PureTech Health plc

Greetings and welcome to the Pure Tech Health 2024 Half-Year Results Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alison Mead Talbot, Head of Communications. Thank you, Alison. You may begin.

Thank you for joining us today for PureTech's 2024 half-year results webcast. Our half-year report was made available this morning and was also filed with the FCC. This information is available on the investor's 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 Charera, Chief Executive Officer, Eric Galenko, Co-Founder and President, Robert Lyne, 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 for a complete discussion of these factors. You should not put undue reliance on any forward-looking statements. 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-IFRS 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 IFRS. 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 Investor Relations website at investors.peertechhealth.com and in our SEC filings. I will now turn the call over to Bharat Charira, Peertech's Chief Executive Officer.

Thank you, Alison. Welcome, everyone, and thank you for joining us today. In the first half of 2024, 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 and years. We completed enrollment in our Phase IIb clinical trial of LYT100, also known as duprofenadone, In idiopathic pulmonary fibrosis, or IPF, it remains on track to read out by the end of the year. One of our founded entities, Karuna, was acquired for $14 billion following the acceptance of its new drug application for CAR XT. And we launched a new founded entity, Seaport Therapeutics, with a $100 million oversubscribed CSA financing. Looking ahead, we anticipate significant near-term catalysts, including top-line results from the Phase IIb clinical trial of LYT100, the FDA's decision regarding the approval of CARXT for adults with schizophrenia, and data from our oncology candidate LYT200 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&D model. We are proud of the hub and spoke R&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 by 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 extract external capital at the asset level, mitigating the capital burden on pure tech. This allows us to concentrate expertise where it's most appropriate for the portfolio and ensures that promising new medicines are progressed efficiently to patients. Second, 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, the spokes 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&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 six years. I'm proud of the clinical and financial track record we have achieved through this model. We consistently maintain one of the most impressive clinical track records in the biopharma industry, with more than 80% of our clinical trials conducted by PureTech or founded entities since 2009 having demonstrated success. And our founded entities have continued to garner external validation and support having raised $3.9 billion since 2018, 95% of which came from third 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 Return $150 million to shareholders to date. Maintain a strong balance sheet with pure tech level cash, cash equivalent, and short-term investments of $400.6 million as of June 30, 2024, with operational runway for at least three years. This track record is a testament to our efficiency and productivity which we believe drives the potential for significant 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 advance these medicines through key de-risking milestones early in the process, leveraging our extensive scientific and industry networks. If a program does not reach our pre-specified threshold for advancement, we quickly deprioritize such programs and move our resources to more promising programs. This approach allows us to move drug candidates efficiently 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 founded 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. Karuna's $14 billion acquisition by Bristol Myers Squibb is a great case study for our model and a hallmark of how we create value, both clinically and financially. Karuna's CarXT was invented and initially developed by PureTech. We allocated a total of $18.5 million to Karuna and have generated approximately $1.1 billion to date through the monetization of equity holdings, gross proceeds from BMS acquisition, and a strategic royalty agreement with Royalty Pharma. Beyond this, we maintain the potential for future earnings from milestones and royalty payments based on CarXD regulatory and commercial success, including the potential to receive up to $400 million over the next several years under the royalty farmer transaction, and 2% royalties on CarXD annual net sales above $2 billion. 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 2024, we completed a $100 million tender offer, which together with $50 million share buyback program that completed in February of this year, constitute $150 million of capital return to the shareholders. For the remainder of 2024, we will continue to deploy capital with a measured approach and expect to have pure tech level cash, cash equivalent short-term investments of approximately $330 million at the end of the year. This figure is inclusive of expected payments of approximately $40 million 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 LYT100, and LYT200 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 two 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 Dr. Eric Alenko, our co-founder and president, to provide a summary of our key programs, including LYT100, which has a highly anticipated clinical readout by the end of this year.