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PURETECH HEALTH PLC – ANNUAL REPORT AND ACCOUNTS 2022ptar_cover_art_2023_final.indd 1ptar_cover_art_2023_final.indd 127/03/2023 15:1027/03/2023 15:10
PureTech Health
Headquarters
Boston, MA
Nasdaq
PRTC
LSE
PRTC
Overview
Highlights of the Year
Letter from the Chair
Strategic report
Letter from the Chief Executive Officer
Components of Our Value
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
Relations with Stakeholders
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12
15
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48
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65
66
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71
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Directors’ Report
Report of the Nomination Committee
Report of the Audit Committee
Directors’ Remuneration Report
Directors’ Remuneration Policy
Annual Report on Remuneration
Financial statements
Independent Auditor’s Report to the Members of PureTech Health plc
Consolidated Statements of Comprehensive Income/(Loss)
Consolidated Statements of Financial Position
Consolidated Statements of Changes in Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
PureTech Health plc Statement of Financial Position
PureTech Health plc Statements of Cash Flows
PureTech Health plc Statements of Changes in Equity
Notes to the Financial Statements
Additional information
History and Development of the Company
Risk Factor Annex
Directors, Secretary and Advisors to PureTech Health plc
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Giving Life to Science
PureTech Health plc (“PureTech Health”, “PureTech” or “the Company”) is a clinical-stage biotherapeutics
company dedicated to giving life to new classes of medicine to change the lives of patients with
devastating diseases. We have created a broad and deep pipeline through our experienced research
and development team and our extensive network of scientists, clinicians and industry leaders that is
being advanced both internally and through our Founded Entities.1 Our R&D engine has resulted in the
development of 27 therapeutics and therapeutic candidates, including two (Plenity® and EndeavorRx®)
that have received both US FDA clearance and European marketing authorization and a third (KarXT)
that is expected to be filed soon for FDA approval. A number of these programs are being advanced
by PureTech or our Founded Entities in various indications and stages of clinical development, including
registration enabling studies. All of the underlying programs and platforms that resulted in this pipeline
of therapeutic candidates were initially identified or discovered and then advanced by the PureTech team
through key validation points.
The common theme underlying all of our programs has been to start with a serious patient need. In many
cases, these programs are identified based on previous signals of human efficacy, which has enabled us
to advance therapeutic candidates with substantially de-risked profiles and robust development rationales.
Within our Wholly Owned Programs,2 the majority of our candidates are centered on enhancing on-target
efficacy, enabling oral administration or improving tolerability to unlock new classes of medicine that have
been held back by one of these issues. We do this by applying our unique insights or technology.
Our track record of success is six times3 the industry average, which is due to our unique approach to
R&D and our seasoned management team. We are led by a team of proven industry leaders who have
significant experience in discovering and developing important new medicines, delivering them to
patients and maximizing shareholder value.
Highlights of the Year – 2022
PureTech Level Cash, Cash
Equivalents and Short-term
Investments as of Year End
$339.5m4
Consolidated Cash, Cash
Equivalents and Short-term
Investments as of Year End
$350.1m4
Includes cash held at the PureTech level
and at Controlled Founded Entities
(Follica, Entrega, and Vedanta)
Amount of Funding Secured
for Founded Entities
$1.28b5,6
$1.25b (98%) came from third parties
2021: $418.9m
2020: $349.4m
2019: $120.6m
2018: $177.7m
2017: $126.7m
2021: $465.7m
2020: $403.9m
2019: $162.4m
2018: $250.9m
2017: $188.7m
2021: $731.9m
2020: $247.8m
2019: $666.8m
2018: $274.0m
2017: $102.9m
1 Our Founded Entities are comprised of our Controlled Founded Entities and our Non-Controlled Founded Entities, all of which are incorporated in the United States.
References in this report to our “Controlled Founded Entities” refer to Follica, Incorporated, and Entrega, Inc., for all periods prior to March 1, 2023, Vedanta Biosciences,
Inc., for all periods prior to May 25, 2022, Sonde Health Inc., and for all periods prior to June 10, 2021, Alivio Therapeutics, Inc. References to our “Non-Controlled
Founded Entities” refer to Akili Interactive Labs, Inc., Karuna Therapeutics, Inc., Vor Bio, Inc., Gelesis, Inc., for all periods following May 25, 2022, Sonde Health, Inc., for
all periods following March 1, 2023, Vedanta Biosciences, 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 our Controlled Founded Entities Follica, Incorporated and Entrega, Inc., 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.
2 References in this report to “Wholly Owned Programs” refer to the Company’s five therapeutic candidates (LYT-100, LYT-200, LYT-300, LYT-310, and LYT-503/IMB-150),
3
Glyph platform and potential future therapeutic candidates and platforms that the Company may develop or obtain. References to “Wholly Owned Pipeline” refer to
LYT-100, LYT-200, LYT-300, LYT-310, and LYT-503/IMB-150. On July 23, 2021, Imbrium Therapeutics exercised its option to license LYT-503/IMB-150 pursuant to which it is
responsible for all future development activities and funding for LYT-503/IMB-150.
Industry average data measures the probability of clinical trial success of therapeutics by calculating the number of programs progressing to the next phase vs. the number
progressing and suspended (Phase 1=52%, Phase 2=29%, Phase 3=58%). BIO, PharmaIntelligence, QLS (2021) Clinical Development Success Rates 2011 – 2020. This study
did not include therapeutics regulated as devices. PureTech’s aggregate percentages include all therapeutic candidates advanced through at least Phase 1 by PureTech
or its Founded Entities from 2009 onward, calculated by multiplying the individual phase percentages of the following, Phase 1 (n = 6/8; 75%), Phase 2 (n = 10/12; 83%),
Phase 3 (n = 3/4; 75%), last updated on August 8, 2022; Phase 2 and Phase 3 percentages include some therapeutic candidates where Phase 1 trials were not conducted
by PureTech or its Founded Entities (i) due to the requirements of the medical device regulatory pathway or (ii) because a prior Phase 1 trial was conducted by a third party,
which Phase 1 trials were not included in this analysis.
4 PureTech level cash, cash equivalents and short-term investments is a non-IFRS measure. For more information in relation to the PureTech level cash, cash equivalents
and short-term investments and Consolidated cash, cash equivalents and short-term investments measures used in this Annual Report, please see pages 51 to 52 of
the Financial Review. For comparative periods from 2016 to 2019, balances included cash, cash equivalents and short-term investments and for 2020 and 2021 balances
included cash and cash equivalents.
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. Funding figure does not include proceeds from Vedanta’s 2023 post-period financing.
6 Number represents figure for the relevant fiscal year only and is not cumulative.
PureTech Health plc Annual report and accounts 2022 1
Overview Letter from the Chair
“As a member of PureTech’s Board of Directors
for nearly a decade, I have seen the Company
grow as a biopharmaceutical pioneer, and 2022
was the most noteworthy year yet. We achieved
multiple firsts as we advanced our goal of
delivering new classes of medicines for patients
with unmet need.”
Christopher Viehbacher,
Chair of the Board of Directors
As a member of PureTech’s Board of Directors for
nearly a decade, I have seen the Company grow as
a biopharmaceutical pioneer, and 2022 was the most
noteworthy year yet. We achieved multiple firsts as we
advanced our goal of delivering new classes of medicines
for patients with unmet need.
I have been reflecting on how PureTech has grown and
evolved. Its track record of clinical success is six times the
industry average, and the Company has pioneered new
classes of medicine that are positioned to impact the lives
of millions of patients.
What stands out to me is how our disciplined approach
to development and financial management has created a
focused, well-capitalized organization with a clear mission
and differentiated value. I have consistently been impressed
by how much PureTech achieves with very little resources,
especially relative to many of its peers.
The team takes swift action when they see a potential hurdle,
and – while it is never easy to deprioritize a program – being
decisive and following the data is what ultimately creates true
value for patients and for shareholders. This team is a force,
and I believe the discipline and focus demonstrated by its
strong management team will continue to inspire employees
to achieve great things.
PureTech’s “do more with less” ethos is something our
industry at large would do well to embrace. To me, it is
this approach that makes PureTech an exemplar of impact
investing and what can be accomplished in a capital-efficient
manner. Given the current macro-economic conditions, this
will only become more imperative for companies and the
patients and shareholders they serve.
PureTech’s model is unique in the industry and keeps the
Company well-positioned to weather the current economic
downturn. For example, the Company’s Founded Entities are
a significant source of non-dilutive cash, and to date, over
$780 million has been generated from the sales of Founded
Entity equity and royalties to fund PureTech’s operations.
PureTech also derives value from its Founded Entities in
the form of royalties, milestone payments and sublicense
revenues, which will similarly be invested back into the
Wholly Owned Programs. This innovative strategy means the
Company has not needed to dilute shareholders by tapping
the equity market in over five years.
2 PureTech Health plc Annual report and accounts 2022
Another remarkable aspect about PureTech is the team’s
ability to be ahead of the times. One example is its potential
impact on mental health through its Founded Entities Karuna
(Nasdaq: KRTX), Akili (Nasdaq: AKLI) and Sonde, as well as a
number of PureTech’s wholly-owned CNS programs enabled
by its Glyph™ platform. As the greater industry has started to
produce disease modifying therapies for chronic neurologic
disorders, the importance of remote screening – and even
remote early diagnosis – could provide a much less expensive
and invasive way to identify and stratify those who may
benefit from the treatments.
PureTech also took a leading position in the role of the
microbiome in medicine. Our Founded Entity Vedanta was
formed on the idea of harnessing the power of the body’s
ecosystem by using bacteria to make medicines to the same
standards as traditional drugs.
In a similar way, PureTech’s Wholly Owned Pipeline is rich with
programs that could have a substantial impact on patients’
needs. LYT-100 (deupirfenidone) for idiopathic pulmonary
fibrosis (IPF) and LYT-300 (oral allopregnanolone) for anxiety
and postpartum depression are just two examples of unique
innovations generated by PureTech that could address the
significant drawbacks of standard of care treatments.
I am proud to have worked so closely with such a talented
and passionate team as I conclude my tenure as Board Chair.
As PureTech embarks on a new phase of clinical expansion,
I look forward to the multiple exciting milestones ahead
in important areas of medical need. The groundbreaking
business model and seasoned management team of
PureTech remain standouts in the industry, and I believe this
will steer the enterprise through continued success in 2023
and beyond. On behalf of the Board, I thank our shareholders
for your continued support of our work to change the
treatment paradigm for patients.
Sincerely,
Christopher Viehbacher
Chair
April 27, 2023
Overview
Letter from the Chief Executive Officer
“2022 was an exceptionally productive year
that shaped the next phase of PureTech’s
development and furthered our mission of
giving life to new medicines for patients with
devastating diseases.”
Daphne Zohar,
Founder and Chief Executive Officer
2022 was an exceptionally productive year that shaped the
next phase of PureTech’s development and furthered our
mission of giving life to new medicines for patients with
devastating diseases.
We continue to have one of the most productive track
records in biopharma with a clinical trial success rate
that is approximately six times better than the industry
average.1 Across our Wholly Owned Pipeline and Founded
Entities, we’ve developed the platforms and programs
resulting in 27 therapeutics and therapeutic candidates.
Two (Akili’s EndeavorRx® and Gelesis’ Plenity®) have gone
from inception at PureTech through FDA and EU regulatory
clearances, and a third (Karuna’s KarXT) is expected to be
filed soon for FDA approval. Within our Wholly Owned
Pipeline alone, we completed five clinical trials this year, and
we expect at least five more important milestones/catalysts
over the next 12 months.
The key to our strong track record of advancing promising
therapeutics lies in our proven innovation and drug
development strategy. Our approach is underpinned by
three key pillars. The first pillar is our network of collaborators
which enables us to learn about advances before the rest
of the world. Nearly 30 papers related to our programs
have been published in major journals such as Science,
Cell and Nature, and – thanks to the deep insights of our
advisors – almost all were published after we in-licensed
the technology or filed key patents. This brings us to the
second pillar: our innovative technologies and approaches.
We are experts in applying proprietary insights to medicines
that have demonstrated efficacy but that have been held
back from reaching their full potential by issues for which
we now have innovative solutions, and I’ll detail this further
in the next section. Our third pillar is centered on what we
call “killer experiments” early in the development process.
We believe in disciplined and rigorous R&D, and we are
quite decisive in rapidly shutting down programs that don’t
reach our prespecified stringent thresholds for advancement.
This allows us to pivot resources towards the programs
with the highest probability of success. Consistent with
this strategy, we have decided to discontinue the Orasome
technology platform and Meningeal lymphatics platform,
as these research programs have not yielded promising
candidates the way our Glyph™ technology platform has.
Our Strategy: Unlocking new classes of medicine
with proven efficacy
A majority of our Wholly Owned Pipeline candidates
are based on a strategy of leveraging validated efficacy
to rapidly advance therapeutics with proven profiles.
For decades, biopharma has devoted time and resources
to discovering new modalities and drug candidates and
proving they work in patients, but important new medicines
have been abandoned after running into issues that seemed
insurmountable at the time. At PureTech, we are applying
new technologies and proprietary insights to bring these
medicines – that weren’t otherwise able to reach their
potential – to life by enhancing on-target efficacy, improving
tolerability or enabling oral administration.
We have a proven track record of success pursuing this
approach as highlighted by the extraordinary clinical success
of our Founded Entity, Karuna. In August 2022, Karuna
announced that it expects to submit an NDA for KarXT in
schizophrenia with the FDA in mid-2023. If approved by the
FDA, Karuna’s KarXT will become the first truly novel therapy
for schizophrenia in more than 50 years. KarXT was built
from our recognition of both the promise and the limitations
of a neuroactive compound, xanomeline. Xanomeline had
demonstrated robust clinical efficacy, but it could not be
advanced into later stage development due to its tolerability
issues. At PureTech, we found an elegant way to overcome
these limitations and enable its potential to meet the needs
of the millions of people with schizophrenia. Additional
details surrounding Karuna and the KarXT program can
be found on page 12.
1
Industry average data measures the probability of clinical trial success of therapeutics by calculating the number of programs progressing to the next phase vs. the number
progressing and suspended (Phase 1=52%, Phase 2=29%, Phase 3=58%). BIO, PharmaIntelligence, QLS (2021) Clinical Development Success Rates 2011 – 2020. This study
did not include therapeutics regulated as devices. PureTech’s aggregate percentages include all therapeutic candidates advanced through at least Phase 1 by PureTech
or its Founded Entities from 2009 onward, calculated by multiplying the individual phase percentages of the following, Phase 1 (n = 6/8; 75%), Phase 2 (n = 10/12; 83%),
Phase 3 (n = 3/4; 75%), last updated on August 8, 2022; Phase 2 and Phase 3 percentages include some therapeutic candidates where Phase 1 trials were not conducted
by PureTech or its Founded Entities (i) due to the requirements of the medical device regulatory pathway or (ii) because a prior Phase 1 trial was conducted by a third party,
which Phase 1 trials were not included in this analysis.
PureTech Health plc Annual report and accounts 2022 3
Strategic report Letter from the Chief Executive Officer — continued
Our approach with KarXT extends to several of our other
Founded Entities and our Wholly Owned Pipeline: we identify
key unmet medical needs and relevant existing approaches
with clearly defined opportunities and challenges, and we
pursue the innovations that will unlock the greatest potential
for the drug. We pursue rapid proof-of-concept through
experiments that rigorously assess our hypotheses and
then make the decisions that will maximize the value of our
pipeline. Our Wholly Owned Pipeline candidates such as
LYT-100, LYT-300 and LYT-310 exemplify this strategy.
Wholly Owned Pipeline: Late-stage development
in IPF and key proofs-of-principle
In our busiest year in the clinic yet, we achieved several
notable milestones. We completed five clinical studies
including demonstrating compelling safety and tolerability
data for LYT-100 (deupirfenidone) and proof-of-principle,
oral bioavailability and tolerability for LYT-300 (oral
allopregnanolone). We also achieved robust dose escalation
with a strong safety profile from the monotherapy portion of
our Phase 1 study LYT-200 (anti-galectin 9 mAb) in metastatic
solid tumors. LYT-200 has now advanced into combination
cohorts for urothelial and head and neck cancers, as well
as a second trial as a monotherapy in patients with acute
myeloid leukemia (AML).
All of these results were important proof points for each
candidate. Notably, the results of our LYT-300 study were
a significant first clinical validation for our Glyph™ technology
platform, which has yielded two candidates to date (LYT-300
and LYT-310) and has great potential utility for a range
of other compounds with proven efficacy but previously
challenging oral bioavailability, safety and tolerability profiles.
LYT-300 is another example of how we take an existing,
efficacious therapy, held back by factors that limit its
commercial use, and apply novel approaches to address
those limitations. With this candidate, we designed an
oral treatment that preserves the natural structure of
allopregnanolone. . Allopregnanolone is FDA-approved
as a 60-hour intravenous infusion to treat postpartum
depression but faces challenges due to the method of
administration. We applied our Glyph technology to
create an oral prodrug of allopregnanolone (LYT-300),
and we have achieved oral bioavailability in humans that is
ninefold greater than what third parties have published with
orally administered allopregnanolone.2 LYT-300 has also
demonstrated engagement of GABA A receptors, which are
known to regulate mood and other neurological conditions.
We believe offering the proven mechanism of natural
allopregnanolone via the innovative orally-administered
approach of LYT-300 represents an advancement that could
have a truly meaningful impact for patients. LYT-300 may
also unlock the class of medicines targeting GABA A receptors,
which has the potential to offer advantages over current
standards of care, such as rapid onset of action, for a range
of conditions including depression, anxiety and others.
Another exemplar of our strategy, deuterated pirfenidone or
LYT-100, has progressed into a global registration-enabling
Phase 2b study for IPF, a rare, progressive and fatal lung
disease where the median survival is two to five years.3 There
are two FDA-approved treatments for IPF, but each of them
causes significant side effects and is poorly tolerated, which
means patients cannot fully benefit from the drugs because
they are unable to stay on treatment long enough or at the
right dose. One of these treatments, pirfenidone, has been
shown to extend life by three years,3 but poor tolerability
forces approximately 50% of patients to discontinue, dose
adjust or switch treatment.4 Because of this, nearly three out
of four patients in the US living with IPF forego treatment with
these otherwise efficacious medicines.5
We hope to change this staggering statistic with LYT-100,
and we have demonstrated an approximately 50% reduction
in GI-related adverse events with LYT-100 in a head-to-head
study compared to pirfenidone. We believe this profile may
offer improved patient outcomes by both allowing patients
to stay on treatment longer and potentially enabling LYT-100
to be dosed at higher exposure levels than the FDA-
approved dose of pirfenidone. We look forward to sharing
the results of our Phase 2b trial in 2024.
Across our Wholly Owned Pipeline, we have generated
compelling clinical data this year that supported the
progression of our pipeline into more advanced studies.
Over the next 12 months, we anticipate multiple important
catalysts that will further guide how we prioritize our pipeline.
These catalysts will help to inform our decisions regarding
which programs we will drive to commercial launches
ourselves and which programs could be most successfully
advanced through other avenues such as a partnership
(for example, LYT-503/IMB-150, which is being advanced
by a partner), sale or spinout into another entity. We have
also advanced several additional molecules into candidate
selection, and we expect to announce progress towards the
clinic with these new candidates in due course.
Founded Entities Highlights: KarXT headed for FDA
submission, commercial progress for EndeavorRx and
Plenity, first AML data from Vor
We often describe our Founded Entities as akin to partnered
programs. Having launched the foundational technologies
and programs on which these companies were formed and
driven them through key points of validation, we have gained
tremendous know-how across R&D, regulatory and business
development, and we now gain continual value through
equity, royalties, sublicense revenue and/or milestone
payments as the Founded Entities mature. It is due to the
success of our unique model that we have been able to
generate non-dilutive funding to support our innovation
engine and have not needed to raise money from the capital
markets in over five years.
2 Brexanolone NDA 211371 Multi-disciplinary Review and Evaluation, FDA CDER, 2018.
3 Fisher, M., Nathan, S. D., Hill, C., Marshall, J., Dejonckheere, F., Thuresson, P., & Maher, T. M. (2017). Predicting Life Expectancy for Pirfenidone in Idiopathic Pulmonary
Fibrosis. Journal of Managed Care & Specialty Pharmacy, 23(3-b Suppl), S17 -S24. https://doi.org/10.18553/jmcp.2017.23.3-b.s17.
4 Cottin, V., Koschel, D., Günther, A., Albera, C., Azuma, A., Sköld, C. M., Tomassetti, S., Hormel, P., Stauffer, J., Kirchgaessler, K., & Maher, T. M. (2018). Long-term safety of
pirfenidone: results of the prospective, observational PASSPORT study. ERJ Open Research, 4(4), 00084–02018. https://doi.org/10.1183/23120541.00084-2018
5 Dempsey, T., Payne, S. C., Sangaralingham, L. R., Yao, X., Shah, N., & Limper, A. H. (2021). Adoption of the Antifibrotic Medications Pirfenidone and Nintedanib for Patients
with Idiopathic Pulmonary Fibrosis. Annals of the American Thoracic Society, 18(7), 1121–1128. https://doi.org/10.1513/annalsats.202007-901oc
4 PureTech Health plc Annual report and accounts 2022
Strategic report Letter from the Chief Executive Officer — continued
One recent example was the approximately $115.4 million
generated from the sale of Karuna stock in August 2022.
Another example was realized in the March 2023 post-
period. We announced that Royalty Pharma acquired an
interest in our royalty in Karuna’s KarXT for up to $500 million,
with $100 million in upfront cash and up to $400 million in
additional payments contingent on the achievement of
certain regulatory and commercial milestones. As part of this
transaction, we sold our right to receive a 3% royalty from
Karuna to Royalty Pharma on sales up to $2 billion annually,
after which threshold we will retain 67% of the royalty
payments and Royalty Pharma will receive 33%. We retain
our 2.8% equity ownership in Karuna as of March 27, 2023,
as well as our right to receive milestone payments from
Karuna upon the achievement of certain regulatory approvals
and 20% of sublicense income. This deal provides us with
upfront non-dilutive capital and significant upside based
on Karuna’s future regulatory and commercial successes.
We’re tremendously proud of the way our model allows us to
continue to fund our Wholly Owned Pipeline and operations,
and we continue to manage our strong financial position
proactively while retaining financial upside.
I want to highlight just a few additional key milestones from
our Founded Entities in 2022. First, Karuna delivered strong
Phase 3 clinical data for KarXT in August of 2022, and in the
March 2023 post-period Karuna announced positive results
from a second Phase 3 trial, reinforcing the safety and efficacy
of KarXT. The consistency in the data to date with KarXT give
us confidence in the drug’s potential to change the treatment
paradigm for people with schizophrenia, and we look forward
to Karuna’s continued work to validate the potential of KarXT
in a range of dementias. The company’s value increased by
more than 60% over the course of 2022.
Gelesis and Akili also continued to advance the commercial
development of their first-in-class FDA-cleared products,
Plenity and EndeavorRx. Gelesis demonstrated the market
potential for Plenity as a highly differentiated weight
management aid for people with obesity or who are
overweight. The company has generated $39.5 million
in sales since launch, $25.5 million of which was in 2022,
representing a 129% increase year-over-year. Gelesis also
applied with the FDA to make Plenity available without
a prescription, which Gelesis has announced could be
achieved as soon as the third quarter of 2023 and should
significantly expand access to millions of patients not served
by other treatment options due to label, affordability or
tolerability. Akili has also formed a foundational partnership
with global gaming giant Roblox to further expand its growth
opportunities for EndeavorRx.
Finally, Vor Bio delivered initial data in patients with AML for
trem-cell (formerly VOR33), supporting both the candidate’s
potential and providing support for the company’s unique
approach of combining targeted therapies and antigen-
depleted hematopoietic stem cell transplants.
Full details for each of our Founded Entities can be found
on pages 12 to 14.
Thanks to our global network for helping us give
life to science
First and foremost, I would like to extend my deepest
gratitude to the patients, families and staff participating
in and supporting our clinical trials. The PureTech team
is inspired by you.
To the PureTech Team: thank you for your unwavering
dedication and commitment to making a transformational
impact for patients. I am so proud of what we have
accomplished together, and I am energized by your passion.
Finally, on behalf of the board and management team,
I would like to thank our ever-widening network of
shareholders, advisors and other stakeholders for your
continued support and input. We are grateful for your
confidence in our team, our model and our vision, and
that you are with us on this journey to change the lives
of patients with devastating diseases.
PureTech is poised for another dynamic year, building on
our momentum from 2022. We are entering the next phase
of our growth with a promising Wholly Owned Pipeline, and
we are in a position to move these new medicines forward
quickly and efficiently. Importantly, we have many important
catalysts on the horizon, and we expect to achieve a number
of development and regulatory milestones over the course
of 2023 and beyond.
Daphne Zohar
Founder, Chief Executive Officer and Director
April 27, 2023
PureTech Health plc Annual report and accounts 2022 5
Strategic report Components of Our Value
The table to the right depicts the four components of our value: (1) our Wholly Owned Programs, (2) Founded Entities, (3) our
available cash, cash equivalents and short-term investments at the PureTech level and (4) our return of capital to shareholders.
We hold majority voting control of or otherwise retain significant influence over our Controlled Founded Entities and continue
to play a role in the development of their therapeutic candidates through representation on the board of directors. As of
December 31, 2022, our board designees represented a majority of the members of the board of directors of Follica and
Vedanta and a minority of the members of the board of directors of Entrega. With respect to our Non-Controlled Founded
Entities, we do not hold majority equity ownership and are not responsible for the development or commercialization of their
therapeutic candidates and therapeutics. Our Non-Controlled Founded Entities have independent management teams, and
we do not control the day-to-day development of their respective therapeutic candidates.
1. Our Wholly Owned Programs: We are focused on the advancement of our Wholly Owned Programs and delivering value
to our shareholders by driving these programs to key clinical and commercial milestones. We are prioritizing preclinical and
clinical advancement, while continuing to generate new wholly-owned candidates through our technology platforms and our
unique model for R&D.
2. Our Founded Entities: We established these entities’ underlying programs and platforms and advanced them through key
validation points. In certain cases, our value from these entities is solely derived from the potential appreciation of our equity
interest. In other cases, we also have the right to royalty payments on product sales and/or sublicense revenues.
3. Cash, cash equivalents and short-term investments: We had PureTech Level cash, cash equivalents and short-term
investments of $339.51 million as of December 31, 2022.
4. Our Return of Capital to Shareholders: In light of the strong foundation we have built for PureTech’s future growth,
the board and senior leadership team are committed to various approaches to drive additional value to our shareholders.
As part of this capital allocation strategy, in 2022 we implemented a share buyback program of up to a maximum
consideration of $50 million. We maintain a capital allocation strategy that will see us prioritize funding the continued
development and expansion of our Wholly Owned Pipeline and strategic investment in our Founded Entities in accordance
with our strategic plan while we will also look to return certain proceeds we may receive in the future to shareholders through
various distribution mechanisms, including continued share buybacks or special dividends.
1 PureTech level cash, cash equivalents and short-term investments is a non-IFRS measure. For more information in relation to the PureTech level cash, cash equivalents and
short-term investments and Consolidated cash, cash equivalents and short-term investments measures used in this Annual Report, including a reconciliation between the
two measures, please see pages 51 to 52 of the Financial Review.
6 PureTech Health plc Annual report and accounts 2022
Strategic report Components of Our Value — continued
1
Wholly Owned Programs
Our Programs2
LYT-100*
Deupirfenidone
LYT-200
Anti-Galectin-9 mAb
LYT-300
Oral Allopregnanolone
LYT-310
Oral Cannabidiol
Research and
Partnered Programs
Discovery
Preclinical
Phase 1
Phase 2
Phase 3
Idiopathic pulmonary fibrosis (IPF)
Solid tumors & hematological malignancies
Depression, anxiety & related indications
Epilepsies & other
neurological indications
Various indications
Phase in progress
Phase completed
*Also being advanced under the Animal Rule for radiation induced fibrosis; plans underway to study LYT-100 in progressive fibrosing interstitial lung disease (PF-ILDs) and exploring
LYT-100 in myocardial and other organ system fibrosis
2
Founded Entities3
NASDAQ: KRTX
NASDAQ: VOR
NASDAQ: AKLI
2.8% Equity
+ Milestone Payments/20% Sublicense
Revenue/Royalties & up to $500M
from agreement w/ Royalty Pharma4
Phase 3
4.0% Equity
14.6% Equity
23.2% Equity
Phase 1/2a
Commercial
+ Royalties
Commercial
40.8% Equity
36.5% Equity
73.8% Equity
Phase 3 Ready
Commercial Release
Preclinical
3
4
PureTech Level Cash, Cash Equivalents and Short-Term Investments as of December 31, 2022: $339.5m1
Our Return of Capital to Shareholders
2 On July 23, 2021, Imbrium Therapeutics exercised its option to license LYT-503/IMB-150 pursuant to which it is responsible for all future development activities and funding
for LYT-503/IMB-150; 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
3 This figure represents the stage of development for each Founded Entity’s most advanced therapeutic candidate. Founded Entities represent companies founded
by PureTech in which PureTech maintains ownership of an equity interest and, in certain cases, is eligible to receive sublicense income and royalties on product sales.
Relevant ownership interests for Vedanta, Sonde and Entrega were calculated on a partially diluted basis (as opposed to a voting basis) as of December 31, 2022,
including outstanding shares, options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Gelesis, Vor Bio, Akili and
Karuna ownerships were calculated on a beneficial ownership basis in accordance with SEC rules as of March 24, 2023, March 17, 2023, March 3, 2023, and March 27, 2023,
respectively. With an increased focus on resource allocation towards our Wholly Owned Programs, we decided to hibernate the Follica Founded Entity in the 2023 post-
period. We may choose to advance this program at a later date or with partners.
As of March 22, 2023, PureTech has sold its right to receive a 3% royalty from Karuna to Royalty Pharma on net sales up to $2 billion annually, after which threshold PureTech
will receive 67% of the royalty payments and Royalty Pharma will receive 33%. PureTech retains its equity ownership in Karuna. Additionally, under its license agreement with
Karuna, PureTech retains the right to receive milestone payments upon the achievement of certain regulatory approvals and 20% of sublicense income.
4
PureTech Health plc Annual report and accounts 2022 7
Strategic report
PureTech’s Wholly Owned Programs
LYT-100
Therapeutic
Candidate
PureTech Ownership
Indication
Stage of Development
LYT-100
Wholly-owned
Idiopathic pulmonary fibrosis (IPF)
Phase 2b (first of two registration enabling studies)
Our lead wholly-owned candidate, LYT-100 (deupirfenidone), is being advanced for the potential treatment of conditions involving inflammation and
fibrosis, including idiopathic pulmonary fibrosis (IPF) and radiation induced fibrosis.1 We also plan to study LYT-100 in progressive fibrosing interstitial
lung diseases (PF-ILDs) and we are exploring its application in other inflammatory and fibrotic conditions, including myocardial and other organ system
fibrosis, based on the strength of the existing clinical data around the use of pirfenidone in these indications. LYT-100 is a selectively deuterated form
of pirfenidone. It is designed to retain the potent and clinically validated anti-fibrotic and anti-inflammatory activity of pirfenidone, but it has a highly
differentiated pharmacokinetic (PK) profile that has the potential to transform the standard of care for IPF. To date, LYT-100 has been studied in more
than 400 subjects as part of our ongoing development work and indication prioritization.
Key Points of
Innovation &
Differentiation
• LYT-100 has shown a 50% reduction in gastro-intestinal (GI)-related adverse events (AEs) in a head-to-head study versus
pirfenidone. We believe the differentiated tolerability profile of LYT-100 will address one of the key reasons that patients on the
current standard of care treatments must dose reduce, discontinue or switch from otherwise efficacious treatments.2,3 We have
also been able to dose LYT-100 at a higher exposure level, but with a lower Cmax, than the FDA-approved dosage of pirfenidone,
potentially enabling improved efficacy. Given this, we believe LYT-100 has the potential to become standard of care and to
become a backbone therapy in the treatment for IPF.
• Pirfenidone (Esbriet®) is approved for the treatment of IPF in the US and other countries. Pirfenidone has been shown to slow
the decline of lung function and research suggests it extends life by approximately 3 years in patients with IPF.4 It is one of two
standard of care treatments for IPF, with nintedanib (OFEV®) being the other.
Program
Discovery
Process by the
PureTech Team
• We acquired LYT-100 in July 2019 based on insights gained internally and via unpublished findings through our network of
collaborators. LYT-100 was originally developed by Auspex Pharmaceuticals, Inc. (Auspex), where our President and Chief
Business, Finance and Operating Officer, Bharatt Chowrira, Ph.D., J.D., served as Chief Operating Officer. Auspex (now a wholly
owned subsidiary of Teva Pharmaceuticals), pioneered the deuteration technology and successfully developed deutetrabenazine
(Austedo®), the first deuterated drug that received FDA approval.
Patient Need
& Market
Potential
• There are approximately 120,000 people in the US and 110,000 people in the EU5 living with IPF.6 IPF is a progressive condition
characterized by irreversible scarring of the lungs that makes it difficult to breathe. The prognosis of IPF is poor, with the median
survival after diagnosis generally estimated at two to five years.4
• Only about 25% of IPF patients are currently being treated with either standard of care drug,3 yet combined sales of Esbriet and
Ofev in 2022 were more than $4 billion, representing a significant market opportunity in IPF and other fibrotic lung diseases.7
• In 2022, we engaged an independent third-party market research firm to survey pulmonologists who actively treat IPF patients
to assess the commercial opportunity for LYT-100 in IPF. The surveyed pulmonologists noted an unmet need for treatments with
improved tolerability profiles, and 80-90% highlighted GI AEs as the primary reason their patients discontinue or dose reduce on
current treatments. Pulmonologists said they would prescribe a new product with an improved tolerability profile and comparable
efficacy to nearly 44% of their new IPF patients, and nearly 80% indicated they would prescribe it more than pirfenidone. Based
on this survey, if approved by the FDA, LYT-100 would be expected to have a significant impact on the IPF market if the improved
tolerability profile seen in the Phase 1 crossover study is reproduced in later stage trials and demonstrates the same or enhanced
efficacy compared to standard of care.
• Pirfenidone has also shown activity in patients with non-IPF PF-ILDs, myocardial fibrosis and other organ system fibrosis.
• IPF
− In June 2022, we announced the initiation of ELEVATE IPF, a Phase 2b clinical trial of LYT-100 for the potential treatment of IPF.
The global, randomized, placebo-controlled registration-enabling trial is designed to evaluate the efficacy, tolerability, safety
and dosing regimen of LYT-100. The primary objective of the trial is to demonstrate a clinically meaningful difference versus
placebo in a measure of lung function, Forced Vital Capacity (FVC), over 6 months. The trial will also assess the relative efficacy
of two doses of LYT-100, one with comparable exposure to the approved dose of pirfenidone and one with a higher level of
exposure that has the potential for improved efficacy. Both doses will be compared to pirfenidone.
− In January 2022, we announced results from a randomized, double-blind crossover trial in healthy older adults demonstrating
that approximately 50% fewer subjects treated with LYT-100 (deupirfenidone) experienced gastrointestinal (GI)-related
adverse events (AE) compared to subjects treated with pirfenidone (17.4% vs. 34.0%). In an additional clinical trial, LYT-100 also
demonstrated that it can be safely dosed with a higher total drug exposure than the currently approved dose of pirfenidone,
which could translate into improved efficacy over pirfenidone.
− In May 2022, we presented additional data from the healthy older adults study at the American Thoracic Society 2022
International Conference. Notably, LYT-100 at 550 mg TID (fed state) met the criteria for bioequivalence for exposure compared
to the FDA-approved dosage of pirfenidone – 801 mg TID – but with a lower Cmax. Higher dosages of LYT-100 may provide
enhanced antifibrotic and anti-inflammatory activity.
• Radiation Induced Fibrosis
− In 2022, we initiated a preclinical program of LYT-100 for the prevention and treatment of the delayed effects of acute radiation
exposure, including radiation induced fibrosis. This program is being developed under the Animal Rule,1 which allows for the
approval of drugs based on well-controlled animal models when human efficacy studies are not ethical or feasible. PureTech may
be eligible to receive a priority review voucher from the FDA for a medical countermeasure application upon approval.
• Topline results from the Phase 2 dose-ranging trial of LYT-100 in patients with IPF are expected in 2024. We also plan to pursue a
streamlined development program for LYT-100 in IPF, capitalizing on efficiencies of the 505(b)(2) pathway. Pending positive clinical
and regulatory feedback, the program will advance into a Phase 3 study. We believe the results of the Phase 2 study, together with
a Phase 3 study, could serve as the basis for registration in the US and other geographies.
• As of December 31, 2022, the LYT-100 patent portfolio includes 32 active patents acquired from Auspex which provide broad
coverage of compositions of matter, formulations and methods of use for deuterated pirfenidone, including the LYT-100
deupirfenidone compound. This IP estate comprises six issued US patents and 26 patents issued in 23 foreign jurisdictions, which
are expected to expire in 2028 and may be extended by up to five years. In addition, we have in-licensed one US patent and
one US patent application from Auspex directed to formulations of deuterated pirfenidone which expires in 2035, and also filed
additional patent applications on deupirfenidone, including 19 pending US patent applications, 17 foreign applications and one
international PCT application directed to the use of deuterated pirfenidone, including LYT-100, for the treatment of a range of
conditions. Any issued patents claiming priority to these applications are expected to expire in 2039 through 2043, exclusive of
possible patent term adjustments or extensions or other exclusivities.
Milestones
Achieved &
Development
Status
Expected
Milestones
Intellectual
Property
1 Our program in radiation induced fibrosis is preclinical-stage and is subject to the Animal Rule, which allows for the approval of drugs based on validated animal models
when human efficacy studies are not feasible. The use of the Animal Rule is intended for drugs and biological products developed to reduce or prevent serious or life-
threatening conditions caused by exposure to lethal or permanently disabling toxic chemical, biological, radiological or nuclear substances.
2 Cottin, V., Koschel, D., Günther, A., Albera, C., Azuma, A., Sköld, C. M., Tomassetti, S., Hormel, P., Stauffer, J., Kirchgaessler, K., & Maher, T. M. (2018). Long-term safety
of pirfenidone: results of the prospective, observational PASSPORT study. ERJ Open Research, 4(4), 00084–02018. https://doi.org/10.1183/23120541.00084-2018
3 Dempsey, T., Payne, S. C., Sangaralingham, L. R., Yao, X., Shah, N., & Limper, A. H. (2021). Adoption of the Antifibrotic Medications Pirfenidone and Nintedanib for Patients
with Idiopathic Pulmonary Fibrosis. Annals of the American Thoracic Society, 18(7), 1121–1128. https://doi.org/10.1513/annalsats.202007-901oc
4 Fisher, M., Nathan, S. D., Hill, C., Marshall, J., Dejonckheere, F., Thuresson, P., & Maher, T. M. (2017). Predicting Life Expectancy for Pirfenidone in Idiopathic Pulmonary
Fibrosis. Journal of Managed Care & Specialty Pharmacy, 23(3-b Suppl), S17 -S24. https://doi.org/10.18553/jmcp.2017.23.3-b.s17
5 United Kingdom, France, Germany, Italy and Spain.
6 GlobalData Epidemiology and Market Size Search.
7 Roche 2022 Annual Report and Boehringer Ingelheim 2022 Financial Results.
8 PureTech Health plc Annual report and accounts 2022
Strategic report PureTech’s Wholly Owned Programs — continued
LYT-300
Therapeutic
Candidate
PureTech Ownership
Indication
Stage of Development
LYT-300
Wholly-owned
Anxiety disorders
Postpartum depression
Phase 2a ready
Phase 2a ready
LYT-300, an oral prodrug of allopregnanolone, is being advanced for the potential treatment of anxiety disorders and postpartum depression.
We developed LYT-300 using our Glyph™ platform, which harnesses the body’s natural lipid absorption and transport process to enable the oral
administration of certain therapeutics that otherwise cannot be administered orally.
Key Points of
Innovation &
Differentiation
• We are developing LYT-300 to advance what we believe could be a best-in-class new medicine for treating anxiety and
depression. LYT-300 is designed to overcome the poor oral bioavailability of allopregnanolone. LYT-300 has demonstrated
oral bioavailability in healthy adults, achieving blood levels of allopregnanolone at or above those associated with therapeutic
effect and nine times greater than orally administered allopregnanolone, based on third-party published data.1 LYT-300 has also
demonstrated favorable tolerability in addition to target engagement with γ-aminobutyric-acid type A (GABA A)receptors, which
are known to regulate mood and other neurological conditions.
• Allopregnanolone is a positive allosteric modulator of GABA A receptors that has therapeutic potential across a wide range of
neurological conditions, including depression and anxiety disorders, though its therapeutic application has been limited due
to high first pass metabolism. To overcome this, the industry has developed synthetic oral analogs of allopregnanolone, though
these may not capture the full therapeutic potential of natural allopregnanolone.
• Our Glyph platform reversibly links a drug to a dietary fat molecule, creating a novel prodrug. The linked fat molecule re-routes
the drug’s normal path to the systemic circulation, bypassing the liver and instead moving from the gut into the lymphatic
vessels that normally process dietary fats. We believe this technology has the potential to provide a broadly applicable means of
enhancing the bioavailability of certain orally administered drugs that would otherwise be limited by first-pass liver metabolism.
Program
Discovery
Process by the
PureTech Team
• We sought out different approaches that could selectively transport therapeutic molecules through the lymphatic system
to target cells in the lymph nodes. Based on insights gained internally and via unpublished findings through our network of
collaborators, we became aware of a 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. We have since
further developed the platform and have generated our own intellectual property associated with the Glyph platform.
• We conducted a systematic analysis of compounds and indications that could benefit from the application of our Glyph platform.
We prioritized areas of high unmet patient need where the broad application of treatment options with validated efficacy was
untapped due to poor oral bioavailability. We believe LYT-300 may unlock the full therapeutic potential of allopregnanolone
across a range of neurological and psychiatric conditions.
Patient Need
& Market
Potential
• Anxiety disorders are the most common mental disorder, affecting nearly 30% of adults.2 There are several types of anxiety
disorders, including generalized anxiety disorder, panic disorder and social anxiety disorder. They are characterized by feelings
of excessive fear and may impact a person’s ability to function normally.
Milestones
Achieved &
Development
Status
• Postpartum depression (PPD) is a debilitating condition that affects over 400,000 women who have given birth in the United
States.3 It is characterized by feelings of extreme sadness, changes in energy, sleep and appetite, and it can impact a mother’s
ability to care for her child.
• Allopregnanolone and related endogenous neurosteroids have been recognized for their potential to treat depression and other
neurological indications with a rapid onset of action. The major hurdles associated with the translation of these compounds have
been the inability to create oral formulations of these neurosteroids and chronically administer compounds to patients.
− An intravenous formulation of allopregnanolone is approved by the FDA as a 60-hour infusion for the treatment of postpartum
depression, though the method of administration has significant challenges and limits the scope of clinical translation with this
class of compounds.
− Medicinal chemistry approaches have been applied to synthesize orally bioavailable analogs of allopregnanolone. The variable
clinical activity of these compounds may be due to the possibility that chemical modifications are interfering with optimal
GABA A receptor engagement and consequently their on-target mode of action. Hence, these chemically distinct analogs
of allopregnanolone may not have the same pharmacologic effects as the natural unmodified allopregnanolone.
• In February 2023, we announced plans to advance LYT-300 (oral allopregnanolone) for the potential treatment of anxiety disorders
and PPD.
• In December 2022, we announced topline results from the completed, multi-part Phase 1 trial of LYT-300. The results showed that
oral administration of LYT-300 achieved blood levels of allopregnanolone at or above those associated with therapeutic benefit
and resulted in exposure-dependent target engagement with GABA A receptors.
• In June 2022, we achieved proof-of-principle for the Glyph platform in a healthy adult study of LYT-300. This was the first
mechanistic proof-of-principle in the clinic for the Glyph platform. Data from this Phase 1 program of LYT-300 showed
bioavailability of allopregnanolone that was approximately ninefold greater than that of orally administered allopregnanolone,
based on previously published data.
• In December 2021, we presented preclinical proof-of-concept data at the 60th American College of Neuropsychopharmacology
(ACNP) Annual Meeting that supported the clinical advancement of LYT-300 for the potential treatment of neurological and
neuropsychological conditions. The data presented at ACNP showed that systemic exposure of natural allopregnanolone was
achieved after oral administration of LYT-300 in multiple preclinical models of increasing complexity. In contrast, systemic levels
of allopregnanolone were not observed following oral administration of natural unmodified allopregnanolone. These results
demonstrated the potential of the Glyph technology platform to enhance the systemic absorption of natural bioactive molecules
and other small molecules with poor oral bioavailability.
Expected
Milestones
Intellectual
Property
• A placebo-controlled, Phase 2a, proof-of-concept, trial using a validated clinical model of anxiety in healthy volunteers is
expected to begin in the first half of 2023, with results anticipated by the end of 2023.
• An open-label, Phase 2a, proof-of-concept clinical trial in women with PPD is expected to begin in the second half of 2023.
• Within the extensive Glyph intellectual property portfolio, which covers a wide range of novel linker chemistries, LYT-300 is
specifically covered by four patent families comprising six US patent applications and 16 foreign patent applications as of
December 31, 2022, which are co-owned with Monash University or PureTech owned. Any patents to issue from these patent
applications are expected to expire in 2039 through 2043, exclusive of possible patent term adjustments or extensions or other
forms of exclusivity.
1 Brexanolone NDA 211371 Multi-disciplinary Review and Evaluation, FDA CDER, 2018.
2 Any Anxiety Disorder. (n.d.). National Institute of Mental Health (NIMH). https://www.nimh.nih.gov/health/statistics/any-anxiety-disorder
3 Bauman, B. L. (2020, May 15). Vital Signs: Postpartum Depressive Symptoms and Provider . . . Centers for Disease Control and Prevention. https://www.cdc.gov/mmwr/
volumes/69/wr/mm6919a2.htm?s_cid=mm6919a2_w
PureTech Health plc Annual report and accounts 2022 9
Strategic report PureTech’s Wholly Owned Programs — continued
LYT-310
Therapeutic
Candidate
PureTech Ownership
Indication
Stage of Development
LYT-310
Wholly-owned
Epilepsies and other neurological indications
Preclinical
LYT-310, an oral form of cannabidiol (CBD), is being advanced for the potential treatment of epilepsies and other neurological indications. Like
LYT-300, we developed LYT-310 using our Glyph™ platform, which harnesses the body’s natural lipid absorption and transport process to enable
the oral administration of certain therapeutics that otherwise have poor oral bioavailability.
Key Points of
Innovation &
Differentiation
• We are developing LYT-310 to offer improved oral dosing and tolerability of CBD. A CBD-based product has received regulatory
approval in the United States and Europe to treat seizures resulting from certain rare conditions, but it requires a large volume
of a sesame oil-based formulation, which limits its use in broader indications and age groups. LYT-310 could expand the
therapeutic application of CBD across a wider range of age groups and indications, including both rare and more common
forms of epilepsy and other central nervous system disorders. LYT-310 is designed to:
− enable oral administration in a capsule or other patient-friendly method of administration;
− expand the use of CBD into a broad range of therapeutic areas and patient populations (such as adolescents and adults) where
higher doses are required to achieve a therapeutic effect;
− potentially improve safety and reduce gastrointestinal (GI) tract side effects that are associated with the currently approved
CBD-based treatment by reduce GI and liver exposure; and
− allow for a readily scalable, consistent product in a cost-effective manner.
• Our Glyph platform reversibly links a drug to a dietary fat molecule, creating a novel prodrug. The linked fat molecule re-routes
the drug’s normal path to the systemic circulation, bypassing the liver and instead moving from the gut into the lymphatic
vessels that normally process dietary fats. We believe this technology has the potential to provide a broadly applicable means of
enhancing the bioavailability of certain orally administered drugs that would otherwise be limited by first-pass liver metabolism.
Program
Discovery
Process by the
PureTech Team
• We sought out different approaches that could selectively transport therapeutic molecules through the lymphatic system
to target cells in the lymph nodes. Based on insights gained internally and via unpublished findings through our network of
collaborators, we became aware of a 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. We have since
further developed the platform and have generated our own intellectual property associated with the Glyph technology platform.
• We conducted a systematic analysis of compounds and indications that could benefit from the application of our Glyph platform.
We prioritized areas of high unmet patient need where the broad application of treatment options with validated efficacy was
untapped due to poor oral bioavailability and tolerability. We believe LYT-310 may expand the therapeutic application and
potential of CBD across a range of epilepsies and other neurological indications.
Patient Need
& Market
Potential
Milestones
Achieved &
Development
Status
Expected
Milestones
Intellectual
Property
• A CBD-based product has received regulatory approval in the United States and Europe to treat seizures resulting from certain
rare conditions, but it requires a large volume of a sesame oil-based formulation to achieve therapeutic levels of exposure, which
limits its use in broader indications and age groups.
• In November 2022, we announced LYT-310 as a new therapeutic candidate leveraging our Glyph platform.
• In multiple preclinical models, including large animal and non-human primate, LYT-310 has demonstrated a three to fourfold
increase in oral exposure vs. unmodified CBD in a fasted state. This has the potential to translate into improved safety
and reduced side effects. Lymphatic transport has also been confirmed in preclinical models, with up to 30% of LYT-310
entering the lymphatics, compared to 5% for unmodified CBD – which further supports the novel Glyph mechanism of
enhancing bioavailability.
• We are advancing LYT-310 toward a Phase 1 clinical trial, which is expected to begin in Q4 of 2023.
• Within the extensive Glyph intellectual property portfolio, which covers a wide range of novel linker chemistries, LYT-310 is
specifically covered by one patent family comprising one US patent application and four foreign patent applications as of
December 31, 2022, which is co-owned with Monash University. Any patents to issue from these patent applications are expected
to expire in 2038, exclusive of possible patent term adjustments or extensions or other forms of exclusivity.
10 PureTech Health plc Annual report and accounts 2022
Strategic report PureTech’s Wholly Owned Programs — continued
LYT-200
Therapeutic
Candidate
PureTech Ownership
Indication
Stage of Development
LYT-200
Wholly-owned
Metastatic/locally advanced solid tumors
Hematological malignancies
Phase 1b/2a
Phase 1b
LYT-200 is a fully human IgG4 monoclonal antibody, or mAb, designed to inhibit the activity of galectin-9, an immunomodulatory 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
the treatment of metastatic/locally advanced solid tumors that have poor survival rates, including urothelial and head and neck cancers. We are also
developing LYT-200 for the treatment of hematological malignancies, such as acute myeloid leukemia (AML), where more than 50% of patients either
don’t respond to initial treatment or experience relapse after responding to initial treatment1 and have an approximately 12.6% five-year survival rate.2
Key Points of
Innovation &
Differentiation
Program
Discovery
Process by the
PureTech Team
Patient Need
& Market
Potential
Milestones
Achieved &
Development
Status
Expected
Milestones
Intellectual
Property
• Galectin-9 promotes and facilitates multiple immunosuppressive pathways by 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 solid tumors and in hematological malignancies, both in patients’ tumors and blood, and correlates with poor survival
outcomes and aggressive disease. Our preclinical work demonstrates single agent mechanistic and anti-tumor efficacy of LYT-
200 in multiple animal and patient-derived tumor cell models. For example, LYT-200 outperforms anti-PD-1 in a standard B16F10
melanoma model as a single agent. LYT-200 also synergizes with anti-PD-1 in activating CD4 and CD8 T cells in melanoma and
pancreatic in vivo models. We are advancing LYT-200 to inhibit the multiple effects of galectin-9 and thereby potentially removing
a key immunosuppressive barrier that would enable the immune system to attack and destroy the tumor.
• A 2021 study published in Nature Communications proposed that the molecular mechanism by which PD-1 and galectin-9 interact
to shield tumors from the immune system demonstrates for the first time that galectin-9 is a ligand for PD-1 and emphasizes its
importance as a promising target for immunotherapy3. This provided further evidence that galectin-9 acts as a key regulator of the
immune response to tumors and supports its importance as a potential target for cancer treatment.
• We believe that LYT-200 is the most advanced clinical program against this target. It has the potential to be used as a single agent
and safely in combination with checkpoint inhibitors and other anti-cancer therapies, depending on the cancer type, treatment
setting and line of treatment. Additionally, targeting galectin-9 gives LYT-200 the potential to address a high unmet need for more
effective therapies with improved tolerability for AML, a devastating disease in which prognosis is poor.
• In order to identify approaches with the potential to provide significant therapeutic benefit to cancer patients, we
opportunistically identified a foundational immunosuppressive mechanism involving galectin-9, which was the basis of certain
intellectual property that we licensed from New York University prior to its publication in Nature Medicine.
• Metastatic/locally advanced solid tumors
− In the US, there are approximately 82,000 new cases of bladder cancer each year3 of which ~90% are urothelial carcinoma.4
While metastatic disease only accounts for ~5% of bladder cancer diagnoses, prognosis for these patients is extremely poor
with a 5-year survival rate of ~5%.4
− In the US, there are approximately 66,000 people diagnosed with head and neck cancers each year.5 At diagnosis, ~10% of
patients have metastatic disease though an additional 20-30% will develop metastases during the course of their disease.
The prognosis for metastatic disease is unfavorable with a median survival of about 10 months.6
• AML
− The National Cancer Institute estimates that about 60,000 new cases of leukemia are diagnosed each year,7 including about
20,000 in AML.8 More than 50% of AML patients either don’t respond to initial treatment or experience relapse or death after
responding to initial treatment1 and have an approximately 12.6% five-year survival rate.2 The poor overall survival highlights the
need for more effective therapies for patients with relapsed and refractory AML.
• AML
− In December 2022, a poster describing new preclinical data supporting the clinical potential of LYT-200 for the treatment
of leukemia was presented at the American Society of Hematology (ASH) 64th Annual Meeting. In all models used, LYT-200
demonstrated significant anti-tumor activity and in addition to its established effects on the immune system in solid tumor
models, it also notably induced direct apoptosis or cell death across all leukemia cell types. Based on this and other compelling
preclinical data generated with LYT-200 in blood cancers, we initiated a clinical trial to evaluate LYT-200 as a single agent for the
treatment of AML.
• Metastatic/locally advanced solid tumors
− In December 2022, we announced results from the monotherapy dose escalation portion of the Phase 1 program of LYT-200 as
a potential treatment for metastatic solid tumors. No dose-limiting toxicities were reported, and the full results are planned for
presentation in a scientific forum in 2023.
− In the first quarter of 2023, we initiated a trial of LYT-200 in combination with tislelizumab in urothelial and head and neck cancers.
• Initial results from a subset of patients from the Phase 1b clinical trial to evaluate LYT-200 as a single agent for the treatment of
AML are expected by the end of 2023.
• Topline results from the Phase 1b trial of LYT-200 in combination with tislelizumab in urothelial or head and neck cancers are
expected in 2024.
• We have broad intellectual property coverage for these antibody-based immunotherapy technologies, including exclusive rights
to seven 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 ten families of PureTech-owned patent applications covering the use of anti-
galectin-9 antibodies in the diagnosis and treatment of solid tumors.
• As of December 31, 2022, there are 17 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 and various other
cancers, and methods of use for the treatment of hematological cancers. This intellectual property comprises three issued US
patents which are expected to expire in 2038, 15 pending US patent applications, which if issued, are expected to expire 2037
through 2043, six international PCT applications, 34 pending foreign applications and eight issued patents in foreign jurisdictions.
1 Walter, R. B., Othus, M., Burnett, A. K., Löwenberg, B., Kantarjian, H. M., Ossenkoppele, G. J., Hills, R. K., Ravandi, F., Pabst, T., Evans, A., Pierce, S., Vekemans, M.,
Appelbaum, F. R., & Estey, E. H. (2015). Resistance prediction in AML: analysis of 4601 patients from MRC/NCRI, HOVON/SAKK, SWOG and MD Anderson Cancer Center.
Leukemia, 29(2), 312–320. https://doi.org/10.1038/leu.2014.242
2 Brandwein, J., Saini, L. M., Geddes, M., Yusuf, D., Liu, F., Schwann, K., Billawala, A., Westcott, C., Kurniawan, J. A., & Cheung, W. Y. (2020). Outcomes of patients with
relapsed or refractory acute myeloid leukemia: a population-based real-world study. American Journal of Blood Research, 10(4), 124–133.
3 Cancer of the Urinary Bladder – Cancer Stat Facts. (n.d.). National Cancer Institute. https://seer.cancer.gov/statfacts/html/urinb.html
4 Saginala, K., Barsouk, A., Aluru, J. S., Rawla, P., Padala, S. A., & Barsouk, A. (2020). Epidemiology of Bladder Cancer. Medical Sciences, 8(1), 15. https://doi.org/10.3390/
medsci8010015
5 Head and Neck Cancer – Statistics. (2022, December 16). Cancer.Net. https://www.cancer.net/cancer-types/head-and-neck-cancer/statistics
6 Pisani, P., Airoldi, M., Allais, A., Valletti, P. A., Battista, M., Benazzo, M., Briatore, R., Cacciola, S., Cocuzza, S., Colombo, A., Conti, B., Costanzo, A., Della Vecchia, L., Russi,
E. G., Fantozzi, C., Galizia, D., Garzaro, M., Genta, I., Iasi, G. A., . . . Zigliani, A. (2020). Metastatic disease in head & neck oncology. Acta Otorhinolaryngologica Italica,
40(SUPPL. 1), S1–S86. https://doi.org/10.14639/0392-100x-suppl.1-40-2020
7 Leukemia – Cancer Stat Facts. (n.d.). National Cancer Institute. https://seer.cancer.gov/statfacts/html/leuks.html
8 Acute Myeloid Leukemia – Cancer Stat Facts. (n.d.). National Cancer Institute. https://seer.cancer.gov/statfacts/html/amyl.html
PureTech Health plc Annual report and accounts 2022 11
Strategic report PureTech’s Founded Entities
Founded Entities in Order of Approximate Value of PureTech’s Holdings
Karuna Therapeutics is a clinical-stage biopharmaceutical company driven to create and deliver transformative medicines for people living with
psychiatric and neurological conditions.
Program
discovery
process by the
PureTech team
• We and our collaborators, including leading schizophrenia experts, were excited about efficacy data generated in schizophrenia
and Alzheimer’s disease by Eli Lilly with xanomeline, which had notable efficacy stemming from its activation of muscarinic
receptors (M1 and M4) but had been held back by gastrointestinal tolerability issues. To overcome this, we invented KarXT, an
oral M1/M4-preferring muscarinic agonist, by combining xanomeline (a muscarinic agonist) with trospium (a peripherally acting
muscarinic antagonist that doesn’t cross the blood brain barrier). This enabled the beneficial effects of M1/M4 activation in the
brain without the peripheral side effects. We conducted key human tolerability proof-of-concept studies with KarXT that allowed
Karuna to advance it further in schizophrenia patients. Karuna licensed the key KarXT intellectual property from PureTech. If
approved, we would have pioneered the development of the first new class of medicine for schizophrenia in over 50 years.
Key milestones
achieved and
development
status
• In August 2022, Karuna announced positive results from the Phase 3 EMERGENT-2 trial evaluating the efficacy, safety and
tolerability of its lead investigational therapy, KarXT (xanomeline-trospium), in adults with schizophrenia. The trial met its primary
endpoint, with KarXT demonstrating a statistically significant and clinically meaningful 9.6-point reduction in Positive and
Negative Syndrome Scale (PANSS) total score compared to placebo (-21.2 KarXT vs. -11.6 placebo; p<0.0001) at Week 5 (Cohen’s
d effect size of 0.61). KarXT also met key secondary endpoints. KarXT was generally well tolerated, with a side effect profile
substantially consistent with prior trials of KarXT in schizophrenia.
Expected
milestones
• In the March 2023 post-period, Karuna announced positive topline results from the Phase 3 EMERGENT-3 trial evaluating the
efficacy, safety, and tolerability of KarXT in adults with schizophrenia. The trial met its primary endpoint, with KarXT demonstrating
a statistically significant and clinically meaningful 8.4-point reduction in Positive and Negative Syndrome Scale (PANSS) total score
compared to placebo (-20.6 KarXT vs. -12.2 placebo; p<0.0001) at Week 5 (Cohen’s d effect size of 0.60). Consistent with prior
trials, KarXT demonstrated an early and sustained statistically significant reduction of symptoms from Week 2 (p<0.05) through
the end of the trial as assessed by PANSS total score. KarXT also demonstrated reductions in positive and negative symptoms of
schizophrenia as measured by PANSS positive and PANSS negative Marder factor subscales. KarXT was generally well tolerated,
with a side effect profile substantially consistent with previous trials of KarXT in schizophrenia.
• Karuna plans to submit a New Drug Application to the FDA for KarXT in schizophrenia in mid-2023, with a potential launch in the
second half of 2024, if approved.
• Karuna expects to initiate the Phase 3 ADEPT-2 and ADEPT-3 trials evaluating KarXT for the treatment of psychosis in Alzheimer’s
disease in 2023.
• Karuna anticipates topline data from the Phase 3 ARISE trial in patients with schizophrenia in the first half of 2024.
• Karuna plans to initiate a Phase 1b open-label clinical trial to evaluate the effect of KarXT on 24-hour ambulatory blood pressure
in adults with schizophrenia early in the second quarter of 2023.
• Karuna anticipates topline data from the Phase 3 ADEPT-1 and ADEPT-2 trials in patients with psychosis related to Alzheimer’s
disease in 2025.
• Karuna expects to share details on the planned development of KAR-2618 (formerly GFB-887) for the treatment of mood and
anxiety disorders in the second half of 2023.
Vor Bio is a clinical-stage cell and genome engineering company that aims to change the standard of care for patients with blood cancers by
engineering hematopoietic stem cells (HSC) to unlock the potential of Vor’s highly potent targeted therapies which have an improved safety profile
for patients, several of which Vor is also developing.
Program
discovery
process by the
PureTech team
Key milestones
achieved and
development
status
• 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 worked with Vor Bio Scientific Board Chair,
Siddhartha Mukherjee, M.D., Ph.D., on key intellectual property, which Vor Bio exclusively in-licensed from Columbia in April 2016,
and on advancing this concept through critical POC experiments.
• In December 2022, Vor announced initial clinical data from VBP101, Vor’s Phase 1/2a multicenter, open-label, first-in-human
study of tremtelectogene empogeditemcel or “trem-cel” (formerly VOR33) in patients with AML. The data observed that the
first AML patient transplanted with trem-cel demonstrated durable engraftment through three cycles of Mylotarg (gemtuzumab
ozogamicin), which was well tolerated at the initial dose level.
• In the February 2023 post-period, Vor announced a second patient also successfully received a trem-cel transplant and
engrafted normally.
Expected
milestones
• Vor Bio expects additional trem-cel engraftment and hematologic protection data updates by year-end 2023.
• Vor Bio plans to submit an IND application in the first half of 2023 to support a Phase 1/2 clinical trial of VCAR33ALLO for patients
with relapsed/refractory AML.
12 PureTech Health plc Annual report and accounts 2022
Strategic report PureTech’s Founded Entities — continued
Founded Entities in Order of Approximate Value of PureTech’s Holdings
Akili is pioneering the development of cognitive treatments through game-changing technologies. Akili’s approach of leveraging technologies
designed to directly target the brain establishes a new category of medicine – medicine that is validated through clinical trials like a drug or medical
device but experienced like entertainment.
Program
discovery
process by the
PureTech team
Key milestones
achieved and
development
status
• 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 collaborated with Dr. Adam Gazzaley, M.D., Ph.D., to
translate the underlying academic device into a medical intervention, including overseeing the initial product development and
design and the implementation of the initial proof-of-concept studies.
• In August 2022, Akili, Inc. began trading on the Nasdaq Stock Market under the ticker symbol “AKLI”.
• In November 2022, Akili deployed the first wave of its EndeavorRx®1 go-to-market sales force in 14 priority territories across the
US with a focus on Integrated Behavioral Health Centers and pediatric providers.
• In June 2020, Akili announced that the FDA granted clearance to market EndeavorRx as a prescription treatment for improving
attention function in children with attention-deficit/hyperactivity disorder (ADHD) and received approval to market EndeavorRx
in Europe.
• In the January 2023 post-period, Akili announced topline results from STARS-ADHD-Adolescents, its pivotal trial of EndeavorRx
(AKL-T01) in adolescents ages 13-17 with ADHD. The study showed robust improvements in attention and broader clinical
outcomes, including attention improvements that were nearly three times as large as those seen in Akili’s pivotal trial that served
as the basis for EndeavorRx’s FDA authorization for children with ADHD ages 8-12.
• In the January 2023 post-period, Akili announced its 2023 operating plan to focus the company’s resources primarily on
supporting the commercialization and growth of EndeavorRx as well as efforts related to the potential label expansion for
EndeavorRx in broader ADHD populations. This resulted in a reduction of expenses, including a reduction in the company’s
workforce by approximately 30% and pipeline reprioritization.
Expected
milestones
• Akili expects to file a label expansion with the FDA for EndeavorRx in 13-17 year old children with ADHD in 2023.
• Akili expects to share topline data from two COVID fog trials of the company’s technology being conducted by outside academic
research institutions in the first half of 2023.
• Akili expects Shionogi pivotal trial data in 6-17 year old children with ADHD in Japan in the second half of 2023.
• Akili expects pivotal trial data in adult ADHD patients in 2023.
Gelesis is a consumer-centered biotherapeutics company and the maker of Plenity,®2 which is inspired by nature and FDA cleared for weight
management in the broadest patient population of any prescription weight management product. Since launch, Plenity has helped over 200,000
people and generated $39.5 million in revenue. The accumulated safety data demonstrates unprecedented real-world tolerability consistent with
clinical studies.
Program
discovery
process by the
PureTech team
Key milestones
achieved and
development
status
Expected
milestones
• Working with leading obesity experts, we conducted a worldwide search for compelling technologies meeting key criteria for a
novel approach to obesity and overweight. We agreed that the ideal characteristics included an orally administered, mechanically
acting device with a favorable safety and tolerability profile. We identified and in-licensed the core intellectual property from
an academic collaborator and subsequently co-invented additional intellectual property around a novel class of biocompatible,
superabsorbent hydrogels, forming the basis for Gelesis’ portfolio.
• Gelesis received clearance from the FDA for its first product, Plenity® (Gelesis100), an aid for weight management in adults with
excess weight or obesity, BMI of 25-40 kg/m2, when used in conjunction with diet and exercise, in April 2019. In June 2020, Gelesis
received a CE Mark for Plenity. The product became broadly available in the US in December 2021.
• In 2022, Gelesis reported product revenue, net, was $25.6 million compared to $11.2 million in 2021, a 129% increase year-over-year.
• In 2022, Gelesis acquired 121,500 new members compared to 61,400 new members during 2021, a 98% increase year-over-year,
and sold 374,000 units in 2022 compared to 174,000 units in 2021, a 115% increase.
• In the March 2023 post-period, Gelesis announced that it has filed an initial 510(k) application with the FDA to change the
classification of Plenity from prescription-only to be available over the counter (“OTC”). Gelesis has stated they believe that this
shift would double Plenity’s addressable market, should significantly reduce the company’s customer acquisition costs, and
could open up new, broader partnership opportunities. An OTC classification would make Plenity widely available and easily
accessible, empowering individuals struggling with excess weight with an easier path to an effective, affordable, and trusted
weight management product. Plenity’s unprecedented safety and efficacy profile has been demonstrated in over 200,000
patients to date. As a result of this potential change to OTC and the impact it may have on the company’s commercial strategy,
as well as its current levels of liquidity, Gelesis significantly reduced its operating costs. Gelesis is evaluating strategic alternatives,
including potential financing and commercial partnerships in various geographies.
• In the April 2023 post-period, multiple subsequent events occurred related to the future operations of Gelesis, including PureTech
submitting a non-binding proposal to acquire all outstanding equity of Gelesis, refer to Note 26 “Subsequent Events” in our
annual financial statements for further details.
• Based on Gelesis’ timelines, Plenity could receive clearance from the FDA to market as an OTC product as soon as the third
quarter of 2023.
1 EndeavorRx is the first-and-only FDA-authorized treatment delivered through a video game experience. EndeavorRx is indicated to improve attention function as measured
by computer-based testing in children ages 8 to 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. The most common side effect observed in children in EndeavorRx’s clinical trials
was a feeling of frustration, as the game can be quite challenging at times. No serious adverse events were associated with its use. EndeavorRx is recommended to be used
for approximately 25 minutes a day, 5 days a week, over initially at least 4 consecutive weeks, or as recommended by your child’s health care provider. To learn more about
EndeavorRx, please visit EndeavorRx.com.
2 Important Safety Information about Plenity: 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 2022 13
Strategic report PureTech’s Founded Entities — continued
Founded Entities in Order of Approximate Value of PureTech’s Holdings
Vedanta is leading the development of a potential new category of oral therapies based on defined consortia of bacteria isolated from the human
microbiome and grown from pure clonal banks. Vedanta is a leader in the field with capabilities and deep expertise to discover, develop and
manufacture live bacteria-based therapies.
Program
discovery
process by the
PureTech team
Key milestones
achieved and
development
status
Expected
milestones
• We engaged with leading world-renowned experts in immunology and identified and in-licensed intellectual property to pioneer
the concept of therapeutically defined consortia of microbes that could modulate the immune system or treat bacterial infections.
• In October 2021, Vedanta announced that its Phase 2 clinical trial of VE303, an orally administered investigational live
biotherapeutic product (LBP) in development for the prevention of recurrent CDI in high-risk patients, met its primary endpoint.
• In April 2022, results from a Phase 1a/1b study evaluating the safety, tolerability, and colonization dynamics of VE303 in healthy
adults were published in the journal Cell Host & Microbe.
• In June 2022, Vedanta announced the opening of a new facility designed to manufacture clinical and commercial supply
for its therapeutic portfolio.
• In the 2023 post-period, Vedanta announced a $106.5 million financing to advance its pipeline of defined bacterial
consortia therapies.
• Vedanta plans to initiate a Phase 3 clinical trial of VE303 in patients at high risk for recurrent Clostridioides difficile infection (CDI)
in Q3 2023.
• Vedanta plans to initiate a Phase 2 clinical trial of VE202 in patients with mild-to-moderate ulcerative colitis in Q2 2023.
• Vedanta expects topline data from the Phase 1/2 clinical trial of VE416, Vedanta’s therapeutic candidate for food allergy, in 2023,
subject to investigator timelines.
Sonde is developing a voice-based technology platform that detects changes in the sound of voice that are linked to health conditions – like
depression, anxiety and respiratory disease – to provide health tracking and monitoring. Sonde’s proprietary technology can be integrated into
ubiquitous devices such as smartphones, headphone and smart speakers.
Program
discovery
process by the
PureTech team
Key milestones
achieved and
development
status
Expected
Milestones
• We identified vocal features as a leading non-invasive source of health data, particularly given the evolving technology landscape
where voice interactions with devices are rapidly increasing and in-licensed proprietary technology from Thomas Quatieri, Ph.D.,
at MIT’s Lincoln Laboratory in May 2016. We developed additional, novel intellectual property around this concept and helped
advance the technology from an academic concept to a commercially focused technology.
• In January 2022, Sonde announced the signing of a multi-year strategic partnership with GN Group to research and develop
commercial vocal biomarkers for mild cognitive impairment associated with hearing loss.
• In December 2022, Sonde raised a $19.25 million Series B investment round led by Partners Investment, with participation from
NEOM Company, KT Corporation and existing investors, including co-founders PureTech Health and M Ventures.
• Sonde plans to launch more key studies and vocal biomarker product pilots in respiratory, mental health, and cognitive
impairment use cases with payor, pharmaceutical, clinical, and digital health partners in 2023.
14 PureTech Health plc Annual report and accounts 2022
Strategic report ESG Report
For PureTech, Environmental, Social and Governance (ESG)
means building and maintaining a sustainable business so
that we can deliver on our mission to to change the lives
of patients with devastating diseases. It is the hard work
and commitment of our internal and external stakeholders
that makes the achievement of our mission possible. We
recognize the importance of good governance in delivering
ESG outcomes and, accordingly, our ESG program is
overseen by our ESG Committee, which guides our approach
and serves as an internal champion for key initiatives.
This is our third annual sustainability report detailing our
ESG strategy, performance and ongoing progress. Over the
following pages, we outline our long-standing commitment
to Patients, People and Planet and the actions we have
taken in 2022 to embed responsible business practices
in all that we do.
The data provided in this report cover the period from
January 1, 2022, through December 31, 2022, unless
otherwise stated. Ongoing initiatives as well as information
deemed significant from our previous reports have also
been included in this report for context.
Our ESG Standards
This report has been prepared in accordance with additional
frameworks and standards including:
• The Sustainability Accounting Standards Board (SASB)
Standard covering the topics that are most material to
our business as a clinical-stage biotherapeutics company.
More information on how we align with the Biotechnology
and Pharmaceutical Industry guidelines can be found in
our SASB index on pages 39 to 41.
• The United Nations Sustainable Development Goals
(SDGs), see pages 18 to 19.
• The Task Force on Climate-related Financial Disclosures
(TCFD) framework, see pages 41 to 43.
This year, we have enhanced our level of disclosure across
all three areas of our ESG framework, as we continue to
integrate responsible business practices throughout our
business. Our ESG governance structure is covered on pages
36 to 38 and further detail is provided in the Governance
section of this report (see page 77).
“The social and environmental
sustainability of PureTech’s
operational model is
integral to the success of
our business. We are proud
of the progress made in 2022,
and we remain committed to
the further development of
our sustainability initiatives.”
Kiran Mazumdar-Shaw,
Chair of the ESG Committee
Our Approach
At PureTech, we are deeply committed to bringing
transformational medicines to those that need it most. For
us, this means identifying disease areas with a high unmet
need and applying our unique insights to invent and deliver
improved therapeutics. Our goal is to bring safe, effective
and sustainable therapeutics to patients.
While delivering this vision has the potential to dramatically
improve lives for the better – we must ensure we are doing so
in a responsible and sustainable way that considers all of our
ESG-related impacts. As we continue to expand our business,
it is imperative that our approach reflects both our ongoing
commitment to continuous improvement and to advancing
innovative and differentiated medicines for patients in need.
As of December 17, 2022, PureTech received an ESG Risk
Rating of 17.5 from Sustainalytics, putting us in the ‘Low Risk’
category of experiencing material financial impacts from
ESG factors. Sustainalytics ESG ratings evaluate a company’s
exposure to material industry-specific ESG risks and how well
a company manages those risks. PureTech ranks in the top 3%
of pharmaceutical companies. This reflects our commitment
and continuous efforts to contribute to a sustainable future.
We have established a process to identify and address the
ESG topics that are most important to our stakeholders
and that have the largest strategic impact on our business.
This is led by our ESG Committee, who helps set our ESG
commitments and sustainability priorities and involves the
following six steps:
Our ESG Assessment
Step 1
Step 2
Step 3
Step 4
Step 5
Step 6
Engage with an
external ESG
stakeholder for
counsel
Review the latest
ESG trends and
key material topics
relevant to our
business
Evaluate the
current regulatory
landscape
Rank and prioritize
issues and assess
our reporting
framework
Integrate findings
into our business
operations and
strategy
Report our progress
on an ongoing
basis, including
through our annual
ESG reporting
PureTech Health plc Annual report and accounts 2022 15
ESG ESG Report — continued
Our ESG Framework – Patients, People and Planet
PureTech’s ESG framework is built around three strategic areas of focus to meet the needs of our stakeholders and to achieve
a positive social impact: Patients, People and Planet. Our approach is underpinned by our robust governance framework
(see pages 36 to 38), which helps us to deliver our mission, strategy and purpose in a consistent and responsible way.
PATIENTS
We are committed to unlocking
new classes of medicines with
proven efficacy to address areas
of significant unmet medical need
across large patient populations.
Our goal is to achieve this through
the innovative, safe and ethical
discovery, development and
commercialization of highly
differentiated medicines.
See pages 20-22 for more.
PLANET
We aim to deliver high standards
of environmental leadership to
protect natural and human capital.
While our environmental footprint
remains small, we recognize our
responsibility in measuring and
managing our impact to contribute
to effective climate solutions.
See pages 32-35 for more.
PEOPLE
Our skilled and committed
employees are central to our
success. We create exceptional
experiences for our people by
supporting their development
and providing equitable
opportunities to support
diverse talent and ideas.
See pages 23-31 for more.
16 PureTech Health plc Annual report and accounts 2022
ESG ESG Report — continued
2022 Highlights
This ESG Report contains disclosure of ESG metrics and
activities that are relevant to PureTech’s business strategy
and were evaluated by PureTech’s ESG Committee.
• Ran peer review and market analysis to identify areas
of improvement, including assessment of emission
target setting
This ESG disclosure generally includes data from the
PureTech level only; however, in accordance with 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).
ESG Oversight
• Strengthened ESG oversight, led by our ESG Committee,
which is chaired by Ms. Kiran Mazumdar-Shaw and
supported by one management member and a dedicated
ESG internal working group
Patients
27
therapeutic and
therapeutic candidates
generated from
PureTech's R&D
engine
• Strong ESG ratings
− Named as one of the 2022 top-rated ESG companies
by Sustainalytics4
− Awarded with ESG Prime status with C+ rating by ISS
− Disclosed for the second time our performance to the
CDP as we further try to unpack and understand our
environmental impacts
15
clinical indications being
pursued by PureTech or its
Founded Entities
2
therapeutics taken from inception at
PureTech to FDA and EU regulatory clearances,
and
1
soon filing for
FDA approval.
People
50% of C-suite is female
1 of 12
FTSE 250 companies to
have a female CEO1
44%
Gender diversity at Board level2
Cultural diversity at Board level2
Planet
Ranked in the top 17
FTSE 250 companies
by FTSE Women
Leaders Review
for surpassing
Board and
leadership gender
balance target1
Approximately
$40K
committed to charitable and social causes3
74%
reduction in energy consumed at
our Boston HQ compared to the
2030 Challenge baseline
25%
reduction in GHG emissions generated
at the Boston HQ compared to the
2030 Challenge baseline
1
2
3
FTSE Women Leaders Review, 2022.
Board composition at December 31, 2022.
In 2022, PureTech made charitable contributions to Fred Hutchinson Cancer Research Center, International Rescue Committee, The Pulmonary Fibrosis Foundation (PFF)
and The Greater Boston Food Bank.
4 https://www.sustainalytics.com/corporate-solutions/esg-solutions/top-rated-companies
PureTech Health plc Annual report and accounts 2022 17
ESG ESG Report — continued
Supporting the UN Sustainable Development Goals
The United Nations 17 Sustainable Development Goals (SDGs), adopted by all UN
Member States in 2015, provide a global blueprint for dignity, peace and prosperity
for people and planet. They are an urgent call to action for businesses to address key
global challenges by 2030, including poverty, inequality, climate change, environmental
degradation, prosperity, peace and justice.
Seven years into the implementation of the SDGs, and with the COVID-19 pandemic
having slowed meaningful progress, it has become more crucial than ever to reinforce
and unify efforts toward achieving the SDGs. At PureTech, we acknowledge the
importance of the goals and, since last year, have undergone an internal exercise to
identify seven SDGs we believe our business operations are best aligned to address.
These are:
Goal 3: Ensure healthy lives and promote well-being for all at all ages
As a clinical-stage biotherapeutics company, contributing to good health and well-
being is where we can make the biggest impact. This is reflected in our mission to
change the lives of patients with devastating diseases (see pages 20 to 22) and is also
demonstrated by the diverse patient population needs we target through our unique
approach to drug development.
We believe that delivering good health requires equitable access to safe, effective,
quality and sustainable medicines for all. To achieve this, we select urgently needed
therapeutic candidates best suited to this goal.
Goal 5: Achieve gender equality and empower all women and girls
We are committed to improving the diversity of our workforce by building a culture
that is inclusive and empowers all our people to thrive (see pages 23 to 31). As a result,
our female employees represent 50% of our workforce – a higher percentage than the
average Scientific Research and Development services sector based on the US Bureau
of Labor Statistics. According to the data from a total of 649,000 employees within the
Scientific research category, 48% are female.5 We are also proud to report 44% gender
diversity at the Board level, which placed PureTech in the top 17 companies for Board
leadership gender balance.1
Goal 8: Promote sustained, inclusive and sustainable economic growth, full and
productive employment and decent work for all
As an employer of 111 individuals, we support our staff by ensuring excellent working
conditions and offering a comprehensive benefits package to all employees across our
business operations (see page 27).
We provide in-depth training to our people, with a strong focus on improving their
skills by putting in place effective career development plans. We also drive significant
economic growth and productivity through our R&D and growing business investments.
Finally, we partner with local universities to provide internship opportunities for
students who want to pursue a career in life sciences (see page 25).
5 https://www.bls.gov/opub/reports/womens-databook/2021/home.htm
18 PureTech Health plc Annual report and accounts 2022
ESG ESG Report — continued
Goal 9: Build resilient infrastructure, promote inclusive and sustainable
industrialization and foster innovation
Industry, infrastructure and innovation are key drivers of economic growth and social
value creation. Innovation sits at the heart of what we do at PureTech, and our success
is a natural result of our innovative and strong R&D model (see pages 2 to 5).
Our approach is underpinned by our ability to identify advanced solutions based on
our leading research from scientific collaborators and our innovative R&D expertise.
Goal 10: Reduce inequality within and among countries
We believe that equality is fundamental to a stable, just, prosperous and peaceful
society and we recognize the important role we can play in addressing systemic
inequality both within our industry and beyond.
We have implemented a series of policies and practices to support equal opportunity
and treatment of all our staff. We have a zero-tolerance policy on discrimination in all
its forms and expect our value chain partners to do the same (see pages 36 to 38).
Goal 12: Ensure sustainable consumption and production patterns
Responsible consumption and production are fundamental to sustainable
development. We engage with external experts to monitor and manage waste with
a particular focus on hazardous medical waste management. The majority of our
biologically and chemically hazardous waste is disposed of through conversion to
energy or for fuels blending.
In addition to waste management, our HQ in Boston, MA, is LEED Silver certified and
incorporates a range of elements to encourage efficient resource use. Throughout our
offices, we have initiatives in place to reduce plastic use, increase use of recycled plastic
content and encourage plastic recycling (see page 35).
Goal 13: Take urgent action to combat climate change and its impacts
The impact of climate change on our planet is one of the biggest challenges facing our
world today, with severe and underreported implications for human health. At PureTech,
we monitor and report our scope 1, 2 and 3 emissions and we recognize that the ability
to manage the potential impacts of climate change on our business and strategic plans
are among the factors that are integral to the long-term success of our business. To take
this a step further, we undertook a detailed analysis to identify any climate-related risks
with the potential to have a strategic impact on our business moving forward and have
published our inaugural Task Force on Climate-Related Financial Disclosures (TCFD)
disclosure in 2021 (see pages 41 to 43 for our 2022 TCFD disclosures).
We remain committed to assessing, measuring and reporting climate exposure and
continuing to support high level partnerships and industry associations advocating for
responsible public policies on climate.
PureTech Health plc Annual report and accounts 2022 19
ESG ESG Report — continued
Chapter 1: Patients
As a leading clinical-stage biotherapeutics company, our
mission is to address devastating diseases and improve the
health of patients around the world through differentiated
medicines. To achieve this consistently and in a way that
prioritizes both business ethics and sustainability, we target
three core areas to best support patients:
Commitment 1
Addressing unmet medical needs
Commitment 2
Ensuring patient safety
Commitment 3
Accelerating our R&D engine to unlock new medicines
The patient population we aim to create value for is
widespread as we explore potentially life-transforming
treatments across many serious diseases.
We continued to develop our Wholly Owned Pipeline in
2022 through the expertise of our dedicated team and
in collaboration with our extensive network of scientists,
clinicians and industry leaders. For details on our Wholly
Owned Pipeline, please see pages 8 to 11.
Commitment 1: Addressing unmet medical needs
Our team is committed to delivering therapeutics where
there are unmet medical needs. We do this by applying
our unique insights to the great foundational work that was
conducted by our industry. For decades, biopharma has
devoted time and resources to discovering new modalities
and proving they work in patients, but important new
medicines were abandoned after running into issues that
seemed insurmountable at the time. Our R&D approach
is centered on enhancing on-target efficacy, enabling oral
administration or improving tolerability to unlock new classes
of medicine that have been held back by one of these issues.
With our cutting-edge R&D efforts, we are targeting
these gaps while creating long-term value for both
patients and stakeholders.
Commitment 2: Ensuring patient safety
Patient safety underpins everything we do. Our dedicated
team of researchers, together with our external stakeholders,
follow strict procedures, processes and guidelines to ensure
the upmost safety of our clinical trials and R&D processes.
Delivering Safe Clinical trials
We conduct all clinical trials according to the highest
standards of ethics and safety. All our trials follow the
standards of the International Conference on Harmonization
(ICH) Good Clinical Practice guidelines and the World
Medical Association (WMA) Declaration of Helsinki on
the Ethical Principles for Medical Research Involving
Human Subjects.
20 PureTech Health plc Annual report and accounts 2022
To ensure compliance and rigor in our approach, we seek
approval from Independent Ethics Committees and local
regulatory authorities on all investigative medicine trials.
In addition, our employees who are engaged with
clinical trials, either as clinical staff or their designees,
are responsible for ensuring full compliance with best
clinical practice.
When sponsoring an Investigational New Drug (IND)
application, we acknowledge our responsibility to both
participants and the regulatory agencies who put their
trust in us to act responsibly. We have a robust governance
framework in place which includes effective policies and
protocols such as our Standard Operating Procedure for
Adverse Event Reporting, which helps us to monitor, review
and act on any incidents.
Clinical trial participants are made fully aware of all risks
involved prior to participating in a clinical trial. To confirm
this, we ensure that every patient has provided informed
consent of their willingness to participate through a signed
voluntary commitment. Our informed consent requirements
are set out in the PureTech Clinical Research Policy.
We also rely on the use of human biological specimens to
develop our innovative therapies through clinical trials, which
require informed consent. Our Human Biological Specimens
Policy specifies our commitment to respecting both donors
and the specimens they provide and that collecting,
obtaining, storing and using human biological samples
must be obtained through consent.
Our Chief Medical Officer is responsible for ensuring
that PureTech follows all US and applicable international
regulatory requirements and standards and applicable
bioethics principles. In 2022, there were no FDA sponsored
inspections related to clinical trial management and
pharmacovigilance that resulted in PureTech receiving
Voluntary Action Indicated (VAI) and Official Action
Indicated (OAI) from FDA.
Bioethics: R&D
Our R&D approach focuses on enhancing on-target efficacy,
enabling oral administration or improving tolerability to
unlock new classes of medicine that have been held back
due to these challenges.
Our ethical and quality management standards allow for
continuous improvement through R&D, while helping us
to maintain high standards of product quality and safety
in compliance with relevant regulations at each phase. In
2022, we spent $152.4 million on research and development
projects to develop new and innovative therapeutics (see
page 57 for details on R&D expenses).
As we enhance our R&D strategy, we continue to assess
and identify areas for improvement across our clinical trial
safety, quality and risk management processes. For example,
in 2022 we implemented new policies relating to Good
Manufacturing Practices (GMP) and regulatory inspections to
reinforce ethics into our processes. Looking ahead, additional
policies and Standard Operating Procedures (SOPs) specific
to GxP risk assessment are planned for 2023.
ESG ESG Report — continued
We are Committed to the Fight Against
Idiopathic Pulmonary Fibrosis (IPF)
It’s important to note that the work we do at PureTech every day is in service to the patients we hope to help. Our most
advanced wholly-owned therapeutic candidate, LYT-100, is being developed for the potential treatment of conditions
involving inflammation and fibrosis, including IPF. IPF is a progressive and life-shortening disorder of the lungs with
a median survival rate of 2-5 years.6
2-5 YEARS
Median survival6
~230,0006
People are affected by
IPF in the US and EU57,8
~75%
IPF patients not
on standard of
care therapy9
2
FDA approved
drugs on the market
with significant
tolerability issues
Consistent with our commitment to improve the care of patients with IPF, we partnered with the Pulmonary Fibrosis
Foundation (PFF) in 2022 to help raise awareness of the condition in several ways.
We have a strong relationship with PFF, which is the leading patient advocacy organization for the IPF community.
They not only provide support and educational resources to the community but are also working to identify effective
treatments for IPF. PFF is also a trusted resource and partner to PureTech as we advance LYT-100 through the clinic.
Our initiatives:
We have undertaken an awareness initiative to inform patients with IPF across the globe of our investigational
treatment option in clinical development. We also work to ensure that caregivers of patients with IPF are included
in our IPF study by creating caregiver-specific guides inviting them to participate in trial meetings.
In September 2022, we promoted Pulmonary Fibrosis Awareness Month to raise awareness of IPF and to serve
as inspiration for our employees.
Virtual Lunch & Learn with PFF
IPF Ambassadors
PureTech/PFF Walk
Employee-led fundraising
with company match
In September 2022, we sponsored an inaugural PFF Education Symposium, an event to provide an overview and
update on the research and development of innovative therapies – like LYT-100 – to improve the lives of those
living with pulmonary fibrosis and related conditions.
We believe that working with advocacy groups such as the PFF and hearing from IPF ambassadors with lived
experiences of the diseases will help us incorporate the patient voice in our work.
6 Fisher, M., Nathan, S. D., Hill, C., Marshall, J., Dejonckheere, F., Thuresson, P., & Maher, T. M. (2017). Predicting Life Expectancy for Pirfenidone in Idiopathic Pulmonary
Fibrosis. Journal of Managed Care & Specialty Pharmacy, 23(3-b Suppl), S17 -S24. https://doi.org/10.18553/jmcp.2017.23.3-b.s17
7 GlobalData Epidemiology and Market Size Search.
8 United Kingdom, France, Germany, Italy and Spain.
9 Dempsey, T., Payne, S. C., Sangaralingham, L. R., Yao, X., Shah, N., & Limper, A. H. (2021). Adoption of the Antifibrotic Medications Pirfenidone and Nintedanib for Patients
with Idiopathic Pulmonary Fibrosis. Annals of the American Thoracic Society, 18(7), 1121–1128. https://doi.org/10.1513/annalsats.202007-901oc
PureTech Health plc Annual report and accounts 2022 21
ESG
To ensure our QMS is robust and up to date, risk assessment
protocol is built into our procedures for vendor audits,
vendor oversight, and data integrity for Chemistry,
Manufacturing, and Controls (CMC). This allows us to
quickly determine vendor risks and accelerate new vendor
onboarding to meet business demands.
Ensuring Drug Efficacy and Safety
None of the therapeutic candidates from within PureTech’s
Wholly Owned Pipeline are currently on the market.
Therefore, in 2022, PureTech received no FDA warning
letters, no products were delayed due to a lack of regulatory
approval and no product recalls took place.
As we continue to advance our therapeutic candidates
towards commercialization, we will continue to practice our
clinical protocols diligently to ensure ongoing safety and
compliance across our operations and clinical trials.
Commitment 3: Accelerating our R&D engine to unlock
new medicines
R&D has been the bedrock of progress in global health and a
key component in the successful discovery and development
of our therapeutic candidates.
Currently, our Wholly Owned Pipeline consists of five
therapeutic candidates, including one that has been licensed
to and is being developed by a partner.
5
Therapeutic
candidates
4
Therapeutic candidates
in clinical stage
Generating such a robust pipeline that has the potential to
address millions of patients with unmet medical needs has
been made possible through our strong R&D model.
We are proud of our model which allows us to fulfill our
unyielding commitment to delivering potentially life-
changing new therapies for patients in need. We will
continue to leverage this model, our scientific insight and
our network of scientists, clinicians and industry leaders
to unlock new medicines and deliver highly innovative
therapeutics for patients.
ESG Report — continued
Environmental considerations continue to play a key role in
R&D as we strive to reduce or eliminate hazardous chemicals
from our R&D process. We also ensure that we remain
aware of the latest developments in green chemistry and
we intend to evaluate the adoption of eco-design principles
in the future. To that end, in the 2023 post-period, we have
already managed to optimize some of our large scale drug
substance processes to replace more hazardous solvents that
negatively impact the environment.
Bioethics: Animal Research
Animal research plays an essential and irreplaceable role in
the advancement of drug discovery as it helps researchers
answer questions of biological uncertainty.
PureTech conducts animal testing only when necessary to
advance the development of therapeutics and is required
by regulatory authorities, before human testing of new
medicines can take place.
We follow the guidelines set out under the USDA Animal
Welfare Act and are committed to the humane and ethical
treatment of animals. Studies involving animals are reviewed
and approved by the Executive Team and are conducted
at externally qualified and certified vendors that meet our
principles and expected practices for the care, welfare and
treatment of animals.
We are committed to applying the replacement, reduction
and refinement of animal studies (3Rs) each time we
consider the use of animal testing. This includes the
following commitments:
REPLACE
REDUCE
REFINE
Bioethics: Quality Management
We have a robust Quality Management System (QMS)
in place to oversee our raw material suppliers. Our QMS
consists of various SOPs which describe our controlled
processes that result in consistent quality control as per
PureTech’s quality system. SOPs include, but are not limited
to, the processes relating to the:
• Qualification of New Vendors
• Qualification of Existing Vendor for New Materials
• Management of Changes related to Vendor
• Evaluation of Supply for Quality
• Change Control
• Batch Disposition
• Employee Training on New Materials
22 PureTech Health plc Annual report and accounts 2022
ESGWe usealternative methodsto animal testingwherever possible.We use theminimum numberof animals in trials.We minimizepain, sufferingand distress, andimprove thewelfare of animalsused in trials. ESG Report — continued
Chapter 2: People
“PureTech is committed to
developing medicines that have
the potential to transform lives.
We are equally committed to
our own PureTech team who
drive our ongoing success.
Our ESG initiatives aim to
reflect this dedication as we
work to consistently deliver
a truly sustainable business.”
Bharatt Chowrira
President and Chief Business,
Finance and Operating Officer
Our employees are critical to bringing our vision to life.
Through their hard work and passion, we aim to deliver
innovative therapeutics that improve patients’ lives while
also creating long-term value for our stakeholders.
We believe that a collaborative and respectful working
environment is vital to cultivating a safe and creative
space where employees can thrive. To achieve this, we are
committed to delivering on the following four priority areas:
Commitment 1
Building a diverse, equitable and inclusive workplace
Commitment 2
Promoting employee development to attract and retain
the best talent
Commitment 3
Maintaining a robust Employee Health and Safety
(EHS) program
Commitment 4
Strengthening engagement and collaboration between
people, communities and partners
Our employees are predominantly located near our
headquarters in Boston, MA, with two individuals based
in London. As of December 31, 2022, we had a total of
111 employees. Of these, 66 employees work in R&D
roles while 45 are engaged in PureTech’s general and
administrative functions.
Commitment 1: Building a diverse, equitable and
inclusive workplace
Diversity, Equity and Inclusion
We believe that the best ideas come from diversity in
thought, ideas and perspectives, which all contribute to
helping unlock our maximum potential as an organization.
This is why we promote a diverse, equitable and inclusive
work environment in which all people are treated with the
upmost dignity and respect.
Under our Equal Opportunity Policy of non-discrimination
and equal opportunity, we are committed to treating all
employees and qualified applicants fairly and equally
regardless of their race, color, religion, gender or gender
identity, sexual orientation, nationality, ancestry, age, physical
or mental disability, veteran or military service, or any other
status protected by law.
Our commitment to diversity and inclusion is evident across
all aspects of our employment practices and covers all stages
from hiring, job assignment, promotion and compensation to
discipline, discharge, benefits and training.
Championing Gender Diversity
We pride ourselves on our strong commitment to gender
diversity and towards enhancing gender balance within the
medical sector. We are committed to promoting diversity
within our leadership team and at the employee level to
ensure a balanced approach. Our gender diversity rate as
of December 31, 2022, sits at 44% at Board level, and a 50%
across the total workforce:
Total employees Managers
Board
Gender
2021
2022
2021
2022
2021
2022
Female
45%
50%
33%
41%
44%
44%
Male
55%
50%
67%
59%
56%
56%
We continue to make strong progress in embedding
diversity at a leadership level. We believe that a diverse
board and senior management team can help to generate
better performance, retain exceptional talent and enhance
shareholder value.
The 2022 Hampton-Alexander Review into Boardroom
gender diversity reported that only 12 FTSE 250 companies
have female CEOs – and we are proud to be one of those
companies. Our founder and CEO, Daphne Zohar, is a
successful entrepreneur who runs our standout team.
She has been the leading figure in PureTech’s fundraising
and business development since inception and is vital to
establishing our therapeutic pipeline across our Wholly
Owned Programs and Founded Entities. Additionally, we
were recognized in the 2022 FTSE Women Leaders Review
for our efforts to improve the number of women in senior
leadership positions – achieving 44% gender diversity at
Board-level.
PureTech Health plc Annual report and accounts 2022 23
ESG Celebrating
Juneteenth
In June 2022, we celebrated
Juneteenth, commemorating the
emancipation of slavery in the US.
To acknowledge and learn more
about this historical event, we
distributed resources to employees
highlighting the history, culture and
events of Juneteenth. As of 2023,
PureTech has also added June 19th
as a company holiday to observe
this important day in history.
Enhancing Pay Equity
We believe in providing equal pay opportunities to our
people regardless of their gender, race, ethnicity or any other
characteristics not relevant to their role or performance in it.
Due to the size of our business, we are not legally obliged
to produce a Gender Pay Gap Report, however, we ensure
full compliance with all local laws relating to equal pay
and remuneration. We are also committed to enhancing
workplace transparency and equality through our human
capital programs which promote career development,
workplace equity, as well as diversity and inclusion.
ESG Report — continued
Promoting Cultural Diversity
As well as championing gender equality, we take great pride
in celebrating and enhancing the cultural diversity of our
workforce and the communities we serve.
We are US Equal Employment Opportunity Commission
compliant with an annual EEO-1 Report filing, disclosing
information about our employees’ job categories, ethnicity,
race and gender. This helps us to enhance transparency and
see where we can better target efforts to further enhance
the diversity of our workplace.
We are proud to report that as of 2022, our cultural diversity
rate at the Board-level is 44%, and we are continuing to
enhance the cultural diversity of our wider management
team and workforce.
In 2022, we enhanced our support to promote all forms of
cultural diversity, led by the employee-led Cultural and Social
Committee. The joint committee, formed in 2021, aims to
create programs that celebrate diversity, promote equity
and encourage respect for one another. Some of the 2022
initiatives included:
Supporting
Asian American
and Pacific
Islander (AAPI)
Heritage Month
Celebrating
LGBTQ+ Pride
Month
In May 2022, we held an initiative
to recognize the contributions
of Asian Americans and Pacific
Islander Americans to the history,
culture and achievements in the
US In honor of AAPI month, we
hosted a month-long initiative to
circulate company-wide materials
discussing AAPI history, culture,
events and resources.
In June 2022, we celebrated
LGBTQ+ Pride Month, dedicated
to the celebration and recognition
of the impact lesbian, gay, bisexual,
and transgender (LGBTQ+)
individuals have had and continue
to have. We celebrated in a few
ways, notably:
• Distributed resources to
employees highlighting LGBTQ+
life science professionals
• Updated our company logo to
raise awareness and solidarity
for LGBTQ+ causes
• Hosted Jessica Halem, an
award-winning educator,
advocate and consultant on
LGBTQ+ issues, to speak on
how to enhance inclusive and
equitable environments
24 PureTech Health plc Annual report and accounts 2022
ESG ESG Report — continued
Commitment 2: Promoting employee development to
attract and retain the best talent
Human capital is vital to a successful business operation to
identify new opportunities, innovate and lead. We depend on
our people, their scientific knowledge, skills and commitment
to thrive. As such, the personal development, retention
and recruitment of industry-leading talent is one of the top
priorities for PureTech.
Recruitment and Retention
Our business continues to grow rapidly as our Wholly Owned
Programs advance. As a result, the PureTech team too has
grown rapidly in 2022, with our head count growing by
16.8% year-over-year. This growth has enabled us to create
new roles internally and attract new talent to broaden our
business and expertise.
Total number of employees
Year-over-year growth (%)
Employee turnover (%)
Internal promotions (%)
2021
95
44%
25%
17%
2022
111
16.8%
30.62%
17%
Developing a sustainable and diverse pipeline of talent is
the principal focus of our recruitment strategy. We source
our talent through our outstanding network of world leading
scientists. We also source emerging talent from local top
tier universities in Boston – the heart of the world’s biotech
hub – as well as through partnerships with local university
cooperative education programs. Co-op programs provide
students with opportunities to alternate periods of academic
study with several months of full-time employment related to
their academic majors and interests. Undergraduate co-op
students can join PureTech for six month paid internships in
our Research department, adding to our talent acquisition
pipeline. Participating in life science career fairs is another
way of targeting skilled candidates.
Beyond this, we are passionate about providing
opportunities to those hoping to pursue a career in life
sciences. To support first-generation students from under-
resourced and under-represented communities, we partner
with local organizations like Project Onramp to offer paid
summer internships. In 2022, we welcomed 9 interns through
our various programs.
34%
Partnerships with
local universities
22%
Project Onramp
22%
Internal referrals
22%
Co-op program
Happy
Intern Day
In July 2022, we hosted an intern day coffee
break at our Boston HQ to celebrate the
future generations of the life sciences
industry. This provided an opportunity not
only for PureTech to thank our interns for
their work but also for participating interns
to meet PureTech employees across all
functions in order to better understand
our business and how they can build their
skillsets for an exciting career in biotech.
PureTech Health plc Annual report and accounts 2022 25
ESG Employee
safety
training
• Mandatory annual safety training
provided to all employees in accordance
with the Occupational Safety and
Health Administration (OSHA)
• Mandatory annual active shooter
training provided to all employees
• Optional annual first aid training
provided to all employees by
Safety Trainers
• Optional annual CRP training provided
to all employees
• Mandatory DOT/HAZMAT training
provided to all lab staff every three years
• Mandatory Personal Protective
Equipment (PPE) policy training
provided to all lab staff year round
R&D
training
• Optional training on how to conduct
effective scientific presentations; offered
four times a year for R&D team
ESG Report — continued
Training and Development
We uphold the value of human capital development at
PureTech, encouraging managers and employees to discuss
job performance and goals on an informal, day-to-day basis
while also conducting formal performance evaluations
annually. We encourage regular one-on-ones between
employees and their supervisors, and progress is monitored
via an online portal. This enables employees and managers
to have clear visibility over their goals throughout the year,
which in turn facilitates ongoing constructive feedback and
development. In 2022, 100% of our employees received
performance appraisals.
For PureTech, career development goes beyond providing
opportunities for promotions. We believe an effective career
development program entails providing opportunities to
enhance employees’ competitive capabilities. To achieve
this, we offer a broad range of training to and also fund
participations in development programs on a case-by-case
basis. Some of the development trainings include:
IT training
• Mandatory annual IT training provided
by Risk Management Solutions (RMS)
for all employees
• Mandatory annual cybersecurity
training for all employees, with follow-
on assignment to be completed
HR training
• Mandatory training at onboarding
covering PureTech practices
and policies
• Special training based on job function;
e.g., employees who perform GxP work
are assigned matrices by the Quality
Assurance department
• Leadership coaching for managers
Governance
training
• Mandatory annual anti-harassment
training provided by an external partner
for all employees
• Mandatory annual anti-harassment
training provided by an external partner
to all managers
26 PureTech Health plc Annual report and accounts 2022
ESG ESG Report — continued
Employee Benefits
The physical, financial, social and emotional well-being of our employees is a priority at PureTech. As a result, we provide
a range of benefits for employees.
An enrollment session is held annually with our benefits administrator, Baystate Benefit Services, to help our employees
understand how they can make best use of the benefits available to them. Following a US model since this is where the
majority of our employees are based, our benefits and perks include:
Premium health plan with an
option to choose from a
PPO or HMO plan
Health Reimbursement
Account (HRA)
Pre-tax parking and
transit benefits
Dental plan
Vision plan
Short-term and long-term
disability plans
401(k) retirement plan with 3%
non-elective contribution by
the company
Benefits continuation
(COBRA)
Paid parental leave
(up to 12 weeks)
Onsite nursing and
wellness room
Employee led Cultural
Committee
Gym membership
reimbursement in addition
to an onsite gym facility
in Boston
Entertainment discounts
Life insurance
Medical FSA
Performance share plan
Onsite free snacks & drinks
Dependent Care FSA
One-on-one
financial coaching
Technology reimbursement
program
Flexible working plans
24/7 unlimited assistance
by ComPsych® on resources
and information on
life’s challenges
PureTech’s performance share plan provides the majority of employees stock options upon joining the organization.
We also provide appropriate market-based compensation and incentives in alignment with the goals of the organization
and its shareholders.
As of 2022, none of our employees are subject to collective bargaining agreements or represented by a trade or labor union.
As an employer we are, however, respectful of the rights of our employees, we thus support their right to collective bargaining
and freedom of association.
PureTech Health plc Annual report and accounts 2022 27
ESG ESG Report — continued
Commitment 3: Maintaining a robust Employee Health
and Safety (EHS) program
It is our unyielding commitment to provide a healthy and safe
working environment for our employees that supports their
physical and mental wellbeing. Throughout the COVID-19
pandemic, we have prioritized the health of our people while
ensuring ongoing business continuity through detailed and
regularly updated action plans.
In 2021, PureTech took steps to evolve its hybrid working
model in response to the pandemic. In 2022, we have
continued to implement flexible/remote working while
maintaining the safety protocols established at the beginning
of COVID-19. We continue to conduct mandatory PCR tests
for onsite staff and employees can track COVID-19 cases on
the employee intranet to mitigate risk.
EHS Governance
We have a robust Employee Health and Safety Management
System (EHSMS) in place that tracks and ensures adherence
to all EHS-related activities including employee safety
training, lab safety protocols and emergency action planning.
Our EHS activities are overseen by a Safety Committee
consisting of three underlying sub-committees, with support
from an external EHS expert who is certified through the
National Registry of Certified Microbiologists (NRCM) and
is a Registered Biosafety Professional (RBP).
General
Safety
Committee
Establishes EHS-related protocols
and applications and submits to IBC
and IACUC for review/approval. The
committee meets monthly and is formed
by PureTech lab operations staff.
Institutional
Biosafety
Committee
(IBC)
Ensures all research, teaching, and
training involving potentially biohazardous
agents at our labs are conducted in
compliance with US National Institutes
of Health (NIH) guidelines, in accordance
with Centers for Disease Control (CDC),
Prevention Biosafety in Microbiological
and Biomedical Laboratories (CDC,
BMBL), Occupational Safety and Health
Administration (OSHA) and local
regulations, and with proper concern
for the safety, the environment, and the
surrounding communities. The committee
meets monthly and reports to US National
Institutes of Health (NIH).
Institutional
Animal
Care & Use
Committee
(IACUC)
Ensures our animal testing upholds the
US federal regulations on animal care
and use. Compliance is recorded through
our Public Health Service Assurance
document, which is approved by the
Office of Laboratory Animal Welfare
(OLAW) at NIH.
28 PureTech Health plc Annual report and accounts 2022
NIH
IBC
OLAW
IACUC
Reports to
General Safety Committee
Conduct internal
lab/EHS audit
PureTech’s EHS team is led by three specific roles as per the
requirements of OSHA. The roles and the responsibilities
involved are as follows:
Biological
Safety
Officer
(BSO)
Oversees all ongoing scientific projects in
the company, ensuring compliance with
local regulations and guidelines as well
as providing guidance to all members
of staff conducting biological work. The
BSO is also a member of the Institutional
Biosafety Committee (IBC).
Chemical
Hygiene
Officer
(CHO)
Appointed under the Chemical Hygiene
Plan, the CHO is responsible for
designing, developing, implementing,
and maintaining the Company’s chemical
hygiene policies and practices. They are
also responsible for ensuring appropriate
safety procedures and training are in
place and ensuring that all hazardous
waste is disposed of correctly.
Emergency
Coordinator
The role involves keeping PureTech’s
Emergency Plan up to date and reviewing
and amending it where necessary.
As well as overseeing day-to-day activities, the EHS team
reviews EHS protocols on an annual basis, or when emerging
reasons demand a process review, such as a lab incident, new
project, or the introduction of a new piece of equipment.
ESG ESG Report — continued
EHS Training and Audits
We provide a mandatory safety training program for all our
staff and conduct regular internal audits to maintain industry-
leading health and safety (H&S) standards. Our H&S training
modules consist of the following to integrate and maintain
highly effective H&S culture:
• Mandatory annual safety training provided to all
employees in accordance with the Occupational Safety
and Health Administration (OSHA)
• Optional annual first aid training provided to all employees
by dedicated Safety Trainers
• Optional annual CPR training provided to all employees
Commitment 4: Strengthening engagement and
collaboration between people, communities and partners
We consider stakeholder engagement and collaboration
to be the cornerstone of innovation and key to unlocking
the solutions we need to address pressing medical needs.
As such, we promote a positive and interconnected company
culture among our stakeholders, while ensuring we make a
positive difference to the communities closest to us.
Employee Engagement
We have series of initiatives to promote employee
engagement which have been received with great enthusiasm:
• Mandatory annual active shooter training provided to
Employee Intranet, a Connection Hub
all employees
• Mandatory year-round Personal Protective Equipment
(PPE) training provided to all lab staff
• Mandatory DOT hazmat training provided to all lab staff
Key safety information is communicated to employees
through regular internal communication channels such as
town hall meetings, bulletin boards, memoranda, and other
written internal communications. Employees must report
any concerns to a supervisor or PureTech’s operations team.
A lab audit is conducted on a quarterly basis to ensure
employee safety and compliance with all appropriate
regulations. The audit captures action items as required
and is reviewed monthly by the Safety Committee.
Reporting on Incidents
PureTech’s operation is classified as a ‘research and
development laboratory’ according to the Standard Industrial
Classification (SIC) or North American Industrial Classification
System (NAICS) codes and hence we are exempt from
reporting on incidents to OSHA. With that said, we continue
to practice thorough safety protocols at our lab facilities and
are committed to continuously improving our EHS measures
driven by our Safety Committee.
Features important company information and
employee resources in one easily accessible
portal. Some of the featured contents
include company news, new hire highlights,
upcoming company events, employee
directory, social gallery and an opportunity
to provide feedback.
Employee-led Cultural and
Social Committee
Plan and host D&I-related programs to foster
engagement and respect and to create a sense
of community belonging for our people.
Employee Engagement Survey
Anticipated to be conducted every two years,
our inaugural employee survey was conducted
in 2021 to better understand our employees’
needs, concerns, and satisfaction rate. The
results revealed how well PureTech performed
in areas such as teamwork, providing a
respectful work environment and building
strong interconnected teams. The results of our
next survey are expected to be reported in our
2023 ESG report.
PureTech Health plc Annual report and accounts 2022 29
ESG ESG Report — continued
Promoting Employee Wellbeing
A shift to a hybrid working model has impacted work-life balance for many around the globe. At PureTech, we believe that
wellbeing is critical to developing a sustainable and happy workplace. This includes ensuring physical, emotional, financial,
social factors as well as a sense of community belonging, and purpose are prioritized. In 2022, we hosted periodic happy
hours for all employees to wind down and connect with one another and organized various initiatives and activities to promote
employee wellbeing:
PureTech Coffee Chat Program
We introduced our inaugural PureTech Coffee Chat Program to foster engagement, collaboration and
connection amongst our peers. This optional program randomly paired participating employees across various
departments to meet in-person or virtually to talk about their work and interests over coffee. The initiative
proved to be very successful, with a 47% participation rate and positive feedback from participants.
Mental Health Awareness Program
In support of Mental Health Awareness month, resources and discounts for wellness programs, such as expert
resources and virtual wellness classes, were introduced to all employees. Additionally, we hosted Krista Quinn,
a wellness trainer and somatic therapy coach, to provide a guided mediation session to help employees unwind.
Employee Outings
We hosted a company retreat, joined a corporate sports league, and offered multiple online competition/
entertainment activities throughout the year as opportunities for employees to connect with one another
outside of work. In some instances, employees’ family members were welcomed to join the fun.
Community Engagement
As a community member within Boston’s thriving biotech hub, we are committed to giving back to our community. In 2022,
we contributed to several community initiatives and charitable events, which included:
Fred Hutch –
Climb to Fight Cancer
In January 2022, Bharatt Chowrira, PureTech’s President and Chief
Business, Finance and Operating Officer, participated in the Fred
Hutch Climb to Fight Cancer fundraiser by trekking to the Mt.
Everest Base Camp. The goal of the expedition, which was led by
Luke Timmerman and comprised of entrepreneurs, executives and
investors from the biotech and pharmaceutical industries, was to
collectively raise $1M to support cancer research. PureTech is
proud to have contributed $15,000 towards the cause, which
collectively raised over $1.3M to fund innovative cancer and
infectious disease research.
In February 2023, Bharatt Chowrira again participated in the
Fred Hutch Climb to Fight Cancer fundraiser by climbing
Mt. Kilimanjaro, Tanzania. The team collectively raised more
than $1.1M to support cancer research.
Supporting Ukraine –
International Rescue
Committee (IRC)
In March 2022, PureTech employees supported the International
Rescue Committee relief fund to provide vital funds to support
Ukrainian humanitarian efforts. With PureTech committed to
matching up to $10,000 of employee donations, we were proud
to see employee donations reach $6,250, which we matched to
contribute a total of $12,500 for the charity.
American Red Cross
Blood Drive
In April 2022, we hosted an American Red Cross blood drive at
our HQ in Boston, MA. With millions of patients needing blood
transfusions each year, this important initiative aligns to our
purpose of helping patients in need, while bringing together
our employees to save lives.
30 PureTech Health plc Annual report and accounts 2022
ESG ESG Report — continued
Catie’s Closet Drive
Lymphatic Education
& Research Network
(LE&RN) Walk
Pulmonary Fibrosis
Foundation (PFF) Walk
Halloween
Candy Drive
In April 2022, we hosted a clothing drive to serve schools with over
50% poverty rate. Catie’s Closet improves school attendance and
graduation rates, as well as the mental, emotional, and physical
health of students facing poverty, homelessness, and other crises
by providing free, in-school access to clothing and basic necessities
and uniting with community partners to meet students’ other
immediate needs. Catie’s Closet serves over 100 schools across
Massachusetts and New Hampshire, helping more than 75,000
students daily.
In May 2022, we hosted a global walk for LE&RN to raise awareness
of lymphatic diseases. We are a proud sponsor of LE&RN, which
is a non-profit organization to fight lymphatic diseases through
education, research and advocacy. Being a sponsor has given us the
opportunity to connect with designated institutions who provide
the best possible multi-disciplinary clinical care and services for
patients affected by lymphatic diseases.
In September 2022, we hosted an in-person charity walk and
a fundraiser in honor of Pulmonary Fibrosis Awareness Month,
a cause close to our hearts as seen from our most advanced
therapeutic candidate LYT-100, which is being developed for the
potential treatment of IPF (see page 8 for more). We are proud to
have contributed towards the PFF fundraiser walk, which collectively
raised over $1M this year.
In September 2022, we participated in the Halloween candy drive
hosted by Related Beal to support South Boston Community
House – a non-profit organization providing support to family
and neighborhood life in South Boston through access to Early
Education and Care Preschool, School Age, Education and Career
Development Programs, Senior Programs and Family Engagement
– and Tierney Learning Center – a Boston based organization with a
mission to address the educational, employment, financial stability,
and health & wellness goals of low-income families in South Boston.
The Greater Boston
Food Bank – Hunger
Free Holidays
Campaign
In November 2022, we participated in a fundraiser for the Hunger
Free Holidays campaign hosted by the Greater Boston Food Bank
to raise awareness and funds during the holiday season for the 1 in
3 who are food insecure. We are proud to have contributed nearly
$8K to this cause.
Holiday
Clothing Drive
In December 2022, we participated in the holiday clothing drive
hosted by Related Beal to support men, women, and children at the
Commonwealth Land Trust in Roxbury and Dorchester – a non-
profit organization providing affordable housing and supportive
services to the most vulnerable individuals and families in
Massachusetts to prevent homelessness, rebuild lives, and preserve
neighborhoods – as well as elders at the Edgar P. Benjamin
Healthcare Center in Roxbury – a non-profit skilled Nursing and
Rehabilitation Center servicing the greater Boston community.
PureTech Health plc Annual report and accounts 2022 31
ESG ESG Report — continued
Chapter 3: Planet
“As our company grows, we are
committed to monitoring and
reducing our environmental
footprint. To achieve this, we
will continue to strengthen the
integrity of our operations,
as we carry on assessing
and identifying areas for
improvement to achieve our
sustainability goals as a team.”
David Carney
VP and Head of Operations
We understand the complex interconnection between nature
and human health, a trend which has been highlighted
prominently during the COVID-19 pandemic. The impacts
of climate change, biodiversity loss, water scarcity and
increasing pollution continue to have a detrimental effect
on public and patient health.
While our impacts on the environment are limited as a result
of the current scale of our operations and phase of our
business, we remain committed to monitoring and reducing
the environmental footprint that results from our operations.
This means continuing to be aware of biodiversity and natural
capital impacts and keeping up to speed with the latest
regulations and reporting requirements. In addition, we are
taking action by addressing the following key areas:
Commitment 1
Transparent GHG emissions disclosures
Commitment 2
Strengthen our waste management process
Commitment 3
Sustainable facility operations
Commitment 1:
The impact of climate change threatens the stability of the
world and directly impacts human health. We understand
it is the responsibility of everyone including businesses to
mobilize and fight the worst impacts and keep the world
aligned with 1.5 degrees. As a clinical-stage biotherapeutics
company with no approved therapeutics on the market, our
current day-to-day impact on the environment is limited.
With that said, we are increasing the level of reporting and
transparency around ESG as we build a stronger and more
sustainable organization and will introduce climate-related
targets, such as a net zero commitment and a transition plan
32 PureTech Health plc Annual report and accounts 2022
to 1.5 C pathway when the state of operations is sufficiently
advanced, such as entering a commercial stage, to render
such analysis meaningful. At this stage, we believe that our
operations have minimal environmental impact (see pages
41 to 43 for details on TCFD report) to develop a robust
climate-related target.
Streamlined Energy & Carbon Reporting
The section below includes our third year of reporting
under the Streamlined Energy & Carbon Reporting (SECR’)
requirements. The reporting period is the same as the
Group’s financial year, January 1, 2022, to December 31, 2022.
Organization Boundary and Scope of Emissions
We have reported on all 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 ending December 31, 2022, are:
• Scope 1: natural gas combustion within boilers and carbon
dioxide emitted by dry ice and incubator cylinders;
• Scope 2: purchased electricity for our own use; and
• Scope 3: business travel, commuting, third-party
deliveries, waste and water
Methodology
For the Group’s reporting, the Group has employed the
services of a specialist adviser, Verco, to quantify and verify
the Greenhouse Gas (GHG) emissions associated with the
Group’s operations.
The following methodology was applied by Verco in the
preparation and presentation of this data:
• Principles of the Greenhouse Gas Protocol published by
the World Business Council for Sustainable Development
and the World Resources Institute (the “GHG Protocol”);
• Application of appropriate emission factors, including
DEFRA (2022) and eGRID (2021), to the Group’s activity
data to calculate GHG emissions;
• Application of location-based and market-based GHG
emission calculation methods for electricity use;
• Inclusion of all applicable Kyoto gases, expressed in
carbon dioxide equivalents, or CO2e;
• Presentation of gross emissions; no net figures are
provided as the Group does not purchase carbon credits
(or equivalents);
• Where data was missing, estimation using extrapolation
of available data or appropriate benchmarks (REEB 2020)
was applied; and
• Where data was not obtained/confirmed in time,
appropriate estimation methodology has been used.
ESG ESG Report — continued
Absolute Emissions
The total Scope 1, 2 and 3 GHG emissions from the Group’s operations in the year ending December 31, 2022, were:
• 720.6 tonnes of CO2 equivalent (tCO2e) when using a ‘location-based’ emission factor methodology for Scope 2 emissions; and
• 722.3 tonnes of CO2 equivalent (tCO2e) when using a ‘market-based’ emission factor methodology for Scope 2 emissions.
Total Energy Use
The total energy use for the Group for FY2022 was 1,672,112kWh.
Electricity/fuel
Mileage
Electricity (kWh)
Gas(kWh)
Petrol(kWh)
Total Energy Use (kWh)
1,626,053
519,694
505,075
46,059
85,577
133,430
0
73,856
513
1,672,112
679,127
639,018
2022
2021
2020
Intensity Ratio
As well as reporting the absolute emissions, two intensity measures are provided below: tonnes of CO2 equivalent per
employee, and tonnes of CO2 equivalent square meter of occupied space.
The intensity metrics were deemed to be the most appropriate because the majority of emissions result from the operation of
the Group’s offices, and the day-to-day activities of the employees. In both cases, Scope 1 and 2 emissions were used only.
The intensity ratios are as follows:
• 2.11 tCO2e per FTE employee (location-based method)
• 2.12 tCO2e per FTE employee (market-based method)
• 0.05 tCO2e per m2 of occupied space (location-based method)
• 0.05 tCO2e per m2 of occupied space (market-based method)
A total floor area of 8,065 m2 and employee number of 195 has been provided for FY2022. Intensity ratios have been calculated
using all Scope 1 and 2 emissions only.
Target and Baselines
The Group’s objective is to maintain or reduce its GHG emissions per square meter of occupied each year and will report
each year whether it has been successful in this regard. When comparing intensity ratios, GHG emissions per square meter
of occupied premise space have remained the same as 2021. However, GHG emissions per full-time employee has seen an
increase in comparison to the previous year.
The Group’s absolute emissions have seen an overall increase using both location-based and market-based calculation
methods. The focus of the increase was on Scope 2 emissions and the reason for the increase is attributed to the addition of
a first floor late-stage production space which added significant electrical load. However, as seen in the chart below, Scope 3
and Scope 1 emissions have exhibited a slight reduction.
Key Figures
GHG emissions
Scope 110
Scope 211
Scope 212
Subtotal (location-based)
Subtotal (market-based)
Scope 313
Total GHG emissions (location-based)
663.7
Total GHG emissions (market-based)
665.0
2022
2021
2020
Tonnes
CO2e
tCO2e/FTE
employee
tCO2e/sq.
metre
Tonnes
CO2e
tCO2e/FTE
employee
tCO2e/sq.
metre
Tonnes
CO2e
tCO2e/FTE
employee
tCO2e/sq.
metre
10.6
401.2
402.6
411.8
413.1
251.9
0.05
2.06
2.06
2.11
2.12
–
–
–
0.001
0.05
0.05
0.05
0.05
–
–
–
17.7
116.4
116.9
134.1
134.6
329.6
463.8
464.3
0.08
0.56
0.56
0.64
0.64
–
–
–
0.002
25.9
0.02
0.02
0.02
0.02
–
–
–
120.9
120.9
146.7
146.8
232.7
379.4
379.5
0.18
0.86
0.86
1.05
1.05
–
–
–
0.004
0.02
0.02
0.02
0.02
–
–
–
10 Scope 1 being emissions from the Group’s combustion of fuel and operation of facilities.
11 Scope 2 being emissions from electricity (from location-based calculations), heat, steam and cooling purchased for the Group’s own use.
12 Scope 2 being emissions from electricity (from market-based calculations), heat, steam and cooling purchased for the Group’s own use.
13 Scope 3 being all indirect emissions (not in scope 2) that occur in the value chain of the reporting company, including both upstream & downstream emissions.
PureTech Health plc Annual report and accounts 2022 33
ESG ESG Report — continued
Understanding the Indirect Environmental Impacts of our Business Activities
As a clinical-stage biotherapeutics company, PureTech’s day-to-day operational activities have a limited impact on the
environment. Despite this, we recognize that the investment decisions we make and the companies we choose to invest
in do have a broader environmental and social impact.
We therefore consider it vital to establish and invest in businesses that comply with existing applicable environmental, ethical
and social legislation in line with PureTech’s ESG framework. It is also critical that these businesses demonstrate they have an
appropriate strategy in place to meet future legislative and regulatory requirements relating to ESG matters and that they
align to all relevant industry standards.
Waste Management
At PureTech, we are committed to reducing our operational waste, recycling and reusing where possible and ensuring the
safe disposal of hazardous material. We partner with Veolia Environment for the management of our hazardous medical
waste. Veolia designs and provides game-changing solutions that are both useful and practical for water, waste and energy
management, its Voluntary Protection Programs (‘VPP’) are rated by OSHA and all staff are HAZWOPER certified. In addition
to providing waste management service, Veolia provides PureTech’s annual waste data. Data from Veolia shows that PureTech
produced 4,457lbs (2,021kg) of biologically and chemically hazardous waste in the course of its research in 2022. The majority
of this waste is disposed of through conversion to energy or for fuels blending. This year we did not have a need to treat waste
using treatment/stabilization or landfills as we did in previous years. Full details of waste generated and treatment methods
are shown in the tables below.
PureTech hazardous waste emissions 2022, 2021 and 2020 (weight in lbs)
2022
2021
2020
Hazardous
Non
Hazardous
Regulated
Medical Waste
780
1,061.0
834.0
334
649.0
115.0
3,343
6,661.0
5,966.0
Total
4,457
8,371.0
6,915.0
PureTech hazardous waste treatment methods 2022, 2021 and 2020 (weight in lbs)
Fuel
Blending
Incineration
Treatment/
Stabilization
Waste to
energy
2022
2021
2020
360
858.0
666.0
217
78.0
48.0
–
133.0
160.0
3,830
5,776.0
5,567.0
Landfill
Recycle
–
231.0
75.0
50
1,296.0
400.0
Total
4,457
8,372.0
6,915.0
The decrease in waste volume was driven by the number of employees on site, despite the employee headcount going up,
more employees worked from home. In addition, the research team numbers dropped due to a strategic change which
resulted in less production and therefore less waste.
PureTech will continue to monitor these output levels as part of a commitment to keep hazardous waste to a minimum.
34 PureTech Health plc Annual report and accounts 2022
ESG
ESG Report — continued
PureTech’s Energy-Efficient Headquarters
PureTech’s headquarters at Innovation Square, 6 Tide Street in Boston, is a brownfield redevelopment site offering many
environmental benefits.
Innovation Square consolidates PureTech’s laboratory and business operation functions in one building, reducing the need
for employees to commute between multiple locations.
The building is in close proximity to public transportation and is equipped with ample bicycle storage – twice the amount
required by LEED for the building’s size – to encourage green commuting. The building also has on-site shower and changing
facilities for cleanliness and hygiene.
Drivers of electric vehicles (EVs) have access to four charging points in the parking area. Employees are also encouraged
to take public transportation to work via a travel subsidy, while an office shuttle bus runs to and from the major Boston
train stations.
The building is certified LEED Silver. The fit-out incorporates a range of elements to encourage efficient resource
use including:14
• A roof featuring reflective materials to reduce the building’s heat island effect.
• 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.
• Design and model expected to use 35% less energy than the LEED baseline across heating, cooling, lighting, hot water
production and other operational functions.
• Designed 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.
• Use of low-emitting flooring, paints and sealants in the construction in compliance with the US SCAQMD Rule #1168
to reduce VOC emissions.
• No chlorofluoro-carbon-based refrigerants (CFCs) were used in building heating, ventilation, air conditioning and
refrigeration systems.
• PureTech’s kitchen area is stocked 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.
14 All data in this section 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 2022 35
ESG
ESG Report — continued
Chapter 4: Governance
Our long-term success depends on building and maintaining
trust with our stakeholders. We strive to meet our
stakeholders’ expectations by being responsible corporate
citizens and holding ourselves to the highest ethical
standards of compliance and transparency. Our approach
to ESG governance, which underpins our focus on Patients,
People and Planet, focuses on the following key areas:
Commitment 1
Establish and maintain a strong ESG governance
Commitment 2
Uphold high standard business ethics
Commitment 3
Strengthen supply chain standards
PureTech’s overall governance framework is described
in detail in pages 44 to 102 of this report in line with the
UK Corporate Governance Code.
ESG Governance
PureTech recognizes the importance of good governance
in delivering positive ESG outcomes, and we have an
effective ESG management framework in place to deliver
this consistently.
Our ESG Committee was founded in 2020 and is chaired
by non-Executive Director, Kiran Mazumdar-Shaw. The
ESG committee is responsible for managing, reviewing and
advancing our ESG progress and enhancing disclosure and
transparency through our annual ESG reporting process.
The ESG Committee, along with other Board Committees,
meets on a quarterly basis (or as the need arises) to assess
and monitor ESG risks.
The ESG Committee reports into the Board, who hold overall
strategic oversight of ESG. The ESG committee is chaired by
a non-Executive Director, a Board member, and supported by
at least one C-Suite Officer and a dedicated internal working
group and welcomes active engagement with shareholders
and other stakeholders on matters relating to ESG and
corporate stewardship.
See our TCFD Report on pages 41 to 43 for more on the
Board roles and structure.
Sustainability-linked remuneration
As of 2022, we have not set any climate-related targets or
incorporated targets into our goals or remuneration policies.
Given the size and nature of our business, we do not yet
deem it appropriate or material to set far-reaching ambitions
in this area.
Our commitment to measuring, monitoring and improving
our climate-related performance remains in place (see pages
32 to 35) as we continue to track our climate-related risks
according to the TCFD guidelines (see pages 41 to 43 for the
2022 TCFD Report).
As our business continues to grow towards
commercialization, we will assess and implement
sustainability-linked remuneration within performance
targets as appropriate.
36 PureTech Health plc Annual report and accounts 2022
Board Diversity
2022 PureTech Board and Executive Committee
composition
44%
44%
gender diversity on the Board level
cultural diversity on the Board level
We take great pride in our Board diversity performance – and
were recognized in 2022 as one of the leading organizations
for board diversity across FTSE 250 businesses.
In 2019, we had 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.
In 2021, we met FTSE Women Leaders Review’s increased
gender diversity target recommending FTSE 350 companies
to achieve a minimum of 40% women on Boards and in
Leadership teams by the end of 2025 and we continued
to uphold this high standard in 2022.
For details on our gender diversity initiatives, please see
page 23.
Business Ethics
For PureTech, being an ethical business means operating with
transparency to promote inclusive behaviors throughout our
organization and across our day-to-day interactions.
We are committed to acting with transparency, integrity,
professionalism and excellence to maintain high levels of
trust with our stakeholders. This requires careful observance
of all applicable laws and regulations, as well as regard for
the highest standards of conduct and personal integrity.
To achieve this, we require all PureTech employees to
abide by our Code of Business Conduct and Ethics, which
reminds and guides employees through the principles and
requirements that govern our business and behavior.
Anti-Bribery and Corruption
Our Code of Business Conduct and Ethics and our Anti-
Bribery Policy outlines the expectations we have for all
employees when it comes to anti-bribery and corruption.
We take a zero-tolerance approach to bribery and corruption
in all its forms. Specific principles related to anti-bribery and
corruption are outlined in our Professional Practices Policy,
while third-party risk is governed by our Anti-Bribery Third-
Party Guidelines. PureTech is bound by UK laws, including
the Bribery Act 2010, and has implemented policies and
procedures accordingly.
ESG
ESG Report — continued
Employees are required to review and consent to PureTech’s
corruption, anti-trust violations, and conflicts of interest
policy during the onboarding process and reinstate their
commitment on an annual basis.
To prevent bribery and corruption, our Whistleblowing
Policy encourages our staff to confidentially report any
ethical concerns, wrongdoings, breaches, or improper
conduct by or on behalf of the Group without fear of
reprisal. Appropriate individuals, depending on the nature
of the specific issue at hand, investigate all allegations
of misconduct and communicate findings to the proper
personnel inside the Company, which often includes the
CEO, to ensure that all concerns are addressed.
In 2022, PureTech was not involved in and suffered no
monetary losses due to legal proceedings related to
corruption and bribery.
Code of Ethics for HealthCare Professionals
PureTech maintains a policy to ensure that interactions and
business relationships with healthcare professionals (HCPs)
are conducted in accordance with applicable regulations and
ethical standards. The policy provides, among other things,
that (a) HCPs will be selected solely on the basis of their
qualifications and (b) payments will be made at fair market
value taking into account purchasing history or volume or
prospective ability to drive sales. The policy provides the
roadmap for engagement of HCPs and regulates interactions
between PureTech and HCPs.
Anti-Harassment and Grievance Mechanism
PureTech does not tolerate any forms of harassment or
offensive conduct, including sexual harassment or any other
form of harassment, as is clearly outlined in our Harassment
Policy. The policy states our position towards any behavior
that impacts an individual’s self-esteem at work and provides
examples of prohibited behavior.
All PureTech employees are required to complete mandatory
annual anti-harassment training to ensure that all employees
are able to recognize and identify behaviors that may cause
harm to their colleagues.
The training highlights the importance of creating an
environment that encourages respect for all people and also
provides an overview of our grievance reporting structure
and how inappropriate conduct is handled. To ensure
continuous compliance and awareness, we send periodic
reminders to encourage our employees to undertake
refresher training relating to anti-corruption. We also ensure
that all new employees complete training during onboarding.
PureTech is committed to maintaining its reputation for
honesty, fairness, respect, responsibility, integrity, trust
and sound business judgment. As part of this commitment
to ethical and legal conduct, we strongly encourage all
employees to ask questions and report any concerns.
PureTech’s Compliance HelpLine allows employees to report
suspected issues, allegations and concerns anonymously. It
is a violation of PureTech’s policy to retaliate against anyone
raising a question or reporting a good faith concern.
Human Rights and Modern Slavery
We are committed to being a responsible corporate citizen
by supporting the protection and advancement of human
rights for our people, patients and the communities in
which we operate. We fully support the Children’s Rights
and Business Principles set out by the UN Declaration of
the Rights of the Child and their protection.
PureTech is exempt from producing a Modern Slavery
statement as we do not yet meet the revenue threshold and
do not have a formal commercial supply chain in place as
a clinical stage business. We do not have cause to believe
that any breaches in Modern Slavery are occurring within
our business or supply chain, and we are striving to adopt
a Modern Slavery transparency statement in the future.
In 2022, we conducted a human rights assessment to
identify how our scientific mission and operational policies
are aligned to deliver on our human rights commitments.
The following are our most material human rights impacts
and their relevance to the International Bill of Human
Rights topics:
Patient
Patient safety
Right to health
Pg 20-21
People
Diversity and
inclusion
Right to equality
between men
and women
Planet
Pg 23
GHG emission Freedom to
Pg 32-34
Addressing
unmet needs
Right to enjoy
the benefits
of science
Accelerating
our R&D engine
to unlock new
medicines
Right to enjoy
the benefits
of science
Pg 20
Employee
Development,
Retention and
recruitment
Right to just
and favorable
conditions
at work
Pg 25-27
Waste
management
Health and
safety
Right to health
Pg 28-29
Sustainable
facility
operations
Collaboration
and growth
Right to an
adequate
standard
of living
Pg 29-31
undertake
scientific
research and
creative activity
Right to an
adequate
standard
of living
Right to just
and favorable
conditions
at work
Pg 34
PureTech Health plc Annual report and accounts 2022 37
ESG ESG Report — continued
Business Continuity
Business continuity is essential to the ongoing success of our
business. It demonstrates the resilience of our organization
and our ability to adapt to any disruptions without delays
in clinical trials or loss of vital information.
In 2022, we continued to assess our systems and identify
ways to improve them. To achieve this, we used an
external vulnerability and verification analysis which allows
us to identify and improve any potential weaknesses in
our processes.
For example, during the year, we collaborated with a cyber
security consultant to assess the security and durability
of our IT systems. As a result, we have implemented two
external tools to enhance our network security:
• VulScan: identifies security vulnerabilities in our network
to ensure business continuity. The tool provides up-to-date
information on the degrees of risk for each vulnerability
and provides appropriate mitigation strategies.
• Crowdstrike: is used for endpoint protection and to
secure the most critical areas of enterprise risk.
We believe a robust IT infrastructure and business continuity
plan is essential to a sustainable operation. Testament to our
IT infrastructure, we remained operational throughout the
COVID-19 pandemic with limited disruption.
Data Privacy and Security
PureTech is committed to upholding and protecting the
privacy of ourselves and our stakeholders. Our Information
Security Acceptable Use Policy outlines the acceptable use
of computer equipment, systems, and software at PureTech,
and maintains a balance between our established culture
of openness, trust and integrity and ensures the safety and
security of our stakeholders, systems, and information.
All employees are required to complete an annual
cybersecurity training to increase employees’ awareness
and understanding of cybersecurity risk.
Additionally, to ensure all clinical trial participant privacy
and confidentiality of Protected Health Information (PHI)
are protected during the conduct of a clinical trial sponsored
by PureTech, all employees who are involved in our clinical
trial operations are required to follow our PHI Standard
Operating Procedure (SOP). (See pages 20 to 21 for more
on patient safety).
Supply Chain
Given the nature of our business operations as a clinical-
stage company, we have a small scale supply chain,
which is mainly comprised of material suppliers for the
development of our Wholly Owned Programs. As a result,
our environmental and social impacts are minimal at the
current scale and phase of our business. Nevertheless, we
are committed to ensuring that all aspects of our business
operations, including relationships with our suppliers, are
sustainable, ethical and responsible.
To achieve this, we have a robust Quality Management
System (QMS) in place to oversee our material suppliers.
This consists of several key SOPs which describe the
controlled processes we follow regarding qualification,
evaluation, change management, and training, to name
a few areas, and ensure consistent conformance to our
high standards. More details on our SOPs are included
in the Patients Section of this Report under Ethical R&D
(see pages 20 to 22).
To determine vendor risks and accelerate new vendor
onboarding, risk assessment processes are built into
all our procedures for vendor audits and data integrity
for Chemistry, Manufacturing, and Controls (CMC). In
2022, approximately half of our Tier I suppliers who
provide materials for our clinical development participate
in Rx-360 International Pharmaceutical Supply Chain
Consortium equivalent audit programs.
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 furthering
our mission of changing the lives of patients with devastating
diseases, and we believe this can only be achieved through
building a sustainable business.
We believe that our environmental, social, and governance
initiatives are crucial to achieving our goals and we are
committed to continuously improving in these areas.
By reporting our ESG metrics, we can better track our
progress and identify areas for improvement, helping
us to further orient PureTech towards a brighter future.
Stakeholder Stewardship
PureTech remains committed to being a good corporate
citizen and our ESG program is one way of delivering on
the commitment. Our stakeholders’ feedback is vital to
us in order to improve our sustainability performance
and disclosure. Accordingly, we welcome your comments,
questions, or suggestions on how we can enhance our
ESG efforts in the future by emailing us at:
esg@puretechhealth.com.
38 PureTech Health plc Annual report and accounts 2022
ESG ESG Report — continued
Appendix
SASB Index
Topic
Accounting Metric
Category
Unit of
measure
SASB
Code
Disclosure Location/
Rationale For Omission
Discussion, by world region, of management
process for ensuring quality and patient
safety during clinical trials
Discussion
and Analysis
–
HC-BP-
210a.1
Deliver safe clinical trials,
pages 20 to 22
Safety of
Clinical Trial
Participants
Number of FDA Sponsor Inspections related
to clinical trial management and
pharmacovigilance that resulted in:
(1) Voluntary Action Indicated (VAI) and
(2) Official Action Indicated (OAI)
Quantitative
Number
HC-BP-
210a.2
Deliver safe clinical trials,
pages 20 to 22
Total amount of monetary losses as a result
of legal proceedings associated with clinical
trials in developing countries
Quantitative
Reporting
currency
HC-BP-
210a.3
N/A
There have not been any
legal proceedings
Access to
Medicines
Description of actions and initiatives to
promote access to health care products for
priority diseases and in priority countries as
defined by the Access to Medicine Index
Discussion
and Analysis
n/a
HC-BP-
240a.1
List of products on the WHO List of
Prequalified Medicinal Products as
part of its Prequalification of Medicines
Programme (PQP)
Discussion
and Analysis
n/a
HC-BP-
240a.2
Number of settlements of Abbreviated New
Drug Application (ANDA) litigation that
involved payments and/or provisions to delay
bringing an authorized generic product to
market for a defined time period
Quantitative
Number
HC-BP-
240b.1
Affordability
& Pricing
Percentage change in: (1) average list price
and (2) average net price across US product
portfolio compared to previous year
Quantitative
Percentage (%)
HC-BP-
240b.2
Percentage change in: (1) list price and (2)
net price of product with largest increase
compared to previous year
Quantitative
Percentage (%)
HC-BP-
240b.3
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
PureTech Health plc Annual report and accounts 2022 39
ESG ESG Report — continued
Topic
Accounting Metric
Category
Unit of
measure
SASB
Code
Disclosure Location/
Rationale For Omission
List of products listed in the Food and Drug
Administration’s (FDA) MedWatch Safety
Alerts for Human Medical Products database
Discussion
and Analysis
n/a
HC-BP-
250a.1
Number of fatalities associated with
products as reported in the FDA Adverse
Event Reporting System
Quantitative
Number
Drug Safety
Number of recalls issued;
total units recalled
Quantitative
Number
HC-BP-
250a.2
HC-BP-
250a.3
Total amount of product accepted for
takeback, reuse, or disposal
Quantitative
Metric tons (t)
HC-BP-
250a.4
Number of FDA enforcement actions taken
in response to violations of current Good
Manufacturing Practices (CGMP), by type
Quantitative
Number
HC-BP-
250a.5
Description of methods and technologies
used to maintain traceability of
products throughout the supply chain
and prevent counterfeiting
Discussion
and Analysis
n/a
HC-BP-
260a.1
Counterfeit
Drugs
Discussion of process for alerting customers
and business partners of potential or known
risks associated with counterfeit products
Discussion
and Analysis
n/a
HC-BP-
260a.2
Number of actions that led to raids, seizure,
arrests, and/or filing of criminal charges
related to counterfeit products
Quantitative
Number
HC-BP-
260a.3
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
40 PureTech Health plc Annual report and accounts 2022
ESG ESG Report — continued
Topic
Accounting Metric
Category
Unit of
measure
SASB
Code
Disclosure Location/
Rationale For Omission
Total amount of monetary losses as a result
of legal proceedings associated with false
marketing claims
Quantitative
Reporting
currency
HC-BP-
270a.1
Description of code of ethics governing
promotion of off-label use of products
Discussion
and Analysis
n/a
HC-BP-
270a.2
Discussion of talent recruitment and
retention efforts for scientists and research
and development personnel
Discussion
and Analysis
n/a
(1) Voluntary and (2) involuntary turnover
rate for: (a) executives/senior managers, (b)
midlevel managers, (c) professionals, and (d)
all others
Percentage of (1) entity’s facilities and (2)
Tier I suppliers’ facilities participating in
the Rx-360 International Pharmaceutical
Supply Chain Consortium audit program or
equivalent third-party audit programs for
integrity of supply chain and ingredients
Total amount of monetary losses as a result
of legal proceedings associated with
corruption and bribery
Quantitative
Rate
Quantitative
Rate
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
N/A
PureTech is a clinical-stage
biotherapeutics company
and has no products on the
market from within our Wholly
Owned Pipeline
Commitment 2: Promoting
employee development to
attract and retain the best talent,
pages 25 to 27
Commitment 2: Promoting
employee development to
attract and retain the best talent,
pages 25 to 27
Supply chain, page 38
HC-BP-
330a.1
HC-BP-
330a.2
HC-BP-
430a.1
Ethical
Marketing
Employee
Recruitment,
Development
& Retention
Supply Chain
Management
Business
Ethics
Quantitative
Reporting
currency
HC-BP-
510a.1
Business Ethics, anti-bribery
and corruption, pages 36 to 37
Description of code of ethics governing
interactions with health care professionals
Discussion
and Analysis
n/a
HC-BP-
510a.2
Code of ethics for healthcare
professionals, page 37
TCFD Disclosure
In this section, we present PureTech’s second formal disclosure aligned to the Task Force on Climate-related Financial
Disclosures (TCFD) guidelines. The TCFD was established in 2015 and is based on a set of 11 recommendations from the
UK Financial Stability Board (FSB) detailing how organizations should disclose their climate-related financial risks and
opportunities in a clear and consistent way.
Building on last year’s disclosure, this section outlines PureTech’s continued efforts to adopt, measure, manage and mitigate
its climate and sustainability-related impacts. Our process and the actions outlined below refer to PureTech’s approach as of
December 31, 2022.
Overview
Our ability to manage any potential climate-related impacts on our business and strategic direction is integral to our long-
term success.
While our impact on the environment is minimal due to the size, scale and nature of our operations (see “Strategy”), we are
committed to mitigating any long-term climate-related risks in line with emerging climate science as our business continues
to expand. To achieve this, we focus on managing energy consumption across our operations, reducing business travel,
optimizing employee commuting, and managing third-party deliveries.
We also measure our ESG-related performance and have embedded effective procedures and processes within our risk
management framework to ensure we are taking appropriate action.
PureTech Health plc Annual report and accounts 2022 41
ESG ESG Report — continued
Governance
Our Board of Directors is tasked with risk identification and with implementing procedures and strategies for risk mitigation
and management. This is discussed during periodic meetings to identify any key or emerging risks facing PureTech.
The Board utilizes its risk management framework to guide our overall strategy, business planning, corporate policies, actions,
and objectives. These are implemented by our management team with oversight and advice from the Board. This process
includes monitoring any emerging or ongoing climate or environmental-related risks. More information on the roles and
responsibilities of the Board, including detail on our risk management framework can be found on pages 44 to 102 of our 2022
Annual Report and Accounts.
In 2020, PureTech’s Board of Directors formed an ESG Committee, chaired by Non-Executive Director, Kiran Mazumdar-Shaw.
The responsibility of the ESG Committee is to effectively manage, review and advance ESG issues on an ongoing basis. This
process includes assessing and overseeing PureTech’s climate-related risks and opportunities, as well as considering how
these should inform business planning and strategic focus into the future.
As of 2022, the ESG Committee comprised one member of PureTech’s Executive team and a dedicated working group of
cross-functional leaders to drive internal action and implementation. The ESG Committee is supported by several third-party
experts to guide our approach. The Committee periodically reports its activities to the Board during scheduled meetings
or via updates throughout the year. The progress of our ESG initiatives is reported in our Annual Report and Accounts, see
pages 16 to 38 of the 2022 ESG Report for more.
Board of
Directors
Nomination
Committee
Audit
Committee
Remuneration
Committee
ESG Committee; Sustainability Oversight
Management Team
R&D Function
Operations Function
Day-to-day Sustainability Oversight
Business Foundation
Business Strategy
Our Mission
Shareholder Value Creation
We discover, develop and aim to commercialize new therapies for devastating diseases where(cid:31)
limited or no treatment options(cid:31)currently exist for patients
Strategy
To identify physical and transitional climate-related risks that may impact our business, PureTech conducts detailed analysis
with third-party organizations to guide our strategic approach.
As a clinical-stage biotherapeutics company with no currently marketed drugs, the scope and scale of our operations have
led us to conclude that PureTech is unlikely to face any material climate-related physical or transition risks over the next 12-24
months. Looking further ahead, we will continue to conduct broad-based risk assessments, and we will monitor the following
climate-related risk areas and their potential financial impacts identified through our risk management on an ongoing basis
(for their short, medium and long-term risk):
• Transitional and Market risks: Associated with higher operating costs due to the introduction of carbon pricing/taxation
schemes or other supply-chain cost increases
• Physical and Market risks: Associated with supply chain or operational disruption leading to increased costs from the
increased severity of extreme weather events, or long-term changes to weather patterns
• Transitional and Reputational risks: Associated with any potential impacts to reputation if PureTech falls short of
stakeholder expectations regarding climate-related performance or impact management
• Transitional and Legal and Reputational risks: Associated with the increased cost of compliance/non-compliance
with new climate regulations and reporting
42 PureTech Health plc Annual report and accounts 2022
ESG ESG Report — continued
We intend to implement formal business continuity plans over the next 12-24 months to ensure that our physical operations
and supply chains have effective measures in place to mitigate any potential climate-related risks. This process was delayed in
2022 due to the lack of immediate-term risk potential. As we look to the future, we will continue to monitor any climate-related
risks and opportunities that may impact our operations. This may include performing a scenario analysis when our operations
are sufficiently advanced for longer-term strategic planning.
As well as our assessment of risks, we have not identified any specific material climate-related opportunities that have the
potential to impact our business model in the medium to long term. However, we will continue to monitor the following areas
over time (for their short, medium, and long-term opportunities):
• Market opportunities: Associated with reducing operating costs through energy-efficient improvements
• Transitional and Reputational opportunities: Associated with being early-adopters of enhanced disclosure measures
or low-carbon technologies
Risk Management
While climate-related risks are not currently identified as a principal risk for PureTech, we will continue to monitor our climate-
related risk profile as internal and external circumstances change.
Risks are formally identified by the Board and appropriate processes are in place to monitor and mitigate them on an ongoing
basis (see “Governance”). In addition, we are committed to introducing climate risk tools and processes that identify, manage
and act on any material climate-related risks by 2025. Our ESG committee, with the assistance of third-party advisors,
considers climate-related risks and strategic priorities on an annual basis, or more regularly, as the need arises.
As part of our climate-related monitoring program, PureTech employs external consultants to audit and report on our climate-
related metrics, including the following assessments which are more fully discussed in our 2022 ESG Report on pages 32 to 35:
• Streamlined Energy and Carbon Reporting (SECR) prepared by Verco
• Green Building Report and LEED Checklist prepared by WSP in conjunction with Related Beal, the landlord of our
headquarters facility
• Hazardous Waste Reporting prepared by Veolia Environment S.A.
These findings inform the ESG Committee’s climate risk analysis strategy to identify and act on any physical and transition
risks considered material to the Company. All employees are encouraged to provide their suggestions for how to address
identified areas of risk, including climate-related risk, via routine company town hall meetings or by discussing with their
line manager.
Metrics and Targets
PureTech employs the services of specialist adviser Verco, to quantify and verify the GHG emissions associated with its
operations. We report our Scope 1 and 2 emissions as required under the Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2018 and the Streamlined Energy and Carbon Reporting (SECR) guidelines. We also report
our Scope 3 emissions.
An operational control approach is used to define our organizational boundary. This is the basis for determining emissions.
The emissions sources that constitute our boundary include:
• 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.
Our current emissions profile, as well as other environmental-related measures adopted, can be found in our 2022 ESG
Report on pages 32 to 35. PureTech considers whether additional environmental metrics should be developed and reported
on throughout the year.
Given (a) the nature of our industry, business operations and therapeutic mission, (b) that PureTech is a clinical-stage company
with no current supply chain emissions, and (c) we have not identified any material climate-related risks to our business,
PureTech has not set any emissions-related targets to date. We do plan on introducing climate-related targets when our
operations have sufficiently advanced to a commercial stage.
Next steps
We remain committed to operating as a good corporate citizen, and to managing the climate-related impacts of our
operations and environmental matters. As our therapeutic pipeline advances to a commercial stage in the future, we intend to
(1) enhance climate-related risks and opportunities management, (2) identify and address areas of improvement year-on-year,
and (3) set GHG emissions targets and measure performance and progress annually.
PureTech Health plc Annual report and accounts 2022 43
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 175 to 211 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.
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.
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 or our
management team serve on the board of
directors of several of the businesses so as
to continue to guide each business’s strategy
and to oversee proper execution thereof.
We use our extensive network of advisors to
ensure that each business has appropriate
domain expertise as it develops and
executes on its strategy and the R&D
Committee of our Board reviews each
program at each stage of development and
advises our Board on further actions.
Additionally, we have a diversified model
with numerous assets such that the failure
of any one of our businesses or therapeutic
candidates 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 are given to assure the quality of
the vendors used to perform the work.
* 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.
44 PureTech Health plc Annual report and accounts 2022
Governance
Risk management — continued
Risk
Impact*
Management Plans/Actions
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.
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.
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. To
mitigate the risk further we have insurance in
place to cover product liability claims which
may arise during the conduct of clinical trials.
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.
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
therapeutic candidates. 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.
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.
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.
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.
PureTech Health plc Annual report and accounts 2022 45
Governance
Risk management — continued
Risk
Impact*
Management Plans/Actions
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
their 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 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.
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
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 or parts thereof. The timing and
size of these potential inflows are uncertain.
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.
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.
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 the risk that we may lose key personnel.
The failure to attract highly effective
personnel or the loss of key personnel
would have an adverse impact on our ability
to continue to grow and may negatively
affect our competitive advantage.
The Board regularly 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 and retain outside recruiters when
necessary or advisable. 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.
46 PureTech Health plc Annual report and accounts 2022
Governance
Risk management — continued
Risk
Impact*
Management Plans/Actions
9 Risks related to business, economic
or public health disruptions
Business, economic, financial or geopolitical
disruptions or global health concerns could seriously
harm our development efforts and increase our
costs and expenses.
We regularly review the business, economic,
financial and geopolitical environment in
which we operate. It is possible that we may
see further impact as a result of current
geopolitical tensions. We monitor the
position of our suppliers, clinical trial sites,
regulators, providers of financial services and
other third parties with whom we conduct
business. We develop and execute
contingency plans to address risks
where appropriate.
Broad-based business, economic , financial
or geopolitical disruptions could adversely
affect our ongoing or planned research and
development activities. Global health
concerns, such as a further pandemic, or
geopolitical events, like the ongoing
consequences of the invasion of Ukraine,
could also result in social, economic, and
labor instability in the countries in which we
operate or the third parties with whom we
engage. We consider the risk to be
increasing since the prior year and note
further risks associated with the banking
system and global financial stability. 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,
providers of financial services and other
third parties with whom we conduct
business, were to experience shutdowns or
other business disruptions, our ability to
conduct our business in the manner and on
the timelines presently planned could be
materially and negatively impacted. It is also
possible that global health concerns or
geopolitical events such as these ones 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.
PureTech Health plc Annual report and accounts 2022 47
Governance
Viability
PureTech Health plc Viability
Statement
In accordance with the UK Corporate
Governance Code (Governance
Code) published in July 2018, the
Directors have assessed the prospects
of the Company, and with respect
to the December 31, 2022, financial
position, we have sufficient available
funding to extend operations into the
first quarter of 2026. This period is
deemed appropriate having assessed
the financial health as of December
31, 2022. 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 2026. 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. It should be noted
that the majority of funding has been
allocated to the advancement of the
Wholly Owned Programs.
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 mean 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 consolidated cash, cash
equivalents and short-term
investments as of December 31, 2022,
were $350.1 million. Our PureTech
Level cash, cash equivalents and short-
term investments as of December 31,
2022, were $339.5 million (see our
financial review section below with
regard to information on this non-
IFRS measure). Our PureTech Level
cash, cash equivalents and short-term
investment position is highly liquid and
is forecasted 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, in order to reach
significant developmental 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
being developed within our Wholly
Owned Pipeline as well as those of our
Founded Entities. Further, the Board
has considered milestone and royalty
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, Vor and
Akili, which are all publicly traded on
Nasdaq as well as Gelesis, which was
listed on the New York Stock Exchange
as of December 31, 2022. In April
2023, Gelesis was delisted from the
New York Stock Exchange, refer to
Note 26 in our consolidated financial
statements for further information.
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 after key value accretion
has occurred similar to the execution of
the sale of 1,000,000 common shares
of Karuna for aggregate proceeds of
$118.0 million in February 2021, the
sale of 750,000 common shares of
Karuna for an aggregate proceeds of
100.1 million in November 2021, the
sale of 602,100 common shares of
Karuna for an aggregate proceeds of
$115.5 million in August and September
2022, and the the sale of 535,400
common shares of Vor for an aggregate
proceeds of $3.3 million in September
and December 2022. 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. 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, cash equivalents
and short-term investments, that we
are highly likely to be able to fund our
infrastructure requirements, advance
multiple clinical trials within our Wholly
Owned Pipeline, including trials in more
advanced stages, 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
and meet our obligations over the
period of the assessment.
48 PureTech Health plc Annual report and accounts 2022
Governance Key Performance Indicators – 2022
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 Entities
Number of programs created for pipeline expansion
$1.28b1,2
$1.25b (98%) came from third parties
2021: $731.9m
2020: $247.8m
2019: $666.8m
2018: $274.0m
2017: $102.9m
12
2021: 2
2020: 3
2019: 1
2018: 1
2017: 1
Progress
Karuna, Vor, Gelesis, Akili and Sonde all raised funds in the
form of financings and non dilutive grants in 2022, including
$1.25 billion by third party financial and strategic investors.
Progress
In 2022, we expanded our Wholly Owned Pipeline with the
nomination of of a new therapeutic candidate, LYT-310.
LYT-310 is an oral cannabidiol (CBD) prodrug and the second
therapeutic candidate developed from our Glyph™ platform
to be advanced toward the clinic.
Proceeds generated from sales
of Founded Entity equity
Number of Wholly Owned Programs
advanced through clinical phases2
$115.4m2
2021: $218.1 million
2020: $350.6 million
2019: $9.3 million
12
2021: 1
2020: 3
2019: 0
Progress
A key component of our strategy is to derive value from the
equity growth of our Founded Entities. In 2022, we generated
cash proceeds of approximately $115.4 million from the sale
of equity in one of 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 one of our Wholly Owned Programs, LYT-100,
into late-stage clinical development in 2022. We initiated
a Phase 2b dose-ranging trial in idiopathic pulmonary
fibrosis (IPF), which is expected to serve as the first of two
registration-enabling studies.
Number of clinical trial initiations
Number of clinical readouts
42,3
2021: 11
2020: 6
2019: 6
62,4
2021: 6
2020: 5
2019: 5
Progress
PureTech initiated two clinical trials, PureTech’s partner
initiated one clinical trial for LYT-503, and Karuna initiated
one clinical trial in 2022.
Progress
PureTech completed five clinical trials, and Karuna completed
one clinical trial in 2022.
1 Funding figure includes private equity financings, loans and promissory notes, public offerings or grant awards. Funding figure excludes future milestone considerations
received in conjunction with partnerships and collaborations. Funding figure does not include proceeds from Vedanta’s 2023 post-period financing.
2 Number represents figure for the relevant fiscal year only and is not cumulative.
3 PureTech initiated two clinical trials, PureTech’s partner initiated one clinical trial for LYT-503, and Karuna initiated one clinical trial in 2022.
4 PureTech completed five clinical trials, and Karuna completed one clinical trial in 2022.
PureTech Health plc Annual report and accounts 2022 49
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 44 to 47 and in the Additional
Information section from pages 175
to 212, 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,
2022 and 2021, and for the years
ended December 31, 2022, 2021
and 2020, have been prepared
in accordance with UK-adopted
International Financial Reporting
Standards (IFRS). The Consolidated
Financial Statements also comply fully
with IFRSs as issued by the International
Accounting Standards Board (IASB).
The following discussion contains
references to the Consolidated
Financial Statements of PureTech
Health plc, or the Company, and its
consolidated subsidiaries, together
the Group. These financial statements
consolidate the Company’s subsidiaries
and include the Company’s interest in
associates and investments held at fair
value. Subsidiaries are those entities
over which the Company maintains
control. Associates are those entities
in which the Company does not
have control for financial accounting
purposes but maintains significant
influence over financial and operating
policies. Where the Company has
neither control nor significant influence
for financial accounting purposes, or
when the Company does not hold
common shares (or shares similar to
common shares) we recognize our
holding in such entity as an investment
at fair value. For purposes of our
Consolidated Financial Statements,
each of our Founded Entities are
considered to be either a “subsidiary",
an “associate” or an "investment
held at fair value" depending on
whether PureTech Health plc controls
or maintains significant influence over
the financial and operating policies of
the respective entity at the respective
period end date. For additional
information regarding the accounting
treatment of these entities, see
Note 1 to our Consolidated Financial
Statements included in this report.
For additional information regarding
our operating structure, see “Basis of
Presentation and Consolidation” below.
Fair value of Investments held at fair
value does not take into consideration
contribution from milestones that
occurred after December 31, 2022,
the value of our interests in our
consolidated Founded Entities
(Vedanta, Follica, and Entrega), our
Wholly Owned Programs, or our cash.
Business Background and
Results Overview
The business background is discussed
above from pages 1 to 14, which
describes in detail the business
development of our Wholly Owned
Programs and Founded Entities.
Our ability to generate product
revenue sufficient to achieve
profitability will depend heavily on the
successful development and eventual
commercialization of one or more
of our wholly-owned or Controlled
Founded Entities’ therapeutic
candidates, which may or may not
occur. Our Founded Entities, Gelesis,
Inc. ("Gelesis"), and Akili Interactive
Labs, Inc. ("Akili"), which we have
not controlled since 2019 and 2018,
respectively, have therapeutics cleared
for sale, but our Wholly Owned
Programs and our Controlled Founded
Entities have not yet generated any
meaningful revenue from product sales,
to date. However, we do generate
significant cash from the sale of shares
of our public Founded Entities. See also
Recent Developments section below
with regard to the Royalty Pharma
agreement signed after balance
sheet date.
We deconsolidated a number of our
Founded Entities, specifically Sonde
Health Inc. ("Sonde") in May 2022,
Karuna Therapeutics, Inc. ("Karuna"),
Vor Biopharma Inc. ("Vor"), and
Gelesis in 2019, and Akili in 2018. We
expect this trend to continue into the
foreseeable future as our Controlled
Founded Entities raise additional
funding that reduces our ownership
interest. Any deconsolidation affects
our financials in the following manner:
• our ownership interest does not
provide us with a controlling
financial interest;
• we no longer control the Founded
Entity's assets and liabilities and
as a result we derecognize the
assets, liabilities and non-controlling
interests related to the Founded
Entity from our Consolidated
Statements of Financial Position;
• we record our non-controlling
financial interest in the Founded
Entity at fair value; and
• the resulting amount of any
gain or loss is recognized in our
Consolidated Statements of
Comprehensive Income/(Loss).
We anticipate our expenses to continue
to increase proportionally in connection
with our ongoing development
activities related mostly to the
advancement into late-stage studies
of the clinical programs within our
Wholly Owned Pipeline and Controlled
Founded Entities. We also expect that
our expenses and capital requirements
will increase substantially in the near to
mid-term as we:
• continue our research and
development efforts;
• seek regulatory approvals for
any therapeutic candidates that
successfully complete clinical trials;
and
• add clinical, scientific,
operational financial and
management information systems
and personnel, including personnel
to support our therapeutic
development and potential future
commercialization claims.
In addition, our internal research and
development spend will increase in the
foreseeable future as we may initiate
additional clinical studies for LYT-100,
LYT-200 and LYT-300, and progress
additional therapeutic candidates into
the clinic, such as LYT-310, as well as
advance our technology platforms.
In addition, with respect to our
Founded Entities’ programs, we
anticipate that we will continue to fund
a small portion of development costs
by strategically participating in such
companies’ financings when we believe
participation in such financings is in
the best interests of our shareholders.
The form of any such participation may
include investment in public or private
financings, collaboration, partnership
arrangements, and/or licensing
arrangements, among others. Our
management and strategic decision
makers consider the future funding
needs of our Founded Entities and
evaluate the needs and opportunities
for returns with respect to each of these
Founded Entities routinely and on a
case-by-case basis.
50 PureTech Health plc Annual report and accounts 2022
Governance Financial Review — continued
As a result, we may need substantial
additional funding in the future,
following the period described below
in the Funding Requirement section,
to support our continuing operations
and pursue our growth strategy until
such time as we can generate sufficient
revenue from product sales to support
our operations, if ever. Until such time
we expect to finance our operations
through a combination of monetization
of our interests in our Founded Entities,
collaborations with third parties, or
other sources. We may be unable to
raise additional funds or enter into such
other agreements or arrangements
when needed on favorable terms, or
at all. If we are unable to raise capital
or enter into such agreements, as
and when needed, we may have to
delay, scale back or discontinue the
development and commercialization
of one or more of our wholly-owned
therapeutic candidates.
Measuring Performance
The Financial Review discusses our
operating and financial performance,
our cash flows and liquidity as well as
our financial position and our resources.
The results for each year are compared
primarily with the results of the
preceding year.
Reported Performance
Reported performance considers all
factors that have affected the results
of our business, as reflected in our
Consolidated Financial Statements.
Core Performance
Core performance measures are
alternative performance measures
(APM) which are adjusted and non-
IFRS measures. These measures
cannot be derived directly from our
Consolidated Financial Statements.
We believe that these non-IFRS
performance measures, when
provided in combination with reported
performance, will provide investors,
analysts and other stakeholders with
helpful complementary information
to better understand our financial
performance and our financial position
from period to period. The measures
are also used by management for
planning and reporting purposes.
The measures are not substitutable for
IFRS financial information and should
not be considered superior to financial
information presented in accordance
with IFRS.
Cash flow and liquidity
PureTech Level Cash,
cash equivalents and
short-term investments
Measure type: Core performance
Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc
and wholly-owned subsidiaries (PureTech LYT, PureTech LYT-100, Alivio Therapeutics, Inc., PureTech
Management, Inc., PureTech Health LLC, PureTech Securities Corp, PureTech Securities II Corp)
Why we use it: PureTech Level Cash, cash equivalents and short-term investments is a measure
that provides valuable additional information with respect to cash, cash equivalents and short-
term investments available to fund the Wholly Owned Programs and make certain investments
in Founded Entities
Recent Developments (subsequent to December 31, 2022)
The Company has evaluated subsequent events after December 31, 2022 up to the date of issuance of the Consolidated
Financial Statements, and has not identified any recordable or disclosable events, except for the following:
On March 1, 2023 Vedanta issued convertible debt to a syndicate of investors. The initial close of the debt was for proceeds
of approximately $88.5 million. The note carries an interest rate of 9 percent per annum. The debt has various conversion
triggers and the conversion price is established at the lower of 80% of the equity price of the last financing round, or a certain
pre-money valuation cap established in the agreement. As part of the issuance of the debt, the convertible debt holders
were granted representation in Vedanta's Board of Directors and PureTech lost control over Vedanta. On April 24, 2023,
Vedanta closed the second tranche of the convertible debt for additional proceeds of $18.0 million, of which $5.0 million
were invested by the Company.
On March 22, 2023, the Company entered into an agreement with Royalty Pharma according to which Royalty Pharma
acquired an interset in our royalty from Karuna's KarXT, with $100.0 million in cash up-front, and up to $400.0 million in
additional cash consideration, contingent on the achievement of certain regulatory and commercial milestones.
Gelesis
On February 21, 2023, the Company entered into a Note and Warrant Purchase agreement with Gelesis for $5.0 million cash
consideration. As part of the agreement, the Company received a short term convertible senior secured note of $5.0 million
and warrants to purchase additional shares of Gelesis' common stock. The note carries an interest rate of 12 percent per
annum and holds an initial maturity date of July 31, 2023 unless the note is converted earlier or redeemed by the issuer.
Subsequent to balance sheet date, on April 10, 2023, the NYSE commenced proceedings to delist the common stock
of Gelesis from the NYSE due to Gelesis ceasing to meet certain conditions to trade on such stock exchange. Trading in
Gelesis’s common stock was suspended immediately, and it was subsequently delisted from the NYSE. The common stock
of Gelesis is currently available for trading in the over-the-counter (“OTC”) market under the symbol GLSH.
In addition, in April 2023 PureTech submitted a non-binding proposal to acquire all of the outstanding equity of Gelesis.
Negotiations related to the proposal and any potential deal remain ongoing and are subject to, among other things, approval
of any definitive transaction by independent committees of the boards of both Gelesis and PureTech.
PureTech Health plc Annual report and accounts 2022 51
Governance Financial Review — continued
Financial Highlights
The following is the reconciliation of the amounts appearing in our Statement of Financial Position to the Alternative
Performance Measure described above:
(in thousands)
Cash and Cash Equivalents
Short-term investments
Consolidated Cash, cash equivalents and short-term investments
Less: Cash and Cash Equivalents held at non-wholly owned subsidiaries
PureTech Level Cash, cash equivalents and short-term investments
Basis of Presentation and
Consolidation
Our Consolidated Financial Information
consolidates the financial information
of PureTech Health plc, as well as its
subsidiaries, and includes our interest in
associates and investments held at fair
value, and is reported in four operating
segments as described below.
Basis for Segmentation
Our Directors are our strategic
decision-makers. Our operating
segments are based on the financial
information provided to our Directors
periodically for the purposes of
allocating resources and assessing
performance. We have determined
that each consolidated Founded
Entity is representative of a single
operating segment as our Directors
monitor the financial results at this
level. When identifying the reportable
segments, we have determined that it
is appropriate to aggregate multiple
operating segments into a single
reportable segment given the high
level of operational and financial
similarities across the entities. We
have identified multiple reportable
segments, as presented below.
Substantially all of our revenue
and profit generating activities are
generated within the United States
and, accordingly, no geographical
disclosures are provided.
There was no change to reportable
segments in 2022, except for the
transfer of Sonde Health, Inc. to the
Non-Controlled Founded Entities
segment due to the deconsolidation
of Sonde Health, Inc on May 25, 2022.
The Non-Controlled Founded Entities
segment is comprised of the entities in
respect of which PureTech Health (i) no
longer holds majority voting control as
a shareholder or (ii) no longer has the
right to elect a majority of the members
of the subsidiaries’ Board of Directors.
Upon deconsolidation of an entity,
the segment disclosure is restated to
reflect the change on a retrospective
basis, as this constitutes a change in the
composition of reportable segments.
As of December 31, 2022, the Non-
Controlled Founded Entities segment
includes Sonde Health, Inc. which
was deconsolidated on May 25, 2022.
Segment results incorporate the
operational results of Sonde Health,
Inc. to the date of deconsolidation.
Following the date of deconsolidation,
the Company accounts for its
investment in Sonde Health, Inc. at the
parent level, and therefore the results
associated with investment activity
following the date of deconsolidation
is included in the Parent Company and
Other section.
The Company has revised in this
report the prior year segment
financial information to conform to
the presentation as of and for the year
ending December 31, 2022 to include
Sonde in the Non-Controlled Founded
Entities segment. This change in
segments reflects how the Company’s
Board of Directors reviews the Group’s
results, allocates resources and
assesses performance of the Group at
this time.
As of:
December 31,
2022
December 31,
2021
149,866
200,229
350,095
(10,622)
$339,473
465,708
—
465,708
(46,856)
$418,851
Following is the description of our
reportable segments:
Internal
The Internal segment is advancing
Wholly Owned Programs, which is
focused on improving the lives of
patients with devastating diseases.
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,
2022, this segment included PureTech
LYT, Inc. (formerly Ariya Therapeutics
Inc.), PureTech LYT-100, Inc and Alivio
Therapeutics, Inc.
Controlled Founded Entities
The Controlled Founded Entities
segment is comprised of our
subsidiaries that are currently
consolidated operational subsidiaries
that either have, or have plans to hire,
independent management teams and
have previously raised, or are currently
in the process of raising, third-party
dilutive capital. These subsidiaries
have active research and development
programs and either have entered into
or plan to seek a strategic partnership
with an equity or debt investment
partner, who will provide additional
industry knowledge and access to
networks, as well as additional funding
to continue the pursued growth of
the company. As of December 31,
2022, this segment included Entrega,
Inc., Follica, Inc., and Vedanta
Biosciences, Inc.
52 PureTech Health plc Annual report and accounts 2022
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
no longer has control over the entity.
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
Sonde Health, Inc.
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 (including the share in the
net loss of associates) following the
date of deconsolidation is included
in the Parent Company and Other
segment (the “Parent Company and
Other segment”).
Parent Company and Other
Parent Company and Other includes
activities that are not directly
attributable to the operating segments,
such as the activities of the Parent,
corporate support functions and
certain research and development
support functions that are not directly
attributable to a strategic business
segment as well as the elimination
of intercompany transactions. Parent
Company and Other also captures the
accounting for our holdings in entities
for which control has been lost, which
is inclusive of the following items: gain
on deconsolidation, gain or loss on
investments held at fair value, realized
loss on sale of investments, the share
of net income/ (loss) of associates
accounted for using the equity method,
gain on dilution of ownership interest
in associate, impairment of investment
in associate. As of December 31, 2022,
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, 2022:
Internal Segment
PureTech LYT
PureTech LYT-100, Inc.
Alivio Therapeutics, Inc.
Controlled Founded Entities
Entrega, Inc.
Follica, Incorporated
Vedanta Biosciences, Inc.
Non-Controlled Founded Entities
Sonde Health, Inc.
Parent Segment1
Puretech Health plc
PureTech Health LLC
PureTech Securities Corporation
PureTech Securities II Corporation
PureTech Management, Inc.
1
Includes dormant, inactive and shell entities that are not listed here.
100.0%
100.0%
100.0%
77.3%
85.4%
47.0%
40.2%
100.0%
100.0%
100.0%
100.0%
100.0%
PureTech Health plc Annual report and accounts 2022 53
Governance Financial Review — continued
Components of Our Results
of Operations
and our Controlled Founded Entities’
therapeutic candidates, which include:
developing therapeutics, including the
uncertainty of:
Revenue
To date, we have not generated any
meaningful revenue from product sales
and we do not expect to generate any
meaningful revenue from product sales
for the near term future. We derive our
revenue from the following:
Contract revenue
We generate revenue primarily from
licenses, services and collaboration
agreements, including amounts that
are recognized related to upfront
payments, milestone payments,
royalties and amounts due to us for
research and development services.
In the future, revenue may include
additional milestone payments and
royalties on any net product sales
under our licensing agreements.
We expect that any revenue we
generate will fluctuate from period
to period as a result of the timing
and amount of license, research and
development services and milestone
and other payments.
Grant Revenue
Grant revenue is derived from grant
awards we receive from governmental
agencies and non-profit organizations
for certain qualified research and
development expenses. We recognize
grants from governmental agencies
as grant income in the Consolidated
Statement of Comprehensive Income/
(Loss), gross of the expenditures that
were related to obtaining the grant,
when there is reasonable assurance
that we will comply with the conditions
within the grant agreement and
there is reasonable assurance that
payments under the grants will be
received. We evaluate the conditions
of each grant as of each reporting date
to ensure that we have reasonable
assurance of meeting the conditions
of each grant arrangement and it is
expected that the grant payment will
be received as a result of meeting the
necessary conditions.
For proceeds from sale of our
investments held at fair value, please
see our Consolidated Cash flow
Statements, Net cash provided by
investing activities.
Operating Expenses
Research and Development Expenses
Research and development expenses
consist primarily of costs incurred
for our research activities, including
our discovery efforts, and the
development of our wholly-owned
• employee-related expenses,
• progressing research and
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;
development of our Wholly Owned
Pipeline, including LYT-100, LYT-200,
LYT-300, LYT-310 and continuing
to progress our various technology
platforms and other potential
therapeutic candidates based on
previous human efficacy and clinically
validated biology within our Wholly
Owned Programs;
• expenses incurred under agreements
with consultants who supplement our
internal capabilities;
• establishing an appropriate safety
profile with investigational new
drug application;
• 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.
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
• the success of our Founded Entities
and their need for additional capital;
• identifying new therapeutic
candidates to add to our Wholly
Owned Pipeline;
• successful enrollment in, and
the initiation and completion of,
clinical trials;
• the timing, receipt and terms of any
marketing approvals from applicable
regulatory authorities;
• commercializing our wholly-
owned and our Founded Entities’
therapeutic candidates, if approved,
whether alone or in collaboration
with others;
• establishing commercial
manufacturing capabilities or
making arrangements with third-
party manufacturers;
• addressing any competing
technological and market
developments, as well as any
changes in governmental
regulations;
• negotiating favorable terms in any
collaboration, licensing or other
arrangements into which we may
enter and performing our obligations
under such arrangements;
• maintaining, protecting and
expanding our portfolio of
intellectual property rights, including
patents, trade secrets and know-how,
as well as obtaining and maintaining
regulatory exclusivity for our wholly-
owned and our Founded Entities’
therapeutic candidates;
• continued acceptable safety profile
of our therapeutics, if any, following
approval; and
• attracting, hiring and retaining
qualified personnel.
A change in the outcome of any
of these variables with respect to
the development of a therapeutic
candidate could mean a significant
change in the costs and timing
associated with the development
of that therapeutic candidate. For
example, the FDA, the EMA, or
54 PureTech Health plc Annual report and accounts 2022
Governance Financial Review — continued
another comparable foreign regulatory
authority may require us to conduct
clinical trials beyond those that we
anticipate will be required for the
completion of clinical development
of a therapeutic candidate, or we may
experience significant trial delays due
to patient enrollment or other reasons,
in which case we would be required to
expend significant additional financial
resources and time on the completion
of clinical development. In addition, we
may obtain unexpected results from
our clinical trials and we may elect to
discontinue, delay or modify clinical
trials of some therapeutic candidates
or focus on others. Identifying potential
therapeutic candidates and conducting
preclinical testing and clinical trials
is a time-consuming, expensive and
uncertain process that takes years to
complete, and we may never generate
the necessary data or results required
to obtain marketing approval and
achieve product sales. In addition,
our wholly-owned and our Founded
Entities’ therapeutic candidates,
if approved, may not achieve
commercial success.
General and Administrative Expenses
General and administrative expenses
consist primarily of salaries and
other related costs, including stock-
based compensation, for personnel
in our executive, finance, corporate
and business development and
administrative functions. General
and administrative expenses also
include professional fees for legal,
patent, accounting, auditing, tax and
consulting services, travel expenses
and facility-related expenses, which
include direct depreciation costs
and allocated expenses for rent and
maintenance of facilities and other
operating costs.
We expect that our general and
administrative expenses will increase
in the future as we increase our
general and administrative headcount
to support our continued research
and development and potential
commercialization of our portfolio
of therapeutic candidates.
Total Other Income/(Loss)
Gain on Deconsolidation of Subsidiary
Upon losing control over a subsidiary,
the assets and liabilities are
derecognized along with any related
non-controlling interest (“NCI”).
Any interest retained in the former
subsidiary is measured at fair value
when control is lost. Any resulting gain
or loss is recognized as profit or loss
in the Consolidated Statements of
Comprehensive Income/(Loss).
Gain/(Loss) on Investments Held at Fair
Value
Investments held at fair value include
both unlisted and listed securities held
by us, which include investments in
Akili, Gelesis, Karuna, Vor and Sonde
and certain insignificant investments.
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.
Our ownership in Akili was in preferred
shares until August 2022 at which time
the preferred shares were exchanged
into common shares as part of Akili
SPAC merger (See Note 5 in the
Consolidated financial statements).
Our ownership in Vor was in preferred
shares until February 2021 at which
time the preferred shares were
converted into common shares as part
of Vor Initial Public Offering. Preferred
shares formed part of our ownership in
Gelesis and such preferred shares were
accounted for as Investments Held
at Fair value while the common stock
investment is accounted for under the
equity method. When the investment
in common stock was reduced to zero
by equity method losses, subsequent
equity method losses were applied to
the preferred share investment, which
was considered to be a Long-term
Interest. In January 2022, as part of
the Gelesis SPAC merger with Capstar,
the Gelesis preferred shares were
exchanged for common shares in the
new Gelesis entity and were treated
as an additional investment in Gelesis
equity interest accounted for under the
equity method (for further details see
Note 6 in the consolidated financial
statements). Our common stock
investment in Karuna is accounted for
under IFRS 9 as an investment held
at fair value. Our A-2 and B preferred
share investments in Sonde are
accounted for as investments held
at fair value
Realized loss on sale of Investments
Realized loss on sale of 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 in
2020 and 2021 is attributable to a block
sale discount, due to a variety of market
factors, primarily the number of shares
being transacted was significantly
larger than the daily trading volume
of the security. The difference in 2022
is attributed to the settlement of call
options written by the Company on
Karuna stock.
Other Income (Expense)
Other income (expense) consists
primarily of gains and losses on
financial instruments and in 2022
relates primarily to the backstop
agreement with Gelesis (see Note
6 in the consolidated financial
statements). In prior years includes
also 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, Gain on Dilution of Ownership
Interest and Impairment of Investment
in Associate
Associates are accounted for using
the equity method (equity accounted
investees) and are initially recognized
at cost, or if recognized upon
deconsolidation they are initially
recorded at fair value at the date of
deconsolidation. The consolidated
financial statements include our share
of the total comprehensive income and
equity movements of equity accounted
investees, from the date that significant
influence commences until the date
that significant influence ceases. When
the share of losses exceeds the net
investment in the investee, including
the investment in preferred shares that
are considered Long-term Interests,
the carrying amount is reduced to nil
and recognition of further losses is
discontinued except to the extent that
we have incurred legal or constructive
obligations or made payments on
behalf of an investee.
We compare the recoverable amount
of the investment to its carrying amount
on a go-forward basis and determine
the need for impairment. We recorded
an impairment in the common stock
investment in Gelesis in the year ended
December 31, 2022.
When our share in the equity of the
investee changes as a result of equity
transactions in the investee (related to
financing events of the investee), we
calculate a gain or loss on such change
in ownership and related share in the
investee's equity. During the year
ended December 31, 2022 we recorded
a gain on dilution of our ownership
interest in Gelesis.
PureTech Health plc Annual report and accounts 2022 55
Governance Financial Review — continued
Income Tax
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 or the change in tax status.
Results of Operations
The following table, which has been derived from our audited financial statements for the years ended December 31, 2022,
2021 and 2020, 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 on deconsolidation of subsidiary
Gain/(loss) on investment held at fair value
Realized loss on sale of investment
Other income/(expenses)
Other income/(loss)
Net finance income/(costs)
Share of net income/(loss) of associates accounted
for using the equity method
Gain on dilution of ownership interest in associate
Impairment of investment in associate
Income/(loss) before income taxes
Taxation
Net income/(loss) including non-controlling
interest
Net income/(loss) for the year attributable to the
Owners of the Company
Year ended December 31,
2022
$2,090
13,528
15,618
2021
$9,979
7,409
17,388
2020
$8,341
3,427
11,768
(60,991)
(152,433)
(197,807)
(57,199)
(110,471)
(150,282)
(49,440)
(81,859)
(119,531)
27,251
(32,060)
(29,303)
8,131
(25,981)
138,924
(27,749)
28,220
(8,390)
(92,783)
55,719
—
179,316
(20,925)
1,592
159,983
5,050
(73,703)
—
—
(58,953)
(3,756)
—
232,674
(54,976)
1,035
178,732
(6,115)
(34,117)
—
—
18,969
(14,401)
Change
(2021 to 2022)
Change
(2020 to 2021)
$(7,889)
6,119
(1,770)
(3,792)
(41,962)
(47,524)
27,251
(211,377)
(8,378)
6,539
(185,965)
133,875
45,954
28,220
(8,390)
(33,830)
59,475
$1,638
3,982
5,621
(7,760)
(28,612)
(30,751)
—
(53,358)
34,051
557
(18,749)
11,164
(39,587)
—
—
(77,922)
10,645
(37,065)
(62,709)
4,568
25,644
(67,277)
$(50,354)
$(60,558)
$5,985
$10,204
$(66,543)
Comparison of the Years Ended December 31, 2022 and 2021
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
Total Grant Revenue
Total Revenue
Year ended December 31,
2022
2021
Change
$—
1,500
81
509
$2,090
$2,826
10,702
$13,528
$15,618
$8,129
1,500
115
235
$9,979
$1,253
6,156
$7,409
$17,388
$(8,129)
—
(34)
274
$(7,889)
$1,573
4,546
$6,119
$(1,770)
Our total revenue was $15.6 million for the year ended December 31, 2022, a decrease of $1.8 million, or 10.2 percent
compared to the year ended December 31, 2021. The decrease was primarily attributable to a decrease of $8.1 million
in Contract Revenue in our Internal Segment due to the conclusion of certain collaboration activities, partially offset by
an increase in Grant Revenue of $4.5 million in the Controlled Founded Entities segment, driven by an increase in grants
received in our controlled founded entity, as well as an increase of $1.6 million in Grant Revenue within the Internal segment
as a result of increased grant-related activities in such segment.
56 PureTech Health plc Annual report and accounts 2022
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,
2022
2021
Change
$(116,054)
(34,668)
(826)
(885)
$(152,433)
$(65,444)
(40,667)
(3,116)
(1,244)
$(110,471)
$50,610
(5,999)
(2,290)
(359)
$41,962
Our research and development expenses were $152.4 million for the year ended December 31, 2022, an increase of
$42.0 million, or 38.0 percent compared to the year ended December 31, 2021. The change was primarily attributable to an
increase of $50.6 million in research and development expenses incurred by the Internal segment due to the advancement
of programs in clinical testing partially offset by decreases in the research and development expenses of $6.0 million and
$2.3 million by the Controlled Founded Entities and the Non-Controlled Founded Entities, respectively. We progressed our
ongoing clinical trials of LYT-100, LYT-200 and of LYT 300 in multiple indications, as well as advanced our research activities.
The increase in the Internal Segment was primarily driven by an increase in clinical trial and clinical research organization
expenditures of $32.7 million, an increase in research and development related employee compensation expense of
$10.5 million (including an increase of $2.0 million in non cash stock based compensation expense), an increase in analytical
and contract manufacturing testing costs of $4.8 million, and an increase in consulting and professional fees of $3.3 million.
The decrease in the Controlled Founded Entities was driven by a $3.5 million reimbursement of expenses related to a
settlement reached with a prior collaboration partner as well as additional decreases of approximately $3 million in clinical
study costs. The decrease in Non-Controlled Founded Entities was due to the fact that in 2022 the results of operations of
Sonde are included only through the date of deconsolidation while in 2021 such results are included for a full year.
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,
2022
2021
Change
$(8,301)
(16,462)
(1,296)
(34,933)
$(60,991)
$(8,673)
(17,504)
(3,225)
(27,797)
$(57,199)
$(373)
(1,042)
(1,929)
7,136
$3,792
Our general and administrative expenses were $61.0 million for the year ended December 31, 2022, an increase of
$3.8 million, or 6.6 percent compared to the year ended December 31, 2021. The change was attributable to an increase of
$7.1 million in the Parent Company and other segment, offset by a decreases of $1.9 million in the Non-Controlled Founded
Entities segment, $1.0 million in the Controlled Founded Entities, and $0.4 million in the Internal Segment. The increase in
the Parent Company and other segment was driven by a $2.5 million increase in employee compensation expense due to
increase in headcount and adjustments to compensation due to inflation, as well as a $4.5 million increase in other taxes,
while the decrease in Non-Controlled Founded Entities was driven by the fact that in 2022 the results of operations of Sonde
are included only through the date of deconsolidation while in 2021 such results are included for a full year. The decrease in
Controlled Founded Entities results from a decrease in employee compensation expenses.
Total Other Income (Loss)
Total Other loss was $26.0 million for the year ended December 31, 2022 compared to Other income of $160.0 million for
the year ended December 31, 2021, reflecting a change of $186.0 million. The increase in losses was primarily attributable
to a loss from investments held at fair value of $32.1 million for the year ended December 31, 2022, compared to a gain of
$179.3 million for the year ended December 31, 2021 and to a much lesser extent an increase in realized loss from the sale
of an investment of $8.4 million. The loss from investments held at fair value for the year ended December 31, 2022 was
primarily attributed to our holdings in Akili, Vor and Gelesis earn-out shares, partially offset by a gain on Karuna holdings
(see Note 5 in our consolidated financial statements for further details). The aforementioned increase in losses was partially
offset by a one-time gain of $27.3 million as a result of the deconsolidation of Sonde and a gain of $7.6 million in respect
of the Gelesis back-stop agreement (See Note 5 to the Consolidated Financial Statements for more details) during the year
ended December 31, 2022.
Net Finance Income (Costs)
Net finance Income was $138.9 million for the year ended December 31, 2022, compared to net finance income of $5.0 million
for the year ended December 31, 2021, reflecting a change of $133.9 million in Net finance Income (costs). The change was
primarily attributable to the fact that during the year ended December 31, 2022 net change in fair value of subsidiaries'
preferred shares, warrant and convertible note liabilities was income of $137.1 million, primarily related to change in fair value
of Vedanta preferred share liabilities, while for the year ended December 31, 2021 such change was a gain of $9.6 million,
leading to increased income of $127.5 million. To a much lesser extent, the increase in finance income was also derived from
a $0.8 million decrease in contractual interest expense on subsidiary convertible notes, and a $5.6 million increase in interest
income from financial assets during the year ended December 31, 2022, as compared to the year ended December 31, 2021.
PureTech Health plc Annual report and accounts 2022 57
Governance
Financial Review — continued
Share of Net Income/(loss) of Associates accounted for using the equity method, Gain on Dilution of Interest in Associate and
Impairment of Investment in Associate
For the year ended December 31, 2022, the share in net loss of associates reported under the equity method was
$27.7 million as compared to the share in net loss of $73.7 million for the year ended December 31, 2021. The change
was primarily attributable to a decrease in our equity interest in Gelesis following the SPAC exchange (see Note 6 to our
Consolidated Financial Statements), as well as a decrease in Gelesis losses reported under IFRS for the year ended December
31, 2022, as compared to the losses reported for the year ended December 31, 2021. In addition, during the year
ended December 31, 2022, PureTech recorded a gain on dilution of its equity ownership interest in Gelesis of $28.2 million
as a result of the completion of the merger with CapStar on January 13, 2022 - See Note 6 to the Consolidated Financial
Statements for more details. Also, during the year ended December 31, 2022, the Company recorded an impairment in its
investment in Gelesis of $8.4 million.
Taxation
Income tax expense was a benefit of $55.7 million for the year ended December 31, 2022, as compared to an expense of
$3.8 million for the year ended December 31, 2021. The increase in the income tax benefit was primarily attributable to the
increase in gains that are non taxable for the year ended December 31, 2022 as compared to the year ended December 31,
2021 and to a lesser extent to a 2022 change in state apportionment. For a full reconciliation from the statutory tax rate to
the effective tax rate, see Note 25 to our Consolidated Financial Statements.
Comparison of the Years Ended December 31, 2021 and 2020
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
Total Grant Revenue
Total Revenue
Year Ended December 31,
2021
2020
Change
$8,129
1,500
115
235
$9,979
$1,253
6,156
$7,409
$17,388
$5,297
896
93
2,054
$8,341
$1,563
1,864
$3,427
$11,768
$2,833
604
22
(1,819)
$1,638
$(310)
4,292
$3,982
$5,621
Our total revenue was $17.4 million for the year ended December 31, 2021, an increase of $5.6 million, or 47.8 percent
compared to the year ended December 31, 2020. The increase was primarily attributable to an increase of $2.8 million in
contract revenue in the Internal segment, which was primarily driven by a $6.5 million increase in revenue due to payment
from Imbrium Therapeutics, Inc. following the exercise of the option to acquire an exclusive license for the Initial Product
Candidate. The increase was partially offset by a decrease in contract revenue of $3.7 million recognized under IFRS 15
due to the completion of development activities related to revenues associated with multiple collaborations in the year
ended December 31, 2021. The increase was also driven by an increase of $4.3 million in grant revenue in the Controlled
Founded Entities segment for the year ended December 31, 2021, which was driven primarily by Vedanta's grant revenue
earned pursuant to its CARB-X and BARDA agreements. The aforementioned increases were partially offset by a non-
recurrent milestone payment of $2.0 million received from Karuna (and included in Parent Company and Other) in the year
ended December 31, 2020.
Research and Development Expenses
(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,
2021
2020
Change
$(65,444)
(40,667)
(3,116)
(1,244)
$(110,471)
$(45,346)
(33,152)
(3,128)
(234)
$(81,859)
$20,098
7,515
(12)
1,010
$28,612
58 PureTech Health plc Annual report and accounts 2022
Governance
Financial Review — continued
Our research and development expenses were $110.5 million for the year ended December 31, 2021, an increase of
$28.6 million, or 35.0 percent compared to the year ended December 31, 2020. The change was primarily attributable to an
increase of $20.1 million in research and development expenses incurred by the Internal segment due to the advancement
of programs in clinical testing. This was primarily driven by an increase in clinical trial and clinical research organization
expenditures of $14.0 million, an increase in research and development related consulting and professional fees of
$2.5 million and an increase in research and development related salaries and stock compensation of $2.6 million. We
progressed our ongoing clinical trials of LYT-100 and LYT- 200 in multiple indications and initiated a clinical trial with respect
to LYT 300, as well as advanced pre-clinical studies and research related to multiple candidates and research platforms.
The increase was further attributable to an increase of $7.5 million in research and development expenses incurred by the
Controlled Founded Entities segment, primarily attributable to Vedanta as they progressed their therapeutic candidates
VE202, VE303, VE416 and VE800 towards meaningful milestones.
General and Administrative Expenses
(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,
2021
2020
Change
$(8,673)
(17,504)
(3,225)
(27,797)
$(57,199)
$(3,482)
(10,752)
(2,939)
(32,267)
$(49,440)
$5,191
6,752
286
(4,470)
$7,760
Our general and administrative expenses were $57.2 million for the year ended December 31, 2021, an increase of
$7.8 million, or 15.7 percent compared to the year ended December 31, 2020. The increase was primarily attributable to
an increase of $7.0 million in the Controlled Founded Entities segment, which was primarily driven by non-cash increases
of $2.9 million in stock based compensation expense, $1.4 million increase in payroll-related costs due to increased
personnel, an increase in professional fees of $1.1 million, and an increase in legal fees of $0.9 million. The increase was
further attributable to an increase of $5.2 million in the Internal segment, which was primarily driven by an increase in the
management fee charged by the Parent company of $6.2 million which was partially offset by a decrease in depreciation
expense of $0.5 million for the year ended December 31, 2021. The decrease in the Parent Company and other of $4.5 million
was primarily attributable to the allocation of management fee charged to other segments of $7.0 million which was partially
offset by an increase in professional and recruiting fees of $0.9 million and an increase in business insurance of $1.7 million for
the year ended December 31, 2021.
Total Other Income (Loss)
Total other income was $160.0 million for the year ended December 31, 2021 a decrease of $18.7 million, compared to
the year ended December 31, 2020. The decline in other income was primarily attributable to a decrease in gains from
investments held at fair value of $53.4 million, primarily driven by the change in the fair value of the investment in Karuna.
These gains from investments held at fair value were partially offset by losses realized on sale of certain investments held at
fair value, as a result of the block sale discount included in the sale. The losses realized on sale of certain investments held at
fair value for the year ended December 31, 2021 decreased $34.1 million compared to the year ended December 31, 2020.
Net Finance Income (Costs)
Net finance costs were $5.0 million for the year ended December 31, 2021, a change of $11.2 million, compared to net
finance costs of $6.1 million for the year ended December 31, 2020. The change was primarily attributable to a $14.0 million
change leading to increased income in respect of the change in the fair value of our preferred shares, warrant and convertible
note liabilities held by third parties, partially offset by a $1.8 million increase in contractual finance costs, mainly in our
controlled founded entity, Vedanta, and a $1.0 million decline in interest income from financial assets for the year ended
December 31, 2021.
Share of Net Gain (Loss) in Associates Accounted for Using the Equity Method, and Impairment of Investment in Associate
For the year ended December 31, 2021, the share in net loss of associates reported under the equity method was
$73.7 million as compared to the share of net loss of $34.1 million for the year ended December 31, 2020. The change
was primarily attributable to an increase in Gelesis losses reported under IFRS for the year ended December 31, 2021 as
compared to the losses reported for the year ended December 31, 2020, due to an increase in the fair value of Gelesis
financial instrument liabilities that are accounted for at Fair Value Through Profit and Loss (FVTPL).
Taxation
Income tax expense was $3.8 million for the year ended December 31, 2021,as compared to income tax expense of
$14.4 million for the year ended December 31, 2020. The decrease in income tax expense was primarily attributable to the
decrease in profit before tax in entities in the U.S. Federal and Massachusetts consolidated return groups of the Company.
For information on the change in the tax rate, see Note 25 in the consolidated financial statements.
PureTech Health plc Annual report and accounts 2022 59
Governance
Financial Review — continued
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
UK-adopted International Financial
Reporting Standards (IFRS). The
Consolidated Financial Statements also
comply fully with IFRSs as issued by
the International Accounting Standards
Board (IASB). 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 such as the future expected
returns on the financial instrument
in different scenarios, earnings
potential of the subsidiary businesses,
appropriate discount rate, appropriate
volatility, appropriate term to exit and
other industry and company specific
risk factors.
Consolidation:
The consolidated financial statements
include the financial statements of the
Company and the entities it controls.
Based on the applicable accounting
rules, the Company controls an
investee when it is exposed, or has
rights, to variable returns from its
involvement with the investee and
has the ability to affect those returns
through its power over the investee.
Therefore an assessment is required
to determine whether the Company
has (i) power over the investee;
(ii) exposure, or rights, to variable
returns from its involvement with the
investee; and (iii) the ability to use
its power over the investee to affect
the amount of the investor’s returns.
Judgement is required to perform such
assessment and it requires that the
Company considers, among others,
activities that most significantly affect
the returns of the investee, its voting
shares, representation on the board,
rights to appoint board members
and management, shareholders
agreements, de facto power 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
60 PureTech Health plc Annual report and accounts 2022
Governance Financial Review — continued
the purposes of IAS 28 (please refer
to Notes 5 and 6). This determination
is based on the individual facts and
circumstances and characteristics of
each investment, but is driven, among
other factors, by the intention and
likelihood to settle the instrument
through redemption or repayment in
the foreseeable future, and whether
or not the investment is likely to be
converted to common stock or other
equity instruments
Recent Accounting Pronouncements
For information on recent accounting
pronouncements, see our consolidated
financial statements and the related
notes found elsewhere in this report.
Cash Flow and Liquidity
Our cash flows may fluctuate and are
difficult to forecast and will depend on
many factors, including:
• the expenses incurred in the
development of wholly-owned
and Controlled Founded Entity
therapeutic candidates;
• the revenue, if any, generated by
wholly-owned and Controlled-
Founded Entity therapeutic
candidates;
• the revenue, if any, generated from
licensing and royalty agreements
with Founded Entities;
• the financing requirements of the
Internal segment, Controlled-
Founded Entities segment and
Parent segment; and
• the investing activities related to
the Internal, Controlled-Founded
Entities, Non-Controlled Founded
Entities and Parent segments,
including the monetization, through
sale, of shares held in our public
Founded Entities.
As of December 31, 2022, we had
consolidated cash and cash equivalents
of $149.9 million and consolidated
cash, cash equivalents and short term
investments of $350.1 million. As of
December 31, 2022, we had PureTech
Level cash, cash equivalents and short-
term investments of $339.5 million.
PureTech Level cash, cash equivalents
and short-term investments is a
non-IFRS measure (for a definition of
PureTech Level cash, cash equivalents
and short-term investments and a
reconciliation to the IFRS number, see
the section Measuring Performance
earlier in this Financial review).
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
(in thousands)
Net cash used in operating activities
Net cash provided by (used in) investing activities
Net cash provided by (used in) financing activities
Net increase (decrease) in cash and cash equivalents
Year ended December 31,
2022
2021
2020
$(178,792)
(107,223)
(29,827)
$(315,842)
$(158,274)
197,375
22,727
$61,827
$(131,827)
364,478
38,869
$271,520
Operating Activities
Net cash used in operating activities was $178.8 million for the year ended December 31, 2022, as compared to $158.3 million
for the year ended December 31, 2021, resulting in an increase of $20.5 million in net cash used in operating activities.
The increase in outflows is primarily attributable to our higher operating loss mainly due to an increase in research and
development activities in the Internal Segment, partially offset by the timing of receipts and payments in the normal course
of business.
Net cash used in operating activities was $158.3 million for the year ended December 31, 2021, as compared to $131.8 million
for the year ended December 31, 2020. The increase in outflows is primarily attributable to our higher operating loss and
higher income taxes paid of $7.0 million, and to a lesser extent the timing of receipts and payments in the normal course
of business.
Investing Activities
Net cash used in investing activities was $107.2 million for the year ended December 31, 2022, as compared to inflows of
$197.4 million for the year ended December 31, 2021, resulting in a decrease of $304.6 million in net cash resulting from
investing activities. The decrease in the net cash resulting from investing activities was primarily attributed to a decrease
in proceeds from the sale of investments held at fair value of $99.4 million and to the purchase of short term investments,
that net of redemptions amounted to $198.7 million for the year ended December 31, 2022.
Net cash provided by investing activities was $197.4 million for the year ended December 31, 2021, as compared to inflows
of $364.5 million for the year ended December 31, 2020, resulting in a decrease of $167.1 million in net cash provided by
investing activities. The decrease in the net cash provided by investing activities was primarily attributed to the decrease in
proceeds from the sale of investments held at fair value of $132.5 million (proceeds from such sales were $218.1 million for
the year ended December 31, 2021 vs. $350.6 million for the year ended December 31, 2020) and the fact that for the year
ended December 31, 2020 the Company had proceeds of $30.1 million from maturity of short term investments while for the
year ended December 31, 2021, there were no such cash inflows.
Financing Activities
Net cash used in financing activities was $29.8 million for the year ended December 31, 2022, as compared to net cash
provided by financing activities of $22.7 million for the year ended December 31, 2021, resulting in a decrease of $52.6
million in the net cash resulting from financing activities. The decrease in the net cash resulting from financing activities was
primarily attributable to the fact that in the year ended December 31, 2021 there was an issuance of subsidiary preferred
shares of $37.6 million while for the year ended December 31, 2022 there was no such issuance, and due to the treasury
share purchases of $26.5 million for the year ended December 31, 2022 while there were no such purchases for the year
ended December 31, 2021. This decrease was partially offset by the fact that during year ended December 31, 2021 there
were payments to settle equity settled stock based awards of $13.3 million, while for the year ended December 31, 2022
there were no such payments made.
PureTech Health plc Annual report and accounts 2022 61
Governance
Financial Review — continued
Net cash provided by financing activities was $22.7 million for the year ended December 31, 2021, as compared to
$38.9 million for the year ended December 31, 2020, resulting in a decrease of $16.1 million in the net cash provided by
financing activities. The decrease in the net cash provided by financing activities was primarily attributable to the decrease in
proceeds from issuance of convertible notes in subsidiaries of $22.8 million and the fact that for the year ended December 31,
2020 the Company had proceeds from the issuance of a long term loan of $14.7 million, while for the year ended December
31, 2021, there was no such cash inflow. Such decreases were partially offset by an increase in proceeds from issuance of
preferred shares in subsidiaries of $23.9 million.
Funding Requirements
We have incurred operating losses since inception. Based on our current plans, we believe our existing financial assets at
December 31, 2022, will be sufficient to fund our operations and capital expenditure requirements into the first quarter of
2026. We expect to incur substantial additional expenditures in the near term to support our ongoing activities. We anticipate
to continue to incur net operating losses for the foreseeable future as is typical for pre-revenue biotechnology companies.
Our ability to fund our therapeutic development and clinical operations as well as commercialization of our wholly-owned
therapeutic candidates, will depend on the amount and timing of cash received from planned financings, monetization of
shares of public Founded Entities and potential business development activities. Our future capital requirements will depend
on many factors, including:
• the costs, timing and outcomes of clinical trials and regulatory reviews associated with our wholly-owned therapeutic
candidates;
• the costs of commercialization activities, including product marketing, sales and distribution;
• the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual
property-related claims;
• the emergence of competing technologies and products and other adverse marketing developments;
• the effect on our therapeutic and product development activities of actions taken by the U.S. Food and Drug Administration
(“FDA”), the European Medicines Agency (“EMA”) or other regulatory authorities;
• our degree of success in commercializing our wholly-owned therapeutic candidates, if and when approved; and
• the number and types of future therapeutics we develop and commercialize.
A change in the outcome of any of these or other variables with respect to the development of any of our wholly-
owned therapeutic candidates could significantly change the costs and timing associated with the development of that
therapeutic candidate.
Further, our operating plans may change, and we may need additional funds to meet operational needs and capital
requirements for clinical trials and other research and development activities. We currently have no credit facility or other
committed sources of capital beyond our existing financial assets. Because of the numerous risks and uncertainties associated
with the development and commercialization of our wholly-owned therapeutic candidates, we have only a general estimate of
the amounts of increased capital outlays and operating expenditures associated with our current and anticipated therapeutic
development programs and these may change in the future.
Financial Position
Summary Financial Position
(in thousands)
Investments held at fair value
Other non-current assets
Non-current assets
Cash and cash equivalents, and short term investments
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
Current liabilities
Total liabilities
Net assets
Total equity
62 PureTech Health plc Annual report and accounts 2022
2022
$251,892
64,562
316,454
350,095
36,097
386,192
702,647
24,155
19,645
14,372
58,172
54,783
2,345
47
27,339
12,371
96,885
155,057
547,589
$547,589
As of December 31,
2021
Change
$397,179
47,018
444,197
465,708
36,101
501,809
946,006
29,040
89,765
16,921
135,725
35,760
4,641
6,787
174,017
4,929
226,135
361,859
584,147
$584,147
$(145,286)
17,544
(127,743)
(115,613)
(4)
(115,617)
(243,359)
(4,884)
(70,120)
(2,549)
(77,553)
19,023
(2,297)
(6,740)
(146,678)
7,442
(129,249)
(206,802)
(36,557)
$(36,557)
Governance
Financial Review — continued
Investments Held at Fair Value
Investments held at fair value
decreased by $145.3 million to
$251.9 million as of December 31, 2022.
As of December 31, 2022, Investments
held at fair value consist primarily of our
common share investment in Karuna,
Vor and Akili (Akili was in the form of
preferred shares until August 2022)
and our preferred share investment in
Sonde (from May 2022). See Note 5 to
our consolidated financial statements
included elsewhere in this annual
report for details regarding the change
in investments held at fair value.
Cash, Cash Equivalents, and Short-
Term Investments
Consolidated cash, cash equivalents
and short-term investments decreased
by $115.6 million to $350.1 million as
of December 31, 2022. The decrease
reflects spend attributed to our
operating loss of $197.8 million, partially
offset by proceeds from sale of Karuna
and Vor shares of $118.7 million during
the year ended December 31, 2022.
Non-Current Liabilities
Non-current liabilities decreased
$77.6 million to $58.2 million as of
December 31, 2022. The decrease
was primarily driven by declines of
$4.9 million and $70.1 million in our
long-term lease liability and deferred
tax liabilities, respectively as of
December 31, 2022.
Trade and Other Payables
Trade and other payables increased
$19.0 million to $54.8 million as of
December 31, 2022. The increase
reflected primarily the timing of
payments as of December 31, 2022.
Notes Payable
Notes payable decreased by
$2.3 million to $2.3 million as of
December 31, 2022. The decrease
reflects the deconsolidation of Sonde
in May 2022.
Preferred Shares and warrant liabilities
Preferred share liability in subsidiaries
in the Controlled founded entity
segment decreased by $146.7 million
to $27.3 million and warrant liability
(also in Controlled founded entity
segment) decreased by $6.7 million to
a negligible amount as of December
31, 2022. The decrease in the preferred
share liability reflects a decrease in fair
value of the preferred share liability
of $130.8 million and to a much lesser
extent a decrease of $15.9 million due
to the deconsolidation of Sonde during
the year ended December 31, 2022.
The decrease in the warrant liability
reflects a decrease in the fair value of
such warrant liability of $6.7 million.
Quantitative and Qualitative
Disclosures about Financial Risks
Interest Rate Sensitivity
As of December 31, 2022, we had
consolidated cash and cash equivalents
of $149.9 million and short term
investments of $200.2 million, while
we had PureTech Level cash, cash
equivalents and short-term investments
of $339.5 million. PureTech Level
cash, cash equivalents and short-term
investments is a non-IFRS measure
(for a definition of PureTech Level
cash, cash equivalents and short-
term investments and a reconciliation
to the IFRS number, see the section
Measuring Performance earlier in this
Financial review). 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 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.
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
$251.9 million as of December 31,
2022, and we may or may not be
able to realize the value in the future.
Accordingly, we view the risk as
high. Our exposure to investments in
associates in limited to the carrying
amount of the investment. We are
not exposed to further contractual
obligations or contingent liabilities
beyond the value of initial investment.
As of December 31, 2022, Gelesis and
Sonde were the only associates. The
carrying amount of the investments in
Gelesis and Sonde accounted for under
the equity method was $9.1 million.
Accordingly, we do not view this risk as
high. 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.
PureTech Health plc Annual report and accounts 2022 63
Governance Financial Review — continued
Equity Price Risk
As of December 31, 2022, we held
1,054,464 common shares of Karuna,
2,671,800 common shares of Vor, and
12,527,477 common shares of Akili.
The fair value of our investments in
the common shares of Karuna was
$207.2 million, in the common shares
of Vor $17.8 million, and in the common
shares of Akili $14.1 million.
The investments in Karuna Vor and
Akili are exposed to fluctuations in
the market price of these common
shares. The effect of a 10.0 percent
adverse change in the market price of
Karuna common shares, Vor common
shares and Akili common shares as of
December 31, 2022, would have been
a loss of approximately $20.7 million,
$1.8 million, and $1.4 million,
respectively, that would have been
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 and 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.
We do not own derivative financial
instruments. Accordingly, we do not
believe that there is any material market
risk exposure with respect to derivative
or other financial instruments.
Credit risk is also the risk of financial
loss if a customer or counterparty to
a financial instrument fails to meet
its contractual obligations. We are
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 receivable base.
However, our exposure to credit
losses is currently low due to the
credit quality of our receivables,
which are primarily from the US
government, large corporations and
large funds with respect to grants.
Foreign Private Issuer Status
Owing to our U.S. listing, we report
under the Securities Exchange Act of
1934, as amended, or the Exchange
Act, as a non-U.S. company with foreign
private issuer status. As long as we
qualify as a foreign private issuer under
the Exchange Act, we will be exempt
from certain provisions of the Exchange
Act that are applicable to U.S. domestic
public companies, including:
• the sections of the Exchange Act
regulating the solicitation of proxies,
consents or authorizations in respect
of a security registered under the
Exchange Act;
• sections of the Exchange Act
requiring insiders to file public
reports of their stock ownership and
trading activities and liability for
insiders who profit from trades made
in a short period of time;
• the rules under the Exchange Act
requiring the filing with the SEC
of quarterly reports on Form 10-Q
containing unaudited financial
and other specified information,
or current reports on Form 8-K,
upon the occurrence of specified
significant events; and
• Regulation FD, which regulates
selective disclosures of material
information by issuers.
64 PureTech Health plc Annual report and accounts 2022
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.
As announced by the Company on November 10, 2022, I have been appointed as President, Chief Executive Officer and
a member of the Board of Biogen, Inc. As a result of this appointment and due to the time commitment associated with
this new role, I have determined that I will not stand for re-election at the Company’s 2023 Annual General Meeting. I have
been working with the Board and the Nomination Committee with assistance from the rest of the Board and the Company’s
management to identify a suitable successor. This process is still ongoing. In the interim, Dr. Raju Kucherlapati has kindly
agreed to act in the position of Interim Chair in addition to his role as the Senior Independent Director to ensure continuity
and the maintenance of strong governance practices.
Further, as has been previously disclosed by the Company, Dame Marjorie Scardino retired as of the close of business on
December 31, 2022. The Nomination Committee with assistance from the rest of the Board and the Company’s management
has also been looking towards potentially adding an additional non-executive director in order to strengthen the Board’s
skillsets and reinforce the strong governance that has been a hallmark of the Company’s Board and broader operations.
While there is not a firm timeline for the identification of a new Chair and potentially an additional non-executive director,
the Nomination Committee and the Company intend to conduct a thorough and expeditious process to identify the best
candidates. Progress updates will be provided in due course.
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 27, 2023
PureTech Health plc Annual report and accounts 2022 65
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.
Sharon Barber-Lui
Independent Non-Executive Director
Sharon Barber-Lui has served as a member of our Board since March 2022 and became the Chair of the Audit
Committee on April 26, 2022. Ms. Barber-Lui has been the Senior Vice President of Finance at EQRx since
January 2022. Prior to joining EQRx, Ms. Barber-Lui worked at Merck for over twenty years in roles of advancing
responsibility, including most recently as the Head of Portfolio Market Strategy, Operations and Business
Analytics from 2019 through 2021 and Chief Financial Officer from 2014 through 2018 for Merck’s U.S. oncology
business. Prior to that Ms. Barber-Lui held a number of other roles with Merck including Treasurer of U.S. Region,
Head of U.S. Treasury Operations, and Head of Legal Entity Integration and Global Treasury Services, among
others. Ms. Barber-Lui began her career as an accountant for KPMG LLP, and she received her bachelor’s degree
as well as her M.B.A. from Lehigh University. Ms. Barber-Lui is a member of the American Institute of Certified
Public Accountants. She is also the recipient of Merck & Co. Inc.’s Top Talent Designation, Women’s Leadership
Recognition and Oncology Women’s Leader Recognition.
Raju Kucherlapati, Ph.D.
Senior Independent Director, R&D Committee Member
Raju Kucherlapati, Ph.D., has served as a member of our Board since 2014 and assumed the role of PureTech’s
Senior Independent Director as well as the chair of its Nomination Committee as of December 31, 2022.
It is intended that Dr. Kucherlapati will act as Interim Chair following the end of the 2023 Annual General
Meeting. 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 (acquired by Amgen for $2.2 billion), Cell Genesys
and Millennium Pharmaceuticals (acquired by Takeda for $8.8 billion). He was the first scientific director of
the Harvard-Partners Center for Genetics and Genomics. He is a fellow of the American Association for the
Advancement of Science and a member of the National Academy of Medicine. Dr. Kucherlapati received his
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. He was a
member of the presidential commission for the study of bioethical issues during the Obama administration.
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. His laboratory was a part of the Human Genome
Program that was responsible for mapping and sequencing the human genome. Dr. Kucherlapati developed
methods for modifying mammalian genes that lead to gene targeting in mice. He has developed many mouse
models for human disease, including a large set of models for human colorectal cancer. His laboratory was a
part of The Cancer Genome Atlas (TCGA) program that uses genetic/genomic approaches to understand the
biology of cancer. He is a promoter of personalized/precision medicine.
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 Biosciences, Inc. 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,” “Pharma and Profits: Balancing Innovation, Medicine,
and Drug Prices” 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.
66 PureTech Health plc Annual report and accounts 2022
* Biographies for executive directors, Daphne Zohar and Bharatt Chowrira, can be found on pages 69 and 70.
Governance Board of Directors — continued
Robert Langer, Sc.D.
Co-Founder and Non-Executive Director, R&D Committee Member
Robert S. Langer, Sc.D., is a co-founder, member of PureTech’s R&D Committee and has served as a member of
the board of directors since our founding. 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, 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.
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 served as a member of our Board from 2015 until her retirement from our Board as of
the close of business on December 31, 2022. 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 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.
Mr. Viehbacher was appointed President, Chief Executive Officer and a member of the Board of Biogen,
Inc. in November 2022. As a result of his appointment, Mr. Viehbacher will not stand for re-election at the
Company’s 2023 Annual General Meeting. Prior to his appointment with Biogen, Inc., he had been the
managing partner of Gurnet Point Capital from October 2014 to November 2022. 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 Biogen, Inc., BEFORE Brands and Crossover Health. Mr. Viehbacher
previously served on the board of directors of Alladapt, Boston Pharmaceuticals, Zikani, Vedanta Biosciences,
Inc., Gurnet Point Capital LLC, 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.
PureTech Health plc Annual report and accounts 2022 67
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, and was a board advisor and a member of PureTech’s R&D
Committee until he retired from those roles in August 2022. 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.
68 PureTech Health plc Annual report and accounts 2022
Governance Management team
(alphabetically)
Joseph Bolen, Ph.D.
R&D Committee Member
Joseph Bolen, Ph.D., first joined PureTech in October 2015 and served as PureTech’s chief scientific officer from
October 2016 through February 2023 and transitioned to a role on PureTech’s R & D committee in February
2023. 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 Business, Finance and Operating Officer, Member of the Board of Directors
Bharatt Chowrira, Ph.D., J.D., has been our president and chief business, finance and operating officer
since September 2022, was our president and chief business, legal and operating officer from January 2022
through September 2022, and was our president and chief of business and strategy from March 2017 through
December 2021. Dr. Chowrira has also served as a member of PureTech’s Board since February 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 previously served on the board of directors of
Vedanta Biosciences, Inc. from September 2018 to February 2023, Akili Interactive Labs, Inc. from November
2017 to September 2019 and June 2021 to October 2022, Vor Biopharma from August 2018 to June 2020, and
Karuna Therapeutics, Inc. from March 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 and Strategy 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, Inc., Gelesis, Inc., Karuna Therapeutics, Inc. and Sonde Health, Inc. Dr. Elenko
serves on the board of directors of Sonde Health, Inc. 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.
PureTech Health plc Annual report and accounts 2022 69
Governance Management team — continued
Julie Krop, M.D.
Chief Medical Officer
Julie Krop, MD, is the chief medical officer at PureTech, where she is responsible for all clinical development,
regulatory, CMC, and medical affairs for PureTech’s clinical-stage Wholly Owned Pipeline. Prior to PureTech,
Dr. Krop served as Chief Medical Officer at Freeline Therapeutics, a clinical-stage gene therapy company.
She also previously served as Chief Medical Officer of AMAG Pharmaceuticals (acquired by Covis group for
$647 million), where she oversaw clinical development, regulatory affairs, clinical operations, medical affairs,
program management and pharmacovigilance. During her time at AMAG, Dr. Krop was responsible for the
oversight of three FDA approvals. Earlier in her career, she held leadership positions at Vertex Pharmaceuticals,
Stryker Regenerative Medicine, Peptimmune, Millennium Pharmaceuticals and Pfizer and also served on the
board of directors of Aquestive Bio, Inc. Dr. Krop received her M.D. from Brown University School of Medicine
and completed an internal medicine residency at Georgetown University Hospital. Additionally, she completed
fellowships in epidemiology, clinical trial design and endocrinology as a Robert Wood Johnson Foundation
Clinical Scholar at the Johns Hopkins School of Medicine.
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 the broad and deep pipeline being advanced via the Company’s Wholly Owned Pipeline
and Founded Entities. PureTech’s R&D engine has generated 27 therapeutics and therapeutic candidates,
including two (Plenity® and EndeavorRx®) that have received both U.S. Food and Drug Administration
clearance and European marketing authorization and a third (KarXT) that we expect will soon be filed for
FDA approval. 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.
Ms. Zohar serves on the BIO (Biotechnology Innovation Organization) Board. 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 to November 2018. Ms. Zohar received a B.S.
from Northeastern University.
70 PureTech Health plc Annual report and accounts 2022
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:
• creating value for shareholders;
• 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.
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
capital expenditure budget;
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.
• 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
Board size and composition
As of December 31, 2022, there were
nine Directors on the Board: the
Non-Executive Chair, two Executive
Directors and six Non-Executive
Directors. The biographies of these
Directors are provided on pages 66
to 70. On March 24, 2022, Ms. Sharon
Barber-Lui joined the Board as a
non-Executive Director. Immediately
following the publication of PureTech’s
Annual Report and Accounts for the
year ended December 31, 2021 on
April 26, 2022, Ms. Barber-Lui became
the Chair of the Audit Committee,
and Mr. Viehbacher stepped down as
the Chair of the Audit Committee but
remained a member thereof. Dame
Marjorie Scardino, Senior Independent
Director, chair of the Nomination
Committee and member of the Audit
Committee, retired as of the close of
business on December 31, 2022. Raju
Kucherlapati, Ph.D., assumed the role of
PureTech’s Senior Independent Director
as well as the chair of its Nomination
Committee, effective as of Dame
Scardino’s retirement. Christopher
Viehbacher, Chair of PureTech’s Board,
was recently appointed President,
Chief Executive Officer and a member
of the Board of Biogen, Inc. Given the
time commitment required by this new
role, Mr. Viehbacher will not stand for
re-election at PureTech’s 2023 Annual
General Meeting. There were no other
changes to the composition of the
Board during 2022.
Following Mr. Viehbacher’s departure
on conclusion of the 2023 AGM, the
Company will have seven directors,
including two Executive Directors and
five Non-Executive Directors. While the
Company is conducting a search for a
new Chair of the Board and considering
adding an additional member to
replace Dame Scardino, it does not
anticipate that such individuals will be
in place at the time of the AGM. As a
result, the Board intends to appoint
Dr. Raju Kucherlapati as interim Chair
PureTech Health plc Annual report and accounts 2022 71
Governance The Board — continued
until a permanent Chair can be selected
and appointed. Dr. Kucherlapati will
also continue in his current role of
Senior Independent 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 86 to 102.
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
except for Christopher Viehbacher will
be offering themselves for election at
the AGM to be held on June 13, 2023,
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), Ms. Sharon Barber-
Lui, Dr. Raju Kucherlapati, Dr. John
LaMattina, Dr. Robert Langer, and
Ms. Kiran Mazumdar-Shaw. As noted
elsewhere, Mr. Viehbacher will not
stand for re-election at the 2023 AGM.
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, certain 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 Dr. Raju Kucherlapati.
Dame Marjorie Scardino was Senior
Independent Director through her
retirement as of the close of business on
December 31, 2022. 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, though he will not stand
for re-election at the 2023 AGM. Mr.
Viehbacher was appointed Chair in
September 2019. The Nomination
Committee is currently conducting a
search to identify a new permanent
Chair, but such person is not expected
to be in place at the time of the
2023 AGM. Until such permanent
replacement is appointed as Chair
by the Board, Dr. Raju Kucherlapati
will serve as interim Chair to fulfill
the leadership requirements and
governance obligations of the role.
There is and will remain a clear division
of responsibilities between the Chair
and the Chief Executive Officer.
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 Ms.
Barber-Lui, Dr. Kucherlapati, Dr.
LaMattina and Ms. Mazumdar-Shaw 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, including equity
grants of restricted stock units made
to Non-Executive Directors by the
Company under its Performance Share
Plan; 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 Ms. Barber-
Lui, Dr. Kucherlapati, Dr. LaMattina,
and Ms. Mazumdar-Shaw are of
independent character and judgement,
notwithstanding the circumstances
described at (i), (ii) and (iii) above.
In addition, with respect to Dr.
Kucherlapati, the Board has considered
his role as interim Chair following the
2023 AGM and determined that such
additional responsibilities shall not
impact his independence in light of
the interim nature of the role and the
search underway for a permanent
Chair appointee.
The Nomination Committee with
assistance from the rest of the Board
and the Company’s management has
also been looking towards potentially
72 PureTech Health plc Annual report and accounts 2022
Governance The Board — continued
adding an additional independent
non-executive director in order to
strengthen the Board’s skillsets and
reinforce the strong governance that
has been a hallmark of the Company’s
Board and broader operations. The
Nomination Committee and the
Company intend to conduct a thorough
and expeditious process to identify the
best candidates. Progress updates will
be provided in due course.
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 7 scheduled meetings in 2022, and
details on attendance are set forth in
the table below:
Director
Christopher Viehbacher
Sharon Barber-Lui
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Dame Marjorie Scardino
Bharatt Chowrira
Daphne Zohar
Number of
Board Meetings
Attended
7/7
7/7
7/7
7/7
7/7
6/7
7/7
7/7
7/7
While each director (with the exception
of Ms. Mazumdar-Shaw with respect
to one meeting) was able to attend
every meeting in 2022, in the event
of any unavoidable absence, the
impacted Director would review with
management the topics and materials
to be discussed at the meeting, and
provide appropriate feedback to be
conveyed at such meeting, as was the
case with Ms. Mazumdar-Shaw with
respect to the one meeting she was
unable to attend.
The Board also acted by unanimous
written consent eight times in 2022. On
occasion it was more expedient for the
board to approve matters, especially
administrative matters, by unanimous
written consent rather than to convene
a board meeting for the purpose.
However, Directors were provided
opportunity to discuss any concerns
they had with the written resolution
before its issue for signature.
At each quarterly meeting of the
Board, there was a closed session held
in which only the Chair and the other
Non-Executive Directors participated.
In certain meetings held to discuss
a specific topic or topics, a closed
session was not held due to limited
time allocated for such meeting or the
nature of the topic being considered.
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 effectively monitor
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.
However, since the onset of the
COVID-19 pandemic and throughout
2022, for the safety of the Board and
the Company’s employees, the vast
majority of board meetings have been
held by videoconference.
Certain 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
PureTech Health plc Annual report and accounts 2022 73
Governance The Board — continued
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 advisors, 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
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.
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 2022 and we are satisfied
that we have adequate controls and
that our internal control over financial
reporting was effective for the year
ended December 31, 2022. In the prior
financial period ended December 31,
2021, we identified a material weakness
related to the risk assessment process
over the design and implementation of
management review controls over the
valuation of financial instruments, the
completeness and accuracy of related
sensitivity disclosures, the valuation
of share based payment liabilities
and completeness and accuracy of
the tax provision. In response to this
material weakness, the Company took
certain steps in its remediation plan,
including (i) improving the processes
and internal controls related to the
valuation of financial instruments and
share based payment liabilities, the
related sensitivity disclosures, and
the tax provision, (ii) disaggregating
the management review controls to
address the specific risks associated
with these items, and (iii) implementing
more robust procedures over the
documentation of the performance of
these management review controls.
As a result, as of December 31, 2022,
we have concluded that this material
weakness has been remediated and the
controls are operating effectively.
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 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.
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 our 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.
However, the performance of business
units may be reviewed more frequently
if deemed appropriate.
74 PureTech Health plc Annual report and accounts 2022
Governance 2023 Annual General Meeting
The Notice of the AGM, which will be
held at 11:00 am EDT (4:00 pm BST)
on June 13, 2023 at the Company’s
headquarters at 6 Tide Street, in
Boston, Massachusetts, U.S., 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.
The Board — continued
The key risks and uncertainties we face,
as well as the relevant mitigations, are
set out on pages 44 to 47 and in the
Additional Information section from
pages 175 to 211.
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 internal
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 are set out on pages 44 to 47 and
in the Additional Information section
from pages 175 to 211.
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 2022 75
Governance Relations with Stakeholders – Section 172 Statement
The Board recognizes its duties under Section 172 of the Companies Act 2006 and continuously has regard to how the
Company’s activities and decisions will impact investors, employees, those with whom 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. In accordance with Section 172, it is the responsibility of the Board as a whole
to ensure that a satisfactory dialogue takes place and that the Board considers the potential impact on the Company’s key
stakeholders when making decisions.
The Board is committed to understanding and engaging with shareholders and other key stakeholder groups of the Company
in order to maximize value and promote long-term Company success in line with our strategic objectives, as well as to
promote and ensure fairness between our stakeholders. 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.
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.
Stakeholder
How we engage
Key matters identified
Further information
• Governance Section of
ARA (Pages 44 to 102)
• ESG Report
(Pages 15 to 43)
• Karuna disposals
(Page 48)
• Remuneration Report
(Pages 86 to 102)
• Components of our
Value (Page 6)
Investors
• Our shareholders are the owners and
investors in our business. We make
significant efforts to engage with
our shareholders and understand
their objectives. We engage with our
shareholders through a number of
mechanisms to ensure that shareholder
views are brought into the boardroom
and considered in our decision-making.
• 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.
• Stakeholder engagement will often take
place by the Executive Directors and
senior management through investor
meetings and investor roadshows,
including participation at healthcare
conferences and participating in fireside
chats at those events, with the Board
receiving regular updates by way of
analysis reports on stakeholder views.
• Meetings were held throughout the
year with institutional shareholders.
Key shareholder publications including
the annual report, the full year and
half year results announcements and
press releases and the information
for investors are available on
the Company’s website: www.
puretechhealth.com.
• Our Board keeps its Strategy and
Business Model under regular review.
During the past year, the Board
has engaged to carefully consider
its strategy for future growth and
development, in particular devoting
attention to the future prospects
of its business model and its listing
venues and the risks and opportunities
this would give to the Company’s
stakeholders.
• The company carefully manages its
expenditure and anticipates future
capital needs through careful capital
management and capital allocation to
its Wholly Owned Programs and clinical
trials as well as opportunities to secure
financing from third parties, for example
the SPAC transactions closed for Gelesis
and Akili in January and August 2022.
Our Board also carefully considers
opportunities for disposal of shares
held in its Founded Entities such as the
disposals of shares in Karuna raising
$115m in August and September 2022.
• During 2022, the Board welcomed
Sharon Barber-Lui to the Board as a
Non-Executive Director and saw the
retirement of Dame Marjorie Scardino
as a Non-Executive Director. The Board
seeks to ensure appropriate board
structure suitable for a Company of
PureTech’s size.
• The Board recognizes the importance
of Diversity, Equity and Inclusion and is
delighted to be one of the few FTSE250
companies with a female CEO.
76 PureTech Health plc Annual report and accounts 2022
Governance Further information
• ESG Report
(Pages 15 to 43)
• Remuneration Report
(Pages 86 to 102)
• Strategic Report
(Pages 3 to 14)
• ESG Report
(Pages 15 to 43)
Relations with Stakeholders – Section 172 Statement — continued
Stakeholder
How we engage
Key matters identified
Our People
• Our employees are crucial to the
success of our business and many key
decisions made by our Board have
an impact on them. It is important to
understand the employee perspective
and ensure that we maintain an
engaged workforce, as we believe that
this will lead to better business results.
We engage with our employees in
various ways to ensure that their voice
is heard in the management of our
business including:
– The conduct of regular Town
Hall Meetings, email briefings
to employees on key events as
well as communication through
the company intranet site and an
engagement survey
– The implementation of regular
appraisals and personal
development programs
• We are committed to supporting the
communities in which we operate and
the wider public. To that end, we have
developed various mechanisms for
engagement including:
– Internships/partnerships with local
universities and programs
– Charitable giving
– Building Certifications
– Therapeutic Focus
Community &
Environment
• The Board recognizes the importance of
an incentivized and engaged workforce,
especially in the competitive greater
Boston area. The Board engages to
ensure the remuneration and benefit
packages are competitive.
• The Board aims to attract and retain
employees through an established
personal management and
development program, with a view to
development of the individual in an
inclusive environment where employees
from diverse backgrounds can thrive.
• We are proud to be a company
dedicated to giving life to new classes
of medicine to improve the lives of
patients with devastating diseases and
believe we have established a business
where our employees are proud to work.
• We are committed to improving our
practices to ensure our business
operates on a sustainable basis. In
particular, we have created an ESG
committee chaired by one of our
Non-Executive Directors to guide our
sustainability initiatives. Our business
is a low carbon emissions, and we are
committed to delivering long-term
environmental sustainability.
• We partner with local universities and
programs to offer paid internship and
externship programs, generally within
technical fields in our development
organization.
• The company engages with local
community and supports charitable
causes. In particular, in 2022 and
through the January 2023 post-period,
PureTech made charitable contributions
to Fred Hutchinson Cancer Research
Center, International Rescue
Committee, The Pulmonary Fibrosis
Foundation (PFF) and The Greater
Boston Food Bank.
Suppliers/
Business
Partners
• Our business model creates value
• We aim to build clear and reliable
• Components of Our
through partnerships and relationships
with various key collaborators, and we
continually evaluate how to strengthen
relationships and arrangements with
these institutions and individuals. Our
engagement in 2022 included:
– Quality updates and quality audits
– Meetings with key surgeons to
understand/identify potential
indications and applications for
therapeutics
– Partnerships – Imbrium, BeiGene and
Eli Lilly
supply arrangements with our contract
manufacturers for clinical product
supply, in particular with an emphasis on
quality, especially in relation to a clinical
environment.
Value (Page 6)
• LYT-200 (Page 11)
• LYT-503/IMB-150
(Page 4)
• We seek partnerships with other life
sciences organizations to secure non-
dilutive funding, access to development
opportunities and access to materials
for our clinical trials.
PureTech Health plc Annual report and accounts 2022 77
Governance Directors’ Report for the year ended December 31, 2022
The Directors present their report and
the audited consolidated financial
statements for the financial year ended
December 31, 2022.
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 66 to 70 and are deemed to be
incorporated into this report.
Descriptions of the terms of the
directors’ service contracts are set forth
on page 94 and page 100 of this report.
All directors shall retire from office and,
except for Christopher Viehbacher, 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, 2022 are set out in the
Annual Report on Remuneration on
page 99 and Note 24 to the financial
statements, located on page 164.
There have been no changes in such
interests from December 31, 2022 to
March 31, 2023, except as specifically
set forth in those sections.
the Company. There are no restrictions
on the transfer of ordinary shares 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.
Results and dividends
Substantial shareholders
We generated a loss for the year ended
December 31, 2022 of $37.1 million
(2021: Loss of $62.7 million).
The Directors do not recommend the
payment of a dividend for the year
ended December 31, 2022 (2021: nil).
Share capital
As of December 31, 2022, the ordinary
issued share capital of the Company
stood at 278,566,306 shares of £0.01
each, including shares issuable upon
conversion of outstanding ADSs, with
10,595,347 shares held in treasury by
the Company under its ongoing Share
Repurchase Program. Details on share
capital are set out in Note 14 to the
financial statements, page 148.
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 148.
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
As of March 31, 2023, the Company had
been advised that the shareholders
listed on page 79 hold interests of
3 percent or more in its ordinary share
capital (other than interests of the
Directors which are detailed on page 99
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 71.
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 2023 AGM.
The following have served as Directors of the Company during the 2022 financial year.
Name
Role
Age
(as of December 31, 2022)
Mr. Christopher Viehbacher Non-Executive Chair
Ms. Daphne Zohar
Dame Marjorie Scardino
Dr. Robert Langer
Dr. Raju Kucherlapati
Dr. John LaMattina
Ms. Kiran Mazumdar-Shaw
Dr. Bharatt Chowrira
Chief Executive Officer
Senior Independent Director
Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
President; Chief Business, Finance and Operating Officer;
Company Secretary
Independent Non-Executive Director (appointed March 24, 2022)
Ms. Sharon Barber-Lui
62
52
75
74
79
72
69
57
49
78 PureTech Health plc Annual report and accounts 2022
Governance Directors’ Report for the year ended December 31, 2022 — 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 73.
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, 2022 (2021: 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, 2022, applied
Shareholder
Invesco Asset Management Limited
Lansdowne Partners International Limited
Baillie Gifford & Co
M&G Investment Management, LTD
Vanguard Group
Patient Capital Management
Recordati SPA Pharmaceutical Company
the main principles and complied
with the provisions set out in the
Governance Code with the following
exception: contrary to provision 24
of the Governance Code, the Chair,
Mr. Christopher Viehbacher, was
also Chair of the Audit Committee
through April 26, 2022 and a member
of the Audit Committee for all of
2022. 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.
Immediately following the publication
of its Annual Report and Accounts
for the year ended December 31,
2021 on April 26, 2022, Ms. Sharon
Barber-Lui became the Chair of the
Audit Committee, and Mr. Viehbacher
stepped down as the Chair of the
Audit Committee but remained
a member thereof.
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 83.
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
15 to 43.
%
23.32
8.81
8.09
4.22
4.04
3.52
3.43
Related party transactions
Details of related party transactions
can be found in Note 24 of the financial
statements on pages 163 to 164.
Share buyback
At the 2021 AGM and the 2022 AGM,
shareholders gave the Company
authority to purchase shares from the
market up to an amount equal to 10%
of the Company’s issued share capital
at that time. The authority granted from
the 2021 AGM expired as of the end of
the 2022 AGM, and the authority from
the 2022 AGM expires as of the earlier
of the end of the 2023 AGM or close of
business on 15 September 2023. During
2022, 10,595,347 ordinary shares were
purchased by the company and held as
treasury shares. Such treasury shares do
not receive dividend rights and may not
exercise voting rights.
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 7 to 14.
Risk and internal controls
The principal risks we face are set out
on pages 44 to 47 and in the Additional
Information section from pages 175 to
211. The Audit Committee’s assessment
of internal controls is laid out on
page 84.
Subsequent Events
Information related to events occurring
after December 31, 2022 can be found
in footnote 26 to the consolidated
financial statements.
Research and Development
Information on our research and
development activities can be found in
the Strategic Report on pages 7 to 14.
Going concern
As of December 31, 2022, the directors
had a reasonable expectation that we
had adequate resources to continue
in operational existence into the first
quarter of 2026.
* Represents an entity that is not a major subsidiary undertaking of the Company.
PureTech Health plc Annual report and accounts 2022 79
Governance Directors’ Report for the year ended December 31, 2022 — continued
Annual General Meeting
The Notice of the AGM, which will be held at 11:00 am EDT (4:00 pm BST) on June 13, 2023 at the Company’s headquarters
at 6 Tide Street, in Boston, Massachusetts, U.S. 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.
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 28, 2023.
Pension schemes
Information on the Company’s 401K Plan can be found in the Annual Report on Remuneration on page 90.
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 90
N/A
N/A
Directors’ Report, page 78
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 the President, any
alleged wrongdoing, breach of a legal obligation or improper conduct by or on the part of us or any of our officers, Directors,
employees, consultants or advisors.
80 PureTech Health plc Annual report and accounts 2022
Governance Directors’ Report for the year ended December 31, 2022 — continued
Appointment of auditor
KPMG has been our auditor since
2015 and during the year the Audit
Committee recommended to the
Board that the audit tender process
be accelerated with a view to
appointing new auditors. The Audit
Committee oversaw a formal and
comprehensive tender process for the
appointment of the external auditor.
The tender offer process enabled
the Audit Committee to recommend
to the Board the appointment of
PricewaterhouseCoopers LLP (“PwC”)
as the preferred new auditor. Based
on this recommendation, the Board is
proposing that PwC be appointed as
external auditor of Company, subject to
shareholder approval at the Company’s
forthcoming AGM on June 13, 2023.
The Audit Committee will oversee
handover and induction arrangements
to ensure a smooth transition.
Disclosure of information to auditor
The Directors who held office at the
date of approval of this Directors’
report confirm that:
• so far as the Director is aware, there
is no relevant audit information of
which the Company’s Auditor is
unaware; and
• the Director has taken all steps that
he/she ought to have taken as a
Director in order to make himself/
herself aware of any relevant audit
information and to establish that
the Company’s Auditor is aware of
that information.
This confirmation is given and should
be interpreted in accordance with
the provisions of Section 418 of the
CA 2006.
Statement of Directors’
responsibilities in respect of the
Annual Report and the financial
statements
The Directors are responsible for
preparing the Annual Report and the
Group and parent Company financial
statements in accordance with
applicable law and regulations.
Company law requires the directors to
prepare Group and parent Company
financial statements for each financial
year. Under that law they are required
to prepare the Group financial
statements in accordance with
UK-adopted international accounting
standards and applicable law and have
elected to prepare the parent Company
financial statements on the same
basis. In addition, the Group financial
statements are required under the UK
Disclosure Guidance and Transparency
Rules to be prepared in accordance
with the UK-adopted international
accounting standards.
Under Company law the Directors must
not approve the financial statements
unless they are satisfied that they
give a true and fair view of the state
of affairs of the Group and parent
Company and of the Group’s profit or
loss for that period. In preparing each
of the Group and parent Company
financial statements, the directors are
required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and estimates that
are reasonable, relevant and reliable;
• state whether they have been
prepared in accordance with
the UK-adopted international
accounting standards;
• assess the Group and parent
Company’s ability to continue
as a going concern, disclosing,
as applicable, matters related to
going concern; and
• use the going concern basis of
accounting unless they either intend
to liquidate the Group or the parent
Company or to cease operations, or
have no realistic alternative but to
do so.
The Directors are responsible for
keeping adequate accounting records
that are sufficient to show and explain
the parent Company’s transactions and
disclose with reasonable accuracy at
any time the financial position of the
parent Company and enable them to
ensure that its financial statements
comply with the Companies Act 2006.
They are responsible for such internal
control as they determine is necessary
to enable the preparation of financial
statements that are free from material
misstatement, whether due to fraud or
error, and have general responsibility
for taking such steps as are reasonably
open to them to safeguard the assets
of the Group and to prevent and detect
fraud and other irregularities.
Under applicable law and regulations,
the Directors are also responsible for
preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report
and Corporate Governance Statement
that complies with that law and
those regulations.
The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of
financial statements may differ from
legislation in other jurisdictions.
Responsibility statement of the
Directors in respect of the annual
financial report
We confirm that to the best of
our knowledge:
• the financial statements, prepared
in accordance with the applicable set
of accounting standards, give a true
and fair view of the assets, liabilities,
financial position and profit or loss of
the Company and the undertakings
included in the consolidation taken
as a whole; and
• the strategic report includes a
fair review of the development
and performance of the business
and the position of the issuer and
the undertakings included in the
consolidation taken as a whole,
together with a description of the
principal risks and uncertainties
that they face.
We consider the annual report and
accounts, taken as a whole, is fair,
balanced and understandable and
provides the information necessary
for shareholders to assess the Group’s
position and performance, business
model and strategy.
By Order of the Board
Daphne Zohar
Founder, Chief Executive Officer and Director
April 27, 2023
PureTech Health plc Annual report and accounts 2022 81
Governance
Report of the Nomination Committee
Raju Kucherlapati,
Ph.D.
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, Dr. Robert
Langer, and Ms. Kiran Mazumdar-
Shaw during 2022. Dame Scardino
retired from the Board as of the close
of business of December 31, 2022, at
which time Dr. Raju Kucherlapati was
appointed to serve on and chair the
committee. The biographies of the
Nomination Committee members can
be found on pages 66 to 67.
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 2022, 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 Board
further regards Dr. Kucherlapati as
independent on the basis of the
Governance Code criteria despite his
serving as interim Chair of the Board
following the Company’s 2023 AGM in
light of the criteria listed above and the
fact that Dr. Kucherlapati’s appointment
as Chair of the Board is expressly
temporary in nature.
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
2022, 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. Ms. Mazumdar-Shaw and Dr.
Langer participated in the meeting.
Dr. Kucherlapati, the Chief Executive
Officer and the President were invited
to and attended the meeting.
In light of retirement of Dame Scardino
and the upcoming departure of
Mr. Viehbacher, the committee has
undertaken a search to identify a new
Board Chair as well as a replacement for
Dame Scardino. The search is intended
to be both expeditious and thorough,
and it is aimed at replacing these
outgoing Directors with individuals of
the same stature while focusing on the
key skill sets needed to complement
the current Board and guide the
Company in its continued evolution.
The Company will provide updates
in due course but does not currently
expect that such new Directors will be
in place at the time of the 2023 AGM.
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 15 to 43.
Board and Committee evaluation
Information regarding the evaluation
of the Board and its Committees can
be found on page 74.
82 PureTech Health plc Annual report and accounts 2022
Governance Report of the Audit Committee
Ms. Sharon
Barber-Lui
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 consisted of three
independent Non-Executive Directors,
Mr. Christopher Viehbacher, Dr. Raju
Kucherlapati and Dame Marjorie
Scardino, until Ms. Sharon Barber-
Lui joined the Committee upon her
appointment to the Board on March
24, 2022. Mr. Viehbacher served as
Chair of the Committee through April
26, 2022, at which point Ms. Barber-
Lui became Chair of the committee.
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. Ms. Barber-Lui has
accounting experience, is currently
the Senior Vice President of Finance
at EQRx, Inc., a publicly-traded U.S.
company (Nasdaq: EQRX), and has
held a number of senior finance and
executive leadership positions in her
career. The Board has deemed this
to be recent and relevant financial
experience qualifying her to be Chair
of the Committee. The biographies of
the Committee members can be found
on pages 66 to 67. The Committee met
three times during the year, with Mr.
Viehbacher, Dr. Kucherlapati and Ms.
Barber-Lui each attending all three
meetings and Dame Scardino attending
one of the three meetings. Dame
Scardino was no longer a member of
the Committee following her retirement
as a Director on December 31, 2022.
Dr. John LaMattina will join the
Audit Committee at such time when
Mr. Viehbacher is no longer a member
of the Audit Committee, unless another
Non-Executive Director is appointed.
The Chief Financial Officer or President
were invited to and attended all of the
meetings, and the external Auditor was
invited to and attended two of the three
meetings. The Chief Executive Officer
also attended certain 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
During the year, the Committee
recommended to the Board that the
audit tender process be accelerated
with a view to appointing new auditors.
The Audit Committee oversaw a formal
and comprehensive tender process for
the appointment of the external auditor.
The tender offer process enabled the
Audit Committee to recommend to
the Board the appointment of PwC
as the preferred new auditor. Based
on this recommendation, the Board is
proposing that PwC be appointed to
as external auditor of the Company,
subject to shareholder approval at the
Company’s forthcoming AGM in June
2023. The Audit Committee will oversee
handover and induction arrangements
to ensure a smooth transition.
Information on the tender process can
be found further below.
The Committee also undertook 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:
Valuation of financial instruments;
investments in non-traded financial
assets and, preferred share
financial liabilities
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, which at year
end had a carrying value totaling
$27 million (2021 – $174 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
totaling $13 million (2021 – $240 million).
We considered the underlying
economics of the valuations and sought
external expertise in determining the
appropriate valuation of the financial
liabilities and financial investments.
These valuations rely, in large part,
on the estimated possible expected
returns on the financial instruments
and the values of recent transactions.
These values also determine the
amount of gain (loss) on the financial
instruments. 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 as such
concluded that the financial Instruments
were appropriately recorded.
Recoverability of investments
in subsidiaries held by the
Parent Company
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 Parent Company.
The carrying value of the Investment of
the Parent Company in its subsidiary is
supported by our underlying assets and
our market capitalization adjusted for
the net assets held at the Parent level.
The Committee was satisfied with the
conclusion reached.
PureTech Health plc Annual report and accounts 2022 83
Governance Report of the Audit Committee — continued
Regulatory compliance
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 2022 Annual
Report and Accounts and our 2022
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, 2022, we had
sufficient operational funding to extend
operations over a three-year period into
the first quarter of 2026.
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 monetize one or more Founded
Entities, it would not threaten our
viability overall.
The Committee has had a role in
supporting our compliance with the
Governance Code, which applies to us
for the 2022 financial year. The Board
has included a statement regarding our
longer-term viability on page 48. The
Committee worked with management
and assessed that there is a robust
process in place to support the
statement made by the Board.
Similarly, the Committee worked with
management to ensure that the current
processes underpinning its oversight
of internal controls provide appropriate
support for the Board’s statement on
the effectiveness of risk management
and internal controls.
Financial Reporting Council
correspondence
During 2022, the company received
a letter from the Financial Reporting
Council (FRC) in relation to its limited
scope review of our Annual Report
and Accounts for the year ended
December 31, 2022 in accordance with
Part 2 of the FRC Corporate Reporting
Review Operating Procedures. Based
on such review, the FRC had no
questions or queries that they wished
to raise with us at this stage. The
letter also noted that certain areas of
the disclosure on deferred tax assets
were an example of better practice.
The nature of the FRC review is that
it provides no assurance that the
annual report and accounts are correct
in all material respects. The FRC’s
role is not to verify the information
but is to consider compliance with
reporting requirements.
Risk and internal controls
The principal risks we face are set
out on pages 44 to 47 and in the
Additional Information section from
pages 175 to 211.
The Committee has directed that
management engage in a continuous
process to review internal controls
around financial reporting and
safeguarding of assets. Management
has engaged external advisors to
complete internal control testing on
behalf of management for the 2022
financial year and the results were
presented to the Committee.
In the financial period ended
December 31, 2021, we identified
a material weakness related to
the risk assessment process over
the design and implementation of
management review controls over the
valuation of financial instruments, the
completeness and accuracy of related
sensitivity disclosures, the valuation
of share-based payment liabilities
and completeness and accuracy of
the tax provision. In response to this
material weakness, the Company took
certain steps in its remediation plan,
including (i) improving the processes
and internal controls related to the
valuation of financial instruments and
share based payment liabilities, the
related sensitivity disclosures, and
the tax provision, (ii) disaggregating
the management review controls to
address the specific risks associated
with these items, and (iii) implementing
more robust procedures over the
documentation of the performance of
these management review controls.
As a result, as of December 31, 2022,
we have concluded that this material
weakness has been remediated and the
controls are operating effectively.
Based on the above, we have satisfied
ourselves that we have adequate
controls and that our internal control
over financial reporting is effective for
the year ended 31 December 2022.
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
84 PureTech Health plc Annual report and accounts 2022
Governance Report of the Audit Committee — continued
performing the risk assessment of the
key areas of assurance and maintaining
related key internal controls, as well
as engaging external advisors to
perform internal control testing,
as described above.
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 2022, the
Committee discussed the Auditor’s
audit plan for 2022. 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 (a) Valuation of
financial instruments preferred share
financial liabilities and non-traded
investments held at fair value and (b)
the valuation of investments held by the
Parent Company.
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.
Audit Tender
KPMG has been our auditors since 2015
and during the year we recommended
to the Board that the audit tender
process be accelerated with a view to
appointing new auditors. As well as
KPMG, two other firms were invited
to submit tenders. The audit tender
process was led by me as Chair of the
Audit Committee and a robust process
was carried out. A Request for Proposal
(RFP) was issued and written proposals
were provided by the tendering parties.
We had a common set of criteria for
evaluating the proposals including,
among other things:
• Audit quality record and Audit
Inspection Reports from the FRC
and PCAOB.
• The lead partner and their audit
team, including team makeup and
relevant experience with dual-listed
companies and applicable accounting
standards and internal control over
financial reporting standards.
• Sector experience.
• Proposed audit plan and
approach to resolving issues
or matters of judgement.
is proposing that PwC be appointed
as external auditor of the Company,
subject to shareholder approval at the
Company’s forthcoming AGM in June
2023. The Audit Committee will oversee
handover and induction arrangements
to ensure a smooth transition. It is
expected that PwC will present their
2023 audit plan to the Audit Committee
following their appointment, with a view
to undertaking the 2023 interim review
and year end audit.
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. During
2022 KPMG LLP did not provide any
non-audit related services. Therefore,
the ratio of non-audit work to audit
work was nil, which the Committee
is satisfied does not breach the
independence of KPMG LLP.
• Transition experience and plans.
Sharon Barber-Lui
Chair of Audit Committee
• Use of technology.
April 27, 2023
The potential audit firms participated
in meetings with management, which
provided an opportunity for the firms to
ask questions arising from their review
of the data room, as well as enabling
management to interact directly with
each potential audit team.
The proposals presented by the
potential audit firms were subject to
detailed evaluation and discussion
which enabled us to recommend to
the Board the appointment of PwC
as the preferred new auditor. Based
on this recommendation, the Board
PureTech Health plc Annual report and accounts 2022 85
Governance Directors’ Remuneration Report for the
year ended December 31, 2022
Dr. John LaMattina
Chair,
Remuneration
Committee
The Directors’ Remuneration Report
is split into three sections, namely:
• This Annual Statement: summarizing
and explaining the major decisions on
Directors’ remuneration in the year;
• The Directors’ Remuneration Policy:
setting out the framework for
remuneration for our Directors on
pages 90 to 94; and
• The Annual Report on Remuneration:
setting out the implementation of
the Remuneration Policy in the year
ended December 31, 2022 and the
intended implementation for the
year ending December 31, 2023
on pages 95 to 102.
The current Directors’ Remuneration
Policy was last approved at the 2021
AGM, and such approval is effective
until the 2024 AGM. The Directors’
Remuneration Report (excluding
that part of the report containing the
Directors’ Remuneration Policy on
pages 90 to 94) will be subject to a
shareholder vote at the 2023 AGM.
This vote is advisory only and does not
affect the actual historical remuneration
paid to any individual Director. We will
also be asking shareholders to approve
a separate AGM proposal to introduce
a new Performance Share Plan (“PSP”),
as explained below.
Committee responsibilities
Committee membership
The Remuneration Committee’s
primary purpose is to assist
the Board in determining the
Company’s remuneration policies.
The Remuneration Committee has
the responsibility for setting the
remuneration policy for all Executive
Directors and the Chairman of the
Company, including pension rights
and compensation payments, and
in determining such policy must
take into account all factors which it
deems necessary including regulatory
requirements, with the objective of
attracting, retaining and motivating
executive management having
regard to views of shareholders and
stakeholders and the risk appetite
of the Company and alignment to
the Company’s long term goals and
strategic plan. The Remuneration
Committee also recommends and
monitors the level and structure of
remuneration for senior management.
The Remuneration Committee shall, in
consultation with the Chairman and/or
the Chief Executive Officer, determine
the total individual remuneration
package of each Executive Director,
including share awards. The
Remuneration Committee shall also
have regard to current information
for remuneration in other companies
of comparable scale and complexity
and can appoint remuneration
consultants to assist in such process.
The Remuneration Committee also has
responsibility to review the design of
all share incentive plans and determine
awards under such plans. A full copy of
the Remuneration Committee’s Terms
of Reference is available on request
from the Company Secretary and within
the Investors section of the Company’s
website at www.puretechhealth.com.
The Remuneration Committee consists
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 66
to 67. The Committee met three times
during the year, with each Committee
member in attendance for all three
meetings. The Committee also acted
by unanimous written consent three
times during the year. The Chief
Executive Officer and the President
were invited to all of the meetings, with
Ms. Zohar attending each meeting
and Dr. Chowrira attending two of the
three meetings. However, no Executive
Director was permitted to participate
in discussions or decisions about his
or her personal remuneration.
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
and seasoned Directors. PureTech’s
Remuneration Policy is therefore an
important part of our business strategy.
Our guiding principle is to provide
market competitive remuneration
packages, including with respect to
cash compensation in the form of base
salary, annual bonuses and benefits
as well as share based compensation,
benchmarked against data generated
from our local markets to enable us to
put together and retain a top tier team.
86 PureTech Health plc Annual report and accounts 2022
Governance Directors’ Remuneration Report — continued
The Directors’ Remuneration Policy
was approved by shareholders at
the 2021 AGM with 83.9% support,
and the Remuneration Report was
approved by shareholders at the 2022
AGM with 86.2% support. Whilst the
Committee was pleased with the
support received in each instance, it
recognizes that some shareholders had
concerns with aspects of our approach.
The Committee recognizes that the
quantum of long-term share awards
may be higher than the norm in the UK
market but believes that such awards
are near the median of peer companies
in Boston, Massachusetts, the largest
biotechnology cluster in the world and
where the Company is headquartered.
Share based remuneration is a vital
component of the remuneration
packages of both executives and the
Board of Directors, as well as for our
broader employee base, and allows us
to compete for, attract and retain talent
in the U.S. market.
We remain committed to long-term
performance-based remuneration
delivered through the PSP and believe
that our current remuneration policy
provides an appropriate framework
to incentivize and motivate our senior
management team with competitive
U.S. remuneration packages, while also
ensuring the overall structure of the PSP
is aligned to UK practice.
All tables within the Directors’
Remuneration Report are audited
under the International Standards
on Auditing (UK) (“ISAs (UK)”) unless
otherwise noted.
Objectives of the Remuneration
Policy for our CEO and Senior
Executives
In the construction of our Executive
Director 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).
Performance and reward in 2022
During 2022, PureTech delivered strong
execution and achievement of key
strategic and financial goals, which has
been reflected in the annual bonus
outcome. The Company delivered
substantial growth and generated
momentum to support future growth in
the coming years as our balance sheet,
Founded Entities equity and royalty
stakes, and Wholly Owned programs
position PureTech with the strength to
build substantial value for shareholders
in the current environment. This growth
is due in large part to (i) significant
development and advancement of our
Wholly Owned Pipeline and activities
initiated or progressed to potentially
bring these innovative therapies
to market, (ii) generation of over
$115 million of non-dilutive cash income
in 2022 from the sale of equity holdings
in Founded Entities, (iii) completion of
various strategic sourcing and strategic
planning initiatives with the forward
looking goal to enhance shareholder
value, (iv) substantial development and
expansion of the Company’s intellectual
property portfolio and (v) key support
provided to the Founded Entities
as their businesses progress and, in
certain cases, execute key transactions
or financings. This increase in
value, together with management’s
operational performance at PureTech
and within the Wholly Owned Pipeline
and Founded Entities, resulted in the
Remuneration Committee approving
90% of the target performance goals.
In line with our standard approach, the
Committee then reviewed the overall
performance of the Company and the
individual Executive Directors before
determining the final bonus payout.
PureTech Health plc Annual report and accounts 2022 87
Governance Directors’ Remuneration Report — continued
The Committee considered operational
performance, the overall growth of the
business during the year, the extent to
which the target performance goals
had in some cases been exceeded
and the individual contributions of the
Executive Directors. Following this
exercise, the Committee determined
that a bonus equal to 90% of target
(or 45% of base salary) was to be
awarded to the Executive Directors.
The Committee is of the view that
this is appropriate in recognizing the
Executive Directors’ achievements
in 2022. See highlights of 2022 on
pages 1 to 5.
In relation to the PSP, PureTech’s
performance over the last three
financial years was very strong in
terms of achievement of strategic
objectives despite such performance
not being rewarded with an increase
in the Company’s share price. Overall,
the share price declined from an
average price of 261 pence during
the last three months of 2019 to an
average price of 253 pence during the
last three months of 2022. However,
strong strategic performance over the
three-year performance period resulted
in the vesting of 24.2 percent of the
PSP awards granted to the executive
management team, including the two
Executive Directors, in 2020.
For the year ended December 31,
2022, the Committee believes the
Remuneration Policy operated as
intended and that remuneration
outcomes are appropriate, taking
into account outcomes throughout
the business, company performance
and the stakeholder experience.
No discretion has been exercised in
relation to the annual bonus or PSP
vesting outcome.
The year ahead
For 2023, the following key decisions
have been made in relation to how the
Policy will be implemented:
• Base salaries for the Executive
Directors will be increased by
8.5 percent, which is slightly below
the average increase for the general
workforce taking into consideration
a number of factors, with a primary
consideration being the current
inflationary pressures in the
United States;
• The annual bonus target and
maximum will remain at 50 percent
and 100 percent of base salary,
respectively; and
• The grants of PSP awards in 2023 will
be at levels of 600 percent of base
salary for the Chief Executive Officer
and 300 percent of salary for the
President, in line with the limits as set
out in the Policy.
Operation of the Performance
Share Plan
In addition to matters relating to
Executive Directors’ remuneration, the
Committee also considers the use of
equity compensation throughout the
whole organization. PureTech grants
its employees awards of performance
shares and restricted shares under
the PSP as well as market-value stock
options. In line with the rules of the PSP,
the number of new shares that can be
issued to satisfy equity awards is limited
to 10% of the issued share capital over
a 10-year period, consistent with UK
standard practice and the expectations
of UK institutional investors, which
limitation was initially put into place
when the plan was implemented
in 2015 following PureTech’s initial
public offering.
We will have granted awards that will
have used up substantially all of the
current 10% dilution limit by the time
of the 2023 AGM. While a non-trivial
portion of these may ultimately never
be issued into the market as ordinary
shares due to forfeitures, cancellations
or tax withholdings, among other
reasons, we believe it is imperative to
act now to set new dilution limits to
ensure we can meet our obligations,
appropriately incentivise our workforce
and attract and retain talent as we
continue to strive to deliver long-
term shareholder value. In addition,
we have not raised dilutive funding in
the past five years, which would have
increased our overall share capital. This
contributes to our need to adjust our
approach to dilution at the current time.
The Company is proposing to
implement a new approach to equity
dilution, more in line with its peer U.S.
listed companies, which will provide
a level of additional flexibility which
is considered vital for us to be able
to compete for talent in our core
markets, while retaining governance
protections appropriate for a UK-listed
company. The Company is proposing
new dilution limits for the issue of new
shares under equity plans. Essentially,
the current “10% in 10 years” limit will
be extinguished as of the 2023 AGM,
and a new forward-looking limit of 10%
of the issued share capital over the next
5 years will be instituted for all awards
from the 2023 AGM. Any forfeitures,
cancellations, or withholdings from
shares granted under the prior
extinguished limit will not be eligible
to be re-granted at any time after the
2023 AGM under the new limit. As part
of the change, we will also remove the
separate “5% in 10 years” dilution limit
applicable to awards granted to senior
employees such as Executive Directors,
to ensure we have full flexibility in
operating the plan.
88 PureTech Health plc Annual report and accounts 2022
Governance Directors’ Remuneration Report — continued
In order to implement this new
approach to dilution, we will be asking
shareholders to approve a resolution to
adopt a new performance share plan at
the AGM.
significantly built out its overall team
at all levels over the period since
listing in 2015. All of this has put
additional pressure on the existing
dilution limits.
Our more detailed rationale for the
changes is as follows:
• Equity is a critically important part
of our compensation packages.
As a company operating in the
US biopharma space, we have an
in-depth programme to discover,
develop and commercialise new
medicines through our own pipeline
and occasionally invest in other
entities with exceptional potential.
This includes a number of candidates
in our wholly owned pipeline that we
are advancing ourselves, which has
required us to expand our team with
experienced professional leadership
at and immediately below the
executive level. The development
of this wholly owned pipeline is the
most critical aspect of our long-
term business strategy and has the
potential to deliver tremendous
value to shareholders. Our business,
programs, and approach to new
medicines is covered on pages
1 to 14 of this Report. Developing
pharmaceutical therapies is expensive
and cash-intensive, and our inherent
preference in line with our capital
allocation strategy is for using cash
resources primarily to fund our
own R&D and investments and to
return capital to shareholders where
possible. As a result, and in common
with other innovative pharmaceutical
and biotechnology companies, there
is a greater weight on equity in our
compensation programmes than
across industry more widely, and
this is based on newly issued shares,
rather than using cash to purchase
shares for employee programmes.
• We therefore need to have the
appropriate capacity to issue equity
to our employees in addition to
the cash remuneration we provide.
Furthermore, to ensure we can attract
and retain talent at all levels of our
highly skilled workforce we have
a policy of granting equity throughout
the whole organisation, both upon
hire and on an ongoing basis in line
with market trends. PureTech has
• PureTech has not raised capital by
issuing new shares since March
2018. This conservative approach to
funding has meant that the number
of shares outstanding has remained
consistent for the past five years. (An
equity raise would have the result
of increasing the share capital, and
thus provide extra headroom in the
dilution limits.) Instead, we have
raised significant non-dilutive funding
(over $680m) through the sale of
our equity interests in our Founded
Entities to invest in our Wholly
Owned Pipeline as well as giving
us flexibility to directly return value
to shareholders through our stock
buyback programme.
• Our compensation approach is
not unique to PureTech: many U.S.
pharma and biotech companies
operate in a similar fashion, preferring
equity rather than cash compensation.
Although PureTech has a UK listing,
we are based in Boston, the largest
biotechnology cluster in the United
States, and our key comparators are
US companies with a similar focus. US
companies in our sector use equity
incentives significantly more than the
wider US market, or UK companies
of a similar size. The annual median
gross burn rate of a Russell 3000
pharma and biotech company
with a similar market capitalisation
to PureTech is circa 5% of the
issued share capital (for employee
incentives). ISS’ analysis of US equity
plans uses a current annual burn rate
benchmark of 5.36% for Russell 3000
pharma and biotech stocks (albeit
ISS now takes a slightly different
approach to calculating the burn rate).
Our current UK-compliant annual burn
rate of only 1% is very uncompetitive,
and this presents us with a number of
serious challenges.
• Critically, we are competing for key
talent with these U.S. organisations.
The ability to offer a compelling
package based around a competitive
equity element is crucial to attracting
and retaining the best people in
the business. Constraints on our
equity offering can limit the talent
pool available and thus our ability to
operate to our fullest potential.
• We are, however, conscious that as a
UK-registered company and one with
some significant UK shareholders, we
cannot ignore UK rules and standards.
We are not therefore proposing an
open-ended ability to issue new
shares for equity incentive purposes;
our suggested 10% in 5 years limit
still implies an annual burn rate of
2%, which is well below comparative
US practice.
• Furthermore, we are retaining the
features of our plan which comply
with UK best practice, for example,
granting performance shares to
Executive Directors, which require
stretching performance targets to be
met, based on measures including
TSR. This contrasts with typical
practice at our US competitors, where
CEOs and other leading executives
receive restricted shares and stock
options with no performance targets
(and sometimes performance
shares in addition). Unlike their US
counterparts, our Executive Directors
are further required to hold any
vested awards for an additional two-
year period, in line with UK norms,
and also meet stretching minimum
shareholding requirements.
Overall, we believe that our proposed
approach represents a suitable balance
between UK good practice and the
commercial realities of operating in
a competitive market for talent in
our sector in the U.S. We recently
consulted with our major shareholders
on the specifics of this proposal
and were very grateful to receive
indications of support from those
who provided feedback.
Closing comments
The Committee is comfortable that
the operation of the Policy for 2022
has demonstrated a robust link
between performance and reward.
The Committee believes the proposed
operation of the Policy for 2023 is
appropriate and takes into account
the wider stakeholder experience.
The Committee looks forward to
shareholders’ support at the 2023
Annual General Meeting for (i) the
advisory resolution covering this
Annual Statement and the Annual
Report on Remuneration and (ii) the
adoption of a new performance share
plan, as explained above.
PureTech Health plc Annual report and accounts 2022 89
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.
This Directors’ Remuneration Policy was approved by a binding shareholder vote at the Company’s AGM on May 27, 2021.
All tables within this Directors’ Remuneration Policy section are audited under the International Standards on Auditing (UK)
(“ISAs (UK)”) unless otherwise noted.
Decision making process for determination, review and implementation of Directors’ Remuneration Policy
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. If changes are required, a new policy (or an amendment to the 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.
Policy table
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 ($30,000 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.
90 PureTech Health plc Annual report and accounts 2022
Governance Operation
Maximum
Based on performance during the
relevant financial year.
Up to 100 percent of
base salary.
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.
Performance targets and
recovery provisions
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.
PureTech Health plc Annual report and accounts 2022 91
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 was 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 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.
2 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.
3 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.
4 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.
5 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 or payment 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;
92 PureTech Health plc Annual report and accounts 2022
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 94;
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 PSP 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 2023 remuneration for the Chief Executive Officer and the President 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
Minimum
Target
$763,879
Minimum
$607,101
100%
100%
$3,283,470
Target
$1,757,201
23%
11%
66%
35%
16%
49%
Maximum
$5,803,060
Maximum
$2,907,301
13% 12%
74%
21%
20%
59%
Fixed pay
Annual bonus
PSP
Notes:
1 The minimum performance scenario comprises the fixed elements of remuneration only, including:
– Salary for FY2023 as set out in the Annual Report on Remuneration.
– Pension in line with policy and benefits as disclosed for FY2022 in the Annual Report on Remuneration.
2 The On-Target level of bonus is taken to be 50 percent of the maximum bonus opportunity (50 percent of salary). 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 the President). These values are included in
addition to the components/values of Minimum remuneration.
3 Maximum assumes full bonus pay-out (100 percent of base salary) 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 the President), in addition to fixed components/values of Minimum remuneration.
4 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 PSP during the performance period.
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.
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.
PureTech Health plc Annual report and accounts 2022 93
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
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
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 early
2023, in relation to the proposed
new performance share plan, and we
are 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.
94 PureTech Health plc Annual report and accounts 2022
Governance Annual Report on Remuneration
Implementation of the Remuneration Policy for the year ending December 31, 2023
All tables within the Annual Report on Remuneration are audited under the International Standards on Auditing (UK) (“ISAs
(UK)”) unless otherwise noted.
Base salary
The Committee reviewed the base salary levels for the Executive Directors in early 2023 and an increase of 8.5 percent was
awarded. This increase was slightly below the average increase for the general workforce, which was largely driven by cost of
living considerations in the US.
Daphne Zohar
Bharatt Chowrira
Chief Executive Officer
President, Chief Business, Financial and Operating Officer,
Corporate Secretary (“President”)
2022
Base salary
$663,487
$530,000
2023
Base salary
$719,883
$575,050
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 2023, the operation of the annual bonus plan will be similar to that operated in 2022. The maximum annual bonus will
continue to be 100 percent of base salary for all Executive Directors. The 2023 annual bonus will be based on internal program
development goals and strategic development, financial and capital markets based goals. The performance metrics and
targets will be disclosed in the FY2023 Annual Report and Accounts.
Long-term incentives
Awards under the PSP will be made to the Executive Directors in 2023. 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 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, TSR is complemented by measures linked to 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 (explained below).
• 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
internal program development, financial achievements, including monetization of Founded Entities, product pipeline growth,
operational excellence, strategic development or transaction related goals 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.
PureTech Health plc Annual report and accounts 2022 95
Governance Annual Report on Remuneration — continued
Non-Executive Directors
Fees for our Board of Directors were reviewed for 2023 and remain unchanged from 2022.
Chair fee
Basic fee
Equity-based Component
Additional fees:
Chair of a committee
Membership of a committee
Membership of a subsidiary board
FY2022 and FY2023
$125,000
$75,000
$50,000
$10,000
$5,000
$0 to $10,000
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.
Remuneration for the year ended December 31, 2022
Single total figure of remuneration for each Director (audited)
The table below sets out remuneration paid in relation to the 2022 financial year with a comparative figure for the 2021
financial year. There were no exercises of share options by Executive Directors or Non-Executive Directors in either of the 2022
or 2021 financial years.
Executive Directors
Daphne Zohar
Bharatt Chowrira3
Non-Executive Directors
Sharon Barber-Lui4
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Year
2022
2021
2022
2021
2022
2022
2021
2022
2021
2022
2021
2022
2021
Dame Marjorie Scardino5 2022
2021
Christopher Viehbacher
2022
2021
2021 and 2020 Remuneration
Basic
Salary/
Fees
Annual
Bonus Plan
Performance
Share Plan
(Vested)2
Benefits1
Pension
Total
Remuneration
Total
Variable
Total
Fixed
$663,487
$34,846
$298,569
$625,931
$33,465
$469,448
$530,000
$22,901
$238,500
$500,000
$25,452
$375,000
$491,377
$1,335,2566
$187,390
$253,3066
$9,150
$1,497,429
$789,946
$707,483
$8,700
$9,150
$8,700
$2,472,800
$1,804,704
$668,096
$987,941
$425,890
$562,051
$1,162,458
$628,306
$534,152
$115,1237
$135,0007
$145,0007
$145,0007
$145,0007
$145,0007
$145,0007
$135,0007
$135,0007
$140,0007
$140,0007
$189,5367
$195,0007
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$115,123
$135,000
$145,000
$145,000
$145,000
$145,000
$145,000
$135,000
$135,000
$140,000
$140,000
$189,536
$195,000
— $115,123
— $135,000
—
$145,000
— $145,000
—
$145,000
— $145,000
—
$145,000
— $135,000
—
$135,000
— $140,000
—
$140,000
— $189,536
—
$195,000
TOTAL
TOTAL
2022 $2,398,146
$57,747
$537,069
$678,768
$18,300
$3,490,030 $1,215,837 $2,274,193
2021
$2,030,931
$58,917
$844,448
$1,588,562
$17,400
$4,540,529
$2,433,010
$2,107,248
Notes:
1 Benefits comprise the following elements: private medical, disability and dental cover and parking.
2 The shares underlying the vested 2020 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 £2.530873, which was the average share price
during the last three months of 2022, and an exchange rate of GBP 1 : USD 1.175155385, which was the average exchange rate over the last three months of 2022.
3 Dr. Chowrira joined the Board in February 2021.
4 Ms. Barber-Lui joined the Board in March 2022.
5 Dame Marjorie retired from the Board at the conclusion of December 2022.
6 These amounts have been updated from those listed in the 2021 Annual Report and Accounts to reflect the actual values paid, which was not known at the date of
publication of the 2021 Annual Report and Accounts.
7 These amounts include grants of share based remuneration in July 2021 and 2022 in the form of time-vesting restricted stock units with a face value of $50,000.
96 PureTech Health plc Annual report and accounts 2022
Governance Percentage
of Target
Attained
50%
Annual Report on Remuneration — continued
Annual bonus outcome for 2022
For the 2022 annual bonus, targets were set for a balanced scorecard at the beginning of the year. The 2022 targets were
focused on (i) internal program development goals designed to incentivize the team to continue development of the
Company’s Wholly Owned Pipeline, generate valuable clinical data in support of the Company’s programs, create innovative
programs, publish key results and achieve patent protection for the Company’s programs; and (ii) strategic goals designed
to incentivize the team to complete important deals, execute strategic partnerships, monetize Founded Entity holdings
or otherwise strengthen the Company’s balance sheet, strengthen the Company’s investor base and provide support for
Founded Entity transactions and financings. In addition, the Remuneration Committee took into account other goals and
other achievements by the management team in setting final achievement attainment and fixing bonus payouts. The table
below sets out the performance assessment and associated bonus outcomes:
Target Goals – Maximum 100 percent Achievement
Performance
Measures Category
Achievement
Internal Program
Development
Strategic Goals
Other
Achievements
Pre-Specified
Maximum Total
The Internal Program Development Goals were 100 percent achieved in 2022. 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 2022 is set out below:
The Company completed multiple ascending dose studies for LYT-100 in healthy older
adults to support proceeding in IPF and initiated a Phase 2 study in IPF, completed
studies of LYT-100 in Long COVID and Lymphedema, achieved Phase 1b study results
with LYT-200 and generated data to support the initiation of Phase 2 studies of LYT-200
in leukemia and solid tumors, completed a Phase 1 study of LYT-300 to select doses for
a Phase 2 study, nominated LYT-310 as an additional therapeutic candidate, generated
a key publication in conjunction with a key collaborator and generated several patent
allowances and issuances in the U.S.
The Strategic Goals were 65 percent achieved in 2022. The management team’s
performance resulted in an achievement outcome of 32.5 percent out of a pre-specified
cap of 50 percent for this category of the goals. A description of performance in 2022 is
set out below:
The Company extensively evaluated certain strategic transactions and options to enhance
shareholder value, monetized approximately $115 million of its Founded Entity equity
holdings, and supported its Founded Entities to achieve certain strategic transactions,
financings and grant funding.
32.5%
The management team evidenced further exceptional performance as described below:
7.5%
The Company completed various strategic sourcing initiatives for new programs and
strategic transactions, conducted extensive outreach to raise the corporate profile
and cultivate new investors and analysts, conducted significant and robust activities to
strengthen the Company’s intellectual property portfolio and generated value accretion
through the successful activities of certain Founded Entities, especially Karuna.
90%
Accordingly, the Committee determined that the Company had achieved 90 percent of its target goals for 2022.
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). In this case, the Committee determined that payouts at 90 percent of target
(i.e. 45 percent of salary) are appropriate taking into account the overall performance of the Executive Directors and
the achievements set forth above. The Committee believes that such a bonus award is appropriate to reward and retain
top management.
Long-term incentive awards vesting in respect of the year (audited)
The 2020 PSP awards to Executive Directors granted on July 20, 2020 were subject to three-year performance conditions
covering the period from January 1, 2020 to December 31, 2022. Following an assessment of the performance conditions,
the Remuneration Committee determined that the awards will vest at 24.2 percent of the maximum. The 2021 awards of
RSUs to Non-executive directors granted on July 21, 2021 vested immediately prior to the 2022 AGM and were issued on
August 12, 2022.
PureTech Health plc Annual report and accounts 2022 97
Governance Annual Report on Remuneration — continued
Scheme
Basis of award granted Shares awarded
Shares vested
Shares lapsed
Daphne Zohar
Bharatt Chowrira
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Dame Marjorie Scardino
Christopher Viehbacher
PSP 2020
PSP 2020
PSP 2021
PSP 2021
PSP 2021
PSP 2021
PSP 2021
PSP 2021
400% of salary
200% of salary
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
683,652
260,715
11,190
11,190
11,190
11,190
11,190
11,190
165,215
63,006
11,190
11,190
11,190
11,190
11,190
11,190
518,437
197,2097
–
–
–
–
–
–
Value of
vested awards1
$491,3772
$187,3902
$31,9203
$31,9203
$31,9203
$31,9203
$31,9203
$31,9203
1 The value of the awards attributable to share price appreciation is nil for all Executive Directors and Non-Executive Directors.
2 Share awards have been valued using a share price of £2.530873, which was the average share price during the last three months of 2022, and an exchange rate
of GBP 1 : USD 1.175155385, which was the average exchange rate over the last three months of 2022.
3 Represents the value of the 11,190 shares on August 12, 2022, the date of issuance to each Non-executive Director.
The outcome of the performance condition relating to the performance based awards granted to the Executive Directors
is set out below (audited):
Measure and weighting
Threshold
Maximum
Achievement
15% p.a.
Absolute TSR (50%)
Total return against FTSE Small Cap Index (12.5%)
At or above median Upper quartile
Total return against MSCI Euro Healthcare Index (12.5%) At or above median Upper quartile
Strategic measures (25%)
See description below
7% p.a.
(1%) p.a.
43rd percentile
20th percentile
Vesting
(% of each
element)
0%
0%
0%
24.2%
The strategic measures over the three-year period were focused on (i) financial goals (55 percent), (ii) clinical development
goals (40 percent), and (iii) operational excellence (5 percent). The financial achievements resulting in satisfaction of 52 percent
of the vesting of the strategic measures included, among other things, obtaining over $680 million for PureTech by monetizing
certain Founded Entity equity, the closing of initial public offerings of two Founded Entities and two SPAC transactions for
Founded Entities, the execution of several partnership agreements which brought in non-dilutive funding and the completion
of certain investor-related activities, including generation of new analyst coverage for the Company. The clinical development
achievements resulting in satisfaction of 40 percent of the vesting of the strategic measures included, among other things, the
successful initiation, enrollment and completion of several Phase 1 and Phase 2 clinical studies for LYT-100 and the initiation
of the LYT-100 IPF phase 2 study, the advancement of other programs within our Wholly Owned Pipeline, the advancement of
certain programs at the Company’s Founded Entities, including receipt of U.S. marketing clearances for two programs. The
operational excellence achievements resulting in satisfaction of 5 percent of the vesting of the strategic measures include the
operation of the Company’s programs within projected timelines and budgets, successfully managing operations through the
COVID-19 pandemic, building out a world-class development organization, 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)
The following long-term Incentive awards were granted to Executive Directors during 2022:
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 2022
Bharatt Chowrira
PSP 2022
500% of
salary
250% of
salary
1,532,051 175.20 pence
$3,317,434
611,909 175.20 pence
$1,325,000
1 The share price at the date of grant is based on the 3-day average closing price immediately prior to the grant of the award.
% of face
value vesting
at threshold
performance
25%
25%
Vesting
determined by
performance over
Three financial
years to
December 31,
2024
The PSP awards granted in 2022 are subject to (i) achievement of absolute TSR targets (40 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 (20 percent of the awards, 10 percent against each benchmark)
and (iii) achievement of targets based on strategic measures (40 percent of the awards), measured over the three year period
to December 31, 2024.
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 is TSR equal to the median of the index, whilst the maximum target will be TSR equal to the upper quartile of the index.
Strategic measures are based on the achievement of project milestones and other qualitative measures of performance.
Strategic targets have been 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 equal weighting on TSR
98 PureTech Health plc Annual report and accounts 2022
Governance Annual Report on Remuneration — continued
and strategic objectives 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.
In addition, each Non-Executive Director was granted share based remuneration on July 21, 2022 in the form of 21,507 time-
vesting restricted stock units. The equity awards granted to our Non-Executive Directors vest in their entirety immediately
prior to Company’s 2023 AGM, provided that the Non-Executive Directors continue their service through such date. This share
based element is part of the annual fee for Non-Executive Directors and is not subject to performance (unaudited).
Non-Executive Directors
Sharon Barber-Lui
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Dame Marjorie Scardino1
Christopher Viehbacher
Shares awarded
Face value of award
Vesting date
21,507
21,507
21,507
21,507
21,507
21,507
21,507
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
June 13, 2023
June 13, 2023
June 13, 2023
June 13, 2023
June 13, 2023
June 13, 2023
June 13, 2023
1 The RSUs awarded to Dame Marjorie were forfeited upon her retirement at the conclusion of December 2022.
Payments for Loss of Office (unaudited)
There were no payments for Loss of Office during 2022.
Payments to past Directors (unaudited)
No payments to past Directors were made during 2022.
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 and a minimum of 200 percent of base salary for the other Executive Directors. The Chief Executive Officer
and President both satisfy this requirement, and neither has disposed of any company shares since the Company’s IPO. Post-
employment shareholding requirements will apply.
The table below sets out current 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, 2022
Dec 31, 2021
Dec 31, 2022
Dec 31, 2021
Dec 31, 2022
Dec 31, 2021
Daphne Zohar1
Bharatt Chowrira
Sharon Barber-Lui8
Raju Kucherlapati
John LaMattina10
Robert Langer11
Kiran Mazumdar-Shaw
Dame Marjorie Scardino
Chris Viehbacher
12,564,1892
2,490,7896
—
2,471,021
1,443,623
2,955,324
11,190
809,90012
1,056,83614
12,197,307
2,213,689
—
2,459,831
1,492,463
2,944,134
—
798,710
1,045,646
2,372,5193
1,322,5967
21,5079
21,5079
21,5079
21,5079
21,5079
21,50713
21,5079
1,524,120 14,936,708
3,813,385
1,158,902
21,507
—
2,492,528
11,190
1,465,130
11,190
2,976,831
11,190
32,697
11,190
831,40713
11,190
11,190
1,078,343
13,721,427
3,372,591
—
2,471,021
1,503,653
2,955,324
11,190
809,900
1,056,836
1 A portion of Ms. Zohar’s shareholding in the Company is indirect. As of December 31, 2020, an aggregate of 8,464,189 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.
2 Includes 410,000 ADSs, which are convertible into 4,100,000 ordinary shares. Does not include 165,215 shares which are issuable pursuant to the PSP award granted to
Ms. Zohar covering the financial years 2020, 2021 and 2022 which have vested but not yet been issued.
3 Includes the following PSP awards, which are subject to performance conditions: 840,468 (2021) and 1,532,051 (2022). Does not include 165,215 shares which are issuable
pursuant to the PSP award granted to Ms. Zohar covering the financial years 2020, 2021 and 2022 which have vested but not yet been issued.
6 Includes 915,789 shares of stock owned by Dr. Chowrira and 1,575,000 vested stock options, none of which have been exercised. Does not include 63,006 shares which
are issuable pursuant to the PSP award granted to Dr. Chowrira covering the financial years 2020, 2021 and 2022 which have vested but not yet been issued.
7 Includes the following PSP awards, which are subject to performance conditions: 335, 687 (2021) and 611,909 (2022), as well as 375,000 unvested stock options. Does not
include 63,006 shares which are issuable pursuant to the PSP award granted to Dr. Chowrira covering the financial years 2020, 2021 and 2022 which have vested but not yet
been issued.
8 Ms. Barber-Lui joined the Board in March 2022.
9 Denotes RSUs, which are subject to continued employment, that were granted in July 2022 and vest immediately prior to the 2023 Annual General Meeting.
10 A portion of Dr. LaMattina’s shareholding in the Company is indirect. As of December 31, 2022, an aggregate of 1,443,623 ordinary shares are held by (i) John L LaMattina
Revocable Trust, (ii) John L LaMattina 2020-2 GRAT, and (iii) LaMattina Charitable Trust.
11 A portion of Dr. Langer’s shareholding in the Company is indirect. As of December 31, 2022, an aggregate of 2,955,324 ordinary shares are held by (i) Langer Family 2020 Trust
and (ii) directly by Dr. Langer.
12 Includes 100 ADSs, which are convertible into 1,000 ordinary shares.
13 Includes 21,507 RSUs which were forfeited by Dame Marjorie upon her retirement from the Board at the close of business on December 31, 2022.
14 Includes 2,000 ADSs, which are convertible into 20,000 ordinary shares.
PureTech Health plc Annual report and accounts 2022 99
Governance Annual Report on Remuneration — continued
Directors’ service contracts (unaudited)
Detail of the service contracts of current Directors is set out below:
Executive Directors
Daphne Zohar
Bharatt Chowrira
Notice period
Contract date
180 days
60 days
June 18, 2015
March 1, 2017
Maximum potential
termination payment
12 months’ salary
12 months’ salary
Potential payment
on change of
control/liquidation
Nil
Nil
Contracts for the above Executive Directors will continue until terminated by notice either by the Company or the Executive
Director. Dame Marjorie Scardino informed the Company of her intention to retire on August 24, 2022, which retirement
became effective as of the close of business on December 31, 2022. Mr. Viehbacher Informed the Company on December 21,
2022 that he would not stand for re-election at the Company’s 2023 AGM.
Non-Executive Directors
Sharon Barber-Lui
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
30 days
March 24, 2022
March 24, 2025
June 5, 2021
June 5, 2021
June 5, 2021
September 28, 2020
June 5, 2021
June 5, 2021
June 5, 2024
June 5, 2024
June 5, 2024
September 28, 2023
n/a
n/a
The Company and the Non-Executive Directors listed above, other than Dame Marjorie and Mr. Viehbacher, 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: Datastream (Thomson Reuters)
(cid:13)
(cid:72)
(cid:73)
(cid:87)
(cid:69)
(cid:70)
(cid:73)
(cid:86)
(cid:12)
(cid:4)
(cid:13)
(cid:102)
(cid:12)
(cid:4)
(cid:73)
(cid:89)
(cid:80)
(cid:69)
(cid:58)
(cid:22)(cid:26)(cid:20)
(cid:22)(cid:24)(cid:20)
(cid:22)(cid:22)(cid:20)
(cid:22)(cid:20)(cid:20)
(cid:21)(cid:28)(cid:20)
(cid:21)(cid:26)(cid:20)
(cid:21)(cid:24)(cid:20)
(cid:21)(cid:22)(cid:20)
(cid:21)(cid:20)(cid:20)
(cid:28)(cid:20)
(cid:26)(cid:20)
(cid:24)(cid:20)
(cid:22)(cid:20)
(cid:20)
(cid:22)(cid:24)(cid:4)(cid:46)(cid:89)(cid:82)
(cid:22)(cid:20)(cid:21)(cid:25)
(cid:23)(cid:21)(cid:4)(cid:40)(cid:73)(cid:71)
(cid:22)(cid:20)(cid:21)(cid:25)
(cid:23)(cid:21)(cid:4)(cid:40)(cid:73)(cid:71)
(cid:22)(cid:20)(cid:21)(cid:26)
(cid:23)(cid:21)(cid:4)(cid:40)(cid:73)(cid:71)
(cid:22)(cid:20)(cid:21)(cid:27)
(cid:23)(cid:21)(cid:4)(cid:40)(cid:73)(cid:71)
(cid:22)(cid:20)(cid:21)(cid:28)
(cid:23)(cid:21)(cid:4)(cid:40)(cid:73)(cid:71)
(cid:22)(cid:20)(cid:21)(cid:29)
(cid:23)(cid:21)(cid:4)(cid:40)(cid:73)(cid:71)
(cid:22)(cid:20)(cid:22)(cid:20)
(cid:23)(cid:21)(cid:4)(cid:40)(cid:73)(cid:71)
(cid:22)(cid:20)(cid:22)(cid:21)
(cid:23)(cid:21)(cid:4)(cid:40)(cid:73)(cid:71)
(cid:22)(cid:20)(cid:22)(cid:22)
(cid:52)(cid:89)(cid:86)(cid:73)(cid:56)(cid:73)(cid:71)(cid:76)
(cid:50)(cid:37)(cid:55)(cid:40)(cid:37)(cid:53)(cid:4)(cid:38)(cid:77)(cid:83)(cid:88)(cid:73)(cid:71)(cid:76)(cid:82)(cid:83)(cid:80)(cid:83)(cid:75)(cid:93)
(cid:55)(cid:10)(cid:52)(cid:26)(cid:20)(cid:20)(cid:4)(cid:38)(cid:77)(cid:83)(cid:88)(cid:73)(cid:71)(cid:76)(cid:82)(cid:83)(cid:80)(cid:83)(cid:75)(cid:93)
This graph shows the value, by December 31, 2022, 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.
100 PureTech Health plc Annual report and accounts 2022
Governance Annual Report on Remuneration — continued
Chief Executive Officer’s Remuneration History (unaudited)
Year
2015
2016
2017
2018
2019
2020
2021
2022
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
Daphne Zohar
Chief Executive Officer
Daphne Zohar
Chief Executive Officer
$955,599
$747,634
$821,898
$2,139,870
$5,783,682
$7,194,841
$2,472,800
Daphne Zohar
Chief Executive Officer
$1,497,429
Single figure of total
remuneration
Annual bonus pay-out
against maximum
PSP Vesting against
maximum opportunity
100%
38.75%
50%
65%
100%
100%
75%
45%
n/a
n/a
n/a
50%
100%
100%
95.8%
24.2%
Percentage change in remuneration of Directors and employees (unaudited)
The table below shows the change in the Directors’ remuneration compared to the change in remuneration of all of our full-
time employees who were employed throughout the same periods:
2021 to 2022
2020 to 2021
2019 to 2020
Base
salary1
Benefits
Annual
bonus
Base
salary
Benefits
Annual
bonus
Base
Salary
Benefits
Annual
Bonus
Daphne Zohar (CEO)
Bharatt Chowrira (President)2
Sharon Barber-Lui3
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Marjorie Scardino
Christopher Viehbacher
Employees4
6%
6%
N/A
(7%)
0%
0%
0%
0%
(3%)
12%
4%
(10%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
6%
(36%)
(36%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(22%)
3%
N/A
N/A
38.1%
16%
16%
635%
55%
26%
9%
6%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
7%
(23%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
1%
3%
N/A
N/A
11%
19%
13%
N/A
0%
45%
8%
0%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
16%
3%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
14%
1 Base salary amounts for Non-Executive Directors in 2021 and 2022 include grants of share based remuneration in the form of time-vesting restricted stock units with a face
value of $50,000.
2 Joined the Board effective February 2021.
3 Joined the Board effective March 2022.
4 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 2022
compared to 2021:
Staff costs1
Distributions to Shareholders
2022
2021
% change
$32,050,089 $22,136,823
$26,359,8512
—
59%
—
1 Excludes Founded Entities.
2 Represents the value of the 10,595,347 ordinary shares repurchased under the Company’s share repurchase programme during 2022.
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 2022 the Committee received independent remuneration advice from Korn Ferry
(UK) Limited, who was appointed by and is accountable to the Committee. A separate practice within Korn Ferry provides
certain other candidate placement 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 President. 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 Korn Ferry amounted to £27,900. 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.
PureTech Health plc Annual report and accounts 2022 101
Governance Annual Report on Remuneration — continued
Statement of voting at general meeting (unaudited)
The table below sets out the proxy results of the vote on our Remuneration Report at our 2022 AGM:
Resolutions
For
%
Against
%
Withheld
Total votes cast
To approve the Directors’
Remuneration Report
186,654,636
86.20%
29,871,462
13.80%
390,360
216,526,098
The table below sets out the proxy results of the vote on our Remuneration Policy at our 2021 AGM:
Resolutions
For
%
Against
%
Withheld
Total votes cast
To approve the Directors’
Remuneration Policy
2023 AGM
187,285,809
83.90%
35,930,008
16.10%
2,309,748
223,215,817
The Company’s AGM will be held at 11:00 am EDT (4:00 pm BST) on June 13, 2023 at the Company’s headquarters at
6 Tide Street, Boston, Massachusetts. Information regarding the voting outcome will be disclosed in next year’s Annual
Report on Remuneration.
This report has been prepared by the Remuneration Committee and has been approved by the Board. It complies with the
UK Companies Act 2006 and related regulations. This report will be put to shareholders for approval at the forthcoming AGM,
alongside a vote to approve the new performance share plan.
On behalf of the Board of Directors
Bharatt Chowrira
Company Secretary
April 27, 2023
102 PureTech Health plc Annual report and accounts 2022
Governance Independent auditor’s report to the members
of PureTech Health plc
1. Our opinion is unmodified
We have audited the financial statements of PureTech Health
plc (“the Company”) for the year ended 31 December
2022 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 2022 and of the Group’s loss for the
year then ended;
• the Group financial statements have been properly
prepared in accordance with UK-adopted international
accounting standards;
• the parent Company financial statements have been
properly prepared in accordance with UK-adopted
international accounting standards 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.
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 eight financial years ended 31
December 2022. 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.
Overview
Materiality: group
financial statements
as a whole
Coverage
$3.50m (2021: $4.00m)
0.49% of total assets
(2021: 0.42% of total assets)
95% (2021: 100%) of total assets,
97% (2021: 99%) of total operating
expenses and 98% (2021: 94%) of
loss before tax
vs 2021
Key audit matters
Recurring
risks
Valuation of financial instruments;
Vedanta preferred shares
financial liabilities*
Valuation of investment balance
held by the Parent Company
* We have not identified any significant risk over ‘classification of new preferred
shares and convertible loan notes including identification and classification of any
embedded derivatives’ in our current year audit. There were no such instruments
issued during the year.Therefore, it is not separately identified in our report this year.
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, 2022: 2 (2021:3),
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.
PureTech Health plc Annual report and accounts 2022 103
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
Valuation of financial liabilities;
Vedanta preferred shares
financial liabilities
The financial liabilities noted above
are a substantial portion of the
amounts disclosed below.
($27.3 million preferred shares
financial liabilities; 2021: ($180.8 million
preferred shares financial liabilities)
Refer to page 83 (Audit Committee
Report), page 121 (accounting policy)
and page 151 (financial disclosures).
The risk
Our response
Subjective valuation:
The Group finances its operations
partly through preferred shares,
convertible notes or warrants which
are classified as level 3 financial
instruments and carried at fair value.
We performed the detailed tests below
rather than seeking to rely on any of the
group’s controls because the nature of the
balance is such that we would expect to
obtain audit evidence primarily through
the detailed procedures described.
Determining the fair value of the
Vedanta preferred share financial
liability which was arrived at
using a market approach involved
a significant level of estimation due
to the Company’s existing phase in
clinical programs and assumptions
used such as the probability of
financing events and exit scenarios
associated with Vedanta that may
impact the enterprise value.
The effect of these matters is that,
as part of our risk assessment, we
determined that the valuation of
financial liability 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.
Our procedures included:
Our valuation expertise:
We involved valuation professionals
with specialized skills and knowledge
who assisted us in evaluating the option
pricing model by re-performing the
simulations used to determine the
enterprise value for each of the probable
financing events and exit scenarios
assumed by the Management.
Our scientific expertise:
Our medical specialist challenged
management’s assessment on the overall
scientific validation and progress of each
relevant fair value estimate.
Assessing valuer’s credentials:
We used our valuation specialists to
assist us in assessing the expertise
and credentials of the group’s external
valuation specialists used in the
corroboration of management’s valuation.
Benchmarking assumptions:
We evaluated the reasonableness of the
probability of exit scenarios by inspecting
strategic plans and comparing against
previous year assumptions and assessing
if any changes were reasonable in the
context of recent developments at
the company.
We evaluated the reasonableness of the
probability of future financing events by
inspecting strategic plans and inspecting
the terms of financing agreements
secured by the Company after the year
end date and comparing the assumptions
used in the option pricing model to the
prior year.
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 level 3
financial instruments to be acceptable.
(2021: acceptable).
104 PureTech Health plc Annual report and accounts 2022
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 investment held by the
Parent Company ($452.4 million;
2021: $446.0m*)
Refer to page 83 (Audit Committee
Report), page 172 (accounting policy)
and page 172 (financial disclosures).
* The previous year balance of $446.0m includes
$148.0m of investment and 298.0m of long-term
receivable from subsidiary. During the year, the
long-term receivable balance has been converted into
investment in subsidiary.
Low risk, high value
The carrying amount of the parent
Company’s investment in its subsidiary
represents 92% (2021: 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.
We performed the tests below rather
than seeking to rely on any of the Group’s
controls because the nature of the
balance is such that we would expect to
obtain audit evidence primarily through
the detailed procedures described.
Our procedures included:
Comparing valuations:
We compared the carrying amount of the
investment to the market capitalisation
of the Group adjusted for any assets and
liabilities held by the parent company,
as PureTech Health LLC contains all the
Group’s trading operations.
We compared the carrying amount of the
investment to the net assets of the Group
adjusted for any assets and liabilities
held by the parent company to assess for
indicators of impairment.
Our results
We found the recoverability of the
investment balance held by the
Parent Company to be acceptable.
(2021: acceptable)
PureTech Health plc Annual report and accounts 2022 105
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
Materiality for the group financial statements as a whole
was set at $3.5m (2021: $4.0m), determined with reference
to a benchmark of group total assets (2021: group total
assets), of which it represents 0.5% (2021: 0.4%). Materiality
for the parent company financial statements as a whole was
set at $2.6m (2021: $2.5m), determined with reference to
a benchmark of parent company total assets, of which it
represents 0.5% (2021: 0.6%).
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 65% (2021: 65%) of
materiality for the financial statements as a whole, which
equates to $2.27m (2021: $2.6m) for the group and $1.69m
(2021: $1.62m) for the parent company. We applied this
percentage in our determination of performance materiality
based on the level of identified misstatements and control
deficiencies during the prior period.
We agreed to report to the Audit Committee any corrected
or uncorrected identified misstatements exceeding $0.2m,
in addition to other identified misstatements that warranted
reporting on qualitative grounds.
The audit work performed was fully substantive as we did not
rely upon the Group’s internal control over financial reporting.
Of the group’s 5 (2021: 4) reporting components, we
subjected 2 (2021: 3) to a full scope audit for group purposes
and 1 (2021:0) to specified risk-focused audit procedures over
cash, total operating Expenses and management override
controls. The component for which we performed specified
risk-focused procedures was not financially significant enough
to require an audit for group reporting purposes, but did
present specific individual risks that needed to be addressed.
The components within the scope of our work accounted
for the percentages illustrated opposite. In the current Year,
we have made one change to the disclosure on scoping
coverage to include total operating Expenses as a relevant
metric in the current year instead of Total revenues in the
prior year. The reason for the change is to provide a more
appropriate presentation of coverage to the users of the
financial statements owing to the size of total revenues and
the stage of development of the Group’s pipeline.
The remaining 3% (2021: 1%) of total operating expenses,
2% (2021: 6%) of total profits and losses that made up Group
loss and 5% (2021: 0%) of total group assets is represented
by 2 (2021: 1) of reporting components, neither of which
individually represented more than 5% (2021: 6%) of any of
total group operating expenses, total profits and losses that
made up Group loss before tax or total group assets. For
these components, we performed analysis at an aggregated
group level to re-examine our assessment that there were
no significant risks of material misstatement within these.
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 Group team approved the component materiality’s
which ranged from $0.5m to $2.8m (2021: $1.05m to $2.8m),
having regard to the mix of size and risk profile of the Group
across the components. The work on 2 out of 3 components
(2021: 2 of the 3 components) was performed by component
auditors and the rest, including the audit of the parent
company, was performed by the Group team.
Telephone conference meetings were held with the
component auditors to assess audit risk and strategy.
The Group team visited 2 (2021: 0) components in-person
as the audit progressed to understand and review the audit
procedures performed. At these visits and meetings, the
findings reported to the Group team were discussed in more
detail, and any further work required by the Group team was
then performed by the component auditor.
Total operating expenses
$703m (2021: $946m)
Group Materiality
$3.50m (2021: $4.00m)
$3.50m
Whole financial
statements materiality
(2021: $4.00m)
$2.27m
Whole financial
statements performance
materiality (2021: $2.60m)
$2.80m
Range of materiality
at 5 components
($0.05m to $2.80m)
(2021: $1.05m to $2.80m)
$0.20m
Misstatements reported
to the audit committee
(2021: $0.20m)
Total operating expenses
Group materiality
Group total
operating expenses
Total profits and losses
that made up Group loss
before tax
3
1
97%
(2021: 99%)
99
97
Group total assets
5
95%
(2021: 100%)
100
95
2
6
98%
(2021: 94%)
94
98
Full scope for Group
audit purposes 2022
Full scope for Group
audit purposes 2021
Out of scope for group
audit purposes 2022
Out of scope for group
audit purposes 2022
106 PureTech Health plc Annual report and accounts 2022
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
4. Going concern
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 71 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.
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 affect the Group’s and
Company’s available financial resources adversely over this
period was:
• Failure to raise future funding to finance the Group’s
strategic business model.
We considered whether this risk 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 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.
• We also compared past budgets to actual results to assess
the directors’ track record of budgeting accurately.
• We evaluated 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.
• We considered 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.
PureTech Health plc Annual report and accounts 2022 107
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
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.
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 level.
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 Vedanta preferred shares financial
liabilities. 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 did not identify any additional fraud risks.
Further detail in respect of the valuation of financial
instruments 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 with unusual descriptions, those
posted and approved by the same user, those posted
to unusual accounts in relation to cash and revenue,
and material post close entries.
• Assessing whether the judgements made in making
accounting estimates are indicative of a potential 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
a group level.
The potential effect of these laws and regulations on the
financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation (including related companies legislation),
distributable profits legislation and taxation legislation and
we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial
statement items.
108 PureTech Health plc Annual report and accounts 2022
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
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 remains 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.
PureTech Health plc Annual report and accounts 2022 109
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
Our work is limited to assessing these matters in the
context of only the knowledge acquired during our financial
statements audit. As we cannot predict all future events or
conditions and as subsequent events may result in outcomes
that are inconsistent with judgements that were reasonable at
the time they were made, the absence of anything to report
on these statements is not a guarantee as to the Group’s and
Company’s longer-term viability.
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.
The impact of climate change on our audit
In planning our audit we performed a risk assessment to
consider the potential impacts of climate change on the
Group’s business and its financial statements and our audit.
This included making enquiries of management to understand
the extent of the potential impact of climate change risk
on the Group’s financial statements. Taking into account
the industries the Group invests in, there was no significant
impact on our key audit matters.
We have also read the Group’s and the Parent Company’s
disclosure of climate related information in the front half
of the annual report as set out on pages 41 to 43 and
considered consistency with the financial statements and
our audit knowledge.
6. We have nothing to report on the other information
in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does
not cover the other information and, accordingly, we do not
express an audit opinion or, except as explicitly stated below,
any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements
audit work, the information therein is materially misstated
or inconsistent with the financial statements or our audit
knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the
strategic report and the directors’ report;
• in our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
• in our opinion those reports have been prepared
in accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
Disclosures of 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.
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 48) 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 Principal Risks disclosures describing these risks and
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 48 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.
110 PureTech Health plc Annual report and accounts 2022
Financial statements Independent auditor’s report to the members of PureTech Health plc — continued
7. We have nothing to report on the other matters
on which we are required to report by exception
9.
The purpose of our audit work and to whom we
owe our responsibilities
Under the Companies Act 2006, we are required to report
to you if, in our opinion:
• adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent Company financial statements and the part of
the Directors’ Remuneration Report to be audited are not
in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
law are not made; or
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by
law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members, as
a body, for our audit work, for this report, or for the opinions
we have formed.
• we have not received all the information and explanations
we require for our audit.
Robert Seale (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
Canary Wharf
London
E14 5GL
27th April 2023
We have nothing to report in these respects.
8.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
81, 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
The Company is required to include these financial
statements in an annual financial report prepared using the
single electronic reporting format specified in the TD ESEF
Regulation. This auditor’s report provides no assurance over
whether the annual financial report has been prepared in
accordance with that format.
PureTech Health plc Annual report and accounts 2022 111
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 of subsidiary
Gain/(loss) on investment held at fair value
Realized loss on sale of investments
Other income/(expense)
Other income/(expense)
Finance income/(costs):
Finance income
Finance costs – contractual
Finance income/(costs) – fair value accounting
Net finance income/(costs)
Share of net loss of associates accounted for using the
equity method
Gain on dilution of ownership interest in associate
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
Equity-accounted associate – share of other comprehensive
income (loss)
Reclassification of foreign currency differences on dilution
of interest
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
6, 16
9
9
9
6
6
6
25
18
18
10
10
2022
$000s
2,090
13,528
15,618
2021
$000s
9,979
7,409
17,388
(60,991)
(152,433)
(197,807)
(57,199)
(110,471)
(150,282)
27,251
(32,060)
(29,303)
8,131
(25,981)
5,799
(3,939)
137,063
138,924
(27,749)
28,220
(8,390)
(92,783)
55,719
(37,065)
—
179,316
(20,925)
1,592
159,983
214
(4,771)
9,606
5,050
(73,703)
—
—
(58,953)
(3,756)
(62,709)
(166)
—
(213)
(379)
(37,444)
(50,354)
13,290
(37,065)
(50,733)
13,290
(37,444)
$
(0.18)
(0.18)
—
—
(62,709)
(60,558)
(2,151)
(62,709)
(60,558)
(2,151)
(62,709)
$
(0.21)
(0.21)
2020
$000s
8,341
3,427
11,768
(49,440)
(81,859)
(119,531)
—
232,674
(54,976)
1,035
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
112 PureTech Health plc Annual report and accounts 2022
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
Investment in associates – equity method
Note from associate
Lease receivable – long-term
Other non-current assets
Total non-current assets
Current assets
Trade and other receivables
Income tax receivable
Prepaid expenses
Lease receivable – short-term
Other financial assets
Short-term note from associate
Short-term investments
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Treasury stock
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 tax liability
Lease liability, non-current
Long-term loan
Liability for share based awards
Total non-current liabilities
Current liabilities
Deferred revenue
Lease liability, current
Trade and other payables
Subsidiary:
Notes payable
Warrant liability
Preferred shares
Current portion of long-term loan
Total current liabilities
Total liabilities
Total equity and liabilities
Note
11
21
12
5, 16
6
16
21
22
25
21
13, 22
22
22
14
18
25
21
20
8
3
21
19
16, 17
16
15, 16
20
2022
$000s
2021
$000s
22,957
14,281
831
251,892
9,147
16,501
835
10
316,454
11,867
10,040
11,617
450
2,124
—
200,229
149,866
386,192
702,647
5,455
289,624
(26,492)
138,506
89
(14,478)
149,516
542,220
5,369
547,589
19,645
24,155
10,244
4,128
58,172
2,185
4,972
54,840
2,345
47
27,339
5,156
96,885
155,057
702,647
26,771
17,166
987
397,179
—
—
1,285
810
444,197
3,174
4,514
10,755
415
2,124
15,120
—
465,708
501,809
946,006
5,444
289,303
—
138,506
469
(40,077)
199,871
593,515
(9,368)
584,147
89,765
29,040
14,261
2,659
135,725
65
3,950
35,817
4,641
6,787
174,017
857
226,135
361,859
946,006
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 27, 2023
and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
April 27, 2023
The accompanying notes are an integral part of these financial statements.
PureTech Health plc Annual report and accounts 2022 113
Financial statements
Consolidated Statements of Changes in Equity
For the years ended December 31
Share Capital
Treasury Shares
Shares
Amount
$000s
Share
premium
$000s
Shares
Amount
$000s
Merger
reserve
$000s
Translation
reserve
$000s
Other
reserve
$000s
Retained
earnings/
(accumulated
deficit)
$000s
Total
Parent
equity
$000s
Non-
controlling
interests
$000s
Total
Equity
$000s
Balance January 1, 2020
Net income/(loss)
Other comprehensive
income/(loss), net
Total comprehensive
income/(loss)
for the year
Exercise of share-
based awards
Revaluation of deferred
tax assets related to
share-based awards
Equity settled share-
based awards
Settlement of restricted
stock units (RSU)
Other
Balance December 31,
2020
Net income/(loss)
Total comprehensive
income/(loss) for the
year
Exercise of share-
based awards
Revaluation of
deferred tax assets
related to share-
based awards
Equity settled share-
based awards
Settlement of restricted
stock units
Reclassification of
equity settled awards
to liability awards
Vesting of share-
based awards and
net share exercise
Acquisition of subsidiary
non-controlling interest
NCI exercise of share
options in subsidiaries
Distributions
Balance December 31,
2021
Net income/(loss)
Other comprehensive
income/(loss), net
Total comprehensive
income/(loss)
for the year
Deconsolidation
of Subsidiary
Exercise of share-
based awards
Revaluation of
deferred tax assets
related to share-
based awards
Purchase of Treasury stock
Equity settled share-
based awards
Partial settlement of share
based liability awards
and settlement of equity
based RSUs
NCI exercise of share
options in subsidiaries
Other
Balance December 31,
2022
285,370,619
—
5,408
—
287,962
—
—
—
514,406
—
—
—
—
—
—
9
—
—
—
—
—
—
1,016
—
—
—
—
285,885,025
5,417 288,978
—
—
1,911,560
—
—
—
—
—
—
—
—
—
—
27
—
—
—
—
—
—
—
—
—
—
326
—
—
—
—
—
—
—
—
287,796,585
5,444 289,303
—
—
—
—
321
—
—
—
—
577,022
—
—
—
788,046
—
—
—
—
—
—
11
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 138,506
—
—
— (18,282)
—
—
254,444
5,985
668,037
5,985
(17,639) 650,398
4,568
(1,417)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
469
469
—
—
—
—
—
—
—
469
—
469
5,985
6,454
(1,417)
5,037
—
1,025
11
1,036
(684)
7,805
—
—
(684)
—
(684)
7,805
2,822
10,627
— (12,888)
—
—
— (12,888)
—
—
— (12,888)
13
13
— 138,506
469
(24,050)
260,429
669,748
(16,209) 653,539
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
615
7,109
(60,558)
(60,558)
(2,151)
(62,709)
(60,558)
(60,558)
(2,151)
(62,709)
—
352
—
352
—
—
615
—
615
7,109
6,252
13,361
— (10,749)
— (10,749)
— (10,749)
—
(6,773)
—
(6,773)
—
(6,773)
—
—
—
—
(2,582)
(9,636)
5,988
—
—
—
—
—
(2,582)
—
(2,582)
(9,636)
8,668
(968)
5,988
—
(5,922)
(6)
66
(6)
— 138,506
469
(40,077)
199,871
593,515
(9,368) 584,147
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(379)
(379)
—
—
—
—
—
—
—
—
—
—
—
—
—
45
—
(50,354)
(50,354)
13,290
(37,065)
—
(379)
—
(379)
(50,354)
(50,733)
13,290
(37,444)
—
—
—
11,904
11,904
332
—
332
—
45
— (26,492)
—
45
— (26,492)
8,856
—
8,856
4,711
13,567
1,528
15,171
—
—
—
—
1,528
—
1,528
15,171
—
(15,164)
(4)
7
(4)
—
—
— (10,595,347)
—
(26,492)
—
—
—
—
—
—
—
—
—
—
—
—
289,161,653
5,455 289,624 (10,595,347)
(26,492) 138,506
89
(14,478)
149,516
542,220
5,369 547,589
The accompanying notes are an integral part of these financial statements.
114 PureTech Health plc Annual report and accounts 2022
Financial statements Consolidated Statements of Cash Flows
For the years ended December 31
Cash flows from operating activities
Income/(loss)
Adjustments to reconcile net income/(loss) to net cash used in operating activities:
Non-cash items:
Depreciation and amortization
Share-based compensation expense
(Gain)/loss on investment held at fair value
Realized loss on sale of investments
Gain on dilution of ownership interest in associate
Impairment of investment in associate
Gain on deconsolidation of subsidiary
Share of net loss of associates accounted for using the equity method
Fair value gain on other financial instruments
Loss on disposal of assets
Income taxes, net
Finance (income)/costs, net
Changes in operating assets and liabilities:
Trade and other receivables
Prepaid expenses
Deferred revenue
Trade and other payables
Other
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
Investment in associates
Purchase of associate preferred shares held at fair value
Purchase of investments held at fair value
Sale of investments held at fair value
Purchase of short-term note from associate
Repayment of short-term Note from associate
Purchase of Convertible Note from associate
Cash derecognized upon loss of control over subsidiary (see table below)
Purchases of short-term investments
Proceeds from maturity of short-term investments
Receipt of payment of sublease
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Receipt of PPP loan
Issuance of long term loan
Issuance of subsidiary preferred Shares
Issuance of Subsidiary Convertible Note
Payment of lease liability
Exercise of stock options
Settlement of restricted stock unit equity awards
Vesting of restricted stock units and net share exercise
NCI exercise of stock options in subsidiary
Issuance of warrants in subsidiary
Purchase of treasury stock
Acquisition of a non-controlling Interest of a subsidiary
Other
Net cash provided by (used in) financing activities
Net increase (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:
Partial settlement of share based liability award through issuance of equity
Purchase of property, plant and equipment against trade and other payables
Leasehold improvements purchased through lease incentives (deducted from Right of Use Asset)
Conversion of subsidiary convertible note into preferred share liabilities
11, 21
8
5
5
6
6
5
6
6, 16
11
25
9
3
19
20, 21
11
12
6
5
5
5
16
16
16
22
22
21
20
15
17
21
15
14
11
11
17
Note
2022
$000s
2021
$000s
(37,065)
(62,709)
8,893
14,698
32,060
29,303
(28,220)
8,390
(27,251)
27,749
(8,163)
138
(55,719)
(138,924)
(7,734)
(862)
2,123
22,033
359
(20,696)
3,460
(3,366)
7,287
13,950
(179,316)
20,925
—
—
—
73,703
(800)
53
3,756
(5,050)
(617)
(5,350)
(1,407)
8,338
(103)
(27,766)
214
(3,382)
2020
$000s
4,568
6,645
10,718
(232,674)
54,976
—
—
—
34,117
—
66
14,402
6,114
(529)
(3,371)
(5,223)
605
(7)
(20,737)
1,155
(2,651)
(178,792)
(158,274)
(131,827)
(2,176)
—
—
(19,961)
—
(5,000)
118,710
—
15,000
(15,000)
(479)
(248,733)
50,000
415
(107,223)
—
—
—
393
(4,025)
332
—
—
7
—
(26,492)
—
(41)
(29,827)
(315,842)
465,708
149,866
1,528
—
—
—
(5,571)
30
(90)
—
—
(500)
218,125
(15,000)
—
—
—
—
—
381
197,375
—
—
37,610
2,215
(3,375)
352
(10,749)
(2,582)
66
—
—
(806)
(5)
22,727
61,827
403,881
465,708
—
1,841
1,010
25,797
(5,170)
—
(254)
—
(10,000)
(1,150)
350,586
—
—
—
—
—
30,116
350
364,478
68
14,720
13,750
25,000
(2,908)
1,036
(12,888)
—
—
92
—
—
—
38,869
271,520
132,360
403,881
—
—
—
—
PureTech Health plc Annual report and accounts 2022 115
Financial statements
Consolidated Statements of Cash Flows — continued
For the years ended December 31
Assets, Liabilities and non controlling interests other than cash in deconsolidated subsidiary
Trade and other payables
Subsidiary notes payable
Subsidiary preferred shares
Other assets and liabilities, net
Non-controlling interest
Investment retained in deconsolidated subsidiary
Gain on deconsolidation
Cash in deconsolidated subsidiary
The accompanying notes are an integral part of these financial statements.
2022
$000s
1,407
3,403
15,853
123
(11,904)
8,882
18,848
(27,251)
479
116 PureTech Health plc Annual report and accounts 2022
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 4AB, 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, 2022 and 2021, and for the years
ended December 31, 2022, 2021 and 2020. The Group financial statements have been approved by the Directors on April 27,
2023, and are prepared in accordance with UK-adopted International Financial Reporting Standards (IFRSs). The Consolidated
Financial Statements also comply fully with IFRSs as issued by the International Accounting Standards Board (IASB). UK-
adopted IFRSs differs in certain respects from IFRS as issued by the IASB. However, the differences have no impact for the
periods presented.
For presentation of the Consolidated Statements of Comprehensive Income/(Loss), the Company uses a classification based
on the function of expenses, rather than based on their nature, as it is more representative of the format used for internal
reporting and management purposes and is consistent with international practice.
Certain amounts in the Consolidated Financial Statements and accompanying notes may not add due to rounding.
All percentages have been calculated using unrounded amounts.
Basis of Measurement
The consolidated financial statements are prepared on the historical cost basis except that the following assets and liabilities
are stated at their fair value: investments held at fair value, short-term and convertible note from associate and liabilities
classified as fair value through the profit or loss.
Use of Judgments and Estimates
In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that
affect the application of the Group’s accounting policies and the reported amounts of assets, liabilities, income and expenses.
Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an on-going basis.
Significant estimation is applied in determining the following:
• Financial instruments valuations (Note 16): when estimating the fair value of subsidiary preferred shares, subsidiary warrants,
and subsidiary convertible notes carried at fair value through profit and loss (FVTPL) as well as investments held at fair value,
at initial recognition and upon subsequent measurement. Valuation of the aforementioned financial instruments (assets and
liabilities) includes making significant estimates, specifically determining the appropriate valuation methodology and making
certain estimates such as the future expected returns on the financial instrument in different scenarios, earnings potential of
the subsidiary businesses, appropriate discount rate, appropriate volatility, appropriate term to exit and other industry and
company specific risk factors.
Significant judgement is also applied in determining the following:
• Subsidiary preferred shares liability classification (Note 15): when determining the classification of financial instruments
in terms of liability or equity. These judgements include an assessment of whether the financial instruments include any
embedded derivative features, whether they include contractual obligations of the Group to deliver cash or other financial
assets or to exchange financial assets or financial liabilities with another party, and whether that obligation will be settled by
the Company exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
Further information about these critical judgements and estimates is included below under Financial Instruments.
• When the power to control the subsidiaries exists (please refer to Notes 5 and 6 and accounting policy below Subsidiaries).
This judgement includes an assessment of whether the Company has (i) power over the investee; (ii) exposure, or rights,
to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect
the amount of the investor’s returns. The Company considers among others its voting shares, shareholder agreements,
ability to appoint board members, representation on the board, rights to appoint management, de facto control, investee
dependence on the Company etc. If the power to control investees exists we consolidate the financial statements of such
investee in the consolidated financial statements of the Group. Upon issuance of new shares in a subsidiary and/or a change
in any shareholders or governance agreements, the Group reassesses its ability to control the investee based on the revised
voting interest and 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.
PureTech Health plc Annual report and accounts 2022 117
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
• 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 the
Group considered 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, we concluded that such
investment was considered a Long Term Interest.
As of December 31, 2022, the Group had cash and cash equivalents of $149.9 million and short-term investments of
$200.2 million. Considering the Group’s and the Company's financial position as of December 31, 2022, and its principal
risks and opportunities, a going concern analysis has been prepared for at least the twelve-month period from the date of
signing the Consolidated Financial Statements ("the going concern period") utilizing realistic scenarios and applying a severe
but plausible downside scenario. Even under the downside scenario, the analysis demonstrates the Group and the Company
continue to maintain sufficient liquidity headroom and continue to comply with all financial obligations. The Directors believe
the Group and the Company is adequately resourced to continue in operational existence for at least the twelve-month period
from the date of signing the Consolidated Financial Statements. 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, 2022 and 2021, and for each of the years ended December 31,
2022, 2021 and 2020, 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, 2022, are reported within the Internal segment, Controlled Founded Entities
segment or the Parent Company and Other section (please refer to Note 4). Under applicable accounting rules, the Group
controls an entity when it is exposed to, or has the rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration
potential voting rights, board representation, shareholders' agreements, ability to appoint Directors and management, de facto
control and other related factors. The financial statements of subsidiaries are included in the consolidated financial statements
from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests
in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have
a deficit balance.
A list of all current and former subsidiaries organized with respect to classification as of December 31, 2022, and the Group’s
total voting percentage, based on outstanding voting common and preferred shares as of December 31, 2022, 2021 and 2020,
is outlined below. All current subsidiaries are domiciled within the United States and conduct business activities solely within
the United States.
118 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Subsidiary
Subsidiary operating companies
Alivio Therapeutics, Inc.1,2
Entrega, Inc. (indirectly held through Enlight)1,2
Follica, Incorporated1,2
PureTech LYT (formerly Ariya Therapeutics, Inc.)
PureTech LYT-100
PureTech Management, Inc.3
PureTech Health LLC3
Vedanta Biosciences, Inc.1,2
Vedanta Biosciences Securities Corp. (indirectly held
through Vedanta)1,2
Deconsolidated former subsidiary
operating companies
Sonde Health, Inc.1,2,5
Akili Interactive Labs, Inc.6
Gelesis, Inc.1,2,6
Karuna Therapeutics, Inc.1,2
Vor Biopharma Inc.1,2
Nontrading holding companies
Endra Holdings, LLC (held indirectly through Enlight)2
Ensof Holdings, LLC (held indirectly through Enlight)2
PureTech Securities Corp.2
PureTech Securities II Corp.2
Inactive subsidiaries
Appeering, Inc.2
Commense Inc.2
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
Voting percentage at December 31, through the holdings in
2022
2021
2020
Common
Preferred
Common
Preferred
Common
Preferred
—
—
28.7
—
—
100.0
100.0
—
100.0
77.3
56.7
100.0
100.0
—
—
47.0
—
—
28.7
—
—
100.0
100.0
—
100.0
77.3
56.7
100.0
100.0
—
—
48.6
—
—
28.7
—
—
100.0
100.0
—
91.9
83.1
56.7
100.0
100.0
—
—
59.3
—
47.0
—
48.6
—
59.3
—
14.7
22.8
3.1
4.1
86.0
86.0
100.0
100.0
—
—
86.0
57.7
—
—
98.3
—
40.2
—
—
—
—
—
—
—
—
100.0
99.1
—
28.3
86.0
100.0
—
100.0
—
—
4.8
5.6
8.6
86.0
86.0
100.0
100.0
—
—
86.0
57.7
—
—
98.3
—
51.8
26.7
19.7
—
—
—
—
—
—
100.0
99.1
—
28.3
86.0
100.0
—
100.0
—
—
4.9
12.6
—
86.0
86.0
100.0
100.0
—
—
86.0
57.7
—
—
98.3
—
51.8
41.9
20.2
—
16.4
—
—
—
—
100.0
99.1
—
28.3
86.0
100.0
—
100.0
1 The voting percentage is impacted by preferred shares that are classified as liabilities, which results in the ownership percentage not being the same as the ownership
percentage used in allocations to non-controlling interests disclosed in Note 18. The allocation of losses/profits to the noncontrolling interest is based on the holdings
of subordinated stock that provide ownership rights in the subsidiaries. The ownership of liability classified preferred shares are quantified in Note 15.
2 Registered address is Corporation Trust Center, 1209 Orange St., Wilmington, DE 19801, USA.
3 Registered address is 2711 Centerville Rd., Suite 400, Wilmington, DE 19808, USA.
4 The Company’s interests in its subsidiaries are predominantly in the form of preferred shares, which have a liquidation preference over the common stock, are convertible into
common stock at the holder’s discretion or upon certain liquidity events, are entitled to one vote per share on all matters submitted to shareholders for a vote and entitled to
receive dividends when and if declared. In the case of Enlight, Mandara and PureTech Health LLC, the holdings are membership interests in an LLC. The holders of common
stock are entitled to one vote per share on all matters submitted to shareholders for a vote and entitled to receive dividends when and if declared.
5 On May 25, 2022 PureTech lost control over Sonde and Sonde was deconsolidated from the Group’s financial statements, resulting in only the profits and losses generated by
Sonde through the deconsolidation date being included in the Group’s Consolidated Statement of Comprehensive Income/(Loss). See Notes 5 and 6 for further details about
the accounting for the investments in Sonde subsequent to deconsolidation.
6 See Notes 5 and 6 for the Gelesis and Akili SPAC merger and for the exchange of the Group's preferred stock investments for common stock of those entities.
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.
PureTech Health plc Annual report and accounts 2022 119
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Application of the equity method to associates
Associates are accounted for using the equity method (equity accounted investees) and are initially recognized at cost, or if
recognized upon deconsolidation they are initially recorded at fair value at the date of deconsolidation. The consolidated
financial statements include the Group’s share of the total comprehensive income and equity movements of equity accounted
investees, from the date that significant influence commences until the date that significant influence ceases.
To the extent the Group holds interests in associates that are not providing access to returns underlying ownership interests,
the instrument held by PureTech is accounted for in accordance with IFRS 9 as investments held at fair value.
When the Group’s share of losses exceeds its equity method investment in the investee, losses are applied against Long-Term
Interests, which are investments accounted for under IFRS 9. Investments are determined to be Long-Term Interests when they
are long-term in nature and in substance they form part of the Group's net investment in that associate. This determination is
impacted by many factors, among others, whether settlement by the investee through redemption or repayment is planned or
likely in the foreseeable future, whether the investment can be converted and/or is likely to be converted to common stock or
other equity instrument and other factors regarding the nature of the investment. Whilst this assessment is dependent on many
specific facts and circumstances of each investment, typically conversion features whereby the investment is likely to convert
to common stock or other equity instruments would point to the investment being a Long-Term Interest. Similarly, where
the investment is not planned or likely to be settled through redemption or repayment in the foreseeable future, this would
indicate that the investment is a Long-Term Interest. When the net investment in the associate, which includes the Group’s
investments in other long-term interests, is reduced to nil, recognition of further losses is discontinued except to the extent
that the Group has incurred legal or constructive obligations or made payments on behalf of an investee.
The Group has also adopted the amendments to IAS 28 Investments in Associates that addresses the dual application of IAS
28 and IFRS 9 (see below) when equity method losses are applied against Long-Term Interests (LTI). The amendments provide
the annual sequence in which both standards are to be applied in such a case. The Group has applied the equity method
losses to the LTIs presented as part of Investments held at fair value subsequent to remeasuring such investments to their fair
value at balance sheet date.
Financial Instruments
Classification
The Group classifies its financial assets in the following measurement categories:
• Those to be measured subsequently at fair value (either through other comprehensive income, or through profit or loss),
and
• Those to be measured at amortized cost.
The classification depends on the Group’s business model for managing the financial assets and the contractual terms of the
cash flows.
For assets measured at fair value, gains and losses are recorded in profit or loss. For investments in equity instruments that are
not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition
to account for the equity investment at FVOCI. As of balance sheet dates, none of the Company's financial assets are
accounted for as FVOCI.
Measurement
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at FVTPL,
transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets that
are carried at FVTPL are expensed.
Impairment
The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at
amortized cost. 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, investments in debt securities, trade and other receivables,
notes, restricted cash deposits and investments in equity securities. The Group’s financial assets are virtually all classified
into the following categories: investments held at fair value, notes, 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.
120 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Investments held at fair value are investments in equity instruments that are not held for trading. Such investments consist
of the Group's minority interest holdings where the Group has no significant influence or preferred share investments in the
Group's associates that are not providing access to returns underlying ownership interests. These financial assets are initially
measured at fair value and subsequently re-measured at fair value at each reporting date. The Company elects if the gain or
loss will be recognized in Other Comprehensive Income/(Loss) or through profit and loss on an instrument by instrument basis.
The Company has elected to record the changes in fair values for the financial assets falling under this category through profit
and loss. Please refer to Note 5.
Changes in the fair value of financial assets at FVTPL are recognized in other income/(expense) in the Consolidated Statements
of Comprehensive Income/(Loss) as applicable.
The notes from an associate, since their contractual terms do not consist solely of cash flow payments of principal and interest
on the principal amount outstanding, such notes are initially and subsequently measured at fair value, with changes in fair value
recognized through profit and loss.
Short term investments consist of short-term US treasury bills that are held to maturity. The contractual terms consist solely
of payment of the principal and the Group's business model is to hold the treasury bills to maturity. As such, such short term
investments are recorded at amortized cost. As of balance sheet date amortized cost approximated the fair value of such short-
term investments.
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.
As of balance sheet date, The Group did not incur or record any such expected lifetime losses. 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, long-term loan, 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 and the long-term loan are accounted for at amortized cost.
The majority of the Group’s subsidiaries have preferred shares and certain notes payable with embedded derivatives, which
are classified as current liabilities. When the Group has preferred shares and notes with embedded derivatives that qualify
for bifurcation, the Group has elected to account for the entire instrument as FVTPL after determining under IFRS 9 that the
instrument qualifies to be accounted for under such FVTPL method.
The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.
Equity Instruments Issued by the Group
Financial instruments issued by the Group are treated as equity only to the extent that they meet the following two conditions,
in accordance with IAS 32:
1. They include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial
assets or financial liabilities with another party under conditions that are potentially unfavorable to the Group; and
2. Where the instrument will or may be settled in the Group’s own equity instruments, it is either a non-derivative that includes
no obligation to deliver a variable number of the Group’s own equity instruments or is a derivative that will be settled by the
Group exchanging a fixed amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the financial instrument is classified as a financial liability. Where the instrument so
classified takes the legal form of the Group’s own shares, the amounts presented in the Group's shareholders' equity exclude
amounts in relation to those shares.
Changes in the fair value of liabilities at FVTPL are recognized in Net finance income (costs) in the Consolidated Statements
of Comprehensive Income/(Loss) as applicable.
IFRS 15, Revenue from Contracts with Customers
The standard establishes a five-step principle-based approach for revenue recognition and is based on the concept of
recognizing an amount that reflects the consideration for performance obligations only when they are satisfied and the control
of goods or services is transferred.
The majority of the Group’s contract revenue is generated from licenses and services, some of which are part of
collaboration arrangements.
Management reviewed contracts where the Group received consideration in order to determine whether or not they should be
accounted for in accordance with IFRS 15. To date, PureTech has entered into transactions that generate revenue and meet the
scope of either IFRS 15 or IAS 20 Accounting for Government Grants. Contract revenue is recognized at either a point-in-time
or over time, depending on the nature of the performance obligations.
PureTech Health plc Annual report and accounts 2022 121
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
The Group accounts for agreements that meet the definition of IFRS 15 by applying the following five step model:
• Identify the contract(s) with a customer – A contract with a customer exists when (i) the Group enters into an enforceable
contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies
the payment terms related to those goods or services, (ii) the contract has commercial substance and, (iii) the Group
determines that collection of substantially all consideration for goods or services that are transferred is probable based
on the customer’s intent and ability to pay the promised consideration.
• Identify the performance obligations in the contract – Performance obligations promised in a contract are identified based
on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the
customer can benefit from the good or service either on its own or together with other resources that are readily available
from third parties or from the Group, and are distinct in the context of the contract, whereby the transfer of the goods or
services is separately identifiable from other promises in the contract.
• Determine the transaction price – The transaction price is determined based on the consideration to which the Group will
be entitled in exchange for transferring goods or services to the customer. To the extent the transaction price includes
variable consideration, the Group estimates the amount of variable consideration that should be included in the transaction
price utilizing either the expected value method or the most likely amount method depending on the nature of the variable
consideration. Variable consideration is included in the transaction price if, in the Group’s judgement, it is probable that a
significant future reversal of cumulative revenue under the contract will not occur.
• Allocate the transaction price to the performance obligations in the contract – If the contract contains a single performance
obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple
performance obligations require an allocation of the transaction price to each performance obligation based on a relative
standalone selling price basis.
• Recognize revenue when (or as) the Group satisfies a performance obligation – The Group satisfies performance obligations
either over time or at a point in time as discussed in further detail below. Revenue is recognized at the time the related
performance obligation is satisfied by transferring a promised good or service to a customer.
Revenue generated from services agreements (typically where licenses and related services were combined into one
performance obligation) is determined to be recognized over time when it can be determined that the services meet one of
the following: (a) the customer simultaneously receives and consumes the benefits provided by the entity’s performance as the
entity performs; (b) the entity’s performance creates or enhances an asset that the customer controls as the asset is created or
enhanced; or (c) the entity’s performance does not create an asset with an alternative use to the entity and the entity has an
enforceable right to payment for performance completed to date.
It was determined that the Group has contracts that meet criteria (a), since the customer simultaneously receives and consumes
the benefits provided by the Company’s performance as the Company performs. Therefore revenue is recognized over time
using the input method based on costs incurred to date as compared to total contract costs. The Company believes that in
research and development service type agreements using costs incurred to date represents the most faithful depiction of the
entity’s performance towards complete satisfaction of a performance obligation.
Revenue from licenses that are not part of a combined performance obligation are recognized at a point in time due to the
licenses relating to intellectual property that has significant stand-alone functionality and as such represent a right to use the
entity's intellectual property as it exists at the point in time at which the license is granted.
Royalty income received in respect of licensing agreements is recognized as the related third party sales in the licensee occur.
Amounts that are receivable or have been received per contractual terms but have not been recognized as revenue since
performance has not yet occurred or has not yet been completed are recorded as deferred revenue. The Company classifies as
non-current deferred revenue amounts received for which performance is expected to occur beyond one year or one operating
cycle.
Grant Income
The Company recognizes grants from governmental agencies as grant income in the Consolidated Statement of
Comprehensive Income/(Loss), gross of the expenditures that were related to obtaining the grant, when there is reasonable
assurance that the Company will comply with the conditions within the grant agreement and there is reasonable assurance
that payments under the grants will be received. The Company evaluates the conditions of each grant as of each reporting
date to ensure that the Company has reasonable assurance of meeting the conditions of each grant arrangement and that it
is expected that the grant payment will be received as a result of meeting the necessary conditions.
The Company submits qualifying expenses for reimbursement after the Company has incurred the research and development
expense. The Company records an unbilled receivable upon incurring such expenses. In cases were grant income is received
prior to the expenses being incurred or recognized, the amounts received are deferred until the related expense is incurred
and/or recognized. Grant income is recognized in the Consolidated Statements of Comprehensive Income/(Loss) at the time
in which the Company recognizes the related reimbursable expense for which the grant is intended to compensate.
122 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Functional and Presentation Currency
These consolidated financial statements are presented in United States dollars (“US dollars”). The functional currency of
all members of the Group is the U.S. dollar. The Group's share in foreign exchange differences in associates were reported
in Other Comprehensive Income/(Loss).
Foreign Currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign
exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at
the balance sheet date are retranslated to the functional currency at the foreign exchange rate ruling at that date. Foreign
exchange differences arising on remeasurement are recognized in the Consolidated Statement of Comprehensive Income/
(Loss). Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
Cash and Cash Equivalents
Cash and cash equivalents include all highly liquid instruments with original maturities of three months or less.
Share Capital
Ordinary shares are classified as equity. The Group's equity is comprised of share capital, share premium, merger reserve, other
reserve, translation reserve, and retained earnings/accumulated deficit.
Treasury Shares
Treasury shares are recognized at cost and are deducted from shareholders' equity. No gain or loss is recognized in profit and
loss for the purchase, sale, re-issue or cancellation of the Company's own equity shares
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. Intangible assets with finite lives are amortized from the time they
are available for their intended use. Amortization is calculated using the straight-line method to allocate the costs of patents
and licenses over their estimated useful lives.
Research and development intangible assets, which are still under development and have accordingly not yet obtained
marketing approval, are presented as In-Process Research and Development (IPR&D). IPR&D is not amortized since it is not yet
available for its intended use, but it is evaluated for potential impairment on an annual basis or more frequently when facts and
circumstances warrant.
Impairment
Impairment of Non-Financial Assets
The Group reviews the carrying amounts of its property and equipment and intangible assets at each reporting date to
determine whether there are indicators of impairment. If any such indicators of impairment exist, then an asset’s recoverable
amount is estimated. The recoverable amount is the higher of an asset’s fair value less cost of disposal and value in use.
The Company’s IPR&D intangible assets are not yet available for their intended use. As such, they are tested for impairment
at least annually.
An impairment loss is recognized when an asset’s carrying amount exceeds its recoverable amount. For the purposes of
impairment testing, assets are grouped at the lowest levels for which there are largely independent cash flows. If a non-
financial asset instrument is impaired, an impairment loss is recognized in the Consolidated Statements of Comprehensive
Income/(Loss).
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, 2022.
PureTech Health plc Annual report and accounts 2022 123
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 (except certain restricted stock units – see
below) in accordance with IFRS 2, regardless of how the equity instruments are obtained by the Group. The grant date fair
value of employee share-based payment awards is recognized as an expense with a corresponding increase in equity over the
requisite service period related to the awards. The amount recognized as an expense is adjusted to reflect the actual number
of awards for which the related service and non-market performance conditions are expected to be met, such that the amount
ultimately recognized as an expense is based on the number of awards that do meet the related service and non-market
performance conditions at the vesting date. For share-based payment awards with market conditions, the grant date fair value
is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.
Certain restricted stock units are treated as liability settled awards starting in 2021. Such awards are remeasured at every
reporting date until settlement date and are recognized as compensation expense over the requisite service period.
Differences in remeasurement are recognized in profit and loss. The cumulative cost that will ultimately be recognized in
respect of these awards will equal to the amount at settlement.
The fair value of the awards is measured using option pricing models and other appropriate models, which take into account
the terms and conditions of the awards granted. See further details in Note 8.
Development Costs
Expenditures on research activities are recognized as incurred in the Consolidated Statements of Comprehensive Income/
(Loss). In accordance with IAS 38 development costs are capitalized only if the expenditure can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable, the Group can demonstrate
its ability to use or sell the intangible asset, the Group intends to and has sufficient resources to complete development
and to use or sell the asset, and it is able to measure reliably the expenditure attributable to the intangible asset during its
development. The point at which technical feasibility is determined to have been reached is, generally, when regulatory
approval has been received where applicable. Management determines that commercial viability has been reached when a
clear market and pricing point have been identified, which may coincide with achieving meaningful recurring sales. Otherwise,
the development expenditure is recognized as incurred in the Consolidated Statements of Comprehensive Income/(Loss).
As of balance sheet date the Group has not capitalized any development costs.
Provisions
A provision is recognized in the Consolidated Statements of Financial Position when the Group has a present legal or
constructive obligation due to a past event that can be reliably measured, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows
at a pre-tax rate that reflects risks specific to the liability.
124 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Leases
The Group leases real estate (and some minor equipment) for use in operations. These leases generally have lease terms of
1 to 10 years. The Group includes options that are reasonably certain to be exercised as part of the determination of the lease
term. The group determines if an arrangement is a lease at inception of the contract in accordance with guidance detailed in
IFRS 16. ROU assets represent the Group’s right to use an underlying asset for the lease term and lease liabilities represent
the Group's obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are
recognized at commencement date based on the present value of the lease payments over the lease term. As most of the
Group's leases do not provide an implicit rate, The Group used its estimated incremental borrowing rate, based on information
available at commencement date, in determining the present value of future payments.
The Group’s leases are virtually all leases of real estate.
The Group has elected to account for lease payments as an expense on a straight-line basis over the life of the lease for:
• Leases with a term of 12 months or less and containing no purchase options; and
• Leases where the underlying asset has a value of less than $5,000.
The right-of-use asset is depreciated on a straight-line basis and the lease liability gives rise to an interest charge.
Further information regarding the subleases, right of use asset and lease liability can be found in Note 21.
Finance Income and Finance Costs
Finance income is comprised of income on funds invested in U.S. treasuries, income on money market funds and income on
a finance lease. Financing income is recognized as it is earned. Finance costs comprise mainly of loan, notes and lease liability
interest expenses and the changes in the fair value of financial liabilities carried at FVTPL (such changes can consist of finance
income when the fair value of such financial liabilities decreases).
Taxation
Tax on the profit or loss for the year comprises current and deferred income tax. In accordance with IAS 12, tax is recognized in
the Consolidated Statements of Comprehensive Income/(Loss) except to the extent that it relates to items recognized directly
in equity.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized due to temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognized for unused tax losses,
unused tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be
available against which they can be used. Deferred tax assets with respect to investments in associates are recognized only to
the extent that it is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available
against which the temporary difference can be utilised. 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.
PureTech Health plc Annual report and accounts 2022 125
Financial statements Notes to the Consolidated Financial Statements — continued
1.
Accounting policies — continued
Fair Value Measurements
The Group’s accounting policies require that certain financial assets and certain financial liabilities be measured at their fair
value.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Fair values
are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the
change has occurred.
The carrying amount of cash and cash equivalents, accounts receivable, restricted cash, deposits, accounts payable, accrued
expenses and other current liabilities in the Group’s Consolidated Statements of Financial Position approximates their fair value
because of the short maturities of these instruments.
Operating Segments
Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating
decision maker (“CODM”). The CODM reviews discrete financial information for the operating segments in order to assess
their performance and is responsible for making decisions about resources allocated to the segments. The CODM has been
identified as the Group’s Directors.
2. New Standards and Interpretations Not Yet Adopted
A number of new standards, interpretations, and amendments to existing standards are effective for annual periods
commencing on or after January 1, 2023 and have not been applied in preparing the consolidated financial information.
The Company’s assessment of the impact of these new standards and interpretations is set out below.
Effective January 1, 2023, the definition of accounting estimates has been amended as an amendment to IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors. The amendments clarify how companies should distinguish changes
in accounting policies from changes in accounting estimates. The distinction is important because changes in accounting
estimates are applied prospectively only to future transactions and future events, but changes in accounting policies are
generally also applied retrospectively to past transactions and other past events. This amendment is not expected to have an
impact on the Group's financial statements.
Effective January 1, 2023, IAS 1 has been amended to clarify that liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting period. Classification is unaffected by the expectations of the
entity or events after the reporting date. The Company does not expect this amendment will have a material impact on its
financial statements.
Effective January 1, 2023, IAS 12 is amended to narrow the scope of the initial recognition exemption (IRE) so that it does
not apply to transactions that give rise to equal and offsetting temporary differences. As a result, companies will need to
recognise a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and
a decommissioning provision. The amendment is not expected to have an impact on the Group's financial statements as the
Group has already recognized a deferred tax asset and deferred tax liability that arose on initial recognition of its leases (the
Group does not have decommissioning provisions).
None of the other new standards, interpretations, and amendments are applicable to the Company’s financial statements and
therefore will not have an impact on the Company.
126 PureTech Health plc Annual report and accounts 2022
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
2022
$000s
2,090
13,528
15,618
2021
$000s
9,979
7,409
17,388
2020
$000s
8,341
3,427
11,768
All amounts recorded in contract revenue were generated in the United States. For the years ended December 31, 2022, 2021
and 2020 contract revenue includes royalties received from an associate in the amount of $509 thousand, $231 thousand, and
$54 thousand, respectively.
Primarily all of the Company’s other contracts for the years ended December 31, 2022, 2021 and 2020 were determined to
have a single performance obligation which consists of a combined deliverable of license to intellectual property and research
and development services (not including the license acquired by Imbrium upon option exercise – see below). Therefore, for
such contracts, revenue is recognized over time based on the input method which the Company believes is a faithful depiction
of the transfer of goods and services. Progress is measured based on costs incurred to date as compared to total projected
costs. Payments for such contracts are primarily made up front on a periodic basis.
During the year ended December 31, 2021, the company received a $6.5 million payment from Imbrium Therapeutics,
Inc. following the exercise of the option to acquire an exclusive license for the Initial Product Candidate, as defined in the
agreement. Since the license transferred was a functional license, revenue from the option exercise was recognized at a point
in time upon transfer of the license, which occurred during the year ended December 31, 2021.
During the year ended December 31, 2020, the Company received a $2.0 million milestone payment from Karuna
Therapeutics, Inc. following initiation of its KarXT Phase 3 clinical study pursuant to the Exclusive Patent License Agreement
between PureTech and Karuna. This milestone was recognized as revenue during the year ended December 31, 2020.
Disaggregated Revenue
The Group disaggregates contract revenue in a manner that depicts how the nature, amount, timing, and uncertainty of
revenue and cash flows are affected by economic factors. The Group disaggregates revenue based on contract revenue or
grant revenue, and further disaggregates contract revenue based on the transfer of control of the underlying performance
obligations.
Timing of contract revenue recognition
For the years ended December 31,
Transferred at a point in time – Licensing Income1
Transferred over time2
2022
$000s
527
1,563
2,090
2021
$000s
6,809
3,171
9,979
2020
$000s
2,054
6,286
8,341
1 2022 – Attributed to Non-Controlled Founded Entities segment ( $19 thousand) and to Parent Company and Other ($509 thousand); 2021 – Attributed to the Internal segment
($6,500 thousand), Non-Controlled Founded Entities segment ($74 thousand), and to Parent Company and Other ($235 thousand); 2020 – Attributed to Parent Company and
Other. See note 4, Segment information.
2 2022 – Attributed to Controlled Founded Entities segment ($1,500 thousand) and to Non-Controlled Founded Entities segment ($63 thousand ); 2021 – Attributed to Internal
segment ($1,629 thousand), Non-Controlled Founded Entities segment ($41 thousand), and to Controlled Founded Entities segment ($1,500 thousand). 2020 – Attributed to
Internal segment ($5,297 thousand), Controlled Founded Entities segment ($896 thousand), and to Non-Controlled Founded Entities segment ($93 thousand). See Note 4,
Segment Information.
PureTech Health plc Annual report and accounts 2022 127
Financial statements Notes to the Consolidated Financial Statements — continued
3.
Revenue — continued
Customers over 10% of revenue
Customer A
Customer B
Customer C
Customer D
Customer E
Customer F
2022
$000s
—
1,500
—
—
—
509
2,009
2021
$000s
—
1,500
—
7,250
—
—
8,750
2020
$000s
1,518
896
2,043
1,736
2,000
—
8,193
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 – short term
2022
$000s
606
—
2021
$000s
704
65
During the year ended December 31, 2022, $65 thousand of revenue was recognized from deferred revenue outstanding at
December 31, 2021.
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, 2022, was nil.
As of December 31, 2022 the deferred revenue balance related entirely to deferred grant income.
128 PureTech Health plc Annual report and accounts 2022
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 periodically for the purposes of allocating resources and assessing performance. The
Group has determined that each entity is representative of a single operating segment as the Directors monitor the financial
results at this level. When identifying the reportable segments the Group has determined that it is appropriate to aggregate
multiple operating segments into a single reportable segment given the high level of operational and financial similarities
across the entities.
The Group has identified multiple reportable segments as presented below. There was no change to reportable segments
in 2022, except for the transfer of Sonde Health, Inc. to the Non-Controlled Founded Entities segment due to the
deconsolidation of Sonde Health, Inc (Sonde) on May 25, 2022.
The Non-Controlled Founded Entities segment includes Sonde Health, Inc. which was deconsolidated on May 25, 2022.
Segment results incorporate the operational results of Sonde Health, Inc. to the date of deconsolidation. Following the date
of deconsolidation, the Company accounts for its investment in Sonde Health, Inc. at the parent level, and therefore the results
associated with investment activity following the date of deconsolidation (including the Group's share in Sonde losses) is
included in the Parent Company and Other section.
The Company has revised in these financial statements the prior year financial information to conform to the presentation as
of and for the year ending December 31, 2022 to include Sonde in the Non-Controlled Founded Entities segment. The change
in segments reflects how the Company’s Board of Directors reviews the Group’s results, allocates resources and assesses
performance of the Group at this time.
Virtually all of the revenue and profit generating activities of the Group are generated within the United States and accordingly,
no geographical disclosures are provided.
Internal
The Internal segment (the “Internal segment”), is advancing Wholly Owned Programs which are focused on treatments for
patients with devastating diseases. 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, 2022, this segment included PureTech LYT, PureTech LYT-
100 and Alivio Therapeutics, Inc.
Controlled Founded Entities
The Controlled Founded Entity segment (the “Controlled Founded Entity segment”) is comprised of the Group’s subsidiaries
that are currently consolidated operational subsidiaries that either have, or have plans to hire, independent management
teams and currently have already raised third-party dilutive capital. These subsidiaries have active research and development
programs and either have entered into or plan to seek an equity or debt investment partner, who will provide additional
industry knowledge and access to networks, as well as additional funding to continue the pursued growth of the company.
As of December 31, 2022, this segment included Entrega Inc., Follica Incorporated, 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 no longer has control over the entity. Upon deconsolidation of an entity the segment
disclosure is restated to reflect the change on a retrospective basis, as this constitutes a change in the composition of its
reportable segments. The Non-Controlled Founded Entities segment includes Sonde Health Inc. which was deconsolidated
on May 25, 2022.
The Non-Controlled Founded Entities segment incorporates the operational results of the aforementioned entity 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 (including the recognition of equity method income/
(losses)) following the date of deconsolidation is included in the Parent Company and Other section.
Parent Company and Other
Parent Company and Other includes activities that are not directly attributable to the operating segments, such as the activities
of the Parent, corporate support functions and certain research and development support functions that are not directly
attributable to a strategic business segment as well as the elimination of intercompany transactions. Intercompany transactions
between segments consist primarily of management fees charged from the Parent Company to the other segments. This
section also captures the accounting for the Company’s holdings in entities for which control has been lost, which is inclusive of
the following items: gain on deconsolidation, gain or loss on investments held at fair value, realized loss on sale of investments,
the share of net income/ (loss) of associates accounted for using the equity method, gain on dilution of ownership interest
in associate, impairment of investment in associate. As of December 31, 2022, 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.
PureTech Health plc Annual report and accounts 2022 129
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 on deconsolidation of subsidiary
Gain/(loss) on investment held at fair value
Realized loss on sale of investments
Other income/(expense)
Total other income/(expense)
Net finance income/(costs)
Share of net income/(loss) of associates accounted
for using the equity method
Gain on dilution of ownership interest in associate
Impairment of investment in associate
Income/(loss) before taxes
Income/(loss) before taxes pre IFRS 9 fair
value accounting, share-based payment expense,
depreciation of tangible assets and amortization
of intangible assets
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:
2022
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent
Company &
Other
$000s
Consolidated
$000s
Internal
$000s
—
2,826
2,826
(8,301)
(116,054)
(124,355)
—
—
—
(204)
(204)
615
—
—
—
(121,118)
1,500
10,702
12,202
(16,462)
(34,668)
(51,130)
—
—
—
(3)
(3)
138,006
—
—
—
99,075
81
—
81
(1,296)
(826)
(2,122)
—
—
—
—
—
(3,045)
—
—
—
(5,085)
509
—
509
(34,933)
(885)
(35,817)
27,251
(32,060)
(29,303)
8,338
(25,775)
3,348
(27,749)
28,220
(8,390)
(65,655)
2,090
13,528
15,618
(60,991)
(152,433)
(213,425)
27,251
(32,060)
(29,303)
8,131
(25,981)
138,924
(27,749)
28,220
(8,390)
(92,783)
(114,255)
(32,468)
(2,079)
(57,452)
(206,254)
—
(5,136)
(1,727)
—
—
—
(121,118)
—
(121,118)
(121,118)
—
140,056
(4,703)
(2,526)
(1,283)
—
—
99,075
—
99,075
85,471
13,604
(2,993)
(8)
(4)
—
(1)
—
(5,085)
—
(5,085)
(4,755)
(330)
—
(4,852)
(1,588)
(1,764)
—
55,719
(9,936)
(379)
(10,316)
137,063
(14,699)
(5,845)
(3,047)
(1)
55,719
(37,065)
(379)
(37,444)
(10,331)
15
(50,733)
13,290
December 31, 2022 $000s
Total assets
Total liabilities1
Net assets/(liabilities)
51,599
271,186
(219,587)
35,341
76,635
(41,294)
—
—
—
615,707
(192,763)
808,470
702,647
155,057
547,589
1 Parent Company and Other Includes eliminations of intercompany liabilities between the Parent Company and the reportable segments in the amount of $255.5 million.
130 PureTech Health plc Annual report and accounts 2022
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 expenses
Other income/(expense):
Gain/(loss) on investment held at fair value
Realized loss on sale of investments
Other income/(expense)
Total 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 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) – 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 liabilities1
Net (liabilities)/assets
2021
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent
Company &
Other
$000s
Consolidated
$000s
Internal
$000s
8,129
1,253
9,382
(8,673)
(65,444)
(74,118)
—
—
—
(1)
(16)
1,500
6,156
7,656
(17,504)
(40,667)
(58,171)
—
—
70
70
7,528
—
(64,753)
—
(42,917)
115
—
115
(3,225)
(3,116)
(6,341)
—
—
—
—
(784)
—
(7,010)
235
—
235
(27,797)
(1,244)
(29,041)
179,316
(20,925)
1,523
159,914
(1,679)
(73,703)
55,727
9,979
7,409
17,388
(57,199)
(110,471)
(167,671)
179,316
(20,925)
1,593
159,983
5,050
(73,703)
(58,953)
(60,368)
(44,335)
(6,248)
63,628
(47,323)
—
(3,066)
(1,319)
—
—
—
(64,753)
—
(64,753)
(64,657)
(96)
10,322
(6,224)
(1,506)
(1,174)
—
—
(42,917)
—
(42,917)
(41,283)
(1,634)
(716)
(32)
(12)
—
(2)
—
(7,010)
—
(7,010)
(6,574)
(436)
—
(4,628)
(1,510)
(1,764)
—
(3,756)
51,971
—
51,971
51,956
15
9,606
(13,950)
(4,347)
(2,938)
(2)
(3,756)
(62,709)
—
(62,709)
(60,558)
(2,151)
December 31, 2021 $000s
125,726
228,789
(103,063)
64,508
209,212
(144,704)
1,765
19,645
(17,880)
754,007
(95,787)
849,794
946,006
361,859
584,147
1 Parent Company and Other Includes eliminations of intercompany liabilities between the Parent Company and the reportable segments in the amount of $233.3 million.
The proportion of net assets shown above that is attributable to non-controlling interest is disclosed in Note 18.
PureTech Health plc Annual report and accounts 2022 131
Financial statements Internal
$000s
5,297
1,563
6,860
(3,482)
(45,346)
(48,828)
—
—
(15)
—
(15)
19
2020
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent
Company &
Other
$000s
Consolidated
$000s
896
1,864
2,760
(10,752)
(33,152)
(43,904)
—
—
(15)
100
85
(4,352)
93
—
93
(2,939)
(3,128)
(6,067)
—
—
—
—
—
(852)
2,054
—
2,054
(32,267)
(234)
(32,500)
232,674
(54,976)
—
965
178,662
(930)
(34,117)
113,170
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
—
(41,964)
—
(45,410)
—
(6,826)
(38,349)
(36,736)
(5,866)
121,644
40,694
—
(2,762)
(854)
—
—
—
(41,964)
—
(41,964)
(41,773)
(191)
(3,492)
(2,469)
(1,528)
(1,186)
—
(1)
(45,411)
—
(45,411)
(44,506)
(905)
(859)
(83)
(17)
—
(1)
—
(6,826)
—
(6,826)
(6,519)
(306)
—
(5,405)
(1,547)
(1,523)
—
(14,400)
98,769
469
99,238
99,253
(15)
(4,351)
(10,718)
(3,945)
(2,709)
(1)
(14,401)
4,568
469
5,037
6,454
(1,417)
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/(loss) on investment held at fair value
Realized loss on sale of investments
Gain/(loss) on disposal of assets
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) – 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
132 PureTech Health plc Annual report and accounts 2022
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
interests in Akili, Vor, Karuna, Gelesis (preferred shares until exchanged for common stock, accounted for under the equity
method, and Earn-out shares following exchange), Sonde and other insignificant investments, are initially measured at fair
value and are subsequently re-measured at fair value at each reporting date with changes in the fair value recorded through
profit and loss. Interests in these investments were accounted for as shown below:
Investments held at fair value
Balance as of January 1, 2021
Sale of Karuna shares
Loss realised on sale of investments
Cash purchase of Vor preferred shares
Gain – change in fair value through profit and loss
Balance as of December 31, 2021 and January 1, 2022 before allocation
of share in associate loss to long-term interest*
Investment in Sonde Preferred shares – Sonde deconsolidation
Sale of Karuna and Vor shares
Loss realised on sale of investments as a result of written call option
Cash Investment (Akili)
Gelesis Earn out shares received in SPAC exchange
Exchange of Gelesis preferred shares to Gelesis common shares
Loss – change in fair value through profit and loss
Balance as of December 31, 2022
$000's
553,167
(218,125)
(20,925)
500
179,271
493,888
11,168
(118,710)
(29,303)
5,000
14,214
(92,303)
(32,060)
251,892
*
Share in associate losses allocated to long-term interest amounted to $96.7 million as of December 31, 2021 and January 1, 2022
Vor
Vor was deconsolidated in February 2019. As PureTech did not hold common shares in Vor upon deconsolidation and the
preferred shares it held did not have equity-like features, PureTech had no basis to account for its investment in Vor under IAS
28. The preferred shares held by PureTech fell under the guidance of IFRS 9 and were treated as a financial asset held at fair
value with changes in fair value recorded in the Consolidated Statement of Comprehensive Income/(Loss).
2020
On February 12, 2020, PureTech participated in the second closing of Vor’s Series A-2 Preferred Share financing. For
consideration of $0.7 million, PureTech received 1,625,000 A-2 shares. On June 30, 2020, PureTech participated in the first
closing of Vor’s Series B Preferred Share financing. For consideration of $0.5 million, PureTech received 961,538 shares. Upon
the conclusion of such Vor financings PureTech no longer had significant influence over Vor.
2021
On January 8, 2021, PureTech participated in the second closing of Vor’s Series B Preferred Share financing. For consideration
of $0.5 million, PureTech received an additional 961,538 B Preferred shares.
On February 9, 2021, Vor closed its initial public offering (IPO) of 9,828,017 shares of its common stock at a price to the
public of $18.00 per share. Subsequent to the closing, PureTech held 3,207,200 shares of Vor common stock, representing
8.6 percent of Vor common stock. Following its IPO, the valuation of Vor common stock is based on level 1 inputs in the fair
value hierarchy. See Note 16.
2022
In August and December 2022, PureTech sold an aggregate of 535,400 shares of Vor common shares for aggregate proceeds
of $3.3 million.
During the years ended December 31, 2022, 2021 and 2020, the Company recognized a loss of $16.2 million, a gain of
$3.9 million, and a gain of $19.1 million, respectively for the changes in the fair value of the investment that were recorded in
the line item Gain/(loss) on investments held at fair value within the Consolidated Statement of Comprehensive Income/(Loss).
Please refer to Note 16 for information regarding the valuation of these instruments.
PureTech Health plc Annual report and accounts 2022 133
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value — continued
Gelesis
Gelesis was deconsolidated in July 2019. The common stock held in Gelesis is accounted for under the equity method, while
the preferred shares and warrants held by PureTech fell under the guidance of IFRS 9 and were treated as financial assets held
at fair value, where changes to the fair value of the preferred shares and warrant were recorded through the Consolidated
Statement of Income/(Loss). Please refer to Note 6 for information regarding the Company's investment in Gelesis as an
associate.
2020
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.
2020 and 2021
During the years ended December 31, 2021 and 2020, due to the equity method based investment in Gelesis being reduced
to zero, the Group allocated a portion of its share in the net loss in Gelesis in the years ended December 31, 2021 and 2020,
totaling $73.7 million, and $23.0 million, respectively, to its preferred share and warrant investments in Gelesis, which were
considered to be long-term interests in Gelesis.
2022
On January 13, 2022, Gelesis completed its business combination with Capstar Special Purpose Acquisition Corp ("Capstar").
As part of the business combination, all shares in Gelesis, common and preferred, including the shares held by PureTech,
were exchanged for common shares of the merged entity and unvested common shares that will vest upon the stock price of
the new combined entity reaching certain target prices (hereinafter "Earn-out shares"). In addition, PureTech invested $15.0
million in the class A common shares of Capstar as part of the Private Investment in Public Equity ("PIPE") transaction that
took place immediately prior to the closing of the business combination and an additional approximately $5.0 million, as part
of the Backstop agreement signed with Capstar on December 30, 2021 (See Note 6). Pursuant to the business combination,
Gelesis became a wholly-owned subsidiary of Capstar and Capstar changed its name to Gelesis Holdings, Inc., which began
trading on the New York Stock Exchange under the ticker symbol "GLS" on January 14, 2022. The exchange of the preferred
stock (including warrants) for common stock (including common stock warrants) represents an additional investment in Gelesis
equity investment. The Group recorded the changes in fair value of the preferred stock (including warrant) through the date
of the exchange upon which the preferred stock were derecognized and recorded as an additional investment in Gelesis
equity interest – See Note 6 for the net gain on the dilution of the equity interest in Gelesis, resulting from the exchange of
all preferred stock in Gelesis to common stock of Gelesis Holdings Inc, the PIPE transaction and the closing of the merger. All
equity method losses allocated in prior periods against the investment in Gelesis held at fair value are now included within the
equity method investment in Gelesis and were offset against the gain on dilution of interest – see Note 6.
As part of the aforementioned exchange PureTech received 4,526,622 Earn-out shares, which were valued on the date of the
exchange at $14.2 million. The Group accounts for such Earn-out shares under IFRS 9 as investments held at fair value with
changes in fair value recorded through profit and loss.
During the years ended December 31, 2022, 2021 and 2020, the Company recognized a loss of $4.4 million, a gain of
$34.6 million, and a gain of $7.1 million, respectively related to the change in the fair value of the preferred shares and
warrants that was recorded in the line item Gain/(loss) on investments held at fair value within the Consolidated Statement of
Comprehensive Income/(Loss).
In addition, the Company recognized a loss of $14.1 million during the year ended December 31, 2022 in respect of the Earn-
out shares, for the change in the fair value related to such investment during the period. As of December 31, 2022 the value of
such earn-out shares amounted to $0.1 million.
Karuna
Karuna was deconsolidated in March 2019. During 2019 Karuna completed its IPO and PureTech lost its significant influence
in Karuna. The shares held in Karuna are accounted for as an investment held at fair value.
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. As a result of
the sales, Puretech recorded a loss of $54.8 million attributable to blockage discount included in the sales price, to the line
item Loss Realized on Sale of Investment within the Consolidated Statement of Comprehensive Income/(Loss). See below for
gain recorded in respect of the change in fair value of the Karuna investment.
2021
On February 9, 2021, the Group sold 1,000,000 common shares of Karuna for $118.0 million. Following the sale the Group
held 2,406,564 common shares of Karuna, which represented 8.2 percent of Karuna common stock at the time of sale.
On November 9, 2021, the group sold an additional 750,000 common shares of Karuna for $100.1 million. Following the
sale the group holds 1,656,564 common shares of Karuna, which represented 5.6 percent at time of sale. As a result of the
aforementioned sales, the Company recorded a loss of $20.9 million, attributable to blockage discount included in the sales
price, to the line item Loss Realised on Sale of Investment within the Consolidated Statement of Comprehensive Income/
(Loss). See below for gain recorded in respect of the change in fair value of the Karuna investment.
134 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value — continued
2022
On August 8, 2022, the Company sold 125,000 shares of Karuna common stock. In addition, the Company wrote a series of
call options entitling the holders thereof to purchase up to 477,100 Karuna common stock at a set price, which were exercised
in full in August and September 2022. Aggregate proceeds to the Company from all aforementioned transactions amounted to
$115.5 million, net of transaction fees. As a result of the aforementioned sales, the Company recorded a loss of $29.3 million,
attributable to the exercise of the aforementioned call options, to the line item Realized Loss on Sale of Investment within the
Consolidated Statement of Comprehensive Income/ (Loss).See below for gain recorded in respect of the change in fair value of
the Karuna investment.
During the years ended December 31, 2022, 2021, and 2020 the Company recognized gains of $135.0 million, $110.0 million
and $191.2 million, respectively for the changes in the fair value of the Karuna investment that were recorded in the line
item Gain/(loss) on investments held at fair value within the Consolidated Statement of Comprehensive Income/(Loss). As of
December 31, 2022, PureTech continued to hold Karuna common shares or 3.1 percent of total outstanding Karuna common
shares. Please refer to Note 16 for information regarding the valuation of these instruments.
Akili
Akili was deconsolidated in 2018. As PureTech did not hold common shares in Akili and the preferred shares it held did not
have equity-like features, PureTech had no basis to account for its investment in Akili under IAS 28. The preferred shares held
by PureTech Health fell under the guidance of IFRS 9 and were treated as a financial asset held at fair value and all movements
to the value of the preferred shares were recorded through the Consolidated Statements of Comprehensive Income/(Loss), in
accordance with IFRS 9.
2021
On May 25, 2021, Akili completed its Series D financing for gross proceeds of $110.0 million in which Akili issued 13,053,508
Series D preferred shares. The Group did not participate in this round of financing and as a result, the Group's interest in Akili
was reduced from 41.9 percent to 27.5 percent.
2022
On January 26, 2022, Akili Interactive and Social Capital Suvretta Holdings Corp. I, a special purpose acquisition company,
announced they had entered into a definitive business combination agreement. The transaction closed on August 19, 2022
and the combined company's securities began trading on August 22, 2022 on the Nasdaq Stock Market under the ticker
symbol "AKLI". As part of this transaction the Akili Interactive shares held by the Company were exchanged for the common
stock of the combined company's securities as well as unvested common stock ("Akili Earnout Shares") that will vest when
the share price exceeds certain thresholds. In addition, as part of a PIPE transaction that took place concurrently with the
closing of the transaction, the Company purchased 500,000 shares in consideration for $5.0 million. Following the closing of
the aforementioned transactions, the Company holds 12,527,477 shares of the combined entity (excluding the Akili Earnout
Shares), which represents 14.7 percent of its outstanding common stock. The Company also holds 1,433,914 Akili Earn-out
Shares, which fair value amounted to $1.0 million as of December 31, 2022.
During the years ended December 31, 2022, 2021 and 2020, the Company recognized a loss of $131.4 million, a gain of
$32.2 million, and a gain of $14.4 million, respectively for the changes in the fair value of the investment in Akili that was
recorded on the line item Gain/(loss) on investments held at fair value within the Consolidated Statement of Comprehensive
Income/(Loss). Please refer to Note 16 for information regarding the valuation of these instruments.
resTORbio
On 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).
Sonde – Investment and gain on deconsolidation
On May 25, 2022, Sonde completed a Series B Preferred Share financing. As part of the financing a new investor invested
$3.5 million in cash in exchange for 1,125,401 shares and all convertible notes, including the convertible notes held by
PureTech, converted into Preferred B shares at the price per share paid by the investor minus a 20% discount. As a result of
the aforementioned financing, the Group's voting interest was reduced below 50% and the Group no longer controls Sonde's
Board of Directors, which is the governance body that has the power to direct the relevant activities of Sonde. Consequently,
the Group concluded it lost control over Sonde and as such it should cease to consolidate Sonde on the date the round of
financing was completed. Therefore, the results of operations of Sonde are included in the consolidated financial statements
through the date of deconsolidation.
PureTech Health plc Annual report and accounts 2022 135
Financial statements Notes to the Consolidated Financial Statements — continued
5.
Investments held at fair value — continued
Following deconsolidation, the Group still has significant influence in Sonde through its voting interest in Sonde and its
remaining representation on Sonde's Board of Directors. The Group holds Preferred A-1, A-2 and B shares. The Preferred A-1
shares, in substance, have the same terms as common stock and as such provide their shareholders with access to returns
associated with a residual equity ownership in Sonde. Consequently, the investment in Preferred A-1 shares is accounted for
under the equity method. The Preferred A-2 and B shares, however, do not provide their shareholders with access to returns
associated with a residual equity interest and as such are accounted for under IFRS 9, as investments held at fair value with
changes in fair value recorded in profit and loss.
Upon deconsolidation, the Group derecognized its assets and liabilities and non controlling interest in respect of Sonde and
recorded its aforementioned investments in Sonde at fair value. The deconsolidation resulted in a gain of $27.3 million. As of
the date of deconsolidation, the investment in Sonde preferred shares held at fair value amounted to $11.2 million.
During the year ended December 31, 2022, the Company recognized a gain of $0.2 million for the changes in the fair
value of the investment in Sonde 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.
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 July 1, 2019, Gelesis was deconsolidated from the Group’s financial statements. While the Group no longer
controls Gelesis, it was concluded that PureTech still has significant influence over Gelesis and as such Gelesis is accounted for
as an associate under IAS 28 in the consolidated financial statements.
Upon the date of deconsolidation, PureTech held preferred shares and common shares of Gelesis and warrants issued by
Gelesis to PureTech. PureTech’s investment in common shares of Gelesis is subject to equity method accounting. See table
below for the Group's share in the profits and losses of Gelesis for the periods presented.
The preferred shares and warrants held by PureTech fell under the guidance of IFRS 9 and were treated as financial assets held
at fair value, where changes to the fair value of the preferred shares and warrants were recorded through the Consolidated
Statement of Comprehensive Income/(Loss). See Note 5 above.
Years ended December 31, 2020 and 2021
During the years ended December 31, 2021 and 2020, the Group recorded its share in the losses of Gelesis. In 2020
the Group's investment in associates accounted for under the equity method was reduced to zero. Since the Group had
investments in Gelesis warrants and preferred shares that were deemed to be Long-term interests, the Company continued
recognizing its share in Gelesis losses while applying such losses to its preferred share and warrant investment in Gelesis
accounted for as an investment held at fair value. In 2021, the total investment in Gelesis, including the Long-term interests,
was reduced to zero. Since the Group did not incur legal or constructive obligations or made payments on behalf of Gelesis,
the Group discontinued recognizing equity method losses in 2021. As of December 31, 2021, unrecognized equity method
losses amounted to $38.1 million, which included $0.7 million of unrecognized other comprehensive loss.
During 2021, due to exercise of stock options into common shares in Gelesis the Group's equity interest in Gelesis was
reduced from 47.9 percent at December 31, 2020 to 42.0 percent as of December 31, 2021. The gain resulting from the
issuance of shares to third parties and the resulting reduction in the Group's share in the accumulated deficit of Gelesis under
the equity method was fully offset by the unrecognized equity method losses.
Backstop agreement – 2022 and 2021
On December 30, 2021, PureTech signed a Backstop agreement with Capstar according to which PureTech had committed
to acquire Capstar class A common shares immediately prior to the closing of the business combination between Gelesis and
Capstar, in case subsequent to the redemptions of Capstar shares being completed, the Available Funds, as defined in the
agreement, were less than$15.0 million. PureTech had committed to acquire two thirds of the necessary shares at $10 per share
so that the Available Funds increase to $15.0 million. According to the Backstop agreement, in case PureTech were required to
acquire any shares under the agreement, PureTech would receive an additional 1,322,500 class A common shares of Capstar
(immediately prior to the closing of the business combination) at no additional consideration.
The Company determined that such agreement meets the definition of a derivative under IFRS 9 and as such should be
recorded at fair value with changes in fair value recorded through profit and loss. The derivative was initially recorded at fair
value adjusted to defer the day 1 gain equal to the difference between the fair value of $11.2 million and transaction price
of zero on the effective date and as such was initially recorded at zero. The deferred gain was amortized to Other income
(expense) in the Consolidated Statement of Income (loss) over the period from the effective date until settlement date,
January 13, 2022. During the years ended December 31, 2022 and 2021, the Group recognized income of $10.4 million and
$0.8 million, respectively for the amortization of the deferred gain. During the year ended December 31, 2022 the Group
recognized a loss of $2.8 million in respect of the decrease in the fair value of the derivative until date of settlement, resulting
in a net gain of $7.6 million recorded during the year ended December 31, 2022 in respect of the Backstop agreement. The
gain was recorded in the line item Other Income/(expense) in the Consolidated Statements of Comprehensive Income/(Loss).
136 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
6.
Investments in Associates — continued
The fair value of the derivative on the date of settlement in the amount of $8.4 million represents an additional investment in
Gelesis as part of the SPAC transaction described below.
On January 13, 2022, as part of the conclusion of the aforementioned Backstop agreement, the Group acquired 496,145
class A common shares of Capstar for $5.0 million and received an additional 1,322,500 common A shares of Capstar for no
additional consideration.
2022
Share exchange – Capstar
On January 13, 2022, Gelesis completed its business combination with Capstar Special Purpose Acquisition Corp ("Capstar").
As part of the business combination, all shares in Gelesis, common and preferred, including the shares held by PureTech, were
exchanged for common shares of the merged entity and unvested common shares that will vest upon the stock price of the
new combined entity reaching certain target prices (hereinafter "Earn-out shares"). In addition, PureTech invested $15.0 million
in the class A common shares of Capstar as part of the PIPE transaction that took place immediately prior to the closing of
the business combination and an additional $5.0 million, as part of the Backstop agreement described above. Pursuant to
the business combination, Gelesis became a wholly-owned subsidiary of Capstar and Capstar changed its name to Gelesis
Holdings, Inc., which began trading on the New York Stock Exchange under the ticker symbol "GLS" on January 14, 2022.
Following the closing of the business combination, the PIPE transaction, the settlement of the aforementioned Backstop
agreement with Capstar, and the exchange of all preferred shares in Gelesis to common shares in the new combined entity,
PureTech holds 16,727,582 common shares of Gelesis Holdings Inc., which was equal to approximately 23.2% of Gelesis
Holdings Inc's outstanding common shares at the time of the exchange. Due to PureTech's significant equity holding and
voting interest in Gelesis, PureTech continues to maintain significant influence in Gelesis and as such continues to account for
its Gelesis equity investment under the equity method.
Gelesis was deemed to be the acquirer in Gelesis Holdings Inc. and the financial assets and financial liabilities in Capstar were
deemed to be acquired by Gelesis in consideration for the shares held by Capstar legacy shareholders. As such, the Group
did not revalue the retained investment in Gelesis but rather treated the exchange as a dilution of its equity interest in Gelesis
from 42.0 percent as of December 31, 2021 to 22.8 percent as of January 13, 2022 (including warrants that provide its holders
access to returns associated with equity holders). After considering the aforementioned additional investments, the exchange
of the preferred stock, previously accounted for as an investment held at fair value, to common stock (and representing an
additional equity investment in Gelesis – See Note 5), the Earn-out shares received in Gelesis (see Note 5) and the offset of
previously unrecognized equity method losses, the net gain recorded on the dilution of interest amounted to $28.3 million.
Impairment
Following Gelesis’s decline in its market price in 2022 and its lack of liquidity, the Group recorded an impairment loss of
$8.4 million as of December 31, 2022 in respect of its investment in Gelesis. The recoverable amount of the investment in
Gelesis was $4.9 million as of December 31, 2022, which was determined based on fair value less costs to sell (costs to sell
were estimated to be insignificant). Fair value was determined based on level 1 of the fair value hierarchy as Gelesis shares
were traded on an active market as of December 31, 2022.
The impairment loss was presented separately in the Consolidated Statement of Comprehensive Income/ (loss) for the year
ended December 31, 2022 in the line item Impairment of investment in associate.
Sonde
On May 25, 2022, Sonde completed a Series B Preferred Share financing. As a result of the aforementioned financing, the
Group's voting interest was reduced below 50% and the Group lost its control over Sonde and as such ceased to consolidate
Sonde on the date the round of financing was completed. See Note 5 above for further details.
Following deconsolidation, the Group has significant influence in Sonde through its voting interest in Sonde and its remaining
representation on Sonde's Board of Directors. The Group's voting interest at date of deconsolidation and as of December
31, 2022 was 48.2% and 40.17%, respectively. The Group holds Preferred A-1, A-2 and B shares. The Preferred A-1 shares, in
substance, have the same terms as common stock and as such provide their shareholders with access to returns associated with
a residual equity ownership in Sonde. Consequently, the investment in Preferred A-1 shares is accounted for under the equity
method. The Preferred A-2 and B shares, however, do not provide their shareholders with access to returns associated with a
residual equity interest and as such are accounted for under IFRS 9, as investments held at fair value. See Note 5.
The fair value of the Preferred A-1 shares on the date of deconsolidation amounted to $7.7 million, which is the initial value of
the equity method investment in Sonde. When applying the equity method, the Group records its share of the losses in Sonde
based on its equity interest in Sonde. Since only the common shares and Preferred A-1 shares in Sonde represent a residual
equity interest and PureTech is the sole holder of the Preferred A-1 shares, the Group's share in Sonde's equity is 93.6%.
During the year ended December 31, 2022 the Company recorded $3.4 million of equity method losses in respect of Sonde.
PureTech Health plc Annual report and accounts 2022 137
Financial statements Notes to the Consolidated Financial Statements — continued
6.
Investments in Associates — continued
The following table summarizes the activity related to the investment in associates balance for the years ended December 31,
2022 and 2021.
Investment in Associates
As of January 1, 2021
Share of net loss in Gelesis – limited to net investment amount
Share of losses recorded against Long Term Interests (LTIs)
As of December 31, 2021 and January 1, 2022
Cash investment in associate
Additional investment as a result of backstop settlement (see above)
Gain on dilution of interest in associate*
Investment in Sonde – deconsolidation
Share in net loss of associates
Reversal of equity method losses recorded against LTIs (due to decrease in LTI fair value)
Share in other comprehensive loss of associates
Impairment
As of December 31, 2022
$000's
—
(73,703)
73,703
—
19,961
8,424
13,793
7,680
(27,749)
(4,406)
(166)
(8,390)
9,147
* Gain on dilution of interest was further increased due to the receipt of Gelesis earn out shares accounted for as investments held at fair value (see above).
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.
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 (deficit) attributable to shareholders of Gelesis Inc.
Group's share of net assets (net deficit)
Goodwill
Impairment
Equity method losses recorded against Long-term Interests
Unrecognized equity method losses*
Investment in associate
Revenue
Loss from continuing operations (100%)
Total comprehensive loss (100%)
Group's share in net losses – limited to net investment amount**
Group's share of total comprehensive loss – limited to net investment amount
2022
$000s
22.5%
333,040
23,495
(99,053)
(80,010)
(46,204)
131,268
29,504
3,858
(28,452)
—
—
4,910
2022
$000s
25,767
(111,567)
(112,285)
(24,306)
(24,472)
2021
$000s
42.0%
357,508
66,092
(120,786)
(537,432)
(14,216)
(248,834)
(104,527)
7,211
(37,495)
96,709
38,101
—
2021
$000s
11,185
(271,430)
(273,005)
(73,703)
(73,703)
2020
$000s
21,442
(71,157)
(70,178)
(34,117)
(33,648)
* Unrecognized equity method losses includes unrecognized other comprehensive loss of $0.7 million for the year ended December 31, 2021.
** For the year ended December 31, 2022 includes $4.4 million reversal of equity method losses recorded against Long-Term Interest (LTI) due to the decrease in fair value
of such LTI.
Subsequent to balance sheet date, on April 10, 2023, the NYSE commenced proceedings to delist the common stock of
Gelesis from the NYSE due to Gelesis ceasing to meet certain conditions to trade on such stock exchange. Trading in Gelesis’s
common stock was suspended immediately, and it was subsequently delisted from the NYSE. The common stock of Gelesis is
currently available for trading in the over-the-counter (“OTC”) market under the symbol GLSH.
In addition, in April 2023 (subsequent to balance sheet date) PureTech submitted a non-binding proposal to acquire all of the
outstanding equity of Gelesis. Negotiations related to the proposal and any potential deal remain ongoing and are subject
to, among other things, approval of any definitive transaction by independent committees of the boards of both Gelesis and
PureTech.
See note 16 for the note issued to the Group by Gelesis and see Note 26 for additional details, including information related
to an additional note issued by Gelesis to the Group subsequent to balance sheet date.
138 PureTech Health plc Annual report and accounts 2022
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
2022
$000s
60,991
152,433
213,425
2021
$000s
57,199
110,471
167,671
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 general and administrative expenses
Other research and development expenses
Total other operating expenses
Total operating expenses
Auditor's remuneration:
For the years ending December 31,
Audit of these financial statements
Audit of the financial statements of subsidiaries
Audit of the financial statements of associate**
Audit-related assurance services*
Non-audit related services
Total
2022
57
144
201
2022
$000s
25,322
36,321
61,643
2022
$000s
41,750
2,908
2,286
14,699
61,643
35,669
116,113
151,782
213,425
2022
$000s
1,716
132
814
1,157
—
3,819
2021
52
119
171
2021
$000s
26,438
28,950
55,388
2021
$000s
36,792
2,563
2,084
13,950
55,388
30,761
81,521
112,282
167,671
2021
$000s
1,183
312
571
1,868
—
3,934
2020
$000s
49,440
81,859
131,299
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
350
490
173
2,449
2021 – $468.2 thousand represents prepaid expenses related to an expected initial public offering of a subsidiary.
*
** Audit fees of $720.0 thousand, $500.0 thousand and $350.0 thousand in respect of financial statements of associates for the years ended December 31, 2022, 2021, and
2020 respectively, are not included within the consolidated financial statements. Fees related to the audit of the financial statements of associates have been disclosed
in respect of 2022, 2021, and 2020 as these fees went towards supporting the audit opinion on the Group accounts. Such amounts were not previously disclosed in the
2020 financial statements.
Please refer to Note 8 for further disclosures related to share-based payments and Note 24 for management’s
remuneration disclosures.
PureTech Health plc Annual report and accounts 2022 139
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments
Share-based payments includes stock options, restricted stock units (“RSUs”) and performance-based RSUs in which the
expense is recognized based on the grant date fair value of these awards, except for performance based RSUs to executives
that are treated as liability awards where expense is recognized based on reporting date fair value up until settlement date.
Share-based Payment Expense
The Group share-based payment expense for the years ended December 31, 2022, 2021 and 2020, were comprised of charges
related to the PureTech Health plc incentive stock and stock option issuances and subsidiary stock plans.
The following table provides the classification of the Group’s consolidated share-based payment expense as reflected in the
Consolidated Statement of Income/(Loss):
Year ended December 31,
General and administrative
Research and development
Total
2022
$000s
8,862
5,837
14,699
2021
$000s
9,310
4,640
13,950
2020
$000s
7,650
3,068
10,718
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan (“PSP”). Under the PSP and subsequent amendments, awards of
ordinary shares may be made to the Directors, senior managers and employees of, and other individuals providing services to
the Company and its subsidiaries up to a maximum authorized amount of 10.0 percent of the total ordinary shares outstanding.
The shares have various vesting terms over a period of service between two and four years, provided the recipient remains
continuously engaged as a service provider.
The share-based awards granted under the PSP are generally equity settled (see cash settlements below) and expire 10 years
from the grant date. As of December 31, 2022, the Company had issued share-based awards to purchase an aggregate of
24,889,462 shares under this plan.
RSUs
RSU activity for the years ended December 31, 2022, 2021 and 2020 is detailed as follows:
Outstanding (Non-vested) at January 1, 2020
RSUs Granted in Period
Vested
Forfeited
Outstanding (Non-vested) at December 31, 2020 and January 1, 2021
RSUs Granted in Period
Vested
Forfeited
Outstanding (Non-vested) at December 31, 2021 and January 1, 2022
RSUs Granted in Period
Vested
Forfeited
Outstanding (Non-vested) at December 31, 2022
*
2021 – for liability awards based on fair value at reporting date.
Number of
Shares/Units
4,636,347
1,759,011
(2,781,687)
(191,089)
3,422,582
2,195,133
(1,176,695)
(808,305)
3,632,715
4,309,883
(696,398)
(1,155,420)
6,090,780
Wtd Avg Grant
Date Fair Value
(GBP)*
2.08
1.80
1.54
2.37
2.46
2.15
2.93
2.25
1.91
1.76
2.80
2.67
1.74
Each RSU entitles the holder to one ordinary share on vesting and the RSU awards are generally based on a cliff vesting
schedule over a one to three-year requisite service period in which the Company recognizes compensation expense for the
RSUs. Following vesting, each recipient will be required to make a payment of one pence per ordinary share on settlement of
the RSUs. Vesting of the majority of the RSUs is subject to the satisfaction of performance and market conditions. The grant
date fair value of market condition awards that were treated as equity settled awards were measured to reflect such conditions
and there was no true-up for differences between expected and actual outcomes. For liability settled awards, see below.
The Company recognizes the estimated fair value of performance-based awards as share-based compensation expense over
the performance period based upon its determination of whether it is probable that the performance targets will be achieved.
The Company assesses the probability of achieving the performance targets at each reporting period. Cumulative adjustments,
if any, are recorded to reflect subsequent changes in the estimated outcome of performance-related conditions.
140 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
The fair value of the market and performance-based awards is based on the Monte Carlo simulation analysis utilizing a
Geometric Brownian Motion process with 100,000 simulations to value those shares. The model considers share price volatility,
risk-free rate and other covariance of comparable public companies and other market data to predict distribution of relative
share performance.
The performance and market conditions attached to the RSU awards are based on the achievement of total shareholder
return (“TSR”), based on the achievement of absolute TSR targets, and to a lesser extent based on TSR as compared to the
FTSE 250 Index, and the MSCI Europe Health Care Index. The remaining portion is based on the achievement of strategic
targets. The RSU award performance criteria have changed over time as the criteria is continually evaluated by the Group’s
Remuneration Committee.
In 2017, the Company granted certain executives RSUs that vested based on the service, market and performance conditions,
as described above. The vesting of all RSUs was achieved by December 31, 2019 where all service, market and performance
conditions were met. The remuneration committee of PureTech's Board of Directors approved the achievement of the vesting
conditions as of December 31, 2019 and reached the decision during the year ended December 31, 2020 to cash settle the
2017 RSUs. The settlement value was determined based on the 3 day average closing price of the shares. The settlement value
was $12.5 million (which after deducting tax withheld on behalf of recipients amounted to $7.2 million). The settlement value
did not exceed the fair value at settlement date and as such the cash settlement was treated as an equity transaction in the
financial statements for the year ended December 31, 2020, whereby the full repurchase cash settlement amount was charged
to equity in Other reserves.
Similarly in 2018, the Company granted certain executives RSUs that vested based on service, market and performance
conditions, as described above. The vesting of all RSUs was achieved by December 31, 2020 where all service, market and
performance conditions were met. In February 2021 the remuneration committee of PureTech's board of directors approved
the achievement of the vesting conditions as of December 31, 2020 and on May 28, 2021 reached the decision to cash settle
RSUs to certain employees while others were issued shares. The settlement value was determined based on the three day
average closing price of the shares. The settlement value was $10.7 million (which after deducting tax withheld on behalf of
recipients amounted to $6.4 million). The settlement value did not exceed the fair value at settlement date and as such the
cash settlement was treated as an equity transaction, whereby the full repurchase cash settlement amount was charged to
equity in Other reserves in the financial statements as of and for the year ended December 31, 2021.
Following the different cash settlements, the Company concluded that although the remaining RSUs are to be settled by shares
according to their respective agreements, and any cash settlement is at the Company's discretion, due to past practice of cash
settlement to multiple employees, some for multiple years, these RSUs to the company executives should be treated as liability
awards and as such adjusted to fair value at every reporting date with changes in fair value recorded in earnings as stock based
compensation expense.
Consequently, the Company reclassified during the year ended December 31, 2021 $1.9 million from equity to other
non-current liabilities and $4.8 million from equity to other payables equal to the fair value of the awards at the date of
reclassification. The Company treated the excess of the fair value at the reclassification date over the grant date fair value of
the RSUs (for the portion of the vesting period that has already elapsed) in the amount of $2.9 million as an equity transaction.
Therefore the full amount of the liability at reclassification was recorded as a charge to equity. The changes in fair value of the
liability from reclassification date to balance sheet date or settlement date are recorded as stock-based compensation expense
in the Consolidated Statement of Comprehensive Income (loss).
The Company incurred share-based payment expenses for performance, market and service based RSUs of $1.6 million
(including $1.1 million expense in respect of RSU liability awards), $1.5 million (including $0.6 million expense in respect of RSU
liability awards), and $5.7 million for the years ended December 31, 2022, 2021 and 2020, respectively. The decrease in the
share based compensation expense in respect of the RSUs for the year ended December 31, 2021, as compared to the year
ended December 31, 2020 is due to reduction in the fair value of the liability awards as compared to their value at the date
the awards were reclassified from equity awards to liability awards, as well as forfeitures of certain awards due to unexpected
terminations of RSU holders.
As of December 31, 2022, the carrying amount of the RSU liability awards was $5.9 million, $1.8 million current; $4.1 million
non current, out of which $1.8 million related to awards that have met all their performance and market conditions.
PureTech Health plc Annual report and accounts 2022 141
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
Stock Options
Stock option activity for the years ended December 31, 2022, 2021 and 2020, is detailed as follows:
Outstanding at January 1, 2020
Granted
Exercised
Forfeited and expired
Options Exercisable at December 31, 2020 and January 1, 2021
Outstanding at December 31, 2020 and January 1, 2021
Granted
Exercised
Forfeited and expired
Options Exercisable at December 31, 2021 and January 1, 2022
Outstanding at December 31, 2021 and January 1, 2022
Granted
Exercised
Forfeited and expired
Options Exercisable at December 31, 2022
Outstanding at December 31, 2022
Number of
Options
8,472,827
4,076,982
(514,410)
(1,119,313)
5,447,405
10,916,086
5,424,000
(2,238,187)
(687,781)
4,773,873
13,414,118
8,881,000
(577,022)
(3,924,215)
6,185,216
17,793,881
Wtd Average
Exercise Price
(GBP)
1.16
3.14
1.52
1.88
0.98
1.81
3.34
0.70
2.53
1.42
2.58
2.04
0.50
2.89
2.03
2.31
Wtd Average of
remaining
contractual
term (in years)
8.55
Wtd Average
Stock Price at
Exercise (GBP)
2.88
3.63
2.43
7.46
8.38
6.50
8.29
6.21
8.03
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
2022
41.70%
6.11
2.13%
—
$1.15
2021
41.05%
6.16
1.06%
—
$1.87
2020
41.25%
6.11
0.53%
—
$1.72
The Company incurred share-based payment expense for the stock options of $8.4 million, $6.2 million and $2.1 million for
the years ended December 31, 2022, 2021 and 2020, respectively. The increase in expense for the year ended December
31, 2022, as compared to the year ended December 31, 2021, is due to the new grants granted in 2022. The increase in
expense for the year ended December 31, 2021, as compared to the year ended December 31, 2020, is due to new grants
granted in 2021.
For shares outstanding as of December 31, 2022, the range of exercise prices is detailed as follows:
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
439,490
6,276,391
5,375,750
5,702,250
17,793,881
Wtd
Average
Exercise
Price (GBP)
Wtd Average of
remaining
contractual
term (in years)
—
1.58
2.26
3.34
2.31
6.76
7.00
8.92
8.40
8.03
142 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
Subsidiary Plans
Certain subsidiaries of the Group have adopted stock option plans. A summary of stock option activity by number of shares
in these subsidiaries is presented in the following table:
Outstanding as
of January 1,
2022
349,500
2,686,120
2,049,004
1,991,637
Outstanding as
of January 1,
2021
3,888,168
962,000
1,309,040
2,192,834
1,741,888
Outstanding as
of January 1,
2020
3,698,244
972,000
1,309,040
1,829,004
1,450,100
Granted During
the Year
Exercised
During the Year
Expired During
the Year
Forfeited
During the Year
Deconsolidation
During the Year
Outstanding as
of December
31, 2022
45,000
90,000
—
490,506
—
—
—
(400,000)
(50,000)
—
—
(65,235)
—
—
—
(192,332)
—
—
(2,049,004)
—
344,500
2,776,120
—
1,824,576
Granted During
the Year
Exercised
During the Year
Expired During
the Year
Forfeited During
the Year
Deconsolidation
During the Year
Outstanding as
of December 31,
2021
197,398
—
1,383,080
—
451,532
(2,373,750)
(525,000)
—
—
(52,938)
(506,260)
(87,500)
(6,000)
(51,507)
(76,491)
(1,205,556)
—
—
(92,323)
(72,354)
—
—
—
—
—
—
349,500
2,686,120
2,049,004
1,991,637
Granted During
the Year
Exercised
During the Year
Expired During
the Year
Forfeited During
the Year
Deconsolidation
During the Year
Outstanding as
of December 31,
2020
189,924
—
—
363,830
493,951
—
—
—
—
(813)
—
—
—
—
—
—
(10,000)
—
—
(201,350)
—
—
—
—
—
3,888,168
962,000
1,309,040
2,192,834
1,741,888
Entrega
Follica
Sonde
Vedanta
Alivio
Entrega
Follica
Sonde
Vedanta
Alivio
Entrega
Follica
Sonde
Vedanta
The weighted-average exercise prices and remaining contractual life for the options outstanding as of December 31, 2022,
were as follows:
Outstanding at December 31, 2022
Entrega
Follica
Vedanta
Number of
options
344,500
2,776,120
1,824,576
Weighted-
average
exercise price
$
Weighted-
average
contractual life
outstanding
1.91
1.41
15.89
4.92
6.38
6.88
The weighted average exercise prices for the options granted for the years ended December 31, 2022, 2021 and 2020, were
as follows:
For the years ended December 31,
Alivio
Entrega
Follica
Sonde
Vedanta
2022
$
—
0.02
1.86
—
14.94
2021
$
—
—
1.86
—
19.69
2020
$
0.47
—
—
0.18
19.59
PureTech Health plc Annual report and accounts 2022 143
Financial statements Notes to the Consolidated Financial Statements — continued
8.
Share-based Payments — continued
The weighted average exercise prices for options forfeited during the year ended December 31, 2022, were as follows:
Forfeited during the year ended December 31, 2022
Vedanta
Weighted-
average
exercise price
$
19.64
Number of
options
192,332
The weighted average exercise prices for options exercised during the year ended December 31, 2022, were as follows:
Exercised during the year ended December 31, 2022
Vedanta
Weighted-
average
exercise price
$
0.02
Number of
options
400,000
The weighted average exercise prices for options exercisable as of December 31, 2022, were as follows:
Exercisable at December 31, 2022
Number of Options
Entrega
Follica
Vedanta
344,500
2,776,120
1,824,576
Weighted-average
exercise price
$
Exercise Price Range
$
1.91
1.41
15.89
0.02-2.36
0.03-1.86
0.02-21.35
Significant Subsidiary Plans
Vedanta 2020 Stock Incentive Plan
On June 2, 2020, the Company’s Board of Directors approved the 2020 Stock Incentive Plan, or 2020 Plan, which replaced the
2010 Stock Incentive Plan, or 2010 Plan, which was set to expire in December 2020. All authorized and issued shares under
the 2010 Plan were transferred to the 2020 Plan. The 2020 Plan provides for the grant of incentive stock options, nonqualified
stock options, and restricted stock to employees, directors, and nonemployees of the Company up to an aggregate of
2,145,867 shares of the Company's common stock. In March 2021, the Company’s Board of Directors approved an increase in
the authorized shares of 151,188 for a total of 2,297,055. In July 2021, the Company’s Board of Directors approved an increase
in the authorized shares of 500,000 for a total of 2,797,055. Under the 2020 Plan, 914,331 shares remained available for
issuance as of December 31, 2022.
The options granted under the 2020 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 2020 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
2022
2021
2020
6.00-8.33
88.22%-89.68%
1.67%-3.13%
—
$10.51-$15.14
$14.00-$18.84
6.00-7.11
88.05%-88.59%
0.96%-1.32%
—
$13.84-$16.23
$19.00-$21.35
6.00-10.00
89.24%-95.46%
0.32%-0.87%
—
$13.09-$16.54
$19.59
Vedanta incurred share-based compensation expense of $4.3 million, $5.4 million and $2.4 million for the years
ended December 31, 2022, 2021 and 2020, respectively.
Other Plans
The stock compensation expense under plans at other subsidiaries of the Group not including Vedanta amounted
to $0.4 million, $0.8 million and $0.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
144 PureTech Health plc Annual report and accounts 2022
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 years ended December 31,
Finance income
Interest income from financial assets
Total finance income
Finance costs
Contractual interest expense on notes payable
Interest expense on other borrowings
Interest expense on lease liability
Gain/(loss) on foreign currency exchange
Total finance cost – contractual
Gain/(loss) from change in fair value of warrant liability
Gain/(loss) from change in fair value of preferred shares
Gain/(loss) from change in fair value of convertible debt
Total finance income/(costs) – fair value accounting
Finance income/(costs), net
10. Earnings/(Loss) per Share
2022
$000s
5,799
5,799
(212)
(1,759)
(1,982)
14
(3,939)
6,740
130,825
(502)
137,063
138,924
2021
$000s
214
214
(1,031)
(1,502)
(2,181)
(56)
(4,771)
1,419
8,362
(175)
9,606
5,050
2020
$000s
1,183
1,183
(96)
(496)
(2,354)
—
(2,946)
(117)
(4,234)
—
(4,351)
(6,115)
The basic and diluted income/(loss) per share has been calculated by dividing the income/(loss) for the year attributable to
ordinary shareholders by the weighted average number of ordinary shares outstanding during the years ended December 31,
2022, 2021 and 2020, respectively. During the years ended December 31, 2022 and 2021 the Company incurred a net loss
and therefore all outstanding potential securities were considered anti-dilutive. The amount of potential securities that were
excluded from the calculation amounted to 3,134,131 and 6,553,905 shares, respectively.
Earnings/(Loss) Attributable to Owners of the Company:
2022
Basic
$000s
Diluted
$000s
2021
Basic
$000s
Diluted
$000s
2020
Basic
$000s
Income/(loss) for the year,
attributable to the owners of the
Company
Income/(loss) attributable to
ordinary shareholders
(50,354)
(50,354)
(60,558)
(60,558)
(50,354)
(50,354)
(60,558)
(60,558)
5,985
5,985
Weighted-Average Number of Ordinary Shares:
2022
2021
2020
Diluted
$000s
5,985
5,985
Basic
Diluted
Issued ordinary shares at January 1, 287,796,585 287,796,585
690,772
Effect of shares issued
Effect of dilutive shares (please
refer to Note 8)
Effect of treasury shares purchased
Weighted average number of
ordinary shares at December 31,
284,759,435 284,759,435
—
(3,727,922)
—
(3,727,922)
690,772
Basic
Diluted
Basic
Diluted
285,885,025 285,885,025
705,958
705,958
285,370,619
233,048
285,370,619
233,048
—
—
—
—
—
—
7,252,246
—
286,590,983
286,590,983
285,603,667
292,855,913
Earnings/(Loss) per Share:
Basic and diluted earnings/(loss)
per share
(0.18)
(0.18)
(0.21)
(0.21)
2022
Basic
$
Diluted
$
2021
Basic
$
Diluted
$
2020
Basic
$
0.02
Diluted
$
0.02
PureTech Health plc Annual report and accounts 2022 145
Financial statements Notes to the Consolidated Financial Statements — continued
11. Property and Equipment
Cost
Balance as of January 1, 2021
Additions, net of transfers
Disposals
Reclassifications
Balance as of December 31, 2021
Additions, net of transfers
Disposals
Deconsolidation of subsidiaries
Reclassifications
Balance as of December 31, 2022
Accumulated depreciation and
impairment loss
Balance as of January 1, 2021
Depreciation
Disposals
Balance as of December 31, 2021
Depreciation
Disposals
Deconsolidation of subsidiaries
Balance as of December 31, 2022
Laboratory and
Manufacturing
Equipment
$000s
Furniture and
Fixtures
$000s
Computer
Equipment and
Software
$000s
Leasehold
Improvements
$000s
Construction in
process
$000s
8,420
1,424
(323)
2,211
11,733
390
(118)
—
1,336
13,341
1,452
—
—
—
1,452
—
—
—
58
1,510
1,519
92
(282)
—
1,329
11
—
(58)
137
1,419
18,054
183
—
248
18,485
412
—
—
5,067
23,964
3,852
6,723
—
(2,459)
8,116
1,362
(77)
—
(6,598)
2,803
Laboratory and
Manufacturing
Equipment
$000s
Furniture and
Fixtures
$000s
Computer
Equipment and
Software
$000s
Leasehold
Improvements
$000s
Construction in
process
$000s
(3,965)
(1,973)
251
(5,686)
(2,082)
57
—
(7,711)
(454)
(208)
—
(663)
(212)
—
—
(875)
(1,287)
(174)
271
(1,190)
(107)
—
53
(1,244)
(4,815)
(1,991)
—
(6,806)
(3,444)
—
—
(10,250)
—
—
—
—
—
—
—
—
Property and Equipment, net
Balance as of December 31, 2021
Balance as of December 31, 2022
Laboratory and
Manufacturing
Equipment
$000s
Furniture and
Fixtures
$000s
Computer
Equipment and
Software
$000s
Leasehold
Improvements
$000s
Construction in
process
$000s
6,047
5,630
790
635
139
174
11,679
13,714
8,116
2,803
Total
$000s
33,297
8,422
(605)
—
41,115
2,176
(195)
(58)
—
43,037
Total
$000s
(10,520)
(4,346)
522
(14,344)
(5,845)
57
53
(20,080)
Total
$000s
26,771
22,957
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 $5.8 million, $4.3 million and $3.9 million for the years ended December 31, 2022, 2021
and 2020, respectively.
146 PureTech Health plc Annual report and accounts 2022
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, 2021
Additions
Balance as of December 31, 2021
Additions
Write-off
Deconsolidation of subsidiaries
Balance as of December 31, 2022
Accumulated amortization
Balance as of January 1, 2021
Amortization
Balance as of December 31, 2021
Amortization
Deconsolidation of subsidiary
Balance as of December 31, 2022
Intangible assets, net
Balance as of December 31, 2021
Balance as of December 31, 2022
Licenses
$000s
900
90
990
25
(163)
(21)
831
Licenses
$000s
(1)
(2)
(3)
(1)
4
—
Licenses
$000s
987
831
Substantially all the intangible asset licenses represent in-process-research-and-development assets since they are still
being developed and are not ready for their intended use. As such, these assets are not yet amortized but tested for
impairment annually.
During 2022, the company wrote off one of its research intangible assets for which research was ceased in the amount
of $162.5 thousand.
The Company tested all other such intangible assets for impairment as of balance sheet date and concluded that none of such
assets were impaired.
During the year ended December 31, 2022, Sonde Health, Inc. was deconsolidated and as such $17.5 thousand in net assets
were derecognised.
The company had negligible Amortization expense for the years ended December 31, 2022 2021 and 2020.
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
2022
$000s
2,124
2,124
2021
$000s
2,124
2,124
PureTech Health plc Annual report and accounts 2022 147
Financial statements Notes to the Consolidated Financial Statements — continued
14. Equity
Total equity for PureTech as of December 31, 2022, and 2021, was as follows:
Equity
Share capital, £0.01 par value, issued and paid 278,566,306 and 287,796,585 as of
December 31, 2022 and 2021, respectively
Merger Reserve
Share premium
Treasury shares, 10,595,347 and zero as of December 31, 2022 and 2021, respectively
Translation reserve
Other reserves
Retained earnings/(accumulated deficit)
Equity attributable to owners of the Group
Non-controlling interests
Total equity
December 31,
2022
$000s
December 31,
2021
$000s
5,455
138,506
289,624
(26,492)
89
(14,478)
149,516
542,220
5,369
547,589
5,444
138,506
289,303
—
469
(40,077)
199,871
593,515
(9,368)
584,147
Changes in share capital and share premium relate primarily to incentive options exercises during the period.
Shareholders are entitled to vote on all matters submitted to shareholders for a vote. Each ordinary share is entitled to one
vote. Each ordinary share is entitled to receive dividends when and if declared by the Company’s Directors. The Company has
not declared any dividends in the past.
On June 18, 2015, the Company acquired the entire issued share capital of PureTech LLC in return for 159,648,387 Ordinary
Shares. This was accounted for as a common control transaction at cost. It was deemed that the share capital was issued in
line with movements in share capital as shown prior to the transaction taking place. In addition, the merger reserve records
amounts previously recorded as share premium.
Other reserves comprise the cumulative credit to share-based payment reserves corresponding to share-based payment
expenses recognized through Consolidated Statements of Comprehensive Income/(Loss), settlements of vested share based
payment awards as well as other additions that flow directly through equity such as the excess or deficit from changes in
ownership of subsidiaries while control is maintained by the Group.
On May 9, 2022, the Company announced the commencement of a $50.0 million share repurchase program the ("Program")
of its ordinary shares of one pence each (“Ordinary Shares”). The Company is executing the Program in two equal tranches.
In respect of the two tranches, PureTech entered into an irrevocable (see below) non-discretionary instruction with Jefferies
International Limited (“Jefferies”) in relation to the purchase by Jefferies of Ordinary Shares for an aggregate consideration
(excluding expenses) of no greater than $25.0 million for each tranche and the simultaneous on-sale of such Ordinary Shares
by Jefferies to PureTech, subject to certain volume and price restrictions. Jefferies makes its trading decisions in relation to
the Ordinary Shares independently of, and uninfluenced by, the Company. Purchases may continue during any close period
to which the Company is subject. The instruction to Jeffries may be amended or withdrawn so long as the Company is not in
a close period or otherwise in possession of inside information.
Any purchases of Ordinary Shares under the Program were carried out on the London Stock Exchange and could be carried
out on any other UK recognized investment exchange which may be agreed, in accordance with pre-set parameters and in
accordance with, and subject to limits, including those limits related to daily volume and price, prescribed by the Company’s
general authority to repurchase Ordinary Shares granted by its shareholders at its annual general meeting on May 27, 2021,
and relevant Rules and Regulations. All Ordinary Shares repurchased under the Program are held in treasury.
As of December 31, 2022, the Company’s issued share capital was 278,566,306 shares, including 10,595,347 shares, which
had been repurchased under the Program and were held by the Company in treasury.
15. Subsidiary Preferred Shares
Preferred shares issued by subsidiaries often contain redemption and conversion features that are assessed under IFRS 9
in conjunction with the host preferred share instrument. This balance represents subsidiary preferred shares issued to
third parties.
The subsidiary preferred shares are redeemable upon the occurrence of a contingent event, other than full liquidation of the
Company, that is not considered to be within the control of the Company. Therefore these subsidiary preferred shares are
classified as liabilities. These liabilities are measured at fair value through profit and loss. The preferred shares are convertible
into ordinary shares of the subsidiaries at the option of the holder and mandatorily convertible into ordinary shares upon a
subsidiary listing in a public market at a price above that specified in the subsidiary’s charter or upon the vote of the holders
of subsidiary preferred shares specified in the charter. Under certain scenarios the number of ordinary shares receivable on
conversion will change and therefore, the number of shares that will be issued is not fixed. As such the conversion feature is
considered to be an embedded derivative that normally would require bifurcation. However, since the preferred share liabilities
are measured at fair value through profit and loss, as mentioned above, no bifurcation is required.
148 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
15.
Subsidiary Preferred Shares — continued
The preferred shares are entitled to vote with holders of common shares on an as converted basis.
The Group recognized the preferred share balance upon the receipt of cash financing or upon the conversion of notes into
preferred shares at the amount received or carrying balance of any notes converted into preferred shares.
The balance as of December 31, 2022 and December 31, 2021, represents the fair value of the instruments for all subsidiary
preferred shares. The following summarizes the subsidiary preferred share balance:
As of December 31,
Entrega
Follica
Sonde
Vedanta Biosciences
Total subsidiary preferred share balance
2022
$000s
169
350
—
26,820
27,339
2021
$000s
669
11,191
13,362
148,796
174,017
As is customary, in the event of any voluntary or involuntary liquidation, dissolution or winding up of a subsidiary, the holders
of subsidiary preferred shares which are outstanding shall be entitled to be paid out of the assets of the subsidiary available
for distribution to shareholders and before any payment shall be made to holders of ordinary shares. A merger, acquisition,
sale of voting control or other transaction of a subsidiary in which the shareholders of the subsidiary immediately before the
transaction do not own a majority of the outstanding shares of the surviving company shall be deemed to be a liquidation
event. Additionally, a sale, lease, transfer or other disposition of all or substantially all of the assets of the subsidiary shall also
be deemed a liquidation event.
As of December 31, 2022 and December 31, 2021, the minimum liquidation preference reflects the amounts that would be
payable to the subsidiary preferred holders upon a liquidation event of the subsidiaries, which is as follows:
As of December 31,
Entrega
Follica
Sonde
Vedanta Biosciences
Total minimum liquidation preference
2022
$000s
2,216
6,405
—
149,568
158,189
2021
$000s
2,216
6,405
12,000
149,568
170,189
For the years ended December 31, 2022 and 2021, the Group recognized the following changes in the value of subsidiary
preferred shares:
Balance as of January 1, 2021
Issuance of new preferred shares – financing cash flow
Conversion of convertible notes
Decrease in value of preferred shares measured at fair value – finance costs (income)
Balance as of January 1, 2022
Decrease in value of preferred shares measured at fair value – finance costs (income)
Deconsolidation of subsidiary – (Sonde)
Balance as of December 31, 2022
2022
During the year ended December 31, 2022 there were no issuances of new preferred shares.
$000s
118,972
37,610
25,797
(8,362)
174,017
(130,825)
(15,853)
27,339
2021
On July 21, 2021 Vedanta closed a Series D financing in which Vedanta issued 2,387,675 Preferred D shares for consideration
of $68.4 million. From such consideration of $68.4 million, $25.8 million was received from Pfizer through conversion of its
convertible note (see Note 17) and $5.0 million was received from PureTech in exchange for 174,520 Preferred D shares. The
amount received from PureTech was eliminated in the consolidated financial statements.
PureTech Health plc Annual report and accounts 2022 149
Financial statements Notes to the Consolidated Financial Statements — continued
16. Financial Instruments
The Group’s financial instruments consist of financial liabilities, including preferred shares, convertible notes, warrants and
loans payable, as well as financial assets. Many of these financial instruments are presented at fair value with fair value changes
recorded through profit and loss.
Fair Value Process
For financial instruments measured at fair value under IFRS 9, the change in the fair value is reflected through profit and
loss. Using the guidance in IFRS 13, the total business enterprise value and allocable equity of each entity being valued was
determined using a market backsolve approach through a recent arm’s length financing round (or a future probable arm's
length transaction), market PWERM approach, discounted cash flow income approach, or hybrid approaches. The approaches,
in order of strongest fair value evidence, are detailed as follows:
Valuation Method
Description
Market – Backsolve
The market backsolve approach benchmarks the original issue price (OIP) of the company’s latest
funding transaction as current value.
Market/Asset – PWERM Under a PWERM, the company 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. An asset approach may be included as an expected future outcome within the PWERM
method. Possible future outcomes can include IPO scenarios, potential SPAC transactions, merger
and acquisition transactions as well as other similar exit transactions of the investee.
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.
Income Based – DCF
As of December 31, 2022 and 2021, at each measurement date, the fair value of preferred shares and warrant liabilities,
including embedded conversion rights that are not bifurcated, as well as investments held at fair value (that are not publicly
traded), were determined using the following allocation methods: option pricing model (“OPM”), Probability-Weighted
Expected Return Method ("PWERM"), or Hybrid allocation framework. The methods are detailed as follows:
Allocation Method
Description
OPM
PWERM
Hybrid
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.
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 for
reasonableness and compliance with the fair value measurements guidance under IFRS. The Group measures fair values using
the following fair value hierarchy that reflects the significance of the inputs used in making the measurements:
Fair Value
Hierarchy Level
Description
Level 1
Level 2
Level 3
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.
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.
150 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
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, 2020
Value at issuance
Change in fair value
Balance at December 31, 2020 and January 1, 2021
Value at issuance
Conversion to subsidiary preferred shares
Accrued interest – contractual
Change in fair value
Balance at December 31, 2021 and January 1, 2022
Value at issuance
Accrued interest – contractual
Change in fair value
Deconsolidation – Sonde
Balance at December 31, 2022
Subsidiary
Preferred Shares
$000s
Subsidiary
Convertible
Notes
$000s
100,989
13,750
4,233
118,972
37,610
25,797
—
(8,362)
174,017
—
—
(130,825)
(15,853)
27,339
—
25,000
—
25,000
2,215
(25,797)
867
175
2,461
393
48
502
(3,403)
—
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, 2022, in the fair value
measurement of the Group’s material subsidiary preferred shares liabilities categorized as Level 3 in the fair value hierarchy:
Fair Value at December 31,
2022
26,820
Valuation Technique
PWERM based on
pro forma backsolve
approach that
leverages a Monte
Carlo simulation
Unobservable Inputs
Estimated Time to Exit
Equity Discount Rate
Debt Discount Rate
Volatility
Weighted Average
2.14
30%
15%
95%
Sensitivity to Decrease in Input
Fair value decrease
Fair value increase
Fair value decrease
Fair value decrease
Subsidiary Preferred Shares Sensitivity
The following summarizes the sensitivity from the assumptions made by the Company with respect to the significant
unobservable inputs which are categorized as Level 3 in the fair value hierarchy and used in the fair value measurement of the
Group’s subsidiary preferred shares liabilities (Please refer to Note 15):
Input
As of December 31, 2022
Time to Liquidity
Volatility
Discount Rate
Subsidiary Preferred Share Liability
Sensitivity Range
- 6 Months
+ 6 Months
(10)%
+10%
(5)%
+5%
Financial Liability
Increase/(Decrease)
$000s
(1,322)
856
(1,133)
1,200
(2,035)
1,922
PureTech Health plc Annual report and accounts 2022 151
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Financial Assets Held at Fair Value
Karuna, Vor and Akili Valuation
Karuna (Nasdaq: KRTX), Vor (Nasdaq: VOR), Akili (Nasdaq: AKLI) and additional immaterial investments are listed entities on an
active exchange and as such the fair value as of December 31, 2022, was calculated utilizing the quoted common share price.
Please refer to Note 5 for further details.
Akili, Gelesis and Sonde
In accordance with IFRS 9, the Company accounted for its preferred share investments in Akili (until the exchange of such
shares to common stock traded on Nasdaq) and Gelesis (until the exchange of such shares to common stock) and accounts
for its investment in Sonde (investment in Preferred A-2 and B shares, subsequent to the date of deconsolidation) as financial
assets held at fair value through the profit and loss. In addition, the Company accounts for its investment in Gelesis Earn-
out shares and Akili Earn-out shares (see Note 5) as investments held at fair value. All the valuations of the aforementioned
investments are categorized as Level 3 in the fair value hierarchy due to the use of significant unobservable inputs to value
such assets. During the year ended December 31, 2022, the Company recorded such investments at fair value and recognized
the change in fair value of the investments as a loss of $30.0 million that was recorded to the Consolidated Statements of
Comprehensive Income/(Loss) in the line item Gain/(loss) on investments held at fair value.
The following table summarizes the changes in all the Group’s investments held at fair value, which were categorized as Level 3
in the fair value hierarchy:
Balance at 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 at December 31, 2020 and January 1, 2021
Cash purchase of Vor preferred shares
Reclassification of Vor from level 3 to level 1
Gain/(Loss) on changes in fair value
Balance at January 1, 2022 before allocation of associate loss to long-term interest
Deconsolidation of Sonde
Gelesis – New Investment – Earn out Shares
Exchange of Gelesis preferred shares to Gelesis common shares
Reclassification of Akili to level 1 investment
Change in fair value
Balance as of December 31, 2022
$'000s
154,445
10,000
1,150
41,297
206,892
500
(33,365)
65,505
239,533
11,168
14,214
(92,303)
(128,764)
(31,253)
12,593
The change in fair value of investments held at fair value are recorded in Gain/(loss) on investments held at fair value in the
Consolidated Statements of Comprehensive Income/(Loss).
The table below sets out information about the significant unobservable inputs used at December 31, 2022, in the fair value
measurement of the Group’s material preferred share investments held at fair value categorized as Level 3 in the fair value
hierarchy:
Fair Value at December 31,
2022
Valuation Technique
Unobservable Inputs
Weighted Average
Sensitivity to Decrease in Input
11,403
Market Backsolve &
OPM
Estimated time to exit
Volatility
2.00
55%
Fair value decrease
Fair value decrease
As the material investments held at fair value categorized as level 3 in the fair value hierarchy are based on a market backsolve
approach using a recent arm's length transaction the change in unobservable inputs in reasonably possible scenarios has an
immaterial impact on the financial statements.
152 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Warrants
Warrants issued by subsidiaries within the Group are classified as liabilities, as they will be settled in a variable number
of preferred shares. The following table summarizes the changes in the Group’s subsidiary warrant liabilities, which were
categorized as Level 3 in the fair value hierarchy:
Balance at January 1, 2020
Warrant Issuance
Change in fair value – finance costs (income)
Balance at December 31, 2020 and January 1, 2021
Change in fair value – finance costs (income)
Balance at December 31, 2021 and January 1, 2022
Change in fair value – finance costs (income)
Balance at December 31, 2022
Subsidiary
Warrant Liability
$000s
7,997
92
117
8,206
(1,419)
6,787
(6,740)
47
The change in fair value of warrants are recorded in Finance income/(costs) – fair value accounting in the Consolidated
Statements of Comprehensive Income/(Loss).
In connection with various amendments to its 2010 Loan and Security Agreement, Follica issued Series A-1 preferred share
warrants at various dates in 2013 and 2014. In 2017, in conjunction with the issuance of convertible notes, the exercise price
of the warrants was adjusted to $0.07 per share.
In connection with the September 2, 2021 Oxford Finance LLC loan issuance, Vedanta also issued Oxford Finance LLC 12,886
Series C-2 preferred share warrants with an exercise price of $23.28 per share, expiring September 2030.
The fair value of the warrant liabilities was immaterial as of December 31, 2022 due to the decline in the fair value of the
underlying preferred shares in the Follica warrant. See also Note 15 for the fair value of Follica preferred share liabilities.
Short-term Note from Associate
On December 7, 2021, Gelesis issued PureTech a $15.0 million note to be repaid the earlier of three business days after
the closing of the business combination of Gelesis with Capstar Special Acquisition Corp ("Capstar"), or 30 days following
the termination of such business combination. In the event of the business combination termination, the Company, who
represented the majority of the note holders, could have elected to convert the note at the next equity financing at a discount
of 25% from the financing price. The note bore interest at a rate of 10% per annum.
The note was repaid by Gelesis in January 2022 due to the closing of the business combination between Gelesis and Capstar
on January 13, 2022.
Note from Associate
On July 27, 2022, PureTech, as a lender, entered into an unsecured Short Term Promissory Note ("Note") with Gelesis (GLS),
as a borrower, in the amount of $15.0 million. The Note bears an annual interest rate of 15% per annum and accrues until the
note is repaid. The term of the Note is the earlier of December 31, 2023 or five business days following the consummation of
a qualified financing by Gelesis.
In case of default, PureTech will be issued a warrant which shall entitle PureTech to purchase at an exercise price per share of
$0.01 a number of shares of Gelesis common Stock equal to (i) (A) 0.2 multiplied by (B) the amount of outstanding principal
and accrued interest under the Note as of the date of conversion described below, divided by (ii) the volume weighted average
price of each share of Common Stock, as reported by the New York Stock Exchange, for the last five (5) trading days ("the
“Common Stock VWAP”) occurring immediately prior to the date of exercise. In addition, PureTech will have the option to
convert the amount of outstanding principal and accrued interest under the Note into a number of shares of Gelesis Common
Stock (the “Conversion Securities”) equal to (i) the amount of outstanding principal and accrued interest under the Note as
of the date of such conversion, divided by (ii) the lesser of the price per share of (A) the Gelesis common Stock, as reported
by the New York Stock Exchange, as of 4:00 P.M. Eastern Time on the date of the conversion notice or (B) the Common Stock
VWAP as of the day prior to the date of the conversion notice.
PureTech Health plc Annual report and accounts 2022 153
Financial statements Notes to the Consolidated Financial Statements — continued
16.
Financial Instruments — continued
Based on the terms of the note, the note is required to be measured at fair value with changes in fair value recorded through
profit and loss. The fair value of the note as of December 31, 2022 was $16.5 million. During the year ended December 31,
2022 the Group recorded $963 thousand of interest income and a gain of $539 thousand for the change in the fair value of
the note. The change in the fair value of the note was recorded in the line item Other Income/(expense) in the Consolidated
Statements of Comprehensive Income/(Loss).
The note was valued using a discounted cash flow approach of the probability weighted future returns on the note, using a
discount rate of 28.9%. Increasing or decreasing the discount rate by 5.0% will decrease or increase the value, respectively, by
approximately $0.4 million. Also, increasing the estimated term to a qualified financing by 6 months (estimated as 3 months
from December 31, 2022) will decrease the fair value by approximately $0.9 million.
Subsequent to balance sheet date, on April 10, 2023, the NYSE commenced proceedings to delist the common stock of
Gelesis from the NYSE due to Gelesis ceasing to meet certain conditions to trade on such stock exchange. Trading in Gelesis’s
common stock was suspended immediately, and it was subsequently delisted from the NYSE. The common stock of Gelesis
is currently available for trading in the over-the-counter (“OTC”) market under the symbol GLSH. See Note 26 for additional
details, including information related to an additional note issued by Gelesis to the Group after balance sheet date.
Fair Value Measurement and Classification
The fair value of financial instruments by category at December 31, 2022 and 2021:
Carrying Amount
Fair Value
2022
Financial Assets
$000s
Financial
Liabilities
$000s
Level 1
$000s
Level 2
$000s
Level 3
$000s
Total
$000s
95,249
200,229
16,501
251,892
11,867
575,738
—
—
—
—
—
—
—
—
—
—
—
47
27,339
2,345
5,932
35,664
95,249
200,229
—
239,299
—
534,777
—
—
—
4,396
4,396
—
—
—
—
11,867
11,867
—
—
2,097
—
2,097
—
—
16,501
12,593
—
29,094
47
27,339
248
1,537
29,171
95,249
200,229
16,501
251,892
11,867
575,738
47
27,339
2,345
5,932
35,664
Financial assets:
Money Markets1,2
Short-term investments1
Note from associate
Investments held at fair value
Trade and other receivables3
Total financial assets
Financial liabilities:
Subsidiary warrant liability
Subsidiary preferred shares
Subsidiary notes payable
Share based liability awards
Total financial liabilities
Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment grade.
Included within Cash and cash equivalents
1
2
3 Outstanding receivables are owed primarily by government agencies and large corporations, virtually all of which are investment grade.
As of balance sheet date the long term loan book value (see Note 20) approximated its fair value due to its variable rate.
Carrying Amount
Fair Value
2021
Financial Assets
$000s
Financial
Liabilities
$000s
Level 1
$000s
Level 2
$000s
Level 3
$000s
Total
$000s
432,649
15,120
493,888
3,174
944,832
—
—
—
—
—
—
—
—
—
—
6,787
174,017
4,641
7,362
192,808
432,649
—
254,355
—
687,005
—
—
—
6,081
6,081
—
—
—
3,174
3,174
—
—
1,945
—
1,945
—
15,120
239,533
—
254,653
6,787
174,017
2,696
1,281
184,781
432,649
15,120
493,888
3,174
944,832
6,787
174,017
4,641
7,362
192,808
Financial assets:
Money Markets1
Short-term note from associate
Investments held at fair value2
Trade and other receivables3
Total financial assets
Financial liabilities:
Subsidiary warrant liability
Subsidiary preferred shares
Subsidiary notes payable
Share based liability awards
Total financial liabilities
Issued by a diverse group of corporations, largely consisting of financial institutions, virtually all of which are investment grade. Included within Cash and cash equivalents
1
2 Balance prior to share of associate loss allocated to long-term interest (please refer to Note 5).
3 Outstanding receivables are owed primarily by government agencies, virtually all of which are investment grade.
154 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
17. Subsidiary Notes Payable
The subsidiary notes payable are comprised of loans and convertible notes. As of December 31, 2022 and December 31, 2021,
the loan in Follica and the financial instruments for Knode and Appeering did not contain embedded derivatives and therefore
these instruments continue to be held at amortized cost. The notes payable consist of the following:
As of December 31,
Loans
Convertible notes
Total subsidiary notes payable
2022
$000s
2,097
248
2,345
2021
$000s
1,945
2,696
4,641
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 $2.0 million and $1.9 million as of December 31, 2022 and December 31, 2021,
respectively. The increase in 2022 is attributed to interest expense for the year ended December 31, 2022.
Convertible Notes
Convertible Notes outstanding were as follows:
January 1, 2021
Gross principal – issuance of notes –
financing activity
Accrued interest on convertible notes –
finance costs
Conversion to subsidiary preferred shares
Change in fair value – finance costs
December 31, 2021 and January 1, 2022
Gross principal – issuance of notes –
financing activity
Accrued interest on convertible notes –
finance costs
Change in fair value – finance costs
Deconsolidation
December 31, 2022
Vedanta
$000s
25,000
—
797
(25,797)
—
—
—
—
—
—
—
Knode
$000s
89
Appeering
$000s
134
—
5
—
—
94
—
5
—
—
99
—
8
—
—
141
—
8
—
—
149
Sonde
$000s
—
2,215
70
—
175
2,461
393
48
502
(3,403)
—
Total
$000s
25,223
2,215
880
(25,797)
175
2,696
393
60
502
(3,403)
248
On December 30, 2020, Vedanta issued a $25.0 million convertible promissory note to an investor. The note bore interest at an
annual rate of 6.0 percent and its maturity date was the first anniversary of the note. Prepayment of the note was not allowed
and there was no conversion discount feature on the note. The note was mandatorily convertible in a Qualified equity financing
and a Qualified Public Offering at the current price of the financing or offering, all as defined in the note purchase agreement.
In addition, the note allowed for optional conversion immediately prior to a Non Qualified public offering, Non Qualified
Equity financing, or a Corporate transaction and for a pay-out in the case of a change of control transaction. On July 19, 2021,
upon the occurrence of Vedanta's Series D preferred share issuance that was considered to be a Qualified Equity Financing,
the entire outstanding amount of the note, principal and interest, was converted into Series D preferred shares of Vedanta at
the current price of the financing. For further details, please see Note 15.
On April 6, 2021, and on November 24, 2021, Sonde issued unsecured convertible promissory notes to its existing
shareholders for a combined total of $4.3 million, of which $2.2 million were issued to third party shareholders (and $2.1 million
were issued to the Company and eliminated in consolidation). In addition, in March 2022 Sonde issued an additional amount
of $0.9 million, of which $0.4 million were issued to third parties (and $0.5 million issued to PureTech and eliminated in
consolidation). The notes bore interest at an annual rate of 6.0 percent and were to mature on the second anniversary of
the issuance. The notes were to mandatorily convert in a Qualified Financing, as defined in the note purchase agreement,
at a discount of 20.0 percent from the price per share in the Qualified Financing. In addition, the notes allowed for optional
conversion concurrently with a discount of 20.0 percent from the price per share in the Non Qualified Equity Financing. Upon
the completion of the Preferred B round of financing in Sonde on May 25, 2022, the Group lost control in Sonde and all
convertible notes were derecognized as part of the deconsolidation – See Note 5.
For the Vedanta and Sonde convertible notes, since these Notes contained embedded derivatives, the Notes were assessed
under IFRS 9 and the entire financial instruments were elected to be accounted for as FVTPL. The Vedanta convertible note
was settled through its conversion in July 2021 and the Sonde notes were deconsolidated in May 2022. See above.
PureTech Health plc Annual report and accounts 2022 155
Financial statements Notes to the Consolidated Financial Statements — continued
18. Non-Controlling Interest
During the year ended December 31, 2022, Sonde Health, Inc was deconsolidated and therefore transferred retroactively
to the Non-Controlled Founded Entity segment. See Note 5. Investments Held at Fair Value.
The Company has revised in the 2022 financial statements the prior period financial information related to the segmentation
of NCI, to conform to the presentation as of and for the year ending December 31, 2022. 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, 2020 *
Share of comprehensive loss
Equity settled share-based payments
Other
Balance at December 31, 2020 and January 1,
2021 *
Share of comprehensive loss
NCI exercise of share-based awards in subsidiaries
– change in NCI interest
Equity settled share-based payments
Acquisition of a subsidiary non controlling interest
Other
Balance at December 31, 2021 and January 1,
2022
Share of comprehensive income (loss)
NCI exercise of share-based awards
Deconsolidation of subsidiaries
Equity settled share-based payments
Other
Balance as of December 31, 2022
Controlled
Founded
Entities
$000s
Non-Controlled
Founded
Entities
$000s
Parent Company
& Other
$000s
1,465
(905)
2,395
11
2,966
(1,634)
(5,922)
6,224
—
—
1,634
13,604
(15,164)
—
4,703
—
4,778
(11,016)
(306)
122
19
(11,181)
(436)
—
32
—
—
(11,585)
(330)
—
11,904
8
2
—
593
(15)
—
(6)
574
15
—
—
—
(6)
583
15
—
—
—
(6)
592
Internal
$000s
(8,682)
(191)
305
—
(8,567)
(96)
—
(4)
8,668
—
—
—
—
—
—
—
—
Total
$000s
(17,639)
(1,417)
2,822
24
(16,209)
(2,151)
(5,922)
6,252
8,668
(6)
(9,368)
13,290
(15,164)
11,904
4,711
(4)
5,369
* Revised to reclassify Sonde to the Non-controlled Founded Entities segment to comply with current period classification. See Note 4.
The following tables summarize the financial information related to the Group’s subsidiaries with material non-controlling
interests, aggregated for interests in similar entities, and before and after intra group eliminations.
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)
2022
Controlled
Founded
Entities
$000s
Intra-group
eliminations
$000s
Internal
$000s
Total
$000s
12,202
99,636
—
99,636
—
1,003
—
1,003
(100)
(11,057)
10,957
35,241
65,578
(30,336)
—
—
—
—
—
—
—
12,202
98,633
—
98,633
35,341
76,635
(41,294)
As of December 31, 2022, Controlled Founded Entities with non-controlling interests primarily include Follica Incorporated,
Entrega Inc., and Vedanta Biosciences, Inc. Ownership interests of the non-controlling interests in Follica Incorporated, Entrega
Inc., and Vedanta Biosciences, Inc are 19.9 percent, 11.7 percent, and 12.2 percent, respectively. In addition, Non-controlling
interests include the amounts recorded for subsidiary stock options, with the vast majority comprising of Vedanta stock options.
156 PureTech Health plc Annual report and accounts 2022
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 assets/(liabilities)
2021
Controlled
Founded
Entities
$000s
Intra-group
eliminations
$000s
Internal
$000s
—
—
—
—
—
—
—
7,771
(50,436)
—
(50,436)
66,279
228,856
(162,576)
—
792
—
792
(161)
(10,755)
10,594
Total
$000s
7,771
(49,644)
—
(49,644)
66,118
218,101
(151,982)
As of December 31, 2021, Controlled Founded Entities with non-controlling interests primarily include, Follica Incorporated,
Sonde Health Inc., Entrega Inc. and Vedanta Biosciences, Inc. Ownership interests of the non-controlling interests in Follica
Incorporated, Sonde Health Inc., and Vedanta Biosciences, Inc are 19.9 percent, 11.7 percent, 6.2 percent and 3.7 percent,
respectively. In addition, Non-controlling interests include the amounts recorded for subsidiary stock options, with the vast
majority comprising of Vedanta stock options.
For the year ended December 31
Statement of Comprehensive Loss
Total revenue
Income/(loss) for the year
Total comprehensive income/(loss) for the year
2020
Controlled
Founded
Entities
$000s
Intra-group
eliminations
1,957
(53,535)
(53,535)
—
1,073
1,073
Internal
$000s
3,267
(2,407)
(2,407)
Total
5,224
(54,869)
(54,869)
As of December 31, 2020, Internal segment with non-controlling interests includes Alivio, Controlled Founded Entities with
non-controlling interests primarily include, Follica Incorporated, Sonde Health Inc., and Vedanta Biosciences, Inc. Ownership
interests of the non-controlling interests in Alivio Therapeutics, Inc., Follica Incorporated, Sonde Health Inc., and Vedanta
Biosciences, Inc are 8.1 percent, 19.9 percent, 4.5 percent and 0.4 percent, respectively. In addition, Non-controlling interests
include the amounts recorded for subsidiary stock options, with the vast majority comprising of Vedanta stock options.
On June 11, 2021, PureTech acquired the remaining 17.1 percent of the minority non-controlling interests of Alivio (after
exercise of all in the money stock options) increasing its ownership to 100.0 percent of Alivio. The consideration for such non
controlling interests amounted to $1.2 million, to be paid in three equal installments, with the first installment of $0.4 million
paid at the effective date of the transaction and two additional installment to be paid upon the occurrence of certain
contingent events. The Group recorded a contingent consideration liability of $0.6 million at fair value for the two additional
installments, resulting in a total acquisition cost of $1.0 million. The excess of the consideration paid over the book value of the
non-controlling interest of approximately $9.6 million was recorded directly as a charge to shareholders’ equity. The second
installment of $0.4 million was paid in July 2021, upon the occurrence of the contingent event specified in the agreement.
The contingent consideration liability is adjusted to fair value at the end of each reporting period with changes in fair value
recorded in earnings. Changes in fair value of the aforementioned contingent consideration liability were not material. As of
December 31, 2022, the remaining contingent liability was reduced to zero as the second contingent event did not occur.
On December 1, 2021, options holders in Entrega exercised options into shares of common stock, increasing the NCI
interest held from 0.2 percent to 11.7 percent. During 2021 option holders in Vedanta exercised options and increased the
NCI interest to 3.7 percent. The exercise of the options resulted in an increase in the NCI share in Entrega's and Vedanta's
shareholder's deficit of $5.9 million. The consideration paid by NCI ($0.1 million) together with the increase in NCI share
in Entrega's and Vedanta's shareholder deficit ( $5.9 million) amounted to $6.0 million and was recorded as a gain directly
in shareholders' equity.
On February 15, 2022, option holders in Vedanta exercised options into shares of common stock, increasing the NCI
interest held from 3.7 percent to 12.2 percent. The exercise of the options resulted in an increase in the NCI share in
Vedanta's shareholder's deficit of $15.2 million. The consideration paid by NCI ($7.2 thousand) together with the increase
in NCI share in Vedanta's shareholder deficit ($15.2 million) amounted to $15.2 million and was recorded as a gain directly
in shareholders' equity.
PureTech Health plc Annual report and accounts 2022 157
Financial statements Notes to the Consolidated Financial Statements — continued
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
Liability settled share based awards
Other
Total trade and other payables
20. Long-term loan
2022
$000s
26,504
24,518
57
1,805
1,957
54,840
2021
$000s
11,346
17,309
57
4,703
2,403
35,817
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 prior to 2023. The loan also carries a final fee upon full
repayment of 7.0 percent of the original principal, or $1.1 million. As part of the loan agreement, Vedanta also issued Oxford
Finance LLC 12,886 Series C-2 preferred share warrants with an exercise price of $23.28 per share, expiring September 2030.
The outstanding loan balance totaled approximately $15.4 million as of December 31, 2022.
The following table summarizes long-term loan activity for the years ended December 31, 2022 and 2021:
Balance at January 1,
Accrued interest
Interest paid
Other
Balance at December 31,
Long-term loan
2022
$000s
15,118
1,755
(1,436)
(38)
15,400
The following table summarizes Vedanta's future principal payments for the long-term loan as of December 31, 2022:
Balance Type
Principal
Balance of accreted premium net of unamortized issuance costs
Total
2023
5,156
2024
5,625
2025
4,219
The long-term loan is presented as follows in the Statement of Financial Position as of December 31, 2022 and 2021:
Current portion of Long-term loan
Long-term loan
Total Long-term loan
Long-term loan
2022
$000s
5,156
10,244
15,400
2021
$000s
14,818
1,502
(1,201)
—
15,118
Total
15,000
400
15,400
2021
$000s
857
14,261
15,118
158 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
21 Leases
The activity related to the Group’s right of use asset and lease liability for the years ended December 31, 2022 and
2021 is as follows:
Balance at January 1,
Additions
Tenant improvement – lease incentive
Depreciation
Balance at December 31,
Balance at January 1,
Additions
Cash paid for rent – principal – financing cash flow
Cash paid for rent – interest
Interest expense
Balance at December 31,
Right of use asset, net
2022
$000s
17,166
163
—
(3,047)
14,281
2021
$000s
20,098
739
(733)
(2,938)
17,166
Total lease liability
2022
$000s
32,990
163
(4,025)
(1,982)
1,982
29,128
2021
$000s
35,348
1,016
(3,375)
(2,181)
2,181
32,990
Depreciation of the right-of-use assets, which virtually all consist of leased real estate, is included in the General
and administrative expenses and Research and development expenses line items in the Consolidated Statements of
Comprehensive Income/(Loss). The Company recorded depreciation expense of $3.0 million, $2.9 million and $2.7 million
for the years ended December 31, 2022, 2021 and 2020 respectively.
The following details the short term and long-term portion of the lease liability as of December 31, 2022 and 2021:
Short-term Portion of Lease Liability
Long-term Portion of Lease Liability
Total Lease Liability
Total lease liability
2022
$000s
4,972
24,155
29,128
2021
$000s
3,950
29,040
32,990
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
2022
$000s
6,673
6,763
5,168
4,419
4,551
7,483
35,056
5,928
29,128
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.
PureTech Health plc Annual report and accounts 2022 159
Financial statements Notes to the Consolidated Financial Statements — continued
21.
Leases — continued
On June 26, 2019, PureTech executed a sublease agreement with Gelesis. The lease is for the approximately 9,446 rentable
square feet located on the sixth floor of the Company’s former offices at the 501 Boylston Street building. The sublessee
obtained possession of the premises on June 1, 2019 and the rent period term began on June 1, 2019 and expires on August
31, 2025. The sublease was determined to be a finance lease. As of December 31, 2022, 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
450
835
1,285
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
Total undiscounted lease receivable
Unearned Finance income
Net investment in the lease
2022
$000s
513
523
353
1,389
103
1,285
On August 6, 2019, PureTech executed a sublease agreement with Dewpoint Therapeutics, Inc. (“Dewpoint”). The sublease
was for approximately 11,852 rentable square feet located on the third floor of the 6 Tide Street building, where the
Company’s offices are currently located. Dewpoint obtained possession of the premises on September 1, 2019 with a rent
period term that began on September 1, 2019, and expired on August 31, 2021. The sublease was determined to be an
operating lease.
Rental income recognized by the Company during the years ended December 31, 2021 and 2020 was $0.6 million and
$1.1 million, respectively and is included in the Other income/(expense) line item in the Consolidated Statements of
Comprehensive Income/(Loss).
22. Capital and Financial Risk Management
Capital Risk Management
The Group's capital and financial risk management policy is to maintain a strong capital base so as to support its strategic
priorities, maintain investor, creditor and market confidence as well as sustain the future development of the business. The
Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide
returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital. To maintain or adjust the capital structure, the Group may issue new shares or incur new debt. The Group has some
external debt and no material externally imposed capital requirements. The Group’s share capital is clearly set out in Note 14.
Management continuously monitors the level of capital deployed and available for deployment in the Internal segment and
at the corporate level as well as at Controlled Founded Entities. The Directors seek to maintain a balance between the higher
returns that might be possible with higher levels of deployed capital and the advantages and security afforded by a sound
capital position.
The Group’s Directors have overall responsibility for establishment and oversight of the Group's capital and risk management
framework. The Group is exposed to certain risks through its normal course of operations. The Group’s main objective in
using financial instruments is to promote the development and commercialization of intellectual property through the raising
and investing of funds for this purpose. The Group’s policies in calculating the nature, amount and timing of investments are
determined by planned future investment activity. Due to the nature of activities and with the aim to maintain the investors’
funds as secure and protected, the Group’s policy is to hold any excess funds in highly liquid and readily available financial
instruments and maintain insignificant exposure to other financial risks.
160 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
22.
Capital and Financial Risk Management — continued
The Group has exposure to the following risks arising from financial instruments:
Credit Risk
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, short term investments, and trade and other receivables. The Group held the
following balances (not including the income tax receivable resulting from overpayment of income taxes, see Note 25):
As of December 31
Cash and cash equivalents
Short-term investments
Trade and other receivables
Total
2022
$000s
149,866
200,229
11,867
361,961
2021
$000s
465,708
—
3,174
468,882
The Group invests its excess cash in U.S. Treasury Bills (presented as short-term investments), and money market accounts,
which the Group believes are of high credit quality. Further the Group's cash and cash equivalents and short-term investments
are held at diverse, investment-grade financial institutions.
The Group assesses the credit quality of customers on an ongoing basis. The credit quality of financial assets is assessed by
historical and recent payment history, counterparty financial position, reference to credit ratings (if available) or to historical
information about counterparty default rates. The Group does not have expected credit losses owing largely to a small number
of counterparties and the high credit quality of most counterparties (primarily the US government and large funds with respect
to grant income and large high credit quality corporations).
The aging of trade and other receivables that were not impaired at December 31 is as follows:
As of December 31
Not impaired
Total
2022
$000s
11,867
11,867
2021
$000s
3,174
3,174
With regard to the Note from associate, such note is presented at fair value which incorporates, among other factors, the credit
risk of the counterparty. See Note 16 for details.
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, 2022 and 2021, based on contractual undiscounted payments:
As of December 31
Long-term loan (non-current + current)
Subsidiary notes payable
Trade and other payables
Warrants2
Subsidiary preferred shares (Note 15)1
Total
As of December 31
Long-term loan
Subsidiary notes payable
Trade and other payables
Warrants2
Subsidiary preferred shares (Note 15)1
Total
Carrying
Amount
$000s
15,400
2,345
54,840
47
27,339
99,971
2022
Within Three
Months
$000s
Three to Twelve
Months
$000s
One to Five
Years
$000s
1,838
2,345
54,840
47
27,339
86,409
5,281
—
—
—
—
5,281
2021
11,413
—
—
—
—
11,413
Carrying
Amount
$000s
Within Three
Months
$000s
Three to Twelve
Months
$000s
One to Five
Years
$000s
15,118
4,641
35,817
6,787
174,017
236,381
296
4,641
35,817
6,787
174,017
221,559
2,182
—
—
—
—
2,182
16,274
—
—
—
—
16,274
Total
$000s*
18,531
2,345
54,840
47
27,339
103,103
Total
$000s*
18,752
4,641
35,817
6,787
174,017
240,015
1 Redeemable only upon a liquidation or Deemed liquidation event, as defined in the applicable shareholder documents.
2 Warrants issued by subsidiaries to third parties to purchase preferred shares.
* Does not include payments in respect of lease obligations. For the contractual future payments related to lease obligations, see Note 21.
PureTech Health plc Annual report and accounts 2022 161
Financial statements Notes to the Consolidated Financial Statements — continued
22.
Capital and Financial Risk Management — continued
Interest Rate Sensitivity
As of December 31, 2022, the Group had cash and cash equivalents of $149.9 million, and short term investments of
$200.2 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 related money market accounts, a change in interest rates would not have a material effect on
the fair market value of the Group's portfolio, and therefore the Group does not expect operating results or cash flows to be
significantly affected by changes in market interest rates.
Controlled Founded Entity Investments
The Group maintains investments in certain Controlled Founded Entities. The Group’s investments in Controlled Founded
Entities are eliminated as intercompany transactions upon financial consolidation. The Group is however exposed to a
preferred share liability owing to the terms of existing preferred shares and the ownership of Controlled Founded Entities
preferred shares by third parties. As discussed in Note 15, certain of the Group’s subsidiaries have issued preferred shares that
include the right to receive a payment in the event of any voluntary or involuntary liquidation, dissolution or winding up of a
subsidiary, including in the event of "deemed liquidation" as defined in the incorporation documents of the entities, which
shall be paid out of the assets of the subsidiary available for distribution to shareholders and before any payment shall be
made to holders of ordinary shares. The liability of preferred shares is maintained at fair value through the profit and loss. The
Group’s strong cash position, budgeting and forecasting processes, as well as decision making and risk mitigation framework
enable the Group to robustly monitor and support the business activities of the Controlled Founded Entities to ensure no
exposure to dissolution or liquidation. Accordingly, the Group views exposure to 3rd party preferred share liability as low.
Non-Controlled Founded Entity Investments
The Group maintains certain investments in Non-Controlled Founded Entities which are deemed either as investments and
accounted for as investments held at fair value or associates and accounted for under the equity method (please refer to
Note 1). The Group's exposure to investments held at fair value is $251.9 million as of December 31, 2022, 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 the investments. Accordingly, the Group does
not view this as a high risk. As of December 31, 2022, Gelesis and Sonde are the only associates. The carrying amount of
the investment in Gelesis and Sonde as associates was $9.1 million. 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, 2022, the Group held 1,054,464 common shares of Karuna, 2,671,800 common shares of Vor and
12,527,477 common shares of Akili. The fair value of these investments in Karuna, Vor and Akili was $239.0 million.
The investments in Karuna, Vor and Akili are exposed to fluctuations in the market price of these common shares. The effect of
a 10.0 percent adverse change in the market price of Karuna, Vor and Akili common shares as of December 31, 2022, would
have been a loss of approximately $23.9 million, that would have been recognized as a component of Other income (expense)
in the Consolidated Statements of Comprehensive Income/(Loss).
Foreign Exchange Risk
The Group maintains consolidated financial statements in the Group's functional currency, which is the U.S. dollar. Monetary
assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at
rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies
are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains
or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective
periods. Such foreign currency gains or losses were not material for all reported periods. See Note 9.
The Group does not currently engage in currency hedging activities since its foreign currency risk is limited, but the Group may
begin to do so in the future if and when its foreign currency risk exposure changes.
162 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
23 Commitments and Contingencies
The Group is party to certain licensing agreements where the Group is licensing IP from third parties. In consideration for
such licenses the Group has made upfront payments and may be required to make additional contingent payments based
on developmental and sales milestones and/or royalty on future sales. As of December 31, 2022, these milestone events
have not yet occurred and therefore the Group does not have a present obligation to make the related payments in respect
of the licenses. Such milestones are dependent on events that are outside of the control of the Group and many of these
milestone events are remote of occurring. As of December 31, 2022, payments in respect of developmental milestones
that are dependent on events that are outside the control of the Group but are reasonably possible to occur amounted to
approximately $8.7 million. These milestone amounts represent an aggregate of multiple milestone payments depending on
different milestone events in multiple agreements. The probability that all such milestone events will occur in the aggregate
is remote. Payments made to license IP represent the acquisition cost of intangible assets. See Note 12.
The Group is party to certain sponsored research arrangements as well as arrangements with contract manufacturing and
contract research organizations, whereby the counterparty provides the Company with research and/or manufacturing
services. As of December 31, 2022, the noncancellable commitments in respect of such contracts amounted to approximately
$11.3 million.
24. Related Parties Transactions
Related Party Subleases and royalties
During 2019, PureTech executed a sublease agreement with a related party, Gelesis. Please refer to Note 21 for further details
regarding the sublease.
The Group receives royalties from Gelesis on its product sales. Such royalties amounted to $509 thousand and $231 thousand
for the years ended December 31, 2022 and 2021, respectively and are presented in Contract revenue in the Consolidated
Statements of Comprehensive Income/(Loss).
Key Management Personnel Compensation
Key management includes executive directors and members of the executive management team of the Group (not including
compensation provided to non-executive directors). The key management personnel compensation of the Group was as
follows for the years ended December 31:
As of December 31
Short-term employee benefits
Share-based payment expense
Total
2022
$000s
4,369
2,741
7,109
2021
$000s
4,666
4,045
8,711
2020
$000s
4,833
5,822
10,656
Short-term employee benefits include salaries, health care and other non-cash benefits. Share-based payments are generally
subject to vesting terms over future periods.
For cash settlements of share based awards – see Note 8.
In addition the Company paid remuneration to non-executive directors in the amounts of $655 thousand, $605 thousand
and $690 thousand for the years ended December 31, 2022, 2021, and 2020, respectively. Also, the Company incurred
$365 thousand and $161 thousand of stock based compensation expense for such non-executive directors for the years
ended December 31, 2022 and 2021, respectively. There is no stock based compensation expense for such non-executive
directors for the year ended December 31, 2020.
During the years ended December 31, 2022 and 2021, the Company incurred $51 thousand, and $181 thousand, respectively
of expenses paid to related parties.
Convertible Notes Issued to Directors
Certain related parties of the Group have invested in convertible notes issued by the Group’s subsidiaries. As of December 31,
2022 and 2021, the outstanding related party notes payable totaled $99 thousand and $94 thousand respectively, including
principal and interest.
The notes issued to related parties bear interest rates, maturity dates, discounts and other contractual terms that are the same
as those issued to outside investors during the same issuances, as described in Note 17.
PureTech Health plc Annual report and accounts 2022 163
Financial statements Notes to the Consolidated Financial Statements — continued
24.
Related Parties Transactions — continued
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, 2022:
Directors:
Ms Daphne Zohar²
Dr Robert Langer
Dr Raju Kucherlapati
Dr John LaMattina3
Business Name (Share Class)
Gelesis (Common)
Entrega (Common)
Enlight (Class B Common)
Gelesis (Common)
Akili (Common)
Gelesis (Common)3
Vedanta Biosciences (Common)
Senior Managers:
Dr Bharatt Chowrira
Dr Joseph Bolen
Karuna (Common)
Vor (Common)
Number of
shares held as
of December
31, 2022
Number of
options held as
of December 31,
2022
Number of
RSUs held as of
December 31,
2022
Ownership
Interest¹
465,121
250,000
—
139,625
56,554
395,035
25,000
5,000
—
3,303,306
82,500
30,000
—
—
37,129
—
—
9,191
1,349,697
—
—
50,639
—
—
—
—
—
4.45%
4.09%
3.00%
0.12%
0.07%
0.38%
0.17%
0.01%
0.01%
1 Ownership interests as of December 31, 2022 are calculated on a diluted basis, including issued and outstanding shares, warrants and options (and written commitments to
issue options) but excluding unallocated shares authorized to be issued pursuant to equity incentive plans and any shares issuable upon conversion of outstanding convertible
promissory notes.
2 Common shares, RSUs and options held by Yishai Zohar, who is the husband of Ms. Zohar. Ms. Zohar does not have any direct interest in the share capital of Gelesis. Ms. Zohar
recuses herself from any and all material decisions with regard to Gelesis.
3 Dr John and Ms Mary LaMattina hold 345,035 shares of common shares in Gelesis. Individually, Dr LaMattina holds 50,000 shares of Gelesis and convertible notes issued
by Appeering in the aggregate principal amount o $50,000.
Directors and senior managers hold 25,371,839 ordinary shares and 9.1 percent voting rights of the Company as of December
31, 2022. This amount excludes options to purchase 2,350,000 ordinary shares. This amount also excludes 6,448,899 shares,
which are issuable based on the terms of performance based RSU awards granted to certain senior managers covering
the financial years 2022, 2021 and 2020, and 172,056 shares, which are issuable to directors immediately prior to the
Company's 2023 Annual General Meeting of Stockholders based on the terms of the RSU awards granted to non-executive
directors in 2022. Such shares will be issued to such senior managers and non executive directors in future periods provided
that performance and/or service conditions are met and certain of the shares will be withheld for payment of customary
withholding taxes.
Note from Associate
See Note 16 for details on the notes issued by Gelesis to the Company. The Company recognized finance income of 1.6
million with respect to interest and changes in fair value related to the notes.
As of December 31, 2022 the Group has a receivable from an associate in the amount of 1.1 million.
164 PureTech Health plc Annual report and accounts 2022
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, 2022, 2021 and 2020, 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, 2022, 2021 and 2020, the Group filed certain consolidated state income tax returns which included
all subsidiaries in which the Company owned greater than 50 percent of the vote and value. The remaining subsidiaries file
separate U.S. tax returns.
Amounts recognized in Consolidated Statements of Comprehensive Income/(Loss):
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
2022
$000s
(37,065)
(55,719)
(92,783)
2022
$000s
13,065
—
1,336
14,401
(48,240)
—
(21,880)
(70,120)
(55,719)
2021
$000s
(62,709)
3,756
(58,953)
2021
$000s
22,138
—
109
22,247
(15,416)
—
(3,075)
(18,491)
3,756
2020
$000s
4,568
14,401
18,969
2020
$000s
21,796
—
—
21,796
(7,349)
—
(46)
(7,395)
14,401
The tax expense/(benefit) was $(55.7) million, $3.8 million and $14.4 million in 2022, 2021 and 2020 respectively. The increase
in tax benefit for the year ended December 31, 2022 is primarily the result of the loss before taxes in entities in the U.S.
Federal and Massachusetts consolidated return groups of the Company.
Reconciliation of Effective Tax Rate
The Group is primarily subject to taxation in the U.S. A reconciliation of the U.S. federal statutory tax rate to the effective tax
rate is as follows:
As of December 31
US federal statutory rate
Effects of state tax rate in U.S.
R&D and orphan drug tax credits
Non deductible share based
payment expenses
Finance income/(costs) – fair value
accounting
Loss with respect to associate
for which no deferred tax asset is
recognized
Change in blended state rate
impact due to state apportionment
change
Transaction Costs
Interest Expense
Executive Compensation
Recognition of deferred tax assets
and tax benefits not previously
recognized
Current year losses for which no
deferred tax asset is recognized
Sonde Deconsolidation
Other
2022
$000s
(19,486)
(8,043)
(6,876)
%
21.00
8.67
7.41
2021
$000s
(12,380)
(4,484)
(5,056)
788
(0.85)
555
(28,783)
31.02
(2,017)
%
21.00
7.61
8.58
(0.94)
3.42
1,413
(1.52)
11,542
(19.58)
(8,856)
—
69
300
9.54
—
(0.07)
(0.32)
—
309
217
746
—
(0.52)
(0.37)
(1.27)
2020
$000s
3,984
1,844
(5,642)
327
919
—
—
361
(2,258)
827
(184)
0.20
(414)
0.70
—
17,287
(3,572)
224
(55,719)
(18.63)
3.85
(0.25)
60.05
14,375
—
363
3,756
(24.38)
—
(0.62)
(6.37)
13,948
—
91
14,401
%
21.00
9.72
(29.74)
1.73
4.84
—
—
1.91
(11.91)
4.36
—
73.53
—
0.48
75.92
PureTech Health plc Annual report and accounts 2022 165
Financial statements Notes to the Consolidated Financial Statements — continued
25.
Taxation — continued
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:
As of December 31
Operating tax losses
Tax credits
Share-based payments
Capitalized Research & Experimental Expenditures
Investment in Associates
Lease Liability
Other temporary differences
Deferred tax assets
Investments held at fair value
ROU asset
Fixed assets
Deferred tax liabilities
Deferred tax assets (liabilities), net
Deferred tax liabilities, net, recognized
Deferred tax assets (liabilities), net, not recognized
2022
$000s
48,317
11,101
8,423
36,084
13,036
7,143
2,957
127,061
(47,877)
(3,519)
(2,348)
(53,744)
73,317
(19,645)
92,962
2021
$000s
46,982
10,673
7,265
—
11,542
8,969
2,665
88,096
(96,804)
(4,667)
(3,547)
(105,018)
(16,922)
(89,765)
72,843
We have recognized deferred tax assets related to entities in the U.S. Federal and Massachusetts consolidated return groups
due to future reversals of existing taxable temporary differences that will be sufficient to recover the net deferred tax assets.
Our unrecognized deferred tax assets of $93.0 million are primarily related to tax credit, loss carryforwards and deductible
temporary differences in subsidiaries outside the U.S. Federal and Massachusetts consolidated return groups. Such deferred
tax assets have not been recognized because it is not probable that future taxable profits will be available to support their
realizability. The unrecognized deferred tax assets, to a lesser extent, also relate to unrecognized deferred tax assets with
respect to a portion of Section 174 capitalized research & experimental expenditures which became effective in 2022 under the
Tax Cuts and Jobs Act and an investment in an associate since the Group does not believe it is probable that such tax benefits
will be realized in the foreseeable future.
There was movement in deferred tax recognized, which impacted income tax expense by approximately $70.1 million benefit,
primarily related to changes in the value of investments and Section 174 capitalized research & experimental expenditures. The
Company sold a portion of its stock in Karuna and VOR during 2022 resulting in net taxable income and current tax expense of
$14.4 million.
Unrecognized Deferred Tax Assets
Deferred tax assets have not been recognized in respect of the following carryforward losses, credits and temporary
differences, because it is not probable that future taxable profit will be available against which the Group can use the benefits
therefrom.
As of December 31
Deductible Temporary Difference
Tax Losses
Tax Credits
Total
2022
$000s
2021
$000s
Gross Amount
Tax Effected
Gross Amount
Tax Effected
132,145
219,466
11,101
362,712
33,544
48,317
11,101
92,962
59,925
215,425
9,636
284,986
16,224
46,982
9,636
72,843
166 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Consolidated Financial Statements — continued
25.
Taxation — continued
Tax Losses and tax credits carryforwards
Tax losses and tax credits for which no deferred tax asset was recognized
As of December 31
Tax losses expiring:
Within 10 years
More than 10 years
Available Indefinitely
Total
Tax credits expiring:
Within 10 years
More than 10 years
Available indefinitely
Total
2022
$000s
2021
$000s
Gross Amount
Tax Effected
Gross Amount
Tax Effected
23,930
42,822
152,714
219,466
43
11,058
—
11,101
5,387
10,509
32,421
48,317
43
11,058
—
11,101
19,735
47,937
147,753
215,425
4
9,632
—
9,636
4,343
11,611
31,028
46,982
4
9,632
—
9,636
The Group had U.S. federal net operating losses carry forwards (“NOLs”) of approximately $219.5 million, $215.4 million and
$169.7 million as of December 31, 2022, 2021 and 2020, respectively, which are available to offset future taxable income.
These NOLs expire through 2037 with the exception of $152.7 million which is not subject to expiration. The Group had U.S.
Federal research and development tax credits of approximately $4.5 million, $3.9 million and $3.9 million as of December
31, 2022, 2021 and 2020, respectively, which are available to offset future taxes that expire at various dates through 2042.
The Group also had Federal Orphan Drug credits of approximately $6.1 million and $5.7 million as of December 31, 2022,
and 2021, which are available to offset future taxes that expire at various dates through 2042. A portion of these Federal
NOLs and credits can only be used to offset the profits from the Company’s subsidiaries who file separate Federal tax returns.
These NOLs and credits are subject to review and possible adjustment by the Internal Revenue Service.
The Group had state net operating losses carry forwards (“NOLs”) of approximately $71.7 million, $27.9 million and
$67.4 million for the years ended December 31, 2022, 2021 and 2020, respectively, which are available to offset future
taxable income. These NOLs expire at various dates beginning in 2030. The Group had Massachusetts research and
development tax credits of approximately $0.6 million, $1.3 million and $2.1 million for the years ended December 31, 2022,
2021 and 2020, respectively, which are available to offset future taxes and expire at various dates through 2037. 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, 2022. The results of this analysis concluded that certain net operating losses
were subject to limitation under Section 382 of the Internal Revenue Code. None of the Company’s tax attributes which are
subject to a restrictive Section 382 limitation have been recognized in the financial statements.
Tax Balances
The current tax related balances are presented in the Statement of Financial Position as follows:
As of December 31
Income tax receivable – current
Trade and Other Payables
2022
$000s
10,040
(57)
2021
$000s
4,514
(57)
Uncertain Tax Positions
The Company has no uncertain tax positions as of December 31, 2022. 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 2022 167
Financial statements Notes to the Consolidated Financial Statements — continued
26. Subsequent Events
The Company has evaluated subsequent events after December 31, 2022, the date of issuance of the Consolidated Financial
Statements, and has not identified any recordable or disclosable events not otherwise reported in these Consolidated Financial
Statements or notes thereto, except for the following:
On March 1, 2023 Vedanta issued convertible debt to a syndicate of investors. The initial close of the debt was for proceeds
of approximately $88.5 million. The note carries an interest rate of 9 percent per annum. The debt has various conversion
triggers and the conversion price is established at the lower of 80% of the equity price of the last financing round, or a certain
pre-money valuation cap established in the agreement. As part of the issuance of the debt, the convertible debt holders were
granted representation in Vedanta's Board of Directors and PureTech lost control over Vedanta. On April 24, 2023, Vedanta
closed the second tranche of the convertible debt for additional proceeds of $18.0 million, of which $5.0 million were invested
by the Company.
On March 22, 2023, the Company entered into an agreement with Royalty Pharma according to which Royalty Pharma
acquired an interset in the Group's royalty from Karuna's KarXT, with $100.0 million in cash up-front, and up to $400.0 million
in additional cash consideration, contingent on the achievement of certain regulatory and commercial milestones.
Gelesis
On February 21, 2023, the Company entered into a Note and Warrant Purchase agreement with Gelesis for $5.0 million cash
consideration. As part of the agreement, the Company received a short term convertible senior secured note of $5.0 million
and warrants to purchase additional shares of Gelesis' common stock. The note carries an interest rate of 12 percent per
annum and holds an initial maturity date of July 31, 2023 unless the note is earlier converted or redeemed by the issuer.
On April 10, 2023, the NYSE commenced proceedings to delist the common stock of Gelesis from the NYSE due to Gelesis
ceasing to meet certain conditions to trade on such stock exchange. Trading in the Gelesis’s common stock was suspended
immediately, and it was subsequently delisted from the NYSE. The common stock of Gelesis is currently available for trading
in the over-the-counter (“OTC”) market under the symbol GLSH.
In addition, in April 2023 PureTech submitted a non-binding proposal to acquire all of the outstanding equity of Gelesis.
Negotiations related to the proposal and any potential deal remain ongoing and are subject to, among other things, approval
of any definitive transaction by independent committees of the boards of both Gelesis and PureTech.
168 PureTech Health plc Annual report and accounts 2022
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
Other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Equity
Share capital
Share premium
Treasury stock
Merger reserve
Other reserve
Retained Earnings/(Accumulated deficit) – (Income for the year $59,198)
Total equity
Current liabilities
Trade and other payables
Intercompany payables
Total current liabilities
Total equity and liabilities
Note
2022
$000s
2021
$000s
2
3
4
4
4
4
4
5
452,374
—
452,374
57
38,503
38,560
490,934
5,455
289,624
(26,492)
138,506
18,114
45,175
470,382
2,475
18,078
20,553
490,934
148,086
297,909
445,995
—
—
—
445,995
5,444
289,304
—
138,506
7,730
(14,022)
426,961
1,856
17,179
19,034
445,995
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 27,
2023 and signed on its behalf by:
Daphne Zohar
Chief Executive Officer
April 27, 2023
The accompanying Notes are an integral part of these financial statements.
PureTech Health plc Annual report and accounts 2022 169
Financial statements PureTech Health plc Statements of Cash Flows
For the years ended December 31
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Non-cash items:
Changes in operating assets and liabilities:
Other receivables
Intercompany payable
Accounts payable and accrued expenses
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Purchase of treasury stocks
Net cash provided by (used in) financing activities
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 investing and financing activities:
Increase (Decrease) in investment against share-based awards
Conversion of intercompany receivable (net of a portion of intercompany payable)
into investment
Exercise of share-based awards against intercompany receivable
The accompanying Notes are an integral part of these financial statements.
2022
$000s
2021
$000s
59,198
(3,401)
(57)
5,236
619
64,995
—
(26,492)
(26,492)
38,503
—
38,503
—
2,167
1,235
—
—
—
—
—
—
—
10,384
293,904
(12,995)
—
332
352
170 PureTech Health plc Annual report and accounts 2022
Financial statements PureTech Health plc Statements of Changes in Equity
For the years ended December 31
Share Capital
Treasury Shares
Shares
Amount
$000s
Share
Premium
$000s
Shares
Amount
$000s
Merger
Reserve
$000s
Other
Reserve
$000s
Retained
earnings/
(Accumulated
deficit)
$000s
Total
equity
$000s
Balance January 1,
2021
Total comprehensive
loss for the year
Exercise of share-
based awards
Equity settled share-
based payments
Settlement of restricted
stock units
Vesting of share-
based awards and
net share exercise
Reclassification of
equity settled awards
to liability awards
in subsidiary
Net loss
Balance December 31,
2021
Total comprehensive
loss for the year
Exercise of share-
based awards
Equity settled share-
based payments
Settlement of restricted
stock units
Purchase of
Treasury stock
Net income
Balance December 31,
2022
285,885,025
5,417 288,978
—
1,911,560
—
—
—
—
—
—
27
—
—
—
—
—
—
326
—
—
—
—
—
287,796,585
5,444 289,303
—
321
—
—
—
577,022
—
788,046
—
—
—
11
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— 138,506 20,725
(10,620) 443,005
—
—
—
—
—
—
—
—
—
—
—
— 7,109
—
—
—
—
352
7,109
— (10,749)
— (10,749)
— (2,582)
— (2,582)
— (6,773)
—
—
— (6,773)
(3,401)
(3,401)
— 138,506
7,730
(14,022) 426,961
—
—
—
—
—
—
—
—
— 8,856
— 1,528
—
—
—
—
—
—
—
—
—
332
8,856
1,528
— (26,492)
59,198
59,198
— (10,595,347)
(26,492)
—
—
—
289,161,653
5,455 289,624 (10,595,347) (26,492) 138,506 18,114
45,176 470,382
The accompanying Notes are an integral part of these financial statements.
PureTech Health plc Annual report and accounts 2022 171
Financial statements Notes to the Financial Statements
1.
Accounting policies
Basis of Preparation and Measurement
The financial statements of PureTech Health plc (the “Parent”) are presented as of December 31, 2022 and 2021, and for
the years ended December 31, 2022 and 2021, and have been prepared under the historical cost convention in accordance
with international accounting standards in conformity with the requirements of UK-adopted International Financial Reporting
Standards (IFRSs). The financial statements of PureTech Health plc also comply fully with IFRSs as issued by the International
Accounting Standards Board (IASB). A summary of the significant accounting policies that have been applied consistently
throughout the year are set out below.
Functional and Presentation Currency
The functional currency of the Parent is United States (“U.S.”) Dollars and the financial statements are presented in U.S. Dollars.
Investments
Investments are stated at historic cost less any provision for impairment in value and are held for long-term investment
purposes. Provisions are based upon an assessment of events or changes in circumstances that indicate that an impairment
has occurred such as the performance and/or prospects (including the financial prospects) of the investee company being
significantly below the expectations on which the investment was based, a significant adverse change in the markets in which
the investee company operates or a deterioration in general market conditions.
Impairment
If there is an indication that an asset might be impaired, the Parent would perform an impairment review. An asset is impaired
if the recoverable amount, being the higher of net realizable value and value in use, is less than its carrying amount. Value in
use is measured based on future discounted cash flows attributable to the asset. In such cases, the carrying value of the asset
is reduced to recoverable amount with a corresponding charge recognized in the profit and loss account.
Dividend Income
Dividend received from the Parent's subsidiary is recorded as dividend income in the profit and loss statement.
Financial Instruments
Currently the Parent does not enter into derivative financial instruments. Financial assets and financial liabilities are recognized
and cease to be recognized on the basis of when the related titles pass to or from the Parent Company.
Equity Settled Share Based Payments
Share based payment awards granted in subsidiaries to employees and consultants to be settled in Parent's equity instruments
are accounted for as equity-settled share-based payment transactions in accordance with IFRS 2. The grant date fair value
of employee share-based payment awards granted in subsidiaries is recognized as an increase to the investment with a
corresponding increase in equity over the requisite service period related to the awards. The fair value is measured using an
option pricing model, which takes into account the terms and conditions of the options granted. When the subsidiary settles
the equity awards other than by the Parent's equity the settlement is recorded as a decrease in equity against a corresponding
decrease to the investment account.
2.
Investment in subsidiary
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
Decrease due to equity settled share based payments granted to employees and service providers in
subsidiaries
Balance at December 31, 2021
Increase due to equity settled share based payments granted to employees and service providers in
subsidiaries
Conversion of intercompany receivable (net of a portion of intercompany payable) into investment
Balance at December 31, 2022
$000s
—
141,348
19,734
161,082
(12,996)
148,086
10,384
293,904
452,374
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
different approaches to advance the needs of human health. For a summary of the Parent’s indirect subsidiaries please refer to
Note 1 of the Consolidated Financial Statements of PureTech Health plc.
In 2020, the Parent recognized a $19.7 million increase in its investment in its operating subsidiary PureTech LLC due to equity
settled share based payments granted to employees and service providers in subsidiaries. $24.8 million out of such amount
related to amounts which should have been recognized at December 31, 2019. The prior year balance sheet has not been
adjusted since the Directors do not believe this item is qualitatively material to users of the financial statements, it has no
impact on distributable reserves of the Parent and no impact on the Group consolidated financial statements. The disclosure
172 PureTech Health plc Annual report and accounts 2022
Financial statements Notes to the Financial Statements — continued
2.
Investment in subsidiary — continued
relating to such share based payment awards is detailed in Note 8 of the accompanying Consolidated Financial Statements.
The decrease in 2021 and increase in 2022 due to such share based payments results from the expense related to the grant
of equity settled share based awards, as well as settlements and payments of these equity awards by the subsidiaries, or
settlement of share based payments through equity by the Company.
3.
Share capital and reserves
PureTech plc was incorporated with the Companies House under the Companies Act 2006 as a public company on May 8,
2015.
On March 12, 2018, the Company raised approximately $100.0 million, before issuance costs and other expenses, by way
of a Placing of 45,000,000 placing shares.
On June 24, 2015, the Company authorized 227,248,008 of ordinary share capital at one pence apiece. These ordinary shares
were admitted to the premium listing segment of the United Kingdom’s Listing Authority and traded on the Main Market of the
London Stock Exchange for listed securities. In conjunction with the authorization of the ordinary shares, the Parent completed
an IPO on the London Stock Exchange, in which it issued 67,599,621 ordinary shares at a public offering price of 160 pence
per ordinary share, in consideration for $159.3 million, net of issuance costs of $11.8 million.
Additionally, the IPO included an over-allotment option equivalent to 15 percent of the total number of new ordinary shares.
The stabilization manager provided notice to exercise in full its over-allotment option on July 2, 2015. As a result, the Parent
issued 10,139,943 ordinary shares at the offer price of 160 pence per ordinary share, which resulted in net proceeds of
$24.2 million, net of issuance costs of $0.8 million.
During the years ended December 31, 2022 and 2021, Other reserves increased (decreased) by $10.4 million and
$(13.0) million, respectively due to equity settled share based payments granted to employees and service providers
in subsidiaries. See Note 2 above.
Treasury stock
On May 9, 2022, PureTech Health plc (the “Company”) announced the commencement of a $50.0 million share repurchase
program of its ordinary shares of one pence each (“Ordinary Shares”). The Company plans to execute the Program in two
equal tranches. In respect of the two tranches, PureTech entered into an irrevocable (see below) non-discretionary instruction
with Jefferies International Limited (“Jefferies”) in relation to the purchase by Jefferies of Ordinary Shares for an aggregate
consideration (excluding expenses) of no greater than $25.0 million for each tranche, and the simultaneous on-sale of such
Ordinary Shares by Jefferies to PureTech. Jefferies makes its trading decisions in relation to the Ordinary Shares independently
of, and uninfluenced by, the Company. Purchases may continue during any close period to which the Company is subject.
The instruction to Jeffries may be amended or withdrawn so long as the Company is not in a close period or otherwise in
possession of inside information.
Any purchases of Ordinary Shares under the Program were carried out on the London Stock Exchange and could be carried
out on any other UK recognized investment exchange which may be agreed, in accordance with pre-set parameters and in
accordance with, and subject to limits, including those limits related to daily volume and price, prescribed by the Company’s
general authority to repurchase Ordinary Shares granted by its shareholders at its annual general meeting on May 27, 2021,
and relevant Rules and Regulations. All Ordinary Shares repurchased under the Program are held in treasury.
As of December 31, 2022, the Company repurchased an aggregate of 10,595,347 Ordinary Shares under the share
repurchase program.
4.
Intercompany payables
The Parent has a balance due to its operating subsidiary PureTech LLC of $18.1 million as of December 31, 2022, which
is related to IPO costs and operating expenses. These intercompany payables do not bear any interest and are repayable
upon demand.
5.
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 income for the year was $59.2 million.
During the year ended December 31, 2022 the Parent recorded income of $65.0 million in respect of dividend received from
its subsidiary.
6. 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 2022 or 2021.
PureTech Health plc Annual report and accounts 2022 173
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 annual report
is not part of hereof.
174 PureTech Health plc Annual report and accounts 2022
Financial statements 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 occur.
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-300, LYT-310,
LYT-503 /IMB-150, or our therapeutics candidates, and our technology
platforms and other potential therapeutic candidates within our Wholly
Owned Pipeline;
• our ability to obtain and maintain regulatory clearance, certification,
authorization, or approval of the therapeutic candidates within our
Wholly Owned Pipeline or our Founded Entities, and any related
restrictions, limitations or warnings in the label of any of the therapeutic
candidates, if cleared, certified, authorized, or 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 biotherapeutics 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 or certification (where
applicable) 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 authorization from
the U.S. Food and Drug Administration, or the FDA, and have been CE
Marked in the European Union, or EU. 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, certifications 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,
2020, 2021 and 2022 were $119.6 million, $149.2 million and $197.8 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 and notified bodies in the
EU 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, 2022, 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 authorization for Plenity and EndeavorRx,
respectively, from the FDA and certification from notified bodies in the
EU, 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, certification,
authorization or approval is obtained will be dependent, in part, upon the
size of the markets in the territories for which we gain regulatory clearance,
certification, authorization or approval, the accepted price for the
therapeutic, the ability to obtain 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
PureTech Health plc Annual report and accounts 2022 175
Additional information of addressable patients is not as anticipated, the indication or intended
use cleared, certified, authorized or approved by regulatory authorities
or notified bodies 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, certified, authorized or approved. Even
if we are able to generate revenue from the sale of any cleared, certified,
authorized or 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, it 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.
Across our Wholly Owned Programs and our Founded Entities, we
established the underlying programs and platforms that have resulted in the
development of 27 therapeutics and therapeutic candidates, including two
(Plenity and EndeavorRx) that have received both U.S. FDA clearance and
European marketing authorization and a third (KarXT) that we expect will
soon be filed for FDA approval. Developing biotherapeutics 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 approvals for the
therapeutic candidates within our Wholly Owned Pipeline and launch
and commercialize any therapeutics for which we receive regulatory
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 or certification process and
potential commercialization of our Wholly Owned Programs and any future
therapeutic candidates we may identify.
As of December 31, 2022, we had cash, cash equivalents and short term
investments of $339.5 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. 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 (such term to include clinical studies in these
Risk Factors where context requires and the item being studied or
subject of a potential study may be regulated as a medical device in the
EU), including our ongoing clinical trials for certain of our therapeutic
candidates, and potential future clinical trials for certain of our
therapeutic candidates;
• 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;
• the costs of operating as a public company in the United Kingdom,
or UK, and the United States and maintaining listings on both the
London Stock Exchange, or the LSE, and The Nasdaq Global Market,
or Nasdaq; and
• costs associated with any adverse market conditions or other
macroeconomic factors.
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
176 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information 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 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, Sonde Health, Inc., or Sonde and Follica,
Incorporated, or Follica; investors’ rights agreements with Akili, Follica,
Vedanta, Entrega, Sonde and Vor Biopharma Inc., or Vor, and stockholders’
agreements with Gelesis, Akili, Follica, Vedanta, Entrega, and Sonde,
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 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, Vor, Akili and Gelesis, 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 2022 177
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
and maintain regulatory clearance, authorization or approvals or identify
alternate regulatory pathways to market for such therapeutic candidate.
Certain of our and our Founded Entities’ therapeutic 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, prescribing
potential treatments that involve the use of our and their therapeutic
candidates, if approved, 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-investigational
new drug application, or 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, similarly to the
AEs publicized with respect to Seres Therapeutics, Inc.’s SER-287 Phase
2 clinical trial, 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 clearance, authorization or approval, which is
necessary before they can be commercialized.
Before obtaining marketing clearance, certification, authorization or
approval from regulatory authorities or notified bodies 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,
or with respect to biologics, safety, purity and potency, 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 authorization from the FDA, and are CE marked in the EU, and
we cannot be certain that any of our internal or our Founded Entities’
other therapeutic candidates will receive regulatory clearance, certification,
authorization or approval, the timing of such clearance, certification,
authorization 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 clearance, certification, authorization or approval for,
and then successfully commercialize therapeutic candidates. We and our
Founded Entities, with the exceptions of Gelesis and Akili, currently have
no drugs or biologics approved or devices cleared, certified, authorized
or approved for sale and have not generated any revenue from sales of
drugs, biologics 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, the FDA has limited
experience reviewing live biological therapeutics 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 engage in further discussions with the FDA on requirements for
potential 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, certification,
authorization 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, authorization or clearance.
Further, our Wholly Owned Programs or our Founded Entities’ therapeutic
candidates may not receive regulatory clearance, certification, authorization
or approval even if we believe they are successful in clinical trials. If we or
our Founded Entities do not receive regulatory clearance, certification,
authorization or 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 clearance, authorization
or approvals or commercialize these programs on a timely basis or at all,
which would have an adverse effect on our business.
Certain of our Wholly Owned Programs 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 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 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;
178 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information • delays in obtaining required Institutional Review Board, or IRB, or other
reviewing bodies approval or positive opinion 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,
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 or similar
foreign authorities find 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 by CROs, other third parties, or us 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 or other events 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., the COVID-19 pandemic or the conflict between Russia
and Ukraine).
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
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 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 or comparable
foreign regulatory authorities. The FDA 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 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 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.
In addition, the FDA’s and other regulatory authorities’ policies with respect
to clinical trials may change and additional government regulations may
be enacted. For instance, the regulatory landscape related to clinical trials
in the EU recently evolved. The EU Clinical Trials Regulation, or CTR, which
was adopted in April 2014 and repeals the EU Clinical Trials Directive,
became applicable on January 31, 2022. While the Clinical Trials Directive
required a separate clinical trial application, or CTA, to be submitted
in each member state in which the clinical trial takes place, to both the
competent national health authority and an independent ethics committee,
the CTR introduces a centralized process and only requires the submission
of a single application for multi-center trials. The CTR allows sponsors to
make a single submission to both the competent authority and an ethics
committee in each member state, leading to a single decision per member
state. The assessment procedure of the CTA has been harmonized as
well, including a joint assessment by all member states concerned, and
a separate assessment by each member state with respect to specific
requirements related to its own territory, including ethics rules. Each
member state’s decision is communicated to the sponsor via the centralized
EU portal. Once the CTA is approved, clinical study development may
proceed. The CTR foresees a three-year transition period. The extent to
which ongoing and new clinical trials will be governed by the CTR varies.
Clinical trials for which an application was submitted (i) prior to January
31, 2022 under the EU Clinical Trials Directive, or (ii) between January 31,
2022 and January 31, 2023 and for which the sponsor has opted for the
application of the EU Clinical Trials Directive remain governed by said
Directive until January 31, 2025. After this date, all clinical trials (including
those which are ongoing) will become subject to the provisions of the CTR.
Compliance with the CTR requirements by us and our third-party service
providers, such as CROs, may impact our developments plans.
It is currently unclear to what extent the UK will seek to align its regulations
with the EU. The UK regulatory framework in relation to clinical trials is
derived from existing EU legislation (as implemented into UK law, through
secondary legislation). On January 17, 2022, the UK Medicines and
Healthcare products Regulatory Agency, or MHRA, launched an eight-week
consultation on reframing the UK legislation for clinical trials, with the aim
to streamline clinical trials approvals, enable innovation, enhance clinical
trials transparency, enable greater risk proportionality, and promote patient
and public involvement in clinical trials. The resulting new legislation will
determine how aligned the UK clinical trials regime is compared to the
(EU) CTR. Under the terms of the Protocol on Ireland/Northern Ireland,
provisions of the (EU) CTR which relate to the manufacture and import of
investigational medicinal products and auxiliary medicinal products apply
PureTech Health plc Annual report and accounts 2022 179
Risk Factor Annex — continuedAdditional information in Northern Ireland. A decision by the UK Government not to closely align
its regulations with the new approach that has been adopted in the EU may
have an effect on the cost of conducting clinical trials in the UK as opposed
to other countries.
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 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
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 or the conflict between Russia and
Ukraine. 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, authorization or approval, cause us to suspend or discontinue
clinical trials, abandon a therapeutic candidate, limit their commercial
potential, if cleared, authorized 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’
drug 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 more restrictive
labeling or the delay or denial of regulatory clearance, certification,
authorization or approval by the FDA, the EMA or other comparable foreign
regulatory authorities, or notified bodies (when applicable). 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
product liability claims. Any of these occurrences may harm our business,
financial condition and prospects significantly.
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.
180 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information In addition to side effects caused by the therapeutic 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 not
caused by therapeutic candidate, the FDA, the European Commission,
the EMA, or other regulatory authorities or bodies could order us to cease
further development of, or deny clearance, certification 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, a requirement that
clinicians or health care settings to become certified prior to prescribing
and to participate in additional REMS activities, such as training, patient
counseling, and monitoring, 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 in the labeling,
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 or similar risk mitigation measures by foreign regulatory
authorities;
• 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.
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 clearance, certification, authorization or 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, certifications, authorization 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, certification, authorization 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 or notified bodies
for commercialization. We may be unable to design and execute a clinical
trial to support marketing authorization or certification.
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, certification,
authorization 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 or notified
bodies (when applicable) will interpret the results as we do, and more
trials could be required before we submit our therapeutic candidates for
clearance, certification 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. 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 are safe or effective for use 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 approval in one jurisdiction may be deemed
inadequate by another regulatory authority to support regulatory
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 approval of our
Wholly Owned Programs. Even if regulatory 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 and certification process is expensive, time-
consuming and uncertain and may prevent us from obtaining clearance,
certification, authorization or 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, certification, advertising, promotion, sale
and distribution, are subject to comprehensive regulation by the FDA
and other comparable foreign regulatory authorities. Failure to obtain
marketing authorization or certification 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 authorization for Plenity and EndeavorRx, respectively, from the
FDA, and are CE marked in the EU, we and our Founded Entities have not
received clearance, certification, authorization 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 clearance, authorization or approval. We have
no experience in filing and supporting the applications necessary to gain
marketing clearance, certification, authorization or approval and expect
PureTech Health plc Annual report and accounts 2022 181
Risk Factor Annex — continuedAdditional information to rely on third-party CROs or regulatory consultants to assist us in this
process. Securing regulatory clearance, certification, authorization 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, authorization 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, certification, authorization or approval or prevent or limit
commercial use, if cleared, certified, authorized or approved.
The process of obtaining marketing clearance, certification, authorization
or approval, both in the United States and abroad, is expensive, may take
many years if additional clinical trials are required, if clearance, certification,
authorization or 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 clearance,
authorization, approval or rejection of an application. The FDA, comparable
authorities and notified bodies in other countries have substantial discretion
in the approval and certification process and may refuse to accept any
application or may decide that our data are insufficient for clearance,
authorization or 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 or certification of a therapeutic candidate. Any marketing approval
or certification we ultimately obtain may be limited or subject to restrictions
or post-market commitments that render the cleared, certified, authorized
or approved therapeutic not commercially viable.
If we experience delays in obtaining clearance, certification, authorization
or approval or if we fail to obtain clearance, certification, authorization 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 or may conduct clinical trials in
additional locations outside the United States, including without limitation
the U.K., Australia, Malaysia, Thailand, South Africa, Greece, Georgia,
India, Romania, Moldova, Ukraine, South Korea, Argentina, Brazil, Chile,
Colombia, Mexico 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. For example,
in cases where data from foreign clinical trials are intended to serve as the
basis for approval of a drug or biologic in the United States, the FDA 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. In addition, even where the foreign study data are
not intended to serve as the sole basis for approval, if the study was not
otherwise subject to an IND, the FDA will not accept the data as support
for an application for marketing approval unless the study was conducted in
accordance with GCP requirements and unless the FDA is able to validate
the data from the study through an onsite inspection if deemed necessary.
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, authorization or
clearance for commercialization in the applicable jurisdiction.
If we are unable to obtain regulatory clearance, certification, authorization
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 or notified bodies have reviewed and cleared, certified,
authorized or approved the therapeutic candidate. Clearance, certification,
authorization or approval by the FDA, the EMA and comparable foreign
regulatory authorities and notified bodies is lengthy and unpredictable,
and depends upon numerous factors, including substantial discretion of
the regulatory authorities and notified bodies. Clearance, certification,
authorization or approval policies, regulations, or the type and amount
of preclinical or clinical data necessary to gain clearance, authorization
or approval may change during the course of a therapeutic candidate’s
development and may vary among jurisdictions, which may cause delays
in the clearance, certification, authorization or approval or the decision
not to clear, certify, authorize or approve an application. Gelesis and
Akili have obtained marketing authorization from the FDA for Plenity and
EndeavorRx, and are CE marked, respectively, but we and our Founded
Entities have not obtained regulatory clearance, authorization 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, certification, authorization or approval. We cannot be
certain that any of our Wholly Owned Programs or our Founded Entities’
therapeutic candidates will receive regulatory clearance, certification,
authorization or approval or be successfully commercialized even if
we or our Founded Entities receive regulatory clearance, certification,
authorization or approval.
Obtaining marketing clearance, certification, authorization or approval
is an extensive, lengthy, expensive and inherently uncertain process,
and regulatory authorities and notified bodies may delay, limit or
deny clearance or clearance, certification, authorization 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, pure, potent or effective as a treatment for
our targeted indications or otherwise meets the applicable regulatory
standards for clearance, authorization or 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 clearance, authorization
or 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 clearance, authorization or 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
• the clearance, certification, authorization 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 clearance, certification,
authorization or 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.
182 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information Furthermore, clearance, authorization or approval by the FDA in the United
States, if obtained, does not ensure approval or certification by regulatory
authorities or notified bodies 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 or notified bodies in other countries, and regulatory approval
or certification in one country does not mean that regulatory approval or
certification will be obtained in any other country. Approval and certification
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 or notified bodies 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 or certification 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 and certification process
involves all of the risks associated with FDA approval. We do not have any
therapeutic candidates approved for sale in international markets, though
two of our Founded Entities, Akili and Gelesis, do. 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
or certifications 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.
If the FDA does not conclude that our product candidates satisfy the
requirements for the Section 505(b)(2) regulatory approval pathway, or if
the requirements for such product candidates under Section 505(b)(2) are
not as we expect, the approval pathway for those product candidates will
likely take significantly longer, cost significantly more and entail significantly
greater complications and risks than anticipated, and in either case may
not be successful.
We plan to develop one or more product candidates, including potentially
LYT-100 and LYT-300 in certain indications, for which we may plan to
seek approval under the 505(b)(2) regulatory pathway. The Drug Price
Competition and Patent Term Restoration Act of 1984, also known as the
Hatch-Waxman Act, added Section 505(b)(2) to the FDCA. Section 505(b)
(2) permits the filing of an NDA where at least some of the information
required for approval comes from studies that were not conducted
by or for the applicant and for which the applicant has not obtained a
right of reference. Section 505(b)(2), if applicable to us under the FDCA,
would allow an NDA we submit to the FDA to rely in part on data in
the public domain or the FDA’s prior conclusions regarding the safety
and effectiveness of approved compounds, which could expedite the
development program for our future product candidates by potentially
decreasing the amount of nonclinical and/or clinical data that we would
need to generate in order to obtain FDA approval.
If the FDA does not allow us to pursue the Section 505(b)(2) regulatory
pathway as anticipated, we may need to conduct additional nonclinical
studies and/or clinical trials, provide additional data and information, and
meet additional standards for regulatory approval. If this were to occur,
the time and financial resources required to obtain FDA approval for such
product candidates, and complications and risks associated with such
product candidates, would likely substantially increase. Moreover, inability
to pursue the Section 505(b)(2) regulatory pathway could result in new
competitive products reaching the market more quickly than any product
candidates we developed, which could adversely impact our competitive
position and prospects. Even if we are allowed to pursue the Section 505(b)
(2) regulatory pathway, we cannot assure you that any product candidates
we develop will receive the requisite approval for commercialization.
In addition, notwithstanding the approval of a number of products by the
FDA under Section 505(b)(2), certain pharmaceutical companies and others
have objected to the FDA’s interpretation of Section 505(b)(2). If the FDA’s
interpretation of Section 505(b)(2) is successfully challenged, the FDA
may change its 505(b)(2) policies and practices, which could delay or even
prevent the FDA from approving any NDA that we submit under Section
505(b)(2). In addition, the pharmaceutical industry is highly competitive,
and Section 505(b)(2) NDAs are subject to certain requirements designed
to protect the patent rights of sponsors of previously approved drugs that
are referenced in a Section 505(b)(2) NDA. These requirements may give
rise to patent litigation and mandatory delays in approval of our NDAs for
up to 30 months or longer depending on the outcome of any litigation. It is
not uncommon for a manufacturer of an approved product to file a citizen
petition with the FDA seeking to delay approval of, or impose additional
approval requirements for, pending. competing products. If successful, such
petitions can significantly delay, or even prevent, the approval of a new
product. Even if the FDA ultimately denies such a petition, the FDA may
substantially delay approval while it considers and responds to the petition.
In addition, even if we are able to utilize the Section 505(b)(2) regulatory
pathway, there is no guarantee this would ultimately lead to streamlined
product development or earlier approval.
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, which is based on a preliminary analysis of
then-available data, and the results and related findings and conclusions
are subject to change following a more comprehensive review of the
data related to the particular study or trial. We also make assumptions,
estimations, calculations and conclusions as part of our analyses of data,
and we may not have received or had the opportunity to fully and carefully
evaluate all data. As a result, the interim, top-line, or preliminary results
that we report may differ from future results of the same studies or trials,
or different conclusions or considerations may qualify such results, once
additional data have been received and fully evaluated. Data from interim
analyses of 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, “top-line,”
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 clearance, authorization or 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
therapeutic may include, 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 clearance, authorization or approval
for combination therapeutics pose unique challenges because they
involve components that are regulated by the FDA 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, respectively, the regulatory
review and clearance, authorization or 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-clearance, authorization or approval
modifications. Similarly, if applicable, the device components of a
combination therapeutic candidate will require any necessary clearances,
certifications or approvals or other marketing authorizations in other
jurisdictions, which may prove challenging to obtain.
PureTech Health plc Annual report and accounts 2022 183
Risk Factor Annex — continuedAdditional information The EU regulates medical devices and medicinal products separately,
through different legislative instruments, and the applicable requirements
will vary depending on the type of drug-device combination product.
For instance, drug-delivery products intended to administer a medicinal
product where the medicinal product and the device form a single integral
product are regulated as medicinal products in the EU. In such a case, the
marketing authorization application must include – where available – the
results of the assessment of the conformity of the device part with the EU
Medical Devices Regulation contained in the manufacturer’s EU declaration
of conformity of the device or the relevant certificate issued by a notified
body. If the marketing authorization application does not include the results
of the conformity assessment and where for the conformity assessment
of the device, if used separately, the involvement of a notified body is
required, the EMA or the EU member state competent authority must
require the applicant to provide a notified body opinion on the conformity
of the device. By contrast, in case of drug-delivery products intended to
administer a medicinal product where the device and the medicinal product
do not form a single integral product (but are e.g., co-packaged), the
medicinal product is regulated in accordance with the rules for medicinal
products described above while the device part is regulated as a medical
device and will have to comply with all the requirements set forth by the
Medical Devices Regulation.
Certain modifications to our Founded Entities’ device therapeutics
may require new 510(k) clearance or other marketing authorizations or
certifications and may require our Founded Entities to recall or cease
marketing their therapeutics.
Akili and Gelesis received de novo classification for EndeavorRx and
Plenity, respectively, 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 medical
device 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, authorizations 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
marketing authorization, 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 authorized therapeutics for which they have
concluded that new clearances, authorization or approvals are unnecessary,
they may be required to cease marketing or to recall the modified
therapeutic until they obtain clearance, authorization or approval, and they
may be subject to significant regulatory fines or penalties.
In the EU, devices lawfully placed on the market pursuant to the EU Medical
Devices Directive prior to May 26, 2021 may generally continue to be made
available on the market or put into service until May 26, 2025, provided that
the requirements of the transitional provisions are fulfilled. In particular, the
certificate in question must still be valid and no substantial change must
be made to the device as such a modification would trigger the obligation
to obtain a new certification under the EU Medical Devices Regulation and
therefore to have a notified body conducting a new conformity assessment
of the devices. Once our devices will be certified under the EU Medical
Devices Regulation, we must inform the notified body that carried out the
conformity assessment of the medical devices that we market or sell in the
EU and the EEA of any planned substantial changes to our quality system
or substantial changes to our medical devices that could affect compliance
with the general safety and performance requirements laid down in Annex I
to the EU Medical Devices Regulation or cause a substantial change to the
intended use for which the device has been CE marked. The notified body
will then assess the planned changes and verify whether they affect the
products’ ongoing conformity with the EU Medical Devices Regulation. If
the assessment is favorable, the notified body will issue a new certificate of
conformity or an addendum to the existing certificate attesting compliance
with the general safety and performance requirements and quality system
requirements laid down in the Annexes to the EU Medical Devices
Regulation. The notified body may disagree with our proposed changes
and product introductions or modifications could be delayed or canceled,
which could adversely affect our ability to grow 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
184 PureTech Health plc Annual report and accounts 2022
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.
The fast track program is intended to expedite or facilitate the process for
reviewing new product candidates that meet certain criteria. Specifically,
drugs and biologic are eligible for fast track designation if they are
intended, alone or in combination with one or more drugs or biologics, to
treat a serious or life-threatening disease or condition and demonstrate the
potential to address unmet medical needs for the disease or condition. Fast
track designation applies to the combination of the product candidate and
the specific indication for which it is being studied. The sponsor of a fast
track product candidate has opportunities for more frequent interactions
with the applicable FDA review team during product development and,
once a BLA or NDA is submitted, the application may be eligible for priority
review. An NDA or BLA submitted for a Fast Track product candidate
may also be eligible for rolling review, where the FDA may consider for
review sections of the NDA or BLA on a rolling basis before the complete
application is submitted, if the sponsor provides a schedule for the
submission of the sections of the NDA or BLA, the FDA agrees to accept
sections of the application and determines that the schedule is acceptable,
and the sponsor pays any required user fees upon submission of the first
section of the application.
A “breakthrough therapy” is defined as a drug or biologic that is intended,
alone or in combination with one or more other drugs or biologics, to treat
a serious or life-threatening disease or condition, where preliminary clinical
evidence indicates that the drug or biologic may demonstrate substantial
improvement over existing therapies on one or more clinically significant
endpoints, such as substantial treatment effects observed early in clinical
development. For product candidates that have been designated as
breakthrough therapies, increased interaction and communication between
the FDA and the sponsor of the trial can help to identify the most efficient
path for clinical development while minimizing the number of patients
placed in ineffective control regimens. Drugs and biologics designated as
breakthrough therapies also receive the same benefits associated with fast
track designation, including eligibility for rolling review of a submitted NDA
or BLA, if the relevant criteria are met.
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 approval,
and there is no assurance that such designation or eligibility will result in
expedited review or approval. Thus, even if we or our Founded Entities do
receive breakthrough therapy, fast track designation, or other comparable
designation, we or our Founded Entities may not experience a faster
development process, review or approval compared to conventional
FDA procedures. In addition, the FDA may withdraw either 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.
We may not be able to obtain or maintain orphan drug designation or
exclusivity for our therapeutic candidates.
Regulatory authorities in some jurisdictions, including the United States,
may designate drugs for relatively small patient populations as orphan
drugs. Under the Orphan Drug Act, the FDA may designate a drug as an
orphan drug if it is intended to treat a rare disease or condition, which is
generally defined as a patient population of fewer than 200,000 individuals
in the United States, or if the disease or condition affects more than 200,000
individuals in the United States and there is no reasonable expectation that
the cost of developing the drug for the type of disease or condition will be
recovered from sales of the product in the United States. The criteria for
designating an “orphan medicinal product” in the EU are similar in principle
to those in the United States. A medicinal product can be designated as
an orphan if its sponsor can establish that: (1) the product is intended for
the diagnosis, prevention or treatment of a life threatening or chronically
debilitating condition (2) either (a) such condition affects not more than
five in 10,000 persons in the EU when the application is made, or (b) the
product, without the benefits derived from the orphan status, would not
generate sufficient return in the EU to justify the necessary investment; and
(3) there exists no satisfactory method of diagnosis, prevention or treatment
of the condition in question that has been authorized for marketing in the
EU or, if such method exists, the product will be of significant benefit to
those affected by that condition.
Orphan drug designation entitles a party to financial incentives, such as tax
advantages and user fee waivers. Additionally, if a product that has orphan
designation subsequently receives the first FDA approval for the disease
or condition for which it has such designation, the product is entitled
to orphan drug exclusivity, which means that the FDA may not approve
Risk Factor Annex — continuedAdditionasl information any other applications to market the same drug for the same disease
or condition for seven years, except in certain circumstances, such as a
showing of clinical superiority (i.e., another product is safer, more effective
or makes a major contribution to patient care) over the product with
orphan exclusivity or where the manufacturer is unable to assure sufficient
product quantity. Competitors, however, may receive approval of different
products for the same disease or condition for which the orphan product
has exclusivity, or obtain approval for the same product but for a different
disease or condition than that for which the orphan product has exclusivity.
In the EU, orphan designation must be requested before submitting an
MAA. An EU orphan drug designation entitles a party to incentives such
as reduction of fees or fee waivers, protocol assistance, and access to the
centralized procedure. Upon grant of a marketing authorization, orphan
medicinal products are entitled to ten years of market exclusivity for the
approved indication, which means that the competent authorities cannot
accept another MAA, or grant a marketing authorization, or accept an
application to extend a marketing authorization for a similar medicinal
product for the same indication for a period of ten years. The period of
market exclusivity is extended by two years for orphan medicinal products
that have also complied with an agreed pediatric investigation plan, or PIP.
No extension to any supplementary protection certificate can be granted
on the basis of pediatric studies for orphan indications.
We have obtained orphan drug designation in the United States for LYT-200
for the treatment of pancreatic cancer, and we may also seek orphan drug
designation for other of our therapeutic candidates in the future. We may
not be the first to obtain regulatory approval of any therapeutic candidate
for its orphan-designated disease or condition and may therefore not
obtain orphan drug exclusivity. In addition, exclusive marketing rights
in the United States may be limited if we seek approval for an disease
or condition broader than the orphan-designated disease or condition
or may be lost if the FDA later determines that the request for orphan
designation was materially defective or if the manufacturer is unable to
assure sufficient quantities of the product to meet the needs of patients
with the rare disease or condition. In the EU, the orphan exclusivity period
may be reduced to six years if, at the end of the fifth year, it is established
that the product no longer meets the criteria for which it received
orphan drug destination, including where it is shown that the product is
sufficiently profitable not to justify maintenance of market exclusivity or
where the prevalence of the condition has increased above the threshold.
Additionally, a marketing authorization may be granted to a similar product
for the same indication at any time if (i) the second applicant can establish
that its product, although similar, is safer, more effective or otherwise
clinically superior; (ii) the applicant consents to a second orphan medicinal
product application; or (iii) the applicant cannot supply enough orphan
medicinal product.
Orphan drug designation does not ensure that we will receive marketing
exclusivity in a particular market, and we cannot assure you that any
future application for orphan drug designation with respect to any other
therapeutic candidate will be granted. Orphan drug designation neither
shortens the development time or regulatory review time of a drug, nor
gives the drug any advantage in the regulatory review or approval process.
If we or our Founded Entities are unable to successfully validate, develop
and obtain regulatory clearance, certification, authorization or 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.
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 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, certification, authorization or approval prior to
commercialization. In addition, if safe and effective use of a therapeutic
product depends on an in vitro companion diagnostic, the FDA generally
will require approval, authorization or clearance of that diagnostic, known as
a companion diagnostic, before or at the same time that the FDA approves
the therapeutic product.
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 clearance, certification, authorization
or 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
clearance, certification, authorization or 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,
certification, authorization 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 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 cleared, certified, authorized or 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, certified, authorized 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, or similar foreign regulations. As
such, we and our CMOs are subject to continual review and inspections
to assess compliance with cGMP, or similar foreign requirements and
adherence to commitments made in any marketing authorization, and
any future 510(k), de novo classification, certification, PMA, 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 authorizations and certifications for Plenity and EndeavorRx,
respectively, are and any regulatory clearances, certification, authorization
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, certified, authorized or approved
indicated uses for which the therapeutic may be marketed and promoted
PureTech Health plc Annual report and accounts 2022 185
Risk Factor Annex — continuedAdditional information or to the conditions of approval. Any regulatory clearances, certifications,
authorizations 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 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 marketing, labeling, advertising and promotion
of therapeutics to ensure that they are manufactured, marketed and
distributed only for the cleared, certified, authorized or approved
indications and in accordance with the provisions of the cleared,
certified, authorized or approved labeling. We are, and will be, required
to comply with requirements concerning advertising and promotion
for the therapeutic candidates within our Wholly Owned Pipeline, if
cleared, certified, authorized or 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, certification, authorization or clearance.
The holder of a cleared 510(k), de novo classification, certification or an
approved NDA, BLA, PMA, MAA or equivalent marketing authorization
must submit new or supplemental applications and obtain clearance,
authorization or approval for certain changes to the approved therapeutic,
therapeutic labeling, or manufacturing process. For example, any
modification to Plenity or EndeavorRx that could significantly affect its
safety or effectiveness or that would constitute a major change in its
intended use could require a new 510(k) clearance, de novo classification,
certification or approval of PMA application. Delays in obtaining required
clearances, certifications 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 or certification 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.
Subject to the transitional provisions and in order to sell our products
in EU member states, our products must comply with the general safety
and performance requirements set forth in the new EU Medical Device
Regulation (EU) 2017/745, which repeals and replaces the Medical Devices
Directive. Compliance with these requirements is a prerequisite to be
able to affix the European Conformity (“CE”) mark to our products,
without which they cannot be marketed or sold in the EU. All medical
devices placed on the market in the EU must meet the general safety
and performance requirements laid down in Annex I to the EU Medical
Devices Regulation (EU) 2017/745 including the requirement that a medical
device must be designed and manufactured in such a way that, during
normal conditions of use, it is suitable for its intended purpose. Medical
devices must be safe and effective and must not compromise the clinical
condition or safety of patients, or the safety and health of users and – where
applicable – other persons, provided that any risks which may be associated
with their use constitute acceptable risks when weighed against the
benefits to the patient and are compatible with a high level of protection
of health and safety, taking into account the generally acknowledged
state of the art. To demonstrate compliance with the general safety and
performance requirements, we or our Founded Entities must undergo
a conformity assessment procedure, which varies according to the type
of medical device and its (risk) classification. Except for low risk medical
devices (Class I), where the manufacturer can self-assess the conformity
of its products with the general safety and performance requirements
(except for any parts which relate to sterility, metrology or reuse aspects),
a conformity assessment procedure requires the intervention of a notified
body. The notified body would typically audit and examine the technical file
and the quality system for the manufacture, design and final inspection of
our devices. If satisfied that the relevant product conforms to the relevant
general safety and performance requirements, the notified body issues
a certificate of conformity, which the manufacturer uses as a basis for its
own declaration of conformity. The manufacturer may then apply the CE
mark to the device, which allows the device to be placed on the market
throughout the EU. If we fail to comply with applicable laws and regulations,
we would be unable to affix the CE mark to our products, which would
prevent us from selling them within the EU. In June 2020, Gelesis received
a certification 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 certification 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 clearance, certification,
authorization or 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 or certifications;
• 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 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, authorization 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, certification, authorization or approval of the
therapeutic candidates within our Wholly Owned Pipeline or our Founded
Entities’ therapeutic candidates. For example, on February 23, 2022, the
FDA issued a proposed rule to amend the Quality System Regulation,
or QSR, which establishes cGMP requirements for medical device
manufacturers, to align more closely with the International Organization
for Standardization standards. This proposal has not yet been finalized or
adopted. Accordingly, it is unclear the extent to which this or any other
proposals, if adopted, could impose additional or different regulatory
requirements on us or our Founded Entities that could increase the costs
of compliance or otherwise create competition that may negatively affect
our business.
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. Outside of the United States, for instance, the
EU pharmaceutical legislation is currently undergoing a complete review
process, in the context of the Pharmaceutical Strategy for Europe initiative,
launched by the European Commission in November 2020. The European
Commission’s proposal for revision of several legislative instruments related
to medicinal products (potentially revising the duration of regulatory
exclusivity, eligibility for expedited pathways, etc.) is currently expected
during the first quarter of 2023. The proposed revisions, once they are
agreed and adopted by the European Parliament and European Council
(not expected before the end of 2024 or early 2025) may have a significant
impact on the biopharmaceutical industry in the long term.
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
186 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information that may be made about prescription therapeutics, if cleared, authorized
or approved. In particular, while the FDA permits the dissemination of
truthful and non-misleading information about a cleared, authorized or
approved therapeutic, a manufacturer may not promote a therapeutic for
uses that are not cleared, authorized or approved by the FDA or such other
regulatory agencies as reflected in the therapeutic’s cleared, authorized or
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 cleared,
authorized or approved, we could become subject to significant liability,
which would materially adversely affect our business and financial condition.
Certain of our product candidates may be regulated as controlled
substances, the making, use, sale, importation, exportation, and
distribution of which are subject to significant regulation by the U.S. Drug
Enforcement Administration, or DEA, and other regulatory agencies.
We expect that certain of our product candidates, if approved, will be
regulated as controlled substances, which are subject to state, federal,
and foreign laws and regulations regarding their manufacture, use, sale,
importation, exportation, and distribution. Among other things, controlled
substances are regulated under the federal Controlled Substances Act of
1970, or CSA, and regulations of the DEA.
The DEA regulates controlled substances as Schedule I, II, III, IV or V
substances. Schedule I substances by definition have no established
medicinal use and may not be marketed or sold in the United States.
A pharmaceutical product may be listed as Schedule II, III, IV or V, with
Schedule II substances considered to present the highest risk of abuse
and Schedule V substances the lowest relative risk of abuse among such
substances. Certain of our other product candidates contain Schedule IV
substances, which subjects such product candidates to additional
restrictions regarding their manufacture, shipment, storage, sale and use,
depending on the scheduling of the active ingredients, and may limit the
commercial potential of any of our product candidates, if approved.
Various states also independently regulate controlled substances. Though
state controlled substances laws often mirror federal law, because the
states are separate jurisdictions, they may separately schedule drugs as
well. While some states automatically schedule a drug when the DEA
does so, in other states there must be rulemaking or a legislative action.
State scheduling may delay commercial sale of any controlled substance
drug product for which we obtain federal regulatory approval and adverse
scheduling could impair the commercial attractiveness of such product.
We or our collaborators must also obtain separate state registrations in
order to be able to obtain, handle and distribute controlled substances for
clinical trials or commercial sale, and failure to meet applicable regulatory
requirements could lead to enforcement and sanctions from the states in
addition to those from the DEA or otherwise arising under federal law.
For any of our products or product candidates classified as controlled
substances, we and our suppliers, manufacturers, contractors, customers
and distributors are required to obtain and maintain applicable registrations
from state, federal and foreign law enforcement and regulatory agencies
and comply with state, federal and foreign laws and regulations regarding
the manufacture, use, sale, importation, exportation and distribution of
controlled substances. There is a risk that DEA regulations may limit the
supply of the compounds used in clinical trials for our product candidates,
and, in the future, the ability to produce and distribute our products in
the volume needed to meet commercial demand. Regulations associated
with controlled substances govern manufacturing, labeling, packaging,
testing, dispensing, production and procurement quotas, recordkeeping,
reporting, handling, shipment and disposal. These regulations increase
the personnel needs and the expense associated with development and
commercialization of product candidates including controlled substances.
The DEA, and some states, conduct periodic inspections of registered
establishments that handle controlled substances. Failure to obtain and
maintain required registrations or comply with any applicable regulations
could delay or preclude us from developing and commercializing our
product candidates containing controlled substances and subject us
to enforcement action. The DEA may seek civil penalties, refuse to
renew necessary registrations or initiate proceedings to revoke those
registrations. In some circumstances, violations could lead to criminal
proceedings. Because of their restrictive nature, these regulations could
limit commercialization of any of our products or product candidates that
are classified as controlled substances.
The EU legislation does not establish different classes of narcotic or
psychotropic substances. However, the United Nations, or UN, Single
Convention on Narcotic Drugs of 1961 and the UN Convention on
Psychotropic Substances of 1971, or the UN Conventions, codify
internationally applicable control measures to ensure the availability of
narcotic drugs and psychotropic substances for medical and scientific
purposes. The individual EU member states are all signatories to these UN
Conventions. All signatories have a dual obligation to ensure that these
substances are available for medical purposes and to protect populations
against abuse and dependence. The UN Conventions regulate narcotic
drugs and psychotropic substances as Schedule I, II, III, IV substances with
Schedule II substances presenting the lowest relative risk of abuse among
such substances and Schedule I and IV substances considered to present
the highest risk of abuse.
The UN Conventions require signatories to require all persons
manufacturing, trading (including exporting and importing) or distributing
controlled substances to obtain a license from the relevant authority. Each
individual export or import of a controlled substance must also be subject
to an authorization. The obligations provided in the UN Conventions
and additional requirements are implemented at national level and
requirements may vary from one member state to another. In order to
develop and commercialize our products in the EU, we need to comply with
the national requirements related to controlled substances which is costly
and may affect our development plans in the EU.
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 cGMP 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 certain
of our therapeutic candidates is dependent on third party CMOs, and
manufacturing such therapeutic candidates is inherently complex.
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 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 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 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.
PureTech Health plc Annual report and accounts 2022 187
Risk Factor Annex — continuedAdditional information 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 any NDA or BLA to the FDA.
We are currently completely dependent on our third-party manufacturers
for the production of certain of our therapeutic candidates in accordance
with cGMPs or similar foreign requirements, 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 for such therapeutic candidates, our third-party manufacturers
may not perform as agreed, may be unable to comply with these cGMP
or similar foreign 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, pass regulatory inspection or maintain a
compliance status acceptable to the FDA or state or foreign regulatory
authorities, our NDAs, BLAs or MAAs 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 will 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
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. 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 or similar foreign
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 the 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 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 or
comparable foreign 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; 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 or foreign regulatory authorities’ 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
188 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information 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 labelling;
• 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
our reputation in the marketplace or among industry participants and our
business prospects.
The incidence and prevalence for target patient populations of our
therapeutic candidates have not been established with precision. If the
market opportunities for our therapeutic candidates are smaller than
we estimate, or if any approval that we obtain is based on a narrower
definition of the patient population, our revenue and ability to achieve
profitability may be materially adversely affected.
The precise incidence and prevalence for all the conditions we aim to
address with our therapeutic candidates are unknown and cannot be
precisely determined. Our projections of both the number of people who
have these diseases, as well as the subset of people with these diseases
who have the potential to benefit from treatment with our therapeutic
candidates, are based on beliefs and estimates. These estimates have
been derived from a variety of sources, including the scientific literature,
surveys of clinics, patient foundations or market research, and may prove
to be incorrect. Further, new trials may change the estimated incidence or
prevalence of these diseases.
The total addressable market across all of our therapeutic candidates
will ultimately depend upon, among other things, the diagnosis criteria
included in the final label for each of our therapeutic candidates approved
for sale for these indications, acceptance by the medical community and
patient access, drug pricing and reimbursement. The number of patients
in the United States and other major markets and elsewhere may turn out
to be lower than expected, patients may not be otherwise amenable to
treatment with our products or new patients may become increasingly
difficult to identify or gain access to, all of which would adversely affect
our results of operations and our business. Further, even if we obtain
significant market share for our therapeutic candidates, if the potential
target populations are very small, we may never achieve profitability despite
obtaining such significant market share.
PureTech Health plc Annual report and accounts 2022 189
Risk Factor Annex — continuedAdditional information 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 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
190 PureTech Health plc Annual report and accounts 2022
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
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.
Risk Factor Annex — continuedAdditionasl information Risks Related to Compliance with Healthcare Laws
• the federal Physician Payments Sunshine Act, created under the ACA,
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. 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;
• 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 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 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;
• 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;
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), certain non-physician providers (physician
assistants, nurse practitioners, clinical nurse specialists, certified nurse
anesthetists, anesthesiologist assistants and certified nurse midwives),
and teaching hospitals, as well as ownership and investment interests
held by physicians and their immediate family members;
• 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 and entities; and state and local laws requiring
the registration of pharmaceutical sales representatives.
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 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,
PureTech Health plc Annual report and accounts 2022 191
Risk Factor Annex — continuedAdditional information 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. 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.
As our operations and business grow, we may become subject to or
affected by new or additional data protection laws and regulations and
face increased scrutiny or attention from regulatory authorities. In the
United States, certain states have adopted data privacy and security laws
and regulations, which govern the privacy, processing and protection of
health-related and other personal information. Such laws and regulations
will be subject to interpretation by various courts and other governmental
authorities, thus creating potentially complex compliance issues for us and
our future customers and strategic partners. For example, the California
Consumer Privacy Act of 2018, or CCPA, went into effect on January 1,
2020. The CCPA creates individual privacy rights for California consumers
and increases the privacy and security obligations of entities handling
certain personal information. The CCPA provides for civil penalties for
violations, as well as a private right of action for data breaches that has
increased the likelihood of, and risks associated with data breach litigation.
Further, the California Privacy Rights Act, or CPRA, generally went into
effect on January 1, 2023, and significantly amends the CCPA. It imposes
additional data protection obligations on covered businesses, including
additional consumer rights processes, limitations on data uses, new audit
requirements for higher risk data, and opt outs for certain uses of sensitive
data. It also creates a new California data protection agency authorized
to issue substantive regulations and could result in increased privacy and
information security enforcement. Additional compliance investment and
potential business process changes may also be required. Similar laws
have passed in Virginia, Colorado, Connecticut and Utah, and have been
proposed in other states and at the federal level, reflecting a trend toward
more stringent privacy legislation in the United States. The enactment of
such laws could have potentially conflicting requirements that would make
compliance challenging. In the event that we are subject to or affected by
HIPAA, the CCPA, the CPRA or other domestic privacy and data protection
laws, any liability from failure to comply with the requirements of these laws
could adversely affect our financial condition.
Further, in the event we decide to conduct clinical trials or continue to
enroll subjects in our ongoing or future clinical trials in the European
Economic Area, or EEA, or the United Kingdom, UK, we may be subject
to additional privacy restrictions. More specifically, the EU General Data
Protection Regulation 2016/679, or GDPR, and the UK general Data
Protection Regulation and the Data Protection Act 2018, or the UK GDPR,
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. The collection and use of
personal health data in the EEA and the UK is governed by the provisions
of the GDPR and UK GDPR, respectively. The GDPR and UK GDPR impose
certain 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/UK GDPR also impose strict rules on the transfer
of personal data out of the EEA/UK to the United States. Among other
requirements, the GDPR regulates transfers of personal data subject to the
GDPR to third countries that have not been found to provide adequate
protection to such personal data, including the United States; in July 2020,
the Court of Justice of the EU, or CJEU, limited how organizations could
lawfully transfer personal data from the EEA and UK to the United States by
invalidating the Privacy Shield for purposes of international transfers and
imposing further restrictions on the use of standard contractual clauses, or
SCCs. In March 2022, the US and EU announced a new regulatory regime
intended to replace the invalidated regulations; however, this new EU-US
Data Privacy Framework has not been implemented beyond an executive
order signed by President Biden on October 7, 2022 on Enhancing
Safeguards for United States Signals Intelligence Activities. European court
and regulatory decisions subsequent to the CJEU decision of July 2020
have taken a restrictive approach to international data transfers. Companies
that must comply with the GDPR and UK GDPR face increased compliance
obligations and risk, including more robust regulatory enforcement of data
protection requirements and potential fines for noncompliance of up to
€20 million under the GDPR and £17.5 million under the UK GDPR or 4%
of the annual global revenues of the noncompliant company, whichever
is greater. The existence of parallel regimes under the GDPR and UK
GDPR, and divergence in respect of implementing or supplementary laws
across the EEA and UK in certain areas, means that we could be subject to
potentially overlapping or divergent enforcement actions for certain actual
or perceived violations.
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’ 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 70 percent 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. On June 17, 2021, the U.S. Supreme Court dismissed the most
recent judicial challenge to the ACA brought by several states without
specifically ruling on the constitutionality of the ACA. Prior to the Supreme
Court’s decision, President Biden issued an executive order to initiate
a special enrollment period for purposes of obtaining health insurance
coverage through the ACA marketplace, which began on February 15, 2021
and remained open through August 15, 2021. The executive order also
instructed certain governmental agencies to review and reconsider their
existing policies and rules that limit access to healthcare, including among
others, reexamining Medicaid demonstration projects and waiver programs
that include work requirements, and policies that create unnecessary
barriers to obtaining access to health insurance coverage through
Medicaid or the ACA.
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, which went into effect in
192 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information 2013, and, due to subsequent legislative amendments, will remain in effect
through 2032, with the exception of a temporary suspension from May 1,
2020 through March 31, 2022, unless additional Congressional action is
taken. 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.
In addition, in March 2021, Congress enacted the American Rescue Plan Act
of 2021, which, among other things, eliminated the statutory cap on drug
manufacturers’ Medicaid Drug Rebate Program rebate liability, effective
January 1, 2024.
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. On August 16, 2022, the Inflation Reduction Act of 2022, or IRA,
was into law. Among other things, the IRA requires manufacturers of certain
drugs to engage in price negotiations with Medicare (beginning in 2026),
imposes rebates under Medicare Part B and Medicare Part D to penalize
price increases that outpace inflation (first due in 2023), and replaces the
Part D coverage gap discount program with a new discounting program
(beginning in 2025). The IRA permits the Secretary of the Department of
Health and Human Services to implement many of these provisions through
guidance, as opposed to regulation, for the initial years. For that and other
reasons, it is currently unclear how the IRA will be effectuated.
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 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.
In the EU, similar developments may affect our ability to profitably
commercialize our product candidates, if approved. On December 13,
2021, Regulation No 2021/2282 on Health Technology Assessment, or
HTA, amending Directive 2011/24/EU, was adopted. While the regulation
entered into force in January 2022, it will only begin to apply from January
2025 onwards, with preparatory and implementation-related steps to
take place in the interim. Once the regulation becomes applicable, it will
have a phased implementation depending on the concerned products.
This regulation intends to boost cooperation among EU member states in
assessing health technologies, including new medicinal products as well as
certain high-risk medical devices, and providing the basis for cooperation
at the EU level for joint clinical assessments in these areas. The regulation
will permit EU member states to use common HTA tools, methodologies,
and procedures across the EU, working together in four main areas,
including joint clinical assessment of the innovative health technologies
with the most potential impact for patients, joint scientific consultations
whereby developers can seek advice from HTA authorities, identification
of emerging health technologies to identify promising technologies
early, and continuing voluntary cooperation in other areas. Individual EU
member states will continue to be responsible for assessing non-clinical
(e.g., economic, social, ethical) aspects of health technology, and making
decisions on pricing and reimbursement.
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 similar treatment areas as we are. If any of
our competitors receive FDA or foreign regulatory authorities 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, 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.
PureTech Health plc Annual report and accounts 2022 193
Risk Factor Annex — continuedAdditional information 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. In the EU,
upon receiving a marketing authorization, new biological entities generally
receive eight years of data exclusivity and an additional two years of market
exclusivity. If granted, data exclusivity prevents regulatory authorities in the
EU from referencing the innovator’s data to assess a biosimilar application.
During the additional two-year period of market exclusivity, a biosimilar
marketing authorization can be submitted, and the innovator’s data may be
referenced, but no biosimilar product can be marketed until the expiration
of the market exclusivity.
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.
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
194 PureTech Health plc Annual report and accounts 2022
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.
Risk Factor Annex — continuedAdditionasl information 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 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 and comparable foreign
regulatory authorities require us to comply with requirements, commonly
referred to as 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 and comparable foreign regulatory authorities
enforce 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 or comparable foreign
regulatory authorities 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 or comparable foreign regulatory
authorities 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 databases including 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 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.
PureTech Health plc Annual report and accounts 2022 195
Risk Factor Annex — continuedAdditional information 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. We are subject to similar
requirements in foreign jurisdictions. 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 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 or certification for or market the therapeutic candidates
within our Wholly Owned Pipeline or our Founded Entities’ therapeutic
candidates, if cleared, certified 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, certification 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 must be manufactured in accordance
with QSR and similar foreign requirements. 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 or certification, 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 and/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 or notified bodies (when applicable) also may,
at any time following clearance, certification 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 devices, 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
196 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information 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,
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 therapeutic candidate
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. We are also party to other
license agreements for intellectual property underlying certain of our
therapeutic candidates and programs. Additionally, our Founded Entities
Akili, Follica, Vedanta, Sonde and Vor, are party to license agreements with
academic institutions pursuant to which such Founded Entities have in-
licensed certain intellectual property underlying various of their therapeutic
candidates. 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
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
PureTech Health plc Annual report and accounts 2022 197
Risk Factor Annex — continuedAdditional information 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;
• 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
198 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information 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;
• 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 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
PureTech Health plc Annual report and accounts 2022 199
Risk Factor Annex — continuedAdditional information 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
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,
200 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information 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 and Federal Circuit 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 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 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
PureTech Health plc Annual report and accounts 2022 201
Risk Factor Annex — continuedAdditional information 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 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.
Risks Related to the COVID-19 Pandemic
The COVID-19 pandemic has impacted, and may in the future impact,
our business, including our clinical trials and preclinical studies, and may
materially and adversely affect our business in the future.
Public health crises such as pandemics or other global emergencies could
adversely impact our business and have a material adverse impact on our
operations and financial condition and results. 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, comparable foreign
regulatory agencies and notified bodies, which may impact review and
approval or certification 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.
The COVID-19 pandemic has had, and may 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, and other negative impacts. In addition, the
trading prices for biopharmaceutical companies have been highly volatile
as a result of recent extreme volatility in the global economy, including 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 extent to which
the COVID-19 pandemic may impact our business, preclinical studies
and clinical trials will depend on future developments, which are highly
uncertain and cannot be predicted with confidence.
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.
202 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl 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 are
driven by our proven innovation and drug development strategy. 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 dedicated to giving life to new classes of medicine to Improve the
lives of patients with devastating diseases. We have created a broad and
deep pipeline through our experienced research and development team
and our extensive network of scientists, clinicians and industry leaders that
is being advanced both internally and through our Founded Entities. Our
R&D engine has resulted in the development of a number of therapeutics
and therapeutic candidates, including two that have received both US FDA
clearance and European marketing authorization and a third that we expect
will soon be filed for FDA approval. A number of these programs are being
advanced by PureTech or our Founded Entities in various indications and
stages of clinical development, including registration enabling studies.
All of the underlying programs and platforms that resulted in this pipeline
of therapeutic candidates were initially identified or discovered and then
advanced by the PureTech team through key validation points. 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.
Delay or failure to advance our programs could adversely impact
our business.
Over time, our and our Founded Entities’ preclinical and clinical work led
us to identify potential synergies across target therapeutic indications,
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 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 business, finance and
operating officer, Eric Elenko, our chief innovation and strategy officer,
and Julie Krop, our chief medical 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.
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
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
PureTech Health plc Annual report and accounts 2022 203
Risk Factor Annex — continuedAdditional information 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.
Litigation against us could be costly and time-consuming to defend and
could result in additional liabilities.
We may from time to time be subject to legal proceedings and claims that
arise in the ordinary course of business or otherwise, such as claims brought
by third parties in connection with commercial disputes and employment
claims made by our current or former employees. Claims may also be
asserted by or on behalf of a variety of other parties, including government
agencies, patients, or stockholders. We could also be subject to securities
class action litigation. In the past, securities class action litigation has often
been brought against a company following a decline in the market price of
its securities. This risk is especially relevant for us because biotechnology
companies have experienced significant stock price volatility in recent years.
If we face such litigation, it could result in substantial costs and a diversion
of management’s attention and resources, which could harm our business.
Any litigation involving us may result in substantial costs, operationally
restrict our business, and may divert management’s attention and resources,
which may seriously harm our business, overall financial condition, and
results of operations. Insurance may not cover existing or future claims, be
sufficient to fully compensate us for one or more of such claims, or continue
to be available on terms acceptable to us. A claim brought against us that
is uninsured or underinsured could result in unanticipated costs, thereby
adversely impacting our results of operations.
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
204 PureTech Health plc Annual report and accounts 2022
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 or comparable foreign regulatory authorities approval,
or notified bodies certification, of the therapeutic candidates within our
Wholly Owned Pipeline or our Founded Entities’ therapeutic candidates
and begin commercializing those therapeutics in the United States and
abroad, 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
Risk Factor Annex — continuedAdditionasl information 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.
Cyberattacks 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 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
cyberattacks 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.
We and certain of our service providers are from time to time subject to
cyberattacks and security incident. Although to our knowledge we have
not experienced any significant system failure, accident or 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.
The increasing focus on environmental sustainability and social initiatives
could increase our costs, harm our reputation and adversely impact our
financial results.
There has been increasing public focus by investors, patients,
environmental activists, the media and governmental and nongovernmental
organizations on a variety of environmental, social and other sustainability
matters. We may experience pressure to make commitments relating
to sustainability matters that affect us, including the design and
implementation of specific risk mitigation strategic initiatives relating to
sustainability. Expectations regarding the management of environmental,
social and governance, or ESG, initiatives continues to evolve rapidly.
While we may from time to time engage in various initiatives (including
but not limited to voluntary disclosures, policies, or goals) to improve our
ESG profile or respond to stakeholder expectations, we cannot guarantee
that these initiatives will have the desired effect. If we are not effective in
addressing environmental, social and other sustainability matters affecting
our business, or setting and meeting relevant sustainability goals, our
reputation and financial results may suffer. In addition, even if we are
effective at addressing such concerns, we may experience increased costs
as a result of executing upon our sustainability goals that may not be offset
by any benefit to our reputation, which could have an adverse impact on
our business and financial condition.
In addition, this emphasis on environmental, social and other sustainability
matters has resulted and may result in the adoption of new laws and
regulations, including new reporting requirements. If we fail to comply
with new laws, regulations or reporting requirements, our reputation and
business could be materially and adversely impacted.
We may acquire businesses, or therapeutics or therapeutic candidates, or
form strategic alliances, in the future, and we may not realize the benefits
of such acquisitions.
We acquire or in-license businesses or therapeutics from other companies
or create joint ventures with third parties that we believe will complement
or augment our existing business. If we acquire businesses with promising
markets or technologies, we may not be able to realize the benefit of
acquiring such businesses if we are unable to successfully integrate them
with our existing operations and company culture or retain key personnel
from the acquired company. We may encounter numerous difficulties
in developing, manufacturing and marketing any new therapeutics or
therapeutic candidates resulting from a strategic alliance or acquisition
that delay or prevent us from realizing their expected benefits or
enhancing our business. We cannot assure you that, following any such
acquisition or license, we will achieve the expected synergies to justify
the transaction. Failure to successfully identify, complete, manage and
integrate acquisitions could materially and adversely affect our business,
financial condition and results of operations and could cause the price of
our securities to decline.
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, foreign regulatory authorities and notified bodies
to review and approve or certify 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. 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 and foreign regulatory authorities may also influence the ability of the
FDA and foreign regulatory authorities to take action on regulatory matters,
for example the FDA’s and foreign regulatory authorities’ budget and
funding levels and ability to hire and retain key personnel.
Disruptions at the FDA and foreign regulatory authorities 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,
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, in response to the global COVID-19 pandemic, the FDA
postponed most inspections of domestic and foreign manufacturing
facilities at various points. Even though the FDA has since resumed
standard inspection operations of domestic facilities where feasible, the
FDA has continued to monitor and implement changes to its inspectional
activities to ensure the safety of its employees and those of the firms
it regulates as it adapts to the evolving COVID-19 pandemic, and any
resurgence of the virus or emergence of new variants may lead to
further inspectional delays. Regulatory authorities outside the U.S. have
adopted similar restrictions or other policy measures in response to the
COVID-19 pandemic or for other reasons 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.
Furthermore, in the EU, notified bodies must be officially designated to
certify products and services in accordance with the EU Medical Devices
PureTech Health plc Annual report and accounts 2022 205
Risk Factor Annex — continuedAdditional information Regulation. Several notified bodies have been designated under the
EU Medical Devices Regulation. However, the COVID-19 pandemic has
significantly slowed down their designation process and the current
designated notified bodies are facing a large amount of requests with
the new regulation as a consequence of which review times may have
lengthened. This situation may impact the way we are conducting our
business in the EU and the EEA and the ability of our notified body to
timely review and process our regulatory submissions and perform its audits
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 now that we are no longer an
emerging growth company, we have incurred and will continue to 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 are 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. To achieve compliance
with Section 404, we have and continue to 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 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
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.
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
currency is the U.S. dollar, our future results could be harmed by a variety of
international factors, including:
• economic weakness, including inflation, or political instability in particular
non-U.S. economies and markets;
• differing and changing regulatory requirements;
• difficulties in compliance with different, complex and changing laws,
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:
206 PureTech Health plc Annual report and accounts 2022
• future activities subject to the terms of the Trade and Cooperation
Agreement between the United Kingdom and the European Union
effective May 1, 2021, which has not impacted our results to-date;
• a second referendum on Scottish independence from the United
Kingdom; and/or
• a snap general election; and
• negative consequences from changes in tax laws.
In addition, 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;
• failure by us to obtain and maintain regulatory approvals for the use of
our therapeutics in various countries;
• additional potentially relevant third-party patent rights;
• complexities and difficulties in obtaining protection and enforcing our
intellectual property;
• difficulties in staffing and managing foreign operations;
• 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,
such as the conflict between Russia and Ukraine, terrorism, and political
unrest, outbreak of disease, boycotts, curtailment of trade, and other
business restrictions;
• certain expenses including, among others, expenses for travel,
translation, and insurance; and
• 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.
Unfavorable global economic conditions 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
Risk Factor Annex — continuedAdditionasl information cannot anticipate all of the ways in which the current economic climate
and financial market conditions could adversely impact our business.
Additionally, we maintain the majority of our cash and cash equivalents
in accounts with major U.S. and multi-national financial institutions, and
our deposits at certain of these institutions exceed insured limits. Market
conditions can impact the viability of these institutions. In the event of
failure of any of the financial institutions where we maintain our cash and
cash equivalents, there can be no assurance that we would be able to
access uninsured funds in a timely manner or at all. Any inability to access
or delay in accessing these funds could adversely affect our business and
financial position.
We are subject to the U.K. Bribery Act 2010, or the Bribery Act, the U.S.
Foreign Corrupt Practices Act of 1977 (as amended) (“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. These laws generally prohibit us and
our employees and intermediaries acting on our behalf from corruptly
authorizing, promising, offering, or providing, directly or indirectly, anything
else of value, to government officials or other persons to obtain or retain
business or gain some other business advantage. The Bribery Act also
prohibits: (i) “commercial” bribery of private parties, in addition to bribery
involving domestic or foreign officials; (ii) the acceptance of bribes, as well
as the giving of bribes, and (iii) “facilitation payments”, meaning generally
low level payments designed to secure or expedite routine governmental
actions or other conduct to which persons are already under obligations
to perform. The Bribery Act also creates an offence applicable corporate
entities for failure to prevent bribery by our employees, officers, directors
and other third parties acting on our behalf, to which the only defence is to
maintain “adequate procedures” designed to prevent such acts of bribery.
In the future, we and our strategic partners may operate in jurisdictions that
pose a heightened risk of potential Bribery Act or FCPA violations, and we
may participate in collaborations and relationships with third parties whose
conduct could potentially subject us to liability under the Bribery Act,
FCPA or other 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.
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 and its member states, including applicable
export control regulations, economic sanctions and embargoes on certain
countries, regions, and persons, import and customs requirements and
currency exchange regulations, collectively referred to as the Trade Control
laws. Compliance with Trade Control Laws regarding the import and export
of our products may create delays in the introduction of our products
in international markets, and, in some cases, prevent the export of our
products to some countries altogether.
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, debarment from debarment from
government contracts as well as other sanctions and remedial measures,
and may also result in collateral litigation. These consequences 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. In addition, responding to any enforcement action may
result in a significant diversion of management’s attention and resources
and significant defense costs and other professional fees.
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.
Since the end of the Brexit transition period on January 1, 2021, Great
Britain (England, Scotland and Wales) has not been directly subject to EU
laws, however under the terms of the Ireland/Northern Ireland Protocol,
EU laws generally apply to Northern Ireland. On February 27, 2023, the UK
Government and the European Commission reached a political agreement
on the “Windsor Agreement” which will revise the Protocol on Ireland/
Northern Ireland in order to address some of the perceived shortcomings
in its operation. Under the proposed changes, Northern Ireland would be
reintegrated under the regulatory authority of the MHRA with respect to
medicinal products. These proposed changes need to be codified and
agreed by the respective parliaments of the UK and EU before taking
effect. There could be additional uncertainty and risk around what these
changes will mean to our business. It is currently unclear to what extent
the UK Government will seek to align its regulations with the EU. The EU
laws that have been transposed into UK law through secondary legislation
remain applicable in Great Britain. However, under the Retained EU
Law (Revocation and Reform) Bill 2022, which is currently before the UK
parliament, any retained EU law not expressly preserved and “assimilated”
into domestic law or extended by ministerial regulations (to no later than
June 23, 2026) will automatically expire and be revoked by December 31,
2023. In addition, new legislation such as the (EU) CTR is not applicable in
Great Britain. Whilst the EU-UK Trade and Cooperation Agreement, or TCA,
includes the mutual recognition of Good Manufacturing Practice, or GMP,
inspections of manufacturing facilities for medicinal products and GMP
documents issued, it does not contain wholesale mutual recognition of
UK and EU pharmaceutical regulations and product standards. There may
be divergent local requirements in Great Britain from the EU in the future,
which may impact clinical and development activities that occur in the UK
in the future. Similarly, clinical trial submissions in the UK will not be able to
be bundled with those of EU member states within the EMA Clinical Trial
Information System, or CTIS, adding further complexity, cost and potential
risk to future clinical and development activity in the UK. Significant political
and economic uncertainty remains about how much the relationship
between the UK and EU will differ as a result of the UK’s withdrawal.
These developments, or the perception that any related developments
could occur, have had and may continue to have a material adverse effect
on global economic conditions and the stability of global financial markets,
and may significantly reduce global market liquidity and restrict the ability
of key market participants to operate in certain financial markets. Any of
these factors could depress economic activity and restrict our access to
capital, which could have a material adverse effect on our business, financial
condition and results of operations and may adversely affect the market
price of our ADSs.
The uncertainty regarding new or modified arrangements between the UK
and other countries following the withdrawal may have a material adverse
effect on the movement of personnel, goods, information or data between
the UK and members of the EU and the United States, including the
interruption of or delays in imports into the UK of goods originating within
the EU and exports from the UK of goods originating there. For example,
shipments into the UK of medicinal product substance manufactured for
us in the EU may be interrupted or delayed and thereby prevent or delay
the manufacture in the UK of drug product. Similarly, shipments out of
the UK of drug product to the United States or the EU may be interrupted
or delayed and thereby prevent or delay the delivery of drug product to
clinical sites. Such a situation could hinder our ability to conduct current
and planned clinical trials and have an adverse effect on our business.
Exchange rate fluctuations may materially affect our results of operations
and financial condition.
Although we are based in the United Kingdom, our financial statements
are denominated in U.S dollars and many of our business activities are
carried out with partners outside the U.S. and United Kingdom and these
transactions may be denominated in another currency. As a result, our
business and the price of our ADSs may be affected by fluctuations in
foreign exchange rates not only between the pound sterling and the
U.S. dollar, but also the currencies of other countries, which may have
a significant impact on our results of operations and cash flows from
period to period. Currently, we do not have any exchange rate hedging
arrangements in place.
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;
PureTech Health plc Annual report and accounts 2022 207
Risk Factor Annex — continuedAdditional information • any delay in submitting an IND, BLA or NDA for the therapeutic
candidates within our Wholly Owned Pipeline or our Founded Entities’
therapeutic 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;
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, 2023, we had 278,461,805 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.
• failure by us, our Founded Entities or our licensors to prosecute, maintain
Holders of ADSs are not treated as holders of our ordinary shares.
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 fluctuated significantly.
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.
208 PureTech Health plc Annual report and accounts 2022
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
Risk Factor Annex — continuedAdditionasl information 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 March 31, 2023, Invesco Asset Management Limited, or Invesco, held
approximately 23.32 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 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 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 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
PureTech Health plc Annual report and accounts 2022 209
Risk Factor Annex — continuedAdditional information 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, 2023.
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
We may discover material weaknesses in our internal control over financial
reporting which, if not remediated, could cause us to fail to timely and
accurately report our results of operations, meet our reporting obligations
or prevent fraud.
Section 404 of the Sarbanes-Oxley Act requires that our management
assess our internal control over financial reporting and that we include a
report of management on our internal control over financial reporting in
our annual reports on Form 20-F. We previously identified and disclosed
a material weakness in our internal control over financial reporting in
our Annual Report on Form 20-F for the year ended December 31, 2021.
This material weakness has since been remediated, but we may discover
additional material weaknesses in our internal control over financial
reporting in the future, which we may not successfully remediate on a
timely basis or at all. Any failure to remediate any significant deficiencies
or material weaknesses identified by us or to implement required new or
improved controls, or difficulties encountered in their implementation,
could cause us to fail to meet our reporting obligations.
If we fail to maintain effective internal control over financial reporting, we
could suffer material misstatements in our financial statements and fail
to meet our reporting obligations, which could cause investors to lose
confidence in our reported financial information. This could in turn limit
our access to capital markets or lead to a decline in the trading price of
our securities. We may also be required to restate our financial statements
from prior periods. 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, litigation from shareholders and
civil or criminal sanctions, which could have a material adverse effect on
our business.
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
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 generally 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 U.S. net operating losses to offset future taxable
income may be subject to certain limitations.
As of December 31, 2022, we had U.S. federal and state net operating loss
carryforwards, or NOLs, of approximately $219.5 million and $71.7million,
respectively, due to prior period losses, which, subject to the following
discussion, are generally available to be carried forward to offset 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,” generally defined as a greater than 50 percentage point change
(by value) in its equity ownership by certain shareholders or groups of
shareholders over a rolling three year period, is subject to limitations on
its ability to utilize its federal NOLs to offset future taxable income. Similar
rules may apply under state law. Our existing federal NOLs may be subject
to limitations arising from previous ownership changes. 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, and our
ability to utilize our federal NOLs could be further limited. Additionally,
we may not be able to utilize the NOLS 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, our federal
NOLs generated In taxable periods beginning after December 31, 2017
may only be used to offset 80 percent of our taxable income in taxable
years beginning after December 31, 2020. However, such Federal NOLs
generated are not subject to expiration For these reasons, even if we
attain profitability, 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.
210 PureTech Health plc Annual report and accounts 2022
Risk Factor Annex — continuedAdditionasl information 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 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;
• 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.
PureTech Health plc Annual report and accounts 2022 211
Risk Factor Annex — continuedAdditional information 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 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)
Dr. Robert Langer (Non-Executive Director)
Dr. Raju Kucherlapati
(Senior Independent Director)
Dr. John LaMattina (Independent
Non-Executive Director)
Ms. Kiran Mazumdar-Shaw
(Independent Non-Executive Director)
Ms. Sharon Barber-Lui
(Independent Non-Executive Director)
Dr. Bharatt Chowrira
(President and Chief Business, Finance &
Operating Officer)
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
212 PureTech Health plc Annual report and accounts 2022
Additionasl information (cid:38)(cid:20)(cid:24)(cid:25)(cid:20)(cid:19)(cid:26)
(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