Greetings, and welcome to the PureTech 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, Allison Mead Talbot, Head of Communications. Thank you, Allison, 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 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 Bharatt Chowrira, Chief Executive Officer; Eric Elenko, 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 take 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 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.puretechhealth.com and in our SEC filings. I will now turn the call over to Bharatt Chowrira, PureTech's Chief Executive Officer.

Thank you, Allison. 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 LYT-100 also known as deupirfenidone in idiopathic pulmonary fibrosis, or IPF, which 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 KarXT. And we launched a new Founded Entity, Seaport Therapeutics with a $100 million oversubscribed Series A financing. Looking ahead, we anticipate significant near-term catalysts, including top line results from the Phase IIb clinical trial of LYT-100. The FDA's decision regarding the approval of KarXT for adults with schizophrenia and data from our oncology candidate, LYT-200 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 catalysts 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…

Thank you, Bharatt. We are very excited by the progress we are making with LYT-100, and we look forward to the top line results of the Phase IIb trial by the end of this year. LYT-100 or deupirfenidone is in development for idiopathic pulmonary fibrosis, or IPF. For those of you who are unfamiliar with IPF, it's a rare, progressive and fatal disease involving scarring of the lungs and the median survival is two to five years. There are two FDA-approved branded treatments, one of which is pirfenidone, that's been shown to slow the decline of lung function and extend life by an average of 2.5 years. While both approved treatments are effective, they can cause significant side effects, which means patients cannot fully benefit from the drugs because they are unable to stay on the treatments long enough or at the right dose. You will note on this slide that nearly 75% of patients with IPF never receive antifibrotic treatment. And of the 25% who are treated with either standard of care medicine, approximately 48% eventually discontinued treatment. Despite these drawbacks, both branded drugs have achieved blockbuster status and generated combined sales of more than $4 billion in 2022, representing a significant market opportunity in IPF and other fibrotic lung diseases. We believe that LYT-100 has the potential to supplant the current standard of care treatments and become the backbone antifibrotics for a range of combination therapies as well as the preferred monotherapy for IPF patients. LYT-100 is a deuterated form of pirfenidone that is designed to retain the antifibrotic and anti-inflammatory activity that is associated with the efficacy of pirfenidone. But it has an advantageous safety and tolerability profile. We have generated significant clinical data to date with LYT-100. 550 milligrams of LYT-100 given 3 times per day…

Thank you, Eric. I'm pleased to report that PureTech's cash position remains strong due to our unique business model, excellent track record of clinical success and commitment to financial discipline. At the PureTech level, we ended June 2024 with cash, cash equivalents and short-term investments of $400.6 million, compared to cash, cash equivalents and short-term investments of $326 million at the end of 2023. On a consolidated basis, our cash and cash equivalents and short-term investments were $500.4 million at the end of June 2024 as compared to cash, cash equivalents and short-term investments of $327.1 million 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 three years. During the first half of 2024, we have implemented strategies to drive efficient operations and capital allocation, which has resulted in a decrease in both our R&D and G&A expenses at the PureTech level. On a consolidated basis, we reported operating expenses of $66.7 million in the first six months of 2024, as compared to $79.3 million 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 four 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 through a public market rates in more than six years. We also believe our model provides us with multiple shots on goal and shareholders would benefit from our ownership stakes in our internal programs and Founded Entities as candidates mature. For some of our programs like KarXT, 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 and advisers who continue to play an essential role in driving highly innovative and impactful R&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.

Thank you very much. [Operator Instructions] Our first question is from Lucy 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 expected cash runway of Seaport, just so we can better think about the consolidated cash position at the end of the year? And then secondly, the tax amount of $40 million owed on Karuna seems a little less than we were anticipating. So 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 share that information. In addition, regarding the tax question that you had, so we had indicated previously that based on the proceeds from the BMS transaction for Karuna Therapeutics of $293 million, 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 to 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 million 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. Yeah. Just first on LYT-100, now that you completed enrollment in the Phase IIb study. I was wondering if you could comment on sort of the high-level characteristics of the patients you've enrolled and how those compare versus your expectations? Are there any notable differences that you'd highlight versus some of the other contemporary Phase II or Phase III IPF studies? And then when we think about potential next steps for this program, obviously, it depends on the data is being generated, but maybe you could just walk us through how you're thinking about potential Phase III registrational design at this point?

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

Yeah. Thank you for the questions. So we haven't released detailed characteristics in terms of the characteristics of the 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 FCC again, kind of gold standard measurement. So I'd say in terms of those overall characteristics, overall approach that part is really in line with what has historically been done. In terms of the Phase III design, we really need to see the data from the Phase IIb because that data will allow us to make conclusions about powering. And also, you'll recall in the Phase IIb, there are two different doses that we're using, one dose that's equivalent to the commercially used dose of pirfenidone as well as a higher dose. And so the ultimate design of the Phase III will be data driven coming out of the Phase IIb, which is fairly typical in terms of the approach.

Yeah. And we plan to engage with the regulatory agencies to kind of discuss what that Phase III would look like. But we are quite excited about being on track to announce the data by the end of the year and 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 Founded Entity approach and then selecting up to two new programs for a year. Can you just elaborate on how you're prioritizing some of the early research work? And how you're thinking about restocking a wholly owned pipeline versus advancing these programs through new spokes and the Founded Entity approach?

Yeah. So in terms of the capital allocation, we have 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 milestone. And so the current two programs that are 100% owned by us, LYT-100 and 200, those two programs, they are funded through the current studies that are ongoing. With respect to our – and then, we continuously have in Eric shop here in the R&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. So those are some of the areas that we are focused on. And typically, based on our scale, we can greenlight up to two programs, but doesn't mean that we have to do two programs. We are very selective in terms of how we initiate a given program. In some years, we may not greenlight any programs. So we're quite selective. And so -- 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, could have additional investments going forward. So that's sort of how we think about our internal R&D engine and internal programs. With respect to our Founded Entities, we are usually focused on being a financial partner to the extent that they need financial support from PureTech. And a lot of times, these programs for example, when we did the Seaport Therapeutic recent launch that they had a $100 million oversubscribed Series A. And we put in $36 million -- $32 million, sorry, into that, Series A around, 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% in Seaport. So a lot of times, 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 the future rounds. In addition to equity, we also negotiate with some of these Founded Entities such as Seaport and the ones that we had with Karuna, for example, we also are eligible for milestones and product royalty, which would be an additional source of cash back to PureTech going forward.

Got it. That makes sense. Looking forward to the Phase IIb data later this year.

Thanks, Tom.

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

Great. Thank you. Bharatt, if I could just return maybe ask Lucy's question in 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 PureTech takes into account further R&D in the wholly-owned entities that might be moderated on any further syndication? And then maybe another follow-up or two, if I can.

Yeah. Hi, Miles. So in terms of the way we've 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 two 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 have an obligation of about $40 million. And so the $330 million approximately at the end of the year takes into account that obligation already. And then up to two new programs rest of the year, it's a fairly modest investment in those new programs. And then the other aspect that this $330 million approximately the end of the year does not take into account any inflows of capital, that we may receive the rest of this year, including, for example, a small milestone from Royalty Pharma on approval of KarXT, which the 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 kind of 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 Gallop. 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 a 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 to some extent, additional studies going forward. So we can make the 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-100. I mean, obviously, there's lots of very good-looking data there so far. If we were to assume that the final wrapping 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.

Yeah. So we are positive and which will -- 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 III from external parties who would then lend us the money to run the Phase III study in return for some back-end economics in the future. So that's one avenue available to us so that we can retain 100% ownership in the program, yet derisk it from a funding perspective, or having someone else funded for us. So second option is that we could partner LYT-100 outside for the rights -- or outside the U.S. And use that money to then fund the Phase III studies. It could also include a optionality to raise money. For example, we have indicated in the past that there may be an opportunity for us to address some of our liquidity challenges on LSE, since we are dual listed on NASDAQ, there is 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 increased liquidity on the NASDAQ markets. And of course, there's always the optionality to sell the whole program to a partner are to spin it out and bring in outside investors. 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 the more strategic sense and generating the maximum shareholder value.

Got it. Thank you. 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.

Yeah. So remember, Karuna was a single asset company for the most part. And 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 Karuna, Seaport has multiple products coming out of the Glyph 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 Karuna.

Thank you, Bharatt.

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.