REG - PureTech Health PLC - Half-year Report
28/08/2024 07:15
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RNS Number : 9165B PureTech Health PLC 28 August 2024
28 August 2024
PureTech Health plc - Half-Year Report
Strong progress across PureTech's portfolio, with significant near-term
catalysts
Robust shareholder returns enabled by Founded Entity(1) monetization; $100
million Tender Offer and
$50 million buyback completed
Strong balance sheet with expected operational runway for at least three years
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 changing the lives of
patients with devastating diseases, today announces its half-yearly results
for the six months ended June 30, 2024. The following information will be
filed on Form 6-K with the United States Securities and Exchange Commission
(the "SEC") and is also available at
https://investors.puretechhealth.com/financials-filings/reports.
Commenting on PureTech's half-yearly results, Bharatt Chowrira, PhD, JD,
Chief Executive Officer of PureTech, said:
"I am proud of the talented team at PureTech that has continued to deliver
results with a sense of diligence and passion. PureTech made significant
progress in the first half of 2024, advancing our mission to develop
innovative therapies for the patients most in need. We have also implemented
strategies to drive efficient operations and capital allocation. This has
resulted in a decrease in both our R&D and G&A expenses at the
PureTech level.
"Looking ahead, we are focused on several key catalysts. The highly
anticipated FDA decision around the approval of KarXT, which is expected by
Bristol Myers Squibb ("BMS") in September, would unlock the first in a series
of milestone payments to PureTech in the coming years as well as future
royalties. We are also very excited about the readout of our Phase 2b trial
from our Internal Program, LYT-100 (deupirfenidone), which is expected by the
end of 2024. We believe LYT-100 has blockbuster potential to transform the
treatment landscape for patients with idiopathic pulmonary fibrosis ("IPF") as
the preferred standard of care, driving significant value for PureTech.
Additionally, we expect clinical readouts from both the Vor and LYT-200
programs as well as further clinical progress at Seaport and Vedanta.
"With our robust hub-and-spoke drug discovery and development model and strong
financial foundation, we believe PureTech is well-positioned to rapidly
advance innovative therapeutic candidates to patients, and we remain committed
to unlocking and realizing value for our shareholders."
Webcast and conference call details
Members of the PureTech management team will host a conference call
at 9:00am EDT / 2:00pm BST today, August 28, 2024, 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 (https://news.puretechhealth.com/events-presentations) . To join by phone,
please dial:
United Kingdom (Local): +44 20 3936 2999
United Kingdom (Toll-Free): +44 800 358 1035
United States (Local): +1 646 664 1960
United States (Toll Free): +1 855 9796 654
Access Code: 808029
For those unable to listen to the call live, a replay will be available on
the PureTech website.
Key Internal Programs(2) & Founded Entities
Internal Programs Ownership Indication
LYT-100 100% Being advanced for idiopathic pulmonary fibrosis and potentially other
conditions involving pulmonary fibrosis
(deupirfenidone)
Founded Entities Ownership(3) Overview
Seaport Therapeutics 57.7% Equity Advancing a clinical-stage pipeline of neuropsychiatric medicines
Karuna Therapeutics Regulatory and commercial milestone payments from Royalty Pharma (up to $400M) Advancing transformative medicines for people living with psychiatric
and BMS, and 2% royalties on annual net sales >$2B from BMS and neurological conditions
(wholly owned subsidiary of Bristol Myers Squibb as of March 18, 2024)
Gallop Oncology 100% Equity Pioneering novel therapies for the treatment of hematological malignancies,
alongside treatments for locally advanced/metastatic solid tumors such as head
and neck cancers
Vedanta Biosciences 35.9% Equity Pioneering a new category of oral therapies based on defined bacterial
consortia
Vor Bio 3.9% Equity Engineering hematopoietic stem cells to enable targeted therapies for patients
with blood cancers
Sonde Health 34.9% Equity Developing 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)
Highlights
PureTech
• Completed enrollment of the Phase 2b ELEVATE IPF trial of LYT-100
(deupirfenidone) in IPF, with topline results expected by the end of 2024.
• Executed $100 million tender offer, which - together with the
Company's $50 million share buyback program that completed on February 7, 2024
- constituted $150 million of capital returned to shareholders since May 2022.
• Appointed key executives, including Bharatt Chowrira, PhD, JD, as
Chief Executive Officer (formerly President and Chief Business, Finance and
Operating Officer), Eric Elenko, PhD, as President (formerly Chief Innovation
Officer), Charles Sherwood III, JD, as General Counsel, and Raju Kucherlapati,
PhD as Chair of the Board of Directors on a permanent basis.
• Welcomed two entrepreneurs-in-residence: Sven Dethlefs, PhD, formerly
Executive Vice President and CEO of Teva North America, and Luba Greenwood,
JD, Managing Partner of the Dana-Farber Cancer Institute Venture Fund, Binney
Street Capital, and former Chief Executive Officer and Board Chair of Kojin
Therapeutics.
• Announced in the August 2024 post-period that Michele Holcomb, PhD,
will join PureTech's Board of Directors as an independent non-executive
director on September 23, 2024.
Founded Entities
• Karuna Therapeutics ("Karuna") was acquired by BMS in March 2024 for a
total equity value of $14 billion. PureTech received approximately $293
million gross proceeds from its equity position in Karuna and is eligible to
receive up to $400 million in future milestone payments as well as royalty
payments based on KarXT regulatory and commercial successes.
• PureTech launched Seaport Therapeutics ("Seaport") with a $100 million
oversubscribed Series A financing to progress the development of novel
neuropsychiatric therapeutic candidates enabled by Glyph™, its novel
platform that allows drugs to be absorbed like dietary lipids so they can
enter the lymphatic system directly and avoid first pass metabolism. Seaport
is led by PureTech Founder and Former CEO and Seaport Founder and CEO Daphne
Zohar, with Steven M. Paul, M.D., former CEO and Chair of Karuna, as Founder
and Chair of the Seaport Board of Directors.
• PureTech announced that it will advance LYT-200 (anti-galectin-9 mAb)
via Gallop Oncology ("Gallop") for the treatment of hematological
malignancies, such as acute myeloid leukemia ("AML") and high-risk
myelodysplastic syndromes ("MDS"), and metastatic/locally advanced solid
tumors, including head and neck cancers. LYT-200 received two designations
from the US Food and Drug Administration ("FDA"): Orphan Drug designation for
the treatment of AML and Fast Track designation for the treatment of head and
neck cancers.
• Vedanta Biosciences ("Vedanta") enrolled the first patient in its
pivotal Phase 3 RESTORATiVE303 trial of VE303 for the prevention of recurrent
C. difficile infection ("rCDI"). Vedanta was also awarded $3.9 million from
CARB-X to ready VE707 for a first-in-human study for the prevention of
multidrug-resistant infections.
• Vor Biopharma (Nasdaq: VOR) ("Vor") dosed the first AML patient in
VBP301, a Phase 1/2 multicenter, open-label, first-in-human study of
VCAR33(ALLO) and announced that it expects to provide a clinical trial update
in the second half of 2024.
• Sonde Health ("Sonde") launched Sonde Cognitive Fitness in the July
post-period, which analyzes eight vocal characteristics from 30-second voice
interactions to provide insight into one's cognitive state, helping people
manage their mental well-being and productivity effectively.
• Entrega continues to advance its platform for the oral administration
of biologics, vaccines and other drugs that are otherwise not efficiently
absorbed when taken orally. To validate its technology, Entrega generated
preclinical proof-of-concept data demonstrating administration of therapeutic
peptides into the bloodstream of large animals.
Financial:
• Consolidated Cash, cash equivalents and short-term investments as of
June 30, 2024, were $500.4 million(4) (December 31, 2023: Consolidated Cash,
cash equivalents and short-term investments of $327.1 million) and PureTech
Level Cash, cash equivalents and short-term investments as of June 30, 2024,
were $400.6 million(5) (December 31, 2023: PureTech Level Cash, cash
equivalents and short-term investments of $326.0 million)
• Operating expenses for the six months ended June 30, 2024, were $66.7
million (June 30, 2023: $79.3 million).
• PureTech expects to have PureTech Level Cash, cash equivalents and
short-term investments of approximately $330 million(6) at December 31, 2024,
which is inclusive of expected payments of approximately $40 million to
address the Company's tax obligations. As of June 30, 2024, the Company
maintains an expected operational runway of at least three years.
Key Upcoming Milestones
• PureTech expects topline results from the Phase 2b ELEVATE IPF
dose-ranging trial of LYT-100 in patients with IPF by the end of 2024. The
trial is designed to evaluate the efficacy, tolerability, safety and dosing
regimen of LYT-100 in patients with IPF compared to placebo and will also
assess the relative efficacy of two doses of LYT-100. The primary endpoint is
the rate of decline in Forced Vital Capacity ("FVC") for the combined LYT-100
arms versus placebo over the 26-week treatment period using a prespecified
Bayesian approach. Both doses of LYT-100 will be compared to pirfenidone,
though the trial is not powered to show a statistical difference in efficacy
between LYT-100 and pirfenidone. We believe LYT-100 has the potential to have
a profound impact on the way IPF is managed by allowing patients to start,
continue and fully benefit from treatment, both as monotherapy and in
combination settings with other antifibrotic therapies.
• KarXT (formerly Karuna; now wholly owned by BMS) has a Prescription
Drug User Fee Act ("PDUFA") date of September 26, 2024, for the treatment of
schizophrenia in adults, which means the FDA is expected to make a decision
regarding the approval of KarXT by this date. If the drug is approved, this
would unlock the first in a series of potential milestone payments to PureTech
in the coming years as well as future royalties. Pending approval, BMS also
announced that KarXT is expected to launch in late 2024.
• LYT-200 (which will be advanced via Gallop) is being evaluated in two
ongoing Phase 1b clinical trials for the treatment of relapsed/refractory AML
and MDS as well as in combination with tislelizumab in head and neck cancers.
Additional data from the open label trials are expected in the fourth quarter
of 2024 and will help to inform future development work.
• Vor expects to provide clinical trial updates for trem-cel and
VCAR33(ALLO) in the second half of 2024. Trem-cel is a shielded transplant in
development for patients with AML and MDS in which healthy transplant donor
cells are genetically engineered removing CD33, with the potential to shield
healthy cells and enable targeted therapies post-transplant such as Mylotarg
and CAR-T therapy. VCAR33(ALLO) is a transplant donor-derived anti-CD33 CAR-T
cell therapy for patients with AML who have relapsed following a
standard-of-care or trem-cel transplant.
• Vedanta expects topline data from its Phase 3 RESTORATiVE303 trial of
VE303 for the prevention of rCDI in 2026. This trial is evaluating the
efficacy and safety of VE303 in patients with rCDI and is intended to form the
basis for a Biologics License Application ("BLA") to be filed with the FDA. It
also expects topline data from its Phase 2 COLLECTiVE202 clinical trial of
VE202 for the treatment of ulcerative colitis ("UC")in 2025. Vedanta also
expects to initiate a Phase 1 trial of VE707 for the prevention of
multidrug-resistant infections in 2025.
About PureTech Health
PureTech is a clinical-stage biotherapeutics company dedicated to giving
life to new classes of medicine to change the lives of patients with
devastating diseases. The Company has created a broad and deep pipeline
through its experienced research and development team and its extensive
network of scientists, clinicians and industry leaders that is being advanced
both internally and through its Founded Entities. PureTech's R&D
engine has resulted in the development of 29 therapeutics and therapeutic
candidates, including two that have received both U.S. FDA clearance and
European marketing authorization and a third (KarXT) that has been filed for
FDA approval. A number of these programs are being advanced by PureTech or
its Founded Entities in various indications and stages of clinical
development, including registration enabling studies. All of the underlying
programs and platforms that resulted in this pipeline of therapeutic
candidates were initially identified or discovered and then advanced by
the PureTech team through key validation points.
For more information, visit www.puretechhealth.com or connect with us on X
(formerly Twitter) @puretechh.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. We intend such
forward-looking statements to be covered by the safe harbor provisions for
forward looking statements contained in Section 27A of the U.S. Securities Act
of 1933, as amended and Section 21E of the Exchange Act of 1934, as amended.
All statements contained in this press release that do not relate to matters
of historical fact should be considered forward-looking statements, including
without limitation, statements that relate to our expectations around our and
our Founded Entities' therapeutic candidates and approach towards addressing
major diseases, operational plans, future prospects, objectives, developments,
strategies and expectations, the progress and timing of clinical trials and
data readouts, the timing of regulatory approvals or clearances from the FDA,
our future results of operations and financial outlook, including our
anticipated cash runway and our forecasted cash, cash equivalents and
short-term investments, and our ability to realize value for our shareholders.
The forward-looking statements are based on current expectations and are
subject to known and unknown risks, uncertainties and other important factors
that could cause actual results, performance and achievements to differ
materially from current expectations, including, but not limited to, the
following: our history of incurring significant operating losses since our
inception; our ability to realize value from our Founded Entities; our need
for additional funding to achieve our business goals, which may not be
available and which may force us to delay, limit or terminate certain of our
therapeutic development efforts; our limited information about and limited
control or influence over our Non-Controlled Founded Entities; the lengthy and
expensive process of preclinical and clinical drug development, which has an
uncertain outcome and potential for substantial delays; potential difficulties
with enrolling patients in clinical trials, which could delay our clinical
development activities; side effects, adverse events or other safety risks
which could be associated with our therapeutic candidates and delay or halt
their clinical development; our ability to obtain regulatory approval for and
commercialize our therapeutic candidates; our ability to compete with
companies currently marketing or engaged in the development of treatments for
indications within our programs are designed to target; our ability to realize
the benefits of our collaborations, licenses and other arrangements; the
impact of government laws and regulations; our ability to maintain and protect
our intellectual property rights; our reliance on third parties, including
clinical research organizations, clinical investigators and manufacturers; our
vulnerability to natural disasters, global economic factors, geo-political
actions and unexpected events; and the risks, uncertainties and other
important factors described under the caption "Risk Factors" in our Annual
Report on Form 20-F for the year ended December 31, 2023 filed with
the SEC and in our other regulatory filings. 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, we
disclaim any obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or otherwise.
1. As of the date of this release, Founded Entities represent
companies founded by PureTech in which PureTech maintains ownership of an
equity interest and, in certain cases, is eligible to receive sublicense
income and royalties on product sales. References to Founded Entities include
PureTech's Seaport Therapeutics, Inc., Gallop Oncology, Inc., Entrega, Inc.,
Vor Biopharma, Inc., Sonde Health, Inc., Vedanta Biosciences, Inc., for all
dates prior to March 18, 2024, Karuna Therapeutics, Inc., for all dates prior
to July 2, 2024, Akili Interactive Labs, Inc., for all dates prior to October
30, 2023, Gelesis, Inc., for all dates prior to December 21, 2023, Follica,
Incorporated, and for all dates prior to December 18, 2019, resTORbio, Inc.
For references and definitions related to PureTech's Viability Statement,
Financial Review, and Financial Statements and related footnotes, please see
Footnote 4 to the Consolidated Financial Statements.
2 Internal Programs represent the Company's current and future
therapeutic candidates and technologies that are wholly owned and have not
been announced as a Founded Entity.
3 Founded Entities represent companies founded by PureTech in which
PureTech maintains ownership of an equity interest and, in certain cases, is
eligible to receive sublicense income and royalties on product sales. Relevant
ownership interests were calculated on a partially diluted basis (as opposed
to a voting basis) as of June 30, 2024, including outstanding shares, options
and warrants, but excluding unallocated shares authorized to be issued
pursuant to equity incentive plans. PureTech controls Seaport Therapeutics,
Inc. and Gallop Oncology, Inc. Vor Biopharma ownership was calculated on a
beneficial ownership basis in accordance with SEC rules as of August 2, 2024.
4 Cash, cash equivalents and short-term investments as of June 30,
2024, and as of December 31, 2023 held at PureTech Health plc and consolidated
subsidiaries. For more information, please see below under the heading
"Non-IFRS Financial Information."
5 This represents a non-IFRS number and is comprised of Cash, cash
equivalents and short-term investments held at PureTech Health plc and our
following wholly-owned subsidiaries: PureTech LYT, Inc., PureTech LYT 100,
Inc., Alivio Therapeutics, Inc., PureTech Management, Inc., PureTech Health
LLC, PureTech Securities Corp., PureTech Securities II Corp. For a
reconciliation of this number to the IFRS equivalent number, please refer to
the "Non-IFRS Financial Information" section of this report.
6 This represents a non-IFRS number and is comprised of Cash, cash
equivalents and short-term investments held at PureTech Health plc and our
following wholly-owned owned subsidiaries: PureTech LYT, Inc., PureTech LYT
100, Inc., Alivio Therapeutics, Inc., PureTech Management, Inc., PureTech
Health LLC, PureTech Securities Corp, PureTech Securities II. We are not
able to provide a reconciliation of this forecasted number to the IFRS
equivalent number because PureTech Level Cash, cash equivalents and Short-term
investments as of December 31, 2024, is contingent on upon a number of
factors, certain of which cannot be predicted on a forward-looking basis
without unreasonable efforts or are not within our control. Actual PureTech
Level Cash, Cash Equivalents and Short-term investments as of December 31,
2024, may differ significantly from this projection. This projection does not
include any potential cash inflows that may be received by the Company prior
to December 31, 2024, and may be impacted by factors beyond our control,
including unanticipated cash expenditures and changes in the value of
short-term investments.
Non-IFRS Financial Information
Cash flow and liquidity
PureTech Level cash, cash equivalents and short-term investments Measure type: Core performance
Definition: Cash and cash equivalents and short-term investments held at
PureTech Health plc and our wholly-owned subsidiaries.
Why we use it: PureTech Level cash, cash equivalents and short-term
investments is a measure that provides valuable additional information with
respect to cash, cash equivalents and short-term investments available to fund
the Wholly-Owned Programs and make certain investments in Founded Entities.
Non-IFRS Measures Reconciliation
The following is the reconciliation of the amounts appearing in our Condensed
Consolidated Statement of Financial Position to the alternative performance
measure described above:
(in thousands) June 30, December 31, 2023
2024
Cash and cash equivalents 308,478 191,081
Short-term investments 191,938 136,062
Consolidated cash, cash equivalents and short-term investments 500,416 327,143
Less: cash and cash equivalents held at non-wholly owned subsidiaries (99,778) (1,097)
PureTech Level cash, cash equivalents and short-term investments $400,638 $326,046
Contact:
PureTech
Public Relations
publicrelations@puretechhealth.com (mailto:publicrelations@puretechhealth.com)
Investor Relations
IR@puretechhealth.com (mailto:IR@puretechhealth.com)
UK/EU Media
Ben Atwell, Rob Winder
+44 (0) 20 3727 1000
puretech@fticonsulting.com (mailto:puretech@fticonsulting.com)
US Media
Nichole Bobbyn
+1 774 278 8273
nichole@tenbridgecommunications.com
(mailto:nichole@tenbridgecommunications.com)
Interim Management Report and Financial Review
Interim Management Report
Introduction
PureTech's core mission is to give life to new classes of medicine to change
the lives of patients with devastating diseases. With this mission in mind, we
pioneered the hub-and-spoke business model. Our R&D engine has proven
successful in this endeavor, having identified, developed and progressed 29
highly differentiated therapeutic approaches, including KarXT, LYT-100
(deupirfenidone) and the portfolio of Seaport Therapeutics, among others. We
maintain one of the most impressive track records in the biopharma industry,
with more than 80% of our clinical trials having demonstrated success since
2009.
Unique drug discovery approach
We believe that our high level of productivity and clinical success is a
result of our distinctive approach to drug development. We first identify an
area with significant patient need. We then explore therapeutic approaches
that often have validated human efficacy but have not yet reached their full
potential due to key limitations, such as the route of administration or side
effects. Next, we work to unlock a potential new medicine's full benefit while
executing efficient de-risking experiments. We adhere to disciplined R&D
strategies, and we only allocate resources to programs that reach our
pre-specified thresholds for advancement. This allows us to pivot resources
towards the programs with the greatest likelihood of advancement and has
resulted in our success rate. Once a program has achieved a key
value-generating inflection point, we determine whether the best path forward
to maximize patient benefit and shareholder value is through continued
internal development or via a Founded Entity, an asset sale, and/or partnering
and royalty transactions.
We intend to utilize the same proven strategy to determine the ideal path for
the advancement of our Internal Program, LYT-100, following the results of the
Phase 2b trial by the end of this year. We will be guided by the data, and we
will pursue the optimal route to deliver this potentially transformational
medicine to patients and generate value for our shareholders.
Efficient funding model
Our Founded Entities serve as specialized platforms to pursue development with
external partners, supporting timely progress of novel medicines to patients
while also mitigating binary risk through a diverse portfolio. KarXT
demonstrates how our Founded Entities are able to generate value for our
shareholders, while also demonstrating our capital efficient approach. We
allocated $18.5 million to the program, and - in addition to transforming the
treatment landscape for patients with schizophrenia -Karuna's success has
allowed us to generate approximately $1.1 billion in cash to date to fund our
operations, fuel our next wave of innovation and return capital to
shareholders. This has been realized through the monetization of a portion of
our holdings in Karuna, gross proceeds from the BMS acquisition, and a
strategic royalty agreement for KarXT with Royalty Pharma that provided us
with capital in the short-term and which we believe has great potential for
long-term earnings based on KarXT's future regulatory and commercial
milestones, as well as product sales.
Our distinct business model and successes like Karuna have enabled us to be a
well-capitalized organization: For more than six years we have been able to
fund new and maturing programs to key inflection points without external
funding at the PureTech Level, we have returned $150 million to shareholders
via our share buyback program and Tender Offer, and - going forward - we aim
to maintain at least three years of cash runway.
Commitment to shareholder value
Maximizing long-term shareholder value remains the Company's top priority, and
the Board and Management Team conduct a continual review of various strategies
in order to unlock and crystallize value for shareholders. In doing so, the
board aims to balance (1) opportunities for further capital returns, (2)
sourcing and development efforts to grow our portfolio of potential new
medicines and (3) support for our current programs and Founded Entities, all
while serving patients in need.
PureTech's expertise builds on a rich legacy of innovation. It spans the
lifecycle of drug development, is infused with scientific entrepreneurship and
maintains a capital efficient ethos. As we look towards the development of our
next wave of innovation, we are focused on advancing candidates with validated
efficacy within the rare and specialty disease spaces, and we look forward to
providing updates in due course.
Notable Developments
Internal Programs
Our Internal Programs are guided by a strategy of leveraging validated
efficacy to rapidly advance therapeutics with proven profiles. A deeper level
of risk management at every stage of development is core to PureTech's
development philosophy. Importantly, our approach prioritizes maintaining the
validated pharmacology of efficacious drugs while applying an innovative step
to maximize their unrealized potential for patient needs.
Our lead Internal Program, LYT-100 (deupirfenidone), is currently in clinical
development for IPF, which is a rare, progressive and fatal lung disease with
a median survival of 2-5 years.(1) Pirfenidone (Esbriet®) is approved for the
treatment of IPF in the US and other countries, having been shown to slow the
decline of lung function and extend life by an average of 2.5 years.(1) It is
one of two standard-of-care treatments for IPF, with nintedanib (Ofev®) being
the other. Despite the proven efficacy of both treatments, only about 25
percent of patients with this rare, progressive and fatal disease are
currently being treated with either standard-of-care drug,(2) largely due to
tolerability issues. Furthermore, combined sales of Esbriet and Ofev in 2022
were more than $4 billion, representing a significant market opportunity in
IPF and other fibrotic lung diseases.(3)
LYT-100 maintains the pharmacology of pirfenidone but has a highly
differentiated pharmacokinetic profile that has translated into favorable
tolerability, as demonstrated by data from multiple human clinical studies.
Our goal with the ongoing Phase 2b ELEVATE IPF trial is to validate the
ability of LYT-100 to demonstrate a favorable tolerability profile and
efficacy that's comparable to pirfenidone, while also exploring the potential
for enhanced efficacy at a higher dose. Based on clinical data generated to
date, we believe that LYT-100 has the potential to disrupt the treatment
paradigm for IPF and become the backbone antifibrotic for a range of
combination therapies as well as the preferred monotherapy for IPF patients,
including the 75% who are not currently on standard-of-care treatment. The
trial is fully enrolled, and we look forward to sharing topline results by the
end of 2024.
This program is emblematic of PureTech's strategy. We identified a clear
patient need with a large market opportunity and are efficiently advancing a
drug candidate with a clear development path and existing clinical
validation.
Founded Entities
Our Founded Entities have achieved significant milestones in the first half of
2024.
In March 2024, Karuna was acquired by BMS for approximately $14 billion,
marking a significant advancement in our Founded Entity's mission to deliver
transformative medicines for people living with psychiatric and neurological
conditions. Karuna is now a wholly owned subsidiary of BMS, and Karuna's lead
candidate, KarXT, has been granted a PDUFA date of September 26, 2024, for the
treatment of schizophrenia in adults. If the drug is approved, this would
unlock the first in a series of potential milestone payments to PureTech in
the coming years as well as future royalties. Pending approval, BMS also
announced that KarXT is expected to launch in late 2024.
In April 2024, PureTech launched Seaport with a $100 million oversubscribed
Series A financing. The funding included participation from top tier biotech
investors ARCH Venture Partners, Sofinnova Investments and Third Rock Ventures
to progress the development of neuropsychiatric therapeutic candidates
initially developed internally at PureTech. Seaport is advancing first and
best-in-class medicines for the treatment of neuropsychiatric disorders using
the Glyph platform. The Glyph platform is uniquely designed to allow drugs to
be taken orally by targeting them directly into the lymphatic system (similar
to the way a dietary lipid is absorbed) rather than the liver, which helps to
reduce liver toxicities and enables more active drug to reach the desired
target in the body. Seaport's pipeline includes, SPT-300 (formerly LYT-300),
an oral prodrug of allopregnanolone, which is being advanced for the treatment
of major depressive disorder; SPT-320 (formerly LYT-320), a novel prodrug of
agomelatine, which is being advanced for the treatment of generalized anxiety
disorder; and SPT-348, a prodrug of a non-hallucinogenic neuroplastogen, which
is in development for the treatment of mood and other neuropsychiatric
disorders.
We also announced that we would be advancing LYT-200 (anti-galectin-9 mAb)
through another Founded Entity, Gallop, for the treatment of hematological
malignancies, such as AML and high-risk MDS, as well as metastatic/locally
advanced solid tumors, including head and neck cancers. LYT-200 has displayed
a favorable safety and tolerability profile in two ongoing Phase 1b clinical
trials - one in AML and another in combination with BeiGene's tislelizumab in
head and neck cancers. The Phase 1b clinical trial evaluating LYT-200 in
relapsed/refractory AML and MDS patients is ongoing, and we expect additional
data from the trial will be presented in a scientific forum in the fourth
quarter of 2024. Also, the Phase 1b trial of LYT-200 in combination with
tislelizumab in head and neck cancers is ongoing, with additional data
expected in the fourth quarter of 2024. In 2024, the FDA granted LYT-200
Orphan Drug designation for the treatment of AML as well as Fast Track
designation for the treatment of head and neck cancers.
Vedanta further advanced the development of a potential new category of oral
therapies utilizing defined consortia of bacteria isolated from the human
microbiome and grown from pure clonal cell banks. In May 2024, Vedanta
announced that the first patient was dosed in the global Phase 3
RESTORATiVE303 clinical study of VE303, which is an orally administered
defined bacterial consortium candidate that is being developed for the
prevention of rCDI. The RESTORATiVE303 trial is evaluating the efficacy and
safety of VE303 in patients with rCDI and is intended to form the basis for a
BLA to be filed with the FDA. Vedanta announced that topline data are expected
in 2026. In April 2024, Vedanta was awarded $3.9 million from CARB-X to
advance Vedanta's VE707 preclinical development program for reducing
colonization and preventing subsequent infections caused by
multidrug-resistant organisms. Vedanta expects the initiation of a Phase 1
trial in 2025. Vedanta also progressed its Phase 2 COLLECTiVE202 clinical
trial of VE202 for the treatment of UC, for Vedanta anticipates topline data
in 2025.
Vor has continued to develop its platform for crafting Hematopoietic Stem Cell
to enable targeted therapies post-transplant. In January 2024, Vor announced
it had dosed the first patient in VBP301, its Phase 1/2, multicenter,
open-label, first-in-human study of VCAR33(ALLO) in patients with relapsed or
refractory AML after standard-of-care transplant or a trem-cel transplant. Vor
announced that it expects to release a VCAR33(ALLO) clinical trial data update
in the second half of 2024. In March 2024, Vor announced that the FDA had
granted Fast Track designation and Orphan Drug designation to VCAR33(ALLO). In
May 2024, Vor announced that the trem-cel clinical trial had been expanded to
include patients diagnosed with MDS. Approximately 1,250 stem cell transplants
occur annually in the US for patients with MDS and Vor's approach represents
an important advancement in potentially transforming treatment of these blood
cancers. Vor's trem-cel has the potential to enable the use of anti-CD33
therapies in those settings, and the company is exploring the potential use of
trem-cel in combination with targeted therapies in these indications. Vor
announced that it expects to provide a trem-cel clinical trial data update in
the second half of 2024.
Sonde has continued to progress a voice-based artificial intelligence platform
that detects changes in the sound of voice that are linked to health
conditions - such as depression, anxiety and respiratory disease - to provide
health tracking and monitoring. In March 2024, Sonde announced the publication
of a new study that has validated the ability of the company's mental fitness
vocal biomarker platform to reliably distinguish individuals with elevated
mental health symptoms. The four-week cohort study revealed a statistically
significant correlation between voice-based identification of increased or
decreased mental health risk with the results of the M3 Checklist, a
clinically validated mental health assessment. In the July post-period, Sonde
launched Sonde Cognitive Fitness, which analyzes eight vocal characteristics
from 30-second voice interactions to provide insight into one's cognitive
state, helping people manage their mental well-being and productivity
effectively.
Entrega has continued to progress its technology platform to enable the oral
administration of biologics, vaccines and other drugs that are otherwise not
efficiently absorbed when taken orally. Entrega's innovative approach uses a
proprietary, customizable hydrogel dosage form to control local fluid
microenvironments in the gastrointestinal tract in an effort to both enhance
absorption and reduce the variability of drug exposure. Entrega has generated
preclinical proof-of-concept data demonstrating administration of therapeutic
peptides into the bloodstream of large animals.
In May 2024, Akili and Virtual Therapeutics, a company focused on improving
mental health at scale using engaging, immersive games, announced the signing
of a definitive merger agreement to form a diversified, leading digital health
company. The merger closed in the July 2024 post-period, and Akili is now a
wholly owned subsidiary of Virtual Therapeutics.
Cautionary Note Regarding Forward-Looking Statements
This Interim Management Report contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. We intend
such forward-looking statements to be covered by the safe harbor provisions
for forward looking statements contained in Section 27A of the U.S. Securities
Act of 1933, as amended and Section 21E of the Exchange Act of 1934, as
amended. All statements contained in this Interim Management Report that do
not relate to matters of historical fact should be considered forward-looking
statements, including without limitation, statements that relate to our and
our Founded Entities' therapeutic candidates, operational plans, future
prospects, objectives, developments and, strategies and expectations, the
progress and timing of clinical trials and data readouts, our intentions for
the advancement of LYT-100 and its potential to treat IPF, our expectations as
to potential earnings based on KarXT's future regulatory and commercial
milestones, our expectations as to the achievement of clinical milestones
across our Founded Entity program, the maintenance of our cash runway, and our
commitment to realizing long-term value for our shareholders. These
forward-looking statements are based on the Company's current expectations and
are subject to known and unknown risks, uncertainties and other important
factors that could cause actual results, performance and achievements to
differ materially from current expectations, including, but not limited to,
the following: our history of incurring significant operating losses since our
inception; our ability to realize value from our Founded Entities; our need
for additional funding to achieve our business goals, which may not be
available and which may force us to delay, limit or terminate certain of our
therapeutic development efforts; our limited information about and limited
control or influence over our Non-Controlled Founded Entities; the lengthy and
expensive process of preclinical and clinical drug development, which has an
uncertain outcome and potential for substantial delays; potential difficulties
with enrolling patients in clinical trials, which could delay our clinical
development activities; side effects, adverse events or other safety risks
which could be associated with our therapeutic candidates and delay or halt
their clinical development; our ability to obtain regulatory approval for and
commercialize our therapeutic candidates; our ability to compete with
companies currently marketing or engaged in the development of treatments for
indications within our programs are designed to target; our ability to realize
the benefits of our collaborations, licenses and other arrangements; the
impact of government laws and regulations; our ability to maintain and protect
our intellectual property rights; our reliance on third parties, including
clinical research organizations, clinical investigators and manufacturers; our
vulnerability to natural disasters, global economic factors, geo-political
actions and unexpected events; and the risks, uncertainties and other
important factors described under the caption "Risk Factors" in our Annual
Report on Form 20-F for the year ended December 31, 2023 filed with the SEC
and in our other regulatory filings. 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 Interim
Management Report. Except as required by law and regulatory requirements, we
disclaim any obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or otherwise.
1. Fisher, M., Nathan, S. D., Hill, C., Marshall, J., Dejonckheere, F.,
Thuresson, P., & Maher, T. M. (2017). Predicting Life Expectancy for
Pirfenidone in Idiopathic Pulmonary Fibrosis. Journal of Managed Care &
Specialty Pharmacy, 23(3-b Suppl), S17 -S24.
https://doi.org/10.18553/jmcp.2017.23.3-b.s17
(https://doi.org/10.18553/jmcp.2017.23.3-b.s17)
2 Dempsey, T., Payne, S. C., Sangaralingham, L. R., Yao, X., Shah, N.,
& Limper, A. H. (2021). Adoption of the Antifibrotic Medications
Pirfenidone and Nintedanib for Patients with Idiopathic Pulmonary Fibrosis.
Annals of the American Thoracic Society, 18(7), 1121-1128.
https://doi.org/10.1513/annalsats.202007-901oc
(https://doi.org/10.1513/annalsats.202007-901oc)
3. Roche 2022 Annual Report and Boehringer Ingelheim 2022 Financial
Results
Financial Review
Reporting Framework
You should read the following discussion and analysis together with our
Condensed 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. You should read this discussion and analysis in conjunction
with the risks identified in the "Risk Factor Annex" on pages 186 to 223 of
our "Annual Report and Accounts 2023", also included as Exhibit 15.1 to the
Form 20-F for the fiscal year ended December 31, 2023 filed with the
Securities and Exchange Commission on April 25, 2024. As a result of many
factors, our actual results could differ materially from the results described
in or implied by these forward-looking statements.
Our unaudited Condensed Consolidated Financial Statements as of June 30, 2024,
and for the six months ended June 30, 2024 and 2023, have been prepared in
accordance with International Accounting Standard ("IAS") 34 Interim Financial
Reporting as adopted for use in the UK and also comply fully with IAS 34 as
issued by the International Accounting Standards Board ("IASB"). This report
should be read in conjunction with the Group's 2023 Annual Reports and
Accounts as of and for the year ended December 31, 2023.
The following discussion contains references to the Consolidated Financial
Statements of PureTech Health plc (the "Parent") and its consolidated
subsidiaries, together "the Group". These financial statements consolidate
PureTech Health plc's subsidiaries and include the Group's interest in
associates by way of equity method, as well as investments held at fair value.
Subsidiaries are those entities over which the Group maintains control.
Associates are those entities in which the Group does not have control for
financial accounting purposes but maintains significant influence over
financial and operating policies. Where the Group has neither control nor
significant influence for financial accounting purposes, or when the
investment in associates is not in instruments that would be considered equity
for accounting purposes, we recognize our holdings in such entity as an
investment at fair value with changes in fair value being recorded in the
Condensed Consolidated Statement of Comprehensive Income/(Loss). For purposes
of our Condensed Consolidated Financial Statements, each of our Founded
Entities(1) are considered to be either a "subsidiary", an "associate" or an
"investment held at fair value" depending on whether the Group controls or
maintains significant influence over the financial and operating policies of
the respective entity at the respective period end date, and depending on the
form of the investment. For additional information regarding the accounting
treatment of these entities, see Note 1. Material Accounting Policies to our
Consolidated Financial Statements included in our 2023 Annual Report and
Accounts. For additional information regarding our operating structure, see
"Basis of Presentation and Consolidation" below.
Business Background and Results Overview
The business background is discussed above in the Interim Management Report,
which describes the business development of our Wholly-Owned Programs(2) and
Founded Entities.
Our ability to generate product revenue sufficient to achieve profitability
will depend on the successful development and eventual commercialization of
one or more therapeutic candidates of our wholly-owned or Controlled Founded
Entities(3), which may or may not occur. Historically, certain of our Founded
Entities therapeutics received marketing authorization from the FDA, but our
Wholly-Owned Programs have not generated revenue from product sales to date.
Furthermore, our ability to achieve profitability will largely rely on
successfully monetizing our investment in Founded Entities, including the sale
of rights to royalties, entering into strategic partnerships, and other
related business development activities.
We deconsolidated a number of our Founded Entities, specifically Vedanta
Biosciences, Inc. ("Vedanta") in March 2023, Sonde Health Inc. ("Sonde") in
2022, Karuna Therapeutics, Inc. ("Karuna"), Vor Biopharma Inc. ("Vor") and
Gelesis in 2019, and Akili in 2018.
Any deconsolidation affects our financials in the following manner:
• our ownership interest does not provide us with a controlling
financial interest;
• we no longer control the Founded Entity's assets and liabilities, and
as a result, we derecognize the assets, liabilities and non-controlling
interests related to the Founded Entity from our financial statements;
• we record our retained investment in the Founded Entity at fair value;
and
• the resulting amount of any gain or loss is recognized.
We anticipate our expenses to continue to increase proportionally in
connection with execution of our strategy around creating and supporting
Founded Entities, as well as the ongoing development activities related mostly
to the advancement into late-stage studies of the clinical programs within our
Wholly-Owned Programs. We also expect that our expenses and capital
requirements will increase in the near to mid-term as we:
• continue our research and development efforts;
• seek regulatory approvals for any therapeutic candidates that
successfully complete clinical trials; and
• add clinical, scientific, operational, financial and management
information systems and personnel, including personnel to support our
therapeutic development and potential future commercialization claims.
More specifically, we anticipate that our internal research and development
spend will increase in the foreseeable future as we may initiate additional
clinical studies for our existing therapeutic candidates, evaluate new
therapeutic candidates for investment and further development, progress
additional therapeutic candidates into the clinic, as well as advance our
technology platforms.
1. Founded Entities are comprised of the entities which the Company
incorporated and announced the incorporation as a Founded Entity externally.
It includes certain of the Company's wholly-owned subsidiaries which have been
announced by the Company as Founded Entities, Controlled Founded Entities(3)
and deconsolidated Founded Entities. As of June 30, 2024, deconsolidated
Founded Entities included Akili Interactive Labs, Inc., Karuna Therapeutics,
Inc., Vor Bio, Inc., Gelesis, Inc., Sonde Health, Inc., and Vedanta
Biosciences, Inc.
2. Wholly-Owned Programs are comprised of the Company's current and
future therapeutic candidates and technologies that are developed by the
Company's wholly-owned subsidiaries, whether they were announced as a Founded
Entity or not, and will be advanced through with either the Company's funding
or non-dilutive sources of financing. As of June 30 ,2024, Wholly-Owned
Programs were developed by the wholly-owned subsidiaries including PureTech
LYT, Inc., PureTech LYT 100, Inc. and Gallop Oncology, Inc. and included
primarily the programs LYT-100, and LYT-200.
3. Controlled Founded Entities are comprised of the Company's
consolidated operational subsidiaries that currently have already raised
third-party dilutive capital. As of June 30, 2024, Controlled Founded Entities
included Entrega, Inc. and Seaport Therapeutics.
In addition, with respect to our Founded Entities' programs, we anticipate
that we will continue to fund a small portion of development costs by
strategically participating in such companies' financings when we believe
participation in such financings is in the best interests of our shareholders.
The form of any such participation may include investment in public or private
financings, collaboration, partnership arrangements, and/or licensing
arrangements, among others. Our management and strategic decision makers
consider the future funding needs of our Founded Entities and evaluate the
needs and opportunities for returns with respect to each of these Founded
Entities routinely and on a case-by-case basis.
As a result, we may need substantial additional funding in the future,
following the period described below in the Funding Requirement section, to
support our continuing operations and pursue our growth strategy until such
time as we can generate sufficient revenue from product sales to support our
operations, if ever. Until such time, we expect to finance our operations
through a combination of monetization of our interests in our Founded
Entities, collaborations with third parties, or other sources. We may be
unable to raise additional funds or enter into such other agreements or
arrangements when needed on favorable terms, or at all. If we are unable to
raise capital or enter into such agreements, as and when needed, we may have
to delay, scale back or discontinue the development and commercialization of
one or more of our wholly-owned therapeutic candidates.
Measuring Performance
The Financial Review discusses our operating and financial performance, our
cash flows and liquidity as well as our financial position and our resources.
The results of current period are compared with the results of the comparative
period in the prior year.
Reported Performance
Reported performance considers all factors that have affected the results of
our business, as reflected in our Condensed Consolidated Financial Statements.
Core Performance
Core performance measures are alternative performance measures which are
adjusted and non-IFRS measures. These measures cannot be derived directly from
our Condensed Consolidated Financial Statements. We believe that these
non-IFRS performance measures, when provided in combination with reported
performance, will provide investors, analysts and other stakeholders with
helpful complementary information to better understand our financial
performance and our financial position from period to period. The measures are
also used by management for planning and reporting purposes. The measures are
not substitutable for IFRS financial information and should not be considered
superior to financial information presented in accordance with IFRS.
Cash flow and liquidity
PureTech Level cash, cash equivalents and short-term investments Measure type: Core performance
Definition: Cash and cash equivalents and short-term investments held at
PureTech Health plc and our wholly-owned subsidiaries.
Why we use it: PureTech Level cash, cash equivalents and short-term
investments is a measure that provides valuable additional information with
respect to cash, cash equivalents and short-term investments available to fund
the Wholly-Owned Programs and make certain investments in Founded Entities.
Recent Developments (subsequent to June 30, 2024)
The Group has evaluated subsequent events after June 30, 2024 up to the date
of issuance, August 28, 2024, of the Condensed Consolidated Financial
Statements, and has not identified any recordable or disclosable events not
otherwise reported in these unaudited Condensed Consolidated Financial
Statements or notes thereto.
Financial Highlights
The following is the reconciliation of the amounts appearing in our Condensed
Consolidated Statement of Financial Position to the non-IFRS alternative
performance measure described above:
(in thousands) June 30 2024 December 31, 2023
Cash and cash equivalents 308,478 191,081
Short-term investments 191,938 136,062
Consolidated cash, cash equivalents and short-term investments 500,416 327,143
Less: cash and cash equivalents held at non-wholly owned subsidiaries (99,778) (1,097)
PureTech Level cash, cash equivalents and short-term investments $400,638 $326,046
Basis of Presentation and Consolidation
Our Condensed Consolidated Financial Statements consolidate the financial
information of PureTech Health plc, as well as its subsidiaries, and include
our interest in associates and investments held at fair value, and are
reported in reportable segments as described below.
Basis for Segmentation
Our Directors are our strategic decision-makers. Our operating segments are
determined based on the financial information provided to our Directors
periodically for the purposes of allocating resources and assessing
performance. We have determined each of our Wholly-Owned Programs represents
an operating segment, and we have aggregated each of these operating segments
into one reportable segment, the Wholly-Owned Programs segment. Each of our
Controlled Founded Entities represents an operating segment. We aggregate each
Controlled Founded Entity operating segment into one reportable segment, the
Controlled Founded Entities segment. The aggregation is based on the high
level of operational and financial similarities of the operating segments. For
our entities that do not meet the definition of an operating segment, we
present this information in the Parent Company and Other column in our segment
footnote to reconcile the information in the segment discussion to our
Condensed Consolidated Financial Statements. Substantially all of our revenue
and profit generating activities are generated within the United States and,
accordingly, no geographical disclosures are provided.
There was no change to the reportable segments in 2024, except for the changes
to the composition of the reportable segments as described below.
In January 2024, we launched two new Founded Entities (Seaport Therapeutics
"Seaport" and Gallop Oncology "Gallop") to advance certain programs within the
Wholly-Owned Programs segment. The financial results of these programs were
included in the Wholly-Owned Programs segment as of and for the year ended
December 31, 2023. Upon raising dilutive third-party financing in April 2024,
the financial results of Seaport are included within the Controlled Founded
Entities segment as the Group still maintains control over this entity. As of
June 30, 2024, Alivio became dormant and did not meet the definition of
operating segment. The financial results of this entity were removed from the
Wholly-Owned Programs segment and are included in the Parent Company and Other
column. The corresponding information for 2023 has been restated to include
Alivio in the Parent Company and Other column, so that the segment disclosures
are presented on a comparable basis.
Results of Operations
The following table, which has been derived from our unaudited financial
statements for the six months ended June 30, 2024 and 2023, included herein,
summarizes our results of operations for the periods indicated, together with
the changes in those items:
Six Months Ended June 30,
(in thousands) 2024 2023 Change
(2023 to 2024)
Contract revenue $- $750 $(750)
Grant revenue 288 2,400 (2,112)
Total revenue 288 3,150 (2,862)
Operating expenses:
General and administrative expenses (27,758) (26,166) (1,592)
Research and development expenses (38,928) (53,146) 14,218
Operating income/(loss) (66,398) (76,163) 9,765
Other income/(expense):
Gain/(loss) on deconsolidation of subsidiary - 61,787 (61,787)
Gain/(loss) on investments held at fair value 3,882 7,818 (3,936)
Realized gain/(loss) on sale of investments 151 - 151
Gain/(loss) on investments in notes from associates 11,612 (6,045) 17,657
Other income/(expense) 548 (1,134) 1,682
Other income/(expense) 16,193 62,426 (46,233)
Net finance income/(costs) (1,468) 5,316 (6,784)
Share of net income/(loss) of associates accounted for using the equity method (3,357) (5,324) 1,967
Income/(loss) before income taxes (55,030) (13,744) (41,286)
Tax benefit/(expense) 6,147 (11,807) 17,953
Net income/(loss) including non-controlling interest (48,883) (25,551) (23,333)
Net income/(loss) attributable to the Owners of the Group $(41,773) $(25,004) $(16,768)
Comparison of the Six Months Ended June 30, 2024 and 2023
Total Revenue
Six Months Ended June 30,
(in thousands) 2024 2023 Change
Contract Revenue:
Controlled Founded Entities $- $750 $(750)
Total Contract Revenue - 750 (750)
Grant Revenue:
Wholly-Owned Programs 288 135 153
Parent Company and Other - 2,265 (2,265)
Total Grant Revenue 288 2,400 (2,112)
Total Revenue $288 $3,150 $(2,862)
Our total revenue was $0.3 million for the six months ended June 30, 2024, a
decrease of $2.9 million, or 91 percent compared to the six months ended June
30, 2023. The decrease in revenue was primarily due to the $2.3 million
reduction in Parent Company and Other revenue which was mostly a result of the
deconsolidation of Vedanta from our financial statements in March 2023, as
well as $0.7 million reduction due to the completion of a revenue agreement
for Entrega, one of our Controlled Founded Entities.
Research and Development Expenses
Six Months Ended June 30,
(in thousands) 2024 2023 Change
Research and Development Expenses:
Wholly-Owned Programs $(32,981) $(45,139) $(12,158)
Controlled Founded Entities (5,710) (368) 5,342
Parent Company and Other (237) (7,640) (7,403)
Total Research and Development Expenses: $(38,928) $(53,146) $(14,218)
Our research and development expenses were $38.9 million for the six months
ended June 30, 2024, a decrease of $14.2 million, or 27 percent compared to
the six months ended June 30, 2023. The decrease in research and development
expenses was driven by 1) our reduced spending on clinical and CMC activities
related to our wholly-owned programs due to the prioritization of research and
development projects, whereby the Group elected to focus on programs where it
believes it has the highest probability of success and reduced efforts in
research and clinical stage projects where such probability of success is
lower, 2) the decrease in employee related costs from lower headcount; and 3)
the deconsolidation of Vedanta in March 2023 which resulted in us no longer
including Vedanta's research and development expenses in our Condensed
Consolidated Financial Statements.
Wholly-Owned Programs: a decrease of $12.2 million in research and
development expenses. $9.2 million of the decrease was due to 1) transfer of
GLYPH platform, the related clinical programs and employees to Seaport, the
expense of which is included in Controlled Founded Entities; 2) the
prioritization of research and development projects as discussed above; and 3)
the decrease in employee related costs from lower headcount. The remaining
decrease was due to a $1.0 million decrease in asset impairment costs, a
$0.6 million decrease in depreciation expense and a $1.4 million decrease in
legal and consulting services in the six months ended June 30, 2024.
Controlled Founded Entities: an increase of $5.3 million in research and
development expense due to the transfer of GLYPH platform, the related
clinical programs and employees to Seaport.
Parent Company and Other: a decrease of $7.4 million due to the
deconsolidation of Vedanta in March 2023, and the winding down of the Alivio
program and the entity became dormant as of June 30, 2024.
General and Administrative Expenses
Six Months Ended June 30,
(in thousands) 2024 2023 Change
General and Administrative Expenses:
Wholly-Owned Programs $(4,450) $(6,981) $(2,531)
Controlled Founded Entities (6,548) (237) 6,311
Parent Company and Other (16,759) (18,947) (2,188)
Total General and Administrative Expenses $(27,758) $(26,166) $1,592
Our general and administrative expenses were $27.8 million for the six months
ended June 30, 2024, an increase of $1.6 million, or 6 percent compared to
the six months ended June 30, 2023. The increase was primarily due to a
$4.0 million increase in stock based compensation largely resulting from
stock awards granted to Seaport employees, offset by a $2.9 million decrease
from the deconsolidation of Vedanta in March 2023.
Wholly-Owned Programs: a decrease of $2.5 million in general and
administrative expenses was primarily driven by a decrease of $2.0 million in
management fees charged by the parent company.
Controlled Founded Entity: an increase of $6.3 million in general and
administrative expenses was primarily driven by the establishment and
operation of Seaport including a $1.6 million increase in legal and advisory
fees, $3.2 million increase in stock based compensation expense and a
$1.3 million increase in payroll.
Parent Company and Other: a $2.2 million decrease in general and
administrative expenses was primarily attributable to a $2.9 million decrease
due to the deconsolidation of Vedanta in March 2023, a $1.5 million decrease
in legal advisory costs primarily related to Gelesis notes and Merger
Agreement in 2023, partially offset by a $2.2 million increase in management
fee.
Total Other Income/(Expense)
Total other income was $16.2 million for the six months ended June 30, 2024
compared to $62.4 million for the six months ended June 30, 2023, a decrease
of $46.2 million, or 74 percent. The decrease in other income was primarily
attributable to the following:
• one time gain of $61.8 million recognized in 2023 as a result of
the deconsolidation of Vedanta in March 2023, reflecting a decrease in other
income of $61.8 million.
• a gain of $11.6 million in investments in notes from associates for
the six months ended June 30, 2024 compared to a loss of $6.0 million for the
six months ended June 30, 2023, reflecting an increase in other income of
$17.7 million.
Net Finance Income/(Costs)
Net finance costs was $1.5 million for the six months ended June 30, 2024,
compared to net finance income of $5.3 million for the six months ended June
30, 2023, an increase in net finance cost of $6.8 million or 128 percent. The
increase was primarily attributable to the following:
• an increase in non-cash interest expense of $6.8 million related to
the sale of future royalties liability due to the six months' accretion of the
liability as well as the change to the liability based on the updated cash
flow forecast in the six months ended June 30, 2024 as compared to the four
months' accretion of the liability for the six months ended June 30, 2023.
• an increase in finance costs of $4.3 million related to changes in
the fair value of subsidiary preferred share liabilities: an income of
$2.6 million for the reduction in fair value of Vedanta and Follica preferred
share liability for the six months ended June 30, 2023 compared to an expense
of $1.6 million for the increase in fair value of Seaport preferred share
liability for the six months ended June 30, 2024.
The above increases in finance costs were partially offset by an increase in
interest income of $4.0 million for the six months ended June 30, 2024 due to
increased cash and cash equivalent and short-term investment balances as well
as higher interest rates earned for the period.
Share of Net Income/(Loss) of Associates Accounted for Using the Equity Method
For the six months ended June 30, 2024, the share in net loss of associates
reported under the equity method was $3.4 million as compared to the share in
net loss of associates of $5.3 million for the six months ended June 30,
2023, a decrease in loss of $2.0 million or 37 percent. The decrease was
primarily attributable to a decrease in Gelesis losses as it went bankrupt in
October 2023 and the carrying value of our investment in Gelesis was reduced
to zero as of December 31, 2023.
Taxation
For the six months ended June 30, 2024, the income tax benefit was
$6.1 million, compared to an income tax expense of $11.8 million for the six
months ended June 30, 2023. The decrease in income tax expense was primarily
due to recording an income tax benefit for the six months ended June 30, 2024,
related to generated tax credits, recognizing a capital loss from the Akili
investment, partially offset by a discrete income tax expense related to the
market-to-market investment adjustments, compared to the recording of an
income tax expense in the six months ended June 30, 2023 due to nonrecurring
events of the sale of future royalties to Royalty Pharma, partially offset by
the deconsolidation of Vedanta.
Material Accounting Policies and Significant Judgments and Estimates
Our financial review of the financial condition and results of operations is
based on our interim financial statements, which we have prepared in
accordance with International Accounting Standards ("IAS") 34 Interim
Financial Reporting as adopted for use in the UK and also comply fully with
IAS 34 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.
The accounting policies most critical to the judgments and estimates used in
the preparation of our financial statements have not changed from those
disclosed in Note 1, Material Accounting policies of the accompanying notes to
the Consolidated Financial Statements included in our 2023 Annual Report and
Accounts except for the adoption of new and amended IFRS Accounting Standards
as set out in Note 2. New Standards and Interpretations to our Condensed
Consolidated Financial Statements.
Cash Flow and Liquidity
Our cash flows may fluctuate and are difficult to forecast and will depend on
many factors, including:
• the expenses incurred in the development of wholly-owned and
Controlled Founded Entity therapeutic candidates;
• the revenue, if any, generated by wholly-owned and
Controlled-Founded Entity therapeutic candidates;
• the revenue, if any, generated from licensing and royalty agreements
with Founded Entities;
• the financing requirements of the Wholly-Owned Programs and our
Founded Entities;
• the investing activities including the monetization, through sale,
of shares held in our public Founded Entities; and
• repurchases of our shares
As of June 30, 2024, we had consolidated cash and cash equivalents of
$308.5 million and short term investments of $191.9 million. As of June 30,
2024, we had PureTech Level cash, cash equivalents and short-term investments
of $400.6 million. PureTech Level cash, cash equivalents and short term
investments is a non-IFRS measure (for a definition of PureTech Level cash,
cash equivalents and short term investments and a reconciliation to the IFRS
number, see the section Measuring Performance earlier in this Financial
review).
Cash Flows
The following table summarizes our cash flows for each of the periods
presented:
Six Months Ended June 30,
(in thousands) 2024 2023 Change
Net cash used in operating activities $(80,014) $(65,133) $(14,881)
Net cash provided by investing activities 236,512 173,885 62,627
Net cash provided by (used in) financing activities (39,101) 91,897 (130,998)
Net increase (decrease) in cash and cash equivalents $117,397 $200,649 $(83,252)
Operating Activities
Net cash used in operating activities was $80.0 million for the six months
ended June 30, 2024, as compared to $65.1 million for the six months ended
June 30, 2023, an increase of $14.9 million in net cash used in operating
activities. The increase in cash outflows is primarily attributable to $15.1
million increase in estimated tax payments related to the sale of the Karuna
shares and $19.0 million change in operating assets and liabilities
including $10.8 million change in operating assets largely related to accounts
receivable and $8.2 million change in operating liabilities due to the timing
of payments in the normal course of business, partially offset by $9.8 million
decrease in operating loss and $7.2 million increase in cash receipts from
interest income.
Investing Activities
Net cash provided by investing activities was $236.5 million for the six
months ended June 30, 2024, as compared to net cash provided by investing
activities of $173.9 million for the six months ended June 30, 2023, an
increase of $62.6 million in net cash provided by investing activities.
The increase in the net cash inflow was primarily attributed to the $292.7
million proceeds received from the sale of Karuna shares in 2024, and two
investing cash outflows in 2023 that did not occur in 2024 ($15.4 million
investments in subsidiary notes, $13.8 million cash deduction from the
deconsolidation of Vedanta) partially offset by increased cash outflow from
short-term investment activities (redemptions, net of purchases) amounting to
$258.8 million.
Financing Activities
Net cash used by financing activities was $39.1 million for the six months
ended June 30, 2024, as compared to net cash provided by financing activities
of $91.9 million for the six months ended June 30, 2023, a decrease of $131.0
million in net cash from financing activities. The decrease in net cash from
financing activities was primarily attributable to $100.0 million received
during the six months ended June 30, 2023 in respect of the sale of future
Karuna royalties, and no such proceeds received during the six months ended
June 30, 2024. The decrease is further attributable to the $101.6 million cash
used for the purchase of shares in connection with the Tender Offer (see note
10. Equity). The decreases were partially offset by an increase of $68.1
million proceeds received from the sale of preferred shares of Seaport.
Funding Requirements
We have incurred operating losses since inception. Based on our current plans,
we believe our existing financial assets as of June 30, 2024 will be
sufficient to fund our operations and capital expenditure requirements for at
least three years. We expect to incur substantial additional expenditures in
the near term to support our ongoing and future activities. We anticipate we
will continue to incur net operating losses for the foreseeable future to
support our existing Founded Entities and newly launched Founded Entities
(Seaport Therapeutics and Gallop Oncology), and our strategy around creating
and supporting other Founded Entities, should they require it, to reach
significant development milestones over the period of the assessment in
conjunction with our external partners. We also expect to incur significant
costs to advance our Wholly-Owned Programs, to continue research and
development efforts, to discover and progress new therapeutic candidates and
to fund the Group's operating costs for at least three years. Our ability to
fund our therapeutic development and clinical operations as well as ability to
fund our existing, newly founded and future Founded Entities, will depend on
the amount and timing of cash received from planned financings, monetization
of shares of public Founded Entities and potential business development
activities. Our future capital requirements will depend on many factors,
including:
• the costs, timing and outcomes of clinical trials and regulatory
reviews associated with our wholly-owned therapeutic candidates;
• the costs of preparing, filing and prosecuting patent applications and
maintaining, enforcing and defending intellectual property related claims;
• the emergence of competing technologies and products and other adverse
marketing developments;
• the effect on our therapeutic and product development activities of
actions taken by the U.S. Food and Drug Administration ("FDA"), the European
Medicines Agency ("EMA") or other regulatory authorities;
• the number and types of future therapeutics we develop and support
with the goal of commercialization;
• the costs, timing and outcomes of identifying, evaluating, and
investing in technologies and drug candidates to develop as Wholly-Owned
Programs or as Founded Entities;
• the costs of commercialization activities for any of the therapeutic
candidates within our Wholly Owned Program that receive marketing approval,
including the costs and timing of establishing therapeutic sales, marketing,
distribution and manufacturing capabilities, or entering into strategic
collaborations with third parties to leverage or access these capabilities;
and
• the success of our Founded Entities and their need for additional
capital.
A change in the outcome of any of these or other variables with respect to the
development of any of our wholly-owned therapeutic candidates could
significantly change the costs and timing associated with the development of
that therapeutic candidate.
Further, our operating plans may change, and we may need additional funds to
meet operational needs and capital requirements for clinical trials and other
research and development activities. We currently have no credit facility or
other committed sources of capital beyond our existing financial assets.
Because of the numerous risks and uncertainties associated with the
development and commercialization of our wholly-owned therapeutic candidates,
we have only a general estimate of the amounts of increased capital outlays
and operating expenditures associated with our current and anticipated
therapeutic development programs and these may change in the future.
Condensed Consolidated Statement of Comprehensive Income/(Loss) (Unaudited)
For the six months ended June 30
Note 2024 2023
$000s $000s
Contract revenue - 750
Grant revenue 288 2,400
Total revenue 288 3,150
Operating expenses:
General and administrative expenses (27,758) (26,166)
Research and development expenses (38,928) (53,146)
Operating income/(loss) (66,398) (76,163)
Other income/(expense):
Gain/(loss) on deconsolidation of subsidiary 4 - 61,787
Gain/(loss) on investments held at fair value 4 3,882 7,818
Realized gain/(loss) on sale of investments 4 151 -
Gain/(loss) on investments in notes from associates 6 11,612 (6,045)
Other income/(expense) 548 (1,134)
Other income/(expense) 16,193 62,426
Finance income/(costs):
Finance income 8 11,732 7,731
Finance costs - contractual 8 (1,036) (1,338)
Finance income/(costs) - fair value accounting 8 (1,613) 2,650
Finance costs - non cash interest expense related to sale of future royalties 12 (10,551) (3,726)
Net finance income/(costs) (1,468) 5,316
Share of net income/(loss) of associates accounted for using the equity method 5 (3,357) (5,324)
Income/(loss) before taxes (55,030) (13,744)
Tax benefit/(expense) 18 6,147 (11,807)
Income/(loss) for the period (48,883) (25,551)
Other comprehensive income/(loss):
Items that are or may be reclassified as profit or loss
Equity-accounted associate - share of other comprehensive income (loss) - 92
Total other comprehensive income/(loss) - 92
Total comprehensive income/(loss) for the period (48,883) (25,458)
Income/(loss) attributable to:
Owners of the Group (41,773) (25,004)
Non-controlling interests (7,111) (546)
(48,883) (25,551)
Comprehensive income/(loss) attributable to:
Owners of the Group (41,773) (24,912)
Non-controlling interests (7,111) (546)
(48,883) (25,458)
$ $
Earnings/(loss) per share:
Basic earnings/(loss) per share 9 (0.15) (0.09)
Diluted earnings/(loss) per share 9 (0.15) (0.09)
The accompanying notes are an integral part of these financial statements.
Condensed Consolidated Statement of Financial Position (Unaudited)
As of
Note June 30, 2024 December 31, 2023
$000s $000s
Assets
Non-current assets
Property and equipment, net 8,393 9,536
Right of use asset, net 8,943 9,825
Intangible assets, net 906 906
Investments held at fair value 4 29,030 317,841
Investment in associates - equity method 5 - 3,185
Investments in notes from associates 6 16,212 4,600
Deferred tax assets 6,778 -
Other non-current assets 878 878
Total non-current assets 71,140 346,771
Current assets
Trade and other receivables 2,055 2,376
Income tax receivable - 11,746
Prepaid expenses 4,703 4,309
Other financial assets 1,636 1,628
Short-term investments 191,938 136,062
Cash and cash equivalents 308,478 191,081
Total current assets 508,810 347,201
Total assets 579,950 693,973
Equity and liabilities
Equity
Share capital 4,860 5,461
Share premium 290,262 290,262
Treasury stock (46,892) (44,626)
Merger reserve 138,506 138,506
Translation reserve 182 182
Other reserve 10 (8,541) (9,538)
(Accumulated deficit)/Retained earnings (62,510) 83,820
Equity attributable to the owners of the Group 315,867 464,066
Non-controlling interests 14 (9,661) (5,835)
Total equity 306,206 458,232
Non-current liabilities
Sale of future royalties liability, non-current 12 117,458 110,159
Deferred tax liability - 52,462
Lease liability, non-current 16,422 18,250
Liability for share-based awards 7 1,550 3,501
Total non-current liabilities 135,430 184,371
Current liabilities
Lease liability, current 3,574 3,394
Trade and other payables 15 31,445 44,107
Sale of future royalties liability, current 12 3,252 -
Income taxes payable 26,135 -
Subsidiary:
Notes payable 4,027 3,699
Preferred shares 11, 13 69,882 169
Total current liabilities 138,314 51,370
Total liabilities 273,744 235,741
Total equity and liabilities 579,950 693,973
Please refer to the accompanying Notes to the consolidated financial
information. Registered number: 09582467.
The Consolidated Financial Statements were approved by the Board of Directors
and authorized for issuance on August 28, 2024 and signed on its behalf by:
Bharatt Chowrira
Chief Executive Officer
August 28, 2024
The accompanying notes are an integral part of these financial statements.
Condensed Consolidated Statement of Changes in Equity (Unaudited)
For the six months ended June 30
Share Capital Treasury Shares
Note Shares Amount Share premium Shares Amount Merger reserve $000s Translation reserve Other reserve Retained earnings/ (accumulated deficit) Total Parent equity Non-controlling interests Total
$000s $000s $000s $000s $000s $000s $000s $000s Equity
$000s
Balance January 1, 2023 289,161,653 5,455 289,624 (10,595,347) (26,492) 138,506 89 (14,478) 149,516 542,220 5,369 547,589
Net income/(loss) - - - - - - - - (25,004) (25,004) (546) (25,551)
Other comprehensive income/(loss) for the period - - - - 92 - - 92 - 92
Total comprehensive income/(loss) for the period - - - - - - 92 - (25,004) (24,912) (546) (25,458)
Deconsolidation of Subsidiary 4 - - - - - - - - - - (9,085) (9,085)
Exercise of stock options 7 306,506 6 638 149,226 327 - - (10) - 961 - 961
Purchase of Treasury stock 10 - - - (2,510,887) (7,276) - - - - (7,276) - (7,276)
Equity-settled share-based awards 7 - - - - - - - 1,465 - 1,465 277 1,742
Settlement of restricted stock units 7 - - - 161,678 337 - - 87 - 424 - 424
Expiration of share options in subsidiary - - - - - - - 786 - 786 (786) -
Other - - - - - - - - - - (6) (6)
Balance June 30, 2023 289,468,159 5,461 290,262 (12,795,330) (33,105) 138,506 182 (12,149) 124,512 513,669 (4,778) 508,891
Balance January 1, 2024 289,468,159 5,461 290,262 (17,614,428) (44,626) 138,506 182 (9,538) 83,820 464,066 (5,835) 458,232
Net income/(loss) - - - - - - - - (41,773) (41,773) (7,111) (48,883)
Total comprehensive income/(loss) for the period - - - - - - - - (41,773) (41,773) (7,111) (48,883)
Exercise of stock options 7 - - - 412,729 1,041 - - (146) - 895 - 895
Repurchase and cancellation of ordinary shares from Tender Offer 10 (31,540,670) (600) - - - - - 600 (104,558) (104,558) - (104,558)
Purchase of Treasury stock 10 - - - (1,903,990) (4,819) - - - - (4,819) - (4,819)
Equity-settled share-based awards expense 7 - - - - - - - 754 - 754 3,285 4,039
Settlement of restricted stock units 7 - - - 599,512 1,512 - - (211) - 1,301 - 1,301
Expiration of share options in subsidiary - - - - - - - 1 - 1 (1) -
Balance June 30, 2024 257,927,489 4,860 290,262 (18,506,177) (46,892) 138,506 182 (8,541) (62,510) 315,867 (9,661) 306,206
The accompanying notes are an integral part of these financial statements.
Condensed Consolidated Statement of Cash Flows (Unaudited)
For the six months ended June 30
Note 2024 2023
$000s $000s
Cash flows from operating activities
Income/(loss) for the period (48,883) (25,551)
Adjustments to reconcile income/(loss) for the period to net cash used in
operating activities:
Non-cash items:
Depreciation and amortization 1,814 3,061
Share-based compensation expense 7 4,648 1,256
(Gain)/loss on investment held at fair value 4 (3,882) (7,818)
Realized gain on sale of investments 4 (151) -
Gain on deconsolidation of subsidiary 4 - (61,787)
Share of net loss of associates accounted for using the equity method 5 3,357 5,324
(Gain)/loss on investments in notes from associates 6 (11,612) 6,045
(Gain)/loss on disposal of assets (23) 522
Impairment of fixed assets 45 1,066
Income taxes, net 18 (6,147) 11,807
Finance (income)/costs, net 8 1,468 (5,316)
Changes in operating assets and liabilities:
Trade and other receivables 320 9,243
Prepaid expenses (394) 1,484
Deferred revenue - (283)
Trade and other payables 15 (16,883) (9,318)
Other - 964
Income taxes paid (15,213) (150)
Interest received 12,196 5,444
Interest paid (675) (1,127)
Net cash used in operating activities (80,014) (65,133)
Cash flows from investing activities:
Purchase of property and equipment - (70)
Proceeds from sale of property and equipment 188 590
Investment in convertible notes and warrants from associates 7 - (15,350)
Sale of investments held at fair value 4 292,672 -
Short-term loan to associate 660 -
Repayment of short-term loan from associate (660) -
Cash derecognized upon loss of control over subsidiary (see table below) 4 - (13,784)
Purchases of short-term investments (213,035) -
Proceeds from maturity of short-term investments 156,687 202,500
Net cash provided by investing activities 236,512 173,885
Cash flows from financing activities:
Receipt of cash from sale of future royalties 12 - 100,000
Issuance of subsidiary preferred Shares 11 68,100 -
Payment of lease liability (1,648) (1,764)
Exercise of stock options 895 961
Repurchase of ordinary shares 10 (101,629) -
Purchase of treasury stock 10 (4,819) (7,276)
Other - (23)
Net cash provided by (used in) financing activities (39,101) 91,897
Net increase (decrease) in cash and cash equivalents 117,397 200,649
Cash and cash equivalents at beginning of year 191,081 149,866
Cash and cash equivalents at end of period 308,478 350,515
Supplemental disclosure of non-cash investment and financing activities:
Purchase of intangible assets not yet paid in cash - 200
Repurchase of ordinary shares not yet paid in cash 2,929 -
Settlement of restricted stock units through issuance of equity 1,301 424
Supplemental disclosure of non-cash investment and financing activities
(continued):
Assets, Liabilities and non-controlling interests in deconsolidated subsidiary
2023
$000s
Trade and other receivables (702)
Prepaid assets (3,516)
Property, plant and equipment, net (8,092)
Right of use asset, net (2,477)
Trade and other Payables 15,078
Deferred revenue 1,902
Lease liabilities (including current potion) 4,146
Long-term loan (including current portion) 15,446
Subsidiary preferred shares and warrants 24,568
Other assets and liabilities, net (323)
Non-controlling interest 9,085
55,115
Investment retained in deconsolidated subsidiary 20,456
Gain on deconsolidation (61,787)
Cash in deconsolidated subsidiary 13,784
The accompanying notes are an integral part of these financial statements.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share and per share data, or exercise price and
conversion price)
1. General information
Description of Business
PureTech Health plc (the "Parent") is a public biotherapeutics company
dedicated to changing the treatment paradigm for devastating diseases. It is
incorporated, domiciled and registered in the United Kingdom ("UK"). The
registered number is 09582467 and the registered address is 13th Floor, One
Angel Court, London, EC2R 7HJ, United Kingdom.
The Parent and its subsidiaries are together referred to as the "Group". The
interim consolidated financial statements of the Group (the "Condensed
Consolidated Financial Statements" or the "Interim Financial Statements")
consolidate those of the Parent and its subsidiaries.
The accounting policies are consistent with those of the previous financial
year and corresponding interim reporting period, except for the adoption of
new and amended IFRS Accounting Standards as set out below in Note 2. New
Standards and Interpretations.
Basis of accounting
These Interim Financial Statements have been prepared in accordance with
International Accounting Standards (IAS) 34 Interim Financial Reporting as
adopted for use in the UK and also comply fully with IAS 34 as issued by the
International Accounting Standards Board ("IASB"). The Interim Financial
Statements should be read in conjunction with the Group's Consolidated
Financial Statements as of and for the year ended December 31, 2023. The
Interim Financial Statements do not include all the information required for a
complete set of financial statements in accordance with International
Financial Reporting Standards ("IFRS"). However, selected explanatory notes
are included to explain events and transactions that are significant to an
understanding of the changes in the Group's financial position and performance
since the last annual consolidated financial information included in the
Annual Report and Accounts for the year ended December 31, 2023, which was
prepared in accordance with UK-adopted International Financial Reporting
Standards and also complied fully with International Financial Reporting
Standards as issued by the IASB. Certain amounts in the Condensed Consolidated
Financial Statements and accompanying notes may not add due to rounding. All
percentages have been calculated using unrounded amounts.
These Condensed Consolidated Financial Statements do not comprise statutory
accounts within the meaning of Section 435 of the Companies Act 2006. The
comparative figures for the six months ended June 30, 2023 are not the Group's
statutory accounts for that financial year. Those accounts were reported upon
by the Group's auditors and delivered to the registrar of companies. The
report of the auditors was unqualified, did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and did not contain statements under Section 498 (2)
or (3) of the Companies Act 2006.
The unaudited Condensed Consolidated Financial Statements reflect all
adjustments of a normal recurring nature that are necessary for a fair
statement of the results for the interim periods presented. Interim results
are not necessarily indicative of results for a full year.
As of June 30, 2024 the Group had cash and cash equivalents of $308,478 and
short term investments of $191,938. Considering the Group's financial position
as of June 30, 2024 and its principal risks and opportunities, a going concern
analysis has been prepared for at least the twelve-month period from the date
of signing the Condensed Consolidated Financial Statements ("the going concern
period") utilizing realistic scenarios and applying a severe but plausible
downside scenario. Even under the downside scenario, the analysis demonstrates
the Group continues to maintain sufficient liquidity headroom and continues to
comply with all financial obligations. Therefore, the Board of Directors
("Directors") believes the Group is adequately resourced to continue in
operational existence for at least the twelve-month period from the date of
signing the Condensed Consolidated Financial Statements. Accordingly, the
Directors considered it appropriate to adopt the going concern basis of
accounting in preparing the Condensed Consolidated Financial Statements.
These Condensed Consolidated Financial Statements were authorized for issue by
the Company's Board of Directors on August 28, 2024.
Material Accounting policies
There have been no significant changes in the Group's accounting policies from
those disclosed in our Consolidated Financial Statements as of and for the
year ended December 31, 2023. The significant accounting policies used for
half-year financial reporting are disclosed in Note 1, Material Accounting
policies of the accompanying notes to the Consolidated Financial Statements
included in our 2023 Annual Report and Accounts.
2.New Standards and Interpretations
The Group has applied Amendments to IAS 1 Presentation of Financial
Statements: Classification of Liabilities as Current or Non-Current for the
first time for its interim reporting period ended June 30, 2024. This
amendment did not have any impact on the amounts recognized in prior and
current periods.
In April 2024, IFRS 18, Presentation and Disclosure in Financial Statements
was issued to achieve comparability of the financial performance of similar
entities. The standard, which replaces IAS 1 Presentation of Financial
Statements, impacts the presentation of primary financial statements and
notes, including the statement of earnings where companies will be required to
present separate categories of income and expense for operating, investing,
and financing activities with prescribed subtotals for each new category. The
standard will also require management-defined performance measures to be
explained and included in a separate note within the consolidated financial
statements. The standard is effective for annual reporting periods beginning
on or after January 1, 2027, including interim financial statements, and
requires retrospective application. The Group is currently assessing the
impact of the new standard.
Certain other new accounting standards, interpretations, and amendments to
existing standards have been published that are effective for annual periods
commencing on or after January 1, 2025 and have not been early adopted by the
Group in preparing the Condensed Consolidated Financial Statements. These
standards, amendments or interpretations are not expected to have a material
impact on the Group in the prior and current periods.
3.Segment Information
Basis for Segmentation
The Directors are the Group's chief operating decision-makers. The Group's
operating segments are determined based on the financial information provided
to the Board of Directors periodically for the purposes of allocating
resources and assessing performance. The Group has determined each of its
Wholly-Owned Programs represents an operating segment and the Group has
aggregated each of these operating segments into one reportable segment, the
Wholly-Owned Programs segment. Each of the Group's Controlled Founded Entities
represents an operating segment. The Group aggregates each Controlled Founded
Entity operating segment into one reportable segment, the Controlled Founded
Entities segment. The aggregation is based on the high level of operational
and financial similarities of the operating segments. For the Group's entities
that do not meet the definition of an operating segment, the Group presents
this information in the Parent Company and Other column in its segment
footnote to reconcile the information in this footnote to the Condensed
Consolidated Financial Statements. Substantially all of the Group's revenue
and profit generating activities are generated within the United States and,
accordingly, no geographical disclosures are provided.
Following is the description of the Group's reportable segments:
Wholly-Owned Programs
The Wholly-Owned Programs segment is advancing Wholly-Owned Programs which are
focused on treatments for patients with devastating diseases. The Wholly-Owned
Programs segment is comprised of the technologies that are wholly-owned and
will be advanced through with either the Group's funding or non-dilutive
sources of financing. The operational management of the Wholly-Owned Programs
segment is conducted by the PureTech Health team, which is responsible for the
strategy, business development, and research and development.
Controlled Founded Entities
The Controlled Founded Entities segment is comprised of the Group's
consolidated operational subsidiaries as of June 30, 2024 that either have, or
have plans to hire, independent management teams and currently have already
raised third-party dilutive capital. These subsidiaries have active research
and development programs and have entered into an equity or debt investment
partner, who will provide additional industry knowledge and access to
networks, as well as additional funding to continue the pursued growth of the
entity.
The Group's entities that were determined not to meet the definition of an
operating segment are included in the Parent Company and Other column to
reconcile the information in this footnote to the Condensed Consolidated
Financial Statements. This column captures activities not directly
attributable to the Group's operating segments and includes the activities of
the Parent, corporate support functions and certain research and development
support functions that are not directly attributable to a strategic business
segment as well as the elimination of intercompany transactions. This column
also captures the operating results for the deconsolidated entities through
the date of deconsolidation (e.g. Vedanta in 2023) and accounting for the
Group's holdings in Founded Entities for which control has been lost, which
primarily represents: the activity associated with deconsolidating an entity
when the Group no longer controls the entity (e.g. Vedanta in 2023), the gain
or loss on the Group's investments accounted for at fair value (e.g. the
Group's ownership stakes in Karuna, Vor and Akili) and the Group's net income
or loss of associates accounted for using the equity method.
(The term "Founded Entities" refers to entities which the Company incorporated
and announced the incorporation as a Founded Entity externally. It includes
certain of the Company's wholly-owned subsidiaries which have been announced
by the Company as Founded Entities, Controlled Founded Entities and
deconsolidated Founded Entities.)
In January 2024, the Group launched two new Founded Entities (Seaport
Therapeutics "Seaport" and Gallop Oncology "Gallop") to advance certain
programs from the Wholly-Owned Programs segment. The financial results of
these programs were included in the Wholly-Owned Programs segment as of and
for the year ended December 31, 2023. Upon raising dilutive third-party
financing in April 2024, the financial results of Seaport are included within
the Controlled Founded Entities Segment as the Group still maintains control
over this entity.
As of June 30, 2024, Alivio became dormant and did not meet the definition of
operating segment. The financial results of this entity were removed from the
Wholly-Owned Programs segment and are included in the Parent Company and Other
column. The corresponding information for 2023 has been restated to include
Alivio in the Parent Company and Other column so that the segment disclosures
are presented on a comparable basis.
The Group's Board of Directors reviews segment performance and allocates
resources based upon revenue, operating loss as well as the funds available
for each segment. The Board of Directors does not review any other information
for purposes of assessing segment performance or allocating resources.
For the six months ended June 30, 2024
Wholly-Owned Programs Controlled Founded Entities Parent Company and Consolidated
$ $ Other $
$
Contract revenue - - - -
Grant revenue 288 - - 288
Total revenue 288 - - 288
General and administrative expenses (4,450) (6,548) (16,759) (27,758)
Research and development expenses (32,981) (5,710) (237) (38,928)
Total operating expense (37,431) (12,258) (16,997) (66,686)
Operating income/(loss) (37,143) (12,258) (16,997) (66,398)
Income/expenses not allocated to segments
Other income/(expense):
Gain/(loss) on investment held at fair value 3,882
Realized loss on sale of investments 151
Gain/(loss) on investment in notes from associates 11,612
Other income/(expense) 548
Total other income/(expense) 16,193
Net finance income/(costs) (1,468)
Share of net income/(loss) of associates accounted for using the equity method (3,357)
Income/(loss) before taxes (55,030)
As of June 30, 2024
Available Funds
Cash and cash equivalents 24,781 99,359 184,338 308,478
Short-term Investments - - 191,938 191,938
Consolidated cash, cash equivalents and short-term investments 24,781 99,359 376,276 500,416
For the six months ended June 30, 2023
Wholly-Owned Programs Controlled Founded Entities Parent Consolidated
$ $ Company and $
Other
$
Contract revenue - 750 - 750
Grant revenue 135 - 2,265 2,400
Total revenue 135 750 2,265 3,150
General and administrative expenses (6,981) (237) (18,947) (26,166)
Research and development expenses (45,139) (368) (7,640) (53,146)
Total Operating expenses (52,120) (605) (26,588) (79,312)
Operating income/(loss) (51,985) 145 (24,323) (76,163)
Income/expenses not allocated to segments
Other income/(expense):
Gain on deconsolidation 61,787
Gain/(loss) on investment held at fair value 7,818
Gain/(loss) on investment in notes from associates (6,045)
Other income/(expense) (1,134)
Total other income/(expense) 62,426
Net finance income/(costs) 5,316
Share of net income/(loss) of associate accounted for using the equity method (5,324)
Income/(loss) before taxes (13,744)
As of December 31, 2023
Available Funds
Cash and cash equivalents 1,895 675 188,511 191,081
Short-term Investments - - 136,062 136,062
Consolidated cash, cash equivalents and short-term investments 1,895 675 324,573 327,143
4. Investments Held at Fair Value
Investments held at fair value include both unlisted and listed securities
held by the Group. These investments, which include interests in Akili, Vor,
Sonde, Vedanta and other insignificant investments, are initially measured at
fair value and are subsequently re-measured at fair value at each reporting
date with changes in the fair value recorded through profit and loss. See Note
13. Financial Instruments for information regarding the valuation of these
instruments. Activities related to such investments during the periods are
shown below:
Investments held at fair value $
Balance as of December 31, 2023 and January 1, 2024 317,841
Sale of Karuna shares (292,672)
Gain realised on sale of investments 151
Gain - change in fair value through profit and loss 3,882
Balance as of June 30, 2024 before allocation of equity method loss to 29,202
long-term interest ("LTI")
Equity method loss recorded against LTI (172)
Balance as of June 30, 2024 after allocation of equity method loss to LTI 29,030
Vedanta
On March 1, 2023 Vedanta issued convertible debt to a syndicate of investors.
The Group did not participate in this round of financing. As part of the
issuance of the debt, the convertible debt holders were granted representation
on Vedanta's Board of Directors and the Group lost control over the Vedanta's
Board of Directors and the power to direct the relevant Vedanta activities.
Consequently, Vedanta was deconsolidated on March 1, 2023 and its results of
operations were included in the Condensed Consolidated Financial Statements
through the date of deconsolidation.
Following deconsolidation, the Group still has significant influence over
Vedanta through its voting interest in Vedanta and its remaining
representation on Vedanta's Board of Directors. However, the Group only holds
convertible preferred shares in Vedanta that do not provide their holders with
access to returns associated with a residual equity interest, and as such, are
accounted for under IFRS 9, as investments held at fair value with changes in
fair value recorded in profit and loss. Under IFRS 9, the preferred share
investments are categorized as debt instruments that are presented at fair
value through profit and loss because the amounts receivable do not represent
solely payments of principal and interest.
Upon deconsolidation, the Group derecognized its assets, liabilities and
non-controlling interest in respect of Vedanta and recorded its aforementioned
investment in Vedanta at fair value. The deconsolidation resulted in a gain of
$61,787.
During the six months ended June 30, 2024 and June 30, 2023, the Group
recognized a loss of $3,648 and $2,171, respectively for the changes in the
fair value of the investment in Vedanta that was included in gain/(loss) on
investments held at fair value within the Condensed Consolidated Statement of
Comprehensive Income/(Loss). The fair value of the Group's investment in
Vedanta was $10,505 and $14,153 as of June 30, 2024 and December 31, 2023,
respectively.
Karuna
As of December 31, 2023, the Group held 886,885 shares or 2.3 percent of total
outstanding Karuna common stock with fair value of $280,708. In March 2024,
Karuna common shares were acquired by Bristol Myers Squibb ("BMS") for $330
per share in accordance with the terms of a definitive merger agreement signed
in December 2023. As a result of this transaction, the Group received total
proceeds of $292,672 before income tax in exchange for its holding of 886,885
shares of Karuna common stock.
During the six months ended June 30, 2024 and 2023, the Group recognized a
gain of $11,813 and $21,458, respectively, for the changes in the fair value
of its investment in Karuna that was included in gain/(loss) on investments
held at fair value within the Condensed Consolidated Statement of
Comprehensive Income/(Loss).
Sonde
On May 25, 2022, Sonde completed a Series B preferred share financing, which
resulted in the Group losing control over Sonde and the deconsolidation of
Sonde.
Following deconsolidation, the Group still had significant influence in Sonde
through its voting interest in Sonde and its remaining representation on
Sonde's Board of Directors. The Group holds Preferred A-1, A-2 and B shares.
The Preferred A-1 shares have the same terms as common stock, and provide
their shareholders with access to returns associated with a residual equity
ownership in Sonde. Consequently, the investment in Preferred A-1 shares is
accounted for under the equity method. See Note 5. Investments in Associates.
The convertible Preferred A-2 and B shares, however, do not provide their
shareholders with access to returns associated with a residual equity
interest, and as such, are accounted for under IFRS 9, as investments held at
fair value with changes in fair value recorded in profit and loss. Under IFRS
9, the A-2 and B preferred share investments are categorized as debt
instruments that are presented at fair value through profit and loss because
the amounts receivable do not represent solely payments of principal and
interest.
During the six months ended June 30, 2024 and 2023, the Group recognized a
gain of $163, and a loss of $167, respectively, for the change in the fair
value of its investment in Sonde that were included in gain/(loss) on
investments held at fair value within the Condensed Consolidated Statement of
Comprehensive Income/(Loss). The fair value of the Group's investment in Sonde
was $10,571 and $10,408 as of June 30, 2024 and December 31, 2023,
respectively. As the Group's investment in
Sonde is considered to be a long term interest, a loss of $172 from Sonde's
equity method of accounting was applied to the investment balance, reducing
the balance to $10,399.
Vor
During the six months ended June 30, 2024 and 2023, the Group recognized a
loss of $3,340 and $9,512, respectively, for the change in the fair value of
its investment in Vor that was included in gain/(loss) on investments held at
fair value within the Condensed Consolidated Statement of Comprehensive
Income/(Loss). The fair value of the Group's investment in Vor was $2,672 and
$6,012 as of June 30, 2024 and December 31, 2023, respectively.
Akili
During the six months ended June 30, 2024 and 2023, the Group recognized a
loss of $985 and $354, respectively, for the changes in the fair value of its
investment in Akili that were included in gain/(loss) on investments held at
fair value within the Condensed Consolidated Statement of Comprehensive
Income/(Loss). The fair value of the Group's investment in Akilli was $5,437
and $6,422 as of June 30, 2024 and December 31, 2023, respectively.
On July 2, 2024, Akili was acquired by Virtual Therapeutics. As a result of
this transaction, the Group received total proceeds of $5,437 before income
taxes in exchange for its holding of 12,527,476 shares of Akili common stock.
5. Investments in Associates
Gelesis
Gelesis was founded by the Group and raised funding through preferred shares
financings as well as issuances of warrants and loans. As of July 1, 2019,
Gelesis was deconsolidated from the Group's financial statements. Upon
deconsolidation, the preferred shares and warrants held by the Group fell
under the guidance of IFRS 9 Financial Instruments and were treated as
financial assets held at fair value and the investment in common shares of
Gelesis was subject to IAS 28 Investment in Associates as the Group had
significant influence over Gelesis.
During the year ended December 31, 2023, the Group entered into agreements
with Gelesis to purchase senior secured convertible promissory notes and
warrants for shares of Gelesis common stock (see Note 6. Investment in Notes
from Associates). The warrants to purchase shares of Gelesis common stock
represented potential voting rights to the Group and it is therefore necessary
to consider whether they were substantive. If these potential voting rights
were substantive and the Group had the practical ability to exercise the
rights and take control of greater than 50% of Gelesis common stock, the Group
would be required to consolidate Gelesis under the accounting standards.
In February 2023, the Group obtained warrants to purchase 23,688,047 shares of
Gelesis common stock (the "February Warrants") at an exercise price of $0.2744
per share. The exercise of the February Warrants was subject to the approval
of the Gelesis stockholders until May 1, 2023. On May 1, 2023, stockholder
approval was no longer required for the Group to exercise the February
Warrants. The potential voting rights associated with the February Warrants
were not substantive as the exercise price of the February Warrants was at a
significant premium to the fair value of the Gelesis common stock.
In May 2023, the Group obtained warrants to purchase 235,441,495 shares of
Gelesis common stock (the "May Warrants"). The May Warrants were exercisable
at the option of the Group and had an exercise price of either $0.0182 or
$0.0142. The May Warrants were substantive as the Group would have benefited
from exercising such warrants since their exercise price was at the money or
at an insignificant premium over the fair value of the Gelesis common stock.
However, that benefit from exercising the May Warrants only existed for a
short period of time because in June 2023, the potential voting rights
associated with the May Warrants were impacted by the terms and conditions of
a merger agreement that the Group signed with Gelesis on June 12, 2023 (the
"Merger Agreement") and were no longer substantive.
On October 12, 2023, the Group terminated the Merger Agreement with Gelesis as
certain closing conditions were not satisfied. In October 2023, Gelesis ceased
operations and filed a voluntary petition for relief under the provisions of
Chapter 7 of Title 11 of the United States Bankruptcy Code. A Chapter 7
trustee has been appointed by the Bankruptcy Court who has control over the
assets and liabilities of Gelesis, effectively eliminating the authority and
powers of the Board of Directors of Gelesis and its executive officers to act
on behalf of Gelesis. The assets of Gelesis are in liquidation and Gelesis no
longer has any officers or employees. The Group ceased accounting for Gelesis
as an equity method investment as it no longer has significant influence in
Gelesis.
During the year ended December 31, 2023, the Group recorded $4,910 as its
share in the losses of Gelesis with $3,787 recorded in the first six months.
The Group's balance in this equity method investment was $- as of June 30,
2024 and December 31, 2023.
Sonde
Following deconsolidation of Sonde on May 25 2022, the Group has significant
influence in Sonde through its voting interest in Sonde and its remaining
representation on Sonde's Board of Directors. The Group holds Preferred A-1,
A-2 and B shares. The Preferred A-1 shares, in substance, have the same terms
as common stock and as such, provide their shareholders with access to returns
associated with a residual equity ownership in Sonde. Consequently, the
investment in Preferred A-1 shares is accounted for under the equity method of
accounting. The Preferred A-2 and B shares, however, do not provide their
shareholders with access to returns associated with a residual equity
interest, and as such, are accounted for under IFRS 9, as investments held at
fair value.
During the six months ended June 30, 2024 and 2023, the Group recorded a loss
of $3,357 and $1,537, respectively, related to Sonde's equity method of
accounting. As of December 31, 2023, the Sonde equity method investment had
a balance of $3,185. The Group's share of Sonde's loss in the six months ended
June 30, 2024 has reduced the Group's investment in this associate to $0. The
excess loss of $172 was applied against the fair value of Sonde Preferred A-2
and B shares, which are considered to be long term interests.
6. Investment in Notes from Associates
Gelesis
On July 27, 2022, the Group, as a lender, entered into an unsecured promissory
note (the "Junior Note") with Gelesis, as a borrower, in the amount of
$15,000. The Junior Note bears an annual interest rate of 15% per annum. The
maturity date of the Junior Note is the earlier of December 31, 2023 or five
business days following the consummation of a qualified financing by Gelesis.
Based on the terms of the Junior Note, due to the option to convert to a
variable amount of shares at the time of default, the Junior Note is required
to be measured at fair value with changes in fair value recorded through
profit and loss.
During the year ended December 31, 2023, the Group entered into multiple
agreements with Gelesis to purchase senior secured convertible promissory
notes (the "Senior Notes") and warrants for share of Gelesis common stock for
a total consideration of $11,850. The Senior Notes are secured by a
first-priority lien on substantially all assets of Gelesis and the guarantors
(other than the equity interests in, and assets held by Gelesis s.r.l., a
subsidiary of Gelesis, and certain other exceptions). The initial fair value
of the Senior Notes was determined to be $10,729 while $1,121 was determined
to be the initial fair value of the warrants. The Senior Notes represent debt
instruments that are presented at fair value through profit and loss as the
amounts receivable do not solely represent payments of principal and interest
as the Senior Notes are convertible into Gelesis common stock.
In October 2023, Gelesis ceased operations and filed a voluntary petition for
relief under the provisions of Chapter 7 of Title 11 of the United States
Bankruptcy Code. Therefore, the Group determined that the fair value of the
Junior Note and the Senior Notes with the warrants was $0 as of December 31,
2023. For the six months ended June 30, 2023 and year ended December 31, 2023,
the Group recorded a loss of $5,945 and $27,230, respectively, for the changes
in the fair value of these instruments which were included in gain/(loss) on
investments in notes from associates in the Condensed Consolidated Statement
of Comprehensive Income/(Loss).
In June 2024, the Bankruptcy Court approved an executed agreement for a third
party to acquire the remaining net assets of Gelesis for $15,000. As the only
senior secured creditor, the Group is expected to receive a majority of the
proceeds from this sale after deduction of Bankruptcy Court related legal and
administrative costs. As of June 30, 2024, these notes were determined to have
a fair value of $11,312. The Group recorded a gain of $11,312 for the changes
in the fair value of these notes which were included in gain/(loss) on
investments in notes from associates in the Condensed Consolidated Statement
of Comprehensive Income/(Loss).
Vedanta
On April 24, 2023, Vedanta closed the second tranche of its convertible debt
for additional proceeds of $18,000, of which $5,000 were invested by the
Group. The convertible debt carries an interest rate of 9 percent per annum.
The debt has various conversion triggers and the conversion price is
established at the lower of 80% of the equity price of the last financing
round, or a certain pre-money valuation cap established in the agreement. If
the convertible debt is not earlier converted or repaid, the entire
outstanding amount of the convertible debt shall be due and payable upon the
earliest to occur of (a) the later of (x) November 1, 2025 and (y) the date
which is sixty (60) days after all amounts owed under, or in connection with,
the loan Vedanta received from a certain investor have been paid in full, or
(b) the consummation of a Deemed Liquidation Event (as defined in Vedanta's
Amended and Restated Certificate of Incorporation).
Due to the terms of the convertible debt, the investment in such convertible
debt is measured at fair value with changes in the fair value recorded through
profit and loss. During the six months ended June 30, 2024 and June 30, 2023,
the Group recorded a gain of $300 and a loss of $100, respectively, for the
changes in the fair value of the Vedanta convertible debt, which were included
in gain/(loss) on investments in notes from associates in the Condensed
Consolidated Statement of Comprehensive Income/(Loss).
Following is the activity in respect of investments in notes from associates
during the period. The fair value of the $16,212 notes from associates as of
June 30, 2024 is determined using unobservable Level 3 inputs. See Note 13.
Financial Instruments for additional information.
Investment in notes from associates $
Balance as of December 31, 2023 and January 1, 2024 4,600
Changes in the fair value of the notes 11,612
Balance as of June 30, 2024 16,212
7.Share-based Payments
Share-based payments includes stock options and restricted stock units
("RSUs"). Expense for stock options and time-based RSUs is recognized based on
the grant date fair value of these awards. Performance-based RSUs to
executives are treated as liability awards and the related expense is
recognized based on reporting date fair value up until settlement date.
Share-based Payment Expense
The Group's share-based payment expense for the six months ended June 30, 2024
and 2023 was $4,648 and $1,256, respectively. The following table provides the
classification of the Group's consolidated share-based payment expense as
reflected in the Condensed Consolidated Statement of Comprehensive
Income/(Loss):
Six months ended June 30, 2024 2023
$ $
General and administrative 4,471 1,121
Research and development 176 135
Total 4,648 1,256
The Performance Share Plan
In June 2015, the Group adopted the Performance Stock Plan (the "2015 PSP").
Under the 2015 PSP and subsequent amendments, awards of ordinary shares may be
made to the Directors, senior managers and employees, and other individuals
providing services to the Group up to a maximum authorized amount of 10.0
percent of the total ordinary shares outstanding.
In June 2023 the Group adopted a new Performance Stock Plan (the "2023 PSP")
that has the same terms as the 2015 PSP but instituted for all new awards a
limit of 10.0 percent of the total ordinary shares outstanding over a
five-year period.
The awards granted under these plans have various vesting terms over a period
of service between one and four years, provided the recipient remains
continuously engaged as a service provider. The options awards expire 10 years
from the grant date.
The share-based awards granted under these plans are generally equity-settled
(see cash settlements below). As of June 30, 2024, the Group had issued
31,654,895 units of share-based awards under these plans.
RSUs
During the six months ended June 30, 2024 and 2023, the Group granted the
following RSUs to certain non-executive Directors, executives and employees:
Six months ended June 30, 2024 2023
Time based RSUs 3,933,606 102,732
Performance based RSUs 1,822,151 3,576,937
Total RSUs 5,755,757 3,679,669
Each RSU entitles the holder to one ordinary share on vesting and the RSU
awards are generally based on a vesting schedule over a one to three-year
requisite service period in which the Group recognizes compensation expense
for the RSUs. Following vesting, each recipient will be required to make a
payment of one pence per ordinary share on settlement of the RSUs.
Time-based RSUs are equity-settled. The grant date fair value on such RSUs is
recognized over the vesting term.
Performance-based RSUs are granted to executives. Vesting of such RSUs is
subject to the satisfaction of both performance and market conditions. The
performance condition is based on the achievement of the Group's strategic
targets. The market conditions are based on the achievement of the absolute
total shareholder return ("TSR"), TSR as compared to the FTSE 250 Index, and
TSR as compared to the MSCI Europe Health Care Index. The RSU award
performance criteria have changed over time as the criteria are continually
evaluated by the Group's Remuneration Committee.
The Group recognizes the estimated fair value of performance-based awards with
non-market conditions as share-based compensation expense over the performance
period based upon its determination whether it is probable that the
performance targets will be achieved. The Group assesses the probability of
achieving the performance targets at each reporting period. Cumulative
adjustments, if any, are recorded to reflect subsequent changes in the
estimated outcome of performance-related conditions.
The fair value of the performance-based awards with market conditions is based
on the Monte Carlo simulation analysis utilizing a Geometric Brownian Motion
process with 100,000 simulations to value those shares. The model considers
share price volatility, risk-free rate and other covariance of comparable
public companies and other market data to predict distribution of relative
share performance.
The RSUs to executives are treated as liability awards as the Group has a
historical practice of settling these awards in cash, and as such, adjusted to
fair value at every reporting date until settlement with changes in fair value
recorded in earnings as stock based compensation expense.
In May 2024, the Group settled 237,420 vested RSUs through issuance of shares
to a terminated employee. As such, the liability at the date of settlement was
settled for $646 in shares.
In March 2024, the Group settled 518,721 vested RSUs through issuance of
shares after paying the employees' withholding taxes in cash. As such, the
liability at the date of settlement was settled for $655 in cash and $655 in
shares.
In February and May 2023, the Group settled 276,425 vested RSUs through
issuance of shares, after paying the employees' withholding taxes in cash. As
such, the liability at dates of settlement was settled for $298 in cash and
$424 in shares.
The Group recorded $973 expense and $235 income for the six months ended June
30, 2024 and 2023, respectively, in respect of all restricted stock units, of
which $609 expense and $485 income, respectively, was in respect of liability
settled share-based awards.
As of June 30, 2024, the carrying amount of the RSU liability awards was
$3,435 with $1,886 current and $1,550 non current. As of December 31, 2023,
the carrying amount of the RSU liability awards was $4,782 with $1,281 current
and $3,501 non current, out of which $1,281 related to awards that met all
their performance and market conditions and were settled in March and May of
2024 as discussed above.
Stock Options
During the six months ended June 30, 2024 and 2023, the Group granted
2,548,375 and 569,125 stock option awards, respectively.
Stock options are treated as equity-settled awards. The fair value of the
stock options awarded by the Group was estimated at the grant date using the
Black-Scholes option valuation model, considering the terms and conditions
upon which options were granted, with the following weighted- average
assumptions:
For the six months ended June 30, 2024 2023
Expected volatility 44.79% 43.45%
Expected terms (in years) 6.16 6.16
Risk-free interest rate 4.32% 3.66%
Expected dividend yield - -
Exercise price (GBP) 1.88 2.29
Underlying stock price (GBP) 1.88 2.29
These assumptions resulted in an estimated weighted-average grant-date fair
value per share of stock options granted during the six months ended June 30,
2024, and 2023 of $1.19, and $1.38, respectively.
As of June 30, 2024, 9,191,140 incentive options are exercisable with a
weighted-average exercise price of £2.20. Exercise prices ranged from £0.01
to £3.60.
The Group incurred share-based payment expense for the stock options of $390
and $1,215 for the six months ended June 30, 2024 and 2023, respectively.
Subsidiary Plans
The subsidiaries incurred $3,285 and $277 in share-based payment expense in
respect of their share-based award plans for the six months ended June 30,
2024 and 2023, respectively.
The share-based payment expense for the six months ended June 30, 2024 is
primarily related to the Seaport Plan discussed below.
In 2024, the Board of Directors of Seaport approved the 2024 Equity Incentive
Plan (the "Seaport Plan"). The options granted under the Seaport Plan are
equity settled and expire 10 years from the grant date. Typically, the awards
vest in four years but vesting conditions can vary based on the discretion of
Seaport's Board of Directors.
The estimated grant date fair value of the equity awards is recognized as an
expense over the awards' vesting periods.
In the six months ended June 30, 2024, Seaport granted 3,450,000 shares of
restricted stock to certain officers and directors, of which 1,227,778 shares
are fully vested as of June 30, 2024. Seaport also granted 14,859,335 stock
options awards to its non-executive Directors, executives and employees. The
fair value of the restricted stock is estimated at the date of grant using the
market backsolve and two-scenario option pricing model. See Note 13. Financial
Instruments. The fair value of the stock option grants was estimated at the
date of grant using the Black-Scholes option pricing model with the following
weighted-average assumptions:
For the six months ended June 30, 2024
Expected volatility 80.00%
Expected terms (in years) 5.75
Risk-free interest rate 4.34%
Expected dividend yield -
Exercise price $0.97
Underlying stock price $0.97
These assumptions resulted in an estimated weighted-average grant-date fair
value of $0.68 per share for stock options granted during the six months ended
June 30, 2024.
8.Finance Income/(Costs), net
The following table shows the breakdown of finance income and costs:
2024 2023
$ $
For the six months ended June 30,
Finance income
Interest income from financial assets 11,732 7,731
Total finance income 11,732 7,731
Finance costs
Contractual interest expense on notes payable (328) (82)
Interest expense on other borrowings - (363)
Interest expense on lease liability (675) (817)
Gain/(loss) on foreign currency exchange (33) (76)
Total finance cost - contractual (1,036) (1,338)
Gain/(loss) from change in fair value of warrant liability - 33
Gain/(loss) from change in fair value of preferred shares (1,613) 2,617
Total finance income/(costs) - fair value accounting (1,613) 2,650
Total finance costs - non cash interest expense related to sale of future (10,551) (3,726)
royalties
Finance income/(costs), net (1,468) 5,316
9.Earnings/(Loss) per Share
Basic earnings/(loss) per share is computed by dividing the Group's income or
loss for the period attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding, net of treasury shares.
Dilutive earnings/loss per share is computed by dividing the Group's income or
loss for the period attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding, net of treasury shares, plus
the weighted average number of ordinary shares that would be issued at
conversion of all the dilutive potential securities into ordinary shares.
Dilutive effects arise from equity-settled shares from the Group's share-based
plans.
During the six months ended June 30, 2024 and 2023, the Group incurred a net
loss, and therefore, all outstanding potential securities were considered
anti-dilutive. The amount of potential securities that were excluded from the
diluted calculation amounted to 1,637,694 and 1,878,514 shares for the six
months ended June 30, 2024 and 2023, respectively.
The following table sets forth the computation of basic and diluted
earnings/(loss) per share for the periods presented:
ForForfor For the six months ended June 30, 2024 2023
Numerator:
Income/(loss) attributable to the owners of the Group ($41,773) ($25,004)
Denominator:
Issued ordinary shares at January 1 271,853,731 278,566,306
Effect of shares issued & treasury shares purchased and cancelled (2,197,209) (311,925)
Weighted average ordinary shares for basic EPS 269,656,522 278,254,381
Effect of dilutive securities - -
Weighted average ordinary shares for diluted EPS 269,656,522 278,254,381
Basic earnings/(loss) per ordinary share ($0.15) ($0.09)
Diluted earnings/(loss) per ordinary share ($0.15) ($0.09)
10. Equity
On May 9, 2022, the Group announced the commencement of a $50,000 share
repurchase program (the "Program") of its ordinary shares of one pence each.
The Group executed the Program in two equal tranches. It entered into an
irrevocable non-discretionary instruction with Jefferies International Limited
("Jefferies") in relation to the purchase by Jefferies of the ordinary shares
for an aggregate consideration (excluding expenses) of no greater than $25,000
for each tranche and the simultaneous on-sale of such ordinary shares by
Jefferies to the Group, subject to certain volume and price restrictions. In
February 2024, the Group completed the Program and has repurchased an
aggregate of 20,182,863 ordinary shares under the Program. These shares have
been held as treasury shares and are being used to settle the vesting of
restricted stock units or exercise of stock options.
In March 2024, the Group announced a proposed capital return of $100,000 to
its shareholders by way of a tender offer (the "Tender Offer"). The proposed
Tender Offer was approved by shareholders at the Annual General Meeting of
Stockholders held on June 6, 2024, to acquire a maximum number of 33,500,000
ordinary shares (including ordinary shares represented by American Depository
Shares (''ADSs'')) for a fixed price of 250 pence per ordinary share
(equivalent to £25.00 per ADS) for a maximum aggregate amount of $100,000
excluding expenses.
The Tender Offer was completed on June 24, 2024. The Group repurchased
31,540,670 ordinary shares under the Tender Offer. Following such repurchase,
the Group cancelled these shares repurchased. As a result of the cancellation,
the nominal value of $600 related to the cancelled shares was reduced from
share capital and transferred to a capital redemption reserve, increasing the
capital redemption reserve balance to $600 as of June 30, 2024 which was
included in other reserve in the Condensed Consolidated Statement of Changes
in Equity.
As of December 31, 2023, the Group had 271,853,731 common shares outstanding,
including 289,468,159 issued shares net of 17,614,428 shares repurchased and
held by the Group in Treasury. As of June 30, 2024, the Group had 239,421,312
common shares outstanding, including 257,927,489 issued shares after deducting
31,540,670 cancelled ordinary shares repurchased through the Tender Offer, net
of 18,506,177 shares repurchased and held by the Group in Treasury.
11. Subsidiary Preferred Shares
In April 2024, Seaport closed a Series A-2 preferred share financing with
aggregate proceeds of $100,100 of which $68,100 was from outside investors and
$32,000 was from the Group. As of June 30, 2024, the Group held equity
ownership in Seaport of 57.7 percent on a diluted basis.
Preferred shares issued by subsidiaries often contain redemption and
conversion features that are assessed under IFRS 9 in conjunction with the
host preferred share instrument. This balance represents subsidiary preferred
shares issued to third parties.
The subsidiary preferred shares are redeemable upon the occurrence of a
contingent event, other than full liquidation of the subsidiaries, that is not
considered to be within the control of the subsidiaries. Therefore, these
subsidiary preferred shares are classified as liabilities. These liabilities
are measured at fair value through profit and loss. The preferred shares are
convertible into ordinary shares of the subsidiaries at the option of the
holders and are mandatorily convertible into ordinary shares under certain
circumstances. Under certain scenarios, the number of ordinary shares
receivable on conversion will change and therefore, the number of shares that
will be issued is not fixed. As such, the conversion feature is considered to
be an embedded derivative that normally would require bifurcation. However,
since the preferred share liabilities are measured at fair value through
profit and loss, as mentioned above, no bifurcation is required.
The preferred shares are entitled to vote with holders of common shares on an
as converted basis.
The fair value of all subsidiary preferred shares as of June 30, 2024 and
December 31, 2023, is as follows:
2024 2023
$ $
As of June 30, 2024 and December 31, 2023
Entrega 169 169
Seaport 69,713 -
Total subsidiary preferred share balance 69,882 169
As is customary, in the event of any voluntary or involuntary liquidation,
dissolution or winding up of a subsidiary, the holders of outstanding
subsidiary preferred shares shall be entitled to be paid out of the assets of
the subsidiary available for distribution to shareholders and before any
payment shall be made to holders of ordinary shares. A merger, acquisition,
sale of voting control or other transaction of a subsidiary in which the
shareholders of the subsidiary immediately before the transaction do not own
a majority of the outstanding shares of the surviving company shall be deemed
to be a liquidation event. Additionally, a sale, lease, transfer or other
disposition of all or substantially all of the assets of the subsidiary shall
also be deemed a liquidation event.
As of June 30, 2024 and December 31, 2023, the minimum liquidation preference
reflecting the amounts that would be payable to the subsidiary preferred
holders upon a liquidation event of the subsidiaries, is as follows:
2024 2023
$ $
As of June 30, 2024 and December 31, 2023
Entrega 2,216 2,216
Follica 6,405 6,405
Seaport 68,100 -
Total minimum liquidation preference 76,721 8,621
For the six months ended June 30, 2024, the Group recognized the following
changes in the value of subsidiary preferred shares:
Subsidiary Preferred Shares
$
Balance as of December 31 2023 169
Issuance of new preferred shares 68,100
Increase/(decrease) in value of preferred shares measured at fair value* 1,613
Balance as of June 30 69,882
*The changes in fair value of preferred shares are included in total finance
income/(costs) - fair value accounting in the Condensed Consolidated Statement
of Comprehensive Income/(Loss).
12. Sale of Future Royalties Liability
On March 4, 2011, the Group entered into a license agreement with Karuna
Therapeutics, Inc. ("Karuna") according to which the Group granted Karuna an
exclusive license to research, develop and sell KarXT in exchange for a
royalty on annual net sales, development and regulatory milestones and a fixed
portion of sublicensing income, if any (hereinafter "License Agreement").
On March 22, 2023, the Group signed an agreement with Royalty Pharma (the
"Royalty Purchase Agreement"), according to which the Group sold Royalty
Pharma a partial right to receive royalty payments made by Karuna in respect
of net sales of KarXT, if and when received. According to the Royalty Purchase
Agreement, all royalties due to the Group under the License Agreement will be
paid to Royalty Pharma up until an annual sales threshold of $60,000, while
all royalties above such annual threshold in a given year will be split 33% to
Royalty Pharma and 67% to the Group. Under the terms of the Royalty Purchase
Agreement, the Group received a non-refundable initial payment of $100,000 at
the execution of the Royalty Purchase Agreement and is eligible to receive
additional payments in the aggregate of up to an additional $400,000 based on
the achievement of certain regulatory and commercial milestones.
The Group continues to hold the rights under the License Agreement and has a
contractual obligation to deliver cash to Royalty Pharma for a portion of the
royalties it receives. Therefore, the Group will continue to account for any
royalties and regulatory milestones due to the Group under the License
Agreement as revenue and record the proceeds from the Royalty Purchase
Agreement as a financial liability on its financial statements. In determining
the appropriate accounting treatment for the Royalty Purchase Agreement,
management applied significant judgement.
The acquisition of Karuna by Bristol Myers Squibb (NYSE: BMY), which closed on
March 18, 2024, had no impact on the Group's rights or obligations under the
License Agreement or Royalty Purchase Agreement, each of which remains in full
force and effect.
In order to determine the amortized cost of the sale of future royalties
liability, management is required to estimate the total amount of future
receipts from and payments to Royalty Pharma under the Royalty Purchase
Agreement over the life of the agreement. The $100,000 liability, recorded at
execution of the Royalty Purchase Agreement, is accreted to the total of these
receipts and payments as interest expense over the life of the Royalty
Purchase Agreement. These estimates contain assumptions that impact both the
amortized cost of the liability and the interest expense that are recognized
in each reporting period.
Additional proceeds received from Royalty Pharma will increase the Group's
financial liability. As royalty payments are made to Royalty Pharma, the
balance of the liability will be effectively repaid over the life of the
Royalty Purchase Agreement. To date, the Group has not made any royalty
payments to Royalty Pharma. The estimated timing and amount of royalty
payments to and proceeds from Royalty Pharma are likely to change over the
life of the Royalty Purchase Agreement. A significant increase or decrease in
estimated royalty payments, or a significant shift in the timing of cash
flows, will materially impact the sale of future royalties liability, interest
expense and the time period for repayment. The Group periodically assesses the
expected payments to, or proceeds from, Royalty Pharma. Any such changes in
amount or timing of cash flows requires the Group to re-calculate the
amortized cost of the sale of future royalties liability as the present value
of the estimated future cash flows from the Royalty Purchase Agreement that
are discounted at the liability's original effective interest rate. The
adjustment is recognized immediately in profit or loss as income or expense.
The following shows the activity in respect of the sale of future royalties
liability:
Sale of future royalties liability
$
Balance as of December 31, 2023 110,159
Non cash interest expense recognized 10,551
Balance as of June 30, 2024 120,710
Less sale of future royalties liability, current -3,252
Sale of future royalties liability, non-current 117,458
13. Financial Instruments
The Group's financial instruments consist of financial assets in the form of
notes, convertible notes and investment in shares, and financial liabilities,
including preferred shares. Many of these financial instruments are presented
at fair value, with changes in fair value recorded through profit and loss.
Fair Value Process
For financial instruments measured at fair value under IFRS 9, the change in
the fair value is reflected through profit and loss. Using the guidance in
IFRS 13, the total business enterprise value and allocable equity of each
entity being valued can be determined using a market backsolve approach
through a recent arm's length financing round (or a future probable arm's
length transaction), market/asset probability-weighted expected return method
("PWERM") approach, discounted cash flow approach, or hybrid approaches. The
approaches, in order of strongest fair value evidence, are detailed
as follows:
Valuation Method Description
Market - Backsolve The market backsolve approach benchmarks the original issue price (OIP) of the
company's latest funding transaction as current value.
Market/Asset - PWERM Under a PWERM, the company value is based upon the probability-weighted
present value of expected future investment returns, considering each of the
possible future outcomes available to the enterprise. Possible future outcomes
can include IPO scenarios, potential SPAC transactions, merger and acquisition
transactions as well as other similar exit transactions of the investee.
Income Based - DCF The income approach is used to estimate fair value based on the income
streams, such as cash flows or earnings, that an asset or business can be
expected to generate.
At each measurement date, investments held at fair value (that are not
publicly traded) as well as the fair value of preferred share liabilities,
including embedded conversion rights that are not bifurcated, were determined
using the following allocation methods: option pricing model ("OPM"), PWERM,
or hybrid allocation framework. The methods are detailed as follows:
Allocation Method Description
OPM The OPM model treats preferred stock as call options on the enterprise's
equity value, with exercise prices based on the liquidation preferences of the
preferred stock.
PWERM Under a PWERM, share value is based upon the probability-weighted present
value of expected future investment returns, considering each of the possible
future outcomes available to the enterprise, as well as the rights of each
share class.
Hybrid The hybrid method is a combination of the PWERM and OPM. Under the hybrid
method, multiple liquidity scenarios are weighted based on the probability of
the scenario's occurrence, similar to the PWERM, while also utilizing the OPM
to estimate the allocation of value in one or more of the scenarios.
Valuation policies and procedures are regularly monitored by the Group. Fair
value measurements, including those categorized within Level 3, are prepared
and reviewed for reasonableness and compliance with the fair value
measurements guidance under IFRS accounting standards. The Group measures fair
value using the following fair value hierarchy that reflects the significance
of the inputs used in making the measurements:
Fair Value Description
Hierarchy Level
Level 1 Inputs that are quoted market prices (unadjusted) in active markets for
identical instruments.
Level 2 Inputs other than quoted prices included within Level 1 that are observable
either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 Inputs that are unobservable. This category includes all instruments for which
the valuation technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instruments' valuation.
Whilst the Group considers the methodologies and assumptions adopted in fair
value measurements as supportable and reasonable, because of the inherent
uncertainty of valuation, those estimated values may differ significantly from
the values that would have been used had a ready market for the investment
existed.
Subsidiary Preferred Shares Liability
The following table summarizes the changes in the Group's subsidiary preferred
shares measured at fair value, which are categorized as Level 3 in the fair
value hierarchy:
Subsidiary Preferred Shares
$
Balance at December 31, 2023 and January 1, 2024 169
Value at issuance 68,100
Change in fair value 1,613
Balance at June 30, 2024 69,882
The change in fair value of preferred shares liabilities are recorded in
finance income/(costs) - fair value accounting in the Condensed Consolidated
Statement of Comprehensive Income/(Loss).
The significant unobservable inputs used at June 30, 2024 in the fair value
measurement of the Group's material subsidiary preferred shares liability and
the sensitivity of the fair value measurement for this liability to changes of
these significant unobservable inputs are summarized in the table below.
As of June 30, 2024 Subsidiary Preferred Share Liability Measured through
Market Backsolve & Two-Scenario OPM
Unobservable Inputs Input Value Sensitivity Range Fair Value Increase/(Decrease) $
Equity Value 192,200 -5% (2,251)
+5% 2,137
Time to Liquidity 1.27 -6 Months 3,511
+ 6 Months (2,924)
Volatility 56% -10% 1,664
+10% (1,714)
Investments Held at Fair Value
Vor and Akili Valuation
Vor (Nasdaq: VOR), Akili (Nasdaq: AKLI) and additional immaterial investments
are listed entities on an active exchange, and as such, the fair value as of
June 30, 2024, was calculated utilizing the quoted common share price which is
categorized as Level 1 in the fair value hierarchy.
Vedanta and Sonde
As of June 30, 2024, the Group accounts for the following investments under
IFRS 9 as investments held at fair value with changes in fair value through
the profit and loss: Sonde preferred A-2 and B shares and Vedanta convertible
preferred shares. The valuation of the aforementioned investments is
categorized as Level 3 in the fair value hierarchy due to the use of
significant unobservable inputs to value such assets. During the six months
ended June 30, 2024, the Group recorded such investments at fair value and
recognized a loss of $3,486 for the change in fair value of the investments.
The following table summarizes the changes in all the Group's investments held
at fair value categorized as Level 3 in the fair value hierarchy:
$
Balance at December 31, 2023 24,872
Gain/(loss) on changes in fair value (3,796)
Balance as of June 30, 2024 before allocation of equity method loss to LTI 21,076
Equity method loss recorded against LTI (172)
Balance as of June 30, 2024 after allocation of equity method loss to LTI 20,904
The change in fair value of investments held at fair value is recorded in
gain/(loss) on investments held at fair value in the Condensed Consolidated
Statement of Comprehensive Income/(Loss).
As of June 30, 2024, the Group's material investments held at fair value
categorized as Level 3 in the fair value hierarchy include the preferred
shares of Sonde and Vedanta, with fair value of $10,571 and $10,505,
respectively. The significant unobservable inputs used at June 30, 2024 in the
fair value measurement of these investments and the sensitivity of the fair
value measurements for these investments to changes of these significant
unobservable inputs are summarized in the table below.
As of June 30, 2024 Investment Measured through
Market Backsolve & OPM
Unobservable Inputs (Sonde) Input Value Sensitivity Range Fair Value Increase/(Decrease) $
Equity Value 54,307 -5% (466)
+5% 466
Time to Liquidity 2.00 -6 Months 34
+ 6 Months (37)
Volatility 55% -10% 1
+10% (25)
As of June 30, 2024 Investment Measured through Market Backsolve that Leverages a Monte Carlo
Simulation
Unobservable Inputs (Vedanta) Input Value Sensitivity Range Fair Value Increase/(Decrease) $
Equity Value 30,272 -5% (1,029)
+5% 913
Time to Liquidity 0.73 - 6 Months (9,690)
+ 6 Months 3,328
Volatility 125% -10% (1,111)
+10% 823
Investments in Notes from Associates
As of June 30, 2024 and December 31, 2023, the investment in notes from
associates was $16,212 and $4,600, respectively. The balance represents the
fair value of convertible promissory notes with a principal value of $26,850
issued by Gelesis and convertible debt with a principal value of $5,000 issued
by Vedanta.
During the six months ended June 30, 2024, the Group recorded a gain of
$11,612 for the change in fair value of the notes from associates in the
gain/(loss) on investments in notes from associates within the Condensed
Consolidated Statement of Comprehensive Income/Loss. The gain was driven by an
increase of $11,312 in the fair value of the Gelesis convertible promissory
notes and an increase of $300 in the fair value of the Vedanta convertible
note.
In October 2023, Gelesis ceased operations and filed a voluntary petition for
relief under the provisions of Chapter 7 of Title 11 of the United States
Bankruptcy Code. Therefore, the Group determined the fair value of the
convertible promissory notes issued by Gelesis to be $0 at December 31, 2023.
In June 2024, the Bankruptcy Court approved an executed agreement for a third
party to acquire the remaining net assets of Gelesis for $15,000. As the only
senior secured creditor, the Group is expected to receive a majority of the
proceeds from this sale after deduction of legal and administrative costs
incurred by the Bankruptcy Court. As of June 30, 2024, these notes were
determined to have a fair value of $11,312.
The convertible debt issued by Vedanta was valued using a market backsolve
approach that leverages a Monte Carlo simulation. The significant unobservable
inputs categorized as Level 3 in the fair value hierarchy used at June 30,
2024, in the fair value measurement of the convertible debt are the same as
the inputs disclosed above for Vedanta preferred shares.
Fair Value Measurement and Classification
The fair value of financial instruments by category as of June 30, 2024 and
December 31, 2023:
2024
Carrying Amount Fair Value
Financial Assets Financial Liabilities Level 1 Level 2 Level 3 Total
$ $ $ $ $ $
Financial assets(3):
Money Markets(1,2) 224,361 - 224,361 - - 224,361
Investment in notes from associates 16,212 - - - 16,212 16,212
Investments held at fair value 29,202 - 8,126 - 21,076 29,202
Total financial assets 269,775 - 232,487 - 37,288 269,775
Financial liabilities:
Subsidiary preferred shares - 69,882 - - 69,882 69,882
Share-based liability awards - 3,435 - - 3,435 3,435
Total financial liabilities - 73,317 - - 73,317 73,317
1. Issued by a diverse group of corporations, largely consisting of
financial institutions, virtually all of which are investment grade.
2. Included within cash and cash equivalents.
3. Excluded from the table above are short-term investments of
$191,938 that are classified at amortized cost as of June 30, 2024. The cost
of these short-term investments approximates current fair value.
The Group has a number of financial instruments that are not measured at fair
value in the Condensed Consolidated Statement of Financial Position. For these
instruments the fair values are not materially different from their carrying
amounts.
2023
Carrying Amount Fair Value
Financial Assets Financial Liabilities Level 1 Level 2 Level 3 Total
$ $ $ $ $ $
Financial assets(3):
Money Markets(1,2) 156,705 - 156,705 - - 156,705
Note from associate 4,600 - - - 4,600 4,600
Investments held at fair value 317,841 - 292,970 - 24,872 317,841
Total financial assets 479,146 - 449,675 - 29,472 479,146
Financial liabilities:
Subsidiary preferred shares - 169 - - 169 169
Share-based liability awards - 4,782 - - 4,782 4,782
Total financial liabilities - 4,951 - - 4,951 4,951
1. Issued by a diverse group of corporations, largely consisting of
financial institutions, virtually all of which are investment grade.
2. Included within cash and cash equivalents.
3. Excluded from the table above are short-term investments of
$136,062 that are classified at amortized cost as of December 31, 2023. The
cost of these short-term investments approximates current fair value.
14. Non-Controlling Interest
As of June 30, 2024, non-controlling interests include Entrega, Follica, and
Seaport. Ownership interests of the non-controlling interests in these
entities as of June 30, 2024 were 11.7 percent, 19.9 percent and 56.4
percent, respectively. As of December 31, 2023, non-controlling interests
include Entrega, and Follica. Ownership interests of the non-controlling
interests in these entities were 11.7 percent, and 19.9 percent, respectively.
Non-controlling interests include the amounts recorded for subsidiary stock
awards.
For the six-months ended June 30, 2024, Seaport issued 950,000 shares of fully
vested common stock to the Group and 3,450,000 shares of common stock to
certain officers and directors, of which 1,227,778 shares are fully vested as
of June 30, 2024. Therefore, the non-controlling interest ownership percentage
is 56.4 percent as of June 30, 2024.
The following table summarizes the changes in the non-controlling ownership
interest in subsidiaries.
Non-Controlling Interest
$
Balance at December 31, 2023 and January 1, 2024 (5,835)
Share of comprehensive income (loss) (7,111)
Equity settled share-based payments 3,285
Expiration of share options in subsidiary (1)
Balance at June 30, 2024 (9,661)
The following table summarizes the financial information related to Seaport,
the Group's only subsidiary with significant non-controlling interest as of
June 30, 2024.
For the period ended June 30, 2024 Non-Controlling Interest
$
Statement of Comprehensive Income/(Loss)
Total revenue -
Income/(loss) for the period (12,332)
Total comprehensive income/(loss) for the period (12,332)
Statement of Financial Position
Total assets 102,494
Total liabilities 79,070
Net assets/(liabilities) 23,424
15. Trade and Other Payables
Information regarding Trade and other payables was as follows:
As of June 30, 2024 and December 31, 2023 2024 2023
$ $
Trade payables 8,125 14,637
Accrued expenses 21,434 28,187
Liability for share-based awards 1,886 1,281
Other 1 3
Total trade and other payables 31,445 44,107
16.Commitments and Contingencies
The Group is a party to certain licensing agreements where the Group is
licensing IP from third parties. In consideration for such licenses, the Group
has made upfront payments and may be required to make additional contingent
payments based on developmental and sales milestones and/or royalty on future
sales. As of June 30, 2024, certain milestone events have not yet occurred,
and therefore, the Group does not have a present obligation to make the
related payments in respect of the licenses. Such milestones are dependent on
events that are outside of the control of the Group, and many of these
milestone events are remote of occurring. Payments in respect of developmental
milestones that are dependent on events that are outside the control of the
Group but are reasonably possible to occur amounted to approximately $7,371
and $7,371, respectively, as of June 30, 2024 and December 31, 2023. These
milestone amounts represent an aggregate of multiple milestone payments
depending on different milestone events in multiple agreements. The
probability that all such milestone events will occur in the aggregate is
remote. Payments made to license IP represent the acquisition cost of
intangible assets.
The Group was a party to certain sponsored research arrangements and is a
party to arrangements with contract manufacturing and contract research
organizations, whereby the counterparty provides the Group with research
and/or manufacturing services. As of June 30, 2024 and December 31, 2023, the
noncancellable commitments in respect of such contracts amounted to
approximately $16,827 and $16,422, respectively.
In March 2024, a complaint was filed in Massachusetts District Court against
the Group alleging breach of contract with respect to certain payments alleged
to be owed to a previous employee of a Group's subsidiary based on purported
terms of a contract between such individual and the Group. The Group intends
to defend itself vigorously though the ultimate outcome of this matter and the
timing for resolution remains uncertain. No determination has been made that a
loss, if any, arising from this matter is probable or that the amount of any
such loss, or range of loss, is reasonably estimable.
The Group is involved from time-to-time in various legal proceedings arising
in the normal course of business. Although the outcomes of these legal
proceedings are inherently difficult to predict, the Group does not expect the
resolution of such legal proceedings to have a material adverse effect on its
financial position or results of operations. The Group did not book any
provisions and did not identify any contingent liabilities requiring
disclosure for any legal proceedings other than already included above for the
six months ended June 30, 2024.
17.Related Parties Transactions
Related Party Subleases
During 2019, the Group executed a sublease agreement with a related party,
Gelesis. During 2023, the sublease receivable was written down to $0 as
Gelesis ceased operations and filed for bankruptcy.
The Group recorded $0, and $16 of interest income with respect to the sublease
during the six months ended June 30, 2024, and 2023, respectively, which is
presented within finance income in the Condensed Consolidated Statement of
Comprehensive Income/(Loss).
Key Management Personnel Compensation
Key management includes executive directors and members of the executive
management team of the Group (not including non-executive directors). The key
management personnel compensation of the Group was as follows for the six
months ended June 30:
2024 2023
$ $
For the six months ended June 30
Short-term employee benefits 1,872 2,230
Post-employment benefits 44 38
Termination Benefits 140 187
Share-based payment expense 314 (518)
Total 2,370 1,937
Short-term employee benefits include salaries, health care and other non-cash
benefits. Post-employment benefits include 401K contributions from the Group.
Termination benefits include severance pay. Share-based payments are generally
subject to vesting terms over future periods. See Note 7. Share-based
Payments. As of June 30, 2024, the payable due to the key management employees
was $909.
In addition the Group paid remuneration to non-executive directors in the
amounts of $245, and $213 for the six months ended June 30, 2024, and 2023,
respectively. Also, the Group incurred $147, and $216, of stock based
compensation expense for such non-executive directors for the six months ended
June 30, 2024, and 2023, respectively.
During the six months ended June 30, 2024 and 2023, the Group incurred $5, and
$0, respectively, of expenses paid to related parties.
Convertible Notes Issued to Directors
Certain related parties of the Group have invested in convertible notes issued
by the Group's subsidiaries. As of June 30, 2024 and December 31, 2023, the
outstanding related party notes payable totaled $107 and $104, respectively,
including principal and interest. The notes issued to related parties bear
interest rates, maturity dates, discounts and other contractual terms that are
the same as those issued to outside investors during the same issuances.
Directors' and Senior Managers' Shareholdings and Share Incentive Awards
The Directors and senior managers hold beneficial interests in shares in the
following businesses and sourcing companies as of June 30, 2024:
Business name (share class) Number of shares held as of June 30, 2024 Number of options held as of June 30, 2024 Number of RSUs held as of June 30, 2024 Ownership
interest¹
Directors:
Dr Robert Langer Entrega (Common) 250,000 82,500 - 4.09%
Dr Raju Kucherlapati Enlight (Class B Common) - 30,000 - 3.00%
Dr John LaMattina(2) Vedanta Biosciences (Common) 25,000 15,000 - 0.25%
Akili (Common) 56,554 - - 0.07%
Senior Managers:
Dr Eric Elenko Seaport Therapeutics 950,000 - - 1.11%
1. Ownership interests as of June 30, 2024 are calculated on a
diluted basis, including issued and outstanding shares, warrants and options
(and written commitments to issue options) but excluding unallocated shares
authorized to be issued pursuant to equity incentive plans and any shares
issuable upon conversion of outstanding convertible promissory notes.
2. Dr John LaMattina holds convertible notes issued by Appeering
in the aggregate principal amount of $50,000. Share holdings in Akili were
sold in July 2024 as a result of the acquisition of Akili by Virtual
Therapeutics.
Directors and senior managers hold 10,295,371 ordinary shares and 4.3 percent
voting rights of the Group as of June 30, 2024. This amount excludes options
to purchase 1,996,875 ordinary shares. This amount also excludes 4,287,561
shares, which are issuable based on the terms of performance based RSU awards
granted to certain senior managers covering the financial years 2024, 2023 and
2022, and 355,212 shares, which are issuable to directors immediately prior to
the Group's 2025 Annual General Meeting of Stockholders, based on the terms of
the RSU awards granted to non-executive directors in 2024. Such shares will be
issued to such senior managers and non-executive directors in future periods
provided that performance and/or service conditions are met, and certain of
the shares will be withheld for payment of customary withholding taxes.
Other
See Note 6. Investment in Notes from Associates for details on the notes
issued by Gelesis and Vedanta to the Group.
As of June 30, 2024, the Group has a receivable from Sonde and Vedanta in the
amount of $930.
See Note 5. Investments in Associates for details on the execution and
termination of the Merger Agreement with Gelesis.
18. Taxation
Income tax benefit/(expense) is recorded based on management's estimate of the
annual effective income tax rate which is determined for each jurisdiction and
applied to the interim period pre-tax income/(loss) of each jurisdiction,
respectively. Income tax benefit/(expense) related to discrete events or
transactions are recorded in the interim period in which the event or
transaction occurs.
For the six months ended June 30, 2024 and 2023, the Group recorded an income
tax benefit of $6,147 and an income tax expense of $11,807, respectively,
which represented an effective tax rate of 11.2 percent and negative 85.9
percent, respectively. The income tax benefit recorded for the six months
ended June 30, 2024, primarily related to recognizing an income tax benefit
from generated tax credits, a discrete income tax benefit related to the
capital loss from the Akili investment, partially offset by a discrete income
tax expense related to the mark-to-market investment adjustments.
19.Subsequent Events
The Group has evaluated subsequent events after June 30, 2024, up to the date
of issuance, August 28, 2024, of the Condensed Consolidated Financial
Statements, and has not identified any recordable or disclosable events not
otherwise reported in these Condensed Consolidated Financial Statements or
notes thereto.
Directors' responsibility statement
The Board of Directors approved this Half-yearly Financial Report on
August 28, 2024.
The Directors confirm that to the best of their knowledge the unaudited
condensed financial information has been prepared in accordance with IAS 34 as
contained in UK-adopted International Financial Reporting Standards (IFRS) and
that the interim management report includes a fair review of the information
required by DTR 4.2.7 and DTR 4.2.8.
Approved by the Board of Directors and signed on its behalf by:
Bharatt Chowrira
Chief Executive Officer
August 28, 2024
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