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cover_puretech_210315.indd 1
18/03/2021 14:46
PureTech Health
Giving Life to Science
PureTech Health plc (“PureTech Health”, “PureTech” or “the Company”) is a clinical-stage biotherapeutics
company dedicated to discovering, developing and commercializing highly differentiated medicines for
devastating diseases, including inflammatory, fibrotic and immunological conditions, intractable cancers,
lymphatic and gastrointestinal diseases and neurological and neuropsychological disorders, among others.
We have created a broad and deep pipeline through the expertise of our experienced research and
development team and our extensive network of scientists, clinicians and industry leaders. Our pipeline,
which is being advanced both internally and through our Founded Entities1, is comprised of 26 therapeutics
and therapeutic candidates, including 15 that are clinical stage and two that have been cleared for
marketing by the U.S. Food and Drug Administration and granted marketing authorization in the European
Economic Area. All of the underlying programs and platforms that resulted in this pipeline of therapeutic
candidates were initially identified or discovered and then advanced by our team through key validation
points based on unique insights into the biology of the brain, immune and gut, or BIG, systems and the
interface between those systems, which we refer to as the BIG Axis.
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 maximizing
shareholder value.
Headquarters
Boston, MA
Nasdaq
PRTC
LSE
PRTC
Overview
Highlights of the Year
Components of Value
Letter from the Chair
Strategic report
Letter from the Chief Executive Officer
Letter from the Chief Innovation Officer
and the Chief Scientific Officer
How PureTech is Building Value for Investors
PureTech’s Wholly Owned Programs
PureTech’s Founded Entities
ESG report
Our Approach to ESG and Sustainable Business
Governance
Risk Management
Viability
Key Performance Indicators
Financial Review
Chair’s Overview
Board of Directors
Management Team
The Board
1
6
8
10
14
17
27
43
60
69
72
73
74
89
90
93
95
Directors’ Report
Report of the Nomination Committee
Report of the Audit Committee
Directors’ Remuneration Report
Directors’ Remuneration Policy
Annual Report on Remuneration
100
104
105
107
109
114
Financial statements
Independent Auditor’s Report to the Members of PureTech Health plc 121
130
Consolidated Statements of Comprehensive Income/(Loss)
131
Consolidated Statements of Financial Position
132
Consolidated Statements of Changes in Equity
133
Consolidated Statements of Cash Flows
134
Notes to the Consolidated Financial Statements
186
PureTech Health plc Statement of Financial Position
187
PureTech Health plc Statements of Changes in Equity
188
PureTech Health plc Statements of Cash Flows
189
Notes to the Financial Statements
Additional information
History and Development of the Company
Risk Factor Annex
Directors, Secretary and Advisors to PureTech Health plc
190
191
228
1
Our Founded Entities are comprised of our Controlled Founded Entities and our Non-Controlled Founded Entities. References in this report to our “Controlled
Founded Entities” refer to Follica, Incorporated, Vedanta Biosciences, Inc., Sonde Health, Inc. Alivio Therapeutics, Inc. and Entrega, Inc. References in this report to
our “Non-Controlled Founded Entities” refer to Gelesis, Inc., Akili Interactive Labs, Inc., Karuna Therapeutics, Inc. and Vor Biopharma Inc., and, for all periods prior
to December 18, 2019, resTORbio, Inc. We formed each of our Founded Entities and have been involved in development efforts in varying degrees. In the case of
each of our Controlled Founded Entities, we continue to maintain majority voting control. With respect to our Non-Controlled Founded Entities, we may benefit
from appreciation in our minority equity investment as a shareholder of such companies.
Highlights of the Year – 2020
PureTech Level Cash
and Cash Equivalents
as of March 31, 2021
$443.4m2
PureTech Level Cash
and Cash Equivalents
as of Year End
$349.4m2
Consolidated Cash
and Cash Equivalents
as of March 31, 2021
$486.5m2
Includes cash held at
the PureTech level and at
Controlled Founded Entities
(Vedanta, Follica, Alivio, Sonde
and Entrega)
Consolidated Cash
and Cash Equivalents
as of Year End
$403.9m2
Includes cash held at
the PureTech level and at
Controlled Founded Entities
(Vedanta, Follica, Alivio, Sonde
and Entrega)
2019: $120.6m
2018: $177.7m
2017: $126.7m
2016: $192.1m
2019: $162.4m
2018: $250.9m
2017: $188.7m
2016: $281.5m
Wholly Owned Programs
Our team, network and expertise in the BIG Axis has enabled the rapid advancement and growth of our Wholly
Owned Programs3. Focused on the lymphatic system and related immunological disorders, our Wholly Owned
Pipeline currently consists of LYT-100, a clinical-stage therapeutic candidate we are pursuing for inflammatory and
fibrotic conditions and disorders of lymphatic flow, LYT-200, a clinical therapeutic candidate targeting a foundational
immunosuppressive protein, galectin-9, we are developing for the potential treatment of a range of cancer indications,
LYT-210, a preclinical therapeutic candidate targeting immunomodulatory gamma delta-1 T cells we are developing
for a range of cancer indications and autoimmune disorders and LYT-300, a preclinical therapeutic candidate we are
developing for a range of neurological and neuropsychological conditions. Our Wholly Owned Programs also include
three discovery platforms: Glyph™ – our synthetic lymphatic targeting chemistry platform – and Orasome™ – our
oral biotherapeutics platform – both of which leverage the absorption of dietary lipids to traffic therapeutics via the
lymphatic system and our meningeal lymphatics discovery research program for treating neurodegenerative and
neuroinflammatory diseases. Key developments included the following:
• In November 2020, we announced the completion of a Phase 1 randomized, double-blind multiple ascending dose, or MAD,
and food effect study of LYT-100, which was initiated in March 2020. The study demonstrated favorable proof-of-concept for
LYT-100’s tolerability and pharmacokinetic, or PK, profile.
• In December 2020, we announced the initiation of a global, randomized, double-blind, placebo-controlled Phase 2 trial to
evaluate the efficacy, safety and tolerability of LYT-100 in adults with Long COVID4 respiratory complications and related
sequelae. Topline results are expected in the second half of 2021.
• In December 2020, we announced the initiation of a Phase 2a proof-of-concept study of LYT-100 in patients with breast
cancer-related, upper limb secondary lymphedema. Topline results are expected in the first half of 2022.
• We are planning registration-enabling studies of LYT-100 for the treatment of idiopathic pulmonary fibrosis, or IPF, and
potentially other progressive fibrosing interstitial lung diseases, or PF-ILDs, and we expect to provide additional guidance
later this year.
• In December 2020, we announced the initiation of our Phase 1 clinical trial to evaluate LYT-200 as a potential treatment
for metastatic solid tumors, with topline results anticipated in the fourth quarter of 2021. The primary objective of
the Phase 1 portion of the adaptive Phase 1/2 trial is to assess the safety and tolerability of escalating doses of LYT-200
in order to identify a dose to carry forward into the Phase 2 portion of the trial. The Phase 1 portion will also assess the
PK and pharmacodynamic, or PD, profiles of LYT-200. Pending favorable topline results, we intend to initiate the Phase 2
expansion cohort portion of the trial, which is designed to evaluate LYT-200 either alone and/or in combination with
chemotherapy and anti-PD-1 therapy for the treatment of multiple solid tumor types, including pancreatic cancer and
cholangiocarcinoma, or CCA.
• In June 2020, we presented a scientific poster for LYT-200 at the American Association for Cancer Research, or AACR,
2020 Virtual Annual Meeting. New preclinical results were presented that established galectin-9 as a novel target for
cancer immunotherapy.
2
3
4
For more information in relation to the PureTech Level Cash and Cash Equivalents and Consolidated Cash and Cash Equivalents measures used in this Annual Report,
please see pages 75 and 76 of the Financial Review. At prior comparative periods from 2016 to 2019, balances included cash, cash equivalents and short-term investments.
For more information in relation to the PureTech Level Cash Reserves and Consolidated Cash Reserves measures, please also see pages 75 and 76 of the Financial Review.
References in this report to “Wholly Owned Programs” refer to the Company’s four therapeutic candidates (LYT-100, LYT-200, LYT-210 and LYT-300), three discovery
platforms and potential future therapeutic candidates and discovery platforms that the Company may develop or obtain. References to “Wholly Owned Pipeline” refer to
LYT-100, LYT-200, LYT-210 and LYT-300.
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19
syndrome (PACS).
PureTech Health plc Annual report and accounts 2020 1
Overview
Highlights of the Year — continued
Amount of funding secured
for Founded Entities
$247.8m5,6
$246.8m (99.6%) came
from third parties
Excludes $473.2m raised
by Founded Entities in
2021 post-period
2019: $666.8m
2018: $274.0m
2017: $102.9m
2016: $98.2m
Clinical trial initiations
Clinical trial readouts
Regulatory clearances
66,7
56,8
36,9
2019: 6
2019: 5
2019: 1
• We are advancing our Glyph technology platform, which is designed to employ the body’s natural lipid absorption and
transport process to orally administer drugs via the lymphatic system. We have successfully extended the platform to
encompass more than 20 molecules as well as a range of novel linker chemistries that have demonstrated promising
lymphatic targeting in preclinical studies. Our most advanced Glyph candidate, LYT-300, is an oral form of allopregnanolone,
an IV version of which is approved by the FDA. We believe LYT-300 may be applicable to a range of neurological conditions,
and we expect to initiate a clinical trial with LYT-300 by the end of 2021.
• In the February 2021 post-period, preclinical proof-of-concept for our Glyph technology was published in the Journal of
Controlled Release. The results demonstrate the ability of this platform to directly target gut lymphatics with an orally dosed
small molecule immunomodulator.
• We progressed our Orasome technology platform, which utilizes multiple vesicle components, including those isolated
from milk. Our Orasome vesicles are being designed to transport macromolecular medicines to selected mucosal cell
types of the intestinal tract. In 2021, we expect preclinical proof-of-concept data and anticipate additional preclinical results
from a non-human primate proof-of-concept study. This work could lay the foundation for investigational new drug, or
IND, application enabling clinical studies for one or more additional therapeutic candidates to be included in our Wholly
Owned Pipeline.
• On November 16, 2020, we commenced trading of American Depository Shares, or ADSs, on the Nasdaq Global Market
under the ticker symbol “PRTC” (the “U.S. Listing”). In addition to the U.S. Listing, we maintain our premium listing on the
Official List of the UK Financial Conduct Authority and trading on the main market of the London Stock Exchange. Our ticker
symbol in the UK is also PRTC, and we are a member of the FTSE 250 index.
• In October 2020, we announced the appointment of biotech entrepreneur Kiran Mazumdar-Shaw to our board of directors.
Ms. Shaw brings extensive experience in biotherapeutics, strategic leadership, financial and business development and
a dedication to improving patients’ lives to our board of industry leaders.
• In the January 2021 post-period, we announced that George Farmer, Ph.D., was appointed as Chief Financial Officer.
Dr. Farmer is responsible for all aspects of our finances, including capital markets strategy and execution, strategic and
financial planning and financial reporting.
5
6
7
8
9
Funding figure includes private equity financings, loans and promissory notes, public offerings or grant awards. Funding figure excludes future milestone considerations
received in conjunction with partnerships and collaborations such as those with Boehringer Ingelheim, Imbrium Therapeutics L.P., Shionogi & Co., Ltd. or Eli Lilly. Funding
figure does not include Vor’s gross proceeds of $203.4 million from its February 2021 post-period IPO or Karuna’s gross proceeds of $269.8 million from its February 2021
post-period follow-on offering.
Number represents figure for the relevant fiscal year only and is not cumulative.
PureTech initiated four clinical trials, Karuna initiated one clinical trial, and Gelesis initiated one clinical trial in 2020.
PureTech, Vedanta (two), Karuna, and Akili reported clinical results from across their pipelines in 2020.
Akili’s EndeavorRx™ was granted FDA clearance and European marketing authorization and Gelesis’ Plenity® was also granted European marketing authorization.
2 PureTech Health plc Annual report and accounts 2020
Overview
Highlights of the Year — continued
Founded Entities10
PureTech’s Founded Entities have made significant progress advancing 22 therapeutics and therapeutic candidates,
of which two have been cleared for marketing by the U.S. Food and Drug Administration and granted marketing
authorization in the European Economic Area and 13 are clinical stage. Key developments included the following:
Founded Entities in which PureTech has a controlling interest or the right to receive royalties, in order of development stage:
Gelesis, Inc. (PureTech ownership: 19.3%;
We also have a right to royalty payments
as a percentage of net sales)
• In June 2020, Gelesis received approval
to market Plenity®11 with a Conformité
Européenne, or CE, Mark as a class III
medical device indicated for weight
loss in overweight and obese adults
with a Body Mass Index, or BMI, of
25 -40 kg/m2, when used in conjunction
with diet and exercise. In addition to
its U.S. FDA clearance, Gelesis is now
able to market Plenity throughout the
European Economic Area and in other
countries that recognize the CE Mark.
Gelesis plans to bring Plenity to the
U.S. first, where it has been available to
a limited extent since the second half
of 2019 through an early experience
program and since 2020 via a beta
launch while the company ramps up its
commercial operations and inventory
for a broader launch in the second half
of 2021. In just one month of limited
promotion and marketing investment
during the beta launch, Gelesis
acquired more new patients on Plenity
than any other branded prescription
in the weight loss market. Gelesis
also plans to seek FDA input on the
requirements for expanding the Plenity
label for treating adolescents.
• In June 2020, Gelesis announced
a partnership with China Medical
System Holdings Ltd., or CMS, for
the commercialization of Plenity in
China. Through the terms of the deal,
CMS provided $35 million upfront in
a combination of licensing fees and
equity investment, with the potential
for an additional $388 million in future
milestone payments as well as royalties.
• In the second half of 2020, Gelesis
initiated a Phase 3 study of GS500 in
functional constipation.
• In November 2020, Gelesis’ collaborator
Alessandra Silvestri, Ph.D., of the
Laboratory of Mucosal Immunology
and Microbiota at Humanitas Research
Hospital, presented a poster on the
therapeutic benefits of Gel-B (GS300)
at The Liver Meeting, the American
Association for the Study of Liver
Diseases, or AASLD, annual conference.
The data demonstrated that, in
a preclinical model, the proprietary
therapeutic candidate reversed the
damage to the intestines induced by
a high fat diet and Gelesis believes that
therapies exploiting the gut liver axis
may offer a unique treatment option for
metabolic liver disorders.
• Also in November 2020, Gelesis
presented three posters at
ObesityWeek 2020, the annual
congress of The Obesity Society.
Presentations included new data that
showed that prediabetes and impaired
beta cell function were associated with
a dysfunctional gut barrier, a potential
precursor to metabolic diseases; an
additional analysis of Gelesis’ pivotal
GLOW study suggested fasting
plasma glucose levels and insulin
resistance could be strong predictors
of weight loss with Plenity; and a new
in vitro beverage interaction study
that demonstrated Plenity’s hydrogel
maintained its properties in the
presence of alcoholic or acidic drinks.
• In September 2020, Gelesis delivered
one oral presentation and two poster
presentations showcasing notable
efficacy data for Plenity at the European
and International Congress on Obesity,
or ECO-ICO 2020.
• In March 2020, Gelesis was named to
Fast Company’s list of the World’s Most
Innovative Companies for 2020.
Karuna Therapeutics, Inc. (PureTech
ownership: 8.2%; We also have a right
to royalty payments as a percentage
of net sales)
• In June 2020, Karuna announced next
steps in the EMERGENT program,
the clinical program evaluating KarXT
for the treatment of adults with
schizophrenia, following the completion
of a successful End-of-Phase 2 meeting
with the FDA.
• In December 2020, Karuna
announced the initiation of
the Phase 3 EMERGENT-2 trial, the
first of two Phase 3 five-week inpatient
trials evaluating the efficacy and safety
of KarXT for the treatment of acute
psychosis in adults with schizophrenia.
• In May 2020, Karuna presented data
from EMERGENT-1, the Phase 2 clinical
trial evaluating KarXT for the treatment
of acute psychosis in patients with
schizophrenia, at the American Society
of Clinical Psychopharmacology, or
ASCP, 2020 Annual Meeting. The poster
and oral presentation detailed new and
previously reported efficacy and safety
data from the Phase 2 clinical trial.
• In the first quarter of the 2021 post-
period, Karuna announced the initiation
of the Phase 3 EMERGENT-4 trial, a 52-
week, outpatient, open-label long-term
safety and tolerability extension trial of
EMERGENT-2 and EMERGENT-3.
• In the February 2021 post-period,
Karuna announced that results from
the EMERGENT-1 Phase 2 clinical trial
evaluating KarXT for the treatment
of schizophrenia were published
in the New England Journal of
Medicine, or NEJM.
• In 2020, we sold approximately four
million of our Karuna shares for cash
consideration of approximately
$347 million, and in the February 2021
post-period we sold an additional one
million shares for cash consideration
of approximately $118 million.
10 Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of December 31, 2020, including outstanding shares,
11
options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Karuna ownership is calculated on an outstanding voting
share basis as of March 4, 2021. Vor ownership is calculated on an outstanding voting share basis as of February 9, 2021.
Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity.
To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be
taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away
if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe
and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.
PureTech Health plc Annual report and accounts 2020 3
Overview Highlights of the Year — continued
Follica, Incorporated (PureTech ownership:
78.2%. We also have a right to royalty
payments as a percentage of net sales)
• In June 2020, Follica announced
the completion of a successful
End-of-Phase 2 meeting with the
FDA for its lead program to treat
male androgenetic alopecia,
which supports the progression
into Phase 3 development. The
initiation of a Phase 3 registration
program in male androgenetic alopecia
is expected in 2021.
• In December 2020, Follica announced
the publication of a pilot study
evaluating scalp skin disruption to
promote hair growth in female pattern
hair loss, or FPHL, in International
Journal of Women’s Dermatology.
The pilot study, led by Maryanne M.
Senna, M.D., an Assistant Professor
of Dermatology at Harvard Medical
School, demonstrated the treatment
promoted hair growth over a four-
month course of treatment.
• In the January 2021 post-period, Follica
announced the appointment of two
leaders in aesthetic medicine and
dermatology to its Board of Directors.
Tom Wiggans, former CEO of Dermira,
joined as Executive Chairman with
over 30 years of experience leading
biopharmaceutical companies
from the start-up stage to global
commercialization, and Michael Davin,
former CEO of Cynosure, joined as
an Independent Director with over
30 years of experience in the medical
device industry.
Vedanta Biosciences, Inc. (PureTech
ownership: 49.5%)
• In June 2020, Vedanta announced
topline Phase 1 clinical data in healthy
volunteers, which showed that VE202,
Vedanta’s orally-administered live
biotherapeutic product, or LBP,
candidate for inflammatory bowel
disease, or IBD, was generally well-
tolerated at all doses studied and
demonstrated durable and dose-
dependent colonization. The trial
was conducted by Janssen Research
& Development, LLC, and a more
complete study dataset and analyses
will be submitted to a peer-reviewed
journal. Vedanta expects to advance
VE202 into a Phase 2 study for IBD in
2021. Vedanta has regained full rights
to the program and will owe Janssen
single-digit royalty payments on net
sales of a commercialized product.
• In the January 2021 post-period, Vedanta
announced a $25 million investment from
Pfizer as part of the Pfizer Breakthrough
Growth Initiative. The proceeds will
fund the Phase 2 study of VE202 in
IBD. Vedanta will retain control of all its
programs and has granted Pfizer a right
of first negotiation on VE202.
• In October 2020, additional data from
a Phase 1 clinical study of VE202 in
healthy volunteers was presented by
Janssen Research & Development, LLC,
at United European Gastroenterology,
or UEG, Week 2020. The new UEG
Week data presentation focused on the
kinetics and durability of colonization
from an 11-strain consortium of
VE202 under various dosing and
pre-treatment regimens.
• Vedanta has also continued to progress
its three ongoing clinical trials of
VE303, VE416 and VE800. In 2021,
Vedanta anticipates topline results
from a Phase 2 trial of VE303 in high-
risk Clostridioides difficile infection, or
CDI, and a first-in-patient clinical trial
of VE800 in combination with Bristol-
Myers Squibb’s checkpoint inhibitor
Opdivo® (nivolumab) in patients with
select types of advanced or metastatic
cancer. Topline results from a Phase
1/2 trial of VE416 for food allergy are
expected in 2022.
• In June 2020, Vedanta strengthened
its balance sheet with an additional
$12 million in new equity and R&D
collaboration funds, bringing its total
Series C round to $71.1 million.
• In September 2020, Vedanta announced
it has been awarded funding of
$7.4 million, with the potential for up
to an additional $69.5 million, from the
Biomedical Advanced Research and
Development Authority, or BARDA, to
advance clinical development of VE303
for high-risk CDI. Vedanta is the first-
ever recipient of a BARDA award in the
microbiome field.
Sonde Health, Inc. (PureTech
ownership: 44.6%)
• In July 2020, Sonde launched Sonde One
for Respiratory, a new voice-enabled
health detection and monitoring app,
to potentially help employers improve
employee safety, meet government
mandates and satisfy their own
administrative needs as they reopen
office doors in a COVID-19 environment.
• In August 2020, Sonde acquired
NeuroLex Labs, a leading voice-enabled
survey and data acquisition platform.
The transaction did not involve any
financial participation from PureTech.
• In November 2020, Sonde announced
the launch of a new Developer Portal
that provides organizations with access
to Sonde’s advanced vocal biomarker-
based health check technology.
As part of the launch, Sonde has
introduced a new self-serve application
programming interface, or API, and
documentation to allow developers
to quickly, easily and autonomously
integrate Sonde’s voice-enabled
respiratory symptoms checker into
their own iOS and Android mobile
applications.
• Sonde has collected over one million
voice samples from over 80,000
subjects as a part of the ongoing
validation of its platform, and it has also
initiated research and development to
expand its proprietary technology into
Alzheimer’s disease, or AD, respiratory
and cardiovascular disease, as well as
other health and wellness conditions
including mental health.
Alivio Therapeutics, Inc. (PureTech
ownership: 78.0%)
• Alivio continued to advance its targeted
disease immunomodulation platform
for the potential treatment of chronic
and acute inflammatory disorders.
Alivio expects an IND filing for ALV-107
for interstitial cystitis or bladder pain
syndrome, or IC/BPS, in 2021 and an
IND for ALV-304 in IBD in 2023. Alivio is
also evaluating the potential application
of its proprietary platform to enable
the oral administration of biologics in
additional indications.
• In October 2020, Alivio announced
a $3.3 million U.S. Department of
Defense, or DoD, Technology/
Therapeutic Development Award to
advance its therapeutic candidate,
ALV-304, for the treatment of IBD. The
funds will support Alivio’s preclinical
research and development activities to
potentially enable the IND filing.
Entrega, Inc. (PureTech ownership: 72.9%)
• Entrega continued to advance its
platform for the oral administration of
biologics, vaccines and other drugs
that are otherwise not efficiently
absorbed when taken orally. As
part of its collaboration with Eli Lilly,
Entrega has continued to investigate
the application of its peptide
administration technology to certain
Eli Lilly therapeutic candidates. In 2020,
the partnership was extended into 2021.
4 PureTech Health plc Annual report and accounts 2020
Overview Highlights of the Year — continued
Founded Entities in which PureTech has an equity interest, in order of development stage:
Akili Interactive Labs, Inc. (PureTech
ownership: 33.7%)
• In June 2020, Akili received clearance
from the FDA to market EndeavorRx™12
(AKL-T01) as a prescription treatment for
improving attention function in children
with attention-deficit/hyperactivity
disorder, or ADHD. Delivered through
a captivating video game experience,
EndeavorRx is indicated to improve
attention function as measured by
computer-based testing in children
ages 8-12 years old with primarily
inattentive or combined-type ADHD,
who have a demonstrated attention
issue. Akili plans to take a scaled
approach to the commercial launch of
EndeavorRx in 2021. The FDA clearance
followed the April 2020 announcement
that ENDEAVOR™ would be available
for use for a limited time by children
with ADHD and their families in
response to new guidance from the
FDA recognizing the need for access
to certain low-risk clinically-validated
digital health devices for psychiatric
conditions, including ADHD, during the
COVID-19 pandemic.
• Also in June 2020, Akili announced
that it had received approval to
market EndeavorRx in Europe. Akili
received a CE Mark certification for
EndeavorRx as a prescription-only
digital therapeutic intended for the
treatment of attention and inhibitory
control deficits in pediatric patients with
ADHD. The CE Mark approval enables
the future marketing of EndeavorRx
in European Economic Area member
countries. With a near-term focus on
launching the EndeavorRx prescription
treatment in the U.S. first, Akili is
exploring expansion opportunities in
Europe as part of its global strategy.
Vor Biopharma Inc. (PureTech
ownership: 8.6%)
• In the January 2021 post-period,
Vor announced that the FDA had
accepted the company’s IND
application for VOR33. Vor plans to
enroll the first patient in a Phase 1/2a
clinical trial for VOR33 in the second
quarter of 2021 and expects initial
human engraftment and protection
data from this trial to be reported in
late 2021 or in the first half of 2022.
• In the February 2021 post-period, Vor
announced the pricing of its initial
public offering of common stock on
the Nasdaq Global Market under the
symbol “VOR.” The aggregate gross
proceeds to Vor from the offering were
approximately $203.4 million, before
deducting the underwriting discounts
and commissions and other offering
expenses payable by Vor.
• In July 2020, Vor announced
a $110 million Series B financing to
advance VOR33 into clinical trials,
deepen its portfolio and accelerate
the validation of additional targets
for its scientific platform.
• In November 2020, Vor announced an
exclusive licensing agreement with the
National Cancer Institute, or NCI, part
of the National Institutes of Health, or
NIH, for intellectual property related to
a clinical-stage anti-CD33 chimeric
antigen receptor T cell, or CAR-T,
therapy candidate, VCAR33. VCAR33
is currently being evaluated in a multi-
site Phase 1/2 clinical trial in young adult
and pediatric patients with relapsed or
refractory acute myeloid leukemia,
or AML, and Vor expects initial
monotherapy clinical proof-of-concept
data in 2022, depending on
investigator’s timing of data release.
• In January 2020, Vor held a pre-IND
meeting with the FDA to gather
feedback to assemble the data package
for a potential IND filing.
• In the April 2021 post-period, Akili
announced collaborations with
Weill Cornell Medicine, New York-
Presbyterian Hospital and Vanderbilt
University Medical Center to evaluate
Akili digital therapeutic AKL-T01 as
a treatment for patients with cognitive
dysfunction following COVID-19 (also
known as “COVID brain fog”). Under
each collaboration, Akili will work with
research teams at each institution to
conduct two separate randomized,
controlled clinical studies evaluating
AKL-T01’s ability to target and improve
cognitive functioning in COVID-19
survivors who have exhibited a deficit
in cognition.
• In January 2020, Akili announced
that its STARS Adjunct trial achieved
its primary endpoint evaluating the
effects of EndeavorRx in children with
ADHD when used with and without
stimulant medication. The study
achieved its predefined primary efficacy
outcome, demonstrating a statistically
significant improvement in the ADHD
Impairment Rating Scale, or IRS, from
baseline after one month of treatment
(p<0.001) in both children taking
stimulant medications and in those not
taking stimulants.
• In February 2020, The Lancet Digital
Health journal published the results
from Akili’s STARS-ADHD pivotal
trial of AKL-T01.
• In October 2020, Akili announced
multiple data presentations on
EndeavorRx, including results from the
STARS Adjunct trial, a multi-site open-
label study designed to evaluate the
impact of EndeavorRx on impairments
in daily life in children with ADHD
and inform prescribing practices.
Also presented were analyses across
four clinical trials of EndeavorRx,
evaluating the impact of treatment
on children’s attention function
compared to normative ranges. The
data were presented for the first time
at the American Academy of Child and
Adolescent Psychiatry, or AACAP, 2020
Virtual Annual Meeting.
• In the March 2021 post-period, Nature
Digital Medicine published the full
results from the STARS Adjunct trial.
12
EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type
ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of
Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered
for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the
disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.
PureTech Health plc Annual report and accounts 2020 5
Overview Components of Value
Wholly Owned Pipeline
Our programs1
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
LYT-100
Deupirfenidone
IPF and potentially
other PF-ILDs
LYT-100
Deupirfenidone
Long COVID2 respiratory
complications and
related sequelae
LYT-100
Deupirfenidone
Lymphatic flow disorders,
including lymphedema
LYT-200
Anti-Galectin-9 mAb
Solid tumors
LYT-210
Anti-Delta-1 mAb
Solid tumors
LYT-300
Oral Allopregnanolone
Neurological indications
Registration-enabling studies planned
Phase in progress
Phase completed
Discovery Platforms
Glyph™ Technology Platform (Lymphatic Targeting)
Orasome™ Technology Platform (Oral Biotherapeutics)
Meningeal Lymphatics Discovery Research Program
Cash at PureTech Level
$443.4m PureTech Level Cash and Cash Equivalents as of March 31, 20213
1
2
3
The FDA and corresponding regulatory authorities will ultimately review our clinical results and determine whether our wholly-owned therapeutic candidates are safe and effective.
No regulatory agency has made any such determination that our wholly-owned therapeutic candidates are safe or effective for use by the general public for any indication.
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19
syndrome (PACS).
For more information in relation to the PureTech Level Cash and Cash Equivalents and Consolidated Cash and Cash Equivalents measures used in this Annual Report, please see
pages 75 and 76 of the Financial Review.
6 PureTech Health plc Annual report and accounts 2020
Overview
Components of Value — continued
Founded Entities4
Controlling interest or right to receive royalties
Limited to equity interest
Advancing a novel hydrogel platform
technology to treat obesity and
other chronic metabolic diseases
Advancing transformative medicines
for people living with psychiatric
and neurological conditions
Advancing digital treatments to target
cognitive dysfunction associated with
conditions across neurology and psychiatry
Interest5
19.3% Equity
plus Royalties
Stage of Development
Commercial Launch
Interest5
8.2% Equity
plus Royalties
Stage of Development
Phase 3
Nasdaq: KRTX
Interest5
33.7% Equity
Stage of Development
Commercial Launch
Building a regenerative biology platform
for androgenetic alopecia, epithelial
aging and other medical indications
Pioneering a new category of therapies
for immune-mediated diseases
Engineering hematopoietic
stem cell therapies combined
with targeted therapies
Interest5
78.2% Equity
plus Royalties
Stage of Development
Phase 3 Ready
Interest5
49.5% Equity
Stage of Development
Phase 2
Interest5
8.6% Equity
Stage of Development
Phase 1/2
Nasdaq: Vor
Developing a voice-based
technology platform to measure
health when a person speaks
Pioneering inflammation targeted
disease immunomodulation
Interest5
44.6% Equity
Stage of Development
Commercial Release
Interest5
78.0% Equity
Stage of Development
Preclinical
Engineering hydrogels to enable the
oral administration of biologics
Interest5
72.9% Equity
Stage of Development
Preclinical
4
5
This figure represents the stage of development for each Founded Entity’s most advanced therapeutic 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 December 31, 2020, Controlled Founded Entities include Follica Incorporated, Vedanta Biosciences, Inc., Sonde Health, Inc., Alivio Therapeutics, Inc. and Entrega, Inc.,
and Non-Controlled Founded Entities include Gelesis, Inc., Karuna Therapeutics, Inc., Akili Interactive Labs, Inc., Vor Biopharma Inc.
Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of December 31, 2020, including outstanding shares,
options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Karuna ownership is calculated on an outstanding voting
share basis as of March 4, 2021. Vor ownership is calculated on an outstanding voting share basis as of February 9, 2021.
PureTech Health plc Annual report and accounts 2020 7
Overview Letter from the Chair
“ To put it simply, PureTech’s story is one of innovation
coupled with rapid growth. I can’t think of another
company that comes close.”
2020 was a year of important milestones
and significant value creation for
PureTech, capped off with a virtual team
celebration as we rang the opening bell
on Nasdaq in early January of 2021.
The bell ringing ceremony highlighted
both our bold vision and our financial
strength, as we entered the new
year jointly listed on the London
Stock Exchange and Nasdaq, while
broadening access to an international
investor base. Fueled by an exceptional
team, powerful scientific insights
and highly differentiated therapeutic
candidates that have emerged from
PureTech’s productive business model,
we believe we are truly building
the biopharmaceutical company
of the future.
When I joined the board five years
ago, PureTech was a cutting-edge
R&D company advancing early-stage
projects. During my time on the
board, I have seen the company grow
into a proven industry leader with
an impressive track record that has
yielded 26 innovative therapeutics
and therapeutic candidates across
our Wholly Owned Pipeline and
our Founded Entities, including 15
programs in clinical development
and two that have been cleared
for marketing by the U.S. Food and
Drug Administration and European
authorities. As one metric of our
rapid progress, consider that we
advanced three programs from our
Wholly Owned Pipeline into the clinic
in the last two months of 2020. These
programs include the global launch of
one of the only clinical trials seeking
to address the long-term sequelae of
COVID-19 infection, a constellation
of highly serious symptoms known as
post-acute COVID-19 syndrome (PACS)
or Long COVID, a clinical study for
lymphedema, a painful and disfiguring
condition that affects one million
people in the U.S., and an oncology
study evaluating the clinical properties
of a novel monoclonal antibody for
the potential treatment of intractable
solid tumors.
Innovation in capital deployment is
the hallmark of our business strategy.
The PureTech team spends a lot of
time devising and executing what
we call “killer” experiments – that
is, experiments designed to take
out potential programs by revealing
their flaws. If a program survives this
hurdle, we believe that it has been
substantially de-risked, and deserves
the commitment of additional
resources. We are proud of our clinical
track record, particularly in the stages
where industry failures are typically
high as depicted in the graphic on
page 9. We have also engineered our
To put it simply, PureTech’s story
is one of innovation coupled with
rapid growth. I can’t think of another
company that comes close.
Our success rests firmly on our
commitment to innovation – innovation
in our pipeline, in our approach to
raising and deploying capital and in
the development of our team.
The story of scientific innovation and
patient focus comes through loud and
clear in the therapeutic clearances our
Founded Entities received. Consider
Gelesis’ Plenity®1, a novel approach
to overweight and obesity: In just
one month of limited promotion and
marketing investment, Gelesis acquired
more new patients on Plenity than
any other branded prescription in the
weight loss market. Additionally, Akili’s
EndeavorRx™ received both FDA and
European clearance in 2020, becoming
the first prescription video game in
the world. Both of these therapeutics,
like those of all of our Founded
Entities, were initially conceived of and
advanced by the PureTech team, as part
of our commitment to think well outside
the box in addressing pressing medical
needs for patients. Both are expecting
a broader launch in the U.S. this year.
1
Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity.
To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be
taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity was
no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away if
problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe and
proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.
8 PureTech Health plc Annual report and accounts 2020
Overview Letter from the Chair — continued
Founded Entities to spread risk so that
our fortunes do not rise and fall on the
outcome of a single, binary readout.
Our business model is unusual in the
biopharma world, and it has served us
exceptionally well.
Innovation in teamwork is the third
pillar of our success. We build
a global network of top-tier scientific
collaborators to help identify promising
ideas, solve knotty problems and apply
scientific insights to new realms. These
collaborators have been invaluable.
But they wouldn’t take us far without
the experienced team we have built to
advance our R&D and clinical programs.
Our rapid response to the emerging
global crisis of Long COVID is an
example of how agile and strategic our
team is as we push ourselves to deliver
breakthroughs for patients.
I am honored to be Chair of the board
and to work closely with my colleagues
on this remarkable board and team. I
know my fellow board members join me
in that sentiment. We were delighted
to welcome two new members to
the board in the past year: Kiran
Mazumdar-Shaw, a highly successful,
pioneering biotech entrepreneur and
passionate philanthropist, who joined
in October of 2020 as an independent
non-executive director, and Bharatt
Chowrira, Ph.D., J.D., PureTech’s
President and Chief of Business and
Strategy, who has been with the
Company since 2017 and was promoted
to the Board in January of 2021. Also in
January, we were pleased to welcome
George Farmer, Ph.D., as our Chief
Financial Officer. Dr. Farmer’s depth of
experience as a biotech executive and
equity analyst will serve us well as we
set our business development strategy
for the years ahead.
Additionally, in March of 2021,
we announced that Stephen Muniz,
Esq., will retire from his role as Chief
Operating Officer and Corporate
Secretary and will step down from
the Board of Directors, effective May
17, 2021. On behalf of the Board, I
would like to thank Steve for all of his
hard work and leadership over the
past 13 years.
I would also like to extend a sincere
thank you to all of our shareholders
for enabling our continued growth.
As always, I am proud to be part of the
PureTech team and I look forward to
continued success in 2021.
Christopher Viehbacher
Chair
April 14, 2021
Track record of outpacing industry averages
26 therapeutics and therapeutic candidates,
of which:
PureTech has demonstrated a strong track record
of clinical advancement; Particularly notable in the
stages where industry failures are typically high
Percent of clinical trials where outcome supports
progression to next phase of clinical development:
15 are clinical stage and
Phase
1, 2 & 32
2
were taken from inception at
PureTech to FDA and European
Regulatory Clearances
0%
20%
40%
60%
PureTech3
Industry average4
2
3
4
The cumulative percentages are calculated by multiplying the individual phase percentages included in the following footnotes.
The aggregate percentages include all therapeutic candidates advanced through at least Phase 1 by PureTech or its Founded Entities from 2009 onward, using the aforementioned
calculation method based on the following individual phase percentages, Phase 1 (n = 6/7; 86%), Phase 2 (n = 9/10; 90%), Phase 3 (n = 2/3; 67%); Phase 2 and Phase 3 percentages
include some therapeutic candidates where Phase 1 trials were not conducted by PureTech or its Founded Entities (i) due to the requirements of the medical device regulatory
pathway or (ii) because a prior Phase 1 trial was conducted by a third party.
Industry average data measures the probability of clinical trial success of therapeutics by calculating the number of programs progressing to the next phase vs. the number
progressing and suspended (Phase 1=63%, Phase 2=31%, Phase 3=58%). BIO, Biomedtracker, Amplion (2015) Clinical Development Success Rates 2006 – 2015. This study
did not include therapeutics regulated as devices.
PureTech Health plc Annual report and accounts 2020 9
Overview Letter from the Chief Executive Officer
“ PureTech was founded to advance a singularly
important mission: Develop groundbreaking
medicines for serious diseases for which patients
currently have few options, or none at all.”
Giving life to science by rapidly
advancing scientific breakthroughs
for patients.
With the COVID-19 pandemic sweeping
the globe, the biopharma industry was
challenged in 2020 to elevate its thinking
and to seize big, bold ideas that could
prove transformative for patients. We’ve
all taken pride in the industry’s response
to the pandemic, and rightfully so. I’m
also immensely proud of PureTech’s
response. Proud, but not surprised –
because thinking big has been woven
into our DNA from the beginning.
PureTech was founded to advance
a singularly important mission: Develop
groundbreaking medicines for serious
diseases for which patients currently
have few options, or none at all. We
start with a clear-eyed assessment of
the need. We then collaborate with
the best scientific minds, identifying
emerging discoveries that could
help us meet our goals of inventing
entirely new solutions when the
current approaches are not sufficiently
innovative. One telling statistic: Our
global network of world-class scientists
probing the Brain-Immune-Gut (BIG)
Axis has published more than 25 papers
describing research breakthroughs,
many in top journals such as Cell,
Nature and Science. In many cases, long
before the rest of the world read about
the discoveries, we had already secured
the relevant intellectual property and
ran crucial de-risking experiments to
validate their therapeutic potential.
It has become clear in recent years that
the BIG Axis and the crosstalk between
those systems plays a critically important
role in regulating health and disease.
We have developed preeminent
expertise in key components of the BIG
Axis, including the gut epithelial barrier,
the microbiome and – importantly – the
lymphatic system, and those insights
have translated into a highly promising
and rapidly advancing pipeline. Across
our Wholly Owned Pipeline and our
Founded Entities, our R&D engine
has delivered 26 therapeutics and
therapeutic candidates, including
15 clinical-stage programs and two
innovative therapeutics that are
now on the market, having received
regulatory clearances by the U.S. Food
and Drug Administration (FDA) and
European regulators.
Daphne Zohar, Founder and Chief Executive Officer, with Eric Elenko, Ph.D., Chief Innovation officer
(left) and Joep Muijrers, Ph.D., Chief of Portfolio Strategy (right). Image taken pre-pandemic.
• We launched the first part of
a Phase 1/2 trial of our monoclonal
antibody LYT-200, which targets
a foundational immunosuppressive
protein, galectin-9, preferentially
expressed in multiple difficult-to-treat
cancers. This trial in relapsed and
refractory metastatic cancer patients
is designed to evaluate safety and
identify a recommended Phase 2
Despite the challenges of operating
in a pandemic, 2020 was a highly
successful year for PureTech across the
key areas of pipeline growth, clinical
execution and financing. Here is a look
at just a few of our scientific highlights
from the past year:
• We launched three trials of LYT-100
(deupirfenidone), our lead therapeutic
candidate from our Wholly Owned
Pipeline and had a successful readout
from one of those trials, and the other
two are ongoing. LYT-100 is currently
being evaluated in a Phase 2 trial in
Long COVID and a Phase 2a trial in
lymphedema. Topline results from
these trials are anticipated in the
second half of 2021 and the first half
of 2022, respectively. We are also
planning registration-enabling studies
in idiopathic pulmonary fibrosis (IPF)
and potentially other progressive
fibrosing interstitial lung diseases (PF-
ILDs), for which we expect to provide
additional guidance later this year.
All three of these indications – Long
COVID, lymphedema and progressive
fibrosing lung diseases – represent
underserved patient populations
with limited or no existing
treatment options.
10 PureTech Health plc Annual report and accounts 2020
Strategic report Letter from the Chief Executive Officer — continued
Milestones achieved in 2020
Jan-May
PureTech generated $248.9m
from equity sales1
Akili successful
study in ADHD
with and without
stimulants
January
February
PureTech initiated
Phase 1 LYT-100
MAD study
Vor announced
a $110m Series B
financing
Sonde launched
Sonde One for
Respiratory
PureTech
successful Phase 1
MAD and food
effect study
PureTech
listing on Nasdaq
Global Market
March
April
May
June
July
September
November
August
October
December
PureTech
generated
$101.6m from
equity sale4
PureTech declared
new therapeutic
candidate,
LYT-300 (oral
allopregnanolone)
PureTech
appointed Kiran
Mazumdar-Shaw
to Board of
Directors
Vedanta
presented
additional data
from Phase 1
study of VE202
Akili’s
EndeavorRx™2
received FDA
clearance and
CE Mark
Karuna
completed
successful
end-of-Phase 2
meeting with FDA
Follica positive
end-of-Phase 2
meeting with FDA
Gelesis’ Plenity®5
received CE Mark
Vedanta two
successful Phase 1
studies for IBD
PureTech
initiated Phase 2a
trial of LYT-100 in
lymphedema
PureTech
initiated Phase 2
trial of LYT-100
in Long COVID3
respiratory
complications and
related sequelae
PureTech initiated
Phase 1 trial of
LYT-200 in metastic
solid tumors
Karuna initiated
EMERGENT-2
Phase 3 trial
of KarXT
$443.4m PureTech Level Cash and Cash Equivalents as of March 31, 20216
Proven track record of value creation, credibility and transparency
dose for potential further evaluation
in combination with chemotherapy
and an anti-PD-1 immunotherapy,
and we also believe that there is
potential for LYT-200 to advance as
a monotherapy. We anticipate topline
results from the first stage of the
study in the fourth quarter of 2021.
• We advanced work on LYT-300, an
exciting new candidate generated
from our expertise and focus in
lymphatics. LYT-300 is an oral
form of the natural neurosteroid
allopregnanolone. An IV version
of allopregnanolone, also known
as brexanolone, is approved by the
FDA to treat postpartum depression.
The FDA-approved product is infused
over 60 hours. We leveraged our
Glyph™ technology platform, which
is designed to employ the body’s
natural lipid absorption and transport
process to send oral drugs into
the lymphatic system, to develop
LYT-300. We believe that the oral
bioavailability demonstrated in our
preclinical work creates significant
potential for LYT-300, as an oral
1
2
3
4
5
6
$200.9 million in proceeds from the January 22, 2020 sale of 2.1 million Karuna common shares, $45.0 million in proceeds from the May 25, 2020 sale of 555.5 thousand
Karuna common shares and $3.0 million in proceeds from the April 30, 2020 sale of 2.1 million resTORbio common shares.
EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type
ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of
Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered
for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the
disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19
syndrome (PACS).
$101.6 million in proceeds from the August 26, 2020 sale of 1.3 million Karuna common shares.
Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity.
To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be
taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity was
no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away if
problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe and
proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.
For more information in relation to the PureTech Level Cash and Cash Equivalents and Consolidated Cash and Cash Equivalents measures used in this Annual Report, please
see pages 75 and 76 of the Financial Review.
PureTech Health plc Annual report and accounts 2020 11
Strategic report Letter from the Chief Executive Officer — continued
dosing regimen may unlock a range
of neurological indications.
• Our Founded Entity Akili received
clearance from the FDA as well as
European marketing authorization
for the first prescription treatment
delivered through a video game,
EndeavorRx, designed for
children with attention deficit
hyperactivity disorder (ADHD).
Cognitive dysfunction is a key
feature of many neuropsychiatric
disorders, including ADHD, which
affects approximately 6.4 million
pediatric patients in the United
States. The treatment of the cognitive
dysfunction associated with these
conditions is only partially served,
or not served at all, by currently
available medications or by in-person
behavioral therapy.
• Our Founded Entity Gelesis received
European marketing authorization for
its lead product Plenity, an innovative
treatment for obesity that was cleared
by the FDA with a label that extends
to the broadest patient population of
any prescription weight management
product. Excess weight is growing
rapidly in prevalence worldwide,
with approximately 70 percent of
American adults struggling with
overweight and obesity. Globally
there are more than 1.9 billion adults
18 years of age or older who have
overweight and 600 million who have
obesity. Current treatment options
are associated with safety concerns,
lifestyle impact, complexity of use,
high cost and compliance issues that
have limited their adoption.
• Our other Founded Entities, which
we are proud to have invented the
underlying platforms and programs
for, continued to advance pioneering
pipelines. Highlights include:
− Karuna (Nasdaq: KRTX) announced
the initiation of its Phase 3
program evaluating KarXT for the
treatment of acute psychosis in
adults with schizophrenia; there
are currently no existing medicines
that sufficiently and safely treat
psychosis and negative and
cognitive symptoms.
− Vedanta Biosciences is advancing
four clinical-stage therapeutic
candidates based on rationally-
defined consortia of human
microbiome-derived bacteria,
with results from two clinical
trials expected in 2021. All of
Vedanta’s therapeutic candidates
are designed to address immune-
mediated diseases for which
existing treatment options have
undesirable side effects or are
ineffective for many patients.
− Vor Biopharma (Nasdaq: VOR)
expects to enroll the first patient in
a Phase 1/2a clinical trial for VOR33
in the second quarter of 2021 for
its engineered hematopoietic stem
cell therapy for the treatment of
acute myeloid leukemia (AML),
while its potential companion
therapeutic, VCAR33, is currently
being evaluated in an investigator-
initiated Phase 1/2 clinical trial.
Existing targeted therapies for
AML frequently cause substantial
toxicities, limiting their potential, so
there is a need for new strategies.
In other words, we are making
substantial, and exciting, progress
for patients. We are giving life to
breakthrough science.
On top of the scientific and clinical
advances, we continued to solidify our
financial presence, as exemplified by
our listing on Nasdaq in November.
We remain listed on the London
Stock Exchange and a member of the
FTSE 250; this joint listing on Nasdaq
expands our access to capital in the
U.S. as well as Europe. We have long
worked with scientists and physicians
around the world in our drive to bring
novel therapeutics to patients, and we
are proud to have expanded our global
reach to the investor community as well.
LYT-100: A case study for
our R&D model
Our development program for
LYT-100 is the perfect case study of
our R&D model and is emblematic of
our commitment to leveraging our
extensive knowledge of the BIG Axis
and lymphatic biology on behalf of
patients with serious unmet need. The
LYT-100 story also underscores our
commitment – distinctive in the biotech
world – to follow the science wherever
it takes us, and to move nimbly and
strategically to seize new opportunities
which hold significant potential value for
patients and shareholders alike.
Our unique insights into the biology
of the lymphatic system led us to
identify LYT-100 and acquire its related
intellectual property in 2019. The
story of LYT-100 is illustrative of our
approach to pipeline development at
PureTech. Our foundational insights
into the lymphatic biology and related
immunology that underly the BIG
Axis prompted us to recognize the
role of inflammation and fibrosis in
lymphedema, a major underserved
disorder of the lymphatic system.
While investigating this pathway, we
were able to tap into our network of
scientific and business collaborators
to identify unpublished data on the
approved drug pirfenidone. That, in
turn, led us to LYT-100. Why were we
so interested? The goal in designing
LYT-100, a deuterated, oral small
molecule, is to have a differentiated
profile, which may overcome some
of the historic challenges associated
with pirfenidone, an approved and
marketed anti-inflammatory and
anti-fibrotic drug for the treatment of
IPF. Pirfenidone is effective, but it is
associated with significant tolerability
issues and requires frequent dosing.
As a result, about half of patients
discontinue treatment, dose adjust
or switch therapies, which leads to
suboptimal disease management.
We are developing LYT-100 to offer
a differentiated safety profile compared
to current standard of care drugs,
which may support improved patient
compliance not only in IPF but also
a wide range of other inflammatory and
fibrotic diseases.
In keeping with our commitment to
put all our programs to a rigorous
test before investing heavily in
clinical development, we launched
a randomized, double-blind multiple
ascending dose and food effect study
of LYT-100 in healthy subjects in 2020.
We reported the results this past fall:
The study demonstrated favorable
proof-of-concept for LYT-100’s
tolerability and pharmacokinetic profile
and paved the way for twice-a-day
dosing without regard to meals in
future studies. We believe this work
substantially de-risked the program and
opened the door for potentially rapid
clinical development.
We are deeply excited about LYT-100
because we believe it has substantial
potential to treat a wide range of
interstitial lung diseases (ILDs),
including IPF and other progressive
fibrosing ILDs. These are devastating
and often deadly diseases that
collectively affect approximately
200,000 people in the U.S. alone.
We aim to bring patients new hope
and more therapeutic options
given the devastating nature of the
disease and limitations with current
standards of care.
LYT-100 also has strong potential
in lymphedema, a serious chronic
condition that affects roughly
12 PureTech Health plc Annual report and accounts 2020
Strategic report Letter from the Chief Executive Officer — continued
one million people in the U.S.
This disease, which leads to painful
and sometimes disfiguring swelling,
is particularly devastating for breast
cancer patients, who have no
treatments other than compression
bandages and physical therapy.
At PureTech, we maintain a laser
focus on debilitating diseases with
inadequate treatment options, and
this population certainly meets that
criteria. We are hopeful we can bring
these patients relief with LYT-100.
Our Phase 2a proof-of-concept study
is enrolling patients with breast
cancer-related, upper limb secondary
lymphedema; we expect to report
topline results in the first half of 2022.
The LYT-100 story is also a window
into the way we at PureTech can move
nimbly and with great speed to address
unexpected challenges.
By late spring of 2020, as the COVID
pandemic surged, we were starting to
hear deep concerns from our network
of leading pulmonologists about the
long-lasting effects of the infection.
They were seeing patients who had
recovered from the acute phase of their
illness and had been discharged from
the hospital – yet who continued to
suffer from severe shortness of breath,
deep fatigue and muscle weakness that
significantly limited their ability to return
to their daily activities. This long-lasting
respiratory dysfunction, along with
other serious and persistent symptoms,
would later be designated Long COVID
or PACS. The symptoms appear to
mimic respiratory complications of
other viral pneumonias like Severe
Acute Respiratory Syndrome (SARS)
and Middle East Respiratory Syndrome
(MERS), and up to one third of SARS
and MERS survivors had abnormal
pulmonary testing and lung imaging
that persisted for years. Testimony from
Long COVID-affected patients and
epidemiological studies published in
The Lancet and elsewhere confirmed
the serious nature of this threat, which
the World Health Organization has
called a top priority for research in 2021
and the United States Congress has
given the National Institutes of Health
over $1 billion to study.
We quickly recognized that LYT-100’s
anti-fibrotic and anti-inflammatory
properties had the potential to
address the debilitating sequelae of
COVID infection. We knew we had an
obligation to evaluate this potential
as quickly as possible, and I am
proud to say that our team moved
mountains to rapidly assess the unmet
need, establish protocols and secure
regulatory approvals for a global
clinical study. Within months, we had
launched a randomized, placebo-
controlled Phase 2 trial of LYT-100 in
Long COVID – one of just a handful of
clinical programs worldwide to evaluate
a potential therapy for this condition,
which could affect a substantial
portion of the over 125 million people
worldwide who have been infected with
COVID-19. We are enrolling in both the
U.S. and Europe and expect a readout
in the second half of 2021.
Our innovative approach to R&D
continues to shape the growth of our
Wholly Owned Pipeline. We are quite
excited about our two anti-cancer
monoclonal antibodies, LYT-200 and
LYT-210. And we are also eager to
initiate a clinical trial with LYT-300
later this year. We see substantial
potential for LYT-300 in a wide array of
neurological and neuropsychological
conditions where patients have
been waiting for far too long for
effective treatments.
Strong financing to support
focused development
At the start of 2021, we celebrated
PureTech’s U.S. listing on Nasdaq
with a virtual bell ringing ceremony. It
was a wonderful opportunity both to
mark how far we’ve come and to look
ahead with pride and confidence at
our opportunities to build additional
value for shareholders while potentially
providing enormous value for patients.
We were delighted to be joined at
the bell ringing by our new chief
financial officer, George Farmer, Ph.D.,
an experienced financial analyst and
biotech executive who joined our
management team in January 2021.
At the PureTech level, we are well-
capitalized with cash resources into
the first quarter of 2025. Our strong
financial position is the result of our
unique strategy, which allows us to
derive value from the equity growth
of our Founded Entities. In 2020,
we generated cash proceeds of
$350.6 million from the sales of equity
in our Founded Entities, and in February
2021 we generated an additional
$118 million. This approach provided
us with access to non-dilutive funding
for our operations and growth and to
further expand and advance our Wholly
Owned Programs, while still maintaining
significant equity ownership across our
Founded Entities.
The Founded Entities are also well-
capitalized, having raised $1.2 billion
from January 2017 through the end of
2020, with an additional $473.2 million
so far in the 2021 post-period. In the
most recent financial milestone, Vor
Biopharma completed a successful
Nasdaq IPO in February of 2021,
raising $203.4 million in gross proceeds
before deducting the underwriting
discounts and commissions and other
offering expenses.
We are well-positioned for the exciting
year ahead, which we expect to
include multiple value drivers across
our Wholly Owned Programs and our
Founded Entities, including at least 10
expected clinical study initiations and
nine expected readouts. In addition, we
look forward to a broader U.S. launch of
Gelesis’ Plenity and Akili’s EndeavorRx.
I would like to thank the entire PureTech
team on their resilience this year as we
accomplished historic milestones as an
organization while navigating remote
working and the emotional strain of
a global pandemic. I would also like to
extend my gratitude to our tremendous
Board and R&D Committee for their
wise counsel and strategic oversight.
We are fortunate to have a dedicated
team and outstanding scientific
collaborators who remain committed
to developing highly differentiated
medicines for patients in dire need of
better options. To our shareholders:
Thank you for your vision and continued
support over the last year.
Above all, we thank the patients and
clinicians working alongside us in
our clinical trials. We are grateful for
your support, humbled by your trust
and inspired by your courage. You
make possible the medical advances
of the future.
We look forward to another
transformational year focused on giving
life to science and making a difference
for patients – together.
Daphne Zohar
Founder, Chief Executive Officer and Director
April 14, 2021
PureTech Health plc Annual report and accounts 2020 13
Strategic report Letter from the Chief Innovation Officer
and the Chief Scientific Officer
“ A transformational year of pipeline
progress and innovation.”
2020 was a transformational year for
PureTech’s pipeline. For the first time,
two therapeutic candidates from within
our Wholly Owned Pipeline entered
the clinic, and over the course of just
twelve months, we initiated a total
of four clinical trials evaluating these
candidates across three different
indications, with one trial reading
out successfully so far for LYT-100.
Additionally, we grew our Wholly Owned
Pipeline with the nomination of a new
therapeutic candidate, LYT-300 (oral
allopregnanolone) that was born from
one of our three discovery platforms and
for which we expect to initiate a clinical
trial by the end of this year. For PureTech,
this progress is both characteristic of
our R&D engine that has yielded 26
therapeutics and therapeutic candidates
being advanced via our Wholly Owned
Pipeline and our Founded Entities, and it
is demonstrative of our strategic shift to
retain full ownership in our innovations as
we advance our Wholly Owned Pipeline.
This momentum was not stymied by
the global pandemic that changed so
much about the world in 2020. In fact,
as the pandemic threw down a gauntlet
to therapeutic innovators, we were all
challenged to think boldly, move nimbly
and harness minds and resources
to meet this immense public health
challenge. This global response is akin to
PureTech’s distinctive approach to R&D:
We start with the unmet need, identify
the ideal solution, put the brightest
minds on discovery, aggressively
evaluate feasibility, and then pursue
development with scientific rigor and the
input of world-leading experts.
Leveraging our leadership in
understanding of the immune system, we
applied our R&D approach to identifying
LYT-100, an exciting therapeutic
candidate with potential to treat several
important serious conditions of high
unmet need. Based on a substantial
body of data, we are developing LYT-100
for multiple therapeutic indications
involving inflammation, fibrosis and
disorders of lymphatic flow, including
progressive fibrosing interstitial lung
diseases such as idiopathic pulmonary
fibrosis (IPF), lymphedema and severe
respiratory sequelae of COVID-19,
which is now commonly called “Long
COVID” or post-acute COVID-19
Eric Elenko, Ph.D.,
Chief Innovation Officer
Joseph Bolen, Ph.D.,
Chief Scientific Officer
syndrome (PACS). The common thread?
Immune dysfunction and fibrosis.
PureTech has been developing expertise
in immunology for years. We have
continued to deepen our focus on the
BIG Axis of the Brain, Immune and Gut
– complex and dynamic modulatory
systems that enable us to respond in
healthy ways to changing circumstances
but that, when disrupted, give rise to
a wide range of diseases. The BIG Axis
is tied together by the 3,500 kilometers
of lymphatic vessels that thread our
bodies, studded with highly specialized
nodes that filter and train immune cells
for their local tissues. That vast lymphatic
system is not just a passive vessel for
fluid but a vibrant organ with an active
and important role in regulating the
immune system.
Our understanding of the importance
of this system led us to LYT-100
(deupirfenidone), a new chemical
entity which retains the pharmacology
of pirfenidone – an FDA-approved
treatment for IPF that has been
granted FDA Breakthrough Therapy
designation in unclassifiable interstitial
lung diseases (ILDs) – but which has
a differentiated pharmacokinetic profile.
We will be evaluating whether LYT-100
can offer tolerability and efficacy with
less frequent dosing, and our goal
is to mitigate some of the GI-related
tolerability issues that have historically
been associated with pirfenidone and
limited its usage. LYT-100 has been
observed to reduce pro-inflammatory
cytokines IL-6 and TNF-α in preclinical
models. Both cytokines may be involved
in the hyperinflammatory response to
external assault such as virus infection.
LYT-100 is also anti-fibrotic and
suppresses TGF-β induced production of
scar tissue components such as collagen.
We are building on a comprehensive
body of research evaluating LYT-100.
A foundational milestone came in the
fall of 2020, when we reported results
from a Phase 1 multiple ascending
dose and food effect study. LYT-100
was well-tolerated at all pre-specified
doses, with a favorable pharmacokinetic
profile. All adverse events that were
possibly or probably related to LYT-100
were mild and transient and there were
no discontinuations of subjects while
taking LYT-100. These results provided
strong proof-of-concept for the potential
tolerability of LYT-100, and we moved
rapidly to initiate two Phase 2 clinical
trials for LYT-100.
The first study is in Long COVID.
This is one of just a handful of clinical
trials anywhere in the world to assess
a potential therapy for this serious public
health threat. Our decision is based
not only on the results of the Phase 1
study, but also on a substantial body
of preclinical research. The second
study is in lymphedema, a debilitating
condition that affects approximately
one million people in the U.S., and
is particularly prevalent in women
recovering from breast cancer. There is
currently no approved pharmaceutical
treatment for lymphedema.
14 PureTech Health plc Annual report and accounts 2020
Strategic report Letter from the Chief Innovation Officer and the Chief Scientific Officer — continued
LYT-100 development plan overview
H2 2021
H1 2022
Planning
Topline results expected
from Phase 2 in Long COVID1
Topline results expected from
Phase 2a POC in lymphedema
Registration-enabling studies in IPF
and potentially other PF-ILDs
Exploring for a range of other inflammatory and fibrotic conditions
Idiopathic pulmonary fibrosis (IPF) and
potentially other progressive fibrosing
interstitial lung diseases (PF-ILDs)
Because of the unique properties
demonstrated with LYT-100, we are now
planning registration-enabling studies
of LYT-100 for IPF and potentially other
PF-ILDs, which represent a deep area
of underserved medical need and
substantial commercial opportunities, and
we expect to provide additional guidance
later this year. There are approximately
200,000 people living with PF-ILDs,
including IPF, in the United States. IPF is
a progressive condition characterized by
irreversible scarring of the lungs, which
worsens over time and makes it difficult
to breathe. The prognosis of IPF is poor,
with the median survival after diagnosis
generally estimated at two to five years.
Current treatments for PF-ILDs, including
pirfenidone (approved for IPF only) and
nintedanib, have serious limitations,
particularly GI-related tolerability
issues. In fact, one large, multinational
post-marketing analysis of about
11,000 patients with IPF found that
only about 13 percent were receiving
pirfenidone during a follow-up period
of approximately five years. We believe
a therapeutic compound that improves
upon tolerability, dosing frequency and
the overall clinical profile of pirfenidone,
while retaining or exceeding its efficacy,
would be an attractive therapeutic
option for IPF and potentially other PF-
ILDs, and we intend to communicate our
clinical development plans for LYT-100
later this year.
Groundbreaking Phase 2 clinical trial
for Long COVID
The COVID-19 pandemic has affected
over 125 million people around the world,
and there is increasing data around the
longer-term complications of COVID-19,
referred to as Long COVID or PACS,
including data regarding respiratory
issues that persist following recovery.
Survivors of the virus can have lung
fibrosis that causes shortness of breath
and other problems that could potentially
last for years, and a high proportion of
mild, moderate and severe COVID-19
patients (up to 53 percent in one study)
already show signs of lung fibrosis at three
weeks post symptom onset. We have
now embarked on a global, randomized,
double-blind, placebo-controlled Phase 2
trial designed to evaluate the efficacy,
safety, and tolerability of LYT-100 in adults
with post-acute COVID-19 respiratory
complications. The primary endpoint is
a standardized test of how far a patient
can walk in six minutes. Secondary
endpoints, including pharmacokinetics,
inflammatory biomarkers, imaging and
patient-reported outcomes will also be
evaluated. The study is ongoing initiated
in both the United States and Europe;
results are expected in the second
half of 2021.
Phase 2a study of LYT-100
in lymphedema
In 2020, we also initiated a Phase 2a
trial of LYT-100 in lymphedema to
explore clinical efficacy endpoints in
patients with breast-cancer related,
upper limb secondary lymphedema.
Lymphedema is a debilitating condition
that affects approximately one million
people in the U.S., and it is particularly
prevalent in women recovering from
breast cancer. It can lead to painful
and disfiguring swelling and recurring
infections, yet there are no approved
drugs and little relief for patients other
than compression bandages, physical
therapy and massage. This is particularly
unfortunate as the lymphatic damage
induces a vicious feedback loop of
inflammation and fibrosis with immune
infiltration of tissues. It is a biochemical
process – so while physical treatments
offer palliation, a therapeutic approach
is urgently needed.
The randomized, placebo-controlled,
Phase 2a proof-of-concept study of
LYT-100 is expected to enroll up to
50 patients. The primary endpoints
will be safety and tolerability, with
secondary clinical efficacy and
biomarker endpoints. Results are
expected in the first half of 2022.
Anti-cancer programs: LYT-200
targeting galectin-9 and LYT-210
targeting gamma delta-1 T cells
We have also made great strides in our
anti-cancer programs, both of which are
built around fully human monoclonal
antibodies that target foundational
immunosuppressive mechanisms.
We see potential for both LYT-200 and
LYT-210 as single agents as well as in
combination with checkpoint inhibitors
and other anti-cancer treatments.
1
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19
syndrome (PACS).
PureTech Health plc Annual report and accounts 2020 15
Strategic report Letter from the Chief Innovation Officer and the Chief Scientific Officer — continued
We were thrilled to launch a Phase 1
trial of LYT-200 in December. The
adaptive trial design will assess the
safety and tolerability of escalating
doses of LYT-200. Results are expected
in the fourth quarter of 2021, and we
may then proceed with a chosen dose
into Phase 2. We shared the strong
preclinical data supporting LYT-200 and
its target, galectin-9, at the American
Association for Cancer Research 2020
Virtual Annual Meeting. Galectin-9 is an
immunosuppressive protein prominently
expressed in multiple difficult-to-
treat cancers, including breast cancer,
pancreatic and cholangiocarcinoma.
Analysis of a vast data set suggested
that high galectin-9 levels in tumor
cells and immune cells within the tumor
microenvironment (TME) are associated
with shorter time to cancer relapse as
well as with an immunosuppressed TME
phenotype in a number of solid tumors.
Additionally, a recent study published in
Nature Communications identified the
molecular mechanism by which PD-1 and
galectin-9 interact to shield tumors from
the immune system, demonstrating for
the first time that galectin-9 is a ligand
for PD-1 and emphasizing its importance
as a promising target for immunotherapy.
Data suggests galectin-9 may also be an
informative biomarker to enrich future
clinical studies, a hypothesis we are
further exploring with the support of
a grant received from the Department
of Defense (DOD) in the fall of 2020.
Our preclinical LYT-210 program
continues to show promise and support
our development rationale that
immunosuppressive gamma delta-1
T cells correlate with more aggressive
disease in a range of tumor types. To
date, both in vivo and in vitro research
demonstrates that targeting these T cells
can stimulate an anti-cancer immune
response and may be synergistic with
checkpoint inhibitors.
LYT-300: Leveraging lymphatic
targeting through the
Glyph™ platform
We further expanded our Wholly Owned
Pipeline in 2020 with the nomination
of LYT-300, which will be entering the
clinic this year.
LYT-300 is an oral form of a natural
neurosteroid called allopregnanolone, an
IV version of which has been approved
by the Food and Drug Administration
to treat postpartum depression and is
administered over the course of 60 hours,
under medical supervision, which is
a high treatment burden for any patient.
Allopregnanolone has been recognized
for its therapeutic potential in a range
of neurological and neuropsychological
conditions, including epilepsy, anxiety,
depression, essential tremors and sleep
disorders. Allopregnanolone belongs to
a class of natural neurosteroids whose
important role in a range of neurological
conditions is well established; however,
these neurosteroids are not orally
bioavailable, which has greatly limited
their evaluation as potential therapeutics.
Making these natural neurosteroids,
such as allopregnanolone, orally
bioavailable could potentially allow for
their development against a number of
neurological conditions.
Our approach: our Glyph technology
platform, which employs the body’s
natural lipid absorption and transport
process to send oral drugs into the
lymphatic system and bypass first-
pass metabolism by the liver. We
essentially coopt the incredible system
of lymphatics vasculature to create
an option for drug distribution that
bypasses natural barriers and keeps the
compound from being destroyed by the
liver. We have demonstrated mechanistic
proof-of-concept of LYT-300 (oral
allopregnanolone) in vivo and intend
to initiate a Phase 1 clinical trial by the
end of 2021.
Additional novel therapeutic
platforms: Orasome™ and
meningeal lymphatics
Glyph is just one of our three novel
therapeutic platforms, each of which
enriches our drug discovery process
with highly versatile technology. Our
Orasome technology platform was
inspired by the in vivo trafficking of
ubiquitous, naturally occurring vesicles,
which are often referred to as exosomes,
and our platform utilizes multiple vesicle
components, including those isolated
from milk. We have engineered these
vesicles to remain stable following oral
consumption and transit through the
upper GI tract. We are now able to purify
these vesicles in substantial quantities
and have successfully packed a variety
of different molecular entities within
them. We are exploring using these
vesicles to deliver nucleic acids such as
mRNA and other expression systems that
could instruct the body to make its own
proteins. These hardy vesicles could also
be leveraged as a convenient and far
less costly way to administer biological
medicines in oral form. We expect
preclinical proof-of-concept and non-
human primate data this year.
Finally, we are leveraging the
incredible discovery of the brain’s
lymphatic network – located in the
meninges – to evaluate a wide range
16 PureTech Health plc Annual report and accounts 2020
of therapeutic possibilities. Correcting
neurological lymphatic dysfunction
could provide an avenue into treating
multiple neurodegenerative and
neuroinflammatory conditions that
have largely resisted drug development
efforts, such as Alzheimer’s disease and
Parkinson’s disease. PureTech is building
deep expertise around the anatomy
and physiology of this novel system to
understand its involvement in disease
and ways to modulate its function.
A collection of our research insights into
this fascinating new area of medicine
will be submitted to a peer-reviewed
publication in 2021.
Although this has been a hard year for
all of us in many ways, we are proud
of the significant achievements of
PureTech’s stellar scientific and clinical
teams. The challenges of the COVID-19
pandemic have made us all even more
aware of the vital importance of our
work and the urgency of patient need.
Our team has demonstrated an agility,
resourcefulness and strategic mindset
that enabled us to respond nimbly to
the pandemic while advancing a rapidly
growing clinical pipeline of potentially
important therapeutic candidates
and a diverse and exciting research
portfolio. We congratulate our team
on rallying to meet the needs of the
moment, working patiently through the
heightened health precautions we have
adopted, and opening new horizons for
lymphatic-based therapeutic approaches
and related immunology. Throughout
this year, we have all experienced the
joy of discovery and the satisfaction
of advancing important programs to
meet profound medical needs. We are
also incredibly grateful to the patients,
volunteers and caregivers participating
in our clinical studies who are making
invaluable contributions to research that
could potentially improve treatment
outcomes for so many.
We look forward to the discoveries and
milestones to come as we continue to
accelerate the growth of PureTech’s
Wholly Owned Programs.
Dr. Joseph Bolen
Chief Scientific Officer
Dr. Eric Elenko
Chief Innovation Officer
April 14, 2021
Strategic report How PureTech is building value for investors
“ We begin by collaborating with a cross-disciplinary group of experienced
clinicians and the world’s leading experts in brain, immune and gut biology in
a discovery process that breaks down specific diseases and comprehensively
identifies, reviews and empirically tests unpublished scientific discoveries in
a modality agnostic and unbiased way.”
We are a clinical-stage biotherapeutics company dedicated to discovering, developing and commercializing highly
differentiated medicines for devastating diseases, including inflammatory, fibrotic and immunological conditions, intractable
cancers, lymphatic and gastrointestinal diseases and neurological and neuropsychological disorders, among others.
The therapeutic candidates within our Wholly Owned Pipeline and the therapeutics and therapeutic candidates being
developed by our Founded Entities were initiated by our experienced research and development team and our extensive
network of scientists, clinicians and industry leaders.
We established the underlying programs and platforms that have resulted in 26 therapeutics and therapeutic candidates that
are being advanced within our Wholly Owned Programs or by our Founded Entities. Of these therapeutics and therapeutic
candidates, 15 are clinical-stage and two have been cleared for marketing by the FDA and granted marketing authorization
in the European Economic Area, or EEA, and in other countries that recognize the CE Mark. Our Non-Controlled Founded
Entities are advancing 10 of these therapeutic candidates, including two that are currently in Phase 3/Pivotal studies, as
well as two FDA-cleared therapeutics. Our Controlled Founded Entities are advancing 10 of these therapeutic candidates,
including one that is expected to enter a Phase 3 study and three that are in Phase 2 development, and we are advancing
four of these therapeutic candidates within our Wholly Owned Pipeline. We and our Founded Entities have relationships with
several pharmaceutical companies or their investment arms to advance some of the programs and platforms underlying these
therapeutics and therapeutic candidates.
All of these underlying programs and platforms were initially identified or discovered and then advanced by our team through
key validation points based on our unique insights into the biology of the Brain, Immune and Gut, or BIG, systems and the
interface between those systems, which we refer to as the BIG Axis. The architectural framework supporting BIG Axis cross-
talk is built on evidence highlighting the presence of 70 percent of the entire immune cell population in the gut, approximately
500 million neurons innervating the gastrointestinal, or GI, tract, enteric neurons as part of the autonomic nervous system
and key components such as the gut epithelial barrier, microbiome, metabolites and neurotransmitters that play key roles in
protecting and influencing the immune system and central nervous system, or CNS.
We are led by a proven and seasoned management team of business leaders with significant experience in discovering and
developing important new medicines, delivering them to market and maximizing shareholder value. Collectively, the members
of our management team have overseen research and development of therapeutics supporting 23 regulatory approvals and
have served in the C-suite of companies acquired for more than $13 billion in the aggregate.
Our team, network and expertise in the BIG Axis enable us to identify and advance scientific discoveries at the interface of
the BIG systems. We begin by collaborating with a cross-disciplinary group of experienced clinicians and the world’s leading
experts in brain, immune and gut biology in a discovery process that breaks down specific diseases and comprehensively
identifies, reviews and empirically tests unpublished scientific discoveries in a modality agnostic and unbiased way. Our model,
which employs (1) this collaborative process leveraging our biological expertise in the BIG axis and our scientific network,
(2) a disciplined approach to program advancement, and (3) a capital efficient approach to driving clinical developments
and value creation, has enabled us to rapidly convert these findings into promising therapeutic candidates.
Historically, we have developed these programs and therapeutic candidates with strategic allies, including equity partners
who helped us to advance those programs via our Founded Entities. As these programs have succeeded and our resources
have grown, we have increasingly focused on our Wholly Owned Programs. Our Wholly Owned Programs are designed to
harness key immunological, fibrotic and lymphatic system mechanisms. They currently consist of LYT-100, a clinical-stage
therapeutic candidate we are developing for inflammatory and fibrotic conditions and disorders of lymphatic flow, LYT-200,
a clinical therapeutic candidate targeting a foundational immunosuppressive protein, galectin-9, which we are developing
as a potential treatment of solid tumors, LYT-210, a preclinical therapeutic candidate targeting immunomodulatory gamma
delta-1 T cells, which we are developing for a range of cancer indications and autoimmune disorders, and LYT-300, a preclinical
therapeutic candidate, which we intend to develop for a range of neurological and neuropsychological conditions. Our Wholly
Owned Programs also include three discovery platforms: Glyph™ – our synthetic lymphatic targeting chemistry platform – and
Orasome™ – our oral biotherapeutics platform – both of which leverage absorption of dietary lipids to traffic therapeutics
via the lymphatic system, and our meningeal lymphatics discovery research program for treating neurodegenerative and
neuroinflammatory diseases.
PureTech Health plc Annual report and accounts 2020 17
Strategic report How PureTech is building value for investors — continued
Components of our Value
The table to the right depicts the four components of our value: (1) our Wholly Owned Programs, (2) Founded Entities that
we have a controlling interest in or from which we are entitled to receive royalty payments, (3) Founded Entities where our
interest is limited to our equity ownership and (4) our available cash, cash equivalents and short-term investments at the
PureTech level.
We hold majority voting control of our Controlled Founded Entities and continue to play a role in the development of their
therapeutic candidates through representation on their board of directors, with respect to Follica, Vedanta, Alivio and
Sonde. Our board designees represent a majority of the members of the board of directors of Follica, Vedanta and Alivio and
a minority of the members of the board of directors of Sonde. With respect to our Non-Controlled Founded Entities, we do
not hold majority equity ownership and are not responsible for the development or commercialization of their therapeutic
candidates and therapeutics. Our Non-Controlled Founded Entities have independent management teams, and we do not
control the day-to-day development of their respective therapeutic candidates.
1 Our Wholly Owned Programs. We are focused on the advancement of our Wholly Owned Programs and delivering value
to our shareholders by driving our Wholly Owned Programs to key clinical and commercial milestones, while continuing
cutting edge research and development efforts to discover and advance new therapeutic candidates. The table to the
right includes a summary of our Wholly Owned Programs and their development status.
2 Founded Entities with Controlling Interest or Right to Receive Royalties. The table to the right summarizes, in
order of development stage, the therapeutic candidates being developed by our Founded Entities in which we either have
a controlling interest or the right to receive royalty payments. We established the underlying programs and platforms that
have resulted in the therapeutic candidates noted in the table and advanced them through key validation points. Each of
these therapeutic candidates targets indications related to one or more of the BIG systems, and any value we realize from
these therapeutic candidates will be through the potential growth and realization of equity and royalty stakes highlighted
in the table to the right.
3 Founded Entities Limited to Equity Interest. We also hold equity ownership in our Non-Controlled Founded Entities,
Akili and Vor. The table to the right describes these entities, in order of development stage. Our interest in the therapeutic
candidates of these entities is limited to the potential appreciation of our equity interest in these entities.
4 Cash and Cash Equivalents. We had PureTech level cash and cash equivalents of $443.4 million as of March 31, 2021 and
$349.4 million as of December 31, 202010.
1
2
3
The FDA and corresponding regulatory authorities will ultimately review our clinical results and determine whether our wholly-owned therapeutic candidates are safe
and effective. No regulatory agency has made any such determination that our wholly-owned therapeutic candidates are safe or effective for use by the general public
for any indication.
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19
syndrome (PACS).
Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of December 31, 2020, including outstanding shares,
options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Karuna ownership is calculated on an outstanding voting
share basis as of March 4, 2021. Vor ownership is calculated on an outstanding voting share basis as of February 9, 2021.
With the exception of Plenity®, candidates are investigational and have not been cleared by the FDA for use in the United States.
4
5 PureTech Health has a right to royalty payments as a percentage of net sales.
6
7
These therapeutic candidates are regulated as devices and their development has been approximately equated to phases of clinical development.
Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity.
To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be
taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away
if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe
and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.
8 Contingent on FDA review of the research plan.
9
EndeavorRx™ is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type
ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of
Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered
for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the
disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.
10 For more information in relation to the PureTech Level Cash and Cash Equivalents and Consolidated Cash and Cash Equivalents measures used in this Annual Report, please
see pages 75 and 76 of the Financial Review.
18 PureTech Health plc Annual report and accounts 2020
Strategic report How PureTech is building value for investors — continued
1 Wholly Owned Programs
Our Programs1
LYT-100
Deupirfenidone
LYT-100
Deupirfenidone
LYT-100
Deupirfenidone
LYT-200
Anti-Galectin-9 mAb
LYT-210
Anti-Delta-1 mAb
LYT-300
Oral Allopregnanolone
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
IPF and potentially other PF-ILDs
Long COVID2 respiratory complications and related sequelae
Lymphatic flow disorders, including lymphedema
Solid tumors
Solid tumors
Neurological indications
Registration-enabling studies planned
Phase in progress
Phase completed
Discovery Platforms
Glyph™ Technology Platform (Lymphatic Targeting)
Orasome™ Technology Platform (Oral Biotherapeutics) Meningeal Lymphatics Discovery Research Program
2 Founded Entities with Controlling Interest or Right to Receive Royalties
Founded Entity
PureTech
Ownership3
Therapeutic
Candidate4
Indication
Non-Controlled Founded Entities with Royalty Interests
Stage of Development
Royalties5
19.3%
Plenity®6,7
GS1006
GS2006
GS3006
GS5006
8.2%
KarXT
D
D
D
D
D
P
Weight management
Adolescent weight management
Weight management in T2D/prediabetes
NASH/NAFLD
Functional constipation
Commercial Launch
Preclinical8
Phase 2
Phase 2 Ready 8
Phase 3
Schizophrenia
Dementia-related psychosis
Phase 3
Phase 1b
Royalties
Royalties
Controlled Founded Entities
78.2%
FOL-004
P/D
Androgenetic alopecia
Phase 3 Ready
Royalties
49.5%
44.6%
78.0%
VE303
VE416
VE202
VE800
Sonde One
(Mental Fitness)6
Sonde One
(Respiratory)6
ALV-107
ALV-304
ALV-306
B
B
B
B
D
D
P
P
P
High-risk CDI
Food allergy
IBD
Solid tumors
Phase 2
Phase 1/2
Phase 2 Ready
Phase 1
Depressive symptoms detection and
monitoring app
Respiratory risk detection and
monitoring app
Product and Clinical Validation
Commercial Release
IC/BPS
IBD
Chronic pouchitis
Preclinical
Preclinical
Preclinical
N/A
N/A
N/A
Note: Discovery-stage programs including Entrega, a Controlled Founded Entity, are not included in this table.
The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
3 Founded Entities Limited to Equity Interest
Founded Entity
PureTech
Ownership3
Description
33.7%
8.6%
Akili is a leading digital therapeutics company, combining scientific and clinical rigor with the ingenuity of the
tech industry while pursuing the 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 received clearance from the
FDA and European marketing authorization in June 2020 for EndeavorRx™9 (formerly known as AKL-T01) as
a prescription treatment for children with ADHD. Delivered through a captivating video game experience,
EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages
8-12 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue.
Vor is a clinical-stage cell therapy company that combines a novel patient engineering approach with targeted
therapies to provide a single company solution for patients suffering from hematological malignancies.
Vor’s proprietary platform leverages its expertise in hematopoietic stem cell, or HSC, biology and genome
engineering to remove surface targets expressed by cancer cells by genetically modifying HSCs. Its lead
therapeutic candidate, VOR33, is in development for acute myeloid leukemia.
4 PureTech level cash and cash equivalents as of March 31, 2021: $443.4m10
PureTech Health plc Annual report and accounts 2020 19
Strategic report How PureTech is building value for investors — continued
Key Pipeline Components and Expected Milestones Through 2021
Through 2021, we anticipate many significant potential milestones across our Wholly Owned Programs and Founded
Entities, including at least nine clinical readouts, at least 10 clinical trial initiations and the full commercial rollout of
two therapeutics. Of these, five clinical readouts and four clinical trial initiations are anticipated within our Wholly
Owned Programs. Additionally, we expect the continued progress of discovery and preclinical programs, as well as the
potential for additional strategic partnerships and transactions and the growth of value through our equity and royalty
holdings in our Founded Entities. Our Wholly Owned Programs and certain of our Founded Entities’ programs that
contribute to our value are as follows:
Our Wholly Owned Programs Harnessing Immunological and Lymphatic System Mechanisms:
LYT-100, Our Lead Clinical-Stage Therapeutic Candidate Targeting a Range of Inflammatory, Fibrotic, Lymphatic
Flow Disorders and Other Related Indications: We are advancing our wholly-owned therapeutic candidate LYT-100 for
the potential treatment of inflammatory and fibrotic conditions and disorders of lymphatic flow, including lung dysfunction
conditions (e.g., IPF and potentially other PF-ILDs and Long COVID respiratory complications and related sequelae) and
lymphedema. In November 2020, we announced the completion of a Phase 1 multiple ascending dose and food effect
study, which demonstrated favorable tolerability and PK proof-of-concept for LYT-100. In December 2020, we announced
the initiation of a Phase 2a proof-of-concept study of LYT-100 in patients with breast cancer-related, upper limb secondary
lymphedema, with topline results anticipated in the first half of 2022. In December 2020, we announced the initiation of
a Phase 2 trial in Long COVID respiratory complications and related sequelae in both the United States and Europe. Topline
results are expected in the second half of 2021. We are also advancing LYT-100 for the treatment of IPF and potentially other
PF-ILDs, and are planning registration-enabling studies and expect to provide additional guidance later this year. Furthermore,
we plan to initiate additional clinical trials of LYT-100 in 2021 to explore further the PK, dosing and tolerability in healthy
volunteers. One of these trials is an extension of the previously completed MAD study, in which the maximum tolerated dose
was not reached. Results from these trials are anticipated in 2021 and are expected to provide additional supportive data to
help with the clinical development of LYT-100 across indications. We have an active IND on file with the FDA for LYT-100.
LYT-200 and LYT-210, Two Immuno-Oncology, or IO, Therapeutic Candidates Harnessing Key Immune Cell Trafficking
and Programming Mechanisms: The lymphatic system plays a crucial role in programming immune cells for precise
functions and trafficking them to specific tissues. By modulating immune cell trafficking and programming, we are developing
therapeutic candidates for the potential treatment of cancer and other immunological disorders. We are advancing LYT-200,
targeting galectin-9, for a range of cancer indications, and LYT-210, targeting immunomodulatory gamma delta-1 T cells for
a range of cancer indications and autoimmune disorders. In December 2020, we announced the initiation of our Phase 1
clinical trial of LYT-200 for the potential treatment of metastatic solid tumors that are difficult to treat and have poor survival
rates, with topline results anticipated in the fourth quarter of 2021. Pending favorable topline results, we intend to initiate
the Phase 2 expansion cohort portion of the trial. We are also exploring additional biomarker studies for LYT-210 in 2021.
We have an active IND on file with the FDA for LYT-200.
LYT-300, Preclinical Therapeutic Candidate Developed Using our Glyph Technology Platform, Targeting Neurological
and Neuropsychological Conditions: The most advanced therapeutic candidate developed from our synthetic lymphatic-
targeting chemistry platform called Glyph is LYT-300 (oral allopregnanolone), which is being evaluated in a preclinical
setting for a range of neurological and neuropsychological conditions. We expect to initiate a clinical trial with LYT-300 by
the end of 2021.
Our Discovery Platforms – Glyph (Lymphatic Targeting Chemistry Platform) and Orasome (Oral Biotherapeutics
Platform) – Leveraging Absorption of Dietary Lipids to Traffic Therapeutics via the Lymphatic System: We are
harnessing the role of the lymphatic system in the absorption of dietary lipids to orally administer and traffic therapeutics via
the lymphatic system. Our Glyph and Orasome technology platforms are based on this key function of the lymphatic system.
In 2021, we expect preclinical proof-of-concept data and results from an additional preclinical non-human primate proof-of-
concept study for our Orasome technology platform. We also expect to advance additional therapeutic candidates from these
platforms internally, and to potentially continue to broaden the platforms through strategic collaborations around non-core
applications, beyond our existing discovery collaboration with a large pharmaceutical company.
Our Meningeal Lymphatics Discovery Research Program: The recent discovery of meningeal lymphatics in the brain, an
area once thought to have immune privilege, has shed new light on neurodegenerative diseases and lymphatic vessel aging.
We believe that augmenting meningeal lymphatic vasculature function may potentially improve outcomes for a range of
neurodegenerative and neuroinflammatory conditions that are not currently effectively treated.
20 PureTech Health plc Annual report and accounts 2020
Strategic report
How PureTech is building value for investors — continued
Founded Entities in which PureTech has a controlling interest or the right to receive royalties, in order
of development stage:
Gelesis
Gelesis, Inc., or Gelesis, which is developing a novel
category of therapies for obesity and GI-related chronic
diseases, received clearance from the FDA in April 2019
and European marketing authorization in June 2020 to
market and sell its lead product Plenity®1 (formerly known
as Gelesis100) as an aid for weight management in adults
with a BMI of 25-40 kg/m2, when used in conjunction with
diet and exercise. Gelesis plans to bring Plenity to the U.S.
first, where it has been available to a limited extent since the
second half of 2019 through an early experience program
and since 2020 via a beta launch while the company ramps
up its commercial operations and inventory for a broader
launch in the second half of 2021. Gelesis plans to seek FDA
input on the requirements for expanding the Plenity label
for treating adolescents. Gelesis is also advancing a pipeline
of therapeutic candidates focused on treating GI disorders.
Gelesis initiated a Phase 3 study of GS500 in functional
constipation in the second half of 2020 and expects to
enroll the first patient in 2021. Additionally, Gelesis expects
topline results from a Phase 2 study of GS200 for weight
management and glycemic control in adults with type 2
diabetes or prediabetes in 2021 and to initiate a Phase 2
study of GS300 in non-alcoholic steatohepatitis and non-
alcoholic fatty liver disease, or NASH/NAFLD, also in 2021.
We have entered into a royalty and sublicense income
agreement with Gelesis, pursuant to which we are entitled
to low single-digit royalties on the worldwide net sales of
certain commercialized therapeutics, as well as a low teen
percentage of any income Gelesis receives from sublicensing
certain of its technology. Our interest in Gelesis also includes
our equity ownership of 19.3 percent at December 31, 2020.
Karuna
Karuna Therapeutics, Inc., or Karuna, which is developing
novel therapies with the potential to transform the lives of
people with disabling and potentially fatal neuropsychiatric
disorders, including schizophrenia and dementia-related
psychosis, is developing KarXT, an investigational therapeutic
candidate designed to selectively activate muscarinic
acetylcholine receptors in the brain. KarXT is Karuna’s
proprietary therapeutic candidate, which combines
xanomeline, a muscarinic receptor agonist, with trospium
chloride, an FDA-approved and well established muscarinic
receptor antagonist that has been shown not to measurably
cross the blood-brain barrier, to preferentially stimulate M1/
M4 muscarinic receptors in the brain without stimulating
muscarinic receptors in peripheral tissues in order to achieve
meaningful therapeutic benefit in patients with psychotic and
cognitive disorders. In November 2019, Karuna announced
topline results from EMERGENT-1, its Phase 2 clinical trial of
KarXT for the treatment of acute psychosis in patients with
schizophrenia, in which KarXT met the trial’s primary endpoint
with a statistically significant (p<0.0001) and clinically
meaningful 11.6 point mean reduction in total Positive and
Negative Syndrome Scale, or PANSS, over placebo at week
five (-17.4 KarXT vs. -5.9 placebo), with similar discontinuation
rates between KarXT (20 percent) and placebo (21 percent).
The study enrolled 182 schizophrenia patients with acute
psychosis, 90 of whom received KarXT. The number of
discontinuations due to treatment emergent adverse events,
or AEs, were equal in the KarXT and placebo arms (n=2 in
each group). One SAE was observed in the KarXT treatment
group, in which the patient discontinued treatment and
subsequently sought hospital care for worsening psychosis,
meeting the regulatory definition of a serious adverse event,
or SAE. In June 2020, Karuna announced the next steps in the
EMERGENT program, the clinical program evaluating KarXT
for the treatment of adults with schizophrenia, following the
completion of a successful End-of-Phase 2 meeting with the
FDA in June 2020. The EMERGENT program includes the
previously completed positive Phase 2 efficacy and safety
trial (EMERGENT-1), two Phase 3 trials evaluating efficacy and
safety (EMERGENT-2 and EMERGENT-3), and two Phase 3
trials evaluating the long-term safety of KarXT (EMERGENT-4
and EMERGENT-5). The first Phase 3 trial, EMERGENT-2, was
initiated in December 2020. EMERGENT-3 and EMERGENT-5,
the remaining trials in the EMERGENT program, are on
track to initiate in the first half of 2021. In August 2020,
Karuna announced that it would not move forward to
develop KarXT in pain. Topline results from a Phase 1b trial
evaluating the analgesic effects of KarXT on experimentally
induced pain in healthy volunteers were inconclusive and
did not provide sufficient evidence of an analgesic benefit
of KarXT compared to placebo. Additionally, Karuna plans
to initiate a Phase 2 trial evaluating KarXT for the treatment
of psychosis in patients with schizophrenia who have an
inadequate response to current standard of care therapies in
the second half of 2021. A multi-cohort, placebo-controlled,
inpatient Phase 1b dose-ranging trial evaluating the safety
and tolerability of KarXT in healthy elderly volunteers is
ongoing. Karuna completed the first two cohorts in this trial,
Cohorts 1 and 2, and expects data from the final cohort,
Cohort 3, in the second quarter of 2021. We have entered into
an exclusive license agreement with Karuna pursuant to which
we are entitled to receive low single-digit royalties and up to
$10.0 million in milestone payments on worldwide net sales of
any commercialized product covered by the granted license.
Our interest in Karuna also includes our equity ownership of
8.2 percent as of March 4, 2021.
1
Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity.
To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be
taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away
if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe
and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.
PureTech Health plc Annual report and accounts 2020 21
Strategic report How PureTech is building value for investors — continued
Follica
Follica, Incorporated, or Follica, which is developing
a regenerative biology platform designed to treat
androgenetic alopecia, epithelial aging and other medical
conditions, is advancing FOL-004 for the treatment of hair
loss in male androgenetic alopecia. In December 2019,
Follica announced topline results from a safety and efficacy
optimization study. Follica announced the completion
of a successful End-of-Phase 2 meeting with the FDA in
June 2020, which supports the progression into Phase 3
development. The initiation of a Phase 3 registration program
is expected in 2021. We are party to a royalty agreement with
Follica pursuant to which we are entitled to low single-digit
royalties on worldwide net sales of certain commercialized
therapeutics and a percentage of any sublicense income
for certain of its technologies within the range of mid
single-digit and mid teen percentages. Our interest in
Follica also includes our equity ownership of 78.2 percent
at December 31, 2020.
Vedanta
Vedanta Biosciences, Inc., or Vedanta, which is developing
a potential new category of therapies for immune-mediated
diseases based on a rationally-defined consortia of human
microbiome-derived bacteria, expects topline data from
a Phase 2 clinical trial for VE303 in high-risk CDI in 2021;
topline data from a first-in-patient clinical trial of VE800 in
combination with Bristol-Myers Squibb’s checkpoint inhibitor
Opdivo® (nivolumab) in patients with selected types of
advanced or metastatic cancer in 2021; and topline data from
a Phase 1/2 clinical trial for VE416 for food allergy in 2022.
Vedanta announced topline data from two Phase 1 studies in
healthy volunteers of VE202, a therapeutic candidate being
developed for IBD in June 2020 and expects to advance
VE202 into a Phase 2 study in IBD in 2021. Our interest in
Vedanta is limited to our equity ownership of 49.5 percent at
December 31, 2020.
Sonde
Sonde Health, Inc. or Sonde, is developing a voice-based
technology platform to measure health when a person
speaks. Sonde’s proprietary technology is designed to sense
and analyze subtle changes in the voice to create a range of
persistent brain, muscle and respiratory health measurements
that provide a more complete picture of health in just
seconds. Sonde has collected over one million voice samples
from over 80,000 subjects as a part of the ongoing validation
of its platform, and it has also initiated research and
development to expand its proprietary technology into AD,
Alivio
Alivio Therapeutics, Inc., or Alivio, is pioneering inflammation-
targeted disease immunomodulation, which involves
selectively restoring immune homeostasis at inflamed sites
in the body, while having minimal impact on the rest of the
body’s immune system, as a novel strategy to treat a range of
chronic and acute inflammatory disorders. This long sought-
after approach has the potential to broadly enable new
medicines to treat a range of chronic and acute inflammatory
disorders, including enabling the use of drugs which were
respiratory and cardiovascular disease, as well as other health
and wellness conditions, including mental health. In July 2020,
Sonde launched Sonde One for Respiratory, a new voice-
enabled health detection and monitoring app, to potentially
help employers improve employee safety, meet government
mandates and satisfy their own administrative needs as they
reopen office doors in a COVID-19 environment. Our interest
in Sonde is limited to our equity ownership of 44.6 percent at
December 31, 2020.
previously limited by issues of systemic toxicity or PK. Alivio
is developing therapeutic candidates that are designed to
selectively treat autoimmune disease without having related
systemic toxicities. Alivio’s pipeline includes candidates for
IBD, chronic pouchitis and IC/BPS. Alivio expects an IND
filing for ALV-107 for IC/BPS in 2021 and an IND for ALV-304
for IBD in 2023. Our interest in Alivio is limited to our equity
ownership of 78.0 percent at December 31, 2020.
Entrega
Entrega Inc. or Entrega, is focused on the oral administration
of biologics, vaccines and other drugs that are otherwise
not efficiently absorbed when taken orally. The vast majority
of biologic drugs, including peptides, proteins and other
macromolecules, are currently administered by injection,
which can present challenges for healthcare administration
and compliance with treatment regimes. Entrega has
ongoing discovery efforts to expand its pipeline. Our interest
in Entrega is limited to our equity ownership of 72.9 percent
at December 31, 2020.
2
3
4
EndeavorRx™ is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type
ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of
Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered
for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the
disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.
Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of December 31, 2020, including outstanding shares,
options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Karuna ownership is calculated on an outstanding voting
share basis as of March 4, 2021. Vor ownership is calculated on an outstanding voting share basis as of February 9, 2021.
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19
syndrome (PACS).
22 PureTech Health plc Annual report and accounts 2020
Strategic report How PureTech is building value for investors — continued
Founded Entities in which PureTech has an equity interest, in order of development stage:
Akili
Akili Interactive Labs, Inc., or Akili, is pioneering the
development of treatments designed to have direct
therapeutic activity, delivered not through a traditional
pill but via a high-quality video game experience. Akili is
developing platform technologies designed to target a broad
range of medical conditions across neurology and psychiatry.
Akili received clearance from the FDA and European
marketing authorization in June 2020 for EndeavorRx™2
(formerly known as AKL-T01) as a prescription treatment
for children with ADHD. Delivered through a captivating
video game experience, EndeavorRx is indicated to improve
attention function as measured by computer-based testing
in children ages 8-12 years old with primarily inattentive or
combined-type ADHD, who have a demonstrated attention
issue. Akili plans to take a scaled approach to the commercial
launch of EndeavorRx in 2021. Our interest in Akili is limited to
our equity ownership of 33.7 percent at December 31, 2020.
Vor
Vor Biopharma, Inc. or Vor, which is a cell therapy company
that combines a novel patient engineering approach with
targeted therapies to provide a single company solution
for patients suffering from hematological malignancies,
announced in the January 2021 post-period that the FDA
had accepted the company’s IND application for VOR33.
Vor plans to enroll the first patient in a Phase 1/2a clinical
trial for VOR33 in the second quarter of 2021 and expects
initial human engraftment and protection data from this
trial to be reported in late 2021 or in the first half of 2022.
In the February 2021 post-period, Vor announced the pricing
of its initial public offering of common stock on the Nasdaq
Global Market under the symbol “VOR”. The aggregate
gross proceeds were approximately $203.4 million, before
deducting the underwriting discounts and commissions
and other offering expenses payable by Vor. Our interest
in Vor is limited to our equity ownership of 8.6 percent at
February 9, 2021.
The chart below depicts milestones that are anticipated to be achieved by our Wholly Owned Programs and our Founded
Entities’ therapeutics and therapeutic candidates through 2021:
Multiple Near-Term Value Drivers Expected
Therapeutic
Candidate
PureTech
Ownership3
2021 (key anticipated milestones in bold)
Wholly
Owned
Programs
Non-
Controlled
Founded
Entities
with Royalty
Interests
Controlled
Founded
Entities
LYT-100
LYT-200
LYT-210
LYT-300
Discovery platforms
Plenity®
GS100
GS200
GS300
GS500
KarXT
FOL-004
VE303
VE202
VE800
100%
100%
100%
100%
100%
19.3%
19.3%
19.3%
19.3%
19.3%
8.2%
78.2%
49.5%
49.5%
49.5%
Results from Ph2 in Long COVID4 respiratory complications and related sequelae
Results from Ph1 in solid tumors
Exploring additional biomarker studies
Initiation of Ph1
Results from non-human primate POC; Publishing key preclinical data
Broader U.S. launch
Seeking FDA input for expanding Plenity label to treat adolescents
Results from Ph2 in patients with T2D and prediabetes
Initiation of Ph2 in NASH/NAFLD
Enrollment of first patient in Ph3 in functional constipation
Initiations of remaining Ph3 trials (EMERGENT-3 and EMERGENT-5)
Initiation of Ph3 program in male AGA
Results from Ph2 in high-risk CDI
Initiation of Ph2 in IBD
Results from first-in-patient clinical trial in solid tumors
Sonde One (Respiratory) 44.6%
Scale revenue and expand outside of respiratory
ALV-107
ENT-100
Founded Entities
Limited to
Equity Interest
EndeavorRx
VOR33
78.0%
72.9%
33.7%
8.6%
IND filing
Continued advancement of platform
Scaled launch
Initiation of Ph1/2a in acute myeloid leukemia
Therapeutic candidate related to the Brain
Therapeutic candidate related to the Immune system
Therapeutic candidate related to the Gut
Potential financings and strategic transactions across Founded Entities
PureTech Health plc Annual report and accounts 2020 23
Strategic report How PureTech is building value for investors — continued
Our Scientific Focus: The Brain-Immune-Gut (BIG) Axis
The therapeutic candidates being advanced within our Wholly Owned Programs and by our Founded Entities, and our work
in these areas, in close collaboration with leading academic and clinical experts, has led us to focus on the biological interplay
among these three systems, which we refer to as the BIG Axis. The architectural framework supporting BIG Axis cross-talk is
built on evidence highlighting the presence of 70 percent of the entire immune cell population in the gut, approximately 500
million neurons innervating the GI tract, enteric neurons as part of the autonomic nervous system and key components such as
the gut epithelial barrier, microbiome, metabolites and neurotransmitters that play key roles in protecting and influencing the
immune system and CNS.
The brain, immune system and gut lymphatic system form an interconnected adaptive network to respond to acute and
chronic environmental change. Using the immune system to act as a bridge, the body relies on the bidirectional relationship
between the gut and brain to maintain normal homoeostasis. Dysregulation of immune signaling through gut inflammation,
microbiome changes and a compromised intestinal barrier all contribute to a range of immunological, GI and neurology and
neuropsychological disorders. We have been at the forefront of research and development in the BIG Axis, including the role
of gut-immune transport, immune-microbial signaling, gut barrier dysfunction and repair and gut and inflammation selective
targeting strategies. Across our Wholly Owned Programs, we are pursuing strategies to directly reach the immune system via
the mesenteric lymph nodes, addressing lymphatic flow and vessel restoration disorders and targeting immunosuppressive
and pathogenic lymphocytes.
Recent scientific advances, including the work of our network of scientific collaborators, have uncovered the lymphatic system
as one of the most critical players in the BIG Axis. In addition to maintaining the balance of interstitial fluid that surrounds
the body’s cells, the lymphatic system plays a key role in conducting surveillance of the immune system through an intricate
network of vessels connecting the over 300 lymph nodes, serving as a “superhighway” for programming immune cells for
specific functions and trafficking them to specific tissues. The mesenteric lymph node group around the intestines serves as
the primary interface between the gut and the immune system and for programming circulating adaptive immune cells. The
recent discovery of meningeal lymphatics in the brain, an area once thought to have immune privilege, has shed new light on
neurodegenerative diseases and lymphatic vessel aging.
Through our scientific leadership in the BIG systems and the BIG Axis, we have created the underlying programs and
therapeutic candidates that have the potential to treat inflammatory and immunological conditions, intractable cancers,
lymphatic and GI diseases and neurological and neuropsychological disorders, among others.
Our Focus on the Lymphatic System
The lymphatic system is a network of tissues and organs in the body that fulfills three essential functions: (1) maintaining the
balance of the fluid that surrounds the body’s cells, or interstitial fluid, (2) conducting surveillance of the immune system and
serving as a “superhighway” for immune cell trafficking and (3) absorbing dietary lipids through an intricate network of vessels
in the intestinal tract.
Dysfunction of the lymphatic system is associated with numerous disease states, and we believe that restoring lymphatic
function in various disease settings can yield meaningful patient benefit. Our proprietary Wholly Owned Programs leverage
these critical functions of the lymphatic system to produce therapeutic candidates with the potential to treat serious diseases:
• Maintaining balance of fluids: We are leveraging insights into the lymphatic system by developing clinical-stage therapeutic
candidate LYT-100 and several discovery-stage programs to address disorders involving impaired lymphatic flow and other
inflammatory and fibrotic conditions, such as lymphedema and certain neurological disorders.
• Immune modulation: The lymphatic system plays a crucial role in programming immune cells for precise functions and
trafficking them to specific tissues. By modulating immune cell trafficking and programming, we are developing therapeutic
candidates for the treatment of cancer and immunological disorders. We are advancing LYT-200, our therapeutic candidate
targeting galectin-9 in solid tumors and LYT-210, our therapeutic candidate targeting immunosuppressive gamma delta-1
T cells in solid tumors and autoimmune disorders, for a range of cancer indications and autoimmune disorders.
• Driving therapeutics through the lymphatics: We are harnessing the role of the lymphatic system in the absorption of dietary
lipids to orally administer and traffic therapeutics via the lymphatic system where immune cells are programmed. LYT-300
and our Glyph (lymphatic targeting) and Orasome (oral biotherapeutics) platforms are based on this key function of the
lymphatic system.
24 PureTech Health plc Annual report and accounts 2020
Strategic report How PureTech is building value for investors — continued
Our Model
We employ the following process to identify and develop therapeutic candidates:
• Step 1: A Collaborative Discovery Process Leveraging our Biological Expertise in the BIG Axis and our Scientific
Network: We collaborate with the world’s leading domain experts on a disease-specific discovery theme through the
lens of BIG Axis biology. All of our Wholly Owned Programs target one or more of the BIG systems and we prioritize
programs that have the potential to reduce early development risk based on preliminary signals of activity in humans
and promising tolerability profiles. We have proven our ability to efficiently leverage our cross-disciplinary research and
discovery efforts across multiple indications and potential therapeutic areas. Our program collaborators and co-inventors
across our Wholly Owned Programs and Founded Entities’ programs include leading academic minds; recipients of major
awards such as the Nobel Prize, the U.S. National Medal of Science, the Charles Stark Draper Prize and the Priestley Medal;
members of prestigious institutions such as the Howard Hughes Medical Institute, all three of the National Academies
and world renowned academic institutions such as Harvard, MIT, Yale, Columbia, Johns Hopkins, Imperial College of
London and Cornell, among others; and former senior executives and board members at some of the world’s largest
pharmaceutical companies.
• Step 2: A Disciplined Approach to Program Advancement: We employ a rigorous and disciplined approach to research
and development. The breadth and depth of our Wholly Owned Programs and our Founded Entities’ programs allow us to
quickly pivot resources to the more promising therapeutic opportunities, strategically reallocate capital across programs
and terminate Wholly Owned Programs we choose not to pursue without adversely impacting the development of other
programs. We, through our internal resources and with our extensive expert network and collaboration partners, repeat key
academic work and conduct focused experiments both internally and externally to rapidly advance those that we believe
hold the greatest promise and deprioritize less attractive programs. Collectively, these activities decrease the risk of any
individual program event negatively impacting our Wholly Owned Programs and enable us to preserve capital for the
programs across our Wholly Owned Programs and Founded Entities that we believe have the greatest opportunity for value
creation in alignment with our shareholders.
• Step 3: A Capital Efficient Approach to Driving Clinical Development and Value Creation: Our management team has
successfully driven these therapeutic candidates from early stage research and development, through POC and into clinical
trials and has supported dedicated teams at our Non-Controlled Founded Entities through pivotal trials and FDA clearance.
We have financed our development efforts through strategic collaborations, pharmaceutical partnerships, non-dilutive
funding mechanisms, including through the sale of our Founded Entities’ equity and through grants, and public and private
equity financings. We leverage shared resources, institutional knowledge and infrastructure between our earlier-stage
Founded Entities and development efforts within our Wholly Owned Programs to advance our programs efficiently prior to
POC. This approach has enabled the discovery and development of 26 therapeutics and therapeutic candidates to date,
including two that have been cleared for marketing by the FDA and granted marketing authorization in the EEA, between
our Wholly Owned Programs and our Founded Entities, in which we retain equity ownership ranging from 8.6 percent to
78.0 percent. We had PureTech level cash and cash equivalents of $443.4 million as of March 31, 2021 and $349.4 million as
of December 31, 20205. From January 1, 2017 to December 31, 2020, our Founded Entities strengthened their collective
balance sheets by attracting $1.2 billion in investments and non-dilutive funding, including $1.1 billion from third parties.
As part of our disciplined capital management, we have been able to generate $477.8 million in non-dilutive funding, as of
February 9, 2021, through the sales of portions of Founded Entity shares.
Our Strategy
Driving development of potential new medicines and accretion of value via three paths
1
2
3
Advance Wholly Owned Programs through
development and commercialization,
including pipeline expansion
Wholly Owned Programs
LYT-100, LYT-200, LYT-210, LYT-300,
Discovery platforms
Derive value from equity growth of Founded
Entities (e.g., M&A, IPO and sale of equity
($477.8 million as of February 9, 2021), royalties)
External Founded Entities
Gelesis, Karuna, Follica, Vedanta,
Sonde, Alivio, Entrega, Akili, Vor
Advance and de-risk discovery platforms
by partnering non-core applications
via non-dilutive funding sources
including partnerships and grants
Non-core Applications of
Wholly-Owned Discovery Platforms
5
For more information in relation to the PureTech Level Cash and Cash Equivalents and Consolidated Cash and Cash Equivalents measures used in this Annual Report, please
see pages 75 and 76 of the Financial Review.
PureTech Health plc Annual report and accounts 2020 25
Strategic report How PureTech is building value for investors — continued
Our goal is to identify, invent, develop and commercialize innovative new categories of therapeutics that are derived from our
deep understanding of the BIG Axis to address significant unmet medical needs. To achieve this goal, key components of our
strategy include:
• Advancing Wholly Owned Programs Through Development and Commercialization, Including Pipeline Expansion:
− Progressing LYT-100, LYT-200, LYT-210 and LYT-300 through clinical studies: We are developing novel classes of
immunomodulatory drugs to treat serious diseases, including lung dysfunction, immuno-oncology, lymphatic,
neurological and neuropsychological disorders.
− Harnessing our proprietary drug discovery and development capabilities to drive pipeline maturation and expansion:
We are pioneering the development of therapeutic candidates by leveraging our unique insights into the lymphatic
system and the BIG Axis. Our Wholly Owned Programs currently comprise four proprietary therapeutic candidates
and three innovative technology platforms. We intend to leverage our proprietary technology platforms, as well as our
extensive network with world-leading scientists in immunology and lymphatics and major pharmaceutical companies,
to generate and acquire additional novel therapeutic candidates. To do so, we will rely on the track record of our team,
which has been instrumental in the generation of 26 therapeutics and therapeutic candidates to date between our Wholly
Owned Programs and our Founded Entities, including two that have been cleared for marketing by the FDA and granted
marketing authorization in the EEA, as well as our established internal identification and prioritization approach. We will
continue to take advantage of our differentiated model to manage the risk of any single program and quickly redeploy
resources towards performing assets.
− Maximizing the impact of our Wholly Owned Programs by expanding development across multiple indications: We aim
to focus our development efforts on therapeutic candidates that have the potential to treat multiple diseases and plan to
develop them in additional indications where warranted. For example, we believe that our therapeutic candidate LYT-100
has the potential to be evaluated in multiple inflammatory and fibrotic indications beyond our initial target indication of
lymphedema, such as IPF and potentially other PF-ILDs and Long COVID respiratory complications and related sequelae.
We are initially developing our other therapeutic candidates, LYT-200 and LYT-210, for the treatment of certain cancers,
including CCA, colorectal cancer, or CRC, and pancreatic cancers, among others, and we are evaluating LYT-210 for the
potential treatment of GI autoimmune diseases as well. Lastly, we are evaluating LYT-300 for a range of neurological and
neuropsychological conditions.
• Deriving Value from Equity Growth of Our Founded Entities: Historically, we have pursued a variety of strategic options to
fund and drive the development of our Founded Entities’ therapeutic candidates, including private and public financings
and multiple partnerships and collaborations with selected partners. In the preliminary stages of our growth, we partnered
with equity investors, pharmaceutical and biotechnology companies and government and non-governmental organizations
for certain of our Founded Entities which are now in advanced stages and have the potential for near-term value creation
with significant upside potential. Going forward, our Founded Entities may participate in private and public financings,
enter into partnerships and collaborations, partner with equity investors, pharmaceutical and biotechnology companies and
government and non-governmental organizations and generate revenues from sales of products. We hold equity ownership
in our Founded Entities and benefit from their growth and catalysts such as M&A transactions, IPOs and royalties from sales.
We also intend to strategically monetize our equity holdings in our Founded Entities after significant value creation has
occurred, generating non-dilutive financing. For example, PureTech generated cash proceeds of $350.6 million in 2020 and
an additional $118 million in the 2021 post-period, from the sales of equity in our Founded Entities, which we intend to use
to fund our operations and growth and to further expand and advance our clinical-stage Wholly Owned Pipeline, while still
maintaining significant equity ownership to derive value from future growth of that entity. We may create additional entities
opportunistically based on future strategic imperatives.
• Advancing Discovery Platforms by Partnering Non-Core Applications via Non-Dilutive Funding Sources, Including
Partnerships and Grants, to Enable Retention of Value: As we further develop our Wholly Owned Programs through key
value inflection points, we may opportunistically enter into strategic partnerships when we believe that such partnerships
could add value to the development or potential commercialization of our wholly-owned therapeutic candidates. We will
also continue to pursue government grant funding and discovery partnerships that allow us to maintain most of the value of
our platforms while offsetting operational costs.
We believe this combination of development of our Wholly Owned Programs, Founded Entity advancement and non-dilutive
partnerships and funding provides us with a unique and multi-pronged engine fueling potential future growth.
By Order of the Board
Daphne Zohar
Founder, Chief Executive Officer and Director
April 14, 2021
26 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Wholly Owned Programs
Our programs
Therapeutic
Candidate1
LYT-100
Deupirfenidone
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
IPF and potentially other PF-ILDs
LYT-100
Deupirfenidone
Long COVID2 respiratory complications
and related sequelae
LYT-100
Deupirfenidone
Lymphatic flow disorders, including
lymphedema
LYT-200
Anti-Galectin-9 mAb
Solid tumors
LYT-210
Anti-Delta-1 mAb
Solid tumors
LYT-300
Oral Allopregnanolone
Neurological indications
Registration-enabling studies planned
Phase in progress
Phase completed
Our Head of Research, Anne Burkhardt, works to advance our
Wholly Owned Programs in our headquarters, pre-pandemic.
1
2
The FDA and corresponding regulatory authorities will ultimately review our clinical results and determine whether our wholly-owned therapeutic candidates are safe
and effective. No regulatory agency has made any such determination that our wholly-owned therapeutic candidates are safe or effective for use by the general public
for any indication.
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute
COVID-19 syndrome (PACS).
PureTech Health plc Annual report and accounts 2020 27
Strategic report PureTech’s Wholly Owned Programs — continued
LYT-100
Therapeutic
Candidate1
PureTech Ownership
Indication
Stage of Development
LYT-100
Wholly-owned
IPF and potentially other progressive fibrosing ILDs
Long COVID2 respiratory complications and related sequelae
Lymphatic flow disorders, including lymphedema
Registration-enabling studies planned
Phase 2
Phase 2a
• Our lead wholly-owned therapeutic candidate, LYT-100 (deupirfenidone), is being advanced for the potential treatment of conditions involving
inflammation and fibrosis, including lung disease (e.g., IPF and potentially other PF-ILDs and Long COVID respiratory complications and related sequelae),
and disorders of lymphatic flow, such as lymphedema. LYT-100 is a selectively deuterated form of pirfenidone and has demonstrated anti-inflammatory and
anti-fibrotic activity. LYT-100 retains the beneficial pharmacology of pirfenidone but is expected to be metabolized slower and with less variability between
patients. Given these properties, we will be evaluating whether LYT-100 can offer tolerability and efficacy with less frequent dosing, and our goal is to
mitigate some of the GI-related tolerability issues that have historically been associated with pirfenidone and limited its usage.
Key points of
differentiation
• Pirfenidone (Esbriet®) slows the progression of IPF and has been approved for the treatment of IPF in the United States and other
countries. Pirfenidone has been granted FDA Breakthrough Therapy designation in uILD. Pirfenidone has also shown activity in
investigational clinical studies in patients with uILD, as well as other indications and has demonstrated activity in a preclinical model
of lymphedema and radiation-induced fibrosis. There are serious limitations in the clinical use of pirfenidone, particularly GI-related
tolerability issues, which have significantly limited its usage. For example, in a large post-marketing analysis of 10,996 patients diagnosed
with IPF, only 13.2 percent received treatment with pirfenidone during a five-year follow-up period3. Additionally, real-world experience
with pirfenidone in the IPF treatment setting highlights significant problems with treatment compliance, resulting in approximately
half of the patients that start therapy either discontinuing therapy, dose-reducing or switching to other therapies, all of which lead to
suboptimal disease management. Thus, despite a proven pharmacology, pirfenidone has severe shortcomings that limit its use. We are
developing LYT-100 to offer a differentiated safety profile compared to current standard of care drugs, which may support improved
patient compliance and may potentially lead to improved treatment compliance while retaining or exceeding its efficacy, and will
potentially be an attractive therapeutic option for a range of lung fibrosis indications, such as IPF and potentially other PF-ILDs.
Tolerability findings of pirfenidone studies and rationale for LYT-100 (deupirfenidone)
We are evaluating LYT-100 (deupirfenidone) for its tolerability and efficacy with less frequent dosing, a lower pill burden,
and without regard to food. Our goal with LYT-100 is to mitigate some of the GI-related tolerability, dosing regimen, pill
burden and food effect issues that have historically been associated with pirfenidone, limiting its usage. Below is a summary
of the findings from the pirfenidone studies.
Pirfenidone discontinuations often related to gastrointestinal
(GI) adverse events (AEs), especially nausea and vomiting4.
Pirfenidone GI AEs:
• Require titration in IPF and other studies
• More common in women3
Design
Most
common
AEs
Pirfenidone food effect/
antacid study3
Pirfenidone food effect and
bioequivalence study5
Pirfenidone
Phase 3 studies4
801mg single-dose in healthy
older adults, 44% women
801mg single-dose in healthy
adults, 36% women
2403mg/day, IPF patients
26% women
Most
common AEs
Pirfenidone
N=16
Most
common AEs
Pirfenidone
N=44
Most
common GI AEs6
Pirfenidone
N=263
Placebo
N=624
Nausea
Dizziness
43.8%
Nausea
29.5%
Nausea
37.5%
Dizziness
18.2%
Rash
AEs more frequent in the
fasted state
AE rate higher in women
Headache
Constipation
Vomiting
Dyspepsia
AEs more frequent in the
fasted state
9.1%
9.1%
4.5%
4.5%
Ab. pain
Diarrhea
Headache
Dyspepsia
Dizziness
Vomiting
Anorexia
36%
30%
24%
26%
22%
19%
18%
13%
13%
16%
10%
15%
20%
19%
7%
11%
6%
5%
We are developing LYT-100 to offer a differentiated safety profile compared to current standard of care drugs, which may
support improved patient compliance and may potentially be an attractive therapeutic option for a range of lung fibrosis
indications, such as IPF and potentially other PF-ILDs.
• LYT-100 (deupirfenidone, a selectively deuterated form of pirfenidone or Esbriet®) has the potential to overcome the foregoing
challenges of pirfenidone and improve the management of lung disease. Selective deuterium substitution of pirfenidone is expected
to retain its pharmacology while improving the metabolic stability of LYT-100, resulting in attenuated formation of the predominant
inactive metabolite of both LYT-100 and pirfenidone. This metabolite was found to be associated with GI tolerability issues in
a pirfenidone clinical study7. We believe improved metabolic stability and attenuated formation of this major metabolite seen with
LYT-100 could contribute to improved tolerability, less frequent dosing and better treatment compliance compared to pirfenidone,
which should translate to an overall improvement in treatment outcomes.
• Single-dose and multiple ascending dose clinical studies suggest that LYT-100 has highly differentiated metabolic stability and
PK profiles, which support the potential for LYT-100 to offer improved safety and tolerability.
• We believe LYT-100 has the potential to replace pirfenidone as standard of care in IPF and to become a backbone treatment for IPF
and potentially other PF-ILDs.
Program
discovery
process by the
PureTech team
• LYT-100 was originally developed by Auspex Pharmaceuticals, Inc., or Auspex, for the treatment of IPF. We selected and acquired
LYT-100 in July 2019 based on insights into the lymphatic system gained internally and via unpublished findings through our network
of collaborators, coupled with the relationships of our team members and their insights into the program previously developed at
Auspex. These insights led us to an initial target indication of lymphedema, and we also believe that LYT-100 has the potential to be
evaluated in multiple fibrotic and inflammatory indications beyond lymphedema, such as IPF and potentially other PF-ILDs, and Long
COVID respiratory complications and related sequelae.
28 PureTech Health plc Annual report and accounts 2020
Strategic report
PureTech’s Wholly Owned Programs — continued
Patient need
and market
potential
Fibrosis and Inflammation-Related Lung Diseases
• Fibrosis and inflammation are a common mechanism across several lung diseases. There are acute diseases with high mortality or
that lead to long-term fibrosis; chronic diseases linked to a specific cause, like a virus or autoimmune disease; and diseases like IPF,
where the causes are unclear but have been postulated to include viruses, genetic factors and a variety of environmental exposures.
In a large percentage of these various lung conditions, there are few approved treatments that address inflammation and fibrosis
of the lungs. Many of these diseases can increase the risk for worsening of lung fibrosis, and there is a clear unmet need to stop
inflammation and fibrosis and to preserve lung function.
• PF-ILDs
− There are approximately 200,000 people living with PF-ILDs, including IPF, in the United States. IPF is a progressive condition
characterized by irreversible scarring of the lungs, which worsens over time and makes it difficult to breathe. The prognosis of IPF is
poor, with the median survival after diagnosis generally estimated at two to five years.
− Even in IPF, for which pirfenidone is approved, high need exists for patients to have additional treatment options. Despite these
unmet needs, pirfenidone sales peaked above $1 billion in 2018 and 2019.
PF-ILDs are estimated to affect >850K patients in the
16 major markets8
Independent research9 shows profile is attractive
to pulmonologists
IPF (>450K)
Non-IPF PF-ILDs (>400K)
PF-CTD-ILDs
PF-sarcoidosis
PF-uILD
PF-chronic fibrotic HP
PF-iNSIP
Other
100%
80%
s
t
n
e
i
t
a
P
F
P
I
%
60%
40%
20%
0%
~45% Esbriet®
(pirfenidone)
~50%
OFEV®
~30%
(LYT-100)
~30% Esbriet®
(pirfenidone)
~40%
OFEV®
~5%
~5%
Current Market
($2.9B10)
Survey Results
(Safety/Tolerability Benefit)
− In 2020, we engaged an independent third-party market research firm to conduct a survey of 100 pulmonologists who actively treat
patients with IPF, to assess the potential commercial opportunity for LYT-100 in IPF. Certain results from this survey are depicted
in the graphic above (right panel). Data from this survey are consistent with findings of independent publications that point to
significant tolerability issues, particularly GI-based adverse events, as the greatest limitations of the current standard of care in IPF.
In this survey, when physicians were asked on an unaided basis for the most significant improvements needed in new treatment
options being developed for IPF, 48 percent highlighted the need for therapies with improved side effect profiles. Pulmonologists
in this survey were also presented with a hypothetical profile of LYT-100, labelled “Product X”, that indicated an improved
tolerability and dosing profile with comparable efficacy relative to standard of care in IPF. Based on this profile, physicians indicated
they may prescribe Product X to approximately 30 percent of their IPF patients. Across the survey, pulmonologists highlighted an
unmet need for treatments with improved tolerability profiles, especially related to GI-related AEs that often lead to dose reduction
or discontinuation of treatment and poor disease management.
1
2
3
4
5
6
7
8
We have an active IND on file with the FDA for LYT-100. The FDA and corresponding regulatory authorities will ultimately review our clinical results and determine whether
our wholly-owned therapeutic candidates are safe and effective. No regulatory agency has made any such determination that LYT-100 is safe or effective for use by the
general public for any indication.
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19
syndrome (PACS).
Rubino CM, Bhavnani SM, Ambrose PG, Forrest A, Loutit JS. Effect of food and antacids on the pharmacokinetics of pirfenidone in older healthy adults. Pulmonary
Pharmacology & Therapeutics. 2009 Aug;22(4):279-285. DOI: 10.1016/j.pupt.2009.03.003.
InterMune, Inc., Esbriet (pirfenidone) [package insert]. U.S. Food and Drug Administration website.
Pan, L., Belloni, P., Ding, H.T. et al. A Pharmacokinetic Bioequivalence Study Comparing Pirfenidone Tablet and Capsule Dosage Forms in Healthy Adult Volunteers.
Adv Ther 34, 2071–2082 (2017). https://doi.org/10.1007/s12325-017-0594-8.
Other most common AEs in pirfenidone vs. placebo include upper resp. infect (27% vs. 25%), fatigue (26% vs. 19%), GERD (11% vs. 7%), sinusitis (11% vs. 10%), insomnia
(10% vs. 7%), weight decrease (10% vs. 5%), arthalgia (10% vs. 7%).
Dempsey TM, Payne S, Sangaralingham L, Yao X, Shah ND, Limper AH. Adoption of the Anti-Fibrotic Medications Pirfenidone and Nintedanib for Patients with Idiopathic
Pulmonary Fibrosis. Ann Am Thorac Soc. 2021 Jan 19. doi: 10.1513/AnnalsATS.202007-901OC. Epub ahead of print. PMID: 33465323.
GlobalData Idiopathic Pulmonary Fibrosis: Opportunity Analysis and Forecasts to 2029; Wong, A., et al. Respiratory Research (2020) 21:32; Sauleda, J., et al. Medical
Sciences (2018) 6:110; 16 major markets: U.S., EU5 (Germany, Spain, Italy, France, UK), Australia, Brazil, Canada, China, India, Japan, Mexico, Russia, South Africa, South
Korea; CTD: Connective Tissue Disease; iNSIP: Idiopathic Non-specific Interstitial Pneumonia; HP: Hypersensitivity Pneumonitis.
100 pulmonologists were surveyed, no pricing information/assumptions was shared.
9
10 Based on 2019 Esbriet and OfevWW sales; in addition to IPF, Ofevis indicated for SSc-ILD and PF-ILD.
PureTech Health plc Annual report and accounts 2020 29
Strategic report
PureTech’s Wholly Owned Programs — continued
Patient need
and market
potential
(continued)
• Long COVID (PACS) Respiratory Complications and
Related Sequelae
− The COVID-19 pandemic has affected over 125 million
people around the world. There is increasing data around
the longer-term complications of COVID-19, referred to as
Long COVID or PACS, including data regarding respiratory
issues that persist following recovery. Survivors of the virus
can have lung fibrosis and shortness of breath and other
problems that could potentially last for years.
− Post-acute injuries are hypothesized to be due to a cascade
of inflammation and fibrosis that begins during the acute
phase of COVID-19 and continues after the infection
resolves. A high proportion of mild, moderate and severe
COVID-19 patients (up to 53 percent) already show signs of
lung fibrosis at three weeks post symptom onset. Clinicians
are also reporting lung fibrosis that persists beyond the
acute infection, and of COVID-19 patients with pneumonia,
44 percent had fibrosis on CT imaging at nine days
post-discharge.
− COVID-19 post-acute injuries appear to mimic respiratory
complications of other viral pneumonias like Severe Acute
Respiratory Syndrome, or SARS, and Middle East Respiratory
Syndrome, or MERS. Up to one third of SARS and MERS
survivors had abnormal pulmonary testing and lung imaging
findings that persisted for years.
• Lymphedema
− Lymphedema is a chronic, disfiguring and painful condition
that afflicts millions of people globally and is characterized
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. By conservative estimates,
lymphedema afflicts approximately one million people in
the United States, including approximately 500,000 breast
cancer survivors. Secondary lymphedema is the most
prevalent form of lymphedema. Secondary lymphedema can
develop after surgery, infection or trauma, and is frequently
caused by cancer, cancer treatments such as radiation and
chemotherapy, resulting in damage to or the removal of
lymph nodes.
− The current standard of care for lymphedema is symptom
management, primarily with compression and physical
therapy to control swelling. These approaches are
cumbersome, uncomfortable and non-curative, and they do
not address the underlying disease. Even with management,
many patients will progress from mild-to-moderate
lymphedema to more severe forms. No approved drugs
therapies exist to treat the underlying causes of lymphedema.
We believe the lack of treatments for lymphedema represents
a major unmet medical need.
Multimodal mechanism of action
Inflammation
2
1
COVID-19
Infection and
cytokine release
TGF-(cid:1115)
TNF-(cid:1114)
IL-6
Fibrosis
Fibroblast
Collagen
TGF-(cid:1028)
TNF-(cid:1027)
IL-6
D3C
LYT-100
N O
Normal
lung
Fibrosis
Over 125 million people have been infected with COVID-19,
and a substantial portion may be at risk of Long COVID or PACS.
Fibrosis leads to chronic lung scarring and respiratory
dysfunction, persisting post-discharge.
The majority of therapeutics in development
only target the acute phase.
• ~1M individuals in the U.S. have lymphedema, including
~500K breast cancer survivors with secondary lymphedema
• Chronic progressive disease with no approved therapies
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
S m
Lymphatic
endothelial
cell
Lymphatic
vessel
o o thmu
s
c
l
e
c
e
l
l
Valve
Healthy lymphatics maintain
fluid homeostasis11
fl o
Impai r e d fl o
w
w
Milestones
achieved and
development
status
• In November 2020, we announced the completion of a Phase 1 randomized, double-blind multiple ascending dose and food effect
study, which was designed to evaluate the safety, tolerability and PK profile of LYT-100 in healthy volunteers. The study demonstrated
favorable proof-of-concept for the tolerability and PK profile of LYT-100.
− All AEs that were possibly or probably related to LYT-100 were mild and transient and there were no discontinuations. No serious
AEs or dose-limiting toxicities were observed in the study. The maximum tolerated dose was not determined after dosing up to
1,000 mg twice per day.
− The food effect portion of the study evaluated two common PK measures that are used to determine the optimal dose of
a therapeutic candidate – area under the curve, or AUC, and Cmax. Under fed conditions, the AUC of LYT-100 was reduced by about
19 percent, which is comparable to the AUC reduction of 16 percent seen with pirfenidone as stated in the Esbriet® U.S. Prescribing
Information. The Cmax reduction observed with LYT-100 was 23 percent, while the Cmax reduction seen with pirfenidone was
49 percent as stated in the Esbriet® (pirfenidone) U.S. Prescribing Information. Based on these findings, we are likely to evaluate
LYT-100 in future clinical studies without regard to timing of food consumption of trial participants.
− The therapeutic dose of pirfenidone approved by FDA for the treatment of IPF is 801 mg three times a day. LYT-100 is designed
to potentially improve upon this regimen. In a previously conducted single-dose crossover study, an 801 mg dose of LYT-100
resulted in greater drug exposure than an 801 mg dose of pirfenidone. In the recently completed Phase 1 multiple ascending dose
study, LYT-100 was well-tolerated at a dose above 801 mg. These data, together with our PK modelling of LYT-100 and pirfenidone
exposures, indicate the potential for twice-a-day dosing with LYT-100.
11 Rockson et al., 2019, Nat Rev Dis Primer.
12 Protocol originally specified 750 mg BID as maximum dose. 750 mg BID was well tolerated and a 1000 mg BID cohort was added.
13 Adverse Events (AE) possibly or probably related to treatment; does not include AEs not related to treatment.
30 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Wholly Owned Programs — continued
LYT-100 Phase 1 clinical data demonstrate favorable POC for tolerability and PK profile
Double-blind, randomized, multiple ascending dose study in healthy
volunteers at 100, 250, 500, 75012, 1000 mg BID LYT-100 or placebo.
• No titration
• 75% women enrolled to inform breast-cancer related lymphedema development
LYT-100 multiple ascending dose study
Design
Up to 2000mg/day* fed in healthy adult volunteers, 75% women
AEs13 occurring in >1 participant
Pooled Placebo, N=10; n (%)
LYT-100 1000 mg BID, N=6; n (%) All LYT-100 cohorts, N=30; n (%)
Most
common
AEs
Nausea
Abdominal discomfort
Abdominal distension
Headache
0
1 (10.0%)
0
2 (20.0%)
0
0
0
2 (33.3%)
3 (10.0%)
2 (6.7%)
3 (10.0%)
7 (23.3%)
All treatment-related adverse events were mild and transient with no discontinuations.
GI AEs occurring in 1/30 participants (3.3%) included vomiting.
PK modelling of LYT-100 and pirfenidone exposures indicate potential for twice-a-day dosing with LYT-100.
Milestones
achieved and
development
status
(continued)
• Long COVID (PACS) respiratory complications and related sequelae
− In December 2020, we announced the initiation of a global, randomized, double-blind, placebo-controlled Phase 2 trial to evaluate
the efficacy, safety and tolerability of LYT-100 in adults with Long COVID respiratory complications and related sequelae.
− In preclinical rodent studies, LYT-100 was observed to suppress levels of IL-6 and TNF-α induced by lipopolysaccharide
administration, which we believe translates into the potential impact of LYT-100 on acute inflammation and cytokine release shown
to be triggered by SARS-CoV-2 infection. LYT-100 anti-fibrotic activity was also observed in preclinical studies, which could be
related to the lung fibrosis that develops in some patients following the acute phase of COVID-19.
• Lymphedema
− In December 2020, we announced the initiation of a Phase 2a proof-of-concept study of LYT-100 in patients with breast cancer-
related, upper limb secondary lymphedema. The primary endpoint of the study is safety and tolerability of LYT-100. Secondary
endpoints include outcome measures of lymphedema, including relative limb volume, bioimpedance spectroscopy (a measure of
extracellular fluid change), tonometry (a measure of fibrosis) and serum levels of inflammatory and fibrotic biomarkers. The study
may also examine patient reported outcomes using validated self-report instruments specific to upper-arm lymphedema. The study
is not powered to evaluate statistical significance of drug effect versus placebo, but we hope that results will be suitable to inform
the design of future clinical protocols.
− In preclinical studies, LYT-100 showed greater anti-fibrotic and anti-inflammatory activity when compared to pirfenidone.
Additionally, LYT-100 was tested by one of our academic collaborators in a preclinical model of lymphedema which showed that
LYT-100 halted progression of lymphedema and reduced overall volume. These results still need to be confirmed in clinical trials.
Expected
milestones
• We expect to announce plans related to the design and initiation of registration-enabling studies of LYT-100 for the treatment of IPF
and potentially other PF-ILDs later in 2021.
• We expect topline results from the Phase 2 trial of LYT-100 in adults with Long COVID respiratory complications and related sequelae
in the second half of 2021.
Intellectual
property
• We expect topline results from the Phase 2a proof-of-concept study of LYT-100 in patients with breast cancer-related, upper limb
secondary lymphedema in the first half of 2022.
• We plan to initiate additional clinical trials of LYT-100 in 2021 to explore further the PK, dosing and tolerability in healthy volunteers.
One of these trials is an extension of the previously completed MAD study, in which the maximum tolerated dose was not reached.
Results from these trials are anticipated in 2021 and are expected to provide additional supportive data to help with the clinical
development of LYT-100 across indications.
• As of December 31, 2020, 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 U.S. patents, which are
expected to expire in 2028, one U.S. 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, we
have filed additional patent applications on deupirfenidone, including 29 pending U.S. patent applications and one international
PCT application directed to the use of deuterated pirfenidone, including LYT-100, for the treatment of a range of conditions
involving inflammation and fibrosis, including lung disease (e.g., IPF and potentially other PF-ILDs and Long COVID respiratory
complications and related sequelae), and disorders of lymphatic flow, such as lymphedema. Any issued patents claiming priority
to these applications are expected to expire in 2039 through 2041, exclusive of possible patent term adjustments or extensions
or other exclusivities.
LYT-100 therapeutic candidates
Therapeutic
Candidate1
LYT-100
Deupirfenidone
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
IPF and potentially other PF-ILDs
LYT-100
Deupirfenidone
Long COVID2 respiratory
complications and related sequelae
LYT-100
Deupirfenidone
Lymphatic flow disorders,
including lymphedema
Registration-enabling studies planned
Phase in progress
Phase completed
PureTech Health plc Annual report and accounts 2020 31
Strategic report PureTech’s Wholly Owned Programs — continued
LYT-200
Therapeutic
Candidate1
PureTech Ownership
Indication
LYT-200
Wholly-owned
Solid tumors
Stage of Development
Phase 1
• LYT-200 is a fully human IgG4 monoclonal antibody, or mAb, designed to inhibit the activity of galectin-9, a key molecule expressed by tumors and immune
cells and shown to suppress the immune system from recognizing and destroying cancer cells. We are developing LYT-200 for difficult-to-treat cancer
indications with poor survival rates, including pancreatic ductal adenocarcinoma, or PDAC, CRC and CCA.
Key points of
differentiation
• Immune checkpoint inhibitors, including therapies that target programmed cell death protein 1, or PD-1, programmed death ligand 1,
or PD-L1, and cytotoxic T-lymphocyte-associated antigen 4, or CTLA-4, have been developed to counteract multiple mechanisms of
immune evasion by a number of different tumor types. Recent reports suggest that marketed drugs against these targets had sales
exceeding $24 billion in 20192. Unfortunately, a large proportion of patients, especially those with immunologically silent tumors such
as PDAC, CCA and some types of CRC respond suboptimally to such agents.
• Galectin-9 promotes and facilitates multiple immunosuppressive pathways by, for example, expanding regulatory T cells, shifting
macrophages from the M1 to M2 phenotype, and inducing apoptosis of activated CD4+ and CD8+ T cells. High expression of
galectin-9 is evident in tumors and in cancer patients’ blood and correlates with poor survival outcomes and aggressive disease in
multiple solid tumor types. We are advancing LYT-200 to inhibit the multiple effects of galectin-9 and thereby potentially removing
a key immunosuppresive barrier that would enable the immune system to attack and destroy the tumor.
Galectin-9 is a ligand for PD-1 regulating T cell death and immune responses in PD-1/PDL-1 expressing tumors
1
2
Therapeutic rationale
Gal-9 binds multiple
receptors (e.g. PD-1, TIM-3,
CD206, CD44, 41BB, CD45,
Dectin-1, DR3) and induces
immunosuppression
in tumors
LYT-200 broadly blocks
gal-9 binding interactions
Secreted gal-9
3
Gal-9/PD-1/TIM-3
co-expression and complex
formation prevents gal-9
mediated T cell death
4
Anti-PD-1 mAbs block
PD-1/PD-L1 but not PD-1/gal-9
PD-L1
PD-1
TIM-3
PD-L1
PD-1
Gal-9 binds
TIM-3
TIM-3
LYT-200
TIM-3
LYT-200 can elicit
expansion and
reactivation of
effector T cells
Tumor response
Effector T cell death3
Gal-9 independent PD-1/TIM-3
independent interaction
through intracellular domains
Effector T cells persist
but are exhausted/anergic3
LYT-200 single agent or
LYT-200 + anti-PD-1 mAb
Exhausted T cells can be
rescued by gal-9 inhibition
to exert anti-tumor immunity
In anti-PD-1 mAb treated
cancers (e.g., melanoma and
lung) high gal-9 levels correlate
with treatment resistance3,4
• A recent study published in Nature Communications identified the molecular mechanism by which PD-1 and galectin-9 interact
to shield tumors from the immune system, demonstrating for the first time that galectin-9 is a ligand for PD-1 and emphasizing its
importance as a promising target for immunotherapy. The work revealed that PD-1 physically interacts with galectin-9 and TIM-3 to
attenuate galectin-9/TIM-3-induced T cell apoptosis and maintain effector T cells in the tumor microenvironment in an exhausted
functional state. It also showed that interferons significantly upregulate galectin-9 expression and secretion in both immune and
cancer cells. Overall, the work provided further evidence that galectin-9 as a key regulator of the immune response to tumors and
supports its importance as a potential target for cancer treatment.
• Under normal physiological conditions, galectin-9 is expressed at low levels, which supports the potential safety of LYT-200 in clinical
settings. Lack of tolerability issues to date in our good laboratory practice, or GLP, studies with LYT-200 – even at extremely high doses,
such as 300 mg/kg in non-human primates (~100 mg/kg human equivalent dose) – further supports this view.
• We are not aware of any other clinical development program with galectin-9 as a therapeutic target, and thus, we believe that
LYT-200 may represent the most advanced therapeutic program against this target. None of the other human galectins have been
documented to play such a global role as galectin-9 in immunosuppression in the context of cancer. We also believe that LYT-200 has
the potential to be used as a single agent and safely in combination with checkpoint inhibitors and other cancer treatments.
• In order to identify approaches with the potential to provide significant therapeutic benefit to cancer patients, we undertook
a global, proactive search to identify therapeutic targets that mediate multiple mechanisms of immunosuppression. Through our
extensive network of advisors and collaborators, we identified a foundational immunosuppressive mechanism involving galectin-9,
the therapeutic target of LYT-200, which was the basis of certain intellectual property that we licensed from New York University prior
to publication in Nature Medicine 5.
• In the United States, there are approximately 57,000 new pancreatic cancer patients, of which 50 percent present with metastatic
disease, approximately 146,000 new CRC patients, of which 35 percent present with metastatic disease, and approximately 8,000 new
CCA patients, of which 50 percent present with metastatic disease, in each case, per year. Unfortunately, a large proportion of patients,
especially those with immunologically silent tumors such as PDAC, CCA and some types of CRC respond suboptimally to immune
checkpoint inhibitors, representing a significant patient population that has yet to receive benefit from any immunotherapy agents.
• Clinical program
− In December 2020, we announced the initiation of our Phase 1 clinical trial to evaluate LYT-200 as a potential treatment for metastatic
solid tumors. The primary objective of the Phase 1 portion of the adaptive Phase 1/2 trial is to assess the safety and tolerability of
escalating doses of LYT-200 in order to identify a dose to carry forward into the Phase 2 portion of the trial. The Phase 1 trial will also
assess LYT-200’s PK and PD profiles. Pending favorable topline results, we intend to initiate the Phase 2 expansion cohort portion of
the trial, which is designed to evaluate LYT-200 either alone and/or in combination with chemotherapy and anti-PD-1 therapy for the
treatment of multiple solid tumor types, including pancreatic cancer and CCA.
Program
discovery
process by the
PureTech team
Patient need
and market
potential
Milestones
achieved and
development
status
1
2
3
4
5
6
We have an active IND on file with the FDA for LYT-200. The FDA and corresponding regulatory authorities will ultimately review our clinical results and determine whether
our wholly-owned therapeutic candidates are safe and effective. No regulatory agency has made any such determination that LYT-200 is safe or effective for use by the
general public for any indication.
Van Arnum, Patricia, DCAT ValueChainInsights, Oncology Pharma Market: Immunotherapies on the Rise (2020).
Yang, Riyao, et al. “Galectin-9 Interacts with PD-1 and TIM-3 to Regulate T Cell Death and Is a Target for Cancer Immunotherapy.” Nature News, Nature Publishing Group,
5 Feb. 2021, www.nature.com/articles/s41467-021-21099-2 (preclinical data).
Limagne, Emeric, et al. “Tim-3/Galectin-9 Pathway and MMDSC Control Primary and Secondary Resistances to PD-1 Blockade in Lung Cancer Patients.” Oncoimmunology,
Taylor & Francis, January 22, 2019; www.ncbi.nlm.nih.gov/pmc/articles/PMC6422400/ (preclinical data).
Daley, D., Mani, V., Mohan, N. et al. Dectin 1 activation on macrophages by galectin 9 promotes pancreatic carcinoma and peritumoral immune tolerance. Nat Med 23,
556 – 567 (2017). https://doi.org/10.1038/nm.4314.
Analyzed n = 23 tumor samples; Success defined as: >20% upregulation of at last two out of three T cell activation markers; Success achieved in 56% of tumors with majority
showing >2 fold activation; Representative data from individual tumors per annotated tumor type are shown.
32 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Wholly Owned Programs — continued
Milestones
achieved and
development
status
(continued)
• Preclinical results
− LYT-200 has been observed to have high specificity for its primary target galectin-9: This was established using a protein array that
assessed binding of LYT-200 to more than 5,000 cell bound and secreted human proteins.
− LYT-200 blocked galectin-9-CD206 interaction: LYT-200 is able to block functional activity of galectin-9, including its interactions
with a specific binding partner/receptor, e.g. CD206. This was established using an ELISA assay demonstrating a galectin-9/CD206
interaction, which could be inhibited by the addition of LYT-200.
− LYT-200 protected MOLM-13 T cells from galectin-9-mediated apoptosis: LYT-200 has also been observed to protect T cells from apoptosis
mediated by galectin-9. For example, galectin-9 was shown to significantly increase apoptotic death of MOLM-13 cells. Treatment with
LYT-200 in the presence of galectin-9 significantly reduced the percentage of T cells undergoing apoptosis in a dose dependent manner.
− LYT-200 exceeded anti-PD-1 activity in the B16F10 melanoma model, a gold standard for measuring checkpoint inhibitor efficacy: To
further characterize the potential of LYT-200 as a single agent, we created a mouse isotype of LYT-200 (mIgG1-200). mIgG1-200 (LYT-200
designed for mouse in vivo models) reduced mean tumor weights by approximately 50 percent while an anti-PD-1 antibody reduced
mean tumor weights by approximately 22 percent, which is what is typically seen in the model. We also observed that when an anti-PD-1
antibody was used in combination with mIgG1-200, the number of tumor-infiltrating cytotoxic T cells detected in tumors approximately
doubled. These data demonstrate efficacy of mIgG1-200, both as a single agent and in combination with a checkpoint inhibitor.
− LYT-200 inhibited tumor growth, induced T cell activation and
increased survival in the orthotopic pancreatic cancer KPC
model where anti-PD1 agents are ineffective: The orthotopic
KPC mouse model is commonly used as a preclinical model
for evaluating PDAC biology and therapeutic agent efficacy.
Anti-PD-1 checkpoint inhibitors have previously proven
ineffective in this syngeneic model. Single agent activity
of mIgG1-200 was observed in the KPC mouse pancreatic
cancer model as illustrated in the figure to the right. We have
evaluated the combination of mIgG1-200 with the standard of
care for pancreatic cancer, (e.g., chemotherapy: gemcitabine/
nab-paclitaxel). We observed a clear survival improvement
with mIgG1-200, both as a single agent and in combination
with clinical standard of care chemotherapy.
− LYT-200 potently and reproducibly activated T cells in
cultures of patient-derived organoid tumors, or PDOTs:
One of the major challenges in oncology research is the
translation from mouse models to humans, particularly in
the case of immuno-oncology. To address this concern, we
explored LYT-200 activity in cultured PDOTs that mimic
human tumor composition within the context of a tumor
microenvironment. The aim of treating PDOTs was to assess
the ability of LYT-200 to induce T cell activation, which may
predict how LYT-200 would behave in humans. LYT-200
potently and reproducibly activated T cells in 56 percent of
the samples tested (n=23).
Examples of in vitro T cell activation with LYT-2006
LYT-200 mouse mAb activity in orthotopic pancreatic cancer
KPC model
l
e
d
o
m
C
P
K
c
p
o
t
o
h
t
r
i
O
)
g
m
(
t
h
g
e
w
i
r
o
m
u
T
750
500
250
0
Control
LYT-200 mouse mAb
n = 10/arm P < 0.01
Colorectal cancer liver metastasis
Cholangiocarcinoma
Pancreatic adenocarcinoma
(cid:12)
(cid:1027)
F
N
T
%
(cid:12)
(cid:1029)
N
F
I
%
)
s
l
l
e
c
T
+
3
D
C
(
)
s
l
l
e
c
T
+
3
D
C
(
30
15
0
40
20
0
Control
LYT-200
+
4
4
D
C
%
(cid:12)
(cid:1027)
F
N
T
%
)
s
l
l
e
c
T
+
3
D
C
(
)
s
l
l
e
c
T
+
3
D
C
(
50
25
0
10
5
0
Control
LYT-200
(cid:12)
(cid:1027)
F
N
T
%
(cid:12)
(cid:1029)
N
F
I
%
)
s
l
l
e
c
T
+
3
D
C
(
)
s
l
l
e
c
T
+
3
D
C
(
40
20
0
20
10
0
Control
LYT-200
Expected
milestones
Intellectual
property
Control
LYT-200
Control
LYT-200
Control
LYT-200
− GLP toxicology studies were carried out in Sprague Dawley rats and cynomolgus monkeys. No safety pharmacology findings that
were attributed to LYT-200 at doses as high as 300 mg/kg/week were observed with repeat dose exposure.
• We expect topline results from our Phase 1 portion of the clinical trial of LYT-200 in metastatic solid tumors in the fourth quarter of
2021. Pending favorable topline results, we intend to initiate the Phase 2 expansion cohort portion of the trial, which is designed to
evaluate LYT-200 either alone and/or in combination with chemotherapy and anti-PD-1 therapy for treatment of multiple solid tumor
types, including pancreatic cancer and CCA.
• We have broad intellectual property coverage for these antibody-based immunotherapy technologies, including exclusive rights
to six families of patent filings that are exclusively licensed from or co-owned with New York University which cover antibodies that
target galectin-9, including LYT-200, methods of using these antibodies, and related immuno-oncology technologies. In addition,
the intellectual property portfolio includes five families of PureTech-owned patent applications covering the use of anti-galectin-9
antibodies in the diagnosis and treatment of solid tumors, as well as one family jointly owned with MGH.
• As of December 31, 2020, there are twelve families of intellectual property within this patent portfolio covering compositions of
matter for antibodies targeting galectin-9, including LYT-200, and methods of use for the treatment of solid tumors, such as pancreatic
cancer, CRC, melanoma, gastric cancer, breast cancer and various other cancers. This intellectual property comprises two issued
U.S. patents which are expected to expire in 2038, twelve pending U.S. patent applications, which if issued, are expected to expire
2037-2041, four international PCT applications, twelve pending foreign applications and two issued patents in foreign jurisdictions.
LYT-200 therapeutic candidate
Therapeutic
Candidate1
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
LYT-200
Anti-Galectin-9 mAb
Solid tumors
Phase in progress
Phase completed
PureTech Health plc Annual report and accounts 2020 33
Strategic report
PureTech’s Wholly Owned Programs — continued
LYT-210
Therapeutic
Candidate1
PureTech Ownership
Indication
LYT-210
Wholly-owned
Solid tumors
Stage of Development
Preclinical
• LYT-210 is a fully human IgG1 mAb directed against the delta-1 chain of T cells bearing gamma delta-1 T cell receptors, or TCRs, that we have designed to
target and deplete immunosuppressive gamma delta-1 T cells in cancer.
Key points of
differentiation
• Immune checkpoint inhibitors, including therapies that target PD-1, PD-L1 and cytotoxic T-lymphocyte-associated antigen 4, or
CTLA-4, have been developed to counteract multiple mechanisms of immune evasion by a number of different tumor types. Recent
reports suggest that marketed drugs against these targets had sales exceeding $24 billion in 20192. Unfortunately, a large proportion
of patients, especially those with immunologically silent tumors such as PDAC, CCA and some types of CRC respond suboptimally to
such agents.
Monoclonal antibody aimed at immunosuppressive gamma delta-1 T cells
Tumor progression
Restrict cytotoxic
gamma delta
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
Pro-tumor gamma delta-1 T cells
Image adapted from CellPress: REVIEW: gamma
delta T cells: Unexpected Regulators of Cancer
Development and Progression.
Key
DC = dendritic cell
TAM = tumor associated macrophage
MDSC = myeloid derived suppressor cell
IL17 = interleukin 17
αβ = alpha beta
γδ = gamma delta
γδ1 = gamma delta-1
γδ1 T17 = gamma delta interleukin 17
producing cells
γδ1 Treg = gamma delta-1 T regulatory cell
γδ2 = gamma delta-2
FoxP3 = forkhead box P3
SPM = small peritoneal macrophages
MSDC = myeloid derived suppressor cells
TGF-β = transforming growth factor beta
B = B cells
NK = natural killer cells
CD8+ = cluster of differentiation 8
CD4+ = cluster of differentiation 4
LYT-210 gamma delta-1 mAb
T cell
Cancer
(cid:1116)(cid:1117)(cid:20)
CD8+
CD4+
(cid:1116)(cid:1117)
Enriched in cancer patients in peripheral blood,
tumors and tumor draining lymph nodes
Tissue
resident
T cell
Activation and
proliferation
Promote
maturation
Help (cid:1114)(cid:1115) T
priming
IL-17
(cid:1116)(cid:1117)1T17
Mobilization
Synergistic
action
(cid:1116)(cid:1117)1 T
FoxP3+
(cid:1116)(cid:1117)1 Treg
Peripheral homing
and activation
Help antibody
production
(cid:1116)(cid:1117) 2
SPM
MSDC Neutrophil
IL-17A
(cid:1114)(cid:1115) T
DC
TGF-(cid:1028)
Developed and used
for adoptive T cell
transfer in cancer patients
ADCC,
cytotoxicity
Angio-
genesis
Growth and
proliferation
Metastasis
Angio-
genesis
Immune
escape
Immune
escape
(cid:1116)(cid:1117)1
Epidermis
(cid:1116)(cid:1117)1
Liver and
spleen
(cid:1116)(cid:1117)1
DC
(cid:1114)(cid:1115) T
B
NK
Uterine,
vaginal,
tongue
and lung
epithelia
• We believe that gamma delta-1 T cells represent an important new IO target because they:
− Activate multiple immunosuppressive pathways in the TME;
− Have expression correlated with poor outcomes for multiple solid tumor types; and
− Target immunosuppressive gamma delta T cells, improved survival and reactivated cytotoxic T cells in the TME in the KPC
orthotopic pancreatic cancer mouse model where approved checkpoint inhibitors are ineffective.
• We are targeting the depletion of immunosuppressive, tumorigenic gamma delta-1 T cells rather than administration of cytotoxic
gamma delta-2 T cells as a cell therapy. Gamma delta-1 T cells execute potent immunosuppressive function via multiple mechanisms,
as illustrated on the left side of the figure above (LYT-210 gamma delta-1 mAB), which facilitates cancer progression. We have designed
LYT-210 to eliminate gamma delta-1 T cells, and thereby potentially relieve immunosuppression, which we believe could enable immune
mediated cancer attack.
Program
discovery
process by the
PureTech team
• In order to identify approaches with the potential to provide significant therapeutic benefit to cancer patients, we 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. As a result of this search, and through our extensive network of advisors
and collaborators, we identified a foundational immunosuppressive mechanism involving immunosuppressive gamma delta-1 T cells,
which was the basis of LYT-210.
1
2
The FDA and corresponding regulatory authorities will ultimately review our clinical results and determine whether our wholly-owned therapeutic candidates are safe and
effective. No regulatory agency has made any such determination that LYT-210 is safe or effective for use by the general public for any indication.
Van Arnum, Patricia, DCAT ValueChainInsights, Oncology Pharma Market: Immunotherapies on the Rise (2020).
34 PureTech Health plc Annual report and accounts 2020
Strategic report
PureTech’s Wholly Owned Programs — continued
Patient need
and market
potential
Milestones
achieved and
development
status
• In the United States, there are approximately 57,000 new pancreatic cancer patients, of which 50 percent present with metastatic
disease, approximately 146,000 new CRC patients, of which 35 percent present with metastatic disease, and approximately 8,000 new
CCA patients, of which 50 percent present with metastatic disease, in each case, per year. Unfortunately, a large proportion of patients,
especially those with immunologically silent tumors such as PDAC, CCA and some types of CRC respond suboptimally to immune
checkpoint inhibitors, representing a significant patient population that has yet to receive benefit from any immunotherapy agents.
• Antibodies against gamma delta-1 T cells reactivated immunosuppressed T cells in the TME in PDOTs: To better assess the potential
activity of the anti-delta-1 antibody, we employed PDOTs from primary and metastatic tumors spanning various solid tumor types
such as pancreatic, CRC, CCA, hepatocellular cancer and neuroendocrine tumors of the GI tract in order to assess the prevalence of
tumor-infiltrating gamma delta-1 T cells and the capacity of the antibodies to restore tumor-infiltrating immune cell effector activity.
We observed positive responses in approximately 60 percent of the PDOTs we analyzed, representing 19 patients, which showed that
direct treatment of PDOTs with LYT-210 resulted in robust reactivation of effector T cells.
The figure below is illustrative of data collected from 19 human tumor organoid samples from CRC patients.
Examples of in vitro T cell activation with antibodies against gamma delta-1 T cells
Colorectal
cancer
Colorectal cancer
liver metastasis
(cid:12)
(cid:1027)
(cid:12)
F
(cid:1027)
N
F
N
T
T
%
%
(cid:12)
(cid:1027)
(cid:12)
F
(cid:1027)
N
F
N
T
T
%
%
)
s
l
)
l
s
e
l
l
c
e
T
c
T
+
8
+
D
8
C
D
C
(
(
)
s
l
)
l
s
e
l
l
c
e
T
c
T
+
8
+
D
8
C
D
C
(
(
15
15
7.5
7.5
0
0
25
25
12.5
12.5
0
0
Isotype
Isotype
Isotype
Isotype
Delta1 IgG1
Delta1 IgG1
Anti-PD1
Anti-PD1
Delta1 IgG1
Delta1 IgG1
(cid:12)
(cid:1029)
(cid:12)
N
(cid:1029)
N
F
F
%
%
I
I
(cid:12)
(cid:1029)
(cid:12)
N
(cid:1029)
N
F
F
%
%
I
I
)
s
l
)
l
s
e
l
l
c
e
T
c
T
+
8
+
D
8
C
D
C
(
(
)
s
l
)
l
s
e
l
l
c
e
T
c
T
+
8
+
D
8
C
D
C
(
(
15
15
7.5
7.5
0
0
30
30
15
15
0
0
Isotype
Isotype
Isotype
Isotype
Delta1 IgG1
Delta1 IgG1
Anti-PD1
Anti-PD1
Delta1 IgG1
Delta1 IgG1
• Absence of gamma delta T cells greatly increased survival
in a pancreatic cancer mouse model: In order to assess the
relevance of gamma delta T cells in the development and
progression of pancreatic cancer, we assessed the survival of
immunocompetent mice which have gamma delta T cells (wild
type) in a KPC mouse pancreatic model. In addition, there was
an additional group of wild type mice treated with an antibody,
UC3-10A6, which functionally blocks immunosuppressive mouse
gamma delta T cells. As shown in the figure to the right, when
mice harboring pancreatic tumors are treated with an antibody
against immunosuppressive gamma delta T cells, survival was
greatly increased, as represented by the navy curve.
• Mucosa-infiltrating pathogenic gamma delta-1 T cells may
contribute to autoimmune diseases: Intraepithelial lymphocytes
expressing gamma delta-1 TCRs are tissue-resident T cells
that play a key role in homeostasis of the intestinal epithelium.
It has been recently observed that chronic inflammation can
permanently reconfigure the tissue-resident T cell compartment
resulting in the repopulation of the GI mucosa with pathogenic
and cytotoxic gamma delta-1 T cells. Establishment of
pathogenic gamma delta-1 T cells along the GI tract tilts the gut
environment towards a chronic inflammatory state, contributing
to the pathophysiology of GI tract and inflammatory diseases,
such as refractory celiac disease.
Pancreatic cancer mouse survival with gamma delta T cell
depletion and blockage
l
a
v
i
v
r
u
s
e
v
i
t
a
u
m
u
C
l
1.0
0.8
0.6
0.4
0.2
0.0
4
5
6
Weeks
7
8
Control
UC3-10Ab mAb3
n = 10/arm
P = 0.009
Expected
milestones
Intellectual
property
• We are exploring additional biomarker studies for LYT-210 in 2021.
• We have broad intellectual property coverage for these antibody-based immunotherapy technologies, including exclusive rights
to three 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 use related immuno-oncology technologies
and antibodies directed to pro-inflammatory gamma delta T cells for use in the treatment of inflammatory conditions, such as
autoimmune disorders.
• As of December 31, 2020, there are three families covering compositions of matter and methods of use for antibodies targeting
gamma delta-1 T cells, including LYT-210, which are directed to the use of these antibodies for the treatment of cancer and one
family directed to the use of these antibodies for the treatment of autoimmune disorders, for example, inflammatory bowel disease,
ulcerative colitis, Crohn’s disease and celiac disease, among others. This intellectual property in total comprise one granted U.S.
patent, three pending U.S. patent applications, one international PCT application and three foreign patent applications. Any patents
issuing from pending applications with respect to LYT-210 are expected to expire in between 2037 and 2041, of which expiration
dates are exclusive of possible patent term adjustments or extensions or other periods of exclusivity.
LYT-210 therapeutic candidate
Therapeutic
Candidate1
LYT-210
Anti-Delta-1 mAb
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
Solid tumors
Phase in progress
Phase completed
3
Tool antibody that blocks mouse immunosuppressive gamma delta T cells.
PureTech Health plc Annual report and accounts 2020 35
Strategic report
PureTech’s Wholly Owned Programs — continued
LYT-300
Therapeutic
Candidate1
PureTech Ownership
Indication
Stage of Development
LYT-300
Wholly-owned
Neurological indications
Preclinical
• Using our Glyph™ platform (see page 38) which harnesses the natural trafficking of dietary lipids via the lymphatics, we have developed an oral lipid-
prodrug version of allopregnanolone, LYT-300. By trafficking via the lymphatics, we are able to overcome first-pass metabolism by the liver and have
achieved significant oral bioavailability of natural allopregnanolone in preclinical models. We plan to advance this preclinical therapeutic candidate,
LYT-300, for a range of neurological and neuropsychological conditions.
Key points of
differentiation
• Allopregnanolone has therapeutic potential across a wide
range of neurological conditions like seizures, sleep and
neuropsychiatric disorders. The problem is allopregnanolone
is not orally bioavailable, as a result of first-pass metabolism
in the liver.
• An intravenous infusion formulation of allopregnanolone is
approved for the treatment of postpartum depression and
available in the U.S. as Zulresso®. As a 60-hour infusion, Zulresso
usage has been limited in postpartum depression and would
likely be similarly limited for other indications.
• Using our proprietary Glyph technology, which is designed
to allow for lymphatic targeting and to avoid first-pass
metabolism, we have developed LYT-300, an oral prodrug form
of the endogenous neurosteroid, allopregnanolone.
• In preclinical studies conducted thus far, we have demonstrated
oral bioavailability with LYT-300 and have observed plasma
exposures that suggest therapeutically relevant human plasma
levels of free allopregnanolone may be achieved. One example
of the data we have generated in non-human primates is shown
to the right.
LYT-300 systemic exposure (non-human primate)
Oral administration
a
m
l
s
a
p
d
e
z
i
l
a
m
r
o
n
e
s
o
D
)
L
/
l
o
m
n
(
O
L
L
A
e
e
r
f
f
o
n
o
i
t
a
r
t
n
e
c
n
o
c
125
100
75
50
25
0
0
10
20
30
40
Time (h)
NATURAL ALLO (n=6)
LYT-300 (n=6)
Program
discovery
process by the
PureTech team
Patient need
and market
potential
• LYT-300 is the most advanced therapeutic candidate developed from our synthetic lymphatic-targeting chemistry platform called
Glyph (see page 38), which employs the body’s natural lipid absorption and transport process to orally administer drugs via the
lymphatic system.
• Allopregnanolone, and neurosteroids in general as a class of potent endogenous natural small molecules, have been recognized
over the past three decades for their therapeutic potential to treat a range of neurological and neuropsychological conditions such
as epileptic disorders, fragile X syndrome, fragile X tremor-associated syndrome, anxiety, depression, essential tremor and sleep
disorders, among others. The major hurdles associated with the translation of these compounds have been:
− The inability to create an oral formulation due to first-pass metabolism by the liver; and
− The inability to administer these chronically to patients – essential for treating CNS disorders.
• The recent approval of Zulresso, a 60-hour IV infusion requiring regular monitoring for sudden loss of consciousness, to treat post-
partum depression, speaks to the challenges that limit the scope of translation of this class of compounds to treat neurological and
neuropsychological disorders.
• An oral form of allopregnanolone and other neurosteroids would enable the development of these natural molecules for the potential
treatment of a range of neurological and neuropsychological conditions.
LYT-300: Developing oral allopregnanolone for a range of neurological and neuropsychological disorders2
LYT-300:
Rationale for development
• Designed to avoid first-pass metabolism
by trafficking via the lymphatic system
• Oral bioavailability demonstrated in canine
and non-human primate PK studies
• If clinical trials are successful, oral administration
of allopregnanolone may open up the
potential to address a range of neurological
and neuropsychological indications with
a natural neurosteroid
Brexanalone for IV injection
marketed as Zulresso®
Allopregnanolone
(cid:34)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3) (cid:21)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:34)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
(cid:21)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)(cid:3)
60-hr IV infusion has limited usage
Oral administration
Phase 1 clinical trial planned to
initiate by YE 2021
1
2
The FDA and corresponding regulatory authorities will ultimately review our clinical results and determine whether our wholly-owned therapeutic candidates are safe and
effective. No regulatory agency has made any such determination that LYT-300 is safe or effective for use by the general public for any indication.
Zulresso® is a trademark of Sage Therapeutics and is not owned by or affiliated with PureTech Health. LYT-300 is an investigational drug not approved by any regulatory authority.
36 PureTech Health plc Annual report and accounts 2020
Strategic report
PureTech’s Wholly Owned Programs — continued
Milestones
achieved and
development
status
• We created a library of lipid prodrugs of allopregnanolone and showed that orally dosing these prodrugs achieved therapeutically
relevant plasma levels in small and large animal models. These studies, coupled with our other preclinical studies, support the
potential utility of this approach for enabling natural allopregnanolone as an orally-dosed drug as well as for numerous other
potential therapeutics with intrinsic hepatic first-pass metabolism liabilities and oral absorption limitations.
• No drug-related adverse effects have been noted in preclinical studies to date at therapeutically relevant doses. Formal safety
studies are being pursued as a part of the first-in-human-enabling package of studies. To support these studies, dose escalation
studies have been performed in rats and dogs, and dose proportionality has been observed in both species.
Expected
milestones
Intellectual
property
• The initial objective of the LYT-300 clinical program is to characterize the safety, tolerability and PK of orally administered LYT-300 in
a Phase 1 clinical trial in healthy volunteers. We expect to initiate a clinical trial by the end of 2021. This study may include exploratory
endpoints such as beta wave power electroencephalography, or ß-EEG, a marker of GABAA target engagement. Data from this study
will be used to define a range of future studies and planned indications, which could include those discussed in the above section
regarding unmet needs.
• Within the extensive Glyph intellectual property portfolio (see page 39), which covers a wide range of novel linker chemistries,
LYT-300 is specifically covered by two patent families comprising one international PCT application and three U.S. patent applications
as of December 31, 2020, all of which are co-owned with Monash University. Any patents to issue from these patent applications are
expected to expire in 2039 or 2041, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.
LYT-300 therapeutic candidate
Therapeutic
Candidate1
Indication
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
LYT-300
Oral Allopregnanolone
Neurological indications
Phase in progress
Phase completed
PureTech Health plc Annual report and accounts 2020 37
Strategic report PureTech’s Wholly Owned Programs — continued
Glyph™: Lymphatic Targeting Chemistry Platform
Therapeutic Candidate
PureTech Ownership
Description
Glyph Technology
Platform
Wholly-owned
Lymphatic-targeting chemistry platform that leverages the body’s natural lipid absorption
and transport process to orally administer drugs via the lymphatic system.
• We are developing a synthetic lymphatic-targeting chemistry platform called Glyph, which is designed to employ the body’s natural lipid absorption and
transport process to orally administer drugs via the lymphatic system. Consumed nutrients and orally administered pharmaceuticals are initially absorbed
by the small intestine mucosa, 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, or
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 GI tract where they pass into larger lymphatic
sinuses connected to the thoracic duct, then transition to systemic circulation as illustrated in the figure below on the right. This is in contrast to
conventional systemic circulation via the gut and liver as shown in the figure below on the left.
Glyph: a synthetic lymphatic-targeting chemistry platform
Conventional oral drug transport
Glyph oral drug transport via the lymphatic system
Drug can be metabolized
by the liver before
ever entering
systemic circulation
Prodrug enters
systemic circulation
and then releases
original drug
Thoracic duct
Heart
Heart
Drug enters
the liver
through the
Portal Vein
Liver
Liver
Lymphatic system
Prodrug bypasses
the liver through
absorption via the
lymphatic system
Gut
Gut
• Our proprietary Glyph technology 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. The process 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. The figure below is a representation of the proprietary chemistry for the design of our lymphatic targeting technology. The
API is meant to indicate an example of a pharmaceutical small molecule that is attached to the triglyceride group (Glyceride in the figure below) using
proprietary linker chemistry (Linker in the figure below) to create a prodrug of the API. The prodrug also includes a proprietary self-immolative or cleaving
chemistry (SI in the figure below) that can be tuned to release the API in its intact original form.
Schematic representation of our lymphatic targeting prodrug technology
Self-Immolative (SI)
Allows controlled
release of exact parent
drug compound
Linker
Tunes stability to gut
enzymes and recognition
for lipid absorption
via the lymphatics
Glyceride
Integrates prodrug
into chylomicrons for
lymphatic transport
API
38 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Wholly Owned Programs — continued
Key points of
differentiation
Program
discovery
process by the
PureTech team
Milestones
achieved and
development
status
Intellectual
property
• We believe this platform provides the following capabilities:
− Targeting the mesenteric lymph nodes: This lymphatic targeting technology has important features that offer potential advantages
in the creation of orally-administered medicines, especially those that need to reach immune system drug targets present in the
GI tract mucosa and submucosa, such as intestine-associated immune cells, or in the mesenteric lymphatic vasculature, such as
circulating immune cells, and mesenteric lymph nodes, such as lymph node stromal cells, antigen-presenting cells and lymph
node-associated immune cells.
− Enabling and enhancing oral bioavailability by bypassing first-pass metabolism: We believe this technology could provide
a broadly applicable modular means to potentially enable oral administration of a range of bio-active natural molecules, such as
neurosteroids, cannabinoids, and a large number of parenterally administered drugs, that are otherwise not orally bioavailable. This
technology also has the potential to significantly enhance the bioavailability of orally-administered drugs that suffer from substantial
first-pass hepatic metabolism or those drugs, especially those utilized in drug combination therapies, that act as modulators
(inducers and/or inhibitors) of drug-metabolizing systems in the liver.
• Given our interest in the lymphatic system, we sought out different approaches that could selectively traffic therapeutic molecules
through the lymphatic system to target immune cells in the lymph nodes. Based on insights gained internally and via unpublished
findings through our network of collaborators, we became aware of certain technology being developed at Monash University that
had the potential to selectively target the lymphatic system. We obtained an exclusive license to this technology and the related
intellectual property from Monash University. We have since further developed the platform and have generated our own intellectual
property associated with the Glyph technology platform.
• Using our Glyph technology platform for trafficking drugs through the lymphatics, we have developed an oral lipid-prodrug version
of allopregnanolone, LYT-300 (see page 36), which is our preclinical therapeutic candidate for targeting a range of neurological and
neuropsychological conditions.
• In the February 2021 post-period, preclinical proof-of-concept for our Glyph technology platform was published in the Journal of
Controlled Release. The additional results highlighted in the publication support the ability of the platform to target administration of
drugs such as mycophenolic acid, or MPA, an immunosuppressant, into lymph and directly into gut-draining mesenteric lymph nodes,
or MLNs. As a key nexus of immune cell trafficking, MLNs play major roles in the pathophysiology of a range of conditions including
inflammatory and autoimmune diseases, cancer and metabolic diseases. As published, oral administration of a Glyph-based prodrug
of MPA (Glyph-MPA) resulted in a >80-fold increase in uptake of total MPA into the lymphatic system and a >20-fold increase in MPA
concentrations in MLNs relative to what was achieved with oral dosing of free MPA. Furthermore, MPA administered orally as Glyph-
MPA was significantly more potent than free MPA in inhibiting T cell proliferation in mice challenged with antigen. Plasma levels were
similar with Glyph-MPA and MPA, indicating low potential for the emergence of new systemic side effects. Additionally, a prodrug
of a fluorescent tracer was shown to rapidly accumulate in MLNs following administration. Together, these findings provide further
support of the potential of our Glyph technology for oral administration of small molecule drugs directly to the lymphatic system,
including drugs with immunomodulatory properties.
• We have successfully extended our lymphatic targeting platform to encompass more than 20 molecules as well as a range of novel
linker chemistries that have demonstrated promising lymphatic targeting in preclinical studies. We expect to select therapeutic
candidates from this and ongoing discovery work.
• In April 2019, we announced an alliance with Boehringer Ingelheim, which is initially focused on evaluating the feasibility of applying
our Glyph technology platform to one of its immuno-oncology therapeutic candidates1.
• We believe this Glyph technology platform could provide a broadly applicable modular means to potentially enable oral
administration of a range of bio-active natural molecules, such as neurosteroids, cannabinoids and a large number of parenterally
administered drugs that are otherwise not orally bioavailable, or such as orally-administered drugs that suffer from substantial first-
pass hepatic metabolism or those drugs, especially those utilized in drug combination therapies, that act as modulators (inducers
and/or inhibitors) of drug-metabolizing systems in the liver. To demonstrate the utility of our Glyph lipid prodrug platform, we chose
a natural bio-active neurosteroid allopregnanolone as the subject of our inquiry, which has resulted in the LYT-300 program (see
page 36). However, we believe that this benefit has the potential to be widely applied to nearly any natural molecules or therapeutic
compatible with the synthetic approach which suffers from hepatic first-pass metabolism as has been evaluated by us and our
collaborators with compounds such as testosterone, buprenorphine, antivirals, anti-infectives and multiple cannabinoids.
• We have broad intellectual property coverage for our proprietary Glyph technology 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 APIs,
for use in the treatment of a wide range of diseases and disorders. The most advanced of these is LYT-300, which is an oral form of
FDA-approved allopregnanolone, a natural neurosteroid, that we believe may be applicable to a range of neurological conditions.
• As of December 31, 2020, our Glyph technology platform intellectual property portfolio consists of 22 patent families comprising
22 U.S. patent applications, five international PCT applications, 15 foreign patent applications and two foreign patents. Of these,
company-owned intellectual property consists of 16 U.S. patent applications in 12 patent families. We exclusively licensed and co-own
a patent portfolio of 10 patent families comprising 21 U.S. and foreign patent applications, two foreign patents and five international
PCT applications from Monash University. Any patents to issue from the in-licensed patent applications are expected to expire in
2035-2036 and any issued patents from the co-owned and company-owned patent applications are expected to expire in 2038-2041,
exclusive of possible patent term adjustments or extensions or other forms of exclusivity.
1
PureTech retains rights to all other applications of this technology outside of the specific Boehringer Ingelheim candidates being studied.
PureTech Health plc Annual report and accounts 2020 39
Strategic report PureTech’s Wholly Owned Programs — continued
Orasome™ Technology Platform
Therapeutic Candidate
PureTech Ownership
Description
Orasome Technology
Platform
Wholly-owned
Programmable and scalable approach for oral administration of nucleic acids
and other biologics.
• We are developing a versatile and programmable oral biotherapeutics platform, Orasome, to enable administration of macromolecule therapeutic
payloads, including antisense oligonucleotides, short interfering RNA, mRNA, modular expression vector systems, peptides and nanoparticles that are
otherwise administered exclusively by injection.
• Our Orasome technology platform was inspired by the in vivo trafficking of ubiquitous, naturally occurring vesicles, which are often referred to as
exosomes, and we have engineered them for transport through the GI tract. Exosomes are a type of extracellular vesicle approximately ranging from
50nm to 150nm in diameter that are produced in the endosomal compartment and secreted from most types of eukaryotic cells. We believe human
cell-derived exosomes have promise as vehicles for systemic drug administration due to their observed tolerability over synthetic polymer-based
administration technologies. However, the fragile nature of exosomes derived from human cells limits their usage for oral administration and the type
of post-isolation manipulations that can be applied in order to optimize such vesicles for exogenous drug cargo loading and storage. Our Orasome
technology platform utilizes multiple vesicle components, including those isolated from milk. We have engineered these vesicles, building on the
naturally evolved architecture in mammals, to remain stable following oral consumption and transit through the upper GI tract. Orasome vesicles are
readily amenable to manufacturing at scale and relatively low cost based on the easily accessible and engineerable components.
• Our Orasome vesicles are being designed to transport macromolecular medicines 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, enable the body to produce its own therapeutic proteins and peptides, such as antibodies within mucosal cells that are secreted into the
mucosal lymphatic vascular network for subsequent systemic distribution. Using our Orasome technology platform, we believe 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. We believe this approach
also has the potential to provide a more convenient and significantly less expensive means to deliver biological medicines.
CNS lymphatics: Harnessing an overlooked immune and metabolite transport network
The figure below depicts one of the approaches we are exploring for the administration of oral biotherapeutics:
Whey Purified
Vesicle
(WPV)
Liposome
1
Orasomes with
expression cargo
Cargo
Cargo
Cargo
Fused
Liposome-WPV
Cargo
Fused
Liposome-WPV
Particle Programmed
with surface ligands
Intestinal
Lumen
2
Orasomes
transiting
through GI tract
3
Surface
programmed
to bind to
intestinal
mucosa
Targeted
Intestinal
Cell Type
5
Basolaterally
secreted proteins
transported via
lymphatics
4
Vector translated
Lacteal
Intestinal
Submucosa
6
Circulating proteins
40 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Wholly Owned Programs — continued
Key points of
differentiation
• Our proprietary Orasome technology platform has the potential to transform the treatment paradigm for diseases, such as
rheumatoid arthritis, diabetes, other autoimmune diseases and cancer for which the standard of care often requires intravenous
infusion or subcutaneous injection of monoclonal antibodies (e.g., anti-PD-1, anti-tumor necrosis factor) or therapeutic proteins/
peptides (e.g., glucagon-like peptide-1, insulin, granulocyte colony-stimulating factor GCSF, Factor VIII and IX, cytokines and
erythropoietin), among others.
PureTech is well-positioned to unleash the potential of oral biotherapeutics
Limitations of protein-based therapeutics
Intravenous or subcutaneous administration
(infusion reactions, barrier for repeat dosing)
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)
Formulation-based immune and cellular toxicities
(protein synthesis by liver hepatocytes)
High dose requirement for protein production
Potential advantages of the Orasome™
technology platform:
Orally administered (flexible repeat dosing)
Body manufactures the therapeutic proteins
Very low immune and cell toxicity
(protein synthesis in GI tract)
Low dose requirement for protein production
Program
discovery
process by the
PureTech team
• Within the context of the current COVID-19 pandemic, we believe our Orasome technology platform has the potential to support
oral administration of anti-SARS-CoV-2 monoclonal antibodies or antibody combinations and vaccines 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 or vaccines offer
significant clinical benefit, we believe our Orasome technology platform has the potential to transform the treatment of a range of
clinical indications, while also lowering costs and simplifying administration of such biotherapeutics.
• We sought out different approaches to enable the oral administration of macromolecule therapeutic payloads that are otherwise
administered exclusively by injection. Based on insights gained internally and via unpublished findings through our network of
collaborators, we became aware of findings from the University of Louisville and the University of Nebraska involving certain aspects
of exosomes isolated from bovine milk that could potentially enable oral delivery of paclitaxel and microRNA. We exclusively licensed
certain intellectual property associated with these findings. We have also independently developed our Orasome technology platform
and have generated data and intellectual property on various aspects of oral administration of macromolecule therapeutic payloads.
• We are harnessing the role of the lymphatic system in the absorption of dietary lipids to orally administer and traffic therapeutics via
the lymphatic system where immune cells are programmed. Our Orasome technology platform is based on this key function of the
lymphatic system.
Expected
milestones
• In 2021, we expect preclinical proof-of-concept data and anticipate additional preclinical results from a non-human primate proof-of-
concept study. The proof-of-concept studies are designed to document the presence of therapeutic serum levels of biotherapeutics
(peptides and proteins, such as antibodies) produced by the body following the oral administration of designer payloads.
Intellectual
property
• This work could lay the foundation for IND-enabling clinical studies for one or more additional therapeutic candidates to be included
in our Wholly Owned Pipeline. We intend to leverage our proprietary technology platforms, as well as our extensive network
with major pharmaceutical companies and world-leading scientists in immunology and lymphatics, to generate additional novel
therapeutic candidates.
• We have broad intellectual property coverage for our Orasome technology platform. Our Orasome technology platform 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 Orasome-formulated therapeutics, which include nucleic acid-based therapeutics
(such as messenger RNA, short interfering RNA and antisense oligonucleotide-based approaches), small molecules, biologics (such
as peptides, proteins and antibodies), expression systems for biologics and other therapeutics for use in the treatment of a wide
range of diseases and disorders, including various immunological disorders, such as cancers and inflammatory diseases. In addition,
we licensed patents and patent application on certain milk exosome technology of oral administration of biotherapeutics.
• As of December 31, 2020, our Orasome technology platform patent portfolio consists of 14 U.S. and eight foreign patent applications
and one pending international PCT application in eight patent families. Any patents to issue from the patent applications are
expected to expire in 2037 through 2041, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.
We exclusively licensed a patent portfolio consisting of two patent families from 3P Biotechnologies, Inc., based on certain milk
exosome technology originating from the University of Louisville. In addition, we exclusively licensed a patent portfolio consisting of
two patent families from NuTech Ventures, based on certain milk exosome technology originating from the University of Nebraska.
PureTech Health plc Annual report and accounts 2020 41
Strategic report PureTech’s Wholly Owned Programs — continued
Meningeal Lymphatics Discovery Research Program
Therapeutic Candidate
PureTech Ownership
Description
Meningeal Lymphatics
Discovery Research
Program
Wholly-owned
Harnessing meningeal lymphatics to potentially treat a range of neurodegenerative and
neuroinflammatory conditions.
• The lymphatic system is an important part of the immune system, GI
system and CNS. Loss of lymphatic flow can play a critical role in diseases
of these systems. The recent discovery of meningeal lymphatics in the
brain, an area once thought to have immune privilege, has shed new light
on neurodegenerative diseases and lymphatic vessel aging.
Key points of
differentiation
• 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 associated with Parkinson’s disease. Blocking the
lymphatic flow increases levels of these molecules
in the brain. In animal models of AD, AD-associated
tauopathies and Parkinson’s disease, blockage of
meningeal lymphatic flow significantly exacerbated
disease progression and severity whereas improving
flow through aged meningeal lymphatics improved
cognitive function in these animal models. With aging,
the lymphatic vessels that drain the brain become
dysfunctional and no longer drain as efficiently. The
“lymphedematous characteristics” of meningeal
lymphatic vessels in aged animals might be leading
to inefficient clearance of pathologic macromolecules
and potentially increased risk for neurodegenerative
diseases. Therefore, restoration of lymphatic flow may
be a novel class of therapies for neurodegeneration
associated with poor lymphatic drainage.
Program
discovery
process by the
PureTech team
• One of our academic collaborators discovered a functional lymphatic system in the meninges of the brain that forms the basis of our
meningeal lymphatics discovery research program. These meningeal lymphatics have been described as the “brain drain,” a route
through which macromolecules are flushed from the brain in cerebrospinal fluid. We believe that augmenting meningeal lymphatic
vasculature function may potentially improve outcomes for a range of neurodegenerative and neuroinflammatory conditions that are
not currently effectively treated.
CNS lymphatics: Harnessing an overlooked immune and metabolite transport network
Meningeal lymphatics may be
modulated to target neurological
disorders – spanning
neurodegeneration and oncology
Immune cells traffic to the
deep cervical lymph node
via the meningeal lymphatics
Transport mechanisms
shared by metabolites and
immune cells via “hot spots”
“Rediscovery” of the
meningeal lymphatics in 2015
Meningeal lymphatics are
key highways for transport
of metabolites – A(cid:1028)
Initial A(cid:1028) findings have been
validated and extended to clearance
of Tau and (cid:1027)-synuclein by
independent research groups
Intellectual
property
• We have broad intellectual property coverage around our meningeal lymphatics discovery research program, 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 December 31, 2020, our meningeal lymphatics discovery research program patent portfolio consists of eight patent families
comprising six U.S. patent applications, three international PCT applications and five foreign patent applications exclusively licensed
from the University of Virginia Licensing & Ventures Group, and one family of one U.S. application exclusively owned by PureTech. Any
patents to issue from the in-licensed patent applications are expected to expire in 2037 through 2041, exclusive of possible patent
term adjustments or extensions or other forms of exclusivity.
42 PureTech Health plc Annual report and accounts 2020
Strategic report
PureTech’s Founded Entities
Founded Entities with Controlling Interest or Right to Receive Royalties
Founded Entity
PureTech
Ownership1
Therapeutic
Candidate2
Indication
Non-Controlled Founded Entities with Royalty Interests
Stage of Development
Royalties3
19.3%
Plenity®4,5
GS1004
GS2004
GS3004
GS5004
8.2%
KarXT
D
D
D
D
D
P
Weight management
Adolescent weight management
Weight management in T2D/prediabetes
NASH/NAFLD
Functional constipation
Commercial Launch
Preclinical6
Phase 2
Phase 2 Ready6
Phase 3
Schizophrenia
Dementia-related psychosis
Phase 3
Phase 1b
Royalties
Royalties
Controlled Founded Entities
78.2%
FOL-004
P/D
Androgenetic alopecia
Phase 3 Ready
Royalties
49.5%
44.6%
78.0%
72.9%
VE303
VE416
VE202
VE800
Sonde One
(Mental Fitness)4
Sonde One
(Respiratory)4
ALV-107
ALV-304
ALV-306
B
B
B
B
D
D
P
P
P
High-risk CDI
Food allergy
IBD
Solid tumors
Phase 2
Phase 1/2
Phase 2 Ready
Phase 1
Depressive symptoms detection and
monitoring app
Respiratory risk detection and
monitoring app
Product and Clinical Validation
Commercial Release
IC/BPS
IBD
Chronic pouchitis
Preclinical
Preclinical
Preclinical
Description
Engineering hydrogels to enable the oral administration
of biologics
Continued advancement
of the platform
N/A
N/A
N/A
N/A
The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
Founded Entities Limited to Equity Interest
Founded Entity
PureTech
Ownership1
Description
33.7%
8.6%
Akili is a leading digital therapeutics company, combining scientific and clinical rigor with the ingenuity of the
tech industry while pursuing the 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 received clearance from the
FDA and European marketing authorization in June 2020 for EndeavorRx™7 (formerly known as AKL-T01) as
a prescription treatment for children with ADHD. Delivered through a captivating video game experience,
EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages
8-12 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue.
Vor is a clinical-stage cell therapy company that combines a novel patient engineering approach with
targeted therapies to provide a single company solution for patients suffering from hematological
malignancies. Vor’s proprietary platform leverages its expertise in HSC biology and genome engineering
to remove surface targets expressed by cancer cells by genetically modifying HSCs. Its lead therapeutic
candidate, VOR33, is in development for acute myeloid leukemia.
1
2
3
4
5
6
7
Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of December 31, 2020, including outstanding shares,
options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Karuna ownership is calculated on an outstanding voting
share basis as of March 4, 2021. Vor ownership is calculated on an outstanding voting share basis as of February 9, 2021.
With the exception of Plenity, candidates are investigational and have not been cleared by the FDA for use in the United States.
PureTech Health has a right to royalty payments as a percentage of net sales.
These therapeutic candidates are regulated as devices and their development has been approximately equated to phases of clinical development.
Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity.
To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be
taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away
if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe
and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.
Contingent on FDA review of the research plan.
EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type
ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of
Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered
for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the
disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.
PureTech Health plc Annual report and accounts 2020 43
Strategic report
PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Founded Entity PureTech Ownership1
Therapeutic Candidate2,3
Indication
Stage of Development
Gelesis4
19.3%
Plenity®5
GS100
GS200
GS300
GS500
D
D
D
D
D
Weight management
Adolescent weight management
Weight management in T2D/prediabetes
NASH/NAFLD
Functional constipation
Commercial Launch
Preclinical6
Phase 2
Phase 2 Ready6
Phase 3
• Gelesis is developing a novel category of therapies for obesity and GI-related chronic diseases. In April 2019, Gelesis received clearance from the FDA for
its first product, Plenity (Gelesis100), an aid for weight management in adults with a BMI of 25-40 kg/m2, when used in conjunction with diet and exercise.
In June 2020, Gelesis received a CE Mark for Plenity as a class III medical device indicated for weight loss in overweight and obese adults with a BMI of
25-40 kg/m2, when used in conjunction with diet and exercise, which allows Gelesis to market Plenity throughout the European Economic Area and in
other countries that recognize the CE Mark.
• 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 favorable safety and efficacy profile. Gelesis’ therapeutic candidates work in the GI tract and pass through
the body without being absorbed. Their superabsorbent hydrogels mimic some of the properties of raw vegetables. They are conveniently administered
in capsules and act locally in the stomach and intestines to reduce the caloric density of meals. They increase the volume and firmness of the food we
eat, similar to raw vegetables. Because Gelesis’ technology acts mechanically and is not systemically absorbed, the therapeutic candidates are treated as
devices for regulatory approval purposes.
Program
discovery
process by the
PureTech team
Patient need
and market
potential
• We were 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. We consulted with leading
obesity experts to brainstorm on the characteristics of an ideal approach, which we decided was an orally-administered mechanically
acting device, and we then conducted a worldwide search for compelling technologies meeting these criteria. We identified and
in-licensed the core intellectual property from one of our academic collaborators in October 2008, and we 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, and 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, M.D., Professor of Medicine and Pediatrics at Boston University School
of Medicine; Louis J Aronne, M.D., FACP, Director of the Comprehensive Weight Control Program at Weill Cornell Medicine; Arne
Astrup, M.D., Head of Department of Nutrition, Exercise and Sports at University of Copenhagen; Ken Fujioka, M.D., Director of the
Nutrition and Metabolic Research Center and the Center for Weight Management at the Scripps Clinic; James Hill, Ph.D., Chairman,
Department of Nutrition Sciences, Director, Nutrition Obesity Research Center, University of Alabama; Professor of Medicine
and Pediatrics, University of Colorado; Lee M Kaplan, M.D., Ph.D., Director of the Obesity, Metabolism and Nutrition Institute at
Massachusetts General Hospital; Bennett Shapiro, M.D., Co-Founder and Non-Executive Director at PureTech and former Executive
Vice President of Research for Merck; and Angelo Tremblay, Ph.D., Professor at Laval University.
• Excess weight is growing rapidly in prevalence worldwide, with approximately 70 percent of American adults struggling with
overweight and obesity. Globally there are more than 1.9 billion adults 18 years of age or older who have overweight and 600 million
who have obesity. Additionally, approximately 13.7 million American children and adolescents are estimated to have obesity. Obesity-
related conditions, such as heart disease, stroke, type 2 diabetes, NASH/NAFLD and certain types of cancer, are some of the leading
causes of preventable death. Functional constipation and NASH/NAFLD affect approximately 35 million and 80 to 100 million
individuals, respectively, in the United States. Type 2 diabetes and prediabetes affect approximately 32 million and 88 million
individuals, respectively, in the United States.
• Current treatments for patients with overweight and obesity 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.
While indicated for adults with a BMI of 25-40 kg/m2 when used in conjunction with diet and exercise, an important market segment
for Plenity is adults with BMI <35 kg/m² (approximately 130 million adults in the U.S.). The consumer expectations of weight loss within
this group and the desire for a strong safety profile provide a particularly differentiated opportunity for Plenity.
Milestones
achieved and
development
status
• 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.
• In June 2020, Gelesis also received a CE Mark for Plenity as a class III medical device indicated for weight loss in overweight and
obese adults with a BMI of 25-40 kg/m2, when used in conjunction with diet and exercise. Gelesis will now be able to market Plenity
throughout the European Economic Area and in other countries that recognize the CE Mark. Gelesis plans to bring Plenity to the U.S.
first, where it has been available to a limited extent since the second half of 2019 through an early experience program and since 2020
via a beta launch while the company ramps up its commercial operations and inventory for a broader launch in the second half of
2021. Gelesis also plans to seek FDA input on the requirements for expanding the Plenity label for treating adolescents.
• Gelesis has a partnership with Ro, a leading U.S. telehealth provider, to support the U.S. commercialization of Plenity. Gelesis also has
a partnership with China Medical System Holdings Ltd., or CMS, for the commercialization of Plenity in China, which was announced
in June 2020. Pursuant to the terms of the deal, CMS provided $35 million upfront in a combination of licensing fees and equity
investment, with the potential for an additional $388 million in future milestone payments as well as royalties.
1
2
3
4
5
As of December 31, 2020, PureTech’s percentage ownership of Gelesis was approximately 19.3 percent on a diluted basis. This calculation includes outstanding shares,
options, and warrants, but excludes unallocated shares authorized to be issued pursuant to equity incentive plans. PureTech has a right to royalty payments as a percentage
of net sales from Gelesis.
The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
These therapeutic candidates are regulated as devices and their development has been approximately equated to phases of clinical development. With the exception of
Plenity, candidates are investigational and have not been cleared by the FDA for use in the United States.
Gelesis’ completed and ongoing studies have been approved by the applicable reviewing Institutional Review Boards, or IRBs, as nonsignificant risk device studies.
Gelesis also has ongoing discovery efforts to expand its pipeline. Our board designees represent a minority of the members of the board of directors of Gelesis, and we
do not control the clinical or regulatory development or commercialization of Gelesis’ therapeutics and therapeutic candidates. We have an interest in Gelesis’ therapeutic
candidates through our minority equity investment as well as our right to royalty payments as a percentage of net sales pursuant to a license agreement between us and
Gelesis. Gelesis is well protected with a robust intellectual property portfolio. Gelesis was incorporated in February 2006.
Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity.
To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be
taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity
was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away
if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe
and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.
6 Contingent on FDA review of the research plan.
44 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Milestones
achieved and
development
status
(continued)
• Plenity was evaluated in a multicenter, double-blind, placebo-controlled pivotal study designed to assess change in body weight
in 436 adults with overweight or obesity (BMI >27 and >40 kg/m²) after six months of treatment. The study had two predefined co-
primary endpoints: at least 35 percent of patients taking Plenity achieving more than five percent weight loss (categorical endpoint)
and placebo-adjusted weight loss with a super-superiority margin of three percent. In addition, a prespecified analysis of simple
superiority was also performed. The study met and exceeded the predefined categorical endpoint, with 59 percent of adults in the
treatment group achieving weight loss of five percent or greater and losing on average 10 percent of their weight (22 pounds) and
3.5 inches from their waists within six months. The study did not meet the three percent super-superiority endpoint but demonstrated
superiority of the Plenity treatment over the placebo group ( – 6.4 percent vs. – 4.4 percent, P=0.0007). Plenity-treated individuals had
twice the odds of achieving at least five percent weight loss as compared to placebo (adjusted odds ratio: 2.0, P=0.0008).
Key findings from Plenity pivotal study
Responders
Adults achieving 5% or greater weight loss
Super Responders
Adults achieving 10% or greater weight loss
6 out of 10
26%
• 59% of adults with overweight or obesity had a clinically
meaningful 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*
TEAE = Treatment Emergent Adverse Event; for the safe and proper
use of Plenity, refer to the Instructions for use in the U.S. and EU.
• 26% of adults with overweight or obesity were super-responders
to 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 diarrhea, distended
abdomen, infrequent bowel movements and flatulence
• In addition, 26 percent of the adults who completed the treatment with Plenity were “super-responders,” defined as achieving at least
ten percent weight loss. These super-responders achieved an average of about 14 percent weight loss or approximately 30 pounds.
• The overall incidence of AEs in the Plenity treatment group was no different than placebo. The most common treatment related
adverse events, or TRAEs, were GI disorders (158 TRAEs in 84 (38 percent) subjects in the Plenity arm, compared to 105 events in
58 (28 percent) subjects receiving placebo), infections and infestations (two events in two (one percent) subjects with Plenity and
one events in one (one percent) subjects with placebo), and musculoskeletal and connective tissue disorders (three events in two
(one percent) subjects with Plenity and 0 in 0 (0 percent) subjects with placebo). There were no SAEs in the Plenity treatment group,
whereas there was one SAE in the placebo treatment group. For the safe and proper use of Plenity, refer to the Instructions for Use.
• Gelesis initiated a Phase 3 study of GS500 in functional constipation in the second half of 2020. A pilot study of 40 individuals showed
that a prototype of GS500 demonstrated a significant reduction in colonic transit time in patients with functional constipation by
approximately 18 hours compared to baseline (P=0.025 compared to placebo).
Expected
milestones
• Gelesis anticipates a broader U.S. launch of Plenity in the second half of 2021.
• In 2021, Gelesis expects to initiate a Phase 2 study of GS300 in NASH/NAFLD.
• Gelesis expects to enroll the first patient in a Phase 3 study of GS500 in functional constipation in 2021.
• Gelesis expects topline results from a Phase 2 study of GS200 in weight management and glycemic control in adults with type 2
diabetes and prediabetes in 2021. Data from a pilot study of GS200 demonstrated that administration of GS200 ten minutes prior
to a meal increased fullness throughout the entire day (P=0.012).
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
FDA
Clearance
Upcoming
Milestone
Gelesis’ pipeline
Therapeutic
Candidate3
Indication
(GELESIS100)5
Weight management in
overweight and obese patients
GS100
GS200
Weight management in
adolescent overweight
and obese patients
Weight management and
glycemic control in patients
with T2D and prediabetes
GS300
NAFLD/NASH
GS500
Functional constipation
(formerly classified as CIC)
Other preclinical programs: GS400 for IBD in preclinical stage
Phase in progress
Phase completed
Commercial
Targeted commercial
launch initiated;
Broader launch H2 2021
Seeking FDA input for
expanding Plenity label
to treat adolescents6
Phase 2 study
topline data 2021
Phase 2 study
initiation 20216
Phase 3 study FPI 2021
PureTech Health plc Annual report and accounts 2020 45
Strategic report
PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Founded Entity PureTech Ownership1
Therapeutic Candidate2,3
Indication
Stage of Development
Karuna4
8.2%
KarXT
P
Schizophrenia
Dementia-related psychosis
Phase 3
Phase 1b
• Karuna is developing novel therapies with the potential to transform the lives of people with disabling and potentially fatal neuropsychiatric disorders,
including schizophrenia and dementia-related psychosis.
• KarXT combines xanomeline, a muscarinic receptor agonist that has demonstrated decreases in multiple psychotic symptoms and improvements in
cognitive symptoms in placebo-controlled human trials in schizophrenia and AD, and trospium chloride as further described below, 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 in order to achieve
meaningful therapeutic benefit in patients with psychotic and cognitive disorders.
• Xanomeline was previously studied by Eli Lilly and Company, or Eli Lilly, in randomized, double-blind, placebo-controlled trials in schizophrenia with acute
psychosis and AD, demonstrating dose-dependent decreases in multiple psychotic symptoms and related behaviors, 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 our 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, diarrhea and increased salivation and sweating, collectively referred to as
cholinergic AEs, or ChAEs, which led Eli Lilly to discontinue development of xanomeline. By pairing xanomeline with trospium chloride, Karuna believes
KarXT could potentially maintain efficacy of xanomeline while ameliorating its ChAEs.
Program
discovery
process by the
PureTech team
• We were 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, realizing that any potential new approaches could have wider applicability. We 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. We invented and broadly filed patents to cover the
concept of combining a muscarinic receptor agonist with a peripherally acting antagonist, and we in-licensed xanomeline from Eli Lilly
in May 2012. Andrew Miller, Ph.D., the core team member who was running this program at PureTech became Karuna’s Chief Operating
Officer and we built a team of leading drug developers and neuroscientists around him, including Steven Paul, M.D., an expert in CNS
drug discovery and development. Karuna completed an initial public offering 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 is a prominent and debilitating symptom that occurs in many neuropsychiatric disorders, including schizophrenia,
dementia, bipolar disorder, major depressive disorder and inflammatory neurological diseases, such as multiple sclerosis, or MS,
but there are no existing medicines that sufficiently and safely treat psychosis and cognition impairments.
Milestones
achieved and
development
status
• There are approximately 2.7 million adults living with schizophrenia and about 8.4 million people living with dementia in the United
States, of which approximately 40 percent are diagnosed with the disease, with around 1.2 million experiencing symptoms of
psychosis. 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. 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.
• 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, reduced social drive and loss of motivation, or cognitive symptoms, such as changes in
working memory and attention, all of which currently lack any approved treatments. Current antipsychotics have modest efficacy
in many patients and significant side effects. 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, hyperlipidemia,
hypertension and cardiovascular disease. The clinical benefit of current antipsychotics is further limited by poor adherence.
• 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.
• In the February 2021 post-period, Karuna announced that results from the EMERGENT-1 Phase 2 clinical trial evaluating KarXT for the
treatment of schizophrenia were published in NEJM.
• In June 2020, Karuna announced next steps in the EMERGENT program, the clinical program evaluating KarXT for the treatment
of adults with schizophrenia, following the completion of a successful End-of-Phase 2 meeting with the FDA.
• The first Phase 3 trial, EMERGENT-2, was initiated in December 2020. This five-week, 1:1 randomized, flexible-dose, double-blind,
placebo-controlled, inpatient trial will enroll approximately 250 adults in the U.S. and evaluate the change in Positive and Negative
Syndrome Scale, or PANSS, total score at Week 5 of KarXT versus placebo as the primary outcome measure.
• EMERGENT-4, a 52-week, outpatient, open-label long-term safety and tolerability extension trial of EMERGENT-2 and EMERGENT-3,
was initiated in the first quarter of the 2021 post-period.
• In November 2019, Karuna announced topline results from EMERGENT-1, its Phase 2 clinical trial of KarXT for the treatment of acute
psychosis in patients with schizophrenia, in which KarXT met the trial’s primary endpoint with a statistically significant (p<0.0001) and
clinically meaningful 11.6 point mean reduction in total PANSS scores over placebo at week five (-17.4 KarXT vs. -5.9 placebo). Karuna
also observed a statistically significant 3.2 point mean reduction from baseline in the PANSS-positive subscale (-5.6 KarXT vs. -2.4
placebo) and a statistically significant 2.3 point mean reduction from baseline in the PANSS-negative subscale (-3.2 KarXT vs. -0.9
placebo) at week five (p<0.0001 and p<0.001, respectively). The total PANSS, PANSS-positive subscale, and the PANSS-negative
subscale had statistically significant separation at every assessment throughout the trial.
• 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 randomized, 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 ChAEs than reported with xanomeline
plus placebo, including nausea, vomiting, diarrhea and excess sweating and salivation. The overall ChAE rate was 64 percent on
xanomeline plus placebo compared to 34 percent on KarXT (p=0.016). The rate of ChAEs for volunteers receiving KarXT (34 percent)
was similar to the rate observed in volunteers receiving placebo during the lead-in period (32 percent), suggesting that the tolerability
of KarXT was more similar to the placebo lead-in period than to treatment with xanomeline plus placebo.
1
As of March 4, 2021, PureTech’s percentage ownership of Karuna was approximately 8.2 percent on an outstanding voting share basis. PureTech Health has a right to
royalty payments as a percentage of net sales from Karuna.
2 The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
3
4
Therapeutic candidates are investigational and have not been cleared by the FDA for use in the United States.
Karuna has an active IND on file with the FDA for KarXT. Karuna also has ongoing discovery efforts to expand its pipeline. We do not control the clinical or regulatory
development of Karuna’s product candidates. We do not have any board designees on Karuna’s board of directors and we are not responsible for the development or
commercialization of its therapeutic candidate. We have an interest in Karuna’s therapeutic candidates through our equity interest as well as our right to royalty payments
as a percentage of net sales of any commercialized product covered by the granted license pursuant to a license agreement between us and Karuna. Karuna is well-
protected with a robust intellectual property portfolio. The disclosure above is qualified in its entirety by reference to Karuna’s public filings with the SEC. Karuna was
incorporated in July 2009.
46 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Phase 2 clinical trial primary endpoint: PANSS total score at Week 5
Phase 2 EMERGENT-1 trial demonstrated clinically meaningful improvement on key secondary endpoints.
A. PANSS
B. PANSS
C. PANSS
D. CGI-S score5
positive subscale
negative subscale
Marder negative
e
n
i
l
e
s
a
b
m
o
r
f
e
g
n
a
h
C
0
-2.5
-5
-7.5
0
-1
-2
-3
-4
0
-1
-2
-3
-4
-5
0
-0.25
-0.5
-0.75
-1
-1.25
Baseline
2
4
Week
5
Baseline
2
4
Week
5
Baseline
2
4
Week
5
Baseline
2
4
3
Week
5
Placebo
KarXT
P<0.001
P<0.0001
Source: Karuna Therapeutics SVB Leerink Healthcare Conference 2021 Presentation
Milestones
achieved and
development
status
(continued)
• Karuna’s second Phase 1 study was a randomized, 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.
• Karuna has an exclusive license for xanomeline from Eli Lilly and has a patent portfolio more broadly covering selective muscarinic
targeting enabled by the KarXT approach.
Expected
milestones
• Karuna plans to initiate the second efficacy trial in its EMERGENT program, EMERGENT-3, in the first half of 2021.
• EMERGENT-5, a 52-week, outpatient, open-label long-term trial evaluating the safety of KarXT in adults with schizophrenia who have
not been enrolled in the EMERGENT-2 or EMERGENT-3 trials, is expected to commence in the first half of 2021.
• Karuna remains on track to initiate a Phase 2 trial evaluating KarXT for the treatment of psychosis in patients with schizophrenia who
have an inadequate response to current standard of care therapies in the second half of 2021. The trial will evaluate the efficacy
and safety of KarXT when dosed in conjunction with background antipsychotic treatment and its potential to improve symptoms in
patients who have not achieved an adequate response on their current antipsychotic treatment.
• The multi-cohort, placebo-controlled, inpatient Phase 1b dose-ranging trial evaluating the safety and tolerability of KarXT in healthy
elderly volunteers is ongoing. Karuna completed the first two cohorts in this trial, Cohorts 1 and 2, and expects data from the final
cohort, Cohort 3, in the second quarter of 2021.
Karuna’s pipeline
Therapeutic
Candidate3
Indication
Schizophrenia – psychosis
Schizophrenia – psychosis
in adults with an inadequate
response to standard of care6
Schizophrenia – negative and
cognitive symptoms7
Dementia-related psychosis
Undisclosed – muscarinic-
targeted pain candidate
Undisclosed – Target-agnostic
drug candidate8
KarXT
Other
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming Milestone
Remaining Phase 3 trials
(EMERGENT-3 and EMERGENT-5)
initiations H1 2021
Phase 2 initiation H2 2021
Phase 2 ready
Data from Cohort 3 in Phase 1b
healthy elderly volunteers Q2 2021
Karuna continues to monitor the impact of COVID-19 across all clinical trials and will provide updates on enrollment and completion timelines as appropriate.
5 Not the preferred analysis; figure shows analysis of CGI-S as a continuous variable.
6 Trial to evaluate KarXT when added to standard of care.
7 Planning stage, ongoing collection of data in EMERGENT program & inadequate response trial.
8
Note – pipeline supplied by Karuna Therapeutics. Shading of bars does not conform to key used for other Founded Entity pipelines within this document.
In collaboration with PsychoGenics.
PureTech Health plc Annual report and accounts 2020 47
Strategic report
PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Founded Entity PureTech Ownership1
Therapeutic Candidate2,3
Indication
Stage of Development
Follica4
78.2%
FOL-004
P/D
Androgenetic alopecia
Phase 3 Ready
• Follica is developing a regenerative biology platform designed to treat androgenetic alopecia, epithelial aging and other medical indications. Follica’s
approach is based on generating an “embryonic window” in adults via a series of skin disruptions, stimulating stem cells causing new hair follicles to
grow. We believe that Follica’s technology is the first observed to create new follicles and hair, followed by the application of specific compounds to
enhance the effect.
Program
discovery
process by the
PureTech team
Patient need
and market
potential
• We were interested in conditions of aging and focused on hair follicles given their importance in regulating human hair and skin
rejuvenation across many medical conditions. We engaged leading dermatologists and hair follicle experts and identified and
in-licensed intellectual property from George Cotsarelis, M.D., the Chair of the Department of Dermatology at the University of
Pennsylvania, on hair follicle neogenesis, or HFN, prior to its publication in the journal Nature. We 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 POC studies to prioritize
HFN inducing modalities and prioritize 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, M.D., Chairman of the Wellman Center for
Photomedicine at the Massachusetts General Hospital, Ken Washenik, M.D., Ph.D., 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. Additionally, the market is estimated to be $1 billion in the United States and
$3.5 billion globally. Only two drugs, both of which have demonstrated a 12 percent 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 aging-
related conditions and wound healing, such as facial skin rejuvenation.
Milestones
achieved and
development
status
• In December 2020, Follica announced the publication of a pilot study evaluating scalp skin disruption to promote hair growth in
FPHL in International Journal of Women’s Dermatology. The pilot study, led by Maryanne M. Senna, M.D., an Assistant Professor of
Dermatology at Harvard Medical School, demonstrated the treatment promoted hair growth over a four-month course of treatment.
• In June 2020, Follica announced the completion of a successful End-of-Phase 2 meeting with the FDA for its lead program to treat
male androgenetic alopecia, which supports the progression into Phase 3 development.
• 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. Follica has been optimizing
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.
• In December 2019, Follica announced topline results from the safety and efficacy optimization 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 percent 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 percent compared to baseline (p < 0.001, n = 48), reflecting a clinical benefit across the entire study population
and a substantially improved outcome seen with the optimal treatment regimen. Additionally, a prespecified analysis comparing
the 44 percent change in non-vellus hair count to a 12 percent historical benchmark set by approved pharmaceutical products
established statistical significance (p = 0.005).
Sample patient outcome from FOL-004 data
Screening
Day 85
Note: Results depicted in the images are above the average demonstrated in the optimization trial.
1
2
3
4
As of December 31, 2020, PureTech’s percentage ownership of Follica was approximately 78.2 percent on a diluted basis. This calculation includes outstanding shares,
options, and warrants, but excludes unallocated shares authorized to be issued pursuant to equity incentive plans. PureTech Health has a right to royalty payments as
a percentage of net sales from Follica.
The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
Therapeutic candidates are investigational and have not been cleared by the FDA for use in the United States.
Follica has an active IND on file with the FDA for FOL-004. Our board designees represent a majority of the members of the board of directors of Follica, but Follica has its
own independent management team. In January 2021, Tom Wiggans joined as Executive Chairman and Michael Davin joined as an independent member of the Board of
Directors. Mr. Wiggans has over 30 years of experience and most recently co-founded and served as Chairman and Chief Executive Officer of Dermira. Mr. Davin also has
over 30 years of experience, including 14 years as Chief Executive Officer at Cynosure. PureTech’s role in the development of Follica’s therapeutic candidates is through our
representation on its board of directors and our role as a majority shareholder. Follica is well-protected with a robust intellectual property portfolio. Follica was incorporated
in July 2005.
48 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Milestones
achieved and
development
status
(continued)
− The study was an endpoint-blinded, randomized, 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 SAEs. No AEs 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.
Proprietary in-office
treatment combines
targeted scalp
micro-disruption
device with a topical
on-market drug
to create and
grow new hairs
• Follica has studied the potential for its proprietary device approach to address other regenerative conditions, including female
pattern hair loss and facial skin rejuvenation.
Expected
milestones
• Follica plans to initiate a Phase 3 registration program in male androgenetic alopecia in 2021.
• Follica also has proprietary amplification compounds in development and ongoing discovery efforts to expand its pipeline.
Follica’s approach
Existing drugs
Hair transplant
Follica approach
(Device plus drug)
Thicken and maintain remaining hair
Moves remaining hair
Designed to grow new hair and thicken existing hair
Investigational device and new drug. Limited by United States law to investigational use.
Follica’s pipeline
Therapeutic
Candidate3
Indication
FOL-004
Androgenetic alopecia
Phase in progress
Phase completed
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming Milestone
Phase 3 registration
program initiation 2021
PureTech Health plc Annual report and accounts 2020 49
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Founded Entity PureTech Ownership1
Therapeutic Candidate2,3
Indication
Stage of Development
Vedanta4
49.5%
VE303
VE416
VE202
VE800
B
B
B
B
High-risk CDI
Food allergy
IBD
Solid tumors
Phase 2
Phase 1/2
Phase 2 Ready
Phase 1
• Vedanta is developing a potential 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 with 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, or 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 fecal transplants or fractions to defined, characterized biologic drugs.
Rationally defined bacterial consortia
STEP 1
STEP 2
STEP 3
Program
discovery
process by the
PureTech team
Patient need
and market
potential
Oral administration
in capsule form
Bacteria consortia are easily
administered in lyophilized
oral capsule form.
Colonization
of the intestine
The active ingredients travel down the
GI tract and colonize the intestine.
They shift the gut microbiota composition
and provide colonization resistance
against gut pathogens.
Stimulation of targeted
immune responses
They elicit a range of immune
responses – immunoregulatory
and immunopotentiating
• We were 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. We engaged with leading world-renowned experts in immunology,
including Dr. Ruslan Medzhitov, Professor of Immunobiology at Yale; Dr. Alexander Rudensky, a tri-institutional Professor at the
Memorial Sloan-Kettering Institute, the Rockefeller University, and Cornell University; Dr. Dan Littman, Professor of Molecular
Immunology at NYU; Dr. Brett Finlay, Professor at the University of British Columbia; and Dr. Kenya Honda, 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.
• We 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, we pioneered the concept of defined
consortia of microbes to modulate the immune system or treat bacterial infections. We 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.
• Clostridioides Difficile Infection: The Centers for Disease Control and Prevention considers CDI 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, fecal transplantation, is an experimental procedure which is
exceedingly difficult to standardize and scale and is fraught with potential safety issues.
• Inflammatory Bowel Disease: 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 U.S. public health concern 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 center
around allergen avoidance. Desensitization regimens in development have limited efficacy, are risky, require treatment for life and
may not be cost-effective. Vedanta’s therapeutic 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 targeting PD-1, PDL-1 and
CTLA-4 are only effective in 20 to 30 percent of patients. Common tumor types where checkpoint inhibitors are utilized include lung,
bladder, skin and renal cancers. Vedanta’s immuno-oncology therapeutic candidate, VE800, is designed to act in combination with
approved checkpoint inhibitors and potentially other immunotherapies to safely improve their efficacy. Initial proposed indications
include advanced and metastatic microsatellite stable, or MSS, colorectal cancers, which cause more than 46,000 deaths per year in
the U.S., gastric cancers, which causes more than 11,000 deaths per year in the U.S., and melanoma, which causes more than 9,000
deaths per year in the U.S.
• The Microbiome Field: Moving Beyond Fecal Transplants and Fractions
− Unlike fecal 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 colonization resistance against a range of intestinal infectious pathogens.
− Vedanta’s novel therapeutic candidates are administered as a lyophilized 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.
1
2
3
As of December 31, 2020, PureTech’s percentage ownership of Vedanta Biosciences was approximately 49.5 percent on a diluted basis. This calculation includes outstanding
shares, options, and warrants, but excludes unallocated shares authorized to be issued pursuant to equity incentive plans.
The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
Therapeutic candidates are investigational and have not been cleared by the FDA for use in the United States.
50 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Milestones
achieved and
development
status
• VE303, Vedanta’s therapeutic candidate for the treatment of high-risk CDI, is being studied in a Phase 2 clinical trial in patients at high
risk of rCDI. 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 colonization and accelerated gut
microbiota restoration after antibiotics.
• In June 2020, Vedanta announced topline Phase 1 clinical data in healthy volunteers showed that VE202, Vedanta’s therapeutic
candidate for IBD, was generally well-tolerated at all doses and demonstrated durable and dose-dependent colonization. The trial
was conducted by Janssen Research & Development, LLC, and a more complete study dataset and analyses will be submitted to
a peer-reviewed journal. Vedanta has regained full rights to the program and will owe Janssen single-digit royalty payments on net
sales of a commercialized product.
• In the January 2021 post-period, Vedanta announced a $25 million investment from Pfizer, as part of the Pfizer Breakthrough Growth
Initiative. The proceeds will fund the Phase 2 clinical trial of VE202 in IBD. Vedanta will retain control of all its programs and has
granted Pfizer a right of first negotiation on VE202. As part of the investment, Michael Vincent, M.D., Ph.D., Senior Vice President and
Chief Scientific Officer, Inflammation & Immunology Research Unit at Pfizer, joined Vedanta’s Scientific Advisory Board.
• VE416, Vedanta’s therapeutic candidate for food allergy, is being evaluated in a Phase 1/2 investigator sponsors trial at Mass General
Hospital for patients 12 years of age or older with a history of peanut allergy. The first patient was enrolled in July 2019 and the trial will
explore VE416 both as a monotherapy and in combination with an oral peanut immunotherapy.
• VE800, Vedanta’s immuno-oncology therapeutic candidate, is being evaluated in a first-in-patient clinical trial with Bristol-Myers
Squibb’s 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
program for the prevention of infection and reoccurrence of several multi-drug resistant organisms including carbapenem-resistant
Enterobacteriaceae extended-spectrum beta lactamase producers and vancomycin-resistant Enterococci 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 2021.
• Initiation of a Phase 2 study of VE202 in IBD is expected in 2021.
• Topline results from first-in-patient clinical trial of VE800 are anticipated in 2021.
• Topline data from the Phase 1/2 clinical trial of VE416 for food allergy are expected in 2022.
From correlation to causation
Field-leading platform for development of microbiome drugs
1
2
3
4
5
6
Interrogate human
interventional data to
generate hypothesis on
which bacteria correlate
with clinical response
Establish microbiome
role in driving
physiological response
in vivo, identify key taxa
responsible
Screen world’s
largest microbiome
library5 in proprietary
assays to select
strains with desired
pharmacology
Assemble, optimize
customized consortia
using computational
tools, co-culture
systems and animal
model testing
Manufacture cGMP-
grade drug supplies
at in-house, state-of-
the-art facility
Test defined consortia
in humans to establish
engraftment, safety
and efficacy
Correlation
Role of bacterial strains in disease pathology
Causation
Vedanta’s pipeline
Therapeutic
Candidate3
Indication
VE303
High-risk C. difficile (CDI)
VE416
Food allergy
VE202
Inflammatory bowel disease
VE800
Solid tumors
Phase in progress
Phase completed
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming
Milestone
Phase 2 topline
data readout 2021
Phase 1/2 topline
data readout 2022
Phase 2 initiation 2021
First-in-patient topline
data readout 2021
4
Active INDs or the foreign regulatory equivalent on file for VE202, VE303, VE416 and VE800. Our board designees represent a majority of the members of the board
of directors of Vedanta, but Vedanta has its own independent management team. Our role in the development of Vedanta’s therapeutic candidates is through our
representation on its board of directors and our role as a majority shareholder. Vedanta is well-protected with a robust intellectual property portfolio. Vedanta was
incorporated in December 2010.
5 >80,000 isolates obtained from >275 healthy donors from 4 continents, >3,000 WGS, extensively phenotyped.
PureTech Health plc Annual report and accounts 2020 51
Strategic report
PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Founded Entity PureTech Ownership1
Therapeutic Candidate2,3
Indication
Sonde4
44.6%
Sonde One
for Mental Fitness
Sonde One
for Respiratory
D
D
Depressive symptoms detection
and monitoring app
Respiratory risk detection
and monitoring app
Stage of Development
Product and
Clinical Validation
Commercial Release
• Sonde is developing a voice-based technology platform to measure health when a person speaks. Sonde’s proprietary technology is designed to sense
and analyze subtle changes in the voice to create a range of persistent brain, muscle and respiratory health measurements that provide a more complete
picture of health in just seconds.
• We believe Sonde’s Vocal Biomarker program 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.
Program
discovery
process by the
PureTech team
Patient need
and market
potential
• We were 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. We selected vocal features as a 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, Ph.D., at MIT’s Lincoln Laboratory in May 2016. Pursuant to an exclusive license
agreement with Dr. Quatieri, we paid an upfront fee and are obligated to pay annual license maintenance fees, both of which we
deem immaterial. Pursuant to the agreement, we are also obligated to pay MIT a low single-digit running royalty of net sales of
any commercialized product covered by the agreement and a mid-double-digit running royalty of net sales of any commercialized
product of a party that we sublicense. MIT is also eligible to receive milestone payments upon the achievement of specified
development, regulatory and commercial milestones up to $250,000. We 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.
• 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, AD, multiple sclerosis, Parkinson’s disease and cardiovascular and respiratory
diseases, to name just a few. Depression alone affects approximately 17 million adults and research suggests nearly 30 percent of
the adult population may be affected by depression during the COVID-19 pandemic 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 CNS diseases and disorders is hampered by the high cost and inherent variability of these
diseases and the reference diagnostic measures used to characterize 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 enrollment and drug development for a range of important conditions.
Milestones
achieved and
development
status
• Sonde has collected over one million voice samples from over 80,000 subjects as a part of the ongoing validation of its platform, and
it has also initiated research and development to expand its proprietary technology into AD, respiratory and cardiovascular disease,
as well as other health and wellness conditions, including mental health. 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-U.S. hospitals, clinics and academic medicine centers.
• In July 2020, Sonde launched Sonde One for Respiratory,
a new voice-enabled health detection and monitoring app,
to potentially help employers improve employee safety, meet
government mandates and satisfy their own administrative
needs as they reopen office doors in a COVID-19 environment.
Leveraging the company’s advanced vocal biomarker
platform and machine learning technology, Sonde One
combines 6-second voice analysis, CDC-informed COVID-19
questionnaire and body temperature reporting in one app
and is designed to give employees clear instructions about
where they can work within one minute. Sonde has partnered
with 12 enterprise companies in the U.S. and India including
corporate wellness solutions provider Wellworks for You to
bring the health screening tool to market, SHI International,
a 5,000-person global provider of technology products and
services and Portea Medical, India’s largest home health
company. The company began implementing the Sonde One
for Respiratory app in August, as it has the potential to help
employers bring employees back to the workplace.
Sonde One
A voice-enabled health detection and monitoring app that
leverages Sonde’s advanced vocal biomarker platform and
machine learning technology.
• In August 2020, Sonde acquired NeuroLex Labs, a leading voice-enabled survey and data acquisition platform. As part of the
agreement, Jim Schwoebel, the Chief Executive Officer of NeuroLex, has joined Sonde’s leadership team as Vice President, Data and
Research. The transaction did not involve any financial participation from PureTech.
1
2
3
4
As of December 31, 2020, PureTech’s percentage ownership of Sonde was approximately 44.6 percent on a diluted basis. This calculation includes outstanding shares,
options, and warrants, but excludes unallocated shares authorized to be issued pursuant to equity incentive plans.
The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
These therapeutic candidates are regulated as devices and their development has been approximately equated to phases of clinical development. Candidates are
investigational and have not been cleared by the FDA for use in the United States.
Sonde has obtained IRB approval independently or in collaboration with partner institutions that covers all past and ongoing human data collection for research in the
United States and abroad. We have two board designees on the board of directors of Sonde, but Sonde has its own independent management team. Our role in the
development of Sonde’s therapeutic candidates is through our representation on its board of directors and our role as a majority shareholder. Sonde is well-protected
with a robust intellectual property portfolio. Sonde was incorporated in February 2015.
52 PureTech Health plc Annual report and accounts 2020
Strategic report
PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
The vocal biomarker platform for health and wellness, population health, corporate wellness, telehealth
and remote monitoring services
1
2
3
4
Capture seconds of speech on
your app via Sonde’s API
Sonde analyzes voice samples
and provides score
Outline tasks/resources for your
users to maintain their health
Sonde’s health tracker
provides trending data
Milestones
achieved and
development
status
(continued)
• In November 2020, Sonde announced the launch of a new Developer Portal that provides organizations with access to Sonde’s
advanced vocal biomarker-based health check technology. As part of the launch, Sonde has introduced a new self-serve API and
documentation to allow developers to quickly, easily and autonomously integrate Sonde’s voice-enabled respiratory symptoms
checker into their own iOS and Android mobile applications.
• Sonde is also creating the first mobile app-based mental health fitness tracker, Sonde One for Mental Fitness, a new voice-enabled
health detection and monitoring app, to potentially help consumers, employers and payors improve engagement in services
to address employee and patient behavioral health needs. Leveraging the company’s advanced vocal biomarker platform and
machine learning technology, Sonde One for Mental Fitness will also combine 30 seconds of voice analysis with validated self-report
questions in one app and is designed to give users a timely indication of how important measures of mental health and symptoms
may be changing.
Expected
milestones
• Sonde expects to scale revenue and expand outside of respiratory.
• Sonde has ongoing discovery efforts to expand its pipeline.
Sonde’s pipeline
Therapeutic Candidate3
Health Condition
In Development
Product and
Clinical Validation
Commercial Release
Sonde App
Sonde API
Platform
Sonde One for Mental Fitness
Depressive symptoms
detection and monitoring app
Sonde One for Respiratory
Respiratory symptoms
detection and monitoring app
Respiratory Symptoms API
Depressive Symptoms API
Respiratory symptoms
detection and monitoring
Depressive symptoms
detection and monitoring
Phase in progress
Phase completed
PureTech Health plc Annual report and accounts 2020 53
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Founded Entity PureTech Ownership1
Therapeutic Candidate2,3
Indication
Stage of Development
Alivio4
78.0%
ALV-107
ALV-304
ALV-306
P
P
P
IC/BPS
IBD
Chronic pouchitis
Preclinical
Preclinical
Preclinical
• Alivio is pioneering inflammation-targeted disease immunomodulation, which involves selectively restoring immune homeostasis at inflamed sites in
the body, while having minimal impact on the rest of the body’s immune system, as a novel strategy to treat a range of chronic and acute inflammatory
disorders. This long sought-after approach has the potential to broadly enable new medicines to treat a range of chronic and acute inflammatory
disorders, including enabling the use of drugs which were previously limited by issues of systemic toxicity or PK. To achieve the vision of selective
immunomodulation, Alivio is advancing a proprietary platform centered on a class of self-assembling therapies that selectively bind to inflamed tissue.
Alivio’s platform has been validated in multiple labs using a range of animal models and indications and the work has been published in six journal
articles in peer-reviewed journals. The platform is able to entrap a wide array of APIs, including small molecules, biologics and nucleic acids. By selectively
targeting API pharmacology to inflamed tissue, Alivio is developing therapeutic candidates that are designed to selectively treat autoimmune disease
without having related systemic toxicities. Alivio’s pipeline includes candidates for IBD, chronic pouchitis and IC/BPS.
Alivio is pioneering targeted disease immunomodulation
Alivio approach
Inflammation-targeting
Inflammation-responsive
Inflammation
Drug release
Structured medicines with new
composition of matter
Selective binding to inflamed tissue over
healthy tissue to localize effects
Responsive release by
inflammatory enzymes
Program
discovery
process by the
PureTech team
Patient need
and market
potential
Milestones
achieved and
development
status
• 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, we were interested in identifying ways to address autoimmune disease
in a targeted manner. We were 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 signaling. 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. We worked with leading immunology experts and identified and in-licensed a technology
created by Alivio’s Co-Founder Jeffrey Karp, Ph.D., Professor of Medicine at Harvard Medical School and Brigham and Women’s
Hospital, and Robert Langer, Sc.D., David H Koch Institute Professor at MIT, that was centered around this unique inflammation-
targeting and inflammation-responsive platform in May 2016. In addition to repeating key academic work and developing therapeutic
candidates, Alivio continues to move those therapeutic candidates into the clinic while we oversee business development.
• Results in preclinical models suggest the Alivio technology could be applied to diseases such as IBD, chronic pouchitis, inflammatory
arthritis, organ transplantation and 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. Chronic pouchitis is estimated to affect between 20,000
and 44,000 people in the United States. IBD is estimated to affect approximately three million people in the United States.
• In December 2018, Alivio entered into a research collaboration, option and license agreement with Imbrium Therapeutics L.P., an
entity affiliated with Purdue Pharma LP, or Purdue, to advance Alivio’s therapeutic candidate, ALV-107, designed to be a potential non-
opioid for IC/BPS through clinical development and commercialization. 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 low single digit to low teens
royalties in tiers on product sales and over $260.0 million in research and development milestones. Imbrium does not currently have
any ownership interest in ALV-107, but does have an option to exercise for rights to develop ALV-107 under the agreement. Imbrium
also has an option to collaborate on a limited number of additional compounds utilizing Alivio’s inflammation-targeting technology,
as well as an option to invest in Alivio’s next equity financing. We are continuing to monitor the impact, if any, of the announced
Chapter 11 bankruptcy by Purdue on this collaboration agreement.
Expected
milestones
• Alivio expects an IND filing for ALV-107 for IC/BPS in 2021 and an IND for ALV-304 for IBD in 2023.
• Alivio is also evaluating the potential application of its proprietary platform to enable the oral administration of biologics in additional
indications. Alivio also has ongoing discovery efforts to expand its pipeline.
Alivio’s pipeline
Therapeutic Candidate3
Indication
Platform
Internal
GI programs
ALV-1075
Inflammation-targeting
lidocaine (intravesical)
ALV-3046
Inflammation-targeting
tacrolimus (oral)
ALV-306
Inflammation-targeting
tacrolimus (local)
Interstitial cystitis/
bladder pain syndrome
IBD
(Ulcerative colitis and Crohn’s disease)
Chronic pouchitis
Phase in progress
Phase completed
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3
Upcoming
Milestone
IND 2021
IND 2023
1
2
3
4
5
As of December 31, 2020, PureTech’s percentage ownership of Alivio was approximately 78.0 percent on a diluted basis. This calculation includes outstanding shares,
options, and warrants, but excludes unallocated shares authorized to be issued pursuant to equity incentive plans.
The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
Therapeutic candidates are investigational and have not been cleared by the FDA for use in the United States.
A majority of the board of directors of Alivio are PureTech employees. These PureTech employees actively manage the day-to-day business activities of Alivio and together
with Alivio’s Chief Executive Officer and the board of directors of Alivio, which is controlled by PureTech, direct the strategy and decision making in connection with the
clinical and regulatory development of Alivio’s therapeutic candidates. As a result, we exert substantial control over the clinical and regulatory development of Alivio’s
therapeutic candidates. Additionally, Alivio’s lab and office space is shared with our lab and office space. Alivio is well-protected with a robust intellectual property portfolio.
Alivio was incorporated in December 2015.
ALV-107 preclinical development until its IND filing was supported, in part, by a $3.3 million grant from the U.S. Department of Defense and in collaboration with Purdue
Pharma LP (Imbrium Therapeutics).
6 ALV-304 preclinical research and development activities will be supported, in part, by a $3.3 million grant from the U.S. Department of Defense.
54 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has a Controlling Interest or the Right to Receive Royalties, in Order of Development Stage
Founded Entity PureTech Ownership1
Description
Entrega2
72.9%
Engineering hydrogels to enable the oral administration
of biologics
Stage of Development
Continued advancement of the platform
• Entrega is focused on the oral administration of biologics, vaccines and
other drugs that are otherwise not efficiently absorbed when taken orally.
The vast majority of biologic drugs, including peptides, proteins and
other macromolecules, are currently administered by injection, which can
present challenges for healthcare administration and compliance with
treatment regimes. Entrega 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.
• Entrega’s technology platform is an innovative approach to oral
administration which uses a proprietary, customizable hydrogel dosage
form to control local fluid microenvironments in the GI tract in an effort to
both enhance absorption and reduce the variability of drug exposure.
Program
discovery
process by the
PureTech team
• We were interested in enabling the oral administration of biologics, which has been a long-standing problem in drug development.
We engaged with leading experts in drug administration, including Robert Langer, Sc.D., and screened over 100 technologies and
the initial platform was licensed from Samir Mitragotri, Ph.D., when he was Professor of Chemical Engineering at UC Santa Barbara
(currently Hiller Professor of Bioengineering and Hansjorg Wyss Professor of Biologically Inspired Engineering at Harvard University).
We later enhanced this platform with intellectual property developed by our team.
• Other scientific and business advisors include Colin Gardner, Ph.D., former Chief Scientific Officer of Transform Pharmaceuticals,
former Senior Vice President of Research and Site Head at Johnson & Johnson and formerly Vice President of Pharmaceutical R&D
at Merck & Co., Inc., or Merck, Rodney Pearlman, Ph.D., formerly Chief Executive Officer of Nuon Therapeutics, President and Chief
Executive Officer of Saegis Pharmaceuticals and Director of Pharmaceutical R&D at Genentech, Robert Armstrong, Ph.D., Co-
Founder and Chief Executive Officer of Boston Pharmaceuticals and Mr. Howie Rosen, former President of ALZA.
• To validate its technology, Entrega generated POC preclinical data demonstrating administration 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 administration technology to certain Eli Lilly therapeutic candidates. In 2020, the partnership was extended into 2021.
• Entrega has ongoing discovery efforts to expand its pipeline.
Milestones
achieved and
development
status
Expected
milestones
1
2
As of December 31, 2020, PureTech’s percentage ownership of Entrega was approximately 72.9 percent on a diluted basis. This calculation includes outstanding shares,
options, and warrants, but excludes unallocated shares authorized to be issued pursuant to equity incentive plans.
The management team of Entrega consists of PureTech employees, and a majority of the board of directors are PureTech designees. These PureTech employees actively
manage the day-to-day business activities of Entrega and together with the board of directors of Entrega, which is controlled by PureTech, direct the strategy and decision
making in connection with the clinical and regulatory development of Entrega’s therapeutic candidates. As a result, we exert substantial control over the clinical and
regulatory development of Entrega’s therapeutic candidates. Additionally, Entrega’s lab and office space is shared with our lab and office space. Entrega is well-protected
with a robust intellectual property portfolio. Entrega was incorporated in December 2010.
PureTech Health plc Annual report and accounts 2020 55
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has an Equity Interest, in Order of Development Stage
Founded Entity PureTech Ownership1
Therapeutic Candidate2,3
Indication
Stage of Development
Akili4
33.7%
EndeavorRx™5 (AKL-T01)
D
Cognitive dysfunction in depression
D
Cognitive dysfunction in multiple sclerosis D
D
Autism spectrum disorder
D
Post-COVID cognitive dysfunction
ADHD
Major depressive disorder
Multiple sclerosis
Autism spectrum disorder
COVID brain fog
Scaled commercial launch
Discovery and research
Discovery and research
Discovery and research
Discovery and research
• Akili is a leading digital therapeutics company, combining scientific and clinical rigor with the ingenuity of the tech industry while pursuing the 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 is evaluating a number of technologies and potential
new digital medicines designed to target neural systems to improve associated cognitive functions.
• Akili’s EndeavorRx treatment is based on a patented technology that is designed to deploy sensory and motor stimuli that target and activate 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 personalized treatments for patients across a range of neuropsychiatric conditions and
allow patients to experience medicine in a new way.
Program
discovery
process by the
PureTech team
Patient need
and market
potential
• We were interested in identifying novel approaches to measure and improve cognition in a safe and non-invasive manner.
We 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 we identified and in-licensed from the University of California,
San Francisco, or UCSF, the intellectual property invented by Dr. Adam Gazzaley, M.D., Ph.D., Professor of Neurology, Psychiatry
and Physiology at UCSF and the inventor of the SSME platform technology, in October 2013 before his work was published as a cover
story in the journal Nature. We 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.
We helped to build development and commercial teams and raise funds. One of the core PureTech team members who helped lead
the identification and platform development is now the Chief Executive Officer of Akili.
• Akili’s FDA-cleared product, EndeavorRx™, 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, Ph.D., 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.
• Cognitive dysfunction is a key feature of many neuropsychiatric disorders, including ADHD, ASD, MS, major depressive disorder, or
MDD, mild cognitive impairment, or MCI, traumatic brain injury, or TBI, and AD. The treatment of the cognitive dysfunction associated
with these conditions is only partially served, or not served at all, by currently available medications or by in-person behavioral
therapy. There are approximately 6.4 million pediatric ADHD patients in the United States and this market – and other markets where
Akili’s cognitive dysfunction targeting products may address the cognitive dysfunction associated with neuropsychiatric disorders –
represent significant potential opportunities for the company.
• Evidence is mounting on long-term neurological and cognitive symptoms that can persist in some COVID-19 patients after initial diagnosis,
even after the virus is no longer detected in the body. A study published in Neuropsychopharmacology led by Drs. Abhishek Jaywant and
Faith Gunning at Weill Cornell Medicine and NewYork-Presbyterian found that difficulties in attention, multitasking, and processing speed
were common in hospitalized patients recovering from COVID-196. Of the patients in their study, 81 percent exhibited some degree of
cognitive impairment6. Recent research also shows these cognitive impairments may persist posthospitalization and commonly occur in
“post-COVID long haulers” or “long COVID” patients. These impairments can have a significant impact on survivors’ daily functioning
and quality of life, impacting the ability of most COVID-19 long haulers to work for six months or more according to a recent study7.
Milestones
achieved and
development
status
• In June 2020, Akili announced that the FDA has granted clearance to market EndeavorRx as a prescription treatment for improving
attention function in children with ADHD. Delivered through a captivating video game experience, EndeavorRx is indicated to
improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or
combined-type ADHD, who have a demonstrated attention issue5.
• The FDA clearance followed the April 2020 announcement that ENDEAVOR™ would be available for use for a limited time by
children with ADHD and their families in response to new guidance from the FDA recognizing the need for access to certain low-risk
clinically-validated digital health devices for psychiatric conditions, including ADHD, during the COVID-19 pandemic.
• Also in June 2020, Akili announced that it had received approval to market EndeavorRx in Europe. Akili received a CE Mark
certification for EndeavorRx as a prescription-only digital therapeutic intended for the treatment of attention and inhibitory control
deficits in pediatric patients with ADHD. The CE Mark approval enables the future marketing of EndeavorRx in European Economic
Area member countries.
• Akili’s EndeavorRx was evaluated in a multi-center, randomized, blinded, controlled pivotal study in 348 pediatric 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, or T.O.V.A.®, compared to an expectancy matched digital
control (p=0.006). There were no SAEs or discontinuations. Of participants using EndeavorRx, 9.2 percent experienced TRAEs which
were mild and included frustration (2.8 percent) and headache (1.7 percent). Mean patient compliance with AKL-T01 was 83 percent
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 the April 2021 post-period, Akili announced collaborations with Weill Cornell Medicine, NewYork-Presbyterian Hospital and
Vanderbilt University Medical Center to evaluate Akili digital therapeutic AKL-T01 as a treatment for patients with cognitive
dysfunction following COVID-19 (also known as “COVID brain fog”). Under each collaboration, Akili will work with research teams at
each institution to conduct two separate randomized, controlled clinical studies evaluating AKL-T01’s ability to target and improve
cognitive functioning in COVID-19 survivors who have exhibited a deficit in cognition.
• In January 2020, Akili announced that its STARS Adjunct trial achieved its primary endpoint evaluating the effects of EndeavorRx in
children with ADHD when used with and without stimulant medication. The study achieved its predefined primary efficacy outcome,
demonstrating a statistically significant improvement in the ADHD IRS from baseline after one month of treatment (p<0.001) in both
children taking stimulant medications and in those not taking stimulants. In the March 2021 post-period, Nature Digital Medicine
published the full results from the STARS Adjunct trial.
• In March 2019, Akili entered into a strategic partnership with Shionogi for the development and commercialization of AKL-T01
(in development for children with ADHD) and AKL-T02 (in development for children with ASD) in Japan and Taiwan. Under the terms
of the agreement, Akili will build and own the platform technology and received upfront payments totaling $20 million with potential
milestone payments for Japan and Taiwan commercialization of up to an additional $105 million in addition to royalties. Akili and
Shionogi have initiated a clinical study in preparation for a regulatory submission in Japan.
1
As of December 31, 2020, PureTech’s percentage ownership of Akili was approximately 33.7 percent on a diluted basis. This calculation includes outstanding shares, options,
and warrants, but excludes unallocated shares authorized to be issued pursuant to equity incentive plans.
2 The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
3
These therapeutic candidates are regulated as devices and their development has been approximately equated to phases of clinical development. With the exception of
EndeavorRx, candidates are investigational and have not been cleared by the FDA for use in the United States.
56 PureTech Health plc Annual report and accounts 2020
Strategic report PureTech’s Founded Entities — continued
Founded Entities in which PureTech has an Equity Interest, in Order of Development Stage
Milestones
achieved and
development
status
(continued)
• 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 MDD. 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 leveraging new digital platforms for its digital therapeutic products to enable launch in a variety of models. The company is offering
AkiliCare™, integrated components that enable streamlined patient service, data processing and distribution functions in 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.
Expected
milestones
• Scaled approach to commercial launch of EndeavorRx in 2021.
• With a near-term focus on launching the EndeavorRx prescription treatment in the U.S. first, Akili is exploring expansion opportunities
in Europe as part of its global strategy.
Akili’s core technologies
Proprietary mechanics
designed to 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
Akili’s pipeline
Commercial Path3
Research
Development
Commercial
Pediatric ADHD 8-12 yrs (U.S.)
Pediatric ADHD (EU)
SSME
Engine
Pediatric ADHD (Japan)
Pediatric ADHD 13-17 yrs
Adult ADHD 18+ yrs
Discovery and Research
Cognitive Dysfunction in Depression (MDD)
Cognitive Dysfunction in Multiple Sclerosis (MS)
Autism Spectrum Disorder (ASD)
Post-COVID Cognitive Dysfunction (COVID Brain Fog)
Cognitive Assessment: Attention and Speed of Processing rapid test
BBT (Body/Brain Trainer): Attention/Working Memory
SNAV (Spatial Navigation): Episodic Memory
SSME
Engine
BBT
Engine
SNAV
Engine
Discovery: Early scientific and product discovery for the technology Research: Early scientific and clinical research for the technology
Development: Product and clinical development supporting defined regulatory pathway Commercial: Product available for commercialization
4
5
Multiple IRBs have determined AKL-T01 to be a non-significant risk device. Akili has obtained IRB approval independently or in collaboration with independent clinical
research institutions for all past and ongoing human data collection for clinical research in the United States. We do not control the clinical or regulatory development of
Akili’s product candidates. We do not have a direct interest in Akili’s therapeutic or therapeutic candidates. Our interest in Akili’s therapeutic and therapeutic candidates is
limited to our equity interest in Akili and any potential appreciation in the value of such equity interest, and we do not control the clinical or regulatory development of Akili’s
therapeutic candidates. Akili is well-protected with a robust intellectual property portfolio. Akili was incorporated in February 2012.
EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type
ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of
Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered
for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the
disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.
Jaywant et al. Neuropsychopharmacol. (2021).
6
7 David et al. Preprint. (2020).
PureTech Health plc Annual report and accounts 2020 57
Strategic report
PureTech’s Founded Entities — continued
Founded Entities in which PureTech has an Equity Interest, in Order of Development Stage
Founded Entity PureTech Ownership1
Therapeutic Candidate2,3
Indication
Vor4
8.6%
VOR33
(CD33)
VCAR33
B
B
Acute myeloid leukemia
Myelodysplastic syndromes,
myeloproliferative neoplasms
Bridge-to-transplant AML
Stage of Development
Phase 1/2a Ready
Preclinical
Phase 1/2
• Vor is a clinical-stage cell therapy company that combines a novel patient engineering approach with targeted therapies to provide a single company
solution for patients suffering from hematological malignancies. The only way for many of these patients to achieve durable remission or a cure is
through hematopoietic stem cell transplant, or HSCT. Despite this, approximately 40 percent of AML patients relapse following such transplant and face
a prognosis with a two-year survival rate of less than 20 percent. Targeted therapies are an effective treatment for many patients in transplant settings
who relapse, though they are limited by toxicities resulting from the expression of the surface targets on healthy cells, including these new transplanted
cells, which is referred to as on-target toxicity.
Changing the traditional tumor target paradigm
Traditional paradigm
Vor treatment approach
On-target toxicity
Cancer
cell target
expression
Healthy
cell target
expression
Vor paradigm
Cancer
cell target
expression
Healthy
cell target
expression
HSCs matched
from healthy
donor
Genome
engineering
removes surface
targets (eg: CD33,
CD123, CLL-1)
Patient receiving
Vor eHSC
transplant
Engineered patient
with engrafted
Vor eHSCs
Companion
therapeutics
Treatment-resistant marrow
unlocking the potential of
companion therapeutics
• Vor’s proprietary platform leverages its expertise in HSC biology and genome engineering to remove surface targets expressed by cancer cells by
genetically modifying HSCs. By removing these targets, Vor makes these HSCs and their progeny treatment resistant to targeted therapies and enables
these treatments to selectively destroy cancerous cells while sparing healthy cells. As a result, Vor’s engineered HSCs, or eHSCs, are designed to limit the
on-target toxicities associated with these targeted therapies, or companion therapeutics, thereby enhancing their utility and broadening their applicability.
• Vor’s platform and expertise allow it to advance its goal of replacing the patient’s HSCs with next-generation, treatment-resistant eHSCs that unlock the
potential of highly-potent targeted therapies.
Program
discovery
process by the
PureTech team
• We were interested in approaches to treat hematological malignancies that currently have poor response rates or poor adverse event
profiles despite recent advances in cell therapies and targeted therapies. We engaged leading hematological cancer specialists and
we became aware of work from the laboratory of Vor Scientific Board Chair Siddhartha Mukherjee, M.D., Ph.D., Assistant Professor
of Medicine at Columbia University and Pulitzer Prize-winning author of The Emperor of All Maladies: A Biography of Cancer.
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. We worked with Dr. Mukherjee on this intellectual property, which
Vor exclusively in-licensed from Columbia in April 2016, and on advancing this concept through critical POC experiments. With
our support, Vor secured additional intellectual property rights (both in-licensed from Columbia and owned by Vor), assembled an
excellent research team and completed a round of fundraising.
• In July 2019, Bill Lundberg, M.D., was appointed to Vor’s Board of Directors. In August 2019, Robert Ang, MBBS, MBA, was appointed
President and Chief Executive Officer of Vor. In May 2020, Vor announced the appointment of Nathan Jorgensen, Ph.D., as Chief
Financial Officer. In July 2020, Vor announced the closing of a $110 million Series B financing and the appointments of Daniella
Beckman and David Lubner to its Board of Directors and Christopher Slapak, M.D., as Chief Medical Officer. In August 2020, Vor
announced the appointment of John King as Chief Commercial Officer, and in October 2020 Vor announced the appointment of
Matthew Patterson to its Board of Directors.
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. There are an estimated 42,500 new diagnoses of AML each year in the United States, Europe and
Japan. The median five-year survival rate for patients with AML is less than 30 percent, but there are significant differences in
prognosis depending on several factors, including the age of the patient at diagnosis.
Milestones
achieved and
development
status
• Targeted therapies, such as CAR-T cells and bispecific antibodies, antibody-drug conjugates and conventional mAbs, have shown
clinical activity, particularly in patients with certain hematologic 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 with limited impact on a patient’s normal cells.
• VOR33 is Vor’s eHSC therapeutic candidate designed to transform the standard of care in AML and potentially other myeloid
malignancies. To create VOR33, Vor genetically modifies donor HSCs in order to remove the CD33 surface target that is highly
expressed in most AML cells. In preclinical studies, Vor observed that the removal of CD33 had no deleterious effects on the
differentiation or function of hematopoietic cells, but it provided robust protection of the healthy donor HSCs from the cytotoxic
effects of CD33-directed companion therapeutics. Vor intends to develop VOR33 as an HSC transplant therapeutic candidate to
replace the standard of care in transplant settings. Once the VOR33 cells have engrafted, patients can potentially be treated with
anti-CD33 therapies, such as Mylotarg or a CAR-T therapy therapeutic candidate, with limited on-target toxicity. The combination of
VOR33 and CD33-directed therapies has the potential to lead to durable anti-tumor activity.
• In the February 2021 post-period, Vor announced the successful closing of its initial public offering of common stock on the Nasdaq
Global Market under the symbol “VOR.” The aggregate gross proceeds to Vor from the offering, before deducting the underwriting
discounts and commissions and other offering expenses payable by Vor, were approximately $203.4 million.
1
As of February 9, 2021, PureTech’s percentage ownership of Vor was approximately 8.6 percent on an outstanding voting share basis. This calculation includes outstanding
shares, options, and warrants, but excludes unallocated shares authorized to be issued pursuant to equity incentive plans.
2 The letters next to the therapeutic candidates denote whether the therapeutic candidate is a pharmaceutical product (P), biologic (B) or device (D).
3
4
Therapeutic candidates are investigational and have not been cleared by the FDA for use in the United States.
Vor has an active IND on file with the FDA for VOR33 and an active IND is on file for VCAR33. PureTech does not have a direct interest in Vor’s therapeutic candidates or its
proprietary platform. PureTech’s interest in Vor’s therapeutic candidates and proprietary platforms is limited to its non-controlling equity interest in Vor and any potential
appreciation in the value of such equity interest and PureTech does not control the clinical or regulatory development of Vor’s therapeutic candidates. Vor is well-protected
with a robust intellectual property portfolio. Vor was incorporated in December 2015.
58 PureTech Health plc Annual report and accounts 2020
Strategic report
PureTech’s Founded Entities — continued
Founded Entities in which PureTech has an Equity Interest, in Order of Development Stage
In the February 2021 post-period, Vor announced the successful closing of its initial public offering of common stock on
the Nasdaq Global Market under the symbol “VOR”
Milestones
achieved and
development
status
(continued)
• In the January 2021 post-period, Vor announced that the FDA had accepted the company’s IND application for VOR33.
• In November 2020, Vor announced an exclusive licensing agreement with the NCI, part of the NIH, for intellectual property related to
a clinical-stage anti-CD33 CAR-T therapy candidate, VCAR33. VCAR33 is a CD33-directed CAR-T therapy that Vor intends to initially
develop as a bridge-to-transplant monotherapy for relapsed/refractory AML where patients have failed prior lines of therapy and
need further treatment to achieve morphologic remission and, if possible, subsequent HSCT. VCAR33 is currently being evaluated in
a multi-site, investigator-initiated Phase 1/2 clinical trial in young adult and pediatric patients with relapsed/refractory AML sponsored
and overseen by the National Marrow Donor Program, or NMDP. If this trial is successful, Vor expects to continue development of
VCAR33 both as a monotherapy treatment for relapsed/refractory AML in the bridge-to-transplant setting and in combination with
VOR33 as part of the VOR33/VCAR33 Treatment System in the post-HSCT setting.
• Vor intends to investigate the VOR33/VCAR33 Treatment System, entailing VOR33 eHSC therapy followed by VCAR33 as a companion
therapeutic, initially for transplant-eligible patients suffering from AML. Vor believes VCAR33 could be a potent anticancer therapy that,
when combined with VOR33, could help obviate severe on-target myeloablative toxicities and unlock the efficacy potential of VCAR33.
• Leveraging its proprietary platform, Vor has identified additional surface targets as well as multiple genome engineering approaches.
Additionally, Vor is conducting ongoing discovery efforts on undisclosed targets for non-myeloid malignancies. PureTech does not
control the clinical or regulatory development of Vor’s therapeutic candidates.
Expected
milestones
• Vor plans to enroll the first patient in a Phase 1/2a clinical trial for VOR33 in the second quarter of 2021. Vor expects initial human
engraftment and protection data from this trial to be reported in late 2021 or in the first half of 2022.
• Vor expects initial monotherapy clinical proof-of-concept data for VCAR33 in 2022, depending on investigator’s timing of data release.
• Vor expects to submit an IND with the FDA for the VOR33/VCAR33 Treatment System in the second half of 2022, following data
from its first-in-human trial evaluating VOR33 and the NMDP-sponsored Phase 1/2 clinical trial studying the VCAR33 construct.
Vor’s pipeline
Programs3
Indication
VOR33 (CD33)
Acute myeloid leukemia
Myelodysplastic syndromes,
myeloproliferative neoplasms
Discovery/
Preclinical
Phase 1
Phase 2
Phase 3 Upcoming Milestone
FPI Phase 1/2a
Q2 2021
VCAR33
Bridge-to-transplant AML
Phase 1 data readout 2022
VOR33/VCAR33
(Treatment System)
Acute myeloid leukemia
Phase in progress
Phase completed
IND filing H2 2022 following initial
VOR33 and NMDP clinical data5
5
The VCAR33 construct is being studied in a Phase 1/2 clinical trial sponsored by the NMDP, and the timing of the data release is dependent on the investigators conducting
the trial.
PureTech Health plc Annual report and accounts 2020 59
Strategic report ESG Report:
Our Approach to ESG and Sustainable Business
For PureTech, Environmental, Social and Governance (ESG) means building a sustainable business so that we can
deliver on our mission to treat patients with underserved diseases. It is also our employees and stakeholders who
make our mission possible. Our approach to ESG focuses on three areas: Patients, People and Planet. Additionally,
we recognize the importance of good governance in delivering ESG outcomes. We are increasing our level of
reporting and transparency around ESG as we build a stronger and more sustainable organization.
This ESG Report contains disclosure of ESG metrics that are relevant to PureTech’s business strategy and were evaluated by
PureTech’s ESG committee. The information in this section will serve as a benchmark for future targets and strategies that will
be used to track PureTech’s performance on key areas over time.
This ESG Report generally includes data only for the PureTech level; however, in accordance with new UK rules contained in the
Companies Act covering the reporting of energy and emissions data, PureTech reports emissions data on a consolidated basis
for the Group (as defined in Note 1 to the financial statements).
Unless otherwise noted, this ESG Report outlines our ESG performance for the period January 1, 2020 through
December 31, 2020.
2020 ESG Highlights
At PureTech, our goal is to make a difference in human health by tackling problems in innovative ways to develop new classes
of medicines for serious and underserved diseases. We achieve this by identifying and advancing highly innovative therapeutic
candidates, either through our Wholly Owned Pipeline or through the talented teams we help build at our Founded Entities.
Patients
People
Planet
26 therapeutic
candidates
15
clinical stage
2 taken from inception to FDA
and EU regulatory clearance
One of only 9 companies in the
FTSE 250 to have a woman CEO1
37.5%
Gender diversity: percentage of women
on the Board2
Up to 28 training hours per
employee provided in 2020
37.5%
Cultural diversity: percentage of senior
executives with a culturally diverse background2
Total market-based GHG emissions declined in 2020 vs 20183:
2018
1,378.7 tCO2e
2020
379.4 tCO2e
-72%
Our headquarters building is certified LEED Silver, which will4:
use 35% less energy than the LEED baseline across heating, cooling,
lighting, hot water production and other operational functions and
-35%
generate 47% fewer greenhouse gas (GHG) emissions than the
American Institute of Architects (AIA) 2030 Challenge baseline
-47%
1 Source: Hampton-Alexander Review FTSE Women Leaders, 2020.
2 Board composition as at December 31, 2020.
3
PureTech relocated its Corporate Headquarters in mid-2019. As such, 2018 is used as the baseline year for comparison as it represents the last full year of data from one
location. 2018 data is reported on a consolidated basis for the entities comprising the Group as of 2018, which, in addition to the Group as of 2020, included Akili, Gelesis,
Karuna and Vor.
4 Based on normal building use.
60 PureTech Health plc Annual report and accounts 2020
ESG ESG Report — continued
Patients
As a clinical-stage biotherapeutics company focused
on discovering, developing and commercializing highly
differentiated medicines for devastating diseases, we
pride ourselves on thinking differently and on being at the
forefront of innovation. After inventing or identifying an
innovative program, we rigorously evaluate it to answer
our key “skeptical” questions. If it fails, there has been
little investment, and PureTech has 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.
PureTech has established a broad and deep pipeline of
disease-based drug discovery and development programs
through our experienced research and development team,
and by working with our network of leading scientists,
clinicians and industry leaders.
We are committed to our work so that we can play a vital role
in improving the health of patients across the globe.
Our commitment to patient safety
Patient safety is a high priority for PureTech. When sponsoring
an IND application, we recognize our responsibility both to
clinical trial participants and to regulatory agencies. We have
detailed protocols in place including Standard Operating
Procedure for Adverse Event Reporting, and our employees
who are engaged with clinical trials – either as clinical staff
or its designee – are responsible for conducting such trials in
compliance with good clinical practice.
PureTech is committed to ensuring that all of its clinical trials
follow the standards of the International Conference on
Harmonisation (ICH) Good Clinical Practice guidelines and
the World Medical Association Declaration of Helsinki on
the Ethical Principles for Medical Research Involving Human
Subjects. The Company applies these standards to all trials
conducted by or on its behalf. To ensure that the trials meet
these standards, PureTech seeks approval for clinical trials of
investigative medicines from independent ethics committees
and local regulatory authorities.
To confirm that a patient is aware of risks involved in
a clinical trial, the Company ensures that every patient
has voluntarily committed to the trial and has provided
informed consent of their willingness to participate. Informed
consent requirements are set out in the PureTech Clinical
Research Policy.
PureTech relies on the use of human biological specimens
in the development of its innovative therapies, and its
Human Biological Specimens Policy specifies that collecting,
obtaining, storing and using human biological samples
requires informed consent, and that PureTech treat both
donors and specimens with respect. PureTech’s Chief
Scientific Officer is responsible for ensuring that PureTech
follows, 1) applicable bioethical principles, and 2) U.S.
and applicable international regulatory requirements
and standards.
Though the COVID-19 pandemic necessitated a temporary
pause for some clinical trials at PureTech’s Founded Entities,
the Company does not believe any clinical trials have been
materially delayed. All current timeline guidance accounts
for any interruptions over the past few months, and PureTech
will continue to monitor the effects of the pandemic across
the organization
Product Safety
None of the therapeutic candidates from within PureTech’s
Wholly Owned Pipeline are currently on the market. In 2020,
PureTech received no FDA warning letters, no products were
delayed due to a lack of regulatory approval and no product
recalls took place.
Animal testing
PureTech conducts animal testing only when it is necessary
to advance the development of therapeutics that will
effectively treat disease. Most of our studies involving animal
subjects are conducted at external qualified and certified
vendors. Animal research plays an essential and currently
irreplaceable role in the advancement of healthcare and is
required by regulatory authorities before human testing of
new medicines can take place. PureTech is committed to the
humane and ethical treatment of animals. PureTech believes
that thoughtful use of animals will minimize the number used
while producing quality data and providing the greatest
benefit to humans.
Before using laboratory animals in research, alternatives must
be considered. We apply the 3 Rs standard:
• Replace: use alternative methods where this is possible
• Reduce: use the minimum number of animals
• Refine: minimize pain, suffering and distress, and improve
the welfare of the animals used
We also follow the guidelines set out under the
Animal Welfare Act.
PureTech Health plc Annual report and accounts 2020 61
ESG ESG Report — continued
People
PureTech is proud of its record of attracting and retaining
high-quality talent. We aim to create a workplace that
enables high achieving people to be successful while also
fostering a collegiate and collaborative atmosphere. We
have one employee in each of London and the Netherlands
and all other employees are located near our headquarters
in Boston, MA.
30 employees are engaged in general and administrative
functions and 36 in R&D functions. None of our employees
are subject to a collective bargaining agreement or
represented by a trade or labor union. We consider our
relationship with our employees to be excellent.
Attracting and retaining talent
Our team expanded during 2020 as our business
continued to grow.
PureTech employees as at December 31, 2020
Total number of employees
Employee growth
Employee turnover
Number of internal promotions
Internal promotions as % of total workforce
66
10%
17%
10%
15%
Note: These figures do not include (i) part time employees or (ii) individuals employed
by our Founded Entities, other than one PureTech employee who splits his time
between PureTech and our Controlled Founded Entity Entrega.
As our resources have grown, we have increasingly focused
on advancing our Wholly Owned Programs, which has
enabled us to create new positions and attract new talent.
As part of this evolution, we have also moved away from
positions that have historically supported the creation of
new Founded Entities.
As a biotherapeutics company, promoting the physical,
financial, social and emotional health of our employees is
a priority. Employees are eligible for a range of benefits
at PureTech and as a company with the majority of its
employees based in the U.S., we follow the U.S. benefits
model. For example, we offer comprehensive healthcare
benefits, sponsor a 401(k) retirement plan for all eligible
employees and provide gym membership coverage in
addition to an onsite gym facility.
The Company offers a range of benefits to attract and retain
high-caliber individuals including flexible working, health
insurance and family and medical leave.
Employees are key stakeholders for PureTech, and the
Company engages with them primarily through regular
email updates and group conference calls, especially for the
sharing of Company news.
Diversity and Inclusion
The strength of PureTech is embodied in its employees
and their diversity. We are committed to a policy of non-
discrimination and equal opportunity for all employees and
qualified applicants without regard to race, color, religion,
gender and gender identity, pregnancy, sexual orientation,
national origin, ancestry, age, physical or mental disability,
genetic information, veteran status, military service, application
for military service or any other status protected by law.
PureTech women employees and women
managers as at December 31, 2020
Percentage of women employees out of total
number of employees
Percentage of women managers out of total managers
50%
36%
In order to provide equal employment and advancement
opportunities to all individuals, employment and
advancement decisions at PureTech are based on merit,
qualifications and skills. This commitment to equal
employment and advancement opportunities is evident in
all aspects of PureTech’s employment practices and policies,
including recruiting, hiring, job assignment, promotion,
compensation, discipline, discharge, benefits and training.
PureTech will make reasonable accommodations for qualified
individuals with known disabilities, in accordance with
applicable law.
PureTech will review ways to continue to increase the
percentage of women managers within the Company.
Team members virtually joined together to “Choose to
Challenge” gender bias and inequality on International
Women’s Day.
Training and development
PureTech supports the continued development of our
employees by providing up to 28 hours of training in
person and online in areas relevant to their work. In 2020,
these included:
Management training
• A custom curriculum to retain talent and develop
leadership skills, provided by the Yamartino Group
(15 hours)
(10 hours)
Office training e.g. anti-harassment, compliance
• A mandatory annual anti-harassment training,
provided to all employees by Whitelaw
Compliance Group
(2 hours)
• New hires are required to complete the anti-
harassment training at the time of onboarding
(1 hour)
Health and safety and first aid training
• A mandatory annual safety training, provided to
all employees in accordance with the Occupational
Safety and Health Administration (OSHA)
• An optional first aid training, provided to all
employees by Safety Trainers
IT training
• A mandatory annual training, provided to all
employees by Risk Management Solutions (RMS)
62 PureTech Health plc Annual report and accounts 2020
ESG
ESG Report — continued
Health and Safety
The COVID-19 global pandemic that changed the world in 2020 has shifted the way we operate. It is our unyielding commitment
to keeping each other and the community safe that has allowed us to act swiftly in incorporating the following safety measures:
Keeping our scientists safe & healthy:
During the pandemic, we have limited the number of staff
onsite. All employees on premises are required to test twice
a week and complete a self-health-assessment test each day
that they are onsite.
Supporting the community to flatten the curve:
In addition to regulating the onsite staff operation,
we incorporated a rigorous safety protocol in case of
contamination; to 1) notify involved parties, including
the Boston Public Health Department, as promptly as
possible, and 2) disinfect the site before employees are
allowed back onsite.
Advancing a potential treatment for an emerging
health crisis:
In December 2020, PureTech initiated a clinical trial to evaluate
the efficacy, safety and tolerability of LYT-100 in adults with
Long COVID respiratory complications and related sequelae
(see more on pages 28-31).
PureTech takes the health and safety of its employees
seriously and provides a mandatory safety training program.
PureTech works closely with specialist Environment Health
and Safety consultants Safety Partners to receive guidance
that ensures we remain compliant with local, state and federal
agencies’ regulations. To ensure regulatory compliance and
employee safety, Safety Partners is onsite once a week and
reviews PureTech lab safety on a monthly basis with additional
quarterly lab audits.
Safety information is communicated to all employees through
regular internal communication channels such as manager-
employer meetings, bulletin boards, memoranda and
other written communications. Employees must report any
concerns to a supervisor or PureTech’s Operations Manager.
How PureTech approaches Health and Safety
All employees are welcome to join PureTech’s health and
safety team. The team is led by three specific roles required
by the Occupational Safety and Health Administration,
or OSHA: Biosafety Officer, or BSO, Chemical Hygiene
Officer, or CHO, and Emergency Coordinator. Appointees
for these roles are chosen based on their technical and
specific knowledge of the research work being conducted
in both a narrow and broad sense, previous experience as
a safety officer or as part of a safety team, knowledge of the
relevant regulatory space, a willingness to help and enforce
compliance and a willingness to address non-compliance.
The BSO oversees all ongoing scientific projects in the
Company, ensuring adherence and compliance with any
local regulations regarding biological safety. The BSO
provides guidance to all Principal Investigators, supervisors
and employees of laboratories performing biological work.
The BSO will also ensure compliance with the Centers for
Disease Control and Prevention and National Institutes
of Health publications, Biosafety in Microbiological and
Biomedical Laboratories and the Guidelines for Research
Involving Recombinant or Synthetic Nucleic Acid Molecules,
as appropriate. The BSO is an active participant on the Safety
Committee and Institutional Biosafety Committee.
The CHO is appointed under the Chemical Hygiene Plan
and is responsible for designing, developing, implementing
and maintaining the Company’s chemical hygiene policies
and practices, ensuring that the correct safety procedures
are undertaken in laboratories and that safe facilities are
maintained at all times. The CHO is also responsible for
ensuring that the correct training programs are available and
the proper documentation for that training is maintained.
The role also involves ensuring that all hazardous waste is
disposed of in the correct manner.
The Emergency Coordinator is in charge of the evacuation
plan for the facility, communicating directly with the
responding emergency service to give the relevant
information about the event in question, whether that is
a fire, medical emergency, explosion, spill or other. The role
also involves keeping the Emergency Plan up to date and
reviewing and amending where and when necessary.
Internally, PureTech’s health and safety team is scheduled to
review protocols on an annual basis, or when a specific reason
demands a review of the process in question, such as a lab
incident, a new project or a new piece of equipment.
PureTech Health plc Annual report and accounts 2020 63
ESG ESG Report — continued
Planet
Contributing to the community where we live and work
PureTech is committed to being a supportive member of our communities. It is with this mission that we continue to stay
involved and form a partnership with organizations in our community.
At the start of the COVID-19 pandemic we provided lab supplies and personal protective equipment to local hospitals
in and around Boston to support their heroic front line efforts. Other community engagement includes:
PureTech welcomed friends and family for family
science day (in early 2020, pre-pandemic)
Charitable Giving:
We support healthcare related organizations
with the mission to keeping our neighbors
safe and healthy, including Life Science Cares
and local food banks
Academia:
We work closely with our community
educators and host guest lectures and panels
at local academic institutions to keep the
future scientists engaged
Educating the Next Generation:
We cultivate young minds via hosting a family
science day, inviting employees’ family and
friends for a day full of science experiments
PureTech is committed to managing the environmental impact of its operations, the majority of which relate to business
functions at our various locations, business travel and employee commuting.
Streamlined Energy and Carbon Reporting
The section below includes our first year of reporting under the new Streamlined Energy & Carbon Reporting (SECR)
requirements. The reporting period is the same as the Group’s financial year, January 1, 2020 to December 31, 2020.
Organization 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 2018. These sources fall within the Group’s consolidated financial statement.
An operational control approach has been used in order to define our organizational boundary. This is the basis for
determining the Scope 1, 2 and 3 emissions for which the Group is responsible.
The emissions sources that constitute our boundary for the year to December 31, 2020 are:
• Scope 1: natural gas combustion within boilers and carbon dioxide used in our laboratories;
• Scope 2: purchased electricity for our own use; and
• Scope 3: business travel, employee commuting and third-party deliveries.
Methodology
For the Group’s reporting, the Group has employed the services of a specialist adviser, Verco, to quantify and verify the 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;
• presentation of gross emissions (as the Group does not purchase carbon credits, or equivalents); and
• some data for business travel and for third-party deliverables was not in a usable format and was therefore not included.
Absolute Emissions
The total Scope 1, 2 and 3 GHG emissions from the Group’s operations in the year ending December 31, 2020 were:
• 379.4 tonnes of CO2 equivalent (tCO2e) using a ‘location-based’ emission factor methodology for Scope 2 emissions; and
• 379.5 tCO2e using a ‘market-based’ emission factor methodology for Scope 2 emissions.
64 PureTech Health plc Annual report and accounts 2020
ESG ESG Report — continued
Total Energy Use
The total energy use for the Group for FY2020 was 638,505 kWh.
Energy Use
2020
Electricity
(kWh)
505,075
Gas
(kWh)
Total Energy Use
(kWh)
133,430
638,505
Intensity Ratio
As well as reporting the absolute emissions, the Group’s GHG emissions are reported below on the metrics of tCO2e per
employee and tCO2e per square meter 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. All of the intensity
ratios have been calculated using Scope 1 and Scope 2 emissions only.
The intensity metric based on floor area is 0.06 tCO2e per m2 for both the location-based method and the market-based
method. The employee number metric is 1.05 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
PureTech Health plc – Breakdown of emissions by scope
2020 (market-based)
25.9
2020 (location-based)
25.9
120.9
120.9
Scope 1
Scope 2
Scope 3
PureTech Health plc – 2020 Greenhouse Gas emissions
Scope 15
Scope 26
Scope 27
Subtotal (location-based)
Subtotal (market-based)
Scope 38
Total GHG emissions (Location-based)
Total GHG emissions (Market-based)
232.7
232.7
Tonnes CO2e
25.9
120.9
120.9
146.7
146.8
232.7
379.4
379.5
2020
tCO2e/FTE
employee9
tCO2e/sq. metre10
0.18
0.86
0.86
1.05
1.05
–
–
–
0.004
0.02
0.02
0.02
0.02
–
–
–
5 Scope 1 being emissions from the Group’s combustion of fuel and operation of facilities.
6 Scope 2 being electricity (from location-based calculations), heat, steam and cooling purchased for the Group’s own use.
7 Scope 2 being electricity (from market-based calculations), heat, steam and cooling purchased for the Group’s own use.
8 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.
9 Employee numbers: 140.
10 Occupied office space: 7,277 m2.
Efficiency actions undertaken
The Group did not undertake any energy efficiency actions during this financial year.
PureTech Health plc Annual report and accounts 2020 65
ESG
ESG Report — 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, recognize that the
more significant impact occurs indirectly, through the investment decisions we make and the operation of the companies we
choose to invest in. The Group therefore considers it important to establish and invest in 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.
Historical emissions data
In addition to the SECR data provided above, we are also providing historical emissions data at a Group level, consistent with
prior annual reports, to enable year on year comparison. Emissions in 2020 were significantly lower than in prior years due
to disruption to business travel and office use from the COVID-19 pandemic. Since our relocation to new energy-efficient
headquarters in 2019, we have monitored both overall emissions and emissions intensity as measured by square meter of office
space and full-time employees.
PureTech historical emissions data PureTech GreenHouse Gas emissions 2018-2020
Scope 15
Scope 26
Scope 27
Subtotal
(location-based)
Subtotal
(market-based)
Scope 311
Scope 312
Total GHG emissions
(location-based
Scope 2)
Total GHG emissions
(market-based
Scope 2)
2020
tCO2e
25.9
120.9
120.9
2020
tCO2e per m2
0.18
0.86
0.86
2020
tCO2e per FTE
0.004
0.020
0.020
2019
(tCO2e)
24.3
79.6
79.6
2019
tCO2e per m2
0.003
0.010
0.010
2019
tCO2e per FTE
0.20
0.67
0.67
2018
(tCO2e)
33.3
145.5
145.6
2018
tCO2e per m2
0.02
0.07
0.07
2018
tCO2e per FTE
0.15
0.64
0.64
1.05
1.05
146.7
146.8
232.7
232.7
379.4
379.5
0.020
103.9
0.010
0.87
178.8
0.020
103.9
656.7
656.7
760.6
760.6
0.010
0.87
178.9
1,199.9
1,199.9
1,378.7
1,378.8
0.09
0.09
0.78
0.78
11
12
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).
2020 – 140 employees, and 7,277m2 occupied office space; 2019 – 119 employees and 8,051m2 office space; 2018 – 229 employees.
Resource management
PureTech produces waste through two main sources: office and kitchen supplies at its headquarters and hazardous waste
generated from laboratory research. In both instances, PureTech endeavors to keep waste to a minimum and dispose of
it responsibly.
Hazardous Waste
PureTech has contracted Triumvirate Environmental, a specialist environmental, health and safety contractor, to manage
its hazardous waste. Data from Triumvirate shows that PureTech produced 6,915lbs (3,137kg) of biologically and chemically
hazardous waste in the course of its research in 2020. The majority of this waste is disposed of through conversion to energy or
for fuels blending. Only around 123lbs (56kg) of all waste is sent to landfill or incinerated. Full details of waste generated and
treatment methods are shown in the tables below.
PureTech hazardous waste emissions 2020
Waste is shown by weight in pounds
Hazardous
834.0
Non-Hazardous
Regulated Medical Waste
115.0
5,966.0
Total
6,915.0
PureTech hazardous waste treatment methods 2020
Waste is shown by weight in pounds
Fuels Blending
Incineration
666.0
48.0
Landfill
75.0
Recycle
400.0
Treatment/
Stabilization
160.0
Waste to Energy
5,567.0
Total
6,915.0
PureTech will continue to monitor these output levels as part of a commitment to keep hazardous waste to a minimum.
66 PureTech Health plc Annual report and accounts 2020
ESG ESG Report — continued
PureTech’s energy-efficient headquarters
In 2019 PureTech moved into its new headquarters at Innovation Square, 6 Tide Street in Boston, a brownfield
redevelopment offering many environmental benefits:
Innovation Square consolidates
PureTech’s laboratory and administrative
functions in one building, reducing the
need for employees to drive between
multiple locations.
The building includes features to
further reduce use of motor vehicles,
including top-rated (6 out of 6) access
to public transport, and storage
facilities for 22 bicycles (twice the
amount required by LEED for the
building’s size) with shower and
changing facilities.
Drivers of electric vehicles (EVs) have
access to four charging points in
the on site parking area. Employees
are also encouraged to take public
transportation to work through a travel
subsidy, while an office shuttle bus
runs to and from the major Boston
train stations.
The new building13 is certified LEED Silver. The fit-out incorporates a range of elements to encourage efficient resource
use including:
The building as designed and modelled is expected to use 35% less energy than the LEED baseline across heating, cooling,
lighting, hot water production and other operational functions. It is also expected to generate 47% fewer greenhouse gas
(GHG) emissions than the AIA 2030 Challenge baseline, equivalent to an annual reduction of 2,500 metric tonnes of CO2e.
-35%
Water use reduction of up to 39% through features
such as low-flow toilets.
Water-efficient landscaping using hardy and drought
tolerant plants to reduce irrigation by 50% over
a midsummer baseline case.
No chlorofluoro-carbon-based refrigerants (CFCs)
were used in building heating, ventilation, air conditioning
and refrigeration systems.
Use of low-emitting flooring, paints and sealants
in the construction.
As part of the fit-out of the new headquarters building
PureTech has stocked kitchen areas with reusable utensils,
plates, cups and glasses to minimize the use of disposable
items. Every conference room has recycling bins for paper and
other waste, as do all kitchens.
Roof featuring reflective materials to reduce
the building’s heat island effect.
13 All data in this paragraph is taken from the Article 37 Green Building Report and LEED checklist developed by WSP for the building’s landlords, Related Beal.
PureTech Health plc Annual report and accounts 2020 67
ESG Data privacy and protection
In circumstances where we are required to collect personal
data from patients (or other groups such as employees or
customers), PureTech maintains and protects this data by
collecting only what is needed and storing it in a way that
protects it from intentional or accidental disclosure. We will
only make disclosures when we have consent or are required
to do so by appropriate legal or regulatory authorities.
Modern slavery, supply chain
Currently PureTech has no wholly-owned therapeutics in
commercial manufacture, and so has a minimal supply chain.
As the Company’s medicines transition from clinical trials into
commercial manufacture, PureTech will develop procurement
policies to support ethical business conduct.
Board diversity
The 2020 Hampton-Alexander Review into Boardroom
gender diversity reported that only nine companies within the
FTSE 250 had women CEOs. PureTech’s Founder and CEO,
Daphne Zohar, is a successful entrepreneur who assembled
a leading team to implement her vision for the Company.
Ms. Zohar has been a key participant in fundraising, business
development and establishing the underlying programs
and platforms that has resulted in PureTech’s Wholly Owned
Programs and pipelines of PureTech’s Founded Entities.
In 2020, PureTech initiated a woman-only Board candidate
search in order to increase Board gender diversity to above
the 33% recommended by the Hampton-Alexander review.
In 2020 Kiran Mazumdar-Shaw was appointed to the Board,
bringing the gender diversity ratio as at December 31, 2020
to three women out of eight Board seats (37.5%). In 2019,
the Company had also already achieved the Parker Review’s
“One by 2021” minimum recommendation that FTSE 350
companies have at least one Board member from an ethnic
minority background by 2021.
ESG Report — continued
Governance
PureTech’s overall governance framework is described in
detail in pages 69-120 of this report in compliance with the UK
Corporate Governance Code. Additional information relevant
to our consideration of ESG matters is provided here.
Oversight and accountability
PureTech recognizes that good governance, of itself, and in
particular, oversight of the E and S streams of ESG, is built
on transparency, disclosure and accountability.
The Board has established a stand-alone ESG committee in
2020, chaired by non-executive director, Kiran Mazumdar-
Shaw, to manage, review and advance ESG issues within the
business and drive enhanced reporting through the ESG
report each year.
The Board, through the ESG committee as led by the
committee’s Chair, will commence a program of active
engagement with shareholders – and with other stakeholders
– on matters relating to ESG and corporate stewardship.
Management compensation and salary gap reporting
Although PureTech is not subject to the UK’s executive pay
transparency disclosures which apply to listed companies
with more than 250 employees, it voluntarily shares
percentage change in remuneration between the CEO
and employees.
More information on compensation at PureTech can be found
at pages 107 to 120.
Anti-bribery and whistleblowing
PureTech takes a zero-tolerance approach to bribery and
corruption and implements and enforces effective systems
to counter bribery. PureTech is bound by the laws of the
UK, including the Bribery Act 2010, and has implemented
policies and procedures based on such laws. In addition,
PureTech has a whistleblowing policy under which staff are
encouraged to report to the CEO 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. As detailed in this 2020 Annual Report and Accounts
(page 106), PureTech’s Audit 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 such concern turns out
to be mistaken.
PureTech Board and Executive Committee composition as at December 31, 2020
37.5%
37.5%
Gender diversity: percentage
of women on the Board
Cultural diversity: percentage of senior
executives with a culturally diverse background
Our Commitment to ESG
PureTech takes pride in its commitment to the community that it consists of (its people), the community it serves (its patients)
and the community that it participates within (the world at large). Our team is committed to further our mission of delivering
therapeutics where there is unmet need, and we believe this can only be achieved through building a sustainable business.
We believe that the environmental, social and governance initiatives we have undertaken set us on the path towards a brighter
future, and reporting our ESG metrics helps to orient PureTech along that path.
68 PureTech Health plc Annual report and accounts 2020
ESG Risk management
The execution of the Group’s strategy is subject to a number of risks and uncertainties. As a clinical-stage biotherapeutics
company, the Group operates in an inherently high-risk environment. The overall aim of the Group’s risk management effort is
to achieve an effective balancing of risk and reward, although ultimately no strategy can provide an assurance against loss.
Risks are formally identified by the Board and appropriate processes are put in place to monitor and mitigate them on an
ongoing basis. If more than one event occurs, it is possible that the overall effect of such events would compound the possible
effect on the Group. The principal risks that the Board has identified as the key business risks facing the Group are set out
in the table below along with the consequences and mitigation of each risk. These risks are only a high level summary of the
principal risks affecting our business; any number of these or other risks could have a material adverse effect on the Group or
its financial condition, development, results of operations, subsidiary companies and/or future prospects. Further information
on the risks facing the Group can be found on pages 191 to 227, which also includes a description of circumstances under
which principal and other risks and uncertainties might arise in the course of our business and their potential impact.
Risk
Impact*
Management Plans/Actions
1 Risks related to science and technology failure
The science and technology being developed or
commercialized by some of our businesses may fail and/
or our businesses may not be able to develop their
intellectual property into commercially viable
therapeutics or technologies.
There is also a risk that certain of the businesses may fail
or not succeed as anticipated, resulting in significant
decline of our value.
The failure of any of our businesses could
decrease our value. A failure of one of the major
businesses could also impact the perception of
PureTech as a developer of high value
technologies and possibly make additional
fundraising at PureTech or any Founded Entity
more difficult.
A critical failure of a clinical trial may result in
termination of the program and a significant
decrease in our 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 our therapeutics to obtain
any required regulatory approval, or conditions
imposed in connection with any such approval,
may result in a significant decrease in our value.
2 Risks related to clinical trial failure
Clinical trials and other tests to assess the commercial
viability of a therapeutic 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 our therapeutic
candidates fail to achieve successful outcomes in their
respective clinical trials, the therapeutics will not receive
regulatory approval and in such event cannot be
commercialized. In addition, if we fail to complete or
experience delays in completing clinical tests for any of
our therapeutic candidates, we may not be able to
obtain regulatory approval or commercialize our
therapeutic candidates on a timely basis, or at all.
3 Risks related to regulatory approval
The 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 therapeutics. Stringent standards are
imposed which relate to the quality, safety and efficacy
of these therapeutics. 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.
We may not obtain regulatory approval for our
therapeutics. Moreover, approval in one territory offers
no guarantee that regulatory approval will be obtained
in any other territory. Even if therapeutics are approved,
subsequent regulatory difficulties may arise, or the
conditions relating to the approval may be more
onerous or restrictive than we expect.
Before making any decision to develop any
technology, extensive due diligence is carried
out 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 programs only
to their next value milestone. Members of our
Board serve on the board of directors of several
of the business so as to continue to guide each
business’s strategy and to oversee proper
execution thereof. We use our extensive network
of advisors to ensure that each business has
appropriate domain expertise as it develops and
executes on its strategy and the R&D Committee
of our Board reviews each program at each
stage of development and advises our Board on
further actions. Additionally, we have a
diversified model with numerous assets such that
the failure of any one of our businesses would
not result in a failure of all of our businesses.
We have a diversified model such that any one
clinical trial outcome would not significantly
impact our ability to operate as a going concern.
We have dedicated internal resources to
establish and monitor each of the clinical
programs in order to try to maximise successful
outcomes. We also engage outside experts to
help design clinical programs to help provide
valuable information and mitigate the risk of
failure. 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.
We manage our 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 our preclinical and
clinical programs. These experts ensure that
high-quality protocols and other documentation
are submitted during the regulatory process, and
that well-reputed contract research organizations
with global capabilities are retained to manage
the trials. We also engage with experts, including
on our R&D Committee, to help design clinical
trials to help provide valuable information and
maximize the likelihood of regulatory approval.
Additionally, we have a diversified model with
numerous assets such that the failure to receive
regulatory approval or subsequent regulatory
difficulties with respect to any one therapeutic
would not adversely impact all of our
therapeutics and businesses.
* When assessing potential impact of a given risk, we looked at the potential effects on our research and development activities, financial health and overall business operations.
PureTech Health plc Annual report and accounts 2020 69
Governance Risk management — continued
Risk
Impact*
Management Plans/Actions
4 Risks related to therapeutic safety
There is a risk of adverse reactions with all drugs and
medical devices. If any of our therapeutics are found to
cause adverse reactions or unacceptable side effects,
then therapeutic 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 us as the developer of the therapeutics
and sponsor of the relevant clinical trials. These risks are
also applicable to our Founded Entities and any trials
they conduct or therapeutic candidates they develop.
Adverse reactions or unacceptable side effects
may result in a smaller market for our
therapeutics, or even cause the therapeutics to
fail to meet regulatory requirements necessary
for sale of the therapeutic. This, as well as any
claims for injury or harm resulting from our
therapeutics, may result in a significant decrease
in our value.
We design our therapeutics with safety as a top
priority and conduct extensive preclinical and
clinical trials which test for and identify any
adverse side effects. Despite these steps and
precautions, we cannot fully avoid the possibility
of unforeseen side effects, and to mitigate the
risk further we have insurance in place to cover
product liability claims which may arise during
the conduct of clinical trials.
5 Risks related to therapeutic profitability
We may not be able to sell our therapeutics 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 to obtain reimbursement from third
party payers, as well as competition from other
therapeutics, could significantly decrease the
amount of revenue we may receive from
therapeutic sales for certain therapeutics. This
may result in a significant decrease in our value.
We engage reimbursement experts to
conduct pricing and reimbursement studies
for our therapeutics to ensure that a viable
path to reimbursement, or direct user
payment, is available. We also closely monitor
the competitive landscape for all of our
therapeutics and adapt our business plans
accordingly. Not all therapeutics that we are
developing will rely on reimbursement. Also,
while we cannot control outcomes, we try
to design studies to generate data that will
help support potential reimbursement.
Third-party payers are increasingly attempting to curtail
healthcare costs by challenging the prices that are
charged for pharmaceutical therapeutics and denying or
limiting coverage and the level of reimbursement.
Moreover, even if the therapeutics can be sold profitably,
they may not be accepted by patients and the
medical community.
Alternatively, our competitors – many of whom have
considerably greater financial and human resources
– may develop safer or more effective therapeutics or be
able to compete more effectively in the markets targeted
by us. New companies may enter these markets and
novel therapeutics and technologies may become
available which are more commercially successful than
those being developed by us. These risks are also
applicable to our Founded Entities and could result in a
decrease in their value.
6 Risks related to intellectual property protection
We may not be able to obtain patent protection for
some of our therapeutics or maintain the secrecy of its
trade secrets and know-how. If we are unsuccessful in
doing so, others may market competitive therapeutics at
significantly lower prices. Alternatively, we may be sued
for infringement of third-party patent rights. If these
actions are successful, then we would have to pay
substantial damages and potentially remove our
therapeutics from the market. We license certain
intellectual property rights from third parties. If we fail to
comply with our obligations under these agreements, it
may enable the other party to terminate the agreement.
This could impair the our freedom to operate and
potentially lead to third parties preventing us from selling
certain of our therapeutics.
7 Risks related to enterprise profitability
We expect to continue to incur substantial expenditure
in further research and development activities. There is
no guarantee that we will become operationally
profitable, and, even if we do so, we may be unable to
sustain operational profitability.
70 PureTech Health plc Annual report and accounts 2020
The failure to obtain patent protection and
maintain the secrecy of key information may
significantly decrease the amount of revenue
we may receive from therapeutic sales. Any
infringement litigation against us may result in
the payment of substantial damages by us and
result in a significant decrease in our value.
We spend significant resources in the
prosecution of our patent applications and
maintenance of our patents, and we have an
in-house patent counsel and patent group to
help with these activities. We also work with
experienced external attorneys and law firms to
help with the protection, maintenance and
enforcement of our patents. Third party patent
filings are monitored to ensure the Group
continues to have freedom to operate.
Confidential information (both our own and
information 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 our employment
and advisory contracts. Licenses are monitored
for compliance with their terms.
The strategic aim of the business is to generate
profits for our shareholders through the
commercialization of technologies through
therapeutic 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
our business.
We retain significant cash in order to support
funding of our Founded Entities and our Wholly
Owned Pipeline. We have close relationships
with a wide group of investors and strategic
partners to ensure we can continue to access the
capital markets and additional monetization and
funding for our businesses. Additionally, our
Founded Entities are able to raise money directly
from third party investors and strategic partners.
Governance Risk management — continued
Risk
Impact*
Management Plans/Actions
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 we remain
competitive in the employment market. We
maintain an extensive recruiting network through
our Board members, advisors and scientific
community involvement. We also employ an
executive as a full-time in-house recruiter.
Additionally, we are proactive in our retention
efforts and include incentive-based
compensation in the form of equity awards and
annual bonuses, as well as a competitive benefits
package. We have a number of employee
engagement efforts to strengthen our
PureTech community.
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. We have been proactive in limiting
the number of staff on site, requiring that all
on-site employees test twice a week and
providing personal protective equipment
to our staff.
8 Risks related to hiring and
retaining qualified employees
We operate in complex and specialized business
domains and require highly qualified and experienced
management to implement our strategy successfully. We
and many of our businesses are located in the United
States which is a highly competitive employment market.
The failure to attract highly effective personnel
or the loss of key personnel would have an
adverse impact on the ability of us to continue
to grow and may negatively affect our
competitive advantage.
Moreover, the rapid development which is envisaged by
us may place unsupportable demands on our current
managers and employees, particularly if we cannot
attract sufficient new employees. There is also risk that
we 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.
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 labor instability in the countries
in which we or the third parties with whom we
engage operate. We cannot presently predict
the scope and severity of any potential business
shutdowns or disruptions, but if we or any of the
third parties with whom we engage, including
the suppliers, clinical trial sites, regulators and
other third parties with whom we conduct
business, were to experience shutdowns or
other business disruptions, our ability to
conduct our business in the manner and on the
timelines presently planned could be materially
and negatively impacted. It is also possible that
global health concerns such as this one could
disproportionately impact the hospitals and
clinical sites in which we conduct any of our
current and/or future clinical trials, which could
have a material adverse effect on our business
and our results of operation and
financial impact.
Brexit
The United Kingdom withdrew from the European Union on January 31, 2020 (Brexit) and the transition period for such
withdrawal ended on December 31, 2020. Although the Board has considered the potential impact of Brexit as part of its risk
management, given that we principally operate in the United States and hold substantially all assets in U.S. dollars, we do not
believe there will be any material financial effect on our business, or any significant operational issues which could arise, as
a result of Brexit.
PureTech Health plc Annual report and accounts 2020 71
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
Company, and with respect to the
December 31, 2020 financial position,
we have sufficient available funding
to extend operations into the first
quarter of 2024, and following the
sale of 1,000,000 common shares of
Karuna for aggregate proceeds of
$118.0 million on February 9, 2021,
we have sufficient funding to extend
operations over a four-year period into
the first quarter of 2025. This period is
deemed appropriate having assessed
the financial health as of December 31,
2020 along with the recent sale of
Karuna shares. Further, we expect
our Wholly Owned Programs (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 our funding to be used to
advance our Wholly Owned Programs,
to continue research and development
efforts, to discover and progress new
therapeutic candidates and to fund
the Company’s head office costs into
the first quarter of 2025. We have
also reserved capital to support our
Founded Entities, should they require
it, to reach significant development
milestones over the period of the
assessment in conjunction with our
external partners. However, the majority
of funding has been allocated to the
advancement of the Wholly Owned
Programs. 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,
royalties on the sale of commercialized
therapeutics and grants as well as
equity fundraising at Founded Entities.
The Directors confirm that they have
a reasonable expectation that we will
continue to operate and meet our
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,
including those that would threaten our
business model, future performance,
solvency or liquidity.
This assessment was made in
consideration of our strong financial
position, current strategy and
management of principal risks. The
following facts support the Directors’
view of the viability:
• We have significant influence over
the spending and strategic direction
of our Wholly Owned Programs and
Controlled Founded Entities.
• Our business model is structured
so that we are not reliant on the
successful outcomes of any one
therapeutic or technology within
the Wholly Owned Programs, or any
Controlled Founded Entity or Non-
Controlled Founded Entity.
In addition, the fact that the Wholly
Owned Programs, Controlled Founded
Entities and Non-Controlled Founded
Entities (with the exception of Gelesis
and Akili) are currently in the research
and development stage means that
these therapeutics, technologies and
entities are not reliant on cash inflows
from product sales or services during
the period of this assessment. This
also means that we are not highly
susceptible to conditions in one or
more market sectors in this time frame.
Although engaging with collaboration
partners is highly valuable from a
validation and, in some cases, funding
perspective, we are not solely reliant on
cash flows from such sources over the
period of assessment.
Our PureTech Level cash and cash
equivalents as of December 31, 2020
was $349.4 million, and following
the cash outflows and inflows for
the three-months ended March 31,
2021, particularly the $118.0 million in
additional cash following the Karuna
share sale, our PureTech Level cash and
cash equivalents was $443.4 million as
of March 31, 2021. Our PureTech
Level cash and cash equivalents is
highly liquid and forecasts to support
infrastructure costs, Wholly Owned
Program research and development
activities and the appropriate funding
of key 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 and regularly considers
funding plans of our Wholly Owned
Programs, Controlled Founded Entities
and Non-Controlled Founded Entities
in our assessment of long-term cash
flow projections.
While the review has considered all of
the principal risks identified, the Board
is focused on the pathway to regulatory
approval of each therapeutic candidate
72 PureTech Health plc Annual report and accounts 2020
being developed within our Wholly
Owned Pipeline as well as those of our
Founded Entities. Further, the Board
has considered milestone funding
based on existing collaboration and
partnership arrangements, and the
ability of the Wholly Owned Program,
and each Controlled Founded Entity
and Non-Controlled Founded Entity
to enter into 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 our ownership
stakes in the Controlled Founded
Entities and Non-Controlled Founded
Entities are expected to be illiquid
in nature, with the exception of our
ownership stakes in Karuna and Vor,
which are both publicly traded on
Nasdaq. While we anticipate holding
these ownership stakes through the
achievement of significant milestones
or other events, we will continue to
be diligent in exploring monetization
opportunities similar to the execution
of the sale of 1,000,000 common shares
of Karuna for aggregate proceeds
of $118.0 million on February 9, 2021.
However, our budget does not include
any further monetization opportunities,
which would further extend operations
beyond the first quarter of 2025. We
also expect that certain of these
Founded Entities may not be successful
and this could result in a loss of the
amounts previously invested with no
opportunity for recovery. However, even
in this scenario, our liquidity is expected
to remain sufficient to achieve the
remaining milestone events and fund
infrastructure costs.
The Directors have concluded, based
on our strong financial position and
readily available cash reserves, we
are highly likely to be able to fund
our infrastructure requirements,
advance at least three clinical trials
within our Wholly Owned Pipeline, and
contribute 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
we have adequate resources and will
continue to operate over the period
of the assessment.
Governance Key Performance Indicators – 2020
The key performance indicators (KPIs) below measure our performance against our strategy. As PureTech’s strategy has
evolved, new KPIs have replaced older metrics that are no longer representative of our progress.
Amount of funding secured
for Founded Entities1,2
$247.8m
$246.8m (99.6%) came from third parties
Excludes $473.2m raised by Founded Entities
in 2021 post-period
2019: $666.8m
2018: $274.0m
2017: $102.9m
2016: $98.2m
Progress
Gelesis, Vedanta, Vor and Alivio all raised funds in the form
of financings and non-dilutive grants in 2020, including
$246.8 million by third-party financial and strategic investors.
Number of programs created
for pipeline expansion2
3
2019: 1
2018: 1
2017: 1
2016: 3
Progress
In 2020, we identified three new programs to expand our
Wholly Owned Pipeline. We are now advancing LYT-100
in (1) Long COVID3 respiratory complications and related
sequelae and (2) IPF and potentially other PF-ILDs, and
we are also advancing (3) LYT-300 (oral allopregnanolone)
for the potential treatment of a range of neurological and
neuropsychological conditions.
Proceeds generated from sales
of Founded Entity equity2
Number of Wholly Owned Programs
advanced through clinical phases2
$350.6m
2019: $9.3 million
3
2019: 0
Progress
A key component of our strategy is to derive value from
the equity growth of our Founded Entities. In 2020, we
generated cash proceeds of $350.6 million from the sales
of equity in our Founded Entities, which we intend to use to
fund our operations and growth and to further expand and
advance our clinical-stage Wholly Owned Pipeline, while still
maintaining significant equity ownership.
Progress
We advanced three of our Wholly Owned Programs through
clinical phases in 2020. For LYT-100, we completed a Phase 1
multiple ascending dose and food effect study and initiated
two Phase 2 clinical trials: a Phase 2a proof-of-concept trial
in breast cancer-related, upper limb secondary lymphedema
and a Phase 2 trial in Long COVID respiratory complications
and related sequelae. For LYT-200, we initiated a Phase 1
clinical trial in metastatic solid tumors that are difficult to treat
and have poor survival rates.
Number of clinical trial initiations2,4
Number of clinical readouts2,5
6
2019: 6
5
2019: 5
Progress
In 2020, PureTech initiated four clinical trials within our Wholly
Owned Pipeline, Karuna initiated one clinical trial and Gelesis
initiated one clinical trial.
Progress
In 2020, PureTech, Vedanta (two), Karuna and Akili reported
clinical results from across their pipelines.
1
2
3
4
5
Funding figure includes private equity financings, loans and promissory notes, public offerings or grant awards. Funding figure excludes future milestone considerations
received in conjunction with partnerships and collaborations such as those with Boehringer Ingelheim, Imbrium Therapeutics L.P., Shionogi & Co., Ltd. or Eli Lilly. Funding
figure does not include Vor’s gross proceeds of $203.4 million from its February 2021 post-period IPO.
Number represents figure for the relevant fiscal year only and is not cumulative.
Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19
syndrome (PACS).
PureTech initiated four clinical trials, Karuna initiated one clinical trial, and Gelesis initiated one clinical trial in 2020.
PureTech, Vedanta (two), Karuna, and Akili reported clinical results from across their pipelines in 2020.
PureTech Health plc Annual report and accounts 2020 73
Governance
Financial Review
Reporting Framework
You should read the following
discussion and analysis together with
our consolidated financial statements,
including the notes thereto, set forth
elsewhere in this report. Some of the
information contained in this discussion
and analysis or set forth elsewhere in
this report, including information with
respect to our plans and strategy for our
business and financing our business,
includes forward-looking statements
that involve risks and uncertainties. As
a result of many factors, including the
risks set forth on pages 69 to 71 and
in the Additional Information section
from pages 191 to 227, our actual
results could differ materially from the
results described in or implied by these
forward-looking statements.
Our audited consolidated financial
statements as of December 31,
2020 and 2019 and for the years
ended December 31, 2020, 2019 and
2018 have been prepared in accordance
with international accounting standards
in conformity with the requirements
of the Companies Act 2006 and
International Financial Reporting
Standards (IFRSs) adopted pursuant
to Regulation (EC) No 1606/2002 as it
applies in the EU. The Consolidated
Financial Statements also comply fully
with IFRSs as issued by the International
Accounting Standards Board (IASB).
The following discussion contains
references to the consolidated financial
statements of PureTech Health plc, or
the Company, and its consolidated
subsidiaries, together the Group. These
financial statements consolidate the
Company’s subsidiaries and include
the Company’s interest in associates
and investments held at fair value.
Subsidiaries are those entities over
which the Company maintains control.
Associates are those entities in which
the Company does not have control
for financial accounting purposes but
maintains significant influence over
financial and operating policies. Where
we have neither control nor significant
influence for financial accounting
purposes, we recognize our holding
in such entity as an investment at fair
value. For purposes of our consolidated
financial statements, each of our
Founded Entities are considered to be
either a “subsidiary", an “associate”
or an "investment held at fair value"
depending on whether PureTech Health
plc controls or maintains significant
influence over the financial and
operating policies of the respective
entity at the respective period end
date. For additional information
regarding the accounting treatment
of these entities, see Note 1 to our
consolidated financial statements
included in this report. For additional
information regarding our operating
structure, see “—Basis of Presentation
and Consolidation” below. Fair value
of investments accounted for at fair
value, does not take into consideration
contribution from milestones that
occurred after December 31, 2020, the
value of our consolidated Founded
Entities (Vedanta, Follica, Sonde, Akili,
Alivio, and Entrega), our Wholly Owned
Programs, or our cash.
Business Background and
Results Overview
The business background is discussed
from pages 1 to 59, which describe
in detail the business development
of our Wholly Owned Programs and
Founded Entities.
Our ability to generate product
revenue sufficient to achieve
profitability will depend heavily on the
successful development and eventual
commercialization of one or more
of our wholly-owned or Founded
Entities’ therapeutics candidates,
which may never occur. Our Founded
Entities, Gelesis, Inc., or Gelesis, and
Akili Interactive Labs, Inc., or Akili in
which we lost control in 2019 and 2018,
respectively, have products cleared
for sale, but we and our Controlled
Founded Entities have not generated
any revenue from product sales.
We have deconsolidated a number of
our Founded Entities during the past
three fiscal years including Akili, in
2018 and, Vor Biopharma Inc., or Vor,
Karuna Therapeutics, Inc., or Karuna
and Gelesis Inc., or Gelesis, during 2019.
We expect this trend to continue into
the foreseeable future as our Controlled
Founded Entities raise additional
funding. Any deconsolidation affects
our financials in the following manner:
• our ownership interest does not
provide us with a controlling
financial interest;
• we no longer control the Founded
Entity’s assets and liabilities and
as a result we derecognize the
assets, liabilities and non-controlling
interests related to the Founded
Entity from our Consolidated
Statements of Financial Position;
• we record our non-controlling
financial interest in the Founded
Entity at fair value; and
• the resulting amount of any gain or
loss is recognized in our Consolidated
Statements of Comprehensive
Income/(Loss).
We anticipate our expenses to continue
to increase proportionally in connection
with our ongoing development
activities related to our preclinical and
clinical programs within our Wholly
Owned Programs and Controlled
Founded Entities. In addition, having
completed our U.S. listing in November
2020, we expect to incur additional
costs associated with operating as a
public company in the U.S. We also
expect that our expenses and capital
requirements will increase substantially
in the near to mid-term as we:
• continue our research and
development efforts;
• seek regulatory approvals for
any therapeutic candidates that
successfully complete clinical trials;
• add clinical, scientific, operational
financial and management
information systems and personnel,
including personnel to support
our therapeutic development and
potential future commercialization
claims; and
• operate as a U.S. public company.
In addition, our internal research and
development spend will increase in
the foreseeable future as we may
initiate clinical studies for LYT-100,
LYT-200, LYT-210 and LYT-300, and as
we continue to progress our GlyphTM
and OrasomeTM technology platforms
as well as our meningeal lymphatics
discovery research program.
In addition, with respect to our
Founded Entities’ programs, we
anticipate that we will continue to fund
a small portion of development costs
by strategically participating in such
companies’ financings when it is in
the best interests of our shareholders.
The form of any such participation
may include investment in public
or private financings, collaboration
and partnership arrangements and
licensing arrangements, among
others. Our management and strategic
decision makers consider the future
funding needs of our Founded
Entities and evaluate the needs and
opportunities with respect to each of
these Founded Entities routinely and
on a case-by-case basis.
As a result, we may need substantial
additional funding to support our
continuing operations and pursue our
growth strategy. Until such time as
74 PureTech Health plc Annual report and accounts 2020
Governance Financial Review — continued
we can generate significant revenue
from product sales, if ever, we expect
to finance our operations through a
combination of public or private equity
or debt financings or other sources,
which may include monetization of
certain of our interests in our Founded
Entities and collaborations with third
parties. We may be unable to raise
additional funds or enter into such
other agreements or arrangements
when needed on favorable terms, or
at all. If we fail to raise capital or enter
into such agreements as, and when
needed, we may have to significantly
delay, scale back or discontinue the
development and commercialization
of one or more of our wholly-owned
therapeutic candidates.
Measuring Performance
The Financial Review discusses our
operating and financial performance,
our cash flows and liquidity as well as
our financial position and our resources.
The results for each year are compared
primarily with the results of the
preceding year.
Reported Performance
Reported performance considers all
factors that have affected the results
of our business, as reflected in our
consolidated financial statements.
Core Performance
Core performance measures are
alternative performance measures
(APM) which are adjusted and non-IFRS
measures. These measures cannot be
derived directly from our consolidated
financial statements. We believe that
these non-IFRS performance measures,
when provided in combination
with reported performance, will
provide investors, analysts and
other stakeholders with helpful
complementary information to better
understand our financial performance
and our financial position from period
to period. The measures are also used
by management for planning and
reporting purposes. The measures are
not substitutable for IFRS results and
should not be considered superior
to results presented in accordance
with IFRS.
Cash flow and liquidity
Consolidated Cash
Reserves
PureTech Level Cash
Reserves
PureTech Level Cash
and Cash Equivalents
Consolidated Cash
Reserves as of
March 31, 2021
PureTech Level
Cash Reserves as of
March 31, 2021
PureTech Level Cash
and Cash Equivalents
as of March 31, 2021
Measure type: Core performance
Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc and
consolidated subsidiaries (Please refer to Note 1 to our consolidated financial statements for further
information with respect to our consolidated subsidiaries)
Why we use it: Consolidated Cash Reserves is a measure that provides valuable additional information
with respect to cash reserves available to fund the Wholly Owned Programs and Founded Entities
Measure type: Core performance
Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc and
only wholly-owned subsidiaries (Please refer to Note 1 to our consolidated financial statements for
further information with respect to our wholly-owned subsidiaries)
Why we use it: PureTech Level Cash Reserves is a measure that provides valuable additional
information with respect to cash reserves available to fund the Wholly Owned Programs and make
certain investments in Founded Entities
Measure type: Core performance
Definition: Cash and cash equivalents held at PureTech Health plc and only wholly-owned
subsidiaries (Please refer to Note 1 to our consolidated financial statements for further information
with respect to our wholly-owned subsidiaries)
Why we use it: PureTech Level Cash and Cash Equivalents is a measure that provides valuable
additional information with respect to cash and cash equivalents available to fund the Wholly Owned
Programs and make certain investments in Founded Entities
Measure type: Core performance
Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc and
consolidated subsidiaries as of March 31, 2021
Why we use it: The measure includes cash outflows and inflows for the first quarter of 2021,
particularly the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million
on February 9, 2021. Further, the measure allows for a more current representation of the
Consolidated Cash Reserves (see above in table) as of the date of signing of our Consolidated
Financial Statements
Measure type: Core performance
Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc and
only wholly-owned subsidiaries as of March 31, 2021
Why we use it: The measure includes cash outflows and inflows for the first quarter of 2021,
particularly the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million on
February 9, 2021. Further, the measure allows for a more current representation of the PureTech Level
Cash Reserves (see above in table) as of the date of signing of our Consolidated Financial Statements
Measure type: Core performance
Definition: Cash and cash equivalents held at PureTech Health plc and only wholly-owned
subsidiaries as of March 31, 2021
Why we use it: The measure includes cash outflows and inflows for the first quarter of 2021,
particularly the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million
on February 9, 2021. Further, the measure allows for a more current representation of the PureTech
Level Cash and Cash Equivalents (see above in table) as of the date of signing of our Consolidated
Financial Statements
PureTech Health plc Annual report and accounts 2020 75
Governance Financial Review — continued
COVID-19
In December 2019, illnesses associated
with COVID-19 were reported and the
virus has since caused widespread
and significant disruption to daily life
and economies across geographies.
The World Health Organization has
classified the outbreak as a pandemic.
Our business, operations and financial
condition and results have not been
significantly impacted during the
year ended December 31, 2020 as a
result of the COVID-19 pandemic. In
response to the COVID-19 pandemic,
we have taken swift action to ensure
the safety of our employees and other
stakeholders. We continue to monitor
the latest developments regarding the
COVID-19 pandemic on our business,
operations, and financial condition
and results, and have made certain
assumptions regarding the pandemic
for purposes of our operational
Financial Highlights
(in thousands)
Cash and cash equivalents
Short-term investments
planning and financial projections,
including assumptions regarding the
duration and severity of the pandemic
and the global macroeconomic impact
of the pandemic. Despite careful
tracking and planning, however, we
are unable to accurately predict the
extent of the impact of the pandemic
on our business, operations, and
financial condition and results in future
periods due to the uncertainty of
future developments. We are focused
on all aspects of our business and
are implementing measures aimed
at mitigating issues where possible
including by using digital technology
to assist operations for our R&D and
enabling functions.
Recent Developments (subsequent
to December 31, 2020)
On January 8, 2021, PureTech
participated in the second closing of
Vor’s Series B Preferred Share financing.
For consideration of $0.5 million,
PureTech received 961,538 shares.
On February 9, 2021, Vor closed its
initial public offering of 9,828,017
shares at a price to the public of $18.00
per share. Subsequent to the closing,
PureTech held 3,207,200.00 shares
of Vor common stock, representing
8.6 percent of Vor common stock.
On February 9, 2021, PureTech Health
sold 1,000,000 common shares of
Karuna for aggregate proceeds of
$118.0 million. Following the sale
PureTech holds 2,406,564 shares of
Karuna common stock, representing
8.2 percent of Karuna common stock.
As of March 31, 2021, we had
consolidated cash and cash equivalents
of $486.5 million and PureTech
Level cash and cash equivalents of
$443.4 million.
As of:
March 31,
2021
December 31,
2020
December 31,
2019
486,469
—
486,469
(43,072)
443,397
—
403,881
—
403,881
(54,473)
349,407
—
132,360
30,088
162,448
(41,840)
120,608
(30,088)
$90,520
Consolidated Cash Reserves
Less: Cash and cash equivalents held at non-wholly owned subsidiaries
PureTech Level Cash Reserves
Less: Short-term investments
PureTech Level Cash and Cash Equivalents
$443,397
$349,407
Basis of Presentation and
Consolidation
Our consolidated financial information
consolidates the financial information
of PureTech Health plc, as well as its
subsidiaries, and includes our interest in
associates and investments held at fair
value, and is reported in four operating
segments as described below.
Basis for Segmentation
Our directors are our strategic decision-
makers. Our operating segments are
based on the financial information
provided to our directors quarterly for
the purposes of allocating resources
and assessing performance. We
have determined that each Founded
Entity is representative of a single
operating segment as our directors
monitor the financial results at this
level. When identifying the reportable
segments we have determined that it
is appropriate to aggregate multiple
operating segments into a single
reportable segment given the high level
of operational and financial similarities
across the entities. We have identified
four reportable segments which are
outlined below. Substantially all of our
revenue and profit generating activities
are generated within the United States
and, accordingly, no geographical
disclosures are provided.
Internal
The Internal segment is advancing
Wholly Owned Programs designed to
harness key immunological, fibrotic and
lymphatic system mechanisms. These
novel classes of immunomodulatory
drugs are designed to treat serious
diseases, including lung dysfunction,
immuno-oncology, lymphatic,
neurological and neuropsychological
disorders. The Internal segment is
comprised of the technologies that are
wholly owned and will be advanced
through either PureTech Health funding
or non-dilutive sources of financing
in the near-term. The operational
management of the Internal segment
is conducted by the PureTech Health
team, which is responsible for the
strategy, business development,
and research and development. As
of December 31, 2020, this segment
included PureTech LYT, Inc. (formerly
Ariya Therapeutics Inc.) and PureTech
LYT 100, Inc.
Controlled Founded Entities
The Controlled Founded Entities
segment is comprised of our
subsidiaries that are currently
consolidated operational subsidiaries
that either have, or have plans to hire,
independent management teams and
have previously raised, or are currently
in the process of raising, third-party
dilutive capital. These subsidiaries
have active research and development
programs and either have entered into
or plan to seek a strategic partnership
with an equity or debt investment
partner, who will provide additional
industry knowledge and access to
networks, as well as additional funding
to continue the pursued growth of the
company. As of December 31, 2020, this
segment included Alivio Therapeutics,
Inc., Entrega, Inc., Follica, Incorporated,
Sonde Health, Inc. and Vedanta
Biosciences, Inc.
76 PureTech Health plc Annual report and accounts 2020
Governance Financial Review — continued
Non-Controlled Founded Entities
The Non-Controlled Founded Entities
segment is comprised of the entities in
respect of which PureTech Health (i) no
longer holds majority voting control as
a shareholder and (ii) no longer has the
right to elect a majority of the members
of the entity’s Board of Directors.
Upon deconsolidation of an entity
the segment disclosure is restated to
reflect the change on a retrospective
basis, as this constitutes a change in the
composition of its reportable segments.
The Non-Controlled Founded Entities
segment included Akili Interactive Labs,
Inc. (“Akili”), Vor Biopharma, Inc. (“Vor”),
Karuna Therapeutics, Inc. (“Karuna”),
and Gelesis, Inc. (“Gelesis”).
The Non-Controlled Founded Entities
segment incorporates the operational
results of the aforementioned entities to
the date of deconsolidation. Following
the date of deconsolidation, we account
for our investment in each entity at the
parent level, and therefore the results
associated with investment activity
following the date of deconsolidation
is included in the Parent Company and
Other segment (the “Parent Company
and Other segment”).
Parent Company and Other segment
The Parent Company and Other
segment includes activities that are not
directly attributable to the operating
segments, such as the activities of the
Parent, corporate support functions
and certain research and development
support functions that are not directly
attributable to a strategic business
segment as well as the elimination
of intercompany transactions. This
segment also captures the accounting
for our holdings in entities for which
control has been lost, which is
inclusive of the following items: gain
on deconsolidation, gain or loss on
investments held at fair value, gain
on loss of significant influence, and
the share of net loss of associates
accounted for using the equity method.
As of December 31, 2020, this segment
included PureTech Health plc, PureTech
Health LLC, PureTech Management,
Inc., PureTech Securities Corp., and
PureTech Securities II Corp. as well as
certain other dormant, inactive and
shell entities.
The table below summarizes the entities that comprised each of our segments as of December 31, 2020:
Internal Segment
PureTech LYT
PureTech LYT-100, Inc.
Controlled Founded Entities
Alivio Therapeutics, Inc.
Entrega, Inc.
Follica, Incorporated
Sonde Health, Inc.
Vedanta Biosciences, Inc.
Non-Controlled Founded Entities
Akili Interactive Labs, Inc.
Gelesis, Inc.
Karuna Therapeutics, Inc.
Vor Biopharma Inc.
Parent Segment1
Puretech Health plc
PureTech Health LLC
PureTech Securities Corporation
PureTech Securities II Corporation
PureTech Management, Inc.
100.0%
100.0%
91.9%
83.1%
85.4%
51.8%
59.3%
41.9%
25.1%
12.7%
16.4%
100.0%
100.0%
100.0%
100.0%
100.0%
1
Includes dormant, inactive and shell entities that are not listed here.
Components of Our Results
of Operations
Revenue
To date, we have not generated any
revenue from product sales and we
do not expect to generate any revenue
from product sales for the near term
future. We derive our revenue from
the following:
Contract revenue
We generate revenue primarily from
licenses, services and collaboration
agreements, including amounts that
are recognized related to upfront
payments, milestone payments and
amounts due to us for research and
development services. In the future,
revenue may include additional
milestone payments and royalties
on any net product sales under our
collaborations. We expect that any
revenue we generate will fluctuate
from period to period as a result of
the timing and amount of license,
research and development services and
milestone and other payments.
Grant Revenue
Grant revenue is derived from grant
awards we receive from governmental
agencies and non-profit organizations
for certain qualified research and
development expenses. We recognize
grants from governmental agencies
as grant income in the Consolidated
Statement of Comprehensive Income/
(Loss), gross of the expenditures that
were related to obtaining the grant,
when there is reasonable assurance
that we will comply with the conditions
within the grant agreement and there
is reasonable assurance that payments
under the grants will be received. We
evaluate the conditions of each grant
as of each reporting date to ensure
that we have reasonable assurance of
meeting the conditions of each grant
arrangement and it is expected that
the grant payment will be received
as a result of meeting the necessary
conditions.
PureTech Health plc Annual report and accounts 2020 77
Governance Financial Review — continued
Operating Expenses
Research and Development Expenses
Research and development expenses
consist primarily of costs incurred for
our research activities, including our
discovery efforts, and the development
of our wholly-owned and our Controlled
Founded Entities’ therapeutic
candidates, which include:
• employee-related expenses,
including salaries, related benefits
and equity-based compensation;
• expenses incurred in connection
with the preclinical and clinical
development of our wholly-
owned and our Founded Entities’
therapeutic candidates, including
our agreements with contract
research organizations, or CROs;
• expenses incurred under
agreements with consultants who
supplement our internal capabilities;
• the cost of lab supplies and
acquiring, developing and
manufacturing preclinical study
materials and clinical trial materials;
• costs related to compliance with
regulatory requirements; and
• facilities, depreciation and other
expenses, which include direct and
allocated expenses for rent and
maintenance of facilities, insurance
and other operating costs.
We expense all research costs in the
periods in which they are incurred and
development costs are capitalized
only if certain criteria are met. For
the periods presented, we have not
capitalized any development costs
since we have not met the necessary
criteria required for capitalization. Costs
for certain development activities are
recognized based on an evaluation of
the progress to completion of specific
tasks using information and data
provided to us by our vendors and
third-party service providers.
Research and development activities
are central to our business model.
Therapeutic candidates in later
stages of clinical development
generally have higher development
costs than those in earlier stages of
clinical development, primarily due
to the increased size and duration of
later-stage clinical trials. We expect
that our research and development
expenses will continue to increase for
the foreseeable future in connection
with our planned preclinical and clinical
development activities in the near
term and in the future. The successful
development of our wholly-owned
and our Founded Entities’ therapeutic
candidates is highly uncertain. As such,
at this time, we cannot reasonably
estimate or know the nature, timing
and estimated costs of the efforts
that will be necessary to complete
the remainder of the development
of these therapeutic candidates. We
are also unable to predict when, if
ever, material net cash inflows will
commence from our wholly-owned
or our Founded Entities’ therapeutic
candidates. This is due to the numerous
risks and uncertainties associated with
developing therapeutics, including the
uncertainty of:
• progressing research and
development of our Wholly Owned
Pipeline, including LYT-100, LYT-200,
LYT-210, LYT-300 and continue to
progress our GlyphTM and OrasomeTM
technology platforms as well as our
meningeal lymphatics discovery
research program and other
potential therapeutic candidates
within our Wholly Owned Programs;
• establishing an appropriate safety
profile with investigational new
drug application enabling studies
to advance our preclinical programs
into clinical development;
• the success of our Founded Entities
and their need for additional capital;
•
identifying new therapeutic
candidates to add to our Wholly
Owned Pipeline;
• successful enrollment in, and
the initiation and completion of,
clinical trials;
• the timing, receipt and terms of any
marketing approvals from applicable
regulatory authorities;
• commercializing our wholly-
owned and our Founded Entities’
therapeutic candidates, if approved,
whether alone or in collaboration
with others;
• establishing commercial
manufacturing capabilities or making
arrangements with third-party
manufacturers;
• addressing any competing
technological and market
developments, as well as any
changes in governmental
regulations;
• negotiating favorable terms in any
collaboration, licensing or other
arrangements into which we may
enter and performing our obligations
under such arrangements;
• maintaining, protecting and
expanding our portfolio of
intellectual property rights, including
patents, trade secrets and know-
how, as well as obtaining and
maintaining regulatory exclusivity for
our wholly-owned and our Founded
Entities’ therapeutic candidates;
• continued acceptable safety profile
of our therapeutics, if any, following
approval; and
• attracting, hiring and retaining
qualified personnel.
A change in the outcome of any
of these variables with respect to
the development of a therapeutic
candidate could mean a significant
change in the costs and timing
associated with the development of that
therapeutic candidate. For example, the
U.S. Food and Drug Administration, or
FDA, the European Medicines Agency,
or EMA, or another comparable foreign
regulatory authority may require us to
conduct clinical trials beyond those
that we anticipate will be required for
the completion of clinical development
of a therapeutic candidate, or we may
experience significant trial delays due
to patient enrollment or other reasons,
in which case we would be required to
expend significant additional financial
resources and time on the completion
of clinical development. In addition, we
may obtain unexpected results from
our clinical trials and we may elect to
discontinue, delay or modify clinical
trials of some therapeutic candidates
or focus on others. Identifying potential
therapeutic candidates and conducting
preclinical testing and clinical trials
is a time-consuming, expensive and
uncertain process that takes years to
complete, and we may never generate
the necessary data or results required
to obtain marketing approval and
achieve product sales. In addition,
our wholly-owned and our Founded
Entities’ therapeutic candidates, if
approved, may not achieve commercial
success.
General and Administrative Expenses
General and administrative expenses
consist primarily of salaries and
other related costs, including stock-
based compensation, for personnel
in our executive, finance, corporate
and business development and
administrative functions. General and
administrative expenses also include
professional fees for legal, patent,
accounting, auditing, tax and consulting
services, travel expenses and facility-
related expenses, which include direct
depreciation costs and allocated
78 PureTech Health plc Annual report and accounts 2020
Governance investment in the investee, including
the investment in preferred shares that
are considered Long-term Interests,
the carrying amount is reduced to nil
and recognition of further losses is
discontinued except to the extent that
we have incurred legal or constructive
obligations or made payments on
behalf of an investee.
We compare the recoverable amount of
the investment to its carrying amount
on a go-forward basis and determine
the need for impairment.
Income Tax
We must make certain estimates and
judgments in determining income
tax expense for financial statement
purposes. The amount of taxes
currently payable or refundable is
accrued, and deferred tax assets
and liabilities are recognized for the
estimated future tax consequences
attributable to differences between the
financial statement carrying amount
of existing assets and liabilities and
their respective tax bases. Deferred tax
assets are also recognized for realizable
loss and tax credit carryforwards.
Deferred tax assets and liabilities
are measured using substantively
enacted tax rates in effect for the year
in which those temporary differences
are expected to be recovered or
settled. Net deferred tax assets are
not recorded if we do not assess their
realization as probable. The effect
on deferred tax assets and liabilities
of a change in income tax rates is
recognized in our financial statements
in the period that includes the
substantive enactment date.
Financial Review — continued
expenses for rent and maintenance of
facilities and other operating costs.
We expect that our general and
administrative expenses will increase
in the future as we increase our
general and administrative headcount
to support our continued research
and development and potential
commercialization of our portfolio
of therapeutic candidates. We also
expect to incur increased expenses
associated with being a public company
in the United States, including costs of
accounting, audit, information systems,
legal, regulatory and tax compliance
services, director and officer insurance
costs and investor and public
relations costs.
Total Other Income/(Loss)
Gain on Deconsolidation
Upon losing control of a subsidiary, the
assets and liabilities are derecognized
along with any related non-controlling
interest (“NCI”). Any interest retained in
the former subsidiary is measured at fair
value when control is lost. Any resulting
gain or loss is recognized as profit or
loss in the Consolidated Statements of
Comprehensive Income/(Loss).
Gain/(Loss) on Investments Held
at Fair Value
Investments held at fair value
include both unlisted and listed
securities held by us, which include
investments in Akili, Gelesis, Karuna,
Vor, ResTORbio (until its sale in 2020)
and certain insignificant investments.
Our ownership in Akili and Vor is in
preferred shares. Preferred shares
form part of our ownership in Gelesis
and such preferred shares investment
is accounted for as Investments Held
at Fair value while the investment in
common stock is accounted for under
the equity method. Our ownership in
Karuna was in preferred shares until its
IPO in June 2019 when such shares were
converted into common shares. When
Karuna’s preferred shares converted
into common shares, our equity interest
in Karuna investment was removed
from Investments Held at Fair Value and
accounted for under the equity method
as we still retained significant influence
in Karuna at such time. On December 2,
2019 we lost significant influence in
Karuna and, beginning on that date,
we accounted for our investment in
Karuna in accordance with IFRS 9 as
an Investment Held at Fair Value. We
account for investments in preferred
shares of our associates in accordance
with IFRS 9 as Investments Held at Fair
Value when the preferred shares do not
provide access to returns underlying
ownership interests.
Loss Realized on Investments Held at
Fair Value
Loss realized on investments held at fair
value relates to realized differences in
the per share disposal price of a listed
security as compared to the per share
exchange quoted price at the time of
disposal. The difference is attributable
to a blockage discount, attributable to
a variety of market factors, primarily the
number of shares being transacted was
significantly larger than the daily trading
volume of a given security.
Gain on Loss of Significant Influence
Gain on loss of significant influence
relates to the assessment in connection
with our ability to exert significant
influence over an investment in a
Non-Controlled Founded Entity.
As of December 31, 2020, only our
investment in Gelesis meets the scope
of equity method accounting. For the
years ended December 31, 2019 and
December 31, 2018, we recognized
gains on loss of significant influence in
Karuna and resTORbio, respectively.
Other Income (Expense)
Other income (expense) consists
primarily of gains and losses related
to the sale of an asset and certain
investments as well as sub-lease income.
Finance Costs/Income
Finance costs consist of loan interest
expense and the changes in the fair
value of certain liabilities associated
with financing transactions, mainly
preferred share liabilities in respect
of preferred shares issued by our non
wholly owned subsidiaries to third
parties. Finance income consists of
interest income on funds invested in
money market funds and U.S. treasuries.
Share of Net Gain (Loss) of Associates
Accounted for Using the Equity
Method, and Impairment of Investment
in Associate
Associates are accounted for using
the equity method (equity accounted
investees) and are initially recognized
at cost, or if recognized upon
deconsolidation they are initially
recorded at fair value at the date of
deconsolidation. The consolidated
financial statements include our share
of the total comprehensive income and
equity movements of equity accounted
investees, from the date that significant
influence commences until the date
that significant influence ceases. When
the share of losses exceeds the net
PureTech Health plc Annual report and accounts 2020 79
Governance Financial Review — continued
Results of Operations
The following table, which has been derived from our audited financial statements for the years ended December 31, 2020,
2019 and 2018 included herein, summarizes our results of operations for the periods indicated, together with the changes in
those items in dollars:
(in thousands)
Contract revenue
Grant revenue
Total revenue
Operating expenses:
General and administrative expenses
Research and development expenses
Operating income/(loss)
Other income/(expense):
Gain/(loss) on deconsolidation
Gain/(loss) on investments held at fair value
Loss realized on sale of investment
Loss on impairment of intangible asset
Gain/(loss) on disposal of assets
Gain on loss of significant influence
Other income/(expenses)
Other income/(loss)
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 income taxes
Taxation
Net income/(loss) including non-controlling
interest
Net (loss)/income attributable to the Company
Year Ended December 31,
2020
$8,341
3,427
11,768
2019
$8,688
1,119
9,807
2018
$16,371
4,377
20,748
(49,440)
(81,859)
(59,358)
(85,848)
(47,365)
(77,402)
(119,531)
(135,399)
(104,019)
—
232,674
(54,976)
—
(30)
—
1,065
178,732
(6,115)
(34,117)
—
18,969
(14,401)
264,409
(37,863)
—
—
(82)
445,582
121
672,167
(46,147)
30,791
(42,938)
478,474
(112,409)
41,730
(34,615)
—
(30)
4,060
10,287
(278)
21,154
25,917
(11,490)
—
(68,438)
(2,221)
Change
(2019 to 2020)
Change
(2018 to 2019)
$(347)
2,308
1,961
9,918
3,988
15,868
(264,409)
270,537
(54,976)
—
52
(445,582)
944
(493,434)
40,032
(64,908)
42,938
(459,504)
98,008
$(7,683)
(3,258)
(10,941)
(11,993)
(8,445)
(31,380)
222,679
(3,248)
—
30
(4,142)
435,295
399
651,013
(72,065)
42,281
(42,938)
546,911
(110,188)
4,568
$5,985
366,065
$421,144
(70,659)
(361,497)
436,724
$(43,654)
$(415,159)
$464,798
Comparison of the Years Ended December 31, 2020 and 2019
Total Revenue
(in thousands)
Contract Revenue:
Internal Segment
Controlled Founded Entities
Non-Controlled Founded Entities
Parent Company and other
Total Contract Revenue
Grant Revenue:
Internal Segment
Controlled Founded Entities
Non-Controlled Founded Entities
Parent Company and other
Total Grant Revenue
Total Revenue
Year Ended December 31,
2020
2019
Change
$3,560
2,726
—
2,054
$8,341
$32
3,395
—
—
$3,427
$11,768
$6,064
2,487
—
137
$8,688
$15
1,104
—
—
$1,119
$9,807
$(2,503)
239
—
1,917
$(347)
$17
2,291
—
—
$2,308
$1,961
Our total revenue was $11.8 million for the year ended December 31, 2020, an increase of $2.0 million, or 20.0 percent
compared to the year ended December 31, 2019. The increase was primarily attributable to an increase of $2.3 million in grant
revenue in the Controlled Founded Entities segment for the year ended December 31, 2020, which was driven primarily by
Vedanta’s grant revenue earned pursuant to its CARB-X and BARDA agreements. The increase was further attributable to an
increase of $1.9 million in contract revenue in the Parent segment for the year ended December 31, 2020, which was primarily
driven by a $2.0 million milestone payment received from Karuna for initiation of its KarXT Phase 3 clinical study pursuant to
the Exclusive Patent License Agreement between PureTech and Karuna. The increases were partially offset by a decline of
$2.5 million in contract revenue in the Internal segment, which was primarily drive by the Orasome collaboration and license
agreement with Roche, which concluded during the year ended December 31, 2020.
80 PureTech Health plc Annual report and accounts 2020
Governance
Financial Review — continued
Research and Development Expenses
(in thousands)
Research and Development Expenses:
Internal Segment
Controlled Founded Entities
Non-Controlled Founded Entities
Parent Company and other
Total Research and Development Expenses:
Year Ended December 31,
2020
2019
Change
$(41,583)
(40,043)
—
(234)
$(81,859)
$(25,977)
(42,780)
(15,555)
(1,536)
$(85,848)
$15,607
(2,737)
(15,555)
(1,302)
$(3,988)
Our research and development expenses were $81.9 million for the year ended December 31, 2020, a decline of $4.0 million, or
4.6 percent compared to the year ended December 31, 2019. The change was attributable to a decline of $15.6 million in the Non-
Controlled Founded Entities segment owing to the deconsolidation of Vor, Karuna and Gelesis during year ended December 31,
2019. The decline was further attributable to declines of $2.7 million in the Controlled Founded Entities segment and $1.3 million
in the Parent segment for the year ended December 31, 2020. The declines were partially offset by an increase of $15.6 million
in research and development expenses incurred by the Internal segment for the year ended December 31, 2020. In 2020 we
progressed our wholly-owned therapeutic candidates to key milestones. We completed a Phase 1 multiple ascending dose
and food effect study for LYT-100. We also initiated a Phase 2a proof-of-concept study of LYT-100 in patients with breast cancer-
related, upper limb secondary lymphedema as well as initiated a Phase 2 trial of LYT-100 in Long COVID respiratory complications
and related sequelae, which is also known as post-acute COVID-19 syndrome (PACS). Finally, we initiated a Phase 1 clinical trial of
LYT-200 for the potential treatment of metastatic solid tumors that are difficult to treat and have poor survival rates.
General and Administrative Expenses
(in thousands)
General and Administrative Expenses:
Internal Segment
Controlled Founded Entities
Non-Controlled Founded Entities
Parent Company and other
Total General and Administrative Expenses
Year Ended December 31,
2020
2019
Change
$(2,112)
(15,061)
—
(32,267)
$(2,385)
(14,436)
(10,439)
(32,098)
$(49,440)
$(59,358)
$(273)
625
(10,439)
168
$(9,918)
Our general and administrative expenses were $49.4 million for the year ended December 31, 2020, a decrease of $9.9 million,
or 16.7 percent compared to the year ended December 31, 2019. The decrease was primarily attributable to a decline of
$10.4 million in the Non-Controlled Founded Entities segment, owing to the deconsolidation of Vor, Karuna and Gelesis during
the year ended December 31, 2019.
Total Other Income (Loss)
Total other income was $178.7 million for the year ended December 31, 2020, a decrease of $493.4 million, compared to the
year ended December 31, 2019. We recognized a gain on loss of significant influence of $445.6 million with respect to Karuna
for the year ended December 31, 2019. No loss of significant influence of associates occurred during the year ended December
31, 2020. The decline was further attributable to a decline of $264.4 million in gain on deconsolidation as no deconsolidation
of subsidiaries occurred during the year ended December 31, 2020, as compared to a gain of $264.4 million recognized for the
deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019. The decline was further attributable
to a loss of $55.0 million realized on the sale of certain investments held at fair value during year ended December 31, 2020.
The declines were partially offset by an increase of $270.5 million on gain on investments held at fair value for the year
ended December 31, 2020, which was primarily driven by Karuna.
Net Finance Income (Costs)
Net finance costs were $6.1 million for the year ended December 31, 2020, a decline of $40.0 million, or 86.7 percent compared
to net finance costs of $46.1 million for the year ended December 31, 2019. The change was primarily attributable to a
$42.1 million decline in the change in the fair value of our preferred shares, warrant and convertible note liabilities held by third
parties for the year ended December 31, 2020.
Share of Net Gain (Loss) in Associates Accounted for Using the Equity Method, and Impairment of Investment in Associate
The share of net loss in associates was $34.1 million for the year ended December 31, 2020, a decrease of $64.9 million, or 210.8
percent as compared to net gain of $30.8 million for the year ended December 31, 2019. The change in share of net gain/(loss)
in associates was primarily attributable to the financial results of Gelesis for the year ended December 31, 2020. Additionally,
we allocated a share of our net loss in Gelesis for the year ended December 31, 2020, totaling $23.0 million, to our long-term
interest in Gelesis as of December 31, 2020. We recorded equity method income of $37.1 million with respect to Gelesis, which
was partially offset by our share of net loss in Karuna of $6.3 million for the year ended December 31, 2019. Additionally, we
recorded an impairment charge of $42.9 million for the year ended December 31, 2019, related to our investment in common
shares held in Gelesis. See Note 6 to our consolidated financial statements included elsewhere in this annual report.
Taxation
Income tax expense was $14.4 million for the year ended December 31, 2020, a decline of $98.0 million, or 87.2 percent as
compared to the year ended December 31, 2019. The decline in income tax expense was primarily attributable to the gains
realized on the loss of significant influence on Karuna for the year ended December 31, 2019 and the gains recognized on
deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019.
PureTech Health plc Annual report and accounts 2020 81
Governance
Financial Review — continued
Comparison of the Years Ended December 31, 2019 and 2018
Total Revenue
(in thousands)
Contract Revenue:
Internal Segment
Controlled Founded Entities
Non-Controlled Founded Entities
Parent Company and other
Total Contract Revenue
Grant Revenue:
Internal Segment
Controlled Founded Entities
Non-Controlled Founded Entities
Parent Company and other
Total Grant Revenue
Total Revenue
Year Ended December 31,
2019
2018
Change
$6,064
2,487
—
137
$8,688
$15
1,104
—
—
$1,119
$9,807
$2,110
14,233
—
29
$16,371
$86
4,271
20
—
$4,377
$20,748
$3,954
(11,745)
—
108
$(7,683)
$(71)
(3,167)
(20)
—
$(3,258)
$(10,941)
Our total revenue was $9.8 million for the year ended December 31, 2019, a decrease of $10.9 million, or 52.7 percent compared
to the year ended December 31, 2018. The decline was attributable to decreases of $11.7 million in contract revenue and
$3.2 million in grant revenue in the Controlled Founded Entities segment for the year ended December 31, 2019, which was
driven primarily by Vedanta’s contract revenue earned under its milestone-based JBI collaboration agreement and grant
revenue earned pursuant to its CARB-X agreement during 2018. The decline in Controlled Founded Entities segment’s
contract and grant revenues, was partially offset by a $4.0 million increase in contract revenue in the Internal segment, which
was driven by increases in contract revenue earned under the Orasome collaboration and license agreement with Roche and
the Lymphatic Targeting platform collaboration and license agreement with Boehringer Ingelheim entered into in July 2019
for the year ended December 31, 2019.
Research and Development Expenses
(in thousands)
Research and Development Expenses:
Internal Segment
Controlled Founded Entities
Non-Controlled Founded Entities
Parent Company and other
Total Research and Development Expenses:
Year Ended December 31,
2019
2018
Change
$(25,977)
(42,780)
(15,555)
(1,536)
$(85,848)
$(8,929)
(36,930)
(29,851)
(1,692)
$(77,402)
$17,047
5,850
(14,296)
(156)
$8,446
Our research and development expenses were $85.8 million for the year ended December 31, 2019, an increase of $8.4 million,
or 10.9 percent compared to the year ended December 31, 2018. The change was attributable to increases of $17.0 million
in the Internal segment for the year ended December 31, 2019. In 2019, we continued to shift our focus towards the Internal
segment, investing in research and development activities to advance a Wholly Owned Pipeline of therapeutic candidates
designed to harness key immunological, fibrotic and lymphatic system mechanisms. During the year ended December 31,
2019, we progressed LYT-100 towards first patient dosing in its Phase 1 multiple ascending dose and food effect study, which
began in 2020, and prepared for the initiation of a Phase 1 clinical study of LYT-200 in solid tumors, which also began in 2020.
Research and development expenses in the Controlled Founded Entities segment also increased $5.9 million as Vedanta
progressed its candidates VE202, VE303, VE416 and VE800 to meaningful milestones. The increases were partially offset by a
decline of $14.3 million in the Non-Controlled Founded Entities segment owing to the deconsolidation of Akili during the year
ended December 31, 2018 and the deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019.
General and Administrative Expenses
(in thousands)
General and Administrative Expenses:
Internal Segment
Controlled Founded Entities
Non-Controlled Founded Entities
Parent Company and other
Total General and Administrative Expenses
Year Ended December 31,
2019
2018
Change
$(2,385)
(14,436)
(10,439)
(32,098)
$(1,498)
(10,212)
(16,385)
(19,270)
$887
4,224
(5,946)
12,828
$(59,358)
$(47,365)
$11,993
Our general and administrative expenses were $59.4 million for the year ended December 31, 2019, an increase of $12.0 million,
or 25.3 percent compared to the year ended December 31, 2018. The change was attributable to increases of $12.8 million in
the Parent segment for year ended December 31, 2019, which was primarily driven by increased professional fees incurred in the
exploration of an ADR listing and increased non-cash depreciation and amortization expenses incurred in the implementation
of IFRS 16 Leases and the lease we entered into during the year ended December 31, 2019 for our new headquarters. Controlled
82 PureTech Health plc Annual report and accounts 2020
Governance
Financial Review — continued
Founded Entities segment’s general and
administrative expenses also increased
by $4.2 million. The increases in the
Internal and Controlled Founded Entities
segments’ general and administrative
were offset by the deconsolidation of
Akili during the year ended December 31,
2018 and the deconsolidation of Vor,
Karuna and Gelesis during the year
ended December 31, 2019.
Total Other Income (Loss)
Total other income was $672.2 million for
the year ended December 31, 2019, an
increase of $651.0 million, as compared
to the year ended December 31, 2018.
The growth was attributable to an
increase of $435.3 million in gain on
loss of significant influence for the year
ended December 31, 2019. For the year
ended December 31, 2019 we recognized
a gain on loss of significant influence of
$445.6 million with respect to Karuna,
while for the year ended December 31,
2018 we recognized a gain on loss of
significant influence of $10.3 million
with respect to resTORbio. The
growth was further attributable to an
increase of $222.7 million in gain on
deconsolidation as we recognized a gain
of $264.4 million for the deconsolidation
of Vor, Karuna and Gelesis during the
year ended December 31, 2019, as
compared to a gain of $41.7 million for
the deconsolidation of Akili during the
year ended December 31, 2018. The
gains were partially offset by a decline
of $4.1 million in income related to asset
disposals and an increase in fair value
accounting losses of $3.2 million on
certain investments held at fair value for
the year ended December 31, 2019.
Net Finance Income (Costs)
Net finance costs were $46.1 million
for the year ended December 31, 2019,
an increase of $72.1 million in costs,
or 278.1 percent as compared to the
year ended December 31, 2018. The
change was primarily attributable to a
$70.5 million decline in the change in
the fair value of our preferred shares,
warrant and convertible note liabilities
held by third parties for the year
ended December 31, 2019.
Share of Net Gain/(Loss) in Associates
Accounted for Using the Equity
Method, and Impairment of Investment
in Associate
The share of net income in associates was
$30.8 million for the year ended December
31, 2019, an increase of $42.3 million,
or 368.0 percent as compared to a net
loss for the year ended December 31,
2018. The change in associate income
was attributable to the deconsolidation
of Karuna and Gelesis and subsequent
equity method accounting from the date
of deconsolidation to December 31, 2019.
We recorded equity method income of
$37.1 million with respect to Gelesis, which
was partially offset by our share of net
loss in Karuna of $6.3 million for the year
ended December 31, 2019. Additionally,
we recorded an impairment charge of
$42.9 million for the year ended December
31, 2019, related to our investment in
common shares held in Gelesis. See Note 6
to our consolidated financial statements
included elsewhere in this annual report.
Taxation
Income tax expense was $112.4 million
for the year ended December 31,
2019, an increase of $110.2 million, or
4961.2 percent as compared to the year
ended December 31, 2018. The growth
in income tax expense was primarily
attributable to the gains realized on the
loss of significant influence on Karuna for
the year ended December 31, 2019 and
the gains recognized on deconsolidation
of Vor, Karuna and Gelesis during the
year ended December 31, 2019.
Critical Accounting Policies and
Significant Judgments and Estimates
Our management’s discussion and
analysis of our financial condition
and results of operations is based on
our financial statements, which we
have prepared in accordance with
international accounting standards in
conformity with the requirements of the
Companies Act 2006 and International
Financial Reporting Standards (IFRSs)
adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the EU.
The Consolidated Financial Statements
also comply fully with IFRSs as issued by
the International Accounting Standards
Board (IASB). In the preparation of these
financial statements, we are required
to make judgments, estimates and
assumptions about the carrying amounts
of assets and liabilities that are not
readily apparent from other sources. The
estimates and associated assumptions
are based on historical experience and
other factors that are considered to
be relevant. Actual results may differ
from these estimates under different
assumptions or conditions.
Our estimates and assumptions are
reviewed on an ongoing basis. Revisions
to accounting estimates are recognized
in the period in which the estimate is
revised if the revision affects only that
period or in the period of the revisions
and future periods if the revision affects
both current and future periods.
While our significant accounting policies
are described in more detail in the notes
to our consolidated financial statements
appearing at the end of this report, we
believe the following accounting policies
to be most critical to the judgments and
estimates used in the preparation of
our financial statements. See Note 1 to
our consolidated financial statements
for a further detailed description of our
significant accounting policies.
Financial instruments
We account for our financial
instruments according to IFRS 9. As
such, when issuing preferred shares
in our subsidiaries we determine the
classification of financial instruments
in terms of liability or equity. Such
determination involves significant
judgement. These judgements include
an assessment of whether the financial
instruments include any embedded
derivative features, whether they include
contractual obligations upon us to
deliver cash or other financial assets or
to exchange financial assets or financial
liabilities with another party at any point
in the future prior to liquidation, and
whether that obligation will be settled
by exchanging a fixed amount of cash or
other financial assets for a fixed number
of the Group’s equity instruments.
In accordance with IFRS 9 we carry certain
investments in equity securities at fair
value as well as our subsidiary preferred
share, convertible notes and warrant
liabilities, all through profit and loss
(FVTPL). Valuation of the aforementioned
financial instruments (assets and
liabilities) includes making significant
estimates, specifically determining the
appropriate valuation methodology and
making certain estimates of the future
earnings potential of the subsidiary
businesses, appropriate discount rate
and earnings multiple to be applied,
marketability and other industry and
company specific risk factors.
Consolidation:
The consolidated financial statements
include the financial statements of the
Company and the entities it controls.
Based on the applicable accounting
rules, the Company controls an investee
when it is exposed, or has rights, to
variable returns from its involvement
with the investee and has the ability
to affect those returns through its
power over the investee. Therefore an
assessment is required to determine
whether the Company has (i) power over
the investee; (ii) exposure, or rights, to
variable returns from its involvement
with the investee; and (iii) the ability to
use its power over the investee to affect
the amount of the investor’s returns.
Judgement is required to perform such
assessment and it requires that the
Company considers, among others,
activities that most significantly affect
the returns of the investee, its voting
shares, representation on the board,
rights to appoint management, investee
PureTech Health plc Annual report and accounts 2020 83
Governance Financial Review — continued
dependence on the Company and other
contributing factors.
Investment in Associates
When we do not control an investee but
maintain significant influence over the
financial and operating policies of the
investee the investee is an associate.
Significant influence is presumed to exist
when we hold 20 percent or more of the
voting power of an entity, unless it can
be clearly demonstrated that this is not
the case. We evaluate if we maintain
significant influence over associates
by assessing if we have the power to
participate in the financial and operating
policy decisions of the associate.
Associates are accounted for using
the equity method (equity accounted
investees) and are initially recognized
at cost, or if recognized upon
deconsolidation they are initially
recorded at fair value at the date of
deconsolidation. The consolidated
financial statements include our share
of the total comprehensive income
and equity movements of equity
accounted investees, from the date
that significant influence commences
until the date that significant influence
ceases. When our share of losses
exceeds the net investment in an
equity accounted investee, including
preferred share investments that are
considered to be Long-Term Interests,
the carrying amount is reduced to zero
and recognition of further losses is
discontinued except to the extent that
we have incurred legal or constructive
obligations or made payments on
behalf of an investee. To the extent we
hold interests in associates that are not
providing access to returns underlying
ownership interests, the instrument
held by PureTech is accounted for
in accordance with IFRS 9.
Judgement is required in order to
determine whether we have significant
influence over financial and operating
policies of investees. This judgement
includes, among others, an assessment
whether we have representation on the
board of directors of the investee, whether
we participate in the policy making
processes of the investee, whether there is
any interchange of managerial personnel,
whether there is any essential technical
information provided to the investee and
if there are any transactions between us
and the investee.
Judgement is also required to determine
which instruments we hold in the
investee form part of the investment in
the associate, which is accounted for
under IAS 28 and scoped out of IFRS 9,
and which instruments are separate
financial instruments that fall under the
scope of IFRS 9. This judgement includes
an assessment of the characteristics of
the financial instrument of the investee
held by us and whether such financial
instrument provides access to returns
underlying an ownership interest.
Where the company has other
investments in an equity accounted
investee that are not accounted for
under IAS 28, judgement is required
in determining if such investments
constitute Long-Term Interests for the
purposes of IAS 28 (please refer to Notes
5 and 6). This determination is based on
the individual facts and circumstances
and characteristics of each investment,
but is driven, among other factors, by
the intention and likelihood to settle
the instrument through redemption or
repayment in the foreseeable future, and
whether or not the investment is likely to
be converted to common stock or other
equity instruments
Income Taxes
We must make certain estimates and
judgments in determining income
tax expense for financial statement
purposes. The amount of taxes currently
payable or refundable is accrued, and
deferred tax assets and liabilities are
recognized for the estimated future tax
consequences attributable to differences
between the financial statement
carrying amounts of existing assets and
liabilities and their respective tax bases.
Deferred tax assets are also recognized
for realizable loss and tax credit
carryforwards. Deferred tax assets and
liabilities are measured using enacted tax
rates in effect for the year in which those
temporary differences are expected to
be recovered or settled. The effect on
deferred tax assets and liabilities for
a change in tax rates is recognized in
income in the period that includes the
enactment date. Net deferred tax assets
are not recorded if we do not assess their
realization as probable. Judgement is
required to determine if realization of
such deferred tax assets is probable.
Share-based Payments
Share-based payments includes stock
options, restricted stock units (“RSUs”) as
well as service, market and performance-
based RSU awards in which the expense
is recognized based on the grant date
fair value of these awards.
In accordance with IFRS 2, “Share-based
Payments,” the fair value of the share
option awards is estimated on the grant
date using the Black-Scholes option-
valuation model which requires the
input of certain assumptions, including
the expected life of the share-based
award, share price volatility, dividend
yield and interest rate. The volatility
is based on our historical data for the
purposes of the Black-Scholes option-
valuation model. Expected life is based
on the median expected term. Volatility
is calculated by taking the weighted-
average of the historical volatilities of our
shares. We have not declared dividends
and we do not plan to pay any dividends
in the future. The risk-free interest rate
for periods in the expected life of the
option is based on the U.S. Treasury
constant maturities in effect at the time
of the grant.
The fair value of the market and
performance-based awards is based
on the Monte Carlo simulation analysis
utilizing a Geometric Brownian Motion
process with 100,000 simulations
to value those shares. The model
considers share price volatility, risk-free
rate and other covariance of comparable
public companies and other market
data to predict distribution of relative
share performance.
We recognize the estimated fair value of
service, market and performance-based
awards as share-based compensation
expense over the vesting period based
upon the determination of whether
it is probable that the performance
targets will be achieved. We assess
the probability of achieving the
performance targets at each reporting
period. Cumulative adjustments, if any,
are recorded to reflect subsequent
changes in the estimated outcome of
performance-related conditions. For
share-based payment awards with
market conditions, the grant date
fair value is measured to reflect such
conditions and there is no true-up for
differences between expected and
actual outcomes.
Recent Accounting Pronouncements
For information on recent accounting
pronouncements, see our consolidated
financial statements and the related
notes found elsewhere in this report.
Cash Flow and Liquidity
Our cash flows may fluctuate and are
difficult to forecast and will depend
on many factors, including:
• the expenses incurred in the
development of wholly-owned
and Controlled-Founded Entity
therapeutic candidates;
• the revenue generated by wholly-
owned and Controlled-Founded
Entity therapeutic candidates;
• the revenue generated from
licensing and royalty agreement
with Founded Entities;
84 PureTech Health plc Annual report and accounts 2020
Governance Financial Review — continued
• the financing requirements of the
Internal segment, Controlled-
Founded Entities segment and Parent
segment; and
• the investment activities in the Internal,
Controlled-Founded Entities, and
Non-Controlled Founded Entities and
Parent segments.
As of December 31, 2020, we had
consolidated cash and cash equivalents
of $403.9 million. As of December 31,
2020, we had PureTech Level cash and
cash equivalents of $349.4 million.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
(in thousands)
Net cash used in operating activities
Net cash provided by/(used in) investing activities
Net cash provided by/(used in) financing activities
Effect of exchange rates on cash and cash equivalents
Net increase in cash and cash equivalents
Operating Activities
Net cash used in operating activities
was $131.8 million for the year
ended December 31, 2020, as
compared to $98.2 million for the
year ended December 31, 2019. The
increase in outflows was primarily
attributable to estimated income taxes
of $20.7 million paid for our disposals of
Karuna common shares during the year
ended December 31, 2020. The increase
was further attributable to a decrease
of $4.5 million in payments received
with respect to contract revenue for
the year ended December 31, 2020.
We received a $2.0 million milestone
payment from Karuna for initiation of its
KarXT Phase 3 clinical study pursuant to
the Exclusive Patent License Agreement
between PureTech and Karuna during
the year ended December 31, 2020.
We received $3.5 million from Imbrium
Therapeutics LP for the execution of
a Research Collaboration Option and
License Agreement and $3.0 million
from Boehringer Ingelheim for the
execution of a Collaboration and
License Agreement during the year
ended December 31, 2019. The increase
in outflows was further attributable
to reduced interest income and the
timing of payments in the normal
course of business for the year ended
December 31, 2020.
Net cash used in operating
activities was $98.2 million for the
year ended December 31, 2019, as
compared to $72.8 million for the
year ended December 31, 2018. The
increase in outflows was primarily due
to our increased operating loss that
resulted from increased research and
development activities. In 2019, our
income resulted from increased non-
cash gains, that had no impact on the
cash used in operating activities.
Investing Activities
Net cash provided by investing
activities was $364.5 million for the
year ended December 31, 2020, as
compared to inflows of $63.7 million
for the year ended December 31, 2019.
The inflow was primarily attributable
to the sale of Karuna and resTORbio
common shares for aggregate
proceeds of $350.6 million during the
year ended December 31, 2020. The
inflow was further attributable to cash
provided by the maturity of short-term
investments totaling $30.1 million.
The inflows were offset by purchases
of Gelesis and Vor preferred shares
totaling $11.1 million and the purchase
of fixed assets totaling $5.2 million.
Net cash provided by investing
activities was $63.7 million for the
year ended December 31, 2019, as
compared to net cash used in investing
activities of $39.6 million for the year
ended December 31, 2018. Cash
provided by the maturity of short-
term investments of $174.0 million was
offset by the purchase of short-term
investments of $69.5 million as well as
the purchase of fixed assets totaling
$12.1 million and the purchase of
intangible assets totaling $0.4 million.
The inflow was further offset by our
investment in Gelesis convertible
promissory notes totaling $6.5 million
and Gelesis Series 3 Growth preferred
shares and Karuna Series B preferred
shares totaling $16.0 million. The inflow
was further offset by the derecognition
of cash totaling $16.0 million held
by Vor, Karuna and Gelesis upon
deconsolidation.
Financing Activities
Net cash provided by financing
activities was $38.9 million for the
year ended December 31, 2020, as
compared to $49.9 million for the year
ended December 31, 2019. The net
inflow was primarily attributable to the
issuances by Vedanta of a $25.0 million
convertible promissory note and a
long-term loan with net proceeds of
$14.7 million. The inflow was further
attributable to $13.8 million received
from the Vedanta Series C-2 and Sonde
Years Ended December 31,
2020
2019
2018
$(131,827)
364,478
38,869
—
$271,520
$(98,156)
63,659
49,910
(104)
$15,309
$(72,796)
(39,645)
156,887
(44)
$44,402
Series A-2 preferred share financings.
The inflows were partially offset by the
$12.9 million settlement of 2017 RSU
awards granted to certain executives.
Net cash provided by financing
activities was $49.9 million for the year
ended December 31, 2019, as compared
to net inflows of $156.9 million for the
year ended December 31, 2018. The
net inflow was primarily attributable to
aggregate proceeds of the issuance
of $51.0 million received from the
Vedanta Series C and C-2, Gelesis
Series 2 Growth and Sonde Series A-2
preferred share financings. Further
inflows of $1.6 million were attributable
to the proceeds from the issuance
of convertible notes by Karuna. The
inflows were partially offset by payment
of our lease liability totaling $1.7 million
and $1.3 million in withholding payroll
tax payments related to the vesting
of 2016 RSU awards granted to
certain executives.
Funding Requirements
We have incurred operating losses
since inception. Based on our current
plans, we believe our existing cash and
cash equivalents at December 31,
2020 will be sufficient to fund our
operations and capital expenditure
requirements into the first quarter
of 2024 and following the sale of
1,000,000 common shares of Karuna for
aggregate proceeds of $118.0 million
on February 9, 2021, we have sufficient
funding to extend operations over a
four year period into the first quarter
of 2025. We expect to incur substantial
additional expenditures in the near
term to support our ongoing activities.
Additionally, we expect to incur
additional costs as a result of operating
as a U.S. public company. We expect
to continue to incur net losses for
the foreseeable future. Our ability to
fund our therapeutic development
and clinical operations as well as
commercialization of our wholly-owned
therapeutic candidates, will depend on
PureTech Health plc Annual report and accounts 2020 85
Governance
Financial Review — continued
the amount and timing of cash received
from planned financings. Our future
capital requirements will depend on
many factors, including:
• the costs, timing and outcomes of
clinical trials and regulatory reviews
associated with our wholly-owned
therapeutic candidates;
• the costs of commercialization
activities, including product
marketing, sales and distribution;
• the costs of preparing, filing and
prosecuting patent applications
and maintaining, enforcing and
defending intellectual property-
related claims;
• the emergence of competing
technologies and products and other
adverse marketing developments;
• the effect on our therapeutic and
product development activities of
actions taken by the FDA, EMA or
other regulatory authorities;
• our degree of success in
commercializing our wholly-owned
therapeutic candidates, if and when
approved; and
• the number and types of future
therapeutics we develop and
commercialize.
A change in the outcome of any of
these or other variables with respect to
the development of any of our wholly-
owned therapeutic candidates could
significantly change the costs and
timing associated with the development
of that therapeutic candidate. Further,
our operating plans may change in the
future, and we may need additional
funds to meet operational needs and
capital requirements associated with
such operating plans.
Until such time, if ever, as we can
generate substantial product
revenue, we expect to finance our
operations through a combination
of equity financings, debt financings,
collaborations with other companies
or other strategic transactions. We
do not currently have any committed
external source of funds. To the extent
that we raise additional capital through
the sale of equity or convertible debt
securities, your ownership interest
will be diluted, and the terms of these
securities may include liquidation or
other preferences that adversely affect
your rights as a common stockholder.
Debt financing and preferred equity
financing, if available, may involve
agreements that include covenants
limiting or restricting our ability to
take specific actions, such as incurring
additional debt, making acquisitions
or capital expenditures or declaring
dividends. If we raise additional funds
through collaborations, strategic
alliances or marketing, distribution
or licensing arrangements with third
parties, we may have to relinquish
valuable rights to our technologies,
future revenue streams, research
programs or therapeutic candidates
or grant licenses on terms that may not
be favorable to us. If we are unable to
raise additional funds through equity or
debt financings or other arrangements
when needed, we may be required to
delay, limit, reduce or terminate our
research, therapeutic development
or future commercialization efforts or
grant rights to develop and market
therapeutic candidates that we would
otherwise prefer to develop and
market ourselves.
Further, our operating plans may
change, and we may need additional
funds to meet operational needs and
capital requirements for clinical trials
and other research and development
activities. We currently have no credit
facility or committed sources of capital.
Because of the numerous risks and
uncertainties associated with the
development and commercialization
of our wholly-owned therapeutic
candidates, we are unable to estimate
the amounts of increased capital outlays
and operating expenditures associated
with our current and anticipated
therapeutic development programs.
Financial Position
Summary Financial Position
(in thousands)
Investments held at fair value
Other non-current assets
Non-current assets
Short-term investments
Cash and cash equivalents
Other current assets
Current assets
Total assets
Lease Liability
Deferred tax liability
Other non-current liabilities
Non-current liabilities
Trade and other payables
Notes payable
Warrant liability
Preferred shares
Other current liabilities
Total current liabilities
Total liabilities
Net assets
Total equity
86 PureTech Health plc Annual report and accounts 2020
As of December 31,
2019
Change
714,905
57,428
772,333
30,088
132,360
6,397
168,845
941,178
34,914
115,445
1,219
151,579
19,750
1,455
7,997
100,989
9,011
139,201
290,780
650,397
650,398
(184,744)
(11,943)
(196,687)
(30,088)
271,521
4,071
245,504
48,816
(2,827)
(6,820)
13,598
3,952
817
25,000
209
17,983
(2,287)
41,722
45,674
3,142
3,141
2020
530,161
45,484
575,645
—
403,881
10,468
414,348
989,994
32,088
108,626
14,818
155,531
20,566
26,455
8,206
118,972
6,724
180,924
336,455
653,539
653,539
Governance
Financial Review — continued
Investments Held at Fair Value
Investments held at fair value decreased
$184.7 million to $530.2 million as of
December 31, 2020. Investments held
at fair value consists primarily of our
common share investment in Karuna
and our preferred share investments
in Akili, Gelesis and Vor. See Notes
5 and 6 to our consolidated financial
statements included elsewhere in this
annual report. Fair value of investments
accounted for at fair value, does not
take into consideration contribution
from milestones that occurred after
December 31, 2020, the value of
our consolidated Founded Entities
(Vedanta, Follica, Sonde, Akili, Alivio,
and Entrega), our Wholly Owned
Programs, or our cash.
Cash and Cash Equivalents, and Short-
term Investments
Consolidated cash, cash equivalents
and short-term investments increased
$241.4 million to $403.9 million as
of December 31, 2020, while we
had PureTech Level cash and cash
equivalents of $349.4 million. The
increase reflected primarily the
disposals of Karuna common shares
during the year ended December 31,
2020. On January 22, 2020, PureTech
sold 2,100,000 shares of Karuna
common shares for aggregate proceeds
of $200.9 million. On May 26, 2020,
PureTech sold an additional 555,500
Karuna common shares for aggregate
proceeds of $45.0 million. On August 26,
2020, PureTech sold 1,333,333 common
shares of Karuna for aggregate
proceeds of $101.6 million. The inflows
from the disposals were primarily offset
by our operating loss of $119.5 million
for the year ended December 31, 2020.
Non-Current Liabilities
Non-current liabilities increased
$4.0 million to $155.5 million as of
December 31, 2020. The increase
reflected the execution by Vedanta
of a $15.0 million long-term loan
and security agreement with Oxford
Finance LLC which was partially
offset by declines of $2.8 million and
$6.8 million in our long-term lease and
deferred tax liabilities, respectively as
of December 31, 2020.
Trade and Other Payables
Trade and other payables decreased
$0.8 million to $20.6 million as of
December 31, 2020. The decline
reflected primarily the timing of
payments as of December 31, 2020.
Notes Payable
Notes payable increased $25.0 million
to $26.5 million as of December 31,
2020. The increase reflected the
issuance by Vedanta of a $25.0 million
convertible promissory note to a third
party investor.
Preferred Shares
Preferred share liability increased
$18.0 million to $119.0 million as of
December 31, 2020. The increase
reflected the issuance by Sonde
of Series A-2 preferred shares for
aggregate proceeds of $4.8 million
and the issuance by Vedanta of Series
C-2 preferred shares for aggregate
proceeds of $9.0 million. The increases
also reflected Finance costs of
$4.2 million owing to the change in fair
value of preferred shares during the
year ended December 31, 2020.
Quantitative and Qualitative
Disclosures about Financial Risks
Interest Rate Sensitivity
As of December 31, 2020, we had
consolidated cash and cash equivalents
of $403.9 million, while we had PureTech
Level cash and cash equivalents
of $349.4 million. Our exposure to
interest rate sensitivity is impacted by
changes in the underlying U.K. and
U.S. bank interest rates. We have not
entered into investments for trading
or speculative purposes. Due to the
conservative nature of our investment
portfolio, which is predicated on capital
preservation and investments in short
duration, high-quality U.S. Treasury Bills
and U.S. debt obligations and related
money market accounts we do not
believe change in interest rates would
have a material effect on the fair market
value of our portfolio, and therefore we
do not expect our operating results or
cash flows to be significantly affected
by changes in market interest rates.
Foreign Currency Exchange Risk
We maintain our consolidated
financial statements in our functional
currency, which is the U.S. dollar.
Monetary assets and liabilities
denominated in currencies other than
the functional currency are translated
into the functional currency at rates
of exchange prevailing at the balance
sheet dates. Non-monetary assets
and liabilities denominated in foreign
currencies are translated into the
functional currency at the exchange
rates prevailing at the date of the
transaction. Exchange gains or
losses arising from foreign currency
transactions are included in the
determination of net income (loss) for
the respective periods. Such foreign
currency gains or losses were not
material for all reported periods.
We recorded foreign currency losses
in respect of foreign operations of
$0.5 million, $0.0 million and $0.2 million
for the years ended December 31, 2020,
December 31, 2019, and December 31,
2018, respectively, which are included
in Other comprehensive income/(loss)
in the Consolidated Statements of
Comprehensive Income/(Loss).
We do not currently engage in currency
hedging activities in order to reduce
our currency exposure, but we may
begin to do so in the future. Instruments
that may be used to hedge future risks
include foreign currency forward and
swap contracts. These instruments may
be used to selectively manage risks,
but there can be no assurance that we
will be fully protected against material
foreign currency fluctuations.
Controlled Founded Entity Investments
We maintain investments in certain
Controlled Founded Entities.
Our investments in Controlled
Founded Entities are eliminated as
intercompany transactions upon
financial consolidation. We are
however exposed to a preferred share
liability owing to the terms of existing
preferred shares and the ownership of
Controlled Founded Entities preferred
shares by third parties. The liability
of preferred shares is maintained at
fair value through the profit and loss.
Our strong cash position, budgeting
and forecasting processes, as well as
decision making and risk mitigation
framework enable us to robustly
monitor and support the business
activities of the Controlled Founded
Entities to ensure no exposure to
credit losses and ultimately dissolution
or liquidation. Accordingly, we view
exposure to third party preferred share
liability as low. Please refer to Note 16
to our consolidated financial statements
for further information regarding our
exposure to Controlled Founded
Entity Investments.
Non-Controlled Founded Entity
Investments
We maintain certain investments in
Non-Controlled Founded Entities which
are deemed either as investments and
accounted for as investments held at
fair value or associates and accounted
for under the equity method (please
refer to Note 1 to our consolidated
financial statements). Our exposure
to investments held at fair value was
$530.2 million as of December 31,
2020 and we may or may not be able
to realize the value in the future.
Accordingly, we view the risk as high.
Our exposure to investments in
associates in limited to the carrying
amount of the investment. We are
not exposed to further contractual
obligations or contingent liabilities
beyond the value of initial investment.
PureTech Health plc Annual report and accounts 2020 87
Governance foreign private issuer status. Even after
we no longer qualify as an emerging
growth company, as long as we qualify
as a foreign private issuer under the
Exchange Act, we will be exempt from
certain provisions of the Exchange Act
that are applicable to U.S. domestic
public companies, including:
• the sections of the Exchange Act
regulating the solicitation of proxies,
consents or authorizations in respect
of a security registered under the
Exchange Act;
• sections of the Exchange Act
requiring insiders to file public
reports of their stock ownership and
trading activities and liability for
insiders who profit from trades made
in a short period of time;
• the rules under the Exchange Act
requiring the filing with the SEC
of quarterly reports on Form 10-Q
containing unaudited financial
and other specified information,
or current reports on Form 8-K,
upon the occurrence of specified
significant events; and
• Regulation FD, which regulates
selective disclosures of material
information by issuers.
Financial Review — continued
As of December 31, 2020, Gelesis was
the only associate. The carrying amount
of the investment in Gelesis as an
associate was zero. Accordingly, we do
not view this as a risk. Please refer to
Notes 5, 6 and 16 to our consolidated
financial statements for further
information regarding our exposure
to Non-Controlled Founded Entity
Investments.
Equity Price Risk
As of December 31, 2020, we held
3,406,564 common shares of Karuna.
The fair value of our investment in
the common stock of Karuna was
$346.1 million.
The investment in Karuna is exposed to
fluctuations in the market price of these
common shares. The effect of a 10.0
percent adverse change in the market
price of Karuna common shares as of
December 31, 2020 would have been
a loss of approximately $34.6 million
recognized as a component of Other
income (expense) in our Consolidated
Statements of Comprehensive
Income/(Loss).
Liquidity Risk
We do not believe we will encounter
difficulty in meeting the obligations
associated with our financial liabilities
that are settled by delivering cash
or another financial asset. While we
believe our cash, cash equivalents and
short-term investments do not contain
excessive risk, we cannot provide
absolute assurance that in the future
our investments will not be subject to
adverse changes or decline in value
based on market conditions.
Credit Risk
We maintain an investment portfolio
in accordance with our investment
policy. The primary objectives of our
investment policy are to preserve
principal, maintain proper liquidity and
to meet operating needs. Although
our investments are subject to credit
risk, our investment policy specifies
credit quality standards for our
investments and limits the amount
of credit exposure from any single
issue, issuer or type of investment.
Also, due to the conservative nature
of our investments and relatively short
duration, interest rate risk is mitigated.
We do not own derivative financial
instruments. Accordingly, we do not
believe that there is any material market
risk exposure with respect to derivative
or other financial instruments.
the credit quality of customers on an
ongoing basis, taking into account
its financial position, past experience
and other factors. The credit quality
of financial assets that are neither past
due nor impaired can be assessed by
reference to credit ratings (if available)
or to historical information about
counterparty default rates. We are also
potentially subject to concentrations
of credit risk in accounts receivable.
Concentrations of credit risk with
respect to receivables is owed to
the limited number of companies
comprising our customer base. Our
exposure to credit losses is low,
however, due to the credit quality of our
larger collaborative partners such as
Boehringer Ingelheim and Eli Lilly.
JOBS Act Exemptions and Foreign
Private Issuer Status
We qualify as an “emerging growth
company” as defined in the U.S.
Jumpstart Our Business Startups
Act of 2012. An emerging growth
company may take advantage
of specified reduced reporting
and other requirements that are
otherwise applicable generally to
public companies. This includes an
exemption from the auditor attestation
requirement in the assessment of our
internal control over financial reporting
pursuant to the Sarbanes-Oxley Act
of 2002. We may take advantage of
this exemption for up to five years
or such earlier time that we are no
longer an emerging growth company.
We will cease to be an emerging
growth company if we have more
than $1.07 billion in total annual gross
revenue, have more than $700.0 million
in market value of our ordinary shares
held by non-affiliates or issue more than
$1.0 billion of non-convertible debt over
a three-year period. We may choose to
take advantage of some but not all of
these provisions that allow for reduced
reporting and other requirements.
We are considering whether we will take
advantage of the extended transition
period provided under Section 7(a)
(2)(B) of the Securities Act of 1933, as
amended, for complying with new or
revised accounting standards. Since
IFRS makes no distinction between
public and private companies for
purposes of compliance with new or
revised accounting standards, the
requirements for our compliance as
a private company and as a public
company are the same.
Credit risk is also the risk of financial
loss if a customer or counterparty to
a financial instrument fails to meet its
contractual obligations. We assess
Owing to our U.S. listing, we will report
under the Securities Exchange Act of
1934, as amended, or the Exchange
Act, as a non-U.S. company with
88 PureTech Health plc Annual report and accounts 2020
Governance Chair’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
our control and management. 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 in connection with our AGM or indeed
at any other time during the year.
Christopher Viehbacher
Chair
April 14, 2021
PureTech Health plc Annual report and accounts 2020 89
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 therapeutics to market.
Raju Kucherlapati, Ph.D.
Independent Non-Executive Director, R&D Committee Member
Raju Kucherlapati, Ph.D., has served as a member of our Board since 2014. He has been the Paul C. Cabot
professor of Genetics and a professor of medicine at Harvard Medical School since 2001. Dr. Kucherlapati
currently serves on the board of directors of Gelesis, Inc. and KEW Inc. He was a founder and former board
member of Abgenix, Cell Genesys and Millennium Pharmaceuticals. 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 Ph.D. 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 served on the
editorial board of the New England Journal of Medicine and was Editor in Chief of the journal Genomics. His
laboratory at Harvard Medical School is involved in cloning and characterization of human disease genes with
a focus on human syndromes with a significant cardiovascular involvement, use of genetic/genomic approaches
to understand the biology of cancer and the generation and characterization of genetically modified mouse
models for cancer and other human disorders.
John LaMattina, Ph.D.
Independent Non-Executive Director, R&D Committee Member
John LaMattina, Ph.D., has served as a member of our Board since 2009. Dr. LaMattina previously worked at
Pfizer in different roles from 1977 to 2007, including vice president of U.S. Discovery Operations in 1993, senior
vice president of worldwide discovery operations in 1998, senior vice president of worldwide development in
1999 and president of global research and development from 2003 to 2007. Dr. LaMattina serves on the board
of directors of Ligand Pharmaceuticals, Immunome Inc. and Vedanta and is chairman of the board of directors
of Alivio. Dr. LaMattina previously served on the board of Zafgen, Inc. until April 2020. 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 U.S. patents. Dr. LaMattina received the 1998 Boston College Alumni Award of Excellence in Science and
the 2004 American Diabetes Association Award for Leadership and Commitment in the Fight Against Diabetes.
He was awarded an Honorary Doctor of Science degree from the University of New Hampshire in 2007. In 2010,
he was the recipient of the American Chemical Society’s Earle B. Barnes Award for Leadership in Chemical
Research Management. He 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 received a B.S. in Chemistry from Boston College and received a Ph.D.
in Organic Chemistry from the University of New Hampshire. He then moved on to Princeton University as
a National Institutes of Health postdoctoral fellow in the laboratory of professor E. C. Taylor.
Robert Langer, Sc.D.
Co-Founder and Non-Executive Director, R&D Committee Member
Robert S. Langer, Sc.D., has served as a member of our Board since our founding and is our co-founder.
Dr. Langer has served as the David H. Koch Institute professor at MIT since 2005. He served as a member of the
FDA’s science board from 1995 to 2002 and as its chairman from 1999 to 2002. Dr. Langer serves on the board
of directors of Seer Bio, Abpro Bio, Frequency Therapeutics, Alivio Therapeutics, Entrega, Inc. and Moderna,
Inc. Dr. Langer has received over 220 major awards, including the 2006 U.S. National Medal of Science, the
Charles Stark Draper Prize in 2002 and the 2012 Priestley Medal. He is also the first engineer to ever receive
the Gairdner Foundation International Award. Dr. Langer has received the Dickson Prize for Science, Heinz
Award, Harvey Prize, John Fritz Award, General Motors Kettering Prize for Cancer Research, Dan David Prize in
Materials Science, Breakthough Prize in Life Sciences, National Medal of Science, National Medal of Technology
and Innovation, Kyoto Prize, Wolf Prize, Albany Medical Center Prize in Medicine and Biomedical Research and
the Lemelson-MIT prize. In 2006, he was inducted into the National Inventors Hall of Fame. In January 2015,
Dr. Langer was awarded the 2015 Queen Elizabeth Prize for Engineering. Dr. Langer received his bachelor’s
degree in Chemical Engineering from Cornell University and his Sc.D. in Chemical Engineering from MIT.
90 PureTech Health plc Annual report and accounts 2020
* Biographies for executive directors, Daphne Zohar, Stephen Muniz and Bharatt Chowrira, can be found on page 94.
Governance Board of Directors — continued
Kiran Mazumdar-Shaw
Independent Non-Executive Director
Kiran Mazumdar-Shaw has served as a member of our Board since September 2020. Ms. Mazumdar- Shaw has
been the executive chairperson of Biocon Limited, which she founded in 1978, since April 2020, and she served
as managing director of Biocon Limited from 1995 to 2020. Ms. Mazumdar-Shaw holds key positions in various
industry, educational, government and professional bodies globally. She has been elected as a full-term member
of the board of trustees of Massachusetts Institute of Technology. She has been elected as a member of the
prestigious U.S.-based National Academy of Engineering. She also serves as the lead independent member of
the board of Infosys Ltd, a director on the board of United Breweries Limited, and non-executive director on the
board of Narayana Health. Ms. Mazumdar-Shaw has received two of India’s highest civilian honors, the Padma
Shri in 1989 and the Padma Bhushan in 2005. She was also honored with the Order of Australia, Australia’s
highest civilian honor in January 2020. In 2016, she was conferred with the highest French distinction – Knight
of the Legion of Honour – and in 2014 received the Othmer Gold Medal in 2014 from the U.S.-based Chemical
Heritage Foundation for her pioneering efforts in biotechnology. Ms. Mazumdar-Shaw has been ranked as one
of the world’s top 20 inspirational leaders in the field of biopharmaceuticals by The Medicine Maker Power List
2020, and she was the winner of EY World Entrepreneur of the Year™ 2020 Award. She was the first woman
business leader from India to sign the Giving Pledge, an initiative of the Gates Foundation, committing to give
the majority of her wealth to philanthropic causes. She received a bachelor’s degree in science, Zoology Hons.,
from Bangalore University and a master’s degree in malting and brewing from Ballarat College, Melbourne
University. She has been awarded several honorary degrees from other universities globally.
Dame Marjorie Scardino
Senior Independent Director
Dame Marjorie Scardino has served as a member of our Board since 2015. She served for 28 years as the chief
executive officer of Pearson, a large education company that included The Economist, The Financial Times and
Penguin Books. She was on the board of the MacArthur Foundation for 12 years, five as chairman, and left in
2017. She was was a member of the board of Twitter from 2013 to 2018 and International Airlines Group from
2014 to 2019. Dame Scardino 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.
Christopher Viehbacher
Chair
Chris Viehbacher has served as a member of our Board since 2015 and as chairman since September 2019. He
has been the managing partner of Gurnet Point Capital since October 2014. Immediately prior to joining Gurnet
Point Capital, Mr. Viehbacher served as the chief executive officer and member of the board of directors of
Sanofi from December 2008 to October 2014. From 1993 to 2008, Mr. Viehbacher worked at GlaxoSmithKline
in different roles, including ultimately President of its North American pharmaceutical division. Mr. Viehbacher
began his career with PricewaterhouseCoopers LLP and qualified as a chartered accountant. Mr. Viehbacher
currently serves on the board of directors of Vedanta Biosciences as chairman, BEFORE Brands, Crossover
Health, Boston Pharmaceuticals, Zikani and Gurnet Point Capital LLC. Mr. Viehbacher previously served on the
board of directors of Axcella Health Inc. and Corium International, Inc. Mr. Viehbacher also serves on the Board
of Trustees of Northeastern University and the Board of Fellows of Stanford Medical School. Mr. Viehbacher has
co-chaired the Chief Executive Officer Roundtable on Neglected Diseases with Bill Gates and formerly chaired
the chief executive officer Roundtable on Cancer. He was the chairman of the board of the Pharmaceutical
Research and Manufacturers of America as well as president of the European Federation of Pharmaceutical
Industries and Associations. 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. Mr. Viehbacher has received the Pasteur Foundation Award for outstanding
commitment to safeguarding and improving health worldwide. He has also received France’s highest civilian
honor, the Légion d’honneur. Mr. Viehbacher received his bachelor’s degree in Commerce from Queen’s
University in Ontario, Canada in 1983.
PureTech Health plc Annual report and accounts 2020 91
Governance Board of Directors — continued
Dennis Ausiello, M.D.**
Board Advisor, R&D Committee Member
Dennis Ausiello, M.D., 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 M.D./Ph.D. 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 center
is a partnership among MGH, MIT and Harvard University with a mission 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) and Pfizer Pharmaceuticals. Dr. Ausiello is a nationally recognized 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 has served as an
editor of Cecil’s Textbook of Medicine. Dr. Ausiello received his BA from Harvard College and an M.D. from the
University of Pennsylvania.
H. Robert Horvitz, Ph.D.**
Board Advisor, R&D Committee Chair
H. Robert Horvitz, Ph.D., is a board observer 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 Scientific Advisory Board of the Novartis Institutes for BioMedical Research.
Dr. Horvitz was a member of the board of trustees of the Massachusetts General Hospital. He also 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 U.S. National Academy of Sciences, the U.S.
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 U.S. 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.
Bennett Shapiro, M.D.**
Board Advisor, R&D Committee Member
Bennett Shapiro, M.D., is a PureTech co-founder, a board advisor, a member of PureTech’s R&D Committee.
He also served as member of the Board from the Company’s founding through June 2020. Dr. Shapiro was
previously Executive Vice President at Merck Research Laboratories of Merck & Co. where he 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 behavior. 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, the Drugs for Neglected Diseases initiative and the Mind and Life Institute. Dr. Shapiro
received a B.S. in Chemistry from Dickinson College and his M.D. from Jefferson Medical College.
**
Dr. Horvitz, Dr. Ausiello and Dr. Shapiro are not members of the PureTech Board. As a Board Observer, Dr. Horvitz attends the
majority of Board meetings. As Board Advisors, Dr. Ausiello and Dr. Shapiro attend select Board meetings. All three are also
members of PureTech’s R&D Committee, of which Dr. Horvitz is the Chair.
92 PureTech Health plc Annual report and accounts 2020
Governance Management team
(alphabetically)
Joseph Bolen, Ph.D.
Chief Scientific Officer
Joseph Bolen, Ph.D., first joined PureTech in October 2015 and has served as PureTech’s chief scientific officer
since October 2016. Prior to joining PureTech, Dr. Bolen oversaw all aspects of research and development, or
R&D, for Moderna, Inc. as president and chief scientific officer from July 2013 to October 2015. 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 positions at Hoechst Marion Roussel, Schering-Plough
and Bristol-Myers Squibb. Dr. Bolen began his career at the National Institutes of Health, 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 received a B.S. in Microbiology & Chemistry and a Ph.D. in Immunology from the University
of Nebraska and conducted his postdoctoral training in Molecular Virology at the Kansas State University
Cancer Center.
Bharatt Chowrira, Ph.D., J.D.
President and Chief of Business and Strategy, Member of the Board of Directors
Bharatt Chowrira, Ph.D., J.D., has been our president and chief of business and strategy since March 2017 and
has served as a member of PureTech’s Board since February 1, 2021. 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 that, Dr. Chowrira was the chief operating officer of Auspex Pharmaceuticals, Inc. from
October 2013 to July 2015, which was acquired by Teva Pharmaceuticals Ltd. 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 August 2011 to July 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 currently a member of the board of directors of Vedanta Biosciences, Inc., or Vedanta and
previously served on the board of directors of Karuna Therapeutics, Inc. from August of 2017 to December 2019.
Dr. Chowrira received a J.D. from the University of Denver’s Sturm College of Law, a Ph.D. in Molecular Biology
from the University of Vermont College of Medicine, an M.S. in Molecular Biology from Illinois State University
and a B.S. in Microbiology from the UAS, Bangalore, India.
Eric Elenko, Ph.D.
Chief Innovation Officer
Eric Elenko, Ph.D., has served as our chief innovation officer since June 2015 and held various other positions
at PureTech prior thereto. While at PureTech, Dr. Elenko has led the development of a number of programs,
including Akili Interactive Labs, Gelesis, Karuna Therapeutics and Sonde Health. Dr. Elenko serves on the board
of directors of Sonde and Alivio. Prior to joining PureTech, Dr. Elenko was a consultant with McKinsey and
Company from February 2002 to September 2005, 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 a B.A. in Biology from Swarthmore
College and his Ph.D. in Biomedical Sciences from University of California, San Diego.
George Farmer, Ph.D.
Chief Financial Officer
George Farmer, Ph.D., has served as our chief financial officer since January 1, 2021. Dr. Farmer joined
PureTech from BMO Capital Markets, where he completed a 15-year career as a senior biotechnology equity
analyst providing in-depth sector research for institutional investor clients. Prior to this role, Dr. Farmer served
as chief executive officer of Cortice Biosciences, a privately held biotechnology company focused on the
clinical development of therapies for brain malignancies and neurodegenerative diseases. He also served as
vice president of corporate development at Synta Pharmaceuticals, a publicly traded company developing
cancer therapeutics. Dr. Farmer was a postdoctoral fellow at Sloan Kettering Cancer Center and University of
California San Francisco after receiving his Ph.D. in biological sciences from Columbia University and a BA from
Dartmouth College.
PureTech Health plc Annual report and accounts 2020 93
Governance Management team — continued
Joep Muijrers, Ph.D.
Chief of Portfolio Strategy
Joep Muijrers, Ph.D., has served as our chief of portfolio strategy since May 2020, and previously served as our
chief financial officer from April 2018 to May 2020. Prior to joining PureTech, he was a portfolio manager and
partner at Life Science Partners, or LSP, a specialist investor group with sole focus on investing in healthcare and
life sciences, in The Netherlands and in Boston for 11 years. 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, Entrega, Follica and Sonde. Dr. Muijrers received a M.S. from the
University of Nijmegen and a Ph.D. from EMBL Heidelberg.
Stephen Muniz, Esq.***
Chief Operating Officer, Member of the Board of Directors
Stephen Muniz, Esq., has served as our chief operating officer and a member of our Board since June 2015,
and previously served as executive vice president of legal, finance and operations from 2007 to June 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. He was also a Kauffman entrepreneur fellow, a program sponsored by the Kauffman Foundation.
Mr. Muniz also sits on the board of directors of Entrega, Follica and Alivio and previously served on the board
of directors of Karuna and Gelesis. Mr. Muniz received a B.A. in Economics and Accounting from The College of
the Holy Cross and a J.D. from the New England School of Law where he graduated summa cum laude.
Daphne Zohar
Founder and Chief Executive Officer, Member of the Board of Directors
Daphne Zohar is the founder of PureTech and has served as our chief executive officer and a member of
our board of directors since our formation and UK main market listing in 2015 and served as the founding
chief executive officer of a number of our Founded Entities. A successful entrepreneur, Ms. Zohar created
PureTech, assembling a leading team and scientific network to help implement her vision for the company,
and was a key participant in fundraising, business development and establishing the underlying programs
and platforms that have resulted in PureTech’s substantial pipeline which is comprised of 26 therapeutics
and therapeutic candidates to date, including two therapeutics that have been cleared by the U.S. Food and
Drug Administration for marketing and granted marketing authorization in the European Economic Area, or
EEA. Ms. Zohar has been recognized as a top leader and innovator in biotechnology by a number of sources,
including EY, BioWorld, MIT’s Technology Review, the Boston Globe, and Scientific American. Previously,
Ms. Zohar has served on a number of private company boards including Karuna Therapeutics, Inc. and served
on the board of resTORbio, Inc. (now Adicet Bio, Inc.) from December 2017-November 2018. Ms. Zohar received
a B.S. from Northeastern University.
94 PureTech Health plc Annual report and accounts 2020
*** Effective May 17, 2021, Mr. Muniz will no longer be an officer of PureTech or a member of PureTech’s board of directors.
Governance The Board
Roles and responsibilities
of the Board
The Board is responsible to
shareholders for our overall
management as a whole. The main roles
of the Board are:
The Company’s schedule of matters
reserved for the Board includes the
following matters:
• approval and monitoring of our
strategic aims and objectives;
• approval of the annual operating and
• creating value for shareholders;
capital expenditure budget;
• providing business and
scientific leadership;
• approving our strategic objectives;
• ensuring that the necessary financial
and human resources are in place to
meet strategic objectives;
• overseeing our system of risk
management; and
• setting the values and standards
for both our 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 our long-term success.
The Board reviews strategic issues on
a regular basis and exercises control
over our performance by agreeing on
budgetary and operational targets
and monitoring performance against
those targets. The Board has overall
responsibility for our system of internal
controls and risk management. Any
decisions made by the Board on
policies and strategy to be adopted
by us 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 our day-to-day management
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
us as a whole due to their strategic,
financial or reputational implications.
• changes to our capital structure, the
issue of any of our securities and
material borrowings;
• approval of the annual report
and half-year results statement,
accounting policies and practices or
any matter having a material impact
on our future financial performance;
• ensuring a sound system of internal
control and risk management;
• approving Board appointments and
removals, and approving policies
relating to directors’ remuneration;
• strategic acquisitions;
• major disposals of our 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 our 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
we maintain the highest standards of
corporate governance. 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 our website at
www.puretechhealth.com.
Board size and composition
As of December 31, 2020, there were
eight Directors on the Board: the
Non-Executive Chair, two Executive
Directors and five Non-Executive
Directors. As of the date of approval
of this Annual Report there were nine
Directors on the Board: the Non-
Executive Chair, three Executive
Directors and five Non-Executive
Directors. The biographies of these
Directors are provided on pages 90
to 94. One of the Company’s former
Non-Executive Directors, Dr. Bennett
Shapiro, retired from the Board in June
2020. Ms. Kiran Mazumdar-Shaw was
appointed as a Non-Executive Director
in September 2020. There were no
other changes to the composition of the
Board during 2020. In February 2021,
Dr. Bharatt Chowrira was appointed as
an Executive Director.
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 107 to 120.
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.
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 May 27, 2021,
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 (Chair), Dr. Raju
Kucherlapati, Dr. John LaMattina,
Dr. Robert Langer, Ms. Kiran Mazumdar-
Shaw and Dame Marjorie Scardino.
PureTech Health plc Annual report and accounts 2020 95
Governance The Board — continued
The Non-Executive Directors provide
us with a wide range of skills and
experience. 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 scrutinize the performance of
management. In addition, most of our
Non-Executive Directors also serve
as members of one or more boards
of directors of our Founded Entities
and are key drivers for our 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 Chair or Chief Executive
Officer. In addition, the Senior
Independent Director serves as an
intermediary between the rest of the
Board and the Chair where necessary.
Further, the Senior Independent
Director will lead the Board in its
deliberations on any matters on which
the Chair is conflicted.
The roles of Chair and
Chief Executive Officer
The Company’s Chair is Mr. Christopher
Viehbacher. There is a clear division
of responsibilities between the Chair
and the Chief Executive Officer.
Mr. Viehbacher was appointed Chair in
September 2019.
The Chair is responsible for the
leadership and conduct of the
Board and for ensuring effective
communication with shareholders.
The Chair 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 Chair 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
PureTech. She is responsible, among
other things, for the development
and implementation of strategy and
processes which enable us to meet
the requirements of shareholders,
for delivering the operating plans
and budgets for our 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 our strategy.
Independence
The Governance Code requires
that at least 50 percent of the Board
of a UK premium listed company,
excluding the Chair, 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, Ms. Mazumdar-Shaw
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, Ms. Mazumdar-Shaw
and Dame Marjorie Scardino are of
independent character and judgement,
notwithstanding the circumstances
described at (i), (ii) and (iii) above.
As previously disclosed, with the
resignation of Mr. Joichi Ito and the
appointment of Mr. Viehbacher as
Chair in 2019, less than 50 percent of
the Company’s Board, excluding the
Chair, was determined by the Board
to be independent during a portion of
2020 as required by the Governance
Code. However, Dr. Shapiro, who was
not considered independent due to the
length of his tenure as a Director of the
Company, did not stand for re-election
at the 2020 AGM and, accordingly,
following the 2020 AGM, the Board
satisfied this requirement, and the
situation improved further through the
addition of Ms. Mazumdar-Shaw to the
Board in September 2020.
Board support, indemnity
and insurance
The Company Secretary, Dr. Bharatt
Chowrira, 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.
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 13 scheduled meetings in 2020, and
details on attendance are set forth in
the table below:
Director
Christopher Viehbacher
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw1
Dame Marjorie Scardino
Bennett Shapiro2
Daphne Zohar
Stephen Muniz
Number of
Board Meetings
Attended
13/13
12/13
13/13
11/13
2/3
12/13
7/7
13/13
13/13
The missed meetings were a result
of unexpected scheduling conflicts.
1 Kiran Mazumdar-Shaw joined the Board in September 2020.
2 Bennett Shapiro’s service on the Board ended in June 2020.
96 PureTech Health plc Annual report and accounts 2020
Governance The Board — continued
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 four times in 2020.
At each meeting of the Board, there
was a closed session held in which only
the Chair and the other 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 Chair, 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 our
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 our overall performance, and
to contribute to the development and
implementation of its strategy.
The majority of Board meetings
are held at our offices in Boston,
Massachusetts, U.S., 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.
During the COVID-19 pandemic, for the
safety of the Board and the Company’s
employees, all board meetings have
been held by videoconference.
Most Directors also serve on the
boards of directors of our 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 authorize conflicts or potential
conflicts of interest. The Board has
established procedures for managing
and, where appropriate, authorizing
any such conflicts or potential conflicts
of interest. In deciding whether to
authorize 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
authorization to a conflict or potential
conflict of interest if they think this is
appropriate. The authorization of any
conflict matter, and the terms of any
authorization, 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 our Founded
Entities and Wholly Owned Pipeline,
the Board periodically receives the
presentations and reports covering the
business and operations of each of our
Founded Entities as well as its Wholly
Owned Pipeline.
We have put in place a comprehensive
induction plan for any new Directors.
This program 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 us and our businesses. In addition,
the Company facilitates sessions as
appropriate with our 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 addition to the above, the Non-
Executive Directors, led by the Senior
Independent Director, will periodically
appraise the Chair’s performance,
following which the Senior Independent
Director will provide any feedback to
the Chair. The performance of each
PureTech Health plc Annual report and accounts 2020 97
Governance The Board — continued
of the Directors on the Board and the
performance of the committees of the
Board will be reviewed by the Chair 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.
the whole organization. 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.
Committees of the Board
The Board has three principal
committees: the Nomination
Committee, the Audit Committee and
the Remuneration Committee. The
composition of the three principal
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 our
website at www.puretechhealth.com.
Internal Control
The Board fully recognizes the
importance of the guidance contained
in the Guidance on Risk Management,
Internal Control and Related Financial
and Business Reporting. Our internal
controls were in place during the whole
of 2020, with two significant failures in
internal control identified for the year
ended December 31, 2020.
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 our success; however,
it recognizes 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 our 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
We have a clear organizational
structure with defined responsibilities
and accountabilities. It adopts the
highest values surrounding quality,
integrity and ethics, and these values
are communicated clearly throughout
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
our performance and the performance
of our Wholly Owned Pipeline and
Founded Entities on a quarterly basis,
although performance of business units
may be reviewed more frequently if
deemed appropriate.
The key risks and uncertainties we face,
as well as the relevant mitigations, are
set out on pages 69 to 71 and in the
Additional Information section from
pages 191 to 227.
Information and financial
reporting systems
We evaluate and manage 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
Our operations and the implementation
of our 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 us
and the steps taken to manage these
risks is set out on pages 69 to 71 and in
the Additional Information section from
pages 191 to 227.
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 our
medium and longer term strategy 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
recognizes 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 2020 include:
Investors
• Our shareholders are the owners
and investors in our business
and we make significant efforts
to engage with our shareholders
and understand their objectives.
Unfortunately, we were unable to
meet shareholders in person at our
2020 AGM due to the COVID-19
pandemic, but we provided an
opportunity for shareholders to
submit questions ahead of the
meeting, which were addressed
in responses to investors and
trading updates;
98 PureTech Health plc Annual report and accounts 2020
Governance The Board — continued
• We held meetings with our signficant
stakeholders to provide them with
updates on the Company’s research
and development activities and
other general corporate updates;
• We maintain very careful capital
management in our business seeking
to invest carefully and also our
long-term viability. Our decision to
dispose of certain shareholdings in
Karuna was taken with a view to our
long term capital requirements. Our
disposal of our interests in Karuna
was taken in consultation with
certain significant shareholders as
explained in our circular posted to
our shareholders on August 26, 2020;
•
Increased cultural and gender
diversity at the Board level is a long-
term goal of a number of PureTech
stakeholders. We were delighted to
welcome Ms. Kiran Mazumdar-Shaw
as an independent non-executive
director onto our Board during 2020;
• We corresponded with certain
stockholders regarding
remuneration policies and obtained
input from such stockholders,
described on page 109.
Employees
• We carefully considered how
to address the impact of the
COVID-19 pandemic on the
Company’s stakeholders, in
particular employees, and
guided the Company through the
pandemic with limited disruption
to the business;
• During 2020, in particular, we
monitored company culture and
engaged with employees on efforts
to continuously improve company
culture and morale during a
difficult year with most of our team
working remotely;
• For additional information on our
actions taken during the COVID-19
pandemic, see page 63.
Community and Environment
• We have engaged with various
stakeholders who wanted to know
more about PureTech’s efforts to
create a sustainable business, and in
response prepared the Company’s
first standalone ESG Report, set out
on pages 60 to 68;
• We are also evaluating LYT-100, our
lead therapeutic candidate from our
Wholly Owned Pipeline, in a Phase 2
trial in Long COVID, which could
help the global community with
the long-term repercussions of the
COVID-19 pandemic.
Business Relationships
• We have evaluated the relationships
with the Company’s various
collaborators through management
and identified ways to strengthen
relationships and arrangements with
key collaborations; and
• Our listing on Nasdaq is an
important case study in our
consideration of the potential impact
on the Company’s key stakeholders
and how that decision links to our
business model. We listened to
employees, investors and potential
investors in the biotech community
about the benefits of being a
Nasdaq listed company. It was clear
that there was strong support and
desire from our stakeholders to see
PureTech join Nasdaq and that such
a step was seen as important for the
long term success of the Company.
The board worked closely with
the Company’s financial advisers
to ensure that the Nasdaq listing
was undertaken in a manner that
would give the best results for the
Company. We completed the listing
of the Company’s ADSs on Nasdaq
in November 2020.
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 recognizes 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 Chair, 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.
While the AGM will be a closed
meeting this year, the Notice of the
AGM, which will be held at 11:00 am
EDT (4:00 pm BST) on May 27, 2021 at
the Company’s headquarters at 6 Tide
Street in Boston, Massachusetts, U.S.
(as a closed meeting with the minimum
attendance required to form a quorum)
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 our website
after the AGM.
Our website at www.puretechhealth.com
is the primary source of information
on us. The website includes an
overview of our activities, details of
our businesses, and details of all of our
recent 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.
PureTech Health plc Annual report and accounts 2020 99
Governance Directors’ Report for the year ended December 31, 2020
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 October 1, 2021.
Substantial shareholders
As of March 31, 2021, the Company
had been advised that the shareholders
listed on page 101 hold interests of
3 percent or more in its ordinary share
capital (other than interests of the
Directors which are detailed on page
118 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.
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 95.
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 2021 AGM.
The Directors present their report and
the audited consolidated financial
statements for the financial year ended
December 31, 2020.
Certain disclosure requirements for
inclusion in this report have been
incorporated by way of cross reference
to the Strategic Report, the Directors’
Remuneration Report and the ESG
Report which should be read in
conjunction with this report.
The Company was incorporated on
May 8, 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 June 24, 2015.
The Company’s American Depository
Shares, each representing 10 ordinary
shares, began trading on the Nasdaq
Global Market on November 16, 2020.
Directors
The membership of the Board can be
found below and biographical details
of the directors can be found on
pages 90 to 94 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 113 and pages 118 to 119
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
December 31, 2020 are set out in the
Directors’ Remuneration Report on
page 107 and Note 24 to the financial
statements, page 180. There have
been no changes in such interests from
December 31, 2020 to March 31, 2021.
Results and dividends
We generated income for the
year ended December 31, 2020 of
$4.5 million (2019: $366.1 million).
The Directors do not recommend the
payment of a dividend for the year
ended December 31, 2020 (2019: nil).
Share capital
As of December 31, 2020, the ordinary
issued share capital of the Company
stood at 285,885,025 shares of £0.01
each, including shares issuable upon
conversion of outstanding ADSs. Details
on share capital are set out in Note 14
to the financial statements, page 165.
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 165.
Rights of ordinary shares
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).
Dr. Bharatt Chowrira was appointed to the Board on February 1, 2021.
The following have served as Directors of the Company during the 2020 financial year.
Name
Role
Mr. Christopher Viehbacher Non-Executive Chair
Ms. Daphne Zohar
Dame Marjorie Scardino
Dr. Bennett Shapiro
Dr. Robert Langer
Dr. Raju Kucherlapati
Dr. John LaMattina
Ms. Kiran Mazumdar-Shaw
Mr. Stephen Muniz1
Chief Executive Officer
Senior Independent Director
Non-Executive Director (retired June 2020)
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director (appointed September 2020)
Chief Operating Officer
1 Mr. Muniz has notified the Company of his decision to retire from the Company effective May 17, 2021.
100 PureTech Health plc Annual report and accounts 2020
Age
(as of December 31, 2020)
60
50
73
81
72
77
70
67
50
Governance Directors’ Report for the year ended December 31, 2020 — continued
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 96.
Political donations
No political contributions/donations
for political purposes were made by
the Company or any of our affiliate
companies to any political party,
politician, elected official or candidate
for public office during the financial year
ended December 31, 2020 (2019 nil).
Significant agreements
There are no agreements between
the Company or any of our affiliate
companies 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 December 31, 2020, applied
the main principles and complied
with the provisions set out in the
Governance Code with the following
exception: contrary to provision 24
Shareholder
Invesco Asset Management Limited
Baillie Gifford & Co
Lansdowne Partners International Limited
Miller Value Partners
M&G Investment Management, LTD
Recordati SA
of the Governance Code, the Chair,
Mr. Christopher Viehbacher, was
also Chair of the Audit Committee
in 2020. 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 Chair 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 106.
Sustainable development and
environmental matters
Details of the Company’s policies and
performance, as well as disclosures
concerning GHG emissions, are
provided in the ESG Report on
pages 60 to 68.
Related party transactions
Details of related party transactions
can be found in Note 24 of the financial
statements on pages 180 to 181.
Issuances of equity by major
subsidiary undertaking
In January 2020 and April 2020, Sonde
sold shares of Series A-2 preferred stock
for aggregate proceeds of $4.8 million.
In February 2020, Vor Biopharma issued
and sold shares of Series A-2 preferred
stock for aggregate proceeds of
approximately $17.8 million. PureTech
Health LLC participated in such offering
and invested $0.7 million.
In April 2020, Gelesis issued 818,990
shares of its Series 3 Growth Preferred
Stock for aggregate proceeds of
$14.1 million, of which we purchased
579,038 shares of Series 3 Growth
Preferred Stock for an aggregate
purchase price of $10.0 million. In June
2020 and August 2020, Gelesis issued
2,026,635 shares of its Series 3 Growth
Preferred Stock for aggregate proceeds
of $35.0 million.
May 2020 and July 2020, Vedanta issued
and sold shares of Series C-2 preferred
stock for aggregate proceeds, when
combined with a September 2019
closing, of approximately $25.7 million.
In July 2020, Vor Biopharma announced
a $110 Series B Financing, which
financing included a June 2020 issuance
and sale of shares of Series B preferred
stock for aggregate proceeds of
approximately $64.7 million. PureTech
Health LLC participated in such offering
and invested $0.5 million.
In December 2020, Vedanta issued
a convertible promissory note to
Pfizer Inc. in the principal amount of
$25.0 million.
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 27 to 59.
Risk and internal controls
The principal risks we face are set out
on pages 69 to 71 and in the Additional
Information section from pages
191 to 227. The Audit Committee’s
assessment of internal controls are laid
out on page 106.
Subsequent Events
Research and Development
Information on our research and
development activities can be found in
the Strategic Report on pages 27 to 59.
%
23.7
10.8
7.2
3.5
3.4
3.3
PureTech Health plc Annual report and accounts 2020 101
Governance Directors’ Report for the year ended December 31, 2020 — continued
Going concern
As of December 31, 2020, the directors had a reasonable expectation that we had adequate resources to continue in
operational existence into the first quarter of 2024 and, following the sale of 1,000,000 shares of Karuna common shares worth
approximately $118.0 million on February 9, 2021, we will now have adequate resources to extend operations over a four year
period into the first quarter of 2025.
Annual General Meeting
The AGM will be held at 11:00 am EDT (4:00 pm BST) on May 27, 2021 at the Company’s headquarters at 6 Tide Street in
Boston, Massachusetts, U.S. (as a closed meeting with the minimum attendance required to form a quorum).
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 April 15, 2021.
Pension schemes
Information on the Company’s 401K Plan can be found in the Annual Report on Remuneration on page 109.
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
Location in Annual Report
A statement of the amount of interest capitalized during the
period under review and details of any related tax relief.
Information required in relation to the publication of unaudited financial information.
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.
N/A
N/A
Directors’ Remuneration Report,
page 110
N/A
N/A
Directors’ Report, page 101
N/A
N/A
N/A
N/A
N/A
N/A
Board statements in respect of relationship agreement with the controlling shareholder.
N/A
Whistleblowing, anti-bribery and corruption
We seek at all times to conduct our business with the highest standards of integrity and honesty. We also have an anti-bribery
and corruption policy which prohibits our employees from engaging in bribery or any other form of corruption. In addition, we
have a whistleblowing policy under which staff are encouraged to report to the Chief Executive Officer or until May 17, 2021,
the Chief Operating Officer, and effective May 17, 2021, the President, any alleged wrongdoing, breach of legal obligation or
improper conduct by or on the part of us or any of our officers, Directors, employees, consultants or advisors.
102 PureTech Health plc Annual report and accounts 2020
Governance Directors’ Report for the year ended December 31, 2020 — continued
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.
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
We and the Directors are responsible
for preparing the Annual Report and
our financial statements in accordance
with applicable law and regulations.
Company law requires the Directors
to prepare our financial statements
for each financial year. Under that
law they are required to prepare our
financial statements in accordance with
international accounting standards in
conformity with the requirements of the
Companies Act 2006 and applicable
law and have elected to prepare the
parent Company financial statements
on the same basis. In addition our
financial statements are required under
the UK Disclosure and Transparency
Rules to be prepared in accordance
with International Financial Reporting
Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it
applies in the European Union.
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 our affairs and of our profit or
loss for that period. In preparing our
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
international accounting standards
in conformity with the requirements
of the Companies Act 2006 and
International Financial Reporting
Standards adopted pursuant to
Regulation (EC) No 1606/2002 as it
applies in the European Union;
• assess our 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 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 our assets
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 our
position and performance, business
model and strategy.
By Order of the Board
Daphne Zohar
Founder, Chief Executive Officer and Director
April 14, 2021
PureTech Health plc Annual report and accounts 2020 103
Governance
Diversity policy
Diversity within the Company’s
Board is essential in maximizing 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.
Information regarding the Company’s
diversity efforts can be found in the
ESG Report on pages 60 to 68.
Board and Committee evaluation
Information regarding the evaluation
of the Board and its Committees can
be found on page 98.
Report of the Nomination Committee
Dame Marjorie
Scardino
Chair, 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 Chair, and
Dr. Robert Langer until September
30, 2020, when Ms. Kiran Mazumdar-
Shaw joined the Committee. Following
that date, the Nomination Committee
consisted of Dame Marjorie Scardino,
as Chair, Dr. Langer and Ms. Mazumdar-
Shaw. The biographies of the
Nomination Committee members can
be found on pages 90 to 91.
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 2020, the Board regarded
Dame Marjorie Scardino, Dr. Langer
and Ms. Mazumdar-Shaw 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 Dame Marjorie Scardino,
Dr. Langer and Ms. Mazumdar-Shaw
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
2020, the Nomination Committee met
one time 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 the meeting.
The Chief Executive Officer and the
Chief Operating Officer were invited to
and attended the meeting.
104 PureTech Health plc Annual report and accounts 2020
Governance
Report of the Audit Committee
Mr. Christopher
Viehbacher
Chair, Audit
Committee
Committee responsibilities
The Audit Committee monitors the
integrity of our financial statements
and reviews all proposed annual and
half-yearly results announcements
to be made by us 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 our 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 serving
as Chair. 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 Chair
of the Committee. The biographies of
the Committee members can be found
on pages 90 to 91. The Committee
met three times during the year, with
Mr. Viehbacher, Dr. Kucherlapati and
Dame Marjorie Scardino each attending
all 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 our
underlying assets. The Committee was
satisfied with the conclusion reached.
Determination of the accounting and
valuation of investment in associates
It has been determined that we no
longer have control as defined in IFRS 10
but have maintained significant influence
over some of our former subsidiaries,
and due to the fact that we hold 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 ownership
rights that are the same as true equity
holders. The valuation of these financial
assets also includes a significant level
of judgement and external valuation
specialists are utilized in this process.
In addition, it has been determined
that such instruments are long term in
nature and therefore subsequent to
the equity investment being reduced
to zero, our share in the losses of the
associate is being applied against those
investments. The Committee believes
that we 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
share liabilities, convertible loan notes
and warrants measured at fair value
through profit/loss as well as
investments held at fair value that do
not have a quoted active market price
An area of material judgement in our
financial statements and, therefore,
audit risk relates to the valuation of
third party held preferred shares
classified as liabilities, convertible
loan notes and warrants measured at
fair value through profit/loss, which at
year end had a carrying value totalling
$152 million (2019 – $109 million), as
well as investments held at fair value
that do not have a quoted active
market price which at year end had a
carrying value totalling $207 million
(2019 – $154 million). We considered the
underlying economics of the valuations
of the Founded Entities and the
investees and sought external expertise
in determining the appropriate valuation
of the liabilities and investments. These
valuations rely, in large part, on the
valuation of our programs and values
of recent transactions and determine
the amount of gain (loss) on the
financial instruments.
Financial instrument classification
and determination of embedded
derivatives
As part of our strategy to finance the
Founded Entities, we create 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 our
statement of financial position. We
considered the pertinent terms and
underlying economics of the financial
instruments and have appropriately
classified them as debt or equity. The
Committee believes that we 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.
Regulatory compliance
Ensuring compliance for FCA regulated
businesses also represents an important
control risk from the perspective of the
Committee. We engage 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 our 2020 Annual Report and
PureTech Health plc Annual report and accounts 2020 105
Governance Report of the Audit Committee — continued
Accounts and our 2020 Half-yearly
Report resulting in the recommendation
of both for approval by the Board. 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 our 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 December 31, 2020, we had
sufficient cash reserves to extend
operations over a three year period into
the first quarter of 2024, and following
the sale of 1,000,000 common shares
of Karuna for aggregate proceeds
of $118.0 million on February 9, 2021,
we have sufficient funding to extend
operations over a four-year period into
the first quarter of 2025.
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 us to
modify our level of capital deployment
into our Wholly Owned Pipeline and
Founded Entities or to more actively
seek to monetise one or more Founded
Entities, it would not threaten our
viability overall.
Compliance
The Committee has had a role in
supporting our compliance with the
Governance Code, which applies to us
for the 2020 financial year. The Board
has included a statement regarding our
longer-term viability on page 72. 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 we face are set
out on pages 69 to 71 and in the
Additional Information section from
pages 191 to 227.
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 is
undergoing enhancement supported
by our new ERP system as we scale up
to meet our increased complexity and
growth objectives. The Committee
believes that we have adequate controls
and appropriate plans to evolve the
control structure in anticipation of
increased complexity of the business
model and operations.
We have 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
We do not maintain a separate internal
audit function. This is principally due
to our size, 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 maintaining
related key internal controls.
External audit
We have engaged KPMG LLP as our
Auditor since 2015. The current audit
partner is Robert Seale who has been
our audit partner since June 2019.
The effectiveness of the external audit
process is dependent on appropriate
risk identification. In October 2020, the
Committee discussed the Auditor’s
audit plan for 2020. 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 us
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, 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
our non-audit services policy. The non-
audit work was capital market services
in regards of obtaining shareholder
approval. The 2020 ratio of non-audit
work to audit work was 0.46 which the
committee is satisfied does not breach
the independence of KPMG LLP.
Christopher Viehbacher
Chair of Audit Committee
April 14, 2021
106 PureTech Health plc Annual report and accounts 2020
Governance
Directors’ Remuneration Report for
the year ended December 31, 2020
Dr. John LaMattina
Chair,
Remuneration
Committee
The Directors’ Remuneration Report is
split in three sections, namely:
• This Annual Statement:
summarizing and explaining the
major decisions on Directors’
remuneration in the year;
• The proposed Directors’
Remuneration Policy: setting out
the basis of remuneration for
our Directors, which is subject to
shareholder approval and will apply
immediately after the 2021 AGM if so
approved, on pages 109 to 111; and
• The Annual Report on Remuneration:
setting out the implementation of
the current Remuneration Policy in
the year ended December 31, 2020
on pages 114 to 120.
The Company makes the Directors’
Remuneration Policy subject to
a binding vote of our 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 our shareholders.
The current Directors’ Remuneration
Policy was last approved at the 2020
AGM, but due to certain proposed
revisions to the Policy described on
page 107, it will be subject to another
shareholder vote at the forthcoming
2021 AGM. The Annual Report on
Remuneration will be subject to an
advisory shareholder vote at the
forthcoming 2021 AGM.
Overview of our Remuneration Policy
The success of PureTech depends on
the motivation and retention of our
highly skilled workforce with significant
expertise across a range of science
and technology disciplines as well as
our highly-experienced management
team. PureTech’s Remuneration Policy
is therefore an important part of our
business strategy.
The Directors’ Remuneration Policy
approved by shareholders at the
2020 AGM was updated with changes
to reflect the current UK Corporate
Governance Code. This year, due
to the continued growth of the
business and with some significant
senior hires, we have needed to
review our remuneration levels and
structure to ensure that we remain
market competitive and that there are
appropriate internal pay relativities.
As a UK listed company with a UK
remuneration structure, we face
significant competitive challenges in our
local markets, where the equity level is
structured differently, with time-based
vesting of both restricted shares and
stock options.
At the current time we remain
committed to retaining a UK structure
with a Performance Share Plan (“PSP”)
as the long-term incentive, which
provides a sharper link between
performance and reward than most
U.S.-style equity incentive packages.
However, as a result of this review it
has become apparent that the equity
component of our package has become
insufficient to enable us to compete
for and retain talent in our local U.S.
market. As we look forward to the
next stage of our growth the Board
and Remuneration Committee have
concluded that now is the right time
to put a proposal to shareholders with
these policy changes.
We have consulted with our largest
institutional shareholders and the
proposed changes to the Company’s
Remuneration Policy are set out below:
• An increase to the annual grant
award level for PSP awards, from
400 percent (or 500 percent in
exceptional circumstances) to
600 percent of salary for our
Chief Executive Officer and from
200 percent to 300 percent of salary
for other Executive Directors;
• A higher minimum shareholding
requirement for the Chief Executive
Officer, increased from 200 percent
to 400 percent of salary; and
• A change to the way we pay our
Non-Executive Directors from
being exclusively in cash, to a mix
of cash and equity.
The increase to the PSP award
level is being proposed for the
following reasons:
• The Committee and Board consider
that the strategic and operational
performance of this team has
delivered significant shareholder
value since IPO. This is now an
experienced management team
that has now proved itself in
a public company context and,
following a one-off adjustment to
base salary in 2019, this is this first
proposed increase to the incentive
packages since IPO
• There has been expansion of the
management team as the business
has grown. In order to recruit and
retain senior executives below
Board level we have needed to pay
significantly higher equity packages,
including significant sign-on grants
of equity. The increase to the PSP
award level will ensure that there are
appropriate relativities in terms of
pay scales throughout the business;
• The performance measures will
build on the performance delivered
to date, with our TSR performance
baseline starting from our recent
share price highs (with the TSR
baseline for FY21 awards being the
average share price over the final
three months of 2020); and
• The addition of an equity
component to our Non-Executive
Director compensation will bring us
more in line with U.S. practice.
Save for these proposed changes, the
Remuneration Policy as approved at the
2020 AGM will continue to apply.
The Committee believes this
Remuneration Policy as revised will
provide an appropriate framework
within which to incentivize, motivate
and compensate our senior
management team and Board, and
intends for this policy to operate for
the next three years.
All tables within the Directors’
Remuneration Report are audited
under the International Standards
on Auditing (UK) (“ISAs (UK)”) unless
otherwise noted.
Committee membership
The Remuneration Committee
consisted of Dr. Bennett Shapiro,
Dr. Raju Kucherlapati and Dr. John
LaMattina, with Dr. John LaMattina
serving as Chair of the Committee, until
the 2020 AGM when Dr. Shapiro did not
stand for reelection, at which point the
Remuneration Committee consisted of
Dr. Kucherlapati and Dr. LaMattina, with
Dr. LaMattina serving as Chair of the
Committee. Upon Ms. Kiran Mazumdar-
Shaw’s appointment to the Board on
September 30, 2020, she joined the
Remuneration Committee and since
that date the Remuneration Committee
has consisted of Dr. Kucherlapati,
Dr. LaMattina and Ms. Mazumdar-Shaw,
with Dr. LaMattina serving as Chair of
the Committee. The biographies of
the Committee members can be found
on pages 90 to 91. The Committee
met five times during the year, with
Dr. Kucherlapati and Dr. LaMattina
in attendance for all of the meetings,
PureTech Health plc Annual report and accounts 2020 107
Governance Directors’ Remuneration Report — continued
Dr. Shapiro attending both of the two
meetings held before the end of his
board service and Ms. Mazumdar-
Shaw attending the one meeting
held after her appointment to the
Board. 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.
Objectives of the Remuneration Policy
In the construction of our senior
executive Remuneration Policy, the
Committee paid particular regard
to the market practice of U.S. peer
companies to ensure that packages
are competitive, recognizing the
predominantly U.S. market in which
we compete 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 our long-term success
(Code principle: Proportionality);
• attract, retain and motivate high
caliber senior management and
focus them on the delivery of our
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 to the
extent appropriate and informed by
relevant market benchmarks (Clarity
and alignment to culture); and
• encourage widespread equity
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 December 31,
2020, the Committee believes the
Remuneration Policy operated
as intended and fulfilled all of
the objectives discussed above
and that remuneration outcomes
are appropriate.
Performance and reward in 2020, and
our response to the COVID-19 pandemic
Our key business priority during 2020
was the health and well-being of our
employees. We were very pleased
that the workforce settled quickly into
the new way of working required due
to the pandemic, in many cases from
home, and we have supported our
employees with several initiatives based
around their welfare. We did not need
to receive any Government support
and furthermore our operational and
financial performance has not been
significantly impacted by the pandemic.
During 2020, PureTech delivered
exceptional performance and this has
been reflected in the annual bonus
and PSP outcomes. The Company’s
share price increased from 317 pence
to 400 pence from December 31, 2019
to December 31, 2020 representing an
increase of approximately 26 percent
for the Company’s shareholders. The
value of our internal programs as well
as our Founded Entities increased
significantly. This increase is due in
large part to (i) EU clearance of Gelesis’
first therapeutic, Plenity™, (ii) FDA and
EU clearance of Akili’s first therapeutic,
EndeavorRx™, (iii) our Founded Entities
raising in excess of $247 million, (iv)
the completion of clinical studies with
positive results, including through
positive readout of the LYT-100 Phase 1
multiple ascending dose and food
effect study data, and (v) generation
of $347.5 million of cash income in
2020 from sale of equity holdings.
PureTech also successfully listed on the
Nasdaq Global Market in November
2020. This increase in value together
with management’s operational
performance at PureTech and within the
Wholly Owned Pipeline and Founded
Entities, resulted in both 2020 Executive
Directors exceeding the target
performance goals set at the beginning
of 2020. As a result, the maximum
annual bonus of 100 percent of base
salary was awarded to the 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 2020 on pages 1 to 5.
In addition, PureTech’s performance
over the last three financial years has
been very strong with an increase in
share price from 150 pence to 400
pence from December 31, 2017 to
December 31, 2020 representing an
increase of approximately 167 percent.
This, along with strong strategic
performance over the three-year
performance period, resulted in the
vesting of 100 percent of the PSP
awards granted in 2018.
Exercise of Discretion
No discretion has been exercised
in relation to Directors’ pay and the
Committee confirms performance
targets for incentives have not
been adjusted.
The year ahead
For 2021, the following key decisions
have been made in relation to how the
Policy will be implemented:
• Base salaries will be increased by
3 percent in line with the average
increase for the general workforce;
• The annual bonus target and
maximum will remain at 50 percent
and 100 percent of base salary,
respectively; and
•
If the proposed revisions to the
Remuneration Policy described on
page 107 are approved, grants of
PSP awards in 2021 will be increased
in quantum as compared to 2020
and vesting terms will focus more on
strategic milestones, alongside TSR.
The Committee recommends that
shareholders vote to approve the
Directors’ Remuneration Policy and the
Annual Report on Remuneration.
108 PureTech Health plc Annual report and accounts 2020
Governance Directors’ Remuneration Policy
This part of the Directors’ Remuneration Report sets out the remuneration Policy for the Executive Directors and has been
prepared in accordance with the provisions of the Companies Act 2006, The Large and Medium Sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2008 and the subsequent amendments, and the UK Listing Authority
Listing Rules. In addition, the report has been prepared on a “comply or explain” basis with regard to the UK Corporate
Governance Code 2018.
This Directors’ Remuneration Policy will be put to a binding shareholder vote at the Company’s AGM on May 27, 2021 and, if
approved, is intended to apply for a period of three years from that date.
Changes to the Remuneration Policy
The policy being brought to shareholders for approval contains the following three changes:
• An increase to the annual grant award level for PSP awards, from 400 percent (or 500 percent in exceptional circumstances)
to 600 percent of salary for our Chief Executive Officer and from 200 percent to 300 percent of salary for other
Executive Directors;
• A higher minimum shareholding requirement for the Chief Executive Officer, increased from 200 percent to 400 percent
of salary; and
• A change to the way we pay our Non-Executive Directors from being exclusively in cash, to a mix of cash and equity.
Decision making process for determination, review and implementation of Directors’ Remuneration Policy
The policy review was carried out by the Remuneration Committee with the advice of the Committee’s remuneration adviser,
Korn Ferry. The Committee reviews the Policy and its operation to ensure it continues to support and align to the business
strategy and appropriately reward the Executive Directors and takes into account relevant market practice, regulation and
governance developments, institutional investor views and the views of our shareholders. The Committee also has regard to
the remuneration arrangements, policies and practices of the workforce as a whole and takes this into account when reviewing
Executive Director pay.
The Policy is reviewed annually by the Committee and if changes are required a new policy will be put forward to shareholder
vote prior to the normal triennial shareholder vote. The Committee consults with shareholders on remuneration proposals and
will consider the feedback in finalizing the Policy.
Operation of the Policy is considered annually for the year ahead, including metrics for incentives, weightings and targets. The
Committee reviews operation for the prior year and considers whether, in light of the strategy, changes are required for the
year ahead or if remuneration remains appropriate for the year ahead. Shareholders’ views may be sought depending on the
changes proposed.
Element
Base salary
How component
supports corporate
strategy
To recognize 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 U.S. 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 recognize, 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 percent of base salary or
the maximum permitted
by the U.S. IRS ($19,500
for 2021).
Pension
To provide a market
competitive level
of contribution
to pension.
The company operates a 401k Plan
for its U.S. 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.
PureTech Health plc Annual report and accounts 2020 109
Governance Operation
Maximum
Performance targets and
recovery provisions
Based on performance during the
relevant financial year.
Up to 100 percent of
base salary.
Performance period:
Normally one year.
Payments are normally based on
a scorecard of strategic and/or
financial measures.
Up to 0 percent of salary payable
for threshold performance,
50 percent of base salary normally
payable for the achievement of
’target’ performance and 100
percent 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 percent of an award
vests at threshold performance
(0 percent vests below this),
increasing to 100 percent 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.
600 percent of salary for the
Chief Executive Officer, 300
percent of base salary for the
other Executive Directors.
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.
None.
None.
Minimum of 400 percent
of base salary for the Chief
Executive Officer and
a minimum of 200 percent
of base salary for the other
Executive Directors.
Lower of (i) 400 percent of
base salary for the Chief
Executive Officer and 200
percent of base salary for the
other Executive Directors and
(ii) the Executive Director’s
shareholding at the date that
notice is served.
Directors’ Remuneration Policy — continued
Element
Annual Bonus
Plan (ABP)
How component
supports corporate
strategy
To drive and reward
annual performance
of individuals, teams
and PureTech.
Long-term
incentives
To drive and reward
our sustained
performance and to
align the interests
with those of
shareholders.
Share
ownership/
Holding Period
Further aligns
executives with
investors, while
encouraging
employee
share ownership.
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.
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. This post-vesting
period continues post-cessation
of employment.
The Committee also has the discretion
to 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.
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.
Post-cessation
holding period
Aligns executives
with investors and
promotes long-term
decision making
Executive Directors must hold shares for
two years after the date of termination
of their employment.
110 PureTech Health plc Annual report and accounts 2020
Governance Directors’ Remuneration Policy — continued
Element
Non-Executive
Directors
How component
supports corporate
strategy
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.
Performance targets and
recovery provisions
None.
Operation
Maximum
Any remuneration provided
to a Non-Executive Director
will be in line with the limits
set out in the Articles of
Association.
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.
Beginning in 2021, a portion of the
compensation to our non-executive
directors will be in the form of our
ordinary shares.
Additional remuneration is payable
for additional services to PureTech
such as the Chairship of a Committee
or membership on a Committee.
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 us.
Taxable benefits may be provided and
may be grossed up where appropriate.
Notes:
1
2
3
4
5
In the event that the Company elects any non-U.S. 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 not be higher than the pension rate operated for the majority of employees in that jurisdiction.
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 reflects 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 U.S.
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 this Remuneration Policy. Details of any payments to former Directors will be set out in the
Annual Report on Remuneration as they arise.
Recovery and withholding provisions
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;
• determining the timing of grants of 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;
PureTech Health plc Annual report and accounts 2020 111
Governance Directors’ Remuneration Policy — continued
• overriding formulaic outcomes of
• undertaking the annual review 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 113;
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 2021 remuneration for the Chief Executive Officer, the President 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
President
Chief Operating Officer
Minimum
$665,549
Minimum
$531,450
Minimum
$472,437
100%
100%
100%
Target
$2,856,308
Target
$1,531,450
Target
$1,342,375
23%
11%
66%
35%
16%
49%
35%
16%
49%
Maximum
$5,047,066
Maximum
$2,531,450
Maximum
$2,212,313
14%
12%
74%
21%
20%
59%
21%
20%
59%
Maximum + 50% growth
$6,924,859
Maximum + 50% growth
$3,281,450
Maximum + 50% growth
$2,864,767
10% 9%
81%
16% 15%
69%
17% 15%
68%
Fixed pay
Annual bonus
PSP
Notes:
1 The minimum performance scenario comprises the fixed elements of remuneration only, including:
– Salary for FY2021 as set out in the Annual Report on Remuneration.
– Pension in line with policy and benefits as disclosed for FY2020 in the Annual Report on Remuneration.
The On-Target level of bonus is taken to be 50 percent of the maximum bonus opportunity (50 percent of salary), and the On-Target level of PSP vesting is assumed to be
50 percent of the face value of the PSP award (i.e. 300 percent of base salary for the CEO and 150 percent of base salary for each of the President and the Chief Operating
Officer). These values are included in addition to the components/values of Minimum remuneration.
Maximum assumes full bonus pay-out (100 percent of base salary only) and the full face value of the proposed PSP awards (i.e. 600 percent of base salary for the CEO
and 300 percent of base salary for each of the President and the Chief Operating Officer), in addition to fixed components of Minimum remuneration.
No share price growth has been factored into the calculations of minimum, target and maximum compensation. An additional maximum scenario has been shown which
assumes 50% share price appreciation for the LTIP during the performance period.
2
3
4
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 and long-
term incentive awards would be limited
in line with the policy. 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.
112 PureTech Health plc Annual report and accounts 2020
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, performance
conditions and delivery mechanism.
Governance
Directors’ Remuneration Policy — continued
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.
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 us, 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-U.S. 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.
Service contracts are available
for inspection at the company’s
registered office.
Policy on termination of employment
Non-Executive Directors
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, provided that they
are deemed to be a ’good leaver’.
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 two-year post vest holding period
will usually continue to apply. The
Committee 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 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.
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 2021, as referenced
on page 109, in relation to the proposed
changes to the remuneration policy and
we were pleased to receive support
from those consulted.
Consideration of our employment
conditions generally
To ensure a coherent cascade of the
Remuneration Policy throughout
the organization, 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,
including participation in stock
based incentive plans. 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
our Remuneration Policy, although the
Committee will keep this under review.
PureTech Health plc Annual report and accounts 2020 113
Governance Annual Report on Remuneration
Implementation of the Remuneration Policy for the year ending December 31, 2021
Base salary
The Committee reviewed the base salary levels for the Executive Directors in early 2021 and an increase of 3 percent 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 who served on the board in 2020:
Daphne Zohar
Stephen Muniz
Chief Executive Officer
Chief Operating Officer
2020
Base salary
$607,700
$422,300
2021
Base salary
$625,931
$434,969
In addition, the 2021 base salary for Bharatt Chowrira, who joined the Board as an Executive Director in February 2021, is
$500,000. Mr. Muniz will retire from the Company effective May 17, 2021.
Pension
We 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 2021, the operation of the annual bonus plan will be similar to that operated in 2020. The maximum annual bonus will
continue to be 100 percent of base salary for all Executive Directors. The 2021 annual bonus will be based on financial and
strategic measures, clinical development milestones and development of new strategic and investor relationships. The
performance metrics and targets will be disclosed in the FY2021 Annual Report and Accounts.
Long-term incentives
Awards under the PSP will be made to the Executive Directors in 2021. If the revisions to the Remuneration Policy as described
on page 107 are approved by our shareholders, the Chief Executive Officer will receive a PSP award with a face value of 600
percent of base salary, and the President will receive an award with a face value of 300 percent of base salary. The Chief
Operating Officer has elected to retire effective May 17, 2021, and therefore will not receive a new award under the PSP in 2021.
The PSP awards will be subject to the performance conditions described below. As a clinical-stage therapeutics 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 incentivizing outperformance of the market. To provide a balance to the TSR performance conditions that is more
directly based on Management’s long term strategic performance the TSR is complemented by some weighting on strategic
delivery. There will be a robust assessment of the achievement of the strategic targets over the three year period with full
disclosure in the Directors’ Remuneration Report following the end of the performance period.
Further detail of the performance conditions is set out below:
• 40 percent of the shares under award will vest based on the achievement of absolute TSR targets.
• 20 percent of the shares under award will vest based on the achievement of a relative TSR performance condition,
10 percent each against two benchmarks.
• 40 percent 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 percent per annum,
whilst the maximum target will be TSR equal to 15 percent per annum. Relative TSR will be measured against the constituent
companies in the FTSE 250 Index (excluding Investment Trusts) and the MSCI Europe Health Care Index (for 10 percent of the
award, respectively). The minimum performance target will be achievement of TSR equal to the median company in the Index
and the maximum performance target will be achievement of upper quartile TSR performance. 25 percent of each element of
the TSR targets will vest for threshold performance. Strategic measures will be based on the achievement of milestones and
other qualitative measures of performance over the performance period. Strategic targets will be set at the outset based on
financial achievements, including monetization of founded entities, clinical development progress, product pipeline growth,
operational excellence and other shareholder value enhancing metrics in line with our strategic plan. Full disclosure of the
measures, weightings and strategic targets will be made retrospectively.
The Committee believes that this combination of measures is appropriate. TSR measures the success of our management
team in identifying and developing new therapeutics whilst strategic targets help incentivize our management team through
the stages which ultimately result in successful therapeutics.
Non-Executive Directors
Fees for our Board of Directors were reviewed for 2021, with the majority remaining unchanged. If the revisions to the
Remuneration Policy as described on page 107 are approved by our shareholders, a new equity-based compensation
component will be added to the Non-Executive Director compensation package for 2021 to align with incentive structures
of similar roles in the U.S. Also, the payments for subsidiary board service will be reduced.
114 PureTech Health plc Annual report and accounts 2020
Governance Annual Report on Remuneration — continued
A summary of 2020 and current fees is as follows:
Chair fee
Basic fee
Equity-based Component
Additional fees:
Chair of a committee
Membership of a committee
Membership of a subsidiary board
FY2020
$125,000
$75,000
–
FY2021
$125,000
$75,000
$50,000
$10,000
$5,000
$0 to $20,000
$10,000
$5,000
$0 to $10,000
% Increase/
Decrease
0%
0%
N/A
0%
0%
(50%)
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 specialized
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 companies 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 2020 financial year with a comparative figure for the 2019
financial year.
Basic Salary/
Fees
Year
Benefits1
Annual
Bonus Plan
Performance
Share Plan
(Vested)2
Pension
Other
payments3
Total
Remuneration
Total
Variable
Total Fixed
2020 and 2019 Remuneration
Executive Directors
Daphne Zohar
Stephen Muniz
2020
2019
2020
2019
$607,700 $31,069
$590,000
$31,265
$422,300 $28,919
$410,000
$29,381
$607,700 $3,925,437
$590,000 $4,564,0176
$422,300 $1,313,917
$410,000 $1,524,3816
$8,550 $260,122 $5,460,578 $4,533,137
$907,441
$8,400
$8,550
$8,400
$5,783,682 $5,154,017
$2,195,986 $1,736,217
$629,665
$459,769
$2,382,162 $1,934,381
$447,781
Non-Executive Directors
Raju Kucherlapati
John LaMattina
Robert Langer
2020
2019
2020
2019
2020
2019
Kiran Mazumdar-Shaw4 2020
2019
Dame Marjorie
Scardino
Bennett Shapiro5
Christopher
Viehbacher
TOTAL
TOTAL
$105,000
$95,000
$125,000
$105,000
$125,000
$110,000
$21,250
—
$90,000
$90,000
$68,944
$95,000
2020
2019
2020
2019
2020
$155,000
2019
$107,074
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$105,000
$95,000
$125,000
$105,000
$125,000
$110,000
$21,250
—
$90,000
$90,000
$68,944
$95,000
$155,000
$107,074
$105,000
$95,000
$125,000
$105,000
$125,000
$110,000
$21,250
—
$90,000
$90,000
$68,944
$95,000
$155,000
$107,074
2020 $1,720,194 $59,988 $1,030,000 $5,239,354 $17,100 $260,122 $2,057,404 $6,269,354 $2,057,404
2019 $1,691,360
$60,646 $1,000,000 $6,088,397 $16,800
$1,679,520 $7,088,398 $1,679,520
Notes:
1
2
Benefits comprise the following elements: private medical, disability and dental cover and parking.
The shares underlying the vested 2018 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 £2.86875, which was the average share price
during the last three months of 2020, and an exchange rate of GBP 1 : USD 1.32127, which was the average exchange rate over the last three months of 2020.
Other payments represent a one-time reimbursement to Ms. Zohar for costs associated with converting certain of her ordinary shares into ADSs, as required by Nasdaq
prior to our listing on Nasdaq.
Ms. Mazumdar-Shaw joined the Board in September 2020.
Dr. Shapiro retired from the Board in May of 2020.
These amounts have been updated from those listed in the 2019 Annual Report and Accounts to reflect the actual values paid, which was not known at the date
of publication of the 2019 Annual Report and Accounts.
3
4
5
6
PureTech Health plc Annual report and accounts 2020 115
Governance Annual Report on Remuneration — continued
Annual bonus outcome for 2020
For the 2020 annual bonus, targets were set for a balanced scorecard at the beginning of the year. The 2020 targets were
focused on (i) financial goals designed to incentivize the team to generate non-dilutive cash and operate within the Company’s
2020 budget, (ii) strategic goals designed to incentivize the team to complete important deals and execute strategic
partnerships, (iii) clinical development/innovation goals designed to incentivize the team to generate valuable clinical
data in support of the Company’s programs and create innovative program, 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) regulatory goals designed to incentivize the team to take all steps necessary to commercially launch
therapeutics. During 2020, management significantly exceeded these targets. The table below sets out the performance
assessment and associated bonus outcomes:
Target Goals – Maximum 100 percent Achievement
Performance
Measures Category
Achievement
Financial Goals
The Financial Goals were achieved in 2020. The management team’s performance
resulted in an achievement outcome of 75 percent but such outcome percentage
had a pre-specified cap of 50 percent for this category of the goals. A description of
performance in 2020 is set out below:
The Company’s Founded Entities raised approximately $205 million in funding which will
enable the Founded Entities to continue toward their respective development milestones.
The Company’s Founded Entities engaged in partnership activity in 2020, including a
partnership between Gelesis and China Medical Holdings Ltd., with $35 million in up front
licensing fees and equity investment and future milestone payments of up to $388 million
plus royalties.
Percentage
of Target
Attained
50%
Strategic Goals
The Strategic Goals were achieved in 2020. The management team’s performance resulted
in an achievement outcome of 50 percent which was equal to the pre-specified cap of 50
percent for this category of the goals. A description of performance in 2020 is set out below:
50%
The Company had $347.5 million of cash income in 2020 from sale of equity holdings. The
Company also achieved its goal of broadening its shareholder base.
Clinical
Development/
Innovation Goals
The Clinical Development/Innovation Goals were partially achieved in 2020. The
management team’s performance resulted in an achievement outcome of 32.5 percent
and such outcome percentage had a pre-specified cap of 40 percent for this category
of the goals. A description of performance in 2020 is set out below:
32.5%
The Company developed its wholly owned programs, including through positive readout
of the LYT-100 Phase 1 multiple ascending dose and food effect study data and the LYT-
200 IND filing. Founded Entities also advanced clinical programs, including through the
positive Phase 1 studies of Vedanta’s VE202 in IBD. The Company and the Company’s
Founded Entities also achieved acceptance of data in peer-reviewed journals validating
their respective technologies, including the International Journal of Women’s Dermatology
(Follica), the Journal of Controlled Release (Glyph), and Lancet Digital (Akili).
Regulatory Goals
The Regulatory Goals were achieved in 2020. The management team’s performance
resulted in an achievement outcome of 40 percent which was equal to the cap of 40 percent
for this category of the goals. A description of performance in 2020 is set out below:
40%
Akili’s first therapeutic, EndeavorRx™, received both FDA clearance and EU marketing
authorization with a CE Mark. Also, Gelesis’ first therapeutic, Plenity®, which was previously
cleared by the FDA for sale, received EU marketing authorization with a CE Mark.
Pre-Specified
Maximum Total
100%
Accordingly, the Company achieved 100 percent of its target goals for 2020.
Each of the above target categories are subject to maximum percentage achievement limits capped at 100 percent of the target
bonus (i.e. 50 percent 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 the Company’s listing on the Nasdaq Global Market in November 2020, an increase in share price during the year
of approximately 26 percent, 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 percent of target (i.e. 100 percent 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.
116 PureTech Health plc Annual report and accounts 2020
Governance Annual Report on Remuneration — continued
The CEO was eligible for a target bonus equal to 50 percent of her 2020 salary. The Company significantly exceeded its
target goals and the Committee determined that the overall percentage achievement should be 200 percent due to the
extraordinary performance of the Company and management. As a result, the CEO was awarded a 2020 bonus equal to
100 percent of her 2020 salary, which is the maximum under the policy.
The COO was eligible for a target bonus equal to 50 percent of his 2020 salary. The Company significantly exceeded its
target goals and the Committee determined that the overall percentage achievement should be 200 percent due to the
extraordinary performance of the Company and management. As a result, the COO was awarded a 2020 bonus equal to
100 percent of his 2020 salary, which is the maximum under the policy.
Long-term incentive awards vesting in the year (unaudited)
The 2018 PSP awards granted on June 15, 2018 are subject to three-year vesting performance conditions covering the period
from January 1, 2018 to December 31, 2020. Following an assessment of the performance conditions, the Remuneration
Committee determined that the awards will vest at 100 percent 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 2018
PSP 2018
400% of salary
200% of salary
1,035,628
346,644
1,035,628
346,644
— $3,925,437
— $1,313,917
1
2
Shares have been valued using a share price of £2.86875, which was the average share price over the last three months of 2020, and an exchange rate of GBP 1 : USD 1.32127,
which was the average exchange rate over the last three months of 2020.
The value of the awards attributable to share price appreciation is $1,806,337 for Daphne Zohar and $604,614 for Stephen Muniz.
The outcome of the performance condition relating to these awards is set out below:
Measure and weighting
Absolute TSR (50%)
Total return against FTSE Small Cap Index (12.5%)
Total return against MSCI Euro Healthcare Index (12.5%)
Strategic measures (25%)
Threshold
Maximum
Achievement
7% p.a.
At or above
median
At or above
median
15% p.a.
Upper
quartile
Upper
quartile
39% p.a.
2nd of 250
3rd of 40
See description below
Vesting
(% of each
element)
100%
100%
100%
100%
The strategic measures over the three-year period were focused on (i) financial goals (72 percent), (ii) clinical development
goals (22 percent), and (iii) operational excellence (6 percent). The financial achievements resulting in satisfaction of 72 percent
of the vesting of the strategic measures included obtaining $345 million for PureTech by monetizing certain Founded Entity
equity, the closing of initial public offerings of two Founded Entities, the execution of several partnership agreements
which brought in non-dilutive funding, the raising of more than $1.183 billion into the Company’s Founded Entities and the
completion of PureTech’s listing on the Nasdaq Global Market. The clinical development achievements resulting in satisfaction
of 22 percent of the vesting of the strategic measures included the successful completion of our Phase 1 clinical study for
LYT-100, the successful completion of co-formulation and Phase 2 clinical studies for the KarXT program, the advancement
of Phase 1 clinical studies for the VE202 and VE416 programs, and successfully having two programs cleared for marketing by
the U.S. Food and Drug Administration. The operational excellence achievements resulting in satisfaction of 6 percent of the
vesting of the strategic measures include the operation of the Company’s programs within projected timelines and budgets,
the in-licensing and creation of new programs, the issuance of certain intellectual property, the advancement of certain pre-
clinical programs, and the publication of validating data in top tier peer-reviewed academic journals.
Long-term incentive awards granted during the year (unaudited)
Scheme
Basis of award
granted
Shares awarded
(as conditional
award of shares)
Share price
at date of grant1
Face value
of award
Daphne Zohar
PSP 2020
Stephen Muniz
PSP 2020
400%
of salary
200%
of salary
683,652 282.33 pence
$2,430,800
237,540 282.33 pence
$844,600
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
December 31,
2022
The PSP awards granted in 2020 are subject to (i) achievement of absolute TSR targets (50 percent 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 percent of the awards, 12.5 percent against each benchmark)
and (iii) achievement of targets based on strategic measures (25 percent of the awards), measured over the three year period
to December 31, 2022.
The minimum performance target for the absolute TSR portion of the award is TSR equal to 7 percent per annum, whilst the
maximum target is TSR equal to 15 percent per annum. The minimum performance target for the relative TSR portion of
the award will be 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
PureTech Health plc Annual report and accounts 2020 117
Governance Annual Report on Remuneration — continued
performance. Strategic targets were set based on financial achievements, including monetization of founded entities, clinical
development progress, product pipeline growth, operational excellence and other shareholder value enhancing metrics
in line with our strategic plan. 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 new therapeutics whilst
strategic targets help incentivize our management team through the stages which ultimately result in successful therapeutics.
Full disclosure of the strategic targets will be made retrospectively.
Payments for Loss of Office
There were no payments for Loss of Office during 2020.
Payments to past Directors
No payments to past Directors were made during 2020.
On March 18, 2021 the Company announced that Stephen Muniz will retire and step down from the board on May 17, 2021.
He will continue to be paid base salary, benefits and pension until May 17, 2021, at which point payments will cease. There is
no compensation payable for loss of office, no eligibility for 2021 bonus and all unvested PSP awards will lapse. Vested PSP
awards are still subject to any applicable holding period and the post-employment shareholding policy will apply, requiring
a shareholding worth 200 percent of base salary level to be retained for two years.
Directors’ shareholdings (audited)
Executive Directors are required to maintain share ownership equal to a minimum of 400 percent of base salary for the
Chief Executive Officer (subject to approval of the new policy) and a minimum of 200 percent of base salary for the other
Executive Directors. The Chief Executive Officer and Chief Operating Officer both satisfy this requirement. Post-employment
shareholding requirements will apply.
The table below sets out Directors’ shareholdings which are beneficially owned or subject to a performance condition and
interests of connected persons.
Total Share Awards not subject
to Service Conditions
Share awards subject
to performance conditions
Total
Director Shareholdings
Director
Dec 31, 2020
Dec 31, 2019
Dec 31, 2020
Dec 31, 2019
Dec 31, 2020
Dec 31, 2019
Daphne Zohar1
Stephen Muniz
Raju Kucherlapati
John LaMattina8
Robert Langer9
Kiran Mazumdar-Shaw
Dame Marjorie Scardino
Chris Viehbacher
12,197,3072
2,889,4995
2,459,831
1,513,133
2,944,134
—
788,71010
1,045,64611
12,197,307
2,889,499
2,459,831
1,495,332
2,944,134
—
787,710
1,025,646
1,328,3203
461,5356
—
—
—
—
—
—
1,680,2964
570,6397
—
—
—
—
—
—
13,525,627
3,351,034
2,459,831
1,513,133
2,944,134
—
788,710
1,045,646
13,877,603
3,460,138
2,459,831
1,495,332
2,944,134
—
787,710
1,025,646
1
2
3
4
5
6
7
8
9
A portion of Ms. Zohar’s shareholding in the Company is indirect. As of December 31, 2020, an aggregate of 8,097,307 ordinary shares and 410,000 ADSs are held by
(i) the Zohar Family Trust I, a U.S.-established trust of which Ms. Zohar is a beneficiary and trustee, (ii) the Zohar Family Trust II, a U.S.-established trust of which Ms Zohar is
a beneficiary (in the event of her spouse’s death) and trustee, (iii) Zohar LLC, a U.S.-established limited liability company, and (iv) directly by Ms. Zohar. Ms. Zohar owns or has
a beneficial interest in 100 percent of the share capital of Zohar LLC.
Includes 410,000 ADSs, which are convertible into 4,100,000 ordinary shares. Does not include 1,035,628 shares which are issuable pursuant to the RSU award granted to
Ms. Zohar covering the financial years 2018, 2019 and 2020 which have vested but not yet been issued.
Includes the following RSUs, which are subject to performance conditions: 644,668 (2019) and 683,652 (2020). Does not include 1,035,628 shares which are issuable pursuant
to the RSU award granted to Ms. Zohar covering the financial years 2018, 2019 and 2020 which have vested but not yet been issued.
Includes the following RSUs, which are subject to performance conditions: 1,035,628 (2018) and 644,668 (2019).
Does not include 346,644 shares which are issuable pursuant to the RSU award granted to Mr. Muniz covering the financial years 2018, 2019 and 2020 which have vested but
not yet been issued.
Includes the following RSUs, which are subject to performance conditions: 223,995 (2019) and 237,540 (2020). Does not include 346,644 shares which are issuable pursuant
to the RSU award granted to Mr Muniz covering the financial years 2018, 2019 and 2020 which have vested but not yet been issued.
Includes the following RSUs, which are subject to performance conditions: 346,644 (2018) and 223,995 (2019).
A portion of Dr. LaMattina’s shareholding in the Company is indirect. As of December 31, 2020, an aggregate of 1,513,133 ordinary shares are held by (i) John L LaMattina
Revocable Trust, (ii) John L LaMattina 2020-2 GRAT, and (iii) LaMattina Charitable Trust.
A portion of Dr. Langer’s shareholding in the Company is indirect. As of December 31, 2020, an aggregate of 2,944,134 ordinary shares are held by (i) Langer Family 2020
Trust and (ii) directly by Dr. Langer.
10 Includes 100 ADSs, which are convertible into 1,000 ordinary shares.
11
Includes 2,000 ADSs, which are convertible into 20,000 ordinary shares.
Directors’ service contracts (unaudited)
Detail of the service contracts of current Directors is set out below:
Executive Directors
Daphne Zohar
Stephen Muniz
Bharatt Chowrira
Notice period
Contract date
180 days
60 days
60 days
June 18, 2015
June 18, 2015
March 1, 2017
Maximum potential
termination payment
12 months’ salary
12 months’ salary
12 months’ salary
Potential payment
on change of
control/liquidation
Nil
Nil
Nil
118 PureTech Health plc Annual report and accounts 2020
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. Mr. Muniz has provided notice of termination of his service contract and his notice period ends on May 17, 2021.
Non-Executive Directors
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Marjorie Scardino
Christopher Viehbacher
Notice period
Contract date
Contract expiration date
30 days
30 days
30 days
30 days
30 days
30 days
June 5, 2018
June 5, 2018
June 5, 2018
September 28, 2020
June 5, 2018
June 5, 2018
June 5, 2021
June 5, 2021
June 5, 2021
September 28, 2023
June 5, 2021
June 5, 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
)
d
e
s
a
b
e
r
(
)
£
(
e
u
l
a
V
240
220
200
180
160
140
120
100
80
60
40
20
0
24 Jun
2015
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
PureTech
NASDAQ Biotechnology
S&P600 Biotechnology
This graph shows the value, by December 31, 2020, of £100 invested in PureTech on the date of Admission (June 24, 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
2017
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
2020
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
$5,783,682
$5,440,579
100%
38.75%
50%
65%
100%
100%
n/a
n/a
n/a
50%
100%
100%
PureTech Health plc Annual report and accounts 2020 119
Governance
Annual Report on Remuneration — continued
Percentage change in remuneration of Directors and employees (unaudited)
The table below shows the change in the Directors’ remuneration from 2019 to 2020 compared to the change in remuneration
of all of our full-time employees who were employed throughout 2019 and 2020:
Daphne Zohar (CEO)
Stephen Muniz (COO)
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Marjorie Scardino
Christopher Viehbacher
Employees1
Base salary
Benefits
Annual bonus
3%
3%
11%
19%
13%
N/A
0%
45%
8%
0%
(1%)
N/A
N/A
N/A
N/A
N/A
N/A
16%
3%
3%
N/A
N/A
N/A
N/A
N/A
N/A
14%
1 Does not include employees of Founded Entities.
Relative importance of spend on pay (unaudited)
The following table sets out the percentage change in overall spend on pay and distributions to shareholders in 2020
compared to 2019:
Staff costs1
Distributions to Shareholders
1 Excludes Founded Entities.
2020
2019
% change
$18,225,744
—
15,600,657
—
17%
—
Details of the Remuneration Committee, advisors to the Committee and their fees
The Remuneration Committee consists of Dr. LaMattina, Ms. Mazumdar-Shaw and Dr. Kucherlapati, with Dr. LaMattina serving as
the Chair of the Committee. In 2020 the Committee received independent remuneration advice from Aon plc. This independent
advisor was appointed by and was accountable to the Committee and provided no other services to the Company. The terms
of engagement between the Committee and Aon are available from the Company Secretary on request. After the year-end,
Korn Ferry (UK) Limited 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 Korn Ferry 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 $33,541. Each of Aon and Korn Ferry 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 our Remuneration Report at our 2020 AGM:
Resolutions
For
%
Against
%
Withheld
Total votes cast
To approve the Directors’
Remuneration Report
214,646,352
96.41%
7,995,196
3.59%
125
222,641,548
The table below sets out the proxy results of the vote on our Remuneration Policy at our 2020 AGM:
Resolutions
For
%
Against
%
Withheld
Total votes cast
To approve the Directors’
Remuneration Policy
Statement of voting at AGM
217,657,809
97.77%
4,957,219
2.23%
26,645
222,615,028
The Company’s AGM will be held at 11:00 am EDT (4:00 pm BST) on May 27, 2021 at the Company’s headquarters at 6 Tide Street,
Boston, Massachusetts (as a closed meeting with the minimum attendance required to form a quorum). 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
Bharatt Chowrira
Company Secretary
April 14, 2021
120 PureTech Health plc Annual report and accounts 2020
Governance Independent auditor’s report to the members
of PureTech Health plc
Overview
Materiality: Group
financial statements as a
whole
Coverage
Key audit matters
$1.10m (2019: $1.28m)
0.8% (2019: 0.9%) of total
operating expenses
100% (2019: 100%) of total
revenue, profit before
tax and total assets
vs 2019
Recurring
risks
Valuation of financial liabilities measured
at fair value through profit and loss;
preferred shares and warrants held
by third parties
Valuation of preferred shares and
warrants measured at fair value through
profit and loss
Classification and measurement of
convertible loan notes
Recoverability of investments and
intercompany receivable balances held
by the Parent Company
1. Our opinion is unmodified
We have audited the financial statements of PureTech Health
plc (“the Company”) for the year ended 31 December
2020 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 2020 and of the Group’s loss for the year
then ended;
• the Group financial statements have been properly
prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting
Standards adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European Union;
• the parent Company financial statements have been
properly prepared in accordance with international
accounting standards in conformity with the requirements
of, 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 to the extent applicable.
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 six financial years ended 31 December
2020. 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 2020 121
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 judgement, 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, 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 liabilities
measured at fair value through
profit and loss; preferred shares
and warrants held by third parties
($127.2m; 2019: $109m)
Refer to page 105 (Audit
Committee Report), page 134
(accounting policy) and page 167
(financial disclosures).
Subjective valuation and forecast-based
valuation:
The Group finances its operations partly
through preferred shares, convertible
notes or warrants which are classified
as financial 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 financial instruments
classified as liabilities can be estimated
by the directors using valuation models
including option pricing models (OPM),
probability-weighted expected return
models (PWERM), or a hybrid of both.
Where the income approach is driven
by a (Discounted Cash flow) DCF, there
is inherent uncertainty involved in
forecasting the trading of such companies
and the significant level of judgement
required to determine the assumptions.
These include the discount rate, revenue
and EBIT forecasts and the probability
of success all of which mean that the
valuations are sensitive to changes in
these assumptions.
The fair value of financial instruments
classified as a liability may also be valued
using the market approach by observing
recent arm’s-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
maturity the company being valued.
Our procedures included:
Our valuation expertise:
We used our 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 and using
independent external corroboration.
Our valuation specialists challenged
the appropriateness of management’s
comparable companies and transactions
by assessing for reasonableness and
possible bias.
Our valuation specialists critically assessed
the appropriateness of the discount rates,
with specific focus (where applicable)
on: the company specific risk premium
(including the 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.
Our scientific expertise:
Our medical specialists challenged
management’s assessment on the overall
scientific validation and progress of each
relevant fair value estimate.
Assessing valuer’s credentials:
We assessed the expertise and credentials
of the group’s external valuation
experts used in the corroboration of
management’s valuation.
Methodology choice:
The audit team with input 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,
availability of reliable forecasts, relevance
of funding rounds, the industry in which
it operates and also the likely exit date or
commercialisation date.
122 PureTech Health plc Annual report and accounts 2020
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 — continued
The risk
Our response
Valuation of financial liabilities
measured at fair value through
profit and loss; preferred shares
and warrants held by third parties
(continued)
($127.2m; 2019: $109m)
Refer to page 105 (Audit
Committee Report), page 134
(accounting policy) and page 167
(financial disclosures).
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.
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.
Benchmarking assumptions:
Internal data such as strategic plans,
forecasts and budgets and actual results
are utilised for inputs such as exit dates, exit
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 and
preferred shares held by third-parties and
measured at fair value through profit and
loss to be acceptable. (2019: acceptable).
PureTech Health plc Annual report and accounts 2020 123
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 — continued
The risk
Our response
Valuation of preferred shares and
warrants measured at fair value
($204.4m; 2019: $154m)
Refer to page 105 (Audit
Committee Report), page 134
(accounting policy) and page 167
(financial disclosures).
Subjective valuation:
The Group holds investments in
subsidiaries through preferred shares, and
warrants which are classified as financial
instruments and carried at fair value.
Determining the fair value of the
preferred shares and warrants involves
a significant level of judgement around
the assumptions used, and internal and
external factors that may impact the
assumptions.
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
page 122.
In the current year this risk is specific to
Akili, Vor, and Gelesis.
Our procedures included:
Our valuation expertise:
We have assessed the Group’s valuation
of the financial asset in line with the
procedures outlined on page 122.
Our scientific expertise:
We have assessed the Group’s valuation
of the financial asset in line with the
procedures outlined on page 122.
Assessing valuer’s credentials:
We assessed the expertise and of the
group’s external valuation experts used
in the corroboration of management’s
valuation.
Methodology choice:
We have assessed the Group’s valuation
of the financial asset in line with the
procedures outlined on page 122.
Benchmarking assumptions:
We have assessed the Group’s valuation
of the financial asset inline with the
procedures outlined on page 123.
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.
Our results
We found the valuation of the preferred
shares and warrants to be acceptable.
(2019: acceptable).
124 PureTech Health plc Annual report and accounts 2020
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 — continued
The risk
Our response
Classification and measurement
of convertible loan notes
($25.0m; 2019: $31.2m)
Refer to page 105 (Audit
Committee Report), page 134
(accounting policy) and page 166
(financial disclosures).
Accounting treatment:
The Group finances its operations partly
through financial instruments and in the
current period entered into a convertible
loan note transaction.
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 required 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 the incorrect classification under
IAS 32 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.
Recoverability of investments and
intercompany receivable balances
held by the Parent Company
($458.6m; 2019: $330.7m)
Refer to page 105 (Audit
Committee Report), page 188
(accounting policy) and page 188
(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%
(2019: 100%) of the Company’s total
assets. The recoverability of these
balances 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 which was the key focus of our overall
parent Company audit.
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 classified as a liability or equity
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.
Assessing transparency:
We have considered the adequacy of the
disclosure of the accounting treatment in
the financial statements and disclosure of
key judgements.
Our results
We found the classification and
measurement of embedded derivatives
within financial instruments to be
acceptable. (2019: acceptable).
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 all the financial
instruments and investments held by the
group to assess for indicators of impairment.
Our results
We found the recoverability of the
investments and intercompany receivable
balances held by the Parent Company to be
acceptable. (2019: acceptable).
We continue to perform procedures over the determination of the accounting and valuation of investments in associates and
revenue recognition. However, following no additional investments in the year and the decrease in contract revenue, we have
not assessed these as areas of most significant risks in our current year audit and, therefore, they are not separately identified in
our report this year.
PureTech Health plc Annual report and accounts 2020 125
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
3. Our application of materiality and an overview
of the scope of our audit
Total operating expenses
$131m (2019: $125m)
Group Materiality
$1.10m (2019: $1.28m)
$1.10m
Whole financial
statements materiality
(2019: $1.28m)
$0.83m
Whole financial
statements performance
materiality (2019: $0.95m)
$0.82m
Range of materiality
at 4 components
($0.39m to $0.82m)
(2019: $0.60m to $0.83m)
$0.06m
Misstatements reported
to the audit committee
(2019: $0.05m)
Total operating expenses
Group materiality
Group revenue
Group profit before tax
100%
(2019: 100%)
100
100
Group total assets
100%
(2019: 100%)
100
100
100%
(2019: 100%)
100
100
Full scope for Group
audit purposes 2020
Full scope for Group
audit purposes 2019
Materiality for the group financial statements as a whole was
set at $1.10m, determined with reference to a benchmark of
Total operating expenses (being general and administrative
expenses and research and development expenses), of which
it represents 0.8% (2019: 0.9%). Total operating expenses
is considered to be one of the principal considerations for
the members of the Company in assessing the financial
performance of the Group, since the Group’s activities are
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 $0.39m (2019: $0.89m), determined
with reference to a benchmark of total assets, capped
at component materiality, of which it represents 0.11%
(2019: 0.15%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to reduce
to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to
a material amount across the financial statements as a
whole. Performance materiality was set at 75% (2019: 75%)
of materiality for the financial statements as a whole, which
equates to $0.83m (2019: $0.95m) for the group and $0.39m
(2019: $0.89m) for the parent company. We applied this
percentage in our determination of performance materiality
because we did not identify any factors indicating an
elevated level of risk.
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding $0.06m,
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
Of the group’s 4 (2019: 3) reporting components, we
subjected 4 (2019: 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 $0.39m to $0.82m,
having regard to the mix of size and risk profile of the Group
across the components. The work on 2 of the 4 components
(2019: 1 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.
126 PureTech Health plc Annual report and accounts 2020
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
4. Going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the
Group or the Company or to cease their operations, and as
they have concluded that the Group’s and the Company’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”).
We used our knowledge of the Group, its industry, and the
general economic environment to identify the inherent risks
to its 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.
We considered whether these risks could plausibly affect
the liquidity in the going concern period by comparing
severe, but plausible downside scenarios that could arise
from these risks individually and collectively against the level
of available financial resources indicated by the Group’s
financial forecasts.
Our procedures also included:
• Critically assessing assumptions in alternative funding
scenarios and overlaying knowledge of the entity’s plans
based on approved budgets and our knowledge of the
entity and the sector in which it operates.
• Comparing past budgets to actual results to assess the
directors’ track record of budgeting accurately.
• Evaluating the achievability of the actions the directors
consider they would take to improve the position
should the risk of being unable to obtain future funding
materialise, which included liquidating balance sheet
assets and stopping additional investments in subsidiaries,
taking into account the extent to which the directors can
control the timing and outcome of these actions.
• Considering whether the going concern disclosure
in note 1 to the financial statements gives a full and
accurate description of the Directors’ assessment of going
concern. We assessed the completeness of the going
concern disclosure.
Our conclusions based on this work:
• we consider that the directors’ use of the going concern
basis of accounting in the preparation of the financial
statements is appropriate;
• we have not identified, and concur with the directors’
assessment that there is not, a material uncertainty related
to events or conditions that, individually or collectively,
may cast significant doubt on the Group’s or Company’s
ability to continue as a going concern for the going
concern period;
• we have nothing 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 the going concern period, and we found the
going concern disclosure in note 1 to be acceptable; and
• the related statement under the Listing Rules set out
on page 102 is materially consistent with the financial
statements and our audit knowledge.
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 above conclusions are not a guarantee
that the Group or the Company will continue in operation.
5.
Fraud and breaches of laws and regulations – ability
to detect
Identifying and responding to risks of material misstatement
due to fraud
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide
an opportunity to commit fraud. Our risk assessment
procedures included:
• Enquiring of directors, the audit committee and inspection
of policy documentation as to the Group’s high-level
policies and procedures to prevent and detect fraud,
including the Group’s channel for “whistleblowing”, as well
as whether they have knowledge of any actual, suspected
or alleged fraud.
• Reading board, audit, remuneration and nomination
committee minutes.
• Considering remuneration incentive schemes and
performance targets for management and directors
including the company specific target for management
remuneration within the Performance share plan (“PSP”)
scheme.
We communicated identified fraud risks throughout the
audit team and remained alert to any indications of fraud
throughout the audit. This included communication from
the group to component audit teams of relevant fraud risks
identified at the Group level and request to component audit
teams to report to the Group audit team any instances of
fraud that could give rise to a material misstatement at group.
As required by auditing standards, and taking into account
possible pressures to meet investor expectations and
weaknesses in internal controls, we perform procedures
to address the risk of management override of controls, in
particular the risk that Group and component management
may be in a position to make inappropriate accounting entries
and the risk of bias in accounting estimates and judgements
such as the valuation of investments and valuation of financial
instruments measured at fair value through profit or loss
(preferred shares, convertible loan notes and warrants).
On this audit we do not believe there is a fraud risk related
to revenue recognition because management have little
incentive to increase revenue on the basis that their
remuneration is not dependent on it and revenue would not
demonstrate progress of the business.
We also identified a fraud risk related to the valuation
of preferred shares and warrants measured at fair value
through profit and loss and valuation of financial instruments
PureTech Health plc Annual report and accounts 2020 127
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
5.
Fraud and breaches of laws and regulations –
ability to detect — continued
measured at fair value through profit or loss; preferred shares,
convertible loan notes and warrants in response to possible
pressures to meet investor expectations and the level of
estimation and judgement required.
Further detail in respect of the valuation of investments and
the valuation of financial instruments measured at fair value
through profit or loss; preferred shares, convertible loan notes
and warrants is set out in the key audit matter disclosures in
section 2 of this report.
We performed procedures including:
• Performing a walkthrough of the design and
•
implementation of journals controls.
Identifying journal entries to test for all full scope
components based on risk criteria and comparing the
identified entries to supporting documentation. These
included those posted by senior finance management,
those posted and approved by the same user/those
posted to unusual accounts.
• Assessing significant accounting estimates for bias.
Identifying and responding to risks of material misstatement
due to non-compliance with laws and regulations
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 discussed with the
directors the policies and procedures regarding compliance
with laws and regulations.
As the Group is regulated, our assessment of risks involved
gaining an understanding of the control environment
including the entity’s procedures for complying with
regulatory requirements.
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 the Group
level, and a request for component auditors to report to the
group team any instances of non-compliance with laws and
regulations that could give rise to a material misstatement
at group.
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. 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 regulations, 1940s Investment Act and the Securities
Exchange Commission regulations. 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. Therefore, if a breach of operational regulations is not
disclosed to us or evident from relevant correspondence, an
audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches
of law or regulation
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
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 fraud, as these may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of
internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
6. We have nothing to report on the other information
in the Annual Report and accounts
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 emerging and principal risks and
longer-term viability
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and
the viability statement, and the financial statements and our
audit knowledge.
128 PureTech Health plc Annual report and accounts 2020
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
Based on those procedures, we have nothing material to add
or draw attention to in relation to:
• the directors’ confirmation within the Viability Statement
page 72 that they have carried out a robust assessment
of the emerging and principal risks facing the Group,
including those that would threaten its business model,
future performance, solvency and liquidity;
• 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.
• the Principal Risks disclosures describing these risks and
We have nothing to report in these respects.
how emerging risks are identified, 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.
We are also required to review the Viability Statement, set
out on page 72 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures
are materially consistent with the financial statements and our
audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
corporate governance disclosures and the financial
statements and our audit knowledge.
Based on those procedures, we have concluded that each
of the following is materially consistent with the financial
statements and our audit knowledge:
• 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;
• the section of the annual report describing the work of
the Audit Committee, including the significant issues that
the audit committee considered in relation to the financial
statements, and how these issues were addressed; and
• the section of the annual report that describes the review
of the effectiveness of the Group’s risk management and
internal control systems.
We are required to review the part of Corporate Governance
Statement relating to the Group’s compliance with the
provisions of the UK Corporate Governance Code specified
by the Listing Rules for our review. We have nothing to report
in this respect.
7. 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
8.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 103,
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 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 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.
9.
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 and the terms of our engagement by
the Company. 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
the further matters we are required to state to them in
accordance with the terms agreed with the Company, 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
April 14, 2021
PureTech Health plc Annual report and accounts 2020 129
Financial statements Consolidated Statements of Comprehensive Income/(Loss)
For the years ended December 31
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 realized on sale of investments
Loss on impairment of intangible asset
Gain/(loss) on disposal of assets
Gain on loss of significant influence
Other income/(expense)
Other income/(expense)
Finance income/(costs):
Finance income
Finance income/(costs) – subsidiary preferred shares
Finance income/(costs) – contractual
Finance income/(costs) – fair value accounting
Net finance income/(costs)
Share of net income/(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
Unrealized 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
5
11
6
21
9
9
9
9
6
6
25
18
18
10
10
2020
$000s
8,341
3,427
11,768
(49,440)
(81,859)
(119,531)
—
232,674
(54,976)
—
(30)
—
1,065
178,732
1,183
—
(2,946)
(4,351)
(6,115)
(34,117)
—
18,969
(14,401)
4,568
469
—
469
5,037
5,985
(1,417)
4,568
6,454
(1,417)
5,037
$
0.02
0.02
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)
130 PureTech Health plc Annual report and accounts 2020
Financial statements
Consolidated Statements of Financial Position
as of December 31
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
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
Long-term loan
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
2020
$000s
2019
$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
22,777
20,098
899
530,161
—
1,700
—
11
575,645
2,558
5,405
381
2,124
—
403,881
414,348
989,994
5,417
288,978
138,506
469
(24,050)
260,429
669,748
(16,209)
653,539
—
108,626
32,088
14,818
155,531
1,472
3,261
21,826
26,455
8,206
118,972
732
180,924
336,455
989,994
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
Please refer to the accompanying Notes to the consolidated financial information. Registered number: 09582467.
The consolidated financial statements were approved by the Board of Directors and authorized for issuance on April 14, 2021
and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
April 14, 2021
The accompanying notes are an integral part of these financial statements.
PureTech Health plc Annual report and accounts 2020 131
Financial statements
Consolidated Statements of Changes in Equity
For the years ended December 31
Share Capital
Shares
Amount
$000s
Share
premium
$000s
Merger
reserve
$000s
Translation
reserve
$000s
237,429,696
—
—
—
4,679 181,588
—
—
—
—
—
—
138,506
—
—
—
224
—
(214)
—
Retained
earnings/
(accumulated
deficit)
$000s
(124,745)
(43,654)
—
(26)
Other
reserve
$000s
17,178
—
—
—
Total Parent
equity
$000s
217,430
(43,654)
(214)
(26)
Non-
controlling
interests
$000s
(145,586)
(27,005)
—
—
Total
Equity
$000s
71,844
(70,659)
(214)
(26)
—
—
45,000,000
64,171
—
—
—
—
696
—
—
—
—
—
96,797
—
—
—
—
—
—
—
—
—
282,493,867
5,375 278,385
138,506
—
—
—
—
282,493,867
5,375 278,385
138,506
—
—
—
—
—
237,090
—
—
—
—
—
5
—
—
—
—
—
499
2,126,338
28
9,078
—
—
513,324
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
285,370,619
5,408 287,962
138,506
—
—
—
—
514,406
—
—
—
—
—
9
—
—
—
—
—
1,016
—
—
—
—
—
—
—
—
—
—
—
(214)
—
(43,680)
(43,894)
(27,005)
(70,899)
—
—
—
—
—
10
—
10
—
(10)
(10)
—
—
—
—
—
—
—
—
—
—
469
469
—
—
—
—
—
(4)
—
—
—
3,749
619
—
122
(8)
—
615
97,493
122
(8)
3,749
55,168
—
—
—
8,888
55,783
97,493
122
(8)
12,637
20,923
(167,692)
275,507
(108,535)
166,972
—
999
999
—
999
20,923
(166,693)
276,506
(108,535)
167,971
—
—
—
—
(20,631)
—
(33,145)
3,061
12,785
(1,280)
5
421,144
—
421,144
(10)
(55,079)
—
366,065
(10)
421,144
421,134
(55,079)
366,055
—
—
—
—
—
—
—
(7)
—
97,178
97,178
(20,631)
504
23,049
—
2,418
504
(24,039)
24,039
—
3,061
12,785
(1,280)
(2)
—
1,683
—
25
3,061
14,468
(1,280)
23
(18,282)
254,444
668,038
(17,640)
650,398
—
—
(684)
7,805
(12,888)
—
5,985
5,985
—
—
—
—
—
5,985
469
6,454
1,025
(684)
7,805
(12,888)
—
(1,417)
(1,417)
11
—
2,822
—
13
4,568
469
5,037
1,036
(684)
10,627
(12,888)
13
Balance January 1, 2018
Net income/(loss)
Foreign currency exchange
Unrealized gain on investments
Total comprehensive income/(loss)
for the period
Deconsolidation of subsidiary
Issuance of placing shares
Exercise of share-based awards
Subsidiary dividends
Equity settled share-based payments
Balance December 31, 2018
Adjustment for the initial application
of IFRS 16
Adjusted balance as of January 1, 2019
Net income/(loss)
Foreign currency exchange
Total comprehensive income/(loss)
for the period
Deconsolidation of subsidiary
Subsidiary note conversion and changes
in NCI ownership interest
Exercise of share-based awards
Purchase of subsidiary’s non-controlling
interest through issuance of shares
Revaluation of deferred tax assets
related to share-based awards
Equity settled share-based payments
Vesting of restricted stock units (RSU)
Other
As at December 31, 2019
Net income/(loss)
Foreign currency exchange
Total comprehensive income/(loss)
for the period
Exercise of share-based awards
Revaluation of deferred tax assets
related to share-based awards
Equity settled share-based payments
Settlement of restricted stock units
Other
Balance December 31, 2020
285,885,025
5,417 288,978
138,506
469
(24,050)
260,429
669,748
(16,210)
653,539
The accompanying notes are an integral part of these financial statements.
132 PureTech Health plc Annual report and accounts 2020
Financial statements Consolidated Statements of Cash Flows
For the years ended December 31
Note
11, 12
6
8
5
5
5
11
6
25
9
22
13
3
19
21
11
12
5, 6
5
5
21
6
22
22
20
17
21
27
15
15
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 amortization
Impairment of intangible assets
Impairment of investment in associate
Equity settled share-based payment expense
(Gain)/loss on investments held at fair value
Realized loss on sale of investments
(Gain)/loss on short-term investments
Gain on deconsolidation
Gain on loss of significant influence
Conversion of debt to equity
Disposal of assets
Share of net (income)/loss of associates accounted for using the equity method
Income taxes, net
Unrealized (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
Trade and other payables
Other liabilities
Income taxes paid
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
Receipt of payment of sublease
Purchase of convertible note
Cash derecognized upon loss of control over subsidiary
Purchases of short-term investments
Proceeds from maturity of short-term investments
Net cash provided by/(used in) investing activities
Cash flows from financing activities:
Receipt of PPP loan
Issuance of long term loan
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 and subsidiary preferred shares
Settlement of RSU’s
Vesting of restricted stock units
Issuance of preferred shares of subsidiaries
Issuance of warrants in subsidiary
Buyback of shares
Distribution to shareholders on dissolution of subsidiary
Subsidiary dividend payments
Net cash provided by financing activities
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
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.
2020
$000s
4,568
6,645
—
—
10,718
(232,674)
54,976
—
—
—
—
66
34,117
14,402
—
6,114
(529)
—
(3,371)
(5,223)
605
(7)
(20,737)
1,155
(2,651)
2019
$000s
2018
$000s
366,065
(70,659)
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
161
11,491
1,723
(271)
(8,446)
467
(1,327)
774
4,841
5,094
115
—
—
—
(131,827)
(98,156)
(72,796)
(5,170)
—
(254)
(10,000)
(1,150)
350,586
350
—
—
—
30,116
364,478
68
14,720
25,000
(2,908)
—
—
1,036
—
(12,888)
—
13,750
92
—
—
—
38,869
—
271,520
132,360
403,881
—
—
—
—
—
20,737
(12,138)
—
(400)
(13,670)
(1,556)
9,294
191
(6,480)
(16,036)
(69,541)
173,995
63,659
—
—
1,606
(1,678)
(178)
(112)
504
—
—
(1,280)
51,048
—
—
—
—
49,910
(104)
15,309
117,051
132,360
9,106
15,894
10,680
4,894
2,418
176
(4,365)
125
(125)
(3,500)
—
—
—
—
(13,390)
(166,452)
148,062
(39,645)
—
—
6,147
—
(185)
—
—
152,030
—
—
—
—
(35)
(1,062)
(8)
156,887
(44)
44,402
72,649
117,051
—
—
—
—
—
92
PureTech Health plc Annual report and accounts 2020 133
Financial statements
Notes to the Consolidated Financial Statements
1. Accounting policies
Description of Business
PureTech Health plc (“PureTech,” the “Parent” or the “Company”) is a public company incorporated, domiciled and registered
in the United Kingdom (“UK”). The registered number is 09582467 and the registered address is 8th Floor, 20 Farringdon
Street, London EC4A 3AE, United Kingdom.
PureTech’s group financial statements consolidate those of the Company and its subsidiaries (together referred to as the
“Group”). The Parent company financial statements present financial information about the Company as a separate entity
and not about its Group.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented
in these group financial statements.
Basis of Presentation
The consolidated financial statements of the Group are presented as of December 31, 2020 and 2019 and for the years
ended December 31, 2020, 2019 and 2018. The Group financial statements have been approved by the Directors on
April 14, 2021 and are prepared in accordance with international accounting standards in conformity with the requirements
of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the EU. The Consolidated Financial Statements also comply fully with IFRSs as issued by the
International Accounting Standards Board (IASB). IFRSs as adopted pursuant to Regulation (EC) No 1606/2002 as it applies
in the EU differs in certain respects from IFRS as issued by the IASB. However, the differences have no impact for the periods
presented.
For presentation of the Consolidated Statements of Comprehensive Income/(Loss), the Company uses a classification based
on the function of expenses, rather than based on their nature, as it is more representative of the format used for internal
reporting and management purposes and is consistent with international practice.
Certain amounts in the Consolidated Financial Statements and accompanying notes may not add due to rounding.
All percentages have been calculated using unrounded amounts.
Basis of Measurement
The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities
are stated at their fair value: investments held at fair value and liabilities classified as fair value through the profit or loss.
Use of Judgments and Estimates
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that
affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis.
Significant estimation applied in determining the following:
• Financial instruments valuations (Note 16): when estimating the fair value of subsidiary convertible notes and subsidiary
preferred shares carried at fair value through profit and loss (FVTPL) and investments held at fair value, at initial recognition
and upon subsequent measurement. This includes determining the appropriate valuation methodology and making certain
estimates of the future earnings potential of the subsidiary businesses, appropriate discount rate and earnings multiple to
be applied, marketability and other industry and company specific risk factors. See Note 16 for the sensitivity analysis for
key estimates used in these valuations.
• Valuation of share based payments (Note 8): when estimating the fair value of share based payment on grant date. This
includes making certain estimates regarding the expected life of the share-based award, share price volatility, risk free
interest rate as well as other covariance of comparable public companies and other market data to predict distribution
of relative share performance.
Significant judgement is also applied in determining the following:
• Revenue recognition (Note 3): when determining the correct amount of revenue to be recognized. This includes making
certain judgements when determining the appropriate accounting treatment of key customer contract terms in accordance
with the applicable accounting standards. In particular, judgement is required to determine the performance obligations
in a contract (if promised goods and services are distinct or not) and timing of revenue recognition (on delivery or over
a period of time).
• Subsidiary preferred shares liability classification (Note 15): when determining the classification of financial instruments
in terms of liability or equity. These judgements include an assessment of whether the financial instrument include any
embedded derivative features, whether they include contractual obligations upon the Group to deliver cash or other
financial assets or to exchange financial assets or financial liabilities with another party, and whether that obligation
will be settled by the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its
own equity instruments. Further information about these critical judgements and estimates is included below under
Financial Instruments.
134 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
• When the power to control the subsidiaries exists (please refer to Notes 5 and 6 and accounting policy below Subsidiaries).
This judgement includes an assessment of whether the Company has (i) power over the investee; (ii) exposure, or rights,
to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect
the amount of the investor’s returns. The Company considers among others its voting shares, representation on the
board, rights to appoint management, investee dependence on the Company etc. If the power to control investees exists
we consolidate the financial statements of such investee in the consolidated financial statements of the Group. Upon
issuance of new shares in a subsidiary and a resulting change in any shareholders or governance agreements, the Group
reassesses its ability to control the investee based on the revised board composition and revised subsidiary governance
and management structure. When such new circumstances result in the Group losing its power to control the investee, the
investee is deconsolidated.
• Whether the Company has significant influence over financial and operating policies of investees in order to determine if
the Company should account for its investment as an associate based on IAS 28 or based on IFRS 9, Financial Instruments
(please refer to Note 5). This judgement includes, among others, an assessment whether the Company has representation
on the board of directors of the investee, whether the Company participates in the policy making processes of the investee,
whether there is any interchange of managerial personnel, whether there is any essential technical information provided to
the investee and if there are any transactions between the Company and the investee.
• Upon determining that the Company does have significant influence over the financial and operating policies of an investee,
if the Company holds more than a single instrument issued by its equity-accounted investee, judgement is required to
determine whether the additional instrument forms part of the investment in the associate, which is accounted for under IAS
28 and scoped out of IFRS 9, or it is a separate financial instrument that falls in the scope of IFRS 9 (please refer to Notes 5
and 6). This judgement includes an assessment of the characteristics of the financial instrument of the investee held by the
Company and whether such financial instrument provides access to returns underlying an ownership interest.
• Where the company has other investments in an equity accounted investee that are not accounted for under IAS 28,
judgement is required in determining if such investments constitute Long-Term Interests for the purposes of IAS 28 (please
refer to Notes 5 and 6). This determination is based on the individual facts and circumstances and characteristics of each
investment, but is driven, among other factors, by the intention and likelihood to settle the instrument through redemption
or repayment in the foreseeable future, and whether or not the investment is likely to be converted to common stock or
other equity instruments (please also refer to accounting policy with regard to Investments in Associates below). When
considering the individual facts and circumstances of the Group’s investment in its associate’s preferred stock in the manner
described above, including the long-term nature of such investment, the ability of the Group to convert its preferred stock
investment to an investment in common shares and the likelihood of such conversion, as well the fact that there is no
planned redemption or other settlement of the preferred stock by the investee in the foreseeable future, we concluded that
such investment is considered a Long Term Interest.
As of December 31, 2020 the Group had cash and cash equivalents of $403.9 million. Considering the Group’s and the
Company’s financial position as of December 31, 2020 and its principal risks and opportunities, a going concern analysis has
been prepared for at least the twelve-month period from the date of signing the Consolidated Financial Statements (“the
going concern period”) utilizing realistic scenarios and applying a severe but plausible downside scenario. Even under the
downside scenario, the analysis demonstrates the Group and the Company continue to maintain sufficient liquidity headroom
and continues to comply with all financial obligations. On February 9, 2021, the Group sold 1,000,000 common shares of
Karuna for aggregate proceeds of $118.0 million, further strengthening the liquidity headroom of the Group. Therefore, the
Directors believe the Group and the Company is adequately resourced to continue in operational existence for at least the
twelve-month period from the date of signing the Consolidated Financial Statements, irrespective of uncertainty regarding
the duration and severity of the COVID-19 pandemic and the global macroeconomic impact of the pandemic. Accordingly, the
Directors considered it appropriate to adopt the going concern basis of accounting in preparing the Consolidated Financial
Statements and the PureTech Health plc Financial Statements.
Basis of consolidation
The consolidated financial information as of December 31, 2020 and 2019 and for each of the years ended December 31, 2020,
2019 and 2018 comprises an aggregation of financial information of the Company and the consolidated financial information of
PureTech Health LLC (“PureTech LLC”). Intra-group balances and transactions, and any unrealized income and expenses arising
from intra-group transactions, are eliminated.
Subsidiaries
As used in these financial statements, the term subsidiaries refers to entities that are controlled by the Group. Financial results
of subsidiaries of the Group as of December 31, 2020 are reported within the Internal segment, Controlled Founded Entities
segment or the Parent Company and Other segment (please refer to Note 4). Under applicable accounting rules, the Group
controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration
potential voting rights and board interest and holding. The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-
controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling
interests to have a deficit balance.
A list of all current and former subsidiaries organized with respect to classification as of December 31, 2020 and the Group’s
total voting percentage, based on outstanding voting common and preferred shares as of December 31, 2020, 2019 and 2018,
is outlined below. All current subsidiaries are domiciled within the United States and conduct business activities solely within
the United States.
PureTech Health plc Annual report and accounts 2020 135
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Subsidiary
Common
Preferred
Common
Preferred
Common
Preferred
Voting percentage at December 31, through the holdings in
2020
2019
2018
Subsidiary operating companies
Alivio Therapeutics, Inc.1,2
Entrega, Inc. (indirectly held through Enlight)1,2
Follica, Incorporated1,2,5
PureTech LYT (formerly Ariya Therapeutics, Inc.)8
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
Deconsolidated former subsidiary
operating companies
Akili Interactive Labs, Inc.2,7
Gelesis, Inc.1,2,9
Karuna Pharmaceuticals, Inc.1,2,10
Vor Biopharma Inc.1,2,11
Nontrading holding companies
Endra Holdings, LLC (held indirectly through Enlight)2
Ensof Holdings, LLC (held indirectly through Enlight)2
PureTech Securities Corp.2
PureTech Securities II 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
—
—
91.9
83.1
56.7
100.0
100.0
—
—
51.8
59.3
—
—
28.7
—
—
100.0
100.0
—
—
91.9
83.1
56.7
100.0
100.0
—
—
64.1
61.8
—
—
4.4
—
—
100.0
100.0
—
—
92.0
83.1
79.2
100.0
100.0
—
—
96.4
74.3
—
59.3
—
61.8
—
74.3
—
4.9
12.6
—
86.0
86.0
100.0
100.0
—
—
86.0
57.7
—
—
98.3
—
41.9
20.2
—
16.4
—
—
—
—
100.0
99.1
—
28.3
86.0
100.0
—
100.0
—
5.7
28.4
—
86.0
86.0
100.0
—
—
—
86.0
57.7
—
—
98.3
—
41.9
20.2
—
47.5
—
—
—
—
100.0
99.1
—
28.3
86.0
100.0
—
100.0
—
7.3
—
—
86.0
86.0
100.0
—
—
—
86.0
57.7
—
—
98.3
—
41.9
18.4
71.0
93.2
—
—
—
—
100.0
99.1
—
28.3
86.0
100.0
—
64.5
1 The voting percentage is impacted by preferred shares that are classified as liabilities, which results in the ownership percentage not being the same as the ownership percentage
used in allocations to non-controlling interests disclosed in Note 18. The allocation of losses/profits to the noncontrolling interest is based on the holdings of subordinated stock
that provide ownership rights in the subsidiaries. The ownership of liability classified preferred shares are quantified in Note 15.
2 Registered address is Corporation Trust Center, 1209 Orange St., Wilmington, DE 19801, USA.
3 Registered address is 2711 Centerville Rd., Suite 400, Wilmington, DE 19808, USA.
4 The Company’s interests in its subsidiaries are predominantly in the form of preferred shares, which have a liquidation preference over the common stock, are convertible into
common stock at the holder’s discretion or upon certain liquidity events, are entitled to one vote per share on all matters submitted to shareholders for a vote and entitled to
receive dividends when and if declared. In the case of Enlight, Mandara and PureTech Health LLC, the holdings are membership interests in an LLC. The holders of common stock
are entitled to one vote per share on all matters submitted to shareholders for a vote and entitled to receive dividends when and if declared.
5 On July 19, 2019, all of the outstanding notes, plus accrued interest, issued by Follica to PureTech converted into 15,216,214 shares of Series A-3 Preferred Shares and 12,777,287
shares of common share pursuant to a Series A-3 Note Conversion Agreement between Follica and the noteholders. Please refer to Note 16.
6 Commense turned inactive during 2019.
7 On May 8, 2018, PureTech lost control of Akili, Akili was deconsolidated from the Group’s financial statements and is no longer considered a subsidiary. This results in only the
profits and losses generated by Akili through the deconsolidation date being included in the Group’s Consolidated Statement of Income/(Loss) and Other Comprehensive Income/
(Loss). See Note 5 for further details about the accounting for the investment in Akili subsequent to deconsolidation.
8 On July 18, 2018, Calix Biopharma, Inc., Glyph Biosciences, Inc., and Nybo Therapeutics, Inc. merged into Ariya Therapeutics, Inc. Thus, the Group no longer holds an interest in
Calix, Glyph and Nybo but rather owns 100.0 percent voting interest of Ariya.
9 As of December 31, 2018, PureTech maintained control of Gelesis. On July 1, 2019 PureTech lost control of Gelesis and Gelesis was deconsolidated from the Group’s financial
statements, resulting in only the profits and losses generated by Gelesis through the deconsolidation date being included in the Group’s Consolidated Statement of Income/(Loss)
and Other Comprehensive Income/(Loss). See Notes 5 and 6 for further details about the accounting for the investments in Gelesis subsequent to deconsolidation.
10 On March 15, 2019, PureTech lost control of Karuna, Karuna was deconsolidated from the Group’s financial statements and is no longer considered a subsidiary. This results in only
the profits and losses generated by Karuna through the deconsolidation date being included in the Group’s Consolidated Statement of Income/(Loss) and Other Comprehensive
Income/(Loss). See Note 5 for further details about the accounting for the investment in Karuna subsequent to deconsolidation.
11 On February 12, 2019, PureTech lost control of Vor, Vor was deconsolidated from the Group’s financial statements and is no longer considered a subsidiary. This results in only the
profits and losses generated by Vor through the deconsolidation date being included in the Group’s Consolidated Statement of Income/(Loss) and Other Comprehensive Income/
(Loss).See Note 5 for further details about the accounting for the investment in Vor subsequent to deconsolidation.
136 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Change in subsidiary ownership and loss of control
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
Where the Group loses control of a subsidiary, the assets and liabilities are derecognized along with any related non-controlling
interest (“NCI”). Any interest retained in the former subsidiary is measured at fair value when control is lost. Any resulting gain
or loss is recognized as profit or loss in the Consolidated Statements of Comprehensive Income/(Loss).
Associates
As used in these financial statements, the term associates are those entities in which the Group has no control but maintains
significant influence over the financial and operating policies. Significant influence is presumed to exist when the Group holds
between 20 and 50 percent of the voting power of an entity, unless it can be clearly demonstrated that this is not the case. The
Group evaluates if it maintains significant influence over associates by assessing if the Group has lost the power to participate
in the financial and operating policy decisions of the associate.
Application of the equity method to associates
Associates are accounted for using the equity method (equity accounted investees) and are initially recognized at cost, or
if recognized upon deconsolidation they are initially recorded at fair value at the date of deconsolidation. The consolidated
financial statements include the Group’s share of the total comprehensive income and equity movements of equity accounted
investees, from the date that significant influence commences until the date that significant influence ceases.
To the extent the Group holds interests in associates that are not providing access to returns underlying ownership interests,
the instrument held by PureTech is accounted for in accordance with IFRS 9 as investments held at fair value.
When the Group’s share of losses exceeds its equity method investment in the investee, losses are applied against Long-Term
Interests, which are investments accounted for under IFRS 9. Investments are determined to be Long-Term Interests when they
are long-term in nature and in substance they form part of the Group’s net investment in that associate. This determination is
impacted by many factors, among others, whether settlement by the investee through redemption or repayment is planned or
likely in the foreseeable future, whether the investment can be converted and/or is likely to be converted to common stock or
other equity instrument and other factors regarding the nature of the investment. Whilst this assessment is dependent on many
specific facts and circumstances of each investment, typically conversion features whereby the investment is likely to convert
to common stock or other equity instruments would point to the investment being a Long-Term Interest. Similarly, where
the investment is not planned or likely to be settled through redemption or repayment in the foreseeable future, this would
indicate that the investment is a Long-Term Interest. When the net investment in the associate, which includes the Group’s
investments in other long-term interests, is reduced to nil, recognition of further losses is discontinued except to the extent that
the Group has incurred legal or constructive obligations or made payments on behalf of an investee.
The Group has also adopted the amendments to IAS 28 Investments in Associates that addresses the dual application of IAS
28 and IFRS 9 (see below) when equity method losses are applied against Long-Term Interests (LTI). The amendments provide
the annual sequence in which both standards are to be applied in such a case. The Group has applied the equity method
losses to the LTIs presented as part of Investments held at fair value subsequent to remeasuring such investments to their fair
value at balance sheet date.
Change in Accounting Policy
As of January 1, 2019, the Group has adopted new accounting policies for the accounting for leases. See updated accounting
policy for leases (IFRS 16) below.
Financial Instruments
Classification
The Group classifies its financial assets in the following measurement categories:
• Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss),
and
• Those to be measured at amortized cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the
cash flows.
For assets measured at fair value, gains and losses will are recorded in profit or loss. For investments in debt instruments, this
will depend on the business model in which the investment is held. For investments in equity instruments that are not held for
trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for
the equity investment at FVOCI. As of balance sheet dates, none of the Company’s financial assets are accounted for as FVOCI.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL,
transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets that
are carried at FVTPL are expensed.
PureTech Health plc Annual report and accounts 2020 137
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Impairment
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at
amortized cost. The Group had no debt instruments carried at amortized cost as of balance sheet date. For trade receivables,
the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from
initial recognition of the receivables.
Financial Assets
The Group’s financial assets consist of cash and cash equivalents, trade and other receivables, debt and equity securities,
other deposits and investments in associates’ preferred shares. The Group’s financial assets are classified into the following
categories: investments held at fair value, trade and other receivables, short-term investments and cash and cash equivalents.
The Group determines the classification of financial assets at initial recognition depending on the purpose for which the
financial assets were acquired.
Investments held at fair value are investments in equity instruments that are not held for trading. Such investments consist
of the Group’s minority interest holdings where the Group has no significant influence or preferred share investments in the
Group’s associates that are not providing access to returns underlying ownership interests. These financial assets are initially
measured at fair value and subsequently re-measured at fair value at each reporting date. The Company elects if the gain or
loss will be recognized in Other Comprehensive Income/(Loss) or through profit and loss on an instrument by instrument basis.
The Company has elected to record the changes in fair values for the financial assets falling under this category through profit
and loss. Please refer to Note 5.
Short-term investments are short-term government treasury bonds carried at fair value with changes in fair value recorded
through profit and loss in financing income.
Changes in the fair value of financial assets at FVTPL are recognized in other income/(expense) in the Consolidated Statements
of Comprehensive Income/(Loss) as applicable.
Trade and other receivables are non-derivative financial assets with fixed and determinable payments that are not quoted on
active markets. These financial assets are carried at the amounts expected to be received less any expected lifetime losses.
Such losses are determined taking into account previous experience, credit rating and economic stability of counterparty and
economic conditions. When a trade receivable is determined to be uncollectible, it is written off against the available provision.
Trade and other receivables are included in current assets, unless maturities are greater than 12 months after the end of the
reporting period.
Financial Liabilities
The Group’s financial liabilities consist of trade and other payables, subsidiary notes payable, preferred shares, and warrant
liability. Warrant liabilities are initially recognized at fair value. After initial recognition, these financial liabilities are re-measured
at FVTPL using an appropriate valuation technique. Subsidiary notes payable without embedded derivatives are accounted for
at amortized cost.
The majority of the Group’s subsidiaries have preferred shares and notes payable with embedded derivatives, which are
classified as current liabilities. When the Group has preferred shares and notes with embedded derivatives that qualify for
bifurcation, the Group has elected to account for the entire instrument as FVTPL after determining under IFRS 9 that the
instrument qualifies to be accounted for under such FVTPL method.
The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.
Equity Instruments Issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions,
in accordance with IAS 32:
1. They include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets
or financial liabilities with another party under conditions that are potentially unfavorable to the Group; and
2. Where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group’s own equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial instrument is classified as a financial liability. Where the instrument so
classified takes the legal form of the Group’s own shares, the amounts presented in the financial information for share capital
and merger reserve account exclude amounts in relation to those shares.
Changes in the fair value of liabilities at FVTPL are recognized in Net finance income (costs) in the Consolidated Statements
of Comprehensive Income/(Loss) as applicable.
IFRS 15, Revenue from Contracts with Customers
The standard establishes a five-step principle-based approach for revenue recognition and is based on the concept of
recognizing an amount that reflects the consideration for performance obligations only when they are satisfied and the control
of goods or services is transferred.
The majority of the Group’s contract revenue is generated from licenses and services, some of which are part of
collaboration arrangements.
138 PureTech Health plc Annual report and accounts 2020
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 recognized at either a point-in-time
or over time, depending on the nature of the services and existence of acceptance clauses.
The Group accounts for agreements that meet the definition of IFRS 15 by applying the following five step model:
•
•
Identify the contract(s) with a customer – A contract with a customer exists when (i) the Group enters into an enforceable
contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies
the payment terms related to those goods or services, (ii) the contract has commercial substance and, (iii) the Group
determines that collection of substantially all consideration for goods or services that are transferred is probable based on
the customer’s intent and ability to pay the promised consideration.
Identify the performance obligations in the contract – Performance obligations promised in a contract are identified based
on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the
customer can benefit from the good or service either on its own or together with other resources that are readily available
from third parties or from the Group, and are distinct in the context of the contract, whereby the transfer of the goods or
services is separately identifiable from other promises in the contract.
• Determine the transaction price – The transaction price is determined based on the consideration to which the Group will
be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes
variable consideration, the Group estimates the amount of variable consideration that should be included in the transaction
price utilizing either the expected value method or the most likely amount method depending on the nature of the variable
consideration. Variable consideration is included in the transaction price if, in the Group’s judgement, it is probable that a
significant future reversal of cumulative revenue under the contract will not occur.
• Allocate the transaction price to the performance obligations in the contract – If the contract contains a single performance
obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple
performance obligations require an allocation of the transaction price to each performance obligation based on a relative
standalone selling price basis.
• Recognize revenue when (or as) the Group satisfies a performance obligation – The Group satisfies performance obligations
either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related
performance obligation is satisfied by transferring a promised good or service to a customer.
Revenue generated from services agreements (typically where licenses and related services were combined into one
performance obligation) is determined to be recognized over time when it can be determined that the services meet one of
the following: (a) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the
entity performs; (b) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or
enhanced; or (c) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an
enforceable right to payment for performance completed to date.
It was determined that the Group has contracts that meet criteria (a), since the customer simultaneously receives and consumes
the benefits provided by the Company’s performance as the Company performs. Therefore revenue is recognized over time
using the input method based on costs incurred to date as compared to total contract costs. The Company believes that in
research and development service type agreements using costs incurred to date represents the most faithful depiction of the
entity’s performance towards complete satisfaction of a performance obligation.
Revenue from licenses that are not part of a combined performance obligation are recognized at a point in time due to the
licenses relating to intellectual property that has significant stand-alone functionality and as such represent a right to use the
entity’s intellectual property as it exists at the point in time at which the license is granted.
Amounts that are receivable or have been received per contractual terms but have not been recognized as revenue since
performance has not yet occurred or has not yet been completed are recorded as deferred revenue. The Company classifies
as non-current deferred revenue amounts received for which performance is expected to occur beyond one year or one
operating cycle.
Grant Income
The Company recognizes grants from governmental agencies as grant income in the Consolidated Statement of
Comprehensive Income/(Loss), gross of the expenditures that were related to obtaining the grant, when there is reasonable
assurance that the Company will comply with the conditions within the grant agreement and there is reasonable assurance that
payments under the grants will be received. The Company evaluates the conditions of each grant as of each reporting date to
ensure that the Company has reasonable assurance of meeting the conditions of each grant arrangement and it is expected
that the grant payment will be received as a result of meeting the necessary conditions.
The Company submits qualifying expenses for reimbursement after the Company has incurred the research and development
expense. The Company records an unbilled receivable upon incurring such expenses. In cases were grant income is received
prior to the expenses being incurred or recognized, the amounts received are deferred until the related expense is incurred
and/or recognized. Grant income is recognized in the Consolidated Statements of Comprehensive Income/(Loss) over the
periods in which the Company recognizes the related reimbursable expense for which the grant is intended to compensate.
PureTech Health plc Annual report and accounts 2020 139
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 (“U.S. dollars”). The functional currency of
virtually all members of the Group is the U.S. dollar. The assets and liabilities of a previously held subsidiary were translated
to U.S. dollars at the exchange rate prevailing on the balance sheet date and revenues and expenses were translated at the
average exchange rate for the period. Foreign exchange differences resulting from the translation of this subsidiary were
reported in the Consolidated Statements of Comprehensive Income/(Loss) in Other Comprehensive Income/(Loss).
Foreign Currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign
exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at
the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on remeasurement are recognized in the Consolidated Statement of Comprehensive Income/
(Loss) except for qualifying cash flow hedges, which are recognized directly in other comprehensive income. The Company
did not have qualifying cash flow hedges during the reported periods. Non-monetary assets and liabilities that are measured
in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments with original maturities of three months or less.
Share Capital
Ordinary shares are classified as equity. The Group is comprised of share capital, share premium, merger reserve, other
reserve, translation reserve, and accumulated deficit.
Property and Equipment
Property and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Cost
includes expenditures that are directly attributable to the acquisition of the asset. Assets under construction represent
leasehold improvements and machinery and equipment to be used in operations or research and development activities.
When parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major
components) of property and equipment. Depreciation is calculated using the straight-line method over the estimated useful
life of the related asset:
Laboratory and manufacturing equipment
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 amortization, if amortization has commenced, and impairment losses. Intangible assets with finite lives are
amortized from the time they are available for use. Amortization is calculated using the straight-line method to allocate the
costs of patents and licenses over their estimated useful lives.
Research and development intangible assets, which are still under development and have accordingly not yet obtained
marketing approval, are presented as In-Process Research and Development (IPR&D). IPR&D is not amortized since it is not yet
available for its intended use, but it is evaluated for potential impairment on an annual basis or more frequently when facts and
circumstances warrant.
Impairment
Impairment of Non-Financial Assets
The Group reviews the carrying amounts of its property and equipment and intangible assets at each reporting date to
determine whether there are indicators of impairment. If any such indicators of impairment exist, then an asset’s recoverable
amount is estimated. The recoverable amount is the higher of an asset’s fair value less cost of disposal and value in use.
The Company’s IPR&D intangible assets are not yet available for their intended use. As such, they are to be tested for
impairment at least annually.
An impairment loss is recognized when an asset’s carrying amount exceeds its recoverable amount. For the purposes of
impairment testing, assets are grouped at the lowest levels for which there are largely independent cash flows. If a non-
financial asset instrument is impaired, an impairment loss is recognized in the Consolidated Statements of Comprehensive
Income/(Loss).
The Company did not record any impairment of such assets during the reported periods.
Investments in associates are considered impaired if, and only if, objective evidence indicates that one or more events, which
occurred after the initial recognition, have had an impact on the future cash flows from the net investment and that impact
can be reliably estimated. If an impairment exists the Company measures an impairment by comparing the carrying value of
the net investment in the associate to its recoverable amount and recording any excess as an impairment loss. See Note 6 for
impairment recorded in respect of an investment in associate during the year ended December 31, 2019.
140 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Employee Benefits
Short-Term Employee Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and expensed as the related service
is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive
obligation due to past service provided by the employee, and the obligation can be estimated reliably.
Defined Contribution Plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate
entity and has no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution
plans are recognized as an employee benefit expense in the periods during which related services are rendered by employees.
Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in future payments is available.
Share-based Payments
Share-based payment arrangements, in which the Group receives goods or services as consideration for its own equity
instruments, are accounted for as equity-settled share-based payment transactions in accordance with IFRS 2, regardless of
how the equity instruments are obtained by the Group. The grant date fair value of employee share-based payment awards is
recognized as an expense with a corresponding increase in equity over the requisite service period related to the awards. The
fair value is measured using an option pricing model, which takes into account the terms and conditions of the options granted.
The amount recognized as an expense is adjusted to reflect the actual number of awards for which the related service and non-
market performance conditions are expected to be met, such that the amount ultimately recognized as an expense is based on
the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-
based payment awards with market conditions, the grant date fair value is measured to reflect such conditions and there is no
true-up for differences between expected and actual outcomes.
Development Costs
Expenditures on research activities are recognized as incurred in the Consolidated Statements of Comprehensive Income/
(Loss). In accordance with IAS 38 development costs are capitalized only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable, the Group can demonstrate
its ability to use or sell the intangible asset, the Group intends to and has sufficient resources to complete development
and to use or sell the asset, and it is able to measure reliably the expenditure attributable to the intangible asset during its
development. The point at which technical feasibility is determined to have been reached is when regulatory approval has
been received where applicable. Management determines that commercial viability has been reached when a clear market and
pricing point have been identified, which may coincide with achieving meaningful recurring sales. Otherwise, the development
expenditure is recognized as incurred in the Consolidated Statements of Comprehensive Income/(Loss). As of balance sheet
date the Group has not capitalized any development costs.
Provisions
A provision is recognized in the Consolidated Statements of Financial Position when the Group has a present legal or
constructive obligation due to a past event that can be reliably measured, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects risks specific to the liability.
Leases
On January 1, 2019, the Group adopted a new accounting standard for leases. The Group leases real estate and equipment
for use in operations. These leases generally have lease terms of 1 to 10 years. The Group includes options that are reasonably
certain to be exercised as part of the determination of the lease term. The group determines if an arrangement is a lease at
inception of the contract in accordance with guidance detailed in the new standard. ROU assets represent the Group’s right to
use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the
lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease
payments over the lease term. As most of our leases do not provide an implicit rate, we use the Group’s estimated incremental
borrowing rate based on information available at commencement date in determining the present value of future payments.
The Group’s operating leases are virtually all leases from real estate.
When adopting IFRS 16 on January 1, 2019, the Group has applied a modified retrospective approach by measuring the right-
of-use asset at an amount equal to the lease liability at the date of transition and therefore comparative information was not
restated. Upon transition, the Group has applied the following practical expedients:
• excluding initial direct costs from the right-of-use assets;
• using hindsight when assessing the lease term; and
• not reassessing whether a contract is or contains a lease.
PureTech Health plc Annual report and accounts 2020 141
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
The Group has elected to account for lease payments as an expense on a straight-line basis over the life of the lease for:
• Leases with a term of 12 months or less and containing no purchase options; and
• Leases where the underlying asset has a value of less than $5,000.
The lease liability was initially measured at the present value of the lease payments that were not paid at the transition date,
discounted by using the Group’s incremental borrowing rate as the rate implicit in the lease was not readily determinable.
The right-of-use asset is depreciated on a straight-line basis and the lease liability will give rise to an interest charge.
The financial impact of adopting IFRS 16 on the Group was primarily as follows:
Right of use asset
Lease liability
Accumulated deficit
January 1, 2019
$000s
10,353
10,995
999
Further information regarding the subleases, right of use asset and lease liability can be found in Note 21.
Finance Income and Finance Costs
Finance income is comprised of income on funds invested in U.S. treasuries, income on money market funds and to a much
lesser extent income on a finance lease. Financing income is recognized as it is earned. Finance costs comprise mainly of loan
and lease liability interest expenses and the changes in the fair value of warrant and financial liabilities carried at FVTPL.
Taxation
Tax on the profit or loss for the year comprises current and deferred income tax. In accordance with IAS 12, tax is recognized in
the Consolidated Statements of Comprehensive Income/(Loss) except to the extent that it relates to items recognized directly
in equity.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized due to temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognized for unused tax losses,
unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using
tax rates enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a
net basis.
Deferred taxes are recognized in Consolidated Statements of Comprehensive Income/(Loss) except to the extent that they
relate to items recognized directly in equity or in other comprehensive income.
Fair Value Measurements
The Group’s accounting policies require that certain financial and non-financial assets and certain financial liabilities be
measured at their fair value.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Fair values
are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
142 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the
change has occurred.
The carrying amount of cash and cash equivalents, accounts receivable, restricted cash, deposits, accounts payable, accrued
expenses and other current liabilities in the Group’s Consolidated Statements of Financial Position approximates their fair value
because of the short maturities of these instruments.
Operating Segments
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating
decision maker (“CODM”). The CODM reviews discrete financial information for the operating segments in order to assess
their performance and is responsible for making decisions about resources allocated to the segments. The CODM has been
identified as the Group’s Directors.
Prior period reclassification
During 2019 management identified that for the year ended December 31, 2018, Gain/(loss) on investments held at fair value
of $14.3 million was incorrectly classified as Finance costs – subsidiary preferred shares. As a result, in the 2019 financial
statements a prior year reclassification has been made in the Consolidated Statement of Comprehensive Income/(Loss) for the
year ended December 31, 2018.
2. New Standards and Interpretations Not Yet Adopted
A number of new standards, interpretations, and amendments to existing standards are effective for annual periods
commencing on or after January 1, 2021 and have not been applied in preparing the consolidated financial information.
The Company’s assessment of the impact of these new standards and interpretations is set out below.
Effective January 1, 2023, the definition of accounting estimates has been amended as an amendment to IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors. The amendments clarify how companies should distinguish changes
in accounting policies from changes in accounting estimates. The distinction is important because changes in accounting
estimates are applied prospectively only to future transactions and future events, but changes in accounting policies are
generally also applied retrospectively to past transactions and other past events. This amendment is not expected to have
an impact on the Company’s financial statements.
Effective January 1, 2023, IAS 1 has been amended to clarify that liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the
entity or events after the reporting date. The Company does not expect this amendment will have a material impact on its
financial statements.
None of the other new standards, interpretations, and amendments are applicable to the Company’s financial statements
and therefore will not have an impact on the Company.
PureTech Health plc Annual report and accounts 2020 143
Financial statements Notes to the Consolidated Financial Statements — continued
3. Revenue
Revenue recorded in the Consolidated Statement of Comprehensive Income/(Loss) consists of the following:
For the years ended December 31,
Contract revenue
Grant income
Total revenue
2020
$000s
8,341
3,427
11,768
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.
Primarily all of the Company’s contracts as of December 31, 2020, 2019 and 2018 were determined to have a single
performance obligation which consists of a combined deliverable of license to intellectual property and research and
development services. Therefore, for such contracts, revenue is recognized over time based on the inputs method which is
a faithful depiction of the transfer of goods and services. Progress is measured based on costs incurred to date as compared
to total projected costs. Payments for such contracts are primarily made up front at the inception of the contract (or upon
achieving a milestone event) and to a much lesser extent payments are made periodically over the contract term.
During the year ended December 31, 2020, the Company received a $2.0 million milestone payment from Karuna Therapeutics,
Inc. following initiation of its KarXT Phase 3 clinical study pursuant to the Exclusive Patent License Agreement between
PureTech and Karuna. This milestone was recognized as revenue during the year ended December 31, 2020
Disaggregated Revenue
The Group disaggregates contract revenue in a manner that depicts how the nature, amount, timing, and uncertainty
of revenue and cash flows are affected by economic factors. The Group disaggregates revenue based on contract
revenue or grant revenue, and further disaggregates contract revenue based on the transfer of control of the underlying
performance obligations.
Timing of contract revenue recognition
Transferred at a point in time – Licensing Income1
Transferred over time2
2020
$000s
2,054
6,286
8,341
2019
$000s
—
8,688
8,688
2018
$000s
12,000
4,371
16,371
1 2020 – Attributed to Parent Company and Other; 2018 – attributed to Controlled Founded Entities segment. See note 4, Segment information.
2 2020 – Attributed to Internal segment ($3,560 thousand) and Controlled founded entities segment ($2,726 thousand); 2019 – Attributed to Internal segment ($6,064 thousand),
Controlled founded entities segment ($2,487 thousand) and Parent Company and Other ($137 thousand); 2018 – Attributed to Internal segment ($2,110 thousand), Controlled
founded entities segment ($2,233 thousand) and Parent Company and Other ($29 thousand). See Note 4, Segment Information.
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.
Karuna Therapeutics, Inc.
2020
$000s
—
—
1,518
896
2,043
1,736
2,000
8,193
2019
$000s
—
—
4,973
1,433
1,091
1,013
—
8,510
2018
$000s
12,000
1,415
—
—
—
—
—
13,415
144 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
3.
Revenue — continued
An estimation uncertainty arises due to management’s application of the inputs method in recognizing revenue overtime.
In doing so, the total cost to satisfy the performance obligation includes a significant estimate by management in its budgets
and projected cash flows. The sensitivity of this calculation for the years ended December 31, 2020, 2019 and 2018 is
detailed below:
For the year ended December 31, 2020
Budgeted costs to complete
Revenue
For the year ended December 31, 2019
Budgeted costs to complete
Revenue
For the year ended December 31, 2018
Budgeted costs to complete
Revenue
+10%
(535)
(10)%
654
+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. 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
2020
$000s
711
0
1,472
2019
$000s
1,699
1,220
5,474
During the year ended December 31, 2020, $5.3 million of revenue was recognized on deferred revenue outstanding at
December 31, 2019.
Remaining performance obligations represent the transaction price of unsatisfied or partially satisfied performance obligations
within contracts with an original expected contract term that is greater than one year and for which fulfillment of the contract
has started as of the end of the reporting period. The aggregate amount of transaction consideration allocated to remaining
performance obligations as of December 31, 2020 was $1.7 million. The following table summarizes when the Group expects
to recognize the remaining performance obligations as revenue. The Group will recognize revenue associated with these
performance obligations as transfer of control occurs:
Remaining Performance Obligation
Less than
1 Year
1,713
Greater than
1 Year
—
Total
1,713
PureTech Health plc Annual report and accounts 2020 145
Financial statements Notes to the Consolidated Financial Statements — continued
4.
Segment Information
Basis for Segmentation
The Directors are the Group’s strategic decision-makers. The Group’s operating segments are reported based on the financial
information provided to the Directors at least quarterly for the purposes of allocating resources and assessing performance.
The Group has determined that each entity is representative of a single operating segment as the Directors monitor the
financial results at this level. When identifying the reportable segments the Group has determined that it is appropriate to
aggregate multiple operating segments into a single reportable segment given the high level of operational and financial
similarities across the entities. The Group has identified four reportable segments which are outlined below. Substantially,
all of the revenue and profit generating activities of the Group are generated within the U.S. and accordingly, no geographical
disclosures are provided.
During the year ended December 31, 2019, the Company deconsolidated three of its subsidiaries which resulted in a change
to the composition of its reportable segments. The Company has revised in the 2019 financial statements the 2018 financial
information to conform to the presentation as of and for the period ending December 31, 2019. The change in segments
reflects how the Company’s Board of Directors reviews the Group’s results, allocates resources and assesses performance.
Internal
The Internal segment (the “Internal segment”), is advancing Wholly Owned Programs designed to harness key immunological,
fibrotic and lymphatic system mechanisms. These novel classes of immunomodulatory drugs are designed to treat serious
diseases, including lung dysfunction, immuno-oncology, lymphatic, neurological and neuropsychological disorders. The Internal
segment is comprised of the technologies that are wholly owned and will be advanced through either PureTech Health funding
or non-dilutive sources of financing in the near-term. The operational management of the Internal segment is conducted by
the PureTech Health team, which is responsible for the strategy, business development, and research and development. As of
December 31, 2020, this segment included PureTech LYT (formerly Ariya Therapeutics) and PureTech LYT-100.
Controlled Founded Entities
The Controlled Founded Entity segment (the “Controlled Founded Entity segment”) is comprised of the Group’s subsidiaries
that are currently consolidated operational subsidiaries that either have, or have plans to hire, independent management teams
and currently have already raised, or are currently in the process of raising, third-party dilutive capital. These subsidiaries have
active research and development programs and either have entered into or plan to seek a strategic partnership with an equity
or debt investment partner, who will provide additional industry knowledge and access to networks, as well as additional
funding to continue the pursued growth of the company. As of December 31, 2020, this segment included Alivio Therapeutics,
Inc., Entrega Inc., Follica Incorporated, Sonde Health Inc., and Vedanta Biosciences, Inc.
Non-Controlled Founded Entities
The Non-Controlled Founded Entities segment (the “Non-Controlled Founded Entities segment”) is comprised of the
entities in respect of which PureTech Health (i) no longer holds majority voting control as a shareholder and no longer has
the right to elect a majority of the members of the subsidiaries’ Board of Directors. Upon deconsolidation of an entity the
segment disclosure is restated to reflect the change on a retrospective basis, as this constitutes a change in the composition
of its reportable segments. The Non-Controlled Founded Entities segment included Akili Interactive Labs, Inc. (“Akili”), Vor
Biopharma Inc. (“Vor”), Karuna Therapeutics, Inc. (“Karuna”), and Gelesis Inc. (“Gelesis”).
The Non-Controlled Founded Entities segment incorporates the operational results of the aforementioned entities to the date
of deconsolidation. Following the date of deconsolidation, the Company accounts for its investment in each entity at the parent
level, and therefore the results associated with investment activity following the date of deconsolidation is included in the
Parent Company and Other segment (the “Parent Company and Other segment”).
Parent Company and Other Segment
The Parent Company and Other segment includes activities that are not directly attributable to the operating segments,
such as the activities of the Parent, corporate support functions and certain research and development support functions
that are not directly attributable to a strategic business segment as well as the elimination of intercompany transactions. This
segment also captures the accounting for the Company’s holdings in entities for which control has been lost, which is inclusive
of the following items: gain on deconsolidation, gain or loss on investments held at fair value, gain on loss of significant
influence, and the share of net income/(loss) of associates accounted for using the equity method. As of December 31, 2020,
this segment included PureTech Health plc, PureTech Health LLC, PureTech Management, Inc., PureTech Securities Corp. and
PureTech Securities II Corp., as well as certain other dormant, inactive and shell entities.
146 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
4.
Segment Information — continued
Information About Reportable Segments:
Consolidated Statements of Comprehensive
Income/(Loss)
Contract revenue
Grant revenue
Total revenue
General and administrative expenses
Research and development expenses
Total operating expense
Other income/(expense):
Gain/(loss) on investments held at fair value
Loss realized on sale of investments
Gain/(loss) on disposal of assets
Other income/(expense)
Total other income/(expense)
Net finance income/(costs)
Share of net income/(loss) of associates accounted
for using the equity method
Income/(loss) before taxes
Income/(loss) before taxes pre IFRS 9 fair
value accounting, finance costs – subsidiary
preferred shares, share-based payment expense,
depreciation of tangible assets and amortization
of intangible assets
Finance income/(costs) – subsidiary preferred shares
Finance income/(costs) – IFRS 9 fair
value accounting
Share-based payment expense
Depreciation of tangible assets
Amortization of ROU assets
Amortization 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)
Internal
$000s
3,560
32
3,592
(2,112)
(41,583)
(43,695)
—
—
(15)
—
(15)
19
2,726
3,395
6,121
(15,061)
(40,043)
(55,104)
—
—
(15)
100
85
(5,204)
—
(40,098)
—
(54,102)
(36,770)
—
—
(2,491)
(838)
—
—
—
(40,098)
—
(40,098)
(44,181)
—
(4,351)
(2,822)
(1,560)
(1,186)
(1)
(1)
(54,103)
—
(54,103)
(40,098)
—
(52,701)
(1,402)
87,917
117,964
(30,047)
68,731
212,542
(143,812)
2020
Non-
Controlled
Founded
Entities
$000s
Controlled
Founded
Entities
$000s
Parent
Company &
Other
$000s
Consolidated
$000s
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,054
—
2,054
(32,267)
(234)
(32,500)
232,674
(54,976)
—
965
178,662
(930)
(34,117)
113,170
121,644
—
—
(5,405)
(1,547)
(1,523)
—
(14,400)
98,769
469
99,238
99,253
(15)
8,341
3,427
11,768
(49,440)
(81,859)
(131,299)
232,674
(54,976)
(30)
1,065
178,732
(6,115)
(34,117)
18,969
40,694
—
(4,351)
(10,718)
(3,945)
(2,709)
(1)
(14,401)
4,568
469
5,037
6,454
(1,417)
833,347
5,949
827,397
989,994
336,455
653,539
PureTech Health plc Annual report and accounts 2020 147
Financial statements Notes to the Consolidated Financial Statements — continued
4.
Segment Information — continued
Consolidated Statements of Comprehensive
Income/(Loss)
Contract revenue
Grant revenue
Total revenue
General and administrative expenses
Research and development expenses
Total operating 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
Impairment of investment in associate
Income/(loss) before taxes
(Loss)/income before taxes pre IFRS 9 fair
value accounting, finance costs – subsidiary
preferred shares, share-based payment expense,
depreciation of tangible assets and amortization of
intangible assets
Finance income/(costs) – subsidiary preferred shares
Finance income/(costs) – IFRS 9 fair
value accounting
Share-based payment expense
Depreciation of tangible assets
Amortization of ROU assets
Amortization 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
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
127
(16,947)
—
—
(70,445)
(48,996)
107
(17,294)
(1,678)
(1,531)
(1,060)
7
(134)
(70,579)
—
(70,579)
(54,717)
(15,862)
41,612
132,935
(91,324)
—
—
—
(10,439)
(15,555)
(25,994)
—
—
—
—
—
—
(30,141)
—
—
(56,135)
(21,873)
(1,564)
(28,737)
(3,543)
(207)
(83)
(128)
(162)
(56,297)
(10)
(56,307)
137
—
137
(32,098)
(1,536)
(33,634)
264,409
(37,863)
(60)
445,582
(45)
672,023
941
30,791
(42,938)
627,320
8,688
1,119
9,807
(59,358)
(85,848)
(145,206)
264,409
(37,863)
(82)
445,582
121
672,167
(46,147)
30,791
(42,938)
478,474
640,298
(1)
547,540
(1,458)
(444)
(9,242)
(1,114)
(2,177)
—
(112,113)
515,207
—
515,207
(46,475)
(14,468)
(3,228)
(3,320)
(117)
(112,409)
366,065
(10)
366,055
(32,353)
(23,953)
515,207
—
421,133
(55,079)
—
—
—
881,952
145,768
736,184
941,178
290,779
650,399
Internal
$000s
6,064
15
6,079
(2,385)
(25,977)
(28,362)
—
—
17
—
—
17
—
—
—
(22,266)
(21,889)
—
—
(5)
(376)
—
4
—
(22,266)
—
(22,266)
(7,002)
(15,264)
17,614
12,076
5,538
148 PureTech Health plc Annual report and accounts 2020
Financial statements 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 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
Income/(loss) before taxes
(Loss)/income before taxes pre IAS 39 fair
value accounting, finance costs – subsidiary
preferred shares, share-based payment expense,
depreciation of tangible assets and amortization of
intangible assets
Finance income/(costs) – subsidiary preferred shares
Finance income/(costs) – IAS 39 fair
value accounting
Share-based payment expense
Depreciation of tangible assets
Amortization 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
Internal
$000s
2,110
86
2,195
(1,498)
(8,929)
(10,427)
—
—
—
—
—
—
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
—
(8,232)
—
(23,297)
—
(40,167)
(38,761)
—
5,516
(6,262)
(390)
(270)
(185)
(41,239)
—
(41,239)
(32,260)
(8,980)
(8,210)
—
—
(11)
(7)
(4)
—
(8,454)
—
(8,454)
(1,139)
(7,315)
2,984
13,366
(10,381)
(24,344)
—
5,341
(2,465)
(1,823)
(6)
(381)
(26,206)
(214)
(26,420)
(15,710)
(10,710)
15,603
60,992
(45,389)
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
(4,235)
(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)
21,155
25,918
(11,490)
(68,438)
(75,550)
(106)
22,632
(12,637)
(2,476)
(302)
(2,221)
(70,659)
(240)
(70,899)
(43,894)
(27,005)
35,934
202,161
(166,227)
387,240
(1,731)
388,970
441,761
274,787
166,973
The proportion of net assets shown above that is attributable to non-controlling interest is disclosed in Note 18.
PureTech Health plc Annual report and accounts 2020 149
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 were accounted for as shown below:
Investments held at fair value
Balance as of January 1, 2019
Deconsolidation of subsidiaries (Vor, Karuna and Gelesis (Note 6))
Reclassification of Karuna investment to investment in associate
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
Balance as of December 31, 2019 and January 1, 2020
Sale of Karuna shares
Sale of resTORbio shares
Loss realised on sale of investments
Cash purchase of Gelesis preferred shares (please refer to Note 6)
Cash purchase of Vor preferred shares
Gain/(loss) – fair value through profit and loss
Balance as of December 31, 2020 before allocation of share in associate loss to long-term interest
Share of associate loss allocated to long-term interest (please refer to Note 6)
Balance as of December 31, 2020 after allocation of share in associate loss to long-term interest2
$000’s
169,755
138,571
(118,006)
40,633
6,480
8,020
557,243
(9,295)
(78,496)
714,905
(347,538)
(3,048)
(54,976)
10,000
1,150
232,674
553,167
(23,006)
530,161
1 The net amount of these two items is a loss of $37.9 million which is reported on the line Gain/(loss) on investments held at fair value in the Consolidated Statements of
Comprehensive Income/(Loss).
2 Fair value of investments accounted for at fair value, does not take into consideration contribution from milestones that occurred after December 31, 2020, the value of the Group’s
consolidated Founded Entities (Vedanta, Follica, Sonde, Akili, Alivio, and Entrega), the Internal segment, or cash and cash equivalents.
Vor
Vor was founded by PureTech through an initial Series A-1 Preferred Shares financing and raised funds through issuance of
convertible notes. As of December 31, 2018, PureTech maintained control of Vor and the subsidiary’s financial results were fully
consolidated in the Group’s consolidated financial statements.
On February 12, 2019, Vor completed a Series A-2 Preferred Shares financing round with PureTech and several new third party
investors. The financing provided for the purchase of 62,819,866 shares of Vor Series A-2 Preferred Shares at the purchase price
of $0.40 per share.
As a result of the issuance of Series A-2 preferred shares to third-party investors, PureTech’s ownership percentage and
corresponding voting rights dropped from 79.5 percent to 47.5 percent, and PureTech simultaneously gave up control on Vor’s
Board of Directors, both of which triggered a loss of control over the entity. As of February 12, 2019, Vor was deconsolidated
from the Group’s financial statements, resulting in only the profits and losses generated by Vor through the deconsolidation
date being included in the Consolidated Statement of Comprehensive Income/(Loss). While the Company no longer controlled
Vor, it was concluded that PureTech still had significant influence over Vor by virtue of its large, albeit minority, ownership
stake and its continued representation on Vor’s Board of Directors. During the year ended December 31, 2019, the Company
recognized a $6.4 million gain on the deconsolidation of Vor, which was recorded to the Gain on the deconsolidation of
subsidiary line item in the Consolidated Statement of Comprehensive Income/(Loss).
As PureTech did not hold common shares in Vor upon deconsolidation and the preferred shares it holds do not have equity-
like features, the voting percentage attributable to common shares is nil. Therefore, PureTech had no basis to account for its
investment in Vor under IAS 28. The preferred shares held by PureTech fall under the guidance of IFRS 9 and are treated as a
financial asset held at fair value through the Consolidated Statement of Comprehensive Income/(Loss). The fair value of the
preferred shares at deconsolidation was $12.0 million.
During the year ended December 31, 2019, the Company recognized a gain of $0.6 million that was recorded on the line item
Gain/(loss) on investments held at fair value within the Consolidated Statement of Comprehensive Income/(Loss). Please refer
to Note 16 for information regarding the valuation of these instruments.
On February 12, 2020, PureTech participated in the second closing of Vor’s Series A-2 Preferred Share financing. For
consideration of $0.7 million, PureTech received 1,625,000 A-2 shares. On June 30, 2020, PureTech participated in the first
closing of Vor’s Series B Preferred Share financing. For consideration of $0.5 million, PureTech received 961,538 shares. Upon
the conclusion of such Vor financings PureTech no longer has significant influence over Vor. During the year ended December 31,
2020 PureTech recognized a fair value gain of $19.1 million in respect of its investment in Vor that was recorded in the line item
Gain/(loss) on investments held at fair value within the Consolidated Statement of Comprehensive Income/(Loss). Please refer
to Note 16 for information regarding the valuation of these instruments.
150 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value — continued
Gelesis
As of July 1, 2019, Gelesis was deconsolidated from the Group’s financial statements, resulting in only the profits and losses
generated by Gelesis through the deconsolidation date being included in the Group’s Consolidated Statement of Income/
(Loss). At the date of deconsolidation, PureTech recorded a $156.0 million gain on the deconsolidation of Gelesis, which was
recorded to the Gain on the deconsolidation of subsidiary line item in the Consolidated Statement of Income/(Loss). The
preferred shares and warrants held by PureTech fall under the guidance of IFRS 9 and are treated as financial assets held at fair
value, where changes to the fair value of the preferred shares and warrant are recorded through the Consolidated Statement of
Income/(Loss). The fair value of the preferred shares and warrants at deconsolidation was $49.2 million. Please refer to Note 6
for information regarding the Company’s investment in Gelesis as an associate.
On August 12, 2019, Gelesis issued a convertible promissory note to the Company in the amount of $2.0 million. On October
7, 2019, Gelesis issued an amended and restated convertible note (the “Gelesis Note”) to the Company in the principal amount
of up to $6.5 million. The Gelesis Note was payable in installments, with $2.0 million of the note drawn down upon execution of
the original note in August 2019 and an additional $3.3 million and $1.2 million drawn down on October 7, 2019 and November 5,
2019, respectively. The Gelesis Note was convertible upon the occurrence of Gelesis’ next qualified equity financing, or at
the demand of the Company at any date after December 31, 2019. The Gelesis Note fell under the guidance of IFRS 9 and
was treated as a financial asset held at fair with all movements to the value of the note recorded through the Consolidated
Statement of Income/(Loss).
On December 5, 2019, Gelesis closed its Series 3 Growth Preferred Stock financing, at which point all outstanding principal
and interest under the Gelesis Note converted into shares of Series 3 Growth Preferred Stock. In addition to the shares issued
upon conversion of the Gelesis Note, PureTech purchased $8.0 million of Series 3 Growth Preferred Stock in the December
financing. On April 1, 2020, PureTech participated in the 2nd closing of Gelesis’s Series 3 Growth Preferred Share financing.
For consideration of $10.0 million, PureTech received 579,038 Series 3 Growth shares.
During the years ended December 31, 2020 and 2019, the Company recognized in respect of the investments in Gelesis held
at fair value a gain of $7.1 million and a loss of $18.7 million, respectively, that were recorded in the line item Gain/(loss) on
investments held at fair value within the Consolidated Statements of Comprehensive Income/(Loss). The loss recorded in 2019
was primarily as a result of the Gelesis Series 3 Growth financing, which was executed with terms that resulted in a decrease in
fair value across all other classes of preferred shares. Additionally, due to the equity method based investment in Gelesis being
reduced to zero, the Company allocated a portion of its share in the net loss in Gelesis for the year ended December 31, 2020,
totaling $23.0 million, to its preferred share investments in Gelesis, which are considered to be long-term interests in Gelesis.
Please refer to Note 16 for information regarding the valuation of these instruments.
Karuna
Karuna was founded by PureTech and raised funding through Preferred Share financings as well as convertible note issuances.
As of December 31, 2018, PureTech maintained control of Karuna and Karuna’s financial statements were fully consolidated in
the Group’s consolidated financial statements.
On March 15, 2019, Karuna completed the closing of a Series B Preferred Share financing with PureTech and several new third
party investors. The financing provided for the purchase of 5,285,102 shares of Karuna Series B Preferred Shares at a purchase
price of $15.14 per share.
As a result of the issuance of the preferred shares to third-party investors, PureTech’s ownership percentage and corresponding
voting rights related to Karuna dropped from 70.9 percent to 44.3 percent, and PureTech simultaneously lost control over
Karuna’s Board of Directors, both of which triggered a loss of control over the entity. As of March 15, 2019, Karuna was
deconsolidated from the Group’s financial statements, resulting in only the profits and losses generated by Karuna through the
deconsolidation date being included in the Group’s Consolidated Statement of Comprehensive Income/(Loss). At the date of
deconsolidation, PureTech recorded a $102.0 million gain on the deconsolidation of Karuna, which was recorded to the Gain
on the deconsolidation of subsidiary line item in the Consolidated Statement of Comprehensive Income/(Loss). While the
Company no longer controls Karuna, it was concluded that PureTech still had significant influence over Karuna by virtue of its
large, albeit minority, ownership stake and its continued representation on Karuna’s Board of Directors. PureTech still had the
power to participate in the financial and operating policy decisions of the entity, although it did not control these policies. As
PureTech had significant influence over Karuna, the entity was accounted for as an associate under IAS 28.
Upon the date of deconsolidation, PureTech held both preferred and common shares in Karuna and a warrant issued by Karuna
to PureTech. The preferred shares and warrant held by PureTech fell under the guidance of IFRS 9 and were treated as financial
assets held at fair value, and all movements to the value of preferred shares held by PureTech were recorded through the
Consolidated Statement of Comprehensive Income/(Loss), in accordance with IFRS 9. The fair value of the preferred shares and
warrant at deconsolidation was $72.4 million. Subsequent to deconsolidation, PureTech purchased an additional $5.0 million of
Karuna Series B Preferred shares.
Due to the immaterial investment in common shares and overwhelmingly large losses by Karuna, the common share investment
accounted for under the equity method was remeasured to nil immediately following both the deconsolidation and the
exercise of the warrant in the first half of 2019.
PureTech Health plc Annual report and accounts 2020 151
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value — continued
On June 28, 2019, Karuna priced its IPO. PureTech’s ownership percentage and corresponding voting rights related to Karuna
dropped from 44.3 percent percent to 31.6 percent; however, PureTech retained significant influence due to its continued
presence on the board and its large, albeit minority, equity stake in the company. Upon completion of the IPO, the Karuna
preferred shares held by PureTech converted to common shares. In light of PureTech’s common share holdings in Karuna
and corresponding voting rights, PureTech had re-established a basis to account for its investment in Karuna under IAS 28.
The preferred shares investment held at fair value was therefore reclassified to investment in associate upon completion
of the conversion. During the year ended December 31, 2019 and up to June 28, 2019, the Company recognized a gain of
$40.6 million that was recorded on the line item Gain on investments held at fair value within the Consolidated Statement
of Comprehensive Income/(Loss) related to the preferred shares that increased in value between the date of deconsolidation
and the date of Karuna’s IPO.
As of December 2, 2019 it was concluded that the Company no longer exerted significant influence over Karuna owing to
the resignation of the PureTech designee from Karuna’s board of directors, with PureTech retaining no ability to reappoint
representation. Furthermore, PureTech is not involved in any manner, or has any influence, on the management of Karuna,
or on any of its decision making processes and has no ability to do so. As such, PureTech lost the power to participate in
the financial and operating policy decisions of Karuna. As a result, Karuna is no longer deemed an Associate and does not
meet the scope of equity method accounting, resulting in the investment being accounted for as an investment held at fair
value. As of December 2, 2019 the Company’s interest in Karuna was 28.4 percent. For the period of June 28, 2019 through
December 2, 2019, PureTech’s investment in Karuna was subject to equity method accounting. In accordance with IAS 28,
the Company’s investment was adjusted by the share of losses generated by Karuna (weighted average of 31.4 percent based
on common stock ownership interest), which resulted in a net loss of associates accounted for using the equity method of
$6.3 million during the year ended December 31, 2019.
Upon PureTech’s loss of significant influence, the investment in Karuna was reclassified to an investment held at fair value.
This change led PureTech to recognize a gain on loss of significant influence of $445.6 million that was recorded to the
Consolidated Statement of Comprehensive Income/(Loss) on the line item Gain on loss of significant influence during the
year ended December 31, 2019. The investment in Karuna after the recording of the gain on loss of significant influence was
$557.2 million, which was reclassified from Investments in associates to Investments held at fair value. Additionally, from
December 2, 2019 PureTech recorded a $0.7 million loss on the line item Gain/(loss) on investments held at fair value within
the Consolidated Statement of Comprehensive Income/(Loss) for the year ended December 31, 2019.
On January 22, 2020, PureTech sold 2,100,000 shares of Karuna common shares for aggregate proceeds of $200.9 million.
On May 26, 2020, PureTech sold an additional 555,500 Karuna common shares for aggregate proceeds of $45.0 million. On
August 26, 2020, PureTech sold 1,333,333 common shares of Karuna for aggregate proceeds of $101.6 million. As a result of
the sales, Puretech recorded a loss of $54.8 million attributable to blockage discount included in the sales price, to the line
item Loss Realized on Sale of Investment within the Consolidated Statement of Comprehensive Income/(Loss). Additionally,
during the year ended December 31, 2020 PureTech recognized a fair value gain of $191.2 million in respect of its investment
in Karuna that was recorded in the line item Gain/(loss) on investments held at fair value within the Consolidated Statement
of Comprehensive Income/(Loss). As of December 31, 2020 PureTech held a 12.6 percent interest in Karuna. Please refer to
Note 16 for information regarding the valuation of these instruments.
Akili
On May 8, 2018, Akili completed the first closing of a Series C Preferred Stock financing in which PureTech Health did not
invest. As a result of the issuance of the preferred shares to third-party investors, following the first close of the Series C
financing, PureTech’s ownership percentage and corresponding voting rights related to Akili dropped from 61.8 percent to
41.9 percent, triggering a loss of control over the entity. As of May 2018, Akili was deconsolidated from the Group’s financial
statements, resulting in only the profits and losses generated by Akili through May 2018 being included in the Group’s
Consolidated Statements of Comprehensive Income/(Loss). As a result of the deconsolidation, PureTech recognized a
$41.7 million gain on the deconsolidation during the year ended December 31, 2018, which was recorded to the Consolidated
Statement of Comprehensive Income/(Loss) on the line item Gain on the deconsolidation of subsidiary.
As PureTech did not hold common shares in Akili upon deconsolidation and the preferred shares it holds do not have equity-
like features, the voting percentage attributable to common shares is nil. Therefore, PureTech had no basis to account for
its investment in Akili under IAS 28. The preferred shares held by PureTech Health fall under the guidance of IFRS 9 and are
treated as a financial asset held at fair value and all movements to the value of the preferred shares is recorded through the
Consolidated Statements of Comprehensive Income/(Loss), in accordance with IFRS 9.
During the years ended December 31, 2020 and 2019, the Company recognized a gain of $14.4 million and $11.5 million,
respectively, that was recorded in the line item Gain/(loss) on investments held at fair value within the Consolidated Statements
of Comprehensive Income/(Loss) in respect of PureTech’s investment in Akili. Please refer to Note 16 for information regarding
the valuation of these instruments.
152 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value — continued
resTORbio
On January 26, 2018, resTORbio, Inc., closed its initial public offering. Prior to the resTORbio IPO, PureTech Health recorded
a loss of $14.3 million during the year ended December 31, 2018 to the Consolidated Statement of Comprehensive Income/
(Loss) within Gain/(Loss) on investments held at Fair Value to adjust the fair value related to its resTORbio Series A Preferred
Share investment. Upon completion of the public offering, the resTORbio Series A Preferred Shares held by PureTech Health
converted to common shares. In light of PureTech’s common shares holdings in resTORbio and corresponding voting rights,
the preferred shares investment held at fair value was reclassified to investment in associate upon the completion of the
conversion.
For the period of January 1, 2018 through November 5, 2018, PureTech’s investment in resTORbio was subject to equity
method accounting. In accordance with IAS 28, PureTech’s investment was adjusted by the share of profits and losses
generated by resTORbio (34.9 percent based on common stock ownership interest) in that period, which resulted in a net loss
from associates of $11.5 million recorded to the Consolidated Statement of Comprehensive Income/(Loss) in the line item Share
of net loss of associates during the year ended December 31, 2018.
As of November 6, 2018, it was that concluded the Company no longer exerted significant influence over resTORbio, as
PureTech lost the power to participate in the financial and operating policy decisions of resTORbio. As a result, resTORbio
was no longer deemed an Associate and did not meet the scope of equity method accounting, resulting in the investment
being accounted for as an investment held at fair value. This change led PureTech to recognize a gain on loss of significant
influence of $10.3 million that was recorded to the Consolidated Statement of Comprehensive Income/(Loss) on the line
item Gain on loss of significant influence during the year ended December 31, 2018. Additionally, PureTech recorded a
loss of $33.0 million for the adjustment to fair value in connection with its investment in resTORbio to the Consolidated
Statement of Comprehensive Income/(Loss) on the line item Gain/(loss) on investments held at fair value during the year
ended December 31, 2018.
On November 15, 2019, resTORbio announced that top line data from the Protector 1 Phase 3 study evaluating the safety and
efficacy of RTB101 in preventing clinically symptomatic respiratory illness in adults age 65 and older, did not meet its primary
endpoint and the Company has stopped the development of RTB101 in this indication. As a result of ceasing the development
of RTB101, resTORbio’s share price witnessed a decline in price. In November and December 2019, PureTech Health sold
7,680,700 common shares of resTORbio for aggregate proceeds of $9.3 million. Immediately following the sale of common
shares, PureTech Health held 2,119,696 common shares, or 5.8 percent, of resTORbio. During the year ended December 31,
2019 PureTech recorded a loss of $71.9 million for the adjustment to fair value of its investment in resTORbio to the
Consolidated Statement of Comprehensive Income/(Loss) in the line item Gain/(loss) on investments held at fair value.
On April 30, 2020, PureTech sold its remaining 2,119,696 resTORbio common shares, for aggregate proceeds of $3.0 million.
As a result of the sale, the Company recorded a loss of $0.2 million attributable to blockage discount included in the sales
price, to the line item Loss realized on sale of investments within the Consolidated Statement of Comprehensive Income/(Loss).
Additionally, during the year ended December 31, 2020, the Company recognized a gain of $0.1 million that was recorded on
the line item Gain/(loss) on investments held at fair value within the Consolidated Statement of Comprehensive Income/(Loss).
Please refer to Note 16 for information regarding the valuation of these instruments.
Gain on deconsolidation
The following table summarizes the gain on deconsolidation recognized by the Company:
Year ended December 31,
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
2020
$000s
—
—
—
—
—
2019
$000s
—
6,357
102,038
156,014
264,409
2018
$000s
41,730
—
—
—
41,730
PureTech Health plc Annual report and accounts 2020 153
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 December 31, 2018, PureTech maintained control of Gelesis and the subsidiary’s financial results were fully
consolidated in the Group’s consolidated financial statements.
On July 1, 2019, the Gelesis Board of Directors was restructured, resulting in two of the three PureTech representatives
resigning from the Board with PureTech retaining no ability to reappoint directors to these board seats. As a result of this
restructuring, PureTech lost control over Gelesis’ Board of Directors, which triggered a loss of control over the entity. At the
deconsolidation date, PureTech held a 25.2 percent voting interest in Gelesis. As of July 1, 2019, Gelesis was deconsolidated
from the Group’s financial statements, resulting in only the profits and losses generated by Gelesis through the deconsolidation
date being included in the Group’s Consolidated Statement of Income/(Loss) and Other Comprehensive Income/(Loss). At the
date of deconsolidation, PureTech recorded a $156.0 million gain on the deconsolidation of Gelesis, which was recorded to the
Gain on the deconsolidation of subsidiary line item in the Consolidated Statement of Income/(Loss) and Other Comprehensive
Income/(Loss). While the Company no longer controls Gelesis, it was concluded that PureTech still has significant influence over
Gelesis by virtue of its large, albeit minority, ownership stake and its continued representation on Gelesis’ Board of Directors.
PureTech still has the power to participate in the financial and operating policy decisions of the entity, although it does not
control these policies. As PureTech has significant influence over Gelesis, the entity is accounted for as an associate under
IAS 28, starting at the date of deconsolidation.
Upon the date of deconsolidation, PureTech held preferred shares and common shares of Gelesis and a warrant issued by
Gelesis to PureTech. PureTech’s investment in common shares of Gelesis is subject to equity method accounting with an initial
investment of $16.4 million. In accordance with IAS 28, PureTech’s investment was adjusted by the share of profits and losses
generated by Gelesis subsequent to the date of deconsolidation. See table below for the Group’s share in the profits and
losses of Gelesis for the periods presented.
The preferred shares and warrant held by PureTech fall under the guidance of IFRS 9 and are treated as financial assets held
at fair value, where changes to the fair value of the preferred shares and warrant are recorded through the Consolidated
Statement of Income/(Loss) and Other Comprehensive Income/(Loss), in accordance with IFRS 9. The fair value of the
preferred shares and warrant at deconsolidation was $49.2 million. See Note 5 for changes in the fair value subsequent to
deconsolidation date.
Impairment loss for the year ended December 31, 2019
Following the issuance of the Gelesis Series 3 Preferred Shares at a higher valuation than the previous round with some
favorable liquidation provisions primarily to PureTech and also to the other Series 3 preferred share investors, which resulted
in adjustments to the fair values of other preferred shares, warrant classes and Gelesis common stock, the Company assessed
the investment in common shares held in Gelesis for impairment. Management compared the recoverable amount of the
investment to its carrying amount as of December 31, 2019, which resulted in an impairment loss to the Investment in Gelesis.
The recoverable amount was estimated based on the fair value of the Gelesis common shares held by PureTech, which are
considered to be within Level 3 of the fair value hierarchy. The costs of disposal are immaterial for the calculation of Gelesis
investment’s recoverable amount.
During the year ended December 31, 2019, the total fair value of common shares was determined utilizing a hybrid valuation
approach with significant unobservable inputs within the PureTech valuation framework (refer to Note 16). The multi-scenario
hybrid valuation approach utilized the recent transaction method within an option pricing framework and an IPO scenario
within a probability-weighted-expected return framework to determine the value allocation for the common share class
of Gelesis. The fair value of the common shares was determined as the calculated business enterprise value allocated to
the outstanding common shares treated as call options within the OPM or the value of common shares within the PWERM.
The PWERM maintained a 75.0 percent probability of occurrence while the OPM maintained a 25.0 percent probability of
occurrence. The probability weighted term to exit was 1.57 years. The discount rate utilized was 20.0 percent while the
risk-free rate and volatility utilized were 1.62 percent and 56.0 percent, respectively.
The impairment loss amounted to $42.9 million and was recorded to Impairment of investment in associate within the
Consolidated Statement of Comprehensive Income/(Loss) for the year ended December 31, 2019. As of December 31, 2019
the investment in Gelesis was $10.6 million, which is equal to the fair value of the common shares held by PureTech.
During the year ended December 31, 2020 the Group recorded its share in the losses of Gelesis and its investment in
associates accounted for under the equity method was reduced to zero. Since the Group has investments in Gelesis preferred
shares that are deemed to be Long-term interests, the Company continued recognizing its share in Gelesis losses while
applying such losses to its preferred share investment in Gelesis accounted for as an investment held at fair value.
Karuna
For the period of June 28, 2019 through December 2, 2019, PureTech’s investment in Karuna was subject to equity method
accounting. In accordance with IAS 28, the Company’s investment was adjusted by the share of losses generated by Karuna
(weighted average of 31.4 percent based on common stock ownership interest), which resulted in a net loss of $6.3 million
during the year ended December 31, 2019 recorded in the line item Share of net income/(loss) of associates. Starting December 2,
2019, due to the loss of significant influence in Karuna on such date, the Company is accounting for the investment in Karuna as
an investment held at fair value. See Note 5 for further detail on the Group’s investment in Karuna.
154 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
6.
Investments in Associates — continued
resTORbio
For the period of January 1, 2018 through November 5, 2018, PureTech’s investment in resTORbio was subject to equity
method accounting. In accordance with IAS 28, PureTech’s investment was adjusted by the share of profits and losses
generated by resTORbio (34.9 percent based on common stock ownership interest) during that period, which resulted in a net
loss from associates of $11.5 million that was recorded to the Consolidated Statement of Comprehensive Income/(Loss) in the
line item Share of net income/(loss) of associates during the year ended December 31, 2018. See Note 5 for further detail on
the Group’s investment in resTORbio.
The following table summarizes the activity related to the investment in associates balance for the years ended December 31,
2020, 2019 and 2018.
Investment in Associates
As of January 1, 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 December 31, 2018 and January 1, 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 in Karuna upon loss of significant influence
As of December 31, 2019 and January 1, 2020
Share of net loss in Gelesis
Share of other comprehensive income in Gelesis
Share of losses recorded against long term interests
As of December 31, 2020
$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
(34,117)
469
23,006
—
Summarized financial information
The following table summarizes the financial information of Gelesis as included in its own financial statements, adjusted for fair
value adjustments at deconsolidation and differences in accounting policies. The table also reconciles the summarized financial
information to the carrying amount of the Company’s interest in Gelesis. The information for the year ended December 31,
2019 includes the results of Gelesis only for the period July 1, 2019 to December 31, 2019, as Gelesis was consolidated prior to
this period.
As of and for the year ended December 31,
Percentage ownership interest
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Non controlling interests and options issued to third parties
Net assets attributable to shareholders of Gelesis Inc.
Group’s share of net assets
Goodwill
Impairment
Recorded against Long-term Interests
Investment in associate
Revenue
Income/(loss) from continuing operations (100%)
Total comprehensive income/(loss) (100%)
Group’s share in income/(loss) from continuing operations
Group’s share of total comprehensive income/(loss)
2020
$000s
47.9%
372,184
92,875
(133,743)
(300,748)
(6,577)
23,989
11,481
8,216
(42,702)
23,006
—
21,442
(71,157)
(70,178)
(34,117)
(33,648)
2019
$000s
49.3%
369,336
40,079
(82,406)
(216,852)
(1,542)
108,615
53,580
—
(42,938)
—
10,642
—
74,573
74,573
37,136
37,136
PureTech Health plc Annual report and accounts 2020 155
Financial statements Notes to the Consolidated Financial Statements — continued
7. Operating Expenses
Total operating expenses were as follows:
For the years ending December 31,
General and administrative
Research and development
Total operating expenses
2020
$000s
49,440
81,859
131,299
2019
$000s
59,358
85,848
145,206
2018
$000s
47,365
77,402
124,767
The average number of persons employed by the Group during the year, analyzed by category, was as follows:
For the years ending December 31,
General and administrative
Research and development
Total
The aggregate payroll costs of these persons were as follows:
For the years ending December 31,
General and administrative
Research and development
Total
Detailed operating expenses were as follows:
For the years ending December 31,
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 ending December 31,
Audit of these financial statements
Audit of the financial statements of subsidiaries
Audit-related assurance services
Non-audit related services
Total
2020
43
95
138
2020
$000s
22,943
20,674
43,616
2020
$000s
29,403
1,866
1,629
10,718
43,616
26,497
61,186
87,683
131,299
2020
$000s
1,145
291
490
173
2,099
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
2,101
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
1,173
Please refer to Note 8 for further disclosures related to share-based payments and Note 24 for management’s remuneration
disclosures.
8.
Share-based Payments
Share-based payments includes stock options, restricted stock units (“RSUs”) and performance-based RSUs in which the
expense is recognized based on the grant date fair value of these awards.
Share-based Payment Expense
The Group share-based payment expense for the years ended December 31, 2020, 2019 and 2018, were comprised of charges
related to the PureTech Health plc incentive stock and stock option issuances and subsidiary stock plans.
The following table provides the classification of the Group’s consolidated share-based payment expense as reflected in the
Consolidated Statement of Income/(Loss):
For the years ending December 31,
General and administrative
Research and development
Total
156 PureTech Health plc Annual report and accounts 2020
2020
$000s
7,650
3,068
10,718
2019
$000s
10,677
3,791
14,468
2018
$000s
5,293
7,344
12,637
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
Ariya Stock Option Exchange
In conjunction with the acquisition of the remaining minority interests of PureTech LYT (previously named Ariya Therapeutics,
Inc.) (Please refer to Note 18), PureTech Health exchanged subsidiary stock options previously granted to the co-inventors and
advisors of PureTech LYT with stock options to purchase 2,147,965 of the Company’s ordinary shares under the PureTech Health
Performance Share Plan. As this was an exchange of awards within the consolidated group, whereby the Company’s stock
options were replacing Ariya’s stock options, the exchange is accounted for as a modification of the original award and the
incremental fair value on the date of the replacement is amortized over the remaining vesting period of the awards.
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan (“PSP”). Under the PSP and subsequent amendments, awards of
ordinary shares may be made to the Directors, senior managers and employees of, and other individuals providing services to
the Company and its subsidiaries up to a maximum authorized amount of 10.0 percent of the total ordinary shares outstanding.
The shares have various vesting terms over a period of service between two and four years, provided the recipient remains
continuously engaged as a service provider.
The share-based awards granted under the PSP are equity settled and expire 10 years from the grant date. As of the years
ended December 31, 2020, 2019 and 2018, the Company had issued share-based awards to purchase an aggregate of
5,835,993, 5,409,751 and 5,657,602 shares, respectively, under this plan.
RSUs
RSU activity for the years ended December 31, 2020, 2019 and 2018 is detailed as follows:
Outstanding (Non-vested) at January 1, 2018
RSUs Granted in Period
Vested
Forfeited
Outstanding (Non-vested) at December 31, 2018 and January 1, 2019
RSUs Granted in Period
Vested
Forfeited
Outstanding (Non-vested) at December 31, 2019 and January 1, 2020
RSUs Granted in Period
Vested
Forfeited
Outstanding (Non-vested) at December 31, 2020
Number of
Shares/Units
5,589,416
2,860,778
(513,324)
(1,338,087)
6,598,783
1,775,569
(3,738,005)
—
4,636,347
1,759,011
(2,781,687)
(191,089)
3,422,582
Wtd Avg Grant
Date Fair Value
(GBP)
1.09
1.54
1.06
1.06
1.29
2.95
1.10
—
2.08
1.80
1.54
2.37
2.46
Each RSU entitles the holder to one ordinary share on vesting and the RSU awards are based on a cliff vesting schedule over a
three-year requisite service period in which the Company recognizes compensation expense on a graded basis for the RSUs.
Following vesting, each recipient will be required to make a payment of one pence per ordinary share on settlement of the
RSUs. Vesting of the RSUs is subject to the satisfaction of performance and market conditions. The grant date fair value of the
market condition awards is measured to reflect such conditions and there is no true-up for differences between expected and
actual outcomes.
The Company recognizes the estimated fair value of these performance-based awards as share-based compensation expense
over the performance period based upon its determination of whether it is probable that the performance targets will be
achieved. The Company assesses the probability of achieving the performance targets at each reporting period. Cumulative
adjustments, if any, are recorded to reflect subsequent changes in the estimated outcome of performance-related conditions.
The fair value of the market and performance-based awards is based on the Monte Carlo simulation analysis utilizing a
Geometric Brownian Motion process with 100,000 simulations to value those shares. The model considers share price volatility,
risk-free rate and other covariance of comparable public companies and other market data to predict distribution of relative
share performance.
The performance and market conditions attached to the 2020 RSU awards are based on the achievement of total shareholder
return (“TSR”), with 50.0 percent of the shares under award vesting based on the achievement of absolute TSR targets, 12.5
percent of the shares under the award vesting based on TSR as compared to the FTSE 250 Index, 12.5 percent of the shares
under the award vesting based on TSR as compared to the MSCI Europe Health Care Index, and 25.0 percent of the shares
under the award vesting based on the achievement of strategic targets. The RSU award performance criteria have changed
over time as the criteria is continually evaluated by the Group’s Remuneration Committee.
In 2017, the Company granted certain executives RSUs that vested based on service, market and performance conditions,
as described above. The vesting of all RSUs was achieved by December 31, 2019 where all service, market and performance
conditions were met. The remuneration committee of PureTech’s board of directors approved the achievement of the
vesting conditions as of December 31, 2019 and reached the decision to cash settle the 2017 RSUs. The settlement value was
determined based on the 3 day average closing price of the shares. The settlement value was $12.5 million. The settlement
value did not exceed the fair value at settlement date and as such the cash settlement was treated as an equity transaction,
whereby the full repurchase cash settlement amount was charged to equity in Other reserves.
PureTech Health plc Annual report and accounts 2020 157
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
In 2018, the Company granted certain executives RSUs that vested based on service, market and performance conditions,
as described above. The remuneration committee of PureTech’s board of directors approved the achievement of certain
vesting conditions as of July 2020 and reached the decision to cash settle a portion of the 2018 RSUs to certain executives.
The settlement value was determined based on the 3 day average closing price of the shares. The settlement value was
$0.4 million. The settlement value did not exceed the fair value at settlement date and as such the cash settlement was treated
as an equity transaction, whereby the full repurchase cash settlement amount was charged to equity in Other reserves.
The Company incurred share-based payment expenses for performance and market based RSUs of $5.7 million, $2.2 million
and $2.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
Stock Options
Stock option activity for the years ended December 31, 2020, 2019 and 2018 is detailed as follows:
Outstanding at January 1, 2018
Granted
Exercised
Forfeited
Options Exercisable at December 31, 2018 and January 1, 2019
Outstanding at at December 31, 2018 and January 1, 2019
Granted
Exercised
Forfeited
Options Exercisable at December 31, 2019 and January 1, 2020
Outstanding at at December 31, 2019 and January 1, 2020
Granted
Exercised
Forfeited
Options Exercisable at December 31, 2020
Outstanding at December 31, 2020
Number of
Options
2,343,085
2,796,820
(64,171)
—
1,195,929
5,075,734
3,634,183
(237,090)
—
4,349,921
8,472,827
4,076,982
(514,410)
(1,119,313)
5,447,405
10,916,086
Wtd Average
Exercise Price
(GBP)
Wtd Average of
remaining
contractual
term (in years)
Wtd Average
Stock Price at
Exercise (GBP)
1.22
1.57
1.20
—
1.26
1.40
0.84
1.98
—
0.93
1.16
3.14
1.52
1.88
0.98
1.81
1.56
2.81
2.88
7.92
8.78
8.34
8.55
7.46
8.38
The fair value of the stock options awarded by the Company was estimated at the grant date using the Black-Scholes
option valuation model, considering the terms and conditions upon which options were granted, with the following weighted-
average assumptions:
At December 31,
Expected volatility
Expected terms (in years)
Risk-free interest rate
Expected dividend yield
Grant date fair value
Share price at grant date
2020
41.25%
6.11
0.53%
—
$1.72
$4.30
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 $2.1 million, $9.2 million and $1.4 million for
the years ended December 31, 2020, 2019 and 2018, respectively. The significant decrease for the year ended December 31,
2020, as compared to the year ended December 31, 2019, is largely attributable to the exchange of the Ariya awards with the
Company’s stock options in the year ended December 31, 2019, which resulted in an additional expense recorded in such year,
as described above.
For shares outstanding as of December 31, 2020, the range of exercise prices is detailed as follow:
Range of Exercise Prices (GBP)
0.01
1.00 to 2.00
2.00 to 3.00
3.00 to 4.00
Total
Options
Outstanding
2,122,965
4,703,639
1,539,482
2,550,000
10,916,086
Wtd
Average
Exercise
Price (GBP)
Wtd Average of
remaining
contractual
term (in years)
—
1.47
2.51
3.51
1.81
8.76
6.99
9.45
9.97
8.38
For shares exercisable at December 31, 2020, utilizing the closing share price on December 31, 2020, the estimated tax obligation
associated with the share-based payments transferable to the tax authority on the employee’s behalf was $6.9 million.
158 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
PureTech LLC Incentive Stock Issuance
In May 2015 and August 2014, the directors of PureTech Health LLC approved the issuance of shares to the management team,
directors and advisors of PureTech Health LLC, subject to vesting restrictions. The share-based awards granted under the 2016
PureTech LLC Incentive Stock Issuance Plan are equity settled and expire 10 years from the grant date. No additional shares will
be granted under this compensation arrangement. The fair value of the shares awarded was estimated as of the date of grant.
The Company incurred an expense of $0.2 million in share-based payment expense for the year ended December 31, 2018,
related to PureTech Health LLC incentive compensation. No share-based payment expense was incurred related to PureTech
Health LLC incentive compensation for the years ended December 31, 2020, and 2019, respectively.
As of December 31, 2020, all shares related to the pre-IPO incentive compensation plan had fully vested.
Subsidiary Plans
Certain subsidiaries of the Group have adopted stock option plans. A summary of stock option activity by number of shares
in these subsidiaries is presented in the following table:
Alivio
Entrega
Follica
Sonde
Vedanta
Gelesis
Alivio
PureTech LYT
Commense
Entrega
Follica
Karuna
Sonde
Vedanta
Outstanding
as of
January 1,
2020
3,698,244
972,000
1,309,040
1,829,004
1,450,100
Outstanding
as of
January 1,
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
189,924
—
—
363,830
493,951
Granted
During the
Year
—
1,329,494
—
—
58,000
79,588
—
1,806,504
154,193
Granted
During the
Year
Exercised
During the
Year
Expired
During the
Year
Forfeited
During the
Year
Outstanding
as of
December 31,
2020
—
—
—
—
(813)
—
—
—
—
—
(10,000)
— 3,888,168
962,000
— 1,309,040
— 2,192,834
1,741,888
(201,350)
Exercised
During the
Year
Expired
During the
Year
Forfeited
During the
Year
—
(3,125)
—
—
—
—
—
—
—
(3,571,346)¹
(110,386)
—
(21,875)
— (2,180,000)²
(540,416)
—
—
—
—
—
— (1,949,927)¹
—
—
(77,843)
—
1 These shares represent the options outstanding on the date of deconsolidation of Karuna and Gelesis.
2 These shares represent the options outstanding on the date of exchange to PureTech stock options.
Gelesis
Alivio
Akili
PureTech LYT
Commense
Entrega
Follica
Karuna
Knode
Sonde
Tal
The Sync Project
Vedanta
Outstanding
as of
January 1,
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
Exercised
During the
Year
Expired
During the
Year
Forfeited
During the
Year
953,500
—
—
2,180,000
121,666
60,000
—
1,111,000
—
—
—
—
278,786
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— (2,385,355)¹
—
—
—
—
(10,000)
(3,750)
—
(41,850)
(12,375)
(4,125)
—
(32,500)
(6,250)
(6,250)
(2,750)
(30,250)
(1,080,000)
—
(74,250)
(24,800)
1 These shares represent the options outstanding on the date of Akili’s deconsolidation.
Outstanding
as of
December 31,
2019
—
3,698,244
—
—
972,000
1,309,040
—
1,829,004
1,450,100
Outstanding
as of
December 31,
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
PureTech Health plc Annual report and accounts 2020 159
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
The weighted-average exercise prices and remaining contractual life for the options outstanding as of December 31, 2020 were
as follows:
Outstanding at December 31, 2020
Alivio
Entrega
Follica
Sonde
Vedanta
Number of
options
3,888,168
962,000
1,309,040
2,192,834
1,741,888
Weighted-
average
exercise price
$
Weighted-
average
contractual life
outstanding
0.21
0.70
0.89
0.19
7.48
7.65
2.80
6.29
8.76
6.15
The weighted average exercise prices for the options granted for the years ended December 31, 2020, 2019 and 2018 were
as follows:
For the years ended December 31,
Alivio
PureTech LYT
Commense
Entrega
Follica
Karuna
Sonde
Vedanta
2020
$
0.47
—
—
—
—
—
0.18
19.59
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 December 31, 2020 were as follows:
Forfeited during the year ended December 31, 2020
Vedanta
Weighted-
average
exercise price
$
16.03
Number of
options
201,350
The weighted average exercise prices for options exercisable as of December 31, 2020 were as follows:
Exercisable at December 31,
Number of Options
Alivio
Entrega
Follica
Sonde
Vedanta
3,888,168
918,164
1,273,326
774,238
1,119,289
Weighted-average
exercise price
$
Exercise Price Range
$
0.04
0.64
0.89
0.20
11.64
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 December 31, 2020, it allowed for the issuance of 2,145,867 share-based compensation awards through
incentive share options, nonqualified share options, and restricted shares to employees, directors, and nonemployees
providing services to Vedanta. At December 31, 2020, 178,929 shares remained available for issuance under the Vedanta Plan.
The options granted under Vedanta Plan are equity settled and expire 10 years from the grant date. Typically, the awards vest
in four years but vesting conditions can vary based on the discretion of Vedanta’s Board of Directors.
Options granted under the Vedanta Plan are exercisable at a price per share not less than the fair market value of the
underlying ordinary shares on the date of grant. The estimated fair value of options, including the effect of estimated
forfeitures, is recognized over the options’ vesting period.
The fair value of the stock option grants has been estimated at the date of grant using the Black-Scholes option pricing model
with the following range of assumptions:
Assumption/Input
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
2020
2019
2018
6.00-10.00
89.24%-95.46%
0.32%-0.87%
—
$13.09-$16.54
$19.59
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
160 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
Vedanta incurred share-based compensation expense of $2.4 million, $1.7 million and $2.1 million for the years
ended December 31, 2020, 2019 and 2018, respectively.
Gelesis 2016 Stock Incentive Plan
In September 2016, the Directors of Gelesis approved the 2016 Stock Incentive Plan (the “2016 Gelesis Plan”) which provides
for the grant of incentive stock options, nonqualified stock options, and restricted stock to employees, directors, and
nonemployees providing services to Gelesis. At 30 June 2019, 329,559 shares remained available for issuance under the
Gelesis Plan.
The options granted under the 2016 Gelesis Plan are equity settled and expire 10 years from the grant date. Typically, the
awards vest in four years but vesting conditions can vary based on the discretion of Gelesis Board of Directors.
Options granted under the 2016 Gelesis Plan are exercisable at a price per share not less than the fair market value of
the underlying ordinary shares on the date of grant. The estimated fair value of options, including the effect of estimated
forfeitures, is recognized over the options’ vesting period.
The fair value of the stock option grants has been estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
Assumption/Input
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
2020
—
—%
—%
—
$—
$—
2019
0
—%
—%
—
$—
$—
2018
6.22
64.58%
2.79%
—
$7.84
$12.82
Gelesis used an average historical share price volatility based on an analysis of reported data for a peer group of comparable
companies which were selected based upon industry similarities. As there is not sufficient historical share exercise data to
calculate the expected term of the options, Gelesis elected to use the “simplified” method for all options granted at the money
to value share option grants. Under this approach, the weighted average expected life is presumed to be the average of the
vesting term and the contractual term of the option.
Gelesis incurred share-based compensation expense of $2.4 million for the six month period prior to deconsolidation ended
June 30, 2019 and $3.9 million for the year ended December 31, 2018.
Karuna Pharmaceuticals, Inc. 2009 Stock Incentive Plan
In 2009, the Board of Directors for Karuna Pharmaceuticals, Inc. approved the 2009 Stock Incentive Plan (the “Karuna 2009
Plan”). It allowed for the issuance of 1,000,000 share-based compensation awards through stock options, restricted stock
units and other stock-based awards under the Karuna 2009 Plan to employees, officers, directors, consultants and advisors
of Karuna. At 15 March 2019, 106,865 shares remained available for issuance under the Karuna 2009 Plan.
The options granted under the Karuna 2009 Plan are equity settled and expire 10 years from the grant date. Typically, the
awards vest in four years but vesting conditions can vary based on the discretion of Karuna’s Board of Directors.
Options granted under the Karuna 2009 Plan are exercisable at a price per share not less than the fair market value of
the underlying ordinary shares on the date of grant. The estimated fair value of options, including the effect of estimated
forfeitures, is recognized over the options’ vesting period.
The fair value of the stock option grants has been estimated at the date of grant using the Black-Scholes option pricing model
with the following weighted average assumptions:
Assumption/Input
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
2020
—
—%
—%
—
$—
$—
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 March 15,
2019 and $1.9 million for the years ended December 31, 2018.
Other Plans
The stock compensation expense under plans at other subsidiaries of the Group not including Gelesis, Vedanta and Karuna
was $0.42 million, $0.01 million and $0.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. The
negative expense incurred during the year ended December 31, 2019 was largely attributable to Commense forfeitures.
PureTech Health plc Annual report and accounts 2020 161
Financial statements Notes to the Consolidated Financial Statements — continued
9.
Finance Cost, net
The following table shows the breakdown of finance income and costs:
For the year ended December 31
Finance income
Interest from financial assets not at fair value through profit or loss
Total finance income
Finance costs
Contractual interest expense on notes payable
Interest expense on other borrowings
Interest expense on lease liability
Gain 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) from change in fair value of preferred shares and convertible notes
Total finance income/(costs) – fair value accounting
Total finance income/(costs) – subsidiary preferred shares
Total finance income/(costs)
Finance income/(costs), net
2020
$000s
1,183
1,183
(96)
(496)
(2,354)
—
—
(2,946)
(117)
(4,234)
(4,351)
—
(4,351)
(6,115)
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
10. Earnings/(Loss) per Share
The basic and diluted loss per share has been calculated by dividing the income/(loss) for the period attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding during the years ended December 31, 2020,
2019 and 2018, respectively.
Earnings/(Loss) Attributable to Owners of the Company:
Income/(loss) for the year,
attributable to the owners of
the Company
Income/(loss) attributable to
ordinary shareholders
2020
Basic
$000s
Diluted
$000s
2019
Basic
$000s
Diluted
$000s
2018
Basic
$000s
Diluted
$000s
5,985
5,985
421,144
421,144
(43,654)
(43,654)
5,985
5,985
421,144
421,144
(43,654)
(43,654)
Weighted-Average Number of Ordinary Shares:
2020
2019
2018
Basic
Diluted
Basic
Diluted
Basic
Diluted
Issued ordinary shares at January 1, 285,370,619 285,370,619
233,048
Effect of shares issued
Effect of dilutive shares (please
refer to Note 8)
Weighted average number
of ordinary shareholders at
December 31,
285,603,667 292,855,913
— 7,252,246
233,048
282,493,867
932,600
282,493,867
932,600
236,897,579
36,950,688
236,897,579
36,950,688
—
8,355,866
—
—
283,426,467
291,782,333
273,848,267
273,848,267
Earnings/(Loss) per Share:
Basic and diluted earnings/(loss)
per share
2020
Basic
$
0.02
Diluted
$
0.02
2019
Basic
$
1.49
Diluted
$
2018
Basic
$
Diluted
$
1.44
(0.16)
(0.16)
162 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
11. Property and Equipment
Cost
Balance as of January 1, 2019
Additions, net of transfers
Disposals
Deconsolidation of subsidiaries
Reclassifications
Exchange differences
Balance as of December 31, 2019
Additions, net of transfers
Disposals
Reclassifications
Balance as of December 31, 2020
Accumulated depreciation
and impairment loss
Balance as of January 1, 2018
Depreciation
Disposals
Deconsolidation of subsidiaries
Reclassifications
Exchange differences
Balance as of January 1, 2019
Depreciation
Disposals
Deconsolidation of subsidiaries
Reclassifications
Exchange differences
Balance as of December 31, 2019
Depreciation
Disposals
Balance as of December 31, 2020
Laboratory and
Manufacturing
Equipment
$000s
Furniture and
Fixtures
$000s
Computer
Equipment and
Software
$000s
Leasehold
Improvements
$000s
Construction in
process
$000s
7,306
3,374
(183)
(3,076)
(25)
(11)
7,385
1,536
(642)
141
8,420
488
1,126
(168)
—
6
—
1,452
—
—
—
1,452
1,431
175
(9)
(137)
48
—
1,508
51
(40)
—
1,519
4,924
13,494
(45)
(754)
36
1
17,656
399
—
—
18,054
239
4,649
—
(4,190)
(76)
24
646
3,347
—
(141)
3,852
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
(2,968)
(1,572)
576
(3,965)
(175)
(60)
2
—
—
—
(233)
(144)
138
—
—
—
(239)
(215)
—
(454)
(534)
(296)
74
—
—
—
(756)
(312)
5
53
(20)
—
(1,030)
(297)
40
(1,287)
(807)
(1,088)
20
—
—
21
(1,854)
(1,448)
20
319
6
2
(2,955)
(1,860)
—
(4,815)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Property and Equipment, net
Balance as of December 31, 2019
Balance as of December 31, 2020
Laboratory and
Manufacturing
Equipment
$000s
Furniture and
Fixtures
$000s
Computer
Equipment and
Software
$000s
Leasehold
Improvements
$000s
Construction in
process
$000s
4,417
4,456
1,213
998
478
232
14,701
13,239
646
3,852
Total
$000s
14,388
22,818
(405)
(8,157)
(11)
14
28,647
5,332
(682)
—
33,297
Total
$000s
(3,876)
(2,476)
210
—
—
77
(6,065)
(3,232)
265
1,829
1
10
(7,192)
(3,944)
616
(10,520)
Total
$000s
21,455
22,777
Depreciation of property and equipment is included in the General and administrative expenses and Research and development
expenses line items in the Consolidated Statements of Comprehensive Income/(Loss). The Company recorded depreciation
expense of $3.9 million, $3.2 million and $2.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.
PureTech Health plc Annual report and accounts 2020 163
Financial statements Notes to the Consolidated Financial Statements — continued
12.
Intangible Assets
Intangible assets consist of licenses of intellectual property acquired by the Group through various agreements with third
parties and are recorded at the value of the consideration transferred. Information regarding the cost and accumulated
amortization of intangible assets is as follows:
Cost
Balance as of January 1, 2019
Additions
Deconsolidation of subsidiary
Balance as of December 31, 2019
Additions
Balance as of December 31, 2020
Accumulated amortization
Balance as of January 1, 2019
Amortization
Deconsolidation of subsidiary
Balance as of December 31, 2019
Amortization
Balance as of December 31, 2020
Intangible assets, net
Balance as of December 31, 2019
Balance as of December 31, 2020
Licenses
$000s
5,067
400
(4,842)
625
275
900
Licenses
$000s
(1,987)
(117)
2,104
—
(1)
(1)
Licenses
$000s
625
899
These intangible asset licenses represent in-process-research-and-development assets since they are still being developed
and are not ready for their intended use. As such, these assets are not yet amortized but tested for impairment annually.
The Company tested such assets for impairment as of balance sheet date and concluded that none were impaired. During
the year ended December 31, 2019, Vor, Karuna and Gelesis were deconsolidated and as such $2.7 million in net assets
were derecognized.
Amortization expense was included in the Research and development expenses line item in the accompanying Consolidated
Statements of Comprehensive Income/(Loss). Amortization expense, recorded using the straight-line method, was
approximately $0.0 million, $0.1 million and $0.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.
13. Other Financial Assets
Other financial assets consist of restricted cash held, which represents amounts that are reserved as collateral against letters of
credit with a bank that are issued for the benefit of a landlord in lieu of a security deposit for office space leased by the Group.
Information regarding restricted cash was as follows:
As of December 31,
Restricted cash
Total other financial assets
2020
$000s
2,124
2,124
2019
$000s
2,124
2,124
164 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
14. Equity
Total equity for PureTech as of December 31, 2020, and 2019 was as follows:
Equity
Share capital, £0.01 par value, issued and paid 285,885,025 and 285,370,619 as of December 31,
2020 and 2019, 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
December 31,
2020
$000s
December 31,
2019
$000s
5,417
138,506
288,978
469
(24,050)
260,429
669,748
(16,209)
653,539
5,408
138,506
287,962
—
(18,282)
254,444
668,038
(17,640)
650,398
Changes in share capital and share premium relate primarily to incentive options exercises during the period.
Shareholders are entitled to vote on all matters submitted to shareholders for a vote. Each ordinary share is entitled to one
vote. Each ordinary share is entitled to receive dividends when and if declared by the Company’s Directors. The Company
has not declared any dividends in the past.
On June 18, 2015, the Company acquired the entire issued share capital of PureTech LLC in return for 159,648,387 Ordinary
Shares. This was accounted for as a common control transaction at cost. It was deemed that the share capital was issued in
line with movements in share capital as shown prior to the transaction taking place. In addition, the merger reserve records
amounts previously recorded as share premium.
Other reserves comprise the cumulative credit to share-based payment reserves corresponding to share-based payment
expenses recognized through Consolidated Statements of Comprehensive Income/(Loss) as well as other additions that
flow directly through equity such as the excess or deficit from changes in ownership of subsidiaries while control is maintained
by the Group.
15. Subsidiary Preferred Shares
IFRS 9 addresses the classification, measurement, and recognition of financial liabilities. Preferred shares issued by subsidiaries
and affiliates often contain redemption and conversion features that are assessed under IFRS 9 in conjunction with the host
preferred share instrument. This balance represents subsidiary preferred shares issued to third parties.
The subsidiary preferred shares are redeemable upon the occurrence of a contingent event, other than full liquidation of the
Company, that is not considered to be within the control of the Company. Therefore these subsidiary preferred shares are
classified as liabilities. These liabilities are measured at fair value through profit and loss. The preferred shares are convertible
into ordinary shares of the subsidiaries at the option of the holder and mandatorily convertible into ordinary shares upon a
subsidiary listing in a public market at a price above that specified in the subsidiary’s charter or upon the vote of the holders
of subsidiary preferred shares specified in the charter. Under certain scenarios the number of ordinary shares receivable on
conversion will change and therefore, the number of shares that will be issued is not fixed. As such the conversion feature is
considered to be an embedded derivative that normally would require bifurcation. However, since the preferred share liabilities
are measured at fair value through profit and loss no bifurcation is required.
The preferred shares are entitled to vote with holders of common shares on an as converted basis.
The Group recognizes the preferred share balance upon the receipt of cash financing or upon the conversion of notes into
preferred shares at the amount received or carrying balance of any notes and derivatives converted into preferred shares.
The balance as of December 31, 2020 and 2019 represents the fair value of the instruments for all subsidiary preferred shares.
The following summarizes the subsidiary preferred share balance:
As of December 31,
Entrega
Follica
Sonde
Vedanta Biosciences
Total subsidiary preferred share balance
2020
$000s
1,291
12,792
12,821
92,068
118,972
2019
$000s
3,222
11,663
7,212
78,892
100,989
As is customary, in the event of any voluntary or involuntary liquidation, dissolution or winding up of a subsidiary, the holders
of subsidiary preferred shares which are outstanding shall be entitled to be paid out of the assets of the subsidiary available
for distribution to shareholders and before any payment shall be made to holders of ordinary shares. A merger, acquisition,
sale of voting control or other transaction of a subsidiary in which the shareholders of the subsidiary immediately before the
transaction do not own a majority of the outstanding shares of the surviving company shall be deemed to be a liquidation
event. Additionally, a sale, lease, transfer or other disposition of all or substantially all of the assets of the subsidiary shall also
be deemed a liquidation event.
PureTech Health plc Annual report and accounts 2020 165
Financial statements Notes to the Consolidated Financial Statements — continued
15.
Subsidiary Preferred Shares — continued
As of December 31, 2020 and 2019, the minimum liquidation preference reflects the amounts that would be payable to the
subsidiary preferred holders upon a liquidation event of the subsidiaries, which is as follows:
As of December 31,
Entrega
Follica
Sonde
Vedanta Biosciences
Total minimum liquidation preference
2020
$000s
2,216
6,405
12,000
86,161
106,782
2019
$000s
2,216
6,405
7,250
77,161
93,032
For the years ended December 31, 2020 and 2019 the Group recognized the following changes in the value of subsidiary
preferred shares:
Balance as of January 1, 2019
Adjustment to preferred shares due to adoption of IFRS 9
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 December 31, 2019 and January 1, 2020
Issuance of new preferred shares
Increase in value of preferred shares measured at fair value
Balance as December 31, 2020
$000s
217,519
—
51,048
4,894
33,636
1,458
(207,346)
(108)
(112)
100,989
13,750
4,234
118,972
2020
In January 2020 and April 2020, Sonde Health issued and sold shares of Series A-2 preferred shares for aggregate proceeds
of $4.8 million, of which none was contributed by PureTech.
In April 2020 and July 2020, Vedanta issued and sold shares of Series C-2 preferred shares for aggregate proceeds of
$9.0 million, of which none was contributed by PureTech.
2019
On March 15, 2019, Karuna was deconsolidated. As of deconsolidation, the fair value of Karuna’s preferred share liability
was $31.7 million.
On April 4, 2019, Sonde Health issued and sold shares of Series A-2 preferred shares for aggregate proceeds of $11.1 million,
of which $5.3 million was contributed by outside investors. Approximately $5.8 million of outstanding principal and interest
on convertible promissory notes issued by Sonde to PureTech converted into Series A-2 preferred shares in this financing in
accordance with their terms. On August 29, 2019, Sonde sold an additional 1,052,632 shares of its Series A-2 preferred shares
for aggregate proceeds of $2.0 million. It has been determined that these shares are liability classified and contain a liability
classified embedded derivative. This embedded derivative is a conversion feature which can result in settlement in a variable
number of shares. The instrument is not bifurcated and is measured in whole at fair value through the profit and loss.
In April 2019, Gelesis completed further closings of its Series 2 Growth financing issuing 799,894 shares for proceeds of
$10.2 million, of which $8.6 million was contributed by outside investors and $1.7 million was contributed by PureTech.
In March and May 2019, Vedanta completed a second and third closing of its Series C preferred shares financing for aggregate
proceeds of $18.7 million. PureTech Health did not participate in either closing. It has been determined that these shares are
liability classified and contain a liability classified embedded derivative. This embedded derivative is a conversion feature which
can result in settlement in a variable number of shares. The instrument is not bifurcated and is measured in whole at fair value
through the profit and loss.
On July 1, 2019, Gelesis was deconsolidated. As of deconsolidation, the fair value of Gelesis’ preferred share liability was
$175.6 million.
On July 19, 2019, all of the outstanding notes, plus accrued interest, issued by Follica converted into 17,639,204 shares of
Series A-3 Preferred Shares and 14,200,044 shares of common share pursuant to a Series A-3 Note Conversion Agreement
between Follica and the noteholders. Third parties held 2,422,990 A-3 preferred shares following the conversion. It has been
determined that these shares are liability classified and contain a liability classified embedded derivative. This embedded
derivative is a conversion feature which can result in settlement in a variable number of shares. The instrument is not bifurcated
and is measured in whole at fair value through the profit and loss.
166 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
15.
Subsidiary Preferred Shares — continued
In September 2019, Vedanta received $16.6 million from outside investors through the issuance of its Series C-2 preferred
shares in two separate closings. The issuances provided for the purchase of 711,772 Series C-2 shares at a purchase price of
$23.38. PureTech Health did not participate in either closing. It has been determined that these shares are liability classified
and contain a liability classified embedded derivative. This embedded derivative is a conversion feature which can result in
settlement in a variable number of shares. The instrument is not bifurcated and is measured in whole at fair value through the
profit and loss.
16. Financial Instruments
The Group’s financial instruments consist of financial liabilities, including preferred shares, convertible notes, warrants and loans
payable, as well as financial assets classified as assets held at fair value.
Fair Value Process
For financial instruments measured at fair value under IFRS 9 the change in the fair value is reflected through profit and loss.
Using the guidance in IFRS 13, the total business enterprise value and allocatable equity of each entity within the Group was
determined using a discounted cash flow income approach, replacement cost/asset approach, market scenario approach, or
market backsolve approach through a recent arm’s length financing round. The approaches, in order of strongest fair value
evidence, are detailed as follows:
Valuation Method
Description
Market – Backsolve
The market backsolve approach benchmarks the original issue price (OIP) of the company’s latest
funding transaction as current value.
Market – Scenario
The market scenario method is based on guideline transaction prices and multiples of similar public
and private companies in initial public offerings and mergers and acquisitions.
Income Based – DCF
The income approach is used to estimate fair value based on the income streams, such as cash flows
or earnings, that an asset or business can be expected to generate.
Asset/Cost
The asset/cost approach considers reproduction or replacement cost as an indicator of value.
During the years ended December 31, 2020 and 2019 at each measurement date, the total fair value of preferred shares,
warrants and convertible note instruments, including embedded conversion rights that are not bifurcated, was determined
using the following allocation methods: option pricing model (“OPM”), probability-weighted expected return method
(“PWERM”) or Hybrid allocation framework. The methods are detailed as follows:
Allocation Method
OPM
Current Value
Common Stock
Equivalent
PWERM
Hybrid
Description
The OPM model treats preferred stock as call options on the enterprise’s equity value, with exercise
prices based on the liquidation preferences of the preferred stock.
The enterprise value determined as of the valuation date is allocated to different classes of security
based upon their rights and preferences.
Every share is treated equally and the equity value derived is allocated assuming full conversion
of preferred shares into common stock at the applicable conversion rate.
Under a PWERM, share value is based upon the probability-weighted present value of expected
future investment returns, considering each of the possible future outcomes available to the enterprise,
as well as the rights of each share class.
The hybrid method (“HM”) is a combination of the PWERM and OPM. Under the hybrid method,
multiple liquidity scenarios are weighted based on the probability of the scenarios occurrence,
similar to the PWERM, while also utilizing the OPM to estimate the allocation of value in one or more
of the scenarios.
Valuation policies and procedures are regularly monitored by the Company’s finance group. Fair value measurements,
including those categorized within Level 3, are prepared and reviewed on their issuance date and then on an annual basis and
any third-party valuations are reviewed for reasonableness and compliance with the fair value measurements guidance under
IFRS. The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used
in making the measurements:
Fair Value
Hierarchy Level
Level 1
Level 2
Level 3
Description
Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
Inputs that are unobservable. This category includes all instruments for which the valuation technique
includes inputs not based on observable data and the unobservable inputs have a significant effect on
the instrument’s valuation.
PureTech Health plc Annual report and accounts 2020 167
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Whilst the Group considers the methodologies and assumptions adopted in fair value measurements as supportable,
reasonable and robust, because of the inherent uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the investment existed and the differences could be significant.
COVID-19 Consideration
At December 31, 2020, the Group assessed certain key assumptions within the valuation of its unquoted instruments and
considered the impact of the COVID-19 pandemic on all unobservable inputs (Level 3). The assumptions considered with
respect to COVID-19 included but were not limited to the following: exit scenarios and timing, discount rates, revenue
assumptions as well as volatilities. The Group views any impact of the COVID-19 pandemic on its unquoted instruments
as immaterial as of December 31, 2020.
Subsidiary Preferred Shares Liability and Subsidiary Convertible Notes
The following table summarizes the changes in the Group’s subsidiary preferred shares and convertible note liabilities
measured at fair value, which were categorized as Level 3 in the fair value hierarchy:
Balance at January 1, 2018
Value at issuance
Conversion
Deconsolidation of preferred shares
Change in fair value
Balance at December 31, 2018 and January 1, 2019
Value at issuance
Conversion to preferred
Conversion to common
Deconsolidation
Change in fair value
Finance Costs
Other
Cash distribution
Balance at December 31, 2019 and January 1, 2020
Value at issuance
Change in fair value
Balance at December 31, 2020
Subsidiary
Preferred
Shares
$000s
215,635
54,537
7,930
(36,517)
(24,066)
217,519
51,048
4,894
—
(207,346)
33,636
1,458
(112)
(108)
100,989
13,750
4,234
118,972
Subsidiary
Convertible
Notes
$000s
11,343
5,824
(7,581)
—
(128)
9,458
1,607
(4,894)
(2,418)
(5,017)
1,389
—
—
—
125
25,000
—
25,125
The change in fair value of preferred shares and convertible notes are recorded in Finance income/(costs) – fair value
accounting in the Consolidated Statements of Comprehensive Income/(Loss).
The table below sets out information about the significant unobservable inputs used at December 31, 2020 in the fair value
measurement of the Group’s material subsidiary preferred shares liabilities categorized as Level 3 in the fair value hierarchy:
Fair Value at
December 31, 2020
92,068
14,083
12,821
Valuation Technique
Market – Backsolve
& Hybrid allocation
Income – DCF &
OPM allocation
Cost Approach &
OPM allocation
Unobservable Inputs
Weighted Average
Sensitivity to Decrease in Input
0.88
Estimated time to exit
30.0%
Discount rate
95.0%
Volatility
2.89
Estimated time to exit
Discount rate
19.7%
Terminal value growth rate (2.8)%
56.8%
Volatility
2.00
Estimated time to exit
29.4%
Discount rate
40.0%
Volatility
Fair value increase
Fair value increase
Fair value decrease
Fair value increase
Fair value increase
168 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Subsidiary Preferred Shares Sensitivity
The following summarizes the sensitivity from the assumptions made by the Company with respect to the significant
unobservable inputs which are categorized as Level 3 in the fair value hierarchy and used in the fair value measurement of the
Group’s subsidiary preferred shares liabilities, as well as that with respect to the enterprise value of the underlying subsidiary
in general (Please refer to Note 15):
Input
Subsidiary Preferred Share Liability
As of December 31, 2020
Subsidiary Enterprise Value
Time to Liquidity
Discount Rate
Sensitivity Range
-2%
+2%
’-6 Months
’+6 Months
-5%
+5%
Financial Liability
Increase/(Decrease)
$000s
(2,146)
2,194
5,815
(5,437)
12,227
(5,779)
Financial Assets Held at Fair Value
Karuna Valuation
Karuna (Nasdaq: KRTX) is a listed entity on an active exchange and as such the fair value for the year ended December 31,
2020 was calculated utilizing the quoted common share price. Please refer to Note 5 for further details.
Akili, Gelesis and Vor Valuation
In accordance with IFRS 9, the Company accounts for its preferred share investments in Akili, Gelesis and Vor as financial assets
held at fair value through the profit and loss. During the year ended December 31, 2020, the Company recorded its investment
at fair value and recognized a gain of $41.3 million that was recorded to the Consolidated Statements of Comprehensive
Income/(Loss) on the line item Gain/(loss) on investments held at fair value.
The following table summarizes the changes in the Group’s investments held at fair value, which were categorized as Level 3
in the fair value hierarchy:
Balance at January 1, 2018
Deconsolidation of Akili
Gain/(Loss) on changes in fair value
Balance at December 31, 2018 and January 1, 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 December 31, 2019 and January 1, 2020
Cash purchase of Gelesis preferred shares (please refer to Note 6)
Cash purchase of Vor preferred shares
Gain/(Loss) on changes in fair value
Balance as of December 31, 2020 before allocation of associate gain/(loss) to long-term interest
Share of associate loss allocated to long-term interest (please refer to Note 6)
Balance as of December 31, 2020 after allocation of associate gain/(loss) to long-term interest
$’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
10,000
1,150
41,297
206,892
(23,006)
183,886
The change in fair value of investments held at fair value are recorded in Gain/(loss) on investments held at fair value in the
Consolidated Statements of Comprehensive Income/(Loss).
PureTech Health plc Annual report and accounts 2020 169
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
The table below sets out information about the significant unobservable inputs used at December 31, 2020 in the fair value
measurement of the Group’s material investments held at fair value categorized as Level 3 in the fair value hierarchy:
Fair Value at
December 31, 2020
204,379
Valuation Technique
Unobservable Inputs
Weighted Average
Sensitivity to Decrease in Input
Market – Scenario &
Hybrid allocation
Estimated time to exit
Exit valuation multiples
Discount rate
Discount for lack of
marketability (“DLOM”)
Volatility
1.73
2.19
28.0%
10.0%
65.0%
Fair value increase
Fair value decrease
Fair value increase
The following summarizes the sensitivity from the assumptions made by the Company with respect to the significant
unobservable inputs which are categorized as Level 3 in the fair value hierarchy and used in the fair value measurement of the
Group’s investments held at fair value, as well as that with respect to the enterprise value of the underlying investee in general
(Please refer to Note 5):
Input
As of December 31, 2020
Investee Enterprise Value
Time to Liquidity
Discount Rate
Investments Held at Fair Value
Sensitivity Range
-2%
+2%
’-6 Months
’+6 Months
-5%
+5%
Financial Asset
Increase/(Decrease)
$000s
(3,915)
3,886
22,828
(20,005)
11,691
(10,689)
Warrants
Warrants issued by subsidiaries within the Group are classified as liabilities, as they will be settled in a variable number of
shares and are not fixed-for-fixed. The following table summarizes the changes in the Group’s subsidiary warrant liabilities,
which were categorized as Level 3 in the fair value hierarchy:
Balance at January 1, 2018
Change in fair value
Balance at December 31, 2018 and January 1, 2019
Warrant Issuance
Gelesis Deconsolidation
Change in fair value
Balance at December 31, 2019 and January 1, 2020
Warrant Issuance
Change in fair value
Balance at December 31, 2020
Subsidiary
Warrant Liability
$000s
13,095
(83)
13,012
4,706
(21,611)
11,890
7,997
92
117
8,206
The change in fair value of warrants are recorded in Finance income/(costs) – fair value accounting in the Consolidated
Statements of Comprehensive Income/(Loss).
In June 2019, Gelesis amended their existing license and patent agreement with One S.r.l. As a result of the amendment
Gelesis issued One S.r.l. a warrant equal to 2.7 percent of as converted shares following the next financing round. The fair value
of the warrant was $4.7 million at issuance. On July 1, 2019, Gelesis deconsolidated and warrant liability of $21.6 million relating
to Series A-1, A-3, A-4 and One S.r.l. warrants was derecognized.
In connection with various amendments to its 2010 Loan and Security Agreement, Follica issued Series A-1 preferred share
warrants at various dates in 2013 and 2014. Each of the warrants has an exercise price of $0.14 and a contractual term of ten
years from the date of issuance. In 2017, in conjunction with the issuance of convertible notes, the exercise price of the warrants
was adjusted to $0.07 per share. The change in the fair value of the subsidiary warrants was recorded in finance costs, net in
the Consolidated Statements of Comprehensive Income/(Loss). The $8.2 million warrant liability at December 31, 2020 was
largely attributable to the outstanding Follica preferred share warrants.
In connection with the September 2, 2020 Oxford Finance LLC loan issuance, Vedanta also issued Oxford Finance LLC 12,886
Series C-2 preferred share warrants with an exercise price of $23.28 per share, expiring September 2030.
170 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
The table below sets out the weighted average of significant unobservable inputs used at December 31, 2020 with respect
to determining the fair value of the Group’s warrants categorized as Level 3 in the fair value hierarchy:
Assumption/Input
Expected term
Expected volatility
Risk free interest rate
Expected dividend yield
Estimated fair value of the convertible preferred shares
Exercise price of the warrants
Warrants
2.65
54.9%
0.1%
—%
$3.09
$0.27
The following summarizes the sensitivity from the assumptions made by the Company with respect to the significant
unobservable inputs which are categorized as Level 3 in the fair value hierarchy and used in the fair value measurement of the
Group’s warrant liabilities:
Input
As at December 31
Discount Rate
Warrant Liability
Sensitivity Range
-5%
+5%
Financial Liability
Increase/(Decrease)
$000s
7,279
(3,321)
Fair Value Measurement and Classification
The fair value of financial instruments by category at December 31, 2020 and 2019:
Financial assets:
U.S. treasuries1
Money Markets2
Investments held at fair value3
Trade and other receivables4
Total financial assets
Financial liabilities:
Subsidiary warrant liability
Subsidiary preferred shares
Subsidiary notes payable
Total financial liabilities
Carrying Amount
Financial
Assets
$000s
Financial
Liabilities
$000s
2020
Fair Value
Level 1
$000s
Level 2
$000s
Level 3
$000s
Total
$000s
—
394,143
553,167
2,558
949,867
—
—
—
—
—
—
394,143
346,275
—
740,417
—
—
—
—
8,206
118,972
26,455
153,633
—
—
—
—
—
—
—
2,558
2,558
—
—
1,330
1,330
—
—
206,892
—
206,892
8,206
118,972
25,125
152,303
—
394,143
553,167
2,558
949,867
8,206
118,972
26,455
153,633
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.
1
2
3 Balance prior to share of associate loss allocated to long-term interest (please refer to Note 6).
4 Outstanding receivables are owed primarily by corporations and government agencies, virtually all of which are investment grade.
Financial assets:
U.S. treasuries1
Money Markets2
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
Carrying Amount
Financial
Assets
$000s
Financial
Liabilities
$000s
30,088
106,586
714,905
1,977
853,556
—
—
—
—
—
—
—
—
—
7,997
100,989
1,455
110,441
2019
Fair Value
Level 1
$000s
Level 2
$000s
Level 3
$000s
Total
$000s
30,088
106,586
560,460
—
697,134
—
—
—
—
—
—
—
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
Issued by governments and government agencies, as applicable, all of which are investment grade.
1
2
Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment grade.
3 Outstanding receivables are owed primarily by corporations and government agencies, virtually all of which are investment grade.
PureTech Health plc Annual report and accounts 2020 171
Financial statements Notes to the Consolidated Financial Statements — continued
17. Subsidiary Notes Payable
The subsidiary notes payable are comprised of loans and convertible notes. During the years ended December 31, 2020
and 2019, the financial instruments for Knode and Appeering did not contain embedded derivatives and therefore these
instruments continue to be held at amortized cost. The notes payable consist of the following:
December 31,
Loans
Convertible notes
Total subsidiary notes payable
2020
$000s
1,330
25,125
26,455
2019
$000s
1,330
125
1,455
Loans
In October 2010, Follica entered into a loan and security agreement with Lighthouse Capital Partners VI, L.P. The loan is
secured by Follica’s assets, including Follica’s intellectual property and bears interest at a rate of 12.0 percent. The outstanding
loan balance totaled approximately $1.3 million and $1.3 million as of December 31, 2020 and 2019. The accrued interest
on such loan balance is presented as Other current liabilities and totaled approximately $0.5 million and $0.4 million as of
December 31, 2020 and 2019, respectively.
Convertible Notes
Convertible Notes outstanding were as follows:
January 1, 2019
Gross principal
Change in fair value
Conversion to preferred
Conversion to common
Deconsolidation
December 31, 2019 and January 1,
2020
Gross principal
Change in fair value
December 31, 2020
Karuna
$000s
2,838
1,607
572
—
—
(5,017)
—
—
—
—
Follica
$000s
6,495
—
817
(4,894)
(2,418)
—
—
—
—
—
Vedanta
$000s
—
—
—
—
—
—
—
25,000
—
25,000
Knode
$000s
50
—
—
—
—
—
50
—
—
50
Appeering
$000s
75
—
—
—
—
—
75
—
—
75
Total
$000s
9,458
1,607
1,389
(4,894)
(2,418)
(5,017)
125
25,000
—
25,125
On March 15, 2019, Karuna was deconsolidated in conjunction with the closing of a Series B Preferred Stock financing and the
outstanding convertible note liability of $5.0 million was derecognized.
In May 2017 and September 2017, Follica received $0.5 million and $0.6 million, respectively, from an existing third-party
investor through the issuance of convertible notes. The notes bore interest at an annual rate of 10.0 percent, matured 30 days
after demand by the holder, were convertible into equity upon a qualifying financing event, and required payment of at least
five times the outstanding principal and accrued interest upon a change of control transaction.
On July 19, 2019, all of the outstanding notes, plus accrued interest, issued by Follica converted into 17,639,204 shares of Series
A-3 Preferred Stock and 14,200,044 shares of common shares pursuant to a Series A-3 Note Conversion Agreement between
Follica and the noteholders. Third parties held 2,422,990 A-3 preferred shares and 1,981,944 common shares following the
conversion. The preferred shares are classified as financial liabilities at fair value through the profit and loss. The common shares
are accounted for as Non-controlling interests. See Note 18 for further details on such change in non-controlling interests.
On December 30, 2020, Vedanta issued a $25.0 million convertible promissory note to an investor. The note bears interest at
an annual rate of 6.0 percent and matures on the first anniversary of the note. Prepayment of the note is not allowed and there
is no conversion discount feature on the note. The note mandatorily converts in a Qualified equity financing and a Qualified
Public Offering at the current price of the financing or offering, all as defined in the note purchase agreement. In addition, the
note allows for optional conversion immediately prior to a Non Qualified public offering, Non Qualified Equity financing, or a
Corporate transaction. In the case of a Non qualified financing or a Corporate transaction the note will convert to the preferred
shares issued at the time of the last financing round at the price at such financing round. In the event of no conversion prior to a
change in control transaction, the note is repaid at one and a half times the outstanding principal plus accrued interest.
172 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
18. Non-Controlling Interest
During the year ended December 31, 2019, the Company deconsolidated three of its subsidiaries which resulted in a change
to the composition of its reportable segments. The Company has revised in the 2019 financial statements the 2018 financial
information to conform to the presentation as of and for the period ending December 31, 2019. Please refer to Note 4
“Segment Information” for further details regarding reportable segments.
The following table summarizes the changes in the equity classified non-controlling ownership interest in subsidiaries by
reportable segment:
Balance at January 1, 2018
Share of comprehensive loss
Deconsolidation of subsidiary
Equity settled share-based payments
Balance at December 31, 2018 and January 1, 2019
Share of comprehensive loss
Deconsolidation of subsidiary
Subsidiary note conversion and changes in NCI
ownership interest
Equity settled share-based payments
Purchase of minority interest
Other
Balance at December 31, 2019 and January 1, 2020
Share of comprehensive loss
Equity settled share-based payments
Other
Balance as of December 31, 2020
Controlled
Founded
Entities
$000s
(18,869)
(10,710)
—
2,476
(27,103)
(15,862)
—
23,049
1,683
—
—
(18,233)
(1,402)
2,822
30
(16,783)
Non-
Controlled
Founded
Entities
$000s
(125,758)
(8,980)
55,168
6,345
(73,225)
(23,953)
97,178
—
—
—
—
—
—
—
—
—
Parent
Company &
Other
$000s
525
—
—
67
592
—
—
—
—
—
1
593
(15)
—
(6)
573
Internal
$000s
(1,484)
(7,315)
—
—
(8,799)
(15,264)
—
—
—
24,039
24
—
—
—
—
—
Total
$000s
(145,586)
(27,005)
55,168
8,888
(108,535)
(55,079)
97,178
23,049
1,683
24,039
25
(17,640)
(1,417)
2,822
24
(16,210)
The following tables summarize the financial information related to the Group’s subsidiaries with material non-controlling
interests, aggregated for interests in similar entities, and before and after intra group eliminations.
For the year ended December 31
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)
Controlled
Founded
Entities
$000s
5,224
(55,942)
—
(55,942)
68,346
200,430
(132,084)
Internal
$000s
—
—
—
—
—
—
—
2020
Non-
Controlled
Founded
Entities
$000s
Intra-group
eliminations
$000s
Total
$000s
5,224
(54,869)
—
(54,869)
1,073
1,073
(7)
(14,621)
14,615
68,339
185,809
(117,470)
—
—
—
—
—
—
—
As of December 31, 2020, Controlled Founded Entities with non-controlling interests primarily include Alivio Therapeutics, Inc.,
Follica Incorporated, Sonde Health Inc., and Vedanta Biosciences, Inc. Ownership interests of the non-controlling interests in
Alivio Therapeutics, Inc., Follica Incorporated, Sonde Health Inc., and Vedanta Biosciences, Inc are 8.1 percent, 19.9 percent,
4.5 percent and 0.4 percent, respectively. In addition, Non-controlling interests include the amounts recorded for subsidiary
stock options, with the vast majority comprising of Vedanta stock options.
PureTech Health plc Annual report and accounts 2020 173
Financial statements Notes to the Consolidated Financial Statements — continued
18. Non-Controlling Interest — continued
For the year ended December 31
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
$000s1
1,968
(26,250)
—
(26,250)
5,290
50,554
(45,264)
—
(47,905)
(10)
(47,915)
—
—
—
Internal
$000s
6,079
(24,289)
—
(24,289)
17,614
11,510
6,104
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.
For the year ended December 31
Statement of Comprehensive Loss
Total revenue
Income/(loss) for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
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
2,195
(8,454)
—
(8,454)
1 Non-Controlled Founded Entities non-controlling interest calculation does not include equity method accounting, fair value method accounting or the gain on the deconsolidation
of subsidiary related to resTORbio or Akili, which is recorded within PureTech Health, LLC. Please refer to Note 5.
On July 19, 2019 PureTech and a third party investor converted their convertible debt in Follica to Follica Preferred shares
(presented as liabilities) and Follica common shares. The amount of convertible debt converted by the third party investor
into Follica common shares amounted to $2.4 million (see also Note 16). As a result of the conversion Follica NCI share (in
Follica common stock) was reduced from 68 percent to 19.9 percent, which resulted in a reduction in the NCI share in Follica’s
shareholders’ deficit of $19.9 million. The excess of the change in the book value of NCI ($19.9 million noted above) over the
contribution made by NCI ($2.4 million) amounted to $17.5 million and was recorded as a loss directly in shareholders’ equity.
During 2019 a subsidiary of the Company fully funded by the Company ceased its operations and became inactive. This
resulted in a change in the NCI share in the subsidiary deficit. As a result the Company recorded a loss directly in equity
of $3.1 million.
On October 1, 2019, PureTech acquired the remaining 10.0 percent of minority non-controlling interests of PureTech LYT, Inc.
(previously named Ariya Therapeutics, Inc.), increasing its ownership from 90.0 percent to 100.0 percent. In consideration for
the acquisition of minority interests, PureTech issued 2,126,338 shares of common shares. The fair value of the shares issued
in consideration for the minority non-controlling interest amounted to $9.1 million. The carrying amount of the non-controlling
interest at the acquisition was a $24.0 million deficit and the excess of the consideration paid over the book value of the non-
controlling interest of approximately $33.1 million was recorded directly in shareholders’ equity.
19. Trade and Other Payables
Information regarding Trade and other payables was as follows:
As of December 31
Trade payables
Accrued expenses
Income tax payable
Other
Total trade and other payables
2020
$000s
8,871
9,090
1,260
2,606
21,826
2019
$000s
11,098
8,651
93
—
19,842
174 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
20. Long-term loan
In September 2020, Vedanta entered into a $15.0 million loan and security agreement with Oxford Finance LLC. The loan
is secured by Vedanta’s assets, including equipment, inventory and intellectual property. The loan bears a floating interest
rate of 7.7 percent plus the greater of (i) 30 day U.S. Dollar LIBOR reported in the Wall Street Journal or (ii) 0.17 percent. The
loan matures September 2025 and requires interest only payments for the initial 24 months. The loan also carries a Final fee
upon full repayment of 7.0 percent of the original principal or $1.1 million. For loan consideration, Vedanta also issued Oxford
Finance LLC 12,886 Series C-2 preferred share warrants with an exercise price of $23.28 per share, expiring September 2030.
The outstanding loan balance totaled approximately $14.8 million as of December 31, 2020.
The following table summarizes long-term loan obligations as at December 31, 2020 and 2019:
Balance at January 1,
Net loan proceeds
Accrued interest
Interest paid
Reclassification of accrued interest to other current liabilities
Balance at December 31,
Long-term loan
2020
$000s
—
14,720
496
(296)
(102)
14,818
2019
$000s
—
—
—
—
—
—
The following table summarizes Vedanta’s principal payments for the long-term loan as of December 31, 2020:
Balance Type
Principal
Unamortized loan discount and
issuance costs
Total
21. Leases
2021
—
—
—
2022
1,491
—
1,491
2023
4,721
—
4,721
2024
5,112
—
5,112
2025
3,676
—
3,676
Total
15,000
(182)
14,818
The activity related to the Group’s right of use asset and lease liability for the year ended December 31, 2020 and 2019
is as follows:
Balance at January 1,
Additions
Subleases
Depreciation
Adjustments
Deconsolidated
Balance at December 31,
Balance at January 1,
Additions
Cash paid for rent (principal + interest)
Interest expense
Adjustments
Deconsolidated
Balance at December 31,
Right of use asset, net
2020
$000s
22,383
—
—
(2,699)
414
—
20,098
2019
$000s
10,353
19,434
(2,580)
(3,237)
—
(1,587)
22,383
Total lease liability
2020
$000s
37,843
—
(5,263)
2,354
414
—
35,348
2019
$000s
10,995
30,305
(4,173)
2,495
—
(1,779)
37,843
The following details the short term and long-term portion of the lease liability as at December 31, 2020 and 2019:
Short-term Portion of Lease Liability
Long-term Portion of Lease Liability
Total Lease Liability
Total lease liability
2020
$000s
3,261
32,088
35,348
2019
$000s
2,929
34,914
37,843
PureTech Health plc Annual report and accounts 2020 175
Financial statements Notes to the Consolidated Financial Statements — continued
21.
Leases — continued
The following table details the future maturities of the lease liability, showing the undiscounted lease payments to be paid 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
2020
$000s
5,422
5,609
6,275
6,489
5,101
16,452
45,348
10,000
35,348
During the year ended December 31, 2019, PureTech entered into a lease agreement for certain premises consisting of
approximately 50,858 rentable square feet of space located at 6 Tide Street. The lease commenced on April 26, 2019
(“Commencement Date”) for an initial term consisting of ten years and three months and there is an option to extend for two
consecutive periods of five years each. The Company assessed at lease commencement date whether it is reasonably certain
to exercise the extension options and deemed such options not reasonably certain to be exercised. The Company will reassess
whether it is reasonably certain to exercise the options only if there is a significant event or significant changes in circumstances
within its control.
On June 26, 2019, PureTech executed a sublease agreement with Gelesis. The lease is for the approximately 9,446 rentable
square feet located on the sixth floor of the Company’s former offices at the 501 Boylston Street building. The sublessee
obtained possession of the premises on June 1, 2019 and the rent period term began on June 1, 2019 and expires on August 31,
2025. The sublease was determined to be a finance lease and the Group, therefore, derecognized the right of use asset and
recognized a lease receivable at inception of the sublease. As of December 31, 2020 the balances related to the sublease were
as follows:
Short-term Portion of Lease Receivable
Long-term Portion of Lease Receivable
Total Lease Receivable
Total lease receivable
$000s
381
1,700
2,082
The following table details the future maturities of the lease receivable, showing the undiscounted lease payments to be
received after the reporting date:
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
2020
$000s
494
504
513
523
353
—
2,387
305
2,082
On August 6, 2019, PureTech executed a sublease agreement with Dewpoint Therapeutics, Inc. (“Dewpoint”). The sublease
is for approximately 11,852 rentable square feet located on the third floor of the 6 Tide Street building, where the Company’s
offices are currently located. Dewpoint obtained possession of the premises on September 1, 2019 with a rent period term that
began on September 1, 2019 and expires on August 31, 2021. The sublease was determined to be an operating lease.
Rental income recognized by the Company during the year ended December 31, 2020 was $1.08 million and is included in the
Other income/(expense) line item in the Consolidated Statements of Comprehensive Income/(Loss). The following table details
the future payments under the sublease, showing the undiscounted lease payments to be received after the reporting date:
Less than one year
Total
2020
$000s
722
722
Total rent expense under the Group’s operating leases was approximately $2.5 million during the year ended December 31,
2018. Rent expense is included in the General and administrative expenses line item in the Consolidated Statements
of Comprehensive Income/(Loss).
176 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
22. Capital and Financial Risk Management
Capital Risk Management
The Group’s capital and financial risk management policy is to maintain a strong capital base so as to support its strategic
priorities, maintain investor, creditor and market confidence as well as sustain the future development of the business. The
Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
To maintain or adjust the capital structure, the Group may issue new shares or incur new debt. The Group has some external
debt and no material externally imposed capital requirements. The Group’s share capital is clearly set out in Note 14.
Management continuously monitors the level of capital deployed and available for deployment in the Internal and Parent
segments as well as at Founded Entities. The Directors seek to maintain a balance between the higher returns that might be
possible with higher levels of deployed capital and the advantages and security afforded by a sound capital position.
The Group’s Directors have overall responsibility for establishment and oversight of the Group’s capital and risk management
framework. The Group is exposed to certain risks through its normal course of operations. The Group’s main objective in
using financial instruments is to promote the development and commercialization of intellectual property through the raising
and investing of funds for this purpose. The Group’s policies in calculating the nature, amount and timing of investments are
determined by planned future investment activity. Due to the nature of activities and with the aim to maintain the investors’
funds as secure and protected, the Group’s policy is to hold any excess funds in highly liquid and readily available financial
instruments and maintain insignificant exposure to other financial risks.
COVID-19
In December 2019, illnesses associated with COVID-19 were reported and the virus has since caused widespread and
significant disruption to daily life and economies across geographies. The World Health Organization has classified the
outbreak as a pandemic. The Group’s operations, financial condition and results have not been significantly impacted during
the year ended December 31, 2020 as a result of the COVID-19 pandemic. In response to the COVID-19 pandemic, the Group
has taken swift action to ensure the safety of employees and other stakeholders. The Group continues to monitor the latest
developments regarding the COVID-19 pandemic on business, operations, and financial condition and results, and have made
certain assumptions regarding the pandemic for purposes of the Group’s operational planning and financial projections,
including assumptions regarding the duration and severity of the pandemic and the global macroeconomic impact of the
pandemic. Despite careful tracking and planning, however, the Group is unable to accurately predict the extent of the impact
of the pandemic on the business, operations, and financial condition and results in future periods due to the uncertainty of
future developments. The Group is focused on all aspects of the business and is implementing measures aimed at mitigating
issues where possible including by using digital technology to assist operations for R&D and enabling functions.
Credit Risk
The Group has exposure to the following risks arising from financial instruments:
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its
contractual obligations. Financial instruments that potentially subject the Group to concentrations of credit risk consist
principally of cash and cash equivalents, investments held at fair value and trade and other receivables. The Group held the
following balances:
As of December 31
Cash and cash equivalents
Short-term investments
Trade and other receivables
Total
2020
$000s
403,881
—
2,558
406,438
2019
$000s
132,360
30,088
1,977
164,425
The Group invests its excess cash in U.S. Treasury Bills, U.S. debt obligations and money market accounts, which the Group
believes are of high credit quality. Further the Group’s cash, cash equivalents and short-term investments are held at diverse,
investment-grade financial institutions.
PureTech Health plc Annual report and accounts 2020 177
Financial statements Notes to the Consolidated Financial Statements — continued
22.
Capital and Financial Risk Management — continued
The Group assesses the credit quality of customers on an ongoing basis. The credit quality of financial assets that are neither
past due nor impaired is assessed by historical and recent payment history, counterparty financial position, reference to credit
ratings (if available) or to historical information about counterparty default rates. The Group does not have expected credit
losses owing largely to a small number of counterparties and the high credit quality of such counterparties.
The aging of trade and other receivables that were not impaired at December 31 is as follows:
As of December 31
Neither past due or impaired
Total
2020
$000s
2,558
2,558
2019
$000s
1,977
1,977
Liquidity Risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities
that are settled by delivering cash or another financial asset. The Group actively manages its risk of a funds shortage by closely
monitoring the maturity of its financial assets and liabilities and projected cash flows from operations, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Due to the nature of
these financial liabilities, the funds are available on demand to provide optimal financial flexibility.
The table below summarizes the maturity profile of the Group’s financial liabilities, including subsidiary preferred shares that
have customary liquidation preferences, as of December 31, 2020 and 2019 based on contractual undiscounted payments:
As of December 31
Long-term loan
Subsidiary notes payable
Trade and other payables
Warrants2
Subsidiary preferred shares (Note 15)1
Total
As of December 31
2020
Carrying
Amount
$000s
Within Three
Months
$000s
Three to
Twelve Months
$000s
One to Five
Years
$000s
14,818
26,455
21,826
8,206
118,972
190,278
296
1,455
21,826
8,206
118,972
150,756
905
25,000
—
—
—
25,905
2019
18,780
—
—
—
—
18,780
Carrying
Amount
$000s
Within Three
Months
$000s
Three to
Twelve Months
$000s
One to Five
Years
$000s
Subsidiary notes payable
Trade and other payables
Warrants2
Subsidiary preferred shares (Note 15)1
Total
1 Redeemable only upon a liquidation or Deemed liquidation event, as defined in the applicable shareholder documents.
2 Warrants issued by subsidiaries to third parties to purchase preferred shares.
1,455
19,842
7,997
100,989
130,283
1,455
19,842
7,997
100,989
130,283
—
—
—
—
—
—
—
—
—
—
Total
$000s
19,981
26,455
21,826
8,206
118,972
195,441
Total
$000s
1,455
19,842
7,997
100,989
130,283
Interest Rate Sensitivity
As of December 31, 2020, the Group had cash and cash equivalents of $403.9 million. The Group’s exposure to interest
rate sensitivity is impacted by changes in the underlying U.K. and U.S. bank interest rates. The Group has not entered into
investments for trading or speculative purposes. Due to the conservative nature of the Group’s investment portfolio, which is
predicated on capital preservation and investments in short duration, high-quality U.S. Treasury Bills and U.S. debt obligations
and related money market accounts, a change in interest rates would not have a material effect on the fair market value of
the Group’s portfolio, and therefore the Group does not expect operating results or cash flows to be significantly affected by
changes in market interest rates.
Controlled Founded Entity Investments
The Group maintains investments in certain Controlled Founded Entities. The Group’s investments in Controlled Founded
Entities are eliminated as intercompany transactions upon financial consolidation. The Group is however exposed to a
preferred share liability owing to the terms of existing preferred shares and the ownership of Controlled Founded Entities
preferred shares by third parties. As discussed in Note 15, certain of the Group’s subsidiaries have issued preferred shares
that include the right to receive a payment in the event of any voluntary or involuntary liquidation, dissolution or winding up
of a subsidiary, which shall be paid out of the assets of the subsidiary available for distribution to shareholders and before any
payment shall be made to holders of ordinary shares. The liability of preferred shares is maintained at fair value through the
profit and loss. The Group’s strong cash position, budgeting and forecasting processes, as well as decision making and risk
mitigation framework enable the Group to robustly monitor and support the business activities of the Controlled Founded
Entities to ensure no exposure to credit losses and ultimately dissolution or liquidation. Accordingly, the Group views exposure
to 3rd party preferred share liability as low. Please refer to Notes 15 and 16 for further information regarding the Group’s
exposure to Controlled Founded Entity Investments.
178 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
22.
Capital and Financial Risk Management — continued
Non-Controlled Founded Entity Investments
The Group maintains certain investments in Non-Controlled Founded Entities which are deemed either as investments and
accounted for as investments held at fair value or associates and accounted for under the equity method (please refer to
Note 1). The Group’s exposure to investments held at fair value is $530.2 million as of December 31, 2020 and the Group may
or may not be able to realize the value in the future. Accordingly, the Group views the risk as high. The Group’s exposure to
investments in associates is limited to the carrying amount of the investment in an Associate. The Group is not exposed to
further contractual obligations or contingent liabilities beyond the value of initial investment. As of December 31, 2020, Gelesis
was the only associate. The carrying amount of the investment in Gelesis as an associate was zero. Accordingly, the Group
does not view this as a risk. Please refer to Notes 5, 6 and 16 for further information regarding the Group’s exposure to Non-
Controlled Founded Entity Investments.
Equity Price Risk
As of December 31, 2020, the Group held 3,406,564 common shares of Karuna. The fair value of the Group’s investment in the
common stock of Karuna was $346.1 million.
The investment in Karuna is exposed to fluctuations in the market price of these common shares. The effect of a 10.0 percent
adverse change in the market price of Karuna common shares as of December 31, 2020 would have been a loss of
approximately $34.6 million recognized as a component of Other income (expense) in the Consolidated Statements of
Comprehensive Income/(Loss).
Foreign Exchange Risk
The Group maintains consolidated financial statements in the Group’s functional currency, which is the U.S. dollar. Monetary
assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at
rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies
are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains
or losses arising from foreign currency transactions are included in the determination of net income/(loss) for the respective
periods. Such foreign currency gains or losses were not material for all reported periods. See Note 9.
The Group recorded foreign currency losses in respect of foreign operations of $0.5 million, $0.0 million and $0.2 million for
the periods ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively, which are included within
Other comprehensive income/(loss) in the Consolidated Statements of Comprehensive Income/(Loss).
The Group does not currently engage in currency hedging activities since its foreign currency risk is limited, but the Group may
begin to do so in the future if and when its foreign currency risk exposure changes. Instruments that may be used to hedge
future risks include foreign currency forward and swap contracts. These instruments may be used to selectively manage risks,
but there can be no assurance that the Group will be fully protected against material foreign currency fluctuations.
23. Commitments and Contingencies
The Group is party to certain licensing agreements where the Company is licensing IP from third parties. In consideration for
such licenses the Group has made upfront payments and may be required to make additional contingent payments based
on developmental and sales milestones and/or royalty on future sales. As of December 31, 2020 these milestone events have
not yet occurred and therefore the Company does not have a present obligation to make the related payments in respect
of the licenses. Many of these milestone events are remote of occurring. As of December 31, 2020 payments in respect of
developmental milestones that are dependent on events that are outside the control of the company but are reasonably
possible to occur amounted to approximately $5.3 million. These milestone amounts represent an aggregate of multiple
milestone payments depending on different milestone events in multiple agreements. The probability that all such milestone
events will occur in the aggregate is remote. Payments made to license IP represent the acquisition cost of intangible assets.
See Note 12.
The Company is party to certain sponsored research arrangements as well as arrangements with contract manufacturing
and contract research organizations, whereby the counterparty provides the Company with research and/or manufacturing
services. As of December 31, 2020 the noncancellable commitments in respect of such contracts amounted to approximately
$5.1 million.
PureTech Health plc Annual report and accounts 2020 179
Financial statements Notes to the Consolidated Financial Statements — continued
24. Related Parties Transactions
Related Party Subleases
During 2019, PureTech executed sublease agreements with a related party Gelesis. Please refer to Note 21 for further details
regarding the sublease.
Key Management Personnel Compensation
Key management includes executive directors and members of the executive management team of the Group. The key
management personnel compensation of the Group was as follows for the years ended December 31:
As of December 31
Short-term employee benefits
Share-based payments
Total
2020
$000s
4,833
5,822
10,656
2019
$000s
5,543
2,774
8,317
2018
$000s
3,998
3,062
7,060
Short-term employee benefits include salaries, health care and other non-cash benefits. Share-based payments are generally
subject to vesting terms over future periods.
Convertible Notes Issued to Directors
Certain members of the Group have invested in convertible notes issued by the Group’s subsidiaries. As of December 31,
2020, 2019 and 2018, the outstanding related party notes payable totaled $89 thousand, $84 thousand and $79 thousand,
respectively, including principal and interest.
The notes issued to related parties bear interest rates, maturity dates, discounts and other contractual terms that are the same
as those issued to outside investors during the same issuances, as described in Note 17.
Directors’ and Senior Managers’ Shareholdings and Share Incentive Awards
The Directors and senior managers hold beneficial interests in shares in the following businesses and sourcing companies as at
December 31, 2020:
Directors:
Ms. Daphne Zohar²
Dame Marjorie Scardino
Kiran Mazumdar-Shaw
Dr. Robert Langer
Dr. Raju Kucherlapati
Dr. John LaMattina4
Mr. Christopher Viehbacher
Mr. Stephen Muniz
Senior Managers:
Dr. Bharatt Chowrira
Dr. Eric Elenko
Dr. Joep Muijrers
Dr. George Farmer
Dr. Joseph Bolen
Business Name (Share Class)
Gelesis (Common)
—
—
Entrega (Common)
Alivio (Common)
Enlight (Class B Common)
Gelesis (Common)
Akili (Series A-2 Preferred)
Akili (Series C 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 December
31, 2020
Number of
options held as
of December
31, 2020
Ownership
Interest¹
1,339,114
59,443
—
—
—
—
—
332,500
— 1,575,000
30,000
—
20,000
—
—
37,372
—
11,755
—
51,070
83,050
—
49,253
—
25,000
—
—
—
20,000
—
10,000
—
—
—
—
—
—
—
—
125,000
5.10%
—%
—%
4.24%
6.14%
3.00%
0.10%
0.15%
0.05%
0.20%
0.30%
0.20%
0.22%
—%
0.10%
0.04%
—%
—%
—%
0.04%
1 Ownership interests as of December 31, 2020 are calculated on a diluted basis, including issued and outstanding shares, warrants and options (and written commitments to
issue options) but excluding unallocated shares authorized to be issued pursuant to equity incentive plans and any shares issuable upon conversion of outstanding convertible
promissory notes.
2 Common shares and options held by Yishai Zohar, who is the husband of Ms. Zohar. Ms. Zohar does not have any direct interest in the share capital of Gelesis. Ms Zohar recuses
herself from any and all material decisions with regard to Gelesis.
3 Shares held through Dr. Bennett Shapiro and Ms. Fredericka F. Shapiro, Joint Tenants with Right of Survivorship.
4 Dr. John and Ms. Mary LaMattina hold 50,540 shares of common shares and 49,524 shares of Series A-1 preferred shares in Gelesis. Individually, Dr. LaMattina holds 530 shares
of Gelesis and convertible notes issued by Appeering in the aggregate principal amount of $50,000.
5 Options to purchase the listed shares were granted in connection with the service on such founded entity’s Board of Directors and any value realized therefrom shall be assigned
to PureTech Health, LLC.
Directors and senior managers hold 23,245,840 ordinary shares and 8.1 percent voting rights of the Company as of
December 31, 2020. This amount excludes options to purchase 3,459,344 ordinary shares. This amount also excludes
6,204,268 shares, which are issuable based on the terms of performance based RSU awards granted to certain senior managers
covering the financial years 2020, 2019 and 2018. Such shares will be issued to such senior managers in future periods provided
that performance conditions are met and certain of the shares will be withheld for payment of customary withholding taxes.
180 PureTech Health plc Annual report and accounts 2020
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 recognized in the Consolidated
Statements of Comprehensive Income/(Loss) except to the extent that it relates to items recognized directly in equity.
For the years ended December 31, 2020, 2019 and 2018, the Group filed a consolidated U.S. federal income tax return
which included all subsidiaries in which the Company owned greater than 80 percent of the vote and value. For the years
ended December 31, 2020, 2019 and 2018, the Group filed certain consolidated state income tax returns which included
all subsidiaries in which the Company owned greater than 50 percent of the vote and value. The remaining subsidiaries file
separate U.S. tax returns.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized due to temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognized for unused tax losses,
unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be realized.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using
tax rates enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on
a net basis.
Deferred taxes are recognized in Consolidated Statements of Comprehensive Income/(Loss) except to the extent that they
relate to items recognized directly in equity or in other comprehensive income.
Amounts recognized in Consolidated Statements of Comprehensive Income/(Loss):
As of December 31
Income/(loss) for the year
Income tax expense/(benefit)
Income/(loss) before taxes
Recognized income tax expense/(benefit):
As of December 31
Federal
Foreign
State
Total current income tax expense/(benefit)
Federal
Foreign
State
Total deferred income tax expense/(benefit)
Total income tax expense/(benefit), recognized
2020
$000s
4,568
14,401
18,969
2020
$000s
21,796
—
—
21,796
(7,349)
—
(46)
(7,395)
14,401
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 was $14.4 million, $112.4 million and $2.2 million in 2020, 2019 and 2018 respectively. The decrease in tax
expense is primarily the result of the decrease in profit before tax.
PureTech Health plc Annual report and accounts 2020 181
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 U.S. A reconciliation of the U.S. federal statutory tax rate to the effective tax
rate is as follows:
2020
2019
2018
As of December 31
Weighted-average statutory rate
Effects of state tax rate in U.S.
R&D and orphan drug tax credits
Share-based payment
measurement
Mark-to-market adjustments
Transaction Costs
Interest Expense
Executive Compensation
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 recognized
Current year losses for which no
deferred tax asset is recognized
Other
$000s
3,984
1,844
(5,642)
327
919
361
(2,258)
827
—
—
—
—
—
13,948
91
14,401
%
21.00
9.72
(29.74)
1.73
4.84
1.91
(11.91)
4.36
0.00
0.00
0.00
0.00
0.00
73.53
0.48
75.92
$000s
97,183
22,111
(6,321)
433
3,725
—
1,030
—
—
(13,658)
—
—
%
21.00
4.78
(1.37)
0.09
0.80
0.00
0.22
0.00
0.00
(2.95)
0.00
0.00
(6,251)
(1.35)
$000s
(14,372)
(3,267)
(3,268)
3,429
(3,745)
—
—
—
22
9,688
(55)
(78)
—
14,514
(356)
112,409
3.14
(0.06)
24.29
13,012
854
2,221
%
21.00
4.77
4.78
(5.01)
5.47
0.00
0.00
0.00
(0.03)
(14.16)
0.08
0.11
0.00
(19.01)
(1.25)
(3.25)
The Company is also subject to taxation in the UK but to date no taxable income has been generated in the UK. Changes
in corporate tax rates can change both the current tax expense (benefit) as well as the deferred tax expense (benefit).
Deferred Tax Assets and Liabilities
Deferred tax assets have been recognized in the U.S. jurisdiction in respect of the following items:
2020
$000s
39,901
—
10,805
5,429
358
9,657
2,078
68,228
(120,676)
(5,491)
(3,588)
(27)
(129,782)
(61,554)
108,626
—
47,072
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)
(78,204)
115,445
(142)
37,099
As of December 31
Operating tax losses
Capital loss carryovers
Research credits
Share-based payments
Deferred revenue
Lease Liability
Other temporary differences
Deferred tax assets
Investment in subsidiaries
ROU asset
Fixed assets
Other temporary differences
Deferred tax liabilities
Deferred tax assets (liabilities), net
Deferred tax liabilities, net, recognized
Deferred tax assets, net, recognized
Deferred tax assets (liabilities), net, not recognized
182 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Consolidated Financial Statements — continued
25.
Taxation — continued
We have recognized deferred tax assets related to entities in the U.S. Federal and Massachusetts consolidated return groups
due to future reversals of existing taxable temporary differences that will be sufficient to recover the net deferred tax assets.
Our remaining deferred tax assets have not been recognized because it is not probable that future taxable profits will be
available to support their realizability.
There was movement in deferred tax recognized, which impacted income tax expense by approximately $7.4 million benefit,
primarily related to changes in the value of investments. The Company sold a portion of its stock in Karuna during 2020 and
was able to partially offset its gains by using various attributes (i.e. net operating losses, research and development credits,
etc.) resulting in current tax expense of $21.8 million.
The Company had U.S. federal net operating losses carry forwards (“NOLs”) of approximately $169.7 million, $243.0 million
and $238.1 million as of December 31, 2020, 2019 and 2018, respectively, which are available to offset future taxable income.
These NOLs expire through 2037 with the exception of $101.9 million which is not subject to expiration. The Company had
U.S. Federal research and development tax credits of approximately $3.9 million, $7.4 million and $6.7 million as of December
31, 2020, 2019 and 2018, respectively, which are available to offset future taxes that expire at various dates through 2040. The
Company also had Federal Orphan Drug credits of approximately $5.2 million and $3.7 million as of December 31, 2020 and
2019, which are available to offset future taxes that expire at various dates through 2040. A portion of these Federal NOLs and
credits can only be used to offset the profits from the Company’s subsidiaries who file separate Federal tax returns. These
NOLs and credits are subject to review and possible adjustment by the Internal Revenue Service.
The Company had Massachusetts net operating losses carry forwards (“NOLs”) of approximately $67.4 million, $273.0 million
and $179.5 million for the years ended December 31, 2020, 2019 and 2018, respectively, which are available to offset future
taxable income. These NOLs expire at various dates beginning in 2030. The Company had Massachusetts research and
development tax credits of approximately $2.1 million, $1.6 million and $1.3 million for the years ended December 31, 2020,
2019 and 2018, respectively, which are available to offset future taxes and expire at various dates through 2035. These NOLs
and credits are subject to review and possible adjustment by the Massachusetts Department of Revenue.
Utilization of the NOLs and research and development credit carryforwards may be subject to a substantial annual limitation
under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or
that could occur in the future. These ownership changes may limit the amount of NOL and research and development credit
carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company notes that a
382 analysis was performed through December 31, 2020. The results of this analysis concluded that certain net operating
losses were subject to limitation under Section 382 of the Internal Revenue Code. None of the Company’s tax attributes which
are subject to a restrictive Section 382 limitation have been recognized in the financial statements.
Uncertain Tax Positions
The Company has no uncertain tax positions as of December 31, 2020. U.S. corporations are routinely subject to audit by
federal and state tax authorities in the normal course of business.
PureTech Health plc Annual report and accounts 2020 183
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 derecognized certain assets and liabilities based on their historical costs. The excess of the consideration
transferred over the historical costs of the assets and liabilities resulted in a gain of approximately $4.0 million, which was
recorded to the line item “Gain/(loss) on disposal of assets” on the accompanying Consolidated Statements Comprehensive
Income/(Loss) for the year ended December 31, 2018.
Additionally, as part of the derecognition, the Company and certain preferred shareholders received a cash distribution of
approximately $3.3 million during the year ended December 31, 2018. During the year ended December 31, 2019, certain
preferred shareholders received further cash distributions of $0.1 million. As of December 31, 2020, no remaining third party
obligations remained.
27. Tal Merger Agreement
During the year ended December 31, 2018, Tal Medical, Inc. (“Tal”) a subsidiary of the Group entered into an option agreement
with a third party, through which the third party was given the option to acquire substantially all of Tal’s assets. The option
was contingent on the third party raising gross proceeds of $15.0 million prior to January 1, 2019 (the option expiration
date). Upon the expiration of the option all external investors, not including PureTech, would be entitled to a distribution
equal to the cash on hand on the date of expiration, and Tal’s operations would wind down. As of December 31, 2018, the
minimum gross proceeds were not raised, resulting in the option expiring. As a result, the preferred shares were adjusted to
the cash distribution the external investors were entitled to, which totaled $0.1 million, resulting in gain of $11.0 million being
recognized in Finance income/(costs) – fair value accounting line of the Consolidated Statements of Comprehensive Income/
(Loss) for the year ended December 31, 2018. In 2019 a merger was executed between PureTech and Tal wherein PureTech
became the sole shareholder of Tal following the liquidation of all assets. In 2019, certain preferred shareholders received
distributions of $0.1 million in connection with the merger. As of December 31, 2019 and 2020 Tal was an inactive entity in
the Group’s Parent segment.
28. Subsequent Events
The Company has evaluated subsequent events after December 31, 2020, the date of issuance of the Consolidated Financial
Statements, and has not identified any recordable or disclosable events not otherwise reported in these consolidated financial
statements or notes thereto, except for the following:
On January 8, 2021, PureTech participated in the second closing of Vor’s Series B Preferred Share financing. For consideration
of $0.5 million, PureTech received 961,538 shares.
On February 9, 2021, Vor closed its initial public offering of 9,828,017 shares at a price to the public of $18.00 per share.
Subsequent to the closing, PureTech held 3,207,200 shares of Vor common stock, representing 8.6 percent of Vor
common stock.
On February 9, 2021, PureTech Health sold 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million.
Following the sale PureTech holds 2,406,564 shares of Karuna common stock, representing 8.2 percent of Karuna
common stock.
184 PureTech Health plc Annual report and accounts 2020
Financial statements PureTech Health plc Statement of Financial Position
For the years ended December 31
Assets
Non-current assets
Investment in subsidiary
Intercompany long-term receivable
Total non-current assets
Current assets
Intercompany receivables
Total current assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Merger reserve
Other reserve
Accumulated deficit (Income/(loss) for the year $(2,739))
Total equity
Current liabilities
Trade and other payables
Intercompany payables
Total current liabilities
Total equity and liabilities
Note
2020
$000s
2019
$000s
2
3
3
4
4
4
4
4
5
161,082
297,556
458,638
—
—
458,638
5,417
288,978
138,506
20,725
(10,621)
443,005
621
15,012
15,633
458,638
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
437,878
Please refer to the accompanying Notes to the PureTech Health plc financial information. Registered number: 09582467.
The PureTech Health plc financial statements were approved by the Board of Directors and authorized for issuance on April 14,
2021 and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
April 14, 2021
The accompanying Notes are an integral part of these financial statements.
PureTech Health plc Annual report and accounts 2020 185
Financial statements
PureTech Health plc Statements of Changes in Equity
For the years ended December 31
Balance January 1, 2019
Total comprehensive loss
for the period
Issue of shares to Ariya founders
Issuance of restricted stock units
Exercise of share-based awards
Net loss
Balance December 31, 2019
Total comprehensive loss
for the period
Exercise of share-based awards
Equity settled share-based
payments
Settlement of restricted stock
units (RSU)
Vesting of restricted stock units
Net loss
Balance December 31, 2020
Shares
Amount
$000s
Share
Premium
$000s
Merger
Reserve
$000s
282,493,867
5,375
278,349
138,506
Other
Reserve
$000s
991
Accumulated
deficit
$000s
Total
equity
$000s
(5,192) 418,029
2,126,338
513,324
237,090
—
285,370,619
28
—
5
—
5,408
9,078
—
535
—
287,962
—
—
—
—
138,506
514,406
—
—
9
—
—
1,016
—
—
—
—
—
—
—
285,885,025
—
—
5,417
—
—
288,978
—
—
138,506
—
—
—
—
991
—
33,902
(12,888)
(1,280)
—
20,725
—
9,106
—
—
—
540
(2,689)
(2,689)
(7,881) 424,986
—
—
—
1,025
33,902
(12,888)
—
(2,739)
(1,280)
(2,739)
(10,620) 444,285
The accompanying Notes are an integral part of these financial statements.
186 PureTech Health plc Annual report and accounts 2020
Financial statements PureTech Health plc Statements of Cash Flows
For the years ended December 31
Cash flows from operating activities
Net loss
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:
Exercise of share based awards
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:
Increase in investment against share-based awards
Issuance of shares against intercompany receivable
Exercise of share-based awards against intercompany receivable
The accompanying Notes are an integral part of these financial statements.
2020
$000s
2019
$000s
(2,739)
(2,689)
—
3,354
(614)
—
—
—
—
—
—
—
—
19,734
—
1,025
(539)
1,453
1,235
(540)
—
540
540
—
—
—
—
—
9,106
—
PureTech Health plc Annual report and accounts 2020 187
Financial statements Notes to the Financial Statements
1.
Accounting policies
2.
Investment in subsidiary
Balance at May 8, 2015
Investment in PureTech LLC as a result of the
reverse acquisition
Increase due to equity settled share based
payments granted to employees and service
providers in subsidiaries
Balance at December 31, 2020 and 2019
$000s
—
141,348
19,734
161,082
PureTech consists of the Parent and its subsidiaries (together,
the “Group”). Investment in subsidiary represents the
Parent’s investment in PureTech LLC as a result of the reverse
acquisition of the Group’s financial statements immediately
prior to the Parent’s initial public offering (“IPO”) on the
London Stock Exchange in June 2015. PureTech LLC operates
in the U.S. as a US-focused scientifically driven research
and development company that conceptualizes, sources,
validates and commercializes unexpected and potentially
disruptive approaches to advance the needs of human health.
For a summary of the Parent’s indirect subsidiaries please
refer to Note 1 of the Consolidated Financial Statements
of PureTech Health plc.
In 2020, the Parent recognized a $19.7 million increase in
its investment in its operating subsidiary PureTech LLC
due to equity settled share based payments granted to
employees and service providers in subsidiaries. $24.8 million
relates to amounts which should have been recognized at
December 31, 2019. The prior year balance sheet has not
been adjusted since the directors do not believe this item
is qualitatively material to users of the financial statements,
it has no impact on distributable reserves of the Parent and
no impact on the Group consolidated financial statements.
The disclosure relating to such share based payment awards
is detailed in Note 8 of the of the accompanying Consolidated
Financial Statements.
3.
Intercompany receivables
The Parent has an accounts receivable balance from its
operating subsidiary PureTech LLC of $297.6 million due to
cash received from the IPO and other share issuances.
As of December 31, 2020 the intercompany receivable
balance was classified as a long-term receivable since the
Parent does not expect to realize the receivable within the
next 12 months.
Basis of Preparation and Measurement
The financial statements of PureTech Health plc (the “Parent”)
are presented as of December 31, 2020 and 2019 and for the
years ended December 31, 2020 and 2019 and have been
prepared under the historical cost convention in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and International
Financial Reporting Standards (IFRSs) adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the EU. The
financial statements of PureTech Health plc also comply
fully with IFRSs as issued by the International Accounting
Standards Board (IASB). A summary of the significant
accounting policies that have been applied consistently
throughout the year are set out below.
Functional and Presentation Currency
The functional currency of the Parent is United States
(“U.S.”) Dollars and the financial statements are presented
in U.S. Dollars.
Investments
Investments are stated at historic cost less any provision for
impairment in value and are held for long-term investment
purposes. Provisions are based upon an assessment of events
or changes in circumstances that indicate that an impairment
has occurred such as the performance and/or prospects
(including the financial prospects) of the investee company
being significantly below the expectations on which the
investment was based, a significant adverse change in
the markets in which the investee company operates or
a deterioration in general market conditions.
Impairment
If there is an indication that an asset might be impaired,
the Parent would perform an impairment review. An asset
is impaired if the recoverable amount, being the higher of
net realizable value and value in use, is less than its carrying
amount. Value in use is measured based on future discounted
cash flows attributable to the asset. In such cases, the
carrying value of the asset is reduced to recoverable amount
with a corresponding charge recognized in the profit and
loss account.
Financial Instruments
Currently the Parent does not enter into derivative financial
instruments. Financial assets and financial liabilities are
recognized and cease to be recognized on the basis of when
the related titles pass to or from the Parent Company.
Equity Settled Share Based Payments
Share based payment awards granted in subsidiaries to
employees and consultants to be settled in Parent’s equity
instruments are accounted for as equity-settled share-based
payment transactions in accordance with IFRS 2. The grant
date fair value of employee share-based payment awards
granted in subsidiaries is recognized as an increase to the
investment with a corresponding increase in equity over the
requisite service period related to the awards. The fair value
is measured using an option pricing model, which takes into
account the terms and conditions of the options granted.
188 PureTech Health plc Annual report and accounts 2020
Financial statements Notes to the Financial Statements — continued
4.
Share capital and reserves
6.
Profit and loss account
As permitted by Section 408 of the Companies Act 2006,
the Parent’s profit and loss account has not been included in
these financial statements. The Parent’s loss for the year was
$2.7 million.
7.
Directors’ remuneration, employee information
and share-based payments
The remuneration of the executive directors of the
Parent Company is disclosed in Note 24, Related Parties
Transactions, of the accompanying Consolidated Financial
Statements. Full details for directors’ remuneration can be
found in the Directors’ Remuneration Report. Full detail of
the share-based payment charge and the related disclosures
can be found in Note 8, Share-based Payments, of the
accompanying Consolidated Financial Statements.
The Parent had no employees during 2020 or 2019.
PureTech plc was incorporated with the Companies House
under the Companies Act 2006 as a public company on
May 8, 2015.
On March 12, 2018, the Company raised approximately
$100.0 million, before issuance costs and other expenses,
by way of a Placing of 45,000,000 placing shares.
On June 24, 2015, the Company authorized 227,248,008 of
ordinary share capital at one pence apiece. These ordinary
shares were admitted to the premium listing segment of the
United Kingdom’s Listing Authority and traded on the Main
Market of the London Stock Exchange for listed securities. In
conjunction with the authorization of the ordinary shares, the
Parent completed an IPO on the London Stock Exchange, in
which it issued 67,599,621 ordinary shares at a public offering
price of 160 pence per ordinary share, in consideration for
$159.3 million, net of issuance costs of $11.8 million.
Additionally, the IPO included an over-allotment option
equivalent to 15 percent of the total number of new ordinary
shares. The stabilization manager provided notice to exercise
in full its over-allotment option on July 2, 2015. As a result, the
Parent issued 10,139,943 ordinary shares at the offer price of
160 pence per ordinary share, which resulted in net proceeds
of $24.2 million, net of issuance costs of $0.8 million.
In 2020, Other reserves increased by $19.7 million due to
equity settled share based payments granted to employees
and service providers in subsidiaries. See Note 2 above.
5.
Intercompany payables
The Parent has a balance due to its operating subsidiary
PureTech LLC of $15.0 million, which is related to IPO costs
and operating expenses. These intercompany payables do
not bear any interest and are repayable upon demand.
PureTech Health plc Annual report and accounts 2020 189
Financial statements History and Development of the Company
We were incorporated and registered under the laws of England and Wales with the Registrar of Companies of England
and Wales, United Kingdom in May 2015 as “PureTech Health plc.” Our predecessor entity, PureTech Health LLC, or our
Predecessor Entity, commenced formal operations and began engaging in initial sourcing activities in 2004, raising its first
financing round greater than $5 million in the same year. The Predecessor Entity was acquired by PureTech Health plc on
June 18, 2015 in a reorganization completed in connection with our initial public offering on the London Stock Exchange.
The Predecessor Entity is now a wholly-owned subsidiary of PureTech Health plc. Our registered office is situated at 8th
Floor, 20 Farringdon Street, London EC4A 4AB, United Kingdom, and our telephone number is +(1) 617 482 2333. Our U.S.
operations are conducted by our wholly-owned subsidiary PureTech Health LLC, a Delaware limited liability company. Our
ordinary shares have traded on the main market of the London Stock Exchange since June 2015 and our ADSs have traded
on the Nasdaq Global Market since November 2020. Our agent for service of process in the United States is PureTech Health
LLC located at 6 Tide Street, Suite 400, Boston, Massachusetts 02210 where our corporate headquarters and laboratories
are located. Our website address is http://puretechhealth.com. The reference to our website is an inactive textual reference
only and information contained in, or that can be accessed through, our website or any other website cited in this registration
statement is not part of hereof.
190 PureTech Health plc Annual report and accounts 2020
Additionasl information Risk Factor Annex
Our business faces significant risks. You should carefully consider all of
the information set forth in this Annual Report and Accounts, including
the following risk factors which we face and which are faced by our
industry. These risks are not listed in any particular order of priority and
are intended to supplement the risks identified elsewhere. Our business,
financial condition or results of operations could be materially and
adversely affected if any of these risks occurs.
This Annual Report and Accounts and our associated Annual Report
on Form 20-F also contain forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially and
adversely from those anticipated in these forward-looking statements
as a result of certain factors including the risks described below and
elsewhere. All statements contained in this Annual Report and Accounts
and our associated Annual Report on Form 20-F, other than statements
of historical fact, including statements regarding our strategy, future
operations, future financial position, future revenues, projected costs,
prospects, plans and objectives of management, are forward-looking
statements. The words “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,”
“would,” “could,” “should,” “continue” and similar expressions are
intended to identify forward-looking statements, although not all forward-
looking statements contain these identifying words. The forward-looking
statements in this Annual Report and Accounts and associated Annual
Report on Form 20-F include, among other things, statements about:
• our ability to realize value from our Founded Entities, which may be
impacted if we reduce our ownership to a minority interest or otherwise
cede control to other investors through contractual agreements
or otherwise;
• the success, cost and timing of our clinical development of our Wholly
Owned Programs, including the progress of, and results from, our
preclinical and clinical trials of LYT-100, LYT-200, LYT-210, LYT-300, our
discovery programs (Glyph, Orasome and our meningeal lymphatics
discovery research program) and other potential therapeutic candidates
within our Wholly Owned Pipeline;
• our ability to obtain and maintain regulatory approval of the therapeutic
candidates within our Wholly Owned Pipeline, and any related
restrictions, limitations or warnings in the label of any of the therapeutic
candidates within our Wholly Owned Pipeline, if approved;
• our ability to compete with companies currently marketing or
engaged in the development of treatments for indications within
our Wholly Owned Pipeline or those of our Founded Entities are
designed to target;
• our plans to pursue research and development of other future
therapeutic candidates;
• the potential advantages of the therapeutic candidates within our
Wholly Owned Pipeline and the therapeutic candidates being
developed by our Founded Entities;
• the rate and degree of market acceptance and clinical utility of our
therapeutic candidates;
• the success of our collaborations and partnerships with third parties;
• our estimates regarding the potential market opportunity for the
therapeutic candidates within our Wholly Owned Pipeline and the
therapeutic candidates being developed by our Founded Entities;
• our sales, marketing and distribution capabilities and strategy;
• our ability to establish and maintain arrangements for manufacture
of the therapeutic candidates within our Wholly Owned Pipeline and
therapeutic candidates being developed by our Founded Entities;
• our intellectual property position;
• our expectations related to the use of capital;
• the effect of the COVID-19 pandemic, including mitigation efforts
and economic effects, on any of the foregoing or other aspects of our
business operations;
• our estimates regarding expenses, future revenues, capital
requirements and needs for additional financing;
• the impact of government laws and regulations; and
• our competitive position.
We may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements, and you should not place
undue reliance on our forward-looking statements. Actual results or
events could differ materially from the plans, intentions and expectations
disclosed in the forward-looking statements we make. You should refer to
the below for a discussion of important factors that may cause our actual
results to differ materially from those expressed or implied by our forward-
looking statements. Our forward-looking statements do not reflect the
potential impact of any future acquisitions, mergers, dispositions, joint
ventures or investments we may make.
You should read this Annual Report and Accounts, our associated Annual
Report on Form 20-F and the documents that we have filed as exhibits
to the Annual Report on 20-F completely and with the understanding
that our actual future results may be materially different from what
we expect. We qualify all of our forward-looking statements by these
cautionary statements.
This Annual Report and Accounts and our associated Annual Report on
Form 20-F include statistical and other industry and market data that we
obtained from industry publications and research, surveys and studies
conducted by third parties. Industry publications and third-party research,
surveys and studies generally indicate that their information has been
obtained from sources believed to be reliable, although they do not
guarantee the accuracy or completeness of such information
Risks Related to our Financial Position and Need for Additional Capital
We are a clinical-stage biopharmaceutical company and have incurred
significant operating losses since our inception. We may continue to incur
significant operating losses for the foreseeable future.
Investment in biotechnology therapeutic development, as well as
medical device development, is highly speculative because it entails
substantial upfront capital expenditures and significant risk that
any potential therapeutic candidate will be unable to demonstrate
effectiveness or an acceptable safety profile, gain regulatory approval
and become commercially viable. To date, only two of our Founded
Entities’ therapeutics, Gelesis, Inc.’s Plenity and Akili Interactive Labs,
Inc.’s EndeavorRx, have received marketing clearance from the U.S. Food
and Drug Administration, or the FDA. All of the therapeutic candidates
in our Wholly Owned Pipeline and the majority of our Founded Entities’
therapeutic candidates may require substantial additional development
time, including extensive clinical research, and resources before we would
be able to apply for or receive regulatory clearances or approvals and
begin generating revenue from therapeutic sales.
Since our inception, we have invested most of our resources in developing
our technology and therapeutic candidates, building our intellectual
property portfolio, developing our supply chain, conducting business
planning, raising capital and providing general and administrative support
for these operations, including with respect to our Founded Entities. We
are not operationally profitable and have incurred operating losses in
each year since our inception. Our operating losses for the years ended
December 31, 2018, 2019 and 2020 were $104.0 million, $135.4 million,
and $119.6 million, respectively. We have no therapeutics developed in
our Wholly Owned Pipeline approved for commercial sale and have not
generated any revenues from therapeutic sales, and we and our Founded
Entities have financed operations solely through the sale of equity
securities, revenue from strategic alliances and government funding
and, with respect to certain of our Founded Entities, debt financings.
We continue to incur significant research and development, or R&D,
and other expenses related to ongoing operations and expect to incur
losses for the foreseeable future. We anticipate continued losses for the
foreseeable future.
Due to risks and uncertainties associated with the development of drugs,
biologics and medical devices, we are unable to predict the timing
or amount of our expenses, or when we will be able to generate any
meaningful revenue or achieve or maintain profitability, if ever. In addition,
our expenses could increase beyond our current expectations if we are
required by the FDA, the European Medicines Agency, or the EMA, or
other comparable foreign regulatory authorities to perform preclinical
studies or clinical trials in addition to those that we currently anticipate,
or if there are any delays in any of our or our future collaborators’ clinical
trials or the development of our existing therapeutic candidates and
any other therapeutic candidates that we may identify. Even if our
existing therapeutic candidates or any future therapeutic candidates
that we may identify are approved for commercial sale, we anticipate
incurring significant costs associated with commercializing any approved
therapeutic and ongoing compliance efforts.
As of December 31, 2020, we had never generated revenue from the
therapeutic candidates within our Wholly Owned Pipeline, and we may
never be operationally profitable.
While Gelesis, Inc., or Gelesis, and Akili Interactive Labs, Inc., or Akili, have
received marketing clearance for Plenity and EndeavorRx, respectively,
from the FDA, we may never be able to develop or commercialize
marketable therapeutics or achieve operational profitability. Revenue
from the sale of any therapeutic candidate for which regulatory clearance
or approval is obtained will be dependent, in part, upon the size of
the markets in the territories for which we gain regulatory clearance or
approval, the accepted price for the therapeutic, the ability to obtain
PureTech Health plc Annual report and accounts 2020 191
Additional information reimbursement at any price and whether we own the commercial
rights for that territory. Our growth strategy depends on our ability to
generate revenue. In addition, if the number of addressable patients is
not as anticipated, the indication or intended use cleared or approved
by regulatory authorities is narrower than expected, or the reasonably
accepted population for treatment is narrowed by competition, physician
choice or treatment guidelines, we may not generate significant revenue
from sales of such therapeutics, even if cleared or approved. Even if we
are able to generate revenue from the sale of any approved therapeutics,
we may not become operationally profitable and may need to obtain
additional funding to continue operations. Even if we achieve operational
profitability in the future, we may not be able to sustain profitability in
subsequent periods.
If we are unable to achieve sustained profitability would depress the value
of our company and could impair our ability to raise capital, expand our
business, diversify our R&D pipeline, market the therapeutic candidates
within our Wholly Owned Pipeline, if cleared or approved, and pursue
or continue our operations. Our prior losses, combined with expected
future losses, have had and may continue to have an adverse effect on our
shareholders’ equity and working capital.
We may require substantial additional funding to achieve our business
goals. If we are unable to obtain this funding when needed and on
acceptable terms, we could be forced to delay, limit or terminate certain
of our therapeutic development efforts. Certain of our Founded Entities
will similarly require substantial additional funding to achieve their
business goals.
We are currently advancing a Wholly Owned Pipeline with four therapeutic
candidates, two of which are in preclinical development, two of which
are in Phase 1 and Phase 2 clinical trials. Our Non-Controlled Founded
Entities are advancing 10 therapeutic candidates, including two that are
in Phase 3/Pivotal studies, as well as two FDA-cleared therapeutics. Our
Controlled Founded Entities are advancing 10 therapeutic candidates,
including one that is expected to enter a Phase 3 study, and three that
are in Phase 2 development. Developing biopharmaceutical therapeutics
is expensive and time-consuming, and with respect to the therapeutic
candidates within our Wholly Owned Pipeline, we expect to require
substantial additional capital to conduct research, preclinical studies and
clinical trials for our current and future programs, establish pilot scale and
commercial scale manufacturing processes and facilities, seek regulatory
clearances and approvals for the therapeutic candidates within our
Wholly Owned Pipeline and launch and commercialize any therapeutics
for which we receive regulatory clearance or approval, including building
our own commercial sales, marketing and distribution organization. With
respect to our Founded Entities’ programs, we anticipate that we will
continue to fund a small portion of development costs by strategically
participating in such companies’ financings when doing so would be
in the interests of our shareholders. The form of any such participation
may include investment in public or private financings, collaboration and
partnership arrangements and licensing arrangements, among others.
Our management and strategic decision makers have not made decisions
regarding the future allocation of certain of our resources among our
Founded Entities, but evaluate the needs and opportunities with respect
to each of these Founded Entities routinely and on a case-by-case
basis. In connection with any collaboration agreements relating to our
Wholly Owned Programs, we are also responsible for the payments to
third parties of expenses that may include milestone payments, license
maintenance fees and royalties, including in the case of certain of our
agreements with academic institutions or other companies from whom
intellectual property rights underlying their respective programs have
been in-licensed or acquired. Because the outcome of any preclinical
or clinical development and regulatory approval process is highly
uncertain, we cannot reasonably estimate the actual amounts necessary
to successfully complete the development, regulatory approval process
and potential commercialization of our Wholly Owned Programs and any
future therapeutic candidates we may identify.
As of March 31, 2021, we had cash and cash equivalents of $443.4 million
at the PureTech Health plc level. However, our operating plan may change
as a result of many factors currently unknown to us, and we may need
to seek additional funds sooner than planned, through public or private
equity or debt financings, sales of assets or programs, other sources, such
as strategic collaborations or license and development agreements, or
a combination of these approaches. Even if we believe we have sufficient
funds for our current or future operating plans, we may opportunistically
seek additional capital if market conditions are favorable or if we have
specific strategic considerations. Our spending will vary based on new
and ongoing therapeutic development and corporate activities. Any such
additional fundraising efforts for us may divert our management from their
day-to-day activities, which may adversely affect our ability to develop and
commercialize therapeutic candidates that we may identify and pursue.
192 PureTech Health plc Annual report and accounts 2020
Moreover, such financing may result in dilution to shareholders, imposition
of debt covenants and repayment obligations, or other restrictions that
may affect our business.
Our future funding requirements, both short-term and long-term, will
depend on many factors, including, but not limited to:
• the time and cost necessary to complete ongoing, planned and future
unplanned clinical trials, including our ongoing clinical trials for LYT-100
and LYT-200, and potential future clinical trials for LYT-210 and LYT-300;
• the outcome, timing and cost of meeting regulatory requirements
established by the FDA, the EMA and other comparable foreign
regulatory authorities;
• the progress, timing, scope and costs of our preclinical studies, clinical
trials and other related activities for our ongoing and planned clinical
trials, and potential future clinical trials;
• the costs of obtaining clinical and commercial supplies of raw materials
and drug products for the therapeutic candidates within our Wholly
Owned Pipeline, as applicable, and any other therapeutic candidates
we may identify and develop;
• our ability to successfully identify and negotiate acceptable terms
for third-party supply and contract manufacturing agreements with
contract manufacturing organizations, or CMOs;
• the costs of commercialization activities for any of the therapeutic
candidates within our Wholly Owned Pipeline that receive marketing
approval, including the costs and timing of establishing therapeutic
sales, marketing, distribution and manufacturing capabilities, or
entering into strategic collaborations with third parties to leverage or
access these capabilities;
• the amount and timing of sales and other revenues from the therapeutic
candidates within our Wholly Owned Pipeline, if approved, including
the sales price and the availability of coverage and adequate third-
party reimbursement;
• the cash requirements of our Founded Entities and our ability and
willingness to provide them with financing;
• the cash requirements of any future acquisitions or discovery of
therapeutic candidates;
• the time and cost necessary to respond to technological and market
developments, including other therapeutics that may compete with one
or more of our Wholly Owned Programs;
• the costs of acquiring, licensing or investing in intellectual property
rights, therapeutics, therapeutic candidates and businesses;
• our ability to attract, hire and retain qualified personnel as we expand
R&D and establish a commercial infrastructure;
• the costs of maintaining, expanding and protecting our intellectual
property portfolio; and
• the costs of operating as a public company in the United Kingdom and
the United States and maintaining listings on both the London Stock
Exchange, or the LSE, and The Nasdaq Global Market, or Nasdaq.
We cannot be certain that additional funding will be available on
acceptable terms, or at all. If adequate funds are not available to us on
a timely basis, we may be required to delay, limit or terminate one or more
research or development programs or the potential commercialization
of any approved therapeutics or be unable to expand operations or
otherwise capitalize on business opportunities, as desired, which could
materially affect our business, prospects, financial condition and results
of operations.
Raising additional capital may cause dilution to our existing shareholders,
restrict our operations or require us to relinquish rights to current
therapeutic candidates or to any future therapeutic candidates on
unfavorable terms.
We expect our expenses to increase in connection with our planned
operations. Unless and until we can generate a substantial amount of
revenue from the therapeutic candidates within our Wholly Owned
Pipeline or royalties and other monetization events related to our
Founded Entities, we expect to finance our future cash needs through
a combination of public and private equity offerings, debt financings,
strategic partnerships, sales of assets and alliances and licensing
arrangements. We, and indirectly, our shareholders, may bear the cost
of issuing and servicing any such securities and of entering into and
maintaining any such strategic partnerships or other arrangements.
Because any decision by us to issue debt or equity securities in the
future will depend on market conditions and other factors beyond our
control, we cannot predict or estimate the amount, timing or nature of
any future financing transactions. To the extent that we or our Founded
Entities raise additional capital through the sale of equity or convertible
debt securities, your ownership interest will be diluted, and the terms
Risk Factor Annex — continuedAdditionasl information may include liquidation or other preferences that adversely affect your
rights as a shareholder. The incurrence of additional indebtedness
would result in increased fixed payment obligations and could involve
additional restrictive covenants, such as limitations on our ability to
incur additional debt, limitations on our ability to acquire, sell or license
intellectual property rights and other operating restrictions that could
adversely impact our ability to conduct our business. Additionally, any
future collaborations we enter into with third parties may provide capital in
the near term, but limit our potential cash flow and revenue in the future.
If we raise additional funds through strategic partnerships and alliances
and licensing arrangements with third parties, we may have to relinquish
valuable rights to our technologies or therapeutic candidates, or grant
licenses or other rights on unfavorable terms.
In addition, if any of our Founded Entities raises funds through the
issuance of equity securities, our shareholders’ indirect equity interest
in such Founded Entity could be substantially diminished. If any of our
Founded Entities raises additional funds through collaboration and
licensing arrangements, it may be necessary to relinquish some rights
to our technologies or these therapeutic candidates or grant licenses on
terms that are not favorable to us.
If we engage in acquisitions or strategic partnerships, this may increase
our capital requirements, dilute our shareholders, cause us to incur debt or
assume contingent liabilities and subject us to other risks.
We may engage in various acquisitions and strategic partnerships in the
future, including licensing or acquiring complementary therapeutics,
intellectual property rights, technologies or businesses. Any acquisition or
strategic partnership may entail numerous risks, including:
• increased operating expenses and cash requirements;
• the assumption of indebtedness or contingent liabilities;
• the issuance of our equity securities which would result in dilution to
our shareholders;
• assimilation of operations, intellectual property, therapeutics and
therapeutic candidates of an acquired company, including difficulties
associated with integrating new personnel;
• the diversion of our management’s attention from our existing
therapeutic programs and initiatives in pursuing such an acquisition or
strategic partnership;
• retention of key employees, the loss of key personnel and uncertainties
in our ability to maintain key business relationships;
• risks and uncertainties associated with the other party to such
a transaction, including the prospects of that party and their existing
therapeutics or therapeutic candidates and regulatory approvals; and
• our inability to generate revenue from acquired intellectual property,
technology and/or therapeutics sufficient to meet our objectives or
even to offset the associated transaction and maintenance costs.
In addition, if we undertake such a transaction, we may issue dilutive
securities, assume or incur debt obligations, incur large one-time
expenses and acquire intangible assets that could result in significant
future amortization expense.
Risks Related to Our Founded Entities
Our ability to realize value from our Founded Entities may be impacted
if we reduce our ownership or otherwise cede control to other investors
through contractual agreements or otherwise.
We do not have a majority interest in our Non-Controlled Founded
Entities. Our interests may be further reduced as such companies raise
capital from third-party investors. In addition, we may agree to contractual
arrangements for the funding of further developments by one or more
of our Founded Entities. As a result, with respect to our Non-Controlled
Founded Entities, we may not be able to exercise control over the affairs
of such Founded Entity, including that Founded Entity’s governance
arrangements and access to management and financial information. We
are also party to agreements with certain of our Founded Entities that
contain provisions which could force us to exit from that Founded Entity
at a time and/or price determined by other investor(s) (for example, by the
exercise of drag-along rights). If we were forced to exit out of a Founded
Entity, this could have a material adverse effect on our business, financial
condition or results of operations and prospects. In addition, if the affairs
of one or more Founded Entities in which we hold a minority stake were to
be conducted in a manner detrimental to our interests or intentions, our
business, reputation and prospects may be adversely affected.
As certain of our Founded Entities have completed equity financings, they
have entered into certain agreements with the investors participating in
such financings, including us. We are party to voting agreements with
Entrega, Inc., or Entrega, and Sonde Health, Inc., or Sonde, investors’
rights agreements with Akili, Karuna Therapeutics, Inc., or Karuna, Follica,
Incorporated, or Follica, Vedanta Biosciences, Inc., or Vedanta, Entrega,
Sonde and Vor Biopharma Inc., or Vor, and a stockholders’ agreement
with Gelesis, pursuant to which we are subject to certain restrictions
on the transfer or sale of shares (e.g., pre-emptive rights or drag-along,
tag-along rights or lock up agreements), and we may not be able freely
to transfer our interest in such Founded Entities or procure the sale of
the entire issued share capital of one of such Founded Entities, similar
to other investors who are party to these agreements. In addition, many
of our Founded Entities have employee share plans which further dilute
our interest in such business. If the affairs of one or more of our Founded
Entities were to be conducted in a manner detrimental to our interests
or intentions or if we were unable to realize our interest in a Founded
Entity or suffer dilution of our shareholding, this could have a material
adverse effect on our business, financial condition or results of operation
and prospects.
Our overall value may be dominated by a single or limited number of our
Founded Entities.
A large proportion of our overall value may at any time reside in a small
proportion of our Founded Entities. Accordingly, there is a risk that if
one or more of the intellectual property or commercial rights relevant to
a valuable business were impaired, this would have a material adverse
impact on our overall value. Furthermore, a large proportion of our
overall revenue may at any time be the subject of one, or a small number
of, licensed technologies. Should the relevant licenses be terminated or
expire this would be likely to have a material adverse effect on the revenue
received by us. Any material adverse impact on the value of the business
of a Founded Entity could, in the situations described above, or otherwise,
have a material adverse effect on our business, financial condition, trading
performance and/or prospects.
We have limited information about and limited control or influence over
our Non-Controlled Founded Entities.
While we maintain ownership of equity interests in our Non-Controlled
Founded Entities, we do not maintain voting control or direct
management and development efforts for these entities. Each of these
entities are independently managed, and we do not control the clinical
and regulatory development of these Non-Controlled Founded Entities’
therapeutic candidates. Any failure by our Non-Controlled Founded
Entities to adhere to regulatory requirements, initiate preclinical studies
and clinical trials on schedule or to obtain clearances or approvals
for their therapeutic candidates could have an adverse effect on our
business, financial condition, results of operation and prospects. The
information included in this report about our Non-Controlled Founded
Entities is based on (i) our knowledge, which may in some cases be
limited, (ii) information that is publicly available, including the public
filings of SEC reporting companies, such as Karuna and Vor, and (iii)
information provided to us by our Non-Controlled Founded Entities.
Where a date is provided, the information included in this report about
our Non-Controlled Founded Entities is as of that date and you should
not assume that it is accurate as of any other date. As such, there may
be developments at our Non-Controlled Founded Entities of which we
are unaware that could have an adverse effect on our business, financial
condition, results of operation and prospects.
Our Founded Entities are difficult to value given that many of their
therapeutic candidates are in the development stage.
Investments in early-stage companies, particularly privately held entities,
are inherently difficult to value since sales, cash flow and tangible asset
values are very limited, which makes the valuation highly dependent on
expectations of future development, and any future significant revenues
would only arise in the medium to longer terms and are uncertain. Equally,
investments in companies just commencing the commercial stage are
also difficult to value since sales, cash flow and tangible assets are limited,
they have only commenced initial receipts of revenues and valuations are
still dependent on expectations of future development. There can be no
guarantee that our valuation of our Founded Entities will be considered
to be correct in light of the early stage of development for many of these
entities and their future performance. As a result, we may not realize
the full value of our ownership in such Founded Entities which could
adversely affect our business and results of operations. For example, on
November 15, 2019, resTORbio, Inc., or resTORbio, announced that its
lead therapeutic candidate, RTB101, did not meet its primary endpoint
in its Phase 3 study and ceased further development leading to a decline
in resTORbio’s stock price from $9.27 to $1.09 and our sale of 7,680,700
common shares of resTORbio. As a result of the foregoing, we recognized
a total cash loss of approximately $10 million from our initial investment
through sale of shares.
PureTech Health plc Annual report and accounts 2020 193
Risk Factor Annex — continuedAdditional information Certain of our and our Founded Entities’ therapeutics and therapeutic
candidates represent novel therapeutic approaches and negative
perception of any therapeutic or therapeutic candidate that we or they
develop could adversely affect our ability to conduct our business, obtain
regulatory approvals or identify alternate regulatory pathways to market for
such therapeutic candidate.
Certain of our and our Founded Entities’ therapeutics candidates are
considered relatively new and novel therapeutic approaches. Our and
their success will depend upon physicians who specialize in the treatment
of diseases targeted by our and their therapeutic candidates, biologics or
medical devices prescribing potential treatments that involve the use of
our and their therapeutic candidates in lieu of, or in addition to, existing
treatments with which they are more familiar and for which greater clinical
data may be available. Access will also depend on consumer acceptance
and adoption of therapeutics that are commercialized. In addition,
responses by the U.S., state or foreign governments to negative public
perception or ethical concerns may result in new legislation or regulations
that could limit our or our Founded Entities’ ability to develop or
commercialize any therapeutic candidates, obtain or maintain regulatory
approval, identify alternate regulatory pathways to market or otherwise
achieve profitability. More restrictive statutory regimes, government
regulations or negative public opinion would have an adverse effect on
our business, financial condition, results of operations and prospects and
may delay or impair the development and commercialization of our or our
Founded Entities’ therapeutic candidates or demand for any therapeutics
we or they may develop.
For example, in the United States and the European Union, no
therapeutics to date have been approved specifically demonstrating an
impact on the microbiome as part of their therapeutic effect. Vedanta
is developing a pipeline of microbiome-derived modulators for immune
and infectious disease. Microbiome therapies may not be successfully
developed or commercialized or gain the acceptance of the public or
the medical community. Additionally, adverse events, or AEs, in non-
IND human clinical studies and clinical trials of Vedanta’s therapeutic
candidates or in clinical trials of other companies developing similar
therapeutics and the resulting publicity, as well as any other AEs in the
field of the microbiome, could result in a decrease in demand for any
therapeutic that Vedanta may develop. Finally, the FDA, the EMA or
other comparable foreign regulatory authorities may lack experience in
evaluating the safety and efficacy of therapeutic candidates based on
microbiome therapeutics, which could result in a longer than expected
regulatory review process, increase expected development costs and
delay or prevent potential commercialization of therapeutic candidates.
Risks Related to the Clinical Development, Regulatory Review and
Approval of our and our Founded Entities’ Therapeutic Candidates
Risks Related to Clinical Development
The therapeutic candidates within our Wholly Owned Pipeline and most of
our Founded Entities’ therapeutic candidates are in preclinical or clinical
development, which is a lengthy and expensive process with uncertain
outcomes and the potential for substantial delays. We cannot give any
assurance that any of our and our Founded Entities’ therapeutic candidates
will receive regulatory approval, which is necessary before they can
be commercialized.
Before obtaining marketing approval from regulatory authorities for the
sale of our or our Founded Entities’ therapeutic candidates, we or our
Founded Entities must conduct extensive clinical trials to demonstrate
the safety and efficacy of the therapeutic candidates in humans. To date,
we have focused substantially all of our efforts and financial resources on
identifying, acquiring, and developing therapeutic candidates, including
conducting lead optimization, preclinical studies and clinical trials, and
providing general and administrative support for these operations. To
date, only two of our Founded Entities’ therapeutic candidates, Gelesis’
Plenity and Akili’s EndeavorRx, have received marketing clearance from
the FDA, and we cannot be certain that any of our internal or our Founded
Entities’ other therapeutic candidates will receive regulatory clearance
or approval, the timing of such clearance or approval, if received, or
that clinical trials will progress as planned. Our or our Founded Entities’
inability to successfully complete preclinical and clinical development
could result in additional costs to us and negatively impact our ability
to generate revenue. Our future success is dependent on our and our
Founded Entities’ ability to successfully develop, obtain regulatory
approval for, and then successfully commercialize therapeutic candidates.
We and our Founded Entities, with the exceptions of Gelesis and Akili,
currently have no drugs approved or devices cleared or approved for
sale and have not generated any revenue from sales of drugs or devices.
We cannot guarantee that we or our Founded Entities will be able in
the future to develop or successfully commercialize any of our or their
therapeutic candidates. Additionally, there is no FDA approved live
194 PureTech Health plc Annual report and accounts 2020
biological therapeutic using a defined cocktail of microbes, which could
result in regulatory complexity in Vedanta’s pipeline. There is also no
approved drug therapy for lymphedema, which will require us to come to
an agreement with the FDA on requirements for approval.
Other than Gelesis’ Plenity and Akili’s EndeavorRx, all of our Wholly
Owned Programs and our Founded Entities’ therapeutic candidates
require additional development; management of preclinical, clinical,
and manufacturing activities; and/or regulatory clearances or approvals.
In addition, we or our Founded Entities may need to obtain adequate
manufacturing supply; build a commercial organization; commence
marketing efforts; and obtain coverage and reimbursement before we
generate any significant revenue from commercial therapeutic sales, if
ever. Many of the therapeutic candidates in our Wholly Owned Pipeline
and our Founded Entities’ therapeutic candidates are in early-stage
research or translational phases of development, and the risk of failure for
these programs is high. We cannot be certain that any of the therapeutic
candidates in our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates will be successful in clinical trials or receive
regulatory approval or clearance. Further, our Wholly Owned Programs or
our Founded Entities’ therapeutic candidates may not receive regulatory
clearance or approval even if we believe they are successful in clinical
trials. If we or our Founded Entities do not receive regulatory approval
for our or their therapeutic candidates, we may not be able to continue
operations, which may result in dissolution, out-licensing the technology
or pursuing an alternative strategy.
Preclinical development is uncertain. Our preclinical programs may
experience delays or may never advance to clinical trials, which would
adversely affect our ability to obtain regulatory approvals or commercialize
these programs on a timely basis or at all, which would have an adverse
effect on our business.
Two of our Wholly Owned Programs, LYT-210 and LYT-300, are in the
preclinical stage, and their risk of failure is high. Before we can commence
clinical trials for a therapeutic candidate, we must complete extensive
preclinical testing and studies that support our planned investigational
new drug applications, or INDs, in the United States, or similar
applications in other jurisdictions. We cannot be certain of the timely
completion or outcome of our preclinical testing and studies and cannot
predict if the FDA or other regulatory authorities will accept our proposed
clinical programs or if the outcome of our preclinical testing and studies
will ultimately support the further development of our programs. As
a result, we cannot be sure that we will be able to submit INDs or similar
applications for our preclinical programs on the timelines we expect, if at
all, and we cannot be sure that submission of INDs or similar applications
will result in the FDA, the EMA or other regulatory authorities allowing
clinical trials to begin.
Clinical trials of our or our Founded Entities’ therapeutic candidates may
be delayed, and certain programs may never advance in the clinic or may
be more costly to conduct than we anticipate, any of which can affect our
ability to fund our company and would have a material adverse impact on
our platform or our business.
Clinical testing is expensive, time-consuming, and subject to uncertainty.
We cannot guarantee that any of our ongoing and planned clinical
trials will be conducted as planned or completed on schedule, if at all.
Moreover, even if these trials are initiated or conducted on a timely
basis, issues may arise that could result in the suspension or termination
of such clinical trials. A failure of one or more clinical trials can occur at
any stage of testing, and our clinical trials may not be successful. Events
that may prevent successful or timely initiation or completion of clinical
trials include:
• inability to generate sufficient preclinical, toxicology, or other in vivo or
in vitro data to support the initiation or continuation of clinical trials;
• delays in confirming target engagement, patient selection or other
relevant biomarkers to be utilized in preclinical and clinical therapeutic
candidate development;
• delays in reaching a consensus with regulatory agencies as to the
design or implementation of our clinical studies;
• delays in reaching agreement on acceptable terms with prospective
contract research organizations, or CROs, and clinical trial sites, the
terms of which can be subject to extensive negotiation and may vary
significantly among different CROs and clinical trial sites;
• delays in identifying, recruiting and training suitable clinical investigators;
• delays in obtaining required Institutional Review Board, or IRB, approval
at each clinical trial site;
• imposition of a temporary or permanent clinical hold by regulatory
agencies for a number of reasons, including after review of an IND
or amendment, clinical trial application, or CTA, or amendment,
Risk Factor Annex — continuedAdditionasl information investigational device exemption, or IDE, or supplement, or equivalent
application or amendment; as a result of a new safety finding that
presents unreasonable risk to clinical trial participants; or a negative
finding from an inspection of our clinical trial operations or study sites;
• developments in trials for other therapeutic candidates with the same
targets or related modalities as our or our Founded Entities’ therapeutic
candidates conducted by competitors that raise regulatory or safety
concerns about risk to patients of the treatment, or if the FDA finds
that the investigational protocol or plan is clearly deficient to meet its
stated objectives;
• difficulties in securing access to materials for the comparator arm of
certain of our clinical trials;
• delays in identifying, recruiting and enrolling suitable patients to
participate in clinical trials, and delays caused by patients withdrawing
from clinical trials or failing to return for post-treatment follow-up;
• difficulties in finding a sufficient number of trial sites, or trial sites
deviating from trial protocol or dropping out of a trial;
• difficulty collaborating with patient groups and investigators;
• failure by CROs, other third parties, or us to adhere to clinical trial
requirements;
• failure to perform in accordance with the FDA’s or any other regulatory
authority’s current good clinical practices, or GCP, requirements, or
regulatory guidelines in other countries;
• occurrence of AEs or undesirable side effects or other unexpected
characteristics associated with the therapeutic candidate that are
viewed to outweigh its potential benefits;
• changes in regulatory requirements and guidance that require
amending or submitting new clinical protocols;
• changes in the standard of care on which a clinical development plan
was based, which may require new or additional trials;
• the cost of clinical trials of any therapeutic candidates that we may
identify and pursue being greater than we anticipate;
• clinical trials of any therapeutic candidates that we may identify and
pursue producing negative or inconclusive results, which may result in
our deciding, or regulators requiring us, to conduct additional clinical
trials or abandon therapeutic development programs;
• transfer of manufacturing processes to larger-scale facilities operated
by a CMO, or by us, and delays or failures by our CMOs or us to make
any necessary changes to such manufacturing process;
– delays in manufacturing, testing, releasing, validating, or importing/
exporting sufficient stable quantities of therapeutic candidates that
we may identify for use in clinical trials or the inability to do any of
the foregoing; and
– factors we may not be able to control, such as current or potential
pandemics that may limit patients, principal investigators or staff or
clinical site availability, result in clinical trial protocol deviations, or
impact supply of our or our Founded Entities’ therapeutic candidates
(e.g., outbreak of COVID-19).
Any inability to successfully initiate or complete clinical trials could result
in additional costs to us or impair our ability to generate revenue. In
addition, if we make manufacturing or formulation changes to our Wholly
Owned Programs, we may be required to or we may elect to conduct
additional preclinical studies or clinical trials to bridge data obtained from
our modified therapeutic candidates to data obtained from preclinical
and clinical research conducted using earlier versions. Clinical trial delays
could also shorten any periods during which our therapeutics have
patent protection and may allow our competitors to bring therapeutics
to market before we do, which could impair our ability to successfully
commercialize therapeutic candidates and may harm our business and
results of operations.
We could also encounter delays if a clinical trial is suspended or
terminated by us, by the data safety monitoring board, or DSMB, or by
the FDA, the EMA or other comparable foreign regulatory authorities,
or if the IRBs of the institutions in which such trials are being conducted
suspend or terminate the participation of their clinical investigators and
sites subject to their review. Such authorities may suspend or terminate
a clinical trial due to a number of factors, including failure to conduct the
clinical trial in accordance with regulatory requirements or our clinical
protocols, inspection of the clinical trial operations or trial site by the FDA,
the EMA or other comparable foreign regulatory authorities resulting
in the imposition of a clinical hold, unforeseen safety issues or adverse
side effects, failure to demonstrate a benefit from using a therapeutic
candidate, changes in governmental regulations or administrative actions
or lack of adequate funding to continue the clinical trial.
Moreover, principal investigators for our clinical trials may serve as
scientific advisors or consultants to us from time to time and receive
compensation in connection with such services. Under certain
circumstances, we may be required to report some of these relationships
to the FDA, the EMA or comparable foreign regulatory authorities. The
FDA, the EMA or comparable foreign regulatory authority may conclude
that a financial relationship between us and a principal investigator has
created a conflict of interest or otherwise affected interpretation of the
study. The FDA, the EMA or comparable foreign regulatory authority may
therefore question the integrity of the data generated at the applicable
clinical trial site and the utility of the clinical trial itself may be jeopardized.
This could result in a delay in approval, or rejection, of our marketing
applications by the FDA, the EMA or comparable foreign regulatory
authority, as the case may be, and may ultimately lead to the denial of
marketing approval of one or more of our Wholly Owned Programs or our
Founded Entities’ therapeutic candidates.
Delays in the initiation, conduct or completion of any clinical trial of the
therapeutic candidates within our Wholly Owned Pipeline will increase our
costs, slow down the therapeutic candidate development and approval
process and delay or potentially jeopardize our ability to commence
therapeutic sales and generate revenue. In addition, many of the factors
that cause, or lead to, a delay in the commencement or completion of
clinical trials may also ultimately lead to the denial of regulatory approval
of the therapeutic candidates within our Wholly Owned Pipeline or our
Founded Entities’ therapeutic candidates. In the event we identify any
additional therapeutic candidates to pursue, we cannot be sure that
submission of an IDE, IND, CTA, or equivalent application, as applicable,
will result in the FDA, the EMA or comparable foreign regulatory authority
allowing clinical trials to begin in a timely manner, if at all. Any of these
events could have a material adverse effect on our business, prospects,
financial condition and results of operations.
The results of early-stage clinical trials and preclinical studies may not be
predictive of future results. Initial data in clinical trials may not be indicative
of results obtained when these trials are completed or in later stage trials.
The results of preclinical studies may not be predictive of the results of
clinical trials, and the results of any early-stage clinical trials we commence
may not be predictive of the results of the later-stage clinical trials. The
results of preclinical studies and clinical trials in one set of patients or
disease indications, or from preclinical studies or clinical trials that we did
not lead, may not be predictive of those obtained in another. In some
instances, there can be significant variability in safety or efficacy results
between different clinical trials of the same therapeutic candidate due
to numerous factors, including changes in trial procedures set forth in
protocols, differences in the size and type of the patient populations,
changes in and adherence to the dosing regimen and other clinical trial
protocols and the rate of dropout among clinical trial participants. In
addition, preclinical and clinical data are often susceptible to various
interpretations and analyses, and many companies that have believed
their therapeutic candidates performed satisfactorily in preclinical studies
and clinical trials have nonetheless failed to obtain marketing approval.
A number of companies in the pharmaceutical, biopharmaceutical and
biotechnology industries have suffered significant setbacks in clinical
development even after achieving promising results in earlier studies,
and any such setbacks in our clinical development could have a material
adverse effect on our business and operating results. Even if early-stage
clinical trials are successful, we may need to conduct additional clinical
trials of our Wholly Owned Programs in additional patient populations or
under different treatment conditions before we are able to seek approvals
or clearances from the FDA, the EMA or other comparable foreign
regulatory authorities to market and sell these therapeutic candidates. Our
failure to obtain marketing authorization for the therapeutic candidates
within our Wholly Owned Pipeline would substantially harm our business,
prospects, financial condition and results of operations.
If we encounter difficulties enrolling patients in clinical trials, our clinical
development activities could be delayed or otherwise adversely affected.
Identifying and qualifying trial participants to participate in clinical studies
is critical to our success. The timing of our clinical studies depends on the
speed at which we can recruit trial participants to participate in testing
the therapeutic candidates within our Wholly Owned Pipeline. Delays
in enrollment may result in increased costs or may affect the timing or
outcome of the planned clinical trials, which could prevent completion of
these trials and adversely affect our ability to advance the development
of the therapeutic candidates within our Wholly Owned Pipeline. If trial
participants are unwilling to participate in our studies because of negative
publicity from AEs in our trials or other trials of similar therapeutics, or
those related to specific therapeutic area, or for other reasons, including
competitive clinical studies for similar patient populations, the timeline for
recruiting trial participants, conducting studies, and obtaining regulatory
PureTech Health plc Annual report and accounts 2020 195
Risk Factor Annex — continuedAdditional information approval of potential therapeutics may be delayed. We also may face
delays as a result of unforeseen global circumstances, for example we
have experienced temporary delays in certain of our clinical development
activities, including enrolling participants in certain of our clinical trials, as
a result of the COVID-19 pandemic. Any delays could result in increased
costs, delays in advancing our therapeutic candidate development, delays
in testing the effectiveness of the therapeutic candidates within our
Wholly Owned Pipeline, or termination of the clinical studies altogether.
We may not be able to identify, recruit and enroll a sufficient number
of trial participants, or those with required or desired characteristics to
achieve diversity in a study, to complete our clinical studies in a timely
manner. Patient and subject enrollment is affected by factors including:
• the size and nature of a patient population;
• the patient eligibility criteria defined in the applicable clinical trial
protocols, which may limit the patient populations eligible for
clinical trials to a greater extent than competing clinical trials for the
same indication;
• the size of the study population required for analysis of the trial’s
primary endpoints;
• the severity of the disease under investigation;
• the proximity of patients to a trial site;
• the inclusion and exclusion criteria for the trial in question;
• the design of the trial protocol;
• the ability to recruit clinical trial investigators with the appropriate
competencies and experience;
• the availability and efficacy of approved medications or therapies for
the disease or condition under investigation;
• clinicians’ and patients’ perceptions as to the potential advantages and
side effects of the therapeutic candidate being studied in relation to
other available therapies and therapeutic candidates;
• the ability to obtain and maintain patient consents; and
• the risk that patients enrolled in clinical trials will not complete such
trials, for any reason.
Furthermore, our or our collaborators’ ability to successfully initiate,
enroll and conduct a clinical trial outside the United States is subject to
numerous additional risks, including:
• difficulty in establishing or managing relationships with CROs
and physicians;
• differing standards for the conduct of clinical trials;
• differing standards of care for patients with a particular disease;
• an inability to locate qualified local consultants, physicians and
partners; and
• the potential burden of complying with a variety of foreign laws,
medical standards and regulatory requirements, including the
regulation of pharmaceutical and biotechnology therapeutics
and treatments.
If we have difficulty enrolling sufficient numbers of patients to conduct
clinical trials as planned, we may need to delay or terminate clinical trials,
either of which would have an adverse effect on our business.
Use of the therapeutic candidates within our Wholly Owned Pipeline or the
therapeutic candidates being developed by our Founded Entities could be
associated with side effects, AEs or other properties or safety risks, which
could delay or halt their clinical development, prevent their regulatory
clearance or approval, cause us to suspend or discontinue clinical trials,
abandon a therapeutic candidate, limit their commercial potential, if
cleared or approved, or result in other significant negative consequences
that could severely harm our business, prospects, operating results and
financial condition.
As is the case with pharmaceuticals generally, it is likely that there may
be side effects and AEs associated with our and our Founded Entities’
drugs or biologic therapeutic candidates’ use. Similarly, investigational
devices may also be subject to side effects and AEs. Results of our clinical
trials or those being conducted by Founded Entities could reveal a high
and unacceptable severity and prevalence of side effects or unexpected
characteristics. Undesirable side effects caused by these therapeutic
candidates could cause us, our Founded Entities or regulatory authorities
to interrupt, delay or halt clinical trials and could result in a more restrictive
label or the delay or denial of regulatory clearance or approval by the
FDA, the EMA or other comparable foreign regulatory authorities. The
side effects related to the therapeutic candidate could affect patient
recruitment or the ability of enrolled patients to complete the trial or result
in potential therapeutic liability claims. Any of these occurrences may
harm our business, financial condition and prospects significantly.
196 PureTech Health plc Annual report and accounts 2020
Moreover, if therapeutic candidates within our Wholly Owned Pipeline
are associated with undesirable side effects in preclinical studies or
clinical trials or have characteristics that are unexpected, we may elect to
abandon their development or limit their development to more narrow
uses or subpopulations in which the undesirable side effects or other
characteristics are less prevalent, less severe or more acceptable from
a risk-benefit perspective, which may limit the commercial expectations
for the therapeutic candidate if approved. We may also be required to
modify or terminate our study plans based on findings in our preclinical
studies or clinical trials. Many therapeutic candidates that initially show
promise in early-stage testing may later be found to cause side effects
that prevent further development. As we work to advance existing
therapeutic candidates and to identify new therapeutic candidates, we
cannot be certain that later testing or trials of therapeutic candidates
that initially showed promise in early testing will not be found to cause
similar or different unacceptable side effects that prevent their further
development.
It is possible that as we test the therapeutic candidates within our Wholly
Owned Pipeline in larger, longer and more extensive clinical trials, or as
the use of these therapeutic candidates becomes more widespread if they
receive regulatory clearance or approval, illnesses, injuries, discomforts
and other AEs that were observed in earlier trials, as well as conditions
that did not occur or went undetected in previous trials, will be reported
by subjects. If such side effects become known later in development
or upon approval, if any, such findings may harm our business, financial
condition and prospects significantly. Additionally, adverse developments
in clinical trials of pharmaceutical, biopharmaceutical or biotechnology
therapeutics conducted by others may cause the FDA or other regulatory
oversight bodies to suspend or terminate our clinical trials or to change
the requirements for approval of any of our Wholly Owned Programs.
In addition to side effects caused by the product candidate, the
administration process or related procedures also can cause adverse side
effects. If any such AEs occur, our clinical trials could be suspended or
terminated. If we are unable to demonstrate that any AEs were caused
by the administration process or related procedures, the FDA, the
European Commission, the EMA, or other regulatory authorities could
order us to cease further development of, or deny clearance or approval
of, a therapeutic candidate for any or all targeted indications. Even if we
can demonstrate that all future serious adverse events, or SAEs, are not
therapeutic-related, such occurrences could affect patient recruitment
or the ability of enrolled patients to complete the trial. Moreover, if we
elect, or are required, to not initiate, delay, suspend or terminate any
future clinical trial of any of our Wholly Owned Programs, the commercial
prospects of such therapeutic candidates may be harmed and our
ability to generate therapeutic revenues from any of these therapeutic
candidates may be delayed or eliminated. Any of these occurrences may
harm our ability to develop other therapeutic candidates, and may harm
our business, financial condition and prospects significantly.
Additionally, if any of the therapeutic candidates within our Wholly
Owned Pipeline receives marketing authorization, the FDA could impose
contraindications or a boxed warning in the labeling of our therapeutic.
For any of our drug or biologic therapeutic candidates receiving marketing
authorization, the FDA could require us to adopt a risk evaluation and
mitigation strategy, or REMS, and could apply elements to assure safe
use to ensure that the benefits of the therapeutic outweigh its risks, which
may include, among other things, a Medication Guide outlining the risks
of the therapeutic for distribution to patients and a communication plan
to health care practitioners. Furthermore, if we or others later identify
undesirable side effects caused by the therapeutic candidates within our
Wholly Owned Pipeline once approved, several potentially significant
negative consequences could result, including:
• regulatory authorities may suspend or withdraw approvals of such
therapeutic candidate, or seek an injunction against its manufacture or
distribution;
• regulatory authorities may require additional warnings on the label,
including “boxed” warnings, or issue safety alerts, Dear Healthcare
Provider letters, press releases or other communications containing
warnings or other safety information about the therapeutic;
• we may be required by the FDA to implement a REMS for a marketed
drug or biologic;
• we may be required to change the way a therapeutic candidate is
administered or conduct additional clinical trials;
• we may be subject to fines, injunctions or the imposition of civil or
criminal penalties;
• we could be sued and held liable for harm caused to patients; and
• our reputation may suffer.
Risk Factor Annex — continuedAdditionasl information Any of these occurrences could prevent us from achieving or maintaining
market acceptance of the particular therapeutic candidate, if approved,
and may harm our business, financial condition and prospects significantly.
Risks Related to Regulatory Review and Approval
Our clinical trials may fail to demonstrate substantial evidence of the safety
and effectiveness of therapeutic candidates that we may identify and
pursue for their intended uses, which would prevent, delay or limit the
scope of regulatory approval and potential commercialization.
Before obtaining regulatory approvals for the commercial sale of any
of our drug or biological therapeutic candidates, we must demonstrate
through lengthy, complex and expensive preclinical studies and clinical
trials that the applicable therapeutic candidate is both safe and effective
for use in each target indication, and in the case of our Wholly Owned
Programs and Founded Entities’ therapeutic candidates regulated as
biological therapeutics, that the therapeutic candidate is safe, pure and
potent for use in its targeted indication. Each therapeutic candidate must
demonstrate an adequate risk versus benefit profile in its intended patient
population and for its intended use. Similarly, before obtaining regulatory
clearances or approvals for the commercial sale of any of the device
therapeutic candidates of our Founded Entities, our Founded Entities
may be required to demonstrate through lengthy, complex and expensive
preclinical studies and clinical trials that the applicable therapeutic
candidate meets the regulatory standard of clearance or approval—for
example, substantial equivalence or a reasonable assurance of safety or
effectiveness, as applicable—for its intended use.
Clinical testing is expensive and can take many years to complete, and
its outcome is inherently uncertain. Failure can occur at any time during
the clinical development process. Most therapeutic candidates that
begin clinical trials are never approved by regulatory authorities for
commercialization. We may be unable to design and execute a clinical trial
to support marketing approval.
We cannot be certain that our clinical trials will be successful. Additionally,
any safety concerns observed in any one of our clinical trials in our
targeted indications could limit the prospects for regulatory clearances
or approval of our therapeutic candidates in those and other indications,
which could have a material adverse effect on our business, financial
condition and results of operations. In addition, even if such clinical trials
are successfully completed, we cannot guarantee that the FDA, the EMA
or comparable foreign regulatory authorities will interpret the results as we
do, and more trials could be required before we submit our therapeutic
candidates for clearance or approval. For example, the definition of
clinical meaningfulness for outcome measures in lymphedema has not
been firmly established by the FDA, introducing risk in evaluating and
demonstrating the efficacy required to obtain FDA approval of LYT-
100. As another example, while there is guidance regarding clinical
meaningfulness for outcome measures in the context of acute COVID-19
treatments and potential vaccines, there is no such guidance for treatment
of complications that persist following the resolution of COVID-19. Even if
we believe that our and our Founded Entities’ clinical trials and preclinical
studies demonstrate the safety and efficacy of our and their therapeutic
candidates, only the FDA and other comparable regulatory agencies may
ultimately make such determination. No regulatory agency has made
any such determination that any of our Wholly Owned Programs or those
of our Founded Entities, except for Plenity and EndeavorRx, are safe or
effective for use by the general public for any indication.
Additionally, we may utilize an “open-label” trial design for some of our
future clinical trials. An open-label trial is one where both the patient and
investigator know whether the patient is receiving the test article or either
an existing approved drug or placebo. Open-label trials are subject to
various limitations that may exaggerate any therapeutic effect as patients
in open-label studies are aware that they are receiving treatment. Open-
label trials may be subject to a “patient bias” where patients perceive their
symptoms to have improved merely due to their awareness of receiving
an experimental treatment. Patients selected for early clinical studies
often include the most severe sufferers and their symptoms may have
been bound to improve notwithstanding the new treatment. In addition,
open-label trials may be subject to an “investigator bias” where those
assessing and reviewing the physiological outcomes of the clinical trials
are aware of which patients have received treatment and may interpret the
information of the treated group more favorably given this knowledge.
The opportunity for bias in clinical trials as a result of open-label design
may not be adequately handled and may cause any of our trials that utilize
such design to fail or to be considered inadequate and additional trials
may be necessary to support future marketing applications. Moreover,
results acceptable to support clearance or approval in one jurisdiction
may be deemed inadequate by another regulatory authority to support
regulatory clearance or approval in that other jurisdiction. To the extent
that the results of the trials are not satisfactory to the FDA, the EMA or
comparable foreign regulatory authorities for support of a marketing
application, we may be required to expend significant resources, which
may not be available to us, to conduct additional trials in support of
potential clearance or approval of our Wholly Owned Programs. Even if
regulatory clearance or approval is secured for a therapeutic candidate,
the terms of such approval may limit the scope and use of the specific
therapeutic candidate, which may also limit its commercial potential.
Even if we complete the necessary preclinical studies and clinical trials,
the marketing approval process is expensive, time-consuming and
uncertain and may prevent us from obtaining approvals for the potential
commercialization of therapeutic candidates.
Any therapeutic candidate we may develop and the activities associated
with their development and potential commercialization, including
their design, testing, manufacture, safety, efficacy, recordkeeping,
labeling, storage, approval, advertising, promotion, sale and distribution,
are subject to comprehensive regulation by the FDA, the EMA and
other comparable foreign regulatory authorities. Failure to obtain
marketing authorization for a therapeutic candidate will prevent us from
commercializing the therapeutic candidate in a given jurisdiction. For
example, although Gelesis and Akili have received marketing clearance
for Plenity and EndeavorRx, respectively, from the FDA, we and our
Founded Entities have not received clearance or approval to market any
of our or their other therapeutic candidates from regulatory authorities
in any jurisdiction and it is possible that none of the other therapeutic
candidates we and our Founded Entities may seek to develop in the future
will ever obtain regulatory approval. We have no experience in filing and
supporting the applications necessary to gain marketing authorizations
and expect to rely on third-party CROs or regulatory consultants to assist
us in this process. Securing regulatory clearance or approval requires
the submission of extensive preclinical and clinical data and supporting
information to the various regulatory authorities for each therapeutic
indication to establish the therapeutic candidate’s safety, purity, efficacy
and potency. Securing regulatory clearance or approval also requires the
submission of information about the therapeutic manufacturing process
to, and inspection of manufacturing facilities by, the relevant regulatory
authority. Any therapeutic candidates we or our Founded Entities
develop may not be effective, may be only moderately effective, or may
prove to have undesirable or unintended side effects, toxicities or other
characteristics that may preclude our obtaining marketing clearance or
approval or prevent or limit commercial use, if cleared or approved.
The process of obtaining marketing authorizations, both in the United
States and abroad, is expensive, may take many years if additional clinical
trials are required, if approval is obtained at all, and can vary substantially
based upon a variety of factors, including the type, complexity and
novelty of the therapeutic candidates involved. Changes in marketing
authorization policies during the development period, changes in or the
enactment of additional statutes or regulations, or changes in regulatory
review for each submitted therapeutic application, may cause delays in
the approval or rejection of an application. The FDA and comparable
authorities in other countries have substantial discretion in the approval
process and may refuse to accept any application or may decide that
our data are insufficient for approval and require additional preclinical,
clinical or other studies. In addition, varying interpretations of the
data obtained from preclinical and clinical testing could delay, limit, or
prevent marketing approval of a therapeutic candidate. Any marketing
approval we ultimately obtain may be limited or subject to restrictions or
post-approval commitments that render the approved therapeutic not
commercially viable.
If we experience delays in obtaining clearance or approval or if we
fail to obtain clearance or approval of any therapeutic candidates
we may develop, the commercial prospects for those therapeutic
candidates may be harmed, and our ability to generate revenues will be
materially impaired.
We have conducted, and may continue to conduct in the future, clinical
trials for therapeutic candidates outside the United States, and the FDA,
the EMA and comparable foreign regulatory authorities may not accept
data from such trials.
We have conducted clinical trials outside of the United States in the past,
and may in the future choose to conduct one or more clinical trials outside
the United States, including in Europe. For example, we have conducted
clinical trials in Australia and are conducting clinical trials in additional
locations outside the United States, including without limitation the U.K.,
Australia, Romania, Spain and the Philippines. The acceptance of study
data from clinical trials conducted outside the United States or another
jurisdiction by the FDA, the EMA or any comparable foreign regulatory
authority may be subject to certain conditions or may not be accepted
at all. In cases where data from foreign clinical trials are intended to
serve as the basis for marketing approval in the United States, the FDA
PureTech Health plc Annual report and accounts 2020 197
Risk Factor Annex — continuedAdditional information will generally not approve the application on the basis of foreign data
alone unless (i) the data are applicable to the U.S. population and U.S.
medical practice; (ii) the trials were performed by clinical investigators
of recognized competence and pursuant to GCP regulations; and (iii)
if necessary, the FDA is able to validate the data through an on-site
inspection or other appropriate means. Additionally, the FDA’s clinical
trial requirements, including sufficient size of patient populations and
statistical powering, must be met. Many foreign regulatory authorities
have similar approval requirements. In addition, such foreign trials would
be subject to the applicable local laws of the foreign jurisdictions where
the trials are conducted. There can be no assurance that the FDA, the
EMA or any comparable foreign regulatory authority will accept data from
trials conducted outside of the United States or the applicable jurisdiction.
If the FDA, the EMA or any comparable foreign regulatory authority does
not accept such data, it would result in the need for additional trials, which
would be costly and time-consuming and delay aspects of our business
plan, and which may result in therapeutic candidates that we may develop
not receiving approval or clearance for commercialization in the applicable
jurisdiction.
If we are unable to obtain regulatory clearance or approval in one or more
jurisdictions for any therapeutic candidates that we may identify and
develop, our business could be substantially harmed.
We cannot commercialize a therapeutic until the appropriate regulatory
authorities have reviewed and cleared or approved the therapeutic
candidate. Approval by the FDA, the EMA and comparable foreign
regulatory authorities is lengthy and unpredictable, and depends upon
numerous factors, including substantial discretion of the regulatory
authorities. Approval policies, regulations, or the type and amount of
preclinical or clinical data necessary to gain approval may change during
the course of a therapeutic candidate’s development and may vary among
jurisdictions, which may cause delays in the approval or the decision not
to approve an application. Gelesis and Akili have obtained marketing
clearance from the FDA for Plenity and EndeavorRx, respectively, but
we and our Founded Entities have not obtained regulatory clearance or
approval for any other therapeutic candidates, and it is possible that our
current therapeutic candidates and any other therapeutic candidates
which we and our Founded Entities may seek to develop in the future
will not ever obtain regulatory clearance or approval. We cannot be
certain that any of our Wholly Owned Programs or our Founded Entities’
therapeutic candidates will receive regulatory clearance or approval or be
successfully commercialized even if we or our Founded Entities receive
regulatory clearance or approval.
Obtaining marketing approval is an extensive, lengthy, expensive and
inherently uncertain process, and regulatory authorities may delay, limit
or deny clearance or approval of the therapeutic candidates within our
Wholly Owned Pipeline or our Founded Entities’ therapeutic candidates
for many reasons, including but not limited to:
• the inability to demonstrate to the satisfaction of the FDA, the EMA
or comparable foreign regulatory authorities that the applicable
therapeutic candidate is safe and effective as a treatment for our
targeted indications or otherwise meets the applicable regulatory
standards for approval;
• the FDA, the EMA or comparable foreign regulatory authorities may
disagree with the design, endpoints or implementation of our or our
Founded Entities’ clinical trials;
• the population studied in the clinical program may not be sufficiently
broad or representative to assure safety or efficacy in the full
population for which we or our Founded Entities seek approval;
• the FDA, the EMA or comparable foreign regulatory authorities may
require additional preclinical studies or clinical trials beyond those that
we or our Founded Entities currently anticipate;
• the FDA, the EMA or comparable foreign regulatory authorities may
disagree with our or our Founded Entities’ interpretation of data from
preclinical studies or clinical trials;
• the data collected from clinical trials of therapeutic candidates that
we may identify and pursue may not be sufficient to support the
submission of an NDA, biologics license application, or BLA, or other
submission for regulatory approval in the United States or elsewhere;
• as applicable, we or our Founded Entities may be unable to
demonstrate to the FDA, the EMA or comparable foreign regulatory
authorities that a therapeutic candidate’s risk-benefit ratio for its
proposed indication is acceptable;
• the FDA, the EMA or comparable foreign regulatory authorities may
identify deficiencies in the manufacturing processes, test procedures
and specifications, or facilities of third-party manufacturers with
which we or our Founded Entities contract for clinical and commercial
supplies; and
198 PureTech Health plc Annual report and accounts 2020
• the clearance or approval policies or regulations of the FDA, the EMA
or comparable foreign regulatory authorities may change in a manner
that renders the clinical trial design or data insufficient for clearance
or approval.
The lengthy approval process, as well as the unpredictability of the results
of clinical trials and evolving regulatory requirements, may result in our
or our Founded Entities’ failure to obtain regulatory approval to market
therapeutic candidates that we or our Founded Entities may pursue in
the United States or elsewhere, which would significantly harm our or our
Founded Entities’ business, prospects, financial condition and results
of operations.
Furthermore, clearance or approval by the FDA in the United States, if
obtained, does not ensure approval by regulatory authorities in other
countries or jurisdictions. In order to market any therapeutics outside
of the United States, we or our Founded Entities must establish and
comply with numerous and varying regulatory requirements of other
countries regarding safety and effectiveness. Clinical trials conducted
in one country may not be accepted by regulatory authorities in other
countries, and regulatory approval in one country does not mean that
regulatory approval will be obtained in any other country. Approval
processes vary among countries and can involve additional therapeutic
testing and validation and additional or different administrative review
periods from those in the United States, including additional preclinical
studies or clinical trials, as clinical trials conducted in one jurisdiction
may not be accepted by regulatory authorities in other jurisdictions. In
many jurisdictions outside the United States, a therapeutic candidate
must be approved for reimbursement before it can be approved for sale
in that jurisdiction. In some cases, the price that we intend to charge for
our therapeutics is also subject to approval. Seeking foreign regulatory
approval could result in difficulties and costs for us or our Founded Entities
and require additional preclinical studies or clinical trials which could be
costly and time-consuming. Regulatory requirements can vary widely
from country to country and could delay or prevent the introduction of
our or our Founded Entities’ therapeutics in those countries. The foreign
regulatory approval process involves all of the risks associated with FDA
approval. We do not have any therapeutic candidates approved for sale
in international markets. If we or our Founded Entities fail to comply with
regulatory requirements in international markets or to obtain and maintain
required approvals, or if regulatory approvals in international markets are
delayed, our target market will be reduced and our ability to realize the full
market potential of our therapeutics will be harmed.
Interim, “top-line,” and preliminary data from our clinical trials that we
announce or publish from time to time may change as more patient data
become available or as additional analyses are conducted, and as the data
are subject to audit and verification procedures that could result in material
changes in the final data.
From time to time, we may publish interim, “top-line,” or preliminary
data from our clinical studies. Interim data from clinical trials that we may
complete are subject to the risk that one or more of the clinical outcomes
may materially change as patient enrollment continues and more patient
data become available. Preliminary or “top-line” data also remain subject
to audit and verification procedures that may result in the final data being
materially different from the preliminary data we previously published. As
a result, interim and preliminary data should be viewed with caution until
the final data are available. Material adverse changes between preliminary,
“top-line,” or interim data and final data could significantly harm our
business prospects.
Further, others, including regulatory agencies, may not accept or agree
with our assumptions, estimates, calculations, conclusions or analyses
or may interpret or weigh the importance of data differently, which
could impact the value of the particular program, the approvability or
commercialization of the particular therapeutic candidate or therapeutic
and our company in general. In addition, the information we choose to
publicly disclose regarding a particular study or clinical trial is based
on what is typically extensive information, and you or others may not
agree with what we determine is the material or otherwise appropriate
information to include in our disclosure. Any information we determine
not to disclose may ultimately be deemed significant by you or others
with respect to future decisions, conclusions, views, activities or otherwise
regarding a particular therapeutic candidate or our business.
The complexity of a combination therapeutic that includes a drug or
biologic and a medical device presents additional, unique development
and regulatory challenges, which may adversely impact our or our
Founded Entities’ development plans and our or our Founded Entities’
ability to obtain regulatory approval of our Wholly Owned Programs or our
Founded Entities’ therapeutic candidates.
We or our Founded Entities, such as Follica, may decide to pursue
marketing authorization of a combination therapeutic. A combination
Risk Factor Annex — continuedAdditionasl information therapeutic includes, amongst other possibilities, any investigational drug,
device, or biologic packaged separately that according to its proposed
labeling is for use only with another individually specified investigational
drug, device, or biologic where both are required to achieve the intended
use, indication, or effect.
Developing and obtaining regulatory approval for combination
therapeutics pose unique challenges because they involve components
that are regulated under different types of regulatory requirements, and
by different FDA centers. As a result, such therapeutics raise regulatory,
policy and review management challenges. For example, because
divisions from both FDA’s Center for Drug Evaluation and Research
or Center for Biologics Evaluation and Research and FDA’s Center for
Devices and Radiological Health must review submissions concerning
therapeutic candidates that are combination therapeutics comprised of
drug or biologics and devices, the regulatory review and approval process
for these therapeutics may be lengthened. In addition, differences in
regulatory pathways for each component of a combination therapeutic
can impact the regulatory processes for all aspects of therapeutic
development and management, including clinical investigation, marketing
applications, manufacturing and quality control, adverse event reporting,
promotion and advertising, user fees and post-approval modifications.
Similarly, the device components of our Founded Entities’ therapeutic
candidates will require any necessary clearances or approvals or
other marketing authorizations in other jurisdictions, which may prove
challenging to obtain.
Certain modifications to our Founded Entities’ device therapeutics may
require new 510(k) clearance or other marketing authorizations and
may require our Founded Entities to recall or cease marketing their
therapeutics.
Akili received marketing clearance for EndeavorRx from the FDA. Once
a medical device is permitted to be legally marketed in the United States
pursuant to a 510(k) clearance, de novo classification, or a premarket
approval, or PMA, a manufacturer may be required to notify the FDA of
certain modifications to the device. Manufacturers determine in the first
instance whether a change to a therapeutic requires a new premarket
submission, but the FDA may review any manufacturer’s decision. The
FDA may not agree with our Founded Entities’ decisions regarding
whether new clearances or approvals are necessary. They may make
modifications or add additional features in the future that they believe do
not require a new 510(k) clearance, de novo classification, or approval of
a PMA or PMA amendments or supplements. If the FDA disagrees with
their determinations and requires them to submit new 510(k) notifications,
requests for de novo classification, or PMAs (or PMA supplements or
amendments) for modifications to their previously cleared or reclassified
therapeutics for which they have concluded that new clearances or
approvals are unnecessary, they may be required to cease marketing or
to recall the modified therapeutic until they obtain clearance or approval,
and they may be subject to significant regulatory fines or penalties.
The regulatory landscape that will apply to development of therapeutic
candidates by us or our Founded Entities or collaborators is rigorous,
complex, uncertain and subject to change, which could result in delays or
termination of development of such therapeutic candidates or unexpected
costs in obtaining regulatory approvals.
We or our Founded Entities or collaborators may develop therapeutic
candidates that use genome or cell editing technologies. Regulatory
requirements governing therapeutics created with genome editing
technology or involving gene therapy treatment have changed frequently
and will likely continue to change in the future. Approvals by one
regulatory agency may not be indicative of what any other regulatory
agency may require for approval, and there is substantial, and sometimes
uncoordinated, overlap in those responsible for regulation of gene
therapy therapeutics, cell therapy therapeutics and other therapeutics
created with genome editing technology. For example, the FDA
established the Office of Tissues and Advanced Therapies within its
Center for Biologics Evaluation and Research, or CBER, to consolidate
the review of gene therapy and related therapeutics, and the Cellular,
Tissue and Gene Therapies Advisory Committee to advise CBER on its
review. These and other regulatory review agencies, committees and
advisory groups and the requirements and guidelines they promulgate
may lengthen the regulatory review process, require us or our Founded
Entities to perform additional preclinical studies or clinical trials, increase
our or our Founded Entities’ development costs, lead to changes in
regulatory positions and interpretations, delay or prevent approval and
commercialization of these treatment candidates or lead to significant
post-approval limitations or restrictions.
Additionally, under the National Institutes of Health, or NIH, Guidelines
for Research Involving Recombinant Synthetic Nucleic Acid Molecules,
or NIH Guidelines, supervision of human gene transfer trials includes
evaluation and assessment by an institutional biosafety committee, or
IBC, a local institutional committee that reviews and oversees research
utilizing recombinant or synthetic nucleic acid molecules at that institution.
The IBC assesses the safety of the research and identifies any potential
risk to public health or the environment, and such review may result in
some delay before initiation of a clinical trial. While the NIH Guidelines
are not mandatory unless the research in question is being conducted
at or sponsored by institutions receiving NIH funding of recombinant
or synthetic nucleic acid molecule research, many companies and other
institutions not otherwise subject to the NIH Guidelines voluntarily
follow them.
In the European Economic Area, or EEA, the EMA has a Committee
for Advanced Therapies, or CAT, that is responsible for assessing the
quality, safety and efficacy of advanced therapy medicinal therapeutics.
Advanced-therapy medicinal therapeutics include gene therapy
medicines, somatic-cell therapy medicines and tissue-engineered
medicines. The role of the CAT is to prepare a draft opinion on an
application for marketing authorization for an advanced therapy medicinal
candidate that is submitted to the EMA. In the EEA, the development and
evaluation of a gene therapy medicinal therapeutic must be considered
in the context of the relevant EMA guidelines. The EMA may issue new
guidelines concerning the development and marketing authorization
for gene therapy medicinal therapeutics and require that we or our
Founded Entities comply with these new guidelines. Similarly complex
regulatory environments exist in other jurisdictions in which we or our
Founded Entities might consider seeking regulatory approvals for our
Wholly Owned Programs or our Founded Entities’ therapeutic candidates,
further complicating the regulatory landscape. As a result, the procedures
and standards applied to gene therapy therapeutics and cell therapy
therapeutics may be applied to any of our or our Founded Entities’ gene
therapy or genome editing therapeutic candidates, but that remains
uncertain at this point.
Changes in applicable regulatory guidelines may lengthen the regulatory
review process for the therapeutic candidates within our Wholly Owned
Pipeline or our Founded Entities’ therapeutic candidates, require
additional studies or trials, increase development costs, lead to changes
in regulatory positions and interpretations, delay or prevent approval
and commercialization of such therapeutic candidates, or lead to
significant post-approval limitations or restrictions. Additionally, adverse
developments in clinical trials conducted by others of gene therapy
therapeutics or therapeutics created using genome editing technology,
or adverse public perception of the field of genome editing, may cause
the FDA, the EMA and other regulatory bodies to revise the requirements
for approval of any therapeutic candidates we or our Founded Entities
may develop or limit the use of therapeutics utilizing genome editing
technologies, either of which could materially harm our or our Founded
Entities’ business. Furthermore, regulatory action or private litigation
could result in expenses, delays or other impediments to our research
programs or the development or commercialization of current or future
therapeutic candidates.
As we advance therapeutic candidates alone or with collaborators, we
will be required to consult with these regulatory and advisory groups
and comply with all applicable guidelines, rules and regulations. If we fail
to do so, we or our collaborators may be required to delay or terminate
development of such therapeutic candidates. Delay or failure to obtain, or
unexpected costs in obtaining, the regulatory approval necessary to bring
a therapeutic candidate to market could decrease our ability to generate
sufficient therapeutic revenue to maintain our business.
We may not elect or be able to take advantage of any expedited
development or regulatory review and approval processes available to
drug therapeutic candidates granted breakthrough therapy or fast track
designation by the FDA.
We intend to evaluate and continue ongoing discussions with the FDA on
regulatory strategies that could enable us or our Founded Entities to take
advantage of expedited development pathways for certain of our Wholly
Owned Programs or our Founded Entities’ therapeutic candidates in the
future, although we cannot be certain that our Wholly Owned Programs or
our Founded Entities’ therapeutic candidates will qualify for any expedited
development pathways or that regulatory authorities will grant, or allow us
or our Founded Entities to maintain, the relevant qualifying designations.
Potential expedited development pathways that we could pursue include
breakthrough therapy and fast track designation.
Breakthrough therapy designation is intended to expedite the
development and review of drug therapeutic candidates that are
designed to treat serious or life-threatening diseases when preliminary
clinical evidence indicates that the drug may demonstrate substantial
PureTech Health plc Annual report and accounts 2020 199
Risk Factor Annex — continuedAdditional information improvement over existing therapies on one or more clinically significant
endpoints, such as substantial treatment effects observed early in
clinical development. The designation of a therapeutic candidate as
a breakthrough therapy provides potential benefits that include more
frequent meetings with FDA to discuss the development plan for the
therapeutic candidate and ensure collection of appropriate data needed
to support approval; more frequent written correspondence from FDA
about such things as the design of the proposed clinical trials and use
of biomarkers; intensive guidance on an efficient drug development
program, beginning as early as Phase 1; organizational commitment
involving senior managers; and eligibility for rolling review and
priority review.
Fast track designation is designed for drug therapeutic candidates
intended for the treatment of a serious or life-threatening disease or
condition, where preclinical or clinical data demonstrate the potential to
address an unmet medical need for this disease or condition. Accordingly,
even if we believe a particular therapeutic candidate is eligible for
breakthrough therapy or fast track designation, we cannot assure you
that the FDA would decide to grant it. Breakthrough therapy designation
and fast track designation do not change the standards for therapeutic
approval, and there is no assurance that such designation or eligibility will
result in expedited review or approval or that the approved indication will
not be narrower than the indication covered by the breakthrough therapy
designation or fast track designation. Thus, even if we or our Founded
Entities do receive breakthrough therapy or fast track designation, we or
our Founded Entities may not experience a faster development process,
review or approval compared to conventional FDA procedures. The FDA
may withdraw breakthrough therapy or fast track designation if it believes
that the therapeutic no longer meets the qualifying criteria. Our business
may be harmed if we are unable to avail ourselves of these or any other
expedited development and regulatory pathways.
If we or our Founded Entities are unable to successfully validate, develop
and obtain regulatory approval for companion diagnostic tests for
any future drug candidates that require or would commercially benefit
from such tests, or experience significant delays in doing so, we or our
Founded Entities may not realize the full commercial potential of these
drug candidates.
In connection with the clinical development of the therapeutic candidates
within our Wholly Owned Pipeline or Founded Entities’ therapeutic
candidates for certain indications, we or our Founded Entities may work
with collaborators to develop or obtain access to in vitro companion
diagnostic tests to identify patient subsets within a disease category who
may derive selective and meaningful benefit from our drug candidates.
For example, we may elect to develop companion diagnostics for
LYT-200 and LYT-210. To be successful, we, our Founded Entities or
our collaborators will need to address a number of scientific, technical,
regulatory and logistical challenges. The FDA, the EMA and comparable
foreign regulatory authorities regulate in vitro companion diagnostics as
medical devices and, under that regulatory framework, will likely require
the conduct of clinical trials to demonstrate the safety and effectiveness
of any diagnostics we or our Founded Entities may develop, which we
expect will require separate regulatory clearance or approval prior to
commercialization.
We or our Founded Entities may rely on third parties for the design,
development and manufacture of companion diagnostic tests for our
Wholly Owned Programs or our Founded Entities’ therapeutic candidates
that may require such tests. If we or our Founded Entities enter into
such collaborative agreements, we will be dependent on the sustained
cooperation and effort of our future collaborators in developing and
obtaining approval for these companion diagnostics. It may be necessary
to resolve issues such as selectivity/specificity, analytical validation,
reproducibility, or clinical validation of companion diagnostics during
the development and regulatory approval processes. Moreover, even if
data from preclinical studies and early clinical trials appear to support
development of a companion diagnostic for a therapeutic candidate,
data generated in later clinical trials may fail to support the analytical
and clinical validation of the companion diagnostic. We, our Founded
Entities and our future collaborators may encounter difficulties in
developing, obtaining regulatory approval for, manufacturing and
commercializing companion diagnostics similar to those we face with
respect to the therapeutic candidates within our Wholly Owned Pipeline
themselves, including issues with achieving regulatory clearance or
approval, production of sufficient quantities at commercial scale and with
appropriate quality standards, and in gaining market acceptance. If we
or our Founded Entities are unable to successfully develop companion
diagnostics for these therapeutic candidates, or experience delays
in doing so, the development of these therapeutic candidates may
be adversely affected, these therapeutic candidates may not obtain
200 PureTech Health plc Annual report and accounts 2020
marketing approval, and we may not realize the full commercial potential
of any of these therapeutic candidates that obtain marketing approval. As
a result, our business, results of operations and financial condition could
be materially harmed. In addition, a diagnostic company with whom we
or our Founded Entities contract may decide to discontinue selling or
manufacturing the companion diagnostic test that we anticipate using
in connection with development and commercialization of our Wholly
Owned Programs or our Founded Entities’ therapeutic candidates or our
relationship with such diagnostic company may otherwise terminate. We
or our Founded Entities may not be able to enter into arrangements with
another diagnostic company to obtain supplies of an alternative diagnostic
test for use in connection with the development and commercialization
of our Wholly Owned Programs or our Founded Entities’ therapeutic
candidates or do so on commercially reasonable terms, which could
adversely affect and/or delay the development or commercialization of
our or our Founded Entities’ therapeutic candidates.
For any approved therapeutic, we or our Founded Entities will be subject
to ongoing regulatory obligations and continued regulatory review, which
may result in significant additional expense and we or our Founded Entities
may be subject to penalties if we or our Founded Entities fail to comply
with regulatory requirements or experience unanticipated problems with
the therapeutic candidates within our Wholly Owned Pipeline or our
Founded Entities’ therapeutic candidates.
Gelesis’ Plenity and Akili’s EndeavorRx are, and any of the therapeutic
candidates within our Wholly Owned Programs or our Founded Entities’
therapeutic candidates that are cleared or approved will be, subject to
ongoing regulatory requirements for manufacturing, labeling, packaging,
storage, advertising, promotion, sampling, record-keeping, conduct
of post-marketing studies, and submission of safety, efficacy and other
post-market information, including both federal and state requirements
in the United States and requirements of comparable foreign
regulatory authorities.
Manufacturers and manufacturers’ facilities are required to comply
with extensive requirements imposed by the FDA, the EMA and other
comparable foreign regulatory authorities, including ensuring that
quality control and manufacturing procedures conform to current good
manufacturing practices, or cGMP, regulations. As such, we and our CMOs
are subject to continual review and inspections to assess compliance
with cGMP and adherence to commitments made in any marketing
clearance, such as for Plenity, and any future 510(k), premarket approval,
or PMA, application, NDA, BLA or marketing authorization application,
or MAA, or equivalent application. We and our CMOs are also subject
to requirements pertaining to the registration of our manufacturing
facilities and the listing of our and our Founded Entities’ therapeutics
and therapeutic candidates with the FDA; continued complaint, adverse
event and malfunction reporting; corrections and removals reporting;
and labeling and promotional requirements. Accordingly, we and others
with whom we work must continue to expend time, money, and effort in
all areas of regulatory compliance, including manufacturing, production
and quality control. Gelesis’ and Akili’s marketing clearance for Plenity and
EndeavorRx, respectively, are and any regulatory clearances or approvals
that we may receive for the therapeutic candidates within our Wholly
Owned Pipeline or our Founded Entities’ therapeutic candidates will be,
subject to limitations on the cleared or approved indicated uses for which
the therapeutic may be marketed and promoted or to the conditions of
approval. Any regulatory clearances or approvals that we may receive for
the therapeutic candidates within our Wholly Owned Pipeline may contain
requirements for potentially costly post-marketing testing, such as Phase
4 clinical trials and surveillance to monitor the safety and efficacy of a drug
therapeutic. We are required to report certain adverse reactions and
production problems, if any, to the FDA, the EMA and other comparable
foreign regulatory authorities. Any new legislation addressing drug or
medical safety issues could result in delays in therapeutic development or
commercialization, or increased costs to assure compliance.
The FDA and other agencies, including the U.S. Department of Justice,
and for certain therapeutics, the Federal Trade Commission, closely
regulate and monitor the post-approval marketing, labeling, advertising
and promotion of therapeutics to ensure that they are manufactured,
marketed and distributed only for the cleared or approved indications
and in accordance with the provisions of the approved label. We are, and
will be, required to comply with requirements concerning advertising
and promotion for the therapeutic candidates within our Wholly Owned
Pipeline, if approved. For example, promotional communications with
respect to prescription drugs and medical devices are subject to a variety
of legal and regulatory restrictions and must be consistent with the
information in the therapeutic’s label or labeling. We may not promote our
therapeutics for indications or uses for which they do not have approval
or clearance.
Risk Factor Annex — continuedAdditionasl information The holder of a cleared 510(k) or an approved NDA, BLA, PMA, MAA or
equivalent marketing authorization must submit new or supplemental
applications and obtain approval for certain changes to the approved
therapeutic, therapeutic labeling, or manufacturing process. For example,
any modification to Plenity or EndeavorRx that would significantly affect
its safety or effectiveness or that would constitute a major change in its
intended use would require a new 510(k) clearance or approval of PMA
application. Delays in obtaining required clearances or approvals would
harm our ability to introduce new or enhanced therapeutic in a timely
manner, which in turn would harm our or our Founded Entities’ future
growth. Failure to submit a new or supplemental application and to obtain
approval for certain changes prior to marketing the modified therapeutic
may require a recall or to stop selling or distributing the marketed
therapeutic as modified, and may lead to significant enforcement actions.
In the European Economic Area, or the EEA, any medical devices will need
to comply with the Essential Requirements set forth in the new Medical
Device Regulation (EU) 2017/745, which will become fully applicable on
May 26, 2021. Compliance with these requirements is a prerequisite to
be able to affix the CE mark to a therapeutic, without which a therapeutic
cannot be marketed or sold in the EEA. To demonstrate compliance with
the Essential Requirements and obtain the right to affix the CE mark, we or
our Founded Entities must undergo a conformity assessment procedure,
which varies according to the type of medical device and its classification.
The conformity assessment procedure requires the intervention of
a Notified Body (except for certain class I devices), which is an organization
designated by a competent authority of an EEA country to conduct
conformity assessments. The Notified Body issues a CE Certificate of
Conformity following successful completion of a conformity assessment
procedure and quality management system audit conducted in relation
to the medical device and its manufacturer and their conformity with
the Essential Requirements. This Certificate entitles the manufacturer to
affix the CE mark to its medical therapeutics after having prepared and
signed a related EC Declaration of Conformity. In June 2020, Gelesis
received a CE Mark for Plenity as a class III medical device indicated for
weight loss in overweight and obese adults with a Body Mass Index of
25-40 kg/m2, when used in conjunction with diet and exercise. Also in
June 2020, Akili received a CE Mark for EndeavorRx as a prescription-only
digital therapeutic software intended for the treatment of attention and
inhibitory control deficits in paediatric patients with ADHD.
We or our Founded Entities could also be required to conduct post-
marketing clinical trials to verify the safety and efficacy of our or our
Founded Entities’ therapeutics in general or in specific patient subsets.
If original marketing approval of a drug or biologic was obtained via
an accelerated approval pathway, we or our Founded Entities could
be required to conduct a successful post-marketing clinical trial to
confirm clinical benefit for our or our Founded Entities’ therapeutics. An
unsuccessful post-marketing study or failure to complete such a study
could result in the withdrawal of marketing approval.
If a regulatory agency discovers previously unknown problems with
a therapeutic, such as AEs of unanticipated severity or frequency, or
problems with the facility where the therapeutic is manufactured, or
disagrees with the promotion, marketing or labeling of a therapeutic,
such regulatory agency may impose restrictions on that therapeutic or
us, including requiring withdrawal of the therapeutic from the market.
If we or our Founded Entities fail to comply with applicable regulatory
requirements, a regulatory agency or enforcement authority may, among
other things:
• issue warning letters that would result in adverse publicity;
• impose civil or criminal penalties;
• suspend or withdraw regulatory approvals;
• suspend any of our or our Founded Entities’ ongoing clinical trials;
• refuse to approve pending applications or supplements to approved
applications submitted by us or our Founded Entities;
• impose restrictions on our operations, including closing our
CMOs’ facilities;
• seize or detain therapeutics; or
• require a therapeutic recall.
Any government investigation of alleged violations of law could
require us to expend significant time and resources in response, and
could generate negative publicity. Any failure to comply with ongoing
regulatory requirements may significantly and adversely affect our
ability to commercialize and generate revenue from our therapeutics. If
regulatory sanctions are applied or if regulatory clearance or approval
is withdrawn, the value of our company and our operating results will be
adversely affected.
The FDA’s and other regulatory authorities’ policies may change and
additional government regulations may be enacted that could prevent,
limit or delay regulatory clearance or approval of the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates. For example, following new guidance from the
FDA recognizing the need for access to certain low-risk clinically-validated
digital health devices for psychiatric conditions during the COVID-19
pandemic, in April 2020 Akili announced that EndeavorRx (AKL-T01) would
be available for use by children with ADHD and their families.
We also cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative action,
either in the United States or abroad. If these legislative or administrative
actions impose constraints on the FDA’s ability to engage in oversight
and implementation activities in the normal course, our business may be
negatively impacted.
The FDA and other regulatory agencies actively enforce the laws and
regulations prohibiting the promotion of off-label uses.
If, for any of our Wholly Owned Programs that are cleared or approved,
we are found to have improperly promoted off-label uses of those
therapeutics, we may become subject to significant liability. The FDA
and other regulatory agencies strictly regulate the promotional claims
that may be made about prescription therapeutics, if approved. In
particular, while the FDA permits the dissemination of truthful and non-
misleading information about an approved therapeutic, a manufacturer
may not promote a therapeutic for uses that are not approved by the
FDA or such other regulatory agencies as reflected in the therapeutic’s
approved labeling. If we are found to have promoted such off-label uses,
we may become subject to significant liability. The federal government
has levied large civil and criminal fines against companies for alleged
improper promotion of off-label use and has enjoined several companies
from engaging in off-label promotion. The FDA has also requested that
companies enter into consent decrees, corporate integrity agreements or
permanent injunctions under which specified promotional conduct must
be changed or curtailed. If we cannot successfully manage the promotion
of the therapeutic candidates within our Wholly Owned Pipeline, if
approved, we could become subject to significant liability, which would
materially adversely affect our business and financial condition.
Risks Related to Manufacturing our Therapeutic Candidates or Those
of our Founded Entities
Certain of the therapeutic candidates being developed by us or our
Founded Entities are novel, complex and difficult to manufacture.
We could experience manufacturing problems that result in delays in
our development or commercialization programs or otherwise harm
our business.
The manufacturing processes our CMOs use to produce our and our
Founded Entities’ therapeutic candidates are complex and in certain
cases novel. Several factors could cause production interruptions,
including inability to develop novel manufacturing processes, equipment
malfunctions, facility contamination, raw material shortages or
contamination, natural disasters, disruption in utility services, human error
or disruptions in the operations of our suppliers, including acquisition of
the supplier by a third party or declaration of bankruptcy. For example,
Vedanta has its own proprietary GMP manufacturing facilities for
certain therapeutic candidates, including VE202, VE303, VE800 and
VE416. Creating defined consortia of live microbial therapeutics for
these therapeutic candidates is inherently complex, and therefore can
be vulnerable to delays. The expertise required to manufacture these
therapeutic candidates is unique to Vedanta, and as a result, it would
be difficult and time consuming to find an alternative CMO. In addition,
manufacturing of clinical supply for LYT-100, LYT-200, LYT-210 and LYT-300
are dependent on third party CMOs, and manufacturing such therapeutic
candidates is inherently complex. As another example, we are advancing
LYT-100 for potential treatment of complications that persist following
the resolution of COVID-19 infection. COVID-19 has been widespread,
and any approved treatments related to COVID-19 could face issues
manufacturing sufficient quantities to meet demand. Additionally, three
vaccines for COVID-19 were granted Emergency Use Authorization by the
FDA in late 2020 and early 2021, and more are likely to be authorized in
the coming months. The resultant demand for vaccines and potential for
manufacturing facilities and materials to be commandeered under the
Defense Production Act of 1950, or equivalent foreign legislation, may
make it more difficult to obtain materials or manufacturing slots for the
therapeutics needed for our and our Founded Entities’ clinical trials or
therapeutics which could lead to delays in these trials or supply shortages
of therapeutics.
Some of our and our Founded Entities’ therapeutic candidates include
biologics, some of which have physical and chemical properties that
cannot be fully characterized. As a result, assays of the finished product
may not be sufficient to ensure that the therapeutic candidate is consistent
PureTech Health plc Annual report and accounts 2020 201
Risk Factor Annex — continuedAdditional information from lot-to-lot or will perform in the intended manner. Accordingly, our
CMOs must employ multiple steps to control the manufacturing process
to assure that the process is reproducible and the therapeutic candidate
is made strictly and consistently in compliance with the process. Problems
with the manufacturing process, even minor deviations from the normal
process, could result in therapeutic defects or manufacturing failures
that result in lot failures, therapeutic recalls, product liability claims or
insufficient inventory to conduct clinical trials or supply commercial
markets. We or our Founded Entities may encounter problems achieving
adequate quantities and quality of clinical-grade materials that meet
the FDA, the EMA or other applicable standards or specifications with
consistent and acceptable production yields and costs.
In addition, the FDA, the EMA and other foreign regulatory authorities
may require us or our Founded Entities to submit samples of any lot of
any approved therapeutic together with the protocols showing the results
of applicable tests at any time. Under some circumstances, the FDA,
the EMA or other foreign regulatory authorities may require that we or
our Founded Entities not distribute a lot until the agency authorizes its
release. Slight deviations in the manufacturing process, including those
affecting quality attributes and stability, may result in unacceptable
changes in the therapeutic that could result in lot failures or therapeutic
recalls. Lot failures or therapeutic recalls could cause us or our Founded
Entities to delay therapeutic launches or clinical trials, which could be
costly to us and otherwise harm our business, financial condition, results of
operations and prospects.
Our CMOs also may encounter problems hiring and retaining
the experienced scientific, quality assurance, quality-control and
manufacturing personnel needed to operate our manufacturing
processes, which could result in delays in production or difficulties in
maintaining compliance with applicable regulatory requirements.
Any problems in our CMOs’ manufacturing process or facilities could
result in delays in planned clinical trials and increased costs, and could
make us a less attractive collaborator for potential partners, including
larger biotechnology companies and academic research institutions,
which could limit access to additional attractive development programs.
Problems in our manufacturing process could restrict our ability to meet
potential future market demand for therapeutics.
We do not currently have nor do we plan to acquire the infrastructure
or capability internally to manufacture our clinical drug supplies for use
in the conduct of our clinical trials, and we lack the resources and the
capability to manufacture the therapeutic candidates within our Wholly
Owned Pipeline on a clinical or commercial scale. Instead, we rely on
our third-party manufacturing partners for the production of the active
pharmaceutical ingredient, or API, and drug formulation. The facilities
used by our third-party manufacturers to manufacture our therapeutic
candidates that we may develop must be successfully inspected by the
applicable regulatory authorities, including the FDA, after we submit our
NDA to the FDA.
We are currently completely dependent on our third-party manufacturers
for the production of LYT-100 and LYT-200 in accordance with cGMPs,
which include, among other things, quality control, quality assurance and
the maintenance of records and documentation.
Although we have entered into agreements for the manufacture of
clinical supplies of LYT-100 and LYT-200, our third-party manufacturers
may not perform as agreed, may be unable to comply with these cGMP
requirements and with FDA, state and foreign regulatory requirements
or may terminate its agreement with us. If any of our third-party
manufacturers cannot successfully manufacture material that conforms
to our specifications and the applicable regulatory authorities’ strict
regulatory requirements, or pass regulatory inspection, our NDA will
not be approved. In addition, although we are ultimately responsible
for ensuring therapeutic quality, we have no direct day-to-day control
over our third-party manufacturers’ ability to maintain adequate quality
control, quality assurance and qualified personnel. If our third-party
manufacturers are unable to satisfy the regulatory requirements for
the manufacture of our therapeutics, if approved, or if our suppliers or
third-party manufacturers decide they no longer want to manufacture
our therapeutics, we may need to find alternative manufacturing facilities,
which would be time-consuming and significantly impact our ability to
develop, obtain regulatory approval for or market our therapeutics, if
approved. If we are required to change contract manufacturers for any
reason, we will be required to show that the new manufacturer maintains
facilities and procedures that comply with quality standards and with
all applicable regulations. We will also need to verify, such as through
a manufacturing comparability study, that any new manufacturing
process or procedure will produce our therapeutic candidate
according to specifications previously submitted to the FDA or another
regulatory authority. We might be unable to identify manufacturers
for long-term clinical and commercial supply on acceptable terms or
202 PureTech Health plc Annual report and accounts 2020
at all. Manufacturers are subject to ongoing periodic announced and
unannounced inspection by the FDA and other governmental authorities
to ensure compliance with government regulations. Currently, our
contract manufacturer for the API for LYT-100 is located outside the
United States and the FDA has recently increased the number of foreign
drug manufacturers that it inspects as well as the frequency of such
inspections. As a result, our third-party manufacturers may be subject to
increased scrutiny.
If we were to experience an unexpected loss of supply for clinical
development or commercialization, we could experience delays in our
ongoing or planned clinical trials as our third-party manufacturers would
need to manufacture additional quantities of our clinical and commercial
supply and we may not be able to provide sufficient lead time to enable
our third-party manufacturers to schedule a manufacturing slot, or to
produce the necessary replacement quantities. This could result in delays
in progressing our clinical development activities and achieving regulatory
approval for our therapeutics, which could materially harm our business.
The manufacture of pharmaceutical therapeutics is complex and requires
significant expertise and capital investment, including the development
of advanced manufacturing techniques and process controls. We and
our contract manufacturers must comply with cGMP regulations and
guidelines. Manufacturers of pharmaceutical therapeutics often encounter
difficulties in production, particularly in scaling up and validating initial
production. These problems include difficulties with production costs
and yields, quality control, including stability of the product, quality
assurance testing, operator error, shortages of qualified personnel,
as well as compliance with strictly enforced federal, state and foreign
regulations. Furthermore, if microbial, viral or other contaminations are
discovered in our therapeutics or in the manufacturing facilities in which
our therapeutics, if approved, are made, such manufacturing facilities
may need to be closed for an extended period of time to investigate and
remedy the contamination. We cannot assure you that any stability or
other issues relating to the manufacture of any of our therapeutics will
not occur in the future. Additionally, our manufacturers may experience
manufacturing difficulties due to resource constraints or as a result of
labor disputes or unstable political environments. If our manufacturers
were to encounter any of these difficulties, or otherwise fail to comply
with their contractual obligations, our ability to provide any therapeutic
candidates to patients in clinical trials would be jeopardized. Any delay
or interruption in the supply of clinical trial supplies could delay the
completion of clinical trials, increase the costs associated with maintaining
clinical trial programs and, depending upon the period of delay, require us
to commence new clinical trials at additional expense or terminate clinical
trials completely.
Any adverse developments affecting clinical or commercial manufacturing
of our therapeutics may result in shipment delays, inventory shortages,
lot failures, therapeutic withdrawals or recalls, or other interruptions in
the supply of our therapeutics or therapeutic candidates. We may also
have to take inventory write-offs and incur other charges and expenses
for therapeutics or therapeutic candidates that fail to meet specifications,
undertake costly remediation efforts or seek more costly manufacturing
alternatives. Accordingly, failures or difficulties faced at any level of
our supply chain could materially adversely affect our business and
delay or impede the development and commercialization of any of
our therapeutics or therapeutic candidates and could have a material
adverse effect on our business, prospects, financial condition and results
of operations.
Our or our Founded Entities’ therapeutics must be manufactured in
accordance with federal, state and international regulations, and we or our
Founded Entities could be forced to recall our or our Founded Entities’
medical devices or terminate production if we or our Founded Entities fail
to comply with these regulations.
The methods used in, and the facilities used for, the manufacture of
medical device therapeutics of our Founded Entities, including Gelesis,
Akili, Follica and Sonde, must comply with the FDA’s cGMPs for medical
devices, known as Quality System Regulation, or QSR, which is a complex
regulatory scheme that covers the procedures and documentation of,
among other requirements, the design, testing, validation, verification,
complaint handling, production, process controls, quality assurance,
labeling, supplier evaluation, packaging, handling, storage, distribution,
installation, servicing and shipping of medical devices. Furthermore,
we and our Founded Entities are required to verify that our suppliers
maintain facilities, procedures and operations that comply with our quality
standards and applicable regulatory requirements. The FDA enforces
the QSR through, among other oversight methods, periodic announced
or unannounced inspections of medical device manufacturing facilities,
which may include the facilities of subcontractors, suppliers or CMOs.
Our and our Founded Entities’ therapeutics are also subject to similar
Risk Factor Annex — continuedAdditionasl information state regulations and various laws and regulations of foreign countries
governing manufacturing.
Our or our Founded Entities’ third-party manufacturers may not take
the necessary steps to comply with applicable regulations or our or our
Founded Entities’ specifications, which could cause delays in the delivery
of our therapeutics. In addition, failure to comply with applicable FDA
requirements or later discovery of previously unknown problems with our
or our Founded Entities’ therapeutics or manufacturing processes could
result in, among other things: warning letters or untitled letters; customer
civil penalties; suspension or withdrawal of approvals or clearances;
seizures or recalls of our or our Founded Entities’ therapeutics; total or
partial suspension of production or distribution; administrative or judicially
imposed sanctions; the FDA’s refusal to grant pending or future clearances
or approvals for our or our Founded Entities’ therapeutics; clinical holds;
refusal to permit the import or export of our or our Founded Entities’
therapeutics; and criminal prosecution of us or our employees. Any of
these actions could significantly and negatively impact supply of our or
our Founded Entities’ therapeutics. If any of these events occurs, our
reputation could be harmed, we could be exposed to product liability
claims and we or our Founded Entities could lose customers and suffer
reduced revenue and increased costs.
Risks Related to Commercialization
If, in the future, we are unable to establish sales and marketing capabilities
or enter into agreements with third parties to sell and market any
therapeutic candidates we may develop, we may not be successful
in commercializing those therapeutic candidates if and when they
are approved.
We do not have a sales or marketing infrastructure or the capabilities
for sale, marketing, or distribution of pharmaceutical therapeutics. To
achieve commercial success for any approved therapeutic for which we
retain sales and marketing responsibilities, we must either develop a sales
and marketing organization or outsource these functions to third parties.
In the future, we may choose to build a focused sales, marketing, and
commercial support infrastructure to market and sell the therapeutic
candidates within our Wholly Owned Pipeline, if and when they are
approved. We may also elect to enter into collaborations or strategic
partnerships with third parties to engage in commercialization activities
with respect to selected therapeutic candidates, indications or geographic
territories, including territories outside the United States, although there is
no guarantee we will be able to enter into these arrangements even if the
intent is to do so.
There are risks involved with both establishing our own commercial
capabilities and entering into arrangements with third parties to
perform these services. For example, recruiting and training a sales
force or reimbursement specialists is expensive and time consuming
and could delay any therapeutic launch. If the commercial launch of
a therapeutic candidate for which we recruit a sales force and establish
marketing and other commercialization capabilities is delayed or does
not occur for any reason, we would have prematurely or unnecessarily
incurred these commercialization expenses. This may be costly,
and our investment would be lost if we cannot retain or reposition
commercialization personnel.
Factors that may inhibit our efforts to commercialize any approved
therapeutic on our own include:
• the inability to recruit and retain adequate numbers of effective sales,
marketing, reimbursement, customer service, medical affairs, and other
support personnel;
• the inability of sales personnel to obtain access to physicians or
persuade adequate numbers of physicians to prescribe any future
approved therapeutics;
• the inability of reimbursement professionals to negotiate arrangements
for formulary access, reimbursement, and other acceptance by payors;
• the inability to price therapeutics at a sufficient price point to ensure an
adequate and attractive level of profitability;
• restricted or closed distribution channels that make it difficult to
distribute our therapeutics to segments of the patient population;
• the lack of complementary therapeutics to be offered by sales
personnel, which may put us at a competitive disadvantage relative to
companies with more extensive therapeutic lines; and
• unforeseen costs and expenses associated with creating an
independent commercialization organization.
If we enter into arrangements with third parties to perform sales,
marketing, commercial support, and distribution services, our therapeutic
revenue or the profitability of therapeutic revenue may be lower than if
we were to market and sell any therapeutics we may develop internally.
In addition, we may not be successful in entering into arrangements
with third parties to commercialize the therapeutic candidates within
our Wholly Owned Pipeline or may be unable to do so on terms that
are favorable to us or them. We may have little control over such third
parties, and any of them may fail to devote the necessary resources and
attention to sell and market our therapeutics effectively or may expose us
to legal and regulatory risk by not adhering to regulatory requirements
and restrictions governing the sale and promotion of prescription drug
therapeutics, including those restricting off-label promotion. If we do
not establish commercialization capabilities successfully, either on our
own or in collaboration with third parties, we will not be successful in
commercializing the therapeutic candidates within our Wholly Owned
Pipeline, if approved.
Even if any current or future therapeutic candidate of ours receives
regulatory clearance or approval, it may fail to achieve the degree of
market acceptance by physicians, patients, third-party payors and others
in the medical community necessary for commercial success, in which case
we may not generate significant revenues or become profitable.
We have never commercialized a therapeutic, and even if any current
or future therapeutic candidate of ours is approved by the appropriate
regulatory authorities for marketing and sale, it may nonetheless fail to
gain sufficient market acceptance by physicians, patients, third-party
payors and others in the medical community. Physicians may be reluctant
to take their patients off their current medications and switch their
treatment regimen. Further, patients often acclimate to the treatment
regime that they are currently taking and do not want to switch unless
their physicians recommend switching therapeutics or they are required to
switch due to lack of coverage and adequate reimbursement. In addition,
even if we are able to demonstrate our Wholly Owned Programs’ safety
and efficacy to the FDA and other regulators, safety or efficacy concerns in
the medical community may hinder market acceptance.
Efforts to educate the medical community and third-party payors on
the benefits of the therapeutic candidates within our Wholly Owned
Pipeline may require significant resources, including management time
and financial resources, and may not be successful. The degree of market
acceptance of the therapeutic candidates within our Wholly Owned
Pipeline, if approved for commercial sale, will depend on a number of
factors, including:
• the efficacy and safety of the therapeutic;
• the potential advantages of the therapeutic compared to
competitive therapies;
• the prevalence and severity of any side effects;
• whether the therapeutic is designated under physician treatment
guidelines as a first-, second- or third-line therapy;
• our ability, or the ability of any future collaborators, to offer the
therapeutic for sale at competitive prices;
• the therapeutic’s convenience and ease of administration compared to
alternative treatments;
• the willingness of the target patient population to try, and of physicians
to prescribe, the therapeutic;
• limitations or warnings, including distribution or use restrictions
contained in the therapeutic’s approved labeling;
• the strength of sales, marketing and distribution support;
• changes in the standard of care for the targeted indications for the
therapeutic; and
• availability and adequacy of coverage and reimbursement from
government payors, managed care plans and other third-party payors.
Sales of medical therapeutics also depend on the willingness of
physicians to prescribe the treatment, which is likely to be based on
a determination by these physicians that the therapeutics are safe,
therapeutically effective and cost effective. In addition, the inclusion
or exclusion of therapeutics from treatment guidelines established by
various physician groups and the viewpoints of influential physicians can
affect the willingness of other physicians to prescribe the treatment. We
cannot predict whether physicians, physicians’ organizations, hospitals,
other healthcare providers, government agencies or private insurers will
determine that our therapeutic is safe, therapeutically effective and cost
effective as compared with competing treatments. If any therapeutic
candidates we develop do not achieve an adequate level of acceptance,
we may not generate significant therapeutic revenue, and we may not
become profitable.
Any failure by any current or future therapeutic candidate of ours that
obtains regulatory approval to achieve market acceptance or commercial
success would adversely affect our business prospects. In addition, any
negative perception of one of our Founded Entities or any therapeutic
candidates marketed or commercialized by them may adversely affect
PureTech Health plc Annual report and accounts 2020 203
Risk Factor Annex — continuedAdditional information our reputation in the marketplace or among industry participants and our
business prospects.
The insurance coverage and reimbursement status of newly-approved
therapeutics is uncertain. The therapeutic candidates within our Wholly
Owned Pipeline may become subject to unfavorable pricing regulations,
third-party coverage and reimbursement practices, or healthcare reform
initiatives, which would harm our business. Failure to obtain or maintain
coverage and adequate reimbursement for new or current therapeutics
could limit our ability to market those therapeutics and decrease our ability
to generate revenue.
The regulations that govern marketing approvals, pricing, coverage, and
reimbursement for new drugs and other medical therapeutics vary widely
from country to country. In the United States, healthcare reform legislation
may significantly change the approval requirements in ways that could
involve additional costs and cause delays in obtaining approvals. Some
countries require approval of the sale price of a therapeutic before it
can be marketed. In many countries, the pricing review period begins
after marketing or therapeutic licensing approval is granted. In some
foreign markets, pricing remains subject to continuing governmental
control even after initial approval is granted. As a result, we might obtain
marketing approval for a therapeutic in a particular country, but then
be subject to price regulations that delay our commercial launch of the
therapeutic, possibly for lengthy time periods, and negatively impact the
revenue we are able to generate from the sale of the therapeutic in that
country. Adverse pricing limitations may hinder our ability to recoup our
investment in one or more therapeutics or therapeutic candidates, even if
any therapeutic candidates we may develop obtain marketing approval.
Our ability to successfully commercialize our therapeutics and therapeutic
candidates also will depend in part on the extent to which coverage
and adequate reimbursement for these therapeutics and related
treatments will be available from government health administration
authorities, private health insurers, and other organizations. Government
authorities and third-party payors, such as private health insurers and
health maintenance organizations, decide which medications they will
pay for and establish reimbursement levels. The availability of coverage
and extent of reimbursement by governmental and private payors is
essential for most patients to be able to afford treatments such as gene
therapy therapeutics. Sales of these or other therapeutic candidates
that we may identify will depend substantially, both domestically and
abroad, on the extent to which the costs of the therapeutic candidates
within our Wholly Owned Pipeline will be paid by health maintenance,
managed care, pharmacy benefit and similar healthcare management
organizations, or reimbursed by government health administration
authorities, private health coverage insurers and other third-party payors.
If coverage and adequate reimbursement is not available, or is available
only to limited levels, we may not be able to successfully commercialize
our therapeutics or therapeutic candidates. Even if coverage is provided,
the approved reimbursement amount may not be high enough to allow
us to establish or maintain pricing sufficient to realize a sufficient return
on our investment. A primary trend in the U.S. healthcare industry and
elsewhere is cost containment. Government authorities and third-party
payors have attempted to control costs by limiting coverage and the
amount of reimbursement for particular medications. In many countries,
the prices of medical therapeutics are subject to varying price control
mechanisms as part of national health systems. In general, the prices
of medicines under such systems are substantially lower than in the
United States. Other countries allow companies to fix their own prices for
medicines, but monitor and control company profits. Additional foreign
price controls or other changes in pricing regulation could restrict the
amount that we are able to charge for the therapeutic candidates within
our Wholly Owned Pipeline. Accordingly, in markets outside the United
States, the reimbursement for therapeutics may be reduced compared
with the United States and may be insufficient to generate commercially
reasonable revenues and profits.
There is also significant uncertainty related to the insurance coverage
and reimbursement of newly approved therapeutics and coverage may
be more limited than the purposes for which the medicine is approved
by the FDA or comparable foreign regulatory authorities. In the United
States, the principal decisions about reimbursement for new medicines
are typically made by the Centers for Medicare & Medicaid Services,
or CMS, an agency within the U.S. Department of Health and Human
Services. CMS decides whether and to what extent a new medicine will
be covered and reimbursed under Medicare and private payors tend to
follow CMS to a substantial degree. No uniform policy of coverage and
reimbursement for therapeutics exists among third-party payors and
coverage and reimbursement levels for therapeutics can differ significantly
from payor to payor. As a result, the coverage determination process is
often a time consuming and costly process that may require us to provide
scientific and clinical support for the use of our therapeutics to each payor
204 PureTech Health plc Annual report and accounts 2020
separately, with no assurance that coverage and adequate reimbursement
will be applied consistently or obtained in the first instance. It is difficult
to predict what CMS will decide with respect to reimbursement for
fundamentally novel therapeutics such as ours, as there is no body
of established practices and precedents for these new therapeutics.
Reimbursement agencies in Europe may be more conservative than
CMS. For example, a number of cancer drugs have been approved for
reimbursement in the United States and have not been approved for
reimbursement in certain European countries. Moreover, eligibility for
reimbursement does not imply that any drug will be paid for in all cases
or at a rate that covers our costs, including research, development,
manufacture, sale, and distribution. Interim reimbursement levels for new
drugs, if applicable, may also not be sufficient to cover our costs and
may not be made permanent. Reimbursement rates may vary according
to the use of the drug and the clinical setting in which it is used, may be
based on reimbursement levels already set for lower cost drugs and may
be incorporated into existing payments for other services. Our inability
to promptly obtain coverage and profitable payment rates from both
government-funded and private payors for any approved therapeutics
we may develop could have a material adverse effect on our operating
results, our ability to raise capital needed to commercialize therapeutic
candidates, and our overall financial condition. As noted above, in the
United States we plan to have various programs to help patients afford our
therapeutics, including patient assistance programs and co-pay coupon
programs for eligible patients.
Net prices for drugs may be reduced by mandatory discounts or rebates
required by government healthcare programs or private payors and by
any future relaxation of laws that presently restrict imports of drugs from
countries where they may be sold at lower prices than in the United States.
Our inability to promptly obtain coverage and profitable reimbursement
rates third-party payors for any approved therapeutics that we develop
could have a material adverse effect on our operating results, our ability
to raise capital needed to commercialize therapeutics and our overall
financial condition.
Increasingly, third-party payors are requiring that pharmaceutical
companies provide them with predetermined discounts from list prices
and are challenging the prices charged for medical therapeutics. We
cannot be sure that reimbursement will be available for any therapeutic
candidate that we commercialize and, if reimbursement is available, the
level of reimbursement. Reimbursement may impact the demand for, or
the price of, any therapeutic or therapeutic candidate for which we obtain
marketing approval. In order to obtain reimbursement, physicians may
need to show that patients have superior treatment outcomes with our
therapeutics compared to standard of care drugs, including lower-priced
generic versions of standard of care drugs. We expect to experience
pricing pressures in connection with the sale of any of the therapeutic
candidates within our Wholly Owned Pipeline, due to the trend toward
managed healthcare, the increasing influence of health maintenance
organizations and additional legislative changes. The downward pressure
on healthcare costs in general, particularly prescription drugs and
surgical procedures and other treatments, has become very intense.
As a result, increasingly high barriers are being erected to the entry of
new therapeutics. Additionally, we may develop companion diagnostic
tests for use with our Wholly Owned Programs or our Founded Entities’
therapeutic candidates. We, or our Founded Entities or our collaborators
may be required to obtain coverage and reimbursement for these tests
separate and apart from the coverage and reimbursement we seek
for our Wholly Owned Programs or our Founded Entities’ therapeutic
candidates, once approved. Even if we or our Founded Entities obtain
regulatory approval or clearance for such companion diagnostics, there
is significant uncertainty regarding our ability to obtain coverage and
adequate reimbursement for the same reasons applicable to our Wholly
Owned Programs or our Founded Entities’ therapeutic candidates.
Medicare reimbursement methodologies, whether under Part A, Part B, or
clinical laboratory fee schedule may be amended from time to time, and
we cannot predict what effect any change to these methodologies would
have on any therapeutic candidate or companion diagnostic for which we
receive approval.
We have no sales, distribution, or marketing capabilities, and may invest
significant financial and management resources to establish these
capabilities. If we are unable to establish such capabilities or enter into
agreements with third parties to market and sell our future therapeutics, if
approved, we may be unable to generate any revenues.
Given our stage of development, we have no sales, distribution, or
marketing capabilities. To successfully commercialize any therapeutics that
may result from our development programs, we will need to develop sales
and marketing capabilities in the United States, Europe, and other regions,
either on our own or with others. We may enter into strategic alliances
with other entities to utilize their mature marketing and distribution
Risk Factor Annex — continuedAdditionasl information capabilities, but we may be unable to enter into marketing agreements
on favorable terms, if at all. If our future strategic collaborators do not
commit sufficient resources to commercialize our future therapeutics, if
any, and we are unable to develop the necessary marketing capabilities
on our own, we may be unable to generate sufficient therapeutic revenue
to sustain our business. We will be competing with many companies that
currently have extensive and well-funded marketing and sales operations.
Without a significant internal team or the support of a third party to
perform marketing and sales functions, we may be unable to compete
successfully against these more established companies.
Risks Related to Compliance with Healthcare Laws
If we fail to comply with healthcare laws, we could face substantial
penalties and our business, operations and financial conditions could be
adversely affected.
Healthcare providers, physicians and third-party payors in the United
States and elsewhere play a primary role in the recommendation
and prescription of pharmaceutical therapeutics. Arrangements with
healthcare providers, third-party payors and customers can expose
pharmaceutical manufacturers to broadly applicable fraud and abuse
and other healthcare laws and regulations, including, without limitation,
the federal Anti-Kickback Statute and the federal False Claims Act, or the
FCA, which may constrain the business or financial arrangements and
relationships through which such companies sell, market and distribute
pharmaceutical therapeutics. In particular, the promotion, sales and
marketing of healthcare items and services, as well as certain business
arrangements in the healthcare industry, are subject to extensive laws
designed to prevent fraud, kickbacks, self-dealing and other abusive
practices. These laws and regulations may restrict or prohibit a wide range
of ownership, pricing, discounting, marketing and promotion, structuring
and commission(s), certain customer incentive programs and other
business arrangements generally. Activities subject to these laws also
involve the improper use of information obtained in the course of patient
recruitment for clinical trials. The applicable federal and state healthcare
laws and regulations laws that may affect our ability to operate include,
but are not limited to:
• the federal Anti-Kickback Statute, which prohibits, among other things,
persons from knowingly and willfully soliciting, receiving, offering or
paying any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind, to induce, or
in return for, either the referral of an individual, or the purchase, lease,
order or recommendation of any good, facility, item or service for which
payment may be made, in whole or in part, under a federal healthcare
program, such as the Medicare and Medicaid programs. A person or
entity does not need to have actual knowledge of the statute or specific
intent to violate it in order to have committed a violation. Violations
are subject to civil and criminal fines and penalties for each violation,
plus up to three times the remuneration involved, imprisonment of up
to ten years, and exclusion from government healthcare programs. In
addition, the government may assert that a claim including items or
services resulting from a violation of the federal Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the FCA. The
Anti-Kickback Statute has been interpreted to apply to arrangements
between pharmaceutical manufacturers, on the one hand, and
prescribers, purchasers and formulary managers, on the other. There
are a number of statutory exceptions and regulatory safe harbors
protecting some common activities from prosecution. On December
2, 2020, the Office of Inspector General, or OIG, published further
modifications to the federal Anti-Kickback Statute. Under the final
rules, OIG added safe harbor protections under the Anti-Kickback
Statute for certain coordinated care and value-based arrangements
among clinicians, providers, and others. This rule (with exceptions)
became effective January 19, 2021. Implementation of this change and
new safe harbors for point-of-sale reductions in price for prescription
pharmaceutical therapeutics and pharmacy benefit manager service
fees are currently under review by the Biden administration and may be
amended or repealed. We continue to evaluate what effect, if any, the
rule will have on our business
• federal civil and criminal false claims laws and civil monetary penalty
laws, including the False Claims Act, which impose criminal and civil
penalties, including through civil “qui tam” or “whistleblower” actions,
against individuals or entities for, among other things, knowingly
presenting, or causing to be presented, claims for payment or approval
from Medicare, Medicaid, or other federal health care programs that
are false or fraudulent; knowingly making or causing a false statement
material to a false or fraudulent claim or an obligation to pay money
to the federal government; or knowingly concealing or knowingly and
improperly avoiding or decreasing such an obligation. Manufacturers
can be held liable under the FCA even when they do not submit claims
directly to government payors if they are deemed to “cause” the
submission of false or fraudulent claims. The FCA also permits a private
individual acting as a “whistleblower” to bring actions on behalf of the
federal government alleging violations of the FCA and to share in any
monetary recovery. When an entity is determined to have violated the
federal civil False Claims Act, the government may impose civil fines
and penalties for each false claim, plus treble damages, and exclude
the entity from participation in Medicare, Medicaid and other federal
healthcare programs;
• the federal Health Insurance Portability and Accountability Act of
1996, or HIPAA, which created additional federal criminal statutes that
prohibit knowingly and willfully executing, or attempting to execute,
a scheme to defraud any healthcare benefit program or obtain, by
means of false or fraudulent pretenses, representations, or promises,
any of the money or property owned by, or under the custody or control
of, any healthcare benefit program, regardless of the payor (e.g., public
or private) and knowingly and willfully falsifying, concealing or covering
up by any trick or device a material fact or making any materially
false statements in connection with the delivery of, or payment for,
healthcare benefits, items or services relating to healthcare matters.
Similar to the federal Anti-Kickback Statute, a person or entity can be
found guilty of violating HIPAA without actual knowledge of the statute
or specific intent to violate it;
• the federal civil monetary penalties laws, which impose civil fines
for, among other things, the offering or transfer or remuneration to
a Medicare or state healthcare program beneficiary if the person knows
or should know it is likely to influence the beneficiary’s selection of
a particular provider, practitioner, or supplier of services reimbursable
by Medicare or a state healthcare program, unless an exception applies;
• HIPAA, as amended by the Health Information Technology for
Economic and Clinical Health Act of 2009, or HITECH, and their
respective implementing regulations, which impose, among other
things, requirements on certain covered healthcare providers, health
plans, and healthcare clearinghouses as well as their respective
business associates that perform services for them that involve the use,
or disclosure of, individually identifiable health information, relating to
the privacy, security and transmission of individually identifiable health
information without appropriate authorization. HITECH also created
new tiers of civil monetary penalties, amended HIPAA to make civil and
criminal penalties directly applicable to business associates, and gave
state attorneys general new authority to file civil actions for damages or
injunctions in federal courts to enforce the federal HIPAA laws and seek
attorneys’ fees and costs associated with pursuing federal civil actions;
• the federal Physician Payments Sunshine Act, created under the ACA,
and its implementing regulations, which require manufacturers of
drugs, devices, biologicals and medical supplies for which payment is
available under Medicare, Medicaid or the Children’s Health Insurance
Program (with certain exceptions) to report annually to the U.S.
Department of Health and Human Services, or HHS, under the Open
Payments Program, information related to payments or other transfers
of value made to physicians (defined to include doctors, dentists,
optometrists, podiatrists and chiropractors), and teaching hospitals,
as well as ownership and investment interests held by physicians and
their immediate family members. Effective January 1, 2022, these
reporting obligations will extend to include transfers of value made
to certain non-physician providers such as physician assistants and
nurse practitioners;
• federal consumer protection and unfair competition laws, which
broadly regulate marketplace activities and activities that potentially
harm consumers;
• federal price reporting laws, which require manufacturers to calculate
and report complex pricing metrics to government programs, where
such reported prices may be used in the calculation of reimbursement
and/or discounts on approved therapeutics; and
• analogous state and foreign laws and regulations, such as state
and foreign anti-kickback, false claims, consumer protection and
unfair competition laws which may apply to pharmaceutical business
practices, including but not limited to, research, distribution, sales
and marketing arrangements as well as submitting claims involving
healthcare items or services reimbursed by any third-party payer,
including commercial insurers; state laws that require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary
compliance guidelines and the relevant compliance guidance
promulgated by the federal government that otherwise restricts
payments that may be made to healthcare providers and other
potential referral sources; state laws that require drug manufacturers
to file reports with states regarding pricing and marketing information,
such as the tracking and reporting of gifts, compensations and other
remuneration and items of value provided to healthcare professionals
PureTech Health plc Annual report and accounts 2020 205
Risk Factor Annex — continuedAdditional information and entities; state and local laws requiring the registration of
pharmaceutical sales representatives; and state and foreign laws
governing the privacy and security of health information in certain
circumstances, many of which differ from each other in significant
ways and are often not pre-empted by HIPAA, thus complicating
compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory
exceptions and regulatory safe harbors available, it is possible that some
of our business activities, including compensation of physicians with stock
or stock options, could, despite efforts to comply, be subject to challenge
under one or more of such laws. Additionally, FDA or foreign regulators
may not agree that we have mitigated any risk of bias in our clinical
trials due to payments or equity interests provided to investigators or
institutions which could limit a regulator’s acceptance of those clinical trial
data in support of a marketing application. Moreover, efforts to ensure
that our business arrangements will comply with applicable healthcare
laws may involve substantial costs. It is possible that governmental and
enforcement authorities will conclude that our business practices may not
comply with current or future statutes, regulations or case law interpreting
applicable fraud and abuse or other healthcare laws and regulations. If
any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have
a significant impact on our business, including the imposition of significant
civil, criminal and administrative penalties, damages, disgorgement,
monetary fines, exclusion from participation in Medicare, Medicaid and
other federal healthcare programs, integrity and oversight agreements to
resolve allegations of non-compliance, contractual damages, reputational
harm, diminished profits and future earnings, and curtailment or
restructuring of our operations, any of which could adversely affect our
ability to operate our business and our results of operations. In addition,
the approval and commercialization of any of the therapeutic candidates
within our Wholly Owned Pipeline outside the United States will also likely
subject us to foreign equivalents of the healthcare laws mentioned above,
among other foreign laws.
Failure to comply with health and data protection laws and regulations
could lead to government enforcement actions (which could include civil
or criminal penalties), private litigation, and/or adverse publicity and could
negatively affect our operating results and business.
We and any potential collaborators may be subject to federal, state, and
foreign data protection laws and regulations (i.e., laws and regulations that
address privacy and data security). In the United States, numerous federal
and state laws and regulations, including federal health information
privacy laws, state data breach notification laws, state health information
privacy laws, and federal and state consumer protection laws (e.g., Section
5 of the Federal Trade Commission Act), that govern the collection, use,
disclosure and protection of health-related and other personal information
could apply to our operations or the operations of our collaborators. In
addition, we may obtain health information from third parties (including
research institutions from which we obtain clinical trial data) that are
subject to privacy and security requirements under HIPAA, as amended
by HITECH. Depending on the facts and circumstances, we could be
subject to civil, criminal, and administrative penalties if we knowingly
obtain, use, or disclose individually identifiable health information
maintained by a HIPAA-covered entity in a manner that is not authorized
or permitted by HIPAA.
Compliance with U.S. and international data protection laws and
regulations, including the General Data Protection Regulation 2016/679,
or GDPR, in the European Union, could require us to take on more
onerous obligations in our contracts, restrict our ability to collect, use and
disclose data, or in some cases, impact our ability to operate in certain
jurisdictions. Failure to comply with these laws and regulations could result
in government enforcement actions (which could include civil, criminal
and administrative penalties), private litigation, and/or adverse publicity
and could negatively affect our operating results and business. Moreover,
clinical trial subjects, employees and other individuals about whom we
or our potential collaborators obtain personal information, as well as
the providers who share this information with us, may limit our ability to
collect, use and disclose the information. Claims that we have violated
individuals’ privacy rights, failed to comply with data protection laws,
or breached our contractual obligations, even if we are not found liable,
could be expensive and time-consuming to defend and could result in
adverse publicity that could harm our business.
Healthcare legislative measures aimed at reducing healthcare costs may
have a material adverse effect on our business and results of operations.
The United States and many foreign jurisdictions have enacted or
proposed legislative and regulatory changes affecting the healthcare
system that could prevent or delay marketing approval of the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
206 PureTech Health plc Annual report and accounts 2020
therapeutic candidates or any future therapeutic candidates, restrict or
regulate post-approval activities and affect our or our Founded Entities’
ability to profitably sell any therapeutic for which we or our Founded
Entities obtain marketing approval. Changes in regulations, statutes or
the interpretation of existing regulations could impact our or our Founded
Entities’ business in the future by requiring, for example: (i) changes to our
manufacturing arrangements; (ii) additions or modifications to therapeutic
labeling; (iii) the recall or discontinuation of our therapeutics; or (iv)
additional record-keeping requirements. If any such changes were to be
imposed, they could adversely affect the operation of our business.
In the United States, there have been and continue to be a number of
legislative initiatives and judicial challenges to contain healthcare costs.
For example, in March 2010, the Affordable Care Act, or the ACA, was
passed, which substantially changed the way healthcare is financed by
both governmental and private insurers, and significantly impacted the
U.S. pharmaceutical industry. The ACA, among other things, subjects
biological therapeutics to potential competition by lower-cost biosimilars,
addresses a new methodology by which rebates owed by manufacturers
under the Medicaid Drug Rebate Program are calculated for drugs
that are inhaled, infused, instilled, implanted or injected, increases the
minimum Medicaid rebates owed by manufacturers under the Medicaid
Drug Rebate Program and extends the rebate program to individuals
enrolled in Medicaid managed care organizations, establishes annual fees
and taxes on manufacturers of certain branded prescription drugs, and
creates a new Medicare Part D coverage gap discount program, in which
manufacturers must agree to offer 50 percent (increased to 70 percent
as of 2019 pursuant to subsequent legislation) point-of-sale discounts
off negotiated prices of applicable brand drugs to eligible beneficiaries
during their coverage gap period, as a condition for the manufacturer’s
outpatient drugs to be covered under Medicare Part D.
Payment methodologies may be subject to changes in healthcare
legislation and regulatory challenges. For example, in order for a drug
therapeutic to receive federal reimbursement under the Medicaid or
Medicare Part B programs or to be sold directly to U.S. government
agencies, the manufacturer must extend discounts to entities eligible
to participate in the 340B drug pricing program. In December 2018, the
CMS published a final rule permitting further collections and payments to
and from certain ACA qualified health plans and health insurance issuers
under the ACA risk adjustment program in response to the outcome
of the federal district court litigation regarding the method CMS uses
to determine this risk adjustment. Since then, the ACA risk adjustment
program payment parameters have been updated annually.
Since the enactment of the ACA, there have been numerous judicial,
administrative, executive, and legislative challenges to certain aspects
of the ACA, and we expect there will be additional challenges and
amendments to the ACA in the future. The Tax Cuts and Jobs Act of 2017,
or the Tax Act, includes a provision that repealed effective January 1,
2019 the tax-based shared responsibility payment imposed by the ACA
on certain individuals who fail to maintain qualifying health coverage
for all or part of a year that is commonly referred to as the “individual
mandate.” On December 14, 2018, a U.S. District Court Judge in the
Northern District of Texas, or the Texas District Court Judge, ruled that
the individual mandate is a critical and inseverable feature of the ACA, and
therefore, because it was repealed as part of the Tax Act, the remaining
provisions of the ACA are invalid as well. The former Trump Administration
and CMS have both stated that the ruling will have no immediate effect,
and on December 30, 2018 the Texas District Court Judge issued an order
staying the judgment pending appeal. On December 18, 2019, the U.S.
Court of Appeals for the 5th Circuit ruled that the individual mandate
was unconstitutional but remanded the case back to the District Court to
determine whether the remaining provisions of the ACA are invalid as well.
On March 2, 2020, the U.S. Supreme Court granted the petitions for writs
of certiorari to review the case, and held oral arguments on November
10, 2020. Pending a decision, the ACA remains in effect, but it is unclear
at this time what effect these developments will have on the status of the
ACA. We will continue to evaluate the effect that the ACA and its possible
repeal and replacement has on our business.
Since January 2017, former President Trump signed various Executive
Orders designed to delay the implementation of certain provisions of
the ACA or otherwise circumvent some of the requirements for health
insurance mandated by the ACA. On October 13, 2017, former President
Trump signed an Executive Order terminating the cost-sharing subsidies
that reimburse insurers under the ACA. The former Trump administration
concluded that cost-sharing reduction, or CSR, payments to insurance
companies required under the ACA have not received necessary
appropriations from Congress and announced that it would discontinue
these payments immediately until those appropriations are made.
Several state Attorneys General filed suit to stop the administration from
terminating the subsidies, but their request for a restraining order was
denied by a federal judge in California on October 25, 2017. On August
Risk Factor Annex — continuedAdditionasl information 14, 2020, the U.S. Court of Appeals for the Federal Circuit ruled in two
separate cases that the federal government is liable for the full amount of
unpaid CSRs for the years preceding and including 2017. For CSR claims
made by health insurance companies for years 2018 and later, further
litigation will be required to determine the amounts due, if any. Further,
on June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that
the federal government was not required to pay more than $12 billion in
ACA risk corridor payments to third-party payors who argued were owed
to them. This decision was appealed to the U.S. Supreme Court, which on
April 27, 2020, reversed the U.S. Court of Appeals for the Federal Circuit’s
decision and remanded the case to the U.S. Court of Federal Claims,
concluding the government has an obligation to pay these risk corridor
payments under the relevant formula. The U.S. federal government has
since started sending third-party payors owed payments. It is not clear
what effect these rulings will have on our business, but we will continue to
monitor any developments.
Moreover, on January 22, 2018, former President Trump signed
a continuing resolution on appropriations for fiscal year 2018 that
delayed the implementation of certain ACA-mandated fees, including
the so called “Cadillac” tax on certain high cost employer-sponsored
insurance plans, the annual fee imposed on certain health insurance
providers based on market share, and the medical device excise tax on
non-exempt medical devices. However, on December 20, 2019, the U.S.
President signed into law the Further Consolidated Appropriations Act
(H.R. 1865), which repeals the Cadillac tax, the health insurance provider
tax, and the medical device excise tax. The Bipartisan Budget Act of
2018, also amended the ACA, effective January 1, 2019, by increasing
the point-of-sale discount that is owed by pharmaceutical manufacturers
who participate in Medicare Part D and closing the coverage gap in
most Medicare drug plans, commonly referred to as the “donut hole.”
In addition, CMS published a final rule on April 25, 2019 that gave states
greater flexibility, starting in 2020, in setting benchmarks for insurers in
the individual and small group marketplaces, which may have the effect
of relaxing the essential health benefits required under the ACA for plans
sold through such marketplaces.
In addition, other legislative changes have been proposed and adopted in
the United States since the ACA was enacted. In August 2011, the Budget
Control Act of 2011, among other things, resulted in aggregate reductions
of Medicare payments to providers of 2 percent per fiscal year, which went
into effect in 2013, and, due to subsequent legislative amendments, will
remain in effect through 2030 unless additional Congressional action is
taken. However, pursuant to the Coronavirus Aid, Relief and Economic
Security Act, or CARES Act, and due to subsequent legislation, these
Medicare sequester reductions have been suspended from May 1, 2020
through March 31, 2021 due to the COVID-19 pandemic. Proposed
legislation, if passed, would extend this suspension until the end of the
pandemic. The American Taxpayer Relief Act of 2012 further reduced
Medicare payments to several types of providers, including hospitals and
cancer treatment centers, and increased the statute of limitations period
for the government to recover overpayments to providers from three
to five years.
There has been increasing legislative and enforcement interest in the
United States with respect to drug pricing practices. Specifically, there
have been several recent U.S. Congressional inquiries and proposed
federal and state legislation designed to, among other things, bring
more transparency to drug pricing, reduce the cost of prescription
drugs under Medicare, review the relationship between pricing and
manufacturer patient programs, and reform government program
reimbursement methodologies for drugs. At the federal level, the former
Trump administration’s budget for fiscal year 2021 includes a $135 billion
allowance to support legislative proposals seeking to reduce drug prices,
increase competition, lower out-of-pocket drug costs for patients, and
increase patient access to lower-cost generic and biosimilar drugs.
On March 10, 2020, the former Trump administration sent “principles”
for drug pricing to Congress, calling for legislation that would, among
other things, cap Medicare Part D beneficiary out-of-pocket pharmacy
expenses, provide an option to cap Medicare Part D beneficiary
monthly out-of-pocket expenses, and place limits on pharmaceutical
price increases. Additionally, the former Trump administration released
a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs
that contains additional proposals to increase manufacturer competition,
increase the negotiating power of certain federal healthcare programs,
incentivize manufacturers to lower the list price of their therapeutics
and reduce the out of pocket costs of drug therapeutics paid by
consumers. The U.S. Department of HHS, has already started the process
of soliciting feedback on some of these measures and, at the same
time, is immediately implementing others under its existing authority.
For example, in May 2019, CMS issued a final rule to allow Medicare
Advantage Plans the option of using step therapy for Part B drugs
beginning January 1, 2020. This final rule codified CMS’s policy change
that was effective January 1, 2019. However, it is unclear whether the
Biden administration will challenge, reverse, revoke or otherwise modify
these executive and administrative actions after January 20, 2021.
In addition, on May 30, 2018, the Right to Try Act was signed into law.
The law, among other things, provides a federal framework for certain
patients to access certain investigational new drug therapeutics that have
completed a Phase 1 clinical trial and that are undergoing investigation
for FDA approval. Under certain circumstances, eligible patients can
seek treatment without enrolling in clinical trials and without obtaining
FDA permission under the FDA expanded access program. There is no
obligation for a drug manufacturer to make its drug therapeutics available
to eligible patients as a result of the Right to Try Act.
In 2020, former President Trump announced several executive orders
related to prescription drug pricing that seek to implement several of the
administration’s proposals. The FDA released a final rule on September
24, 2020, which went into effect on November 30, 2020, providing
guidance for states to build and submit importation plans for drugs from
Canada. Further, on November 20, 2020, CMS issued an Interim Final
Rule implementing the Most Favored Nation, or MFN, Model under which
Medicare Part B reimbursement rates will be calculated for certain drugs
and biologicals based on the lowest price drug manufacturers receive
in Organization for Economic Cooperation and Development countries
with a similar gross domestic product per capita. The MFN Model
regulations mandate participation by identified Part B providers and
would have applied to all U.S. states and territories for a seven-year period
beginning January 1, 2021, and ending December 31, 2027. However,
in response to a lawsuit filed by several industry groups, on December
28, the U.S. District Court for the Northern District of California issued
a nationwide preliminary injunction enjoining government defendants
from implementing the MFN Rule pending completion of notice-and-
comment procedures under the Administrative Procedure Act. On
January 13, 2021, in a separate lawsuit brought by industry groups in the
U.S. District of Maryland, the government defendants entered a joint
motion to stay litigation on the condition that the government would
not appeal the preliminary injunction granted in the U.S. District Court
for the Northern District of California and that performance for any final
regulation stemming from the MFN Interim Final Rule shall not commence
earlier than 60 days after publication of that regulation in the Federal
Register. Further, authorities in Canada have passed rules designed to
safeguard the Canadian drug supply from shortages. If implemented,
importation of drugs from Canada and the MFN Model may materially and
adversely affect the price we receive for any of our therapeutic candidates.
Additionally, on December 2, 2020, HHS published a regulation removing
safe harbor protection for price reductions from pharmaceutical
manufacturers to plan sponsors under Part D, either directly or through
pharmacy benefit managers, unless the price reduction is required
by law. The rule also creates a new safe harbor for price reductions
reflected at the point-of-sale, as well as a safe harbor for certain fixed fee
arrangements between pharmacy benefit managers and manufacturers.
Pursuant to an order entered by the U.S. District Court for the District
of Columbia, the portion of the rule eliminating safe harbor protection
for certain rebates related to the sale or purchase of a pharmaceutical
therapeutic from a manufacturer to a plan sponsor under Medicare Part
D has been delayed to January 1, 2023. Further, implementation of this
change and new safe harbors for point-of-sale reductions in price for
prescription pharmaceutical therapeutics and pharmacy benefit manager
service fees are currently under review by the Biden administration and
may be amended or repealed.
At the state level, legislatures have increasingly passed legislation and
implemented regulations designed to control pharmaceutical and
biological therapeutic pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain therapeutic access and
marketing cost disclosure and transparency measures, and, in some
cases, designed to encourage importation from other countries and bulk
purchasing. In addition, regional healthcare authorities and individual
hospitals are increasingly using bidding procedures to determine what
pharmaceutical therapeutics and which suppliers will be included in their
prescription drug and other healthcare programs. Furthermore, there
has been increased interest by third-party payors and governmental
authorities in reference pricing systems and publication of discounts and
list prices.
There have been, and likely will continue to be, legislative and regulatory
proposals at the foreign, federal and state levels directed at containing or
lowering the cost of healthcare. The implementation of cost containment
measures or other healthcare reforms may prevent us from being able to
generate revenue, attain profitability, or commercialize our therapeutic.
Such reforms could have an adverse effect on anticipated revenue from
therapeutic candidates that we may successfully develop and for which
we may obtain regulatory approval and may affect our overall financial
condition and ability to develop therapeutic candidates. We cannot
PureTech Health plc Annual report and accounts 2020 207
Risk Factor Annex — continuedAdditional information predict the initiatives that may be adopted in the future. The continuing
efforts of the government, insurance companies, managed care
organizations and other payors of healthcare services to contain or reduce
costs of healthcare and/or impose price controls may adversely affect:
• the demand for the therapeutic candidates within our Wholly Owned
Pipeline or our Founded Entities’ therapeutic candidates, if approved;
• our ability to receive or set a price that we believe is fair for our
therapeutics;
• our ability to generate revenue and achieve or maintain profitability;
• the amount of taxes that we are required to pay; and
• the availability of capital.
Other healthcare reform measures may be adopted in the future, and
may result in additional reductions in Medicare and other healthcare
funding, more rigorous coverage criteria, lower reimbursement, and
new payment methodologies. This could lower the price that we receive
for any approved therapeutic. Any denial in coverage or reduction in
reimbursement from Medicare or other government-funded programs
may result in a similar denial or reduction in payments from private payors,
which may prevent us from being able to generate sufficient revenue,
attain profitability or commercialize the therapeutic candidates within our
Wholly Owned Pipeline or our Founded Entities’ therapeutic candidates,
if approved. Litigation and legislative efforts to change or repeal the ACA
are likely to continue, with unpredictable and uncertain results.
Risks Related to Competition
We face significant competition in an environment of rapid technological
and scientific change, and there is a possibility that our competitors may
achieve regulatory approval before us or develop therapies that are
safer, more advanced or more effective than ours, which may negatively
impact our ability to successfully market or commercialize any therapeutic
candidates we may develop and ultimately harm our financial condition.
The development and commercialization of new drug therapeutics
is highly competitive. We may face competition with respect to any
therapeutic candidates that we seek to develop or commercialize in the
future from major pharmaceutical companies, specialty pharmaceutical
companies, and biotechnology companies worldwide. Potential
competitors also include academic institutions, government agencies, and
other public and private research organizations that conduct research,
seek patent protection, and establish collaborative arrangements for
research, development, manufacturing, and commercialization.
There are a number of major pharmaceutical and biotechnology
companies that are currently pursuing the development and
commercialization of potential medicines targeting the Brain-Immune-
Gut. If any of our competitors receive FDA approval before we do, the
therapeutic candidates within our Wholly Owned Pipeline would not be
the first treatment on the market, and our market share may be limited.
In addition to competition from other companies targeting our target
indications, any therapeutics we may develop may also face competition
from other types of therapies.
Many of our current or potential competitors, either alone or with their
strategic partners, have:
• greater financial, technical, and human resources than we have
at every stage of the discovery, development, manufacture, and
commercialization of therapeutics;
• more extensive resources for preclinical testing, conducting clinical
trials, obtaining regulatory approvals, and in manufacturing, marketing,
and selling drug therapeutics;
• therapeutics that have been approved or are in late stages of
development; and
• collaborative arrangements in our target markets with leading
companies and research institutions.
Mergers and acquisitions in the pharmaceutical and biotechnology
industries may result in even more resources being concentrated among
a smaller number of our competitors. Smaller or early-stage companies
may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies.
These competitors also compete with us in recruiting and retaining
qualified scientific and management personnel and establishing clinical
trial sites and patient registration for clinical trials, as well as in acquiring
technologies complementary to, or necessary for, our programs. Our
commercial opportunity could be reduced or eliminated if our competitors
develop and commercialize therapeutics that are safer, more effective,
have fewer or less severe side effects, are more convenient, or are less
expensive than any therapeutics that we may develop. Furthermore,
currently approved therapeutics could be discovered to have application
for treatment of our targeted disease indications or similar indications,
208 PureTech Health plc Annual report and accounts 2020
which could give such therapeutics significant regulatory and market
timing advantages over the therapeutic candidates within our Wholly
Owned Pipeline. Our competitors may also obtain FDA, EMA or other
comparable foreign regulatory approval for their therapeutics more
rapidly than we may obtain approval for ours and may obtain orphan
therapeutic exclusivity from the FDA for indications that we are targeting,
which could result in our competitors establishing a strong market position
before we are able to enter the market. Additionally, therapeutics or
technologies developed by our competitors may render our potential
therapeutic candidates uneconomical or obsolete and we may not be
successful in marketing any therapeutic candidates we may develop
against competitors.
In addition, we could face litigation or other proceedings with respect to
the scope, ownership, validity and/or enforceability of our patents relating
to our competitors’ therapeutics and our competitors may allege that our
therapeutics infringe, misappropriate or otherwise violate their intellectual
property. The availability of our competitors’ therapeutics could limit the
demand, and the price we are able to charge, for any therapeutics that we
may develop and commercialize.
The therapeutic candidates within our Wholly Owned Pipeline or our
Founded Entities’ therapeutic candidates for which we or our Founded
Entities intend to seek approval as biologic therapeutics may face
competition sooner than anticipated.
If we or our Founded Entities are successful in achieving regulatory
approval to commercialize any biologic therapeutic candidate we or
our Founded Entities develop alone or with collaborators, it may face
competition from biosimilar therapeutics. In the United States, certain
of the therapeutic candidates within our Wholly Owned Pipeline and our
Founded Entities’ therapeutic candidates are regulated by the FDA as
biologic therapeutics subject to approval under the BLA pathway. The
Biologics Price Competition and Innovation Act of 2009, or BPCIA, created
an abbreviated pathway for the approval of biosimilar and interchangeable
biologic therapeutics following the approval of an original BLA. The
abbreviated regulatory pathway establishes legal authority for the
FDA to review and approve biosimilar biologics, including the possible
designation of a biosimilar as “interchangeable” based on its similarity
to an existing brand therapeutic. Under the BPCIA, an application for
a biosimilar therapeutic may not be submitted until four years following
the date that the reference therapeutic was first licensed by the FDA.
In addition, the approval of a biosimilar therapeutic may not be made
effective by the FDA until 12 years after the reference therapeutic was
first licensed by the FDA. During this 12-year period of exclusivity,
another company may still market a competing version of the reference
therapeutic if the FDA approves a full BLA for the competing therapeutic
containing the sponsor’s own preclinical data and data from adequate and
well-controlled clinical trials to demonstrate the safety, purity and potency
of their therapeutic. The law is complex and is still being interpreted and
implemented by the FDA. As a result, its ultimate impact, implementation,
and meaning are subject to uncertainty. While it is uncertain when such
processes intended to implement BPCIA may be fully adopted by the
FDA, any such processes could have a material adverse effect on the
future commercial prospects for biological therapeutic candidates.
We believe that any of the therapeutic candidates within our Wholly
Owned Pipeline or our Founded Entities’ therapeutic candidates that
are approved as a biological therapeutic under a BLA should qualify
for the 12-year period of exclusivity. However, there is a risk that this
exclusivity could be shortened due to congressional action or otherwise,
or that the FDA will not consider such therapeutic candidates to be
reference therapeutics for competing therapeutics, potentially creating
the opportunity for generic competition sooner than anticipated. Other
aspects of the BPCIA, some of which may impact the BPCIA exclusivity
provisions, have also been the subject of recent litigation. Moreover,
the extent to which a biosimilar therapeutic, once approved, will be
substituted for any one of our, our Founded Entities’ or our collaborators’
reference therapeutics in a way that is similar to traditional generic
substitution for non-biologic therapeutics is not yet clear, and will
depend on a number of marketplace and regulatory factors that are
still developing. If competitors are able to obtain marketing approval
for biosimilars referencing any therapeutics that we or our Founded
Entities develop alone or with collaborators that may be approved,
such therapeutics may become subject to competition from such
biosimilars, with the attendant competitive pressure and potential
adverse consequences.
Risk Factor Annex — continuedAdditionasl information Risks Related to Reliance on Third Parties
We are currently party to and may seek to enter into additional
collaborations, licenses and other similar arrangements and may not be
successful in maintaining existing arrangements or entering into new ones,
and even if we are, we may not realize the benefits of such relationships.
We are currently parties to license and collaboration agreements with
a number of universities and pharmaceutical companies and expect
to enter into additional agreements as part of our business strategy.
The success of our current and any future collaboration arrangements
will depend heavily on the efforts and activities of our collaborators.
Collaborations are subject to numerous risks, which may include risks that:
• collaborators may have significant discretion in determining the efforts
and resources that they will apply to collaborations;
• collaborators may not pursue development and commercialization of
the therapeutic candidates within our Wholly Owned Pipeline or may
elect not to continue or renew development or commercialization
programs based on clinical trial results, changes in their strategic focus
due to their acquisition of competitive therapeutics or their internal
development of competitive therapeutics, availability of funding or
other external factors, such as a business combination that diverts
resources or creates competing priorities;
• collaborators may delay clinical trials, provide insufficient funding
for a clinical trial program, stop a clinical trial, abandon a therapeutic
candidate, repeat or conduct new clinical trials or require a new
formulation of a therapeutic candidate for clinical testing;
• collaborators could independently develop, or develop with third
parties, therapeutics that compete directly or indirectly with our
therapeutics or therapeutic candidates;
• a collaborator with marketing, manufacturing and distribution rights
to one or more therapeutics may not commit sufficient resources to or
otherwise not perform satisfactorily in carrying out these activities;
• we could grant exclusive rights to our collaborators that would prevent
us from collaborating with others;
• collaborators may not properly maintain or defend our intellectual
property rights or may use our intellectual property or proprietary
information in a way that gives rise to actual or threatened litigation that
could jeopardize or invalidate our intellectual property or proprietary
information or expose us to potential liability;
• disputes may arise between us and a collaborator that cause the delay
or termination of the research, development or commercialization
of our current or future therapeutic candidates or that results in
costly litigation or arbitration that diverts management attention
and resources;
• collaborations may be terminated, which may result in a need for
additional capital to pursue further development or commercialization
of the applicable current or future therapeutic candidates;
• collaborators may own or co-own intellectual property covering
therapeutics that result from our collaboration with them, and in
such cases, we would not have the exclusive right to develop or
commercialize such intellectual property;
• disputes may arise with respect to the ownership of any intellectual
property developed pursuant to our collaborations; and
• a collaborator’s sales and marketing activities or other operations may
not be in compliance with applicable laws resulting in civil or criminal
proceedings.
Additionally, we may seek to enter into additional collaborations, joint
ventures, licenses and other similar arrangements for the development or
commercialization of the therapeutic candidates within our Wholly Owned
Pipeline, due to capital costs required to develop or commercialize
the therapeutic candidate or manufacturing constraints. We may not
be successful in our efforts to establish such collaborations for the
therapeutic candidates within our Wholly Owned Pipeline because our
R&D pipeline may be insufficient, the therapeutic candidates within our
Wholly Owned Pipeline may be deemed to be at too early of a stage of
development for collaborative effort or third parties may not view the
therapeutic candidates within our Wholly Owned Pipeline as having
the requisite potential to demonstrate safety and efficacy or significant
commercial opportunity. In addition, we face significant competition
in seeking appropriate strategic partners, and the negotiation process
can be time consuming and complex. Further, any future collaboration
agreements may restrict us from entering into additional agreements with
potential collaborators. We cannot be certain that, following a strategic
transaction or license, we will achieve an economic benefit that justifies
such transaction.
Even if we are successful in our efforts to establish such collaborations,
the terms that we agree upon may not be favorable to us, and we may not
be able to maintain such collaborations if, for example, development or
approval of a therapeutic candidate is delayed, the safety of a therapeutic
candidate is questioned or sales of an approved therapeutic candidate are
unsatisfactory.
In addition, any potential future collaborations may be terminable by
our strategic partners, and we may not be able to adequately protect
our rights under these agreements. Furthermore, strategic partners
may negotiate for certain rights to control decisions regarding the
development and commercialization of the therapeutic candidates
within our Wholly Owned Pipeline, if approved, and may not conduct
those activities in the same manner as we do. Any termination of
collaborations we enter into in the future, or any delay in entering into
collaborations related to the therapeutic candidates within our Wholly
Owned Pipeline, could delay the development and commercialization
of the therapeutic candidates within our Wholly Owned Pipeline and
reduce their competitiveness if they reach the market, which could have
a material adverse effect on our business, financial condition and results
of operations.
Collaborative relationships with third parties could cause us to expend
significant resources and give rise to substantial business risk with no
assurance of financial return.
We anticipate relying upon strategic collaborations for marketing and
commercializing our existing therapeutic candidates, and we may rely
even more on strategic collaborations for R&D of other therapeutic
candidates or discoveries. We may sell therapeutic offerings through
strategic partnerships with pharmaceutical and biotechnology companies.
If we are unable to establish or manage such strategic collaborations
on terms favorable to us in the future, our R&D efforts and potential to
generate revenue may be limited.
If we enter into R&D collaborations during the early phases of therapeutic
development, success will in part depend on the performance of
research collaborators. We will not directly control the amount or timing
of resources devoted by research collaborators to activities related to
therapeutic candidates. Research collaborators may not commit sufficient
resources to our R&D programs. If any research collaborator fails to
commit sufficient resources, the preclinical or clinical development
programs related to the collaboration could be delayed or terminated.
Also, collaborators may pursue existing or other development-stage
therapeutics or alternative technologies in preference to those being
developed in collaboration with us. Finally, if we fail to make required
milestone or royalty payments to collaborators or to observe other
obligations in agreements with them, the collaborators may have the right
to terminate or stop performance of those agreements.
Establishing strategic collaborations is difficult and time-consuming. Our
discussions with potential collaborators may not lead to the establishment
of collaborations on favorable terms, if at all. Potential collaborators
may reject collaborations based upon their assessment of our financial,
regulatory or intellectual property position. In addition, there have
been a significant number of recent business combinations among large
pharmaceutical companies that have resulted in a reduced number of
potential future collaborators. Even if we successfully establish new
collaborations, these relationships may never result in the successful
development or commercialization of therapeutic candidates or the
generation of sales revenue. To the extent that we enter into collaborative
arrangements, the related therapeutic revenues are likely to be lower
than if we directly marketed and sold therapeutics. Such collaborators
may also consider alternative therapeutic candidates or technologies for
similar indications that may be available to collaborate on and whether
such a collaboration could be more attractive than the one with us for any
future therapeutic candidate.
Management of our relationships with collaborators will require:
• significant time and effort from our management team;
• coordination of our marketing and R&D programs with the marketing
and R&D priorities of our collaborators; and
• effective allocation of our resources to multiple projects.
We rely on third parties to assist in conducting our clinical trials and some
aspects of our research and preclinical testing, and those third parties
may not perform satisfactorily, including failing to meet deadlines for the
completion of such trials, research, or testing.
We currently rely and expect to continue to rely on third parties, such
as CROs, clinical data management organizations, medical institutions,
and clinical investigators, to conduct some aspects of research and
preclinical testing and clinical trials. Any of these third parties may
terminate their engagements with us or be unable to fulfill their
contractual obligations. If any of our relationships with these third
parties terminate, we may not be able to enter into arrangements with
PureTech Health plc Annual report and accounts 2020 209
Risk Factor Annex — continuedAdditional information alternative third parties on commercially reasonable terms, or at all. If we
need to enter into alternative arrangements, it would delay therapeutic
development activities.
Further, although our reliance on these third parties for clinical
development activities limits our control over these activities, we remain
responsible for ensuring that each of our trials is conducted in accordance
with the applicable protocol, legal and regulatory requirements and
scientific standards. For example, notwithstanding the obligations of
a CRO for a trial of one of the therapeutic candidates within our Wholly
Owned Pipeline, we remain responsible for ensuring that each of our
clinical trials is conducted in accordance with the general investigational
plan and protocols for the trial. Moreover, the FDA requires us to comply
with requirements, commonly referred to as Good Clinical Practices,
or GCPs, for conducting, recording and reporting the results of clinical
trials to assure that data and reported results are credible and accurate
and that the rights, integrity and confidentiality of trial participants are
protected. The FDA enforces these GCPs through periodic inspections
of trial sponsors, principal investigators, clinical trial sites and IRBs. If we
or our third-party contractors fail to comply with applicable GCPs, the
clinical data generated in our clinical trials may be deemed unreliable
and the FDA may require us to perform additional clinical trials before
approving the therapeutic candidates within our Wholly Owned Pipeline,
which would delay the regulatory approval process. We cannot be certain
that, upon inspection, the FDA will determine that any of our clinical
trials comply with GCPs. We are also required to register certain clinical
trials and post the results of completed clinical trials on a government-
sponsored database, ClinicalTrials.gov, within certain timeframes. NIH and
FDA recently signaled the government’s willingness to begin enforcing
those requirements against non-compliant clinical trial sponsors. Failure to
do so can result in fines, adverse publicity and civil and criminal sanctions.
Furthermore, the third parties conducting clinical trials on our behalf are
not our employees, and except for remedies available to us under our
agreements with such contractors, we cannot control whether or not they
devote sufficient time, skill and resources to our ongoing development
programs. These contractors may also have relationships with other
commercial entities, including our competitors, for whom they may also
be conducting clinical trials or other drug or medical device development
activities, which could impede their ability to devote appropriate time to
our clinical programs. If these third parties, including clinical investigators,
do not successfully carry out their contractual duties, meet expected
deadlines or conduct our clinical trials in accordance with regulatory
requirements or our stated protocols, we may not be able to obtain, or
may be delayed in obtaining, regulatory approvals for the therapeutic
candidates within our Wholly Owned Pipeline. If that occurs, we will not
be able to, or may be delayed in our efforts to, successfully commercialize
the therapeutic candidates within our Wholly Owned Pipeline. In such
an event, our financial results and the commercial prospects for any
therapeutic candidates that we seek to develop could be harmed, our
costs could increase and our ability to generate revenues could be
delayed, impaired or foreclosed.
Our or our Founded Entities’ use of third parties to manufacture the
therapeutic candidates within our Wholly Owned Pipeline or our Founded
Entities’ therapeutic candidates and other therapeutic candidates that we
or our Founded Entities may develop for preclinical studies and clinical
trials may increase the risk that we or our Founded Entities will not have
sufficient quantities of our or our Founded Entities’ therapeutic candidates,
therapeutics, or necessary quantities of such materials on time or at an
acceptable cost.
With respect to certain of the therapeutic candidates within our Wholly
Owned Pipeline or our Founded Entities’ therapeutic candidates, we
and certain of our Founded Entities do not currently have, nor do we
plan to acquire, the infrastructure or capability internally to manufacture
drug supplies for our ongoing clinical trials or any future clinical trials
that we or our Founded Entities may conduct, and we and our Funded
Entities lack the resources to manufacture any therapeutic candidates
on a commercial scale. We rely, and expect to continue to rely, on
third-party manufacturers to produce our and certain of our Founded
Entities’ therapeutic candidates or other therapeutic candidates that
we or our Founded Entities may identify for clinical trials, as well as for
commercial manufacture if any therapeutic candidates receive marketing
authorization. Although we and our Founded Entities generally do not
begin a clinical trial unless we or our Founded Entities believe we have
a sufficient supply of a therapeutic candidate to complete the trial, any
significant delay or discontinuity in the supply of a therapeutic candidate,
or the raw material components thereof, for an ongoing clinical trial due to
the need to replace a third-party manufacturer could considerably delay
the clinical development and potential regulatory authorization of the
therapeutic candidates within our Wholly Owned Pipeline or our Founded
210 PureTech Health plc Annual report and accounts 2020
Entities’ therapeutic candidates, which could harm our business and
results of operations.
We or our Founded Entities may be unable to identify and appropriately
qualify third-party manufacturers or establish agreements with third-party
manufacturers or do so on acceptable terms. Even if we or our Founded
Entities are able to establish agreements with third-party manufacturers,
reliance on third-party manufacturers entails additional risks, including:
• reliance on the third party for sourcing of raw materials, components,
and such other goods as may be required for execution of its
manufacturing processes and the oversight by the third party of
its suppliers;
• reliance on the third party for regulatory compliance and quality
assurance for the manufacturing activities each performs;
• the possible breach of the manufacturing agreement by the third party;
• the possible misappropriation of proprietary information, including
trade secrets and know-how; and
• the possible termination or non-renewal of the agreement by the
third party at a time that is costly or inconvenient for us or our
Founded Entities.
Furthermore, all of our CMOs are engaged with other companies to
supply and/or manufacture materials or therapeutics for such companies,
which exposes our manufacturers to regulatory risks for the production
of such materials and therapeutics. The facilities used by our contract
manufacturers to manufacture our drug, or medical device therapeutic
candidates are subject to review by the FDA pursuant to inspections that
will be conducted after we submit an NDA, BLA, PMA application or other
marketing application to the FDA. We do not control the manufacturing
process of, and are to some extent dependent on, our contract
manufacturing partners for compliance with the regulatory requirements,
known as cGMP requirements for manufacture of drug, biologic and
device therapeutics. If our contract manufacturers cannot successfully
manufacture material that conforms to our specifications and the strict
regulatory requirements of the FDA or others, we will not be able to
secure or maintain regulatory authorization for the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates manufactured at these manufacturing facilities. In addition, we
have no control over the ability of our contract manufacturers to maintain
adequate quality control, quality assurance and qualified personnel. If the
FDA, the EMA or another comparable foreign regulatory agency does not
approve these facilities for the manufacture of the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates or if any agency withdraws its approval in the future, we or our
Founded Entities may need to find alternative manufacturing facilities,
which would negatively impact our or our Founded Entities’ ability to
develop, obtain regulatory authorization for or market the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates, if cleared or approved.
The therapeutic candidates within our Wholly Owned Pipeline or our
Founded Entities’ therapeutic candidates may compete with other
therapeutic candidates and marketed therapeutics for access to
manufacturing facilities. Any performance failure on the part of our or our
Founded Entities’ existing or future manufacturers could delay clinical
development, marketing approval or commercialization. Our and certain
of our Founded Entities’ current and anticipated future dependence
upon others for the manufacturing of the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates may adversely affect our future profit margins and our ability
to commercialize any therapeutic candidates that receive marketing
clearance or approval on a timely and competitive basis.
If the contract manufacturing facilities on which we and certain of our
Founded Entities’ rely do not continue to meet regulatory requirements
or are unable to meet our or our Founded Entities’ supply demands, our
business will be harmed.
All entities involved in the preparation of therapeutic candidates for
clinical trials or commercial sale, including our and certain of our Founded
Entities’ existing CMOs for the therapeutic candidates within our Wholly
Owned Pipeline or our Founded Entities’ therapeutic candidates, are
subject to extensive regulation. Components of a finished drug or
biologic therapeutic approved for commercial sale or used in late-
stage clinical trials must be manufactured in accordance with cGMP,
or similar regulatory requirements outside the United States. These
regulations govern manufacturing processes and procedures, including
recordkeeping, and the implementation and operation of quality systems
to control and assure the quality of investigational therapeutics and
therapeutics approved for sale. Similarly, medical devices manufactured
under an IDE must be manufactured in accordance with select provisions
the FDA QSR requirements, and devices cleared or approved by FDA
Risk Factor Annex — continuedAdditionasl information for commercial sale must be manufactured in accordance with QSR.
Poor control of production processes can lead to the introduction of
contaminants or to inadvertent changes in the properties or stability
of Gelesis’ Plenity, Akili’s EndeavorRx, our Founded Entities’ other
therapeutic candidates or the therapeutic candidates within our Wholly
Owned Pipeline. Our or our Founded Entities’ failure, or the failure of
third-party manufacturers, to comply with applicable regulations could
result in sanctions being imposed on us or our Founded Entities, including
clinical holds, fines, injunctions, civil penalties, delays, suspension or
withdrawal of approvals, license revocation, suspension of production,
seizures or recalls of therapeutic candidates or marketed drugs or devices,
operating restrictions and criminal prosecutions, any of which could
significantly and adversely affect clinical or commercial supplies of the
therapeutic candidates within our Wholly Owned Pipeline or our Founded
Entities’ therapeutic candidates.
We or our CMOs must supply all necessary documentation, as applicable,
in support of a marketing application, such as an NDA, BLA, PMA or MAA,
on a timely basis and must adhere to regulations enforced by the FDA
and other regulatory agencies through their facilities inspection program.
Some of our CMOs have never produced a commercially approved
pharmaceutical therapeutic and therefore have not obtained the requisite
regulatory authority approvals to do so. The facilities and quality systems
of some or all of our third-party contractors must pass a pre-approval
inspection for compliance with the applicable regulations as a condition
of regulatory approval of the therapeutic candidates within our Wholly
Owned Pipeline or our Founded Entities’ therapeutic candidates or any
of our other potential therapeutics. In addition, the regulatory authorities
may, at any time, audit or inspect a manufacturing facility involved with
the preparation of the therapeutic candidates within our Wholly Owned
Pipeline or our Founded Entities’ therapeutic candidates or our other
potential therapeutics or the associated quality systems for compliance
with the regulations applicable to the activities being conducted.
Although we oversee the CMOs, we cannot control the manufacturing
process of, and are completely dependent on, our CMO partners for
compliance with the regulatory requirements. If these facilities do not pass
a pre-approval plant inspection, regulatory approval of the therapeutics
may not be granted or may be substantially delayed until any violations are
corrected to the satisfaction of the regulatory authority, if ever.
The regulatory authorities also may, at any time following clearance or
approval of a therapeutic for sale, audit the manufacturing facilities of our
third-party contractors. If any such inspection or audit identifies a failure
to comply with applicable regulations or if a violation of our therapeutic
specifications or applicable regulations occurs independent of such an
inspection or audit, we or the relevant regulatory authority may require
remedial measures that may be costly and/or time consuming for us
or a third party to implement, and that may include the temporary or
permanent suspension of a clinical study or commercial sales or the
temporary or permanent closure of a facility. Any such remedial measures
imposed upon us or third parties with whom we contract could materially
harm our business.
Additionally, if supply from one approved manufacturer is interrupted,
an alternative manufacturer would need to be qualified. For drug and
biologic therapeutics, as applicable, an NDA, BLA supplement or MAA
variation, or equivalent foreign regulatory filing, is also required, which
could result in further delay. Similarly, for medical device, a new marketing
application or supplement may be required. The regulatory agencies
may also require additional studies if a new manufacturer is relied
upon for commercial production. Switching manufacturers may involve
substantial costs and is likely to result in a delay in our desired clinical and
commercial timelines.
These factors could cause us or our Founded Entities to incur higher
costs and could cause the delay or termination of clinical trials, regulatory
submissions, required approvals, or commercialization of the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates. Furthermore, if our or our Founded Entities’
suppliers fail to meet contractual requirements and we or our Founded
Entities are unable to secure one or more replacement suppliers capable
of production at a substantially equivalent cost, our or our Founded
Entities’ clinical trials may be delayed or we or our Founded Entities could
lose potential revenue.
Risks Related to Our Intellectual Property
Risks Related to Our Intellectual Property Protection
If we or our Founded Entities are unable to obtain and maintain sufficient
intellectual property protection for our or our Founded Entities’ existing
therapeutic candidates or any other therapeutic candidates that we or
they may identify, or if the scope of the intellectual property protection
we or they currently have or obtain in the future is not sufficiently broad,
our competitors could develop and commercialize therapeutic candidates
similar or identical to ours, and our ability to successfully commercialize our
existing therapeutic candidates and any other therapeutic candidates that
we or they may pursue may be impaired.
As is the case with other pharmaceutical and biopharmaceutical
companies, our success depends in large part on our ability to obtain
and maintain protection of the intellectual property we may own solely
and jointly with others, particularly patents, in the United States and
other countries with respect to our Wholly Owned Programs or our
Founded Entities’ therapeutic candidates and technology. We and our
Founded Entities seek to protect our proprietary position by filing patent
applications in the United States and abroad related to our and our
Founded Entities’ existing therapeutic candidates, our various proprietary
technologies, and any other therapeutic candidates or technologies that
we or they may identify.
Obtaining, maintaining and enforcing pharmaceutical and
biopharmaceutical patents is costly, time consuming and complex, and
we may not be able to file or prosecute all necessary or desirable patent
applications, or maintain, enforce or license patents that may issue from
such patent applications, at a reasonable cost or in a timely manner. It
is also possible that we could fail to identify patentable aspects of our
R&D output before it is too late to obtain patent protection. Although
we take reasonable measures, we have systems in place to remind us of
filing and prosecution deadlines, and we employ outside firms and rely on
outside counsel to monitor patent deadlines, we may miss or fail to meet
a patent deadline, including in a foreign country, which could negatively
impact our patent rights and harm our competitive position, business, and
prospects. We may not have the right to control the preparation, filing and
prosecution of patent applications, or to maintain the rights to patents
licensed to third parties. Therefore, these patents and applications may
not be prosecuted and enforced in a manner consistent with the best
interests of our business.
The patent position of biotechnology and pharmaceutical companies
generally is highly uncertain, involves complex legal, technological and
factual questions and has in recent years been the subject of much
litigation. The standards that the U.S. Patent and Trademark Office, or the
USPTO, and its foreign counterparts use to grant patents are not always
applied predictably or uniformly. In addition, the laws of foreign countries
may not protect our rights to the same extent as the laws of the United
States, or vice versa. There is no assurance that all potentially relevant
prior art relating to our patents and patent applications has been found,
which can prevent a patent from issuing from a pending application or
later invalidate or narrow the scope of an issued patent. For example,
publications of discoveries in the scientific literature often lag behind the
actual discoveries, and patent applications in the United States and other
jurisdictions are typically not published until 18 months after filing or, in
some cases, not at all. Therefore, we cannot know with certainty whether
we were the first to make the inventions claimed in our patents or pending
patent applications, or that we were the first to file for patent protection
of such inventions. As a result, the issuance, scope, validity, enforceability
and commercial value of our patent rights are highly uncertain. Our
pending and future patent applications may not result in patents being
issued that protect our Wholly Owned Programs or our Founded Entities’
therapeutic candidates, in whole or in part, or which effectively prevent
others from commercializing competitive therapeutic candidates. Even
if our patent applications issue as patents, they may not issue in a form
that will provide us with any meaningful protection, prevent competitors
from competing with us or otherwise provide us with any competitive
advantage. Our competitors may be able to circumvent our patents
by developing similar or alternative therapeutic candidates in a non-
infringing manner.
In addition, the issuance of a patent is not conclusive as to its inventorship,
scope, validity or enforceability, and our patents may be challenged in the
courts or patent offices in the United States and abroad. Such challenges
may result in loss of exclusivity or freedom to operate or in patent claims
being narrowed, invalidated or held unenforceable, in whole or in part,
which could limit our ability to stop others from using or commercializing
similar or identical therapeutic candidates to ours, or limit the duration
of the patent protection of our Wholly Owned Programs or our Founded
Entities’ therapeutic candidates. For example, we may be subject to
a third-party preissuance submission of prior art to the USPTO, or become
involved in opposition, derivation, reexamination, inter partes review,
PureTech Health plc Annual report and accounts 2020 211
Risk Factor Annex — continuedAdditional information post-grant review or interference proceedings challenging our owned or
licensed patent rights. An adverse determination in any such submission,
proceeding or litigation could reduce the scope of, or invalidate, our
patent rights, allow third parties to commercialize our Wholly Owned
Programs or our Founded Entities’ therapeutic candidates and compete
directly with us, without payment to us, or result in our inability to
manufacture or commercialize drugs without infringing third-party patent
rights. In addition, if the breadth or strength of protection provided by our
patents and patent applications is threatened, regardless of the outcome,
it could dissuade companies from collaborating with us to license, develop
or commercialize current or future therapeutic candidates.
Furthermore, our and our Founded Entities’ intellectual property
rights may be subject to a reservation of rights by one or more third
parties. We are party to a license agreement with New York University
related to certain intellectual property underlying our LYT-200 and
LYT-210 therapeutic candidates which is subject to certain rights of the
government, including march-in rights, to such intellectual property
due to the fact that the research was funded at least in part by the U.S.
government. Additionally, our Founded Entities Akili, Follica, Vedanta,
Sonde, Alivio and Vor, are party to license agreements with academic
institutions pursuant to which such Founded Entities have in-licensed
certain intellectual property underlying the therapeutic candidates
AKL-T01, AKL-T02, AKL-T03, AKL-T04, FOL-004, VE303, Sonde, ALV-
306, ALV-304, ALV-107 and VOR33. While these license agreements are
exclusive, they contain provisions pursuant to which the government has
certain rights, including march-in rights, to such patents and technologies
due to the fact that the research was funded at least in part by the U.S.
government. When new technologies are developed with government
funding, the government generally obtains certain rights in any resulting
patents, including a non-exclusive license authorizing the government to
use the invention or to have others use the invention on its behalf. These
rights may permit the government to disclose our information to third
parties and to exercise march-in rights to use or allow third parties to
use our technology. The government can exercise its march-in rights if it
determines that action is necessary because we fail to achieve practical
application of the government-funded technology, because action is
necessary to alleviate health or safety needs, to meet requirements of
federal regulations, or to give preference to U.S. industry. In addition,
our rights in such inventions may be subject to certain requirements to
manufacture therapeutics embodying such inventions in the United States.
Any exercise by the government of such rights or by any third party of its
reserved rights could harm our competitive position, business, financial
condition, results of operations, and prospects.
If our or our Founded Entities’ trademarks and trade names are not
adequately protected, then we may not be able to build name recognition
in our markets of interest and our business may be adversely affected.
Our or our Founded Entities’ registered or unregistered trademarks or
trade names may be challenged, infringed, circumvented or declared
generic or determined to be infringing on other marks. We and our
Founded Entities may not be able to protect our rights to these
trademarks and trade names, which we need to build name recognition
among potential collaborators or customers in our markets of interest. At
times, competitors may adopt trade names or trademarks similar to ours,
thereby impeding our ability to build brand identity and possibly leading
to market confusion. In addition, there could be potential trade name or
trademark infringement claims brought by owners of other trademarks or
trademarks that incorporate variations of our registered or unregistered
trademarks or trade names. Over the long term, if we and our Founded
Entities are unable to establish name recognition based on our trademarks
and trade names, then we may not be able to compete effectively and
our business may be adversely affected. We and our Founded Entities
may license our trademarks and trade names to third parties, such as
distributors. Though these license agreements may provide guidelines
for how our or our Founded Entities’ trademarks and trade names may
be used, a breach of these agreements or misuse of our trademarks and
tradenames by our licensees may jeopardize our rights in or diminish
the goodwill associated with our trademarks and trade names. Our
or our Founded Entities’ efforts to enforce or protect our proprietary
rights related to trademarks, trade names, trade secrets, domain names,
copyrights or other intellectual property may be ineffective and could
result in substantial costs and diversion of resources and could adversely
affect our competitive position, business, financial condition, results of
operations and prospects.
We may not be able to protect our intellectual property rights
throughout the world.
Filing, prosecuting and defending patents on the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates in all countries throughout the world would be prohibitively
212 PureTech Health plc Annual report and accounts 2020
expensive, and our intellectual property rights in some countries outside
the United States can be less extensive than those in the United States.
In addition, the laws of some foreign countries do not protect or enforce
intellectual property rights to the same extent as federal and state laws in
the United States. Consequently, we and our Founded Entities may not be
able to prevent third parties from practicing our inventions in all countries
outside the United States, or from selling or importing therapeutics made
using our inventions in and into the United States or other jurisdictions.
Competitors may use our and our Founded Entities’ technologies in
jurisdictions where we have not obtained patent protection to develop
their own therapeutics and may also export infringing therapeutics to
territories where we have patent protection, but enforcement is not as
strong as that in the United States. These therapeutics may compete
with our or our Founded Entities’ therapeutics and our patents or other
intellectual property rights may not be effective or sufficient to prevent
them from competing.
Many companies have encountered significant problems in protecting and
defending intellectual property rights in foreign jurisdictions. The legal
systems of certain countries, particularly certain developing countries, do
not favor the enforcement of patents, trade secrets, and other intellectual
property protection, particularly those relating to biotechnology and
pharmaceutical therapeutics, which could make it difficult for us to stop
the infringement of our or our Founded Entities’ patents or marketing of
competing therapeutics in violation of our proprietary rights generally.
Proceedings to enforce our or our Founded Entities’ patent rights in
foreign jurisdictions, whether or not successful, could result in substantial
costs and divert our efforts and attention from other aspects of our
business, could put our or our Founded Entities’ patents at risk of being
invalidated or interpreted narrowly and our patent applications at risk
of not issuing, and could provoke third parties to assert claims against
us or our Founded Entities. We may not prevail in any lawsuits that we
or our Founded Entities initiate and the damages or other remedies
awarded, if any, may not be commercially meaningful. Accordingly, our
efforts to enforce our intellectual property rights around the world may
be inadequate to obtain a significant commercial advantage from the
intellectual property that we develop or license.
In some jurisdictions including European Union countries, compulsory
licensing laws compel patent owners to grant licenses to third parties.
In addition, some countries limit the enforceability of patents against
government agencies or government contractors. In these countries, the
patent owner may have limited remedies, which could materially diminish
the value of such patent. If we, our Founded Entities or any of our licensors
are forced to grant a license to third parties under patents relevant to
our or our Founded Entities’ business, or if we, our Founded Entities or
our licensors are prevented from enforcing patent rights against third
parties, our competitive position may be substantially impaired in such
jurisdictions.
Our or our Founded Entities’ proprietary rights may not adequately protect
our technologies and therapeutic candidates, and do not necessarily
address all potential threats to our competitive advantage.
The degree of future protection afforded by our or our Founded Entities’
intellectual property rights is uncertain because intellectual property
rights have limitations, and may not adequately protect our or our
Founded Entities’ business, or permit us to maintain our competitive
advantage. The following examples are illustrative:
• others may be able to make therapeutics that are the same as or similar
to the therapeutic candidates within our Wholly Owned Pipeline or our
Founded Entities’ therapeutic candidates but that are not covered by
the claims of the patents that we or our Founded Entities own or have
exclusively licensed;
• others, including inventors or developers of our or our Founded
Entities’ owned or in-licensed patented technologies who may
become involved with competitors, may independently develop similar
technologies that function as alternatives or replacements for any of our
or our Founded Entities’ technologies without infringing our intellectual
property rights;
• we, our Founded Entities or our licensors or our other collaboration
partners might not have been the first to conceive and reduce to
practice the inventions covered by the patents or patent applications
that we or our Founded Entities own or license or will own or license;
• we, our Founded Entities or our licensors or our other collaboration
partners might not have been the first to file patent applications
covering certain of the patents or patent applications that we
or they own or have obtained a license, or will own or will have
obtained a license;
Risk Factor Annex — continuedAdditionasl information • we, our Founded Entities or our licensors may fail to meet obligations
to the U.S. government with respect to in-licensed patents and patent
applications funded by U.S. government grants, leading to the loss of
patent rights;
• it is possible that our or our Founded Entities’ pending patent
applications will not result in issued patents;
• it is possible that there are prior public disclosures that could invalidate
our, our Founded Entities’ or our licensors’ patents;
• issued patents that we or our Founded Entities own or exclusively
license may not provide us with any competitive advantage, or may
be held invalid or unenforceable, as a result of legal challenges by
our competitors;
• our or our Founded Entities’ competitors might conduct R&D activities
in countries where we do not have patent rights, or in countries where
R&D safe harbor laws exist, and then use the information learned from
such activities to develop competitive therapeutics for sale in our major
commercial markets;
• ownership, validity or enforceability of our, our Founded Entities’ or our
licensors’ patents or patent applications may be challenged by third
parties; and
• the patents of third parties or pending or future applications of third
parties, if issued, may have an adverse effect on our business.
Risks Related to Our License Arrangements
The failure to maintain our licenses and realize their benefits may harm
our business.
We have acquired and in-licensed certain of our technologies from third
parties. We may in the future acquire, in-license or invest in additional
technology that we believe would be beneficial to our business. We are
subject to a number of risks associated with our acquisition, in-license or
investment in technology, including the following:
• diversion of financial and managerial resources from
existing operations;
• successfully negotiating a proposed acquisition, in-license or
investment in a timely manner and at a price or on terms and conditions
favorable to us;
• successfully combining and integrating a potential acquisition into our
existing business to fully realize the benefits of such acquisition;
• the impact of regulatory reviews on a proposed acquisition, in-license
or investment; and
• the outcome of any legal proceedings that may be instituted with
respect to the proposed acquisition, in-license or investment.
If we fail to properly evaluate potential acquisitions, in-licenses,
investments or other transactions associated with the creation of new R&D
programs or the maintenance of existing ones, we might not achieve the
anticipated benefits of any such transaction, we might incur costs in excess
of what we anticipate, and management resources and attention might be
diverted from other necessary or valuable activities.
Our or our Founded Entities’ rights to develop and commercialize our
Wholly Owned Programs or our Founded Entities’ therapeutic candidates
are subject in part to the terms and conditions of licenses granted
to us and our Founded Entities by others, and the patent protection,
prosecution and enforcement for some of our Wholly Owned Programs or
our Founded Entities’ therapeutic candidates may be dependent on our
and our Founded Entities’ licensors.
We and our Founded Entities currently are reliant upon licenses of certain
intellectual property rights and proprietary technologies from third
parties that are important or necessary to the development of our and
our Founded Entities’ proprietary technologies, including technologies
related to our Wholly Owned Programs and our Founded Entities’
therapeutic candidates. These licenses, and other licenses we and they
may enter into in the future, may not provide adequate rights to use such
intellectual property and proprietary technologies in all relevant fields
of use or in all territories in which we or our Founded Entities may wish
to develop or commercialize technology and therapeutic candidates in
the future. Licenses to additional third-party proprietary technology or
intellectual property rights that may be required for our or our Founded
Entities’ development programs may not be available in the future or
may not be available on commercially reasonable terms. In that event,
we or our Founded Entities may be required to expend significant time
and resources to redesign our proprietary technology or therapeutic
candidates or to develop or license replacement technology, which
may not be feasible on a technical or commercial basis. If we and our
Founded Entities are unable to do so, we may not be able to develop and
commercialize technology and therapeutic candidates in fields of use and
territories for which we are not granted rights pursuant to such licenses,
which could harm our competitive position, business, financial condition,
results of operations and prospects significantly.
In some circumstances, we and our Founded Entities may not have
the right to control the preparation, filing and prosecution of patent
applications, or to maintain and enforce the patents, covering technology
that we or our Founded Entities license from third parties. In addition,
some of our or our Founded Entities’ agreements with our licensors
require us to obtain consent from the licensor before we can enforce
patent rights, and our licensor may withhold such consent or may not
provide it on a timely basis. Therefore, we cannot be certain that our
licensors or collaborators will prosecute, maintain, enforce and defend
such intellectual property rights in a manner consistent with the best
interests of our business, including by taking reasonable measures to
protect the confidentiality of know-how and trade secrets, or by paying
all applicable prosecution and maintenance fees related to intellectual
property registrations for any of our Wholly Owned Programs or our
Founded Entities’ therapeutic candidates and proprietary technologies.
We and our Founded Entities also cannot be certain that our licensors
have drafted or prosecuted the patents and patent applications licensed
to us in compliance with applicable laws and regulations, which may
affect the validity and enforceability of such patents or any patents that
may issue from such applications. This could cause us to lose rights in
any applicable intellectual property that we in-license, and as a result
our ability to develop and commercialize therapeutic candidates may be
adversely affected and we may be unable to prevent competitors from
making, using and selling competing therapeutics.
In addition, our or our Founded Entities’ licensors may own or control
intellectual property that has not been licensed to us and, as a result, we
may be subject to claims, regardless of their merit, that we are infringing
or otherwise violating the licensor’s rights. In addition, while we cannot
currently determine the amount of the royalty obligations we would be
required to pay on sales of future therapeutics, if any, the amounts may
be significant. The amount of our and our Founded Entities’ future royalty
obligations will depend on the technology and intellectual property
we and our Founded Entities use in therapeutic candidates that we
successfully develop and commercialize, if any. Therefore, even if we or
our Founded Entities successfully develop and commercialize therapeutic
candidates, we may be unable to achieve or maintain profitability. In
addition, we or our Founded Entities may seek to obtain additional
licenses from our licensors and, in connection with obtaining such licenses,
we may agree to amend our existing licenses in a manner that may be
more favorable to the licensors, including by agreeing to terms that could
enable third parties (potentially including our competitors) to receive
licenses to a portion of the intellectual property rights that are subject
to our or our Founded Entities’ existing licenses. Any of these events
could have a material adverse effect on our or our Founded Entities’
competitive position, business, financial conditions, results of operations,
and prospects.
If we or our Founded Entities fail to comply with our obligations in the
agreements under which we license intellectual property rights from third
parties or these agreements are terminated or we or our Founded Entities
otherwise experience disruptions to our business relationships with our
licensors, we could lose intellectual property rights that are important to
our business.
We are party to various agreements that we depend on to develop our
Wholly Owned Programs or our Founded Entities’ therapeutic candidates
and various proprietary technologies, and our rights to use currently
licensed intellectual property, or intellectual property to be licensed
in the future, are or will be subject to the continuation of and our and
our Founded Entities’ compliance with the terms of these agreements.
For example, under certain of our and our Founded Entities’ license
agreements we and our Founded Entities are required to use commercially
reasonable efforts to develop and commercialize therapeutic candidates
covered by the licensed intellectual property rights, maintain the licensed
intellectual property rights, and achieve certain development milestones,
each of which could result in termination in the event we or our Founded
Entities fail to comply.
In spite of our efforts, our or our Founded Entities’ licensors might
conclude that we have materially breached our obligations under
such license agreements and might therefore terminate the license
agreements, thereby removing or limiting our or our Founded Entities’
ability to develop and commercialize therapeutics and technology
covered by these license agreements.
Moreover, disputes may arise regarding intellectual property subject to
a licensing agreement, including:
• the scope of rights granted under the license agreement and other
interpretation-related issues;
PureTech Health plc Annual report and accounts 2020 213
Risk Factor Annex — continuedAdditional information • the extent to which our Wholly Owned Programs or our Founded
Entities’ therapeutic candidates, technology and processes infringe
on intellectual property of the licensor that is not subject to the
licensing agreement;
• the sublicensing of patent and other rights under our or our Founded
Entities’ collaborative development relationships;
• our and our Founded Entities’ diligence obligations under the license
agreement and what activities satisfy those diligence obligations;
• the inventorship and ownership of inventions and know-how resulting
from the joint creation or use of intellectual property by our and our
Founded Entities’ licensors and us and our Founded Entities and our
partners; and
• the priority of invention of patented technology.
In addition, certain provisions in our and our Founded Entities’ license
agreements may be susceptible to multiple interpretations. The resolution
of any contract interpretation disagreement that may arise could narrow
what we believe to be the scope of our rights to the relevant intellectual
property or technology, or increase what we believe to be our financial
or other obligations under the agreement, either of which could have
a material adverse effect on our or our Founded Entities’ business,
financial condition, results of operations and prospects. Moreover, if
disputes over intellectual property that we or our Founded Entities
have licensed prevent or impair our ability to maintain our current
licensing arrangements on commercially acceptable terms, we may
be unable to successfully develop and commercialize the affected
therapeutic candidates, which could have a material adverse effect on our
competitive position, business, financial conditions, results of operations
and prospects.
Third-party claims of intellectual property infringement may prevent or
delay our development and commercialization efforts.
Our commercial success depends in part on our avoiding infringement
of the patents and proprietary rights of third parties. However, our
research, development and commercialization activities may be subject
to claims that we infringe or otherwise violate patents or other intellectual
property rights owned or controlled by third parties. There is a substantial
amount of litigation, both within and outside the United States, involving
patent and other intellectual property rights in the biotechnology and
pharmaceutical industries, including patent infringement lawsuits,
interferences, derivation, oppositions, inter partes review and post-
grant review before the USPTO, and corresponding foreign patent
offices. Numerous U.S. and foreign issued patents and pending patent
applications, which are owned by third parties, exist in the fields in which
we are pursuing development candidates. Our competitors in both the
United States and abroad, many of which have substantially greater
resources and have made substantial investments in patent portfolios
and competing technologies, may have applied for or obtained or may in
the future apply for or obtain, patents that will prevent, limit or otherwise
interfere with our ability to make, use and sell, if approved, the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates. In addition, many companies in the biotechnology
and pharmaceutical industries have employed intellectual property
litigation as a means to gain an advantage over their competitors. As
the biotechnology and pharmaceutical industries expand and more
patents are issued, and as we gain greater visibility and market exposure
as a public company, the risk increases that our existing therapeutic
candidates and any other therapeutic candidates that we or our Founded
Entities may identify may be subject to claims of infringement of the
patent rights of third parties.
There may be other third-party patents or patent applications with
claims to materials, formulations, methods of manufacture or methods
for treatment related to the use or manufacture of our or our Founded
Entities’ existing therapeutic candidates and any other therapeutic
candidates that we or they may identify. Because patent applications
can take many years to issue, there may be currently pending patent
applications which may later result in issued patents that our or our
Founded Entities’ existing therapeutic candidates and any other
therapeutic candidates that we or they may identify may infringe. In
addition, third parties may obtain patents in the future and claim that use
of our or our Founded Entities’ technologies infringes upon these patents.
If any third-party patents were held by a court of competent jurisdiction to
cover the manufacturing process of our or our Founded Entities’ existing
therapeutic candidates and any other therapeutic candidates that we
or they may identify, any molecules formed during the manufacturing
process, or any final therapeutic itself, the holders of any such patents may
be able to block our ability to commercialize such therapeutic candidate
unless we obtained a license under the applicable patents, or until such
patents expire. Additionally, pending patent applications that have
been published can, subject to certain limitations, be later amended in
214 PureTech Health plc Annual report and accounts 2020
a manner that could cover our Wholly Owned Programs or our Founded
Entities’ therapeutic candidates. Furthermore, the scope of a patent claim
is determined by an interpretation of the law, the written disclosure in
a patent and the patent’s prosecution history and can involve other factors
such as expert opinion. Our analysis of these issues, including interpreting
the relevance or the scope of claims in a patent or a pending application,
determining applicability of such claims to our proprietary technologies or
therapeutic candidates, predicting whether a third party’s pending patent
application will issue with claims of relevant scope, and determining
the expiration date of any patent in the United States or abroad that we
consider relevant may be incorrect, which may negatively impact our
or our Founded Entities’ ability to develop and market the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates. We do not always conduct independent reviews
of pending patent applications of and patents issued to third parties.
Similarly, if any third-party patents were held by a court of competent
jurisdiction to cover aspects of our or our Founded Entities’ formulations,
processes for manufacture or methods of use, including any combination
therapies, the holders of any such patents may be able to block our
or our Founded Entities’ ability to develop and commercialize the
applicable therapeutic candidate unless we obtained a license or until
such patent expires. In either case, such a license may not be available
on commercially reasonable terms or at all, or it may be non-exclusive,
which could result in our competitors gaining access to the same
intellectual property.
Parties making claims against us or our Founded Entities may obtain
injunctive or other equitable relief, which could effectively block our ability
to further develop and commercialize our or our Founded Entities’ existing
therapeutic candidates and any other therapeutic candidates that we may
identify. Defense of these claims, regardless of their merit, would involve
substantial litigation expense and would be a substantial diversion of
management and employee resources from our business. In the event of
a successful claim of infringement against us or our Founded Entities, we
or our Founded Entities may have to pay substantial damages, including
treble damages and attorneys’ fees for willful infringement, pay royalties,
redesign our infringing therapeutics or obtain one or more licenses from
third parties, which may be impossible or require substantial time and
monetary expenditure.
Parties making claims against us or our Founded Entities may be able
to sustain the costs of complex patent litigation more effectively than
we can because they have substantially greater resources. Furthermore,
because of the substantial amount of discovery required in connection
with intellectual property litigation or administrative proceedings, there is
a risk that some of our confidential information could be compromised by
disclosure. In addition, any uncertainties resulting from the initiation and
continuation of any litigation could have material adverse effect on our
ability to raise additional funds or otherwise have a material adverse effect
on our business, results of operations, financial condition and prospects.
Risks Related to Our Patents
Patent terms may be inadequate to protect our competitive position on
therapeutic candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance
fees are timely paid, the natural expiration of a patent is generally 20 years
from its earliest U.S. non-provisional or international patent application
filing date. Various extensions may be available, but the life of a patent,
and the protection it affords, is limited. Even if patents covering our
Wholly Owned Programs or our Founded Entities’ therapeutic candidates
are obtained, once the patent life has expired, we or our Founded
Entities may be open to competition from competitive therapeutics,
including generics or biosimilars. Given the amount of time required
for the development, testing and regulatory review of new therapeutic
candidates, patents protecting such candidates might expire before or
shortly after such candidates are commercialized. As a result, our or our
Founded Entities’ owned and licensed patent portfolio may not provide us
with sufficient rights to exclude others from commercializing therapeutics
similar or identical to ours.
If we or our Founded Entities are not able to obtain patent term extension
or non-patent exclusivity in the United States under the Hatch-Waxman
Act and in foreign countries under similar legislation, thereby potentially
extending the marketing exclusivity term of the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of FDA marketing
approval of the therapeutic candidates within our Wholly Owned Pipeline
or our Founded Entities’ therapeutic candidates, one or more of the U.S.
patents covering each of such therapeutic candidates or the use thereof
may be eligible for up to five years of patent term extension under the
Risk Factor Annex — continuedAdditionasl information Hatch-Waxman Act. The Hatch-Waxman Act allows a maximum of one
patent to be extended per new drug application, or NDA, for an FDA
approved therapeutic as compensation for the patent term lost during the
FDA regulatory review process. A patent term extension cannot extend
the remaining term of a patent beyond a total of 14 years from the date
of therapeutic approval and only those claims covering such approved
drug therapeutic, a method for using it or a method for manufacturing
it may be extended. Patent term extension also may be available in
certain foreign countries upon regulatory approval of the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates. Nevertheless, we or our Founded Entities may
not be granted patent term extension either in the United States or in any
foreign country because of, for example, failing to exercise due diligence
during the testing phase or regulatory review process, failing to apply
within applicable deadlines, failing to apply prior to expiration of relevant
patents or otherwise failing to satisfy applicable requirements. Moreover,
the term of extension, as well as the scope of patent protection during
any such extension, afforded by the governmental authority could be less
than we request.
If we or our Founded Entities are unable to obtain patent term extension
or restoration, or the term of any such extension is less than our request,
the period during which we will have the right to exclusively market our
therapeutic may be shortened and our competitors may obtain approval
of competing therapeutics following our patent expiration sooner, and our
revenue could be reduced, possibly materially.
Further, for certain of our and our Founded Entities’ licensed patents, we
and our Founded Entities do not have the right to control prosecution,
including filing with the USPTO, a petition for patent term extension
under the Hatch-Waxman Act. Thus, if one of our or our Founded Entities’
licensed patents is eligible for patent term extension under the Hatch-
Waxman Act, we may not be able to control whether a petition to obtain
a patent term extension is filed with, or whether a patent term extension is
obtained from, the USPTO.
Also, there are detailed rules and requirements regarding the patents
that may be submitted to the FDA for listing in the Approved Drug
Products with Therapeutic Equivalence Evaluations, or the Orange Book.
We or our Founded Entities may be unable to obtain patents covering
the therapeutic candidates within our Wholly Owned Pipeline or our
Founded Entities’ therapeutic candidates that contain one or more claims
that satisfy the requirements for listing in the Orange Book. Even if we or
our Founded Entities submit a patent for listing in the Orange Book, the
FDA may decline to list the patent, or a manufacturer of generic drugs
may challenge the listing. If or when one of the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates is approved and a patent covering that therapeutic candidate
is not listed in the Orange Book, a manufacturer of generic drugs would
not have to provide advance notice to us of any abbreviated new drug
application, or ANDA, filed with the FDA to obtain permission to sell
a generic version of such therapeutic candidate.
Issued patents covering our Wholly Owned Programs or our Founded
Entities’ therapeutic candidates could be found invalid or unenforceable if
challenged in courts or patent offices.
If we, our Founded Entities or one of our licensing partners initiated legal
proceedings against a third party to enforce a patent covering one or
more of our Wholly Owned Programs or our Founded Entities’ therapeutic
candidates, the defendant could counterclaim that the patent covering
the relevant therapeutic candidate is invalid and/or unenforceable. In
patent litigation in the United States, defendant counterclaims alleging
invalidity and/or unenforceability are commonplace. Grounds for
a validity challenge could be an alleged failure to meet any of several
statutory requirements, including subject matter eligibility, novelty,
nonobviousness, written description or enablement. Grounds for an
unenforceability assertion could be an allegation that someone connected
with prosecution of the patent withheld relevant information from the
USPTO, or made a misleading statement, during prosecution. Third
parties may also raise similar claims before administrative bodies in the
United States or abroad, even outside the context of litigation. Such
mechanisms include re-examination, post grant review, and equivalent
proceedings in foreign jurisdictions (e.g., opposition proceedings). Such
proceedings could result in revocation or amendment to our or our
Founded Entities’ patents in such a way that they no longer cover our
Wholly Owned Programs or our Founded Entities’ therapeutic candidates.
The outcome following legal assertions of invalidity and unenforceability
is unpredictable. With respect to the validity question, for example, we
cannot be certain that there is no invalidating prior art, of which we and
the patent examiner were unaware during prosecution. If a defendant
were to prevail on a legal assertion of invalidity and/or unenforceability,
we would lose at least part, and perhaps all, of the patent protection
on our Wholly Owned Programs or our Founded Entities’ therapeutic
candidates. Such a loss of patent protection could have a material adverse
impact on our business.
Changes in U.S. patent law could diminish the value of patents in general,
thereby impairing our and our Founded Entities’ ability to protect
our therapeutics.
Changes in either the patent laws or interpretation of the patent laws in
the United States could increase the uncertainties and costs surrounding
the prosecution of patent applications and the enforcement or defense
of issued patents. Assuming that other requirements for patentability
are met, prior to March 2013, in the United States, the first to invent the
claimed invention was entitled to a patent, while outside the United
States, the first to file a patent application was entitled to the patent. After
March 2013, under the Leahy-Smith America Invents Act, or the America
Invents Act, enacted in September 2011, the United States transitioned to
a first inventor to file system in which, assuming that other requirements
for patentability are met, the first inventor to file a patent application will
be entitled to the patent on an invention regardless of whether a third
party was the first to invent the claimed invention. A third party that
files a patent application in the USPTO after March 2013, but before us
could therefore be awarded a patent covering an invention of ours even
if we had made the invention before it was made by such third party.
This will require us and our Founded Entities to be cognizant of the time
from invention to filing of a patent application and be diligent in filing
patent applications, but circumstances could prevent us from promptly
filing patent applications on our inventions. Since patent applications in
the United States and most other countries are confidential for a period
of time after filing or until issuance, we cannot be certain that we, our
Founded Entities or our licensors were the first to either (i) file any patent
application related to our Wholly Owned Programs or our Founded
Entities’ therapeutic candidates or (ii) invent any of the inventions
claimed in our, our Founded Entities or our licensor’s patents or patent
applications.
The America Invents Act also includes a number of significant changes
that affect the way patent applications are prosecuted and also may
affect patent litigation. These include allowing third party submission
of prior art to the USPTO during patent prosecution and additional
procedures to attack the validity of a patent by USPTO administered
post-grant proceedings, including post-grant review, inter partes review,
and derivation proceedings. Because of a lower evidentiary standard
in USPTO proceedings compared to the evidentiary standard in U.S.
federal courts necessary to invalidate a patent claim, a third party
could potentially provide evidence in a USPTO proceeding sufficient
for the USPTO to hold a claim invalid even though the same evidence
would be insufficient to invalidate the claim if first presented in a district
court action. Accordingly, a third party may attempt to use the USPTO
procedures to invalidate our patent claims that would not have been
invalidated if first challenged by the third party as a defendant in a district
court action. Therefore, the America Invents Act and its implementation
could increase the uncertainties and costs surrounding the prosecution
of our or our Founded Entities’ owned or in-licensed patent applications
and the enforcement or defense of our or our Founded Entities’ owned
or in-licensed issued patents, all of which could have a material adverse
effect on our competitive position, business, financial condition, results of
operations, and prospects.
In addition, the patent positions of companies in the development and
commercialization of pharmaceuticals are particularly uncertain. Recent
U.S. Supreme Court rulings have narrowed the scope of patent protection
available in certain circumstances and weakened the rights of patent
owners in certain situations. This combination of events has created
uncertainty with respect to the validity and enforceability of patents, once
obtained. Depending on future actions by the U.S. Congress, the federal
courts, and the USPTO, the laws and regulations governing patents could
change in unpredictable ways that could have a material adverse effect
on our existing patent portfolio and our ability to protect and enforce our
intellectual property in the future.
Obtaining and maintaining our patent protection depends on compliance
with various procedural, document submission, fee payment and other
requirements imposed by governmental patent agencies, and our patent
protection could be reduced or eliminated for non-compliance with
these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other
governmental fees on patents and/or applications will be due to be paid
to the USPTO and various governmental patent agencies outside of
the United States in several stages over the lifetime of the patents and/
or applications. We and our Founded Entities have systems in place to
remind us to pay these fees, and we and our Founded Entities employ
outside firms and rely on outside counsel to pay these fees due to the
USPTO and non-U.S. patent agencies. However, we and our Founded
PureTech Health plc Annual report and accounts 2020 215
Risk Factor Annex — continuedAdditional information Entities cannot guarantee that our licensors have similar systems and
procedures in place to pay such fees. In addition, the USPTO and
various non-U.S. governmental patent agencies require compliance with
a number of procedural, documentary, fee payment and other similar
provisions during the patent application process. We employ reputable
law firms and other professionals to help us comply, and in many cases, an
inadvertent lapse can be cured by payment of a late fee or by other means
in accordance with the applicable rules. However, there are situations in
which non-compliance can result in abandonment or lapse of the patent or
patent application, resulting in partial or complete loss of patent rights in
the relevant jurisdiction. In such an event, our competitors might be able
to enter the market and this circumstance would have a material adverse
effect on our business.
Risks Related to Confidentiality
If we are unable to protect the confidentiality of our trade secrets, the value
of our technology could be materially adversely affected and our business
would be harmed.
We and our Founded Entities consider proprietary trade secrets,
confidential know-how and unpatented know-how to be important to
our business. We and our Founded Entities may rely on trade secrets and
confidential know-how to protect our technology, especially where patent
protection is believed by us to be of limited value. However, trade secrets
and confidential know-how are difficult to protect, and we have limited
control over the protection of trade secrets and confidential know-how
used by our licensors, collaborators and suppliers. Because we have relied
in the past on third parties to manufacture the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates, because we may continue to do so in the future, and because
we expect to collaborate with third parties on the development of our
current therapeutic candidates and any future therapeutic candidates we
develop, we may, at times, share trade secrets with them. We also conduct
joint R&D programs that may require us to share trade secrets under
the terms of our R&D partnerships or similar agreements. Under such
circumstances, trade secrets and confidential know-how can be difficult to
maintain as confidential.
We and our Founded Entities seek to protect our confidential proprietary
information, in part, by confidentiality agreements and invention
assignment agreements with our employees, consultants, scientific
advisors, contractors and collaborators. These agreements are designed
to protect our proprietary information. However, we cannot be certain
that such agreements have been entered into with all relevant parties,
and we cannot be certain that our and our Founded Entities’ trade secrets
and other confidential proprietary information will not be disclosed
or that competitors will not otherwise gain access to our trade secrets
or independently develop substantially equivalent information and
techniques. For example, any of these parties may breach the agreements
and disclose proprietary information, including trade secrets, and we may
not be able to obtain adequate remedies for such breaches. We and our
Founded Entities also seek to preserve the integrity and confidentiality of
our confidential proprietary information by maintaining physical security
of our premises and physical and electronic security of our information
technology systems, but it is possible that these security measures could
be breached. If any of our or our Founded Entities’ confidential proprietary
information were to be lawfully obtained or independently developed by
a competitor, we or our Founded Entities would have no right to prevent
such competitor from using that technology or information to compete
with us, which could harm our competitive position.
Unauthorized parties may also attempt to copy or reverse engineer
certain aspects of our or our Founded Entities’ therapeutics that we
consider proprietary. We or our Founded Entities may not be able
to obtain adequate remedies in the event of such unauthorized use.
Enforcing a claim that a party illegally disclosed or misappropriated
a trade secret can be difficult, expensive and time-consuming, and the
outcome is unpredictable. In addition, some courts inside and outside
the United States are less willing or unwilling to protect trade secrets.
Trade secrets will also over time be disseminated within the industry
through independent development, the publication of journal articles
and the movement of personnel skilled in the art from company to
company or academic to industry scientific positions. Though our or our
Founded Entities’ agreements with third parties typically restrict the
ability of our advisors, employees, collaborators, licensors, suppliers,
third-party contractors and consultants to publish data potentially
relating to our trade secrets, our agreements may contain certain limited
publication rights. In addition, if any of our or our Founded Entities’ trade
secrets were to be lawfully obtained or independently developed by
a competitor, we would have no right to prevent such competitor from
using that technology or information to compete with us, which could
harm our competitive position. Despite employing the contractual and
other security precautions described above, the need to share trade
216 PureTech Health plc Annual report and accounts 2020
secrets increases the risk that such trade secrets become known by our
competitors, are inadvertently incorporated into the technology of others,
or are disclosed or used in violation of these agreements. If any of these
events occurs or if we otherwise lose protection for our trade secrets, the
value of such information may be greatly reduced and our competitive
position, business, financial condition, results of operations, and prospects
would be harmed.
We or our Founded Entities may be subject to claims that our employees,
consultants or independent contractors have wrongfully used or
disclosed confidential information of third parties or that our employees
have wrongfully used or disclosed alleged trade secrets of their
former employers.
As is common in the biotechnology and pharmaceutical industries, we and
our Founded Entities employ individuals who were previously employed
at universities or other biotechnology or pharmaceutical companies,
including our competitors or potential competitors. Although we and
our Founded Entities try to ensure that our employees, consultants and
independent contractors do not use the proprietary information or know-
how of others in their work for us, we or our Founded Entities may be
subject to claims that we or our employees, consultants or independent
contractors have inadvertently or otherwise used or disclosed intellectual
property, including trade secrets or other proprietary information, of
any of our employee’s former employer or other third parties. Litigation
may be necessary to defend against these claims. If we or our Founded
Entities fail in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or personnel,
which could adversely impact our business. Even if we or our Founded
Entities are successful in defending against such claims, litigation could
result in substantial costs and be a distraction to management and
other employees.
Risks Related to Challenges or Lawsuits Related to Intellectual
Property
We may become involved in lawsuits to protect or enforce our or our
Founded Entities’ patents or other intellectual property, which could be
expensive, time consuming and unsuccessful.
Competitors may infringe our or our Founded Entities’ patents or other
intellectual property. Our and our Founded Entities’ ability to enforce
our patent or other intellectual property rights depends on our ability
to detect infringement. It may be difficult to detect infringers who do
not advertise the components or methods that are used in connection
with their therapeutics and services. Moreover, it may be difficult or
impossible to obtain evidence of infringement in a competitor’s or
potential competitor’s therapeutic or service. We may not prevail in any
lawsuits that we initiate and the damages or other remedies awarded
if we were to prevail may not be commercially meaningful. If we were
to initiate legal proceedings against a third party to enforce a patent
covering one or more of our Wholly Owned Programs or our Founded
Entities’ therapeutic candidates, the defendant could counterclaim that
the patent covering our or our Founded Entities’ therapeutic candidate
is invalid and/or unenforceable. In patent litigation in the United States,
defendant counterclaims alleging invalidity and/or unenforceability are
commonplace. Grounds for a validity challenge could be an alleged failure
to meet any of several statutory requirements, including subject matter
eligibility, novelty, nonobviousness, written description or enablement.
Grounds for an unenforceability assertion could be an allegation that
someone connected with prosecution of the patent withheld relevant
information from the USPTO, or made a misleading statement, during
prosecution. The outcome following legal assertions of invalidity and
unenforceability is unpredictable. Interference or derivation proceedings
provoked by third parties or brought by us or declared by the USPTO may
be necessary to determine the priority of inventions with respect to our
or our Founded Entities’ patents or patent applications. An unfavorable
outcome could require us to cease using the related technology or to
attempt to license rights to it from the prevailing party. Our business
could be harmed if the prevailing party does not offer us a license on
commercially reasonable terms or at all, or if a non-exclusive license is
offered and our competitors gain access to the same technology. Our
defense of litigation or interference or derivation proceedings may
fail and, even if successful, may result in substantial costs and distract
our management and other employees. In addition, the uncertainties
associated with litigation could have a material adverse effect on our
ability to raise the funds necessary to continue clinical trials, continue
research programs, license necessary technology from third parties, or
enter into development partnerships that would help us bring therapeutic
candidates to market. Furthermore, because of the substantial amount of
discovery required in connection with intellectual property litigation, there
is a risk that some of our or our Founded Entities’ confidential information
could be compromised by disclosure during this type of litigation. There
Risk Factor Annex — continuedAdditionasl information could also be public announcements of the results of hearings, motions,
or other interim proceedings or developments. If securities analysts or
investors perceive these results to be negative, it could adversely impact
the price of our ADSs. Furthermore, any of the foregoing could have
a material adverse effect on our financial condition, results of operations,
and prospects.
We and our Founded Entities may be subject to claims challenging the
inventorship of our patents and other intellectual property.
Our and our Founded Entities’ agreements with employees and our
personnel policies provide that any inventions conceived by an individual
in the course of rendering services to us shall be our exclusive property.
Although our policy is to have all such individuals complete these
agreements, we may not obtain these agreements in all circumstances,
and individuals with whom we have these agreements may not comply
with their terms. The assignment of intellectual property may not
be automatic upon the creation of an invention and despite such
agreement, such inventions may become assigned to third parties.
In the event of unauthorized use or disclosure of our trade secrets or
proprietary information, these agreements, even if obtained, may not
provide meaningful protection, particularly for our trade secrets or other
confidential information.
We, our Founded Entities or our licensors may be subject to claims that
former employees, collaborators or other third parties have an interest
in our owned or in-licensed patents, trade secrets, or other intellectual
property as an inventor or co-inventor. For example, we, our Founded
Entities or our licensors may have inventorship disputes arising from
conflicting obligations of employees, consultants or others who are
involved in developing our Wholly Owned Programs or our Founded
Entities’ therapeutic candidates. Litigation may be necessary to defend
against these and other claims challenging inventorship of our, our
Founded Entities’ or our licensors’ ownership of our owned or in-licensed
patents, trade secrets or other intellectual property. If we, our Founded
Entities or our licensors fail in defending any such claims, in addition to
paying monetary damages, we may lose valuable intellectual property
rights, such as exclusive ownership of, or right to use, intellectual property
that is important to our Wholly Owned Programs or our Founded Entities’
therapeutic candidates. Even if we are successful in defending against
such claims, litigation could result in substantial costs and be a distraction
to management and other employees.
Any of the foregoing could have a material adverse effect on our
competitive position, business, financial condition, results of operations
and prospects.
The outbreak of, and the long term effects of the outbreak of, the
novel strain of coronavirus, SARS-CoV-2, which causes COVID- 19,
could adversely impact our business, including our clinical trials and
preclinical studies.
Public health crises such as pandemics or other global emergencies
could adversely impact our business. In December 2019, a novel strain
of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or
COVID-19, surfaced in Wuhan, China. Since then, COVID-19 has spread
globally. In response to the spread of COVID-19 and governmental shelter-
in-place orders, we have encouraged our administrative employees to
work outside of our offices and allowed staff in our laboratory facilities to
operate under applicable government orders and protocols designed to
protect their health and safety.
As a result of the COVID-19 outbreak or any future pandemics, we have
experienced, and may in the future experience, disruptions that severely
impact our business, clinical trials and preclinical studies, including:
• delays or difficulties in enrolling patients in our clinical trials;
• delays or difficulties in clinical site initiation, including difficulties in
recruiting clinical site investigators and clinical site staff;
• delays or disruptions in non-clinical experiments due to unforeseen
circumstances at contract research organizations, or CROs, and vendors
along their supply chain;
• increased rates of patients withdrawing from our clinical trials following
enrollment as a result of contracting COVID-19, being forced to
quarantine, or not accepting home health visits;
• diversion of healthcare resources away from the conduct of clinical
trials, including the diversion of hospitals serving as our clinical trial
sites and hospital staff supporting the conduct of our clinical trials;
• interruption of key clinical trial activities, such as clinical trial site data
monitoring, due to limitations on travel imposed or recommended by
federal or state governments, employers and others or interruption
of clinical trial subject visits and study procedures (particularly any
procedures that may be deemed non-essential), which may impact the
integrity of subject data and clinical study endpoints;
• interruption or delays in the operations of the FDA and comparable
foreign regulatory agencies, which may impact review and
approval timelines;
• interruption of, or delays in receiving, supplies of our therapeutic
candidates from our contract manufacturing organizations due
to staffing shortages, production slowdowns or stoppages and
disruptions in delivery systems; and
• limitations on employee resources that would otherwise be focused
on the conduct of our preclinical studies and clinical trials, including
because of sickness of employees or their families, the desire of
employees to avoid contact with large groups of people, an increased
reliance on working from home or mass transit disruptions.
These and other factors arising from the COVID-19 pandemic could
worsen in countries that are already afflicted with COVID-19, could
continue to spread to additional countries, or could return to countries
where the pandemic has been partially contained, each of which could
further adversely impact our ability to conduct clinical trials and our
business generally, and could have a material adverse impact on our
operations and financial condition and results.
In addition, the trading prices for biopharmaceutical companies have been
highly volatile as a result of the COVID-19 pandemic. As a result, if we
require any further capital we may face difficulties raising capital through
sales of our common stock or such sales may be on unfavorable terms.
The COVID-19 outbreak continues to rapidly evolve. The extent to which
the outbreak may impact our business, preclinical studies and clinical
trials will depend on future developments, which are highly uncertain and
cannot be predicted with confidence, such as the ultimate geographic
spread of the disease, the duration of the outbreak, travel restrictions
and actions to contain the outbreak or treat its impact, such as social
distancing and quarantines or lock-downs in the United States and other
countries, business closures or business disruptions and the effectiveness
of actions taken in the United States and other countries to contain and
treat the disease.
To the extent the COVID-19 pandemic adversely affects our business
and financial results, it may also have the effect of heightening many of
the other risks described in this “Risk Factors” section, such as those
relating to our clinical development operations, the supply chain for our
ongoing and planned clinical trials, and the availability of governmental
and regulatory authorities to conduct inspections of our clinical trial
sites, review materials submitted by us in support of our applications for
regulatory approval and grant approval for our therapeutic candidates.
We may not be successful in our efforts to develop LYT-100 for the
treatment of Long COVID respiratory complications and related sequelae.
We have initiated a global, randomized, double-blind, placebo-controlled
Phase 2 trial designed to evaluate the efficacy, safety and tolerability of
LYT-100 in adults with post-acute COVID-19 respiratory complications.
The primary endpoint is a standardized test of how far a patient can
walk in six minutes. Secondary endpoints, including pharmacokinetics,
inflammatory biomarkers, imaging, and patient-reported outcomes will
also be evaluated.
The timing and success of this proposed clinical trial will depend on our
ability to enroll patients in the trial. Many other companies are pursuing
the development of therapeutic candidates for the treatment of COVID-19
and three vaccines have already received Emergency Use Authorization to
prevent COVID-19, and patient enrollment may be affected by availability
of commercially available treatment and prevention options. Our ability
to enroll a sufficient number of patients could also be impacted by
a decrease in COVID-19 hospitalization rates or a decrease in COVID-19
infection rate. Our inability to enroll a sufficient number of patients could
result in significant delays or could require us to abandon the trial and
development of LYT-100 for the treatment of these patients altogether.
Given the rapidity of the onset of the COVID-19 pandemic, scientific
and medical research on the SARS-CoV-2 virus is ongoing and evolving.
Results from ongoing clinical trials and discussions with regulatory
authorities may raise new questions and require us to redesign proposed
clinical trials, including revising proposed endpoints or adding new
clinical trial sites or cohorts of subjects. Any such developments could
delay the development timeline for and materially increase the cost of
LYT-100. Furthermore, we cannot be certain that the evidence that we
believe suggests that LYT-100 may be beneficial to these patients will be
established in a clinical trial. The failure of LYT-100 to demonstrate safety
and efficacy in these patients could negatively impact the perception of us
and LYT-100 by investors and it is possible that unexpected safety issues
could occur in these COVID-19 patients. Any such safety issues could
affect our development plans for LYT-100 in other indications.
PureTech Health plc Annual report and accounts 2020 217
Risk Factor Annex — continuedAdditional information Risks Related to Our Business and Industry
We attempt to distribute our scientific, execution and financing risks across
a variety of therapeutic areas, indications, programs and modalities that
relate to the brain, immune system and gastrointestinal system and the
interface between them. However, our assessment of, and approach to,
risk may not be comprehensive or effectively avoid delays or failures in one
or more of our programs. Failures in one or more of our programs could
adversely impact other programs and have a material adverse impact on
our business, results of operations and ability to fund our business.
We are creating medicines for serious diseases involving the brain,
immune system and gastrointestinal, or BIG, system and the interface
between those systems, or the BIG Axis. We have made investments in
our Founded Entities, R&D infrastructure, and clinical capabilities that
have enabled us to establish the underlying programs and platforms
that have resulted in 26 therapeutics and therapeutic candidates that are
being advanced within our Wholly Owned Pipeline or by our Founded
Entities. Of these therapeutics and therapeutic candidates, 15 are clinical-
stage, and two have been cleared by the FDA and granted marketing
authorization in the EEA. Our Non-Controlled Founded Entities are
advancing 10 of these therapeutic candidates, including two that are
in Phase 3/Pivotal studies, as well as two FDA-cleared therapeutics.
Our Controlled Founded Entities are advancing 10 of these therapeutic
candidates, including one that is expected to enter a Phase 3 study, and
three that are in Phase 2 development, and we are advancing four of these
therapeutic candidates within our Wholly Owned Pipeline. As our and
certain of our Founded Entities’ therapeutic candidates progress through
clinical development, we or others may determine that certain of our risk
allocation decisions were incorrect or insufficient, that individual programs
or our science in general has technology or biology risks that were
unknown or underappreciated, or that we have allocated resources across
our programs in such a way that did not maximize potential value creation.
All of these risks may relate to our current and future programs sharing
similar science and infrastructure, and in the event material decisions in
any of these areas turn out to have been incorrect or under-optimized, we
may experience a material adverse impact on our business and ability to
fund our operations.
Our business is highly dependent on the clinical advancement of our
programs and our success in identifying potential therapeutic candidates
across the BIG Axis. Delay or failure to advance our programs could
adversely impact our business.
We are developing new medicines based on the lymphatic system, the
BIG systems and the BIG Axis. Over time, our and our Founded Entities’
preclinical and clinical work led us to identify potential synergies across
target therapeutic indications in the BIG Axis, generating a broad
portfolio of therapeutic candidates across multiple programs. Even if
a particular program is successful in any phase of development, such
program could fail at a later phase of development, and other programs
within the same therapeutic area may still fail at any phase of development
including at phases where earlier programs in that therapeutic area were
successful. This may be a result of technical challenges unique to that
program or due to biology risk, which is unique to every program. As we
progress our programs through clinical development, there may be new
technical challenges that arise that cause an entire program or a group
of programs within an area of focus in the BIG Axis to fail. While we
aim to segregate risk across programs, and in certain cases among our
Founded Entities, there may be foreseen and unforeseen risks across the
therapeutic candidates within our Wholly Owned Pipeline and programs
being developed by our Founded Entities in whole or in part. In addition,
if any one or more of our clinical programs encounter safety, tolerability,
or efficacy problems, developmental delays, regulatory issues, or other
problems, our business could be significantly harmed.
Our future success depends on our ability to retain key employees,
directors, consultants and advisors and to attract, retain and motivate
qualified personnel.
Our ability to compete in the highly competitive biotechnology industry
depends upon our ability to attract and retain highly qualified managerial,
scientific and medical personnel. We are highly dependent on the
management, R&D, clinical, financial and business development expertise
of our executive officers, our directors, as well as the other members
of our scientific and clinical teams, including Daphne Zohar, our chief
executive officer, Bharatt Chowrira, our president and chief of business
and strategy, George Farmer, our chief financial officer, Joep Muijrers, our
chief of portfolio strategy, Eric Elenko, our chief innovation officer, and
Joseph Bolen, our chief scientific officer. The loss of the services of any
of our executive officers and other key personnel, and our inability to find
suitable replacements could result in delays in therapeutic development
and our financial condition and results of operations could be materially
adversely affected. For example, Stephen Muniz, our chief operating
218 PureTech Health plc Annual report and accounts 2020
officer, will retire from the Company effective May 17, 2021, and we will
need to prepare for the loss of his service.
Furthermore, each of our executive officers may terminate their
employment with us at any time. Recruiting and retaining qualified
scientific and clinical personnel and, if we progress the development of
the therapeutic candidates within our Wholly Owned Pipeline toward
scaling up for commercialization, sales and marketing personnel, will also
be critical to our success. The loss of the services of our executive officers
or other key employees could impede the achievement of research,
development and commercialization objectives and seriously harm our
ability to successfully implement our business strategy. Furthermore,
replacing executive officers and key employees may be difficult and
may take an extended period of time because of the limited number
of individuals in our industry with the breadth of skills and experience
required to successfully develop, gain regulatory approval for and
commercialize the therapeutic candidates within our Wholly Owned
Pipeline. Competition to hire qualified personnel in our industry is
intense, and we may be unable to hire, train, retain or motivate these key
personnel on acceptable terms given the competition among numerous
pharmaceutical and biotechnology companies for similar personnel.
Furthermore, to the extent we hire personnel from competitors, we may
be subject to allegations that they have been improperly solicited or that
they have divulged proprietary or other confidential information, or that
their former employers own their research output. We also experience
competition for the hiring of scientific and clinical personnel from
universities and research institutions.
In addition, we rely on consultants and advisors, including scientific and
clinical advisors, to assist us in formulating our research and development
and commercialization strategy. Our consultants and advisors may be
employed by employers other than us and may have commitments under
consulting or advisory contracts with other entities that may limit their
availability to us. If we are unable to continue to attract and retain high
quality personnel, our ability to pursue our growth strategy will be limited.
We will need to expand our organization and we may experience
difficulties in managing this growth, which could disrupt our operations.
As we mature, we expect to expand our full-time employee base and to
hire more consultants and contractors. Our management may need to
divert a disproportionate amount of its attention away from our day-to-
day activities and devote a substantial amount of time toward managing
these growth activities. We may not be able to effectively manage the
expansion of our operations, which may result in weaknesses in our
infrastructure, operational mistakes, loss of business opportunities, loss of
employees and reduced productivity among remaining employees. Our
expected growth could require significant capital expenditures and may
divert financial resources from other projects, such as the development
of additional therapeutic candidates. If our management is unable to
effectively manage our growth, our expenses may increase more than
expected, our ability to generate and/or grow revenues could be reduced,
and we may not be able to implement our business strategy. Our future
financial performance and our ability to commercialize therapeutic
candidates and compete effectively will depend, in part, on our ability to
effectively manage any future growth.
Because we are developing multiple programs and therapeutic candidates
and are pursuing a variety of target indications and treatment modalities,
we may expend our limited resources to pursue a particular therapeutic
candidate and fail to capitalize on development opportunities or
therapeutic candidates that may be more profitable or for which there is
a greater likelihood of success.
Because we have limited financial and personnel resources, we may
forgo or delay pursuit of opportunities with potential target indications
or therapeutic candidates that later prove to have greater commercial
potential than our current and planned development programs and
therapeutic candidates. Our resource allocation decisions may cause
us to fail to capitalize on viable commercial therapeutics or profitable
market opportunities. Our spending on current and future research
and development programs and other future therapeutic candidates
for specific indications may not yield any commercially viable future
therapeutic candidates. If we do not accurately evaluate the commercial
potential or target market for a particular therapeutic candidate,
we may be required to relinquish valuable rights to that therapeutic
candidate through collaboration, licensing or other royalty arrangements
in cases in which it would have been more advantageous for us to
retain sole development and commercialization rights to such future
therapeutic candidates.
Additionally, we may pursue additional in-licenses or acquisitions of
development-stage assets or programs, which entails additional risk to us.
For example, in 2019 we acquired LYT-100, which is the most advanced
therapeutic candidate in our Wholly Owned Pipeline and to which we are
Risk Factor Annex — continuedAdditionasl information investing significant resources for its development. Identifying, selecting
and acquiring promising therapeutic candidates requires substantial
technical, financial and human resources expertise. Efforts to do so may
not result in the actual acquisition or license of a successful therapeutic
candidate, potentially resulting in a diversion of our management’s
time and the expenditure of our resources with no resulting benefit. For
example, if we are unable to identify programs that ultimately result in
approved therapeutics, we may spend material amounts of our capital and
other resources evaluating, acquiring and developing therapeutics that
ultimately do not provide a return on our investment.
Product liability lawsuits against us could cause us to incur substantial
liabilities and could limit commercialization of any therapeutic candidates
that we may develop.
We face an inherent risk of product liability exposure related to the
testing of therapeutic candidates in human clinical trials and will face an
even greater risk if we commercially sell any therapeutics that we may
develop. If we cannot successfully defend ourselves against claims that the
therapeutic candidates within our Wholly Owned Pipeline or medicines
caused injuries, we could incur substantial liabilities. Regardless of merit or
eventual outcome, liability claims may result in:
• decreased demand for any therapeutic candidates or medicines that we
may develop;
• injury to our reputation and significant negative media attention;
• withdrawal of clinical trial participants;
• significant costs to defend the related litigation;
• substantial monetary awards to trial participants or patients;
• loss of revenue; and
• the inability to commercialize the therapeutic candidates within our
Wholly Owned Pipeline.
Although we maintain product liability insurance, including coverage
for clinical trials that we sponsor, it may not be adequate to cover all
liabilities that we may incur. We anticipate that we will need to increase
our insurance coverage as we commence additional clinical trials and if
we successfully commercialize any therapeutic candidates. The market for
insurance coverage is increasingly expensive, and the costs of insurance
coverage will increase as our clinical programs increase in size. We may
not be able to maintain insurance coverage at a reasonable cost or in an
amount adequate to satisfy any liability that may arise.
The increasing use of social media platforms presents new risks
and challenges.
Social media is increasingly being used to communicate about our and
our Founded Entities’ clinical development programs and the diseases
our therapeutics are being developed to treat, and we intend to utilize
appropriate social media in connection with our commercialization
efforts following approval of the therapeutic candidates within our Wholly
Owned Pipeline. Social media practices in the biopharmaceutical industry
continue to evolve and regulations relating to such use are not always
clear. This evolution creates uncertainty and risk of noncompliance with
regulations applicable to our business. For example, patients may use
social media channels to comment on their experience in an ongoing
blinded clinical study or to report an alleged adverse event. When such
disclosures occur, there is a risk that we fail to monitor and comply with
applicable adverse event reporting obligations or we may not be able
to defend our business or the public’s legitimate interests in the face
of the political and market pressures generated by social media due to
restrictions on what we may say about the therapeutic candidates within
our Wholly Owned Pipeline. There is also a risk of inappropriate disclosure
of sensitive information or negative or inaccurate posts or comments
about us on any social networking website. If any of these events were to
occur or we otherwise fail to comply with applicable regulations, we could
incur liability, face regulatory actions or incur other harm to our business.
Our and our Founded Entities’ employees, independent contractors,
consultants, commercial partners and vendors may engage in misconduct
or other improper activities, including noncompliance with regulatory
standards and requirements.
We are exposed to the risk of fraud, misconduct or other illegal activity
by our employees, independent contractors, consultants, commercial
partners and vendors as well as the employees, independent contractors,
consultants, commercial partners and vendors of our Founded Entities.
Misconduct by these parties could include intentional, reckless and
negligent conduct that fails to: comply with the laws of the FDA and
comparable foreign regulatory authorities; provide true, complete and
accurate information to the FDA and comparable foreign regulatory
authorities; comply with manufacturing standards we have established;
comply with healthcare fraud and abuse laws in the United States and
similar foreign fraudulent misconduct laws; or report financial information
or data accurately or to disclose unauthorized activities. If we or our
Founded Entities obtain FDA approval of the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates and begin commercializing those therapeutics in the United
States, our potential exposure under such laws will increase significantly,
and our costs associated with compliance with such laws are also likely
to increase. In particular, research, sales, marketing, education and other
business arrangements in the healthcare industry are subject to extensive
laws designed to prevent fraud, kickbacks, self-dealing and other abusive
practices. These laws and regulations may restrict or prohibit a wide range
of pricing, discounting, educating, marketing and promotion, sales and
commission, certain customer incentive programs and other business
arrangements generally. Activities subject to these laws also involve the
improper use of information obtained in the course of patient recruitment
for clinical trials, which could result in regulatory sanctions and cause
serious harm to our reputation. It is not always possible to identify and
deter misconduct by employees and third parties, and the precautions
we take to detect and prevent this activity may not be effective in
controlling unknown or unmanaged risks or losses or in protecting us
from governmental investigations or other actions or lawsuits stemming
from a failure to be in compliance with such laws. If any such actions are
instituted against us, and we are not successful in defending ourselves or
asserting our rights, those actions could have a significant impact on our
business, including the imposition of significant fines or other sanctions.
Employee litigation and unfavorable publicity could negatively affect our
future business.
Our employees may, from time to time, bring lawsuits against us
regarding injury, creating a hostile work place, discrimination, wage
and hour disputes, sexual harassment, or other employment issues. In
recent years, there has been an increase in the number of discrimination
and harassment claims generally. Coupled with the expansion of social
media platforms and similar devices that allow individuals access to
a broad audience, these claims have had a significant negative impact
on some businesses. Certain companies that have faced employment- or
harassment-related lawsuits have had to terminate management or other
key personnel, and have suffered reputational harm that has negatively
impacted their business. If we were to face any employment-related
claims, our business could be negatively affected.
If we fail to comply with environmental, health and safety laws and
regulations, we could become subject to fines or penalties or incur costs
that could harm our business.
We are subject to numerous environmental, health and safety laws and
regulations, including those governing laboratory procedures and the
handling, use, storage, treatment and disposal of hazardous materials
and wastes. Our operations involve the use of hazardous and flammable
materials, including chemicals and biological materials. Our operations
also produce hazardous waste therapeutics. We generally contract with
third parties for the disposal of these materials and wastes. We cannot
eliminate the risk of contamination or injury from these materials. In the
event of contamination or injury resulting from our use of hazardous
materials, we could be held liable for any resulting damages, and any
liability could exceed our resources. We also could incur significant costs
associated with civil or criminal fines and penalties for failure to comply
with such laws and regulations.
Although we maintain workers’ compensation insurance to cover us
for costs and expenses we may incur due to injuries to our employees
resulting from the use of hazardous materials, this insurance may not
provide adequate coverage against potential liabilities. We do not
maintain insurance for environmental liability or toxic tort claims that
may be asserted against us in connection with our storage or disposal of
biological, hazardous or radioactive materials.
In addition, we may incur substantial costs in order to comply with
current or future environmental, health and safety laws and regulations.
These current or future laws and regulations may impair our research,
development or therapeutic efforts. Our failure to comply with these
laws and regulations also may result in substantial fines, penalties or
other sanctions.
Cyber-attacks or other failures in our telecommunications or information
technology systems, or those of our collaborators, contract research
organizations, third-party logistics providers, distributors or other
contractors or consultants, could result in information theft, data corruption
and significant disruption of our business operations.
We, our collaborators, our CROs, third-party logistics providers,
distributors and other contractors and consultants utilize information
technology, or IT, systems and networks to process, transmit and store
electronic information in connection with our business activities. As use
PureTech Health plc Annual report and accounts 2020 219
Risk Factor Annex — continuedAdditional information of digital technologies has increased, cyber incidents, including third
parties gaining access to employee accounts using stolen or inferred
credentials, computer malware, viruses, spamming, phishing attacks or
other means, and deliberate attacks and attempts to gain unauthorized
access to computer systems and networks, have increased in frequency
and sophistication. These threats pose a risk to the security of our, our
collaborators’, our CROs’, third-party logistics providers’, distributors’
and other contractors’ and consultants’ systems and networks, and
the confidentiality, availability and integrity of our data. There can be
no assurance that we will be successful in preventing cyber-attacks or
successfully mitigating their effects. Similarly, there can be no assurance
that our collaborators, CROs, third-party logistics providers, distributors
and other contractors and consultants will be successful in protecting our
clinical and other data that is stored on their systems. Although to our
knowledge we have not experienced any such material system failure or
material security breach to date, if such an event were to occur and cause
interruptions in our operations, it could result in a material disruption of
development programs and business operations.
Any cyber-attack, data breach or destruction or loss of data could
result in a violation of applicable U.S. and international privacy, data
protection and other laws, and subject us to litigation and governmental
investigations and proceedings by federal, state and local regulatory
entities in the United States and by international regulatory entities,
resulting in exposure to material civil and/or criminal liability. Further,
our general liability insurance and corporate risk program may not cover
all potential claims to which we are exposed and may not be adequate
to indemnify us for all liability that maybe imposed; and could have
a material adverse effect on our business and prospects. For example,
the loss of clinical trial data from completed or ongoing clinical trials for
any of the therapeutic candidates within our Wholly Owned Pipeline or
our Founded Entities’ therapeutic candidates could result in delays in our
development and regulatory approval efforts and significantly increase
our costs to recover or reproduce the data. In addition, we may suffer
reputational harm or face litigation or adverse regulatory action as a result
of cyber-attacks or other data security breaches and may incur significant
additional expense to implement further data protection measures.
Changes in funding for the FDA, the SEC and other government agencies
could hinder their ability to hire and retain key leadership and other
personnel, prevent new therapeutics and services from being developed
or commercialized in a timely manner or otherwise prevent those agencies
from performing normal functions on which the operation of our business
may rely, which could negatively impact our business.
The ability of the FDA to review and approve new therapeutics or take
action with respect to other regulatory matters can be affected by
a variety of factors, including government budget and funding levels,
ability to hire and retain key personnel and accept payment of user fees,
and statutory, regulatory, and policy changes. Average review times at the
agency have fluctuated in recent years as a result. In addition, government
funding of the SEC and other government agencies on which our
operations may rely, including those that fund research and development
activities is subject to the political process, which is inherently fluid and
unpredictable. The priorities of the FDA may also influence the ability
of the FDA to take action on regulatory matters, for example the FDA’s
budget and funding levels and ability to hire and retain key personnel.
Disruptions at the FDA and other agencies may also slow the time
necessary for new drugs to be reviewed and/or approved, or for other
actions to be taken, by relevant government agencies, which would
adversely affect our business. For example, over the last several years,
including for 35 days beginning on December 22, 2018, the U.S.
government has shut down several times and certain regulatory agencies,
such as the FDA and the SEC, have had to furlough critical FDA, SEC and
other government employees and stop critical activities. If a prolonged
government shutdown occurs, it could significantly impact the ability
of the FDA to timely review and process our regulatory submissions,
which could have a material adverse effect on our business. Similarly,
a prolonged government shutdown could prevent the timely review of
our patent applications by the USPTO, which could delay the issuance
of any U.S. patents to which we might otherwise be entitled. Further, in
our operations as a public company, future government shutdowns could
impact our ability to access the public markets and obtain necessary
capital in order to properly capitalize and continue our operations.
Separately, since March 2020, foreign and domestic inspections by the
FDA have largely been on hold with FDA announcing plans in July 2020
to resume prioritized domestic inspections. Should the FDA determine
that an inspection is necessary for approval of a marketing application
and an inspection cannot be completed during the review cycle due to
restrictions on travel, the FDA has stated that it generally intends to issue
a complete response letter. Further, if there is inadequate information to
make a determination on the acceptability of a facility, the FDA may defer
220 PureTech Health plc Annual report and accounts 2020
action on the application until an inspection can be completed. In 2020,
several companies announced receipt of complete response letters due to
the FDA’s inability to complete required inspections for their applications.
Regulatory authorities outside the U.S. may adopt similar restrictions
or other policy measures in response to the COVID-19 pandemic and
may experience delays in their regulatory activities. If a prolonged
government shutdown or other disruption occurs, it could significantly
impact the ability of the FDA to timely review and process our regulatory
submissions, which could have a material adverse effect on our business.
Future shutdowns or other disruptions could also affect other government
agencies such as the SEC, which may also impact our business by delaying
review of our public filings, to the extent such review is necessary, and our
ability to access the public markets.
We or the third parties upon whom we depend may be adversely affected
by a natural disaster and our business continuity and disaster recovery
plans may not adequately protect us from a serious disaster.
Natural disasters could severely disrupt our operations, and have
a material adverse effect on our business, results of operations, financial
condition and prospects. If a natural disaster, power outage or other
event occurred that prevented us from using all or a significant portion
of our headquarters, that damaged critical infrastructure, such as the
manufacturing facilities of our third-party CMOs, or that otherwise
disrupted operations, it may be difficult or, in certain cases, impossible
for us to continue our business for a substantial period of time. The
disaster recovery and business continuity plans we have in place currently
are limited and are unlikely to prove adequate in the event of a serious
disaster or similar event. We may incur substantial expenses as a result of
the limited nature of our disaster recovery and business continuity plans,
which, could have a material adverse effect on our business, financial
condition, results of operations and prospects.
We will continue to incur increased costs as a result of operating as a U.S.-
listed public company, and our management will be required to devote
substantial time to new compliance initiatives.
As a U.S. public company, and particularly after we are no longer an
emerging growth company, we will incur significant legal, accounting
and other expenses that we did not incur as a public company listed on
the LSE. In addition, the Sarbanes-Oxley Act of 2002, or the Sarbanes-
Oxley Act, and rules subsequently implemented by the SEC and Nasdaq
have imposed various requirements on public companies, including
establishment and maintenance of effective disclosure and financial
controls and corporate governance practices. Our management and
other personnel will need to devote a substantial amount of time to these
compliance initiatives. Moreover, these rules and regulations will increase
our legal and financial compliance costs and will make some activities
more time-consuming and costly. For example, we expect that these rules
and regulations may make it more difficult and more expensive for us to
obtain director and officer liability insurance.
Pursuant to Section 404, we will be required to furnish a report by our
management on our internal control over financial reporting, including an
attestation report on internal control over financial reporting issued by
our independent registered public accounting firm. However, while we
remain an emerging growth company, we will not be required to include
an attestation report on internal control over financial reporting issued by
our independent registered public accounting firm. To achieve compliance
with Section 404 within the prescribed period, we will be engaged in
a process to document and evaluate our internal control over financial
reporting, which is both costly and challenging. In this regard, we will need
to continue to dedicate internal resources, potentially engage outside
consultants and adopt a detailed work plan to assess and document the
adequacy of internal control over financial reporting, continue steps to
improve control processes as appropriate, validate through testing that
controls are functioning as documented and implement a continuous
reporting and improvement process for internal control over financial
reporting. Despite our efforts, there is a risk we will not be able to
conclude within the prescribed timeframe that our internal control over
financial reporting is effective as required by Section 404. This could result
in an adverse reaction in the financial markets due to a loss of confidence
in the reliability of our financial statements.
Risks Related to Our International Operations
As a company based in the United Kingdom, we are subject to
economic, political, regulatory and other risks associated with
international operations.
As a company based in the United Kingdom, our business is subject to
risks associated with being organized outside of the United States. While
the majority of our operations are in the United States and our functional
Risk Factor Annex — continuedAdditionasl information currency is the U.S. dollar, our future results could be harmed by a variety
of international factors, including:
• failure by us to obtain and maintain regulatory approvals for the use of
our therapeutics in various countries;
• economic weakness, including inflation, or political instability in
• additional potentially relevant third-party patent rights;
particular non-U.S. economies and markets;
• complexities and difficulties in obtaining protection and enforcing our
• differing and changing regulatory requirements;
intellectual property;
• difficulties in compliance with different, complex and changing laws,
• difficulties in staffing and managing foreign operations;
regulations and court systems of multiple jurisdictions and compliance
with a wide variety of foreign laws, treaties and regulations;
• changes in a specific country’s or region’s political or economic
environment, including, but not limited to, the implications of one or
more of the following occurring the decision of the United Kingdom:
• relating to the terms of the future trading arrangement between the
United Kingdom and the European Union following the expiry of the
Brexit transition period on December 31, 2020;
• a second referendum on Scottish independence from the United
Kingdom; and/or
• a snap general election; and
• complexities associated with managing multiple payor reimbursement
regimes, government payors, or patient self-pay systems;
• limits in our ability to penetrate international markets;
• financial risks, such as longer payment cycles, difficulty collecting
accounts receivable, the impact of local and regional financial crises
on demand and payment for our therapeutics, and exposure to foreign
currency exchange rate fluctuations;
• natural disasters, political and economic instability, including wars,
terrorism, and political unrest, outbreak of disease, boycotts,
curtailment of trade, and other business restrictions;
• certain expenses including, among others, expenses for travel,
• negative consequences from changes in tax laws.
translation, and insurance; and
Unfavorable global economic conditions, including conditions resulting
from the COVID-19 pandemic, could adversely affect our business,
financial condition or results of operations.
Our ability to invest in and expand our business and meet our financial
obligations, to attract and retain third-party contractors and collaboration
partners and to raise additional capital depends on our operating and
financial performance, which, in turn, is subject to numerous factors,
including the prevailing economic and political conditions and financial,
business and other factors beyond our control, such as the rate of
unemployment, the number of uninsured persons in the United States,
political influences and inflationary pressures. For example, an overall
decrease in or loss of insurance coverage among individuals in the United
States as a result of unemployment, underemployment or the repeal of
certain provisions of the ACA, may decrease the demand for healthcare
services and pharmaceuticals. If fewer patients are seeking medical care
because they do not have insurance coverage, we and our Founded
Entities may experience difficulties in any eventual commercialization
of the therapeutic candidates within our Wholly Owned Pipeline or our
Founded Entities’ therapeutic candidates and our business, results of
operations, financial condition and cash flows could be adversely affected.
In addition, our results of operations could be adversely affected by
general conditions in the global economy and in the global financial
markets upon which pharmaceutical and biopharmaceutical companies
such as us are dependent for sources of capital. In the past, global
financial crises have caused extreme volatility and disruptions in the
capital and credit markets. A severe or prolonged economic downturn
could result in a variety of risks to our business, including a reduced
ability to raise additional capital when needed on acceptable terms, if
at all, and weakened demand for the therapeutic candidates within our
Wholly Owned Pipeline. A weak or declining economy could also strain
our suppliers, possibly resulting in supply disruption. Any of the foregoing
could harm our business and we cannot anticipate all of the ways in
which the current economic climate and financial market conditions could
adversely impact our business.
The COVID-19 pandemic has had, and will continue to have, an
unfavorable impact on global economic conditions, including a decrease
in or loss of insurance coverage among individuals in the United
States, an increase in unemployment, volatility in markets, and other
negative impacts that have arisen or will arise over the course of the
COVID-19 pandemic.
Our international operations may expose us to business, regulatory,
political, operational, financial, pricing and reimbursement and economic
risks associated with doing business outside of the United States.
Our business strategy incorporates potential international expansion to
target patient populations outside the United States. If we or our Founded
Entities receive regulatory approval for and commercialize any of the
therapeutic candidates within our Wholly Owned Pipeline or our Founded
Entities’ therapeutic candidates in patient populations outside the
United States, we may hire sales representatives and conduct physician
and patient association outreach activities outside of the United States.
Doing business internationally involves a number of risks, including, but
not limited to:
• multiple, conflicting, and changing laws and regulations such as privacy
regulations, tax laws, export and import restrictions, employment laws,
regulatory requirements, and other governmental approvals, permits,
and licenses;
• regulatory and compliance risks that relate to maintaining accurate
information and control over sales and activities that may fall within
the purview of the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or the FCPA, its books and records provisions, or its anti-
bribery provisions.
Any of these factors could significantly harm our potential international
expansion and operations and, consequently, our results of operations.
European data collection is governed by restrictive regulations governing
the use, processing and cross-border transfer of personal information.
In the event we decide to conduct clinical trials or continue to enroll
subjects in our ongoing or future clinical trials in the European Union,
we may be subject to additional privacy restrictions. The collection and
use of personal health data in the European Union is governed by the
provisions of the General Data Protection Regulation (EU) 2016/679, or
GDPR. This directive imposes several requirements relating to the consent
of the individuals to whom the personal data relates, the information
provided to the individuals, notification of data processing obligations to
the competent national data protection authorities and the security and
confidentiality of the personal data. The GDPR also imposes strict rules
on the transfer of personal data out of the European Union to the United
States. Failure to comply with the requirements of the Data Protection
Directive, which governs the collection and use of personal health data in
the European Union, the GDPR, and the related national data protection
laws of the European Union Member States may result in fines and other
administrative penalties. The GDPR introduced new data protection
requirements in the European Union and substantial fines for breaches of
the data protection rules. The GDPR regulations may impose additional
responsibility and liability in relation to personal data that we process
and we may be required to put in place additional mechanisms ensuring
compliance with these and/or new data protection rules. This may be
onerous and adversely affect our business, financial condition, prospects
and results of operations.
We are subject to the U.K. Bribery Act 2010, or the Bribery Act, the FCPA
and other anti-corruption laws, as well as export control laws, import
and customs laws, trade and economic sanctions laws and other laws
governing our operations.
Our operations are subject to anti-corruption laws, including the Bribery
Act, the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C.
§201, the U.S. Travel Act, and other anti-corruption laws that apply in
countries where we do business. The Bribery Act, the FCPA and these
other laws generally prohibit us and our employees and intermediaries
from authorizing, promising, offering, or providing, directly or indirectly,
improper or prohibited payments, or anything else of value, to
government officials or other persons to obtain or retain business or gain
some other business advantage. Under the Bribery Act, we may also be
liable for failing to prevent a person associated with us from committing
a bribery offense. In the future, we and our strategic partners may operate
in jurisdictions that pose a high risk of potential Bribery Act or FCPA
violations, and we may participate in collaborations and relationships with
third parties whose corrupt or illegal activities could potentially subject
us to liability under the Bribery Act, FCPA or local anti-corruption laws,
even if we do not explicitly authorize or have actual knowledge of such
activities. In addition, we cannot predict the nature, scope or effect of
future regulatory requirements to which our international operations might
be subject or the manner in which existing laws might be administered or
interpreted.
PureTech Health plc Annual report and accounts 2020 221
Risk Factor Annex — continuedAdditional information We are also subject to other laws and regulations governing our
international operations, including regulations administered by the
governments of the United Kingdom and the United States, and
authorities in the European Union, including applicable export control
regulations, economic sanctions and embargoes on certain countries and
persons, anti-money laundering laws, import and customs requirements
and currency exchange regulations, collectively referred to as the Trade
Control laws.
There is no assurance that we will be completely effective in ensuring our
compliance with all applicable anti-corruption laws, including the Bribery
Act, the FCPA or other legal requirements, including Trade Control laws.
If we are not in compliance with the Bribery Act, the FCPA and other anti-
corruption laws or Trade Control laws, we may be subject to criminal and
civil penalties, disgorgement and other sanctions and remedial measures,
and legal expenses, which could have an adverse impact on our business,
financial condition, results of operations and liquidity. Likewise, any
investigation of any potential violations of the Bribery Act, the FCPA, other
anti-corruption laws or Trade Control laws by United Kingdom, United
States or other authorities could also have an adverse impact on our
reputation, our business, results of operations and financial condition.
The United Kingdom’s withdrawal from the European Union may have
a negative effect on global economic conditions, financial markets and our
business, which could reduce the price of our ADSs.
On June 23, 2016, the United Kingdom held a referendum in which
a majority of the eligible members of the electorate voted for the United
Kingdom to leave the European Union. The United Kingdom’s withdrawal
from the European Union is commonly referred to as Brexit. In October
2019, a withdrawal agreement, or the Withdrawal Agreement, setting
out the terms of the United Kingdom’s exit from the European Union,
and a political declaration on the framework for the future relationship
between the United Kingdom and European Union was agreed between
the UK and EU governments. Under the terms of the EU Withdrawal
Agreement, the United Kingdom withdrew from membership of the
European Union on 31 January 2020 and entered into a ’transition
period’, or the Transition Period, during which the majority of rights and
obligations associated with membership of the European Union continued
to apply to the United Kingdom; however, this expired on December
31, 2020. The United Kingdom and the European Union have signed
a EU-UK Trade and Cooperation Agreement, which became provisionally
applicable on January 1, 2021 and will become formally applicable once
ratified by both the United Kingdom and the European Union. This
agreement provides details on how some aspects of the United Kingdom
and European Union’s relationship will operate going forwards however
there are still many uncertainties.
These developments have had and may continue to have a significant
adverse effect on global economic conditions and the stability of
global financial markets, and could significantly reduce global market
liquidity and restrict the ability of key market participants to operate
in certain financial markets. In particular, it could also lead to a period
of considerable uncertainty in relation to the UK financial and banking
markets. As a result of this uncertainty, global financial markets could
experience significant volatility, which could adversely affect the market
price of our ADSs. Asset valuations, currency exchange rates and credit
ratings may also be subject to increased market volatility.
We may also face new regulatory costs and challenges that could have
an adverse effect on our operations. The United Kingdom will lose the
benefits of global trade agreements negotiated by the European Union
on behalf of its members, which may result in increased trade barriers
that could make our doing business in Europe more difficult. In addition,
currency exchange rates in the pound sterling and the euro with respect
to each other and the U.S. dollar have already been adversely affected
by Brexit. Furthermore, now that the Transition Period has expired,
Great Britain will no longer be covered by the centralized procedure for
obtaining EEA-wide marketing authorization from the EMA and a separate
process for authorization of drug therapeutics, including the therapeutic
candidates within our Wholly Owned Pipeline, will be required in Great
Britain, resulting in an authorization covering the United Kingdom or Great
Britain only. For a period of two years from January 1, 2021, the Medicines
and Healthcare products Regulatory Agency, or MHRA (the UK medicines
and medical devices regulator) may rely on a decision taken by the
European Commission on the approval of a new marketing authorization
in the centralized procedure, in order to more quickly grant a Great Britain
marketing authorization. A separate application will, however, still be
required. The MHRA has published a series of guidance notes on how
the process for authorization of medicines will now work, however exactly
what implications this will have in practice remain unclear.
222 PureTech Health plc Annual report and accounts 2020
Risks Related to Our Equity Securities and ADSs
The market price of our ADSs has been and will likely continue to be highly
volatile, and you could lose all or part of your investment.
The market price of our ADSs has been and will likely continue
to be volatile. The stock market in general, and the market for
biopharmaceutical companies in particular, has experienced extreme
volatility that has often been unrelated to the operating performance of
particular companies. As a result of this volatility, you may not be able to
sell your ADSs at or above the purchase price. The market price for our
ADSs may be influenced by many factors, including:
• adverse results or delays in our preclinical studies or clinical trials;
• reports of AEs or other negative results in clinical trials of third parties’
therapeutic candidates that target the therapeutic candidates within
our Wholly Owned Pipeline’s or our Founded Entities’ therapeutic
candidates’ target indications;
• an inability for us to obtain additional funding on reasonable
terms or at all;
• any delay in filing an IND, BLA or NDA for the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ product
candidates and any adverse development or perceived adverse
development with respect to the FDA’s review of that IND, BLA or NDA;
• failure to develop successfully and commercialize the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates;
• announcements we make regarding our current therapeutic candidates,
acquisition of potential new therapeutic candidates and companies
and/or in-licensing;
• failure to maintain our or our Founded Entities’ existing
license arrangements or enter into new licensing and
collaboration agreements;
• failure by us, our Founded Entities or our licensors to prosecute,
maintain or enforce our intellectual property rights;
• changes in laws or regulations applicable to future therapeutics;
• inability to obtain adequate clinical or commercial supply for the
therapeutic candidates within our Wholly Owned Pipeline or our
Founded Entities’ therapeutic candidates or the inability to do so at
acceptable prices;
• adverse regulatory decisions, including failure to reach agreement with
applicable regulatory authorities on the design or scope of our planned
clinical trials;
• failure to obtain and maintain regulatory exclusivity for the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic candidates;
• regulatory approval or commercialization of new therapeutics or other
methods of treating our target disease indications by our competitors;
• failure to meet or exceed financial projections we may provide to the
public or to the investment community;
• publication of research reports or comments by securities or
industry analysts;
• the perception of the pharmaceutical and biotechnology industries by
the public, legislatures, regulators and the investment community;
• announcements of significant acquisitions, strategic partnerships,
joint ventures or capital commitments by us, our Founded Entities our
strategic collaboration partners or our competitors;
• disputes or other developments relating to proprietary rights, including
patents, litigation matters and our or our Founded Entities’ ability to
obtain patent protection for our technologies;
• additions or departures of our key scientific or management personnel;
• significant lawsuits, including patent or shareholder
litigation, against us;
• changes in the market valuations of similar companies;
• adverse developments relating to any of the above or additional factors
with respect to our Founded Entities;
• sales or potential sales of substantial amounts of our ADSs; and
• trading volume of our ADSs.
In addition, companies trading in the stock market in general, and
Nasdaq, in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the
operating performance of these companies. Broad market and industry
factors may negatively affect the market price of our ADSs, regardless
of our actual operating performance. Since our ADSs were initially sold
in November 2020 at a price of $33.00 per ADS, our ADS price has
Risk Factor Annex — continuedAdditionasl information fluctuated significantly, ranging from an intraday low of $33.00 to an
intraday high of $63.95 for the period beginning November 16, 2020, our
first day of trading on The Nasdaq Global Market, through March 31, 2021.
If the market price of our ADSs does not exceed the price at which you
acquired them, you may not realize any return on your investment in us
and may lose some or all of your investment.
If securities or industry analysts do not publish research or publish
inaccurate or unfavorable research about our business, our ADS price and
trading volume could decline.
The trading market for our ADSs and ordinary shares depends in part
on the research and reports that securities or industry analysts publish
about us or our business. If no or few securities or industry analysts cover
our company, the trading price for our ADSs and ordinary shares would
be negatively impacted. If one or more of the analysts who covers us
downgrades our equity securities or publishes incorrect or unfavorable
research about our business, the price of our ordinary shares and ADSs
would likely decline. If one or more of these analysts ceases coverage of
our company or fails to publish reports on us regularly, or downgrades
our securities, demand for our ordinary shares and ADSs could decrease,
which could cause the price of our ordinary shares and ADSs or their
trading volume to decline.
Future sales, or the possibility of future sales, of a substantial number of
our securities could adversely affect the price of the shares and dilute
shareholders.
Sales of a substantial number of our ADSs in the public market could
occur at any time, subject to certain restrictions described below. If our
existing shareholders sell, or indicate an intent to sell, substantial amounts
of our securities in the public market, the trading price of the ADSs could
decline significantly and could decline below the original purchase price.
As of March 31, 2021, we had 285,898,746 outstanding ordinary shares.
Ordinary shares subject to outstanding options under our equity incentive
plans and the ordinary shares reserved for future issuance under our
equity incentive plans will become eligible for sale in the public market in
the future, subject to certain legal and contractual limitations.
Holders of ADSs are not treated as holders of our ordinary shares.
If you purchase an ADS, you will become a holder of ADSs with underlying
ordinary shares in a company incorporated under English law. Holders
of ADSs are not treated as holders of our ordinary shares, unless they
withdraw the ordinary shares underlying their ADSs in accordance with the
deposit agreement and applicable laws and regulations. The depositary
is the holder of the ordinary shares underlying the ADSs. Holders of ADSs
therefore do not have any rights as holders of our ordinary shares, other
than the rights that they have pursuant to the deposit agreement. See
“Description of Securities Other Than Equity Securities” in our Annual
Report on Form 20-F.
Holders of ADSs may be subject to limitations on the transfer of their ADSs
and the withdrawal of the underlying ordinary shares.
ADSs are transferable on the books of the depositary. However, the
depositary may close its books at any time or from time to time when it
deems expedient in connection with the performance of its duties. The
depositary may refuse to deliver, transfer or register transfers of ADSs
generally when our books or the books of the depositary are closed, or at
any time if we or the depositary think it is advisable to do so because of
any requirement of law, government or governmental body, or under any
provision of the deposit agreement, or for any other reason, subject to the
right of ADS holders to cancel their ADSs and withdraw the underlying
ordinary shares. Temporary delays in the cancellation of your ADSs and
withdrawal of the underlying ordinary shares may arise because the
depositary has closed its transfer books or we have closed our transfer
books, the transfer of ordinary shares is blocked to permit voting at
a shareholders’ meeting or we are paying a dividend on our ordinary
shares. In addition, ADS holders may not be able to cancel their ADSs and
withdraw the underlying ordinary shares when they owe money for fees,
taxes and similar charges and when it is necessary to prohibit withdrawals
in order to comply with any laws or governmental regulations that apply to
ADSs or to the withdrawal of ordinary shares or other deposited securities.
See “Description of Securities Other Than Equity Securities” in our Annual
Report on Form 20-F.
ADS holders may not be entitled to a jury trial with respect to claims
arising under the deposit agreement, which could result in less favorable
outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our ordinary
shares provides that, to the fullest extent permitted by law, holders and
beneficial owners of ADSs irrevocably waive the right to a jury trial of any
claim they may have against us or the depositary arising out of or relating
to the ADSs or the deposit agreement.
If this jury trial waiver provision is not permitted by applicable law, an
action could proceed under the terms of the deposit agreement with
a jury trial. If we or the depositary opposed a jury trial demand based on
the waiver, the court would determine whether the waiver was enforceable
based on the facts and circumstances of that case in accordance with the
applicable state and federal law. To our knowledge, the enforceability of
a contractual pre-dispute jury trial waiver in connection with claims arising
under the federal securities laws has not been finally adjudicated by the
U.S. Supreme Court. However, we believe that a contractual pre-dispute
jury trial waiver provision is generally enforceable, including under the
laws of the State of New York, which govern the deposit agreement,
by a federal or state court in the City of New York, which has non-
exclusive jurisdiction over matters arising under the deposit agreement.
In determining whether to enforce a contractual pre-dispute jury trial
waiver provision, courts will generally consider whether a party knowingly,
intelligently and voluntarily waived the right to a jury trial. We believe
that this is the case with respect to the deposit agreement and the ADSs.
It is advisable that you consult legal counsel regarding the jury waiver
provision before entering into the deposit agreement.
If you or any other holders or beneficial owners of ADSs bring a claim
against us or the depositary in connection with matters arising under the
deposit agreement or the ADSs, including claims under federal securities
laws, you or such other holder or beneficial owner may not be entitled
to a jury trial with respect to such claims, which may have the effect of
limiting and discouraging lawsuits against us and/or the depositary. If
a lawsuit is brought against us and/or the depositary under the deposit
agreement, it may be heard only by a judge or justice of the applicable
trial court, which would be conducted according to different civil
procedures and may result in different outcomes than a trial by jury would
have had, including results that could be less favorable to the plaintiff(s)
in any such action, depending on, among other things, the nature of
the claims, the judge or justice hearing such claims, and the venue of
the hearing.
No condition, stipulation or provision of the deposit agreement or ADSs
serves as a waiver by any holder or beneficial owner of ADSs or by us or
the depositary of compliance with the U.S. federal securities laws and the
rules and regulations promulgated thereunder.
One of our principal shareholders has a significant holding in the company
which may give them influence in certain matters requiring approval by
shareholders, including approval of significant corporate transactions in
certain circumstances.
As of February 2, 2021, Invesco Asset Management Limited, or Invesco,
held approximately 25 percent of our ordinary shares. Accordingly,
Invesco may, as a practical matter, be able to influence certain matters
requiring approval by shareholders, including approval of significant
corporate transactions in certain circumstances. Such concentration of
ownership may also have the effect of delaying or preventing any future
proposed change in control of the Company. The trading price of the
ordinary shares could be adversely affected if potential new investors are
disinclined to invest in the Company because they perceive disadvantages
to a large shareholding being concentrated in the hands of a single
shareholder. The interests of Invesco and the investors that acquire ADSs
may not be aligned. Invesco may make acquisitions of, or investments in,
other businesses in the same sectors as us or our Founded Entities. These
businesses may be, or may become, competitors of us or our Founded
Entities. In addition, funds or other entities managed or advised by
Invesco may be in direct competition with us or our Founded Entities on
potential acquisitions of, or investments in, certain businesses. In addition,
Invesco holds equity interests in certain of our Founded Entities where
they may exert direct influence.
You will not have the same voting rights as the holders of our ordinary
shares and may not receive voting materials in time to be able to exercise
your right to vote.
Except as described in our Annual Report on Form 20-F and the deposit
agreement, holders of the ADSs will not be able to exercise voting rights
attaching to the ordinary shares represented by the ADSs. Under the
terms of the deposit agreement, holders of the ADSs may instruct the
depositary to vote the ordinary shares underlying their ADSs. Otherwise,
holders of ADSs will not be able to exercise their right to vote unless
they withdraw the ordinary shares underlying their ADSs to vote them in
person or by proxy in accordance with applicable laws and regulations
and our Articles of Association. Even so, ADS holders may not know about
a meeting far enough in advance to withdraw those ordinary shares. If we
ask for the instructions of holders of the ADSs, the depositary, upon timely
notice from us, will notify ADS holders of the upcoming vote and arrange
to deliver our voting materials to them. Upon our request, the depositary
PureTech Health plc Annual report and accounts 2020 223
Risk Factor Annex — continuedAdditional information will mail to holders a shareholder meeting notice that contains, among
other things, a statement as to the manner in which voting instructions
may be given. We cannot guarantee that ADS holders will receive the
voting materials in time to ensure that they can instruct the depositary
to vote the ordinary shares underlying their ADSs. A shareholder is only
entitled to participate in, and vote at, the meeting of shareholders,
provided that it holds our ordinary shares as of the record date set for
such meeting and otherwise complies with our Articles of Association. In
addition, the depositary’s liability to ADS holders for failing to execute
voting instructions or for the manner of executing voting instructions is
limited by the deposit agreement. As a result, holders of ADSs may not be
able to exercise their right to give voting instructions or to vote in person
or by proxy and they may not have any recourse against the depositary or
us if their ordinary shares are not voted as they have requested or if their
shares cannot be voted.
You may not receive distributions on our ordinary shares represented by
the ADSs or any value for them if it is illegal or impractical to make them
available to holders of ADSs.
The depositary for the ADSs has agreed to pay to you any cash dividends
or other distributions it or the custodian receives on our ordinary shares
or other deposited securities after deducting its fees and expenses. You
will receive these distributions in proportion to the number of our ordinary
shares your ADSs represent. However, in accordance with the limitations
set forth in the deposit agreement, it may be unlawful or impractical to
make a distribution available to holders of ADSs. We have no obligation to
take any other action to permit distribution on the ADSs, ordinary shares,
rights or anything else to holders of the ADSs. This means that you may
not receive the distributions we make on our ordinary shares or any value
from them if it is unlawful or impractical to make them available to you.
These restrictions may have an adverse effect on the value of your ADSs.
Because we do not have immediate plans to pay any cash dividends on
our ADSs, capital appreciation, if any, may be your sole source of gains and
you may never receive a return on your investment.
Under current English law, a company’s accumulated realized profits must
exceed its accumulated realized losses (on a non-consolidated basis)
before dividends can be declared and paid. Therefore, we must have
sufficient distributable profits before declaring and paying a dividend.
We have not paid dividends in the past on our ordinary shares. We have
not announced any immediate plans to pay any cash dividends. As
a result, capital appreciation, if any, on our ADSs will be your sole source
of gains for the foreseeable future, and you would suffer a loss on your
investment if you were unable to sell your ADSs at or above the price that
you initially paid for them. Investors seeking cash dividends should not
purchase our ADSs.
Risks Related to Our Corporate Status
We are an “emerging growth company,” and there are reduced disclosure
requirements applicable to emerging growth companies.
We are an “emerging growth company” as defined in the SEC’s rules
and regulations and we will remain an emerging growth company until
the earlier to occur of (1) the last day of 2024, (2) the last day of the
fiscal year in which we have total annual gross revenues of at least $1.07
billion, (3) the last day of the fiscal year in which we are deemed to be
a “large accelerated filer,” under the rules of the U.S. Securities and
Exchange Commission, or SEC, which means the market value of our
equity securities that is held by non-affiliates exceeds $700 million as of
the prior June 30th, and (4) the date on which we have issued more than
$1.0 billion in non-convertible debt during the prior three-year period. For
so long as we remain an emerging growth company, we are permitted and
intend to rely on exemptions from certain disclosure requirements that
are applicable to other public companies that are not emerging growth
companies. These exemptions include:
• not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act, or Section 404;
• not being required to comply with any requirement that has or may
be adopted by the Public Company Accounting Oversight Board, or
PCAOB, regarding mandatory audit firm rotation or a supplement to
the auditor’s report providing additional information about the audit
and the financial statements;
• being permitted to provide only two years of audited financial
statements in this annual report, in addition to any required unaudited
interim financial statements, with correspondingly reduced disclosure
requirements related to discussion and analysis by management of
financial condition and results of operations, see “Financial Review” in
this Annual Report and Accounts;
• reduced disclosure obligations regarding executive compensation; and
224 PureTech Health plc Annual report and accounts 2020
• an exemption from the requirement to seek nonbinding advisory votes
on executive compensation or golden parachute arrangements.
We may choose to take advantage of some, but not all, of the available
exemptions. We have taken advantage of reduced reporting burdens in
our Annual Report on Form 20-F. In particular, we have not included all of
the executive compensation information that would be required if we were
not an emerging growth company. We cannot predict whether investors
will find our ADSs less attractive if we rely on certain or all of these
exemptions. If some investors find our ADSs less attractive as a result,
there may be a less active trading market for our ADSs and our ADS price
may be more volatile.
In addition, the JOBS Act provides that an emerging growth company
may take advantage of an extended transition period for complying with
new or revised accounting standards. This allows an emerging growth
company to delay the adoption of certain accounting standards until
those standards would otherwise apply to private companies. We are
considering whether we will take advantage of the extended transition
period for complying with new or revised accounting standards. Since
IFRS makes no distinction between public and private companies for
purposes of compliance with new or revised accounting standards, the
requirements for our compliance as a private company and as a public
company are the same.
Even after we no longer qualify as an emerging growth company, we
may still qualify as a “smaller reporting company” if the market value of
our ordinary shares held by non-affiliates is below $250 million (or $700
million if our annual revenue is less than $100 million) as of June 30 in any
given year, which would allow us to take advantage of many of the same
exemptions from disclosure requirements, including reduced disclosure
obligations regarding executive compensation in our periodic reports and
proxy statements.
We are not, and do not intend to become, regulated as an “investment
company” under the Investment Company Act of 1940, as amended, or
the 1940 Act and if we were deemed an “investment company” under
the 1940 Act, applicable restrictions could make it impractical for us to
continue our business as contemplated and could have a material adverse
effect on our business.
The 1940 Act and the rules thereunder contain detailed parameters
for the organization and operation of investment companies. Among
other things, the 1940 Act and the rules thereunder limit or prohibit
transactions with affiliates, impose limitations on the issuance of debt
and equity securities and impose certain governance requirements. We
have not been and do not intend to become regulated as an investment
company, and we intend to conduct our activities so that we will not be
deemed to be an investment company under the 1940 Act. In order to
ensure that we are not deemed to be an investment company, we may be
limited in the assets that we may continue to own and, further, may need
to dispose of or acquire certain assets at such times or on such terms as
may be less favorable to us than in the absence of such requirement. If
anything were to happen which would cause us to be deemed to be an
investment company under the 1940 Act (such as significant changes in
the value of our Founded Entities or a change in circumstance that results
in a reclassification of our interests in our Founded Entities for purposes
of the 1940 Act), the requirements imposed by the 1940 Act could make
it impractical for us to continue our business as currently conducted,
which would materially adversely affect our business, results of operations
and financial condition. In addition, if we were to become inadvertently
subject to the 1940 Act, any violation of the 1940 Act could subject
us to material adverse consequences, including potentially significant
regulatory penalties and the possibility that certain of our contracts could
be deemed unenforceable.
As a foreign private issuer, we are exempt from a number of rules under
the U.S. securities laws and are permitted to file less information with
the SEC than a U.S. company. This may limit the information available to
holders of ADSs or our ordinary shares.
We are a “foreign private issuer,” as defined in the SEC’s rules and
regulations and, consequently, we are not subject to all of the disclosure
requirements applicable to public companies organized within the United
States. For example, we are exempt from certain rules under the Exchange
Act, that regulate disclosure obligations and procedural requirements
related to the solicitation of proxies, consents or authorizations applicable
to a security registered under the Exchange Act, including the U.S. proxy
rules under Section 14 of the Exchange Act. In addition, our officers and
directors are exempt from the reporting and “short-swing” profit recovery
provisions of Section 16 of the Exchange Act and related rules with
respect to their purchases and sales of our securities. Moreover, while we
currently make annual and semi-annual filings with respect to our listing
on the LSE, we will not be required to file periodic reports and financial
statements with the SEC as frequently or as promptly as U.S. domestic
Risk Factor Annex — continuedAdditionasl information issuers and will not be required to file quarterly reports on Form 10-Q or
current reports on Form 8-K under the Exchange Act. Accordingly, there
will be less publicly available information concerning our company than
there would be if we were not a foreign private issuer.
As a foreign private issuer, we are permitted to adopt certain home
country practices in relation to corporate governance matters that differ
significantly from Nasdaq corporate governance listing standards. These
practices may afford less protection to shareholders than they would enjoy
if we complied fully with corporate governance listing standards.
As a foreign private issuer listed on Nasdaq, we are subject to corporate
governance listing standards. However, rules permit a foreign private
issuer like us to follow the corporate governance practices of its home
country. Certain corporate governance practices in the United Kingdom,
which is our home country, may differ significantly from corporate
governance listing standards. For example, neither the corporate laws of
the United Kingdom nor our articles of association require a majority of
our directors to be independent and we could include non-independent
directors as members of our nomination and remuneration committee,
though a majority is required, and our independent directors would not
necessarily hold regularly scheduled meetings at which only independent
directors are present. Currently, we follow home country practice to
the maximum extent possible. Therefore, our shareholders may be
afforded less protection than they otherwise would have under corporate
governance listing standards applicable to U.S. domestic issuers. See
“Governance” of this Annual Report and Accounts and “Item 16G—
Corporate Governance” of our Annual Report on Form 20-F,
We may lose our foreign private issuer status in the future, which could
result in significant additional cost and expense.
While we currently qualify as a foreign private issuer, the determination of
foreign private issuer status is made annually on the last business day of an
issuer’s most recently completed second fiscal quarter and, accordingly,
the next determination will be made with respect to us on June 30, 2021.
In the future, we would lose our foreign private issuer status if we to fail
to meet the requirements necessary to maintain our foreign private issuer
status as of the relevant determination date. For example, if more than
50 percent of our securities are held by U.S. residents and more than 50
percent of the members of our executive committee or members of our
board of directors are residents or citizens of the United States, we could
lose our foreign private issuer status.
The regulatory and compliance costs to us under U.S. securities laws
as a U.S. domestic issuer may be significantly more than costs we incur
as a foreign private issuer. If we are not a foreign private issuer, we will
be required to file periodic reports and registration statements on
U.S. domestic issuer forms with the SEC, which are more detailed and
extensive in certain respects than the forms available to a foreign private
issuer. We would be required under current SEC rules to prepare our
financial statements in accordance with U.S. GAAP, rather than IFRS,
and modify certain of our policies to comply with corporate governance
practices associated with U.S. domestic issuers. Such conversion of
our financial statements to U.S. GAAP will involve significant time and
cost. In addition, we may lose our ability to rely upon exemptions from
certain corporate governance requirements on U.S. stock exchanges
that are available to foreign private issuers such as the ones described
above and exemptions from procedural requirements related to the
solicitation of proxies.
Risks Related to Our Internal Controls
If we are unable to maintain an effective system of internal control over
financial reporting, we may not be able to accurately report our financial
results or prevent fraud. As a result, shareholders could lose confidence in
our financial and other public reporting, which would harm our business
and the trading price of our ADSs.
Effective internal controls over financial reporting are necessary for us to
provide reliable financial reports and, together with adequate disclosure
controls and procedures, are designed to prevent fraud. Any failure to
implement required new or improved controls, or difficulties encountered
in their implementation could cause us to fail to meet our reporting
obligations. In addition, any testing by us conducted in connection with
Section 404, or any subsequent testing by our independent registered
public accounting firm, may reveal deficiencies in our internal controls over
financial reporting that are deemed to be material weaknesses or that may
require prospective or retroactive changes to our financial statements or
identify other areas for further attention or improvement. Inferior internal
controls could also cause investors to lose confidence in our reported
financial information, which could have a negative effect on the trading
price of our ADSs.
Our management will be required to assess the effectiveness of these
controls annually. However, for as long as we are an emerging growth
company, our independent registered public accounting firm will not
be required to attest to the effectiveness of our internal controls over
financial reporting pursuant to Section 404. We could be an emerging
growth company for up to five years. An independent assessment of the
effectiveness of our internal controls over financial reporting could detect
problems that our management’s assessment might not. Undetected
material weaknesses in our internal controls over financial reporting
could lead to financial statement restatements and require us to incur the
expense of remediation.
In connection with the audit of our consolidated financial statements in
accordance with the standards of the PCAOB and U.S. securities laws,
a material weakness in our internal control over financial reporting was
found to exist. If we fail to implement and maintain effective internal
control over financial reporting, we may be unable to accurately report our
results of operations, meet our reporting obligations or prevent fraud.
We have been a public company on the LSE with limited requirements
to implement and test internal controls under a UK framework. As such,
we have not been subject to the internal control over financial reporting
requirements of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley
Act, and the standards of the PCAOB and furthermore our independent
registered public accounting firm has not conducted an audit of our
internal control over financial reporting in accordance with such rules.
As a U.S. public company, Section 404 of the Sarbanes-Oxley Act will
require that our management assess our internal control over financial
reporting and include a report of management on our internal control
over financial reporting in our annual report on Form 20-F beginning
with our second annual report. Although we have adhered to and will
continue to adhere to all internal control requirements made relevant by
the governance of the LSE, the requirements pertaining to the design
and implementation of internal controls over financial reporting as
contemplated under the Sarbanes-Oxley Act had not been considered in
the production of financial statements for the years ended December 31,
2020, 2019 and 2018 for our annual report issued in the United Kingdom.
In connection with the audits of our consolidated financial statements as
of and for each of the years ended December 31, 2020, 2019 and 2018
conducted in connection with this annual report, we and our independent
registered public accounting firm identified a material weakness in
our internal control over financial reporting. A material weakness is
a deficiency, or combination of control deficiencies, in internal control
over financial reporting, such that there is a reasonable possibility that
a material misstatement of the annual or interim financial statements will
not be prevented or detected on a timely basis. The material weakness
relates to several significant deficiencies that were identified which, in
aggregate, rise to the level of a material weakness. These significant
deficiencies relate to our process around accounting for costs attributed
to individual projects, contract and consolidated review, segregation of
duties, expense identification, allocation of employee stock compensation
expense, and tax provision relating to underlying investments and
related party identification. We have taken steps to remediate the
material weakness, including increasing the depth and experience within
our accounting and finance organization, designing and implementing
improved processes and internal controls based on the COSO framework,
and internally testing the effectiveness of our internal controls. As with any
internal control framework, we cannot be certain that these efforts will be
sufficient to remediate our material weaknesses, prevent future material
weaknesses or significant deficiencies from occurring. If we are unable to
successfully remediate our existing or any future material weaknesses in
our internal control over financial reporting, or if we identify any additional
material weaknesses, the accuracy and timing of our financial reporting
may be adversely affected. In addition, investors could lose confidence in
our reported financial information, and we could be subject to regulatory
scrutiny and to litigation from shareholders, which could have a material
adverse effect on our business.
Once we cease to be an “emerging growth company” as such term is
defined in the JOBS Act, our independent registered public accounting
firm must attest to and report on the effectiveness of our internal control
over financial reporting. Our independent registered public accounting
firm, after conducting its own independent testing, may issue a report that
is adverse if it is not satisfied with our internal controls or the level at which
our controls are documented, designed, operated or reviewed, or if it
interprets the relevant requirements differently from us. In addition, after
we become a public company in the U.S., our reporting obligations may
place a significant strain on our management, operational and financial
resources and systems for the foreseeable future. We may be unable to
timely complete our evaluation testing for internal control over financial
reporting and any required remediation.
PureTech Health plc Annual report and accounts 2020 225
Risk Factor Annex — continuedAdditional information If we fail to achieve and maintain an effective internal control environment,
we could suffer material misstatements in our financial statements and
fail to meet our reporting obligations, which would likely cause investors
to lose confidence in our reported financial information. This could in
turn limit our access to capital markets, harm our results of operations,
and lead to a decline in the trading price of our securities. Additionally,
ineffective internal control over financial reporting could expose us to
increased risk of fraud or misuse of corporate assets and subject us to
potential delisting from the stock exchange on which we list, regulatory
investigations and civil or criminal sanctions. We may also be required to
restate our financial statements from prior periods.
Our disclosure controls and procedures may not prevent or detect all
errors or acts of fraud.
We are subject to certain reporting requirements of the Exchange Act.
Our disclosure controls and procedures are designed to reasonably
assure that information required to be disclosed by us in reports we file
or submit under the Exchange Act is accumulated and communicated
to management, recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC. We believe
that any disclosure controls and procedures or internal controls and
procedures, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the
control system are met. These inherent limitations include the realities
that judgments in decision-making can be faulty, and that breakdowns
can occur because of simple error or mistake. Additionally, controls can
be circumvented by the individual acts of some persons, by collusion
of two or more people or by an unauthorized override of the controls.
Accordingly, because of the inherent limitations in our control system,
misstatements or insufficient disclosures due to error or fraud may occur
and not be detected.
Risks Related to Tax Matters
Comprehensive tax reform legislation could adversely affect our business
and financial condition.
The rules dealing with U.S. federal, state, and local income taxation are
constantly under review by persons involved in the legislative process
and by the Internal Revenue Service and the U.S. Treasury Department.
Changes to tax laws (which changes may have retroactive application)
could adversely affect us or holders of our common stock. In recent years,
many such changes have been made and changes are likely to continue
to occur in the future. For example, on December 22, 2017, the Tax Act
was signed into law and enacted many significant changes to U.S. tax
laws. Future guidance from the Internal Revenue Service and other tax
authorities with respect to the Tax Act may affect us, and certain aspects
of the Tax Act could be repealed or modified in future legislation. For
example, on March 27, 2020, the “Coronavirus Aid, Relief, and Economic
Security Act” or the CARES Act was signed into law, which modified
certain provisions of the Tax Act and included certain changes in tax
law intended to stimulate the U.S. economy in light of the COVID-19
coronavirus outbreak, including temporary beneficial changes to the
treatment of net operating losses, interest deductibility limitations and
payroll tax matters. It is uncertain if and to what extent various states will
conform to the newly enacted federal tax law. We will continue to examine
the impact tax reform legislation may have on our business.
We are treated as a U.S. domestic corporation for U.S. federal income
tax purposes.
We are treated as a U.S. domestic corporation for U.S. federal income tax
purposes under Section 7874(b) of the Internal Revenue Code of 1986, as
amended, or the Code. As a result, we are subject to U.S. income tax on
our worldwide income and any dividends paid by us to non-U.S. holders
(as defined in the discussion under “Taxation in the United States” in
our Annual Report on Form 20-F) will be subject to U.S. federal income
tax withholding at a 30 percent rate or such lower rate as provided in an
applicable treaty. Furthermore, PureTech Health plc is also resident for tax
purposes in the U.K. and subject to U.K. corporation tax on its worldwide
income and gains. Consequently, we may be liable for both U.S. and U.K.
income tax, which could have a material adverse effect on our financial
condition and results of operations.
This discussion of certain U.S. federal income tax risks is subject in its
entirety to the summaries set forth in “Certain United Kingdom Tax
Considerations” and “Taxation in the United States” in our Annual Report
on Form 20-F
Our ability to use our net operating losses to offset future taxable income
may be subject to certain limitations.
As of December 31, 2020, we had U.S. federal and state net operating
loss carryforwards, or NOLs, of approximately $169.7 million due to prior
226 PureTech Health plc Annual report and accounts 2020
period losses, which, subject to the following discussion, are generally
available to be carried forward to offset a portion of our future taxable
income, if any, until such NOLs are used or expire. In general, under
Section 382 of the Code, a corporation that undergoes an “ownership
change” is subject to limitations on its ability to utilize its NOLs to offset
future taxable income. Similar rules may apply under state tax laws.
Our existing NOLs may be subject to limitations arising from previous
ownership changes, and if we undergo an ownership change, our ability to
utilize NOLs could be further limited by Section 382 of the Code. Future
changes in our stock ownership, some of which are outside of our control,
could result in an ownership change under Section 382 of the Code.
Additionally, we may no longer be able to utilize losses of our Founded
Entities that have been deconsolidated or that will deconsolidate in the
future. Furthermore, our ability to utilize NOLs of companies that we
have acquired or may acquire in the future may be subject to limitations.
In addition, under the Tax Act, the amount of post 2017 NOLs that we
are permitted to deduct in any taxable year is limited to 80 percent of
our taxable income in such year, where taxable income is determined
without regard to the NOL deduction itself. Federal NOLs generated
after December 31, 2017 are not subject to expiration and generally may
not be carried back to prior taxable years, except that under the CARES
Act, NOLs generated in 2018, 2019 and 2020 may be carried back five
taxable years. There is also a risk that due to changes under the Tax Act,
regulatory changes, such as suspensions on the use of NOLs, or other
unforeseen reasons, our existing NOLs could be unavailable to offset
future income tax liabilities. For these reasons, we may not be able to
realize a tax benefit from the use of our NOLs.
We may be unable to use net operating loss and tax credit carryforwards
and certain built-in losses to reduce future U.K. tax liabilities.
As a U.K. incorporated and tax resident entity, PureTech Health plc is
subject to U.K. corporate taxation on its tax-adjusted trading profits. Due
to the nature of our business, PureTech Health plc has generated losses
since inception and therefore we have not paid any U.K. corporation tax.
Subject to numerous utilization criteria and restrictions (including those
that limit the percentage of profits that can be reduced by carried forward
losses and those that can restrict the use of carried forward losses where
there is a change of ownership of more than half the ordinary shares of the
company and a major change in the nature, conduct or scale of the trade),
we expect these to be eligible for carry forward and utilization against
future U.K. operating profits.
Future changes to tax laws could materially adversely affect our company
and reduce net returns to our shareholders.
The tax treatment of the company is subject to changes in tax laws,
regulations and treaties, or the interpretation thereof, tax policy initiatives
and reforms under consideration and the practices of tax authorities
in jurisdictions in which we operate, as well as tax policy initiatives and
reforms related to the Organisation for Economic Co-Operation and
Development’s, or OECD, Base Erosion and Profit Shifting, or BEPS,
Project, the European Commission’s state aid investigations and other
initiatives. Such changes may include (but are not limited to) the taxation
of operating income, investment income, dividends received or (in the
specific context of withholding tax) dividends paid. We are unable to
predict what tax reform may be proposed or enacted in the future or what
effect such changes would have on our business, but such changes, to
the extent they are brought into tax legislation, regulations, policies or
practices, could affect our financial position and overall or effective tax
rates in the future in countries where we have operations, reduce post-tax
returns to our shareholders, and increase the complexity, burden and cost
of tax compliance.
Tax authorities may disagree with our positions and conclusions regarding
certain tax positions, resulting in unanticipated costs, taxes or non-
realization of expected benefits.
A tax authority may disagree with tax positions that we have taken,
which could result in increased tax liabilities. For example, HM Revenue
& Customs, or HMRC, the Internal Revenue Service or another tax
authority could challenge our allocation of income by tax jurisdiction and
the amounts paid between certain of our Founded Entities pursuant to
our intercompany arrangements and transfer pricing policies, including
amounts paid with respect to our intellectual property development.
Similarly, a tax authority could assert that we are subject to tax in
a jurisdiction where we believe we have not established a taxable
connection, often referred to as a “permanent establishment” under
international tax treaties, and such an assertion, if successful, could
increase our expected tax liability in one or more jurisdictions. A tax
authority may take the position that material income tax liabilities, interest
and penalties are payable by us, in which case, we expect that we might
contest such assessment. Contesting such an assessment may be lengthy
Risk Factor Annex — continuedAdditionasl information • if the offeror acquires an interest in shares in an offeree company (i.e.,
a target) at a price higher than the value of the offer, the offer must
be increased to not less than the highest price paid for the interest in
shares so acquired;
• the offeree company must obtain competent advice as to whether the
terms of any offer are fair and reasonable and the substance of such
advice must be made known to all the shareholders, together with the
opinion of the board of directors of the offeree company;
• special or favorable deals for selected shareholders are not permitted,
except in certain circumstances where independent shareholder
approval is given and the arrangements are regarded as fair and
reasonable in the opinion of the financial adviser to the offeree;
• all shareholders must be given the same information;
• each document published in connection with an offer by or on behalf of
the offeror or offeree must state that the directors of the offeror or the
offeree, as the case may be, accept responsibility for the information
contained therein;
• profit forecasts, quantified financial benefits statements and asset
valuations must be made to specified standards and must be reported
on by professional advisers;
• misleading, inaccurate or unsubstantiated statements made in
documents or to the media must be publicly corrected immediately;
• actions during the course of an offer by the offeree company, which
might frustrate the offer are generally prohibited unless shareholders
approve these plans. Frustrating actions would include, for example,
lengthening the notice period for directors under their service contract
or agreeing to sell off material parts of the target group;
• stringent and detailed requirements are laid down for the disclosure
of dealings in relevant securities during an offer, including the prompt
disclosure of positions and dealing in relevant securities by the parties
to an offer and any person who is interested (directly or indirectly) in 1
percent or more of any class of relevant securities; and
• employees of both the offeror and the offeree company and the
trustees of the offeree company’s pension scheme must be informed
about an offer. In addition, the offeree company’s employee
representatives and pension scheme trustees have the right to
have a separate opinion on the effects of the offer on employment
appended to the offeree board of directors’ circular or published
on a website.
and costly and if we were unsuccessful in disputing the assessment,
the implications could increase our anticipated effective tax rate,
where applicable.
Shareholder protections found in provisions under the U.K. City Code
on Takeovers and Mergers, or the Takeover Code, will not apply if our
securities are no longer admitted to trading on a regulated market or
a multilateral trading facility in the United Kingdom or on any stock
exchange in the Channel Islands or the Isle of Man and our place
of management and control is considered to change to outside the
United Kingdom.
We are registered as a public limited company incorporated in England
and Wales and have our ordinary shares admitted to trading on
a regulated market in the United Kingdom (being the main market of the
LSE). Accordingly, we are currently subject to the Takeover Code and, as
a result, our shareholders are entitled to the benefit of certain takeover
offer protections provided under the Takeover Code. The Takeover Code
provides a framework within which takeovers of companies are regulated
and conducted. If, at the time of a takeover offer, we have de-listed from
the main market of the LSE (and do not maintain a listing of securities on
any other regulated market or a multilateral trading facility in the United
Kingdom or on any stock exchange in the Channel Islands or the Isle of
Man) and the Panel on Takeovers and Mergers determine that we do not
have our place of central management and control in the United Kingdom,
then the Takeover Code may not apply to us and our shareholders would
not be entitled to the benefit of the various protections that the Takeover
Code affords. In particular, we would not be subject to the rules regarding
mandatory takeover bids. The following is a brief summary of some of the
most important rules of the Takeover Code:
• when any person acquires, whether by a series of transactions over
a period of time or not, an interest in shares which (taken together with
shares already held by that person and an interest in shares held or
acquired by persons acting in concert with him or her) carry 30 percent
or more of the voting rights of a company that is subject to the Takeover
Code, that person is generally required to make a mandatory offer
to all the holders of any class of equity share capital or other class of
transferable securities carrying voting rights in that company to acquire
the balance of their interests in the company;
• when any person who, together with persons acting in concert with him
or her, is interested in shares representing not less than 30 percent but
does not hold more than 50 percent of the voting rights of a company
that is subject to the Takeover Code, and such person, or any person
acting in concert with him or her, acquires an additional interest in
shares which increases the percentage of shares carrying voting rights
in which he or she is interested, then such person is generally required
to make a mandatory offer to all the holders of any class of equity share
capital or other class of transferable securities carrying voting rights of
that company to acquire the balance of their interests in the company;
• a mandatory offer triggered in the circumstances described in the
two paragraphs above must be in cash (or be accompanied by a cash
alternative) and at not less than the highest price paid within the
preceding 12 months to acquire any interest in shares in the company
by the person required to make the offer or any person acting in
concert with him or her;
• in relation to a voluntary offer (i.e. any offer which is not a mandatory
offer), when interests in shares representing 10 percent or more of
the shares of a class have been acquired for cash by an offeror (i.e.,
a bidder) and any person acting in concert with it in the offer period
and the previous 12 months, the offer must be in cash or include a cash
alternative for all shareholders of that class at not less than the highest
price paid for any interest in shares of that class by the offeror and by
any person acting in concert with it in that period. Further, if an offeror
acquires for cash any interest in shares during the offer period, a cash
alternative must be made available at not less than the highest price
paid for any interest in the shares of that class;
PureTech Health plc Annual report and accounts 2020 227
Risk Factor Annex — continuedAdditional information 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 (Chair)
Ms. Daphne Zohar (Chief Executive Officer)
Dame Marjorie Scardino
(Senior Independent Non-Executive Director)
Dr. Robert Langer (Non-Executive Director)
Dr. Raju Kucherlapati
(Independent Non-Executive Director)
Dr. John LaMattina (Independent
Non-Executive Director)
Ms. Kiran Mazumdar-Shaw
(Independent Non-Executive Director)
Mr. Stephen Muniz (Chief Operating Officer)*
Dr. Bharatt Chowrira
(President and Chief of Business and Strategy)
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
Dr. Bharatt Chowrira
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
* Mr. Muniz will retire from the Company and cease to serve as a member of the Board of Directors effective May 17, 2021.
228 PureTech Health plc Annual report and accounts 2020
Additionasl information (cid:38)(cid:20)(cid:24)(cid:25)(cid:20)(cid:19)(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