PURETECH HEALTH PLC – ANNUAL REPORT AND ACCOUNTS 2023
BOSTON
MA
Headquarters
PRTC
Nasdaq and LSE
Overview
Highlights of the Year
Letter from the Chair
Strategic report
Letter from the Chief Executive Officer
Components of Our Value
Capital Allocation Overview
Hub-And-Spoke Model
PureTech’s Programs
ESG report
Building and Maintaining a Sustainable Business
Governance
Risk Management
Viability
Key Performance Indicators
Financial Review
Chair’s Overview
Board of Directors
Management Team
The Board
Relations with Stakeholders
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
93
98
99
102
106
113
123
128
129
130
131
133
180
181
182
183
185
186
224
1
2
3
7
8
10
11
22
60
65
67
68
81
82
85
86
91
PureTech Health plc Annual Report and Accounts 2023 1
i
H
g
h
l
i
g
h
t
s
2
0
2
3
PureTech Health plc (“PureTech Health”, “PureTech” or “the Company”), which is comprised of
PureTech and its subsidiaries (together, the “Group”), 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 Entities1 via our hub-and-spoke model.
Our R&D engine has resulted in the development of 29 therapeutics and therapeutic candidates,
including two that have received both US FDA clearance and European marketing authorization
and a third (KarXT) that has been filed for FDA approval. A number of these programs are being
advanced by PureTech as Internal Programs2 or by 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 across our programs is serious patient need. In many cases, these programs are
identified based on previous signals of human efficacy or validated pharmacology, which has enabled
us to advance therapeutic candidates with substantially de-risked profiles and robust development
rationales. 80 percent of the trials that have been run by PureTech or our Founded Entities have been
successful,3 and our probability of clinical success is six times better than the industry average.4
With this track record, we believe we are delivering on our promise to give life to science, advance
novel medicines to patients and generate value for shareholders.
Highlights of the Year – 2023
$326.0m5
$327.1m5
PureTech Level Cash,
Cash Equivalents and Short-term
Investments as of Year End
Consolidated Cash,
Cash Equivalents and Short-term
Investments as of Year End
Includes cash held at the PureTech level
and at Controlled Founded Entities
$578.4m6,7
Amount of Funding Secured
for Founded Entities
2022: $339.5m
2021: $418.9m
2020: $349.4m
2019: $120.6m
2018: $177.7m
2017: $126.7m
2022: $350.1m
2021: $465.7m
2020: $403.9m
2019: $162.4m
2018: $250.9m
2017: $188.7m
2022: $1.28b
2021: $731.9m
2020: $247.8m
2019: $666.8m
2018: $274.0m
2017: $102.9m
1 As of the date of this report, 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. References in the Strategic Report, ESG Report, Governance section, and Additional Information section
to Founded Entities include PureTech’s Seaport Therapeutics, Inc., Gallop Oncology, Inc., Entrega, Inc., Akili Interactive Labs, Inc., Vor Bio, Inc., Sonde Health, Inc., Vedanta
Biosciences, Inc., for all dates prior to March 18, 2024, Karuna Therapeutics, Inc., for all dates prior to October 30, 2023, Gelesis, Inc., for all dates prior to December 21, 2023,
Follica, Incorporated, and for all dates prior to December 18, 2019, resTORbio. For references and definitions related to PureTech’s Viability Statement, Financial Review, and
Financial Statements and related footnotes, please see Footnote 4 to the Consolidated Financial Statements.
2 Internal Programs represent the Company’s current and future therapeutic candidates and technologies that are wholly owned and have not been announced as a Founded Entity.
References in the Strategic Report, ESG Report, Governance section, and Additional Information section to Internal Programs include PureTech’s LYT-100.
3 The percentage includes number of successful trials out of all trials run for all therapeutic candidates advanced through at least Phase 1 by PureTech or its Founded Entities from
2009 onward.
4 Calculated based on the aggregate PureTech data including all therapeutic candidates advanced through at least Phase 1 by PureTech or its Founded Entities from 2009 onward
and the industry average data. 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=52%). BIO, PharmaIntelligence, QLS (2021) Clinical Development Success Rates 2011
-2020. This study did not include therapeutics regulated as devices.
5 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 69 to 70 of the Financial Review.
The balance shown for each year may include short-term investments for any positions that Puretech holds as of each year end.
6 Funding figure includes private convertible notes and public offerings. Funding figure excludes future milestone considerations received in conjunction with partnerships and
collaborations. Funding figure does not include gross proceeds due to PureTech following the 2024 post-period acquisition of Karuna by BMS.
7 Number represents figure for the relevant fiscal year only and is not cumulative.
2 PureTech Health plc Annual Report and Accounts 2023
Letter from the Chair
Delivering
value
r
i
a
h
C
e
h
t
m
o
r
f
r
e
t
t
e
L
Every decision we make is anchored in our mission to
advance treatments for patients that simultaneously
create shareholder value, and I’m confident we will see
continued success in both areas.
Raju Kucherlapati, Ph.D.
Interim Chair of the Board of Directors
Since I joined the PureTech Board of
Directors, I have witnessed the Company
mature its hub-and-spoke business model
with a commitment to deliver value to
patients and shareholders.
Consistent with our founding strategy,
the Company has progressed promising
programs in various therapeutic areas to
inflection points and advanced them
either internally or via Founded Entities.
This uniquely efficient approach to R&D
has enabled the development of a robust
pipeline of new medicines, including two
that have received FDA clearance and
a third that has been filed for FDA
approval, all without raising money from
the capital markets in six years. This is
a true testament to our model.
PureTech’s exceptional productivity and
capital discipline was exemplified in 2023.
The Company embarked on a new phase
of clinical expansion by creating two new
Founded Entities from its internal work.
The launches of Seaport Therapeutics and
Gallop Oncology mark an exciting next
chapter for PureTech, adding new
de-risked specialist opportunities or
“spokes” to the PureTech hub-and-spoke
model. PureTech’s self-sustaining engine
has enabled this continued operational
progress despite adverse macroeconomic
factors for the industry whilst also
providing capital for the Company to
return $50 million to shareholders via
a share buyback program in addition to
the recently proposed $100 million
tender offer.
I would like to personally thank all of our
shareholders for supporting us as we seek
to improve patients’ lives. Every decision
we make is anchored in our mission to
advance treatments for patients that
simultaneously create shareholder value,
and I’m confident we will see continued
success in both areas.
On behalf of the Board, I would like to
thank Daphne Zohar for her vision,
leadership and dedication in founding and
building PureTech. Daphne pioneered the
hub-and-spoke model to create cutting-
edge medicines, assembled a leading
team and positioned PureTech for an
exciting future and continued growth, and
I am confident that our Founded Entity,
Seaport Therapeutics, will thrive with her
at the helm as Chief Executive Officer.
I would also like to welcome Bharatt
Chowrira, Ph.D. J.D., into the Chief
Executive Officer role at PureTech.
A 30-year veteran of the biotech industry,
Bharatt has held leadership roles including
Chief Executive Officer, Chief Operating
Officer and General Counsel in multiple
biotech companies, including Auspex
Pharmaceuticals Inc., which was acquired
by Teva Pharmaceuticals for $3.5 billion,
and Sirna Therapeutics, which was
acquired by Merck & Co. for $1.1 billion.
Bharatt has been a driving force behind
PureTech’s achievements since 2017,
serving as the Company’s President and
Chief Business, Finance and Operating
Officer and as a member of the board of
directors, and I know our organization will
continue to deliver value to patients and
shareholders alike under his
seasoned leadership.
Sincerely,
Raju Kucherlapati, Ph.D.
Interim Chair
April 25, 2024
C
h
i
e
f
L
e
t
t
e
r
f
r
o
m
t
h
e
E
x
e
c
u
t
i
v
e
O
f
fi
c
e
r
PureTech Health plc Annual Report and Accounts 2023 3
Letter from the Chief Executive Officer
Shaping our
future
2023 was a banner year for PureTech, and we are already charting an exciting
path forward in 2024. I am proud and very humbled to assume the role of
Chief Executive Officer at such a remarkable organization, and I look forward
to continuing our transformational work for patients and shareholders.
Bharatt Chowrira, Ph.D., J.D.
Chief Executive Officer and Member of the Board of Directors
PureTech made remarkable progress in
2023 as we continued to deliver on our
mission to give life to new classes of
medicine that have the potential to
change the lives of patients with
devastating diseases. In 2023, we
made significant strategic and clinical
advancements across our hub-and-spoke
R&D model, setting up the Company for
growth in 2024 and beyond.
Our strategy: A hub-and-spoke model
that manages risk in advancing novel
medicines for patients and generates
value for shareholders
At PureTech we pioneered the hub-and-
spoke model in biotech. Our “hub” is
our core group of people, our proven,
innovative R&D engine, and our
capabilities at PureTech that are at the
center of everything we do. It enables us
to identify promising technologies and
therapeutic opportunities; unlock their
value through innovation; progress them
through key de-risking milestones; and
then develop them further – either
internally or through the creation of
a Founded Entity. The Founded Entities
are our “spokes,” and they allow us to
continue advancing candidates via
a focused vehicle while sharing
development costs with outside partners.
These sector specialists not only enable
cost efficiencies by investing capital in the
Founded Entities, but also serve as
external validation for the programs that
we have until then developed in-house.
This model ensures that promising new
medicines are progressed to patients
efficiently while we continue to generate
and develop the next wave of novel
candidates. It also yields a diversified
portfolio, enabling us to have multiple
shots on goal for creating shareholder
value. Our distinctive approach is
powered by three guiding principles:
validated efficacy, clear patient benefit
and an efficient de-risked path.
This R&D model allows us to be more
capital efficient, ensures that our interests
are aligned with our shareholders and
incentivizes us to move our resources to
the programs with the greatest probability
of success. It also brings in non-dilutive
capital, which has resulted in PureTech not
needing to raise money from the capital
markets in over six years. In fact, nearly
$3.8 billion has been raised by our
Founded Entities since July 2018, of which
96 percent was from third parties.1 In that
time, we have generated tremendous
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.
r
e
c
fi
f
O
e
v
i
t
u
c
e
x
E
e
h
t
m
o
r
f
r
e
t
t
e
L
f
e
i
h
C
4 PureTech Health plc Annual Report and Accounts 2023
Letter from the Chief Executive Officer continued
value, including through the monetization
of our stakes in Founded Entities, and have
reinvested proceeds in further growing
PureTech’s hub-and-spoke business. We
have also returned $50 million to
shareholders through our share buyback
program and recently proposed an
additional $100 million return to
shareholders via a Tender Offer.2 The
Board is committed to evaluating our
capital allocation regularly (see page 8
for further details), including assessing
opportunities for capital returns to
shareholders, subject to future
monetization events and the Company’s
operational needs.
We consistently maintain one of the most
impressive track records in the biopharma
industry, with a probability of clinical
success that is six times higher than the
industry average3. More than 80 percent4
of our clinical trials have demonstrated
success, and we take great pride in this
track record. Across our programs, this has
delivered a robust pipeline of new
medicines that are poised for growth. This
includes 29 new therapeutics and
therapeutic candidates generated to date,
with two taken from inception at PureTech
to U.S. Food and Drug Administration
(FDA) and EU regulatory clearances and
one – Karuna’s KarXT (xanomeline-
trospium) – that has been filed for
FDA approval.
Our model makes biopharma accessible
both to generalist investors compelled by
the meaningfulness of medical innovation
and upside of cutting-edge R&D as well as
to specialists comfortable with evaluating
therapeutic opportunities. The former
sees aligned incentives within PureTech’s
internal activity and broader equity
portfolio, through which they are shielded
from the volatility of single asset binary
outcomes so common in our industry.
We have followed our model to success as
our programs have matured and our
internal capabilities have grown.
Importantly, our R&D strategy is not only
proven, but it is also scalable and
repeatable. Consistent with our founding
strategy, we have progressed several
programs to inflection points, having
sufficiently de-risked their core assets, and
at the end of 2023, we added two new
Founded Entity “spokes” to the PureTech
“hub.” Our newly launched Seaport
Therapeutics builds on the success of our
Glyph platform and related therapeutic
candidates to accelerate the development
of new neuropsychiatric medicines in
areas of high unmet need. I am also
delighted that PureTech has indicated the
launch Gallop Oncology™, which builds
on the promising clinical and preclinical
data generated from our LYT-200 program
in hematological malignancies and solid
tumors. In creating these focused entities,
we continue to deliver on our fundamental
goal: advance novel therapeutic solutions
to patients battling serious,
devastating conditions.
Internal Programs: Effective
identification and de-risking of the most
promising technologies
Most of the candidates that we advance
internally are centered around a strategy
that focuses on established biological
principles to promptly progress
therapeutics with validated efficacy and
clinical signals.
This strategy is exemplified through our
lead Internal Program, LYT-100,
a deuterated form of pirfenidone.
Pirfenidone (Esbriet®) is approved for the
treatment of idiopathic pulmonary fibrosis
(IPF) in the US and other countries, having
been shown to slow the decline of lung
function and extend life by an average of
2.5 years.7 It is one of two standard of care
treatments for IPF, with nintedanib
(OFEV®) being the other, yet – despite the
proven efficacy – only about 25 percent of
IPF patients with this rare, progressive and
fatal disease are currently being treated
with either standard of care drug, largely
due to tolerability issues.
LYT-100 is designed to retain the beneficial
pharmacology and clinically-validated
efficacy of pirfenidone with a highly
Case study
The KarXT
journey at
PureTech
p14
Karuna’s KarXT, invented and advanced by
PureTech, is a hallmark for how we create
value. Patients living with schizophrenia
need new treatment options as current
standard-of-care antipsychotics have
significant side effects and poor
adherence rates. Xanomeline, originally
discovered by Eli Lilly, demonstrated
clinical efficacy but was shelved due to its
side effect profile. PureTech’s team
invented and filed patents for a synergistic
agonist and antagonist concept (e.g.,
xanomeline + trospium chloride) that
would unlock the efficacy of xanomeline
and allow for improved tolerability.
Following an exceptionally successful
clinical journey, FDA approval for KarXT is
anticipated in 2024. If approved, KarXT will
deliver the first new mechanism for
treating schizophrenia in over 50 years,
and - as a result of KarXT’s remarkable
innovation story – Bristol Myers Squibb
(BMS) acquired Karuna for $14 billion in the
March 2024 post-period.
In addition to transforming the treatment
landscape for patients with schizophrenia,
Karuna’s success has allowed us to
generate approximately $1.1 billion in cash
to date5 to fund our operations and fuel
our next wave of innovation. This has been
realized through the monetization of
a portion of our holdings in Karuna, gross
proceeds from BMS’ acquisition valued at
$293 million as well as a strategic royalty
agreement for KarXT with Royalty Pharma.
The $500 million transaction with Royalty
Pharma, which was announced in March
2023, included $100 million in cash
received up front in 2023 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 PureTech’s
rights to receive a 3 percent royalty from
Karuna to Royalty Pharma on sales up to
$2 billion annually, after which Royalty will
receive 33 percent and PureTech will retain
67 percent of the royalty payments.6
C
h
i
e
f
L
e
t
t
e
r
f
r
o
m
t
h
e
E
x
e
c
u
t
i
v
e
O
f
fi
c
e
r
Letter from the Chief Executive Officer continued
PureTech Health plc Annual Report and Accounts 2023 5
differentiated pharmacokinetic profile that has
translated into favorable tolerability in multiple
clinical studies. In fact, we have demonstrated
an approximately 50 percent reduction in
participants experiencing gastro-intestinal (GI)
and central nervous system (CNS)-related
adverse events (AEs) in a crossover study of
LYT-100 vs. pirfenidone. We believe this profile
has the potential to keep patients on treatment
longer, enabling more optimal disease
management and patient outcomes.
Beyond this promising profile, we have also
shown that LYT-100 is well-tolerated at exposure
levels higher than the FDA-approved dose of
pirfenidone, which may enable enhanced
efficacy given Phase 3 data with pirfenidone that
showed a dose-response effect on forced vital
capacity and survival in people with IPF.8
Our goal with the ongoing Phase 2b ELEVATE
IPF trial is to validate the ability of LYT-100 to
deliver a more tolerable treatment with
comparable efficacy to pirfenidone at one dose
while also exploring the potential for enhanced
efficacy at a higher dose. The trial is fully
enrolled, and we look forward to sharing topline
results in the fourth quarter of 2024.
Founded Entities: Launch of two new
Founded Entities; KarXT seeking FDA
approval; clinical and commercial progress
across the Group
We are constantly evaluating our Internal
Programs for candidates that can follow the
This agreement supplied us with non-dilutive
capital in the short-term and has great
potential for long-term earnings based on
KarXT’s future regulatory and commercial
milestones, as well as product sales.
We believe KarXT’s journey to regulators
benefited from our creation of Karuna as
a Founded Entity focused on a specialized
asset. Initially, KarXT was part of a diversified
portfolio undergoing de-risking within
PureTech. Eventually its potential and the
forecasted demands of its later-stage clinical
journey informed our decision to house
Karuna as a stand-alone Founded Entity that
could draw the right mix of investors, including
specialists, and dedicated personnel and
expertise to effectively and efficiently drive its
progress. The KarXT story therefore
showcases both sides of our value proposition:
de-risked portfolio development in-house
and specialized asset advancement via
Founded Entities.
KarXT “playbook”, and in 2023 we made the
decision to advance several into new
Founded Entities.
Seaport Therapeutics was born from our Glyph
technology platform, which has demonstrated
clinical proof-of-concept and has been prolific in
producing new therapeutic candidates. The
proprietary Glyph platform is designed to
enable and enhance oral bioavailability, bypass
first-pass metabolism and reduce
hepatotoxicity and other side effects to advance
active drugs that were previously held back by
those limitations. With this technology and
candidate portfolio, including SPT-300 (Glyph
allopregnanolone; formerly LYT-300), SPT-320
(Glyph agomelatine; formerly LYT-320), and SPT
348 (a prodrug of a non-hallucinogenic
neuroplastogen) Seaport’s mission, similar to
Karuna’s, is to advance first-and-best-in class
therapeutics for patients with anxiety,
depression and other neuropsychiatric
disorders. The Seaport programs made
important advancements at PureTech in 2023,
with topline Phase 2a data announced from
a proof-of-concept study of SPT-300, a grant
received from the U.S. Department of Defense
of up to $11.4 million to advance SPT-300 in
Fragile X-associated Ataxia Syndrome, and the
nomination of SPT-320. In the 2024 post-period,
we announced the launch of Seaport with
a $100 million9 oversubscribed Series A
financing with participation from top tier biotech
investors ARCH Venture Partners, Sofinnova
Investments and Third Rock Ventures. Seaport
will be led by PureTech Founding CEO Daphne
Zohar. Following the Series A financing,
PureTech holds equity ownership in Seaport of
61.5 percent.
We also indicated the intent to launch Gallop
Oncology from our LYT-200 (anti-galectin-9)
program. We are advancing a differentiated
approach to cancer treatment by targeting the
pro-tumor mechanisms of galectin-9 for the
treatment of hematological malignancies and
solid tumors. A large body of preclinical and
human data underscores the importance of
galectin-9 as a potent oncogenic driver in
leukemia cells and an immunosuppressive
protein, and LYT-200 has demonstrated direct
cytotoxic, anti-leukemic effects through
multiple mechanisms as well as anti-tumor
efficacy. We’re excited by the data generated to
date in acute myeloid leukemia (AML) and
high-risk myelodysplastic syndrome (MDS), as
well as head and neck cancers. We expect
additional data from the ongoing Phase 1b
clinical trial for the potential treatment of AML
and MDS to be presented in a scientific forum in
2024, as well as additional data from the
2 The Tender Offer is expected to be
launched in early May, subject to
market conditions and shareholder
approval.
3 Calculated based on the aggregate
PureTech data including all therapeutic
candidates advanced through at least
Phase 1 by PureTech or its Founded
Entities from 2009 onward and the
industry average data. 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=52%). BIO,
PharmaIntelligence, QLS (2021)
Clinical Development Success Rates
2011-2020. This study did not include
therapeutics regulated as devices.
4 The percentage includes number
of successful trials out of all trials
run for all therapeutic candidates
advanced through at least Phase 1 by
PureTech or its Founded Entities from
2009 onward.
5 Represents cash generated to date
through sales of KRTX common
stock including gross proceeds due
to PureTech following Bristol Myers
Squibb’s acquisition of Karuna as
well as the $100 million in upfront
consideration from PureTech’s
transaction with Royalty Pharma.
6 PureTech’s agreement with Royalty
Pharma is not impacted by the BMS
acquisition of Karuna.
7 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.
8 King, T. E., Bradford, W. Z., Castro-
9
Bernardini, S., Fagan, E. A., Glaspole,
I., Glassberg, M. K., Gorina, E.,
Hopkins, P., Kardatzke, D., Lancaster,
L., Lederer, D. J., Nathan, S. D., De
Castro Pereira, C. A., Sahn, S. A.,
Sussman, R., Swigris, J. J., & Noble, P.
W. (2014). A Phase 3 Trial of Pirfenidone
in Patients with Idiopathic Pulmonary
Fibrosis. The New England Journal of
Medicine, 370(22), 2083–2092. https://
doi.org/10.1056/nejmoa1402582
Includes participation by top tier
biotech investors ARCH Venture
Partners, Sofinnova Investments
and Third Rock Ventures alongside
PureTech’s $32 million cash
contribution. Following the Series
A financing, PureTech holds equity
ownership in Seaport of 61.5 percent
on a diluted basis. Additionally, as
the founder of Seaport, PureTech
also has a right to royalty payments
on a percentage of net sales of any
commercialized product as well
as the right under the terms of the
license agreement with Seaport to
receive milestone payments upon the
achievement of certain regulatory
approvals and a percentage of
sublicense income.
r
e
c
fi
f
O
e
v
i
t
u
c
e
x
E
e
h
t
m
o
r
f
r
e
t
t
e
L
f
e
i
h
C
6 PureTech Health plc Annual Report and Accounts 2023
Letter from the Chief Executive Officer continued
10 EndeavorRx is a digital therapeutic
indicated to improve attention
function as measured by computer-
based testing in children ages 8-17
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.
11 EndeavorOTC is a digital therapeutic
indicated to improve attention
function, ADHD symptoms and quality
of life in adults 18 years of age and
older with primarily inattentive or
combined-type ADHD. EndeavorOTC
utilizes the same proprietary
technology underlying EndeavorRx,
a prescription digital therapeutic
indicated to improve attention
function in children ages 8-17.
EndeavorOTC is available under the
U.S. Food and Drug Administration’s
current Enforcement Policy for Digital
Health Devices for Treating Psychiatric
Disorders During the Coronavirus
Disease 2019 (COVID-19) Public Health
Emergency. EndeavorOTC has not
been cleared or authorized by the U.S.
Food and Drug Administration for its
indications. It is recommended that
patients speak to their health care
provider before starting EndeavorOTC
treatment. No serious adverse events
have been reported in any of our
clinical studies. To learn more, visit
EndeavorOTC.com.
Phase 1b trial in combination with tislelizumab
for the potential treatment of advanced
solid tumors.
Several of our other Founded Entities have
made key progress in 2023 as well. As noted,
Karuna submitted a New Drug Application to
the FDA for KarXT for the treatment of
schizophrenia in adult patients, which was
accepted and granted a Prescription Drug User
Fee Act (PDUFA) date of September 26, 2024.
The company was subsequently acquired by
BMS for $14 billion. The clinical program
expanding the evidence base for KarXT
continued with additional positive data
reported and two Phase 3 trial initiations in
Alzheimer’s disease.
At Vedanta, the team administered the initial
dose to the first patient for the company’s
Phase 2 COLLECTiVE202 clinical trial of VE202
for the management of ulcerative colitis and the
program was granted Fast Track designation by
the FDA. Vedanta also plans to initiate a Phase 3
clinical trial of VE303 in patients at high risk for
recurrent Clostridioides difficile infection in the
second quarter of 2024. Vor also made progress
in the clinic and announced new clinical data
from its Phase 1/2a first-in-human study of
trem-cel (VOR33) in patients with AML,
titled VBP101.
Notably, Akili received U.S. FDA authorization to
broaden the label for EndeavorRx®.10 This
expansion now includes children aged 13 to
17 years old with attention-deficit/hyperactivity
disorder (ADHD), which will increase the
eligibility for this treatment and thus double
the number of pediatric patients with ADHD
who can benefit. Akili also announced plans to
transition from a prescription to a non-
prescription business model to further increase
access. Further to this strategic plan, Akili
launched EndeavorOTC®11 for adults with
ADHD, following positive results from a clinical
trial evaluating EndeavorRx in this population.
Finally, Sonde Health increased its sales and
growth through establishing partnerships with
a variety of providers, health companies,
pharmaceutical entities and manufacturers.
Entrega also continued its R&D work to advance
its core platform for the oral administration of
biologics, vaccines and other drugs that are
usually not effectively absorbed when
administered orally.
Our future: Crystalizing value
We have successfully grown a pipeline of
therapeutics and candidates, carefully allocated
our resources and diligently executed on our
mission. We retain substantial holdings in both
our public and private Founded Entities; are due
certain royalties and milestone payments as
some of these programs advance; maintain
a strong balance sheet to support our existing
programs, and Founded Entities, and fuel our
future innovation; and we will have returned
$150 million to shareholders through our
recently completed share buyback program and
proposed Tender Offer. These achievements
underscore the significant value we have
created that has not been fully recognized by
the market. I am committed to evaluating ways
to unlock and crystalize that value for
shareholders and look forward to sharing my
vision for the Company’s future growth in the
coming months.
Thanks to our network of supporters for
giving life to science
After an extremely productive year, I would like
to extend my thanks and appreciation to our
dedicated teams – both at PureTech and across
our Founded Entities – who play an essential
role in driving highly innovative and impactful
R&D forward. Your commitment to our cause
is inspiring, and I am so grateful to work
alongside you in the name of serving patients
and our shareholders.
I would also like to thank our talented board for
their guidance, in addition to our wide network
of shareholders, collaborators, and advisors for
their continued support of our vision.
I also want to express my sincere gratitude to
Daphne Zohar for her remarkable leadership
since the inception of PureTech and for guiding
the Company into this exciting new phase. I am
pleased that we will continue to benefit from her
entrepreneurial spirit as she drives further value
for PureTech in her new role as CEO of Seaport.
2023 was a banner year for PureTech, and we are
already charting an exciting path forward in
2024. I am proud and very humbled to assume
the role of CEO at such a remarkable
organization, and I look forward to continuing
our transformational work for patients and
shareholders.
Bharatt Chowrira, Ph.D., J.D.
Chief Executive Officer and Director
April 25, 2024
PureTech Health plc Annual Report and Accounts 2023 7
K
e
y
c
o
m
p
o
n
e
n
t
s
o
f
v
a
l
u
e
KEY COMPONENTS OF VALUE
1. Strong Balance Sheet
2. Founded Entity Equity Value
3. Internal Programs
4. Royalties, Milestone and Sublicense Income
(e.g., Royalty Pharma Deal, Seaport)
5. Capital Returns
6. People/R&D Engine
8 PureTech Health plc Annual Report and Accounts 2023
w 2024 Capital Allocation Overview
e
i
v
r
e
v
O
n
o
i
t
a
c
o
l
l
A
l
a
t
i
p
a
C
PureTech determines its capital allocation with a measured approach that balances support for its current Internal and Founded
Entity Programs and the funding of future innovation, with the goal of maximizing shareholder returns. Key components include:
Capital Returns
Strategy
Value impact
Taxes
In 2024, PureTech has proposed a $100 million Tender Offer1. The board will continue to assess ongoing
opportunities to improve shareholder returns, including additional capital returns to shareholders from future
monetization events, while maintaining a cash runway of at least three years to support our Internal Programs,
Founded Entities, future innovation and operational needs.
We believe that periodic capital returns to shareholders are an important acknowledgement of the value created
for shareholders that may not be reflected in the share price. We believe the proposed Tender Offer1 is a capital
efficient mechanism that maximizes shareholder returns, provides liquidity and reduces the outstanding share
count while allowing us to maintain a strong balance sheet.
As a U.S. domiciled taxpayer, the amount of tax that we would owe on any proceeds we may generate between federal and state
obligations is in the mid to high 20 percent range; however, the exact amount is dependent upon a number of factors including our
ability to claim net operating losses or other losses (e.g., operating losses, capital losses) and utilize R&D credits. We actively work to
appropriately manage our tax burden and requirements. We currently anticipate having fairly minimal losses in 2024 as compared to
our sizeable gains in the year, especially with respect to Karuna in light of its sale to Bristol Myers Squibb. Further guidance around our
anticipated 2024 tax position will be set forth in our 2024 Half Year report.
Founded Entities
Strategy
Balancing costs, benefits, risks and rewards, we may move assets from Internal Programs to Founded Entities.
We may continue to make investments into our Founded Entities, such as Seaport, in which we invested
$32 million in conjunction with the Series A financing. The decision to contribute capital to a Founded Entity
financing is intended to maintain PureTech’s ownership position or minimize dilution of PureTech’s position in
a Founded Entity or, in certain circumstances, to help catalyze a financing round that we believe will bring
additional long-term value to the company. PureTech may participate in financing rounds for existing Founded
Entities as well as newly formed Founded Entities.
Value impact
Our Founded Entities are a prospective source of non-dilutive capital that enable us to advance potential
medicines to patients efficiently, reduce our financial exposure, return capital to shareholders and largely
self-fund our operations through future monetization events. Housing our candidates and/or platforms in this
structure attracts specialized management teams and defrays cost-intensive late-stage development work while
maintaining financial upside potential upon success.
Existing programs
Strategy
Value impact
New innovation
Strategy
Our most advanced internal program is LYT-100, for which we expect Phase 2b data in the fourth quarter of 2024.
PureTech anticipates completing the ongoing trial with existing capital. The necessary level of spend for
a subsequent Phase 3 trial for LYT-100 will be driven by the required number of patients and exact design, both of
which will be informed by the results of the Phase 2b trial and discussions with the FDA. If the data are positive,
PureTech anticipates having optionality to pursue third-party funding to support a subsequent trial. Additionally,
we intend to develop LYT-200 in our recently created Founded Entity Gallop Oncology. PureTech anticipates
funding the continued development of LYT-200 until Gallop Oncology is positioned to raise capital from third
party investors at an appropriate juncture. As we have historically demonstrated, if our candidates don’t achieve
our pre-specified threshold for advancement early on, we move our resources to areas that we believe are better
positioned to add value.
Our development strategy is intended to align our interests with those of our shareholders by pursuing internal
de-risking activities to ensure that our assets under development present a demonstrable value proposition.
We avoid the bias to continue by establishing a high threshold for further development. Once a program has
reached the next key value generating inflection point, we retain the optionality to continue internal
development for further value accretion, or we may pursue external funding, collaborations or partnerships
to reduce risk and expense while maximizing shareholder value.
Consistent with our founding hub-and-spoke R&D model, we are continuously sourcing innovations which – with
further work – could create significant value. Subject to consultation with our esteemed R&D committee and
ultimately our Board, both of which assist us in our rigorous process of vetting potential assets, we anticipate
selecting up to two assets or programs per year that require minimal spend to get to a value inflection point and
will do so in a capital efficient manner. New innovations may yield assets that could be complementary to our
existing programs.
Value impact
Our innovation engine enables the growth of our portfolio to ensure the next wave of candidates is progressing
towards value creating milestones for shareholders. We will continue to examine the overall value created from
these initiatives to ensure they are driving shareholder value and consider other mechanisms as appropriate.
2024 Capital Allocation Overview continued
PureTech Health plc Annual Report and Accounts 2023 9
$573.3 Million
PureTech Level Cash, Cash Equivalents &
Short-Term Investments as of March 31, 2024
C
a
p
i
t
a
l
A
l
l
o
c
a
t
i
o
n
O
v
e
r
v
i
e
w
Capital Returns
U.S. Taxes
Founded Entities
$100M Tender Offer1
Mid to high 20% on any
proceeds generated;
potential to optimize
and offset2
Additional funding to
retain upside (e.g., $32M
in Seaport Series A)
Existing Programs
New Innovations
LYT-100 Phase 2b trial
LYT-200 Phase 1b trials
Up to 2 programs/year
1 The Tender Offer is expected to be launched in early May, subject to market conditions and shareholder approval.
2
Potential to optimize and offset a portion to the extent allowed under US tax code.
10 PureTech Health plc Annual Report and Accounts 2023
PURETECH’S HUB-AND-SPOKE MODEL:
A PIPELINE OF NEW MEDICINES POISED
FOR TREMENDOUS GROWTH
l
e
d
o
M
e
k
o
p
S
-
d
n
a
-
b
u
H
LYT-100
Internal
Karuna
Therapeutics
Acquired by Bristol
Myers Squibb for $14B
Gallop
Oncology
100% equity
P11
P14
VOR
(Nasdaq: VOR)
3.9% equity
P15
P18
PURETECH’S
EXPERIENCED
R&D TEAM
AND EXTENSIVE
NETWORK
P17
Akili
(Nasdaq: AKLI)
14.6% equity
Seaport
Therapeutics
61.5% equity
P13
P21
P20
Entrega
73.8% equity
P19
Sonde
35.2% equity
Vedanta
36.1% equity
Relevant ownership interests for Vedanta and Sonde were calculated on a partially diluted basis (as opposed to a voting basis) as of December 31, 2023, and Seaport as of April 8,
2024, including outstanding shares, options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. PureTech controls Seaport
Therapeutics, Inc. and Gallop Oncology, Inc. Akili and Vor ownerships were calculated on a beneficial ownership basis in accordance with SEC rules as of February 21, 2024 and
March 15, 2024, respectively. As released on RNS Reach, PureTech announced in October 2023 that it would not be moving forward with the previously contemplated plan of merger
with Gelesis. On October 30, 2023, Gelesis ceased operations and filed a voluntary petition for relief under Ch. 7 of Title 11 of the United States bankruptcy code. In April 2024, the
Chapter 7 Trustee provided notice that a third party bid to purchase the assets subject to the bankruptcy had been accepted as a stalking horse bid, subject to Bankruptcy Court
approval. If such sale of the assets is ultimately approved by the Bankruptcy Court and consummated, it is expected that PureTech could recover a portion of its investment in Gelesis
senior secured convertible promissory notes. The ultimate resolution of this matter, any potential recovery, and the associated timing remains uncertain.
Internal Program
LYT-100
Program discovery
process by the
PureTech team
Key milestones
achieved and
development status
PureTech Health plc Annual Report and Accounts 2023 11
I
n
t
e
r
n
a
l
LYT-100 (deupirfenidone) is currently being developed internally at PureTech for the
treatment of idiopathic pulmonary fibrosis (IPF), which is a rare, progressive and fatal
disease. It has the potential to address multiple underserved diseases, including progressive
fibrosing interstitial lung diseases, a group of lung diseases closely related to IPF, as well as
other fibrotic conditions where there is human data with pirfenidone that is suggestive of
clinical benefit.
— We acquired LYT-100 based on insights gained internally and via unpublished findings through
our network of collaborators. LYT-100, which is a deuterated form of pirfenidone, was originally
developed by Auspex Pharmaceuticals, Inc. (Auspex), where our Chief Executive 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 FDA-approved deuterated drug.
— Pirfenidone (Esbriet®) is approved for the treatment of IPF in the U.S. and other countries. It has
been shown to slow the decline of lung function and research suggests it extends life by
approximately 2.5 years in patients with IPF.1 It is one of two standard of care treatments for IPF,
along with nintedanib (OFEV®). Only about 25% of IPF patients are currently being treated with
either standard of care drug,2 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.3
LYT-100 is designed to retain the beneficial pharmacology and clinically-validated efficacy of
pirfenidone with a highly differentiated pharmacokinetic profile that has translated into
favorable tolerability in multiple clinical studies and has the potential to keep patients on
treatment longer to enable more optimal disease management.
IPF
— LYT-100 is currently being evaluated in ELEVATE IPF, a global, randomized, double-blind,
placebo-controlled Phase 2b clinical trial designed to evaluate the efficacy, tolerability, safety
and dosing regimen of LYT-100 in patients with IPF compared to placebo. The trial has four arms:
placebo, pirfenidone, a dose of LYT-100 with comparable exposure to the FDA-approved dose of
pirfenidone and a dose of LYT-100 with a higher level of exposure than the FDA-approved dose of
pirfenidone. The primary endpoint is the rate of decline in Forced Vital Capacity (FVC) for the
combined LYT-100 arms versus placebo over the 26-week treatment period using a prespecified
Bayesian approach. Other key endpoints include tolerability measures, biomarkers and patient-
reported outcomes. Both doses of LYT-100 will be compared to pirfenidone, though the trial is
not powered to show a statistical difference in efficacy between LYT-100 and pirfenidone.
— LYT-100 has shown a 50% reduction in gastro-intestinal related adverse events in a crossover trial
versus pirfenidone in healthy older adults. We believe the differentiated tolerability profile of
LYT-100 will address one of the key reasons that patients on current standard of care dose reduce,
discontinue or switch from otherwise efficacious treatments.2,4 We have also been able to dose
LYT-100 at a higher exposure level, 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.
— In the April 2024 post-period, enrollment was completed in the ELEVATE IPF Phase 2b clinical trial
evaluating LYT-100 in patients with IPF.
— In October 2023, expanded data were presented at the CHEST Annual Meeting from
a completed trial of LYT-100 in healthy older adults, which informed the two doses selected for
the ongoing Phase 2b trial. In addition to supporting the improved tolerability of LYT-100 versus
the FDA-approved dose of pirfenidone, the data supported the selection of a higher dose of
LYT-100 with the potential for improved efficacy that is now being evaluated in ELEVATE IPF.
Expected milestones
— Topline results from ELEVATE IPF are expected in Q4 2024. A streamlined development program
is planned using the same endpoints that have supported past approvals. Pending positive
clinical and regulatory feedback, the program will advance into a Phase 3 trial. We believe the
results of the Phase 2b trial, together with a Phase 3 trial, could serve as the basis for registration
in the U.S. and other geographies.
12 PureTech Health plc Annual Report and Accounts 2023
Internal continued
Intellectual property
l
a
n
r
e
t
n
I
— As of December 31, 2023, 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 U.S. 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 U.S. patent and one U.S. patent application from Auspex directed to formulations
of deuterated pirfenidone, both of which expire in 2035, and also filed additional patent
applications on deupirfenidone, including nine (9) pending U.S. patent applications, 17 foreign
applications and three (3) international PCT applications 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 2044, exclusive of
possible patent term adjustments or extensions.
1 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.
2 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
3 Roche 2022 Annual Report and Boehringer Ingelheim 2022 Financial Results
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
Founded Entities
Seaport Therapeutics
PureTech Ownership
61.5% equity
PureTech Health plc Annual Report and Accounts 2023 13
F
o
u
n
d
e
d
E
n
t
i
t
i
e
s
Program discovery
process by the
PureTech team
Key milestones
achieved and
development status
Seaport Therapeutics is a clinical-stage biopharmaceutical company charting a proven path in
neuropsychiatry. Seaport is advancing a clinical-stage pipeline of neuropsychiatric medicines
that includes its most advanced therapeutic candidate, SPT-300 (formerly known as LYT-300),
an oral prodrug of allopregnanolone, which is being advanced for the treatment of anxious
depression, SPT-320 (formerly known as LYT-320), a novel prodrug of agomelatine, which
is being advanced for the treatment of Generalized Anxiety Disorder (GAD), and SPT-348,
a prodrug of a non-hallucinogenic neuroplastogen, which is in development for the treatment
of mood and other neuropsychiatric disorders. Beyond these programs, Seaport has multiple
discovery and preclinical programs underway. All of the programs in Seaport’s pipeline are
based on the Glyph™ platform, which is designed to enable and enhance oral bioavailability,
avoid first-pass metabolism and reduce hepatotoxicity and other side effects to advance
active drugs that were previously held back by those limitations. The design and optimization
of drug-specific chemistry and pharmacology is tailored for each program. This robust and
consistent application of Glyph technology has led to the rapid growth of a robust pipeline
of neuropsychiatric medicines.
— With intersecting interests in enabling promising neuropsychiatric drugs to reach their full
potential and the emerging science around the lymphatic system, we identified a breakthrough
technology being developed at Monash University that had the potential to selectively transport
therapeutic molecules through the lymphatic system.
— With the Glyph platform, drugs are absorbed like dietary fats through the intestinal lymphatic
system and transported into circulation. The Glyph technology has the potential to be widely
applied to many therapeutic molecules that have high first-pass metabolism leading to low
bioavailability and/or side effects, including hepatotoxicity. We prioritized areas of high unmet
patient need where the broad application of treatment options with validated efficacy was
untapped due to these issues. The Glyph platform has been refined at PureTech and Seaport to
efficiently generate multiple therapeutic candidates within Seaport’s pipeline.
— In December 2023, SPT-320 (Glyph-agomelatine) was nominated as a new therapeutic candidate
powered by the Glyph platform. A novel prodrug of agomelatine, SPT-320 is in development for
the treatment of GAD. Agomelatine is effective in treating GAD and major depressive disorder
(MDD) and offers superior tolerability to standard of care. However, agomelatine has low (~1%)
bioavailability due to high first-pass metabolism, resulting in increased liver enzymes in some
patients and necessitating frequent liver function monitoring that has held back the drug.
SPT-320 uses the Glyph platform to bypass first-pass metabolism by the liver and thus has the
potential to reduce liver exposure, hepatotoxicity, and the need for liver function monitoring.
— In November 2023, successful topline results from the randomized, proof-of-concept Phase 2a
trial of SPT-300 (Glyph-allopregnanolone) were reported. The trial was designed to evaluate the
salivary cortisol response in the Trier Social Stress Test, a validated clinical model of anxiety in
healthy volunteers. Oral administration of SPT-300 achieved the trial’s primary endpoint of
a statistically significant reduction versus placebo in the increase from baseline to peak levels of
the stress hormone salivary cortisol (p=0.0001) with a treatment effect size versus placebo of
0.72, measured by Cohen’s d.
— In August 2023, it was announced that the U.S. Department of Defense awarded up to
$11.4 million to advance SPT-300 for the treatment of Fragile X-associated Tremor/Ataxia
Syndrome (FXTAS).
Expected milestones
— Following the completion of an oversubscribed $100 million Series A financing, Seaport is
evaluating its timelines and will provide public guidance around milestones in due course.
Intellectual property
— As of December 31, 2023, the extensive Glyph intellectual property portfolio includes 20 families
of patent filings directed to platform technologies which provide expansive coverage for a broad
range of novel linker chemistries, as well as product technologies directed to compositions of
matter for a wide variety of prodrugs and methods of use for the treatment of various indications,
including several CNS-related indications. This intellectual property estate comprises eight (8)
families of patent filings that provide exclusive rights to IP that is co-owned or exclusively licensed
with Monash University and twelve (12) families of company-owned patent applications covering
various aspects of the Glyph prodrug technologies, including compositions of matter,
formulations, synthetic processes, and methods of therapeutic uses. Any patents to issue from
these patent families are expected to expire in 2035 through 2044, exclusive of possible patent
term adjustments or extensions or other forms of exclusivity. PureTech retains the right to
develop non-CNS therapies utilizing the Glyph platform, subject to certain contractual
constraints.
14 PureTech Health plc Annual Report and Accounts 2023
Founded Entities continued
Karuna Therapeutics
s
e
i
t
i
t
n
E
d
e
d
n
u
o
F
Program discovery
process by the
PureTech team
Key milestones
achieved and
development status
PureTech Ownership
PureTech is entitled to milestone payments, royalties and up to $400 million in milestone payments
under its agreement with Royalty Pharma.1
Karuna Therapeutics is a wholly owned subsidiary of Bristol Myers Squibb (BMS) driven
to create and deliver transformative medicines for people living with psychiatric and
neurological conditions. Karuna’s lead candidate KarXT (xanomeline-trospium) is under
review by the U.S. Food and Drug Administration (FDA) for the treatment of schizophrenia
in adults. KarXT is also being evaluated in Phase 3 clinical trials as a potential adjunctive
treatment for schizophrenia and as a potential treatment for psychosis in Alzheimer’s disease.
— 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. KarXT has been submitted to the FDA, and – if approved – we will have
pioneered the development of the first new class of medicine for schizophrenia in over 50 years.
— In December 2023, Karuna announced they entered into a definitive agreement with BMS under
which BMS has agreed to acquire Karuna for $330.00 per share in cash, for a total equity value
of $14.0 billion. In the March 2024 post-period, the transaction was completed and Karuna is now
a wholly owned subsidiary of BMS.
— In November 2023, Karuna announced that the FDA accepted its new drug application for KarXT
(xanomeline-trospium) for the treatment of schizophrenia and has granted a Prescription Drug
User Fee Act (PDUFA) date of September 26, 2024.
— In November 2023, Karuna announced positive results from the Phase 1b trial evaluating the
effect of KarXT on 24-hour ambulatory systolic blood pressure in adults with schizophrenia. The
primary endpoint in the trial was the change from baseline at week 8 in 24-hour average
ambulatory systolic blood pressure. In the trial, KarXT demonstrated a mean change from
baseline to week 8 in 24-hour ambulatory systolic blood pressure of -0.59 mmHg. The upper
bound of the two-sided 95% confidence interval for the mean change from baseline to week 8
was 1.60 mmHg, thus ruling out a clinically meaningful increase in blood pressure (defined per
FDA guidance as ≥3 mmHg change from baseline). Daytime and nighttime systolic blood
pressure measurements showed no meaningful change and were generally consistent with the
24-hour average. Additional vital sign measures collected in the trial, including 24-hour average
diastolic blood pressure and heart rate, were consistent with prior trials of KarXT in schizophrenia.
Further, KarXT was generally well tolerated, with a side effect profile consistent with prior trials in
the EMERGENT program.
— In March 2023, 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.
— In the third quarter of 2023, Karuna initiated the Phase 3 ADEPT-2 and ADEPT-3 trials for
psychosis in Alzheimer’s disease (AD).
Expected milestones
— Karuna’s New Drug Application for KarXT in schizophrenia has been granted a PDUFA date of
September 26, 2024. If approved, KarXT is expected to launch in late 2024.
1 As of 22 March 2023, PureTech has sold its right to receive a 3 percent royalty from Karuna to Royalty Pharma on net sales up to
$2 billion annually, after which threshold PureTech will receive 67 percent of the royalty payments and Royalty Pharma will receive
33 percent.
Founded Entities continued
Gallop Oncology
PureTech Ownership
100% equity
PureTech Health plc Annual Report and Accounts 2023 15
F
o
u
n
d
e
d
E
n
t
i
t
i
e
s
Program discovery
process by the
PureTech team
Key milestones
achieved and
development status
Gallop Oncology™ is advancing a first-in-class, mechanistically differentiated approach to
cancer treatment by targeting a novel, pro-tumor and immunosuppressive molecule. Gallop’s
LYT-200 is ananti-galectin-9 monoclonal antibody (mAb) being developed for the treatment
of acute myeloid leukemia (AML) and high-risk myelodysplastic syndromes (MDS) and head
and neck cancers.
— With a focus on providing significant therapeutic benefit to cancer patients, we opportunistically
identified a foundational immunosuppressive/pro-tumor mechanism(s) 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. Galectin-9 promotes multiple immunosuppressive
pathways in the context of solid tumors and blocking galectin-9 results in tumor cell death in the
context of AML and other hematological malignancies. High levels of galectin-9 expression in
tumor tissue, on leukemia cells as well as in patients’ blood are linked to more advanced disease
and worse outcomes. LYT-200 is a fully human IgG4 monoclonal antibody designed to inhibit the
activity of galectin-9. 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 in combination with other anti-cancer
therapies, depending on the cancer type, treatment setting and line of treatment. LYT-200 has
also demonstrated direct cytotoxic, anti-leukemic effects through multiple mechanisms, as well
as synergy with standard of care in preclinical models.
— Preclinical work demonstrates single agent mechanistic and anti-tumor efficacy of LYT- 200 in
multiple animal and patient-derived tumor cell models.
AML
— In the February 2024 post-period, the U.S. Food and Drug Administration (FDA) granted Orphan
Drug Designation to LYT-200 for the treatment of AML. The FDA grants orphan drug designation
to novel products for the treatment of conditions affecting fewer than 200,000 persons in the U.S,
and it qualifies the company for incentives including tax credits for some clinical trials and
eligibility for seven years of market exclusivity in the U.S., if the drug is approved for AML.
— In December 2023, it was announced that three dose escalation cohorts had been completed at
weekly doses of 2 mg/kg (cohort 1), 4 mg/kg (cohort 2) and 7.5 mg/kg (cohort 3) in the ongoing
Phase 1b trial evaluating LYT-200 as a single agent in relapsed/refractory AML and MDS patients.
In a heavily pre-treated patient population, the early data demonstrate a favorable safety and
tolerability profile of LYT-200 with no dose limiting toxicities. In the first cohort, disease
stabilization was observed in two of the five patients treated, with one patient achieving red
blood cell transfusion independence. In the second cohort, disease stabilization was observed in
two of the four patients treated. In the third cohort, disease stabilization was observed in all four
of the patients treated, with a reduction in bone marrow blasts observed in two of the four
patients and the clearance of peripheral blasts observed in one patient. Two patients achieved
more than 50 percent bone marrow blast reduction, with one of these patients observing an
increase in platelet count without transfusions. The fourth cohort, evaluating a weekly regimen of
LYT-200 at the 12 mg/kg dose, is still ongoing, and additional data are expected to be shared in
a scientific forum.
Locally advanced/metastatic solid tumors
— In the March 2024 post-period, the FDA granted Fast Track designation for LYT-200 in
combination with anti-PD1 therapy for the treatment of recurrent/metastatic head and neck
cancers. Fast Track designation is a process designed to streamline the development and
accelerate the assessment of drugs that target serious conditions with unmet need.
— In December 2023, initial data from the Phase 1 portion of the Phase 1/2 dose escalation and
expansion clinical trial of LYT-200 was announced. The initial data were presented at European
Society for Medical Oncology meeting and demonstrate a favorable safety profile in all cohorts,
including the monotherapy and combination arms with tislelizumab, an anti-PD-1 antibody being
developed by BeiGene, and show disease control and suggestion of anti-tumor activity in
combination with tislelizumab. In the combination cohort, anti-tumor activity was observed in
patients with relapsed or refractory head and neck cancer, a patient population that has
historically demonstrated a low response rate to anti-PD-1 agents of around 20 percent and
10 percent with chemotherapy1.
1 Vermorken, J. B., MesíA, R., Rivera, F., Remenár, É., Kawecki, A., Rottey, S., Erfán, J., Zabolotnyy, D., Kienzer, H., Cupissol, D.,
Peyrade, F., Benasso, M., Vynnychenko, I., De Raucourt, D., Bokemeyer, C., Schueler, A., Amellal, N., & Hitt, R. (2008). Platinum-Based
Chemotherapy plus Cetuximab in Head and Neck Cancer. The New England Journal of Medicine, 359(11), 1116–1127. https://doi.
org/10.1056/nejmoa0802656
16 PureTech Health plc Annual Report and Accounts 2023
Founded Entities continued
s
e
i
t
i
t
n
E
d
e
d
n
u
o
F
Expected milestones
— The Phase 1b clinical trial evaluating LYT-200 in relapsed/refractory AML and MDS patients is
ongoing. Additional data from the trial is expected to be presented in a scientific forum in 2024.
— Additional results from the Phase 1b trial of LYT-200 in combination with tislelizumab in head and
neck cancers are expected in 2024.
Intellectual property
— LYT-200 has broad intellectual property coverage for these antibody-based immunotherapy
technologies. As of December 31, 2023, there are 15 families of intellectual property within this
patent portfolio, including eight families of patent filings that are co-owned with and/or
exclusively licensed from New York University which cover antibodies that target galectin-9,
including LYT-200, and methods of using these antibodies in various immuno-oncology
technologies and treatment methods. In addition, the intellectual property portfolio includes six
families of company-owned patent applications covering the use of anti-galectin-9 antibodies in
the diagnosis and treatment of various cancers, including solid tumors and hematological
cancers and one family of patent applications co-owned with BeiGene directed to combination
therapies for the treatment of solid tumors. This intellectual property portfolio comprises four
issued U.S. patents which are expected to expire in 2038, 12 pending U.S. patent applications,
which if issued, are expected to expire 2037 through 2044, two international PCT applications,
54 pending foreign applications and 12 issued patents in foreign jurisdictions.
Founded Entities continued
Akili
Program discovery
process by the
PureTech team
Key milestones
achieved and
development status
Expected milestones
PureTech Health plc Annual Report and Accounts 2023 17
F
o
u
n
d
e
d
E
n
t
i
t
i
e
s
PureTech Ownership
14.6% equity
Akili is pioneering the development of cognitive treatments through game-changing
technologies. Akili’s EndeavorRx®1 is an FDA-cleared digital therapeutic indicated to improve
attention function as measured by computer-based testing in children ages 8-17 years old
with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue.
Akili’s EndeavorOTC®2 is a digital therapeutic indicated to improve attention function, ADHD
symptoms and quality of life in adults 18 years of age and older with primarily inattentive or
combined-type ADHD.
— 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.
— Akili’s FDA-cleared product, EndeavorRx, is based on a patented platform technology
exclusively licensed from the University of California, San Francisco. The proprietary platform
targets cognitive interference processing while also adapting difficulty automatically in real-
time, allowing individuals of wide-ranging ability levels to interact with the product in their homes
without the need for physician calibration or additional hardware.
— In September 2023, Akili announced its strategic plan to transition from a prescription to
a non-prescription business model. The non-prescription model allows Akili to give consumers
access to differentiated and clinically-validated technology, while removing the reliance on
payers that stand in the way of patients trying to access treatment.
— In January 2023, Akili shared topline results of the STARS-ADHD-Adolescents label expansion trial
evaluating the efficacy and safety of EndeavorRx in adolescents ages 13-17 with ADHD. The pivotal
trial achieved its predefined primary efficacy outcome, showing statistically significant improvement
in attentional functioning after four weeks of treatment. Based on these results, Akili announced in
December 2023 that it received authorization from the FDA to expand the EndeavorRx label to
include older children aged 13-17. This increased age range is expected to more than double the
number of pediatric patients with ADHD who are now eligible for EndeavorRx.
— In May 2023, Akili shared topline results of the STARS-ADHD-Adult clinical trial evaluating the
efficacy and safety of EndeavorRx in adults with ADHD. The results demonstrated attention
improved in more than 80 percent of adults with ADHD, and over one-third of participants no
longer exhibited an attention deficit following treatment. Improvements in attention were nearly
seven times larger than those seen in the pivotal trial that supported EndeavorRx’s FDA
authorization for aged 8 to 12 with ADHD. Additionally, nearly half of adults treated with
EndeavorRx met a prespecified threshold for clinically meaningful improvement in their quality
of life. EndeavorRx treatment was well-tolerated, with minimal side effects and no serious
device-related adverse events reported. Based on these results, Akili announced the release of
EndeavorOTC in June 2023, and submitted a 510(k) application to the FDA in October for
EndeavorOTC as an over-the-counter (OTC) treatment for adults with ADHD.
— In the February 2024 post-period, Akili shared positive results from its partner Shionogi’s Phase 3
pivotal trial of its localized version of Akili’s EndeavorRx for pediatric ADHD patients in Japan
aged 8 to 17. Shionogi submitted the results of this trial for regulatory approval to Japan’s
Pharmaceuticals and Medical Devices Agency in 2024.
— Akili plans to pursue regulatory approval for OTC labeling of its treatment products and expects that
both EndeavorOTC and EndeavorRx will remain on the market as the company pursues these plans.
— EndeavorOTC: Akili continues to work interactively with FDA on the review of its marketing
submission for EndeavorOTC and expects to provide a status update by the end of the second
quarter of 2024. Pursuant to FDA guidance, Akili is continuing to make EndeavorOTC available
over the counter, without a prescription, while its submission to FDA is under review.
— EndeavorRx: Akili announced plans to submit data to the FDA to convert its pediatric
prescription product, EndeavorRx, to OTC in 2024. Akili’s partner Shionogi submitted the
localized Japanese version of Akili’s AKL-T01 (marketed as EndeavorRx in the U.S.) for marketing
approval with Japan’s Pharmaceuticals and Medical Devices Agency.
1
EndeavorRx is a digital therapeutic indicated to improve attention function as measured by computer-based testing in children ages 8-17 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 EndeavorOTC is a digital therapeutic indicated to improve attention function, ADHD symptoms and quality of life in adults 18 years of age and older with primarily inattentive or
combined-type ADHD. EndeavorOTC utilizes the same proprietary technology underlying EndeavorRx, a prescription digital therapeutic indicated to improve attention function
in children ages 8 - 17. EndeavorOTC is available under the U.S. Food and Drug Administration’s current Enforcement Policy for Digital Health Devices for Treating Psychiatric
Disorders During the Coronavirus Disease 2019 (COVID-19) Public Health Emergency. EndeavorOTC has not been cleared or authorized by the U.S. Food and Drug Administration
for its indications. It is recommended that patients speak to their health care provider before starting EndeavorOTC treatment. No serious adverse events have been reported in any
of our clinical studies. To learn more, visit EndeavorOTC.com.
18 PureTech Health plc Annual Report and Accounts 2023
Founded Entities continued
Vor
s
e
i
t
i
t
n
E
d
e
d
n
u
o
F
Program discovery
process by the
PureTech team
Key milestones
achieved and
development status
PureTech Ownership
3.9% equity
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 enable targeted therapies post-transplant. Vor’s lead eHSC candidate
is tremtelectogene empogeditemcel (trem-cel), formerly VOR33, which is created by
genetically modifying healthy donor HSCs in order to remove the CD33 surface target
protecting them from a targeted therapy post-transplant. Transplant with trem-cel is
designed to replace standard of care transplants for patients suffering from acute myeloid
leukemia (AML) and potentially other blood cancers. Trem-cel has the potential to enable
powerful targeted therapies in the post-transplant setting including CD33-targeted CAR-T
cells. VCAR33ALLO is a CD33-directed CAR-T cell therapy made from healthy cells obtained
from the same donor from which the patient was previously transplanted. Vor’s vision is
to develop a treatment system for AML where trem-cel is first administered to patients to
remove CD33 from their healthy cells, followed by VCAR33ALLO administration to target and
kill any remaining cancer cells.
— 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, and on
advancing this concept through critical proof-of-concept experiments.
— In the March 2024 post-period, Vor announced that the FDA had granted Fast Track Designation
and Orphan Drug Designation to VCAR33ALLO.
— In the January 2024 post-period, Vor announced it has dosed the first patient in VBP301, its
Phase 1/2, multicenter, open-label, first-in-human study of VCAR33ALLO in patients with relapsed
or refractory AML after standard-of-care transplant or a trem-cel transplant. By using healthy
transplant donor cells as the starting material to produce VCAR33ALLO, the CAR-T cells have
a more stem-like phenotype, leading to greater potential for expansion, persistence, and
anti-leukemia activity compared to a product derived from a patient’s own lymphocytes.
— In November 2023, Vor announced updated data from patients treated in VBP101, Vor’s
Phase 1/2a multicenter, open-label, first-in-human study of trem-cell in patients with AML.
Primary neutrophil engraftment occurred in all seven patients treated to date with trem-cel with
a median time to engraftment of 10 days. All three patients treated with Mylotarg (the only
anti-CD33 therapy approved by the FDA) experienced hematologic protection from deep
cytopenias through repeat doses, suggesting that trem-cel transplants shielded patients’
healthy cells from the on-target toxicity (myelosuppression) typically seen with Mylotarg
treatment. The hematological protection exhibited provides support that dose escalation of
Mylotarg is warranted and highlights the potential to dose CD33-targeted CAR-T therapy
without expected hematologic toxicity.
— In August 2023, Vor announced a world-wide non-exclusive license from Editas Medicine for
ex-vivo Cas9 gene-edited HSC therapies for the treatment and/or prevention of hematological
malignancies.
Expected milestones
— A trem-cel clinical trial data update is expected in the second half of 2024.
— A VCAR33ALLO clinical trial data update is expected in the second half of 2024.
Founded Entities continued
Vedanta Biosciences
PureTech Ownership
36.1% equity
PureTech Health plc Annual Report and Accounts 2023 19
F
o
u
n
d
e
d
E
n
t
i
t
i
e
s
Program discovery
process by the
PureTech team
Key milestones
achieved and
development status
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. Vedanta’s candidates
include VE303, a Phase 3-ready therapeutic candidate designed for the prevention of
recurrent Clostridioides difficile infection (rCDI), VE202, a Phase 2 therapeutic candidate
in development for the treatment of ulcerative colitis and VE707, a preclinical therapeutic
candidate being advanced for the prevention of infection and colonization recurrence of
several multidrug-resistant organisms (MDROs).
— 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 2023, Vedanta announced the first patient was dosed in the Phase 2 COLLECTiVE202
clinical trial of VE202 for the treatment of ulcerative colitis. Vedanta also announced that the U.S.
Food and Drug Administration granted Fast Track designation to VE202.
— In October 2023, Vedanta shared additional data from the VE303 Phase 2 CONSORTIUM
clinical trial that further explained the biological effects of VE303 associated with prevention
of Clostridioides difficile recurrence. VE303 accelerated the restoration of a healthy gut
microbiome community and early recovery of key metabolites. Furthermore, among nearly
400 bacterial species detected in trial participants after treatment, species in VE303 were
the top predictors of non-recurrence. Vedanta previously announced that the trial met its
primary endpoint.
— In October 2023, Vedanta shared preclinical data of VE707, which demonstrated that among
nearly 100 consortia tested for their ability to reduce intestinal carriage of some of the most
common and serious MDROs, VE707 was the most effective at reducing the levels of K.
pneumoniae and E. coli in rodent models. Results also demonstrated that a rationally designed,
defined consortium of bacteria can decolonize MDROs in animals and can be manufactured
efficiently.
— In May 2023, Vedanta announced the U.S. FDA granted Fast Track designation to VE303, for the
prevention of rCDI.
— In April 2023, Vedanta announced a $106.5 million financing to advance its pipeline of defined
bacterial consortia therapies.
Expected milestones
— Vedanta plans to initiate a Phase 3 clinical trial of VE303 in patients at high risk for rCDI in the first
half of 2024.
20 PureTech Health plc Annual Report and Accounts 2023
Founded Entities continued
Sonde
s
e
i
t
i
t
n
E
d
e
d
n
u
o
F
Program discovery
by the PureTech team
Key milestones
achieved and
development status
PureTech Ownership
35.2% equity
Sonde is developing a voice-based artificial intelligence 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.
— 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. We
developed novel intellectual property around this concept and helped advance the technology
from an academic concept to a commercially focused technology.
— In the March 2024 post-period, Sonde announced the publication of a new study that has
validated the ability of the company’s mental fitness vocal biomarker (MFVB) platform to reliably
distinguish individuals with elevated mental health symptoms. The four-week cohort study
revealed a statistically significant correlation between voice-based identification of increased or
decreased mental health risk with the results of the M3 Checklist, a clinically validated mental
health assessment. The research, published in the peer-reviewed journal Frontiers in Psychiatry,
highlights the potential of vocal biomarkers and Sonde’s technology specifically to provide
objective data that can complement clinical care and improve self-monitoring for conditions like
depression, stress- and trauma-related conditions, and anxiety.
— In May 2023, Sonde announced the publication of new research that demonstrates the ability of
its respiratory responsive vocal biomarker (RRVB) machine learning model to differentiate
patients with COVID-19 from healthy individuals with about 70% accuracy. The peer-reviewed
study, which was published in the Journal of Medical Internet Research, suggests the RRVB tool
could serve as a pre-screening tool for acute respiratory infection and pave the way for the
development of voice-based tools for future disease detection and monitoring applications.
— In February 2023, Sonde and the Massachusetts General Hospital Frontotemporal Disorders
Unit announced they had been selected by the Massachusetts Artificial Intelligence and
Technology Center for Connected Care in Aging & Alzheimer’s Disease (MassAITC) to lead
a pilot study focused on leveraging vocal biomarkers for remote detection and monitoring of
mild cognitive impairment in the home environment. Funded by MassAITC and the National
Institute on Aging, a division of the U.S. National Institutes of Health, the project is part of
a $1.7 million grant to explore the use of artificial intelligence and other advanced technologies
for in-home care. Specifically, it will evaluate the feasibility of obtaining voice recordings of older
individuals in the home environment that can be used to longitudinally monitor speech and
memory functions.
Expected milestones
— Sonde is working to develop a cognitive fitness or Mild Cognitive Impairment vocal biomarker
health tracking capability by late 2024.
PureTech Health plc Annual Report and Accounts 2023 21
Founded Entities continued
Entrega
Program discovery
by the PureTech team
Key milestones
achieved and
development status
F
o
u
n
d
e
d
E
n
t
i
t
i
e
s
PureTech Ownership
73.8% equity
Entrega is focused on the oral administration of biologics, vaccines and other drugs that
are otherwise not efficiently absorbed when taken orally. The vast majority of biologic
drugs, including peptides, proteins and other macromolecules, are currently administered
by injection, which can present challenges for healthcare administration and compliance
with treatment regimes. Entrega believes oral administration thus represents an ideal
administration approach for this increasingly large class of therapies reshaping many areas of
medicine, including the treatment of diabetes and weight loss.
Entrega’s technology platform is an innovative approach to oral administration which uses
a proprietary, customizable hydrogel dosage form to control local fluid microenvironments
in the GI tract in an effort to both enhance absorption and reduce the variability of drug
exposure. Peptide therapeutics (e.g., the emerging GLP-1 agonist class) are ideally suited to
benefit from Entrega’s approach.
— We were interested in enabling the oral administration of biologics, which has been a long-
standing problem in drug development. We engaged with leading experts in drug
administration, including Robert Langer, Sc.D., screened over 100 technologies and the initial
platform was licensed from Samir Mitragotri, Ph.D., when he was Professor of Chemical
Engineering at UC Santa Barbara (currently Hiller Professor of Bioengineering and Hansjorg Wyss
Professor of Biologically Inspired Engineering at Harvard University). We later enhanced this
platform with intellectual property developed by our team.
— In 2023, Entrega demonstrated increased oral peptide bioavailability of two- to three-fold over
standard permeation enhancer formulations.
— Entrega continues to advance its platform for the oral administration of biologics, vaccines and
other drugs that are otherwise not efficiently absorbed when taken orally. To validate its
technology, Entrega generated preclinical proof-of-concept data demonstrating administration
of therapeutic peptides into the bloodstream of large animals.
NOTE: The disclosure requirement relating to our Section 172 Statement for inclusion in this report has been incorporated by way of
cross reference to Relations with Stakeholders
22 PureTech Health plc Annual Report and Accounts 2023
Building and maintaining
a sustainable business
ESG report PureTech Health plc Annual Report and Accounts 2023 23
ESG report
E
S
G
r
e
p
o
r
t
Patients
We are committed to giving life to new classes
of medicine to change the lives of patients with
devastating diseases.
People
Our dedicated and talented workforce is vital
to achieving success in all that we do.
Planet
We aim to deliver high standards of
environmental leadership to protect natural
and human capital.
Governance
Our work would not be possible without trust
– it is a core value on which our success
depends, and the foundation of our
relationship with our stakeholders.
ESG report
24 PureTech Health plc Annual Report and Accounts 2023
ESG report
At PureTech, our commitment to sustainability through strong
Environmental, Social and Governance (ESG) practices remains
steadfast. As we work to give life to new classes of medicine
to change the lives of patients with devastating diseases, we
recognize that maintaining a sustainable business is essential.
“At PureTech, we believe that cultivating social and
environmental sustainability is key to achieving our mission
of transforming patients’ lives. In 2023, thanks to the
passion of our people, we continued to strengthen our
oversight and delivery of our sustainability strategy. But our
work is never done. As we continue pursuing scientific
breakthroughs, we renew our pledge to deepen our
sustainability efforts in the years ahead. Our future
depends on forging an enterprise where human health,
business growth and planetary well-being
evolve together.”
Kiran Mazumdar-Shaw: Chair of the ESG Committee
We appreciate the dedication of our valued
stakeholders, both our employees and external
partners. Their insights and collaboration will be
crucial as we lay the groundwork for our future
ESG efforts.
Our governance structure supports our ESG
program via our cross-functional ESG
Committee. They provide guidance and
oversight, championing major initiatives
across environmental sustainability, social
responsibility, ethics and transparency. For 2023
and beyond, we aim to build upon existing ESG
efforts. Sustainability is integral to our purpose;
through collaboration and accountability, we
create shared, lasting value.
This is our fourth annual sustainability report
detailing our ESG strategy, performance and
ongoing progress. This report was developed
based on feedback from our stakeholders and
metrics used by corporate responsibility and
sustainability rating providers. Over the
following pages, we outline our long-standing
commitment to Patients, People and Planet and
the actions we have taken in 2023 to embed
responsible business practices in all that we do.
The data provided in this report cover the
period from January 1, 2023, through
December 31, 2023, 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 50 to 52.
— The United Nations Sustainable
Development Goals (SDGs), see
pages 28 to 29.
— The Task Force on Climate-related Financial
Disclosures (TCFD) framework, see
pages 54 to 58.
ESG report ESG report continued
PureTech Health plc Annual Report and Accounts 2023 25
E
S
G
r
e
p
o
r
t
In 2023, we continued to enhance our
disclosures and transparency by aligning our
reporting with best practice frameworks. We
strengthened our partnerships on sustainability
in alignment with SDG 17, creating impact
through collaboration. Our cross-functional
ESG working group closely monitored
emerging regulations and engaged with
industry partners to stay ahead of evolving
stakeholder expectations. On the governance
front, we continued to engage an external ESG
expert to strengthen disclosures and ensure our
ESG governance reporting and implementation
remains best in class.
Our Approach
At PureTech, we remain committed to
developing transformative therapies for those
who need it most. We identify disease areas with
high unmet needs and leverage our expertise to
create improved treatments. Our mission is to
deliver safe, effective, and sustainable
medicines that dramatically improve
patients’ lives.
With the potential to significantly benefit many,
we must ensure our work reflects responsibility
and sustainability across ESG impacts. As our
business grows, our approach must
demonstrate an unwavering pledge to
continuous enhancement and pioneering new
medicines that address persistent
patient needs.
We constantly challenge ourselves to elevate
standards, amplify underserved voices, and
promote conscientious progress. Our
dedication to exceed expectations will guide
decisions small and large to build a healthier,
more equitable world.
PureTech participates in various third party ESG
Risk Ratings to evaluate our exposure to material
industry-specific ESG risks. The assessment
process and its results guide our ESG program
with a goal to improve our initiatives each year.
In 2023, we participated in and received positive
ratings from Sustainalytics, ISS, CDP and FTSE
Russell. This reflects our commitment and
continuous efforts to contribute to
a sustainable future.
Our ESG assessment
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. The process seeks to
identify and integrate material ESG issues that are relevant for our business. We refresh this process
on an annual basis, to ensure our strategy reflects the most material ESG issues to our business and
that the refinement of our approach matches the evolving ESG landscape. The process involves the
following six steps:
1.
2.
3.
4.
5.
6.
Engage with an external ESG stakeholder to guide our ESG next steps, including
shareholders, B corp certified ESG advisors, and sustainability rating providers
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
26 PureTech Health plc Annual Report and Accounts 2023
Our ESG framework
Based on the outcomes of our ESG
Assessment, 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 46 to 50), which helps us to
deliver our mission, strategy and purpose
in a consistent and responsible way.
PATIENTS
We are committed to giving life to new classes
of medicine to change the lives of patients with
devastating diseases.
Our goal is to achieve this through the innovative,
safe and ethical discovery, development and
commercialization of highly differentiated medicines.
See pages 30-33 for more.
2023 highlights
This ESG Report contains disclosure of ESG metrics and activities
that are relevant to PureTech’s business strategy. The ESG metrics
and activities disclosed in this report were evaluated by
PureTech’s ESG Committee.
The UN SDGs
The ESG data contained in this report is generally disclosed at
PureTech level only and is in accordance with UK rules contained
in the Companies Act covering the reporting of energy and
emissions data.
ESG Oversight
— Continued to strengthen 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.
— Ran peer review and market analysis to identify areas
of improvement, including assessment of emission
target setting.
— Monitored and assessed the evolving ESG regulatory
landscape to ensure we remained compliant with various ESG
frameworks we may be subject to, including the monitoring
of the European Sustainability Reporting Standards (ESRS),
Corporate Sustainability Reporting Directive (CSRD), EU
Sustainable Finance Framework, Corporate Sustainability
Due Diligence Directive (CSDDD) – all of which do not impact
PureTech at this stage .
— Received positive ESG ratings from Sustainalytics, ISS, CDP
and FTSE Russell.
29 therapeutic and therapeutic candidates
generated from PureTech’s R&D
14 clinical indications being pursued by PureTech
or its Founded Entities
2 therapeutics taken from inception at PureTech
to FDAand EU regulatory clearances
1 filed for FDA approval
80% of clinical trials have been successful1
6X better probability of clinical success
compared to the industry average2
ESG report PureTech Health plc Annual Report and Accounts 2023 27
E
S
G
r
e
p
o
r
t
PEOPLE
PLANET
Our dedicated and talented workforce is vital
to achieving success in all that we do. We foster
a supportive and engaging environment where all
employees can thrive, by investing in their growth,
promoting inclusion, and welcoming diverse
backgrounds and perspectives. This allows us to tap
into the full potential of our team to drive innovation
and benefit the lives of others.
We aim to deliver high standards of environmental
leadership to protect natural and human capital.
While our environmental footprint remains
comparatively small, we recognize our responsibility in
measuring and managing our impact to contribute to
effective climate solutions.
See pages 34-39 for more.
See pages 40-45 for more.
The UN SDGs
The UN SDGs
12% within FTSE250 by FTSE Women Leaders Review
for surpassing Board and leadership gender
balance target3
73% less energy consumed at the Boston HQ
compared to the 2030 Challenge baseline
Top 7 within FTSE350 healthcare sector
for women in leadership
28% fewer GHG emissions generated at the Boston HQ
compared to the 2030 Challenge baseline
Top 30 within FTSE250 for female board
membership inclusion
1 of only 8 FTSE250 companies to have
exceeded the 2024 target
of more than two minority
ethnic directors4
50% C-Suite is female5
1 The percentage includes number of successful trials out of all trials run for all
therapeutic candidates advanced through at least Phase 1 by PureTech or its
Founded Entities from 2009 onward.
2 Calculated based on the aggregate PureTech data including all therapeutic
candidates advanced through at least Phase 1 by PureTech or its Founded Entities
from 2009 onward and the industry average data. 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=52%). BIO, PharmaIntelligence,
QLS (2021) Clinical Development Success Rates 2011-2020. This study did not include
therapeutics regulated as devices.
3 FTSE Women Leaders Review, 2024.
4 Parker Review, Improving the Ethnic Diversity of UK Boards, 2023.
5 Board composition as of December 31, 2023.
Our ESG framework continued
28 PureTech Health plc Annual Report and Accounts 2023
Supporting the UN Sustainable Development Goals
The United Nations 17 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.
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 11 to 21) 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.
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 34 to
39). This is reflected in the fact that our
female employees represent 58% of our
workforce – 10% higher than the
average Scientific Research and
Development services sector based
on the US Bureau of Labor Statistics.6
We are proud to have 43% gender
diversity at the Board level, which
placed PureTech within the top 30
FTSE250 companies.7
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 10 to 21).
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 page 35).
Goal 8: Promote sustained, inclusive
and sustainable economic growth,
full and productive employment and
decent work for all
We support our staff by ensuring
excellent working conditions and
offering a comprehensive benefits
package to all employees across our
business operations (see page 37).
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 36).
Goal 12: Ensure sustainable
consumption and production patterns
Responsible consumption and
production are fundamental to
sustainable development. We engage
with external experts, including
a Ecovadis Silver rated sustainable
environmental solutions provider 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, including single stream
recycling, e-waste recycling, green
cleaning policy, and an Integrated Pest
Management (IPM) program using least
toxic pesticides, managed by our
property manager, Related Beal
Management (RBM) (see page 45).
ESG report Supporting SDGs continued
PureTech Health plc Annual Report and Accounts 2023 29
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 54 to 58
for our 2023 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.
Goal 17: Strengthen the means of
implementation and revitalize the
global partnership for sustainable
development
At PureTech, we recognize the
importance of building partnerships
and collaborations to drive progress on
the Sustainable Development Goals.
Over the past year, we have focused on
fostering partnerships with health
initiatives to advance our community
engagement.
For People: We partner with local
organizations in the world’s number 1
biotech hub to source a top tier
sustainable and diverse pipeline of
talent to deliver on our mission for
patients (see pages 34 to 39 for
more details).
For Patients: We collaborate with
patient resource groups such as PF
Warriors and Pulmonary Fibrosis
Foundation (PFF), to advance
awareness, education and clinical
research initiatives for the therapeutic
area we are advancing medicines in (see
page 31 for more details). By lending
our scientific expertise, we help
broaden the reach and impact of these
groups in building understanding and
driving funding for additional research.
As we look ahead, we remain
committed to leveraging the power of
partnerships across the private, public
and nonprofit sectors to deliver on our
social mission and drive progress on the
SDGs most closely connected to
our business.
6 U.S. Bureau of Labour Statistics, Labor Force
Statistics from the Current Population Survey, 2024.
7 FTSE Women Leaders Review, 2024.
ESG report 30 PureTech Health plc Annual Report and Accounts 2023
Our ESG framework continued
t
r
o
p
e
r
G
S
E
s
t
n
e
i
t
a
P
PATIENTS
As a clinical stage biotherapeutics company, our mission is to address devastating diseases and improve patient health worldwide
through innovative medicines. To accomplish this goal consistently and ethically, we focus our sustainability efforts on three key areas
that enable patient support:
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 programs in 2023 through the
expertise of our dedicated team and in collaboration with our
extensive network of scientists, clinicians and industry leaders.
For details on our programs, please see pages 10 to 21].
E
E
S
S
G
G
r
r
e
e
p
p
o
o
r
r
t
t
P
a
t
i
e
n
t
s
Our ESG framework continued
PureTech Health plc Annual Report and Accounts 2023 31
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 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.8
Our initiatives:
Our awareness campaign to informs IPF patients and caregivers
worldwide of our investigational treatment in development. Our
initiative creates inclusive resources to engage both patients and
caregivers in clinical trials.
In September 2023, we continued our efforts to promote
Pulmonary Fibrosis Awareness Month to raise awareness of IPF
and to serve as inspiration for our employees. During this month
we hosted a lunch and learn with Dr. Lisa Lancaster to understand
the evolution of IPF trials and the patient experience. During an
employee town hall, members of the Social and Culture
Committee led the discussion on IPF and conducted the ‘Pucker
Up Challenge”. We also held an all-employee walk in taking steps
toward a cure.
In February 2023, we celebrated Rare Disease Day in which
employees wore stripes to show support for rare diseases such as
IPF. The idea is to raise awareness for the over 7,000 rare diseases
that impact millions of people globally and to advocate for
health equity.
2-5 Years Median survival8
Rare disease day
All-Employee walk
PF Warriors
>232,000 People are affected by IPF
in the US and EU9,10
~75% IPF patients not on standard of care therapy11
2 FDA approved branded drugs on the market with significant
tolerability issue
Consistent with our commitment to improve the care of patients
with IPF, we partnered with the Pulmonary Fibrosis Foundation
(PFF) in 2023 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.
In November 2023, we established an educational grant
partnership with PF Warriors to advance their awareness,
education and clinical research initiatives for pulmonary fibrosis
patients. PF Warriors is an international support network
delivering vital assistance, education, inspiration and hope to
pulmonary fibrosis patients and families. Through such strategic
alliances, we aim to empower patient advocacy groups creating
real change for those living with PF. Our grant upholds our
commitment to foster greater understanding of this disease while
accelerating essential efforts to improve patient
health outcomes.
8 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
9 GlobalData Epidemiology and Market Size Search.
10 United Kingdom, France, Germany, Italy and Spain
11 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
32 PureTech Health plc Annual Report and Accounts 2023
Patients
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 President is responsible for ensuring that PureTech follows all
US and applicable international regulatory requirements and
standards and applicable bioethics principles. In 2023, 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 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 2023, we
spent $110.5 million on research and development projects to
develop new and innovative therapeutics (see page 73 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. We have robust policies
relating to Good Manufacturing Practices (GMP) and regulatory
inspections to reinforce ethics into our processes and we are in
the process of implementing additional policies on quality and
risk management.
Environmental factors remain integral in our R&D as we aim to cut
back or remove hazardous chemicals from our R&D procedures.
We also stay current on the newest green chemistry
advancements and strive to implement eco-friendly design
principles. In 2023, we managed to optimize some of our
large-scale drug substance processes to replace more hazardous
solvents that negatively impact the environment.
Commitment #1:
Addressing unmet medical needs
s
t
n
e
i
t
a
P
Our team is dedicated to providing therapeutics for unmet
medical needs. We leverage the substantial groundwork laid by
the biopharmaceutical industry, which has dedicated decades to
discovering novel modalities and proving efficacy in patients.
Despite these advancements, barriers have prevented important
new medicines from reaching their full potential. Through our
unique insights, we aim to realize the full promise of these vital
new therapeutics for patients in need. With our cutting-edge
R&D efforts, we are targeting these gaps while creating long-
term value for both patients and shareholders.
Commitment #2:
Ensuring patient safety
Patient safety remains our utmost priority informing all aspects of
our work. Our committed research team, in conjunction with
external partners, adheres to strict procedures, processes and
guidelines to ensure clinical trial and R&D integrity. Through
diligent oversight and responsible development practices, we
seek to uphold patient wellbeing at every stage.
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.
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 to ensure
patient oversight which includes effective policies and protocols
such as our Safety Management Plans and Medical Monitoring
Plans, which helps us to monitor, review and act on any incidents.
All protocols are compliant with ICH E6 (R2) per FDA regulations
and most of our studies have Independent Data Safety
Monitoring Committees.
Our ESG framework continuedESG report PureTech Health plc Annual Report and Accounts 2023 33
Bioethics: Animal Research
Animal research continues to play a vital and irreplaceable part in
progressing drug discovery, as it assists scientists in addressing
biological uncertainties.
Ensuring Drug Efficacy and Safety
None of the therapeutic candidates being advanced internally or
by PureTech’s Controlled Founded Entities are currently
on the market.
P
a
t
i
e
n
t
s
Therefore, in 2023, 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.
Generating 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.
PureTech conducts animal testing only when necessary, in line
with the FDA Modernization Act 2.0, to further the development
of therapeutics and is mandated by regulatory bodies, before
human trials of new medications can proceed.
We follow the guidelines outlined under the USDA Animal
Welfare Act and are dedicated to the human and ethical
treatment of animals. Studies involving animals are evaluated and
approved by the Executive Team and are carried out at external
qualified and certified vendors that fulfil our standards and
anticipated practices for animal care, welfare and handling.
Whenever we contemplate animal testing, we are devoted to
applying the replacement, reduction and refinement of animal
studies (3Rs).
— Replace
We use alternative methods to animal testing
wherever possible.
— Reduce
We use the minimum number of animals in trials.
— Refine
We minimize pain, suffering and distress, and improve the
welfare of animals used in trials.
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
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.
Our ESG framework continuedESG report
34 PureTech Health plc Annual Report and Accounts 2023
“People are at the forefront of our work
– and the drivers behind it. Their care
and commitment are the heartbeat of
our success, and the cornerstone of our
ESG strategy. As we drive positive social
impact, our unwavering dedication to
both life-changing medicines and our
exceptional team ensures a sustainable
legacy of success”
Bharatt Chowrira, CEO
l
e
p
o
e
P
PEOPLE
Our people are an essential part of transforming our vision into a reality. Thanks to their work ethic, passion and dedication, we are able
to deliver cutting-edge, innovative therapeutics that benefit patients’ lives and bring long-term value for our stakeholders.
It is our firm belief that an inclusive and supportive working environment is fundamental to creating a collaborative, safe space where
our colleagues can grow and excel. To achieve this, we are committed to delivering on the following four pillars:
Commitment #1:
Commitment #3:
Building a diverse, equitable
and inclusive workplace
Maintaining a robust
Employee Health
and Safety (EHS) program
Commitment #2:
Promoting employee
development to attract
and retain the best talent
Commitment #4:
Strengthening engagement
and collaboration between
people, communities
and partners
Our employees are predominantly located near our headquarters in Boston, MA, with three individuals based in London. As of
December 31, 2023, we had a total of 90 employees. Of these, 47 employees work in R&D roles while 43 are engaged in PureTech’s
general and administrative functions.
Our ESG framework continuedESG report PureTech Health plc Annual Report and Accounts 2023 35
We have been recognized in the 2023 FTSE Women Leaders
Review for our dedication to championing diversity in senior
leadership positions. Moreover, we are proud to set an example
in the industry, having been ranked the top 2% within the
FTSE350 healthcare sector for women in leadership.13
P
e
o
p
e
l
Our detailed Board and Executive Management diversity data is
set out in page 53 of this report as required by the Listing Rules
LR 9.8.6(10) Annex 2.1. Data is for the PureTech Board and
Executive Management as of December 31st, 2023. Numbers in
this table are based on how individuals identify themselves.
Promoting Cultural Diversity
It is important to us that alongside our efforts to champion
gender equality, we promote and celebrate cultural diversity
within our firm and the communities we serve.
We are compliant with the US Equal Employment Opportunity
Commission’s requirement to file an annual EEO-1 Report,
disclosing employment data about job categories as well as the
ethnicity, race and gender of our employees. This process
ensures that we maintain transparency and accountability across
our business and allows us to identify target areas for further
improvement regarding diversity, equity and inclusion.
In 2023, our employee-led Cultural and Social Committee
continued its work to support the enhancement of cultural
diversity in our workplace. Established in 2021, this collaborative
committee dedicates itself to creating programs that celebrate
diversity, promote equality, and foster respect and inclusion.
Examples of the Committee’s initiatives in 2023 included:
Marking International Women’s Day
In March, we celebrated International Women’s Day, a global day
dedicated to recognizing the social, economic, cultural, and
political achievements of women. To mark this occasion, we
circulated company-wide educational materials and event
resources, to help colleagues learn more about the history of
women’s rights and their invaluable contributions to society, as well
as current ways in which colleagues can get involved in supporting
this mission. We are proud to play our part in this important global
initiative by commemorating women’s achievements, raising
awareness about discrimination, and encouraging action to drive
gender parity.
Celebrating LGBTQ+ Pride Month
In June, we marked LGBTQ+ Pride Month by celebrating the
profound impact lesbian, gay, bisexual, and transgender
(LGBTQ+) individuals have made in past and continue to make on
our present and future. Throughout the month we celebrated in
many ways, including:
Commitment #1:
Building a diverse, equitable and inclusive workplace
Diversity, Equity and Inclusion
We know that the best ideas are brought to life when we combine
our different perspectives, talents and skills to unlock our
maximum potential as an organization. That is why we value having
a diverse, equitable and inclusive work environment in which all our
colleagues are treated with utmost fairness, kindness, and respect.
Under PureTech’s Formal Policy, we are strictly committed to
treating all employees and qualified applicants 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, equity and inclusion is embedded
across every aspect of our employment practices and
encompasses all stages from hiring, job assignment, promotion
and compensation to discipline, discharge, benefits and training.
Championing Gender Diversity
For us at PureTech, it is a deep source of pride that we champion
gender diversity and equality in the medical industry, as well as in
our workplace.
We are strongly committed to promoting diverse teams across
both our leadership and employee level, to ensure an equitable
environment in the business. We are consistently taking
significant steps forward in integrating diversity at a leadership
level, as we believe that a diverse board and senior management
team leads to stronger performance, retention of exceptional
talent and greater shareholder value.
We have achieved gender parity at Board level as of December 31,
2023, with 43% women and 57% men making up our senior
leadership team, whilst also continuing to enhance the gender and
cultural diversity of our wider management team and workforce.
Total
employees
Senior
management and
their direct reports12
Board
Gender
2022
2023
2022
2023
2022
2023
111
90
40
31
9
7
Total
Female
50%
58%
48%
48%
44%
43%
— Sharing resources with colleagues spotlighting LGBTQ+ life
56
52
19
15
4
3
science professionals
Male
50%
42%
52%
52%
56%
57%
55
38
21
16
5
4
12 This references senior management who we deem to be our Management Team.
See page 85 of our 2023 Annual Report and Accounts for the current listing of our
Management Team.
13 FTSE Women Leaders Review, 2024.
Our ESG framework continuedESG report
36 PureTech Health plc Annual Report and Accounts 2023
People
Commemorating Juneteenth
In June 2023, we honoured Juneteenth, the day dedicated to
commemorating the emancipation of slavery in the US. To learn
more about the legacy of this historical event, we distributed
resources to employees highlighting the context, events and
significance of Juneteenth. In addition to this, we supported local
African-American businesses through catering orders for
company events. As of 2023, we have also added June 19th as
a company holiday to observe this important day in history.
l
e
p
o
e
P
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 our top priorities
at PureTech.
Recruitment and Retention
As our programs advance and our business rapidly evolves, the
PureTech team has evolved with it over the course of years. While
the prioritization of our pipeline led to a scale-back of our R&D
operations in 2023, our recruitment strategy remains unchanged,
as we continue to focus on developing a skilled and diverse
pipeline of talent.
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 2023,
we welcomed 4 interns through our various programs.
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 2023, 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, broaden their expertise and
deepen their knowledge. To achieve this, we offer an extensive
range of training 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
Total number of employees
Year-over-year growth (%)
Employee turnover (%)
2022
111
16.8%
30.62%
2023
90
(18%)
44.1%
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
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. Our engagement in cooperative education
programs offers students real-world experience aligned with
their academic pursuits. By welcoming undergraduate co-op
students for six-month paid internships in our Research
department, we continue to fortify our talent acquisition pipeline.
Additionally, active participation in life science career fairs
enables us to identify and attract skilled candidates, ensuring we
have a strongly dynamic team working towards our innovative and
sustainable initiatives.
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
Employee safety training
— Mandatory annual safety training provided to all employees
in accordance with the Occupational Safety and Health
Administration (OSHA)
— Mandatory Personal Protective Equipment (PPE) policy
training provided to all lab staff year round
Our ESG framework continuedESG report
PureTech Health plc Annual Report and Accounts 2023 37
Employee Benefits
The physical, financial, social and emotional well-being of our
employees is paramount to us at PureTech. To support this, we
provide a range of benefits for our 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
PPO or HMO plan
— Health Reimbursement Account (HRA)
— Pre-tax parking and transit benefits
— Dental plan
— Benefits continuation (COBRA)
— Gym membership in addition to an onsite gym facility
— Vision plan
— Paid parental leave (Up to 12 weeks)
— Entertainment discounts
— Short-term and long-term disability plan
— Onsite nursing and wellness room
— Life insurance
— Employee led Social Committee
— 401(k) retirement plan with 3% non-elective contribution
by the company
— Employee led Cultural Committee
— Medical FSA
— Life insurance
— Performance share plan
— Onsite free snacks & drinks
— Dependent Care FSA
— Medical FSA
— One-on-one financial coaching
— Flexible working plans
— Dependent Care FSA
— Technology reimbursement program
— 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 2023, our company does not have any employees who are
covered by collective bargaining agreements or are affiliated with
trade or labour unions. While we currently operate without such
arrangements, we respect the rights of our employees, and
support their freedom of association and the option
collective bargaining.
Commitment #3:
Maintaining a robust Employee Health and Safety (EHS) program
P
e
o
p
e
l
It is our unyielding commitment to provide a healthy and safe
working environment for our employees that supports their
physical and mental wellbeing. Amid the challenges posed by the
COVID-19 pandemic, our unwavering commitment to employee
well-being has been paramount. We continue to prioritize the
health and safety of our team, alongside implementing
comprehensive and regularly updated action plans to ensure
business continuity. In 2023, we have continued to evolve our
COVID-19 practices in response to guidance from scientific
communities and local/national government. We monitor the
local and national COVID-19 levels to ensure our practices keep
staff safe. We provide all staff access to free COVID tests and
masks to be used when the individual deems it necessary. Onsite
staff are encouraged to use our hybrid working model when they
are not feeling well.
EHS Governance
We have a robust Employee Health and Safety program in place
that ensures adherence to all EHS-related activities including
employee safety training, lab safety protocols and emergency
action planning.
Our EHS activities are overseen by an Emergency Coordinator
and Safety Officer with support from an external EHS expert who
is certified through the National Registry of Certified
Microbiologists (NRCM) and is a Certified Biosafety Professional
(CBSP) and Registered Biosafety Professional (RBP) through the
American Biological Safety Association (ABSA).
PureTech’s EHS team is led by a Safety Officer and Emergency
Coordinator per the requirements of OSHA. The roles and the
responsibilities involved are as follows:
Safety Officer
— Fulfils the role of 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.
Our ESG framework continuedESG report 38 PureTech Health plc Annual Report and Accounts 2023
People
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.
Commitment #4:
Strengthening engagement and collaboration between people,
communities and partners
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:
l
e
p
o
e
P
— Mandatory annual safety training provided to all lab
employees in accordance with the Occupational Safety
and Health Administration (OSHA)
— Mandatory refresher Personal Protective Equipment (PPE)
training provided to all lab staff
— Mandatory RCRA hazardous waste refresher 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.
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.
Stakeholder engagement and collaboration is the foundation of
innovation and key to unlocking new solutions that profoundly
transform the lives of patients.
As such, we take great care to invest in and promote a positive
and interconnected company culture among our stakeholders,
while ensuring we make a meaningful difference to the
communities closest to us.
Employee Engagement
We are proud of our series of initiatives to promote employee
engagement, which are met with resounding enthusiasm and
appreciation from our colleagues:
Employee Intranet, a Connection Hub
— Our Employee Intranet features important company
information and employee resources in one easily accessible
portal, including company news, new hire highlights,
upcoming company events, employee directory, a social
gallery and an opportunity to provide feedback.
Employee Value Recognition
— In 2023, we added an Employee Value Recognition section to
the Employee Intranet platform, providing employees with
the opportunity to nominate their colleagues for their hard
work and recognize the ways in which they uphold PureTech’s
core values. All submitted value recognitions are then shared
and celebrated at the following companywide town hall.
Employee-led Cultural and Social Committee
— Our dedicated Cultural and Social Committee, run by our
employees, plan and host D&I-related programs and events,
with the aim of fostering engagement and cementing a sense
of community and belonging for our people.
Employee Engagement
— We have an open-door policy to encourage employee
feedback and to better understand our employees’ needs,
concerns, and satisfaction rate. In 2023, we held a series of
employee value and cultural workshops during a company
retreat. See more in Employee Retreat.
Our ESG framework continuedESG report
PureTech Health plc Annual Report and Accounts 2023 39
Community Engagement
As a longstanding member of Boston’s thriving biotech hub, we
are committed to giving back to our community in as many ways
as we can, to help make a difference. In 2023, we contributed to
several community initiatives and charitable events,
which included:
P
e
o
p
e
l
The Greater Boston Food Bank – Hunger Free Holidays
Campaign
— In November 2023, 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 matched up to $10,000 in employee donations
in support of this cause.
School on Wheels
— PureTech invited School on Wheels to come in and present
during our monthly Town Hall to talk to us about their mission
and goals. Following this, our employees assembled 144
backpacks filled with supplies purchased by PureTech to
donate to students impacted by homelessness. In addition to
this, PureTech made a donation to LifeScience Cares, enabling
employees to have priority access to volunteer opportunities
there both in-person and virtual.
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 2023, we hosted onsite 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 continued to host our 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.
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 meditation session
to help employees unwind.
Employee Retreat
— In 2023 we organized a companywide offsite retreat,
welcoming all employees and their families to come
together and join in on the fun. Team bonding exercises and
workshops included encouraging individuals to come up
with words and ideas they associate with PureTech’s 5 key
values: Excellence in Everything We Do, Respect for People,
Entrepreneurial and Scrappy, Dance to Our Own Tune, Trust
and Integrity. The resulting word cloud reflecting employees’
perceptions perfectly encapsulated our company culture –
a clear testament to the unity amongst team members and
alignment of values.
Image: PureTech values by employees.
Our ESG framework continuedESG report 40 PureTech Health plc Annual Report and Accounts 2023
“Our commitment to the planet remains
unchanged. While recognizing we have
more work to do, we are constantly
looking at ways to improve to reduce
our environmental impact. The
leadership team understands our
obligation to protect natural resources
for future generations. Through
accountability and transparency, we aim
to drive meaningful progress.”
David Carney, VP and Head
of Operations
t
e
n
a
P
l
PLANET
The deep interconnection between planetary and human health continues to reveal itself through trends like shifting disease vectors,
extreme weather events, changing pollen patterns, and disrupted access to clean air and water. As we emerge from the COVID-19
pandemic, we have an increased understanding of how environmental factors directly impact public health outcomes. At PureTech, we
recognize our responsibility to account for and mitigate the detrimental effects our operations may have on communities already
burdened by issues like pollution, biodiversity loss, water scarcity, and the mounting health consequences of climate change. By
comprehensively analyzing our environmental footprint, we aim to benefit both people and planet.
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 #3:
Sustainable facility
operations
Commitment #2:
Strengthen our waste
management process
Our ESG framework continuedESG report PureTech Health plc Annual Report and Accounts 2023 41
Commitment #1:
Transparent GHG emissions disclosures
All carbon dioxide emissions and energy consumption figures
relate to global operations. PureTech Health PLC is listed on the
London Stock Exchange but operates in the United States of
America. Therefore, emissions and energy consumption figures
in this report relate to emissions in offshore areas.
l
P
a
n
e
t
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 to
1.5ºC 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 54 to 58 for details
of our TCFD report) to develop a robust climate-related target.
Streamlined Energy & Carbon Reporting
The section below, prepared by Verco, includes our fourth year of
reporting under the Streamlined Energy & Carbon Reporting
(SECR’) requirements. Verco is a leading sustainability and carbon
consultancy with a 30-year track record supporting its clients to
understand policy risks and delivering compliance services.
Verco draws upon its considerable expertise and experience to
ensure that the requirements of the SECR regulation are met.
The reporting period is the same as the Company’s financial year,
January 1, 2023, to December 31, 2023.
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 (‘Regulations’). These sources fall within the
Company’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 Company is responsible.
The emissions sources that constitute our boundary for the year
ending December 31, 2023, are:
— Scope 1: Natural gas combustion;
— Scope 2: Purchased electricity for our own use; and
— Scope 3: Fuel used in personal/hire cars for business use,
business travel, waste, water, well-to-tank emissions, and
T&D emissions associated with electricity consumption.
Please note that Scope 3, aside from fuel used in personal/
hire cars, is voluntary disclosure going beyond the
Regulation requirements.
Methodology
We employed the services of a specialist adviser, Verco, to
quantify and verify the Greenhouse Gas (GHG) emissions
associated with our 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 our activity data to calculate
GHG emissions;
— For Scope 2 reporting, the application of appropriate
emission factors to electricity consumption data to calculate
location-based and market-based GHG emissions;
— Presentation of gross emissions; no net figures are provided
as the Company does not purchase carbon credits
(or equivalents);
— Inclusion of all applicable Kyoto gases, expressed in carbon
dioxide equivalents, or CO2e;
— Presentation of annual energy use, expressed in
kilowatt-hours, or kWh;
— The following assumptions have been used due to data not
being obtainable or unable to be confirmed by the time
of this report:
– As supplier-specific generation mix information was
unavailable, the United States Environmental Protection
Agency (‘EPA’) and the Department for Environment, Food
& Rural Affairs (‘DEFRA’) residual fuel mix emissions factors
have been used to calculate market-based emissions.
– 136 Harrison Avenue did not have electricity consumption
data available. Verco estimated the figure by applying
Real Estate Environmental Benchmarks (‘REEB’) and
Building Energy Efficiency Survey (‘BEES’) benchmarks to
the floor area.
– PureTech Health PLC have provided the total mileage
claimed by employees for business travel in personal cars
across the reporting period. Verco have used a relevant
emissions factor, for an average car size, to calculate the
associated emissions.
– PureTech Health PLC have provided the total mileage of
flights taken by employees for business travel throughout
the reporting period. Verco have used a relevant
emissions factor, for domestic US flights, to calculate the
associated emissions.
Our ESG framework continuedESG report
42 PureTech Health plc Annual Report and Accounts 2023
Planet
Absolute Emissions
The total Scope 1, 2 and 3 GHG emissions from the Company’s operations in the year ending 31st December 2023 were:
— 168.2 tonnes of CO2 equivalent (t CO2e) when using a ‘location-based’ calculation methodology for Scope 2 emissions;
— 168.5 tonnes of CO2 equivalent (t CO2e) when using a ‘market-based’ calculation methodology for Scope 2 emissions.
Scope 1 emissions included natural gas combustion;
Scope 2 emissions included purchased electricity, calculated using both the location-based and market-based methods;
t
e
n
a
P
l
Scope 3 emissions included fuel used in personal cars for business use, business travel, Electricity T&D and WTT emissions,
waste, and water.
Total Energy Use
The total energy use for FY2023 was 423,297 kWh.
2023
2022
excluding Vedanta Biosciences
2022
including Vedanta Biosciences
2021
including Vedanta Biosciences
2020
including Vedanta Biosciences
Electricity
(kWh)
222,667
384,108
1,626,053
519,694
505,075
Electricity/fuel
Gas
(kWh)
21,272
46,059
46,059
85,577
133,430
Mileage
Petrol
(kWh)
179,358
0
0
73,856
513
Total Energy Use
(kWh)
423,297
430,166
1,672,112
679,127
639,018
Note: Consistent with the Company’s consolidated financial statement, the emissions report leading up to FY2022 included our
controlled Founded Entity, Vedanta, data. An increase in energy use for FY2022 was largely driven by the energy consumption at the
Vedanta facility. Vedanta has been deconsolidated as of FY2023.
Intensity Ratio
As well as reporting the absolute emissions, intensity ratios for the Company’s emissions have been provided below. The Company’s
GHG emissions intensity is expressed as tonnes of CO2 equivalent per m2 of floor area and per number of full-time employee (FTE).
These were selected as the most appropriate metrics for the Company, as the majority of emissions result from the operation of the
Company’s premises and employee travel. These metrics are also consistent with previous years.
The intensity ratios are as follows:
— 0.03 t CO2e per m2 of total floor area and 1.87 t CO2e per FTE (location-based method).
— 0.03 t CO2e per m2 of total floor area 1.87 t CO2e per FTE (market-based method).
The intensity ratios for FY2023 have been calculated using a total floor area of 5,018 m2 and total number of 90 full-time employees.
Our ESG framework continuedESG report PureTech Health plc Annual Report and Accounts 2023 43
Baselines and Progress
The Company’s absolute GHG emissions have seen a decrease of approximately 21.9 t CO2e, when using both the location-based and
market-based method for Scope 2 emissions. This can be attributed to a reduction in electricity and gas consumption, as a result of the
termination of the Company’s lease for one of its sites in March 2023. On the other hand, Scope 3 emissions have increased by 27%
compared to FY2022, due to a surge in business travel, particularly flights. The emissions categories CO2/dry ice and third-party
deliveries, which were reported on in FY2022, are not included in FY2023 reporting.
l
P
a
n
e
t
Key figures
GHG emissions
Scope 114
Scope 215
Scope 216
Subtotal
(location-based)
Subtotal
(market-based)
Scope 317
Total GHG emissions
(location-based)
Total GHG emissions
(market-based)
Tonnes
CO2e
tCO2e/
FTE
employee
3.9
56.6
57.0
168.2
0.04
0.63
0.63
1.87
202313
tCO2e/
sq.
metre
0.0305
0.0113
0.0114
0.0633
Tonnes
CO2e
tCO2e/
FTE
employee
10.6
401.2
402.6
411.8
0.05
2.06
2.06
2.11
2022
tCO2e/
sq.
metre
0.001
0.05
0.05
0.05
Tonnes
CO2e
tCO2e/
FTE
employee
116.4
116.9
134.1
134.6
0.56
0.56
0.64
0.64
2021
tCO2e/
sq.
metre
0.02
0.02
0.02
0.02
168.5
1.87
0.0633
413.1
2.12
0.05
134.6
0.64
0.02
107.7
275.9
276.2
–
–
–
0.0215
–
–
251.9
663.7
665.0
–
–
–
–
–
–
329.6
463.8
464.3
–
–
–
–
–
–
13 Total floor area: 5,018 m2 (FY2023) and 5,033 m2 (FY2022) for PureTech Health plc and 8,065 m2 (FY2022) when including Vedanta Biosciences in FY2022. Total number of full-time
employees: 90 (FY2023), 118 (FY2022) for PureTech Health plc and 195 (FY2022) when including Vedanta Biosciences in FY2022. Vedanta Biosciences has been excluded from
reporting in FY2023.
14 Scope 1 being emissions due to natural gas combustion and fuel used in an on-site diesel generator.
15 Scope 2 being electricity (from location-based calculations) purchased for the Company’s own use.
16 Scope 2 being electricity (from market-based calculations) purchased for the Company’s own use.
17 Scope 3 being fuel used in personal/hire cars for business use, business travel, waste, water, well-to-tank emissions, and T&D emissions associated with electricity consumption.
Understanding the Indirect Environmental Impacts of our Business Activities
While our direct environmental footprint as a clinical-stage biotherapeutics company is relatively modest, PureTech recognizes the
broader influence we can have through our strategic investment decisions. Guided by our comprehensive Environmental, Social and
Governance (ESG) framework, we consider environmental and social impacts when assessing potential partner companies, in addition
to governance and ethical practices.
We prioritize business partners that demonstrate accountability through ambitious goals, transparent reporting and full compliance
with all applicable regulations related to emissions to waste, energy usage to diversity, equity and inclusion.
While our own operations may have minimal ecological impact directly, the companies we choose to fund create ripples across
industries and communities worldwide. By selecting partners based on ESG initiatives, we amplify our positive influence. Our
investment decisions shape a rising tide that lifts environmental stewardship, social progress and ethical business practices.
Our ESG framework continuedESG report 44 PureTech Health plc Annual Report and Accounts 2023
Planet
Commitment #2:
Waste Management
t
e
n
a
P
l
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 and Triumvirate for the management of our hazardous medical waste.
Veolia’s Voluntary Protection Programs (‘VPP’) are rated by OSHA and all staff are HAZWOPER certified. Triumvirate is a sustainable
environmental solutions provider helping organizations reduce waste, stay safe and compliant, and manage risk. In 2023, PureTech
produced 1,174lbs (98kg) of biologically and chemically hazardous waste in the course of its research. The majority of this waste is
disposed of through incineration or for fuels blending. Full details of waste generated and treatment methods are shown in the
tables below.
PureTech hazardous waste emissions 2023, 2022, 2021 and 2020 (weight in lbs)
GHG emissions
Hazardous
Non
Hazardous
Regulated Medical
Waste
2023
2022
2021
2020
216
780
1,061
834
721
334
649
115
211
3,343
6,661
5,966
PureTech hazardous waste treatment methods 2023, 2022, 2021 and 2020 (weight in lbs)
GHG emissions
Fuel
Blending
Incineration
Treatment/
Stabilization
Waste to
energy
Landfill
Recycle
2023
2022
2021
2020
1,474
360
858.0
666.0
4,148
217
78.0
48.0
–
–
133.0
160.0
832
3,830
5,776.0
5,567.0
–
–
231.0
75.0
220
50
1,296.0
400.0
Total
1,174
4,457
8,371
6,915
Total
6,674
4,457
8,372.0
6,915.0
The decrease in waste volume was driven by the closure of our lab space due to the scale-back of our R&D operations in 2023, which
also drove the increase in fuel blending and incineration due to hazardous material disposal.
PureTech will continue to monitor these output levels as part of a commitment to keep hazardous waste to a minimum.
Our ESG framework continuedESG report
PureTech Health plc Annual Report and Accounts 2023 45
Commitment #3:
PureTech’s Energy-Efficient Headquarters
PureTech’s headquarters at Innovation Square, 6 Tide Street in Boston, is a bro wnfield 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:18
— 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.
18 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.
Our ESG framework continuedESG report
46 PureTech Health plc Annual Report and Accounts 2023
e
c
n
a
n
r
e
v
o
G
GOVERNANCE
Our work would not be possible without trust – it is a core value on which our success depends, and the foundation of our relationship
with our stakeholders. We prioritize meeting our stakeholders’ expectations by being responsible corporate citizens and holding
ourselves to the highest ethical standards of compliance and transparency. Our approach to Governance, which underpins our focus
on Patients, People and Planet, centers on the following key areas:
Commitment #1:
Establish and maintain
a strong ESG governance
Commitment #3:
Strengthen supply
chain standards
Commitment #2:
Uphold high standard
business ethics
PureTech’s governance framework is described in detail in pages
59 to 122 of this report in line with the UK Corporate
Governance Code.
Our ESG framework continuedESG report PureTech Health plc Annual Report and Accounts 2023 47
Commitment #1:
Establish and maintain a strong ESG governance
Our commitment to measuring, monitoring and improving our
climate-related performance remains in place as we continue to
track our climate-related risks according to the TCFD guidelines
(see pages 54 to 58 for the TCFD Report).
G
o
v
e
r
n
a
n
c
e
ESG Governance
PureTech recognizes the importance of good governance in
delivering positive ESG outcomes, in line with the long-term
objectives of the business. The Board maintains direct oversight
and is ultimately responsible for our performance. Our ESG
strategy is driven by the ESG Committee, which reports directly
to the Board, and guides our approach and provides the
important framework to deliver on this strategy in
a consistent manner.
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. While not part of the
Board of Directors, the ESG Committee, along with other Board
Committees, meets with the Board on a quarterly basis (or as the
need arises) to assess and monitor ESG risks and provide updates
on progress regarding the implementation of strategy.
The ESG committee is composed of a non-Executive Director
and supported by at least one C-Suite Officer, and reports
directly to the Board. The work of the ESG Committee is
supported by a dedicated internal working group, that is
responsible for the implementation of strategy and welcomes
active engagement with shareholders and other stakeholders on
matters relating to ESG and corporate stewardship.
Our TCFD Report, on pages 54 to 58, provides additional detail on
the role and responsibilities of the Board and our Management
Team in the oversight and implementation of our ESG strategy.
Commitment #2:
Uphold high standard business ethics
Sustainability-linked remuneration
As of 2023, we have not set any climate-related targets or
incorporated such targets into our remuneration policies. While
we are cognizant of the ESG preference at large to incorporate
sustainability-related metrics into companies’ executive
remuneration policies, we believe it is most beneficial for our
stakeholders when the remuneration metrics are material to the
business, suitably stretching and clearly linked to the strategy of
the business. 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.
19 Board composition as of December 31, 2023.
20 Board composition as of December 31, 2023.
Board Diversity
The Board and Management continue to recognize the benefits
of diversity and the requirements set out in the FCA Diversity
Policy, as well as the expectations set out in the FTSE Women’s
Leaders Review and the Parker Review. Reflective of this
commitment was our recognition as one of the leading
organizations for Board diversity across the FTSE 250. We take
great pride in the diversity of our leadership team, which at the
end of 2023, PureTech Board and Executive Committee
accounted for:
— 43% gender diversity at Board level19
— 57% cultural diversity at Board level20
Our commitment to championing diversity of gender and
ethnicity in particular has been longstanding. While the Parker
Review called for the appointment of at least one non-Executive
Director from an ethnic minority background by 2021 – “One by
2021” – we had already achieved this target in 2019. We are 1 of
only 8 FTSE250 companies to have met and exceeded the 2024
target with a minority ethnic Chair and more than two minority
ethnic directors in the business, and 1 of only 14 FTSE250
companies with a minority ethnic CEO. The Board is cognizant of
the updated targets set by the Parker Review for the appointment
of an Executive Director from an ethnic minority background by
December 2027. The current composition of our Executive team
positions us to be in alignment with these expectations, and we
will continue to take all aspects of diversity into consideration as
part of our ongoing Board and Executive Management
refreshment.
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 2023.
For details on our gender diversity initiatives, please see page 35.
Our detailed Board and Executive Management diversity data is
set out in page 53 of this report as required by the Listing Rules LR
9.8.6(10) Annex 2.1. Data is for the PureTech Board and Executive
Management as of December 31st, 2023. Numbers in this table
are based on how individuals identify themselves.
Business Ethics
For PureTech, being an ethical business means operating with
transparency to ensure just and inclusive behaviors throughout
our organization and across our day-to-day interactions.
We are committed to acting with transparency, integrity,
professionalism and excellence to uphold deep 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.
Our ESG framework continuedESG report
48 PureTech Health plc Annual Report and Accounts 2023
Governance
It is mandatory for 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.
e
c
n
a
n
r
e
v
o
G
Anti-Bribery and Corruption
PureTech has written policies and reporting procedures in place
on its zero-tolerance approach to bribery and corruption that
have been reviewed and approved by the Board of Directors.
These policies are detailed in 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.
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.
The terms of our Whistleblowing Policy have been formally set
out in the Employee Handbook and published on our intranet. 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 Company without fear of reprisal. This includes an external
hotline to allow employees to report suspected issues,
allegations and concerns anonymously. 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. The results of
these investigations are reported to the Audit Committee.
The Audit Committee is satisfied that the Policy has been
designed in a manner that encourages staff to report suspected
wrongdoing as soon as possible and provides guidance on how
to raise any concerns. In 2023, 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 states, 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 is committed to providing a work environment that is
free of harassment based on sex, race or any other personal
characteristic protected under federal or state law. 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 either
through our internal or external helplines. 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.
In light of the size of our business and the nature of our business,
PureTech is exempt from producing a Modern Slavery statement.
However, 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.
Our ESG framework continuedESG report PureTech Health plc Annual Report and Accounts 2023 49
Following are our most material human rights impacts and their
relevance to the International Bill of Human Rights topics:
Patient
Business Continuity
Business continuity is essential to the ongoing success of our
business. It demonstrates the strength and resilience of our
organization, and our ability to adapt to any unexpected
challenges without delays in clinical trials or loss of vital
information.
G
o
v
e
r
n
a
n
c
e
Patient safety
Addressing unmet needs
Accelerating our R&D engine to
unlock new medicines
People
Right to health
Pg 32-33
Right to enjoy the benefits
of science
Pg 31-32
Right to enjoy the benefits
of science
Pg 33
Diversity and inclusion
Employee Development,
Retention and recruitment
Health and safety
Collaboration
and growth
Planet
GHG emission
Waste
management
Sustainable facility operations
Right to equality between
men and women
Pg 35-36
Right to just and favorable
conditions at work
Pg 36-37
Right to health
Pg 37-38
Right to an adequate
standard of living
Pg 38-39
Freedom to undertake
scientific research and
creative activity
Pg 41-43
Right to an adequate
standard of living
Pg 44
Right to just and favorable
conditions at work
Pg 45
In 2023, we made progress towards establishing and
implementing a Business Continuity Plan (BCP) to provide for
recovery of critical business functions in case of any unplanned
events. As we prepare our BCP, and to ensure that we have
identified any potential weaknesses in our process, an external
vulnerability and verification analysis was carried out by an
external third-party which allows us to identify and improve any
potential weaknesses in our processes. We will continue to
evaluate and prioritize risks and uncertainties that may impact our
operation and will implement formal BCP in due course.
Some of the tools currently in place to enhance our cyber security
include, but are not limited to:
— 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: Used for endpoint protection and to secure the
most critical areas of enterprise risk.
We believe a robust IT infrastructure and the development of
a BCP are essential to secure and improve the resilience of the
business. In light of the accelerated digital transformation and
associated security risks that the pandemic and geopolitical
issues have brought about in recent years, cybersecurity remains
a key area of focus of our leadership. Given its material risks to the
business, it also represents a key component of our BCP.
Data Privacy and Security
PureTech is committed to upholding and protecting the privacy
of our business members 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 whilst ensuring 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 32 to 33 for more on patient safety).
Our ESG framework continuedESG report 50 PureTech Health plc Annual Report and Accounts 2023
Governance
Commitment #3:
Strengthen supply chain standards
e
c
n
a
n
r
e
v
o
G
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
Internal 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.
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 dedicated to furthering our mission of changing the lives
of patients with devastating diseases, and we are aware that this
can only be achieved through a sustainable business.
We believe that our environmental, social, and governance
initiatives are crucial to achieving our goals, and we are
committed to making continuous advancements across
these areas.
By reporting our ESG metrics, we can better track our progress
and identify areas for improvement, helping us to further direct
PureTech towards a brighter future.
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 32 to 33).
Stakeholder Stewardship
PureTech remains committed to being a good corporate citizen
and our ESG program is one way of delivering on this
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.
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 2023, ~30% of our Tier I
suppliers who provide materials for our clinical development
participate in Rx-360 International Pharmaceutical Supply Chain
Consortium equivalent audit programs.
Appendix
PureTech continues to utilize the Sustainability Accounting
Standards Board (SASB) sector guidance for our ESG disclosures
this year. At the same time, we are monitoring the International
Sustainability Standards Board (ISSB) as it works to establish
a global baseline for sustainability reporting standards.
We anticipate incorporating the ISSB standards into our ESG
reporting process once they are finalized and implemented
across our sector.
SASB Index
Topic
Accounting Metric
Category
Unit of
measure
SASB
Code
Disclosure Location/
Rationale For Omission
Safety of
Clinical Trial
Participants
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,
page 32
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)
Total amount of monetary losses
as a result of legal proceedings
associated with clinical trials in
developing countries
Quantitative Number
HC-BP- 210a.2 Deliver safe clinical trials,
page 32
Quantitative
Reporting
currency
HC-BP- 210a.3 N/A
There have not been any legal
proceedings
Our ESG framework continuedESG report
PureTech Health plc Annual Report and Accounts 2023 51
G
o
v
e
r
n
a
n
c
e
Category
Discussion
and Analysis
Discussion
and Analysis
Unit of
measure
SASB
Code
Disclosure Location/
Rationale For Omission
N/A
HC-BP- 240a.1 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
N/A
HC-BP- 240a.2 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
Quantitative Number
HC-BP- 240b.1 N/A
Topic
Accounting Metric
Access to
Medicines
Affordability
& Pricing
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
List of products on the WHO List
of Prequalified Medicinal Products
as part of its Prequalification of
Medicines Programme (PQP)
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
Percentage change in: (1) average
list price and (2) average net
price across US product portfolio
compared to previous year
Quantitative
Percentage
(%)
Percentage change in: (1) list price
and (2) net price of product with
largest increase compared to
previous year
Quantitative
Percentage
(%)
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
HC-BP- 240b.2 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
HC-BP- 240b.3 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
Drug Safety
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 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
Number of fatalities associated with
products as reported in the FDA
Adverse Event Reporting System
Number of recalls issued;
total units recalled
Total amount of product accepted
for takeback, reuse, or disposal
Quantitative Number
HC-BP- 250a.2 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
Quantitative Number
HC-BP- 250a.3 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
Quantitative Number
HC-BP- 250a.4 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
Number of FDA enforcement
actions taken in response to
violations of current Good
Manufacturing Practices (CGMP),
by type
Quantitative Metric tons
HC-BP- 250a.5 N/A
(t)
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
Our ESG framework continuedESG report 52 PureTech Health plc Annual Report and Accounts 2023
Governance
Topic
Accounting Metric
Counterfeit
Drugs
e
c
n
a
n
r
e
v
o
G
Description of methods and
technologies used to maintain
traceability of products throughout
the supply chain and prevent
counterfeiting
Discussion of process for alerting
customers and business partners of
potential or known risks associated
with counterfeit products
Number of actions that led to
raids, seizure, arrests, and/or filing
of criminal charges related to
counterfeit products
Category
Discussion
and Analysis
Discussion
and Analysis
Unit of
measure
SASB
Code
Disclosure Location/
Rationale For Omission
N/A
HC-BP- 260a.1 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
N/A
HC-BP- 260a.2 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
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 internal programs
Ethical
Marketing
Total amount of monetary
losses as a result of legal
proceedings associated with
false marketing claims
Quantitative
Reporting
currency
HC-BP- 270a.1 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
Description of code of ethics
governing promotion of off-label
use of products
Discussion
and Analysis
Number
HC-BP- 270a.2 N/A
PureTech is a clinical-stage
biotherapeutics company and has
no products on the market from
within our internal programs
HC-BP- 330a.1 Commitment 2: Promoting
employee development to
attract and retain the best talent,
pages 36 to 37
HC-BP- 330a.2 Commitment 2: Promoting
employee development to
attract and retain the best talent,
pages 36 to 37
Quantitative Number
HC-BP- 430a.1
Supply chain, page 50
Employee
Recruitment,
Development
& Retention
Discussion of talent recruitment
and retention efforts for scientists
and research and development
personnel
Discussion
and Analysis
N/A
Quantitative N/A
Supply Chain
Management
(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
as a result of legal proceedings
associated with corruption
and bribery
Description of code of ethics
governing interactions with
health care professionals
Business EthicsTotal amount of monetary losses
Quantitative
Reporting
currency
HC-BP- 510a.1 Business Ethics, anti-bribery and
corruption, pages 47 to 48
Discussion
and Analysis
N/A
HC-BP- 510a.2 Code of ethics for healthcare
professionals, page 48
Our ESG framework continuedESG report PureTech Health plc Annual Report and Accounts 2023 53
PureTech Board and in its executive management diversity data as of December 31, 2023 in accordance with the Listing Rules
LR 9.8.6(10) Annex 2.1
Gender diversity
Number of board members
Percentage of the board
Number of senior positions on the board (CEO, CFO, SID and Chair)
Number in executive management
Percentage of executive management
Cultural diversity
Men
4
57%
1
2
Women
3
43%
1
2
50%
50%
G
o
v
e
r
n
a
n
c
e
White British or
other White
(including minority-
white groups)
Mixed/Multiple
Ethnic Groups
Asian/
Asian British
Black/African/
Caribbean/
Black British
Other
ethnic group,
including Arab
Number of board members
Percentage of the board
Number of senior positions on the
board (CEO, CFO, SID and Chair)
Number in executive management
Percentage of executive management
3
43%
—
1
25%
1
14%
1
1
3
43%
1
1
25%
25%
—
—
—
—
—
—
—
—
1
25%
Our ESG framework continuedESG report 54 PureTech Health plc Annual Report and Accounts 2023
t
r
o
p
e
R
D
F
C
T
TCFD REPORT
Overview
In this section, we present PureTech’s third formal climate related
financial disclosures that are partially consistent with all four
themes and eleven recommended disclosures from Section C of
the Annex entitled ‘Implementing the Recommendations of the
Task Force on Climate-related Financial Disclosures’, published in
October 2021 by the TCFD, outlining PureTech’s continued
efforts to adopt, measure, manage and mitigate its climate and
sustainability-related impacts. We believe that our ability to
manage any potential climate-related impacts on our business
and strategic direction is integral to our success.
As a clinical-stage biotherapeutics company, we operate in an
inherently high-risk environment. The overall aim of our risk
management effort is to achieve an effective balancing of risk
and reward. Risks are formally identified by the Board and
appropriate processes are put in place to monitor and mitigate
them on an ongoing basis (see details on risk management on
pages 60 to 64 of the 2023 Annual Report and Accounts). Due to
the size, scale and nature of our operations (see “Strategy”), we
have concluded that PureTech is unlikely to face any material
climate-related physical or transition risks in the short to medium-
term. Materiality is defined by whether an event will have an
adverse effect on to PureTech’s financial condition, development,
or results of operations. Where appropriate, we use short-,
medium- and long-term horizons to assess the climate related
impact to our operation. For short-term time horizon we use 2-4
years, for medium-term time horizon 5-6 years, and for long-term
time horizon over 7 years.
While our impact on the environment is minimal, we are
committed to mitigating 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, 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. Our risk management metrics are set
forth on pages 60 to 64 of our 2023 Annual Report and Accounts
and are reviewed by the Executive team and the Board to ensure
we are taking appropriate action.
Our process and the actions outlined below refer to PureTech’s
approach as of December 31, 2023.
Our ESG framework continuedESG report
PureTech Health plc Annual Report and Accounts 2023 55
Governance
Our Board of Directors is tasked with risk identification and with
implementing procedures and strategies for risk mitigation and
management, including climate-related risks. 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 86 to 90 of our
2023 Annual Report and Accounts.
PureTech’s ESG Committee is chaired by Non-Executive Director
Kiran Mazumdar-Shaw with the responsibility to effectively
manage, review and advance ESG issues on an ongoing basis.
Ms. Mazumdar-Shaw is an avid climate advocate and leads ESG
initiatives across the companies she serves. PureTech’s ESG
Committee 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. The ESG committee considers
climate-related risks on at least an annual basis or more often
as the need arises. All findings are reported to the Board.
As of 2023, the ESG Committee composed of a non-Executive
Director and supported by at least one C-Suite Officer, and
a dedicated internal working group of cross-functional leaders to
drive internal action and implementation, reporting directly to
the Board. 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 2023 Annual Report and
Accounts, see pages 22 to 50 for more.
Strategy
To identify physical and transitional climate-related risks and
opportunities that may impact our business, PureTech conducts
detailed analysis with third-party organizations, including an ESG
expert, to guide our strategic approach.
T
C
F
D
R
e
p
o
r
t
This analysis has led us to conclude that PureTech is unlikely to
face any material climate-related risk and opportunities in the
short, medium to long term, particularly due to the scope and
scale of our operations. Looking ahead, we will continue to
conduct broad-based risk assessments and monitor the following
climate-related risks and opportunities 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
— 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
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
Our ESG framework continuedESG report
56 PureTech Health plc Annual Report and Accounts 2023
TCFD Report
As we continue our operation as a good corporate citizen, we
have taken steps to improve upon the managing risks, should
they arise. For example, we have initiated compiling a Business
Continuity Plan (BCP) in 2023 to ensure that our physical
operations and supply chains have effective measures in place to
mitigate any potential climate-related risks. As part of the
transitional planning, we intend to have a formal BCP in place in
the short-term horizon (see page 49 of the 2023 Annual Report
and Accounts for more information on our BCP). For further
information on the Company’s risk assessment, monitoring and
mitigation efforts, please see Risk Management section of the
2023 Annual Report and Accounts (see pages 60 to 66).
t
r
o
p
e
R
D
F
C
T
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”). On an annual basis, our
auditors perform a risk assessment to consider the potential
impacts of climate change on our business, financial statements
and the audit. This included making enquiries of management to
understand the extent of the potential material impact of climate
change risk on our financial statements (see page 125 of the 2023
Annual Report and Accounts for more). In addition, we are
committed to introducing climate risk tools and processes that
identify, manage and act on any material climate-related risks
should the needs arise. Our ESG committee, with the counsel of
third-party ESG experts, 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 2023 ESG Report on pages 22 to 50:
— 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. and Triumvirate Environmental
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.
Metrics and Targets
PureTech employs the services of a B Corp certified 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 voluntarily report our Scope 3 emissions categories that
are relevant to our business.
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. We do not report on all 15 categories
of the GHG Protocol as not all categories are material to
our operation.
Our current emissions profile, as well as other environmental-
related measures adopted, can be found in our 2023 ESG Report
(pages 44 to 45 of the 2023 Annual Report and Accounts).
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 and (b) 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 beyond clinical stage and deem this necessary.
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. 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 in the medium-term time horizon.
Our ESG framework continuedESG report
PureTech Health plc Annual Report and Accounts 2023 57
Mapping PureTech ESG Program Against the TCFD Disclosure Recommendations
TCFD Recommendations
PureTech Alignment
Disclosure Location/ Rationale For Omission
Governance a. Describe the board’s oversight
Consistent
of climate-related risks and
opportunities.
b. Describe management’s role
in assessing and managing
climate-related risks and
opportunities.
Consistent
Strategy
a. Describe the climate-related
risks and opportunities the
organization has identified over
the short, medium, and long
term.
Consistent
Climate-related risks are monitored and assessed by the
ESG Committee. ESG Committee reports its findings
directly to the Board. See the Governance section (page
55) of the TCFD report for details.
Climate-related risks are monitored and assessed by the
ESG Committee. The ESG Committee is comprised of
one NED and supported by at least one C-Suite Officer.
See the Governance section (page 55) of the TCFD report
for details.
PureTech conducts detailed analysis to identify physical
and transitional climate-related risks. This analysis have
led us to conclude that PureTech is unlikely to face any
material climate-related risk and opportunities in the
short, medium to long term, particularly due to the
scope and scale of our operations and hence no risk
and opportunities have been outlined. See the Strategy
section (page 55) of the TCFD report for details.
T
C
F
D
R
e
p
o
r
t
b. Describe the impact of climate-
related risks and opportunities
on the organization’s
businesses, strategy, and
financial planning.
c. Describe the resilience of the
organization’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario.
Consistent
See above summary to Strategy (a).
Consistent
As a clinical-stage biotherapeutics company with no
approved therapeutics on the market, our current day-
to-day impact on the environment is limited and hence
this recommended disclosure is not material to our
operation, but we will continue to keep this under review.
See Planet; Commitment 1 – Transparent GHG emissions
disclosures section (pages 41 to 43) of the ESG report for
details.
Our ESG framework continuedESG report
58 PureTech Health plc Annual Report and Accounts 2023
TCFD Report
TCFD Recommendations
PureTech Alignment
Disclosure Location
Risk
management
a. Describe the organization’s
Consistent
processes for identifying and
assessing climate-related risks.
t
r
o
p
e
R
D
F
C
T
b. Describe the organization’s
processes for managing
climate-related risks.
Consistent
c. Describe how processes for
identifying, assessing, and
managing climate-related
risks are integrated into the
organization’s overall risk
management.
a. Disclose the metrics used by the
organization to assess climate-
related risks and opportunities
in line with its strategy and risk
management process.
Consistent
Partially consistent
Metrics and
Targets
b. Disclose Scope 1, Scope 2
Consistent
and, if appropriate, Scope 3
greenhouse gas (GHG)
emissions and the related risks.
c. Describe the targets used by
the organization to manage
climate-related risks and
opportunities and performance
against targets.
Consistent
See the Governance section (page 55) of the TCFD report
for details on the function and responsibility of the ESG
Committee, and the Risk Management section (page
56) of the TCFD report for details on the risk assessment
process.
Risks are formally identified by the Board and appropriate
processes are in place to monitor and mitigate them on
an ongoing basis. Climate-related risks are not currently
identified as a principal risk for PureTech. See Risk
Management section (page 56) for details.
While climate-related risks are not currently identified
as a principal risk for PureTech, an overview of how risks
are managed, should they arise, are outlined in the
Risk Management section (page 56).
Climate-related risks and opportunities assessment is
conducted by the ESG Committee with metrics outlined
across the Governance, Risk Management, and Metrics
and Targets sections (pages 55 to 56) of the TCFD report.
The findings are reported directly to the Board. However,
the underlying metrics for climate-related assessment
are not fully aligned with the business strategy and risk
management as they are charged by different parties. We
will consider aligning these metrics in the long-term time
horizon.
See the Metrics and Targets section (page 56) of the
TCFD report for the overview of our emissions disclosure
and the Planet section (page 40) of our ESG report for
details.
Given (a) the nature of our industry, business operations
and therapeutic mission and (b) we have not identified
any material climate-related risks to our business,
PureTech has not set any climate-related targets to date.
We plan on continuing to assess this on an annual basis.
See Metrics and Targets section (page 56) of the TCFD
report for details.
Our ESG framework continuedESG report
PureTech Health plc Annual Report and Accounts 2023 59
Governance
Our world class
Board of Directors provides
strong governance
Governance 60 PureTech Health plc Annual Report and Accounts 2023
Risk management
The execution of the Group’s strategy is subject to a range of risks and uncertainties. As a clinical-stage biotherapeutics company, the
Group operates in an inherently high-risk environment. The Group’s strategic approach seeks to aid the Group’s risk management
efforts to achieve an effective balancing of risk and reward. Risk assessment, evaluation and mitigation are integral parts of the Group’s
management process. The Group, however, also recognizes that ultimately no strategy provides an assurance against loss, as we
saw in the current year with Gelesis, which ceased operations and filed a voluntary petition for Chapter 7 bankruptcy liquidation in
October 2023.
Risks are formally identified by the Board and appropriate internal controls are put in place and tailored to the specific risks to monitor
and mitigate them on an ongoing basis. If multiple or an emerging risk event occurs, it is possible that the overall effect of such events
would compound the overall 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 impact and mitigation management plan with respect to 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 186 to 223 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 reputation of
PureTech as a developer of high
value technologies and possibly
make additional fundraising by
PureTech or any Founded Entity
more difficult or unavailable on
acceptable terms at all.
Prior to additional steps in the development
of any technology, extensive due diligence is
carried out that covers all the major business risks,
including technological feasibility, competition and
technology advances, market size, strategy, adoption
and intellectual property protection.
A capital efficient approach is employed, which
requires the achievement of a level of proof of
concept prior to the commitment of substantial
capital is committed. Capital deployment is
generally tranched to ensure the funding of
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.
Governance
Risk management continued
PureTech Health plc Annual Report and Accounts 2023 61
G
o
v
e
r
n
a
n
c
e
Risk
Impact*
Management Plans/Actions
2 Risks related to clinical trial failure
Clinical trials and other tests to assess the
commercial viability of a therapeutic candidate are
typically expensive, complex and time-consuming,
and have uncertain outcomes.
Conditions in which clinical trials are conducted
differ, and results achieved in one set of conditions
could be different from the results achieved in
different conditions or with different subject
populations. If our therapeutic candidates fail to
achieve successful outcomes in their respective
clinical trials, the therapeutics will not receive
regulatory approval and in such event cannot be
commercialized. In addition, if we fail to complete
or experience delays in completing clinical tests
for any of our therapeutic candidates, we may
not be able to obtain regulatory approval or
commercialize our therapeutic candidates on a
timely basis, or at all.
3 Risks related to regulatory approval
The pharmaceutical industry is highly regulated.
Regulatory authorities across the world enforce
a range of laws and regulations governing 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 the commercial viability of
developing 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 anticipate.
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.
We have a diversified model to limit the impact
of clinical trial outcomes on our ability to operate
as a going concern. We have dedicated internal
resources to establish and monitor each of the clinical
programs for the purpose of maximising successful
outcomes. We also engage outside experts to help
create well-designed clinical programs that provide
valuable information and mitigate the risk of failure.
Significant scientific due diligence and preclinical
experiments are conducted prior to a clinical trial
to evaluate 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.
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.
62 PureTech Health plc Annual Report and Accounts 2023
Risk management continued
Risk
Impact*
Management Plans/Actions
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.
Safety is our top priority in the design of our
therapeutics. We 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, and 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 our therapeutics and therapeutic candidates
and adapt our business plans accordingly. Not
all therapeutics that we are developing will rely
on reimbursement. Also, while we cannot control
outcomes, we seek to design studies to generate
data that will help support potential reimbursement.
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 require product labels to include additional
safety warnings. Adverse events or unforeseen
side effects may also potentially lead to product
liability claims 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
and competition
We may be unable 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. If, 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 adopted 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.
Governance
Risk management continued
PureTech Health plc Annual Report and Accounts 2023 63
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.
8 Risks related to hiring and retaining
qualified employees and key personnel
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 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.
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.
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.
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.
We retain significant cash in order to support funding
of our Founded Entities and our Internal Programs.
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.
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.
Governance
64 PureTech Health plc Annual Report and Accounts 2023
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
armed conflicts, 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.
Governance
PureTech Health plc Annual Report and Accounts 2023 65
This assessment was made in consideration of our strong
financial position, current strategy, and management of
principal and emerging risks. The following facts support
the Directors’ view of the viability:
— We have a cash, cash equivalents and short-term
investments position of $327.1 million as of December 31,
2023. Our cash position was strengthened in March 2024
when we received gross proceeds of $292.7 million from the
BMS acquisition of Karuna.
— In March 2024, we announced a proposed capital return
of $100.0 million to our shareholders by way of a tender
offer. This announcement reflects the Board’s commitment
to evaluate its capital allocation regularly, including the
assessment of opportunities for capital returns to our
shareholders, subject to the Company’s operational needs.
— Our cash, cash equivalents and short-term investments are
highly liquid and readily available.
— We have control 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
Founded Entities.
In addition, the fact that our Wholly-Owned Programs and
Founded Entities (with the exception of Akili) are currently
in the research and development stage means that these
therapeutics, technologies and entities are not reliant on cash
inflows from product sales or services during the period of this
assessment. This also means that we are not highly susceptible
to conditions in one or more market sectors in this time frame.
The utilization of existing cash, cash equivalents and short-
term investments to advance these therapeutics, technologies
and entities is within our control, and the spending and
investment decisions are largely discretionary. Therefore, there
is management control on reducing discretionary spending
if unforeseen liquidity risks arise. 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.
Further, the Directors have considered milestone and royalty
funding based on existing collaboration and partnership
arrangements, milestone payments from the Royalty Purchase
Agreement with Royalty Pharma, the ability of the Wholly-
Owned Programs and each 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.
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 with respect to
the December 31, 2023 financial position. Based on current
projections, the Directors believe that the Company has
sufficient available funding to extend operations into at least
2027. This period is deemed appropriate having assessed
the financial health as of December 31, 2023. We expect our
Wholly-Owned Programs3 to significantly progress during
this period and for key Controlled Founded Entities2 to reach
significant development milestones over the period of the
assessment. As we advance our Wholly-Owned Programs
and Controlled Founded Entities, our future decisions will be
driven by the data of our programs. Our current projections
are consistent with our disciplined R&D approach to advance
our Wholly-Owned Programs and Controlled Founded
Entities through the development process and not commit
resources to further development unless specific thresholds
for advancement are met.
The Directors have evaluated our cash and cash equivalents
and short-term investment of $327.1 million as of December
31, 2023, the gross proceeds of $292.7 million that we received
from the Bristol Myers Squibb ("BMS") acquisition of Karuna in
March 2024, and our proposed capital return of $100.0 million
by way of a repurchase of ordinary shares to our shareholders
announced in March 2024, against plausible scenarios. The
Directors have determined that these amounts are sufficient
to support our existing and newly launched Founded
Entities1 (Seaport Therapeutics and Gallop Oncology), and
our strategy around creating and supporting other Founded
Entities, should they require it. Additionally, the Directors
have determined that these amounts are also sufficient for
the advancement of our Wholly-Owned Programs, to provide
reasonable returns for our shareholders and to fund the
Company’s operating costs into at least 2027.
The Directors' review has considered all of the principal and
emerging risks identified and focused on the pathway to
regulatory approval of each therapeutic candidate being
developed within our Wholly-Owned Programs as well as those
of our Founded Entities. The Directors reviewed the near-term
liquidity and considered funding plans of our Wholly-Owned
Programs and Founded Entities and the near-term capital
returns to our shareholders in our assessment of long-term
cash flow projections. It should be noted that the majority of
funding has been allocated to support the Company’s strategy
around Founded Entities, alongside the advancement of
the Wholly-Owned Programs which could become Founded
entities themselves.
The Directors confirm that they have a reasonable expectation
that we will continue to operate and meet our obligations as
they become due over the period of the assessment. In making
this statement, the Directors carried out a robust assessment
of the principal and emerging risks, including those that would
threaten our business model, future performance, solvency
or liquidity and evaluated plausible scenarios that included
these risks.
Governance 66 PureTech Health plc Annual Report and Accounts 2023
Viability continued
The Directors note that our ownership stakes in the Founded
Entities are expected to be illiquid in nature, with the
exception of our ownership stakes in entities which are
publicly traded on Nasdaq. While we anticipate holding these
ownership stakes through the achievement of significant
milestones or other events, we will continue to be diligent in
exploring monetization opportunities after key value accretion
has occurred similar to the execution of the sale of 1,750,000
common shares of Karuna for an aggregate proceeds of
$218.1 million in 2021, the sale of 602,100 common shares of
Karuna for an aggregate proceeds of $115.5 million in 2022,
the sale of 535,400 common shares of Vor for an aggregate
proceeds of $3.3 million in 2022, and the sale of 167,579
common shares of Karuna for an aggregate proceeds of
$33.3 million in 2023. 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. For example, Gelesis
was listed on the New York Stock Exchange as of December
31, 2022 and was delisted from the New York Stock Exchange
in April 2023. On October 30, 2023, Gelesis ceased operations
and filed a voluntary petition for relief under the United States
bankruptcy code. However, even if certain Founded Entities
are not successful, our liquidity is expected to remain sufficient
to achieve the remaining milestone events, fund operational
costs and provide returns for our shareholders over the period
of assessment.
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 our Wholly-
Owned Programs, including trials in more advanced stages,
and contribute amounts necessary for the Founded Entities
to reach significant development milestones over the period
of the assessment and return capital to our shareholders.
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.
1. Founded Entities are comprised of the entities which the Company incorporated and announced the incorporation as a Founded Entity externally. It includes certain of the
Company’s wholly-owned subsidiaries which have been announced by the Company as Founded Entities, Controlled Founded Entities2 and deconsolidated Founded Entities.
As of December 31, 2023, deconsolidated Founded Entities included Akili Interactive Labs, Inc., Karuna Therapeutics, Inc., Vor Bio, Inc., Gelesis, Inc., Sonde Health, Inc., and
Vedanta Biosciences, Inc.
2. Controlled Founded Entities are comprised of the Company’s consolidated operational subsidiaries that currently have already raised third-party dilutive capital. As of December 31,
2023, Entrega was the only entity under this definition.
3. Wholly-Owned Programs are comprised of the Company’s current and future therapeutic candidates and technologies that are developed by the Company's wholly-owned
subsidiaries, whether they were announced as a Founded Entity or not, and will be advanced through with either the Company's funding or non-dilutive sources of financing. As of
December 31, 2023, Wholly-Owned Programs were developed by the wholly-owned subsidiaries Alivio Therapeutics, Inc., PureTech LYT, Inc., PureTech LYT 100, Inc. and included
primarily the programs LYT-100, LYT-200, LYT-300, and the Glyph platform.
Governance PureTech Health plc Annual Report and Accounts 2023 67
Key Performance Indicators – 2023
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.
$578.4m1,2
Amount of funding secured for Founded Entities
$561.5m (97%) came from third parties
12
Number of programs created by PureTech
2022:
2021:
2020:
2019:
2018:
2017:
$1.28b
$731.9m
$247.8m
$666.8m
$274.0m
$102.9m
2022: 1
2021: 2
2020: 3
2019: 1
2018: 1
2017: 1
Progress
Karuna, Vedanta, and Gelesis raised funds in the form of
financings in 2023, including $561.5 million by third party financial
and strategic investors.
Progress
In 2023, we nominated a new therapeutic candidate, LYT-320.
LYT-320 is a novel prodrug of agomelatine and the third
therapeutic candidate developed from our Glyph™ platform to
be advanced toward the clinic. LYT-320 is now being advanced
through a newly created Founded Entity, Seaport
Therapeutics, as SPT-320.
$133.3m2
Proceeds generated from Founded Entity
monetization events
12
Number of programs advanced internally through
clinical phases
2022: $115.4m
2021: $218.1m
2020: $350.6m
2019: $9.3m
2022: 1
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 2023, we generated cash
proceeds of approximately $133.3 million from the sale of equity
in one of our Founded Entities and an upfront payment on a
royalty transaction for one of our Founded Entities.
Progress
In 2023, we advanced LYT-300 into a Phase 2a clinical trial in acute
anxiety. LYT-300 is now being advanced through a newly created
Founded Entity, Seaport Therapeutics, as SPT-300.
52
Number of clinical trial initiations
52
Number of clinical trial readouts
2022: 4
2021: 11
2020: 6
2019: 6
2022: 1
2021: 1
2020: 3
2019: 0
Progress
PureTech initiated one clinical trial, Karuna initiated three clinical
trials, and Vedanta initiated one clinical trial in 2023.
Progress
PureTech completed one clinical trial, Akili completed two clinical
trials, and Karuna completed two clinical trials in 2023.
1 Funding figure includes private convertible notes and public offerings. Funding figure excludes future milestone considerations received in conjunction with partnerships and
collaborations. Funding figure does not include gross proceeds received by PureTech following the 2024 post-period acquisition of Karuna by BMS.
2 Number represents figure for the relevant fiscal year only and is not cumulative.
Governance 68 PureTech Health plc Annual Report and Accounts 2023
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 60 to 64 and in the
Additional Information section from pages 186 to 224, 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, 2023 and 2022, and for the years
ended December 31, 2023, 2022 and 2021, have been
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").
The following discussion contains references to the
Consolidated Financial Statements of PureTech Health plc
(the "Parent") and its consolidated subsidiaries, together "the
Group". These financial statements consolidate PureTech
Health plc’s subsidiaries and include the Group’s interest in
associates by way of equity method, as well as investments
held at fair value. Subsidiaries are those entities over which
the Group maintains control. Associates are those entities in
which the Group does not have control for financial accounting
purposes but maintains significant influence over financial and
operating policies. Where the Group has neither control nor
significant influence for financial accounting purposes, or when
the investment in associates is not in instruments that would
be considered equity for accounting purposes, we recognize
our holdings in such entity as an investment at fair value with
changes in fair value being recorded in the Consolidated
Statement of Comprehensive Income/(Loss). For purposes of
our Consolidated Financial Statements, each of our Founded
Entities1 are considered to be either a “subsidiary", an
“associate” or an "investment held at fair value" depending on
whether the Group controls or maintains significant influence
over the financial and operating policies of the respective
entity at the respective period end date, and depending
on the form of the investment. For additional information
regarding the accounting treatment of these entities, see
Note 1. Material Accounting Policies to our Consolidated
Financial Statements included in this report. For additional
information regarding our operating structure, see “Basis of
Presentation and Consolidation” below.
Business Background and Results Overview
The business background is discussed above from pages 1 to
21, which describes the business development of our Wholly-
Owned Programs3 and Founded Entities.
Our ability to generate product revenue sufficient to achieve
profitability will depend on the successful development
and eventual commercialization of one or more therapeutic
candidates of our wholly-owned or Controlled Founded
Entities2, which may or may not occur. Historically, certain
of our Founded Entities' therapeutics received marketing
authorization from the FDA, but our Wholly-Owned Programs
have not generated revenue from product sales to date.
Furthermore, our ability to achieve profitability will largely
rely on successfully monetizing our investment in founded
entities, including the sale of rights to royalties, entering
into strategic partnerships, and other related business
development activities.
We deconsolidated a number of our Founded Entities,
specifically Vedanta Biosciences, Inc. ("Vedanta") in
March 2023, Sonde Health Inc. ("Sonde") in 2022, Karuna
Therapeutics, Inc. ("Karuna"), Vor Biopharma Inc. ("Vor") and
Gelesis in 2019, and Akili in 2018.
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 Statement of
Financial Position;
— we record our retained investment in the Founded Entity
at fair value; and
— the resulting amount of any gain or loss is recognized in our
Consolidated Statement of Comprehensive Income/(Loss).
We anticipate our expenses to continue to increase
proportionally in connection with execution of our strategy
around creating and supporting Founded Entities, as well
as the ongoing development activities related mostly to the
advancement into late-stage studies of the clinical programs
within our Wholly-Owned Programs. We also expect that our
expenses and capital requirements will increase 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.
More specifically, we anticipate that our internal research and
development spend will increase in the foreseeable future
as we may initiate additional clinical studies for our existing
therapeutic candidates, evaluate new therapeutic candidates
for investment and further development, progress additional
therapeutic candidates into the clinic, as well as advance our
technology platforms.
1. Founded Entities are comprised of the entities which the Company incorporated and announced the incorporation as a Founded Entity externally. It includes certain of the
Company’s wholly-owned subsidiaries which have been announced by the Company as Founded Entities, Controlled Founded Entities2 and deconsolidated Founded Entities.
As of December 31, 2023, deconsolidated Founded Entities included Akili Interactive Labs, Inc., Karuna Therapeutics, Inc., Vor Bio, Inc., Gelesis, Inc., Sonde Health, Inc., and
Vedanta Biosciences, Inc.
2. Controlled Founded Entities are comprised of the Company’s consolidated operational subsidiaries that currently have already raised third-party dilutive capital. As of December 31,
2023, Entrega was the only entity under this definition.
3. Wholly-Owned Programs are comprised of the Company’s current and future therapeutic candidates and technologies that are developed by the Company's wholly-owned
subsidiaries, whether they were announced as a Founded Entity or not, and will be advanced through with either the Company's funding or non-dilutive sources of financing. As of
December 31, 2023, Wholly-Owned Programs were developed by the wholly-owned subsidiaries Alivio Therapeutics, Inc., PureTech LYT, Inc., PureTech LYT 100, Inc. and included
primarily the programs LYT-100, LYT-200, LYT-300, and the Glyph platform.
Governance PureTech Health plc Annual Report and Accounts 2023 69
Recent Developments (subsequent to December 31, 2023
The Group has evaluated subsequent events after December
31, 2023 up to the date of issuance, April 25, 2024, 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:
In January 2024, the Group established two new clinical-
stage entities: Seaport Therapeutics ("Seaport") and Gallop
Oncology ("Gallop"). Seaport will advance certain central
nervous system programs and relevant Glyph intellectual
property. Gallop will advance LYT-200 and other galectin-9
intellectual property. As of December 31, 2023, the financial
results of these programs were included in the Wholly-Owned
Programs segment in the footnotes to the Consolidated
Financial Statements. Upon raising dilutive third-party
financing, the financial results of these two entities will be
included in the Controlled Founded Entities segment to the
extent that the Group maintains control over these entities.
On May 9, 2022, the Group announced the commencement
of a $50.0 million share repurchase program the ("Program")
of its ordinary shares of one pence each. In February 2024,
the Group completed the Program and has repurchased an
aggregate of 20,182,863 ordinary shares under the Program.
These shares have been held as treasury shares and are being
used to settle the vesting of restricted stock units or exercise
of options.
In March 2024, Karuna was acquired by Bristol Myers Squibb
(“BMS”) in accordance with a definitive merger agreement
signed in December 2023. The Group received total proceeds
of $292.7 million before income tax in exchange for its holding
of 886,885 shares of Karuna common stock.
In March 2024, the Group announced a proposed capital
return of $100.0 million to its shareholders by way of a tender
offer (the "Tender Offer"). The Tender Offer is expected to
be launched in early May, subject to market conditions and
shareholder approval. If the full $100.0 million is not returned,
then the Group intends to return any remainder following the
completion of the Tender Offer, by way of a special dividend.
In April 2024, Seaport Therapeutics, the Group's latest
Founded Entity, raised $100 million in a Series A financing,
out of which $32 million was invested by the Group. Following
the Series A financing, the Group holds equity ownership in
Seaport of 61.5 percent on a diluted basis.
In April 2024, the Gelesis' Chapter 7 Trustee provided notice
that a third party bid to purchase the assets subject to the
bankruptcy had been accepted as a stalking horse bid,
subject to Bankruptcy Court approval. If such sale of the
assets is ultimately approved by the Bankruptcy Court and
consummated, it is expected that PureTech could recover a
portion of its investment in Gelesis senior secured convertible
promissory notes. The ultimate resolution of this matter, any
potential recovery, and the associated timing remain uncertain.
The Group has not recorded any amount in its Consolidated
Financial Statements related to amounts that may be received
as a result of the bankruptcy process.
Financial Review continued
In addition, with respect to our Founded Entities’ programs,
we anticipate that we will continue to fund a small portion
of development costs by strategically participating in such
companies’ financings when we believe participation in
such financings is in the best interests of our shareholders.
The form of any such participation may include investment
in public or private financings, collaboration, partnership
arrangements, and/or licensing arrangements, among others.
Our management and strategic decision makers consider the
future funding needs of our Founded Entities and evaluate the
needs and opportunities for returns with respect to each of
these Founded Entities routinely and on a case-by-case basis.
As a result, we 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
period are compared primarily with the results of the
comparative period in the prior 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 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 our wholly-owned
subsidiaries.
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.
Governance 70 PureTech Health plc Annual Report and Accounts 2023
Financial Review continued
Financial Highlights
The following is the reconciliation of the amounts appearing
in our Consolidated 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
December 31
2023
December 31
2022
191,081
136,062
149,866
200,229
327,143
350,095
(1,097)
(10,622)
$326,046
$339,473
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.
Basis for Segmentation
Our Directors are our strategic decision-makers. Our operating
segments are determined based on the financial information
provided to our Directors periodically for the purposes of
allocating resources and assessing performance. During the
second half of 2023, we changed the financial information that
was regularly reviewed by the Directors to allocate resources
and assess performance. We have determined each of our
Wholly-Owned Programs represents an operating segment,
and we have aggregated each of these operating segments
into one reportable segment, the Wholly-Owned Programs
segment, given the high level of operational and financial
similarities across our Wholly-Owned Programs. Each of our
Controlled Founded Entities represents an operating segment.
We aggregate each Controlled Founded Entity operating
segment into one reportable segment, the Controlled
Founded Entities segment. For our entities that do not meet
the definition of an operating segment, we present this
information in the Parent Company & Other column in our
segment footnote to reconcile the information in this footnote
to our Consolidated Financial Statements. Substantially all of
our revenue and profit generating activities are generated
within the United States and, accordingly, no geographical
disclosures are provided.
Following is the description of our reportable segments:
Wholly-Owned Programs
The Wholly-Owned Programs segment is advancing Wholly-
Owned Programs which are focused on treatments for
patients with devastating diseases. The Wholly-Owned
Programs segment is comprised of the technologies that are
wholly-owned and will be advanced through with either the
Group's funding or non-dilutive sources of financing. The
operational management of the Wholly-Owned Programs
segment is conducted by the PureTech Health team, which
is responsible for the strategy, business development, and
research and development.
Controlled Founded Entities
The Controlled Founded Entities segment is comprised of the
Group’s consolidated operational subsidiaries as of December
31, 2023 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.
The Group’s entities that were determined not to meet
the definition of an operating segment are included in the
Parent Company and Other column to reconcile the segment
information to the financial statements. This column captures
activities not directly attributable to the Group’s operating
segment and includes the activities of the Parent, corporate
support functions and certain research and development
support functions that are not directly attributable to a
strategic business segment as well as the elimination of
intercompany transactions. This column also captures the
operating results for our deconsolidated entities through the
date of deconsolidation (e.g. Vedanta in 2023 and Sonde in
2022), and accounting for our holdings in Founded Entities for
which control has been lost, which primarily represents: the
activity associated with deconsolidating an entity when we no
longer control the entity (e.g. Vedanta in 2023 and Sonde in
2022), the gain or loss on our investments accounted for at fair
value (e.g. our ownership stakes in Karuna, Vor and Akili) and
our net income or loss of associates accounted for using the
equity method.
In January 2024, the Group launched two new Founded
Entities (Seaport Therapeutics and Gallop Oncology) to
advance certain programs from the Wholly-Owned Programs.
Seaport Therapeutics will advance certain central nervous
system programs and relevant Glyph intellectual property.
Gallop Oncology will advance LYT-200 and other galectin-9
intellectual property. The financial results of these programs
were included in the Wholly-Owned Programs segment in
the footnotes to the Consolidated Financial Statements as of
December 31, 2023 and 2022, and for the three years ended
December 31, 2023, 2022 and 2021, respectively. Upon raising
dilutive third-party financing, the financial results of these two
entities will be included in the Controlled Founded Entities
segment to the extent that the Group maintains control over
these entities.
The table below summarizes the entities that comprised each
of our segments as of December 31, 2023:
Wholly-Owned Programs Segment
PureTech LYT
PureTech LYT-100, Inc.
Alivio Therapeutics, Inc.
Controlled Founded Entities Segment
Entrega, Inc.
Parent Company and Other3
Follica, LLC
Gelesis, Inc.
Sonde Health, Inc.1
Vedanta Biosciences, Inc.2
PureTech Health plc
PureTech Health LLC
PureTech Securities Corporation
PureTech Securities II Corporation
PureTech Management, Inc.
Ownership
Percentage
100.0%
100.0%
100.0%
77.3%
85.4%
—%
40.2%
47.0%
100.0%
100.0%
100.0%
100.0%
100.0%
1 Sonde Health, Inc was deconsolidated on May 25, 2022.
2 Vedanta Biosciences, Inc. was deconsolidated on March 1, 2023.
3
Includes dormant, inactive and shell entities as well as Founded Entities that were
deconsolidated prior to 2023.
Governance PureTech Health plc Annual Report and Accounts 2023 71
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 through our funding or in conjunction
with our external partners. We are also unable to predict
when, if ever, material net cash inflows will commence from our
wholly-owned or our Founded Entities’ therapeutic candidates.
This is due to the numerous risks and uncertainties associated
with developing therapeutics, including the uncertainty of:
— progressing research and development of our Wholly-
Owned Programs and Founded Entities 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 and Founded Entities;
— establishing an appropriate safety profile with investigational
new drug application;
— the success of our Founded Entities and their need for
additional capital;
— identifying new therapeutic candidates to add to our Wholly-
Owned Programs or Founded Entities;
— successful enrollment in, and the initiation and completion
of, clinical trials;
— the timing, receipt and terms of any marketing approvals
from applicable regulatory authorities;
— establishing commercial manufacturing capabilities or
making arrangements with third-party manufacturers;
— addressing any competing technological and market
developments, as well as any changes in governmental
regulations;
— negotiating favorable terms in any collaboration, licensing or
other arrangements into which we may enter and performing
our obligations under such arrangements;
— maintaining, protecting and expanding our portfolio of
intellectual property rights, including patents, trade secrets
and know-how, as well as obtaining and maintaining
regulatory exclusivity for our wholly-owned and our Founded
Entities’ therapeutic candidates;
— continued acceptable safety profile of our therapeutics,
if any, following approval; and
— attracting, hiring and retaining qualified personnel.
A change in the outcome of any of these variables with respect
to the development of a therapeutic candidate could mean
a significant change in the costs and timing associated with
the development of that therapeutic candidate. For example,
the FDA, the EMA, or another comparable foreign regulatory
authority may require us to conduct clinical trials beyond
those that we anticipate will be required for the completion
of clinical development of a therapeutic candidate, or we may
experience significant trial delays due to patient enrollment or
other reasons, in which case we would be required to expend
significant additional financial resources and time on the
completion of clinical development. In addition, we may obtain
unexpected results from our clinical trials, and we may elect to
discontinue, delay or modify clinical trials of some therapeutic
candidates or focus on others. Identifying potential therapeutic
candidates and conducting preclinical testing and clinical
trials is a time-consuming, expensive and uncertain process
that takes years to complete, and we may never generate
the necessary data or results required to obtain marketing
approval and achieve product sales. In addition, our wholly-
owned and our Founded Entities’ therapeutic candidates,
if approved, may not achieve commercial success.
Financial Review continued
Components of Our Results of Operations
Revenue
To date, we have not generated any meaningful revenue
from product sales and we do not expect to generate any
meaningful revenue from product sales in the near 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 and non-profit
organizations as grant revenue 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.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily
of costs incurred for our research activities, including our
discovery efforts, and the development of our wholly-owned
and our Controlled Founded Entities’ therapeutic candidates,
which include:
— employee-related expenses, including salaries, related
benefits and equity-based compensation;
— expenses incurred in connection with the preclinical and
clinical development of our wholly-owned and our Founded
Entities’ therapeutic candidates, including our agreements
with contract research organizations;
— expenses incurred under agreements with consultants who
supplement our internal capabilities;
— the cost of lab supplies and acquiring, developing and
manufacturing preclinical study materials and clinical
trial materials;
— costs related to compliance with regulatory requirements;
and
— facilities, depreciation and other expenses, which include
direct and allocated expenses for rent and maintenance
of facilities, insurance and other operating costs.
We expense all research costs in the periods in which they
are incurred and development costs are capitalized only if
certain criteria are met. For the periods presented, we have
not capitalized any development costs since we have not met
the necessary criteria required for capitalization.
Research and development activities are central to
our business model. 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 related to our Wholly-Owned Programs and our
existing, newly established and future Founded Entities. The
successful development of our wholly-owned and our Founded
Governance 72 PureTech Health plc Annual Report and Accounts 2023
Financial Review continued
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 support our increased
number of consolidated Founded Entities, continued
research and development to support our Wholly-Owned
Programs and our technology platforms, as well as potential
commercialization of our Controlled Founded Entities'
portfolio of therapeutic candidates.
Total Other Income/(Expense)
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
Statement 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, Karuna, Vor, Vedanta and Sonde and other insignificant
investments. We account for investments in convertible
preferred shares in accordance with IFRS 9 as investments
held at fair value when the preferred shares do not provide
their holders with access to returns associated with a residual
equity interest. Under IFRS 9, the preferred share investments
are categorized as debt instruments that are presented at fair
value through profit and loss because the amounts receivable
do not represent solely payments of principal and interest.
Realized Gain/(Loss) on Sale of Investments
Realized gain/(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 realized loss in
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 realized loss in 2022 is attributable
to the settlement of call options written by the Group on
Karuna stock. The amount in 2023 is not significant.
Gain/(Loss) on Investments in Notes from Associates
Gain/(loss) on investments in notes from associates relates
to our investment in the notes from Gelesis and Vedanta.
We account for these notes in accordance with IFRS 9
as investments held at fair value, with changes in fair
value recognized through the Consolidated Statement of
Comprehensive Income/(Loss). The amount in 2023 is primarily
attributable to a decrease in the fair value of our notes from
Gelesis. On October 30, 2023, Gelesis ceased operations and
filed a voluntary petition for relief under the United States
bankruptcy code.
Other Income (Expense)
Other income (expense) consists primarily of gains and losses
on financial instruments. In 2022, it relates primarily to the
Backstop agreement with Gelesis.
Finance Income/(Costs)
Finance costs consist of loan interest expense, interest
expense due to accretion of and adjustment to the sale of
future royalties liability as well as 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 Income (Loss) of Associates Accounted for Using
the Equity Method, Gain on Dilution of Ownership Interest and
Impairment of Investment in 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 our share of
the total comprehensive income/(loss) 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 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.
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.
In 2023, we recorded our share of the net loss of Gelesis
which reduced the carrying amount of our investment to zero.
On October 30, 2023, Gelesis ceased operations and our
significant influence in Gelesis ceased.
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.
Governance PureTech Health plc Annual Report and Accounts 2023 73
Financial Review continued
Results of Operations
The following table, which has been derived from our audited financial statements for the years ended December 31, 2023, 2022
and 2021, included herein, summarizes our results of operations for the periods indicated, together with the changes in those
items:
(in thousands)
Contract revenue
Grant revenue
Total revenue
Operating expenses:
General and administrative expenses
Research and development expenses
Operating income/(loss)
Other income/(expense):
Gain/(loss) on deconsolidation of subsidiary
Gain/(loss) on investments held at fair value
Realized gain/(loss) on sale of investments
Gain/(loss) on investments in notes from associates
Other income/(expense)
Other income/(expense)
Net finance income/(costs)
Share of net income/(loss) of associates accounted
for using the equity method
Gain/(loss) on dilution of ownership interest
in associate
Impairment of investment in associates
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 Group
Year ended December 31,
2023
$750
2,580
3,330
(53,295)
(96,235)
(146,199)
61,787
77,945
(122)
(27,630)
(908)
111,072
5,078
2022
$2,090
13,528
15,618
(60,991)
(152,433)
(197,807)
27,251
(32,060)
(29,303)
—
8,131
(25,981)
138,924
2021
$9,979
7,409
17,388
Change
(2022 to 2023)
$(1,340)
(10,948)
(12,288)
Change
(2021 to 2022)
$(7,889)
6,119
(1,770)
(57,199)
(110,471)
(150,282)
—
179,316
(20,925)
—
1,592
159,983
5,050
7,696
56,199
51,607
34,536
110,006
29,180
(27,630)
(9,038)
137,053
(133,846)
(3,792)
(41,962)
(47,524)
27,251
(211,377)
(8,378)
—
6,539
(185,965)
133,875
(6,055)
(27,749)
(73,703)
21,695
45,954
—
—
(36,103)
(30,525)
(66,628)
28,220
(8,390)
(92,783)
55,719
(37,065)
—
—
(58,953)
(3,756)
(62,709)
(28,220)
8,390
56,680
(86,243)
(29,563)
28,220
(8,390)
(33,830)
59,475
25,644
$(65,697)
$(50,354)
$(60,558)
$(15,342)
$10,204
Comparison of the Years Ended December 31, 2023 and 2022
Total Revenue
(in thousands)
Contract Revenue:
Controlled Founded Entities
Parent Company and Other
Total Contract Revenue
Grant Revenue:
Wholly-Owned Programs
Parent Company and Other
Total Grant Revenue
Total Revenue
Year ended December 31,
2023
750
—
750
853
1,727
2,580
3,330
2022
Change
1,500
590
2,090
2,826
10,702
13,528
15,618
(750)
(590)
(1,340)
(1,973)
(8,975)
(10,948)
(12,288)
Our total revenue was $3.3 million for the year ended December 31, 2023, a decrease of $12.3 million, or 79 percent compared
to the year ended December 31, 2022. The decrease was primarily attributable to a decrease of $10.9 million in grant revenue,
mainly as a result of inclusion of Vedanta’s activities only for a part of the year through its deconsolidation in March 2023, and
a decrease of $2.0 million as a result of decreased grant-related activities. The decrease was also attributed to a decrease of
$1.3 million in contract revenue due to the conclusion of certain collaboration agreements, as well as a decrease of $0.6 million
due primarily to the discontinuation of royalty revenue from Gelesis as Gelesis ceased operations in October 2023.
Governance
74 PureTech Health plc Annual Report and Accounts 2023
Financial Review continued
Research and Development Expenses
(in thousands)
Research and Development Expenses:
Wholly-Owned Programs
Controlled Founded Entities
Parent Company and Other
Total Research and Development Expenses:
Year ended December 31,
2023
2022
Change
$(89,495)
(672)
(6,068)
$(96,235)
$(116,054)
(1,051)
(35,328)
$(152,433)
$(26,559)
(379)
(29,260)
$(56,199)
Our research and development expenses were $96.2 million for the year ended December 31, 2023, a decrease of $56.2 million,
or 37 percent compared to the year ended December 31, 2022. The change was primarily attributable to a decrease of
$26.6 million in research and development expenses incurred by the Wholly-Owned Programs, out of which $13.1 million is due
to prioritization of research and development projects, whereby the Group elected to focus on programs where it believes it has
the highest probability of success and reduced efforts in research and clinical stage projects where such probability of success
is lower. The program prioritization and reduction in the research activities further resulted in a decrease of $6.3 million in payroll
and headcount related costs, and $1.3 million of impairment cost of fixed assets related to write down of lab equipment that
was previously used by the research team. In addition, there was a decrease of $12.4 million, mainly in contract manufacturing
expenses in the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to the ramp up of
clinical manufacturing efforts in the year ended December 31, 2022, in preparation of the start of new clinical studies. These
decreases in research and development expenses were partially offset with increases of $4.7 million in consulting fee and outside
services. The decrease in research and development expenses was also attributable to a decrease of $29.3 million in the Parent
Company and Other as a result of inclusion of Vedanta’s activities only for a part of the year 2023 through its deconsolidation
in March 2023, as compared with inclusion of the results for the full year in the year ended December 31, 2022.
General and Administrative Expenses
(in thousands)
General and Administrative Expenses:
Wholly-Owned Programs
Controlled Founded Entities
Parent Company and Other
Total General and Administrative Expenses
Year ended December 31,
2023
2022
Change
$(14,020)
(562)
(38,713)
$(53,295)
$(8,301)
(419)
(52,272)
$(60,991)
$5,720
143
(13,559)
$(7,696)
Our general and administrative expenses were $53.3 million for the year ended December 31, 2023, a decrease of $7.7 million,
or 13 percent compared to the year ended December 31, 2022. The change was attributable to a decrease of $13.6 million in
Parent Company and Other offset by increases of $5.7 million, and $0.1 million in the Wholly-Owned Programs segment and
the Controlled Founded Entities segment, respectively. The decrease in the Parent Company and Other in 2023 was primarily
attributable to the inclusion of Vedanta’s activities only for a part of the year 2023 through its deconsolidation in March 2023,
as compared with inclusion of the results for the full year in the year ended December 31, 2022, partially offset with an increase
in consulting fees related to project evaluation and employee compensation costs. The increases in the Wholly-Owned Programs
segment and the Controlled Founded Entities segments were primarily driven by increases, in management fees, charged by
the Parent Company during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Total Other Income/(Expense)
Total other income was $111.1 million for the year ended December 31, 2023 compared to a loss of $26.0 million for the year
ended December 31, 2022, reflecting a change of $137.1 million, or 528%. The increase in other income was primarily attributable
to the following:
— a gain from investments held at fair value of $77.9 million primarily attributed to an increase in fair value of Karuna shares for
the year ended December 31, 2023, compared to a loss of $32.1 million for the year ended December 31, 2022, reflecting
an increase in other income of $110.0 million.
— a gain from deconsolidation of Vedanta of $61.8 million for the year ended December 31, 2023, compared to a gain from
deconsolidation of Sonde of $27.3 million for the year ended December 31, 2022, reflecting an increase in other income of
$34.5 million.
— a decrease of $29.2 million in realized loss from the sale of investments.
These increases in total other income were partially offset by a loss from investments in notes from associates of $27.6 million
primarily due to Gelesis ceasing operations in October 2023, for the year ended December 31, 2023, while no such loss occurred
during the year ended December 31, 2022, as well as a decrease in other income of $9.0 million due to a gain of $7.6 million in
respect of the Gelesis back-stop agreement recorded during the year ended December 31, 2022.
Governance
Financial Review continued
Net Finance Income/(Costs)
Net finance income was $5.1 million for the year
ended December 31, 2023, compared to net finance income
of $138.9 million for the year ended December 31, 2022,
reflecting a decrease of $133.8 million or 96 percent in net
finance Income. The decrease was primarily attributable to the
net change in fair value of subsidiaries' financial instrument
liabilities: during the year ended December 31, 2023, net
change in fair value of subsidiaries' preferred shares, warrant
and convertible note liabilities was an income of $2.6 million,
while for the year ended December 31, 2022, such change
was an income of $137.1 million, primarily related to change
in fair value of Vedanta preferred share liabilities, leading to
decrease in income of $134.4 million. In addition, the decrease
in net finance income is attributable to non-cash interest
expenses in the amount of $10.2 million recorded on the sale
of future royalties liability, during the year ended December
31, 2023, with no such corresponding expense, or liability,
in the year ended December 31, 2022. This decrease in net
finance income was partially offset by an increase in interest
income in the amount of $10.2 million due to higher interest
rates and yields earned on financial assets and a decrease of
$0.5 million in contractual interest expense during the year
ended December 31, 2023, as compared to the year ended
December 31, 2022.
Share of Net Income/(loss) of Associates Accounted for Using
the Equity Method
For the year ended December 31, 2023, the share in net loss of
associates reported under the equity method was $6.1 million
as compared to the share in net loss of associates of
$27.7 million for the year ended December 31, 2022, resulting
in a net decrease in loss of $21.7 million. The decrease was
primarily attributable to a decrease in Gelesis losses incurred
in the year ended December 31, 2023, due to the reduction
in the carrying value of our investment to zero.
Gain/(Loss) on Dilution of Ownership Interest in Associates
and Impairment of Investment in Associates
During the year ended December 31, 2022, the Group
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. In addition, during
the year ended December 31, 2022, the Group recorded an
impairment loss of $8.4 million in respect of its investment in
Gelesis. No such gains or impairment was incurred in the year
ended December 31, 2023.
Taxation
Income tax expense was an expense of $30.5 million for
the year ended December 31, 2023, as compared to a
benefit of $55.7 million for the year ended December
31, 2022, reflecting an increase in income tax expense of
$86.2 million. The increase in the income tax expense in the
year ended December 31, 2023, was primarily attributable to
lower pre-tax loss in the tax consolidated U.S. group, the tax
in respect of the sale of future royalties to Royalty Pharma and
the impact of derecognizing previously recognized deferred
tax assets that are no longer expected to be utilized. For
the year ended December 31, 2022, the Group recorded
an income tax benefit, primarily attributable to the increase
in gains that are non-taxable. For a full reconciliation from
the statutory tax rate to the effective tax rate, see Note 27.
Taxation to our Consolidated Financial Statements.
Comparison of the Years Ended December 31, 2022 and 2021
For the comparison of 2022 to 2021, refer to Part I, Item 5
“Operating and Financial Review and Prospects” of our Annual
Report on Form 20-F for the year ended December 31, 2022.
PureTech Health plc Annual Report and Accounts 2023 75
Material 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
("IFRSs"). 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. Material Accounting Policies 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. In accordance with IFRS 9, we carry certain financial assets
and financial liabilities at fair value, with changes in fair value
through profit and loss ("FVTPL"). Valuation of these financial
instruments includes determining the appropriate valuation
methodology and making certain estimates such as the future
expected returns on the financial instrument in different
scenarios, appropriate discount rate, volatility, and term to exit.
In accordance with IFRS 9, when issuing preferred shares in
our subsidiaries, we determine the classification of financial
instruments in terms of liability or equity. Such determination
involves 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.
Consolidation
The Consolidated Financial Statements include the financial
statements of the Group and the entities it controls. Based
on the applicable accounting rules, we control an investee
when we are exposed, or have rights, to variable returns
from our involvement with the investee and have the ability
to affect those returns through our power over the investee.
Therefore an assessment is required to determine whether
we have (i) power over the investee; (ii) exposure, or rights, to
variable returns from our involvement with the investee; and
(iii) the ability to use our power over the investee to affect
the amount of our returns. Judgement is required to perform
such assessment and it requires that we consider, among
others, activities that most significantly affect the returns of the
investee, our voting shares, representation on the board, rights
to appoint board members and management, shareholders
agreements, de facto power and other contributing factors.
Governance 76 PureTech Health plc Annual Report and Accounts 2023
Financial Review continued
Sale of Future Royalties Liability
We account for the sale of future royalties liability as a financial
liability, as we continue to hold the rights under the royalty
bearing licensing agreement and have a contractual obligation
to deliver cash to an investor for a portion of the royalty
we receive. Interest on the sale of future royalties liability is
recognized using the effective interest rate over the life of the
related royalty stream.
The sale of future royalties liability and the related interest
expense are based on our current estimates of future royalties
expected to be paid over the life of the arrangement.
Forecasts are updated periodically as new data is obtained.
Any increases, decreases or a shift in timing of estimated
cash flows require us to re-calculate the amortized cost of
the sale of future royalties liability as the present value of the
estimated future contractual cash flows that are discounted at
the liability’s original effective interest rate. The adjustment is
recognized immediately in profit or loss as income or expense.
In determining the appropriate accounting treatment for
the Royalty Purchase Agreement, management applied
significant judgement.
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 or loss 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 investments considered to be long-term
interests ("LTI"), 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
us 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 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 associates,
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 Group 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.
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 Note 2. New Standards and Interpretations to our
Consolidated Financial Statements.
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 Entities' therapeutic candidates;
— the revenue, if any, generated by wholly-owned and
Controlled-Founded Entities' therapeutic candidates;
— the revenue, if any, generated from licensing and royalty
agreements with Founded Entities;
— the financing requirements of the Wholly-Owned Programs
and our Founded Entities; and
— the investing activities including the monetization, through
sale, of shares held in our public Founded Entities.
As of December 31, 2023, we had cash and cash equivalents
of $191.1 million and short-term investments of $136.1 million.
As of December 31, 2023, we had PureTech Level cash, cash
equivalents and short-term investments of $326.0 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 with the IFRS number, see the section Measuring
Performance earlier in this Financial Review). In March 2024, we
received total proceeds of $292.7 million before income tax in
exchange for our holding of 886,885 shares of Karuna common
stock as a result of the completion of Karuna acquisition by
Bristol Myers Squibb (“BMS”).
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,
2023
2022
2021
$(105,917)
68,991
78,141
$41,215
$(178,792)
(107,223)
(29,827)
$(315,842)
$(158,274)
197,375
22,727
$61,827
Governance
PureTech Health plc Annual Report and Accounts 2023 77
Funding Requirements
We have incurred operating losses since inception. Based on
our current plans, we believe our existing financial assets as of
December 31, 2023, will be sufficient to fund our operations
and capital expenditure requirements into at least 2027. We
expect to incur substantial additional expenditures in the
near term to support our ongoing and future activities. We
anticipate to continue to incur net operating losses for the
foreseeable future to support our existing Founded Entities
and newly launched Founded Entities (Seaport Therapeutics
and Gallop Oncology), and our strategy around creating and
supporting other Founded Entities, should they require it, to
reach significant development milestones over the period of
the assessment in conjunction with our external partners. We
also expect to incur significant costs to advance our Wholly-
Owned Programs, to continue research and development
efforts, to discover and progress new therapeutic candidates
and to fund the Group’s operating costs into at least 2027.
Our ability to fund our therapeutic development and clinical
operations as well as ability to fund our existing, newly
founded and future Founded Entities, 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 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;
— the number and types of future therapeutics we develop and
support with the goal of commercialization;
— The costs, timing and outcomes of identifying, evaluating,
and investing in technologies and drug candidates to
develop as Wholly-Owned Programs or as Founded Entities;
and
— the success of our Founded Entities and their need for
additional capital.
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 Review continued
Operating Activities
Net cash used in operating activities was $105.9 million
for the year ended December 31, 2023, as compared to
$178.8 million for the year ended December 31, 2022, resulting
in a decrease of $72.9 million in net cash used in operating
activities. The decrease in outflows is primarily attributable to
our lower operating loss mainly due to a decrease in research
and development activities in the Wholly-Owned Programs
and Controlled Founded Entities and a decrease of operating
cash flows as a result of the deconsolidation of Vedanta on
March 1, 2023.
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 Wholly-Owned Programs
segment, partially offset by the timing of receipts and
payments in the normal course of business.
Investing Activities
Net cash provided by investing activities was $69.0 million for
the year ended December 31, 2023, as compared to net cash
outflow of $107.2 million for the year ended December 31,
2022, resulting in an increase of $176.2 million in net cash from
investing activities. The increase in net cash from investing
activities was primarily attributable to increased cash inflow
from short-term investment activities (redemptions, net of
purchases) amounting to $264.4 million, partially offset by a
reduction in proceeds from the sale of investments held at fair
value of $85.4 million.
Net cash used in investing activities was $107.2 million for the
year ended December 31, 2022, as compared to cash inflows
of $197,375 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,
net of redemptions amounted to $198.7 million for the year
ended December 31, 2022.
Financing Activities
Net cash provided by financing activities was $78.1 million
for the year ended December 31, 2023, as compared to
net cash used in financing activities of $29.8 million for the
year ended December 31, 2022, resulting in an increase of
$108.0 million in the net cash provided by financing activities.
The increase in the net cash provided by financing activities
was primarily attributable to the receipts of $100.0 million
upfront payment from Royalty Pharma upon execution of
Royalty Purchase Agreement in March 2023, and a $6.8 million
decrease in treasury stock purchase in 2023 as compared
to 2022.
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
the year ended December 31, 2021, there were payments
to settle stock based awards of $13.3 million, while for
the year ended December 31, 2022, there were no such
payments made.
Governance 78 PureTech Health plc Annual Report and Accounts 2023
Financial Review continued
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
Sale of future royalties liability
Other non-current liabilities
Non-current liabilities
Trade and other payables
Notes payable
Preferred shares
Other current liabilities
Current liabilities
Total liabilities
Net assets
Total equity
As of December 31,
2023
$317,841
28,930
346,771
327,143
20,059
347,201
693,973
18,250
52,462
110,159
3,501
184,371
44,107
3,699
169
3,394
51,370
235,741
458,232
$458,232
2022
$251,892
64,562
316,454
350,095
36,097
386,192
702,647
24,155
19,645
—
14,372
58,172
54,840
2,345
27,339
12,361
96,885
155,057
547,589
$547,589
Change
$65,949
(35,632)
30,317
(22,952)
(16,039)
(38,991)
(8,674)
(5,906)
32,817
110,159
(10,871)
126,199
(10,733)
1,354
(27,170)
(8,967)
(45,516)
80,684
(89,358)
$(89,358)
Investments Held at Fair Value
Investments held at fair value increased by $65.9 million to $317.8 million as of December 31, 2023. As of December 31, 2023,
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) and Vedanta (from March
2023). The increase is primarily attributed to an increase of $73.5 million in the value of Karuna shares as well as the Group
recognizing its investment in the convertible preferred shares of Vedanta in the amount of $20.5 million subsequent to Vedanta
being deconsolidated from the Group’s financial statements, partially offset by decreases in fair value of various investments.
Cash, Cash Equivalents, and Short-Term Investments
Consolidated cash, cash equivalents and short-term investments decreased by $23.0 million to $327.1 million as of December 31,
2023. The decrease is primarily attributed to net cash used in operating activities of $105.9 million, purchase of treasury
stock of $19.6 million, purchase of convertible note from associate of $16.9 million, and cash derecognized upon loss of
control over Vedanta of $13.8 million, partially offset by proceeds of $33.3 million from sale of Karuna shares during the year
ended December 31, 2023, and receipts of $100.0 million upfront payment from Royalty Pharma upon execution of Royalty
Purchase Agreement in March 2023.
Non-Current Liabilities
Non-current liabilities increased by $126.2 million to $184.4 million as of December 31, 2023. The increase was driven by the
Group receiving a $100.0 million non-refundable initial payment at the execution of the Royalty Purchase Agreement with
Royalty Pharma, which is accounted for as a non-current sale of future royalties liability, as well as the accretion of non-cash
interest expense on the sale of future royalties liability, and a $32.8 million increase in our deferred tax liabilities, partially offset
by a $10.2 million decrease in long-term loan due to Vedanta being deconsolidated in 2023.
Trade and Other Payables
Trade and other payables decreased by $10.7 million to $44.1 million as of December 31, 2023. The decrease reflected primarily
the deconsolidation of Vedanta and the timing of payments as of December 31, 2023.
Preferred Shares
Preferred share liability in subsidiaries decreased by $27.2 million as of December 31, 2023. The decrease in the preferred
share liability primarily relates to a decrease of $24.6 million due to the deconsolidation of Vedanta during the year
ended December 31, 2023.
Governance
Financial Review continued
Quantitative and Qualitative Disclosures about Financial Risks
Interest Rate Sensitivity
As of December 31, 2023, we had cash and cash equivalents
of $191.1 million and short-term investments of $136.1 million,
while we had PureTech Level cash, cash equivalents and
short-term investments of $326.0 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
with 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 a 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 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 profit and loss. We view our exposure
to third-party preferred share liability as low as of December
31, 2023 as the liability is not significant. Please refer to Note
16. Subsidiary Preferred Shares to our Consolidated Financial
Statements for further information regarding our exposure to
Controlled Founded Entity investments.
PureTech Health plc Annual Report and Accounts 2023 79
Deconsolidated Founded Entity Investments
We maintain certain debt or equity holdings in Founded
Entities which have been deconsolidated. These holdings
are deemed either as investments carried at fair value under
IFRS 9 with changes in fair value recorded through profit and
loss or as associates accounted for under IAS 28 using the
equity method. Our exposure to investments held at fair value
and investments in notes from associates was $317.8 million
and $4.6 million, respectively, as of December 31, 2023,
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 is 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, 2023, Sonde was the
only associate, and the carrying amount of the investments
in Sonde accounted for under the equity method was
$3.2 million. Accordingly, we do not view this risk as high.
Equity Price Risk
As of December 31, 2023, we held 886,885 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, Vor and Akili was $280.7 million,
$6.0 million, and $6.1 million, respectively.
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,
2023, would cause a loss of $29.3 million to be recognized as
a component of other income (expense) in our Consolidated
Statement of Comprehensive Income/(Loss). However, we
view exposure to equity price risk as low due to the definitive
merger agreement Karuna entered into with Bristol Myers
Squibb ("BMS”) in December 2023 under which Karuna
common shares were acquired by BMS for $330 per share in
March 2024. See Note 28. Subsequent Events.
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.
Governance 80 PureTech Health plc Annual Report and Accounts 2023
Financial Review continued
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 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 relatively low receivable balance, a small
number of counterparties and the high credit quality or healthy
financial conditions of these counterparties.
Foreign Private Issuer Status
Owing to our U.S. listing on the Nasdaq Global Market,
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.
Governance PureTech Health plc Annual Report and Accounts 2023 81
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 Report 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.
Since the Company’s 2023 Annual General Meeting, it has been
my pleasure to act in the position of interim Chair, in addition to my
role as the Senior Independent Director, to ensure continuity and
the maintenance of strong governance practices at PureTech. As
part of my expanded role, I have been working with my colleagues
on the Nomination Committee and the rest of the Board to
identify a suitable successor to our former Chair, Mr. Christopher
Viehbacher. This process is ongoing as we work to identify a
seasoned candidate with extensive experience in maximising
shareholder value.
The Nomination Committee, with assistance from the rest of
the Board and the Company’s management, has also continued
to explore potentially adding another non-executive director
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 potential additional non-
executive director, the Nomination Committee and the Company
are conducting a thorough and efficient process to identify the
best candidates.
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.
Dr. Raju Kucherlapati, Ph.D.
Interim Chair
April 25, 2024
Governance 82 PureTech Health plc Annual Report and Accounts 2023
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.
* The biography for executive director
Bharatt Chowrira can be found on
page 85.
Sharon Barber-Lui
Independent
Non-Executive Director
Raju Kucherlapati, Ph.D.
Interim Chair of the Board,
Senior Independent Director,
R&D Committee Member
Sharon Barber-Lui has served as a
member of our Board since March
2022 and became the Chair of the
Audit Committee in April 2022.
Ms. Barber-Lui has been the Chief
Financial Officer and Senior Vice
President, North America at Teva
Pharmaceutical Industries Ltd. since
July 2023. Prior to joining Teva,
Ms. Barber-Lui worked as Senior
Vice President of Global Finance
at EQRx and 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., 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. Dr. Kucherlapati has served as
interim Chair since 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 KEW Inc.
Dr. Kucherlapati previously served
on the board of Gelesis Holdings,
Inc. until October 2023. 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.
Governance Board of Directors continued
PureTech Health plc Annual Report and Accounts 2023 83
John LaMattina, Ph.D.
Independent
Non-Executive Director,
R&D Committee Member
Robert Langer, Sc.D.
Co-Founder and
Non-Executive Director,
R&D Committee Member
Kiran Mazumdar-Shaw
Independent
Non-Executive Director
Christopher Viehbacher
Former Chair
Christopher Viehbacher served as
a member of our Board from 2015,
and as chairman from September
2019 until his retirement from the
Board in June 2023. 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 did
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.
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 and Vedanta
Biosciences, Inc. Dr. LaMattina
previously served on the boards of
Immunome Inc. until October 2023
and Zafgen, Inc. until April 2020. He
is also 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.
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 and Moderna, Inc. Dr. Langer
previously served on the boards
of Abpro Korea until February
2024 and Frequency Therapeutics,
Inc. until November 2023. until
November 2023. Dr. Langer has
received over 250 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 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 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
served as a full-term member of the
board of trustees of Massachusetts
Institute of Technology until
June 2023. She has been elected
as a member of the prestigious
U.S.-based National Academy of
Engineering. She also serves as
a director on the board of United
Breweries Limited, and non-
executive director on the board of
Narayana Health. Ms. Mazumdar-
Shaw previously served as the lead
independent member of the board
of Infosys Ltd until March 2023.
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.
Governance 84 PureTech Health plc Annual Report and Accounts 2023
Board of Directors continued
Dennis Ausiello, M.D.**
Board Advisor,
R&D Committee Member
Joseph Bolen, Ph.D.**
Board Advisor,
R&D Committee Member
H. Robert Horvitz, Ph.D.**
Board Advisor,
R&D Committee Chair
Daphne Zohar**
Founder and Board Advisor
Joseph Bolen, Ph.D., is a board
advisor and member of the
PureTech R&D Committee. He first
joined PureTech in October 2015
and served as PureTech’s chief
scientific officer from October
2016 through 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.
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 Therapeutics,
Inc. and Alnylam Pharmaceuticals,
Inc. 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.
Daphne Zohar is a board observer
and senior advisor. A founder
of PureTech, Ms. Zohar served
as chief executive officer and a
member of the board of directors
since our formation and UK main
market listing in 2015 until her
departure on April 8, 2024, to
become chief executive officer of
PureTech founded entity, Seaport
Therapeutics, Inc. PureTech’s
R&D engine has generated 29
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 has been
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.
(acquired by Bristol Myers Squibb
for $14.0 billion). Ms. Zohar received
a B.S. from Northeastern University.
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.
Governance PureTech Health plc Annual Report and Accounts 2023 85
Management Team
(alphabetically)*
Bharatt Chowrira, Ph.D., J.D.
Chief Executive Officer,
Member of the Board
of Directors
Bharatt Chowrira, Ph.D., J.D., has
been our chief executive officer
since his appointment by the Board
on April 8, 2024. He was formerly
president and chief business,
finance and operating officer
since September 2022, president
and chief business, legal and
operating officer from January 2022
through September 2022 and our
president and chief of business and
strategy from March 2017 through
December 2021. Dr. Chowrira has
served as a member of PureTech’s
Board since February 2021 and
also serves on the board of
directors of Seaport Therapeutics,
Inc. 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
Pharmaceutical Industries 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, a M.S. in Molecular
Biology from Illinois State University
and a B.S. in Microbiology from the
UAS, Bangalore, India.
Eric Elenko, Ph.D.
President
Robert Lyne
Chief Portfolio Officer
Charles (Chip) Sherwood, J.D.
General Counsel and
Company Secretary
Eric Elenko, Ph.D., has served as our
president since his appointment by
the Board on April 8, 2024. Prior to
his current role, Dr. Elenko served
as 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. (acquired
by Bristol Myers Squibb for $14.0
billion) and Sonde Health, Inc.
Dr. Elenko serves on the board of
directors of Seaport Therapeutics,
Inc. and 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.
Robert Lyne is the chief portfolio
officer at PureTech. Prior to joining
PureTech, Mr. Lyne was the Chief
Executive Officer at Arix Bioscience
plc, a transatlantic venture capital
company focused on investing
in innovative biotechnology
companies. He began his career
as a lawyer at international law firm
Bird & Bird LLP in London before
moving to Touchstone Innovations,
a London listed biotech and
technology investor, which was
acquired in 2017. He has worked on
over 80 venture capital financings in
Europe and North America as well
as multiple trade exits and IPOs. As
an experienced UK plc executive,
Mr. Lyne has broad experience
formulating and implementing
corporate strategy. Mr. Lyne
has a B.A. from the University of
Oxford and an L.L.B. from Oxford
Brookes University.
Charles Sherwood, J.D., is the
general counsel and company
secretary at PureTech, where he
leads the company’s corporate
legal function, including corporate
governance and compliance.
Mr. Sherwood also serves
on the board of directors of
Vedanta Biosciences, Inc. Prior
to joining PureTech in August
2021, Mr. Sherwood was the Vice
President, Corporate Legal Counsel
at Anika Therapeutics, a small-cap
NASDAQ-listed biotechnology
company. During his time at Anika,
Charles built and led the legal
department, where he served as a
strategic advisor to management
and the Board and developed
extensive subject matter expertise
involving strategic transactions,
intellectual property, product
and brand marketing, financing
and other financial matters and
securities compliance and other
compliance matters. Mr. Sherwood
received a B.A. in economics
from Middlebury College and a
J.D. from Vanderbilt University
Law School. He is admitted to the
Massachusetts Bar.
** Dr. Horvitz, Dr. Ausiello, Dr. Bolen,
and Ms. Zohar are not members of the
PureTech Board. As Board Observers,
Dr. Horvitz and Ms. Zohar attend the
majority of Board meetings. As Board
Advisors, Dr. Ausiello and Dr. Bolen
attend select Board meetings. Dr.
Horvitz, Dr. Ausiello and Dr. Bolen
are also members of PureTech’s R&D
Committee, of which Dr. Horvitz is
the Chair.
*** Julie Krop, M.D., served as chief
medical officer at PureTech for the
duration of 2023 and departed from
the Company on March 31, 2024.
Governance 86 PureTech Health plc Annual Report and Accounts 2023
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. During
the past year the Board has played an active role on a variety of
strategic initiatives of the Company. Members served as subject
matter experts, advised on asset evaluation strategy and reviewed
potential transactions. In addition, several members served on
an independent transactions committee, led by the interim Chair.
As a result, certain members have devoted substantial time and
effort to the Company, above and beyond what would typically be
expected of Non-Executive Directors.
The Board has also exercised 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
Director and other members of management, and only after a
detailed process of review and challenge by the Board. Once
made, the Executive Director 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;
— changes to our capital structure, the issue of any of our
securities and material borrowings;
— approval of the annual report and half-year results statement,
accounting policies and practices or any matter having a
material impact on our future financial performance;
— ensuring a sound system of internal control and
risk management;
— approving Board appointments and removals, and approving
policies relating to directors’ remuneration;
— strategic acquisitions;
— major disposals of our assets or subsidiaries;
— approval of all circulars, prospectuses and other documents
issued to shareholders governed by the Financial
Conduct Authority’s (FCA) Listing Rules, Disclosure
Guidance and Transparency Rules or the City Code on
Takeovers and Mergers;
— approval of terms of reference and membership of
Board committees;
— considering and, where appropriate, approving directors’
conflicts of interest; and
— approval, subject to shareholder approval, of the appointment
and remuneration of the auditors.
The schedule of matters reserved to the Board is available on
request from the Company Secretary or within the Investors
section of our website at www.puretechhealth.com.
The Board delegates specific responsibilities to certain
committees that assist the Board in carrying out its functions
and ensure independent oversight of internal control and risk
management. The three principal Board committees (Audit,
Remuneration and Nomination) play an essential role in
supporting the Board in fulfilling its responsibilities and ensuring
that we maintain the highest standards of corporate governance.
Each committee has its own terms of reference which set out the
specific matters for which delegated authority has been given
by the Board.
The terms of reference for each of the committees are fully
compliant with the provisions of the Governance Code.
All of these are available on request from the Company
Secretary or within the Investors section of our website at
www.puretechhealth.com.
Governance The Board continued
PureTech Health plc Annual Report and Accounts 2023 87
Board size and composition
As of December, 2023, there were seven Directors on the Board:
the Non-Executive interim Chair, two Executive Directors and four
Non-Executive Directors. Following the departure from the Board
of Daphne Zohar on April, 2024 to become chief executive officer
of PureTech founded entity, Seaport Therapeutics, Inc., there
were six Directors on the Board: the Non-Executive interim Chair,
one Executive Director and four Non-Executive Directors. The
biographies of these Directors (including the former CEO and the
former Chair) are provided on pages 82 to 85. 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 January 1, 2023, following the retirement of Dame
Marjorie Scardino. Additionally, Dr. Kucherlapati assumed the role
of interim Chair following the conclusion of the term of the former
Chair Mr. Christopher Viehbacher on June 13, 2023. There were no
other changes to the composition of the Board during 2023. Dr.
Raju Kucherlapati will continue as interim Chair until a permanent
Chair can be selected and appointed. Dr. Kucherlapati will also
continue in his current role of Senior Independent director during
this period.
While the Company is conducting a search for a new Chair of the
Board and considering adding an additional member, it does not
anticipate that these activities will be completed by the time of
the 2024 AGM.
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 102 to 122.
The size and composition of the Board is regularly reviewed by
the Nomination Committee to ensure there is an appropriate and
diverse mix of skills and experience on the Board.
The Board may appoint any person to serve as a Director, either to
fill a vacancy or as an addition to the existing Board. Any Director
so appointed by the Board shall hold office only until the following
AGM and then shall be eligible for election by the shareholders. In
accordance with the Governance Code, all of the Directors will be
offering themselves for election at the AGM to be held on June 13,
2024, 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 Dr. Raju Kucherlapati
(interim Chair), Ms. Sharon Barber-Lui, Dr. John LaMattina, Dr.
Robert Langer, and Ms. Kiran Mazumdar-Shaw.
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
Internal Programs.
Senior Independent Director
The Company’s Senior Independent Director is Dr. Raju
Kucherlapati. A key responsibility of the Senior Independent
Director, following the appointment of a permanent Chair, 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 is to serve
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. For the period while Dr. Raju Kucherlapati
serves as both interim Chair and Senior Independent Director, any
other of the Non-Executive Directors is available to shareholders
in the event that they may feel it inappropriate to relay views
through the Chair or Chief Executive Officer. In addition, any other
of the Non-Executive Directors may be elected by the Board to
lead the Board in its deliberations on any matters on which Dr. Raju
Kucherlapati is conflicted.
The roles of Chair and Chief Executive Officer
The Company’s interim Chair is Dr. Raju Kucherlapati. He has
served as interim Chair since the 2023 AGM to fulfill the leadership
requirements and governance obligations of the role following
the resignation of the former Chair. 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 2024 AGM. Until such permanent replacement is appointed
as Chair by the Board, Dr. Raju Kucherlapati is serving as interim
Chair. 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, Dr. Bharatt Chowrira, 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.
Governance 88 PureTech Health plc Annual Report and Accounts 2023
The Board continued
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 and
Dr. Kucherlapati, the length of their tenures as Directors 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 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, is focused on potentially
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, Mr. Charles Sherwood, 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 8 scheduled
meetings in 2023, and details on attendance are set forth in the
table below:
Director
Raju Kucherlapati
Sharon Barber-Lui
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Christopher Viehbacher*
Bharatt Chowrira
Daphne Zohar
Number of Board
Meetings Attended
8/8
7/8
7/8
8/8
7/8
1/3
8/8
6/8
* Mr. Viehbacher retired from the Company’s Board in June 2023.
While each current director was able to attend the vast majority
of meetings in 2023, 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
respect to the meetings any director was unable to attend. Ms.
Zohar did not attend certain meetings where she recused herself
in light of the topics to be discussed.
The Board also acted by unanimous written consent five times
in 2023. On occasion it was more expedient for the Board to
approve matters, especially administrative matters, by unanimous
written consent rather than to convene a meeting for the purpose.
Directors were, however, provided with an 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 interim 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
Governance The Board continued
PureTech Health plc Annual Report and Accounts 2023 89
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.
Company Board meetings are held either in our offices in Boston,
Massachusetts, U.S., or by videoconference. This practice began
during the onset of the COVID-19 pandemic for the safety of the
Board and has continued in recent years. The venue of Board
meetings varies depending on the schedules and health of our
directors. The Board endeavours to hold at least two in-person
meetings during the year, as they give 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.
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 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),
and upon joining the Board subsequent to the IPO, 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 Internal Programs, the Board periodically receives the
presentations and reports covering the business and operations
of each of our Founded Entities as well as its Internal Programs.
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. For 2023, internal evaluations of
the Board demonstrated that the Board and its Committees fulfil
their responsibilities, operate effectively and demonstrate a clear
structure and division of responsibilities between the Board and
its Committees. The increased quality of Board materials and
presentations and advances in the process for evaluating strategic
transactions were favourably viewed. The Board will continue to
perform internal evaluations to ensure the effectiveness of the
Board and ensure alignment with the interests of stakeholders.
In addition to the above, the Non-Executive Directors, led by the
Senior Independent Director when that person is not also serving
as interim Chair, will periodically appraise the permanent Chair’s
performance, following which the Senior Independent Director
will provide any feedback to the Chair. For the period while the
Senior Independent Director also serves as interim Chair, the
appraisal of the Interim Chair’s performance will be led by the
Non-Executive Directors acting together. 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
Governance 90 PureTech Health plc Annual Report and Accounts 2023
The Board continued
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.
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.
Principal and emerging 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 60 to 64 and in the
Additional Information section from pages 186 to 223.
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.
2024 Annual General Meeting
The Notice of the AGM, which will be held at 4:00 pm BST (11:00
am EDT) on June 13, 2024 at the offices of FTI Consulting at 200
Aldersgate, 200 Aldersgate Street, London EC1A 4HD, 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.
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 2023 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, 2023.
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 Internal Programs and all Founded Entities on a
regular basis, and reviews our performance and the performance
of our Internal Programs and Founded Entities on a quarterly
basis. However, the performance and structuring of business units
may be reviewed more frequently if deemed appropriate.
The key risks and uncertainties we face, as well as the relevant
mitigations, are set out on pages 60 to 64 and in the Additional
Information section from pages 186 to 223.
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
Governance PureTech Health plc Annual Report and Accounts 2023 91
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.
Further information
– Governance Section of
ARA (Pages 46 to 101)
– ESG Report
(Pages 24 to 45)
– Karuna proceeds
(Page 65)
– Remuneration Report
(Pages 102 to 122)
– PureTech’s Hub-and-
Spoke Model (Page 10)
Stakeholder
How we engage
Key matters identified
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 Internal Programs and clinical
trials as well as opportunities to secure financing
from third parties, for example we monetized
PureTech’s royalty in Karuna Therapeutics’
KarXT for up to $500 million, with $100 million
in cash paid up front. Our Board also carefully
considers opportunities for disposal of shares in
our Founded Entities, which have generated over
$815 million in non-dilutive proceeds to advance
our pipeline and growth since 2020.
– The Board seeks to ensure appropriate board
structure and the Nomination Committee
continues to actively evaluate seasoned
candidates with extensive experience suitable for
a Company of PureTech’s size.
– The Board recognizes the importance of Diversity,
Equity and Inclusion and is delighted to have a
diverse group of leaders at both the Board and
Management levels.
Governance 92 PureTech Health plc Annual Report and Accounts 2023
Relations with Stakeholders – Section 172 Statement continued
Further information
– ESG Report
(Pages 24 to 45)
– Remuneration Report
(Pages 102 to 122)
– Strategic Report
(Pages 3 to 21)
– ESG Report
(Pages 24 to 45)
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
Community
&
Environment
– 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
– The Board recognizes the importance of an
incentivized and engaged workforce, especially
in the highly competitive biotechnology cluster
of the greater Boston area. While the Board
recognized the three methods suggested in
the Code for workforce engagement, the Board
opted for a more informal approach given the
Company’s number of employees. The Board
is responsive to the views of employees, and
regularly seeks feedback from the Executive
Directors on the overall culture of the Company
which is aligned to the purpose, values and
strategy of the organization. Executive Directors
provide insights based on the feedback from
routine employee engagement, such as through
surveys and Town Hall Meetings.
– The Board aims to attract and retain employees.
This is attained through a combination of
competitive remuneration and benefit packages
and an established personal management
and development program. This program is
implemented 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 operates with 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
2023, PureTech made charitable contributions to
the Pulmonary Fibrosis Foundation, School on
Wheels and The Greater Boston Food Bank.
Suppliers/
Business
Partners
– Our business model creates value through
– We aim to build clear and reliable supply
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 2023 included:
– Quality updates and quality audits
– Meetings with key surgeons to
understand/identify potential indications
and applications for therapeutics
– Partnerships – BeiGene and Eli Lilly
arrangements with our contract manufacturers
for clinical product supply, in particular with an
emphasis on quality, especially in relation to a
clinical environment.
– 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’s Hub-and-
Spoke Model (Page 10)
– Seaport
Therapeutics (Page 13)
– Gallop Oncology
(Page 15)
Governance PureTech Health plc Annual Report and Accounts 2023 93
Directors’ Report for the year
ended December 31, 2023
The Directors present their report and the audited consolidated
financial statements for the financial year ended December 31, 2023.
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 13th Floor, One Angel Court, London, EC2R 7HJ,
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
82 to 85 and are deemed to be incorporated into this report.
Descriptions of the terms of the directors’ service contracts are set
forth on page 112 and page 120 of this report.
All current directors shall retire from office and will offer
themselves for reappointment by the members at the Company’s
upcoming AGM.
Details of the interests of directors in the share capital of the
Company as of December 31, 2023 are set out in the Annual
Report on Remuneration on page 119 and Note 26 to the financial
statements, located on page 176. There have been no changes in
such interests from December 31, 2023 to March 31, 2024, except
as specifically set forth in those sections.
Results and dividends
We generated a loss for the year ended December 31, 2023 of
$60.2 million (2022: Loss of $37.1 million).
The Directors do not recommend the payment of a dividend for
the year ended December 31, 2023 (2022: nil).
Share capital
As of December 31, 2023, the ordinary issued share capital of the
Company stood at 289,468,159 shares of £0.01 each, including
shares issuable upon conversion of outstanding ADSs, with
17,614,428 shares held in treasury by the Company under its
ongoing Share Repurchase Program. Details on share capital are
set out in Note 15 to the financial statements, page 162.
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 15 to the financial
statements, page 162.
Rights of ordinary shares
All of the Company’s issued ordinary shares are fully paid up
and rank pari passu in all respects and there are no special rights
with regard to control of the Company. There are no restrictions
on the transfer of ordinary shares 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.
Substantial shareholders
As of March 31, 2024, the Company had been advised that the
shareholders listed below hold interests of 3 percent or more in its
ordinary share capital (other than interests of the Directors which
are detailed on page 119 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.
Shareholder
Invesco Asset Management Limited
Lansdowne Partners International Limited
Baillie Gifford & Co
Vanguard Group
Patient Capital Management
Recordati SPA Pharmaceutical Company
M&G Investment Management, LTD
%
23.76
8.10
7.65
4.24
3.90
3.54
3.39
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 89.
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 2024 AGM.
Governance 94 PureTech Health plc Annual Report and Accounts 2023
Directors’ Report for the year ended December 31, 2023 continued
The following have served as Directors of the Company during the 2023 financial year.
Name
Role
Age (as of December 31, 2023)
Dr. Raju Kucherlapati
Lead Independent Non-Executive Director; Interim Chair
Dr. Bharatt Chowrira
Chief Executive Officer
Dr. Robert Langer
Non-Executive Director
Dr. John LaMattina
Independent Non-Executive Director
Ms. Kiran Mazumdar-Shaw
Independent Non-Executive Director
Ms. Sharon Barber-Lui
Independent Non-Executive Director
Ms. Daphne Zohar
Former Chief Executive Officer (departed the Board in April 2024)
Mr. Christopher Viehbacher
Former Non-Executive Chair (departed the Board in June 2023)
80
58
75
73
70
50
53
63
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 88.
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, 2023
(2022: 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, 2023, applied the main principles and
complied with the provisions set out in the Governance Code with
the following exceptions:
— Dr. Raju Kucherlapati, the interim Chair, is also Chair of
the Nomination Committee when it is dealing with the
appointment of a successor, which is not aligned with provision
17 of the Governance Code. In making the determination
for maintaining Dr. Kucherlapati as Chair of the Nomination
Committee the Board duly considered (i) the interim nature
of the role and the search underway for a permanent Chair
appointee (ii) his professional background (iii) his tenure on the
Board and experience. The Board deemed this to be relevant
experience making his role as Chair of Committee in the
best interest of the Company’s shareholders. The Board has
acknowledged Dr. Kucherlapati’s exemplary leadership during
a busy and transformative period for the Company. However,
the Directors are also cognizant of the extended tenure of
Dr. Kucherlapati’s interim role and are taking affirmative steps
to appoint a permanent Chair. These affirmative steps include
both interviewing external potential candidates for the role
as well as evaluating the skillsets and leadership qualities of
its current members. If an external candidate is chosen as
permanent Chair, Dr. Kucherlapati is expected to remain a key
member of the Company’s Board.
— Mr. Christopher Viehbacher, the former Chair, served on
the Audit Committee during the year, which is not aligned
with provision 24 of the Governance Code. In making the
determination for maintaining Mr. Viehbacher as a member
of the Audit Committee the Board duly considered (i) his
experience as a Chartered Accountant and numerous senior
executive positions in his career (ii) his prior service as chair of
the Committee and (iii) his departure from the Committee and
the Board following the 2023 AGM. The Board deemed this to
be recent and relevant financial experience, qualifying him to
serve on the Committee.
Governance Directors’ Report for the year ended December 31, 2023 continued
PureTech Health plc Annual Report and Accounts 2023 95
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.
Subsequent Events
Information related to events occurring after December 31, 2023
can be found in Note 28 to the consolidated financial statements.
Research and Development
Information on our research and development activities can be
found in the Strategic Report on pages 11 to 12.
Going concern
As of December 31, 2023, the directors had a reasonable
expectation that we had adequate resources to continue in
operational existence into 2027.
Annual General Meeting
The Notice of the AGM, which will be held at 4:00 pm BST (11:00
am EDT) on June 13, 2024 at the offices of FTI Consulting at 200
Aldersgate, 200 Aldersgate Street, London EC1A 4HD, 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 25, 2024.
Pension schemes
Information on the Company’s 401K Plan can be found in the
Annual Report on Remuneration on page 107.
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 18 to the financial statements
and the Corporate Governance section of the Annual Report
on page 100.
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 24 to 45.
Related party transactions
Details of related party transactions can be found in Note 26 of the
financial statements on pages 175 to 176.
Share buyback
At the 2022 AGM and the 2023 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. On May 9, 2022, the Company commenced a
$50 million Share Buyback Programme. The Company executed
the Programme in two equal tranches, the first of which was
completed on October 26, 2022, and the second which was
completed on February 7, 2024. Between May 9, 2022, and
February 7, 2024, the Company repurchased an aggregate of
20,182,863 ordinary shares under the Share Buyback Programme,
which represents approximately 7% of the Company’s issued
share capital at the time the programme commenced. The
authority granted from the 2022 AGM expired as of the end of
the 2023 AGM, and the authority from the 2023 AGM expires
as of the earlier of the end of the 2024 AGM or close of business
on 15 September 2024. During 2023, 7,683,526 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 Internal Programs and
Founded Entities’ future developments can be found in the
Strategic Report on pages 11 to 21.
Risk and internal controls
The principal risks we face are set out on pages 60 to 64 and in
the Additional Information section from pages 186 to 223. The
Audit Committee’s assessment of internal controls is laid out
on page 100.
Governance 96 PureTech Health plc Annual Report and Accounts 2023
Directors’ Report for the year ended December 31, 2023 continued
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.
N/A
N/A
Directors’ Remuneration
Report, page 106
N/A
N/A
Details of any non-pre-emptive issues of equity for cash by any unlisted major subsidiary undertaking.
Directors’ Report, page 93
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.
Board statements in respect of relationship agreement with the controlling shareholder.
N/A
N/A
N/A
N/A
N/A
N/A
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. In the event of a
communication to the Executive Directors or others, including via
the Company’s Whistleblower hotline, pursuant to these policies,
this information will be shared with the Audit Committee who will
evaluate the claims and in turn report to the rest of the Board.
Transition of auditor
During 2023, the Audit Committee oversaw the handover and
induction arrangements to ensure a smooth transition for our
new auditors. Last year, following a tender offer process, the
Audit Committee recommended to the Board the appointment
of PricewaterhouseCoopers LLP UK (“PwC”) as the preferred
new auditor, replacing KPMG LLP who has served as our auditor
since 2015. Based on this recommendation, the Board proposed
that PwC be appointed as external auditor of Company, which
received shareholder approval at the 2023 AGM Audit Committee,
with 99.75% of votes cast in favour of the appointment.
Disclosure of information to auditor
The Directors who held office at the date of approval of this
Directors’ report confirm that:
Governance Directors’ Report for the year ended December 31, 2023 continued
PureTech Health plc Annual Report and Accounts 2023 97
— 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
Bharatt Chowrira, Ph.D., J.D.
Chief Executive Officer and Director
April 25, 2024
Governance 98 PureTech Health plc Annual Report and Accounts 2023
Report of the Nomination Committee
Raju Kucherlapati, Ph.D.
Chair, Nomination Committee
might affect, or appear to affect, the Directors’ judgement in
their service on the Nomination Committee. While the Board
has not deemed Dr. Langer independent for the purposes of
overall Board composition, he is independent in the context
of his service on the Nomination Committee. The Board duly
considered (i) his involvement in other Founded Entities and (ii) the
exceptional circumstance that Dr. Langer is a founding Director
of the Company. The Board further regards Dr. Kucherlapati as
independent on the basis of the Governance Code criteria despite
also serving as interim Chair of the Board since June 2023 in light
of the criteria listed above and the fact that Dr. Kucherlapati’s
appointment as Chair of the Board is 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 2023,
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. Dr. Kucherlapati, Ms. Mazumdar-Shaw and
Dr. Langer participated in the meeting. Mr. Viehbacher, the Chief
Executive Officer and the President were invited to and attended
the meeting.
In light of the retirement of Dame Scardino at the end of 2022
and departure of Mr. Viehbacher following the Company’s 2023
AGM, the committee undertook a search to identify a new Board
Chair and Director. This thorough search 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 2024 AGM.
Diversity policy
Diversity within the Company’s Board and the Management
Team 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 and
develop 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. This approach is also applied to ensuring diversity
within the Board and the Remuneration, Audit and Nomination
committees. 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 across both
the Board and the Management Team..
Information regarding the Company’s diversity efforts can be
found in the ESG Report on pages 24 to 45.
Board and Committee evaluation
Information regarding the evaluation of the Board and its
Committees can be found on page 90.
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 Dr. Raju Kucherlapati,
who served as the committee’s Chair, Dr. Robert Langer, and
Ms. Kiran Mazumdar-Shaw during 2023. The biographies of the
Nomination Committee members can be found on pages 82 to 83.
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 2023, the Board
regarded Dr. Raju Kucherlapati, 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
EntitiesThe 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 Dr. Langer
and Ms. Mazumdar-Shaw to be independent in character and
judgement and free from relationships or circumstances which
Governance PureTech Health plc Annual Report and Accounts 2023 99
Report of the Audit Committee
Ms. Sharon Barber-Lui
Chair, Audit Committee
in making the independence determination for the interim Chair,
Dr. Kucherlapati, the Board considered his (i) his prior service
on the Board (ii) relevant leadership positions within the sector
and (iii) the interim nature of his role as interim Chair. The Board
deemed this to be recent and relevant financial experience,
qualifying both Mr. Viehbacher and Dr. Kucherlapati to serve
on the Committee.
Ms. Barber-Lui has served as Chair of the Committee since
April 26, 2022. Ms. Barber-Lui has experience as a Chartered
Accountant and has held numerous senior executive positions in
her career. The Board has deemed this to be recent and relevant
financial experience, qualifying her to be Chair of the Committee.
Ms. Barber-Lui has accounting experience, is currently the Chief
Financial Officer and Senior Vice President, North America at Teva
Pharmaceutical Industries Ltd., a publicly-traded Israeli company
(NYSE and TASE: TEVA), 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.
Both Dr. Kucherlapati and Dr. LaMattina have also been deemed
to have recent and relevant financial experience qualifying them
to serve on the Committee. The Board based this determination
based on (i) their numerous senior leadership positions and (ii)
their competence in the sector in which the company operates.
For Dr. Raju Kucherlapati and Dr. John LaMattina The biographies
of the Committee members can be found on pages 82 to 83.
The Committee met six times during the year, with Ms. Barber-Lui
and Dr. Kucherlapati each attending all six meetings,
Mr. Viehbacher attending three of four meetings prior to his
departure from the Committee and Dr. LaMattina attending two
meetings after replacing Mr. Viehbacher on the Committee. In
2023, the Chief Executive Officer and President were invited to
and attended all of the meetings, the prior Auditor was invited to
and attended two of the meetings and the current Auditor was
invited to and attended three 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 Audit Committee oversaw the handover
and induction arrangements to ensure a smooth transition for
our new auditors. Last year, following a tender offer process, the
Audit Committee recommended to the Board the appointment
of PricewaterhouseCoopers LLP UK (“PwC”) as the preferred new
auditor, replacing KPMG LLP who had served as our auditor since
2015. Based on this recommendation, the Board proposed that
PwC be appointed as external auditor of the Company, which
received shareholder approval at the 2023 AGM Audit Committee,
with 99.75% of votes cast in favour of the appointment.
The Committee also undertook the normal recurring items, the
most important of which are noted below.
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 and has complied with the provisions of
the Competition and Markets Authority Order. Additionally we are
in compliance with legal requirements, including the provisions of
the, FCA’s Listing Rules, Disclosure Guidance and Transparency
Rules, and reviews any recommendations from the Group’s
Auditor regarding improvements to internal controls and the
adequacy of resources within our finance function. A full copy of
the Committee’s Terms of Reference is available on request from
the Company Secretary and within the Investor’s section on the
Company’s website at www.puretechhealth.com.
Committee membership
The Committee consists of three independent Non-Executive
Directors, Ms. Sharon Barber-Lui, Dr. Raju Kucherlapati and
Dr. John LaMattina. Dr. LaMattina replaced Mr. Christopher
Viehbacher following his departure from the Committee due
to his retirement from the Board on June 13, 2023.
The Governance Code requires that the audit committee be
comprised of independent Non-Executive Directors, with the
chair of the Board refraining from serving on the Committee.
In making the determination for maintaining Mr. Viehbacher as
a member of the Audit Committee the Board duly considered
(i) his experience as a Chartered Accountant and numerous
senior executive positions in his career (ii) his prior service as
chair of the Committee and (iii) his upcoming departure from
the Committee and the Board following the 2023 AGM. Similarly,
Governance 100 PureTech Health plc Annual Report and Accounts 2023
Report of the Audit Committee continued
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 the determination of the accounting treatment
for the sale of future royalties, and valuation of Level 3 financial
instruments, including those related to Vedanta Biosciences and
Sonde Health.
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
Internal Programs, as well as support its Founded Entities
with further capital, the business model is currently inherently
cash consuming.
As of December 31, 2023, we had sufficient funding to extend
operations into 2027 based on the Company’s strategic
operating plan.
Accounting treatment for the sale of future royalties
An area of judgment in our financial statements and, therefore
audit risk, relates to the determination of the appropriate
accounting treatment for the Royalty Agreement, which at year
end resulted in a sale of future royalty liability of $110.2 million. We
considered the pertinent terms and underlying economics of the
agreement in determining the appropriate accounting treatment.
Therefore, while an inability of the Internal Programs 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
Internal Programs and Founded Entities or to more actively seek
to monetize one or more Founded Entities, it would not threaten
our viability overall.
Valuation of financial instruments
An area of judgement in our financial statements and, therefore
audit risk, relates to the valuation of investments held at fair
value that do not have a quoted active market price which at year
end had a carrying value totaling $25 million (2022 – $11 million).
We considered the underlying economics of the valuations
and sought external expertise in determining the appropriate
valuation of the financial investments. These valuations rely, in
large part, on the capital structure, values of recent transactions
and market movement. 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.
Regulatory compliance
Ensuring compliance for FCA regulated businesses also
represents an important control risk from the perspective of the
Committee. We engage with outside counsel and other advisors
on a regular basis to ensure compliance with legal requirements.
Review of Annual Report and Accounts and Half-
yearly Report
The Committee carried out a thorough review of our 2023 Annual
Report and Accounts and our 2023 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.
Compliance
The Committee has had a role in supporting our compliance
with the Governance Code, which applies to us for the 2023
financial year. The Board has included a statement regarding our
longer-term viability on page 65. The Committee worked with
management and assessed that there is a robust process in place
to support the statement made by the Board.
Similarly, the Committee worked with management to ensure
that the current processes underpinning its oversight of internal
controls provide appropriate support for the Board’s statement
on the effectiveness of risk management and internal controls.
Risk and internal controls
The principal risks we face are set out on pages 60 to 64 and in the
Additional Information section from pages 186 to 223.
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 2023 financial year and the results were
presented to the Committee.
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 December 31, 2023.
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.
Governance Report of the Audit Committee continued
PureTech Health plc Annual Report and Accounts 2023 101
Internal audit
We do not maintain a separate internal audit function. This is
principally due to our size, where close control over operations
is exercised by a small number of executives. In assessing the
need for an internal audit function, the Committee considered
the risk assessment performed by management to identify key
areas of assurance and the whole system of internal financial
and operational controls. The Company achieves internal
assurance by performing the risk assessment of the key areas of
assurance and maintaining related key internal controls, as well as
engaging external advisors to perform internal control testing, as
described above.
External audit
We have engaged PricewaterhouseCoopers LLP (UK) as our
Auditor since 2023. The current audit partner is Sam Taylor who
has been our audit partner since June 2023.
The effectiveness of the external audit process is dependent on
appropriate risk identification. In November 2023, the Committee
discussed the Auditor’s audit plan for 2023. 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 and
(b) the accounting model for the sale of a future royalty liability.
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.
Non-audit work
The Committee approves all fees paid to the Auditor for
non-audit work.
Where appropriate, the Committee sanctions the use of
PricewaterhouseCoopers LLP for non-audit services in
accordance with our non-audit services policy. During 2023
PwC did not provide any non-audit related services, apart from
non-audit fees in connection with access to the firm’s accounting
research and disclosure database. Therefore, the ratio of non-
audit work to audit work was nil, which the Committee is satisfied
does not breach the independence of PricewaterhouseCoopers.
Sharon Barber-Lui
Chair of Audit Committee
April 25, 2024
Governance 102 PureTech Health plc Annual Report and Accounts 2023
Directors’ Remuneration Report
for the year ended December 31, 2023
Dr. John LaMattina
Chair, Remuneration Committee
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 interim 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.
Committee membership
The Remuneration Committee consists of Dr. LaMattina, Dr.
Kucherlapati and Ms. Mazumdar-Shaw, with Dr. LaMattina serving
as Chair of the Committee. The biographies of the Committee
members can be found on pages 82 to 83. 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 seven times during the year. During
2023, the Chief Executive Officer and the President were invited
to all of the meetings, with Ms. Zohar attending two of the three
meetings and Dr. Chowrira attending all 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.
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 2023
AGM with 95.5% support. At the 2023 AGM, we also received
96.8% support for a proposal for a new Performance Share Plan
to help us better manage the potential dilution from equity
incentives, a critically important part of our overall compensation
program. The Committee is grateful for this level of investor
support, which clearly indicates that shareholders are sympathetic
to our approach of balancing UK standards on remuneration
with practices designed to ensure that PureTech can remain
competitive against U.S. peer companies in the biopharma sector.
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 106 to 112; and
— The Annual Report on Remuneration: setting out the
implementation of the Remuneration Policy in the year ended
December 31, 2023 and the intended implementation for the
year ending December 31, 2024 on pages 113 to 122.
The current Directors’ Remuneration Policy was last approved
at the 2021 AGM, and such approval is effective until the
December 31, 2024. We are asking shareholders to approve a
new Remuneration Policy at the 2024 AGM by way of a binding
vote. The Directors’ Remuneration Report (excluding that part
of the report containing the Directors’ Remuneration Policy on
pages 106 to 112) and is also subject to a shareholder vote at this
year’s AGM. The vote to approve the Directors’ Remuneration
Report 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 amend the Performance Share Plan (“PSP”) to align with
the new Policy.
Committee responsibilities
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
Governance Directors’ Remuneration Report continued
PureTech Health plc Annual Report and Accounts 2023 103
Ahead of the requirement to seek shareholder approval for
a new Directors’ Remuneration Policy at the 2024 AGM, the
Remuneration Committee has reviewed whether any changes
are required, taking into account the evolution of the business
and, in particular, the ongoing pressures in what remains a
very competitive U.S. market for talent. At the same time, the
Committee recognizes the need for remuneration practices
to broadly align with UK standards and the expectations of UK
investors. We have sought to develop a package which remains
consistent 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).
The new Remuneration Policy continues many of the features of
the existing Policy, including with respect to fixed remuneration,
annual bonuses and shareholding guidelines. We are, however,
making an important change to long-term equity incentive
provision for the Executive Directors.
Currently, the Executive Directors receive annual grants of
performance shares at levels of up to 600 percent of base salary
for the Chief Executive Officer and up to 300 percent of base
salary for any other Executive Directors. The shares vest subject
to the achievement of performance conditions over a three-year
period, with a subsequent two-year post-vesting holding period.
While this focus on performance shares is consistent with normal
practice for UK-listed companies, it is unusual for U.S. companies
in the biopharma sector, where restricted stock and stock
options are significantly more common. PureTech competes for
talent with other companies based in the biotech cluster around
Boston, and we face increasing challenges to retain key people
in a local market where competitor organizations are offering
large equity grants to senior employees without long-term
performance conditions.
In the interests of providing a suitably competitive package for
PureTech’s leaders which is relevant in the local context, the new
Policy introduces certain time-vesting restricted shares into
the long-term incentive structure for the Executive Directors.
Under this approach, 50 percent of the total long-term equity
component will remain as performance shares, with the remaining
50 percent being comprised of time-vesting restricted shares. To
ensure ongoing competitiveness, total grant levels will remain
unchanged, so that the Chief Executive Officer’s award under this
new structure will be up to 300 percent of salary in performance
shares and 300 percent in time-vesting restricted shares. For
any other Executive Directors, the grant levels will be up to 150
percent in performance shares and 150 percent in time-vesting
restricted shares.
The vesting of the performance shares will continue to be subject
to the satisfaction of challenging performance conditions over
a three-year period, with a significant proportion linked to TSR.
The time-vesting restricted shares will vest subject to continued
employment, albeit with a requirement that the Remuneration
Committee is satisfied with Company and individual performance
over the vesting period. The time-vesting restricted shares will
vest in three equal annual instalments commencing one year
from the initial grant date, in line with common U.S. practice.
Both performance and time-vesting restricted shares will remain
subject to a two-year post-vesting holding period. Vesting
provisions with respect to time-vesting restricted shares may
be altered at the discretion of the Remuneration Committee,
provided that the vesting periods are not shorter than what is
described previously.
We recognise that the introduction of time-vesting restricted
shares is a significant change to the incentive construct. However,
it results in a hybrid approach which is directly in line with market
practice in the sector, and helps us provide our leaders with
compensation packages which are more competitive in the local
context, while also putting the business in a better position to
attract the very best talent going forward.
One other change we are making to the Remuneration Policy
relates to Non-Executive Director compensation. Currently, Non-
Executive Directors receive a mixture of cash and ordinary shares
in PureTech. The fee levels payable to date have been significantly
below the levels typically payable for experienced Non-
Executive Directors at U.S. companies in our sector. Given the
Board’s policy of appointing high calibre Directors who can add
considerable value based on their knowledge and experience,
we intend to address the current market shortfall in two ways.
First, over the course of 2024 we will be reviewing the level of
cash compensation, to ensure that it is consistent with the very
significant contributions made by the Non-Executive Directors.
Full details of any changes will be disclosed in next year’s
Directors’ Remuneration Report. Second, the new Remuneration
Governance 104 PureTech Health plc Annual Report and Accounts 2023
Directors’ Remuneration Report continued
Policy provides more flexibility in the way Non-Executive Directors
can be paid, by increasing the equity element of the fee from
$50,000 to up to $150,000.
The full Directors’ Remuneration Policy is set out on
pages 106 to 112.
Amendment to Performance Share Plan
The purpose of the separate proposal to amend the performance
share plan is to align the plan document with the remuneration
policy being proposed at the upcoming AGM. This amendment
will facilitate an important element of our overall compensation
program and aligns with our historic approach of balancing UK
standards on remuneration with practices designed to ensure that
PureTech can remain competitive against U.S. peer companies in
the biopharma sector.
Performance and reward in 2023
During 2023, 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 Internal 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 Internal
Programs and activities initiated or progressed to potentially
bring these innovative therapies to market, (ii) monetization
of PureTech’s royalty in Karuna Therapeutics’ KarXT for up to
$500 million, with $100 million in cash paid up front, (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 Internal Programs and Founded Entities,
resulted in the Remuneration Committee approving 75% 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. 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 75% of target (or
37.5% of base salary) was to be awarded to the Executive Directors.
The Committee focused on the monetization of the KarXT royalty
as an exceptional achievement, and also considered at length
the successful activities of certain Founded Entities and the value
created for PureTech thereby, especially Karuna in light of its sale
to Bristol Myers Squibb. Following this exercise of review, the
Committee determined to exercise discretion to increase the
bonus payment from 75% of target to 200% of target. This resulted
in a bonus payment of 100% of base salary to be awarded to the
Executive Directors. The Committee is of the view that this is
appropriate in recognizing the Executive Directors’ achievements
in 2023. See highlights of 2023 on pages 1 to 6.
In relation to the PSP, PureTech’s performance over the last three
financial years was very strong in terms of the achievement of
strategic objectives despite such performance not translating
to growth in the Company’s share price. Overall, the share price
declined from an average price of 285 pence during the last three
months of 2020 to an average price of 164 pence during the last
three months of 2023. However, strong strategic performance
over the three-year performance period resulted in PSP awards
granted to the executive management team, including the two
Executive Directors, in 2021 vesting at a level of 35.3 percent after
the end of the 2023 financial year.
Full details of payments to the Executive Directors in 2023
can be found later in this report. As part of the Remuneration
Committee’s review of overall compensation arrangements in the
Fall of 2023, and taking into account multi-year periods compared
to Executive Directors of U.S. and UK companies of a similar
size to PureTech, the Committee concluded that a significant
deficiency existed, and determined to make significant lump
sum benefits payments to the Executive Directors to align with
allowances often provided to other Executive Directors in both
the U.S. and the UK. These allowances, related to housing and
transportation, had not been provided to Executive Directors
of PureTech since PureTech’s IPO in 2015 and the Committee felt
that it was appropriate to address this important competitive
element that would typically be part of an overall compensation
regime. As a result, we agreed to make two payments to the then
serving Chief Executive Officer, with the first $1.5 million paid in
2023 and the second $1.0 million paid in early 2024. A one-time
$1.0 million payment was also made to the then serving President
for the same reasons in early 2024. Full details of the payments are
set out in the Directors’ Remuneration Report. We recognize that
payments of this nature are relatively unusual, but they are
considered to be in shareholders’ interests as they ensure that we
are fairly compensating our senior team in a manner consistent
with common practice for other leaders in our sector, taking into
account a period of under-reward in earlier years. As noted, the
Remuneration Committee periodically considers the overall
mix of benefits provided to all employees, including senior
management team members, and does not currently anticipate
making similar benefits payments in the near term.
The Committee believes the Remuneration Policy operated
as intended during the year and that remuneration outcomes
are appropriate, taking into account outcomes throughout
the business, company and individual performance and the
stakeholder experience.
Governance Directors’ Remuneration Report continued
PureTech Health plc Annual Report and Accounts 2023 105
Board changes since the year end
As announced on April 9, 2024 in connection with the foundation
of Seaport Therapeutics, Inc. (Seaport), our Chief Executive
Officer Daphne Zohar left the business with immediate effect to
become Chief Executive Officer of Seaport, while also serving as
senior adviser and observer to the Board of Directors of PureTech.
Ms. Zohar has been paid base salary, benefits and pension up
to April 8, 2024, and is not eligible for the 2024 bonus award.
However, outstanding PSP awards will continue to vest for the
duration of her service as senior advisor and observer to the
Board. The two-year post-vesting holding period for PSP awards
will continue to apply, and Ms. Zohar is also required to maintain a
minimum level of shareholding for at least two years following her
departure, in line with the Directors’ Remuneration Policy.
There are no compensation payments for loss of office. Full details
of 2024 remuneration will be disclosed in next year’s Directors’
Remuneration Report.
The compensation package for her successor as Chief Executive
Officer, Bharatt Chowrira, is described in the next section. There
are no other compensation elements in connection with his
appointment as Chief Executive Officer beyond those set out.
The year ahead
For 2024, the following key decisions have been made in relation to
how the Policy will be implemented:
— Base salaries for the Executive Director were increased by
3.2 percent, which is in line with 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.
— Since this decision was taken in relation to base salaries,
as noted above there has been a Chief Executive Officer
succession. The Committee carefully considered the base
salary for Bharatt Chowrira, the new Chief Executive Officer,
and determined that this should be $850,000 effective from
the date of appointment. This took into account the scope of
the role and the appropriate market positioning against key
competitors, considering base salary and the other elements
of the package.
— The annual bonus target and maximum will remain at
50 percent and 100 percent of base salary, respectively and for
the new Chief Executive Officer will be based on the blended
base salary paid over the year; and
— The grants of PSP awards in 2024 will remain at the level of
600 percent of base salary for the Chief Executive Officer,
in line with the limits as set out in the Policy. Subject to
shareholder approval of the new Remuneration Policy, half of
the awards will be granted as performance shares and half as
time-vesting restricted shares.
— For the performance share element, we are retaining a mix of
performance measures linked to absolute TSR, relative TSR
and key strategic metrics which are tied to business progress
over the three-year performance period. We have made a
small change to the weightings for these different elements,
with the 2024 award set to be based 50 percent on TSR and
50 percent on strategic metrics.
— For the Non-Executive Directors, as noted above, our intention
is to increase the current equity portion of fees from $50,000 to
$150,000, with this additional $100,000 either being awarded
in the form of a higher grant of PureTech ordinary shares or in
subsidiary equity, in line with new Remuneration Policy.
— Levels of cash compensation for the Non-Executive Directors
will be reviewed later in 2024.
Remuneration for other Colleagues
In addition to matters relating to Executive Directors’
remuneration, the Committee also reviews the compensation
policies for the wider employee base, with a particular focus on 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, helping to ensure a degree of competitiveness against
other U.S. companies operating in the same sector. Following
shareholder approval of the new Performance Share Plan in 2023,
we have greater flexibility in operating the plan given the new
dilution limits within the plan. As argued last year, we believe
that our new 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.
Closing comments
The Committee is comfortable that the operation of the Policy
for 2023 has demonstrated a robust link between performance
and reward given the successes recorded during the year and that
discretion, where exercised, has been in line with shareholder
interests. The Committee believes the new Remuneration Policy,
and the proposed operation of the Policy for 2024 is appropriate
and continues to strike a suitable balance between UK investor
expectations and the realities of operating in a competitive
U.S. market.
The Committee looks forward to shareholders’ support at
the 2024 Annual General Meeting for the advisory resolution
covering this Annual Statement and the Annual Report on
Remuneration and the separate resolution to approve the new
Remuneration Policy.
Governance 106 PureTech Health plc Annual Report and Accounts 2023
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) Regulations 2008 and the subsequent amendments, and the UK Listing Authority Listing Rules. In addition, the report has been
prepared on a “comply or explain” basis with regard to the UK Corporate Governance Code 2018.
This Directors’ Remuneration Policy will be put to a binding shareholder vote at the Company’s AGM on June 13, 2024 and, if approved,
is intended to apply for a period of three years from that date.
Changes to the Remuneration Policy
The policy being brought to shareholders for approval contains the following three changes:
— Time-vesting restricted shares are being introduced into the long-term incentive structure for the Executive Directors, with
50 percent of the total long-term equity component remaining as performance shares, and 50 percent being comprised of time-
vesting restricted shares. In the interests of ensuring ongoing competitiveness, maximum grant levels will remain unchanged.
— The time-vesting restricted shares will vest over three years in three equal annual instalments commencing one year from the
initial grant date, subject to continued employment and a Remuneration Committee assessment that individual and company
performance has been satisfactory over the vesting period. Both performance and time-vesting restricted shares will remain subject
to the same two-year post-vesting holding period as currently applies.
— Increasing the annual equity grant of PureTech ordinary shares paid to our Non-Executive Directors from $50,000 to $150,000.
In addition, some minor changes to the wording of the Policy have been made in the interests of enhanced clarity.
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. The Committee sought the views of major shareholders before
confirming the Policy as set out below.
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.
Governance Directors’ Remuneration Policy continued
PureTech Health plc Annual Report and Accounts 2023 107
Policy table
Element
Base salary
How component
supports corporate
strategy
To recognize the
market value of the
employee and the role.
Performance targets and recovery
provisions
Not applicable.
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.
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.
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.
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 ($46,000 for 2024).
Not applicable.
Benefits
To provide a market
competitive level
of benefits.
Annual
Bonus Plan
(ABP)
To drive and reward
annual performance
of individuals, teams
and PureTech.
Includes: housing allowance,
transportation allowance,
private medical and dental
cover, disability, life insurance.
Additional benefits may
also be provided in certain
circumstances, such as those
provided to all employees.
Based on performance during
the relevant financial year.
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.
Cost paid by the company.
Not applicable.
Up to 100 percent of base salary. Performance period:
Normally one year.
Payments are normally based on
a scorecard of strategic and/or
financial measures.
Up to 0 percent of salary payable
for threshold performance, 50
percent of base salary normally
payable for the achievement
of ’target’ performance and
100 percent of base salary
payable for the achievement
of stretch performance.
Recovery and withholding
provisions are in place.
Governance 108 PureTech Health plc Annual Report and Accounts 2023
Directors’ Remuneration Policy continued
Operation
Maximum
Element
Long-term
incentives
How component
supports corporate
strategy
To drive and reward
our sustained
performance, promote
the retention of the
leaders of the business
and to align executive
interests with those of
shareholders.
Share
ownership/
Holding
Period
Further aligns
executives with
investors, while
encouraging employee
share ownership.
The Company can make long-
term incentive awards of either
performance shares or time-
vesting restricted shares.
For performance shares, vesting
is dependent on the satisfaction
of performance targets and
continued service. Performance
and vesting periods are normally
three years.
For time-vesting restricted
shares, vesting is dependent
on continued service and
Remuneration Committee
confirmation that Company
and individual performance
has been satisfactory over the
vesting period. Vesting normally
takes place in three equal annual
tranches over a three-year
period following grant.
All awards 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.
For the Chief Executive Officer,
600 percent of base salary. This
will normally be split 300 percent
of base salary in performance
shares and 300 percent of base
salary in time-vesting restricted
shares.
For other Executive Directors,
300 percent of base salary. This
will normally be split 150 percent
of salary in performance shares
and 150 percent in time-vesting
restricted shares.
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.
Performance targets and recovery
provisions
For performance shares, the
performance period is normally
three years.
Up to 25 percent of a performance
share 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 performance share
award will be measured against
TSR targets with the remainder
measured against relevant
financial or strategic measures.
Performance conditions are
agreed by the Committee on
an annual basis.
For time-vesting restricted
shares, there are no performance
conditions other than the
requirement for the Remuneration
Committee to confirm a
satisfactory level of Company and
individual performance over the
vesting period.
Recovery and withholding
provisions are in place for both
performance and time-vesting
restricted shares.
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.
None.
Governance Directors’ Remuneration Policy continued
PureTech Health plc Annual Report and Accounts 2023 109
Element
Post-
cessation
holding
period
Non-
Executive
Directors
How component
supports corporate
strategy
Operation
Maximum
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.
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.
Performance targets and recovery
provisions
None.
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.
Remuneration provided to Non-
Executive Directors is operated
in line with the terms set out in
the Articles of Association.
Any remuneration provided to a
Non-Executive Director will be
in line with the limits set out in
the Articles of Association.
None.
The fee levels of the Non-
Executive Directors are
reviewed on an annual basis.
Subject to the limits set out in
the Articles of Association, fees
may be increased to reflect
changes in responsibility or time
commitment, and/or to maintain
fees at appropriate levels
relative to other companies
operating in the sector.
Cash fees, normally paid on a
quarterly basis, are comprised of
the following elements:
– Base fee.
– Additional fees.
A portion of the compensation
to Non-Executive Directors is in
the form of PureTech Health plc
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.
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 equity 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
places significant 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 performance shares (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.
Governance 110 PureTech Health plc Annual Report and Accounts 2023
Directors’ Remuneration Policy continued
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.
In compliance with U.S. Securities and Exchange Commission
reporting and Nasdaq listing standards, effective as of November
8, 2023, the Committee has adopted a new Policy for Recovery of
Erroneously Awarded Compensation. This new policy requires
that the Remuneration Committee clawback excess incentive
compensation from executive officers following a required
accounting restatement where, based on the restated financials,
executives would have missed the portion of the award tied to a
specific financial performance metrics.
The new policy covers restatements involving the financial
measures within the Performance Share Plan and Annual Bonus
Plan and is intended to apply in addition to and in concert with the
Company’s existing clawback and malus provisions.
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 (where relevant);
— making the appropriate adjustments required in certain
circumstances, for instance for changes in capital structure;
— deciding how to settle awards made under the plans, e.g. in
cash, shares, nil-cost options or as otherwise permitted under
the plan rules;
— overriding formulaic outcomes of incentive plans if
determined by the Committee not to be reflective of
company performance;
— determining “good leaver” status for incentive plan purposes
and applying the appropriate treatment; further details
on the discretion applicable in relation to leavers are set
out on page 112;
— undertaking the annual review of 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.
Governance Directors’ Remuneration Policy continued
PureTech Health plc Annual Report and Accounts 2023 111
Reward scenarios
The charts below show how the composition of 2024 remuneration for the Chief Executive Officer varies at different levels of
performance under the Policy set out above, as a percentage of total remuneration opportunity and as a total value.
Executive Director compensation (unaudited)
Chief Executive Officer
Minimum
100%
Target
27%
8%
74%
Maximum
13%
12%
75%
Fixed pay Annual bonus PSP
$891,000
$5,141,000
$9,391,000
Notes:
1 The minimum performance scenario comprises the fixed elements of remuneration only, including:
– Salary for FY2024 as set out in the Annual Report on Remuneration.
– Pension in line with policy and estimated benefits for FY2024. Given the special housing and transportation allowance payments are included in 2023 remuneration, they are
not included in these charts as It Is not expected that similar payments of this nature will be made in 2024.
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 performance share element, i.e. 150 percent of base salary for the CEO, plus 100 percent of the face value of the time-vesting restricted share element,
i.e. 300 percent of base salary for the CEO. 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, 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 performance-related 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, meaning that bonus opportunity
would be limited to 100% of base salary and long-term incentive
awards would be limited to 600% (in the case of a new Chief
Executive Officer) or to 300% (in the case of a new Executive
Director who is not a Chief Executive Officer). 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
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.
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.
Governance
112 PureTech Health plc Annual Report and Accounts 2023
Directors’ Remuneration Policy continued
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 (for performance share awards)
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 (for performance share awards) 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 resolutions to approve
the Remuneration Policy and 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 2024, in relation to new
Remuneration Policy.
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. The Remuneration Committee seeks employee feedback
with respect to the overall compensation policies and practices
from the Executive Directors and other members of Management,
who provide insights based on information gathered through
routine employee engagement.
Governance PureTech Health plc Annual Report and Accounts 2023 113
Annual Report on Remuneration
Implementation of the Remuneration Policy for the year ending December 31, 2024
Base salary
The Committee reviewed the base salary levels for the Executive Directors in early 2024 and an increase of 3.2 percent was awarded.
This increase was in line the average increase for the general workforce, which was largely driven by cost of living considerations in the US.
Following this annual increase, Dr. Chowrira’s base salary was increased as part of his appointment as Chief Executive Officer in April 2024.
Bharatt Chowrira* Chief Executive Officer
Daphne Zohar**
Former Chief Executive Officer
2023
Base salary
2024
Base salary
$575,050
$850,000
$719,883
$742,920
* Dr. Chowrira’s base salary for 2024 increased upon execution of his new employment agreement to reflect his appointment as Chief Executive Officer on April 8, 2024.
** A pro rata portion of Ms. Zohar’s 2024 compensation was paid prior to her resignation from the Company on April 8, 2024.
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 housing allowance, transportation allowance, private medical, disability and dental cover.
As explained in the Annual Statement from the Chair of the Remuneration Committee, benefits payments related to housing and
transportation allowance of $1.0 million were made to both the Chief Executive Officer and the former Chief Executive Officer in
early 2024, though those payments are reflected in the 2023 Single Total Figure of Remuneration for each Director set forth below.
Additional payments of this type are not expected in 2024.
Annual bonus
For 2024, the operation of the annual bonus plan will be similar to the plan’s operation in 2023. The maximum annual bonus will continue
to be 100 percent of base salary for the Executive Director based on the blended base salary paid over the year. The 2024 annual bonus
will be based on development goals and strategic development of our Internal Programs, financial and capital markets based goals. The
performance metrics and targets will be disclosed in the FY2024 Annual Report and Accounts given that they are commercially sensitive
at the current time.
Long-term incentives
Awards under the PSP will be made to the Executive Director in 2024. As explained in the Annual Statement from the Chair of the
Remuneration Committee, subject to shareholder approval of the new Remuneration Policy at the AGM, the Chief Executive Officer
will receive a performance share award with a face value of 300 percent of base salary and a restricted share award with a face value of
300 percent of base salary.
The performance share awards will be subject to the performance conditions described below, measured over the three-year period
ended 31 December 2026. 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:
— 30 percent of the performance shares under award will vest based on the achievement of absolute TSR targets.
— 20 percent of the performance shares under award will vest based on the achievement of a relative TSR performance condition,
10 percent each against two benchmarks (explained below).
— 50 percent of the performance shares under award will vest based on the achievement of strategic targets.
The change in the weightings between TSR and strategic targets reflects the nature of the business and the critical importance of
meeting specific milestones and developing the portfolio of companies within which PureTech has an interest.
Governance 114 PureTech Health plc Annual Report and Accounts 2023
Annual Report on Remuneration continued
The minimum performance target for the absolute TSR portion of the performance share award will be TSR equal to 10 percent per
annum, whilst the maximum target will be TSR equal to 20 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 (each benchmark applying to
10 percent of the performance share 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 development of Internal Programs, 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.
Any performance shares which vest will be subject to a two-year post-vesting holding period.
The restricted shares to be granted to the Executive Directors will vest subject to continued employment and a Remuneration
Committee assessment that Company and individual performance has been satisfactory. In line with normal practice in the United
States, vesting will take place in three equal annual tranches over three years. For each tranche there will be a two-year post-vesting
holding period.
Non-Executive Directors
Fees for our Board of Directors have been reviewed for 2024. The level of cash compensation is not being increased for 2024 although,
as noted in the Annual Statement from the Chair of the Remuneration Committee, a further review will be undertaken later this year in
the interests of ensuring ongoing competitiveness.
The Board intends to increase the equity component of compensation from $50,000 to $150,000. Full details will be provided in next
year’s Directors’ Remuneration Report.
Chair fee
Basic fee
Equity-based Component
Additional fees:
Chair of a committee
Membership of a committee
Membership of a subsidiary board
FY2024
$125,000
$75,000
$150,000
$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.
Governance Annual Report on Remuneration continued
PureTech Health plc Annual Report and Accounts 2023 115
Remuneration for the year ended December 31, 2023
Single total figure of remuneration for each Director (audited)
The table below sets out remuneration paid in relation to the 2023 financial year with a comparative figure for the 2022 financial year.
There were no exercises of share options by Executive Directors or Non-Executive Directors in either of the 2023 or 2022 financial years.
Basic
Salary/Fees
Year
Benefits1
Annual
Bonus Plan
Performance
Share Plan
(Vested)2
Pension
Total
Remuneration
Total
Variable
Total
Fixed
2023 and 2022 Remuneration
Executive Directors
Daphne Zohar
2023
$719,883
$2,539,391
$719,883
$749,970
$9,900
$4,739,027 $1,469,853 $3,269,174
2022
$663,487
$34,846
$298,569
$481,9127
$9,150
$1,487,964
$780,481
$707,483
Bharatt Chowrira
2023
$575,050
$1,030,972
$575,050
$299,453
$9,900 $2,490,425
$874,503 $1,615,922
2022
$530,000
$26,5016
$238,500
$183,7817
$9,150
$987,932
$422,281
$565,651
Non-Executive Directors
Sharon Barber-Lui
2023
$135,0005
2022
$115,1235
Raju Kucherlapati
2023
$172,5005
John LaMattina
2023
$137,7505
2022
$135,0005
2022
$145,0005
Robert Langer
2023
$135,0005
2022
$145,0005
Kiran Mazumdar-Shaw
2023
$135,0005
2022
$135,0005
Christopher Viehbacher3
2023
—
2022
$189,5365
Marjorie Scardino4
2023
—
2022
$140,0005
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $135,000
— $135,000
—
$115,123
— $115,123
— $172,500
— $172,500
— $135,000
— $135,000
—
$137,750
— $137,750
— $145,000
— $145,000
— $135,000
— $135,000
— $145,000
— $145,000
— $135,000
— $135,000
— $135,000
— $135,000
—
—
—
—
— $189,536
— $189,536
—
—
—
—
— $140,000
— $140,000
TOTAL
TOTAL
2023
$2,010,183 $3,570,363 $1,294,933 $1,049,423
$19,800
$7,944,702 $2,344,356 $5,600,346
2022
$2,198,146
$61,347
$537,069
$665,692
$18,300 $3,480,554
$1,202,761 $2,277,793
Notes:
1 Benefits comprises the following elements: housing allowance, transportation allowance, private medical, disability and dental cover and parking. Benefits payments to the
Executive Directors in respect of 2023 include specific payments of $2.5 million to Ms. Zohar and $1.0 million to Dr. Chowrira, as explained in the Annual Statement from the
Chair of the Remuneration Committee.
2 The amounts disclosed for 2023 represent the value of the shares underlying the vested 2021 Performance Share Plan awards. Therese awards were valued based on a share price
of 199.67 pence and an exchange rate of GBP 1: USD 1.2648, the 3-day average closing price and the 3-day average exchange rate immediately prior to the date of issuance of the
vested awards to Executive Directors. The amount of these values attributable to share price appreciation is $nil for both Executive Directors.
3 Mr. Viehbacher declined cash compensation for his services in 2023 and retired from the Board following the 2023 Annual General Meeting.
4 Dame Marjorie Scardino retired from the Board at the conclusion of December 2022.
5 These amounts include the grants of share based remuneration in July 2022 and 2023 in the form of time-vesting restricted stock units with a face value of $50,000.
6 This amount has been updated from the total listed in the 2022 Annual Report and Accounts to reflect an additional approximately $3600 in health-related benefits.
7 These amounts have been updated from those listed in the 2022 Annual Report and Accounts to reflect the actual values paid, which were not known at the date of publication
of the 2022 Annual Report and Accounts.
Governance 116 PureTech Health plc Annual Report and Accounts 2023
Annual Report on Remuneration continued
Annual bonus outcome for 2023 (audited)
For the 2023 annual bonus, targets were set for a balanced scorecard at the beginning of the year. The 2023 targets were focused on (i)
development goals designed to incentivize the team to continue development of the Company’s Internal Programs, generate valuable
clinical data in support of the Company’s Internal Programs, create innovative Internal Programs, publish key results and achieve patent
protection for the Company’s Internal 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 (audited)
Performance Measures Category
Achievement
Internal Program Development
(50%)
The Internal Program Development Goals were 70 percent achieved in 2023. The
management team’s performance resulted in an achievement outcome of 35 percent
which was lower than the pre-specified cap of 50 percent for this category of the goals.
A description of performance in 2023 is set out below:
Percentage of
Target Attained
35%
The Company expanded enrollment of Phase 2b multiple ascending dose studies for
LYT-100 in healthy older adults to support proceeding in IPF, completed studies to support
appropriate dosing and design of a pivotal trial in IPF, 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-320 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.
Strategic Goals
(50%)
The Strategic Goals were 66 percent achieved in 2023. The management team’s performance
resulted in an achievement outcome of 33 percent out of a pre-specified cap of 50 percent for
this category of the goals. A description of performance in 2023 is set out below:
33%
The Company extensively evaluated certain strategic transactions and options to enhance
shareholder value, monetized PureTech’s royalty in Karuna Therapeutics’ KarXT for up to
$500 million, with $100 million in cash paid up front, considered the further monetization
of Founded Entity equity holdings and supported its Founded Entities to achieve certain
strategic transactions, financings and grant funding.
Other Achievements
The management team evidenced further exceptional performance as described below:
7%
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 in light of
its sale to Bristol Myers Squibb.
Pre-Specified Maximum Total
75%
Accordingly, the Committee determined that the Company had achieved 75 percent of its target goals for 2023, which would equate to
a bonus payout at 37.5 percent of base salary.
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). For 2023, the Committee exercised discretion, increasing the bonus payout to 200 percent of target
(i.e. 100 percent of base salary) for the reasons set out in the Annual Statement accompanying this report.
The Committee determined that payouts at this level are appropriate taking into account the overall performance of the Executive
Directors and the achievements set forth above. In exercising discretion, the Committee also considered the monetization of PureTech’s
royalty in Karuna Therapeutics’ KarXT for up to $500 million, with $100 million in cash paid up front, and the successful activities of
certain Founded Entities and the value created for PureTech thereby, especially Karuna in light of its sale to Bristol Myers Squibb. The
Committee believes that such a bonus award is appropriate to reward and retain top management.
Governance Annual Report on Remuneration continued
PureTech Health plc Annual Report and Accounts 2023 117
Long-term incentive awards vesting in respect of the year (audited)
The 2021 PSP awards to Executive Directors granted on July 21, 2021 were subject to three-year performance conditions covering
the period from January 1, 2021 to December 31, 2023. Following an assessment of the performance conditions, the Remuneration
Committee determined that the awards will vest at 35.3 percent of the maximum. The 2022 awards of RSUs to Non-Executive Directors
granted on July 22, 2022, vested immediately prior to the 2023 AGM and, with the exception of Mr. Viehbacher, were issued on
July 26, 2023.
Daphne Zohar
Bharatt Chowrira
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Scheme
Basis of award
granted
PSP 2021 600% of salary
Shares
awarded
840,468
PSP 2021 300% of salary
335,587
PSP 2022
$50,000
PSP 2022
$50,000
PSP 2022
$50,000
PSP 2022
$50,000
21,507
21,507
21,507
21,507
21,507
Shares
vested
296,965
118,609
21,507
21,507
21,507
21,507
21,507
Shares
lapsed
Value of vested
awards1
543,503
$749,9702
216,978
$299,4532
–
–
–
–
–
$62,9793
$62,9793
$62,9793
$62,9793
$55,9934
Christopher Viehbacher
PSP 2022
$50,000
1 The value of the awards attributable to share price appreciation is nil for all Executive Directors and Non-Executive Directors.
2 The shares underlying the vested 2021 Performance Share Plan awards were valued based on a share price of 199.67 pence and an exchange rate of GBP 1: USD 1.2648, the 3-day
average closing price and the 3-day average exchange rate immediately prior to the date of issuance of the vested awards to Executive Directors.
3 Represents the value of the 21,507 shares on July 26, 2023, and an exchange rate of GBP 1 : USD 1.2900 at the date of issuance to current Non-executive Directors.
4 Represents the value of the 21,507 shares on August 9, 2023, and an exchange rate of GBP 1 : USD 1.2700 at the date of issuance to the retired 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
Absolute TSR (40%)
Threshold
7% p.a.
Maximum
15% p.a.
Achievement
(17%) p.a.
Total return against FTSE 250 Index (10%)
At or above median
Upper quartile
10th percentile
Total return against MSCI Euro Healthcare Index (10%) At or above median
Upper quartile
9th percentile
Strategic measures (40%)
See description below
Vesting
(% of each element)
0%
0%
0%
35.3%
The strategic measures over the three-year period were focused on (i) financial goals (40 percent), (ii) clinical development goals
(40 percent), and (iii) other achievements (10 percent). The financial achievements resulted in satisfaction of 35 percent of the vesting of
the strategic measures included, among other things, obtaining approximately $815 million for PureTech by monetizing Founded Entity
equity, most notably Karuna in light of its sale to Bristol Myers Squibb, 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. The clinical development achievements resulted in satisfaction of 45 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 robust enrollment of the LYT-100 IPF phase 2 study, the advancement of other
product candidates within our Internal Programs, the advancement of certain programs at the Company’s Founded Entities, including
receipt of U.S. marketing clearances for two programs. The other achievements resulted in satisfaction of 8 percent of the vesting of the
strategic measures include the monetization of PureTech’s royalty in Karuna Therapeutics’ KarXT for up to $500 million, with $100 million
in cash paid up front, operation of the Company’s Internal Programs within projected timelines and budgets, conducting significant and
robust activities to strengthen the Company’s intellectual property portfolio, building out a world-class development organization, the
in-licensing and creation of new programs, the issuance of certain intellectual property, and the publication of validating data in top tier
peer-reviewed academic journals.
Governance 118 PureTech Health plc Annual Report and Accounts 2023
Annual Report on Remuneration continued
Long-term incentive awards granted during the year (audited)
The following long-term Incentive awards were granted to Executive Directors during 2023:
Scheme
Basis of award
granted
Shares awarded
(as conditional
award of shares)
Share price at
date of grant1
Face value of
award2
Daphne Zohar
PSP 2023 600% of salary
1,678,971
206.67 pence
$4,319,299
Bharatt Chowrira
PSP 2023 300% of salary
670,590
206.67 pence
$1,725,150
% of face
value vesting
at threshold
performance
25%
25%
Vesting determined by
performance over
Three financial years to
December 31, 2025
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.
2 Share awards have been valued based on an exchange rate of GBP 1: USD 1.2448, which was the 3-day average exchange rate immediately prior to the grant of the award.
The PSP awards granted in 2023 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, 2025.
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 agreed weightings are 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, with the exception of Mr. Viehbacher, was granted share based remuneration on June 8, 2023,
in the form of 17,122 time-vesting restricted stock units. The equity awards granted to our Non-Executive Directors vest in their entirety
immediately prior to Company’s 2024 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 (audited).
Non-Executive Directors
Sharon Barber-Lui
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
Christopher Viehbacher
Shares
awarded1
Face value of
award
Vesting date
17,122
17,122
17,122
17,122
17,122
–
$50,000
June 13, 2024
$50,000
June 13, 2024
$50,000
June 13, 2024
$50,000
June 13, 2024
$50,000
June 13, 2024
–
–
1 The number of shares awarded are based on the closing price of 235.50 pence and an exchange rate of GBP 1 : USD 1.2439, the 3-day averages immediately prior to the grant of
the award.
Payments for Loss of Office (audited)
There were no payments for Loss of Office during 2023.
Governance Annual Report on Remuneration continued
PureTech Health plc Annual Report and Accounts 2023 119
Payments to past Directors (audited)
No payments to past Directors were made during 2023.
On April 9, 2024, the Company announced that Daphne Zohar had resigned from her roles as Chief Executive Officer and as a member of
the Company’s Board of Directors with immediate effect. Ms. Zohar has been paid base salary, benefits and pension up to April 8, 2024.
She will continue to serve as a senior advisor and observer to the Board of Directors of PureTech, during which vesting of PSP awards
previously granted will continue for the duration of her service. There is no compensation payable for loss of office and no eligibility for
the 2024 bonus award. All PSP awards are still subject to any applicable holding period and the post-employment shareholding policy
will apply, requiring a shareholding worth 400 percent of base salary to be retained for two years.
Directors’ shareholdings (audited)
Executive Directors are required to maintain share ownership equal to a minimum of 400 percent of base salary for the Chief Executive
Officer and a minimum of 200 percent of base salary for any other Executive Directors. The current and former Chief Executive
Officers 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, subject to a performance condition, subject to a
service condition and interests of connected persons.
Directors’ Share Interests
Shares Owned
Outright
Vested But
Unexercised
Options
Options
Subject To
Service
RSUs Subject
To Performance
Conditions
RSUs Subject
To Service
Conditions
Director
Daphne Zohar1
Bharatt Chowrira
Sharon Barber-Lui
Raju Kucherlapati
John LaMattina7
Robert Langer8
Kiran Mazumdar-Shaw
Christopher Viehbacher9
December 31, 2023
12,629,5472
—
—
3,211,0223
940,7144
1,762,500
187,500
1,282,4995
21,507
2,492,528
1,414,530
2,976,831
32,697
1,078,34310
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Total
15,840,569
4,173,213
38,629
2,509,650
1,431,652
2,993,953
49,819
—
—
17,1226
17,1226
17,1226
17,1226
17,1226
—
1,078,343
1 A portion of Ms. Zohar’s shareholding in the Company is indirect. As of December 31, 2023, an aggregate of 8,529,547 ordinary shares and 410,000 ADSs are held by (i) the Zohar
2
Family. A portion of Ms. Zohar’s shareholding in the Company is indirect. As of December 31, 2023, an aggregate of 8,529,547 ordinary shares and 410,000 ADSs are held by (i) the
Zohar Family Trust I, a U.S.-established trust of which Ms. Zohar is a beneficiary and trustee, (ii) the Zohar Family Trust II, a U.S.-established trust of which Ms Zohar is a beneficiary
(in the event of her spouse’s death) and trustee, (iii) Zohar LLC, a U.S.-established limited liability company, and (iv) directly by Ms. Zohar. Ms. Zohar owns or has a beneficial interest
in 100 percent of the share capital of Zohar LLC.
Includes 410,000 ADSs, which are convertible into 4,100,000 ordinary shares. Does not include 148,482 shares which were issued in March 2024 pursuant to the PSP award granted
to Ms. Zohar covering the financial years 2021, 2022 and 2023, the performance conditions related to which were measured as of the close of business on December 31, 2023. As of
March 31, 2024, Ms. Zohar owned 12,778,029 shares outright.
Includes the following PSP awards, which are subject to performance conditions: 1,532,051 (2022) and 1,678,971 (2023).
3
4 Does not include 148,482 shares which were issued in March 2024 pursuant to the PSP award granted to Ms. Zohar covering the financial years 2021, 2022 and 2023, the
performance conditions related to which were measured as of the close of business on December 31, 2023. As of March 31, 2024, Ms. Zohar owned 12,778,029 shares outright.
Includes the following PSP awards, which are subject to performance conditions: 611,909 (2022) and 670,590 (2023).
5
6 Denotes RSUs, which are subject to continued service, that were granted in June 2023 and vest immediately prior to the 2024 Annual General Meeting.
7 A portion of Dr. LaMattina’s shareholding in the Company is indirect. As of December 31, 2023, an aggregate of 1,414,530 ordinary shares are held by (i) John L LaMattina
Revocable Trust, (ii) John L LaMattina 2020-2 GRAT, and (iii) LaMattina Charitable Trust.
8 A portion of Dr. Langer’s shareholding in the Company is indirect. As of December 31, 2023, an aggregate of 2,976,831 ordinary shares are held by (i) Langer Family 2020 Trust and
(ii) directly by Dr. Langer.
9 Mr. Viehbacher’s shareholdings reflect his holdings as of the date of his retirement from the Board following the Company’s 2023 AGM.
10 Includes 2,000 ADSs, which are convertible into 20,000 ordinary shares.
Governance 120 PureTech Health plc Annual Report and Accounts 2023
Annual Report on Remuneration continued
Directors’ service contracts (unaudited)
Detail of the service contracts of current Directors is set out below:
Executive Directors
Bharatt Chowrira
Notice period
Contract date
Maximum potential
termination payment
Potential payment on change
of control/liquidation
90 days
April 8, 2024 12 months’ salary (pro-
rated target bonus)
Nil
Contracts for the above Executive Directors will continue until terminated by notice either by the Company or the Executive Director.
Non-Executive Directors
Notice period
Contract date
Contract expiration date
Sharon Barber-Lui
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
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
June 5, 2024
June 5, 2024
June 5, 2024
September 28, 2023
September 28, 2026
The Company and the Non-Executive Directors listed above intend to enter into new contracts prior to their expiration.
TSR performance graph (unaudited)
The graph below shows the value, by December 31, 2023, 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
Committee considers these to be relevant indices for TSR comparison as they are broad-based measures of the performance of the
biotechnology industry.
The other points plotted are the values at intervening financial year-ends.
Total shareholder return
Source: Datastream (Thomson Reuters)
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
260
240
220
200
180
160
140
120
100
80
60
40
20
0
24 Jun
2015
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
31 Dec
2019
31 Dec
2020
31 Dec
2021
31 Dec
2022
31 Dec
2023
Puretech S&P600 Biotechnology NASDAQ Biotechnology
Governance
Annual Report on Remuneration continued
PureTech Health plc Annual Report and Accounts 2023 121
This graph shows the value, by December 31, 2023, of £100 invested in PureTech on the date of Admission (June 24, 2015), compared with
the value of £100 invested in the Nasdaq Biotechnology and S&P600 Biotechnology indices on the same date.
The other points plotted are the values at intervening financial year-ends.
Chief Executive Officer’s Remuneration History (unaudited)
Year
2015
2016
2017
2018
2019
2020
2021
2022
2023
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
Daphne Zohar
Chief Executive Officer
Daphne Zohar
Chief Executive Officer
Single figure
of total
remuneration
Annual bonus
pay-out against
maximum
$955,599
100%
$747,634
38.75%
$821,898
$2,139,870
$5,783,682
$7,194,841
$2,472,800
$1,487,964
$4,739,027
50%
65%
100%
100%
75%
45%
100%
PSP Vesting
against
maximum
opportunity
n/a
n/a
n/a
50%
100%
100%
95.8%
24.2%
35.3%
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:
2022 to 2023
2021 to 2022
2020 to 2021
2019 to 2020
Base
salary1 Benefits2
Annual
bonus
Base
salary1 Benefits
Annual
bonus
Base
salary1 Benefits
Annual
bonus
Base
salary1 Benefits
Annual
bonus
Daphne Zohar (CEO)
8.5% 7187%
141%
8.5% 3790%
141%
4%
(36%)
3%
6%
(23%)
(10%)
(36%)
N/A
N/A
N/A
Bharatt Chowrira
(President)3
Sharon Barber-Lui4
Raju Kucherlapati
John LaMattina
Robert Langer
Kiran Mazumdar-Shaw
17.3%
27.8%
(5%)
0%
0%
Christopher Viehbacher5
(100%)
Employees6
9%
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
12%
6%
6%
N/A
(7%)
0%
0%
0%
(3%)
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
38.1%
N/A
N/A
16%
16%
N/A
635%
N/A
26%
9%
N/A
N/A
N/A
N/A
N/A
N/A
7%
N/A
N/A
N/A
N/A
N/A
N/A
1%
77%
12%
6%
(22%)
3%
N/A
N/A
11%
19%
13%
N/A
45%
8%
0%
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
14%
1 Base salary amounts for Non-Executive Directors in 2022 and 2023 include grants of share based remuneration in the form of time-vesting restricted stock units with a face value
of $50,000.
2 This segment includes: housing allowance, transportation allowance, private medical and dental cover, disability and life insurance. Benefits payments to the Executive Directors
in respect of 2023 include specific payments of $2.5 million to Ms. Zohar and $1.0 million to Dr. Chowrira, as explained in the Annual Statement from the Chair of the Remuneration
Committee.
3 Joined the Board effective February 2021.
4 Joined the Board effective March 2022.
5 Mr. Viehbacher declined cash compensation for his services in 2023.
6 Does not include employees of Founded Entities.
Governance 122 PureTech Health plc Annual Report and Accounts 2023
Annual Report on Remuneration continued
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 2023 compared to 2022:
Staff costs1
Distributions to Shareholders
2023
2022
% change
$37,913,231
$32,050,089
$19,067,6602
$26,359,8513
18.3%
(27.7%)
1 Excludes non controlled Founded Entities.
2 Represents the value of the 7,683,526 ordinary shares repurchased under the Company’s share repurchase programme during 2023.
3 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 2023 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 Executive Directors. 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
£14,012. Korn Ferry is a founder member of the Remuneration Consultants’ Group and complies with its Code of Conduct which sets
out guidelines to ensure that its advice is independent and free of undue influence.
Statement of voting at general meeting (unaudited)
The table below sets out the proxy results of the vote on our Remuneration Report at our 2023 AGM:
Resolutions
For
%
Against
%
Withheld Total votes cast
To approve the Directors’ Remuneration Report
208,436,087
95.51%
9,804,137
4.49%
776
218,240,224
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
187,285,809
83.90%
35,930,008
16.10%
2,309,748
223,215,817
2024 AGM
The Company’s AGM will be held at 4:00 pm BST (11:00 am EDT) on June 13, 2024 at the offices of FTI Consulting at 200 Aldersgate,
200 Aldersgate Street, London EC1A 4HD. 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
votes to approve the new Directors’ Remuneration Policy, and (2) amend the performance share plan.
On behalf of the Board of Directors
Charles Sherwood, J.D.
Company Secretary
April 25, 2024
Governance PureTech Health plc Annual report and accounts 2023 123
Independent auditors’ report to the members
of PureTech Health plc
Report on the audit of the financial statements
Opinion
In our opinion, PureTech Health plc’s group financial statements
and company financial statements (the “financial statements”):
— give a true and fair view of the state of the group’s and of
the company’s affairs as at 31 December 2023 and of the
group’s loss and the group’s and company’s cash flows for
the year then ended;
— have been properly prepared in accordance with UK-
adopted international accounting standards as applied in
accordance with the provisions of the Companies Act 2006;
and
— have been prepared in accordance with the requirements
of the Companies Act 2006.
We have audited the financial statements, included within the
Annual Report and Accounts (the “Annual Report”), which
comprise: the Consolidated and parent company Statement
of Financial Position, as at 31 December 2023; Consolidated
Statement of Comprehensive Income/(Loss), Consolidated and
parent company Statement of Changes in Equity, Consolidated
and parent company Statement of Cash Flows, for the
year then ended; and the notes to the financial statements,
comprising material accounting policy information and other
explanatory information.
Our opinion is consistent with our reporting to the
Audit Committee.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1 to the financial statements, the group
and company, in addition to applying UK-adopted international
accounting standards, have also applied international financial
reporting standards (IFRSs) as issued by the International
Accounting Standards Board (IASB).
In our opinion, the group and company financial statements
have been properly prepared in accordance with IFRSs as
issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described
in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical
Standard, as applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that non-
audit services prohibited by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in Note 8 to the consolidated
financial statements, we have provided no non-audit services
to the company or its controlled undertakings in the period
under audit.
Our audit approach
Context
PureTech Health plc is a public limited company incorporated
under the laws of England and Wales, and is listed on the FTSE
Main Market. As such, the group and parent company financial
statements are subject to an audit in accordance with the
requirements of the UK Companies Act.
Overview
Audit scope
— We identified three entities, being PureTech Health LLC,
PureTech LYT and PureTech LYT 100, Inc, which when
grouped represent one component, collectively and
hereafter referred to as PureTech Health. This component,
in our view, required a full scope audit based on its
contribution to adjusted loss before tax. In addition, we
determined that audit procedures over certain accounts
or balances were required at a further two components
(Vedanta Biosciences, Inc and Gelesis Holdings, Inc) to
provide sufficient overall group coverage of particular
financial statement line items. Further we performed a full
scope audit under ISA (UK) requirements for the PureTech
Health plc entity.
— All work in relation to the components for the group audit
was performed by our PwC US (overseas supporting firm)
colleagues in Boston, under our direction and supervision.
The audit procedures over the parent company were
performed by PwC UK, in addition to incremental ISA (UK)
procedures as required for the group audit, which includes
the audit of the group consolidation.
Key audit matters
— Determination of the Accounting Treatment for the Sale
of Future Royalties Liability (group)
— Valuation of investments in subsidiaries (parent)
Materiality
— Overall group materiality: $7,000,000 based on
professional judgement.
— Overall company materiality: $4,772,000 based on
1% of total assets.
— Performance materiality: $5,250,000 (group) and
$3,579,000 (company).
The scope of our audit
As part of designing our audit, we determined materiality
and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’
professional judgement, were of most significance in the audit
of the financial statements of the current period and include
the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors,
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. These matters,
and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on
these matters.
Financial statements 124 PureTech Health plc Annual report and accounts 2023
Independent auditors’ report to the members of PureTech Health plc continued
This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Determination of the Accounting Treatment for the Sale of Future
Royalties Liability (group)
As described in Notes 1 and 17 to the consolidated financial
statements, on March 4, 2011, the Group entered into a licence
agreement with Karuna Therapeutics, Inc. (“Karuna”) according to
which the Group granted Karuna an exclusive licence to research,
develop and sell KarXT in exchange for a royalty on annual net
sales, development and regulatory milestones and a fixed portion
of sublicensing income, if any (hereinafter “Licence Agreement”).
On March 22, 2023, the Group signed an agreement with Royalty
Pharma (hereinafter “Royalty Purchase Agreement”), according
to which the Group sold Royalty Pharma a partial right to receive
royalty payments made by Karuna in respect of net sales of KarXT, if
and when received. According to the Royalty Purchase Agreement,
all royalties due to the Group under the Licence Agreement will be
paid to Royalty Pharma up until an annual threshold of $60 million,
while all royalties above such annual threshold in a given year will
be split 33% to Royalty Pharma and 67% to the Group.
Under the terms of the Royalty Purchase Agreement, the Group
received a non-refundable initial payment of $100 million at the
execution of the Royalty Purchase Agreement and is eligible to
receive additional payments in the aggregate of up to an additional
$400 million based on the achievement of certain regulatory and
commercial milestones. The Group continues to hold the rights
under the Licence Agreement and has a contractual obligation
to deliver cash to Royalty Pharma for a portion of the royalties
it receives.
Therefore, the Group will continue to account for any royalties
and regulatory milestones due to the Group under the License
Agreement as revenue in its Consolidated Statement of
Comprehensive Income/(Loss) and record the proceeds from
the Royalty Purchase Agreement as a financial liability in its
Consolidated Statement of Financial Position. In determining the
appropriate accounting treatment for the Royalty Agreement,
management applied significant judgement. In order to determine
the amortised cost of the sale of future royalties liability,
management is required to estimate the total amount of future
receipts from and payments to Royalty Pharma under the Royalty
Purchase Agreement over the life of the agreement.
The $100 million liability, recorded at execution of the Royalty
Purchase Agreement, will be accreted to the total of these receipts
and payments as interest expense over the life of the Royalty
Purchase Agreement. The sale of future royalties liability amounted
to $110.2 million as of December 31, 2023.
Valuation of investments in subsidiaries (parent)
As described in Note 2 to the parent company financial statements,
the company holds an investment in its subsidiary undertaking
($456.9m). The recoverability of the investment is assessed as a
normal risk, as it is not subject to significant judgement. However
due to its materiality in the context of the parent company financial
statements, this is the area which was the key focus of our overall
parent company audit. Our audit focused on the risk that the
carrying value of the investment in subsidiaries could be overstated.
In accordance with IFRS, this asset is subject to impairment testing
when a triggering event or change in circumstances indicates
that the carrying value may not be recoverable. Management
have performed an impairment trigger assessment, and have not
identified any impairment triggers. No impairment charge has
been recorded against the company’s investment in subsidiary
undertakings in the current year.
The principal considerations for our determination that
performing procedures relating to the determination of
the accounting treatment for the sale of future royalties
liability is a critical audit matter are (i) the significant
judgement by management when determining the
accounting treatment for the sale of future royalties
liability and (ii) a high degree of auditor judgement
and effort in performing procedures and evaluating
audit evidence related to the accounting for the sale of
future royalties liability. Addressing the matter involved
performing procedures and evaluating audit evidence
in connection with forming our overall opinion on the
consolidated financial statements. These procedures
included testing the effectiveness of controls relating
to management’s determination of the accounting
treatment for the sale of future royalties liability.
These procedures also included, among others, (i)
obtaining and reviewing the key terms of the License
Agreement and Royalty Agreement; (ii) evaluating the
appropriateness of management’s determined accounting
treatment for the sale of future royalties liability; and (iii)
evaluating the sufficiency of the disclosures within the
consolidated financial statements. Based on the results
of the procedures described above, we conclude that
the accounting treatment for the sale of future royalties
liability is appropriate.
We evaluated management’s assessment of whether any
indication of impairment existed, and confirmed that no
such indication existed. In order to assess whether there is
an indication of impairment, management compared the
carrying amount of the net assets of the group ($453.2m)
to the group’s market capitalisation at December 31,
2023 of $672.1m. Based on the results of the procedures
described above, we conclude that the carrying amount
of the investment in subsidiaries is appropriate. We have
also assessed the related disclosures in the company only
financial statements, and consider them to be appropriate.
Financial statements PureTech Health plc Annual report and accounts 2023 125
Independent auditors’ report to the members of PureTech Health plc continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of
the group and the company, the accounting processes and
controls, and the industry in which they operate.
For each component in the scope of our group audit, we
allocated a materiality that is less than our overall group
materiality. The materiality allocated to the component was
$6,300,000. Certain components were audited to a local
statutory audit materiality that was also less than our overall
group materiality.
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the
group and the parent company, the accounting processes and
controls, and the industry in which they operate. The group’s
accounting process is structured around a group finance
function located in Boston, Massachusetts, who maintain
accounting records and controls for the group.
In establishing the overall group audit strategy and plan, we
determined whether for each component within the group
we required an audit of its complete financial information
(‘full scope audit’), or whether specific audit procedures to
address a certain risk characteristic or financial statement line
items would be sufficient. One component, PureTech Health,
has been considered to be individually financially significant
and therefore requiring a full scope audit. In addition, we
determined that audit procedures over certain accounts or
balances were required at a further two components (Vedanta
Biosciences, Inc and Gelesis Holdings, Inc) to provide sufficient
overall group coverage of particular financial statement
line items. We performed a detailed review of the working
papers of our overseas supporting firm, and maintained
regular communications during the planning, execution and
completion phases of their audit. We directed the work of the
overseas supporting firm, engaged in site visits, reviewed their
approach and findings and participated in the closing meetings.
Further we performed a full scope audit under ISA (UK)
requirements for the PureTech Health plc entity.
The impact of climate risk on our audit
As part of our audit we made enquiries of management and
performed a risk assessment to consider the potential impacts
of climate change on the Group and parent company financial
statements. We remained alert when performing our audit
procedures for any indicators of the impact of climate risk. Our
procedures did not identify any material impact as a result of
climate risk on the group’s and company’s financial statements.
Materiality
The scope of our audit was influenced by our application
of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations,
helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual
financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate
on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as follows:
We use performance materiality to reduce to an appropriately
low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality.
Specifically, we use performance materiality in determining
the scope of our audit and the nature and extent of our testing
of account balances, classes of transactions and disclosures,
for example in determining sample sizes. Our performance
materiality was 75% of overall materiality, amounting to
$5,250,000 for the group financial statements and $3,579,000
for the company financial statements.
In determining the performance materiality, we considered
a number of factors - the history of misstatements, risk
assessment and aggregation risk and the effectiveness of
controls – and concluded that an amount in the middle of our
normal range was appropriate.
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
$350,000 (group audit) and $239,000 (company audit) as
well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and
the company’s ability to continue to adopt the going concern
basis of accounting included:
— Obtaining from management their assessment which
supports the Board’s conclusions with respect to going
concern basis of preparation of the financial statements;
— Testing the mathematical integrity of the cash flow
forecasts and the models and reconciled these to the Board
approved budgets;
— Identifying and assessing management’s alternate downside
scenarios, and considering whether the assumptions in the
downside scenario were reasonable and appropriate;
— Considering additional mitigating actions, in particular
assessing the reasonableness of potential mitigating actions
based on historical execution and feasibility;
— Assessing the completeness of the going concern
disclosures; and
— Assessing the reliability of cash flow forecasts by comparing
actual performance to forecasts, specifically performing look
back testing over the budgeted results of 2023.
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on
the group’s and the company’s ability to continue as a going
concern for a period of at least twelve months from when the
financial statements are authorised for issue.
Financial statements – group
Financial statements – company
Overall materiality
$7,000,000.
How we determined it Based on professional judgement
Rationale for
benchmark applied
Based on the volatility of earnings experienced by the company
in recent years, due to material non operating items, we have
concluded that pre-tax income or loss for the current year alone
is not the most meaningful benchmark for determining overall
materiality. Thus, we have also considered adjusted income or loss
before tax as an alternative benchmark. These benchmarks yielded
overall materiality levels ranging from $4.8 million to $8 million.
We then used our professional judgement to determine an overall
materiality level of $ 7 million.
$4,772,000.
1% of total assets
As the primary value of
the parent company is the
investments held, an asset based
metric is the most appropriate
benchmark for setting materiality.
Financial statements 126 PureTech Health plc Annual report and accounts 2023
Independent auditors’ report to the members of PureTech Health plc continued
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
responsibilities with respect to the corporate governance
statement as other information are described in the Reporting
on other information section of this report.
However, because not all future events or conditions can be
predicted, this conclusion is not a guarantee as to the group’s
and the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’
statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the
Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the
other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do
not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or
material misstatement, we are required to perform procedures
to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other
information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we
also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course
of the audit, the information given in the Strategic report and
Directors’ Report for the year ended 31 December 2023 is
consistent with the financial statements and has been prepared
in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and
company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the
Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report
to be audited has been properly prepared in accordance with
the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements
in relation to going concern, longer-term viability and that
part of the corporate governance statement relating to the
company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review. Our additional
Based on the work undertaken as part of our audit, we have
concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial
statements and our knowledge obtained during the audit,
and we have nothing material to add or draw attention to in
relation to:
— The directors’ confirmation that they have carried out a
robust assessment of the emerging and principal risks;
— The disclosures in the Annual Report that describe those
principal risks, what procedures are in place to identify
emerging risks and an explanation of how these are being
managed or mitigated;
— The directors’ statement in the financial statements about
whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their
identification of any material uncertainties to the group’s
and company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the
financial statements;
— The directors’ explanation as to their assessment of the
group’s and company’s prospects, the period this assessment
covers and why the period is appropriate; and
— The directors’ statement as to whether they have a
reasonable expectation that the company will be able to
continue in operation and meet its liabilities as they fall due
over the period of its assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
Our review of the directors’ statement regarding the longer-
term viability of the group and company was substantially less
in scope than an audit and only consisted of making inquiries
and considering the directors’ process supporting their
statement; checking that the statement is in alignment with the
relevant provisions of the UK Corporate Governance Code;
and considering whether the statement is consistent with the
financial statements and our knowledge and understanding of
the group and company and their environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit,
we have concluded that each of the following elements of the
corporate governance statement is materially consistent with
the financial statements and our knowledge obtained during
the audit:
— The directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced and
understandable, and provides the information necessary for
the members to assess the group’s and company’s position,
performance, business model and strategy;
— The section of the Annual Report that describes the review
of effectiveness of risk management and internal control
systems; and
— The section of the Annual Report describing the work of the
Audit Committee.
We have nothing to report in respect of our responsibility to
report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified under
the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’
responsibilities in respect of the Annual Report and the financial
statements, the directors are responsible for the preparation
Financial statements PureTech Health plc Annual report and accounts 2023 127
Independent auditors’ report to the members of PureTech Health plc continued
of the financial statements in accordance with the applicable
framework and for being satisfied that they give a true and fair
view. The directors are also 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.
are not closely related to events and transactions reflected
in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
In preparing the financial statements, the directors are
responsible for assessing the group’s and the 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 the directors either intend to
liquidate the group or the company or to cease operations, or
have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
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 an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a 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 the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material
misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting
irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we
identified that the principal risks of non-compliance with
laws and regulations related to direct laws and regulations
over financial reporting, specifically Companies Act 2006
and tax legislation, and we considered the extent to which
non-compliance might have a material effect on the financial
statements. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and
determined that the principal risks were related to the
misappropriation of cash. The group engagement team shared
this risk assessment with the component auditors so that they
could include appropriate audit procedures in response to such
risks in their work. Audit procedures performed by the group
engagement team and/or component auditors included:
— Identifying and testing of journal entries based on our risk
assessment criteria, in particular any journals with unusual
account combinations which credit cash;
— Evaluation of controls designed to prevent and detect
irregularities;
— Reviewing board minutes throughout the financial year
and post year end to identify any unusual items such as
suspicious activity, non-compliance, breaches of laws or
potential litigation;
— Review of financial statements disclosures for compliance
with Companies Act 2006;
— Assessing compliance with the tax legislation through our
audit work over the payroll, VAT and corporation tax;
— Performing enquiries of the Directors, management and
legal counsel and inspection of regulatory and legal
correspondence and;
— Incorporating unpredictability into our audit plan.
There are inherent limitations in the audit procedures described
above. We are less likely to become aware of instances of non-
compliance with laws and regulations that
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited
number of items for testing, rather than testing complete
populations. We will often seek to target particular items for
testing based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the
financial statements is located on the FRC’s website at: www.frc.
org.uk/auditorsresponsibilities. This description forms part of
our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and
only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no
other purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent
in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
— we have not obtained all the information and explanations
we require for our audit; or
— adequate accounting records have not been kept by the
company, or returns adequate for our audit have not been
received from branches not visited by us; or
— certain disclosures of directors’ remuneration specified by
law are not made; or
— the company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we
were appointed by the directors on 13 June 2023 to audit the
financial statements for the year ended 31 December 2023 and
subsequent financial periods. This is therefore our first year of
uninterrupted engagement.
Other matter
As required by the Financial Conduct Authority Disclosure
Guidance and Transparency Rule 4.1.14R, these financial
statements form part of the ESEF-prepared annual financial
report filed on the National Storage Mechanism of the Financial
Conduct Authority in accordance with the ESEF Regulatory
Technical Standard (‘ESEF RTS’). This auditors’ report provides
no assurance over whether the annual financial report has been
prepared using the single electronic format specified in the
ESEF RTS.
Sam Taylor (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Reading
25 April 2024
Financial statements 128 PureTech Health plc Annual report and accounts 2023
Consolidated Statement 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/(loss) on deconsolidation of subsidiary
Gain/(loss) on investments held at fair value
Realized gain/(loss) on sale of investments
Gain/(loss) on investments in notes from associates
Other income/(expense)
Other income/(expense)
Finance income/(costs):
Finance income
Finance costs – contractual
Finance income/(costs) – fair value accounting
Finance costs – non cash interest expense related to sale
of future royalties
Net finance income/(costs)
Share of net income/(loss) of associates accounted for using the
equity method
Gain/(loss) on dilution of ownership interest in associates
Impairment of investment in associates
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 Group
Non-controlling interests
Comprehensive income/(loss) attributable to:
Owners of the Group
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
8
8
5
5
5
7
10
10
10
17
6
6
6
27
6
11
11
2023
$000s
750
2,580
3,330
2022
$000s
2,090
13,528
15,618
(53,295)
(96,235)
(146,199)
(60,991)
(152,433)
(197,807)
61,787
77,945
(122)
(27,630)
(908)
111,072
16,012
(3,424)
2,650
(10,159)
5,078
(6,055)
—
—
(36,103)
(30,525)
(66,628)
92
—
92
(66,535)
(65,697)
(931)
(66,628)
(65,604)
(931)
(66,535)
$
(0.24)
(0.24)
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)
(166)
(213)
(379)
(37,444)
(50,354)
13,290
(37,065)
(50,733)
13,290
(37,444)
$
(0.18)
(0.18)
2021
$000s
9,979
7,409
17,388
(57,199)
(110,471)
(150,282)
—
179,316
(20,925)
—
1,592
159,983
214
(4,771)
9,606
—
5,050
(73,703)
—
—
(58,953)
(3,756)
(62,709)
—
—
—
(62,709)
(60,558)
(2,151)
(62,709)
(60,558)
(2,151)
(62,709)
$
(0.21)
(0.21)
Financial statements
PureTech Health plc Annual report and accounts 2023 129
Consolidated Statement 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
Investments in notes from associates
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 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
Equity attributable to the owners of the Group
Non-controlling interests
Total equity
Non-current liabilities
Sale of future royalties liability
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
Notes payable
Warrant liability
Preferred shares
Current portion of long-term loan
Total current liabilities
Total liabilities
Total equity and liabilities
Note
2023
$000s
2022
$000s
12
23
13
5
6
7
23
24
27
23
14
24
24
15
20
17
27
23
22
9
3
23
21
19
18
16, 18
22
9,536
9,825
906
317,841
3,185
4,600
—
878
346,771
2,376
11,746
4,309
—
1,628
136,062
191,081
347,201
693,973
5,461
290,262
(44,626)
138,506
182
(9,538)
83,820
464,066
(5,835)
458,232
110,159
52,462
18,250
—
3,501
184,371
—
3,394
44,107
3,699
—
169
—
51,370
235,741
693,973
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
Please refer to the accompanying Notes to the consolidated financial information. Registered number: 09582467.
The Consolidated Financial Statements were approved by the Board of Directors and authorized for issuance on April 25, 2024
and signed on its behalf by:
Bharatt Chowrira
Chief Executive Officer
April 25, 2024
The accompanying notes are an integral part of these financial statements.
Financial statements
130 PureTech Health plc Annual report and accounts 2023
Consolidated Statement of Changes in Equity
For the years ended December 31
Share Capital
Treasury Shares
Note
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, 2021
Net income/(loss)
Total comprehensive
income/(loss)
for the year
Exercise of stock options
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
Other
Balance December 31,
2021
Net income/(loss)
Other comprehensive
income/(loss), net
Total comprehensive
income/(loss)
for the year
Deconsolidation
of Subsidiary
Exercise of stock options
Purchase of
Treasury stock
Revaluation of
deferred tax assets
related to share-
based awards
Equity-settled share-
based awards
Settlement of restricted
stock units
NCI exercise of share
options in subsidiaries
Other
Balance December 31,
2022
Balance January 1, 2023
Net income/(loss)
Other comprehensive
income/(loss) for
the period
Total comprehensive
income/(loss)
for the period
Deconsolidation
of Subsidiary
Exercise of stock options
Purchase of
Treasury stock
Equity-settled share-
based awards
Settlement of restricted
stock units
Expiration of share
options in subsidiary
Other
Balance December 31,
2023
9
9
9
9
9
5
9
15
9
9
9
5
9
15
9
9
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
—
—
469
—
(24,050)
—
260,429
(60,558)
669,748
(60,558)
(16,209) 653,539
(62,709)
(2,151)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(60,558)
—
(60,558)
352
(2,151)
—
(62,709)
352
615
7,109
—
—
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
8,856
1,528
— 15,171
—
—
(50,354)
(50,354)
13,290
(37,065)
—
(379)
—
(379)
(50,354)
(50,733)
13,290
(37,444)
—
—
—
332
11,904
—
11,904
332
— (26,492)
— (26,492)
—
—
—
—
—
45
—
45
8,856
4,711
13,567
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
289,161,653
—
5,455 289,624 (10,595,347)
—
—
—
(26,492) 138,506
—
—
—
—
—
306,506
—
—
—
—
—
—
—
—
6
—
—
—
—
—
—
—
—
638
—
—
—
239,226
—
—
—
530
— (7,683,526)
(19,650)
—
—
—
—
—
—
425,219
986
—
—
—
—
—
—
—
—
—
—
—
—
—
89
89
—
92
92
—
—
—
—
—
—
—
(14,478)
(14,478)
—
149,516
542,220
5,369 547,589
149,516
(65,697)
542,220
(65,697)
5,369 547,589
(66,628)
(931)
—
—
—
(22)
—
3,348
156
1,458
—
—
92
—
92
(65,697)
(65,604)
(931)
(66,535)
—
—
—
1,153
(9,085)
—
(9,085)
1,153
— (19,650)
— (19,650)
—
—
—
—
3,348
277
3,625
1,142
1,458
—
—
1,142
(1,458)
(6)
—
(6)
289,468,159
5,461 290,262 (17,614,428)
(44,626) 138,506
182
(9,538)
83,820
464,066
(5,835) 458,232
The accompanying notes are an integral part of these financial statements.
Financial statements PureTech Health plc Annual report and accounts 2023 131
Consolidated Statement of Cash Flows
For the years ended December 31
Cash flows from operating activities
Income/(loss) for the year
Adjustments to reconcile income/(loss) for the period to net cash used in operating activities:
Note
2023
$000s
2022
$000s
2021
$000s
(66,628)
(37,065)
(62,709)
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 associates
Gain on deconsolidation of subsidiary
Share of net loss of associates accounted for using the equity method
Loss on investments in notes from associates
Fair value gain on other financial instruments
Loss on disposal of assets
Impairment of fixed 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 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 cash from sale of future royalties
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
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:
Purchase of intangible assets not yet paid in cash
Settlement of restricted stock units 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
12, 23
9
5
5
6
6
5
6
7
6, 18
27
10
21
12
13
6
5
5
7
5
17
16
23
15
4,933
4,415
(77,945)
265
—
—
(61,787)
6,055
27,630
—
318
1,260
30,525
(5,078)
9,750
2,834
(283)
3,844
1,374
(150)
14,454
(1,701)
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)
(105,917)
(178,792)
(158,274)
(70)
865
(175)
—
—
33,309
—
—
(16,850)
(13,784)
(178,860)
244,556
—
68,991
100,000
—
—
(3,338)
1,153
—
—
—
(19,650)
—
(23)
78,141
41,215
149,866
191,081
25
1,142
—
—
—
(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
Financial statements
132 PureTech Health plc Annual report and accounts 2023
Consolidated Statements of Cash Flows continued
For the years ended December 31
Supplemental disclosure of non-cash investment and financing activities (continued):
Assets, Liabilities and non-controlling interests in deconsolidated subsidiary
Trade and other receivables
Prepaid assets
Property, plant and equipment, net
Right of use asset, net
Trade and other Payables
Deferred revenue
Lease liabilities (including current potion)
Long-term loan (including current portion)
Subsidiary notes payable
Subsidiary preferred shares and warrants
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.
2023
$000s
(702)
(3,516)
(8,092)
(2,477)
15,078
1,902
4,146
15,446
—
24,568
(323)
9,085
55,115
20,456
(61,787)
13,784
2022
$000s
—
—
—
—
1,407
—
—
—
3,403
15,853
123
(11,904)
8,882
18,848
(27,251)
479
Financial statements PureTech Health plc Annual report and accounts 2023 133
Notes to the Consolidated Financial Statements
(Amounts in thousands, except share and per share data, or exercise price and conversion price)
1. Material Accounting Policies
Description of Business
PureTech Health plc (the “Parent”) is a public company incorporated, domiciled and registered in the United Kingdom (“UK”). The
registered number is 09582467 and the registered address is 13th Floor, One Angel Court, London, EC2R 7HJ, United Kingdom.
The Parent and its subsidiaries are together referred to as the “Group”. The Parent company financial statements present financial
information about the Parent 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 (the "Consolidated Financial Statements") are presented as of December 31,
2023 and 2022, and for the years ended December 31, 2023, 2022 and 2021. The Consolidated Financial Statements have been
approved by the Directors on April 25, 2024, 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 IFRSs as issued by the IASB. However, the differences
have no impact for the periods presented.
For presentation of the Consolidated Statement of Comprehensive Income/(Loss), the Group 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, investments in notes from associates and liabilities classified as fair value
through the profit or loss.
Use of Judgments and Estimates
In preparing the 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 (see Note 18. Financial Instruments): In accordance with IFRS 9, the Group carries certain
financial assets and financial liabilities at fair value, with changes in fair value 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, appropriate discount rate, volatility, and term to exit.
Significant judgement is also applied in determining the following:
— Whether financial instruments should be classified as liability or equity (see Note 16. Subsidiary Preferred Shares.). The
judgement includes an assessment of whether the financial instruments 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 those
obligations could be settled by the Group 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.
— Whether the power to control investees exists (see Note 5. Investments Held at Fair Value and Note 6. Investments in
Associates and accounting policy with regard to Subsidiaries below). The judgement includes an assessment of whether
the Group 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 its own returns. The Group 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 Group, etc. If the power to control the investee exists, it
consolidates the financial statements of such investee in the Consolidated Financial Statements of the Group. Upon issuance
of new shares in an investee 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, revised board composition and revised subsidiary governance and
management structure. When such new circumstances result in the Group losing its power to control the investee, the investee
is deconsolidated. On March 1 2023 Vedanta was deconsolidated. Although the Group holds 47% of the voting rights and
the other shareholders are widely dispersed, the Group does not have de facto control because the investor rights agreement
stipulates that the relevant activities of Vedanta are directed by Vedanta's Board and the Group does not control Vedanta's
Board decision making. Voting rights are not the dominant factor for directing Vedanta's relevant activities.
Financial statements 134 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
— Whether the Group has significant influence over financial and operating policies of investees in order to determine if the
Group should account for its investment as an associate based on IAS 28 or a financial instrument based on IFRS 9. (refer to
Note 5. Investments Held at Fair Value and Note 6. Investments in Associates ). This judgement includes, among others, an
assessment whether the Group has representation on the board of directors of the investee, whether the Group 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 Group and the investee.
— Upon determining that the Group does have significant influence over the financial and operating policies of an investee, if
the Group 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. This judgement includes an
assessment of the characteristics of the financial instrument of the investee held by the Group and whether such financial
instrument provides access to returns underlying an ownership interest.
— When the Group 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 ("LTI") for the purposes of IAS 28. 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. After considering the individual
facts and circumstances of the Group’s investment in its associate's preferred stock in the manner described above, including
the long-term nature of such investment, the ability of the Group to convert its preferred stock investment to an investment in
common shares and the likelihood of such conversion, the Group concluded that such investment was considered a long term
interest.
— In determining the appropriate accounting treatment for the Royalty Purchase Agreement, management applied significant
judgement (refer to Note 17. Sale of Future Royalties Liability).
As of December 31, 2023, the Group had cash and cash equivalents of $191,081 and short-term investments of $136,062.
Considering the Group’s financial position as of December 31, 2023, and its principal risks and opportunities, the Group prepared
a going concern analysis covering a period of 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 continues to maintain sufficient liquidity headroom and
continues to comply with all financial obligations. The Board of Directors believe the Group and the Parent 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 Board of 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 Statements as of December 31, 2023 and 2022, and for each of the years ended December 31, 2023,
2022 and 2021, comprises PureTech Health plc and its consolidated subsidiaries. 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. 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 board of 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.
Financial statements PureTech Health plc Annual report and accounts 2023 135
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
A list of all current and former subsidiaries organized with respect to classification as of December 31, 2023, and the Group’s
total voting percentage, based on outstanding voting common and preferred shares as of December 31, 2023, 2022 and 2021,
is outlined below. All current subsidiaries are domiciled within the United States and conduct business activities solely within the
United States.
Subsidiary
Subsidiary operating companies
Alivio Therapeutics, Inc.2
Entrega, Inc. (indirectly held through Enlight)2
PureTech LYT, Inc. (formerly Ariya Therapeutics, Inc.)2
PureTech LYT 100, Inc.2
PureTech Management, Inc.3
PureTech Health LLC3
Deconsolidated former subsidiary
operating companies
Sonde Health, Inc.2,5
Akili Interactive Labs, Inc.2,6
Gelesis, Inc.1,2
Karuna Therapeutics, Inc.2,6
Vedanta Biosciences, Inc.2, 4
Vedanta Biosciences Securities Corp. (indirectly held
through Vedanta)2, 4
Vor Biopharma Inc.2,6
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)2
Follica, LLC 2
Knode Inc. (indirectly held through Enlight)2
Libra Biosciences, Inc.2
Mandara Sciences, LLC2
Tal Medical, Inc.2
Voting percentage at December 31, through the holdings in
2023
2022
2021
Common
Preferred
Common
Preferred
Common
Preferred
—
—
—
—
100.0
100.0
—
14.6
—
2.3
—
—
3.9
86.0
86.0
100.0
100.0
—
—
86.0
57.7
28.7
—
—
98.3
—
100.0
77.3
100.0
100.0
—
—
40.2
—
—
—
47.0
47.0
—
—
—
—
—
100.0
99.1
—
28.3
56.7
86.0
100.0
—
100.0
—
—
—
—
100.0
100.0
—
14.7
22.8
3.1
—
—
4.1
86.0
86.0
100.0
100.0
—
—
86.0
57.7
28.7
—
—
98.3
—
100.0
77.3
100.0
100.0
—
—
40.2
—
—
—
47.0
47.0
—
—
—
—
—
100.0
99.1
—
28.3
56.7
86.0
100.0
—
100.0
—
—
—
—
100.0
100.0
—
—
4.8
5.6
—
—
8.6
86.0
86.0
100.0
100.0
—
—
86.0
57.7
28.7
—
—
98.3
—
100.0
77.3
100.0
100.0
—
—
51.8
26.7
19.7
—
48.6
48.6
—
—
—
—
—
100.0
99.1
—
28.3
56.7
86.0
100.0
—
100.0
1 On October 30, 2023, Gelesis ceased operations and filed a voluntary petition for relief under the United States bankruptcy code. See Note 6. Investments in Associates for details.
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 On March 1, 2023, the Group lost control over Vedanta and Vedanta was deconsolidated from the Group’s financial statements, resulting in only the profits and losses generated by
Vedanta through the deconsolidation date being included in the Group’s Consolidated Statement of Comprehensive Income/(Loss). See Notes 5. Investments Held at Fair Value for
further details about the accounting for the investments in Vedanta subsequent to deconsolidation.
5 On May 25, 2022, the Group 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. Investments Held at Fair Value and 6.
Investments in Associates for further details about the accounting for the investments in Sonde subsequent to deconsolidation.
6 See Notes 5. Investments Held at Fair Value and 6. Investments in Associates for additional discussion on the Group's investment held in Akili, Karuna and Vor.
7 Follica became inactive during 2023.
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 Statement 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 the power to participate in the
financial and operating policy decisions of the associate.
Financial statements 136 PureTech Health plc Annual report and accounts 2023
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 or loss 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 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 adopted the amendments to IAS 28 Investments in Associates that addresses the dual application of IAS 28 and
IFRS 9 when equity method losses are applied against long-term interests. 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 long-term interests
presented as part of Investments held at fair value subsequent to remeasuring such investments to their fair value at balance sheet
date.
Sale of Future Royalties Liability
The Group accounts for the sale of future royalties liability as a financial liability, as it continues to hold the rights under the royalty
bearing licensing agreement and has a contractual obligation to deliver cash to an investor for a portion of the royalty it receives.
Interest on the sale of future royalties liability is recognized using the effective interest rate over the life of the related royalty
stream.
The sale of future royalties liability and the related interest expense are based on the Group’s current estimates of future royalties
expected to be paid over the life of the arrangement. Forecasts are updated periodically as new data is obtained. Any increases,
decreases or a shift in timing of estimated cash flows require the Group to re-calculate the amortized cost of the sale of future
royalties liability as the present value of the estimated future contractual cash flows that are discounted at the liability’s original
effective interest rate. The adjustment is recognized immediately in profit or loss as income or expense.
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 "FVOCI", or through profit or loss
"FVTPL", 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.
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.
Investments held at fair value are investments in equity instruments. Such investments consist of the Group's minority interest
holdings where the Group has no significant influence or preferred share investments that are not providing access to returns
underlying ownership interests and are categorized as debt instruments that are presented at fair value through profit and loss
because the amounts receivable do not represent solely payments of principal and interest. These financial assets are initially
measured at fair value and subsequently re-measured at fair value at each reporting date. The Group 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. Investments
Held at Fair Value.
Financial statements PureTech Health plc Annual report and accounts 2023 137
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
Changes in the fair value of financial assets at FVTPL are recognized in other income/(expense) in the Consolidated Statement 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, are initially and subsequently measured at fair value, with changes in fair value recognized
through profit and loss.
Cash and cash equivalents consist of demand deposits with banks and other financial institutions and highly liquid instruments
with original maturities of three months or less at the date of purchase. Cash and cash equivalents are carried at cost, which
approximates their fair value.
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 interest 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 record any such expected lifetime losses related to the outstanding trade and other receivable
balances. 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 primarily consist of trade and other payables, and preferred shares.
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 Statement 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, the Group has entered into transactions that generate revenue and meet the
scope of either IFRS 15 or IAS 20 Accounting for Government Grants. Contract revenue is recognized at either a point-in-time or
over time, depending on the nature of the performance obligations.
The Group accounts for agreements that meet the definition of IFRS 15 by applying the following five step model:
— Identify the contract(s) with a customer – A contract with a customer exists when (i) the Group enters into an enforceable
contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the
payment terms related to those goods or services, (ii) the contract has commercial substance and, (iii) the Group determines
that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s
intent and ability to pay the promised consideration.
— Identify the performance obligations in the contract – Performance obligations promised in a contract are identified based on
the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can
benefit from the good or service either on its own or together with other resources that are readily available from third parties
or from the Group, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately
identifiable from other promises in the contract.
Financial statements 138 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
— 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 Group’s performance as the Group performs. Therefore revenue is recognized over time using
the input method based on costs incurred to date as compared to total contract costs. The Group 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 when the license of intellectual property is the predominant item in the
arrangement 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 Group classifies as non-
current deferred revenue amounts received for which performance is expected to occur beyond one year or one operating cycle.
Grant Revenue
The Group recognizes grants from governmental agencies as grant revenue 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
Group will comply with the conditions within the grant agreement and there is reasonable assurance that payments under the
grants will be received. The Group evaluates the conditions of each grant as of each reporting date to ensure that the Group 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 Group submits qualifying expenses for reimbursement after the Group has incurred the research and development expense.
The Group records an unbilled receivable upon incurring such expenses. In cases in which the grant revenue 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 revenue is recognized in the Consolidated Statement of Comprehensive Income/(Loss) at the time in which the
Group recognizes the related reimbursable expense for which the grant is intended to compensate.
Functional and Presentation Currency
The 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.
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.
Financial statements PureTech Health plc Annual report and accounts 2023 139
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
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 Group'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). The cost of IPR&D represents upfront payments as well
as additional contingent payments based on development, regulatory and sales milestones related to certain license agreement
where the Group licenses IP from a third party. These milestones are capitalized as the milestone is triggered. See Note 25.
Commitments and Contingencies. 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 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 Group’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 Statement 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 Group 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. Investments in
Associates for impairment recorded in respect of an investment in associate during the year ended December 31, 2022.
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.
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.
Financial statements 140 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
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.
Development Costs
Expenditures on research activities are recognized as incurred in the Consolidated Statement 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 Statement 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 Statement of Financial Position when the Group has a present legal or constructive
obligation due to a past event that can be reliably measured, and it is probable that an outflow of economic benefits will be
required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that
reflects risks specific to the liability.
Leases
The Group leases real estate for use in operations. These leases have lease terms of approximately 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. Right-of-use (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.
Finance Income and Finance Costs
Finance income consists of interest income on funds invested in money market funds and U.S. treasuries. Finance income is
recognized as it is earned. Finance costs consist mainly of loan, notes and lease liability interest expenses, interest expense due to
accretion of and adjustment to sale of future royalties liability as well as 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 Statement of Comprehensive Income/(Loss) except to the extent that it relates to items recognized directly in equity.
Current income tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantially enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognized due to temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax assets are recognized for unused tax losses, unused
tax credits and deductible temporary differences to the extent that it is probable that future taxable profits will be available against
which they can be used. Deferred tax assets with respect to investments in associates are recognized only to the extent that it
is probable the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the
temporary difference can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it
is no longer probable that the related tax benefit will be realized.
Financial statements PureTech Health plc Annual report and accounts 2023 141
Notes to the Consolidated Financial Statements continued
1. Accounting policies continued
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax
rates enacted or substantively enacted at the reporting date.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net
basis.
Fair Value Measurements
The Group’s accounting policies require that certain financial assets and certain financial liabilities be measured at their fair value.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to
measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. Fair values
are categorized into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
— Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
— Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
— Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during which the
change has occurred.
The carrying amount of cash and cash equivalents, accounts receivable, restricted cash, deposits, accounts payable, accrued
expenses and other current liabilities in the Group’s Consolidated Statement 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 Board of Directors.
2. New Standards and Interpretations
The Group has applied the following amendments for the first time for its annual reporting period commencing January 1, 2023:
— IFRS 17 Insurance Contracts
— Definition of Accounting Estimates (Amendments to IAS 8)
— Deferred Tax related to Assets and Liabilities Arising from a Single Transaction (Amendments to IAS 12)
The amendments listed above did not have any impact on the amounts recognized in prior and current periods and are not
expected to significantly affect the future periods.
Certain new accounting standards, amendments to accounting standards and interpretations have been published that are
not mandatory for December 31, 2023 reporting periods and have not been early adopted by the Group. These standards,
amendments or interpretations are not expected to have a material impact on the Group in the current or future reporting periods
and on foreseeable future transactions.
Financial statements 142 PureTech Health plc Annual report and accounts 2023
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 revenue
Total revenue
2023
$
750
2,580
3,330
2022
$
2,090
13,528
15,618
2021
$
9,979
7,409
17,388
All amounts recorded in contract revenue were generated in the United States.
For the years ended December 31, 2023, 2022 and 2021, contract revenue includes royalties received from an associate in the
amounts of zero, $509 and $231, respectively.
Substantially all of the Group’s contracts related to contract revenue for the years ended December 31, 2023, 2022 and 2021 were
determined to have a single performance obligation which consists of a combined deliverable of license of intellectual property
and research and development services. Therefore, for such contracts, revenue is recognized over time based on the input method
which the Group 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 Group received a $6,500 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 right to use 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.
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 Income
Transferred over time
Customers over 10% of revenue
Customer A
Customer B
Customer C
2023
$
—
750
750
2023
$
750
—
—
750
2022
$
527
1,563
2,090
2022
$
1,500
—
509
2,009
2021
$
6,809
3,171
9,979
2021
$
1,500
7,250
—
8,750
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 receivables are included within trade and other receivables
on the Consolidated Statement of Financial Position. The accounts receivables related to contract revenue were $555 and $606 as
of December 31, 2023 and 2022, respectively.
Financial statements PureTech Health plc Annual report and accounts 2023 143
Notes to the Consolidated Financial Statements continued
4. Segment Information
Basis for Segmentation
The Directors are the Group’s chief operating decision-makers. The Group’s operating segments are determined based on the
financial information provided to the Board of Directors periodically for the purposes of allocating resources and assessing
performance. During the second half of 2023, the Group changed the financial information that was regularly reviewed by the
Board of Directors to allocate resources and assess performance. The Group has determined each of its Wholly-Owned Programs
represents an operating segment and the Group has aggregated each of these operating segments into one reportable segment,
the Wholly-Owned Programs segment, given the high level of operational and financial similarities across its Wholly-Owned
Programs. Each of the Group’s Controlled Founded Entities represents an operating segment. The Group aggregates each
Controlled Founded Entity operating segment into one reportable segment, the Controlled Founded Entities segment. For the
Group’s entities that do not meet the definition of an operating segment, the Group presents this information in the Parent &
Other column in its segment footnote to reconcile the information in this footnote to the Consolidated Financial Statements.
Substantially all of the Group’s revenue and profit generating activities are generated within the United States and, accordingly, no
geographical disclosures are provided.
The Group has retroactively recast its fiscal year 2022 and 2021 results on the new basis for comparability.
Following is the description of the Group's reportable segments:
Wholly-Owned Programs
The Wholly-Owned Programs segment is advancing Wholly-Owned Programs which are focused on treatments for patients with
devastating diseases. The Wholly-Owned Programs segment is comprised of the technologies that are wholly-owned and will
be advanced through with either the Group's funding or non-dilutive sources of financing. The operational management of the
Wholly-Owned Programs segment is conducted by the PureTech Health team, which is responsible for the strategy, business
development, and research and development.
Controlled Founded Entities
The Controlled Founded Entities segment is comprised of the Group’s consolidated operational subsidiaries as of December 31,
2023 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 entity.
The Group’s entities that were determined not to meet the definition of an operating segment are included in the Parent Company
and Other column to reconcile the information in this footnote to the financial statements. This column captures activities not
directly attributable to the Group's operating segments and includes the activities of the Parent, corporate support functions and
certain research and development support functions that are not directly attributable to a strategic business segment as well as the
elimination of intercompany transactions. This column also captures the operating results for the deconsolidated entities through
the date of deconsolidation (e.g. Vedanta in 2023 and Sonde in 2022) and accounting for the Group's holdings in Founded Entities
for which control has been lost, which primarily represents: the activity associated with deconsolidating an entity when the Group
no longer controls the entity (e.g. Vedanta in 2023 and Sonde in 2022), the gain or loss on the Group's investments accounted
for at fair value (e.g. the Group's ownership stakes in Karuna, Vor and Akili) and the Group's net income or loss of associates
accounted for using the equity method.
(The term "Founded Entities" refers to entities which the Company incorporated and announced the incorporation as a Founded
Entity externally. It includes certain of the Company’s wholly-owned subsidiaries which have been announced by the Company as
Founded Entities, Controlled Founded Entities and deconsolidated Founded Entities.)
In January 2024, the Group launched two new Founded Entities to advance certain programs from the Wholly-Owned Programs
segment. Refer to Note 28. Subsequent Events for detail. The financial results of these programs were included in the Wholly-
Owned Programs segment as of December 31, 2023 and 2022 and for the three years ended December 31, 2023, 2022 and 2021,
respectively. Upon raising dilutive third-party financing, the financial results of these two entities will be included in the Controlled
Founded Entities segment to the extent that the Group maintains control over these entities.
The Group’s Board of Directors reviews segment performance and allocates resources based upon revenue and operating loss as
well as the funds available for each segment. The Board of Directors do not review any other information for purposes of assessing
segment performance or allocating resources.
Financial statements 144 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
4. Segment information continued
Contract revenue
Grant revenue
Total revenue
General and administrative expenses
Research and development expenses
Total operating expense
Operating income/(loss)
Income/expenses not allocated to segments
Other income/(expense):
Gain on deconsolidation of subsidiary
Gain/(loss) on investment held at fair value
Realized loss on sale of investments
Gain/(loss) on investment in notes from associates
Other income/(expense)
Total other income/(expense)
Net finance income/(costs)
Share of net income/(loss) of associates accounted for using the equity
method
Income/(loss) before taxes
For the year ended December 31, 2023
Wholly-Owned
Programs
$
—
853
853
(14,020)
(89,495)
(103,516)
(102,662)
Controlled
Founded
Entities
$
750
—
750
(562)
(672)
(1,233)
(483)
Parent
Company &
Other
$
—
1,727
1,727
(38,713)
(6,068)
(44,781)
(43,054)
Consolidated
$
750
2,580
3,330
(53,295)
(96,235)
(149,530)
(146,199)
61,787
77,945
(122)
(27,630)
(908)
111,072
5,078
(6,055)
(36,103)
Available Funds
Cash and cash equivalents
Short-term Investments
Consolidated cash, cash equivalents and short-term investments
2,140
—
2,140
675
—
675
188,266
136,062
324,328
191,081
136,062
327,143
As of December 31, 2023
Financial statements PureTech Health plc Annual report and accounts 2023 145
Notes to the Consolidated Financial Statements continued
4. Segment information continued
Contract revenue
Grant revenue
Total revenue
General and administrative expenses
Research and development expenses
Total Operating expenses
Operating income/(loss)
Income/expenses not allocated to segments
Other income/(expense):
Gain on deconsolidation
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
Gain on dilution of ownership interest in associate
Impairment of investment in associates
Income/(loss) before taxes
Available Funds
For the year ended December 31, 2022
Wholly-Owned
Programs
$
Controlled
Founded
Entities
$
Parent
Company &
Other
$
—
2,826
2,826
(8,301)
(116,054)
(124,355)
(121,529)
1,500
—
1,500
(419)
(1,051)
(1,470)
30
590
10,702
11,292
(52,272)
(35,328)
(87,600)
(76,308)
Consolidated
$
2,090
13,528
15,618
(60,991)
(152,433)
(213,425)
(197,807)
27,251
(32,060)
(29,303)
8,131
(25,981)
138,924
(27,749)
28,220
(8,390)
(92,783)
As of December 31, 2022
Cash and cash equivalents
Short-term Investments
Consolidated cash, cash equivalents and short-term investments
7,306
—
7,306
823
—
823
141,737
200,229
341,966
149,866
200,229
350,095
Financial statements 146 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
4. Segment information continued
Contract revenue
Grant revenue
Total revenue
General and administrative expenses
Research and development expenses
Total operating expense
Operating income/(loss)
Income/expenses not allocated to segments
Other income/(expense):
Gain/(loss) on investment held at fair value
Realized loss on sale of investments
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
5. Investments Held at Fair Value
For the year ended December 31, 2021
Wholly-Owned
Programs
$
8,129
1,253
9,382
(8,673)
(65,444)
(74,118)
(64,736)
Controlled
Founded
Entities
$
1,500
—
1,500
(365)
(918)
(1,284)
216
Parent
Company &
Other
$
350
6,156
6,506
(48,161)
(44,108)
(92,269)
(85,763)
Consolidated
$
9,979
7,409
17,388
(57,199)
(110,471)
(167,671)
(150,282)
179,316
(20,925)
1,592
159,983
5,050
(73,703)
(58,953)
Investments held at fair value include both unlisted and listed securities held by the Group. These investments, which include
interests in Akili, Vor, Karuna, Sonde, Vedanta, Gelesis 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.
Activities related to such investments during the periods are shown below:
Investments held at fair value
Balance as of January 1, 2022
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
Investment in Akili common shares
Gelesis Earn-out Shares received in the 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 and January 1, 2023
Investment in Vedanta preferred shares – Vedanta deconsolidation
Investment in Gelesis 2023 Warrants
Sale of Karuna shares
Loss realised on sale of investments
Gain – change in fair value through profit and loss
Balance as of December 31, 2023
$
493,888
11,168
(118,710)
(29,303)
5,000
14,214
(92,303)
(32,060)
251,892
20,456
1,121
(33,309)
(265)
77,945
317,841
Financial statements PureTech Health plc Annual report and accounts 2023 147
Notes to the Consolidated Financial Statements continued
5. Investments Held at Fair Value continued
Vedanta
On March 1, 2023, Vedanta issued convertible debt to a syndicate of investors. The Group did not participate in this round of
financing. As part of the issuance of the debt, the convertible debt holders were granted representation on Vedanta's Board of
Directors and the Group lost control over the Vedanta Board of Directors and the power to direct the relevant Vedanta activities.
Consequently, Vedanta was deconsolidated on March 1, 2023 and its results of operations are included in the Consolidated
Financial Statements through the date of deconsolidation.
Following deconsolidation, the Group has significant influence over Vedanta through its voting interest in Vedanta and its
remaining representation on Vedanta's Board of Directors. However, the Group only holds convertible preferred shares in Vedanta
that do not provide their holders 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. Under IFRS 9, the preferred
share investments are categorized as debt instruments that are presented at fair value through profit and loss because the amounts
receivable do not represent solely payments of principal and interest.
Upon deconsolidation, the Group derecognized its assets, liabilities and non-controlling interest in respect of Vedanta and
recorded its aforementioned investment in Vedanta at fair value. The deconsolidation resulted in a gain of $61,787. As of the date
of deconsolidation, the investment in Vedanta convertible preferred shares held at fair value amounted to $20,456.
During the year ended December 31, 2023, the Group recognized a loss of $6,303 for the changes in the fair value of the
investment in Vedanta that was included in gain/(loss) on investments held at fair value within the Consolidated Statement of
Comprehensive Income/(Loss). The fair value of the Group’s investment in Vedanta is $14,153 as of December 31, 2023.
Karuna
Karuna was deconsolidated in March 2019. During 2019, Karuna completed its IPO and the Group lost its significant influence in
Karuna. The shares held in Karuna are accounted for as an investment held at fair value under IFRS 9.
2021
On February 9, 2021, the Group sold 1,000,000 common shares of Karuna for $118,000. On November 9, 2021, the Group sold
an additional 750,000 common shares of Karuna for $100,125. As a result of the aforementioned sales, the Group recorded a loss
of $20,925, attributable to blockage discount included in the sales price, in realized gain/(loss) on sale of investments within the
Consolidated Statement of Comprehensive Income/(Loss).
2022
On August 8, 2022, the Group sold 125,000 shares of Karuna common stock. In addition, the Group 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 Group from all aforementioned transactions amounted to $115,457, net of
transaction fees. As a result of the aforementioned sales, the Group recorded a loss of $29,303, attributable to the exercise of the
aforementioned call options, in realized gain/(loss) on sale of investment within the Consolidated Statement of Comprehensive
Income/(Loss).
2023
During the three months ended December 31, 2023, the Group sold 167,579 shares of Karuna common stock with aggregate
proceeds of $33,309, net of transaction fees.
During the years ended December 31, 2023, 2022, and 2021 the Group recorded gains of $107,079, $134,952, $109,987,
respectively for the changes in the fair value of the Karuna investment that were included in gain/(loss) on investments held at fair
value within the Consolidated Statement of Comprehensive Income/(Loss). As of December 31, 2023, the Group held 886,885
shares or 2.3 percent of total outstanding Karuna common stock. In December 2023, Karuna entered into a definitive merger
agreement with Bristol Myers Squibb ("BMS") under which Karuna common shares were acquired by Bristol Myers Squibb for $330
per share in March 2024. See Note 28. Subsequent Events. The fair value of the Group’s investment in Karuna is $280,708 as of
December 31, 2023.
Vor
Vor was deconsolidated in February 2019. As the Group did not hold common shares in Vor upon deconsolidation and the
preferred shares it held did not have equity-like features. Therefore, the preferred shares held by the Group 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).
2021
On January 8, 2021, the Group participated in the second closing of Vor’s Series B preferred share financing. For consideration of
$500, the Group received an additional 961,538 Series B preferred shares.
On February 9, 2021, Vor closed its initial public offering (the "IPO") of 9,828,017 shares of its common stock at a price of $18.00
per share. Subsequent to the closing, the Group held 3,207,200 shares of Vor common stock, representing 8.6 percent of Vor
common stock.
2022
In August and December 2022, the Group sold an aggregate of 535,400 shares of Vor common stock for aggregate proceeds of
$3,253.
During the years ended December 31, 2023, 2022 and 2021, the Group recognized a loss of $11,756, a loss of $16,247, and a
gain of $3,903, respectively, for the changes in the fair value of the investment that were included in gain/(loss) on investments
held at fair value within the Consolidated Statement of Comprehensive Income/(Loss). The fair value of the Group’s investment in
Vor is $6,012 as of December 31, 2023.
Financial statements 148 PureTech Health plc Annual report and accounts 2023
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 was accounted for under the equity method, while
the preferred shares and warrants held by the Group fell under the guidance of IFRS 9 and were treated as financial assets held
at fair value, with changes to the fair value of the instruments recorded through the Consolidated Statement of Comprehensive
Income/(Loss). Please refer to Note 6. Investments in Associates for information regarding the Group's investment in Gelesis as an
associate.
2021
During the year ended December 31, 2021, as the equity method based investment in Gelesis was reduced to zero previously,
the Group allocated a portion of its share in the net loss in Gelesis of $73,703, 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 the Group, 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 "Gelesis Earn-out Shares"). In addition, the Group invested $15,000
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 $4,961, as part of the Backstop
agreement signed with Capstar on December 30, 2021 (See Note 6. Investments in Associates). 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 and warrants through the date
of the exchange upon which the preferred shares and warrants were derecognized and recorded as an additional investment in
Gelesis equity interest. All equity method losses allocated in prior periods against the investment in Gelesis held at fair value were
reclassified to include within the equity method investment in Gelesis and were offset against the gain on dilution of interest.
As part of the aforementioned exchange, the Group received 4,526,622 Gelesis Earn-out Shares, which were valued on the date
of the exchange at $14,214. The Group accounted for such Gelesis Earn-out Shares under IFRS 9 as investments held at fair value
with changes in fair value recorded through profit and loss.
2023
In February and May 2023, as part of Gelesis' issuance of senior secured promissory notes to the Group, Gelesis also issued to the
Group (i) warrants to purchase 23,688,047 shares of Gelesis common stock with an exercise price of $0.2744 per share (ii) warrants
to purchase 192,307,692 shares of Gelesis common stock at an exercise price of $0.0182 per share and (iii) warrants to purchase
43,133,803 shares of Gelesis common stock at an exercise price of $0.0142 per share. These warrants expire five years after
issuance and are collectively referred to as the Gelesis 2023 Warrants.
The Gelesis 2023 Warrants were recorded at their initial fair value of $1,121 and then subsequently re-measured to fair value
through the profit and loss. As of December 31, 2023, the fair value of the Gelesis 2023 Warrants was $0 as Gelesis ceased
operations in October 2023.
During the years ended December 31, 2023, 2022 and 2021, the Group recognized a loss of $1,264, a loss of $18,476 and a gain
of $34,566, respectively, related to the change in the fair value of these instruments that was included in gain/(loss) on investments
held at fair value within the Consolidated Statement of Comprehensive Income/(Loss).
Sonde
On May 25, 2022, Sonde completed a Series B preferred share financing, which resulted in the Group losing control over Sonde
and the deconsolidation of Sonde. Therefore, the results of operations of Sonde are included in the Consolidated Financial
Statements through the date of deconsolidation.
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 $27,251. As of the date
of deconsolidation, the investment in Sonde preferred shares held at fair value amounted to $11,168.
Following deconsolidation, the Group had significant influence in Sonde through its 48.2% voting interest in Sonde and its
remaining representation on Sonde's Board of Directors. The Group holds Preferred A-1, A-2 and B shares. The Preferred A-1
shares have the same terms as common stock and 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
convertible Preferred A-2 and B shares 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. Under IFRS 9, the A-2 and B preferred share investments are categorized as debt instruments that are presented at fair
value through profit and loss because the amounts receivable do not represent solely payments of principal and interest.
During the years ended December 31, 2023 and 2022, the Group recognized a loss of $994, and a gain of $235, respectively, for
the changes in the fair value of the investment in Sonde that were included in gain/(loss) on investments held at fair value within
the Consolidated Statement of Comprehensive Income/(Loss). The fair value of the Group’s investment in Sonde is $10,408 as of
December 31, 2023.
Financial statements PureTech Health plc Annual report and accounts 2023 149
Notes to the Consolidated Financial Statements continued
5. Investments Held at Fair Value continued
Akili
Akili was deconsolidated in 2018. At time of deconsolidation, as the Group did not hold common shares in Akili and the preferred
shares it held did not have equity-like features. Therefore, the preferred shares held by the Group fell under the guidance of IFRS 9
and were treated as a financial asset held at fair value and changes to the fair value of the preferred shares were recorded through
the Consolidated Statement of Comprehensive Income/(Loss), in accordance with IFRS 9.
On May 25, 2021, Akili completed its Series D financing for gross proceeds of $110,000 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.
On August 19, 2022, Akili Interactive merged with Social Capital Suvretta Holdings Corp. I, a special purpose acquisition
company. 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 Group 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 Group purchased 500,000 shares for a total consideration of $5,000. Following the closing of the aforementioned
transactions, the Group holds 12,527,477 shares of the combined entity and 1,433,914 Akili Earn-out Shares, with fair value
amounted to $6,422 as of December 31, 2023.
During the years ended December 31, 2023, 2022 and 2021, the Group recognized a loss of $8,681, a loss of $131,419, and
a gain of $32,151, respectively, for the changes in the fair value of the investment in Akili that were included in gain/(loss) on
investments held at fair value within the Consolidated Statement of Comprehensive Income/(Loss).
6. Investments in Associates
Gelesis
Gelesis was founded by the Group 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. Upon deconsolidation, the preferred
shares and warrants held by the Group fell under the guidance of IFRS 9 Financial Instruments and were treated as financial assets
held at fair value and the investment in common shares of Gelesis was subject to IAS 28 Investment in Associates as the Group had
significant influence over Gelesis.
2021
Due to the Group's share in the losses of Gelesis, in 2020, the Group's investment in Gelesis 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 Group 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, 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 $38,101, which included $709 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, the Group signed a Backstop agreement with Capstar and had committed to acquire Capstar class A
common shares at $10 per share immediately prior to the closing of the business combination between Gelesis and Capstar, in
case, the Available Funds, as defined in the agreement, were less than $15,000. According to the Backstop agreement, if the
Group had to acquire any shares under the agreement, the Group would receive an additional 1,322,500 class A common shares
of Capstar at no additional consideration.
The Group 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 $11,200 and transaction price of zero on the effective
date of the Backstop agreement and as such was initially recorded at zero. The deferred gain was amortized 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 $10,400 and $800, respectively, for the amortization of the deferred gain. During the year ended December
31, 2022, the Group recognized a loss of $2,776 in respect of the decrease in the fair value of the derivative until the settlement
date, resulting in a net gain of $7,624 recorded during the year ended December 31, 2022 in respect of the Backstop agreement.
The gain was included in other Income/(expense) in the Consolidated Statement of Comprehensive Income/(Loss). The fair value
of the derivative on the settlement date in the amount of $8,424 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 $4,961 and received an additional 1,322,500 class A common shares of Capstar for no additional
consideration.
Financial statements 150 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
6. Investments in Associates continued
2022
Share exchange – Capstar
On January 13, 2022, Gelesis completed its business combination with Capstar. As part of the business combination, all shares
in Gelesis, common and preferred, including the shares held by the Group, 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
(the "Gelesis Earn-out Shares"). In addition, the Group invested $15,000 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 $4,961, 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, the Group 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 the Group's significant equity
holding and voting interest in Gelesis, the Group continued to maintain significant influence in Gelesis and as such continued 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), the earn-out shares received in Gelesis (see Note 5. Investments Held at Fair Value) and the offset of
previously unrecognized equity method losses, the net gain recorded on the dilution of interest amounted to $28,255.
Impairment
Following Gelesis’ decline in its market price in 2022 and its lack of liquidity, the Group recorded an impairment loss of $8,390
as of December 31, 2022 in respect of its investment in Gelesis. The recoverable amount of the investment in Gelesis was $4,910
as of December 31, 2022, which was determined based on fair value less costs to sell (which 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 associates.
2023
During the year ended December 31, 2023, the Group entered into agreements with Gelesis to purchase senior secured
convertible promissory notes and warrants for shares of Gelesis common stock (see Note 7. Investment in Notes from Associates).
The warrants to purchase shares of Gelesis common stock represented potential voting rights to the Group and it is therefore
necessary to consider whether they were substantive. If these potential voting rights were substantive and the Group had the
practical ability to exercise the rights and take control of greater than 50% of Gelesis common stock, the Group would be required
to consolidate Gelesis under the accounting standards.
In February 2023, the Group obtained warrants to purchase 23,688,047 shares of Gelesis common stock (the “February Warrants”)
at an exercise price of $0.2744 per share. The exercise of the February Warrants was subject to the approval of the Gelesis
stockholders until May 1, 2023. On May 1, 2023, stockholder approval was no longer required for the Group to exercise the
February Warrants. The potential voting rights associated with the February Warrants were not substantive as the exercise price of
the February Warrants was at a significant premium to the fair value of the Gelesis common stock.
In May 2023, the Group obtained warrants to purchase 235,441,495 shares of Gelesis common stock (the “May Warrants”). The
May Warrants were exercisable at the option of the Group and had an exercise price of either $0.0182 or $0.0142. The May
Warrants were substantive as the Group would have benefited from exercising such warrants since their exercise price was at
the money or at an insignificant premium over the fair value of the Gelesis common stock. However, that benefit from exercising
the May Warrants only existed for a short period of time because in June 2023, the potential voting rights associated with the
May Warrants were impacted by the terms and conditions of the Merger Agreement as described below and were no longer
substantive.
Financial statements PureTech Health plc Annual report and accounts 2023 151
Notes to the Consolidated Financial Statements continued
6. Investments in Associates continued
In October 2023, the Group terminated the Merger Agreement with Gelesis and the potential voting rights associated with the
May Warrants were not substantive. Also, in October 2023, Gelesis ceased operations and filed a voluntary petition for relief
under the provisions of Chapter 7 of Title 11 of the United States Bankruptcy Code. A Chapter 7 trustee has been appointed by
the Bankruptcy Court who has control over the assets and liabilities of Gelesis, effectively eliminating the authority and powers of
the Board of Directors of Gelesis and its executive officers to act on behalf of Gelesis. The assets of Gelesis will be liquidated and
Gelesis no longer has any officers or employees. The Group ceased accounting for Gelesis as an equity method investment as it no
longer had significant influence in Gelesis. During the year ended December 31, 2023, the Group recorded $4,910 as its share in
the losses of Gelesis and the Group’s balance in this equity method investment was zero as of December 31, 2023.
Merger Agreement
On June 12, 2023, PureTech Health LLC and Caviar Merger Sub LLC, a Delaware limited liability company and a wholly-owned
subsidiary of PureTech (“Merger Sub”), entered into an agreement (the "Merger Agreement"), pursuant to which Gelesis would
merge with and into Merger Sub, with Merger Sub continuing as the surviving company ( the “Merger”). If the Merger had been
completed, PureTech would have acquired all issued and outstanding shares of common stock of Gelesis not otherwise held by
PureTech, and Gelesis would have become an indirect wholly-owned subsidiary of PureTech. On October 12, 2023, the Group
terminated the Merger Agreement.
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.
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.
The fair value of the Preferred A-1 shares on the date of deconsolidation amounted to $7,716, which is the initial value of the
equity method investment in Sonde.
During the years ended December 31, 2023 and 2022, the Group recorded losses of $1,052 and $3,443, respectively, related to
Sonde's equity method of accounting. As of December 31, 2023, the Sonde equity method investment has a balance of $3,185.
The following table summarizes the activity related to the investment in associates balance for the years ended December 31,
2023 and 2022.
Investment in Associates
As of January 1, 2022
Cash investment in associates
Additional investment as a result of settling the Backstop agreement (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 LTI (due to decrease in the fair value of such LTI):
Share in other comprehensive loss of associates
Impairment
As of December 31, 2022 and January 1, 2023
Share in net loss of associates
Share in other comprehensive income of associates
As of December 31, 2023
* 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).
$
—
19,961
8,424
13,793
7,680
(27,749)
(4,406)
(166)
(8,390)
9,147
(6,055)
92
3,185
Financial statements 152 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
6. Investments in Associates continued
Summarized financial information
The following table summarizes the financial information of Gelesis as of December 31, 2022 and for the years ended December
31, 2022 and 2021, 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
Group’s interest in Gelesis. As of December 31, 2023, the Group’s investment in Gelesis is $0 and Gelesis does not represent a
significant equity method investment. As a result, such a disclosure for Gelesis is not presented for the year ended December 31,
2023.
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
Investment in associates
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
$
22.5%
333,040
23,495
(99,053)
(80,010)
(46,204)
131,268
29,504
3,858
(28,452)
4,910
2022
$
25,767
(111,567)
(112,285)
(24,306)
(24,472)
2021
$
11,185
(271,430)
(273,005)
(73,703)
(73,703)
*
For the year ended December 31, 2022, the amount includes $4,406 reversal of equity method losses recorded against long-term Interests ("LTI") due to the decrease in fair value of
such LTI.
7. Investment in Notes from Associates
Gelesis
Unsecured Promissory Note
On July 27, 2022, the Group, as a lender, entered into an unsecured promissory note (the "Junior Note") with Gelesis, as a
borrower, in the amount of $15,000. The Junior Note bears an annual interest rate of 15% per annum. The maturity date of the
Junior Note is the earlier of December 31, 2023 or five business days following the consummation of a qualified financing by
Gelesis. Based on the terms of the Junior Note, due to the option to convert to a variable amount of shares at the time of default,
the Junior Note is required to be measured at fair value with changes in fair value recorded through profit and loss.
As of December 31, 2023 and December 31, 2022 the fair value of the Junior Note was $0 and $16,501, respectively. In the year
ended December 31, 2023, the Group recorded a loss of $16,501 for the change in the fair value of the Junior Note which was
included in gain/(loss) on investments in notes from associates within the Consolidated Statement of Comprehensive Income/
(Loss). The fair value of the Junior Note was determined to be $0 as of December 31, 2023 as Gelesis has ceased operations and
filed for bankruptcy. In the year ended December 31, 2022, the Group recorded interest income of $963 and a gain of $539 for
the change in the fair value of the Junior Note which was included in other income/(expense) in the Consolidated Statement of
Comprehensive Income/(Loss).
Financial statements PureTech Health plc Annual report and accounts 2023 153
Notes to the Consolidated Financial Statements continued
7. Investment in Notes from Associates continued
Senior Secured Convertible Promissory Notes
During the year ended December 31, 2023, the Group entered into multiple agreements with Gelesis to purchase for $11,850
senior secured convertible promissory notes (the "Senior Notes") and warrants for share of Gelesis common stock. The initial fair
value of the Senior Notes was determined to be $10,729 while $1,121 was determined to be the initial fair value of the warrants.
The Senior Notes represent debt instruments that are presented at fair value through profit and loss as the amounts receivable do
not solely represent payments of principal and interest as the Senior Notes are convertible into Gelesis common stock.
The Senior Notes are secured by a first-priority lien on substantially all assets of Gelesis and the guarantors (other than the equity
interests in, and assets held by Gelesis s.r.l., a subsidiary of Gelesis, and certain other exceptions).
In October 2023, Gelesis ceased operations and filed a voluntary petition for relief under the provisions of Chapter 7 of Title
11 of the United States Bankruptcy Code. Therefore, the Group determined that the fair value of the Senior Notes was $0 as of
December 31, 2023 and the Group recorded a loss of $10,729 for the changes in the fair value of the Senior Notes. The loss was
included in gain/(loss) on investments in notes from associates in the Consolidated Statement of Comprehensive Income/(Loss).
Vedanta
On April 24, 2023, Vedanta closed the second tranche of its convertible debt for additional proceeds of $18,000, of which $5,000
were invested by the Group. The convertible debt 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. If the convertible debt is not earlier converted or repaid, the entire outstanding
amount of the convertible debt shall be due and payable upon the earliest to occur of (a) the later of (x) November 1, 2025 and
(y) the date which is sixty (60) days after all amounts owed under, or in connection with, the loan Vedanta received from a certain
investor have been paid in full, or (b) the consummation of a Deemed Liquidation Event (as defined in Vedanta’s Amended and
Restated Certificate of Incorporation).
Due to the terms of the convertible debt, the investment in such convertible debt is measured at fair value with changes in the fair
value recorded through profit and loss. During the years ended December 31, 2023, the Group recorded a loss of $400 for the
changes in the fair value of the Vedanta convertible debt which was included in gain/(loss) on investments in notes from associates
in the Consolidated Statement of Comprehensive Income/(Loss).
Following is the activity in respect of investments in notes from associates during the periods. The fair value of the $4,600 note
from associate as of December 31, 2023 is determined using unobservable Level 3 inputs. See Note 18. Financial Instruments for
additional information.
Investment in notes from associates
Balance as of January 1, 2022
Investment In Gelesis notes
Changes in the fair value of the notes
Balance as of December 31, 2022 and January 1, 2023
Investment In Gelesis notes
Investment in Vedanta convertible debt
Changes in the fair value of the notes and convertible debt
Balance as of December 31, 2023
$
—
15,000
1,501
16,501
10,729
5,000
(27,630)
4,600
Financial statements 154 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
8. Operating Expenses
Total operating expenses were as follows:
For the years ending December 31,
General and administrative
Research and development
Total operating expenses
2023
$
53,295
96,235
149,530
2022
$
60,991
152,433
213,425
2021
$
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 and other benefits
Payroll taxes
Share-based payments
Total payroll costs
Amortization
Depreciation
Total amortization and depreciation expenses
Other general and administrative expenses
Other research and development expenses
Total other operating expenses
Total operating expenses
2023
40
56
96
2023
$
24,586
21,102
45,688
2023
$
37,084
2,599
1,590
4,415
45,688
1,979
2,955
4,933
25,180
73,729
98,909
149,530
2022
57
144
201
2022
$
25,322
36,321
61,643
2022
$
41,750
2,908
2,286
14,699
61,643
3,048
5,845
8,893
31,600
111,288
142,888
213,425
2021
52
119
171
2021
$
26,438
28,950
55,388
2021
$
36,792
2,563
2,084
13,950
55,388
2,940
4,347
7,287
26,714
78,282
104,996
167,671
Please refer to Note 9. Share-based Payments for further disclosures related to share-based payments and Note 26. Related Parties
Transactions for management’s remuneration disclosures.
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
2023
$
2,241
—
—
445
9
2,695
2022
$
1,716
132
814
1,157
—
3,819
2021
$
1,183
312
571
1,868
—
3,934
*
2023 - this amount represents assurance service relating to SOX controls work for purposes of the ICFR audit of Form 20-F; 2021 – $468 represents prepaid expenses related to an
expected initial public offering of a subsidiary.
** Audit fees of $—, $720 and $500 in respect of financial statements of Gelesis for the years ended December 31, 2023, 2022, and 2021 respectively, are not included within the
Consolidated Financial Statements. Fees related to the audit of the financial statements of Gelesis have been disclosed in respect of 2023, 2022, and 2021 as these fees went
towards supporting the audit opinion on the Group accounts.
Financial statements PureTech Health plc Annual report and accounts 2023 155
Notes to the Consolidated Financial Statements continued
9. Share-based Payments
Share-based payments includes stock options, time-based 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's share-based payment expense for the years ended December 31, 2023, 2022 and 2021, was $4,415, $14,699, and
$13,950 respectively. 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
2023
$
3,185
1,230
4,415
2022
$
8,862
5,837
14,699
2021
$
9,310
4,640
13,950
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan (the “2015 PSP”). Under the 2015 PSP and subsequent
amendments, awards of ordinary shares may be made to the Directors, senior managers and employees, and other individuals
providing services to the Group 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 one and four years, provided the recipient remains
continuously engaged as a service provider. The options awards expire 10 years from the grant date.
In June 2023 the Group adopted a new Performance Stock Plan (the "2023 PSP") that has the same terms as the 2015 PSP but
instituted for all new awards a limit of 10.0 percent of the total ordinary shares outstanding over a five-year period.
The share-based awards granted under the PSPs are generally equity-settled (see cash settlements below). As of December 31,
2023, the Group had issued 27,384,777 units of share-based awards under these plans.
RSUs
RSU activity for the years ended December 31, 2023, 2022 and 2021 is detailed as follows:
Outstanding (Non-vested) at 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 and January 1, 2023
RSUs Granted in Period
Vested
Forfeited
Outstanding (Non-vested) at December 31, 2023
*
For liability awards - based on fair value at reporting date.
Number of
Shares/Units
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
3,679,669
(716,029)
(1,880,274)
7,174,146
Weighted
Average Grant
Date Fair Value
(GBP) (*)
2.46
2.15
2.93
2.25
1.91
1.76
2.80
2.67
1.74
1.28
2.00
1.94
1.10
Each RSU entitles the holder to one ordinary share on vesting and the RSU awards are generally based on a vesting schedule over
a one to three-year requisite service period in which the Group 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.
RSUs granted to the non-executive directors are time-based and equity-settled. The grant date fair value on such RSUs is
recognized over the vesting term.
RSUs granted to executives are performance-based and vesting of such RSUs is subject to the satisfaction of both performance
and market conditions. The performance condition is based on the achievement of the Group's strategic targets. The market
conditions are based on the achievement of the absolute total shareholder return (“TSR”), TSR as compared to the FTSE 250
Index, and TSR as compared to the MSCI Europe Health Care Index. The RSU award performance criteria have changed over time
as the criteria are continually evaluated by the Group’s Remuneration Committee.
The Group recognizes the estimated fair value of performance-based awards with non-market conditions 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 Group 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.
Financial statements 156 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
9. Share-based Payments continued
The fair value of the performance-based awards with market conditions 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.
Liability settled RSUs classification
The RSUs to executives are treated as liability awards as the Group has a historical practice of settling these awards in cash, and as
such adjusted to fair value at every reporting date until settlement with changes in fair value recorded in earnings as stock based
compensation expense.
The Group incurred share-based payment expenses for RSUs of $827 (including $402 expense in respect of RSU liability awards),
$1,637 (including $1,131 expense in respect of RSU liability awards), and $1,540 (including $589 expense in respect of RSU liability
awards) for the years ended December 31, 2023, 2022 and 2021, respectively. The decrease in the share-based compensation
expense in respect of the RSUs for the year ended December 31, 2023, as compared to the year ended December 31, 2022 is due
to reduction in the fair value of the liability awards.
As of December 31, 2023, the carrying amount of the RSU liability awards was $4,782, $1,281 current; $3,501 non current, out of
which $1,283 related to awards that have met all their performance and market conditions.
Stock Options
Stock option activity for the years ended December 31, 2023, 2022 and 2021, is detailed as follows:
Outstanding at 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 and January 1, 2023
Outstanding at December 31, 2022 and January 1, 2023
Granted
Exercised
Forfeited and expired
Options Exercisable at December 31, 2023
Outstanding at December 31, 2023
Number of
Options
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
3,120,975
(534,034)
(3,424,232)
9,065,830
16,956,590
Wtd Average
Exercise Price
(GBP)
1.81
3.34
0.70
2.53
1.42
2.58
2.04
0.50
2.89
2.03
2.31
2.22
1.71
2.40
2.19
2.29
Wtd Average of
remaining
contractual
term (in years)
8.38
Wtd Average
Stock Price at
Exercise (GBP)
3.63
2.43
2.46
6.50
8.29
6.21
8.03
6.01
7.20
The fair value of the stock options awarded by the Group 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
Exercise price (GBP)
Underlying stock price (GBP)
2023
43.69%
6.16
4.04%
—
2.22
2.22
2022
41.70%
6.11
2.13%
—
2.04
2.04
2021
41.05%
6.16
1.06%
—
3.34
3.34
These assumptions resulted in an estimated weighted-average grant-date fair value per share of stock options granted during the
years ended December 31, 2023, 2022 and 2021 of $1.37, $1.15 and $1.87, respectively.
The Group incurred share-based payment expense for the stock options of $3,310, $8,351 and $6,158 for the years
ended December 31, 2023, 2022 and 2021, respectively.
Financial statements PureTech Health plc Annual report and accounts 2023 157
Notes to the Consolidated Financial Statements continued
9. Share-based Payments continued
For shares outstanding as of December 31, 2023, 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
4,989,572
6,664,028
4,863,500
16,956,590
Wtd
Average
Exercise
Price (GBP)
—
1.54
2.25
3.33
2.29
Wtd Average of
remaining
contractual
term (in years)
5.76
5.64
8.55
7.10
7.20
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:
Entrega
Follica
Vedanta
Entrega
Follica
Sonde
Vedanta
Alivio
Entrega
Follica
Sonde
Vedanta
Outstanding as
of January 1,
2023
344,500
2,776,120
1,824,576
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
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, 2023
—
—
—
—
—
— (2,170,547)
(1,313)
—
—
(605,573)
(29,607)
—
—
(1,793,656)
344,500
—
—
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
The weighted-average exercise prices and remaining contractual life for the options outstanding as of December 31, 2023, were
as follows:
Outstanding at December 31, 2023
Entrega
Weighted-
average
exercise price
$
Weighted-
average
contractual life
outstanding
1.91
3.92
Number of
options
344,500
There were no grants in 2023 under any of the subsidiary option plans. The weighted average exercise prices for the options
granted for the years ended December 31, 2022 and 2021, were as follows:
For the years ended December 31,
Entrega
Follica
Vedanta
2022
$
0.02
1.86
14.94
2021
$
—
1.86
19.69
Financial statements 158 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
9. Share-based Payments continued
The weighted average exercise prices for options forfeited during the year ended December 31, 2023, were as follows:
Forfeited during the year ended December 31, 2023
Follica
Vedanta
The weighted average exercise prices for options exercisable as of December 31, 2023, were as follows:
Weighted-
average
exercise price
$
1.86
17.06
Number of
options
605,573
29,607
Exercisable at December 31, 2023
Entrega
Weighted-
average
exercise price
$
1.99
Exercise Price
Range
$
0.02-2.36
Number of
Options
329,500
There were no subsidiary options exercised during the year ended December 31, 2023.
For the years ended December 31, 2023, 2022 and 2021, the subsidiaries incurred share-based payment expense of $277, $4,711
and $6,252, respectively.
10. Finance Income/(Costs), 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
Total finance costs – non cash interest expense related to sale of future royalties
Finance income/(costs), net
2023
$
16,012
16,012
(1,422)
(363)
(1,544)
(94)
(3,424)
33
2,617
—
2,650
(10,159)
5,078
2022
$
5,799
5,799
(212)
(1,759)
(1,982)
14
(3,939)
6,740
130,825
(502)
137,063
—
138,924
2021
$
214
214
(1,031)
(1,502)
(2,181)
(56)
(4,771)
1,419
8,362
(175)
9,606
—
5,050
Financial statements PureTech Health plc Annual report and accounts 2023 159
Notes to the Consolidated Financial Statements continued
11. Earnings/(Loss) per Share
Basic earnings/(loss) per share is calculated by dividing the Group's net income or loss for the year attributable to ordinary
shareholders by the weighted average number of ordinary shares outstanding, net of treasury shares.
Diluted EPS is calculated by dividing the Group's net income or loss for the year by the weighted average number of ordinary
shares outstanding, net of treasury shares, plus the weighted average number of ordinary shares that would be issued at
conversion of all the dilutive potential ordinary shares into ordinary shares. Dilutive effects arise from equity-settled shares from the
Group's share-based plans.
For the years ended December 31, 2023, 2022 and 2021, the Group incurred a net loss and therefore all outstanding potential
securities were considered anti-dilutive. The amount of potential securities that were excluded from the diluted calculation
amounted to 1,509,900, 3,134,131 and 6,553,905 shares, respectively.
Earnings/(Loss) Attributable to Owners of the Group:
Income/(loss) for the year, attributable
to the owners of the Group
(65,697)
(65,697)
(50,354)
(50,354)
(60,558)
(60,558)
2023
2022
2021
Basic $
Diluted $
Basic $
Diluted $
Basic $
Diluted $
Weighted-Average Number of Ordinary Shares:
Issued ordinary shares at January 1,
Effect of shares issued & treasury
shares purchased
Weighted average number of ordinary
shares at December 31,
Earnings/(Loss) per Share:
2023
2022
2021
Basic
Diluted
Basic
Diluted
Basic
Diluted
278,566,306 278,566,306
287,796,585
287,796,585
285,885,025 285,885,025
(2,263,773)
(2,263,773)
(3,037,150)
(3,037,150)
705,958
705,958
276,302,533 276,302,533
284,759,435
284,759,435
286,590,983
286,590,983
Basic and diluted earnings/(loss) per
share
(0.24)
(0.24)
(0.18)
(0.18)
(0.21)
(0.21)
2023
2022
2021
Basic $
Diluted $
Basic $
Diluted $
Basic $
Diluted $
Financial statements 160 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
12. Property and Equipment
Cost
Balance as of January 1, 2022
Additions, net of transfers
Disposals
Deconsolidation of subsidiaries
Reclassifications
Balance as of December 31, 2022
Additions, net of transfers
Disposals/Impairment
Deconsolidation of subsidiaries
Reclassifications
Balance as of December 31, 2023
Accumulated depreciation and impairment loss
Balance as of January 1, 2022
Depreciation
Disposals
Deconsolidation of subsidiaries
Balance as of December 31, 2022
Depreciation
Disposals
Deconsolidation of subsidiaries
Balance as of December 31, 2023
Laboratory and
Manufacturing
Equipment
$
Furniture and
Fixtures
$
Computer
Equipment and
Software
$
Leasehold
Improvements
$
Construction in
process
$
11,733
390
(118)
—
1,336
13,341
—
(2,886)
(5,092)
—
5,363
1,452
—
—
—
58
1,510
—
—
(438)
—
1,072
1,329
11
—
(58)
137
1,419
—
(137)
(365)
—
917
18,485
412
—
—
5,067
23,964
—
—
(8,799)
—
15,165
8,116
1,362
(77)
—
(6,598)
2,803
87
—
(2,871)
(18)
1
Laboratory and
Manufacturing
Equipment
$
Furniture and
Fixtures
$
Computer
Equipment and
Software
$
Leasehold
Improvements
$
Construction in
process
$
(5,686)
(2,082)
57
—
(7,711)
(892)
543
3,917
(4,142)
(663)
(212)
—
—
(875)
(162)
—
339
(698)
(1,190)
(107)
—
53
(1,244)
(45)
38
357
(894)
(6,806)
(3,444)
—
—
(10,250)
(1,856)
—
4,858
(7,248)
—
—
—
—
—
—
—
—
—
Property and Equipment, net
Balance as of December 31, 2022
Balance as of December 31, 2023
Laboratory and
Manufacturing
Equipment
$
Furniture and
Fixtures
$
Computer
Equipment and
Software
$
Leasehold
Improvements
$
Construction in
process
$
5,630
1,221
635
375
174
23
13,714
7,917
2,803
1
Total
$
41,115
2,176
(195)
(58)
—
43,037
87
(3,023)
(17,565)
(18)
22,518
Total
$
(14,344)
(5,845)
57
53
(20,080)
(2,955)
581
9,472
(12,982)
Total
$
22,957
9,536
Depreciation of property and equipment is included in the general and administrative expenses and research and development
expenses in the Consolidated Statement of Comprehensive Income/(Loss). The Group recorded depreciation expense of $2,955,
$5,845 and $4,347 for the years ended December 31, 2023, 2022 and 2021, respectively.
Financial statements PureTech Health plc Annual report and accounts 2023 161
Notes to the Consolidated Financial Statements continued
13. 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, 2022
Additions
Impairment
Deconsolidation of subsidiary
Balance as of December 31, 2022
Additions
Impairment
Deconsolidation of subsidiaries
Balance as of December 31, 2023
Accumulated amortization
Balance as of January 1, 2022
Amortization
Deconsolidation of subsidiary
Balance as of December 31, 2022
Amortization
Deconsolidation of subsidiary
Balance as of December 31, 2023
Intangible assets, net
Balance as of December 31, 2022
Balance as of December 31, 2023
Licenses
$
990
25
(163)
(21)
831
200
(105)
(19)
906
Licenses
$
(3)
(1)
4
—
—
—
—
Licenses
$
831
906
Substantially all the intangible asset licenses represent in-process-research-and-development assets since they are still being
developed and not ready for their intended use. As such, these assets are not amortized but tested for impairment annually.
During the year ended December 31, 2023, the Group wrote off two of its research intangible assets for which research was ceased
in the amount of $105.
During the year ended December 31, 2023, Vedanta, Inc. was deconsolidated and as such, $19 net in intangible assets were
derecognized.
During the year ended December 31,2022, the Group wrote off one of its research intangible assets for which research was
ceased in the amount of $163.
During the year ended December 31, 2022, Sonde Health, Inc. was deconsolidated and as such, $18 net intangible assets were
derecognized.
The Group tested all intangible assets for impairment as of the balance sheet date and concluded that none of such assets were
impaired.
The Group had negligible amortization expense for the years ended December 31, 2022 and 2021 and no amortization expense
for the year ended December 31, 2023.
Financial statements 162 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
14. Other Financial Assets
Other financial assets consist primarily of restricted cash reserved as collateral against a letter of credit with a bank that is issued
for the benefit of a landlord in lieu of a security deposit for office space leased by the Group. The restricted cash was $1,628 and
$2,124 as of December 31, 2023 and 2022, respectively.
15. Equity
Total equity for the Group as of December 31, 2023, and 2022, was as follows:
Equity
Share capital, £0.01 par value, issued and paid 271,853,731 and 278,566,306 as of December 31,
2023 and 2022, respectively
Share premium
Treasury shares, 17,614,428 and 10,595,347 as of December 31, 2023 and 2022, respectively
Merger Reserve
Translation reserve
Other reserves
Retained earnings/(accumulated deficit)
Equity attributable to owners of the Group
Non-controlling interests
Total equity
December 31,
2023
$
December 31,
2022
$
5,461
290,262
(44,626)
138,506
182
(9,538)
83,820
464,066
(5,835)
458,232
5,455
289,624
(26,492)
138,506
89
(14,478)
149,516
542,220
5,369
547,589
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
and is entitled to receive dividends when and if declared by the Group’s Directors.
On June 18, 2015, the Group 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 Statement of Comprehensive Income/(Loss), settlements of vested stock 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 Group announced the commencement of a $50,000 share repurchase program (the "Program") of its ordinary
shares of one pence each (the “Ordinary Shares”). The Group executed the Program in two equal tranches. The Group entered
into an irrevocable non-discretionary instruction with Jefferies International Limited (“Jefferies”) in relation to the purchase by
Jefferies of the Ordinary Shares for an aggregate consideration (excluding expenses) of no greater than $25,000 for each tranche,
and the simultaneous on-sale of such Ordinary Shares by Jefferies to the Group, subject to certain volume and price restrictions.
Jefferies made its trading decisions in relation to the Ordinary Shares independently of, and uninfluenced by, the Group. Purchases
could continue during any close period to which the Group was subject. The instruction to Jeffries could be amended or withdrawn
so long as the Group was not in a close period or otherwise in possession of inside information.
Any purchases of the 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 in accordance with pre-set parameters and subject to limits prescribed by
the Group’s general authority to repurchase the 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 and
re-issued for settlement of share-based awards. As of December 31, 2023, the Group had repurchased an aggregate of 18,278,873
Ordinary Shares under the share repurchase program with 7,683,526 shares repurchased in 2023. The Program was completed
during the month ended February 2024.
As of December 31, 2023, the Group’s issued share capital was 289,468,159 shares, including 17,614,428 shares repurchased
under the Program and were held by the Group in treasury. The Group does not have a limited amount of authorized share capital.
Financial statements PureTech Health plc Annual report and accounts 2023 163
Notes to the Consolidated Financial Statements continued
16. 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
Group, that is not considered to be within the control of the Group. 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 holders and are mandatorily convertible into ordinary shares under certain
circumstances. Under certain scenarios, the number of ordinary shares receivable on conversion will change and therefore, the
number of shares that will be issued is not fixed. As such the conversion feature is considered to be an embedded derivative that
normally would require bifurcation. However, since the preferred share liabilities are measured at fair value through profit and loss,
as mentioned above, no bifurcation is required.
The preferred shares are entitled to vote with holders of common shares on an as converted basis.
The fair value of all subsidiary preferred shares as of December 31, 2023 and December 31, 2022, is as follows:
As of December 31,
Entrega
Follica
Vedanta Biosciences
Total subsidiary preferred share balance
2023
$
169
—
—
169
2022
$
169
350
26,820
27,339
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, 2023 and December 31, 2022, the minimum liquidation preference reflecting the amounts that would be
payable to the subsidiary preferred holders upon a liquidation event of the subsidiaries, is as follows:
As of December 31,
Entrega
Follica
Vedanta Biosciences
Total minimum liquidation preference
2023
$
2,216
6,405
—
8,621
2022
$
2,216
6,405
149,568
158,189
For the years ended December 31, 2023 and 2022, the Group recognized the following changes in the value of subsidiary
preferred shares:
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
Decrease in value of preferred shares measured at fair value – finance costs (income)
Deconsolidation of subsidiary – (Vedanta)
Balance as of December 31, 2023
$
174,017
(130,825)
(15,853)
27,339
(2,617)
(24,554)
169
Financial statements 164 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
17. Sale of Future Royalties Liability
On March 4, 2011, the Group entered into a license agreement with Karuna Therapeutics, Inc. (“Karuna”) according to which
the Group granted Karuna an exclusive license to research, develop and sell KarXT in exchange for a royalty on annual net sales,
development and regulatory milestones and a fixed portion of sublicensing income, if any (hereinafter “License Agreement”).
On March 22, 2023, the Group signed an agreement with Royalty Pharma (hereinafter "Royalty Purchase Agreement"), according
to which the Group sold Royalty Pharma a partial right to receive royalty payments made by Karuna in respect of net sales of
KarXT, if and when received. According to the Royalty Purchase Agreement, all royalties due to the Group under the License
Agreement will be paid to Royalty Pharma up until an annual threshold of $60,000, while all royalties above such annual threshold
in a given year will be split 33% to Royalty Pharma and 67% to the Group. Under the terms of the Royalty Purchase Agreement,
the Group received a non-refundable initial payment of $100,000 at the execution of the Royalty Purchase Agreement and is
eligible to receive additional payments in the aggregate of up to an additional $400,000 based on the achievement of certain
regulatory and commercial milestones.
The Group continues to hold the rights under the License Agreement and has a contractual obligation to deliver cash to Royalty
Pharma for a portion of the royalties it receives. Therefore, the Group will continue to account for any royalties and regulatory
milestones due to the Group under the License Agreement as revenue in its Consolidated Statement of Comprehensive Income/
(Loss) and record the proceeds from the Royalty Purchase Agreement as a financial liability on its Consolidated Statement of
Financial Position. In determining the appropriate accounting treatment for the Royalty Purchase Agreement, management applied
significant judgement.
The acquisition of Karuna by Bristol Meyers Squibb (NYSE: BMY), which closed on March 18, 2024, had no impact on the Group's
rights or obligations under the License Agreement or Royalty Purchase Agreement, each of which remains in full force and effect.
In order to determine the amortized cost of the sale of future royalties liability, management is required to estimate the total
amount of future receipts from and payments to Royalty Pharma under the Royalty Purchase Agreement over the life of the
agreement. The $100,000 liability, recorded at execution of the Royalty Purchase Agreement, will be accreted to the total of these
receipts and payments as interest expense over the life of the Royalty Purchase Agreement. These estimates contain assumptions
that impact both the amortized cost of the liability and the interest expense that will be recognized in future periods.
Additional proceeds received from Royalty Pharma will increase the Group’s financial liability. As royalty payments are made
to Royalty Pharma, the balance of the liability will be effectively repaid over the life of the Royalty Purchase Agreement. The
estimated timing and amount of royalty payments to and proceeds from Royalty Pharma are likely to change over the life of the
Royalty Purchase Agreement. A significant increase or decrease in estimated royalty payments, or a significant shift in the timing
of cash flows, will materially impact the sale of future royalties liability, interest expense and the time period for repayment. The
Group will periodically assess the expected payments to, or proceeds from, Royalty Pharma, and any such changes in amount or
timing of cash flows will require the Group to re-calculate the amortized cost of the sale of future royalties liability as the present
value of the estimated future cash flows from the Royalty Purchase Agreement that are discounted at the liability’s original effective
interest rate. The adjustment is recognized immediately in profit or loss as income or expense.
The following shows the activity in respect of the sale of future royalties liability:
Sale of future royalties liability
Balance as of January 1, 2023
Amounts received at closing
Non cash interest expense recognized
Balance as of December 31, 2023
$
—
100,000
10,159
110,159
Financial statements PureTech Health plc Annual report and accounts 2023 165
Notes to the Consolidated Financial Statements continued
18. Financial Instruments
The Group’s financial instruments consist of financial assets in the form of notes, convertible notes and investment in shares, and
financial liabilities, including preferred shares. Many of these financial instruments are presented at fair value, with changes in fair
value 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 can be determined
using a market backsolve approach through a recent arm’s length financing round (or a future probable arm's length transaction),
market/asset probability-weighted expected return method ("PWERM") approach, discounted cash flow approach, or hybrid
approaches. The approaches, in order of strongest fair value evidence, are detailed as follows:
Valuation Method
Description
Market – Backsolve
Market/Asset – PWERM
Income Based – DCF
The market backsolve approach benchmarks the original issue price (OIP) of the company’s latest
funding transaction as current value.
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. 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.
At each measurement date, investments held at fair value (that are not publicly traded) as well as the fair value of preferred share
liabilities, including embedded conversion rights that are not bifurcated, were determined using the following allocation methods:
option pricing model (“OPM”), 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 is a combination of the PWERM and OPM. Under the hybrid method, multiple
liquidity scenarios are weighted based on the probability of the scenario's 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 Group. Fair value measurements, including those categorized
within Level 3, are prepared and reviewed for reasonableness and compliance with the fair value measurements guidance under
IFRS accounting standards. The Group measures fair value 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 instruments' valuation.
Whilst the Group considers the methodologies and assumptions adopted in fair value measurements as supportable and
reasonable, 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.
Financial statements 166 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
18. 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 notes liabilities measured
at fair value, which were categorized as Level 3 in the fair value hierarchy:
Balance at 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
Deconsolidation – Sonde
Change in fair value
Balance at December 31, 2022 and January 1, 2023
Change in fair value
Deconsolidation – Vedanta
Balance at December 31, 2023
Subsidiary
Preferred Shares
$
Subsidiary
Convertible
Notes
$
118,972
37,610
25,797
—
(8,362)
174,017
—
—
(15,853)
(130,825)
27,339
(2,617)
(24,554)
169
25,000
2,215
(25,797)
867
175
2,461
393
48
(3,403)
502
—
—
—
—
The change in fair value of preferred shares and convertible notes liabilities are recorded in finance income/(costs) – fair value
accounting in the Consolidated Statement of Comprehensive Income/(Loss).
Investments 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, 2023, was calculated utilizing the quoted common share price
which is categorized as Level 1 in the fair value hierarchy.
Vedanta and Sonde
As of December 31, 2023, the Group accounts for the following investments under IFRS 9 as investments held at fair value with
changes in fair value through the profit and loss: Sonde preferred A-2 and B shares and Vedanta convertible preferred shares
(subsequent to the date of deconsolidation). The valuation of the aforementioned investments is 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, 2023,
the Group recorded such investments at fair value and recognized a loss of $7,298 for the change in fair value of the investments.
In addition, the Group determined that the fair value of its investment in the Gelesis 2023 Warrants was $0 as Gelesis ceased
operations in October 2023.
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, 2021
Cash purchase of Vor preferred shares
Reclassification of Vor from level 3 to level 1
Gain/(loss) on change in fair value
Balance at December 31, 2021
Deconsolidation of Sonde
Gelesis Earn-out Shares received in the SPAC exchange
Exchange of Gelesis preferred shares to Gelesis common shares
Reclassification of Akili to level 1 investment
Gain/(loss) on change in fair value
Balance at December 31, 2022
Deconsolidation of Vedanta - new investment in Vedanta preferred shares
Investment in Gelesis 2023 Warrants
Gain/(loss) on changes in fair value
Balance as of December 31, 2023
$
206,892
500
(33,365)
65,505
239,533
11,168
14,214
(92,303)
(128,764)
(31,253)
12,593
20,456
1,121
(9,299)
24,872
Financial statements PureTech Health plc Annual report and accounts 2023 167
Notes to the Consolidated Financial Statements continued
18. Financial Instruments continued
The change in fair value of investments held at fair value is recorded in gain/(loss) on investments held at fair value in the
Consolidated Statement of Comprehensive Income/(Loss).
At December 31, 2023, the Group’s material investments held at fair value categorized as Level 3 in the fair value hierarchy include
the preferred shares of Sonde and Vedanta, with fair value of $10,408 and $14,153, respectively. The significant unobservable
inputs used at December 31, 2023 in the fair value measurement of these investments and the sensitivity of the fair value
measurements for these investments to changes to these significant unobservable inputs are summarized in the table below.
As of December 31, 2023
Unobservable Inputs
Equity Value
Time to Liquidity
Volatility
As of December 31, 2023
Unobservable Inputs
Equity Value
Time to Liquidity
Volatility
Investment (Sonde) Measured through
Market Backsolve & OPM
Input Value
Sensitivity Range
Investment Fair Value
Increase/(Decrease)
$
53,242
2.00
60%
Input Value
127,883
1.23
120%
-5%
+5%
-6 Months
+ 6 Months
-10%
+10%
(464)
463
39
(42)
19
(35)
Investment (Vedanta) Measured through Market
Backsolve that Leverages a Monte Carlo Simulation
Sensitivity Range
-5%
+5%
- 6 Months
+ 6 Months
-10%
+10%
Investment Fair Value
Increase/(Decrease)
$
(1,416)
1,069
(3,907)
1,261
(954)
474
Investments in Notes from Associates
As of December 31, 2022, the investment in notes from associates was $16,501 and represents investments the Group made in
convertible promissory notes of Gelesis. During the year ended December 31, 2023, the Group invested $10,729 in convertible
promissory notes of Gelesis and $5,000 in a convertible note of Vedanta. The Group recorded a loss of $27,630 for the change in
fair value of the notes from associates in the gain/(loss) on investments in notes from associates within the Consolidated Statement
of Comprehensive Income/Loss. The loss was driven by a reduction in the fair value of the Gelesis convertible promissory notes of
$27,230 as Gelesis filed for bankruptcy in October 2023 and a change in the fair value of the Vedanata convertible note of $400.
The convertible debt issued by Vedanta was valued using a market backsolve approach that leverages a Monte Carlo simulation.
The significant unobservable inputs categorized as Level 3 in the fair value hierarchy used at December 31, 2023, in the fair value
measurement of the convertible debt are the same as the inputs disclosed above for Vedanta preferred shares.
Financial statements 168 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
18. Financial Instruments continued
Fair Value Measurement and Classification
The fair value of financial instruments by category as of December 31, 2023 and 2022:
Carrying Amount
Fair Value
Financial Assets
$
Financial
Liabilities
$
Level 1
$
Level 2
$
2023
Financial assets3:
Money Markets1,2
Investment in notes from associates
Investments held at fair value
Total financial assets
Financial liabilities:
Subsidiary preferred shares
Share-based liability awards
Total financial liabilities
156,705
4,600
317,841
479,146
—
—
—
—
—
—
—
169
4,782
4,951
156,705
—
292,970
449,675
—
—
—
—
—
—
—
—
—
—
Level 3
$
—
4,600
24,872
29,472
169
4,782
4,951
Total
$
156,705
4,600
317,841
479,146
169
4,782
4,951
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 Excluded from the table above are short-term investments of $136,062 that are classified at amortized cost as of December 31, 2023. The cost of these short-term investments
approximates current fair value.
The Group has a number of financial instruments that are not measured at fair value in the Consolidated Statement of Financial
Position. For these instruments the fair values are not materially different from their carrying amounts.
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
Carrying Amount
Fair Value
2022
Financial Assets
$
Financial
Liabilities
$
95,249
200,229
16,501
251,892
11,867
575,738
—
—
—
—
—
—
—
—
—
—
—
47
27,339
2,345
5,932
35,664
Level 1
$
95,249
200,229
—
239,299
—
534,777
—
—
—
4,396
4,396
Level 2
$
—
—
—
—
11,867
11,867
—
—
2,097
—
2,097
Level 3
$
—
—
16,501
12,593
—
29,094
47
27,339
248
1,537
29,171
Total
$
95,249
200,229
16,501
251,892
11,867
575,738
47
27,339
2,345
5,932
35,664
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.
Financial statements PureTech Health plc Annual report and accounts 2023 169
Notes to the Consolidated Financial Statements continued
19. Subsidiary Notes Payable
The subsidiary notes payable are comprised of loans and convertible notes. As of December 31, 2023 and December 31, 2022,
the loan in Follica and the convertible notes 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
2023
$
3,439
260
3,699
2022
$
2,097
248
2,345
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 5.0 percent in the interest only period and
12.0 percent in the repayment period.
Convertible Notes
Convertible Notes outstanding were as follows:
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 and January 1, 2023
Accrued interest on convertible notes – finance costs
December 31, 2023
Knode
$
94
—
5
—
—
99
5
104
Appeering
$
141
—
8
—
—
149
8
156
Sonde
$
2,461
393
48
502
(3,403)
—
—
—
Total
$
2,696
393
60
502
(3,403)
248
13
260
On April 6, 2021, and on November 24, 2021, Sonde issued unsecured convertible promissory notes to its existing shareholders
for a combined total of $4,329, of which $2,215 were issued to third-party shareholders (and $2,113 were issued to the Group
and eliminated in consolidation). In addition, in March 2022, Sonde issued an additional amount of $921, of which $393 were
issued to third parties (and $528 issued to the Group 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.
Investments Held at Fair Value.
For 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 Sonde notes were deconsolidated in May 2022 as
described above.
Financial statements 170 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
20. Non-Controlling Interest
As of December 31, 2023, non-controlling interests include Entrega and Follica. Ownership interests of the non-controlling
interests in these entities as of December 31, 2023 were 11.7 percent, and 19.9 percent, respectively. As of December 31, 2022,
non-controlling interests include Entrega, Follica, and Vedanta. Ownership interests of the non-controlling interests in these entities
were 11.7 percent , 19.9 percent, and 12.2 percent, respectively. As of December 31, 2021, non-controlling interests include
Entrega, Follica, Sonde, and Vedanta. Ownership interests of the non-controlling interests in these entities were 11.7 percent,
19.9 percent, 6.2 percent and 3.7 percent, respectively. During the year ended December 31, 2023, Vedanta Biosciences, Inc was
deconsolidated. During the year ended December 31, 2022, Sonde Health, Inc was deconsolidated. See Note 5. Investments Held
at Fair Value.
Non-controlling interests include the amounts recorded for subsidiary stock options.
On June 11, 2021, the Group 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 $1,224, to be paid in three equal installments, with the first installment of $408 paid at the effective date of
the transaction and two additional installments to be paid upon the occurrence of certain contingent events. The Group recorded
a contingent consideration liability of $560 at fair value for the two additional installments, resulting in a total acquisition cost
of $968. The excess of the consideration paid over the book value of the non-controlling interest of approximately $9,636 was
recorded directly as a charge to shareholders’ equity. The second installment of $408 was paid in July 2021, upon the occurrence
of the contingent event specified in the agreement. The contingent consideration liability was 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, option 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 and Vedanta shareholder's deficit of
$5,887. The amount together with the consideration paid by NCI ($101) amounted to $5,988 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 shareholder's
deficit of $15,171. The amount together with the consideration paid by NCI ($7) amounted to $15,171 and was recorded as a gain
directly in shareholders' equity.
21. 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 for share-based awards
Other
Total trade and other payables
2023
$
14,637
28,187
—
1,281
3
44,107
2022
$
26,504
24,518
57
1,805
1,957
54,840
Financial statements PureTech Health plc Annual report and accounts 2023 171
Notes to the Consolidated Financial Statements continued
22. Long-term loan
In September 2020, Vedanta entered into a $15,000 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 $1,050. 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 $15,400 as of December 31, 2022. On March 1, 2023, the Group derecognized the loan in connection with
Vedanta's deconsolidation. Refer to Note 5. Investments Held at Fair Value.
The following table summarizes long-term loan activity for the years ended December 31, 2023 and 2022:
Balance at January 1,
Accrued interest
Interest paid
Other
Deconsolidation of subsidiary
Balance at December 31,
Long-term loan
2023
$
15,400
363
(300)
(17)
(15,446)
—
The long-term loan is presented as follows in the Statement of Financial Position as of December 31, 2023 and 2022:
Current portion of long-term loan
Long-term loan
Total Long-term loan
23. Leases and subleases
Long-term loan
2023
$
—
—
—
2022
$
15,118
1,755
(1,436)
(38)
—
15,400
2022
$
5,156
10,244
15,400
The activity related to the Group’s right of use asset and lease liability for the years ended December 31, 2023 and 2022 is as
follows:
Balance at January 1,
Additions
Depreciation
Deconsolidated
Balance at December 31,
Balance at January 1,
Additions
Cash paid for rent – principal – financing cash flow
Cash paid for rent – interest
Interest expense
Deconsolidated
Balance at December 31,
Right of use asset, net
2023
$
14,281
—
(1,979)
(2,477)
9,825
2022
$
17,166
163
(3,047)
—
14,281
Total lease liability
2023
$
29,128
—
(3,338)
(1,544)
1,544
(4,146)
21,644
2022
$
32,990
163
(4,025)
(1,982)
1,982
—
29,128
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 Statement of Comprehensive Income/(Loss). The Group
recorded depreciation expense of $1,979, $3,047 and $2,938 for the years ended December 31, 2023, 2022 and 2021,
respectively.
Financial statements 172 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
23. Leases and subleases continued
The following table details the short-term and long-term portion of the lease liability as of December 31, 2023 and 2022:
Short-term portion of lease liability
Long-term portion of lease liability
Total lease liability
Total lease liability
2023
$
3,394
18,250
21,644
2022
$
4,972
24,155
29,128
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
2023
$
4,689
4,644
4,419
4,551
4,687
2,796
25,785
4,141
21,644
During the year ended December 31, 2019, the Group entered into a lease agreement for certain premises consisting of 50,858
rentable square feet of space located at 6 Tide Street, Boston, Massachusetts. The lease commenced on April 26, 2019 for an
initial term consisting of ten years and three months, and there is an option to extend the lease for two consecutive periods of
five years each. The Group assessed at the lease commencement date whether it was reasonably certain to exercise the extension
options, and deemed such options were not reasonably certain to be exercised. The Group will reassess whether it is reasonably
certain to exercise the options only if there is a significant event or significant change in circumstances within its control.
On June 26, 2019, the Group executed a sublease agreement with Gelesis. The lease is for 9,446 rentable square feet located
on the sixth floor of the Group’s former office at 501 Boylston Street, Boston, Massachusetts. The sublease was set to expire on
August 31, 2025, and was determined to be a finance lease. Gelesis ceased operations and filed for bankruptcy on October 30,
2023. As a result, the Group wrote off its receivable in the lease of $1,266 in 2023.
On January 23, 2023, the Group executed a sublease agreement with Allonnia, LLC (“Allonnia”). The sublease is for approximately
11,000 rentable square feet located on the third floor of the 6 Tide Street building where the Group’s offices are currently located.
Allonnia obtained possession of the premises on February 17, 2023 with a rent commencement date of May 17, 2023. The lease
term is two years from the rent commencement date, and Allonnia has the option to extend the sublease for an additional year at
the same terms. The annual lease fee is $1,111 per year. The sublease was determined to be an operating lease, and as such, the
total lease payments under the sublease agreement are recognized over the lease term on a straight-line basis. In February 2024,
Allonnia exercised the option and extended the lease term through May 31, 2026.
Rental income recognized by the Group during the year ended December 31, 2023 was $781 which was included in the other
income/(expense) line item in the Consolidated Statement of Comprehensive Income/(Loss). In the year ended December 31,
2022, the Group did not recognize any rental income.
Financial statements PureTech Health plc Annual report and accounts 2023 173
Notes to the Consolidated Financial Statements continued
24. Capital and Financial Risk Management
Capital Risk Management
The Group's capital and financial risk management policy is to maintain a strong capital base 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, 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 no material externally imposed capital
requirements. The Group’s share capital is set out in Note 15. Equity.
Management continuously monitors the level of capital deployed and available for deployment in the Wholly-Owned Programs
segment and at Founded Entities. The Directors seek to maintain a balance between the higher returns that might be possible with
higher levels of deployed capital and the advantages and security afforded by a sound capital position.
The Group’s Directors have overall responsibility for the 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 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 minimal exposure to
other financial risks.
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 as of December 31, 2022. See Note 27. Taxation):
As of December 31
Cash and cash equivalents
Short-term investments
Trade and other receivables
Total
2023
$
191,081
136,062
2,376
329,518
2022
$
149,866
200,229
11,867
361,961
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, and reference to credit ratings (if available) or to historical
information about counterparty default rates. The Group does not have expected credit losses due to the high credit quality or
healthy financial conditions of these counterparties. As of December 31, 2023 and 2022, none of the trade and other receivables
were impaired.
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 liquidity risk 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, 2023 and 2022, based on contractual undiscounted payments:
As of December 31
Subsidiary notes payable
Trade and other payables
Subsidiary preferred shares (Note 16)1
Total
Carrying
Amount
$
3,699
44,107
169
47,975
2023
Within Three
Months
$
Three to Twelve
Months
$
One to Five
Years
$
3,699
44,107
169
47,975
—
—
—
—
—
—
—
—
Total
$ (*)
3,699
44,107
169
47,975
Financial statements 174 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
24. Capital and Financial Risk Management continued
As of December 31
Long-term loan
Subsidiary notes payable
Trade and other payables
Warrants2
Subsidiary preferred shares (Note 16)1
Total
Carrying
Amount
$
15,400
2,345
54,840
47
27,339
99,971
2022
Within Three
Months
$
Three to Twelve
Months
$
One to Five
Years
$
1,838
2,345
54,840
47
27,339
86,409
5,281
—
—
—
—
5,281
11,413
—
—
—
—
11,413
Total
$ (*)
18,531
2,345
54,840
47
27,339
103,103
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 23. Leases and subleases.
Interest Rate Sensitivity
As of December 31, 2023, the Group had cash and cash equivalents of $191,081, and short-term investments of $136,062. 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 16. Subsidiary Preferred Shares, 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 cash position
supports the business activities of the Controlled Founded Entities. Accordingly, the Group views exposure to the third party
preferred share liability as low.
Deconsolidated Founded Entity Investments
The Group maintains certain debt or equity holdings in Founded Entities that are deconsolidated. These holdings are deemed
either as investments and accounted for as investments held at fair value, or as associates and accounted for under the equity
method. The Group's exposure to investments held at fair value is $317,841 as of December 31, 2023, 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 initial investments. Accordingly, the Group does not view this as a high
risk. As of December 31, 2023, Sonde is the only associate, and the carrying amount of the investment as associate is $3,185.
Equity Price Risk
As of December 31, 2023, the Group held 886,885 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 $292,831, of which approximately 96% is
related to the Karuna common shares.
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 would cause a loss of approximately
$29,283 to be recognized as a component of other income (expense) in the Consolidated Statement of Comprehensive Income/
(Loss). However, the Group views exposure to equity price risk as low due to the definitive merger agreement Karuna entered into
with Bristol Myers Squibb "BMS") in December 2023 under which Karuna common shares were acquired by Bristol Myers Squibb
for $330 per share in March 2024.
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 exchange
rates 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.
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.
Financial statements PureTech Health plc Annual report and accounts 2023 175
Notes to the Consolidated Financial Statements continued
25. Commitments and Contingencies
The Group is a 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, 2023, certain 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, 2023 and 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
$7,371 and $8,666, respectively. 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.
The Group was a party to certain sponsored research arrangements and is a party to arrangements with contract manufacturing
and contract research organizations, whereby the counterparty provides the Group with research and/or manufacturing services.
As of December 31, 2023 and 2022, the noncancellable commitments in respect of such contracts amounted to approximately
$16,422 and $11,288, respectively.
In March 2024, a complaint was filed in Massachusetts District Court against the Group alleging breach of contract with respect to
certain payments alleged to be owed to a previous employee of a Group subsidiary based on purported terms of a contract between
such individual and the Group. The Group intends to defend itself vigorously though the ultimate outcome of this matter and the
timing for resolution remains uncertain. No determination has been made that a loss, if any, arising from this matter is probable or
that the amount of any such loss, or range of loss, is reasonably estimable.
The Group is involved from time-to-time in various legal proceedings arising in the normal course of business. Although the
outcomes of these legal proceedings are inherently difficult to predict, the Group does not expect the resolution of such legal
proceedings to have a material adverse effect on its financial position or results of operations. The Group did not book any
provisions and did not identify any contingent liabilities requiring disclosure for any legal proceedings other than already included
above for the years ended December 31, 2023 and 2022.
26. Related Parties Transactions
Related Party Subleases and Royalties
During 2019, the Group executed a sublease agreement with a related party, Gelesis. As of December 31, 2022, the sublease
receivable amounted to $1,285. During 2023, the sublease receivable was written down to $0 as Gelesis ceased operations and
filed for bankruptcy.
The Group recorded $23, $89 and $113 of interest income with respect to the sublease during the years ended December 31,
2023, 2022, and 2021, respectively, which is presented within finance income in the Consolidated Statement of Comprehensive
Income/(Loss).
The Group received royalties from Gelesis on its product sales. The Group recorded zero, $509, and $231 of royalty revenue
during the years ended December 31, 2023, 2022, 2021, respectively, which is presented in contract revenue in the Consolidated
Statement 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 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
Post-employment benefits
Termination Benefits
Share-based payment expense
Total
2023
$
9,714
41
417
599
10,772
2022
$
4,162
55
152
2,741
7,109
2021
$
4,612
54
—
4,045
8,711
Short-term employee benefits include salaries, health care and other non-cash benefits. Post-employment benefits include 401K
contributions from the Group. Termination benefits include severance pay. Share-based payments are generally subject to vesting
terms over future periods. See Note 9. Share-based Payments. As of 12/31/2023, the payable due to the key management
employees was $4,732.
In addition the Group paid remuneration to non-executive directors in the amounts of $475, $655 and $605 for the years
ended December 31, 2023, 2022 and 2021, respectively. Also, the Group incurred $373, $365, and $161 of stock based
compensation expense for such non-executive directors for the years ended December 31, 2023, 2022, and 2021, respectively.
During the years ended December 31, 2023 and 2022, the Group incurred $46, and $51, respectively, of expenses paid to
related parties.
Financial statements 176 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
26. Related Parties Transactions continued
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,
2023 and December 31, 2022, the outstanding related party notes payable totaled $104 and $99, 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.
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 of
December 31, 2023:
Directors:
Dr Robert Langer
Dr Raju Kucherlapati
Dr John LaMattina2
Senior Managers:
Dr Bharatt Chowrira
Business name (share class)
Number of
shares held as
of December
31, 2023
Number of
options held as
of December 31,
2023
Number of
RSUs held as of
December 31,
2023
Ownership
interest¹
Entrega (Common)
Enlight (Class B Common)
Akili (Common)
Vedanta Biosciences (Common)
250,000
—
56,554
25,000
82,500
30,000
—
15,000
Karuna (Common)
5,000
—
—
—
—
—
—
4.09%
3.00%
0.07%
0.24%
0.01%
1 Ownership interests as of December 31, 2023 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 Dr John LaMattina holds convertible notes issued by Appeering in the aggregate principal amount of $50,000.
Directors and senior managers hold 23,547,554 ordinary shares and 11.5 percent voting rights of the Group as of December 31,
2023. This amount excludes options to purchase 2,262,500 ordinary shares. This amount also excludes 7,301,547 shares, which
are issuable based on the terms of performance based RSU awards granted to certain senior managers covering the financial years
2023, 2022 and 2021, and 102,732 shares, which are issuable to directors immediately prior to the Group's 2024 Annual General
Meeting of Stockholders, based on the terms of the RSU awards granted to non-executive directors in 2023. 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.
Other
See Note 7. Investment in Notes from Associates for details on the notes issued by Gelesis and Vedanta to the Group.
As of December 31, 2023, the Group has a receivable from Sonde and Vedanta in the amount of $1,569.
See Note 6. Investments in Associates for details on the execution and termination of Merger Agreement with Gelesis.
27. Taxation
Tax on the profit or loss for the year comprises current and deferred income tax. Tax is recognized in the Consolidated Statement
of Comprehensive Income/(Loss) except to the extent that it relates to items recognized directly in equity.
For the years ended December 31, 2023, 2022 and 2021, the Group filed a consolidated U.S. federal income tax return which
included all subsidiaries in which the Group owned greater than 80 percent of the vote and value. For the years ended December
31, 2023, 2022 and 2021, the Group filed certain consolidated state income tax returns which included all subsidiaries in which the
Group owned greater than 50 percent of the vote and value. The remaining subsidiaries file separate U.S. tax returns.
Amounts recognized in Consolidated Statement of Comprehensive Income/(Loss):
For the year ended December 31
Income/(loss) for the year
Income tax expense/(benefit)
Income/(loss) before taxes
Recognized Income Tax Expense/(Benefit):
For the year ended December 31
Federal – current
State – current
Total current income tax expense/(benefit)
Federal – deferred
State – deferred
Total deferred income tax expense/(benefit)
Total income tax expense/(benefit), recognized
2023
$
(66,628)
30,525
(36,103)
2023
$
(2,246)
(46)
(2,292)
29,294
3,523
32,817
30,525
2022
$
(37,065)
(55,719)
(92,783)
2022
$
13,065
1,336
14,401
(48,240)
(21,880)
(70,120)
(55,719)
2021
$
(62,709)
3,756
(58,953)
2021
$
22,138
109
22,247
(15,416)
(3,075)
(18,491)
3,756
Financial statements PureTech Health plc Annual report and accounts 2023 177
Notes to the Consolidated Financial Statements continued
27. Taxation continued
The income tax expense/(benefit) was $30,525, $(55,719) and $3,756 in 2023, 2022 and 2021 respectively. The increase in
tax expense for the year ended December 31, 2023 was primarily attributable to a lower pre-tax loss in the tax consolidated
U.S. group, the tax in respect of the sale of future royalties to Royalty Pharma and the tax impact of derecognizing previously
recognized deferred tax assets that are no longer expected to be utilized.
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:
For the year ended December 31
US federal statutory rate
State taxes, net of federal effect
Tax credits
Stock-based compensation
Finance income/(costs) – fair value
accounting
Loss with respect to associate
for which no deferred tax asset is
recognized
Revaluation of deferred due to rate
change
Nondeductible compensation
Recognition of deferred tax assets and
tax benefits not previously recognized
Unrecognized deferred tax asset
Deconsolidation of subsidiary
Other
Worthless stock deduction
2023
$
(7,573)
(3,974)
(9,167)
589
%
21.00
11.01
25.39
(1.63)
2022
$
(19,486)
(8,043)
(6,876)
788
%
21.00
8.67
7.41
(0.85)
2021
$
(12,380)
(4,484)
(5,056)
555
%
21.00
7.61
8.58
(0.94)
(556)
1.54
(28,783)
31.02
(2,017)
3.42
249
—
872
(433)
83,984
(17,506)
1,321
(17,281)
30,525
(0.69)
0.00
(2.42)
1.20
(232.63)
48.49
(3.65)
47.87
(84.52)
1,413
(1.52)
11,542
(19.58)
(8,856)
300
(184)
17,287
(3,572)
293
—
(55,719)
9.54
(0.32)
0.20
(18.63)
3.85
(0.32)
—
60.05
—
746
(414)
14,375
—
889
—
3,756
—
(1.27)
0.70
(24.38)
—
(1.51)
—
(6.37)
The Group 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:
For the year ended December 31
Operating tax losses
Tax credits
Share-based payments
Capitalized research & development expenditures
Investment in Associates
Lease liability
Sale of future royalties
Other temporary differences
Deferred tax assets
Investments held at fair value
Right of use assets
Property and equipment, net
Investment in Associates
Deferred tax liabilities
Deferred tax assets (liabilities), net
Deferred tax liabilities, net, recognized
Deferred tax assets (liabilities), net, not recognized
2023
$
3,849
2,425
5,210
39,422
—
5,133
35,920
1,770
93,729
(53,411)
(2,330)
(1,637)
(755)
(58,133)
35,596
(52,462)
88,058
2022
$
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
The Group has recognized deferred tax assets due to future reversals of existing taxable temporary differences that will be
sufficient to recover the deferred tax assets. Our unrecognized deferred tax assets of $88,058 are primarily related to tax
credits, capitalized research & development expenditures and deferred tax asset related to the sale of future royalties to Royalty
Pharma. The Group does not believe it is probable that future taxable profit will be available to support the realizability of these
unrecognized deferred tax assets.
Financial statements 178 PureTech Health plc Annual report and accounts 2023
Notes to the Consolidated Financial Statements continued
27. Taxation continued
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.
For the year ended December 31
Deductible temporary difference
Tax losses
Tax credits
Total
2023
$
2022
$
Gross Amount
Tax Effected
Gross Amount
Tax Effected
353,323
13,681
468
367,472
83,741
3,849
468
88,058
132,145
219,466
11,101
362,712
33,544
48,317
11,101
92,962
Tax Losses and Tax Credits Carryforwards
Tax losses and tax credits for which no deferred tax asset was recognized are presented below:
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
2023
$
2022
$
Gross Amount
Tax Effected
Gross Amount
Tax Effected
4,741
6,635
2,305
13,681
43
425
—
468
1,284
1,455
1,110
3,849
43
425
—
468
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
The Group had U.S. federal net operating losses carry forwards (“NOLs”) of $13,681, $219,466 and $215,400 as of December
31, 2023, 2022 and 2021, respectively, which are available to offset future taxable income. These NOLs expire through 2037 with
the exception of $2,305 which is not subject to expiration. The Group had U.S. federal research and development tax credits of
approximately $1,396, $4,500 and $3,900 as of December 31, 2023, 2022 and 2021, respectively, which are available to offset
future taxes that expire at various dates through 2043. The Group also had Federal Orphan Drug credits of approximately $930
and $6,100 as of December 31, 2023, and 2022, which are available to offset future taxes that expire at various dates through
2043. A portion of these federal NOLs and credits can only be used to offset the profits from the Group’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 $111,446, $71,700 and $27,900 for the years
ended December 31, 2023, 2022 and 2021, 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 $98,
$600 and $1,300 for the years ended December 31, 2023, 2022 and 2021, respectively, which are available to offset future taxes
and expire at various dates through 2038. These NOLs and credits are subject to review and possible adjustment by state taxing
authority.
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 Group has performed a Section 382 analysis
through December 31, 2023. 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 Group’s net operating losses which are subject to a Section 382
limitation has been recognized in the financial statements.
Tax Balances
The tax related balances presented in the Statement of Financial Position are as follows:
For the year ended December 31
Income tax receivable – current
Trade and other payables
2023
$
11,746
—
2022
$
10,040
(57)
Uncertain Tax Positions
The Group has no uncertain tax positions as of December 31, 2023. U.S. corporations are routinely subject to audit by federal and
state tax authorities in the normal course of business.
Financial statements PureTech Health plc Annual report and accounts 2023 179
Notes to the Consolidated Financial Statements continued
28. Subsequent Events
The Group has evaluated subsequent events after December 31, 2023, up to the date of issuance, April 25, 2024, 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:
In January 2024, the Group launched two new Founded Entities (Seaport Therapeutics and Gallop Oncology) to advance certain
programs from the Wholly-Owned Programs segment. Seaport Therapeutics ("Seaport") will advance certain central nervous
system programs and relevant Glyph intellectual property. Gallop Oncology will advance LYT-200 and other galectin-9 intellectual
property. The financial results of these programs were included in the Wholly-Owned Programs segment in the footnotes to the
Consolidated Financial Statements, as of December 31, 2023 and 2022, and for the three years ended December 31, 2023, 2022
and 2021, respectively. Upon raising dilutive third-party financing, the financial results of these two entities will be included in the
Controlled Founded Entities segment to the extent that the Group maintains control over these entities.
On May 9, 2022, the Group announced the commencement of a $50,000 share repurchase program (the "Program") of its ordinary
shares of one pence each. In February 2024, the Group completed the Program and has repurchased an aggregate of 20,182,863
ordinary shares under the Program. These shares have been held as treasury shares and are being used to settle the vesting of
restricted stock units or exercise of options.
In March 2024, Karuna was acquired by Bristol Myers Squibb (“BMS”) in accordance with a definitive merger agreement signed in
December 2023. As a result of this transaction, the Group received total proceeds of $292,672 before income tax in exchange for
its holding of 886,885 shares of Karuna common stock.
In March 2024, the Group announced a proposed capital return of $100,000 to its shareholders by way of a tender offer (the
"Tender Offer"). The Tender Offer is expected to be launched in early May, subject to market conditions and shareholder approval.
If the full $100,000 is not returned, then the Group intends to return any remainder following the completion of the Tender Offer,
by way of a special dividend.
In April 2024, Seaport Therapeutics, the Group's latest Founded Entity, raised $100,000 in a Series A financing, out of which
$32,000 was invested by the Group. Following the Series A financing, the Group holds equity ownership in Seaport of 61.5 percent
on a diluted basis.
In April 2024, the Gelesis' Chapter 7 Trustee provided notice that a third party bid to purchase the assets subject to the bankruptcy
had been accepted as a stalking horse bid, subject to Bankruptcy Court approval. If such sale of the assets is ultimately approved
by the Bankruptcy Court and consummated, it is expected that PureTech could recover a portion of its investment in Gelesis senior
secured convertible promissory notes. The ultimate resolution of this matter, any potential recovery, and the associated timing
remain uncertain. The Group has not recorded any amount in its Consolidated Financial Statements related to amounts that may
be received as a result of the bankruptcy process.
Financial statements 180 PureTech Health plc Annual report and accounts 2023
Parent Company Statement of Financial Position
For the years ended December 31
Assets
Non-current assets
Investment in subsidiary
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 – (loss of $3,178 and income of $59,198 for 2023 and 2022,
respectively)
Total equity
Current liabilities
Trade and other payables
Intercompany payables
Total current liabilities
Total equity and liabilities
Note
2023
$000s
2022
$000s
2
3
3
3
3
3
4
456,864
456,864
—
20,425
20,425
477,289
5,461
290,262
(44,626)
138,506
21,596
41,997
453,196
2,033
22,061
24,093
477,289
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
Please refer to the accompanying notes to the PureTech Health plc financial information ("Notes"). Registered number: 09582467.
The PureTech Health plc financial statements were approved by the Board of Directors and authorized for issuance on April 25,
2024 and signed on its behalf by:
Bharatt Chowrira
Chief Executive Officer
April 25, 2024
The accompanying Notes are an integral part of these financial statements.
Financial statements PureTech Health plc Annual report and accounts 2023 181
Parent Company Statement 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 (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 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/payable
The accompanying notes are an integral part of these financial statements.
2023
$000s
2022
$000s
(3,178)
59,198
57
5,135
(442)
1,572
(57)
5,236
619
64,995
—
—
(19,650)
(19,650)
(18,078)
38,503
20,425
4,489
—
1,153
(26,492)
(26,492)
38,503
—
38,503
10,384
293,904
332
Financial statements 182 PureTech Health plc Annual report and accounts 2023
Parent Company Statement of Changes in Equity
For the years ended December 31
Share Capital
Treasury Shares
Shares
287,796,585
Amount
$000s
Share
Premium
$000s
5,444 289,303
—
577,022
—
788,046
—
—
—
11
—
—
—
—
—
321
—
—
Shares
—
—
—
—
—
—
—
—
—
— (10,595,347)
—
—
(26,492)
—
Amount
$000s
Merger
Reserve
$000s
— 138,506
Other
Reserve
$000s
7,730
Retained
earnings/
(Accumulated
deficit)
$000s
Total
equity
$000s
(14,022) 426,961
—
—
—
—
— 8,856
— 1,528
—
—
—
—
—
—
—
—
—
332
8,856
1,528
— (26,492)
59,198
59,198
289,161,653
5,455 289,624 (10,595,347) (26,492) 138,506 18,114
45,175 470,382
—
306,506
—
—
—
—
—
6
—
—
—
—
—
638
—
—
—
239,226
—
—
530
—
425,219
986
— (7,683,526)
—
—
(19,650)
—
—
—
—
(22)
— 3,348
—
—
—
156
—
—
—
—
—
—
—
1,153
3,348
1,142
— (19,650)
(3,178)
(3,178)
289,468,159
5,461 290,262 (17,614,428) (44,626) 138,506 21,596
41,997 453,196
Balance January 1, 2022
Total comprehensive
income (loss) for the year
Exercise of stock options
Equity-settled share-
based payments
Settlement of restricted
stock units
Purchase of treasury stock
Net Income (loss)
Balance December 31,
2022
Total comprehensive
income (loss) for the year
Exercise of stock options
Equity-settled share-
based payments
Settlement of restricted
stock units
Purchase of treasury stock
Net income (loss)
Balance December 31,
2023
The accompanying Notes are an integral part of these financial statements.
Financial statements PureTech Health plc Annual report and accounts 2023 183
Notes to the Financial Statements
(amounts in thousands, except share and per share data)
1. Accounting policies
Basis of Preparation and Measurement
The financial statements of PureTech Health plc (the “Parent”) are presented as of December 31, 2023 and 2022, and for the
years ended December 31, 2023 and 2022, 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.
Certain amounts in the Parent Company Financial Statements and accompanying notes may not add due to rounding. All
percentages have been calculated using unrounded amounts.
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 historical 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 fair value less cost to sell 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 its recoverable amount with a corresponding charge recognized in the profit and loss statement.
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.
Share-Based Payments
Share-based payment awards granted in subsidiaries to employees, Board of Directors 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. Restricted
stock units granted in subsidiaries to the executives are accounted for as share-based liability awards in accordance with IFRS
2 as they can be cash-settled at PureTech's discretion and have a history of being cash-settled. The grant date fair value of
equity-settled share-based payment awards and the settlement date fair value of the share-based liability awards are recognized
as an increase to the investment with a corresponding increase in equity. For equity-settled restricted stock units, the grant
date fair value is the grant date share price. For share-based liability awards, the fair value at each reporting date is measured
using the Monte Carlo simulation analysis considering share price volatility, risk-free rate, and other covariance of comparable
public companies and other market data to predict distribution of relative share performance. For stock options, 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 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
Increase due to equity-settled share-based payments granted to employees and service providers in subsidiaries
Balance at December 31, 2023
$000s
161,082
(12,996)
148,086
10,384
293,904
452,374
4,489
456,864
Financial statements 184 PureTech Health plc Annual report and accounts 2023
Notes to the Financial Statements continued
2.
Investment in subsidiary continued
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 the Group.
The Parent recognizes in its investment in its operating subsidiary PureTech LLC, share-based payments granted to employees,
executives, non-executive directors and service providers in its subsidiary. The decrease in 2021 and increases in investment in
subsidiary in 2022 and 2023, respectively, are due to such share-based payments results from the expenses related to the grant of
equity-settled share-based awards, as well as settlements and payments of these equity awards by the subsidiary, or settlement of
share-based payments through equity by PureTech.
3. Share capital and reserves
PureTech Health plc was incorporated with the Companies House under the Companies Act 2006 as a public company on May 8,
2015.
On June 24, 2015, the Group 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.
On March 12, 2018, the Group raised approximately $100.0 million, before issuance costs and other expenses, by way of a placing
of 45,000,000 placing shares.
During the years ended December 31, 2023 and 2022, other reserves increased by $3,482 and $10,384, respectively, primarily due
to equity-settled share-based payments granted to employees, the Board of Directors and service providers in subsidiaries. See
Note 2 above.
Treasury stock
On May 9, 2022, the Group announced the commencement of a $50,000 share repurchase program (the "Program") of its ordinary
shares of one pence each (the “Ordinary Shares”). The Group executed the Program in two equal tranches. The Group entered
into an irrevocable non-discretionary instruction with Jefferies International Limited (“Jefferies”) in relation to the purchase by
Jefferies of the Ordinary Shares for an aggregate consideration (excluding expenses) of no greater than $25,000 for each tranche,
and the simultaneous on-sale of such Ordinary Shares by Jefferies to the Group. Jefferies made its trading decisions in relation to
the Ordinary Shares independently of, and uninfluenced by, the Group. Purchases could continue during any close period to which
the Group was subject. The instruction to Jeffries could be amended or withdrawn so long as the Group was not in a close period
or otherwise in possession of inside information.
Any purchases of the 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 in accordance with pre-set parameters and subject to limits prescribed by
the Group’s general authority to repurchase the 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, 2023, the Group repurchased an aggregate of 18,278,873 Ordinary Shares under the share repurchase
program. The Program was completed during the month ended February 2024.
4.
Intercompany payables
The Parent had a balance due to its operating subsidiary PureTech LLC of $22,061 as of December 31, 2023, 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 loss for the year was $3,178.
6. Directors’ remuneration, employee information and share-based payments
The remuneration of the executive Directors of the Parent company is disclosed in Note 26. Related Parties Transactions, of the
Group's Consolidated Financial Statements. Full details of Directors’ remuneration can be found in the audited sections of the
Directors’ Remuneration Report. Full detail of the share-based payment charge and the related disclosures can be found in Note 9.
Share-based Payments, of the Group's Consolidated Financial Statements.
The Parent had no employees during 2023 or 2022.
Financial statements PureTech Health plc Annual report and accounts 2023 185
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 (the "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 13th Floor, One Angel Court, London, EC2R 7HJ,
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.
Financial statements 186 PureTech Health plc Annual Report and Accounts 2023
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 within our
Internal Programs and our Founded Entities, including the progress of,
and results from, our Internal Programs’ and Founded Entities’ preclinical
and clinical trials of LYT-100, LYT-200, SPT-300 (formerly known as LYT-
300), SPT-310 (formerly known as LYT-310), SPT-320 (formerly known as
LYT-320), or our therapeutics candidates, and our technology platforms
and other potential therapeutic candidates within our Internal Programs
and therapeutic candidates being developed by our Founded Entities;
— our ability to obtain and maintain regulatory clearance, certification,
authorization, or approval of the therapeutic candidates within our
Internal Programs 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 Internal
Programs or 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
Internal Programs and the therapeutic candidates 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 Internal Programs 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 Internal Programs and therapeutic
candidates being developed by our Founded Entities;
— our intellectual property position;
— our expectations related to the use of capital;
— the effect of any pandemic or public health crises, 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 undertake.
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, including therapeutic development and
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’ medical devices, 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 Internal Programs 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, 2021, 2022 and 2023 were $150.3 million, $197.8 million and
$146.2 million, respectively. We have no therapeutics developed in our
Internal Programs 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, 2023, we had never generated revenue from the
therapeutic candidates within our Internal Programs, and we may never be
operationally profitable.
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
Additional information PureTech Health plc Annual Report and Accounts 2023 187
we own the commercial rights for that territory. Our growth strategy
depends on our ability to generate revenue. In addition, if the number
of addressable patients is not as anticipated, the indication or intended
use cleared, 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 Internal Programs, 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 Internal Programs and our Founded Entities, we established
the underlying platforms that have resulted in the development of 29
therapeutics and therapeutic candidates, including two (Plenity and
EndeavorRx) that have received both U.S. FDA and European marketing
authorization and a third (KarXT) that has been filed for FDA approval.
Developing biotherapeutics is expensive and time-consuming, and with
respect to the therapeutic candidates within our Internal Programs, 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 Internal Programs 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. 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, among others. We, and indirectly, our shareholders,
may bear the cost of issuing and servicing any such securities and of
entering into and maintaining any such strategic partnerships or other
arrangements. Because any decision by us to issue debt or equity
securities in the future will depend on market conditions and other factors
beyond our control, we cannot predict or estimate the amount, timing or
nature of any future financing transactions. 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 Internal 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 Internal
Programs and any future therapeutic candidates we may identify.
As of December 31, 2023, we had cash, cash equivalents and short term
investments of $326 million at the PureTech Health plc level. Based on
current projections, the Directors believe that the company has sufficient
available funding to extend operations into at least 2027. 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.
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 Internal
Programs, 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 Internal Programs 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 Internal Programs, 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 Internal Programs or those of our Founded Entities;
— 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, or US, 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.
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
Risk Factor Annex continuedAdditional information 188 PureTech Health plc Annual Report and Accounts 2023
terms. 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.
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 Seaport
Therapeutics, Inc. or Seaport; investors’ rights agreements with Akili,
Vedanta, Entrega, Sonde, Seaport and Vor Biopharma Inc., or Vor, and
stockholders’ agreements with Gelesis, Akili, 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 or
impacted in a manner detrimental to our interests or intentions the value
we are able to realize from such entity may be diminished. For example,
on October 30, 2023, Gelesis ceased operations and filed a voluntary
petition for Chapter 7 bankruptcy liquidation in October 2023. 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 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. For example, on October 30, 2023, Gelesis ceased operations
and filed a voluntary petition for Chapter 7 bankruptcy liquidation in
October 2023.
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.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 189
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 EU, 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 Internal Programs 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’ products, 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.
Other than Gelesis’ Plenity and Akili’s EndeavorRx, all of our Internal
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 Internal Programs 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 Internal Programs or our Founded
Entities’ therapeutic candidates will be successful in clinical trials or receive
regulatory approval, authorization or clearance. Further, our Internal
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 Internal 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;
— delays in obtaining required Institutional Review Board, or IRB, or other
reviewing bodies approval or positive opinion at each clinical trial site;
Risk Factor Annex continuedAdditional information 190 PureTech Health plc Annual Report and Accounts 2023
— 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.
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 Internal 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 Internal Programs or our
Founded Entities’ therapeutic candidates.
Delays in the initiation, conduct or completion of any clinical trial of the
therapeutic candidates within our Internal Programs or our Founded
Entities’ therapeutic candidates 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 Internal Programs 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 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 EU 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 multicenter 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), and after Brexit, EU laws on clinical trials (including
the (EU) CTR) are not directly applicable in Great Britain (i.e., the UK
excluding Northern Ireland). 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 MHRA published
its consultation outcome on March 21, 2023 in which it confirmed that it
would update the existing legislation. The resulting legislative changes
will ultimately determine the extent to which the UK regulations align
with the CTR. Under the terms of the Protocol on Ireland and Northern
Ireland, provisions of the CTR which relate to the manufacture and import
of investigational medicinal products and auxiliary medicinal products
currently apply in Northern Ireland.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 191
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.
— 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:
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 Internal 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 Internal Programs 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 Internal Programs. 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 Internal Programs. 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. 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 Internal
Programs, 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.
— 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 Internal Programs 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 Internal Programs 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 Internal
Programs 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 Internal Programs.
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 the 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
Risk Factor Annex continuedAdditional information 192 PureTech Health plc Annual Report and Accounts 2023
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 Internal 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 Internal
Programs or those of our Founded Entities receives marketing
authorization, the FDA could impose contraindications or a boxed
warning in the labeling of the 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 Internal Programs or those of our Founded Entities,
once approved, cleared, certified, or authorized, 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 or our Founded Entities 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 or our Founded Entities may be required to change the way a
therapeutic candidate is administered or conduct additional clinical trials;
— we or our Founded Entities may be subject to fines, injunctions or the
imposition of civil or criminal penalties;
— we or our Founded Entities could be sued and held liable for harm
caused to patients; and
— our or our Founded Entities’ reputations may suffer.
Any of these occurrences could prevent us or our Founded Entities from
achieving or maintaining market acceptance of the particular therapeutic
candidate, if approved, authorized, cleared, or certified, 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 Internal Programs
and Founded Entities’ therapeutic candidates regulated as biological
therapeutics in the United States, 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 to a predicate medical device 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. 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 Internal 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 Internal 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
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,
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 193
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
Argentina, Australia, Brazil, Bulgaria, Chile, Colombia, Czech Republic,
Finland, Georgia, Greece, India, Malaysia, Mexico, Moldova, Philippines,
Poland, Romania, Spain, South Africa, South Korea, Thailand, Ukraine,
and the United Kingdom. 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 Internal 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, certification, authorization or approval of the therapeutic
candidates within our Internal Programs 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.
Risk Factor Annex continuedAdditional information 194 PureTech Health plc Annual Report and Accounts 2023
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. 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 therapeutics 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 therapeutic candidates satisfy the
requirements for the Section 505(b)(2) regulatory approval pathway, or if
the requirements for such therapeutic candidates under Section 505(b)
(2) are not as we expect, the approval pathway for those therapeutic
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 therapeutic candidates 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 therapeutic 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
therapeutic candidates, and complications and risks associated with such
therapeutic 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
therapeutic 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
therapeutic 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 Internal
Programs or our Founded Entities’ therapeutic candidates.
We or our Founded Entities may decide to pursue marketing authorization
of a combination therapeutic. A combination therapeutic may include,
amongst other possibilities, any drug, device, or biologic that is intended
for use with another individually specified drug, device, or biologic, where
both are required to achieve the intended use, indication, or effect.
Developing and obtaining regulatory clearance, authorization or approval
in the United States for combination therapeutics pose unique challenges
because such therapeutic candidates involve components that are
regulated by the FDA under different types of regulatory requirements,
and in the United States 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 more complex than would otherwise be required
for single-agent therapeutics. 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.
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, provided that the requirements
of the transitional provisions are fulfilled. In particular, 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.
PureTech Health plc Annual Report and Accounts 2023 195
We may not elect or be able to take advantage of any expedited
development or regulatory review and approval processes available
to 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
Internal Programs or our Founded Entities’ therapeutic candidates in the
future, although we cannot be certain that our Internal Programs or our
Founded Entities’ therapeutic candidates will qualify for any expedited
development pathways or that regulatory authorities will grant, or allow us
or our Founded Entities to maintain, the relevant qualifying designations.
Examples of 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 therapeutic candidates that meet certain criteria.
Specifically, drugs and biologics are eligible for fast track designation
if they are intended, alone or in combination with one or more drugs or
biologics, to treat serious or life-threatening diseases or conditions and
demonstrate the potential to address unmet medical needs for such
diseases or conditions. Fast track designation applies to the combination
of the therapeutic candidate and the specific indication for which it is
being studied. The sponsor of a fast track therapeutic 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 therapeutic 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 therapeutic 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
Risk Factor Annex continuedAdditional information 196 PureTech Health plc Annual Report and Accounts 2023
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
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 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 for the treatment of acute
myeloid leukemia, 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 Internal Programs 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. 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.
In addition, the FDA has historically required approval of a PMA application
for companion diagnostics associated with cancer medications. However,
in January 2024, the FDA announced its intention to initiate the process
to reclassify into Class II most in vitro diagnostic tests that are currently
regulated as Class III medical devices, including certain companion
diagnostic in-vitro diagnostics. If such reclassification efforts occur, any
companion diagnostics that are the subject of the down-classification
may no longer require approval of a PMA application, but rather may be
marketed pursuant to the generally less burdensome 510(k) clearance
process. However, there is no assurance that any companion diagnostic
required for therapeutic candidates within our Internal Programs or those
of our Founded Entities will benefit from the reclassification, or that the
reclassification, even if it does occur, will result in a shorter timeline to
development or marketing of the companion diagnostic.
We or our Founded Entities may rely on third parties for the design,
development and manufacture of companion diagnostic tests for our
Internal 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 Internal Programs
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
Internal 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 Internal 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 Internal Programs or our Founded Entities’ therapeutic candidates.
Gelesis’ Plenity and Akili’s EndeavorRx are, and any of the therapeutic
candidates within our Internal 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.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 197
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
Internal Programs 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
or to the conditions of approval. Any regulatory clearances, certifications,
authorizations or approvals that we may receive for the therapeutic
candidates within our Internal Programs 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 Internal Programs, 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 EU Medical
Devices Directive. Compliance with these requirements is a prerequisite to
be able to affix the European Conformity, or “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 Internal Program or our Founded
Entities’ therapeutic candidates.
In addition, the FDA has historically required approval of a PMA application
for companion diagnostics associated with cancer medications. However,
in January 2024, the FDA announced its intention to initiate the process
to reclassify into Class II most in vitro diagnostic tests that are currently
regulated as Class III medical devices, including certain companion
diagnostic in-vitro diagnostics. If such reclassification efforts occur, any
companion diagnostics that are the subject of the down-classification
may no longer require approval of a PMA application, but rather may be
marketed pursuant to the generally less burdensome 510(k) clearance
process. However, there is no assurance that any companion diagnostic
required for therapeutic candidates within our Internal Programs or those
Risk Factor Annex continuedAdditional information 198 PureTech Health plc Annual Report and Accounts 2023
of our Founded Entities will benefit from the reclassification, or that the
reclassification, even if it does occur, will result in a shorter timeline to
development or marketing of the companion diagnostic.
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 reducing the duration of
regulatory data protection, revising the eligibility for expedited pathways,
etc.) was published on April 26, 2023. The proposed revisions, remain
to be agreed and adopted by the European Parliament and European
Council, and the proposals may therefore be substantially revised before
adoption, which is not anticipated before early 2026. The revisions may,
however, 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 Internal Programs that are cleared or approved, we are
found to have improperly promoted off-label uses of those therapeutics,
we may become subject to significant liability. The FDA and other
regulatory agencies strictly regulate the promotional claims that may be
made about prescription therapeutics, if 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 Internal Programs, 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 therapeutic 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 therapeutic 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 therapeutic candidates contain
Schedule IV substances, which subjects such therapeutic 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 therapeutic
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 therapeutic 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 therapeutic 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
therapeutic 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
therapeutic 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 therapeutic 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.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 199
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.
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 Internal Programs
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 therapeutic candidate 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 therapeutic candidates 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 potential commercial
manufacturing of our therapeutic candidates may result in shipment
delays, inventory shortages, lot failures, therapeutic withdrawals or recalls,
or other interruptions in the supply of our therapeutic candidates. We may
also have to take inventory write-offs and incur other charges and expenses
for 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 therapeutic candidates
and could have a material adverse effect on our business, prospects,
financial condition and results of operations.
Our or our Founded Entities’ therapeutic candidates 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 and therapeutic candidates 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 and therapeutic candidates 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 and therapeutic candidates are also
subject to similar state regulations and various laws and regulations of
foreign countries governing manufacturing.
Risk Factor Annex continuedAdditional information 200 PureTech Health plc Annual Report and Accounts 2023
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 therapeutic candidates. 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
therapeutic candidates 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, certifications, authorizations, or approvals for our or
our Founded Entities’ therapeutic candidates; clinical holds; refusal to
permit the import or export of our or our Founded Entities’ therapeutics or
therapeutic candidates; 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 or therapeutic candidates. If
any of these events occurs, our reputation could be harmed, we could be
exposed to product liability claims and we or our Founded Entities could
lose customers and suffer reduced revenue and increased costs.
Risks Related to Commercialization
If, in the future, we are unable to establish sales and marketing
capabilities or enter into agreements with third parties to sell and
market any therapeutic candidates we may develop, we may not be
successful in commercializing those therapeutic candidates if and when
they are approved.
We do not have a sales or marketing infrastructure or the capabilities for
sale, marketing, or distribution of pharmaceutical therapeutics. To achieve
commercial success for any approved therapeutic for which we retain
sales and marketing responsibilities, we must either develop a sales and
marketing organization or outsource these functions to third parties. In the
future, we may choose to build a focused sales, marketing, and commercial
support infrastructure to market and sell the therapeutic candidates within
our Internal Programs, 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 Internal
Programs 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 Internal Programs, 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 Internal 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 Internal Programs 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 Internal Programs, 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.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 201
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.
The insurance coverage and reimbursement status of newly-approved
therapeutics is uncertain. The therapeutic candidates within our Internal
Programs 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
Internal Programs 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 Internal Programs. 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 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 Internal Programs, 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
Risk Factor Annex continuedAdditional information 202 PureTech Health plc Annual Report and Accounts 2023
Internal 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 Internal 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 Internal 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.
— 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;
Risks Related to Compliance with Healthcare Laws
If we fail to comply with healthcare laws, we could face substantial
penalties and our business, operations and financial conditions could be
adversely affected.
Healthcare providers, physicians and third-party payors in the United
States and elsewhere play a primary role in the recommendation and
prescription of pharmaceutical therapeutics. Arrangements with healthcare
providers, third-party payors and customers can expose pharmaceutical
manufacturers to broadly applicable fraud and abuse and other healthcare
laws and regulations, including, without limitation, the federal Anti-
Kickback Statute and the federal False Claims Act, or the FCA, which
may constrain the business or financial arrangements and relationships
through which such companies sell, market and distribute pharmaceutical
therapeutics. In particular, the promotion, sales and marketing of
healthcare items and services, as well as certain business arrangements in
the healthcare industry, are subject to extensive laws designed to prevent
fraud, kickbacks, self-dealing and other abusive practices. These laws and
regulations may restrict or prohibit a wide range of ownership, pricing,
discounting, marketing and promotion, structuring and commission(s),
certain customer incentive programs and other business arrangements
generally. Activities subject to these laws also involve the improper use of
information obtained in the course of patient recruitment for clinical trials.
The applicable federal and state healthcare laws and regulations laws that
may affect our ability to operate include, but are not limited to:
— the federal Anti-Kickback Statute, which prohibits, among other things,
persons from knowingly and willfully soliciting, receiving, offering or
paying any remuneration (including any kickback, bribe, or rebate),
directly or indirectly, overtly or covertly, in cash or in kind, to induce, or
in return for, either the referral of an individual, or the purchase, lease,
order or recommendation of any good, facility, item or service for which
payment may be made, in whole or in part, under a federal healthcare
program, such as the Medicare and Medicaid programs. A person or
entity does not need to have actual knowledge of the statute or specific
intent to violate it in order to have committed a violation. Violations are
subject to civil and criminal fines and penalties for each violation, plus
up to three times the remuneration involved, imprisonment of up to
ten years, and exclusion from government healthcare programs. 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 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;
— the federal Physician Payments Sunshine Act, created under the ACA,
and its implementing regulations, which require manufacturers of drugs,
devices, biologicals and medical supplies for which payment is available
under Medicare, Medicaid or the Children’s Health Insurance Program
(with certain exceptions) to report annually to the U.S. Department
of Health and Human Services, or HHS, under the Open Payments
Program, information related to payments or other transfers of value
made to physicians (defined to include doctors, dentists, optometrists,
podiatrists and chiropractors), certain non-physician providers (physician
assistants, nurse practitioners, clinical nurse specialists, certified nurse
anaesthetists, anaesthesiologist 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
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 203
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
Internal Programs 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,
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, as amended by the California Privacy Rights
Act, or collectively, the CCPA, requires covered businesses that process
the personal information of California residents to, among other things: (i)
provide certain disclosures to California residents regarding the business’s
collection, use, and disclosure of their personal information; (ii) receive
and respond to requests from California residents to access, delete, and
correct their personal information, or to opt out of certain disclosures of
their personal information; and (iii) enter into specific contractual provisions
with service providers that process California resident personal information
on the business’s behalf. Additional compliance investment and potential
business process changes may also be required. Similar laws have passed
in other states and are continuing to be proposed at the state and 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. 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 impose comprehensive
data privacy compliance obligations in relation to our collection and use
of personal data, including a principle of accountability and the obligation
to demonstrate compliance through policies, procedures, training and
audit, as well as regulating cross-border transfers of personal data out
of the EEA and the UK. In relation to data transfers from the EEA to the
United States, the EU-US Data Privacy Framework, or DPF, was approved
by the European Commission in July 2023 as an effective EU GDPR data
transfer mechanism to U.S. entities self-certified under the DPF. The
UK Extension to the DPF followed in October 2023, as an effective UK
GDPR data transfer mechanism to U.S. entities self-certified under the
UK Extension to the DPF. In relation to such cross border transfers of
personal data, we expect the existing legal complexity and uncertainty
regarding international personal data transfers to continue. In particular,
we expect the European Commission approval of the current DPF to be
challenged and international transfers to the United States and to other
jurisdictions more generally to continue to be subject to enhanced scrutiny
by regulators. As the regulatory guidance and enforcement landscape in
relation to data transfers continue to develop, we could suffer additional
costs, complaints and/or regulatory investigations or fines; we may have to
stop using certain tools and vendors and make other operational changes;
we may have to implement alternative data transfer mechanisms under the
GDPR and/ or take additional compliance and operational measures; and/
or it could otherwise affect the manner in which we provide our services
and could adversely affect our business, operations and financial condition.
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
undertaking, 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 Internal Programs 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. 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.
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.
Risk Factor Annex continuedAdditional information 204 PureTech Health plc Annual Report and Accounts 2023
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
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 signed 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. On August 29, 2023, HHS announced the list of the
first ten drugs that will be subject to price negotiations, although the
Medicare drug price negotiation program is currently subject to legal
challenges. 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 Internal Programs
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 Internal Programs 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 therapeutic 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 applicable, it will have a phased implementation
depending on the concerned products. The 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 provide the basis for cooperation at the EU level for joint
clinical assessments in these areas. It 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 highest 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 Internal Programs
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 Internal Programs. 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
Risk Factor Annex continuedAdditional information may obtain orphan therapeutic exclusivity from the FDA for indications
that we are targeting, which could result in our competitors establishing a
strong market position before we are able to enter the market. Additionally,
therapeutics or technologies developed by our competitors may render
our potential therapeutic candidates uneconomical or obsolete and we
may not be successful in marketing any therapeutic candidates we may
develop against competitors.
In addition, we could face litigation or other proceedings with respect to
the scope, ownership, validity and/or enforceability of our patents relating
to our competitors’ therapeutics and our competitors may allege that our
therapeutics infringe, misappropriate or otherwise violate their intellectual
property. The availability of our competitors’ therapeutics could limit the
demand, and the price we are able to charge, for any therapeutics that we
may develop and commercialize.
The therapeutic candidates within our Internal Programs 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 Internal Programs 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 Internal
Programs 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.
PureTech Health plc Annual Report and Accounts 2023 205
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,
and it could cause us to expend significant resources and give rise to
substantial business risk with no assurance of financial return.
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.
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. 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. 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 Internal Programs or may elect
not to continue or renew development or commercialization programs
based on clinical trial results, changes in their strategic focus due to their
acquisition of competitive therapeutics or their internal development
of competitive therapeutics, availability of funding or other external
factors, such as a business combination that diverts resources or creates
competing priorities;
— collaborators may delay clinical trials, provide insufficient funding
for a clinical trial program, stop a clinical trial, abandon a therapeutic
candidate, repeat or conduct new clinical trials or require a new
formulation of a therapeutic candidate for clinical testing;
— collaborators could independently develop, or develop with third parties,
therapeutics that compete directly or indirectly with our therapeutics or
therapeutic candidates;
— a collaborator with marketing, manufacturing and distribution rights
to one or more therapeutics may not commit sufficient resources to or
otherwise not perform satisfactorily in carrying out these activities;
— we could grant exclusive rights to our collaborators that would prevent us
from collaborating with others;
— collaborators may not properly maintain or defend our intellectual
property rights or may use our intellectual property or proprietary
information in a way that gives rise to actual or threatened litigation that
could jeopardize or invalidate our intellectual property or proprietary
information or expose us to potential liability;
— disputes may arise between us and a collaborator that cause the delay
or termination of the research, development or commercialization of our
current or future therapeutic candidates or that results in costly litigation
or arbitration that diverts management attention and resources;
— collaborations may be terminated, which may result in a need for
additional capital to pursue further development or commercialization of
the applicable current or future therapeutic candidates;
— collaborators may own or co-own intellectual property covering
therapeutics that result from our collaboration with them, and in such
cases, we would not have the exclusive right to develop or commercialize
such intellectual property;
— disputes may arise with respect to the ownership of any intellectual
property developed pursuant to our collaborations; and
— a collaborator’s sales and marketing activities or other operations
may not be in compliance with applicable laws resulting in civil or
criminal proceedings.
Additionally, we may seek to enter into additional collaborations, joint
ventures, licenses and other similar arrangements for the development
or commercialization of the therapeutic candidates within our Internal
Programs, 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 Internal Programs because our R&D pipeline may be
insufficient, the therapeutic candidates within our Internal Programs 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
Internal Programs as having the requisite potential to demonstrate safety
and efficacy or significant commercial opportunity, or collaborators may
Risk Factor Annex continuedAdditional information 206 PureTech Health plc Annual Report and Accounts 2023
pursue existing or other development-stage therapeutics or alternative
technologies in preference to those being developed in collaboration with
us. 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. Additionally, 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.
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 Internal Programs, 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 Internal Programs, could delay the
development and commercialization of the therapeutic candidates within
our Internal Programs 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.
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 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.
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 Internal
Programs, 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 Internal Programs, 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. 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 Internal Programs. If that occurs, we will not be able
to, or may be delayed in our efforts to, successfully commercialize the
therapeutic candidates within our Internal Programs. 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 Internal Programs 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 Internal
Programs 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 Founded 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. 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 Internal Programs 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;
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 207
— reliance on the third party for regulatory compliance and quality
assurance for the manufacturing activities each performs;
— the possible breach of the manufacturing agreement by the third party;
— the possible misappropriation of proprietary information, including trade
secrets and know-how; and
— the possible termination or non-renewal of the agreement by the
third party at a time that is costly or inconvenient for us or our
Founded Entities.
Furthermore, all of our CMOs are engaged with other companies to
supply and/or manufacture materials or therapeutics for such companies,
which exposes our manufacturers to regulatory risks for the production
of such materials and therapeutics. The facilities used by our contract
manufacturers to manufacture our drug, or medical device therapeutic
candidates are subject to review by the FDA pursuant to inspections that
will be conducted after we submit an NDA, BLA, PMA application or other
marketing application to the FDA. We do not control the manufacturing
process of, and are to some extent dependent on, our contract
manufacturing partners for compliance with the regulatory requirements,
known as cGMP requirements for manufacture of drug, biologic and
device therapeutics. If our contract manufacturers cannot successfully
manufacture material that conforms to our specifications and the strict
regulatory requirements of the FDA or others, we will not be able to secure
or maintain regulatory authorization for the therapeutic candidates within
our Internal Programs 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 Internal Programs
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 Internal
Programs or our Founded Entities’ therapeutic candidates, if cleared,
certified or approved.
The therapeutic candidates within our Internal Programs 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
Internal Programs 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 Internal Programs
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 Internal Programs. 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 Internal Programs 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
Internal Programs 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 Internal Programs
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 Internal Programs 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 Internal 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.
Risk Factor Annex continuedAdditional information 208 PureTech Health plc Annual Report and Accounts 2023
Obtaining, maintaining and enforcing pharmaceutical and
biopharmaceutical patents is costly, time consuming and complex, and
we may not be able to file or prosecute all necessary or desirable patent
applications, or maintain, enforce or license patents that may issue from
such patent applications, at a reasonable cost or in a timely manner. It
is also possible that we could fail to identify patentable aspects of our
R&D output before it is too late to obtain patent protection. Although
we take reasonable measures, we have systems in place to remind us of
filing and prosecution deadlines, and we employ outside firms and rely on
outside counsel to monitor patent deadlines, we may miss or fail to meet
a patent deadline, including in a foreign country, which could negatively
impact our patent rights and harm our competitive position, business, and
prospects. We may not have the right to control the preparation, filing and
prosecution of patent applications, or to maintain the rights to patents
licensed to third parties. Therefore, these patents and applications may not
be prosecuted and enforced in a manner consistent with the best interests
of our business.
The patent position of biotechnology and pharmaceutical companies
generally is highly uncertain, involves complex legal, technological
and factual questions and has in recent years been the subject of much
litigation. The standards that the U.S. Patent and Trademark Office, or the
USPTO, and its foreign counterparts use to grant patents are not always
applied predictably or uniformly. In addition, the laws of foreign countries
may not protect our rights to the same extent as the laws of the United
States, or vice versa. There is no assurance that all potentially relevant
prior art relating to our patents and patent applications has been found,
which can prevent a patent from issuing from a pending application or
later invalidate or narrow the scope of an issued patent. For example,
publications of discoveries in the scientific literature often lag behind the
actual discoveries, and patent applications in the United States and other
jurisdictions are typically not published until 18 months after filing or, in
some cases, not at all. Therefore, we cannot know with certainty whether
we were the first to make the inventions claimed in our patents or pending
patent applications, or that we were the first to file for patent protection of
such inventions. As a result, the issuance, scope, validity, enforceability and
commercial value of our patent rights are highly uncertain. Our pending
and future patent applications may not result in patents being issued
that protect our Internal 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 Internal Programs or our Founded Entities’
therapeutic candidates. For example, we may be subject to a third-
party pre-issuance submission of prior art to the USPTO, or become
involved in opposition, derivation, re-examination, 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 Internal 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 Internal Programs of 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
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 209
competing therapeutics in violation of our proprietary rights generally.
Proceedings to enforce our or our Founded Entities’ patent rights in
foreign jurisdictions, whether or not successful, could result in substantial
costs and divert our efforts and attention from other aspects of our
business, could put our or our Founded Entities’ patents at risk of being
invalidated or interpreted narrowly and our patent applications at risk
of not issuing, and could provoke third parties to assert claims against
us or our Founded Entities. We may not prevail in any lawsuits that we
or our Founded Entities initiate and the damages or other remedies
awarded, if any, may not be commercially meaningful. Accordingly, our
efforts to enforce our intellectual property rights around the world may
be inadequate to obtain a significant commercial advantage from the
intellectual property that we develop or license.
In some jurisdictions including European Union countries, compulsory
licensing laws compel patent owners to grant licenses to third parties.
In addition, some countries limit the enforceability of patents against
government agencies or government contractors. In these countries, the
patent owner may have limited remedies, which could materially diminish
the value of such patent. If we, our Founded Entities or any of our licensors
are forced to grant a license to third parties under patents relevant to
our or our Founded Entities’ business, or if we, our Founded Entities or
our licensors are prevented from enforcing patent rights against third
parties, our competitive position may be substantially impaired in such
jurisdictions.
Our or our Founded Entities’ proprietary rights may not adequately protect
our technologies and therapeutic candidates, and do not necessarily
address all potential threats to our competitive advantage.
The degree of future protection afforded by our or our Founded Entities’
intellectual property rights is uncertain because intellectual property
rights have limitations, and may not adequately protect our or our Founded
Entities’ business, or permit us to maintain our competitive advantage.
The following examples are illustrative:
— others may be able to make therapeutics that are the same as or similar
to the therapeutic candidates within our Internal Programs 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;
— failure to successfully negotiate a proposed acquisition, in-license or
investment in a timely manner and at a price or on terms and conditions
favorable to us;
— failure to successfully combine and integrate 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
Internal 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 Internal 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 Internal 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 Internal
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.
Risk Factor Annex continuedAdditional information 210 PureTech Health plc Annual Report and Accounts 2023
In addition, our or our Founded Entities’ licensors may own or control
intellectual property that has not been licensed to us and, as a result, we
may be subject to claims, regardless of their merit, that we are infringing
or otherwise violating the licensor’s rights. In addition, while we cannot
currently determine the amount of the royalty obligations we would be
required to pay on sales of future therapeutics, if any, the amounts may
be significant. The amount of our and our Founded Entities’ future royalty
obligations will depend on the technology and intellectual property
we and our Founded Entities use in therapeutic candidates that we
successfully develop and commercialize, if any. Therefore, even if we or
our Founded Entities successfully develop and commercialize therapeutic
candidates, we may be unable to achieve or maintain profitability. In
addition, we or our Founded Entities may seek to obtain additional licenses
from our licensors and, in connection with obtaining such licenses, we
may agree to amend our existing licenses in a manner that may be more
favorable to the licensors, including by agreeing to terms that could
enable third parties (potentially including our competitors) to receive
licenses to a portion of the intellectual property rights that are subject
to our or our Founded Entities’ existing licenses. Any of these events
could have a material adverse effect on our or our Founded Entities’
competitive position, business, financial conditions, results of operations,
and prospects.
If we or our Founded Entities fail to comply with our obligations in the
agreements under which we license intellectual property rights from third
parties or these agreements are terminated or we or our Founded Entities
otherwise experience disruptions to our business relationships with our
licensors, we could lose intellectual property rights that are important
to our business.
We are party to various agreements that we depend on to develop our
Internal 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 Internal 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 Internal
Programs 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 Internal 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
Internal Programs 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
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 211
or our Founded Entities may have to pay substantial damages, including
treble damages and attorneys’ fees for willful infringement, pay royalties,
redesign our infringing therapeutics or obtain one or more licenses from
third parties, which may be impossible or require substantial time and
monetary expenditure.
Parties making claims against us or our Founded Entities may be able
to sustain the costs of complex patent litigation more effectively than
we can because they have substantially greater resources. Furthermore,
because of the substantial amount of discovery required in connection
with intellectual property litigation or administrative proceedings, there is
a risk that some of our confidential information could be compromised by
disclosure. In addition, any uncertainties resulting from the initiation and
continuation of any litigation could have material adverse effect on our
ability to raise additional funds or otherwise have a material adverse effect
on our business, results of operations, financial condition and prospects.
Risks Related to Our Patents
Patent terms may be inadequate to protect our competitive position on
therapeutic candidates for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees
are timely paid, the natural expiration of a patent is generally 20 years from
its earliest U.S. non-provisional or international patent application filing
date. Various extensions may be available, but the life of a patent, and
the protection it affords, is limited. Even if patents covering our Internal
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 Internal Programs 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 Internal Programs 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 Internal Programs 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 Internal Programs 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 Internal Programs 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 Internal 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 Internal 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 Internal 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 Internal 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 Internal 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.
Risk Factor Annex continuedAdditional information 212 PureTech Health plc Annual Report and Accounts 2023
The America Invents Act also includes a number of significant changes
that affect the way patent applications are prosecuted and also may
affect patent litigation. These include allowing third party submission
of prior art to the USPTO during patent prosecution and additional
procedures to attack the validity of a patent by USPTO administered
post-grant proceedings, including post-grant review, inter partes review,
and derivation proceedings. Because of a lower evidentiary standard in
USPTO proceedings compared to the evidentiary standard in U.S. federal
courts necessary to invalidate a patent claim, a third party could potentially
provide evidence in a USPTO proceeding sufficient for the USPTO to hold
a claim invalid even though the same evidence would be insufficient to
invalidate the claim if first presented in a district court action. Accordingly,
a third party may attempt to use the USPTO procedures to invalidate our
patent claims that would not have been invalidated if first challenged by the
third party as a defendant in a district court action. Therefore, the America
Invents Act and its implementation could increase the uncertainties and
costs surrounding the prosecution of our or our Founded Entities’ owned
or in-licensed patent applications and the enforcement or defense of our
or our Founded Entities’ owned or in-licensed issued patents, all of which
could have a material adverse effect on our competitive position, business,
financial condition, results of operations, and prospects.
In addition, the patent positions of companies in the development and
commercialization of pharmaceuticals are particularly uncertain. Recent
U.S. Supreme Court 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 Internal Programs 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.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 213
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 Internal 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 or Future Public Health Crises
The COVID-19 pandemic has impacted, and any future global health crises
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. We have experienced as
a result of COVID-19, and may in the future experience as a result of any
future pandemic or global health crises, 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 any future global health crises may
have in the future, 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 ordinary shares or such sales may be on
unfavorable terms.
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.
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 Internal 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 Internal 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
Risk Factor Annex continuedAdditional information 214 PureTech Health plc Annual Report and Accounts 2023
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.
While we aim to distribute our scientific, execution and financing risks
across programs, there may be foreseen and unforeseen risks across
the therapeutic candidates within our Internal Programs 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. 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.
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 Bharatt Chowrira, our chief executive
officer, and Eric Elenko, our President. 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 Internal Programs 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 Internal Programs. 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. Identifying, selecting and acquiring promising therapeutic candidates
requires substantial technical, financial and human resources expertise.
Efforts to do so may not result in the actual acquisition or license of a
successful therapeutic candidate, potentially resulting in a diversion of
our management’s time and the expenditure of our resources with no
resulting benefit. For example, if we are unable to identify programs that
ultimately result in approved therapeutics, we may spend material amounts
of our capital and other resources evaluating, acquiring and developing
therapeutics that ultimately do not provide a return on our investment.
Product liability lawsuits against us could cause us to incur substantial
liabilities and could limit commercialization of any therapeutic candidates
that we may develop.
We face an inherent risk of product liability exposure related to the
testing of therapeutic candidates in human clinical trials and will face an
even greater risk if we commercially sell any therapeutics that we may
develop. If we cannot successfully defend ourselves against claims that
the therapeutic candidates within our Internal Programs 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
Internal Programs.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 215
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 Internal Programs 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 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.
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.
In March 2024, a complaint was filed against the company alleging breach
of contract with respect to certain payments alleged to be owed to a
previous employee of a company subsidiary based on purported terms of
a contract between such individual and the company. We intend to defend
ourselves vigorously though the ultimate outcome of this matter and the
timing for resolution remains uncertain. No determination has been made
that a loss, if any, arising from this matter is probable or that the amount of
any such loss, or range of loss, is reasonably estimable. We may from time
to time be subject to additional 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 Internal
Programs. 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 Internal Programs. There is also a risk of inappropriate disclosure of
sensitive information or negative or inaccurate posts or comments about
us on any social networking website. If any of these events were to occur
or we otherwise fail to comply with applicable regulations, we could incur
liability, face regulatory actions or incur other harm to our business.
Our and our Founded Entities’ employees, independent contractors,
consultants, commercial partners and vendors may engage in misconduct
or other improper activities, including noncompliance with regulatory
standards and requirements.
We are exposed to the risk of fraud, misconduct or other illegal activity
by our employees, independent contractors, consultants, commercial
partners and vendors as well as the employees, independent contractors,
consultants, commercial partners and vendors of our Founded Entities.
Misconduct by these parties could include intentional, reckless and
negligent conduct that fails to: comply with the laws of the FDA and
comparable foreign regulatory authorities; provide true, complete and
accurate information to the FDA and comparable foreign regulatory
authorities; comply with manufacturing standards we have established;
comply with healthcare fraud and abuse laws in the United States and
similar foreign fraudulent misconduct laws; or report financial information
Risk Factor Annex continuedAdditional information 216 PureTech Health plc Annual Report and Accounts 2023
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 collect and maintain information in digital form that is necessary to
conduct our business, and we are increasingly dependent on information
technology, or IT, systems and infrastructure to operate our business. In
the ordinary course of our business, we collect, store, and transmit large
amounts of confidential information, including intellectual property,
proprietary business information, clinical trial data, and personal
information (collectively, “Confidential Information”) of clinical trial
participants, employees, and contractors. It is critical that we do so in
a secure manner to maintain the confidentiality and integrity of such
Confidential Information.
As use of digital technologies has increased, cyber incidents, including
third parties gaining access to employee accounts using stolen or
inferred credentials, computer malware (e.g., ransomware), viruses,
misconfigurations, “bugs” or other vulnerabilities, malicious code
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 material security
breach to date, if such an event were to occur and cause interruptions in
our operations, it could result in a material disruption of development
programs and business operations.
Any cyber attack, data breach or destruction or loss of data could result in
a violation of applicable U.S. and international privacy, data protection and
other laws, and subject us to litigation and governmental investigations
and proceedings by federal, state and local regulatory entities in the
United States and by international regulatory entities, resulting in exposure
to material civil and/or criminal liability. A security incident could also
expose us to risks and could cause management distraction and the
obligation to devote significant financial and other resources to mitigate
such problems, which would increase our future information security costs,
including through organizational changes, deploying additional personnel,
reinforcing administrative, physical and technical safeguards, further
training of employees, changing third-party vendor control practices, and
engaging third-party subject matter experts and consultants and reduce
the demand for our technology and services. Any security compromise
affecting us, our collaborators, CROs, third-party logistics providers,
distributors, and other contractors and consultants, or our industry,
whether real or perceived, could harm our reputation, erode confidence in
the effectiveness of our security measures and lead to regulatory scrutiny.
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 Internal Programs 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.
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, future
shutdown as a result of COVID-19 or any other public health crises may
lead to inspectional or administrative delays. 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.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 217
Furthermore, in the EU, notified bodies must be officially designated
to certify products and services in accordance with the EU Medical
Devices Regulation. Despite a recent increase in designations, the
current number of notified bodies designated under the new Regulation
remains significantly lower than the number of notified bodies designated
under the previous regime. The current designated notified bodies
are therefore facing a backlog of requests as a consequence of which
review times 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 only 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 continue 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.
We continue to evaluate these rules and regulations and cannot predict
or estimate the amount of additional costs we may incur or the timing
of such costs. These rules and regulations are often subject to varying
interpretations, in many cases due to their lack of specificity, and, as a
result, their application in practice may evolve over time as new guidance
is provided by regulatory and governing bodies. This could result in
continuing uncertainty regarding compliance matters and higher costs
necessitated by ongoing revisions to disclosure and governance practices.
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:
— 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 Internal Programs 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,
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 Internal Programs 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 Internal
Programs. A weak or declining economy could also strain our suppliers,
possibly resulting in supply disruption. Any of the foregoing could harm
our business and we cannot anticipate all of the ways in which the current
economic climate and financial market conditions could adversely impact
our business. Additionally, we maintain the majority of our cash and
Risk Factor Annex continuedAdditional information 218 PureTech Health plc Annual Report and Accounts 2023
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.
We have policies and procedures designed to promote compliance
with anti-corruption laws and Trade Control laws. However, 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 changes, Northern Ireland will be reintegrated
under the regulatory authority of the MHRA with respect to medicinal
products. The Windsor Framework was approved by the European
Union-United Kingdom Joint Committee on March 24, 2023, so the UK
government and the EU will enact legislative measures to bring it into
law. On June 9, 2023, the MHRA announced that the medicines aspects
of the Windsor Framework will apply from January 1, 2025. 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, but 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 cannot 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.
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 219
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 Internal Programs or our Founded Entities’ therapeutic candidates’
target indications;
— an inability for us to obtain additional funding on reasonable
terms or at all;
— any delay in submitting an IND, BLA or NDA for the therapeutic
candidates within our Internal Programs 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 Internal Programs or our Founded Entities’
therapeutic candidates;
— announcements we make regarding our current therapeutic candidates,
acquisition of potential new therapeutic candidates and companies and/
or in-licensing;
— failure to maintain our or our Founded Entities’ existing license
arrangements or enter into new licensing and collaboration agreements;
— failure by us, our Founded Entities or our licensors to prosecute, maintain
or enforce our intellectual property rights;
— changes in laws or regulations applicable to future therapeutics;
— inability to obtain adequate clinical or commercial supply for
the therapeutic candidates within our Internal Programs 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 Internal Programs 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.
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, 2024, we had 270,209,101 outstanding ordinary shares. Ordinary
shares subject to outstanding options under our equity incentive plans and
the ordinary shares reserved for future issuance under our equity incentive
plans will become eligible for sale in the public market in the future, subject
to certain legal and contractual limitations.
Holders of ADSs are not treated as holders of our ordinary shares.
If you purchase an ADS, you will become a holder of ADSs with underlying
ordinary shares in a company incorporated under English law. Holders
of ADSs are not treated as holders of our ordinary shares, unless they
withdraw the ordinary shares underlying their ADSs in accordance with the
deposit agreement and applicable laws and regulations. The depositary
is the holder of the ordinary shares underlying the ADSs. Holders of ADSs
therefore do not have any rights as holders of our ordinary shares, other
than the rights that they have pursuant to the deposit agreement. See
“Description of Securities Other Than Equity Securities” in our Annual
Report on Form 20-F.
Holders of ADSs may be subject to limitations on the transfer of their ADSs
and the withdrawal of the underlying ordinary shares.
ADSs are transferable on the books of the depositary. However, the
depositary may close its books at any time or from time to time when it
deems expedient in connection with the performance of its duties. The
depositary may refuse to deliver, transfer or register transfers of ADSs
generally when our books or the books of the depositary are closed, or at
any time if we or the depositary think it is advisable to do so because of
any requirement of law, government or governmental body, or under any
provision of the deposit agreement, or for any other reason, subject to
the right of ADS holders to cancel their ADSs and withdraw the underlying
ordinary shares. Temporary delays in the cancellation of your ADSs and
withdrawal of the underlying ordinary shares may arise because the
depositary has closed its transfer books or we have closed our transfer
books, the transfer of ordinary shares is blocked to permit voting at
a shareholders’ meeting or we are paying a dividend on our ordinary
shares. In addition, ADS holders may not be able to cancel their ADSs and
withdraw the underlying ordinary shares when they owe money for fees,
taxes and similar charges and when it is necessary to prohibit withdrawals
in order to comply with any laws or governmental regulations that apply to
ADSs or to the withdrawal of ordinary shares or other deposited securities.
See “Description of Securities Other Than Equity Securities” in our Annual
Report on Form 20-F.
ADS holders may not be entitled to a jury trial with respect to claims
arising under the deposit agreement, which could result in less favorable
outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our ordinary
shares provides that, to the fullest extent permitted by law, holders and
beneficial owners of ADSs irrevocably waive the right to a jury trial of any
claim they may have against us or the depositary arising out of or relating
to the ADSs or the deposit agreement.
If this jury trial waiver provision is not permitted by applicable law, an
action could proceed under the terms of the deposit agreement with a
jury trial. If we or the depositary opposed a jury trial demand based on the
waiver, the court would determine whether the waiver was enforceable
based on the facts and circumstances of that case in accordance with the
applicable state and federal law. To our knowledge, the enforceability of a
contractual pre-dispute jury trial waiver in connection with claims arising
under the federal securities laws has not been finally adjudicated by the
Risk Factor Annex continuedAdditional information 220 PureTech Health plc Annual Report and Accounts 2023
U.S. Supreme Court. However, we believe that a contractual pre-dispute
jury trial waiver provision is generally enforceable, including under the laws
of the State of New York, which govern the deposit agreement, by a federal
or state court in the City of New York, which has non-exclusive jurisdiction
over matters arising under the deposit agreement. In determining whether
to enforce a contractual pre-dispute jury trial waiver provision, courts will
generally consider whether a party knowingly, intelligently and voluntarily
waived the right to a jury trial. We believe that this is the case with respect
to the deposit agreement and the ADSs. It is advisable that you consult
legal counsel regarding the jury waiver provision before entering into the
deposit agreement.
If you or any other holders or beneficial owners of ADSs bring a claim
against us or the depositary in connection with matters arising under the
deposit agreement or the ADSs, including claims under federal securities
laws, you or such other holder or beneficial owner may not be entitled to a
jury trial with respect to such claims, which may have the effect of limiting
and discouraging lawsuits against us and/or the depositary. If a lawsuit is
brought against us and/or the depositary under the deposit agreement, it
may be heard only by a judge or justice of the applicable trial court, which
would be conducted according to different civil procedures and may result
in different outcomes than a trial by jury would have had, including results
that could be less favorable to the plaintiff(s) in any such action, depending
on, among other things, the nature of the claims, the judge or justice
hearing such claims, and the venue of the hearing.
No condition, stipulation or provision of the deposit agreement or ADSs
serves as a waiver by any holder or beneficial owner of ADSs or by us or the
depositary of compliance with the U.S. federal securities laws and the rules
and regulations promulgated thereunder.
One of our principal shareholders has a significant holding in the company
which may give them influence in certain matters requiring approval by
shareholders, including approval of significant corporate transactions in
certain circumstances.
As of March 31, 2024, Invesco Asset Management Limited, or Invesco, held
approximately 23.76 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 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 U.S. domestic public companies. 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. In addition, “foreign private issuers”
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 221
are exempt from Regulation FD, which prohibits selective disclosures
of material information. Accordingly, there will be less publicly available
information concerning our company than there would be if we were not
a foreign private issuer.
As a foreign private issuer, we are permitted to adopt certain home
country practices in relation to corporate governance matters that differ
significantly from Nasdaq corporate governance listing standards. These
practices may afford less protection to shareholders than they would enjoy
if we complied fully with corporate governance listing standards.
As a foreign private issuer listed on Nasdaq, we are subject to corporate
governance listing standards. However, rules permit a foreign private issuer
like us to follow the corporate governance practices of its home country.
Certain corporate governance practices in the United Kingdom, which
is our home country, may differ significantly from corporate governance
listing standards. For example, neither the corporate laws of the United
Kingdom nor our articles of association require a majority of our directors
to be independent and we could include non-independent directors
as members of our nomination and remuneration committee, though a
majority is required, and our independent directors would not necessarily
hold regularly scheduled meetings at which only independent directors
are present. Currently, we follow home country practice to the maximum
extent possible. Therefore, our shareholders may be afforded less
protection than they otherwise would have under corporate governance
listing standards applicable to U.S. domestic issuers. See “Governance” of
this Annual Report and Accounts and “Item 16G—Corporate Governance”
of our Annual Report on Form 20-F.
We may lose our foreign private issuer status in the future, which could
result in significant additional cost and expense.
While we currently qualify as a foreign private issuer, the determination of
foreign private issuer status is made annually on the last business day of an
issuer’s most recently completed second fiscal quarter and, accordingly,
the next determination will be made with respect to us on June 30, 2024.
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
Failure to maintain effective internal control over financial reporting
could have a material adverse effect on our business, financial condition,
results of operations, and stock price and may adversely affect investor
confidence in our company and, as a result, the value of our ADSs and
your investment. Section 404 of the Sarbanes-Oxley Act requires us to
evaluate the effectiveness of our internal controls over financial reporting
as of the end of each fiscal year, including a management report assessing
the effectiveness of our internal controls over financial reporting, and a
report issued by our independent registered public accounting firm on
that assessment. Our ability to comply with the annual internal control
reporting requirements will depend on the effectiveness of our financial
reporting and data systems and controls across our company. We expect
these systems and controls to require additional investment as we
become increasingly more complex and our business grows. To effectively
manage this complexity, we will need to continue to maintain and revise
our operational, financial and management controls, and our reporting
systems and procedures. Certain weaknesses or deficiencies or failures to
implement required new or improved controls, or difficulties encountered
in the implementation or operation of these controls, could harm our
operating results and cause us to fail to meet our financial reporting
obligations, or result in material misstatements in our financial statements,
which could adversely affect our business and reduce the value of our
ADSs. 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 (or deemed to be paid
by us for U.S. federal income tax purposes) 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 and certain other tax
attributes to offset future U.S. taxable income and income tax liabilities
may be subject to certain limitations.
As of December 31, 2023, we had U.S. federal and state net operating loss
carryforwards, or NOLs, of approximately $13.7 million and $111.5 million,
respectively, 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. Our federal NOLs generated in taxable
years beginning after December 31, 2017 are not subject to expiration,
but may generally only be used to offset 80% of taxable income in years
beginning after December 31, 2020. As of December 31, 2023, we also
had U.S. federal and state research and development and other tax credit
carryforwards of approximately $2.3 million and $0.1 million, respectively,
available to reduce our future income tax liabilities, if any. These NOLs
and tax credit carryforwards could expire unused, to the extent subject to
expiration, and be unavailable to offset future taxable income or income
tax liabilities.
Risk Factor Annex continuedAdditional information 222 PureTech Health plc Annual Report and Accounts 2023
In general, under Sections 382 and 383 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 pre-change U.S. federal
NOLs and tax credit carryforwards to offset future taxable income and
income tax liabilities. Similar rules may apply under state law. Our existing
federal NOLs and tax credits may be subject to limitation arising from
previous ownership changes. Future changes in our stock ownership, some
of which are outside of our control, could result in ownership changes
under Sections 382 or 383 of the Code, and our ability to utilize our federal
NOLs or tax credit carryforwards could be further limited.
Additionally, we may not be able to utilize the NOLs or tax credit
carryforwards 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 similar limitations.
For these reasons, even if we attain profitability, we may not be able to
realize a tax benefit from the use of our NOLs or tax credit carryforwards.
We may be unable to use net operating loss and tax credit carryforwards
and certain built-in losses to reduce future U.K. tax liabilities.
As a U.K. incorporated and tax resident entity, PureTech Health plc is
subject to U.K. corporate taxation on its tax-adjusted trading profits. Due
to the nature of our business, PureTech Health plc has generated losses
since inception and therefore we have not paid any U.K. corporation tax.
Subject to numerous utilization criteria and restrictions (including those
that limit the percentage of profits that can be reduced by carried forward
losses and those that can restrict the use of carried forward losses where
there is a change of ownership of more than half the ordinary shares of the
company and a major change in the nature, conduct or scale of the trade),
we expect these to be eligible for carry forward and utilization against
future U.K. operating profits.
Future changes to tax laws could materially adversely affect our company
and reduce net returns to our shareholders.
The tax treatment of the company is subject to changes in tax laws,
regulations and treaties, or the interpretation thereof, tax policy initiatives
and reforms under consideration and the practices of tax authorities
in jurisdictions in which we operate, as well as tax policy initiatives and
reforms related to the Organisation for Economic Co-Operation and
Development’s, or OECD, Base Erosion and Profit Shifting, or BEPS,
Project, the European Commission’s state aid investigations and other
initiatives. Such changes may include (but are not limited to) the taxation
of operating income, investment income, dividends received or (in the
specific context of withholding tax) dividends paid. We are unable to
predict what tax reform may be proposed or enacted in the future or what
effect such changes would have on our business, but such changes, to
the extent they are brought into tax legislation, regulations, policies or
practices, could affect our financial position and overall or effective tax
rates in the future in countries where we have operations, reduce post-tax
returns to our shareholders, and increase the complexity, burden and cost
of tax compliance.
Tax authorities may disagree with our positions and conclusions regarding
certain tax positions, resulting in unanticipated costs, taxes or non-
realization of expected benefits.
A tax authority may disagree with tax positions that we have taken, which
could result in increased tax liabilities. For example, HM Revenue &
Customs, or HMRC, the Internal Revenue Service or another tax authority
could challenge our allocation of income by tax jurisdiction and the
amounts paid between certain of our Founded Entities pursuant to our
intercompany arrangements and transfer pricing policies, including
amounts paid with respect to our intellectual property development.
Similarly, a tax authority could assert that we are subject to tax in
a jurisdiction where we believe we have not established a taxable
connection, often referred to as a “permanent establishment” under
international tax treaties, and such an assertion, if successful, could
increase our expected tax liability in one or more jurisdictions. A tax
authority may take the position that material income tax liabilities, interest
and penalties are payable by us, in which case, we expect that we might
contest such assessment. Contesting such an assessment may be lengthy
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;
Risk Factor Annex continuedAdditional information PureTech Health plc Annual Report and Accounts 2023 223
— 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.
Risk Factor Annex continuedAdditional information 224 PureTech Health plc Annual Report and Accounts 2023
Company information
Directors, Secretary and Advisors to PureTech
Company Registration Number
09582467
Registered Office
13th Floor
One Angel Court
London EC2R 7HJ
United Kingdom
Website
www.puretechhealth.com
Board of Directors
Dr. Raju Kucherlapati (Interim Chair and Senior
Independent Director)
Dr. Bharatt Chowrira (Chief Executive Officer)
Dr. Robert Langer (Non-Executive Director)
Dr. John LaMattina (Independent Non-Executive Director)
Ms. Kiran Mazumdar-Shaw (Independent Non-Executive Director)
Ms. Sharon Barber-Lui (Independent Non-Executive Director)
Company Secretary
Mr. Charles Sherwood
Media and Public Relations
FTI Consulting, Inc.
200 Aldersgate Street
Barbican
London EC1A 4HD
United Kingdom
Tel: +44 203 727 1000
Independent Auditor
PricewaterhouseCoopers LLP
3 Forbury Place
23 Forbury Road
Reading RG1 3JH
United Kingdom
Tel: +44 (0) 118 959 7111
Broker
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
United Kingdom
Tel: +44 207 029 8000
Registrar
ComputerShare 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
Barbican, London EC1A 4HT
United Kingdom
Tel: +44 870 011 1111
Additional 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)
This document is printed on
Mohawk Superfine, a carbon
neutral paper containing 100%
virgin fibre sourced from well
managed, responsible, FSC®
certified forests and controlled
resources. The pulp used
in this product is bleached
using an elemental chlorine
free (ECF) process.
Designed and produced by
Whitehouse Associates, London.
Printed by Donnelley Financial
Solutions on FSC® certified paper.
Donnelley Financial Solutions is
an EMAS certified company and
its Environmental Management
System is certified to ISO 14001.
P
u
r
e
T
e
c
h
H
e
a
l
t
h
p
l
c
A
n
n
u
a
l
r
e
p
o
r
t
a
n
d
a
c
c
o
u
n
t
s
2
0
2
3
PureTech Health
6 Tide Street
Suite 400
Boston
MA 02210
Tel: +1 617 482 2333
Email: info@puretechhealth.com