News Release Details

PureTech Announces Annual Results for Year Ended December 31, 2020

2021-04-15

15 April 2021

PureTech Health plc

PureTech Announces Annual Results for Year Ended December 31, 2020

Strong capital base and cash runway extended into the first quarter of 2025, with PureTech level cash and cash equivalents of $443.4 million as of March 31, 20211 ($349.4 million as of December 31, 20202) and consolidated cash and cash equivalents of $486.5 million as of March 31, 20213 ($403.9 million as of December 31, 20204)

Advancement of Wholly Owned Pipeline with four clinical trial initiations and one successful readout, with three clinical trials ongoing

Significant milestones across PureTech’s Founded Entities including one FDA Clearance for Marketing, two European Marketing Authorizations, initiation of a Phase 3 program, $247.8 million raised in 20205 and $473.2 million raised in the 2021 post-period6

Further validation of PureTech’s model through monetization of partial stakes in Founded Entities that generated $350.6 million in 2020 and an additional $118 million in the 2021 post-period

Listing on Nasdaq Global Market broadens access to US investors

Company to host a webcast and conference call today at 9:00am EDT / 2:00pm BST

PureTech Health plc (Nasdaq: PRTC, LSE: PRTC) ("PureTech" or the "Company"), a clinical-stage biotherapeutics company dedicated to discovering, developing and commercializing highly differentiated medicines for devastating diseases, today announced its results for the year ended December 31, 2020 as well as its cash balance as of the first quarter ended March 31, 2021. The following information represents select highlights from the full report, which  will be filed as an Exhibit to Form 20-F with the United States Securities and Exchange Commission and is also available at https://investors.puretechhealth.com/financials-filings/reports.

Webcast and conference call details

Members of the PureTech Management Team will host a conference call at 9:00am EDT / 2:00pm BST today, April 15, to discuss these results. A live webcast and presentation slides will be available on the investors section of PureTech’s website under the Events and Presentations tab. To join by phone, please dial:

United Kingdom: 0800 640 6441

United Kingdom (Local): 020 3936 2999

United States: 1 855 9796 654

United States (Local): 1 646 664 1960

All other locations: +44 20 3936 2999

Access code: 440629

For those unable to listen to the call live, a replay will be available on the PureTech website.

Commenting on the annual results, Daphne Zohar, Founder and Chief Executive Officer of PureTech said:

“2020 was a year like no other. For our team at PureTech, it was defined both by transformational progress and tremendous resilience, as we realized significant financial, clinical and regulatory milestones while navigating the challenges of a global pandemic. I am immensely proud of our team’s dedication to our mission: develop groundbreaking medicines for serious diseases for which patients currently have few options.

“We now have 26 therapeutics and therapeutic candidates being advanced through our Wholly Owned Pipeline or our Founded Entities. This includes two therapeutics that have received FDA clearance and European marketing authorization - Gelesis’ Plenity® and Akili’s EndeavorRxTM – both of which were initially conceived of and advanced by the PureTech team to address urgent medical needs for patients. We expect a broader U.S. launch for both therapeutics this year.

“We made notable progress in the advancement of our Wholly Owned Pipeline this year, initiating four clinical trials and reporting the successful completion of one clinical trial. We are currently evaluating two candidates – LYT-100 and LYT-200 – across three different indications where there is serious need. I am also pleased to have expanded our Wholly Owned Pipeline with the nomination of a new therapeutic candidate, LYT-300 (oral allopregnanolone), which we expect to enter a clinical trial by the end of 2021.

Additionally, we continued to solidify our financial position by generating $350.6 million in 2020 and an additional $118 million in the February 2021 post-period via the monetization of partial stakes in Founded Entities. We also successfully completed a listing of American Depository Shares on the Nasdaq Global Market in November 2020, which enables us to broaden access to an international investor base as we maintained our premium listing on the London Stock Exchange and our membership in the FTSE 250.

We are well-positioned for an exciting year ahead, which we expect will include multiple value drivers across our Wholly Owned Programs and our Founded Entities, including at least ten expected clinical trial initiations and nine expected readouts.

I would like to thank our shareholders for their vision and continued support over the last year. Above all, I would like to thank the patients and clinicians working alongside us in our clinical trials. We are grateful for your support, humbled by your trust and inspired by your courage. You make possible the medical advances of the future.”

Continued advancement and growth of Wholly Owned Programs7

Our team, network and expertise in the BIG Axis has enabled the rapid advancement and growth of our Wholly Owned Programs. Focused on the lymphatic system and related immunological disorders, our Wholly Owned Pipeline currently consists of LYT-100, a clinical-stage therapeutic candidate we are pursuing for inflammatory and fibrotic conditions and disorders of lymphatic flow, LYT-200, a clinical therapeutic candidate targeting a foundational immunosuppressive protein, galectin-9, we are developing for the potential treatment of a range of cancer indications, LYT-210, a preclinical therapeutic candidate targeting immunomodulatory gamma delta-1 T cells we are developing for a range of cancer indications and autoimmune disorders and LYT-300, a preclinical therapeutic candidate we are developing for a range of neurological and neuropsychological conditions. Our Wholly Owned Programs also include three discovery platforms: Glyph™ – our synthetic lymphatic targeting chemistry platform – and Orasome™ – our oral biotherapeutics platform – both of which leverage absorption of dietary lipids to traffic therapeutics via the lymphatic system, and our meningeal lymphatics discovery research program for treating neurodegenerative and neuroinflammatory diseases. Key developments included the following:

Program Highlights

LYT-100

  • In November 2020, we announced the completion of a Phase 1 randomized, double-blind multiple ascending dose and food effect study of LYT-100, which was initiated in March 2020. The study demonstrated favorable proof-of-concept for LYT-100’s tolerability and pharmacokinetic, or PK, profile.
  • In December 2020, we announced the initiation of a global, randomized, double-blind, placebo-controlled Phase 2 trial to evaluate the efficacy, safety and tolerability of LYT-100 in adults with Long COVID respiratory complications and related sequelae. Topline results are expected in the second half of 2021.
  • In December 2020, we announced the initiation of a Phase 2a proof-of-concept study of LYT-100 in patients with breast cancer-related, upper limb secondary lymphedema. Topline results are expected in the first half of 2022.
  • We are planning registration-enabling studies of LYT-100 for the treatment of idiopathic pulmonary fibrosis, or IPF, and potentially other progressive fibrosing interstitial lung diseases, or PF-ILDs, and we expect to provide additional guidance later this year.

LYT-200

  • In December 2020, we announced the initiation of our Phase 1 clinical trial to evaluate LYT-200 as a potential treatment for metastatic solid tumors, with topline results anticipated in the fourth quarter of 2021. The primary objective of the Phase 1 portion of the adaptive Phase 1/2 trial is to assess the safety and tolerability of escalating doses of LYT-200 in order to identify a dose to carry forward into the Phase 2 portion of the trial. The Phase 1 portion will also assess the PK and pharmacodynamic, or PD, profiles of LYT-200. Pending favorable topline results, we intend to initiate the Phase 2 expansion cohort portion of the trial, which is designed to evaluate LYT-200 either alone and/or in combination with chemotherapy and anti-PD-1 therapy for the treatment of multiple solid tumor types, including pancreatic cancer and cholangiocarcinoma, or CCA.
  • In June 2020, we presented a scientific poster for LYT-200 at the American Association for Cancer Research, or AACR, 2020 Virtual Annual Meeting. New preclinical results were presented that established galectin-9 as a novel target for cancer immunotherapy.

LYT-300 and the Glyph Technology Platform

  • We are advancing our Glyph technology platform, which is designed to employ the body’s natural lipid absorption and transport process to orally administer drugs via the lymphatic system. We have successfully extended the platform to encompass more than 20 molecules as well as a range of novel linker chemistries that have demonstrated promising lymphatic targeting in preclinical studies. Our most advanced Glyph candidate, LYT-300, is an oral form of allopregnanolone, an FDA-approved drug, which is a natural neurosteroid that we believe may be applicable to a range of neurological conditions. We expect to initiate a clinical trial with LYT-300 by the end of 2021.
  • In the February 2021 post-period, preclinical proof-of-concept for our Glyph technology was published in the Journal of Controlled Release. The results demonstrate the ability of this platform to directly target gut lymphatics with an orally dosed small molecule immunomodulator.

Orasome Technology Platform

  • We progressed our Orasome technology platform, which utilizes multiple vesicle components, including those isolated from milk. Our Orasome vesicles are being designed to transport macromolecular medicines to selected mucosal cell types of the intestinal tract. In 2021, we expect preclinical proof-of-concept data and anticipate additional preclinical results from a non-human primate proof-of-concept study. This work could lay the foundation for investigational new drug, or IND, application enabling clinical studies for one or more additional therapeutic candidates to be included in our Wholly Owned Pipeline.

Corporate Highlights

  • On November 16, 2020, we commenced trading of American Depository Shares, or ADSs, on the Nasdaq Global Market under the ticker symbol “PRTC” (the “U.S. Listing”). In addition to the U.S. Listing, we maintain our premium listing on the Official List of the UK Financial Conduct Authority and trading on the main market of the London Stock Exchange. Our ticker symbol in the UK is also PRTC, and we are a member of the FTSE250 index.
  • In October 2020, we announced the appointment of biotech entrepreneur Kiran Mazumdar-Shaw to our board of directors. Ms. Shaw brings extensive experience in biotherapeutics, strategic leadership, financial and business development and a dedication to improving patients’ lives to our board of industry leaders.
  • In the January 2021 post-period, we announced that George Farmer, Ph.D., was appointed as Chief Financial Officer. Dr. Farmer is responsible for all aspects of our finances, including capital markets strategy and execution, strategic and financial planning and financial reporting.

Financial Highlights

  • In 2020, we sold shares in our Founded Entities for cash consideration of $350.6 million, while in the February 2021 post-period we sold an additional one million shares in Karuna Therapeutics, Inc. for cash consideration of $118 million.
  • PureTech level cash and cash equivalents were $443.4 million as of March 31, 20211 and $349.4 million as of December 31, 20202. We extended our cash runway guidance by one year into the first quarter of 2025.
  • Consolidated cash and cash equivalents, which includes cash held at the PureTech level and at Controlled Founded Entities, were $486.5 million as of March 31, 20213 and $403.9 million as of December 31, 20204.
  • PureTech’s Founded Entities raised $247.8 million in 20205 and an additional $473.2 million in the 2021 post-period6, almost all of which came from third parties.

Significant regulatory, clinical and financial momentum across PureTech’s Founded Entities8

PureTech’s Founded Entities have made significant progress advancing 22 therapeutics and therapeutic candidates, of which two have been cleared for marketing by the U.S. Food and Drug Administration and granted marketing authorization in the European Economic Area and 13 are clinical stage. Key developments included the following:

Founded Entities in which PureTech has a controlling interest or the right to receive royalties, in order of development stage:

  • Gelesis, Inc. (PureTech ownership: 19.3%; We also have a right to royalty payments as a percentage of net sales)
    • In June 2020, Gelesis received approval to market Plenity®9 with a Conformité Européenne, or CE, Mark as a class III medical device indicated for weight loss in overweight and obese adults with a Body Mass Index, or BMI, of 25-40 kg/m2, when used in conjunction with diet and exercise. In addition to its U.S. FDA clearance, Gelesis is now able to market Plenity® throughout the European Economic Area and in other countries that recognize the CE Mark. Gelesis plans to bring Plenity to the U.S. first, where it has been available to a limited extent since the second half of 2019 through an early experience program and since 2020 via a beta launch while the company ramps up its commercial operations and inventory for a broader launch in the second half of 2021. In just one month of limited promotion and marketing investment during the limited launch, Gelesis acquired more new patients on Plenity, than any other branded prescription in the weight loss market. Gelesis also plans to seek FDA input on the requirements for expanding the Plenity label for treating adolescents.
    • In June 2020, Gelesis announced a partnership with China Medical System Holdings Ltd., or CMS, for the commercialization of Plenity in China. Through the terms of the deal, CMS provided $35 million upfront in a combination of licensing fees and equity investment, with the potential for an additional $388 million in future milestone payments as well as royalties.
    • In the second half of 2020, Gelesis initiated a Phase 3 study of GS500 in functional constipation.
    • In November 2020, Gelesis’ collaborator Alessandra Silvestri, Ph.D., of the Laboratory of Mucosal Immunology and Microbiota at Humanitas Research Hospital, presented a poster on the therapeutic benefits of Gel-B (GS300) at The Liver Meeting, the American Association for the Study of Liver Diseases, or AASLD, annual conference. The data demonstrated that, in a preclinical model, the proprietary therapeutic candidate reversed the damage to the intestines induced by a high fat diet and Gelesis believes that therapies exploiting the gut liver axis may offer a unique treatment option for metabolic liver disorders.
    • Also in November 2020, Gelesis presented three posters at ObesityWeek 2020, the annual congress of The Obesity Society. Presentations included new data that showed that prediabetes and impaired beta cell function were associated with a dysfunctional gut barrier, a potential precursor to metabolic diseases; an additional analysis of Gelesis’ pivotal GLOW study suggested fasting plasma glucose levels and insulin resistance could be strong predictors of weight loss with Plenity; and a new in vitro beverage interaction study that demonstrated Plenity’s hydrogel maintained its properties in the presence of alcoholic or acidic drinks.
    • In September 2020, Gelesis delivered one oral presentation and two poster presentations showcasing notable efficacy data for Plenity® at the European and International Congress on Obesity, or ECO-ICO 2020.
    • In March 2020, Gelesis was named to Fast Company’s list of the World’s Most Innovative Companies for 2020.
  • Karuna Therapeutics, Inc. (PureTech ownership: 8.2%; We also have a right to royalty payments as a percentage of net sales)
    • In June 2020, Karuna announced next steps in the EMERGENT program, the clinical program evaluating KarXT for the treatment of adults with schizophrenia, following the completion of a successful End-of-Phase 2 meeting with the FDA.
    • In December 2020, Karuna announced the initiation of the Phase 3 EMERGENT-2 trial, the first of two Phase 3 five-week inpatient trials evaluating the efficacy and safety of KarXT for the treatment of acute psychosis in adults with schizophrenia.
    • In May 2020, Karuna presented data from EMERGENT-1, the Phase 2 clinical trial evaluating KarXT for the treatment of acute psychosis in patients with schizophrenia, at the American Society of Clinical Psychopharmacology, or ASCP, 2020 Annual Meeting. The poster and oral presentation detailed new and previously reported efficacy and safety data from the Phase 2 clinical trial.
    • In the first quarter of the 2021 post-period, Karuna announced the initiation of the Phase 3 EMERGENT-4 trial, a 52-week, outpatient, open-label long-term safety and tolerability extension trial of EMERGENT-2 and EMERGENT-3.
    • In the February 2021 post-period, Karuna announced that results from the EMERGENT-1 Phase 2 clinical trial evaluating KarXT for the treatment of schizophrenia were published in the New England Journal of Medicine, or NEJM.
  • Follica, Incorporated (PureTech ownership: 78.2%; We also have a right to royalty payments as a percentage of net sales)
    • In June 2020, Follica announced the completion of a successful End-of-Phase 2 meeting with the FDA for its lead program to treat male androgenetic alopecia, which supports the progression into Phase 3 development. The initiation of a Phase 3 registration program in male androgenetic alopecia is expected in 2021.
    • In December 2020, Follica announced the publication of a pilot study evaluating scalp skin disruption to promote hair growth in female pattern hair loss, or FPHL, in International Journal of Women’s Dermatology. The pilot study, led by Maryanne M. Senna, M.D., an Assistant Professor of Dermatology at Harvard Medical School, demonstrated the treatment promoted hair growth over a four-month course of treatment.
    • In the January 2021 post-period, Follica announced the appointment of two leaders in aesthetic medicine and dermatology to its Board of Directors. Tom Wiggans, former CEO of Dermira, joined as Executive Chairman with over 30 years of experience leading biopharmaceutical companies from the start-up stage to global commercialization, and Michael Davin, former CEO of Cynosure, joined as an Independent Director with over 30 years of experience in the medical device industry.
  • Vedanta Biosciences, Inc. (PureTech ownership: 49.5%)
    • In June 2020, Vedanta announced topline Phase 1 clinical data in healthy volunteers, which showed that VE202, Vedanta’s orally-administered live biotherapeutic product, or LBP, candidate for inflammatory bowel disease, or IBD, was generally well-tolerated at all doses studied and demonstrated durable and dose-dependent colonization. The trial was conducted by Janssen Research & Development, LLC, and a more complete study dataset and analyses will be submitted to a peer-reviewed journal. Vedanta expects to advance VE202 into a Phase 2 study for IBD in 2021. Vedanta has regained full rights to the program and will owe Janssen single-digit royalty payments on net sales of a commercialized product.
    • In the January 2021 post-period, Vedanta announced a $25 million investment from Pfizer as part of the Pfizer Breakthrough Growth Initiative. The proceeds will fund the Phase 2 study of VE202 in IBD. Vedanta will retain control of all its programs and has granted Pfizer a right of first negotiation on VE202.
    • In October 2020, additional data from a Phase 1 clinical study of VE202 in healthy volunteers was presented by Janssen Research & Development, LLC, at United European Gastroenterology, or UEG, Week 2020. The new UEG Week data presentation focused on the kinetics and durability of colonization from an 11-strain consortium of VE202 under various dosing and pre-treatment regimens.
    • Vedanta has also continued to progress its three ongoing clinical trials of VE303, VE416 and VE800. In 2021, Vedanta anticipates topline results from a Phase 2 trial of VE303 in high-risk Clostridioides difficile infection, or CDI and a first-in-patient clinical trial of VE800 in combination with Bristol- Myers Squibb’s checkpoint inhibitor Opdivo® (nivolumab) in patients with select types of advanced or metastatic cancer. Topline results from a Phase 1/2 trial of VE416 for food allergy are expected in 2022.
    • In June 2020, Vedanta strengthened its balance sheet with an additional $12 million in new equity and R&D collaboration funds, bringing its total Series C round to $71.1 million.
    • In September 2020, Vedanta announced it has been awarded funding of $7.4 million, with the potential for up to an additional $69.5 million, from the Biomedical Advanced Research and Development Authority, or BARDA, to advance clinical development of VE303 for high-risk CDI. Vedanta is the first-ever recipient of a BARDA award in the microbiome field.
  • Sonde Health, Inc. (PureTech ownership: 44.6%)
    • In July 2020, Sonde launched Sonde One for Respiratory, a new voice-enabled health detection and monitoring app, to potentially help employers improve employee safety, meet government mandates and satisfy their own administrative needs as they reopen office doors in a COVID-19 environment.
    • In August 2020, Sonde acquired NeuroLex Labs, a leading voice-enabled survey and data acquisition platform. The transaction did not involve any financial participation from PureTech.
    • In November 2020, Sonde announced the launch of a new Developer Portal that provides organizations with access to Sonde’s advanced vocal biomarker-based health check technology. As part of the launch, Sonde has introduced a new self-serve application programming interface, or API, and documentation to allow developers to quickly, easily, and autonomously integrate Sonde’s voice-enabled respiratory symptoms checker into their own iOS and Android mobile applications.
    • Sonde has collected over one million voice samples from over 80,000 subjects as a part of the ongoing validation of its platform, and it has also initiated research and development to expand its proprietary technology into Alzheimer’s disease, or AD, respiratory and cardiovascular disease, as well as other health and wellness conditions, including mental health.
  • Alivio Therapeutics, Inc. (PureTech ownership: 78.0%)
    • Alivio continued to advance its targeted disease immunomodulation platform for the potential treatment of chronic and acute inflammatory disorders. Alivio expects an IND filing for ALV-107 for interstitial cystitis or bladder pain syndrome, or IC/BPS, in 2021 and an IND for ALV-304 in IBD in 2023. Alivio is also evaluating the potential application of its proprietary platform to enable the oral administration of biologics in additional indications.
    • In October 2020, Alivio announced a $3.3 million U.S. Department of Defense, or DoD, Technology/Therapeutic Development Award to advance its therapeutic candidate, ALV-304, for the treatment of IBD. The funds will support Alivio’s preclinical research and development activities to potentially enable the IND filing.
  • Entrega, Inc. (PureTech ownership: 72.9%)
    • Entrega continued to advance its platform for the oral administration of biologics, vaccines and other drugs that are otherwise not efficiently absorbed when taken orally. As part of its collaboration with Eli Lilly, Entrega has continued to investigate the application of its peptide administration technology to certain Lilly therapeutic candidates. In 2020, the partnership was extended into 2021.

Founded Entities in which PureTech has an equity interest, in order of development stage:

  • Akili Interactive Labs, Inc. (PureTech ownership: 33.7%)
    • In June 2020, Akili received clearance from the FDA to market EndeavorRx™10 (AKL-T01) as a prescription treatment for improving attention function in children with attention-deficit/hyperactivity disorder, or ADHD. Delivered through a captivating video game experience, EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue. Akili plans to take a scaled approach to the commercial launch of EndeavorRx in 2021. The FDA clearance followed the April 2020 announcement that ENDEAVOR™ would be available for use for a limited time by children with ADHD and their families in response to new guidance from the FDA recognizing the need for access to certain low-risk clinically-validated digital health devices for psychiatric conditions, including ADHD, during the COVID-19 pandemic.
    • Also in June 2020, Akili announced that it had received approval to market EndeavorRx in Europe. Akili received a CE Mark certification for EndeavorRx as a prescription-only digital therapeutic intended for the treatment of attention and inhibitory control deficits in pediatric patients with ADHD. The CE Mark approval enables the future marketing of EndeavorRx in European Economic Area member countries. With a near-term focus on launching the EndeavorRx prescription treatment in the U.S. first, Akili is exploring expansion opportunities in Europe as part of its global strategy.
    • In the April 2021 post-period, Akili announced collaborations with Weill Cornell Medicine, NewYork-Presbyterian Hospital and Vanderbilt University Medical Center to evaluate Akili digital therapeutic AKL-T01 as a treatment for patients with cognitive dysfunction following COVID-19 (also known as “COVID brain fog”). Under each collaboration, Akili will work with research teams at each institution to conduct two separate randomized, controlled clinical studies evaluating AKL-T01’s ability to target and improve cognitive functioning in COVID-19 survivors who have exhibited a deficit in cognition.
    • In January 2020, Akili announced that its STARS Adjunct trial achieved its primary endpoint evaluating the effects of EndeavorRx in children with ADHD when used with and without stimulant medication. The study achieved its predefined primary efficacy outcome, demonstrating a statistically significant improvement in the ADHD Impairment Rating Scale, or IRS, from baseline after one month of treatment (p<0.001) in both children taking stimulant medications and in those not taking stimulants.
    • In February 2020, The Lancet Digital Health journal published the results from Akili’s STARS-ADHD pivotal trial of AKL-T01.
    • In October 2020, Akili announced multiple data presentations on EndeavorRx, including results from the STARS Adjunct trial, a multi-site open-label study designed to evaluate the impact of EndeavorRx on impairments in daily life in children with ADHD and inform prescribing practices. Also presented were analyses across four clinical trials of EndeavorRx, evaluating the impact of treatment on children’s attention function compared to normative ranges. The data were presented for the first time at the American Academy of Child and Adolescent Psychiatry, or AACAP, 2020 Virtual Annual Meeting.
    • In the March 2021 post-period, Nature Digital Medicine published the full results from the STARS Adjunct trial.
  • Vor Biopharma Inc. (PureTech ownership: 8.6%)
    • In the January 2021 post-period, Vor announced that the FDA had accepted the company’s IND application for VOR33. Vor plans to enroll the first patient in a Phase 1/2a clinical trial for VOR33 in the second quarter of 2021 and expects initial human engraftment and protection data from this trial to be reported in late 2021 or in the first half of 2022.
    • In the February 2021 post-period, Vor announced the pricing of its initial public offering of common stock on the Nasdaq Global Market under the symbol “VOR.” The aggregate gross proceeds to Vor from the offering were approximately $203.4 million, before deducting the underwriting discounts and commissions and other offering expenses payable by Vor.
    • In July 2020, Vor announced a $110 million Series B financing to advance VOR33 into clinical trials, deepen its portfolio and accelerate the validation of additional targets for its scientific platform.
    • In November 2020, Vor announced an exclusive licensing agreement with the National Cancer Institute, or NCI, part of the National Institutes of Health, or NIH, for intellectual property related to a clinical-stage anti-CD33 chimeric antigen receptor T cell, or CAR-T, therapy candidate, VCAR33. VCAR33 is currently being evaluated in a multi-site Phase 1/2 clinical trial in young adults and pediatric patients with relapsed or refractory acute myeloid leukemia, or AML, and Vor expects initial monotherapy clinical proof-of-concept data in 2022, depending on investigator’s timing of data release.
    • In January 2020, Vor held a pre-IND meeting with the FDA to gather feedback to assemble the data package for a potential IND filing.

PureTech Health today released its Annual Report for the year ended December 31, 2020. In compliance with the Financial Conduct Authority’s Listing Rule 9.6.3, the following documents have today been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

  • Annual Report and Accounts for the year ended December 31, 2020; and
  • Notice of 2021 Annual General Meeting.

Printed copies of these documents together with the Form of Proxy will be posted to shareholders. Copies are also available electronically on the Investor Relations section of the Company's website at https://investors.puretechhealth.com/financials-filings/reports.

PureTech’s 2021 Annual General Meeting (AGM) will be held on May 27, 2021 at 11:00am EDT / 4:00pm BST at PureTech’s headquarters, which is located at 6 Tide Street, Boston, Massachusetts, United States. Please note that in light of COVID-19, it will not be possible for the Directors to travel to the United Kingdom. The Company has therefore decided to hold the AGM in the United States where most of the Directors are resident.

The Company’s preference had been to welcome shareholders in person to the 2021 AGM, particularly given the constraints faced in 2020 due to the COVID-19 pandemic. However, at present, in light of the limits on international travel and the public health guidance issued in the UK and the US and in order to protect the wellbeing of PureTech’s people and shareholders, the Company is proposing to hold the AGM as a closed meeting with the minimum attendance required to form a quorum. Accordingly, shareholders will not be permitted to attend the AGM in person but can be represented by the Chair of the meeting acting as their proxy.

The Company continues to closely monitor the evolving situation in respect of COVID-19 and its forthcoming AGM. The health and welfare of the Company's shareholders, as well as its employees and partners, is the number one priority.

The Company appreciates that a number of its shareholders are not resident or located in the United States and asks shareholders to participate in the AGM by submitting any questions in advance and voting via proxy rather than attending in person. As such, any specific questions on the business of the AGM and resolutions can be submitted ahead of meeting by e-mail to ir@puretechhealth.com (marked for the attention of Dr. Bharatt Chowrira).

Shareholders are encouraged to complete and return their votes by proxy, and to do so no later than 4:00 pm (BST) on Tuesday May 25, 2021. This will appoint the chair of the meeting as proxy and will ensure that votes will be counted even though attendance at the meeting is restricted. Details of how to appoint a proxy are set out in the notice of AGM.

PureTech will keep shareholders updated of any changes it may decide to make to the current plans for the AGM. Please visit the Company’s website at www.puretechhealth.com for the most up to date information.

About PureTech Health

PureTech is a clinical-stage biotherapeutics company dedicated to discovering, developing and commercializing highly differentiated medicines for devastating diseases, including inflammatory, fibrotic and immunological conditions, intractable cancers, lymphatic and gastrointestinal diseases and neurological and neuropsychological disorders, among others. The Company has created a broad and deep pipeline through the expertise of its experienced research and development team and its extensive network of scientists, clinicians and industry leaders. This pipeline, which is being advanced both internally and through PureTech's Founded Entities is comprised of 26 products and product candidates, including two that have received FDA clearance and European marketing authorization. All of the underlying programs and platforms that resulted in this pipeline of product candidates were initially identified or discovered and then advanced by the PureTech team through key validation points based on the Company's unique insights into the biology of the brain, immune and gut, or BIG, systems and the interface between those systems, referred to as the BIG Axis.

For more information, visit www.puretechhealth.com or connect with us on Twitter @puretechh.

Cautionary Note Regarding Forward-Looking Statements

This press release contains statements that are or may be forward-looking statements, including statements that relate to the company's future prospects, developments, and strategies. The forward-looking statements are based on current expectations and are subject to known and unknown risks and uncertainties that could cause actual results, performance and achievements to differ materially from current expectations, including, but not limited to, our expectations regarding the potential therapeutic benefits of our product candidates and those of our Founded Entities, our expectations regarding 2021 milestones and timing, including with respect to clinical trial initiations and expected data readouts, our ability to broaden access to an international investor base, our cash runway and financial position as well as those risks and uncertainties described in the risk factors included in the regulatory filings for PureTech Health plc (including the risk factors in our 2020 Annual Report and Accounts). These forward-looking statements are based on assumptions regarding the present and future business strategies of the company and the environment in which it will operate in the future. Each forward-looking statement speaks only as at the date of this press release. Except as required by law and regulatory requirements, neither the company nor any other party intends to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Contact:

Investors

EU media

 

U.S. media

Allison Mead Talbot

+1 617 651 3156

amt@puretechhealth.com

Ben Atwell, Rob Winder

+44 (0) 20 3727 1000

ben.atwell@FTIconsulting.com

Stephanie Simon

+1 617 581 9333

stephanie@tenbridgecommunications.com

Notes

  1. Cash and cash equivalents held at PureTech Health plc and only wholly-owned subsidiaries (please refer to Note 1 to our consolidated financial statements for further information with respect to our wholly-owned subsidiaries) as of March 31, 2021. The measure includes cash outflows and inflows for the first quarter of 2021, particularly the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million on February 9, 2021. This represents a non-IFRS number. For a reconciliation of this number to IFRS, please see below under the heading "Financial Review.”
  2. Cash and cash equivalents held at PureTech Health plc and only wholly-owned subsidiaries (Please refer to Note 1 to our consolidated financial statements for further information with respect to our wholly-owned subsidiaries) as of December 31, 2020. This represents a non-IFRS number. For a reconciliation of this number to IFRS, please see below under the heading "Financial Review.”
  3. Cash and cash equivalents held at PureTech Health plc and consolidated subsidiaries (please refer to Note 1 to our consolidated financial statements for further information with respect to our consolidated subsidiaries) as of March 31, 2021. The measure includes cash outflows and inflows for the first quarter of 2021, particularly the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million on February 9, 2021.
  4. Cash and cash equivalents held at PureTech Health plc and consolidated subsidiaries (please refer to Note 1 to our consolidated financial statements for further information with respect to our consolidated subsidiaries) as of December 31, 2020.
  5. Funding figure includes private equity financings, loans and promissory notes, public offerings or grant awards. Funding figure excludes future milestone considerations received in conjunction with partnerships and collaborations such as those with Boehringer Ingelheim, Imbrium Therapeutics L.P., Shionogi & Co., Ltd. or Eli Lilly. Funding figure does not include Vor’s gross proceeds of $203.4 million from its February 2021 post-period IPO or Karuna’s gross proceeds of $269.8 million from its February 2021 post-period follow-on offering.
  6. Funding figure includes Vor’s gross proceeds of $203.4 million from its February 2021 post-period IPO and Karuna’s gross proceeds of $269.8 million from its February 2021 post-period follow-on offering.
  7. References in this report to “Wholly Owned Programs” refer to the Company’s four therapeutic candidates (LYT-100, LYT-200, LYT-210 and LYT-300), three discovery platforms and potential future therapeutic candidates and discovery platforms that the Company may develop or obtain. References to “Wholly Owned Pipeline” refer to LYT-100, LYT-200, LYT-210 and LYT-300.
  8. Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of December 31, 2020, including outstanding shares, options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Karuna ownership is calculated on an outstanding voting share basis as of March 4, 2021. Vor ownership is calculated on an outstanding voting share basis as of February 9, 2021.
  9. Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity. To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.
  10. EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.

Letter from the Chair

2020 was a year of important milestones and significant value creation for PureTech, capped off with a virtual team celebration as we rang the opening bell on Nasdaq in early January of 2021.

The bell ringing ceremony highlighted both our bold vision and our financial strength, as we entered the new year jointly listed on the London Stock Exchange and Nasdaq, while broadening access to an international investor base. Fueled by an exceptional team, powerful scientific insights and highly differentiated therapeutic candidates that have emerged from PureTech’s productive business model, we believe we are truly building the biopharmaceutical company of the future.

When I joined the board five years ago, PureTech was a cutting-edge R&D company advancing early-stage projects. During my time on the board, I have seen the company grow into a proven industry leader with an impressive track record that has yielded 26 innovative therapeutics and therapeutic candidates across our Wholly Owned Pipeline and our Founded Entities, including 15 programs in clinical development and two that have been cleared for marketing by the U.S. Food and Drug Administration and European authorities. As one metric of our rapid progress, consider that we advanced three programs from our Wholly Owned Pipeline into the clinic in the last two months of 2020. These programs include the global launch of one of the only clinical trials seeking to address the long-term sequelae of COVID-19 infection, a constellation of highly serious symptoms known as post-acute COVID-19 syndrome (PACS) or Long COVID, a clinical study for lymphedema, a painful and disfiguring condition that affects one million people in the U.S., and an oncology study evaluating the clinical properties of a novel monoclonal antibody for the potential treatment of intractable solid tumors.

To put it simply, PureTech’s story is one of innovation coupled with rapid growth. I can’t think of another company that comes close.

Our success rests firmly on our commitment to innovation – innovation in our pipeline, in our approach to raising and deploying capital and in the development of our team.

The story of scientific innovation and patient focus comes through loud and clear in the therapeutic clearances our Founded Entities received. Consider Gelesis’ Plenity®1, a novel approach to overweight and obesity: In just one month of limited promotion and marketing investment, Gelesis acquired more new patients on Plenity than any other branded prescription in the weight loss market. Additionally, Akili’s EndeavorRx™ received both FDA and European clearance in 2020, becoming the first prescription video game in the world. Both of these therapeutics, like those of all of our Founded Entities, were initially conceived of and advanced by the PureTech team, as part of our commitment to think well outside the box in addressing pressing medical needs for patients. Both are expecting a broader launch in the U.S. this year.

Innovation in capital deployment is the hallmark of our business strategy. The PureTech team spends a lot of time devising and executing what we call “killer” experiments – that is, experiments designed to take out potential programs by revealing their flaws. If a program survives this hurdle, we believe that it has been substantially de-risked, and deserves the commitment of additional resources. We are proud of our clinical track record, particularly in the stages where industry failures are typically high as depicted in the graphic on page 9. We have also engineered our Founded Entities to spread risk so that our fortunes do not rise and fall on the outcome of a single, binary readout. Our business model is unusual in the biopharma world, and it has served us exceptionally well.

Innovation in teamwork is the third pillar of our success. We build a global network of top-tier scientific collaborators to help identify promising ideas, solve knotty problems and apply scientific insights to new realms. These collaborators have been invaluable. But they wouldn’t take us far without the experienced team we have built to advance our R&D and clinical programs. Our rapid response to the emerging global crisis of Long COVID is an example of how agile and strategic our team is as we push ourselves to deliver breakthroughs for patients.

I am honored to be Chair of the board and to work closely with my colleagues on this remarkable board and team. I know my fellow board members join me in that sentiment. We were delighted to welcome two new members to the board in the past year: Kiran MazumdarShaw, a highly successful, pioneering biotech entrepreneur and passionate philanthropist, who joined in October of 2020 as an independent non-executive director, and Bharatt Chowrira, Ph.D., J.D., PureTech’s President and Chief of Business and Strategy, who has been with the Company since 2017 and was promoted to the Board in January of 2021. Also in January, we were pleased to welcome George Farmer, Ph.D., as our Chief Financial Officer. Dr. Farmer’s depth of experience as a biotech executive and equity analyst will serve us well as we set our business development strategy for the years ahead.

Additionally, in March of 2021, we announced that Stephen Muniz, Esq., will retire from his role as Chief Operating Officer and Corporate Secretary and will step down from the Board of Directors, effective May 17, 2021. On behalf of the Board, I would like to thank Steve for all of his hard work and leadership over the past 13 years.

I would also like to extend a sincere thank you to all of our shareholders for enabling our continued growth. As always, I am proud to be part of the PureTech team and I look forward to continued success in 2021.

Christopher Viehbacher

Chair

April 14, 2021

1   Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity. To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.

2   The cumulative percentages are calculated by multiplying the individual phase percentages included in the following footnotes.

3   The aggregate percentages include all therapeutic candidates advanced through at least Phase 1 by PureTech or its Founded Entities from 2009 onward, using the aforementioned calculation method based on the following individual phase percentages, Phase 1 (n = 6/7; 86%), Phase 2 (n = 9/10; 90%), Phase 3 (n = 2/3; 67%); Phase 2 and Phase 3 percentages include some therapeutic candidates where Phase 1 trials were not conducted by PureTech or its Founded Entities (i) due to the requirements of the medical device regulatory pathway or (ii) because a prior Phase 1 trial was conducted by a third party.

4   Industry average data measures the probability of clinical trial success of therapeutics by calculating the number of programs progressing to the next phase vs. the number progressing and suspended (Phase 1=63%, Phase 2=31%, Phase 3=58%). BIO, Biomedtracker, Amplion (2015) Clinical Development Success Rates 2006 – 2015. This study did not include therapeutics regulated as devices.

Letter from the Chief Executive Officer

Giving life to science by rapidly advancing scientific breakthroughs for patients.

With the COVID-19 pandemic sweeping the globe, the biopharma industry was challenged in 2020 to elevate its thinking and to seize big, bold ideas that could prove transformative for patients. We’ve all taken pride in the industry’s response to the pandemic, and rightfully so. I’m also immensely proud of PureTech’s response. Proud, but not surprised – because thinking big has been woven into our DNA from the beginning.

PureTech was founded to advance a singularly important mission: Develop groundbreaking medicines for serious diseases for which patients currently have few options, or none at all. We start with a clear-eyed assessment of the need. We then collaborate with the best scientific minds, identifying emerging discoveries that could help us meet our goals of inventing entirely new solutions when the current approaches are not sufficiently innovative. One telling statistic: Our global network of world-class scientists probing the Brain-Immune-Gut (BIG) Axis has published more than 25 papers describing research breakthroughs, many in top journals such as Cell, Nature and Science. In many cases, long before the rest of the world read about the discoveries, we had already secured the relevant intellectual property and ran crucial de-risking experiments to validate their therapeutic potential.

It has become clear in recent years that the BIG Axis and the crosstalk between those systems plays a critically important role in regulating health and disease. We have developed preeminent expertise in key components of the BIG Axis, including the gut epithelial barrier, the microbiome and – importantly – the lymphatic system, and those insights have translated into a highly promising and rapidly advancing pipeline. Across our Wholly Owned Pipeline and our Founded Entities, our R&D engine has delivered 26 therapeutics and therapeutic candidates, including 15 clinical-stage programs and two innovative therapeutics that are now on the market, having received regulatory clearances by the U.S. Food and Drug Administration (FDA) and European regulators.

Despite the challenges of operating in a pandemic, 2020 was a highly successful year for PureTech across the key areas of pipeline growth, clinical execution and financing. Here is a look at just a few of our scientific highlights from the past year:

  • We launched three trials of LYT-100 (deupirfenidone), our lead therapeutic candidate from our Wholly Owned Pipeline and had a successful readout from one of those trials, and the other two are ongoing. LYT-100 is currently being evaluated in a Phase 2 trial in Long COVID and a Phase 2a trial in lymphedema. Topline results from these trials are anticipated in the second half of 2021 and the first half of 2022, respectively. We are also planning registration-enabling studies in idiopathic pulmonary fibrosis (IPF) and potentially other progressive fibrosing interstitial lung diseases (PF-ILDs), for which we expect to provide additional guidance later this year. All three of these indications – Long COVID, lymphedema and progressive fibrosing lung diseases – represent underserved patient populations with limited or no existing treatment options.
  • We launched the first part of a Phase 1/2 trial of our monoclonal antibody LYT-200, which targets a foundational immuno-suppressive protein, galectin-9, preferentially expressed in multiple difficult-to-treat cancers. This trial in relapsed and refractory metastatic cancer patients is designed to evaluate safety and identify a recommended Phase 2 dose for potential further evaluation in combination with chemotherapy and an anti-PD-1 immunotherapy, and we also believe that there is potential for LYT-200 to advance as a monotherapy. We anticipate topline results from the first stage of the study in the fourth quarter of 2021.
  • We advanced work on LYT-300, an exciting new candidate generated from our expertise and focus in lymphatics. LYT-300 is an oral form of the natural neurosteroid allopregnanolone. An IV version of allopregnanolone, also known as brexanolone, is approved by the FDA to treat postpartum depression. The FDA-approved product is infused over 60 hours. We leveraged our Glyph™ technology platform, which is designed to employ the body’s natural lipid absorption and transport process to send oral drugs into the lymphatic system, to develop LYT-300. We believe that the oral bioavailability demonstrated in our preclinical work creates significant potential for LYT-300, as an oral dosing regimen may unlock a range of neurological indications.
  • Our Founded Entity Akili received clearance from the FDA as well as European marketing authorization for the first prescription treatment delivered through a video game, EndeavorRx, designed for children with attention deficit hyperactivity disorder (ADHD). Cognitive dysfunction is a key feature of many neuropsychiatric disorders, including ADHD, which affects approximately 6.4 million pediatric patients in the United States. The treatment of the cognitive dysfunction associated with these conditions is only partially served, or not served at all, by currently available medications or by in-person behavioral therapy.
  • Our Founded Entity Gelesis received European marketing authorization for its lead product Plenity, an innovative treatment for obesity that was cleared by the FDA with a label that extends to the broadest patient population of any prescription weight management product. Excess weight is growing rapidly in prevalence worldwide, with approximately 70 percent of American adults struggling with overweight and obesity. Globally there are more than 1.9 billion adults 18 years of age or older who have overweight and 600 million who have obesity. Current treatment options are associated with safety concerns, lifestyle impact, complexity of use, high cost and compliance issues that have limited their adoption.
  • Our other Founded Entities, which we are proud to have invented the underlying platforms and programs for, continued to advance pioneering pipelines. Highlights include:
  • Karuna (Nasdaq: KRTX) announced the initiation of its Phase 3 program evaluating KarXT for the treatment of acute psychosis in adults with schizophrenia; there are currently no existing medicines that sufficiently and safely treat psychosis and negative and cognitive symptoms.
  • Vedanta Biosciences is advancing four clinical-stage therapeutic candidates based on rationally-defined consortia of human microbiome-derived bacteria, with results from two clinical trials expected in 2021. All of Vedanta’s therapeutic candidates are designed to address immune-mediated diseases for which existing treatment options have undesirable side effects or are ineffective for many patients.
  • Vor Biopharma (Nasdaq: VOR) expects to enroll the first patient in a Phase 1/2a clinical trial for VOR33 in the second quarter of 2021 for its engineered hematopoietic stem cell therapy for the treatment of acute myeloid leukemia (AML), while its potential companion therapeutic, VCAR33, is currently being evaluated in an investigator-initiated Phase 1/2 clinical trial. Existing targeted therapies for AML frequently cause substantial toxicities, limiting their potential, so there is a need for new strategies.

In other words, we are making substantial, and exciting, progress for patients. We are giving life to breakthrough science.

On top of the scientific and clinical advances, we continued to solidify our financial presence, as exemplified by our listing on Nasdaq in November. We remain listed on the London Stock Exchange and a member of the FTSE 250; this joint listing on Nasdaq expands our access to capital in the U.S. as well as Europe. We have long worked with scientists and physicians around the world in our drive to bring novel therapeutics to patients, and we are proud to have expanded our global reach to the investor community as well.

LYT-100: A case study for our R&D model

Our development program for LYT-100 is the perfect case study of our R&D model and is emblematic of our commitment to leveraging our extensive knowledge of the BIG Axis and lymphatic biology on behalf of patients with serious unmet need. The LYT-100 story also underscores our commitment – distinctive in the biotech world – to follow the science wherever it takes us, and to move nimbly and strategically to seize new opportunities which hold significant potential value for patients and shareholders alike.

Our unique insights into the biology of the lymphatic system led us to identify LYT-100 and acquire its related intellectual property in 2019. The story of LYT-100 is illustrative of our approach to pipeline development at PureTech. Our foundational insights into the lymphatic biology and related immunology that underly the BIG Axis prompted us to recognize the role of inflammation and fibrosis in lymphedema, a major underserved disorder of the lymphatic system. While investigating this pathway, we were able to tap into our network of scientific and business collaborators to identify unpublished data on the approved drug pirfenidone. That, in turn, led us to LYT-100. Why were we so interested? The goal in designing LYT-100, a deuterated, oral small molecule, is to have a differentiated profile, which may overcome some of the historic challenges associated with pirfenidone, an approved and marketed anti-inflammatory and anti-fibrotic drug for the treatment of IPF. Pirfenidone is effective, but it is associated with significant tolerability issues and requires frequent dosing. As a result, about half of patients discontinue treatment, dose adjust or switch therapies, which leads to suboptimal disease management. We are developing LYT-100 to offer a differentiated safety profile compared to current standard of care drugs, which may support improved patient compliance not only in IPF but also a wide range of other inflammatory and fibrotic diseases.

In keeping with our commitment to put all our programs to a rigorous test before investing heavily in clinical development, we launched a randomized, double-blind multiple ascending dose and food effect study of LYT-100 in healthy subjects in 2020. We reported the results this past fall: The study demonstrated favorable proof-of-concept for LYT-100’s tolerability and pharmacokinetic profile and paved the way for twice-a-day dosing without regard to meals in future studies. We believe this work substantially de-risked the program and opened the door for potentially rapid clinical development.

We are deeply excited about LYT-100 because we believe it has substantial potential to treat a wide range of interstitial lung diseases (ILDs), including IPF and other progressive fibrosing ILDs. These are devastating and often deadly diseases that collectively affect approximately 200,000 people in the U.S. alone. We aim to bring patients new hope and more therapeutic options given the devastating nature of the disease and limitations with current standards of care.

LYT-100 also has strong potential in lymphedema, a serious chronic condition that affects roughly one million people in the U.S. This disease, which leads to painful and sometimes disfiguring swelling, is particularly devastating for breast cancer patients, who have no treatments other than compression bandages and physical therapy. At PureTech, we maintain a laser focus on debilitating diseases with inadequate treatment options, and this population certainly meets that criteria. We are hopeful we can bring these patients relief with LYT-100. Our Phase 2a proof-of-concept study is enrolling patients with breast cancer-related, upper limb secondary lymphedema; we expect to report topline results in the first half of 2022.

The LYT-100 story is also a window into the way we at PureTech can move nimbly and with great speed to address unexpected challenges.

By late spring of 2020, as the COVID pandemic surged, we were starting to hear deep concerns from our network of leading pulmonologists about the long-lasting effects of the infection. They were seeing patients who had recovered from the acute phase of their illness and had been discharged from the hospital – yet who continued to suffer from severe shortness of breath, deep fatigue and muscle weakness that significantly limited their ability to return to their daily activities. This long-lasting respiratory dysfunction, along with other serious and persistent symptoms, would later be designated Long COVID or PACS. The symptoms appear to mimic respiratory complications of other viral pneumonias like Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS), and up to one third of SARS and MERS survivors had abnormal pulmonary testing and lung imaging that persisted for years. Testimony from Long COVID-affected patients and epidemiological studies published in The Lancet and elsewhere confirmed the serious nature of this threat, which the World Health Organization has called a top priority for research in 2021 and the United States Congress has given the National Institutes of Health over $1 billion to study.

We quickly recognized that LYT-100’s anti-fibrotic and anti-inflammatory properties had the potential to address the debilitating sequelae of COVID infection. We knew we had an obligation to evaluate this potential as quickly as possible, and I am proud to say that our team moved mountains to rapidly assess the unmet need, establish protocols and secure regulatory approvals for a global clinical study. Within months, we had launched a randomized, placebo-controlled Phase 2 trial of LYT-100 in Long COVID – one of just a handful of clinical programs worldwide to evaluate a potential therapy for this condition, which could affect a substantial portion of the over 125 million people worldwide who have been infected with COVID-19. We are enrolling in both the U.S. and Europe and expect a readout in the second half of 2021.

Our innovative approach to R&D continues to shape the growth of our Wholly Owned Pipeline. We are quite excited about our two anti-cancer monoclonal antibodies, LYT-200 and LYT-210. And we are also eager to initiate a clinical trial with LYT-300 later this year. We see substantial potential for LYT-300 in a wide array of neurological and neuropsychological conditions where patients have been waiting for far too long for effective treatments.

Strong financing to support focused development

At the start of 2021, we celebrated PureTech’s U.S. listing on Nasdaq with a virtual bell ringing ceremony. It was a wonderful opportunity both to mark how far we’ve come and to look ahead with pride and confidence at our opportunities to build additional value for shareholders while potentially providing enormous value for patients. We were delighted to be joined at the bell ringing by our new chief financial officer, George Farmer, Ph.D., an experienced financial analyst and biotech executive who joined our management team in January 2021.

At the PureTech level, we are well-capitalized with cash resources into the first quarter of 2025. Our strong financial position is the result of our unique strategy, which allows us to derive value from the equity growth of our Founded Entities. In 2020, we generated cash proceeds of $350.6 million from the sales of equity in our Founded Entities, and in February 2021 we generated an additional $118 million. This approach provided us with access to non-dilutive funding for our operations and growth and to further expand and advance our Wholly Owned Programs, while still maintaining significant equity ownership across our Founded Entities.

The Founded Entities are also well-capitalized, having raised $1.2 billion from January 2017 through the end of 2020, with an additional $473.2 million so far in the 2021 post-period. In the most recent financial milestone, Vor Biopharma completed a successful Nasdaq IPO in February of 2021, raising $203.4 million in gross proceeds before deducting the underwriting discounts and commissions and other offering expenses.

We are well-positioned for the exciting year ahead, which we expect to include multiple value drivers across our Wholly Owned Programs and our Founded Entities, including at least 10 expected clinical study initiations and nine expected readouts. In addition, we look forward to a broader U.S. launch of Gelesis’ Plenity and Akili’s EndeavorRx.

I would like to thank the entire PureTech team on their resilience this year as we accomplished historic milestones as an organization while navigating remote working and the emotional strain of a global pandemic. I would also like to extend my gratitude to our tremendous Board and R&D Committee for their wise counsel and strategic oversight. We are fortunate to have a dedicated team and outstanding scientific collaborators who remain committed to developing highly differentiated medicines for patients in dire need of better options. To our shareholders: Thank you for your vision and continued support over the last year.

Above all, we thank the patients and clinicians working alongside us in our clinical trials. We are grateful for your support, humbled by your trust and inspired by your courage. You make possible the medical advances of the future.

We look forward to another transformational year focused on giving life to science and making a difference for patients – together.

Daphne Zohar

Founder, Chief Executive Officer and Director

April 14, 2021

1   $200.9 million in proceeds from the January 22, 2020 sale of 2.1 million Karuna common shares, $45.0 million in proceeds from the May 25, 2020 sale of 555.5 thousand Karuna common shares and $3.0 million in proceeds from the April 30, 2020 sale of 2.1 million resTORbio common shares.

2   EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.

3   Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19 syndrome (PACS).

4   $101.6 million in proceeds from the August 26, 2020 sale of 1.3 million Karuna common shares.

5   Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity. To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.

6   For more information in relation to the PureTech Level Cash and Cash Equivalents and Consolidated Cash and Cash Equivalents measures used in this Annual Report, please see pages 75 and 76 of the Financial Review.

Letter from the Chief Innovation Officer and the Chief Scientific Officer

2020 was a transformational year for PureTech’s pipeline. For the first time, two therapeutic candidates from within our Wholly Owned Pipeline entered the clinic, and over the course of just twelve months, we initiated a total of four clinical trials evaluating these candidates across three different indications, with one trial reading out successfully so far for LYT-100. Additionally, we grew our Wholly Owned Pipeline with the nomination of a new therapeutic candidate, LYT-300 (oral allopregnanolone) that was born from one of our three discovery platforms and for which we expect to initiate a clinical trial by the end of this year. For PureTech, this progress is both characteristic of our R&D engine that has yielded 26 therapeutics and therapeutic candidates being advanced via our Wholly Owned Pipeline and our Founded Entities, and it is demonstrative of our strategic shift to retain full ownership in our innovations as we advance our Wholly Owned Pipeline.

This momentum was not stymied by the global pandemic that changed so much about the world in 2020. In fact, as the pandemic threw down a gauntlet to therapeutic innovators, we were all challenged to think boldly, move nimbly and harness minds and resources to meet this immense public health challenge. This global response is akin to PureTech’s distinctive approach to R&D: We start with the unmet need, identify the ideal solution, put the brightest minds on discovery, aggressively evaluate feasibility, and then pursue development with scientific rigor and the input of world-leading experts.

Leveraging our leadership in understanding of the immune system, we applied our R&D approach to identifying LYT-100, an exciting therapeutic candidate with potential to treat several important serious conditions of high unmet need. Based on a substantial body of data, we are developing LYT-100 for multiple therapeutic indications involving inflammation, fibrosis and disorders of lymphatic flow, including progressive fibrosing interstitial lung diseases such as idiopathic pulmonary fibrosis (IPF), lymphedema and severe respiratory sequelae of COVID-19, which is now commonly called “Long COVID” or post-acute COVID-19 syndrome (PACS). The common thread? Immune dysfunction and fibrosis.

PureTech has been developing expertise in immunology for years. We have continued to deepen our focus on the BIG Axis of the Brain, Immune and Gut – complex and dynamic modulatory systems that enable us to respond in healthy ways to changing circumstances but that, when disrupted, give rise to a wide range of diseases. The BIG Axis is tied together by the 3,500 kilometers of lymphatic vessels that thread our bodies, studded with highly specialized nodes that filter and train immune cells for their local tissues. That vast lymphatic system is not just a passive vessel for fluid but a vibrant organ with an active and important role in regulating the immune system.

Our understanding of the importance of this system led us to LYT-100 (deupirfenidone), a new chemical entity which retains the pharmacology of pirfenidone – an FDA-approved treatment for IPF that has been granted FDA Breakthrough Therapy designation in unclassifiable interstitial lung diseases (ILDs) – but which has a differentiated pharmacokinetic profile. We will be evaluating whether LYT-100 can offer tolerability and efficacy with less frequent dosing, and our goal is to mitigate some of the GI-related tolerability issues that have historically been associated with pirfenidone and limited its usage. LYT-100 has been observed to reduce pro-inflammatory cytokines IL-6 and TNF-α in preclinical models. Both cytokines may be involved in the hyperinflammatory response to external assault such as virus infection. LYT-100 is also anti-fibrotic and suppresses TGF-β induced production of scar tissue components such as collagen.

We are building on a comprehensive body of research evaluating LYT-100. A foundational milestone came in the fall of 2020, when we reported results from a Phase 1 multiple ascending dose and food effect study. LYT-100 was well-tolerated at all pre-specified doses, with a favorable pharmacokinetic profile. All adverse events that were possibly or probably related to LYT-100 were mild and transient and there were no discontinuations of subjects while taking LYT-100. These results provided strong proof-of-concept for the potential tolerability of LYT-100, and we moved rapidly to initiate two Phase 2 clinical trials for LYT-100.

The first study is in Long COVID. This is one of just a handful of clinical trials anywhere in the world to assess a potential therapy for this serious public health threat. Our decision is based not only on the results of the Phase 1 study, but also on a substantial body of preclinical research. The second study is in lymphedema, a debilitating condition that affects approximately one million people in the U.S., and is particularly prevalent in women recovering from breast cancer. There is currently no approved pharmaceutical treatment for lymphedema.

Idiopathic pulmonary fibrosis (IPF) and potentially other progressive fibrosing interstitial lung diseases (PF-ILDs)

Because of the unique properties demonstrated with LYT-100, we are now planning registration-enabling studies of LYT-100 for IPF and potentially other PF-ILDs, which represent a deep area of underserved medical need and substantial commercial opportunities, and we expect to provide additional guidance later this year. There are approximately 200,000 people living with PF-ILDs, including IPF, in the United States. IPF is a progressive condition characterized by irreversible scarring of the lungs, which worsens over time and makes it difficult to breathe. The prognosis of IPF is poor, with the median survival after diagnosis generally estimated at two to five years.

Current treatments for PF-ILDs, including pirfenidone (approved for IPF only) and nintedanib, have serious limitations, particularly GI-related tolerability issues. In fact, one large, multinational post-marketing analysis of about 11,000 patients with IPF found that only about 13 percent were receiving pirfenidone during a follow-up period of approximately five years. We believe a therapeutic compound that improves upon tolerability, dosing frequency and the overall clinical profile of pirfenidone, while retaining or exceeding its efficacy, would be an attractive therapeutic option for IPF and potentially other PF-ILDs, and we intend to communicate our clinical development plans for LYT-100 later this year.

Groundbreaking Phase 2 clinical trial for Long COVID

The COVID-19 pandemic has affected over 125 million people around the world, and there is increasing data around the longer-term complications of COVID-19, referred to as Long COVID or PACS, including data regarding respiratory issues that persist following recovery. Survivors of the virus can have lung fibrosis that causes shortness of breath and other problems that could potentially last for years, and a high proportion of mild, moderate and severe COVID-19 patients (up to 53 percent in one study) already show signs of lung fibrosis at three weeks post symptom onset. We have now embarked on a global, randomized, double-blind, placebo-controlled Phase 2 trial designed to evaluate the efficacy, safety, and tolerability of LYT-100 in adults with post-acute COVID-19 respiratory complications. The primary endpoint is a standardized test of how far a patient can walk in six minutes. Secondary endpoints, including pharmacokinetics, inflammatory biomarkers, imaging and patient-reported outcomes will also be evaluated. The study is ongoing initiated in both the United States and Europe; results are expected in the second half of 2021.

Phase 2a study of LYT-100 in lymphedema

In 2020, we also initiated a Phase 2a trial of LYT-100 in lymphedema to explore clinical efficacy endpoints in patients with breast-cancer related, upper limb secondary lymphedema. Lymphedema is a debilitating condition that affects approximately one million people in the U.S., and it is particularly prevalent in women recovering from breast cancer. It can lead to painful and disfiguring swelling and recurring infections, yet there are no approved drugs and little relief for patients other than compression bandages, physical therapy and massage. This is particularly unfortunate as the lymphatic damage induces a vicious feedback loop of inflammation and fibrosis with immune infiltration of tissues. It is a biochemical process – so while physical treatments offer palliation, a therapeutic approach is urgently needed.

The randomized, placebo-controlled, Phase 2a proof-of-concept study of LYT-100 is expected to enroll up to 50 patients. The primary endpoints will be safety and tolerability, with secondary clinical efficacy and biomarker endpoints. Results are expected in the first half of 2022.

Anti-cancer programs: LYT-200 targeting galectin-9 and LYT-210 targeting gamma delta-1 T cells

We have also made great strides in our anti-cancer programs, both of which are built around fully human monoclonal antibodies that target foundational immunosuppressive mechanisms. We see potential for both LYT-200 and LYT-210 as single agents as well as in combination with checkpoint inhibitors and other anti-cancer treatments.

We were thrilled to launch a Phase 1 trial of LYT-200 in December. The adaptive trial design will assess the safety and tolerability of escalating doses of LYT-200. Results are expected in the fourth quarter of 2021, and we may then proceed with a chosen dose into Phase 2. We shared the strong preclinical data supporting LYT-200 and its target, galectin-9, at the American Association for Cancer Research 2020 Virtual Annual Meeting. Galectin-9 is an immuno-suppressive protein prominently expressed in multiple difficult-to-treat cancers, including breast cancer, pancreatic and cholangiocarcinoma. Analysis of a vast data set suggested that high galectin-9 levels in tumor cells and immune cells within the tumor microenvironment (TME) are associated with shorter time to cancer relapse as well as with an immuno-suppressed TME phenotype in a number of solid tumors. Additionally, a recent study published in Nature Communications identified the molecular mechanism by which PD-1 and galectin-9 interact to shield tumors from the immune system, demonstrating for the first time that galectin-9 is a ligand for PD-1 and emphasizing its importance as a promising target for immunotherapy. Data suggests galectin-9 may also be an informative biomarker to enrich future clinical studies, a hypothesis we are further exploring with the support of a grant received from the Department of Defense (DOD) in the fall of 2020.

Our preclinical LYT-210 program continues to show promise and support our development rationale that immunosuppressive gamma delta-1 T cells correlate with more aggressive disease in a range of tumor types. To date, both in vivo and in vitro research demonstrates that targeting these T cells can stimulate an anti-cancer immune response and may be synergistic with checkpoint inhibitors.

LYT-300: Leveraging lymphatic targeting through the Glyph™ platform

We further expanded our Wholly Owned Pipeline in 2020 with the nomination of LYT-300, which will be entering the clinic this year.

LYT-300 is an oral form of a natural neurosteroid called allopregnanolone, an IV version of which has been approved by the Food and Drug Administration to treat postpartum depression and is administered over the course of 60 hours, under medical supervision, which is a high treatment burden for any patient. Allopregnanolone has been recognized for its therapeutic potential in a range of neurological and neuropsychological conditions, including epilepsy, anxiety, depression, essential tremors and sleep disorders. Allopregnanolone belongs to a class of natural neurosteroids whose important role in a range of neurological conditions is well established; however, these neurosteroids are not orally bioavailable, which has greatly limited their evaluation as potential therapeutics. Making these natural neurosteroids, such as allopregnanolone, orally bioavailable could potentially allow for their development against a number of neurological conditions.

Our approach: our Glyph technology platform, which employs the body’s natural lipid absorption and transport process to send oral drugs into the lymphatic system and bypass first-pass metabolism by the liver. We essentially coopt the incredible system of lymphatics vasculature to create an option for drug distribution that bypasses natural barriers and keeps the compound from being destroyed by the liver. We have demonstrated mechanistic proof-of-concept of LYT-300 (oral allopregnanolone) in vivo and intend to initiate a Phase 1 clinical trial by the end of 2021.

Additional novel therapeutic platforms: Orasome™ and meningeal lymphatics

Glyph is just one of our three novel therapeutic platforms, each of which enriches our drug discovery process with highly versatile technology. Our Orasome technology platform was inspired by the in vivo trafficking of ubiquitous, naturally occurring vesicles, which are often referred to as exosomes, and our platform utilizes multiple vesicle components, including those isolated from milk. We have engineered these vesicles to remain stable following oral consumption and transit through the upper GI tract. We are now able to purify these vesicles in substantial quantities and have successfully packed a variety of different molecular entities within them. We are exploring using these vesicles to deliver nucleic acids such as mRNA and other expression systems that could instruct the body to make its own proteins. These hardy vesicles could also be leveraged as a convenient and far less costly way to administer biological medicines in oral form. We expect preclinical proof-of-concept and non-human primate data this year.

Finally, we are leveraging the incredible discovery of the brain’s lymphatic network – located in the meninges – to evaluate a wide range of therapeutic possibilities. Correcting neurological lymphatic dysfunction could provide an avenue into treating multiple neurodegenerative and neuroinflammatory conditions that have largely resisted drug development efforts, such as Alzheimer’s disease and Parkinson’s disease. PureTech is building deep expertise around the anatomy and physiology of this novel system to understand its involvement in disease and ways to modulate its function. A collection of our research insights into this fascinating new area of medicine will be submitted to a peer-reviewed publication in 2021.

Although this has been a hard year for all of us in many ways, we are proud of the significant achievements of PureTech’s stellar scientific and clinical teams. The challenges of the COVID-19 pandemic have made us all even more aware of the vital importance of our work and the urgency of patient need. Our team has demonstrated an agility, resourcefulness and strategic mindset that enabled us to respond nimbly to the pandemic while advancing a rapidly growing clinical pipeline of potentially important therapeutic candidates and a diverse and exciting research portfolio. We congratulate our team on rallying to meet the needs of the moment, working patiently through the heightened health precautions we have adopted, and opening new horizons for lymphatic-based therapeutic approaches and related immunology. Throughout this year, we have all experienced the joy of discovery and the satisfaction of advancing important programs to meet profound medical needs. We are also incredibly grateful to the patients, volunteers and caregivers participating in our clinical studies who are making invaluable contributions to research that could potentially improve treatment outcomes for so many.

We look forward to the discoveries and milestones to come as we continue to accelerate the growth of PureTech’s Wholly Owned Programs.

Dr. Joseph Bolen

Chief Scientific Officer

Dr. Eric Elenko

Chief Innovation Officer

April 14, 2021

How PureTech is building value for investors

We are a clinical-stage biotherapeutics company dedicated to discovering, developing and commercializing highly differentiated medicines for devastating diseases, including inflammatory, fibrotic and immunological conditions, intractable cancers, lymphatic and gastrointestinal diseases and neurological and neuropsychological disorders, among others.

The therapeutic candidates within our Wholly Owned Pipeline and the therapeutics and therapeutic candidates being developed by our Founded Entities were initiated by our experienced research and development team and our extensive network of scientists, clinicians and industry leaders.

We established the underlying programs and platforms that have resulted in 26 therapeutics and therapeutic candidates that are being advanced within our Wholly Owned Programs or by our Founded Entities. Of these therapeutics and therapeutic candidates, 15 are clinical-stage and two have been cleared for marketing by the FDA and granted marketing authorization in the European Economic Area, or EEA, and in other countries that recognize the CE Mark. Our Non-Controlled Founded Entities are advancing 10 of these therapeutic candidates, including two that are currently in Phase 3/Pivotal studies, as well as two FDA-cleared therapeutics. Our Controlled Founded Entities are advancing 10 of these therapeutic candidates, including one that is expected to enter a Phase 3 study and three that are in Phase 2 development, and we are advancing four of these therapeutic candidates within our Wholly Owned Pipeline. We and our Founded Entities have relationships with several pharmaceutical companies or their investment arms to advance some of the programs and platforms underlying these therapeutics and therapeutic candidates.

All of these underlying programs and platforms were initially identified or discovered and then advanced by our team through key validation points based on our unique insights into the biology of the Brain, Immune and Gut, or BIG, systems and the interface between those systems, which we refer to as the BIG Axis. The architectural framework supporting BIG Axis cross-talk is built on evidence highlighting the presence of 70 percent of the entire immune cell population in the gut, approximately 500 million neurons innervating the gastrointestinal, or GI, tract, enteric neurons as part of the autonomic nervous system and key components such as the gut epithelial barrier, microbiome, metabolites and neurotransmitters that play key roles in protecting and influencing the immune system and central nervous system, or CNS.

We are led by a proven and seasoned management team of business leaders with significant experience in discovering and developing important new medicines, delivering them to market and maximizing shareholder value. Collectively, the members of our management team have overseen research and development of therapeutics supporting 23 regulatory approvals and have served in the C-suite of companies acquired for more than $13 billion in the aggregate.

Our team, network and expertise in the BIG Axis enable us to identify and advance scientific discoveries at the interface of the BIG systems. We begin by collaborating with a cross-disciplinary group of experienced clinicians and the world’s leading experts in brain, immune and gut biology in a discovery process that breaks down specific diseases and comprehensively identifies, reviews and empirically tests unpublished scientific discoveries in a modality agnostic and unbiased way. Our model, which employs (1) this collaborative process leveraging our biological expertise in the BIG axis and our scientific network, (2) a disciplined approach to program advancement, and (3) a capital efficient approach to driving clinical developments and value creation, has enabled us to rapidly convert these findings into promising therapeutic candidates.

Historically, we have developed these programs and therapeutic candidates with strategic allies, including equity partners who helped us to advance those programs via our Founded Entities. As these programs have succeeded and our resources have grown, we have increasingly focused on our Wholly Owned Programs. Our Wholly Owned Programs are designed to harness key immunological, fibrotic and lymphatic system mechanisms. They currently consist of LYT-100, a clinical-stage therapeutic candidate we are developing for inflammatory and fibrotic conditions and disorders of lymphatic flow, LYT-200, a clinical therapeutic candidate targeting a foundational immunosuppressive protein, galectin-9, which we are developing as a potential treatment of solid tumors, LYT-210, a preclinical therapeutic candidate targeting immunomodulatory gamma delta-1 T cells, which we are developing for a range of cancer indications and autoimmune disorders, and LYT-300, a preclinical therapeutic candidate, which we intend to develop for a range of neurological and neuropsychological conditions. Our Wholly Owned Programs also include three discovery platforms: Glyph™ – our synthetic lymphatic targeting chemistry platform – and Orasome™ – our oral biotherapeutics platform – both of which leverage absorption of dietary lipids to traffic therapeutics via the lymphatic system, and our meningeal lymphatics discovery research program for treating neurodegenerative and neuroinflammatory diseases.

Components of our Value

The table to the right depicts the four components of our value: (1) our Wholly Owned Programs, (2) Founded Entities that we have a controlling interest in or from which we are entitled to receive royalty payments, (3) Founded Entities where our interest is limited to our equity ownership and (4) our available cash, cash equivalents and short-term investments at the PureTech level.

We hold majority voting control of our Controlled Founded Entities and continue to play a role in the development of their therapeutic candidates through representation on their board of directors, with respect to Follica, Vedanta, Alivio and Sonde. Our board designees represent a majority of the members of the board of directors of Follica, Vedanta and Alivio and a minority of the members of the board of directors of Sonde. With respect to our Non-Controlled Founded Entities, we do not hold majority equity ownership and are not responsible for the development or commercialization of their therapeutic candidates and therapeutics. Our Non-Controlled Founded Entities have independent management teams, and we do not control the day-to-day development of their respective therapeutic candidates.

1. Our Wholly Owned Programs. We are focused on the advancement of our Wholly Owned Programs and delivering value to our shareholders by driving our Wholly Owned Programs to key clinical and commercial milestones, while continuing cutting edge research and development efforts to discover and advance new therapeutic candidates. The table to the right includes a summary of our Wholly Owned Programs and their development status.

2. Founded Entities with Controlling Interest or Right to Receive Royalties. The table to the right summarizes, in order of development stage, the therapeutic candidates being developed by our Founded Entities in which we either have a controlling interest or the right to receive royalty payments. We established the underlying programs and platforms that have resulted in the therapeutic candidates noted in the table and advanced them through key validation points. Each of these therapeutic candidates targets indications related to one or more of the BIG systems, and any value we realize from these therapeutic candidates will be through the potential growth and realization of equity and royalty stakes highlighted in the table to the right.

3. Founded Entities Limited to Equity Interest. We also hold equity ownership in our Non-Controlled Founded Entities, Akili and Vor. The table to the right describes these entities, in order of development stage. Our interest in the therapeutic candidates of these entities is limited to the potential appreciation of our equity interest in these entities.

4. Cash and Cash Equivalents. We had PureTech level cash and cash equivalents of $443.4 million as of March 31, 2021 and $349.4 million as of December 31, 202010.

1   The FDA and corresponding regulatory authorities will ultimately review our clinical results and determine whether our wholly-owned therapeutic candidates are safe and effective. No regulatory agency has made any such determination that our wholly-owned therapeutic candidates are safe or effective for use by the general public for any indication.

2   Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19 syndrome (PACS).

3   Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of December 31, 2020, including outstanding shares, options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Karuna ownership is calculated on an outstanding voting share basis as of March 4, 2021. Vor ownership is calculated on an outstanding voting share basis as of February 9, 2021.

4   With the exception of Plenity®, candidates are investigational and have not been cleared by the FDA for use in the United States.

5   PureTech Health has a right to royalty payments as a percentage of net sales.

6   These therapeutic candidates are regulated as devices and their development has been approximately equated to phases of clinical development.

7   Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity. To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.

8   Contingent on FDA review of the research plan.

9   EndeavorRx™ is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.

10 For more information in relation to the PureTech Level Cash and Cash Equivalents and Consolidated Cash and Cash Equivalents measures used in this Annual Report, please see pages 75 and 76 of the Financial Review.

Key Pipeline Components and Expected Milestones Through 2021

Through 2021, we anticipate many significant potential milestones across our Wholly Owned Programs and Founded Entities, including at least nine clinical readouts, at least 10 clinical trial initiations and the full commercial rollout of two therapeutics. Of these, five clinical readouts and four clinical trial initiations are anticipated within our Wholly Owned Programs. Additionally, we expect the continued progress of discovery and preclinical programs, as well as the potential for additional strategic partnerships and transactions and the growth of value through our equity and royalty holdings in our Founded Entities. Our Wholly Owned Programs and certain of our Founded Entities’ programs that contribute to our value are as follows:

Our Wholly Owned Programs Harnessing Immunological and Lymphatic System Mechanisms:

LYT-100, Our Lead Clinical-Stage Therapeutic Candidate Targeting a Range of Inflammatory, Fibrotic, Lymphatic Flow Disorders and Other Related Indications: We are advancing our wholly-owned therapeutic candidate LYT-100 for the potential treatment of inflammatory and fibrotic conditions and disorders of lymphatic flow, including lung dysfunction conditions (e.g., IPF and potentially other PF-ILDs and Long COVID respiratory complications and related sequelae) and lymphedema. In November 2020, we announced the completion of a Phase 1 multiple ascending dose and food effect study, which demonstrated favorable tolerability and PK proof-of-concept for LYT-100. In December 2020, we announced the initiation of a Phase 2a proof-of-concept study of LYT-100 in patients with breast cancer-related, upper limb secondary lymphedema, with topline results anticipated in the first half of 2022. In December 2020, we announced the initiation of a Phase 2 trial in Long COVID respiratory complications and related sequelae in both the United States and Europe. Topline results are expected in the second half of 2021. We are also advancing LYT-100 for the treatment of IPF and potentially other PF-ILDs, and are planning registration-enabling studies and expect to provide additional guidance later this year. Furthermore, we plan to initiate additional clinical trials of LYT-100 in 2021 to explore further the PK, dosing and tolerability in healthy volunteers. One of these trials is an extension of the previously completed MAD study, in which the maximum tolerated dose was not reached. Results from these trials are anticipated in 2021 and are expected to provide additional supportive data to help with the clinical development of LYT-100 across indications. We have an active IND on file with the FDA for LYT-100.

LYT-200 and LYT-210, Two Immuno-Oncology, or IO, Therapeutic Candidates Harnessing Key Immune Cell Trafficking and Programming Mechanisms: The lymphatic system plays a crucial role in programming immune cells for precise functions and trafficking them to specific tissues. By modulating immune cell trafficking and programming, we are developing therapeutic candidates for the potential treatment of cancer and other immunological disorders. We are advancing LYT-200, targeting galectin-9, for a range of cancer indications, and LYT-210, targeting immunomodulatory gamma delta-1 T cells for a range of cancer indications and autoimmune disorders. In December 2020, we announced the initiation of our Phase 1 clinical trial of LYT-200 for the potential treatment of metastatic solid tumors that are difficult to treat and have poor survival rates, with topline results anticipated in the fourth quarter of 2021. Pending favorable topline results, we intend to initiate the Phase 2 expansion cohort portion of the trial. We are also exploring additional biomarker studies for LYT-210 in 2021. We have an active IND on file with the FDA for LYT-200.

LYT-300, Preclinical Therapeutic Candidate Developed Using our Glyph Technology Platform, Targeting Neurological and Neuropsychological Conditions: The most advanced therapeutic candidate developed from our synthetic lymphatic-targeting chemistry platform called Glyph is LYT-300 (oral allopregnanolone), which is being evaluated in a preclinical setting for a range of neurological and neuropsychological conditions. We expect to initiate a clinical trial with LYT-300 by the end of 2021.

Our Discovery Platforms – Glyph (Lymphatic Targeting Chemistry Platform) and Orasome (Oral Biotherapeutics Platform) – Leveraging Absorption of Dietary Lipids to Traffic Therapeutics via the Lymphatic System: We are harnessing the role of the lymphatic system in the absorption of dietary lipids to orally administer and traffic therapeutics via the lymphatic system. Our Glyph and Orasome technology platforms are based on this key function of the lymphatic system. In 2021, we expect preclinical proof-of-concept data and results from an additional preclinical non-human primate proof-of-concept study for our Orasome technology platform. We also expect to advance additional therapeutic candidates from these platforms internally, and to potentially continue to broaden the platforms through strategic collaborations around non-core applications, beyond our existing discovery collaboration with a large pharmaceutical company.

Our Meningeal Lymphatics Discovery Research Program: The recent discovery of meningeal lymphatics in the brain, an area once thought to have immune privilege, has shed new light on neurodegenerative diseases and lymphatic vessel aging. We believe that augmenting meningeal lymphatic vasculature function may potentially improve outcomes for a range of neurodegenerative and neuroinflammatory conditions that are not currently effectively treated.

Founded Entities in which PureTech has a controlling interest or the right to receive royalties, in order of development stage:

Gelesis

Gelesis, Inc., or Gelesis, which is developing a novel category of therapies for obesity and GI-related chronic diseases, received clearance from the FDA in April 2019 and European marketing authorization in June 2020 to market and sell its lead product Plenity®1 (formerly known as Gelesis100) as an aid for weight management in adults with a BMI of 25-40 kg/m2, when used in conjunction with diet and exercise. Gelesis plans to bring Plenity to the U.S. first, where it has been available to a limited extent since the second half of 2019 through an early experience program and since 2020 via a beta launch while the company ramps up its commercial operations and inventory for a broader launch in the second half of 2021. Gelesis plans to seek FDA input on the requirements for expanding the Plenity label for treating adolescents. Gelesis is also advancing a pipeline of therapeutic candidates focused on treating GI disorders. Gelesis initiated a Phase 3 study of GS500 in functional constipation in the second half of 2020 and expects to enroll the first patient in 2021. Additionally, Gelesis expects topline results from a Phase 2 study of GS200 for weight management and glycemic control in adults with type 2 diabetes or pre-diabetes in 2021 and to initiate a Phase 2 study of GS300 in non-alcoholic steatohepatitis and non-alcoholic fatty liver disease, or NASH/NAFLD, also in 2021. We have entered into a royalty and sublicense income agreement with Gelesis, pursuant to which we are entitled to low single-digit royalties on the worldwide net sales of certain commercialized therapeutics, as well as a low teen percentage of any income Gelesis receives from sublicensing certain of its technology. Our interest in Gelesis also includes our equity ownership of 19.3 percent at December 31, 2020.

Karuna

Karuna Therapeutics, Inc., or Karuna, which is developing novel therapies with the potential to transform the lives of people with disabling and potentially fatal neuropsychiatric disorders, including schizophrenia and dementia-related psychosis, is developing KarXT, an investigational therapeutic candidate designed to selectively activate muscarinic acetylcholine receptors in the brain. KarXT is Karuna’s proprietary therapeutic candidate, which combines xanomeline, a muscarinic receptor agonist, with trospium chloride, an FDA-approved and well established muscarinic receptor antagonist that has been shown not to measurably cross the blood-brain barrier, to preferentially stimulate M1/M4 muscarinic receptors in the brain without stimulating muscarinic receptors in peripheral tissues in order to achieve meaningful therapeutic benefit in patients with psychotic and cognitive disorders. In November 2019, Karuna announced topline results from EMERGENT-1, its Phase 2 clinical trial of KarXT for the treatment of acute psychosis in patients with schizophrenia, in which KarXT met the trial’s primary endpoint with a statistically significant (p<0.0001) and clinically meaningful 11.6 point mean reduction in total Positive and Negative Syndrome Scale, or PANSS, over placebo at week five (-17.4 KarXT vs. -5.9 placebo), with similar discontinuation rates between KarXT (20 percent) and placebo (21 percent). The study enrolled 182 schizophrenia patients with acute psychosis, 90 of whom received KarXT. The number of discontinuations due to treatment emergent adverse events, or AEs, were equal in the KarXT and placebo arms (n=2 in each group). One SAE was observed in the KarXT treatment group, in which the patient discontinued treatment and subsequently sought hospital care for worsening psychosis, meeting the regulatory definition of a serious adverse event, or SAE. In June 2020, Karuna announced the next steps in the EMERGENT program, the clinical program evaluating KarXT for the treatment of adults with schizophrenia, following the completion of a successful End-of-Phase 2 meeting with the FDA in June 2020. The EMERGENT program includes the previously completed positive Phase 2 efficacy and safety trial (EMERGENT-1), two Phase 3 trials evaluating efficacy and safety (EMERGENT-2 and EMERGENT-3), and two Phase 3 trials evaluating the long-term safety of KarXT (EMERGENT-4 and EMERGENT-5). The first Phase 3 trial, EMERGENT-2, was initiated in December 2020. EMERGENT-3 and EMERGENT-5, the remaining trials in the EMERGENT program, are on track to initiate in the first half of 2021. In August 2020, Karuna announced that it would not move forward to develop KarXT in pain. Topline results from a Phase 1b trial evaluating the analgesic effects of KarXT on experimentally induced pain in healthy volunteers were inconclusive and did not provide sufficient evidence of an analgesic benefit of KarXT compared to placebo. Additionally, Karuna plans to initiate a Phase 2 trial evaluating KarXT for the treatment of psychosis in patients with schizophrenia who have an inadequate response to current standard of care therapies in the second half of 2021. A multi-cohort, placebo-controlled, inpatient Phase 1b dose-ranging trial evaluating the safety and tolerability of KarXT in healthy elderly volunteers is ongoing. Karuna completed the first two cohorts in this trial, Cohorts 1 and 2, and expects data from the final cohort, Cohort 3, in the second quarter of 2021. We have entered into an exclusive license agreement with Karuna pursuant to which we are entitled to receive low single-digit royalties and up to $10.0 million in milestone payments on worldwide net sales of any commercialized product covered by the granted license. Our interest in Karuna also includes our equity ownership of 8.2 percent as of March 4, 2021.

Follica

Follica, Incorporated, or Follica, which is developing a regenerative biology platform designed to treat androgenetic alopecia, epithelial aging and other medical conditions, is advancing FOL-004 for the treatment of hair loss in male androgenetic alopecia. In December 2019, Follica announced topline results from a safety and efficacy optimization study. Follica announced the completion of a successful End-of-Phase 2 meeting with the FDA in June 2020, which supports the progression into Phase 3 development. The initiation of a Phase 3 registration program is expected in 2021. We are party to a royalty agreement with Follica pursuant to which we are entitled to low single-digit royalties on worldwide net sales of certain commercialized therapeutics and a percentage of any sublicense income for certain of its technologies within the range of mid single-digit and mid teen percentages. Our interest in Follica also includes our equity ownership of 78.2 percent at December 31, 2020.

Vedanta

Vedanta Biosciences, Inc., or Vedanta, which is developing a potential new category of therapies for immune-mediated diseases based on a rationally-defined consortia of human microbiome-derived bacteria, expects topline data from a Phase 2 clinical trial for VE303 in high-risk CDI in 2021; topline data from a first-in-patient clinical trial of VE800 in combination with Bristol-Myers Squibb’s checkpoint inhibitor Opdivo® (nivolumab) in patients with selected types of advanced or metastatic cancer in 2021; and topline data from a Phase 1/2 clinical trial for VE416 for food allergy in 2022. Vedanta announced topline data from two Phase 1 studies in healthy volunteers of VE202, a therapeutic candidate being developed for IBD in June 2020 and expects to advance VE202 into a Phase 2 study in IBD in 2021. Our interest in Vedanta is limited to our equity ownership of 49.5 percent at December 31, 2020.

Sonde

Sonde Health, Inc. or Sonde, is developing a voice-based technology platform to measure health when a person speaks. Sonde’s proprietary technology is designed to sense and analyze subtle changes in the voice to create a range of persistent brain, muscle and respiratory health measurements that provide a more complete picture of health in just seconds. Sonde has collected over one million voice samples from over 80,000 subjects as a part of the ongoing validation of its platform, and it has also initiated research and development to expand its proprietary technology into AD, respiratory and cardiovascular disease, as well as other health and wellness conditions, including mental health. In July 2020, Sonde launched Sonde One for Respiratory, a new voice-enabled health detection and monitoring app, to potentially help employers improve employee safety, meet government mandates and satisfy their own administrative needs as they reopen office doors in a COVID-19 environment. Our interest in Sonde is limited to our equity ownership of 44.6 percent at December 31, 2020.

Alivio

Alivio Therapeutics, Inc., or Alivio, is pioneering inflammation-targeted disease immunomodulation, which involves selectively restoring immune homeostasis at inflamed sites in the body, while having minimal impact on the rest of the body’s immune system, as a novel strategy to treat a range of chronic and acute inflammatory disorders. This long sought-after approach has the potential to broadly enable new medicines to treat a range of chronic and acute inflammatory disorders, including enabling the use of drugs which were previously limited by issues of systemic toxicity or PK. Alivio is developing therapeutic candidates that are designed to selectively treat autoimmune disease without having related systemic toxicities. Alivio’s pipeline includes candidates for IBD, chronic pouchitis and IC/BPS. Alivio expects an IND filing for ALV-107 for IC/BPS in 2021 and an IND for ALV-304 for IBD in 2023. Our interest in Alivio is limited to our equity ownership of 78.0 percent at December 31, 2020.

Entrega

Entrega Inc. or Entrega, is focused on the oral administration of biologics, vaccines and other drugs that are otherwise not efficiently absorbed when taken orally. The vast majority of biologic drugs, including peptides, proteins and other macromolecules, are currently administered by injection, which can present challenges for healthcare administration and compliance with treatment regimes. Entrega has ongoing discovery efforts to expand its pipeline. Our interest in Entrega is limited to our equity ownership of 72.9 percent at December 31, 2020.

Founded Entities in which PureTech has an equity interest, in order of development stage:

Akili

Akili Interactive Labs, Inc., or Akili, is pioneering the development of treatments designed to have direct therapeutic activity, delivered not through a traditional pill but via a high-quality video game experience. Akili is developing platform technologies designed to target a broad range of medical conditions across neurology and psychiatry. Akili received clearance from the FDA and European marketing authorization in June 2020 for EndeavorRx™2 (formerly known as AKL-T01) as a prescription treatment for children with ADHD. Delivered through a captivating video game experience, EndeavorRx is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue. Akili plans to take a scaled approach to the commercial launch of EndeavorRx in 2021. Our interest in Akili is limited to our equity ownership of 33.7 percent at December 31, 2020.

Vor

Vor Biopharma, Inc. or Vor, which is a cell therapy company that combines a novel patient engineering approach with targeted therapies to provide a single company solution for patients suffering from hematological malignancies, announced in the January 2021 post-period that the FDA had accepted the company’s IND application for VOR33. Vor plans to enroll the first patient in a Phase 1/2a clinical trial for VOR33 in the second quarter of 2021 and expects initial human engraftment and protection data from this trial to be reported in late 2021 or in the first half of 2022. In the February 2021 post-period, Vor announced the pricing of its initial public offering of common stock on the Nasdaq Global Market under the symbol “VOR”. The aggregate gross proceeds were approximately $203.4 million, before deducting the underwriting discounts and commissions and other offering expenses payable by Vor. Our interest in Vor is limited to our equity ownership of 8.6 percent at February 9, 2021.

Our Scientific Focus: The Brain-Immune-Gut (BIG) Axis

The therapeutic candidates being advanced within our Wholly Owned Programs and by our Founded Entities, and our work in these areas, in close collaboration with leading academic and clinical experts, has led us to focus on the biological interplay among these three systems, which we refer to as the BIG Axis. The architectural framework supporting BIG Axis cross-talk is built on evidence highlighting the presence of 70 percent of the entire immune cell population in the gut, approximately 500 million neurons innervating the GI tract, enteric neurons as part of the autonomic nervous system and key components such as the gut epithelial barrier, microbiome, metabolites and neurotransmitters that play key roles in protecting and influencing the immune system and CNS.

The brain, immune system and gut lymphatic system form an interconnected adaptive network to respond to acute and chronic environmental change. Using the immune system to act as a bridge, the body relies on the bidirectional relationship between the gut and brain to maintain normal homoeostasis. Dysregulation of immune signaling through gut inflammation, microbiome changes and a compromised intestinal barrier all contribute to a range of immunological, GI and neurology and neuropsychological disorders. We have been at the forefront of research and development in the BIG Axis, including the role of gut-immune transport, immune-microbial signaling, gut barrier dysfunction and repair and gut and inflammation selective targeting strategies. Across our Wholly Owned Programs, we are pursuing strategies to directly reach the immune system via the mesenteric lymph nodes, addressing lymphatic flow and vessel restoration disorders and targeting immunosuppressive and pathogenic lymphocytes.

Recent scientific advances, including the work of our network of scientific collaborators, have uncovered the lymphatic system as one of the most critical players in the BIG Axis. In addition to maintaining the balance of interstitial fluid that surrounds the body’s cells, the lymphatic system plays a key role in conducting surveillance of the immune system through an intricate network of vessels connecting the over 300 lymph nodes, serving as a “superhighway” for programming immune cells for specific functions and trafficking them to specific tissues. The mesenteric lymph node group around the intestines serves as the primary interface between the gut and the immune system and for programming circulating adaptive immune cells. The recent discovery of meningeal lymphatics in the brain, an area once thought to have immune privilege, has shed new light on neurodegenerative diseases and lymphatic vessel aging.

Through our scientific leadership in the BIG systems and the BIG Axis, we have created the underlying programs and therapeutic candidates that have the potential to treat inflammatory and immunological conditions, intractable cancers, lymphatic and GI diseases and neurological and neuropsychological disorders, among others.

Our Focus on the Lymphatic System

The lymphatic system is a network of tissues and organs in the body that fulfills three essential functions: (1) maintaining the balance of the fluid that surrounds the body’s cells, or interstitial fluid, (2) conducting surveillance of the immune system and serving as a “superhighway” for immune cell trafficking and (3) absorbing dietary lipids through an intricate network of vessels in the intestinal tract.

Dysfunction of the lymphatic system is associated with numerous disease states, and we believe that restoring lymphatic function in various disease settings can yield meaningful patient benefit. Our proprietary Wholly Owned Programs leverage these critical functions of the lymphatic system to produce therapeutic candidates with the potential to treat serious diseases:

  • Maintaining balance of fluids: We are leveraging insights into the lymphatic system by developing clinical-stage therapeutic candidate LYT-100 and several discovery-stage programs to address disorders involving impaired lymphatic flow and other inflammatory and fibrotic conditions, such as lymphedema and certain neurological disorders.
  • Immune modulation: The lymphatic system plays a crucial role in programming immune cells for precise functions and trafficking them to specific tissues. By modulating immune cell trafficking and programming, we are developing therapeutic candidates for the treatment of cancer and immunological disorders. We are advancing LYT-200, our therapeutic candidate targeting galectin-9 in solid tumors and LYT-210, our therapeutic candidate targeting immunosuppressive gamma delta-1 T cells in solid tumors and autoimmune disorders, for a range of cancer indications and autoimmune disorders.
  • Driving therapeutics through the lymphatics: We are harnessing the role of the lymphatic system in the absorption of dietary lipids to orally administer and traffic therapeutics via the lymphatic system where immune cells are programmed. LYT-300 and our Glyph (lymphatic targeting) and Orasome (oral biotherapeutics) platforms are based on this key function of the lymphatic system.

Our Model

We employ the following process to identify and develop therapeutic candidates:

  • Step 1: A Collaborative Discovery Process Leveraging our Biological Expertise in the BIG Axis and our Scientific Network: We collaborate with the world’s leading domain experts on a disease-specific discovery theme through the lens of BIG Axis biology. All of our Wholly Owned Programs target one or more of the BIG systems and we prioritize programs that have the potential to reduce early development risk based on preliminary signals of activity in humans and promising tolerability profiles. We have proven our ability to efficiently leverage our cross-disciplinary research and discovery efforts across multiple indications and potential therapeutic areas. Our program collaborators and co-inventors across our Wholly Owned Programs and Founded Entities’ programs include leading academic minds; recipients of major awards such as the Nobel Prize, the U.S. National Medal of Science, the Charles Stark Draper Prize and the Priestley Medal; members of prestigious institutions such as the Howard Hughes Medical Institute, all three of the National Academies and world renowned academic institutions such as Harvard, MIT, Yale, Columbia, Johns Hopkins, Imperial College of London and Cornell, among others; and former senior executives and board members at some of the world’s largest pharmaceutical companies.
  • Step 2: A Disciplined Approach to Program Advancement: We employ a rigorous and disciplined approach to research and development. The breadth and depth of our Wholly Owned Programs and our Founded Entities’ programs allow us to quickly pivot resources to the more promising therapeutic opportunities, strategically reallocate capital across programs and terminate Wholly Owned Programs we choose not to pursue without adversely impacting the development of other programs. We, through our internal resources and with our extensive expert network and collaboration partners, repeat key academic work and conduct focused experiments both internally and externally to rapidly advance those that we believe hold the greatest promise and deprioritize less attractive programs. Collectively, these activities decrease the risk of any individual program event negatively impacting our Wholly Owned Programs and enable us to preserve capital for the programs across our Wholly Owned Programs and Founded Entities that we believe have the greatest opportunity for value creation in alignment with our shareholders.
  • Step 3: A Capital Efficient Approach to Driving Clinical Development and Value Creation: Our management team has successfully driven these therapeutic candidates from early stage research and development, through POC and into clinical trials and has supported dedicated teams at our Non-Controlled Founded Entities through pivotal trials and FDA clearance. We have financed our development efforts through strategic collaborations, pharmaceutical partnerships, non-dilutive funding mechanisms, including through the sale of our Founded Entities’ equity and through grants, and public and private equity financings. We leverage shared resources, institutional knowledge and infrastructure between our earlier-stage Founded Entities and development efforts within our Wholly Owned Programs to advance our programs efficiently prior to POC. This approach has enabled the discovery and development of 26 therapeutics and therapeutic candidates to date, including two that have been cleared for marketing by the FDA and granted marketing authorization in the EEA, between our Wholly Owned Programs and our Founded Entities, in which we retain equity ownership ranging from 8.6 percent to 78.0 percent. We had PureTech level cash and cash equivalents of $443.4 million as of March 31, 2021 and $349.4 million as of December 31, 20205. From January 1, 2017 to December 31, 2020, our Founded Entities strengthened their collective balance sheets by attracting $1.2 billion in investments and non-dilutive funding, including $1.1 billion from third parties. As part of our disciplined capital management, we have been able to generate $477.8 million in non-dilutive funding, as of February 9, 2021, through the sales of portions of Founded Entity shares.

Our Strategy

Our goal is to identify, invent, develop and commercialize innovative new categories of therapeutics that are derived from our deep understanding of the BIG Axis to address significant unmet medical needs. To achieve this goal, key components of our strategy include:

  • Advancing Wholly Owned Programs Through Development and Commercialization, Including Pipeline Expansion:
  • Progressing LYT-100, LYT-200, LYT-210 and LYT-300 through clinical studies: We are developing novel classes of immunomodulatory drugs to treat serious diseases, including lung dysfunction, immuno-oncology, lymphatic, neurological and neuropsychological disorders.
  • Harnessing our proprietary drug discovery and development capabilities to drive pipeline maturation and expansion: We are pioneering the development of therapeutic candidates by leveraging our unique insights into the lymphatic system and the BIG Axis. Our Wholly Owned Programs currently comprise four proprietary therapeutic candidates and three innovative technology platforms. We intend to leverage our proprietary technology platforms, as well as our extensive network with world-leading scientists in immunology and lymphatics and major pharmaceutical companies, to generate and acquire additional novel therapeutic candidates. To do so, we will rely on the track record of our team, which has been instrumental in the generation of 26 therapeutics and therapeutic candidates to date between our Wholly Owned Programs and our Founded Entities, including two that have been cleared for marketing by the FDA and granted marketing authorization in the EEA, as well as our established internal identification and prioritization approach. We will continue to take advantage of our differentiated model to manage the risk of any single program and quickly redeploy resources towards performing assets.
  • Maximizing the impact of our Wholly Owned Programs by expanding development across multiple indications: We aim to focus our development efforts on therapeutic candidates that have the potential to treat multiple diseases and plan to develop them in additional indications where warranted. For example, we believe that our therapeutic candidate LYT-100 has the potential to be evaluated in multiple inflammatory and fibrotic indications beyond our initial target indication of lymphedema, such as IPF and potentially other PF-ILDs and Long COVID respiratory complications and related sequelae. We are initially developing our other therapeutic candidates, LYT-200 and LYT-210, for the treatment of certain cancers, including CCA, colorectal cancer, or CRC, and pancreatic cancers, among others, and we are evaluating LYT-210 for the potential treatment of GI autoimmune diseases as well. Lastly, we are evaluating LYT-300 for a range of neurological and neuropsychological conditions.
  • Deriving Value from Equity Growth of Our Founded Entities: Historically, we have pursued a variety of strategic options to fund and drive the development of our Founded Entities’ therapeutic candidates, including private and public financings and multiple partnerships and collaborations with selected partners. In the preliminary stages of our growth, we partnered with equity investors, pharmaceutical and biotechnology companies and government and non-governmental organizations for certain of our Founded Entities which are now in advanced stages and have the potential for near-term value creation with significant upside potential. Going forward, our Founded Entities may participate in private and public financings, enter into partnerships and collaborations, partner with equity investors, pharmaceutical and biotechnology companies and government and non-governmental organizations and generate revenues from sales of products. We hold equity ownership in our Founded Entities and benefit from their growth and catalysts such as M&A transactions, IPOs and royalties from sales. We also intend to strategically monetize our equity holdings in our Founded Entities after significant value creation has occurred, generating non-dilutive financing. For example, PureTech generated cash proceeds of $350.6 million in 2020 and an additional $118 million in the 2021 post-period, from the sales of equity in our Founded Entities, which we intend to use to fund our operations and growth and to further expand and advance our clinical-stage Wholly Owned Pipeline, while still maintaining significant equity ownership to derive value from future growth of that entity. We may create additional entities opportunistically based on future strategic imperatives.
  • Advancing Discovery Platforms by Partnering Non-Core Applications via Non-Dilutive Funding Sources, Including Partnerships and Grants, to Enable Retention of Value: As we further develop our Wholly Owned Programs through key value inflection points, we may opportunistically enter into strategic partnerships when we believe that such partnerships could add value to the development or potential commercialization of our wholly-owned therapeutic candidates. We will also continue to pursue government grant funding and discovery partnerships that allow us to maintain most of the value of our platforms while offsetting operational costs.

We believe this combination of development of our Wholly Owned Programs, Founded Entity advancement and non-dilutive partnerships and funding provides us with a unique and multi-pronged engine fueling potential future growth.

By Order of the Board

Daphne Zohar

Founder, Chief Executive Officer and Director

April 14, 2021

1   Important Safety Information: Patients who are pregnant or are allergic to cellulose, citric acid, sodium stearyl fumarate, gelatin, or titanium dioxide should not take Plenity. To avoid impact on the absorption of medications: For all medications that should be taken with food, take them after starting a meal. For all medications that should be taken without food (on an empty stomach), continue taking on an empty stomach or as recommended by your physician. The overall incidence of side effects with Plenity was no different than placebo. The most common side effects were diarrhea, distended abdomen, infrequent bowel movements, and flatulence. Contact a doctor right away if problems occur. If you have a severe allergic reaction, severe stomach pain, or severe diarrhea, stop using Plenity until you can speak to your doctor. Rx Only. For the safe and proper use of Plenity or more information, talk to a healthcare professional, read the Patient Instructions for Use, or call 1-844-PLENITY.

2   EndeavorRx™ is indicated to improve attention function as measured by computer-based testing in children ages 8-12 years old with primarily inattentive or combined-type ADHD, who have a demonstrated attention issue. Patients who engage with EndeavorRx demonstrate improvements in a digitally assessed measure Test of Variables of Attention (TOVA) of sustained and selective attention and may not display benefits in typical behavioral symptoms, such as hyperactivity. EndeavorRx should be considered for use as part of a therapeutic program that may include clinician-directed therapy, medication, and/or educational programs, which further address symptoms of the disorder. EndeavorRx is available by prescription only. It is not intended to be used as a stand-alone therapeutic and is not a substitution for a child’s medication.

3   Relevant ownership interests for Founded Entities were calculated on a diluted basis (as opposed to a voting basis) as of December 31, 2020, including outstanding shares, options and warrants, but excluding unallocated shares authorized to be issued pursuant to equity incentive plans. Karuna ownership is calculated on an outstanding voting share basis as of March 4, 2021. Vor ownership is calculated on an outstanding voting share basis as of February 9, 2021.

4   Long COVID is a term being used to describe the emerging and persistent complications following the resolution of COVID-19 infection, also known as post-acute COVID-19 syndrome (PACS).

5   For more information in relation to the PureTech Level Cash and Cash Equivalents and Consolidated Cash and Cash Equivalents measures used in this Annual Report, please see pages 75 and 76 of the Financial Review.

Risk management

The execution of the Group’s strategy is subject to a number of risks and uncertainties. As a clinical-stage biotherapeutics company, the Group operates in an inherently high-risk environment. The overall aim of the Group’s risk management effort is to achieve an effective balancing of risk and reward, although ultimately no strategy can provide an assurance against loss.

Risks are formally identified by the Board and appropriate processes are put in place to monitor and mitigate them on an ongoing basis. If more than one event occurs, it is possible that the overall effect of such events would compound the possible effect on the Group. The principal risks that the Board has identified as the key business risks facing the Group are set out in the table below along with the consequences and mitigation of each risk. These risks are only a high level summary of the principal risks affecting our business; any number of these or other risks could have a material adverse effect on the Group or its financial condition, development, results of operations, subsidiary companies and/or future prospects. Further information on the risks facing the Group can be found on pages 191 to 227, which also includes a description of circumstances under which principal and other risks and uncertainties might arise in the course of our business and their potential impact.

Risk

Impact*

Management Plans/Actions

1 Risks related to science and technology failure

The science and technology being developed or commercialized by some of our businesses may fail and/or our businesses may not be able to develop their intellectual property into commercially viable therapeutics or technologies.

There is also a risk that certain of the businesses may fail or not succeed as anticipated, resulting in significant decline of our value.

The failure of any of our businesses could decrease our value. A failure of one of the major businesses could also impact the perception of PureTech as a developer of high value technologies and possibly make additional fundraising at PureTech or any Founded Entity more difficult.

Before making any decision to develop any technology, extensive due diligence is carried out that covers all the major business risks, including technological feasibility, market size, strategy, adoption and intellectual property protection.

A capital efficient approach is pursued such that some level of proof of concept has to be achieved before substantial capital is committed and thereafter allocated. Capital deployment is generally tranched so as to fund programs only to their next value milestone. Members of our Board serve on the board of directors of several of the business so as to continue to guide each business’s strategy and to oversee proper execution thereof. We use our extensive network of advisors to ensure that each business has appropriate domain expertise as it develops and executes on its strategy and the R&D Committee of our Board reviews each program at each stage of development and advises our Board on further actions. Additionally, we have a diversified model with numerous assets such that the failure of any one of our businesses would not result in a failure of all of our businesses.

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.

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 such that any one clinical trial outcome would not significantly impact our ability to operate as a going concern. We have dedicated internal resources to establish and monitor each of the clinical programs in order to try to maximise successful outcomes. We also engage outside experts to help design clinical programs to help provide valuable information and mitigate the risk of failure. Significant scientific due diligence and preclinical experiments are done prior to a clinical trial to attempt to assess the odds of the success of the trial. In the event of the outsourcing of these trials, care and attention is given to assure the quality of the vendors used to perform the work.

3 Risks related to regulatory approval

The pharmaceutical industry is highly regulated. Regulatory authorities across the world enforce a range of laws and regulations which govern the testing, approval, manufacturing, labelling and marketing of pharmaceutical therapeutics. Stringent standards are imposed which relate to the quality, safety and efficacy of these therapeutics. These requirements are a major determinant of whether it is commercially feasible to develop a drug substance or medical device given the time, expertise, and expense which must be invested.

We may not obtain regulatory approval for our therapeutics. Moreover, approval in one territory offers no guarantee that regulatory approval will be obtained in any other territory. Even if therapeutics are approved, subsequent regulatory difficulties may arise, or the conditions relating to the approval may be more onerous or restrictive than we expect.

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.

4 Risks related to therapeutic safety

There is a risk of adverse reactions with all drugs and medical devices. If any of our therapeutics are found to cause adverse reactions or unacceptable side effects, then therapeutic development may be delayed, additional expenses may be incurred if further studies are required, and, in extreme circumstances, it may prove necessary to suspend or terminate development. This may occur even after regulatory approval has been obtained, in which case additional trials may be required, the approval may be suspended or withdrawn or additional safety warnings may have to be included on the label. Adverse events or unforeseen side effects may also potentially lead to product liability claims being raised against us as the developer of the therapeutics and sponsor of the relevant clinical trials. These risks are also applicable to our Founded Entities and any trials they conduct or therapeutic candidates they develop.

Adverse reactions or unacceptable side effects may result in a smaller market for our therapeutics, or even cause the therapeutics to fail to meet regulatory requirements necessary for sale of the therapeutic. This, as well as any claims for injury or harm resulting from our therapeutics, may result in a significant decrease in our value.

We design our therapeutics with safety as a top priority and conduct extensive preclinical and clinical trials which test for and identify any adverse side effects. Despite these steps and precautions, we cannot fully avoid the possibility of unforeseen side effects, and to mitigate the risk further we have insurance in place to cover product liability claims which may arise during the conduct of clinical trials.

5 Risks related to therapeutic profitability

We may not be able to sell our therapeutics profitably if reimbursement from third-party payers such as private health insurers and government health authorities is restricted or not available because, for example, it proves difficult to build a sufficiently strong economic case based on the burden of illness and population impact.

Third-party payers are increasingly attempting to curtail healthcare costs by challenging the prices that are charged for pharmaceutical therapeutics and denying or limiting coverage and the level of reimbursement. Moreover, even if the therapeutics can be sold profitably, they may not be accepted by patients and the medical community.

Alternatively, our competitors – many of whom have considerably greater financial and human resources – may develop safer or more effective therapeutics or be able to compete more effectively in the markets targeted by us. New companies may enter these markets and novel therapeutics and technologies may become available which are more commercially successful than those being developed by us. These risks are also applicable to our Founded Entities and could result in a decrease in their value.

The failure to obtain reimbursement from third party payers, as well as competition from other therapeutics, could significantly decrease the amount of revenue we may receive from therapeutic sales for certain therapeutics. This may result in a significant decrease in our value.

We engage reimbursement experts to conduct pricing and reimbursement studies for our therapeutics to ensure that a viable path to reimbursement, or direct user payment, is available. We also closely monitor the competitive landscape for all of our therapeutics and adapt our business plans accordingly. Not all therapeutics that we are developing will rely on reimbursement. Also, while we cannot control outcomes, we try to design studies to generate data that will help support potential reimbursement.

6 Risks related to intellectual property protection

We may not be able to obtain patent protection for some of our therapeutics or maintain the secrecy of its trade secrets and know-how. If we are unsuccessful in doing so, others may market competitive therapeutics at significantly lower prices. Alternatively, we may be sued for infringement of third-party patent rights. If these actions are successful, then we would have to pay substantial damages and potentially remove our therapeutics from the market. We license certain intellectual property rights from third parties. If we fail to comply with our obligations under these agreements, it may enable the other party to terminate the agreement. This could impair the our freedom to operate and potentially lead to third parties preventing us from selling certain of our therapeutics.

The failure to obtain patent protection and maintain the secrecy of key information may significantly decrease the amount of revenue we may receive from therapeutic sales. Any infringement litigation against us may result in the payment of substantial damages by us and result in a significant decrease in our value.

We spend significant resources in the prosecution of our patent applications and maintenance of our patents, and we have an in-house patent counsel and patent group to help with these activities. We also work with experienced external attorneys and law firms to help with the protection, maintenance and enforcement of our patents. Third party patent filings are monitored to ensure the Group continues to have freedom to operate. Confidential information (both our own and information belonging to third parties) is protected through use of confidential disclosure agreements with third parties, and suitable provisions relating to confidentiality and intellectual property exist in our employment and advisory contracts. Licenses are monitored for compliance with their terms.

7 Risks related to enterprise profitability

We expect to continue to incur substantial expenditure in further research and development activities. There is no guarantee that we will become operationally profitable, and, even if we do so, we may be unable to sustain operational profitability.

The strategic aim of the business is to generate profits for our shareholders through the commercialization of technologies through therapeutic sales, strategic partnerships and sales of businesses. The timing and size of these potential inflows is uncertain, and should revenues from our activities not be achieved, or in the event that they are achieved but at values significantly less than the amount of capital invested, then it would be difficult to sustain our business.

We retain significant cash in order to support funding of our Founded Entities and our Wholly Owned Pipeline. We have close relationships with a wide group of investors and strategic partners to ensure we can continue to access the capital markets and additional monetization and funding for our businesses. Additionally, our Founded Entities are able to raise money directly from third party investors and strategic partners.

8 Risks related to hiring and retaining qualified employees

We operate in complex and specialized business domains and require highly qualified and experienced management to implement our strategy successfully. We and many of our businesses are located in the United States which is a highly competitive employment market.

Moreover, the rapid development which is envisaged by us may place unsupportable demands on our current managers and employees, particularly if we cannot attract sufficient new employees. There is also risk that we may lose key personnel.


 

The failure to attract highly effective personnel or the loss of key personnel would have an adverse impact on the ability of us to continue to grow and may negatively affect our competitive advantage.


 

The Board annually seeks external expertise to assess the competitiveness of the compensation packages of its senior management. Senior management continually monitors and assesses compensation levels to ensure we remain competitive in the employment market. We maintain an extensive recruiting network through our Board members, advisors and scientific community involvement. We also employ an executive as a full-time in-house recruiter. Additionally, we are proactive in our retention efforts and include incentive-based compensation in the form of equity awards and annual bonuses, as well as a competitive benefits package. We have a number of employee engagement efforts to strengthen our PureTech community.

9 Risks related to business, economic or public health disruptions

Business or economic disruptions or global health concerns could seriously harm our development efforts and increase our costs and expenses.


 

Broad-based business or economic disruptions could adversely affect our ongoing or planned research and development activities. For example, in December 2019 an outbreak of a novel strain of coronavirus originated in Wuhan, China, and has since spread to a number of other countries, including the United States. To date, this outbreak has already resulted in extended shutdowns of certain businesses around the world. Global health concerns, such as coronavirus, could also result in social, economic, and labor instability in the countries in which we or the third parties with whom we engage operate. We cannot presently predict the scope and severity of any potential business shutdowns or disruptions, but if we or any of the third parties with whom we engage, including the suppliers, clinical trial sites, regulators and other third parties with whom we conduct business, were to experience shutdowns or other business disruptions, our ability to conduct our business in the manner and on the timelines presently planned could be materially and negatively impacted. It is also possible that global health concerns such as this one could disproportionately impact the hospitals and clinical sites in which we conduct any of our current and/or future clinical trials, which could have a material adverse effect on our business and our results of operation and financial impact.


 

To date, we have seen limited impact on our research and development activities and the operation of our company more generally, but we will continuously monitor this pandemic and its impact on our business going forward and may see further impact as the situation continues to develop. We have been proactive in limiting the number of staff on site, requiring that all on-site employees test twice a week and providing personal protective equipment to our staff.

*   When assessing potential impact of a given risk, we looked at the potential effects on our research and development activities, financial health and overall business operations.

Brexit

The United Kingdom withdrew from the European Union on January 31, 2020 (Brexit) and the transition period for such withdrawal ended on December 31, 2020. Although the Board has considered the potential impact of Brexit as part of its risk management, given that we principally operate in the United States and hold substantially all assets in U.S. dollars, we do not believe there will be any material financial effect on our business, or any significant operational issues which could arise, as a result of Brexit.

Responsibility statement of the Directors in respect of the annual financial report

We confirm that to the best of our knowledge:

  • the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
  • the strategic report includes a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

We consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess our position and performance, business model and strategy.

By Order of the Board

Daphne Zohar

Founder, Chief Executive Officer and Director

April 14, 2021

Financial Review

Reporting Framework

You should read the following discussion and analysis together with our consolidated financial statements, including the notes thereto, set forth elsewhere in this report. Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and financing our business, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including the risks set forth on pages 69 to 71 and in the Additional Information section from pages 191 to 227, our actual results could differ materially from the results described in or implied by these forward-looking statements.

Our audited consolidated financial statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018 have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the EU. The Consolidated Financial Statements also comply fully with IFRSs as issued by the International Accounting Standards Board (IASB).

The following discussion contains references to the consolidated financial statements of PureTech Health plc, or the Company, and its consolidated subsidiaries, together the Group. These financial statements consolidate the Company’s subsidiaries and include the Company’s interest in associates and investments held at fair value. Subsidiaries are those entities over which the Company maintains control. Associates are those entities in which the Company does not have control for financial accounting purposes but maintains significant influence over financial and operating policies. Where we have neither control nor significant influence for financial accounting purposes, we recognize our holding in such entity as an investment at fair value. For purposes of our consolidated financial statements, each of our Founded Entities are considered to be either a “subsidiary", an “associate” or an "investment held at fair value" depending on whether PureTech Health plc controls or maintains significant influence over the financial and operating policies of the respective entity at the respective period end date. For additional information regarding the accounting treatment of these entities, see Note 1 to our consolidated financial statements included in this report. For additional information regarding our operating structure, see “—Basis of Presentation and Consolidation” below. Fair value of investments accounted for at fair value, does not take into consideration contribution from milestones that occurred after December 31, 2020, the value of our consolidated Founded Entities (Vedanta, Follica, Sonde, Akili, Alivio, and Entrega), our Wholly Owned Programs, or our cash.

Business Background and Results Overview

The business background is discussed from pages 1 to 59, which describe in detail the business development of our Wholly Owned Programs and Founded Entities.

Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our wholly-owned or Founded Entities’ therapeutics candidates, which may never occur. Our Founded Entities, Gelesis, Inc., or Gelesis, and Akili Interactive Labs, Inc., or Akili in which we lost control in 2019 and 2018, respectively, have products cleared for sale, but we and our Controlled Founded Entities have not generated any revenue from product sales.

We have deconsolidated a number of our Founded Entities during the past three fiscal years including Akili, in 2018 and, Vor Biopharma Inc., or Vor, Karuna Therapeutics, Inc., or Karuna and Gelesis Inc., or Gelesis, during 2019. We expect this trend to continue into the foreseeable future as our Controlled Founded Entities raise additional funding. Any deconsolidation affects our financials in the following manner:

  • our ownership interest does not provide us with a controlling financial interest;
  • we no longer control the Founded Entity's assets and liabilities and as a result we derecognize the assets, liabilities and non-controlling interests related to the Founded Entity from our Consolidated Statements of Financial Position;
  • we record our non-controlling financial interest in the Founded Entity at fair value; and
  • the resulting amount of any gain or loss is recognized in our Consolidated Statements of Comprehensive Income/(Loss).

We anticipate our expenses to continue to increase proportionally in connection with our ongoing development activities related to our preclinical and clinical programs within our Wholly Owned Programs and Controlled Founded Entities. In addition, having completed our U.S. listing in November 2020, we expect to incur additional costs associated with operating as a public company in the U.S. We also expect that our expenses and capital requirements will increase substantially in the near to mid-term as we:

  • continue our research and development efforts;
  • seek regulatory approvals for any therapeutic candidates that successfully complete clinical trials;
  • add clinical, scientific, operational financial and management information systems and personnel, including personnel to support our therapeutic development and potential future commercialization claims; and
  • operate as a U.S. public company.

In addition, our internal research and development spend will increase in the foreseeable future as we may initiate clinical studies for LYT-100, LYT-200, LYT-210 and LYT-300, and as we continue to progress our GlyphTM and OrasomeTM technology platforms as well as our meningeal lymphatics discovery research program.

In addition, with respect to our Founded Entities’ programs, we anticipate that we will continue to fund a small portion of development costs by strategically participating in such companies’ financings when it is in the best interests of our shareholders. The form of any such participation may include investment in public or private financings, collaboration and partnership arrangements and licensing arrangements, among others. Our management and strategic decision makers consider the future funding needs of our Founded Entities and evaluate the needs and opportunities with respect to each of these Founded Entities routinely and on a case-by-case basis.

As a result, we may need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include monetization of certain of our interests in our Founded Entities and collaborations with third parties. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our wholly-owned therapeutic candidates.

Measuring Performance

The Financial Review discusses our operating and financial performance, our cash flows and liquidity as well as our financial position and our resources. The results for each year are compared primarily with the results of the preceding year.

Reported Performance

Reported performance considers all factors that have affected the results of our business, as reflected in our consolidated financial statements.

Core Performance

Core performance measures are alternative performance measures (APM) which are adjusted and non-IFRS measures. These measures cannot be derived directly from our consolidated financial statements. We believe that these non-IFRS performance measures, when provided in combination with reported performance, will provide investors, analysts and other stakeholders with helpful complementary information to better understand our financial performance and our financial position from period to period. The measures are also used by management for planning and reporting purposes. The measures are not substitutable for IFRS results and should not be considered superior to results presented in accordance with IFRS.

Cash flow and liquidity

Consolidated Cash Reserves

Measure type: Core performance

Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc and consolidated subsidiaries (Please refer to Note 1 to our consolidated financial statements for further information with respect to our consolidated subsidiaries)

Why we use it: Consolidated Cash Reserves is a measure that provides valuable additional information with respect to cash reserves available to fund the Wholly Owned Programs and Founded Entities

PureTech Level Cash Reserves

Measure type: Core performance

Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc and only wholly-owned subsidiaries (Please refer to Note 1 to our consolidated financial statements for further information with respect to our wholly-owned subsidiaries)

Why we use it: PureTech Level Cash Reserves is a measure that provides valuable additional information with respect to cash reserves available to fund the Wholly Owned Programs and make certain investments in Founded Entities

PureTech Level Cash and Cash Equivalents

Measure type: Core performance

Definition: Cash and cash equivalents held at PureTech Health plc and only wholly-owned subsidiaries (Please refer to Note 1 to our consolidated financial statements for further information with respect to our wholly-owned subsidiaries)

Why we use it: PureTech Level Cash and Cash Equivalents is a measure that provides valuable additional information with respect to cash and cash equivalents available to fund the Wholly Owned Programs and make certain investments in Founded Entities

Consolidated Cash Reserves as of March 31, 2021

Measure type: Core performance

Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc and consolidated subsidiaries as of March 31, 2021

Why we use it: The measure includes cash outflows and inflows for the first quarter of 2021, particularly the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million on February 9, 2021. Further, the measure allows for a more current representation of the Consolidated Cash Reserves (see above in table) as of the date of signing of our Consolidated Financial Statements

PureTech Level Cash Reserves as of March 31, 2021

Measure type: Core performance

Definition: Cash and cash equivalents, and Short-term investments held at PureTech Health plc and only wholly-owned subsidiaries as of March 31, 2021

Why we use it: The measure includes cash outflows and inflows for the first quarter of 2021, particularly the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million on February 9, 2021. Further, the measure allows for a more current representation of the PureTech Level Cash Reserves (see above in table) as of the date of signing of our Consolidated Financial Statements

PureTech Level Cash and Cash Equivalents as of March 31, 2021

Measure type: Core performance

Definition: Cash and cash equivalents held at PureTech Health plc and only wholly-owned subsidiaries as of March 31, 2021

Why we use it: The measure includes cash outflows and inflows for the first quarter of 2021, particularly the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million on February 9, 2021. Further, the measure allows for a more current representation of the PureTech Level Cash and Cash Equivalents (see above in table) as of the date of signing of our Consolidated Financial Statements

COVID-19

In December 2019, illnesses associated with COVID-19 were reported and the virus has since caused widespread and significant disruption to daily life and economies across geographies. The World Health Organization has classified the outbreak as a pandemic. Our business, operations and financial condition and results have not been significantly impacted during the year ended December 31, 2020 as a result of the COVID-19 pandemic. In response to the COVID-19 pandemic, we have taken swift action to ensure the safety of our employees and other stakeholders. We continue to monitor the latest developments regarding the COVID-19 pandemic on our business, operations, and financial condition and results, and have made certain assumptions regarding the pandemic for purposes of our operational planning and financial projections, including assumptions regarding the duration and severity of the pandemic and the global macroeconomic impact of the pandemic. Despite careful tracking and planning, however, we are unable to accurately predict the extent of the impact of the pandemic on our business, operations, and financial condition and results in future periods due to the uncertainty of future developments. We are focused on all aspects of our business and are implementing measures aimed at mitigating issues where possible including by using digital technology to assist operations for our R&D and enabling functions.

Recent Developments (subsequent to December 31, 2020)

On January 8, 2021, PureTech participated in the second closing of Vor’s Series B Preferred Share financing. For consideration of $0.5 million, PureTech received 961,538 shares.

On February 9, 2021, Vor closed its initial public offering of 9,828,017 shares at a price to the public of $18.00 per share. Subsequent to the closing, PureTech held 3,207,200.00 shares of Vor common stock, representing 8.6% of Vor common stock.

On February 9, 2021, PureTech Health sold 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million. Following the sale PureTech holds 2,406,564 shares of Karuna common stock, representing 8.2% of Karuna common stock.

As of March 31, 2021, we had consolidated cash and cash equivalents of $486.5 million and PureTech Level cash and cash equivalents of $443.4 million.

Financial Highlights

As of:

(in thousands)

March 31, 2021

December 31, 2020

December 31, 2019

Cash and cash equivalents

486,469 

403,881 

132,360 

Short-term investments

— 

— 

30,088 

Consolidated Cash Reserves

486,469 

403,881 

162,448 

Less: Cash and cash equivalents held at non-wholly owned subsidiaries

(43,072)

(54,473)

(41,840)

PureTech Level Cash Reserves

443,397 

349,407 

120,608 

Less: Short-term investments

— 

— 

(30,088)

PureTech Level Cash and Cash Equivalents

$

443,397 

$

349,407 

$

90,520 

                   

Basis of Presentation and Consolidation

Our consolidated financial information consolidates the financial information of PureTech Health plc, as well as its subsidiaries, and includes our interest in associates and investments held at fair value, and is reported in four operating segments as described below.

Basis for Segmentation

Our directors are our strategic decision-makers. Our operating segments are based on the financial information provided to our directors quarterly for the purposes of allocating resources and assessing performance. We have determined that each Founded Entity is representative of a single operating segment as our directors monitor the financial results at this level. When identifying the reportable segments we have determined that it is appropriate to aggregate multiple operating segments into a single reportable segment given the high level of operational and financial similarities across the entities. We have identified four reportable segments which are outlined below. Substantially all of our revenue and profit generating activities are generated within the United States and, accordingly, no geographical disclosures are provided.

Internal

The Internal segment is advancing Wholly Owned Programs designed to harness key immunological, fibrotic and lymphatic system mechanisms. These novel classes of immunomodulatory drugs are designed to treat serious diseases, including lung dysfunction, immuno-oncology, lymphatic, neurological and neuropsychological disorders. The Internal segment is comprised of the technologies that are wholly owned and will be advanced through either PureTech Health funding or non-dilutive sources of financing in the near-term. The operational management of the Internal segment is conducted by the PureTech Health team, which is responsible for the strategy, business development, and research and development. As of December 31, 2020, this segment included PureTech LYT, Inc. (formerly Ariya Therapeutics Inc.) and PureTech LYT 100, Inc.

Controlled Founded Entities

The Controlled Founded Entities segment is comprised of our subsidiaries that are currently consolidated operational subsidiaries that either have, or have plans to hire, independent management teams and have previously raised, or are currently in the process of raising, third-party dilutive capital. These subsidiaries have active research and development programs and either have entered into or plan to seek a strategic partnership with an equity or debt investment partner, who will provide additional industry knowledge and access to networks, as well as additional funding to continue the pursued growth of the company. As of December 31, 2020, this segment included Alivio Therapeutics, Inc., Entrega, Inc., Follica, Incorporated, Sonde Health, Inc. and Vedanta Biosciences, Inc.

Non-Controlled Founded Entities

The Non-Controlled Founded Entities segment is comprised of the entities in respect of which PureTech Health (i) no longer holds majority voting control as a shareholder and (ii) no longer has the right to elect a majority of the members of the entity's Board of Directors. Upon deconsolidation of an entity the segment disclosure is restated to reflect the change on a retrospective basis, as this constitutes a change in the composition of its reportable segments. The Non-Controlled Founded Entities segment included Akili Interactive Labs, Inc. (“Akili”), Vor Biopharma, Inc. (“Vor”), Karuna Therapeutics, Inc. (“Karuna”), and Gelesis, Inc. (“Gelesis”).

The Non-Controlled Founded Entities segment incorporates the operational results of the aforementioned entities to the date of deconsolidation. Following the date of deconsolidation, we account for our investment in each entity at the parent level, and therefore the results associated with investment activity following the date of deconsolidation is included in the Parent Company and Other segment (the “Parent Company and Other segment”).

Parent Company and Other segment

The Parent Company and Other segment includes activities that are not directly attributable to the operating segments, such as the activities of the Parent, corporate support functions and certain research and development support functions that are not directly attributable to a strategic business segment as well as the elimination of intercompany transactions. This segment also captures the accounting for our holdings in entities for which control has been lost, which is inclusive of the following items: gain on deconsolidation, gain or loss on investments held at fair value, gain on loss of significant influence, and the share of net loss of associates accounted for using the equity method. As of December 31, 2020, this segment included PureTech Health plc, PureTech Health LLC, PureTech Management, Inc., PureTech Securities Corp., and PureTech Securities II Corp. as well as certain other dormant, inactive and shell entities.

The table below summarizes the entities that comprised each of our segments as of December 31, 2020:

Internal Segment

PureTech LYT

100.0 

%

PureTech LYT-100, Inc.

100.0 

%

Controlled Founded Entities

Alivio Therapeutics, Inc.

91.9 

%

Entrega, Inc.

83.1 

%

Follica, Incorporated

85.4 

%

Sonde Health, Inc.

51.8 

%

Vedanta Biosciences, Inc.

59.3 

%

Non-Controlled Founded Entities

Akili Interactive Labs, Inc.

41.9 

%

Gelesis, Inc.

25.1 

%

Karuna Therapeutics, Inc.

12.7 

%

Vor Biopharma Inc.

16.4 

%

Parent Segment1

Puretech Health plc

100.0 

%

PureTech Health LLC

100.0 

%

PureTech Securities Corporation

100.0 

%

PureTech Securities II Corporation

100.0 

%

PureTech Management, Inc.

100.0 

%

1        Includes dormant, inactive and shell entities that are not listed here.

Components of Our Results of Operations

Revenue

To date, we have not generated any revenue from product sales and we do not expect to generate any revenue from product sales for the near term future. We derive our revenue from the following:

Contract revenue.

We generate revenue primarily from licenses, services and collaboration agreements, including amounts that are recognized related to upfront payments, milestone payments and amounts due to us for research and development services. In the future, revenue may include additional milestone payments and royalties on any net product sales under our collaborations. We expect that any revenue we generate will fluctuate from period to period as a result of the timing and amount of license, research and development services and milestone and other payments.

Grant Revenue.

Grant revenue is derived from grant awards we receive from governmental agencies and non-profit organizations for certain qualified research and development expenses. We recognize grants from governmental agencies as grant income in the Consolidated Statement of Comprehensive Income/(Loss), gross of the expenditures that were related to obtaining the grant, when there is reasonable assurance that we will comply with the conditions within the grant agreement and there is reasonable assurance that payments under the grants will be received. We evaluate the conditions of each grant as of each reporting date to ensure that we have reasonable assurance of meeting the conditions of each grant arrangement and it is expected that the grant payment will be received as a result of meeting the necessary conditions.

Operating Expenses

Research and Development Expenses

Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our wholly-owned and our Controlled Founded Entities’ therapeutic candidates, which include:

  • employee-related expenses, including salaries, related benefits and equity-based compensation;
  • expenses incurred in connection with the preclinical and clinical development of our wholly-owned and our Founded Entities’ therapeutic candidates, including our agreements with contract research organizations, or CROs;
  • expenses incurred under agreements with consultants who supplement our internal capabilities;
  • the cost of lab supplies and acquiring, developing and manufacturing preclinical study materials and clinical trial materials;
  • costs related to compliance with regulatory requirements; and
  • facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other operating costs.

We expense all research costs in the periods in which they are incurred and development costs are capitalized only if certain criteria are met. For the periods presented, we have not capitalized any development costs since we have not met the necessary criteria required for capitalization. Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and third-party service providers.

Research and development activities are central to our business model. Therapeutic candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will continue to increase for the foreseeable future in connection with our planned preclinical and clinical development activities in the near term and in the future. The successful development of our wholly-owned and our Founded Entities’ therapeutic candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the remainder of the development of these therapeutic candidates. We are also unable to predict when, if ever, material net cash inflows will commence from our wholly-owned or our Founded Entities’ therapeutic candidates. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty of:

  • progressing research and development of our Wholly Owned Pipeline, including LYT-100, LYT-200, LYT-210, LYT-300 and continue to progress our GlyphTM and OrasomeTM technology platforms as well as our meningeal lymphatics discovery research program and other potential therapeutic candidates within our Wholly Owned Programs;
  • establishing an appropriate safety profile with investigational new drug application enabling studies to advance our preclinical programs into clinical development;
  • the success of our Founded Entities and their need for additional capital;
  • identifying new therapeutic candidates to add to our Wholly Owned Pipeline;
  • successful enrollment in, and the initiation and completion of, clinical trials;
  • the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
  • commercializing our wholly-owned and our Founded Entities’ therapeutic candidates, if approved, whether alone or in collaboration with others;
  • establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
  • addressing any competing technological and market developments, as well as any changes in governmental regulations;
  • negotiating favorable terms in any collaboration, licensing or other arrangements into which we may enter and performing our obligations under such arrangements;
  • maintaining, protecting and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how, as well as obtaining and maintaining regulatory exclusivity for our wholly-owned and our Founded Entities’ therapeutic candidates;
  • continued acceptable safety profile of our therapeutics, if any, following approval; and
  • attracting, hiring and retaining qualified personnel.

A change in the outcome of any of these variables with respect to the development of a therapeutic candidate could mean a significant change in the costs and timing associated with the development of that therapeutic candidate. For example, the U.S. Food and Drug Administration, or FDA, the European Medicines Agency, or EMA, or another comparable foreign regulatory authority may require us to conduct clinical trials beyond those that we anticipate will be required for the completion of clinical development of a therapeutic candidate, or we may experience significant trial delays due to patient enrollment or other reasons, in which case we would be required to expend significant additional financial resources and time on the completion of clinical development. In addition, we may obtain unexpected results from our clinical trials and we may elect to discontinue, delay or modify clinical trials of some therapeutic candidates or focus on others. Identifying potential therapeutic candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our wholly-owned and our Founded Entities’ therapeutic candidates, if approved, may not achieve commercial success.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include professional fees for legal, patent, accounting, auditing, tax and consulting services, travel expenses and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

We expect that our general and administrative expenses will increase in the future as we increase our general and administrative headcount to support our continued research and development and potential commercialization of our portfolio of therapeutic candidates. We also expect to incur increased expenses associated with being a public company in the United States, including costs of accounting, audit, information systems, legal, regulatory and tax compliance services, director and officer insurance costs and investor and public relations costs.

Total Other Income/(Loss)

Gain on Deconsolidation

Upon losing control of a subsidiary, the assets and liabilities are derecognized along with any related non-controlling interest (“NCI”). Any interest retained in the former subsidiary is measured at fair value when control is lost. Any resulting gain or loss is recognized as profit or loss in the Consolidated Statements of Comprehensive Income/(Loss).

Gain/(Loss) on Investments Held at Fair Value

Investments held at fair value include both unlisted and listed securities held by us, which include investments in Akili, Gelesis, Karuna, Vor, ResTORbio (until its sale in 2020) and certain insignificant investments. Our ownership in Akili and Vor is in preferred shares. Preferred shares form part of our ownership in Gelesis and such preferred shares investment is accounted for as Investments Held at Fair value while the investment in common stock is accounted for under the equity method. Our ownership in Karuna was in preferred shares until its IPO in June 2019 when such shares were converted into common shares. When Karuna's preferred shares converted into common shares, our equity interest in Karuna investment was removed from Investments Held at Fair Value and accounted for under the equity method as we still retained significant influence in Karuna at such time. On December 2, 2019 we lost significant influence in Karuna and, beginning on that date, we accounted for our investment in Karuna in accordance with IFRS 9 as an Investment Held at Fair Value. We account for investments in preferred shares of our associates in accordance with IFRS 9 as Investments Held at Fair Value when the preferred shares do not provide access to returns underlying ownership interests.

Loss Realized on Investments Held at Fair Value

Loss realized on investments held at fair value relates to realized differences in the per share disposal price of a listed security as compared to the per share exchange quoted price at the time of disposal. The difference is attributable to a blockage discount, attributable to a variety of market factors, primarily the number of shares being transacted was significantly larger than the daily trading volume of a given security.

Gain on Loss of Significant Influence

Gain on loss of significant influence relates to the assessment in connection with our ability to exert significant influence over an investment in a Non-Controlled Founded Entity. As of December 31, 2020, only our investment in Gelesis meets the scope of equity method accounting. For the years ended December 31, 2019 and December 31, 2018, we recognized gains on loss of significant influence in Karuna and resTORbio, respectively.

Other Income (Expense)

Other income (expense) consists primarily of gains and losses related to the sale of an asset and certain investments as well as sub-lease income.

Finance Costs/Income

Finance costs consist of loan interest expense and the changes in the fair value of certain liabilities associated with financing transactions, mainly preferred share liabilities in respect of preferred shares issued by our non wholly owned subsidiaries to third parties. Finance income consists of interest income on funds invested in money market funds and U.S. treasuries.

Share of Net Gain (Loss) of Associates Accounted for Using the Equity Method, and Impairment of Investment in Associate

Associates are accounted for using the equity method (equity accounted investees) and are initially recognized at cost, or if recognized upon deconsolidation they are initially recorded at fair value at the date of deconsolidation. The consolidated financial statements include our share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant influence commences until the date that significant influence ceases. When the share of losses exceeds the net investment in the investee, including the investment in preferred shares that are considered Long-term Interests, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that we have incurred legal or constructive obligations or made payments on behalf of an investee.

We compare the recoverable amount of the investment to its carrying amount on a go-forward basis and determine the need for impairment.

Income Tax

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. The amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using substantively enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Net deferred tax assets are not recorded if we do not assess their realization as probable. The effect on deferred tax assets and liabilities of a change in income tax rates is recognized in our financial statements in the period that includes the substantive enactment date.

Results of Operations

The following table, which has been derived from our audited financial statements for the years ended December 31, 2020, 2019 and 2018 included herein, summarizes our results of operations for the periods indicated, together with the changes in those items in dollars:

 

Year Ended December 31,

(in thousands)

2020

2019

2018

Change

(2019 to 2020)

Change

(2018 to 2019)

Contract revenue

$

8,341 

$

8,688 

$

16,371 

$

(347)

$

(7,683)

Grant revenue

3,427 

1,119 

4,377 

2,308 

(3,258)

Total revenue

11,768 

9,807 

20,748 

1,961 

(10,941)

Operating expenses:

 

 

 

 

 

General and administrative expenses

(49,440)

(59,358)

(47,365)

9,918 

(11,993)

Research and development expenses

(81,859)

(85,848)

(77,402)

3,988 

(8,445)

Operating income/(loss)

(119,531)

(135,399)

(104,019)

15,868 

(31,380)

Other income/(expense):

 

 

 

 

 

Gain/(loss) on deconsolidation

— 

264,409 

41,730 

(264,409)

222,679 

Gain/(loss) on investments held at fair value

232,674 

(37,863)

(34,615)

270,537 

(3,248)

Loss realized on sale of investment

(54,976)

— 

— 

(54,976)

— 

Loss on impairment of intangible asset

— 

— 

(30)

— 

30 

Gain/(loss) on disposal of assets

(30)

(82)

4,060 

52 

(4,142)

Gain on loss of significant influence

— 

445,582 

10,287 

(445,582)

435,295 

Other income/(expenses)

1,065 

121 

(278)

944 

399 

Other income/(loss)

178,732 

672,167 

21,154 

(493,434)

651,013 

Net finance income/(costs)

(6,115)

(46,147)

25,917 

40,032 

(72,065)

Share of net gain/(loss) of associates accounted for using the equity method

(34,117)

30,791 

(11,490)

(64,908)

42,281 

Impairment of investment in associate

— 

(42,938)

— 

42,938 

(42,938)

Income/(loss) before income taxes

18,969 

478,474 

(68,438)

(459,504)

546,911 

Taxation

(14,401)

(112,409)

(2,221)

98,008 

(110,188)

Net income/(loss) including non-controlling interest

4,568 

366,065 

(70,659)

(361,497)

436,724 

Net (loss)/income attributable to the Company

$

5,985 

$

421,144 

$

(43,654)

$

(415,159)

$

464,798 

Comparison of the Years Ended December 31, 2020 and 2019

Total Revenue

 

Year Ended December 31,

(in thousands)

2020

2019

Change

Contract Revenue:

 

 

 

Internal Segment

$

3,560 

$

6,064 

$

(2,503)

Controlled Founded Entities

2,726 

2,487 

239 

Non-Controlled Founded Entities

— 

— 

— 

Parent Company and other

2,054 

137 

1,917 

Total Contract Revenue

$

8,341 

$

8,688 

$

(347)

Grant Revenue:

 

 

 

Internal Segment

$

32 

$

15 

$

17 

Controlled Founded Entities

3,395 

1,104 

2,291 

Non-Controlled Founded Entities

— 

— 

— 

Parent Company and other

— 

— 

— 

Total Grant Revenue

$

3,427 

$

1,119 

$

2,308 

Total Revenue

$

11,768 

$

9,807 

$

1,961 

Our total revenue was $11.8 million for the year ended December 31, 2020, an increase of $2.0 million, or 20.0 percent compared to the year ended December 31, 2019. The increase was primarily attributable to an increase of $2.3 million in grant revenue in the Controlled Founded Entities segment for the year ended December 31, 2020, which was driven primarily by Vedanta's grant revenue earned pursuant to its CARB-X and BARDA agreements. The increase was further attributable to an increase of $1.9 million in contract revenue in the Parent segment for the year ended December 31, 2020, which was primarily driven by a $2.0 million milestone payment received from Karuna for initiation of its KarXT Phase 3 clinical study pursuant to the Exclusive Patent License Agreement between PureTech and Karuna. The increases were partially offset by a decline of $2.5 million in contract revenue in the Internal segment, which was primarily drive by the Orasome collaboration and license agreement with Roche, which concluded during the year ended December 31, 2020.

Research and Development Expenses

 

Year Ended December 31,

(in thousands)

2020

2019

Change

Research and Development Expenses:

 

 

 

Internal Segment

$

(41,583)

$

(25,977)

$

15,607 

Controlled Founded Entities

(40,043)

(42,780)

(2,737)

Non-Controlled Founded Entities

— 

(15,555)

(15,555)

Parent Company and other

(234)

(1,536)

(1,302)

Total Research and Development Expenses:

$

(81,859)

$

(85,848)

$

(3,988)

Our research and development expenses were $81.9 million for the year ended December 31, 2020, a decline of $4.0 million, or 4.6 percent compared to the year ended December 31, 2019. The change was attributable to a decline of $15.6 million in the Non-Controlled Founded Entities segment owing to the deconsolidation of Vor, Karuna and Gelesis during year ended December 31, 2019. The decline was further attributable to declines of $2.7 million in the Controlled Founded Entities segment and $1.3 million in the Parent segment for the year ended December 31, 2020. The declines were partially offset by an increase of $15.6 million in research and development expenses incurred by the Internal segment for the year ended December 31, 2020. In 2020 we progressed our wholly-owned therapeutic candidates to key milestones. We completed a Phase 1 multiple ascending dose and food effect study for LYT-100. We also initiated a Phase 2a proof-of-concept study of LYT-100 in patients with breast cancer-related, upper limb secondary lymphedema as well as initiated a Phase 2 trial of LYT-100 in Long COVID respiratory complications and related sequelae, which is also known as post-acute COVID-19 syndrome (PACS). Finally, we initiated a Phase 1 clinical trial of LYT-200 for the potential treatment of metastatic solid tumors that are difficult to treat and have poor survival rates.

General and Administrative Expenses

 

Year Ended December 31,

(in thousands)

2020

2019

Change

General and Administrative Expenses:

 

 

 

Internal Segment

$

(2,112)

$

(2,385)

$

(273)

Controlled Founded Entities

(15,061)

(14,436)

625 

Non-Controlled Founded Entities

— 

(10,439)

(10,439)

Parent Company and other

(32,267)

(32,098)

168 

Total General and Administrative Expenses

$

(49,440)

$

(59,358)

$

(9,918)

Our general and administrative expenses were $49.4 million for the year ended December 31, 2020, a decrease of $9.9 million, or 16.7 percent compared to the year ended December 31, 2019. The decrease was primarily attributable to a decline of $10.4 million in the Non-Controlled Founded Entities segment, owing to the deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019.

Total Other Income/(Loss)

Total other income was $178.7 million for the year ended December 31, 2020, a decrease of $493.4 million, compared to the year ended December 31, 2019. We recognized a gain on loss of significant influence of $445.6 million with respect to Karuna for the year ended December 31, 2019. No loss of significant influence of associates occurred during the year ended December 31, 2020. The decline was further attributable to a decline of $264.4 million in gain on deconsolidation as no deconsolidation of subsidiaries occurred during the year ended December 31, 2020, as compared to a gain of $264.4 million recognized for the deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019. The decline was further attributable to a loss of $55.0 million realized on the sale of certain investments held at fair value during year ended December 31, 2020. The declines were partially offset by an increase of $270.5 million on gain on investments held at fair value for the year ended December 31, 2020, which was primarily driven by Karuna.

Net Finance Income (Costs)

Net finance costs were $6.1 million for the year ended December 31, 2020, a decline of $40.0 million, or 86.7 percent compared to net finance costs of $46.1 million for the year ended December 31, 2019. The change was primarily attributable to a $42.1 million decline in the change in the fair value of our preferred shares, warrant and convertible note liabilities held by third parties for the year ended December 31, 2020.

Share of Net Gain (Loss) in Associates Accounted for Using the Equity Method, and Impairment of Investment in Associate

The share of net loss in associates was $34.1 million for the year ended December 31, 2020, a decrease of $64.9 million, or 210.8 percent as compared to net gain of $30.8 million for the year ended December 31, 2019. The change in share of net gain/(loss) in associates was primarily attributable to the financial results of Gelesis for the year ended December 31, 2020. Additionally, we allocated a share of our net loss in Gelesis for the year ended December 31, 2020, totaling $23.0 million, to our long-term interest in Gelesis as of December 31, 2020. We recorded equity method income of $37.1 million with respect to Gelesis, which was partially offset by our share of net loss in Karuna of $6.3 million for the year ended December 31, 2019. Additionally, we recorded an impairment charge of $42.9 million for the year ended December 31, 2019, related to our investment in common shares held in Gelesis. See Note 6 to our consolidated financial statements included elsewhere in this annual report.

Taxation

Income tax expense was $14.4 million for the year ended December 31, 2020, a decline of $98.0 million, or 87.2 percent as compared to the year ended December 31, 2019. The decline in income tax expense was primarily attributable to the gains realized on the loss of significant influence on Karuna for the year ended December 31, 2019 and the gains recognized on deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019.

Comparison of the Years Ended December 31, 2019 and 2018

Total Revenue

 

Year Ended December 31,

(in thousands)

2019

2018

Change

Contract Revenue:

 

Internal Segment

$

6,064 

$

2,110 

$

3,954 

Controlled Founded Entities

2,487 

14,233 

(11,745)

Non-Controlled Founded Entities

— 

— 

— 

Parent Company and other

137 

29 

108 

Total Contract Revenue

$

8,688 

$

16,371 

$

(7,683)

Grant Revenue:

 

Internal Segment

$

15 

$

86 

$

(71)

Controlled Founded Entities

1,104 

4,271 

(3,167)

Non-Controlled Founded Entities

— 

20 

(20)

Parent Company and other

— 

— 

— 

Total Grant Revenue

$

1,119 

$

4,377 

$

(3,258)

Total Revenue

$

9,807 

$

20,748 

$

(10,941)

Our total revenue was $9.8 million for the year ended December 31, 2019, a decrease of $10.9 million, or 52.7 percent compared to the year ended December 31, 2018. The decline was attributable to decreases of $11.7 million in contract revenue and $3.2 million in grant revenue in the Controlled Founded Entities segment for the year ended December 31, 2019, which was driven primarily by Vedanta's contract revenue earned under its milestone-based JBI collaboration agreement and grant revenue earned pursuant to its CARB-X agreement during 2018. The decline in Controlled Founded Entities segment's contract and grant revenues, was partially offset by a $4.0 million increase in contract revenue in the Internal segment, which was driven by increases in contract revenue earned under the Orasome collaboration and license agreement with Roche and the Lymphatic Targeting platform collaboration and license agreement with Boehringer Ingelheim entered into in July 2019 for the year ended December 31, 2019.

Research and Development Expenses

 

Year Ended December 31,

(in thousands)

2019

2018

Change

Research and Development Expenses:

 

 

 

Internal Segment

$

(25,977)

$

(8,929)

$

17,047 

Controlled Founded Entities

(42,780)

(36,930)

5,850 

Non-Controlled Founded Entities

(15,555)

(29,851)

(14,296)

Parent Company and other

(1,536)

(1,692)

(156)

Total Research and Development Expenses:

$

(85,848)

$

(77,402)

$

8,446 

Our research and development expenses were $85.8 million for the year ended December 31, 2019, an increase of $8.4 million, or 10.9 percent compared to the year ended December 31, 2018. The change was attributable to increases of $17.0 million in the Internal segment for the year ended December 31, 2019. In 2019, we continued to shift our focus towards the Internal segment, investing in research and development activities to advance a Wholly Owned Pipeline of therapeutic candidates designed to harness key immunological, fibrotic and lymphatic system mechanisms. During the year ended December 31, 2019, we progressed LYT-100 towards first patient dosing in its Phase 1 multiple ascending dose and food effect study, which began in 2020, and prepared for the initiation of a Phase 1 clinical study of LYT-200 in solid tumors, which also began in 2020. Research and development expenses in the Controlled Founded Entities segment also increased $5.9 million as Vedanta progressed its candidates VE202, VE303, VE416 and VE800 to meaningful milestones. The increases were partially offset by a decline of $14.3 million in the Non-Controlled Founded Entities segment owing to the deconsolidation of Akili during the year ended December 31, 2018 and the deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019.

General and Administrative Expenses

 

Year Ended December 31,

(in thousands)

2019

2018

Change

General and Administrative Expenses:

 

 

 

Internal Segment

$

(2,385)

$

(1,498)

$

887 

Controlled Founded Entities

(14,436)

(10,212)

4,224 

Non-Controlled Founded Entities

(10,439)

(16,385)

(5,946)

Parent Company and other

(32,098)

(19,270)

12,828 

Total General and Administrative Expenses

$

(59,358)

$

(47,365)

$

11,993 

Our general and administrative expenses were $59.4 million for the year ended December 31, 2019, an increase of $12.0 million, or 25.3 percent compared to the year ended December 31, 2018. The change was attributable to increases of $12.8 million in the Parent segment for year ended December 31, 2019, which was primarily driven by increased professional fees incurred in the exploration of an ADR listing and increased non-cash depreciation and amortization expenses incurred in the implementation of IFRS 16 Leases and the lease we entered into during the year ended December 31, 2019 for our new headquarters. Controlled Founded Entities segment's general and administrative expenses also increased by $4.2 million. The increases in the Internal and Controlled Founded Entities segments' general and administrative were offset by the deconsolidation of Akili during the year ended December 31, 2018 and the deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019

Total Other Income/(Loss)

Total other income was $672.2 million for the year ended December 31, 2019, an increase of $651.0 million, as compared to the year ended December 31, 2018. The growth was attributable to an increase of $435.3 million in gain on loss of significant influence for the year ended December 31, 2019. For the year ended December 31, 2019 we recognized a gain on loss of significant influence of $445.6 million with respect to Karuna, while for the year ended December 31, 2018 we recognized a gain on loss of significant influence of $10.3 million with respect to resTORbio. The growth was further attributable to an increase of $222.7 million in gain on deconsolidation as we recognized a gain of $264.4 million for the deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019, as compared to a gain of $41.7 million for the deconsolidation of Akili during the year ended December 31, 2018. The gains were partially offset by a decline of $4.1 million in income related to asset disposals and an increase in fair value accounting losses of $3.2 million on certain investments held at fair value for the year ended December 31, 2019.

Net Finance Income (Costs)

Net finance costs were $46.1 million for the year ended December 31, 2019, an increase of $72.1 million in costs, or 278.1 percent as compared to the year ended December 31, 2018. The change was primarily attributable to a $70.5 million decline in the change in the fair value of our preferred shares, warrant and convertible note liabilities held by third parties for the year ended December 31, 2019.

Share of Net Gain/(Loss) in Associates Accounted for Using the Equity Method, and Impairment of Investment in Associate

The share of net income in associates was $30.8 million for the year ended December 31, 2019, an increase of $42.3 million, or 368.0 percent as compared to a net loss for the year ended December 31, 2018. The change in associate income was attributable to the deconsolidation of Karuna and Gelesis and subsequent equity method accounting from the date of deconsolidation to December 31, 2019. We recorded equity method income of $37.1 million with respect to Gelesis, which was partially offset by our share of net loss in Karuna of $6.3 million for the year ended December 31, 2019. Additionally, we recorded an impairment charge of $42.9 million for the year ended December 31, 2019, related to our investment in common shares held in Gelesis. See Note 6 to our consolidated financial statements included elsewhere in this annual report.

Taxation

Income tax expense was $112.4 million for the year ended December 31, 2019, an increase of $110.2 million, or 4961.2 percent as compared to the year ended December 31, 2018. The growth in income tax expense was primarily attributable to the gains realized on the loss of significant influence on Karuna for the year ended December 31, 2019 and the gains recognized on deconsolidation of Vor, Karuna and Gelesis during the year ended December 31, 2019.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the EU. The Consolidated Financial Statements also comply fully with IFRSs as issued by the International Accounting Standards Board (IASB). In the preparation of these financial statements, we are required to make judgments, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates under different assumptions or conditions.

Our estimates and assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revisions and future periods if the revision affects both current and future periods.

While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing at the end of this report, we believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements. See Note 1 to our consolidated financial statements for a further detailed description of our significant accounting policies.

Financial instruments

We account for our financial instruments according to IFRS 9. As such, when issuing preferred shares in our subsidiaries we determine the classification of financial instruments in terms of liability or equity. Such determination involves significant judgement. These judgements include an assessment of whether the financial instruments include any embedded derivative features, whether they include contractual obligations upon us to deliver cash or other financial assets or to exchange financial assets or financial liabilities with another party at any point in the future prior to liquidation, and whether that obligation will be settled by exchanging a fixed amount of cash or other financial assets for a fixed number of the Group's equity instruments.

In accordance with IFRS 9 we carry certain investments in equity securities at fair value as well as our subsidiary preferred share, convertible notes and warrant liabilities, all through profit and loss (FVTPL). Valuation of the aforementioned financial instruments (assets and liabilities) includes making significant estimates, specifically determining the appropriate valuation methodology and making certain estimates of the future earnings potential of the subsidiary businesses, appropriate discount rate and earnings multiple to be applied, marketability and other industry and company specific risk factors.

Consolidation:

The consolidated financial statements include the financial statements of the Company and the entities it controls. Based on the applicable accounting rules, the Company controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Therefore an assessment is required to determine whether the Company has i) power over the investee; (ii) exposure, or rights, to variable returns from its involvement with the investee; and (iii) the ability to use its power over the investee to affect the amount of the investor’s returns. Judgement is required to perform such assessment and it requires that the Company considers, among others, activities that most significantly affect the returns of the investee, its voting shares, representation on the board, rights to appoint management, investee dependence on the Company and other contributing factors.

Investment in Associates

When we do not control an investee but maintain significant influence over the financial and operating policies of the investee the investee is an associate. Significant influence is presumed to exist when we hold 20 percent or more of the voting power of an entity, unless it can be clearly demonstrated that this is not the case. We evaluate if we maintain significant influence over associates by assessing if we have the power to participate in the financial and operating policy decisions of the associate.

Associates are accounted for using the equity method (equity accounted investees) and are initially recognized at cost, or if recognized upon deconsolidation they are initially recorded at fair value at the date of deconsolidation. The consolidated financial statements include our share of the total comprehensive income and equity movements of equity accounted investees, from the date that significant influence commences until the date that significant influence ceases. When our share of losses exceeds the net investment in an equity accounted investee, including preferred share investments that are considered to be Long-Term Interests, the carrying amount is reduced to zero and recognition of further losses is discontinued except to the extent that we have incurred legal or constructive obligations or made payments on behalf of an investee. To the extent we hold interests in associates that are not providing access to returns underlying ownership interests, the instrument held by PureTech is accounted for in accordance with IFRS 9.

Judgement is required in order to determine whether we have significant influence over financial and operating policies of investees. This judgement includes, among others, an assessment whether we have representation on the board of directors of the investee, whether we participate in the policy making processes of the investee, whether there is any interchange of managerial personnel, whether there is any essential technical information provided to the investee and if there are any transactions between us and the investee.

Judgement is also required to determine which instruments we hold in the investee form part of the investment in the associate, which is accounted for under IAS 28 and scoped out of IFRS 9, and which instruments are separate financial instruments that fall under the scope of IFRS 9. This judgement includes an assessment of the characteristics of the financial instrument of the investee held by us and whether such financial instrument provides access to returns underlying an ownership interest.

Where the company has other investments in an equity accounted investee that are not accounted for under IAS 28, judgement is required in determining if such investments constitute Long-Term Interests for the purposes of IAS 28 (please refer to Notes 5 and 6). This determination is based on the individual facts and circumstances and characteristics of each investment, but is driven, among other factors, by the intention and likelihood to settle the instrument through redemption or repayment in the foreseeable future, and whether or not the investment is likely to be converted to common stock or other equity instruments

Income Taxes

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. The amount of taxes currently payable or refundable is accrued, and deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are also recognized for realizable loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities for a change in tax rates is recognized in income in the period that includes the enactment date. Net deferred tax assets are not recorded if we do not assess their realization as probable. Judgement is required to determine if realization of such deferred tax assets is probable.

Share-based Payments

Share-based payments includes stock options, restricted stock units (“RSUs”) as well as service, market and performance-based RSU awards in which the expense is recognized based on the grant date fair value of these awards.

In accordance with IFRS 2, “Share-based Payments,” the fair value of the share option awards is estimated on the grant date using the Black-Scholes option-valuation model which requires the input of certain assumptions, including the expected life of the share-based award, share price volatility, dividend yield and interest rate. The volatility is based on our historical data for the purposes of the Black-Scholes option-valuation model. Expected life is based on the median expected term. Volatility is calculated by taking the weighted-average of the historical volatilities of our shares. We have not declared dividends and we do not plan to pay any dividends in the future. The risk-free interest rate for periods in the expected life of the option is based on the U.S. Treasury constant maturities in effect at the time of the grant.

The fair value of the market and performance-based awards is based on the Monte Carlo simulation analysis utilizing a Geometric Brownian Motion process with 100,000 simulations to value those shares. The model considers share price volatility, risk-free rate and other covariance of comparable public companies and other market data to predict distribution of relative share performance.

We recognize the estimated fair value of service, market and performance-based awards as share-based compensation expense over the vesting period based upon the determination of whether it is probable that the performance targets will be achieved. We assess the probability of achieving the performance targets at each reporting period. Cumulative adjustments, if any, are recorded to reflect subsequent changes in the estimated outcome of performance-related conditions. For share-based payment awards with market conditions, the grant date fair value is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

Recent Accounting Pronouncements

For information on recent accounting pronouncements, see our consolidated financial statements and the related notes found elsewhere in this report.

Cash Flow and Liquidity

Our cash flows may fluctuate and are difficult to forecast and will depend on many factors, including:

  • the expenses incurred in the development of wholly-owned and Controlled-Founded Entity therapeutic candidates;
  • the revenue generated by wholly-owned and Controlled-Founded Entity therapeutic candidates;
  • the revenue generated from licensing and royalty agreement with Founded Entities;
  • the financing requirements of the Internal segment, Controlled-Founded Entities segment and Parent segment; and
  • the investment activities in the Internal, Controlled-Founded Entities, and Non-Controlled Founded Entities and Parent segments.

As of December 31, 2020, we had consolidated cash and cash equivalents of $403.9 million. As of December 31, 2020, we had PureTech Level cash and cash equivalents of $349.4 million.

Cash Flows

The following table summarizes our cash flows for each of the periods presented:

 

Years Ended December 31,

(in thousands)

2020

2019

2018

Net cash used in operating activities

$

(131,827)

$

(98,156)

$

(72,796)

Net cash provided by/(used in) investing activities

364,478 

63,659 

(39,645)

Net cash provided by/(used in) financing activities

38,869 

49,910 

156,887 

Effect of exchange rates on cash and cash equivalents

— 

(104)

(44)

Net increase in cash and cash equivalents

$

271,520 

$

15,309 

$

44,402 

Operating Activities

Net cash used in operating activities was $131.8 million for the year ended December 31, 2020, as compared to $98.2 million for the year ended December 31, 2019. The increase in outflows was primarily attributable to estimated income taxes of $20.7 million paid for our disposals of Karuna common shares during the year ended December 31, 2020. The increase was further attributable to a decrease of $4.5 million in payments received with respect to contract revenue for the year ended December 31, 2020. We received a $2.0 million milestone payment from Karuna for initiation of its KarXT Phase 3 clinical study pursuant to the Exclusive Patent License Agreement between PureTech and Karuna during the year ended December 31, 2020. We received $3.5 million from Imbrium Therapeutics LP for the execution of a Research Collaboration Option and License Agreement and $3.0 million from Boehringer Ingelheim for the execution of a Collaboration and License Agreement during the year ended December 31, 2019. The increase in outflows was further attributable to reduced interest income and the timing of payments in the normal course of business for the year ended December 31, 2020.

Net cash used in operating activities was $98.2 million for the year ended December 31, 2019, as compared to $72.8 million for the year ended December 31, 2018. The increase in outflows was primarily due to our increased operating loss that resulted from increased research and development activities. In 2019, our income resulted from increased non-cash gains, that had no impact on the cash used in operating activities.

Investing Activities

Net cash provided by investing activities was $364.5 million for the year ended December 31, 2020, as compared to inflows of $63.7 million for the year ended December 31, 2019. The inflow was primarily attributable to the sale of Karuna and resTORbio common shares for aggregate proceeds of $350.6 million during the year ended December 31, 2020. The inflow was further attributable to cash provided by the maturity of short-term investments totaling $30.1 million. The inflows were offset by purchases of Gelesis and Vor preferred shares totaling $11.1 million and the purchase of fixed assets totaling $5.2 million.

Net cash provided by investing activities was $63.7 million for the year ended December 31, 2019, as compared to net cash used in investing activities of $39.6 million for the year ended December 31, 2018. Cash provided by the maturity of short-term investments of $174.0 million was offset by the purchase of short-term investments of $69.5 million as well as the purchase of fixed assets totaling $12.1 million and the purchase of intangible assets totaling $0.4 million. The inflow was further offset by our investment in Gelesis convertible promissory notes totaling $6.5 million and Gelesis Series 3 Growth preferred shares and Karuna Series B preferred shares totaling $16.0 million. The inflow was further offset by the derecognition of cash totaling $16.0 million held by Vor, Karuna and Gelesis upon deconsolidation.

Financing Activities

Net cash provided by financing activities was $38.9 million for the year ended December 31, 2020, as compared to $49.9 million for the year ended December 31, 2019. The net inflow was primarily attributable to the issuances by Vedanta of a $25.0 million convertible promissory note and a long-term loan with net proceeds of $14.7 million. The inflow was further attributable to $13.8 million received from the Vedanta Series C-2 and Sonde Series A-2 preferred share financings. The inflows were partially offset by the $12.9 million settlement of 2017 RSU awards granted to certain executives.

Net cash provided by financing activities was $49.9 million for the year ended December 31, 2019, as compared to net inflows of $156.9 million for the year ended December 31, 2018. The net inflow was primarily attributable to aggregate proceeds of the issuance of $51.0 million received from the Vedanta Series C and C-2, Gelesis Series 2 Growth and Sonde Series A-2 preferred share financings. Further inflows of $1.6 million were attributable to the proceeds from the issuance of convertible notes by Karuna. The inflows were partially offset by payment of our lease liability totaling $1.7 million and $1.3 million in withholding payroll tax payments related to the vesting of 2016 RSU awards granted to certain executives.

Funding Requirements

We have incurred operating losses since inception. Based on our current plans, we believe our existing cash and cash equivalents at December 31, 2020 will be sufficient to fund our operations and capital expenditure requirements into the first quarter of 2024 and following the sale of 1,000,000 common shares of Karuna for aggregate proceeds of $118.0 million on February 9, 2021, we have sufficient funding to extend operations over a four year period into the first quarter of 2025. We expect to incur substantial additional expenditures in the near term to support our ongoing activities. Additionally, we expect to incur additional costs as a result of operating as a U.S. public company. We expect to continue to incur net losses for the foreseeable future. Our ability to fund our therapeutic development and clinical operations as well as commercialization of our wholly-owned therapeutic candidates, will depend on the amount and timing of cash received from planned financings. Our future capital requirements will depend on many factors, including:

  • the costs, timing and outcomes of clinical trials and regulatory reviews associated with our wholly-owned therapeutic candidates;
  • the costs of commercialization activities, including product marketing, sales and distribution;
  • the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims;
  • the emergence of competing technologies and products and other adverse marketing developments;
  • the effect on our therapeutic and product development activities of actions taken by the FDA, EMA or other regulatory authorities;
  • our degree of success in commercializing our wholly-owned therapeutic candidates, if and when approved; and
  • the number and types of future therapeutics we develop and commercialize.

A change in the outcome of any of these or other variables with respect to the development of any of our wholly-owned therapeutic candidates could significantly change the costs and timing associated with the development of that therapeutic candidate. Further, our operating plans may change in the future, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity financings, debt financings, collaborations with other companies or other strategic transactions. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or therapeutic candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, therapeutic development or future commercialization efforts or grant rights to develop and market therapeutic candidates that we would otherwise prefer to develop and market ourselves.

Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials and other research and development activities. We currently have no credit facility or committed sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our wholly-owned therapeutic candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated therapeutic development programs.

Financial Position

Summary Financial Position

 

As of December 31,

(in thousands)

2020

2019

Change

Investments held at fair value

530,161 

714,905 

(184,744)

Other non-current assets

45,484 

57,428 

(11,943)

Non-current assets

575,645 

772,333 

(196,687)

Short-term investments

— 

30,088 

(30,088)

Cash and cash equivalents

403,881 

132,360 

271,521 

Other current assets

10,468 

6,397 

4,071 

Current assets

414,348 

168,845 

245,504 

Total assets

989,994 

941,178 

48,816 

Lease Liability

32,088 

34,914 

(2,827)

Deferred tax liability

108,626 

115,445 

(6,820)

Other non-current liabilities

14,818 

1,219 

13,598 

Non-current liabilities

155,531 

151,579 

3,952 

Trade and other payables

20,566 

19,750 

817 

Notes payable

26,455 

1,455 

25,000 

Warrant liability

8,206 

7,997 

209 

Preferred shares

118,972 

100,989 

17,983 

Other current liabilities

6,724 

9,011 

(2,287)

Total current liabilities

180,924 

139,201 

41,722 

Total liabilities

336,455 

290,780 

45,674 

Net assets

653,539

650,397

3,142 

Total equity

653,539

650,398

3,141 

Investments Held at Fair Value

Investments held at fair value decreased $184.7 million to $530.2 million as of December 31, 2020. Investments held at fair value consists primarily of our common share investment in Karuna and our preferred share investments in Akili, Gelesis and Vor. See Notes 5 and 6 to our consolidated financial statements included elsewhere in this annual report. Fair value of investments accounted for at fair value, does not take into consideration contribution from milestones that occurred after December 31, 2020, the value of our consolidated Founded Entities (Vedanta, Follica, Sonde, Akili, Alivio, and Entrega), our Wholly Owned Programs, or our cash.

Cash and Cash Equivalents, and Short-term Investments

Consolidated cash, cash equivalents and short-term investments increased $241.4 million to $403.9 million as of December 31, 2020, while we had PureTech Level cash and cash equivalents of $349.4 million. The increase reflected primarily the disposals of Karuna common shares during the year ended December 31, 2020. On January 22, 2020, PureTech sold 2,100,000 shares of Karuna common shares for aggregate proceeds of $200.9 million. On May 26, 2020, PureTech sold an additional 555,500 Karuna common shares for aggregate proceeds of $45.0 million. On August 26, 2020, PureTech sold 1,333,333 common shares of Karuna for aggregate proceeds of $101.6 million. The inflows from the disposals were primarily offset by our operating loss of $119.5 million for the year ended December 31, 2020.

Non-Current Liabilities

Non-current liabilities increased $4.0 million to $155.5 million as of December 31, 2020. The increase reflected the execution by Vedanta of a $15.0 million long-term loan and security agreement with Oxford Finance LLC which was partially offset by declines of $2.8 million and $6.8 million in our long-term lease and deferred tax liabilities, respectively as of December 31, 2020.

Trade and Other Payables

Trade and other payables decreased $0.8 million to $20.6 million as of December 31, 2020. The decline reflected primarily the timing of payments as of December 31, 2020.

Notes Payable

Notes payable increased $25.0 million to $26.5 million as of December 31, 2020. The increase reflected the issuance by Vedanta of a $25.0 million convertible promissory note to a third party investor.

Preferred Shares

Preferred share liability increased $18.0 million to $119.0 million as of December 31, 2020. The increase reflected the issuance by Sonde of Series A-2 preferred shares for aggregate proceeds of $4.8 million and the issuance by Vedanta of Series C-2 preferred shares for aggregate proceeds of $9.0 million. The increases also reflected Finance costs of $4.2 million owing to the change in fair value of preferred shares during the year ended December 31, 2020.

Quantitative and Qualitative Disclosures about Financial Risks

Interest Rate Sensitivity

As of December 31, 2020, we had consolidated cash and cash equivalents of $403.9 million, while we had PureTech Level cash and cash equivalents of $349.4 million. Our exposure to interest rate sensitivity is impacted by changes in the underlying U.K. and U.S. bank interest rates. We have not entered into investments for trading or speculative purposes. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation and investments in short duration, high-quality U.S. Treasury Bills and U.S. debt obligations and related money market accounts we do not believe change in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.

Foreign Currency Exchange Risk

We maintain our consolidated financial statements in our functional currency, which is the U.S. dollar. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Non-monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the date of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income/(loss) for the respective periods. Such foreign currency gains or losses were not material for all reported periods.

We recorded foreign currency losses in respect of foreign operations of $0.5 million, $0.0 million and $0.2 million for the years ended December 31, 2020, December 31, 2019, and December 31, 2018, respectively, which are included in Other comprehensive income/(loss) in the Consolidated Statements of Comprehensive Income/(Loss).

We do not currently engage in currency hedging activities in order to reduce our currency exposure, but we may begin to do so in the future. Instruments that may be used to hedge future risks include foreign currency forward and swap contracts. These instruments may be used to selectively manage risks, but there can be no assurance that we will be fully protected against material foreign currency fluctuations.

Controlled Founded Entity Investments

We maintain investments in certain Controlled Founded Entities. Our investments in Controlled Founded Entities are eliminated as intercompany transactions upon financial consolidation. We are however exposed to a preferred share liability owing to the terms of existing preferred shares and the ownership of Controlled Founded Entities preferred shares by third parties. The liability of preferred shares is maintained at fair value through the profit and loss. Our strong cash position, budgeting and forecasting processes, as well as decision making and risk mitigation framework enable us to robustly monitor and support the business activities of the Controlled Founded Entities to ensure no exposure to credit losses and ultimately dissolution or liquidation. Accordingly, we view exposure to third party preferred share liability as low. Please refer to Note 16 to our consolidated financial statements for further information regarding our exposure to Controlled Founded Entity Investments.

Non-Controlled Founded Entity Investments

We maintain certain investments in Non-Controlled Founded Entities which are deemed either as investments and accounted for as investments held at fair value or associates and accounted for under the equity method (please refer to Note 1 to our consolidated financial statements). Our exposure to investments held at fair value was $530.2 million as of December 31, 2020 and we may or may not be able to realize the value in the future. Accordingly, we view the risk as high. Our exposure to investments in associates in limited to the carrying amount of the investment. We are not exposed to further contractual obligations or contingent liabilities beyond the value of initial investment. As of December 31, 2020, Gelesis was the only associate. The carrying amount of the investment in Gelesis as an associate was zero. Accordingly, we do not view this as a risk. Please refer to Notes 5, 6 and 16 to our consolidated financial statements for further information regarding our exposure to Non-Controlled Founded Entity Investments.

Equity Price Risk

As of December 31, 2020, we held 3,406,564 common shares of Karuna. The fair value of our investment in the common stock of Karuna was $346.1 million.

The investment in Karuna is exposed to fluctuations in the market price of these common shares. The effect of a 10.0 percent adverse change in the market price of Karuna common shares as of December 31, 2020 would have been a loss of approximately $34.6 million recognized as a component of Other income (expense) in our Consolidated Statements of Comprehensive Income/(Loss).

Liquidity Risk

We do not believe we will encounter difficulty in meeting the obligations associated with our financial liabilities that are settled by delivering cash or another financial asset. While we believe our cash, cash equivalents and short-term investments do not contain excessive risk, we cannot provide absolute assurance that in the future our investments will not be subject to adverse changes or decline in value based on market conditions.

Credit Risk

We maintain an investment portfolio in accordance with our investment policy. The primary objectives of our investment policy are to preserve principal, maintain proper liquidity and to meet operating needs. Although our investments are subject to credit risk, our investment policy specifies credit quality standards for our investments and limits the amount of credit exposure from any single issue, issuer or type of investment. Also, due to the conservative nature of our investments and relatively short duration, interest rate risk is mitigated. We do not own derivative financial instruments. Accordingly, we do not believe that there is any material market risk exposure with respect to derivative or other financial instruments.

Credit risk is also the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. We assess the credit quality of customers on an ongoing basis, taking into account its financial position, past experience and other factors. The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to credit ratings (if available) or to historical information about counterparty default rates. We are also potentially subject to concentrations of credit risk in accounts receivable. Concentrations of credit risk with respect to receivables is owed to the limited number of companies comprising our customer base. Our exposure to credit losses is low, however, due to the credit quality of our larger collaborative partners such as Boehringer Ingelheim and Eli Lilly.

JOBS Act Exemptions and Foreign Private Issuer Status

We qualify as an “emerging growth company” as defined in the U.S. Jumpstart Our Business Startups Act of 2012. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. This includes an exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002. We may take advantage of this exemption for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company if we have more than $1.07 billion in total annual gross revenue, have more than $700.0 million in market value of our ordinary shares held by non-affiliates or issue more than $1.0 billion of non-convertible debt over a three-year period. We may choose to take advantage of some but not all of these provisions that allow for reduced reporting and other requirements.

We are considering whether we will take advantage of the extended transition period provided under Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. Since IFRS makes no distinction between public and private companies for purposes of compliance with new or revised accounting standards, the requirements for our compliance as a private company and as a public company are the same.

Owing to our U.S. listing, we will report under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as a non-U.S. company with foreign private issuer status. Even after we no longer qualify as an emerging growth company, as long as we qualify as a foreign private issuer under the Exchange Act, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:

  • the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
  • sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time;
  • the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on Form 8-K, upon the occurrence of specified significant events; and
  • Regulation FD, which regulates selective disclosures of material information by issuers.

Consolidated Statements of Comprehensive Income/(Loss)

For the years ended December 31

Note

2020

$000s

2019

$000s

2018

$000s

Contract revenue

3

8,341 

8,688 

16,371 

Grant revenue

3

3,427 

1,119 

4,377 

Total revenue

11,768 

9,807 

20,748 

Operating expenses:

General and administrative expenses

7

(49,440)

(59,358)

(47,365)

Research and development expenses

7

(81,859)

(85,848)

(77,402)

Operating income/(loss)

(119,531)

(135,399)

(104,019)

Other income/(expense):

Gain on deconsolidation

5

— 

264,409