PureTech Health plc Price & Performance (PRTC)

Our half year report was made available this morning and was also filed with the SEC. This information is available on the Investors page of our website at puretechhealth.com. PureTech is led by a proven and seasoned management team with significant experience in discovering and developing important new medicines, delivering them to market and maximizing shareholder value. Today, I'm pleased to be joined by members of the senior team.

Including Bharat Chirera, Chief Executive Officer Eric Galinko, Co Founder and President Robert Line, Chief Portfolio Officer and Chip Sherwood, General Counsel. I would like to remind you that during today's call, we will be making certain forward looking statements. These statements are subject to various important risks, uncertainties and assumptions that could cause our actual results to differ materially from our expectations. And we ask that you refer to our annual report and our SEC filings, a complete discussion of these factors. You should not put undue reliance on any forward looking statement. These forward looking statements reflect our expectations as of the date of this call and we undertake no obligation to revise or update any forward looking statements or information except as required by law.

I also want to remind you that we will be referring to certain non measures in this presentation. The presentation of this non IFRS financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with A reconciliation of the IFRS to non IFRS measures that we will be referring to today can be found in the accompanying presentation and is also available on our Relations website at investors. Puretechhealth.com and in our SEC filings. I will now turn the call over to Bharat Charira, PureTech Chief Executive Officer.

Thank you, Alison. Welcome everyone and thank you for joining us today. The first half of twenty twenty four, we made substantial progress in our mission to change the lives of patients with devastating diseases. Which we believe will drive significant shareholder value in the coming months years. We completed enrollment in our Phase IIb clinical trial of LYT-one hundred also known as duprefinidone, in idiopathic pulmonary fibrosis or IPF It remains on track to readout by the end of the year. 1 of our founder entities Corona was acquired for $14,000,000,000 following the acceptance of its new drug application. For CAR XT. And we launched a new founded entity Seaport Therapeutics with a $100,000,000 oversubscribed CEC financing. Looking ahead, we anticipate significant near term catalyst including top line results from the Phase 2b clinical trial of LYT-one hundred the FDA's decision regarding the approval of CAR X T for adults with schizophrenia and data from our oncology candidate LYT-two hundred in hematologic malignancies and solid tumors. Today, we will discuss the progress we have made thus far why we are so excited about the near term catalyst and the options we have to realize our return on investment across our portfolio.

I'll start with a reminder of our innovative and efficient R and D model. We are proud of the hub and spoke R and D model we have pioneered, which has many benefits, including uncapped upside and diversified risk profile for downside protection. Our hub is our core group of people Proven Drug Discovery Engine impressive track record of success and capabilities at PureTech that are at the center of everything we do. Our spokes are our founded entities, which house the programs and platforms that were initially identified and discovered and then advanced PureTech team through key validation and value inflection points. This model is beneficial in a few ways. First, it is extremely resource efficient. Putting assets into founded entities allows us to attract external capital at the asset level mitigating the capital burden on Fiertech. This allows us to concentrate expertise where it's most of appropriate for the portfolio and ensures that promising new medicines are progressed efficiently to patients. 2nd, bringing in outside partners serves as external validation for programs we have created. It also offers greater optionality for funding the program such as through an IPO. And finally, Bespoke's also serve as a source of capital back to PureTech through the monetization of our equity stakes, and product revenues.

This evergreen source of capital allows us to advance our existing programs fuel our R and D engine to generate new medicines and enables us to return capital to our shareholders. The success of our self funded model is highlighted by our strong balance sheet and the fact that we have not had to raise money in the equity markets in over 6 years. I'm proud of the clinical and financial track record we have achieved through this model. We consistently maintained one of the most impressive clinical track records in the biopharma industry. With more than 80% of our clinical trials conducted by Piotek or founded entities since 2009, having demonstrated success. And our found identities have continued to garner external validation and support having raised $3,900,000,000 [indiscernible] 2018, 95% of which came from 3rd parties. Our strong financial position is underpinned by our disciplined approach to capital allocation. And the inflows resulting from monetization of our founded entities. This has allowed us to drive our drug discovery pipeline with an evergreen funding model returned $150,000,000 to shareholders to date maintain a strong balance sheet with PureTech level cash cash equivalent and short term investments of $400,600,000 As of June 30, 2024, with operational runway for at least 3 years.

This track record is a testament to our upside across the portfolio. We start with small molecule and biological drugs that can address significant patient needs. And have already demonstrated some level of human efficacy. We then advanced these medicines through key derisking milestones early in the process. Leveraging our extensive scientific and industry network. If a program does not reach our pre specified thresholds for advancement, we quickly deprioritize such programs and move our resources to more promising programs. This approach allows us to move drug candidates as [indiscernible] towards value inflection points where we can then assess the best path forward to maximize patient benefit and shareholder value. Our model has been incredibly productive with Foundered entities now returning capital back to us, which enables us to continue on our mission for patients and also evaluate potential further capital returns. To shareholders. Cronos 14,000,000,000 acquisition by Bristol Myers Squibb is a great case study for our mall and a hallmark of how we create value both clinically and financial. Corona's CAR XT was invented and initially developed by PureTech. We allocated a total of $18,500,000 to Karuna and have generated approximately 1.1 through the monetization of equity holdings, gross proceeds from BMS acquisition, and a strategic royalty agreement with Royal De Pharma.

Beyond this, we maintain the potential for future earnings from milestones and royalty payments based on CAR XT regulatory and commercial success, including the potential to receive up to $400,000,000 over the next several years under the Royalty Pharma transaction. And 2% royalties on CAR XT annual net sales above $2,000,000,000 Despite significant success across our business, there remains a significant value disconnect. To unlock our intrinsic value across our portfolio we will continue to evaluate strategies that employ a capital efficient approach that balances support for the internal and founded entity programs as well as funding of future innovations to maximize shareholder returns. In the first half of twenty twenty four, we completed a $100,000,000 tender offer which together with $50,000,000 share buyback program that completed in February of this year constitute 150,000,000 dollars of capital return [indiscernible] For the remainder of 2024, we will continue to deploy capital with a measured approach and expect to have PureTech level cash cash equivalent short term investments of approximately $330,000,000 at the end of the year. This figure is inclusive of expected payments of approximately $40,000,000 to address our tax obligations and does not take into consideration any additional inflows of capital subsequent to the date of this report.

We may also continue to make investments in our founded entities with the goal of maintaining our ownership position or minimizing dilution or in certain circumstances to help capitalize a financing round that we believe will bring additional long term value to the company. We will also continue to fund existing programs in which we currently hold 100% ownership interest such as LYT-one hundred and LYT-two hundred through their key milestones. Advancing these programs internally affords us the optionality either to continue internal development for further value accretion or to pursue external funding or partnerships, to maximize shareholder value. With the maturation of many of our existing programs, we will also focus on building for the future. By sourcing new innovations and anticipate selecting up to 2 programs per year. Historically, initial spend on new programs has been minimal. With exact amount required being program specific. Our innovation engine enables the growth of our portfolio to ensure that the next wave of candidates is progressing towards value creating milestones for shareholders. I would now like to invite Doctor. Eric Elanco, our Co Founder and President to provide a summary of our key programs, including LYT-one hundred, which has a highly anticipated clinical readout by the end of this year.

Thank you, Bharat.

We are very excited by the progress we are making with LYT-one hundred and we look forward to the top line results of the Phase 2b trial by the end of this [indiscernible] LYT-one hundred or duperfhenidone is in development for idiopathic pulmonary fibrosis. Or IPF For those of you who are unfamiliar with IPS, it's a rare progressive and fatal disease involving scarring of the lungs and the median survival is 2 to 5 years. There are 2 FDA approved branded treatments one of which is proffendone and has been shown to slow the decline of lung function and extend life by an average of 2.5 years. While both approved treatments are which means patients cannot fully benefit from the drugs because they are unable [indiscernible] or at the right dose. You'll note on this slide that nearly 75% patients with IPS never receive anti fibrotic treatment and of the 25% who are treated with either standard of care medicine approximately 40% eventually discontinued treatment. Despite these drawbacks, both branded drugs have achieved blockbuster status and generated combined sales of more than $4,000,000,000 in 20 22, representing a significant market opportunity in IPS and other fibrotic lung diseases. We believe that LYT-one hundred has the potential to supplant the current standard of care treatments and become the backbone anti fibrot for a range of combination therapies as well as the preferred monotherapy for IPF patients.

LIQ-one hundred is a deuterated form of propendone that is designed to retain the anti fibrotic and anti inflammatory activity that is associated with the efficacy of BRAFENDO.

But it has an advantageous safety and tolerability profile. We have generated significant clinical data to date with OYG-one hundred. 550 milligrams ofLYT-one hundred given 3 times per day achieves the same level of drug exposure as the FDA approved dose of propendone. In our Phase 1 crossover study, the same dose demonstrated a 50% reduction in the number of healthy older adults experiencing gastrointestinal related adverse events compared to prophinidone. This is important because gastrointestinal adverse events affect patients' quality of life and their ability to stay on the drug. Therefore, one of the ways we can define success is by offering the same level of efficacy as perfundone, but have improved tolerability. In our ongoing Phase 2b trial, we are also exploring a higher dose of LYT-one hundred, which was well tolerated in Phase 1 trials and we believe gives us a second shot on goal of achieving better efficacy. Data support a dose dependent effect with prophinidone but the tolerability profile of prophenedone has limited further The primary endpoint is the rate decline in forced vital [indiscernible] which is the gold standard endpoint in determining the escoacy of IP therapies. The trial is powered to show a statistical difference between LYT-one hundred and placebo over the 26 week treatment period using a pre specified Bayesian approach which has been used previously in Phase II IPF trials.

Other key endpoints include tolerability measures and patient reported This trial is expected to readout by the end of the year and we look forward to sharing the top line data. We think LYT-one hundred could potentially address the needs of multiple segments of IPF patients. You see here are the findings from a survey of pulmonologists who actively treat IPF patients conducted by an independent third party market research firm to assess the commercial opportunity for LYT-one hundred and IPS. As a result, we believe LYT-one hundred has potential to become the standard of care drug for iPS and offer an attractive treatment option to those who are currently not on therapy. Beyond iPS, there are additional opportunities forLYT-one hundred and other progressive fibrosing ILDs which could double the number of patients who could benefit. Again, we expect results from the Phase 2b trial in patients with IPF by the end of this year and we look forward to sharing those data. Another program I'd like to highlight today is LY2-two hundred, which will be advanced by our founded entity Gallip Oncology.

We are advancing and differentiated approach to cancer treatment by targeting the pro tumor mechanisms of Galectin9 for the treatment of hematological malignancies and solid tumors. In the first half of the year, the FDA granted LYT-two hundred orphan drug designation for the treatment of AML as well as Fast Track designation for the treatment of head and neck cancers. Blocking Galectin9 results in direct cell death as well as relief of immunosuppression AML as well as head and neck cancer among others. We're encouraged by the preliminary data generated to date in our 2 ongoing Phase 1 clinical trials, and we expect additional data in the Q4 of 2024 for the potential treatment of AML and MDS as well as in combination with tislelizumab for the potential treatment of advanced solid tumors.

The last program I'll highlight today is Seaport Therapeutics, which houses the CNS pipeline spun out from PureTech. With an oversubscribed $100,000,000 Series A in the first half of this year and is led by PureTech former CEO. Daphne Zohar. The Seaport pipeline was born out of our strong R and D and It has many of the same elements that led to Crunha's success and utilizes the same approach we are taking with LYT-one hundred. Unlocking the full potential of drugs that have clinically validated mechanisms, but also key limitations that have hindered full patient benefit. Seaport is different from Corona because it is centered around a proprietary platform called GLIS rather than a single asset. The Glyph platform is designed to allow drug to be taken orally as well as circumvent liver toxicity when those issues are caused by what is known as first pass metabolism. 1st pass metabolism refers to the way a drug is processed by the liver after being taken. Some drugs get chewed up to a very large extent by enzymes in the liver, which can cause problems. GLIF allows drugs to be absorbed like dietary lipids enabling them to be absorbed directly into the lymphatic system and avoid for passive metabolism.

The platform also allows new intellectual property to be generated for each new drug that is created. Seaport is advancing 1st and best in class medicine for people living with neuropsychiatric disorders. They have 3 therapeutic candidates in their pipeline and multiple discovery preclinical programs underway leveraging the Gluf platform. We are excited for Seaport's journey to make a difference for patients in need. As Bharat discussed, we are pleased that we have the necessary capital and discipline to continue to execute on our model. To make a difference for patients with devastating disease, while creating shareholder value. I'd like to now hand it over to Bharat to provide a recap of our 2020 4 half year financial results as well as closing remarks.

Thank you, Eric. I'm pleased to report that PureTech cash position remains strong due to our unique business model excellent track record of clinical success, and commitment financial discipline. At the PureTech level, we ended June 2024 with cash, cash equivalents and short term investments of $400,600,000 compared to cash, cash equivalents and short term investments of $326,000,000 at the end of 2023. On a consolidated basis, our cash and cash equivalents and short term investments were $500,400,000 at the end of June 2024, as compared to cash, cash equivalents and short term investments of $327,100,000 at the end of 2023. Based on our existing financial assets as of June 30, 2024, we expect to have operational runway of at least 3 years. During the first half of twenty twenty four, we have implemented strategies to drive efficient operations and capital allocation which has resulted in a decrease in both our R and D and G and A expenses at the PureTech level. On a consolidated basis, we reported operating expenses of 66.7 $1,000,000 in the 1st 6 months of 2024 as compared to $79,300,000 in the same period in 2023. As we look ahead to 2024 and onwards, I'd like to note that we are more excited than ever to deliver on our mission to crystallize value for our shareholders.

And we view the 4 elements of this slide as the key drivers. Our portfolio model protects shareholders from potential downside with a strong balance sheet and our self funding model means we have not had to dilute shareholders to a public market raise in more than 6 years. We also believe our model provides us with multiple shots on goal and shareholders will benefit from our ownership stakes in our internal programs and founded entities as candidates mature. For some of our programs like CAR XT, these anticipated capital inflows are already being realized. And we anticipate additional earnings from regulatory and commercial success. All of these value drivers are intended to enable us to return capital to shareholders and we will continue to evaluate future opportunities for additional capital returns. In closing, I'd like to thank all of the patients and clinicians who are participating in our clinical trials I would also like to extend many thanks and appreciation to our dedicated team including our Board of Directors [indiscernible] continue to play an essential role in driving highly innovative and impactful R and D forward. Finally, I'd like to thank our shareholders for continuing to support our journey to bring new classes of medicine to patients in need We value our recent and continued engagement and your feedback as we remain steadfast in maximizing value both for the patients and for our shareholders.

We will now take questions.

Our first question is from you see Codrington with Jefferies. Lucy, your line is now open. Please go ahead.

Hi, there. Thank you for taking my questions. Just a couple to help with modeling, please. So is it possible to provide any guidance on the cash burn and [indiscernible] consolidated cash position at the end of the year? And then secondly, the tax amount of €40,000,000 owed on Karuna seems a little less than we were anticipating. I just wanted to confirm that this is the only tax owed this year. Thank you.

Thank you, Lucy. So regarding Seaport, even though we are consolidating the financials, we it's an independently operating company. And so we are not at liberty to discuss their cash burn on an ongoing basis. So we won't be able to to share that information. In addition, regarding the [indiscernible] question that you had. So we had indicated previously that based on the proceeds from the BMS transaction for Corona Therapeutics, of $293,000,000 we would be potentially obligated to pay somewhere in the high 20% in taxes. Which we would look to figure out a way to offset the extent we can, with respect to any operating losses or net operating loss or other offsets that we can avail And so based on that, we are projecting that we would This year in 2024, we would pay approximately $40,000,000 in taxes. Based on some of those offsets that were available to us.

Thanks very much. Thank you very much. Our next question is from Thomas Smith with Leerink Partners. Thomas, your line is now open. Please go ahead.

Hey guys, good morning. Thanks for taking the questions and congrats on the progress.

Yes.

Just first on LIGHT-one hundred, now that you've completed enrollment in the Phase 2b study, I was wondering if you could comment on the high level characteristics of the patients you've enrolled and how those compare versus your notable differences that you'd highlight versus some of the other contemporary Phase 2 or Phase 3 IPF studies? And then we think about potential next steps for this program, obviously, depends on the data that's being generated, but maybe you could just walk us through how you're thinking about a potential Phase 3 registration design at this point?

Thanks, Tom. Appreciate it. So I will ask Eric to comment on those questions.

Yes. Thank you for the questions. So we haven't released detailed characteristics in characteristics of patients. But if you look at our study design, it's really the type of design and inclusion and exclusion criteria that you're going to find in other IPF studies. And if you look at our primary endpoint of SEC, again, kind of goal standard measurement. So I'd say in terms of those overall characteristics, [indiscernible] overall approach that part is really in line with what has historically [indiscernible] done. In terms of the Phase 3 design, We really need to see the data from the Phase 2b because that data will allow us to make conclusions about powering And also you'll recall in the Phase 2b, there are 2 different doses that we're using 1 dose set to equivalent to the commercially used dose of propundone, as well as a higher dose. And so the ultimate design of the Phase 3 will be data drift coming out of the Phase 2b, which is fairly typical in terms of the approach.

Yes. And we plan to engage with the regulatory agencies to kind of discuss what that Phase C would look like. But we are quite excited about being on track to announce data by the end of the year. And so look forward to that.

Got it. That makes sense. And then if I could ask a follow-up with respect to capital allocation.

You talked about balancing your research efforts across both the wholly owned pipeline and the standard entity approach and then selecting up to 2 new programs per year. Can you just elaborate on how your prioritizing some of the early research work and how you're thinking about restocking the wholly owned pipeline versus advancing these programs through new spokes and the founded entity approach?

Yes. So in terms of the capital allocation, we've always been quite capital efficient and disciplined in terms of how we spend our cash. We usually budget for any given study to the next [indiscernible] And so the current 2 programs that are 100% owned by us [indiscernible] those two programs, they are funded through the current studies that are ongoing. With respect to our and then then we continuously have in Eric's shop here in the R and D engine we continuously evaluate new product concepts and we are focusing on small molecules and biologics and we are directing a lot of our attention towards respiratory inflammation as well as some of the CNS indications. Those are some of the areas that we are focused on. And typically, based on our scale, we can green light up to 2 programs, but doesn't mean that we have to do 2 programs. We are very selective in terms of how we initiate a given program. In some years, we may not green light any programs. So we're quite selective and those initial investments in these programs are fairly modest. And then based on the data when we do these killer experiments, and those that survive those initial derisking experiments, those then depending on the indication [indiscernible] have additional investments going forward.

So that's sort of how we think about our internal R and D engine and the internal programs. With respect to our founded entities, [indiscernible] are usually focused on on being a financial partner to the extent that they need the financial support from PureTech. And a lot of times these programs for example, when we did the Seaport Therapeutics, recent launch they had a $100,000,000 oversubscribed Series A And we put in 36,000,000 32,000,000 sorry, into that Series A round. But the rest of the money came from external parties. And so similarly with our other founded entities, to the extent that and we still own 61.5 percent in Seaport. So a lot of times in our external investors don't necessarily want us to have such a high stake in these companies. As we bring in external investors. And so over time, our ownership will get will decrease and also depends on how much money we decide to put in, in the future rounds. In addition to equity, we also negotiate with some of these funded entities such as Seaport and the ones that we had with Corona, for example, we also are eligible for milestones and product royalties.

Which would be additional source of cash back to PureTech. Going forward.

Got it. That makes sense. Thanks for taking the questions and looking forward to the Phase 2b data later this year.

Thanks Tom.

Thank you very much. Our next question is from Myles Dickson with Peel Hunt. Myles, your line is now open. Please go ahead.

Great. Thank you. And Barrick, if I could just return maybe ask Lucy's question a slightly different way. So I mean, thinking about the reducing OpEx burn from the syndication, how much of the forward looking run rate for the second half in pure Tech takes into account further R and D in the wholly owned entities that might be moderated on any further syndication? And then maybe another follow-up or 2 if I can. [indiscernible] So hi, Myles. So in terms of the way we publicly talked about the capital allocation, we are currently going to spend there's a bucket of capital that we have set aside to support the existing 2 programs that are currently in clinical trials. And we'll finish those ongoing studies. So there's a pool of capital allocated towards that. There's another pool of capital allocated to support our founded entities to the extent they need our support. Going forward Then there is another pool of capital that we have set aside for potential tax obligations and we indicated that this year in 2024, we are we have an obligation of about 40,000,000 dollars And so the $330,000,000 approximately at the end of the year takes into account that obligation already.

And then up to 2 new programs rest of the year in That's a fairly modest investment in those new programs. And then the other aspect this 330,000,000 approximately the end of the year, does not take into account any inflows of capital that we may receive in the rest of this year, including, for example, a small milestone from Royalty Pharma upon approval of CAR TXT, which PDUFA date is slated for September 26. And so assuming that gets approval, we are eligible for milestone from royalty pharma and a small milestone from Bristol Myers Squibb from that license agreement. And so that's sort of how you should think about the capital allocation.

Got it. Thank you. I'll spare you from asking you what that milestone might be. But if I could just quickly move on to Gallup. I mean, this was obviously spun out at the same time as Seaport, but yet there's yet to be any syndication on it. Is this because there's potential alternatives being considered such as partnering or is it exclusively about waiting for the data to be better advised?

It's the latter, right? So we want to kind of let the data mature some more. Before so that we can get an appropriate valuation. And also it helps us decide whether we really do want to go out and syndicate and bring in external capital or continue to fund this [indiscernible] going forward. So we can make that determination later this year based on some additional data that we expect on both the hematological malignancy indication as well as solid tumors. So we're just waiting for some additional data.

Thank you. And probably one final similar question on LYT-one hundred. I mean, obviously, there's very good looking data there so far. If we were to assume that the final wrappings of data, if you like, are very good, Is the default internally for you to progress that and fund it yourself? Or is the default to then look to partner? Thank you.

Yes. So When not assuming the data are positive, I mean, will know by the end of the year, it gives us optionality, right? So we have a lot of options to really think about what is the best path forward to generate the maximum value from that program. For us and for our shareholders. And so those options include We could decide to do a synthetic royalty type arrangement. Where we can get funding for a Phase 3 from external parties who would then lend us the money to run the Phase 3 study in return for some back end economics in the future. So So that's one avenue available to us so that we can retain 100% ownership in the program, but yet derisk it from a funding perspective having someone else funded for it.

For us. So second option is that we could partner LYT-one hundred outside for the rights for outside the U. S. And use that money to then fund the Phase 3 studies. Could also include optionality to raise money. For example, we have indicated in the past that there may be an opportunity for us to to address some of our liquidity challenges on LSC. Since we are dual listed on NASDAQ to raise additional capital on NASDAQ.

That could potentially be used to fund a Phase III study not because we need the money, it's mostly to try and diversify the shareholder base and bring in some specialist investors on the and increase liquidity on the NASDAQ markets. And then of course, there's always the optionality to sell the whole program to a partner. Or to spin it out and bring in outside So we have multiple optionalities options that we could evaluate and it will all depend on the strength of the data and what we want to do and what makes most strategic sense in generating the maximum. Shareholder value.

It. Sounds like you're going to be pretty busy with data in the second half. If I could just very quickly ask on the Seaport versus Karuna economics, when we think about the shape and profile of those that you're now agreeing with Seaport, Do they look very similar to the Karuna ones? Thank you. [indiscernible] Yes. So remember Karuna was a single asset company. For the most part. And so so we had some milestones associated with that license. As well as some royalties which we then monetize with Royalty Pharma. So, the structure with the Seaport is kind of similar in terms of but it actually involves multiple products as opposed to a single product. With Corona, Seaport has multiple products coming out of the GLIF platform and each one of those products would as they progress we would be eligible for certain milestones and royalties on product sales And the quantum of the royalties are in similar range as corona.

Thank you, Barrett.

Thank you very much. That's all the time we have for today. Therefore, that concludes today's conference call. Thank you all for joining. You may now disconnect your lines. You are the last party in the conference. Your participation in the conference has been terminated by the host.