Puretech Health(PRTC) - 2023 Q2 - Quarterly Report

Executive Summary & Company Overview PureTech Health made significant clinical and financial progress in H1 2023, advancing its pipeline and strengthening its capital position Half-Year Highlights PureTech Health achieved significant clinical and financial milestones in H1 2023, strengthening its pipeline and capital position Operational Highlights PureTech advanced its wholly-owned pipeline and Founded Entities, achieving significant clinical and regulatory milestones - Progressed Phase 2b dose-ranging trial of LYT-100 in idiopathic pulmonary fibrosis (IPF) - Initiated Phase 2a proof-of-concept trial for LYT-300 (oral allopregnanolone) for anxiety and depression, and received up to $11.4 million from the U.S. Department of Defense for LYT-300 in Fragile X-associated Tremor/Ataxia Syndrome (FXTAS)[12] - Initiated Phase 1b trial of LYT-200 (anti-galectin-9 mAb) in combination with tislelizumab for urothelial and head and neck cancers, and progressed single-agent Phase 1b trial for acute myeloid leukemia (AML)[12] - Karuna Therapeutics is on track to file KarXT for FDA approval in schizophrenia in Q3 2023, with a planned launch in H2 2024[12] - Akili released EndeavorOTC™ for adults with ADHD without a prescription and submitted data to the FDA to expand EndeavorRx® label to adolescents[12] - Gelesis filed a 510(k) application with the FDA to make Plenity® available without a prescription and has generated over $40 million in revenue since launch[12] - Vedanta Biosciences received Fast Track designation for VE303 for recurrent Clostridioides difficile infection (rCDI) and raised $106.5 million[12] Financial Highlights PureTech maintained strong cash position with $350.5 million, reduced operating expenses, and secured a $500 million KarXT royalty agreement Cash and Cash Equivalents (YoY) | Metric | June 30, 2023 | December 31, 2022 | Change | | :----- | :------------ | :---------------- | :----- | | Consolidated Cash and cash equivalents | $350.5 million | $350.1 million | +$0.4 million | | PureTech Level Cash and cash equivalents | $348.5 million | $339.5 million | +$9.0 million | Operating Expenses (YoY) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :----- | :----------------------------- | :----------------------------- | :----- | | Operating expenses | $79.3 million | $108.2 million | -$28.9 million | - PureTech and Royalty Pharma entered into a KarXT Royalty Agreement for up to $500 million, including $100 million upfront cash[12] - PureTech's Wholly Owned Pipeline has three clinical-stage therapeutic candidates across four clinical trials and four additional preclinical CNS programs[2] - Advancements across Founded Entities include Karuna's third positive registrational trial for KarXT, Akili's commercial release of EndeavorOTC™, Gelesis' application for non-prescription Plenity®, positive results from Vor's leukemia trial, and Vedanta's $106.5 million financing[2] - PureTech plans a more robust capital return strategy, leveraging cash from Founded Entities, and exploring new Founded Entities, asset sales, or partnerships for Wholly Owned Programs[2] Consolidated Cash and Cash Equivalents | Metric | June 30, 2023 | December 31, 2022 | | :----- | :------------ | :---------------- | | Consolidated Cash and cash equivalents | $350.5 million | $350.1 million | | Operational Runway | Into Q1 2026 | N/A | Key Wholly Owned & Founded Entity Programs PureTech maintains a diverse pipeline of wholly-owned candidates and a portfolio of Founded Entities addressing significant medical needs Wholly Owned Candidates | Candidate | Ownership | Indication | | :-------- | :-------- | :--------- | | LYT-100 (deupirfenidone) | 100% | Conditions involving inflammation and fibrosis, including idiopathic pulmonary fibrosis | | LYT-200 (anti-galectin-9 mAb) | 100% | Metastatic/locally advanced solid tumors, including urothelial and head and neck cancers, and hematological malignancies, such as acute myeloid leukemia | | LYT-300 (oral allopregnanolone) | 100% | A range of neurological and neuropsychological conditions, including anxiety, mood disorders and Fragile X-associated Tremor/Ataxia Syndrome | | LYT-310 (oral cannabidiol) | 100% | Epilepsies and other neurological conditions | Founded Entities Overview | Founded Entity | Ownership | Overview | | :------------- | :-------- | :------- | | Karuna | 2.8% Equity plus milestone payments, 20% sublicense revenue, royalties, and up to $500M from agreement with Royalty Pharma | Advancing transformative medicines for people living with psychiatric and neurological conditions | | Akili | 14.6% Equity | Pioneering the development of cognitive treatments through game-changing technologies | | Gelesis | 22.8% Equity plus Royalties | Advancing a novel category of treatments for weight management and gut related chronic diseases | | Vedanta | 41.0% Equity | Pioneering a new category of oral therapies based on defined bacterial consortia | | Vor Bio | 4.0% Equity | Engineering hematopoietic stem cells to enable targeted therapies for patients with blood cancers | | Sonde | 35.2% Equity | A voice-based artificial intelligence platform to detect changes in health | | Entrega | 73.8% Equity | Engineering hydrogels to enable the oral administration of peptide therapeutics (e.g., GLP-1 agonists) | About PureTech Health PureTech Health is a clinical-stage biotherapeutics company with a high success rate, developing 27 therapeutics through internal R&D and Founded Entities - PureTech's R&D engine has developed 27 therapeutics and candidates, with two FDA-cleared (Plenity® and EndeavorRx®) and KarXT expected to be filed soon[17] - The company's clinical success rate is six times greater than the industry average[3][25] Key Upcoming Milestones PureTech and its Founded Entities anticipate several significant clinical, regulatory, and commercial milestones over the next 12-24 months - Wholly Owned Pipeline milestones include topline Phase 2b results for LYT-100 in IPF (2024), Phase 2a proof-of-concept results for LYT-300 (end of 2023), and initiation of a Phase 1 trial for LYT-310 (Q4 2023)[18] - Founded Entities milestones include Karuna's FDA filing for KarXT in schizophrenia (Q3 2023) and initiation of ADEPT-2 Phase 3 trial (H2 2023)[18] - Akili expects to submit data for EndeavorOTC™ marketing authorization (H2 2023) and Gelesis anticipates FDA decision on non-prescription Plenity® (Q1 2024)[18] - Vedanta plans to initiate a Phase 3 trial for VE303 in rCDI (Q4 2023) and expects topline data from VE416 Phase 1/2 trial (2023)[18] Interim Management Report This report details PureTech's strategic business model, significant advancements in its wholly-owned and Founded Entity programs, and operational highlights Introduction & Business Model PureTech's business model focuses on identifying unmet needs, de-risking programs, and generating non-dilutive capital through its high-success R&D engine - PureTech's R&D engine has generated 27 therapeutics and candidates, with two FDA-cleared and KarXT expected to be filed soon[23] - The company's distinctive approach to drug development involves identifying unmet needs, applying proprietary technologies to overcome limitations, and efficient de-risking through 'killer' experiments and disciplined R&D[23][25] - PureTech has generated nearly $800 million from Founded Entity equity and royalty monetization events, without needing to raise funds from capital markets in almost six years[25] - The KarXT program, with an initial allocation of $18.5 million, has yielded an almost 50x return on investment, including a $100 million upfront payment from Royalty Pharma and potential additional payments up to $400 million[26] Notable Developments - Wholly Owned Programs PureTech's wholly-owned pipeline, leveraging validated efficacy, saw significant progress across LYT-100, LYT-300, LYT-310, and LYT-200 programs LYT-100 (deupirfenidone) LYT-100 is in Phase 2b for IPF, aiming for improved tolerability and potential U.S. registration, with exploration for other fibrotic conditions - LYT-100 is in Phase 2b for idiopathic pulmonary fibrosis (IPF), with topline results expected in 2024. It aims to improve tolerability and potentially efficacy over pirfenidone, addressing the high discontinuation rate of current treatments[30][32][33] - The development program is streamlined, using endpoints that have supported past approvals, with Phase 2b and a subsequent Phase 3 trial potentially serving as the basis for U.S. registration[33] - LYT-100 is also being explored for progressive fibrosing interstitial lung diseases, other fibrotic conditions, and as a medical countermeasure under the FDA Animal Rule, potentially qualifying for a priority review voucher[34] LYT-300 (oral allopregnanolone) LYT-300, an oral allopregnanolone prodrug, entered Phase 2a for anxiety and received DoD funding for FXTAS - LYT-300, an oral prodrug of allopregnanolone developed using the Glyph™ platform, is being advanced for anxiety disorders and depression, aiming to unlock allopregnanolone's therapeutic potential in a convenient oral form[35][37] - A Phase 2a proof-of-concept trial in healthy volunteers for anxiety was initiated in June, with results expected by the end of 2023[37] - PureTech received up to $11.4 million from the U.S. Department of Defense to advance LYT-300 for Fragile X-associated Tremor/Ataxia Syndrome (FXTAS), supporting a planned Phase 2 trial[12][37][39] LYT-310 (oral cannabidiol) LYT-310, an oral CBD candidate, is being developed for epilepsies with a Phase 1 trial expected in Q4 2023 - LYT-310, an oral cannabidiol (CBD) candidate from the Glyph™ platform, is being developed for epilepsies and other neurological indications, aiming to overcome limitations of existing CBD products like large volume formulations and GI side effects[40] - A Phase 1 clinical trial for LYT-310 is expected to be initiated in Q4 2023[18][40] LYT-200 (anti-galectin-9 mAb) LYT-200, an anti-galectin-9 mAb, advanced in Phase 1b trials for solid tumors and AML, with results expected in 2023-2024 - LYT-200, an anti-galectin-9 monoclonal antibody, is being developed for metastatic/locally advanced solid tumors (urothelial and head and neck cancers) and hematological malignancies (acute myeloid leukemia)[42] - A Phase 1b trial of LYT-200 in combination with tislelizumab for solid tumors was initiated in H1 2023 (topline results expected 2024), and initial results from a single-agent Phase 1b trial for AML are anticipated by end of 2023[12][18][42] Glyph™ Technology Platform & Preclinical Programs PureTech's Glyph™ platform generated additional preclinical CNS programs, with plans for pipeline expansion - PureTech has generated multiple additional preclinical programs from its Glyph™ platform, focused on central nervous system (CNS) indications, with plans to share more about pipeline expansion[12][41] - Wholly Owned Programs focus on leveraging validated efficacy to rapidly advance therapeutics with proven profiles, preserving pharmacology while maximizing unrealized potential[29] Notable Developments - Founded Entities PureTech's Founded Entities achieved significant commercial and clinical momentum, advancing key programs and securing financing Karuna Therapeutics Karuna reported positive Phase 3 results for KarXT in schizophrenia, with FDA filing planned for Q3 2023 and a H2 2024 launch - Karuna announced positive topline results from the Phase 3 EMERGENT-3 trial for KarXT in schizophrenia, meeting its primary endpoint with a statistically significant reduction in PANSS total score[44] - Karuna plans to file KarXT for FDA approval in schizophrenia in Q3 2023, with a launch anticipated in H2 2024 if approved. They also expect to initiate a second Phase 3 trial (ADEPT-2) for psychosis in Alzheimer's disease in H2 2023[12][18][44] Akili, Inc. Akili released EndeavorOTC™ for adults with ADHD without prescription and submitted data for EndeavorRx® label expansion to adolescents - Akili shared positive topline results from STARS-ADHD-Adolescents and STARS-ADHD-Adult clinical trials for EndeavorRx® and EndeavorOTC™ respectively, demonstrating improvements in attention[12][45][48] - EndeavorOTC™, a video game treatment for adults with ADHD, was released without a prescription in June 2023. Akili expects to submit adult clinical trial data to the FDA for marketing authorization for EndeavorOTC to be available without a prescription in H2 2023[12][18][48] Gelesis Holdings, Inc. Gelesis filed for non-prescription Plenity® and entered a merger agreement with PureTech, having generated over $40 million in revenue - Gelesis' weight management product, Plenity®, has helped over 200,000 people and generated more than $40 million in revenue since launch[12][49] - Gelesis filed a 510(k) application with the FDA to make Plenity® available without a prescription, anticipating a decision by Q1 2024, which could double its addressable market[18][49] - PureTech entered into an Agreement and Plan of Merger to acquire all outstanding stock of Gelesis and take the company private, contingent on shareholder approval and other closing conditions[18][50] Vedanta Biosciences Vedanta received Fast Track designation for VE303, raised $106.5 million, and plans a Phase 3 trial for rCDI - Vedanta received Fast Track designation for VE303, its Phase 3 ready therapeutic candidate for preventing recurrent Clostridioides difficile infection (rCDI)[12][51] - Vedanta raised $106.5 million in financing to advance its pipeline of oral therapies based on defined bacterial consortia[12][51] - Vedanta plans to initiate a Phase 3 clinical trial of VE303 in Q4 2023 and expects topline data from VE416 Phase 1/2 trial for food allergy in 2023[18] Vor Biopharma Inc. Vor Bio announced successful trem-cel engraftment in AML patients and secured a gene-edited HSC license - Vor Bio announced successful primary engraftment of trem-cel (VOR33) in five AML patients[12][52] - The FDA cleared Vor's Investigational New Drug application for a Phase 1/2 clinical trial of VCAR334Llo[12][52] - Vor secured a worldwide non-exclusive license from Editas Medicine for ex-vivo Cas9 gene-edited HSC therapies for blood cancers[52] Sonde Health Sonde continues developing its voice-based AI platform for detecting health changes linked to various conditions - Sonde continues to develop its voice-based artificial intelligence platform for detecting health changes linked to conditions like depression, anxiety, and respiratory disease[53] Entrega Entrega is advancing its hydrogel-based platform for oral administration of biologics, including GLP-1 agonists, to enhance absorption - Entrega is advancing its hydrogel-based platform for oral administration of biologics, vaccines, and other drugs, particularly peptide therapeutics like GLP-1 agonists, to enhance absorption and reduce variability[54] - Founded Entities demonstrated significant commercial and clinical momentum in H1 2023[43] Financial Review This section outlines PureTech's financial reporting framework, performance metrics, and detailed results of operations, cash flow, and funding requirements Reporting Framework & Basis of Consolidation PureTech's financial statements adhere to IAS 34, consolidating subsidiaries and accounting for associates, with deconsolidation impacting reporting - Financial statements are prepared in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting[60] - Founded Entities are classified as subsidiaries (controlled), associates (significant influence), or investments held at fair value (neither control nor significant influence)[61] - Deconsolidation of a Founded Entity results in derecognition of its assets/liabilities, recording the retained investment at fair value, and recognizing any gain or loss in the Consolidated Statements of Comprehensive Income/(Loss)[67] Business Background and Results Overview PureTech's profitability depends on successful commercialization, with funding from Founded Entity monetization and anticipated increases in R&D expenses - Profitability depends on successful development and commercialization of wholly-owned or Controlled Founded Entities' therapeutic candidates[66] - Significant cash was generated from the sale of shares in public Founded Entities and the sale of an interest in Karuna future royalties[66] - Operating expenses are anticipated to increase due to advancing late-stage clinical programs (LYT-100, LYT-200, LYT-300), progressing new candidates (LYT-310), and expanding technology platforms[67] - Future operations will be financed through monetization of Founded Entity interests, collaborations, or other sources, as substantial additional funding may be required[71] Measuring Performance (APMs) PureTech uses IFRS and non-IFRS APMs to provide complementary information for understanding its financial performance and position - Core performance measures are non-IFRS Alternative Performance Measures (APMs) used to provide complementary information for understanding financial performance and position[74] Key Alternative Performance Measures (APMs) | Measure Type | Definition | Why it's used | | :----------- | :--------- | :------------ | | PureTech Level Cash, cash equivalents and short-term investments | Cash and cash equivalents, and Short-term investments held at PureTech Health plc and its wholly-owned subsidiaries. | Provides valuable additional information with respect to cash, cash equivalents and short-term investments available to fund the Wholly Owned Programs and make certain investments in Founded Entities. | | PureTech Level Cash and Cash Equivalents | Cash and Cash Equivalents held at PureTech Health plc and its wholly-owned subsidiaries. | 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. | Results of Operations (Six Months Ended June 30, 2023 vs 2022) PureTech's H1 2023 financial performance saw decreased revenue and operating expenses, with a net loss influenced by other income gains Total Revenue Total revenue decreased to $3.15 million, primarily due to lower grant revenue from deconsolidated entities Total Revenue (YoY) | Revenue Type (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :-------------------------- | :----------------------------- | :----------------------------- | :----- | | Contract Revenue | $750 | $1,141 | $(391) | | Grant Revenue | $2,400 | $5,890 | $(3,490) | | Total Revenue | $3,150 | $7,030 | $(3,880) | | Decrease in Grant Revenue (Non-Controlled Founded Entities) | N/A | N/A | Primarily due to partial-period reporting by Vedanta due to deconsolidation. | Research and Development Expenses R&D expenses decreased by $31.43 million to $53.15 million, driven by project prioritization and Vedanta's deconsolidation Research and Development Expenses (YoY) | Segment (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :--------------------- | :----------------------------- | :----------------------------- | :----- | | Internal Segment | $(46,941) | $(62,499) | $(15,557) | | Non-Controlled Founded Entities | $(5,380) | $(20,432) | $(15,052) | | Total R&D Expenses | $(53,146) | $(84,579) | $(31,432) | | Percentage Change | N/A | N/A | -37.2% | - Decrease in R&D expenses was primarily due to prioritization of projects in the Internal Segment and reduced contract manufacturing expenses, as well as partial period reporting by Vedanta due to its deconsolidation[90][92] General and Administrative Expenses G&A expenses increased by $2.52 million to $26.17 million, due to higher employee compensation and consulting fees, partially offset by the deconsolidation of Vedanta General and Administrative Expenses (YoY) | Segment (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :--------------------- | :----------------------------- | :----------------------------- | :----- | | Parent Company and other | $(15,716) | $(10,580) | $5,136 | | Internal Segment | $(7,405) | $(4,156) | $3,249 | | Non-Controlled Founded Entities | $(2,942) | $(8,055) | $(5,113) | | Total G&A Expenses | $(26,166) | $(23,644) | $2,522 | | Percentage Change | N/A | N/A | +10.7% | - Increase in G&A expenses was driven by higher employee compensation ($4.1M, including $2.0M in stock-based compensation) and consulting fees ($3.9M) in the Parent Company and Internal Segment, partially offset by the deconsolidation of Vedanta[93] Total Other Income (Loss) Total other income significantly increased to $62.43 million, primarily from gains on investments held at fair value and Vedanta's deconsolidation Total Other Income (Loss) (YoY) | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :-------------------- | :----------------------------- | :----------------------------- | :----- | | Total Other Income (Loss) | $62,426 | $(24,126) | $86,552 | | Gain/(loss) on investments held at fair value | $7,818 | $(59,019) | $66,837 | | Gain on deconsolidation of subsidiary | $61,787 | $27,251 | $34,536 | | Gain/(loss) on investments in notes from associates | $(6,045) | $0 | $(6,045) | | Other income/(expenses) | $(1,134) | $7,642 | $(8,776) | - The significant increase in other income was primarily due to a gain from investments held at fair value (mainly Karuna holdings) and a gain from the deconsolidation of Vedanta[94] Finance Income (Costs) Net finance income decreased to $5.32 million, mainly due to lower fair value gains on preferred shares and new non-cash interest expense Net Finance Income (Costs) (YoY) | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :-------------------- | :----------------------------- | :----------------------------- | :----- | | Net finance income/(costs) | $5,316 | $56,320 | $(51,004) | | Net change in fair value of subsidiaries' financial instrument liabilities | $2,650 | $57,651 | $(55,001) | | Non-cash interest expense related to sale of future royalties | $(3,726) | $0 | $(3,726) | | Interest income from financial assets | $7,731 | $630 | $7,101 | - The decrease in net finance income was mainly due to a lower gain from changes in fair value of subsidiaries' financial instrument liabilities (Vedanta preferred shares in 2022) and the introduction of non-cash interest expense related to the sale of future royalties[95][97] Share of Net Income/(Loss) of Associates & Gain on Dilution Net loss from associates decreased by $10.0 million, primarily due to reduced Gelesis losses, with no prior year dilution gain Share of Net Income/(Loss) of Associates (YoY) | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :-------------------- | :----------------------------- | :----------------------------- | :----- | | Share of net income/(loss) of associates | $(5,324) | $(15,322) | $9,998 | | Gain on dilution of ownership interest in associate | $0 | $28,363 | $(28,363) | - The decrease in net loss from associates was primarily due to reduced losses from Gelesis. The prior year included a $28.4 million gain on dilution of ownership interest in Gelesis due to its merger with CapStar[98] Taxation Income tax expense increased to $11.81 million, driven by tax on royalty sales and lower pre-tax loss, partially offset by non-taxable deconsolidation gain Taxation (YoY) | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :-------------------- | :----------------------------- | :----------------------------- | :----- | | Income tax expense/(benefit) | $(11,807) | $32,485 | $(44,291) | | Effective tax rate | -85.9% | 58.1% | N/A | - The increase in income tax expense was mainly due to tax in respect of the sale of future royalties to Royalty Pharma and a lower pre-tax loss in the consolidated US group, partially offset by the non-taxable gain on Vedanta deconsolidation[99][281] Condensed Consolidated Statements of Comprehensive Income/(Loss) Summary | Metric (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change (2022 to 2023) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Total revenue | $3,150 | $7,030 | $(3,880) | | Operating expenses | $(79,312) | $(108,223) | $28,911 | | Operating income/(loss) | $(76,163) | $(101,192) | $25,030 | | Other income/(loss) | $62,426 | $(24,126) | $86,552 | | Net finance income/(costs) | $5,316 | $56,320 | $(51,004) | | Income/(loss) before income taxes | $(13,744) | $(55,957) | $42,213 | | Taxation | $(11,807) | $32,485 | $(44,291) | | Net income/(loss) including non-controlling interest | $(25,551) | $(23,472) | $(2,079) | | Net income/(loss) for the period attributable to the Owners of the Company | $(25,004) | $(28,344) | $3,340 | Critical Accounting Policies and Significant Judgments and Estimates PureTech's financial statements, prepared under UK-adopted IFRS, involve management judgments and estimates, with a new policy for future royalties liability - Financial statements are prepared in accordance with UK-adopted International Financial Reporting Standards (IFRS), requiring judgments, estimates, and assumptions[100] - Estimates and assumptions are reviewed on an ongoing basis, with revisions recognized in the affected periods[101] - No significant changes to critical accounting policies since the 2022 Annual Report, except for the accounting policy for the sale of future royalties liability[102] Cash Flow and Liquidity PureTech's cash flows fluctuate with development expenses and financing, with $350.5 million in cash and increased investing and financing activities Operating Activities Net cash used in operating activities decreased by $22.1 million to $65.1 million, due to lower operating loss and Vedanta's deconsolidation - Net cash used in operating activities decreased by $22.1 million to $65.1 million, primarily due to a lower operating loss from decreased R&D in the Internal Segment and Vedanta's deconsolidation[107] Investing Activities Net cash provided by investing activities increased by $180.8 million to $173.9 million, mainly from short-term investment maturities - Net cash provided by investing activities increased by $180.8 million to $173.9 million, mainly driven by $202.5 million from the maturity of short-term investments, partially offset by a $15.4 million investment in notes from associates[108] Financing Activities Net cash provided by financing activities increased by $97.6 million to $91.9 million, primarily from the sale of future Karuna royalties - Net cash provided by financing activities increased by $97.6 million to $91.9 million, primarily due to $100.0 million received from the sale of future Karuna royalties, partially offset by a $3.0 million increase in treasury shares repurchased[109] - Cash flows are influenced by expenses for wholly-owned and Controlled Founded Entity therapeutic candidates, revenue from licensing/royalties, and financing/investing activities[103] Cash and Cash Equivalents | Metric | June 30, 2023 | December 31, 2022 | | :----- | :------------ | :---------------- | | Consolidated Cash and cash equivalents | $350.5 million | $350.1 million | | PureTech Level cash and cash equivalents | $348.5 million | $339.5 million | Summary of Cash Flows (YoY) | Cash Flow Type (in thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | Change | | :---------------------------- | :----------------------------- | :----------------------------- | :----- | | Net cash used in operating activities | $(65,133) | $(87,249) | $22,115 | | Net cash provided by (used in) investing activities | $173,885 | $(6,884) | $180,770 | | Net cash provided by (used in) financing activities | $91,897 | $(5,665) | $97,562 | | Net increase (decrease) in cash and cash equivalents | $200,649 | $(99,798) | $300,447 | Funding Requirements PureTech's existing assets fund operations into Q1 2026, but substantial additional funding is needed for advancing candidates, relying on monetization or collaborations - Existing financial assets at June 30, 2023, are expected to fund operations and capital expenditure requirements into Q1 2026[110] - Substantial additional expenditures are expected in the near term to support ongoing activities, including clinical trials and commercialization of wholly-owned therapeutic candidates[110] - Future capital requirements depend on factors such as costs and timing of clinical trials, regulatory reviews, commercialization activities, intellectual property costs, and competitive landscape[110][115] - Funding will rely on monetization of Founded Entity interests, collaborations, or other sources, as the company has no committed sources of capital beyond existing financial assets[113] Condensed Consolidated Financial Statements (Unaudited) This section presents PureTech's unaudited condensed consolidated financial statements, including income, financial position, equity changes, and cash flows Condensed Consolidated Statements of Comprehensive Income/(Loss) PureTech reported a net loss of $25.55 million, with total revenue of $3.15 million and operating expenses of $79.31 million Condensed Consolidated Statements of Comprehensive Income/(Loss) | Metric ($000s) | 2023 | 2022 | | :-------------- | :--- | :--- | | Contract revenue | 750 | 1,141 | | Grant revenue | 2,400 | 5,890 | | Total revenue | 3,150 | 7,030 | | General and administrative expenses | (26,166) | (23,644) | | Research and development expenses | (53,146) | (84,579) | | Operating income/(loss) | (76,163) | (101,192) | | Gain on deconsolidation of subsidiary | 61,787 | 27,251 | | Gain/(loss) on investments held at fair value | 7,818 | (59,019) | | Gain/(loss) on investments in notes from associates | (6,045) | - | | Other income/(expense) | (1,134) | 7,642 | | Other income/(expense) | 62,426 | (24,126) | | Net finance income/(costs) | 5,316 | 56,320 | | Share of net loss of associates accounted for using the equity method | (5,324) | (15,322) | | Gain on dilution of ownership interest in associate | - | 28,363 | | Income/(loss) before taxes | (13,744) | (55,957) | | Taxation | (11,807) | 32,485 | | Income/(Loss) for the period | (25,551) | (23,472) | | Total comprehensive income/(loss) for the period | (25,458) | (24,008) | | Owners of the Company | (25,004) | (28,344) | | Non-controlling interests | (546) | 4,872 | | Basic earnings/(loss) per share | (0.09) | (0.10) | | Diluted earnings/(loss) per share | (0.09) | (0.10) | Condensed Consolidated Statements of Financial Position Total assets were $693.55 million, with cash and cash equivalents at $350.52 million, and total equity at $508.89 million Condensed Consolidated Statements of Financial Position | Metric ($000s) | June 30, 2023 | December 31, 2022 | | :-------------- | :------------ | :---------------- | | Assets | | | | Investments held at fair value | 281,288 | 251,892 | | Cash and cash equivalents | 350,515 | 149,866 | | Short-term investments | - | 200,229 | | Total assets | 693,552 | 702,647 | | Equity and liabilities | | | | Equity attributable to the owners of the Company | 513,669 | 542,220 | | Non-controlling interests | (4,778) | 5,369 | | Total equity | 508,891 | 547,589 | | Sale of future royalties liability | 103,726 | - | | Deferred tax liability | 9,084 | 19,645 | | Lease liability, non-current | 19,996 | 24,155 | | Total non-current liabilities | 135,395 | 58,172 | | Total current liabilities | 49,265 | 96,885 | | Total liabilities | 184,661 | 155,057 | | Total equity and liabilities | 693,552 | 702,647 | Condensed Consolidated Statements of Changes in Equity Total equity decreased by $38.69 million to $508.89 million, primarily due to net loss and deconsolidation impacts Condensed Consolidated Statements of Changes in Equity | Metric ($000s) | Balance January 1, 2023 | Net income/(loss) | Deconsolidation of Subsidiary | Purchase of Treasury stock | Balance June 30, 2023 | | :-------------- | :---------------------- | :---------------- | :-------------------------- | :----------------------- | :-------------------- | | Share Capital | 5,455 | - | - | - | 5,461 | | Share premium | 289,624 | - | - | - | 290,262 | | Treasury stock | (26,492) | - | - | (7,276) | (33,105) | | Merger reserve | 138,506 | - | - | - | 138,506 | | Translation reserve | 89 | 92 | - | - | 182 | | Other reserve | (14,478) | - | - | - | (12,149) | | Retained earnings | 149,516 | (25,004) | - | - | 124,512 | | Equity attributable to the owners of the Company | 542,220 | (25,004) | 1 | (7,276) | 513,669 | | Non-controlling interests | 5,369 | (546) | (9,085) | - | (4,778) | | Total equity | 547,589 | (25,551) | (9,085) | (7,276) | 508,891 | Condensed Consolidated Statements of Cash Flows Net cash increased by $200.65 million, driven by positive shifts in operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows | Metric ($000s) | 2023 | 2022 | | :-------------- | :--- | :--- | | Net cash used in operating activities | (65,133) | (87,249) | | Net cash provided by (used in) investing activities | 173,885 | (6,884) | | Net cash provided by (used in) financing activities | 91,897 | (5,665) | | Net increase (decrease) in cash and cash equivalents | 200,649 | (99,798) | | Cash and cash equivalents at beginning of year | 149,866 | 465,708 | | Cash and cash equivalents at end of period | 350,515 | 365,910 | Notes to the Condensed Consolidated Financial Statements (Unaudited) This section provides detailed notes on PureTech's accounting policies, segment information, financial instruments, and other financial disclosures General Information & Basis of Accounting PureTech Health plc, a UK biotherapeutics company, prepares interim financials under IAS 34, adopting a going concern basis - PureTech Health plc is a UK-incorporated biotherapeutics company, with its interim financial statements prepared in accordance with IAS 34[129][132] - The accounting policies are consistent with the 2022 Annual Report, except for the new policy regarding the sale of future royalties liability[131][138] - The Group maintains sufficient liquidity headroom and has adopted the going concern basis of accounting, with cash and cash equivalents of $350.5 million as of June 30, 2023[136] - The sale of future royalties liability is accounted for as a financial liability, with interest recognized using the effective interest rate over the life of the royalty stream[139] Segment Information PureTech's operating segments are based on internal reporting, with Vedanta Biosciences transferred to non-controlled entities - Operating segments are based on financial information provided to Directors for resource allocation and performance assessment[81] - Vedanta Biosciences was transferred to the Non-Controlled Founded Entities segment on March 1, 2023, due to deconsolidation, and prior year financial information was restated[82][144][146] - The Non-Controlled Founded Entities segment includes entities where PureTech no longer holds majority voting control or the right to elect a majority of Board members[83] Segment Operating Income/(Loss) (Six Months Ended June 30, 2023) | Segment | Operating income/(loss) ($000s) | | :------ | :------------------------------ | | Internal | (53,673) | | Controlled Founded Entities | 51 | | Non-Controlled Founded Entities | (6,595) | | Parent Company & Other | (15,945) | | Consolidated | (76,163) | Investments Held at Fair Value PureTech's fair value investments, including Karuna holdings, are re-measured with changes recorded through profit and loss - Investments held at fair value include unlisted and listed securities, re-measured at each reporting date with changes recorded through profit and loss[152] - Vedanta was deconsolidated on March 1, 2023, and its retained investment in convertible preferred shares ($20.5 million) is now accounted for at fair value, resulting in a $61.8 million gain on deconsolidation[153][155] - For the six months ended June 30, 2023, PureTech recognized a $7.8 million gain on investments held at fair value, primarily attributed to its holdings in Karuna[94][152][164] Investments Held at Fair Value Activity ($000s) | Activity | Amount | | :------- | :----- | | Balance as of December 31, 2022 and January 1, 2023 | 251,892 | | Investment in Vedanta Preferred shares - Vedanta deconsolidation | 20,456 | | Investment in Gelesis warrants | 1,121 | | Gain - change in fair value through profit and loss | 7,818 | | Balance as of June 30, 2023 | 281,288 | Investments in Associates PureTech accounts for Gelesis and Sonde using the equity method and plans to acquire Gelesis - PureTech owns 22.8% of Gelesis common stock and accounts for it under the equity method, recording $3.8 million in equity method losses for the six months ended June 30, 2023[166][170] - PureTech entered into a Merger Agreement to acquire all outstanding stock of Gelesis and take the company private, with consideration up to $5.1 million[172][176] - As of June 30, 2023, PureTech concluded it does not have substantive rights to control Gelesis, despite holding warrants, as the exercise price of February Warrants was at a significant premium and May Warrants' potential voting rights were impacted by the Merger Agreement[168][169][170] - Following Sonde's deconsolidation on May 25, 2022, its A-1 shares are accounted for under the equity method, with $1.5 million in equity method losses recorded for the six months ended June 30, 2023[178] Investment in Notes from Associates PureTech recorded a $6.0 million loss from fair value changes in notes from associates - Investments in notes from associates are measured at fair value, with changes recorded in the profit and loss statement[180][192][194] - PureTech recorded a $6.0 million loss from changes in the fair value of notes from associates for the six months ended June 30, 2023[94][197] - This includes a $4.4 million loss on an unsecured promissory note from Gelesis and a $1.6 million loss on senior secured convertible promissory notes from Gelesis[180][192] - PureTech invested $5.0 million in Vedanta's convertible debt, recognizing a $0.1 million loss on its fair value[193][194] Investment in Notes from Associates Activity ($000s) | Activity | Amount | | :------- | :----- | | Balance as of December 31, 2022 and January 1, 2023 | 16,501 | | Investment In Gelesis Notes | 9,229 | | Investment in Vedanta convertible debt | 5,000 | | Changes in the fair value of the notes | (6,045) | | Balance as of June 30, 2023 | 24,686 | Share-based Payments PureTech's share-based payment expense decreased to $1.26 million, with RSU liability awards adjusted to fair value Share-based Payment Expense (YoY) | Expense Type ($000s) | 2023 | 2022 | | :------------------- | :--- | :--- | | General and administrative | 1,121 | 516 | | Research and development | 135 | 3,037 | | Total | 1,256 | 3,552 | - RSUs granted to executives are treated as liability awards, adjusted to fair value at each reporting date, with changes recorded as stock-based compensation expense[204] - The company recognized $0.2 million income from restricted stock units in 2023 (vs. $2.9 million income in 2022), primarily due to a reduction in the value of the company's share price[212] - During the six months ended June 30, 2023, PureTech granted 3,576,937 service, market, and performance-based RSUs and 569,125 stock option awards[202][213] Finance Cost, net Net finance income significantly decreased to $5.32 million due to lower fair value gains and new non-cash interest expense Finance Income and Costs (YoY) | Metric ($000s) | 2023 | 2022 | | :-------------- | :--- | :--- | | Interest income from financial assets | 7,731 | 630 | | Total finance income | 7,731 | 630 | | Total finance cost - contractual | (1,338) | (1,961) | | Gain/(loss) from change in fair value of warrant liability | 33 | 3,002 | | Gain/(loss) from change in fair value of preferred shares | 2,617 | 55,152 | | Gain/(loss) from change in fair value of convertible debt | - | (502) | | Total finance income/(costs) - fair value accounting | 2,650 | 57,651 | | Total Finance costs - non cash interest expense related to sale of future royalties | (3,726) | - | | Finance income/(costs), net | 5,316 | 56,320 | Earnings/(Loss) per Share PureTech reported a basic and diluted loss per share of $0.09, with all potential securities considered anti-dilutive Earnings/(Loss) per Share (YoY) | Metric | 2023 | 2022 | | :----- | :--- | :--- | | Income/(loss) attributable to the owners of the Company | ($25,004) | ($28,344) | | Weighted average ordinary shares for basic earnings per ordinary share | 278,254,381 | 287,754,262 | | Basic earnings/(loss) per ordinary share | ($0.09) | ($0.10) | | Diluted earnings/(loss) per ordinary share | ($0.09) | ($0.10) | - All outstanding potential securities were considered anti-dilutive due to the net loss incurred, and thus excluded from the diluted EPS calculation[218] Equity PureTech had 276.67 million common shares outstanding and is executing a $50.0 million share repurchase program - As of June 30, 2023, PureTech had 276,672,829 common shares outstanding[220] - The company's issued share capital was 289,468,159 shares, including 12,795,330 shares repurchased under the program and held in treasury[223] - PureTech is executing a $50.0 million share repurchase program, with the second tranche currently underway, and all repurchased shares are held in treasury[221][222] Subsidiary Preferred Shares Subsidiary preferred shares, classified as liabilities, decreased to $0.17 million due to Vedanta's deconsolidation - Subsidiary preferred shares are classified as liabilities and measured at fair value through profit and loss due to redemption and conversion features[225] Subsidiary Preferred Share Balance ($000s) | Metric | 2023 | 2022 | | :----- | :--- | :--- | | Entrega | 169 | 169 | | Follica | - | 350 | | Vedanta Biosciences | - | 26,820 | | Total subsidiary preferred share balance | 169 | 27,339 | - The decrease in preferred share balance was primarily due to the deconsolidation of Vedanta Biosciences ($24.55 million)[229] Minimum Liquidation Preference ($000s) | Subsidiary | 2023 | 2022 | | :--------- | :--- | :--- | | Entrega | 2,216 | 2,216 | | Follica | 6,405 | 6,405 | | Vedanta Biosciences | - | 149,568 | | Total minimum liquidation preference | 8,621 | 158,189 | Sale of Future Royalties Liability PureTech sold KarXT royalty rights for $100.0 million upfront, accounted for as a financial liability - PureTech sold Royalty Pharma the right to receive KarXT royalty payments for an initial $100.0 million and up to $400.0 million in additional milestone payments[231] - This transaction is accounted for as a financial liability, with the $100.0 million liability accreted as interest expense over the life of the Royalty agreement[232][233] - PureTech retains rights under the original license agreement and will recognize royalties as revenue, while the liability balance will be effectively repaid as royalty payments are made to Royalty Pharma[232][234] Sale of Future Royalties Liability Activity ($000s) | Activity | Amount | | :------- | :----- | | Balance as of January 1, 2023 | 0 | | Amounts received at closing | 100,000 | | Non cash interest expense recognized | 3,726 | | Balance as of June 30, 2023 | 103,726 | Financial Instruments PureTech's financial instruments are measured at fair value using a hierarchy, with Level 3 inputs for unlisted entities - Financial instruments are measured at fair value, with changes reflected through profit and loss, using valuation methods like market backsolve, PWERM, and discounted cash flow[237][238] - Fair value hierarchy categorizes inputs as Level 1 (quoted market prices), Level 2 (observable inputs), and Level 3 (unobservable inputs)[238] - Karuna, Vor, and Akili are valued using Level 1 quoted common share prices, while Vedanta, Sonde, Gelesis warrants, and Akili earn-out shares are valued using Level 3 unobservable inputs[241][242] - For the six months ended June 30, 2023, PureTech recorded a $3.8 million loss from changes in fair value of Level 3 investments held at fair value and a $6.0 million loss from changes in fair value of notes from associates[242][248] Fair Value Measurement and Classification (June 30, 2023, $000s) | Category | Carrying Amount (Financial Assets) | Level 1 | Level 2 | Level 3 | Total Fair Value | | :------- | :------------------------------- | :------ | :------ | :------ | :--------------- | | Money Markets | 308,046 | 308,046 | - | - | 308,046 | | Investment in notes from associates | 24,686 | - | - | 24,686 | 24,686 | | Investments held at fair value | 281,288 | 250,948 | - | 30,339 | 281,288 | | Total financial assets | 614,019 | 558,994 | - | 55,025 | 614,019 | | Subsidiary preferred shares | - | - | - | 169 | 169 | | Share based liability awards | - | 3,850 | - | 874 | 4,724 | | Total financial liabilities | - | 3,850 | - | 1,042 | 4,893 | Non-Controlling Interest Non-controlling interests decreased to a negative $4.78 million, primarily due to Vedanta's deconsolidation Changes in Non-Controlling Interest ($000s) | Metric | Balance at December 31, 2022 and January 1, 2023 | Share of comprehensive income (loss) | Deconsolidation of subsidiaries | Balance at June 30, 2023 | | :----- | :----------------------------------------------- | :--------------------------------- | :-------------------------- | :----------------------- | | Total | 5,369 | (546) | (9,085) | (4,778) | - The decrease in non-controlling interest was primarily due to the deconsolidation of Vedanta Biosciences on March 1, 2023[254][255] - Controlled Founded Entities with non-controlling interests include Follica Incorporated (19.9%) and Entrega Inc. (11.7%)[256] Trade and Other Payables Total trade and other payables significantly decreased to $31.34 million, driven by reductions in trade payables and accrued expenses Trade and Other Payables ($000s) | Metric | June 30, 2023 | December 31, 2022 | | :----- | :------------ | :---------------- | | Trade payables | 8,725 | 26,504 | | Accrued expenses | 20,387 | 24,518 | | Liability settled share based awards | 2,135 | 1,805 | | Other | 92 | 1,957 | | Total trade and other payables | 31,339 | 54,783 | Sub-Leases PureTech executed a two-year operating sublease agreement with Allonia LLC for office space - PureTech executed an operating sublease agreement with Allonia LLC for approximately 11,000 square feet of office space[260] - The sublease has a two-year term from May 17, 2023, with an option for an additional year, and an annual lease fee of $1.1 million[260][261] Commitments and Contingencies PureTech has contingent payments for licensing agreements and non-cancellable commitments for research - PureTech has contingent payments for licensing agreements based on developmental and sales milestones, with reasonably possible developmental milestones amounting to approximately $7.4 million as of June 30, 2023[262] - Non-cancellable commitments for sponsored research and contract manufacturing/research organizations totaled approximately $12.7 million as of June 30, 2023[263] - The company is involved in various legal proceedings but does not expect their resolution to have a material adverse effect on its financial position or results of operations[264] Related Parties Transactions PureTech engages in related party transactions, including a sublease with Gelesis, and discloses key management personnel compensation - PureTech has a sublease receivable from Gelesis, a related party, amounting to $377 thousand as of June 30, 2023[265] - Key management personnel compensation totaled $1.75 million for the six months ended June 30, 2023, including short-term employee benefits and share-based payment income due to RSU value decrease[268][270] - Directors and senior managers hold 23,377,627 ordinary shares and 11.8% voting rights of PureTech as of June 30, 2023, excluding options and certain RSU awards[276] Directors' and Senior Managers' Shareholdings (June 30, 2023) | Business Name (Share Class) | Number of shares held | Number of options held | Number of RSUs held | Ownership Interest | | :-------------------------- | :-------------------- | :------------------- | :------------------ | :----------------- | | Gelesis (Common) (Ms Daphne Zohar) | 465,121 | 3,303,306 | 1,349,697 | 1.37% | | Entrega (Common) (Dr Robert Langer) | 250,000 | 82,500 | - | 4.09% | | Enlight (Class B Common) (Dr Raju Kucherlapati) | - | 30,000 | - | 3.00% | | Akili (Common) (Dr John LaMattina) | 56,554 | - | - | 0.07% | | Karuna (Common) (Dr Bharatt Chowrira) | 5,000 | - | - | 0.01% | Taxation PureTech recorded an $11.81 million income tax expense, a shift from a prior year benefit Tax Provision (YoY) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----- | :----------------------------- | :----------------------------- | | Consolidated tax provision | $11.8 million expense | $32.5 million benefit | | Effective tax rate | -85.9% | 58.1% | - The increase in tax expense was primarily attributable to tax in respect of the sale of future royalties to Royalty Pharma and a lower pre-tax loss in the consolidated US group, partially offset by the non-taxable gain on Vedanta deconsolidation[281] Subsequent Events No recordable or disclosable subsequent events were identified between June 30, 2023, and the report's issuance date - No recordable or disclosable subsequent events were identified between June 30, 2023, and the issuance date of August 29, 2023[282] Additional Information This section includes important cautionary notes regarding forward-looking statements and contact information for PureTech Health Cautionary Note Regarding Forward-Looking Statements This report contains forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially - The press release contains forward-looking statements regarding plans, future prospects, objectives, developments, strategies, expectations, clinical trial progress, regulatory approvals, and cash runway[21] - These statements are subject to known and unknown risks, uncertainties, and important factors that could cause actual results to differ materially, including significant operating losses, need for additional funding, lengthy and expensive drug development, potential difficulties in patient enrollment, safety risks, and reliance on third parties[21] Contact Information & Webcast Details PureTech Health hosted a webcast for half-yearly results, with contact information available for public and investor relations - PureTech Health hosted a webcast and conference call on August 29, 2023, at 9:00am EDT / 2:00pm BST to discuss the half-yearly results[2][5] - A live webcast and presentation slides were available on the investors section of PureTech's website, with a replay also available[5][6] Contact Information | Department | Contact | Email/Phone | | :--------- | :------ | :---------- | | Public Relations (EU media) | Ben Atwell, Rob Winder | +44 (0) 20 3727 1000, ben.atwell@FTIconsulting.com | | Public Relations (U.S. media) | Nichole Sarkis | +1 774 278 8273, nichole@tenbridgecommunications.com | | Investor Relations | IR@puretechhealth.com | N/A |