-100 in Long COVID respiratory complications and related
sequelae, which is also known as post-acute COVID-19 syndrome
(PACS). Finally, we initiated a Phase 1 clinical trial of LYT-200
for the potential treatment of metastatic solid tumors that are
difficult to treat and have poor survival rates.
General and Administrative Expenses
Year Ended December 31,
(in thousands) 2020 2019 Change
General and Administrative
Expenses:
Internal Segment $ (3,482) $ (3,252) $ 230
Controlled Founded Entities (13,691) (13,569) 122
Non-Controlled Founded Entities - (10,439) (10,439)
Parent Company and other (32,267) (32,098) 168
Total General and Administrative
Expenses $ (49,440) $ (59,358) $ (9,918)
Our general and administrative expenses were $49.4 million for
the year ended December 31, 2020, a decrease of $9.9 million, or
16.7 percent compared to the year ended December 31, 2019. The
decrease was primarily attributable to a decline of $10.4 million
in the Non-Controlled Founded Entities segment, owing to the
deconsolidation of Vor, Karuna and Gelesis during the year ended
December 31, 2019.
Total Other Income (Loss)
Total other income was $178.7 million for the year ended
December 31, 2020 a decrease of $493.4 million, compared to the
year ended December 31, 2019. We recognized a gain on loss of
significant influence of $445.6 million with respect to Karuna for
the year ended December 31, 2019. No loss of significant influence
of associates occurred during the year ended December 31, 2020. The
decline was further attributable to a decline of $264.4 million in
gain on deconsolidation as no deconsolidation of subsidiaries
occurred during the year ended December 31, 2020, as compared to a
gain of $264.4 million recognized for the deconsolidation of Vor,
Karuna and Gelesis during the year ended December 31, 2019. The
decline was further attributable to a loss of $55.0 million
realized on the sale of certain investments held at fair value
during year ended December 31, 2020. The declines were partially
offset by an increase of $270.5 million on gain on investments held
at fair value for the year ended December 31, 2020, which was
primarily driven by Karuna.
Net Finance Income (Costs)
Net finance costs were $6.1 million for the year ended December
31, 2020, a decline of $40.0 million, or 86.7 percent compared to
net finance costs of $46.1 million for the year ended December 31,
2019. The change was primarily attributable to a $42.1 million
decline in the change in the fair value of our preferred shares,
warrant and convertible note liabilities held by third parties for
the year ended December 31, 2020.
Share of Net Gain (Loss) in Associates Accounted for Using the
Equity Method, and Impairment of Investment in Associate
The share of net loss in associates was $34.1 million for the
year ended December 31, 2020, a decrease of $64.9 million, or 210.8
percent as compared to net gain of $30.8 million for the year ended
December 31, 2019. The change in share of net gain/(loss) in
associates was primarily attributable to the financial results of
Gelesis for the year ended December 31, 2020. Additionally, we
allocated a share of our net loss in Gelesis for the year ended
December 31, 2020, totaling $23.0 million, to our long-term
interest in Gelesis as of December 31, 2020. We recorded equity
method income of $37.1 million with respect to Gelesis, which was
partially offset by our share of net loss in Karuna of $6.3 million
for the year ended December 31, 2019. Additionally, we recorded an
impairment charge of $42.9 million for the year ended December 31,
2019, related to our investment in common shares held in Gelesis.
See Note 6 to our consolidated financial statements included
elsewhere in this annual report.
Taxation
Income tax expense was $14.4 million for the year ended December
31, 2020, a decline of $98.0 million, or 87.2 percent as compared
to the year ended December 31, 2019. The decline in income tax
expense was primarily attributable to the gains realized on the
loss of significant influence on Karuna for the year ended December
31, 2019 and the gains recognized on deconsolidation of Vor, Karuna
and Gelesis during the year ended December 31, 2019.
Critical Accounting Policies and Significant Judgments and
Estimates
Our management's discussion and analysis of our financial
condition and results of operations is based on our financial
statements, which we have prepared in accordance with international
accounting standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting Standards
(IFRSs) as adopted for use in the UK. The 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.
While our significant accounting policies are described in more
detail in the notes to our consolidated financial statements
appearing at the end of this report, we believe the following
accounting policies to be most critical to the judgments and
estimates used in the preparation of our financial statements. See
Note 1 to our consolidated financial statements for a further
detailed description of our significant accounting policies.
Financial instruments
We account for our financial instruments according to IFRS 9. As
such, when issuing preferred shares in our subsidiaries we
determine the classification of financial instruments in terms of
liability or equity. Such determination involves significant
judgement. These judgements include an assessment of whether the
financial instruments include any embedded derivative features,
whether they include contractual obligations upon us to deliver
cash or other financial assets or to exchange financial assets or
financial liabilities with another party at any point in the future
prior to liquidation, and whether that obligation will be settled
by exchanging a fixed amount of cash or other financial assets for
a fixed number of the Group's equity instruments.
In accordance with IFRS 9 we carry certain investments in equity
securities at fair value as well as our subsidiary preferred share,
convertible notes and warrant liabilities, all through profit and
loss (FVTPL). Valuation of the aforementioned financial instruments
(assets and liabilities) includes making significant estimates,
specifically determining the appropriate valuation methodology and
making certain estimates of the future earnings potential of the
subsidiary businesses, appropriate discount rate and earnings
multiple to be applied, marketability and other industry and
company specific risk factors.
Consolidation:
The consolidated financial statements include the financial
statements of the Company and the entities it controls. Based on
the applicable accounting rules, the Company controls an investee
when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those
returns through its power over the investee. Therefore an
assessment is required to determine whether the Company has (i)
power over the investee; (ii) exposure, or rights, to variable
returns from its involvement with the investee; and (iii) the
ability to use its power over the investee to affect the amount of
the investor's returns. Judgement is required to perform such
assessment and it requires that the Company considers, among
others, activities that most significantly affect the returns of
the investee, its voting shares, representation on the board,
rights to appoint board members and management, shareholders
agreements, de facto power, investee dependence on the Company and
other contributing factors.
Investment in Associates
When we do not control an investee but maintain significant
influence over the financial and operating policies of the investee
the investee is an associate. Significant influence is presumed to
exist when we hold 20 percent or more of the voting power of an
entity, unless it can be clearly demonstrated that this is not the
case. We evaluate if we maintain significant influence over
associates by assessing if we have the power to participate in the
financial and operating policy decisions of the associate.
Associates are accounted for using the equity method (equity
accounted investees) and are initially recognized at cost, or if
recognized upon deconsolidation they are initially recorded at fair
value at the date of deconsolidation. The consolidated financial
statements include our share of the total comprehensive income and
equity movements of equity accounted investees, from the date that
significant influence commences until the date that significant
influence ceases. When our share of losses exceeds the net
investment in an equity accounted investee, including preferred
share investments that are considered to be Long-Term Interests,
the carrying amount is reduced to zero and recognition of further
losses is discontinued except to the extent that we have incurred
legal or constructive obligations or made payments on behalf of an
investee. To the extent we hold interests in associates that are
not providing access to returns underlying ownership interests, the
instrument held by PureTech is accounted for in accordance with
IFRS 9.
Judgement is required in order to determine whether we have
significant influence over financial and operating policies of
investees. This judgement includes, among others, an assessment
whether we have representation on the Board of Directors of the
investee, whether we participate in the policy making processes of
the investee, whether there is any interchange of managerial
personnel, whether there is any essential technical information
provided to the investee and if there are any transactions between
us and the investee.
Judgement is also required to determine which instruments we
hold in the investee form part of the investment in the associate,
which is accounted for under IAS 28 and scoped out of IFRS 9, and
which instruments are separate financial instruments that fall
under the scope of IFRS 9. This judgement includes an assessment of
the characteristics of the financial instrument of the investee
held by us and whether such financial instrument provides access to
returns underlying an ownership interest.
Where the company has other investments in an equity accounted
investee that are not accounted for under IAS 28, judgement is
required in determining if such investments constitute Long-Term
Interests for the purposes of IAS 28 (please refer to Notes 5 and
6). This determination is based on the individual facts and
circumstances and characteristics of each investment, but is
driven, among other factors, by the intention and likelihood to
settle the instrument through redemption or repayment in the
foreseeable future, and whether or not the investment is likely to
be converted to common stock or other equity instruments
Recent Accounting Pronouncements
For information on recent accounting pronouncements, see our
consolidated financial statements and the related notes found
elsewhere in this report.
Cash Flow and Liquidity
Our cash flows may fluctuate and are difficult to forecast and
will depend on many factors, including:
-- the expenses incurred in the development of wholly-owned and
Controlled Founded Entity therapeutic candidates;
-- the revenue, 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 December 31, 2021, we had consolidated cash and cash
equivalents of $465.7 million. As of December 31, 2021, we had
PureTech Level cash and cash equivalents of $418.9 million (for a
definition of PureTech Level cash and cash equivalents, see
paragraph "Cash flow and cash equivalents" earlier in this
Financial review).
Cash Flows
The following table summarizes our cash flows for each of the
periods presented:
Year Ended December 31,
(in thousands) 2021 2020 2019
Net cash used in operating
activities $ (158,274) $ (131,827) $ (98,156)
Net cash provided by
investing activities 197,375 364,478 63,659
Net cash provided by
financing activities 22,727 38,869 49,910
Effect of exchange rates
on cash and cash
equivalents - - (104)
Net increase in cash and
cash equivalents $ 61,827 $ 271,520 $ 15,309
Operating Activities
Net cash used in operating activities was $158.3 million for the
year ended December 31, 2021, as compared to $131.8 million for the
year ended December 31, 2020. The increase in outflows is primarily
attributable to our higher operating loss and higher income taxes
paid of $7.0 million, and to a lesser extent the timing of receipts
and payments in the normal course of business.
Net cash used in operating activities was $131.8 million for the
year ended December 31, 2020, as compared to $98.2 million for the
year ended December 31, 2019. The increase in outflows was
primarily attributable to estimated income taxes of $20.7 million
paid for our disposals of Karuna common shares during the year
ended December 31, 2020. The increase was further attributable to a
decrease of $4.5 million in payments received with respect to
contract revenue for the year ended December 31, 2020. We received
a $2.0 million milestone payment from Karuna for initiation of its
KarXT Phase 3 clinical study pursuant to the Exclusive Patent
License Agreement between PureTech and Karuna during the year ended
December 31, 2020. We received $3.5 million from Imbrium
Therapeutics LP for the execution of a Research Collaboration
Option and License Agreement and $3.0 million from Boehringer
Ingelheim for the execution of a Collaboration and License
Agreement during the year ended December 31, 2019. The increase in
outflows was further attributable to reduced interest income and
the timing of payments in the normal course of business for the
year ended December 31, 2020.
Investing Activities
Net cash provided by investing activities was $197.4 million for
the year ended December 31, 2021, as compared to inflows of $364.5
million for the year ended December 31, 2020, resulting in a
decrease of $167.1 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 $132.5 million
(proceeds from such sales were $218.1 million for the year ended
December 31, 2021 vs. $350.6 million for the year ended December
30, 2020) and the fact that for the year ended December 31, 2020
the Company had proceeds of $30.1 million from maturity of short
term investments while for the year ended December 31, 2021, there
were no such cash inflows.
Net cash provided by investing activities was $364.5 million for
the year ended December 31, 2020, as compared to inflows of $63.7
million for the year ended December 31, 2019. The inflow was
primarily attributable to the sale of Karuna and resTORbio common
shares for aggregate proceeds of $350.6 million during the year
ended December 31, 2020. The inflow was further attributable to
cash provided by the maturity of short-term investments totaling
$30.1 million. The inflows were offset by purchases of Gelesis and
Vor preferred shares totaling $11.1 million and the purchase of
fixed assets totaling $5.2 million.
Financing Activities
Net cash provided by financing activities was $22.7 million for
the year ended December 31, 2021, as compared to $38.9 million for
the year ended December 31, 2020, resulting in a decrease of $16.1
million in the net cash provided by financing activities. The
decrease in the net cash provided by financing activities was
primarily attributable to the decrease in proceeds from issuance of
convertible notes in subsidiaries of $22.8 million and the fact
that for the year ended December 31, 2020 the Company had proceeds
from the issuance of a long term loan of $14.7 million, while for
the year ended December 31, 2021, there was no such cash inflow.
Such decreases were partially offset by an increase in proceeds
from issuance of preferred shares in subsidiaries of $23.9
million
Net cash provided by financing activities was $38.9 million for
the year ended December 31, 2020, as compared to $49.9 million for
the year ended December 31, 2019. The net inflow was primarily
attributable to the issuances by Vedanta of a $25.0 million
convertible promissory note and a long-term loan with net proceeds
of $14.7 million. The inflow was further attributable to $13.8
million received from the Vedanta Series C-2 and Sonde Series A-2
preferred share financings. The inflows were partially offset by
the $12.9 million settlement of 2017 RSU awards granted to certain
executives.
Funding Requirements
We have incurred operating losses since inception. Based on our
current plans, we believe our existing cash and cash equivalents at
December 31, 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. We anticipate to continue
to incur net operating losses for the foreseeable future as is
typical for pre-revenue biotechnology companies. Our ability to
fund our therapeutic development and clinical operations as well as
commercialization of our wholly-owned therapeutic candidates, will
depend on the amount and timing of cash received from planned
financings and potential business development activities. Our
future capital requirements will depend on many factors,
including:
-- the costs, timing and outcomes of clinical trials and
regulatory reviews associated with our wholly-owned therapeutic
candidates;
-- the costs of commercialization activities, including product
marketing, sales and distribution;
-- the costs of preparing, filing and prosecuting patent
applications and maintaining, enforcing and defending intellectual
property-related claims;
-- the emergence of competing technologies and products and
other adverse marketing developments;
-- the effect on our therapeutic and product development
activities of actions taken by the U.S. Food and Drug
Administration ("FDA"), the European Medicines Agency ("EMA") or
other regulatory authorities;
-- our degree of success in commercializing our wholly-owned
therapeutic candidates, if and when approved; and
-- the number and types of future therapeutics we develop and
commercialize.
A change in the outcome of any of these or other variables with
respect to the development of any of our wholly-owned therapeutic
candidates could significantly change the costs and timing
associated with the development of that therapeutic candidate.
Further, our operating plans may change, and we may need
additional funds to meet operational needs and capital requirements
for clinical trials and other research and development activities.
We currently have no credit facility or other committed sources of
capital. 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.
Financial Position
Summary Financial Position
As of December 31,
(in thousands) 2021 2020 Change
Investments held at fair value (*) 397,179 530,161 (132,982)
Other non-current assets 47,018 45,484 1,534
Non-current assets 444,197 575,645 (131,448)
Cash and cash equivalents 465,708 403,881 61,827
Other current assets 36,101 10,468 25,634
Current assets 501,809 414,348 87,461
Total assets 946,006 989,994 (43,988)
Lease Liability 29,040 32,088 (3,048)
Deferred tax liability 89,765 108,626 (18,861)
Other non-current liabilities 16,921 14,818 2,103
Non-current liabilities 135,725 155,531 (19,806)
Trade and other payables 35,760 20,566 15,194
Notes payable 3,916 26,455 (22,539)
Warrant liability 6,787 8,206 (1,419)
Preferred shares 174,017 118,972 55,045
Other current liabilities 5,654 6,724 (1,069)
Current liabilities 226,135 180,924 45,211
Total liabilities 361,859 336,455 25,405
Net assets 584,147 653,539 (69,392)
Total equity 584,147 653,539 (69,392)
(*) Fair value of investments accounted for at fair value, does
not take into consideration contribution from milestones that
occurred after December 31, 2021, the value of our consolidated
Founded Entities (Vedanta, Follica, Sonde, Alivio, and Entrega),
our Wholly Owned Programs, or our cash.
Investments Held at Fair Value
Investments held at fair value decreased $133.0 million to
$397.2 million as of December 31, 2021. Investments held at fair
value consists primarily of our common share investment in Karuna
and Vor (from February 2021) and our preferred share investments in
Akili, Gelesis and Vor (until February 2021). See Note 5 to our
consolidated financial statements included elsewhere in this annual
report for details regarding the change in investments held at fair
value.
Cash and Cash Equivalents
Consolidated cash, cash equivalents increased $61.8 million to
$465.7 million as of December 31, 2021, while we had PureTech Level
cash and cash equivalents of $418.9 million. The increase reflected
primarily the disposals of Karuna common shares during the year
ended December 31, 2021. On February 9, 2021, PureTech sold
1,000,000 shares of Karuna common shares for aggregate proceeds of
$118.0 million. On November 9, 2021, PureTech sold an additional
750,000 Karuna common shares for aggregate proceeds of 100.1
million. The inflows from the disposals were primarily offset by
our operating loss of $150.3 million for the year ended December
31, 2021.
Non-Current Liabilities
Non-current liabilities decreased $19.8 million to $135.7
million as of December 31, 2021. The decrease was driven by
declines of $3.0 million and $18.9 million in our long-term lease
and deferred tax liabilities, respectively as of December 31,
2021.
Trade and Other Payables
Trade and other payables increased $15.2 million to $35.8
million as of December 31, 2021. The increase reflected primarily
the timing of payments as of December 31, 2021.
Notes Payable
Notes payable decreased $22.5 million to $3.9 million as of
December 31, 2021. The decrease reflected the conversion of the
Vedanta $25.0 million convertible promissory note to a third party
investor during the execution of the Series D financing round. This
decrease was partially offset by a $2.2 million note issuance by
Sonde.
Preferred Shares
Preferred share liability increased $55.0 million to $174.0
million as of December 31, 2021. The increase reflected the
issuance by Vedanta of Series D preferred shares and the conversion
of Vedanta notes into Series D preferred shares, increasing the
liability by $63.4 million. This increases was partially offset by
a decrease in fair value of the preferred share liability by $8.4
million during the year ended December 31, 2021.
Quantitative and Qualitative Disclosures about Financial
Risks
Interest Rate Sensitivity
As of December 31, 2021, we had consolidated cash and cash
equivalents of $465.7 million, while we had PureTech Level cash and
cash equivalents of $418.9 million. Our exposure to interest rate
sensitivity is impacted by changes in the underlying U.K. and U.S.
bank interest rates. We have not entered into investments for
trading or speculative purposes. Due to the conservative nature of
our investment portfolio, which is predicated on capital
preservation and investments in short duration, high-quality U.S.
Treasury Bills and U.S. debt obligations and related money market
accounts we do not believe change in interest rates would have a
material effect on the fair market value of our portfolio, and
therefore we do not expect our operating results or cash flows to
be significantly affected by changes in market interest rates.
Foreign Currency Exchange Risk
We maintain our consolidated financial statements in our
functional currency, which is the U.S. dollar. Monetary assets and
liabilities denominated in currencies other than the functional
currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet dates. Non-monetary assets
and liabilities denominated in foreign currencies are translated
into the functional currency at the exchange rates prevailing at
the date of the transaction. Exchange gains or losses arising from
foreign currency transactions are included in the determination of
net income (loss) for the respective periods. Such foreign currency
gains or losses were not material for all reported periods.
We recorded foreign currency losses in respect of foreign
operations of $0.0 million, $0.5 million and $0.0 million for the
years ended December 31, 2021, December 31, 2020, and December 31,
2019, respectively, which are included in Other comprehensive
income/(loss) in the Consolidated Statements of Comprehensive
Income/(Loss).
We do not currently engage in currency hedging activities in
order to reduce our currency exposure, but we may begin to do so in
the future. Instruments that may be used to hedge future risks
include foreign currency forward and swap contracts. These
instruments may be used to selectively manage risks, but there can
be no assurance that we will be fully protected against material
foreign currency fluctuations.
Controlled Founded Entity Investments
We maintain investments in certain Controlled Founded Entities.
Our investments in Controlled Founded Entities are eliminated as
intercompany transactions upon financial consolidation. We are
however exposed to a preferred share liability owing to the terms
of existing preferred shares and the ownership of Controlled
Founded Entities preferred shares by third parties. The liability
of preferred shares is maintained at fair value through the profit
and loss. Our strong cash position, budgeting and forecasting
processes, as well as decision making and risk mitigation framework
enable us to robustly monitor and support the business activities
of the Controlled Founded Entities to ensure no exposure to credit
losses and ultimately dissolution or liquidation. Accordingly, we
view exposure to third party preferred share liability as low.
Please refer to Note 16 to our consolidated financial statements
for further information regarding our exposure to Controlled
Founded Entity Investments.
Non-Controlled Founded Entity Investments
We maintain certain investments in Non-Controlled Founded
Entities which are deemed either as investments and accounted for
as investments held at fair value or associates and accounted for
under the equity method (please refer to Note 1 to our consolidated
financial statements). Our exposure to investments held at fair
value was $397.2 million as of December 31, 2021, and we may or may
not be able to realize the value in the future. Accordingly, we
view the risk as high. Our exposure to investments in associates in
limited to the carrying amount of the investment. We are not
exposed to further contractual obligations or contingent
liabilities beyond the value of initial investment. As of December
31, 2021, Gelesis was the only associate. The carrying amount of
the investment in Gelesis as an associate was zero. Accordingly, we
do not view this as a risk. Please refer to Notes 5, 6 and 16 to
our consolidated financial statements for further information
regarding our exposure to Non-Controlled Founded Entity
Investments.
Equity Price Risk
As of December 31, 2021, we held 1,656,564 common shares of
Karuna and 3,207,200 common shares of Vor. The fair value of our
investment in the common shares of Karuna was $217.0 million and
common shares of Vor was $37.3 million.
The investments in Karuna and Vor are exposed to fluctuations in
the market price of these common shares. The effect of a 10.0
percent adverse change in the market price of Karuna common shares
and Vor common shares as of December 31, 2021, would have been a
loss of approximately $21.7 million and $3.7 million, respectively,
recognized as a component of Other income (expense) in our
Consolidated Statements of Comprehensive Income/(Loss).
Subsequent to December 31, 2021 our investment in Gelesis was
converted into shares of common stock of Gelesis (after the
combination with Capstar), which are publicly traded on the New
York Stock Exchange.
Liquidity Risk
We do not believe we will encounter difficulty in meeting the
obligations associated with our financial liabilities that are
settled by delivering cash or another financial asset. While we
believe our cash and cash equivalents do not contain excessive
risk, we cannot provide absolute assurance that in the future our
investments will not be subject to adverse changes or decline in
value based on market conditions.
Credit Risk
We maintain an investment portfolio in accordance with our
investment policy. The primary objectives of our investment policy
are to preserve principal, maintain proper liquidity and to meet
operating needs. Although our investments are subject to credit
risk, our investment policy specifies credit quality standards for
our investments and limits the amount of credit exposure from any
single issue, issuer or type of investment. Also, due to the
conservative nature of our investments and relatively short
duration, interest rate risk is mitigated. We do not own derivative
financial instruments. Accordingly, we do not believe that there is
any material market risk exposure with respect to derivative or
other financial instruments.
Credit risk is also the risk of financial loss if a customer or
counterparty to a financial instrument fails to meet its
contractual obligations. We assess the credit quality of customers
on an ongoing basis, taking into account its financial position,
past experience and other factors. The credit quality of financial
assets that are neither past due nor impaired can be assessed by
reference to credit ratings (if available) or to historical
information about counterparty default rates. We are also
potentially subject to concentrations of credit risk in accounts
receivable. Concentrations of credit risk with respect to
receivables is owed to the limited number of companies comprising
our customer base. However, our exposure to credit losses is
currently de minimis due to the credit quality of our receivables,
which are primarily from the US government and large funds with
respect to grants.
Foreign Private Issuer Status
Owing to our U.S. listing, we report under the Securities
Exchange Act of 1934, as amended, or the Exchange Act, as a
non-U.S. company with foreign private issuer status. As long as we
qualify as a foreign private issuer under the Exchange Act, we will
be exempt from certain provisions of the Exchange Act that are
applicable to U.S. domestic public companies, including:
-- the sections of the Exchange Act regulating the solicitation
of proxies, consents or authorizations in respect of a security
registered under the Exchange Act;
-- sections of the Exchange Act requiring insiders to file
public reports of their stock ownership and trading activities and
liability for insiders who profit from trades made in a short
period of time;
-- the rules under the Exchange Act requiring the filing with
the SEC of quarterly reports on Form 10-Q containing unaudited
financial and other specified information, or current reports on
Form 8-K, upon the occurrence of specified significant events;
and
-- Regulation FD, which regulates selective disclosures of
material information by issuers.
Consolidated Statements of Comprehensive Income/(Loss)
For the years ended December 31
2021 2020 2019
Note $000s $000s $000s
Contract revenue 3 9,979 8,341 8,688
Grant revenue 3 7,409 3,427 1,119
Total revenue 17,388 11,768 9,807
Operating
expenses:
General and
administrative
expenses 7 (57,199) (49,440) (59,358)
Research and
development
expenses 7 (110,471) (81,859) (85,848)
Operating
income/(loss) (150,282) (119,531) (135,399)
Other
income/(expense):
Gain on
deconsolidation 5 - - 264,409
Gain/(loss) on
investments held
at
fair value 5 179,316 232,674 (37,863)
Loss realized on
sale of
investments 5 (20,925) (54,976) -
Gain on loss of
significant
influence 6 - - 445,582
Other
income/(expense) 6, 21 1,592 1,035 39
Other
income/(expense) 159,983 178,732 672,167
Finance
income/(costs):
Finance income 9 214 1,183 4,362
Finance costs -
contractual 9 (4,771) (2,946) (2,576)
Finance
income/(costs) -
fair value
accounting 9 9,606 (4,351) (46,475)
Finance
income/(costs) -
subsidiary
preferred shares 9 - - (1,458)
Net finance
income/(costs) 5,050 (6,115) (46,147)
Share of net
income/(loss) of
associates
accounted for
using the equity
method 6 (73,703) (34,117) 30,791
Impairment of
investment in
associate 6 - - (42,938)
Income/(loss)
before taxes (58,953) 18,969 478,474
Taxation 25 (3,756) (14,401) (112,409)
Income/(Loss) for
the year (62,709) 4,568 366,065
Other
comprehensive
income/(loss):
Items that are or
may be
reclassified
as profit or loss
Foreign currency
translation
differences - 469 (10)
Total other
comprehensive
income/(loss) - 469 (10)
Total
comprehensive
income/(loss)
for the year (62,709) 5,037 366,055
Income/(loss)
attributable to:
Owners of the
Company (60,558) 5,985 421,144
Non-controlling
interests 18 (2,151) (1,417) (55,079)
(62,709) 4,568 366,065
Comprehensive
income/(loss)
attributable
to:
Owners of the
Company (60,558) 6,454 421,134
Non-controlling
interests 18 (2,151) (1,417) (55,079)
(62,709) 5,037 366,055
$ $ $
Earnings/(loss)
per share:
Basic
earnings/(loss)
per share 10 (0.21) 0.02 1.49
Diluted
earnings/(loss)
per share 10 (0.21) 0.02 1.44
The accompanying notes are an integral part of these financial
statements.
Consolidated Statements of Financial Position
As of December 31,
2021 2020
Note $000s $000s
Assets
Non-current assets
Property and equipment, net 11 26,771 22,777
Right of use asset, net 21 17,166 20,098
Intangible assets, net 12 987 899
Investments held at fair value 5, 16 397,179 530,161
Investments in associates 6 - -
Lease receivable - long-term 21 1,285 1,700
Other non-current assets 810 11
Total non-current assets 444,197 575,645
Current assets
Trade and other receivables 22 3,174 2,558
Income tax receivable 25 4,514 -
Prepaid expenses 10,755 5,405
Lease receivable - short-term 21 415 381
Other financial assets 13, 22 2,124 2,124
Short-term note from associate 16 15,120 -
Cash and cash equivalents 22 465,708 403,881
Total current assets 501,809 414,348
Total assets 946,006 989,994
Equity and liabilities
Equity
Share capital 14 5,444 5,417
Share premium 14 289,303 288,978
Merger reserve 14 138,506 138,506
Translation reserve 14 469 469
Other reserve 14 (40,077) (24,050)
Retained earnings/(accumulated deficit) 14 199,871 260,429
Equity attributable to the owners of the
Company 593,515 669,748
Non-controlling interests 14, 18 (9,368) (16,209)
Total equity 584,147 653,539
Non-current liabilities
Deferred tax liability 25 89,765 108,626
Lease liability, non-current 21 29,040 32,088
Long-term loan 20 14,261 14,818
Liability for share based awards 8 2,659 -
Total non-current liabilities 135,725 155,531
Current liabilities
Deferred revenue 3 65 1,472
Lease liability, current 21 3,950 3,261
Trade and other payables 19 35,817 21,826
Subsidiary:
Notes payable 16, 17 3,916 26,455
Warrant liability 16 6,787 8,206
Preferred shares 15, 16 174,017 118,972
Current portion of long-term loan 20 857 -
Other current liabilities 726 732
Total current liabilities 226,135 180,924
Total liabilities 361,859 336,455
Total equity and liabilities 946,006 989,994
Please refer to the accompanying Notes to the consolidated
financial information. Registered number: 09582467. The
Consolidated Financial Statements were approved by the Board of
Directors and authorized for issuance on April 25, 2022 and signed
on its behalf by:
Daphne Zohar
Chief Executive Officer
April 25, 2022
The accompanying notes are an integral part of these financial
statements.
Consolidated Statements of Changes in Equity
For the years ended December 31
Share Capital
Total
Retained
earnings/ Total
Share Translation Other (accumulated Parent Non-controlling
Amount premium reserve reserve deficit) equity interests Equity
Merger
reserve
Shares $000s $000s $000s $000s $000s $000s $000s $000s $000s
Balance January
1, 2019 282,493,867 5,375 278,385 138,506 10 20,923 (166,693) 276,506 (108,535) 167,971
Net income/(loss) - - - - - - 421,144 421,144 (55,079) 366,065
Foreign currency
exchange - - - - (10) - - (10) - (10)
Total
comprehensive
income/(loss)
for the year - - - - (10) - 421,144 421,134 (55,079) 366,055
Deconsolidation
of subsidiary - - - - - - - - 97,178 97,178
Subsidiary note
conversion and
changes in NCI
ownership
interest - - - - - (20,631) - (20,631) 23,049 2,418
Exercise of
share-based
awards 237,090 5 499 - - - - 504 - 504
Purchase of
subsidiary's
non-controlling
interest through
issuance of
shares 2,126,338 28 9,078 - - (33,145) - (24,039) 24,039 -
Revaluation of
deferred tax
assets
related to
share-based
awards - - - - - 3,061 - 3,061 - 3,061
Equity settled
share-based
payments - - - - - 12,785 - 12,785 1,683 14,468
Vesting of
restricted
stock units
(RSU) 513,324 - - - - (1,280 - (1,280) - (1,280)
Other - - - - - 5 (7) (2) 25 23
Balance December
31, 2019 285,370,619 5,408 287,962 138,506 - (18,282) 254,444 668,037 (17,639) 650,398
Net income/(loss) - - - - - - 5,985 5,985 (1,417) 4,568
Foreign currency
exchange - - - - 469 - - 469 - 469
Total
comprehensive
income/(loss)
for the year - - - - 469 - 5,985 6,454 (1,417) 5,037
Exercise of
share-based
awards 514,406 9 1,016 - - - - 1,025 11 1,036
Revaluation of
deferred tax
assets
related to
share-based
awards - - - - - (684) - (684) - (684)
Equity settled
share-based
awards - - - - - 7,805 - 7,805 2,822 10,627
Settlement of
restricted stock
units - - - - - (12,888) - (12,888) - (12,888)
Other - - - - - - - - 13 13
As at December
31, 2020 285,885,025 5,417 288,978 138,506 469 (24,050) 260,429 669,748 (16,209) 653,539
Net income/(loss) - - - - - - (60,558) (60,558) (2,151) (62,709)
Foreign currency
exchange - - - - - - - - - -
Total
comprehensive
income/(loss)
for the year - - - - - - (60,558) (60,558) (2,151) (62,709)
Exercise of
share-based
awards 1,911,560 27 326 - - - - 352 - 352
Revaluation of
deferred tax
assets
related to
share-based
awards - - - - - 615 - 615 - 615
Equity settled
share-based
awards - - - - - 7,109 - 7,109 6,252 13,361
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)
NCI exercise of
share-based
awards
in subsidiaries - - - - - 5,988 - 5,988 (5,922) 66
Distributions - - - - - - - - (6) (6)
Balance December
31, 2021 287,796,585 5,444 289,303 138,506 469 (40,077) 199,871 593,515 (9,368) 584,147
The accompanying notes are an integral part of these financial
statements.
Consolidated Statements of Cash Flows
For the years ended December 31
2021 2020 2019
Note $000s $000s $000s
Cash flows from
operating
activities
Income/(loss) (62,709) 4,568 366,065
Adjustments to
reconcile net
operating
loss to net cash
used in
operating
activities:
Non-cash items:
Depreciation and 11,
amortization 12 7,287 6,645 6,665
Impairment of
investment in
associate 6 - - 42,938
Equity settled
share-based
payment expense 8 13,950 10,718 14,468
(Gain)/loss on
investments
held at fair
value 5 (179,316) (232,674) 37,863
Realized loss on
sale of
investments 20,925 54,976 -
Gain on
deconsolidation 5 - - (264,409)
Gain on loss of
significant
influence 5 - - (445,582)
Loss on disposal
of assets 11 53 66 140
Share of net
(income)/loss
of associates
accounted for
using the
equity method 6 73,703 34,117 (30,791)
Fair value gain
on derivative 6 (800) - -
Income taxes,
net 25 3,756 14,402 112,077
Finance costs,
net 9 (5,050) 6,114 46,229
Changes in
operating assets
and liabilities:
Accounts
receivable 22 (617) (529) 747
Other financial
assets 13 - - (48)
Prepaid expenses
and other
current assets (5,350) (3,371) (25)
Deferred
revenues 3 (1,407) (5,223) 186
Trade and other
payables 19 8,338 605 11,166
Other
liabilities - (7) 3,002
Other (103) - -
Income taxes
paid (27,766) (20,737) -
Interest
received 214 1,155 3,648
20,
Interest paid 21 (3,382) (2,651) (2,495)
Net cash used in
operating
activities (158,274) (131,827) (98,156)
Cash flows from
investing
activities:
Purchase of
property and
equipment 11 (5,571) (5,170) (12,138)
Proceeds from
sale of property
and equipment 30 - -
Purchases of
intangible
assets 12 (90) (254) (400)
Purchase of
associate
preferred
shares
held at fair 5,
value 6 - (10,000) (13,670)
Purchase of
investments
held at fair
value 5 (500) (1,150) (1,556)
Sale of
investments
held at fair
value 5 218,125 350,586 9,294
Receipt of
payment of
sublease 21 381 350 191
Purchase of
short-term note
from associate 16 (15,000) - -
Purchase of
convertible
note 6 - - (6,480)
Cash
derecognized
upon loss of
control
over subsidiary - - (16,036)
Purchases of
short-term
investments 22 - - (69,541)
Proceeds from
maturity of
short-term
investments 22 - 30,116 173,995
Net cash
provided by
investing
activities 197,375 364,478 63,659
Cash flows from
financing
activities:
Receipt of PPP
loan - 68 -
Issuance of long
term loan 20 - 14,720 -
Issuance of
subsidiary
preferred
Shares 15 37,610 13,750 51,048
Proceeds from
issuance of
convertible
notes in
subsidiary 17 2,215 25,000 1,606
Payment of lease
liability 21 (3,375) (2,908) (1,678)
Repayment of
long-term debt - - (178)
Distribution to
Tal
shareholders - - (112)
Exercise of
stock options 352 1,036 504
Settlement of
RSU's (10,749) (12,888) -
Vesting of
restricted
stock units and
net share
exercise (2,582) - (1,280)
Issuance of
shares to NCI
in subsidiary 15 66 - -
Issuance of
warrants - 92 -
Acquisition of a
non-controlling
Interest
of a subsidiary (806) - -
Other (5) - -
Net cash
provided by
financing
activities 22,727 38,869 49,910
Effect of
exchange rates
on cash and
cash
equivalents - - (104)
Net increase in
cash and cash
equivalents 61,827 271,520 15,309
Cash and cash
equivalents at
beginning
of year 403,881 132,360 117,051
Cash and cash
equivalents at
end of year 465,708 403,881 132,360
Supplemental
disclosure of
non-cash
investment
and financing
activities:
Purchase of non
controlling
interest
in
consideration
for issuance of
shares
and options - - 9,106
Purchase of
intangible
asset and
investment
held at fair
value in
consideration
for
issuance of
warrant
liability and
assumption
of other long
and short-term
liabilities - - 15,894
Purchase of
property, plant
and equipment
against trade
and other
payables 11 1,841 - -
Leasehold
improvements
purchased
through
lease
incentives
(deducted from
Right
of Use Asset) 11 1,010 - 10,680
Conversion of
subsidiary
convertible
note into
preferred share
liabilities 17 25,797 - 4,894
Conversion of
subsidiary
convertible
note into
subsidiary
common stock
(NCI) - - 2,418
Supplemental
disclosure of
cash paid
for income
taxes:
Cash paid for
income taxes 27,766 20,737 176
The accompanying notes are an integral part of these financial
statements.
Notes to the Consolidated Financial Statements
1. Accounting policies
Description of Business
PureTech Health plc ("PureTech," the "Parent" or the "Company")
is a public company incorporated, domiciled and registered in the
United Kingdom ("UK"). The registered number is 09582467 and the
registered address is 8th Floor, 20 Farringdon Street, London EC4A
3AB, United Kingdom.
PureTech's group financial statements consolidate those of the
Company and its subsidiaries (together referred to as the "Group").
The Parent company financial statements present financial
information about the Company as a separate entity and not about
its Group.
The accounting policies set out below have, unless otherwise
stated, been applied consistently to all periods presented in these
group financial statements.
Basis of Presentation
The consolidated financial statements of the Group are presented
as of December 31, 2021 and 2020, and for the years ended December
31, 2021, 2020 and 2019. The Group financial statements have been
approved by the Directors on April 25, 2022, and are prepared in
accordance with UK-adopted International Financial Reporting
Standards (IFRSs). The Consolidated Financial Statements also
comply fully with IFRSs as issued by the International Accounting
Standards Board (IASB). UK-adopted IFRSs differs in certain
respects from IFRS as issued by the IASB. However, the differences
have no impact for the periods presented.
For presentation of the Consolidated Statements of Comprehensive
Income/(Loss), the Company uses a classification based on the
function of expenses, rather than based on their nature, as it is
more representative of the format used for internal reporting and
management purposes and is consistent with international
practice.
Certain amounts in the Consolidated Financial Statements and
accompanying notes may not add due to rounding. All percentages
have been calculated using unrounded amounts.
Basis of Measurement
The consolidated financial statements are prepared on the
historical cost basis except that the following assets and
liabilities are stated at their fair value: investments held at
fair value, short-term note from associate and liabilities
classified as fair value through the profit or loss.
Use of Judgments and Estimates
In preparing these consolidated financial statements, management
has made judgements, estimates and assumptions that affect the
application of the Group's accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates. Estimates and underlying
assumptions are reviewed on an on-going basis.
Significant estimation is applied in determining the
following:
-- Financial instruments valuations (Note 16): when estimating
the fair value of subsidiary warrants, convertible notes and
subsidiary preferred shares carried at fair value through profit
and loss (FVTPL) as well as investments held at fair value, at
initial recognition and upon subsequent measurement. This includes
determining the appropriate valuation methodology and making
certain estimates of the future earnings potential of the
subsidiary businesses, appropriate discount rate, estimated time to
exit, marketability and other industry and company specific risk
factors. See Note 16 for the sensitivity analysis for key estimates
used in these valuations.
Significant judgement is also applied in determining the
following:
-- Subsidiary preferred shares liability classification (Note
15): when determining the classification of financial instruments
in terms of liability or equity. These judgements include an
assessment of whether the financial instruments include any
embedded derivative features, whether they include contractual
obligations of the Group to deliver cash or other financial assets
or to exchange financial assets or financial liabilities with
another party, and whether that obligation will be settled by the
Company exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments. Further
information about these critical judgements and estimates is
included below under Financial Instruments.
-- When the power to control the subsidiaries exists (please
refer to Notes 5 and 6 and accounting policy below Subsidiaries).
This judgement includes an assessment of whether the Company has
(i) power over the investee; (ii) exposure, or rights, to variable
returns from its involvement with the investee; and (iii) the
ability to use its power over the investee to affect the amount of
the investor's returns. The Company considers among others its
voting shares, shareholder agreements, ability to appoint board
members, representation on the board, rights to appoint management,
de facto control, investee dependence on the Company etc. If the
power to control investees exists we consolidate the financial
statements of such investee in the consolidated financial
statements of the Group. Upon issuance of new shares in a
subsidiary and a resulting change in any shareholders or governance
agreements, the Group reassesses its ability to control the
investee based on the revised board composition and revised
subsidiary governance and management structure. When such new
circumstances result in the Group losing its power to control the
investee, the investee is deconsolidated.
-- Whether the Company has significant influence over financial
and operating policies of investees in order to determine if the
Company should account for its investment as an associate based on
IAS 28 or based on IFRS 9, Financial Instruments (please refer to
Note 5). This judgement includes, among others, an assessment
whether the Company has representation on the Board of Directors of
the investee, whether the Company participates in the policy making
processes of the investee, whether there is any interchange of
managerial personnel, whether there is any essential technical
information provided to the investee and if there are any
transactions between the Company and the investee.
-- Upon determining that the Company does have significant
influence over the financial and operating policies of an investee,
if the Company holds more than a single instrument issued by its
equity-accounted investee, judgement is required to determine
whether the additional instrument forms part of the investment in
the associate, which is accounted for under IAS 28 and scoped out
of IFRS 9, or it is a separate financial instrument that falls in
the scope of IFRS 9 (please refer to Notes 5 and 6). This judgement
includes an assessment of the characteristics of the financial
instrument of the investee held by the Company and whether such
financial instrument provides access to returns underlying an
ownership interest.
-- Where the company has other investments in an equity
accounted investee that are not accounted for under IAS 28,
judgement is required in determining if such investments constitute
Long-Term Interests for the purposes of IAS 28 (please refer to
Notes 5 and 6). This determination is based on the individual facts
and circumstances and characteristics of each investment, but is
driven, among other factors, by the intention and likelihood to
settle the instrument through redemption or repayment in the
foreseeable future, and whether or not the investment is likely to
be converted to common stock or other equity instruments (please
also refer to accounting policy with regard to Investments in
Associates below). When considering the individual facts and
circumstances of the Group's investment in its associate's
preferred stock in the manner described above, including the
long-term nature of such investment, the ability of the Group to
convert its preferred stock investment to an investment in common
shares and the likelihood of such conversion, as well the fact that
there is no planned redemption or other settlement of the preferred
stock by the investee in the foreseeable future, we concluded that
such investment is considered a Long Term Interest.
As of December 31, 2021, the Group had cash and cash equivalents
of $465.7 million. Considering the Group's and the Company's
financial position as of December 31, 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
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. The Directors believe the Group and the
Company is adequately resourced to continue in operational
existence for at least the twelve-month period from the date of
signing the Consolidated Financial Statements, irrespective of
uncertainty regarding the duration and severity of the COVID-19
pandemic and the global macroeconomic impact of the pandemic.
Accordingly, the Directors considered it appropriate to adopt the
going concern basis of accounting in preparing the Consolidated
Financial Statements and the PureTech Health plc Financial
Statements.
Basis of consolidation
The consolidated financial information as of December 31, 2021
and 2020, and for each of the years ended December 31, 2021, 2020
and 2019, comprises an aggregation of financial information of the
Company and the consolidated financial information of PureTech
Health LLC ("PureTech LLC"). Intra-group balances and transactions,
and any unrealized income and expenses arising from intra-group
transactions, are eliminated.
Subsidiaries
As used in these financial statements, the term subsidiaries
refers to entities that are controlled by the Group. Financial
results of subsidiaries of the Group as of December 31, 2021, are
reported within the Internal segment, Controlled Founded Entities
segment or the Parent Company and Other section (please refer to
Note 4). Under applicable accounting rules, the Group controls an
entity when it is exposed to, or has the rights to, variable
returns from its involvement with the entity and has the ability to
affect those returns through its power over the entity. In
assessing control, the Group takes into consideration potential
voting rights, board representation, shareholders' agreements,
ability to appoint Directors and management, de facto control and
other related factors. The financial statements of subsidiaries are
included in the consolidated financial statements from the date
that control commences until the date that control ceases. Losses
applicable to the non-controlling interests in a subsidiary are
allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a deficit balance.
A list of all current and former subsidiaries organized with
respect to classification as of December 31, 2021, and the Group's
total voting percentage, based on outstanding voting common and
preferred shares as of December 31, 2021, 2020 and 2019, is
outlined below. All current subsidiaries are domiciled within the
United States and conduct business activities solely within the
United States.
Voting percentage at December 31, through
the holdings in
2021 2020 2019
Subsidiary Common Preferred Common Preferred Common Preferred
Subsidiary operating
companies
Alivio Therapeutics,
Inc.(1,2) - 100.0 - 91.9 - 91.9
Entrega, Inc.
(indirectly
held through
Enlight)(1,2) - 77.3 - 83.1 - 83.1
Follica,
Incorporated(1,2,5) 28.7 56.7 28.7 56.7 28.7 56.7
PureTech LYT
(formerly Ariya
Therapeutics, Inc.) - 100.0 - 100.0 - 100.0
PureTech LYT-100 - 100.0 - 100.0 - 100.0
PureTech Management,
Inc.(3) 100.0 - 100.0 - 100.0 -
PureTech Health
LLC(3) 100.0 - 100.0 - 100.0 -
Sonde Health,
Inc.(1,2) - 51.8 - 51.8 - 64.1
Vedanta Biosciences,
Inc.(1,2) - 48.6 - 59.3 - 61.8
Vedanta Biosciences
Securities
Corp. (indirectly
held through
Vedanta)(1,2) - 48.6 - 59.3 - 61.8
Deconsolidated
former subsidiary
operating companies
Akili Interactive
Labs, Inc.(2) - 26.7 - 41.9 - 41.9
Gelesis,
Inc.(1,2,7,10) 4.8 19.7 4.9 20.2 5.7 20.2
Karuna Therapeutics,
Inc.(1,2,8) 5.6 - 12.6 - 28.4 -
Vor Biopharma
Inc.(1,2,9) 8.6 - - 16.4 - 47.5
Nontrading holding
companies
Endra Holdings, LLC
(held
indirectly through
Enlight)(2) 86.0 - 86.0 - 86.0 -
Ensof Holdings, LLC
(held
indirectly through
Enlight)(2) 86.0 - 86.0 - 86.0 -
PureTech Securities
Corp.(2) 100.0 - 100.0 - 100.0 -
PureTech Securities
II Corp.(2) 100.0 - 100.0 - - -
Inactive
subsidiaries
Appeering, Inc.(2) - 100.0 - 100.0 - 100.0
Commense Inc.(2,6) - 99.1 - 99.1 - 99.1
Enlight Biosciences,
LLC(2) 86.0 - 86.0 - 86.0 -
Ensof Biosystems,
Inc. (held
indirectly through
Enlight)(1,2) 57.7 28.3 57.7 28.3 57.7 28.3
Knode Inc.
(indirectly held
through Enlight)(2) - 86.0 - 86.0 - 86.0
Libra Biosciences,
Inc.(2) - 100.0 - 100.0 - 100.0
Mandara Sciences,
LLC(2) 98.3 - 98.3 - 98.3 -
Tal Medical,
Inc.(1,2) - 100.0 - 100.0 - 100.0
1 The voting percentage is impacted by preferred shares that are
classified as liabilities, which results in the ownership
percentage not being the same as the ownership percentage used in
allocations to non-controlling interests disclosed in Note 18. The
allocation of losses/profits to the noncontrolling interest is
based on the holdings of subordinated stock that provide ownership
rights in the subsidiaries. The ownership of liability classified
preferred shares are quantified in Note 15.
2 Registered address is Corporation Trust Center, 1209 Orange St., Wilmington, DE 19801, USA.
3 Registered address is 2711 Centerville Rd., Suite 400, Wilmington, DE 19808, USA.
4 The Company's interests in its subsidiaries are predominantly
in the form of preferred shares, which have a liquidation
preference over the common stock, are convertible into common stock
at the holder's discretion or upon certain liquidity events, are
entitled to one vote per share on all matters submitted to
shareholders for a vote and entitled to receive dividends when and
if declared. In the case of Enlight, Mandara and PureTech Health
LLC, the holdings are membership interests in an LLC. The holders
of common stock are entitled to one vote per share on all matters
submitted to shareholders for a vote and entitled to receive
dividends when and if declared.
5 On July 19, 2019, all of the outstanding notes, plus accrued
interest, issued by Follica to PureTech converted into 15,216,214
shares of Series A-3 Preferred Shares and 12,777,287 shares of
common share pursuant to a Series A-3 Note Conversion Agreement
between Follica and the noteholders. Please refer to Note 16.
6 Commense turned inactive during 2019.
7 On July 1, 2019 PureTech lost control of Gelesis and Gelesis
was deconsolidated from the Group's financial statements, resulting
in only the profits and losses generated by Gelesis through the
deconsolidation date being included in the Group's Consolidated
Statement of Comprehensive Income/(Loss). See Notes 5 and 6 for
further details about the accounting for the investments in Gelesis
subsequent to deconsolidation.
8 On March 15, 2019, PureTech lost control of Karuna, Karuna was
deconsolidated from the Group's financial statements and is no
longer considered a subsidiary. This results in only the profits
and losses generated by Karuna through the deconsolidation date
being included in the Group's Consolidated Statement of
Comprehensive Income/(Loss).. See Note 5 for further details about
the accounting for the investment in Karuna subsequent to
deconsolidation.
9 On February 12, 2019, PureTech lost control of Vor, Vor was
deconsolidated from the Group's financial statements and is no
longer considered a subsidiary. This results in only the profits
and losses generated by Vor through the deconsolidation date being
included in the Group's Consolidated Statement of Comprehensive
Income/(Loss) .See Note 5 for further details about the accounting
for the investment in Vor subsequent to deconsolidation.
10 See note 26 regarding Gelesis business combination with
Capstar Special Purpose Acquisition Corp after balance sheet date
and the Group's ownership rights in the new combined public
entity.
Change in subsidiary ownership and loss of control
Changes in the Group's interest in a subsidiary that do not
result in a loss of control are accounted for as equity
transactions.
Where the Group loses control of a subsidiary, the assets and
liabilities are derecognized along with any related non-controlling
interest ("NCI"). Any interest retained in the former subsidiary is
measured at fair value when control is lost. Any resulting gain or
loss is recognized as profit or loss in the Consolidated Statements
of Comprehensive Income/(Loss).
Associates
As used in these financial statements, the term associates are
those entities in which the Group has no control but maintains
significant influence over the financial and operating policies.
Significant influence is presumed to exist when the Group holds
between 20 and 50 percent of the voting power of an entity, unless
it can be clearly demonstrated that this is not the case. The Group
evaluates if it maintains significant influence over associates by
assessing if the Group has lost the power to participate in the
financial and operating policy decisions of the associate.
Application of the equity method to associates
Associates are accounted for using the equity method (equity
accounted investees) and are initially recognized at cost, or if
recognized upon deconsolidation they are initially recorded at fair
value at the date of deconsolidation. The consolidated financial
statements include the Group's share of the total comprehensive
income and equity movements of equity accounted investees, from the
date that significant influence commences until the date that
significant influence ceases.
To the extent the Group holds interests in associates that are
not providing access to returns underlying ownership interests, the
instrument held by PureTech is accounted for in accordance with
IFRS 9 as investments held at fair value.
When the Group's share of losses exceeds its equity method
investment in the investee, losses are applied against Long-Term
Interests, which are investments accounted for under IFRS 9.
Investments are determined to be Long-Term Interests when they are
long-term in nature and in substance they form part of the Group's
net investment in that associate. This determination is impacted by
many factors, among others, whether settlement by the investee
through redemption or repayment is planned or likely in the
foreseeable future, whether the investment can be converted and/or
is likely to be converted to common stock or other equity
instrument and other factors regarding the nature of the
investment. Whilst this assessment is dependent on many specific
facts and circumstances of each investment, typically conversion
features whereby the investment is likely to convert to common
stock or other equity instruments would point to the investment
being a Long-Term Interest. Similarly, where the investment is not
planned or likely to be settled through redemption or repayment in
the foreseeable future, this would indicate that the investment is
a Long-Term Interest. When the net investment in the associate,
which includes the Group's investments in other long-term
interests, is reduced to nil, recognition of further losses is
discontinued except to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of an
investee.
The Group has also adopted the amendments to IAS 28 Investments
in Associates that addresses the dual application of IAS 28 and
IFRS 9 (see below) when equity method losses are applied against
Long-Term Interests (LTI). The amendments provide the annual
sequence in which both standards are to be applied in such a case.
The Group has applied the equity method losses to the LTIs
presented as part of Investments held at fair value subsequent to
remeasuring such investments to their fair value at balance sheet
date.
Financial Instruments
Classification
The Group classifies its financial assets in the following
measurement categories:
-- Those to be measured subsequently at fair value (either
through other comprehensive income, or through profit or loss),
and
-- Those to be measured at amortized cost.
The classification depends on the Group's business model for
managing the financial assets and the contractual terms of the cash
flows.
For assets measured at fair value, gains and losses will are
recorded in profit or loss. For investments in debt instruments,
this will depend on the business model in which the investment is
held. For investments in equity instruments that are not held for
trading, this will depend on whether the Group has made an
irrevocable election at the time of initial recognition to account
for the equity investment at FVOCI. As of balance sheet dates, none
of the Company's financial assets are accounted for as FVOCI.
Measurement
At initial recognition, the Group measures a financial asset at
its fair value plus, in the case of a financial asset not at FVTPL,
transaction costs that are directly attributable to the acquisition
of the financial asset. Transaction costs of financial assets that
are carried at FVTPL are expensed.
Impairment
The Group assesses on a forward-looking basis the expected
credit losses associated with its debt instruments carried at
amortized cost. The Group had no debt instruments carried at
amortized cost as of balance sheet date. For trade receivables, the
Group applies the simplified approach permitted by IFRS 9, which
requires expected lifetime losses to be recognized from initial
recognition of the receivables.
Financial Assets
The Group's financial assets consist of cash and cash
equivalents, trade and other receivables, investments in equity
securities, short-term note, other deposits and investments in
associates' preferred shares. The Group's financial assets are
classified into the following categories: investments held at fair
value, trade and other receivables, short-term investments (if
applicable) and cash and cash equivalents. The Group determines the
classification of financial assets at initial recognition depending
on the purpose for which the financial assets were acquired.
Investments held at fair value are investments in equity
instruments that are not held for trading. Such investments consist
of the Group's minority interest holdings where the Group has no
significant influence or preferred share investments in the Group's
associates that are not providing access to returns underlying
ownership interests. These financial assets are initially measured
at fair value and subsequently re-measured at fair value at each
reporting date. The Company elects if the gain or loss will be
recognized in Other Comprehensive Income/(Loss) or through profit
and loss on an instrument by instrument basis. The Company has
elected to record the changes in fair values for the financial
assets falling under this category through profit and loss. Please
refer to Note 5.
Changes in the fair value of financial assets at FVTPL are
recognized in other income/(expense) in the Consolidated Statements
of Comprehensive Income/(Loss) as applicable.
The short term note from an associate, since its contractual
terms do not consist solely of cash flow payments of principal and
interest on the principal amount outstanding, is initially and
subsequently measured at fair value, with changes in fair value
recognized through profit and loss.
Trade and other receivables are non-derivative financial assets
with fixed and determinable payments that are not quoted on active
markets. These financial assets are carried at the amounts expected
to be received less any expected lifetime losses. Such losses are
determined taking into account previous experience, credit rating
and economic stability of counterparty and economic conditions.
When a trade receivable is determined to be uncollectible, it is
written off against the available provision. Trade and other
receivables are included in current assets, unless maturities are
greater than 12 months after the end of the reporting period.
Financial Liabilities
The Group's financial liabilities consist of trade and other
payables, subsidiary notes payable, preferred shares, and warrant
liability. Warrant liabilities are initially recognized at fair
value. After initial recognition, these financial liabilities are
re-measured at FVTPL using an appropriate valuation technique.
Subsidiary notes payable without embedded derivatives are accounted
for at amortized cost.
The majority of the Group's subsidiaries have preferred shares
and notes payable with embedded derivatives, which are classified
as current liabilities. When the Group has preferred shares and
notes with embedded derivatives that qualify for bifurcation, the
Group has elected to account for the entire instrument as FVTPL
after determining under IFRS 9 that the instrument qualifies to be
accounted for under such FVTPL method.
The Group derecognizes a financial liability when its
contractual obligations are discharged, cancelled or expire.
Equity Instruments Issued by the Group
Financial instruments issued by the Group are treated as equity
only to the extent that they meet the following two conditions, in
accordance with IAS 32:
1. They include no contractual obligations upon the Group to
deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions
that are potentially unfavorable to the Group; and
2. Where the instrument will or may be settled in the Group's
own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group's own
equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets
for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial
instrument is classified as a financial liability. Where the
instrument so classified takes the legal form of the Group's own
shares, the amounts presented in the Group's shareholders' equity
exclude amounts in relation to those shares.
Changes in the fair value of liabilities at FVTPL are recognized
in Net finance income (costs) in the Consolidated Statements of
Comprehensive Income/(Loss) as applicable.
IFRS 15, Revenue from Contracts with Customers
The standard establishes a five-step principle-based approach
for revenue recognition and is based on the concept of recognizing
an amount that reflects the consideration for performance
obligations only when they are satisfied and the control of goods
or services is transferred.
The majority of the Group's contract revenue is generated from
licenses and services, some of which are part of collaboration
arrangements.
Management reviewed contracts where the Group received
consideration in order to determine whether or not they should be
accounted for in accordance with IFRS 15. To date, PureTech has
entered into transactions that generate revenue and meet the scope
of either IFRS 15 or IAS 20 Accounting for Government Grants.
Contract revenue is recognized at either a point-in-time or over
time, depending on the nature of the performance obligations.
The Group accounts for agreements that meet the definition of
IFRS 15 by applying the following five step model:
-- Identify the contract(s) with a customer - A contract with a
customer exists when (i) the Group enters into an enforceable
contract with a customer that defines each party's rights regarding
the goods or services to be transferred and identifies the payment
terms related to those goods or services, (ii) the contract has
commercial substance and, (iii) the Group determines that
collection of substantially all consideration for goods or services
that are transferred is probable based on the customer's intent and
ability to pay the promised consideration.
-- Identify the performance obligations in the contract -
Performance obligations promised in a contract are identified based
on the goods or services that will be transferred to the customer
that are both capable of being distinct, whereby the customer can
benefit from the good or service either on its own or together with
other resources that are readily available from third parties or
from the Group, and are distinct in the context of the contract,
whereby the transfer of the goods or services is separately
identifiable from other promises in the contract.
-- Determine the transaction price - The transaction price is
determined based on the consideration to which the Group will be
entitled in exchange for transferring goods or services to the
customer. To the extent the transaction price includes variable
consideration, the Group estimates the amount of variable
consideration that should be included in the transaction price
utilizing either the expected value method or the most likely
amount method depending on the nature of the variable
consideration. Variable consideration is included in the
transaction price if, in the Group's judgement, it is probable that
a significant future reversal of cumulative revenue under the
contract will not occur.
-- Allocate the transaction price to the performance obligations
in the contract - If the contract contains a single performance
obligation, the entire transaction price is allocated to the single
performance obligation. Contracts that contain multiple performance
obligations require an allocation of the transaction price to each
performance obligation based on a relative standalone selling price
basis.
-- Recognize revenue when (or as) the Group satisfies a
performance obligation - The Group satisfies performance
obligations either over time or at a point in time as discussed in
further detail below. Revenue is recognized at the time the related
performance obligation is satisfied by transferring a promised good
or service to a customer.
Revenue generated from services agreements (typically where
licenses and related services were combined into one performance
obligation) is determined to be recognized over time when it can be
determined that the services meet one of the following: (a) the
customer simultaneously receives and consumes the benefits provided
by the entity's performance as the entity performs; (b) the
entity's performance creates or enhances an asset that the customer
controls as the asset is created or enhanced; or (c) the entity's
performance does not create an asset with an alternative use to the
entity and the entity has an enforceable right to payment for
performance completed to date.
It was determined that the Group has contracts that meet
criteria (a), since the customer simultaneously receives and
consumes the benefits provided by the Company's performance as the
Company performs. Therefore revenue is recognized over time using
the input method based on costs incurred to date as compared to
total contract costs. The Company believes that in research and
development service type agreements using costs incurred to date
represents the most faithful depiction of the entity's performance
towards complete satisfaction of a performance obligation.
Revenue from licenses that are not part of a combined
performance obligation are recognized at a point in time due to the
licenses relating to intellectual property that has significant
stand-alone functionality and as such represent a right to use the
entity's intellectual property as it exists at the point in time at
which the license is granted.
Royalty income received in respect of licensing agreements is
recognized as the related third party sales in the licensee
occur.
Amounts that are receivable or have been received per
contractual terms but have not been recognized as revenue since
performance has not yet occurred or has not yet been completed are
recorded as deferred revenue. The Company classifies as non-current
deferred revenue amounts received for which performance is expected
to occur beyond one year or one operating cycle.
Grant Income
The Company recognizes grants from governmental agencies as
grant income in the Consolidated Statement of Comprehensive
Income/(Loss), gross of the expenditures that were related to
obtaining the grant, when there is reasonable assurance that the
Company will comply with the conditions within the grant agreement
and there is reasonable assurance that payments under the grants
will be received. The Company evaluates the conditions of each
grant as of each reporting date to ensure that the Company has
reasonable assurance of meeting the conditions of each grant
arrangement and that it is expected that the grant payment will be
received as a result of meeting the necessary conditions.
The Company submits qualifying expenses for reimbursement after
the Company has incurred the research and development expense. The
Company records an unbilled receivable upon incurring such
expenses. In cases were grant income is received prior to the
expenses being incurred or recognized, the amounts received are
deferred until the related expense is incurred and/or recognized.
Grant income is recognized in the Consolidated Statements of
Comprehensive Income/(Loss) at the time in which the Company
recognizes the related reimbursable expense for which the grant is
intended to compensate.
Functional and Presentation Currency
These consolidated financial statements are presented in United
States dollars ("US dollars"). The functional currency of virtually
all members of the Group is the U.S. dollar. The assets and
liabilities of a previously held subsidiary were translated to U.S.
dollars at the exchange rate prevailing on the balance sheet date
and revenues and expenses were translated at the average exchange
rate for the period. Foreign exchange differences resulting from
the translation were reported in Other Comprehensive
Income/(Loss).
Foreign Currency
Transactions in foreign currencies are translated to the
respective functional currencies of Group entities at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
balance sheet date are retranslated to the functional currency at
the foreign exchange rate ruling at that date. Foreign exchange
differences arising on remeasurement are recognized in the
Consolidated Statement of Comprehensive Income/(Loss). Non-monetary
assets and liabilities that are measured in terms of historical
cost in a foreign currency are translated using the exchange rate
at the date of the transaction.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments
with original maturities of three months or less.
Share Capital
Ordinary shares are classified as equity. The Group is comprised
of share capital, share premium, merger reserve, other reserve,
translation reserve, and accumulated deficit.
Property and Equipment
Property and equipment is stated at cost less accumulated
depreciation and any accumulated impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of
the asset. Assets under construction represent leasehold
improvements and machinery and equipment to be used in operations
or research and development activities. When parts of an item of
property and equipment have different useful lives, they are
accounted for as separate items (major components) of property and
equipment. Depreciation is calculated using the straight-line
method over the estimated useful life of the related asset:
Laboratory and manufacturing equipment 2-8 years
Furniture and fixtures 7 years
Computer equipment and software 1-5 years
Leasehold improvements 5-10 years, or the remaining term
of the lease, if shorter
Depreciation methods, useful lives and residual values are
reviewed at each balance sheet date.
Intangible Assets
Intangible assets, which include purchased patents and licenses
with finite useful lives, are carried at historical cost less
accumulated amortization, if amortization has commenced. Intangible
assets with finite lives are amortized from the time they are
available for use. Amortization is calculated using the
straight-line method to allocate the costs of patents and licenses
over their estimated useful lives.
Research and development intangible assets, which are still
under development and have accordingly not yet obtained marketing
approval, are presented as In-Process Research and Development
(IPR&D). IPR&D is not amortized since it is not yet
available for its intended use, but it is evaluated for potential
impairment on an annual basis or more frequently when facts and
circumstances warrant.
Impairment
Impairment of Non-Financial Assets
The Group reviews the carrying amounts of its property and
equipment and intangible assets at each reporting date to determine
whether there are indicators of impairment. If any such indicators
of impairment exist, then an asset's recoverable amount is
estimated. The recoverable amount is the higher of an asset's fair
value less cost of disposal and value in use.
The Company's IPR&D intangible assets are not yet available
for their intended use. As such, they are tested for impairment at
least annually.
An impairment loss is recognized when an asset's carrying amount
exceeds its recoverable amount. For the purposes of impairment
testing, assets are grouped at the lowest levels for which there
are largely independent cash flows. If a non- financial asset
instrument is impaired, an impairment loss is recognized in the
Consolidated Statements of Comprehensive Income/(Loss).
The Company did not record any impairment of such assets during
the reported periods.
Investments in associates are considered impaired if, and only
if, objective evidence indicates that one or more events, which
occurred after the initial recognition, have had an impact on the
future cash flows from the net investment and that impact can be
reliably estimated. If an impairment exists the Company measures an
impairment by comparing the carrying value of the net investment in
the associate to its recoverable amount and recording any excess as
an impairment loss. See Note 6 for impairment recorded in respect
of an investment in associate during the year ended December 31,
2019.
Employee Benefits
Short-Term Employee Benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and expensed as the related service is provided.
A liability is recognized for the amount expected to be paid if the
Group has a present legal or constructive obligation due to past
service provided by the employee, and the obligation can be
estimated reliably.
Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan
under which an entity pays fixed contributions into a separate
entity and has no legal or constructive obligation to pay further
amounts. Obligations for contributions to defined contribution
plans are recognized as an employee benefit expense in the periods
during which related services are rendered by employees. Prepaid
contributions are recognized as an asset to the extent that a cash
refund or a reduction in future payments is available.
Share-based Payments
Share-based payment arrangements, in which the Group receives
goods or services as consideration for its own equity instruments,
are accounted for as equity-settled share-based payment
transactions (except certain restricted stock units - see below) in
accordance with IFRS 2, regardless of how the equity instruments
are obtained by the Group. The grant date fair value of employee
share-based payment awards is recognized as an expense with a
corresponding increase in equity over the requisite service period
related to the awards. The amount recognized as an expense is
adjusted to reflect the actual number of awards for which the
related service and non-market performance conditions are expected
to be met, such that the amount ultimately recognized as an expense
is based on the number of awards that do meet the related service
and non-market performance conditions at the vesting date. For
share-based payment awards with market conditions, the grant date
fair value is measured to reflect such conditions and there is no
true-up for differences between expected and actual outcomes.
Certain restricted stock units are treated as liability settled
awards starting in 2021. Such awards are remeasured at every
reporting date until settlement date and are recognized as
compensation expense over the requisite service period. Differences
in remeasurement are recognized in profit and loss. The cumulative
cost that will ultimately be recognized in respect of these awards
will equal to the amount at settlement.
The fair value of the awards is measured using option pricing
models and other appropriate models, which take into account the
terms and conditions of the awards granted. See further details in
Note 8.
Development Costs
Expenditures on research activities are recognized as incurred
in the Consolidated Statements of Comprehensive Income/(Loss). In
accordance with IAS 38 development costs are capitalized only if
the expenditure can be measured reliably, the product or process is
technically and commercially feasible, future economic benefits are
probable, the Group can demonstrate its ability to use or sell the
intangible asset, the Group intends to and has sufficient resources
to complete development and to use or sell the asset, and it is
able to measure reliably the expenditure attributable to the
intangible asset during its development. The point at which
technical feasibility is determined to have been reached is,
generally, when regulatory approval has been received where
applicable. Management determines that commercial viability has
been reached when a clear market and pricing point have been
identified, which may coincide with achieving meaningful recurring
sales. Otherwise, the development expenditure is recognized as
incurred in the Consolidated Statements of Comprehensive
Income/(Loss). As of balance sheet date the Group has not
capitalized any development costs.
Provisions
A provision is recognized in the Consolidated Statements of
Financial Position when the Group has a present legal or
constructive obligation due to a past event that can be reliably
measured, and it is probable that an outflow of economic benefits
will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects risks specific to the liability.
Leases
The Group leases real estate (and some minor equipment) for use
in operations. These leases generally have lease terms of 1 to 10
years. The Group includes options that are reasonably certain to be
exercised as part of the determination of the lease term. The group
determines if an arrangement is a lease at inception of the
contract in accordance with guidance detailed in IFRS 16. ROU
assets represent the Group's right to use an underlying asset for
the lease term and lease liabilities represent our obligation to
make lease payments arising from the lease. Operating lease ROU
assets and lease liabilities are recognized at commencement date
based on the present value of the lease payments over the lease
term. As most of our leases do not provide an implicit rate, we use
the Group's estimated incremental borrowing rate based on
information available at commencement date in determining the
present value of future payments.
The Group's operating leases are virtually all leases of real
estate.
The Group has elected to account for lease payments as an
expense on a straight-line basis over the life of the lease
for:
-- Leases with a term of 12 months or less and containing no
purchase options; and
-- Leases where the underlying asset has a value of less than
$5,000.
The right-of-use asset is depreciated on a straight-line basis
and the lease liability gives rise to an interest charge.
Further information regarding the subleases, right of use asset
and lease liability can be found in Note 21.
Finance Income and Finance Costs
Finance income is comprised of income on funds invested in U.S.
treasuries, income on money market funds and income on a finance
lease. Financing income is recognized as it is earned. Finance
costs comprise mainly of loan, notes and lease liability interest
expenses and the changes in the fair value of financial liabilities
carried at FVTPL (such changes can consist of finance income when
the fair value of such financial liabilities decreases).
Taxation
Tax on the profit or loss for the year comprises current and
deferred income tax. In accordance with IAS 12, tax is recognized
in the Consolidated Statements of Comprehensive Income/(Loss)
except to the extent that it relates to items recognized directly
in equity.
Current income tax is the expected tax payable or receivable on
the taxable income or loss for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustment to
tax payable in respect of previous years.
Deferred tax is recognized due to temporary differences between
the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes.
Deferred tax assets are recognized for unused tax losses, unused
tax credits and deductible temporary differences to the extent that
it is probable that future taxable profits will be available
against which they can be used. Deferred tax assets with respect to
investments in associates are recognized only to the extent that it
is probable the temporary difference will reverse in the
foreseeable future and taxable profit will be available against
which the temporary difference can be utilized. Deferred tax assets
are reviewed at each reporting date and are reduced to the extent
that it is no longer probable that the related tax benefit will be
realized.
Deferred tax is measured at the tax rates that are expected to
be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and
liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
Fair Value Measurements
The Group's accounting policies require that certain financial
assets and certain financial liabilities be measured at their fair
value.
The Group uses valuation techniques that are appropriate in the
circumstances and for which sufficient data are available to
measure fair value, maximizing the use of relevant observable
inputs and minimizing the use of unobservable inputs. Fair values
are categorized into different levels in a fair value hierarchy
based on the inputs used in the valuation techniques as
follows:
-- Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
-- Level 2: inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The Group recognizes transfers between levels of the fair value
hierarchy at the end of the reporting period during which the
change has occurred.
The carrying amount of cash and cash equivalents, accounts
receivable, restricted cash, deposits, accounts payable, accrued
expenses and other current liabilities in the Group's Consolidated
Statements of Financial Position approximates their fair value
because of the short maturities of these instruments.
Operating Segments
Operating segments are reported in a manner that is consistent
with the internal reporting provided to the chief operating
decision maker ("CODM"). The CODM reviews discrete financial
information for the operating segments in order to assess their
performance and is responsible for making decisions about resources
allocated to the segments. The CODM has been identified as the
Group's Directors.
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, 2022 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 Group'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.
Effective January 1, 2023, IAS 12 is amended to narrow the scope
of the initial recognition exemption (IRE) so that it does not
apply to transactions that give rise to equal and offsetting
temporary differences. As a result, companies will need to
recognise a deferred tax asset and a deferred tax liability for
temporary differences arising on initial recognition of a lease and
a decommissioning provision. The amendment is not expected to have
an impact on the Group's financial statements as the Group has
already recognized a deferred tax asset and deferred tax liability
that arose on initial recognition of its leases (the Group does not
have decommissioning provisions).
None of the other new standards, interpretations, and amendments
are applicable to the Company's financial statements and therefore
will not have an impact on the Company.
3. Revenue
Revenue recorded in the Consolidated Statement of Comprehensive
Income/(Loss) consists of the following:
2021 2020 2019
For the years ended December 31, $000s $000s $000s
Contract revenue 9,979 8,341 8,688
Grant income 7,409 3,427 1,119
Total revenue 17,388 11,768 9,807
All amounts recorded in contract revenue were generated in the
United States. For the years ended December 31, 2021 and 2020
contract revenue includes royalties received from an associate in
the amount of $231 thousand and $54 thousand, respectively.
Primarily all of the Company's contracts in the years ended
December 31, 2021, 2020 and 2019 were determined to have a single
performance obligation which consists of a combined deliverable of
license to intellectual property and research and development
services (not including the license acquired by Imbrium upon option
exercise - see below). 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.
During the year ended December 31, 2021, the company received a
$6.5 million payment from Imbrium Therapeutics, Inc. following the
exercise of the option to acquire an exclusive license for the
Initial Product Candidate, as defined in the agreement. Since the
license transferred was a functional license, revenue from the
option exercise was recognized at a point in time upon transfer of
the license, which occurred during the year ended December 31,
2021.
During the year ended December 31, 2020, the Company received a
$2.0 million milestone payment from Karuna Therapeutics, Inc.
following initiation of its KarXT Phase 3 clinical study pursuant
to the Exclusive Patent License Agreement between PureTech and
Karuna. This milestone was recognized as revenue during the year
ended December 31, 2020.
Disaggregated Revenue
The Group disaggregates contract revenue in a manner that
depicts how the nature, amount, timing, and uncertainty of revenue
and cash flows are affected by economic factors. The Group
disaggregates revenue based on contract revenue or grant revenue,
and further disaggregates contract revenue based on the transfer of
control of the underlying performance obligations.
Timing of contract revenue recognition 2021 2020 2019
For the years ended December 31, $000s $000s $000s
Transferred at a point in time -
Licensing
Income(1) 6,809 2,054 -
Transferred over time(2) 3,171 6,286 8,688
9,979 8,341 8,688
1 2021 - Attributed to Internal segment ($6.5 million),
Controlled Founded Entities segment ($74 thousand) and to Parent
Company and Other ($235 thousand); 2020 - Attributed to Parent
Company and Other. See note 4, Segment information.
2 2021 - Attributed to Internal segment ($1,629 thousand) and
Controlled Founded Entities segment ($1,541 thousand); 2020 -
Attributed to Internal segment ($5,297 thousand), and Controlled
Founded Entities segment ($990 thousand), 2019 - Attributed to
Internal segment ($7,077 thousand), Controlled founded entities
segment ($1,474 thousand) and Parent Company and Other ($137
thousand). See Note 4, Segment Information.
2021 2020 2019
Customers over 10% of revenue $000s $000s $000s
Customer A - 1,518 4,973
Customer B 1,500 896 1,433
Customer C - 2,043 1,091
Customer D 7,250 1,736 1,013
Customer E - 2,000 -
8,750 8,193 8,510
Accounts receivables represent rights to consideration in
exchange for products or services that have been transferred by the
Group, when payment is unconditional and only the passage of time
is required before payment is due. Accounts receivables do not bear
interest and are recorded at the invoiced amount. Accounts
receivable are included within Trade and other receivables on the
Consolidated Statement of Financial Position.
Contract liabilities represent the Group's obligation to
transfer products or services to a customer for which consideration
has been received, or for which an amount of consideration is due
from the customer. Contract liabilities are included within
deferred revenue on the Consolidated Statement of Financial
Position.
2021 2020
Contract Balances $000s $000s
Accounts receivable 704 711
Deferred revenue - short term 65 1,472
During the year ended December 31, 2021, $1.4 million of revenue
was recognized from deferred revenue outstanding at December 31,
2020.
Remaining performance obligations represent the transaction
price of unsatisfied or partially satisfied performance obligations
within contracts with an original expected contract term that is
greater than one year and for which fulfillment of the contract has
started as of the end of the reporting period. The aggregate amount
of transaction consideration allocated to remaining performance
obligations as of December 31, 2021, was nil.
4. Segment Information
Basis for Segmentation
The Directors are the Group's strategic decision-makers. The
Group's operating segments are reported based on the financial
information provided to the Directors periodically for the purposes
of allocating resources and assessing performance. The Group has
determined that each entity is representative of a single operating
segment as the Directors monitor the financial results at this
level. When identifying the reportable segments the Group has
determined that it is appropriate to aggregate multiple operating
segments into a single reportable segment given the high level of
operational and financial similarities across the entities.
The Group has identified 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. Virtually all of the revenue
and profit generating activities of the Group are generated within
the United States and accordingly, no geographical disclosures are
provided.
During the year ended December 31, 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 December 31, 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.
Internal
The Internal segment (the "Internal segment"), is advancing
Wholly Owned Programs which is focused on immunological, fibrotic
and lymphatic system disorders and builds upon validated biologic
pathways and proven pharmacology. The Internal segment is comprised
of the technologies that are wholly owned and will be advanced
through either PureTech Health funding or non-dilutive sources of
financing in the near-term. The operational management of the
Internal segment is conducted by the PureTech Health team, which is
responsible for the strategy, business development, and research
and development. As of December 31, 2021, this segment included
PureTech LYT (formerly Ariya Therapeutics), PureTech LYT-100 and
Alivio Therapeutics, Inc.
Controlled Founded Entities
The Controlled Founded Entity segment (the "Controlled Founded
Entity segment") is comprised of the Group's subsidiaries that are
currently consolidated operational subsidiaries that either have,
or have plans to hire, independent management teams and currently
have already raised third-party dilutive capital. These
subsidiaries have active research and development programs and
either have entered into or plan to seek an equity or debt
investment partner, who will provide additional industry knowledge
and access to networks, as well as additional funding to continue
the pursued growth of the company. As of December 31, 2021, this
segment included Entrega Inc., Follica Incorporated, Sonde Health
Inc., and Vedanta Biosciences, Inc.
Non-Controlled Founded Entities
The Non-Controlled Founded Entities segment (the "Non-Controlled
Founded Entities segment") is comprised of the entities in respect
of which PureTech Health (i) no longer holds majority voting
control as a shareholder and no longer has the right to elect a
majority of the members of the subsidiaries' Board of Directors.
Upon deconsolidation of an entity the segment disclosure is
restated to reflect the change on a retrospective basis, as this
constitutes a change in the composition of its reportable segments.
The Non-Controlled Founded Entities segment includes Vor Biopharma
Inc. ("Vor"), Karuna Therapeutics, Inc. ("Karuna"), and Gelesis
Inc. ("Gelesis"), which were deconsolidated during the year ended
December 31, 2019.
The Non-Controlled Founded Entities segment incorporates the
operational results of the aforementioned entities to the date of
deconsolidation. Following the date of deconsolidation, the Company
accounts for its investment in each entity at the parent level, and
therefore the results associated with investment activity following
the date of deconsolidation is included in the Parent Company and
Other section.
Parent Company and Other
Parent Company and Other includes activities that are not
directly attributable to the operating segments, such as the
activities of the Parent, corporate support functions and certain
research and development support functions that are not directly
attributable to a strategic business segment as well as the
elimination of intercompany transactions. Intercompany transactions
between segments consist primarily of management fees charged from
the Parent Company to the other segments. This section also
captures the accounting for the Company's holdings in entities for
which control has been lost, which is inclusive of the following
items: gain on deconsolidation, gain or loss on investments held at
fair value, gain on loss of significant influence, and the share of
net income/ (loss) of associates accounted for using the equity
method. As of December 31, 2021, this segment included PureTech
Health plc, PureTech Health LLC, PureTech Management, Inc.,
PureTech Securities Corp. and PureTech Securities II Corp., as well
as certain other dormant, inactive and shell entities.
Information About Reportable Segments:
2021 $000s
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
Consolidated
Statements of
Comprehensive
Income/(Loss)
Contract revenue 8,129 1,615 - 235 9,979
Grant revenue 1,253 6,156 - - 7,409
Total revenue 9,382 7,771 - 235 17,388
General and
administrative
expenses (8,673) (20,729) - (27,797) (57,199)
Research and
development
expenses (65,444) (43,783) - (1,244) (110,471)
Total operating
expense (74,118) (64,512) - (29,041) (167,671)
Other
income/(expense):
Gain/(loss) on
investments
held at fair value - - - 179,316 179,316
Loss realized on sale
of
investments - - - (20,925) (20,925)
Gain/(loss) on
disposal of
assets (1) (51) - - (53)
Other
income/(expense) - 121 - 1,523 1,645
Total other
income/(expense) (1) 70 - 159,914 159,983
Net finance
income/(costs) (16) 6,744 - (1,679) 5,050
Share of net
income/(loss)
of associates
accounted for
using the equity
method - - - (73,703) (73,703)
Income/(loss) before
taxes (64,753) (49,927) - 55,727 (58,953)
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 (60,368) (50,583) - 63,628 (47,323)
Finance
income/(costs) -
IFRS 9 fair value
accounting - 9,606 - - 9,606
Share-based payment
expense (3,066) (6,256) - (4,628) (13,950)
Depreciation of
tangible
assets (1,319) (1,518) - (1,510) (4,347)
Amortization of ROU
assets - (1,174) - (1,764) (2,938)
Amortization of
intangible
assets - (2) - - (2)
Taxation - - - (3,756) (3,756)
Income/(loss) for the
year (64,753) (49,927) - 51,971 (62,709)
Other comprehensive
income/(loss) - - - - -
Total comprehensive
income/(loss)
for the year (64,753) (49,927) - 51,971 (62,709)
Total comprehensive
income/(loss)
attributable to:
Owners of the Company (64,657) (47,857) - 51,956 (60,558)
Non-controlling
interests (96) (2,069) - 15 (2,151)
December 31, 2021 $000s
Consolidated
Statements of
Financial Position:
Total assets 125,726 66,274 - 754,007 946,006
Total liabilities(1) 228,789 228,857 - (95,787) 361,859
Net
assets/(liabilities) (103,063) (162,584) - 849,794 584,147
1 Parent Company and Other Includes eliminations of intercompany
liabilities between the Parent Company and the reportable segments
in the amount of $233.3 million.
2020 $000s
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
Consolidated
Statements of
Comprehensive
Income/(Loss)
Contract revenue 5,297 990 - 2,054 8,341
Grant revenue 1,563 1,864 - - 3,427
Total revenue 6,860 2,853 - 2,054 11,768
General and
administrative
expenses (3,482) (13,691) - (32,267) (49,440)
Research and
development
expenses (45,346) (36,279) - (234) (81,859)
Total Operating
expenses (48,828) (49,970) - (32,500) (131,299)
Other
income/(expense):
Gain/(loss) on
investments
held at fair value - - - 232,674 232,674
Loss realized on sale
of
investments - - - (54,976) (54,976)
Gain/(loss) on
disposal of
assets (15) (15) - - (30)
Other
income/(expense) - 100 - 965 1,065
Other
income/(expense) (15) 85 - 178,662 178,732
Net finance
income/(costs) 19 (5,204) - (930) (6,115)
Share of net
income/(loss)
of associate
accounted for
using the equity
method - - - (34,117) (34,117)
Income/(loss) before
taxes (41,964) (52,236) - 113,170 18,969
(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 (38,349) (42,602) - 121,644 40,694
Finance
income/(costs) -
subsidiary preferred
shares - - - - -
Finance
income/(costs) -
IFRS 9 fair value
accounting - (4,351) - - (4,351)
Share-based payment
expense (2,762) (2,552) - (5,405) (10,718)
Depreciation of
tangible
assets (854) (1,544) - (1,547) (3,945)
Amortization of ROU
assets - (1,186) - (1,523) (2,709)
Amortization of
intangible
assets - (1) - - (1)
Taxation - (1) - (14,400) (14,401)
Income/(loss) for the
year (41,964) (52,237) - 98,769 4,568
Other comprehensive
income/(loss) - - - 469 469
Total comprehensive
income/(loss)
for the year (41,964) (52,237) - 99,238 5,037
Total comprehensive
income/(loss)
attributable to:
Owners of the Company (41,773) (51,026) - 99,253 6,454
Non-controlling
interests (191) (1,211) - (15) (1,417)
December 31, 2020 $000s
Consolidated
Statements 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
The proportion of net assets shown above that is attributable to
non-controlling interest is disclosed in Note 18.
2019 $000s
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
Consolidated
Statements of
Comprehensive Loss
Contract revenue 7,077 1,474 - 137 8,688
Grant revenue 928 191 - - 1,119
Total revenue 8,006 1,664 - 137 9,807
General and
administrative
expenses (3,252) (13,569) (10,439) (32,098) (59,358)
Research and
development
expenses (28,874) (39,883) (15,555) (1,536) (85,848)
Total operating
expense (32,126) (53,451) (25,994) (33,634) (145,206)
Other
income/(expense):
Gain on
deconsolidation - - - 264,409 264,409
Gain/(loss) on
investments
held at fair
value - - - (37,863) (37,863)
Gain/(loss) on
disposal of
assets 17 (39) - (60) (82)
Gain on loss of
significant
influence - - - 445,582 445,582
Other
income/(expense) - 166 - (45) 121
Other
income/(expense) 17 127 - 672,023 672,167
Net finance
income/(costs) - (16,947) (30,141) 941 (46,147)
Share of net
income/(loss)
of associate
accounted for
using the equity
method - - - 30,791 30,791
Impairment of
investment
in associate - - - (42,938) (42,938)
Income/(loss)
before taxes (24,104) (68,608) (56,135) 627,320 478,474
(Loss)/income
before taxes
pre IAS 39 fair
value accounting,
finance costs -
subsidiary
preferred shares,
share-based
payment expense,
depreciation
of tangible
assets and
amortization
of intangible
assets (23,698) (47,188) (21,873) 640,298 547,540
Finance
income/(costs) -
subsidiary
preferred shares - 107 (1,564) (1) (1,458)
Finance
income/(costs) -
IFRS 9 fair value
accounting - (17,294) (28,737) (444) (46,475)
Share-based
payment expense (19) (1,664) (3,543) (9,242) (14,468)
Depreciation of
tangible
assets (390) (1,517) (207) (1,114) (3,228)
Amortization of
ROU assets - (1,060) (83) (2,177) (3,320)
Amortization of
intangible
assets 4 7 (128) - (117)
Taxation - (134) (162) (112,113) (112,409)
Income/(loss) for
the year (24,104) (68,741) (56,297) 515,207 366,065
Other
comprehensive
income/(loss) - - (10) - (10)
Total
comprehensive
income/(loss)
for the year (24,104) (68,741) (56,307) 515,207 366,055
Total
comprehensive
income/(loss)
attributable to:
Owners of the
Company (6,461) (55,258) (32,353) 515,207 421,133
Non-controlling
interests (17,643) (13,483) (23,953) - (55,079)
5. 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 through
profit and loss. Interests in these investments were accounted for
as shown below:
Investments held at fair value $000's
Balance as of January 1, 2020 714,905
Sale of Karuna shares (347,538)
Sale of resTORbio shares (3,048)
Loss realised on sale of investments (54,976)
Cash purchase of Gelesis preferred shares (please refer
to Note 6) 10,000
Cash purchase of Vor preferred shares 1,150
Unrealized Loss - fair value through profit and loss 232,674
Balance as of January 1, 2021 before allocation of share
in associate loss to long-term interest 553,167
Sale of Karuna shares (218,125)
Loss realised on sale of investments (see below) (20,925)
Cash purchase of Vor preferred shares 500
Unrealized gain - fair value through profit and loss 179,271
Balance as of December 31, 2021 before allocation of share
in associate loss to long-term interest 493,888
Share of associate loss allocated to long-term interest
(see Note 6) (96,709)
Balance as of December 31, 2021 after allocation of share
in associate loss to long-term interest(1) 397,179
1 Fair value of investments accounted for at fair value, does
not take into consideration contribution from milestones that
occurred after December 31, 2021, the value of the Group's
consolidated Founded Entities (Vedanta, Follica, Sonde and
Entrega), the Internal segment, or cash and cash equivalents.
Vor
On February 12, 2019, Vor completed a Series A-2 Preferred
Shares financing round with PureTech and several new third party
investors. The financing provided for the purchase of 62,819,866
shares of Vor Series A-2 Preferred Shares at the purchase price of
$0.40 per share.
As a result of the issuance of Series A-2 preferred shares to
third-party investors, PureTech's ownership percentage and
corresponding voting rights dropped from 79.5 percent to 47.5
percent, and PureTech simultaneously lost control on Vor's Board of
Directors, both of which triggered a loss of control over the
entity. As of February 12, 2019, Vor was deconsolidated from the
Group's financial statements, resulting in only the profits and
losses generated by Vor through the deconsolidation date being
included in the Consolidated Statement of Comprehensive
Income/(Loss). While the Company no longer controlled Vor, it was
concluded that PureTech still had significant influence over Vor by
virtue of its large, albeit minority, ownership stake and its
continued representation on Vor's Board of Directors. During the
year ended December 31, 2019, the Company recognized a $6.4 million
gain on the deconsolidation of Vor, which was recorded to the Gain
on the deconsolidation of subsidiary line item in the Consolidated
Statement of Comprehensive Income/(Loss).
As PureTech did not hold common shares in Vor upon
deconsolidation and the preferred shares it held did not have
equity-like features, PureTech had no basis to account for its
investment in Vor under IAS 28. The preferred shares held by
PureTech fell under the guidance of IFRS 9 and were treated as a
financial asset held at fair value with changes in fair value
recorded in the Consolidated Statement of Comprehensive
Income/(Loss). The fair value of the preferred shares at
deconsolidation was $12.0 million.
On February 12, 2020, PureTech participated in the second
closing of Vor's Series A-2 Preferred Share financing. For
consideration of $0.7 million, PureTech received 1,625,000 A-2
shares. On June 30, 2020, PureTech participated in the first
closing of Vor's Series B Preferred Share financing. For
consideration of $0.5 million, PureTech received 961,538 shares.
Upon the conclusion of such Vor financings PureTech no longer had
significant influence over Vor.
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 16.
During the years ended December 31, 2021, 2020 and 2019, the
Company recognized a gain of $3.9 million, a gain of $19.1 million,
and a gain of $0.6 million, respectively for the changes in the
fair value of the investment that were recorded in the line item
Gain/(loss) on investments held at fair value within the
Consolidated Statement of Comprehensive Income/(Loss). Please refer
to Note 16 for information regarding the valuation of these
instruments.
Gelesis
As of July 1, 2019, Gelesis was deconsolidated from the Group's
financial statements, resulting in only the profits and losses
generated by Gelesis through the deconsolidation date being
included in the Group's Consolidated Statement of Income/(Loss). At
the date of deconsolidation, PureTech recorded a $156.0 million
gain on the deconsolidation of Gelesis, which was recorded to the
Gain on the deconsolidation of subsidiary line item in the
Consolidated Statement of Income/(Loss). The preferred shares and
warrants held by PureTech fall under the guidance of IFRS 9 and are
treated as financial assets held at fair value, where changes to
the fair value of the preferred shares and warrant are recorded
through the Consolidated Statement of Income/(Loss). The fair value
of the preferred shares and warrants at deconsolidation was $49.2
million. Please refer to Note 6 for information regarding the
Company's investment in Gelesis as an associate.
On August 12, 2019, Gelesis issued a convertible promissory note
to the Company in the amount of $2.0 million. On October 7, 2019,
Gelesis issued an amended and restated convertible note (the
"Gelesis Note") to the Company in the principal amount of up to
$6.5 million. The Gelesis Note was payable in installments, with
$2.0 million of the note drawn down upon execution of the original
note in August 2019 and an additional $3.3 million and $1.2 million
drawn down on October 7, 2019 and November 5, 2019, respectively.
The Gelesis Note was convertible upon the occurrence of Gelesis'
next qualified equity financing, or at the demand of the Company at
any date after December 31, 2019. The Gelesis Note fell under the
guidance of IFRS 9 and was treated as a financial asset held at
fair with all movements to the value of the note recorded through
the Consolidated Statement of Income/(Loss).
On December 5, 2019, Gelesis closed its Series 3 Growth
Preferred Stock financing, at which point all outstanding principal
and interest under the Gelesis Note converted into shares of Series
3 Growth Preferred Stock. In addition to the shares issued upon
conversion of the Gelesis Note, PureTech purchased $8.0 million of
Series 3 Growth Preferred Stock in the December financing.
On April 1, 2020, PureTech participated in the 2nd closing of
Gelesis's Series 3 Growth Preferred Share financing. For
consideration of $10.0 million, PureTech received 579,038 Series 3
Growth shares.
During the years ended December 31, 2021, 2020 and 2019, the
Company recognized a gain of $34.6 million, a gain of $7.1 million
and a loss of $18.7 million, respectively related to the change in
the fair value of the preferred shares and warrants that was
recorded in the line item Gain/(loss) on investments held at fair
value within the Consolidated Statement of Comprehensive
Income/(Loss). The loss recorded in 2019 was primarily as a result
of the Gelesis Series 3 Growth financing, which was executed with
terms that resulted in a decrease in fair value across all other
classes of preferred shares. Please refer to Note 16 for
information regarding the valuation of these instruments.
Additionally, due to the equity method based investment in Gelesis
being reduced to zero, the Group allocated a portion of its share
in the net loss in Gelesis in the years ended December 31, 2021 and
2020, totaling $73.7 million and $23.0 million, respectively, to
its preferred share and warrant investments in Gelesis, which are
considered to be long-term interests in Gelesis. As of December 31,
2021, the investment in Gelesis preferred shares and warrants was
entirely reduced to nil.
See Note 26 for subsequent event regarding the investment in
Gelesis.
Karuna
2019
On March 15, 2019, Karuna completed the closing of a Series B
Preferred Share financing with PureTech and several new third party
investors. The financing provided for the purchase of 5,285,102
shares of Karuna Series B Preferred Shares at a purchase price of
$15.14 per share.
As a result of the issuance of the preferred shares to
third-party investors, PureTech's ownership percentage and
corresponding voting rights related to Karuna dropped from 70.9
percent to 44.3 percent, and PureTech simultaneously lost control
over Karuna's Board of Directors, both of which triggered a loss of
control over the entity. As of March 15, 2019, Karuna was
deconsolidated from the Group's financial statements, resulting in
only the profits and losses generated by Karuna through the
deconsolidation date being included in the Group's Consolidated
Statement of Comprehensive Income/(Loss). At the date of
deconsolidation, PureTech recorded a $102.0 million gain on the
deconsolidation of Karuna, which was recorded to the Gain on the
deconsolidation of subsidiary line item in the Consolidated
Statement of Comprehensive Income/(Loss). While the Company no
longer controls Karuna, it was concluded that PureTech still had
significant influence over Karuna by virtue of its large, albeit
minority, ownership stake and its continued representation on
Karuna's Board of Directors. As PureTech had significant influence
over Karuna, the entity was accounted for as an associate under IAS
28.
Upon the date of deconsolidation, PureTech held both preferred
and common shares in Karuna and a warrant issued by Karuna to
PureTech. The preferred shares and warrant held by PureTech fell
under the guidance of IFRS 9 and were treated as financial assets
held at fair value, and all movements to the value of preferred
shares held by PureTech were recorded through the Consolidated
Statement of Comprehensive Income/(Loss), in accordance with IFRS
9. The fair value of the preferred shares and warrant at
deconsolidation was $72.4 million. Subsequent to deconsolidation,
PureTech purchased an additional $5.0 million of Karuna Series B
Preferred shares.
Due to the immaterial investment in common shares and
overwhelmingly large losses by Karuna, the common share investment
accounted for under the equity method was remeasured to nil
immediately following both the deconsolidation and the exercise of
the warrant in the first half of 2019.
On June 28, 2019, Karuna priced its IPO. PureTech's ownership
percentage and corresponding voting rights related to Karuna
dropped from 44.3 percent percent to 31.6 percent; however,
PureTech retained significant influence due to its continued
presence on the board and its large, albeit minority, equity stake
in the company. Upon completion of the IPO, the Karuna preferred
shares held by PureTech converted to common shares. In light of
PureTech's common share holdings in Karuna and corresponding voting
rights, PureTech had re-established a basis to account for its
investment in Karuna under IAS 28. The preferred shares investment
held at fair value was therefore reclassified to investment in
associate upon completion of the conversion. During the year ended
December 31, 2019 and up to June 28, 2019, the Company recognized a
gain of $40.6 million that was recorded on the line item Gain on
investments held at fair value within the Consolidated Statement of
Comprehensive Income/(Loss) related to the preferred shares that
increased in value between the date of deconsolidation and the date
of Karuna's IPO.
As of December 2, 2019 it was concluded that the Company no
longer exerted significant influence over Karuna owing to the
resignation of the PureTech designee from Karuna's Board of
Directors, with PureTech retaining no ability to reappoint
representation. Furthermore, PureTech was not involved in any
manner, or had any influence, on the management of Karuna, or on
any of its decision making processes and had no ability to do so.
As such, PureTech lost the power to participate in the financial
and operating policy decisions of Karuna. As a result, Karuna was
no longer deemed an Associate and did not meet the scope of equity
method accounting, resulting in the investment being accounted for
as an investment held at fair value. As of December 2, 2019 the
Company's interest in Karuna was 28.4 percent. For the period of
June 28, 2019 through December 2, 2019, PureTech's investment in
Karuna was subject to equity method accounting. In accordance with
IAS 28, the Company's investment was adjusted by the share of
losses generated by Karuna (weighted average of 31.4 percent based
on common stock ownership interest), which resulted in a net loss
of associates accounted for using the equity method of $6.3 million
during the year ended December 31, 2019.
Upon PureTech's loss of significant influence, the investment in
Karuna was reclassified to an investment held at fair value. This
change led PureTech to recognize a gain on loss of significant
influence of $445.6 million that was recorded to the Consolidated
Statement of Comprehensive Income/(Loss) on the line item Gain on
loss of significant influence during the year ended December 31,
2019. The investment in Karuna after the recording of the gain on
loss of significant influence was $557.2 million, which was
reclassified from Investments in associates to Investments held at
fair value. Additionally, from December 2, 2019 PureTech recorded a
$0.7 million loss on the line item Gain/(loss) on investments held
at fair value within the Consolidated Statement of Comprehensive
Income/(Loss) for the year ended December 31, 2019.
2020 and 2021
On January 22, 2020, PureTech sold 2,100,000 shares of Karuna
common shares for aggregate proceeds of $200.9 million. On May 26,
2020, PureTech sold an additional 555,500 Karuna common shares for
aggregate proceeds of $45.0 million. On August 26, 2020, PureTech
sold 1,333,333 common shares of Karuna for aggregate proceeds of
$101.6 million. As a result of the sales, Puretech recorded a loss
of $54.8 million attributable to blockage discount included in the
sales price, to the line item Loss Realized on Sale of Investment
within the Consolidated Statement of Comprehensive Income/(Loss).
See below for gain recorded in respect of the change in fair value
of the Karuna investment.
On February 9, 2021, the Group sold 1,000,000 common shares of
Karuna for $118.0 million. Following the sale the Group held
2,406,564 common shares of Karuna, which represented 8.2 percent of
Karuna common stock at the time of sale. On November 9, 2021, the
group sold an additional 750,000 common shares of Karuna for $100.1
million. Following the sale the group holds 1,656,564 common shares
of Karuna, which represented 5.6 percent at time of sale. As a
result of the aforementioned sales, the Company recorded a loss of
$20.9 million, attributable to blockage discount included in the
sales price, to the line item Loss Realised on Sale of Investment
within the Consolidated Statement of Comprehensive Income/ (Loss)
for the year ended December 31, 2021. See below for gain recorded
in respect of the change in fair value of the Karuna
investment.
During the years ended December 31, 2021 and 2020, the Company
recognized a gain of $110.0 million and a gain of $191.2 million,
respectively for the changes in the fair value of the Karuna
investment that were recorded in the line item Gain/(loss) on
investments held at fair value within the Consolidated Statement of
Comprehensive Income/(Loss). As of December 31, 2021, PureTech
continued to hold Karuna common shares or 5.6 percent of total
outstanding Karuna common shares. Please refer to Note 16 for
information regarding the valuation of these instruments.
Akili
As PureTech does not hold common shares in Akili and the
preferred shares it holds do not have equity-like features,
PureTech has no basis to account for its investment in Akili under
IAS 28. The preferred shares held by PureTech Health fall under the
guidance of IFRS 9 and are treated as a financial asset held at
fair value and all movements to the value of the preferred shares
are recorded through the Consolidated Statements of Comprehensive
Income/(Loss), in accordance with IFRS 9.
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 years ended December 31, 2021, 2020 and 2019, the
Company recognized a gain of $32.2 million, a gain of $14.4
million, and a gain of $11.5 million, respectively for the changes
in the fair value of the investment in Akili that was recorded on
the line item Gain/(loss) on investments held at fair value within
the Consolidated Statement of Comprehensive Income/(Loss). Please
refer to Note 16 for information regarding the valuation of these
instruments.
resTORbio
On November 15, 2019, resTORbio announced that top line data
from the Protector 1 Phase 3 study evaluating the safety and
efficacy of RTB101 in preventing clinically symptomatic respiratory
illness in adults age 65 and older, did not meet its primary
endpoint and the Company has stopped the development of RTB101 in
this indication. As a result of ceasing the development of RTB101,
resTORbio's share price witnessed a decline in price. In November
and December 2019, PureTech Health sold 7,680,700 common shares of
resTORbio for aggregate proceeds of $9.3 million. Immediately
following the sale of common shares, PureTech Health held 2,119,696
common shares, or 5.8 percent, of resTORbio. During the year ended
December 31, 2019 PureTech recorded a loss of $71.9 million for the
adjustment to fair value of its investment in resTORbio to the
Consolidated Statement of Comprehensive Income/(Loss) in the line
item Gain/(loss) on investments held at fair value.
On April 30, 2020, PureTech sold its remaining 2,119,696
resTORbio common shares, for aggregate proceeds of $3.0 million. As
a result of the sale, the Company recorded a loss of $0.2 million
attributable to blockage discount included in the sales price, to
the line item Loss realized on sale of investments within the
Consolidated Statement of Comprehensive Income/(Loss).
Additionally, during the year ended December 31, 2020, the Company
recognized a gain of $0.1 million that was recorded on the line
item Gain/(loss) on investments held at fair value within the
Consolidated Statement of Comprehensive Income/(Loss).
Gain on deconsolidation
The following table summarizes the gain on deconsolidation
recognized by the Company:
2021 2020 2019
Year ended December 31, $000s $000s $000s
Gain on deconsolidation of
Vor - - 6,357
Gain on deconsolidation of
Karuna - - 102,038
Gain on deconsolidation of
Gelesis [Note
6] - - 156,014
Total gain on
deconsolidation - - 264,409
6. Investments in Associates
Gelesis
Gelesis was founded by PureTech and raised funding through
preferred shares financings as well as issuances of warrants and
loans. As of January 1, 2019, PureTech maintained control of
Gelesis and Gelesis's financial results were fully consolidated in
the Group's consolidated financial statements.
On July 1, 2019, the Gelesis Board of Directors was
restructured, resulting in two of the three PureTech
representatives resigning from the Board with PureTech retaining no
ability to reappoint Directors to these board seats. As a result of
this restructuring, PureTech lost control over Gelesis' Board of
Directors, which triggered a loss of control over the entity. At
the deconsolidation date, PureTech held a 25.2 percent voting
interest in Gelesis. As of July 1, 2019, Gelesis was deconsolidated
from the Group's financial statements, resulting in only the
profits and losses generated by Gelesis through the deconsolidation
date being included in the Group's Consolidated Statement of
Income/(Loss) and Other Comprehensive Income/(Loss). At the date of
deconsolidation, PureTech recorded a $156.0 million gain on the
deconsolidation of Gelesis, which was recorded to the Gain on the
deconsolidation of subsidiary line item in the Consolidated
Statement of Comprehensive Income/(Loss). While the Company no
longer controls Gelesis, it was concluded that PureTech still has
significant influence over Gelesis by virtue of its large, albeit
minority, ownership stake and its continued representation on
Gelesis' Board of Directors and as such Gelesis is accounted for as
an associate under IAS 28, starting at the date of
deconsolidation.
Upon the date of deconsolidation, PureTech held preferred shares
and common shares of Gelesis and a warrant issued by Gelesis to
PureTech. PureTech's investment in common shares of Gelesis is
subject to equity method accounting with an initial investment of
$16.4 million. In accordance with IAS 28, PureTech's investment was
adjusted by the share of profits and losses generated by Gelesis
subsequent to the date of deconsolidation. See table below for the
Group's share in the profits and losses of Gelesis for the periods
presented.
The preferred shares and warrant held by PureTech fall under the
guidance of IFRS 9 and are treated as financial assets held at fair
value, where changes to the fair value of the preferred shares and
warrant are recorded through the Consolidated Statement of
Income/(Loss) and Other Comprehensive Income/(Loss), in accordance
with IFRS 9. The fair value of the preferred shares and warrant at
deconsolidation was $49.2 million. See Note 5 for changes in the
fair value subsequent to deconsolidation date.
Impairment loss for the year ended December 31, 2019
Following the issuance of the Gelesis Series 3 Preferred Shares
at a higher valuation than the previous round with some favorable
liquidation provisions primarily to PureTech and also to the other
Series 3 preferred share investors, which resulted in adjustments
to the fair values of other preferred shares, warrant classes and
Gelesis common stock, the Company assessed the investment in common
shares held in Gelesis for impairment. Management compared the
recoverable amount of the investment to its carrying amount as of
December 31, 2019, which resulted in an impairment loss to the
Investment in Gelesis. The recoverable amount was estimated based
on the fair value of the Gelesis common shares held by PureTech,
which are considered to be within Level 3 of the fair value
hierarchy. The costs of disposal are immaterial for the calculation
of Gelesis investment's recoverable amount. The total fair value of
common shares was determined utilizing a hybrid valuation approach
with significant unobservable inputs within the PureTech valuation
framework. The multi-scenario hybrid valuation approach utilized
the recent transaction method within an option pricing framework
and an IPO scenario within a probability-weighted-expected return
framework to determine the value allocation for the common share
class of Gelesis. The PWERM maintained a 75.0 percent probability
of occurrence while the OPM maintained a 25.0 percent probability
of occurrence. The probability weighted term to exit was 1.57
years. The discount rate utilized was 20.0 percent while the
risk-free rate and volatility utilized were 1.62 percent and 56.0
percent, respectively.
The impairment loss amounted to $42.9 million and was recorded
to Impairment of investment in associate within the Consolidated
Statement of Comprehensive Income/(Loss) for the year ended
December 31, 2019. As of December 31, 2019 the investment in
Gelesis was $10.6 million, which is equal to the fair value of the
common shares held by PureTech.
Years ended December 31, 2020 and 2021
During the year ended December 31, 2021 and 2020, the Group
recorded its share in the losses of Gelesis. In 2020 the Group's
investment in associates accounted for under the equity method was
reduced to zero. Since the Group has investments in Gelesis
warrants and preferred shares that are deemed to be Long-term
interests, the Company continued recognizing its share in Gelesis
losses while applying such losses to its preferred share and
warrant investment in Gelesis accounted for as an investment held
at fair value. In 2021, the total investment in Gelesis, including
the Long-term interests, was reduced to zero. Since the Group did
not incur legal or constructive obligations or made payments on
behalf of Gelesis, the Group discontinued recognizing equity method
losses. As of December 31, 2021, unrecognized equity method losses
amounted to $38.1 million, which included $0.7 million of
unrecognized other comprehensive loss.
During 2021, due to exercise of stock options into common shares
in Gelesis the Group's equity interest in Gelesis was reduced from
47.9 percent at December 31, 2020 to 42.0 percent as of December
31, 2021. The gain resulting from the issuance of shares to third
parties and the resulting reduction in the Group's share in the
accumulated deficit of Gelesis under the equity method was fully
offset by the unrecognized equity method losses.
Karuna
For the period of June 28, 2019, through December 2, 2019,
PureTech's investment in Karuna was subject to equity method
accounting. In accordance with IAS 28, the Company's investment was
adjusted by the share of losses generated by Karuna (weighted
average of 31.4 percent based on common stock ownership interest),
which resulted in a net loss of $6.3 million during the year ended
December 31, 2019, recorded in the line item Share of net
income/(loss) of associates. Starting December 2, 2019, due to the
loss of significant influence in Karuna on such date, the Company
is accounting for the investment in Karuna as an investment held at
fair value. See Note 5 for further detail on the Group's investment
in Karuna.
The following table summarizes the activity related to the
investment in associates balance for the years ended December 31,
2021, 2020 and 2019.
Investment in Associates $000's
As of January 1, 2019 -
Reclassification of Karuna investment at initial public
offering 118,006
Investment in Gelesis upon deconsolidation 16,444
Share of net loss of Karuna accounted for using the equity
method (6,345)
Share of net profit of Gelesis accounted for using the equity
method 37,136
Impairment of investment in Gelesis (42,938)
Reclassification of investment upon loss of significant
influence (111,661)
As of December 31, 2019 and January 1, 2020 10,642
Share of net loss in Gelesis (34,117)
Share of other comprehensive income in Gelesis 469
Share of losses recorded against long term interests 23,006
As of December 31, 2020 and January 1, 2021 -
Share of net loss in Gelesis (73,703)
Share of losses recorded against long term interests 73,703
As of December 31, 2021 -
Summarized financial information
The following table summarizes the financial information of
Gelesis as included in its own financial statements, adjusted for
fair value adjustments at deconsolidation and differences in
accounting policies. The table also reconciles the summarized
financial information to the carrying amount of the Company's
interest in Gelesis. The information for the year ended December
31, 2019, includes the results of Gelesis only for the period July
1, 2019 to December 31, 2019, as Gelesis was consolidated prior to
this period.
2021 2020
As of and for the year ended December 31, $000s $000s
Percentage ownership interest 42.0 % 47.9 %
Non-current assets 357,508 372,184
Current assets 66,092 92,875
Non-current liabilities (120,786) (133,743)
Current liabilities (537,432) (300,748)
Non controlling interests and options
issued
to third parties (14,216) (6,577)
Net assets attributable to shareholders
of Gelesis Inc. (248,834) 23,989
Group's share of net assets (104,527) 11,481
Goodwill 7,211 8,216
Impairment provision balance (37,495) (42,702)
Equity method losses recorded against
Long-term
Interests 96,709 23,006
Unrecognized equity method losses (*) 38,101 -
Investment in associate - -
2021 2020 2019
$000s $000s $000s
Revenue 11,185 21,442 -
Income/(loss) from continuing operations
(100%) (271,430) (71,157) 74,573
Total comprehensive income/(loss) (100%) (273,005) (70,178) 74,573
Group's share in net income (losses) -
limited
to net investment amount (73,703) (34,117) 37,136
Group's share of total comprehensive
income
(loss) - limited to net investment amount (73,703) (33,648) 37,136
(*) Unrecognized equity method losses includes unrecognized
other comprehensive loss of $0.7 million.
See Note 26, for the completion of the business combination of
Gelesis with Capstar Special Purpose Acquisition Corp ("Capstar")
on January 13, 2022. The publicly traded company began trading on
the New York Stock exchange under the ticker symbol "GLS" on
January 14, 2022.
On December 30, 2021, PureTech signed a Backstop agreement with
Capstar according to which PureTech committed to acquire Capstar
class A common shares immediately prior to the closing of the
business combination between Gelesis and Capstar, in case
subsequent to the redemptions of Capstar shares being completed,
the Available Funds, as defined in the agreement, are less
than$15.0 million. Puretech committed to acquire two thirds of the
necessary shares at $10 per share so that the Available Funds
increase to $15.0 million. According to the Backstop agreement, in
case PureTech is required to acquire any shares under the
agreement, PureTech will receive an additional 1,322,500 class A
common shares of Capstar (immediately prior to the closing of the
business combination) at no additional consideration.
The Company determined that such agreement meets the definition
of a derivative under IFRS 9 and as such should be recorded at fair
value with changes in fair value recorded through profit and loss.
For the year ended December 31, 2021 the changes in fair value were
de minimis. The derivative was initially recorded at fair value
adjusted to defer the day 1 gain equal to the difference between
the fair value of $11.2 million and transaction price of zero on
the effective date and as such was initially recorded at zero. The
deferred gain is amortized to Other income (expense) in the
Consolidated Statement of Income (loss) over the period from the
effective date until settlement date. As such, the Group recognized
$0.8 million income in 2021 for the portion of the deferred gain
amortized in 2021.
On January 13, 2022, as part of the conclusion of the
aforementioned Backstop agreement, the Group acquired 496,145 class
A common shares of Capstar for $5.0 million and received an
additional 1,322,500 common A shares of Capstar for no additional
consideration.
7. Operating Expenses
Total operating expenses were as follows:
2021 2020 2019
For the years ending December 31, $000s $000s $000s
General and administrative 57,199 49,440 59,358
Research and development 110,471 81,859 85,848
Total operating expenses 167,671 131,299 145,206
The average number of persons employed by the Group during the
year, analyzed by category, was as follows:
For the years ending
December 31, 2021 2020 2019
General and
administrative 52 43 39
Research and development 119 95 90
Total 171 138 129
The aggregate payroll costs of these persons were as
follows:
2021 2020 2019
For the years ending December 31, $000s $000s $000s
General and administrative 26,438 22,943 24,468
Research and development 28,950 20,674 20,682
Total 55,388 43,616 45,150
Detailed operating expenses were as follows:
2021 2020 2019
For the years ending December 31, $000s $000s $000s
Salaries and wages 36,792 29,403 27,703
Healthcare benefits 2,563 1,866 1,511
Payroll taxes 2,084 1,629 1,468
Share-based payments 13,950 10,718 14,468
Total payroll costs 55,388 43,616 45,150
Other selling, general and administrative
expenses 30,761 26,497 34,890
Other research and development expenses 81,521 61,186 65,166
Total other operating expenses 112,282 87,683 100,056
Total operating expenses 167,671 131,299 145,206
Auditor's remuneration:
2021 2020 2019
For the years ending December 31, $000s $000s $000s
Audit of these financial
statements 1,183 1,145 870
Audit of the financial statements
of subsidiaries 312 291 290
Audit of the financial statements
of associate** 571 350 -
Audit-related assurance services* 1,868 490 163
Non-audit related services - 173 778
Total 3,934 2,449 2,101
* 2021 - $468.2 thousand represents prepaid expenses related to
an expected initial public offering of a subsidiary.
** Audit fees of $500.0 thousand and $350.0 thousand in respect
of financial statements of associates for the years ended December
31, 2021, and 2020, respectively, are not included within the
consolidated financial statements. Fees related to the audit of the
financial statements of associates have been disclosed in respect
of both 2021 and 2020 as these fees went towards supporting the
audit opinion on the Group accounts. Such amounts were not
previously disclosed in the 2020 financial statements.
Please refer to Note 8 for further disclosures related to
share-based payments and Note 24 for management's remuneration
disclosures.
8. Share-based Payments
Share-based payments includes stock options, restricted stock
units ("RSUs") and performance-based RSUs in which the expense is
recognized based on the grant date fair value of these awards,
except for performance based RSUs to executives that are treated as
liability awards where expense is recognized based on reporting
date fair value up until settlement date.
Share-based Payment Expense
The Group share-based payment expense for the years ended
December 31, 2021, 2020 and 2019, 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 2019
Year ended December 31, $000s $000s $000s
General and administrative 9,310 7,650 10,677
Research and development 4,640 3,068 3,791
Total 13,950 10,718 14,468
Ariya Stock Option Exchange- 2019
In conjunction with the acquisition of the remaining minority
interests of PureTech LYT (previously named Ariya Therapeutics,
Inc.) on October 1, 2019 (Please refer to Note 18), PureTech Health
exchanged subsidiary stock options previously granted to the
co-inventors, advisors and employees of PureTech LYT with stock
options to purchase 2,147,965 of the Company's ordinary shares
under the PureTech Health Performance Share Plan. As this was an
exchange of awards within the consolidated group, whereby the
Company's stock options were replacing Ariya's stock options, the
exchange was accounted for as a modification of the original award
and the incremental fair value on the date of the replacement was
amortized over the remaining vesting period of the awards.
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan
("PSP"). Under the PSP and subsequent amendments, awards of
ordinary shares may be made to the Directors, senior managers and
employees of, and other individuals providing services to the
Company and its subsidiaries up to a maximum authorized amount of
10.0 percent of the total ordinary shares outstanding. The shares
have various vesting terms over a period of service between two and
four years, provided the recipient remains continuously engaged as
a service provider.
The share-based awards granted under the PSP are generally
equity settled (see cash settlements below) and expire 10 years
from the grant date. As of December 31, 2021, the Company had
issued share-based awards to purchase an aggregate of 21,756,187
shares under this plan.
RSUs
RSU activity for the years ended December 31, 2021, 2020 and
2019 is detailed as follows:
Wtd Avg
Grant Date
Number Fair Value
of Shares/Units (GBP) (*)
Outstanding (Non-vested) at January 1, 2019 6,598,783 1.29
RSUs Granted in Period 1,775,569 2.95
Vested (3,738,005) 1.10
Forfeited - -
Outstanding (Non-vested) at December 31, 2019 and
January 1, 2020 4,636,347 2.08
RSUs Granted in Period 1,759,011 1.80
Vested (2,781,687) 1.54
Forfeited (191,089) 2.37
Outstanding (Non-vested) at December 31, 2020 and
January 1, 2021 3,422,582 2.46
RSUs Granted in Period 2,195,133 2.15
Vested (1,176,695) 2.93
Forfeited (808,305) 2.25
Outstanding (Non-vested) at December 31, 2021 3,632,715 1.91
(*) 2021 - for liability awards based on fair value at reporting
date.
Each RSU entitles the holder to one ordinary share on vesting
and the RSU awards are generally based on a cliff vesting schedule
over a one to 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
majority of the RSUs is subject to the satisfaction of performance
and market conditions. The grant date fair value of market
condition awards that are treated as equity settled awards is
measured to reflect such conditions and there is no true-up for
differences between expected and actual outcomes. For liability
settled awards, see below.
The Company recognizes the estimated fair value of
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"),
based on the achievement of absolute TSR targets, and to a lesser
extent based on TSR as compared to the FTSE 250 Index, and the MSCI
Europe Health Care Index. The remaining portion is 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 year ended December
31, 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 year
ended December 31, 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 year ended
December 31, 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 to the company executives 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 or
settlement date are recorded as stock-based compensation expense in
the Consolidated Statement of Comprehensive Income (loss).
The Company incurred share-based payment expenses for
performance, market and service based RSUs of $1.5 million
(including $0.6 million expense in respect of RSU liability
awards), $5.7 million and $2.2 million for the years ended December
31, 2021, 2020 and 2019, respectively. The decrease in the share
based compensation expense in respect of the RSUs for the year
ended December 31, 2021, as compared to the year ended December 31,
2020 is due to reduction in the fair value of the liability awards
as compared to their value at the date the awards were reclassified
from equity awards to liability awards, as well as forfeitures of
certain awards due to unexpected terminations of RSU holders.
As of December 31, 2021, the carrying amount of the RSU
liability awards was $7.4 million ($4.7 million current; $2.7
million non current), out of which $4.6 million related to awards
that have met all their performance and market conditions.
Stock Options
Stock option activity for the years ended December 31, 2021,
2020 and 2019, is detailed as follows:
Wtd Average
of
remaining Wtd Average
Wtd Average contractual Stock Price
Number Exercise term (in at Exercise
of Options Price (GBP) years) (GBP)
Outstanding at January 1,
2019 5,075,734 1.40 8.78
Granted 3,634,183 0.84
Exercised (237,090) 1.98 2.81
Forfeited - -
Options Exercisable at
December 31,
2019 and January 1, 2020 4,349,921 0.93 8.34
Outstanding at December 31,
2019
and January 1, 2020 8,472,827 1.16 8.55
Granted 4,076,982 3.14
Exercised (514,410) 1.52 2.88
Forfeited (1,119,313) 1.88
Options Exercisable at
December 31,
2020 and January 1, 2021 5,447,405 0.98 7.46
Outstanding at December 31,
2020
and January 1, 2021 10,916,086 1.81 8.38
Granted 5,424,000 3.34
Exercised (2,238,187) 0.70 3.63
Forfeited (687,781) 2.53
Options Exercisable at
December 31,
2021 4,773,873 1.42 6.50
Outstanding at December 31,
2021 13,414,118 2.58 8.29
The fair value of the stock options awarded by the Company was
estimated at the grant date using the Black-Scholes option
valuation model, considering the terms and conditions upon which
options were granted, with the following weighted-average
assumptions:
At December 31, 2021 2020 2019
41.05 41.25 35.68
Expected volatility % % %
Expected terms (in years) 6.16 6.11 5.81
Risk-free interest rate 1.06 % 0.53 % 1.85 %
Expected dividend yield - - -
Grant date fair value $1.87 $1.72 $2.23
The Company incurred share-based payment expense for the stock
options of $6.2 million, $2.1 million and $9.2 million for the
years ended December 31, 2021, 2020 and 2019, respectively. The
increase in expense for the year ended December 31, 2021, as
compared to the year ended December 31, 2020, is due to the new
grants granted in 2021. The significant decrease for the year ended
December 31, 2020, as compared to the year ended December 31, 2019,
is largely attributable to the exchange of the Ariya awards with
the Company's stock options in the year ended December 31, 2019,
which resulted in an additional expense recorded in such year, as
described above.
For shares outstanding as of December 31, 2021, the range of
exercise prices is detailed as follow:
Wtd Average
of
Wtd remaining
Average contractual
Options Exercise term (in
Range of Exercise Prices (GBP) Outstanding Price (GBP) years)
0.01 842,762 - 7.76
1.00 to 2.00 3,521,839 1.42 5.81
2.00 to 3.00 1,251,017 2.47 8.35
3.00 to 4.00 7,798,500 3.39 9.46
Total 13,414,118 2.58 8.29
Subsidiary Plans
Certain subsidiaries of the Group have adopted stock option
plans. A summary of stock option activity by number of shares in
these subsidiaries is presented in the following table:
Outstanding Outstanding
as of Granted Exercised Expired Forfeited as of
January During During During During December
1, 2021 the Year the Year the Year the Year 31, 2021
Alivio 3,888,168 197,398 (2,373,750) (506,260) (1,205,556) -
Entrega 962,000 - (525,000) (87,500) - 349,500
Follica 1,309,040 1,383,080 - (6,000) - 2,686,120
Sonde 2,192,834 - - (51,507) (92,323) 2,049,004
Vedanta 1,741,888 451,532 (52,938) (76,491) (72,354) 1,991,637
Outstanding Outstanding
as of Granted Exercised Expired Forfeited as of
January During During During During December
1, 2020 the Year the Year the Year the Year 31, 2020
Alivio 3,698,244 189,924 - - - 3,888,168
Entrega 972,000 - - - (10,000) 962,000
Follica 1,309,040 - - - - 1,309,040
Sonde 1,829,004 363,830 - - - 2,192,834
Vedanta 1,450,100 493,951 (813) - (201,350) 1,741,888
Outstanding Outstanding
as of Granted Exercised Expired Forfeited as of
January During During During During December
1, 2019 the Year the Year the Year the Year 31, 2019
Gelesis 3,681,732 - - (110,386) (3,571,346)(1) -
Alivio 2,393,750 1,329,494 (3,125) - (21,875) 3,698,244
PureTech
LYT 2,180,000 - - - (2,180,000)(2) -
Commense 540,416 - - - (540,416) -
Entrega 914,000 58,000 - - - 972,000
Follica 1,229,452 79,588 - - - 1,309,040
Karuna 1,949,927 - - - (1,949,927)(1) -
Sonde 22,500 1,806,504 - - - 1,829,004
Vedanta 1,373,750 154,193 - - (77,843) 1,450,100
1 These shares represent the options outstanding on the date of
deconsolidation of Karuna and Gelesis.
2 These shares represent the options outstanding on the date of
exchange to PureTech stock options.
The weighted-average exercise prices and remaining contractual
life for the options outstanding as of December 31, 2021, were as
follows:
Weighted-average
exercise Weighted-average
Number price contractual
Outstanding at December 31, 2021 of options $ life outstanding
Alivio - - 0
Entrega 349,500 1.88 4.62
Follica 2,686,120 1.39 7.28
Sonde 2,049,004 0.20 7.71
Vedanta 1,991,637 13.42 5.92
The weighted average exercise prices for the options granted for
the years ended December 31, 2021, 2020 and 2019, were as
follows:
2021 2020 2019
For the years ended December 31, $ $ $
Alivio - 0.47 0.49
Follica 1.86 - 0.03
Sonde - 0.18 0.20
Vedanta 19.69 19.59 19.13
The weighted average exercise prices for options forfeited
during the year ended December 31, 2021, were as follows:
Weighted-average
exercise
Number price
Forfeited during the year ended December 31, 2021 of options $
Alivio 1,205,556 0.48
Sonde 92,323 0.18
Vedanta 72,354 19.36
The weighted average exercise prices for options exercised
during the year ended December 31, 2021, were as follows:
Weighted-average
exercise
Number price
Exercised during the year ended December 31, 2021 of options $
Alivio 2,373,750 0.03
Entrega 525,000 0.03
Vedanta 52,938 0.96
The weighted average exercise prices for options exercisable as
of December 31, 2021, were as follows:
Exercise
Exercisable Weighted-average Price
at December Number of exercise price Range
31, 2021 Options $ $
Alivio - - -
Entrega 349,500 1.88 0.03-2.36
Follica 2,686,120 1.01 0.03-1.86
Sonde 2,049,004 0.20 0.13-0.20
Vedanta 1,991,637 9.64 0.02-19.94
Significant Subsidiary Plans
Vedanta 2010 Stock Incentive Plan
In 2010, the Board of Directors for Vedanta approved the 2010
Stock Incentive Plan (the "Vedanta Plan"). Through subsequent
amendments, as of December 31, 2021, it allowed for the issuance of
2,797,055 share-based compensation awards through incentive share
options, nonqualified share options, and restricted shares to
employees, Directors, and nonemployees providing services to
Vedanta. At December 31, 2021, 747,270 shares remained available
for issuance under the Vedanta Plan.
The options granted under Vedanta Plan are equity settled and
expire 10 years from the grant date. Typically, the awards vest in
four years but vesting conditions can vary based on the discretion
of Vedanta's Board of Directors.
Options granted under the Vedanta Plan are exercisable at a
price per share not less than the fair market value of the
underlying ordinary shares on the date of grant. The estimated fair
value of options, including the effect of estimated forfeitures, is
recognized over the options' vesting period.
The fair value of the stock option grants has been estimated at
the date of grant using the Black-Scholes option pricing model with
the following range of assumptions:
Assumption/Input 2021 2020 2019
Expected award life (in years) 6.00-7.11 6.00-10.00 5.86-6.07
Expected award price volatility 88.05%-88.59% 89.24%-95.46% 89.24%-95.46%
Risk free interest rate 0.96%-1.32% 0.32%-0.87% 1.73%-1.88%
Expected dividend yield - - -
Grant date fair value $13.84-$16.23 $13.09-$16.54 $14.12-$15.61
Share price at grant date $19.00-$21.35 $19.59 $18.71-$19.94
Vedanta incurred share-based compensation expense of $5.4
million, $2.4 million and $1.7 million for the years ended December
31, 2021, 2020 and 2019, respectively.
Other Plans
The stock compensation expense under plans at other subsidiaries
of the Group not including Vedanta amounted to $0.84 million, $0.42
million and $0.01 million for the years ended December 31, 2021,
2020 and 2019, respectively.
9. Finance Cost, net
The following table shows the breakdown of finance income and
costs:
2021 2020 2019
For the years ended December 31, $000s $000s $000s
Finance income
Interest income from financial
assets 214 1,183 4,362
Total finance income 214 1,183 4,362
Finance costs
Contractual interest expense on
notes payable (1,031) (96) (149)
Interest expense on other
borrowings (1,502) (496) -
Interest expense on lease
liability (2,181) (2,354) (2,495)
Gain/(loss) on foreign currency
exchange (56) - 68
Total finance cost - contractual (4,771) (2,946) (2,576)
Gain/(loss) from change in fair
value of
warrant liability 1,419 (117) (11,890)
Gain/(loss) from change in fair
value of
preferred shares 8,362 (4,234) (34,585)
Gain/(loss) from change in fair
value of
convertible debt (175) - -
Total finance income/(costs) -
fair value
accounting 9,606 (4,351) (46,475)
Total finance costs - subsidiary
preferred
shares - - (1,458)
Total finance income/(costs) 9,606 (4,351) (47,933)
Finance income/(costs), net 5,050 (6,115) (46,147)
10. Earnings/(Loss) per Share
The basic and diluted loss per share has been calculated by
dividing the income/(loss) for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares
outstanding during the years ended December 31, 2021, 2020 and
2019, respectively. During the year ended December 31, 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
6,553,905 shares.
Earnings/(Loss) Attributable to Owners of the Company:
2021 2020 2019
Basic Diluted Basic Diluted Basic Diluted
$000s $000s $000s $000s $000s $000s
Income/(loss)
for
the year,
attributable
to the owners
of
the Company (60,558) (60,558) 5,985 5,985 421,144 421,144
Income/(loss)
attributable
to ordinary
shareholders (60,558) (60,558) 5,985 5,985 421,144 421,144
Weighted-Average Number of Ordinary Shares:
2021 2020 2019
Basic Diluted Basic Diluted Basic Diluted
Issued
ordinary
shares
at January 1, 285,885,025 285,885,025 285,370,619 285,370,619 282,493,867 282,493,867
Effect of
shares
issued 705,958 705,958 233,048 233,048 932,600 932,600
Effect of
dilutive
shares
(please refer
to Note 8) - - - 7,252,246 - 8,355,866
Weighted
average
number of
ordinary
shareholders
at December
31, 286,590,983 286,590,983 285,603,667 292,855,913 283,426,467 291,782,333
Earnings/(Loss) per Share:
2021 2020 2019
Basic Diluted Basic Diluted Basic Diluted
$ $ $ $ $ $
Basic and
diluted
earnings/(loss)
per
share (0.21) (0.21) 0.02 0.02 1.49 1.44
11. Property and Equipment
Computer
Laboratory Furniture Equipment Construction
and Manufacturing and and Leasehold in
Equipment Fixtures Software Improvements process Total
Cost $000s $000s $000s $000s $000s $000s
Balance as of
January
1, 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 1,424 - 92 183 6,723 8,422
Disposals (323) - (282) - - (605)
Reclassifications 2,211 - - 248 (2,459) -
Balance as of
December
31, 2021 11,733 1,452 1,329 18,485 8,116 41,115
Accumulated Computer
depreciation Laboratory Furniture Equipment Construction
and and Manufacturing and and Leasehold in
impairment Equipment Fixtures Software Improvements process Total
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 (1,973) (208) (174) (1,991) - (4,346)
Disposals 251 - 271 - - 522
Balance as of
December
31, 2021 (5,686) (663) (1,190) (6,806) - (14,344)
Computer
Property Laboratory Furniture Equipment Construction
and and Manufacturing and and Leasehold in
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
December
31, 2021 6,047 790 139 11,679 8,116 26,771
Depreciation of property and equipment is included in the
General and administrative expenses and Research and development
expenses line items in the Consolidated Statements of Comprehensive
Income/(Loss). The Company recorded depreciation expense of $4.3
million, $3.9 million and $3.2 million for the years ended December
31, 2021, 2020 and 2019, respectively.
12. Intangible Assets
Intangible assets consist of licenses of intellectual property
acquired by the Group through various agreements with third parties
and are recorded at the value of the consideration transferred.
Information regarding the cost and accumulated amortization of
intangible assets is as follows:
Licenses
Cost $000s
Balance as of January 1, 2020 625
Additions 275
Balance as of December 31, 2020 900
Additions 90
Balance as of December 31, 2021 990
Licenses
Accumulated amortization $000s
Balance as of January 1, 2020 -
Amortization (1)
Balance as of December 31, 2020 (1)
Amortization (2)
Balance as of December 31, 2021 (3)
Licenses
Intangible assets, net $000s
Balance as of December 31, 2020 899
Balance as of December 31, 2021 987
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.
The Company tested such assets for impairment as of balance
sheet date and concluded that none were impaired.
Amortization expense was included in the Research and
development expenses line item in the accompanying Consolidated
Statements of Comprehensive Income/(Loss). Amortization expense,
recorded using the straight-line method, was approximately $0.0
million, $0.0 million and $0.1 million for the years ended December
31, 2021 2020 and 2019, respectively.
13. Other Financial Assets
Other financial assets consist of restricted cash held, which
represents amounts that are reserved as collateral against letters
of credit with a bank that are issued for the benefit of a landlord
in lieu of a security deposit for office space leased by the Group.
Information regarding restricted cash was as follows:
2021 2020
As of December 31, $000s $000s
Restricted cash 2,124 2,124
Total other financial assets 2,124 2,124
14. Equity
Total equity for PureTech as of December 31, 2021, and 2020, was
as follows:
December December
31, 2021 31, 2020
Equity $000s $000s
Share capital, GBP0.01 par value, issued and paid
287,796,585 and 285,885,025 as of December 31, 2021
and 2020, respectively 5,444 5,417
Merger Reserve 138,506 138,506
Share premium 289,303 288,978
Translation reserve 469 469
Other reserves (40,077) (24,050)
Retained earnings/(accumulated deficit) 199,871 260,429
Equity attributable to owners of the Group 593,515 669,748
Non-controlling interests (9,368) (16,209)
Total equity 584,147 653,539
Changes in share capital and share premium relate primarily to
incentive options exercises during the period.
Shareholders are entitled to vote on all matters submitted to
shareholders for a vote. Each ordinary share is entitled to one
vote. Each ordinary share is entitled to receive dividends when and
if declared by the Company's Directors. The Company has not
declared any dividends in the past.
On June 18, 2015, the Company acquired the entire issued share
capital of PureTech LLC in return for 159,648,387 Ordinary Shares.
This was accounted for as a common control transaction at cost. It
was deemed that the share capital was issued in line with movements
in share capital as shown prior to the transaction taking place. In
addition, the merger reserve records amounts previously recorded as
share premium.
Other reserves comprise the cumulative credit to share-based
payment reserves corresponding to share-based payment expenses
recognized through Consolidated Statements of Comprehensive
Income/(Loss), settlements of vested share based payment awards as
well as other additions that flow directly through equity such as
the excess or deficit from changes in ownership of subsidiaries
while control is maintained by the Group.
15. Subsidiary Preferred Shares
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 December 31, 2021 and 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 December 31, $000s $000s
Entrega 669 1,291
Follica 11,191 12,792
Sonde 13,362 12,821
Vedanta Biosciences 148,796 92,068
Total subsidiary preferred share balance 174,017 118,972
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 December 31, 2021 and 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 December 31, $000s $000s
Entrega 2,216 2,216
Follica 6,405 6,405
Sonde 12,000 12,000
Vedanta Biosciences 149,568 86,161
Total minimum liquidation preference 170,189 106,782
For the years ended December 31, 2021 and 2020, the Group
recognized the following changes in the value of subsidiary
preferred shares:
$000s
Balance as of January 1, 2020 100,989
Issuance of new preferred shares 13,750
Increase in value of preferred shares measured at fair value 4,234
Balance as of January 1, 2021 118,972
Issuance of new preferred shares - financing cash flow 37,610
Conversion of convertible notes into preferred shares -
non cash financing activity 25,797
decrease in value of preferred shares measured at fair value
- finance costs (income) (8,362)
Balance as December 31, 2021 174,017
2021
On July 21, 2021 Vedanta closed a Series D financing in which
Vedanta issued 2,387,675 Preferred D shares for consideration of
$68.4 million. From such consideration of $68.4 million, $25.8
million was received from Pfizer through conversion of its
convertible note (see Note 17) and $5.0 million was received from
PureTech in exchange for 174,520 Preferred D shares. The amount
received from PureTech was eliminated in the consolidated financial
statements.
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.
16. Financial Instruments
The Group's financial instruments consist of financial
liabilities, including preferred shares, convertible notes,
warrants and loans payable, as well as financial assets classified
as assets held at fair value.
Fair Value Process
For financial instruments measured at fair value under IFRS 9
the change in the fair value is reflected through profit and loss.
Using the guidance in IFRS 13, the total business enterprise value
and allocable equity of each entity being valued was determined
using a discounted cash flow income approach, replacement
cost/asset approach, market/asset - PWERM 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/Asset Under a PWERM, the company value is based upon the
- PWERM probability-weighted present value of expected future
investment returns, considering each of the possible
future outcomes available to the enterprise. An Asset
approach may be included as an expected future outcome
within the PWERM method. Possible future outcomes can
include IPO scenarios, potential SPAC transactions,
merger and acquisition transactions as well as other
similar exit transactions of the investee.
Income Based 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 December 31, 2021 and 2020, at each measurement date, the
total fair value of preferred shares and warrants, 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.
COVID-19 Consideration
At December 31, 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 December 31, 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 January 1, 2019 217,519 9,333
Value at issuance 51,048 1,607
Conversion to preferred 4,894 (4,894)
Conversion to common - (2,418)
Deconsolidation (207,346) (5,017)
Change in fair value 33,636 1,389
Finance Costs 1,458 -
Other (112) -
Cash distribution (108) -
Balance at December 31, 2019 and January 1, 2020 100,989 -
Value at issuance 13,750 25,000
Change in fair value 4,234 -
Balance at December 31, 2020 and January 1, 2021 118,972 25,000
Value at issuance 37,610 2,215
Conversion to subsidiary preferred shares 25,797 (25,797)
Accrued interest - contractual - 867
Change in fair value (8,362) 175
Balance at December 31, 2021 174,017 2,461
The change in fair value of preferred shares and convertible
notes are recorded in Finance income/(costs) - fair value
accounting in the Consolidated Statements of Comprehensive
Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at December 31, 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
December 31, Unobservable Sensitivity to
2021 Valuation Technique Inputs Weighted Average Decrease in Input
Market/Asset
- PWERM & Hybrid Estimated time
148,796 allocation to exit 0.93 Fair value increase
Discount rate 30.0%
Volatility 95.0%
Income - DCF Estimated time
11,860 & OPM allocation to exit 2.94 Fair value decrease
Probability of
Success 76.5%
Discount rate 21.9% Fair value increase
Terminal value Fair value decrease
growth rate (1.3)%
Volatility 57.1%
Market - Backsolve Estimated time
13,362 & OPM allocation to exit 2.00 Fair value increase
Volatility 40.0%
Subsidiary Preferred Shares Sensitivity
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value hierarchy
and used in the fair value measurement of the Group's subsidiary
preferred shares liabilities (Please refer to Note 15):
Subsidiary Preferred
Input Share Liability
Financial
Liability
Increase/(Decrease)
Sensitivity
As of December 31, 2021 Range $000s
Subsidiary Enterprise Value -2% (3,041)
+2% 3,140
Time to Liquidity -6 Months 5,934
+6 Months (6,838)
Volatility -10% 737
+10% (682)
Discount Rate -5% 10,575
+5% (6,068)
Subsidiary Convertible Notes
Vedanta issued convertible promissory notes in December 2020 and
Sonde issued convertible notes in April 2021 and November 2021
(collectively the "Notes"). See Note 17 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 the Finance Income (Cost) line
item in the Consolidated statement of comprehensive income
(loss).
In July 2021 the entire convertible note issued by Vedanta was
converted into Vedanta Series D preferred shares - see Note 15 for
further details.
The aggregate fair value of the Sonde Notes was determined to be
approximately $2.5 million at December 31, 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 December 31, 2021. The significant unobservable input used
at December 31, 2021, in the fair value measurement of Sonde's
convertible notes constituted the estimated time to exit, which was
0.59 years.
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 year ended December 31, 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
year ended December 31, 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 gain of $66.7 million that was
recorded to the Consolidated Statements of Comprehensive
Income/(Loss) in the line item Gain/(loss) on investments held at
fair value.
The following table summarizes the changes in the Group's
investments held at fair value, which were categorized as Level 3
in the fair value hierarchy:
$'000s
Balance at January 1, 2019 85,163
Deconsolidation of Vor 12,028
Deconsolidation of Karuna 77,373
Deconsolidation of Gelesis 49,170
Reclass of Karuna to Associate (118,006)
Gain/(Loss) on changes in fair value 48,867
Issuance of note receivable 6,480
Conversion of note receivable (6,630)
Balance at December 31, 2019 and January 1, 2020 154,445
Cash purchase of Gelesis preferred shares (please refer
to Note 6) 10,000
Cash purchase of Vor preferred shares 1,150
Gain/(Loss) on changes in fair value 41,297
Balance 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 65,505
Balance as of December 31, 2021 before allocation of associate
loss to long-term interest 239,533
Share of associate loss allocated to long-term interest
(please refer to Note 5) (96,709)
Balance as of December 31, 2021 after allocation of associate
loss to long-term interest 142,824
The change in fair value of investments held at fair value are
recorded in Gain/(loss) on investments held at fair value in the
Consolidated Statements of Comprehensive Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at December 31, 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
December 31, Valuation Sensitivity to
2021 Technique Unobservable Inputs Weighted Average Decrease in Input
Market - PWERM Estimated time
238,231 & Hybrid allocation to exit (*) 0.76 Fair value increase
Discount rate 20.0%
Volatility 62.0%
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value hierarchy
and used in the fair value measurement of the Group's investments
held at fair value (Please refer to Note 5):
Investments Held at Fair
Input Value
Financial
Asset Increase/(Decrease)
Sensitivity
As of December 31, 2021 Range $000s
Investee Enterprise Value -2% (4,559)
+2% 4,652
Time to Liquidity (*) '-6 Months 11,828
'+6 Months (14,691)
Discount Rate -5% 3,842
+5% (3,408)
(*) Gelesis investment in preferred shares was excluded from the
sensitivity calculation with regard to the time to liquidity as
changing the time to liquidity in the Gelesis valuation would
result in an unreasonable assumption leading to 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 January 1, 2019 13,012
Warrant Issuance 4,706
Gelesis Deconsolidation (21,611)
Change in fair value 11,890
Balance at December 31, 2019 and January 1, 2020 7,997
Warrant Issuance 92
Change in fair value 117
Balance at December 31, 2020 and January 1, 2021 8,206
Change in fair value - finance costs (income) (1,419)
Balance at December 31, 2021 6,787
The change in fair value of warrants are recorded in Finance
income/(costs) - fair value accounting in the Consolidated
Statements of Comprehensive Income/(Loss).
In 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 $6.8 million warrant liability at December 31, 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 December 31, 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 1.66
Expected volatility 49.1 %
Risk free interest rate 0.7%
Expected dividend yield -%
Estimated fair value of the preferred share $2.72
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value hierarchy
and used in the fair value measurement of the Group's warrant
liabilities:
Input Warrant Liability
Financial
Liability
Increase/(Decrease)
Sensitivity
As at December 31, 2021 Range $000s
Discount Rate used in the calculation of
estimated fair value of the preferred share -5% 8,390
+5% (4,222)
Short-term Note from Associate
On December 7, 2021, Gelesis issued PureTech a $15.0 million
note to be repaid the earlier of three business days after the
closing of the business combination of Gelesis with Capstar Special
Acquisition Corp ("Capstar"), or 30 days following the termination
of such business combination. In the event of the business
combination termination, the Company, who represented the majority
of the note holders, could have elected to convert the note at the
next equity financing at a discount of 25% from the financing
price. The note bears interest at a rate of 10% per annum.
The note was repaid by Gelesis in January 2022 due to the
closing of the business combination between Gelesis and Capstar on
January 13, 2022.
The Note is measured at fair value in accordance with IFRS 9
with changes in fair value recorded as profit or loss in the
Consolidated Statement of Comprehensive Income/(Loss). The fair
value as of December 31, 2021, of $15.1 million approximated the
note's contractual amount and the change in fair value from
issuance date to December 31, 2021, was not material.
Fair Value Measurement and Classification
The fair value of financial instruments by category at December
31, 2021 and 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) 432,649 - 432,649 - - 432,649
Short-term note
from
associate 15,120 - - - 15,120 15,120
Investments
held
at fair
value(2) 493,888 - 254,355 - 239,533 493,888
Trade and other
receivables(3) 3,174 - - 3,174 - 3,174
Total financial
assets 944,832 - 687,005 3,174 254,653 944,832
Financial
liabilities:
Subsidiary
warrant
liability - 6,787 - - 6,787 6,787
Subsidiary
preferred
shares - 174,017 - - 174,017 174,017
Subsidiary
notes
payable - 3,916 - 1,330 2,586 3,916
Share based
liability
awards - 7,362 6,081 - 1,281 7,362
Total financial
liabilities - 192,082 6,081 1,330 184,671 192,082
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 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.
17. Subsidiary Notes Payable
The subsidiary notes payable are comprised of loans and
convertible notes. As of December 31, 2021 and 2020, the loan in
Follica and 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 December 31, $000s $000s
Loans 1,330 1,330
Convertible notes 2,586 25,125
Total subsidiary notes payable 3,916 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 December 31, 2021 and December 31, 2020. The
accrued interest on such loan balance is presented as Other current
liabilities and totaled approximately $0.6 million and $0.5 million
as of December 31, 2021 and December 31, 2020, respectively. The
increase in 2021 is attributed to interest expense for the year
ended December 31, 2021.
Convertible Notes
Convertible Notes outstanding were as follows:
Vedanta Knode Appeering Sonde Total
$000s $000s $000s $000s $000s
January 1,
2020 - 50 75 - 125
Gross
principal -
issuance
of notes 25,000 - - - 25,000
Change in
fair value - - - - -
December 31,
2020 and
January
1, 2021 25,000 50 75 - 25,125
Gross
principal -
issuance
of notes -
financing
activity - - - 2,215 2,215
Accrued
interest on
convertible
notes -
finance
costs 797 - - 70 867
Conversion
to
subsidiary
preferred
shares (25,797) - - - (25,797)
Change in
fair value
- finance
costs - - - 175 175
December 31,
2021 - 50 75 2,461 2,586
On December 30, 2020, Vedanta issued a $25.0 million convertible
promissory note to an investor. The note bore interest at an annual
rate of 6.0 percent and its maturity date was the first anniversary
of the note. Prepayment of the note was not allowed and there was
no conversion discount feature on the note. The note was
mandatorily convertible in a Qualified equity financing and a
Qualified Public Offering at the current price of the financing or
offering, all as defined in the note purchase agreement. In
addition, the note allowed for optional conversion immediately
prior to a Non Qualified public offering, Non Qualified Equity
financing, or a Corporate transaction and for a pay-out in the case
of a change of control transaction. On July 19, 2021, upon the
occurrence of Vedanta's Series D preferred share issuance that was
considered to be a Qualified Equity Financing, the entire
outstanding amount of the note, principal and interest, was
converted into Series D preferred shares of Vedanta at the current
price of the financing. For further details, please see Note
15.
On April 6, 2021, and on November 24, 2021, Sonde issued
unsecured convertible promissory notes to its existing shareholders
for a combined total of $4.3 million, of which $2.2 million were
issued to third party shareholders (and $2.1 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. The Vedanta convertible note was settled through its
conversion in July 2021. See above. See Note 16 for further details
on the fair value of the Sonde notes.
18. Non-Controlling Interest
During the year ended December 31, 2021, the Company acquired
the non-controlling interest in Alivio which resulted in Alivio
being transferred to the Internal segment. The Company has revised
in the 2021 financial statements the prior period financial
information related to the segmentation of NCI, to conform to the
presentation as of and for the year ending December 31, 2021.
Please refer to Note 4 "Segment Information" for further details
regarding reportable segments.
The following table summarizes the changes in the equity
classified non-controlling ownership interest in subsidiaries by
reportable segment:
Controlled Non-Controlled Parent
Founded Founded Company
Internal Entities Entities & Other Total
$000s $000s $000s $000s $000s
Balance at
January 1, 2019
* (15,102) (20,800) (73,225) 592 (108,535)
Share of
comprehensive
loss (17,643) (13,483) (23,953) - (55,079)
Deconsolidation
of subsidiary - - 97,178 - 97,178
Subsidiary note
conversion
and changes in
NCI ownership
interest - 23,049 - - 23,049
Equity settled
share-based
payments - 1,683 - - 1,683
Acquisition of a
subsidiary
non controlling
interest 24,039 - - - 24,039
Other 24 - - 1 25
Balance at
December 31,
2019
and January 1,
2020 (8,682) (9,551) - 593 (17,639)
Share of
comprehensive
loss (191) (1,211) - (15) (1,417)
Equity settled
share-based
payments 305 2,517 - - 2,822
Other - 30 - (6) 24
Balance at
December 31,
2020
and January 1,
2021 (8,567) (8,215) - 574 (16,209)
Share of
comprehensive
income
(loss) (96) (2,069) - 15 (2,151)
NCI exercise of
share-based
awards in
subsidiaries -
change in NCI
interest - (5,922) - - (5,922)
Equity settled
share-based
payments (4) 6,256 - - 6,252
Acquisition of a
subsidiary
non controlling
interest 8,668 - - - 8,668
Other - - - (6) (6)
Balance as of
December 31,
2021 - (9,950) - 583 (9,368)
(*) Revised to reclassify Alivio into the Internal segment to
comply with current period classification. See Note 4.
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 Non-Controlled
For the year ended Founded Founded Intra-group
December Internal Entities Entities eliminations Total
31 $000s $000s $000s $000s $000s
Statement of
Comprehensive
Loss
Total revenue - 7,771 - - 7,771
Income/(loss) for the
year - (50,436) - 792 (49,644)
Other comprehensive
income/(loss) - - - - -
Total comprehensive
income/(loss)
for the year - (50,436) - 792 (49,644)
Statement of
Financial Position
Total assets - 66,279 - (161) 66,118
Total liabilities - 228,856 - (10,755) 218,101
Net
assets/(liabilities) - (162,576) - 10,594 (151,982)
As of December 31, 2021, Controlled Founded Entities with
non-controlling interests primarily include Follica Incorporated,
Sonde Health Inc., Entrega Inc. and Vedanta Biosciences, Inc.
Ownership interests of the non-controlling interests in Follica
Incorporated, Entrega Inc., Sonde Health Inc., and Vedanta
Biosciences, Inc are 19.9 percent, 11.7 percent, 6.2 percent and
3.7 percent, respectively. In addition, Non-controlling interests
include the amounts recorded for subsidiary stock options, with the
vast majority comprising of Vedanta stock options.
2020
Controlled Non-Controlled
For the year ended Founded Founded Intra-group
December Internal Entities Entities eliminations Total
31 $000s $000s $000s $000s $000s
Statement of
Comprehensive
Loss
Total revenue 3,267 1,957 - - 5,224
Income/(loss) for the
year (2,407) (53,535) - 1,073 (54,869)
Total comprehensive
income/(loss)
for the year (2,407) (53,535) - 1,073 (54,869)
Statement of
Financial Position
Total assets 1,297 67,048 - (7) 68,339
Total liabilities 12,086 188,345 - (14,621) 185,809
Net
assets/(liabilities) (10,788) (121,296) - 14,615 (117,470)
As of December 31, 2020, Internal segment with non-controlling
interests include Alivio, 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 Alivio Therapeutics,
Inc., Follica Incorporated, Sonde Health Inc., and Vedanta
Biosciences, Inc are 8.1 percent, 19.9 percent, 4.5 percent and 0.4
percent, respectively. In addition, Non-controlling interests
include the amounts recorded for subsidiary stock options, with the
vast majority comprising of Vedanta stock options.
2019
Controlled Non-Controlled
Founded Founded
For the year ended Internal Entities Entities
December 31 $000s $000s $000s
Statement of
Comprehensive Loss
Total revenue 8,006 41 -
Income/(loss) for the
year (26,668) (23,871) (47,905)
Other comprehensive
income/(loss) - - (10)
Total comprehensive
income/(loss) for the
year (26,668) (23,871) (47,915)
On July 19, 2019 PureTech and a third party investor converted
their convertible debt in Follica to Follica Preferred shares
(presented as liabilities) and Follica common shares. The amount of
convertible debt converted by the third party investor into Follica
common shares amounted to $2.4 million (see also Note 16). As a
result of the conversion Follica NCI share (in Follica common
stock) was reduced from 68 percent to 19.9 percent, which resulted
in a reduction in the NCI share in Follica's shareholders' deficit
of $19.9 million. The excess of the change in the book value of NCI
($19.9 million noted above) over the contribution made by NCI ($2.4
million) amounted to $17.5 million and was recorded as a loss
directly in shareholders' equity.
During 2019 a subsidiary of the Company fully funded by the
Company ceased its operations and became inactive. This resulted in
a change in the NCI share in the subsidiary deficit. As a result
the Company recorded a loss directly in equity of $3.1 million.
On October 1, 2019, PureTech acquired the remaining 10.0 percent
of minority non-controlling interests of PureTech LYT, Inc.
(previously named Ariya Therapeutics, Inc.), increasing its
ownership from 90.0 percent to 100.0 percent. In consideration for
the acquisition of minority interests, PureTech issued 2,126,338
shares of common shares. The fair value of the shares issued in
consideration for the minority non-controlling interest amounted to
$9.1 million. The carrying amount of the non-controlling interest
at the acquisition was a $24.0 million deficit and the excess of
the consideration paid over the book value of the non-controlling
interest of approximately $33.1 million was recorded directly in
shareholders' equity.
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
installment to be paid upon the occurrence of certain 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 second
installment of $0.4 million was paid in July 2021, upon the
occurrence of the contingent event specified in the agreement. The
contingent consideration liability is adjusted to fair value at the
end of each reporting period with changes in fair value recorded in
earnings. Changes in fair value of the aforementioned contingent
consideration liability were not material.
On December 1, 2021, options holders in Entrega exercised
options into shares of common stock, increasing the NCI interest
held from 0.2 percent to 11.7 percent. During 2021 option holders
in Vedanta exercised options and increased the NCI interest to 3.7
percent. The exercise of the options resulted in an increase in the
NCI share in Entrega's and Vedanta's shareholder's deficit of $5.9
million. The consideration paid by NCI ($0.1 million) together with
the increase in NCI share in Entrega's and Vedanta's shareholder
deficit ( $5.9 million) amounted to $6.0 million and was recorded
as a gain directly in shareholders' equity.
19. Trade and Other Payables
Information regarding Trade and other payables was as
follows:
2021 2020
As of December 31, $000s $000s
Trade payables 11,346 8,871
Accrued expenses 17,309 9,090
Income tax payable 57 1,260
Liability settled share based awards 4,703 -
Other 2,403 2,606
Total trade and other payables 35,817 21,826
20. Long-term loan
In September 2020, Vedanta entered into a $15.0 million loan and
security agreement with Oxford Finance LLC. The loan is secured by
Vedanta's assets, including equipment, inventory and intellectual
property. The loan bears a floating interest rate of 7.7 percent
plus the greater of (i) 30 day U.S. Dollar LIBOR reported in the
Wall Street Journal or (ii) 0.17 percent. The loan matures
September 2025 and requires interest only payments for the initial
24 months. The loan also carries a final fee upon full repayment of
7.0 percent of the original principal, or $1.1 million. For loan
consideration, Vedanta also issued Oxford Finance LLC 12,886 Series
C-2 preferred share warrants with an exercise price of $23.28 per
share, expiring September 2030. The outstanding loan balance
totaled approximately $15.1 million as of December 31, 2021.
The following table summarizes long-term loan activity for the
years ended December 31, 2021 and 2020:
Long-term loan
2021 2020
$000s $000s
Balance at January 1, 14,818 -
Net loan proceeds - 14,720
Accrued interest 1,502 496
Interest paid (1,201) (296)
Other - (102)
Balance at December 31, 15,118 14,818
The following table summarizes Vedanta's future principal
payments for the long-term loan as of December 31, 2021:
Balance Type 2022 2023 2024 2025 Total
Principal 857 5,143 5,143 3,857 15,000
Balance of
accreted
premium
net of
unamortized
issuance
costs 118
Total 15,118
The long-term loan is presented as follows in the Statement of
Financial Position as of December 31, 2021 and 2020:
Long-term loan
2021 2020
$000s $000s
Current portion of Long-term loan 857 -
Long-term loan 14,261 14,818
Total Long-term loan 15,118 14,818
21. Leases
The activity related to the Group's right of use asset and lease
liability for the years ended December 31, 2021 and 2020 is as
follows:
Right of use asset,
net
2021 2020
$000s $000s
Balance at January 1, 20,098 22,383
Additions 739 -
Tenant improvement - lease incentive (733) -
Depreciation (2,938) (2,699)
Adjustments - 414
Balance at December 31, 17,166 20,098
Total lease liability
2021 2020
$000s $000s
Balance at January 1, 35,348 37,843
Additions 1,016 -
Cash paid for rent - principal - financing cash
flow (3,375) (2,908)
Cash paid for rent - interest (2,181) (2,354)
Interest expense 2,181 2,354
Adjustments - 414
Balance at December 31, 32,990 35,348
Depreciation of the right-of-use assets, which virtually all
consist of leased real estate, is included in the General and
administrative expenses and Research and development expenses line
items in the Consolidated Statements of Comprehensive
Income/(Loss). The Company recorded depreciation expense of $2.9
million, $2.7 million and $3.2 million for the years ended December
31, 2021, 2020 and 2019, respectively.
The following details the short term and long-term portion of
the lease liability as at December 31, 2021 and 2020:
Total lease liability
2021 2020
$000s $000s
Short-term Portion of Lease Liability 3,950 3,261
Long-term Portion of Lease Liability 29,040 32,088
Total Lease Liability 32,990 35,348
The following table details the future maturities of the lease
liability, showing the undiscounted lease payments to be paid after
the reporting date:
2021
$000s
Less than one year 5,927
One to two years 6,591
Two to three years 6,754
Three to four years 5,168
Four to five years 4,419
More than five years 12,033
Total undiscounted lease maturities 40,893
Interest 7,903
Total lease liability 32,990
During the year ended December 31, 2019, PureTech entered into a
lease agreement for certain premises consisting of approximately
50,858 rentable square feet of space located at 6 Tide Street. The
lease commenced on April 26, 2019 ("Commencement Date") for an
initial term consisting of ten years and three months and there is
an option to extend for two consecutive periods of five years each.
The Company assessed at lease commencement date whether it is
reasonably certain to exercise the extension options and deemed
such options not reasonably certain to be exercised. The Company
will reassess whether it is reasonably certain to exercise the
options only if there is a significant event or significant changes
in circumstances within its control.
On June 26, 2019, PureTech executed a sublease agreement with
Gelesis. The lease is for the approximately 9,446 rentable square
feet located on the sixth floor of the Company's former offices at
the 501 Boylston Street building. The sublessee obtained possession
of the premises on June 1, 2019 and the rent period term began on
June 1, 2019 and expires on August 31, 2025. The sublease was
determined to be a finance lease. As of December 31, 2021, the
balances related to the sublease were as follows:
Total
lease
receivable
$000s
Short-term Portion of Lease Receivable 415
Long-term Portion of Lease Receivable 1,285
Total Lease Receivable 1,700
The following table details the future maturities of the lease
receivable, showing the undiscounted lease payments to be received
after the reporting date:
2021
$000s
Less than one year 504
One to two years 513
Two to three years 523
Three to four years 353
Total undiscounted lease receivable 1,892
Unearned Finance income 192
Net investment in the lease 1,700
On August 6, 2019, PureTech executed a sublease agreement with
Dewpoint Therapeutics, Inc. ("Dewpoint"). The sublease was 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 expired on August 31, 2021. The sublease was
determined to be an operating lease.
Rental income recognized by the Company during the years ended
December 31, 2021, 2020 and 2019, was $0.65 million, $1.08 million
and $0.4 million, respectively and is included in the Other
income/(expense) line item in the Consolidated Statements of
Comprehensive Income/(Loss).
22. Capital and Financial Risk Management
Capital Risk Management
The Group's capital and financial risk management policy is to
maintain a strong capital base so as to support its strategic
priorities, maintain investor, creditor and market confidence as
well as sustain the future development of the business. The Group's
objectives when managing capital are to safeguard its ability to
continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. To
maintain or adjust the capital structure, the Group may issue new
shares or incur new debt. The Group has some external debt and no
material externally imposed capital requirements. The Group's share
capital is clearly set out in Note 14.
Management continuously monitors the level of capital deployed
and available for deployment in the Internal and Parent segments as
well as at Controlled Founded Entities. The Directors seek to
maintain a balance between the higher returns that might be
possible with higher levels of deployed capital and the advantages
and security afforded by a sound capital position.
The Group's Directors have overall responsibility for
establishment and oversight of the Group's capital and risk
management framework. The Group is exposed to certain risks through
its normal course of operations. The Group's main objective in
using financial instruments is to promote the development and
commercialization of intellectual property through the raising and
investing of funds for this purpose. The Group's policies in
calculating the nature, amount and timing of investments are
determined by planned future investment activity. Due to the nature
of activities and with the aim to maintain the investors' funds as
secure and protected, the Group's policy is to hold any excess
funds in highly liquid and readily available financial instruments
and maintain insignificant exposure to other financial risks.
COVID-19
In March 2020, the World Health Organization declared the
COVID-19 outbreak a pandemic. The pandemic has since caused
widespread and significant disruption to daily life and the global
economy as governments have taken actions, including the issuance
of stay-at-home orders and social distancing guidelines, and
businesses have adjusted their activities. While our business,
operations and financial condition and results have not been
significantly impacted in 2020 or 2021, as a result of the COVID-19
pandemic, we have 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
business, operations, and financial condition and results, and has
made certain assumptions regarding the pandemic for purposes of the
Group's operational planning and financial projections, including
assumptions regarding the duration and severity of the pandemic and
the global macroeconomic impact of the pandemic. Despite careful
tracking and planning, however, the Group is unable to accurately
predict the extent of the impact of the pandemic on the business,
operations, and financial condition and results in future periods
due to the uncertainty of future developments. The Group is focused
on all aspects of the business and is implementing measures aimed
at mitigating issues where possible.
Credit Risk
The Group has exposure to the following risks arising from
financial instruments:
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. Financial instruments that potentially
subject the Group to concentrations of credit risk consist
principally of cash and cash equivalents and trade and other
receivables. The Group held the following balances (not including
the income tax receivable resulting from overpayment of income
taxes, see Note 25):
2021 2020
As of December 31 $000s $000s
Cash and cash equivalents 465,708 403,881
Trade and other receivables 3,174 2,558
Total 468,882 406,438
The Group invests its excess cash in U.S. Treasury Bills, U.S.
debt obligations and money market accounts, which the Group
believes are of high credit quality. Further the Group's cash and
cash equivalents and short-term investment are held at diverse,
investment-grade financial institutions.
The Group assesses the credit quality of customers on an ongoing
basis. The credit quality of financial assets is assessed by
historical and recent payment history, counterparty financial
position, reference to credit ratings (if available) or to
historical information about counterparty default rates. The Group
does not have expected credit losses owing largely to a small
number of counterparties and the high credit quality of such
counterparties (primarily the US government and large funds in
respect of grant income).
The aging of trade and other receivables that were not impaired
at December 31 is as follows:
2021 2020
As of December 31 $000s $000s
Not impaired 3,174 2,558
Total 3,174 2,558
Liquidity Risk
Liquidity risk is the risk that the Group will encounter
difficulty in meeting the obligations associated with its financial
liabilities that are settled by delivering cash or another
financial asset. The Group actively manages its risk of a funds
shortage by closely monitoring the maturity of its financial assets
and liabilities and projected cash flows from operations, under
both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group's reputation. Due to the
nature of these financial liabilities, the funds are available on
demand to provide optimal financial flexibility.
The table below summarizes the maturity profile of the Group's
financial liabilities, including subsidiary preferred shares that
have customary liquidation preferences, as of December 31, 2021 and
2020, based on contractual undiscounted payments:
2021
Within Three
Carrying Three to Twelve One to Total
As of Amount Months Months Five Years $000s
December 31 $000s $000s $000s $000s (*)
Long-term
loan
(non-current
+ current) 15,118 296 2,182 16,274 18,752
Subsidiary
notes
payable 3,916 3,916 - - 3,916
Trade and
other
payables 35,817 35,817 - - 35,817
Warrants(2) 6,787 6,787 - - 6,787
Subsidiary
preferred
shares
(Note 15)(1) 174,017 174,017 - - 174,017
Total 235,656 220,833 2,182 16,274 239,290
2020
Within Three
Carrying Three to Twelve One to Total
As of Amount Months Months Five Years $000s
December 31 $000s $000s $000s $000s (*)
Long-term
loan 14,818 296 905 18,780 19,981
Subsidiary
notes
payable 26,455 1,455 25,000 - 26,455
Trade and
other
payables 21,826 21,826 - - 21,826
Warrants(2) 8,206 8,206 - - 8,206
Subsidiary
preferred
shares
(Note 15)(1) 118,972 118,972 - - 118,972
Total 190,278 150,756 25,905 18,780 195,441
1 Redeemable only upon a liquidation or Deemed liquidation
event, as defined in the applicable shareholder documents.
2 Warrants issued by subsidiaries to third parties to purchase preferred shares.
(*) Does not include payments in respect of lease obligations.
For the contractual future payments related to lease obligations,
see Note 21.
Interest Rate Sensitivity
As of December 31, 2021, the Group had cash and cash equivalents
of $465.7 million. The Group's exposure to interest rate
sensitivity is impacted by changes in the underlying U.K. and U.S.
bank interest rates. The Group has not entered into investments for
trading or speculative purposes. Due to the conservative nature of
the Group's investment portfolio, which is predicated on capital
preservation and investments in short duration, high-quality U.S.
Treasury Bills and U.S. debt obligations and related money market
accounts, a change in interest rates would not have a material
effect on the fair market value of the Group's portfolio, and
therefore the Group does not expect operating results or cash flows
to be significantly affected by changes in market interest
rates.
Controlled Founded Entity Investments
The Group maintains investments in certain Controlled Founded
Entities. The Group's investments in Controlled Founded Entities
are eliminated as intercompany transactions upon financial
consolidation. The Group is however exposed to a preferred share
liability owing to the terms of existing preferred shares and the
ownership of Controlled Founded Entities preferred shares by third
parties. As discussed in Note 15, certain of the Group's
subsidiaries have issued preferred shares that include the right to
receive a payment in the event of any voluntary or involuntary
liquidation, dissolution or winding up of a subsidiary, including
in the event of "deemed liquidation" as defined in the
incorporation documents of the entities, which shall be paid out of
the assets of the subsidiary available for distribution to
shareholders and before any payment shall be made to holders of
ordinary shares. The liability of preferred shares is maintained at
fair value through the profit and loss. The Group's strong cash
position, budgeting and forecasting processes, as well as decision
making and risk mitigation framework enable the Group to robustly
monitor and support the business activities of the Controlled
Founded Entities to ensure no exposure to dissolution or
liquidation. Accordingly, the Group views exposure to 3rd party
preferred share liability as low.
Non-Controlled Founded Entity Investments
The Group maintains certain investments in Non-Controlled
Founded Entities which are deemed either as investments and
accounted for as investments held at fair value or associates and
accounted for under the equity method (please refer to Note 1). The
Group's exposure to investments held at fair value is $397.2
million as of December 31, 2021, and the Group may or may not be
able to realize the value in the future. Accordingly, the Group
views the risk as high. The Group's exposure to investments in
associates is limited to the carrying amount of the investment in
an Associate. The Group is not exposed to further contractual
obligations or contingent liabilities beyond the value of initial
investment. As of December 31, 2021, Gelesis was the only
associate. The carrying amount of the investment in Gelesis as an
associate was zero. Accordingly, the Group does not view this as a
risk. Please refer to Notes 5,6 and 16 for further information
regarding the Group's exposure to Non-Controlled Founded Entity
Investments.
Equity Price Risk
As of December 31, 2021, the Group held 1,656,564 common shares
of Karuna and 3,207,200 common shares of Vor. The fair value of the
Group's investment in the common stock of Karuna and Vor was $217.0
million and $37.3 million respectively.
The investments in Karuna and Vor are exposed to fluctuations in
the market price of these common shares. The effect of a 10.0
percent adverse change in the market price of Karuna and Vor common
shares as of December 31, 2021, would have been a loss of
approximately $21.7 million and $3.7 million respectively,
recognized as a component of Other income (expense) in the
Consolidated Statements of Comprehensive Income/(Loss).
Foreign Exchange Risk
The Group maintains consolidated financial statements in the
Group's functional currency, which is the U.S. dollar. Monetary
assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at
rates of exchange prevailing at the balance sheet dates.
Non-monetary assets and liabilities denominated in foreign
currencies are translated into the functional currency at the
exchange rates prevailing at the date of the transaction. Exchange
gains or losses arising from foreign currency transactions are
included in the determination of net income (loss) for the
respective periods. Such foreign currency gains or losses were not
material for all reported periods. See Note 9.
The Group does not currently engage in currency hedging
activities since its foreign currency risk is limited, but the
Group may begin to do so in the future if and when its foreign
currency risk exposure changes. Instruments that may be used to
hedge future risks include foreign currency forward and swap
contracts. These instruments may be used to selectively manage
risks, but there can be no assurance that the Group will be fully
protected against material foreign currency fluctuations.
23. Commitments and Contingencies
The Group is party to certain licensing agreements where the
Group is licensing IP from third parties. In consideration for such
licenses the Group has made upfront payments and may be required to
make additional contingent payments based on developmental and
sales milestones and/or royalty on future sales. As of December 31,
2021, these milestone events have not yet occurred and therefore
the Group does not have a present obligation to make the related
payments in respect of the licenses. Such milestones are dependent
on events that are outside of the control of the Group and many of
these milestone events are remote of occurring. As of December 31,
2021, payments in respect of developmental milestones that are
dependent on events that are outside the control of the Group but
are reasonably possible to occur amounted to approximately $10.3
million. These milestone amounts represent an aggregate of multiple
milestone payments depending on different milestone events in
multiple agreements. The probability that all such milestone events
will occur in the aggregate is remote. Payments made to license IP
represent the acquisition cost of intangible assets. See Note
12.
The Group is party to certain sponsored research arrangements as
well as arrangements with contract manufacturing and contract
research organizations, whereby the counterparty provides the
Company with research and/or manufacturing services. As of December
31, 2021, the noncancellable commitments in respect of such
contracts amounted to approximately $6.7 million.
24. Related Parties Transactions
Related Party Subleases and royalties
During 2019, PureTech executed sublease agreements with a
related party, Gelesis. Please refer to Note 21 for further details
regarding the sublease.
The Group receives royalties from Gelesis on its product sales.
Such royalties amounted to $231 thousand and $54 thousand for the
years ended December 31, 2021 and 2020, respectively and are
presented in Contract revenue in the Consolidated Statements of
Comprehensive Income/(Loss).
Key Management Personnel Compensation
Key management includes executive directors and members of the
executive management team of the Group (not including compensation
provided to independent directors). Full details for Directors'
remuneration can be found in the Directors' Remuneration Report.
The key management personnel compensation of the Group was as
follows for the years ended December 31:
2021 2020 2019
As of December 31 $000s $000s $000s
Short-term employee benefits 4,666 4,833 5,543
Share-based payments 4,045 5,822 2,774
Total 8,711 10,656 8,317
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 8 .
During the year ended December 31, 2021, the company incurred
$782 thousand of general administrative expenses that was paid to a
related party.
Convertible Notes Issued to Directors
Certain members of the Group have invested in convertible notes
issued by the Group's subsidiaries. As of December 31, 2021, 2020
and 2019, the outstanding related party notes payable totaled $94
thousand, $89 thousand and $84 thousand respectively, including
principal and interest.
The notes issued to related parties bear interest rates,
maturity dates, discounts and other contractual terms that are the
same as those issued to outside investors during the same
issuances, as described in Note 17.
Directors' and Senior Managers' Shareholdings and Share
Incentive Awards
The Directors and senior managers hold beneficial interests in
shares in the following businesses and sourcing companies as at
December 31, 2021:
Number Number
of shares of options
held as held as
Business Name (Share of December of December Ownership
Class) 31, 2021 31, 2021 Interest(1)
Directors:
Ms Daphne Zohar(2) Gelesis (Common) 179,443 1,207,006 5.03 %
Dr Robert Langer Entrega (Common) 250,000 82,500 4.09 %
Dr Raju Kucherlapati Enlight (Class B Common) - 30,000 3.00 %
Dr John LaMattina(3) Akili (Series A-2 Preferred) 37,372 - 0.80 %
Akili (Series C Preferred) 11,755 - 0.20 %
Gelesis (Common)(3) 50,540 - 0.18 %
Gelesis (Common()4 33,051 33,578 0.24 %
Gelesis (Series A-1 Preferred)(3) 49,523 - 0.18 %
Vedanta Biosciences (Common) 25,000 - 0.17 %
Senior Managers:
Dr Bharatt Chowrira Karuna (Common)(4) 5,000 - 0.02 %
Dr Joseph Bolen Vor (Common) - 9,191 0.02 %
1 Ownership interests as of December 31, 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 33,051 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 24,676,165 ordinary shares
and 8.6 percent voting rights of the Company as of December 31,
2021. This amount excludes options to purchase 4,750,000 ordinary
shares. This amount also excludes 4,666,514 shares, which are
issuable based on the terms of performance based RSU awards granted
to certain senior managers covering the financial years 2021, 2020
and 2019, and 67,140 shares, which are issuable to directors
immediately prior to the Company's 2022 Annual General Meeting of
Stockholders based on the terms of the RSU awards granted to
non-executive directors in 2021. Such shares will be issued to such
senior managers and non executive directors in future periods
provided that performance and/or service conditions are met and
certain of the shares will be withheld for payment of customary
withholding taxes.
Short term Note from Associate
See Note 16 for details on the $15.0 million note issued by
Gelesis to the Company. The Company recognized income of $0.1
million with respect to interest and changes in fair value related
to the short term note.
25. Taxation
Tax on the profit or loss for the year comprises current and
deferred income tax. Tax is recognized in the Consolidated
Statements of Comprehensive Income/(Loss) except to the extent that
it relates to items recognized directly in equity.
For the years ended December 31, 2021, 2020 and 2019, the Group
filed a consolidated U.S. federal income tax return which included
all subsidiaries in which the Company owned greater than 80 percent
of the vote and value. For the years ended December 31, 2021, 2020
and 2019, the Group filed certain consolidated state income tax
returns which included all subsidiaries in which the Company owned
greater than 50 percent of the vote and value. The remaining
subsidiaries file separate U.S. tax returns.
Amounts recognized in Consolidated Statements of Comprehensive
Income/(Loss):
2021 2020 2019
As of December 31 $000s $000s $000s
Income/(loss) for the year (62,709) 4,568 366,065
Income tax expense/(benefit) 3,756 14,401 112,409
Income/(loss) before taxes (58,953) 18,969 478,474
Recognized income tax expense/(benefit):
2021 2020 2019
As of December 31 $000s $000s $000s
Federal 22,138 21,796 -
Foreign - - -
State 109 - -
Total current income tax
expense/(benefit) 22,247 21,796 -
Federal (15,416) (7,349) 83,776
Foreign - - -
State (3,075) (46) 28,633
Total deferred income
tax expense/(benefit) (18,491) (7,395) 112,409
Total income tax
expense/(benefit),
recognized 3,756 14,401 112,409
The tax expense was $3.8 million, $14.4 million and $112.4
million in 2021, 2020 and 2019 respectively. The decrease in tax
expense is primarily the result of the decrease in profit before
tax in entities in the U.S. Federal and Massachusetts consolidated
return groups of the Company.
Reconciliation of Effective Tax Rate
The Group is primarily subject to taxation in the U.S. A
reconciliation of the U.S. federal statutory tax rate to the
effective tax rate is as follows:
2021 2020 2019
As of December
31 $000s % $000s % $000s %
US federal
statutory
rate (12,380) 21.00 3,984 21.00 97,183 21.00
Effects of state
tax rate in
U.S. (4,484) 7.61 1,844 9.72 22,111 4.78
R&D and orphan
drug
tax credits (5,056) 8.58 (5,642) (29.74) (6,321) (1.37)
Non deductible
share
based payment
expenses 555 (0.94) 327 1.73 433 0.09
Finance
income/(costs)
- fair value
accounting (2,017) 3.42 919 4.84 3,725 0.80
Loss with
respect
to associate
for
which no
deferred
tax asset is
recognized 11,542 (19.58) - - - -
Transaction
Costs 309 (0.52) 361 1.91 - -
Interest Expense 217 (0.37) (2,258) (11.91) 1,030 0.22
Executive
Compensation 746 (1.27) 827 4.36 - -
Deconsolidation
adjustments - 0.00 - - (13,658) (2.95)
Recognition of
deferred
tax assets and
tax
benefits not
previously
recognized (414) 0.70 - - (6,251) (1.35)
Current year
losses
for which no
deferred
tax asset is
recognized 14,375 (24.38) 13,948 73.53 14,514 3.14
Other 363 (0.62) 91 0.48 (356) (0.06)
3,756 (6.37) 14,401 75.92 112,409 24.29
The Company is also subject to taxation in the UK but to date no
taxable income has been generated in the UK. Changes in corporate
tax rates can change both the current tax expense (benefit) as well
as the deferred tax expense (benefit).
Deferred Tax Assets and Liabilities
Deferred tax assets have been recognized in the U.S.
jurisdiction in respect of the following items:
2021 2020
As of December 31 $000s $000s
Operating tax losses 46,982 39,901
Tax credits 10,673 10,805
Share-based payments 7,265 5,429
Deferred revenue - 358
Investment in Associates 11,542 -
Lease Liability 8,969 9,657
Other temporary differences 2,665 2,078
Deferred tax assets 88,096 68,228
Investments held at fair value (96,804) (120,676)
ROU asset (4,667) (5,491)
Fixed assets (3,547) (3,588)
Other temporary differences - (27)
Deferred tax liabilities (105,018) (129,782)
Deferred tax assets (liabilities), net (16,922) (61,554)
Deferred tax liabilities, net, recognized (89,765) (108,626)
Deferred tax assets, net, recognized - -
Deferred tax assets (liabilities), net, not recognized 72,843 47,072
We have recognized deferred tax assets related to entities in
the U.S. Federal and Massachusetts consolidated return groups due
to future reversals of existing taxable temporary differences that
will be sufficient to recover the net deferred tax assets. Our
unrecognized deferred tax assets of $72.8 million are primarily
related to tax credit, loss carryforwards and deductible temporary
differences in subsidiaries outside the U.S. Federal and
Massachusetts consolidated return groups. Such deferred tax assets
have not been recognized because it is not probable that future
taxable profits will be available to support their realizability.
The unrecognized deferred tax assets, to a lesser extent, also
relate to unrecognized deferred tax assets with respect to an
investment in an associate since the Group does not believe it is
probable that such tax benefits will be realized in the foreseeable
future.
There was movement in deferred tax recognized, which impacted
income tax expense by approximately $18.5 million benefit,
primarily related to changes in the value of investments. The
Company sold a portion of its stock in Karuna during 2021 and was
able to partially offset its gains by using various attributes
(i.e. net operating losses, research and development credits, etc.)
resulting in current tax expense of $22.2 million.
Unrecognized Deferred Tax Assets
Deferred tax assets have not been recognized in respect of the
following carryforward losses, credits and temporary differences,
because it is not probable that future taxable profit will be
available against which the Group can use the benefits
therefrom.
2021 2020
$000s $000s
As of
December 31 Gross Amount Tax Effected Gross Amount Tax Effected
Deductible
Temporary
Difference 59,925 16,224 7,997 1,679
Tax Losses 215,425 46,982 169,731 36,273
Tax Credits 9,636 9,636 9,120 9,120
Total 284,986 72,843 186,848 47,072
Tax Losses and tax credits carryforwards
Tax losses and tax credits for which no deferred tax asset was
recognized
2021 2020
$000s $000s
As of
December 31 Gross Amount Tax Effected Gross Amount Tax Effected
Tax losses
expiring:
Within 10
years 19,735 4,343 12,530 2,760
More than 10
years 47,937 11,611 55,312 12,117
Available
Indefinitely 147,753 31,028 101,889 21,397
Total 215,425 46,982 169,731 36,273
Tax credits
expiring:
Within 10
years 4 4 13 13
More than 10
years 9,632 9,632 9,107 9,107
Available
indefinitely - - - -
Total 9,636 9,636 9,120 9,120
The Group had U.S. federal net operating losses carry forwards
("NOLs") of approximately $215.4 million, $169.7 million and $243.0
million as of December 31, 2021, 2020 and 2019, respectively, which
are available to offset future taxable income. These NOLs expire
through 2037 with the exception of $147.8 million which is not
subject to expiration. The Group had U.S. Federal research and
development tax credits of approximately $3.9 million, $3.9 million
and $7.4 million as of December 31, 2021, 2020 and 2019,
respectively, which are available to offset future taxes that
expire at various dates through 2041. The Group also had Federal
Orphan Drug credits of approximately $5.7 million and $5.2 million
as of December 31, 2021, and 2020, which are available to offset
future taxes that expire at various dates through 2041. A portion
of these Federal NOLs and credits can only be used to offset the
profits from the Company's subsidiaries who file separate Federal
tax returns. These NOLs and credits are subject to review and
possible adjustment by the Internal Revenue Service.
The Group had Massachusetts net operating losses carry forwards
("NOLs") of approximately $27.9 million, $67.4 million and $273.0
million for the years ended December 31, 2021, 2020 and 2019,
respectively, which are available to offset future taxable income.
These NOLs expire at various dates beginning in 2030. The Group had
Massachusetts research and development tax credits of approximately
$1.3 million, $2.1 million and $1.6 million for the years ended
December 31, 2021, 2020 and 2019, respectively, which are available
to offset future taxes and expire at various dates through 2036.
These NOLs and credits are subject to review and possible
adjustment by the Massachusetts Department of Revenue.
Utilization of the NOLs and research and development credit
carryforwards may be subject to a substantial annual limitation
under Section 382 of the Internal Revenue Code of 1986 due to
ownership change limitations that have occurred previously or that
could occur in the future. These ownership changes may limit the
amount of NOL and research and development credit carryforwards
that can be utilized annually to offset future taxable income and
tax, respectively. The Company notes that a 382 analysis was
performed through December 31, 2021. The results of this analysis
concluded that certain net operating losses were subject to
limitation under Section 382 of the Internal Revenue Code. None of
the Company's tax attributes which are subject to a restrictive
Section 382 limitation have been recognized in the financial
statements.
Tax Balances
The current tax related balances are presented in the Statement
of Financial Position as follows:
2021 2020
As of December 31 $000s $000s
Income tax receivable - current 4,514 -
Trade and Other Payables (57) (1,260)
Uncertain Tax Positions
The Company has no uncertain tax positions as of December 31,
2021. U.S. corporations are routinely subject to audit by federal
and state tax authorities in the normal course of business.
26. Subsequent Events
The Company has evaluated subsequent events after December 31,
2021, the date of issuance of the Consolidated Financial
Statements, and has not identified any recordable or disclosable
events not otherwise reported in these Consolidated Financial
Statements or notes thereto, except for the following:
On January 13, 2022 Gelesis completed its business combination
with Capstar Special Purpose Acquisition Corp ("Capstar"). As part
of the business combination all shares held in Gelesis, common and
preferred, were exchanged for common shares of the merged entity.
In addition, the Group invested $15.0 million in the class A common
shares of Capstar as part of the PIPE transaction that took place
immediately prior to the closing of the business combination and an
additional approximately $5.0 million, as part of the Backstop
agreement signed with Capstar on December 30, 2021 (see Note 6).
Pursuant to the business combination, Gelesis became a wholly-owned
subsidiary of Capstar and Capstar changed its name to Gelesis
Holdings, Inc., which began trading on the New York Stock exchange
under the ticker symbol "GLS" on January 14, 2022. Following the
closing of the business combination, the PIPE transaction and the
settlement of the aforementioned Backstop agreement with Capstar,
PureTech holds 16,727,582 common shares of Gelesis Holdings Inc.,
which is equal to approximately 23.2% of Gelesis Holdings Inc's
outstanding common shares.
On January 26, 2022, Akili Interactive and Social Capital
Suvretta Holdings Corp a special purpose acquisition company
announced 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 Nasdaq Stock
Market under the ticker symbol "AKLI". The transaction is expected
to close in mid-2022. As part of this transaction the Akili
Interactive shares held by the Company will be exchanged for the
combined company's securities and the Company's interest in the
combined public entity is expected to decrease from its current
voting interest in Akili of 26.7%.
PureTech Health plc Statement of Financial Position
For the years ended December 31
2021 2020
Note $000s $000s
Assets
Non-current assets
Investment in subsidiary 2 148,086 161,082
Intercompany long-term receivable 3 297,909 297,556
Total non-current assets 445,995 458,638
Total current assets - -
Total assets 445,995 458,638
Equity and liabilities
Equity
Share capital 4 5,444 5,417
Share premium 4 289,304 288,978
Merger reserve 4 138,506 138,506
Other reserve 4 7,730 20,725
Accumulated deficit (Income/(loss) for the
year $(3,401)) 4 (14,022) (10,621)
Total equity 426,961 443,005
Current liabilities
Trade and other payables 1,856 621
Intercompany payables 5 17,179 15,012
Total current liabilities 19,034 15,633
Total equity and liabilities 445,995 458,638
Please refer to the accompanying Notes to the PureTech Health
plc financial information. Registered number: 09582467.
The PureTech Health plc financial statements were approved by
the Board of Directors and authorized for issuance on April 25,
2022 and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
April 25, 2022
The accompanying Notes are an integral part of these financial
statements.
PureTech Health plc Statements of Cash Flows
For the years ended December 31
2021 2020
$000s $000s
Cash flows from operating activities
Net loss (3,401) (2,739)
Adjustments to reconcile net operating loss to net
cash used in operating activities:
Non-cash items:
Changes in operating assets and liabilities:
Intercompany payable 2,167 3,354
Accounts payable and accrued expenses 465 (614)
Net cash (used in) operating activities (770) -
Cash flows from investing activities:
Net cash provided by (used in) investing activities - -
Cash flows from financing activities:
Net cash provided by (used in) financing activities - -
Net decrease in cash and cash equivalents (770) -
Cash and cash equivalents at beginning of year - -
Cash and cash equivalents at end of year (770) -
Supplemental disclosure of non-cash investment and
financing activities:
Increase (Decrease) in investment against share-based
awards (12,995) 19,734
Exercise of share-based awards against intercompany
receivable 352 1,025
The accompanying Notes are an integral part of these financial
statements.
PureTech Health plc Statements of Changes in Equity
For the years ended December 31
Share Merger Other Accumulated Total
Amount Premium Reserve Reserve deficit equity
Shares $000s $000s $000s $000s $000s $000s
Balance January
1,
2020 285,370,619 5,408 287,962 138,506 991 (7,881) 424,986
Total
comprehensive
loss for the
period -
Exercise of
share-based
awards 514,406 9 1,016 - - - 1,025
Settlement of
restricted
stock units - - - - (12,888) - (12,888)
Equity settled
share-based
payments - - - - 33,902 - 33,902
Vesting of
restricted
stock units - - - - (1,280) - (1,280)
Net loss - - - - - (2,739) (2,739)
Balance December
31,
2020 285,885,025 5,417 288,978 138,506 20,725 (10,620) 443,005
Total
comprehensive
loss for the
period
Exercise of
share-based
awards 1,911,560 27 326 - - - 352
Equity settled
share-based
awards - - - - 7,109 - 7,109
Settlement of
restricted
stock units - - - - (10,749) - (10,749)
Vesting of
share-based
awards and net
share
exercise - - - - (2,582) - (2,582)
Reclassification
of
equity settled
awards
to liability
awards
in subsidiary (6,773) (6,773)
Net loss - - - - - (3,401) (3,401)
Balance December
31,
2021 287,796,585 5,444 289,303 138,506 7,730 (14,022) 426,961
The accompanying Notes are an integral part of these financial
statements.
Notes to the Financial Statements
1. Accounting policies
Basis of Preparation and Measurement
The financial statements of PureTech Health plc (the "Parent")
are presented as of December 31, 2021 and 2020, and for the years
ended December 31, 2021 and 2020, and have been prepared under the
historical cost convention in accordance with international
accounting standards in conformity with the requirements of
UK-adopted International Financial Reporting Standards (IFRSs). The
financial statements of PureTech Health plc also comply fully with
IFRSs as issued by the International Accounting Standards Board
(IASB). A summary of the significant accounting policies that have
been applied consistently throughout the year are set out
below.
Functional and Presentation Currency
The functional currency of the Parent is United States ("U.S.")
Dollars and the financial statements are presented in U.S.
Dollars.
Investments
Investments are stated at historic cost less any provision for
impairment in value and are held for long-term investment purposes.
Provisions are based upon an assessment of events or changes in
circumstances that indicate that an impairment has occurred such as
the performance and/or prospects (including the financial
prospects) of the investee company being significantly below the
expectations on which the investment was based, a significant
adverse change in the markets in which the investee company
operates or a deterioration in general market conditions.
Impairment
If there is an indication that an asset might be impaired, the
Parent would perform an impairment review. An asset is impaired if
the recoverable amount, being the higher of net realizable value
and value in use, is less than its carrying amount. Value in use is
measured based on future discounted cash flows attributable to the
asset. In such cases, the carrying value of the asset is reduced to
recoverable amount with a corresponding charge recognized in the
profit and loss account.
Financial Instruments
Currently the Parent does not enter into derivative financial
instruments. Financial assets and financial liabilities are
recognized and cease to be recognized on the basis of when the
related titles pass to or from the Parent Company.
Equity Settled Share Based Payments
Share based payment awards granted in subsidiaries to employees
and consultants to be settled in Parent's equity instruments are
accounted for as equity-settled share-based payment transactions in
accordance with IFRS 2. The grant date fair value of employee
share-based payment awards granted in subsidiaries is recognized as
an increase to the investment with a corresponding increase in
equity over the requisite service period related to the awards. The
fair value is measured using an option pricing model, which takes
into account the terms and conditions of the options granted. When
the subsidiary settles the equity awards other than by the Parent's
equity the settlement is recorded as a decrease in equity against a
corresponding decrease to the investment account.
2. Investment in subsidiary
$000s
Balance at May 8, 2015 -
Investment in PureTech LLC as a result of the reverse acquisition 141,348
Increase due to equity settled share based payments granted
to employees and service providers in subsidiaries 19,734
Balance at December 31, 2020 161,082
Decrease due to equity settled share based payments granted
to employees and service providers in subsidiaries (12,996)
Balance at December 31, 2021 148,086
PureTech consists of the Parent and its subsidiaries (together,
the "Group"). Investment in subsidiary represents the Parent's
investment in PureTech LLC as a result of the reverse acquisition
of the Group's financial statements immediately prior to the
Parent's initial public offering ("IPO") on the London Stock
Exchange in June 2015. PureTech LLC operates in the U.S. as a
US-focused scientifically driven research and development company
that conceptualizes, sources, validates and commercializes
unexpected and potentially disruptive approaches to advance the
needs of human health. For a summary of the Parent's indirect
subsidiaries please refer to Note 1 of the Consolidated Financial
Statements of PureTech Health plc.
In 2020, the Parent recognized a $19.7 million increase in its
investment in its operating subsidiary PureTech LLC due to equity
settled share based payments granted to employees and service
providers in subsidiaries. $24.8 million out of such amount related
to amounts which should have been recognized at December 31, 2019.
The prior year balance sheet has not been adjusted since the
Directors do not believe this item is qualitatively material to
users of the financial statements, it has no impact on
distributable reserves of the Parent and no impact on the Group
consolidated financial statements. The disclosure relating to such
share based payment awards is detailed in Note 8 of the
accompanying Consolidated Financial Statements. The decrease in
2021 due to such equity settled share based payments results from
settlements and payments of these equity awards by the
subsidiaries, net of the expense related to the grant of such
equity settled share based awards.
3. Intercompany receivables
The Parent has an accounts receivable balance from its operating
subsidiary PureTech LLC of $297.9 million as of December 31, 2021
due to cash received from the IPO and other share issuances.
As of December 31, 2021and 2020, the intercompany receivable
balance was classified as a long-term receivable since the Parent
does not expect to realize the receivable within the next 12
months.
4. Share capital and reserves
PureTech plc was incorporated with the Companies House under the
Companies Act 2006 as a public company on May 8, 2015.
On March 12, 2018, the Company raised approximately $100.0
million, before issuance costs and other expenses, by way of a
Placing of 45,000,000 placing shares.
On June 24, 2015, the Company authorized 227,248,008 of ordinary
share capital at one pence apiece. These ordinary shares were
admitted to the premium listing segment of the United Kingdom's
Listing Authority and traded on the Main Market of the London Stock
Exchange for listed securities. In conjunction with the
authorization of the ordinary shares, the Parent completed an IPO
on the London Stock Exchange, in which it issued 67,599,621
ordinary shares at a public offering price of 160 pence per
ordinary share, in consideration for$159.3 million, net of issuance
costs of $11.8 million.
Additionally, the IPO included an over-allotment option
equivalent to 15 percent of the total number of new ordinary
shares. The stabilization manager provided notice to exercise in
full its over-allotment option on July 2, 2015. As a result, the
Parent issued 10,139,943 ordinary shares at the offer price of 160
pence per ordinary share, which resulted in net proceeds of $24.2
million, net of issuance costs of $0.8 million.
During the years ended December 31, 2020 and 2021, Other
reserves increased (decreased) by $19.7 million and $(13.0) million
respectively due to equity settled share based payments granted to
employees and service providers in subsidiaries. See Note 2
above.
5. Intercompany payables
The Parent has a balance due to its operating subsidiary
PureTech LLC of $17.2 million as of December 31, 2021, which is
related to IPO costs and operating expenses. These intercompany
payables do not bear any interest and are repayable upon
demand.
6. Profit and loss account
As permitted by Section 408 of the Companies Act 2006, the
Parent's profit and loss account has not been included in these
financial statements. The Parent's loss for the year was $3.4
million.
7. Directors' remuneration, employee information and share-based payments
The remuneration of the executive Directors of the Parent
Company is disclosed in Note 24, Related Parties Transactions, of
the accompanying Consolidated Financial Statements. Full details
for Directors' remuneration can be found in the Directors'
Remuneration Report. Full detail of the share-based payment charge
and the related disclosures can be found in Note 8, Share-based
Payments, of the accompanying Consolidated Financial
Statements.
The Parent had no employees during 2021 or 2020.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR PPUCUCUPPPPA
(END) Dow Jones Newswires
April 26, 2022 10:06 ET (14:06 GMT)
Puretech Health (LSE:PRTC)
Historical Stock Chart
From Jun 2024 to Jul 2024
Puretech Health (LSE:PRTC)
Historical Stock Chart
From Jul 2023 to Jul 2024
