TIDMPRTC
RNS Number : 1491X
PureTech Health PLC
25 August 2022
25 August 2022
PureTech Health plc - Half-Year Report
Strong capital base with PureTech Level Cash and Cash
Equivalents of $341.4 million(1) and Consolidated Cash and Cash
Equivalents of $365.9 million(2) as of June 30, 2022, excluding up
to $115.4 million added post-period(3) ; Operational runway
extended into Q1 2026
Significant advancement of PureTech's Wholly Owned Programs,
with three clinical trials underway, four completed, and human
proof-of-principle achieved for a key PureTech platform
Excellent progress across the Founded Entities, including
Karuna's positive topline Phase 3 results for KarXT in
schizophrenia, Akili's Nasdaq listing and Gelesis' commercial
progress with Plenity (R)(4) in the post-period , and four clinical
data publications across Founded Entities
Company to host a webcast and conference call today at 9:00am
EDT / 2:00pm BST
PureTech Health plc (Nasdaq: PRTC, LSE: PRTC) ("PureTech" or the
"Company") today announces its half-yearly results for the six
months ended June 30, 2022. The following information will be filed
on Form 6-K with the United States Securities and Exchange
Commission (the "SEC") and is also available at
https://investors.puretechhealth.com/financials-filings/reports
.
Webcast and conference call details
Members of the PureTech management team will host a conference
call at 9:00am EDT / 2:00pm BST today, August 25, 2022, 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 Toll-Free: +44 800 640 6441
United Kingdom Toll/International: +44 20 3936 2999
United States: +1 646 664 1960
United States Toll-Free: +1 855 979 6654 / +1 800 249 2588
Access Code: 563263
For those unable to listen to the call live, a replay will be
available on the PureTech website.
Commenting on PureTech's half-yearly results, Daphne Zohar,
Founder and Chief Executive Officer of PureTech, said:
"The first half of 2022 has been an exceedingly strong period
for PureTech. Our mission is to change the treatment paradigm for
patients with devastating diseases, and we have made great progress
towards that goal, particularly on the heels of stellar topline
results from Karuna's Phase 3 trial evaluating KarXT in adults with
schizophrenia. Schizophrenia is a severe and debilitating disorder
affecting approximately 21 million people worldwide. KarXT, which
was invented at PureTech, demonstrated notable improvements across
symptom domains, and was not associated with the debilitating side
effects of weight gain, sedation and movement disorders seen with
existing treatments. It is now poised to potentially be the first
new class of medicine in over 50 years for patients living with
schizophrenia. As a co-inventor of KarXT, we have the right to
receive royalties, sublicense income and milestone payments in
addition to the value of our equity.
"Across our Wholly Owned Pipeline are examples of other programs
that we have developed in a similar way to Karuna's KarXT, where we
start with an approach or candidate that has proof of human
efficacy, but key limitations have hindered the class from reaching
its full potential. Through the expertise of our experienced
R&D team and our network of industry-leading collaborators, we
strive to overcome barriers to unlock potential new classes of
therapeutics for the benefit of patients.
"Another example of our clinically de-risked development
approach is LYT-300, which is an oral form of natural
allopregnanolone. LYT-300 could make a difference for patients with
a range of mental health conditions, such as depression, where
there is a growing need but standard of care treatments like
selective serotonin reuptake inhibitors (SSRIs) can have mixed
efficacy, delayed onset of action and poor tolerability. In June,
we announced that we can orally administer LYT-300 and achieve
therapeutic levels of allopregnanolone in systemic circulation.
This is exciting because allopregnanolone has proven efficacy but
is only available for the treatment of postpartum depression as a
60-hour IV infusion. Demonstration of human oral bioavailability of
allopregnanolone is therefore a key milestone for LYT-300 and for
our Glyph platform, which enabled this innovation. Similarly, we
are advancing LYT-100, a deuterated form of pirfenidone, to make a
meaningful difference in the lives of patients with lung fibrosis
and other inflammatory and fibrotic conditions by potentially
offering better therapeutic effect without the poor tolerability
associated with current standard of care drugs. In the first half
of 2022, we initiated a late-stage clinical trial of LYT-100 for
the potential treatment of idiopathic pulmonary fibrosis (IPF), a
terminal condition that affects about three million people
worldwide. These milestones are just a few of the many
accomplishments from our Wholly Owned Pipeline that demonstrate our
commitment to improving the lives of millions of patients.
"In addition to Karuna, several of our other Founded Entities
also made notable progress. Most recently, Akili began trading on
Nasdaq, becoming the fourth of our Founded Entities to be publicly
traded, and - together with Karuna, Gelesis and Vor Bio - bringing
the value of publicly traded Founded Entities created by PureTech
to over $9 billion. Gelesis also continued to grow its revenue from
Plenity(4) sales, generating $16.5 million in net product revenue
in the first half of 2022, resulting in an increase of 212%
year-over-year.
"I'm particularly proud of our track record of clinical success,
which is approximately six times better than the biopharma industry
average.(5) This clinical success has led us to financial success
as one of a few cash generating biotech companies in the world. We
have generated over $680 million in non-dilutive cash in less than
three years(3) and have not had to raise money from the capital
markets in over four years. Based on a strong balance sheet, our
Board approved a share buyback program in May. We are delighted to
have received positive feedback from shareholders thus far, and we
are confident that we can maintain sufficient cash on hand to
support the advancement of our Wholly Owned Pipeline, including the
completion of all currently initiated clinical trials and certain
strategic investments in our Founded Entities. Additionally, we
have updated our guidance to extend our operational runway to the
first quarter of 2026.
" We look forward to carrying this success forward into another
catalyst rich period as we unlock the potential of validated
efficacy to deliver new classes of medicine for patients with
devastating diseases."
Operational Highlights
Strong progress across our Wholly Owned Programs(6) , including
the progression of four clinical trials
-- Initiated a registration-enabling trial of LYT-100
(deupirfenidone) for the potential treatment of IPF
-- Completed four clinical trials with LYT-100 to validate the
thesis of the anti-fibrotic and anti-inflammatory activity of
pirfenidone with a differentiated pharmacokinetic (PK) profile,
affirming both the strong safety and tolerability profile of
LYT-100
-- Completed the bi-monthly, monotherapy dose escalation portion
of the Phase 1 program assessing the safety and tolerability of
escalating doses of LYT-200 (anti-galectin-9 mAb) as a potential
treatment for metastatic solid tumors
-- Achieved oral bioavailability of LYT-300 (oral
allopregnanolone) in a multi-part Phase 1 program, representing the
first mechanistic proof-of-principle in the clinic for our
Glyph(TM) platform
Momentum across Founded Entities(7) , which we initiated and
co-invented, demonstrates success of our R&D model
-- Karuna Therapeutics, Inc. (Nasdaq: KRTX) (Karuna) announced
positive topline Phase 3 data evaluating the efficacy, safety and
tolerability of KarXT in adults with schizophrenia, meeting its
primary endpoint and key secondary endpoints in the August 2022
post-period.
-- Akili, Inc. (Nasdaq: AKLI) (Akili) recently began trading on
the Nasdaq Stock Market and announced its partner, Shionogi, had
started a pivotal Phase 3 randomized, controlled study of SDT-001
in children with attention-deficit hyperactivity disorder (ADHD),
both in the August post-period, and Akili partnered with Roblox
(NYSE: RBLX) in May.
-- Gelesis Holdings, Inc. (NYSE: GLS) (Gelesis) began trading on
the New York Stock Exchange in January 2022, and generated net
product revenue of $16.5 million in the first half of 2022 for
Plenity(4) , an increase of 212% year-over-year.
-- Gelesis presented results from a clinical trial demonstrating
that approximately 6 out of 10 adults in the trial who were treated
with GS200 lost on average 11% of their body weight; Akili
announced the publication of data in adults with systemic lupus
erythematosus (SLE), adults with major depressive disorder (MDD)
and children with ADHD in major scientific journals; and Vedanta
Biosciences, Inc. (Vedanta) published data in a major journal for
its lead program, VE303.
Financial Highlights:
-- PureTech Level Cash and Cash Equivalents as of June 30, 2022,
were $341.4 million(1) (December 31, 2021: $418.9 million) and
Consolidated Cash and Cash Equivalents as of June 30, 2022, were
$365.9 million(2) (December 31, 2021: $465.7 million).
-- Founded Entities have strengthened their collective balance
sheets by attracting gross proceeds of $113.5 million(8) in equity
investments during the six months ended June 30, 2022. In the
post-period, Founded Entities attracted additional gross proceeds
of more than $1 billion.(9) Since July 2018 through the date of
this report, our Founded Entities have raised funding of $3.1
billion,(8) of which $2.9 billion (95.3%) was from third
parties.
-- Operating Expenses for the period were $108.2 million (June
30, 2021: 73.9 million).
-- PureTech initiated a share buyback program up to a maximum
consideration of $50 million.
-- PureTech will receive aggregate proceeds of up to
approximately $115.4 million, net of transaction fees, through the
sale of Karuna shares in the August 2022 post-period.(3)
Key Upcoming Milestones (next 12 to 24 months)
Multiple important milestones are anticipated, including those
announced by our Founded Entities:
Wholly Owned Pipeline
-- We expect topline results from the registration-enabling
trial of LYT-100 in IPF by the end of 2023 as part of a streamlined
development program that capitalizes on efficiencies of the
505(b)(2) pathway. Pending positive clinical and regulatory
feedback, we believe the results of the Phase 2 clinical trial,
together with a Phase 3 clinical trial, could serve as the basis
for registration in the U.S.
-- We expect results from the Phase 1/2 clinical trial
evaluating LYT-200 in single agent cohorts by the end of 2022 and
will soon begin to enroll patients in cohorts designed to evaluate
LYT-200 in combination with chemotherapy. Results from the
combination cohorts are expected in 2023.
-- We plan to initiate a clinical trial to evaluate LYT-200 as a
single agent for the treatment of acute myeloid leukemia (AML) by
the end of 2022.
-- We expect to complete the multi-part Phase 1 program of
LYT-300 by the end of 2022, and - based on the data - a Phase 1b/2a
clinical trial is planned to initiate in 2023.
-- We expect additional preclinical validation of our key
technology platforms.
Founded Entities
-- Karuna plans to submit a New Drug Application (NDA) for KarXT
in schizophrenia with the U.S. Food and Drug Administration (FDA)
in mid-2023 and Karuna's Phase 3 ADEPT program, evaluating KarXT
for the treatment of psychosis in elderly patients with Alzheimer's
disease (AD) is expected to initiate in the third quarter of
2022.
-- Akili expects to bring its digital therapeutic to more
families and healthcare providers with the broader commercial
launch of EndeavorRx(R)(10) in the second half of 2022.
-- Vor Biopharma Inc. (Nasdaq: VOR) (Vor) expects to report
initial clinical data from VBP101, a Phase 1/2a clinical trial for
VOR33 for patients with AML, in the fourth quarter of 2022, and
data from the ongoing Phase 1/2 National Marrow Donor Program
(NMDP)-sponsored clinical trial evaluating VCAR33(AUTO) in young
adult and pediatric patients with relapsed/refractory AML in a
bridge-to-transplant study are expected in 2022, depending on
investigator's timing of data release.(11)
-- Vedanta plans to initiate a Phase 3 clinical trial of VE303
in patients at high risk for recurrent Clostridioides difficile
infection (CDI) in the first half of 2023.
-- Four additional Founded Entities also expect multiple
near-term milestones.
Components of Value
Wholly Owned Candidates Ownership Indication
================================== ==================== ===================================
LYT-100 100% Conditions involving inflammation
and fibrosis, including
idiopathic pulmonary fibrosis
(deupirfenidone)
LYT-200 100% Solid tumors, including
pancreatic ductal adenocarcinoma,
colorectal cancer and
cholangiocarcinoma, as
well as acute myeloid
leukemia
(anti-galectin-9 mAb)
LYT-210 100% A range of cancer indications
(anti-delta-1 mAb)
LYT-300 100% A range of neurological
and neuropsychological
conditions, including
depression
(oral allopregnanolone)
LYT-510 100% Inflammatory bowel disease
and chronic pouchitis
(oral immunosuppressant)
LYT-500 100% Inflammatory bowel disease
(oral IL-22 + immunosuppressant)
LYT-503/IMB-150 Partnered Interstitial cystitis
or bladder pain syndrome
(non-opioid)
Founded Entities Ownership Overview
================================== ==================== ===================================
Karuna 4.3% Equity Advancing transformative
plus Royalties, medicines for people living
Milestone Payments with psychiatric and neurological
& Sublicense conditions
Revenues
Akili 14.7% Equity Pioneering the development
of cognitive treatments
through game-changing
technologies
Gelesis 23.4% Equity Advancing a novel category
plus Royalties of treatments for weight
management and gut related
chronic diseases
Vor Bio 8.3% Equity Engineering hematopoietic
stem cells to enable targeted
therapies post-transplant
Vedanta 40.5% Equity Pioneering a new category
of oral therapies based
on defined bacterial consortia
Follica 75.9% Equity Building a regenerative
plus Royalties biology platform for androgenetic
alopecia, epithelial aging
and other medical indications
Sonde 42.7% Equity Developing a voice-based
technology platform to
detect changes of health
conditions
Entrega 73.8% Equity Engineering hydrogels
to enable the oral administration
of biologics
1. PureTech Level Cash and Cash Equivalents as of June 30, 2022,
represent cash and cash equivalents held at PureTech Health plc and
its wholly-owned subsidiaries only. Please refer to the Financial
Review section of this report for additional detail.
2. Consolidated Cash and Cash Equivalents as of June 30, 2022,
represent cash and cash equivalents of $365.9 million as shown on
the Consolidated Statements of Financial Position.
3. Presumes the exercise of all call options written by the
Company covering 477,100 Karuna shares.
4. 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.
5. Clinical success is measured as the probability of transition
success from Phase 1 to regulatory filing. PureTech's probability
is 47%, and the industry average is 8%. The cumulative percentages
are calculated by multiplying the individual phase percentages.
Industry average data measures the probability of clinical trial
success of therapeutics by calculating the number of programs
progressing to the next phase vs. the number progressing and
suspended (Phase 1=52%, Phase 2=29%, Phase 3=58%). BIO,
PharmaIntelligence, QLS (2021) Clinical Development Success Rates
2011 - 2020. This report did not include therapeutics regulated as
devices. PureTech average data measures aggregate percentages
including all therapeutic candidates advanced through at least
Phase 1 by PureTech or its Founded Entities from 2009 onward, using
the aforementioned calculation method based on the following
individual phase percentages, Phase 1 (n = 6/8; 75%), Phase 2 (n =
10/12; 83%), Phase 3 (n = 3/4; 75%), last updated on August 8,
2022; Phase 2 and Phase 3 percentages include some therapeutic
candidates where Phase 1 trials were not conducted by PureTech or
its Founded Entities (i) due to the
requirements of the medical device regulatory pathway or (ii)
because a prior Phase 1 trial was conducted by a third party, which
Phase 1 trials were not included in this analysis.
6. 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), 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.
7. 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 June 30, 2022,
Controlled Founded Entities include Follica Incorporated, Vedanta
Biosciences, Inc. and Entrega, Inc., and Non-Controlled Founded
Entities include Gelesis Holdings, Inc., Karuna Therapeutics, Inc.,
Akili, Inc., Sonde Health, Inc. and Vor Biopharma Inc. Relevant
ownership interests for Founded Entities contained in this
strategic report were calculated on a partially diluted basis (as
opposed to a voting basis) as of June 30, 2022, including
outstanding shares, options and warrants, but excluding unallocated
shares authorized to be issued pursuant to equity incentive plans.
Gelesis, Karuna, Vor Bio and Akili ownerships were calculated on a
beneficial ownership basis in accordance with SEC rules as of
August 15, 2022, August 19, 2022, August 19, 2022 and August 22,
2022, respectively.
8. Funding figure can include private equity financings, loans
and promissory notes, public offerings or grant awards, and gross
proceeds from SPAC mergers. Funding figure excludes future
milestone considerations received in conjunction with partnerships
and collaborations.
9. Karuna's gross proceeds from an equity offering of
approximately $862.5 million before underwriting discounts and
expenses and Akili's gross proceeds resulting from SPAC merger of
$163 million before deducting transaction expenses and advisory
fees.
10. 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.
11. The VCAR33 construct is being studied in a Phase 1/2
clinical trial sponsored by the National Marrow Donor Program
("NMDP"), and the timing of data release is dependent on the
investigators conducting the trial.
About PureTech Health
PureTech is a biotherapeutics company dedicated to changing the
treatment paradigm for devastating diseases. 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 and a third that is
expected to be filed soon for FDA approval, as of the date of
PureTech's most recently filed Half-Year 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 related to our and our Founded Entities'
plans, future prospects, objectives, developments and strategies,
the progress and timing of clinical trials and data readouts, the
timing of potential Investigational New Drug (IND) and NDA
submissions, the sufficiency of cash and cash equivalents and
expected cash runway, and the expected aggregate proceeds from our
sale of shares of Karuna. 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, those risks,
uncertainties and other important factors described under the
caption "Risk Factors" in our Annual Report on Form 20-F for the
year ended December 31, 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 EU media U.S. media
Public Relations Ben Atwell, Rob Winder Nichole Sarkis
publicrelations@puretechhealth.com +44 (0) 20 3727 1000 +1 774 278 8273
Investor Relations ben.atwell@FTIconsulting.com nichole@tenbridgecommunications.com
IR@puretechhealth.com
Interim Management Report
Introduction
Our distinctive model for bringing innovative medicines to
patients has led to rapid advancement across our Wholly Owned
Pipeline and Founded Entities over the first six months of 2022.
These programs have generated significant fundamental value and
achieved a number of clinical and business milestones towards our
mission of changing the treatment paradigm for patients with
devastating diseases.
Our R&D engine is centered on improving tolerability,
enabling oral administration or enhancing on-target efficacy to
unlock new classes of medicine that have demonstrated efficacy but
whose development has been held back by one of these issues. Across
our pipeline, there are examples of how we start with an approach
that has proof of human efficacy, but key limitations have hindered
the class from reaching its full potential. Through the expertise
of our experienced R&D team and extensive network of
scientists, clinicians and industry leaders, we strive to overcome
these barriers to unlock a new class of therapeutics. The process
to identify, invent and advance scientific breakthroughs also
includes de-risking experiments before advancing new programs. This
model has enabled us to consistently gain early access to
breakthrough discoveries well before the rest of the world reads
about them in major scientific journals. Our R&D engine has now
generated 27 therapeutics and therapeutic candidates, including two
that have gone from inception at PureTech through FDA and EU
regulatory clearances for marketing, and a third that will soon be
filing for FDA approval. Each of these were first-of-their-kind
breakthroughs in their respective fields, in some cases ending
decades of stagnated therapeutic innovation for of tens of millions
of patients.
We have continued to demonstrate the strength of our model
throughout the first six month of 2022, with the rapid advancement
of our Wholly Owned Pipeline, which now includes three clinical
trials, and the progression of our proprietary lymphatic and
inflammation platforms, from which four novel therapeutic
candidates have already been identified for pipeline growth. Our
eight Founded Entities, which we initiated and co-invented, have
also achieved key milestones so far this year.
Our work translates into value for our shareholders in multiple
ways. Our primary focus is the development of our Wholly Owned
Programs towards commercialization, which could generate future
revenue. We also have the option to spin out, sell or partner these
programs, which we assess on an ongoing basis. In addition to the
Wholly Owned Programs, we see our Founded Entities as sources of
value to us over time. We hold sizable equity positions across our
Founded Entities and continue to benefit from their growth,
including from events such as M&A transactions, IPOs and
potential royalties and sublicense income from certain product
sales.
The combination of the development of the Wholly Owned Programs,
advancement of the Founded Entities and optionality to pursue
non-dilutive partnerships and funding provides a distinctive and
multi-pronged engine to fuel potential future growth while allowing
us to more fully capture the value of milestones at a parent
company level. We anticipate multiple milestones across our Wholly
Owned Pipeline and Founded Entities and are committed to ensuring
our shareholders receive the benefits of our strong model.
Notable Developments
Wholly Owned Programs
In the first half of 2022, we continued to strengthen our Wholly
Owned Programs.
Our clinical-stage therapeutic candidate, LYT-100, continued to
advance during the period. LYT-100 is a selectively deuterated form
of pirfenidone that is designed to retain the potent and
clinically-validated anti-fibrotic and anti-inflammatory activity
of pirfenidone but has a highly differentiated PK profile that has
translated into improved tolerability, as supported by data from
multiple human clinical trials. Pirfenidone is one of two
FDA-approved IPF treatments, with the other being nintedanib, both
of which have been available in the U.S. since 2014 and recorded
over $1 billion in annual sales each year from 2018 to 2021. While
both agents have been shown to slow the decline in lung function
for IPF patients, they have poor tolerability, which often leads to
patients discontinuing therapy or down-titrating to a sub-optimal
dose. Accordingly, there is an unmet need for better tolerated IPF
treatments so that patients can stay on therapy and preserve more
lung function. Given its PK profile, LYT-100 is being advanced for
the potential treatment of conditions involving inflammation and
fibrosis, including IPF. In 2022, we initiated a
registration-enabling trial of LYT-100 for the potential treatment
of IPF and topline results are expected by the end of 2023. We also
completed a Phase 2a proof-of-concept trial of LYT-100 in patients
with breast cancer-related, upper limb secondary lymphedema. We
believe the data generated to date is sufficient to evaluate the
primary endpoints of safety and tolerability, and the strong safety
and tolerability profile of LYT-100 seen in previous clinical
trials was reaffirmed. As part of our pipeline prioritization
strategy, we will be reviewing the data further, including the
exploratory efficacy endpoints, to determine next steps for the
program.
In January 2022, we announced results from a randomized,
double-blind crossover clinical trial in healthy older adults
demonstrating that approximately 50% fewer subjects treated with
LYT-100 experienced gastrointestinal (GI)-related adverse events
(AEs) compared to subjects treated with pirfenidone (17.4% vs.
34.0%). In an additional clinical trial, LYT-100 also demonstrated
that it can be safely dosed with a higher total drug exposure than
the currently approved dose of pirfenidone, which could translate
into improved efficacy over pirfenidone. These results, along with
the additional data generated from our robust LYT-100 clinical
program and regulatory feedback, further guided the advancement of
LYT-100 into late-stage clinical development for the treatment of
IPF. In May 2022, we presented the additional data for LYT-100 at
the American Thoracic Society 2022 International Conference.
Additionally, in June 2022, we announced the results from the Phase
2 clinical trial of LYT-100, which affirmed the strong safety and
tolerability profile of LYT-100 seen in previous clinical trials,
adding to the growing body of favorable LYT-100 data. We are also
exploring the potential evaluation of LYT-100 in other inflammatory
and fibrotic conditions such as myocardial and other organ system
fibrosis based on the strength of existing clinical data around the
use of pirfenidone in these indications.
LYT-200 also progressed through clinical development. LYT-200 is
a fully human IgG4 monoclonal antibody targeting a foundational
immunosuppressive protein, galectin-9, for the potential treatment
of solid tumors, including pancreatic ductal adenocarcinoma,
colorectal cancer and cholangiocarcinoma, that are difficult to
treat and have poor survival rates, and AML. Currently, a large
proportion of patients, especially those with immunologically
silent tumors, respond sub-optimally to immune checkpoint
inhibitors, representing a significant patient population that has
yet to receive benefit from this class of immunotherapeutic agents.
Given its design to inhibit the activity of galectin-9, LYT-200 is
being advanced to potentially remove a key immunosuppressive
barrier that would enable the immune system to attack and destroy
the tumor. In the first half of 2022, we completed the bi-monthly,
monotherapy dose escalation portion of the Phase 1 program, began
evaluating weekly doses of LYT-200 as a monotherapy and will soon
begin to enroll patients in cohorts designed to evaluate LYT-200 in
combination with chemotherapy. Data from the single agent cohorts
are expected by the end of 2022, and data from the combination
cohorts are expected in 2023. Additionally, we believe that
targeting galectin-9 gives LYT-200 the potential to address a high
unmet need for more effective and less toxic therapies for AML, a
devastating disease in which prognosis is poor, with a roughly 30%
five-year survival rate. Compelling data have been generated with
LYT-200 in multiple preclinical models of leukemia, which have been
submitted for presentation in a scientific forum. Based on these
data, and significant evidence showing the relevance of galectin-9
as a potential novel target in AML, we expect to initiate a
clinical trial of LYT-200 as a single agent for the treatment of
AML by the end of 2022.
The Phase 1 clinical trial of LYT-300, our most advanced
candidate derived from the Glyph technology platform, achieved a
key milestone in the first half of 2022. LYT-300 is an oral form of
natural allopregnanolone which we believe may be applicable for the
potential treatment of a range of neurological and
neuropsychological conditions. An injectable formulation of
allopregnanolone is approved by the FDA as a 60-hour IV infusion
for the treatment of postpartum depression, though the method of
administration has significant limitations. Oral formulations of
allopregnanolone and other neurosteroids could potentially have
significant advantages for the potential treatment of a range of
neurological and neuropsychological conditions, addressing the
significant unmet medical need for more effective treatments for
psychiatric conditions, such as postpartum depression and MDD,
which impact 400,000 and over 20 million patients in the U.S. each
year, respectively. LYT-300 is designed to capitalize on the
validated efficacy of allopregnanolone to potentially offer a new,
oral treatment option to address these unmet needs. In June 2022,
we announced the achievement of proof-of-principle for our Glyph
platform in the ongoing healthy adult clinical trial of LYT-300.
This was a key milestone for the candidate, which is designed to
overcome the normally poor oral bioavailability of allopregnanolone
to deliver its proven efficacy via simple, convenient oral dosing.
This is also the first mechanistic proof-of-principle in the clinic
for the Glyph technology platform, which is designed to bypass
first-pass metabolism to help maximize the therapeutic potential of
validated targets and drugs where oral bioavailability has been a
barrier. We expect to complete the Phase 1 clinical trial by the
end of 2022, and - based on the data - a Phase 1b/2a clinical trial
is planned to initiate in 2023. The multi-part Phase 1 program of
LYT-300 has three primary objectives - to demonstrate oral
bioavailability, evaluate safety and tolerability across a range of
doses, and to inform dose selection moving forward. With the
achievement of the first objective, additional dose exploration and
assessments of safety, tolerability, PK and pharmacodynamics will
be measured. Additionally, in April 2022, the U.S. Patent Office
granted two patents covering our Glyph technology platform. One
patent is directed to Glyph and broadly covers lipid chemistries
used in our prodrug compounds with a patent term that extends to
September 2037. A second patent was issued and covers a variety of
prodrug chemistries exemplified with the immunosuppressant
mycophenolic acid with a patent term that extends to December
2038.
We also continued to develop our Alivio(TM) technology platform,
which is designed to target biologics and other drugs to sites of
inflammation in a localized manner while limiting their systemic
exposure, which has the potential to significantly improve both the
safety and efficacy profile of the therapy. The Alivio technology
platform has generated three therapeutic candidates to date: 1)
LYT-510 is an oral inflammation-targeting formulation of
tacrolimus, a potent immunosuppressant drug, in development for the
potential treatment of inflammatory bowel disease (IBD) and chronic
pouchitis. Current therapies for IBD must be provided through
multiple injections over time and are associated with several
limitations, including a lack of efficacy for some patients,
dose-limiting AEs, loss of efficacy over time via anti-drug
antibody development and the potential for opportunistic infections
or malignancies. We believe that oral administration of therapeutic
candidates generated from our Alivio technology platform can
potentially
overcome these challenges by targeting multiple mechanisms of
disease pathogenesis and minimizing the potential for systemic side
effects; 2) 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 anti-inflammatory drug and is designed
to address the two key underlying causes of IBD pathogenesis and
progression, namely mucosal barrier disruption and inflammation;
and 3) LYT-503/IMB-150 is a non-opioid pain candidate being
developed as a partnered program for the potential treatment of
interstitial cystitis or bladder pain syndrome (IC/BPS), a chronic
inflammatory condition of the bladder that lacks an effective
treatment option. The LYT-503/IMB-150 therapeutic candidate is
designed to selectively treat inflamed tissues along the bladder
wall, while minimizing the potential for drug-related side effects
in healthy parts of the body.
In the first half of 2022, we also progressed our Orasome(TM)
and Other Technologies Platform, which utilizes a programmable and
scalable approach for the oral administration of nucleic acids and
other biologics. To date, we have 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
continue to generate additional data in preclinical models to
optimize and validate the Orasome and Other Technologies Platform.
We intend to leverage our proprietary technology platforms, as well
as our extensive network with major pharmaceutical companies and
world-leading scientists in immunology and lymphatics, to generate
additional novel therapeutic candidates.
In March 2022, 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. and
brings extensive experience in finance, operations, portfolio
management and commercialization to our board of industry, business
and academic leaders.
Commenting on her appointment, Ms. Barber-Lui said:
"I am energized by PureTech's unique model and approach to
creating new therapies for devastating diseases. PureTech is a true
pioneer, and I look forward to joining the distinguished members of
the board to help support PureTech's talented team in executing on
the collective vision of transforming patient care by giving life
to science."
Additionally, PureTech notes that Dame Marjorie Scardino, senior
independent director and member of the audit committee, informed
the Company on August 24, 2022, that she intends to retire as of
the close of business on December 31, 2022. Dame Scardino joined
the board in 2015 when PureTech listed on the London Stock
Exchange. Since then, her strong focus on corporate governance has
been invaluable as the Company advanced as a UK listed entity, and
the entire board has benefited from her thoughtful and pragmatic
perspectives.
Commenting on her retirement, Dame Scardino said:
"To work with such a creative and ambitious team has been a
privilege. It's gratifying to see the successes they have already
achieved and to have insight into those that are in the pipeline.
These advances will benefit everyone, including investors, and -
most importantly - the patients who will have access to their
therapeutics."
Founded Entities
Our Founded Entities have had a productive 2022 so far, with
significant clinical progress and strategic financings.
Karuna made progress towards developing its novel therapies with
the potential to deliver transformative medicines for people living
with psychiatric and neurological conditions, including
schizophrenia and dementia-related psychosis. In the August 2022
post-period, Karuna announced positive topline results from its
Phase 3 EMERGENT-2 trial evaluating the efficacy, safety and
tolerability of its lead investigational therapy, KarXT, in adults
with schizophrenia. The trial met its primary endpoint, with KarXT
demonstrating a statistically significant and clinically meaningful
9.6-point reduction in the Positive and Negative Syndrome Scale
(PANSS) total score compared to placebo (-21.2 KarXT vs. -11.6
placebo, p<0.0001) at Week 5 (Cohen's d effect size of 0.61).
KarXT also demonstrated an early and sustained statistically
significant reduction of symptoms, as assessed by PANSS total
score, starting at Week 2 and maintained such reduction through all
timepoints in the trial. Karuna announced that it plans to submit
an NDA for KarXT in schizophrenia with the U.S. FDA in
mid-2023.
In May 2022, Karuna announced details for its Phase 3 ADEPT
program, which is evaluating KarXT for the treatment of psychosis
related to AD and will consist of three Phase 3 trials. ADEPT-1 is
a trial evaluating the efficacy and safety of KarXT compared to
placebo in adults with moderate to severe psychosis related to AD.
The trial will consist of a 12-week, single-blind treatment period,
followed by a 26-week, double-blind, randomized withdrawal period.
Patients who meet the response criteria in the single-blind
treatment period will enter the double-blind treatment period and
will be randomized to receive KarXT or placebo. The ADEPT-1 trial
is on track to initiate in the third quarter of 2022. ADEPT-2, a
12-week trial evaluating the acute efficacy and safety of KarXT
compared to placebo in adults with psychosis related to AD, is
expected to initiate in 2023. ADEPT-3, a 52-week outpatient,
open-label extension trial evaluating the long-term safety and
tolerability of KarXT in adults who completed ADEPT-1 or ADEPT-2,
is expected to initiate in 2023.
In the August 2022 post-period, Karuna also announced that it
anticipates topline data from the Phase 3 ARISE trial in the first
half of 2024. The trial is evaluating the safety and efficacy of
KarXT compared to placebo as an adjunctive treatment for
schizophrenia in adults who experience an inadequate response to
current standard of care.
In the August 2022 post-period, PureTech announced that it has
raised aggregate proceeds of up to approximately $115.4 million,
net of transaction fees, through the sale of shares of Karuna,
comprising a sale of 125,000 Karuna shares in on-market
transactions and expected completion of call options covering up to
477,100 Karuna shares (collectively, the "Transaction").(3)
PureTech intends to use the proceeds from the Transaction to
further the advancement and growth of the Company. As the founder
of Karuna and co-inventor of the KarXT program, PureTech has a
right to royalty payments of 3% of net sales of any commercialized
product as well as 20% of sublicense income covered by the license
agreement. The license agreement covers the KarXT program in key
territories including the U.S., European Union, and Japan. PureTech
is also eligible to receive certain milestone payments upon the
achievement of regulatory approvals.
Akili has made progress in advancing its digital diagnostics,
treatments and monitors for cognitive impairments across diseases
and disorders. In the August 2022 post-period, Akili, Inc. began
trading on the Nasdaq Stock Market under the ticker symbol "AKLI"
on August 22, 2022, following the January 2022 announcement of 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.
In the July 2022 post-period, Akili announced publication of
full data from a randomized, unblinded study conducted by National
Jewish Health and the University of Colorado School of Medicine
Departments of Neurology, Psychiatry and Rheumatology that
evaluated the ability of Akili's AKL-T01 product candidate to
improve cognitive dysfunction in patients diagnosed with SLE. Data
from the study show that AKL-T01 resulted in significant
improvement in motor speed and executive functions. Further, the
study investigated the ability of the product EVO(TM) Monitor,
built on the same technology platform, to serve as a rapid mobile
assessment of cognitive function. The study results were published
in the medical journal Lupus.
In February 2022, 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. Data from the study show that
EndeavorRx(10) 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 the August 2022 post-period, Akili announced the start of a
pivotal Phase 3 randomized, controlled study of SDT-001 (a version
of AKL-T01 localized for Japanese language and culture), a product
candidate designed to improve measures of attention in children
diagnosed with ADHD. The study, conducted by Akili's partner,
global pharmaceutical company Shionogi, is designed to evaluate the
safety and efficacy of the product candidate in children ages 6-17
with ADHD as a registration-enabling trial. Clinical trial sites
have begun enrolling patients, and results of the study are
expected in the second half of 2023.
In April 2022, Akili announced that the American Journal of
Psychiatry published findings from the STARS-MDD clinical trial
evaluating Akili's AKL-T03 product candidate as a potential
treatment for attention impairments in adults with MDD when used
alongside antidepressant medication.
In May 2022, Akili and Roblox (NYSE: RBLX), a global platform
bringing millions of people together through shared experiences,
announced a collaboration that connects patients' medical
treatments to their favorite virtual worlds. Initially, the
companies will establish an exclusive Roblox rewards exchange tied
to Akili's EndeavorRx(10) app. The companies are exploring
additional novel approaches and opportunities to engage Akili
patients through Roblox integrations.
In March 2022, 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 June 2022, Akili announced that industry veteran Matt
Franklin joined the company in the newly created role of President
and Chief Operating Officer (COO). As President and COO, Mr.
Franklin joined Eddie Martucci, Akili's Chief Executive Officer,
and the company's executive leadership team to scale the
organization and bring Akili's diverse pipeline of cognitive
treatments to market, with an initial focus on the commercial
launch of EndeavorRx(10) . In March 2022, 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 has continued to advance its novel category of
treatments for weight management and gut related chronic diseases.
In January 2022, 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 June 2022, Gelesis announced that Ro, a leading and rapidly
growing U.S. direct-to-patient healthcare company, placed a $15
million pre-paid order for Gelesis' commercial product for weight
management, Plenity(4) . This is in addition to previous Plenity(4)
pre-orders from Ro totaling $40 million.
In January 2022, 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(4)
multichannel campaign encompasses TV, digital, social and Out of
Home (OOH) to grow awareness of Plenity's(4) novel approach to
weight management. In March 2022, Gelesis announced preliminary
results from this 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 May 2022, Gelesis presented results from the LIGHT-UP
clinical trial for adults with overweight or obesity who have
prediabetes or type 2 diabetes and were treated with either GS200
or placebo. Approximately 6 out of 10 adults treated with GS200
achieved a clinically meaningful response to treatment (achieving
at least 5% body weight loss), losing on average 11% of their body
weight (23 pounds) and an average reduction of 5.5 inches off their
waist circumference. GS200 is an orally administered superabsorbent
hydrogel taken by capsule with water 10 minutes before lunch and
dinner and is designed to act mechanically in the GI tract in order
to induce satiety in patients with prediabetes and type 2
diabetes.
In April 2022, Gelesis released a poster presentation at the
World of Microbiome Annual Meeting in Vienna. The preclinical study
showed administration of one of the company's proprietary
superabsorbent hydrogels, Gel-B, significantly shifted the
composition of the microbiome to a profile correlated with better
metabolic health, including improved weight and glucose control.
Adding Gel-B to a high-fat diet exponentially encouraged the growth
of Akkermansia muciniphila, a bacteria associated with thickened
mucosal lining of the gut, improved gut barrier function, and lean
body mass. Furthermore, benchtop studies indicated that the 3-D
structure and unique properties of Gel-B is required to support the
increased growth of Akkermansia. These data suggest that
superabsorbent hydrogels may offer additional therapeutic
mechanisms promoting metabolic health beyond their space occupying
properties.
In June 2022, Gelesis presented new preclinical data showing
weight loss and additional metabolic benefits in mice receiving a
microbiota transplant from another group of mice, treated with one
of the company's proprietary hydrogels, at the American Diabetes
Association's Annual Conference. These metabolic benefits occurred
while both groups of mice, the donors of the microbiota transplant
and the recipient mice, were on a high fat, high carbohydrate diet
typically causing rapid weight gain, obesity and diabetes.
In January 2022, 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 over $300 million
revenue in a direct-to-consumer business model and public company
execution as Gelesis plans to scale Plenity(4) to meet growing
consumer demand.
Vor Bio continued to progress the development of its novel
platform for engineering Hematopoietic Stem Cell (HSCs) to enable
targeted therapies post-transplant. Vor Bio expects to share
initial clinical data from VBP101, a Phase 1/2a multicenter,
open-label, first-in-human study of VOR33 in participants with AML
who are at risk of relapse in the fourth quarter of 2022.
In March 2022, 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, which
include VCAR33(ALLO) and VCAR33(AUTO) , which are designed to
target CD33, a clinically-validated target for AML. VCAR33(ALLO)
uses allogeneic healthy donor-derived cells and is Vor Bio's lead
VCAR33 program. The scientific community has an increasing
appreciation for the value of stem-like cell phenotype in CAR-T
approaches, and HLA-matched healthy donor cells have a potentially
superior cell phenotype with improved persistence and in vivo
expansion capability. VCAR33(AUTO) uses autologous cells from each
patient and is being studied in an ongoing Phase 1/2 clinical trial
sponsored by the NMDP in young adult and pediatric patients with
relapsed/refractory AML in a bridge-to-transplant study. Data from
this trial are expected in 2022 and timing is dependent on the
investigators conducting the trial.(11)
Vor Bio 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 VOR33 + VCAR33 Treatment
System.
Vor Bio's in-house clinical manufacturing facility in Cambridge,
MA headquarters to become operational in the fourth quarter 2022.
The facility is designed to support clinical manufacturing for both
Vor Bio's eHSC and CAR-T product pipeline and reduce the time and
cost required to manufacture cell therapy clinical candidates.
Vedanta also progressed the development of a potential new
category of oral therapies based on defined consortia of bacteria
isolated from the human microbiome and grown from pure clonal cell
banks. In April 2022, Vedanta announced a publication in the
journal Cell Host & Microbe. The publication detailed the
results from a Phase 1a/1b study evaluating the safety,
tolerability, and colonization dynamics of VE303 in healthy adults.
VE303 was observed to be generally well-tolerated at all doses
tested and to colonize optimally if dosed over multiple days after
vancomycin pre-treatment. The work illuminates some fundamental
features of the colonization dynamics of a live biotherapeutic
product (LBP) that may be generalizable.
In May 2022, Vedanta announced presentations of research
informed by multiple clinical studies at Digestive Disease Week
(DDW). The analyses cover several defined bacterial consortia
candidates developed by Vedanta, and include assessments of safety,
tolerability, efficacy, and the relationships between dosing
regimen, consortium strain colonization, and restoration of a
patient's resident microbial community. These analyses further
deepen Vedanta's understanding of the clinical pharmacology and
potential benefits of defined bacterial consortia and help inform
future clinical research. This body of data builds on published
analyses from earlier clinical work that identified key factors
that drive colonization of Vedanta's candidates.
In June 2022, Vedanta announced the opening of a new facility
designed to manufacture clinical and commercial supply for its
therapeutic portfolio, including for the planned Phase 3 study and
potential commercial launch of its lead candidate, VE303, in
CDI.
Additionally, Vedanta expects topline data from the Phase 1/2
clinical trial of VE416, Vedanta's therapeutic candidate for food
allergy, in 2023, subject to investigator timelines.
Follica Incorporated continued to advance its regenerative
platform designed to treat androgenetic alopecia, epithelial aging
and other related indications. Preparations are underway for the
registration clinical program in male androgenetic alopecia and
initiation is anticipated in 2022.
Sonde Health, Inc. (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 more than 80,000 individuals. In January 2022, 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.
Entrega, Inc. (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 continues into the second half of 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.
Financial Review
Reporting Framework
You should read the following discussion and analysis together
with our Condensed Consolidated Financial Statements, including the
notes thereto, set forth elsewhere in this report. Some of the
information contained in this discussion and analysis or set forth
elsewhere in this report, including information with respect to our
plans and strategy for our business and financing our business,
includes forward-looking statements that involve risks and
uncertainties. You should read this discussion and analysis in
conjunction with the risks identified in the "Risk Factor Annex" on
pages 217 to 252 of our "Annual Report and Accounts 2021", also
included as Exhibit 15.1 to the Form 20-F for the fiscal year ended
December 31, 2021 filed with the Securities and Exchange Commission
on April 26, 2022. As a result of many factors, our actual results
could differ materially from the results described in or implied by
these forward-looking statements.
Our unaudited Condensed Consolidated Financial Statements as of
June 30, 2022 and for the six months ended June 30, 2022 have been
prepared in accordance with International Accounting Standard
("IAS") 34 Interim Financial Reporting as adopted for use in the
UK. The Condensed Consolidated Financial Statements also comply
fully with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The
annual financial statements of the Group for the year ended
December 31, 2022 will be prepared in accordance with UK-adopted
International Financial Reporting Standards (IFRS). This report
should be read in conjunction with the Group's 2021 Annual Reports
and Accounts as of and for the year ended December 31, 2021.
The following discussion contains references to the Condensed
Consolidated Financial Statements of PureTech Health plc, or the
Company, and its consolidated subsidiaries, together the Group.
These financial statements consolidate the Company's subsidiaries
and include the Company's interest in associates and investments
held at fair value. Subsidiaries are those entities over which the
Company maintains control. Associates are those entities in which
the Company does not have control for financial accounting purposes
but maintains significant influence over financial and operating
policies. Where the Company has neither control nor significant
influence for financial accounting purposes, we recognize our
holding in such entity as an investment at fair value. For purposes
of our Condensed Consolidated Financial Statements, each of our
Founded Entities are considered to be either a "subsidiary", an
"associate" or an "investment held at fair value" depending on
whether PureTech Health plc controls or maintains significant
influence over the financial and operating policies of the
respective entity at the respective period end date. For additional
information regarding the accounting treatment of these entities,
see Note 1 to our Consolidated Financial Statements as of and for
the year ended December 31, 2021 included in our 2021 Annual Report
and Accounts. For additional information regarding our operating
structure, see "Basis of Presentation and Consolidation" below.
Fair value of Investments held at fair value does not take into
consideration contribution from milestones that occurred after June
30, 2022, the value of our interests in our consolidated Founded
Entities (Vedanta, Follica, and Entrega), our Wholly Owned
Programs, or our cash.
Business Background and Results Overview
The business background is discussed above in the Interim
Management Report, which describes 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, to date. However, we do generate significant cash from the
sale of shares of our public Founded Entities.
We deconsolidated a number of our Founded Entities, specifically
Sonde Health Inc. ("Sonde") in May 2022, Karuna Therapeutics, Inc.
("Karuna"), Vor Biopharma Inc. ("Vor"), and Gelesis in 2019, and
Akili in 2018. 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 to the advancement into late-stage
studies of the clinical programs within our Wholly Owned Pipeline
and Controlled Founded Entities. 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; and
-- add clinical, scientific, operational financial and
management information systems and personnel, including personnel
to support our therapeutic development and potential future
commercialization claims.
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 progress
additional product therapeutic candidates into the clinic and
advance our lymphatic and inflammation platforms.
In addition, with respect to our Founded Entities' programs, we
anticipate that we will continue to fund a small portion of
development costs by strategically participating in such companies'
financings when we believe participation in such financings is in
the best interests of our shareholders. The form of any such
participation may include investment in public or private
financings, collaboration, partnership arrangements, and/or
licensing arrangements, among others. Our management and strategic
decision makers consider the future funding needs of our Founded
Entities and evaluate the needs and opportunities for returns with
respect to each of these Founded Entities routinely and on a
case-by-case basis.
As a result, we may need substantial additional funding in the
future, following the period described below in the Funding
Requirement section, to support our continuing operations and
pursue our growth strategy until such time as we can generate
sufficient revenue from product sales to support our operations, if
ever. Until such time we expect to finance our operations through a
combination of monetization of our interests in our Founded
Entities, collaborations with third parties, public or private
equity, debt financings, or other sources. We may be unable to
raise additional funds or enter into such other agreements or
arrangements when needed on favorable terms, or at all. If we are
unable to raise capital or enter into such agreements, as and when
needed, we may have to delay, scale back or discontinue the
development and commercialization of one or more of our
wholly-owned therapeutic candidates.
Measuring Performance
The Financial Review discusses our operating and financial
performance, our cash flows and liquidity as well as our financial
position and our resources. The results for each year are compared
primarily with the results of the preceding year.
Reported Performance
Reported performance considers all factors that have affected
the results of our business, as reflected in our Condensed
Consolidated Financial Statements.
Core Performance
Core performance measures are alternative performance measures
(APM) which are adjusted and non-IFRS measures. These measures
cannot be derived directly from our Condensed Consolidated
Financial Statements. We believe that these non-IFRS performance
measures, when provided in combination with reported performance,
will provide investors, analysts and other stakeholders with
helpful complementary information to better understand our
financial performance and our financial position from period to
period. The measures are also used by management for planning and
reporting purposes. The measures are not substitutable for IFRS
results and should not be considered superior to results presented
in accordance with IFRS.
Cash flow and
liquidity
PureTech Level Measure type: Core performance.
Cash and Cash
Equivalents
Definition: Cash and Cash Equivalents held at PureTech
Health plc and only wholly-owned subsidiaries as noted
(PureTech LYT, PureTech LYT-100, PureTech Management,
Inc., PureTech Health LLC,and inactive entities in
which we have no current operations).
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.
============== ===========================================================
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, 2021, or 2022 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 June 30, 2022)
The Company has evaluated subsequent events after June 30, 2022
up to the date of issuance of the Condensed Consolidated Financial
Statements, and has not identified any recordable or disclosable
events, except for the following:
Loan to Gelesis
On July 27, 2022, the Company, as a lender, entered into an
unsecured Short Term Promissory Note ("Note") with Gelesis (GLS),
as a borrower, in the amount of $15.0 million. The Note bears an
annual interest rate of 15.0 percent per annum and accrues until
the note is repaid. The term of the Note is the earlier of December
31, 2023 or five business days following the consummation of a
qualified financing by Gelesis.
Subsequent to the balance sheet date through August 19, 2022,
the Company repurchased an aggregate of 2,471,832 Ordinary Shares
under the share repurchase program. See note 12.
On August 8, 2022, the Company sold 125,000 shares of Karuna
common stock. In addition, the Company wrote a series of call
options entitling the holders thereof to purchase up to 477,100
Karuna common stock at a set price. Aggregate proceeds to the
Company from all aforementioned transactions are expected to be
approximately $115.4 million, net of transaction fees, presuming
the exercise of all call options.
On January 26, 2022, Akili and Social Capital Suvretta Holdings
Corp. I, a special purpose acquisition company, announced they had
entered into a definitive business combination agreement. The
transaction closed after balance sheet date on August 19, 2022 and
the combined company's securities began trading on August 22, 2022
on the Nasdaq Stock Market under the ticker symbol "AKLI". As part
of this transaction the Akili Interactive shares held by the
Company were exchanged for the common stock of the combined
company's securities, as well as unvested common stock ("Akili
Earnout Shares") that will vest when the share price exceeds
certain thresholds. In addition, as part of a PIPE transaction that
took place concurrently with the closing of the transaction, the
Company purchased 500,000 shares in consideration for $5.0 million.
Following the closing of the aforementioned transactions, the
Company holds 12,527,477 shares of the combined entity (excluding
the Akili Earnout Shares), which represents 14.7 percent of its
outstanding common stock.
Financial Highlights
The following is the reconciliation of the amounts appearing in
our Statement of Financial Position to the Alternative Performance
Measure described above:
As of:
June 30, June 30,
(in thousands) 2022 2021
=================================================== ======== ========
Consolidated Cash and Cash Equivalents 365,910 439,766
Less: Cash and Cash Equivalents held at non-wholly
owned subsidiaries (24,517) (30,018)
PureTech Level Cash and Cash Equivalents $341,393 $409,748
=================================================== ======== ========
Basis of Presentation and Consolidation
Our Condensed Consolidated Financial Information consolidates
the financial information of PureTech Health plc, as well as its
subsidiaries, and includes our interest in associates and
investments held at fair value, and is reported in four operating
segments as described below.
Basis for Segmentation
Our Directors are our strategic decision-makers. Our operating
segments are based on the financial information provided to our
Directors periodically for the purposes of allocating resources and
assessing performance. We have determined that each consolidated
Founded Entity is representative of a single operating segment as
our Directors monitor the financial results at this level. When
identifying the reportable segments, we have determined that it is
appropriate to aggregate multiple operating segments into a single
reportable segment given the high level of operational and
financial similarities across the entities. We have identified
multiple reportable segments, as presented below. Substantially all
of our revenue and profit generating activities are generated
within the United States and, accordingly, no geographical
disclosures are provided.
There was no change to reportable segments in 2022, except for
the transfer of Sonde Health, Inc. to the Non-Controlled Founded
Entities segment due to the deconsolidation of Sonde Health, Inc on
May 25, 2022.
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 subsidiaries' Board
of Directors. Upon deconsolidation of an entity, the segment
disclosure is restated to reflect the change on a retrospective
basis, as this constitutes a change in the composition of
reportable segments.
As of June 30, 2022, the Non-Controlled Founded Entities segment
includes Sonde Health, Inc. which was deconsolidated on May 25,
2022. Segment results incorporate the operational results of Sonde
Health, Inc. to the date of deconsolidation. Following the date of
deconsolidation, the Company accounts for its investment in Sonde
Health, Inc. 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.
Results of Operations
The following table, which has been derived from our unaudited
financial statements for the six months ended June 30, 2022 and
2021, included herein, summarizes our results of operations for the
periods indicated, together with the changes in those items in
dollars:
Six Months Ended June
30,
Change
(2021 to
(in thousands) 2022 2021 2022)
============================================== ========= ========= =========
Contract revenue $1,141 $2,391 $(1,250)
Grant revenue 5,890 3,445 2,445
============================================== ========= ========= =========
Total revenue 7,030 5,836 1,195
============================================== ========= ========= =========
Operating expenses:
General and administrative expenses (23,644) (25,586) 1,942
Research and development expenses (84,579) (48,330) (36,249)
============================================== ========= ========= =========
Operating income/(loss) (101,192) (68,080) (33,112)
============================================== ========= ========= =========
Other income/(expense):
Gain on deconsolidation 27,251 - 27,251
Gain/(loss) on investments held at fair
value (59,019) 74,415 (133,434)
Loss realized on sale of investment - (7,500) 7,500
Other income/(expenses) 7,642 595 7,048
Other income/(loss) (24,126) 67,510 (91,636)
============================================== ========= ========= =========
Net finance income/(costs) 56,320 (16,252) 72,571
============================================== ========= ========= =========
Share of net income/(loss) of associates
accounted for using the equity method (15,322) (78,108) 62,787
Gain on dilution of ownership interest in
associate 28,363 - 28,363
============================================== ========= ========= =========
Income/(loss) before income taxes (55,957) (94,931) 38,974
Taxation 32,485 17,378 15,107
============================================== ========= ========= =========
Net income/(loss) including non-controlling
interest (23,472) (77,553) 54,081
============================================== ========= ========= =========
Net (loss)/income attributable to the Company $(28,344) $(75,395) $47,051
============================================== ========= ========= =========
Comparison of the Six Months Ended June 30, 2022 and 2021
Total Revenue
Six Months Ended June
30,
=========================
(in thousands) 2022 2021 Change
================================ ======= ====== ========
Contract Revenue:
Internal Segment $- $1,594 $(1,594)
Controlled Founded Entities 731 610 121
Non-Controlled Founded Entities 81 81 -
Parent Company and other 328 105 223
================================ ======= ====== ========
Total Contract Revenue $1,141 $2,391 $(1,250)
================================ ======= ====== ========
Grant Revenue:
Internal Segment $1,821 $853 $969
Controlled Founded Entities 4,068 2,592 1,476
Total Grant Revenue $5,890 $3,445 $2,445
================================ ======= ====== ========
Total Revenue $7,030 $5,836 $1,195
================================ ======= ====== ========
Our total revenue was $7.0 million for the six months ended June
30, 2022, an increase of $1.2 million, or 20.5 percent compared to
the six months ended June 30, 2021. The increase was primarily
attributable to an increase of $2.4 million in grant revenue,
driven by a $1.5 million increase in the Controlled Founded
Entities segment due to increased grant revenue from Vedanta CARB-X
and BARDA grants, and a $1.0 million increase in the Internal
segment as a result of increased grant revenue by Alivio and
PureTech LYT Inc. The increase was partially offset by a decrease
of $1.3 million in contract revenue, primarily as a result of the
conclusion of certain collaboration activities in the Internal
segment.
Research and Development Expenses
Six Months Ended June
30,
(in thousands) 2022 2021 Change
========================================= ========= ========= =======
Research and Development Expenses:
Internal Segment $(62,499) $(27,246) $35,252
Controlled Founded Entities (20,877) (19,231) 1,646
Non-Controlled Founded Entities (826) (1,722) (897)
Parent Company and other (377) (130) 247
========================================= ========= ========= =======
Total Research and Development Expenses: $(84,579) $(48,330) $36,249
========================================= ========= ========= =======
Our research and development expenses were $84.6 million for the
six months ended June 30, 2022, an increase of $36.2 million, or
75.0 percent compared to the six months ended June 30, 2021. The
change was primarily attributable to an increase of $35.3 million
in research and development expenses incurred by the Internal
segment due to the advancement of programs in clinical testing. We
progressed our ongoing clinical trials of LYT-100, LYT-200 and of
LYT 300 in multiple indications, as well as advanced pre-clinical
studies and research related to multiple candidates and research
platforms. This increase was primarily driven by an increase in
clinical trial and clinical research organization expenditures of
$25.4 million, an increase in research and development related
employee compensation expense of $6.1 million (including an
increase of $1.1 million in non cash stock based compensation
expense), an increase in research and development related
consulting and professional fees of $1.8 million, and an increase
in analytical and contract manufacturing testing costs of $1.5
million.
General and Administrative Expenses
Six Months Ended June
30,
(in thousands) 2022 2021 Change
========================================== ========= ========= ========
General and Administrative Expenses:
Internal Segment $(4,156) $(4,335) $(179)
Controlled Founded Entities (7,612) (8,605) (993)
Non-Controlled Founded Entities (1,296) (1,654) (358)
Parent Company and other (10,580) (10,992) (413)
========================================== ========= ========= ========
Total General and Administrative Expenses $(23,644) $(25,586) $(1,942)
========================================== ========= ========= ========
Our general and administrative expenses were $23.6 million for
the six months ended June 30, 2022, a decrease of $1.9 million, or
7.6 percent compared to the six months ended June 30, 2021. The
change was primarily attributable to a decrease of $1.0 million in
the Controlled Founded Entities segment, primarily due to a
decrease in non-cash stock based compensation expense of $0.8
million. The change was also attributable to a decrease of $0.4
million in the Non-Controlled Founded Entities segment, which was
primarily driven by the deconsolidation of Sonde on May 25, 2022,
while the prior period contains activity of a full six month
period. In addition, there was a decrease of $0.4 million in the
Parent Company and other segment due to a decrease in non-cash
stock based compensation expense of $2.3 million driven by the
decline in value of the liability settled stock based award,
largely offset by increases in employee compensation expenses,
insurance expense and facility costs.
Total Other Income (Loss)
Total Other loss was $24.1 million for the six months ended June
30, 2022 compared to Other income of $67.5 million for the six
months ended June 30, 2021, reflecting increased losses of $91.6
million. The increase in losses was primarily attributable to a
loss from investments held at fair value of $59.0 million for the
six months ended June 30, 2022 , compared to a gain of $74.4
million for the six months ended June 30, 2021. The increase in
losses was partially offset by a one-time gain of $27.3 million as
a result of the deconsolidation of Sonde and a gain of $7.6 million
in respect of Gelesis back-stop agreement (See Note 5 to the
Condensed Consolidated Financial Statements for more details)
during the six months ended June 30, 2022.
Net Finance Income (Costs)
Net finance Income was $56.3 million for the six months ended
June 30, 2022, compared to net finance cost of $16.3 million for
the six months ended June 30, 2021, reflecting a change of $72.6
million in Net finance Income (costs). The change was primarily
attributable to the fact that during the six months ended June 30,
2022 net change in fair value of subsidiaries' preferred shares,
warrant and convertible note liabilities was income of $57.7
million, while for the six months ended June 30, 2021 such change
was a cost of $13.6 million, leading to increased income of $71.3
million. To a much lesser extent, the increase in finance income
was also derived from a $0.8 million decrease in contractual
interest expense on subsidiary convertible notes, and a $0.5
million increase in interest income from financial assets during
the six months ended June 30, 2022, as compared to the six months
ended June 30, 2021 .
Share of Net Gain (Loss) in Associates and Gain on Dilution of
Interest in Associate
For the six months ended June 30, 2022, the share in net loss of
associates reported under the equity method was $15.3 million as
compared to the share in net loss of $78.1 million for the six
months ended June 30, 2021. The change was primarily attributable
to a decrease in our equity interest in Gelesis following the SPAC
exchange (see Note 6 to our Condensed Consolidated Financial
Statements), as well as a decrease in Gelesis losses reported under
IFRS for the six months ended June 30, 2022, as compared to the
losses reported for the six months ended June 30, 2021. In
addition, during the six months ended June 30, 2022, PureTech
recorded a gain on dilution of its equity interest ownership in
Gelesis of $28.4 million as a result of the completion of the
merger with CapStar on January 13, 2022 - See Note 6 to the
Condensed Consolidated Financial Statements for more details.
Taxation
Income tax expense was a benefit of $32.5 million for the six
months ended June 30, 2022, as compared to a benefit of $17.4
million for the six months ended June 30, 2021. The increase in the
income tax benefit was primarily attributable to the increase in
the tax losses in entities in the U.S. Federal and Massachusetts
consolidated return groups of the Company for the six months ended
June 30, 2022 as compared to the six months ended June 30, 2021.
For information on the change in the tax rate, see Note 22 to our
Condensed Consolidated Financial Statements.
Critical Accounting Policies and Significant Judgments and
Estimates
Our management's discussion and analysis of our financial
condition and results of operations is based on our financial
statements, which we have prepared in accordance with International
Accounting Standards ("IAS") 34 Interim Financial Reporting as
adopted for use in the UK. The Condensed Consolidated Financial
Statements also comply fully with IFRS as issued by the
International Accounting Standards Board (IASB). In the preparation
of these financial statements, we are required to make judgments,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates under different
assumptions or conditions.
Our estimates and assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in
which the estimate is revised if the revision affects only that
period or in the period of the revisions and future periods if the
revision affects both current and future periods.
The accounting policies most critical to the judgments and
estimates used in the preparation of our financial statements have
not changed since our 2021 Annual Report. For further detail see
Note 1 of the accompanying notes to the Consolidated Financial
Statements included in our 2021 Annual 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
agreements with Founded Entities;
-- the financing requirements of the Internal segment,
Controlled-Founded Entities segment and Parent segment; and
-- the investing activities related to the Internal,
Controlled-Founded Entities, Non-Controlled Founded Entities and
Parent segments, including the monetization through sale of shares
held in our public Founded Entities.
As of June 30, 2022, we had consolidated cash and cash
equivalents of $365.9 million. As of June 30, 2022, we had PureTech
Level cash and cash equivalents of $341.4 million (for a definition
of PureTech Level cash and cash equivalents, see the section
Measuring Performance earlier in this Financial review).
Cash Flows
The following table summarizes our cash flows for each of the
periods presented:
Six Months Ended
June 30,
(in thousands) 2022 2021
==================================================== ========= =========
Net cash used in operating activities $(87,249) $(65,366)
Net cash provided by (used in) investing activities (6,884) 114,964
Net cash provided by (used in) financing activities (5,665) (13,713)
Net decrease in cash and cash equivalents $(99,798) $35,886
==================================================== ========= =========
Operating Activities
Net cash used in operating activities was $87.2 million for the
six months ended June 30, 2022, as compared to $65.4 million for
the six months ended June 30, 2021, resulting in an increase of
$21.9 million in net cash used in operating activities. The
increase in outflows is primarily attributable to our higher
operating loss mainly due to an increase in research and
development activities in the Internal Segment, partially offset by
the timing of receipts and payments in the normal course of
business.
Investing Activities
Net cash used in investing activities was $6.9 million for the
six months ended June 30, 2022, as compared to inflows of $115.0
million for the six months ended June 30, 2021, resulting in a
decrease of $121.8 million in net cash resulting from investing
activities. The change in the net cash resulting from investing
activities was primarily attributed to the fact that in the six
months ended June 30, 2021 there was a sale of investments held at
fair value of $118.0 million while for the six months ended June
30, 2022 there was no such sale. This decrease also resulted from
an investment in an associate of $20.0 million, partially offset by
proceeds from repayment of a loan granted to an associate of $15.0
million for the six months ended June 30, 2022, while for the six
months ended June 30, 2021 there were no such activities.
Financing Activities
Net cash used in financing activities was $5.7 million for the
six months ended June 30, 2022, as compared to outflows of $13.7
million for the six months ended June 30, 2021, resulting in a
decrease of $8.0 million in the net cash used in financing
activities. The decrease in the net cash used in financing
activities was primarily attributable to the fact that in the six
months ended June 30, 2021payments to settle equity settled stock
based awards amounted to $13.3 million, while for the six months
ended June 30, 2022 there were no such payments made to settle
equity settled awards. This decrease in cash used in financing
activities was partially offset by treasury share purchases of $4.3
million for the six months ended June 30, 2022 while there were no
such purchases for the six months ended June 30, 2021.
Funding Requirements
We have incurred operating losses since inception. Based on our
current plans, we believe our existing financial assets at June 30,
2022, will be sufficient to fund our operations and capital
expenditure requirements into the first quarter of 2026. We expect
to incur substantial additional expenditures in the near term to
support our ongoing activities. We anticipate to continue to incur
net operating losses for the foreseeable future as is typical for
pre-revenue biotechnology companies. Our ability to fund our
therapeutic development and clinical operations as well as
commercialization of our wholly-owned therapeutic candidates, will
depend on the amount and timing of cash received from planned
financings, monetization of shares of public Founded Entities and
potential business development activities. Our future capital
requirements will depend on many factors, including:
-- the costs, timing and outcomes of clinical trials and
regulatory reviews associated with our wholly-owned therapeutic
candidates;
-- the costs of commercialization activities, including product
marketing, sales and distribution;
-- the costs of preparing, filing and prosecuting patent
applications and maintaining, enforcing and defending intellectual
property-related claims;
-- the emergence of competing technologies and products and
other adverse marketing developments;
-- the effect on our therapeutic and product development
activities of actions taken by the U.S. Food and Drug
Administration ("FDA"), the European Medicines Agency ("EMA") or
other regulatory authorities;
-- our degree of success in commercializing our wholly-owned
therapeutic candidates, if and when approved; and
-- the number and types of future therapeutics we develop and
commercialize.
A change in the outcome of any of these or other variables with
respect to the development of any of our wholly-owned therapeutic
candidates could significantly change the costs and timing
associated with the development of that therapeutic candidate.
Further, our operating plans may change, and we may need
additional funds to meet operational needs and capital requirements
for clinical trials and other research and development activities.
We currently have no credit facility or other committed sources of
capital beyond our existing financial assets. Because of the
numerous risks and uncertainties associated with the development
and commercialization of our wholly-owned therapeutic candidates,
we have only a general estimate of the amounts of increased capital
outlays and operating expenditures associated with our current and
anticipated therapeutic development programs and these may change
in the future.
Condensed Consolidated Statements of Comprehensive
Income/(Loss)
For the six months ended June 30
2022 2021
$000s $000s
Note Unaudited Unaudited
================================================= ==== ========= =========
Contract revenue 3 1,141 2,391
Grant revenue 3 5,890 3,445
================================================= ==== ========= =========
Total revenue 7,030 5,836
------------------------------------------------- ---- --------- ---------
Operating expenses:
General and administrative expenses (23,644) (25,586)
Research and development expenses (84,579) (48,330)
================================================= ==== ========= =========
Operating income/(loss) (101,192) (68,080)
Other income/(expense):
Gain on deconsolidation 5 27,251 -
Gain/(loss) on investments held at fair
value 5 (59,019) 74,415
Loss realized on sale of investments 5 - (7,500)
Other income/(expense) 6 7,642 595
------------------------------------------------- ---- --------- ---------
Other income/(expense) (24,126) 67,510
Finance income/(costs):
Finance income 8 630 119
Finance costs - contractual 8 (1,961) (2,755)
Finance income/(costs) - fair value accounting 8 57,651 (13,616)
Net finance income/(costs) 56,320 (16,252)
Share of net income/(loss) of associates
accounted for using the equity method 6 (15,322) (78,108)
Gain on dilution of ownership interest
in associate 6 28,363 -
Income/(loss) before taxes (55,957) (94,931)
------------------------------------------------- ---- --------- ---------
Taxation 22 32,485 17,378
------------------------------------------------- ---- --------- ---------
Income/(Loss) for the period (23,472) (77,553)
Other comprehensive income/(loss):
Items that are or may be reclassified as
profit or loss
Equity-accounted associate - share of OCI (323) -
Reclassification of foreign currency differences
on dilution of interest (213) -
------------------------------------------------- ==== --------- =========
Total other comprehensive income/(loss) (536) -
================================================= ==== ========= =========
Total comprehensive income/(loss) for
the period (24,008) (77,553)
================================================= ==== ========= =========
Income/(loss) attributable to:
Owners of the Company (28,344) (75,395)
Non-controlling interests 17 4,872 (2,158)
------------------------------------------------- ---- --------- ---------
(23,472) (77,553)
------------------------------------------------- ---- --------- ---------
Comprehensive income/(loss) attributable
to:
Owners of the Company (28,880) (75,395)
Non-controlling interests 17 4,872 (2,158)
------------------------------------------------- ---- --------- ---------
(24,008) (77,553)
------------------------------------------------- ---- --------- ---------
$ $
------------------------------------------------- ---- --------- ---------
Earnings/(loss) per share:
Basic earnings/(loss) per share 9 (0.10) (0.26)
Diluted earnings/(loss) per share 9 (0.10) (0.26)
------------------------------------------------- ---- --------- ---------
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated Statements of Financial Position
As of
June 30, December
2022 31, 2021
$000s $000s
Note Unaudited Audited
========================================= ====== ========= =========
Assets
Non-current assets
Property and equipment, net 10 25,617 26,771
Right of use asset, net 19 15,782 17,166
Intangible assets, net 11 968 987
Investments held at fair value 5, 14 367,947 397,179
Investments in associates 6 29,952 -
Lease receivable - long-term 19 1,065 1,285
Other non-current assets 10 810
----------------------------------------- ------ --------- ---------
Total non-current assets 441,341 444,197
========================================= ====== ========= =========
Current assets
Trade and other receivables 4,369 3,174
Income tax receivable 4,514 4,514
Prepaid expenses 4,463 10,755
Lease receivable - short-term 19 432 415
Other financial assets 2,124 2,124
Short-term note from associate - 15,120
Cash and cash equivalents 365,910 465,708
----------------------------------------- ------ --------- ---------
Total current assets 381,811 501,809
----------------------------------------- ------ --------- ---------
Total assets 823,153 946,006
----------------------------------------- ------ --------- ---------
Equity and liabilities
Equity
Share capital 5,446 5,444
Share premium 289,301 289,303
Treasury stock (4,267) -
Merger reserve 138,506 138,506
Translation reserve (67) 469
Other reserve (18,688) (40,077)
Retained earnings/(accumulated deficit) 171,527 199,871
----------------------------------------- ------ --------- ---------
Equity attributable to the owners of the
Company 581,757 593,515
Non-controlling interests 17 (5,733) (9,368)
----------------------------------------- ------ --------- ---------
Total equity 576,024 584,147
----------------------------------------- ------ --------- ---------
Non-current liabilities
Deferred tax liability 22 57,277 89,765
Lease liability, non-current 19 26,697 29,040
Long-term loan 16 11,881 14,261
Liability for share based awards 7 1,020 2,659
Total non-current liabilities 96,875 135,725
----------------------------------------- ------ --------- ---------
Current liabilities
Deferred revenue 3 19 65
Lease liability, current 19 4,635 3,950
Trade and other payables 18 33,110 35,817
Subsidiary:
Notes payable 14, 15 1,455 3,916
Warrant liability 14 3,786 6,787
Preferred shares 13, 14 103,013 174,017
Current portion of long-term loan 16 3,429 857
Other current liabilities 808 726
----------------------------------------- ------ --------- ---------
Total current liabilities 150,254 226,135
----------------------------------------- ------ --------- ---------
Total liabilities 247,129 361,859
----------------------------------------- ------ --------- ---------
Total equity and liabilities 823,153 946,006
----------------------------------------- ------ --------- ---------
Please refer to the accompanying Notes to the condensed
consolidated financial information. Registered number:
09582467.
The Condensed Consolidated Financial Statements were approved by
the Board of Directors and authorized for issuance on August 24,
2022 and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
August 24, 2022
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated Statements of Changes in Equity
For the six months ended June 30
Treasury
Share Capital Shares
=================== ====================
Total
Retained
earnings/ Total
Share Translation Other (accumulated Parent Non-controlling
Amount premium Amount reserve reserve deficit) equity interests Equity
Merger
reserve
Shares $000s $000s Shares $000s $000s $000s $000s $000s $000s $000s $000s
Balance January
1, 2021 285,885,025 5,417 288,978 - - 138,506 469 (24,050) 260,429 669,748 (16,209) 653,539
Net income/(loss) - - - - - - - - (75,395) (75,395) (2,158) (77,553)
----------------- ----------- ------ ------- ----------- ------- ------- ----------- -------- ------------ -------- --------------- --------
Total
comprehensive
income/(loss)
for the period - - - - - - - - (75,395) (75,395) (2,158) (77,553)
Exercise
of share-based
awards 645,640 1 36 - - - - - - 37 6 43
Revaluation
of deferred
tax assets
related to
share-based
awards - - - - - - - (122) - (122) - (122)
Equity settled
share-based
awards - - - - - - - 3,468 - 3,468 3,075 6,544
Settlement
of restricted
stock units - - - - - - - (10,749) - (10,749) - (10,749)
Reclassification
of equity
settled awards
to liability
awards - - - - - - - (6,773) - (6,773) - (6,773)
Vesting of
share-based
awards and
net share
exercise - - - - - - - (2,582) - (2,582) - (2,582)
Acquisition
of subsidiary
non-controlling
interest - - - - - - - (9,636) - (9,636) 8,668 (968)
Distributions - - - - - - - - - - (6) (6)
================= =========== ====== ======= =========== ======= ======= =========== ======== ============ ======== =============== ========
Balance
June 30,
2021 (unaudited) 286,530,665 5,419 289,013 - - 138,506 469 (50,443) 185,034 567,997 (6,625) 561,372
================= =========== ====== ======= =========== ======= ======= =========== ======== ============ ======== =============== ========
Treasury
Share Capital Shares
=================== ====================
Total
Retained
earnings/ Total
Share Translation Other (accumulated Parent Non-controlling
Amount premium Amount reserve reserve deficit) equity interests Equity
Merger
reserve
Shares $000s $000s Shares $000s $000s $000s $000s $000s $000s $000s $000s
================= =========== ====== ======= =========== ======= ======= =========== ======== ============ ======== =============== ========
Balance January
1, 2022 287,796,585 5,444 289,303 - - 138,506 469 (40,077) 199,871 593,515 (9,368) 584,147
Net income/(loss) - - - - - - - - (28,344) (28,344) 4,872 (23,472)
Other
comprehensive
income/(loss),
net - - - - - - (536) - - (536) - (536)
================= =========== ====== ======= =========== ======= ======= =========== ======== ============ ======== =============== ========
Total
comprehensive
income/(loss)
for the period - - - - - - (536) - (28,344) (28,880) 4,872 (24,008)
Deconsolidation
of Subsidiary - - - - - - - - - - 11,904 11,904
Exercise
of share-based
awards 104,819 2 (2) - - - - - - - - -
Purchase
of Treasury
stock - - - (2,010,269) (4,267) - - - - (4,267) - (4,267)
Equity settled
share-based
awards - - - - - - - 4,691 - 4,691 2,026 6,717
Partial
settlement
of share
based liability
awards through
share issuance 709,717 - - - - - - 1,528 - 1,528 - 1,528
NCI exercise
of share
options in
subsidiaries - - - - - - - 15,171 - 15,171 (15,164) 7
Other - - - - - - - - - - (4) (4)
================= =========== ====== ======= =========== ======= ======= =========== ======== ============ ======== =============== ========
Balance
June 30,
2022 (unaudited) 288,611,121 5,446 289,301 (2,010,269) (4,267) 138,506 (67) (18,688) 171,527 581,757 (5,733) 576,024
================= =========== ====== ======= =========== ======= ======= =========== ======== ============ ======== =============== ========
The accompanying notes are an integral part of these financial
statements.
Condensed Consolidated Statements of Cash Flows
For the six months ended June 30
2022 2021
$000s $000s
Note Unaudited Unaudited
---------------------------------------------------- ---- --------- ---------
Cash flows from operating activities
Income/(loss) (23,472) (77,553)
Adjustments to reconcile net loss to net cash
used in operating activities:
Non-cash items:
10,
Depreciation and amortization 19 4,294 3,648
share-based compensation expense 7 3,552 5,639
(Gain)/loss on investments held at fair value 5 59,019 (74,415)
Realized loss on sale of investments - 7,500
Gain on deconsolidation 6 (27,251) -
Gain on dilution of ownership interest in associate 6 (28,363) -
Disposal of assets 10 57 (2)
Share of net (income)/loss of associates accounted
for using the equity method 5 15,322 78,108
Fair value gain on derivative (7,624) -
Income taxes, net 22 (32,485) (17,378)
Finance (income)/costs, net 8 (56,320) 16,252
Forgiveness of PPP Loan - (68)
Changes in operating assets and liabilities:
Accounts receivable (1,050) (881)
Prepaid expenses and other current assets 6,292 74
Deferred revenues 3 (44) (912)
Trade and other payables 18 1,707 (428)
Income taxes paid - (3,364)
Interest received 750 119
Interest paid (1,633) (1,705)
---------------------------------------------------- ---- --------- ---------
Net cash used in operating activities (87,249) (65,366)
---------------------------------------------------- ---- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment 10 (1,647) (2,724)
Proceeds from sale of property and equipment - 2
5,
Investment in associate 6 (19,961) -
Purchase of investments held at fair value 5 - (500)
Sale of investments held at fair value 5 - 118,000
Repayment of short-term Note granted to associate 15,000 -
Cash in deconsolidated subsidiary (479) -
Receipt of payment of sublease 19 203 186
Net cash provided by (used in) investing activities (6,884) 114,964
---------------------------------------------------- ---- --------- ---------
Cash flows from financing activities:
Proceeds from issuance of convertible notes
in subsidiary 15 393 1,415
Payment of lease liability 19 (1,794) (1,425)
Exercise of stock options - 43
Settlement of RSU's - (10,749)
Vesting of restricted stock units and net share
exercise - (2,582)
NCI exercise of stock options in subsidiary 17 7 -
Purchase of treasury stock 12 (4,267) -
Acquisition of a non-controlling Interest of
a subsidiary - (408)
Subsidiary dividend payments (4) (6)
---------------------------------------------------- ---- --------- ---------
Net cash provided by (used in) financing activities (5,665) (13,713)
Net increase in cash and cash equivalents (99,798) 35,886
Cash and cash equivalents at beginning of year 465,708 403,881
---------------------------------------------------- ---- --------- ---------
Cash and cash equivalents at end of period 365,910 439,766
==================================================== ==== ========= =========
Supplemental disclosure of non-cash investment
and financing activities:
Contingent consideration in purchase of non
controlling interest - 560
Partial settlement of share based liability
award through issuance of equity 1,528 -
---------------------------------------------------- ---- ========= ---------
Assets, Liabilities and non controlling interests
other than cash in deconsolidated subsidiary
2022
$000s
================================================== ========
Trade and other payables 1,407
Subsidiary notes payable 3,403
Subsidiary preferred shares 15,853
Other assets and liabilities, net 123
Non-controlling interest (11,904)
================================================== ========
8,882
Investment retained in deconsolidated subsidiary 18,848
Gain on deconsolidation (27,251)
================================================== ========
Cash in deconsolidated subsidiary 479
================================================== ========
The accompanying notes are an integral part of these financial
statements.
Notes to the Condensed Consolidated Financial Statements
1. General information
Description of Business
PureTech Health plc ("PureTech," the "Parent" or the "Company")
is a public company incorporated, domiciled and registered in the
United Kingdom ("UK"). The registered number is 09582467 and the
registered address is 8th Floor, 20 Farringdon Street, London EC4A
3AE, United Kingdom.
PureTech is a biotherapeutics company dedicated to changing the
treatment paradigm for devastating diseases.
PureTech's Condensed Consolidated Financial Statements ("interim
financial statements") consolidate those of the Company and its
subsidiaries (together referred to as the "Group").
The accounting policies applied consistently to all periods
presented in these half-yearly Condensed Consolidated Financial
Statements are the same as those applied by the Group in its
Consolidated Financial Statements in its 2021 Annual Report and
Accounts.
Basis of accounting
These interim financial statements have been prepared in
accordance with International Accounting Standards (IAS) 34 Interim
Financial Reporting as adopted for use in the UK and also comply
fully with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB). The
annual financial statements of the Group for the year ended
December 31, 2022 will be prepared in accordance with UK-adopted
international accounting standards. The condensed consolidated
interim financial statements should be read in conjunction with the
Group's last Consolidated Financial Statements as of and for the
year ended December 31, 2021. The interim condensed consolidated
financial statements do not include all the information required
for a complete set of IFRS financial statements. However, selected
explanatory notes are included to explain events and transactions
that are significant to an understanding of the changes in the
Group's financial position and performance since the last annual
consolidated financial information included in the Annual Report
and Accounts as of and for the year ended December 31, 2021, which
was prepared in accordance with UK-adopted International Financial
Reporting Standards (IFRSs) and also complied fully with IFRSs as
issued by the IASB. Certain amounts in the Condensed Consolidated
Financial Statements and accompanying notes may not add due to
rounding. All percentages have been calculated using unrounded
amounts.
These condensed consolidated half-yearly financial statements do
not comprise statutory accounts within the meaning of Section 435
of the Companies Act 2006. The comparative figures for the six
months ended June 30, 2021 are not the Group's statutory accounts
for that financial year. Those accounts were reported upon by the
Group's auditors and delivered to the registrar of companies. The
report of the auditors was unqualified, did not include a reference
to any matters to which the auditors drew attention by way of
emphasis without qualifying their report and did not contain
statements under Section 498 (2) or (3) of the Companies Act
2006.
The unaudited interim Condensed Consolidated Financial
Statements reflect all adjustments of a normal recurring nature
that are necessary for a fair presentation of the results for the
interim periods presented. Interim results are not necessarily
indicative of results for a full year.
As of June 30, 2022 the Group had cash and cash equivalents of
$365.9 million. Considering the Group's financial position as of
June 30, 2022 and its principal risks and opportunities, a going
concern analysis has been prepared for at least the twelve-month
period from the date of signing the Condensed Consolidated
Financial Statements ("the going concern period") utilizing
realistic scenarios and applying a severe but plausible downside
scenario. Even under the downside scenario, the analysis
demonstrates the Group and the Company continue to maintain
sufficient liquidity headroom and continue to comply with all
financial obligations. Therefore, the Directors believe the Group
is adequately resourced to continue in operational existence for at
least the twelve-month period from the date of signing the
Condensed Consolidated Financial Statements, irrespective of
uncertainty regarding the duration and severity of the COVID-19
pandemic and the global macroeconomic impact of the pandemic.
Accordingly, the Directors considered it appropriate to adopt the
going concern basis of accounting in preparing the Condensed
Consolidated Financial Statements.
These condensed financial statements were authorized for issue
by the Company's Board of Directors on August 24, 2022.
COVID-19 Pandemic
In December 2019, illnesses associated with COVID-19 were
reported and the virus has since caused widespread and significant
disruption to daily life and economies across geographies. The
World Health Organization has classified the outbreak as a
pandemic. Our business, operations and financial condition and
results have not been significantly impacted during the six months
ended June 30, 2022 as a result of the COVID-19 pandemic. In
response to the COVID-19 pandemic, the Group has taken swift action
to ensure the safety of its employees and other stakeholders. The
Group continues to monitor the latest developments regarding the
COVID-19 pandemic on its business, operations, and financial
condition and results.
Significant Accounting policies
There have been no significant changes in the Group's accounting
policies from those disclosed in our Consolidated Financial
Statements as of and for the year ended December 31, 2021. The
significant accounting policies we use for half-year financial
reporting are disclosed in Note 1, Accounting policies of the
accompanying notes to the Consolidated Financial Statements
included in our 2021 Annual Report.
Adoption of New Accounting Standards
There have been no recent new accounting standards that have had
an impact on the Company's Condensed Consolidated Financial
Statements.
2. New Standards and Interpretations Not Yet Adopted
A number of new standards, interpretations, and amendments to
existing standards are effective for annual periods commencing on
or after January 1, 2023 and have not been applied in preparing the
condensed consolidated financial information. The Company's
assessment of the impact of these new standards and interpretations
is set out below.
Effective January 1, 2023, the definition of accounting
estimates has been amended as an amendment to IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors. The
amendments clarify how companies should distinguish changes in
accounting policies from changes in accounting estimates. The
distinction is important because changes in accounting estimates
are applied prospectively only to future transactions and future
events, but changes in accounting policies are generally also
applied retrospectively to past transactions and other past events.
This amendment is not expected to have an impact on the Company's
financial statements.
Effective January 1, 2023, IAS 1 has been amended to clarify
that liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting
period. Classification is unaffected by the expectations of the
entity or events after the reporting date. The Company does not
expect this amendment will have a material impact on its financial
statements.
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 Condensed Consolidated Statement of
Comprehensive Income/(Loss) consists of the following:
2022 2021
For the six months ended June 30, $000s $000s
---------------------------------- ------- ------
Contract revenue 1,141 2,391
Grant income 5,890 3,445
---------------------------------- ------- ------
Total revenue 7,030 5,836
---------------------------------- ------- ------
All amounts recorded in contract revenue were generated in the
United States. For the six months ended June 30, 2022 and 2021
contract revenue includes royalties received from an associate in
the amount of $328.4 thousand and $105.3 thousand respectively.
Primarily all of the Company's other contracts as of June 30,
2022 and 2021 were determined to have a single performance
obligation which consists of a combined deliverable of license to
intellectual property and research and development services.
Therefore, for such contracts, revenue is recognized over time
based on the input method which the Company believes is a faithful
depiction of the transfer of goods and services. Progress is
measured based on costs incurred to date as compared to total
projected costs. Payments for such contracts are primarily made up
front on a periodic basis.
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 2022 2021
For the six months ended June 30, $000s $000s
===================================================== ======= ======
Transferred at a point in time - Licensing Income(1) 347 179
Transferred over time(2) 794 2,212
===================================================== ======= ======
1,141 2,391
===================================================== ======= ======
1 2022 - Attributed to, Non-Controlled Founded Entities segment
( $19 thousand) and to Parent Company and Other ($328 thousand);
2021 - Attributed to Parent Company and Other ($105 thousand) and
to Non-Controlled Founded Entities segment ($74 thousand); See note
4, Segment information.
2 2022 - Attributed to, Controlled Founded Entities segment
($731 thousand) and to Non-Controlled Founded Entities segment ($63
thousand ); 2021 - Attributed to Internal segment ($1,594
thousand), Non-Controlled Founded Entities segment ($8 thousand),
and to Controlled Founded Entities segment ($610 thousand). See
Note 4, Segment Information.
2022 2021
Customers over 10% of revenue $000s $000s
Customer B 731 610
Customer C - 879
Customer D - 715
Customer E 328 -
------------------------------ ------- ------
1,060 2,204
============================== ======= ======
4 Segment Information
The Group has identified multiple reportable segments as
presented below. There was no change to reportable segments in
2022, except for the transfer of Sonde Health, Inc. to the
Non-Controlled Founded Entities segment due to the deconsolidation
of Sonde Health, Inc on May 25, 2022.
The Non-Controlled Founded Entities segment includes Sonde
Health, Inc. which was deconsolidated on May 25, 2022. Segment
results incorporate the operational results of Sonde Health, Inc.
to the date of deconsolidation. Following the date of
deconsolidation, the Company accounts for its investment in Sonde
Health, Inc. 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.
Virtually all of the revenue and profit generating activities of
the Group are generated within the United States and accordingly,
no geographical disclosures are provided.
Information About Reportable Segments:
For the six months ended June 30, 2022
$000s
--------------------------------------------------------------
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
----------------------------------- --------- ---------- -------------- --------- ------------
Condensed Consolidated Statements
of Comprehensive Income/(Loss)
Contract revenue - 731 81 328 1,141
Grant revenue 1,821 4,068 - - 5,890
----------------------------------- --------- ---------- -------------- --------- ------------
Total revenue 1,821 4,799 81 328 7,030
=================================== ========= ========== ============== ========= ============
General and administrative
expenses (4,156) (7,612) (1,296) (10,580) (23,644)
Research and development expenses (62,499) (20,877) (826) (377) (84,579)
----------------------------------- --------- ---------- -------------- --------- ------------
Total operating expense (66,655) (28,489) (2,122) (10,957) (108,223)
Other income/(expense):
Gain on deconsolidation - - - 27,251 27,251
Gain/(loss) on investments
held at fair value - - - (59,019) (59,019)
Gain/(loss) on disposal of
assets (57) - - - (57)
Other income/(expense) - - - 7,699 7,699
----------------------------------- --------- ---------- -------------- --------- ------------
Total other income/(expense) (57) - - (24,069) (24,126)
Net finance income/(costs) 112 59,638 (3,045) (385) 56,320
Share of net income/(loss)
of associates accounted for
using the equity method - - - (15,322) (15,322)
Gain on dilution of ownership
interest in associate - - - 28,363 28,363
----------------------------------- --------- ---------- -------------- --------- ------------
Income/(loss) before taxes (64,779) 35,948 (5,085) (22,041) (55,957)
=================================== --------- ---------- -------------- --------- ------------
Income/(loss) before taxes
pre IFRS 9 fair value accounting,
share-based payment expense,
depreciation of tangible assets
and amortization of intangible
assets (61,282) (20,901) (2,079) (21,498) (105,760)
Finance income/(costs) - IFRS
9 fair value accounting - 60,644 (2,993) - 57,651
Share-based payment expense (2,657) (2,018) (8) 1,131 (3,552)
Depreciation of tangible assets (839) (1,138) (4) (792) (2,773)
Amortization of ROU assets - (639) - (882) (1,521)
Amortization of intangible
assets - - (1) - (1)
Taxation - - - 32,485 32,485
----------------------------------- --------- ---------- -------------- --------- ------------
Income/(loss) for the period (64,779) 35,948 (5,085) 10,444 (23,472)
Other comprehensive income/(loss) - - - (536) (536)
----------------------------------- --------- ---------- -------------- --------- ------------
Total comprehensive income/(loss)
for the period (64,779) 35,948 (5,085) 9,908 (24,008)
----------------------------------- --------- ---------- -------------- --------- ------------
Total comprehensive income/(loss)
attributable to:
Owners of the Company (64,779) 30,753 (4,755) 9,901 (28,880)
Non-controlling interests - 5,195 (330) 7 4,872
----------------------------------- --------- ---------- -------------- --------- ------------
June 30, 2022 $000s
--------------------------------------------------------------
Condensed Consolidated Statements
of Financial Position:
=================================== ========= ========== ============== ========= ============
Total assets 84,044 41,969 - 697,139 823,153
Total liabilities(1) 249,500 148,854 - (151,225) 247,129
----------------------------------- --------- ---------- -------------- --------- ------------
Net assets/(liabilities) (165,455) (106,885) - 848,364 576,024
----------------------------------- --------- ---------- -------------- --------- ------------
1 Parent Company and Other Includes eliminations of intercompany
liabilities between the Parent Company and the reportable segments
in the amount of $241.0 million.
For the six months ended June 30, 2021
$000s
-------------------------------------------------------------
Parent
Controlled Non-Controlled Company
Founded Founded &
Internal Entities Entities Other Consolidated
$000s $000s $000s $000s $000s
------------------------------------- --------- ---------- -------------- -------- ------------
Condensed Consolidated Statements
of Comprehensive Income/(Loss)
Contract revenue 1,594 610 81 105 2,391
Grant revenue 853 2,592 - - 3,445
------------------------------------- --------- ---------- -------------- -------- ------------
Total revenue 2,447 3,202 81 105 5,836
------------------------------------- --------- ---------- -------------- -------- ------------
General and administrative
expenses (4,335) (8,605) (1,654) (10,992) (25,586)
Research and development expenses (27,246) (19,231) (1,722) (130) (48,330)
------------------------------------- --------- ---------- -------------- -------- ------------
Total Operating expenses (31,581) (27,835) (3,377) (11,123) (73,916)
Other income/(expense):
Gain/(loss) on investments
held at fair value - - - 74,415 74,415
Loss realized on sale of investments - - - (7,500) (7,500)
Other income/(expense) - 71 - 524 595
------------------------------------- ========= ========== ============== ======== ============
Total other income/(expense) - 71 - 67,439 67,510
Net finance income/(costs) (284) (18,502) 2,751 (217) (16,252)
Share of net income/(loss)
of associate accounted for
using the equity method - - - (78,108) (78,108)
------------------------------------- --------- ---------- -------------- -------- ------------
Income/(loss) before taxes (29,418) (43,064) (545) (21,904) (94,931)
===================================== ========= ========== ============== ======== ============
(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 (27,376) (22,786) (3,309) (19,142) (72,613)
Finance income/(costs) - IFRS
9 fair value accounting - (16,408) 2,792 - (13,616)
Share-based payment expense (1,435) (3,060) (20) (1,124) (5,639)
Depreciation of tangible assets (607) (804) (7) (756) (2,174)
Amortization of ROU assets - (6) - (882) (888)
Amortization of intangible
assets - - (1) - (1)
------------------------------------- --------- ---------- -------------- -------- ------------
Taxation - - - 17,378 17,378
------------------------------------- --------- ---------- -------------- -------- ------------
Income/(loss) for the period (29,418) (43,064) (545) (4,526) (77,553)
Other comprehensive income/(loss) - - - - -
------------------------------------- --------- ---------- -------------- -------- ------------
Total comprehensive income/(loss)
for the period (29,418) (43,064) (545) (4,526) (77,553)
------------------------------------- --------- ---------- -------------- -------- ------------
Total comprehensive income/(loss)
attributable to:
Owners of the Company (29,322) (41,022) (517) (4,533) (75,395)
Non-controlling interests (96) (2,042) (28) 7 (2,158)
===================================== ========= ========== ============== ======== ============
December 31, 2021 $000s
=============================================================
Consolidated Statements of
Financial Position:
===================================== ========= ========== ============== ======== ============
Total assets 125,726 64,508 1,765 754,007 946,006
Total liabilities(1) 228,789 209,212 19,645 (95,787) 361,859
===================================== ========= ========== ============== ======== ============
Net (liabilities)/assets (103,063) (144,704) (17,880) 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.
The proportion of net assets shown above that is attributable to
non-controlling interest is disclosed in Note 17.
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 (preferred shares until
exchanged for common stock and Earn-out shares following exchange),
Sonde 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, 2022 before allocation of share
in associate loss to long-term interest 493,888
Investment in Sonde Preferred shares - Sonde deconsolidation 11,168
Gelesis Earn out shares received in SPAC exchange 14,214
Exchange of Gelesis preferred shares to Gelesis common shares
- transferred to investment in associates (92,303)
Unrealized gain (loss) - change in fair value through profit
and loss (59,019)
Balance as of June 30, 2022 before allocation of share
in associate loss to long-term interest 367,947
============================================================== ========
Share of associate loss allocated to long-term interest
(see Note 6) -
============================================================== ========
Balance as of June 30, 2022 after allocation of share in
associate loss to long-term interest(1) 367,947
============================================================== ========
1 Fair value of investments accounted for at fair value, does
not take into consideration contribution from milestones that
occurred after June 30, 2022, the value of the Group's consolidated
Founded Entities (Vedanta, Follica, and Entrega), the Internal
segment, or cash and cash equivalents.
Gelesis
2022
On January 13, 2022, Gelesis completed its business combination
with Capstar Special Purpose Acquisition Corp ("Capstar"). As part
of the business combination, all shares in Gelesis, common and
preferred, including the shares held by PureTech, were exchanged
for common shares of the merged entity and unvested common shares
that will vest upon the stock price of the new combined entity
reaching certain target prices (hereinafter "Earn-out shares"). In
addition, PureTech invested $15.0 million in the class A common
shares of Capstar as part of the Private Investment in Public
Equity ("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. The exchange of the preferred
stock (including warrants) for common stock (including common stock
warrants) represents an additional investment in Gelesis equity
investment. The Group recorded the changes in fair value of the
preferred stock (including warrant) through the date of the
exchange upon which the preferred stock were transferred as an
additional investment in Gelesis equity interest - See Note 6 for
the net gain on the dilution of the equity interest in Gelesis,
resulting from the exchange of all preferred stock in Gelesis to
common stock of Gelesis Holdings Inc, the PIPE transaction and the
closing of the merger. All equity method losses allocated in prior
periods against the investments in Gelesis held at fair value are
now included within the equity method investment in Gelesis and
offset against the gain on dilution of interest - see Note 6.
As part of the aforementioned exchange PureTech received
4,526,622 Earn-out shares, which were valued on the date of the
exchange at $14.2 million. The Group accounts for such Earn-out
shares under IFRS 9 as investments held at fair value with changes
in fair value recorded through profit and loss.
During the six months ended June 30, 2022 and 2021, the Company
recognized a loss of $4.4 million and a gain of $39.0 million,
respectively related to the investment in preferred shares and
warrants that was recorded in the line item Gain/(loss) on
investments held at fair value within the Condensed Consolidated
Statements of Comprehensive Income/(Loss). In addition, the Company
recognized a loss of $12.7 million during the six months ended June
30, 2022 in respect of the Earn-out shares, for the change in the
fair value related to such investment during the period. Please
refer to Note 14 for information regarding the valuation of these
instruments.
Sonde
On May 25, 2022, Sonde completed a Series B Preferred Share
financing. As part of the financing a new investor invested $3.5
million in cash in exchange for 1,125,401 shares and all
convertible notes, including the convertible notes held by
PureTech, converted into Preferred B shares at the price per share
paid by the investor minus a 20% discount. As a result of the
aforementioned financing, the Group's voting interest was reduced
below 50% and the Group no longer controls Sonde's Board of
Directors, which is the governance body that has the power to
direct the relevant activities of Sonde. Consequently, the Group
concluded it lost control over Sonde and as such it should cease to
consolidate Sonde on the date the round of financing was completed.
Therefore, the results of operations of Sonde are included in the
condensed consolidated financial statements through the date of
deconsolidation.
Following deconsolidation, the Group still has significant
influence in Sonde through its 48.2% voting interest in Sonde and
its remaining representation on Sonde's Board of Directors. The
Group holds Preferred A-1, A-2 and B shares. The Preferred A-1
shares, in substance, have the same terms as common stock and as
such provide their shareholders with access to returns associated
with a residual equity ownership in Sonde. Consequently, the
investment in Preferred A-1 shares is accounted for under the
equity method. The Preferred A-2 and B shares, however, do not
provide their shareholders with access to returns associated with a
residual equity interest and as such are accounted for under IFRS
9, as investments held at fair value with changes in fair value
recorded in profit and loss.
Upon deconsolidation, the Group derecognized its assets and
liabilities and non controlling interest in respect of Sonde and
recorded its aforementioned investments in Sonde at fair value. The
deconsolidation resulted in a gain of $27.3 million. As of the date
of deconsolidation, the investment in Sonde preferred shares held
at fair value amounted to $11.2 million. There were no changes in
fair value for such investments between deconsolidation date and
June 30, 2022.
Vor
2021
On January 8, 2021 PureTech participated in the second closing
of Vor's Series B Preferred Share financing. For consideration of
$0.5 million, PureTech received an additional 961,538 B Preferred
shares.
On February 9, 2021, Vor closed its initial public offering
(IPO) of 9,828,017 shares of its common stock at a price to the
public of $18.00 per share. Subsequent to the closing, PureTech
held 3,207,200 shares of Vor common stock, which represented 8.6
percent of Vor common stock on the IPO date. Following its IPO, the
valuation of Vor common stock is based on level 1 inputs in the
fair value hierarchy. See Note 14.
During the six months ended June 30, 2022 and 2021, the Company
recognized a loss of $21.3 million and a gain of $26.4 million,
respectively that was recorded in the line item Gain/(loss) on
investments held at fair value within the Condensed Consolidated
Statements of Comprehensive Income/(Loss). Please refer to Note 14
for information regarding the valuation of these instruments.
Karuna
2021
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. As a result of the sale,
the Company recorded a loss of $7.5 million, attributable to
blockage discount included in the sales price, to the line item
Loss Realised on Sale of Investment within the Condensed
Consolidated Statement of Comprehensive Income/ (Loss) for the six
months ended June 30, 2021. See below for gain recorded in 2021 in
respect of the change in fair value of the Karuna investment.
During the six months ended June 30, 2022 and 2021 the Company
recognized a loss of $7.4 million and a gain of $53.8 million,
respectively that was recorded on the line item Gain/(loss) on
investments held at fair value within the Condensed Consolidated
Statements of Comprehensive Income/(Loss). As of June 30, 2022,
PureTech continued to hold Karuna common shares of 5.5 percent of
total outstanding Karuna common shares. Please refer to Note 14 for
information regarding the valuation of these instruments.
Akili
On May 25, 2021, Akili completed its Series D financing for
gross proceeds of $110.0 million in which Akili issued 13,053,508
Series D preferred shares. The Group did not participate in this
round of financing and as a result, the Group's interest in Akili
was reduced from 41.9 percent to 27.5 percent.
2022
On January 26, 2022, Akili Interactive and Social Capital
Suvretta Holdings Corp. I, a special purpose acquisition company,
announced they had entered into a definitive business combination
agreement. The transaction closed after balance sheet date on
August 19, 2022 and the combined company's securities began trading
on August 22, 2022 on the Nasdaq Stock Market under the ticker
symbol "AKLI". As part of this transaction the Akili Interactive
shares held by the Company were exchanged for the common stock of
the combined company's securities as well as unvested common stock
("Akili Earnout Shares") that will vest when the share price
exceeds certain thresholds. In addition, as part of a PIPE
transaction that took place concurrently with the closing of the
transaction, the Company purchased 500,000 shares in consideration
for $5.0 million. Following the closing of the aforementioned
transactions, the Company holds 12,527,477 shares of the combined
entity (excluding the Akili Earnout Shares), which represents 14.7
percent of its outstanding common stock.
During the six months ended June 30, 2022 and 2021, the Company
recognized a loss of $12.8 million and $44.0 million, respectively
that was recorded on the line item Gain/(loss) on investments held
at fair value within the Condensed Consolidated Statement of
Comprehensive Income/(Loss). Please refer to Note 14 for
information regarding the valuation of these instruments.
6. Investments in Associates
Gelesis
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 make payments on behalf
of Gelesis, the Group discontinued recognizing equity method
losses.
On December 30, 2021, PureTech signed a Backstop agreement with
Capstar according to which PureTech had 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, were less than
$15.0 million . PureTech had 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 were required to acquire any shares under the
agreement, PureTech would 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.
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
was amortized to Other income (expense) in the Condensed
Consolidated Statement of Income (loss) over the period from the
effective date until settlement date, January 13, 2022. During the
six months ended June 30, 2022 , the Group recognized income of
$10.4 million for the portion of the deferred gain amortized in
2022 and a loss of $2.8 million in respect of the decrease in the
fair value of the derivative until date of settlement, resulting in
a net gain of $7.6 million recorded in respect of the Backstop
agreement. The fair value of the derivative on the date of
settlement in the amount of $8.4 million represents an additional
investment in Gelesis as part of the SPAC transaction described
below.
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.
On January 13, 2022, Gelesis completed its business combination
with Capstar Special Purpose Acquisition Corp ("Capstar"). As part
of the business combination, all shares in Gelesis, common and
preferred, including the shares held by PureTech, were exchanged
for common shares of the merged entity and unvested common shares
that will vest upon the stock price of the new combined entity
reaching certain target prices (hereinafter "Earn-out shares"). 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 $5.0 million , as part of the Backstop agreement
described above. 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, the settlement of the aforementioned Backstop
agreement with Capstar, and the exchange of all preferred shares in
Gelesis to common shares in the new combined entity, PureTech holds
16,727,582 common shares of Gelesis Holdings Inc., which was equal
to approximately 23.2% of Gelesis Holdings Inc's outstanding common
shares. Due to PureTech's significant equity holding and voting
interest in Gelesis, PureTech continues to maintain significant
influence in Gelesis and as such continues to account for its
Gelesis equity investment under the equity method.
Gelesis was deemed to be the acquirer in Gelesis Holdings Inc.
and the financial assets and financial liabilities in Capstar were
deemed to be acquired by Gelesis in consideration for the shares
held by Capstar legacy shareholders. As such, the Group did not
revalue the retained investment in Gelesis but rather treated the
exchange as a dilution of its equity interest in Gelesis from
42.01% as of December 31, 2021 to 22.8% as of January 13, 2022
(including warrants that provide its holders access to returns
associated with equity holders). After considering the
aforementioned additional investments, the exchange of the
preferred stock, previously accounted for as an investment held at
fair value, to common stock (and representing an additional equity
investment in Gelesis - See Note 5), the Earn-out shares received
in Gelesis (see Note 5) and the offset of previously unrecognized
equity method losses, the net gain recorded on the dilution of
interest amounted to $28.4 million .
During the six months ended June 30, 2022 the Company recorded
$14.8 million of equity method losses in respect of Gelesis.
Sonde
On May 25, 2022, Sonde completed a Series B Preferred Share
financing. As a result of the aforementioned financing, the Group's
voting interest was reduced below 50% and the Group lost its
control over Sonde and as such ceased to consolidate Sonde on the
date the round of financing was completed. See Note 5 above for
further details.
Following deconsolidation, the Group has significant influence
in Sonde through its 48.2% voting interest in Sonde and its
remaining representation on Sonde's Board of Directors. The Group
holds Preferred A-1, A-2 and B shares. The Preferred A-1 shares, in
substance, have the same terms as common stock and as such provide
their shareholders with access to returns associated with a
residual equity ownership in Sonde. Consequently, the investment in
Preferred A-1 shares is accounted for under the equity method. The
Preferred A-2 and B shares, however, do not provide their
shareholders with access to returns associated with a residual
equity interest and as such are accounted for under IFRS 9, as
investments held at fair value. See Note 5.
The fair value of the Preferred A-1 shares on the date of
deconsolidation amounted to $7.7 million, which is the initial
value of the equity method investment in Sonde. When applying the
equity method, the Group records its share of the losses in Sonde
based on its equity interest in Sonde. Since only the common shares
and Preferred A-1 shares in Sonde represent a residual equity
interest and PureTech is the sole holder of the Preferred A-1
shares, the Group's share in Sonde's equity is 93.6%. The Group
recorded equity method losses of $0.6 million between the date of
deconsolidation and June 30, 2022.
7. Share-based Payments
Share-based payments includes stock options, restricted stock
units (RSUs) and performance-based RSUs. Share based payments are
recognized as an expense based on the grant date fair value of the
awards, except certain RSUs to executive management, see below.
Share-based Payment Expense
The Group share-based payment expense for the six months ended
June 30, 2022 and 2021, were comprised of charges related to the
PureTech Health plc incentive stock and stock option issuances and
subsidiary stock plans.
The following table provides the classification of the Group's
consolidated share-based payment expense as reflected in the
Condensed Consolidated Statement of Income/(Loss):
2022 2021
Six months ended June 30, $000s $000s
=========================== ======= ======
General and administrative 516 3,514
Research and development 3,037 2,125
=========================== ======= ======
Total 3,552 5,639
=========================== ======= ======
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan
(PSP). Under the PSP and subsequent amendments, awards of ordinary
shares may be made to the Directors, senior managers and employees
of, and other individuals providing services to the Company and its
subsidiaries up to a maximum authorized amount of 10.0 percent of
the total ordinary shares outstanding. The shares have various
vesting terms over a period of service between two and four years,
provided the recipient remains continuously engaged as a service
provider.
The share-based awards granted under the PSP expire 10 years
from the grant date. As of June 30, 2022, the Company had issued
share-based awards to purchase an aggregate of 25,787,073 shares
under this plan.
RSUs
During the six months ended June 30, 2022, the Company issued
certain executives 4,765,424 service, market and performance-based
RSUs. During the six months ended June 30, 2021, the Company issued
to a consultant 75,757 RSUs subject to service conditions. During
the six months ended June 30, 2021, the Company issued no new
market or performance-based RSUs.
Each RSU entitles the holder to one ordinary share on vesting
and the RSU awards are based on a cliff vesting schedule over a
three-year requisite service period in which the Company recognizes
compensation expense for the RSUs. Following vesting, each
recipient will be required to make a payment of one pence per
ordinary share on settlement of the RSUs. Vesting of the RSUs is
subject to the satisfaction of performance and market
conditions.
The Company recognizes the estimated fair value of these
performance-based awards as share-based compensation expense over
the performance period based upon its determination of whether it
is probable that the performance targets will be achieved. The
Company assesses the probability of achieving the performance
targets at each reporting period. Cumulative adjustments, if any,
are recorded to reflect subsequent changes in the estimated outcome
of performance-related conditions.
The fair value of the market based awards is based on the Monte
Carlo simulation analysis utilizing a Geometric Brownian Motion
process with 100,000 simulations to value those shares. The model
considers share price volatility, risk-free rate and other
covariance of comparable public companies and other market data to
predict distribution of relative share performance.
The performance and market conditions attached to the RSU awards
are based on the achievement of total shareholder return ("TSR"),
with 40.0 - 50.0 percent of the shares under the award vesting
based on the achievement of absolute TSR targets, 10 - 12.5 percent
of the shares under the award vesting based on TSR as compared to
the FTSE 250 Index, 10 - 12.5 percent of the shares under the award
vesting based on TSR as compared to the MSCI Europe Health Care
Index, and 25 - 40.0 percent of the shares under the award vesting
based on the achievement of strategic targets. The RSU award
performance criteria have changed over time as the criteria is
continually evaluated by the Group's Remuneration Committee.
2021
In February 2021, the remuneration committee of PureTech's board
of directors approved the achievement of the vesting conditions of
the 2018 RSU award as of December 31, 2020 and on May 28, 2021
reached the decision to cash settle RSUs to certain employees while
others were issued shares. The settlement value was determined
based on the three day average closing price of the shares. The
settlement value was $10.7 million (which after deducting tax
withheld on behalf of recipients amounted to $6.4 million). The
settlement value did not exceed the fair value at settlement date
and as such the cash settlement was treated as an equity
transaction, whereby the full repurchase cash settlement amount was
charged to equity in Other reserves in the financial statements as
of and for the six months ended June 30, 2021.
Following the different cash settlements (including the cash
settlement that occurred in 2020), the Company concluded that
although the remaining RSUs are to be settled by shares according
to their respective agreements, and any cash settlement is at the
Company's discretion, due to past practice of cash settlement to
multiple employees, some for multiple years, these RSUs should be
treated as liability awards and as such adjusted to fair value at
every reporting date with changes in fair value recorded in
earnings as stock based compensation expense.
Consequently, the Company recl assified $1.9 million from equity
to other non-current liabilities and $4.8 million from equity to
other payables equal to the fair value of the awards at the date of
reclassification. The Company treated the excess of the fair value
at the reclassification date over the grant date fair value of the
RSUs (for the portion of the vesting period that has already
elapsed) in the amount of $2.9 million as an equity transaction.
Therefore the full amount of the liability at reclassification was
recorded as a charge to equity. The changes in fair value of the
liability from reclassification date to balance sheet date will be
recorded as stock-based compensation expense in the Consolidated
Statement of Comprehensive Income (loss).
2022
In February 2022 the remuneration committee of PureTech's board
of directors approved the achievement of the vesting conditions as
of December 31, 2021 of the 2019 RSU grants and on May 17, 2022
reached the decision to settle the RSUs through issuance of shares
after paying all the employee withholding taxes in cash. As such,
the liability at date of settlement was settled for $1.0 million in
cash and $1.5 million in shares.
The Company recorded $2.9 million income and $0.3 million income
for the six months ended June 30, 2022 and 2021, respectively, in
respect of all restricted stock units. The income results from the
reduction in the value of the Company's share price, which reduces
the Company's liability settled awards.
Stock Options
During the six months ended June 30, 2022 and 2021, the Company
granted 8,195,500 and 1,912,500 stock option awards under the PSP,
respectively.
Stock options are treated as equity settled awards. The fair
value of the stock options awarded by the Company was estimated at
the grant date using the Black-Scholes option valuation model,
considering the terms and conditions upon which options were
granted, with the following weighted- average assumptions:
For the six months ended June 30, 2022 2021
---------------------------------- ------ ------
Expected volatility 41.62% 41.20%
Expected terms (in years) 6.11 6.16
Risk-free interest rate 2.06% 1.02%
Expected dividend yield - -
Grant date fair value $1.06 $2.04
================================== ====== ======
As of June 30, 2022, 5,956,414 incentive options are exercisable
with a weighted-average exercise price of $2.20. Exercise prices
ranged from $1.39 to $4.52.
The Company incurred share-based payment expense for the stock
options of $4.5 million and $2.8 million for the six months ended
June 30, 2022 and 2021, respectively.
Significant Subsidiary Plans
The subsidiaries incurred $2.0 million and $3.1 million in
share-based payment expense for the six months ended June 30, 2022
and 2021, respectively.
Vedanta 2010 Stock Incentive Plan
In 2010, the Board of Directors of Vedanta approved the 2010
Stock Incentive Plan (the "Vedanta Plan"). Through subsequent
amendments, as of June 30, 2022, 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 non-employees providing services to
Vedanta. At June 30, 2022, 266,578 shares remained available for
issuance under the Vedanta Plan.
The options granted under the Vedanta Plan are equity settled
and expire 10 years from the grant date. Typically, the awards vest
in four years but vesting conditions can vary based on the
discretion of Vedanta's Board of Directors.
Options granted under the Vedanta Plan are exercisable at a
price per share not less than the fair market value of the
underlying ordinary shares on the date of grant. The estimated
grant date fair value of the options is recognized as an expense
over the options' vesting period.
The fair value of the stock option grants has been estimated at
the date of grant using the Black-Scholes option pricing model with
the following range of assumptions:
For the six months ended June 30, 2022 2021
================================== ====== ======
Assumption/Input
Expected award life (in years) 7.00 7.00
Expected award price volatility 89.33% 88.33%
Risk free interest rate 2.67% 1.14%
Expected dividend yield - -
Grant date fair value $11.56 $14.77
Share price at grant date $14.90 $19.43
================================== ====== ======
Vedanta incurred share-based compensation expense of $1.8
million and $2.6 million for the six months ended June 30, 2022 and
2021, respectively.
Other Subsidiary Plans
The stock-based compensation expense under plans at other
subsidiaries of the Group not including Vedanta, was $0.2 million
and $0.4 million for the six months ended June 30, 2022 and 2021,
respectively.
8. Finance Cost, net
The following table shows the breakdown of finance income and
costs:
2022 2021
For the six months ended June 30, $000s $000s
----------------------------------------------------- ------- --------
Finance income
Interest income from financial assets 630 119
----------------------------------------------------- ------- --------
Total finance income 630 119
----------------------------------------------------- ------- --------
Finance costs
Contractual interest expense on notes payable (130) (852)
Interest expense on other borrowings (811) (752)
Interest expense on lease liability (1,021) (1,106)
Gain/(loss) on foreign currency exchange 1 (45)
----------------------------------------------------- ------- --------
Total finance cost - contractual (1,961) (2,755)
----------------------------------------------------- ------- --------
Gain/(loss) from change in fair value of warrant
liability 3,002 (1,027)
Gain/(loss) from change in fair value of preferred
shares 55,152 (12,539)
Gain/(loss) from change in fair value of convertible
debt (502) (50)
----------------------------------------------------- ------- --------
Total finance income/(costs) - fair value accounting 57,651 (13,616)
Finance income/(costs), net 56,320 (16,252)
----------------------------------------------------- ------- --------
9. Earnings/(Loss) per Share
Basic earnings/(loss) per share is computed by dividing the
income/(loss) attributable to the Company and available to ordinary
shareholders by the weighted average number of ordinary shares.
Dilutive earnings/loss per share is computed by dividing the
income/(loss) attributable to the Company and available to ordinary
shareholders by the sum of the weighted average number of ordinary
shares and the number of additional ordinary shares that would have
been outstanding if the Company's outstanding potentially dilutive
securities had been issued. During the six months ended June 30,
2022 the Company incurred a net loss and therefore all outstanding
potential securities were considered anti-dilutive. The amount of
potential securities that were excluded from the calculation
amounted to 2,992,980 shares.
The following table sets forth the computation of basic and
diluted earnings/(loss) per ordinary shares for the periods
presented (in thousands, except for shares and per share
amounts):
2022 2021
====================================================== =========== ===========
Numerator:
Income/(loss) attributable to the owners of the
Company ($28,344) ($75,395)
====================================================== =========== ===========
Denominator:
Weighted average ordinary shares for basic earnings
per ordinary share 287,754,262 286,011,246
Effect of dilutive securities - -
====================================================== =========== ===========
Weighted average ordinary shares for diluted earnings
per ordinary share 287,754,262 286,011,246
Basic earnings/(loss) per ordinary share ($0.10) ($0.26)
Diluted earnings/(loss) per ordinary share ($0.10) ($0.26)
====================================================== =========== ===========
10. 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, 2021 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
======================= ================== ========= ========== ============= ============ ======
Additions, net of
transfers 305 - 11 88 1,278 1,682
Disposals (91) - - - - (91)
Deconsolidation of
subsidiaries - - (58) - - (58)
Reclassifications 1,176 58 137 5,391 (6,762) -
Balance as of June
30, 2022 13,123 1,510 1,419 23,965 2,631 42,647
======================= ================== ========= ========== ============= ============ ======
Computer
Laboratory Furniture Equipment Construction
and Manufacturing and and Leasehold in
Accumulated depreciation Equipment Fixtures Software Improvements process Total
and impairment loss $000s $000s $000s $000s $000s $000s
Balance as of January
1, 2021 (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)
========================= ================== ========= ========== ============= ============ ========
Depreciation (1,028) (106) (57) (1,582) - (2,773)
Disposals 35 - - - - 35
Deconsolidation of
subsidiaries - - 53 - - 53
Balance as of June
30, 2022 (6,680) (769) (1,193) (8,388) - (17,030)
========================= ================== ========= ========== ============= ============ ========
Computer
Laboratory Furniture Equipment Construction
and Manufacturing and and Leasehold in
Property and Equipment, Equipment Fixtures Software Improvements process Total
net $000s $000s $000s $000s $000s $000s
Balance as of December
31, 2021 6,047 790 139 11,679 8,116 26,771
======================== ================== ========= ========== ============= ============ ======
Balance as of June
30, 2022 6,443 741 225 15,577 2,631 25,617
======================== ================== ========= ========== ============= ============ ======
11. 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, 2021 900
Additions 90
Balance as of December 31, 2021 990
Deconsolidation of subsidiaries (21)
================================ --------
Balance as of June 30, 2022 968
================================ ========
Licenses
Accumulated amortization $000s
Balance as of January 1, 2021 (1)
Amortization (2)
Balance as of December 31, 2021 (3)
================================ ========
Amortization (1)
Deconsolidation of subsidiary 4
================================ ========
Balance as of June 30, 2022 -
================================ ========
Licenses
Intangible assets, net $000s
Balance as of December 31, 2021 987
================================ ========
Balance as of June 30, 2022 968
================================ ========
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.
12. Equity
At June 30, 2022 and December 31, 2021, 288,611,120 and
287,796,585 common shares were outstanding, respectively, including
all vested common shares issued pursuant to PureTech Health LLC
Incentive Compensation arrangements as detailed in Note 7, and
including all shares repurchased and held by the Company in
Treasury.
On May 9, 2022, PureTech Health plc (the "Company") announced
the commencement of a $50 million share repurchase program of its
ordinary shares of one pence each ("Ordinary Shares"). The Company
plans to execute the Program in two equal tranches. In respect of
the first tranche, PureTech entered into an irrevocable
non-discretionary instruction with Jefferies International Limited
("Jefferies") in relation to the purchase by Jefferies of Ordinary
Shares for an aggregate consideration (excluding expenses) of no
greater than $25 million and the simultaneous on-sale of such
Ordinary Shares by Jefferies to PureTech. Jefferies makes its
trading decisions in relation to the Ordinary Shares independently
of, and uninfluenced by, the Company. Purchases may continue during
any close period to which the Company is subject.
Any purchase of Ordinary Shares under the first tranche of the
Program are carried out on the London Stock Exchange and any other
UK recognized investment exchange which may be agreed, in
accordance with pre-set parameters and in accordance with, and
subject to limits, including those limits related to daily volume
and price, prescribed by the Company's general authority to
repurchase Ordinary Shares granted by its shareholders at its
annual general meeting on May 27, 2021, and relevant Rules and
Regulations. All Ordinary Shares repurchased under the Program will
be held in treasury.
As of June 30, 2022, the Company's issued share capital was
288,611,120 shares, including 2,010,269 shares, which had been
repurchased under the Program and were held by the Company in
treasury.
13. 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 converted into preferred shares.
The balance as of June 30, 2022 and December 31, 2021,
represents the fair value of the instruments for all subsidiary
preferred shares. The following summarizes the subsidiary preferred
share balance:
2022 2021
As of June 30, $000s $000s
Entrega 500 669
Follica 7,684 11,191
Sonde - 13,362
Vedanta Biosciences 94,828 148,796
========================================= ======= =======
Total subsidiary preferred share balance 103,013 174,017
----------------------------------------- ------- -------
As is customary, in the event of any voluntary or involuntary
liquidation, dissolution or winding up of a subsidiary, the holders
of subsidiary preferred shares which are outstanding shall be
entitled to be paid out of the assets of the subsidiary available
for distribution to shareholders and before any payment shall be
made to holders of ordinary shares. A merger, acquisition, sale of
voting control or other transaction of a subsidiary in which the
shareholders of the subsidiary immediately before the transaction
do not own a majority of the outstanding shares of the surviving
company shall be deemed to be a liquidation event. Additionally, a
sale, lease, transfer or other disposition of all or substantially
all of the assets of the subsidiary shall also be deemed a
liquidation event.
As of June 30, 2022 and December 31, 2021, 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:
2022 2021
As of June 30, $000s $000s
Entrega 2,216 2,216
Follica 6,405 6,405
Sonde - 12,000
Vedanta Biosciences 149,568 149,568
------------------------------------- ------- -------
Total minimum liquidation preference 158,189 170,189
------------------------------------- ------- -------
For the six months ended June 30, 2022 the Group recognized the
following changes in the value of subsidiary preferred shares:
$'000s
============================================================= ========
Balance as of January 1, 2022 174,017
Decrease in value of preferred shares measured at fair value (55,152)
Deconsolidation of subsidiary (15,853)
Balance as of June 30, 2022 103,013
============================================================= ========
During the six months ended June 30, 2022 and 2021 there were no
issuances of new preferred shares.
14. 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 Description
Method
================== ==============================================================
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 June 30, 2022 and December 31, 2021, at each measurement
date, the 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 June 30, 2022, the Group assessed certain key assumptions
within the valuation of its unquoted instruments and considered the
impact of the COVID-19 pandemic on all unobservable inputs (Level
3). The assumptions considered with respect to COVID-19 included
but were not limited to the following: exit scenarios and timing,
discount rates, revenue assumptions as well as volatilities. The
Group views any impact of the COVID-19 pandemic on its unquoted
instruments as immaterial as of June 30, 2022.
Subsidiary Preferred Shares Liability and Subsidiary Convertible
Notes
The following table summarizes the changes in the Group's
subsidiary preferred shares and convertible note liabilities
measured at fair value, which were categorized as Level 3 in the
fair value hierarchy:
Subsidiary Subsidiary
Preferred Convertible
Shares Notes
$000s $000s
Balance at December 31, 2021 and January 1, 2022 174,017 2,461
================================================= ========== ============
Value at issuance - 393
Deconsolidation - Sonde (15,853) (3,403)
Accrued interest - contractual - 48
Change in fair value (55,152) 502
Balance at June 30, 2022 103,013 -
================================================= ========== ============
The change in fair value of preferred shares and convertible
notes are recorded in Finance income/(costs) - fair value
accounting in the Condensed Consolidated Statements of
Comprehensive Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at June 30, 2022, in the fair value
measurement of the Group's material subsidiary preferred shares
liabilities categorized as Level 3 in the fair value hierarchy:
Fair Value at Unobservable Sensitivity to
June 30, 2022 Valuation Technique Inputs Weighted Average Decrease in Input
============== =================== ============== ================ ===================
Market PWERM Estimated time
94,828 & PWERM allocation to exit 1.1 Fair value increase
============== =================== ===================
Discount rate 30.0%
============== =================== ============== ================ ===================
Income - DCF/
Market Backsolve Estimated time
8,185 & OPM allocation to exit 2.9 Fair value increase
============== ===================
Discount rate 25.8%
============== ===================
Volatility 54.4% Fair value decrease
============== =================== ============== ================ ===================
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 13):
Subsidiary Preferred
Input Share Liability
=================================
Financial
Liability
Increase/(Decrease)
Sensitivity
As of June 30, 2022 Range $000s
============================ =========== ====================
Subsidiary Enterprise Value -2% (2,203)
+2% 2,157
Time to Liquidity -6 Months 13,273
+6 Months (11,704)
Discount Rate -5% 7,776
============================
+5% (6,244)
============================ =========== ====================
Financial Assets Held at Fair Value
Karuna and Vor Valuation
Karuna (Nasdaq: KRTX) and Vor (Nasdaq: VOR) and additional
immaterial investments are listed entities on an active exchange
and as such the fair value for the six months ended June 30, 2022,
was calculated utilizing the quoted common share price. Please
refer to Note 5 for further details.
Akili, Gelesis and Sonde
In accordance with IFRS 9, the Company accounts for its
preferred share investments in Akili, Gelesis (until the exchange
of such shares to common stock) and Sonde (investment in Preferred
A-2 and B shares, subsequent to the date of deconsolidation) as
financial assets held at fair value through the profit and loss. In
addition, the Company accounts for its investment in Gelesis
Earn-out shares (see Note 5) as investments held at fair value. All
the valuations of the aforementioned investments are categorized as
Level 3 in the fair value hierarchy due to the use of significant
unobservable inputs to value such assets. During the six months
ended June 30, 2022, the Company recorded such investments at fair
value and recognized the change in fair value of the investments as
a loss of $29.9 million that was recorded to the Condensed
Consolidated Statements of Comprehensive Income/(Loss) in the line
item Gain/(loss) on investments held at fair value.
The following table summarizes the changes in all the Group's
investments held at fair value, which were categorized as Level 3
in the fair value hierarchy:
$'000s
Balance at January 1, 2022 before allocation of associate
loss to long-term interest 239,533
Deconsolidation of Sonde 11,168
Gelesis - New Investment - Earn out Shares 14,214
Exchange of Gelesis preferred shares to Gelesis common shares
- transferred to investment in associates (92,303)
Gain/(Loss) on changes in fair value (30,217)
Balance as of June 30, 2022 before allocation of associate
loss to long-term interest 142,394
============================================================== ========
Share of associate loss allocated to long-term interest
(please refer to Note 5) -
============================================================== ========
Balance as of June 30, 2022 after allocation of associate
loss to long-term interest 142,394
============================================================== ========
The change in fair value of investments held at fair value are
recorded in Gain/(loss) on investments held at fair value in the
Condensed Consolidated Statements of Comprehensive
Income/(Loss).
The table below sets out information about the significant
unobservable inputs used at June 30, 2022, in the fair value
measurement of the Group's material preferred share investments
held at fair value categorized as Level 3 in the fair value
hierarchy:
Fair Value at Valuation Sensitivity to
June 30, 2022 Technique Unobservable Inputs Weighted Average Decrease in Input
============== ==================== =================== ================ ===================
Market PWERM Estimated time
128,764 & Hybrid allocation to exit 0.2 Fair value increase
============== ==================== ===================
Discount rate 20.0%
============== ==================== =================== ================ ===================
Market Backsolve Estimated time
11,168 & OPM to exit 2.00 Fair value increase
============== ====================
Volatility 50.0% Fair value decrease
============== ==================== =================== ================ ===================
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value hierarchy
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 June 30, 2022 Range $000s
========================== =========== ==========================
Investee Enterprise Value -2% (2,610)
+2% 2,644
Discount Rate -5% 900
==========================
+5% (876)
========================== =========== --------------------------
The sensitivity table does not include sensitivities around the
time to liquidity as changing the time to liquidity in the
valuations would either result in an unreasonable assumption
leading to an unreasonable alternative value considering the
circumstances on the financial reporting date, or it does not
materially impact the valuation.
The value of Gelesis Earn-out shares at June 30, 2022 was $1.6
million. The Earn-out shares were valued based on a Monte-Carlo
simulation with a daily frequency, using a risk free rate of 3.0%
and volatility of 62.0%.
Warrants
Warrants issued by subsidiaries within the Group are classified
as liabilities, as they will be settled in a variable number of
preferred shares. The following table summarizes the changes in the
Group's subsidiary warrant liabilities, which were categorized as
Level 3 in the fair value hierarchy:
Subsidiary
Warrant
Liability
$000s
Balance at December 31, 2021 and January 1, 2022 6,787
Change in fair value - finance costs (income) (3,002)
------------------------------------------------- ----------
Balance at June 30, 2022 3,786
================================================= ----------
The change in fair value of warrants are recorded in Finance
income/(costs) - fair value accounting in the Condensed
Consolidated Statements of Comprehensive Income/(Loss).
In connection with various amendments to its 2010 Loan and
Security Agreement, Follica issued Series A-1 preferred share
warrants at various dates in 2013 and 2014. Each of the warrants
has an exercise price of $0.14 and a contractual term of ten years
from the date of issuance. In 2017, in conjunction with the
issuance of convertible notes, the exercise price of the warrants
was adjusted to $0.07 per share.
In connection with the September 2, 2021 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 $3.8 million warrant liability at June 30, 2022, was largely
attributable to the outstanding Follica preferred share
warrants.
The table below sets out the weighted average of significant
unobservable inputs used at June 30, 2022, 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 1.17
Expected volatility 47.7%
Risk free interest rate 2.8%
Expected dividend yield -
Estimated fair value of the preferred share $1.65
============================================ ========
The following summarizes the sensitivity from the assumptions
made by the Company with respect to the significant unobservable
inputs which are categorized as Level 3 in the fair value hierarchy
and used in the fair value measurement of the Group's warrant
liabilities:
Input Warrant Liability
=================================
Financial
Liability
Increase/(Decrease)
Sensitivity
As at June 30, 2022 Range $000s
============================================= =========== ====================
Discount Rate used in the calculation of
estimated fair value of the preferred share -5% 2,022
=============================================
+5% (1,068)
============================================= =========== ====================
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 bore 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.
Fair Value Measurement and Classification
The fair value of financial instruments by category at June 30,
2022 and December 31, 2021:
2022
Carrying Amount Fair Value
------------------------ ----------------------------------
Financial Financial Level Level Level
Assets Liabilities 1 2 3 Total
$000s $000s $000s $000s $000s $000s
------------------------------- ---------- ------------ ------- ------- ------- -------
Financial assets:
Money Markets(1) 275,558 - 275,558 - - 275,558
Investments held
at fair value 367,947 - 225,553 - 142,394 367,947
Trade and other receivables(2) 4,369 - - 4,369 - 4,369
------------------------------- ---------- ------------ ------- ------- ------- -------
Total financial
assets 647,874 - 501,111 4,369 142,394 647,874
------------------------------- ---------- ------------ ------- ------- ------- -------
Financial liabilities:
Subsidiary warrant
liability - 3,786 - - 3,786 3,786
Subsidiary preferred
shares - 103,013 - - 103,013 103,013
Subsidiary notes
payable - 1,455 - 1,330 125 1,455
Share based liability
awards - 1,636 1,410 - 227 1,636
=============================== ========== ============ ======= ======= ======= =======
Total financial
liabilities - 109,890 1,410 1,330 107,150 109,890
------------------------------- ---------- ------------ ------- ------- ------- -------
1 Issued by a diverse group of corporations, largely consisting
of financial institutions, virtually all of which are investment
grade.
2 Outstanding receivables are owed primarily by government
agencies, virtually all of which are investment grade.
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.
15. Subsidiary Notes Payable
The subsidiary notes payable are comprised of loans and
convertible notes. As of June 30, 2022 and December 31, 2021, 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:
2022 2021
As of June 30, 2022 and December 31, 2021 $000s $000s
------------------------------------------ ------- ------
Loans 1,330 1,330
Convertible notes 125 2,586
------------------------------------------ ------- ------
Total subsidiary notes payable 1,455 3,916
------------------------------------------ ------- ------
Loans
In October 2010, Follica entered into a loan and security
agreement with Lighthouse Capital Partners VI, L.P. The loan is
secured by Follica's assets, including Follica's intellectual
property and bears interest at a rate of 12.0 percent. The
outstanding loan balance totaled approximately $1.3 million and
$1.3 million as of June 30, 2022 and December 31, 2021,
respectively. The accrued interest on such loan balance is
presented as Other current liabilities and totaled approximately
$0.7 million and $0.6 million as of June 30, 2022 and December 31,
2021, respectively. The increase in 2022 is attributed to interest
expense for the six months ended June 30, 2022.
Convertible Notes
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). In addition, in March
2022 Sonde issued an additional amount of $0.9 million, of which
$0.4 were issued to third parties (and $0.5 issued to PureTech and
eliminated in consolidation). The notes bore interest at an annual
rate of 6.0 percent and were to mature on the second anniversary of
the issuance. The notes were to 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 a discount of 20.0 percent from the price per
share in the Non Qualified Equity Financing. Upon the completion of
the Preferred B round of financing in Sonde on May 25, 2022, the
Group lost control in Sonde and all convertible notes were
derecognized as part of the deconsolidation - See Note 5.
Since these Notes contained embedded derivatives, the Notes were
assessed under IFRS 9 and the entire financial instruments were
elected to be accounted for as FVTPL. The group recorded the
changes in the fair value of the convertible notes In Finance Costs
in the Condensed Consolidated Statement of Comprehensive
Income.
Convertible Notes outstanding were as follows:
Knode Appeering Sonde Total
$000s $000s $000s $000s
====================================== ====== ========= ======= =======
As of January 1, 2022 50 75 2,461 2,586
====================================== ====== ========= ======= =======
Gross principal - issuance of notes
- financing activity - - 393 393
Accrued interest on convertible notes
- finance costs - - 48 48
Change in fair value - finance costs - - 502 502
Deconsolidation of subsidiary - - (3,403) (3,403)
====================================== ====== ========= ======= =======
As of June 30, 2022 50 75 - 125
====================================== ====== ========= ======= =======
16. 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. As part of
the loan agreement, 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 $15.3 million as of June 30,
2022.
The following table summarizes long-term loan activity for the
six months ended June 30, 2022:
Long-term
loan
=========
2022
$000s
====================== =========
Balance at January 1, 15,118
Accrued interest 811
Interest paid (620)
Balance at June 30, 15,309
====================== =========
The following table summarizes Vedanta's future principal
payments for the long-term loan as of June 30, 2022:
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 309
============================= ==== ===== ===== ===== ======
Total 15,309
============================= ==== ===== ===== ===== ======
The long-term loan is presented as follows in the Statement of
Financial Position as of June 30, 2022 and December 31, 2021
Long-term loan
================
2022 2021
$000s $000s
================================== ======== ======
Current portion of Long-term loan 3,429 857
Long-term loan 11,881 14,261
---------------------------------- ======== ======
Total Long-term loan 15,309 15,118
---------------------------------- -------- ------
17. Non-Controlling Interest
The following table summarizes the changes in the equity
classified non-controlling ownership interest in subsidiaries by
reportable segment; On May 25, 2022, Sonde Health, Inc was
deconsolidated and therefore transferred retroactively to the
Non-Controlled Founded Entity segment. See Note 5. Investments Held
at Fair Value.
Controlled Non-Controlled Parent
Founded Founded Company
Internal Entities Entities & Other Total
$000s $000s $000s $000s $000s
-------------------------------- -------- ---------- -------------- -------- --------
Balance at January 1, 2022 - 1,634 (11,585) 583 (9,368)
Share of comprehensive income
(loss) - 5,195 (330) 7 4,872
NCI exercise of share-based
awards - (15,164) - - (15,164)
Deconsolidation of subsidiaries - - 11,904 - 11,904
Equity settled share-based
payments - 2,018 8 - 2,026
Other - - 2 (6) (4)
Balance at June 30, 2022 - (6,317) - 584 (5,733)
================================ ======== ========== ============== ======== ========
On June 11, 2021, PureTech acquired the remaining 17.1 percent
of the minority non-controlling interests of Alivio (after exercise
of all in the money stock options) increasing its ownership to
100.0 percent of Alivio. The consideration for such non controlling
interests amounted to $1.2 million, to be paid in three equal
installments, with the first installment of $0.4 million paid at
the effective date of the transaction and two additional
installments to be paid upon the occurrence of contingent events.
The Group recorded a contingent consideration liability of $0.6
million at fair value for the two additional installments,
resulting in a total acquisition cost of $1.0 million. The excess
of the consideration paid over the book value of the
non-controlling interest of approximately $9.6 million was recorded
directly as a charge to shareholders' equity. The contingent
consideration liability is adjusted to fair value at the end of
each reporting period until settlement with changes in fair value
recorded in earnings. The second installment was paid in July
2021.
On February 15, 2022, option holders in Vedanta exercised
options into shares of common stock, increasing the NCI interest
held from 3.7 percent to 12.2 percent. The exercise of the options
resulted in an increase in the NCI share in Vedanta's shareholder's
deficit of $15.2 million. The consideration paid by NCI ($7.2
thousand) together with the increase in NCI share in Vedanta's
shareholder deficit ($15.2 million) amounted to $15.2 million and
was recorded as a gain directly in shareholders' equity.
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.
2022
Controlled
Founded Intra-group
Entities eliminations Total
For the period ended June 30 $000s $000s $000s
------------------------------------------ ---------- ------------- --------
Statement of Comprehensive Loss
------------------------------------------ ---------- ------------- --------
Total revenue 4,799 - 4,799
------------------------------------------ ---------- ------------- --------
Income/(loss) for the period 35,727 502 36,229
Total comprehensive income/(loss) for the
period 35,727 502 36,229
------------------------------------------ ---------- ------------- --------
Statement of Financial Position
Total assets 41,969 (99) 41,870
Total liabilities 148,854 (9,709) 139,144
========================================== ========== ============= ========
Net assets/(liabilities) (106,884) 9,610 (97,274)
========================================== ========== ============= ========
As of June 30, 2022, Controlled Founded Entities with
non-controlling interests primarily include Follica Incorporated,
Entrega Inc., and Vedanta Biosciences, Inc. Ownership interests of
the non-controlling interests in Follica Incorporated, Entrega
Inc., and Vedanta Biosciences, Inc as of June 30, 2022 are 19.9
percent, 11.7 percent and 12.2 percent, respectively. In addition,
Non-controlling interests include the amounts recorded for
subsidiary stock options, with the vast majority comprising of
Vedanta stock options.
18. Trade and Other Payables
Information regarding Trade and other payables was as
follows:
2022 2021
As of June 30, 2022 and December 31, 2021 $000s $000s
========================================== ======= ======
Trade payables 15,094 11,346
Accrued expenses 15,209 17,309
Income tax payable 60 57
Liability settled share based awards 617 4,703
Other 2,131 2,403
------------------------------------------ ------- ------
Total trade and other payables 33,110 35,817
------------------------------------------ ------- ------
19. Leases
The activity related to the Group's right of use asset and lease
liability for the six months ended June 30, 2022 is as follows:
Right of
use asset,
net
===========
2022
$000s
Balance at January 1, 17,166
Additions 137
Depreciation (1,521)
Balance at June 30, 15,782
====================== ===========
Total lease
liability
===========
2022
$000s
Balance at January 1, 32,990
Additions 137
Cash paid for rent - principal - financing cash flow (2,815)
Cash paid for rent - interest (1,021)
Interest expense 1,021
Balance at June 30, 31,333
===================================================== ===========
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 $1.5
million and $1.5 million for the six months ended June 30, 2022,
and June 30, 2021, respectively.
The following details the short term and long-term portion of
the lease liability as of June 30, 2022:
Total lease
liability
===========
2022
$000s
-------------------------------------- -----------
Short-term Portion of Lease Liability 4,635
Long-term Portion of Lease Liability 26,697
-------------------------------------- -----------
Total Lease Liability 31,333
-------------------------------------- -----------
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 sublesee obtained possession
of the premises on June 1, 2019 and the rent period term began on
June 1, 2019 and expires on August 31, 2025. The sublease was
determined to be a finance lease. As of June 30, 2022, the balances
related to the sublease were as follows:
Total
lease
receivable
$000s
--------------------------------------- -----------
Short-term Portion of Lease Receivable 432
Long-term Portion of Lease Receivable 1,065
--------------------------------------- -----------
Total Lease Receivable 1,497
--------------------------------------- -----------
During the six months ended June 30, 2021 PureTech recognized
$0.5 million sublease income for an operating lease of
approximately 11,852 rentable square feet located on the third
floor of the 6 Tide Street building, that expired on August 31,
2021.
20. Commitments and Contingencies
The Group is party to certain licensing agreements where the
Group is licensing IP from third parties. In consideration for such
licenses the Group has made upfront payments and may be required to
make additional contingent payments based on developmental and
sales milestones and/or royalty on future sales. As of June 30,
2022, these milestone events have not yet occurred and therefore
the Group does not have a present obligation to make the related
payments in respect of the licenses. Such milestones are dependent
on events that are outside of the control of the Group and many of
these milestone events are remote of occurring. As of June 30,
2022, 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 $9.6
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
11.
The Group is party to certain sponsored research arrangements as
well as arrangements with contract manufacturing and contract
research organizations, whereby the counterparty provides the
Company with research and/or manufacturing services. As of June 30,
2022, the noncancellable commitments in respect of such contracts
amounted to approximately $11.1 million.
21. Related Parties Transactions
Related Party Subleases and royalties
During 2019, PureTech executed sublease agreements with a
related party, Gelesis. Please refer to Note 19 for further details
regarding the sublease.
The Group receives royalties from Gelesis on its product sales.
Such royalties amounted to $328 thousand and $105 thousand for the
six months ended June 30, 2022 and 2021, 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 non-executive directors). The key management personnel
compensation of the Group was as follows for the six months ended
June 30:
2022 2021
For the six months ended June 30 $000s $000s
------------------------------------- ------- ------
Short-term employee benefits 1,672 1,313
Share-based payment expense (income) (2,010) 1,896
------------------------------------- ------- ------
Total (337) 3,209
------------------------------------- ------- ------
Short-term employee benefits include salaries, health care and
other non-cash benefits. Share-based payments are generally subject
to vesting terms over future periods. For the six months ended June
30, 2022 the Group had net income in respect of share based
compensation to executives due to the income in respect of RSU
liabilities because of the decrease in value of RSUs.
For cash settlements of share based awards - see Note 7.
In addition the company paid remuneration to non-executive
directors in the amounts of $303 thousand and $280 thousand for the
six months ended June 30, 2022 and June 30, 2021 respectively.
Also, the company incurred $145 thousand of stock based
compensation expense for such non-executive directors for the six
months ended June 30, 2022. There is no stock based compensation
expense for such non-executive directors for the six months ended
June 30, 2021.
During the six months ended June 30, 2022 and 2021,
respectively, the company incurred $54 thousand and $30 thousand of
expenses paid to related parties.
Convertible Notes Issued to Directors
Certain members of the Group have invested in convertible notes
issued by the Group's subsidiaries. As of June 30, 2022 and
December 31, 2021, the outstanding related party notes payable
totaled $97 thousand and $94 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 15.
Directors' and Senior Managers' Shareholdings and Share
Incentive Awards
The Directors and senior managers hold beneficial interests in
shares in the following businesses and sourcing companies as at
June 30, 2022:
Number Number Number
of shares of options of RSUs
held as held as held as
Business Name (Share of June of June of June Ownership
Class) 30, 2022 30, 2022 30, 2022 Interest(1)
===================== =========================== ========== =========== ========= ============
Directors:
Ms Daphne Zohar(2) Gelesis (Common) 465,121 3,303,306 1,349,697 4.38%
Dr Robert Langer Entrega (Common) 250,000 82,500 - 4.09%
Dr Raju Kucherlapati Enlight (Class B Common) - 30,000 - 3.00%
Akili (Series A-2
Dr John LaMattina(3) Preferred) 37,372 - - 0.84%
Akili (Series C Preferred) 11,755 - - 0.15%
Gelesis (Common)(3) 373,530 62,130 - 0.37%
Vedanta Biosciences
(Common) 25,000 - - 0.17%
Senior Managers:
Dr Bharatt Chowrira Karuna (Common) 5,000 - - 0.02%
Dr Joseph Bolen Vor (Common) - 9,191 - 0.02%
--------------------- --------------------------- ---------- ----------- --------- ------------
1 Ownership interests as of June 30, 2022 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 287,861 shares of common
shares in Gelesis. Individually, Dr LaMattina holds 85,669 shares
of Gelesis and convertible notes issued by Appeering in the
aggregate principal amount o $50,000.
Directors and senior managers hold 25,405,881 ordinary shares
and 8.8 percent voting rights of the Company as of June 30, 2022.
This amount excludes options to purchase 3,550,000 ordinary shares.
This amount also excludes 8,237,106 shares, which are issuable
based on the terms of performance based RSU awards granted to
certain senior managers covering the financial years 2022, 2021 and
2020, and 67,140 shares which were issued to directors in July 2022
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 14 for details on the $15.0 million note issued by
Gelesis to the Company. The Company recognized finance income of
$59 thousand with respect to interest and changes in fair value
related to the short term note. 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.
22. Taxation
Tax benefit/(expense) is recognized based on management's best
estimate of the average annual effective income tax rate which is
determined for each taxing jurisdiction and applied individually to
the interim period pre-tax income/(loss) of each jurisdiction.
Additionally, tax expense/(benefit) that relates to discrete events
and transactions is recognized in the interim period in which the
event or transactions occurs.
During the six months ended June 30, 2022 and 2021, the Group
recorded a consolidated tax provision of $(32.5) million benefit
and $(17.4) million benefit, respectively, which represented
effective tax rates of 58.1 percent and 18.3 percent, respectively.
The effective tax rate in the current period (which is higher than
the statutory tax rate) is primarily driven by the fact that
finance income recorded in respect of changes in the fair value of
subsidiary preferred share liabilities is non taxable as well as
the majority of the gain on deconsolidation and the gain on
dilution of interest in an associate. The change in the tax rate
period over period also results from the aforementioned gains that
do not exist for the six months ended June 30, 2021.
23. Subsequent Events
The Company has evaluated subsequent events after June 30, 2022,
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:
Loan to Gelesis
On July 27, 2022, the Company, as a lender, entered into an
unsecured Short Term Promissory Note ("Note") with Gelesis (GLS),
as a borrower, in the amount of $15.0 million. The Note bears an
annual interest rate of 15.0 percent per annum and accrues until
the note is repaid. The term of the Note is the earlier of December
31, 2023 or five business days following the consummation of a
qualified financing by Gelesis.
Subsequent to balance sheet date through August 19, 2022, the
Company repurchased an aggregate of 2,471,832 Ordinary Shares under
the share repurchase program. See note 12.
On August 8, 2022, the Company sold 125,000 shares of Karuna
common stock. In addition, the Company wrote a series of call
options entitling the holders thereof to purchase up to 477,100
Karuna common stock at a set price. Aggregate proceeds to the
Company from all aforementioned transactions are expected to be
approximately $115.4 million , net of transaction fees, presuming
the exercise of all call options.
See Note 5 for the closing after balance sheet date of the
business combination agreement between Akili Interactive and Social
Capital Suvretta Holdings Corp. I, a special purpose acquisition
company. The transaction closed on August 19, 2022 and the combined
company's securities began trading on August 22, 2022 on the Nasdaq
Stock Market under the ticker symbol "AKLI". As part of a PIPE
transaction that took place concurrently with the closing of the
transaction, the Company purchased 500,000 shares in consideration
for $5.0 million. Following the closing of the aforementioned
transactions, the Company holds 12,527,477 shares of the combined
entity (excluding the Akili Earnout Shares), which represents 14.7
percent of its outstanding common stock.
Directors' responsibility statement
The Board of Directors approved this Half-yearly Financial
Report on August 24, 2022 .
The Directors confirm that to the best of their knowledge the
unaudited condensed financial information has been prepared in
accordance with IAS 34 as contained in UK-adopted International
Financial Reporting Standards (IFRS) and that the interim
management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8.
Approved by the Board of Directors and signed on its behalf by
:
Daphne Zohar
Chief Executive Officer
August 24, 2022
INDEPENDENT REVIEW REPORT TO PURETECH HEALTH PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2022 which comprises the condensed
consolidated statement of financial position, related condensed
consolidated statements of comprehensive income/(loss), condensed
consolidated statements of changes in equity, condensed
consolidated statements of cash flows and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2022 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Basis for conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued for use in the UK. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. We
read the other information contained in the half-yearly financial
report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the condensed
set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of conclusion
section of this report, nothing has come to our attention that
causes us to believe that the directors have inappropriately
adopted the going concern basis of accounting, or that the
directors have identified material uncertainties relating to going
concern that have not been appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However, future events or
conditions may cause the group to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
group will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with UK-adopted international
accounting standards.
The directors are responsible for preparing the condensed set of
financial statements included in the half-yearly financial report
in accordance with IAS 34 as adopted for use in the UK.
In preparing the condensed set of financial statements, the
directors are responsible for assessing the group's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for conclusion section of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Robert Seale
for and on behalf of KPMG LLP
Chartered Accountants
15 Canada Square
London
E14 5GL
United Kingdom
August 24, 2022
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