PureTech Health plc
Annual report and accounts 2019
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M E D I C I N E S
PureTech Health
Developing BIG medicines
PureTech Health plc (HQ: Boston, MA; LSE: PRTC) (“PureTech Health”, “PureTech”, or “the Company”), which is comprised
of PureTech and its Founded Entities1 (together, “the Group”), is a clinical-stage biotherapeutics company dedicated
to discovering, developing and commercialising highly differentiated medicines for devastating diseases, including
intractable cancers, lymphatic and gastrointestinal diseases, central nervous system disorders and inflammatory and
immunological diseases, among others. The Group 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 Entities1, is comprised of 23 product
candidates and one product that has been cleared by the US Food and Drug Administration (FDA). All of the underlying
programmes and platforms that resulted in this pipeline of product candidates were initially identified or discovered and
then advanced by the PureTech team through key validation points based on their unique insights into the biology of the
brain, immune and gut, or BIG, systems and the interface between those systems, referred to as the BIG Axis.
PureTech is led by a proven and seasoned management team of business leaders with significant experience in discovering
and developing important new medicines, delivering them to market and maximising shareholder value.
In addition to the management team, PureTech’s accomplished board of directors and research and development
committee contribute to its robust innovation and development engine. Having joined from senior positions at top
biopharmaceutical companies and research institutions, the board and members of the research and development
committee possess substantial expertise and experience in drug discovery, development and commercialisation.
Across its Wholly Owned Pipeline and Founded Entities, PureTech is developing BIG medicines with:
• disease-focused drug discovery based on proprietary
insights that have yielded 23 product candidates, of
which 14 are clinical-stage product candidates, and one
product that has been cleared by the US Food and Drug
Administration (FDA);
• a strong capital base with PureTech Level Cash Reserves
of $120.6 million as of 31 December 2019 along with
$200.9 million in proceeds from the 22 January 2020 sale
of 2.1 million Karuna common shares totalling PureTech
Level Pro-forma Cash Reserves of $321.5 million2;
• a unique and collaborative approach to research and
development that enables rapid and capital-efficient
prioritisation and validation;
• relationships with major pharmaceutical companies or
their investment arms to advance some of the underlying
programmes and platforms; and
• a distinctive business model that drives shareholder
• an innovative and entrepreneurial culture that attracts
value through a Wholly Owned Pipeline, equity
growth in Founded Entities and non-dilutive
partnerships and grants;
and retains top talent.
Overview
Highlights of the Year
Components of Value
Letter from the Chairman
Strategic report
Letter from the Chief Executive Officer
Letter from the Chief Scientific Officer
How PureTech is building value for investors
PureTech’s Wholly Owned Pipeline
PureTech’s Founded Entities
Governance
Risk management
Viability
Key Performance Indicators
Financial Review
Chairman’s overview
Board of Directors
Management team
The Board
1
4
6
7
10
14
21
31
45
48
49
50
54
55
58
60
Corporate and Social Responsibility
Directors’ Report
Report of the Nomination Committee
Report of the Audit Committee
Directors’ Remuneration Report
Directors’ Remuneration Policy
Annual Report on Remuneration
65
68
73
74
76
78
82
Financial statements
Independent auditor’s report to the members of PureTech Health plc 89
98
Consolidated Statements of Comprehensive Income/(Loss)
99
Consolidated Statements of Financial Position
100
Consolidated Statements of Changes in Equity
102
Consolidated Statements of Cash Flows
104
Notes to the Consolidated Financial Statements
152
PureTech Health plc Statement of Financial Position
153
PureTech Health plc Statements of Changes in Equity
154
PureTech Health plc Statements of Cash Flows
155
Notes to the Financial Statements
156
Directors, Secretary, and Advisors to PureTech Health plc
1
2
Unless the context specifically indicates otherwise, references in this report to “Founded Entities” refer to the entities that PureTech founded and in which PureTech
continues to hold equity. 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 31 December 2019, Controlled Founded Entities
include Alivio Therapeutics, Inc., Follica, Incorporated, Entrega, Inc., Vedanta Biosciences, Inc. and Sonde Health, Inc., and Non-Controlled Founded Entities include
Akili Interactive Labs, Inc., Gelesis, Inc., Karuna Therapeutics, Inc., Vor Biopharma Inc. and, for all periods prior to December 18, 2019, resTORbio, Inc.
PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the
$200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Level Cash Reserves represent cash balances and short-term
investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC, PureTech Securities Corporation of $112.0 million for the year ended
2019 and the internal pipeline of $8.6 million for the year ended 2019, all of which are wholly-owned entities of PureTech, excluding cash balances and short-term
investments of Controlled Founded Entities. PureTech Pro-forma Cash Reserves is therefore considered to be more representative of the Corporate’s cash available for
the year 2020 and beyond to advance product candidates within the full breadth of its operations.
Highlights of the Year – 2019
2019 PureTech Level
Pro-forma Cash Reserves Cash Reserves at Year End
2019 Consolidated
Pro-forma Cash Reserves Cash Reserves at Year End
Consolidated
$321.5m3
$120.6m4
$363.3m5
$162.4m6
2018: $177.7m
2017: $126.7m
2016: $192.1m
2015: $255.5m
2014: $53.2m
2018: $250.9m
2017: $188.7m
2016: $281.5m
2015: $313.7m
2014: $62.7m
Amount of funding secured for Founded Entities
Clinical trials initiated
Clinical trial readouts
$666.8m7,8
$622.8m (93.4%) came from third parties
68,9
58,10
2018: $274.0m
2017: $102.9m
2016: $98.2m
2015: $74.6m
2014: $8.0m
Wholly Owned Pipeline
In 2019, PureTech grew and strengthened its Wholly Owned Pipeline, which is centred on the lymphatic system
and related immunological disorders. This pipeline includes one clinical-stage product candidate for the potential
treatment of a range of conditions involving fibrosis, inflammation and impaired lymphatic flow (LYT-100), two
preclinical product candidates for intractable cancers (LYT-200 and LYT-210) and three discovery platforms.
Key developments include the following:
• In July 2019, PureTech announced the acquisition of a clinical‑stage product candidate LYT‑100 (deupirfenidone) for the
potential treatment of a range of conditions of fibrosis, inflammation and impaired lymphatic flow, including lymphoedema.
Lymphoedema is a debilitating and chronic condition that affects millions of people and is characterised by swelling due to
the build‑up of lymph fluid and inflammation.
• In the March 2020 post‑period, PureTech announced the initiation of a multiple ascending dose study to evaluate the safety,
tolerability and pharmacokinetic profile of LYT‑100 in healthy participants. Results are expected in 2020 and may enable
the initiation of a proof‑of‑concept study in people with breast cancer‑related, upper limb secondary lymphoedema later
in 2020. PureTech may also explore the application of LYT‑100 in idiopathic pulmonary fibrosis (IPF), interstitial pneumonias,
unclassifiable interstitial lung disease (uILD) and other interstitial lung disease (ILD), radiation‑induced fibrosis and focal
segmental glomerulosclerosis (FSGS).
• In April 2019, PureTech announced a collaboration agreement with Boehringer Ingelheim (BI) to evaluate the feasibility of
applying PureTech’s lymphatic targeting technology to advance certain of BI’s immuno‑oncology product candidates. Under
the terms of the agreement, PureTech is eligible to receive up to $26 million in upfront payments, research support and
preclinical milestones, and is eligible to receive more than $200 million in development and sales milestones, in addition to
royalties on product sales.
• PureTech presented preclinical data supporting its first‑in‑class, fully‑human monoclonal antibodies targeting galectin‑9
(LYT‑200) and immunosuppressive γδ1 (gamma delta‑1) T cells (LYT‑210) at the American Association for Cancer Research
(AACR) Annual Meeting in April 2019 and the Society for Immunotherapy of Cancer (SITC) Annual Meeting in November
2019. PureTech is developing LYT‑200 and LYT‑210 to treat intractable cancers, including colorectal cancer (CRC),
cholangiocarcinoma and pancreatic cancer, along with other relevant cancers and immunological disorders.
• In June 2019, PureTech expanded to new corporate headquarters and labs in Boston’s Seaport District to advance and
accelerate development of the Company’s Wholly Owned Pipeline. In addition to the programmes mentioned above
(LYT‑100, LYT‑200, LYT‑210 and the lymphatic targeting chemistry platform), PureTech’s Wholly Owned Pipeline includes
a milk exosome platform to traffic therapeutics via the lymphatic system and a meningeal lymphatics platform for treating
neurodegenerative diseases.
3
4
5
6
7
PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the
$200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-forma Cash Reserves is therefore considered to be more
representative of the Corporate’s cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.
PureTech Level Cash Reserves represent cash balances and short-term investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC,
PureTech Securities Corporation of $112.0 million for the year ended 2019 and the internal pipeline of $8.6 million for the year ended 2019, all of which are wholly-owned
entities of PureTech, excluding cash balances and short-term investments of Controlled Founded Entities. The balance excludes the $200.9 million in proceeds from the
22 January 2020 sale of 2.1 million Karuna common shares.
Consolidated Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the Consolidated Cash Reserves of $162.4 million and the $200.9 million
in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. Consolidated Pro-forma Cash Reserves is therefore considered to be more representative of
the Group’s cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.
Consolidated Cash Reserves includes cash balances of $132.4 million and short-term investments of $30.1 million for the year ended 2019 as shown on the Consolidated
Statements of Financial Position.
Funding figure includes private equity financings, public offerings or grant awards. Funding figure excludes upfront payments and future milestone considerations received
in conjunction with partnerships and collaborations such as those with Roche, Boehringer Ingelheim, Imbrium Therapeutics L.P., Shionogi & Co., Ltd. or Eli Lilly.
Number represents figure for the relevant fiscal year only and is not cumulative.
Karuna, Vedanta and resTORbio each initiated two clinical trials in 2019.
8
9
10 Gelesis, Karuna, Follica, Akili and resTORbio reported clinical results from across their pipelines in 2019.
PureTech Health plc Annual report and accounts 2019 1
Overview
Highlights of the Year — continued
Founded Entities
PureTech’s Founded Entities have made significant progress advancing 20 product candidates,
13 of which are clinical stage. Key developments include the following:
• In the January 2020 post‑period, Akili
announced that a study achieved
its primary endpoint evaluating the
effects of lead product candidate
AKL‑T01 in children with Attention
Deficit Hyperactivity Disorder
(ADHD) when used with and without
stimulant medication.
• In December 2019, Akili presented
the results from a trial of AKL‑T03 as
a potential treatment for cognitive
impairments adjunct to anti‑depressant
medication in adults with Major
Depressive Disorder (MDD) at the
58th Annual Meeting of the American
College of Neuropsychopharmacology.
In the trial, AKL‑T03 demonstrated
a statistically significant improvement
in sustained attention compared
to control. AKL‑T03 is designed to
improve specific cognitive functions
and may play a complementary role
to antidepressants in the holistic
treatment of MDD.
• Akili is currently actively pursuing FDA
clearance for AKL‑T01. Clearance for
AKL‑T01 has not yet been granted, and
Akili continues to work with the FDA in
an effort to make the product available
for children living with ADHD.
• In March 2019, Akili entered into
a strategic partnership with Shionogi
& Co., Ltd. for the development and
commercialisation of two of Akili’s
digital medicine product candidates,
AKL‑T01 and AKL‑T02 (in development
for children with ADHD and Autism
Spectrum Disorder, respectively), in
Japan and Taiwan. Under the terms of
the agreement, Akili will build and own
the platform technology and received
upfront payments totalling $20 million,
with potential milestone payments for
Japan and Taiwan commercialisation
of up to an additional $105 million in
addition to substantial royalties.
• In June 2019, Karuna announced the
successful pricing of its initial public
offering (IPO) of common stock on
the Nasdaq Global Market under the
symbol “KRTX.” Gross proceeds were
approximately $102.6 million, including
the full exercise of the underwriters’
over‑allotment option. Karuna
previously completed an $82.1 million
Series B round in April 2019, including
the issuance of $7.1 million in shares
upon conversion of debt into equity.
• In November 2019, Karuna announced
that KarXT achieved the primary
endpoint of its Phase 2 clinical trial
for the treatment of acute psychosis
in patients with schizophrenia. In the
clinical trial, KarXT demonstrated
a statistically significant and clinically
meaningful 11.6 point mean reduction
in total Positive and Negative Syndrome
Scale (PANSS) score compared
to placebo (p<0.0001) and also
demonstrated good overall tolerability.
A statistically significant reduction in
the secondary endpoints of PANSS‑
Positive and PANSS‑Negative scores
were also observed (p<0.001). Karuna
plans to hold an end‑of‑Phase 2
meeting with the FDA in the second
quarter of 2020, and pending the
outcome of that meeting, anticipates
advancing KarXT into a Phase 3 clinical
trial by the end of 2020.
• In November 2019, Karuna completed
a follow‑on offering of 2,600,000
shares of its common stock, with gross
proceeds of approximately $250 million.
• In the January 2020 post‑period,
PureTech sold 2.1 million of its Karuna
shares for a cash consideration of
approximately $200 million. PureTech
intends to use the proceeds from this
transaction to fund its operations and
growth for the foreseeable future
and to further expand and advance
its clinical‑stage Wholly Owned
Pipeline. Following the sale, PureTech
continues to hold 5,295,397 shares of
Karuna common stock (20.3% as of
13 March 2020) and has a right to royalty
payments as a percentage of net sales.
• In April 2019, Gelesis received clearance
from the FDA for its first product,
Plenity™1 (Gelesis100), a prescription
aid for weight management in adults
with a Body Mass Index (BMI) of
25‑40 kg/m2, when used in conjunction
with diet and exercise. Gelesis initiated
a Plenity early experience programme
in the United States in the second
half of 2019 and anticipates Plenity
will be available by prescription in the
United States in the second half of
2020, with a broad launch in early 2021.
Gelesis also filed Plenity for marketing
authorisation in Europe in February
2019. Important safety information
regarding Plenity can be found at
www.myplenity.com.
• In December 2019, Gelesis announced
a partnership with Ro, a leading US
telehealth provider, to support the US
commercialisation of Plenity, which is
expected in the second half of 2020,
with a broad launch in early 2021.
• In 2019, Gelesis secured nearly
$100 million in new capital and
non‑dilutive grants to support the
US commercialisation of Plenity,
including over $84 million announced
in December 2019 and $10.6 million
announced in April 2019.
• In 2019, Gelesis and its research
collaborators presented clinical data
supporting its proprietary hydrogel
platform. Additional safety and
efficacy data for Plenity was presented
at ObesityWeek, and clinical data
for a GS500 prototype in patients
with chronic idiopathic constipation
(CIC) was presented at Digestive
Disease Week. Gelesis also presented
preclinical research at the Endocrine
Society Annual Meeting and The
International Liver Congress suggesting
that GS300 may restore gut barrier
function after damage as well as
prevent the harmful effects of a high‑
fat diet on the liver and associated
metabolic disorders.
• In the March 2020 post‑period, Gelesis
was named to Fast Company’s annual
list of the World’s Most Innovative
Companies for 2020, which honours the
businesses making the most profound
impact on both industry and culture.
2 PureTech Health plc Annual report and accounts 2019
Overview Highlights of the Year — continued
• In December 2019, Follica announced
topline results from its safety and
efficacy optimisation study of its lead
candidate to treat hair loss in male
androgenetic alopecia. The study
was designed to select the optimal
treatment regimen using Follica’s
proprietary device in combination with
a topical drug and successfully met
its primary endpoint. The selected
treatment regimen demonstrated
a statistically significant 44%
improvement of non‑vellus (visible) hair
count after three months of treatment
compared to baseline (p < 0.001,
n = 19). The initiation of a Phase 3
registration study in male androgenetic
alopecia is expected in 2020.
• In January 2019, Alivio Therapeutics
entered into a partnership focused
on non‑opioid approaches to
pain management with Imbrium
Therapeutics L.P. to advance ALV‑107,
a non‑opioid treatment being
developed for interstitial cystitis/
bladder pain syndrome (IC/BPS),
through clinical development. Under
the terms of the agreement, Alivio is
eligible to receive up to $14.75 million
in upfront and near‑term license
exercise payments and is eligible to
receive royalties on product sales
and over $260 million in research and
development milestones. Alivio retains
the rights of its inflammation targeting
platform for a broad range of internal
and partnering applications.
• In December 2019, Vedanta Biosciences
announced the initiation of a first‑in‑
patient clinical trial of its immuno‑
oncology candidate, VE800, in
patients with select types of advanced
or metastatic cancer. The trial will
evaluate clinical activity of VE800
in combination with Bristol‑Myers
Squibb’s programmed death‑1 (PD‑1)
immune checkpoint inhibitor Opdivo®
(nivolumab). Topline results are
anticipated in 2021.
• In July 2019, Vedanta Biosciences
announced the enrolment of the
first patient in its Phase 1/2 clinical
study of its product candidate VE416
for food allergy. Topline results are
expected in 2021.
• In January 2019, Vedanta Biosciences
published seminal research in Nature
that underlies Vedanta’s proprietary
oral immuno‑oncology product
candidate, VE800.
• In May 2019 and September 2019,
Vedanta Biosciences announced
extensions to its Series C financing
round, bringing the total capital raised
in the round to $62.1 million.
• In December 2019, Vedanta
Biosciences announced that it had
been awarded a $5.8 million grant
from Combating Antibiotic‑Resistant
Bacteria Biopharmaceutical Accelerator
(CARB‑X) to advance its VE707
programme targeting multi‑drug
resistant organisms.
• In May 2019, Vedanta Biosciences
presented expanded data from
its Phase 1a/1b study of VE303, the
company’s product candidate for high‑
risk Clostridioides difficile infection
(CDI) at Digestive Disease Week.
• In February 2019, Vor completed
a $42.9 million Series A financing round
to advance its lead cell therapy product
candidate for the treatment of acute
myeloid leukaemia (AML) and to further
build its pipeline to treat haematologic
malignancies.
• In May 2019, the scientific founder
of Vor Biopharma, Dr Siddhartha
Mukherjee, and key individuals
from his lab at Columbia University,
published a preclinical proof‑of‑
concept study supporting Vor’s lead
product candidate, VOR33, and its
technology platform for treating cancer
via engineered haematopoietic stem
cells (HSCs) in the Proceedings of the
National Academy of Sciences (PNAS).
• In the January 2020 post‑period,
Vor held a pre‑IND meeting with the
FDA to gather important feedback to
assemble the data package necessary
for a potential IND filing.
• In April 2019, Sonde completed
a $16 million Series A financing round,
including the issuance of $6 million in
shares upon conversion of debt into
equity, to expand the capability of its
voice‑based technology platform for
monitoring and diagnosing mental
and physical medical conditions
across additional health conditions
and device types and to fund
commercialisation activities.
• Sonde has collected voice data from
over 40,000 subjects as a part of the
ongoing validation of its platform,
and it has also initiated research and
development to expand its proprietary
technology into Alzheimer’s disease
and respiratory and cardiovascular
disease, as well as other health and
wellness conditions.
1 Important Safety Information: Plenity is contraindicated in patients who are pregnant or are allergic
to cellulose, citric acid, sodium stearyl fumarate, gelatine, or titanium oxide. Plenity may alter the
absorption of medications. Read Sections 6 and 8.3 of the Instructions for Use carefully. Avoid use in
patients with the following conditions: oesophageal anatomic anomalies, including webs, diverticuli,
and rings; suspected strictures (such as patients with Crohn’s disease); or complications from prior
gastrointestinal (GI) surgery that could affect GI transit and motility. Use with caution in patients with:
active GI conditions such as gastro-oesophageal reflux disease (GERD), ulcers, or heartburn. Overall,
the most common treatment related adverse events (TRAEs) were GI-related TRAEs with 38 per cent
of adults in the Plenity group and 28 per cent of adults in the placebo group experiencing a GI-related
TRAE. The overall incidence of AEs in the Plenity group was no different than the placebo group.
Rx Only. For the safe and proper use of Plenity, refer to the Instructions for Use.
• Entrega continued to advance its
platform for the oral delivery of
biologics, vaccines and other drugs that
are otherwise not efficiently absorbed
when taken orally, progressing a broad
range of prototypes in additional
preclinical studies as part of its
collaboration with Eli Lilly.
PureTech Health plc Annual report and accounts 2019 3
Overview Components of Value
Wholly Owned Pipeline
Product Candidate
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
LYT-100
Deupirfenidone
Lymphatic flow disorders,
including lymphoedema
LYT-100
Deupirfenidone
Other fibrotic and
inflammatory disorders
Initiation of POC
study in 2020
Initiation of POC
study in 2020
LYT-200
Anti‑Galectin‑9 MAb
Solid Tumours
IND and initiation of
Ph1a/1b study in 2020
LYT-210
Anti‑Delta‑1 MAb
Solid Tumours
LYT-210
Anti‑Delta‑1 MAb
GI Autoimmunity
Lymphatic Targeting
Chemistry Platform
Milk Exosome
Platform
Meningeal Lymphatics
Platform
Cash at PureTech Parent Level
$321.5m PureTech Level Pro-forma Cash Reserves1
$120.6m PureTech Level Cash Reserves2 as of 31 December 2019
1
2
PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the $200.9 million
in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-forma Cash Reserves is therefore considered to be more representative of the
Corporate’s cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.
PureTech Level Cash Reserves represent cash balances and short-term investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC, PureTech
Securities Corporation of $112.0 million for the year ended 2019 and the internal pipeline of $8.6 million for the year ended 2019, all of which are wholly-owned entities of PureTech,
excluding cash balances and short-term investments of Controlled Founded Entities. The balance excludes the $200.9 million in proceeds from the 22 January 2020 sale of
2.1 million Karuna common shares.
4 PureTech Health plc Annual report and accounts 2019
Overview Components of Value — continued
Founded Entities1
Controlling interest or right to receive royalties
Limited to equity interest
Developing therapies for people with
severe neuropsychiatric disorders and pain
A regenerative platform
for hair growth
Digital therapeutics for people
living with cognitive impairment
Interest2 (KRTX)
20.3% Equity
plus Royalties
Stage of Development
Phase 2 Complete3
Interest2
78.3% Equity
plus Royalties
Stage of Development
Phase 3 Ready
Interest2
34.4% Equity
Stage of Development
Pursuing FDA Clearance
Targeting the GI system locally to
treat the genesis of chronic disease
Founded by scientific leaders in the fields
of immunology and the microbiome
Engineered haematopoietic stem cells that
unleash the potential of targeted therapies
Interest2
22.0% Equity
plus Royalties
Stage of Development
FDA Cleared
Interest2
53.3% Equity
Stage of Development
Phase 2
Interest2
28.1% Equity
Stage of Development
Preclinical
Targeting devastating
GI disease
Unlocking voice as a vital sign and
meaningful predictor of health
Interest2
78.6% Equity
Stage of Development
Preclinical
Interest2
45.9% Equity
Stage of Development
Phase 1
Engineering hydrogels to enable
oral delivery of biologics
Interest2
72.9% Equity
Stage of Development
Preclinical
1
2
3
This figure represents the stage of development for each Founded Entity’s most advanced product candidate. 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
31 December 2019, Controlled Founded Entities include Alivio Therapeutics, Inc., Follica, Incorporated, Entrega, Inc., Vedanta Biosciences, Inc. and Sonde Health, Inc., and
Non-Controlled Founded Entities include Akili Interactive Labs, Inc., Gelesis, Inc., Karuna Therapeutics, Inc., Vor Biopharma Inc. and, for all periods prior to December 18,
2019, resTORbio, Inc.
Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of 31 December 2019 (with the exception of Gelesis
ownership which is as of 1 April 2020), including outstanding shares, options and warrants, but excluding unallocated shares authorised to be issued pursuant to equity
incentive plans. Ownership of Vor and Sonde is based on the assumption that all future tranches of their most recent financing rounds are funded. Karuna ownership is
calculated on an outstanding voting share basis as of 13 March 2020.
Pending the outcome of an End-of-Phase 2 meeting with the FDA, Karuna expects to initiate a Phase 3 clinical trial.
PureTech Health plc Annual report and accounts 2019 5
Overview Letter from the Chairman
“ What really drives value for investors and patients alike are
positive clinical outcomes, regulatory progress and the
validation of third-party investors – and PureTech has had
an incredible series of such results this past year.”
2019 was a year of validation and
transformation for PureTech. PureTech
has a long track record of identifying
and incubating highly innovative
technologies to address significant
unmet need, then building highly
talented and passionate teams around
each programme while making
remarkably efficient use of resources.
What really drives value for investors
and patients alike are positive clinical
outcomes, regulatory progress and the
validation of third‑party investors – and
PureTech has had an incredible series of
such results this past year.
One such example is Karuna. The team
identified a portfolio medicine from Eli
Lilly with compelling efficacy signals in
schizophrenia and Alzheimer’s disease
suggesting it could outstrip existing
therapies. But, unable to resolve the
tolerability profile, Eli Lilly abandoned
the drug. PureTech came up with a novel,
scientifically elegant way to offset the
mechanism causing the tolerability
problems without reducing efficacy.
Karuna’s successful proof‑of‑concept
studies showed that PureTech’s patience
and persistence paid off. Karuna
subsequently completed an IPO in July
2019 and, following positive Phase 2
results in November 2019, became
a company worth approximately
$2 billion1. Now seeking to validate
its Phase 2 findings in a Phase 3 trial,
there is new hope for patients with
schizophrenia, who have had very few
new therapeutic options for decades.
At the same time, tremendous value has
been created for PureTech investors.
The Karuna results were outstanding
in our industry but this was only one
of many positive developments for
PureTech in 2019.
Among the many metrics that validate
PureTech’s novel approach to drug
development, this one stands out
as particularly striking: 23 product
candidates are now in development
across PureTech’s Founded Entities
and Wholly Owned Pipeline, including
14 in the clinic. Another point of
pride: Gelesis’ Plenity™2, a highly
differentiated approach for weight
management, is moving rapidly toward
commercialisation after receiving
clearance from the US Food and Drug
Administration in April 2019.
Across PureTech’s Founded Entities are
novel therapeutic approaches to address
cancer, schizophrenia, severe infection,
ADHD, inflammatory bowel disease
and other serious disorders. Tellingly,
all these potential breakthroughs
originated from research conducted
by PureTech’s internal team together
with its global network of advisers and
collaborators. We have built a truly
unparalleled ecosystem for identifying
pioneering ideas, subjecting them to
rigorous evaluation and then moving
the best forward.
This track record of success makes
me even more excited about our
focused work to advance our Wholly
Owned Pipeline. In these programmes,
we aim to translate our expertise
in the Brain‑Immune‑Gut axis into
novel therapeutics for lymphatic and
immunological disorders and intractable
cancers. It’s a thrill to be in the clinic
with our most advanced wholly‑
owned programme, LYT‑100, which
we are initially evaluating for a range
of immune and fibrotic disorders,
including the potential treatment of
lymphoedema, a serious and often
disfiguring disease for which there are
no approved drugs. LYT‑100 has the
potential to be developed for a range
of fibrotic conditions in addition to
lymphoedema. Also advancing quickly
through our pipeline are two novel
antibody candidates for hard‑to‑treat
cancers. Our proprietary lymphatic
targeting platform and our meningeal
discovery platform are also building
value through substantial partnerships
with top‑notch collaborators, such as
Boehringer Ingelheim, and through our
own internal R&D efforts.
PureTech is able to take on such an
ambitious scope of work due to strong
leadership from the executive team and
thoughtful guidance from our wonderful
board. We are all committed to creating
value as we bring transformational
medicines to patients living with
substantial need. I extend a sincere
thank you to all our shareholders for
supporting and enabling our continued
growth and to my fellow board members
for their thoughtful and strategic
guidance. I am proud to be part of the
PureTech team and I look forward to
continued success in 2020.
Christopher Viehbacher
Chairman
8 April 2020
1 Based on market cap of $1.96 billion on 31 December 2019.
2
Plenity has been cleared by the United States Food and Drug Administration (US FDA) as an aid to weight management in adults with a Body Mass Index (BMI) of
25-40 kg/m2, when used in conjunction with diet and exercise. Important Safety Information: Plenity is contraindicated in patients who are pregnant or are allergic to
cellulose, citric acid, sodium stearyl fumarate, gelatine, or titanium oxide. Plenity may alter the absorption of medications. Read Sections 6 and 8.3 of the Instructions for Use
carefully. Avoid use in patients with the following conditions: oesophageal anatomic anomalies, including webs, diverticuli, and rings; suspected strictures (such as patients
with Crohn’s disease); or complications from prior gastrointestinal (GI) surgery that could affect GI transit and motility. Use with caution in patients with: active GI conditions
such as gastro-oesophageal reflux disease (GERD), ulcers, or heartburn. Overall, the most common treatment related adverse events (TRAEs) were GI-related TRAEs with 38
per cent of adults in the Plenity group and 28 per cent of adults in the placebo group experiencing a GI-related TRAE. The overall incidence of AEs in the Plenity group was
no different than the placebo group. Rx Only. For the safe and proper use of Plenity, refer to the Instructions for Use.
6 PureTech Health plc Annual report and accounts 2019
Overview Letter from the Chief Executive Officer
“ We are proud of our record of rapidly advancing
therapies that could prove transformational for
millions of people who have long struggled to
find effective treatments.”
Making a difference in human health
The team at PureTech has consistently
been united behind a shared goal: to
make a difference in human health by
bringing truly novel and differentiated
therapeutics to patients where
great needs exist.
We are proud of our record of rapidly
advancing therapies that could
prove transformational for millions
of people who have long struggled
to find effective treatments. These
potential breakthroughs include
Karuna’s KarXT, which achieved the
primary endpoint in a Phase 2 clinical
trial of acute psychosis in patients with
schizophrenia, a condition estimated
to affect one per cent of the
population; our wholly‑owned product
candidate LYT‑100, which entered
a clinical trial and has the potential to
treat a range of serious conditions
related to fibrosis, inflammation and
impaired lymphatic flow, including
lymphoedema, a condition that
affects approximately one million
people in the United States and has
no FDA‑approved drug treatment; our
wholly‑owned LYT‑200 and LYT‑210
programmes for intractable cancers,
such as pancreatic cancer, colorectal
cancer and cholangiocarcinoma as
well as gastrointestinal autoimmune
diseases; Vedanta’s microbiome product
candidates, four of which are being
evaluated in the clinic for the potential
treatment of severe infection, cancer,
food allergy and inflammatory bowel
disease; Akili’s digital therapeutics
for cognition and attention in multiple
conditions, such as paediatric attention
deficit hyperactivity disorder, multiple
sclerosis and major depressive
disorder; Follica’s new approach
to potentially treat millions of men
and women with androgenetic
alopecia, which is expected to enter
a Phase 3 registration study in 2020;
and – importantly – Gelesis’ Plenity™1,
a novel weight management aid that
was cleared by the US Food and
Drug Administration in April 2019, with
a label that extends to approximately
150 million2 people in the US with
overweight and obesity.
That’s a remarkable record of which I
am very proud.
Leveraging strategic partnerships to
accelerate programme development
has always been core to the PureTech
strategy. In 2019, a number of new
collaborations were formed, including
PureTech’s research collaboration
with Boehringer Ingelheim to
leverage PureTech’s proprietary
lymphatic targeting technology
for immune modulation, starting in
immuno‑oncology; Akili’s strategic
partnership with Shionogi & Co., Ltd
to commercialise two of Akili’s digital
medicine product candidates, AKL‑T01
and AKL‑T02, in Japan and Taiwan;
Gelesis’ deal with leading US telehealth
provider Ro, making Plenity the first
FDA‑cleared weight management aid
and first primary care product to launch
with both traditional healthcare provider
and telehealth services; and Alivio’s
partnership with Imbrium Therapeutics
L.P. to advance ALV‑107, a non‑
opioid treatment being developed
for interstitial cystitis/ bladder
pain syndrome.
Meanwhile, PureTech’s scientific team
and collaborators continued to generate
high quality publications and engage
at leading conferences. Among the
highlights of 2019: cutting‑edge science
being advanced by the Company was
published in Nature and the Proceedings
of the National Academy of Sciences and
presented at the annual meetings of the
Society for Immunotherapy of Cancer
(SITC) and the American Association for
Cancer Research (AACR).
All of these programmes – and indeed,
the underlying programmes and
platforms resulting in all 23 of the
product candidates in development
across our Wholly Owned Pipeline and
those of our Founded Entities – were
discovered and launched by PureTech’s
team of world‑class scientists and
entrepreneurs. In fact, employees
of PureTech have contributed as
inventors of key intellectual property
supporting nearly all of our Founded
Entities. Our unique model for drug
development and value creation
was validated again and again over
the course of last year: we now have
14 product candidates in the clinic,
spanning multiple modalities and
indications, across our wholly‑owned
programmes and our Founded Entities.
These milestones across the Wholly
Owned Pipeline and Founded Entities
resulted in significant share price
appreciation in 2019 and drove value of
several hundred millions of dollars, well
beyond what was reflected in our share
1
2
Plenity has been cleared by the United States Food and Drug Administration (US FDA) as an aid to weight management in adults with a Body Mass Index (BMI) of
25-40 kg/m2, when used in conjunction with diet and exercise. Important Safety Information: Plenity is contraindicated in patients who are pregnant or are allergic to
cellulose, citric acid, sodium stearyl fumarate, gelatine, or titanium oxide. Plenity may alter the absorption of medications. Read Sections 6 and 8.3 of the Instructions for Use
carefully. Avoid use in patients with the following conditions: oesophageal anatomic anomalies, including webs, diverticuli, and rings; suspected strictures (such as patients
with Crohn’s disease); or complications from prior gastrointestinal (GI) surgery that could affect GI transit and motility. Use with caution in patients with: active GI conditions
such as gastro-oesophageal reflux disease (GERD), ulcers, or heartburn. Overall, the most common treatment related adverse events (TRAEs) were GI-related TRAEs with 38
per cent of adults in the Plenity group and 28 per cent of adults in the placebo group experiencing a GI-related TRAE. The overall incidence of AEs in the Plenity group was
no different than the placebo group. Rx Only. For the safe and proper use of Plenity, refer to the Instructions for Use.
Plenity has been cleared by the United States Food and Drug Administration (US FDA) as an aid to weight management in adults with a Body Mass Index (BMI) of
25-40 kg/m2, when used in conjunction with diet and exercise. A BMI of 25 kg/m2 and over is the accepted definition of overweight, and a BMI of 30 kg/m2 and above
commonly defines obesity. Rx Only. For the safe and proper use of Plenity, refer to the Instructions for Use.
PureTech Health plc Annual report and accounts 2019 7
Strategic report Letter from the Chief Executive Officer — continued
Significant fundamental value created
2019 price performance
1Q 2019
2Q 2019
3Q 2019
4Q 2019
28 Jan – Alivio announced
partnership with Imbrium
Therapeutics for ALV-107 in
interstitial cystitis/bladder
pain syndrome
19 Dec – Follica announced positive topline data
from male androgenetic alopecia
13 May – Vedanta
closed $45.5m funding
9 Dec – Gelesis $84m
in new capital
14 Feb – Vor Biopharma
announced $42.9m
Series A
20 May – Gelesis clinical
data from GS500 for
chronic idiopathic
constipation
18 Nov – Karuna
KarXT Phase 2 met
primary endpoint
5 Mar – Akili
announced
partnership with
Shionogi in certain
Asian markets
17 Jul – PureTech
acquired LYT-100
to treat conditions
of fibrosis, inflammation
and impaired lymphatic flow
1 Jul – Vedanta
started Phase 1/2
food allergy trial
15 Nov – resTORbio announced
RTB101 Phase 3 did not meet endpoint
18 Mar – Karuna
announced
$68m Series B
17 Apr – PureTech
announced Boehringer
Ingelheim IO partnership
1 Apr – Karuna
completed $80m
Series B
14 Apr – Gelesis
FDA Clearance
of Plenity™
£3.50
£3.00
£2.50
£2.00
£1.50
£1.00
£0.50
Year to date
milestones
15 Jan – Akili
announced
AKL-T01
achieved
primary
endpoint
in children
with ADHD
22 Jan – Partial
Karuna sale
~$200m
25 Feb – Akili
announced
AKL-T01 data
published in
The Lancet
Digital Health
3 Mar –
PureTech
announced
LYT-100 MAD
initiation for
fibrotic
conditions
Components
of Value
Equity and
value in nine
Founded
Entities plus
royalties
including
KRTX 20.3%
ownership
Wholly-owned,
clinical-stage
pipeline
Value of
platform, team,
network and
enterprise
$321.5m1 2019
PureTech Level
Pro-forma Cash
Reserves
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
1
PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the
$200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-forma Cash Reserves is therefore considered to be more
representative of the Corporate’s cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.
price. There are many additional value‑
driving milestones on the horizon.
We got to this point by thinking
differently – very differently.
Many biotech companies start with
a target, a specific discovery technology
or a molecule. We start with a disease
where there is significant unmet
need. Our unmatched network of
experts helps us scour the globe for
breakthrough research that might
suggest a new way of tackling the
disease. Long before it has hit scientific
journals, we’ve usually seen the best and
most novel research in our area of focus
anywhere in the world. If we’re intrigued,
we bring the concept or research into
our labs and subject it to rigorous
evaluation designed to answer our key
“sceptical” questions. If it fails, we’ve lost
little in the way of investment, and we’ve
gained substantial scientific knowledge
along the way. If it passes our stringent
evaluation, we advance it to the next
step of research and development and in
the process have de‑risked the concept.
Historically, we’ve housed many of those
promising early programmes in Founded
Entities, of which we would initially own
close to one hundred per cent. Our
model is unique in our industry, where
many companies face binary readouts
that will determine their fate. Biology
is a surprising discipline, so we have
chosen to carefully spread risk across
multiple wholly-owned programmes
and our Founded Entities. We saw
this strategy validated in 2019 with an
outstanding Phase 2 clinical readout
from Karuna Therapeutics that
generated nearly $600 million in value
for PureTech as of 31 March 2020, along
with a binary setback for resTORbio that
resulted in limited losses to PureTech.
After resTORbio’s disappointing
development, we were able to recover
approximately half of our investment;
therefore, our total cash loss on
resTORbio was only around $10 million.
This juxtaposition of two binary events
is a perfect example of how our model
decreases the risk of any individual
event while creating the opportunity
for tremendous value realisation.
In the January 2020 post‑period, we
sold a minority of our Karuna shares for
approximately $200 million, and, while
this was a significant sale, we continue
to own over 20 per cent of Karuna. In
addition to our equity stake, we also
have a right to receive royalty payments
on net sales of its lead product.
While we continue to hold significant
equity stakes in our Founded Entities,
which we believe will continue to grow
and potentially serve as a source of
funding for us, we have also embarked
on a carefully considered strategy
8 PureTech Health plc Annual report and accounts 2019
to focus on our internal research
programmes, backed by a stellar R&D
team helmed by chief scientific officer
Joe Bolen, PhD. This Wholly Owned
Pipeline is exciting for its scientific
promise in the areas of immunology and
oncology, and the potential it holds for
patients. This evolution of our model
also allows us to more fully capture
the value of future milestones at
a PureTech parent company level.
In our Wholly Owned Pipeline, we
already have a clinical stage programme,
which could be applicable to a range
of conditions involving fibrosis,
inflammation and impaired lymphatic
flow, including lymphoedema,
idiopathic pulmonary fibrosis (IPF),
interstitial pneumonias, unclassifiable
interstitial lung disease (uILD) and other
interstitial lung disease (ILD), radiation‑
induced fibrosis and focal segmental
glomerulosclerosis (FSGS), multiple
immunomodulatory programmes for
cancer and autoimmunity, and strong
milk exosome and lymphatic targeting
platforms that hold promise for
expanding a variety of modalities, such
as messenger RNA and antisense, to new
disease areas and treatment regimens.
This work has benefited enormously
from our leadership position at the
forefront of Brain‑Immune‑Gut (BIG)
and lymphatic biology, which has given
us unparalleled insights and an edge in
Strategic report Letter from the Chief Executive Officer — continued
identifying the opportunities that will
enable us to tackle some of the most
devastating diseases facing humans.
We used a similar lens to identify
our immuno‑oncology candidates,
undertaking a global, proactive search to
discover important new scientific insights
and technologies that could address
the challenge of multiple mechanisms
of immunosuppression in current
therapeutics. We identified pioneering
research prior to its publication that
formed the basis for our two product
candidates, LYT‑200 and LYT‑210, and
we are planning to file an Investigational
New Drug (IND) application for LYT‑200
and initiate a Phase 1a/1b in solid
tumours in 2020.
COVID-19 perspective and update
Given our focus on making a difference
in human health, we have been closely
monitoring the global SARS‑CoV‑2
(COVID‑19) outbreak since January and
have put plans and contingencies in
place to enable our business to progress
productively while doing our part as
global citizens. This pandemic has
brought significant healthcare concerns
to the forefront, and we believe it will
also surface significant opportunities
for the industry to innovate, including
the importance of telemedicine and fast
monitoring and screening. The broader
community has also begun to glimpse
the power of a more collaborative
and fast‑moving approach engaging
academic, clinical and industry scientists
– a collaborative and inter‑disciplinary
problem‑solving approach that PureTech
has been harnessing for years.
For the team at PureTech, our mission
to develop new classes of medicines for
serious and underserved diseases will
continue to be driven by our internal
capabilities and collaborations with our
network of leading experts in an effort
to advance important healthcare needs
for vulnerable populations affected
by immunological diseases, severe
infections, neurological disorders
and intractable cancers, among other
serious disorders.
We’ve also demonstrated
a longstanding commitment to
healthcare innovation, with our eyes set
on identifying and addressing significant
unmet needs well ahead of the curve.
For example, Sonde is using seconds of
voice that can be captured in consumer
devices to detect and quantify disease
in a low to no‑burden manner that could
allow for more proactive and potentially
effective interventions. Near‑continuous
health information, powered by Sonde’s
technology, has the potential to improve
screening, monitoring and timeliness
of high‑cost conditions, broadly
improving outcomes and care efficiency
in areas like mental health, respiratory
and cardiovascular disease. Gelesis is
another example of the forward thinking
nature of the approaches that we have
taken. The Gelesis‑Ro partnership is
dedicated to high‑quality remote care
for weight management and prescription
fulfilment of Plenity. Akili has also been
building a commercial infrastructure
that is based on remote monitoring,
care and fulfilment. These are a few
examples of the forward thinking remote
medicine driven approaches deployed
across the Group.
Across our organisation, we have also
taken measures to ensure the safety
and well‑being of our employees while
continuing to execute against our
business objectives. As of 8 April, we do
not believe that any of our ongoing
work has been materially delayed,
but we do anticipate the strain on the
global healthcare system may eventually
impact timelines, as healthcare providers
rightly prioritise acute, near‑term needs.
We are so grateful to those on the front
lines, and we have donated lab supplies
and personal protective equipment
(PPE) to local hospitals to aid in their
heroic efforts.
Strong financing to support
focused development
This was an unprecedented period for
new capital raising for PureTech and our
Founded Entities with over $666.8 million
raised, $622.8 million of which came from
third party investors.
At the PureTech level, we are in
a strong cash position. With the
31 December 2019 cash balance
of $120.6 million1, we had enough
funding to extend operations into
the first quarter of 2022. Following
the sale of Karuna common
shares worth $200.9 million on
22 January 2020, our pro-forma cash
reserves of $321.5 million2 will now
extend operations over a four‑year
period into the first quarter of 2024.
We also announced in July that we are
exploring the potential for a US listing
on Nasdaq of American Depository
Shares. Given the catalysts of the past
year and the strength of our current
cash position, we’re still very much
committed to considering the ADR
listing or other means to broaden our
access to the US capital markets, and we
will launch that process from a position
of strength in due course. We believe
we have built significant value for our
stakeholders across our growing clinical
and preclinical research programmes,
business developments, regulatory
achievements and a deepened capital
base, and we are committed to
making sure that value is realised by
our shareholders.
I would like to thank Joep Muijrers,
PhD, for helping to drive these
accomplishments in his role as chief
financial officer (CFO). Joep has recently
moved to Europe with his family, and
he will continue to lead our portfolio
analysis, monetisation and strategy in his
new role as chief of portfolio strategy,
effective May 2020, which is a natural
fit with his significant background as
a portfolio manager. It is important to
have someone based in Boston full‑time
to manage operational aspects, so we
have begun a search for a new CFO. We
have a strong finance team in place that
will be overseen by our chief operating
officer, Stephen Muniz, Esq., who has
run this function for us in the past, until
a new CFO is selected.
I congratulate the PureTech team on an
incredibly productive year and thank our
Board for their oversight and counsel.
Our wide network of collaborators
continues to be incredible partners
in our shared vision of developing
transformational treatments for
devastating diseases, and we look
forward to deepening our work together
in the year ahead. To our shareholders –
thank you for your support in this exciting
new phase of PureTech’s development as
we focus on maximising the value of our
ground‑breaking platform.
Daphne Zohar
Chief Executive Officer
8 April 2020
1
2
PureTech Level Cash Reserves represent cash balances and short-term investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC,
PureTech Securities Corporation of $112.0 million for the year ended 2019 and the internal pipeline of $8.6 million for the year ended 2019, all of which are wholly-owned
entities of PureTech, excluding cash balances and short-term investments of Controlled Founded Entities. The balance excludes the $200.9 million in proceeds from the
22 January 2020 sale of 2.1 million Karuna common shares.
PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the
$200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-forma Cash Reserves is therefore considered to be more
representative of the Corporate’s cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.
PureTech Health plc Annual report and accounts 2019 9
Strategic report Letter from the Chief Scientific Officer
“ PureTech’s mission has always been to
develop new classes of medicines for
serious and underserved diseases.”
This has been a year of immense
excitement for PureTech’s formidable
R&D team as we built out and advanced
a promising Wholly Owned Pipeline
that leverages our leadership position
in the Brain‑Immune‑Gut (BIG) Axis
and the lymphatic system in service
of our mission to develop new
classes of medicines for serious and
underserved diseases.
As our Founded Entities advance
a number of highly differentiated
approaches targeting the BIG Axis,
we have a strong focus in our internal
programmes on the lymphatic system
and related immunology mechanisms.
We have been harnessing our
understanding of the underappreciated
lymphatic infrastructure to develop
immunomodulatory drugs to treat an
array of serious diseases, including
lymphatic and immunological disorders
and intractable cancers.
We’re thrilled that our most advanced
wholly‑owned programme, LYT‑100,
has entered the clinic, with the first
participants dosed in a Phase 1
multiple ascending dose study in
March 2020. LYT‑100 is a deuterium‑
containing analogue of pirfenidone,
which is approved for the treatment
of idiopathic pulmonary fibrosis (IPF)
in the United States, European Union
and a number of other countries.
Pirfenidone has also recently been
granted Breakthrough Therapy
designation from the FDA for
unclassifiable interstitial lung disease
(uILD). LYT‑100 retains the same intrinsic
pharmacology of pirfenidone, while
potentially improving its tolerability
and safety through its enhanced
pharmacokinetic profile. LYT‑100
previously completed a Phase 1
clinical trial conducted by Auspex
Pharmaceuticals (now a wholly‑owned
subsidiary of Teva Pharmaceuticals)
for another indication, and it may
hold therapeutic potential across
a range of disorders characterised by
fibrosis, inflammation and impaired
lymphatic flow.
We are initially evaluating LYT‑100
for the potential treatment of
lymphoedema, a painful and chronic
condition that can lead to disability,
disfigurement and risks of serious
comorbidities. There are currently no
FDA‑approved drugs for lymphoedema;
the standard of care is management,
primarily via compression and physical
therapy. We hope to bring this large
patient population – estimated to be at
least one million people in the US alone
– the first drug to address the root
cause of this debilitating disease, and
we plan to initiate a proof‑of‑concept
study in patients with breast cancer‑
related secondary lymphoedema
later this year.
LYT‑100 also has the potential to treat
a range of fibrotic and inflammatory
conditions of the lung, kidney, liver
and other organs, including IPF,
interstitial pneumonias, uILD and
other interstitial lung disease (ILD),
radiation‑induced fibrosis and focal
segmental glomerulosclerosis (FSGS).
There are several lung diseases that
have a common mechanism of fibrosis
and inflammation. There are acute
diseases that have high mortality and
lead to long‑term fibrosis. There are
chronic diseases linked to a specific
cause, like a virus or autoimmune
disease. And there are diseases like
idiopathic pulmonary fibrosis (IPF),
where the cause is unclear. Outside of
IPF, there are no approved treatments
that address inflammation and fibrosis.
Many of these diseases can increase
risk for worsening lung fibrosis, and
there is a clear unmet need to stop
inflammation and fibrosis and preserve
lung function.
We have GMP supply of LYT‑100
from our ongoing Phase 1, multiple
ascending dose study, which is
designed to evaluate the safety,
tolerability and pharmacokinetics of
LYT‑100, and we have increased our
clinical supply and are actively pursuing
a path forward for this candidate for
the treatment of another fibrotic and
inflammatory disorder in 2020.
We are also delighted with the
progress of both our novel, fully‑human
monoclonal antibody candidates
targeting powerful immunosuppressors
to treat intractable cancers and other
immune disorders. We are advancing
LYT‑200, which targets galectin‑9 for
a range of cancer indications, and
LYT‑210, which targets γδ1 T cells
for a range of solid tumours and
autoimmune disorders. We were proud
to present significant – and quite
encouraging – preclinical findings for
these candidates at the Society for
Immunotherapy of Cancer (SITC) 34th
Annual Meeting and the American
Association for Cancer Research (AACR)
110th Annual Meeting.
For LYT‑200, we have shown
preliminary proof‑of‑concept
in both human organoids and
preclinical cancer models. We’re
particularly excited about this
compound because galectin‑9 is
a foundational immunosuppressive
protein that is prominently expressed
in a number of cancers, especially
in hard‑to‑treat cancers, such as
colorectal and pancreatic cancer
and cholangiocarcinomas. This is
aligned with our mission to deliver
transformative therapies to patients
with serious diseases who are not well
served by existing therapies. We intend
to file an Investigational New Drug (IND)
application for LYT‑200 in 2020 and
anticipate initiating a Phase 1a/1b in
solid tumours soon after.
10 PureTech Health plc Annual report and accounts 2019
Strategic report Letter from the Chief Scientific Officer — continued
LYT-100 (deupirfenidone): a potent anti-inflammatory and anti-fibrotic oral molecule
Deuteration modifies metabolism
LYT-100 deupirfenidone
NCE with a differentiated PK profile
Potential advantages include:
– enhanced exposure;
~ 1M individuals in the US have lymphoedema
Proprietary, preclinical POC in lymphoedema
– less frequent dosing, reduced pill burden;
~130k patients in the US with IPF or uILD
– improved tolerability; and
– increased efficacy
Issued composition of matter patent
– exclusivity up to 2033
Pirfenidone approved for IPF and
breakthrough designation for uILD
This meningeal discovery platform
is just one plank of our internal R&D.
Lymphatic flow also plays a critical
role in the immune and GI systems.
Our insights into these connections
have guided our development of
two additional discovery platforms:
a synthetic lymphatic targeting
chemistry platform and a milk
exosome platform.
In April of 2019, we announced
a research collaboration with
Boehringer Ingelheim to develop
novel product candidates to leverage
our proprietary lymphatic targeting
chemistry platform for immune
modulation. The collaboration
will initially focus on applying our
technology to an immuno‑oncology
product candidate. By masking the
drug as a fat, we hope to steer it into
the lymphatic vasculature and thereby
send it directly to the gut, where it
will come into direct contact with the
tumour cells it’s targeting. Outside of
the specific programmes covered under
this partnership, we have maintained
ownership for all other applications,
which we will advance through both
our own discovery efforts and other
potential partnerships.
LYT‑210 targets pathogenic and
immunosuppressive γδ1 T cells. To our
knowledge, no other company is
developing a candidate against this
target. We believe LYT‑210 has strong
potential as a novel immuno‑oncology
agent acting against solid tumours
by killing immunosuppressive γδ1 T
cells. We also plan to evaluate it in
autoimmune diseases affecting the
gastrointestinal (GI) tract.
In addition to these three product
candidates, our R&D team is exploring
other mechanisms to modulate
lymphatic flow throughout the body
and brain. This is a cutting‑edge line
of inquiry, driven in part by ground‑
breaking research from one of our
collaborators, Jonathan Kipnis, PhD.
He discovered a functional lymphatic
system in the meninges of the brain
and then demonstrated that blocking
the lymphatic flow in the meninges
leads to an accumulation of pathogenic
macromolecules, such as amyloid‑beta
and tau, which are both associated
with Alzheimer’s disease, and alpha‑
synuclein, which is associated with
Parkinson’s disease. This research
adds to the large body of evidence
we have developed about the crucial
role of the lymphatic system in health
and disease. In the past year, we have
made significant progress in mapping
the lymphatics networks in the brain
– something that has never been
done before.
We have also made significant
progress with our milk exosome
technology for the oral administration
of macromolecules. This technology
is designed to ferry macromolecular
medicines, such as peptides, proteins
and nucleic acids, to selected mucosal
cell types of the intestinal tract where
the therapeutics act either directly
in the GI tract, transit through the
mucosa to the underlying lymphatic
vascular network or, in the case of
cargos that yield mRNAs, produce
complex biologics such as antibodies
within mucosal cells that are secreted
into the mucosal lymphatic vascular
network for subsequent systemic
distribution. We believe our proprietary
milk exosome technology has the
potential to transform the treatment
paradigm for a number of serious
diseases, such as rheumatoid arthritis,
diabetes and cancer, in which the
standard of care requires intravenous
infusion or subcutaneous injection
of monoclonal antibodies (e.g. anti‑
PD1, anti‑TNF) or protein/peptides
(e.g. GLP‑1, β‑glucocerebrosidase,
Factor IX, Erythropoietin). Using our
milk exosome technology, it may be
possible for a patient to take an oral
drug product that will permit their own
GI tract cells to make virtually any type
of therapeutic protein. This approach
also has the potential to provide
a more convenient and significantly
less expensive means to deliver
biological medicines.
PureTech Health plc Annual report and accounts 2019 11
Strategic report Letter from the Chief Scientific Officer — continued
Biotherapeutics hold huge promise but have significant limitations
The global biologics market is anticipated to reach
Limitations of protein-based therapeutics
~$400b by 2025*
• Encompasses a range of protein and mRNA medicines
(e.g., mAbs, peptide hormones, enzymes, vaccines)
• Broad range of indications
• Significant share of global pharmaceutical market
Intravenous or subcutaneous administration
(infusion reactions, barrier for repeat dosing)
High upfront manufacturing costs
Expensive cold supply chain
Lengthy scale-up timeline
Limitations of mRNA-based therapeutics and vaccines
Intravenous, intramuscular or subcutaneous
administration (infusion reactions, co‑medications
needed for dosing, very limited repeat dose options)
Significant drug manufacturing cost
Expensive cold supply chain
Formulation-based immune and cellular toxicities
(protein synthesis by liver hepatocytes)
High dose requirement for protein production
PureTech is well-positioned to unleash the potential of oral biotherapeutics
PureTech’s milk exosomes
technology has the potential
to transform biologics and
RNA-based therapies by
enabling patients to take
the medicines orally and
have the body make the
therapeutic proteins
Orally administered
(flexible repeat dosing)
Body manufactures the
therapeutic proteins
Low manufacturing cost
Cold supply chain not required
Very low immune and cell toxicity
(protein synthesis in GI tract)
Low dose requirement
for protein production
*
Grand View Research, 2017, Biologics Market Analysis By Source (Microbial, Mammalian), By Products (Monoclonal Antibodies, Vaccines, Recombinant Proteins,
Antisense, RNAi), By Disease Category, By Manufacturing, & Segment Forecasts, 2018 – 2025.
12 PureTech Health plc Annual report and accounts 2019
Strategic report Letter from the Chief Scientific Officer — continued
This approach is particularly relevant as
world health authorities consider the
potential impact of infectious diseases,
and the clear utility of providing passive
immune protection for those most
seriously affected, as well as for health
care professionals on the front line
of treatment has been highlighted.
Towards this goal, scientists around
the world have generated monoclonal
antibodies that have the ability to
lessen the impact of disease in SARS‑
CoV‑2 infected individuals and lower
the inter‑individual transmission rate.
However, the lengthy time required
to produce sufficient supplies of such
monoclonal antibodies by standard
manufacturing processes, accompanied
by the significant manufacturing
cost and the need for intravenous
monoclonal antibody infusion, render
this approach less than ideal. This is
underscored if it turns out that not
one, but two, or potentially three anti‑
virus antibodies need to be combined
in order to achieve virus control. In
contrast, the milk exosome platform
may allow for rapid transfer of the
DNA sequences or other nucleic acid
expression systems coding for the
monoclonal antibodies into the milk
exosomes, thereby enabling the body
to make its own “drug” and permitting
oral administration at significantly
lower cost than traditional approaches.
Importantly, we believe this approach
will permit the generation of multiple
antibody combinations where needed
for more optimal therapeutic efficacy.
Thus, whether combating emerging
epidemic/pandemic pathogens or
other diseases where monoclonal
antibody therapeutics offer significant
clinical benefit, our milk exosome
platform has the potential to transform
the range of biotherapeutics clinical
indications while also lowering costs
and simplifying administration.
As you can see, this has been quite
a momentous year for PureTech’s
R&D team. It’s exciting to see what we
have been able to accomplish since
we combined our labs and corporate
activities in our new headquarters in
Boston’s Seaport District. The first
thing you see when you step off the
elevator is the lab, front and centre,
which buzzes with energy and ideas.
It’s a statement about our commitment
to science leading the way as we tackle
important diseases.
Our insights into to the lymphatic
system have paved the way for
pioneering drug discovery. Our
internal team and our global network
of collaborators bring unmatched
experience to bolster these efforts.
Most importantly, we all share an
unquenchable drive to transform the
lives of patients, and I am overjoyed to
see this aspiration coming to fruition
through several of our Founded
Entities. We are proud of what we’ve
accomplished across the organisation
in 2019 and are excited about the
milestones to come. I look forward
to sharing updates as we advance
towards these goals.
Dr Joseph Bolen
Chief Scientific Officer
8 April 2020
PureTech Health plc Annual report and accounts 2019 13
Strategic report How PureTech is building value for investors
“ PureTech’s team, network and expertise in the
BIG Axis enable it to identify and advance the
latest scientific discoveries at the interface of
the BIG systems.”
PureTech, which is comprised of PureTech Health plc and
its Founded Entities (together, “the Group”), is a clinical‑
stage biotherapeutics company dedicated to discovering,
developing and commercialising highly differentiated
medicines for devastating diseases, including intractable
cancers, lymphatic and gastrointestinal (GI) diseases, central
nervous system (CNS) disorders and inflammatory and
immunological diseases, among others.
PureTech established the underlying programmes and
platforms that have resulted in 23 product candidates and
one product cleared by the US Food and Drug Administration
(FDA) that are being advanced within PureTech’s Wholly
Owned Pipeline or by its Founded Entities.
All of these underlying programmes and platforms were
initially identified or discovered and then advanced by
PureTech through key validation points based on the
Company’s unique insights into the biology of the Brain,
Immune and Gut (BIG) systems and the interface between
those systems (the BIG Axis).
The architectural framework supporting BIG Axis cross‑talk is
built on evidence highlighting the presence of 70 per cent of
the entire immune cell population in the gut, approximately
500 million neurons innervating the GI tract, enteric
neurons as part of the autonomic nervous system and key
components such as the gut epithelial barrier, microbiome,
metabolites and neurotransmitters that play important roles
in protecting and influencing the immune system and CNS.
The brain, immune system and gut lymphatic system form an
interconnected adaptive network to respond to acute and
chronic environmental change. Using the immune system
to act as a bridge, the body relies on the bidirectional
relationship between the gut and brain to maintain normal
homoeostasis. Dysregulation of immune signalling through
gut inflammation, microbiome changes and a compromised
intestinal barrier all contribute to a range of immunological,
GI and CNS disorders. PureTech has been at the forefront
of research and development in the BIG Axis, including the
role of gut‑immune transport, immune‑microbial signalling,
gut barrier dysfunction and repair and gut and inflammation
selective targeting strategies. Through the Company’s
wholly‑owned programmes, PureTech is pursuing strategies
to directly reach the immune system via the mesenteric
lymph nodes, addressing lymphatic flow and vessel
restoration disorders and targeting immunosuppressive and
pathogenic lymphocytes.
14 PureTech Health plc Annual report and accounts 2019
Strategic report How PureTech is building value for investors — continued
PureTech’s team, network and expertise in the BIG Axis
enable it to identify and advance the latest scientific
discoveries at the interface of the BIG systems. PureTech
begins by collaborating with a cross‑disciplinary group
of experienced clinicians and the world’s leading experts
in brain, immune and gut biology in a discovery process
that breaks down specific diseases and comprehensively
identifies, reviews and empirically tests unpublished
scientific discoveries in a modality agnostic and unbiased
way. Through this process, PureTech prioritises approaches
that have the potential to reduce early development
risk based on preliminary signals of human efficacy and
favourable expected safety profiles. PureTech identifies
potential programmes from their laboratories of origin,
other companies or its own internal discovery platforms.
The Company’s key relationships have consistently provided
access to important discoveries before they were known to
others in the industry. This proactive approach has enabled
PureTech to license or file patents around the discoveries
underlying its Wholly Owned Pipeline and Founded Entities’
product candidates prior to the publication of that work in
dozens of papers in top tier scientific journals like Science,
Cell and Nature.
This model has enabled PureTech to rapidly convert these
findings into valuable therapeutic product candidates.
Historically, these programmes and product candidates
have been developed with strategic allies, including
equity partners who helped advance those programmes
via PureTech’s Founded Entities. As these programmes
have succeeded and PureTech’s resources have grown,
the Company has increasingly focused on its wholly‑
owned programmes.
PureTech’s unique collaborative research and development model for advancing new medicines
1
Disease focused drug
discovery based on
proprietary insights
2
Rapid and capital-
efficient prioritisation
and validation
3
Develop internally,
partner or advance
through subsidiary
LYT-100
LYT-200/210
Discovery Platforms
PureTech Health plc Annual report and accounts 2019 15
Strategic report How PureTech is building value for investors — continued
Driving development of potential new medicines and accretion of value via three paths
1
2
3
Advance Wholly Owned Pipeline through
development and commercialisation,
including pipeline expansion
Wholly Owned Pipeline
LYT-100, LYT-200, LYT-210,
Discovery programmes
Derive value from equity growth
of Founded Entities (e.g., M&A, IPO
and sale of equity, royalties)
External Founded Entities
Karuna, Gelesis, Akili, Follica,
Vedanta, Alivio, Vor, Sonde, Entrega
Advance and de-risk discovery programmes
by partnering non-core applications
(via non-dilutive funding sources
including partnerships and grants)
Non-core Applications of Internal
Discovery Platforms
Example partnerships:
PureTech will continue to leverage its experience and network
with the goal of identifying, inventing, developing and
commercialising innovative new therapeutics leveraging the
science of the BIG Axis to address significant medical needs.
This also enables the accretion of value via three paths as
illustrated above. The first is centred on the development of
PureTech’s wholly‑owned programmes, which includes three
product candidates (LYT‑100, LYT‑200 and LYT‑210) and three
innovative technology platforms. The second is based on the
strategic monetisation of PureTech’s equity holdings in its
Founded Entities after significant value creation has occurred.
The third is through advancing PureTech’s discovery
programmes by partnering non‑core applications via non‑
dilutive funding sources, including partnerships and grants,
to enable retention of value.
This combination of development of the wholly‑owned
programmes, advancement of the Founded Entities and
non‑dilutive partnerships and funding provides a unique and
multi‑pronged engine fuelling potential future growth.
As part of PureTech’s commitment to driving value for
shareholders, the Company announced in July 2019 that
it is exploring the potential for a US listing on Nasdaq of
American Depository Shares. Given the catalysts of 2019
and the strength of the Company’s current cash position,
PureTech is assessing the ADR listing or other means to
access US capital and will launch that process in due course.
16 PureTech Health plc Annual report and accounts 2019
Strategic report How PureTech is building value for investors — continued
Numerous milestones expected, including at least 7 readouts and 10 initiations in 2020
Product
Candidate
PureTech
Ownership*
2020 (key milestones in bold)
2021
LYT-100
LYT-100
LYT-200
LYT-210
100%
100%
100%
100%
Results from Ph1b MAD and initiation of POC study in patients
Initiation of POC study in another fibrotic and inflammatory disorder
IND filing and initiation of Ph1a/1b study in solid tumours
Preclinical and biomarker studies
Discovery programmes
100%
Nomination of preclinical candidate(s)
KarXT
Plenity™
Gelesis200
GS300
GS500
AKL-T01
FOL-004
VE202
VE303
ALV-306
VOR33
Sonde
ENT-100
20.3%
22.0%
22.0%
22.0%
22.0%
34.4%
78.3%
53.3%
53.3%
78.6%
28.1%
45.9%
72.9%
End-of-Phase 2 meeting, Ph3 study initiation, add’l. readouts
Commercial rollout of Plenity (H2 2020)
Topline results for weight management in T2D/prediabetes
Initiation of Ph2 in NASH/NAFLD
Initiation of Ph3 study in chronic constipation
Currently pursuing FDA clearance in paediatric ADHD
Initiation of Ph3 registration study in AGA
PK/PD results from Ph1 healthy subject study for IBD
Topline results from Ph2 study in high-risk CDI
Nomination of clinical candidate
Pre-IND meeting with FDA
Readout from depression detection study
Continued advancement of platform
Topline results
from multiple
clinical studies
Multiple IND filings
At least one
potential FDA
NDA submission
Additional strategic
partnerships
New clinical
candidate
selections
Progress of
discovery/
preclinical
programmes
Wholly Owned
Controlled Founded Entities
Non-controlled Founded Entities
Product candidate related to the Brain
Product candidate related to the Immune system
Product candidate related to the Gut
Potential financings and strategic transactions across Founded Entities
Wholly Owned Pipeline
In 2019, PureTech significantly advanced its Wholly Owned Pipeline focused on the lymphatic system
and related immunology mechanisms for the treatment of cancer and immunological, lymphatic and
CNS‑related disorders. In order to support these efforts and accelerate its work, PureTech established
new corporate headquarters and labs in Boston’s Seaport District in June 2019.
In July 2019, PureTech announced the acquisition of
deupirfenidone (LYT‑100), a clinical‑stage, oral small molecule
drug candidate for the potential treatment of lymphoedema
and other lymphatic and fibrotic disorders. In the March 2020
post‑period, PureTech initiated a Phase 1 multiple ascending
dose and food effect study in healthy volunteers. Results
from this study are expected in 2020 and may enable the
initiation of a proof‑of‑concept study in people with breast
cancer‑related, upper limb secondary lymphoedema later in
2020. PureTech may also explore the application of LYT‑100
in idiopathic pulmonary fibrosis (IPF), interstitial pneumonias,
unclassifiable interstitial lung disease (uILD) and other
interstitial lung disease (ILD), radiation‑induced fibrosis and
focal segmental glomerulosclerosis (FSGS).
In April 2019, PureTech announced an alliance with
Boehringer Ingelheim (BI), which is initially focused on
evaluating the feasibility of applying PureTech’s lymphatic
targeting technology to one of BI’s immuno‑oncology
product candidates. Under the terms of the agreement,
PureTech is eligible to receive up to $26 million in upfront
payments, research support and preclinical milestones, and is
eligible to receive more than $200 million in development and
sales milestones, in addition to royalties on product sales.
Also in April 2019, PureTech presented two posters
highlighting data on the development and preclinical efficacy
of PureTech’s immuno‑oncology product candidates, LYT‑200
and LYT‑210 (in development for the potential treatment
of historically difficult‑to‑treat cancers), at the American
Association for Cancer Research (AACR) 2019 Annual
Meeting. In November 2019, PureTech presented additional
preclinical data on LYT‑200 and LYT‑210 at the Society for
Immunotherapy of Cancer (SITC) 34th Annual Meeting. The
findings presented at SITC further support the ability of
LYT‑210 to potentially restore the immune system’s ability
to fight difficult‑to‑treat cancers. Also presented at SITC
were new preclinical data on LYT‑200, which indicated that
galectin‑9 is not only a potent therapeutic target, but also
a potentially relevant biomarker. PureTech intends to file an
investigative new drug application (IND) for LYT‑200 and to
initiate a Phase 1a/1b study in solid tumours in 2020.
*
Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of 31 December 2019 (with the exception of Gelesis
ownership which is as of 1 April 2020), including outstanding shares, options and warrants, but excluding unallocated shares authorised to be issued pursuant to equity
incentive plans. Ownership of Vor and Sonde is based on the assumption that all future tranches of their most recent financing rounds are funded. Karuna ownership is
calculated on an outstanding voting share basis as of 13 March 2020.
PureTech Health plc Annual report and accounts 2019 17
Strategic report How PureTech is building value for investors — continued
Founded Entities
PureTech’s Founded Entities had a momentous 2019, with excellent clinical progress,
new strategic partnerships and validating financings.
Karuna
Karuna made strong progress towards developing novel
therapies to address disabling neuropsychiatric conditions,
including schizophrenia, dementia‑related psychosis and
pain. In November 2019, Karuna announced that KarXT
achieved the primary endpoint of its Phase 2 clinical
trial for the treatment of acute psychosis in patients with
schizophrenia, demonstrating a statistically significant
and clinically meaningful 11.6 point mean reduction in
total Positive and Negative Syndrome Scale (PANSS) score
compared to placebo (p<0.0001) and also demonstrating
improved tolerability as compared to placebo. Karuna
plans to hold an end‑of‑Phase 2 meeting with the FDA in
the second quarter of 2020 and, pending the outcome of
that meeting, anticipates advancing KarXT into a Phase
3 clinical trial by the end of 2020. Karuna also anticipates
topline results from a Phase 1b clinical trial for the treatment
of experimentally induced pain in healthy volunteers in
mid‑2020, and topline results from a Phase 1b clinical trial in
healthy elderly volunteers to assess the safety and tolerability
of KarXT for the treatment of dementia‑related psychosis by
the end of 2020.
Additionally, Karuna announced the pricing of its initial public
offering (IPO) on Nasdaq under the ticker symbol “KRTX” in
June 2019. Gross proceeds were approximately $102.6 million,
including the full exercise of the underwriters’ over‑allotment
option. In November 2019, Karuna completed a follow‑on
offering of 2,600,000 shares of its common stock, with gross
proceeds of approximately $250 million. Prior to this, in
April 2019, the company completed an $82.1 million Series B
financing, including the issuance of $7.1 million in shares upon
conversion of debt into equity.
Gelesis
During 2019, Gelesis rapidly advanced its pipeline of
mechanobiology‑based therapies to treat chronic diseases
related to the gastrointestinal (GI) system. In April 2019,
Gelesis received clearance from the FDA for Plenity™1
as an aid for weight management in adults with a BMI of
25‑40 kg/m2 when used in conjunction with diet and exercise.
In December 2019, Gelesis announced a partnership with
Ro, a leading US telehealth provider, to support the US
commercialisation of Plenity. Gelesis initiated a Plenity
early experience programme in the United States in the
second half of 2019 and anticipates Plenity will be available
by prescription in the United States in the second half of
2020, with a broad launch in early 2021. Gelesis also secured
nearly $100 million in new capital in 2019 to support the
US commercialisation of Plenity, including over $84 million
announced in December 2019 and $10.6 million announced
in April 2019. Gelesis also filed Plenity for marketing
authorisation in Europe in February 2019.
Gelesis has also continued to progress additional product
candidates through clinical and preclinical evaluation. In 2019,
Gelesis presented clinical and preclinical data at four major
medical meetings. In March 2019, Gelesis presented three
posters at the Endocrine Society Annual Meeting. In addition
to highlighting clinical data from the pivotal study of Plenity,
the posters showcased preclinical research suggesting that
Gelesis’ pipeline candidate, GS300, which is in development
for NASH/NAFLD, could restore gut barrier function after
damage. Gelesis presented additional preclinical data for
GS300 at The International Liver Congress 2019 in April 2019
demonstrating that GS300 could prevent the harmful effects
of a high‑fat diet on the liver and associated metabolic
disorders. Gelesis anticipates initiating a Phase 2 study of
Gelesis300 in 2020. In May 2019, Gelesis presented promising
clinical data of its novel hydrogel GS500 prototype at
Digestive Disease Week. GS500, which is being evaluated
for the potential treatment of chronic idiopathic constipation
(CIC), demonstrated a significant 16‑hour reduction in colonic
transit time in patients with CIC. Based on these findings,
the company plans to initiate a Phase 3 study in 2020. In
November 2019, Gelesis presented two oral presentations
and one poster at ObesityWeek 2019, which highlighted
the safety and efficacy of Plenity, including a new post‑hoc
analysis of the pivotal GLOW (Gelesis Loss of Weight) study.
The presented analysis also showed that twice as many adults
(11 per cent) reached a BMI of 27 kg/m2 when treated with
Plenity as compared to placebo (5 per cent).
Gelesis plans to initiate a Phase 2 study of Gelesis100 for
weight management in adolescents with overweight and
obesity in 2021. Additionally, topline results are anticipated
in 2020 from the Gelesis200 Phase 2 study in weight
management and glycaemic control in adults with type 2
diabetes and prediabetes.
1
Important Safety Information: Plenity is contraindicated in patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatine, or titanium
oxide. Plenity may alter the absorption of medications. Read Sections 6 and 8.3 of the Instructions for Use carefully. Avoid use in patients with the following conditions:
oesophageal anatomic anomalies, including webs, diverticuli, and rings; suspected strictures (such as patients with Crohn’s disease); or complications from prior
gastrointestinal (GI) surgery that could affect GI transit and motility. Use with caution in patients with: active GI conditions such as gastro-oesophageal reflux disease (GERD),
ulcers, or heartburn. Overall, the most common treatment related adverse events (TRAEs) were GI-related TRAEs with 38 per cent of adults in the Plenity group and 28 per
cent of adults in the placebo group experiencing a GI-related TRAE. The overall incidence of AEs in the Plenity group was no different than the placebo group. Rx Only.
For the safe and proper use of Plenity, refer to the Instructions for Use.
18 PureTech Health plc Annual report and accounts 2019
Strategic report How PureTech is building value for investors — continued
Akili
Akili has continued to progress its pipeline of digital
therapeutics designed to treat cognitive dysfunction
associated with medical conditions across neurology and
psychiatry, as well as complementary management‑based
care applications for caregivers to track behaviours and
symptoms. In March 2019, Akili entered into a strategic
partnership with Shionogi & Co., Ltd. for the development
and commercialisation of two of Akili’s digital medicine
product candidates, AKL‑T01 and AKL‑T02 (in development
for children with ADHD and Autism Spectrum Disorder,
respectively), in Japan and Taiwan. Under the terms of the
agreement, Akili will build and own the platform technology
and received upfront payments totalling $20 million,
with potential milestone payments for Japan and Taiwan
commercialisation of up to an additional $105 million in
addition to royalties. The Akili and Shionogi teams have
begun work on product localisation and clinical study design
toward future regulatory submission and commercialisation.
In December 2019, Akili presented results from a trial of
AKL‑T03 as a potential treatment for cognitive impairments
adjunct to anti‑depressant medication in adults with Major
Depressive Disorder (MDD) at the 58th Annual Meeting of
Follica
Follica has continued to progress its regenerative biology
platform designed to treat androgenetic alopecia, epithelial
ageing and other medical conditions. In December 2019,
Follica announced topline results from the safety and efficacy
optimisation study of its lead candidate to treat hair loss
in male androgenetic alopecia. The study was designed
to select the optimal treatment regimen using Follica’s
proprietary device in combination with a topical drug and
successfully met its primary endpoint. The initiation of
a Phase 3 registration study in male androgenetic alopecia
the American College of Neuropsychopharmacology. In
the trial, AKL‑T03 demonstrated a statistically significant
improvement in sustained attention compared to control.
AKL‑T03 is designed to improve specific cognitive functions
and may play a complementary role to antidepressants in the
holistic treatment of MDD.
In the January 2020 post‑period, Akili announced topline
results from its STARS‑ADHD Adjunctive Study of AKL‑T01,
which showed statistically significant improvement in
the ADHD Impairment Rating Scale (IRS) when used with
and without stimulant medication. In the February 2020
post‑period, The Lancet Digital Health journal published
the pivotal study results from Akili’s STARS‑ADHD trial of
AKL‑T01. The publication represents the first presentation of
complete results from the STARS‑ADHD trial, a first‑of‑its‑
kind large, randomised, multi‑centre, controlled study of the
company’s foundational technology and the first seminal trial
in a series of recent and ongoing studies of the attentional
treatment. Clearance for AKL‑T01 has not yet been granted,
and Akili continues to work with the FDA in an effort to make
the product available for children living with ADHD.
is expected in 2020. Follica has also been optimising its
device and conducting tests in androgenetic alopecia and
other medical indications and is further developing and
testing compounds that enhance the newly formed follicles
and hairs. Additionally, Follica is studying the potential
for its proprietary device approach to address other
regenerative conditions, including female pattern hair loss
and facial skin rejuvenation, for which Follica has a second
product candidate.
Vedanta Biosciences
Vedanta Biosciences has continued to advance its pipeline
of rationally‑defined bacterial consortia‑based product
candidates to address immune‑mediated diseases through
a number of milestones in 2019. Four of the company’s
orally‑administered product candidates are currently being
evaluated in clinical studies. In May 2019, Vedanta Biosciences
presented expanded, long‑term positive data from
its Phase 1a/1b study of VE303 for high‑risk Clostridioides
difficile infection (CDI). A Phase 2 study of VE303 is ongoing,
with results anticipated in 2020. Vedanta Biosciences also
announced the enrolment of the first patient in the Phase 1/2
clinical study of VE416, Vedanta’s product candidate in
development for treatment of food allergies in adults
and adolescents with a history of peanut allergy, in June
2019. Topline results from this study are expected in 2021.
A Phase 1 study of Vedanta’s IBD candidate, VE202, is also
progressing, with results anticipated in 2020. In December
2019, the company initiated its first‑in‑patient clinical study of
VE800 in combination with Bristol‑Myers Squibb’s checkpoint
inhibitor OPDIVO® (nivolumab) in advanced or metastatic
cancers, with topline results expected in 2021. Notably,
foundational preclinical research supporting the identification
and development of VE800 was published in one of the top
scientific journals, Nature, in January 2019.
PureTech Health plc Annual report and accounts 2019 19
Strategic report
How PureTech is building value for investors — continued
Alivio Therapeutics
Alivio Therapeutics continued to advance its targeted disease
immunomodulation platform for the potential treatment of
chronic and acute inflammatory disorders. In January 2019,
Alivio entered into a strategic partnership with Imbrium
Therapeutics L.P. to advance Alivio’s product candidate ALV‑
107 (in development for the potential treatment of (interstitial
cystitis or bladder pain syndrome (IC/BPS)) through clinical
development. Under the terms of the agreement, Alivio is
eligible to receive up to $14.75 million in upfront and near‑
term license exercise payments and is eligible to receive
royalties on product sales and over $260 million in research
and development milestones. Imbrium also has an option to
collaborate on a limited number of additional compounds
utilising Alivio’s inflammation‑targeting technology. Alivio
expects to file an IND for ALV‑306, its lead product candidate,
in pouchitis and distal colitis and to initiate a clinical trial in
2021. Alivio also plans to file an IND for ALV‑107 for IC/BPS in
2021 and an IND for ALV‑304 in IBD in 2022.
Vor
Vor progressed its pipeline of haematopoietic stem cell‑
based therapies for the potential treatment of haematologic
malignancies. Vor has achieved ex vivo proof of concept for
its technology and received validation of its technology in
engineered humanised mouse models. In February 2019,
Vor announced a $42.9 million Series A financing round to
advance its lead candidate, VOR33, towards the clinic for the
treatment of AML, and to further build its pipeline to treat
haematologic malignancies. The scientific founder of Vor
Biopharma, Dr Siddhartha Mukherjee, and key individuals
from his lab at Columbia University, published foundational
proof‑of‑concept research supporting the development of
VOR33 in PNAS in May 2019. In the January 2020 post‑period,
Vor held a pre‑IND meeting with the FDA to gather important
feedback to assemble the data package necessary for
a potential IND filing.
Sonde
Sonde continued to advance its vocal biomarker technology
designed to monitor and diagnose psychological and
physical medical conditions. Sonde has collected voice
data from over 40,000 subjects as a part of the ongoing
validation of its platform, and it has also initiated research
and development to expand its proprietary technology
into Alzheimer’s disease and respiratory and cardiovascular
disease, as well as other health and wellness conditions.
Entrega
Entrega continued to advance its technology platform for
the oral delivery of biologics, vaccines and other drugs that
are otherwise not efficiently absorbed when taken orally.
This approach uses a proprietary, customisable hydrogel
dosage form to control local fluid microenvironments in the
gastrointestinal tract in order to both enhance absorption
In April 2019, Sonde completed a $16 million Series A
financing round, including the issuance of $6 million in shares
upon conversion of debt into equity, to expand its capability
across additional health conditions and device types and
to fund commercialisation activities. Additionally, topline
results from Sonde’s ongoing depression detection study
are anticipated in 2020.
and reduce the variability of drug exposure. In 2019, Entrega
continued to collaborate closely with Eli Lilly to explore
the potential of Entrega’s platform in oral macromolecule
delivery, progressing a broad range of prototypes in
additional preclinical studies.
By Order of the Board
Stephen Muniz, Esq.
Company Secretary
8 April 2020
20 PureTech Health plc Annual report and accounts 2019
Strategic report Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
PureTech’s Wholly Owned Pipeline
Our programmes
Product
candidate
LYT-100
Deupirfenidone
LYT-100
Deupirfenidone
Lymphatic flow disorders, including lymphoedema
Other fibrotic and inflammatory disorders
LYT-200
Anti‑Galectin‑9 MAb
Solid Tumours
LYT-210
Anti‑Delta‑1 MAb
LYT-210
Anti‑Delta‑1 MAb
Solid Tumours
GI Autoimmunity
Lymphatic Targeting
Chemistry Platform
Milk Exosome
Platform
Meningeal Lymphatics
Platform
Phase in progress
Phase completed
Initiation of POC
study in 2020
Initiation of POC
study in 2020
IND and initiation of
Ph1a/1b study in 2020
PureTech Health plc Annual report and accounts 2019 21
Strategic report PureTech’s Wholly Owned Pipeline — continued
LYT‑100
Founded Entity PureTech Ownership
Description
LYT-100
Wholly-Owned
PureTech is developing LYT-100, a clinical-stage product candidate for the potential treatment
of a range of conditions involving fibrosis, inflammation and impaired lymphatic flow, including
lymphoedema, idiopathic pulmonary fibrosis (IPF), interstitial pneumonias, unclassifiable interstitial lung
disease (uILD) and other interstitial lung disease (ILD), radiation-induced fibrosis and focal segmental
glomerulosclerosis (FSGS).
Programme
discovery
process by the
PureTech team
Patient need
and market
potential
Innovative
approach for
solving the
problem
Intellectual
property
PureTech acquired LYT‑100 in July 2019 based on the company’s insights into immunology and lymphatic biology coupled with
knowledge of unpublished findings from academic collaborators and awareness of data generated by Auspex Pharmaceuticals
(Auspex). LYT‑100 was originally developed by Auspex, which is now a wholly‑owned subsidiary of Teva Pharmaceuticals, for the
treatment of idiopathic pulmonary fibrosis (IPF) and other fibrotic conditions. LYT‑100 has demonstrated potent anti‑fibrotic and anti‑
inflammatory activity with significant reduction in IL‑6 and TNF‑alpha levels in preclinical disease models including lymphoedema,
and – importantly – it has been evaluated in human clinical safety studies. PureTech believes LYT‑100, if successfully developed and
approved, could become a promising treatment for a range of these serious fibrotic and inflammatory conditions, with an initial focus
on lymphoedema.
• Lymphatic flow disorders
− Lymphoedema is a chronic and progressive disorder that is characterised by severe swelling in parts of the body, typically the arms
or legs, due to the build‑up of lymph fluid and inflammation, fibrosis and adipose deposition. Lymphoedema can cause loss of
range of motion and function in the affected limb, disfigurement and pain. Lymphoedema typically progresses through multiple
stages, with increased fibrosis and limb volume and tissue changes.
− Secondary lymphoedema is the most prevalent form of lymphoedema, and it can develop after surgery, infection or trauma and is
frequently caused by cancer or cancer treatments.
− Approximately one million people in the United States have lymphoedema, including approximately 500,000 breast cancer
survivors with secondary lymphoedema. Each year, up to one in five of the more than 250,000 Americans estimated to be diagnosed
with breast cancer who undergo surgery will develop secondary lymphoedema. Beyond breast cancer, lymphoedema can occur in
up to 15 per cent of cancer survivors with malignancies ranging from melanoma to sarcoma.
− The standard of care is management, primarily by compression and physical therapy to control swelling. There are currently no FDA
approved drug therapies to treat lymphoedema.
• Fibrotic and inflammatory disorders
− Interstitial lung disease (ILD) includes chronic fibrosing diseases like IPF, as well as acute forms like acute exacerbations of IPF and
acute interstitial pneumonia, which have high mortality and limited therapeutic options. These acute ILDs can be triggered by viral
infections, including coronaviruses such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome
(SARS). Long‑term pulmonary fibrosis and reduced respiratory function similar to chronic ILD has been observed in SARS and MERS.
A drug therapy with anti‑inflammatory and anti‑fibrotic activity may have the potential to reduce the symptoms of acute interstitial
pneumonia as well as treat the progressive lung damage that can end up affecting survivors of the disease.
− Apart from the direct destruction of lung function caused by infections, severe and prolonged inflammatory reactions mediated by
numerous cytokines, including TNF‑alpha and IL‑6, are also a characteristic feature. Therefore, treatment strategies should include
not only inhibitors of virus proliferation but also include therapies like LYT‑100 that suppress pro‑inflammatory mediators that can
damage lung tissue.
• LYT‑100, or deupirfenidone, is an oral deuterium‑containing analogue of pirfenidone. LYT‑100 retains the same intrinsic
pharmacology of pirfenidone, while potentially improving its tolerability and safety profile. LYT‑100 has shown a differentiated and
superior pharmacokinetic (PK) profile compared to pirfenidone in human studies, and it would be classified as a New Chemical
Entity. Pirfenidone is an orally‑administered, small molecule currently approved for the treatment of IPF, and it was recently given
Breakthrough Therapy designation from the FDA for uILD. Pirfenidone has also demonstrated significant activity in lymphoedema
resolution in preclinical models, and it also has documented activity in patients with rare kidney disorders, such as focal segmental
glomerulosclerosis (FSGS), as well as radiation‑induced fibrosis and a number of other fibrotic conditions.
• LYT‑100 is being developed for the potential treatment of a range of conditions involving fibrosis, inflammation, and impaired lymphatic
flow. These conditions include lymphoedema, IPF, interstitial pneumonias, uILD and other ILD, radiation‑induced fibrosis and FSGS.
• PureTech has GMP supply of LYT‑100 for its ongoing Phase 1, multiple ascending dose study, which is designed to evaluate the safety,
tolerability and PK of LYT‑100. PureTech has increased its clinical supply and is planning to advance LYT‑100 for the treatment of breast
cancer‑related, upper limb secondary lymphoedema and other fibrotic and inflammatory disorders.
• As of 31 December 2019, the LYT‑100 patent portfolio includes 31 active patents acquired and one patent application licensed from
Auspex. These patents and application provide broad coverage of compositions of matter, formulations and methods of use for
deuterated pirfenidone, including the LYT‑100 deupirfenidone compound, comprising six issued US patents, which are expected
to expire in 2028, one US patent application which, if issued, is expected to expire in 2035, and 25 patents issued in 23 foreign
jurisdictions, without taking into account any possible patent term extension or regulatory exclusivities.
• In addition, PureTech has filed additional patent applications on deupirfenidone, including two pending US patent applications and
one international PCT application directed to the use of deuterated pirfenidone, including LYT‑100 deupirfenidone, for the treatment
of lymphoedema and other relevant disorders.
• Any issued patents claiming priority to these applications are expected to expire in 2039 through 2040, exclusive of possible patent
term adjustments or extensions or other exclusivities.
Milestones
achieved
• In March 2020, PureTech initiated a Phase 1 multiple ascending dose study in healthy volunteers.
• In July 2019, PureTech acquired LYT‑100 from Auspex, a leader in deuteration, which was acquired by Teva Pharmaceutical Industries
in 2015.
• LYT‑100 was studied in a single dose crossover Phase 1 clinical trial of 24 healthy volunteers to assess safety and PK. These results
demonstrate that LYT‑100 displays improved PK relative to pirfenidone and suggest the possibility of twice‑daily dosing of LYT‑100
in patients with lymphoedema. In addition, LYT‑100 was well‑tolerated and there were no serious adverse events observed in
the Phase 1 clinical trial of healthy volunteers.
Expected
milestones
• PureTech expects results from the multiple ascending dose and food effect study in 2020, which, if successful, may enable the
initiation of a proof‑of‑concept study in people with breast cancer‑related, upper limb secondary lymphoedema in 2020, as well as
additional studies in people with other fibrotic and inflammatory conditions.
• PureTech also plans to initiate a proof‑of‑concept study evaluating LYT‑100 in another fibrotic and inflammatory disorder in 2020.
22 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Wholly Owned Pipeline — continued
LYT-100 product candidates
Product
candidate
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
LYT-100
Deupirfenidone
Lymphatic flow disorders,
including lymphoedema
LYT-100
Deupirfenidone
Other fibrotic and
inflammatory disorders
Phase in progress
Phase completed
Initiation of POC study in 2020
Initiation of POC study in 2020
This figure depicts the feedback loop between inflammation and fibrosis-driven lymphoedema
Panel A shows lymphoedema skin biopsy samples from lymphoedematous and normal limbs of patients. As shown in Panel B, lymphoedema skin biopsy
samples from lymphoedematous and normal limbs of patients show increased intracellular TGF-β1 staining in immunohistochemical staining.
A healthy lymphatic system
drains interstitial fluid
Damaged lymphatics
fail to drain
Art e ri o l e
Venule
osis
Fibrosis
Infl
a
m
m
a
t
i
o
n
Panel A
Immune cell
infiltration in arm
promotes fibrosis2
Panel B
Fibrosis in arm tissue
impairs flow and blocks
regeneration3
S m
Lymphatic
endothelial
cell
Lymphatic
vessel
o o th mu
s
c
l
e
c
e
l
l
Valve
Control
Lymphoedema
Healthy lymphatics maintain
fluid homeostasis1
fl o
Impai r e d fl o
w
w
CD45 strain
TGF-β1 strain
LYT-100 has been studied in a single dose crossover study in healthy volunteers and is currently being evaluated in
a Phase 1 multiple ascending dose study
Preclinical
Clinical
Planned
LYT-100 showed anti-fibrotic and
anti-inflammatory activity which may break
the feedback loop in lymphoedema.
LYT-100 showed favourable PK to pirfenidone.
LYT-100 entered a Phase 1 trial in 2020, and
two patient proof-of-concepts are expected
to begin in 2020.
LYT-100 is expected to have:
• Potential lower dose and less frequent dosing
• Potential better safety profile
Advised by the world’s leading
lymphoedema experts:
l
) 8000
m
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n
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t
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120000
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LPS Model (Rodents),
n=6-8 per group, 100mg/mL
Control
Pirfenidone (preclinical
activity in lymphoedema)
100mg/kg
LYT-100 at same dose, 100mg/kg
6
12
18
24
n=24 per group
LYT-100 (same dose)
Pirfenidone (preclinical
activity in lymphoedema)
100mg/kg
Babak Mehrara
Memorial Sloan
Kettering
Stanley Rockson
Stanford
Medicine
1 Rockson et al., 2019, Nat Rev Dis Primer
2 Gousopolos et al., 2016, JCI Insight – CD-45 stain
3 Avraham et al., 2010; Am J Pathology – TGF-β stain
PureTech Health plc Annual report and accounts 2019 23
Strategic report
PureTech’s Wholly Owned Pipeline — continued
LYT‑200
Founded Entity PureTech Ownership
Description
LYT-200
Wholly-Owned
LYT-200 is an investigational, fully human, IgG4 monoclonal antibody (mAb) that is designed to target
galectin-9, a protein that regulates immunosuppression and is prominently expressed in hard-to-treat
cancers, such as colorectal cancer, or CRC, cholangiocarcinoma, pancreatic cancer and others.
Programme
discovery
process by the
PureTech team
Patient need
and market
potential
Innovative
approach for
solving the
problem
Intellectual
property
Milestones
achieved
Expected
milestones
PureTech undertook a global, proactive search to discover important new scientific insights and technologies that could address
the challenge of multiple mechanisms of immunosuppression in current therapeutics. Through this process, PureTech identified the
pioneering work of George Miller, MD, at New York University. PureTech began collaborating with Dr Miller prior to his ground‑breaking
research being published in Cell and Nature Medicine. The publications demonstrate the role of newly discovered immunosuppressive
mechanisms involving galectin‑9, which was the basis of developing LYT‑200.
• Each year in the US there are approximately:
− 57,000 new pancreatic cancer patients, of which 50 per cent present with metastatic disease;
− 146,000 new CRC patients, of which 35 per cent present with metastatic disease; and
− 8,000 new cholangiocarcinoma patients, of which 50 per cent present with metastatic disease.
• These all represent significant patient populations that have yet to receive benefits from any immuno‑therapy agents.
• LYT‑200 is an investigational, fully human IgG4 mAb that is designed to block galectin‑9, which PureTech is developing for the
treatment of solid tumours, including CRC, pancreatic cancer, cholangiocarcinoma and others that do not respond to approved
checkpoint inhibitors and have poor survival rates.
• PureTech believes LYT‑200 holds potential as an immuno‑oncology therapeutic because galectin‑9:
− Polarises macrophages from the M1 to M2 phenotype, induces apoptosis of cytotoxic CD8+ T cells and facilitates expansion of and
immunosuppression via Tregs and myeloid derived suppressor cells (MDSCs);
− Has high expression that correlates with poor outcomes for multiple solid tumour types as well as resistance to approved
checkpoint inhibitors;
− Has preclinical evidence using a reagent anti‑galectin‑9 antibody that showed improvement in survival in a KPC pancreatic cancer
mouse model where, like their human counterparts, checkpoint inhibitors have failed. PureTech has since obtained data using
LYT‑200 in pancreatic cancer and melanoma rodent models where administration of LYT‑200 led to greater tumour reduction and
activity than an anti‑PD‑1 antibody as well as in patient‑derived organoid, or PDOT, systems;
− While elevated in the context of cancer, galectin‑9 has low expression under normal physiological conditions, indicating a potential
safety window which has been further supported by the lack of tolerability concerns to date in PureTech’s studies with LYT‑200, even
at extremely high doses such as 300 mg/kg in non‑human primates.
• PureTech has broad intellectual property coverage for this antibody‑based immuno‑therapy technology, including exclusive rights
to four families of patent filings that are exclusively licensed from or co‑owned with New York University, which cover antibodies that
target immunosuppressive agents and mechanisms and methods of use for the treatment of solid tumours, such as pancreatic cancer,
CRC, melanoma, gastric cancer, breast cancer and various other cancers.
• As of 31 December 2019, there are three families of intellectual property within this patent portfolio covering compositions of matter
and methods of use for antibodies targeting galectin‑9, including LYT‑200. These three families comprise in total two issued US
patents which are expected to expire in 2038, 13 pending US patent applications, which, if issued, are expected to expire in 2038
through 2040 and one international PCT application.
• In addition, there is one family of intellectual property covering compositions of matter and methods of use for related immuno‑
oncology technologies, which in total comprises three pending patent applications in US and foreign jurisdictions. This family is
expected to expire in 2037. All expiration dates are exclusive of possible patent term adjustments or extensions or other periods
of exclusivity.
• In November 2019, PureTech presented new preclinical data at the Society for Immuno‑therapy of Cancer (SITC) 34th Annual Meeting.
The presented data indicate that galectin‑9 is not only a potent therapeutic target, but also a potentially relevant biomarker. Across
multiple cohorts, galectin‑9 was significantly increased in blood samples of individuals with primary and metastatic pancreatic cancer,
lung tumours and colorectal carcinoma, compared to healthy individuals.
• PureTech plans to file an IND application and initiate a Phase 1a/1b in solid tumours in 2020. The planned clinical trial is a Phase 1a/1b
open label non‑randomised clinical trial of LYT‑200 alone or in combination with chemotherapy or an approved anti‑PD‑1 agent in
relapsed/refractory metastatic patients.
LYT-200 product candidate
Product
candidate
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
LYT-200
Anti‑Galectin‑9 MAb
Solid Tumours
IND and initiation of
Ph1a/1b study in 2020
Phase in progress
Phase completed
24 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Wholly Owned Pipeline — continued
Galectin-9 triggers and mediates multiple pathways of immunosuppression
Foundational biology
Affects multiple pathways of
immunosuppression, potentially enabling
a single-agent therapeutic
Proof‑of‑concept in preclinical models
• Tumour reduction in pancreatic cancer model
where anti-PD1 has failed
• Outperforms anti-PD1 in standard checkpoint
inhibitor (CPI) responsive melanoma model
• Restoration of T cell activity in patient-
derived organoids
Biomarker opportunity
Expression increased in blood and tissue
of multiple tumour types, correlating with
adverse prognosis
Promotes
expansion of
MDSCs
CD8
MDSCs
Galectin-9
Induces Treg cell
differentiation
and stability
Treg
Th1
Induces apoptosis
of Th1 and CD8+
T cells
M1
CD8
Tumour
Switching M1 to M2
macrophage
M2
Image adapted from J Mol Biol; 428 (16): 3266-3281; 2016
Treg = T regulatory cell; MDSC = myeloid derived suppressor cell; M1/M2 = tumour associated macrophage (TAM)1 (immunoactive) and 2 (immunosuppressed) cell;
Th1 = T helper1 cell
The below figure on the left depicts LYT-200 mouse mAb activity in an orthotopic pancreatic cancer KPC model
KPC cells were engrafted into the pancreata of immunocompetent mice and were treated systemically with the mouse version of the LYT-200 antibody,
or LYT-200 mouse mAb. PureTech observed significant tumour growth reduction at the end of the experiment with LYT-200 mouse mAb as a single
agent (p < 0.01) as assessed by decrease in tumour weight. The below figure in the middle illustrates examples of in vitro T cell activation with LYT-200.
Single agent activity in KPC
(pancreatic cancer) model
A model where anti-PD1s do not work
)
g
m
(
t
h
g
e
w
i
r
u
o
m
u
T
800
600
400
200
T cell activation with LYT‑200 in
patient‑derived organoid model
LYT‑200 drug properties make
it an excellent clinical clone
(cid:11)
(cid:1027)
F
N
T
%
(cid:11)
(cid:1029)
N
F
I
%
(cid:10)
(cid:84)
(cid:77)
(cid:77)
(cid:70)
(cid:68)
(cid:3)
(cid:53)
(cid:3)
(cid:11)
(cid:20)
(cid:37)
(cid:36)
(cid:9)
(cid:10)
(cid:84)
(cid:77)
(cid:77)
(cid:70)
(cid:68)
(cid:3)
(cid:53)
(cid:3)
(cid:11)
(cid:20)
(cid:37)
(cid:36)
(cid:9)
50
25
0
40
20
0
Control
(cid:45)(cid:58)(cid:53)(cid:14)(cid:19)(cid:17)(cid:17)
• High affinity and specificity for galectin-9
• Desired function: Blocking galectin-9
mediated immunosuppression
• Robust activity in preclinical studies:
− Single agent causes tumour reduction in
pancreatic and melanoma mouse models
− Observed ~50% tumour reduction with
LYT-200 vs. ~22% tumour reduction with
anti-PD1 in melanoma model
− Increase in intra-tumoural CD8 T cells
in combination with anti-PD1
− Activation of intra-tumoural immunity
in patient-derived tumour models
Control
(cid:1027)Gal9 mAb
Control
(cid:45)(cid:58)(cid:53)(cid:14)(cid:19)(cid:17)(cid:17)
n = 10/arm
P < 0.01
Note: For patient-derived organoids, n = 23 tumour samples; Success defined as: >20% upregulation of at least two out of three T cell activation markers; success achieved in
60% of tumours with majority showing >2 fold activation
PureTech Health plc Annual report and accounts 2019 25
Strategic report
PureTech’s Wholly Owned Pipeline — continued
LYT‑210
Founded Entity PureTech Ownership
Description
LYT-210
Wholly-Owned
PureTech is developing LYT-210, an investigational, fully human IgG1 monoclonal antibody (mAb)
directed against the delta-1 (γδ1) chain of T cells bearing γδ1 T cell receptors (TCRs) for antibody-
dependent cell-mediated cytotoxicity and antibody-dependent cellular phagocytosis (ADCP).
Programme
discovery
process by the
PureTech team
Patient need
and market
potential
Innovative
approach for
solving the
problem
Intellectual
property
Milestones
achieved
Expected
milestones
PureTech undertook a global, proactive search to discover important new scientific insights and technologies that could address
the challenge of multiple mechanisms of immunosuppression in current therapeutics. Through this process, PureTech identified the
pioneering work of George Miller, MD, at New York University. PureTech began collaborating with Dr Miller prior to his ground‑breaking
research being published in Cell. The publication demonstrated the role of newly discovered immunosuppressive mechanisms
involving immunosuppressive γδ1 T cells, which was the basis of developing LYT‑210.
• Each year in the US there are approximately:
− 57,000 new pancreatic cancer patients, of which 50 per cent present with metastatic disease;
− 146,000 new CRC patients, of which 35 per cent present with metastatic disease; and
− 8,000 new cholangiocarcinoma patients, of which 50 per cent present with metastatic disease.
• These all represent significant patient populations that have yet to receive benefits from any immuno‑therapy agents.
• LYT‑210 is an investigational, fully human, IgG4 mAb targeting immunosuppressive/pathogenic γδ1 T cells for a range of cancer
indications and autoimmune disorders.
• γδ1 T cells execute potent immunosuppressive function via multiple mechanisms, which facilitates cancer progression. PureTech has
designed LYT‑210 to eliminate γδ1 T cells, and thereby potentially relieve immunosuppression, which PureTech believes could enable
immune‑mediated cancer attack.
• PureTech believes that γδ1 T cells represent an important new immuno‑oncology target because they:
− Activate multiple immunosuppressive pathways;
− Have expression correlated with poor outcomes for multiple solid tumour types;
− Have preclinical evidence that showed improvement in survival in the KPC pancreatic cancer mouse model where approved
checkpoint inhibitors are ineffective;
− While elevated in the context of cancer, have low expression under normal physiological conditions which indicates a potential
safety window;
− Represent an attractive target; to our knowledge, there are no other companies developing a therapeutic candidate targeting
immunosuppressive and pathogenic γδ1 T cells.
• PureTech has broad intellectual property coverage for this immuno‑therapy technology, including exclusive rights to four families
of patent filings that are exclusively licensed from or co‑owned with New York University. Three of these families cover antibodies
that target immunosuppressive agents and mechanisms and methods of use for the treatment of solid tumours, such as pancreatic
cancer, CRC, melanoma, gastric cancer, breast cancer and various other cancers. The fourth family covers antibodies that are directed
to pro‑inflammatory γδ T cells for use in the treatment of inflammatory conditions, such as autoimmune disorders, for example, IBD,
ulcerative colitis, Crohn’s disease and coeliac disease, among others.
• As of December 2019, there are three families of intellectual property within this patent portfolio covering compositions of matter
and methods of use for antibodies targeting delta‑1 chain of T cell Receptor, including LYT‑210, which include one issued patent,
nine pending US applications and one PCT application. Two of these families, one of which includes the issued patent, are related
to compositions and methods of use in oncology applications. The third family is directed to methods of use in the treatment of
inflammatory conditions, such as autoimmune disorders. The issued patent and any patents issuing from pending applications with
respect to LYT‑210 are expected to expire in 2039 through 2040.
• In addition, there is one family of intellectual property covering compositions of matter and methods of use for related immuno‑
oncology technologies, which in total comprises three pending patent applications in US and foreign jurisdictions. This family is
expected to expire in 2037. All expiration dates are exclusive of possible patent term adjustments or extensions or other periods
of exclusivity.
• In November 2019, PureTech presented new preclinical data at the Society for Immunotherapy of Cancer (SITC) 34th Annual
Meeting. The data presented on LYT‑210 showed that γδ1 T cells were the abundant T cell within the studied tumours, which
included pancreatic, colorectal, cholangiocarcinoma and liver cancer. PureTech also presented data showing that LYT‑210 depletes
immunosuppressive γδ1 T cells through cytotoxicity and phagocytosis in patient blood and tumour samples. Together, these findings
further support the ability of LYT‑210 to potentially restore the immune system’s ability to fight difficult‑to‑treat cancers.
• PureTech plans to continue to advance preclinical and biomarker studies for LYT‑210 in 2020.
LYT-210 product candidates
Product
candidate
LYT-210
Anti‑Delta‑1 MAb
LYT-210
Anti‑Delta‑1 MAb
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
Solid Tumours
GI Autoimmunity
Phase in progress
Phase completed
26 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Wholly Owned Pipeline — continued
This figure illustrates the impact of protumourigenic γδ1 T cells on tumour progression
Immunosuppressive γδ1 T cells
• Solid tumours harbour immunosuppressive
γδ1 T cells that correlate with tumour
aggressiveness/lower rate survival
• Works through multiple pathways to
cause immunosuppression in the tumour
micro‑environment
• LYT‑210 is a fully human monoclonal IgG1
antibody (cross reacts with monkey)
Tumour progression
Restrict cytotoxic
(cid:1029)(cid:1030) T cell activity
Inhibit maturation and
antigen presentation of DCs
Restrict and suppress
cytotoxic (cid:1027)(cid:1028) T cell activity
Immunosuppressive cytokine
production (exp. IL17)
Chemoattract MDSCs,
TAMs neutrophils
Image adapted from CellPress: REVIEW: γδ T cells: Unexpected Regulators of Cancer Development and Progression.
DC = dendritic cell; TAM = tumour associated macrophage; MDSC = myeloid derived suppressor cell; IL17 = interleukin 17
Pro-tumour (cid:1116)(cid:1117)1 T cells
As shown in the below figure on the left, when mice with pancreatic cancer were treated with an antibody against
immunosuppressive γδ T cells, which is represented by the dark blue curve, survival was greatly increased. The below
figure in the middle illustrates examples of in vitro T cell activation with antibodies against γδ T cells.
Single agent activity in KPC (pancreatic
cancer) model (Published in Cell)
T cell activation with an anti‑δ1 mAb
in patient‑derived organoid model
LYT‑210 candidate clone has
excellent drug properties
l
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l
1.0
0.8
0.6
0.4
0.2
0.0
4
5
6
7
8
Weeks
Control
UC3-10A(cid:1030) mAb*
n = 10/arm
P = 0.009
(cid:12)
(cid:1029)
N
F
I
%
(cid:12)
(cid:1027)
F
N
T
%
(cid:10)
(cid:84)
(cid:77)
(cid:77)
(cid:70)
(cid:68)
(cid:3)
(cid:53)
(cid:3)
(cid:12)
(cid:25)
(cid:37)
(cid:36)
(cid:9)
(cid:10)
(cid:84)
(cid:77)
(cid:77)
(cid:70)
(cid:68)
(cid:3)
(cid:53)
(cid:3)
(cid:12)
(cid:25)
(cid:37)
(cid:36)
(cid:9)
15
10
5
0
15
10
5
0
Control
(cid:34)(cid:79)(cid:85)(cid:74)(cid:14)(cid:1030)(cid:18)(cid:3)(cid:78)(cid:34)(cid:67)
Control
(cid:34)(cid:79)(cid:85)(cid:74)(cid:14)(cid:1030)(cid:18)(cid:3)(cid:78)(cid:34)(cid:67)
• High affinity and specificity/selectivity for
pathogenic γδ1 T cells
• Species cross reactivity to enable IND tox
• Desired function: Inducing ADCC/ADCP
and activating suppressed effector T cells
in patient-derived tumour models
• Proof of principle in animal models:
− Targeting immunosuppressive γδ T
cells significantly prolongs survival in
a KPC model
− Targeting immunosuppressive γδ T cells
synergises with checkpoint inhibitors in
melanoma and lung cancer models
Cell. 2016 Sep 8;166(6):1485-1499; *Tool antibody that blocks mouse immunosuppressive γδ T cells
Note: For patient-derived organoids: Analysed n = 22 tumour samples; success defined as: >20% upregulation of at least two out of three T cell activation markers;
Success achieved in 63% of tumours with majority showing >2-fold activation
PureTech Health plc Annual report and accounts 2019 27
Strategic report
PureTech’s Wholly Owned Pipeline — continued
PureTech’s wholly-owned programmes also include three discovery platforms designed to harness the lymphatic
system functions for immunology, oncology and CNS indications.
Lymphatic Targeting Chemistry Platform
PureTech is developing a synthetic lymphatic targeting
chemistry platform that employs the body’s natural lipid
absorption and transport process to orally administer drugs
via the lymphatic system by (1) targeting the mesenteric
lymph nodes and (2) bypassing first‑pass metabolism.
The point of original small molecule release from the
triglyceride is governed by self‑cleaving chemical structures
with different release‑timing features that tether the small
molecule to the module connected to the triglyceride.
Consumed nutrients and orally‑administered pharmaceuticals
are initially absorbed by the small intestine mucosa and
distributed to the liver by the portal vein before entering
systemic circulation. Importantly, many consumed dietary
lipids, particularly triglycerides, enter systemic circulation by
an alternate route. Triglycerides, which are composed of three
fatty acid chains tethered to a 3‑carbon glycerol molecule, are
absorbed by small intestine mucosal enterocytes where they
are incorporated into large lipid‑protein complexes called
chylomicrons and released into the submucosa. Chylomicrons
are too large to enter blood vessels and are instead taken
up by submucosal lymphatic vessels. Once in the lymphatic
vessels, they are transported to mesenteric lymph nodes
associated with the gastro‑intestinal (GI) tract where they pass
into larger lymphatic sinuses connected to the thoracic duct,
then transition to systemic circulation. This is in contrast to
conventional systemic circulation via the gut and liver.
PureTech’s lymphatic targeting technology has important
features potentially offering meaningful advantages in the
creation of orally‑administered medicines, especially those
that need to reach immune system drug targets that are
present in the GI tract mucosa and submucosa (e.g., intestine‑
associated immune cells), or in the mesenteric lymphatic
vasculature (e.g., circulating immune cells) and mesenteric
lymph nodes (e.g., lymph node stromal cells, antigen‑
presenting dendritic cells (DCs) and lymph node‑associated
immune cells). The platform takes advantage of the fact that
one of the triglyceride‑associated fatty acids remains bound
to dietary lipids during intestinal absorption, chylomicron
conversion, lymphatic vessel uptake and eventual transport
into the circulatory system. Using a modular set of proprietary
chemical entities, small molecule pharmaceutical compounds
can be docked to triglycerides where, following oral
administration, the small molecule is directed into the
mesenteric lymphatic system and on to systemic circulation.
Conventional drug circulation versus lymphatic systemic circulation
Targeting the mesenteric lymph node
To demonstrate the mesenteric lymphatic targeting capability
of the platform, prodrugs were created from unmodified
mycophenolic acid (MPA), which is an immune‑suppressive
agent widely used in solid organ transplant rejection therapy
and the treatment of lupus autoimmunity. Preclinical studies
in rodent models conducted by one of the co‑inventors of
this technology and a PureTech collaborator, Chris Porter,
PhD, at Monash University, and subsequently reproduced
by PureTech, demonstrated that lipid prodrugs of MPA were
capable of achieving MPA concentrations in mesenteric
lymph, mesenteric lymph nodes and in mesenteric lymph
node immune cells that were ten to 100‑fold higher than
observed with unmodified MPA.
Enhancing oral bioavailability
This technology could provide a broadly‑applicable modular
means to significantly enhance the bioavailability of orally‑
administered drugs that suffer from substantial first‑pass
liver metabolism or those drugs, especially those utilised in
drug combination therapies, that act as modulators (inducers
and/or inhibitors) of drug‑metabolising systems in the liver.
To explore the utility of the platform in such cases, PureTech
has created several lipid prodrugs of allopregnanolone, an
inhibitory pregnane neurosteroid that acts as a highly potent
positive allosteric modulator of the GABAA receptor and is
approved by the FDA as a 60‑hour infusion for the treatment
of postpartum depression under the brand name Zulresso.
PureTech demonstrated that oral‑dosing of these prodrugs
achieved therapeutically relevant plasma levels in small and
large animal models. Coupled with other preclinical studies,
these results support the possible utility of this approach
for converting allopregnanolone into an orally‑dosed
drug as well as for numerous other potential therapeutics
with intrinsic hepatic metabolism liabilities and/or oral
absorption limitations.
Gut – Portal – Systemic Circulation
Gut – Lymphatic – Systemic Circulation
28 PureTech Health plc Annual report and accounts 2019
Strategic report
PureTech’s Wholly Owned Pipeline — continued
To date, PureTech has successfully extended the platform
to encompass more than 20 potential product candidates
as well as a range of novel linker chemistries that have
demonstrated promising lymphatic targeting in preclinical
studies. From this work, PureTech may be able to nominate
a prodrug candidate as soon as the first half of 2020.
Additionally, PureTech announced an alliance with Boehringer
Ingelheim in April 2019, which is initially focused on evaluating
the feasibility of applying its lymphatic targeting technology
to one of Boehringer Ingelheim’s immuno‑oncology product
candidates. Under the terms of the agreement, PureTech
is eligible to receive up to $26 million in upfront payments,
research support, and preclinical milestones, and is eligible
to receive more than $200 million in development and
sales milestones, in addition to royalties on product sales.
PureTech retains all other applications of this technology.
Intellectual Property
PureTech has broad intellectual property coverage for its
proprietary lymphatic targeting platform, which includes
exclusively licensed and co‑owned patent applications,
as well as company‑owned patent applications. These
patent applications cover compositions of matter, methods
of use and methods of treatment encompassing specific
chemical modifications, including a wide range of novel linker
chemistries, as well as various classes of lymphatic targeting
therapeutics, which include prodrugs for a large number
of active pharmaceutical ingredients (APIs), for use in the
treatment of a wide range of diseases and disorders.
As of 31 December 2019, PureTech’s lymphatic targeting
platform intellectual property portfolio consists of
17 patent families comprising 15 US patent applications,
four international PCT applications and ten foreign patent
applications. Of these, company‑owned IP consists of eight
US patent applications in six patent families. PureTech
exclusively licensed and co‑owns a patent portfolio of
11 patent families comprising 18 US and foreign patent
applications and four international PCT applications from
Monash University. Any issued patents from the in‑licensed
patent applications are expected to expire in 2035 through
2036 and any issued patents from the co‑owned and
company‑owned patent applications are expected to expire
in 2038 through 2040, exclusive of possible patent term
adjustments or extensions or other forms of exclusivity.
Milk Exosome Platform
PureTech is developing a milk exosome‑based technology
to enable oral administration of macromolecule therapeutic
payloads, including antisense oligonucleotides, short
interfering RNA, messenger RNA (mRNA), peptides and
nanoparticles that are otherwise administered exclusively
by injection.
Exosomes are a type of extracellular vesicle approximately
100nm in diameter that are produced in the endosomal
compartment and secreted from most types of eukaryotic
cells. Human cell‑derived exosomes have attractive promise
as vehicles for systemic drug delivery due to their tolerability
over synthetic polymer‑based delivery technologies.
However, the fragile nature of exosomes derived from human
cells limits the type of post‑isolation manipulations that can
be applied in order to optimise such vesicles for exogenous
drug cargo loading, administration and storage. This
contrasts with milk‑derived exosomes, which form the basis
of PureTech’s technology and have evolved in all mammals to
remain stable following oral consumption and transit through
the upper GI tract.
PureTech’s platform utilises bovine‑derived milk exosomes.
Bovine milk is a rich, readily available and inexpensive
source of exosomes harbouring approximately 1011 to 1012
purifiable exosomes per millilitre. By comparison, serum or
plasma contains approximately 1,000‑fold fewer exosomes
(108 to 109 exosomes) per millilitre. The concept for utilising
bovine milk‑derived exosomes for drug delivery is based
on earlier research conducted in the laboratory of Ramesh
Gupta, PhD, at the University of Louisville. PureTech has in‑
licensed the underlying foundational intellectual property
derived from this research. Subsequently, PureTech has
expanded and industrialised this technology developing
easily scalable processes for low cost exosome purification,
efficient universal cargo loading and formulations for
oral administration.
PureTech’s milk‑derived exosome platform is currently
constructed to transport macromolecular medicines to
selected mucosal cell types of the intestinal tract where
the therapeutics act either directly in the GI tract, transit
Harnessing milk exosomes for oral administration of
nucleic acids and other biologics
Unique source of
oral exosomes
Biologics
(e.g., nucleic acids,
peptides, proteins)
Small molecules
Oral administration
Stable trafficking
through the stomach
Biodistribution beyond
the liver via the lymphatics
This figure depicts milk exosomes enabling the oral intake of large
molecules via the gut and the lymphatic system.
through the mucosa to the underlying lymphatic vascular
network or, in the case of cargos that yield mRNAs, produce
complex biologics such as antibodies within mucosal cells
that are secreted into the mucosal lymphatic vascular network
for subsequent systemic distribution. Using PureTech’s
milk exosome technology, it may be possible for a patient
to take an oral drug product that will permit their own GI
tract cells to make virtually any type of therapeutic protein.
This approach also has the potential to provide a more
convenient and significantly less expensive means to deliver
biological medicines. This proprietary milk‑derived exosome
technology has the potential to alter the treatment paradigm
for diseases, such as rheumatoid arthritis, diabetes and
cancer for which the standard of care requires intravenous
infusion or subcutaneous injection of monoclonal antibodies
(e.g. anti‑PD1, anti‑TNF) or protein/peptides (e.g. GLP‑1,
β‑glucocerebrosidase, Factor IX, Erythropoietin). Within the
PureTech Health plc Annual report and accounts 2019 29
Strategic report PureTech’s Wholly Owned Pipeline — continued
context of the current COVID‑19 pandemic, PureTech’s milk‑
derived exosome platform has the potential to support oral
administration of anti‑SARS CoV‑2 monoclonal antibodies or
antibody combinations to supply passive immune therapies
for infected individuals and passive immune protection for
health care and first responder professionals.
Thus, whether combating emerging epidemic/pandemic
pathogens or other diseases where monoclonal antibody
therapeutics offer significant clinical benefit, the milk
exosome platform has the potential to transform the range of
biotherapeutics clinical indications, while also lowering costs
and simplifying administration.
Intellectual Property
PureTech has broad intellectual property coverage for its
milk exosome platform technologies, which includes both
exclusively licensed and company‑owned patents and patent
applications. PureTech’s milk exosome intellectual property
portfolio covers compositions of matter, methods of use
and methods of treatment spanning various platform‑based
technologies, as well as various broad classes of milk‑
exosome formulated therapeutics, which include nucleic
acid‑based therapeutics (such as messenger RNA, nucleic
acid expression systems, short interfering RNA and antisense
oligonucleotide‑based approaches), small molecules,
biologics (such as peptides, proteins and antibodies) and
other therapeutics for use in the treatment of a wide range
of diseases and disorders, including various cancers and
inflammatory diseases.
As of 31 December 2019, PureTech’s milk exosome patent
portfolio consists of eight patent families comprising
three issued US patents, five US patent applications, two
international PCT applications and five foreign patent
applications. Of these, company‑owned IP consists of
eight US and foreign patent applications and one pending
international PCT application in four patent families. PureTech
exclusively licensed a patent portfolio consisting of two
patent families from 3P Biotechnologies, Inc. based on
technology originating from the University of Louisville. In
addition, PureTech exclusively licensed a patent portfolio
consisting of two patent families from NuTech Ventures
based on technology originating from the University of
Nebraska. PureTech’s issued patents and any patents issuing
from their related filings are expected to expire in 2034 and
2037. Any issued patents from the other patent applications
are expected to expire in 2037 through 2041, exclusive of
possible patent term adjustments or extensions or other
forms of exclusivity.
Meningeal Lymphatics Platform
The lymphatic system is an important part of the immune
system, GI system and central nervous system (CNS), and
loss of lymphatic flow can play a critical role in diseases of
these systems. This concept underlies PureTech’s meningeal
lymphatics platform, which aims to correct lymphatic
dysfunction in the brain to potentially improve outcomes
for a range of neurodegenerative and neuroinflammatory
conditions that are not currently effectively treated, such
as Alzheimer’s disease (AD) and Parkinson’s disease.
The meningeal lymphatics is a functional lymphatic system
in the meninges of the brain that was recently discovered
by one of PureTech’s collaborators, Jonathan Kipnis, PhD,
a professor at the University of Virginia. These meningeal
lymphatics have been described as the “brain drain,” a route
through which macromolecules are flushed from the brain
in cerebrospinal fluid. Among the macromolecules that are
drained via the lymphatics are pathogenic macromolecules
such as amyloid‑beta and tau, which are both associated
with AD pathology, as well as alpha‑synuclein, which is
30 PureTech Health plc Annual report and accounts 2019
associated with Parkinson’s disease. In animal models of AD,
AD associated tauopathies and Parkinson’s disease, blocking
meningeal lymphatic flow significantly exacerbated disease
progression and severity, and improving flow through aged
meningeal lymphatics improved cognitive brain function in
these animal models. With ageing, the lymphatic vessels
that drain the brain become dysfunctional and no longer
drain as efficiently. The “lymphoedematous characteristics”
of meningeal lymphatic vessels in aged animals might be
leading to inefficient clearance of pathologic macromolecules
and potentially increase risk for neurodegenerative diseases.
PureTech is exploring multiple ways of altering lymphatic flow,
both in the CNS and other parts of the body. Starting with
LYT‑100, PureTech is developing novel therapeutic candidates
that target inflammation, fibrosis and other mechanisms that
impair lymphatic flow.
Intellectual Property
PureTech has broad intellectual property coverage around
its meningeal lymphatics platform, which includes exclusively
licensed patent applications covering compositions of matter,
methods of use and methods of treatment encompassing
its platform‑based brain lymphatic technologies, including
the identification of macromolecular targets, as well as
various classes of brain lymphatic targeting therapeutics for
use in the treatment of a wide range of neurodegenerative
and neuroinflammatory conditions, as well as various
neuropathies and cancers.
As of 31 December 2019, PureTech’s brain lymphatics patent
portfolio consists of eight patent families comprising seven US
patent applications, two international PCT applications and
five foreign patent applications exclusively licensed from the
University of Virginia Licensing & Ventures Group. Any issued
patents from the in‑licensed patent applications are expected
to expire in 2037 through 2040, exclusive of possible patent
term adjustments or extensions or other forms of exclusivity.
Strategic report PureTech’s Founded Entities
Founded Entities where PureTech has a controlling interest or right to receive royalties*
Founded
Entity
PureTech
Ownership1
Product
Candidate2
Indication
Stage of Development
Royalties3
Karuna
(KRTX)
20.3%
Follica
78.3%
Gelesis
22.0%
Vedanta
53.3%
Alivio
78.6%
Sonde
45.9%
KarXT
P
Schizophrenia
Dementia-related psychosis
Pain
FOL-004
FOL-005
P/D
D
Androgenetic alopecia
Skin rejuvenation
Plenity™5
GS1005
GS5005
Gelesis2005
GS3005
GS4005
VE303
VE416
VE202
VE800
ALV-306
ALV-304
ALV-107
Sonde†
D
D
D
D
D
D
B
B
B
B
P
P
P
D
B
Weight management
Adolescent weight management
CIC
Weight management in T2D/prediabetes
NASH/NAFLD
IBD
High-risk CDI
Food allergy
IBD
Solid tumours
Pouchitis and distal colitis
IBD
IC/BPS
Depression detection
Oral delivery of biologics,
vaccines and other drugs
Phase 2 Complete4
Phase 1
Phase 1
Phase 3 Ready
Phase 2
FDA Cleared
Phase 2 Ready6
Phase 3 Ready6
Phase 2
Phase 2 Ready6
Preclinical
Phase 2
Phase 1/2
Phase 1
Phase 1
Preclinical
Preclinical
Preclinical
Phase 1
Preclinical
Royalties
Royalties
Royalties
N/A
N/A
N/A
N/A
Entrega
72.9%
ENT-100
Founded Entities where PureTech has an equity interest*
Founded
Entity
PureTech
Ownership1
Product
Candidate2
Indication
Stage of Development
Royalties3
Akili
34.4%
AKL-T01
AKL-T02
AKL-T03
AKL-T04
AKL-X01
Vor
28.1%
VOR33
D
D
D
D
D
B
Paediatric ADHD
Parkinson’s/MCI
Traumatic brain injury
Paediatric Autism
Major depressive disorder
Multiple sclerosis
Major depressive disorder
ADHD caregiver app
Pursuing FDA Clearance
Phase 1 (Feasibility)
Phase 1 (Feasibility)
Phase 2 (POC)
Pivotal Study Ready7
Phase 2 (POC)
Preclinical
Clinical Trials
N/A
Acute myeloid leukaemia
Preclinical
N/A
Founded Entity related to the Brain
Founded Entity related to the Immune System
Founded Entity related to the Gut
*
1
While PureTech maintains ownership of equity interests in its Founded Entities, the Company does not, in all cases, maintain control over these entities (by virtue of (i)
majority voting control and (ii) the right to elect representation to the entities’ 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 31 December 2019, Controlled Founded Entities include Alivio Therapeutics, Inc., Follica, Incorporated,
Entrega, Inc., Vedanta Biosciences, Inc. and Sonde Health, Inc., and Non-Controlled Founded Entities include Akili Interactive Labs, Inc., Gelesis, Inc., Karuna Therapeutics,
Inc., Vor Biopharma Inc. and, for all periods prior to 18 December 2019, resTORbio, Inc.
Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of 31 December 2019 (with the exception of Gelesis
ownership which is as of 1 April 2020), including outstanding shares, options and warrants, but excluding unallocated shares authorised to be issued pursuant to equity
incentive plans. Ownership of Vor and Sonde is based on the assumption that all future tranches of their most recent financing rounds are funded. Karuna ownership is
calculated on an outstanding voting share basis as of 13 March 2020.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B) or device (D).
PureTech has a right to royalty payments as a percentage of net sales.
2
3
4 Pending the outcome of an End-of-Phase 2 meeting with the FDA, Karuna expects to initiate a Phase 3 clinical trial.
5
6
7
These product candidates are regulated as devices and their development has been approximately equated to phases of clinical development.
Contingent on FDA review of the research plan.
Future clinical research plans and priorities in process.
PureTech Health plc Annual report and accounts 2019 31
Strategic report
PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Product Candidate**
Indication
Karuna
(KRTX)
Programme
discovery
process by the
PureTech team
20.3%
KarXT
P
Schizophrenia
Dementia-related psychosis
Pain
Stage of Development
Phase 2 Complete***
Phase 1
Phase 1
PureTech was interested in developing a new approach to treat schizophrenia that was effective but did not have the debilitating side
effects of the current class of antipsychotics, realising that any potential new approaches could have wider applicability. PureTech
engaged with a group of leading schizophrenia experts who were most excited about muscarinic agonists, pointing to the data
generated by Eli Lilly with xanomeline, which was not advanced at that time due to tolerability issues. PureTech invented and broadly
filed patents to cover the concept of combining a muscarinic receptor agonist with a peripherally acting antagonist, and it in‑licensed
xanomeline from Eli Lilly in May 2012. The core team member who was running this programme at PureTech became Karuna’s chief
operating officer and PureTech built a team of leading drug developers and neuroscientists around him, including Steven Paul, MD,
an expert in central nervous system (CNS) drug discovery and development. Karuna completed an initial public offering (IPO) on the
Nasdaq Global Market in July 2019.
Dr Paul was formerly executive vice president for science and technology and president of the Lilly Research Laboratories at Eli Lilly, and
was involved in the original xanomeline work at Eli Lilly. Dr Paul was also a co‑founder of Sage Therapeutics and Voyager Therapeutics,
where he also served as chief executive officer, and the former scientific director of the National Institute of Mental Health.
Patient need
and market
potential
• Psychosis and cognitive impairments are debilitating features of schizophrenia, dementia‑related psychosis and other mental
illnesses that affect tens of millions of people, but there are no existing medicines that sufficiently and safely treat psychosis and
cognition impairments.
− There are approximately 2.7 million adults living with schizophrenia and approximately 8.4 million people living with dementia in the
United States.
− Approximately 1.2 million of the estimated 8.4 million patients with dementia in the United States experience psychosis at some
point during the course of their disease.
− People with schizophrenia have a ten to fifteen‑year reduction in life expectancy compared to the general population, struggle
to maintain employment or live independently and are often unable to maintain meaningful interpersonal relationships.
• Antipsychotics are the mainstay therapy; however, drugs currently in use all rely on the same fundamental mechanism of action and,
despite widespread use, the prognosis for patients remains poor. Current antipsychotics have modest efficacy in many patients and
significant side effects.
− Current antipsychotics only address psychosis, also known as positive symptoms, such as hallucinations and delusions, but despite
treatment, patients often experience residual positive symptoms throughout their lives.
− There are no approved treatments for the negative symptoms, such as apathy and loss of motivation, or cognitive symptoms, such
as changes in working memory and attention, of schizophrenia, or the treatment of dementia‑related psychosis.
− At least half of patients fail to adequately respond to current antipsychotic drugs.
− Additionally, current treatments are often associated with severe side effects, including sedation, extrapyramidal side effects
such as motor rigidity, tremors and slurred speech and significant weight gain resulting in the complications of diabetes,
hyperlipidaemia, hypertension and cardiovascular disease.
• There is an unmet need for new treatments in schizophrenia that could address the positive, negative and cognitive symptoms and are free
of the problematic safety issues with existing medicines. There are currently no approved treatments for dementia‑related psychosis.
• The current standard of care for neuropathic and inflammatory pain include opioids, nonsteroidal anti‑inflammatory drugs, topical
agents, anticonvulsants and antidepressants.
• Karuna is targeting muscarinic cholinergic receptors for the treatment of psychosis and cognitive impairment across CNS disorders,
including schizophrenia and dementia‑related psychosis, as well as pain.
• KarXT consists of xanomeline, a novel muscarinic acetylcholine receptor agonist that has demonstrated decreases in multiple
psychotic symptoms and improvements in cognitive symptoms in placebo‑controlled human trials in schizophrenia and Alzheimer’s
disease, and trospium chloride, an FDA approved and well‑established muscarinic receptor antagonist that has been shown not
to measurably cross the blood‑brain barrier. KarXT is designed to preferentially stimulate M1/M4 muscarinic receptors in the brain
without stimulating muscarinic receptors in peripheral tissues to significantly improve tolerability.
• Xanomeline was previously studied by Eli Lilly in randomised, double‑blind, placebo‑controlled trials in schizophrenia and AD,
demonstrating dose‑dependent decreases in multiple psychotic symptoms and related behaviours, including hallucinations,
delusions and agitation, as compared to patients on placebo in the treatment of psychosis and improvements in symptoms as
measured by both the Alzheimer’s disease Assessment Scale‑Cognitive Subscale and the Clinician Interview‑Based Impression of
Change plus caregiver interview standards.
• To PureTech’s knowledge, xanomeline is the only muscarinic agonist that has demonstrated potential therapeutic benefit in humans in
either schizophrenia or AD. Like all muscarinic receptor agonists studied to date, however, xanomeline’s tolerability has been limited
by side effects arising from muscarinic receptor stimulation in peripheral tissues, leading to nausea, vomiting, diarrhoea and increased
salivation and sweating, which led Eli Lilly to discontinue development of xanomeline. By pairing xanomeline with trospium chloride,
Karuna believes KarXT could potentially alleviate the tolerability issues seen with xanomeline while maintaining the improvement of
positive, negative and cognitive symptoms of schizophrenia and psychosis in AD observed in previous Phase 2 studies.
• In November 2019, Karuna announced that KarXT achieved the primary endpoint of its Phase 2 clinical trial for the treatment of acute
psychosis in patients with schizophrenia, demonstrating a statistically significant and clinically meaningful 11.6 point mean reduction
in total Positive and Negative Syndrome Scale (PANSS) score compared to placebo (p<0.0001) and also demonstrated improved
tolerability as compared to placebo. A statistically significant reduction in the secondary endpoints of PANSS‑Positive and PANSS‑
Negative scores were also observed (p<0.001). KarXT demonstrated improved tolerability as compared to placebo, with similar
discontinuation rates between KarXT (20 per cent) and placebo (21 per cent). The study enrolled 182 schizophrenia patients with acute
psychosis, 90 of whom received KarXT. The number of discontinuations due to treatment emergent adverse events (AEs) were equal
in the KarXT and placebo arms (n=2 in each group). One serious adverse event (SAE) was experienced in the drug treatment arm, in
which the patient discontinued treatment and subsequently sought hospital care for worsening psychosis, meeting the regulatory
definition of an SAE. In Karuna’s Phase 1 tolerability POC study, KarXT was better tolerated than xanomeline plus placebo and no
serious or severe adverse events, or SAEs, were reported.
• The safety and tolerability of KarXT and dose selection for the Phase 2 clinical trial was supported by results from Karuna’s
two Phase 1 healthy volunteer studies in over 140 patients with KarXT. As disclosed in its public filings, Karuna observed in its
first Phase 1 randomised, double‑blind placebo‑controlled study that the addition of trospium to xanomeline was associated with
clinically meaningful reductions in the rate of the most common treatment‑emergent cholinergic adverse events (ChAEs) than
reported with xanomeline plus placebo, including nausea, vomiting, diarrhoea and excess sweating and salivation.
Innovative
approach for
solving the
problem
Milestones
achieved
*
PureTech Health has a right to royalty payments as a percentage of net sales from Karuna. As of 13 March 2020, PureTech’s percentage ownership of Karuna was
approximately 20.3 per cent on an outstanding share basis.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B), or device (D).
**
*** Pending the outcome of an End-of-Phase 2 meeting with the FDA, Karuna expects to initiate a Phase 3 clinical trial.
32 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Founded Entities — continued
Milestones
achieved
(continued)
• Karuna’s second Phase 1 study was a randomised, double‑blind, placebo‑controlled multiple ascending dose trial of KarXT. This trial
evaluated twice‑a‑day dosing of the proprietary KarXT co‑formulation containing fixed ratios of xanomeline and trospium, rather than
the three‑times‑a‑day dosing previously used with xanomeline. The study demonstrated tolerability at xanomeline dose levels exceeding
those shown in previous studies of xanomeline alone. The co‑formulation also achieved exposure levels equivalent to or higher than the
separate dosage forms used previously.
• Xanomeline has also shown potent activity preclinically in a number of models of analgesia, demonstrating the potential of KarXT to treat
a variety of pain indications, including acute, inflammatory and neuropathic pain, and addressing the need for non‑opioid pain medications.
Expected
milestones
• Karuna plans to hold an end‑of‑Phase 2 meeting with the United States Food and Drug Administration (FDA) in the second quarter of 2020,
and pending the outcome of that meeting, anticipates advancing KarXT into a Phase 3 clinical trial by the end of 2020.
• Karuna anticipates topline results from a Phase 1b clinical trial for the treatment of experimentally induced pain in healthy volunteers in
mid‑2020, and topline results from a Phase 1b clinical trial in healthy elderly volunteers to assess the safety and tolerability of KarXT for the
treatment of dementia‑related psychosis by the end of 2020.
KarXT selectively activates muscarinic receptors in the brain
Increase Activity
Decrease Activity
Offsetting Effect
System
Potential Impact on Symptoms
xanomeline + trospium = KarXT
Commentary
Central Nervous System
n/a
Improvement in psychosis and cognition
Salivation Glands
Sweat Glands
GI Tract
Bladder
Tolerability from neutralisation
of peripheral activity
Phase 2 clinical trial primary endpoint: PANSS total score at Week 5
e
n
i
l
e
s
a
B
m
o
r
f
e
g
n
a
h
C
S
S
N
A
P
)
e
c
n
e
r
e
f
f
i
d
n
a
e
m
S
L
(
5
0
-5
-10
-15
-20
Clinically meaningful and statistically
significant improvement in
total PANSS vs. placebo
• 11.6 point improvement at week 5 with p<0.0001
(‑17.4 KarXT vs. ‑5.9 placebo)
• Statistical separation at every assessed time point
• Cohen’s d effect size of 0.75
Baseline
Week 2
Week 4
Week 5
mITT population
Placebo
KarXT
P<0.0001
Karuna’s product candidates
Product
candidate
Indication
Schizophrenia – psychosis
Schizophrenia – cognitive symptoms
KarXT
Schizophrenia – negative symptoms
Dementia‑related psychosis
Pain
Other
Muscarinic‑targeted pain candidate
Phase in progress
Phase completed
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming
Milestone
End‑of‑Phase 2
meeting Q2 2020
Phase 1b study
initiation H1 2020
Phase 1b study
initiation H1 2020
Phase 1b topline
data end of 2020
Phase 1b topline
data mid‑2020
IND‑enabling
studies 2020
PureTech Health plc Annual report and accounts 2019 33
Strategic report
PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Product Candidate**
Indication
Stage of Development
Gelesis
22.0%
Plenity™†
GS100†
GS500†
Gelesis200†
GS300†
GS400†
D
D
D
D
D
D
Weight management
Adolescent weight management
CIC
Weight management in T2D/prediabetes
NASH/NAFLD
IBD
FDA Cleared
Phase 2 Ready***
Phase 3 Ready***
Phase 2
Phase 2 Ready***
Preclinical
Programme
discovery
process by the
PureTech team
PureTech was interested in creating an effective and safe therapy for obesity given the tremendous need, significant health implications
and failure of prior approaches to effectively engage and serve the breadth of the population affected. PureTech consulted with leading
obesity experts to brainstorm on the characteristics of an ideal approach, which it decided was an orally‑administered mechanically
acting device, and then conducted a worldwide search for compelling technologies meeting these criteria. PureTech identified and
in‑licensed the core intellectual property from its collaborator Alessandro Sannino, PhD, at Università del Salento in October 2008, and
PureTech subsequently co‑invented additional intellectual property around a novel class of biocompatible, superabsorbent hydrogels.
One of the core PureTech team members involved in the initial identification and development process subsequently assumed the role of
chief executive officer of Gelesis, successfully attracted financing and built a strong development and commercial leadership team.
The Gelesis advisory team is comprised of leading experts in obesity and its related comorbidities, clinical research and development
and advanced biomaterials, including Caroline Apovian, MD, professor of medicine and pediatrics at Boston University School of
Medicine; Louis J. Aronne, MD, FACP, director of the Comprehensive Weight Control Center at Weill Cornell Medicine; Arne Astrup,
MD, head of the Department of Nutrition, Exercise and Sports at University of Copenhagen; Ken Fujioka, MD, director of the Nutrition
and Metabolic Research Center and the Center for Weight Management at the Scripps Clinic; James Hill, PhD, chairman of the
Department of Nutrition Sciences, director of the Nutrition Obesity Research Center at University of Alabama; professor of medicine
and pediatrics at University of Colorado; Lee M. Kaplan, MD, PhD, director of the Obesity, Metabolism and Nutrition Institute at
Massachusetts General Hospital; Bennett Shapiro, MD, co‑founder and non‑executive director at PureTech and former executive
vice president of Research for Merck; and Angelo Tremblay, PhD, professor at Laval University.
Patient need
and market
potential
• Excess weight is growing rapidly in prevalence worldwide, with approximately 70 per cent of American adults struggling with
overweight and obesity. Globally there are more than 1.9 billion adults 18 years of age or older who are overweight and 600 million
who have obesity.
• Obesity‑related conditions, such as heart disease, stroke, type 2 diabetes, non‑alcoholic steatohepatitis (NASH)/non‑alcoholic fatty
liver disease (NAFLD) and certain types of cancer, are some of the leading causes of preventable death.
• Chronic idiopathic constipation (CIC), NASH/NAFLD and inflammatory bowel disease (IBD) affect approximately 35 million,
80 to 100 million and three million individuals, respectively, in the United States.
• Type 2 diabetes and prediabetes affect approximately 30 million and 84 million individuals, respectively, in the United States.
• Current treatments for overweight and obese patients begin with lifestyle modification, such as diet and exercise. When healthy
eating and physical activity fail to produce the desired results, physicians may consider pharmaceutical therapies, device implantation
or surgical treatments, such as gastric bypass and gastric banding (for patients with more severe obesity). These approaches are
associated with safety concerns, lifestyle impact, complexity of use, high cost and compliance issues that have limited their adoption.
Innovative
approach for
solving the
problem
• Gelesis is developing oral therapeutics based on a novel, superabsorbent hydrogel technology platform to treat excess weight and
other chronic diseases related to the gastrointestinal (GI) pathway. Gelesis’ proprietary approach is designed to act mechanically in
the GI pathway to potentially alter the course of chronic diseases. In April 2019, Gelesis received clearance from the United States
Food and Drug Administration (FDA) for its first product, Plenity‡ (Gelesis100), an aid for weight management in adults with a body
mass index (BMI) of 25‑40 kg/m2, when used in conjunction with diet and exercise.
Milestones
achieved
Expected
milestones
• Given challenges associated with pharmacological and invasive surgical treatments for obesity, Gelesis designed an approach
with an oral, non‑invasive, non‑systemic mechanism of action and a highly favourable safety and efficacy profile. Gelesis’ product
candidates work in the GI tract and pass through the body without being absorbed. They are synthesised from two naturally derived
building blocks (citric acid and cellulose) that form a novel, patent‑protected three‑dimensional structural composition and occupies
volume in the stomach and small intestine to promote satiety and fullness. Because Gelesis’ technology acts mechanically and is not
systemically absorbed, the product candidates are treated as devices for regulatory approval purposes.
• Gelesis received clearance from the FDA to market and sell its lead product Plenity as an aid for weight management in adults
with a BMI of 25‑40 kg/m2, when used in conjunction with diet and exercise. Plenity is FDA‑cleared for the largest number of adults
struggling with overweight and obesity of any prescription weight‑management aid and the only prescription weight management
product to be cleared for use by overweight adults with a BMI as low as 25 kg/m2, with or without comorbidities. Nearly 150 million
adults with excess weight in the United States fall within the BMI range included in the Plenity label.
• Gelesis initiated a Plenity early experience programme in the United States in the second half of 2019.
• Gelesis filed for marketing authorisation of Plenity in the European Union.
• Data from a clinical study demonstrated that administration of Gelesis200 ten minutes prior to a meal increased fullness throughout
the entire day (p=0.012).
• A clinical study of 40 individuals showed that a prototype of GS500 demonstrated a significant reduction in colonic transit time
in patients with CIC by approximately 16 hours (approximately 31 per cent) compared to baseline (p=0.02 compared to placebo).
• Gelesis announced a partnership with Ro, a leading US telehealth provider, to support the US commercialisation of Plenity.
• Gelesis anticipates Plenity will be available by prescription in the United States in the second half of 2020, with a broad launch in
early 2021.
• Gelesis anticipates a decision on CE mark approval for Plenity in the European Union.
• Gelesis200 is being evaluated for weight management and glycaemic control in adults with type 2 diabetes and prediabetes.
Topline results from this Phase 2 study are anticipated in 2020.
• Gelesis plans to initiate a Phase 2 study of GS100 for weight management in adolescents with overweight and obesity in 2021.
• A Phase 3 study of GS500 in CIC is expected to begin in 2020.
• Gelesis expects to initiate a Phase 2 study for NASH/NAFLD in 2020.
*
PureTech has a right to royalty payments as a percentage of net sales from Gelesis. As of 1 April 2020, PureTech’s percentage ownership of Gelesis was approximately
22.0 per cent on a diluted basis. This calculation includes outstanding shares, options, and warrants, but excludes unallocated shares authorised to be issued pursuant to
equity incentive plans and assumes all committed tranches are funded in the Series 3 Growth financing round.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B), or device (D).
**
*** Contingent on FDA review of the research plan.
†
‡
These product candidates are regulated as devices and their development has been approximately equated to phases of clinical development.
Important Safety Information: Plenity is contraindicated in patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatine, or titanium
oxide. Plenity may alter the absorption of medications. Read Sections 6 and 8.3 of the Instructions for Use carefully. Avoid use in patients with the following conditions:
oesophageal anatomic anomalies, including webs, diverticuli, and rings; suspected strictures (such as patients with Crohn’s disease); or complications from prior
gastrointestinal (GI) surgery that could affect GI transit and motility. Use with caution in patients with: active GI conditions such as gastro-oesophageal reflux disease (GERD),
ulcers, or heartburn. Overall, the most common treatment related adverse events (TRAEs) were GI-related TRAEs with 38 per cent of adults in the Plenity group and 28 per
cent of adults in the placebo group experiencing a GI-related TRAE. The overall incidence of AEs in the Plenity group was no different than the placebo group. Rx Only.
For the safe and proper use of Plenity, refer to the Instructions for Use.
34 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Founded Entities — continued
Gelesis received FDA clearance for Plenity™ as an aid for weight management in adults with a BMI of 25-40 kg/m2,
when used in conjunction with diet and exercise
Responders
Super Responders
Adults achieving 5% or greater weight loss
Adults achieving 10% or greater weight loss
6 out of 10
26%
• 59% of adults with overweight or obesity had a clinically meaningful
• 26% of adults with overweight or obesity were super‑responders to
response to Plenity, losing on average 10% of their weight (22 pounds) or
~3.5 inches from their waist
• Plenity doubled the odds of achieving 5% or greater weight loss
compared with placebo
Plenity (n)
Placebo (n)
% of subjects with severe TEAE
3.6% (8)
4.7% (10)
# of subjects with serious TEAE
0
1*
Plenity, losing on average 14% of their weight (30 pounds)
Co-primary endpoint – The study also demonstrated
statistically superior weight loss compared with the placebo
group (‑6% vs ‑4%, respectively; P=0.0007) and did not meet
the predefined super‑superiority margin of 3%
Safety – Plenity had no overall increased risks versus
placebo, no serious adverse events and a lower dropout rate
versus placebo
Most common side effects are fullness, bloating, flatulence,
and/or abdominal pain
Plenity go-to-market approach
For illustrative purposes only.
1
2
3
Patients drive demand of
Directly tap consumer demand via targeted
digital engagement and influencer focus
Strong base of physicians
ready to prescribe
Lower barrier to access by both driving telehealth and
traditional physician visits while leveraging mail order
to create an Amazon-like experience
Member-centric customer
experience
A support programme that encourages diet, exercise,
mindful eating, plus packaging that fits into lifestyle
Gelesis’ product candidates
Product
Candidate
Indication
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
(GELESIS100)
GS100*
Weight management in
overweight and obese patients
Weight management in
adolescent overweight
and obese patients
GELESIS200*
Weight management and
glycaemic control in patients
with T2D and prediabetes
GS300*
NAFLD/NASH
GS400*
Mucositis/IBD
GS500*
Chronic Constipation (CIC)
Phase in progress
Phase completed
FDA
Clearance
Upcoming
Milestone
Cleared
by FDA
US launch and EU
CE mark application
decision
Phase 2 study
initiation 2021**
Phase 2 study
topline data
readout 2020
Phase 2 study
initiation 2020**
Phase 3 study
initiation 2020**
Products are investigational and have not been cleared by the FDA for use in the United States.
*
** Contingent on FDA review of the research plan.
PureTech Health plc Annual report and accounts 2019 35
Strategic reportSocial PostsFacebookInstagram / GIF
PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Product Candidate**
Indication
Akili
34.4%
AKL-T01
AKL-T02
AKL-T03
AKL-T04
AKL-X01
D
D
D
D
D
Paediatric ADHD
Parkinson’s/MCI
Traumatic brain injury
Paediatric Autism
Major depressive disorder
Multiple sclerosis
Major depressive disorder
ADHD caregiver app
Stage of Development
Pursuing FDA Clearance
Phase 1 (Feasibility)
Phase 1 (Feasibility)
Phase 2 (POC)
Pivotal Study Ready†
Phase 2 (POC)
Preclinical
Clinical Trials
Programme
discovery
process by the
PureTech team
PureTech was interested in identifying novel approaches to measure and improve cognition in a safe and non‑invasive manner.
PureTech engaged with leading neuroscientists and clinicians who had been studying the effects of video games on cognition and
the underlying neural processes accessible by sensory stimulation, and identified and in‑licensed from University of California, San
Francisco (UCSF) the intellectual property invented by Adam Gazzaley, MD, PhD, professor of neurology, psychiatry and physiology
at UCSF and the inventor of this platform technology, in October 2013 before his work was published as a cover story in the journal
Nature. PureTech then collaborated with Dr Gazzaley to translate the underlying academic device into a medical intervention, including
overseeing the initial product development and design and the implementation of the initial POC studies. PureTech helped to build
development and commercial teams and raise funds, including from the investment arms of Amgen and Merck KGaA, Darmstadt,
Germany as a part of Akili’s series B financing round. One of the core PureTech team members who helped lead the identification and
platform development is now the CEO of Akili.
Akili’s lead product candidate, AKL‑T01, is based on a platform technology exclusively licensed from UCSF. The proprietary platform
targets cognitive interference processing while also adapting difficulty automatically in real‑time, allowing individuals of wide‑ranging
ability levels to interact with the product in their homes without the need for physician calibration or additional hardware. Dr Gazzaley
currently serves as the chief scientific advisor and a board member of Akili. Daphne Bavelier, PhD, associate professor in the Department
of Brain and Cognitive Sciences at the University of Rochester and at the University of Geneva, is a co‑founding scientific advisor.
Patient need
and market
potential
• Cognitive dysfunction is a key feature of many neuropsychiatric disorders, including ADHD, ASD, MS, MDD, MCI, TBI and AD.
The treatment of these conditions is only partially served, or not served at all, by currently available medications or by in‑person
behavioural therapy.
Innovative
approach for
solving the
problem
Milestones
achieved
• There are approximately 6.4 million paediatric ADHD patients in the United States, approximately 1.5 million children with autism,
17 million adults with MDD and approximately 900,000 people with MS and Akili believes that this market – and other markets where
Akili’s cognitive dysfunction targeting products may act as a stand‑alone medical treatment, add‑on therapy, or digital biomarker –
represent significant opportunities for the company.
• Akili is a leading digital therapeutics company, combining scientific and clinical rigour with the ingenuity of the tech industry with
a goal of changing how medicine is developed, delivered and experienced. Akili is pioneering the development of treatments
designed to have direct therapeutic activity, delivered not through a traditional pill but via a high‑quality video game experience.
• Akili’s platform is based on a patented technology that deploys sensory and motor stimuli that targets and activates the neurological
systems known to play a key role in certain cognitive functions, including attentional control. Akili’s approach aims to improve
cognitive impairment and related symptoms through improving neural processing at the functional neurological level. The treatment
is delivered through an immersive video‑game, resulting in non‑invasive, patient‑friendly medicine that can be used at home.
• By combining high‑quality neurological and clinical science, and consumer‑grade entertainment, Akili is seeking to produce a new
type of medical product that can potentially offer safe, effective, scalable and personalised treatments for patients across a range of
neuropsychiatric conditions and allow patients to experience medicine in a new way.
• Akili has a broad pipeline of programmes to target cognitive dysfunction associated with medical conditions across neurology
and psychiatry. Akili is pursuing FDA clearance in the United States and, through a collaboration and development agreement
with Shionogi, regulatory approval in Japan, for AKL‑T01, its lead therapeutic designed to improve attention in paediatric patients
diagnosed with ADHD. Akili is evaluating its platform technology in studies of various sizes across a variety of patient populations
suffering from cognitive dysfunction, including adult ADHD, ASD, multiple sclerosis, or MS, major depression disorder, or MDD,
Parkinson’s‑related mild cognitive impairment, or MCI, and traumatic brain injury, or TBI. Akili is also developing complementary and
integrated monitoring and measurement‑based care applications. AKL‑X01 is a monitoring and measurement‑based care application
currently being developed and tested by Akili both as an independent product and as a complement to AKL‑T01.
• Akili’s lead product candidate, AKL‑T01, is designed to deploy sensory and motor stimuli to target and activate the prefrontal cortex,
the area of the brain known to play a key role in cognitive function. Following a number of pilot studies, Akili conducted a multi‑
centre, randomised, blinded, controlled pivotal study of AKL‑T01 in 348 paediatric ADHD patients. In this study, AKL‑T01 achieved
its primary endpoint, showing a statistically significant change in the Attention Performance Index, a composite score of attention
from the Test of Variables of Attention (TOVA.) compared to an expectancy matched digital control (p=0.006). There were no serious
adverse events or discontinuations. Treatment‑related adverse events were mild and included frustration (2.8 per cent) and headache
(1.7 per cent). Mean patient compliance with AKL‑T01 was 83 per cent of instructed use. Subjective secondary outcome measures,
including the ADHD Rating Scale and the Impairment Rating Scale, showed statistically significant improvements in both the
treatment and control groups and there was no statistically significant separation on those measures between groups.
• In March 2019, Akili entered into a strategic partnership with Shionogi for the development and commercialisation of AKL‑T01 and
AKL‑T02 (in development for children with ADHD and Autism Spectrum Disorder, respectively), in Japan and Taiwan. Under the terms
of the agreement, Akili will build and own the platform technology and received upfront payments totalling $20 million with potential
milestone payments for Japan and Taiwan commercialisation of up to an additional $105 million in addition to royalties. Akili and
Shionogi have begun work on product localisation and clinical study design in preparation for a regulatory submission in Japan.
• In December 2019, Akili presented the results from a trial of AKL‑T03 as a potential treatment for cognitive impairments adjunct
to anti‑depressant medication in adults with Major Depressive Disorder (MDD) at the 58th Annual Meeting of the American
College of Neuropsychopharmacology. In the trial, AKL‑T03 demonstrated a statistically significant improvement in sustained
attention compared to control. AKL‑T03 is designed to improve specific cognitive functions and may play a complementary role to
antidepressants in the holistic treatment of MDD.
• In the January 2020 post‑period, Akili announced topline results from its multi‑site open‑label study to evaluate the effects of
AKL‑T01 in children with ADHD when used with and without stimulant medication. The effects of increasing the duration of treatment
were also studied. The study achieved its predefined primary efficacy outcome, demonstrating a statistically significant improvement
in the ADHD Impairment Rating Scale (IRS) from baseline after one month of treatment (p<0.001) in both children taking stimulant
medications and in those not taking stimulants.
Expected
milestones
• Akili is currently actively pursuing FDA clearance for AKL‑T01.
• Akili is building its own commercial distribution platform for its digital therapeutic products to enable launch in a variety of
commercial models. The company is building an integrated system for patient service, data processing and distribution functions
for its initial product launch, to allow flexibility, learning and iteration as it continues to invest in the delivery of digital therapeutic
solutions to the market. Akili’s Shionogi partnership is structured to enable the implementation of this localised platform in Japan.
*
**
†
As of 31 December 2019, PureTech’s percentage ownership of Akili was approximately 34.4 per cent on a diluted basis. This calculation includes outstanding shares, options,
and warrants, but excludes unallocated shares authorised to be issued pursuant to equity incentive plans.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B), or device (D).
Future clinical research plans and priorities in process.
36 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Founded Entities — continued
Akili’s core technologies
Proprietary*
mechanics activate
key neurological
processing systems
SSME™
Selective Stimulus Management Engine
Cognitive control, attention, processing speed
SNAV™
Spatial Navigation Engine
Spacial navigation, episodic memory
BBT™
Body-Brain Trainer
Attention, goal management, working memory
Total treatment solution: integrated suite of technologies, distribution model and data delivery
Services/Support
Cognitive Digital Therapeutics
Patient Reported Data
Data Delivery and Insights
Care Management Platform
Discovery/
Preclinical
Phase 1
(Feasibility)
Phase 2
(POC)
Phase 3
(Pivotal)
FDA Filing
Akili’s product candidates
Product Candidate
Indication
Behavioural
Mood and
affective
AKL‑T01 Paediatric ADHD1
AKL‑T02 Paediatric autism2
AKL‑T03 Major depressive disorder3
AKL‑T04 Major depressive disorder
Immune
AKL‑T03 Multiple sclerosis
Other
AKL‑T01 Parkinson’s/MCI
AKL‑T01 Traumatic brain injury
Product Candidate
Indication
In Development
Clinical Trials
Released
Health care
solutions apps
AKL‑X01 ADHD caregiver app
Phase in progress
Phase completed
*
1
Protected by 98 patents/patent applications
Davis et al., PLoSONE. 2018, 13(1):e0189749
Kollins et al., JAACAP. 2018 Oct. V57(10) S172
NCT02828644. No data published yet
NCT03649074. On-going
NCT03844269. On-going
2 Yerys et al. Journal of Autism and Developmental Disorders. 2018 Dec.
3 Anguera et. al. Depression and Anxiety. Jan. 2017
PureTech Health plc Annual report and accounts 2019 37
Strategic report
PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Product Candidate**
Indication
Stage of Development
Follica
78.3%
FOL-004
FOL-005
P/D
D
Androgenetic alopecia
Skin rejuvenation
Phase 3 Ready
Phase 2
Programme
discovery
process by the
PureTech team
Patient need
and market
potential
Innovative
approach for
solving the
problem
Milestones
achieved
PureTech was interested in conditions of ageing and focused on hair follicles given their importance in regulating human hair and skin
rejuvenation across many medical conditions. PureTech engaged leading dermatologists and hair follicle experts and identified and
in‑licensed IP from George Cotsarelis, MD, the chair of the Department of Dermatology at the University of Pennsylvania, on hair follicle
neogenesis (HFN) prior to its publication in the journal Nature. PureTech translated the academic work into an in‑office procedure
after testing a number of modalities for initiating HFN, identified and co‑invented intellectual property around modalities and drug
compounds to enhance the newly formed hair follicles and helped conduct multiple proof‑of‑concept (POC) studies to prioritise HFN
inducing modalities and prioritise potential drug compounds.
Follica’s core technology and patent suite has been developed in collaboration with leading researchers, building on the work
of Dr Cotsarelis. Follica’s other key scientific advisors include Richard Rox Anderson, MD, chairman of the Wellman Center for
Photomedicine at the Massachusetts General Hospital, and Ken Washenik, MD, PhD, medical director of Bosley and the executive vice
president of scientific and medical development of the Aderans Research Institute.
• Androgenetic alopecia represents the most common form of hair loss in men and women, with an estimated 90 million people who
are eligible for treatment in the United States alone.
• Only two drugs, both of which have demonstrated a 12 per cent increase of non‑vellus hair count over baseline for their primary
endpoints, are currently approved for the treatment of androgenetic alopecia.
• The most effective current approach for the treatment of hair loss is hair transplant surgery, comprising a range of invasive, expensive
procedures for a subset of patients who have enough donor hair to be eligible.
• As a result, Follica believes that there is significant unmet need for safe, effective, non‑surgical treatments which grow new hair.
• Follica’s regenerative biology platform has potential applications beyond hair growth to other ageing‑related conditions and wound
healing, such as facial skin rejuvenation.
• Follica is developing a regenerative biology platform designed to treat androgenetic alopecia, epithelial ageing and other medical
indications. Follica’s approach is based on generating an “embryonic window” in adults via a targeted, proprietary method of scalp
disruption, stimulating stem cells causing new hair follicles to grow. PureTech believes Follica is the first to bring forward an approach
to grow new hair that is now supported by strong human efficacy data.
• In December 2019, Follica announced topline results from the safety and efficacy optimisation study of its lead candidate to treat hair
loss in male androgenetic alopecia. The study was designed to select the optimal treatment regimen using Follica’s proprietary device in
combination with a topical drug and successfully met its primary endpoint. The selected treatment regimen demonstrated a statistically
significant 44 per cent improvement of non‑vellus (visible) hair count after three months of treatment compared to baseline (p < 0.001,
n = 19). Across all three treatment arms, the overall improvement of non‑vellus hair count after three months of treatment was 29 per
cent compared to baseline (p < 0.001, n = 48), reflecting a substantially improved outcome seen with the optimal treatment regimen.
Additionally, a prespecified analysis comparing the 44 per cent change in non‑vellus hair count to a 12 per cent historical benchmark set
by approved pharmaceutical products established statistical significance (p = 0.005).
• The study was an endpoint‑blinded, randomised, controlled study designed to establish therapeutic parameters for Follica’s
proprietary HFN device in combination with a topical on‑market drug. The study involved a less than five‑minute in‑office
experimental scalp procedure using the HFN and evaluated the optimal frequency and number of treatments across three arms.
The study consisted of 48 men aged 18 to 40 who had moderate grades of androgenetic alopecia as determined by the Hamilton
Norwood III‑IV scale.
• The regimen was well tolerated across all treatment arms with no reported serious adverse events. No adverse events were related to
device treatment. A single non‑severe event (headache) was determined to be related to use of the drug and is in line with minor side
effects seen from treatment with the approved drug alone.
• In the three previously conducted clinical studies of patients with androgenetic alopecia, Follica demonstrated hair follicle
neogenesis via biopsy following skin disruption, and hair growth through target area hair count. One of these studies demonstrated
that skin disruption alone generates not only new hair follicles but also terminal (visible, thick) hairs.
Expected
milestones
• The initiation of a Phase 3 registration study in male androgenetic alopecia is expected in 2020.
• Follica has been optimising its device and conducting tests in androgenetic alopecia and other medical indications and is further
developing and testing compounds that enhance the newly formed follicles and hairs.
• Follica is also studying the potential for its proprietary device approach to address other regenerative conditions, including female
pattern hair loss and facial skin rejuvenation.
• Follica also has proprietary amplification compounds in development and ongoing discovery efforts to expand its pipeline.
Sample patient outcome from FOL-004 data
Note: Results depicted in the images are above the
average demonstrated in the optimisation trial.
Screening
Day 85
Follica’s product candidates
Product
candidate
Indication
FOL-004
Androgenetic alopecia
FOL-005
Skin rejuvenation
Phase in progress
Phase completed
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming Milestone
Initiation of Phase 3
registration study 2020
*
**
PureTech Health has a right to royalty payments as a percentage of net sales from Follica. As of 31 December 2019, PureTech’s percentage ownership of Follica was
approximately 78.3 per cent on a diluted basis. This calculation includes outstanding shares, options, and warrants, but excludes unallocated shares authorised to be issued
pursuant to equity incentive plans.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B), or device (D).
38 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Product Candidate**
Indication
Stage of Development
Alivio
78.6%
ALV-306
ALV-304
ALV-107
P
P
P
Pouchitis and distal colitis
IBD
IC/BPS
Preclinical
Preclinical
Preclinical
Programme
discovery
process by the
PureTech team
A key challenge in new drug development for autoimmune and inflammatory disease is that attractive drug targets are frequently
expressed in both diseased and normal tissue. Consequently, PureTech was interested in identifying ways to address autoimmune
disease in a targeted manner. PureTech was inspired by a key observation, which is that pathologic inflammation frequently manifests
at specific sites in tissues and organs and is driven by dysfunctional immune signalling. However, traditional approaches act to broadly
suppress the immune system throughout the body. This mismatch substantially limits the potential targets that can be pursued and
frequently results in narrow therapeutic windows. PureTech worked with leading immunology experts and identified and in‑licensed
a technology created by Alivio’s co‑founder Jeffrey Karp, PhD, professor of medicine at Harvard Medical School and Brigham and
Women’s Hospital, and Robert Langer, ScD, David H Koch Institute Professor at MIT, that was centred around this unique inflammation‑
targeting and inflammation‑responsive platform in May 2016. In addition to repeating key academic work and developing product
candidates, Alivio continues to move those product candidates into the clinic while PureTech oversees business development.
Patient need
and market
potential
• Results in preclinical models suggest the Alivio technology could be applied to diseases, such as inflammatory bowel disease (IBD),
pouchitis, inflammatory arthritis, organ transplantation and interstitial cystitis or bladder pain syndrome (IC/BPS). These diseases
collectively impact tens of millions of patients in the United States alone and have limited treatment options.
• IC/BPS is a chronic bladder condition that consists of discomfort or pain in the bladder or surrounding pelvic region and is often
associated with frequent urination. It is estimated to affect four million to 12 million people in the United States. Current treatments
fail to control pain in many patients.
• Pouchitis is estimated to affect between 70,000 and 135,000 people in the United States.
• Distal colitis impacts approximately 225,000 people in the United States.
• IBD is estimated to affect approximately three million people in the United States.
Innovative
approach for
solving the
problem
• Alivio is pioneering targeted disease immunomodulation, which involves selectively restoring immune homeostasis at inflamed sites
in the body, while having minimal impact on the rest of the body’s immune system, as a novel strategy to treat a range of chronic and
acute inflammatory disorders. This long sought‑after approach has the potential to broadly enable new medicines to treat a range
of chronic and acute inflammatory disorders, including enabling the use of drugs which were previously limited by issues of systemic
toxicity or pharmacokinetics (PK).
• To achieve the vision of selective immunomodulation, Alivio is developing a proprietary platform centred on a class of self‑
assembling hydrogels that selectively bind to inflamed tissue. Alivio’s platform has been validated in multiple labs using a range of
animal models and indications. The platform is able to entrap a wide array of active pharmaceutical ingredients (APIs), including small
molecules, biologics and nucleic acids. By selectively targeting API pharmacology to inflamed tissue, Alivio is developing product
candidates that are designed to selectively treat autoimmune disease without having related systemic toxicities. Alivio’s pipeline
includes candidates for inflammatory pouchitis, IBD and IC/BPS.
Milestones
achieved
• In January 2019, Alivio entered into a research collaboration, option and license agreement with Imbrium Therapeutics L.P. to advance
Alivio’s product candidate, ALV‑107, through clinical development. Under the terms of the agreement, Alivio is eligible to receive up
to $14.8 million in upfront and near‑term license option exercise payments and is eligible to receive royalties on product sales and
over $260.0 million in research and development milestones. Alivio retains the rights of its inflammation targeting platform for a broad
range of internal and partnering applications.
Expected
milestones
• Alivio expects to file an IND for ALV‑306, its lead product candidate, in pouchitis and distal colitis and initiate a clinical trial in 2021.
• Alivio also plans to file an IND for ALV‑107 for IC/BPS in 2021 and an IND for ALV‑304 in IBD in 2022.
Alivio is pioneering targeted disease immunomodulation
Inflammation-targeted
Active at the site of disease with
limited systemic exposure
Engage targets in immune
and/or nervous system
Can engage target using whatever
molecule(s) is optimal
Bona fide pipeline potential
Built using unique and proprietary platform
n
o
i
t
a
r
t
n
e
c
n
o
c
d
o
o
B
l
Disease
Time
Alivio’s product candidates
Product Candidate
Indication
Internal
GI
programmes
Platform
ALV-306
Inflammation‑targeting
tacrolimus (local)
ALV-304
Inflammation‑targeting
tacrolimus (oral)
ALV-107†
Inflammation‑targeting
lidocaine (intravesical)
Pouchitis and distal colitis
IBD
(Ulcerative colitis and Crohn’s disease)
Interstitial cystitis/
bladder pain syndrome
Phase in progress
Phase completed
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming
Milestone
IND 2021
IND 2022
IND 2021
*
**
†
As of 31 December 2019, PureTech’s percentage ownership of Alivio was approximately 78.6 per cent on a diluted basis. This calculation includes outstanding shares,
options, and warrants, but excludes unallocated shares authorised to be issued pursuant to equity incentive plans.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B), or device (D).
ALV-107 preclinical development was supported, in part, by a $3.3m grant from the US Department of Defense and in collaboration with Imbrium Therapeutics.
PureTech Health plc Annual report and accounts 2019 39
Strategic report
PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Product Candidate**
Indication
Stage of Development
Vedanta
53.3%
VE303
VE416
VE202
VE800
B
B
B
B
High-risk CDI
Food allergy
IBD
Solid tumours
Phase 2
Phase 1/2
Phase 1
Phase 1
Programme
discovery
process by the
PureTech team
PureTech was interested in translating the crosstalk between the immune system and commensal microbes that live in our bodies
into therapeutics to modulate a range of immunological processes. PureTech engaged with leading world‑renowned experts in
immunology, including Ruslan Medzhitov, PhD, professor of immunobiology at Yale, Alexander Rudensky, PhD, a tri‑institutional
Professor at the Memorial Sloan‑Kettering Institute, the Rockefeller University, and Cornell University, Dan Littman, MD, PhD, professor
of molecular immunology at NYU, Brett Finlay, PhD, professor at the University of British Columbia, and Kenya Honda, MD, PhD,
professor at the School of Medicine, Keio University.
Drs Honda and Rudensky demonstrated the role of the microbiota in inducing regulatory T cells and uncovered some of the molecular
mediators, known as short chain fatty acids. PureTech identified and in‑licensed intellectual property from Dr Honda when he was at
Tokyo University in November 2011 before his seminal work was published in the journals Science and Nature. Based on Dr Honda’s
work, PureTech pioneered the concept of defined consortia of microbes to modulate the immune system or treat bacterial infections.
PureTech played a critical role in the initial product development, initial experiments and planning of key clinical studies, business
development and fundraising, and a core PureTech team member who helped lead the identification and platform development is now
the chief executive officer of Vedanta.
Patient need
and market
potential
Clostridioides Difficile (C. difficile) Infection:
• The Center for Disease Control and Prevention (CDC) considers C. difficile infections one of the most urgent bacterial threats.
C. difficile infections account for approximately 12,800 deaths each year in the United States alone and there are approximately
500,000 cases annually, of which 100,000 to 120,000 patients experience recurrence.
• Existing interventions include antibiotics such as vancomycin or metronidazole, which have the undesirable side effect of damaging
the gut microbiome and leaving patients vulnerable to re‑infection. An alternative intervention, faecal transplantation, is an
experimental procedure which is exceedingly difficult to standardise and scale and is fraught with potential safety issues.
Inflammatory Bowel Disease (IBD):
• IBD is estimated to affect approximately three million people in the United States, and other autoimmune diseases affect over
20 million people in the United States.
• Many of the existing interventions are limited by toxicities and systemic immune suppression.
Allergies:
• Food allergies are a growing public health concern in the United States and have an estimated annual economic cost near $25 billion.
• Peanut allergies specifically affect an estimated 2.5 million people in the United States.
• Current treatment options primarily centre around allergen avoidance. Desensitisation regimens in development have limited
efficacy, are risky, require treatment for life and may not be cost‑effective.
• Vedanta’s product candidate, VE416, is being developed to safely induce permanent tolerance to food allergens including peanut allergy.
Immuno-oncology:
• Despite profound survival improvements in some patients, checkpoint inhibitors, such as PD‑1, PDL‑1 and CTLA‑4, are only effective
in 20 to 30 per cent of patients.
• Common tumour types where checkpoint inhibitors are utilised include lung, bladder, skin and renal cancers.
• Vedanta’s immuno‑oncology product candidate, VE800, is designed to act in combination with approved checkpoint inhibitors
and potentially other immuno‑therapies to safely improve their efficacy.
• Initial proposed indications include advanced and metastatic microsatellite‑stable colorectal cancers, affecting more than 46,000
patients in the United States per year, gastric cancers, affecting more than 11,000 patients in the United States per year and
melanoma, affecting more than 9,000 patients in the United States per year.
• Vedanta is developing a new category of therapies for immune‑mediated diseases based on a rationally‑defined consortia of human
microbiome‑derived bacteria. The human microbiome is increasingly implicated in various immune‑mediated diseases.
• Vedanta is a leader in the field with capabilities and deep expertise to discover, develop and manufacture live bacteria drugs. These
include what is believed to be a leading intellectual property position in the field, the largest collection of human microbiome‑
associated bacterial strains, a suite of proprietary assays to select pharmacologically potent strains, vast proprietary datasets from
human interventional studies and facilities for current good manufacturing practice (cGMP) compliant manufacturing of rationally‑
defined bacterial consortia in powder form. All of this work has helped move the microbiome field beyond correlation to causation,
and beyond faecal transplants or fractions to defined, characterised biologic drugs.
• Unlike faecal transplants, which require use of donors and are untargeted, inherently variable procedures, Vedanta’s approach is
based on bacterial consortia therapeutics, which are defined drug compositions produced from clonally isolated bacteria that can
trigger targeted immune responses. Unlike single strain probiotics, defined consortia can robustly shift the composition of the gut
microbiota and provide colonisation resistance against a range of intestinal infectious pathogens.
• Vedanta’s novel product candidates are administered as a lyophilised powder in a capsule dosage form, designed to have specific
effects on the immune system, including restoring the balance of the microbiome in the gut to treat immune and infectious diseases
and immunopotentiating responses to treat cancer.
Innovative
approach for
solving the
problem
*
**
As of 31 December 2019, PureTech’s percentage ownership of Vedanta Biosciences was approximately 53.3 per cent on a diluted basis. This calculation includes outstanding
shares, options, and warrants, but excludes unallocated shares authorised to be issued pursuant to equity incentive plans.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B), or device (D).
40 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Founded Entities — continued
Milestones
achieved
• VE303, Vedanta’s product candidate for the treatment of high‑risk C. difficile infection (CDI) is being studied in a Phase 2 clinical
trial in patients at high risk of CDI. The trial was initiated in December 2018, and dose selection was based on the results from
the Phase 1a/1b clinical trial in healthy volunteers, which showed that VE303 treatment resulted in rapid, durable, dose‑dependent
colonisation and accelerated gut microbiota restoration after antibiotics.
• VE202, Vedanta’s product candidate in IBD, is being evaluated in a Phase 1 clinical trial in healthy volunteers.
• VE416, Vedanta’s product candidate in food allergy, is being evaluated in a Phase 1/2 investigator sponsored trial at MassGeneral
Hospital for Children for patients 12 years of age or older with a history of peanut allergy. The first patient was enrolled in July 2019 and
will explore VE416 both as a monotherapy and in combination with an oral peanut immuno‑therapy over the course of several months.
• VE800, Vedanta’s immuno‑oncology product candidate, is being evaluated in a first‑in‑patient clinical trial with Bristol‑Myers
Squibb’s, or BMS, checkpoint inhibitor OPDIVO® (nivolumab) in patients with selected types of advanced or metastatic cancer.
The trial was initiated in December 2019. As part of the agreement with BMS, Vedanta will conduct the clinical trial and BMS will
supply nivolumab.
• Vedanta also has ongoing discovery efforts to expands its pipeline, including VE707. VE707 is Vedanta’s preclinical discovery
programme for the prevention of infection and reoccurrence of several multi‑drug resistant organisms (MDROs) including
carbapenem‑resistant Enterobacteriaceae (CRE), extended‑spectrum beta lactamase producers (ESBL), and vancomycin‑resistant
Enterococci (VRE), which are some of the most common hospital‑acquired infections.
Expected
milestones
• Topline results for the Phase 2 clinical trial of VE303 are anticipated in 2020.
• PK/PD results for the Phase 1 clinical trial of VE202 are anticipated in 2020.
• Topline data from the Phase 1/2 clinical trial of VE416 in food allergy are expected in 2021.
• Topline results from the first‑in‑patient clinical trial of VE800 are anticipated in 2021.
Rationally defined bacterial consortia
Faecal transplant procedures
Defined bacterial consortia drugs
Single strains or small molecules
Can shift ecosystem, untargeted,
variable procedure, non‑reproducible input
Shifts ecosystem with targeted
immune responses
Overly reductionistic, fail to capture pleiotropic
MoAs and bacteria‑bacteria interactions
More complex
Less complex
Vedanta’s product candidates
Product
Candidate
Indication
VE303
High‑risk CDI
VE416
Food allergy
VE202
Inflammatory bowel disease
VE800
Cancer immuno‑therapy indication
Phase in progress
Phase completed
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming
Milestone
Phase 2 data
readout 2020
Phase 1/2 data
readout 2021
Phase 1 PK/PD
data readout 2020
Phase 1 data
readout 2021
PureTech Health plc Annual report and accounts 2019 41
Strategic report
PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Product Candidate**
Indication
Stage of Development
Vor
28.1%
VOR33
B
Acute myeloid leukaemia
Preclinical
Programme
discovery
process by the
PureTech team
PureTech was interested in approaches to treat haematological malignancies that currently have poor response rates or poor adverse
event profiles despite recent advances in cell therapies and targeted therapies. PureTech engaged leading haematological cancer
specialists and became aware of work from the laboratory of Vor scientific board chair, Siddhartha Mukherjee, MD, PhD, assistant
professor of medicine at Columbia University and Pulitzer Prize‑winning author of The Emperor of All Maladies: A Biography of Cancer
and The Gene. Dr Mukherjee pioneered the idea of genetically engineering stem cells to eliminate a particular target such that healthy
stem cells and progeny cells would be spared from targeted cancer therapy. PureTech worked with Dr Mukherjee on this intellectual
property, which it exclusively in‑licensed from Columbia in April 2016, and on advancing this concept through critical proof‑of‑concept
(POC) experiments. PureTech has filed additional intellectual property (both in‑licensed from Columbia and owned by Vor), assembling
an excellent research team and completing a round of fundraising.
In July 2019, Bill Lundberg, MD, was appointed to Vor’s board of directors. Dr Lundberg is the former chief scientific officer of CRISPR
Therapeutics. In August 2019, Robert Ang, MBBS, MBA, was appointed president and chief executive officer of Vor. Dr Ang is the
former chief business officer of Neon Therapeutics.
Patient need
and market
potential
• The prognosis for relapsed and refractory blood‑borne malignancies is very poor and can be measured in a few months, depending
on patient‑specific risk factors. For example, for acute myeloid leukaemia (AML) which affects approximately 60,000 patients at any
one time in the United States, only about 30 per cent of patients with active disease following a bone marrow transplant survive
past 12 months.
• Targeted therapies, such as CAR‑T cells and bispecific antibodies, antibody‑drug conjugates and conventional mAbs, have shown
excellent outcomes, particularly in patients with certain haematologic malignancies expressing B‑cell markers. However, these
targeted therapies frequently target both cancer and normal cells, causing substantial toxicities and limiting their potential.
There is a need for new strategies that can enable selectively targeting cancer cells without impacting a patient’s normal cells.
Innovative
approach for
solving the
problem
• Vor is taking a fundamentally novel approach for targeting cancer selectively by addressing the detrimental effects of on‑target
toxicity to healthy tissue. Vor is developing engineered haematopoietic stem cells (eHSCs) for the treatment of haematological
cancers. Vor’s differentiated approach is designed to enable broad targeting of lineage antigens, which are attractive targets but
face serious limitations, since they are expressed on both healthy cells and cancerous cells.
• Vor’s eHSCs do not display a particular antigen, therefore making these antigens tumour‑specific and potentially safer to target
while protecting the healthy blood cells from depletion. This enables maximal targeted therapy doses to be administered without
fear of on‑target toxicity. Vor’s approach may also enable new targeted therapies to be developed that otherwise would be too toxic
to consider developing.
• Vor’s technology is enabled via gene editing of haematopoietic stem cells, generating eHSCs which can be transplanted into patients
as part of standard transplant procedures. Transplants can be performed prior to the targeted therapy or the targeted therapy can be
used prior to the haematopoietic stem cell transplantation. By using Vor’s approach the population of potential target antigens could
potentially be expanded beyond tumour‑specific antigens such as neoantigens or B‑cell antigens, for example CD19, to antigens
which are present in broad ranges of haematological malignancies.
• Vor’s platform can potentially be used to improve the safety profile of targeted therapies, such as antibody drug conjugates,
bispecific antibodies, chimeric antigen receptor T (CAR‑T) cells and others, expanding their reach beyond B‑cell malignancies to
other myeloid leukaemias, such as AML, as well as enhancing the effectiveness of similar therapies. When combined with targeted
therapies, this technology could potentially enable transformative outcomes in patients with otherwise grim prognoses.
• Vor’s lead product candidate, VOR33, is a novel haematopoietic stem cells (HSC) therapy in development for AML consisting
of donor‑derived HSCs that are engineered to lack the cell surface protein CD33. When removed from the cell surface, VOR33
engineered haematopoietic stem cells (eHSCs) lack cell surface expression of CD33, do not appear to have any measurable changes
to their biological function and have been shown to be highly resistant to attack from CD33‑targeted therapies. When infused into
a patient, these eHSCs are designed to mature and differentiate into a full spectrum of healthy immune and blood cells that would be
unaffected by the cancer treatment. This approach has the potential to minimise targeted therapy toxicities and maximise the potency
of anti‑CD33 therapies for treating AML.
• In May 2019, preclinical research was published in the scientific journal Proceedings of the National Academy of Sciences supporting
Vor’s novel approach to treating cancer via eHSCs.
• Vor has achieved ex vivo POC for its technology and received validation of its technology in engineered humanised mouse models.
• In the January 2020 post‑period, Vor held a pre‑IND meeting with the FDA to gather important feedback to assemble the data
package necessary for a potential IND filing.
Milestones
achieved
Vor’s eHSC technology
Apheresis
VOR process
Transplant
CD33-directed therapy
HSCs
eHSCs (CD33Del)
Donor
Cells now have inherent resistance
to CD33-targeted therapy
Recipient
Potential advantages:
• Lower on‑target toxicity
• Enable earlier therapy
• Enable chronic dosing
Vor’s product candidate
Product
candidate
Indication
Discovery/Preclinical
Phase 1
Phase 2
Phase 3
VOR33
Acute myeloid leukaemia
Phase in progress
Phase completed
*
**
As of 31 December 2019, PureTech’s percentage ownership of Vor was approximately 28.1 per cent on a diluted basis. This calculation includes outstanding shares, options,
and warrants, but excludes unallocated shares authorised to be issued pursuant to equity incentive plans, and assumes all future tranches are funded in the Series A
financing round, with PureTech investing an additional $0.7 million.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B), or device (D).
42 PureTech Health plc Annual report and accounts 2019
Strategic report PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Product Candidate**
Indication
Stage of Development
Sonde
45.9%
Sonde†
D
Depression detection
Phase 1
Programme
discovery
process by the
PureTech team
PureTech was interested in new ways to detect and quantify disease in a low‑ to no‑burden manner that could allow for more proactive
and potentially effective interventions. PureTech selected vocal features as leading source of health data for this purpose, particularly
given the evolving technology landscape where voice interactions with devices are rapidly increasing, and identified and in‑licensed
proprietary technology from Thomas Quatieri, PhD, at MIT’s Lincoln Laboratory in May 2016. PureTech developed additional, novel
intellectual property around this concept and helped advance the technology from an academic concept to a commercially‑focused
technology. A core PureTech team member who played a critical role in founding Sonde is currently the chief operating officer.
Patient need
and market
potential
• The lag between onset of disease and accurate diagnosis and beginning of treatment can be measured in years for many high‑
burden health conditions, including depression, Alzheimer’s disease (AD), multiple sclerosis, Parkinson’s disease and cardiovascular
and respiratory diseases, to name just a few.
Innovative
approach for
solving the
problem
• Depression alone affects approximately 17 million adults in the United States.
• Near‑continuous health information, powered by Sonde’s technology, has the potential to improve screening, monitoring and
timeliness of treatment of high‑cost conditions, broadly improving outcomes and care efficiency.
• Development of effective therapies for central nervous system (CNS) diseases and disorders is hampered by the high cost and
inherent variability of these diseases and the reference diagnostic measures used to characterise them. Objective digital tools that
can augment, and perhaps one day replace, the current clinical endpoints with novel measures that can be quantified with more
meaningful accuracy and less burden can improve patient enrolment and drug development for a range of important conditions.
• Sonde is developing a voice‑based technology platform to measure health when a person speaks. Sonde’s proprietary technology
is designed to sense and analyse subtle changes in the voice to create a range of persistent brain, muscle and respiratory health
measurements that provide a more complete picture of health in just seconds.
• PureTech believes Sonde’s Vocal Biomarker programme has demonstrated the potential to screen and monitor for disease using
information obtained from an individual’s voice on commonly‑owned devices, such as smartphones and smart speakers, and it has
the potential to fundamentally change the way mental and physical health is screened and monitored.
• Currently, Sonde is accelerating the development of respiratory measures that are directly relevant to its current customer pipeline
and the immediate challenges facing global healthcare systems, including COVID‑19. Sonde has voice data from over 2,000 asthma
patients in India, including a large subset with spirometry data, which provides evidence that vocal biomarkers change significantly
with respiratory impairment.
Milestones
achieved
• Sonde has collected voice data from over 40,000 subjects as a part of the ongoing validation of its platform, and it has also initiated
research and development to expand its proprietary technology into AD, respiratory and cardiovascular disease, as well as other
health and wellness conditions.
• Sonde is collaborating with the University of New South Wales and Black Dog Institute in Australia to create the first mobile device‑
based automatic assessment of depression from acoustic speech and has entered into collaborative partnerships with leading
institutions, including UMass Memorial Medical Center, Yale University, Partners Massachusetts General Hospital and multiple other
ex‑US hospitals, clinics and academic medicine centres.
• In April 2019, Sonde completed a $16 million Series A financing round, including the issuance of $6 million in shares upon conversion
of debt into equity, to expand the capability of its voice‑based technology platform for monitoring and diagnosing mental and
physical medical conditions across additional health conditions and device types and to fund commercialisation activities.
• In October 2019, David Liu joined Sonde as chief executive officer and a member of its board of directors.
Expected
milestones
• Sonde expects topline results from a depression detection study in 2020.
• Sonde expects to launch its application programming interface (API) platform, which will allow the world to license and build
products with Sonde’s voice biomarker based health detection technology, in 2020.
• Sonde also has ongoing discovery efforts to expand its pipeline.
Sonde’s product candidate
Product
candidate
Indication
Sonde
Depression detection
Phase in progress
Phase completed
Voice used differently
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming Milestone
Depression detection
data readout 2020
Speech recognition
Health recognition
Task focused
(voice assistants)
Health change focused
(voice assisted over
any device)
*
**
As of 31 December 2019, PureTech’s percentage ownership of Sonde was approximately 45.9 per cent on a diluted basis. This calculation assumes all future closings of the
Series A financing and includes outstanding shares, options, and warrants, but excludes unallocated shares authorised to be issued pursuant to equity incentive plans.
The letters next to the product candidates denote whether the product candidate is a pharmaceutical product (P), biologic (B), or device (D).
PureTech Health plc Annual report and accounts 2019 43
Strategic report PureTech’s Founded Entities — continued
Founded Entity PureTech Ownership*
Description
Entrega
72.9%
Entrega is focused on the oral delivery of biologics, vaccines and other drugs that are otherwise not
efficiently absorbed when taken orally. Entrega believes oral administration thus represents an ideal
administration approach for this increasingly large class of therapies reshaping many areas of medicine,
including the treatment of diabetes.
Programme
discovery
process by the
PureTech team
PureTech was interested in enabling the oral administration of biologics, which has been a long‑standing problem in drug
development. PureTech engaged with leading experts in drug delivery, including Robert Langer, ScD, David H Koch Institute Professor
at MIT, and screened over 100 technologies and the initial platform was licensed from Samir Mitragotri, PhD, professor of chemical
engineering at UC Santa Barbara. PureTech later enhanced this platform with intellectual property developed by its team.
Other scientific and business advisors include Colin Gardner, PhD, former chief scientific officer of Transform Pharmaceuticals, former
senior vice president of research and site head at Johnson & Johnson and formerly VP of pharmaceutical R&D at Merck & Co., Inc.;
Robert Armstrong, PhD, cofounder and chief executive officer of Boston Pharmaceuticals; and Mr Howie Rosen, former President of ALZA.
Innovative
approach for
solving the
problem
• Entrega is focused on the oral delivery of biologics, vaccines and other drugs that are otherwise not efficiently absorbed when
taken orally. The vast majority of biologic drugs, including peptides, proteins and other macromolecules, are currently administered
by injection, which can present challenges for healthcare delivery and compliance with treatment regimes. Entrega believes oral
administration thus represents an ideal administration approach for this increasingly large class of therapies reshaping many areas
of medicine, including the treatment of diabetes.
Milestones
achieved
• Entrega’s technology platform is an innovative approach to oral delivery which uses a proprietary, customisable hydrogel dosage
form to control local fluid microenvironments in the gastrointestinal tract in an effort to both enhance absorption and reduce the
variability of drug exposure.
• To validate its technology, Entrega generated POC preclinical data demonstrating delivery of therapeutic peptides into the
bloodstream of large animals.
• Entrega received $5 million in equity and research funding from Eli Lilly to investigate the application of its peptide delivery
technology to certain Lilly therapeutic candidates.
Engineered hydrogels to enable oral delivery of biologic drugs
*
As of 31 December 2019, PureTech’s percentage ownership of Entrega was approximately 72.9 per cent on a diluted basis. This calculation includes outstanding shares,
options, and warrants, but excludes unallocated shares authorised to be issued pursuant to equity incentive plans.
44 PureTech Health plc Annual report and accounts 2019
Strategic report Risk management
The execution of the Group’s strategy is subject to a number of risks and uncertainties. As a developer of advanced and early
stage technologies addressing significant unmet medical needs, the Group inherently operates in a high-risk environment.
The overall aim of the Group’s risk management effort is to achieve an effective balancing of risk and reward, although
ultimately no strategy can provide an absolute assurance against loss.
Risks are formally identified by the Board and appropriate processes are put in place to monitor and mitigate them on an
ongoing basis. If more than one event occurs, it is possible that the overall effect of such events would compound the possible
effect on the Group. The principal risks that the Board has identified as the key business risks facing the Group are set out
in the table below along with the consequences and mitigation of each risk. Any number of these could have a material
adverse effect on the Group or its financial condition, development, results of operations, subsidiary companies and/or future
prospects. Additional information regarding risks related to financial instruments can be found on page 134.
Risk
Impact*
Mitigation
1 Risks related to science and technology failure
The science and technology being developed
or commercialised by some of the Group’s businesses
may fail and/or the Group’s businesses may not be able
to develop their intellectual property into commercially
viable products or technologies.
There is also a risk that certain of the businesses may
fail or not succeed as anticipated, resulting in significant
decline of the Group’s value.
The failure of any of the Group’s businesses
could decrease the Group’s value. A failure of
one of the major businesses could also impact
on the perception of the Group as a developer
of high value technologies and possibly make
additional fundraising at the PureTech or
subsidiary company level more difficult.
A critical failure of a clinical trial may result in
termination of the programme and
a significant decrease in the Group’s value.
Significant delays in a clinical trial to support
the appropriate regulatory approvals could
impact the amount of capital required for the
business to become fully sustainable on
a cash flow basis.
The failure of one of the Group’s products to
obtain any required regulatory approval, or
conditions imposed in connection with any
such approval, may result in a significant
decrease in the Group’s value.
2 Risks related to clinical trial failure
Clinical trials and other tests to assess the commercial
viability of a product candidate are typically expensive,
complex and time-consuming, and have
uncertain outcomes.
Conditions in which clinical trials are conducted differ,
and results achieved in one set of conditions could be
different from the results achieved in different
conditions or with different subject populations. If the
Group’s product candidates fail to achieve successful
outcomes in their respective clinical trials, the products
will not receive regulatory approval and in such event
cannot be commercialised. In addition, if the Group
fails to complete or experiences delays in completing
clinical tests for any of its product candidates, it may not
be able to obtain regulatory approval or commercialise
its product candidates on a timely basis, or at all.
3 Risks related to regulatory approval
The pharmaceutical industry is highly regulated.
Regulatory authorities across the world enforce a range
of laws and regulations which govern the testing,
approval, manufacturing, labelling and marketing of
pharmaceutical products. Stringent standards are
imposed which relate to the quality, safety and efficacy
of these products. These requirements are a major
determinant of whether it is commercially feasible to
develop a drug substance or medical device given the
time, expertise, and expense which must be invested.
The Group may not obtain regulatory approval for its
products. Moreover, approval in one territory offers no
guarantee that regulatory approval will be obtained in
any other territory. Even if products are approved,
subsequent regulatory difficulties may arise, or the
conditions relating to the approval may be more
onerous or restrictive than the Group expects.
Before making any decision to develop any
technology, extensive due diligence is carried
out by the Group that covers all the major
business risks, including technological
feasibility, market size, strategy, adoption and
intellectual property protection.
A capital efficient approach is pursued such that
some level of proof of concept has to be
achieved before substantial capital is
committed and thereafter allocated. Capital
deployment is generally tranched so as to fund
programmes only to their next value milestone.
Members of the Group’s Board serve on the
Board of directors of each business so as to
continue to guide each business’s strategy and
to oversee proper execution thereof. The
Group uses its extensive network of advisors to
ensure that each business has appropriate
domain expertise as it develops and executes
on its strategy. Additionally, the Group has
a diversified model with numerous assets such
that the failure of any one of the Group’s
businesses would not result in a significant
decline of the Group’s value.
The Group has a diversified model such that
any one clinical trial outcome would not
significantly impact the Group’s ability to
operate as a going concern. It has dedicated
internal resources to establish and monitor each
of the clinical programmes in order to try to
maximise successful outcomes. Significant
scientific due diligence and preclinical
experiments are done prior to a clinical trial to
attempt to assess the odds of the success of the
trial. In the event of the outsourcing of these
trials, care and attention is given to assure the
quality of the vendors used to perform the work.
The Group manages its regulatory risk by
employing highly experienced clinical
managers and regulatory affairs professionals
who, where appropriate, will commission advice
from external advisors and consult with the
regulatory authorities on the design of the
Group’s preclinical and clinical programmes.
These experts ensure that high-quality
protocols and other documentation are
submitted during the regulatory process, and
that well-reputed contract research
organisations with global capabilities are
retained to manage the trials. Additionally, the
Group has a diversified model with numerous
assets such that the failure to receive regulatory
approval or subsequent regulatory difficulties
with respect to any one product would not
result in a significant decline of the
Group’s value.
*
When assessing potential impact of a given risk, the Group looked at the potential effects on the Group’s research and development activities, financial health and overall
business operations.
PureTech Health plc Annual report and accounts 2019 45
Governance Risk management — continued
Risk
Impact*
Mitigation
Adverse reactions or unacceptable side effects
may result in a smaller market for the Group’s
products, or even cause the products to fail to
meet regulatory requirements necessary for
sale of the product. This, as well as any claims
for injury or harm resulting from the Group’s
products, may result in a significant decrease
in the Group’s value.
The Group designs its products with safety as
a top priority and conducts extensive preclinical
and clinical trials which test for and identify any
adverse side effects. Insurance is in place to
cover product liability claims which may arise
during the conduct of clinical trials.
4 Risks related to product safety
There is a risk of adverse reactions with all drugs and
medical devices. If any of the Group’s products are
found to cause adverse reactions or unacceptable side
effects, then product development may be delayed,
additional expenses may be incurred if further studies
are required, and, in extreme circumstances, it may
prove necessary to suspend or terminate development.
This may occur even after regulatory approval has been
obtained, in which case additional trials may be
required, the approval may be suspended or withdrawn
or additional safety warnings may have to be included
on the label. Adverse events or unforeseen side effects
may also potentially lead to product liability claims
being raised against the Group as the developer of the
products and sponsor of the relevant clinical trials.
These risks are also applicable to our Founded Entities
and any trials they conduct or product candidates
they develop.
5 Risks related to product profitability
The Group may not be able to sell its products
profitably if reimbursement from third-party payers such
as private health insurers and government health
authorities is restricted or not available because, for
example, it proves difficult to build a sufficiently strong
economic case based on the burden of illness and
population impact.
The failure of the Group to obtain
reimbursement from third party payers, as well
as competition from other products, could
significantly decrease the amount of revenue
the Group may receive from product sales for
certain products. This may result in a significant
decrease in the Group’s value.
The Group engages reimbursement experts to
conduct pricing and reimbursement studies for
its products to ensure that a viable path to
reimbursement, or direct user payment, is
available. The Group also closely monitors the
competitive landscape for all of its products and
adapts its business plans accordingly.
Third-party payers are increasingly attempting to curtail
healthcare costs by challenging the prices that are
charged for pharmaceutical products and denying or
limiting coverage and the level of reimbursement.
Moreover, even if the products can be sold profitably,
they may not be accepted by patients and the
medical community.
Alternatively, the Group’s competitors – many of whom
have considerably greater financial and human
resources – may develop safer or more effective
products or be able to compete more effectively in the
markets targeted by the Group. New companies may
enter these markets and novel products and
technologies may become available which are more
commercially successful than those being developed by
the Group. These risks are also applicable to our
Founded Entities and could result in a decrease
in their value.
6 Risks related to intellectual
property protection
The Group may not be able to obtain patent protection
for some of its products or maintain the secrecy of its
trade secrets and know-how. If the Group is
unsuccessful in doing so, others may market
competitive products at significantly lower prices.
Alternatively, the Group may be sued for infringement
of third-party patent rights. If these actions are
successful, then the Group would have to pay
substantial damages and potentially remove its
products from the market. The Group licenses certain
intellectual property rights from third parties. If the
Group fails to comply with its obligations under these
agreements, it may enable the other party to terminate
the agreement. This could impair the Group’s freedom
to operate and potentially lead to third parties
preventing it from selling certain of its products.
7 Risks related to enterprise profitability
The Group expects to continue to incur substantial
expenditure in further research and development
activities. There is no guarantee that the Group will
become profitable, either through commercial sales,
strategic partnerships or sales of a business, and, even
if it does so, it may be unable to sustain profitability.
The failure of the Group to obtain patent
protection and maintain the secrecy of key
information may significantly decrease the
amount of revenue the Group may receive
from product sales. Any infringement litigation
against the Group may result in the payment
of substantial damages by the Group and
result in a significant decrease in the
Group’s value.
The Group spends significant resources in the
prosecution of its patent applications and has
an in-house patent counsel. Third party patent
filings are monitored to ensure the Group
continues to have freedom to operate.
Confidential information (both of the Group
and belonging to third parties) is protected
through use of confidential disclosure
agreements with third parties, and suitable
provisions relating to confidentiality and
intellectual property exist in the Group’s
employment and advisory contracts. Licenses
are monitored for compliance with their terms.
The strategic aim of the business is to
generate profits for its shareholders through
the commercialisation of technologies through
product sales, strategic partnerships and sales
of businesses. The timing and size of these
potential inflows is uncertain, and should
revenues from our activities not be achieved,
or in the event that they are achieved but at
values significantly less than the amount of
capital invested, then it would be difficult to
sustain the Group’s business.
The Group retains significant cash in order to
support funding of its Founded Entities and its
Wholly Owned Pipeline. The Group has close
relationships with a wide group of investors and
strategic partners to ensure it can continue to
access the capital markets and additional
monetisation and funding for its businesses.
Additionally, its Founded Entities are able to
raise money directly from third party investors
and strategic partners.
46 PureTech Health plc Annual report and accounts 2019
Governance
Risk management — continued
Risk
Impact*
Mitigation
8 Risks related to hiring and
retaining qualified employees
The Group operates in complex and specialised
business domains and requires highly qualified and
experienced management to implement its strategy
successfully. The Group and many of its businesses are
located in the United States which is a highly
competitive employment market.
Moreover, the rapid development which is envisaged
by the Group may place unsupportable demands on
the Group’s current managers and employees,
particularly if it cannot attract sufficient new employees.
There is also risk that the Group may lose
key personnel.
9 Risks related to business, economic
or public health disruptions
Business or economic disruptions or global health
concerns could seriously harm our development efforts
and increase our costs and expenses.
The Board annually seeks external expertise to
assess the competitiveness of the
compensation packages of its senior
management. Senior management continually
monitors and assesses compensation levels to
ensure the Group remains competitive in the
employment market. The Group maintains an
extensive recruiting network through its Board
members, advisors and scientific community
involvement. The Group also employs an
executive as a full-time in-house recruiter.
To date, we have seen limited impact on our
research and development activities and the
operation of our company more generally, but
we will continuously monitor this pandemic and
its impact on our business going forward and
may see further impact as the situation
continues to develop.
The failure to attract highly effective personnel
or the loss of key personnel would have an
adverse impact on the ability of the Group to
continue to grow and may negatively affect the
Group’s competitive advantage.
Broad-based business or economic disruptions
could adversely affect our ongoing or planned
research and development activities. For
example, in December 2019 an outbreak of
a novel strain of coronavirus originated in
Wuhan, China, and has since spread to
a number of other countries, including the
United States. To date, this outbreak has
already resulted in extended shutdowns of
certain businesses around the world. Global
health concerns, such as coronavirus, could
also result in social, economic, and labour
instability in the countries in which we or the
third parties with whom we engage operate.
We cannot presently predict the scope and
severity of any potential business shutdowns or
disruptions, but if we or any of the third parties
with whom we engage, including the suppliers,
clinical trial sites, regulators and other third
parties with whom we conduct business, were
to experience shutdowns or other business
disruptions, our ability to conduct our business
in the manner and on the timelines presently
planned could be materially and negatively
impacted. It is also possible that global health
concerns such as this one could
disproportionately impact the hospitals and
clinical sites in which we conduct any of our
current and/or future clinical trials, which could
have a material adverse effect on our business
and our results of operation and
financial impact.
Brexit
The United Kingdom withdrew from the European Union on 31 January 2020 (Brexit). However, it remains unclear what the
regulatory and economic position will be for the United Kingdom after the transition period ends on 31 December 2020.
The uncertainty in the political, economic and regulatory landscape is expected to continue while negotiations between the
United Kingdom and the European Union continue to establish an exit agreement and ongoing trade arrangements. The
uncertainty surrounding Brexit has and may continue to contribute to volatility in the prices of securities of companies listed
in Europe and currency exchange rates, including the valuation of the euro and British pound in particular. Any one of these
factors, or the combination of more than one of these factors, could negatively affect such foreign securities market and the
price of securities therein.
Although the Board has considered the potential impact of Brexit as part of its risk management, given that the Group
principally operates in the United States and holds substantially all assets in US dollars, the Group does not believe there will
be any material financial effect on our business, or any significant operational issues which could arise, as a result of Brexit.
PureTech Health plc Annual report and accounts 2019 47
Governance
Viability
PureTech Health plc Viability Statement
In accordance with the UK Corporate
Governance Code (Governance Code)
published in July 2018, the Directors
have assessed the prospects of the
Group, and with the 31 December 2019
cash balance, the Group had enough
funding to extend operations into
the first quarter of 2022 and following
the sale of 2,100,000 shares of Karuna
common shares worth $200.9 million
on 22 January 2020, the Group will now
extend operations over a four year
period into the first quarter of 2024. This
period is deemed appropriate having
assessed the financial health of the
Group’s Parent as of 31 December 2019
along with the sale of Karuna shares.
Further, we expect the Group’s
wholly owned internal pipeline (or
“Internal segment”) to significantly
progress during this period and for key
Controlled Founded Entities and Non-
Controlled Founded Entities to reach
significant development milestones over
the period of the assessment.
We anticipate the Group’s funding
to be used in advancing two of the
Group’s Internal segment programmes
to human clinical testing by the end of
2020; investing in the development of
new high-potential product candidates;
and funding the Company’s head office
costs into the first quarter of 2024. We
further anticipate the Group to support
its Founded Entities to reach significant
development milestones over the
period of the assessment in conjunction
with the Group’s external partners. This
budget projection is conservative as
it includes only existing funds as well
as some limited inflows from current
collaborations. The budget projection
does not include potential inflows of
cash which may occur, for example, as
a result of future strategic partnerships,
sales of holdings, and grants as well as
equity fundraising at Founded Entities.
The Directors confirm that they have
a reasonable expectation that the
Group will continue to operate and
meet its obligations as they fall due
over the period of the assessment. In
making this statement the Directors
carried out a robust assessment of
the principal risks facing the Group,
including those that would threaten its
business model, future performance,
solvency or liquidity.
This assessment was made in
consideration of the Group’s strong
financial position, current strategy
and management of principal risks
facing the Group. The following facts
support the Directors’ view of the
viability of the Group:
• The Group has significant influence
over the spending and strategic
direction of its Internal segment
programmes and Controlled
Founded Entities.
• The Group’s business model is
structured so that the Group is not
reliant on the successful outcomes
of any one Internal segment
programme, Controlled Founded
Entity, or investment in Non-
Controlled Founded Entity.
In addition, the fact that the Internal
segment programmes, Controlled
Founded Entities and Non-Controlled
Founded Entities (with the exception
of Gelesis) are currently in the research
and development stage means that
these programmes and entities are not
reliant on cash inflows from sales of
products or services during the period
of this assessment. This also means
that the Group is not highly susceptible
to conditions in one or more market
sectors in this time frame. Although
engaging with collaboration partners
is highly valuable to the Group from
a validation and, in some cases, funding
perspective, the Group is not solely
reliant on cash flows from such sources
over the period of assessment.
The PureTech-level 2019 year end cash
reserve of $120.6 million, with a pro
forma cash reserve of $321.5 million1,
is highly liquid and forecast to support
infrastructure costs, Internal segment
research and development activities
and the appropriate funding of its
Controlled Founded Entities and Non-
Controlled Founded Entities to reach
significant development milestones over
the period of the assessment.
The Board reviews the near-term
liquidity of the Group and regularly
considers funding plans of its Internal
segment, Controlled Founded Entities
and Non-Controlled Founded Entities
in its assessment of long-term cash
flow projections.
While the review has considered all
of the principal risks identified by
the Group, the Board is focused on
the pathway to regulatory approval
of each product candidate being
developed within its Internal segment
programmes as well as those of its
Founded Entities. Further, the Board has
considered milestone funding based on
existing collaboration and partnership
arrangements, and the ability of
each Internal segment programme,
Controlled Founded Entity and Non-
Controlled Founded Entity to enter
new collaboration agreements, all of
which could be expected to generate
cash in-flows but were not included in
the assessment. Additionally, given that
spending and investment decisions
are largely discretionary, there is
management control on reducing
discretionary spending if unforeseen
liquidity risks arise.
The Directors note that the Group’s
ownership stakes in the Controlled
Founded Entities and Non-Controlled
Founded Entities are expected to be
illiquid in nature, with the exception
of its ownership stakes in resTORbio
and Karuna, which are both publicly
traded on NASDAQ. While the Group
anticipates holding these ownership
stakes through the achievement
of significant milestones or other
events, the Group will continue to be
diligent in exploring monetisation
opportunities similar to the execution
of the sale of 2,100,000 shares of Karuna
common shares worth $200.9 million
on 22 January 2020. In November and
December 2019, the Group also sold
7.7 million common shares of resTORbio
for aggregate proceeds of $9.3 million.
However, the Group’s budget does
not include any further monetisation
opportunities, which would further
extend operations over a four year
period beyond the first quarter of
2024. It is also expected that certain
of these Founded Entities may not be
successful and could result in a loss of
the amounts previously invested with no
opportunity for recovery. However, even
in this scenario, the Group’s liquidity is
expected to remain sufficient to achieve
the remaining milestone events and
fund infrastructure costs.
The Directors have concluded, based on
the Group’s strong financial position and
readily available cash reserves (inclusive
of short-term investments), that the
Group is likely to be able to fund its
infrastructure requirements, advancing
two of the Group’s Internal segment
programmes to human clinical testing
by the end of 2020, and the amounts
considered necessary for the Controlled
Founded Entities and Non-Controlled
Founded Entities to reach significant
development milestones over the
period of the assessment. Therefore,
there is a reasonable expectation that
the Group has adequate resources and
will continue to operate over the period
of the assessment.
1
PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the
$200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-forma Cash Reserves is therefore considered to be more
representative of the Corporate’s cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.
48 PureTech Health plc Annual report and accounts 2019
Governance Key Performance Indicators – 2019
The key performance indicators (KPIs) below measure the Group’s performance against its strategy. As PureTech’s strategy has
evolved, new KPIs have replaced older metrics that are no longer representative of the Group’s progress.
Amount of funding secured
for Founded Entities1,2
Number of programmes
created for pipeline expansion1
$666.8m
$622.8m (93.4%) came from third parties
2018: $274.0m
2017: $102.9m
2016: $98.2m
2015: $74.6m
2014: $8.0m
1
2018: 1
2017: 1
2016: 3
2015: 3
2014: 2
Progress
Karuna, Gelesis, Vedanta, Vor
and Sonde all raised funds in
the form of financings and non-
dilutive grants in 2019, including
$622.8 million by third-party
financial and strategic investors.
Progress
As a part of its Wholly Owned Pipeline, PureTech selected and acquired LYT-100
in July 2019 based on proprietary insights into the lymphatic system, unpublished
findings from its network of collaborators, and prior knowledge of the programme.
PureTech believes LYT-100, if successfully developed and approved, could become
a promising treatment for lymphoedema as well as other disorders of impaired
lymphatic flow and conditions involving inflammation and fibrosis.
Number of theme-based
assets evaluated1
211
2018: 1449
2017: 951
2016: 918
2015: 776
2014: 521
Progress
The Company continued to identify
and review innovative technologies
that form the basis of its Wholly Owned
Pipeline. In the past, these efforts have
been broader in scope, resulting in
a larger number of assets considered.
Current sourcing activities (including
diligence and experiments) are centred
on the lymphatic system and related
immunology mechanisms for the
treatment of cancer and immunological,
lymphatic and CNS-related disorders.
In 2019, PureTech screened approximately 4,500 assets in total. Of these, PureTech
conducted literature reviews and secondary research for 211, held discussions with
the asset holding institution for 25, performed a deep dive analysis for three, and
in-licensed one clinical-stage asset, deupirfenidone.
~4,500
assets
screened
211
25
3
1
assets
reviewed
external
discussions
deep
dive
license
Number of clinical trials initiated1,3
Number of clinical readouts1,4
6
5
Progress
In 2019, Karuna, Vedanta and
resTORbio each initiated two
clinical trials.
Progress
In 2019 Gelesis, Karuna, Follica, Akili
and resTORbio reported clinical results
from across their pipelines.
1
2
3
4
Number represents figure for the relevant fiscal year only and is not cumulative.
Funding figure includes private equity financings, public offerings or grant awards. Funding figure excludes upfront payments and future milestone considerations received
in conjunction with partnerships and collaborations such as those with Roche, Boehringer Ingelheim, Imbrium Therapeutics L.P., Shionogi & Co., Ltd. or Eli Lilly.
Karuna, Vedanta and resTORbio each initiated two clinical trials in 2019.
Gelesis, Karuna, Follica, Akili and resTORbio reported clinical results from across their pipelines in 2019.
PureTech Health plc Annual report and accounts 2019 49
Governance
Financial Review
Financial Highlights
Cash Reserves
Consolidated Cash Reserves1
Consolidated Pro-forma Cash Reserves – Alternative Performance Measure (APM)1,3
PureTech Level Cash Reserves2
PureTech Level Pro-forma Cash Reserves – Alternative Performance Measure (APM)1,4
Results of Operations
Revenue
Operating Loss
Adjusted Operating Loss – Alternative Performance Measure (APM)5
Income/(loss) for the Period
Adjusted Loss for the Period – Alternative Performance Measure (APM)6
2019
$ millions
2018
$ millions
162.4
363.3
120.6
321.5
9.8
(135.4)
(114.3)
366.1
(112.4)
250.9
—
178.2
—
20.7
(104.0)
(88.6)
(70.7)
(83.7)
1
2
3
4
5
6
Consolidated Cash Reserves includes cash balances of $132.4 million and $117.1 million, and short-term investments of $30.1 million and $133.8 million for the year ended
2019 and 2018, respectively as shown on the Consolidated Statements of Financial Position.
PureTech Level Cash Reserves represent cash balances and short-term investments held at PureTech Health LLC, PureTech Management, Inc., PureTech Health PLC, PureTech
Securities Corporation of $112.0 million and $177.7 million for the year ended 2019 and 2018, respectively, and the internal pipeline of $8.6 million and $0.5 million for the year
ended 2019 and 2018, respectively, all of which are wholly owned entities of PureTech, excluding cash balances and short-term investments of Controlled Founded Entities.
Consolidated Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the Consolidated Cash Reserves of $162.4 million and the $200.9 million
in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. As of 13 March 2020, PureTech Health held 5.3 million common shares, or 20.3 per cent of
Karuna. Consolidated Pro-forma Cash Reserves is therefore considered to be more representative of the Group’s cash available for the year 2020 and beyond to advance
product candidates within the full breadth of its operations.
PureTech Level Pro-forma Cash Reserves is an alternative performance measure (APM) which includes the PureTech Level Cash Reserves of $120.6 million and the
$200.9 million in proceeds from the 22 January 2020 sale of 2.1 million Karuna common shares. PureTech Pro-forma Cash Reserves is therefore considered to be more
representative of the Corporate’s cash available for the year 2020 and beyond to advance product candidates within the full breadth of its operations.
Stated before the effect of non-cash charges consisting of share-based payments of $14.5 million (2018 – $12.6 million), depreciation of $3.2 million (2018 – $2.5 million) and
amortisation of $3.4 million (2018 – $0.3 million). Non-cash items are excluded due to the fact that the Group’s businesses require cash investment in order to operate and
continue with their R&D activities. Adjusted operating loss is therefore considered to be more representative of the operating performance of the Group and an appropriate
alternative performance measure.
Stated before the charges discussed in Note 5 above as well as fair value accounting costs of $46.5 million (2018 – charge of $22.6 million) and finance cost – subsidiary
preferred shares of $1.5 million (2018 – $0.1 million) and share of net gain/ (loss) of associates accounted for using the equity method of $30.8 million (2018 – ($11.5) million).
Adjusted Loss for the Period is also adjusted for impairment of investment in associate totalling $42.9 million (2018 – nil), the non-cash gain from the deconsolidation of
subsidiary of $264.4 million (2018 – $41.7 million), a Loss on investments held at fair value of $37.9 million (2018 – $34.6), and tax impact of $112.4 million. Adjusted Loss for
the Period is further adjusted for the Gain on Loss of Significant Influence of $445.6 million for the year ended 31 December 2019 (2018 – $10.3 million). These items are also
non-cash expenses and income, respectively. Adjusted loss for the period is therefore considered to be more representative of the operating performance of the Group.
Revenue
Revenue for 2019 relates primarily to
the Internal segment’s agreements
with Roche and Boehringer Ingelheim,
and Entrega’s research collaboration
agreement with Eli Lilly, as well as
the Alivio’s agreement with Imbrium
Therapeutics, and grant revenue.
Future revenue may be earned under
existing license and collaboration
agreements, as well as under grant
awards. Management evaluates
opportunities to enter new license
and collaboration agreements with
the aim of balancing the potential
value of these partnerships with our
interest in retaining ownership over
our programmes as they achieve
meaningful milestones. Revenue
from license and collaboration
agreements during the development
and approval period is typically driven
by the achievement of contractual
milestones, which tend to be event-
driven. Furthermore, grant revenues
are typically associated with specific
deliverables that have finite timelines
and do not extend over long periods.
Therefore, significant period to period
changes in revenue are to be expected
and are not necessarily indicative
of the Consolidated Group’s overall
revenue trend.
Operating Expenses
Operating Losses increased by 30.2
per cent, or $31.4 million, for the year
ended 31 December 2019 compared
to the year ended 31 December 2018.
The largest driver of the increase
was the increase in research and
development expenditures within the
Internal segment. In 2019, the Group
continued to shift its focus towards the
Internal segment, investing in research
and development activities to advance
a wholly owned pipeline of lymphatic
system and related immuno-oncology
programmes. We progressed LYT-100
and LYT-200 towards first patient dosing
in 2020. Research and development
expenditures within the Internal
segment increased by 190.9 per cent,
or $17.0 million, for the year ended
31 December 2019 compared to the
year ended 31 December 2018.
Within the Internal segment, general
and administrative expenses
increased by $0.9 million, or 59.2
per cent, for the year ended
31 December 2019 compared to
the year ended 31 December 2018.
The year-over-year increase in general
and administrative expenses reflects
costs incurred in conjunction with the
move to new corporate headquarters
and labs in Boston’s Seaport area and
the subsequent development of this
space, as well as wage and benefit
growth related to increased headcount.
The Group continued to support
research and development activities
within its Controlled Founded
Entities segment, which resulted
in an increase of 15.8 per cent, or
$5.8 million, for the year ended
31 December 2019 compared to
the year ended 31 December 2018.
As the Controlled Founded Entities
approached meaningful milestones,
general and administrative expenses
within the Controlled Founded Entities
segment increased by $4.2 million
or 40.7 per cent for the year ended
31 December compared to the year
ended 31 December 2019.
50 PureTech Health plc Annual report and accounts 2019
Governance Financial Review — continued
The Parent segment continued to
support the operating activities
of the Internal and Controlled
Founded Entities segments. General
and administrative expenses
increased by $12.8 million, or
66.8 per cent, for the year ended
31 December 2019 compared to the
year ended 31 December 2018. In 2019,
the Parent segment incurred one-time
costs associated with the acquisition
of minority interests in internal
pipeline programmes, the move to
Boston’s Seaport area, and additional
tax expense related to share based
payment awards.
The Directors anticipate that operating
expenses, particularly research and
development-related expenses, will
continue to increase as the Group
advances its pipeline. These operating
expenses will include regulatory
activities, conducting clinical and
preclinical studies, intellectual property
registration and the cost of acquiring,
developing and manufacturing
clinical study materials. General
and administrative costs, consisting
primarily of personnel-related costs,
lease costs and professional fees, are
anticipated to grow as well, and are
primarily attributed to increases in
overall corporate expenses.
Net finance costs
Net finance costs excluding finance
income/(costs) in respect of fair value
accounting (2019 – $46.5 million
expense; 2018 – $22.6 million income)
and finance costs – subsidiary preferred
shares (2019 – $1.5 million expense;
2018 – $0.1 million expense) resulted
in income of $1.8 million for the year
ended 31 December 2019 compared
to income of $3.4 million for the year
ended 31 December 2018, a decrease
in income of $1.6 million. The income
in both periods is related to interest
received on short-term investments
held at PureTech Health and certain
subsidiaries. The Consolidated Group,
as described below, has adopted
a conservative cash management
policy and invested the significant
cash reserves generated since the
IPO in US Treasuries, which resulted in
$4.4 million and $3.4 million of income
from interest earned on these securities
for the years ended 31 December 2019
and 2018, respectively. The increase in
interest income was more than offset
by an increase in contractual finance
costs of $2.6 million for the year ended
31 December 2019 in respect of the
Company’s lease obligations. The lease
obligations resulted from the adoption
of IFRS 16 Leases as of 1 January 2019 as
well as from new lease agreements the
Company entered into during the year
ended 31 December 2019. Therefore
no such finance costs exist for the year
ended 31 December 2018.
During the year ended
31 December 2019, the Group
recognised finance costs related to
fair value accounting of $46.5 million,
as compared to a finance income
related to fair value accounting for
the year ended 31 December 2018
of $22.6 million. The costs generated
within Finance income/(costs) – fair
value accounting during 2019 is
primarily attributable to the increase
in fair value of the Group’s investments
in Follica, Sonde and Vedanta as
well as Gelesis during the period of
consolidation in addition to Sonde
and Vedanta preferred share issuances
during the year.
The balance of subsidiary preferred
shares held by external parties, and
therefore the related balance of the
aggregate liquidation preference,
decreased during 2019 due to the
deconsolidations of Vor, Karuna and
Gelesis, which was partially offset by
new issuances of Series A-2 preferred
shares by Sonde and Series C and
C-2 preferred shares by Vedanta.
Please refer to Note 15 in the financial
statements for more information.
During the year ended
31 December 2019, the Group
realised a year-over-year decrease of
$72.1 million as it recognised finance
costs of $46.1 million, compared to
a finance income of $25.9 million for
the year ended 31 December 2018.
The decrease resulted from the change
in fair value of the Group’s investments
in the common and preferred shares of
other entities.
Deconsolidations
Vor
In February 2019, Vor completed
the first closing of its Series A-2
preferred shares financing round.
As a result of this closing, PureTech
Health’s ownership percentage of
Vor’s voting shares dropped from 79.5
per cent to 47.5 per cent, triggering
deconsolidation. Although PureTech
Health no longer controls Vor, PureTech
Health maintains significant influence
over the Company’s strategy and the
direction of the Company by virtue of
its large, albeit non-majority, ownership
stake and continued representation on
Vor’s Board of Directors.
Upon deconsolidation, PureTech
Health recognised the fair value of the
Series A-1 and Series A-2 preferred
shares (collectively the “Vor preferred
shares”), resulting in a gain of
$6.4 million. The Vor preferred shares
were classified as an Investment held at
fair value upon deconsolidation.
PureTech Health does not hold
common shares in Vor and therefore
is not subject to equity method
accounting under IAS 28. PureTech
Health will continue to account for the
Vor preferred shares as an Investment
held at fair value until such time that
Vor Preferred Shares is converted
to common shares. Please refer to
Note 5 in the financial statements for
further information.
Karuna
In March 2019, Karuna completed
a Series B preferred shares financing
round. As a result of this financing,
PureTech Health’s ownership
percentage of Karuna’s voting shares
dropped from 70.9 per cent to 44.3 per
cent, triggering deconsolidation. Upon
the date of deconsolidation, PureTech
Health held preferred shares, preferred
share warrants and common shares of
Karuna. Although PureTech Health no
longer controlled Karuna, PureTech
Health maintained significant influence
over the Company’s strategy and the
direction of the Company by virtue of
its large, albeit non-majority, ownership
stake and continued representation on
Karuna’s Board of Directors through
December 2019.
Upon deconsolidation, PureTech Health
recognised the fair value of the Karuna
preferred shares and the preferred
shares warrant, resulting in a gain of
$102.0 million. The Karuna preferred
shares and warrant were classified as
Investments held at fair value upon
deconsolidation. PureTech Health’s
investment in the common shares of
Karuna is subject to equity method
accounting following deconsolidation
and has been adjusted for PureTech
Health’s share of Karuna’s net income
or loss. Due to the relatively small
initial fair value of the common shares
investment, it was remeasured to nil
immediately following deconsolidation.
PureTech Health plc Annual report and accounts 2019 51
Governance Financial Review — continued
In June 2019, Karuna completed an
initial public offering (IPO). Upon
completion of the IPO, the Karuna
preferred shares held by PureTech
Health converted to common shares.
In light of PureTech’s common share
holdings in Karuna and corresponding
voting rights, PureTech had re-
established a basis to account for
its investment in Karuna under the
equity method. The preferred shares
investment held at fair value was
therefore reclassified to an investment
in associate upon completion of
the conversion and the Company
recognised a gain of $40.6 million
related to the IPO. Subsequent to the
IPO, PureTech’s ownership percentage
of Karuna’s voting shares was
31.6 per cent.
In December 2019, it was concluded
that PureTech Health no longer
exerted significant influence over
Karuna. As a result, Karuna was
no longer deemed an associate of
PureTech Health and did not meet the
scope of equity method accounting.
Upon PureTech Health’s loss of
significant influence, the investment in
Karuna was reclassified to an investment
held at fair value and PureTech Health
recognised a gain on loss of significant
influence of Karuna of $445.6 million.
Please refer to Note 5 in the financial
statements for further information.
Gelesis
In July 2019, the Gelesis Board
of Directors was restructured,
resulting in two of the three
PureTech representatives resigning
from the Board and triggering the
deconsolidation of Gelesis. At the
deconsolidation date, PureTech held
25.2 per cent of the outstanding voting
shares of Gelesis. While the Company
no longer controls Gelesis, it was
concluded that PureTech Health still
had significant influence over Gelesis
by virtue of its large, albeit minority,
ownership stake and its continued
representation on Gelesis’ Board
of Directors.
Upon the date of deconsolidation,
PureTech Health held preferred shares
and common shares of Gelesis, as well
as a preferred share warrant. Upon
deconsolidation, PureTech Health
recognised the fair value of the Gelesis
preferred shares and the preferred
shares warrant resulting in a gain of
$156.0 million. The Gelesis preferred
shares and warrant were classified as
Investments held at fair value upon
deconsolidation. As PureTech Health
is able to demonstrate that it has
significant influence over Gelesis,
PureTech Health’s investment in the
Gelesis common shares will be subject
to equity method accounting following
deconsolidation and will subsequently
be adjusted for PureTech Health’s
share of Gelesis’ net income or loss.
Please refer to Note 6 in the financial
statements for further information.
Financial Position
Cash and short-term investments
make up a significant portion of the
Consolidated Group’s current assets,
which were $168.8 million for the year
ended 31 December 2019 compared
to $259.8 million for the year ended
31 December 2018. The decrease
in cash and short-term investments
of 31 December 2019 compared to
31 December 2018 was attributable
to the deconsolidation of Vor, Karuna
and Gelesis. Amounts that cannot
be immediately deployed have been
used to purchase US Treasuries with
durations of less than two years. The
consolidated cash reserves, consisting
of cash, cash equivalents and US
Treasuries, which are classified as both
long and short term, were $162.4 million
at 31 December 2019, compared to
$250.9 million for the year ended
31 December 2018. Of this amount,
$120.6 million (31 December 2018 –
$178.2 million) of cash reserves is held
at the PureTech Health level (refer to
footnotes 1 to 4 of Financial Highlights)
to fund activities of the Group including
funding the Internal segment’s wholly
owned internal pipeline, progressing
Founded Entity programmes toward
meaningful milestone events where
necessary and appropriate, and
maintaining a robust Parent support
infrastructure.
In November 2019, Karuna announced
results from its Phase 2 clinical
trial of KarXT for the treatment of
acute psychosis in patients with
schizophrenia. As such, Karuna’s
share price witnessed significant price
appreciation. On 22 January 2020,
PureTech Health monetised a portion
of its common shares holdings in
Karuna. PureTech sold 2.1 million Karuna
common shares for aggregate proceeds
of $200.9 million. As of 13 March 2020,
PureTech Health held 5.3 million shares,
or 20.3 per cent, of Karuna.
The sale of a minority of its holding
in Karuna provided the Group with
additional cash resources to fund
operational growth within the Internal
segment. The Group’s consolidated
cash position as of 31 December 2019
on a pro-forma basis, inclusive of
the Karuna share sale proceeds, was
$363.3 million. The parent level cash
position as of 31 December 2019
on such a pro-forma basis was
$321.5 million.
Other significant items impacting the
Consolidated Group’s financial position
and health include:
•
Investments held at fair value and
Investments in associates increased
by $545.2 million to $725.5 million
as of 31 December 2019 compared
to 31 December 2018, primarily
driven by the deconsolidation
of Vor, Karuna and Gelesis and
subsequent fair value increases,
which were partially offset by the
fair value decrease of our resTORbio
shares and subsequent reduction
of ownership.
•
In November and December 2019,
PureTech sold 7.7 million common
shares of resTORbio for aggregate
proceeds of $9.3 million. As of
31 December 2019, PureTech held
2.1 million common shares, or
5.8 per cent, of resTORbio.
• Current Liabilities decreased by
$126.6 million, or 47.6 per cent, to
$139.2 million for the year ended
31 December 2019 compared to
$265.8 million for the year ended
31 December 2018, which is primarily
attributable to the deconsolidation
of Vor, Karuna and Gelesis. This
was partially offset by additional
Controlled Founded Entity preferred
share issuances and subsidiary
preferred share and subsidiary
warrant fair value increases during
the year ended 31 December 2019.
52 PureTech Health plc Annual report and accounts 2019
Governance Financial Review — continued
Financial Position
Non-current assets
Current assets
Total assets
Non-current liabilities
Total current liabilities
Total liabilities
The Directors anticipate the continued
strong financial health of the Group’s
Parent and expect the Group’s wholly
owned internal pipeline to significantly
progress during this period. The
Group also expects key Controlled
Founded Entities and Non-Controlled
Founded Entities to achieve meaningful
milestones. The Consolidated Group’s
funds are sufficient to continue
to progress the Internal segment,
Controlled Founded Entities and
Non-Controlled Founded Entities to
meaningful milestone events into the
first quarter of 2024.
The Group’s net cash used in operating
activities reflects the payment of
operating expenses, which, with the
exception of its non-cash charges
highlighted in footnotes 5 and 6 of the
Results of Operations Schedule above,
are primarily cash based.
Net cash used in operating activities
was $98.2 million for the year ended
31 December 2019, compared to
$72.8 million for the year ended
31 December 2018. The increase
in outflows was primarily due to the
increased Company operating loss that
resulted from increased research and
development activities throughout the
Group. In 2019 the Company’s income
resulted from increased non-cash gains,
that had no impact on the cash used in
operating activities.
The net cash inflow of $63.7 million from
investing activities during 2019 relates
to the maturity of investments in US
Treasuries with durations of less than
two years which totalled $104.5 million.
The cash provided by the maturity of
short-term investments was offset by
the purchase of fixed assets totalling
$12.1 million and the purchase of
intangible assets totalling $0.4 million.
The inflow was further offset by
the Group’s investment in Gelesis
convertible promissory notes totalling
$6.5 million as well as Gelesis Series 3
Growth and Karuna Series B preferred
shares totalling $13.7 million. The inflow
was further offset by the derecognition
of cash totalling $16.0 million held
by Vor, Karuna and Gelesis upon
deconsolidation.
Cash Flows
Operating Cash Flows
Investing Cash Flows
Financing Cash Flows
2019
$ millions
2018
$ millions
772.3
168.8
941.1
151.6
139.2
290.8
182.0
259.8
441.8
9.0
265.8
274.8
The net cash inflow of $49.9 million
from financing activities during
2019 was primarily attributable to
$51.0 million in aggregate proceeds
received from the Vedanta Series C
and Series C-2 closings ($32.2 million),
Sonde Series A-2 closings ($7.3 million)
and Gelesis Series 2 Growth closings
($8.6 million). Further inflows were
attributable the sale of resTORbio
shares. In November and December
2019, PureTech sold 7.7 million
common shares of resTORbio for
aggregate proceeds of $9.3 million.
As of 31 December 2019, PureTech
held 2.1 million common shares, or
5.8 per cent, of resTORbio.
The Group is focused on maintaining
liquidity as well as capital preservation
of investments. As a result, surplus
cash reserves have been placed in
highly- rated, short duration vehicles,
primarily US Treasuries with maturities
under one year. The Group monitors
market conditions to manage any
risk to the investment portfolio and
investigates opportunities to increase
the yield on the amounts invested, while
maintaining the Group’s liquidity and
capital preservation objectives.
2019
$ millions
2018
$ millions
(98.2)
63.7
49.9
(72.8)
(39.6)
156.9
PureTech Health plc Annual report and accounts 2019 53
Governance Chairman’s overview
“ We believe that good corporate
governance is essential for building
a successful and sustainable business.”
Dear Shareholder
I am pleased to introduce our Corporate Governance Report. This section sets out our governance framework and the work of
the Board and its committees.
As a Board we are responsible for ensuring there is an effective governance framework in place. This includes setting
the Company’s strategic objectives, ensuring the right leadership and resources are in place to achieve these objectives,
monitoring performance, ensuring that sufficient internal controls and protections are in place and reporting to shareholders.
An effective governance framework is also designed to ensure accountability, fairness and transparency in the Company’s
relationships with all of its stakeholders, whether shareholders, employees, partners, the government or the wider patient
community. We believe that good corporate governance is essential for building a successful and sustainable business.
The Board is committed to the highest standards of corporate governance and undertakes to maintain a sound framework for
the control and management of the Group. In this report we provide details of that framework.
The key constituents necessary to deliver a robust structure are in place and, accordingly, this report includes a description
of how the Company has applied the principles and provisions of the Governance Code and how it intends to apply those
principles in the future.
The Board looks forward to being able to discuss these matters with our shareholders at the Group’s AGM or indeed at any
other time during the year.
Christopher Viehbacher
Chairman
8 April 2020
54 PureTech Health plc Annual report and accounts 2019
Governance
Board of Directors
(alphabetically)*
PureTech Health is led by a seasoned and accomplished
Board of Directors and management team with extensive
experience in maximising shareholder value, discovering
scientific breakthroughs, and delivering products to market.
Raju Kucherlapati, PhD
Independent Non-Executive Director, R&D Committee Member
Raju Kucherlapati, PhD, has served as a member of the board of directors since 2014. He is the Paul C. Cabot
Professor of Genetics and Professor of Medicine at Harvard Medical School, is an independent non-executive
director at PureTech and sits on PureTech’s R&D Committee. Dr Kucherlapati currently serves on the board of
directors of Gelesis, Inc. and KEW Inc. He was a founder and formerly a board member of Abgenix (acquired
by Amgen for $2.2 billion), Cell Genesys and Millennium Pharmaceuticals (acquired by Takeda for $8.8 billion).
He was the first scientific director of the Harvard-Partners Center for Genetics and Genomics. He is a fellow
of the American Association for the Advancement of Science and a member of the National Academy of
Medicine. Dr Kucherlapati received his PhD from the University of Illinois. He trained at Yale and has held faculty
positions at Princeton University, University of Illinois College of Medicine and the Albert Einstein College
of Medicine. He was a member of the presidential commission for the study of bioethical issues during the
Obama administration.
Dr Kucherlapati’s laboratory at Harvard Medical School is involved in cloning many human disease genes with
a focus on human syndromes with significant cardiovascular involvement, use of genetic/genomic approaches
to understand the biology of cancer and the generation and characterisation of genetically modified mouse
models for cancer and other human disorders. His laboratory was a part of the Human Genome Program that
was responsible for mapping and sequencing the human genome. Dr Kucherlapati developed methods for
modifying mammalian genes that lead to gene targeting in mice. He has developed many mouse models for
human disease, including a large set of models for human colorectal cancer. His laboratory was a part of The
Cancer Genome Atlas (TCGA) programme that uses genetic/genomic approaches to understand the biology of
cancer. He is a promoter of personalised/precision medicine. Dr Kucherlapati served on the editorial board of
the New England Journal of Medicine and was editor-in-chief of the journal Genomics.
John LaMattina, PhD
Independent Non-Executive Director, R&D Committee Member
John LaMattina, PhD, is an independent non-executive director at PureTech and has served as a member
of the board of directors since 2009. Dr LaMattina was previously president of Pfizer Global Research and
Development and held positions of increasing responsibility during his 30-year career at Pfizer, including vice
president of US Discovery Operations in 1993, senior vice president of Worldwide Discovery Operations in 1998
and senior vice president of Worldwide Development in 1999. Dr LaMattina serves on the board of directors
of Ligand Pharmaceuticals, Zafgen, Inc., Immunome Inc. and Vedanta Biosciences, Inc. and is chairman of the
board of directors of Alivio Therapeutics, Inc. He also serves on the Scientific Advisory Board of Frequency
Therapeutics and is a trustee associate of Boston College.
During Dr LaMattina’s leadership tenure, Pfizer discovered and/or developed a number of important new
medicines including Tarceva, Chantix, Zoloft, Selzentry and Lyrica, along with a number of other medicines
currently in late stage development for cancer, rheumatoid arthritis and pain. He is the author of numerous
scientific publications and US patents. In addition, Dr LaMattina is the author of Devalued and Distrusted: Can
the Pharmaceutical Industry Restore Its Broken Image, Drug Truths: Dispelling the Myths About Pharma R&D,
and an author of the Drug Truths blog at Forbes.com. Dr LaMattina was awarded an Honorary Doctor of Science
degree from the University of New Hampshire in 2007 and in 2010 was the recipient of the American Chemical
Society’s Earle B. Barnes Award for Leadership in Chemical Research Management. Dr LaMattina received a BS
in chemistry from Boston College in 1971 and received a PhD in organic chemistry from the University of New
Hampshire in 1975. He then moved on to Princeton University as a National Institutes of Health Postdoctoral
Fellow in the laboratory of Professor E. C. Taylor.
* Biographies for executive directors, Daphne Zohar and Stephen Muniz, can be found on page 59.
PureTech Health plc Annual report and accounts 2019 55
Governance Board of Directors — continued
Robert Langer, ScD
Co-Founder and Non-Executive Director, R&D Committee Member
Robert S. Langer, ScD, is a co-founder, member of PureTech’s R&D Committee and has served as a member of
the board of directors since the Company’s founding. He has served as the David H. Koch Institute Professor at
MIT since 2005. He is one of 12 institute professors, which is the highest honour that can be awarded to a faculty
member at MIT. He served as a member of the FDA’s Science Board, the FDA’s highest advisory board, from
1995 to 2002 and as its chairman from 1999 to 2002. Dr Langer serves on the board of directors of Frequency
Therapeutics, Inc., Abpro Korea, Alivio Therapeutics, Inc., Entrega, Inc. and Moderna, Inc. Dr Langer has written
more than 1,500 articles. He also has over 1,350 issued and pending patents worldwide. Dr Langer’s patents
have been licensed or sublicensed to over 400 pharmaceutical, chemical, biotechnology and medical device
companies. He is the most cited engineer in history (h-index 272 with over 300,000 citations according to
Google Scholar).
Dr Langer has received over 220 major awards. He is one of four living individuals to have received both the
2006 United States National Medal of Science, the Charles Stark Draper Prize in 2002, considered the equivalent
of the Nobel Prize for engineers, and the 2012 Priestley Medal, the highest award of the American Chemical
Society. He is also the only engineer to ever receive the Gairdner Foundation International Award. Dr Langer has
received the Dickson Prize for Science, Heinz Award, the Harvey Prize, the John Fritz Award (given previously
to inventors such as Thomas Edison and Orville Wright), the General Motors Kettering Prize for Cancer
Research, the Dan David Prize in Materials Science, the Albany Medical Center Prize in Medicine and Biomedical
Research, the largest prize in the US for medical research, and the Lemelson-MIT prize, the world’s largest prize
for invention, for being “one of history’s most prolific inventors in medicine.” In 2006, he was inducted into
the National Inventors Hall of Fame. In 2015, Dr Langer received the Queen Elizabeth Prize for Engineering.
He received his bachelor’s degree from Cornell University in 1970 and his ScD from the Massachusetts Institute
of Technology in 1974, both in chemical engineering.
Dame Marjorie Scardino
Senior Independent Director
Dame Marjorie Scardino is the senior independent director of PureTech’s Board of Directors and has served
as a member of the board since 2015. She served as chief executive of The Economist for 12 years and then
from 1997 through 2012 was the chief executive of Pearson plc, the world’s leading education company and
the owner of Penguin Books and The Financial Times Group. Prior to that, she was a lawyer and she and
her husband founded a weekly newspaper in Georgia which won a Pulitzer Prize. She served as chairman of
The MacArthur Foundation from 2012 to 2017, and later became the chairman of the London School of Hygiene
and Tropical Medicine.
Until the end of 2018, she was on the board of Twitter, where she was the senior independent director. She was
a member of the board of International Airlines Group (IAG) (the holding company of British Airways, Iberia and
other airlines) until the end of 2019. Non-profit boards she sits on are The Carter Center and The Royal College
of Arts. Dame Marjorie has received a number of honorary degrees, and in 2003 was dubbed a Dame of the
British Empire. She is also a member of the Royal Society of the Arts in the UK and the American Association
of Arts and Sciences.
Dr Bennett Shapiro†
Non-Executive Director
Ben Shapiro, MD, is a co-founder, member of PureTech’s R&D Committee and has served as member of the
board of directors since the Company’s founding. Executive Vice President at Merck Research Laboratories
of Merck & Co. Dr Shapiro initially led Worldwide Basic Research and was responsible for all the basic and
preclinical research activities at Merck. He later led Worldwide Licensing and External Research and was
responsible for Merck’s relationships with the academic and industrial biomedical research community. His
leadership resulted in the discovery, development and registration of approximately 25 drugs and vaccines.
Previously, he was professor and chairman of the Department of Biochemistry at the University of Washington
and is the author of over 120 papers on the molecular regulation of cellular behaviour. Following an internship
in Medicine at the University of Pennsylvania Hospital, he was a Research Associate at the NIH, then a Visiting
Scientist at the Institut Pasteur in Paris and returned to the NIH as Chief-Section on Cellular Differentiation in the
Laboratory of Biochemistry prior to joining the University of Washington. Dr Shapiro has been a Guggenheim
Fellow, a Fellow of the Japan Society for the Promotion of Science and a Visiting Professor at the University of
Nice. He currently serves as a member of the board of directors of Vedanta Biosciences and VBL Therapeutics.
Dr Shapiro previously served as a director of Celera Corporation. He also is a director of the Drugs for
Neglected Diseases initiative and the Mind and Life Institute. Dr Shapiro received a BS in Chemistry from
Dickinson College and his MD from Jefferson Medical College.
56 PureTech Health plc Annual report and accounts 2019
† Dr. Shapiro will not stand for re-election at the 2020 AGM.
Governance Board of Directors — continued
Christopher Viehbacher
Chairman
Chris Viehbacher has served as a member of PureTech’s board of directors since 2015 and as chairman
since September 2019. He is the managing partner of Gurnet Point Capital, a Boston based investment
fund associated with the Bertarelli family and has a $2 billion capital allocation. He is the former CEO and
member of the board of directors of Sanofi and was also the chairman of the board of Genzyme in Boston.
Prior to joining Sanofi, Mr Viehbacher spent over 20 years with GlaxoSmithKline in Germany, Canada, France
and, latterly, the US as president of its North American pharmaceutical division. He began his career with
PricewaterhouseCoopers LLP and qualified as a chartered accountant. Mr Viehbacher currently serves on the
boards of Vedanta Biosciences, Inc. as chairman, Alladapt, BEFORE Brands, Corium, Crossover Health, Boston
Pharmaceuticals, Zikani, York River Holdings and Gurnet Point Capital LLC. He is also a trustee of Northeastern
University and a member of the board of fellows at Stanford Medical School.
Mr Viehbacher has been a strong advocate for the healthcare industry. Past advocacy roles include: former
co-chair with Bill Gates of the CEO Roundtable on Neglected Diseases; chairman of the CEO Roundtable on
Cancer; chairman of the board of the Pharmaceutical Research and Manufacturers of America in Washington;
and president of the European Federation of Pharmaceutical Industries and Associations in Brussels.
Mr Viehbacher has served on various advisory groups at MIT, Duke University and Queen’s University
at Kingston, Ontario. At the World Economic Forum at Davos, Mr Viehbacher was a chair of the Health
Governors and co-chaired an initiative to create a Global Charter for Healthy Living. He was also a member
of the International Business Council. He has received the Pasteur Foundation Award for outstanding
commitment to safeguarding and improving health worldwide and received France’s highest civilian honour,
the Legion d’Honneur. Mr Viehbacher received his bachelor’s degree in commerce from Queen’s University
in Ontario, Canada.
Robert Horvitz, PhD**
Board Advisor, R&D Committee Chair
H Robert Horvitz, PhD, is a board advisor and chair of the R&D Committee at PureTech. He received the
Nobel Prize in Physiology or Medicine and is the David H Koch Professor of Biology at Massachusetts Institute
of Technology, an investigator of the Howard Hughes Medical Institute, neurobiologist (Neurology) at
Massachusetts General Hospital, a member of the MIT McGovern Institute for Brain Research and the MIT Koch
Institute for Integrative Cancer Research. He is cofounder of multiple life science companies, including Epizyme
(EPZM), Mitobridge (acquired by Astellas) and Idun Pharmaceuticals (acquired by Pfizer) and was a member of
the board of scientific advisors of the Novartis Institute for Biomedical Research.
Dr Horvitz is a member of the board of trustees of the Massachusetts General Hospital. He previously served
as chairman of the board of trustees of the Society for Science and the Public and as president of the Genetics
Society of America. Dr Horvitz is a member of the US National Academy of Sciences, the US National Academy
of Medicine and the American Philosophical Society and is a foreign member of the Royal Society of London.
He is a fellow of the American Academy of Arts and Sciences and of the American Academy of Microbiology.
Dr Horvitz received the US National Academies of Science Award in Molecular Biology; the Charles A. Dana
Award for Pioneering Achievements in Health; the Ciba-Drew Award for Biomedical Science; the General
Motors Cancer Research Foundation Alfred P. Sloan, Jr. Prize; the Gairdner Foundation International Award;
the March of Dimes Prize in Developmental Biology; the Genetics Society of America Medal; the Bristol-Myers
Squibb Award for Distinguished Achievement in Neuroscience; the Wiley Prize in the Biomedical Sciences; the
Peter Gruber Foundation Genetics Prize; the American Cancer Society Medal of Honor; the Alfred G. Knudson
Award of the National Cancer Institute; and the UK Genetics Society Mendel Medal. He has received honorary
doctoral degrees from the University of Rome, Cambridge University, Pennsylvania State University and the
University of Miami.
Dennis Ausiello, MD**
Board Advisor, R&D Committee Member
Dennis Ausiello, MD, is a board advisor and member of the PureTech R&D Committee. He is the Jackson
Distinguished Professor of Clinical Medicine and was previously director, emeritus of the MD/PhD Program
at Harvard Medical School. Dr Ausiello is chairman of medicine, emeritus and director of the Center for
Assessment Technology and Continuous Health (CATCH) at Massachusetts General Hospital (MGH). This centre
is a partnership among MGH, MIT and Harvard University whose mission is to develop real-time assessment
of human traits in wellness and disease. In partnership with industry, it is creating tools for measurements
of traditional and novel phenotypes. Understanding the need for partnerships between the academy and
industry, Dr Ausiello served on the board of directors of Pfizer Pharmaceuticals, where he was their former lead
director. He currently serves as a member of the board of directors of Seres Health and Alnylam. Dr Ausiello is
also a member of the board of directors of several non-public biotech companies and is a consultant to Verily
(formerly Google Life Sciences). Dr Ausiello is a nationally recognised leader in academic medicine who was
elected to the National Academy of Medicine in 1999 and the American Academy of Arts and Sciences in 2003.
He has published numerous articles, book chapters and textbooks and served as an editor of Cecil’s Textbook
of Medicine. Dr Ausiello received his BA from Harvard College and an MD from the University of Pennsylvania.
**
Dr Horvitz and Dr Ausiello are not members of the PureTech Board of Directors but rather are advisors to the Board and
members of the R&D Committee. They attend select board of director meetings as observers.
PureTech Health plc Annual report and accounts 2019 57
Governance Management team
(alphabetically)
Joseph Bolen, PhD
Chief Scientific Officer
Joseph Bolen, PhD, is chief scientific officer at PureTech, where he works with the Company’s discovery and
preclinical team to identify and pursue promising new technologies. Dr Bolen has more than 30 years of industry
and research experience and has been at the forefront of cancer and immunology research. Dr Bolen most
recently oversaw all aspects of research and development for Moderna Therapeutics as president and chief
scientific officer. Previously, he was chief scientific officer and global head of oncology research at Millennium:
The Takeda Oncology Company. Prior to joining Millennium in 1999, Dr Bolen held senior R&D positions at
Hoechst Marion Roussel, Schering-Plough and Bristol-Myers Squibb. He began his career at the National
Institutes of Health (NIH), where he contributed to the discovery of a class of proteins known as tyrosine kinase
oncogenes as key regulators of the immune system. Dr Bolen graduated from the University of Nebraska with
a BS degree in microbiology and chemistry and a PhD in immunology and conducted his postdoctoral training
in molecular virology at the Kansas State University Cancer Center.
Bharatt Chowrira, PhD, JD
President and Chief of Business and Strategy
Bharatt Chowrira, PhD, JD, has been the president and chief of business and strategy at PureTech since March
2017. Prior to joining PureTech, Dr Chowrira was the president of Synlogic, Inc., a biopharmaceutical company
focused on developing synthetic microbiome-based therapeutics, from September 2015 to February 2017,
where he oversaw and managed corporate and business development, alliance management, financial,
human resources, intellectual property and legal operations. Prior to joining Synlogic, Dr Chowrira was
the chief operating officer of Auspex Pharmaceuticals Inc., from 2013 to 2015, which was acquired by Teva
Pharmaceuticals in the Spring of 2015. Previously, he was president and chief executive officer of Addex
Therapeutics Ltd., a biotechnology company publicly traded on the SIX Swiss Exchange, from 2011 to 2013.
Prior to that, Dr Chowrira held various leadership and management positions at Nektar Therapeutics (chief
operating officer), Merck & Co, or Merck (vice president), Sirna Therapeutics (general counsel; acquired by
Merck) and Ribozyme Pharmaceuticals (chief patent counsel). Dr Chowrira is a member of the board of directors
of Vedanta Biosciences, Inc., and Vor Biopharma, Inc. Dr Chowrira received a JD from the University of Denver’s
Sturm College of Law, a PhD in molecular biology from the University of Vermont College of Medicine, an MS in
molecular biology from Illinois State University and a BS in microbiology from the UAS, Bangalore, India.
Eric Elenko, PhD
Chief Innovation Officer
Eric Elenko, PhD, is the chief innovation officer at PureTech where he has led the development of a number of
programmes, including Akili Interactive Labs, Inc., Gelesis, Inc., Karuna Therapeutics, Inc. and Sonde Health,
Inc. Prior to joining PureTech, Dr Elenko was a consultant with McKinsey and Company where he advised
senior executives of both Fortune 500 and specialty pharmaceutical companies on a range of issues such as
product licensing, mergers and acquisitions, research and development strategy and marketing. Dr Elenko
received his BA in biology from Swarthmore College and his PhD in biomedical sciences from the University
of California, San Diego.
58 PureTech Health plc Annual report and accounts 2019
Governance Management team — continued
Joep Muijrers, PhD
Chief Financial Officer
Joep Muijrers, PhD, is the chief financial officer at PureTech, and – effective in May 2020 – he will be the chief
of portfolio strategy. Dr Muijrers has two decades of experience in corporate and capital finance, specifically
focused on investment, M&A, portfolio management, strategic asset allocation, financial and regulatory
reporting and fundraising. Prior to joining PureTech, he was a portfolio manager and partner at LSP (Life
Sciences Partners), a specialist investor group with sole focus on investing in healthcare and life sciences, in
the Netherlands and in Boston. At LSP, Dr Muijrers was responsible for investing in publicly traded companies,
a strategy that generated a total return in excess of 900 per cent, more than twice the return of the Nasdaq
Biotechnology Index during the same period (Q2 2008 – Q1 2018). Notable investments included companies
that were acquired by large pharma (Ablynx, CoLucid, InterMune, Kite Pharma, NeuroDerm) and/or became
leaders in their respective areas of activity (Evotec, Genmab, GW Pharmaceuticals, MorphoSys, Neurocrine).
Prior to joining LSP, he held the position of director corporate finance and capital markets at Fortis Bank,
currently part of ABN AMRO. Dr Muijrers is currently a member of the board of directors of Alivio Therapeutics,
Inc., Entrega, Inc., Follica, Incorporated and Sonde Health, Inc. Dr Muijrers holds a PhD degree in molecular
biology from the European Molecular Biology Laboratory (EMBL) in Heidelberg, Germany and an MS in
biochemistry from the University of Nijmegen, the Netherlands.
Stephen Muniz, Esq.
Chief Operating Officer, Member of the Board of Directors
Stephen Muniz, Esq., is the chief operating officer at PureTech and has served as a member of PureTech’s
board of directors since 2015. Prior to joining PureTech, Mr Muniz was a partner in the corporate department
of Locke Lord LLP, where he practiced law for 10 years. Mr Muniz’s practice at Locke Lord LLP focused on the
representation of life science venture funds as well as their portfolio companies in general corporate matters
and in investment and liquidity transactions.
Prior to joining Locke Lord LLP, Mr Muniz was a law clerk to The Honorable Raya Dreben at the Massachusetts
Appeals Court. He was also a Kauffman Entrepreneur Fellow, a programme sponsored by the Kauffman
Foundation. Mr Muniz also sits on the board of directors of Entrega, Inc., Follica, Incorporated, and Alivio
Therapeutics, Inc. He previously served on the board of directors of Karuna Therapeutics, Inc. and Gelesis, Inc.
Mr Muniz has a BA in economics and accounting from The College of the Holy Cross and a JD from the New
England School of Law (NESL) where he graduated summa cum laude. Mr Muniz was valedictorian of the 1997
NESL Commencement and has been awarded the Amos L. Taylor Award for Excellence in Scholarship, the New
England Scholar Award and the NESL Trustee Scholar Award.
Ms Daphne Zohar
Founder and Chief Executive Officer, Member of the Board of Directors
Daphne Zohar is the founder and chief executive officer of PureTech and a member of the board of directors.
She has also served as the founding chief executive officer of a number of PureTech’s Founded Entities. A
successful entrepreneur, Ms Zohar created PureTech, assembling a leading team to help implement her
vision for the Company, and was a key participant in fundraising, business development and establishing the
underlying programmes and platforms that have resulted in PureTech’s substantial pipeline, which is comprised
of 23 product candidates and one product that has been cleared by the US Food and Drug Administration.
Ms Zohar has been recognised as a top leader and innovator in biotechnology by a number of sources, including
EY, BioWorld, MIT Technology Review, The Boston Globe and Scientific American. She is an editorial advisor to
Xconomy, a US news company.
PureTech Health plc Annual report and accounts 2019 59
Governance The Board
Roles and responsibilities
of the Board
The Board is responsible to
shareholders for the overall
management of the Group as a whole.
The main roles of the Board are:
• creating value for shareholders;
• providing business and scientific
leadership to the Group;
• approving the Group’s
strategic objectives;
• ensuring that the necessary financial
and human resources are in place to
meet strategic objectives;
• overseeing the Group’s system of
risk management; and
• setting the values and standards for
both the Group’s business conduct
and governance matters.
The Directors are also responsible
for ensuring that obligations to
shareholders and other stakeholders
are understood and met and that
communication with shareholders
is maintained. The responsibility of
the Directors is collective, taking
into account their respective roles
as Executive Directors and Non-
Executive Directors. All Directors are
equally accountable to the Company’s
shareholders for the proper stewardship
of its affairs and the long-term
success of the Group.
The Board reviews strategic issues on
a regular basis and exercises control
over the performance of the Group by
agreeing on budgetary and operational
targets and monitoring performance
against those targets. The Board has
overall responsibility for the Group’s
system of internal controls and risk
management. Any decisions made by
the Board on policies and strategy to
be adopted by the Group or changes
to current policies and strategy are
made following presentations by
the Executive Directors and other
members of management, and only
after a detailed process of review
and challenge by the Board. Once
made, the Executive Directors and
other members of management
are fully empowered to implement
those decisions.
Except for a formal schedule of matters
which are reserved for decision and
approval by the Board, the Board has
delegated the day-to-day management
of the Group to the Chief Executive
Officer who is supported by other
members of the senior management
team. The schedule of matters reserved
for Board decision and approval are
those significant to the Group as
a whole due to their strategic, financial
or reputational implications.
The Company’s schedule of matters
reserved for the Board includes the
following matters:
• approval and monitoring of
the Group’s strategic aims
and objectives;
• approval of the annual operating and
capital expenditure budget;
• changes to the Group’s capital
structure, the issue of any securities
and material borrowing of the Group;
• approval of the annual report
and half-year results statement,
accounting policies and practices
or any matter having a material
impact on future financial
performance of the Group;
• ensuring a sound system of internal
control and risk management;
• approving Board appointments and
removals, and approving policies
relating to directors’ remuneration;
• strategic acquisitions by the Group;
• major disposals of the Group’s assets
or subsidiaries;
• approval of all circulars,
prospectuses and other documents
issued to shareholders governed by
the Financial Conduct Authority’s
(FCA) Listing Rules, Disclosure
Guidance and Transparency
Rules or the City Code on
Takeovers and Mergers;
• approval of terms of reference and
membership of Board committees;
• considering and, where appropriate,
approving directors’ conflicts
of interest; and
• approval, subject to shareholder
approval, of the appointment and
remuneration of the auditors.
The schedule of matters reserved to
the Board is available on request from
the Company Secretary or within the
Investors section of the Group’s website
at www.puretechhealth.com.
The Board delegates specific
responsibilities to certain committees
that assist the Board in carrying out
its functions and ensure independent
oversight of internal control and risk
management. The three principal Board
committees (Audit, Remuneration
and Nomination) play an essential role
in supporting the Board in fulfilling
its responsibilities and ensuring that
the highest standards of corporate
governance are maintained throughout
the Group. Each committee has its own
terms of reference which set out the
specific matters for which delegated
authority has been given by the Board.
The terms of reference for each of the
committees are fully compliant with the
provisions of the Governance Code. All
of these are available on request from
the Company Secretary or within the
Investors section of the Group’s website
at www.puretechhealth.com.
Board size and composition
As at 31 December 2019 and up to the
date of approval of this Annual Report,
there were eight Directors on the
Board: the Non-Executive Chairman,
two Executive Directors and five Non-
Executive Directors. The biographies
of these Directors are provided on
pages 55 to 59. The Company’s former
Non-Executive Chairman, Joichi Ito,
resigned from the Board in September
2019 and the Company’s Non-Executive
Director Christopher Viehbacher was
appointment Non-Executive Chairman
following his resignation. There were
no other changes to the composition
of the Board during 2019. Joichi Ito
was not involved in the selection or
appointment of Christopher Viehbacher
as Non-Executive Chairman.
The Company’s policy relating to
the terms of appointment and the
remuneration of both Executive and
Non-Executive Directors is detailed in
the Directors’ Remuneration Report on
pages 76 to 88.
The size and composition of the Board
is regularly reviewed by the Nomination
Committee to ensure there is an
appropriate and diverse mix of skills
and experience on the Board.
60 PureTech Health plc Annual report and accounts 2019
Governance The Board — continued
The Board may appoint any person
to serve as a Director, either to fill
a vacancy or as an addition to the
existing Board. Any Director so
appointed by the Board shall hold office
only until the following AGM and then
shall be eligible for election by the
shareholders. In accordance with the
Governance Code, all of the Directors
will be offering themselves for election
at the AGM to be held on 11 June 2020,
full details of which are set out in the
notice of meeting accompanying this
Annual Report.
Non-Executive Directors
The Company’s Non-Executive
Directors are Mr Christopher
Viehbacher (Chairman), Dr Raju
Kucherlapati, Dr John LaMattina,
Dr Robert Langer, Dame Marjorie
Scardino and Dr Bennett Shapiro.
Dr Shapiro will not stand for re-
election at the 2020 AGM but will
continue to serve as a member of the
Company’s R&D Committee following
the 2020 AGM.
The Non-Executive Directors provide
a wide range of skills and experience
to the Group. Each Non-Executive
Director has significant senior level
experience as well as an extensive
network in each of their own fields, an
innovative mindset and independent
judgement on issues of strategy,
performance and risk, and is well
placed to constructively challenge
and scrutinise the performance of
management. In addition, most of our
Non-Executive Directors also serve
as members of one or more boards
of directors of the Group’s Founded
Entities and are key drivers for the
Group’s Wholly Owned Pipeline.
Senior Independent Director
The Company’s Senior Independent
Director is Dame Marjorie Scardino.
A key responsibility of the Senior
Independent Director is to be available
to shareholders in the event that they
may feel it inappropriate to relay
views through the Chairman or Chief
Executive Officer. In addition, the
Senior Independent Director serves
as an intermediary between the
rest of the Board and the Chairman
where necessary. Further, the Senior
Independent Director will lead the
Board in its deliberations on any matters
on which the Chairman is conflicted.
The roles of Chairman and
Chief Executive Officer
The Company’s Chairman is
Mr Christopher Viehbacher. There
is a clear division of responsibilities
between the Chairman and the Chief
Executive Officer. Mr Viehbacher was
appointed Chairman in September
2019 following the resignation of
the Company’s former chairman,
Mr Joichi Ito.
The Chairman is responsible for
the leadership and conduct of the
Board and for ensuring effective
communication with shareholders.
The Chairman facilitates the full
and effective contribution of Non-
Executive Directors at Board and
Committee meetings, ensures that they
are kept well informed and ensures
a constructive relationship between the
Executive Directors and Non-Executive
Directors. The Chairman also ensures
that the Board committees carry out
their duties, including reporting back
to the Board either orally or in writing
following their meetings at the next
Board meeting.
The role of the Chief Executive Officer,
Ms Daphne Zohar, is to lead the
execution of the Company’s strategy
and the executive management of the
Group. She is responsible, amongst
other things, for the development
and implementation of strategy and
processes which enable the Group to
meet the requirements of shareholders,
for delivering the operating plans and
budgets for the Group’s businesses,
for monitoring business performance
against key performance indicators
(KPIs) and reporting on these to the
Board and for providing the appropriate
environment to recruit, engage, retain
and develop the high-quality personnel
needed to deliver the Group’s strategy.
Independence
The Governance Code requires that
at least 50 per cent of the Board
of a UK premium listed company,
excluding the Chairman, consists of
Non-Executive Directors determined
by the Board to be independent in
character and judgement and free from
relationships or circumstances which
may affect, or could appear to affect,
the Directors’ judgement. The Board
regards Dr Kucherlapati, Dr LaMattina
and Dame Marjorie Scardino as
Independent Non- Executive Directors
for the purposes of the Governance
Code. In reaching this determination,
the Board duly considered (i) their
directorships and links with other
Directors through their involvement in
other subsidiary companies; (ii) their
equity interests in PureTech and/or the
Founded Entities; and (iii) in respect of
Dr LaMattina, the length of his tenure
as a Director of the Company. The
Board is satisfied that the judgement,
experience and challenging approach
adopted by each of these Directors
should ensure that they each make
a significant contribution to the work
of the Board and its committees.
Therefore, the Board has determined
that Dr Kucherlapati, Dr LaMattina
and Dame Marjorie Scardino are of
independent character and judgement,
notwithstanding the circumstances
described at (i) and (ii) above.
With the resignation of Mr Joichi Ito
and the appointment of Mr Viehbacher
as Chairman, less than 50 per cent of
the Company’s Board, excluding the
Chairman, was determined by the
Board to be independent as required
by the Governance Code. However,
Dr. Shapiro will not stand for re-election
at the 2020 AGM and, accordingly,
following the 2020 AGM, the Board will
satisfy this requirement. In addition,
the Company is currently conducting
a search for one or more Independent
Non-Executive Directors to join the
Board and expects that at least one
such individual will join the Board by
the end of 2020.
The Governance Code also requires
that, on appointment, the Chairman
meets the independence criteria
set out in the Governance Code.
The Board considers Mr Viehbacher
to have been independent in
character and judgement on his
appointment as Chairman.
Board support, indemnity
and insurance
The Company Secretary, Mr Stephen
Muniz, is responsible to the Board
for ensuring Board procedures
are followed, applicable rules and
regulations are complied with and that
the Board is advised on governance
and relevant regulatory matters.
All Directors have access to the
impartial advice and services of the
Company Secretary.
PureTech Health plc Annual report and accounts 2019 61
Governance The Board — continued
There is also an agreed procedure
for Directors to take independent
professional advice at the Company’s
expense. In accordance with the
Company’s Articles of Association
and a contractual Deed of Indemnity,
the Directors have been granted an
indemnity issued by the Company
to the extent permitted by law in
respect of liabilities incurred to third
parties as a result of their office. The
indemnity would not provide any
coverage where a Director is proved to
have acted fraudulently or with wilful
misconduct. The Company has also
arranged appropriate insurance cover
in respect of legal action against its
Directors and officers.
Board meetings and decisions
The Board meets regularly during the
year, as well as on an ad hoc basis as
required by business need. The Board
had six scheduled meetings in 2019, and
details on attendance are set forth in
the table below:
Director
Daphne Zohar
Joichi Ito1
Raju Kucherlapati
John LaMattina
Robert Langer
Marjorie Scardino
Bennett Shapiro
Christopher Viehbacher
Stephen Muniz
Number of
Board Meetings
Attended
6/6
3/3
6/6
5/6
5/6
6/6
6/6
6/6
6/6
The missed meetings were as a result
of unexpected scheduling conflicts.
Where absences were unavoidable,
the impacted Director reviewed with
management the topics and materials
to be discussed at the meeting, and
provided appropriate feedback to be
conveyed at such meeting.
The Board also acted by unanimous
written consent three times in 2019.
At each meeting of the Board, there
was a closed session held in which only
the Chairman and the Non-Executive
Directors participated.
The schedule of Board and Committee
meetings each year is, so far as is
possible, determined before the
commencement of that year and
all Directors or, if applicable, all
Committee members, are expected to
attend each meeting.
Supplementary meetings of the Board
and/or the Committees are held as
and when necessary. Each member of
the Board receives in advance of each
scheduled meeting detailed Board
packages, which include an agenda
based upon matters to be addressed
and appropriate presentation and
background materials. If a Director
is unable to attend a meeting due to
exceptional circumstances, he or she
will nonetheless receive the meeting
materials and discuss the materials with
the Chief Executive Officer.
The Chairman, Chief Executive Officer
and senior management team work
together to ensure that the Directors
receive relevant information to enable
them to discharge their duties and that
such information is accurate, timely
and clear. This information includes
quarterly management accounts
containing analysis of performance
against budget as well as a summary
of the operational performance of
each of the Group’s businesses against
its goals. Additional information is
provided as appropriate for the topics
being addressed at the meeting. At
each meeting, the Board receives
presentations from the Chief Executive
Officer and, by invitation, other
members of senior management as
required. This ensures that all Directors
are in a position to monitor effectively
the overall performance of the Group,
and to contribute to the development
and implementation of its strategy.
The majority of Board meetings are
held at the Group’s offices in Boston,
Massachusetts, US, which gives
members of the Company’s senior
management team, as well as the senior
management of the Founded Entities,
the opportunity to formally present
to the Board on new technology
development and business strategies.
Most Directors also serve on the boards
of directors of the Group’s Founded
Entities. These Founded Entity boards
of directors meet regularly during the
year, as well as on an ad hoc basis as
required by business need. This service
enables the Directors to have deep
understanding of the businesses and
contribute significantly to the strategy
and oversight of these businesses.
Directors’ conflicts of interest
Each Director has a statutory duty
under the Companies Act 2006 (the CA
2006) to avoid a situation in which he or
she has or can have a direct or indirect
interest that conflicts or may potentially
conflict with the interests of the
Company. This duty is in addition to the
continuing duty that a director owes to
the Company to disclose to the Board
any transaction or arrangement under
consideration by the Company in which
he or she is interested. The Company’s
Articles of Association permit the
Board to authorise conflicts or potential
conflicts of interest. The Board has
established procedures for managing
and, where appropriate, authorising
any such conflicts or potential conflicts
of interest. In deciding whether to
authorise any conflict, the Directors
must have regard to their general duties
under the CA 2006 and their overriding
obligation to act in a way they consider,
in good faith, will be most likely to
promote the Company’s success.
In addition, the Directors are able to
impose limits or conditions when giving
authorisation to a conflict or potential
conflict of interest if they think this is
appropriate. The authorisation of any
conflict matter, and the terms of any
authorisation, may be reviewed by the
Board at any time. The Board believes
that the procedures established to
deal with conflicts of interest are
operating effectively.
Induction, awareness
and development
In preparation for the Company’s initial
public offering (IPO), all Directors
received an induction briefing from
the Company’s legal advisors on their
duties and responsibilities as Directors
of a publicly quoted company. The
Directors also received presentations
from the Company’s corporate brokers
prior to the IPO. In addition, in order
to ensure that the Directors continue
to further their understanding of the
challenges facing the Group’s Founded
Entities and Wholly Owned Pipeline,
the Board periodically receives the
presentations and reports covering the
business and operations of each of the
Group’s Founded Entities as well as its
Wholly Owned Pipeline.
1
Joichi Ito resigned from the Board in September 2019.
62 PureTech Health plc Annual report and accounts 2019
Governance The Board — continued
We have put in place a comprehensive
induction plan for any new Directors.
This programme will be tailored
to the needs of each individual
Director and agreed with him or her
so that he or she can gain a better
understanding of the Group and its
businesses. In addition, the Company
facilitates sessions as appropriate
with the Group’s advisers, as well as
appropriate governance specialists,
to ensure that any new Directors are
fully aware of, and understand, their
responsibilities and obligations of
a publicly quoted company and of the
governance framework within which
they must operate.
Board effectiveness and
performance evaluation
The Board periodically reviews its
effectiveness and performance.
The Board seeks the assistance of
an independent third party provider
at least once every three years in its
evaluation in compliance with the
Governance Code, and will otherwise
carry out an internally facilitated
Board evaluation led by the Senior
Independent Director, assisted by
the Company Secretary, covering
the effectiveness of the Board as
a whole, its individual Directors and
its Committees.
In January 2019, the Company engaged
Dr Tracy Long, an independent third-
party advisor, to conduct an evaluation
of effectiveness of the Company’s
Board. The evaluation focused on
the Board’s strengths and challenges
as identified by the Directors in
questionnaires provided to Dr Long.
Dr Long initially held a number of
pre-briefings with the Directors.
A workshop was thereafter led by
Dr Long during which the Directors
exchanged ideas on how the Board
could optimise its contribution to the
success of PureTech and prepare for the
future. It was concluded that the Board
is effectively carrying out its duties.
In consultation with Dr Long, the
Directors also evaluated the following:
• shareholder and stakeholder
relationships and
communication channels;
• clarity of the role and objectives
of the Board, and the quality of its
debate and decision making;
• the leadership of the Chairman,
and encouragement of individual
and collective contribution;
• the roles and relationships
between Executive and Non-
Executive Directors;
• the Board’s composition, its blend
of voices, and succession planning;
• management’s use of formal and
informal Board time; and
• use and reporting of Committees
and the governance framework.
The Board continued to consult
with Dr Long as it implemented the
concepts discussed in the workshop.
A summary of the results of the review,
together with Dr Long’s observations
and recommendations, were prepared
and shared with members of the Board.
In addition to the above, the Non-
Executive Directors, led by the Senior
Independent Director, will periodically
appraise the Chairman’s performance,
following which the Senior Independent
Director will provide feedback to the
Chairman. The performance of each
of the Directors on the Board and the
performance of the committees of the
Board will be reviewed by the Chairman
as deemed necessary. The performance
of Executive Directors will be reviewed
by the Board on an ongoing basis, as
deemed necessary, in the absence of
the Executive Director under review.
Committees of the Board
The Board has three committees: the
Nomination Committee, the Audit
Committee and the Remuneration
Committee. The composition of
the three committees of the Board
and the attendance of the members
throughout the year is set out in
the respective committee reports
contained in this Annual Report. The
terms of reference of each committee
are available on request from the
Company Secretary and within the
Investors section of the Group’s website
at www.puretechhealth.com.
Internal Control
The Board fully recognises the
importance of the guidance contained
in the Guidance on Risk Management,
Internal Control and Related Financial
and Business Reporting. The Group’s
internal controls were in place during
the whole of 2019, were reviewed by
the Audit Committee of the Board of
Directors and were considered to be
effective throughout the year ended
31 December 2019.
The Board is responsible for
establishing and monitoring internal
control systems and for reviewing the
effectiveness of these systems. The
Board views the effective operation of
a rigorous system of internal control
as critical to the success of the Group;
however, it recognises that such
systems are designed to manage
rather than eliminate risk of failure and
can provide only reasonable and not
absolute assurance against material
misstatement or loss. The key elements
of the Group’s internal control system,
all of which have been in place during
the financial year and up to the date
these financial statements were
approved, are as follows:
Control environment and procedures
The Group has a clear organisational
structure with defined responsibilities
and accountabilities. It adopts the
highest values surrounding quality,
integrity and ethics, and these values
are communicated clearly throughout
the whole organisation. Detailed
written policies and procedures
have been established covering key
operating and compliance risk areas.
These policies and procedures are
reviewed and the effectiveness of the
systems of internal control is assessed
periodically by the Board.
Identification and evaluation of risks
The Board actively identifies and
evaluates the risks inherent in the
business, and ensures that appropriate
controls and procedures are in place
to manage these risks. The Board
obtains an update regarding its Wholly
Owned Pipeline and all Founded
Entities on a regular basis, and reviews
the performance of the Group and its
Wholly Owned Pipeline and Founded
Entities on a quarterly basis, although
performance of business units may
be reviewed more frequently if
deemed appropriate.
PureTech Health plc Annual report and accounts 2019 63
Governance The Board — continued
The key risks and uncertainties
faced by the Group, as well as the
relevant mitigations, are set out on
pages 45 to 47.
Information and financial
reporting systems
The Group evaluates and manages
significant risks associated with the
process for preparing consolidated
accounts by having in place systems
and controls that ensure adequate
accounting records are maintained and
transactions are recorded accurately
and fairly to permit the preparation
of financial statements in accordance
with IFRS. The Board approves the
annual operating budgets and regularly
receives details of actual performance
measured against the budget.
Principal risks and uncertainties
The operations of the Group and the
implementation of its objectives and
strategy are subject to a number of
key risks and uncertainties. Risks are
formally reviewed by the Board at least
annually and appropriate procedures
are put in place to monitor and, to the
extent possible, mitigate these risks.
A summary of the key risks affecting the
Group and the steps taken to manage
these risks is set out on pages 45 to 47.
Relations with stakeholders
The Company is committed
to a continuous dialogue with
shareholders as it believes that
this is essential to ensure a greater
understanding of and confidence
amongst its shareholders in the medium
and longer term strategy of the Group
and in the Board’s ability to oversee its
implementation. It is the responsibility
of the Board as a whole to ensure that
a satisfactory dialogue takes place.
Section 172 of the CA 2006 requires
Directors to take into consideration
the interests of stakeholders in
their decision making. The Board is
committed to understanding and
engaging with all key stakeholder
groups of the Company in order to
maximise value and promote long-
term Company success in line with
our strategic objectives. The Board
recognises its duties under Section 172
and continuously has regard to how
the Company’s activities and decisions
will impact employees, those with
which it has a business relationship,
the community and environment and
its reputation for high standards of
business conduct. In weighing all of the
relevant factors, the Board, acting in
good faith and fairly between members,
makes decisions and takes actions that
it considers will best lead to the long-
term success of the Company.
During the year, the Board assessed
its current activities between the
Board and its stakeholders, which
demonstrated that the Board actively
engages with its stakeholders and
takes their various objectives into
consideration when making decisions.
Specifically, actions the Board has
taken to engage with its stakeholders
in 2019 include:
• Attended the 2019 AGM to answer
questions and receive additional
feedback from investors;
• Arranged meetings with certain
stakeholders to provide them with
updates on the Company’s research
and development activities and
other general corporate updates;
• Evaluated the relationships with the
Company’s various collaborators
through management and identified
ways to strengthen relationships
and arrangements with key
collaborations; and
• Monitored company culture and
engaged with employees on efforts
to continuously improve company
culture and morale.
The Board believes that appropriate
steps and considerations have been
taken during the year so that each
Director has an understanding of
the various key stakeholders of the
Company. The Board recognises its
responsibility to contemplate all such
stakeholder needs and concerns
as part of its discussions, decision-
making, and in the course of taking
actions and will continue to make
stakeholder engagement a top priority
in the coming years.
The Board’s primary shareholder
contact is through the Chief Executive
Officer. The Chairman, the Senior
Independent Director and other
Directors, as appropriate, make
themselves available for contact
with major shareholders and other
stakeholders in order to understand
their issues and concerns.
The Company plans to use the AGM
as an opportunity to communicate
with its shareholders. Notice of the
AGM, which will be held at 11.00 am
EDT (4.00 pm BST) on 11 June 2020
at the Company’s headquarters at 6
Tide Street in Boston, Massachusetts,
is enclosed with this report. Details of
the resolutions and the explanatory
notes thereto are included with the
Notice. To ensure compliance with the
Governance Code, the Board proposes
separate resolutions for each issue
and proxy forms allow shareholders
who are unable to attend the AGM to
vote for or against or to withhold their
vote on each resolution. In addition, to
encourage shareholders to participate
in the AGM process, the Company
proposes to offer electronic proxy
voting through the Registrar’s website
and through the CREST service. The
results of all proxy voting will be
published on the Group’s website after
the AGM. Shareholders who attend
the AGM will have the opportunity
to ask questions.
The Group’s website at
www.puretechhealth.com is the primary
source of information on the Group.
The website includes an overview of
the activities of the Group, details of
its businesses, and details of all recent
Group announcements.
Political expenditure
It is the Board’s policy not to incur
political expenditure or otherwise
make cash contributions to political
parties and it has no intention of
changing that policy.
64 PureTech Health plc Annual report and accounts 2019
Governance Corporate and Social Responsibility
Policy statement
Greenhouse Gas Emissions
Absolute Emissions
The total Scope 1, 2 and 3 GHG
emissions from the Group’s
operations in the year ending
31 December 2019 were:
• 760.6 tonnes of CO2 equivalent
(tCO2e) using a ‘location-based’
emission factor methodology for
Scope 2 emissions; and
• 760.6 tonnes of CO2 equivalent
(tCO2e) using a ‘market-based’
emission factor methodology for
Scope 2 emissions.
This is the fourth year of reporting for
the Group so we show a comparison
between FY2019, FY2018, FY2017 and
FY2016. The Group’s total employee
number has decreased considerably
between years as previously
consolidated Founded Entities have
been deconsolidated from the Group.
Overall, there has been a decrease
in total emissions. This is mainly due
to a reduction in number of business
entities being reported. There have
been decreases across all three
scopes. Scope 3 emissions have had
the most significant decrease due to
less employees, less business travel
and commuting.
PureTech aims to conduct its business
in a socially responsible manner, to
contribute to the communities in
which it operates and to respect the
needs of its employees and all of
its stakeholders.
The Group is committed to growing
the business while ensuring a safe
environment for employees as well
as minimising the overall impact on
the environment.
PureTech endeavours to conduct its
business in accordance with established
best practice, to be a responsible
employer and to adopt values and
standards designed to help guide
staff in their conduct and business
relationships.
Our business ethics and
social responsibility
PureTech seeks to conduct all of its
operating and business activities in an
honest, ethical and socially responsible
manner. The Group is committed to
acting professionally, fairly and with
integrity in all its business dealings
and relationships wherever it operates,
and ensuring its Directors and staff
have due regard to the interest of
all of its stakeholders including its
shareholders, its employees, its
partners, the government and the wider
patient community.
The Group takes a zero tolerance
approach to bribery and corruption
and implements and enforces effective
systems to counter bribery. The
Group is bound by the laws of the UK,
including the Bribery Act 2010, and has
implemented policies and procedures
based on such laws.
The Group’s management and
employees are fundamental to its
success, and as a result the Group
is committed to encouraging their
ongoing development with the aim
of maximising the Group’s overall
performance. Emphasis is placed on
staff development through work-based
learning, with senior members of staff
acting as coaches and mentors.
The section below includes our
mandatory reporting of greenhouse
gas emissions. The reporting period is
the same as the Group’s financial year,
1 January 2019 to 31 December 2019.
Organisation Boundary and Scope
of Emissions
We have reported on all of the emission
sources required under the Companies
Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013.
These sources fall within the Group’s
consolidated financial statement.
An operational control approach
has been used in order to define our
organisational boundary. This is the
basis for determining the Scope 1, 2
and 3 emissions for which the Group
is responsible.
Methodology
For the Group’s reporting, the
Group has employed the services
of a specialist adviser, Verco, to
quantify and verify the Greenhouse
Gas (GHG) emissions associated with
the Group’s operations.
The following methodology was
applied by Verco in the preparation
and presentation of this data:
• the Greenhouse Gas Protocol
published by the World
Business Council for Sustainable
Development and the World
Resources Institute (the “WBCSD/
WRI GHG Protocol”);
• application of appropriate emission
factors to the Group’s activities to
calculate GHG emissions;
• scope 2 reporting methods –
application of location-based and
market-based emission factors for
electricity supplies;
•
inclusion of all the applicable Kyoto
gases, expressed in carbon dioxide
equivalents, or CO2e; and
• presentation of gross emissions as
the Group does not purchase carbon
credits (or equivalents).
PureTech Health plc Annual report and accounts 2019 65
Governance Corporate and Social Responsibility — continued
Intensity Ratio
As well as reporting the absolute
emissions, the Group’s GHG emissions
are reported below on the metrics of
tonnes of CO2 equivalent per employee
and tonnes of CO2 equivalent per
square metre of the occupied areas.
These are the most appropriate metrics
given that the majority of emissions
result from the operation of the Group’s
offices and the day-to-day activities of
the employees.
For 2019, the intensity metrics have
decreased from 0.09 tCO2e per m2 to
0.01 tCO2e per m2 for both the location-
based method and the market-based
method. The total floor area has
increased for 2019 due to a move to
larger premises and also includes
a laboratory. The employee number
metrics have increased from 0.78 tCO2e
per FTE to 0.87 tCO2e per FTE using
the location-based method and the
market-based method.
Target and Baselines
Given the comparatively low GHG
impact of the Group’s operations,
the Group’s objective is to maintain
or reduce its GHG emissions per
employee and per square meter
of office space each year and will
report each year whether it has been
successful in this regard.
Key figures
Breakdown of emissions by scope
Tonnes of CO2e
2019 (market-based)
3%
11%
2019 (location-based)
3%
11%
86%
86%
Scope 1
Scope 2
Scope 3
GHG emissions
2019
Scope 11
Scope 22
Scope 23
Subtotal (location-based)
Subtotal (market-based)
Scope 34
Scope 35
Total GHG emissions
(Location-based Scope 2)
Total GHG emissions
(Market-based Scope 2)
Tonnes
CO2e
24.3
79.6
79.6
103.9
103.9
656.7
656.7
760.6
760.6
Tonnes
CO2e
per m2
0.003
0.01
0.01
0.01
0.01
—
—
—
—
Tonnes
CO2e
per FTE
0.20
0.67
0.67
0.87
0.87
—
—
—
—
Tonnes
CO2e
33.3
145.5
145.6
178.8
178.8
1,199.9
1,199.9
1,378.7
1,378.7
2018
Tonnes
CO2e
per m2
Tonnes
CO2e
per FTE
0.02
0.07
0.07
0.09
0.09
—
—
—
—
0.15
0.64
0.64
0.78
0.78
—
—
—
—
Scope 1 being emissions from the Group’s combustion of fuel and operation of facilities.
Scope 2 being electricity (from location-based calculations), heat, steam and cooling purchased for the Group’s own use.
Scope 2 being electricity (from market-based calculations), heat, steam and cooling purchased for the Group’s own use.
Scope 3 being all indirect emissions (not in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions (location-based)
Scope 3 being all indirect emissions (not in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions (market-based)
1
2
3
4
5
2019 – 119 employees and 8,051 m2 office space; 2018 – 229 employees and 1,983 m2 office space
66 PureTech Health plc Annual report and accounts 2019
Scope 11
Scope 22
Scope 23
Scope 34
Scope 35
Subtotal (location-based)
Subtotal (market-based)
Total GHG emissions
(Location-based Scope 2)
Total GHG emissions
(Market-based Scope 2)
Tonnes
CO2e
25.1
120.1
120.2
145.2
145.3
791.9
791.9
937.0
937.2
2017
Tonnes
CO2e
per m2
0.01
0.06
0.06
0.07
0.07
—
—
—
—
Tonnes
CO2e
per FTE
0.76
0.82
0.82
1.58
1.58
—
—
—
—
Tonnes
CO2e
24.4
75.8
92.1
100.2
116.5
505.7
509.2
605.9
625.7
2016
Tonnes
CO2e
per m2
Tonnes
CO2e
per FTE
0.01
0.04
0.04
0.05
0.06
—
—
—
—
0.29
0.90
1.10
1.19
1.39
—
—
—
—
Governance
Corporate and Social Responsibility — continued
Understanding the Indirect
Environmental Impacts of our
Business Activities
The Group’s day-to-day operational
activities have a limited impact on
the environment. We do, however,
recognise that the more significant
impact occurs indirectly, through
the business decisions we make and
the operation of the companies we
choose to collaborate with. The Group
therefore considers it important
to establish and collaborate with
businesses that comply with existing
applicable environmental, ethical and
social legislation. It is also important
that these businesses can demonstrate
that an appropriate strategy is in place
to meet future applicable legislative
and regulatory requirements and
that these businesses can operate to
specific industry standards, striving for
best practice.
Employee diversity, employment
policies and human rights
The Group seeks to operate as
a responsible employer and has
adopted standards which promote
corporate values designed to help
and guide employees in their conduct
and business relationships. The Group
has a formal anti-bribery policy with
which all employees are required
to comply, and the Group monitors
human rights and social matters on
an ongoing basis to ensure employee
appropriate conduct. The Group seeks
to comply with all laws, regulations and
rules applicable to its business and
to conduct the business in line with
applicable established best practice.
The Group’s policy is one of equal
opportunity in the selection, training,
career development and promotion of
employees, regardless of age, gender,
sexual orientation, ethnic origin, religion
and whether disabled or otherwise.
The Group, including Founded Entities,
has more than 300 full-time employees
(as at 31 December 2019). A breakdown
of staff by gender can be seen in the
adjacent illustrations.
The Group supports the rights of all
people as set out in the UN Universal
Declaration of Human Rights and
ensures that all transactions the Group
enters into uphold these principles.
Breakdown of staff by gender
The following is a breakdown of the
Company’s staff by gender as of
31 December 2019.1
Female
Male
Staff
Senior Management
Board of Directors
21 (60%) 14 (40%)
9 (36%) 16 (64%)
2 (25%) 6 (75%)
1
Does not include employees of Founded Entities.
The Group, including Founded Entities,
has more than 300 full-time employees
(as at 31 December 2019).
GHG emissions
Scope 11
Scope 22
Scope 23
Scope 34
Scope 35
Subtotal (location-based)
Subtotal (market-based)
Total GHG emissions
(Location-based Scope 2)
Total GHG emissions
(Market-based Scope 2)
Tonnes
CO2e
24.3
79.6
79.6
103.9
103.9
656.7
656.7
760.6
760.6
2019
Tonnes
CO2e
per m2
0.003
0.01
0.01
0.01
0.01
—
—
—
—
Tonnes
CO2e
per FTE
0.20
0.67
0.67
0.87
0.87
—
—
—
—
Tonnes
CO2e
33.3
145.5
145.6
178.8
178.8
1,199.9
1,199.9
1,378.7
1,378.7
2018
Tonnes
CO2e
per m2
Tonnes
CO2e
per FTE
0.02
0.07
0.07
0.09
0.09
—
—
—
—
0.15
0.64
0.64
0.78
0.78
—
—
—
—
Scope 11
Scope 22
Scope 23
Subtotal (location-based)
Subtotal (market-based)
Scope 34
Scope 35
Total GHG emissions
(Location-based Scope 2)
Total GHG emissions
(Market-based Scope 2)
Tonnes
CO2e
25.1
120.1
120.2
145.2
145.3
791.9
791.9
937.0
937.2
2017
Tonnes
CO2e
per m2
Tonnes
CO2e
per FTE
0.01
0.06
0.06
0.07
0.07
—
—
—
—
0.76
0.82
0.82
1.58
1.58
—
—
—
—
Tonnes
CO2e
24.4
75.8
92.1
100.2
116.5
505.7
509.2
605.9
625.7
2016
Tonnes
CO2e
per m2
Tonnes
CO2e
per FTE
0.01
0.04
0.04
0.05
0.06
—
—
—
—
0.29
0.90
1.10
1.19
1.39
—
—
—
—
PureTech Health plc Annual report and accounts 2019 67
Governance Directors’ Report for the year ended 31 December 2019
The Directors present their report and
the audited consolidated financial
statements for the financial year ended
31 December 2019.
Certain disclosure requirements
for inclusion in this report have
been incorporated by way of cross
reference to the Strategic Report and
the Directors’ Remuneration Report,
which should be read in conjunction
with this report.
The Company was incorporated
on 8 May 2015 as a public company
limited by shares in the UK and has
a registered office situated at 8th Floor,
20 Farringdon Street, London, EC4A
4AB, United Kingdom. The Company
was admitted to the premium listing
segment of the Official List of the UK
Listing Authority and to trading on
the main market of the London Stock
Exchange on 24 June 2015.
Results and dividends
The Group generated income for
the year ended 31 December 2019
of $366.1 million (2018 $(70.7) million).
The Directors do not recommend the
payment of a dividend for the year
ended 31 December 2019 (2018 nil).
Share capital
As at 31 December 2019, the ordinary
issued share capital of the Company
stood at 285,370,619 shares of £0.01
each. Details on share capital are
set out in Note 14 to the financial
statements, page 131.
The Company’s issued ordinary
share capital comprises a single
class of ordinary shares. Details on
movements in issued share capital can
be found in Note 14 to the financial
statements, page 131.
Directors
Rights of ordinary shares
The membership of the Board can be
found below and biographical details
of the directors can be found on
pages 55 to 59 and are deemed to be
incorporated into this report.
Descriptions of the terms of the service
contracts of the directors is set forth on
page 86 of this report.
All directors shall retire from
office and will offer themselves for
reappointment by the members at the
Company’s upcoming AGM.
Details of the interests of directors in
the share capital of the Company as of
31 December 2019 are set out in the
Directors’ Remuneration Report on
page 76 and Note 24 to the financial
statements, page 146. There have
been no changes in such interests from
31 December 2019 to 8 April 2020.
All of the Company’s issued ordinary
shares are fully paid up and rank pari
passu in all respects and there are no
special rights with regard to control of
the Company. There are no restrictions
on the transfer of ordinary shares
(other than certain transfer restrictions
applicable to the former holders of
Ariya Therapeutics, Inc. securities) or on
the exercise of voting rights attached
to them, which are governed by the
Articles of Association and relevant UK
legislation. The Directors are not aware
of any agreements between holders of
the Company’s shares that may result in
restrictions on the transfer of securities
or in voting rights (other than certain
transfer restrictions applicable to the
former holders of Ariya Therapeutics,
Inc. securities).
The shares in the Company issued to
former holders of Ariya Therapeutics
Inc. securities are subject to lock up
agreements with the Company and are
not tradable until 1 October 2021.
Substantial shareholders
As at 31 March 2020, the Company
had been advised that the shareholders
listed on page 69 hold interests of
3 per cent or more in its ordinary share
capital (other than interests of the
Directors which are detailed on page 86
of the Directors’ Remuneration Report).
Other than as shown, so far as the
Company (and its Directors) are aware,
no other person holds or is beneficially
interested in a disclosable interest
in the Company.
Relationship Agreement
In accordance with Listing Rule 9.8.4(14)
R, the Company has set out below
a statement describing the relationship
agreement entered into by the
Company with its principal shareholder.
On 18 June 2015, the Company entered
into a Relationship Agreement with
Invesco Asset Management Limited
(Invesco), which came into force at the
Company’s IPO. The principal purpose
of the Relationship Agreement is to
ensure that the Company is capable
at all times of carrying on its business
independently of Invesco.
If any person acquires control of the
Company or the Company ceases
to be admitted to the Official List,
the Relationship Agreement may
be terminated by Invesco. If Invesco
(together with its associates) ceases to
hold 30 per cent or more of the voting
rights over the Company’s shares, the
Relationship Agreement shall terminate
save for certain specified provisions.
The following have served as Directors of the Company during the 2019 financial year.
Mr Joichi Ito
Ms Daphne Zohar
Non-Executive Chairman (Resigned September 2019)
Chief Executive Officer
Dame Marjorie Scardino
Senior Independent Director
Dr Bennett Shapiro
Dr Robert Langer
Dr Raju Kucherlapati
Dr John LaMattina
Mr Christopher Viehbacher
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director (January 2019 to September 2019);
Non-Executive Chairman (September 2019 to present)
Mr Stephen Muniz
Chief Operating Officer and Company Secretary
68 PureTech Health plc Annual report and accounts 2019
Governance Directors’ Report for the year ended 31 December 2019 — continued
The Relationship Agreement provides
that Invesco undertakes to use all
reasonable endeavours to procure
that its associates and any person with
whom it is acting in concert shall:
• conduct all agreements,
arrangements, transactions and
relationships with any member of the
Group on an arm’s length basis and
on a normal commercial basis and
in accordance with the related party
transaction requirements of Chapter
11 of the Listing Rules;
• not take any action that would
have the effect of preventing the
Company from complying with its
obligations under the Listing Rules or
precluding or inhibiting any member
of the Group from carrying on its
business independently of Invesco,
its associates and any person with
whom it is acting in concert;
• not propose or procure the proposal
of a shareholder resolution which
is intended to, or appears to be
intended to, circumvent the proper
application of the Listing Rules; and
• not exercise any of its voting rights
attaching to the shares held by
it to procure any amendment
to the Articles of Association of
the Company which would be
inconsistent with, undermine or
breach any of the provisions of the
Relationship Agreement.
The Directors believe that the terms
of the Relationship Agreement
enable the Company to carry on its
business independently from Invesco
and its affiliates, and ensure that all
transactions and relationships between
the Company and Invesco are, and will
be, at arm’s length and on a normal
commercial basis.
The Company has and, in so far as it
is aware, Invesco and its associates
have, complied with the independence
provisions set out in the Relationship
Agreement from the date of the
agreement, through the relevant period
under review.
Shareholder
Invesco Asset Management Limited
Baillie Gifford & Co
Lansdowne Partners International Limited
Jupiter Asset Management Ltd.
Recordati SA
The ordinary shares owned by Invesco
rank pari passu with the other ordinary
shares in all respects.
Powers of the Directors
Subject to the Company’s Articles of
Association, UK legislation and any
directions given by special resolution,
the business of the Company is
managed by the Board of Directors.
Details of the matters reserved for the
Board can be found in the Corporate
Governance Report on page 60.
Articles of Association
The Articles of Association of the
Company can only be amended by
special resolution at a general meeting
of the shareholders. No amendments
are proposed at the 2020 AGM.
Directors’ liabilities
(Directors’ indemnities)
As at the date of this report, the
Company has granted qualifying
third party indemnities to each of
its Directors against any liability
that attaches to them in defending
proceedings brought against them, to
the extent permitted by the Companies
Act. In addition, Directors and officers
of the Company and its Founded
Entities have been and continue to
be covered by directors’ and officers’
liability insurance.
See further description of indemnity
and insurance on page 61.
Political donations
No political contributions/donations for
political purposes were made by the
Company or any affiliate company in the
Group to any political party, politician,
elected official or candidate for public
office during the financial year ended
31 December 2019 (2018 nil).
Charitable Donations
No charitable contributions/donations
for charitable purposes were made
by the Company during the financial
year ended 31 December 2019 or
31 December 2018.
%
31.6
9.1
8.3
8.2
3.3
Significant agreements
There are no agreements between the
Company or any affiliate company in
the Group and any of its employees
or any Director which provide for
compensation to be paid to an
employee or a Director for loss of
office as a consequence of a takeover
of the Company.
Compliance with the UK Corporate
Governance Code
The Directors are committed to a high
standard of corporate governance and
compliance with the best practice of
the UK Corporate Governance Code
(Governance Code) published in July
2018. The Governance Code is available
at the Financial Reporting Council
website at www.frc.org.uk.
The Directors consider that the
Company has, throughout the year
ended 31 December 2019, applied
the main principles and complied
with the provisions set out in the
Governance Code with the following
exception: contrary to provision 24 of
the Governance Code, the Chairman,
Mr Christopher Viehbacher, was
a member of the Audit Committee
in 2019. The Board believes that
Mr Viehbacher’s professional
background and experience, together
with his past participation on such
committee for the past five years,
made him a valuable member of
the Audit Committee and that his
membership was in the best interests
of the Company’s shareholders.
Mr Viehbacher was appointed Chairman
in September 2019.
Further explanation as to how the
provisions set out in the Governance
Code have been applied by the
Company is provided in this Report,
the Report of the Nomination
Committee and the Report of the
Audit Committee.
Financial instruments
The financial risk management and
internal control processes and policies,
and exposure to the risks associated
with financial instruments can be found
in Note 16 to the financial statements
and the Corporate Governance section
of the Annual Report on page 75.
PureTech Health plc Annual report and accounts 2019 69
Governance Directors’ Report for the year ended 31 December 2019 — continued
Sustainable development and
environmental matters
The Corporate and Social Responsibility
section of this report focuses on the
health and safety, environmental
and employment performance of
the Company’s operations, and
outlines the Company’s core values
and commitment to the principles
of sustainable development
and development of community
relations programmes.
Details of the Company’s policies and
performance, as well as disclosures
concerning GHG emissions, are
provided in the Corporate and
Social Responsibility section on
pages 65 to 67.
Related party transactions
Details of related party transactions
can be found in Note 24 of the financial
statements on pages 146 to 147.
Issuances of equity by major
subsidiary undertaking
In February 2019, Vor Biopharma
issued and sold shares of Series A-2
preferred stock for aggregate proceeds
of approximately $25.1 million.
The Company participated in the
offering and invested $0.6 million.
Additionally, approximately $7.4 million
of outstanding principal and interest
on convertible promissory notes issued
by Vor Biopharma to the Company
converted into Series A-2 preferred
stock in this financing in accordance
with their terms.
In March and April 2019, Karuna issued
and sold shares of Series B preferred
stock for aggregate proceeds of
approximately $82.1 million. The
Company invested approximately
$5.0 million in the financing.
In April 2019, Sonde issued and sold
shares of Series A-2 preferred stock for
aggregate proceeds of $11.0 million.
Approximately $5.8 million of
outstanding principal and interest on
convertible promissory notes issued
by Sonde to the Company converted
into Series A-2 preferred stock in this
financing in accordance with their
terms. On 29 August 2019, Sonde
sold an additional 1,052,632 shares
of its Series A-2 preferred stock for
aggregate proceeds of $2.0 million.
In July 2019, Karuna announced the
closing of its IPO of 6,414,842 shares
of common stock, which included the
exercise in full by the underwriters
of their option to purchase up
to 836,718 additional shares, at
a public offering price of $16.00 per
share. The gross proceeds from the
offering were $102.6 million, before
deducting underwriting discounts and
commissions and estimated offering
expenses. The shares commenced
trading on the Nasdaq Global
Market on 28 June 2019 under the
ticker symbol KRTX.
In July 2019, all of the outstanding
notes issued by Follica converted into
17,639,204 shares of Series A-3 Preferred
Stock and 14,200,044 shares of common
stock pursuant to a Series A-3 Note
Conversion Agreement between Follica
and the noteholders.
In August 2019, Gelesis issued
a convertible note (the Gelesis Note) to
the Company in the principal amount
of up to $6.5 million. The Gelesis
Note was payable in instalments, with
$2.0 million of the note drawn down
upon execution of the note and an
additional $3.3 million and $1.2 million
drawn down on October 7, 2019 and
November 5, 2019, respectively.
In November 2019, Karuna conducted
an underwritten public offering of
2,600,000 shares of its common stock
at a price of $96.00 per share. The gross
proceeds to Karuna from the offering,
before deducting the underwriting
discounts and commissions and other
estimated offering expenses, was
approximately $250.0 million.
In November and December 2019,
the Company sold 7,680,700 common
shares of resTORbio for aggregate
proceeds of $9.3 million. Immediately
following the sale of common shares,
the Company held 2,119,696 common
shares, or 5.8%, of resTORbio.
In December 2019, Gelesis issued
2,973,270 shares of its Series 3 Growth
Preferred Stock for aggregate proceeds
of $50.1 million, including approximately
$10.9 million of outstanding principal
and interest on convertible promissory
notes issued by Gelesis, including the
Gelesis Note, which converted into
Series 3 Growth Preferred Stock in
this financing in accordance with their
terms. In addition to the 422,443 shares
of Series 3 Growth Preferred Stock
issued to PureTech upon conversion
of the Gelesis Note, the Company
also purchased 464,389 shares of
Series 3 Growth Preferred Stock
for an aggregate purchase price of
$8.0 million.
See also equity issuances described
in Subsequent Events below.
Future business developments
Information on the Company and its
Wholly Owned Pipeline and Founded
Entities’ future developments can
be found in the Strategic Report on
pages 21 to 44.
Risk and internal controls
The principal risks the Group faces are
set out on pages 45 to 47. The Audit
Committee’s assessment of internal
controls are laid out on page 75.
Subsequent Events
On 6 January 2020, Sonde sold an
additional 2,105,264 shares of Series A-2
preferred stock for aggregate proceeds
of $4.0 million.
On 22 January 2020, PureTech sold
2,100,000 shares of common stock
of Karuna for gross proceeds of
$200.9 million. As of 13 March 2020,
PureTech held 5,295,397 shares of
common stock, or 20.3%, of Karuna.
In March 2020, the World Health
Organization declared the outbreak
of a new Coronavirus, now known as
COVID-19, a pandemic. The outbreak
of the virus has caused material
disruptions to the global economy,
including its health care system. Since
the future course and duration of the
COVID-19 outbreak are unknown,
the Company is currently unable to
determine whether the outbreak
will have a negative effect on the
Company’s results in 2020. To date, the
Company has seen limited impact on
its research and development activities
and the operation of the Company
more generally. If the pandemic
continues to extended for a period of
time such as six months, the Company
would potentially have milestones
delayed; however the Company has
sufficient capital to absorb any potential
delays and continue operations in line
with its going concern statement set
forth on page 71.
On 1 April 2020, Gelesis issued 818,990
shares of its Series 3 Growth preferred
stock for aggregate proceeds of
$14.4 million in a second closing of its
preferred stock financing which initially
closed on 5 December 2019.
Research and Development
Information on the Group’s research
and development activities can be
found in the Strategic Report on
pages 21 to 44.
70 PureTech Health plc Annual report and accounts 2019
Governance Directors’ Report for the year ended 31 December 2019 — continued
Going concern
As of 31 December 2019, the directors had a reasonable expectation the Group had adequate resources to continue in
operational existence into the first quarter of 2022 and, following the sale of 2,100,000 shares of Karuna common shares worth
$200.9 million on 22 January 2020, the Group will now have adequate resources to extend operations over a four year period
into the first quarter of 2024.
Annual General Meeting
The AGM will be held at 11.00 am EDT (4.00 pm BST) on 11 June 2020 at the Company’s headquarters at 6 Tide Street in
Boston, Massachusetts.
The Notice of the Meeting, together with an explanation of the items of business, will be contained in a circular to
shareholders to be dated 8 April 2020.
Pension schemes
Information on the Company’s 401K Plan can be found in the Annual Report on Remuneration on page 78.
Disclosure of information under Listing Rule 9.8.4R
For the purposes of LR 9.8.4R, the information required to be disclosed can be found in the sections of the Annual Report and
Financial Statements listed in the table below.
Listing Rule Requirement
A statement of the amount of interest capitalised during the
period under review and details of any related tax relief.
Location in Annual Report
N/A
Information required in relation to the publication of unaudited financial information.
N/A
Details of any long-term incentive schemes.
Details of any arrangements under which a Director has waived emoluments,
or agreed to waive any future emoluments, from the Company.
Details of any non-pre-emptive issues of equity for cash.
Details of any non-pre-emptive issues of equity for cash
by any unlisted major subsidiary undertaking.
Details of parent participation in a placing by a listed subsidiary.
Details of any contract of significance in which
a Director is or was materially interested.
Details of any contract of significance between the Company
(or one of its subsidiaries) and a controlling shareholder.
Details of any provision of services by a controlling shareholder.
Details of waiver of dividends or future dividends by a shareholder.
Where a shareholder has agreed to waive dividends, details of such waiver, together
with those relating to dividends which are payable during the period under review.
Directors’ Remuneration Report,
page 76
N/A
N/A
Directors’ Report, page 68
N/A
N/A
Invesco Relationship Agreement,
page 68
N/A
N/A
N/A
Board statements in respect of relationship agreement
with the controlling shareholder.
Invesco Relationship Agreement,
page 68
Whistleblowing, anti-bribery and corruption
The Group seeks at all times to conduct its business with the highest standards of integrity and honesty. The Group also has
an anti-bribery and corruption policy which prohibits the Group’s employees from engaging in bribery or any other form
of corruption. In addition, the Group has a whistleblowing policy under which staff are encouraged to report to the Chief
Executive Officer or the Chief Operating Officer any alleged wrongdoing, breach of legal obligation or improper conduct by
or on the part of the Group or any officers, Directors, employees, consultants or advisors of the Group.
Appointment of auditor
KPMG LLP, the external Auditor of the Company, was appointed in 2015 and a resolution proposing its reappointment will be
proposed at the forthcoming AGM.
PureTech Health plc Annual report and accounts 2019 71
Governance Directors’ Report for the year ended 31 December 2019 — continued
Disclosure of information to auditor
The Directors who held office at the
date of approval of this directors’
report confirm that:
• so far as the Director is aware, there
is no relevant audit information
of which the Company’s Auditor
is unaware; and
• the Director has taken all steps
that he/she ought to have taken as
a Director in order to make himself/
herself aware of any relevant audit
information and to establish that
the Company’s Auditor is aware of
that information.
This confirmation is given and
should be interpreted in accordance
with the provisions of Section 418
of the CA 2006.
Statement of Directors’
responsibilities in respect of
the Annual Report and the
financial statements
The Directors are responsible for
preparing the Annual Report and the
Group and parent Company financial
statements in accordance with
applicable law and regulations.
Company law requires the Directors to
prepare Group and parent Company
financial statements for each financial
year. Under that law they are required to
prepare the Group financial statements
in accordance with International
Financial Reporting Standards as
adopted by the European Union (IFRSs
as adopted by the EU) and applicable
law and have elected to prepare the
parent Company financial statements
on the same basis.
Under company law the Directors must
not approve the financial statements
unless they are satisfied that they give
a true and fair view of the state of affairs
of the Group and parent Company and
of their profit or loss for that period.
In preparing each of the Group and
parent Company financial statements,
the Directors are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and estimates that
are reasonable, relevant and reliable;
• state whether they have been
prepared in accordance with IFRSs
as adopted by the EU;
• assess the Group and parent
Company’s ability to continue
as a going concern, disclosing,
as applicable, matters related to
going concern; and
• use the going concern basis of
accounting unless they either intend
to liquidate the Group or the parent
Company or to cease operations,
or have no realistic alternative
but to do so.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the parent Company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
parent Company and enable them to
ensure that its financial statements
comply with the Companies Act 2006.
They are responsible for such internal
control as they determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or
error, and have general responsibility
for taking such steps as are reasonably
open to them to safeguard the assets
of the Group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement
that complies with that law and
those regulations.
The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the
Directors in respect of the annual
financial report
We confirm that to the best of
our knowledge:
• the financial statements, prepared in
accordance with the applicable set
of accounting standards, give a true
and fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole; and
• the strategic report includes a fair
review of the development and
performance of the business and
the position of the issuer and
the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties
that they face.
We consider the annual report and
accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy.
By Order of the Board
Stephen Muniz, Esq.
Company Secretary
8 April 2020
72 PureTech Health plc Annual report and accounts 2019
Governance
Report of the Nomination Committee
Marjorie Scardino
Chairman,
Nomination
Committee
Committee responsibilities
The Nomination Committee assists the
Board in discharging its responsibilities
relating to the composition and make-
up of the Board and any Committees
of the Board. It is also responsible
for periodically reviewing the Board’s
structure and identifying potential
candidates to be appointed as
Directors or Committee members as
the need may arise. The Nomination
Committee is responsible for evaluating
the balance of skills, knowledge and
experience and the size, structure
and composition of the Board and
Committees of the Board, retirements
and appointments of additional and
replacement Directors and Committee
members, and makes appropriate
recommendations to the Board
on such matters. A full copy of the
Committee’s Terms of Reference is
available on request from the Company
Secretary and within the Investor’s
section on Company’s website at
www.puretechhealth.com.
Committee membership
The Nomination Committee consisted
of Dame Marjorie Scardino, who
served as the committee’s Chairman,
Mr Joichi Ito and Dr Robert Langer
until 7 September 2019, when Mr Ito
resigned from the Board of Directors.
Following that date, the Nomination
Committee consisted of Dame Marjorie
Scardino, as Chairman, and Dr Langer.
The biographies of the Nomination
Committee members can be
found on page 56.
The Governance Code requires
that a majority of the members of
a nomination committee should be
independent Non-Executive Directors.
In making their determination for
the year 2019, the Board regarded
Dame Marjorie Scardino and Dr Langer
as meeting the independence criteria
set out in the Governance Code as
it is applied to their service on the
Nomination Committee. In reaching
this determination, the Board duly
considered (i) their directorships and
links with other Directors through their
involvement in other Founded Entities;
(ii) their equity interests in PureTech
Health and/or the Founded Entities;
and (iii) the circumstance that Dr Langer
is a founding Director of the Company.
The Board also duly considered the
extent to which these matters may
impact their service on the Nomination
Committee. After such consideration,
the Board has determined Marjorie
Scardino and Dr Langer to be
independent in character and
judgement and free from relationships
or circumstances which might affect,
or appear to affect, the Directors’
judgement in their service on the
Nomination Committee.
The Nomination Committee meets
as required to initiate the selection
process of, and make recommendations
to, the Board with regard to the
appointment of new Directors. During
2019, the Nomination Committee met
two times to review the structure, size
and composition of the Board in light
of the requirements of the Governance
Code. Dame Marjorie Scardino
and Dr Langer participated in both
meetings. Mr Ito participated in the
one meeting that took place before
he resigned in September 2019. The
Chief Executive Officer and the Chief
Operating Officer were invited to and
attended the meetings.
Diversity policy
Diversity within the Company’s
Board is essential in maximising its
effectiveness, as it enriches debates,
business planning and problem solving.
The Company approaches diversity
in its widest sense so as to recruit the
best talent available, based on merit
and assessed against objective criteria
of skills, knowledge, independence
and experience as well as other criteria
such as gender, age and ethnicity. The
Company will adhere to a strategy of
recruiting individuals who meet these
criteria as it searches for additional
independent Non-Executive Directors
to the Board, as discussed below. The
Committee’s primary objective is to
ensure that the Company maintains the
strongest possible leadership.
There are currently two women on the
Company’s Board and nine women on
our senior management team.
Board and Committee evaluation
Information regarding the evaluation of
the Board and its Committees can be
found on page 63.
Action plan for next year
In the year ahead, the Nomination
Committee will continue to assess
the Board’s composition and how it
may be enhanced. The Committee’s
priority will be to recruit one or more
additional independent Non-Executive
Directors to the Board, and one to
the Committee.
PureTech Health plc Annual report and accounts 2019 73
Governance
Report of the Audit Committee
Mr Christopher
Viehbacher
Chairman, Audit
Committee
Committee responsibilities
The Audit Committee monitors the
integrity of the financial statements of the
Group, and reviews all proposed annual
and half-yearly results announcements
to be made by the Group with
consideration being given to any
significant financial reporting judgements
contained in them. The Committee
also advises the Board on whether it
believes the annual report and accounts,
taken as a whole, are fair, balanced
and understandable and provide the
information necessary for shareholders
to assess the Company’s position and
performance, business model and
strategy. The Committee also considers
internal controls, compliance with legal
requirements, the FCA’s Listing Rules,
Disclosure Guidance and Transparency
Rules, and reviews any recommendations
from the Group’s Auditor regarding
improvements to internal controls and
the adequacy of resources within the
Group’s finance function. A full copy of
the Committee’s Terms of Reference is
available on request from the Company
Secretary and within the Investor’s
section on the Company’s website at
www.puretechhealth.com.
Committee membership
The Committee consists of three
independent Non-Executive
Directors, Mr Christopher Viehbacher,
Dr Raju Kucherlapati and Dame Marjorie
Scardino, with Mr Viehbacher as
Chairman. Mr Viehbacher has experience
as a Chartered Accountant and has
held numerous senior executive
positions in his career. The Board has
deemed this to be recent and relevant
financial experience qualifying him
to be Chairman of the Committee.
The biographies of the Committee
members can be found on pages 55
to 57. The Committee met three times
during the year, with Mr Viehbacher
and Dr Kucherlapati attending all
three meetings and Dame Marjorie
Scardino attending two of the three
meetings. The Chief Executive Officer,
the Chief Financial Officer, the Chief
Operating Officer and the external
Auditor were invited to and attended
all of the meetings. When appropriate,
the Committee met with the Auditor
without any members of the executive
management team being present.
Activities during the year
The activities undertaken by the
Committee were the normal recurring
items, the most important of which
are noted below.
Significant issues considered in
relation to the financial statements
The Committee considered, in
conjunction with management and the
external auditor, the significant areas of
estimation, judgement and possible error
in preparing the financial statements and
disclosures, discussed how these were
addressed and approved the conclusions
of this work. The principal areas of focus
in this regard were:
Carrying amount of parent’s
investment in Founded Entities and
intercompany receivables
The significant issue is the recoverability
of the investment by the Company,
due to its materiality in the context of
the total assets of the Company. The
carrying value of investments in Founded
Entities and intercompany receivables
is supported by the underlying assets of
the Group. The Committee was satisfied
with the conclusion reached.
Determination of the accounting and
valuation of investment in associates
It has been determined that the Group
no longer has control as defined in
IFRS 10 but has maintained significant
influence over some of its subsidiaries,
and due to the fact that the Group holds
a variety of instruments in these entities,
which have varying risks and rights, there
is significant judgement in relation to
the accounting for these instruments.
It has been determined that where the
instruments held are preferred shares
these will be accounted for as financial
assets and held at fair value rather than
equity accounted for as associates. This is
due to the fact that the preferred shares
are determined not to have equity like
features. The valuation of these financial
assets also includes a significant level
of judgement and external valuation
specialists are utilised in this process.
The Committee believes that the Group
considered the pertinent terms and
accurate accounting of each of the
financial instruments (and sought external
expertise as well).
Valuation of third party held
preferred shares, convertible loan
notes and warrants measured at
fair value through profit/loss
An area of material judgement in the
Group’s financial statements and,
therefore, audit risk relates to the
valuation of third party held preferred
shares, convertible loan notes and
warrants measured at fair value through
profit/loss, which at year end had
a carrying value totalling $110.4 million
(2018 – $242.6 million). The Group
considered the underlying economics
of the valuations of the Founded
Entities, and sought external expertise
in determining the appropriate valuation
of the liabilities. These valuations rely, in
large part, on the valuation of the Group
programmes and determine the amount
of gain (loss) on the financial instruments.
Financial instrument classification
and determination of embedded
derivatives
As part of the Group’s strategy to finance
the Founded Entities, it creates financial
instruments commensurate with the
economics of each transaction. Often
these arrangements contain terms
that can make it difficult to determine
whether the financial instrument should
be classified as debt or equity on the
Group’s statement of financial position.
The Group considered the pertinent
terms and underlying economics of the
valuations of the financial instruments
and sought external expertise as well
and has appropriately classified them as
debt or equity. The Committee believes
that the Group considered the pertinent
terms and underlying economics of
each of the financial instruments, as
well as the advice of external experts,
and has appropriately classified them as
debt or equity.
Revenue recognition
There is a significant level of judgement
in relation to revenue recognition
as a result of the complex nature of
the customer contracts which the
Group enters into and in particular
considerations in relation to the
accounting application of IFRS 15.
There is also significant estimation
uncertainty regarding the budgeted
costs to complete the long-term
contracts. The Committee believes
that the Group considered the accurate
revenue recognition accounting of their
customer contracts.
Regulatory compliance
Ensuring compliance for FCA regulated
businesses also represents an important
control risk from the perspective of the
Committee. The Group engages with
outside counsel and other advisors on
a regular basis to ensure compliance with
legal requirements.
Review of Annual Report and
Accounts and Half-yearly Report
The Committee carried out a thorough
review of the Group’s 2019 Annual Report
and Accounts and its 2019 Half-yearly
Report resulting in the recommendation
of both for approval by the Board.
74 PureTech Health plc Annual report and accounts 2019
Governance Report of the Audit Committee — continued
In carrying out its review, the Committee
gave particular consideration to whether
the Annual Report, taken as a whole,
was fair, balanced and understandable,
concluding that it was. It did this primarily
through consideration of the reporting of
the Group’s business model and strategy,
the competitive landscape in which it
operates, the significant risks it faces,
the progress made against its strategic
objectives and the progress made by,
and changes in fair value of, its Founded
Entities during the year.
Going concern
At least annually, the Committee
considers the going concern principle
on which the financial statements are
prepared. As a business which seeks
to fund the development of its Wholly
Owned Pipeline, as well as support its
Founded Entities with further capital, the
business model is currently inherently
cash consuming.
As of 31 December 2019, the Group
had sufficient cash reserves to continue
to provide capital to its internal
programmes and Founded Entities
and to create and fund project stage
programmes and independent growth
stage affiliates into the first quarter of
2022; and, following the sale of 2,100,000
shares of Karuna common shares worth
$200.9 million on 22 January 2020, the
Group will now have sufficient cash
reserves to extend operations over a four
year period into the first quarter of 2024.
Therefore, while an inability of the Wholly
Owned Pipeline and Founded Entities
to raise funds through equity financings
with outside investors, strategic
arrangements, licensing deals or debt
facilities may require the Group to modify
its level of capital deployment into its
Wholly Owned Pipeline and Founded
Entities or to more actively seek to
monetise one or more Founded Entities,
it would not threaten the viability of the
Group overall.
Compliance
The Committee has had a role in
supporting the Group’s compliance with
the Governance Code, which applies
to the Group for the 2019 financial year.
The Board has included a statement
regarding the Group’s longer-term
viability on page 48. The Committee
worked with management and
assessed that there is a robust process
in place to support the statement
made by the Board.
Similarly, the Committee worked with
management to ensure that the current
processes underpinning its oversight
of internal controls provide appropriate
support for the Board’s statement on the
effectiveness of risk management and
internal controls.
Risk and internal controls
The principal risks the Group faces are
set out on pages 45 to 47.
The Committee has directed that
management engage in a continuous
process to review internal controls
around financial reporting and
safeguarding of assets. Management
has determined that the overall internal
control framework environment requires
additional attention and is currently in
a development phase of enhancing these
controls as the Group scales up to meet
the increased complexity and growth
objectives. The Committee believes that
the Group has adequate controls and
appropriate plans to evolve the control
structure in anticipation of increased
complexity of the business model
and operations.
The Group has a formal whistleblowing
policy. The Committee is satisfied
that the policy has been designed to
encourage staff to report suspected
wrongdoing as soon as possible, to
provide staff with guidance on how to
raise those concerns, and to ensure staff
that they should be able to raise genuine
concerns without fear of reprisals, even if
they turn out to be mistaken.
Internal audit
The Group does not maintain a separate
internal audit function. This is principally
due to the size of the Group where close
control over operations is exercised
by a small number of executives. In
assessing the need for an internal audit
function, the Committee considered
the risk assessment performed by
management to identify key areas
of assurance and the whole system
of internal financial and operational
controls. The Company achieves
internal assurance by performing the
risk assessment of the key areas of
assurance and continuing to focus
on the development of those key
internal controls.
External audit
The Group has engaged KPMG LLP as
its Auditor since 2015. The current audit
partner is Robert Seale who has been
the audit partner of the Group since
June 2019, following Charles le Strange
Meakin’s retirement from KPMG LLP.
The effectiveness of the external audit
process is dependent on appropriate
risk identification. In November 2019,
the Committee discussed the Auditor’s
audit plan for 2019. This included
a summary of the proposed audit scope
and a summary of what the Auditor
considered to be the most significant
financial reporting risks facing the Group
together with the Auditor’s proposed
audit approach to these significant risk
areas. The main areas of audit focus
for the year were the carrying value of
parent’s investment in subsidiaries and
related party receivables, the valuation
of preferred shares, warrants, and
convertible notes measured at fair value
through profit/loss, the classification and
measurement of financial instruments,
the determination and valuation of
investments in associates, revenue
recognition, and ensuring there has been
regulatory compliance for those parts of
the business covered by FCA regulations.
Appointment and independence
The Committee advises the Board on the
appointment of the external Auditor and
on its remuneration both for audit and
non-audit work, and discusses the nature,
scope and results of the audit with the
external Auditor. The Committee keeps
under review the cost-effectiveness and
the independence and objectivity of
the external Auditor. Controls in place
to ensure this include monitoring the
independence and effectiveness of the
audit, a policy on the engagement of
the external Auditor to supply non-audit
services, and a review of the scope of the
audit and fee and performance of the
external Auditor.
The Audit Committee ensures that at
least once every ten years the audit
services contract is put out to tender to
enable us to compare the quality and
effectiveness of the services provided
by the incumbent auditor with those of
other audit firms.
Non-audit work
The Committee approves all fees paid
to the Auditor for non-audit work.
Where appropriate, the Committee
sanctions the use of KPMG LLP for non-
audit services in accordance with the
Group’s non-audit services policy. The
non-audit work was required services
by our external auditors related to the
exploration of a potential ADR listing
on the NASDAQ and the interim review.
The 2019 ratio of non-audit work to audit
work was 0.65 which the committee
is satisfied does not breach the
independence of KPMG LLP.
Christopher Viehbacher
Chairman of Audit Committee
8 April 2020
PureTech Health plc Annual report and accounts 2019 75
Governance
Directors’ Remuneration Report for
the year ended 31 December 2019
Dr John LaMattina
Chairman,
Remuneration
Committee
The Directors’ Remuneration Report is
split in three sections, namely:
• This Annual Statement:
summarising and explaining the
major decisions on Directors’
remuneration in the year;
• The proposed Directors’
Remuneration Policy: setting out
the basis of remuneration for the
Group’s Directors, which is subject to
shareholder approval and will apply
immediately after the 2020 AGM if so
approved, on pages 78 to 80; and
• The Annual Report on Remuneration:
setting out the implementation of
the current Remuneration Policy in
the year ended 31 December 2019
on pages 82 to 88.
The Company makes the Directors’
Remuneration Policy subject to
a binding vote of its shareholders every
three years (sooner if changes are made
to the Policy) and the Annual Report
on Remuneration subject to an annual
advisory vote of its shareholders.
The current Directors’ Remuneration
Policy was last approved at the 2019
AGM, but due to certain proposed
revisions to the Policy described on
page 76, it will be subject to another
shareholder vote at the forthcoming
2020 AGM. The Annual Report on
Remuneration will be subject to an
advisory shareholder vote at the
forthcoming 2020 AGM.
Overview of our Remuneration Policy
The success of PureTech Health
depends on the motivation and
retention of its highly skilled workforce
with significant expertise across a range
of science and technology disciplines
as well as its highly-experienced
management team. PureTech’s
Remuneration Policy is therefore an
important part of its business strategy.
The Remuneration Policy is intended
to strike a balance between market
practice and remuneration levels in
the relevant sector, which is largely US
based, and the corporate governance
expectations resulting from the
Company’s UK listing. As noted in the
Company’s 2019 Annual Statement
the Company has now consulted
with shareholders and is proposing
certain revisions to the Company’s
Remuneration Policy. The proposed
changes will not increase remuneration
levels for executive directors, but
are necessary to reflect the recent
UK Corporate Governance Code
changes and to take into account
the Committee’s review of non-
executive director remuneration levels
and structure.
The proposed changes are
summarised below:
•
Introduction of a post-employment
shareholding guideline for executive
directors in line with the Investment
Association guidelines; details on
these new shareholding guidelines
are set out in the remuneration table
on page 79; and
• Clarification of the areas of discretion
in the policy in order to ensure
that they can be operated and
take account of the UK Corporate
Governance Code; a description and
explanation of these discretions is
set out on page 80.
These changes take account of our
obligations as a UK company by
aligning our remuneration with UK
corporate governance best practice
through appropriate discretions
and a strong post-employment
shareholding requirement. Save for the
proposed changes, the Remuneration
Policy as accepted at the 2019 AGM will
continue to apply.
The Committee believes this
Remuneration Policy as revised will
provide an appropriate framework
within which to incentivise and motivate
our senior management team.
All tables within the Directors’
Remuneration Report are audited
unless otherwise noted.
Committee membership
The Remuneration Committee
consists of Dr Bennett Shapiro,
Dr Raju Kucherlapati and Dr John
LaMattina, with Dr John LaMattina
serving as Chairman of the Committee.
The biographies of the Committee
members can be found on pages 55
to 56. The Committee met three times
during the year, with Dr Kucherlapati
and Dr LaMattina in attendance for
all of the meetings and Dr Shapiro
in attendance for two of the three
meetings. The Committee also acted by
unanimous written consent three times
during the year. The Chief Executive
Officer and the Chief Operating Officer
were invited to and attended all of
the meetings. However, no Executive
was permitted to participate in
discussions or decisions about his or
her personal remuneration.
Dr. Shapiro has chosen to retire
from the Board as of the date of the
2020 AGM and therefore will not
be a member of the Remuneration
Committee following the 2020 AGM.
The Company is evaluating new
candidates for membership on the
Remuneration Committee to succeed
Dr. Shapiro following the 2020 AGM.
76 PureTech Health plc Annual report and accounts 2019
Governance Directors’ Remuneration Report — continued
Performance and reward in 2019
The year ahead
• encourage widespread equity
During 2019 PureTech Health delivered
exceptional performance and this has
been reflected in the annual bonus
outcomes. The Company’s share
price increased from 169 pence to
317 pence from 31 December 2018 to
31 December 2019 representing an
increase of approximately 88% for the
Company’s shareholders. The value of
the Group’s internal programmes as
well as its Founded Entities increased
significantly. This increase is due
in large part to (i) the initial public
offering of Karuna Therapeutics,
which was one of the best performing
US initial public offerings of 2019,
(ii) FDA clearance of Gelesis’ first
product, Plenity™, (iii) the execution
of collaboration and partnership
agreements with Boehringer Ingelheim,
Bristol-Myers Squibb, Ro, Shionogi &
Co. Ltd among others, (iv) the Group’s
Founded Entities raising in excess
of $623 million, (v) the completion of
clinical studies with positive results,
including the results of Karuna’s Phase 2
clinical trial, and (vi) the increase in
the value of the Company’s shares
of Karuna to $557.1 million as of
31 December 2019. This increase in
value together with management’s
operational performance at PureTech
and within the Wholly Owned Pipeline
and Founded Entities, resulted in
both Executive Directors exceeding
the target performance goals set at
the beginning of 2019. As a result, the
maximum annual bonus of 100% of
base salary was awarded to Executive
Directors which the Committee thinks
is appropriate and entirely in line
with the operational and share price
performance delivered during the year.
See highlights of 2019 on pages 1 to 3.
In addition, PureTech’s performance
over the last three financial years has
been very strong with an increase
in share price from 118 pence to
317 pence from 31 December 2016
to 31 December 2019 representing
an increase of approximately 167 per
cent. This, along with strong strategic
performance over the three year
performance period, resulted in the
vesting of 100 per cent of the PSP
awards granted in 2017.
For 2020, the following key decisions
have been made in relation to how the
Policy will be implemented:
• Base salaries will be increased
by 3.0 per cent in line with the
general workforce;
• The annual bonus target and
maximum will remain at 50 per cent
and 100 per cent of base salary,
respectively; and
• Grants of PSP awards in 2020
will be of the same quantum and
vesting terms as in 2019, and will be
subject to a two-year post-vesting
holding period.
The Committee recommends that
shareholders vote to approve the
Directors’ Remuneration Policy and the
Annual Report on Remuneration.
Objectives of the Remuneration Policy
In the construction of the Group’s
senior executive Remuneration Policy,
the Committee paid particular regard
to the market practice of US peer
companies to ensure that packages
are competitive, recognising the
predominantly US market in which
the Group competes for talent. At
the same time the structure of the
packages was designed to be in line
with the principles of the UK Corporate
Governance Code and best practice.
The key aims of the Remuneration
Policy and the Code principles to which
they relate are as follows:
• promote the long-term success
of the Group (Code principle:
Proportionality);
• attract, retain and motivate high
calibre senior management and
focus them on the delivery of the
Group’s long-term strategic and
business objectives (Proportionality,
alignment to culture and risk);
• be simple and understandable,
both externally and internally
(Clarity, simplicity, predictability
and proportionality);
• achieve consistency of approach
across senior management within
the Group to the extent appropriate
and informed by relevant market
benchmarks (Clarity and alignment
to culture); and
ownership across the executive
team to ensure a long-term
focus and alignment of interest
with shareholders (Alignment to
culture, risk).
For the year ended 31 December 2019,
we believe the Remuneration Policy
operated as intended and fulfilled all
of the objectives discussed above.
Consideration of shareholder views
The Committee will carefully consider
shareholder feedback received in
relation to the AGM each year. This
feedback, plus any additional feedback
received during any meetings from
time to time, is then considered
as part of the annual review of the
Remuneration Policy.
The Company will seek to engage
directly with major shareholders and
their representative bodies should
any material changes be proposed
to the Remuneration Policy or its
implementation. Details of votes
cast for and against the resolution to
approve the prior year’s remuneration
report and any matters discussed
with shareholders during the year
will be set out in the Annual Report
on Remuneration. The Company
consulted with shareholders in 2019,
as referenced on page 76.
Consideration of employment
conditions elsewhere in the Group
To ensure a coherent cascade of the
Remuneration Policy throughout
the organisation, no element of
remuneration is operated solely for
Executive Directors and all elements
of remuneration provided to the
Executive Directors are generally
operated for other employees.
In addition, the Committee considers
the general base salary increase for the
broader employee population when
determining the annual salary increases
for the Executive Directors. The
Remuneration Committee has general
responsibility for determining pay for
senior management as well as executive
directors. Employees (other than senior
executives) have not been consulted
in respect of the design of the Group’s
Remuneration Policy, although the
Committee will keep this under review.
Exercise of Discretion
Save in relation to the 2019 bonus
outcomes noted above, no discretions
have been exercised in relation to
Directors’ pay.
PureTech Health plc Annual report and accounts 2019 77
Governance Directors’ Remuneration Policy
Summary of Remuneration Policy
Element
Base salary
How component
supports corporate
strategy
To recognise the
market value of
the employee and
the role.
Operation
Maximum
Normally reviewed annually.
Salaries are benchmarked
periodically primarily against biotech,
pharmaceutical and specialty finance
companies listed in the US and UK.
The committee also considers UK-listed
general industry companies of similar
size to PureTech as a secondary point
of reference.
Performance targets and
recovery provisions
Not applicable.
Not applicable.
There is no prescribed
maximum base salary or
annual salary increase.
The Committee is guided by
the general increase for the
broader employee population
but may decide to award
a lower increase for Executive
Directors or indeed exceed
this to recognise, for example,
an increase in the scale,
scope or responsibility of the
role and/or to take account
relevant market movements.
Current salary levels are set
out in the Annual Report on
Remuneration
Under the 401k Plan,
Company contributions
are capped at the lower of
3 per cent of base salary or
the maximum permitted by
the US IRS ($19,500 for 2020).
Pension
To provide a market
competitive level
of contribution
to pension.
The company operates a 401k Plan
for its US Executive Directors. The
operation of the Plan is in line with the
operation for all other employees.
Benefits
To provide a market
competitive level of
benefits.
Includes: private medical and dental
cover, disability, life insurance.
Additional benefits may also be
provided in certain circumstances, such
as those provided to all employees.
Cost paid by the company.
Not applicable.
Based on performance during the
relevant financial year.
Up to 100 per cent of
base salary.
Performance period:
Normally one year.
Annual Bonus
Plan (ABP)
To drive and reward
annual performance
of individuals, teams
and the Group.
Long-term
incentives
To drive and
reward sustained
performance of the
Group and to align
the interests with
those of shareholders.
Paid in cash.
The Committee has discretion to
adjust payout levels if it considers the
formulaic outcome inappropriate taking
into account the underlying financial
performance of the Company, share
price performance, the investment
return to shareholders during the
year, and such other factors as it
considers appropriate.
The Company can make long-
term incentive awards with the
following features:
• performance shares.
•
vesting is dependent on the
satisfaction of performance targets
and continued service.
performance and vesting periods
are normally three years.
•
Payments are normally based on
a scorecard of strategic and/or
financial measures.
Up to 50 per cent of base
salary normally payable for
the achievement of ‘target’
performance and 100 per
cent of base salary payable
for the achievement of
stretch performance.
Recovery and withholding
provisions are in place.
Performance period:
Normally three years.
Up to 25 per cent of an award vests
at threshold performance (0 per
cent vests below this), increasing
to 100 per cent pro-rata for
maximum performance. Normally,
at least half of any award will be
measured against TSR targets
with the remainder measured
against relevant financial or
strategic measures.
Recovery and withholding
provisions are in place.
400 per cent of salary.
(500 per cent of salary
exceptional limit).
Participants may benefit from
the value of dividends paid
over the vesting period to
the extent that awards vest.
This benefit is delivered in
the form of cash or additional
shares at the time that awards
vest. Individual award sizes
are set out in the Annual
Report on Remuneration.
Awards granted from 2019 onwards will
be subject to a two-year post-vesting
holding period during which vested
shares cannot be sold other than to
settle tax.
The Committee may also adjust vesting
levels of performance–related awards
to override formulaic outcomes, taking
into account similar factors as apply in
relation to annual bonus awards, but by
reference to the performance period.
78 PureTech Health plc Annual report and accounts 2019
Governance Directors’ Remuneration Policy — continued
Element
Share
ownership/
Holding Period
Post-cessation
holding period
Non-Executive
Directors
How component
supports corporate
strategy
Further aligns
executives with
investors, while
encouraging
employee share
ownership.
Aligns executives
with investors and
promotes long-term
decision making
To provide fee
levels and structure
reflecting time
commitments and
responsibilities of
each role, in line
with those provided
by similarly-sized
companies and
companies operating
in our sector.
Operation
Maximum
Performance targets and
recovery provisions
Minimum of 200 per cent of
base salary.
None.
None.
None.
Lower of 200 per cent of
base salary and the Executive
Director’s shareholding at the
date that notice is served.
Any remuneration provided
to a Non-Executive Director
will be in line with the limits
set out in the Articles of
Association.
The Committee requires that Executive
Directors who participate in a long-
term incentive plan operated by the
Company retain half of the net shares
vesting under any long-term incentive
plan until a shareholding requirement
is met.
Executive Directors must hold shares for
two years after the date of termination
of their employment.
Remuneration provided to Non-
Executive Directors is operated in line
with the terms set out in the Articles of
Association.
Cash fees, normally paid on a quarterly
basis, are comprised of the following
elements:
• Base fee.
• Additional fees.
A proportion of any post-tax fees
may be required to be used for the
acquisition of PureTech shares.
Additional remuneration is payable for
additional services to PureTech such
as the Chairmanship of a Committee,
membership on a Committee, and
participation on the board of directors
of a subsidiary business. Additional
remuneration is also payable for
services provided beyond those
services traditionally provided as
a director, and can be provided for
a material increase in time commitment.
Fees are reviewed annually and take
into account:
•
•
the median level of fees for similar
positions in the market; and
the time commitment each
Non-Executive Director makes
to the Group.
Taxable benefits may be provided and
may be grossed up where appropriate.
Notes:
1
2
3
4
5
6
7
8
9
A description of how the Company intends to implement the Policy set out in this table is set out in the Annual Report on Remuneration.
In the event that the Company elects any non-US Executive Directors, the 401k Plan may not be an appropriate pension arrangement. In such cases an alternative pension
arrangement may be offered. Any such arrangement would take account of market levels of pension provision in the relevant geography, and normally any Company
contribution would be limited to 15 per cent or less of base salary.
For those below Board level, a lower annual bonus opportunity and PSP award size may apply. In general, these differences arise from the development of remuneration
arrangements that are market competitive for the various categories of individuals, together with the fact that remuneration of the Executive Directors and senior executives
typically has a greater emphasis on performance-related pay.
The choice of the performance metrics for the annual bonus scheme reflect the Committee’s belief that incentive compensation should be appropriately challenging and
linked to the delivery of the Company’s strategy. Further information on the choice of performance measures and targets is set out in the Annual Report on Remuneration.
The performance conditions applicable to the PSP (see Annual Report on Remuneration) are selected by the Remuneration Committee on the basis that they reward
the delivery of long-term returns to shareholders and are consistent with the Company’s objective of delivering superior levels of long-term value to shareholders while
providing the Company with tools to successfully recruit and retain employees in the US.
The Committee operates the PSP in accordance with the plan rules and the Listing Rules and the Committee and, consistent with market practice, retains discretion over
a number of areas in the plan rules relating to the operation and administration of the plan. Further detail is contained in the section on discretions, below.
While current Policy is that PSP awards vest after three years subject to continued service and performance targets, the Committee will consider developments in practice
when setting future long-term incentive grant policies in addition to the existing shareholding guidelines.
For the avoidance of doubt, the Company reserves the right to honour any commitments entered into in the past with current or former Directors (such as the vesting/
exercise of share awards) notwithstanding that these may not be in line with the Remuneration Policy. Details of any payments to former Directors will be set out in the
Annual Report on Remuneration as they arise.
Executive Directors may participate in any HMRC tax-advantaged all-employee share scheme.
PureTech Health plc Annual report and accounts 2019 79
Governance Directors’ Remuneration Policy — continued
Recovery and withholding provisions
• determining the timing of grants of
• undertaking the annual review of
Recovery and withholding provisions
(‘‘clawback and malus’’) may be
operated at the discretion of the
Remuneration Committee in respect of
awards granted under the Performance
Share Plan and in certain circumstances
under the Annual Bonus Plan (including
where there has been a material
misstatement of accounts, or in the
event of fraud, gross misconduct or
conduct having a materially detrimental
effect on the Company’s reputation).
The issue giving rise to the recovery
and withholding must be discovered
within three years of vesting and there
is flexibility to recover overpayments by
withholding future incentive payments
and recovering the amount directly
from the employee.
Discretions in the policy
To ensure the efficient administration
of the variable incentive plans outlined
above, the Committee will apply certain
operational discretions. These include
the following:
• selecting the participants in the
plans on an annual basis;
awards and/or payments;
• determining the quantum of awards
and/or payments (within the limits
set out in the Policy table above);
• reviewing performance against LTI
performance metrics;
• determining the extent of
vesting based on the assessment
of performance;
• making the appropriate adjustments
required in certain circumstances,
for instance for changes in
capital structure;
• deciding how to settle awards made
under the plans, e.g. in cash, shares,
nil-cost options or as otherwise
permitted under the plan rules;
• overriding formulaic outcomes of
incentive plans if determined by the
Committee not to be reflective of
company performance;
• determining “good leaver” status
for incentive plan purposes and
applying the appropriate treatment;
further details on the discretion
applicable in relation to leavers are
set out on page 81;
weighting of performance measures
and setting targets for the annual
bonus plan and other incentive
schemes, where applicable, from
year to year; and
• discretion, in the event of a change
in control of the Company, to
determine that time pro-rating shall
not apply to outstanding awards.
If an event occurs which results in the
annual bonus plan or LTIP performance
conditions and/or targets being
deemed no longer appropriate
(e.g. material acquisition or divestment),
the Committee will have the ability
to adjust appropriately the measures
and/or targets and alter weightings,
provided that the revised conditions
are not materially less challenging than
the original conditions.
Reward scenarios
The charts below show how the
composition of 2020 remuneration
for the Chief Executive Officer and
the Chief Operating Officer varies
at different levels of performance
under the Policy set out above, as
a percentage of total remuneration
opportunity and as a total value.
Executive Director compensation (unaudited)
Chief Executive Officer
Chief Operating Officer
Minimum
$647,365
Minimum
$460,081
100%
100%
Target
$2,166,615
Target
$1,093,531
30%
14%
56%
42%
19%
39%
Maximum
$3,685,865
Maximum
$1,938,131
17%
17%
66%
23%
33%
44%
Maximum + 50% growth
$4,901,265
Maximum + 50% growth
$2,360,431
14% 12%
74%
19%
27%
54%
Fixed pay
Annual bonus
PSP
Notes:
1
2.
The minimum performance scenario comprises the fixed elements of remuneration only, including:
– Salary for FY2020 as set out in the Annual Report on Remuneration.
– Pension and benefits as disclosed for FY2018 in the Annual Report on Remuneration.
The On-Target level of bonus is taken to be 50 per cent of the maximum bonus opportunity (50 per cent of salary), and the On-Target level of PSP vesting is assumed to be
50 per cent of the face value of the PSP award (i.e. 200 per cent of base salary for the CEO and 100 per cent of base salary for the Chief Operating Officer). These values are
included in addition to the components/values of Minimum remuneration.
3. Maximum assumes full bonus pay-out (100 per cent of base salary only) and the full face value of the proposed PSP awards (i.e. 400 per cent of base salary for the CEO and
200 per cent of base salary for the Chief Operating Officer), in addition to fixed components of Minimum remuneration.
4. No share price growth has been factored into the calculations of minimum, target and maximum compensation.
80 PureTech Health plc Annual report and accounts 2019
Governance
Directors’ Remuneration Policy — continued
Approach to recruitment
and promotions
The remuneration package for a new
Executive Director would be set in
accordance with the terms of the
Company’s prevailing approved
Remuneration Policy at the time of
appointment and take into account the
skills and experience of the individual,
the market rate for a candidate of that
experience and the importance of
securing the relevant individual.
Salary would be provided at such
a level as required to attract the most
appropriate candidate and may be set
initially at or above mid-market level.
Additionally, salary may be provided
at a below mid-market level on the
basis that it may progress towards the
mid-market level once expertise and
performance has been proven and
sustained. The annual bonus potential
would be limited to 100 per cent of
salary and long-term incentive awards
would be limited normally between
100 per cent to 500 per cent of salary
determined by the Remuneration
Committee at its discretion. Depending
on the timing of the appointment, the
Committee may deem it appropriate
to set annual bonus performance
conditions for such appointee that are
different than those applicable to the
incumbent Executive Directors. A PSP
award can be made shortly following
an appointment.
In addition, the Committee may offer
additional cash and/or share-based
elements to replace deferred or
incentive pay forfeited by an executive
leaving a previous employer if required
in order to facilitate, in exceptional
circumstances, the recruitment of
the relevant individual. It would
seek to ensure, where possible, that
these awards would be consistent
with awards forfeited in terms of
vesting periods, expected value and
performance conditions.
For appointment of an Executive
Director who was employed by the
Company prior to the appointment,
any variable pay element awarded
in respect of the prior role may be
allowed to pay out according to its
terms. In addition, any other ongoing
remuneration obligations existing prior
to appointment may continue.
For any Executive Director
appointment, the Committee may
agree that the Company will meet
certain relocation and/or incidental
expenses as appropriate.
If appropriate, the Committee may
agree on recruitment of a new executive
with a notice period in excess of
12 months but to reduce this to at most
12 months over a specified period.
For Non-Executive Directors,
remuneration will be provided in line
with the policy table and the articles
of association.
Service contracts
Executive Directors’ service contracts
do not provide for liquidated damages,
longer periods of notice on a change of
control of the Company or additional
compensation on an Executive
Director’s cessation of employment with
the Group, except as discussed below.
The Committee’s Policy is to offer
service contracts for Executive
Directors with notice periods of no
more than 12 months, and typically
between 60 to 180 days.
Service contracts provide for severance
pay following termination in the case
that employment is terminated by the
Company without ‘cause’, or by the
employee for ‘good reason’. In this case
severance pay as set out in the contract
is no greater than 12-months’ base
salary and is aligned to the duration of
any restrictive covenants placed on the
employee. Service contracts may also
provide for the continuation of benefits
but for no longer than a 12-month
period post termination.
Service contracts also provide for
the payment of international tax in
non-US jurisdictions if applicable
to the Executive Director. They also
can provide for garden leave and, if
required by applicable law, the recovery
and withholding of incentive payments.
Policy on termination of employment
The Policy on termination is that the
Company does not make payments
beyond its contractual obligations
and the commitments entered into as
part of any incentive plan operated by
the Company. In addition, Executive
Directors will be expected to mitigate
their loss. The Committee ensures
that there have been no unjustified
payments for failure.
An Executive Director may be eligible
for an annual bonus payment for the
final year in which that Director served
as an employee. If so, any such annual
bonus payment will be subject to
performance testing and a pro-rata
reduction will normally be applied
based on the time served during the
relevant financial year.
The default treatment for any share-
based entitlements under the PSP is
that any unvested outstanding awards
lapse on cessation of employment.
However, in certain prescribed
circumstances, or at the discretion of
the Remuneration Committee, ‘good
leaver’ status can be applied. In these
circumstances a participant’s awards
will vest subject to the satisfaction of
the relevant performance criteria and,
ordinarily, on a time pro-rated basis,
with the balance of the awards lapsing.
The Committee also has discretion to
permit the early vesting at the date of
cessation of employment, again based
on performance and ordinarily on
a time pro-rated basis.
In addition, the Company can pay for
any administrative expenses, legal
expenses or outplacement services
arising from the termination where
considered appropriate.
External appointments
The Board can allow Executive
Directors to accept appropriate outside
commercial Non-Executive Director
appointments provided that the duties
and time commitment required are
compatible with their duties and time
commitment as Executive Directors.
Non-Executive Directors
Non-Executive Directors are appointed
as a Non-Executive Director of the
Company by a letter of appointment.
These letters usually provide for
a notice period of one month from
the Company and the Non-Executive
Director prior to termination.
PureTech Health plc Annual report and accounts 2019 81
Governance Annual Report on Remuneration
Implementation of the Remuneration Policy for the year ending 31 December 2020
Base salary
The Committee reviewed the base salary levels for the Executive Directors in early 2020 and an increase of 3.0 per cent was
awarded. This increase was in line with the increase for the general workforce. The table below shows the base salaries for
both Executive Directors:
Daphne Zohar
Stephen Muniz
Chief Executive Officer
Chief Operating Officer
2019
Base salary
$590,000
$410,000
2020
Base salary
$607,700
$422,300
Pension
The Group will continue to contribute under the 401k Plan subject to the maximum set out in the Policy table.
Benefits
Benefits provided will continue to include private medical, disability and dental cover.
Annual bonus
For 2020, the operation of the annual bonus arrangement will be similar to that operated in 2019. The maximum annual bonus
will continue to be 100 per cent of base salary for both Executive Directors. The 2020 annual bonus will be based on financial
and strategic measures, clinical development milestones, development of new strategic and investor relationships, and the
regulatory milestones. Bonus outcomes will be disclosed in the FY2020 Annual Report and Accounts.
Long-term incentives
The Company adopted the PSP and its scheme for long-term incentive awards made under the PSP at the time of the IPO.
Awards under the PSP will be made to both Executive Directors in 2020. The Chief Executive Officer will receive a PSP award
with a face value of 400 per cent of base salary. The Chief Operating Officer will receive an award with a face value of 200 per
cent of base salary.
The PSP awards will be subject to the performance conditions described below. As a clinical-stage biopharma company, the
Company believes that TSR is an appropriate and objective measure of the Company’s performance. In addition, measuring
TSR on both an absolute and relative basis rewards our management team for absolute value creation for our shareholders
whilst also incentivising outperformance of the market.
Further detail of the planned performance condition is set out below:
• 50 per cent of the shares under award will vest based on the achievement of absolute TSR targets.
• 25 per cent of the shares under award will vest based on the achievement of a relative TSR performance condition.
• 25 per cent of the shares under award will vest based on the achievement of strategic targets.
The minimum performance target for the absolute TSR portion of the award will be TSR equal to 7 per cent per annum, whilst
the maximum target will be TSR equal to 15 per cent per annum. Strategic measures will be based on the achievement of
project milestones and other qualitative measures of performance. Relative TSR will be measured against the constituent
companies in the FTSE 250 Index (excluding Investment Trusts) and the MSCI Europe Health Care Index.
The Committee believes that this combination of measures is appropriate. TSR measures the success of our management
team in identifying and developing medical solutions whilst strategic targets help incentivise our management team through
the stages which ultimately result in successful products.
Full disclosure of the strategic targets will be made retrospectively.
82 PureTech Health plc Annual report and accounts 2019
Governance Annual Report on Remuneration — continued
Non-Executive Directors
Fees for our Board of Directors were reviewed for 2020, with the majority remaining unchanged. Fees for membership of
a subsidiary board were increased to up to $20,000 to take into account the time commitment and market rates for similar
roles in the US.
A summary of 2019 and current fees is as follows:
Chairman fee
Basic fee
Additional fees:
Chairmanship of a committee
Membership of a committee
Membership of a subsidiary board
FY2020
% Increase
FY2019
$125,000
$75,000
$125,000
$75,000
$10,000
$5,000
$0 to $10,000
$10,000
$5,000
$0 to $20,000
0%
0%
0%
0%
100%
As our Board of Directors consists of leading experts with the experience of successfully developing technologies and
bringing them to market, this gives rise to the possibility that the intellectual property we seek to acquire has been developed
by one of our Non-Executive Directors and/or that our Non-Executive Directors provide technical or otherwise specialised
advisory services to the Company above and beyond the services typically provided by a Non-Executive Director. In such
exceptional circumstances, our Remuneration Policy provides us with the flexibility to remunerate them with equity in the
relevant subsidiary company as we would any other inventor of the intellectual property or provider of technical advisory
services. This practice is in line with other investors in the life sciences sector. If the Company is unable to offer market-
competitive remuneration in these circumstances, it risks forfeiting opportunities to obtain intellectual property developed by
our Non-Executive Directors and/or foregoing valuable advisory services. The Company believes foregoing such intellectual
property and/or advisory services would not be in the long-term interest of our shareholders. Accordingly, subsidiary equity
grants may be made to Non-Executive Directors upon the occurrence of the exceptional circumstances set out above.
Single total figure of remuneration for each Director (audited)
The table below sets out remuneration paid in relation to the 2019 financial year with a comparative figure for the 2018
financial year.
Year
Basic Salary/
Fees
Benefits1
Annual
Bonus Plan
Performance
Share Plan
(Vested)2
Pension
Other
payments
Total
2019 and 2018 Remuneration
Executive Directors
Daphne Zohar
Stephen Muniz
Non-Executive Directors
Joi Ito
Raju Kucherlapati
John LaMattina
Robert Langer
Marjorie Scardino
Bennett Shapiro
Christopher Viehbacher
TOTAL
TOTAL
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
$590,000 $31,265
$24,425
$536,857
$410,000 $29,381
$23,118
$359,392
$590,000 $4,573,012
$1,221,381
$348,957
$410,000 $1,527,385
$407,941
$233,605
$8,400
$8,250
$8,400
$8,250
$89,285
$140,000
$95,000
$100,000
$105,000
$100,000
$110,000
$110,000
$90,000
$90,000
$95,000
$104,167
$107,074
$95,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$1,691,360 $60,646 $1,000,000 $6,100,397 $16,800
2018
$1,635,416
$47,543
$582,562
$1,629,322 $16,500
$5,792,677
$2,139,870
$2,385,166
$1,032,306
$89,285
$140,000
$95,000
$100,000
$105,000
$100,000
$110,000
$110,000
$90,000
$90,000
$95,000
$104,167
$107,074
$95,000
$8,869,203
$3,911,343
Notes:
1 Benefits comprise the following elements: private medical, disability and dental cover and parking.
2
The shares underlying the vested 2017 Performance Share Plan awards will be issued after the finalisation of this report. As a result, the share price on the date of issuance
is not known at the date of this report and the figures shown above for the PSP awards have been valued using a share price of £2.6089, which was the average share price
during the last three months of 2019, and an exchange rate of GBP 1 : USD 1.2866, which was the average exchange rate over the last three months of 2019.
PureTech Health plc Annual report and accounts 2019 83
Governance Annual Report on Remuneration — continued
Annual bonus outcome for 2019
For the 2019 annual bonus, targets were set for a balanced scorecard at the beginning of the year. The 2019 targets were
focused on (i) financial and strategic goals designed to incentivise the team to complete important deals, execute strategic
partnerships and operate within the Company’s 2019 budget, (ii) clinical development goals designed to incentivise the team
to generate valuable clinical data in support of the Company’s programmes, (iii) innovation goals designed to incentivise the
team to create innovative programmes, obtain patent protection for its technologies, obtain publication of the technologies
in top tier medical and science journals and establish state of the art laboratory and operations teams, and (iv) commercial
goals designed to incentivise the team to take all steps necessary to commercially launch products. During 2019, management
significantly exceeded these targets. The table below sets out the performance assessment and associated bonus outcomes:
Target Goals – Maximum 100% Achievement
Performance
Measures Category
Achievement
Financial/
Strategic Goals
The Financial and Strategic Goals were achieved in 2019. The management team’s
performance resulted in an achievement outcome of 75 per cent but such outcome
percentage had a pre-specified capped of 50 per cent for this category of the goals.
A description of performance in 2019 is set out below:
The Company enabled the initial public offering of Karuna, which was one of the
best performing US initial public offerings of 2019. The Company also entered into
collaboration and partnership agreements with Boehringer Ingelheim, Bristol-Myers
Squibb, Ro, Shionogi & Co. Ltd among others as described on pages 21 to 44.
The Company’s Founded Entities raised approximately $623 million in funding which will
enable the Founded Entities to continue toward their respective development milestones.
Percentage
of Target
Attained
50%
Clinical
Development and
Regulatory Goals
The Clinical Development Goals were achieved in 2019. The management team’s
performance resulted in an achievement outcome of 60 per cent but such outcome
percentage had a pre-specified capped of 25 per cent for this category of the goals. A
description of performance in 2019 is set out below:
25%
Gelesis’ first product, Plenity™, was cleared by the FDA for sale. Karuna, Gelesis, Akili
and Follica completed successful clinical studies in 2019 within prescribed timelines,
including Karuna’s Phase 2 clinical trial of KarXT for the treatment of acute psychosis in
patients with schizophrenia.
Market
Capitalisation
Goals
The Market Capitalisation Goals were achieved in 2019. The management team’s
performance resulted in an achievement outcome of 50 per cent which was equal to the
cap of 50 per cent for this category of the goals. A description of performance in 2019 is
set out below:
50%
The Company’s share price increased from 169 pence to 317 pence from
31 December 2018 to 31 December 2019 representing an increase of approximately 88
per cent for the Company’s shareholders. The Company increased the net asset value
of its holdings dramatically while also developing product candidates within its Wholly
Owned Pipeline.
Innovation Goals
The Commercial Goals were achieved in 2019. The management team’s performance
resulted in an achievement outcome of 40 per cent but such outcome percentage had
a pre-specified capped of 25 per cent for this category of the goals. A description of
performance in 2019 is set out below:
25%
The Company acquired a clinical stage immune focussed asset (LYT-100) from Teva
Pharmaceuticals and showed pre-clinical proof of concept in it LYT-200 (solid tumours)
and LYT-210 (solid tumours and autoimmune disorders) programmes. The Group also
had patents issued covering several of the Founded Entities’ technologies and filed
patent applications covering many others. The Company also had several programmes
published in top-tier peer reviewed scientific journals.
Pre-Specified
Maximum Total
100%
Accordingly, the Company achieved 100 per cent of its target goals for 2019.
84 PureTech Health plc Annual report and accounts 2019
Governance Annual Report on Remuneration — continued
Each of the above target categories are subject to maximum percentage achievement limits capped at 100 per cent of the
target bonus (i.e. 50 per cent of salary). Payments beyond the target are determined by the Remuneration Committee in
light of stretch goals which take into account the extent target goals have been exceeded, the overall quality of underlying
performance and value created for shareholders. In this case, the Company performed significantly above the target
category maximum goals reflected in an increase in share price during the year of approximately 88 per cent, a substantial
increase in net asset value as well as significant portfolio, partnering and regulatory successes. In light of these extraordinary
achievements, the Committee determined that the stretch goals had been achieved in full and that payouts at 200 per cent of
target (i.e. 100 per cent of salary) are appropriate. The Committee believes that such a bonus award is appropriate to reward
and retain top management when such extraordinary performance is achieved.
The CEO was eligible for a target bonus equal to 50 per cent of her 2019 salary. The Company significantly exceeded its target
goals and the Committee determined that the overall percentage achievement should be 200% due to the extraordinary
performance of the Company and management. As a result, the CEO was awarded a 2019 bonus equal to 100 per cent of her
2019 salary, which is the maximum under the policy.
The COO was eligible for a target bonus equal to 50 per cent of his 2019 salary. The Company significantly exceeded its target
goals and the Committee determined that the overall percentage achievement should be 200% due to the extraordinary
performance of the Company and management. As a result, the COO was awarded a 2019 bonus equal to 100 per cent of his
2019 salary, which is the maximum under the policy.
Long-term incentive awards vesting in the year (unaudited)
The 2017 PSP awards granted on 19 May 2017 will vest in 2020. Following an assessment of the performance condition, the
Remuneration Committee determined that the awards will vest at 100 per cent of the maximum as follows:
Scheme
Basis of award granted Shares awarded
Shares vested
Shares lapsed
vested awards1,2
Value of
Daphne Zohar
Stephen Muniz
PSP 2017
PSP 2017
400% of salary
200% of salary
1,362,393
455,039
1,362,393
455,039
— $4,573,012
— $1,527,385
1
Shares have been valued using a share price of £2.6089, which was the average share price over the last three months of 2019, and an exchange rate of GBP 1 : USD 1.2866,
which was the average exchange rate over the last three months of 2019.
2 The value of the awards attributable to share price is $2,469,752 for Daphne Zohar and $824,897 for Stephen Muniz.
The outcome of the performance condition relating to these awards is set out below:
Measure and weighting
Absolute TSR (50%)
Net Asset Value growth (25%)
Strategic measures (25%)
Threshold
Maximum
Achievement
7% p.a.
7% p.a.
15% p.a.
15% p.a.
See description below
Achieved
Achieved
Achieved
Vesting
(% of each
element)
100%
100%
100%
The strategic measures over the three year period were focussed on (i) financial achievements, (ii) clinical development goals,
(iii) innovation goals related to obtaining patent protection for its technologies, obtaining publication of the technologies in
top tier medical and science journals and establishing state of the art laboratory and operations teams, and (iv) commercial
goals related to the Company’s efforts to commercially launch products. During the three year period, achievements satisfying
these goals included substantially increasing the value of the Company’s Internal programs and Founded Entities, raising more
than $990 million into the Company’s Founded Entities, executing more than 17 partnerships, prosecuting hundreds of patents
and patent applications, executing initial public offerings of Karuna therapeutics, Inc. and resTORbio, having one programme
cleared by the US Food and Drug Administration and developing validating clinical data across the Company’s Internal
programs and the Company’s Founded Entities.
Long-term incentive awards granted during the year (unaudited)
Basis of award
Scheme
granted Shares awarded
Share price
at date of grant1
Face value of
award
Daphne Zohar
PSP 2019
Stephen Muniz
PSP 2019
400% of
salary
200% of
salary
644,668 277.33 pence
$2,360,000
223,995 277.33 pence
$820,000
1
The share price at the date of grant is based on the 3-day average closing price immediately prior to the grant of the award.
% of face
value vesting
at threshold
performance
25%
25%
Vesting
determined by
performance over
Three financial
years to
31 December
2021
The PSP awards granted in 2019 are subject to (i) achievement of absolute TSR targets (50 per cent of the awards), (ii)
achievement of TSR targets as compared to TSR performance of the constituent companies in the FTSE 250 Index (excluding
Investment Trusts) and the MSCI Europe Health Care Index (25 per cent of the awards) and (iii) achievement of targets based
on strategic measures (25 per cent of the awards), measured over the three year period to 31 December 2021.
PureTech Health plc Annual report and accounts 2019 85
Governance Annual Report on Remuneration — continued
The minimum performance target for the absolute TSR portion of the award is TSR equal to 7 per cent per annum, whilst the
maximum target is TSR equal to 15 per cent per annum. The minimum performance target for the relative TSR portion of the
award is TSR equal to the median of the index, whilst the maximum target will be TSR equal to the upper quartile of the index.
Strategic measures will be based on the achievement of project milestones and other qualitative measures of performance.
The Committee believes that this combination of measures and the higher weighting on TSR is appropriate. TSR measures the
success of our management team in identifying and developing medical solutions whilst strategic targets help incentivise our
management team through the stages which ultimately result in successful products.
Full disclosure of the strategic targets will be made retrospectively.
Payments for Loss of Office
There were no payments for Loss of Office during 2019.
Payments to past Directors
No payments to past Directors were made during 2019.
Directors’ shareholdings (audited)
Directors are required to maintain share ownership equal to a minimum of 200 per cent of base salary. Both Executive Directors
satisfy this requirement. As noted, if the proposed new Remuneration Policy is approved, post-employment shareholding
requirements will apply.
The table below sets out Directors’ shareholdings which are beneficially owned or subject to a service condition.
Total Share Awards not subject
to Service Conditions
Director Shareholdings
Share awards subject
to performance and service
conditions
Total
Director
31 Dec 2019
31 Dec 2018
31 Dec 2019
31 Dec 2018
31 Dec 2019
31 Dec 2018
Daphne Zohar (Zohar LLC + Trusts)1
Stephen Muniz
Joi Ito
Raju Kucherlapati
John LaMattina
Robert Langer
Marjorie Scardino
Ben Shapiro
Chris Viehbacher (Trust)6
12,197,307
2,889,499
1,395,579
2,459,831
1,495,332
2,944,134
787,710
2,629,974
1,025,646
11,890,157
2,786,170
1,395,579
2,459,831
1,495,332
2,944,134
787,710
2,629,974
1,025,646
1,680,2962
570,6394
—
—
—
—
—
—
—
2,398,0213
801,6835
45,223
22,611
22,611
22,611
122,101
22,611
170,941
13,877,603
3,460,138
1,395,579
2,459,831
1,495,332
2,944,134
787,710
2,629,974
1,025,646
14,288,178
3,587,853
1,395,579
2,459,831
1,495,332
2,944,134
787,710
2,629,974
1,025,646
1
2
3
4
5
6
A portion of Ms Zohar’s shareholding in the Company is indirect. As of 31 December 2019, (i) 2,378,032 ordinary shares are held by the Zohar Family Trust I, a US-established
trust of which Ms Zohar is a beneficiary and trustee, (ii) 2,378,031 ordinary shares are held by the Zohar Family Trust II, a US-established trust of which Ms Zohar is
a beneficiary (in the event of her spouse’s death) and trustee, (iii) 7,134,094 ordinary shares are held by Zohar LLC, a US-established limited liability company, and (iv) 307,150
ordinary shares are held directly by Ms. Zohar. Ms Zohar owns or has a beneficial interest in 100 per cent of the share capital of Zohar LLC.
Includes the following RSUs, which are subject to performance conditions: 1,035,628 (2018) and 644,668 (2019). Does not include 1,362,393 shares which are issuable
pursuant to the RSU award granted to Ms Zohar covering the financial years 2017, 2018 and 2019 which have vested but not yet been issued.
Includes the following RSUs, which are subject to performance conditions: 1,362,393 (2017) and 1,035,628 (2018).
Includes the following RSUs, which are subject to performance conditions: 346,644 (2018) and 223,995 (2019). Does not include 455,039 shares which are issuable pursuant
to the RSU award granted to Mr Muniz covering the financial years 2017, 2018 and 2019 which have vested but not yet been issued.
Includes the following RSUs, which are subject to performance conditions: 455,039 (2017) and 346,644 (2018).
All of Mr Viehbacher’s shareholding in the Company is held through his trust, Viehbacher 2015 GRAT u/a/d 22 May 2015.
Directors‘ service contracts (unaudited)
Detail of the service contracts of current Directors is set out below:
Executive Directors
Daphne Zohar
Stephen Muniz
Notice period
180 days
60 days
Contract date
18 June 2015
18 June 2015
Maximum potential
termination payment
12 months’ salary
12 months‘ salary
Potential payment
on change of
control/liquidation
Nil
Nil
86 PureTech Health plc Annual report and accounts 2019
Governance Annual Report on Remuneration — continued
Contracts for the above Executive Directors will continue until terminated by notice either by the Company or the
Executive Director.
Non-Executive Directors
Raju Kucherlapati
John LaMattina
Robert Langer
Marjorie Scardino
Bennett Shapiro
Christopher Viehbacher
Notice period
Contract date
Contract expiration date
1 month
1 month
1 month
1 month
1 month
1 month
5 June 2018
5 June 2018
5 June 2018
5 June 2018
5 June 2018
5 June 2018
5 June 2021
5 June 2021
5 June 2021
5 June 2021
5 June 2021
5 June 2021
The Company and the Non-Executive Directors listed above intend to enter into new contracts prior to their expiration.
TSR performance graph (unaudited)
The graph shows the Company’s performance, measured by total shareholder return (TSR), compared with the NASDAQ
Biotechnology Index and S&P600 Biotechnology Index since the Company’s IPO. The Committee considers these to be
relevant indices for TSR comparison as they are broad-based measures of the performance of the biotechnology industry.
Total shareholder return (unaudited)
Source: FactSet
200
180
160
140
120
100
80
60
40
20
)
d
e
s
a
b
e
r
(
)
£
(
e
u
l
a
V
0
19 Jun
&%'!$'"!&(
2015
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
PureTech
NASDAQ Biotechnology
S&P600 Biotechnology
This graph shows the value, by 31 December 2019, of £100 invested in PureTech on the date of Admission (19 June 2015),
compared with the value of £100 invested in the NASDAQ Biotechnology and S&P600 Biotechnology Indices on the same date.
The other points plotted are the values at intervening financial year-ends.
Chief Executive Officer‘s Remuneration History (unaudited)
Year
2015
2016
2018
2018
2019
Incumbent
Role
Daphne Zohar
Chief Executive Officer
Daphne Zohar
Chief Executive Officer
Daphne Zohar
Chief Executive Officer
Daphne Zohar
Chief Executive Officer
Daphne Zohar
Chief Executive Officer
Single figure of total
remuneration
Annual bonus pay-out
against maximum
PSP Vesting against
maximum opportunity
$955,599
$747,634
$821,898
$2,139,870
$5,792,677
100%
38.75%
50%
65%
100%
n/a
n/a
n/a
50%
100%
PureTech Health plc Annual report and accounts 2019 87
Governance
Annual Report on Remuneration — continued
Percentage change in remuneration of CEO and employees (unaudited)
The table below shows the change in the Chief Executive Officer’s remuneration from 2018 to 2019 compared to the change in
remuneration of all full-time employees across the Group who were employed throughout 2018 and 2019:
CEO
Employees1
1 Does not include employees of Founded Entities.
Relative importance of spend on pay (unaudited)
Base salary
Benefits
Annual bonus
10%
12%
3%
4%
69%
60%
The following table sets out the percentage change in overall spend on pay, distributions to shareholders and profit in 2019
compared to 2018:
Staff costs1
Distributions to Shareholders
Profit before tax and exceptional items1
1 Excludes Founded Entities.
2019
2018
% change
$15,562,153 $11,005,550
—
$618,408,813 $(12,443,967)
—
41%
—
—%
Details of the Remuneration Committee, advisors to the Committee and their fees
The Remuneration Committee consists of Dr LaMattina, Dr Shapiro and Dr Kucherlapati, with Dr LaMattina serving as the
Chairman of the Committee. The Committee received independent remuneration advice from Aon plc. This independent
advisor was appointed by and is accountable to the Committee and provides no other services to the Company. The terms
of engagement between the Committee and Aon are available from the Company Secretary on request. The Committee
also consults with the Chief Executive Officer and Chief Operating Officer. However, no Director is permitted to participate
in discussions or decisions about their personal remuneration. During the year fees in respect of remuneration advice from
Aon amounted to £44,766. Aon is a founder member of the Remuneration Consultants’ Group and complies with its Code of
Conduct which sets out guidelines to ensure that its advice is independent and free of undue influence.
Statement of voting at general meeting (unaudited)
The table below sets out the proxy results of the vote on the Group’s Remuneration Report at the Group’s 2019 AGM:
Resolutions
For
%
Against
%
Withheld
Total votes cast
To approve the Directors’
Remuneration Report
198,555,876
94.45
11,659,058
5.55%
125
210,214,934
The table below sets out the proxy results of the vote on the Group’s Remuneration Policy at the Group’s 2019 AGM:
Resolutions
For
%
Against
%
Withheld
Total votes cast
To approve the Directors’
Remuneration Policy
Statement of voting at AGM
209,293,335
99.56
920,331
0.44%
1,393
210,213,666
The Company’s AGM will be held at 11.00 am EDT (4.00 pm BST) on 11 June 2020 at the Company’s headquarters at
6 Tide Street, Boston, Massachusetts. Information regarding the voting outcome will be disclosed in next year’s annual
report on remuneration.
This report has been prepared by the Remuneration Committee and has been approved by the Board. It complies with the
CA 2006 and related regulations. This report will be put to shareholders for approval at the forthcoming AGM.
On behalf of the Board of Directors
Stephen Muniz, Esq.
Company Secretary
8 April 2020
88 PureTech Health plc Annual report and accounts 2019
Governance Independent auditor’s report to the members
of PureTech Health plc
Overview
Materiality:
Group financial
statements as a whole
Coverage
Key audit matters
$1.28m (2018: $1m)
0.9% (2018: 0.8%) of total
operating expenses
100% (2018: 100%) of
group profit before tax
Recurring
risks
Valuation of financial
instruments measured at fair
value through profit or loss;
preferred shares, convertible
loan notes and warrants
Classification and measurement
of preferred shares, convertible
loan notes and warrants
Determination of the
accounting and valuation of
investments in associates
Revenue recognition
Valuation of investment and
related party receivables held
by the Parent Company
vs 2018
1. Our opinion is unmodified
We have audited the financial statements of
PureTech Health plc (“the Company”) for the
year ended 31 December 2019 which comprise
the Consolidated Statements of Comprehensive
Income/(Loss), Consolidated Statements of Financial
Position, Consolidated Statements of Changes in
Equity, Consolidated Statements of Cash Flows,
Company Statement of Financial Position, Company
statements of changes in Equity, Company
statement of Cash Flows, and the related notes,
including the accounting policies in note 1.
In our opinion:
• the financial statements give a true and fair view
of the state of the Group’s and of the parent
Company’s affairs as at 31 December 2019 and of
the Group’s profit for the year then ended;
• the Group financial statements have been properly
prepared in accordance with International Financial
Reporting Standards as adopted by the European
Union (IFRSs as adopted by the EU);
• the parent Company financial statements have
been properly prepared in accordance with IFRSs
as adopted by the EU and as applied in accordance
with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities are described
below. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our
opinion. Our audit opinion is consistent with our report
to the audit committee.
We were first appointed as auditor by the directors on
7 September 2015. The period of total uninterrupted
engagement is for the five financial years ended
31 December 2019. We have fulfilled our ethical
responsibilities under, and we remain independent of
the Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to
listed public interest entities. No non-audit services
prohibited by that standard were provided.
PureTech Health plc Annual report and accounts 2019 89
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial
statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified
by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit;
and directing the efforts of the engagement team. We summarise below the key audit matters (unchanged from 2018), in
decreasing order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address
those matters and, as required for public interest entities, our results from those procedures. These matters were addressed,
and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial
statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not
provide a separate opinion on these matters.
The risk
Our response
Valuation of financial instruments
measured at fair value through
profit or loss; preferred shares,
convertible loan notes and
warrants
($109 million; 2018: $240 million)
Refer to page 74 (Audit Committee
Report), page 104 (accounting
policy) and page 134 (financial
disclosures).
Our procedures included:
Our valuation expertise:
We used our own valuation specialists to
assist us in critically assessing certain key
inputs utilised within the OPM, PWERMs
or hybrid approaches for each company
being valued, being equity value where
derived from the market valuation
approach, EBIT margins, discount rates,
volatility, risk free rates using independent
external corroboration.
Our valuation specialists challenged the
appropriateness of the management’s
comparable companies and transactions by
comparing to an independent selection of
companies and transactions.
Our valuation specialists critically
assessed the appropriateness of the
discount rates, with specific focus (where
applicable) on: the company specific
risk premium (including appropriateness
of the probability of success where
applicable); the control premium; and the
venture capital rates of return utilised.
We considered against the stage of
development of the company where capital
rates of return are utilised and the specific
scenarios of the company in respect of the
control premium.
Assessing valuer’s credentials:
We assessed the expertise of the group’s
external valuation experts used in the
corroboration of management’s valuation.
Subjective valuation:
The Group finances its operations and
its subsidiaries partly through preferred
shares, convertible notes or warrants which
are classified as instruments and carried
at fair value.
Determining the fair value of the preferred
shares, convertible notes and warrants
involves a significant level of judgement
around the assumptions used, and internal
and external factors that may impact
the assumptions.
The fair value of the instruments classified
as assets or liabilities are estimated by the
directors using valuation models including
option pricing models (OPM), probability-
weighted expected return models
(PWERM), or a hybrid of both.
The fair value of instruments classified as
equity may be valued using the market
approach by observing recent arms-length
transactions or comparable guideline
public companies.
There is judgement in relation to the
appropriate valuation technique to adopt
in determining the equity value of each
entity, dependent on the nature and the
stage of the company being valued.
Where the market approach (comparable
public companies or transactions) is
used, there is judgement as to the
appropriateness of the comparable
companies or transactions selected.
Where a recent arm’s length funding round
is used, there is judgement as to whether
the funding round is sufficiently arm’s
length to ensure that it is representative
of an independent market valuation at fair
value. There is also judgement as to the
relevance of the arm’s length transaction
based on the stability of the external
and internal environment since that
funding round occurred and the specific
circumstances of that investment.
90 PureTech Health plc Annual report and accounts 2019
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
2. Key audit matters: including our assessment of risks of material misstatement — continued
The risk
Our response
Valuation of financial instruments
measured at fair value through
profit or loss; preferred shares,
convertible loan notes and
warrants (continued)
($109 million; 2018: $240 million)
Refer to page 74 (Audit Committee
Report), page 104 (accounting
policy) and page 134 (financial
disclosures).
Where the valuation utilises
the cost approach, there is
judgement relating to whether
the costs incurred by the company
in developing the intellectual
property and/or the value of the
IP and the assets of the company
is representative of what would
be recoverable if the company
had to be sold.
The effect of these matters is that,
as part of our risk assessment,
we determined that the valuation
of financial liabilities has a high
degree of estimation uncertainty,
with a potential range of
reasonable outcomes greater
than our materiality for the
financial statements as a whole
and possibly many times that
amount. The financial statements
(note 16) disclose the sensitivity
estimated by the Group.
Methodology choice:
We, with assistance from our valuation
specialists, assessed the appropriateness
of the valuation methodology used for each
company based on the specific circumstances
relevant to each company such as the stage of
development, relevant comparable companies
to the company, availability of reliable forecasts,
relevance of funding rounds, the industry in
which it operates and also the likely exit date or
commercialisation date.
Benchmarking assumptions:
Internal data such as strategic plans, forecasts and
budgets and actual results are utilised for inputs
such as exit dates and scenarios and probability
of exit scenarios. Procedures performed included
comparing to prior periods for consistency,
assessing the probabilities assigned to the
scenarios given the stage of the company in its life
cycle, understanding key changes and critically
assessing current progress against milestones
set and assessing where there is an impact on
the forecast exit date and assessing whether
the assumptions used are consistent with the
strategic plans.
Where instruments were valued using the price
of a recent investment as an appropriate basis for
the measurement of fair value we corroborated
the price to signed agreements and evaluated the
independence of the funding round.
We also critically assessed whether there had
been market or company specific events between
the date of the third party funding round and
the year end date which would impact the value
of the company.
We critically assessed the appropriateness of
the assumptions underlying the forecasts. The
assumptions over projected revenue included
forecast product commercialisation or license
date, royalty rates where applicable, operating
costs, EBIT margin, terminal values and the
probability of success factors where applicable.
In doing this we used our knowledge of each
subsidiary and its industry with reference to both
internal management information and externally
derived data and benchmarks. External data
related to market size data, royalty rates and
competitor analysis is based on information
from public material.
Assessing transparency:
We assessed the appropriateness, in accordance
with relevant accounting standards, of the
disclosures related to estimation uncertainty.
Our results
We found the valuation of warrants, convertible
notes, preferred shares fair valued through profit/
loss to be acceptable. (2018: acceptable)
PureTech Health plc Annual report and accounts 2019 91
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
2. Key audit matters: including our assessment of risks of material misstatement — continued
The risk
Our response
Classification and measurement
of preferred shares, convertible
loan notes and warrants
($109 million; 2018: $240 million)
Refer to page 74 (Audit Committee
Report), page 104 (accounting
policy) and page 134 (financial
disclosures).
Accounting treatment:
The Group finances its operations
and subsidiaries partly through
financial instruments such as
preferred shares, convertible loan
notes and warrants.
There is a significant level of
judgement in relation to assessing
the terms of the instruments to
identify whether the instruments
meet the criterion to be classified as
debt or equity in the issuer.
There is also judgement in assessing
the terms of the contracts to
determine any host instrument and
whether there are any separable
embedded derivatives. Failure
to identify the key clauses of
the instrument could result in
a different answer which will impact
the subsequent measurement of
the instrument.
Due to these factors, for new
financial instruments issued in the
year, this has been determined to
be a significant risk.
Our procedures included:
Accounting analysis:
Assessing the conclusions reached by the Group
in relation to the debt versus equity classification
of the issued financial instruments by considering
the key terms and features of the contracts
and applying and interpreting the relevant
accounting standards;
Assessing whether the financial instruments
contained embedded derivatives by considering
the key terms of the contracts, identifying a host
contract, and assessing whether each feature met
the definition of an embedded derivative and
whether they should be bifurcated;
Assessing the Group’s classification of whether any
separable embedded derivative should be liability
or equity classified based on the terms of the
related contracts;
Where the Group classified the entire hybrid
contract at fair value through profit or loss, we
evaluated whether certain embedded derivatives
required separate measurement by critically
assessing the key terms and features of
those derivatives;
Challenging the Group’s assessment of the
implications of the debt versus equity classification
of the preferred shares issued at subsidiary level
on the measurement of NCI in the Group by
inspecting the source documentation to identify
the key features which would determine the
classification and then considering the impact
of this classification on the measurement of the
NCI calculation;
Assessing transparency:
Assessing whether the Group’s disclosures
were consistent with the conclusions reached in
relation to both the classification of the financial
instruments and the determination of whether
there are embedded derivatives within the
host contracts;
Our results
We found the classification and determination of
embedded derivatives within financial instruments
to be acceptable. (2018: acceptable)
92 PureTech Health plc Annual report and accounts 2019
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
2. Key audit matters: including our assessment of risks of material misstatement — continued
Determination of the accounting
and valuation of investments
in associates
($153 million; 2018: $84 million)
Refer to page 74 (Audit Committee
Report), page 104 (accounting
policy) and page 121 (financial
disclosures).
Revenue recognition
($9 million; 2018: $16 million)
Refer to page 74 (Audit Committee
Report), page 104 (accounting
policy) and page 113 (financial
disclosures).
The risk
Our response
Accounting treatment:
The Group has entities it controls and
therefore consolidates under IFRS 10. As the
entities progress they require further external
funding which in some scenarios reduces
the Group’s shareholding to an extent that it
loses control which results in them no longer
being able to consolidate the entity.
Due to the fact that the Group holds
a variety of instruments in the entities,
which have varying risks and rights, there is
significant judgement in relation to whether
the shares are accounted for under IAS 28
Investments in Associates and Joint Ventures
or as a financial asset per IFRS 9 Financial
Instruments and therefore held at fair value.
The judgements include whether significant
influence exists and whether the instruments
fall within the scope of IAS 28 or IFRS 9.
Our procedures included:
Accounting analysis:
We have assessed the Group’s
technical accounting where there is
a determination whether the investment
falls within the scope of IFRS 10, IAS 28
and/or IFRS 9.
Assessing transparency:
We have considered the adequacy of the
disclosure of the accounting treatment in
the financial statements and disclosure
of assumptions relating to the valuation
of the investment if it falls into the
scope of IFRS 9.
Our valuation expertise:
We have assessed the Group’s valuation
of the financial asset inline with the
procedures outlined on pages 90 and 91.
Subjective valuation:
There is a significant level of judgement
involving estimates in relation to determining
the fair value of this financial asset. The
valuation risk is outlined on pages 90 and 91.
Our results
We found the determination of
the classification and valuation of
the investments to be acceptable.
(2018: acceptable)
In the current year this risk is specific to Akili,
Vor, Karuna and Gelesis.
Accounting treatment:
Revenue recognition involves a significant
level of judgement and estimation due to
the non-standard nature of the research
and development revenue stream of the
Group. This revenue stream involves bespoke
contracts which are drafted in relation to
each agreement reached with a third party.
Judgement is required in assessing the
implications of the terms of the agreements
and identification of distinct performance
obligations; allocation of the transaction
price to each performance obligation; and
consideration as to whether revenue should
recognised as over time or at a point in
time in relation to the appropriate revenue
recognition policy.
There is significant estimation involved in
the budgets and forecasts that drive the
inputs method of revenue recognition where
revenue is recognised over time.
The effect of these matters is that, as part of
our risk assessment, we determined that the
costs to complete of the long term contracts
have a high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality for the
financial statements as a whole, and possibly
many times that amount. The financial
statements (note 3) disclose the sensitivity
estimated by the Group.
Our procedures included:
Accounting analysis:
We have assessed the key agreements to
consider the Group’s assessment of the
revenue contract.
We have assessed the Group’s
determination of distinct performance
obligations contained within the contract.
We have reviewed the Group’s
calculated constrained transaction
price and its allocation to the identified
performance obligations.
We have assessed the Group’s
methodology in recognising revenue
based on the inputs method by testing
a sample of costs and considering
completeness of the costs.
Assessing transparency:
We have assessed the adequacy of
the Group’s disclosures in relation to
the revenue recognition accounting
policies adopted, including the
transition to IFRS 15.
Our results
We found the revenue recognition to be
acceptable. (2018: acceptable)
PureTech Health plc Annual report and accounts 2019 93
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
2. Key audit matters: including our assessment of risks of material misstatement — continued
The risk
Our response
Valuation of investments and
intercompany receivable balances
held by the Parent Company
($438 million; 2018: $428 million)
Refer to page 71 (Audit Committee
Report), page 104 (accounting
policy) and page 134 (financial
disclosures).
Low risk, high value
The carrying amount of the parent
Company’s investments in and
intercompany receivables from the
subsidiary companies represents
100% (2018: 100%) of the Company’s
total assets. Their recoverability is not
considered to contain a high risk of
significant misstatement or be subject
to significant judgement. However, due
to their materiality in the context of the
parent Company financial statements,
this is considered to be the area that
had the greatest effect on our overall
parent Company audit.
Our procedures included:
Comparing valuations:
We compared the carrying amount of the
investment and the intercompany receivables
to the market capitalisation of the Group, as
PureTech Health LLC contains all of the Group’s
trading operations.
We compared the carrying value of the
investment and the intercompany receivables
to the valuations derived for the purposes of
the fair value of the financial instruments to
assess for indicators of impairment.
Our results
We found the valuation of the investments
and intercompany receivable balances held
by the Parent Company to be acceptable.
(2018: acceptable)
3. Our application of materiality and an overview of the scope of our audit
Materiality for the group financial statements as a whole
was set at $1.28 million, determined with reference to
a benchmark of Total operating expenses (being general
and administrative expenses and research and development
expenses), of which it represents 0.9% (2018: 0.8%).
Total operating expenses is considered to be on of the
principle considerations for the members of the Company
in assessing the financial performance of the Group, since
the Group’s activities are currently principally in relation to
expenditure on developing forms of intellectual property
which can be exploited commercially to generate income
and growth in the future.
Materiality for the parent company financial statements
as a whole was set at $890k (2018: $830k), determined
with reference to a benchmark of total assets, capped
at component materiality, of which it represents 0.2%
(2018: 0.25%).
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding $60k, in
addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the group’s 3 (2018: 3) reporting components, we
subjected 3 (2018: 3) to full scope audits for group purposes.
The Group team instructed component auditors as to the
significant areas to be covered, including the relevant risks
detailed above and the information to be reported back.
The component materialities ranged from $480k to $760k,
having regard to the mix of size and risk profile of the Group
across the components. The work on 1 of the 3 components
(2018: 2 of the 3 components) was performed by component
auditors and the rest, including the audit of the parent
company, was performed by the Group team.
Meetings and telephone conferences were also held with the
component auditor to assess audit risk and strategy. At these
meetings, the findings reported to the Group team were
discussed in more detail, and any further work required by the
Group team was then performed by the component auditor.
Total operating expenses
$145m (2018: $125m)
Group Materiality
$1.28m (2018: $1m)
$1.28m
Whole financial
statements materiality
(2018: $1m)
$950k
Range of materiality
at 3 components
($480k to $760k)
(2018: $600k to $830k)
$60k
Misstatements reported
to the audit committee
(2018: $50k)
Total expenses
Group materiality
Group revenue
Group loss before tax
100%
(2018: 100%)
100
100
Group total assets
100%
(2018: 100%)
100
100
100%
(2018: 100%)
100
100
Full scope for Group
audit purposes 2019
Full scope for Group
audit purposes 2018
94 PureTech Health plc Annual report and accounts 2019
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
4. We have nothing to report on going concern
5. We have nothing to report on the other information
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Company or the Group or to cease their operations, and as
they have concluded that the Company’s and the Group’s
financial position means that this is realistic. They have also
concluded that there are no material uncertainties that could
have cast significant doubt over their ability to continue as
a going concern for at least a year from the date of approval
of the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of
the Directors’ conclusions and, had there been a material
uncertainty related to going concern, to make reference to
that in this audit report. However, as we cannot predict all
future events or conditions and as subsequent events may
result in outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the absence
of reference to a material uncertainty in this auditor’s report
is not a guarantee that the Group and the Company will
continue in operation.
In our evaluation of the Directors’ conclusions, we considered
the inherent risks to the Group’s and Company’s business
model and analysed how those risks might affect the Group’s
and Company’s financial resources or ability to continue
operations over the going concern period. The risks that we
considered most likely to adversely affect the Group’s and
Company’s available financial resources over this period were:
• Failure to raise future funding to finance the Group’s
strategic business model.
As these were risks that could potentially cast significant
doubt on the Group’s and the Company’s ability to continue
as a going concern, we considered sensitivities over the
level of available financial resources indicated by the Group’s
financial forecasts taking account of reasonably possible
(but not unrealistic) adverse effects that could arise from
these risks individually and collectively and evaluated the
achievability of the actions the Directors consider they would
take to improve the position should the risks materialise.
Based on this work, we are required to report to you if:
• we have anything material to add or draw attention to
in relation to the directors’ statement in Note 1 to the
financial statements on the use of the going concern
basis of accounting with no material uncertainties that
may cast significant doubt over the Group and Company’s
use of that basis for a period of at least twelve months
from the date of approval of the financial statements; or
• the related statement under the Listing Rules set
out on page 71 is materially inconsistent with our
audit knowledge.
We have nothing to report in these respects, and we did not
identify going concern as a key audit matter.
in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated
or inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the
strategic report and the directors’ report;
• in our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
• in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
Disclosures of principal risks and longer-term viability
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw
attention to in relation to:
• the directors’ confirmation within the Viability Statement
on page 48 that they have carried out a robust assessment
of the principal risks facing the Group, including those that
would threaten its business model, future performance,
solvency and liquidity;
• the Principal Risks disclosures describing these risks
and explaining how they are being managed and
mitigated; and
• the directors’ explanation in the Viability Statement of
how they have assessed the prospects of the Group, over
what period they have done so and why they considered
that period to be appropriate, and their statement as
to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet
its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Under the Listing Rules we are required to review the Viability
Statement. We have nothing to report in this respect.
Our work is limited to assessing these matters in the
context of only the knowledge acquired during our financial
statements audit. As we cannot predict all future events or
conditions and as subsequent events may result in outcomes
that are inconsistent with judgments that were reasonable at
the time they were made, the absence of anything to report
on these statements is not a guarantee as to the Group’s and
Company’s longer-term viability.
PureTech Health plc Annual report and accounts 2019 95
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
5. We have nothing to report on the other information
in the Annual Report — continued
Corporate governance disclosures
We are required to report to you if:
• we have identified material inconsistencies between the
knowledge we acquired during our financial statements
audit and the directors’ statement that they consider
that the annual report and financial statements taken as
a whole is fair, balanced and understandable and provides
the information necessary for shareholders to assess
the Group’s position and performance, business model
and strategy; or
• the section of the annual report describing the work of the
Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the
provisions of the UK Corporate Governance Code specified
by the Listing Rules for our review.
We have nothing to report in these respects.
6. We have nothing to report on the other matters on
which we are required to report by exception
Under the Companies Act 2006, we are required to report
to you if, in our opinion:
• adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 72,
the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error; assessing the Group and parent Company’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 they either intend
to liquidate the Group or the parent Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or other
irregularities (see below), or error, and to issue our opinion in
an auditor’s report. Reasonable assurance is a high level of
assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from
fraud, other irregularities or error and are considered material
if, individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users taken
on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
Irregularities – ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the
financial statements from our general commercial and sector
experience and through discussion with the directors (as
required by auditing standards), and from inspection of the
group’s regulatory and legal correspondence and discussed
with the directors and other management the policies and
procedures regarding compliance with laws and regulations.
We communicated identified laws and regulations
throughout our team and remained alert to any indications
of non-compliance throughout the audit. This included
communication from the group to component audit teams
of relevant laws and regulations identified at group level.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation and taxation legislation, and
we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial
statement items.
Secondly, the group is subject to many other laws and
regulations where the consequences of non-compliance
could have a material effect on amounts or disclosures in
the financial statements, for instance through the imposition
of fines or litigation or the loss of the group’s licence to
operate. We identified the following areas as those most
likely to have such an effect: health and safety, anti-bribery,
employment law (including within the United States), Food
and Drug Administration and European Medicines Agency
regulation, 1940s Investment Act and the Securities Exchange
Commission. Auditing standards limit the required audit
procedures to identify non-compliance with these laws
and regulations to enquiry of the directors and inspection
of regulatory and legal correspondence, if any. These
limited procedures did not identify actual or suspected
non-compliance.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements, even
though we have properly planned and performed our audit
in accordance with auditing standards. For example, the
further removed non-compliance with laws and regulations
(irregularities) is from the events and transactions reflected in
the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify
it. In addition, as with any audit, there remained a higher
risk of non-detection of irregularities, as these may involve
collusion, forgery, intentional omissions, misrepresentations,
or the override of internal controls. We are not responsible
for preventing non-compliance and cannot be expected to
detect non-compliance with all laws and regulations.
96 PureTech Health plc Annual report and accounts 2019
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
8. The purpose of our audit work and to whom we owe
our responsibilities
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s 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 and the Company’s members, as
a body, for our audit work, for this report, or for the opinions
we have formed.
Robert Seale (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
8 April 2020
PureTech Health plc Annual report and accounts 2019 97
Financial statements Consolidated Statements of Comprehensive Income/(Loss)
For the years ended 31 December
Contract revenue
Grant revenue
Total revenue
Operating expenses:
General and administrative expenses
Research and development expenses
Operating income/(loss)
Other income/(expense):
Gain on deconsolidation
Gain/(loss) on investments held at fair value
Loss on impairment of intangible asset
Gain/(loss) on disposal of assets
Gain/(loss) on loss of significant influence
Other income/(expense)
Other income/(expense)
Finance income/(costs):
Finance income/(costs)
Finance income/(costs) – subsidiary preferred shares
Finance income/(costs) – contractual
Finance income/(costs) – fair value accounting
Net finance income/(costs)
Share of net gain/(loss) of associates accounted for using the equity method
Impairment of investment in associate
Income/(loss) before taxes
Taxation
Income/(loss) for the year
Other comprehensive income/(loss):
Items that are or may be reclassified as profit or loss
Foreign currency translation differences
Unrealised gain/(loss) on investments held at fair value
Total other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
Income/(loss) attributable to:
Owners of the Company
Non-controlling interests
Comprehensive income/(loss) attributable to:
Owners of the Company
Non-controlling interests
Earnings/(loss) per share:
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
The accompanying Notes are an integral part of these financial statements.
Note
3
3
7
7
5
5
11
6
9
9
9
9
6
6
25
18
18
10
10
2019
$000s
8,688
1,119
9,807
2018
$000s
16,371
4,377
20,748
(59,358)
(85,848)
(135,399)
(47,365)
(77,402)
(104,019)
264,409
(37,863)
—
(82)
445,582
121
672,167
4,362
(1,458)
(2,576)
(46,475)
(46,147)
30,791
(42,938)
478,474
(112,409)
366,065
(10)
—
(10)
366,055
421,144
(55,079)
366,065
421,134
(55,079)
366,055
$
1.49
1.44
41,730
(34,615)
(30)
4,060
10,287
(278)
21,154
3,358
(106)
34
22,631
25,917
(11,490)
—
(68,438)
(2,221)
(70,659)
(214)
(26)
(240)
(70,899)
(43,654)
(27,005)
(70,659)
(43,894)
(27,005)
(70,899)
$
(0.16)
(0.16)
98 PureTech Health plc Annual report and accounts 2019
Financial statements Consolidated Statements of Financial Position
For the years ended 31 December
Assets
Non-current assets
Property and equipment, net
Right of use asset, net
Intangible assets, net
Investments held at fair value
Investments in associates
Lease receivable – long-term
Deferred tax assets
Other non-current assets
Total non-current assets
Current assets
Trade and other receivables
Prepaid expenses and other current assets
Lease receivable – short-term
Other financial assets
Short-term investments
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Merger reserve
Translation reserve
Other reserve
Retained earnings/(accumulated deficit)
Equity attributable to the owners of the Company
Non-controlling interests
Total equity
Non-current liabilities
Deferred revenue
Deferred tax liability
Lease liability, non-current
Other long-term liabilities
Total non-current liabilities
Current liabilities
Deferred revenue
Lease liability, current
Trade and other payables
Subsidiary:
Notes payable
Warrant liability
Preferred shares
Other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2019
$000s
2018
$000s
11
21
12
5
6
21
21
13, 22
22
22
14
14
14
14
14
14
14
14, 18
14
3
25
21
20
3
21
19
16, 17
16
15, 16
21,455
22,383
625
714,905
10,642
2,082
142
99
772,333
1,977
1,946
350
2,124
30,088
132,360
168,845
941,178
5,408
287,962
138,506
—
(18,282)
254,444
668,038
(17,640)
650,398
1,220
115,445
34,914
—
151,579
5,474
2,929
19,842
1,455
7,997
100,989
515
139,201
290,780
941,178
8,323
—
3,080
169,755
—
—
449
370
181,977
1,328
5,380
—
2,199
133,828
117,051
259,786
441,763
5,375
278,385
138,506
10
20,923
(167,692)
275,507
(108,535)
166,972
83
6,428
—
2,516
9,027
6,560
—
15,875
12,010
13,012
217,519
788
265,764
274,791
441,763
Please refer to the accompanying Notes to the consolidated financial information. Registered number: 09582467.
The consolidated financial statements were approved by the Board of Directors and authorised for issuance on 8 April 2020
and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
8 April 2020
The accompanying Notes are an integral part of these financial statements.
PureTech Health plc Annual report and accounts 2019 99
Financial statements Consolidated Statements of Changes in Equity
For the years ended 31 December
Balance 1 January 2018
Net income/(loss)
Foreign currency exchange
Unrealised gain/(loss) on investments
Total comprehensive income/(loss) for the period
Deconsolidation of subsidiary
Issuance of placing shares
Exercise of share-based awards
Subsidiary dividends to non-controlling interests
Equity settled share-based payments
As at 31 December 2018
Adjustment for the initial application of IFRS16
Adjusted balance as of 1 January 2019
Net income/(loss)
Foreign currency exchange
Total comprehensive income/(loss) for the period
Deconsolidation of subsidiaries
Subsidiary note conversion and changes in NCI ownership interest
Exercise of share-based awards
Shares and options issued in consideration for subsidiary’s non-controlling interest
Purchase of subsidiary’s non-controlling interest
Revaluation of deferred tax assets related to share-based awards
Equity settled share-based payments
Vesting of restricted stock units
Other
Share Capital
Shares
237,429,696
—
—
—
—
—
45,000,000
64,171
—
—
282,493,867
—
282,493,867
—
—
—
—
—
237,090
2,126,338
—
—
—
513,324
—
Amount
$000s
4,679
—
—
—
—
—
696
—
—
—
5,375
—
5,375
—
—
—
—
—
5
28
—
—
—
—
—
Share
premium
$000s
181,588
—
—
—
—
—
96,797
—
—
—
278,385
—
278,385
—
—
—
—
—
499
9,078
—
—
—
—
—
Balance 31 December 2019
285,370,619
5,408
287,962
138,506
(18,282)
254,444
668,038
(17,640)
650,398
The accompanying Notes are an integral part of these financial statements.
Other
reserve
$000s
17,178
Retained
earnings/
(accumulated
deficit)
$000s
(124,745)
(43,654)
Merger
reserve
$000s
138,506
Translation
reserve
$000s
224
—
(214)
—
(214)
(43,680)
(43,894)
Total
parent
equity
$000s
217,430
(43,654)
(214)
(26)
615
97,493
122
(8)
3,749
(10)
—
(20,631)
504
15,757
(39,796)
3,061
12,785
(1,280)
(2)
Non-
controlling
interests
$000s
(145,586)
(27,005)
(27,005)
55,168
—
—
—
—
—
—
—
97,178
23,049
24,039
1,683
—
—
—
—
25
Total
equity
$000s
71,844
(70,659)
(214)
(26)
(70,899)
55,783
97,493
122
(8)
999
167,971
366,065
(10)
97,178
2,418
504
15,757
(15,757)
3,061
14,468
(1,280)
23
—
(26)
619
—
122
(8)
—
—
—
—
—
—
—
—
—
—
(7)
3,749
8,888
12,637
20,923
(167,692)
275,507
(108,535)
166,972
999
999
20,923
(166,693)
276,506
(108,535)
421,144
421,144
(55,079)
421,144
421,134
(55,079)
366,055
—
—
—
—
(4)
—
—
—
—
—
—
—
—
—
(20,631)
6,651
(39,796)
3,061
12,785
(1,280)
5
138,506
138,506
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
10
—
10
—
(10)
(10)
—
—
—
—
—
—
—
—
—
—
100 PureTech Health plc Annual report and accounts 2019
Financial statements Consolidated Statements of Changes in Equity — continued
Balance 1 January 2018
Net income/(loss)
Foreign currency exchange
Unrealised gain/(loss) on investments
Total comprehensive income/(loss) for the period
Deconsolidation of subsidiary
Issuance of placing shares
Exercise of share-based awards
Subsidiary dividends to non-controlling interests
Equity settled share-based payments
As at 31 December 2018
Adjustment for the initial application of IFRS16
Adjusted balance as of 1 January 2019
Net income/(loss)
Foreign currency exchange
Total comprehensive income/(loss) for the period
Deconsolidation of subsidiaries
Subsidiary note conversion and changes in NCI ownership interest
Exercise of share-based awards
Shares and options issued in consideration for subsidiary’s non-controlling interest
2,126,338
Purchase of subsidiary’s non-controlling interest
Revaluation of deferred tax assets related to share-based awards
Equity settled share-based payments
Vesting of restricted stock units
Other
Balance 31 December 2019
The accompanying Notes are an integral part of these financial statements.
Share Capital
Shares
Amount
$000s
Share
premium
$000s
237,429,696
4,679
181,588
45,000,000
64,171
696
96,797
282,493,867
5,375
278,385
282,493,867
5,375
278,385
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5
28
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
499
9,078
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
237,090
513,324
Merger
reserve
$000s
138,506
—
—
—
—
—
—
—
—
—
138,506
—
138,506
—
—
—
—
—
—
—
—
—
—
—
—
285,370,619
5,408
287,962
138,506
Translation
reserve
$000s
224
—
(214)
—
(214)
—
—
—
—
—
10
—
10
—
(10)
(10)
—
—
—
—
—
—
—
—
—
—
Retained
earnings/
(accumulated
deficit)
$000s
(124,745)
(43,654)
—
(26)
(43,680)
619
—
122
(8)
—
(167,692)
999
(166,693)
421,144
—
421,144
—
—
—
—
—
—
—
—
(7)
Other
reserve
$000s
17,178
—
—
—
—
(4)
—
—
—
3,749
20,923
—
20,923
—
—
—
—
(20,631)
—
6,651
(39,796)
3,061
12,785
(1,280)
5
(18,282)
254,444
Total
parent
equity
$000s
217,430
(43,654)
(214)
(26)
(43,894)
615
97,493
122
(8)
3,749
275,507
999
276,506
421,144
(10)
421,134
—
(20,631)
504
15,757
(39,796)
3,061
12,785
(1,280)
(2)
668,038
Non-
controlling
interests
$000s
(145,586)
(27,005)
—
—
(27,005)
55,168
—
—
—
8,888
(108,535)
—
(108,535)
(55,079)
—
(55,079)
97,178
23,049
—
—
24,039
—
1,683
—
25
(17,640)
Total
equity
$000s
71,844
(70,659)
(214)
(26)
(70,899)
55,783
97,493
122
(8)
12,637
166,972
999
167,971
366,065
(10)
366,055
97,178
2,418
504
15,757
(15,757)
3,061
14,468
(1,280)
23
650,398
PureTech Health plc Annual report and accounts 2019 101
Financial statements Consolidated Statements of Cash Flows
For the years ended 31 December
Cash flows from operating activities
Income/(loss) for the year
Adjustments to reconcile net operating loss to net cash used in operating activities:
Non-cash items:
Depreciation and amortisation
Impairment of intangible assets
Impairment of investment in associate
Equity settled share-based payment expense
(Gain)/loss on investments held at fair value
(Gain)/loss on short-term investments
Gain on deconsolidation
Gain on loss of significant influence
Conversion of debt to equity
Disposal of assets
Proceeds from sale of assets
Share of net (income)/loss of associate
Deferred income taxes
Unrealised (gain)/loss on foreign currency transactions
Finance costs, net
Changes in operating assets and liabilities:
Accounts receivable
Other financial assets
Prepaid expenses and other current assets
Deferred revenues
Accounts payable and accrued expenses
Other liabilities
Interest received
Interest paid
Net cash used in operating activities
Cash flows from investing activities:
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchases of intangible assets
Purchase of associate preferred shares held at fair value
Purchase of investments held at fair value
Sale of investments held at fair value
Purchase of convertible note
Cash derecognised upon loss of control over subsidiary
Purchases of short-term investments
Receipt of payment for finance sub-lease
Proceeds from maturity of short-term investments
Net cash provided by/(used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of convertible notes
Payment of lease liability
Repayment of long-term debt
Distribution to Tal shareholders
Exercise of stock options
Proceeds from the issuance of shares
Vesting of restricted stock units
Buyback of shares
Distribution to shareholders on dissolution of subsidiary
Subsidiary dividend payments
Net cash provided by financing activities
102 PureTech Health plc Annual report and accounts 2019
Note
2019
$000s
2018
$000s
366,065
(70,659)
11,12
6
8
5
5
5
11
11
6
25
9
22
13
3
19
21
11
12
5, 6
5
5
6
22
21
22
18
21
27
15
6,665
—
42,938
14,468
37,863
—
(264,409)
(445,582)
—
140
—
(30,791)
112,077
—
46,229
747
(48)
(25)
186
11,166
3,002
3,648
(2,495)
2,778
30
—
12,637
20,307
(843)
(41,730)
(10,287)
349
111
50
11,491
1,723
(271)
(8,446)
467
(1,327)
774
4,841
5,094
115
—
(98,156)
(72,796)
(12,138)
—
(400)
(13,670)
(1,556)
9,294
(6,480)
(16,036)
(69,541)
191
173,995
63,659
1,606
(1,678)
(178)
(112)
504
51,048
(1,280)
—
—
—
(4,365)
125
(125)
(3,500)
—
—
—
(13,390)
(166,452)
—
148,062
(39,645)
6,147
—
(185)
—
—
152,030
—
(35)
(1,062)
(8)
49,910
156,887
Financial statements Consolidated Statements of Cash Flows — continued
Effect of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Note
Supplemental disclosure of non-cash investment and financing activities:
Purchase of non controlling interest in consideration for issuance of shares and options
Purchase of intangible asset and investment held at fair value in consideration for
issuance of warrant liability and assumption of other long and short-term liabilities
Leasehold improvements purchased through lease incentives (deducted from Right of Use Asset)
Conversion of subsidiary convertible note into preferred share liabilities
Conversion of subsidiary convertible note into subsidiary common stock (NCI)
Supplemental disclosure of cash paid for income taxes:
Cash paid for income taxes
The accompanying Notes are an integral part of these financial statements.
2019
$000s
(104)
15,309
117,051
132,360
15,757
15,894
10,680
4,894
2,418
176
2018
$000s
(44)
44,402
72,649
117,051
—
92
PureTech Health plc Annual report and accounts 2019 103
Financial statements Notes to the Consolidated Financial Statements
1.
Accounting policies
Description of Business
PureTech Health plc (“PureTech,” the “Parent” or the “Company”) is a public company incorporated, domiciled and
registered in the United Kingdom (“UK”). The registered number is 09582467 and the registered address is 8th Floor,
20 Farringdon Street, London EC4A 3AE, United Kingdom.
PureTech’s group financial statements consolidate those of the Company and its subsidiaries (together referred to as the
“Group”). The Parent company financial statements present financial information about the Company as a separate entity and
not about its Group.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in
these group financial statements.
Basis of Presentation
The consolidated financial statements of the Group are presented for the years ended 31 December 2019 and 2018. The Group
financial statements have been approved by the Directors and are prepared in accordance with the International Financial
Reporting Standards, International Accounting Standards, and Interpretations (collectively “IFRS”) issued by the International
Accounting Standards Board (“IASB”) as adopted by the European Union (adopted IFRSs).
For presentation of the Consolidated Statements of Comprehensive Income/(Loss), the Company uses a classification based
on the function of expenses, rather than based on their nature, as it is more representative of the format used for internal
reporting and management purposes and is consistent with international practice.
Basis of Measurement
The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities
are stated at their fair value: investments held at fair value and financial instruments classified as fair value through the
profit or loss.
Use of Judgements and Estimates
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that
affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis.
Significant estimation applied in determining the following:
• Financial instruments valuations (Note 21): when estimating the fair value of subsidiary undertakings, subsidiary preferred
shares and investments carried at fair value through profit and loss (FVTPL) according to IFRS 9 at initial recognition and
upon subsequent measurement. This includes determining the appropriate valuation methodology and making certain
estimates of the future earnings potential of the subsidiary businesses, appropriate discount rate and earnings multiple to
be applied, marketability and other industry and company specific risk factors.
• Revenue recognition (Note 3): when estimating the costs to complete for overtime revenue recognition. This includes
making certain estimates of costs to be incurred relating to contracts with customers in meeting the overtime performance
obligation. The costs are for research and development activity and the estimation uncertainty is regarding the level of
activity required to meet the performance obligation and the timing in which that arises during the term of the contract.
Significant judgement is also applied in determining the following:
• Revenue recognition (Note 3): when determining the correct amount of revenue to be recognised. This includes making
certain judgements when determining the appropriate accounting treatment of key customer contract terms in accordance
with the applicable accounting standards. In particular, judgement is required to determine the performance obligations
in a contract (if promised goods and services are distinct or not) and timing of revenue recognition (on delivery or over
a period of time).
• Subsidiary preferred shares liability classification (Note 21): when determining the classification of financial instruments
in terms of liability or equity. These judgements include an assessment of whether the financial instrument include any
embedded derivative features, whether they include contractual obligations upon the Group to deliver cash or other
financial assets or to exchange financial assets or financial liabilities with another party, and whether that obligation
will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its
own equity instruments. Further information about these critical judgements and estimates is included below under
Financial Instruments.
• When the power to control the subsidiaries exists (please refer to Notes 5 and 6 and accounting policy below Subsidiaries).
This judgement includes an assessment of whether the Company has i) power over the investee; (ii) exposure, or rights, to
variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect the
amount of the investor’s returns. The Company considers among others its voting shares, representation on the board,
rights to appoint management, investee dependence on the Company etc.
104 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
• When the Company has significant influence over financial and operating policies of investees in order to determine if the
Company should account for its investment as an associate based on IAS 28 or based on IFRS 9, Financial Instruments
(please refer to Note 5). This judgement includes, among others, an assessment whether the Company has representation
on the board of directors of the investee, whether the Company participates in the policy making processes of the investee,
whether there is any interchange of managerial personnel, whether there is any essential technical information provided to
the investee and if there are any transactions between the Company and the investee.
• Upon determining that the Company does have significant influence over the financial and operating policies of an investee,
if the Company holds more than a single instrument issued by its equity-accounted investee, judgement is required to
determine whether the additional instrument forms part of the investment in the associate, which is accounted for under IAS
28 and scoped out of IFRS 9, or it is a separate financial instrument that falls in the scope of IFRS 9 (please refer to Notes 5
and 6). This judgement includes an assessment of the characteristics of the financial instrument of the investee held by the
Company and whether such financial instrument provides access to returns underlying an ownership interest.
Going Concern
After making inquiries and considering the impact of risks and opportunities on expected cash flows and based on the cash
and cash equivalents available to the Group as of 31 December 2019, the Directors have a reasonable expectation that the
Group had adequate cash to continue in operational existence into the first quarter of 2022 and, following the sale of 2,100,000
shares of Karuna common shares worth $200.9 million on 22 January 2020, the Group now has sufficient cash reserves to fund
its operations into the first quarter of 2024, assuming broadly our expected level of required investments in businesses and
other operating expenditures. The financial statements have been prepared using the going concern basis of accounting.
Basis of Consolidation
The consolidated financial information for each of the years ended 31 December 2019 and 2018 comprises an aggregation
of financial information of the Company and the consolidated financial information of PureTech Health LLC (“PureTech LLC”).
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to
the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
Subsidiaries
As used in these financial statements, the term subsidiaries refers to entities that are controlled by the Group. Financial results
of subsidiaries of the Group as of 31 December 2019 are reported within the Internal segment, Controlled Founded Entities
segment or the Parent Company and Other segment (please refer to Note 4). Under applicable accounting rules, the Group
controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration
potential voting rights and board interest and holding. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-
controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling
interests to have a deficit balance.
PureTech Health plc Annual report and accounts 2019 105
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
A list of all subsidiaries and the Group’s total voting percentage, based on outstanding voting common and preferred shares as
of 31 December 2019 and 2018, is outlined below. All subsidiaries are domiciled within the United States and conduct business
activities solely within the United States.
Subsidiary
Voting percentage at 31 December through the holdings in
2019
2018
Common
Preferred
Common
Preferred
Subsidiary operating companies
Alivio Therapeutics, Inc.1,2
Entrega, Inc. (indirectly held through Enlight)1,2
Follica, Incorporated1,2,5
PureTech LYT
PureTech LYT-100
PureTech Management, Inc.3
PureTech Health LLC3
Sonde Health, Inc.1,2
Vedanta Biosciences, Inc.1,2
Vedanta Biosciences Securities Corp. (indirectly held through Vedanta)1,2
Nontrading holding companies
Endra Holdings, LLC (held indirectly through Enlight)2
Ensof Holdings, LLC (held indirectly through Enlight)2
PureTech Securities Corp.2
Inactive subsidiaries
Appeering, Inc.2
Commense Inc.2,6
Enlight Biosciences, LLC2
Ensof Biosystems, Inc. (held indirectly through Enlight)1,2
Knode Inc. (indirectly held through Enlight)2
Libra Biosciences, Inc.2
Mandara Sciences, LLC2
Tal Medical, Inc.1,2
—
—
28.7
—
—
100.0
100.0
—
—
—
86.0
86.0
100.0
—
—
86.0
57.7
—
—
98.3
—
91.9
83.1
56.7
100.0
100.0
—
—
64.1
61.8
61.8
—
—
—
100.0
99.1
—
28.3
86.0
100.0
—
100.0
—
—
4.4
—
—
100.0
100.0
—
—
—
86.0
86.0
100.0
—
—
86.0
57.7
—
—
98.3
—
92.0
83.1
79.2
100.0
100.0
—
—
96.4
74.3
74.3
—
—
—
100.0
99.1
—
28.3
86.0
100.0
—
64.5
1
2
3
4
5
The ownership percentage includes liability classified preferred shares, which results in the ownership percentage not being the same as the ownership percentage used in
allocations to non-controlling interests disclosed in Note 16. The allocation of losses/profits to the noncontrolling interest is based on the common share ownership of the
subsidiaries. The ownership of liability classified preferred shares are quantified in Note 15.
Registered address is Corporation Trust Center, 1209 Orange St., Wilmington, DE 19801, USA.
Registered address is 2711 Centerville Rd., Suite 400, Wilmington, DE 19808, USA.
The Company’s interests in its subsidiaries are predominantly in the form of preferred shares, which have a liquidation preference over the common stock, are convertible
into common stock at the holder’s discretion or upon certain liquidity events, are entitled to one vote per share on all matters submitted to shareholders for a vote and
entitled to receive dividends when and if declared, except in the case of Enlight, Mandara and PureTech Health LLC in which the holdings are membership interests in an
LLC. The holders of common stock are entitled to one vote per share on all matters submitted to shareholders for a vote and entitled to receive dividends when and if
declared.
On 19 July 2019, all of the outstanding notes, plus accrued interest, issued by Follica to PureTech converted into 15,216,214 shares of Series A-3 Preferred Shares and
12,777,287 shares of common share pursuant to a Series A-3 Note Conversion Agreement between Follica and the noteholders. Please refer to Note 16.
6 Commense turned inactive during 2019.
Change in subsidiary ownership and loss of control
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Where the Group loses control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling
interest (“NCI”). Any interest retained in the former subsidiary is measured at fair value when control is lost. Any resulting gain
or loss is recognised as profit or loss in the Consolidated Statements of Comprehensive Income/(Loss).
Associates
As used in these financial statements, the term associates are those entities in which the Group has no control but maintains
significant influence over the financial and operating policies. Significant influence is presumed to exist when the Group holds
between 20 and 50 per cent of the voting power of an entity, unless it can be clearly demonstrated that this is not the case. The
Group evaluates if it maintains significant influence over associates by assessing if the Group has lost the power to participate
in the financial and operating policy decisions of the associate.
Application of the equity method to associates
Associates are accounted for using the equity method (equity accounted investees) and are initially recognised at cost, or
if recognised upon deconsolidation they are initially recorded at fair value at the date of deconsolidation. The consolidated
financial statements include the Group’s share of the total comprehensive income and equity movements of equity accounted
investees, from the date that significant influence commences until the date that significant influence ceases. When the Group’s
share of losses exceeds its investment in an equity accounted investee, including the Group’s investments in other long-term
interests, the Group’s carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent
that the Group has incurred legal or constructive obligations or made payments on behalf of an investee. To the extent the
Group holds interests in associates that are not providing access to returns underlying ownership interests and are more akin
to debt like securities, the instrument held by PureTech is accounted for in accordance with IFRS 9.
106 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Change in Accounting Policy
In these financial statements, the Group has adopted new accounting policies resulting in a change in accounting for leases.
See updated accounting policy for leases (IFRS 16) below.
The Group has also adopted the amendments to IAS 28 Investments in Associates that addresses the dual application of IAS
28 and IFRS 9 (see below) when equity method losses are applied against Long-Term Investments (LTI), as defined in IAS 28.
The amendments provide the annual sequence in which both standards are to be applied in such a case. The amendment did
not have an impact on the Group’s financial statements as the Group has not yet had an investment in an associate where it
applied the equity method losses against a LTI.
All other accounting policies have remained unchanged from the previous year.
IFRS 9, Financial Instruments
As of 1 January 2018, the Company adopted IFRS 9, Financial Instruments (“IFRS 9”), which replaced IAS 39, Financial
Instruments: Recognition and Measurement. IFRS 9 addresses the classification, measurement and recognition of financial
assets and liabilities. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement
categories for financial assets: amortised cost, fair value through other comprehensive income (“FVOCI”), and fair value
through the profit and loss statement (“FVTPL”). The basis of classification depends on the entity’s business model and
the contractual cash flow characteristics of the entity’s business model and of the financial asset. Investments in equity
instruments are required to be measured at FVTPL with the irrevocable option at inception to present changes in fair value
in other comprehensive income. There is now a new expected credit losses model that replaces the incurred loss impairment
model previously used in IAS 39. For financial liabilities there were no changes to classification and measurement except for
the recognition of changes in the Company’s own credit risk in Other Comprehensive Income/(Loss) for liabilities designated
at FVTPL. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests.
It requires an economic relationship between the hedged item and hedging instrument and for the hedged ratio to be the
same as the one management uses for risk management purposes.
Contemporaneous documentation is still required but is different than what was prepared under IAS 39.
The Group reviewed the financial liabilities reported on its Consolidated Statements of Financial Position and completed an
assessment between IAS 39 and IFRS 9 to identify any accounting changes. The financial liabilities subject to this review were
the Subsidiary notes payable, Derivative liability, Warrant liability, and Preferred share liability. Based on this assessment of
the classification and measurement model, impairment and interest income, the accounting impact on financial liabilities was
determined not to be material. As part of the transition requirement, entities have the option upon implementation of the
new standard to designate a financial liability as measured at FVTPL. The Group re-assessed its financial liabilities and has
elected not to split out embedded derivatives and retrospectively recorded changes in fair value of the entire financial liability
instrument through the statement of profit and loss, leading to changes in the carrying value of the instruments when looked at
in the aggregate.
The Group also reviewed the financial assets reported on its Consolidated Statements of Financial Position and notes no
changes in the application of IFRS 9.
The accounting policy (effective from 1 January 2018) is as follows:
Financial Instruments
Classification
From 1 January 2018, the Group classifies its financial assets in the following measurement categories:
• Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss), and
• Those to be measured at amortised cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of
the cash flows.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income.
For investments in debt instruments, this will depend on the business model in which the investment is held. For investments
in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election
at the time of initial recognition to account for the equity investment at FVOCI.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL,
transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets that
are carried at FVTPL are expensed.
Impairment
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at
amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase
in credit risk. For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected
lifetime losses to be recognised from initial recognition of the receivables.
PureTech Health plc Annual report and accounts 2019 107
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
The Group has reviewed the financial assets and liabilities and determined the following impact from the adoption of the
new standard:
Financial Assets
The Group’s financial assets consist of cash and cash equivalents, trade and other receivables, debt and equity securities, other
deposits and investments in associates’ preferred shares and promissory notes. The Group’s financial assets are classified into
the following categories: investments held at fair value, trade and other receivables and cash and cash equivalents. The Group
determines the classification of financial assets at initial recognition depending on the purpose for which the financial assets
were acquired.
Investments held at fair value are non-derivative instruments that are designated in this category or not classified in any
other category. These financial assets are initially measured at fair value and subsequently re-measured at fair value at each
reporting date. The Company elects if the gain or loss will be recognised in Other Comprehensive Income/(Loss) or through
profit and loss on an instrument by instrument basis. Financial assets that are recognised through FVOCI are presented in the
Consolidated Statements of Financial Position as non-current assets, unless the Group intends to dispose of them within 12
months after the end of the reporting period. The Company has elected to record the changes in fair values for most financial
assets falling under this category through profit and loss. Please refer to Note 5.
Trade and other receivables are non-derivative financial assets with fixed and determinable payments that are not quoted
on active markets. These financial assets are carried at the amounts expected to be received less any allowance for doubtful
debts. Provisions are made where there is evidence of a risk of nonpayment, taking into account aging, previous experience
and economic conditions. When a trade receivable is determined to be uncollectible, it is written off against the available
provision and then to the Consolidated Statements of Comprehensive Income/(Loss). Trade and other receivables are included
in current assets, unless maturities are greater than 12 months after the end of the reporting period.
Financial Liabilities
The Group’s financial liabilities consist of trade and other payables, subsidiary notes payable, preferred shares, and warrant
liability. Warrant liabilities are initially recognised at fair value. After initial recognition, these financial liabilities are re-measured
at FVTPL using an appropriate valuation technique. Subsidiary notes payable and subsidiary preferred shares without
embedded derivatives are accounted for at amortised cost.
The majority of the Group’s subsidiaries have preferred shares and notes payable with embedded derivatives, which are
classified as current liabilities. These financial instruments are assessed under IFRS 9 to determine if the instrument qualifies to
be accounted for under the FVTPL method. When the Group has preferred shares with embedded derivatives that qualify for
bifurcation, the Group has elected to account for the entire instrument as FVTPL.
The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.
Equity Instruments Issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions,
in accordance with IAS 32:
1. They include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions that are potentially unfavourable to the Group; and
2. Where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group’s own equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial instrument is classified as a financial liability. Where the instrument so
classified takes the legal form of the Group’s own shares, the amounts presented in the financial information for share capital
and merger reserve account exclude amounts in relation to those shares.
The Group subsequently measures all equity investments at fair value. Where the Group’s management has elected to present
fair value gains and losses on equity investments in other comprehensive income, there is no subsequent reclassification of
fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments
continue to be recognised in profit or loss as other income when the Group’s right to receive payment is established.
Changes in the fair value of financial assets at FVTPL are recognised in other income/(expense) in the Consolidated Statements
of Comprehensive Income/(Loss) as applicable. Impairment losses (and reversal of impairment losses) on equity investments
measured at FVOCI are not reported separately from other changes in fair value.
IFRS 15, Contract Revenue
IFRS 15 establishes principles for reporting useful information to users of financial statements about the nature, amount, timing
and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. The standard establishes a five-
step principle-based approach for revenue recognition and is based on the concept of recognising an amount that reflects the
consideration for performance obligations only when they are satisfied and the control of goods or services is transferred.
The majority of the Group’s contract revenue is generated from licenses, services, and collaboration arrangements. The Group
adopted IFRS 15 with effect from 1 January 2018 using the Modified Retrospective approach. The adoption of this standard
did not have an impact to the consolidated results.
108 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Management reviewed contracts where the Group received consideration in order to determine whether or not they should be
accounted for in accordance with IFRS 15. To date, PureTech has entered into transactions that generate revenue and meet the
scope of either IFRS 15 or IAS 20 Accounting for Government Grants. Contract revenue is recognised at either a point-in-time
or over time, depending on the nature of the services and existence of acceptance clauses.
Revenue generated by collaboration and service agreements is accounted for under IFRS 15. The Group accounts for
agreements that meet the definition of IFRS 15 by applying the following five step model:
• Identify the contract(s) with a customer – A contract with a customer exists when (i) the Group enters into an enforceable
contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies
the payment terms related to those goods or services, (ii) the contract has commercial substance and, (iii) the Group
determines that collection of substantially all consideration for goods or services that are transferred is probable based on
the customer’s intent and ability to pay the promised consideration.
• Identify the performance obligations in the contract – Performance obligations promised in a contract are identified based
on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the
customer can benefit from the good or service either on its own or together with other resources that are readily available
from third parties or from the Group, and are distinct in the context of the contract, whereby the transfer of the goods or
services is separately identifiable from other promises in the contract.
• Determine the transaction price – The transaction price is determined based on the consideration to which the Group will
be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes
variable consideration, the Group estimates the amount of variable consideration that should be included in the transaction
price utilising either the expected value method or the most likely amount method depending on the nature of the variable
consideration. Variable consideration is included in the transaction price if, in the Group’s judgement, it is probable that
a significant future reversal of cumulative revenue under the contract will not occur. Determining the transaction price
requires significant judgement, which is discussed by revenue category in further detail below.
• Allocate the transaction price to the performance obligations in the contract – If the contract contains a single performance
obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple
performance obligations require an allocation of the transaction price to each performance obligation based on a relative
standalone selling price basis unless the transaction price is variable and meets the criteria to be allocated entirely to
a performance obligation or to a distinct good or service that forms part of a single performance obligation. The Group
determines standalone selling price based on the price at which the performance obligation is sold separately. If the
standalone selling price is not observable through past transactions, the Group estimates the standalone selling price
taking into account available information such as market conditions and internally approved pricing guidelines related to the
performance obligations.
• Recognise revenue when (or as) the Group satisfies a performance obligation – The Group satisfies performance obligations
either over time or at a point in time as discussed in further detail below. Revenue is recognised at the time the related
performance obligation is satisfied by transferring a promised good or service to a customer.
Revenue generated from services agreements (typically where licenses and related services were combined into one
performance obligation) is determined to be recognised over time when it can be determined that the services meet one of
the following: (a) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the
entity performs; (b) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or
enhanced; or (c) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an
enforceable right to payment for performance completed to date.
It was determined that the Group has contracts that meet criteria (a), since the customer simultaneously receives and
consumes the benefits provided by the Company’s performance as the Company performs as well as one contract that meets
criteria (b) above. Therefore revenue is recognised over time using the input method based on labour hours, laboratory
expenses and supplies.
For cases where the entity does not have an enforceable right to payment due to acceptance clauses, it was determined that
costs incurred to fulfil the services are to be capitalised until acceptance is received for the milestone. This resulted in PureTech
capitalising service-related expenses as of 31 December 2017 and recognising the consideration as revenue once acceptance
was received during 2018.
Grant Income
The Company recognises grants from governmental agencies as grant income in the Consolidated Statement of
Comprehensive Income/(Loss), gross of the expenditures that were related to obtaining the grant, when there is reasonable
assurance that the Company will comply with the conditions within the grant agreement and there is reasonable assurance that
payments under the grants will be received. The Company evaluates the conditions of each grant as of each reporting date to
ensure that the Company has reasonable assurance of meeting the conditions of each grant arrangement and it is expected
that the grant payment will be received as a result of meeting the necessary conditions.
The Company submits qualifying expenses for reimbursement for certain expenses after the Company has incurred the
research and development expense. The Company records an unbilled receivable upon incurring such expenses. Grant
income is recognised in the Consolidated Statements of Comprehensive Income/(Loss) over the periods in which the Company
recognises the related reimbursable expense for which the grant is intended to compensate.
PureTech Health plc Annual report and accounts 2019 109
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Functional and Presentation Currency
These consolidated financial statements are presented in United States dollars (“US dollars”). The functional currency of
virtually all members of the Group is the US dollar. The assets and liabilities of a previously held subsidiary were translated
to US dollars at the exchange rate prevailing on the balance sheet date and revenues and expenses were translated at the
average exchange rate for the period. Foreign exchange differences resulting from the translation of this subsidiary were
reported in the Consolidated Statements of Comprehensive Income/(Loss) in Other Comprehensive Income/(Loss).
Foreign Currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign
exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at
the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on remeasurement are recognised in the Consolidated Statement of Comprehensive Income/
(Loss) except for differences arising on the retranslation of a financial liability designated as a hedge of the net investment in
a foreign operation that is effective, or qualifying cash flow hedges, which are recognised directly in other comprehensive
income. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies
that are stated at fair value are retranslated to the functional currency at foreign exchange rates ruling at the dates the fair value
was determined.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments with original maturities of three months or less.
Share Capital
Ordinary shares are classified as equity. The Group is comprised of share capital, share premium, merger reserve, other
reserve, translation reserve, and accumulated deficit.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Cost includes
expenditures that are directly attributable to the acquisition of the asset. Assets under construction represent leasehold
improvements and machinery and equipment to be used in operations or research and development activities. When parts of
an item of property and equipment have different useful lives, they are accounted for as separate items (major components)
of property and equipment. Depreciation is calculated using the straight-line method over the estimated useful life of the
related asset:
Laboratory and manufacturing equipment
Furniture and fixtures
Computer equipment and software
Leasehold improvements
2-8 years
7 years
1-5 years
5-10 years, or the remaining term of the lease, if shorter
Depreciation methods, useful lives and residual values are reviewed at each balance sheet date.
Intangible Assets
Intangible assets, which include purchased patents and licenses with finite useful lives, are carried at historical cost less
accumulated amortisation, if amortisation has commenced, and impairment losses. Intangible assets with finite lives are
amortised from the time they are available for use. Amortisation is calculated using the straight-line method to allocate the
costs of patents and licenses over their estimated useful lives, which is typically the remaining life of the underlying patents.
Research and development intangible assets, which are still under development and have accordingly not yet obtained
marketing approval, are presented as In-Process Research and Development (IPR&D). IPR&D is not amortised since it is not yet
available for its intended use, but it is evaluated for potential impairment on an annual basis or more frequently when facts and
circumstances warrant.
Impairment
Impairment of Non-Financial Assets
The Group reviews the carrying amounts of its property and equipment and intangible assets at each reporting date to
determine whether there are indicators of impairment. If any such indicators of impairment exist, then an asset’s recoverable
amount is estimated. The recoverable amount is the higher of an asset’s fair value less cost of disposal and value in use.
The Company’s IPR&D intangible assets are not yet available for their intended use. As such, they are to be tested for
impairment at least annually.
An impairment loss is recognised when an asset’s carrying amount exceeds its recoverable amount. For the purposes of
impairment testing, assets are grouped at the lowest levels for which there are largely independent cash flows. If a non-
financial asset instrument is impaired, an impairment loss is recognised in the Consolidated Statements of Comprehensive
Income/(Loss).
Investments in associates are considered impaired if, and only if, objective evidence indicates that one or more events, which
occurred after the initial recognition, have had an impact on the future cash flows from the net investment and that impact
can be reliably estimated. If an impairment exists the Company measures an impairment by comparing the carrying value of
the net investment in the associate to its recoverable amount and recording any excess as an impairment loss. See Note 6 for
impairment recorded in respect of investment in associate.
110 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Impairment of Financial Assets Carried at Fair Value
The Group’s financial assets are carried at fair value through Other Comprehensive Income/(Loss) or through profit and loss,
depending on the election taken for each instrument. Financial assets that carried at fair value through Other Comprehensive
Income/(Loss) are reviewed at each reporting period to assess whether there is objective evidence that the assets should be
impaired. An impairment loss is recognised when there is a significant or prolonged decline in fair value below the instrument’s
cost. If an instrument is impaired, the impairment loss is calculated and recognised in the Consolidated Statements of
Comprehensive Income/(Loss).
Impairment of Financial Assets Measured at Amortised Cost
The Group assesses financial assets measured at amortised cost for impairment at each reporting period. These financial
assets are impaired if one or more loss events occur after initial recognition that impact the estimated future cash flows of the
asset. An impairment loss is calculated as the difference between its carrying amount and the present value of the estimated
future cash flows discounted at the asset’s original effective interest rate and is recognised in the Consolidated Statements of
Comprehensive Income/(Loss).
Employee Benefits
Short-Term Employee Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and expensed as the related service
is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive
obligation due to past service provided by the employee, and the obligation can be estimated reliably.
Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution
plans are recognised as an employee benefit expense in the periods during which related services are rendered by employees.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Share-based Payments
Share-based payment arrangements, in which the Group receives goods or services as consideration for its own equity
instruments, are accounted for as equity-settled share-based payment transactions in accordance with IFRS 2, regardless of
how the equity instruments are obtained by the Group. The grant date fair value of employee share-based payment awards is
recognised as an expense with a corresponding increase in equity over the period that the employee is unconditionally entitled
to the awards. The fair value is measured using an option pricing model, which takes into account the terms and conditions of
the options granted. The amount recognised as an expense is adjusted to reflect the actual number of awards for which the
related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an
expense is based on the number of awards that do meet the related service and non-market performance conditions at the
vesting date. For share-based payment awards with non-vesting and non-market performance conditions, the grant date fair
value is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
Development Costs
Expenditures on research activities are recognised as incurred in the Consolidated Statements of Comprehensive Income/
(Loss). In accordance with IAS 38 development costs are capitalised only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable, the Group intends to and
has sufficient resources to complete development and to use or sell the asset, and it is able to measure reliably the expenditure
attributable to the intangible asset during its development. The point at which technical feasibility is determined to have been
reached is when regulatory approval has been received where applicable. Management determines that commercial viability
has been reached when a clear market and pricing point have been identified, which may coincide with achieving recurring
sales. Otherwise, the development expenditure is recognised as incurred in the Consolidated Statements of Comprehensive
Income/(Loss). As of balance sheet date the Group has not capitalised any development costs.
Provisions
A provision is recognised in the Consolidated Statements of Financial Position when the Group has a present legal or
constructive obligation due to a past event that can be reliably measured, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects risks specific to the liability.
Leases
On 1 January 2019, the Group adopted a new accounting standard for leases. The Group leases real estate and equipment
for use in operations. These leases generally have lease terms of 1 to 10 years. We include options that are reasonably certain
to be exercised as part of the determination of the lease term. We determine if an arrangement is a lease at inception of
the contract in accordance with guidance detailed in the new standard and we perform the lease classification test as of the
lease commencement date. ROU assets represent the Group’s right to use an underlying asset for the lease term and lease
liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities
are recognised at commencement date based on the present value of lease payments over the lease term. As most of our
leases do not provide an implicit rate, we use the Group’s estimated incremental borrowing rate based on information
available at commencement date in determining the present value of future payments.
The Group’s operating leases impacted by IFRS 16 principally include leases from real estate.
PureTech Health plc Annual report and accounts 2019 111
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Existing finance leases continue to be treated as finance leases. For existing operating leases, the Group has applied
a modified retrospective approach by measuring the right-of-use asset at an amount equal to the lease liability at the date
of transition and therefore comparative information was not restated. Upon transition, the Group has applied the following
practical expedients:
• excluding initial direct costs from the right-of-use assets;
• using hindsight when assessing the lease term;
• not reassessing whether a contract is or contains a lease; and
• not separating the lease components from the non-lease components in lease contracts.
The Group has elected to account for lease payments as an expense on a straight-line basis over the life of the lease for:
• Leases with a term of 12 months or less and containing no purchase options; and
• Leases where the underlying asset has a value of less than $5,000.
The lease liability was initially measured at the present value of the lease payments that were not paid at the transition date,
discounted by using the rate implicit in the lease, or if that rate was not readily determinable, the Group used its incremental
borrowing rate. The right-of-use asset is depreciated on a straight-line basis and the lease liability will give rise to an
interest charge.
The financial impact of adopting IFRS 16 on the Group was as follows:
Right of use asset
Lease liability
Accumulated deficit
1 January 2019
$000s
10,353
10,995
(999)
The cumulative impact resulted mainly from lease term extensions under IFRS 16 offset by the exclusion of short term leases
and leases of low value assets.
In January and April 2019, the Company entered into additional leases that added substantially more right of use assets and
lease liabilities to the statement of financial position. This includes three different spaces for the Company and its consolidated
subsidiaries, amounting to approximately $42 million of additional future lease commitments. In June and August 2019, the
Company entered into two sublease agreements. Further information regarding the subleases, right of use asset and lease
liability can be found in Note 20.
Finance Income and Finance Costs
Finance income is comprised of interest income on funds invested in US treasuries, which is recognised as it accrues in the
Consolidated Statements of Comprehensive Income/(Loss) via the effective interest method. Finance costs comprise loan
interest expenses and the changes in the fair value of warrant and derivative liabilities associated with financing transactions.
Taxation
Tax on the profit or loss for the year comprises current and deferred income tax. In accordance with IAS 12, tax is recognised
in the Consolidated Statements of Comprehensive Income/(Loss) except to the extent that it relates to items recognised
directly in equity.
For the years ended 31 December 2019 and 2018, the Group filed a consolidated US income tax return which included
all subsidiaries in which the Company owned greater than 80.0 per cent of the vote and value. For the years ended
31 December 2019 and 2018, the Group filed certain consolidated state income tax returns which included all subsidiaries
in which the Company owned greater than 50.0 per cent of the vote and value. The remaining subsidiaries file separate
US tax returns.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised due to temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised for unused tax losses,
unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using
tax rates enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances
on a net basis.
Deferred taxes are recognised in Consolidated Statements of Comprehensive Income/(Loss) except to the extent that they
relate to items recognised directly in equity or in other comprehensive income.
112 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Deferred Revenue and Deferred Costs
Deferred revenue includes amounts that are receivable or have been received per contractual terms but have not been
recognised as revenue since performance has not yet occurred or has not yet been completed. Deferred costs represent costs
to fulfil a contract and include capitalised labour and research and development expenditures. The Company classifies non-
current deferred revenue and deferred costs for any transaction which is expected to be recognised beyond one year or one
operating cycle.
Fair Value Measurements
The Group’s accounting policies require that its financial and non-financial assets and liabilities be measured at their fair value.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Fair values
are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the
change has occurred.
The carrying amount of cash and cash equivalents, accounts receivable, short-term investments, restricted cash, deposits,
accounts payable, accrued expenses and other current liabilities in the Group’s Consolidated Statements of Financial Position
approximates their fair value because of the short maturities of these instruments.
Operating Segments
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating
decision maker (“CODM”). The CODM reviews discrete financial information for the operating segments in order to assess
their performance and is responsible for making decisions about resources allocated to the segments. The CODM has been
identified as the Group’s Directors.
Prior period reclassification
During 2019 management identified that for the year ended 31 December 2018, Gain/(loss) on investments held at fair value
of $14.3 million was incorrectly classified as Finance costs – subsidiary preferred shares. As a result, a prior year reclassification
has been made in the Consolidated Statement of Comprehensive Income/(Loss) for the year ended 31 December 2018.
2. New Standards and Interpretations Not Yet Adopted
A number of new standards, interpretations, and amendments to existing standards are effective for annual periods
commencing on or after 1 January 2020 and have not been applied in preparing the consolidated financial information.
The Company’s assessment of the impact of these new standards and interpretations is set out below.
Effective 1 January 2020 the definition of a “business” has been amended as an amendment to IFRS 3 Business Combinations.
The amendments include an election to use a concentration test. This is a simplified assessment that results in an asset
acquisition if substantially all of the fair value of the gross assets is concentrated in a single identifiable asset or a group of
similar identifiable assets. If an entity chooses not to apply the concentration test, or fails the test, then the assessment focuses
on the existence of an input and a substantive process applied to the input/s. These amendments are not expected to have an
impact on the Company’s financial statements.
As part of its amendments to IAS 1 and IAS 8, the IASB has refined its definition of ‘material’ and issued practical guidance on
applying the concept of materiality. These amendments are effective 1 January 2020 and are not expected to have an impact
on the Company’s financial statements.
None of the other new standards, interpretations, and amendments are applicable to the Company’s financial statements and
therefore will not have an impact on the Company.
3.
Revenue
Revenue recorded in the Consolidated Statement of Comprehensive Income/(Loss) consists of the following:
For the years ended 31 December:
Contract revenue
Grant income
Total revenue
2019
$000s
8,688
1,119
9,807
2018
$000s
16,371
4,377
20,748
All amounts recorded in contract revenue were generated in the United States. All of the Company’s contracts as of
31 December 2019 and 2018 were determined to have a single performance obligation which consists of a combined
deliverable of license to intellectual property and research and development services. Therefore revenue is recognised over
time based on the inputs method which is a faithful depiction of the transfer of goods and services. Progress is measured
based on costs incurred to date as compared to total projected costs.
PureTech Health plc Annual report and accounts 2019 113
Financial statements Notes to the Consolidated Financial Statements — continued
3.
Revenue — continued
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 revenue recognition
Transferred at a point in time
Transferred over time
Customers over 10% of revenue
Janssen Biotech, Inc.
BMEB Services LLC
Roche Holding AG
Eli Lilly and Company
Boehringer Ingelheim International GMBH
Imbrium Therapeutics L.P.
2019
$000s
—
8,688
8,688
2019
$000s
—
—
4,973
1,433
1,091
1,013
8,510
2018
$000s
13,415
2,956
16,371
2018
$000s
12,000
1,415
—
—
—
—
13,415
An estimation uncertainty arises due to management’s application of the inputs method in recognising revenue overtime.
In doing so, the total cost to satisfy the performance obligation includes a significant estimate by management in its budgets
and projected cash flows. The sensitivity of this calculation for the years ended 31 December 2019 and 2018 is detailed below:
For the year ended 31 December 2019
Budgeted costs to complete
Revenue
For the year ended 31 December 2018
Budgeted costs to complete
Revenue
+10%
(951)
+10%
(265)
(10)%
738
(10)%
323
Contract Balances
Accounts receivables represent rights to consideration in exchange for products or services that have been transferred by the
Group, when payment is unconditional and only the passage of time is required before payment is due. Accounts receivables
do not bear interest and are recorded at the invoiced amount. Accounts receivable are included within Trade and other
receivables on the Consolidated Statement of Financial Position.
Contract liabilities represent the Group’s obligation to transfer products or services to a customer for which consideration
has been received, or for which an amount of consideration is due from the customer. When applicable, contract assets and
liabilities are reported on a net basis at the contract level, depending on the contracts position at the end of each reporting
period. Contract liabilities are included within deferred revenue on the Consolidated Statement of Financial Position.
Contract Balances
Accounts receivable
Deferred revenue – long term
Deferred revenue – short term
2019
$000s
1,699
1,220
5,474
2018
$000s
151
83
6,560
During the year ended 31 December 2019, $5.0 million of revenue was recognised on deferred revenue outstanding at
31 December 2018.
Remaining performance obligations represent the transaction price of unsatisfied or partially satisfied performance obligations
within contracts with an original expected contract term that is greater than one year and for which fulfilment of the contract
has started as of the end of the reporting period. The aggregate amount of transaction consideration allocated to remaining
performance obligations as of 31 December 2019 was $7.6 million. The following table summarises when the Group expects
to recognise the remaining performance obligations as revenue. The Group will recognise revenue associated with these
performance obligations as transfer of control occurs:
Remaining Performance Obligation
Less than
1 Year
Greater than
1 Year
6,344
1,220
Total
7,564
Cost to Fulfil a Contract
Contract fulfilment costs include direct labour for professional services, payments made to third parties for intellectual
property licenses and direct materials. Incremental costs incurred to fulfil our contracts are capitalised if these costs (i) relate
114 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
3.
Revenue — continued
directly to the contract, (ii) are expected to generate resources that will be used to satisfy the Company’s performance
obligation under the contract, and (iii) are expected to be recovered through revenue generated under the contract. The
revenue associated with direct labour for professional services is recognised over time; therefore the costs associated are
expensed as incurred. The payments made to third parties for intellectual property licenses are capitalised when paid and
recognised in line with associated revenue, whether this be over time or at a point in time. As of 31 December 2018, the Group
has capitalised $0.8 million of cost to fulfil which are included within Prepaid expenses and other current assets as well as Other
non-current assets on the Consolidated Statement of Financial Position. As of 31 December 2019 the remaining unamortised
balance was $0.3 million.
4.
Segment Information
Basis for Segmentation
The Directors are the Group’s strategic decision-makers. The Group’s operating segments are reported based on the financial
information provided to the Directors at least quarterly for the purposes of allocating resources and assessing performance.
The Group has determined that each entity is representative of a single operating segment as the Directors monitor the
financial results at this level. When identifying the reportable segments the Group has determined that it is appropriate to
aggregate multiple operating segments into a single reportable segment given the high level of operational and financial
similarities across the entities. The Group has identified four reportable segments which are outlined below. Substantially, all
of the revenue and profit generating activities of the Group are generated within the US and accordingly, no geographical
disclosures are provided.
During the year ended 31 December 2019, the Company deconsolidated three of its subsidiaries which resulted in a change to
the composition of its reportable segments. Consequently, the Company has revised the 2018 financial information to conform
to the presentation as of and for the period ending 31 December 2019. The change in segments reflects how the Company’s
Board of Directors reviews the Group’s results, allocates resources and assesses performance. This change has been adjusted
in both the current and the prior period in the tables below.
Internal
The Internal segment (the “Internal segment”), is advancing a pipeline fuelled by recent discoveries in lymphatics and immune
cell trafficking to modulate disease in a tissue-specific manner. These programmes leverage the transport and biodistribution
of various immune system components for the targeted treatment of diseases with major unmet needs, including cancers,
autoimmune diseases, and neuroimmune disorders. The Internal segment is comprised of the technologies that will be
advanced through either PureTech Health funding or non-dilutive sources of financing in the near-term. The operational
management of the Internal segment is conducted by the PureTech Health team, which is responsible for the strategy,
business development, and research and development. As of 31 December 2019, this segment included PureTech LYT
(formerly Ariya Therapeutics) and PureTech LYT 100.
Controlled Founded Entities
The Controlled Founded Entity segment (the “Controlled Founded Entity segment”) is comprised of the Group’s subsidiaries
that are currently consolidated operational subsidiaries that either have, or have plans to hire, independent management teams
and currently have already raised, or are currently in the process of raising, third-party dilutive capital. These subsidiaries have
active research and development programmes and either have entered into or plan to seek a strategic partnership with an
equity or debt investment partner, who will provide additional industry knowledge and access to networks, as well as additional
funding to continue the pursued growth of the company. As of 31 December 2019, this segment included Alivio Therapeutics,
Inc., Commense Inc., Entrega, Inc., Follica Incorporated, Sonde Health, Inc., and Vedanta Biosciences, Inc.
Non-Controlled Founded Entities
The Non-Controlled Founded Entities segment (the “Non-Controlled Founded Entities segment”) is comprised of the
entities in respect of which PureTech Health (i) no longer holds majority voting control as a shareholder and (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 its reportable segments. As of 31 December 2019, the Non-Controlled Founded Entities segment included resTORbio,
Inc. (“resTORbio”), Akili Interactive Labs, Inc. (“Akili”), Vor Biopharma Inc. (“Vor”), Karuna Therapeutics, Inc. (“Karuna”), and
Gelesis Inc. (“Gelesis”).
The Non-Controlled Founded Entities segment incorporates the operational results of the aforementioned entities to the date
of deconsolidation. Following the date of deconsolidation, the Company accounts for its investment in each entity at the parent
level, and therefore the results associated with investment activity following the date of deconsolidation is included in the
Parent Company and Other segment (the “Parent Company and Other segment”).
Parent Company and Other Segment
The Parent Company and Other segment includes activities that are not directly attributable to the operating segments, such
as the activities of the Parent, corporate support functions and certain research and development support functions that are
not directly attributable to a strategic business segment as well as the elimination of intercompany transactions. This segment
also captures the accounting for the Company’s holdings in entities for which control has been lost, which is inclusive of the
following items: gain on deconsolidation, gain or loss on investments held at fair value, gain on loss of significant influence,
and the share of net loss of associates accounted for using the equity method. As of 31 December 2019, this segment included
PureTech Health plc, PureTech Health LLC, PureTech Management, Inc. and PureTech Securities Corp., as well as certain other
dormant, inactive and shell entities.
PureTech Health plc Annual report and accounts 2019 115
Financial statements Notes to the Consolidated Financial Statements — continued
4.
Segment Information — continued
Information About Reportable Segments:
Consolidated Statements of Comprehensive Loss
Contract revenue
Grant revenue
Total revenue
General and administrative expenses
Research and development expenses
Total operating income/(expense)
Other income/(expense):
Gain on deconsolidation
Gain/(loss) on investments held at fair value
Gain/(loss) on disposal of assets
Gain on loss of significant influence
Other income/(expense)
Total other income/(expense)
Net finance income/(costs)
Share of net income/(loss) of associates accounted
for using the equity method
Impairment of investment in associate
2019
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent
Company &
Other
$000s
Consolidated
$000s
2,487
1,104
3,591
(14,436)
(42,780)
(57,216)
—
—
(39)
—
166
—
—
—
(10,439)
(15,555)
(25,994)
—
—
—
—
—
127
(16,947)
—
(30,141)
137
—
137
(32,098)
(1,536)
8,688
1,119
9,807
(59,358)
(85,848)
(33,634)
(145,206)
264,409
(37,863)
(60)
445,582
(45)
672,023
941
264,409
(37,863)
(82)
445,582
121
672,167
(46,147)
—
—
—
—
30,791
(42,938)
30,791
(42,938)
Internal
$000s
6,064
15
6,079
(2,385)
(25,977)
(28,362)
—
—
17
—
—
17
—
—
—
Income/(loss) from continuing operations
(22,266)
(70,445)
(56,135)
627,320
478,474
Income/(loss) before taxes pre IFRS 9 fair
value accounting, finance costs – subsidiary
preferred shares, share-based payment expense,
depreciation of tangible assets and amortisation
of intangible assets
Finance income/(costs) – subsidiary preferred shares
Finance income/(costs) – IFRS 9 fair value accounting
Share-based payment expense
Depreciation of tangible assets
Amortisation of ROU assets
Amortisation of intangible assets
Taxation
Income/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) attributable to:
Owners of the Company
Non-controlling interests
Consolidated Statements of Financial Position:
Total assets
Total liabilities
Net assets/(liabilities)
(21,889)
—
—
(5)
(376)
—
4
—
(22,266)
—
(22,266)
(48,996)
107
(17,294)
(1,678)
(1,531)
(1,060)
7
(134)
(70,579)
—
(70,579)
(21,873)
(1,564)
(28,737)
(3,543)
(207)
(83)
(128)
640,298
(1)
(444)
(9,242)
(1,114)
(2,177)
—
547,540
(1,458)
(46,475)
(14,468)
(3,228)
(3,320)
(117)
(162)
(112,113)
(112,409)
(56,297)
(10)
(56,307)
515,207
—
515,207
366,065
(10)
366,055
(7,001)
(15,265)
(54,719)
(15,860)
(32,353)
(23,954)
515,207
—
421,134
(55,079)
17,614
12,076
5,538
41,612
132,935
(91,324)
—
—
—
881,952
145,768
736,184
941,178
290,779
650,399
116 PureTech Health plc Annual report and accounts 2019
Financial statements Income/(loss) from continuing operations
(8,232)
(23,297)
(40,167)
Notes to the Consolidated Financial Statements — continued
4.
Segment Information — continued
Consolidated Statements of Comprehensive Loss
Contract revenue
Grant revenue
Total revenue
General and administrative expenses
Research and development expenses
Total operating income/(expense)
Other income/(expense):
Gain on deconsolidation
Gain/(loss) on investments held at fair value
Gain/(loss) on disposal of assets
Gain on loss of significant influence
Other income/(expense)
Other income/(expense)
Net finance income/(costs)
Share of net income/(loss) of associate accounted
for using the equity method
Internal
$000s
2,110
86
2,195
(1,498)
(8,929)
(10,427)
—
—
—
—
—
—
—
—
(Loss)/income before taxes pre IFRS 9 fair
value accounting, finance costs – subsidiary
preferred shares, share-based payment expense,
depreciation of tangible assets and amortisation
of intangible assets
Finance income/(costs) – subsidiary preferred shares
Finance income/(costs) – IFRS 9 fair value accounting
Share-based payment expense
Depreciation of tangible assets
Amortisation of intangible assets
Taxation
Income/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
Total comprehensive income/(loss) attributable to:
Owners of the Company
Non-controlling interests
Consolidated Statements of Financial Position:
Total assets
Total liabilities
Net (liabilities)/assets
2018
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent
Company &
Other
$000s
Consolidated
$000s
14,233
4,271
18,504
(10,212)
(36,930)
(47,142)
—
—
—
—
—
—
5,341
—
20
20
(16,385)
(29,851)
(46,236)
—
—
—
—
104
104
5,945
—
—
(8,210)
—
—
(11)
(7)
(4)
—
(8,454)
—
(8,454)
(1,139)
(7,315)
(24,344)
—
5,341
(2,465)
(1,823)
(6)
(381)
(26,206)
(214)
(26,420)
(15,710)
(10,710)
(38,761)
—
5,516
(6,262)
(390)
(270)
(185)
(41,239)
—
(41,239)
(32,258)
(8,980)
29
—
29
(19,270)
(1,692)
(20,962)
41,730
(34,615)
4,054
10,287
(405)
21,051
14,631
(11,490)
3,258
(4,234)
(106)
11,775
(3,899)
(256)
(22)
(1,655)
5,239
(26)
5,213
5,213
—
16,371
4,377
20,748
(47,365)
(77,402)
(124,768)
41,730
(34,615)
4,054
10,287
(302)
21,154
25,918
(11,490)
(68,438)
(75,549)
(106)
22,631
(12,637)
(2,476)
(302)
(2,221)
(70,659)
(240)
(70,899)
(43,894)
(27,005)
2,984
13,366
(10,381)
15,603
60,992
35,934
202,161
(45,389)
(166,227)
387,240
(1,731)
388,970
441,761
274,788
166,973
The Parent commences initiatives in theme-based technologies, raises capital for investment in new companies and existing
subsidiaries, provides other corporate shared services and support for all subsidiaries and manages the new programme
creation process.
The activity between the Parent and the reporting segments has been eliminated in consolidation. These elimination
amounts are allocated to the subsidiaries.
The proportion of net assets shown above that is attributable to non-controlling interest is disclosed in Note 16.
The Non-Controlled Founded Entities consist of the Company’s minority interest holdings.
PureTech Health plc Annual report and accounts 2019 117
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value
Investments held at fair value include both unlisted and listed securities held by PureTech. These investments, which include
Akili, Vor, Karuna, Gelesis (other than the investment in common shares – please refer to Note 6), resTORbio and other
insignificant investments, are initially measured at fair value and are subsequently re-measured at fair value at each reporting
date. Interests in these investments are accounted for as investments held at fair value, as shown below:
Investments held at fair value
Balance at 1 January 2018
Deconsolidation of Akili
Reclassification of investment between investment in associate and investment held at fair value
Gain – comprehensive income/(loss)
Loss – fair value through profit and loss
Balance at 31 December 2018 and 1 January 2019
Deconsolidation of subsidiaries (Vor, Karuna and Gelesis, please refer to Note 6)
Reclassification of Karuna investment between investment in associate and investment held at fair value
Gain on Karuna investment at initial public offering1
Cash purchase of Gelesis convertible notes (please refer to Note 6)
Cash purchase of Gelesis preferred shares (please refer to Note 6)
Reclassification of Karuna investment at loss of significant influence
Sale of resTORbio shares
Loss – fair value through profit and loss1
As of 31 December 2019
$000's
131,351
70,748
2,297
(26)
(34,615)
169,755
138,571
(118,006)
40,633
6,480
8,020
557,243
(9,295)
(78,496)
714,905
1
The net amount of these two items is a loss of $37.9 million which is reported on the line Gain/(Loss) on investments held at fair value in the Consolidated Statements of
Comprehensive Income/(Loss).
Vor
Vor was founded by PureTech through an initial Series A-1 Preferred Shares financing and raised funds through issuance of
convertible notes. As of 31 December 2018, PureTech maintained control of Vor and the subsidiary’s financial results were fully
consolidated in the Group’s consolidated financial statements.
On 12 February 2019, Vor completed a Series A-2 Preferred Shares financing round with PureTech and several new third party
investors. The financing provided for the purchase of 62,819,866 shares of Vor Series A-2 Preferred Shares at the purchase price
of $0.40 per share.
As a result of the issuance of Series A-2 preferred shares to third-party investors, PureTech’s ownership percentage and
corresponding voting rights dropped from 79.5 per cent to 47.5 per cent, and PureTech simultaneously gave up control
on Vor’s Board of Directors, both of which triggered a loss of control over the entity. As of 12 February 2019, Vor was
deconsolidated from the Group’s financial statements, resulting in only the profits and losses generated by Vor through the
deconsolidation date being included in the Consolidated Statement of Income/(Loss) and Other Comprehensive Income/(Loss).
While the Company no longer controls Vor, it was concluded that PureTech still had significant influence over Vor by virtue of
its large, albeit minority, ownership stake and its continued representation on Vor’s Board of Directors. PureTech still has the
power to participate in the financial and operating policy decisions of the entity, although it does not control these policies.
During the year ended 31 December 2019, the Company recognised a $6.4 million gain on the deconsolidation of Vor, which
was recorded to the Gain on the deconsolidation of subsidiary line item in the Consolidated Statement of Income/(Loss) and
Other Comprehensive Income/(Loss).
As PureTech did not hold common shares in Vor upon deconsolidation and the preferred shares it holds do not have equity-
like features, the voting percentage attributable to common shares is nil. Therefore, PureTech had no basis to account for its
investment in Vor under IAS 28. The preferred shares held by PureTech fall under the guidance of IFRS 9 and will be treated as
a financial asset held at fair value through the Consolidated Statement of Income/(Loss) and Other Comprehensive Income/
(Loss). The fair value of the preferred shares at deconsolidation was $12.0 million.
During the year ended 31 December 2019, the Company recognised a gain of $0.6 million that was recorded on the line item
Gain/(loss) on investments held at fair value within the Consolidated Statement of Income/(Loss) and Other Comprehensive
Income/(Loss). Please refer to Note 16 for information regarding the valuation of these instruments.
Karuna
Karuna was founded by PureTech and raised funding through Preferred Share financings as well as convertible note issuances.
As of 31 December 2018, PureTech maintained control of Karuna and the company’s financial results were fully consolidated in
the Group’s consolidated financial statements.
On 15 March 2019, Karuna completed the closing of a Series B Preferred Share financing with PureTech and several new third
party investors. The financing provided for the purchase of 5,285,102 shares of Karuna Series B Preferred Shares at a purchase
price of $15.14 per share.
118 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value — continued
As a result of the issuance of the preferred shares to third-party investors, PureTech’s ownership percentage and corresponding
voting rights related to Karuna dropped from 70.9 per cent to 44.3 per cent, and PureTech simultaneously lost control over
Karuna’s Board of Directors, both of which triggered a loss of control over the entity. As of 15 March 2019, Karuna was
deconsolidated from the Group’s financial statements, resulting in only the profits and losses generated by Karuna through
the deconsolidation date being included in the Group’s Consolidated Statement of Income/(Loss) and Other Comprehensive
Income/(Loss). At the date of deconsolidation, PureTech recorded a $102.0 million gain on the deconsolidation of Karuna,
which was recorded to the Gain on the deconsolidation of subsidiary line item in the Consolidated Statement of Income/(Loss)
and Other Comprehensive Income/(Loss). While the Company no longer controls Karuna, it was concluded that PureTech still
had significant influence over Karuna by virtue of its large, albeit minority, ownership stake and its continued representation
on Karuna’s Board of Directors. PureTech still had the power to participate in the financial and operating policy decisions of
the entity, although it did not control these policies. As PureTech was able to demonstrate that it has significant influence over
Karuna, the entity will be accounted for as an associate under IAS 28.
Upon the date of deconsolidation, PureTech held both preferred and common shares in Karuna and a warrant issued by
Karuna to PureTech. The preferred shares and warrant held by PureTech fall under the guidance of IFRS 9 and will be treated
as financial assets held at fair value, and all movements to the value of preferred shares held by PureTech will be recorded
through the Consolidated Statement of Income/(Loss) and Other Comprehensive Income/(Loss), in accordance with IFRS
9. The fair value of the preferred shares and warrant at deconsolidation was $72.4 million. Subsequent to deconsolidation,
PureTech purchased an additional $5.0 million of Karuna Series B Preferred shares, for a total fair value immediately following
deconsolidation of $77.4 million.
On 28 June 2019, Karuna priced its IPO. PureTech’s ownership percentage and corresponding voting rights related to Karuna
dropped from 44.3 per cent to 31.6 per cent; however, PureTech retained significant influence due to its continued presence on
the board and its large, albeit minority, equity stake in the company. Upon completion of the IPO, the Karuna preferred shares
held by PureTech converted to common shares. In light of PureTech’s common share holdings in Karuna and corresponding
voting rights, PureTech had re-established a basis to account for its investment in Karuna under IAS 28. The preferred shares
investment held at fair value was therefore reclassified to investment in associate upon completion of the conversion. During
the year ended 31 December 2019 and up to 28 June 2019, the Company recognised a gain of $40.6 million that was recorded
on the line item Gain on investments held at fair value within the Consolidated Statement of Comprehensive Income/(Loss)
related to the preferred shares that increased in value between the date of deconsolidation and the date of Karuna’s IPO.
As of 2 December 2019 it was concluded that the Company no longer exerted significant influence over Karuna owing to
the resignation of the PureTech designee from Karuna’s board of directors, with PureTech retaining no ability to reappoint
representation. As such, PureTech lost the power to participate in the financial and operating policy decisions of Karuna. As
a result, Karuna is no longer deemed an Associate and does not meet the scope of equity method accounting, resulting in the
investment being accounted for as an investment held at fair value. For the period of 28 June 2019 through 2 December 2019,
PureTech’s investment in Karuna was subject to equity method accounting. In accordance with IAS 28, the Company’s
investment was adjusted by the share of losses generated by Karuna (weighted average of 31.4 per cent based on common
stock ownership interest), which resulted in a net loss of associates accounted for using the equity method of $6.4 million
during the year ended 31 December 2019.
Upon PureTech’s loss of significant influence, the investment in Karuna was reclassified to an investment held at fair value. This
change led PureTech to recognise a gain on loss of significant influence of $445.6 million that was recorded to the Consolidated
Statement of Income/(Loss) on the line item Gain on loss of significant influence during the year ended 31 December 2019. The
investment in Karuna after the recording of the gain on loss of significant influence was $557.2 million, which was reclassified
from Investments in associates to Investments held at fair value. Additionally, from 2 December 2019 PureTech recorded
a $0.7 million loss on the line item Gain/(loss) on investments held at fair value within the Consolidated Statement of Income/
(Loss) and Other Comprehensive Income/(Loss) for the year ended 31 December 2019.
Akili
On 8 May 2018, Akili completed the first closing of a Series C Preferred Stock financing in which PureTech Health did not invest.
As a result of the issuance of the preferred shares to third-party investors, following the first close of the Series C financing,
PureTech’s ownership percentage and corresponding voting rights related to Akili dropped from 61.8 per cent to 41.9 per cent,
triggering a loss of control over the entity. As of May 2018, Akili was deconsolidated from the Group’s financial statements,
resulting in only the profits and losses generated by Akili through May 2018 being included in the Group’s Consolidated
Statements of Comprehensive Income/(Loss). As a result of the deconsolidation, PureTech recognised a $41.7 million gain
on the deconsolidation during the year ended 31 December 2018, which was recorded to the Consolidated Statement of
Comprehensive Income/(Loss) on the line item Gain on the deconsolidation of subsidiary.
As PureTech did not hold common shares in Akili upon deconsolidation and the preferred shares it holds do not have equity-
like features, the voting percentage attributable to common shares is nil. Therefore, PureTech had no basis to account for its
investment in Akili under IAS 28. The preferred shares held by PureTech Health fall under the guidance of IFRS 9 and will be
treated as a financial asset held at fair value and all movements to the value of PureTech’s share in the preferred shares will
be recorded through the Consolidated Statements of Comprehensive Income/(Loss), in accordance with IFRS 9. During the
year ended 31 December 2019 and 2018, the Company recognised a gain of $11.5 million and $12.7 million, respectively, that
was recorded on the line item Loss on investments held at fair value within the Consolidated Statements of Comprehensive
Income/(Loss). Please refer to Note 16 for information regarding the valuation of these instruments.
PureTech Health plc Annual report and accounts 2019 119
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value — continued
resTORbio
On 26 January 2018, resTORbio, Inc., closed its initial public offering. Prior to the resTORbio IPO, PureTech Health recorded
a loss of $14.3 million during the year ended 31 December 2018 to the Consolidated Statement of Income/(Loss) within Gain/
(Loss) on investments held at Fair Value to adjust the fair value related to its resTORbio Series A Preferred Share investment.
Upon completion of the public offering, the resTORbio Series A Preferred Shares held by PureTech Health converted to
common shares. In light of PureTech’s common shares holdings in resTORbio and corresponding voting rights, the preferred
shares investment held at fair value was reclassified to investment in associate upon the completion of the conversion.
For the period of 1 January 2018 through 5 November 2018, PureTech’s investment in resTORbio was subject to equity method
accounting. In accordance with IAS 28, PureTech’s investment was adjusted by the share of profits and losses generated by
resTORbio (34.9 per cent based on common stock ownership interest), which resulted in a net loss of associates of $11.5 million
accounted for using the equity method which was recorded to the Consolidated Statement of Income/(Loss) on the line item
Share of net loss of associates during the year ended 31 December 2018.
As of 6 November 2018, it was that concluded the Company no longer exerted significant influence over resTORbio, as
PureTech lost the power to participate in the financial and operating policy decisions of resTORbio. As a result, resTORbio is
no longer deemed an Associate and does not meet the scope of equity method accounting, resulting in the investment being
accounted for as an investment held at fair value. For the period of 1 January 2018 through 5 November 2018, PureTech’s
investment in resTORbio was subject to equity method accounting. In accordance with IAS 28, PureTech’s investment was
adjusted by the share of profits and losses generated by resTORbio, that resulted a net loss of associates accounted for using
the equity method of $11.5 million that was recorded to the Consolidated Statement of Income/(Loss) on the line item Share
of net loss of associates accounted for using the equity method during the year ended 31 December 2018. This change led
PureTech to recognise a gain on loss of significant influence of $10.3 million that was recorded to the Consolidated Statement
of Income/(Loss) on the line item Gain on loss of significant influence during the year ended 31 December 2018. Additionally,
PureTech recorded a loss of $33.0 million for the adjustment to fair value in connection with its investment in resTORbio to the
Consolidated Statement of Income/(Loss) on the line item Loss on financial asset during the year ended 31 December 2018.
On 15 November 2019, resTORbio announced that top line data from the Protector 1 Phase 3 study evaluating the safety and
efficacy of RTB101 in preventing clinically symptomatic respiratory illness in adults age 65 and older, did not meet its primary
endpoint and the Company has stopped the development of RTB101 in this indication. As a result of ceasing the development
of RTB101, resTORbio’s share price witnessed a decline in price. In November and December 2019, PureTech Health sold
7,680,700 common shares of resTORbio for aggregate proceeds of $9.3 million. Immediately following the sale of common
shares, PureTech Health held 2,119,696 common shares, or 5.8 per cent, of resTORbio. Additionally, PureTech recorded a loss
of $71.9 million for the adjustment to fair value in connection with its investment in resTORbio to the Consolidated Statement
of Income/(Loss) on the line item Loss on financial asset during the year ended 31 December 2019.
Gain on deconsolidation
The following table summarises the gain on deconsolidation recognised by the Company:
Year ended 31 December
Gain on deconsolidation of Akili
Gain on deconsolidation of Vor
Gain on deconsolidation of Karuna
Gain on deconsolidation of Gelesis (Note 6)
Total gain on deconsolidation
2019
$000s
—
6,357
102,038
156,014
264,409
2018
$000s
41,730
—
—
—
41,730
120 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
6.
Investments in Associates
Gelesis
Gelesis was founded by PureTech and raised funding through preferred shares financings as well as issuances of warrants
and loans. As of 31 December 2018, PureTech maintained control of Gelesis and the subsidiary’s financial results were fully
consolidated in the Group’s consolidated financial statements.
On 1 July 2019, the Gelesis Board of Directors was restructured, resulting in two of the three PureTech representatives
resigning from the Board with PureTech retaining no ability to reappoint directors to these board seats. As a result of this
restructuring, PureTech lost control over Gelesis’ Board of Directors, which triggered a loss of control over the entity. At the
deconsolidation date, PureTech held a 25.2 per cent voting interest in Gelesis. As of 1 July 2019, Gelesis was deconsolidated
from the Group’s financial statements, resulting in only the profits and losses generated by Gelesis through the deconsolidation
date being included in the Group’s Consolidated Statement of Income/(Loss) and Other Comprehensive Income/(Loss). At the
date of deconsolidation, PureTech recorded a $156.0 million gain on the deconsolidation of Gelesis, which was recorded to the
Gain on the deconsolidation of subsidiary line item in the Consolidated Statement of Income/(Loss) and Other Comprehensive
Income/(Loss). While the Company no longer controls Gelesis, it was concluded that PureTech still has significant influence over
Gelesis by virtue of its large, albeit minority, ownership stake and its continued representation on Gelesis’ Board of Directors.
PureTech still has the power to participate in the financial and operating policy decisions of the entity, although it does not
control these policies. As PureTech is able to demonstrate that it has significant influence over Gelesis, the entity will be
accounted for as an associate under IAS 28, starting at the date of deconsolidation.
Upon the date of deconsolidation, PureTech held shares of preferred shares and common shares of Gelesis and a warrant
issued by Gelesis to PureTech. PureTech’s investment in common shares of Gelesis is subject to equity method accounting
with an initial investment of $16.4 million. In accordance with IAS 28, PureTech’s investment was adjusted by the share of profits
and losses generated by Gelesis subsequent to the date of deconsolidation. PureTech recognised its share in the net profit of
Gelesis (weighted average of 49.8 per cent based on common stock ownership interest) for the period from deconsolidation
date until 31 December 2019 in the amount of $37.1 million.
The preferred shares and warrant held by PureTech fall under the guidance of IFRS 9 and will be treated as financial assets
held at fair value and all movements to the value of PureTech’s share in the preferred shares will be recorded through the
Consolidated Statement of Income/(Loss) and Other Comprehensive Income/(Loss), in accordance with IFRS 9. The fair value
of the preferred shares and warrant at deconsolidation was $49.2 million.
During the year ended 31 December 2019, the Company recognised a loss of $18.7 million related to the preferred shares and
warrants that was recorded on the line item Gain/(loss) on investments held at fair value within the Consolidated Statement of
Income/(Loss) and Other Comprehensive Income/(Loss). This loss occurred as a result of the Gelesis Series 3 Growth financing,
which was executed with terms that resulted in a decrease in fair value across all other classes of preferred shares.
On 12 August 2019, Gelesis issued a convertible promissory note to the Company in the amount of $2 million. On
7 October 2019, Gelesis issued an amended and restated convertible note (the “Gelesis Note”) to the Company in the principal
amount of up to $6.5 million. The Gelesis Note was payable in instalments, with $2.0 million of the note drawn down upon
execution of the original note in August 2019 and an additional $3.3 million and $1.2 million drawn down on 7 October 2019
and 5 November 2019, respectively. The Gelesis Note was convertible upon the occurrence of Gelesis’ next qualified equity
financing, or at the demand of the Company at any date after 31 December 2019. The Gelesis Note falls under the guidance
of IFRS 9 and will be treated as a financial asset held at fair and all movements to the value of the note will be recorded through
the Consolidated Statement of Income/(Loss) and Other Comprehensive Income/(Loss).
On 5 December 2019, Gelesis closed its Series 3 Growth Preferred Stock financing, at which point all outstanding principal and
interest under the Gelesis Note converted into shares of Series 3 Growth Preferred Stock. In addition to the shares issued upon
conversion of the Gelesis Note, PureTech purchased $8 million of Series 3 Growth Preferred Stock in the December financing.
Impairment loss
Following the issuance of the Gelesis Series 3 Preferred Shares at a higher valuation than the previous round with some
favourable liquidation provisions primarily to PureTech and also to the other Series 3 preferred share investors, which resulted
in adjustments to the fair values of other preferred shares, warrant classes and Gelesis common stock, the Company assessed
the investment in common shares held in Gelesis for impairment. Management compared the recoverable amount of the
investment to its carrying amount as of 31 December 2019, which resulted in an impairment loss to the Investment in Gelesis.
The recoverable amount was estimated based on the fair value of the Gelesis common shares held by PureTech, which are
considered to be within Level 3 of the fair value hierarchy. The costs of disposal are immaterial for the calculation of Gelesis
investment’s recoverable amount.
PureTech Health plc Annual report and accounts 2019 121
Financial statements Notes to the Consolidated Financial Statements — continued
6.
Investments in Associates — continued
During the year ended 31 December 2019, the total fair value of common shares was determined utilising a hybrid valuation
approach with significant unobservable inputs within the PureTech valuation framework (refer to Note 16). The multi-scenario
hybrid valuation approach utilised the recent transaction method within an option pricing framework and an IPO scenario
within a probability-weighted-expected return framework to determine the value allocation for the common share class
of Gelesis. The fair value of the common shares was determined as the calculated business enterprise value allocated to
the outstanding common shares treated as call options within the OPM or the value of common shares within the PWERM.
The PWERM maintained a 75.0 per cent probability of occurrence while the OPM maintained a 25.0 per cent probability
of occurrence. The probability weighted term to exit was 1.57 years. The discount rate utilised was 20.0 percent while the
risk-free rate and volatility utilised were 1.62 per cent and 56.0 per cent, respectively.
The impairment loss amounted to $42.9 million and was recorded to Impairment of investment in associate within the
Consolidated Statement of Income/(Loss) and Other Comprehensive Income/(Loss) for the year ended 31 December 2019.
As of 31 December 2019 the investment in Gelesis was $10.6 million, which is equal to the fair value of the common shares
held by PureTech.
The following table summarises the activity related to the investment in associates balance for the years ended
31 December 2018 and 2019.
Investment in Associates
At 1 January 2018
Investment upon initial public offering of resTORbio
Cash investment in Associate
Share of net loss of resTORbio accounted for using the equity method
Gain on loss of significant influence of resTORbio
Reclassification of resTORbio investment upon loss of significant influence
As of 31 December 2018 and 1 January 2019
Reclassification of Karuna investment at initial public offering
Investment in Gelesis upon deconsolidation
Share of net loss of Karuna accounted for using the equity method
Share of net profit of Gelesis accounted for using the equity method
Impairment of investment in Gelesis
Reclassification of investment upon loss of significant influence
As of 31 December 2019
$000's
—
115,210
3,500
(11,490)
10,287
(117,507)
—
118,006
16,444
(6,345)
37,136
(42,938)
(111,661)
10,642
The following table summarises the financial information of Gelesis as included in its own financial statements, adjusted for fair
value adjustments at deconsolidation and differences in accounting policies. The table also reconciles the summarised financial
information to the carrying amount of the Company’s interest in Gelesis. The information for the year ended 31 December 2019
includes the results of Gelesis only for the period 1 July 2019 to 31 December 2019, as Gelesis was consolidated prior
to this period.
Year ended 31 December
Percentage ownership interest – common stock
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets (100%)
Group's share of net assets (49.3%)
Share in associate's equity settled share based payments
Investment before impairment
Impairment of investment in associate
Investment in associate
Revenue
Income from continuing operations (100%)
Total comprehensive income (100%)
Group's share of total comprehensive income (49.8%)
122 PureTech Health plc Annual report and accounts 2019
2019
$000s
49.3%
369,336
40,079
82,406
216,852
110,157
54,340
(760)
53,580
(42,938)
10,642
—
74,573
74,573
37,136
Financial statements Notes to the Consolidated Financial Statements — continued
7. Operating Expenses
Total operating expenses were as follows:
For the years ending 31 December:
General and administrative
Research and development
Total operating expenses
2019
$000s
59,358
85,848
2018
$000s
47,365
77,402
145,206
124,767
The average number of persons employed by the Group during the year, analysed by category, was as follows:
For the years ending 31 December:
General and administrative
Research and development
Total
The aggregate payroll costs of these persons were as follows:
For the years ending 31 December:
General and administrative
Research and development
Total
Detailed operating expenses were as follows:
For the years ending 31 December:
Salaries and wages
Healthcare benefits
Payroll taxes
Share-based payments
Total payroll costs
Other selling, general and administrative expenses
Other research and development expenses
Total other operating expenses
Total operating expenses
Auditors remuneration:
For the years ended 31 December:
Audit of these financial statements
Audit of the financial statements of subsidiaries
Audit-related assurance services
Non-audit related services
Taxation
Total
2019
39
90
129
2019
$000s
24,468
20,682
45,150
2019
$000s
27,703
1,511
1,468
14,468
45,150
34,890
65,166
100,056
145,206
2019
$000s
870
290
163
778
—
2018
55
90
145
2018
$000s
22,939
20,109
43,048
2018
$000s
27,274
1,465
1,672
12,637
43,048
24,426
57,293
81,719
124,767
2018
$000s
652
200
162
159
—
2,101
1,173
Please refer to Note 8 for further disclosures related to share-based payments and Note 24 for management’s
remuneration disclosures.
PureTech Health plc Annual report and accounts 2019 123
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments
Share-based payments includes stock options, restricted stock units (“RSUs”) and performance-based restricted share unit
awards in which the expense is recognised based on the grant date fair value of these awards.
Share-based Payment Expense
The Group share-based payment expense for the years ended 31 December 2019 and 2018, were comprised of charges
related to the PureTech Health plc incentive stock and stock option issuances and subsidiary stock plans.
The following table provides the classification of the Group’s consolidated share-based payment expense as reflected in the
Consolidated Statement of Income/(Loss):
For the years ended 31 December
General and administrative
Research and development
Total
2019
$000s
10,677
3,791
14,468
2018
$000s
5,293
7,344
12,637
There was no income tax benefit recognised for share-based payment arrangements during the periods presented due to
existence of operating losses for all issuing entities. In conjunction with the acquisition of the remaining minority interests
of Ariya Therapeutics Inc. (“Ariya”) PureTech Health granted options to the co-inventors and advisors of Ariya to purchase
2,147,295 ordinary shares under the PureTech Health Performance Share Plan (please refer to Note 16). Upon the conclusion
of the transaction, Ariya was subsequently renamed PureTech LYT.
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 authorised amount of 10.0 per cent of the total ordinary shares
outstanding. The shares have various vesting terms over a period of service between two and four years, provided the recipient
remains continuously engaged as a service provider.
The share-based awards granted under the PSP are equity settled and expire 10 years from the grant date. As of the years
ended 31 December 2019 and 2018, the Company had issued share-based awards to purchase an aggregate of 5,409,751
and 5,657,602 shares, respectively, under this plan.
RSUs
During the twelve months ended 31 December 2019 and 2018, the Company issued 1,775, 568 and 2,860,782 performance
based RSUs under the PSP, respectively.
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 recognises compensation expense on a graded basis for the RSUs.
Following vesting, each recipient will be required to make a payment of one pence per ordinary share on settlement of the
RSUs. Vesting of the RSUs is subject to the satisfaction of performance conditions.
The Company recognises the estimated fair value of performance-based awards as share-based compensation expense
over the performance period based upon its determination of whether it is probable that the performance targets will be
achieved. The Company assesses the probability of achieving the performance targets at each reporting period. Cumulative
adjustments, if any, are recorded to reflect subsequent changes in the estimated outcome of performance-related conditions.
The fair value of the performance-based awards is based on the Monte Carlo simulation analysis utilising 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 conditions attached to the 2019 RSU awards are based on the achievement of total shareholder return
(“TSR”), with 50.0 per cent of the shares under award vesting based on the achievement of absolute TSR targets, 12.5 per cent
of the shares under the award vesting based on TSR as compared to the FTSE 250 Index, 12.5 per cent of the shares under the
award vesting based on TSR as compared to the MSCI Europe Health Care Index, and 25.0 per cent 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.
The Company incurred share-based payment expenses for performance based RSUs of $2.2 million and $2.3 million for the
twelve months ended 31 December 2019 and 2018, respectively.
124 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
Stock Options
During the twelve months ended 31 December 2019 and 2018, the Company granted 3,634,183 and 2,796,820 stock option
awards under the PSP, respectively.
The fair value of the stock options awarded by the Company was estimated at the grant date using the Black-Scholes option
valuation model, considering the terms and conditions upon which options were granted, with the following weighted-
average assumptions:
At 31 December:
Expected volatility
Expected terms (in years)
Risk-free interest rate
Expected dividend yield
Grant date fair value
Share price at grant date
2019
35.68%
5.81
1.85%
—
$2.23
$2.57
2018
44.18%
6.08
2.79%
—
$0.96
$2.05
The Company incurred share-based payment expense for the stock options of $9.2 million and $1.4 million for the twelve
months ended 31 December 2019 and 2018, respectively. The significant increase for the year ended 31 December 2019,
as compared to the year ended 31 December 2018, is largely attributable to the amortisation of share based payments
awarded to the Ariya founders.
As of 31 December 2019, 4,229,793 incentive options are exercisable with a weighted-average exercise price of $1.42.
Exercise prices ranged from $0.01 to $4.62.
PureTech LLC Incentive Stock Issuance
In May 2015 and August 2014, the directors of PureTech Health LLC approved the issuance of shares to the management team,
directors and advisors of PureTech Health LLC, subject to vesting restrictions. The share-based awards granted under the 2016
PureTech LLC Incentive Stock Issuance Plan are equity settled and expire 10 years from the grant date. No additional shares will
be granted under this compensation arrangement. The fair value of the shares awarded was estimated as of the date of grant.
The Company incurred an expense of nil and $0.2 million in share-based payment expense for the twelve months ended
31 December 2019 and 2018, respectively, related to PureTech Health LLC incentive compensation.
As of 31 December 2018, all shares related to the pre-IPO incentive compensation plan had fully vested.
Subsidiary Plans
Certain subsidiaries of the Group have adopted stock option plans. A summary of stock option activity by number of shares in
these subsidiaries is presented in the following table:
Gelesis
Alivio
PureTech LYT
Commense
Entrega
Follica
Karuna
Sonde
Vedanta
Outstanding
as of
1 January
2019
3,681,732
2,393,750
2,180,000
540,416
914,000
1,229,452
1,949,927
22,500
1,373,750
Granted
During the
Year
—
1,329,494
—
—
58,000
79,588
—
1,806,504
154,193
Exercised
During the
Year
—
(3,125)
—
—
—
—
—
—
—
Expired
During the
Year
(110,386)
—
—
—
—
—
—
—
—
Forfeited
During the
Year
(3,571,346)1
(21,875)
(2,180,000)2
(540,416)
—
—
(1,949,927)1
—
(77,843)
Outstanding
as of
31 December
2019
—
3,698,244
—
—
972,000
1,309,040
—
1,829,004
1,450,100
1 These shares represent the options outstanding on the date of deconsolidation of Karuna and Gelesis.
2 These share represent the option outstanding on the date of conversion to PureTech stock options.
PureTech Health plc Annual report and accounts 2019 125
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
Gelesis
Alivio
Akili
PureTech LYT
Commense
Entrega
Follica
Karuna
Knode
Sonde
Tal
The Sync Project
Vedanta
Outstanding
as of
1 January
2018
2,728,232
2,393,750
2,385,355
—
418,750
867,750
1,271,302
855,427
32,500
35,000
1,663,806
1,080,000
1,194,014
Granted
During the
Year
953,500
—
—
2,180,000
121,666
60,000
—
1,111,000
—
—
—
—
278,786
Exercised
During the
Year
Expired
During the
Year
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(3,750)
(41,850)
(4,125)
(32,500)
(6,250)
(30,250)
—
(24,800)
Forfeited
During the
Year
—
—
(2,385,355)1
—
—
(10,000)
—
(12,375)
—
(6,250)
(2,750)
(1,080,000)
(74,250)
Outstanding
as of
31 December
2018
3,681,732
2,393,750
—
2,180,000
540,416
914,000
1,229,452
1,949,927
—
22,500
1,630,806
—
1,373,750
1 These shares represent the options outstanding on the date of Akili’s deconsolidation.
The weighted average exercise prices for the options outstanding as of 1 January 2019 were as follows:
Outstanding at 1 January 2019
Alivio
Entrega
Follica
Sonde
Vedanta
Number of
options
2,393,750
914,000
1,229,452
22,500
1,373,750
Weighted-
average
exercise price
$
0.03
0.71
0.92
0.12
9.30
The weighted average exercise prices for the options granted for the years ended 31 December 2019 and 2018 were as follows:
For the years ended 31 December:
Alivio
PureTech LYT
Commense
Entrega
Follica
Karuna
Sonde
Vedanta
2019
$
0.49
—
—
—
0.03
—
0.20
19.13
2018
$
—
0.03
1.34
1.95
—
9.42
—
14.66
The weighted average exercise prices for options forfeited during the year ended 31 December 2019 were as follows:
Forfeited during the year ended 31 December 2019
Number of options
Gelesis
Alivio
PureTech LYT
Commense
Karuna
Vedanta
3,571,346
21,875
2,180,000
540,416
1,949,927
77,843
Weighted-average
exercise price
$
7.48
0.49
0.01
0.13
5.10
1.31
126 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
The weighted average exercise prices for options exercisable as of 31 December 2019 were as follows:
Exercisable at 31 December 2019
Number of Options
Weighted-average
exercise price
Exercise
Price Range
Alivio
Entrega
Follica
Sonde
Vedanta
1,419,750
882,062
1,118,635
191,405
1,081,005
$0.04
$0.60
$0.89
$0.18
$7.05
$0.03 – $0.49
$0.03 – $2.36
$0.03 – $1.40
$0.13 – $0.20
$0.02 – $19.94
Significant Subsidiary Plans
Vedanta 2010 Stock Incentive Plan
In 2010, the Board of Directors for Vedanta approved the 2010 Stock Incentive Plan (the “Vedanta Plan”). Through subsequent
amendments, as of 31 December 2019, it allowed for the issuance of 2,145,867 share-based compensation awards through
incentive share options, nonqualified share options, and restricted shares to employees, directors, and nonemployees
providing services to Vedanta. At 31 December 2019, 595,642 shares remained available for issuance under the Vedanta Plan.
The options granted under Vedanta Plan are equity settled and expire 10 years from the grant date. Typically, the awards vest
in four years but vesting conditions can vary based on the discretion of Vedanta’s Board of Directors.
Options granted under the Vedanta Plan are exercisable at a price per share not less than the fair market value of the
underlying ordinary shares on the date of grant. The estimated fair value of options, including the effect of estimated
forfeitures, is recognised over the options’ vesting period.
The fair value of the stock option grants has been estimated at the date of grant using the Black-Scholes option pricing model
with the following range of assumptions:
Assumption/Input
Expected award life (in years)
Expected award price volatility
Risk free interest rate
Expected dividend yield
Grant date fair value
Share price at grant date
2019
2018
5.86 – 6.07
89.24% – 95.46%
1.73% – 1.88%
—
$14.12 – $15.61
$18.71 – $19.94
6.03 – 6.16
91.60% – 92.56%
2.65% – 2.78%
—
$11.21 – $11.26
$14.66
Vedanta incurred share-based compensation expense of $1.7 million and $2.1 million for the years ended 31 December 2019
and 2018, respectively.
Gelesis 2016 Stock Incentive Plan
In September 2016, the Directors of Gelesis approved the 2016 Stock Incentive Plan (the “2016 Gelesis Plan”) which provides for
the grant of incentive stock options, nonqualified stock options, and restricted stock to employees, directors, and nonemployees
providing services to Gelesis. At 30 June 2019, 329,559 shares remained available for issuance under the Gelesis Plan.
The options granted under the 2016 Gelesis Plan are equity settled and expire 10 years from the grant date. Typically, the
awards vest in four years but vesting conditions can vary based on the discretion of Gelesis Board of Directors.
Options granted under the 2016 Gelesis Plan are exercisable at a price per share not less than the fair market value of
the underlying ordinary shares on the date of grant. The estimated fair value of options, including the effect of estimated
forfeitures, is recognised over the options’ vesting period.
The fair value of the stock option grants has been estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
Assumption/Input
Expected award life (in years)
Expected award price volatility
Risk free interest rate
Expected dividend yield
Grant date fair value
Share price at grant date
2019
0
—%
—%
—
$—
$—
2018
6.22
64.58%
2.79%
—
$7.84
$12.82
PureTech Health plc Annual report and accounts 2019 127
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
Gelesis used an average historical share price volatility based on an analysis of reported data for a peer group of comparable
companies which were selected based upon industry similarities. As there is not sufficient historical share exercise data to
calculate the expected term of the options, Gelesis elected to use the “simplified” method for all options granted at the money
to value share option grants. Under this approach, the weighted average expected life is presumed to be the average of the
vesting term and the contractual term of the option.
Gelesis incurred share-based compensation expense of $2.4 million for the six month period prior to deconsolidation ended
30 June 2019 and $3.9 million for the year ended 31 December 2018.
Karuna Pharmaceuticals, Inc. 2009 Stock Incentive Plan
In 2009, the Board of Directors for Karuna Pharmaceuticals, Inc. approved the 2009 Stock Incentive Plan (the “Karuna 2009
Plan”). It allowed for the issuance of 1,000,000 share-based compensation awards through stock options, restricted stock
units and other stock-based awards under the Karuna 2009 Plan to employees, officers, directors, consultants and advisors
of Karuna. At 15 March 2019, 106,865 shares remained available for issuance under the Karuna 2009 Plan.
The options granted under the Karuna 2009 Plan are equity settled and expire 10 years from the grant date. Typically,
the awards vest in four years but vesting conditions can vary based on the discretion of Karuna’s Board of Directors.
Options granted under the Karuna 2009 Plan are exercisable at a price per share not less than the fair market value of
the underlying ordinary shares on the date of grant. The estimated fair value of options, including the effect of estimated
forfeitures, is recognised over the options’ vesting period.
The fair value of the stock option grants has been estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
Assumption/Input
Expected award life (in years)
Expected award price volatility
Risk free interest rate
Expected dividend yield
Grant date fair value
Share price at grant date
2019
0
—%
—%
—
$—
$—
2018
6.07
50.28%
1.95%
—
$3.51
$7.08
Karuna incurred share-based compensation expense of $1.2 million for the period prior to deconsolidation ended
15 March 2019 and $1.9 million for the year ended 31 December 2018.
Other Plans
The stock compensation expense under plans at other subsidiaries of the Group not including Gelesis, Vedanta and Karuna
was $0.01 million and $0.8 million for the years ended 31 December 2019 and 2018, respectively. The negative expense
incurred during the year ended 31 December 2019 was largely attributable to Commense forfeitures.
9.
Finance Cost, net
The following table shows the breakdown of finance income and costs:
For the year ended 31 December
Finance income
Interest from financial assets not at fair value through profit or loss
Total finance income
Finance costs
Contractual interest expense on convertible notes
Interest income/(expense) on other borrowings
Interest Expense
Gain/(loss) on forgiveness of debt
Gain/(loss) on foreign currency exchange
Total finance income/(costs) – contractual
Gain/(loss) from change in fair value of warrant liability
Gain/(loss) on fair value accounting
Total finance income/(costs) – fair value accounting
Total finance income/(costs) – subsidiary preferred shares
Total finance income/(costs)
Finance income/(costs), net
128 PureTech Health plc Annual report and accounts 2019
2019
$000s
4,362
4,362
(149)
—
(2,495)
—
68
(2,576)
(11,890)
(34,585)
(46,475)
(1,458)
(47,933)
(46,147)
2018
$000s
3,358
3,358
(388)
(4)
—
289
137
34
82
22,549
22,631
(106)
22,525
25,917
Financial statements Notes to the Consolidated Financial Statements — continued
10. Earnings/(Loss) per Share
The basic and diluted loss per share has been calculated by dividing the income/(loss) for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding during the years ended 31 December 2019 and
2018, respectively.
Earnings/(Loss) Attributable to Owners of the Company:
Earnings/(loss) for the year, attributable to the owners
of the Company
Earnings/(loss) attributable to ordinary shareholders
Weighted-Average Number of Ordinary Shares:
Issued ordinary shares at 1 January
Effect of shares issued
Effect of dilutive shares
Weighted average number of ordinary shareholders
at 31 December
Earnings/(Loss) per Share:
Basic and diluted earnings/(loss) per share
11. Property and Equipment
2019
Basic
$000s
Diluted
$000s
2018
Basic
$000s
Diluted
$000s
421,144
421,144
421,144
421,144
(43,654)
(43,654)
(43,654)
(43,654)
2019
2018
Basic
Diluted
Basic
Diluted
282,493,867 282,493,867
932,600
8,355,866
932,600
—
236,897,579 236,897,579
36,950,688
—
36,950,688
—
283,426,467 291,782,333
273,848,267 273,848,267
2019
Basic
$
1.49
Diluted
$
1.44
2018
Basic
$
(0.16)
Diluted
$
(0.16)
Cost
Balance as of 1 January 2018
Additions, net of transfers
Disposals
Exchange differences
Balance as of 31 December 2018
Additions, net of transfers
Disposals
Deconsolidation of subsidiaries
Reclassifications
Exchange differences
Balance as of 31 December 2019
Accumulated depreciation
and impairment loss
Balance as of 1 January 2017
Depreciation
Disposals
Exchange differences
Balance as of 31 December 2018
Depreciation
Disposals
Deconsolidation of subsidiaries
Reclassifications
Exchange differences
Laboratory and
Manufacturing
Equipment
$000s
Furniture and
Fixtures
$000s
Computer
Equipment and
Software
$000s
Leasehold
Improvements
$000s
Construction in
process
$000s
6,082
1,586
(261)
(101)
7,306
3,374
(183)
(3,076)
(25)
(11)
7,385
469
27
(8)
—
488
1,126
(168)
—
6
—
1,452
1,214
477
(260)
—
1,431
175
(9)
(137)
48
—
2,899
2,070
(27)
(18)
4,924
13,494
(45)
(754)
36
1
1,508
17,656
74
171
—
(6)
239
4,649
—
(4,190)
(76)
24
646
Laboratory and
Manufacturing
Equipment
$000s
Furniture and
Fixtures
$000s
Computer
Equipment and
Software
$000s
Leasehold
Improvements
$000s
Construction in
process
$000s
(2,360)
(1,032)
114
56
(3,222)
(1,328)
102
1,457
15
8
(175)
(60)
2
—
(233)
(144)
138
—
—
—
(534)
(296)
74
—
(756)
(312)
5
53
(20)
—
(807)
(1,088)
20
21
(1,854)
(1,448)
20
319
6
2
—
—
—
—
—
—
—
—
—
—
—
Total
$000s
10,738
4,331
(556)
(125)
14,388
22,818
(405)
(8,157)
(11)
14
28,647
Total
$000s
(3,876)
(2,476)
210
77
(6,065)
(3,232)
265
1,829
1
10
(7,192)
Balance as of 31 December 2019
(2,968)
(239)
(1,030)
(2,955)
PureTech Health plc Annual report and accounts 2019 129
Financial statements Notes to the Consolidated Financial Statements — continued
11.
Property and Equipment — continued
Property and Equipment, net
Laboratory and
Manufacturing
Equipment
$000s
Furniture and
Fixtures
$000s
Computer
Equipment and
Software
$000s
Leasehold
Improvements
$000s
Construction in
process
$000s
Balance as of 31 December 2018
Balance as of 31 December 2019
4,084
4,417
255
1,213
675
478
3,070
14,701
239
646
Total
$000s
8,323
21,455
Depreciation of property and equipment is included in the General and administrative expenses and Research and
development expenses line items in the Consolidated Statements of Comprehensive Income/(Loss). The Company recorded
depreciation expense of $3.2 million and $2.5 million for the years ended 31 December 2019 and 2018, respectively.
12.
Intangible Assets
Intangible assets consist of licenses of intellectual property acquired by the Group through various agreements with third
parties and are recorded at the value of cash and non-cash consideration transferred. Information regarding the cost and
accumulated amortisation of intangible assets is as follows:
Cost
Balance at 1 January 2018
Additions
Deconsolidation of subsidiary
Balance as of 31 December 2018
Additions
Deconsolidation of subsidiaries
Balance as of 31 December 2019
Accumulated amortisation
Balance at 1 January 2018
Amortisation
Deconsolidation of subsidiary
Balance as of 31 December 2018
Amortisation
Deconsolidation of subsidiary
Balance as of 31 December 2019
Intangible assets, net
Balance as of 31 December 2018
Balance as of 31 December 2019
Licenses
$000s
5,018
125
(76)
5,067
400
(4,842)
625
Licenses
$000s
(1,709)
(302)
24
(1,987)
(117)
2,104
—
Licenses
$000s
3,080
625
These intangible asset licenses represent in-process-research-and-development assets since they are still being developed and
are not ready for their intended use. As such, these assets are not yet amortised but tested for impairment annually. The Company
tested such assets for impairment as of balance sheet date and concluded that none were impaired. During the year ended
31 December 2019, Vor, Karuna and Gelesis were deconsolidated and as such $2.7 million in net assets were derecognised.
Amortisation expense is included in the Research and development expenses line item in the accompanying Consolidated
Statements of Comprehensive Income/(Loss). Amortisation expense, recorded using the straight-line method, was
approximately $0.1 million and $0.3 million for the years ended 31 December 2019 and 2018, respectively.
13. Other Financial Assets
Other financial assets consist of restricted cash held, which represents amounts that are reserved as collateral against letters of
credit with a bank that are issued for the benefit of a landlord in lieu of a security deposit for office space leased by the Group.
Information regarding restricted cash was as follows:
As of 31 December
Restricted cash
Total other financial assets
2019
$000s
2,124
2,124
2018
$000s
2,199
2,199
130 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
14. Equity
Total equity for PureTech as of 31 December 2019 and 2018 was as follows:
Equity
Share capital, £0.01 par value, issued and paid 285,370,619 and 282,493,867 as of
31 December 2019 and 2018, respectively
Merger reserve
Share premium
Translation reserve
Other reserves
Retained earnings/(accumulated deficit)
Equity attributable to owners of the Group
Non-controlling interests
Total equity
31 December
2019
$000s
31 December
2018
$000s
5,408
138,506
287,962
—
(18,282)
254,444
668,037
(17,640)
650,397
5,375
138,506
278,385
10
20,923
(167,692)
275,507
(108,535)
166,972
Changes in share capital and share premium relate primarily to acquisition of Ariya non-controlling interest and incentive
options exercises during the period.
Shareholders are entitled to vote on all matters submitted to shareholders for a vote. Each ordinary share is entitled to one
vote. Each ordinary share is entitled to receive dividends when and if declared by the Company’s Directors. The Company has
not declared any dividends in the past.
On June 18, 2015, the Company acquired the entire issued share capital of PureTech LLC in return for 159,648,387 Ordinary
Shares. This was accounted for as a common control transaction at cost. It was deemed that the share capital was issued in
line with movements in share capital as shown prior to the transaction taking place. In addition, the merger reserve records
amounts previously recorded as share premium.
Other reserves comprise the cumulative credit to share-based payment reserves corresponding to share-based payment
expenses recognised through Consolidated Statements of Comprehensive Income/(Loss).
15. Subsidiary Preferred Shares
IFRS 9 addresses the classification, measurement, and recognition of financial liabilities. Preferred shares issued by subsidiaries
and affiliates often contain redemption and conversion features that are assessed under IFRS 9 in conjunction with the host
preferred share instrument.
The subsidiary 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, a variable number of shares will
be issued. Because the possible conversion of the preferred shares is outside of the control of the Group, these have been
classified as liabilities on the balance sheet and subsequently remeasured at fair value through the profit and loss.
The preferred shares are entitled to vote with holders of common shares on an as converted basis.
The Group recognises the preferred share balance upon the receipt of cash financing or upon the conversion of notes into
preferred shares at the amount received or carrying balance of any notes and derivatives converted into preferred shares.
Preferred shares are not allocated a proportion of the subsidiary losses.
The balance as of 31 December 2019 and 2018 represents the fair value of the instruments for all subsidiary preferred shares
except for Tal, which represents the host instrument at amortised cost. The following summarises the subsidiary preferred
share balance:
As of 31 December
Entrega
Follica
Gelesis
Karuna
Sonde
The Sync Project
Tal
Vedanta Biosciences
Total subsidiary preferred share balance
2019
$000s
3,222
11,663
—
—
7,212
—
—
78,892
100,989
2018
$000s
2,780
60
140,192
32,342
—
109
113
41,923
217,519
As of 31 December 2019, the total subsidiary preferred share balance decreased owing to the deconsolidation of
Karuna and Gelesis.
PureTech Health plc Annual report and accounts 2019 131
Financial statements Notes to the Consolidated Financial Statements — continued
15.
Subsidiary Preferred Shares — continued
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 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 31 December 2019 and 2018, 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:
As of 31 December
Entrega
Follica
Gelesis
Karuna
Sonde
Sync
Tal
Vedanta Biosciences
Total minimum liquidation preference
2019
$000s
2,216
6,405
—
—
7,250
—
—
77,161
93,032
2018
$000s
2,216
1,895
77,301
24,343
—
109
113
41,923
147,900
As of 31 December 2018, Tal ceased operations and was in the process of liquidated. Therefore, the liquidation preference
shown above equals the cash on hand, as this will be paid out to existing investors.
As of 31 December 2019, the minimum liquidation preference decreased owing to the deconsolidation of Karuna and Gelesis.
For the years ended 31 December 2019 and 2018, the Group recognised the following changes in the value of subsidiary
preferred shares:
$000s
215,635
54,537
7,930
(23,110)
(1,062)
(36,517)
106
217,519
51,048
4,894
33,636
1,458
(207,346)
(108)
(112)
100,989
Balance as of 31 Balance as of 1 January 2018
Issuance of new preferred shares
Conversion of convertible notes
Decrease in value of preferred shares measured at fair value
Sale of The Sync Group
Deconsolidation of subsidiary
Accretion
Balance as of 31 December 2018 and 1 January 2019
Issuance of new preferred shares
Conversion of convertible notes
Increase in value of preferred shares measured at fair value
Finance costs
Deconsolidation of subsidiary
Other
Cash Distribution
Balance as of 31 December 2019
132 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
15.
Subsidiary Preferred Shares — continued
2019
On 15 March 2019, Karuna was deconsolidated. As of deconsolidation, the fair value of Karuna’s preferred share liability was
$31.7 million.
On 4 April 2019, Sonde Health issued and sold shares of Series A-2 preferred shares for aggregate proceeds of $11.1 million,
of which $5.3 million was contributed by outside investors. Approximately $5.8 million of outstanding principal and interest
on convertible promissory notes issued by Sonde to PureTech converted into Series A-2 preferred shares in this financing in
accordance with their terms. On 29 August 2019, Sonde sold an additional 1,052,632 shares of its Series A-2 preferred shares
for aggregate proceeds of $2.0 million. It has been determined that these shares are liability classified and contain a liability
classified embedded derivative. This embedded derivative is a conversion feature which can result in settlement in a variable
number of shares. The instrument is not bifurcated and is measured in whole at fair value through the profit and loss.
In April 2019, Gelesis completed further closings of its Series 2 Growth financing issuing 799,894 shares for proceeds of
$10.2 million, of which $8.6 million was contributed by outside investors and $1.6 million was contributed by PureTech.
In March and May 2019, Vedanta completed a second and third closing of its Series C preferred shares financing for aggregate
proceeds of $18.7 million. PureTech Health did not participate in either closing. It has been determined that these shares are
liability classified and contain a liability classified embedded derivative. This embedded derivative is a conversion feature which
can result in settlement in a variable number of shares. The instrument is not bifurcated and is measured in whole at fair value
through the profit and loss.
On 1 July 2019, Gelesis was deconsolidated. As of deconsolidation, the fair value of Gelesis’ preferred share liability was
$175.6 million.
On 19 July 2019, all of the outstanding notes, plus accrued interest, issued by Follica converted into 17,639,204 shares of
Series A-3 Preferred Shares and 14,200,044 shares of common share pursuant to a Series A-3 Note Conversion Agreement
between Follica and the noteholders. Third parties held 2,422,990 A-3 preferred shares following the conversion. It has been
determined that these shares are liability classified and contain a liability classified embedded derivative. This embedded
derivative is a conversion feature which can result in settlement in a variable number of shares. The instrument is not bifurcated
and is measured in whole at fair value through the profit and loss.
In September 2019, Vedanta received $16.7 million from outside investors through the issuance of its Series C-2 preferred
shares in two separate closings. The issuances provided for the purchase of 711,772 Series C-2 shares at a purchase price of
$23.28. PureTech Health did not participate in either closing. It has been determined that these shares are liability classified
and contain a liability classified embedded derivative. This embedded derivative is a conversion feature which can result in
settlement in a variable number of shares. The instrument is not bifurcated and is measured in whole at fair value through the
profit and loss.
2018
In 2018, Gelesis received $16.8 million from outside investors through the issuance of its Series 2 Growth preferred shares
as part of a $30.0 million financing with multiple closings. It has been determined that these shares are liability classified
and contain a liability classified embedded derivative. This embedded derivative is a conversion feature which can result in
settlement in a variable number of shares. The instrument is not bifurcated and is measured in whole at fair value through the
profit and loss.
In May 2018, Akili issued Series C preferred shares for aggregate proceeds of $55.0 million; PureTech Health did not
participate in this financing. Upon closing of Akili’s Series C financing, the subsidiary was deconsolidated by PureTech Health
(please refer to Note 3).
In August 2018, Karuna issued Series A preferred shares for aggregate proceeds of $42.1 million, of which $23.9 came from
outside investors. In conjunction with the August 2018 issuance of Series A preferred shares, $26.1 million of outstanding
principal and accrued interest on notes payable converted, of which $7.9 million related to outside investors. It has been
determined that these shares are liability classified and contain a liability classified embedded derivative. The instrument
is not bifurcated and is measured in whole at fair value through the profit and loss.
On 21 December 2018, Vedanta issued Series C preferred shares for aggregate proceeds of $26.7 million, of which
$21.7 million came from outside investors. It has been determined that these shares are liability classified and contain
a liability classified embedded derivative. The instrument is not bifurcated and is measured in whole at fair value through
the profit and loss.
PureTech Health plc Annual report and accounts 2019 133
Financial statements Notes to the Consolidated Financial Statements — continued
16. Financial Instruments
The Group’s financial instruments consist of financial liabilities, including preferred shares, convertible notes, warrants and loans
payable, as well as financial assets classified as assets held at fair value.
Subsidiary Preferred Shares Liability and Subsidiary Convertible Notes
The following table summarises the changes in the Group’s subsidiary preferred shares and convertible note liabilities
measured at fair value using significant unobservable inputs (Level 3):
Balance at 31 December 2016
Value of derivatives at issuance
Change in fair value
Balance at 1 January 2018
Adjustment for IFRS 9 implementation
Value at issuance
Conversion
Deconsolidation of preferred shares
Change in fair value
Balance at 31 December 2018 and 1 January 2019
Value at issuance
Conversion to preferred
Conversion to common
Deconsolidation
Change in fair value
Finance Costs
Other
Cash distribution
Balance at 31 December 2019
Subsidiary
Preferred
Shares
$000s
Subsidiary
Convertible
Notes
$000s
—
—
—
—
—
—
215,635
11,343
54,537
7,930
(36,517)
(24,066)
217,519
51,048
4,894
—
(207,346)
33,636
1,458
(112)
(108)
100,989
5,824
(7,581)
—
(128)
9,458
1,607
(4,894)
(2,418)
(5,017)
1,389
—
—
—
125
For financial instruments measured at fair value under IFRS 9 the change in the fair value of the entire instrument is reflected
through profit and loss. The techniques used to determine fair value of the preferred shares and convertible notes included
the market approach, the market backsolve approach and the discounted cash flow income approach. A market approach
uses prices and other relevant information generated by recent market transactions involving identical or comparable assets
or liabilities. The discounted cash flow income approach, which represents a Level 3 approach, relies upon unobservable
inputs that are supported by little or no market activity and that are significant to determining the fair value of certain assets
or liabilities. The market backsolve method is derived from the total equity that is implied by the most recent financing round
in which the only truly observable value indicator is the financing round and the economic rights and the allocation inputs are
implied by the terms of the financing, while volatility and term are Management inputs within the option pricing-method.
During the years ended 31 December 2019 and 2018, at each measurement date, the total fair value of preferred share,
warrants and convertible note instruments, including embedded conversion rights that are not bifurcated, was determined
using an OPM, PWERM or with or without framework which consisted of a three-step process detailed below.
First, the total business enterprise value of each business within the Group was determined using a discounted cash flow
income approach or market approach, or market backsolve approach through a recent arm’s length financing round.
Second, the principal methods that the Group applies for the allocation of value are the Option Pricing Method (“OPM”) and
the Probability-Weighted Expected Return Method (“PWERM”).
• The OPM treats outstanding securities as call options on the enterprise’s value or overall equity value. The value of
a security is based on the optionality over and above the value of securities that are senior in the capital structure (e.g.
preferred shares), which takes into consideration the dilutive effects of subordinate securities. In the OPM, the exercise price
is based on a comparison with the overall equity value rather than per-share value.
• The PWERM estimates the value of equity securities based on an analysis of various discrete future outcomes, such as an
IPO, merger or sale, dissolution, or continued operation as a private or public enterprise until a later exit date. The equity
value today is based on the probability-weighted present values of expected future investment returns, considering each
of the possible outcomes available to the enterprise, as well as the rights of each security class.
Third, the fair value of the preferred shares was determined as the calculated business enterprise value allocated to the
outstanding preferred share classes treated as call options within the OPM or the value of preferred shares on a converted
common share basis within the PWERM. For convertible notes, the fair value of the instrument, including the embedded
conversion right which was not bifurcated, was also calculated using a with or without method.
134 PureTech Health plc Annual report and accounts 2019
Financial statements
Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Quantitative information about the significant unobservable inputs used in the fair value measurement of the Group’s
embedded derivative liability related to the subsidiary preferred shares designated as Level 3 is as follows:
Option Pricing Model Inputs for Preferred Shares and Convertible Notes Liabilities under IFRS 9 at 31 December 2019:
Measurement Date
31/12/2018
31/12/2019
Range of Values
Expiration Date
0.3 – 2.5 years
0.7 – 2.0 years
Volatility
Risk Free Rate
Probability of IPO/M&A
45.00% – 85.00%
30.00% – 85.00%
2.47% – 2.60%
1.58% – 1.60%
—%
65%/35%
Probability Weighted Expected Return Method Inputs for Preferred Shares and Convertible Notes Liabilities under IFRS 9 at
31 December 2019:
Measurement Date
31/12/2018
31/12/2019
Range of Values
Time to
Anticipated
Exit Event
Probability of
IPO/M&A/
Dissolution Sale
0.75 – 1.00 years
—
50.0%/50.0%/0.0%
—%
Quantitative information about the significant unobservable inputs used in the fair value measurement of the Group’s
convertible note liabilities designated as Level 3 for the year ended 31 December 2018 is as follows:
Significant Unobservable Inputs
Time to next qualified equity financing
Implied discount rate
Probability of a qualified financing or change of control
Range of Values
At Issuance
2018
1.00 – 2.03 years
11.3% – 2,459.0%
0.0% – 100.0%
0.33 – 1.50 years
10.8% – 44.9%
95.0% – 100.0%
Valuation policies and procedures are regularly monitored by the Company’s finance group. Fair value measurements, including
those categorised within Level 3, are prepared and reviewed on their issuance date and then on an annual basis and any third-
party valuations are reviewed for reasonableness and compliance with the fair value measurements guidance under IFRS.
Subsidiary Preferred Shares Sensitivity
The following summarises the sensitivity from the assumptions made by the Company in respect to the unobservable inputs
used in the fair value measurement of the Group’s preferred share liabilities, which do not qualify for bifurcation and are
recorded at fair value (please refer to Note 15).
Input
As of 31 December
Enterprise Value
Volatility
Time to Liquidity
Risk-free Rate1
IPO/M&A Event Probability
1 Risk-free rate is a function of the time to liquidity input assumption.
Subsidiary Preferred Share Liability
Sensitivity Range
Financial Liability
Increase/(Decrease)
$000s
-2%
2%
-10%
10%
-6 Months
+6 Months
-0.08%/-0.03%
+0.02%/+0.05%
-10%
+10%
(1,785)
1,784
410
(459)
565
(501)
565
(501)
1,167
(1,162)
The change in fair value of preferred shares are recorded in Finance cost, net in the Consolidated Statements of
Comprehensive Income/(Loss).
Financial Assets Held at Fair Value
resTORbio Valuation
ResTORbio (NASDAQ: TORC) is a listed entity on an active exchange and as such the fair value as of 31 December 2019 was
calculated utilising the quoted common share price. Please refer to Note 5 for further details.
Karuna Valuation
Karuna (NASDAQ: KRTX) is a listed entity on an active exchange and as such the fair value as of 31 December was calculated
utilising the quoted common share price. Please refer to Note 5 for further details.
PureTech Health plc Annual report and accounts 2019 135
Financial statements
Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Akili, Gelesis and Vor Valuation
In accordance with IFRS 9, the Company accounts for its preferred share investments in Akili, Gelesis and Vor as financial assets
held at fair value through the profit and loss. During the year ended 31 December 2019, the Company recorded its investment
at fair value and recognised a gain of $48.8 million that was recorded to the Consolidated Statements of Comprehensive
Income/(Loss) on the line item Gain/(loss) on investments held at fair value.
The following table summarises the changes in the Group’s investments held at fair value using significant unobservable
inputs (Level 3):
Balance at 1 January 2018
Deconsolidation of Akili
Gain/(Loss) on changes in fair value
Issuance of note receivable
Balance at 31 December 2018 and 1 January 2019
Deconsolidation of Vor
Deconsolidation of Karuna
Deconsolidation of Gelesis
Reclass of Karuna to Associate
Gain/(Loss) on changes in fair value
Issuance of note receivable
Conversion of note receivable
Balance at 31 December 2019
$’000s
1,449
70,748
12,966
—
85,163
12,028
77,373
49,170
(118,006)
48,867
6,480
(6,630)
154,445
Option Pricing Model and Probability Weighted Expected Return Method Inputs for Investments Held at Fair Value at
31 December 2019 and 2018:
PWERM (IPO Scenario) Measurement Date
31/12/2018
31/12/2019
OPM (Long-term Exit Scenario) Measurement Date
31/12/2018
31/12/2019
Range of Values
Time to
Anticipated
Exit Event
Probability
of IPO
0.50 years
1.1 – 3.0 years
50.0%
55.0% – 75.0%
Range of Values
Expiration Date
1.25 years
1.13 – 3 years
Volatility
Risk Free Rate
75.0%
56.0% – 80.0%
2.56%
1.59% – 1.62%
The following summarises the sensitivity from the assumptions made by the Company in respect to the unobservable inputs
used in the fair value measurement of the Group’s investments held at fair value (please refer to Note 5):
Investments Held at Fair Value
Sensitivity Range
Financial Asset
Increase/(Decrease)
$000s
-2%
2%
-10%
10%
-6 Months
+6 Months
-0.08%/-0.02%
+0.10%/+0.16%
(2,947)
2,947
131
(143)
20,699
(17,711)
20,699
(17,711)
Input
As of 31 December
Enterprise Value
Volatility
Time to Liquidity
Risk-free Rate1
1 Risk-free rate is a function of the time to liquidity input assumption.
136 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Warrants
Warrants issued by the Group are classified as liabilities, as they will be settled in a variable number of shares and are not fixed-
for-fixed. The following table summarises the changes in the Group’s subsidiary warrant liabilities measured at fair value using
significant unobservable inputs (Level 3):
Balance at 1 January 2018
Adjustment for IFRS 9 implementation
Change in fair value
Balance at 31 December 2018
Warrant Issuance
Gelesis Deconsolidation
Change in fair value
Balance at 31 December 2019
Subsidiary
Warrant Liability
$000s
13,095
—
(83)
13,012
4,706
(21,611)
11,890
7,997
In June 2019, Gelesis amended their existing license and patent agreement with One S.r.l. As a result of the amendment
Gelesis issued One S.r.l. a warrant equal to 2.7 per cent of as converted shares following the next financing round. The fair
value of the warrant was $4.7 million at issuance. On 1 July 2019, Gelesis deconsolidated and warrant liability of $21.6 million
relating to Series A-1, A-3, A-4 and One S.r.l. warrants was derecognised.
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 $0.1425 and a contractual term of
10 years from the date of issuance. In 2017, in conjunction with the issuance of convertible notes, the exercise price of the
warrants was adjusted to $0.07 per share. The change in the fair value of the subsidiary warrants was recorded in finance costs,
net in the Consolidated Statements of Comprehensive Income/(Loss). The $8.0 million warrant liability at 31 December 2019 is
attributable to the outstanding Follica preferred share warrants.
The following weighted average assumptions were utilised by the Company with respect to determining the fair value of the
Follica warrants at 31 December 2019:
Assumption/Input
Expected term
Expected volatility
Risk free interest rate
Expected dividend yield
Estimated fair value of the convertible preferred shares
Exercise price of the warrants
Series A-1
Warrants
3.66
40.6%
1.6%
—%
$2.93
$0.07
The following summarises the sensitivity from the assumptions made by the Company in respect to the unobservable inputs
used in the fair value measurement of the Group’s warrant liabilities as of 31 December 2019:
Input
As of 31 December
Enterprise Value
Warrant Liability
Sensitivity Range
-2%
2%
Financial Liability
Increase/(Decrease)
$000s
(128)
127
PureTech Health plc Annual report and accounts 2019 137
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Fair Value Measurement and Classification
The fair value of financial instruments by category at 31 December 2019 and 2018:
Carrying Amount
Financial
Assets
$000s
Financial
Liabilities
$000s
2019
Fair Value
Level 1
$000s
Level 2
$000s
Level 3
$000s
Total
$000s
30,088
106,586
714,905
1,977
853,556
—
—
—
—
—
30,088
106,586
560,460
—
697,134
—
—
—
—
7,997
100,989
1,455
110,441
—
—
—
—
—
—
—
1,977
1,977
—
—
1,455
1,455
—
—
154,445
—
154,445
7,997
100,989
—
108,986
30,088
106,586
714,905
1,977
853,556
7,997
100,989
1,455
110,441
Financial assets:
US treasuries1
Money Markets2
Investments held at fair value
Trade and other receivables3
Total financial assets
Financial liabilities:
Subsidiary warrant liability
Subsidiary preferred shares
Subsidiary notes payable
Total financial liabilities
1
Issued by governments and government agencies, as applicable, all of which are investment grade.
Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment grade.
2
3 Outstanding receivables are owed primarily by corporations and government agencies, virtually all of which are investment grade.
Carrying amount
Financial
Assets
$000s
Financial
Liabilities
$000s
133,828
2,199
100
169,755
1,328
307,210
—
—
—
—
—
—
—
—
—
—
13,012
217,519
12,010
242,541
2018
Fair Value
Level 1
$000s
Level 2
$000s
Level 3
$000s
Total
$000s
133,828
—
—
84,592
—
218,420
—
—
—
—
—
2,199
100
—
1,328
3,627
—
—
12,010
12,010
—
—
—
85,163
133,828
2,199
100
169,755
—
1,328
85,163
307,210
13,012
217,519
—
230,531
13,012
217,519
12,010
242,541
Financial assets:
US treasuries1
Certificates of deposit2
Other deposits2
Investments held at fair value
Loans and receivables:
Trade and other receivables3
Total financial assets
Financial liabilities:
Subsidiary warrant liability
Subsidiary preferred shares
Subsidiary notes payable
Total financial liabilities
Issued by governments and government agencies, as applicable, all of which are investment grade.
1
Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment grade.
2
3 Outstanding receivables are owed primarily by corporations and government agencies, virtually all of which are investment grade.
17. Subsidiary Notes Payable
The subsidiary notes payable are comprised of loans and convertible notes. During the years ended 31 December 2019
and 2018, the financial instruments for Knode and Appeering did not contain embedded derivatives and therefore these
instruments continue to be held at amortised cost. The notes payable consist of the following:
As of 31 December
Loans
Convertible notes
Total subsidiary notes payable
2019
$000s
1,330
125
1,455
2018
$000s
2,552
9,458
12,010
138 PureTech Health plc Annual report and accounts 2019
Financial statements
Notes to the Consolidated Financial Statements — continued
17.
Subsidiary Notes Payable — continued
Loans
In October 2010, Follica entered into a loan and security agreement with Lighthouse Capital Partners VI, L.P. The loans are
secured by Follica’s assets, including Follica’s intellectual property. The outstanding loan balance totalled approximately
$1.3 million as of each of 31 December 2019 and 2018.
In May 2014, Gelesis entered into a grant and loan agreement with an Italian economic development agency. Borrowings
under the loan totalled €1.1 million as of 31 December 2018 (approximately $1.3 million). Gelesis was required to make interest
payments only in fiscal years 2014 and 2015, with principal and interest payments from January 2017 through January 2024.
As of Gelesis’ deconsolidation, $0.9 million in outstanding principal and interest remained and the outstanding balance
was derecognised.
Convertible Notes
Convertible Notes outstanding were as follows:
1 January 2018
Gross principal
Change in fair value
Conversion
31 December 2018 and 1 January 2019
Gross principal
Change in fair value
Conversion to preferred
Conversion to common
Deconsolidation
31 December 2019
Karuna
$000s
5,812
4,700
(93)
(7,581)
2,838
1,607
572
—
—
(5,017)
—
Follica
$000s
5,406
1,124
(35)
—
6,495
—
817
(4,894)
(2,418)
—
—
Knode
$000s
Appeering
$000s
50
—
—
—
50
—
—
—
—
—
50
75
—
—
—
75
—
—
—
—
—
75
Total
$000s
11,343
5,824
(128)
(7,581)
9,458
1,607
1,389
(4,894)
(2,418)
(5,017)
125
Certain of the Group’s subsidiaries have issued convertible promissory notes (“Notes”) to fund their operations with an
expectation of an eventual share-based award settlement of the Notes.
Substantially all Notes become due and payable on or after either 31 December of the year of issuance or on the thirtieth day
following a demand by the majority of Note holders and bear interest at a rate of either 8.0 per cent (or 12.0 per cent upon
an Event of Default) or 10.0 per cent (or 15.0 per cent upon an Event of Default). Interest is calculated based on actual days
elapsed for a 360-day calendar year. Generally, the Notes cannot be prepaid without approval from the holders of a majority
of the outstanding principle of a series of Notes. During the years ended 31 December 2019 and 2018, the Notes were
assessed under IFRS 9 and the entire financial instruments are elected to be accounted for as FVTPL.
The Notes constitute complex hybrid instruments, which contain equity conversion features where holders may convert,
generally at a discount, the outstanding principal and accrued interest into shares of the subsidiary before maturity and
redemption options upon a change of control of the respective subsidiary.
The three key features are described below:
• Automatic conversion feature – upon a Qualified Financing, as such term is defined in the applicable Note, the unpaid
principal and interest amounts are automatically converted into shares of the subsidiary issued in the Qualifying Financing
at a conversion price equal to the price at which shares are sold in such Qualified Financing, less a discount. The discounts
range from 5.0 per cent to 25.0 per cent and some require the issuance of an equal number of ordinary shares.
• Optional conversion feature – upon a Non-Qualified Financing, holders may convert the outstanding principal balance and
unpaid interest to shares issued in the Non-Qualifying Financing at a conversion price equal to the price shares are sold in
such Non-Qualified Financing, less a discount. The discounts range from 5.0 per cent to 25.0 per cent and some require the
issuance of an equal number of ordinary shares.
• Change of control features – The Notes also generally contain a put option such that, in the event of a Change of Control
transaction of the respective subsidiary prior to conversion or repayment of the Notes, the holders will be paid an amount
equal to two or three times the outstanding principal balance plus any accrued and unpaid interest, in cash, on the date of
the Change of Control.
On 15 March 2019, Karuna was deconsolidated in conjunction with the closing of a Series B Preferred Stock financing and the
outstanding convertible note liability of $5.0 was derecognised.
In May 2017 and September 2017, Follica received $0.5 million and $0.6 million, respectively, from an existing third-party
investor through the issuance of convertible notes. The notes bear interest at an annual rate of 10 per cent, mature 30 days
after demand by the holder, are convertible into equity upon a qualifying financing event, and require payment of at least
five times the outstanding principal and accrued interest upon a change of control transaction. On 19 July 2019, all of the
outstanding notes, plus accrued interest, issued by Follica converted into 17,639,204 shares of Series A-3 Preferred Stock
and 14,200,044 shares of common shares pursuant to a Series A-3 Note Conversion Agreement between Follica and the
noteholders. Third parties held 2,422,990 A-3 preferred shares and 1,981,944 common shares following the conversion. The
preferred shares are classified as financial liabilities at fair value through the profit and loss. The common shares are accounted
for as Non-controlling interests.
PureTech Health plc Annual report and accounts 2019 139
Financial statements
Notes to the Consolidated Financial Statements — continued
18. Non-Controlling Interest
During 2019, the Company deconsolidated three of its subsidiaries which resulted in a change to the composition of its
reportable segments. As such, the Company has updated the following disclosures. Please refer to Note 4 “Segment
Information” for further details regarding reportable segments.
The following table summarises the changes in the equity classified non-controlling ownership interest in subsidiaries
by reportable segment:
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent
Company
& Other
$000s
Balance at 1 January 2018*
Share of comprehensive loss*
Deconsolidation of subsidiary*
Equity settled share-based payments*
Balance as of 31 December 2018 and 1 January 2019*
Share of comprehensive loss
Deconsolidation of subsidiaries
Subsidiary note conversion and changes in NCI
ownership interest
Equity settled share-based payments
Purchase of minority interest
Other
Internal
$000s
(1,484)
(7,315)
—
—
(8,799)
(15,264)
—
—
24,039
24
(18,869)
(10,710)
—
2,476
(27,103)
(15,862)
—
23,049
1,683
—
—
(125,758)
(8,980)
55,168
6,345
(73,225)
(23,953)
97,178
—
—
—
—
—
Total
$000s
(145,586)
(27,005)
55,168
8,888
(108,535)
(55,079)
97,178
23,049
1,683
24,039
25
525
—
—
67
592
—
—
—
—
—
1
Balance as of 31 December 2019
—
(18,233)
593
(17,640)
*
During the year ended 31 December 2019, the Company deconsolidated three of its subsidiaries which resulted in a change to the composition of its reportable segments.
Consequently, the Company has revised the 2018 financial information to conform to the presentation as of and for the period ending 31 December 2019.
The following tables summarise the financial information related to the Group’s subsidiaries with material non-controlling
interests, aggregated for interests in similar entities, and before intra group eliminations.
For the year ended 31 December:
Statement of Comprehensive Loss
Total revenue
Income/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
Statement of Financial Position
Total assets
Total liabilities
Net assets/(liabilities)
For the year ended 31 December:
Statement of Comprehensive Loss
Total revenue
Income/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
Statement of Financial Position
Total assets
Total liabilities
Net liabilities
2019
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
—
(47,905)
(10)
(47,915)
—
—
—
1,968
(26,250)
—
(26,250)
5,290
50,554
(45,264)
2018
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s1
18,504
(26,206)
(214)
(26,420)
20
(41,239)
(214)
(41,453)
Internal
$000s
6,078
(24,289)
—
(24,289)
17,614
11,510
6,104
Internal
$000s
2,195
(8,454)
—
(8,454)
2,984
13,366
(10,382)
15,603
60,992
35,934
202,161
(45,389)
(166,227)
1
Non-Controlled Founded Entities non-controlling interest calculation does not include equity method accounting, fair value method accounting or the gain on the
deconsolidation of subsidiary related to Vor, Karuna, Gelesis, resTORbio or Akili, which is recorded within PureTech Health, LLC. Please refer to Note 5.
140 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
18. Non-Controlling Interest — continued
On 19 July 2019 PureTech and a third party investor converted their convertible debt in Follica to Follica Preferred shares
(presented as liabilities) and Follica common shares. The amount of convertible debt converted by the third party investor into
Follica common shares amounted to $2.4 million (see also Note 16). As a result of the conversion Follica NCI share (in Follica
common stock) was reduced from 68% to 19.9%, which resulted in a reduction in the NCI share in Follica’s shareholders’ deficit
of $20.1 million. The excess of the change in the book value of NCI ($20.1 million noted above) over the contribution made by
NCI ($2.4 million) amounted to $17.8 million and was recorded as a loss directly in shareholders’ equity.
During 2019 a subsidiary of the Company fully funded by the Company ceased its operations and became inactive. This
resulted in a change in the NCI share in the subsidiary deficit. As a result the Company recorded a loss directly in equity of
$3.1 million.
On 1 October 2019, PureTech acquired the remaining 10.0 per cent of minority non-controlling interests of PureTech LYT, Inc.
(previously named Ariya Therapeutics, Inc.), increasing its ownership from 90 per cent to 100 per cent. In consideration for the
acquisition of minority interests, PureTech issued 2,126,338 shares of common shares and granted options to the co-inventors
and advisors of PureTech LYT to purchase 2,147,295 ordinary shares under the PSP. The fair value of the shares and options
issued in consideration for the minority non-controlling interest amounted to $15.8 million. The carrying amount of the non-
controlling interest at the acquisition was a $24 million deficit and the excess of the consideration paid over the book value of
the non-controlling interest of approximately $39.8 million was recorded directly in shareholders’ equity.
19. Trade and Other Payables
As of 31 December
Trade payables
Accrued expenses
Total trade and other payables
20. Other Long-Term Liabilities
Information regarding Other long-term liabilities was as follows:
As of 31 December
Deferred rent
Lease incentive obligation
Accrued professional fees
Other
Other long-term liabilities
2019
$000s
11,098
8,744
19,842
2019
$000s
—
—
—
—
—
2018
$000s
4,644
11,231
15,875
2018
$000s
1,283
357
738
138
2,516
With the implementation of IFRS 16 on 1 January 2019 all other long-term liabilities were extinguished.
Please refer to Note 3 for a discussion of deferred revenue balances as of 31 December 2019 and 2018.
21. Leases
On 1 January 2019 the Company adopted IFRS 16, which replaced IAS 17 for the annual period beginning on 1 January 2019.
Further discussion around the adoption of IFRS 16 is included in Note 1.
The activity related to the Group’s right of use asset and lease liability for the year ended 31 December 2019 is as follows:
Balance at 31 December 2018
Adoption of IFRS 16
Balance at 1 January 2019
Additions
Subleases
Depreciation
Deconsolidated
Balance at 31 December 2019
Right of use asset, net
$000s
—
10,353
10,353
19,434
(2,580)
(3,237)
(1,587)
22,383
PureTech Health plc Annual report and accounts 2019 141
Financial statements Notes to the Consolidated Financial Statements — continued
21.
Leases — continued
Balance at 31 December 2018
Adoption of IFRS 16
Balance at 1 January 2019
Additions
Cash paid for rent
Interest expense
Deconsolidated
Balance at 31 December 2019
Total lease liability
$000s
—
10,995
10,995
30,305
(4,173)
2,495
(1,779)
37,843
The following reconciles operating lease commitments disclosed as at 31 December 2018 to the lease liability recognised at
1 January 2019:
Operating lease commitments disclosed as at 31 December 2018
Discounted using the lessee's incremental borrowing rate at the date of initial application
Lease liability recognised at 1 January 2019
The following details the short term and long-term portion of the lease liability as at 31 December 2019:
Short-term Portion of Lease Liability
Long-term Portion of Lease Liability
Total Lease Liability
2019
$000s
11,443
(448)
10,995
Total lease liability
$000s
2,929
34,914
37,843
The following table details the future maturities of the lease liability, showing the undiscounted lease payments to be received
after the reporting date:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease maturities
Interest
Total lease liability
2019
$000s
5,257
5,409
5,603
6,071
6,247
21,494
50,080
12,237
37,843
Additions in the period relate to three leases that were entered into by PureTech and its consolidated subsidiaries during the
year ended 31 December 2019. Amounts were arrived at using the contractual minimal lease payments, present valued using
the applicable incremental borrowing rate, which ranged from 5.49 per cent to 6.58 per cent. Rent expense related to short-
term leases which are not accounted for under IFRS 16 was $1.3 million for the year ended 31 December 2019.
During the year ended 31 December 2019, PureTech entered into a lease agreement for certain premises consisting of
approximately 50,858 rentable square feet of space located at 6 Tide Street. The lease commenced on 26 April 2019
(“Commencement Date”) for an initial term consisting of ten years and three months and there is an option to extend for two
consecutive periods of five years each. As of 31 December 2019, the Company has not determined whether it will exercise
these extension options.
On 26 June 2019, PureTech executed a sublease agreement with Gelesis. The lease is for the approximately 9,446 rentable
square feet located on the sixth floor of the Company’s former offices at the 501 Boylston Street building. The sublessee
obtained possession of the premises on 1 June 2019 and the rent period term begins 1 June 2019 and expires on
31 August 2025. The sublease was determined to be a finance lease and was reclassified from the right of use asset to a lease
receivable at inception of the sublease. As of 31 December 2019 the balances related to the sublease were as follows:
Short-term Portion of Lease Receivable
Long-term Portion of Lease Receivable
Total Lease Liability
142 PureTech Health plc Annual report and accounts 2019
Total lease receivable
$000s
350
2,082
2,432
Financial statements Notes to the Consolidated Financial Statements — continued
21.
Leases — continued
The following table details the future maturities of the lease receivable, showing the undiscounted lease payments to be
received after the reporting date:
Less than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Total undiscounted lease receivable
Unearned Finance income
Net investment in the lease
2019
$000s
485
494
504
513
523
353
2,872
440
2,432
On 6 August 2019, PureTech executed a sublease agreement with Dewpoint Therapeutics, Inc. (“Dewpoint”). The sublease is
for approximately 11,852 rentable square feet located on the third floor of the 6 Tide Street building, where the Company’s
offices are currently located. Dewpoint obtained possession of the premises on 1 September 2019 with a rent period term that
begins on 1 September 2019 and expires on 31 August 2021. The sublease was determined to be an operating lease.
Rental income recognised by the Company during the year ended 31 December 2019 was $0.36 million. The following
table details the future payments under the sublease, showing the undiscounted lease payments to be received after the
reporting date:
Less than one year
One to two years
Total
Prior to the adoption of IFRS 16, minimum rental commitments under non-cancellable leases were payable as follows:
As of 31 December
Within one year
Between one and five years
More than five years
Total minimum lease payments
2019
$000s
1,083
722
1,805
2018
$000s
1,742
9,349
352
11,443
Some property leases contain extension options exercisable by the Company before the end of the non-cancellable contract
period. The extension options held are exercisable only by the Company and not by the lessors. The Company assesses
at lease commencement date whether it is reasonably certain to exercise the extension options. The Company reassesses
whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances
within its control. The Company has estimated that the potential future lease payments, should it exercise the extension option,
would result in an increase in lease liability of $18.7 million.
During the year ended 31 December 2019, the Group reassessed the anticipated term of its Tide Street lease due to
uncertainty as to whether the two extension options provided for in the lease agreement will be exercised. It was determined
that there was sufficient uncertainty as to whether these options would be utilised, resulting in the useful life of the lease being
adjusted from 20 years to 10 years. This resulted in a decrease to the lease liability and right of use asset, as well as an increase
to the minimum lease payments due within one year and between one and five years.
During the year ended 31 December 2018, the Group determined that there were certain tenant improvement allowances
that were originally classified as a reduction to leasehold improvements rather than as a liability. The Company concluded that
the impact of the change of a reclassification from property and equipment to other current and long-term liabilities was not
material to the Consolidated Financial Statements presented in the Annual Report of 31 December 2018.
Total rent expense under these leases was approximately $2.5 million during the year ended 31 December 2018. Rent
expense is included in the General and administrative expenses line item in the Consolidated Statements of Comprehensive
Income/(Loss).
PureTech Health plc Annual report and accounts 2019 143
Financial statements Notes to the Consolidated Financial Statements — continued
22. Capital and Financial Risk Management
The Company’s financial strategy policy is to support its strategic priorities, maintain investor and creditor confidence and
sustain future development of the business through an appropriate mix of debt and equity. Management monitors the level
of capital deployed and available for deployment in subsidiary companies. The Directors seek to maintain a balance between
the higher returns that might be possible with higher levels of deployed capital and the advantages and security afforded by
a sound capital position.
The Group’s Directors have overall responsibility for establishment and oversight of its risk management framework. The
Group is exposed to certain risks through its normal course of operations. The Group’s main objective in using financial
instruments is to promote the development and commercialisation of intellectual property through the raising and investing
of funds for this purpose. The Group’s policies in calculating the nature, amount and timing of investments are determined by
planned future investment activity. Due to the nature of activities and with the aim to maintain the investors’ funds as secure
and protected, the Group’s policy is to hold any excess funds in highly liquid and readily available financial instruments and
maintain insignificant exposure to other financial risks.
Credit Risk
The Group has exposure to the following risks arising from financial instruments:
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. Financial instruments that potentially subject the Group to concentrations of credit risk consist
principally of cash and cash equivalents and trade and other receivables.
The Group held the following balances:
As of 31 December
Cash and cash equivalents
Short-term investments
Investments held at fair value
Trade and other receivables
Total
2019
$000s
132,360
30,088
714,905
1,977
879,330
2018
$000s
117,051
133,828
169,755
1,328
421,962
The Group invests its excess cash in US Treasury Bills, US debt obligations and money market accounts, which the Group
believes are of high credit quality.
The Group assesses the credit quality of customers on an ongoing basis, taking into account its financial position, past
experience and other factors. The credit quality of financial assets that are neither past due nor impaired can be assessed by
reference to credit ratings (if available) or to historical information about counterparty default rates.
The aging of trade and other receivables that were not impaired at 31 December is as follows:
As of 31 December
Neither past due or impaired
Total
2019
$000s
1,977
1,977
2018
$000s
1,328
1,328
The Company is also potentially subject to concentrations of credit risk in its accounts receivable. Concentrations of credit
risk with respect to receivables is owed to the limited number of companies comprising the Company’s customer base. The
Group’s exposure to credit losses is low, however, owing largely to the credit quality of its larger collaborative partners such
as Roche, Boehringer Ingelheim and Eli Lilly.
Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The Group actively manages its risk of a funds shortage by closely
monitoring the maturity of its financial assets and liabilities and projected cash flows from operations, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Due to the nature of
these financial liabilities, the funds are available on demand to provide optimal financial flexibility.
144 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
22.
Capital and Financial Risk Management — continued
The table below summarises the maturity profile of the Group’s financial liabilities, including subsidiary preferred shares that
have customary liquidation preferences, as of 31 December 2019 and 2018 based on contractual undiscounted payments:
As of 31 December
Subsidiary notes payable
Trade and other payables
Warrants
Subsidiary preferred shares (Note 15)
Total
As of 31 December
Subsidiary notes payable
Trade and other payables
Warrants
Subsidiary preferred shares (Note 15)
Total
2019
Carrying
Amount
$000s
Within
Three Months
$000s
Three to
Twelve Months
$000s
One to
Five Years
$000s
1,455
19,842
7,997
100,989
130,283
1,455
19,842
7,997
100,989
130,283
—
—
—
—
—
2018
—
—
—
—
—
Carrying
Amount
$000s
Within
Three Months
$000s
Three to
Twelve Months
$000s
One to
Five Years
$000s
12,010
15,875
13,012
217,519
258,416
12,010
15,875
13,012
217,519
258,416
—
—
—
—
—
—
—
—
—
—
Total
$000s
1,455
19,842
7,997
100,989
130,283
Total
$000s
12,010
15,875
13,012
217,519
258,416
In addition to the above financial liabilities, the Group is required to spend the following minimum amounts under intellectual
property license agreements:
Licenses
Total
2019
$000s
1,366
1,366
2020
$000s
1,374
1,374
2021
$000s
1,373
1,373
2022
$000s
773
773
Market Risk
Market risk is due to changes in market prices, such as foreign exchange rates, interest rates and equity prices that affect the
Group’s income or the value of its financial instrument holdings. The objective of the Group’s market risk management is to
manage and control market risk exposures within acceptable parameters, while optimising its return. The Group maintains the
exposure to market risk from such financial instruments to insignificant levels. The Group’s exposure to changes in interest rates
has been determined to be insignificant.
Controlled Founded Entity Investments
The Group maintains investments in certain Controlled Founded Entities. The Group’s investments in Controlled Founded
Entities are eliminated as intercompany transactions upon financial consolidation. The Group is however exposed to a preferred
share liability owing to the terms of existing preferred shares and the ownership of Controlled Founded Entities preferred
shares by third parties. The liability of preferred shares is maintained at fair value through the profit and loss. The Group’s
strong cash position, budgeting and forecasting processes, as well as decision making and risk mitigation framework enable
the Group to robustly monitor and support the business activities of the Controlled Founded Entities to ensure no exposure
to credit losses and ultimately dissolution or liquidation. Accordingly, the Group views exposure to 3rd party preferred share
liability as low.
Non-Controlled Founded Entity Investments
The Group maintains certain investments in Non-Controlled Founded Entities which are deemed associates and accounted
for under the equity method (please refer to Note 1). The Group’s exposure to investments in associates in limited to the initial
carrying amount upon recognition as an Associate. The Group is not exposed to further contractual obligations or contingent
liabilities beyond the value of initial investment. As of 31 December 2019, Gelesis was the only associate. The initial carrying
amount of the investment in Gelesis as an associate was $16.4 million. Accordingly, the Group views the risk as high.
PureTech Health plc Annual report and accounts 2019 145
Financial statements
Notes to the Consolidated Financial Statements — continued
22.
Capital and Financial Risk Management — continued
Equity Price Risk
We have an investment in common shares of Karuna and resTORbio, as described further in Note 5. As of 31 December 2019
the fair value of our investments in resTORbio and Karuna common shares was $3.2 million and $557.2 million, respectively.
These investments are exposed to fluctuations in the market price of these common shares. The effect of a 10.0 per cent
adverse change in the market price of resTORbio and Karuna common shares as of 31 December 2019 would have been a loss
of approximately $0.3 million and $55.7 million, respectively, recognised as a component of Other income (expense) in our
Consolidated Statements of Comprehensive Income/(Loss).
Foreign Exchange Risk
With respect to Gelesis, prior to deconsolidation, certain grant revenues and the research and development costs associated
with those grants are generated and incurred in Euros. As such, the Group’s certain results of operations and cash flows will be
subject to fluctuations due to change in foreign currency exchange rates. Foreign currency transaction exposure arising from
external trade flows is generally not hedged.
Capital Risk Management
The Group is funded by equity and debt financing as well as grant and research collaboration income. Total capital is calculated
as Total Equity as shown in the Consolidated Statements of Financial Position.
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital. To maintain or adjust the capital structure, the Group may issue new shares or incur new debt. The Group has some
external debt and no material externally imposed capital requirements. The Group’s share capital is clearly set out in Note 15.
As discussed in Note 15, certain of the Group’s subsidiaries have issued preferred shares that include the right to receive
a payment in the event of any voluntary or involuntary liquidation, dissolution or winding up of a subsidiary, which shall be paid
out of the assets of the subsidiary available for distribution to shareholders and before any payment shall be made to holders
of ordinary shares.
23. Commitments and Contingencies
Gelesis is a party to a patent license and assignment agreement whereby it will be required to pay approximately $8.0 million
upon the achievement of certain milestones, pay royalties on future sales and/or a percentage of sublicense income.
Gelesis accrued $6.6 million as potential expenses under the patent license and assignment agreement for the year ended
31 December 2018. During the year ended 31 December 2019 Gelesis was deconsolidated. Therefore, there are no additional
contingencies recorded related to Gelesis at 31 December 2019.
Other members of the Group are also parties to certain licensing agreements that require milestone payments and/or royalties
on future sales. None of these payments have become due and the amounts of any future milestone or royalty payments
cannot be reliably measured as of the date of the financial information.
24. Related Parties Transactions
Related Party Subleases
During 2019, PureTech executed sublease agreements with related parties Gelesis and Dewpoint Therapeutics. Please refer
to Note 20 for further details regarding the sublease.
Key Management Personnel Compensation
Key management includes executive directors and members of the executive management team of the Group. The key
management personnel compensation of the Group was as follows for the years ended 31 December:
As of 31 December
Short-term employee benefits
Share-based payments
Total
2019
$000s
5,543
2,774
8,317
2018
$000s
3,998
3,062
7,060
Wages and employee benefits include salaries, health care and other non-cash benefits. Share-based payments are generally
subject to vesting terms over future periods.
146 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
24.
Related Parties Transactions — continued
Convertible Notes Issued to Directors
Certain members of the Group have invested in convertible notes issued by the Group’s subsidiaries. As of 31 December 2019
and 2018, the outstanding related party notes payable totalled $84 thousand and $79 thousand, respectively including
principal and interest.
The notes issued to related parties bear interest rates, maturity dates, discounts and other contractual terms that are the same
as those issued to outside investors during the same issuances, as described in Note 17.
Directors’ and Senior Managers’ Shareholdings and Share Incentive Awards
The Directors and senior managers hold beneficial interests in shares in the following businesses and sourcing companies as at
31 December 2019:
Directors:
Ms. Daphne Zohar2
Dame Marjorie Scardino
Dr Bennett Shapiro
Dr Robert Langer
Dr Raju Kucherlapati
Dr John LaMattina4
Mr Christopher Viehbacher
Mr Stephen Muniz
Senior Managers:
Dr Eric Elenko
Dr Joep Muijrers
Dr Bharatt Chowrira
Dr Joseph Bolen
Business Name
(Share Class)
Gelesis (Common)
—
Akili (Series A-2 Preferred)3
Gelesis (Common)
Gelesis (Series A-1 Preferred)
Vedanta Biosciences (Common)
Vedanta Biosciences (Series B Preferred)
Entrega (Common)
Alivio (Common)
Enlight (Class B Common)
Gelesis (Common)
Akili (Series A-2 Preferred)
Gelesis (Common)4
Gelesis (Common)5
Gelesis (Series A-1 Preferred)4
Vedanta Biosciences (Common)
—
Gelesis (Common)5
—
—
Karuna (Common)5
Vor (Common)
Number
of shares
held as of
31 December
2019
Number
of options
held as of
31 December
2019
Ownership
Interest1
939,086
59,443
—
—
33,088
—
10,840
24,009
—
23,418
25,000
—
—
11,202
—
332,500
— 1,575,000
30,000
—
20,000
—
37,372
—
117,169
—
20,000
—
49,524
—
25,000
—
—
—
20,000
—
—
—
10,000
—
—
—
—
125,000
4.30%
—
0.20%
0.01%
0.20%
0.22%
0.10%
4.09%
6.06%
3.00%
0.10%
0.20%
0.50%
0.10%
0.20%
0.22%
—
0.10%
—
—
0.04%
0.12%
1
2
3
4
5
Ownership interests as of 31 December 2019 are calculated on a diluted basis, including issued and outstanding shares, warrants and options (and written commitments
to issue options) but excluding unallocated shares authorised to be issued pursuant to equity incentive plans and any shares issuable upon conversion of outstanding
convertible promissory notes.
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.
Shares held through Dr Bennett Shapiro and Ms Fredericka F. Shapiro, Joint Tenants with Right of Survivorship.
Dr John and Ms Mary LaMattina hold 49,523 shares of common shares and 49,524 shares of Series A-1 preferred shares in Gelesis. Individually, Dr LaMattina holds 12,642
shares of Gelesis and convertible notes issued by Appeering in the aggregate principal amount of $50,000.
Options to purchase the listed shares were granted in connection with the service on such Founded Entity’s Board of Directors and any value realised therefrom shall be
assigned to PureTech Health, LLC.
Directors and senior managers hold 29,939,913 ordinary shares and 10.5 per cent voting rights of the Company as of
31 December 2019. This amount excludes options to purchase 2,909,344 ordinary shares. This amount also excludes 8,374,351
shares, which are issuable contingent to the terms of performance based RSU awards granted to certain senior managers
covering the financial years 2019, 2018 and 2017. Such shares will be issued to such senior managers in future periods provided
that performance conditions are met and certain of the shares will be withheld for payment of customary withholding taxes.
PureTech Health plc Annual report and accounts 2019 147
Financial statements Notes to the Consolidated Financial Statements — continued
25. Taxation
Tax on the profit or loss for the year comprises current and deferred income tax. Tax is recognised in the Consolidated
Statements or Comprehensive Income/(Loss) except to the extent that it relates to items recognised directly in equity.
For the years ended 31 December 2019 and 2018, the Group filed a consolidated US federal income tax return which included
all subsidiaries in which the Company owned greater than 80% of the vote and value. For the years ended 31 December 2019
and 2018, the Group filed certain consolidated state income tax returns which included all subsidiaries in which the Company
owned greater than 50% of the vote and value. The remaining subsidiaries file separate US tax returns.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised due to temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognised for unused tax losses,
unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using
tax rates enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances
on a net basis.
Deferred taxes are recognised in Consolidated Statements of Comprehensive Income/(Loss) except to the extent that they
relate to items recognised directly in equity or in other comprehensive income.
Amounts recognised in Consolidated Statements of Comprehensive Income/(Loss):
As of 31 December
Income/(loss) for the year
Income tax expense/(benefit)
Income/(loss) before taxes
Recognised income tax expense/(benefit):
As of 31 December
Federal
Foreign
State
Total current income tax expense/(benefit)
Federal
Foreign
State
Total deferred income tax expense/(benefit)
Total income tax expense/(benefit), recognised
2019
$000s
366,065
112,409
478,474
2019
$000s
—
—
—
—
83,776
—
28,633
112,409
112,409
2018
$000s
(70,659)
2,221
(68,438)
2018
$000s
2
—
496
498
2,034
(311)
—
1,723
2,221
The tax expense of $112.4 million and $2.2 million in 2019 and 2018, respectively, is primarily the result of the establishment
of a deferred tax liability for unrealised gains pertaining to our investments in Karuna, Vor, AZ Therapies, and Gelesis, and the
remeasurement of existing deferred tax liabilities for unrealised gains pertaining to our investments in resTORbio and Akili.
148 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
25.
Taxation — continued
Reconciliation of Effective Tax Rate
The Group is primarily subject to taxation in the US. A reconciliation of the US federal statutory tax rate to the effective tax rate
is as follows:
2019
2018
As of 31 December
Weighted-average statutory rate
Effects of state tax rate in US
R&D and orphan drug tax credits
Share-based payment measurement
Mark-to-market adjustments
Accretion on preferred shares
Deconsolidation adjustments
Mark-to-market investment in subsidiary
Income of partnerships not subject to tax
Recognition of deferred tax assets not previously recognised
Current year losses for which no deferred tax asset is recognised
Other
$000s
97,183
22,111
(6,321)
433
3,725
—
(13,658)
—
—
(6,251)
14,514
674
112,410
%
21.00
4.78
(1.37)
0.09
0.80
0.00
(2.95)
0.00
0.00
(1.35)
3.14
0.15
24.29
$000s
(14,372)
(3,267)
(3,268)
3,429
(3,745)
22
9,688
(55)
(78)
—
13,012
854
2,220
%
21.00
4.77
4.78
(5.01)
5.47
(0.03)
(14.16)
0.08
0.11
0.00
(19.01)
(1.25)
(3.25)
The Group is also subject to taxation in the UK and exposed to state taxation in certain jurisdictions within the US. Changes in
corporate tax rates can change both the current tax expense (benefit) as well as the deferred tax expense (benefit).
Deferred Tax Assets and Liabilities
Deferred taxes have been recognised in the US jurisdiction in respect of the following items:
As of 31 December
Operating tax losses
Capital loss carryovers
Research credits
Investment in subsidiaries
Share-based payments
Deferred revenue
Lease Liability
Other
Deferred tax assets
Investment in Subsidiaries
ROU asset
Other temporary differences
Deferred tax liabilities
Deferred tax liabilities, net, recognised
Deferred tax assets, net, recognised
Deferred tax assets, net, not recognised
2019
$000s
68,690
2,292
9,931
—
9,711
1,125
10,339
2,117
104,205
(173,069)
(6,115)
(3,225)
(182,409)
115,445
(142)
37,099
2018
$000s
69,170
—
8,056
589
13,003
—
—
2,184
93,002
—
—
(33,412)
(33,412)
6,428
(449)
65,569
We have recognised deferred tax assets related to entities in the US Federal and Massachusetts consolidated return groups
due to future reversals of existing taxable temporary differences that will be sufficient to recover the net deferred tax assets.
Our remaining deferred tax assets have not been recognised because it is not probable that future taxable profits will be
available to support their realisability.
PureTech Health plc Annual report and accounts 2019 149
Financial statements Notes to the Consolidated Financial Statements — continued
25.
Taxation — continued
There was movement in deferred tax recognised which impacted income tax expense of approximately $112.4 million, primarily
related to the unrealised gains pertaining to our investments in resTORbio, Akili, Karuna, Vor, AZ Therapies, and Gelesis.
The deferred tax liability related to the unrealised gains on these investments exceeds our available US federal and state
deferred tax assets.
The Company had US federal net operating losses carry forwards (“NOLs”) of approximately $243.0 million and $238.1 million
for the years ended 31 December 2019 and 2018, respectively, which are available to offset future taxable income. These NOLs
expire through 2037 with the exception of $126.6 million which is not subject to expiration. The Company had US Federal
research and development tax credits of approximately $7.4 million and $6.7 million for the years ended 31 December 2019
and 2018, respectively, which are available to offset future taxes that expire at various dates through 2039. The Company also
had Federal Orphan Drug credits of approximately $3.7 million and $0.0 million for the years ended 31 December 2019 and
2018, respectively, which are available to offset future taxes that expire at various dates through 2039. These NOLs and credits
are subject to review and possible adjustment by the Internal Revenue Service.
The Company had Massachusetts net operating losses carry forwards (“NOLs”) of approximately $273.0 million and
$179.5 million for the years ended 31 December 2019 and 2018, respectively, which are available to offset future taxable
income. These NOLs expire at various dates beginning in 2024. The Company had Massachusetts research and development
tax credits of approximately $1.6 million and $1.3 million for the years ended 31 December 2019 and 2018, respectively, which
are available to offset future taxes and expire at various dates through 2034. These NOLs and credits are subject to review and
possible adjustment by the Massachusetts Department of Revenue.
Utilisation of the NOLs and research and development credit carryforwards may be subject to a substantial annual limitation
under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or
that could occur in the future. These ownership changes may limit the amount of NOL and research and development credit
carryforwards that can be utilised annually to offset future taxable income and tax, respectively. The Company notes that a 382
analysis was performed through 31 December 2019. The results of this analysis concluded that certain net operating losses
were subject to limitation under Section 382 of the Internal Revenue Code. None of the Company’s tax attributes which are
subject to a restrictive Section 382 limitation have been recognised in the financial statements.
Uncertain Tax Positions
The changes to uncertain tax positions from 1 January 2018 through 31 December 2019 are as follows:
Gross tax liabilities as of 1 January 2018
Additions based on tax provisions related to the current year
Additions to tax positions of prior years
Reductions due to settlements with tax authorities
Reductions for positions of prior years
Gross tax liabilities as of 31 December 2018
Additions based on tax provisions related to the current year
Additions to tax positions of prior years
Reductions due to settlements with tax authorities
Reductions for positions of prior years
Gross tax liabilities as of 31 December 2019
US
$000s
Foreign
$000s
Total
$000s
—
—
—
—
—
—
—
—
—
—
—
15
—
—
—
(12)
3
—
—
—
(3)
—
15
—
—
—
(12)
3
—
—
—
(3)
—
US corporations are routinely subject to audit by federal and state tax authorities in the normal course of business. During 2019,
the IRS completed an audit of Vedanta for the financial year ended 31 December 2016 with no impact to the Group’s financial
condition, results of operations, or cash flows.
150 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Consolidated Financial Statements — continued
26. Sale of assets
In February 2018, The Sync Project, Inc. (“Sync”) entered into an asset purchase agreement with Bose Corporation for the sale
of certain assets and liabilities. The total aggregate purchase price was $4.5 million, consisting of approximately $4.0 million
paid at closing and $0.5 million in cash deposited into escrow to be held for 12 months in order to secure the indemnification
obligations of Sync after the closing date.
PureTech Health derecognised certain assets and liabilities based on their historical costs. The excess of the consideration
transferred over the historical costs of the assets and liabilities resulted in a gain of approximately $4.0 million, which was
recorded to the line item “Gain on sale of assets” on the accompanying Consolidated Statements Comprehensive Income/
(Loss) for the year ended 31 December 2018.
Additionally, as part of the derecognition, the Company and certain preferred shareholders received a cash distribution of
approximately $3.3 million during the year ended 31 December 2018. During the year ended 31 December 2019, certain
preferred shareholders received further cash distributions of $0.1 million. As of 31 December 2019, no remaining third party
obligations remained.
27. Tal Merger Agreement
During the year ended 31 December 2018, Tal Medical, Inc. (“Tal”) a subsidiary of the Group entered into an option agreement
with a third party, through which the third party was given the option to acquire substantially all of Tal’s assets. The option
was contingent on the third party raising gross proceeds of $15 million prior to 1 January 2019 (the option expiration date).
Upon the expiration of the option all external investors, not including PureTech, would be entitled to a distribution equal to
the cash on hand on the date of expiration, and Tal’s operations would wind down. As of 31 December 2018, the minimum
gross proceeds were not raised, resulting in the option expiring. As a result, the preferred shares were adjusted to the cash
distribution the external investors were entitled to, which totalled $0.1 million, resulting in gain of $11 million being recognised
in Finance costs – subsidiary preferred shares line of the Consolidated Statements of Comprehensive Income/(Loss). In 2019
a merger was executed between PureTech and Tal wherein PureTech became the sole shareholder of Tal following the
liquidation of all assets. In 2019, certain preferred shareholders received distributions of $0.1 million in connection with the
merger. As of 31 December 2019 Tal was an inactive entity in the Group’s Parent segment.
28. Subsequent Events
The Company has evaluated subsequent events after 31 December 2019, the date of issuance of the Consolidated Financial
Statements, and has not identified any recordable or disclosable events not otherwise reported in these consolidated financial
statements or notes thereto, except for the following:
On 6 January 2020, Sonde effected the second tranche closing of its Series A-2 preferred share financing which initially closed
on 4 April 2019. The Company received an aggregate of $4.8 million in gross proceeds in the second tranche closing.
On 22 January 2020, PureTech Health sold 2,100,000 common shares of Karuna for aggregate proceeds of $200.9 million.
As of 13 March 2020, PureTech Health held 5,295,397 common shares, or 20.3 per cent, of Karuna.
On 5 February 2020, PureTech Health participated in the second closing of Vor’s Series A-2 preferred share financing which
initially closed on 12 February 2019. PureTech’s participation totalled $0.7 million. Proceeds for the second closing totalled
$17.8 million.
In March 2020, the World Health Organization declared the outbreak of a new Coronavirus, now known as COVID-19,
a pandemic. The outbreak of the virus has caused material disruptions to the global economy, including its health care
system. Since the future course and duration of the COVID-19 outbreak are unknown, the Company is currently unable to
determine whether the outbreak will have a negative effect on the Company’s results in 2020. To date, the Company has seen
limited impact on its research and development activities and the operation of the Company more generally. If the pandemic
continues to extended for a period of time such as six months, the Company would potentially have milestones delayed;
however the Company has sufficient capital to absorb any potential delays and continue operations in line with its going
concern statement set forth in Note 1.
On 1 April 2020, PureTech Health participated in the second closing of Gelesis’ Series 3 Growth preferred share financing
which initially closed on 5 December 2019. PureTech’s participation totalled $10.0 million. Proceeds for the second closing
totalled $14.1 million.
PureTech Health plc Annual report and accounts 2019 151
Financial statements PureTech Health plc Statement of Financial Position
For the years ended 31 December
Assets
Non-current assets
Investment in subsidiary
Total non-current assets
Current assets
Intercompany receivables
Other Receivables
Total current assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Merger reserve
Other reserve
Accumulated deficit
Total equity
Trade and other payables
Intercompany payables
Total current liabilities
Total equity and liabilities
Note
2019
$000s
2018
$000s
2
3
3
4
4
4
4
4
5
141,348
141,348
141,348
141,348
296,531
—
296,531
437,879
5,408
287,962
138,506
991
(7,882)
424,985
1,235
11,658
12,893
286,886
—
286,886
428,234
5,375
278,349
138,506
991
(5,192)
418,029
—
10,204
10,204
437,878
428,234
Please refer to the accompanying Notes to the PureTech Health plc financial information. Registered number: 09582467.
The PureTech Health plc financial statements were approved by the Board of Directors and authorised for issuance on
8 April 2020 and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
8 April 2020
The accompanying Notes are an integral part of these financial statements.
152 PureTech Health plc Annual report and accounts 2019
Financial statements PureTech Health plc Statements of Changes in Equity
For the years ended 31 December
Shares
Amount
$000s
Share
Premium
$000s
Merger
Reserve
$000s
Other
Reserve
$000s
Accumulated
deficit
$000s
Total
equity
$000s
237,429,696
4,679
181,588
138,506
855
(4,483)
321,145
Balance 1 January 2018
Total comprehensive loss
for the period
Issuance of placing shares
Offering costs
Exercise of share-based awards
Net loss
45,000,000
—
64,171
—
696
—
—
—
96,761
—
—
—
—
—
—
—
Balance 31 December 2018
282,493,867
5,375
278,349
138,506
Total comprehensive loss
for the period
Issue of shares to Ariya founders
Issuance of restricted stock units
Exercise of share-based awards
Net loss
2,126,338
513,324
237,090
—
28
—
5
—
9,078
—
535
—
—
—
—
—
—
—
136
—
991
—
—
—
—
—
(86)
—
(623)
97,457
(86)
136
(623)
(5,192)
418,029
—
—
—
(2,689)
9,106
0
540
(2,689)
Balance 31 December 2019
285,370,619
5,408
287,962
138,506
991
(7,881)
424,986
The accompanying Notes are an integral part of these financial statements.
PureTech Health plc Annual report and accounts 2019 153
Financial statements PureTech Health plc Statements of Cash Flows
For the years ended 31 December
Cash flows from operating activities
Income/(loss) for the year
Adjustments to reconcile net operating loss to net cash used in operating activities:
Non-cash items:
Intercompany receivable
Intercompany payable
Accounts payable and accrued expenses
Net cash (used in) operating activities
Cash flows from investing activities:
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Equity settled share-based payment expense
Issuance of placing shares
Offering costs
Net cash provided by (used in) financing activities
Effect of exchange rates on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of non-cash investment and financing activities:
Vesting of incentive awards
Issuance of shares against intercompany receivable
The accompanying Notes are an integral part of these financial statements.
2019
$000s
2018
$000s
(2,689)
(623)
(539)
1,453
1,235
(540)
—
540
—
—
540
—
—
—
—
33
9,106
(97,493)
1,323
(715)
(97,372)
—
136
97,493
(121)
97,372
—
—
—
—
70
0
154 PureTech Health plc Annual report and accounts 2019
Financial statements Notes to the Financial Statements
1.
Accounting policies
3.
Intercompany receivables
Basis of Preparation and Measurement
The financial statements of PureTech Health plc (the “Parent”)
have been prepared under the historical cost convention,
in accordance with the International Financial Reporting
Standards, International Accounting Standards, and
Interpretations (collectively “IFRS”) issued by the International
Accounting Standards Board (“IASB”) as adopted by the
European Union (“adopted IFRSs”). A summary of the
significant accounting policies that have been applied
consistently throughout the year are set out below.
Functional and Presentation Currency
The functional currency of the Parent is United States
(“US”) Dollars and the financial statements are presented
in US Dollars.
Investments
Investments are stated at historic cost less any provision for
impairment in value and are held for long-term investment
purposes. Provisions are based upon an assessment of
events or changes in circumstances that indicate that an
impairment has occurred such as the performance and/or
prospects (including the financial prospects) of the investee
company being significantly below the expectations on which
the investment was based, a significant adverse change
in the markets in which the investee company operates or
a deterioration in general market conditions.
Impairment
If there is an indication that an asset might be impaired,
the Parent would perform an impairment review. An asset
is impaired if the recoverable amount, being the higher
of net realisable value and value in use, is less than its
carrying amount. Value in use is measured based on future
discounted cash flows attributable to the asset. In such cases,
the carrying value of the asset is reduced to recoverable
amount with a corresponding charge recognised in the profit
and loss account.
Financial Instruments
Currently the Parent does not enter into derivative financial
instruments. Financial assets and financial liabilities are
recognised and cease to be recognised on the basis of when
the related titles pass to or from the Parent Company.
2.
Investment in subsidiary
The Parent has an accounts receivable balance from its
operating subsidiary PureTech LLC of $296.5 million due
to cash received from the IPO.
4.
Share capital and reserves
PureTech plc was incorporated with the Companies House
under the Companies Act 2006 as a public company
on 8 May 2015.
On 12 March 2018, the Company raised approximately
$100.0 million, before issuance costs and other expenses,
by way of a Placing of 45,000,000 placing shares.
On 24 June 2015, the Company authorised 227,248,008 of
ordinary share capital at one pence apiece. These ordinary
shares were admitted to the premium listing segment of the
United Kingdom’s Listing Authority and traded on the Main
Market of the London Stock Exchange for listed securities.
In conjunction with the authorisation of the ordinary
shares, the Parent completed an IPO on the London Stock
Exchange, in which it issued 67,599,621 ordinary shares at
a public offering price of 160 pence per ordinary share, in
consideration for $159.3 million, net of issuance costs of
$11.8 million.
Additionally, the IPO included an over-allotment option
equivalent to 15 per cent of the total number of new ordinary
shares. The stabilisation manager provided notice to exercise
in full its over-allotment option on 2 July 2015. As a result, the
Parent issued 10,139,943 ordinary shares at the offer price of
160 pence per ordinary share, which resulted in net proceeds
of $24.2 million, net of issuance costs of $0.8 million.
5.
Intercompany payables
The Parent has a balance due to its operating subsidiary
PureTech LLC of $11.7 million, which is related to IPO costs
and operating expenses. These intercompany payables do
not bear any interest and are repayable upon demand.
6.
Profit and loss account
As permitted by Section 408 of the Companies Act 2006,
the Parent’s profit and loss account has not been included
in these financial statements. The Parent’s loss for the year
was $2.7 million.
$000s
7.
Directors’ remuneration, employee information and
share-based payments
Balance at 8 May 2015
Additions
Balance at 31 December 2019 and 2018
—
141,348
141,348
PureTech consists of the Parent and its subsidiaries (together,
the “Group”). Investment in subsidiary represents the
Parent’s investment in PureTech LLC as a result of the reverse
acquisition of the Group’s financial statements immediately
prior to the Parent’s initial public offering (“IPO”) on the
London Stock Exchange in June 2015. PureTech LLC operates
in the US as a US-focused scientifically driven research
and development company that conceptualises, sources,
validates and commercialises unexpected and potentially
disruptive approaches to advance the needs of human health.
For a summary of the Parent’s indirect subsidiaries please
refer to Note 1 of the Consolidated Financial Statements
of PureTech Health plc.
The remuneration of the executive directors of the
Parent Company is disclosed in Note 24, Related Parties
Transactions, of the accompanying Consolidated Financial
Statements. Full details for directors’ remuneration can be
found in the Directors’ Remuneration Report. Full detail of
the share-based payment charge and the related disclosures
can be found in Note 8, Share-based Payments, of the
accompanying Consolidated Financial Statements.
The Parent had no employees during 2019 or 2018.
PureTech Health plc Annual report and accounts 2019 155
Financial statements
Company information
Directors, Secretary and Advisors to PureTech
Company Registration Number
09582467
Registered Office
8th Floor
20 Farringdon Street
London EC4A 4AB
United Kingdom
Website
www.puretechhealth.com
Board of Directors
Mr Christopher Viehbacher (Chairman)
Ms Daphne Zohar (Chief Executive Officer)
Dame Marjorie Scardino
(Senior Independent Non-Executive Director)
Dr Bennett Shapiro (Non-Executive Director)
Dr Robert Langer (Non-Executive Director)
Dr Raju Kucherlapati
(Independent Non-Executive Director)
Dr John LaMattina (Independent
Non-Executive Director)
Mr Stephen Muniz (Chief Operating Officer)
Broker
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
United Kingdom
Tel: +44 207 029 8000
Registrar
Computer Share Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZY
United Kingdom
Tel: +44 (0)370 707 1147
Solicitors
DLA Piper UK LLP
160 Aldersgate Street
London EC1A 4HT
United Kingdom
Tel: +44 870 011 1111
Company Secretary
Stephen Muniz
Media and Public Relations
FTI Consulting, Inc.
200 Aldersgate
Aldersgate Street
London EC1A 4HD
United Kingdom
Tel: +44 203 727 1000
Independent Auditor
KPMG LLP
15 Canada Square
London E14 5GL
United Kingdom
Tel: +44 207 311 1000
156 PureTech Health plc Annual report and accounts 2019
Financial statements (cid:38)(cid:19)(cid:19)(cid:26)(cid:25)(cid:25)(cid:26)
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PureTech Health
6 Tide Street
Suite 400
Boston
MA 02210
Tel: +1 617 482 2333
Email: info@puretechhealth.com